Alaska's oil revenue forecast shows big drop from earlier projections
Alaska’s latest revenue forecast shows a weaker fiscal position for the state from earlier projections, presenting challenges for lawmakers and the governor as the budget is written for the next fiscal year.
Gov. Michael Dunleavy is required to release a budget proposal for the next fiscal year before Dec. 15.
On Tuesday, he said the budget would be different from the one he presented in February that had $1.6 billion in proposed cuts. “It won’t be quite like that but we certainly have to have discussions about the gap, again, what are the things we want to fund and support and what are the things we may not want to?”
The fall revenue forecast released on Friday projects that efforts to bridge a billion dollar-plus deficit will be made more difficult for the Dunleavy administration.
According to figures from the Departments of Revenue and Natural Resources, there will be nearly $200 million less in state coffers than was projected earlier in the year, mostly due to lower-than-expected oil prices.
The Alaska North Slope (ANS) oil price is forecast to be $63.54 per barrel for this fiscal year, a drop from $66 that was forecast in spring. For the fiscal year that starts July 1 the North Slope oil price is forecast to be $59.00 per barrel.
Oil production is also lower than projected earlier in the year.
In spring, 529,500 barrels per day were projected to be pumped this fiscal year. As of Friday, the figure is projected to be 492,100 barrels per day.
Ed King, an Alaska-based economist, says the price and production figures presented from the Revenue Department are “not surprising.” He says there has been a glut in oil production that may have contributed to lower prices.
On Friday, OPEC agreed to cut production which could lead to a rise in oil prices.
King says the Department of Revenue was conservative in projections for oil production in the future, particularly as new fields could come online on the North Slope.
“New fields offer tremendous potential to increase production later in the 2020s but these developments are still contingent on final investment decisions and commitment of billions of dollars of new investments on the part of oil and gas producers,” Acting Revenue Commissioner Michael Barnhill wrote to the governor on Friday.
The governor released a statement on the forecast saying that, "my administration uses these numbers to prepare the budget, we also understand they can and do fluctuate. An additional forecast will be out this spring that will provide more accurate information for the FY21 budget.”