Governor: Partners have individual responsibilities

Obligations of government not always in sync with those of industry, but we want to partner, Murkowski tells ‘Meet Alaska’

Kristen Nelson

Petroleum News Editor-in-Chief

Alaska Gov. Frank Murkowski gave the Alaska Support Industry Alliance a civics lesson at the organization’s Jan. 27 “Meet Alaska” conference in Anchorage. The governor, in his first appearance before an industry group since his announcement Jan. 12 that the state would aggregate Prudhoe Bay satellites effective Feb. 1 with the main field for purposes of calculating the economic limit factor, or ELF, said he felt “a little bit like a pork chop” being thrown into the wolf cage coming to the podium.

Alliance board of directors President Mark Huber, who introduced the governor, likened the Prudhoe ELF decision to “a rock chip in the window of opportunity.” You don’t know, Huber said, if that chip will stay small or spread and ruin the window.

Murkowski countered that he had “a new kind of goo that fills in that crack and stops it,” and invited Huber to see him afterwards.

The governor said the state is a partner with industry, but the state and industry have different responsibilities.

Companies, he said, “have a fundamental obligation to protect your interests and the interests of your shareholders, and I respect that.”

In return, the governor said, he was asking for industry’s recognition of “the responsibility the government has for administering the state, providing public service and protecting the interests of its citizens.

“And I would hope that our administration is as equally skilled, as equally dedicated, in the accomplishment of their tasks as you are with yours.”

The governor assured industry that the administration will “honor all formal agreements on aggregation issued by the Department of Revenue. We’re not going to go back on deals.”

Goal of ELF to increase flow

The decision to aggregate satellites at Prudhoe Bay “recognized economic interdependence,” he said. “… When a field is operated through shared facilities as a single unit without regard to unit boundaries, all production, in our opinion, should share a common tax burden.”

ELF, Murkowski said, “was designed specifically to help encourage develop of marginally economic fields.” Where ELF is needed to support marginal develops, the administration supports it, he said.

“ELF was never intended to provide tax breaks on properties with demonstrated economic production. When this is the case the administration has a responsibility to its shareholders to see that they are being fairly compensated for the production of their resources.”

Why the change now?

Murkowski touched on why the change to ELF was made when it was, saying it was obvious the Legislature was going to pursue changes in the ELF. He said he was going to support hearings on ELF, and “had hoped there would be hearings during the months since the last Legislature.”

The governor’s Jan. 12 announcement was that an administrative change would be made effective Feb. 1 for Prudhoe satellites.

He also said he supports statutory changes: “It’s been 15 years since any changes have been made and the time has come to consider ELF and other incentive legislation to determine whether they are collectively helping to increase the flow of oil, exploration and investment.”

The governor said he would support legislative hearings on ELF, and urged industry to make proposals of its own.

“We talk about partnerships: we want to partner, OK. But it’s got to be good for you and it’s got to be good for the state,” he said.