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Haley Zaremba

Haley Zaremba

Haley Zaremba is a writer and journalist based in Mexico City. She has extensive experience writing and editing environmental features, travel pieces, local news in the…

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Alaska’s Conflicted Oil Future

Alaska North Slope

Alaska, the final frontier, may be the next oil industry goldmine thanks to aggressive drilling, changing environmental policies, and a bullish administration. Not all Alaskans, however, are on board with the transition, and the issue is now more divisive than ever.

Take for example, the polemic Hilcorp, the fast-growing and assertive Houston-based company that while keeping a low public profile, has made a name for itself within the energy industry as a money-making powerhouse. Though the company is less than 30 years old, Hilcorp founder Jeffery Hildebrand has swiftly become a billionaire. His employees are some of the best-paid in the business, famously receiving six-figure bonuses for meeting output goals.

Their extreme success, however, comes at a high cost to the same oil-rich terrain that’s putting money in their pockets. Hilcorp is not just famous among energy moguls - it’s also infamous in environmentalist circles. The corporation has adopted an acquire and exploit strategy that has racked up a sizable number of environmental violations in Alaska and elsewhere.

Less than three years after Hilcorp began its operations in Alaska, the Alaska Oil and Gas Conservation Commission had already documented 25 violations of their regulations, culminating in the chair of the commission writing in a strongly worded letter that "Hilcorp's conduct is inexcusable." Related: Tech Guru Unveils New Battery To Challenge Lithium-Ion

In the past Alaska has encouraged small companies to explore for oil within their state with incentives like a cashable oil tax credit program, instated under Sarah Palin in 2007. However, just last month the state legislature voted to end the program, some voters citied that the program was, by any other name, a tax hike, and some stated that the incentive and its subsequent draw of prospectors in Alaska had gone too far.

In fact, in the last few years after the bottoming out of oil prices, the state has made very minimal payments on outstanding tax credits and owes almost $1 billion to oil companies, a staggering sum that comprises nearly a quarter of the entire state budget. Already this summer, two different oil companies announced that they’re freezing projects in Alaska because the state has failed to pay them for promised reimbursables.

While Alaska has damaged its reputation as a worthy business partner in the oil industry, it’s likely that drilling won’t decline much. In fact, it will probably continue to boom. In May, Donald Trump announced that opening the vast Arctic National Wildlife Refuge to oil and gas drilling is among his top priorities, and was featured prominently in his 2018 budget proposal.

Ultimately, it’s up to congress whether this change in protected status will come to pass, but it is indicative of a larger political zeitgeist that this regime change was brought with it. Whether or not the Arctic National Wildlife Refuge is subject to drilling, it is clear that this administration favors oil and is less concerned about environmental regulations - positions that are quite attractive to the oil industry and likely to make companies a bit bullish in their plans for the next four years.

Related: Oil Rises, But Saudis Face Daunting Dilemma

It’s hard to say what Alaska’s oil future will be. Their economy is completely tied up in the oil industry, but that’s not as safe of a bet as it once was. In 1977 Alaska was responsible for almost a fourth of US oil. Today, the state only produces between 6 and 7 percent. From 2007-2014, Alaska was flush with cash as oil hovered around $100 a barrel. Today, as oil hovers around $50 per barrel, the state is wallowing in billions of dollars of debt and boasts the highest unemployment rate in the nation.

For many, this is the time to double down on oil and bring back the jobs that the industry provided during the state’s oil production heyday. This dream isn’t an impossible one, with oil prices slowly recovering and the recent discovery on major oil on the North Slope by three different companies. The question is, is this the future that Alaska wants, forever at the whim of the pump? Or will they prefer to turn their back on corporate interests and forage a new future in the wilderness of the final frontier?

By Haley Zaremba for Oilprice.com

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  • Harrison Davis on August 19 2017 said:
    In Haley Zaremba's final sentence, she used the word 'forage' instead of the more typical ' forge' , but upon reflection I wonder if it isn't really a typo. After all, if Alaska foregoes hydrocarbon production, then aside from fishing and its support industries, what remains for those who choose to stay other than the hunter-gatherer lifestyle prevalent before oil and mineral extraction?

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