Pipeline contract question still open

Legislators seek to avoid being bypassed as session resumes

Posted: Tuesday, July 25, 2006

Gov. Frank Murkowski's top aide on Monday assured a legislative committee that the governor will not sign a natural gas pipeline fiscal contract without first putting it to a vote by state lawmakers.

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But Chief of Staff Jim Clark ducked the question of whether Murkowski would enact the contract anyway if the Legislature votes no and the state Supreme Court rules legislative approval is not necessary.

Lawmakers reconvened their special session Monday after a weeklong hiatus. Murkowski wants three things from the Legislature so he can enact his gas contract with Exxon Mobil Corp., BP PLC and ConocoPhillips: a rewrite of the state's production taxes, authorization to negotiate a long-term oil tax freeze as part of the deal and ratification of the contract itself.

The contract setting the three companies' taxes and royalties for up to 45 years would allow the state and the three companies to go to the next step in developing a plan for a North Slope gas pipeline to Canada, estimated to cost more than $20 billion.

But first, legislators wanted to hear whether Murkowski intends to go ahead without their vote, especially after a legislative attorney wrote a governor could make the case he doesn't need lawmakers' approval to enact a contract.

To that end, a resolution introduced by the House Judiciary Committee would put a constitutional amendment to voters requiring legislative approval of the gas contract. Committee Chairwoman Lesil McGuire, R-Anchorage, and Rep. Max Gruenberg, D-Anchorage, said the resolution was meant to get the Murkowski administration's attention and to get the governor's views on the record.

Clark, speaking before the committee on Monday, said the governor needs the Legislature's nod to negotiate oil taxes as part of the gas contract. Further, Clark said he expects the contract between the state and the oil companies will face a constitutional challenge, and "our position before the Supreme Court is enhanced by having legislative approval."

He presented the House Judiciary Committee with a letter from Attorney General David Marquez in which Marquez writes "because the power of taxation is so clearly implicated by the contract, in my opinion legislative approval of the fiscal contract is constitutionally required."

That letter satisfied several committee members, but not all. Rep. Les Gara, D-Anchorage, put to Clark four times the question of whether the governor would sign the contract if three things happened: The Legislature gives Murkowski the authority to negotiate oil taxes in his contract, lawmakers vote against the contract and the Supreme Court rules the governor doesn't need legislative approval.

Clark evaded a direct answer, saying he did not want to answer speculative questions and the administration would have to see the Supreme Court's order before charting its course.

"If the Supreme Court came up with something shocking, we would sit down and talk with you about what to do," he said.

Gara pressed him, asking for a yes or no answer.

"That's not a yes or no question," Clark said.

McGuire ended the questioning after the fourth time it was asked.

"I think you've answered the question as best as you're going to answer it," she said.

Gruenberg said he was reassured by Marquez's letter and said he saw no need to pursue the resolution for a constitutional amendment. Reps. Pete Kott, R-Eagle River, and Peggy Wilson, R-Wrangell, agreed.

Kott said if a situation such as Gara's does come up, the Legislature can call itself into special session and take up the resolution then.

But the possibility means lawmakers will proceed cautiously with proposed changes to the Stranded Gas Development Act, a bill separate from the contract that would allow Murkowski to negotiate oil taxes with the producers.

Lawmakers fear that is the only definite approval Murkowski needs from the Legislature to enact his contract.

"By extension, it's a type of ratification," McGuire said.

The House Judiciary Committee is expected to take up the Stranded Gas Development Act changes Tuesday.

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