JUNEAU — Gov. Sean Parnell on Wednesday set new benchmarks for progress on a major natural gas pipeline project in Alaska and urged lawmakers to act this year on legislation to change the state’s oil tax structure.
In his fourth State of the State address, Parnell told a joint session of the Legislature that he wants the companies involved in advancing a long-hoped-for gas line project to settle on a concept by Feb. 15. That is, he wants details, like the project’s size, the location of the gas treatment plant, the size and scope of a liquefaction plant, and the number of off-take points where gas can be diverted for use in-state.
By spring, he said he wants the companies to finalize an agreement to move into a stage that would include preliminary engineering and a financing plan. He also wants a full summer of field work to begin this year.
It was in Parnell’s State of the State speech last year that he set benchmarks for progress that helped jumpstart the seemingly stalled project. The North Slope’s three major players and TransCanada Corp. agreed to pursue a liquefied natural gas project capable of overseas exports that they have said could cost more than $65 billion. But they haven’t announced specifics and haven’t committed to build. They said last fall that “significant environmental, regulatory, engineering and commercial work remains to reach upcoming decisions to bring North Slope gas to market.”
The oil companies have sought greater long-term certainty on Alaska oil and gas taxes, and have made clear that’s a key element as they move ahead with any project. Parnell last year said that if companies met his benchmarks, the state could look at gas taxes this year.
Parnell is proposing an overhaul of the state’s oil tax structure, which he has said is simpler than the current system and is aimed at encouraging new production and making Alaska more competitive. Oil production is declining, and while there is a shared goal at the Capitol to reverse that trend, there is disagreement over how best to do that. Some Democrats have already blasted Parnell’s proposal as a repackaged version of his prior tax-cut bills, and as a giveaway to oil companies.
Senate Minority Leader Johnny Ellis, D-Anchorage, said if Alaska stops getting its “fair share for our oil resource, it will bust our budget and that means politicians will look to sales and income taxes and a potential raid on your PFD,” he said in a Democratic response to the speech. PFD stands for Permanent Fund Dividend. Most Alaskans receive the dividend, their yearly share of the state’s oil wealth.
“That’s not scare tactics, that’s what’s coming, if this bill passes,” he said.
Parnell urged lawmakers to act on making changes to the tax system.
“While Alaskans — and many of us in this room — haven’t always seen eye to eye on these issues, we can all see the obvious, that unless we restore balance to our tax system, our oil fields will become obsolete,” he said. “We must make reforms and we must make them now. Waiting, it only makes this problem worse.”
Parnell said the question at hand was how to keep the state of Alaska strong.
“Make no mistake: Our present prosperity does not guarantee our future security. The choices we make during this short session will have long-lasting consequences. So let us choose wisely. Let us choose well,” he said.
The 90-day legislative session opened Tuesday.
The governor also touched on other priorities, including public safety and building on past efforts aimed at curbing domestic violence and sexual assaults. He also said he would like to see Alaska’s high school graduation rate hit 90 percent by 2020 — it’s currently around 69 percent — and he called for a commitment to childhood literacy.
He also urged lawmakers to act on legislation to help speed progress on a natural gas pipeline to meet the state’s demand for the fuel. And he called for lawmakers to come together and work with him to set a spending limit.