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Frank Murkowski talks oil and gas

Posted: Friday, October 16, 2009

Former Gov. Frank Murkowski says Alaska needs to abandon its effort to build a natural gas pipeline and roll back its recent oil tax increase.

Michael Penn / Juneau Empire
Michael Penn / Juneau Empire

Instead, Murkowski told the Juneau Chamber of Commerce on Thursday, it should resurrect the Stranded Gas Act, his administration's failed pipeline effort.

The only way to get a pipeline, he said, was with the state's oil producers, not an independent pipeline company.

Murkowski warned that oil production in Alaska was dropping, from 960,000 barrels a day when he left office in 2006 to 640,000 per day now, and continuing to decline by 7 percent a year.

"We have some trying challenges ahead of us, and I think that's an understatement," he said.

With oil running out, Murkowski said the state needs to lower oil taxes to encourage the state's oil producers to boost production.

He acknowledged that might be a tough sell.

"Some people aren't too fond of Big Oil, but they pay most of the taxes and hire most of the people," he said.

With the right tax incentives, along with making exploration and drilling permits easier to get, the decline in oil production could be leveled off, he said.

The only way to get a natural gas pipeline, Murkowski said, is to abandon the Alaska Gasline Inducement Act, the state's current effort to develop a pipeline.

AGIA was a key achievement of the administration of former Gov. Sarah Palin, and her Lt. Gov. Sean Parnell, who became governor in July following Palin's resignation.

The Legislature adopted AGIA over the objections of the state's oil industry, and the industry's allies in the Legislature.

TransCanada Corp. was awarded a "license" last year under AGIA qualifying it for $500 million in state subsidy for development costs, in exchange for developing a pipeline with expansion rules and other conditions that would benefit Alaska.

Two of the state's natural gas lease holders, ConocoPhillips Co. and BP PLC, declined to seek that license, and instead began developing their own pipeline, called Denali.

The state's third big leaseholder, ExxonMobil Corp. joined TransCanada's effort and will be bound by AGIA's conditions.

However, Murkowski was adamant that AGIA is not working.

"We've got to recognize we're not going to get the gasline under AGIA," he said.

Parnell declined comment on Murkowski's speech through spokeswoman Sharon Leighow. Murkowski said he was to meet with Parnell later Thursday.

Murkowski said the only way to get a gasline is to encourage the oil producers, who also hold leases for the natural gas, to develop it.

To do that, he said, they needed to go back to the contract he negotiated with the oil producers under the Stranded Gas Act.

"Go back and offer that to the producers, pay off TransCanada for their out-of-pocket costs, and see what you can smoke out," Murkowski said.

Murkowski had declined interview requests from the Empire as the Legislature was adopting AGIA, awarding the license to TransCanada, and replacing his Petroleum Profits Tax with ACES.

He's speaking out now, he said, because of the continued decline in oil production and because of the distance from the election.

"When you are a former governor and you lose a race, you've lost the race and you don't have a soapbox," Murkowski said.

Murkowski, also a former U.S. senator, came in third in the Republican primary for his gubernatorial re-election bid after Palin attacked his pipeline plan as a giveaway to the oil industry.

Murkowski said the state would need to offer oil producers "fiscal certainty" on gas taxes under which tax rates would be locked in for the length of a contract, or else they'd not develop a pipeline or sell their gas through it.

• Contact reporter Pat Forgey at 523-2250 or patrick.forgey@juneauempire.com.



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