Kenai borough considers port authority for gas line development

Hearing scheduled to discuss $50,000 appropriation if tax-exempt status sought for peninsula terminus project

by The Associated Press

If forming a port authority brings tax advantages for a North Slope gas line to Valdez, municipal officials here think it should do the same for a pipeline to Nikiski.

So, the Kenai Peninsula Borough Assembly has introduced an ordinance to appropriate $50,000 to explore a port authority for the Nikiski route. A public hearing will be held March 21.

“At this time, we’re not proposing to do a port authority,” said borough Mayor Dale Bagley. “But if we decide to do it, we want to be able to put a (spending) plan before the assembly. It takes a while to appropriate money. This way, it will be ready.”

The goal of a pipeline to either port is to bring North Slope gas to tidewater, where it can be liquefied for export to Asia.

Last fall, voters in the North Slope Borough, Fairbanks North Star Borough and Valdez approved a port authority to build and operate a gas line to Valdez. Their Alaska Gasline Port Authority proposes a $12 billion project to export about 14 million metric tons of liquefied natural gas per year.

The Internal Revenue Service recently ruled that the port authority is tax-exempt. Port authority managing director Dave Dengel, who also is the city manager of Valdez, said that effectively cuts up to $3 billion from the project’s cost.

Meanwhile, an industry group exploring pipeline options has narrowed its choices to routes ending in Nikiski and Valdez. In November, the Kenai Peninsula Borough Assembly appropriated $100,000 to promote Nikiski as the terminus, and formed a task force to plot strategy.

Now, it may add $50,000 for a port authority. That would show that the borough is ready to move ahead if it turns out a port authority is key to the viability of a pipeline, said former borough Mayor Mike Navarre, who sits with Bagley, assembly president Bill Popp and other peninsula officials on a task force promoting Nikiski as the gas pipeline terminus.

Dengel said Valdez, Alaska’s northernmost ice-free port, is the better terminus, and Prince William Sound has deeper water.

Approaching other boroughs

Popp said the task force is approaching Anchorage and the Mat-Su borough to gauge their interest in a forming port authority. He said the task force also should approach the state, which has an interest in royalties, and the Fairbanks and North Slope boroughs, which would benefit from a pipeline on either route.

“Obviously, if the (industry) group — which is the one that’s going to make the decision — decides to go to Nikiski instead of Valdez, it’s in the interests of the Fairbanks and North Slope boroughs to be part of this,” he said.

Roger Marks, a petroleum economist for the Alaska Department of Revenue, said the administration currently has no position on a route.

“It does create an interesting tension, if all of a sudden you have two port authorities competing for the same thing,” he said.