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Stars aligned for GOP in Alaska
Kay Cashman Petroleum News Publisher & Managing Editor
When Frank Murkowski, Alaska’s Republican governor, was sworn into office on Dec.2, he said “never before” have the stars been so aligned “in the House and Senate, not only in Juneau but in Washington.”
The former U.S. senator from Alaska promised an agenda that would rebuild the state’s wealth and revitalize its economy with greater resource development. Murkowski said his goals included a 3 percent increase in Alaska’s oil production beginning in 2005, noting that the state’s oil production had fallen from its peak of 2 million barrels a day in 1988 to 920,591 barrels a day in November 2002.
Murkowski’s sentiments were echoed by the Republican leadership in both the Alaska House and Senate when the legislative session convened in January. RDC pleased with permitting changes Political observers say the Republicans are well on their way to fulfilling their promises.
“From our perspective, the two big issues were permit streamlining and the fiscal plan,” Tadd Owens, executive director of the Resource Development Council for Alaska, told the Associated Press. “We feel like a lot of headway was made on permit streamlining, and there’s still a lot of work to be done on the fiscal plan.”
Dave Dittman, a pollster and longtime political observer, told the Associated Press, “I doubt if they won any friends this time because they probably did make everyone mad. But I think, by and large, they did what they said they were going to do.”
In addition to cutting state spending and not hampering industry with additional taxes, lawmakers, prompted and supported by the governor, accomplished the following in the legislative session that adjourned in May:
• established exploration tax credits designed to encourage drilling and seismic outside of existing producing units (see sidebar)
• approved royalty reductions for oil produced from Cook Inlet fields and platforms as they near the end of production capability, with a goal of keeping facilities operating as long as possible
• revamped the Alaska Coastal Management Program to make it easier for companies to get projects approved
• approved Murkowski’s “one stop” permitting concept, making the state Department of Natural Resources the lead agency on permits, including shifting decisions on habitat permits from the Department of Fish and Game to DNR
• passed a bill that halted an environmental group’s lawsuit over Forest Oil’s Cook Inlet Redoubt Shoal development and prevents similar suits against state-approved projects in the future
• changed the state’s public interest litigant rules to require losing parties to also pay attorney fees, which raised the stakes for environmentalists that file lawsuits to block projects
• authorized the Alaska Railroad to issue tax-exempt bonds to raise funding for construction of a natural gas pipeline from the North Slope
• authorized the administration to negotiate with North Slope gas producers for payments in lieu of taxes and royalty adjustments for natural gas sales
• approved a more flexible method to calculate oil and gas royalties, allowing the state to encourage production of oil and gas fields that might be marginal or not economically feasible under the current system
• authorized the commissioner of DNR to negotiate royalty contracts on natural gas; goal to keep Agrium's Nikiski fertilizer plant operating because of its importance to the Kenai Peninsula's economy
• extended the life of the Regulatory Commission of Alaska
• increased the exploration acreage limit for oil and gas leases from 500,000 acres to 750,000 acres, except for land north of the Umiat Meridian baseline
• among other things, authorized the commissioner of DNR to waive local jurisdiction for shallow gas leasing and exempted it from the coastal management process to speed up permitting for shallow gas projects
• formed of a nine-member Alaska Energy Policy Task Force to review and analyze the state's current and long-term energy needs
“We really have put truth behind the old slogan, ‘We’re open for business,”’ Senate President Gene Therriault, R-North Pole, said. Sales tax rejected Legislators balked at the governor’s plan to impose a statewide sales tax to generate more state revenues, approving a fiscal 2004 budget that spends about $3.6 billion from state coffers.
Murkowski said he will have to trim an additional $130 million from the budget before the start of the new fiscal year on July 1 to reach his target of preserving the state’s dwindling reserve account.
The state faces a gap between spending and revenues that has been filled in recent years by dipping into a reserve fund that is expected to run out in about three years.
The administration said that drawing more than $400 million from the state’s reserve fund will threaten Alaska’s bond rating.
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