Supporters of state gas reserves tax try again

Democratic legislators seek to spur natural gas development

Posted: Sunday, November 30, 2008

Lt. Gov. Sean Parnell has certified an initiative petition seeking to establish a natural gas reserves tax for Alaska.

Initiative sponsors, Reps. Harry Crawford, D-Anchorage, Beth Kerttula, D-Juneau, and David Guttenberg, D-Fairbanks, are now able to begin signature-gathering.

Alaska voters in 2006 overwhelmingly rejected a similar tax, at a time when Gov. Frank Murkowski was still trying to build a natural gas pipeline with the cooperation of the oil companies holding leases to billions of cubic feet of natural gas on the North Slope.

Now, after two years of progress toward building a natural gas pipeline by Gov. Sarah Palin, the legislators are back with another version of a reserves tax.

The initiative is designed to push for a gas pipeline by exempting the leaseholders of gas committed to a pipeline. Crawford said that should encourage those holding the gas to develop it, something they've been reluctant to do for decades.

"It will make a pipeline more likely to succeed, certainly," he said.

The initiative would impose an annual tax of 3 cents per 1,000 cubic feet of certain natural gas reserves. Crawford estimated that would raise about $600,000 to $700,000 dollars a year for the state.

The previous version of the tax would have raised about $1 billion a year, but the tax no longer applies to gas in the Point Thomson field, which has been taken back by the state because it has not been developed by the leaseholders.

Crawford said the initiative bill will support Palin's efforts under the Alaska Gasline Inducement Act to get a pipeline built. That's the act under which TransCanada Corp. is moving forward with a pipeline independent of the gas lease holders.

At the same time, two of the companies holding huge reserves of gas, ConocoPhillips and BP, are moving forward with their own gas pipeline plans. Neither pipeline has yet begun construction, or even received Federal Energy Regulatory Commission permits.

A review of the initiative by the Department of Law found some potential problems with the bill, but said that it was not "clearly unconstitutional," the only reason why it could be rejected at this stage.

"The ambiguities noted by the Department of Law and the potential difficulties in the bill's implementation are concerning," Parnell wrote in a letter to Crawford.

Crawford said he was open to amending the language of the bill if need be.

The initiative language appears to favor the TransCanada pipeline over the joint ConocoPhillips and BP pipeline, however, by making exemption from the tax contingent upon meeting criteria in the AGIA law.

AGIA included 20 conditions, known as "must haves" that the oil companies objected to, but which Palin said were necessary to ensure Alaska will get a fair deal from a pipeline.

Crawford said the gas leaseholders would have to comply with the AGIA conditions, as TransCanada did, to avoid the reserves tax.

"If they don't meet the 20 must haves, they're going to be faced with paying the reserves tax," he said.

The sponsors have a year to collect a minimum number of signatures, from at least 30 of the state's 40 representative districts. He estimated it would take about 40,000 signatures to ensure qualification.

• Contact reporter Pat Forgey at 523-2250 or e-mail

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