By OGJ editors
HOUSTON, May 11 -- Alaska's legislature convened a special session May 10 that Gov. Frank H. Murkowski called to address issues about partial state ownership of a proposed pipeline to carry gas from the North Slope to the Lower 48.
The special session started the day after lawmakers adjourned a regular session without the House and Senate reaching consensus on an income tax on oil producers associated with a proposed gas pipeline contract agreement (OGJ, Mar. 6, 2006, p. 32).
The tax bill was intended to raise state revenue in times of high oil prices. Lawmakers could not agree on how much to tax oil company profits.
The House and Senate passed differing versions of the tax, and the Senate failed to concur with the House changes. House members supported a 21.5% tax rate, while the Senate supported a 22.5% tax rate.
Murkowski had proposed a 20% tax on net profit—defined as revenue minus capital and operating outlays—and a 20% tradable tax credit. The result, Murkowski said, would be that tax revenue to Alaska would be lower when producers made large capital investments and higher as production increased.
The proposed tax on oil producers also would contain a $73 million annual standard tax deduction to provide an exploration incentive for small independent producers, he said.
Murkowski wanted lawmakers to lock in a tax for 30 years as part of a gas contract under the state's Stranded Gas Development Act (SGDA).
Gas pipeline accord
Also on May 10, Murkowski made public for the first time a 356-page draft gas-pipeline agreement between the state and the three North Slope producers: BP PLC, ConocoPhillips, and ExxonMobil Corp.
The documents said that all terms were "draft in nature" and that all terms are subject to review and approval by all parties. Following public review, the contract will go to the legislature for ratification.
"The governor has not included oil taxes in the special session call," Murkowski spokeswoman Rebecca Hultberg told OGJ May 10.
He issued a May 9 executive proclamation that called for the special session to address six issues:
-- Statutory changes to clarify or provide addition authority for development of contract terms under the SGDA.
-- Enforceability of a contract executed under a law authorizing a contract enacted under the act.
-- Establishment of a state entity responsible for financing, owning, and managing the state's interest in the proposed pipeline.
-- Establishment of a method for providing fiscal certainty for certain North Slope oil and gas leases not covered by the proposed Alaska Stranded Gas Fiscal Contract.
-- Preliminary findings and a determination of the Alaska Department of Revenue.
-- Provisions of the proposed Alaska Stranded Gas Fiscal Contract submitted to the governor from the state revenue department.
Once Alaska's legislature approves the contract, the producer group could begin to make plans and seek permits. The project also will need permits and a right of way through Canada.
Murkowski has estimated that the Federal Energy Regulatory Commission's open season would take place in 2007, that construction would begin in 2009 or 2010, and that the pipeline could be in operation by 2014.