JUNEAU — Alaska is willing to pay up to $2 million for help studying potential changes to its system of taxing oil and gas production.
The solicitation comes as efforts continue toward making a long-anticipated natural gas pipeline a reality. There are two major competing proposals that would deliver gas from the prodigious North Slope to market. One, Denali, a joint effort of BP PLC and ConocoPhillips, plans to begin seeking shipping commitments in early July. The other, TransCanada Corp., which is working with Exxon Mobil Corp. to advance a separate project, plans to wrap its three-month open season by the end of July.
While it’s widely expected that only one major line, if that, will be built, state officials expect companies will want changes to Alaska’s oil and gas tax system as a condition for moving ahead. In recent years, the tax scheme has been a leading topic in the Legislature — an ill-fated proposal to separate oil and gas taxes captured considerable attention this past session. And companies have already warned of a need for greater fiscal certainty to boost their comfort level with signing on.
Revenue Commissioner Pat Galvin said Tuesday that the current consultant’s contract is expiring and the new contract would essentially be a continuation of that work. The goal is to have a contractor picked by July 1, a turnaround that Galvin said he was told was consistent with past practice.
The request for proposal lays out a work schedule that includes having an economic model reflecting all aspects of the tax structure done in August. The RFP also includes the ability to issue a detailed response to any report by a legislative consultant that is related to or proposing changes to the system within 20 days of such a report.
Ralph Samuels, a former lawmaker and Republican candidate for governor, called the request “nonsensical,” saying the issue already has been studied heavily. “How many models do you need?” he asked.
Samuels has criticized the Alaska Gasline Inducement Act, a pet cause of then-Gov. Sarah Palin aimed at creating a more competitive environment for a line and moving away from the private negotiations with energy companies. TransCanada won an exclusive license with the state under the act, along with the promise of up to $500 million in costs to advance a project.
Samuels said the point of the inducement act was to avoid negotiations, and now, several years after its passage, people are bracing for them and “we’re right back to square one.”
Galvin said Samuels is wrong. The structure, set out by the act, is the state’s effort to ensure a project isn’t “held hostage” until companies get whatever fiscal concessions they might want from the state, Galvin said. State officials have long maintained that if companies can prove that fiscal changes are needed, then that would be considered, he said.
“It’s not that the state will give them what they want for a line,” Galvin said. “That’s the distinction, and it’s an important one.”