PHOENIX — Alaska Gov. Bill Walker said he will not introduce a bill to impose a property tax on natural gas leases in major reserve areas after receiving written assurances from two industry giants that they will make available their share of Alaska’s North Slope gas to a future gas pipeline project.
Walker said in a statement Friday that ConocoPhillips and BP had both agreed to complete the project continuity and gas sale terms by early December, leading the governor to call off a piece of his legislative agenda in the special session he called this month. Energy companies haven't been tapping Alaska's natural gas reserves because there is no way to ship it out of state and the economics are difficult because it is easier to get the gas in the lower 48 states, but Walker said last month it was time to start monetizing those untapped gas reserves by taxing the resources held by private companies.
Alaska and various energy companies have been exploring the possibility of a natural gas pipeline since the mid-1970s to no avail. Last year the state enacted Senate Bill 138, which established a negotiating framework between Alaska, TransCanada, ExxonMobil, BP, and ConocoPhillips to develop a pipeline from Alaska's North Slope. Walker had expressed frustration at the slow progress of negotiations.
“It is important that Alaska act like the owner state it is,” Walker said Friday. “The reserves tax proposal is appropriate leverage for Alaska in response to a situation where known, producible gas could be withheld from a state project because it does not meet the commercial strategy of a particular producer. I am pleased BP and ConocoPhillips have now demonstrated their commitment to make their gas available for an Alaska project.”
Walker has been pressing the issue hard because Alaska's government's revenues, almost entirely dependent on oil extraction taxes, have bottomed out in recent months as oil prices have sunk. Walker and other state officials have repeatedly said that budget cuts cannot offset the budget gap, and that more revenue has to come from somewhere. Walker has suggested opening up Alaska’s permanent fund, a huge investment fund funded by oil royalties, to help close the state’s $3.5 billion deficit. The state remains triple-A rated, but analysts have voiced concerns and Standard & Poor’s has put Alaska’s GO rating on negative outlook.
The gas line project, known as Alaska LNG and bearing a cost estimated to exceed $45 billion, includes facilities for cleaning and liquefying natural gas as well as a roughly 800 mile pipeline. Walker said the continuity agreement with the two companies will contain specific timetables for commercial agreements to move the project forward, but should either company decide to pull out of the project the gas will still be made available for a pipeline.
“I thank ConocoPhillips and BP for their commitment to address the state’s legitimate concerns regarding the assurance of a gas supply,” Walker said, adding that he has also had encouraging conversations with ExxonMobil. “I look forward to achieving the completion of the commercial agreements that will underpin the state’s fiscal commitments.”
