Sponsor says gas line tax break bill is dead

Posted: Sunday, May 12, 2002

JUNEAU (AP) -- A bill that would have provided nearly $600 million in tax breaks for builders of a North Slope natural gas pipeline will not make it through the Legislature this session.

Gov. Tony Knowles said Saturday that following several hours of negotiations, it became apparent an impasse could not be resolved with only four days left in this legislative session.

''I don't think that there was enough agreement on the important elements of a negotiated tax deferment,'' Knowles said Saturday.

But Knowles said several important points were resolved before negotiations ended between the administration and officials with BP, Phillips Petroleum and Exxon Mobil.

Those points should provide a framework for future negotiations, he said. Knowles, a Democrat, is in his last year in office and cannot seek a third consecutive term.

''If the producers have already agreed upon it once, they are going to have to agree to it again. The floor has been established at a much higher level,'' Knowles said.

Producers would receive a discounted 3 mill property tax rate during construction and one year of operation, Knowles said.

At the end of that period producers could repay the discounted taxes for months when natural gas prices are high.

Officials with the three major oil companies could not be reached for comment late Saturday.

No agreement could be reached on promises of Alaska hiring preference, labor negotiations and a timeline for construction of the project.

The administration had sought a provision that ended the incentives if the pipeline was not constructed by 2008, the industry had agreed to 2012 already in proposed legislation.

In all, the package would have represented about $510 million in incentives less about $90 million being paid to local governments under the discounted tax scheme.

Rep. Pete Kott, R-Eagle River, introduced legislation earlier this session to give the oil industry a $760 million incentive package that gave a break for construction and two years of operation.

On Saturday, Kott acknowledged the plan appeared dead for this legislative session. ''It's basically come to an end,'' he said shortly after the House adjourned for the day.

Kott brought the measure at the urging of Veco Inc., an Anchorage construction and oil field service company, whose employees contribute to the campaigns of about two-thirds of the Legislature.

Kott said time was running too short to move the bill through the House and then through the Senate. The Legislature is scheduled to adjourn for the last time on Tuesday.

Kott had argued the state needs to offer incentives to spur oil and gas companies to invest the $20 billion to build the pipeline. He and other supporters of the measure say the long-term benefits to the state will more than outweigh the costs.

Opponents had said the industry has not provided enough financial information to judge whether the tax break is needed, and the state should only offer the incentive through negotiations with the industry.

The measure went through several incarnations since being introduced in mid-April as lawmakers weighed in on the idea.

Rep. Jim Whitaker, R-Fairbanks, has argued that the taxes should be deferred, but not forgiven entirely unless there is evidence that is needed to make the project economically feasible.

Meanwhile, oil producers had said they don't think they can make enough money on the project now to justify the risk. They had said Kott's bill by itself would not tip the scale in favor of a natural gas pipeline.

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