A Citizen’s Guide

A Senate committee adopted an amendment on Saturday to lower taxes on all natural gas produced for use in Alaska, giving hope to two Fairbanks companies looking for tax relief on natural gas projects in separate parts of the state.

The amendment, drawn up by the Palin administration, takes a broad approach to expanding tax breaks currently offered only to Cook Inlet natural gas producers. Previous amendments on the issue brought up during this special legislative session extended the tax break only to certain parts of the state.

Local companies Fairbanks Natural Gas, LLC and Doyon, Ltd. separately began asking lawmakers last week to expand the tax breaks. Doyon hopes to restart an exploration project in the Nenana Basin, while Fairbanks Natural Gas wants to create a liquid natural gas project on the North Slope.

But in discussing the amendment with fellow members of the Senate Judiciary Committee on Saturday, Sen. Gene Therriault, R-North Pole, said broadening the amendment would help cover exploration work in Glennallen and around the Red Dog Mine near Kotzebue.

“They all needed to not have that additional tax burden,” Therriault said.

While the broad language of the amendment seemed to satisfy some lawmakers who originally opposed expanding the tax break, it worried others.

Sen. Bill Wielechowski, D-Anchorage, expressed some concern that the amendment did not make a distinction between gas sold to residential and industrial customers, and also did not address future gas sales from a natural gas pipeline.

Sen. Charlie Huggins, R-Wasilla, said lawmakers needed to dedicate time to address natural gas taxes. The current bill before the Legislature deals primarily with oil tax issues.

“I discourage us from incrementally dealing with issues of gas as we bump into them,” Huggins said.

The tax break only lasts until 2022, when it would need to be approved again.

Fairbanks Natural Gas President Dan Britton has been in Juneau talking to legislators, but said ultimately the broader amendment put forth by the Palin administration seemed to inspire broader support from lawmakers.

“I feel good about this amendment’s chances of making it through to the end, compared to our more specific amendment,” Britton said.

When the House Oil and Gas Committee passed its version of Gov. Sarah Palin’s tax bill last week, it included one amendment to help Doyon, but voted down a similar amendment to help Fairbanks Natural Gas.

Doyon had requested an amendment to extended the tax credit to any natural gas produced south of the 68th parallel, excluding the North Slope, the foothills of the Brooks Range and the National Petroleum Reserve-Alaska.

Because Fairbanks Natural Gas is buying and not producing natural gas, they requested an amendment to extend the tax break to companies selling fewer than 10 billion cubic feet of natural gas a year to a liquefied natural gas project on the North Slope.

That worried some lawmakers, who wondered whether Fairbanks Natural Gas would pass on that tax savings to its customers. While the company is not economically regulated and can adjust rates at will, state regulators have threatened to impose regulations if the company if rate payers are not getting a fair deal.

The House Resources Committee discussed an similar amendment on Saturday.

Speaking before the committee Friday night, Revenue Commission Pat Galvin said expanding the tax break to all in-state production would level the playing field for real and hypothetical projects across the state.

Although pushed by small companies looking at gas prospects, the amendment could also help much larger producers like Anadarko Petroleum Corp., which has been exploring for natural gas in the foothills of the Brooks Range.

Mark Hanley with Anadarko told the House Resources Committee that the amendment could help his company start offering that natural gas to local markets. Hanley asked lawmaker to consider opening the tax break to all natural gas in an attempt to spur natural gas exploration in the state.

Contact staff writer Eric Lidji at 459-7504.