Alaska Gov. Frank Murkowski called on state lawmakers to pull together and approve a natural gas pipeline contract within the next month with the “Big Three” North Slope producers: BP plc, ExxonMobil Corp. and ConocoPhillips. Without approval, he warned, Alaska’s hopes to build a gas pipeline to the Lower 48 could be “slipping away.”
The Republican governor, who has tied his hopes for a gas pipeline contract to the November elections, reintroduced his petroleum production tax (PPT) bill during the special session of the legislature, which opened on Wednesday. Murkowski’s bill, which mirrors his previous “20/20” legislation, would tax producers at a rate of 20% for net profits and provide a 20% tax credit (see NGI, May 29).
Murkowski’s urgency to gain a gas contract is likely tied to the bruising he has been taking politically. According to a survey of likely voters by Survey USA in July, only 20% of Alaskans approve of the job Murkowski is doing; 78% disapprove. Murkowski has to win the state’s Aug. 22 primary, not coincidentally a date that would come after he wants the contract approved. But winning the primary is not a sure thing. Murkowski faces two strong Republican opponents in former Wasilla, AK Mayor Sarah Palin and prominent businessman John Binkley. If Murkowski manages to win the Republican primary, more troubles are ahead. In the fall, the Republicans will likely be challenged by former Gov. Tony Knowles, the popular Democratic governor who has already served two terms (see NGI, June 5).
Murkowski warned legislators who are critical of his 20/20 proposal — and who have defeated similar legislation already twice this year — that they were “missing the window of opportunity” to move North Slope gas to Lower 48 markets.
“The issue is a rare and historic opportunity to authorize the largest construction project ever undertaken in our state, a project that for the next 50 years will solidify the economic foundation of our state for generations to come,” Murkowski said. “Clearly, the time for this gas line is now.”
Murkowski, who at times appeared to nearly threaten legislators, while at other times was pleading with them, said, “the people of Alaska want and expect us to stop arguing and get a gas pipeline contract approved. NOW! This session…With a gas pipeline, our future is secured. Without it, we face uncertainty.”
Murkowski said “to protect the project, the contract must be in place before the November ballot.” Criticizing legislators who called for higher producer taxes, the governor said the 20% PPT “is far beyond” what the producers want to pay in taxes to the state. “They initially proposed 12%. 20/20 will give Alaska the highest government take in North America. The real prizes here are the gas pipeline and substantially more investment in the North Slope…We need to focus on what Alaska gets, not what the producers get.”
Bowing to pressure by the state Senate, Murkowski amended proposed legislation to revise the Stranded Gas Development Act. The provisions of the new bill are based largely on changes proposed by the Alaska Senate Special Committee on Natural Gas Development. The new bill would authorize the commissioner of revenue to negotiate fiscal terms relating to oil, and includes provisions relating to certain payments to municipalities and nonprofit organizations.
“I continue to believe that the fiscal contract we have negotiated with the producers would be in the public’s best interest,” Murkowski said. “However, it is my intent to respond to the concerns expressed by the legislature and by members of the public concerning the provisions in the contract that provide for fiscal certainty on oil taxes.”
The proposed tax and royalty terms for the gas pipeline are out for public review until July 24. The special session could last until Aug. 10.
“I see no justification for extending this process beyond the decision-making obligation we have here,” Murkowski told the Anchorage Daily News. “Nobody’s walking out of here without taking a position and standing up and being counted.”
Still, Democratic and Republican legislators — and even BP officials — appear skeptical that a gas pipeline contract or any tax bill will be approved before the special session ends.
Democratic State Rep. Ethan Berkowitz, the House Minority Leader, told the News, “I think if you were to put a proposal, his current proposal, in front of the legislature, it would be rejected soundly, and it would be rejected across party lines.” Republican Rep. Jay Ramras said legislature may pass a PPT this session. However, Ramras said Murkowski was “paving the way for an easy vote on a prematurely done contract…I’ll vote no and sleep like a baby.”
Ken Konrad, gas business leader for BP’s Alaska subsidiary, also appeared skeptical of gaining a contract within the next month.”That would be a bit aspirational,” he told the News.
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