Lawmakers considering a supposedly simple bill breaking gas out of the state's oil tax found Friday that a fix they can be confident in isn't going to come easily.

Glitches raised by a couple of lawmakers and state Revenue Commissioner Pat Galvin slowed but didn't stall progress on the bill in the state Senate -- but clearly, it's going to take longer and will prove more controversial than previously thought.

Lawmakers have already been warned that under the existing tax, the state could miss out on up to $2 billion in revenue in years when oil is expensive and gas is cheap. But Galvin ran other scenarios -- if oil is going for $125 per barrel and gas at $20 per million Btu and isn't subject to a tax function called progressivity, the state could lose out on up to $5 billion.

One of the incentives offered through AGIA to encourage gas producers to commit to the project in an open season is a 10-year lock-in of the current gas tax. Consequently, lawmakers should be careful to "balance a desire to generate revenue with creating an attractive investment climate for that gas line," Galvin said at a hearing Friday morning. Changes this late in the game could hurt prospects under an AGIA open season, Galvin continued, particularly if producers catch wind of increased financial risk or of instability.

Legislative consultant Roger Marks, on the other hand, said a combined tax sets the stage for additional risk as well. Under certain price scenarios, producers could fear higher oil taxes if they bring gas streams online.

Sen. Bert Stedman, who introduced the bill, said he isn't looking for a hard and fast gas tax now -- that will come later, when companies and the state negotiate terms. Instead, he wants the state to enter a potentially binding open season with a tax that doesn't create a deficit from the start. It's widely acknowledged that in order for producers to back a pipeline, the economics will have to look good -- and that means, in part, low taxes.

"I think it would be difficult to put an aggressive tax structure on a low-value hydrocarbon on a $40 billion project," the Sitka Republican said, adding that the state shouldn't necessarily give up value on its oil to incentivize gas.

But gas and oil are combined under the existing tax, which could potentially cost the state billions of dollars in revenue if the price gap between the two resources widens.

Stedman's proposed fix would separate the combined tax and evaluate each resource on its own. He offered a "surgical" cut, one his colleagues said they may be able to support. In one proposal, gas would be taxed at a flat 25 percent of production value. In a second proposal that could be far more complicated, gas would be taxed at 25 percent and be subject to the same progressivity levels in place for oil. When prices are high and companies are churning out profits, the state's take increases. That could also present an opportunity for lawmakers to essentially craft a new progressivity structure for gas, a politically charged prospect they may not be able to accomplish with the 90-day session half over.

Sen. Bill Wielechowski, D-Anchorage, sat in on the Finance hearing and said he's troubled by the bills.

"My guess is that as we move forward, we are going to uncover things that we had never expected," Wielechowski said. "I am very worried that with 40 days left in the session we're potentially going to rush through and make a major, major policy decision that could end up costing us billions -- for something we don't have to do."

Another huge complication looms if gas is taxed separately. Credits are applied before reaching a taxable value. The allocation of those costs -- and therefore the distribution of the credits -- between gas and oil could significantly alter the state's take and could prove complicated for producers and the state.