Does it make sense that Alaska gets no return for the next 12 years?

I was on the fence about Willow project approval. Generally I support oil and mining development, but in this case and listening to my more pregressive friends I was watching this more closely and I’m not sure we can afford the win! I shared the following in a Linkedin Post based on the news in the ADN this week that the project was approved.

Jobs? Sure. Who do you think will be employed, where do they live, and what state taxes will they pay?

We’ve again done what our state is best at, helping our industrial visitors develop their ability to extract Alaskan resources.

I received some respectable folks pushing back on my comments, especially the “industrial visitors” comment. Sometimes I do go a bit over board.

While fortunate to have had a great career in mining and the oil industry (upstream and downstream); I now am looking at Alaska’s future economy and what we are building for the next generation.

Based on the figures in the article I shared, the discounted (8%) net present value of the Willow project is about $500M before any induced public costs (School BSA, Persoanl PFD, Roads, Parks etc. for growth and atracting and keeping people in AK), rather than the glossy gross of $5.4 over 25 years.

I don’t have access to what I expect might be some better details on the cash flow, so I’d be happy to share my spreadsheet. Please correct me if I’m not roughly right.

When I think about how our state will have to continue to cut budgets and leave education, community, and economic development starving to cover the loss in revenue over the next ten years, I do wonder if the $1B might have a better use. Alternatively, what will be the impact of raising $1B in taxes to cover the state’s loss in GF while we are waiting? (Never mind that we are focused on declaring success by building more vacuum tubes.)

The Alaska Disconnect lives on. There will also be winners like the north slope borough and AK contractors. As I watch Alberta move beyond petroleum and AK starves its future potential, this project has its merits and its consequences. I’m still not convinced we’ve won anything work keeping, but congratulations to the oil companies and contractors – send us a postcard.

Update 1/18 – I found more of the data I overlooked that was linked in the ADN article! My NPV assumed a flatter credit/payments over the live so perhaps NPV is higher – too bad the analaysis didn’t offer discounted cash flow comparison. Regardless, it looks like the big winners from day one are the participantes in the impacted commuinty fund, and then federal government. https://drive.google.com/file/d/1HctZV41T2DFyCeWriwen8yDz0em9xvdr/view?usp=drivesdkhttps://drive.google.com/file/d/1HctZV41T2DFyCeWriwen8yDz0em9xvdr/view?usp=drivesdk

Updates

3/26/23 ADN proposed new oil revenue bill and update on willow.

3/39/23 ADN Alaska’s own March Madness, fueled by oil By Bill Sherwonit