Jet fuel tax sparks opposition

Posted: Tuesday, June 11, 2002

ANCHORAGE (AP) -- The Alaska Air Carriers Association said it will sue the Fairbanks North Star Borough if voters approve a 2-cent-per-gallon fuel transfer tax June 25.

Williams Alaska Petroleum Inc., the Alaska Air Carriers Association and the Alaska Railroad Corp. said state and federal laws prohibit the tax.

Most of the money from the proposed tax likely would come from jet fuel Williams Alaska sells to Anchorage from its North Pole refinery, said Merrick Peirce, spokesman for A Bright Future for Fairbanks.

The tax would bring in $24 million -- enough to reduce property taxes by 40 percent throughout the borough, Peirce said.

Peirce said property taxes in and around Fairbanks have doubled during the last 15 years. The borough's population has declined in the last few years and property tax delinquencies are up, he said.

Jeff Cook, vice president of external affairs for Williams Alaska, said Williams Alaska pays the third-largest amount of property tax in the borough, about $3 million annually.

Although it would save about $1 million a year in property taxes if the fuel transfer tax is approved by voters, Williams would suffer severe financial losses from its jet fuel sales, Cook said.

Williams provides about half of the jet fuel for the Ted Stevens Anchorage International Airport. Cook said if his company were hit with the tax, it would lose its customers to Tesoro Alaska Petroleum Inc. or to Outside producers.

Petroleum makes up most of the freight revenue for the Alaska Railroad, projected at $36 million for 2002. If Cook is right, the railroad would suffer huge losses, said Patrick Flynn, Alaska railroad spokesman.

State law prohibits the Alaska Railroad from taking sides on the issue, Flynn said.

Flynn said the railroad believes the tax is not allowed under federal law. The proposed tax, Flynn said, would ''discriminate against rail transport and exempt pipeline fuel.''

David Leone, a special assistant for Mayor Rhonda Boyles, said neither the borough nor the Fairbanks City Council have taken a position on the proposed tax.

The borough has hired Av Gross, a former state attorney general, to give a legal opinion on the borough's power to tax fuel transfers. Gross said he would provide the borough with his opinion in early June.

State law prohibits taxation of fuel used for heating and power generation or fuel used in airplanes that operate flights to foreign countries. Cook said most of the jet fuel Williams produces is used for foreign flights.

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