Alaska fiscal woes give oil firms the upper hand

ANCHORAGE, Alaska (Reuters) – Alaska is driving a hard bargain with the oil majors that dominate its energy sector but the state is negotiating from a position of weakness as falling oil production will soon begin to bite into its revenue.

Gov. Sarah Palin has raised taxes on oil production and is trying to find a way to build a natural gas pipeline to the rest of the United States without involving the majors in a bid to wrest more control over the industry from the companies.


She has also threatened to cancel oil field leases if the producers do not fall into line with her policies.

The state’s bargaining power, however, is hampered by its growing fiscal problems, even with oil at $100 a barrel.

“The state doesn’t have a whole lot of leverage on these issues,” said Steven Haycox, an Alaska historian at the University of Alaska, Anchorage. “The economy is on a very narrow base and is at the end of a very long economic chain.”

Reuters