Alaska LNG seeks 90% property tax cut; Kenai Peninsula pushes back

The Alaska LNG project wants a 90 percent property tax cut to move forward with final investment decisions. Borough leaders say the cut would leave local governments short on revenue to cover project impacts.

The project wants complete property tax relief for 10 years after commercial operations begin, or until it reaches one billion cubic feet per day of production for a full month. After that period, it would shift to a small alternative volumetric tax that would generate about $74 million annually in state revenue, Cathy Giessel, chair of the Alaska State Senate Resources Committee, said at a Commonwealth North forum Friday.

Under current law, the LNG export plant would not be taxable by the state but would be taxable by the Kenai Peninsula Borough. Dan Stickel, chief economist at the Alaska Department of Revenue, said in earlier testimony that local governments can tax property outside the state's oil-and-gas definition.

Peter Micciche, mayor of the Kenai Peninsula Borough, said the borough estimates about $30 million per year in impacts from construction and operations, based on worksheets from the Alaska Gasline Development Corporation. "The original bill left us short and with a worrisome potential outcome for our local taxpayers," Micciche said.

Stickel said in that earlier testimony that municipal revenue could rise from $50 million initially to nearly $500 million in 2033 under current law. State revenue from property tax would ramp from $25 million to $244 million by 2033.

Matt Kissinger, commercial director at the Alaska Gas Line Development Corporation, said the project cannot move forward without property tax relief. The property taxes Alaska LNG would face are about 10 times higher than comparable projects, he said. "We'd be looking at 600 to 800 million a year, possibly a billion a year once you factor in the potential risk of cost overruns. Whereas in LNG Canada I believe that they're paying somewhere around 27 million a year," Kissinger said.

He described the project as marginal and said property tax relief was necessary to make it investable.

Giessel said the Senate Resources Committee held 36 hearings on the proposal in less than two months. The proposal would provide complete property tax relief from state and municipal taxes for 10 years after commercial operations began, or until the project reached one billion cubic feet per day of production for a full month. It would then shift to a small alternative volumetric tax.

One of the legislature's key concerns was protecting Alaska ratepayers, including discussion of capping gas prices and preventing cost overruns from being passed to consumers, Giessel said.