Tax would punish Big Oil for leaving gas in ground

Posted: Tuesday, March 20, 2001

JUNEAU (AP) -- The big oil companies that own most of the North Slope's natural gas would have to pay the state at least a billion dollars a year if the gas isn't taken to market soon under a bill sponsored by a Fairbanks Republican.

For the past 25 years Alaska has watched the oil companies develop competing projects around the globe while leaving their state gas leases on the North Slope untouched, said Rep. Jim Whitaker.

''Call it a warehousing fee,'' said Whitaker, R-Fairbanks. ''No more talk, no more pilot projects,'' Whitaker said. ''Take it to market. ''We know the market exists. We know the economics to build a project are in place. Time's up.

The proposed ''incentive tax'' would apply to all North Slope gas leases, with the state to receive no less than the $1 billion in combined revenue from the companies holding them.

The tax would not be imposed if substantial North Slope gas contract commitments are made by the end of 2003 and the companies are ready to deliver the gas to market by the end of 2007.

Whitaker also on Friday introduced a resolution stating that the Legislature will ''exercise every power within its authority'' to prevent a North Slope natural gas pipeline from bypassing Alaska on a Canadian route.

Both the resolution and the incentive tax are based upon the Alaska Constitution's mandate that the state must manage its resources for the ''maximum benefit of its people,'' Whitaker said.

The incentive tax is similar to legislation introduced last year by Anchorage Democrat Eric Croft. Whitaker had a major hand in crafting that bill and held hearings on it as chairman of the House Special Committee on Oil and Gas.

The bill did not draw enough support last year following strenuous opposition by the oil industry, Whitaker said. He is hoping another year of gas sitting in the ground will sway his colleagues in the Legislature.

Representatives of BP and Phillips Petroleum Co. said the proposed tax would do nothing to help commercialize North Slope natural gas.

''We're doing everything we can do to develop an economically viable gas sales project, and the markets will determine whether an Alaska project moves forward,'' said BP spokesman Ronnie Chappell.

The three key companies operating on the North Slope -- BP, Exxon Mobil, and Phillips -- say they are in the midst of a one-year $75 million project to determine whether a North Slope natural gas pipeline should be built and along what route.

The major routes under consideration by the companies are the northern route to the Canadian Arctic and the southern route down the Alaska Highway.

The spokeswoman for Phillips, which became a major player on the North Slope after purchasing Arco's Alaska holdings last year, said commercializing North Slope gas is high on the company's priority list.

''On the scale of our investments worldwide, it's a huge piece of it,'' said Phillips spokeswoman Dawn Patience. ''The best thing we can do is keep an open dialogue with the Alaska Legislature. We are working very hard on this project.''

The concept of a gas commercialization incentive tax has also been mentioned by Palmer Rep. Scott Ogan, chairman of the House Special Committee on Oil and Gas. Ogan noted that other nations take such measures.

Both Ogan and Whitaker were disappointed by a recent announcement by Phillips that it is planning to ship Timor Sea gas to the West Coast via Australia.

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