The Gas Reserves Tax Ballot Initiative: Risky State Policy

Abstract

Alaska voters will decide whether the state government should start taxing the natural gas reserves in the two largest North Slope gas fields. The idea behind the proposal is to jump-start construction of a gas pipeline. The North Slope has one of the largest accumulations of natural gas in the U.S., and Alaskans have been waiting a long time for a pipeline to carry that gas to market. Recent higher gas prices have made the project more attractive. Several oil companies hold leases on the gas. They’ve taken steps toward a pipeline—like negotiating fiscal terms with the state—but they haven’t committed to building one.

Supporters of the reserves tax think they’re delaying the project (for various possible reasons) and should be pushed. The ballot proposal calls for the oil companies to pay a reserves tax—a tax on gas in the ground—until a pipeline is completed and North Slope gas is up for sale. It offers incentives for them to speed up the project: the sooner the pipeline is finished, the less they pay; and later they would recover some of what they did pay, in credits on gas production taxes. This report is summarized in the fifth Fiscal Policy Note which is included with this document record.