Construction, property tax proposal offered for gas project

JUNEAU — A tentative agreement has been reached between the state and North Slope’s three major producers over payments for impacts on communities during the construction of a proposed major gas project and property taxes once gas starts to flow, state Revenue commissioner Randall Hoffbeck said.

Municipal officials are reviewing the plan, presented at a recent meeting of a municipal advisory group on the gas project. Hoffbeck said the municipalities don’t have veto power, but having agreement from them up front would add to the stability of a fiscal package.

The tentative agreement calls for $800 million in payments for impacts occurring during construction, with an expected pay-out over five years. Hoffbeck said those impacts could include a need for additional police, teachers and wage inflation. The tentative agreement also has a targeted amount of $15.7 billion for a flow-related property tax paid out over 25 years, though that could be higher or lower, depending on the flow rate, Hoffbeck said.

Legislation is expected to be needed to help formalize the payment structure for both. Hoffbeck expects a property tax bill introduced by the administration during the last regular session will be revamped.

Larry Persily, a special assistant on oil and gas issues to Kenai Peninsula Borough Mayor Mike Navarre, an advisory group member, said the numbers look reasonable though, he said, the communities represented by the group haven’t added up what they think they’ll have for impacts. The bigger issue, from the municipal perspective, will be how the money is divided, Persily said.

No determination has been made yet on how that split will be made among the state and municipalities.

The state is pursuing the liquefied natural gas project with North Slope players BP, ConocoPhillips and Exxon Mobil Corp.; the Alaska Gasline Development Corp. and TransCanada Corp.

Gov. Bill Walker has called a special session for late October to consider buying-out TransCanada’s position, as well as a reserve tax on North Slope gas that is not developed. Details of that proposal have yet to be released though Walker told reporters this week that it speaks to his wanting project certainty and making sure the project can’t be stalled if a company does not allow for gas it controls to be commercialized. BP and Exxon Mobil have said a reserves tax would complicate efforts to advance the project.

No decision has been made yet on whether to build the project, which oil-dependent Alaska sees as critical to its economic future. The project is in a preliminary engineering and design phase.

Kim Jordan, a spokeswoman for Exxon Mobil Alaska, called the tentative agreement an important step toward advancing the project.

“It is important that the needs and concerns of the municipalities and state of Alaska are being addressed in a concise and equitable manner as the Alaska LNG project progresses,” Jordan wrote in an email Wednesday.

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