Alaskan oil falling behind in production volume

Alaska is trying to revive its oil industry.

Perhaps more than any other state's residents, Alaskans' welfare is tied to local oil production. Not only is it one of Alaska's biggest natural resources, it's also a steady source of income: each year, every man, woman and child there receives a share of profits earned via oil sales. This year, that amount was nearly $900, a significant amount, especially for larger families. 

These dividends don't just help individual households, they also help the economy as a whole. The more money households have, the more they can spend at local institutions. One resident, Paul Hughes, knows both sides of this value intimately: he used one of his family's checks to make important repairs in his kitchen, and told CBS News that the snowmobile shop he owns near Anchorage always sees an uptick in sales when the oil money is released.

However, the amount of money dispersed is getting smaller and smaller. While more than 2 million barrels per day were being pumped out in 1988, the current output is less than a fourth of that number. In fact, so little oil goes through the Trans-Alaskan pipeline that some officials are worried that it may freeze over and have to be shut down. 

This would be a huge blow for Alaska. Not only do the citizens get a cut of the revenues, the state itself relies on them heavily. Since there are no income, property or sales taxes, 90 percent of the state budget is paid for via oil sales. 

The problem, it seems, isn't one of volume. There are still billions of barrels left in the North Slope alone, according to industry professionals. However, taxation is believed to be one of the factors that has caused production in the region to slow down and lose its perch atop the nation, dropping to fourth behind Texas, North Dakota and California. Due to a measure passed in 2007, taxes on crude shot up, in same cases getting as high as 75 percent. 

For his part, Governor Sean Parnell is pushing through a 35 percent flat tax.  He hopes that this measure will entice oil companies to begin producing in Alaska again, perhaps using the new hydraulic jet pumps and triplex pumps that have contributed to the industry's profitability in the states that have emerged as top producers. Until then, Alaska will likely continue to falter by comparison.