Bill would impose tax on gas reserves

Sponsor says legislation encourages producers to ensure supply for gas line

Posted: Wednesday, February 18, 2004

The state is reviewing applications to build a natural gas pipeline, but a legislator is worried there might not be an adequate supply of gas.

With that concern in mind, Rep. Eric Croft, D-Anchorage, has introduced a bill that would impose a reserves tax on holders of natural gas leases if they fail to sell gas for the pipeline.

Croft says House Bill 482 encourages natural gas producers to ensure supply for the gas line. The state has received two applications to build the line.

One application came from a group of companies including MidAmerican Energy Holding Co., a privately held company whose major owners are billionaire investor Warren Buffett and his holding company, Omaha, Neb.-based Berkshire Hathaway. The other application was submitted by ConocoPhillips, BP Exploration Inc. and ExxonMobil Corp., the three major oil producers with rights to natural gas on the North Slope.

Croft said he believes the producers only filed an application because they got word that Buffett's company was going to file. The producers' application was filed a week before MidAmerican's application.

He said he is concerned that producers would not want to sell gas to be shipped on a pipeline they don't own.

"There's a lot of competitive reasons why the major oil companies might want to hold out not for just any pipeline but for a pipeline they own and control," Croft said. "They own (the oil pipeline) and can charge a high tariff on that, and then if they own the gas line and can control who ships on it, they basically control the Slope."

But ConocoPhillips spokeswoman Dawn Patience said the bill doesn't help move the project forward. She said ConocoPhillips' gas is for sale "for reasonable terms."

"This bill is not an incentive to sell gas or market gas. It's just a new tax," Patience said. "It doesn't do anything to reduce the cost or lessen the risk of the project for major investors. It's not a positive step."

The bill probably won't be heard, said Rep. Vic Kohring, R-Wasilla, who chairs the House Oil and Gas Committee.

"I'm philosophically opposed to any additional taxes on the oil and gas industry. I think that's the wrong approach if our intent is to spur development in the industry," Kohring said. "It's (the producers') business what they want to do, whether they want to sell gas for the pipeline or not."

Kohring said he isn't concerned about adequate supply, given high prices and the current demand for gas in the Lower 48.

John Manly, spokesman for Gov. Frank Murkowski, said the gas producers' leases require them to sell the gas if they have a willing buyer.

• Masha Herbst can be reached at masha.herbst@juneauempire.com.



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