ANCHORAGE (AP) — Alaska’s latest revenue forecast has estimated a $200 million decrease in oil revenue after an excess of the resource contributed to lower prices worldwide, state officials said.
The state Department of Revenue released the forecast Friday revealing both prices and production are running below expectations presenting challenges for state officials planning next year’s budget, officials said.
The Alaska North Slope oil price is forecast to decline from the $66 originally projected in the spring to $63.54 a barrel before July 1 and $59 after July 1, department officials said.
Meanwhile, oil production is also expected to decline from 541,000 barrels to 492,100 barrels each day, officials said.
The estimated revenue reduction “is a sobering fact in Alaska’s fiscal reality. It is but another example of why fiscal discipline must be the cornerstone of a long-term fiscal plan,” Republican state Rep. Cathy Tilton told the Anchorage Daily News.
Republican Gov. Mike Dunleavy is expected to introduce a preliminary version of the 2021 budget next week based on the forecast, state officials said. The state Legislature is expected to start considering his proposal when it convenes in January, officials said.
The new projections “are very disappointing but not unexpected,” Alaska Policy Forum executive director Bethany Marcum said. She added that the forum believes “reducing spending will be a necessity again in the next legislative session.”
The Department of Revenue was conservative in future oil production projections, particularly as new fields could come online on the North Slope, said Ed King, an Alaska-based economist.
“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,” Interim Revenue Commissioner Michael Barnhill said.
“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,” Dunleavy said.