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Alaska Reserves Tax Ballot Measure Will Go to Voters Nov. 7

The Alaska gas reserves tax ballot initiative, crafted last summer by Anchorage Democratic Reps. Eric Croft and Harry Crawford, was certified this week and will head to voters Nov. 7 regardless of what the legislature does with a bill that would impose a similar tax on state leaseholders.

The ballot measure would impose a tax of 3 cents/Mcf/year on gas reserves under lease until production begins. It amounts to about $1 billion a year given the 35 Tcf of estimated reserves under lease (see Daily GPI, Sept. 1, 2005). The measure is designed to be an incentive for producers to get moving on their $25 billion gas pipeline project to the Lower 48 states so that gas production can begin, increasing state revenue through royalties.

Given the time it would take to build the pipeline, the tax could be levied for nearly 10 years. However, the measure calls for an escrow account to hold the proceeds of the taxes in case producers file a lawsuit to challenge the tax. The funds collected also would be returned to producers in the form of a credit against future severance taxes as soon as the pipeline is built. The proposed ballot measure is based on a tactic the state used in 1975 to get an oil pipeline built.

Producers have said all along that a commercial pipeline project can't be taxed into service. BP and ConocoPhillips officials have called it bad policy that would penalize the industry at the very moment it is preparing to make a massive investment in the state.

The ink is still drying on the preliminary pipeline agreement that Gov. Frank Murkowski reached late last month with Exxon Mobil, ConocoPhillips and BP (see Daily GPI, Feb. 23, March 3).

But proponents believe it would give the state much-needed leverage against producers who have been allowed to sit on their reserves for 30 years.

According to the Anchorage Daily News, the tax bill may have attracted strong opposition in the legislature, but on the street, the ballot measure appears to be much more popular.

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