By Governor Frank H. Murkowski
September 15, 2006
The most urgent reason to act now is the deal-breaker on the November ballot- the tax on gas reserves in the ground. If that tax passes, there will be no gas pipeline contract.
The reserves tax proposal will tax the gas at about $1 billion annually. Pipeline design, permitting and construction are estimated to take ten years. Over those ten years the producers would pay about $10 billion-with no return on that investment.
That $10 billion would add 40 to 50 percent to project costs before any gas flows, killing the project by making it non-economic. But if we have a contract, it will negate the reason for the reserves tax and enable the project to get underway.
Further delay to re-study the issues or to restart the contract process will also add the risk that LNG or other forms of energy will replace Alaska natural gas in meeting the energy needs of the mid-United States. Alaska has a narrow window. We cannot let it close.
Oil development provides 86-percent of state revenue for services including schools, troopers and the transportation system. Without a gas pipeline, oil flow through the current pipeline is projected to stop in 2030.
In ten years, current oil flow will be cut by half unless the producers make significant investments to arrest the serious decline. It is not at all certain that the producers will increase investment in North Slope oil without a gas pipeline contract.
With the flow of oil through the pipeline running out, we must monetize our gas to replace lost oil revenue. Because the reserves tax will kill the gas pipeline, it is absolutely clear that we need to act now. Each year of delay erodes our bargaining power to get a gas pipeline contract.
A gas pipeline will secure Alaska's economic future for the next 50 years. It will add 20 years to the life of the oil pipeline because gas exploration will mean more oil is found. From this, the state will earn an additional $50 billion.
It will also provide the opportunity to develop the technology to obtain commercial access to nearly 10 billion barrels of heavy oil.
The gas pipeline will allow the state to get a financial return from the 35 trillion cubic feet of gas which is proven and create the incentives necessary to explore for the 200 TCF experts estimate is on the North Slope.
This also provides time to develop the technology to commercially access abundant gas hydrates (frozen methane) to help insure our economic future.
Alaska's economic future is secure if we have a gasline.
So where does this leave us? Senator Ted Stevens answered this question in appearances before the Alaska State Senate Special Committee on Natural Gas in mid-July and later before the Anchorage Chamber of Commerce. He made these points:
Time is short and we must act now. Delay is not in Alaska's interest.
We can still complete the gas pipeline contract, with the key changes to the draft contract the public has requested, before my administration leaves office. To do otherwise risks losing or delaying the economic future of Alaska.
Gubernatorial candidate Andrew Halcro has it right about the gas pipeline contract. I call upon him, Sarah Palin, Tony Knowles and our Alaska Legislature to join with me, the Vice President, our Congressional delegation and Alaska's business community to move a gas pipeline contract now.
Pipeline unity is essential. We must act together.
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