September 23, 2006
Murkowski also outlined a process for going forward. To start with, the leadership would appoint a working group of its members to monitor negotiations between the administration and the producers.
"It is imperative that the Legislature have a clear understanding of how we are negotiating the issues about which they are concerned," Murkowski said. "That is what the working group would provide. We believe that once the Legislature gets re-engaged in this process, we can negotiate contract changes that will result in a contract that answers their concerns and set up a meaningful opportunity for ratification.
"Alaska needs to complete the gas fiscal contract now," Murkowski said. "By 2016 oil flows will be approximately half of what they are today and there will thus be significantly less state revenue than we now enjoy. Without the gas pipeline, commercial oil operations will cease around 2030. We need to move rapidly toward replacing our oil revenue-based economy with a gas revenue-based economy."
The governor's three-page letter outlined the state's responsibility to Alaskans to pursue the gas pipeline project, while focusing on the revenue impacts the state could face if we continue to delay moving forward.
Among the ways delay could hurt the state's chances to get a gas pipeline contract are competition in the mid-America marketplace from other sources of energy and the proposed reserves tax.
"There are 6,000 trillion cubic feet of gas at tidewater from Qatar and other areas around the world," Murkowski said. "The longer the gas pipeline project remains uncertain, the more likely other sources of energy could replace Alaska's gas in the mid-America market."
Murkowski reiterated that the potential passage of a reserves tax on the November ballot would kill the economics of the project and move the state from a negotiation posture to a litigation posture with the producers.
"Ratification of a gas fiscal contract now is the best way to defeat the initiative," Murkowski said.
While urging the House to reconsider its stance against returning to the capitol for a special session to ratify the administration's proposed contract with the producers, the governor also provided an update on the ongoing negotiations.
The administration has prepared responses to address public concerns gathered during the summer's comment period, along with a proposed limited liability corporation, or LLC, that would manage the gas pipeline's operation and assets, according to the governor.
"However, the producers are reluctant to negotiate further, citing your September 5, 2006 letter as evidence that there is no advantage in negotiating with our administration so long as the Legislature is not willing to participate in negotiations and opposes a special session to ratify a renegotiated gas fiscal contract," Murkowski said.
In summarizing the closing of his letter to House leadership, the governor said, "I invite you to appoint members to sit down with the producers and my gas negotiating team to work through these necessary fiscal contract modifications so that we can have a special session designed to ratify the renegotiated contract."
While Murkowski has not issued a call for another special session, he said he would leave that option open.
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