Lawmakers to help decide if special session is called

Governor asks for session to work on gas pipeline deal

Posted: Thursday, August 31, 2006

ANCHORAGE - Gov. Frank Murkowski said Wednesday he expects to hear from legislative leaders in the next few days on whether they want a third special session to work on a $25 billion North Slope natural gas pipeline deal.

If both legislative chambers agree to move the contract forward in another session, negotiations on a pipeline deal for the first time would include members of the House and Senate picked by legislative leaders, Murkowski said during a news conference in Anchorage.

"If we have a favorable response from the House and Senate, it would be my intention to call special session Sept. 19," he said.

Murkowski must give 15 days of notice for a special session, and would face a Labor Day deadline to meet the Sept. 19 date.

The meetings initially would include only members of the Republican majority. Those legislators selected by the leadership to participate would have to agree to keep some aspects of the negotiations confidential, the governor said.

Murkowski made his draft contract with Exxon Mobil Corp., BP and ConocoPhillips public in May. Since then, the Legislature has twice failed to pass bills that would make the terms negotiated in the contract legal, and the contract has gone back for revisions after a public comment period.

Lawmakers have had concerns over the favorable tax and royalty terms for the oil companies in Murkowski's proposal, and the governor's loss in last week's Republican primary may have made it more difficult to gain legislative support for the deal.

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Murkowski said extensive meetings were held Tuesday night with House leaders.

"We did get a list of items they felt that would be necessary to have resolved prior to any further movement on a special session," he said.

Those include concerns over freezing the companies' oil taxes, no actual commitments to build the pipeline, the lack of a project labor agreement, disputes decided by an arbitrator and the implications of a ballot initiative to tax the North Slope's natural gas reserves.

Representatives from the three oil companies also took part in Tuesday's talks, and Murkowski said they indicated these items were negotiable.

Murkowski said passing a gas pipeline contract before the November general election would put an end to the proposed reserves tax, even if voters approved the ballot measure.

The reserves tax, headed by Rep. Eric Croft, D-Anchorage, and fellow Democratic Reps. Harry Crawford of Anchorage and David Guttenberg of Fairbanks, would penalize the oil companies approximately $1 billion a year for every year a gas pipeline is not built.

Crawford said the reserves tax is the thing that forced the producers to the table.

"I believe that the reserves tax is the only reason the (gas pipeline) discussion is still alive," he said.

Murkowski said Attorney General David W. Marquez was asked whether the legislature could pass a law that is substantially the same as the reserve tax initiative with the purpose of repealing it later.

Marquez said in an Aug. 29 response that if the legislature enacted a measure it would void the initiative. However, he said, it was unclear whether lawmakers could then undo that law.

"Alaskans have a constitutional right to enact laws by initiative," Marquez said in a memorandum to Murkowski. Both measures would likely be protected from repeal for two years, he said.

A two-year delay would put the gas pipeline project in peril, Murkowski said, again underscoring the need to negotiate his proposed contract with the producers, describing it as the only proposal that is economically viable.

"The contract speaks for itself and would nullify the referendum," Murkowski said, adding that a reserves tax would add between $10 billion and $15 billion to the project. Murkowski has said the tax would kill the pipeline project to Alberta, Canada.

"We have heard from the producers. They won't pay it," the governor said Wednesday.

The House Republican leadership is not talking to Democrats, just their own party members about the need for another special session and changes to the contract, Crawford said. He said the Republicans should force an Alaska solution, not a Republican one.

Crawford is doubtful that the Murkowski administration is leaving the decision on the contract and the special session to the Legislature.

"I don't trust that he's actually putting it in our hands. They've never asked for our input before, why ask now?" he said.



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