AGIA and the $10 billion challenge
Everytime we hear lawmakers or members of the Palin administration talk about the beauty and necessity of AGIA, they always throw in the same line; it will save us from the $10 billion worth of concessions that the previous gas line proposal cost Alaskans.
As long as the $10 billion “concession” number under the SGDA negotiation keeps coming up, it should be known that this number was a piece of art and a falsity designed by DNR as a public relations tool after they became disenfranchised with the process.
At the end of the day the negotiation was structured so that the state would receive the same net total long-run fiscal receipts it would have received under the status quo fiscal structure at the time of the negotiation. The amount was over $100 billion in nominal dollars over 35 years, given a $5.50/mmbtu price in Chicago. This was all clearly laid out in the best interest finding. Getting that with a gasline would have been considered a major coup at that time.
It was a total deal. Some things went up relative to the status quo and some went down.
But, again, at the end of the day, it came out the same.
For instance, the production tax was higher and the property taxes were higher. What was lower was, for instance, the fact that we would pay a small marketing fee since we were taking all our royalty and tax gas in-kind under that deal and were selling it ourselves. Or that we were giving up the right to assess taxes and royalties based on the higher of prevailing value or actual proceeds, again, because we were selling the tax and royalty gas ourselves.
So some things went up and some went down but the total was unchanged. What DNR did was only look at the things going down. That was the $10 billion. It’s like if you give me $5 and I give you $5 back, DNR was only looking at the $5 I gave you and called it a concession.
Of course the SGDA contract under former Governor Murkowski is long gone, but the $10 billion keeps coming up as a justification for why we cannot negotiate with the producers, why they are greedy. and more importantly why we must have AGIA to save us from our own inability to strike a business deal with companies who will assume the risk and build the project.
The $10 billion concession is a myth, and a false one at that.
I'd like to see this administration publicly decompose the $10 billion giveaway and show us the money.