Sponsor says gas line tax break bill is dead

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.

But negotiations on the bill will provide a starting point for future talks on gas line incentives, Gov. Tony Knowles said.

The bill's sponsor, Rep. Pete Kott, R-Eagle River, said Saturday night time had run out on trying to come up with a compromise bill that had broad enough support to make it through the House and Senate before adjournment Tuesday night.

''At this point the game's off,'' Kott said. ''We gave it our best shot.''

House Bill 519 as initially proposed would have provided a $760 million property tax break to builders of the pipeline during construction and the first two years of operation.

Opponents had said the industry has not provided enough financial information to judge whether the tax break is needed. Some lawmakers and Knowles had argued for repayment of lost taxes if gas prices rose high enough.

Knowles administration officials, representatives of BP and Phillips and representatives of Veco, the oil field service company that was pushing the bill, had been negotiating until 8 p.m. Saturday on the measure.

Kott said the bill would remain in the Rules Committee that he heads and could be revived if Knowles or the Legislature decides to call a special session on the subject.

Knowles said he did not anticipate a special session, but agreed the points that had been settled will provide a framework for future negotiations, either by his administration or the next one.

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.

Joe Marushack of Phillips agreed that talks would likely take up where they left off if a future attempt is made to craft a gas line incentive agreement.

''I think he's right,'' Marushack said Sunday. ''A lot of it you wouldn't have to do again.''

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

Producers would pay only a 3 mill property tax rate during construction and one year of operation, as opposed to the normal 20 mill rate, Knowles said.

Producers had agreed to repay the tax break during months when prices reached $4.85 per thousand cubic feet.

That price is the same as a payback level called for in a version of the federal energy bill that passed the U.S. Senate. That legislation, which still needs U.S. House approval, would provide pipeline owners with a tax credit if the gas price fell below $3.25 per thousand cubic feet that would be repaid if prices rose to $4.85 per thousand cubic feet.

No agreement was 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.

Oil producers have said they don't think they can make enough money on the project now to justify the risk of a pipeline costing perhaps $20 billion.

They had said Kott's bill would have helped, but by itself would not have tipped the scale in favor of a natural gas pipeline.