Tax-exempt bonds issued by the Alaska Railroad Corp. could be used to shave $1 billion off the cost of a natural gas pipeline to the Lower 48, Gov. Tony Knowles said in a speech prepared for today’s meeting of the Alaska Highway Natural Gas Pipeline Policy Council.
Estimates prepared by the state Department of Revenue and Goldman Sachs provide the savings figure, in today’s dollars, which would come over the life of the project, Knowles said.
Knowles said that when the state took ownership of the railroad in 1983, Congress granted the railroad the ability to issue tax-exempt revenue bonds to finance industrial development.
The special exemption granted by Congress at the behest of Sen. Ted Stevens supercedes restrictions in today’s tax law, Knowles said.
Although the railroad would issue the bonds, neither the railroad nor the state would own the gasline, or be responsible for the debt, Knowles maintains. That would be the responsibility of the private companies that build, own and operate the line.
Knowles said he was prepared to send the Legislature a bill to provide the railroad with state authority to issue the bonds to get the pipeline built. And he said he was asking the producers to give the idea a close, hard look.
The method has been used in Alaska previously, the governor said, notably when the city of Valdez issued tax-exempt bonds for $1.265 billion for construction of the terminal for the trans-Alaska oil pipeline.
Editor’s note: Read the full story in the Feb. 10 issue of Petroleum News Alaska.