House Finance delays gas line tax bill as North Slope, Kenai mayors negotiate property tax structures

The Alaska House Finance Committee postponed its amendment deadline Friday on SB2001, a gas line tax relief bill, as North Slope Borough and Kenai Peninsula Borough mayors negotiated property tax structures with developers. Representatives heard testimony from borough mayors and four major producers. Multiple speakers identified property tax as the main obstacle to making the project investable.

The committee plans to set the amendment deadline Monday or Tuesday. It expects to take up amendments June 8, 9 or 10 in Juneau as negotiations continue between boroughs and Alaska LNG developers over how to tax the gas treatment plant and liquefaction facilities.

SB2001 addresses taxation of natural gas project property. It includes a volumetric tax on gas throughput as an alternative to traditional property tax based on assessed facility value. The bill has been through multiple versions since the start of session. Each version attempts a different balance between making the project attractive enough to proceed and keeping enough revenue for the state and municipalities.

North Slope Borough Mayor Josiah Puckettuck told the committee Friday he cannot support the project without the ability to negotiate gas treatment plant taxes under the existing AS 29.45 property tax framework. He opposes a novel volumetric tax.

"I can't go home and say, you know, they ask, Mr. Mayor, what's the deal on AK LNG? I say, well, we lost all of our property taxes and we have no gas going to any of our communities, so there's that," Puckettuck said.

He said elected officials must look out for the best interests of all communities. Resources delivered to market or to residents should be equally shared by all.

Kenai Peninsula Mayor Peter Machicki said his borough is closer to compromise. The borough is willing to accept significantly less than full property tax to enable the project while covering community impacts.

"We're willing to negotiate to a point where we cover our costs and it will be significantly shorter than the $8.5 million structure," Machicki said.

He added that under the current terms, the borough is getting closer to being kept whole. That depends on what is known and what is not known about the impacts of the project.

The North Slope Borough operates under a tax cap formula that forces the borough to shift costs to long-term debt. The borough carries $500 million in debt and $130 million in unfunded public employee retirement liability. Six of the borough's eight communities are diesel-reliant. Puckettuck said possible spur lines to Kaktovik and Anaktuvik Pass are part of the borough's concern about receiving direct gas benefits from the project.

Puckettuck proposed keeping the gas treatment plant under the AS 29.45 property tax framework. That would allow the borough to negotiate directly with producers.