Producers agree to $16.5 billion for PILT, impact payments on AK LNG project

The “big three” producers involved in the Alaska LNG Project have agreed with the state to pay $16.5 billion for property tax obligations and to offset impacts in communities affected by construction and for the life of the project.

 

Of the $16.5 billion sum, $800 million would be for community impact payments during construction. Afterward, $15.7 billion would be payments in lieu of tax, or PILT, substituted for property tax payments in project infrastructure and property holdings, Revenue Commissioner Randall Hoffbeck told the Municipal Advisory Gas Project Review Board Wednesday in Fairbanks.

The board consists primarily of mayors of local governments along the project route from the North Slope to Nikiski on the Kenai Peninsula.

The $800 million figure was negotiated by the state and is a fairly firm number, according to Hoffbeck. Having the community impact payment amount settled will be important for generating financial models as the $45 billion to $65 billion natural gas pipeline and liquefaction export project moves forward, he said.

“If there was a firestorm of pushback (from local governments) we would take it back to the negotiations,” Hoffbeck said.

That money would pay for increased public services, such as police and fire, in communities along the project corridor during construction.

It is based on a five-year construction timeframe, and would have to be appropriately managed by the state to ensure funds remained if construction exceeded five years, Hoffbeck said.

The $15.7 billion of PILT funds was deemed to be a reasonable amount of property taxes during operation and is based on a full, 42-inch pipeline over a 25-year project life, he said. If more gas is found on the North Slope or elsewhere to put into the pipeline the payment could be greater.

Hoffbeck described it as a “pennies per mcf” surcharge on gas. Mcf is an industry abbreviation for one thousand cubic feet of natural gas, which a base measurement of gas volume.

Allocation of the PILT money between state and local jurisdictions still needs to be hashed out, he said.

Elwood Brehmer can be reached at elwood.brehmer@alaskajournal.com.

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