Legislature Begins Push to “De-Couple” Oil and Gas Taxes

By Dave Donaldson

The Parnell administration agrees with legislative consultants who say under certain  conditions the state could lose money with a natural gas pipeline from the North Slope to North American markets.    However,  they counsel against changing the tax regime to remove the possibility.

Senate Finance Co-chair Bert Stedman is prepared to get the issue of “decoupling” oil and gas taxes before legislators and the public.

I’m not interested in rushing through this issue.  This is the biggest issue sitting in this building by far.

Revenue Commissioner Pat Galvin today presented a series of tax scenarios that agree with Stedman’s premise:   if oil prices are high,  and gas prices are low – like they are now —  and the two fuels remain linked as they are in the current tax structure – the state will get a lot less money.  Stedman puts the estimate at some two Billion dollars a year less than the potential of taxing them separately.

It takes away all our gas revenue on our severance portion – or production portion.  Most likely takes away our royalty portion. And then we can get into finer calculation to see if we lose our property tax collection, that type of thing.   Why would we not just shut the gate on a gasline?   The treasury would be up almost a Billion bucks a year without running a …  why would we, why would we,  why would we do this?

Galvin defends the possibility, however.  He says by taking a risk on the price of gas,  the state makes the project appear better to potential shippers and makes it more likely that there will be a gas line at all.  In addition, he says,  without the gas line,  the money from higher production will not likely be there – and the result could be even worse for the state’s bottom line.

With the gas production, we end up with more oil production as well.  And the projections for oil production without a gas line are different in terms of the oil side of this column than they are if you have gas in there as well.

Galvin says legislators should not look at revenue estimates as a snapshot.

There is no legislation at this point for lawmakers to act on,  however, there is a concern that decisions on separating oil and gas taxes be made before TransCanada goes to the industry for shippers to bid for space during the Open Season process beginning in May.  By statute,  a company willing to commit  to the project  may ship under the taxes in place at the time of the bid – locking in the state’s position for ten years from the time the gasline opens.


Comments Off on Legislature Begins Push to “De-Couple” Oil and Gas Taxes

Filed under News Scripts

Comments are closed.