October 22, 2004 --- Vol. 10, No. 93October 2004

President signs Alaska gas pipeline tax incentives

This morning President Bush signed legislation containing two key financial incentives for the Alaska North Slope natural gas pipeline. North Slope producers have said the tax provisions in the corporate tax bill (H.R. 4520) are needed to make an Alaska gasline economically viable.

“These tax incentives are the key piece that will allow gas producers, pipeline companies and the state to proceed with the final negotiations needed to get Alaska’s gas to market. The puzzle isn’t finished, but the federal outline is in place. We’re closer than ever before to seeing this pipeline under way,” said Sen. Lisa Murkowski, R-Alaska after the signing.

One tax provision allows the North Slope gas owners to amortize the cost Alaska-built segments of a pipeline in their taxes over seven years instead of 15 years, a change that will save line owners an estimated $441 million over the life of the line, $150 million in the first 10 years, according to final estimates from the Senate Joint Tax Committee.The second incentive allows an enhanced oil recovery tax credit for the cost of a gas conditioning plant on the North Slope. That provision, Murkowski said, should save the companies $295 million more in taxes in the first decade of the project.

Earlier in the month the president signed the first part of the needed gasline legislation package into law, approving an $18 billion loan guarantee. It also streamlined permitting and expedited court review, created the Office of the Federal Coordinator for Alaska Natural Gas Transportation Projects to be responsible for speeding construction of an Alaska gasline, and established a $20 million worker training program and other provisions to help the state benefit from development of the project.

State asks for comments on area in Holitna exploration license

On July 2, Holitna Energy Co. submitted a request to convert its shallow natural gas applications in southwestern Alaska to a Holitna basin exploration license, as per language in House Bill 531, which essentially legislated out of existence the state’s non-competitive, shallow gas leasing program.

Today the Alaska Department of Natural Resources, Division of Oil and Gas, issued a public notice saying it intended to evaluate Holitna Energy’s exploration license proposal, which encompasses 26,880 gross acres.

Before issuing an exploration license the division must issue a finding to determine if an exploration license in the area is in the state's best interests. In its public notice the division asks for comments on the proposed license area. The 60-day comment period begins today, Oct. 22 and ends on Dec. 21.

Holitna Energy has said the gas produced on its acreage will likely be used to supply power and heat for Donlin Creek mining project and for nearby villages. On May 25, the company’s top executive, Phil St. George, told Petroleum News that Donlin Creek may not be the only potential large mine customer for Holitna basin gas. St. George said he was approached by state development employees interested in taking Holitna gas about 100 miles south to Iliamna Lake, to the Pebble gold-copper-molybdenum project.

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