Timing of the Legislative Debate

Some have said that the State needs to have a better estimate of what the pipeline is going to cost before the legislature evaluates the gas tax, but the legislature doesn’t need to know the cost of the pipeline or the future price of gas in order to make good decisions about the gas tax. The tax cannot be based on what someone thinks the cost of the pipeline will be or on their estimate of the future price of gas. If history has taught us anything, it is that we are not good predictors of the future, and we will surely fail if we pass a tax based on a specific value for the pipeline or some expert’s projection of the future price of gas.

Over the past couple of years the estimated cost of the pipeline has fluctuated wildly based on the estimates on the price of steel and the cost of labor. Those estimates will probably continue to fluctuate until contracts are executed and the pipeline is built. And the experts’ predictions of the price of gas have not even been close to what has actually happened in the short term let alone the long term. Projections are an inexact science and they should not be depended upon for determining Alaska’s future. The legislature must assume a broad range of variables when it determines what a fair tax would be. The tax should be fair if the price of the pipeline costs $25 billion or if it costs $50 billion. The tax should be fair when the price of gas is at $2.50 and when it is at $12.00. The legislature does not have to wait for more information. If they wait, the information will only be marginally better than what they have today. If the legislature passes a fair tax prior to the open season, it will have provided additional needed information to enable the producers to effectively participate in that open season. They will have contributed to the potential success of the open season instead of waiting to participate in a finger pointing exercise afterword.

The highest chance for a successful open season is to address the critical issues ahead of time, not wait until after an open season has failed.