Gas pipeline tax break bill moving quickly

Posted: Tuesday, April 23, 2002

JUNEAU (AP) -- A measure giving up to $500 million in tax breaks for construction of a natural gas pipeline is moving quickly through the House.

Rep. Pete Kott, R-Eagle River, is sponsoring the bill, which would exempt a natural gas pipeline from local and state property taxes while it is being built and for the first two years of operation. It would also exempt it from sales taxes.

Supporters of the bill say the tax breaks are needed for a gas pipeline from the North Slope to be built. But state officials characterize it as a giveaway that should first be justified through negotiations with the industry.

Kott argued Monday the tax break is warranted.

''We don't have a viable project now to tax, so we're not losing anything,'' he told the House Resources Committee. ''There's perhaps some short-term losses for some extremely long-term benefits.''

The three major oil companies on the North Slope -- BP, Phillips Petroleum and Exxon Mobil -- so far have said that a $15 billion to $20 billion Alaska gas pipeline would not guarantee enough revenue to justify the risk.

Kott is trying to push the bill quickly through the House and Senate before the Legislature adjourns May 14.

Some Resources Committee members tried to slow the bill down Monday, saying it had just come to them after a hearing Friday in the Oil and Gas Committee and they needed more time to work on it.

''I feel rushed, and I feel unfairly rushed,'' said Rep. Joe Green, R-Anchorage.

But the committee voted 5-4 to send the bill on to the House Finance Committee, which has the bill on its hearing schedule Wednesday.

''I'm not willing to gamble that that pipeline may not be built in the near future just because some of the t's aren't crossed and the i's aren't dotted,'' said Rep. Hugh Fate, R-Fairbanks.

Bill Allen, the president and CEO of Anchorage-based oil field services company Veco Corp., supports the bill.

He and other supporters said it will improve the chances of proposed federal gas line legislation that would streamline regulations and offer federal tax credits.

Joe Marushak of Phillips Petroleum said the incentives offered in Kott's bill are not by themselves enough to make or break the project, but they would help. And the bill would provide an answer when lawmakers in Washington, D.C., ask what the state is doing to help the project, he said.

''The federal issues are the most important,'' Marushak told the Oil and Gas Committee on Friday. ''If those don't happen, I don't know how we can move the project forward.''

But state officials said a better approach would be for the Legislature to authorize negotiations between the state and the industry over possible tax breaks or other incentives.

Department of Natural Resources Commissioner Pat Pourchot said such talks would take into consideration whether giving up taxes for six or seven years is really needed to make a pipeline project work.

Veco representatives told the Oil and Gas Committee on Friday that the bill does allow the state and industry to negotiate longer-term tax terms. But they said waiting to negotiate over the shorter-term tax breaks could mean the companies move on to other worldwide projects.

Sen. John Torgerson, R-Kasilof, is pushing a different approach in the state Senate. Senate Bill 360 would only allow state commissioners to offer tax breaks after a project sponsor showed that a North Slope pipeline would not be economically feasible otherwise.

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