It took Gov. Sean Parnell three years to get his oil tax overhaul through the Legislature. Now, the goal is to pass a bill setting the terms for a massive natural gas pipeline in 90 days. Hearings on the project started today, and a half dozen more are scheduled through this week alone.
The gasline bill that Gov. Sean Parnell produced Friday is long and detailed. So detailed in fact that the title alone takes up two pages.
But here are a few highlights: The legislation taxes natural gas at a rate of 10.5 percent starting in 2022. It allows for those taxes to be directly paid in gas instead of money. It expands the powers of the natural resources commissioner and the revenue commissioner to work out a deal with all the other parties involved. The governor has said this is the sort of stuff that needs to get turned into law if the North Slope producers are going to lock themselves into a project that’s expected to cost upwards of $45 billion.
For lawmakers to lock themselves into the project as well, they want to be assured Parnell’s arrangement is going to work.
At a Senate Finance Committee meeting on Monday morning, Anchorage Republican Kevin Meyer wanted to know what made this gasline proposal better than all the other plans he’d seen. He likes the idea of the state partnering with the North Slope producers and getting an ownership share in the projects, but needs to hear a little more.
“This one is a little different, and so I am trying to get excited – I am excited – but is there anything else you can share to help my excitement?” asked Meyer. “I’m getting old, I’ve been hearing this too many times, and I’m done doing cartwheels. But I do want to see a gas pipeline in my lifetime.”
Natural Resources Commissioner Joe Balash says there are two big reasons why this gasline is more likely to be built. One, the legal settlement over gas at Point Thomson has made Exxon more eager to develop their leases there.
“In the past, when the companies have evaluated various opportunities to commercialized North
Slope gas, they’ve had to take into account the oil that would not get produced if the gas was blown out and sold.”
Balash says that’s not the case anymore.
“What we see in the next decade is that we are approaching the turning point in the field’s economics in the recovery of gas versus oil.”
While that answer satisfied some questions about the viability of a natural gas megaproject, it triggered a whole different set of questions about the state’s energy outlook. Sen. Mike Dunleavy, a Wasilla Republican, pointed out that just last session, the Legislature passed Parnell’s oil tax bill on the premise that it would boost production of that resource.
“The exercise that we went through last year, how does that jibe with the gas approach this year?” asked Dunleavy. “In other words, we are anticipating and hoping for more production. Does that more production in oil is that predicated on the long use system of re-injecting gas, or is there another approach?”
Balash responded that the oil tax act they voted on last year will accelerate this transition to gas by encouraging Exxon, Conoco, and BP to produce more oil now. Mike Pawlowski, a deputy commissioner with the Department of Revenue who was also testifying on the project, added that the whole Prudhoe Bay Unit still has areas with untapped oil within it that don’t fit in within that oil-gas trade-off.
The bill is slated to be heard in the resource and finance committees in both chambers, as well as the House Labor & Commerce Committee.
Watch the committee meeting:
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