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Municipal gas line group loses member North Slope Borough leaves port authority to focus on private projects Larry Persily Petroleum News Government Affairs Editor
The North Slope Borough says there are several reasons it decided to drop out of the Alaska Gasline Port Authority, the 5-year-old municipal partnership committed to building a North Slope natural gas pipeline.
The borough wants to focus on protecting its property tax revenues under either of two proposed privately owned gas line projects, said Mayor George Ahmaogak Sr.
It also wants to avoid any appearance of a conflict of interest in its membership on the municipal group advising the state on those private projects while at the same time promoting its own gas line proposal with the port authority, the mayor said in a prepared announcement March 23.
And, with the slope’s regional Native corporation signed on as a partner in one of those private projects, the borough doesn’t want to compete against itself.
“We are part of an advisory group that is helping the state to understand the local impacts of a gas line and what should be done about them,” the mayor said. “Some of the other advisory group members argue that there’s a conflict if we’re on the advisory group at the same time as we’re applying to build the project.
“I think they’ve got a point,” Ahmaogak said in announcing the borough was ending its participation in the municipal port authority. Valdez, Fairbanks still at work The borough’s departure leaves the city of Valdez and the Fairbanks North Star Borough as the remaining two members of the port authority.
“We fully understand their position,” Fairbanks Borough Mayor Jim Whitaker said of the North Slope announcement. “It does not affect the port authority, and we will continue on.”
The municipal authority filed an application with the Alaska Department of Revenue last month to negotiate a long-term revenue-sharing contract to split the profits from a port authority-owned gas line with the state and municipalities across Alaska. Proponents believe the possible tax and bond financing advantages of a municipally owned project give it a significant boost over any privately developed pipeline.
The Fairbanks-Valdez team wants to build a $26 billion project that would include a line to move 6 billion cubic feet a day of natural gas from the North Slope, taking a little more than half to the Canadian border for distribution to Lower 48 markets and moving the rest to a liquefaction plant and shipping terminal at Valdez for LNG deliveries to the Far East and U.S. West Coast. A smaller spur line would feed Southcentral Alaska’s urban markets.
The port authority is working to put together a deal for North Slope natural gas supplies, pipeline financing and construction and sales contracts needed to build the project that has eluded private developers for almost 30 years. Regional Native corporation part of private proposal But it’s not alone in working toward that goal. The two private proposals before the state are from the three major North Slope producers and from Iowa-based pipeline operator MidAmerican Energy Holdings Co. The Arctic Slope Regional Corp. is among the regional Native corporations that have signed on as partners with the MidAmerican proposal.
“It doesn’t make sense for the borough to compete with Arctic Slope Regional Corporation over a gas line project,” Ahmaogak said in explaining one of the reasons for the borough’s decision to drop out of the municipally owned project.
“One of our purposes as a port authority was to jumpstart gas development at a time when very little was happening,” he said, complimenting the authority on doing just that. The borough has contributed $130,000 to the port authority since it was established in 1999, said David Harding of the borough mayor’s office.
“We just need to pull back and make it clear that the borough is coming at this as a municipality with a significant stake, not as a developer,” the mayor said. Property tax big money for North Slope Borough The borough’s stake is hundreds of millions of dollars in property tax revenues over the long life of a natural gas project.
Alaska’s Stranded Gas Development Act — under which the North Slope producers and MidAmerican are negotiating — allows the state and a private developer to set up a long-term contract for payments in lieu of all state and municipal taxes on a gas line project. Negotiations have been under way for almost two months between the state and the producers and separately between the state and MidAmerican.
“We are a major revenue stakeholder in this process … so we have to zero in on stranded gas. We can’t have our voice diluted by our active participation in other groups with other interests,” Ahmaogak said.
The North Slope Borough is one of 12 boroughs and cities serving on the Department of Revenue’s municipal advisory group for the Stranded Gas Act negotiations.
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