Wednesday, July 19, 2006

The Reserves Tax: A Lawyer's dream

When it comes to the initiative setup by Croft, Crawford and Guttenberg, it is an Act that is going to be lawyer's dream.

First to the Act or intitative.

“An Act levying a tax on certain leases having known resources of natural gas, conditionally repealing the levy of that tax, and authorizing a credit for payments of that tax against amounts due under the oil and gas properties production (severance) tax if requirements relating to the sale or shipment of the natural gas are met; and providing for an effective date”.

05GAS2AG's File Number: Primary Sponsors: David Guttenberg, Harry T. Crawford Jr., Eric Croft

Contact Information -Application was received in the Lieutenant Governor's Office on July 20, 2005. A copy of the application and signatures were sent to the Department of Law and Division of Elections on July 22, 2005.

The Division of Elections determined that there were a sufficient number of sponsor signatures on July 29, 2005. The application was certified on August 29, 2005. Petition booklets were issued to the initiative committee on September 2, 2005. Petition booklets were submitted to the Division of Elections on January 6, 2006.

Status of Signature Verification for 05GAS2 Petition: As of March 22, 2006 the division has entered 47,539 signatures for the 05GAS2 petition. Of the entered signatures, 34,823 have qualified through our automated and manual verification processes. The division will continue entering signatures from petition booklets, which will be verified through our automated and/or manual qualification processes. This information will be updated again before the close of business on Wednesday, May 31, 2006.

*There are two parts to the signature verification process:

Part 1: All signatures contained in petition booklets are entered into our database. An automated verification program is run routinely, which matches the information input into the system from the petition booklets with information in existing voter records. If the program is able to match the information, that signature is qualified.

Part 2: All signatures which did not qualify through the automated verification process in part 1 are reviewed manually to determine if the signatures can qualify. Often, there are subtle differences between the voter record and the information in the petition booklet which require manual review. For example, a voter who is registered in our system as Robert M. Voter signs the petition booklet and prints his name as Bob M. Voter would not qualify through the automated process in part 1 and would require manual review.Click here for the 05GAS2 proposed bill language as provided by the sponsors. In PDF

If the PPT passes, the Act in effect mucks up the waters.

It addresses a production tax not a profits tax. And nevermind if you continue with a production tax, because oil production will decrease if the taxes are raised on the production tax. This whole scenario, gives the oil companies the ammo to sue the state if the state sets an amount on production.

The gas pipeline will need new investment in oil exploration to increase the amount of natural gas going through the pipeline. And with an increase in a production tax, don't look for new investments.

All the oil companies have to do is show how an increase in production taxes has impacted production world-wide. But a jury may not be so sympathetic to the facts.

But there is no doubt in my mind that if the Act passes, the oil companies will sue the State of Alaska and the court battles will continue and be appealed. And in the end, there will be no gas pipeline.

And the lawsuits will have an impact. Any spur or off-take point will be history as will any chance for a future gas pipeline or LNG line.

With Conoco investing 25% in the Rockies Express gas pipeline, it seems there is at least one company that is looking at a worst case scenario. And they are looking elesewhere.

Lastly, I bet those voters who signed on, where misinformed or signed under with a different intent. The oil companies could have a contract to build the line, start the permitting process and start construction but still be taxed. A tax that in the meantime, would take away from new investment in oil production in Alaska. New production that would increase bot oil and gas revenues.

All I can say is, Larry, Moe and Curly could have done better.

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