When Gov. Frank Murkowski spoke to members of the Anchorage Chamber of Commerce on Jan. 30, he offered nearly a point-by-point defense of his efforts to secure a gas pipeline deal with North Slope producers.
"It is clear now, with the political season upon us, that politics is beginning to cloud the public discussion with fact-free, and sometimes fact-less, assertions about the gas pipeline negotiations," he told the chamber.
The governor didn't name any names, but made it clear that he feels that his political foes are incorrect in many of their assertions.
The state is close to achieving a gas line deal, Murkowski said. Once the producers sign off on the agreement, the deal will be made public, and only then should it be debated. His administration isn't trying to hide anything, his negotiating team simply can't defend what they're doing because by law the negotiations must remain confidential.
"We have had to defend our efforts in the public arena with both hands tied behind our backs and duct tape around our feet," he said. "We are compelled by the Stranded Gas Act to keep the negotiations confidential, that is the law. It is amazing to me to have legislators who voted for the confidentiality provision now complaining about it."
State Department of Labor Commissioner Greg O'Claray was scheduled to speak at the chamber luncheon about labor issues for 2005 and 2006. The chamber announced late in the prior week that the governor would take O'Claray's place.
Murkowski did speak on gains in the labor sector, however.
Murkowski said that the state added 13,600 new private-sector jobs, and had seen a shift in the market from lower-paying service jobs to higher-paying jobs in mining, construction and oil.
He credited the job growth to his administration's focus on natural resources development.
"Over the past three years of my administration, we have witnessed the dramatic reawakening of Alaska's economic engine," he said. "We have come off dead idle and are rapidly gathering momentum."
He briefly spoke of the state's budget surplus and the record-high Alaska Permanent Fund account, comparing those to the $800 million deficit he faced when he entered office.
He quickly noted proposals to fund the state's long-range transportation plan and to relieve traffic congestion. Murkowski is proposing $30 million in state funds for Anchorage traffic, and he has already taken steps to improve safety along the Seward Highway, he said.
Murkowski also noted that he plans to again propose to the Legislature the idea of employing a percent of market value formula for using permanent fund earnings. This idea was pushed forward following his Conference of Alaskans in early 2004, a group of business leaders and Alaska citizens who gathered to come up with a long-range fiscal plan for the state.
Members of the conference supported the POMV approach to manage the permanent fund account by taking 5 percent of the fund's value a year. Half that percentage would go toward funding permanent fund dividends to the public, while 45 percent would go to education and 5 percent to community needs.
Had the proposal passed, he said, in fiscal year 2004, about $1.8 billion would have gone to education, and nearly $200 million would have gone to communities around with state, Murkowski said. Dividend checks would have totaled more than $2,000 over the past two years, instead of the nearly $1,800 Alaskans received.
Because of high energy costs and other community needs, Murkowski said he also plans to propose a community assistance plan by using the earnings from the Amerada Hess account, a reserve account set up using oil money that cannot be used for permanent fund dividends.
The account holds $424 million in principal that earns $26 million a year, he said. The governor will propose that the Legislature appropriate "another $600-or-so million" to produce enough earnings to have a sustaining fund of about $70 million.
That money could then be divided up between the state's communities, useful since the governor eliminated community sharing funds soon after taking office.
From there, the governor's speech was all about oil taxes and gas line negotiations. In his talk, he would bring up a subject for which he had been criticized recently, and then offer his response.
He said the media has allowed detractors to speculate what is happening with the talks, and to lay out their cases for why the gas line deal won't work, all before anyone knows what the plan is.
The Stranded Gas Act, he said, required talks to be kept confidential.
The gas is stranded, Murkowski said, a fact that is obvious to him, seeing that no producer has brought the gas to market. Critics have questioned whether the gas fits the definition of being 'stranded.' The gas hasn't yet been brought to market because, historically, prices weren't right. Now they are, and that's why the state is negotiating for a pipeline deal, he said.
"Some Alaskans argue that the project is economic under current prices," the governor said. "The problem is that experience of the last three decades has shown that prices are subject to considerable fluctuation. Just because prices are attractive today does not mean that the prices will be high 10 years from now, when the gas will be flowing. North American gas prices are very volatile and the world economy is unpredictable."
The state can't wait, he said.
Murkowski said that if he couldn't strike a fair deal for the state, he would fall back into a litigation strategy. "But that time has not come, and I hope it never does, because litigation takes years. We may lose our window of opportunity to market our gas while we are paying lawyers to litigate," he said.
Negotiations are taking so long, he said, because he wants to make sure everything is done right.
One way he's trying to do that, the governor said, was to bring some assurances of fiscal certainty to the producers. The state can't do that through a reserves tax placed on the leaseholders for the undeveloped gas, which has been proposed through the Legislature. Nor can it be achieved through an anti-trust lawsuit, which has already been filed, he said.
"Confrontation is not the best way to promote investment," Murkowski said. "Large-scale investments can only be made in an environment of fiscal and political stability. There is not a single example around the world where a reserves tax has resulted in the start of a large gas project. This is not how the gas exporting jurisdictions that are competing with us do business."
Murkowski said he'll propose a new oil tax plan that will replace the antiquated Economic Limit Factor currently used. That plan would calculate oil taxes based on producers' net profits.
But the gas line and the oil taxes must be negotiated separately, he said.
"The producers need to know their limits on taxation," Murkowski said. "Producers won't sign a contract on gas and find themselves wide open on oil. They're willing to pay for that certainty."
Melissa Campbell can be reached at melissa.campbell@alaskajournal.com.
