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Alaska port authority at work Municipalities do not limit pipeline talks to Stranded Gas Act contract Larry Persily Petroleum News Government Affairs Editor
It’s been five weeks since the Alaska Gasline Port Authority submitted its application under the state’s Stranded Gas Development Act, looking to possibly negotiate a contract for revenue sharing with the state and municipalities if it goes ahead and builds a municipally owned North Slope natural gas pipeline.
The state has yet to announce if the port authority’s application meets the requirements of the Stranded Gas Act, but that’s not really an issue, said Mayor Jim Whitaker of the Fairbanks North Star Borough, one of two municipalities in the authority.
“In the end we will have to have some kind of protocol,” an agreement between the state and the port authority possibly governing state royalty gas, revenue sharing from the pipeline’s profits and rights of way on state lands, Whitaker said.
If not a Stranded Gas Act contract, perhaps some other form of agreement, the mayor said.
The state and port authority have held preliminary discussions, with further talks scheduled April 1 in Anchorage, said Steve Porter, deputy commissioner at the Department of Revenue.
The port authority believes it qualifies under the Stranded Gas Act to negotiate a long-term fiscal contract with the state, covering its payments in lieu of state and municipal taxes for the proposed gas line project.
State officials are not so certain. State working with port authority “We expect to give them advice on their application,” Porter said of the April 1 meeting. Though Porter was careful not to say whether the port authority’s application meets the requirements of the Stranded Gas Act, he said state officials might offer suggestions at the meeting for how the authority could amend its application, if necessary.
“I have every indication that our issues will be resolved,” Whitaker said. “None of us are interested in an endless series of meetings.”
The law requires a contract applicant to hold either production leases or the rights to natural gas, or own assets worth around $1 billion or more. Although the port authority does not meet any of those tests, it believes its intent to buy the state’s 12.5 percent royalty share of North Slope natural gas production gives it sufficient standing to qualify under the act.
But even more important, Whitaker said, is that the state needs to understand what a municipally owned gas line could do for Alaska. In addition to promoting statewide distribution of gas, the port authority’s project-financing plan includes passing on the entire $26 billion risk to investors — with no financial risk to the state or its communities, he said. Port authority touts benefits The authority says it could build a pipeline and move North Slope gas to market cheaper than private ventures, relying on the benefits of its possible federally tax-exempt status to offer lower-cost tariffs.
In addition to the Fairbanks borough, the 5-year-old port authority includes the city of Valdez. The North Slope Borough was a member from the beginning but dropped out of the partnership March 23, citing its conflicting role as a potential project developer vs. its need to protect its property tax revenues as a party in the state’s ongoing Stranded Gas Act negotiations with private ventures.
The Department of Revenue in late January approved the North Slope producers’ Stranded Gas Act application a couple of days after receiving the thick document, and approved a similar application from MidAmerican Energy Holdings Co., of Des Moines, Iowa, less than a week after the company turned it in.
The difference between those two fast turnarounds and the port authority’s month-long wait, Porter said, is that the private companies discussed the details of their applications in advance with state officials to ensure they met all of the requirements under the law. The port authority did not discuss its application with the state before submitting it to the Department of Revenue, Porter said.
Whitaker met with governor’s office staff and other state officials March 30 in Juneau to explain the port authority project and to show what benefits the municipally owned pipeline could bring to the state.
“We are in that gray area wherein politics and economics come together,” the mayor said.
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