Lt. Governor Sean Parnell recently certified a gas reserves tax initiative submitted by Representatives Harry Crawford, Beth Kertulla and David Guttenberg. Sponsors of the new tax now have one year to collect a sufficient number of signatures to get the initiative on the 2010 ballot. If passed, the initiative would levy a tax on known gas reserves in large Alaska fields.

The measure is similar to one soundly defeated by Alaska voters in 2006 following a lengthy and expensive public relations effort by the oil industry, RDC and other organizations. Voters rejected that initiative by a 2-1 ratio. It drew sharp opposition from all major gubernatorial candidates, including Sarah Palin, as well as Alaska’s congressional delegation and business leaders across all of Alaska’s resource industries.

Crawford and Guttenberg were sponsors of the earlier initiative.

RDC vigorously fought the 2006 initiative and intends to do so again with the new initiative.

The sponsors say both measures are intended to force oil companies to develop North Slope gas reserves.

Those resources remain in the ground because a pipeline to carry the gas to Lower 48 markets does not exist. Yet since the previous ballot measure failed, two proposals for building the $30-$40 billion pipeline have made major strides.

Both ConocoPhillips and BP have united under Denali: The Alaska Gas Pipeline to advance plans for a pipeline from the North Slope to the Lower 48. Denali has several hundred people in Alaska working on the project and had 80 people in the field this summer. The company spent $80 million on the project this summer.

The company has formed a project team and has opened an Anchorage office. It has begun a pre-filing process with the Federal Energy and Regulatory Commission and submitted a right-of-way application to the Bureau of Land Management.

TransCanada is proceeding under the State’s Alaska Gasline Inducement Act (AGIA) framework on its plans for a pipeline. In early December, the state formally issued the company a license to pursue the project. TransCanada has begun engineering, environmental and field work.

Crawford said that he would cancel the reserves tax if the lessees commit gas to a pipeline that meets AGIA’s requirements.

The measure would apply to all the gas contained in the Prudhoe Bay and Kuparuk fields. It would allow leaseholders to reclaim the tax through annual credits.

The initiative is propagated on two myths: that the North Slope producers have been “warehousing” the gas for the last 30 years, and they are not interested in building the gasline.

The project did not become even remotely viable until after 2000. Before then, prices were too low in North America for natural gas, and demand in Asia was not sufficient to justify the volume it would take to realize efficient pipeline economics of scale.

Since 2000, the producers have been actively working on the project, spending hundreds of millions of dollars on conceptual engineering and other work.

Former RDC President John Shively noted in the 2006 debate on the issue, “I do not believe it is possible to tax a project into being, but I do know it is possible to tax it out of existence.”

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