NGI The Weekly Gas Market Report
Giving it one more try in his last two years in office, AlaskaGov. Tony Knowles expects to introduce legislation this fall thatwould lower the tax barriers for potential stranded natural gasprojects — such as a possible natural gas pipeline — to bringgas from the North Slope to the Lower 48 and gas-to-liquidsfacilities.
Knowles said the long-proposed pipeline, which he has endorsedfor years, would create jobs, new industries and fatten up thestate’s Permanent Fund.
For nearly 20 years, industries and state officials have workedto create a pipeline to market Alaska’s North Slope natural gas,where reserves may be well above the proven 35 Tcf. So far,however, the high costs have deterred potential projects.
Now, however, Knowles believes the time is right, with naturalgas prices at an all-time high and consumer demand increasing. Lastweek, the governor outlined tasks facing the state before thepipeline could become reality. Among the problems to overcome,which Knowles estimates could take as long as two years, will beacquiring state and federal rights of way; obtaining extensivepermits; and updating already completed federal environmentalimpact statements.
Changing the tax system is one thing he wants to begin now,however. Two years ago, Knowles introduced a bill to allow thesponsor of a liquids-to-natural gas project to negotiate with thestate for payments instead of taxes. That bill failed in thelegislature. This time, he hopes to convince his state legislatorsthat a pipeline has to be built with tax incentives.
“The idea is to lessen the tax burden during construction andthe early years of production, before the project produces ahealthy cash flow,” he said. New legislation, he said, would createa more efficient taxation system, and give investors more economicstability, without reducing Alaska’s revenue share.
His proposed bill also would allow companies to make paymentsinstead of taxes to reduce the initial development costs. Taxrevenues would be collected after the project was completed.
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