Alaska editorial: In support of the governor's revenue plan

Posted: Thursday, May 25, 2006

This editorial appeared in the Ketchikan Daily News:

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Six billion dollars is big bucks. Alaska and its communities could build just about whatever we wanted with annual revenue of at least $6 billion. But this wouldn't be Alaska's annual revenue. This would be new revenue on top of what Alaska receives today in oil revenue.

Gov. Murkowski and his administration negotiated a oil production tax/natural gas pipeline proposal with three major oil companies and introduced the proposal to the Legislature this session. Legislators failed to endorse it or come up with their own proposal during the session and the governor has called them back for a special look at it.

At first the Legislature complained about lack of information about the proposal. Then it complained of too much information. Now it needs to quit complaining, look at the proposal, tweak it if necessary - but on the surface and what most Alaskans will note is that it likely requires few changes when the outcome could be about seven really big ones annually.

Whatever the Legislature does, it cannot be fiscally responsible if it does nothing. The proposal would put more oil in the existing pipeline - that amount is dwindling and the current state revenue with it - because gas and oil are extracted together. Now without a gas line, the gas is returned to the ground while the oil is sent down the pipeline to refineries and then market. Of course, it also would be instrumental in getting natural gas to market, too.

The proposal includes an increase in oil production tax, which is the second tax increase for the oil companies by the Murkowski administration. Murkowski increased the tax in 2005. Oil taxes aren't increased often. Oil companies tend to lobby, placing excruciating pressure on legislators, to prevent that. The governor has proposed a 20 percent increase; legislators are considering figures, but staying in the low 20s.

The oil companies would like the tax stabilized for the next 30 years in order to reduce their business risk in building a natural gas line. They wouldn't want to see the oil tax go up at the same time they are investing millions of dollars in the new line. But they would take on some risk, as would the state by nature of being a partner in the gas line. As a partner, and unlike with the oil pipeline in which it isn't a partner, it would have access to all the data concerning the gas line. Such information would help the state ensure it was being paid appropriate royalties for its gas.The figures are based on the current price of oil and natural gas. The $60 a barrel price could increase or decrease. If it decreases, Alaskans won't receive as much in oil royalties, but we would enjoy relief at the service station gas pumps and in our home-heating bills. If it increases, the state would receive even greater royalties and the communities could renovate and expand.

Not only will construction of the gas line create jobs, but the influx of new gas and oil tax revenue would build infrastructure to sustain and attract new businesses to communities. Alaska would be able to provide jobs for its youth, and instead of sending them off to grow and develop other states, they would live here and share their knowledge and ingenuity with us. They likely would be able to study at Alaska institutions with world-class reputations.

We have been blessed with oil and gas resources. It is foolhardy not to make the most of them. Not to act now is like sitting on a diamond mine and complaining about being poor. It's pitiful. We support the governor's contract with the oil companies, and suggest the Legislature do the same. Sure there is risk, but there is risk in getting up in the morning. The governor and administration have laid out a proposal that speaks of greater wealth for Alaska. All the Legislature has to do is stop complaining or reading motives into what the governor has done and look at the deal at face value and move ahead with it.

The governor has done his homework; he's helped legislators and other Alaskans do theirs by providing reams of material on his Web site, at public hearings, through op-ed columns and other reports. Read it - the long version or the short version - and encourage your legislators to get this contract signed immediately. If we don't, they might let $6 billion annually slip away.

This gas line could be built and operating in 10 years. That isn't far in the future; think of it this way: in less than 12 months, Ketchikan Pulp Mill will have been closed for a decade. Times change fast; Alaska should not let the natural gas line disappear over the horizon.

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