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North Slope Borough helps gas line effort Financial backing from borough allows consultant to start socioeconomic study Larry Persily Petroleum News Government Affairs Editor
While waiting for the Alaska Legislature to appropriate state funds for the job, the North Slope Borough has agreed to guarantee payment so that a consultant could start work on the study of possible social and economic effects of an Alaska natural gas line project.
The Department of Revenue has been looking for state funding to cover the consultant’s contract and other costs related to studying the project’s possible effects on the state and how Alaska could best profit from a gas line. But lawmakers have been slow to appropriate funding, and the borough volunteered to help get the socioeconomic contract started.
The report will assist the state and municipalities as they continue negotiating a possible fiscal contract for the proposed gas line project. The intent of such a contract under Alaska’s Stranded Gas Development Act is to set up a long-term schedule of payments in lieu of existing state and municipal taxes that would otherwise apply to construction and operation of the line.
The state can require applicants under the Stranded Gas Act to reimburse up to $1.5 million of the state’s negotiating costs and contract analysis, but the administration has told lawmakers it will need more than that to get the job done. In addition to the socioeconomic study, the state is contracting with tax law, tariff and other fiscal consultants.
The Senate on March 17 approved $1 million for the state’s efforts to study a possible gas line project and negotiate fiscal contracts with the two Stranded Gas Act applicants — a partnership of North Slope producers, and MidAmerican Energy Holdings Co. The House Finance Committee approved the measure March 23, with approval by the full House expected quickly. Contract estimated at $50,000 to $200,000 The final cost and delivery date for the socioeconomic contract will be decided after the Department of Revenue gets funding for the work and signs a contract, said Steve Porter, deputy commissioner at Revenue. He estimated the contract at between $50,000 and $200,000.
“The state is going to pay, the borough is just going to guarantee it to get started,” said David Harding, government affairs spokesman for the North Slope Borough mayor’s office. “The borough was able to do it and wants the process to go ahead.”
Information Insights, of Fairbanks, has started on the study and will take an estimated 45 to 60 days to look at how a multibillion-dollar gas line from the North Slope across Alaska and into Canada might affect communities statewide and especially in its path, Harding said.
The department selected Information Insights for the work because of its knowledge of Alaska’s communities and economics, Porter said. The Stranded Gas Act exempts the department from the state’s competitive-bidding requirements.
As the lead agency in the Stranded Gas Act negotiations, the Department of Revenue set up a municipal advisory group — as required by law — to assist the department in its contract talks. The North Slope Borough volunteered to guarantee the consultant’s contract at the advisory group’s March 3 meeting, Harding said.
“The advisory group thought it was a great idea to get the company going,” he said. Municipalities concerned about property taxes Municipalities, which depend on property tax revenues for much of their income, are taking a strong interest in the state’s negotiations for a contract in lieu of taxes. Communities in the gas line’s path are especially concerned about getting enough revenue to cover the cost of dealing with the thousands of construction workers who would use municipal services.
Porter said he provided advisory group members in early March with information on how a system of payments in lieu of taxes might be structured. The group’s next meeting is set for March 24, he said. “We’ll meet as often as we need to.”
In addition to communities directly in the route of the proposed pipeline, the Department of Revenue broadened the group’s membership to include cities and boroughs that might serve as staging areas, freight depots or construction sites for project components. The expanded membership includes the North Slope Borough, Fairbanks North Star Borough and Kenai Peninsula Borough, and the cities of North Pole, Fairbanks, Delta, Valdez, Anchorage, Seward, Kenai, Haines and Skagway.
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