Drue Pearce, federal coordinator for the Alaska natural gas pipeline from Prudhoe Bay, says she doesn't believe the corruption trials and convictions involving Alaska legislators will affect the gas line.
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Maybe she means federal bureaucrats won't pay much attention. But the corruption trials are one of the reasons Gov. Sarah Palin called a special session of the Legislature to change oil and gas taxes. She and her advisers seek an alternative proposal to the Petroleum Production Tax (PPT) that the administration of former Gov. Frank Murkowski came up with and the Legislature passed.
Sometimes we believe she and her advisors, a few of whom quit or were fired by the Murkowski administration, are so intent with erasing any memory of Murkowski that they ignore what's good for the state.
Right now, the major oil and gas producers and any other conglomerates or companies interested in contracting to build the gas pipeline are drawing up proposals. How do they complete the job with a special legislative session possibly changing the rules?
Appearing more interested in changing anything with a Murkowski connection, Palin sold the state's jet purchased by Murkowski. All that did was reduce the ability of the Department of Public Safety to respond quickly in emergencies.
Palin tried to come up with a new oil tax plan to replace the PPT, which went into effect July 1, replacing the old Economic Limit Factor (ELF). But her advisers admit that they couldn't build a tax plan on a gross production basis and had to go back to the PPT net profits base. Now they recommend raising the net taxed from 22.5 percent to 25 percent, and making some other minor adjustments such as changing the title.
As for the corruption and how it affected consideration of PPT, observers report that the four lawmakers accused or convicted of corruption voted to have a 20 percent net tax and lost that when the rest of the Legislature selected 22.5. Maybe the governor thinks it might have been boosted to 25 percent if the four hadn't held back. We doubt that. We suspect that the governor and her advisers just had to devise something different from what Murkowski supported.
In any event, this writer, like many offering advice on oil and gas taxes, doesn't have access to all the figures, but we do know that keeping oil companies guessing on what they will pay while they are considering building a $25 billion natural gas pipeline is poor policy.
Also, although the PPT is producing more than $1 billion a year in additional revenue for the state, officials say it is falling $200 million short of projections. Whose projections?
We wonder if those projections were made by the same state number crunchers that handled 401k-type funds for some 1,100 state employees and managed to lose 16 percent of the retirement money in two months.
With markets at record high levels, the 401k retirement funds with which this writer is familiar have earned more than 10 percent per year in each of the last two years, and probably will exceed that this year.
Instead of changing the rules for oil companies in the middle of their consideration of the natural gas pipeline, the lawmakers might investigate the state revenue department's ability with numbers and consider changing PPT, if necessary, after the proposals are in for the gas pipeline.
Lew Williams can be reached at email@example.com.
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