Report on state ownership of gasline to be released Jan. 31

Kay Cashman

A deputy commissioner from the department tasked with looking at whether or not the state should take any, all or part ownership in a North Slope gas pipeline project told the Joint Committee on Gas Pipelines Jan. 16 that the department would release a hefty report on its findings Jan. 31.

Larry Persily with the Alaska Department of Revenue said Senate Bill 158, which was passed last year, directed the department to look at the “merits of state ownership and/or financing of a natural gas pipeline.”

The latest draft of the report is 117 pages and “still growing,” Persily told the committee.

Upon completion, copies will likely be posted on the Web, he said.

Persily talked about one aspect of SB 158 on which DOR has not previously commented: a directive that the department look at the possibility of “establishing a private corporation of Alaska citizens to own a — or the — gasline.” He said DOR believes such an entity would raise a number of questions that would warrant further in-depth analysis.

The concept of a private corporation of Alaska citizens was first proposed in a 1978 report by Dillon Reed and Co. Persily said the firm modeled the structure in its report on Alberta Energy Corp., which at the time was half owned by the government of the province of Alberta and half owned by its citizens.

Persily said limiting shareholders exclusively to Alaska citizens could present problems.

“As a practical matter, residency requirements for shareholders might be difficult to monitor and enforce and would almost certainly diminish the market value of those shares because resale could only be to the select group of residents,” he told the committee. It might also produce legal challenges, he said, because it appears to be unprecedented in the United States: “A residents-only shareholders rule that might be challenged as lacking a legitimate public purpose. It might also be challenged under the privilege and immunities clause of the Constitution.”

DOR also believes a private corporation with Alaska shareholders would “fail to offer any tax or financial advantage over the development of a project by private corporations.”

Persily told the committee Dillon Reed based its assumptions on a defunct 1978 tax code which allowed issuance of tax-exempt bonds by a state to raise funds for the initial capitalization of a project.