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Alaska ready to talk with gas line cities Municipal advisory group to start work in advance of stranded gas application Larry Persily Petroleum News Juneau Correspondent
While the state continues to wait for the major North Slope producers to submit a project application under the Stranded Gas Development Act, it figures there’s no sense in waiting any longer to start talking with the municipalities that would be affected by a natural gas project.
The Stranded Gas Act requires the Department of Revenue to set up a municipal advisory group of the cities and boroughs that would see economic or social effects from a pipeline running through their communities. The department will start talking with those communities in the next couple of weeks, said Steve Porter, deputy commissioner at Revenue.
The department’s earlier plan was to wait for a project application before starting talks with municipalities, Porter said. But that was when the state expected an application this summer. With time running short to review an eventual application, work through issues with the municipalities, negotiate a contract with the producers and still present the package to the public and Legislature by next session, he said, the decision was made to set up the municipal advisory group in advance of receiving a project application.
Contract would replace all taxes Alaska’s Stranded Gas Development Act, adopted in 1998 and amended this past session without a dissenting vote in either the House or the Senate, authorizes the administration to negotiate with natural gas project developers for contractual payments in lieu of taxes. The intent is that the contractual payments would provide a greater measure of fiscal certainty to project developers and investors than the existing collection of state and municipal property taxes, local sales taxes, state corporate income and production taxes.
Municipalities, however, have been concerned that the state 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 communities also have been worried that they lack a vote or a veto on terms of the contract, and will need to trust the state to protect their local interests.
The statute requires the Department of Revenue to work with a municipal advisory group — comprised of one representative selected by each affected community — to help ensure that the project contract provides cities and boroughs with a “fair and reasonable share of the payments.”
Advisory group to start this fall Porter said he expects the department will work with the municipalities this fall to set up the advisory group.
“The main focus for the municipalities will be to try to work with them to identify impacts from the proposed project,” Porter said. Their financial needs over the life of the project — especially during construction, when the strain of work crews on communities would be greatest — will be a key part of the discussion, he said.
Although the statute requires the commissioner of Revenue to set up the municipal advisory group after receiving a project application, there is nothing in the law that prevents formation of the group in advance of an application.
Porter said the administration still plans to submit a contract to the Legislature for approval next session. The Stranded Gas Act directs the administration to negotiate the contract, then seek public comment before submitting the document to the Legislature for an up or down vote. Lawmakers may not amend the contract.
Legislators have asked that they not get the contract toward the end of the session, when they are short on time for complex issues. Porter said the delivery date to lawmakers will be a function of how soon the state receives a project application. The Department of Revenue is the lead agency on the state’s negotiating team, assisted by the departments of Law and Natural Resources. Producers working together As they continue working together on an application, the major North Slope producers have asked the state questions about what it needs to see in the application, Porter said. The administration is also doing its homework, preparing for the application, he said. That includes running economic models and analysis, looking at some of the issues it expects will be on the negotiating table.
Company officials were reluctant to predict a date or even an approximate timeframe for an application, although all three producers said the timing of the application is not related in any way to energy bill negotiations under way in Congress. The state and North Slope producers are pushing for federal tax incentives to help ease the financial risk of building a $20 billion natural gas pipeline from Alaska to the North America pipeline grid in Alberta.
“The timing of an energy bill does not affect the timing of ExxonMobil’s work with BP and ConocoPhillips to develop a joint application,” said ExxonMobil spokesman Bob Davis from Houston.
BP natural gas spokesman Dave MacDowell added, “A good application is our primary objective.” He said BP is working with the other producers and the state to ensure that the eventual application meets everyone’s information needs.
“We have no specific timeline for submittal,” he said.
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