Oil and Gas 101
28 April 2006The ACPP Blog has had several good posts on the oil and gas issues. These are complex issues that have incredible implications for the future of Alaska – in virtually every aspect of life.
However, when you ask the public about oil and gas, you are likely to get an answer about whether or not we should be drilling in ANWR. While this is also a worthy debate, it demonstrates that the general public does not seem to have a basic understanding of what is happening in the Legislature with regards to oil and gas production.
Oil and Gas are two separate issues. The OIL issue in front of the Legislature deals with changing the tax structure. The proposed legislation would close the loopholes which allow the oil companies to harvest oil while paying virtually no taxes. However, the legislation would implement a very volatile tax, which is a risk for the state. The GAS issue has to do with harvesting the “stranded†natural gas on the North Slope and bringing it to market by building a gas pipeline similar to the oil pipeline. These are two separate and distinct issues.
That being said, here’s how they are tied together.
1. The oil producers (BP, ConocoPhillips, and ExxonMobile) are the same corporations that would likely be harvesting the natural gas, taking part in building the pipeline, and selling the gas on the open market.
2. The governor has negotiated a contract with these three corporations to harvest the gas and bring it to market. During these meetings, he allegedly agreed to major changes to the oil tax structure. He has also refused to show the contract to the Legislature until they agree on an oil tax.
Several aspects of these negotiations have been called into question. It is not clear that the Governor has been acting within the legal constraints of the Stranded Gas Act and the Constitution of the State of Alaska. The Legislature is the only body able to change the tax; the Governor cannot. Without a constitutional amendment, even the Legislature cannot lock in any tax for 30 years, as the Governor is promoting now.
Although the Legislature hasn’t seen the contract, there has been much debate about the choices the state will inevitably need to make. Should Alaska be investing in the construction of the pipeline? Should the state take royalties and/or gas in kind? An all-Alaska pipeline or the Alaska Highway route?
The upcoming short series on oil and gas is only a very basic overview of what is happening with oil and gas in the Legislature. Here are some great sites to find more information in plain English about what is happening and the possible consequences:
Representative Les Gara does a great job breaking down the oil tax issue in his newsletter, A Note from Representative Les Gara.
Check out the AK Democrats page for a comparison of the current severance tax and the House and Senate versions being considered.
Senator Kim Elton highlights some of the concerns with the gas line negotiations in his newsletter, off the record.
Finally, UAA’s Institute for Social and Economic Research (ISER) provides a great online resource for more information on the gas pipeline.
-kt