We provide an update of the FY 2016 budgets actions (lower item this page).

The Alaska LNG Project is making progress in cost-reductions as preliminary engineering nears completion, managers of a joint industry-state consortium told state legislators in a briefing Wednesday.

“We believe we will able to drive costs down to the lower end of the an early estimate of $45 billion to $65 billion range. But we have not been able to cut it in half,” said Steve Butt, an ExxonMobil official on loan as Alaska LNG project manager.

Alaska LNG involves an 800-mile, 48-inch pipeline built from the North Slope to a large natural gas liquefaction plant in southern Alaska and a large gas treatment plant on the slope needed mainly to remove the 12.5 percent carbon dioxide that is in Prudhoe Bay field gas, Butt said.

About 35 trillion cubic feet of gas reserves have been identified on the slope to support the pipeline and LNG project. Read the rest of this entry »

Alaska’s Division of Oil and Gas denied approval for renewal of a key operating permit for the Prudhoe Bay field on the North Slope in a letter sent June 30 to BP, the field operator.

The division gave field owners BP, ConocoPhillips and ExxonMobil until Sept. 1 to remedy issues that were raised, according to the letter. The current permit, the Plan of Development for the field, ended June 30 but has been extended to Nov. 1.

The state is seeking information on marketing activities by the companies relating to 26 tcf of gas in the Prudhoe reservoir. Prudhoe is a major producer of oil but also contains large quantities of gas.

Read the rest of this entry »

Despite legislators’ inability to adopt fiscal reforms, the good news is that Gov. Bill Walker isn’t backing off. He is keeping the issue on the table, and showing plenty of guts. His June 29 veto of half the funding for the Permanent Fund Dividend is a strong and powerful wake-up call to the public and the Legislature–a message delivered with a sledgehammer. Let’s put it this way: He has chosen to be less the politician and more a governor. The message in the $1.5 billion vetoes and other spending reductions imposed by the governor is simple: Either cut spending or enact revenues to support spending. The bottom line is to stem the outflow from state cash reserves, and do it now. Read the rest of this entry »

Both the state House and Senate have passed their versions of the FY 2017 state operating budget and both make several hundred millions of dollars in cuts from the current FY 2016 spending. But with about a month remaining before the Legislature’s scheduled April 17 adjournment, several big spending issues are still unresolved that will affect the final bottom line: (1) A budget figure for oil and gas tax incentive payments, which depends on what happens to House Bill 247, now being worked in the House Resources Committee; (2) payments on state teachers’ and public employees’ pension liabilities; (3) certain education programs.

How these will come out remains to be determined, but overall, House and Senate leaders are hoping to keep the FY 2016 budget including a bare-bones capital budget at about $4.5 billion. A big unknown is what the spring revenue forecast update will say. The assumed oil price will surely be lower than used in the December, 2015 forecast ($49 per barrel). Some House leaders are working under an assumption that FY 2017 oil revenues may drop to $1.2 billion to $1.5 billion, down from about $1.8 billion estimated in December. If revenues are $1.5 billion and spending is $4.5 billion, that’s a $3 billion draw from reserves. While that’s steep, it would be better than the $4 billion assumed widely since the session began in January. Meanwhile, there’s no sense yet on what legislators may do about new revenues. Passage of any several tax bills proposed is unlikely, but some use of Permanent Fund earnings may be devised. More to come on all this.  (See our weekly Legislative Digest edition for more).

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