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Gas Taxes Will Be Part of Getting New Pipelines

By | July 30, 2012

The Parnell Administration is beginning to consider what needs to be done with the state’s tax on gas production.   Currently it is coupled with the oil tax regime,  but legislators were told today that it’s time to begin planning  a new system  to encourage gasline development  for in-state use – as well as for export.

Gas exploration companies and the Parnell Administration are anticipating an alignment of interests this Fall that could make is easier to deliver natural gas from the North Slope to  SouthCentral and the Railbelt.   Part of that alignment will be the development of a gas tax regime that reflects what Deputy Natural Resources Commissioner Joe Balash told the In-State Gas Caucus is a effort for the state to – quote – “recalibrate its thinking.”  He says a gas pipeline project from the North Slope was originally based on sending gas to the lower-48.  The focus now is on exporting liquefied gas to Pacific markets.

The original construct of AGIA had within it upstream inducements that were made available for that first open season, but because there were no firm transportation commitments resolved there,  those particular inducements are no longer statutorily available.   So we recognize the need to adjust a few things relative to those kinds of inducements for an LNG-focused project.

Natural Resources Commissioner Dan Sullivan says there has been no specific element of a new tax regime yet considered – saying staff is looking at broad principles while considering the options as a project comes together.  He told legislators that oil and gas companies,  along with the state and Trans-Canada pipeline company are still coming up with details for an export  project with results expected in September.  Balash said legislators should have a new plan to consider during next year’s session.

When January rolls around, I think there’s a reasonable expectation that the governor’s going to keep oil tax legislation on the front burner and there will be some means of addressing natural gas – be it commercialization or in-state use or both.  Exactly how or what we do as an administration will be determined in that time frame.  It’s premature to say with any degree of specificity what that will look like.

The Caucus also got updates from the Alaska Gasline Development corporation on its plans for a smaller gas line to Fairbanks, the Railbelt and SouthCentral.   CEO Dan Fauske said the project is behind schedule for holding  an open season next year because lawmakers did not provide sufficient funding for all the work leading up to the offering.  However, he said  planning work is still continuing and new budgets are now being prepared that will fit in with expectations of more commercial alignment this fall.

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