Providing coverage of Alaska and northern Canada's oil and gas industry
August 2005

Vol. 10, No. 33 Week of August 14, 2005

Alaska gas tax initiative hits the street

Democrats propose 2 cent tax per 1,000 cubic feet; Croft wants a project start date in pipeline contract

Matt Volz

Associated Press Writer

Alaska Lt. Gov. Loren Leman Aug. 3 gave sponsors the go-ahead to collect signatures for an initiative proposal to tax Alaska natural gas reserves, but the plan’s main backer says he is waiting for approval of a newer version that bumps up the tax even higher.

The proposal by Rep. Eric Croft, D-Anchorage, would place a 2-cent tax on every 1,000 cubic feet of proven natural gas reserves under lease that the leaseholders — the North Slope oil and gas producers — don’t extract and ship to market.

Croft and co-sponsors, including the late former Gov. Jay Hammond, filed an updated proposal last month for a 3-cent tax, which would bring in to the state about $1 billion a year instead of $650 million under the original plan, Croft said.

Croft said the differences between the two proposals are few and he doesn’t want the state to waste money printing booklets for the 2-cent proposal. He said he has asked Leman to expedite certification of the 3-cent tax proposal so sponsors can begin collecting the 314,502 signatures needed to get the initiative on the 2006 general election ballot. The signatures have to be turned in by the beginning of January’s legislative session to be certified for next year’s election.

Annette Kreitzer, Leman’s chief of staff, said the lieutenant governor’s office does not call the Department of Law and tell them to hurry up any opinions on initiative proposals. But, she said, most people are mindful that the state fairs are coming up, which is when initiative sponsors tend to collect the bulk of their signatures.

The purpose of the proposal, Croft said, is to compel North Slope producers to build a gas pipeline and ship Alaska’s natural gas to market. State negotiators are now in talks with the three major producers, TransCanada and the Alaska Gasline Port Authority to set fiscal terms for building a gas line. Oil industry spokesmen have said they oppose the reserves tax proposal, and it would contribute to fiscal uncertainty in moving forward with the $20 billion project.

Croft: starting date needed in contract

If negotiations result in a contract proposal that includes a starting date, the initiative won’t be needed, Croft said.

“If we get a deal on a gas line that is good for Alaska, and we get it soon, no, I don’t think we need this,” he said. “But I anticipate we’ll be glad we have this on the ballot to vote on.”

In a legal review, assistant attorney general Sarah Felix wrote that the gas tax initiative proposal met the basic requirements of an initiative, but the proposal could raise other constitutional questions that would have to be determined later.

Following an Alaska Supreme Court decision earlier this year, the lieutenant governor can only reject initiatives that are clearly unconstitutional, and none of the issues raised in the current proposal are clearly unconstitutional, Felix wrote. Any “other potential constitutional or legal infirmities must await passage of the initiative by the people and review by the courts,” Felix’s assessment read.

The Supreme Court ruling was on a challenge to last year’s initiative on filling U.S. Senate vacancies. Croft also was a sponsor of that initiative. Leman tried unsuccessfully to remove the initiative from the ballot but a judge ordered it back on weeks before the election. The measure was approved by voters.

Leman noted the questions raised in Felix’s review, but said in a statement, “Alaska courts have been reluctant to disallow circulation of an initiative while awaiting resolution of constitutional questions. They prefer instead to address those questions later, if necessary.”

Kreitzer said Leman is very mindful of the Supreme Court decision in considering this year’s batch of initiatives. “Our task is to uphold the law. When there’s a court decision like that, agree or not, that’s what you’re bound to,” she said.

The 314,502 signatures needed represent 10 percent of the people who voted in the last elections. The signatures must come from at least 7 percent of voters in at least 30 of the 40 Alaska House Districts.

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