Gov. Sean Parnell said Thursday he's not going to negotiate with the oil companies over how much the state taxes natural gas until they unite behind a gas pipeline project and can prove they need the help in order for construction to start.
Parnell told a Resource Development Council gathering in Anchorage that "once they've come together on a project, then come talk to me" about taxes.
There are two competing proposals for a multibillion-dollar natural gas pipeline to the Lower 48. The state is tied under the Alaska Gasline Inducement Act to the effort led by the pipeline firm TransCanada Corp. and backed by Exxon Mobil, while Conoco Phillips and BP are engaged in a rival project called Denali.
Parnell, who became governor just over a month ago when Sarah Palin resigned, made public some of his oil and gas plans to the Resource Development Council and in a discussion later Thursday with reporters. Like Palin, he endorses offshore development in federal waters on Alaska's Outer Continental Shelf, a controversy that has the North Slope Borough, Eskimo whalers and environmental groups on the other side. Parnell focused his speech to the development council on that issue, saying it would be a big priority for him.
"I will personally lead the charge in pursuit of OCS exploration and development," said Parnell, who sent a letter to U.S. Interior Secretary Ken Salazar on Thursday in support of a federal leasing program.
Parnell said the estimated 27 billion barrels of oil in federal waters off Alaska's northern coast could revitalize the declining flow through the trans-Alaska pipeline, and that natural gas there could help a gasline. He said he'd work with the Natives who oppose development on how to address their concerns.
Parnell: prove the need
Parnell will also be closely watched to see how he goes about trying to secure the long-deferred dream of a natural gas pipeline from the North Slope. All the oil companies who hold leases for natural gas on the Slope, as well as TransCanada, say the project requires certainty from the state on how much of a financial bite it would take.
"This project faces many economic risks. One of the big risks is uncertainty about state taxes / fiscal terms. The state is in position to reduce this economic risk and increase the likelihood of a successful project," said BP Alaska spokesman Steve Rinehart.
Parnell said he was involved in negotiations over gas taxes when he worked in the state Oil and Gas Division earlier this decade and came away convinced it is a bad idea to hash it out with individual companies who have different requirements for what's needed. He said he'll negotiate only with a partnership and "the road to fiscal certainty runs right through AGIA."
"TransCanada and Exxon have moved in a way that demonstrates the Alaska Gasline Inducement Act is working. I think the Denali team now can move and those four companies can negotiate their own terms together on how they're going to make a project happen.
"These two (projects) need to merge," he told reporters.
If they reached that point, Parnell said, "anything they can prove is economically needed I will consider."
Sitka Republican Sen. Bert Stedman, who has a lot of say on gasline issues as co-chair of the Senate Finance Committee, said Parnell is wrong on the viability of the TransCanada project. He said he doesn't see how it will come together.
"My expectation is AGIA is going to fail and there will be a mutual agreement between the state and TransCanada to terminate that relationship," he said.
Stedman said it's too soon to set gas taxes because the industry is still working out the costs of the project. But the current tax system would be a bad deal for the state as well if a gasline was built, Stedman said, so changes will need to happen.
"It is not in the best interests of the state or the industry to lock in the current structure," Stedman said.
Conoco spokeswoman Natalie Lowman said her company and the other producers will be asked to make billions of dollars in commitments for the project. "The terms that affect those producers will remain the critical issues in moving this massive project forward and these terms can be addressed independent of project ownership," she argued.
Find Sean Cockerham online at adn.com/contact/scockerham or call him at 257-4344.