Gas plan counts on new finds

The proposed contract with Exxon Mobil Corp., BP PLC and Conoco Phillips would set the tax and royalty rates for oil and gas for those three companies for 45 years in the hopes of inducing construction of a natural-gas pipeline from the North Slope to Alberta or Chicago.

The three oil companies also control nearly all the gas leases on the North Slope, which holds an estimated 35 trillion cubic feet of gas reserves.

In order for the pipeline project to work, an additional 16 trillion cubic feet of gas needs to be found, said Department of Natural Resources Commissioner Mike Menge.

Incentives have to be given for new explorers to find that gas, he said.

"We don't want to create two classes of citizens on the North Slope," Menge said.

The same basic terms in the contract that would be offered to explorers include a 7.25 percent production tax, minus the royalty rate and to be taken in gas instead of cash. Royalties also would be taken in gas, but the rate would be set by the lease. Those tax rates would be locked in for 30 to 45 years for oil and gas, as well.

Menge presented the idea to legislators Friday as part of the review of the gas contract, but he said he did not know if the governor planned to introduce a bill this special session.

The third day of the special legislative session ended with the continuation of the Murkowski administration's overview of the gas contract and not a single bill for lawmakers to consider.

The marathon floor sessions Monday and Tuesday leading to the regular session's adjournment have taken their toll: On Friday, half of the legislators attended the overview at Centennial Hall in Juneau.

Sen. Fred Dyson, R-Eagle River, said he thought many lawmakers were following the proceedings on the government access cable channel Gavel to Gavel.

However, he acknowledged that many people were tired and burned out, and that the complexity of the 352-page gas contract may be a little too much immediately after the regular session.

"Some of this stuff is really esoteric," Dyson said.

Rep. Les Gara, D-Anchorage, said he finds some of the information useful but that it amounted to 10 days of hearing one side of a debate.

"They should have the right to express their case," Gara said. But "what's the point of being here if we can't ask questions?" he added.

Revenue Commissioner Bill Corbus has accepted written questions from legislators, which he reads and answers at the end of each day's session.

For example, Corbus read a question on Friday submitted by a lawmaker concerning where was the state's fiscal certainty.

"We do not have certainty the pipeline is going to be built just because this (contract) is signed; however, it does provide a process to make sure the project is carefully analyzed and if it proves to be feasible, the mechanism is in place for the project to proceed," Corbus answered.

Gara said the question-and-answer sessions would be more meaningful for lawmakers if they were allowed to follow up with multiple questions on a topic. He also said he believed some of the presentations were "an excess of salesmanship" by the Murkowski administration.

Corbus said he was pleased with the way the meetings had progressed.

"Our intent is to brief them and provide them with an understanding of the contract," Corbus said. "It's not a sales pitch."

The presentations on the contract proposal are scheduled to last through May 22, and it was not clear if the governor then plans to introduce legislation to consider.

Murkowski also has not said when he plans to bring an oil tax bill back before the Legislature. The Senate killed the plan to tax the net profits of oil companies in the closing hours of the regular session.

The governor had planned to roll that tax into the gas contract and ask lawmakers to lock up the terms for 30 years for oil and 45 years for gas. At least 10 articles in the contract are affected by the tax, the governor's office has said.

Murkowski plans to call lawmakers into another special session later this year to ratify the contract after a public comment period.