Late last week at lunchtime, members of the Alaska state Senate leadership team were seen going into a private dining room at the Glacier BrewHouse in Anchorage. They were there for a meeting with Department of Natural Resources Acting Commissioner Joe Balash and Department of Revenue staffer Mike Pawlowski, also known as “Fish.”
The Senate Rules Committee Chair Lesil McGuire was noticeably absent. Was she busy with official legislative duties? Was she campaigning for her bid for lieutenant governor? Or was she simply not invited? Why do people call Pawlowski “Fish”? What was the group discussing? They weren’t likely discussing an oil tax overhaul. That, after all, is so last year. Natural gas taxes? Probably.
On Monday, ExxonMobil, BP, ConocoPhillips and TransCanada announced that the terminus to the mythical natural gas “big line” would be in Nikiski. Say what you will about the project bypassing Valdez, the fact that the three producers who don’t often agree on anything, agreed on this is kind of a big deal.
Embedded in the announcement was a message to the state: “A competitive, predictable and durable oil and gas fiscal environment will be required for a project of this unprecedented scale, complexity and cost to compete in global energy markets.” Translation: They also all agreed that they need a tax break on gas to build the line.
Currently, natural gas is taxed at an effective rate of 35 percent prior to credits, roughly the same rate as oil. But it’s much less valuable and the producers aren’t going to invest up to $65 billion on a project that won’t result in a hefty profit.
However, even if all the evidence points to the fact that the producers actually do need a tax break to move forward, it’s unclear if legislators have the stomach for more talk of tax breaks for the producers.
A repeal of last legislative session’s oil tax break is still in the works and won’t be voted on until the primary election in August 2014. Taking this one on next legislative session might invigorate those who would repeal that tax.
Besides, creating the kind of “competitive, predictable and durable” tax regime takes tons of political capital from the governor’s office. And it’s unclear, in an election year, if Gov. Sean Parnell will have that much to spare.
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