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First meeting set for gas pipeline advisory group Alaska municipalities to work with state on contract with North Slope gas producers for payments in lieu of taxes Larry Persily Petroleum News Juneau Correspondent
The municipal group that will advise the state of Alaska on gas line project talks with North Slope producers for contractual payments in lieu of state and local taxes will hold its first meeting Oct. 27 in Fairbanks.
The incorporated cities and boroughs along the proposed pipeline route from Prudhoe Bay to the Canadian border selected the following representatives for the advisory group to assist the state’s Stranded Gas Development Act negotiations:
• George Ahmaogak, mayor, North Slope Borough.
• Rhonda Boyles, mayor, Fairbanks North Star Borough. Boyles will likely be replaced by Jim Whitaker, who defeated Boyles in her re-election bid Oct. 7. Whitaker will leave his job as state representative to take over as mayor.
• Steve Thompson, mayor, city of Fairbanks.
• Jeffrey Jacobson, mayor, city of North Pole.
• Pete Hallgren, city administrator, Delta Junction.
The advisory group’s job is to determine what issues it would like to see addressed in the state’s contract with owners of the proposed $20 billion natural gas project and how those economic issues can be resolved to the communities’ satisfaction.
Although the state has not received a project application from the producers, the Alaska Department of Revenue — the lead agency in the stranded gas negotiations — announced in September it would start talks with the communities to save time in anticipation of having a contract ready for the Legislature before the end of next year’s session. No one predicting date for project application State officials had said they expected a project application earlier this fall, though neither they nor the producers are providing any new predictions of an application date. The companies say the congressional delay in passing an energy bill — with possible federal tax credits intended to promote construction for the Alaska natural gas pipeline — has nothing to do with their timetable to submit a project application to the state.
The Stranded Gas Development Act — adopted by the Legislature in 1998 and amended this past session — requires the Department of Revenue to set up an advisory group of cities and boroughs in the path of the proposed natural gas pipeline. Membership on the panel is limited by statute to the cities and boroughs that will see economic or social effects from the project.
“I would find payments in lieu of taxes preferable to straight taxability,” said Delta Junction’s Hallgren, who said he has been studying the Stranded Gas Act. “Even if that might be a little smaller than if you have property tax,” he said, contractual payments would provide the communities with a more predictable income stream than annual property tax battles.
Hallgren, former Sitka mayor, remembered how the Southeast Alaska community went through an expensive reappraisal of the pulp mill property in that community every five years. “We’d duke it out with the pulp mill,” debating the property tax assessment, he said. Contract improves fiscal certainty The Stranded Gas Act authorizes the administration to negotiate with natural gas project developers for contractual payments in lieu of taxes, with the intent of ensuring a greater measure of fiscal certainty to the project owners than the existing and potential assortment of state and municipal property taxes, local sales taxes, state corporate income and production taxes.
Among the possible subjects for the advisory group’s discussions, Hallgren said, would be a possible formula for calculating payments to municipalities along the pipeline route, such as basing it on pipeline mileage through a community.
Delta Junction, with about 840 residents, has no property tax, and therefore receives no tax revenue from the trans-Alaska oil pipeline that crosses its borders.
Some municipalities expressed concerns during legislative discussions on the Stranded Gas Act in 1998 that a contract for payments in lieu of taxes could leave them short of funds needed to handle the social and economic impacts of such a large project. The advisory group was created as a compromise to address those issues. Legislative approval required Legislative approval of the contract is required after the administration completes its negotiations with producers. Lawmakers have asked that they not get the contract toward the end of the session, when they are short on time for such a complex issue. The Department of Revenue has said the delivery date will depend on when it receives a project application.
Steve Porter, deputy commissioner at the Alaska Department of Revenue, and Randy Hoffbeck, oil and gas property assessor at the department, will assist the municipal advisory group.
Porter said he expects the panel will select a chairman and prepare a work list and schedule at the Oct. 27 meeting.
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