Alaska editorial: Give people math on the proposed gas line

Posted: Monday, December 19, 2005

This editorial first appeared in the Anchorage Daily News:

Just a few years ago, state production tax and royalty revenues from the proposed North Slope natural gas pipeline were estimated at $400 million a year. Admittedly, that was in an era of much lower gas prices, very much lower than today's market. So you would expect more recent estimates to reach a higher number.

But the number keeps climbing. First it was $1 billion, then maybe $2 billion. Then Gov. Frank Murkowski, in a speech last month at the Resource Development Council's fall conference in Anchorage, said: "These are the options: A line with the producers involved with $2 billion to $3 billion a year for the state to spend as the Legislature sees fit."

No doubt much of the increase in estimated tax and royalty income is based on higher long-term price forecasts for natural gas, but how high are those projected prices? Are they realistic? How much of the latest multibillion-dollar estimate is based on the governor's plan for the state to own a minority stake in the pipeline itself? And how much is based on the other key part of the governor's proposal, that the state assume the market risk and reward of taking gas to sell in lieu of hard-cash tax and royalty checks?

How sensitive is that revenue estimate to market prices for natural gas? How much does it depend on pipeline construction costs coming in on budget? Assuming it includes property taxes, how much might go to municipalities along the pipeline route?

As we've said before, we understand the need for confidentiality in the state's fiscal negotiations with the major North Slope producers. There are good reasons to keep secret proprietary information about private companies, and bargaining between state and producer negotiators should be done at the table - not in a battle of news conferences and press releases. Alaskans will get to see the deal when it's done, and then accept or reject it on its merits.

But until then, the state should share as much nonconfidential information as possible with the public. The more time people have to understand and question, the smarter they will be if and when a deal is ready for prime time.

Sharing the math behind the latest estimates of $2 billion to $3 billion a year in state revenues seems like something the governor could do with Alaskans now, not later.v



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