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Coastal zone, tax on gas bills on burner Two issues firing up legislators — role of local districts in coastal management and tax impacts of open season — move toward votes Kristen Nelson Petroleum News
Two issues in particular are firing up members as the Alaska Legislature moves into its final days: coastal zone management and the impact of North Slope gas sales on the state’s production tax income.
Sen. Bert Stedman, R-Sitka, co-chair of Senate Finance, has been working the gas issue with consultants for more than a year, and Senate Bill 305 passed the Senate and was in House Finance, expected to move on to the House floor, as Petroleum News went to press April 15.
The coastal zone management bill remains controversial, with considerable support by members but seemingly implacable opposition from the administration.
House Bill 74, the coastal zone bill sponsored by Rep. Reggie Joule, D-Kotzebue, stalled out in House Resources but the Senate version, SB 4, by Sen. Donny Olson, D-Nome, has been amended and passed out of Senate Finance April 14 and was expected to be debated on the Senate floor.
Momentum on decoupling SB 305, decoupling oil and gas for purposes of calculating the progressivity portion of the state’s production tax, appeared to gain momentum as consultants relentlessly hammered the numbers. Because the difference in value between oil and gas is currently much greater than the difference in volume, when the two are combined in production tax calculation, as they are now, a relatively low dollar value of natural gas combined with a high volume at the time of major gas sales from the North Slope could cost the state billions.
The bill began with decoupling natural gas from oil before progressivity was calculated; there was initially no progressivity on gas. Calculations from the administration showed that at certain oil and gas price relationships the state could lose money by decoupling gas from progressivity, and the bill was amended to include progressivity on gas — but as decoupled from oil.
House Finance had heard the bill and was working with the administration on an amendment to SB 305; the bill was expected to pass out of House Finance and move to the House floor.
Stedman has said that decoupling can happen at any time, but because of the Alaska Gasline Inducement Act the tax on North Slope natural gas will be locked in place for the first 10 years of sales for any volumes committed in the first AGIA binding open season, which begins May 1.
Anger over coastal management While the administration has worked with legislators on SB 305, even though the administration’s position is that the legislation is not needed, it has not worked with legislators on the coastal zone management bill, which has visibly angered legislators who want more local involvement in coastal zone management.
Sponsors amended the bill in an effort to meet one objection, changing a requirement that the governor select members for a new council from a list provided by coastal districts, to a requirement that members be selected from coastal districts.
Stedman asked the administration in Senate Finance for amendments to the bill.
Department of Environmental Conservation Commissioner Larry Hartig appeared April 14 to speak for the administration and said the bill is such a strong shift from the present program that it is extremely difficult for the administration to see a way to move forward to enhance local authority without the state giving up authority.
He said the governor and the administration would like to see communications continue, but don’t see the present bill as the vehicle to make changes because of strong differences between the administration and the sponsors.
On the request for administration suggestions for changes in the bill, Hartig said that until consensus is reached on where authority would lie — particularly on large resource projects that affect the state as a whole — that it is hard to move forward with specific language.
Coastal response North Slope Borough Mayor Edward Itta has been in Juneau speaking on the coastal zone issues, and said in a press conference April 14 that while the bill sponsors have been willing to compromise, the state hasn’t been willing to show any flexibility at all.
He called this “state government at its very worst,” refusing to participate in a legitimate process with the people of Alaska and the Legislature.
Rep. Bob Herron, D-Bethel, called this “a huge missed opportunity” by the administration, and said that without local involvement in coastal management “the feds will run right over us.”
Rep. Bryce Edgmon, D-Dillingham, said the local areas are “pro development, but we’re also pro local influence.” Since the old program was changed in 2003, Olson and Joule have repeatedly tried to get this on the table to find middle ground, he said.
Itta said local involvement in coastal zone management gives local people input and buy-in on a project. Itta highlighted the Pebble project as an example where there was no local input or buy-in.
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