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Senate approves oil and gas tax freeze

House unlikely to vote on measure before end of the special session

Posted: Wednesday, June 07, 2006

The Alaska Senate on Tuesday voted to give Gov. Frank Murkowski the authority to freeze the oil and gas taxes of the three companies in negotiations to build a North Slope natural gas pipeline.

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The bill likely would go no farther, though, as the House did not plan to bring it to a vote before the special session adjourns Thursday.

Sen. Gene Therriault, R-North Pole, said that was one of the reasons he voted against the bill.

"It's like a dead man walking," Therriault said. "It can't possibly pass the Legislature during this special session."

But the majority did not see it that way. The Senate approved the freeze and other changes to the Stranded Gas Development Act on a 12-8 vote.

Senate President Ben Stevens, R-Anchorage, said the vote was necessary.

"It sends a message to the industry that if you want certainty, these are the terms," he said.

Sen. Kim Elton, D-Juneau, gave notice of reconsideration of his vote, meaning it could be taken up during the next floor session.

Gov. Frank Murkowski proposed freezing oil taxes for 30 years and gas taxes for up to 45 years for the three major oil companies that are negotiating to build a North Slope natural gas pipeline.

Murkowski and Exxon Mobil Corp., ConocoPhillips and BP PLC say the tax freeze will give them the stability needed to invest the estimated $19 billion to $27 billion needed to build the pipeline.

But to make that plan fit under the state's Stranded Gas Development Act, Murkowski is asking lawmakers to change the 1998 law. The changes would allow him to negotiate oil taxes as part of the gas contract proposal with the companies and lock in the rates.

Recognizing that most lawmakers oppose locking oil rates for such a long time, the Senate Special Committee on Natural Gas Development changed Murkowski's oil-tax freeze proposal.

There would be no tax freeze for the design permitting and phase of the pipeline project, estimated to last four years.

Taxes would be frozen during procurement, construction and the capital cost recovery phase, all of which is estimated to take 14 years.

For a period of time after that, the three companies' gas taxes could be adjusted if the Legislature changes their oil taxes.

From the contract's effective date, the fixed and adjusted tax period couldn't last longer than 25 years, under the provision.

Not all legislators saw the revised tax-freeze plan as a compromise.

Sen. Hollis French, D-Anchorage, on Tuesday released a 26-page legal analysis of freezing oil and gas taxes for multiple years. French concluded that Attorney General David Marquez's view is flawed that the state constitution allows such a freeze, because the constitution allows no tax to be contracted away for more than two years.



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