Senate cuts community impact fees for gas pipeline by half

The Alaska Senate Resources Committee voted Wednesday to cut community impact fees for the Alaska LNG pipeline project in half, from $1 million to $500,000 per mile. That drops projected payments to municipalities from about $740 million to $370 million during construction.

The reduction is part of Senate Bill 280, which would replace the current property tax system with a volume-based tax on gas flowing through the pipeline. The broader bill would exempt the Alaska LNG project from taxes for a decade during construction and startup. At full capacity, it would reduce municipal revenue by about 90 percent. Municipalities would receive $13 billion less than under current taxation.

The committee adopted Amendment H6 without objection after rejecting a further reduction to $250,000 per mile by a 3-4 vote. The original $800 million figure came from a 2016 Municipal Advisory Group analysis adjusted for inflation, according to testimony at the 28th hearing on the bill.

Senator Wilkowski said the million-dollar-per-mile fee came from an attempt to replicate the Municipal Advisory Group report from 10 years ago. The producers got together with the local communities and the governor's office at the time and they came up with a number, community impact fee, of around $800 million.

Supporters of the reduction said lower fees could improve the project's economics and help it move forward. Wilkowski said he understands the economics of this project are a challenge. If this is what it takes, this is a significant, significant cut in the community impact fee. But if this is what it takes to get this pipeline forward, he could be open to supporting it.

Senator Myers questioned whether the original fee accurately reflected actual municipal costs. The projected employment for this pipe is 10,000 to 12,000, so roughly half of what TAPS construction was in terms of employment. And honestly, a lot of people, especially if we're talking about the remote camps out, a lot of them probably will do some sort of remote commute.

Myers added that the dollar figure looked too high because it was copied from a project that did not go forward. Staying with that model says to me, well, we're trying to copy from something that didn't work.

Senator Kawasaki defended the original analysis. This was a discussion about 10 years ago when they did have the Municipal Advisory Group, and it was discussed how much a municipality or community would be impacted, and that's why they came up with the $800 million construction-related payment-in-lieu-of-tax system.

Kawasaki noted that the original base case analysis under Senate Bill 138 projected property taxes during construction would likely reach $1.68 billion to $1.79 billion. The agreed-upon $800 million represented roughly 48 percent of that base case. There are some tremendous costs that we potentially are going to be passing on to municipalities by what we are doing here today.