Friday, June 26, 2009

Taxes Are The Sticking Point With AGIA, Says Exxon

This has always been a sticking point on AGIA: fiscal certainty

When ExxonMobil joined TransCanada their officials said Exxon's eventual intention is to build the pipeline under the state's AGIA terms. During Tuesday testimony, however, ExxonMobil's Marty Massey said AGIA's 10-year tax terms are too short.

The Palin administration says now is not the time to start this debate.

Revenue Commissioner Pat Galvin says, "We believe there is a significant distinction between what the producers want and what they say they want, and what they are ultimately going to need."

This is Palin's problem which will plague her.

All of the hoopla on the Exxon/TansCanada partnership was not discussed on this site because along with issues that surround the Mackenzie pipeline in Canada, the fiscal certainty issue is what will drive the gas pipeline to be a successful endeavor or not.

The fiscal certainty issue has been written about here on this site for some time.

And Commissioner Galvin knows fiscal certainty is the sticking point and he knows the costs to pull gas hydrates out of heavy oil is very expensive.

Galvin did address the fiscal terms of AGIA when he stated:

Galvin said there are two parts to any discussion on fiscal terms, one being the amount of "state take," or revenues, going to the state government, and the second being "fiscal stability," or the freezing of existing tax rates for a period of time.

"On state take, the administration's position is still that the project is profitable now and there is no need to alter the fiscal situation. But we have always made the opportunity available for people to provide us with information that changes are needed," Galvin said. "On fiscal stability, this is already provided for under AGIA, which allows for 10 years of fixed terms for production taxes for gas committed to an AGIA-licensed project."

This issue on fiscal certainty, if not resolved, will sink the project.

Related Links:

AGIA: What's it all about and who really wins

Fagan and Halcro: Know it all Palin Bashers

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