By Sophie Minich, CIRI president and chief executive officer
The CIRI Annual Meeting held earlier this month provided a fantastic opportunity to meet and talk with shareholders. I appreciate those who took time out of their busy summer schedule to attend the event, participate in the Board election and hear about the latest developments at CIRI. I was especially pleased with the positive atmosphere and feedback we received from shareholders.
CIRI’s five incumbent Board members were elected to serve another three years on the Board. Again, I appreciate all of the shareholders who voted in person or submitted their proxies for the election.
As you may have read in recent media coverage in Alaska, CIRI joined a coalition called “No One on One” with five other regional Native corporations to oppose a ballot measure that will be decided in Alaska’s primary election on August 19, 2014. It is rare for CIRI to become publicly involved in political issues, so I wanted to explain the reasoning behind the decision of our Board of Directors.
Ballot Measure 1 is a proposal to repeal the oil tax reform legislation passed by the Alaska Legislature in 2013. The 2013 tax reform law replaced a system enacted in 2007 that significantly increased the taxes oil and gas companies paid the state, particularly in times of high oil prices.
Production from Alaska’s North Slope oil fields continue their steady decline, and new investment is needed to find fresh reservoirs and develop existing fields that are more expensive to produce.
Many of the effects of declining investment and oil production are masked by abnormally high oil prices, which allow the State of Alaska to maintain strong revenues and a budget surplus. However, whenever oil prices stabilize, our state will face a budget deficit. Oil revenues pay for roughly 90 percent of state spending on schools, roads, public safety and more.
With the passage of the 2013 oil tax reform, we have witnessed a resurgence of investment from oil companies. They are looking for new oil, employing new technology and hiring more contractors and employees. Since the reform was enacted, the companies have pledged more than $8 billion in new projects that could add more than 130,000 barrels a day of production. This winter, the North Slope had more drill rigs operating than ever before. Between 2013 and 2014 alone, ConocoPhillips Alaska’s capital budget increased from just over $1 billion to nearly $1.8 billion, and BP Alaska is reinvesting 90 percent of every dollar in Alaska. It’s encouraging, and it demonstrates that the 2013 tax reform legislation is working as intended.
CIRI investments include companies that work directly with oil and gas producers, such as Alaska Interstate Construction and Cruz Marine. These companies see direct benefits from increased activity, which helps CIRI’s bottom line. In a broader sense, CIRI and many of our shareholders rely on a strong, vibrant Alaska economy. A healthy economy helps to ensure investments like the Tikahtnu Commons Retail and Entertainment Center, the ConocoPhillips Office Complex and the new Fireweed Business Center increase in value and produce strong financial returns for the company.
In addition, oil production from ANCSA subsurface lands are an important source of 7(i) resource revenues shared among the Alaska Native corporations. Arctic Slope Regional Corporation’s subsurface lands in the Kuparuk oil field have paid substantial 7(i) distributions over the years. The new investments proposed by the industry include additional developments at Kuparuk.
If the oil tax reform is repealed, our state could lose the momentum that we are witnessing today. That’s why CIRI has decided to become a voice in the debate. We believe the prudent choice for the long- term prosperity of Alaska, and for CIRI, is to vote no on Ballot Measure 1.
CIRI is proud to join Arctic Slope Regional Corporation; Doyon, Limited; NANA Development Corporation; Bristol Bay Native Corporation and Bering Straits Native Corporation in the No One On One coalition.