Alaskan voters Tuesday gifted the oil and gas industry with a Republican governor and defeat of a controversial tax on natural gas reserves.

Former small-town mayor Sarah Palin defeated former Alaska governor Democrat Tony Knowles, in his attempt at a third term in the governor's mansion, and independent Andrew Halcro. With 98% of precincts counted Wednesday, Palin defeated Knowles 49% to 41%. Halcro had 10% of the vote. Earlier this year, 42-year-old Palin beat Gov. Frank Murkowski in the Republican primary.

After taking office, Palin will play a key role in negotiations for a natural gas pipeline to deliver her state's abundant gas reserves to the Lower 48 states. Previously, she has said she wants to expand the competition for pipeline development. In September Palin said high gas prices mean North Slope gas is no longer stranded, which frees any pipeline negotiations from being under the umbrella of Alaska's Stranded Gas Development Act. "The door to competition is wide open," she said (see Daily GPI, Sept. 11).

"The free market will work if we want it to. This market will include, but not be limited to, BP, ExxonMobil and ConocoPhillips. However, I will not allow them a monopoly, nor will I accept that huge concessions are the only way to get the line built."

A controversial ballot measure in Alaska to spur development of a natural gas pipeline by taxing the undeveloped gas reserves of major oil companies failed at the polls Tuesday by a 2-1 margin, based on returns from 75% of precincts.

Ballot measure 2 -- the Alaska Gas Line Now initiative (see Daily GPI, Oct. 25) -- had little organized support, but the oil industry spent heavily on advertising to counter the measure, which it said would not speed pipeline progress and only add to the cost of the $20 billion project. Had it passed, the measure would have imposed an annual tax on North Slope gas reserves until they flowed through the pipeline. The oil industry would have been eligible for credit for some of the tax paid after production flow depending upon how long it took to get the pipeline in service. Estimates of how much the tax would have raised ranged from $400 million to $1 billion/year.

In other gasline related news, efforts by lame duck Gov. Frank Murkowski to call a special session for consideration of his draft contract with potential North Slope gas producers BP, ConocoPhillips and ExxonMobil appear dead. Leaders of the state's Republican majority have asked the governor to withdraw his call for a special session, and lawmakers have said that if one is called they will adjourn without taking any action. Last week, Palin, Knowles and Halcro had put their support behind a Legislature lawsuit to prevent Murkowski from signing the gasline contract with producers without legislative approval.

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