HEAVY OIL DEVELOPMENT: PREPARED FoR. BP Exploration (Alaska) Inc. PREPARED BY. Bradford Tuck Professor of Economics. December 1995

Transcription

1 HEAVY OIL DEVELOPMENT: THE ECONOMIC IMPACT PREPARED FoR BP Exploration (Alaska) Inc. PREPARED BY Bradford Tuck Professor of Economics December 1995 SCHOOL OF PuBuc AFFAIRS AND INSTITUTE OF SOCIAL AND ECONOMIC RESEARCH UNIVERSITY OF ALASKA ANCHORAGE 3211 l'rovidence DRIVE ANCHORAGE, ALASKA This publication is printed on recycled paper.

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3 HEAVY OIL DEVELOPMENT: THE ECONOMIC IMPACT EXECUTIVE SUMMARY T he extension of North Slope oil production, through new discoveries, enhanced recovery techniques, and development of marginal fields, has received considerable public policy _ attention. Less discussed have been the reserves of heavy crude oil. While more difficult to produce, there are billions of barrels of reserves in place. The present study looks at the economic impact of an hypothesized development of heavy oil in the Milne Point Unit-Schrader Bluff area. The general dimensions of the project envision development expenditures of about $550 million, with the bulk of that spread over the first nine years of the project. In addition, production expenses are estimated at about $600 million, or an average of $14. 7 million per year over the forty-one year production life of the project. Average production of oil is approximately 20 thousand barrels per day over the life of the field. The economic impact methodology used is based on that employed by Professor Scott Goldsmith in his study Marginal Oil Field Development: The Economic Impact (Institute of Social and Economic Research, University of Alaska Anchorage; June 5, 1995). The basic objective in this type of impact analysis is to measure the change in aggregate expenditure, employment, and population effects in both the private and public sectors that result from the direct project expenditures. In other words, how does the economy look with the project, as compared to without the project. The analysis can look either at impacts on some periodic basis, such as changes in the annual level of activity. or at the aggregate impacts over the life of the project. The second focus is employed in this study and the Marginal Field study. One reason for this is that a central question often asked is how the benefits to the economy from the project compare to the costs, or, more specifically, how government revenues compare to government costs. The impact analysis is described in a series of tables, with text, that detail the various steps in developing the estimates of overall impact. Tables 1 and 2 provide the estimates of project expenditures for development and production. These are the basic driving force in the expansion of overall economic activity. Tables 3 and 4 describe the project related revenue flows to the Government sector. Over the life of the field projected revenues range from $149 million to $64 2 million, depending on assumptions related to royalty rates and future prices, transportation costs, and other factors that influence wellhead value. The increase in pipeline throughput resulting from the project reduces pipeline tariffs, and increases the wellhead value of all oil transported. This results in higher revenues to the state, as described in Table 4. Over the life of the field these revenue gains amount to between $65 million and $84 million.

4 HEAVY OIL DEVELOPMENT: THE ECONOMIC IMPACT Table 5 shows the results of project development and production expenditures on the overall level of economic activity. The development phase of the project results in about fourteen hundred man years of labor, and additional vendor, indirect and induced jobs increase the impact by about another eighteen hundred. The production phase, measured annually, results in another 134 jobs. However, there are further effects that are the result of expansion of population and increases in the Government sector and succeeding rounds of interactions within the economy. These are described in Tables 6-9, and address both state and local government costs. Table 10 summarizes the employment, payroll, and population impacts of the project, as estimated in Tables 5-9. These figures represent the net increase in economic activity resulting from the project. Field development activity and subsequent vendor, indirect, and induced jobs are projected to total 3,476 man years oflabor from Alaska residents. Comparable annual production related labor demand is 147. Over the life of the project this amounts to 6,027 man years of labor demand. The total population increase related to development (including subsequent multiplier impacts) is The comparable production related impact, annually, is 273. The estimated annual payroll per job is between $55 and $56 thousand dollars. Finally, Table 11 and Table 12 address some specific questions. Table 11 considers the revenue potential of payroll based taxes related to the project. It is estimated that some form of payroll tax, at an average rate of 4.5 percent, would result in revenue to state government over the project life of $27.5 million. Table 12 summarizes the overall revenue and expenditure requirements of state government resulting from the project. The state government expenditures, over the life of the project, include resource management costs of about $22 million, and costs related to provision of government services to the general population that amount to about $7 4 million. The total is $96.5 million. Projected revenues depend on several variables, including wellhead price, the throughput gain, and the royalty rate. The range on these estimates is a low of $214 million, and a high of $753 million. This suggests a fiscal "dividend" (revenues less expenditures) ranging from $ll8 million to $657 million. The estimates presented depend on a number of assumptions, and interpretation of the results should keep these in mind. First, this is not an analysis of the economic feasibility of developing heavy oil. While the cost figures have been developed primarily by BP (Alaska), Inc., the estimates are preliminary in nature and are intended only to provide general insight into the order of costs contemplated in such a development. Furthermore, feasibility would be highly dependent upon projected project revenues and public policy parameters, including oil prices, wellhead values, pipeline tariffs, royalty rates, severance tax rates, etc. This analysis has dealt with most of these parameters by specifying a range of values by assumption, rather than by attempting any kind of forecast. Second, the present analysis is based primarily on the application of the Goldsmith methodology to the analysis of a heavy oil development scenario. In addition to adopting the methodology, this analysis also makes use of the parameters developed by Goldsmith in the Marginal Oil Field Development study. In other words, no attempt has been made to recalculate the general parameters of the model. There are a few specific instances in the present analysis where assumptions or parameters have been altered, and these are noted in the text and table notes. These changes relate primarily to assumptions regarding

5 HEAVY OIL DEVELOPMENT: THE ECONOMIC IMPACT future wellhead values and their estimation. The parameters have not been adjusted for changes in the forthcoming Department of Revenue State Revenue Forecast, but it is believed that events of the last six months do not materially affect our long-run projections and assumptions. Third, as noted above, this methodology is aimed at considering the aggregate impacts of the proposed development, not the annual consequences. Thus, the total number of man years of employment, or the total cost of government services related to the project, may be very different from the impact in a particular year. The production phase tables are generally presented in annual average format to provide some perspective on ongoing levels of activity, but the computation of costs of public services, and total revenues to the state, are based on project lifetime totals. Finally, the dollar figures in the are constant dollars, measured in 1995 dollars.

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7 HEAVY 011 DEVELOPMENT: THE ECONOMIC IMPACT INTRODUCTION AND '1ERVIEW T he extension of North Slope oil production, through new discoveries, enhanced recovery techniques, and development of marginal fields, has received consi-derable public policy attention. Less discussed have been the reserves of heavy crude oil. While more difficult to produce, there are billions of barrels of reserves in place. The present study looks at the economic impact of an hypothesized development of heavy oil in the Milne Point Unit-Schrader Bluff area. The general dimensions of the project envision development expenditures of about 550 million dollars, with the bulk of that spread over the first nine years of the project. In addition, production expenses are estimated at about 600 million dollars, or an average of million dollars per year over the forty-one year production life of the project. The economic impact methodology used is based on that used by Professor Scott Goldsmith in his study Marginal Oil Field Development: The Economic Impact (Institute of Social and Economic Research, University of Alaska Anchorage; June 5, 1995). The overall dimensions of this approach can be seen in Figure 1. The figure does not reflect all flows, but only those central to the present analysis. Basically, the Alaska economy is divided into three sectors; Households, Producers, and Government. Each sector receives flows of payments and each sector generates various expenditure flows. The Household sector provides labor services to the Producer and Government sectors, and in return receives income, primarily in the form of wages and salaries (links 6, 11). The Household sector utilizes this income by making purchases from the Producers sector (link 5), by spending outside of Alaska and by saving (link 7). The Government sector receives revenues in the form of taxes, fees, royalties, etc. (links 3, 9), and spends on labor (i.e., wages and salaries, link 11 again), on purchases from the Producer sector (link 8), and on purchases from outside Alaska and saving Clink 12). The Producer sector receives revenue from the sale of goods and services to the Household and Government sectors (links 5 and 8), and from sales to other firms in the Producer sector, so-called interindustry transactions. Producer sector revenues are expended on labor (wages and salaries to the Household sector, link 6 again), purchases from other firms in the Producer sector, payments to the Government sector (link 9 again), and expenditures outside of Alaska (link 10). Saving, and expenditures outside of Alaska constitute leakages from this circular flow of spending. Injections into the circular flow can result from Producer sector investment in Alaska, an increase in sales to non-alaska buyers, and a variety of other external sources. In general, leakages from the circular flow reduce the overall level of economic activity in the state, and injections into the circular flow increase the equilibrium level of activity. Furthermore, a one dollar change in either leakages or injections usually results in some multiplier effect, where the change on the overall system is greater that the initial spending change. In the present case, the focal point is the injection into the circular flow resulting from expenditures related to the development of heavy oil reserves. These expenditures enter the circular flow in several ways, including direct labor income to the Household sector (link 1), purchases from the Producer

8 HEAVY OIL DEVELOPMENT: THE ECONOMIC IMPACT sector (link 2), and production related payments to the Government sector Clink 3). Since some of the project expenditures are made outside of Alaska, there are leakages as well Clink 4). The basic objective in this type of impact analysis is to measure the initial change in expenditure flows and determine changes in both sector and overall economic activity levels resulting from the initial expenditure increase. In other words, how does the economy look with the expenditure, as compared to without the expenditure. It should be noted that the analysis can look either at impacts on some periodic basis, such as changes in the annual level of activity, or at the aggregate impacts over the life of the project. The second focus is that employed in this study and the Marginal Field study. One reason for this is that a related question often asked is how the benefits to the economy from the project compare to the costs, or more specifically, how government revenues compare to government costs. The remainder of the paper contains a series of tables, with text, that describe the various steps of the analysis. Tables 1 and 2 provide the estimates of project expenditures for development and production. These are the measures of the "project" box in Figure 1, and are the basis of the direct dollar flows to the Household and Producer sectors. Tables 3 and 4 describe the project related revenue flows to the Government sector. Table 5 shows a part of the results of project development and production expenditures on the overall level of economic activity (i.e., the expansion of the circular flow). However, there are additional effects that result from the expansion of population and increases in the Government sector (and further interaction with both the Household and Producer sectors). These are described in Tables 6-9. Table 10 summarizes the employment, payroll, and population impacts of the project, as estimated in Tables 5-9. These figures represent the net increase in economic activity resulting from the project. Finally, Table 11 and Table 12 address some specific questions. Table 11 considers the revenue potential of payroll based taxes related to the project, and Table 12 looks at the overall revenue and expenditure requirements of state government resulting from the project. Before looking at the tables a few general comments are in order. First, this is not an analysis of the economic feasibility of developing heavy oil. While the cost figures have been developed primarily by BP (Alaska), Inc., the estimates are preliminary in nature and are intended only to provide general insight into the order of costs contemplated in such a development. Furthermore, feasibility would be highly dependent upon projected project revenues and public policy parameters, including oil prices, wellhead values, pipeline tariffs, royalty rates, severance tax rates, etc. This analysis has dealt with most of these parameters by specifying a range of values by assumption, rather than by attempting any kind of forecast. Second, the present analysis is based primarily on the application of the Goldsmith methodology to the analysis of a heavy oil development scenario. In addition to adopting the methodology, this analysis also makes use of the parameters developed by Goldsmith in the Marginal Oil Field Development study. In other words, no attempt has been made to recalculate the general parameters of the model. There are a few specific instances in the present analysis where assumptions or parameters have been altered, and these are noted in the text and table notes. These changes relate primarily to assumptions regarding future wellhead values and their estimation. The parameters have not been

9 HEAVY OIL DEVELOPMENT: THE ECONOMIC IMPACT FIGURE Heavy Oil Project Direct project income to households 2. Project expenditures to producers (purchase of goods and services) 3. Project production related revenues to state government 4. Project expenditures to "outside" 5. Household expenditures to producers (purchase of goods and services) 6. Producer sector income payments to households 7. Household sector purchases from "outside" 8. Government expenditures to producers (government purchases of goods and services) 9. Producer payments to government (taxes, etc.) 10. Producer sector expenditures to "outside" 11. Government sector payments to households (wages and salaries) 12. Government sector payments to "outside" and savings

10 HEAVY OIL DEVELOPMENT: THE ECONOMIC IMPACT adjusted for changes in the forthcoming Department of Revenue State Revenue Forecast, but it is believed that events of the last six months do not materially affect our long-run projections and assumptions. Third, as noted above, this methodology is aimed at considering the aggregate impacts of the proposed development, not the annual consequences. Thus, the total number of man years of employment, or the total cost of government services, may be very different from the impact in a particular year. The production phase tables are generally presented in annual average format to provide some perspective on ongoing levels of activity, but the computation of costs of public services, and total revenues to the state, are based on project lifetime totals. Finally, the dollar figures in the succeeding tables are constant dollars, measured in 1995 dollars. TOTAL CAPITAL EXPENDITURES (TABLE 1) Table 1 provides a description of the total expenditures associated with the development of the Heavy Oil project. For modeling purposes the expenditures begin in 1996 and are concentrated in the first nine years of the project. Total development costs are projected at about 550 million dollars (in 1995 dollars). Expenditures have been allocated to labor, equipment, supplies, services and transportation, and have been further allocated to expenditures in Alaska and "Outside." As can be seen from the numbers, about 67 percent of the man years of employment, and 61 percent of total project development expenditures take place in Alaska. These figures are primarily based on estimates provided by BP Exploration (Alaska), Inc. It should be noted that these are aggregate figures. The expenditure in a given year would be some fraction of the total. For example, assuming that the bulk of development is accomplished in the first nine years of the project, then the annual figure for man years of employment would be approximately 152. However, the present analysis is looking at the aggregate, rather than annual, effects.

11 TABLE 1: HEAVY OIL OEVELOPMENT ANALYSIS: TOTAL CAPITAL EXPENDITURES SUM DRILLING SURFACE FACILITIES CENTRAL FACILITIES PAD INFRA TOTAL UPGRADES STRUCTURE TOTAL ALASKA OUTSIDE TOTAL ALASKA OUTSIDE TOTAL ALASKA OUTSIDE TOTAL ALASKA OUTSIDE TOTAL ALASKA OUTSIDE EXPENDITURE (MILLION $) $549 S333 $216 $279 S186 S93 $254 S135 S119 $60 S2S S3S S112.S S64.1 S48.4 LABOR (INCLUDES BENEFITS) $238 $184 SS4 S75.4 S75.4 so.o $148.1 $97.4 S50.7 $33.6 $19.8 S13.8 S66.4 S4S.O $21.4 EQUIPMENT $140 SS1 $89 S72.6 $36.3 $36.3 $67.4 S14.S SS2.9 S18.9 S0.9 $18.0 $28.1 $7.9 S20.3 SUPPLIES SSS $16 S39 $41.9 $10.S $31.4 $11.8 $4.2 S7.6 S2.1 S0.3 $1.8 SS.6 $2.3 $3.4 SERVICES $94 S72 $21 $78.1 $S8.6 $19.S S1S.4 S13.4 $1.9 $1.8 $1.8 so.a $7.9 S6.8 $1.1 TRANSPORT $23 $11 $11 $11.2 SS.6 SS.6 $11.4 SS.7 SS.7 $3.6 $1.8 $1.8 S4.S $2.3 $2.3 OTHER so so so so.o $0.0 so.o so.o $0.0 $0.0 so.o so.o so.o so.o $0.0 so.o EMPLOYEES (MAN YEARS) S S AVG PAYROLL (THOUSAND $) (Al $100 $60 $100 $60 $100 $60 $100 $60 TOTAL PAYROLL (MILLION $) $182.9 $141.2 $41.7 S58.0 $58.0 so.o $113.9 $74.9 $39.0 S2S.8 S1S.2 $10.6 $51.1 $34.6 $ SOURCE: DATA ON TOTAL EXPENDITURES ANO COMPONENTS PROVIDED BY BP EXPLORATION (ALASKA), INC. (Al AVERAGE ANNUAL ALASKA PAYROLL (OREMOTE SITE CONSTRUCTION $100 DOES NOT INCLUDE BENEFITS OIL AND GAS $100 DOES NOT INCLUDE BENEFITS THIS IS ABOVE THE AVERAGE FDR THE INDUSTRY BECAUSE THE JOBS ARE REMOTE SITE AND HIGHLY TECHNICAL LABOR COST/PAYROLL RATIO 1.3 (Al FROM GOLDSMITH, MARGINAL OIL FIELD DEVELOPMENT ::c: "' t:i ;i "' i!2' SI

12 HEAVY OIL DEVELOPMENT: THE ECONOMIC IMPACT TABLE 1: HEAVY Oil DEVELOPMENT, CAPITAL EXPENDITURES, CONTINUED Ell TIE-INS OTHER COMPANY CAPITAL MANAGEMENT TOTAL ALASKA OUTSIDE TOTAL ALASKA OUTSIDE TOTAL ALASKA OUTSIDE EXPENDITURE (MILLION $) $62.5 $35.6 $26.9 $19.0 $10.8 S8.2 $16.0 $12.0 $4.0 LABOR (INCLUDES BENEFITS) $36.9 $25.0 $11.9 $11.21 $7.6 $3.6 $14.4 $10.8 $3.6 EQUIPMENT $15.6 $4.4 $11.3 $4.8 $1.3 $3.4 so.o $0.0 $0.0 SUPPLIES $3. 1 $1.3 $1.9 $1.0 $0.4 $0.6 $1.6 $1.2 $0.4 SERVICES $4.4 $3.8 $0.6 $1.3 $1. 1 $0.2 $0.0 so.a $0.0 TRANSPORT $2.5 $1.3 $1.3 $0.8 S0.4 $0.4 so.o $0.0 $0.0 OTHER so.o so.o so.o so.a so.o so.o so.o $0.0 $0.0 EMPLOYEES (MAN YEARS) AVG PAYROLL (THOUSANO $) (A) $100 $60 $100 $60 $100 $75 TOTAL PAYROLL (MILLION S) $28.4 $19.2 $9.1 $8.6 S5.8 $2.8 $11.1 $8.3 S

13 HEAVY OIL DEVELOPMENT: THE ECONOMIC IMPACT PRODUCTION PHASE ANNUAL AVERAGE EXPENDITURES (TABLE 2) Table 2 shows the annual average production expenditures derived from estimated annual production expenditures. The averages are based on a 41 year production life. Total production costs over the life of the field are 601 million dollars, with total production at just over 300 million barrels. Of the total expenditures of 601 million dollars, 52 percent is for labor, almost all of which occurs in Alaska. just over 85 percent of total expenditures are made in Alaska, and reflect direct purchases from the Producer sector for supplies and equipment, transportation, and services, as well as wage and salary payments. The balance of expenditures are made outside of Alaska. It should also be noted that these expenditures do not include anything for payments to state government, such as royalty or severance tax payments. These are estimated separately in Table 3. TABLE 2. HEAVY OIL DEVELOPMENT ANALYSIS: PRODUCTION PHASE ANNUAL AVERAGE EXPENDITURES St\\ 1"11tnCosts WrnH(O\tt<DRtLU'<.(ll) lieidqt\rttns Tl)l\17.\l\,h:\ t1ll'>ld! 1111\1.\l\'>t\ t1lf\f!li Tu1\1 Af\'-h\(}t/'-COI Jo1u.\11/\1 l)11'i Expenditure (Million$) Labor $3.8 $3.7 $0.1 $3.2 $3.2 $0.0 $0.6 $0.6 $0.0 Equipment $1.6 $0.8 $0.8 $0.7 $0.4 $0.4 $0.8 $0.4 $0.4 $0.1 $0.1 $0.0 Supplies $3.2 $1.9 $1.3 $0.7 $0.7 $0.1 $2.4 $1.2 $1.2 $0.1 $0.1 $0.0 Services $1.5 $1.5 $0.0 $0.1 $0.1 $0.0 $1.2 $1.2 $0.0 $0.1 $0.1 $0.0 Transport $0.7 $0.7 $0.0 $0.2 $0.2 $0.0 $0.4 $0.4 $0.0 $0.0 $0.0 $0.0 Other $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 Employees (Man Years) Avg Payroll (Thous.nd $)(A) $100 $60 $100 $50 $100 $50 Total Payroll (Million$) $5.864 $5.751 $0.113 $2.932 $2.819 $0.113 $2.481 $2.481 $0.000 $0.451 $0.451 $0.000 Source: Data on total expenditures and components provided by BP Exploration (Alaska) Inc. Note: Since production and drilling continue around the clock, each job requires four employees. With a 12-hour shilt and weekly rotation there will be two shifts "on site" at any given time. (A) Average Annual Alaksa Payroll (000$) Oil and Gas $100 This is above the average for the industry because the jobs are remote site and highly technical (B) Workovcr drilling commences in Year 1 of field operations and continues through Year 40 These figures represent the total lifetime cost of workover drilling divided by the 41 Year production life Labor Cost/Payroll Ratio L3 (A)-(B) From Goldsmith, Marginal Oil Field Development

14 HEAVY OIL DEVELOPMENT: THE ECONOMIC IMPACT PRODUCTION AND DIRECT PETROLEUM REvENUES TO STATE GOVERNMENT (TABLE 3) Table 3 provides the estimates of revenue to state government. Three Milne Point wellhead prices are used. These prices are derived from estimates of Alaska North Slope pump station one prices, adjusted for projected TAPS and marine tariffs, and adjusted for local pipeline tariffs, pumpability charges and quality bank adjustments. These resulted in low, mid and high wellhead price estimates of $7.05, $11.53, and $ These are projected averages over the life of the project, in constant 1995 dollars. Severance taxes were assumed to be zero. The royalty rate was assumed to range from 6 percent in the low price case to 12 percent for the mid-price case, and 14 percent in the high price case. Revenue from the corporate income tax and property tax was also included. Based on the above assumptions annual direct revenues to the state ranged from $3.64 to $15.65 million. Over the production life of the project, the range is $ to $ million. REvENUES FROM HIGHER WELLHEAD (TABLE 4) The average production for this project is projected to be about twenty thousand barrels per day ( and just over 300 million barrels in total). This increased pipeline throughput results in a lower average tariff for all oil moving through the TAPS pipeline. In tum, the lower tariff results in a higher wellhead value and increased revenue to the state. The estimated increase in revenue amounts to between $65 and $84 million, over the life of the project, depending upon assumptions related to other volumes of oil flowing through the pipeline. OIL RELATED EMPLOYMENT (TABLE 5) The employment impacts related to the project include the direct project jobs in construction, and oil and gas, related to the development and production phases of the project. These jobs (and the associated incomes spent in Alaska) plus the project related expenditures for supplies and equipment, transportation, and services, lead to successive rounds of spending within the Alaska economy. In addition to direct project employment, there are additional jobs referred to as vendor jobs. Vendor jobs are those jobs resulting from direct expenditures for project supplies and equipment (in wholesale trade), transportation, and various business services. The combined effect of development and production payrolls, plus expenditures to vendors, results in another layer of employment, so-called indirect and induced employment (and income), which results from the overall multiplier effect. The multiplier effects are calculated using an Alaska Input-Output model. Certain assumptions are necessary before using the model, since only expenditures entering the Alaska circular flow are included. First, it is assumed that a proportion of total direct labor is nonresident. Second, it is assumed that non-resident income has only a small impact on the Alaska economy. These adjustments are made using parameters estimated in Goldsmiths Marginal Oil Field Development, and are detailed in the table notes. In general, it is estimated that the development phase of the project will require about 1412 man-years of labor, roughly divided between oil and gas industry jobs and construction industry jobs. About 75 percent of these jobs go to Alaska residents. Production jobs (annually) are estimated to result in 58 man-years, continuing over the life of the project. About 80 percent of these go to residents. Vendor, and indirect and induced jobs in Alaska add to the total employment effect, with the development phase adding 554 man-years of vendor employment and indirect and induced jobs adding another 1282 man-years of employment. In the production phase, vendor and indirect and induced jobs add annual demands of 76 man-years of labor, lasting for the life of the project.

15 TABLE 3: HEAVY OIL ANALYSIS: PRODUCTION AND DIRECT PETROLEUM REVENUES ========================================================================================= WELLHEAD PRICE DETERMINATION ANS PUMP STATION 1 PRICE CA) DEFLATE TO 1995 $ CB) TRANSPORT DIFFERENTIAL (C) NET MARGINAL FIELD WELLHEAD AT MILNE POINT ROYALTY RATE LOW $11.12 S8.26 $1.21 S7.D5 6% MlD $21.14 s S1.21 S ': HIGH $ $15.94 $1.21 $ :t 300 MILLION BARRELS CUMMULATIVE PRODUCTION ANNUAL 41 YEAR FIELD L!FE WELLHEAD PRICE $7.05 $11.53 $14.73 $7.05 $11.53 $ PRODUCTION MILLION BARRELS WELLHEAD VALUE MILLION S S52 $85 S1D8 $2,118 $3,465 $4,426 ROYALTIES MILLION S S3.10 S10.14 $15.11 $ $ $ SEVERANCE (0) 1 1 SO.OD SO.DO SO.OD SO.OD SO.DO SO.DO INCOME (E) II S0.37 S0.37 S0.37 S15.02 s15.02 S15.02 PROPERTY ( F) 11 S0.17 S0.17 S0.17 $6.92 $6.92 $6.92 TOTAL DIRECT REVENUES S3.64 $10.68 S15.65 S $ $ =================================================================================================================== (A) BASED ON ESTIMATED AVERAGE PRICE FOR (APPENDIX Al (Bl SEE APPENDIX A CCl SEE APPENDIX A CDl SEVERANCE TAX RATE 0.00% CE) CORPORATE INCOME TAX ON PETROLEUM ( F) PROPERTY TAX BASED ON HALF COST OF FIELD DEVELOPMENT TAX RATE LEVELIZED TO REFLECT DEPRECIATION OF VALUE STATE SHARE OF TAXES COLLECTED ANNUAL STATE COLLECTION FY DAILY TAX PROOUCTION CORP TAX PER BARREL STATE SHARE OF TAXES COLLECTED BASED ON NORTH SLOPE BOROUGH HILL RATE OF FROM ALASKA TAXABLE S S S $ S $ S S S $ S S S S $ $0.17 NET OF SETTLEMENT $17.80 S0.03 AVG = $0.19 ASSUME $0.05 TAX PER BARREL S % S2.75 6% S ;::: t:i ;; "' tt1 n 12' ;:! Ci SCURCE: ADOR SPRING 1995 REVENUE SCURCES (A)-(E) FROM GOLDSMITH, MARGINAL OIL FIELD DEVELOPMENT

16 m HEAVY 0JL DEVELOPMENT: THE ECONOMIC IMPACT TABLE 4. HEAVY OIL ANALYSIS: RE\'ENUES from HIGHER WELLHEAD MILLION BBL OVER 41 YEARS LOii TARIFF HIGH TARIFF DAILY MARGINAL PROOUCTION 20,080 20,080 20,080 20,080 PIPELINE TARIFF (AVE. FOR ) JN 95 $ (A) $2.448 $2.448 $ $2.796 DAILY TAPS THRUPUT (Bl 950,000 1,300, ,000 1,300,000 CHARGES (MILLION $) $849 $1, 162 $970 $1,327 AUGMENTED DAILY THRUPUT 970,080 1,320, ,080 1,320,080 ADDITIONAL CHARGES (C) $8.94 $8.94 $8.94 $8.94 AUGMENTED THRUPUT TARIFF $2.42 $2.43 $2.76 $2.77 REDUCTION IN TARIFF-- $0.03 $0.02 $0.03 $0.02 INCREASE IN MELLHEAD INCREASE JN MELLHEAD VALUES $8.81 $8.86 $11.31 $11.38 (MILLION $) BLENDED TAX I ROYALTY RATE (0) 18X 18X 18X 18X INDIRECT INCREASE IN REVENUE (MILLION $) ANNUAL $1.59 $1.60 $2.04 S YEAR FIELD LIFE S65.05 S65.41 $83.48 $83.95 ================================================================================== (Al SEE APPENDIX A, LOii AND HIGH CASES (B) ANS PETROLEUM PROOUCTION PROJECTION FOR 2005 ADOR, SPRING 1995 REVENUE SOURCES (C) TARIFF INCLUDES FIXED PROFIT PER AND VARIABLE OPERATING AND TAX TOTAL BASED ON CONVERSATIONS MITH ADOR PERSONNEL (0) ASSUME 12% ROYALTY AND 6% SEVERANCE TAX (8)-(0) FROM GOLDSMITH, MARGINAL Oil FIELD DEVELOPMENT S0.54 S0.32 S0.36 $ ,000 BARRELS I OAY 1,292,000 BARRELS I OAY LOii HIGH

17 HEAVY 011 DEVELOPMENT: THE EcoNOMIC IMPACT 'I TABLE 5. HEAVY OIL ANALYSIS: OIL RELATED EMPLOYMENT TOTAL ANNUAL DEVELOPMENT PROOUCTION EXPENDITURE IN ALASKA (MILLION S) LABOR EQUIPMENT SUPPLIES SERVICES TRANSPORT OTHER DIRECT JOBS IN AK (MAN YEARS) CONSTRUCTION OIL AND GAS JOBS HELD BY ALASKA RESIDENTS (A) CONSTRUCTION OIL AND GAS DIRECT PAYROLL IN ALASKA (MILLION $) (B) CONSTRUCTION OIL AND GAS PAYROLL TO ALASKA RESIDENTS CONSTRUCTION OIL AND GAS ITEM: NON-RESIDENT PAYROLL SPENT IN AK (C) $184 S51 S16 S72 s 11 $0 1, , $ $69.08 S72.12 $ $51.Bl $54.09 $7.06 S7 Sl $2 S2 Sl so SS. 75 S0.00 $5.75 $4.60 so.co $4.60 $0.23 VENDOR JOBS IN ALASKA (D) INDIRECT AND INDUCED JOBS IN ALASKA (D) TOTAL JOBS TOTAL JOBS TO ALASKA RESIDENTS 554 1,2B2 3,24B 2,B VENDOR PAYROLL (MILLION $) CD) INDIRECT AND TOTAL PAYROLL INDUCED PAYROLL (D) TOTAL PAYROLL TO ALASKA RESIDENTS $16.61 S4B.66 $ $ S0.72 S2. 11 SB.SB S7.43 ==================================================z========================== ============= (Al RESIDENT SHARES OF DIRECT JOBS CONSTRUCTION 01 L AND GAS 75X 75X BOX BOX (B) AVERAGE PAYROLL FROM ADOL REMOTE SITE CONSTRUCTION OIL AND GAS $100 $10D (Cl PORTION OF NON-RESIDENT PAYROLL SPENT IN AK 20X 20X (D) FROM ALASKA IHPUT OUTPUT MOOEL (A) (C) FROM GCLDSMITH, MARGINAL OIL FIELD DEVELOPMENT

18 m HEAVY 01L DEVELOPMENT: THE ECONOMIC IMPACT OIL RELATED POPULATION (TABLE 6) The project will result in population adjustments in response to changes in the level of employment. The underlying assumption is that there is some "natural rate" of unemployment in Alaska, and that if total employment expands, population will also expand. This also implies that population migration is the mechanism by which the equilibrium in the labor market is maintained. It is possible that this equilibrium could also be maintained by changes in the participation rate of the existing population at a given point in time. Historically, it seems that the primary adjustment mechanism has been migration, and we do not attempt to incorporate changes in the labor force panicipation rate. The magnitude of the population effect will depend on the characteristics of the migrating population and of the household characteristics of workers participating in the new employment opportunities. Data from the 1990 Census have been used to establish parameters for average household size, adults per household, school aged children per household, and jobs per household. These are used to calculate the specific population impacts. The total population effect associated with development is 5,379, reflecting the addition of 1847 households made up of 3,4 77 adults and 1,202 school age children. This should not be interpreted to mean that the population will swell by households at one point in time. Assuming relatively level development effort over nine years, then the household increase in a given year would be closer to 205, and the number of school age children about 134. Production related population is estimated to be about 22 7, or about 78 households, with 51 school age children. This would be a relatively constant figure over the life of the field. TABLE 6. HEAVY OIL ANALYSIS: OIL RELATED POPULATION fu 1 IL D11 11t11 \11 \ 1,\\\I 11 P1mn111 11nN "' ;8 l\jhltll 1 h:nm1t 1 ln1\1 l)jlul l \1\tllllt l\lllllll I1\l\! Dm1< 1 \'1,lltm l\j>ltld, 0 Resident] obs 2,895 1, Household Size (A) Adults/HH (B) School Aged Kids!HH (C) jobs Per HH (D) Households 1, Adults 3,477 1, , School Aged Kids 1, Pop 5,379 1, , Assume all indirect and induced jobs held by residents (A) 1990 Census Public Use Sample (B) Population 18 to 64 in households, 1990 Census Public Use Sample (C) Population 5 to 17 in households, 1990 Census Public Use Sample (D) jobs per household is ratio of jobs per household to employees per household multiplied by the industry specific employees per household from 1990 Census Public Use Sample Oil and Gas Construction All Other (A)-(D) from Goldsmith, Marginal Oil Field Development

19 HEAVY 011 DEVELOPMENT: THE ECONOMIC IMPACT STATE GOVERNMENT COSTS OF OIL-RELATED POPULATION (TABLE 7) The population changes identified in Table 6 will give rise to an increase in the demand for state government services. Provision of these services entails both operating budget and capital budget expenditures. The nature of the expenditures will also depend on the characteristics of the added population. Goldsmith has analyzed the 1990 state budget and derived parameters for state spending relative to characteristics of households. These parameters are used here without modification. Certain other adjustments and assumptions of Goldsmith should be emphasized. First, the increase in population will also result in an increase in the number of unemployed, since we are assuming a constant rate of unemployment. These individuals (and households) require a different level of government services. Second, about one-third of the total state government expenditures result from federal government transfers, program receipts, etc. It is assumed that these increase proportionally Given these parameters, it is estimated that the state will incur, over the life of the project, additional costs of about $22 million related to provision of services to development related employment and population. An additional $38 million over the project life is associated with provision of services to production related employment and population. Thus, it is estimated that the total expenditures for the provision of services is about $60 million for project related population. STATE-GOVERNMENT RELATED EMPLOYMENT (TABLE 8) The increase in the demand for state government services resulting from the oil-related population increase leads to an expansion in state government employment and also expansion of private sector construction industry employment related to provision (construction) of public facilities. There is also an associated multiplier effect that reflects the spending of incomes of the added government workers, and government purchases of goods and services from the private sector. The same holds for the increase in construction industry paytdlls and purchases related to increased capital expenditures. It is estimated that the project related increase in population (from Table 6) will result in the first round expansion of about 175 state government and associated construction industry jobs related to development and an additional 7 jobs (man years) annually related to production. These jobs in tum lead, through multiplier effects, to indirect and induced jobs throughout the economy It is estimated that the development phase results in the demand for an additional 68 man years of labor, and about three man years of labor annually from production. The above increases in the demand for man years of labor also lead to population increases. The total population effect from the development phase is about 446, and 19 from annual production. These are second round impacts. This population increase leads to a further increase in state government expenditures and employment (third round impacts) of about 18 from the development phase and 1 annually from production. As can be seen, successive rounds of change diminish rapidly, and these are summarized in Table 9.

20 HEAVY OIL DEVELOPMENT: THE ECONOMIC IMPACT TABLE 7. HEAVY OIL ANALYSIS: PuBuc EXPENDITURE REQUIREMENTS TOTAL DEVELOPMENT ANNUAL PRODUCTION TOTAL DIRECT VENDOR INDIRECT TOTAL DIRECT VENDOR INDIRECT INDUCED INDUCED HOUSEHOLDS ASSOCIATED WITH OIL ACTIVITY 1, ADULTS 3,477 1,2S6 6S7 1, SS 2S 67 SCHOOL AGED KIDS 1,202 42S 222 SSS S POPULATION S,379 1, ,SOO NEW RESIDENTS REQUIRING PUBLIC SERVICES HOUSEHOLDS OF WORKERS ADULTS 3,477 1,2S6 6S7 1,S SS 2S 67 S A KIDS 1,202 42S 222 SSS S UNEMPLOYED (A) ADULTS s S A KIDS TOTAL ADULTS 3, 720 1, ,673 1S S A KIDS 1,286 45S PER CAPITA COST OF STATE OPERATING SERVICES (GENERAL FUND) (8) EMPLOYED ADULTS $2,980 S2,980 $2,980 $2,980 S2,980 S2,980 S A KIDS SS,240 SS,240 SS,240 $5,240 S5,240 SS,240 UNEMPLOYED ADULTS SS,S30 SS,S30 SS,530 SS,S30 S5,S30 SS,53u S A KIDS S5,240 S5,240 S5,240 S5,240 S5,240 S5,240 TOTAL COST OF STATE OPERATING SERVICES (MILLION S) S18.44 S6.61 S3.46 $8.38 S0.78 S0.29 so. 13 S0.36 EMPLOYED ADULTS $10.36 S3.74 S1.96 $4,66 $0.44 S0.16 $0.07 S0.20 S A KIDS S6.30 S2.23 $1. 16 S2.91 $0.27 $0.10 S0.04 so. 12 UNEMPLOYED ADULTS S1.35 $0.49 S0.25 $0.61 $0.06 $0.02 $0.01 $0,03 S A KIDS $0.44 S0, 16 S0.08 $0.20 $0.02 $0.01 SO.DO S0.01 PER CAPITA COST OF STATE CAPITAL SERVICES (GENERAL FUND) EMPLOYED ADULTS S596 $596 $596 S596 $596 SS96 S A KIDS S1,048 S1,048 S1,048 $1,048 S1,048 S1,04B UNEMPLOYED ADULTS S596 $596 SS96 SS96 SS96 SS96 S A KIDS S1,048 S1,048 S1,048 S1,048 S1,048 S1,048 TOTAL COST OF STATE CAPITAL SERVICES (MILLION S) S3.S6 S1.28 S0.67 S1.62 S0.1S S0.06 S0.03 S0.07 EMPLOYED ADULTS S2.07 S0.75 S0.39 S0.93 $0.09 $0.03 $0.01 S0.04 S A KIDS $1.26 S0.45 S0.23 $0.S8 SO.OS $0.02 S0.01 S0.02 UNEMPLOYED ADULTS S0.15 SO.OS S0.03 S0.07 $0.01 SO.OD SO.OD SO.DO S A KIDS $0.09 S0.03 S0.02 S0.04 so.oo SO.DO S0.00 so.oo TOTAL COST OF STATE SERVICES ANNUAL OPERATING S0.78 S0.29 so. 13 S0.36 CAPITAL S0.1S S0.06 S0.03 S0.07 TOTAL S0.93 S0.34 S0.16 S0.43 LI FE OF PROJECT OPERATING S18.44 S6.61 S3.46 SS.38 $31.88 S11.78 SS.38 S14.73 CAPITAL $3.56 $1.28 S0.67 $1.62 S6.16 $2.28 $1.04 S2.85 TOTAL $22.01 $7.89 $4.13 $9.99 $38.04 $14.05 S6.41 S17.58 ============================================= = == === ================================== -=============

21 HEAVY OIL DEVELOPMENT: THE ECONOMIC IMPACT NOTES FOR TABLE 7 (A) RATIO OF UNEMPLOYED NEW RESIDENTS TO EMPLOYED SOURCE: ADOL (B) PER CAPITA ANALYSIS USES 199D BUDGET SEE TABLE 13 (C) PER CAPITA ANNUAL CAPITAL COST ASSUMED TO BE 20%0F OPERATING COST THIS IS ROUGHLY BASED ON THE HISTORICAL RATIO OF OEBT SERVICE AND CAPITAL BUDGETS TO THE OPERATING BUDGET (A) (C) NEW RESIDENT SHARE OF EMPLOYED POPULATION 100X IF THE CURRENTLY RESIDENT UNEMPLOYED FILLED SOl4E OF THE JOBS THEN THE COST TO THE PUBLIC SECTOR WOULD BE MUCH LOWER ALSO IF THE JOBS WERE FILLED BY RESIDENTS WHO WOULD OTHERWISE LEAVE THE STATE THE COST WOULD BE LOWER IF THEIR LEAVING CREATED EXCESS CAPACITY IN THE PUBLIC CAPITAL STOCK ASSUME NON-GENERAL FUND REVENUES COVER NON-GENERAL FUND EXPENDITURES THIS IS PRIMARILY FEDERAL FUNDS FROl4 GOLDSMITH, MARGINAL OIL FIELD DEVELOPMENT

22 HEAVY 011 DEVELOPMENT: THE ECONOMIC IMPACT TABLE 8. HEAVY OIL ANALYSIS: STATE GOVERNMENT ]OBS To!AL DE\ ELOl''1EN 1 I /0 State Government Expenditures (Million $) Related to Table 6 Population Operating $18.44 Capital $3.56 Direct Jobs in Alaska (Man Years) (A) 175 State Government 154 Construction 21 Jobs Held by Alaska Residents (B) 172 State Government 154 Construction 18 Direct Payroll in Alaska (Million$) (C) $7.02 State Government $6.08 Construction $0.94 Payroll to Alaska Residents $6.88 State Government $6.08 Construction $0.80 Item: Non-Resident Payroll Spent in Alaska (D) $0.03 Indirect and Induced Jobs in Alaska (E) 68 Total Jobs 243 Total Jobs to Alaska Residents 240 Indirect and Induced (Million $) (E) $1.52 Total Payroll $8.54 Total Payroll to Alaska Residents $8.40 Population Induced by These Jobs (F) 446 State Expenditures Required for This Population (G) $2.14 Related State Employment 18. bn1 \L P1<0Dt1c1 ION $0.78 $ $0.30 $0.26 $0.04 $0.29 $0.26 $0.03 $ $0.06 $0.36 $ $ Notes for Table 8 (A) Direct Employment per $1 Million of Spending (B) Resident Share of Employment (C) Annual Average Payroll (D) Share of Non-Resident Payroll SPent in Alaska (E) From Alaska Input-Output Model (F) Population to Employment Ratio See Table 9 Notes (G) State Expenditures Per Capita See Table 9 Notes (H) Employment calculated using factor from Note (A) (A)-(H) From Goldsmith, Marginal Oil Field Development State Operations Construction State Operations Construction State Operations Non-Remote Site Constniction !00% 85% $39.6 $ % l.86 $4,800

23 HEAVY OIL DEVELOPMENT: THE ECONOMIC IMPACT ADDITIONAL MULTIPLIER EFFECTS: EMPLOYMENT, POPULATION, AND STATE GOVERNMENT COSTS (TABLE 9) As indicated above, the first round of government expansion itself would lead to further rounds of increased government services, employment, and population increase. The third, and successive, rounds are the increases that are addressed in Table 9. Goldsmith identifies three effects of the initial increase in state government expenditures and employment. First (Part A of Table 9), the added government employees (in response to oil-related population increases and indirect and induced increases) are also consumers of government services. This increase in demand will result in a further increase in government services, employment, and population, and subsequent rounds of increase will trigger further rounds. Second (Part B), the increase in population,.both from the oil-related population and from government expansion, will result in increased demand for local government services. It is assumed that local government revenues will increase in proportion to increased population (through a combination of shared state government revenues, and increased sales or property tax revenues). This implies that there is no local government budget deficit consequence. There is, however, a local government employment effect that also results in a population effect. Multiplier effects at the local government level are the same as at the state level. The third (Part C) effect reflects the interaction of state and local government increases. New state government employees will demand local government services and new local government workers will expect state government services. The "third round" interaction effects are twice the third round effects of Part A, etc. The combined effects of Parts A-C are summarized, and indicate that an additional demand for labor of 341 man years results from development, with an additional 15 man years annually, from production. Comparable population changes are 635 and 27. TOTAL EMPLOYMENT, POPULATION, AND PAYROLL IMPACTS (TABLE 10) Table 10 summarizes the total estimated employment, population and payroll impacts of the proposed Heavy Oil development project. The estimates are shown for both the development and production phases of the project. The overall impact includes the creation of 3,832 man years of labor demand associated with the production phase, including direct project related activity, expanded government, and additional round impacts. The overall population impact is 6,460. The comparable annual impacts from production are 159 and 273. The average payroll per man year is about $55,000 to $56,000. POTENTIAL REVENUE FROM NEW PAYROLL TAX BASE (TABLE 11) At present, Alaska has no payroll based tax or state-wide sales tax. Nationally, Goldsmith found that about 4.8% of personal income is captured by states, using some combination of personal income tax or sales tax. Table 4 indicates the tax revenue that would result if the incomes resulting from the Heavy Oil project were taxed at the rate of 4.5 percent. This reflects a rate of 2.3 percent for income taxes and 2.2 percent for sales taxes for the U.S. as a whole. Over the life of the ptllject it is projected that a the hypothesized tax would generate revenues in the amount of $27.52 million.

24 HEAVY OIL DEVELOPMENT: THE ECONOMIC IMPACT TABLE 9. HEAVY OIL ANALYSIS: ADDITIONALjOBS AND Pusuc SPENDING TOTAL DEVELOPMENT A. JOBS CREATED BY STATE PUBLIC SECTOR REQUIREMENTS OF NEW POPULATION GENERATED BY STATE SPENDING (TABLE 8) THIRD ROUND JOBS FOURTH ROUND JOBS (A) 5.35 FIFTH ROUND JOBS 1.60 SIXTH ROUND JOBS 0.48 SEVENlH ROUND JOBS 0.14 ANNUAL PRODUCTION TOTAL ADDITIONAL JOBS 25 TOTAL ADDITIONAL PAYROLL (B) $0.81 POPULATION (C) 47 STATE EXPENDITURES (D} $0.23 $ $ JOBS FROM THE PROVISION OF LOCAL GOVERNMENT SERVICES LOCAL GENERATED JOBS EQUAL TO TABLE 8 239,89 THIRD ROUND JOBS (SIMILAR TO PART A) FOURlH ROUND JOBS 5.35 FlFTH ROUND JOBS 1.60 SIXTH ROUND JOBS 0.48 SEVENTH ROUND JOBS TOTAL ADDITIONAL JOBS 265 TOTAL ADDITIONAL PAYROLL (B) $8.47 POPULATION (C) 493 STATE EXPENDITURES (D) $ $ $0.10 C. INTERACTION EFFECTS THIRD ROUND JOBS FOURTH ROUND JOOS FIFTH ROUND JOBS 3.21 SIXTH ROUND JOBS 0.96 SEVENTH ROUND JOBS 0.29 TOTAL ADDITIONAL JOBS 51 TOTAL ADDITIONAL PAYROLL (B) $1.62 POPULATION (C) 94 STATE EXPENDITURES (D) $ $ $0.02 SLM TOTAL ADDITIONAL JOBS 341 TOTAL ADDITIONAL PAYROLL $10.90 POPULATION 635 STATE EXPENDITURES $ $ $0.13 NOTES FOR TABLE 9 (A) ASSUME 0.3 ADDITIONAL JOBS CREATED IN EACH SUBSEQUENT ROUND OF THE MUL Tl PU ER EFFECT (8) AVERAGE ANNUAL PAYROLL (000$) $31.9 FROMADOL {C) RAllO OF POPULAllON TO EMPLOYMENT FROM TABLE (D) STATE EXPENDITURES PER CAPITA $4,800 FROM ANALYSIS OF 1990 BUDGET--TABLE 12 {A) (D) FROM GOLDSMITH, MARGINAL OIL FIELD DEVELOPMENT

25 HEAVY OIL DEVELOPMENT: THE ECONOMIC IMPACT TABLE 10. HEAVY OIL ANALYSIS: TOTAL]OBS IMPACT TOTAL DEVELOPMENT ANNUAL PRODUCTION Oil PATCH JOBS: TABLE 5 3, DIRECT 1, VENDORS INDIRECT AND INDUCED 1, TOTAL ALASKA RESIDENTS 2, NON-RESIDENTS STATE SUPPORT OF Oil PATCH INDUCED POPULATION: TABLE 8 STATE GOVERNMENT AND STATE FUNDED CONSTRUCTION INDIRECT AND INDUCED TOTAL ALASKA RESIDENTS NON-RESIDENTS OTHER JOBS: TABLE 9 TOTAL ALASKA RESIDENTS NON-RESIDENTS TOTAL RESIDENT JOBS CREATED NON-RESIDENTS , TOTAL POPULATION INCREASE Oil PATCH JOBS STATE SUPPORT OTHER 6,460 5, TOTAL PAYROLL INCREASE (MILLION $) Oil PATCH JOBS STATE SUPPORT OTHER AVERAGE PAYROLL (000$) $ $ $8.40 $10.90 $ $8.25 $7.43 S0.35 S0.46 $56.23 ======================================================================

26 m HEAVY 01L DEVELOPMENT: THE ECONOMIC IMPACT TABLE 11. HEAVY OIL ANALYSIS: POTENTIAL llevenues FROM NEW TAX BASE TOTAL DEVELOPMENT ANNUAL PROOUCTJON TOTAL PROOUCTION SUM TOTAL PAYROLL--TAX BASE (MILLION $) OIL RELATED EMPLOYMENT RESIDENT NON-RESIDENT $ $35.30 $7.43 $1.15 S $47.16 $ $82.46 PUBLIC EXPENDITURE RELATED RESIDENT NON-RESIDENT $8.40 $0.14 $0.35 $0.01 $14.45 $0.24 $22.85 SD.38 OTHER MULTIPLIER EFFECTS RESIDENT NON-RESIDENT $10.90 $0.00 $0.46 $0.00 $18.99 $0.00 $29.90 $0.00 TOTAL RESIDENT NON-RESIDENT $ $35.44 $8.25 $1. 16 $ $47.40 $ $82.84 POTENTIAL REVENUES (MILLION $) PERSONAL INCOME TAX RESIDENT NON-RESIDENT STATE SALES TAX RESIDENT NON-RESIDENT $10.17 $4.97 $4.19 $0. 78 S5.20 $4.38 $0.82 $0.42 $0.21 $0.18 $0.03 S0.22 S0.19 $0.03 $17.35 $8.48 $7.44 $1.04 $8.87 S7.78 $1.09 $27.52 $13.45 $11.63 $1.82 $14.07 $12.16 $1.91 ==================================================================================================== FOR THE US AS A WHOLE STATE PERSONAL INCOME TAXES ANO STATE GENERAL SALES TAXES COMPRISE 4.5X OF PERSONAL INCOME. SOURCE: SIGNIFICANT FEATURES OF FISCAL FEDERALISM, ADVISORY COMMISSION ON INTERGOVERNMENTAL RELATIONS, SEPTEMBER 1992, PAGE 168. PERSONAL INCOME TAX RATE 2.20X STATE SALES TAX RATE 2.30X FROM GOLDSMITH, MARGINAL OIL FJELD DEVELOPMENT