Alaskans have just been told that gasline contract negotiations have not progressed satisfactorily and thus there is no time left to get a constitutional amendment allowing a vote on fiscal certainty on the 2016 ballot. The proposed constitutional amendment would provide the producers with the necessary assurances that the state would not arbitrarily increase the tax rate over the life of the LNG project.
The producers have told the state for years that unless they had fiscal certainty on taxes, they would not spend the large sums of money (around $4 billion) required for Front End Engineering and Design (FEED).
Putting off fiscal certainty until the 2018 elections and the resulting delay in beginning FEED should be unacceptable to all parties — both the state and the producers. To suggest that there may be another market for Alaska gas overlooks the fact that a good portion of Alaska’s gas has been leased to the producers. Any effort to take it back will result in extended litigation and more delay.
A few months ago, I proposed a solution which I sent to each legislator and the Alaska media. I believe my proposal has merit and if adopted addresses the two major concerns of each of the parties: Fiscal certainty for the producers, and eliminating the state’s risk of paying its share of FEED ($1 billion) if the pipeline isn’t built.
In 2005 and 2006, when my administration was negotiating with the producers on the natural gas line, fiscal certainty was a major issue and a “must have” for the producers. We did not seek a constitutional amendment regarding Alaska’s tax alienation authority because we were not turning over Alaska’s taxing authority to someone else. We were simply entering into a good faith contract and “fixing the tax rate for the life of the project” (subject to certain escalation based on inflation). We agreed that the state and the producers could rely on that part of the Alaska Constitution that protects the “sanctity of contracts” and each side would be bound by its terms.
In order to avoid the threat of a constitutional challenge to such a contract, the Legislature could require that any constitutional challenge would have to be brought directly in the Supreme Court within 90 days of the Legislature’s approval of the contract.
Why not agree to similar contract terms and move on? It was satisfactory then, why not now?
With the delicate state of the Alaskan economy, we must take advantage of every opportunity to market our resources in a sound and prudent manner in the best interest of all our citizens. It is not in the interest of the state or the producers to delay.
• Frank Murkowski was the governor of Alaska from 2002-2006 and is a member of the Republican party.
