Mayors: State gas line plan would hurt local governments' ability to collect revenue

Lisa Demer

JUNEAU -- Three Alaska mayors from communities on the route of the proposed big natural gas pipeline from the North Slope to Nikiski told senators Thursday they are concerned a state deal with oil and gas companies could hurt their ability to reap their own revenue from the project.

Mayors told the Senate Finance Committee they are worried about vague wording in agreements the Parnell administration already has signed with Alaska's major oil producers and a pipeline company that refer to "payments in lieu of property tax."

The mayors of the Kenai Peninsula Borough, the North Slope Borough and the Fairbanks North Star Borough all said they need a strong voice in the Alaska liquefied natural gas project.

A fourth mayor, Clay Walker of the Denali Borough, said he agreed with the state's approach but also liked the idea of allowing local governments to negotiate themselves.

The state's signed agreements with BP, ExxonMobil, ConocoPhillips and pipeline company TransCanada aren't binding contracts but rather an outline of principles and steps to come on the long road toward a pipeline.

The mayors are focused on a section that says payments instead of property taxes would be paid "in consultation by the Administration with local governments."

Mayor Mike Navarre of the Kenai Peninsula Borough said "consult" doesn't give the municipalities much power.

The payment system needs to be agreed to by the municipalities, Mayor Luke Hopkins of the Fairbanks North Star Borough said.

"We would rather have agreement in that process and what that structure looks like, or if not agreement we would like to negotiate our deal on our own behalf," Navarre told the Finance Committee.

The signed agreements also say local governments should get "impact payments," which state officials say could be significant and could help communities absorb the strain of a pipeline boom on schools, roads, police and social services.

The mayors should get to weigh in on the project, House Speaker Mike Chenault, R-Nikiski, said Thursday. The proposed liquefied natural gas plant and marine terminal is proposed for his community and the list of what could be affected is long, he said.

"Just the road impact, just the schools, just -- you can go right down to the grocery stores to the swimming pools to the fire service area to the senior service area," he told reporters.

Gov. Sean Parnell also has proposed legislation, now before the Finance Committee, to put some elements of a gas project into law.

The legislation itself doesn't create a system for payments instead of local property taxes on a pipeline or a liquefaction plant. But it would give state officials authority to negotiate contracts with oil companies and TransCanada that then would come back to the Legislature for approval.

The Senate Resources Committee added in general wording saying local governments' financial interests must be considered in drafting contracts. The mayors want more.

Those contracts can "lock in fiscal certainty," Navarre said, referring to stable taxes pushed for by oil producers.

Both Navarre and Hopkins asked legislators to clarify in the bill that taxes on existing oil and gas facilitates and property would not be affected by the new LNG project.

"We don't want to stop the project, but in terms of what gets negotiated into it, everybody should be concerned if we are talking about somehow rolling existing oil taxable properties into this mix," Navarre said.

Charlotte Brower, North Slope Borough mayor, urged that Senate Bill 138 be changed to ensure that property tax exemptions already approved for a smaller gas pipeline during construction don't apply to a big pipeline.

She suggested municipalities be able to take an ownership interest in the project and get access to natural gas. And she proposed the governor create an advisory group that includes municipal officials, the administration and industry.

Back in 2006, legislative consultant Pedro van Meurs told legislators they didn't need to cap municipal property taxes in order to secure a natural gas pipeline. Local taxes are minimal in the scale of a big pipeline, he advised.

"There is absolutely no need to treat Alaska as a banana republic to secure the gas line," he wrote in a Feb. 1, 2006, memo.

Sen. Pete Kelly, R-Fairbanks and co-chairman of the Senate Finance Committee, said the municipalities' concerns would be addressed. He said he asked Sen. Peter Micciche, R-Soldotna and former mayor, to work on that.

A new version of the LNG bill will be before the committee early next week, he said.

Reach Lisa Demer at or 952-3965.

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