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September 29, 2008 --- Vol. 14, No. 94September 2008

Lawmakers revive gas reserves tax initiative

A group of state lawmakers have revived a measure to tax Alaska natural gas reserves.

Rep. Harry Crawford, D-Anchorage; Rep. David Guttenberg, D-Fairbanks; and Rep. Beth Kertulla, D-Juneau recently filed paperwork for a proposed ballot initiative to levy a 3-cent tax for every thousand cubic feet of known gas reserves in large fields in Alaska.

The measure is nearly identical to one filed several years ago by Crawford, Guttenberg and then-Rep. Eric Croft, D-Anchorage. Following a lengthy and expensive public relations effort by oil companies and vigorous debate on both sides of the issue, voters opposed the measure by a ratio of nearly 2-to-1 during the 2006 elections.

Both measures serve the same purpose: to prompt lessees to develop North Slope natural gas resources. Those resources currently remain stranded because the infrastructure to carry Alaska gas to markets in the Lower 48, Canada or overseas does not exist.

Since the previous ballot measure failed, though, two proposals for building that multi-billion dollar pipeline have made significant strides. A state-sponsored effort by the Canadian pipeline company TransCanada, and a BP and ConocoPhillips joint venture called Denali both plan to hold open seasons on separate pipelines in 2010.

Crawford told Petroleum News on Sept. 29 that he would cancel the new reserves tax if the North Slope lessees committed gas to a pipeline that met the set of 20 requirements, or “must haves,” set out by the state under the Alaska Gasline Inducement Act.

As the licensee under that act, only TransCanada is required to meet those 20 must haves.

The measure filed last week would apply to all units created since 1990 and known to contain at least 1 trillion cubic feet of natural gas of proven, but unproduced reserves.

Under that definition, the measure would certainly cover the gas contained in the Prudhoe Bay and Kuparuk River units, but the sponsors believe the measure would not cover the Point Thomson unit because of a recent state decision to terminate the unit.

ExxonMobil, the unit operator at Point Thomson, is challenging that decision in court.

The new measure would allow leaseholders to reclaim the entire tax through annual credits. The previous measure included a similar provision, but stopped reimbursing companies after 2030. The newly proposed measure contains no such deadline.

See full story in Oct. 5 issue of Petroleum News, available to subscribers online at noon, Friday, Oct. 3 at www.PetroleumNews.com

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