Olson, Chenault talk oil taxes, gas pipeline

Two lawmakers from the Kenai Peninsula contend the Alaska State Legislature is closer than ever to making historic decisions on two hot button issues — a rework of the state’s oil tax system and building a gas pipeline from the North Slope.


“I think we are closer than we were in the past,” Rep. Kurt Olson, R-Soldotna, said. “... I think we’ve got a real shot at it. I think people are tired of us not doing anything.”

Olson made his comments in an interview Saturday after a town hall meeting at the George A. Navarre Borough Administration building’s assembly chambers where he and House Speaker Mike Chenault, R-Nikiski, earlier gave an update on legislative progress, heard residents’ concerns and answered questions.

Other than education-related subjects, oil taxes and gas pipeline issues dominated the mid-morning discussion. Chenault said he hopes the Legislature can wrap up on time — avoiding a summer special session — but conceded that debates on oil taxes and a gas pipeline could keep lawmakers away longer.

“I think we’ll get the operating budget, which is the only thing that we have to have done and we’ll get a capital budget done, but other than that, we’ll just see,” he said.

He said he is also optimistic House Bill 4 — his effort to help the Alaska Gasline Development Corporation usher to open season a gas pipeline — will pass the Senate.

“I don’t think there is anything in there that’s a poison pill,” he said. “We just have to get people to understand what the bill actually does and how it moves Alaska forward.”

Chenault was asked by a resident why anyone would oppose his HB4. The Nikiski Republican said he could think of many — size, location and “it’s not the right color,” he jested.

“Right now you actually have a city that is funding an ... ad campaign — you’ve probably seen the ads on TV — saying to call your legislator, tell him to vote against House Bill 4 because it is too small, it doesn’t benefit all Alaskans, it won’t raise revenue,” he said.

But, the pipeline is a sure bet to “heat Alaskan homes, Alaskan businesses, fuel Alaska’s economy and if there is any left, ship it somewhere else where we can make more money,” Chenault said.

He said some of the bill’s biggest push back last session came from Fairbanks-area lawmakers.

“Fortunately a couple of them aren’t there now,” he said. “That may be part of it. Their idea was to run a pipeline from Cook Inlet, a place that doesn’t have gas mind you, to Fairbanks, a place that doesn’t have gas. It made no sense.”

Some say the state shouldn’t be looking at a gas line because of the estimates of Cook Inlet’s resources, Chenault said. However, uncertainties plague that answer — where is it located, when will it be discovered, how long before it is place on the market and the cost.

If the cost of investment is too high, companies won’t drill and the area, he said, can only hope producers put more gas in the market based on the results of their oil drilling.

“They are not going to spend hundreds of millions of dollars to develop a gas field that they can only sell gas at in the middle of winter,” he said. “It makes no economic sense.”

That strengthens the pipeline’s case, especially considering recent utility threats of possible liquefied natural gas imports to meet demand, he said.

“If we don’t find gas in Cook Inlet and if a gas pipeline doesn’t get here in time, that may be the only option that’s out there,” he said of importing LNG. “I think it’ll be a sad day for Alaskans whenever we import LNG from a foreign country to fuel our energy needs when we have 35Ts of known gas sitting at Prudhoe Bay.”

Both Olson and Chenault said they have not seen Senate Bill 21, an oil tax overhaul approved by the Senate on Wednesday. However, both representatives said it was time for action.

“The majority feel ACES should be modified,” Chenault said. “We talk about, ‘We need to take our time, we need to consider it, we need to think about it.’ For those that weren’t here, ACES was passed across the House and the Senate floor in 30 days ... we have taken four years looking at ACES and modifications to it.”

Continued declining oil production and lack of new investment “spells disaster in a short period of time,” for the state’s finances, he said.

“I don’t think that puts us up against a wall that we have to (pass oil tax reform),” he said. “But, people are concerned that we are going to be deficit spending if we pass the bill. We are going to be deficit spending if we don’t pass the bill.”

Said Chenault, “I’m willing to give up a little bit today to increase the production to last into the future.”

Olson said the only thing keeping the state afloat is the current high price of oil.

“I’ve been through three cycles — it is amazing how fast it can drop when something happens world wide that has an impact,” he said. “We could be back down to below $40 in six months and not even know it. Well, we would know it because we’d be broke.”

Brian Smith can be reached at brian.smith@peninsulaclarion.com.


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