April 19, 2002 --- Vol. 8, No. 42April 2002

House oil and gas moves gasline tax exemption bill

House Bill 519, reviving the Alaska Stranded Gas Development Act and providing a holiday from state property tax and all municipal taxes during construction, was heard in the House Special Committee on Oil and Gas today and was moved on to House Resources. The bill, sponsored by the House Rules Committee, was introduced by Rep. Pete Kott, chairman of House Rules and had the support of industry.

Kott said the state has a window of opportunity for a gas pipeline project, and needs to provide an incentive. This bill does that, he said, by providing a tax holiday from sales tax and property tax along the right of way through the construction period and the first two years of operation of the gasline.

The administration opposes the bill. Commissioner of Natural Resources Pat Pourchot said the bill would provide a grant of up to $500 million of state and local taxes and the administration does not support tax relief outside of a negotiated process. But, he said, the administration does support provisions of the bill which would reactivate and expand the Stranded Gas Development Act of 1998.

Deputy Commissioner of Revenue Larry Persily said Revenue prefers negotiation under the framework of the stranded gas act — which expired because there were no applications under the act. He said the state could negotiate a lower take during construction and in the early years, but a higher rate later on when the line was profitable.

Jack Chenoweth of Legislative Legal Services said the bill as offered does put property tax off limits during construction, but also reactivates the stranded gas act, provisions of which provide for negotiations which might, he said, allow the state to recoup taxes not paid in early years of the line.

VECO Corp. Chairman and CEO Bill Allen and Vice President Rick Smith told the committee that VECO believes the state needs to act quickly to seize unique opportunities to market North Slope gas while the window of opportunity is open. VECO "strongly suspects," they said, that "if the window shuts it may never open again."

Kakfwi presses Canadian government to fight U.S. gasline subsidies

Northwest Territories Premier Stephen Kakfwi has called on the Canadian government to “take a clear stand in the national interest,” and oppose U.S. Senate moves to offer $10 billion in loan guarantees for a North Slope gas pipeline along the Alaska Highway.

He told a news conference in Calgary April 18 that Canada could lose billions of dollars in resource revenues if a pipeline from the North Slope is built before a planned pipeline from the Mackenzie Delta.

“If the Americans are going to subsidize, we need our government to stand up and support us,” said Jim Antoine, the Northwest Territories' minister for resources and economic development.

“We are afraid that the Americans, who are supposed to be the champions of free enterprise, are now starting to talk about subsidizing those huge volumes of Alaska gas,” said Kakfwi.

He urged Chretien to be ready to take “strong measures,” including the imposition of punitive tariffs on North Slope gas crossing through Canada to the Lower 48.

“There is no way that people will accept that American gas will flow through this country at the expense of Canadian gas,” Kakfwi said.

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