|
Alaska wants gas tax credits, too State wants federal energy bill to ensure its royalty gas also benefits from tax credits; no opposition apparent, says Katz Larry Persily Petroleum News Juneau Correspondent
In addition to pushing for federal tax credits and other financial incentives to encourage North Slope producers to build a $20 billion natural gas pipeline from Alaska, the state is working in Congress to ensure that the same tax credits apply to Alaska�s royalty gas.
Without language in the energy bill to sufficiently clarify that Alaska�s royalty gas would also be covered by the credits, the state could find its royalty-in-kind gas worth less than the producers� gas.
�The goal has been to make the purchasers of royalty gas eligible for the tax credits,� said John Katz, director of Alaska Gov. Frank Murkowski�s Washington, D.C. office.
The Senate version of the energy bill before the conference committee includes language discussing the issue, but it is inadequate for Alaska�s needs. The issue is not covered in the House version of the bill.
�The bill is clearly going to be written in conference,� Katz said. Fortunately for Alaska, Sen. Chuck Grassley, chairman of the Senate Finance Committee and a member of the conference committee, has indicated he will offer an amendment to help Alaska, Katz said. �It solves the problem.�
Alaska wants fairness It�s simply a matter of fairness, he said.
�Even though we�re not a taxpayer, we want the purchasers of royalty gas to be treated as a taxpayer,� Katz said. Otherwise, the state would have to sell its royalty gas at a lower price, reflecting the fact that neither the state nor the purchasers would receive the federal credit.
For example, if the wellhead value of North Slope gas were $1 per thousand cubic feet, under the tax credit plan being promoted by the state for the energy bill the producers would receive federal corporate tax credits of 35 cents per mcf. The provision sets $1.35 an mcf as the benchmark for the credits.
But because the state is not a taxpayer, it would not be eligible for the 35 cents, leaving Alaska to receive just $1 from the sale of its royalty gas. Loss to state could be millions For every 10 cents of value lost to the state on its 12.5 percent royalty share of a natural gas project carrying 4.5 billion cubic feet per day, Alaska would receive about $18 million less in revenue over an entire year.
Supporters of the tax credits say they are needed to help reduce the financial risk to producers so that they will take a chance and build the line from the North Slope into Alberta for connection to North America�s pipeline grid. The producers risk not only lower-than-forecast market prices for their gas when the line starts flowing in the next decade, but also the worry of expensive construction cost overruns to build the project.
Though the state would lose value if its royalty-in-kind gas were not covered by the tax credits provision, Alaska would not be taking the financial risk of paying for the project.
The royalty issue is not well understood by many of her congressional colleagues, said Alaska Republican Sen. Lisa Murkowski.
�We�ve not heard any opposition,� said Katz, who explained it�s not a matter of responding to opposition as much as the state needs to ensure the conference committee bill is clear in protecting the state�s interest.
| 