Alaska, lagging in oil production, looks to bring back boom

The U.S. is on its way to becoming the world's top oil producer. The Energy Department believes American output will soar to 9.6 million barrels a day by the year 2016. But surprisingly, Alaska, one of the country's top oil suppliers, is being left in the dust.

Paul Hughes owns a snowmobile shop near Anchorage. He says there's one day each year every Alaskan looks forward to: the day the state announces the oil dividend. He said this year it’s almost $900.

Every man woman and child in Alaska gets a check, their share of the state’s vast oil revenues. Hughes told CBS News’ Ben Tracy some people spend the money on snowmobiles and he used one of his kids’ checks to buy a new stove.

However, those annual oil checks are getting smaller because Alaska is producing less oil. Production on the North Slope peaked at 2 million barrels per day in 1988 but has dropped to less than 500,000 barrels currently. There's so little oil flowing through the 800-mile Trans-Alaskan Pipeline that some state leaders say it may freeze and shutdown.

The problem isn't that they're running out of oil in Alaska -- the oil industry says there's still billions of barrels of oil in the North Slope alone. But they say the problem is taxes."

Kara Moriarty represents Alaska’s oil industry. She blames a 2007 oil tax imposed by the state that climbed as high as 75 percent depending on the price of oil that caused the oil industry to slow production in Alaska. Alaska has now fallen behind Texas, North Dakota and California in oil production.

"If we don't change things we're going to be out-surpassed by Oklahoma,” said Moriarty.  

Alaska Gov. Sean Parnell has now pushed through a new 35-percent flat tax on oil. He's hoping to lure companies back to Alaska’s North Slope.

"When California eclipsed us a producing state, that was embarrassing,” said Joe Balash, who runs Alaska’s Department of Natural Resources. “They are the most over-regulated, overtaxed place on the face of the planet - well in the United States."

Alaska is uniquely dependent on oil. There is no income tax, property tax or sales tax. More than 90 percent of the state budget is paid for with oil taxes. The people in the state also depend on the revenue from oil.

Hughes knows what oil and those oil checks mean to his business, even if they are getting smaller. He told Tracy that he’d “like to see it higher.”

However, that won't happen unless production on Alaska’s North Slope stops heading south.

-- Photographs in this "CBS This Morning" piece are provided by Judy Patrick Photography