Assembly backs ideas for gas line

Posted: Monday, June 12, 2006

State lawmakers’ failure Thursday to agree on a petroleum profits tax rate could lead Gov. Frank Murkowski to call the Legislature back for another special session.

If he does, the Kenai Peninsula Borough Assembly wants several issues incorporated into any pipeline contract that might eventually emerge from deliberations on a profits tax and assorted amendments to the Alaska Stranded Gas Development Act.

At the invitation of the governor, the borough mayor’s office has been a participant in the Stranded Gas Act Municipal Advisory Group, or MAG, since 2004. That group has adopted resolutions regarding a future gas pipeline project and recently adopted five new resolutions taking positions on aspects of the draft contract.

The legislative bodies of the participating municipalities have been passing their own resolutions in support of these MAG positions. Tuesday, it was the Kenai Peninsula Borough Assembly’s turn, and members threw their support behind the MAG positions with a unanimous vote.

The latest MAG resolutions said a final contract should:

· Extend the existence of the MAG through the end of pipeline construction so the group could advise the commissioner of Commerce, Community and Economic Development on allocating future funds appropriated by the Legislature to assist communities with the expected economic and social impacts related to pipeline construction;

· Provide inflation-adjusted economic and social impact payments to the state;

· Develop and implement statutory changes to protect local education funding from any adverse financial effects resulting from the provisions of any Stranded Gas Act contract. (The draft contract would exempt certain oil and gas properties from full and true property valuation in municipalities with general property taxes where those valuations are used to calculate annual education funding).

· Increase the value assigned to the TransAlaska Pipeline from $3.49 billion to the $4.3 billion recently established by the State Assessment Review Board. (This is important if current proposed changes in oil taxation remain in the contract, MAG said).

· (This one concerns only Valdez) References to the city of Valdez’s personal property tax on vessels over 95 feet should be stricken from the contract.

The resolutions concerning the value of the TAPS and Valdez’ ability to tax large vessels rely on a provision currently in the Stranded Gas Development Act that states specifically that establishing fiscal terms that encourage investment in developing stranded gas resources should be done “without significantly altering tax and royalty methodologies and rates on existing oil and gas infrastructure and production.”

Mayor Williams said Friday the Legislature’s failure to act on the PPT bill should not alter the borough’s decision, or that of any other municipality, to back the MAG resolutions.

They “primarily deal with the disposition of funds that would be collected on behalf of municipalities and distributed to them,” he said. “To that end, if there is no gas pipeline, then there are no funds. If there is, the resolutions lead the way to the distribution of those funds.”

The “somewhat nebulous” language in one MAG’s resolution does concern him, however, Mayor Williams said. It reads, “the Legislature may appropriate money” to address economic and social impacts felt by municipalities.

“It’s hard to dictate to the Legislature, but ‘may’ can wind up so soft that municipalities might not get anything,” Williams said.

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