Alaska News

Governor says reserves tax unnecessary after receiving promises of gas

JUNEAU — Alaska Gov. Bill Walker's special session starting Saturday won't include a controversial tax proposal that he originally wanted as leverage to force oil companies to supply their natural gas for a pipeline megaproject from the North Slope.

Walker said at a news conference Friday afternoon that he was dropping the proposal to tax natural gas reserves in the ground on the North Slope after BP and ConocoPhillips sent him letters promising to commit their gas to a pipeline if they pull out of their partnership on the $55 billion project with the state.

Both letters make the offers of gas contingent on mutually agreeable and "commercially reasonable terms."

But Walker said: "What it gives is the assurance that we'll have gas for a gas line."

Walker had previously suggested that his tax proposal was aimed at ExxonMobil, the state's third oil company partner in the Alaska LNG pipeline project. Walker has frequently cited ExxonMobil's other potential pipelines around the world as being in competition with Alaska's, and argues that the state needs a way to force the company to give up its gas if it doesn't want to invest in Alaska LNG.

Just after the press conference, ExxonMobil released a copy of its own letter to Walker's administration dated Thursday that said the company was also willing to negotiate concepts "that would allow the project to move forward in the event one or more parties were to withdraw."

Walker, a Republican-turned-independent, said at his news conference that ExxonMobil didn't give him "quite the letter I was looking for." His spokeswoman, Katie Marquette, later said Walker didn't view ExxonMobil's offer as equivalent to those from the two other companies.

ADVERTISEMENT

But, Walker added at his news conference: "I'm hopeful they will also join BP and ConocoPhillips in this kind of a commitment."

In a prepared statement before his press conference, Walker said a call he received from ExxonMobil on Friday gave him hope that a deal can be struck. At the news conference, he explained, "They said the right words — I just need to see it in writing."

The decision not to introduce the tax could help Walker defuse what was expected to be an acrimonious special session.

Republican legislative leaders had complained the tax proposal was an unnecessary jab at its three oil company partners in the pipeline project, and suggested they were unlikely to approve it.

Sen. John Coghill, R-North Pole, the Senate's majority leader, said he did not like the gas-tax concept even if he would have been willing to listen to Walker's idea.

"I think everybody was just going, 'Oh, no, how are we going to deal with this?' And now we don't have to," Coghill said in a phone interview. "That's one less stress item. It's just one less question. Sounds like the governor got a fairly decent response, and I'm glad he did. Now, we can get down to business."

House Speaker Mike Chenault, R-Nikiski, called Walker's announcement "good news" in a prepared statement. And Rep. Adam Wool, D-Fairbanks, said he expected the move would allow him to return home to his family more quickly.

"As soon as I heard it, I was like: 'Yes!' " Wool said. "I've got little kids — I've got parent-teacher conferences next week."

The primary impact of the oil companies' letters may, in fact, be in reducing political tensions, according to Larry Persily, the former federal pipeline coordinator who now works as an oil and gas advisor for the Kenai Peninsula Borough mayor.

"They're a wise political gesture for peace in our time on the gas reserves tax," Persily said in a phone interview late Friday. "But an agreement to participate on mutually agreeable, reasonable terms isn't something you take to the bank and borrow against — and I'm sure the governor understands that. They mean all the parties are still talking. They also mean we don't have a project yet."

Lawmakers are now left with one item on their special session agenda. Walker is asking them to approve spending about $150 million to increase Alaska's stake in the pipeline project.

That money will go for development costs and for buying out a share of the project currently held by pipeline company TransCanada.

Nathaniel Herz

Anchorage-based independent journalist Nathaniel Herz has been a reporter in Alaska for nearly a decade, with stints at the Anchorage Daily News and Alaska Public Media. Read his newsletter, Northern Journal, at natherz.substack.com

ADVERTISEMENT