Jan 22: AGIA. The gas tax rate cometh...okay we're not sure...maybe

On a working Saturday in the Senate Resources Committee, Marcia Davis, Deputy Commissioner of the Department of Revenue was asked if the legislature should begin discussions about changing the gas tax in anticipation of a gas pipeline deal.

"Beginning the gas talk discussion is certainly not inappropriate",  Davis replied.

Let stop here and review.

Davis and her Gas line team have an AGIA applicant that is planning to pull off an open season in just eighteen months. That means in January of 2010, Transcanada will be inviting producers to commit their gas. 

Davis testified that the tax rate "effects what a producer puts into their consideration as they approach an open season and decide whether to tender their gas".

Safe to say anyone committing to paying for decades worth of firm transportation commitments would want to know something as important as their production tax rate.

Industry analysts have stated the gas tax rate needs to be in the low 20's. During the AGIA hearings, Commissioner of Revenue Pat Galvin stated that at 22.5% the gas tax was too high. Then during the ACES debate, the legislature raised it from 22.5 to 25%.

However Davis' testimony showed an almost laissez faire attitude towards setting the gas tax rate. She actually said, "I'm not downplaying the importance of having what we think is our best gas tax system in place" for open season.

That is an odd way of recognizing that your administration has less than two legislative sessions to get one of the most important components of the project settled.

And since this year is an election year, next year there will be a crop of freshman trying to figure out a new gas tax system.

But when Davis was pressed on the quick open season proposed by Transcanada's AGIA application she offered this interesting answer, "We don't know if that bidder will be the successful licensee".

However Davis' comment about Transcanada is the opposite of what Governor Palin said in her State of the State address. 

"A respected pipeline construction company, TransCanada, submitted a proposal that meets all of Alaska’s requirements", Palin announced to Alaskans last week. 

But this isn't the first time the administration has publicly hedged on Transcanada in spite of what Palin has advertised from the podium.

It seems the administration claims Transcanada when they want to show how AGIA worked but when tough question arise about how it works, they seem to turn into Harpo Marx.

The lack of a firm strategy on setting gas tax rates is another sign that this process is out of whack.

Suggested Reading:

http://www.andrewhalcro.com/april_13_-_agias_upstream_inducement_whats_my_tax_rate_again