Analysts say such a plant could mean big things for oil and natural gas production in Alaska — and, in doing so, could significantly extend the life of the trans-Alaska oil pipeline.
The bill, proposed Monday, would extend a major break on corporate income taxes to a plant’s operator.
Modern gas-to-liquids plants turn natural gas into liquid petroleum products, namely diesel and naphtha. The process is expensive, but an ever-upward creep of oil prices could make proposed projects far more attractive to investors. And it could change the economics of developing natural gas — in abundance in northern Alaska and the Arctic but stranded thousands of miles from major markets.
“With declining throughput in our pipeline and growing uncertainty over the prospects of a large diameter pipeline we need to look to alternative solutions to monetize our North Slope natural gas resources,” said Sen. Lesil McGuire, R-Anchorage and the measure’s primary sponsor, in a statement.
An operator could ship GTL products down the trans-Alaska oil pipeline, be they mixed with crude oil or kept separate through a “batching” process, according to an analysis from the Alaska Department of Revenue. The department said the West Coast is a likely market for synthesized diesel while China presents a potential endpoint for petrochemicals produced from synthesized naphtha. It suggested both products would be expected to carry higher prices than North Slope crude.
One of the three North Slope oil majors, BP, opened a small-scale gas-to-liquids plant in 2002 in Nikiski. The department said that plant operated through several winters and “established that the process is very reliable, operable and controllable” in Alaska. But even that project cost more than $500 million, and income taxes could be a major hurdle to someone thinking of building a bigger plant elsewhere in Alaska.
The proposed tax break could reach, at most, $475 million — GTL plants can cost $10 billion or more to build — and could only waive up to 60 percent of corporate taxes in any given year.
Sens. Tom Wagoner (R-Kenai) and Bill Wielechowski (D-Anchorage) are co-sponsors of the measure, Senate Bill 109.
Contact staff writer Christopher Eshleman at 459-7582.
Before long Alaska will pay to have its gas and oil rights exploited and the profits fund new corporate headquarters.
Here is some news folks: BP alone increased its profits last year and ended up increasing its cash on hand by over $ 10 billion. A sure sign that they need tax breaks is when there profits increase.
Profits are not a bad thing. But when your profits are rising and your crying for tax reductions it seems rather obvious why your not drilling in Alaska.