Gov. Murkowski wants lawmakers to vote on gas contract this session

Posted: Friday, July 14, 2006

Gov. Frank Murkowski on Thursday said he will ask state lawmakers within the next month to approve his natural gas pipeline contract with three oil companies.

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Murkowski told reporters that he plans to call for a ratification vote of the deal with ConocoPhillips, Exxon Mobil Corp. and BP this legislative session. The contract setting tax and royalty terms for the pipeline to Alberta, Canada, is out for public review until July 24. The special session, which began Wednesday, can last until Aug. 10.

Most had assumed a contract ratification vote would be held later in the year in a separate special session, but the Republican governor says he wants to wrap it up now.

"I see no justification for extending this process beyond the decision making obligation we have here," Murkowski said. "Nobody's walking out of here without taking a position and standing up and being counted."

To reach a ratification vote, the Legislature would first have to pass an oil tax rewrite and a bill authorizing the governor to negotiate oil taxes in the contract.

Both bills have failed in previous sessions.

Murkowski sidestepped the question of whether he would unilaterally execute the contract if the Legislature votes it down. Recent legal opinions say the governor may be able to do so.

"I will be bound by the law and the state constitution, and that I think is adequate and appropriate for the governor and that is where I stand on the issue," Murkowski said.

He declined to answer what his interpretation of the law is.

Democratic lawmakers have been saying the gas contract proposal and the governor's oil tax plan give away too much to the oil companies, and that they shouldn't have been linked in the first place. Now, they say, that view has spread and it will doom the governor's deal if Murkowski forces a vote.

"I think if you were to put a proposal, his current proposal, in front the Legislature, it would be rejected soundly and it would be rejected across party lines," said House Minority Leader Ethan Berkowitz, D-Anchorage.

Earlier Thursday, Murkowski addressed the state House and Senate in a joint session. He hammered the message for lawmakers to pass his version of the oil tax plan - a twice-rejected 20 percent tax on companies' Alaska profits - and he also tried to squelch alternative proposals that have bubbled up.

Murkowski also prodded lawmakers to give him the power to execute his gas contract, invoking a recent federal report that says the market opportunity for Alaska to sell its 35 trillion cubic feet of gas reserves may be slipping with massive imports of liquefied natural gas expected to arrive on American shores in the coming years.

He said the contract needs to be acted upon before voters decide in November on a gas reserves tax initiative, which would tax oil companies $1 billion for every year they don't develop the state's gas reserves.

Murkowski says that tax would kill the pipeline project, but his contract with the producers would shield them from it. That means the contract needs to be in place by November, requiring legislative action now, he said.

"Those who advise you to gavel out, to go home without acting or to wait until November are either ignorant of the LNG and the reserve tax threats to this project, or simply don't care," Murkowski told lawmakers.

But the governor may have a hard time getting past step one: Replacing the state's oil and gas production tax with one based on companies' net profits. Lawmakers have not been swayed by Murkowski's argument that a 20 percent flat tax is the best balance for raising revenue and increasing investment that will slow Alaska's decline in production.

Twice they have adjourned after failing to compromise on a higher tax rate, even after adding a sliding tax scale that would kick in when oil goes over $50 per barrel.

And this time, other tax plans have been submitted. Democratic Reps. Eric Croft and Les Gara of Anchorage submitted separate bills Thursday that would base the tax on gross oil production instead of profits. Sen. Tom Wagoner, R-Kenai, is working on a similar bill.

The Democrats have long criticized the net-profits system, saying companies will be able to manipulate the it by inflating their costs, thereby lessening their tax burden. A tax based on gross production won't be as easy to "game," they say.

Murkowski spent a good portion of his speech trying to deflate the momentum the gross production tax plan seems to be gaining. He said the concerns about manipulating the profits tax are "ill-founded" and a tax in which companies' costs are not considered won't give them an incentive to investing the state.

"They want to kill it. They want to come back and start all over again in, whatever, in a year or two, or whatever," Murkowski said later of supporters of the gross production tax. "They're for a gas line, but they're not for it now for reasons we can all speculate."

The governor, who faces a competitive primary election Aug. 22, also used the podium to do a little campaigning: He promised that in the next legislative session - after the election - he will propose to use money from the new oil tax to refund homeowners $1,000 each for their property taxes.

Immediately after Murkowski's address, the Legislature took a vote on whether to override the governor's line-item veto of $73.5 million in utility projects struck from the capital budget.

The vote to restore the money to utilities along the state's railbelt won a 27-24 majority, but it failed because 45 votes are needed to override the veto.

Rep. Bill Stoltze, R-Chugiak, called for the vote, saying the veto was a shock to many legislators and a jolt to the customers living in the utilities' areas.

Murkowski says he vetoed the money so the utilities in Southcentral Alaska and the Interior would work together to increase generating capacity and meet rising energy demand.



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