A Citizen’s Guide

JUNEAU—Gov. Frank Murkowski is banking legislators will complete their work on a new oil tax system by the May 9 end of session.

Murkowski needs the Legislature to move quickly on reforming the state’s oil production tax so the fiscal details can be inserted into a contract with Exxon, BP and ConocoPhillips to develop North Slope natural gas reserves.

The governor and administration officials announced Friday that a draft version of the gas contract would be released on May 10 to start the clock on the public comment period.

“Sometimes to move projects forward you need to create deadlines,” said Deputy Commissioner of Revenue Steve Porter, a member of the governor’s gas line negotiating team.

Murkowski has been meeting privately this week with leadership from both bodies to push for passage of oil tax legislation. The governor said Friday that Republican legislative leaders had agreed to move the bill before the end of session.

The Senate passed its version of the oil tax to the House earlier this week. Republican leadership in the Senate has agreed to try to pass a final version before the end of session, said Jeff Turner, Senate majority spokesman.

House Majority Leader John Coghill, R-North Pole, said a similar commitment was made on the House side.

“All members of leadership in the House have agreed to get it out before we gavel out,” he said.

The House caucus has made no agreement on what the final tax will look like, though, and the House Finance Committee, which is currently considering the latest version of the tax bill, has vowed not to rush the bill, Coghill said.

“Even though we know there’s a plug-in connection with the gas line, we want to be sure it stands on its own,” Coghill said.

The governor has repeatedly told legislators the gas line deal he negotiated with the producers includes a 20 percent tax on oil companies’ profits after expenses with a 20 percent credit for capital investment.

Even a slight change could scuttle a tentative agreement with the companies for a $25 billion gas pipeline from the North Slope to markets in the Lower 48.

Murkowski said the oil tax legislation must be complete by the May 9 deadline, so lawmakers can begin work on the gas contract.

Once the bill reaches the floor, all bets are off, said House Speaker John Harris, R-Valdez.

“The problem with that statement is that leadership on our side is only six votes,” he said. “We’re going to try our best, but we can’t force people to vote for something they don’t want to.”

The current version of the bill sets the tax rate at 22.5 percent with a 25 percent credit for investment. The bill also includes a surtax that kicks in when oil prices hit $50 a barrel and increases by 0.2 percent for every dollar above that level.

House Finance is expected to introduce a substitute version of the bill on Monday or Tuesday. Coghill said the bill could reach the floor Wednesday.

He said the floor debate in the House will likely take four days.

If lawmakers fail to meet the deadline, Murkowski said he would unveil the contract anyway.

“If PPT is not complete, we can still release the contract for public comment,” he said. The administration has put together a specific timeline for the mandatory 30-day public review process, which would happen at the same time legislators are going over the contract.

It will be up to Revenue Commissioner Bill Corbus to decide when enough public comment has been heard. Murkowski said the public comment period could be extended if more time is deemed necessary.

“We’re going to allow as long as it takes,” he said.

Sen. Gene Therriault is pushing to extend the mandatory comment period. The North Pole Republican on Friday succeeded in doubling the public review in an amendment to the Stranded Gas Development Act to be read across the Senate floor Saturday. The governor said he didn’t believe the Therriault amendment was needed.

Richard Owen of Exxon Mobil told House Finance members on Thursday that his company would need as much as two weeks to review the tax to determine whether they could accept it.

Once the contract is released, the administration and producers will meet with legislators in special session for a 10-day page-by-page walk-through of the contract and amendments to the Stranded Gas Act.

The administration plans to hold public hearings across the state starting a week later. The first hearing would be in Ketchikan, Porter said.

The administration did not release additional details on when or where others public hearings would be held.

After it’s released, the contract, amendments, supporting documents and a description of how the state would take ownership of as much as 20 percent of the pipeline will be available online for public review, Porter said.

At the end of the review process, the commissioner of revenue will have 30 days to assess testimony from the public and legislators to determine whether changes to the contract are needed.

Those changes would have to be negotiated with the oil companies and then approved by the Legislature in a second special session, Porter said.

After the oil companies and administration agree on the final version of the contract it goes back before the Legislature for an up or down vote.

Speaking Friday evening at the University of Alaska Fairbanks College of Engineering and Mines annual awards banquet in Fairbanks, Murkowski touched on the oil tax and the gas line project.

“We basically have a commitment,” he said, “but we don’t have the authorization for that commitment, because that can only happen if the Legislature approves it.”

He touted the benefits to the state and the university system of both the oil tax and a potential gas line, which he claimed could almost double the state’s revenue stream.

“That changes the whole dimension of the state of Alaska,” he said. “We’re going have the ability to fund major projects.

“We’re on the way now,” he said.

Murkowski spoke confidently of the gas line. “This is going to happen,” he said. “We are going to get a gas line. The revenues will come in to the state.”

Staff writer R.A. Dillon can be reached at (907) 463-4893 or rdillon@newsminer.com. Stefan Milkowski in Fairbanks contributed to this report.