My Turn: Natural-gas line incentive bill must be fair

Posted: Tuesday, May 07, 2002

Most Alaskans would agree to give industry a tax incentive if they could be assured it translated into Alaska jobs, a growing economy and sharing the benefits when assuming some of the risks.

That's the two-way partnership I want to see put in a measure (House Bill 519) rapidly moving in the final days of this year's legislative session that would give a $600 million tax break to the oil-company sponsors of an Alaska natural gas pipeline.

I've worked hard to kick-start a gas pipeline and have partnered with Alaska's oil and gas industry to keep it healthy. But as it stands today, this bill provides only the incentive, and doesn't take care of Alaska's needs. It must be reshaped to reflect a two-way partnership that's fair, reasonable and acceptable to all Alaskans.

Since day one of the Knowles-Ulmer administration, good jobs and a healthy economy have been our No. 1 priority. To create a pro-business environment, we have partnered with the oil and gas industry, providing incentives for marginal field development, spearheading development of the National Petroleum Reserve, sponsoring the development of Northstar, offering record amounts of acreage for oil and gas development, and settling year's-old tax disputes.

To advance a natural gas pipeline, we pushed through the 1998 Legislature the Stranded Gas Development Act, providing the opportunity for incentives and fiscal certainty to help make a project possible. I also convinced the nation's governors to unanimously endorse an Alaska Highway gas project.

We've introduced bills currently pending before the Legislature to save project sponsors more than a billion dollars using tax-exempt bonding offered through the Alaska Railroad.

Thanks to the great work of the Alaska Highway Natural Gas Policy Council, we helped successfully convince the U.S. Senate to incorporate provisions into the national energy bill encouraging a gas project and meeting Alaska's access needs.

These are examples of a two-way partnership, not a multimillion-dollar giveaway with no guarantee of a gas project and no provision for paying back Alaskans.

That's why we have offered specific changes to HB 519 to make incentives right for Alaskans as well as industry.

First, tax exemptions should ensure an early start-up - this year - of a gasline project. If the oil companies want tax relief, they owe Alaskans a project.

Second, we insist that when Alaska assumes the risk by foregoing property taxes during project construction, Alaskans deserve to see a payback of deferred taxes when gas prices are high.

We already have a provision for this kind of payback in federal legislation, which reduces the federal tax burden when the price of natural gas is low, but requires project sponsors to re-pay the federal government when prices are high.

Third, we should limit the facilities that could be subject to the tax exemption to only those essential to this project.

Fourth, we insist any tax holiday be limited to the construction phase of the project. It doesn't make sense to give a tax break while profits are flowing from a project that could generate $6 billion a year in gross revenue.

Fifth, we insist on stronger provisions for Alaska hire, use of Alaska businesses and a project labor agreement. This gas resource belongs to all Alaskans, so all Alaskans deserve to benefit from it.

Finally, communities impacted from a gasline boom deserve assistance, as they were during the oil pipeline construction. Right now, there's a provision in HB 519 to provide for community impact, but no way to pay for it. We propose this be done through a small temporary state property tax, which would be imposed during gasline construction.

These changes to the gasline incentive bill would provide a true, two-way partnership that's fair to industry and to Alaskans.

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