Governor announces gas deal, but fate hinges with oil tax plan
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By MATT VOLZ, Associated Press Writer
Published: February 21, 2006
Last Modified: February 21, 2006 at 06:54 PM
JUNEAU, Alaska (AP) - Alaska Gov. Frank Murkowski says an agreement has been struck with three oil companies to bring a much-anticipated $20 billion North Slope natural gas pipeline a step closer to construction.
But the agreement on the tax and royalties for developing Alaska's natural gas will hinge on the Legislature passing a new state oil production tax. Murkowski on Tuesday introduced a bill that calls for a 20 percent tax of oil companies' net profits in Alaska plus a 20 percent tax credit for reinvestment in Alaska.
"Clearly there is a connection, because what the producers basically accepted yesterday was a package, an assumption that the Legislature would prevail at (the) 20-20 (rate) as well as the acceptance of the gas proposal," Murkowski said.
For more than a year, Murkowski's negotiators have been in talks with Exxon Mobil, BP and ConocoPhillips under Alaska's Stranded Gas Development Act. Locking up natural gas fiscal issues with the state is one of several conditions in building the gas line, which would run along the Alaska Highway through Canada and to markets in the Midwest.
Murkowski Chief of Staff Jim Clark said all the major articles of the natural gas contract proposal have been agreed upon by the three companies, and what remains is technical work and contract reviews by outside attorneys. Murkowski spokesman Chuck Logsdon said there is no telling when a contract proposal would be released to the public.
All three oil companies will be carefully watching the fate of the governor's oil tax bill before a gas contract is signed and sent to the Legislature.
"We need a healthy oil business in order to move to a healthy gas business," said BP spokesman Daren Beaudo. "We view oil and gas as one package and the agreement reached with the governor is finely balanced."
Murkowski last week planned to introduce a bill to tax 25 percent of the companies' net profits, but halted at the last moment when the three companies requested a meeting with the governor.
After that Monday meeting, Murkowski's rate had changed to 20 percent, and that proposal is the one that will now go to the Legislature.
The oil companies involved all said the governor's bill fit with what was needed to move the gas pipeline forward.
"Oil contract terms consistent with the Gov.'s proposed oil tax bill would provide the predictability and durability necessary to advance the gas project to the next phase," said Exxon Mobil spokeswoman Susan Reeves in an e-mailed response to an Associated Press query.
Legislative Democrats see it differently. The tax rates proposed are too low and it is now up to the Legislature to raise them before passing a bill, said Rep. Eric Croft, D-Anchorage, a candidate for governor.
"I think it's a sad day. One hundred thirty-nine years ago Russia sold Alaska for peanuts, and we just sold Alaska's oil for peanuts," Croft said. "I think we're going to get a gut check on this Legislature and finally find out who owns this state."
Another Democratic candidate for governor, House Minority Leader Ethan Berkowitz, D-Anchorage, said he believed the governor caved in to pressure by the oil industry in lowering the proposed tax rates.
"It seems to me he's been spelunking at the very least," Berkowitz said.
Under the governor's tax proposal, the state would take in $773 million over the current production tax next year if oil averages $60 a barrel.
If Murkowski had stayed with the original 25 percent tax rate, another $300 million would be added that number, said Pedro van Meurs, the governor's lead oil and gas consultant.
But Senate President Ben Stevens, R-Anchorage, said the tax proposal is not just about bringing more money into the state, but making Alaska an attractive investment.
"We want to make sure it is attractive for industry and it's a fair deal for the state's portion of the take," Stevens said.
Hearings on the oil tax bill will be going on the rest of the week in both the House and Senate Resources committees. |
