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Sunday, November 6, 2011

Undated: Alaska Monthly -- Cruz Construction -- Yes, A Bust In the Bakken is Not Unthinkable -- The Bakken, North Dakota, USA

Updates

October 6, 2012: a human interest story on Cruz Construction in The Dickinson Press/Inside Climate News. Remember: this is the guy from Alaska who returned to North Dakota and noted:
“Thousands of more [Alaska] jobs are at risk,” Cruz said. “My own company is a microcosm of what’s happening throughout Alaska’s oil industry now and what will happen throughout Alaska’s economy soon if we continue to drive away investments with unfriendly taxes and regulations. Three years ago, we were flying high and employed 200 Alaskans through the exploration season. Then came the ACES oil tax, and it was like someone turned off the faucet.
Something for NoDaks to think about.

Original Post
Link here.

You may want to check out Cruz Construction website first.

From the article linked above:
Dave Cruz’s Alaska roots run deep. His first job was working on the trans-Alaska pipeline and he built a successful business servicing the North Slope. Now, Cruz’s family may have to uproot for new lands.


“We have to follow the work, so we made the choice to move our oilfield support to North Dakota,” Cruz says. “North Dakota has a more favorable tax environment, they are more pro-business and they have a how-can-I-help-you attitude instead of what’s-in-it-for-us attitude.”

“In 2007 through ’08, we were able to employ a couple hundred people all winter,” Cruz says. “Now we’re able to employ a dozen. We had Anadarko, Chevron, FEX, Brooks Range, ConocoPhillips, Pioneer that were exploring on the North Slope. Today, we have only one exploration well that’s going to happen – and that will be done in March of this year.”

Cruz is now one of the thousands of Alaskans supporting Gov. Sean Parnell and his call to restructure ACES, which was enacted in 2007 under then-Gov. Sarah Palin. It raised the oil production tax base rate to 25 percent, applied against the production tax value. It also set a progressivity rate of 0.4 percent, significantly boosting taxes, particularly when oil prices are high. And, under ACES, as oil prices increase, the marginal tax rates can climb to more than 80 percent.
Later in the article:
Last year, Alaska’s most active explorer, ConocoPhillips, did not drill an exploration well for the first time in 45 years, and it says it has no plans to drill a well in 2011. In fact, while more than 900 exploration wells were drilled across the United States last year, only one was drilled on the North Slope. This winter, only a lone exploration well is planned.

“Thousands of more jobs are at risk,” Cruz said. “My own company is a microcosm of what’s happening throughout Alaska’s oil industry now and what will happen throughout Alaska’s economy soon if we continue to drive away investments with unfriendly taxes and regulations. Three years ago, we were flying high and employed 200 Alaskans through the exploration season. Then came the ACES oil tax, and it was like someone turned off the faucet.”

That trickle is also being felt in the trans-Alaska oil pipeline. At about 600,000 barrels per day, the pipeline is two-thirds empty, and in 2010, it declined by about 7 percent. It’s a scenario that has industry insiders pondering the question: How low can it go? At some point it will simply become too expensive for producers to continue to pump oil through the pipeline or technical issues will force its closure. Some fear that day could come five to 10 years from now.

“When that happens, Alaska is in for a rude awakening,” Hamilton said. “No flow means no dough. And, when the oil industry isn’t paying the bills, guess where the government will come looking. But even if we implemented a statewide income tax and abolished the Permanent Fund dividend, it wouldn’t come close to making up what the oil industry pays to state government.”
BEXP sold out to Statoil, partly because of the huge up-front cost of drilling for oil. Taxes are not an inconsequential part of the cost of oil production. So, for those folks asking whether the Bakken could experience a bust sooner than later: yup.

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