Current gas tax may be a money loser

If gas had flowed through a huge pipeline from the North Slope during the past two years, Alaska's linked oil and gas tax would have drawn about $2 billion less in tax revenue than if oil and gas were taxed separately.

That's according to an analysis done by consultant David Wood in response to an inquiry by Senate Finance Committee member Sen. Joe Thomas, D-Fairbanks.

Thomas is among a group of lawmakers led by Senate Finance co-chair Sen. Bert Stedman, R-Sitka, arguing that the state must break gas out from the oil tax before May 1. That's when an open season on a large-diameter natural gas pipeline could lock the tax rate in for the first 10 years of flow. The lawmakers are concerned that without such action, Alaska's treasury could take a hit as big as the one in Wood's scenario -- or bigger. The way gas and oil production are linked for tax purposes means that, under certain scenarios, producers may pay no tax on gas, and even get a break on oil taxes if they're producing gas too.

Other legislators remain skeptical that the state would risk much by leaving the tax as is, and question whether May 1 is a true "lock in" date. They say future negotiations between the state and companies making bids to ship gas on the line will iron out Alaska's take. Some also say that a loss in oil revenues is an expected "give" in order to "get" a pipeline built.

Gov. Sean Parnell told reporters late last week that changes to the gas tax at this stage of the game could hurt pipeline progress under the Alaska Gasline Inducement Act.

With a pledge of up to $500 million of state money and a state license under AGIA, Calgary-based TransCanada Corp. is planning an open season beginning May 1 to solicit pipe space reservations from potential shippers.

A Senate Finance Committee bill breaking apart the two taxes is expected next week.

In his analysis, Wood used Department of Revenue price, volume and cost data for fiscal year 2008 (July 2007 to June 2008) and fiscal year 2009 (July 2008 to June 2009). That period, he points out, "encompasses the wide range of oil prices that were prevailed" since the state's tax structure, Alaska's Clear and Equitable Share, was in put in place.

In FY 2008, Alaska took in $7.05 billion for oil production. If a 4.5 billion cubic foot per day gasline was operating and gas was taxed separately, the state could have absorbed another $1.14 billion in taxes. Overall, the state take could have hit $8.599 billion.

But because the two resources are linked under the current tax, Alaska would have taken in a combined tax of $6.776 billion -- or $1.822 billion less than if the two were taxed separately.

For FY 2009, Alaska would have taken in $3.251 billion on oil and $583 million on gas, or $4.185 billion total, if taxed separately -- but the link would have netted $800 million less.

Contact Rena Delbridge at rena(at)alaskadispatch.com.