Another special session possible

Governor willing to take up oil tax just before primaries

Posted: Sunday, June 11, 2006

Gov. Frank Murkowski hinted at calling a second special session sometime this summer during a Friday press conference held on the lawn of the Governor's Mansion.

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Lawmakers adjourned from this year's first 30-day special session Thursday night, leaving two historic items on the table: a proposal to earn billions of dollars more for the state by rewriting oil tax laws and amendments to the Stranded Gas Development Act that may lead to a deal to build with three producers a $19 billion-$27 billion natural gas pipeline.

The governor said he would discuss scheduling the second special session with the House and Senate leadership in the coming weeks before making the announcement.

"I see no reason why we should move off the momentum that we have," Murkowski said. "We have a summer. People ordinarily want to go fishing, but we've got work to do."

The so-called petroleum production tax, or PPT, and the SGDA amendments will likely be on the agenda, he said.

The governor said he would wait at least until mid-July to call lawmakers back to Juneau. A public comment period on the pipeline gas contract began May 10 and the administration said it would expire in mid-July or perhaps later.

Also during this time, the administration is conducting presentations of the contract throughout the state for the public.

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"I'm counting on people to go home and hear from average citizens," said Senate Minority Leader Johnny Ellis, D-Anchorage. "I think people are just starting to pay attention now at the grassroots level to what's going on here."

Despite that several representatives, senators and the governor himself will be facing off against opponents in the Aug. 22 primary election, Murkowski said requiring legislators to be in Juneau in August would not be out of the question.

House Speaker John Harris, R-Valdez, said he would prefer the Legislature to return after the primaries.

"My suggestion to the governor is that he takes some time; he makes sure he interacts with the public, with the business community, with all the other types of entities that have expressed concern (over the oil tax and the contract)," he said.

House Minority Leader Ethan Berkowitz, D-Anchorage, who is running for lieutenant governor, said he wasn't surprised to hear the governor is thinking about another session close to the primaries.

"There's a logic to mid-July," he said, adding that Murkowski calling the session then would help him politically and give the governor the appearance he is still in charge before Alaskans cast votes in August.

Murkowski will face four Republican challengers - Sarah Palin of Wasilla, John Binkley of Anchorage, Jerry Heikes of Palmer and Merica Hlatcu of Anchorage - later this summer.

Though they differ on when they should return, Berkowitz, Harris and other legislators said they were eager to revisit the oil tax and issues concerning the contract.

The House's Thursday night 13-25 rejection of the net-profits tax surprised many in the Capitol who thought the vote would be closer.

"Some of the folks who voted 'no' I thought were going to vote 'yes.' So, it was a surprise," said Harris, who voted "no" because he thought the bill's tax rate, 22.8 percent, and the escalator set at .175 percent that increases the rate at $50 a barrel, were too low.

The defeat came after members of a conference committee produced a single version that contained compromises between the House and the Senate bills. The House's draft with higher tax rates sided with the Legislature's hired consultants, who said oil companies could afford a tax increase. The Senate's conservative numbers leaned toward the oil companies' pleas for lower taxes.

The Senate approved the bill 14-6.

As the bill officially died with the special session, the next time lawmakers meet in Juneau they will have to start from scratch with a new bill. Murkowski said he plans to introduce one with a tax rate of 20 percent, as he did at the start. With that rate, ConocoPhillips, Exxon Mobil and BP have verbally agreed to build the pipeline.

"I was told (the producers) were willing to have their tax doubled, but not tripled. So I can only assume that their position was that they found the compromise unacceptable," he said.

But few, if any, legislators have supported a bill with only 20 percent and no escalator.

"We're going see 20 crammed back in a tax bill," said Rep. Mike Kelly, R-Fairbanks, who supports a higher rate. "I would think about that twice if I were him."

To break the logjam between the two chambers, Harris said legislators would consider looking at the whole package of the bill, instead of focusing on the tax rates, and also how the bill is linked with Murkowski's proposed pipeline contract.

"It may take on a completely different dynamic," he said.

The administration's contract freezes oil tax rates for 30 years and freezes gas tax rates 45 years.

Democrats have pushed for a scheme that taxes gross profits, not net, as they say producers and state accountants may forever be at odds figuring out the true net value of revenue earned.

"After the resounding defeat in the House tonight, clearly they're going to have to look for other options," Berkowitz said on Thursday.

• Andrew Petty can be reached at andrew.petty@juneauempire.com.



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