There will be impact fund for gas pipeline, developer says

For the Frontiersman

There will be a construction impact fund for the planned Alaska LNG Project, Glenfarne, the state’s partner in the project, has told Alaska legislators.

The lack of impact funding has been a major complaint of borough mayors reviewing a proposed change in property taxes the Legislature is considering, including Matanuska-Susitna Mayor Edna DeVries.

“We recognize there will be impacts from construction and we have to make sure the communities are taken care of,” Adam Prestidge, vice president for Glenfarne Energy Transitions, told the Senate Resources Committee last Monday, March 30.

The bills before the Legislature, sponsored by Gov. Mike Dunleavy, would cut municipalities’ ability to levy property taxes and substitute an alternative tax based on the volume of gas moving through the project until it reaches a threshold of one billion cubic feet day. After that the project would pay a fee of 6 cents per thousand cubic feet.

The governor’s bill as introduced has nothing now to help boroughs and cities deal with expected public safety, road congestion and other problems created by thousands of construction workers. “Even under current law there’s no taxes paid during construction. We’ll look at how to modify that,” Prestidge told the legislators. Matt Kissinger, commercial manager for the state’s Alaska Gasline Development Corp., agreed with this. “There will be real impacts. There will be a resolution to this,” he said.

“This bill will change,” said Sen. Cathy Giessel, chair of the resources committee.

DeVries and other mayors from boroughs through which the planned 42-inch gas pipeline will be build had talked with the senate committee the previous week, raising concerns about lack of support for community impacts and other problems. The senators are reviewing the governor’s bill, which would reduce tax payments to the state and municipalities from 20 mills currently, or 2% of the assessed value, to the equivalent of 2 mills under the alternative plan.

Sen. George Rasucher, R-Mat-Su, a member of the resources committee, asked Prestidge to confirm his understanding that the big project would not be economic without the tax change. Prestidge said this is the case.

The proposed change would put Alaska LNG on par with local, state and provincial taxes on other large LNG projects in the Lower 48 and Canada which would be competitors with Alaska LNG. U.S. gulf coast LNG exporters can now deliver liquefied gas to Asia for about $10 per million British Thermal Unit, or mmBtus, a standard measure used in the energy industry.

Alaska LNG can likely compete with that with a change in the property tax, but not doing that would add about 50 cents per mmBtu to the cost of delivering Alaska LNG, Prestidge said. That would hurt its ability to compete.

Senators on the committee appeared open to giving Alaska LNG a break on taxes but want to see some numbers for the calculations Glenfarne is making.

“I’m fine with reducing it to 2 mills but I want to be convinced that 2 mills is right, and that this couldn’t work with 4 mills or 6 mills,” said Sen. Bill Wielechowski, D-Anch., a member of the committee. “How much do you really need? What’s the cost you’re working with?”

Glenfarne and ADGC have so far not released their latest cost estimates in public, citing confidential negotiations underway with potential customers and this has raised concerns in the Legislature.

Mark Begich, a former Alaska U.S. senator who has been retained by the governor to work on Alaska LNG, said releasing the cost estimates in public would put Glenfarne at a disadvantage in negotiations. The information can given to legislators but it has to be held confidential, he said.

The Legislature has a way to do this now. The Legislature’s Budget and Audit Committee routinely works with confidential information on contacts and audits and legislators could review information on Alaska LNG in an executive session, which is closed, Begich said.

The Alaska LNG project involves a proposed 42-inch gas pipeline built from the North Slope through Interior and Southcentral Alaska to a large liquefied natural gas export plant planned at Nikiski, on the Kenai Peninsula. The project is now planned in two phases, initially the pipeline to deliver gas to Alaska communities and secondly the large LNG plant that would export liquefied gas to markets in Asia.

The pipeline-only phase one would have the pipeline terminate in the Mat-Su Borough, where it woud connect with existing gas distribution lines owned by Enstar Natural Gas Corp. The state gas corporation, AGDC, is now a 25% owner of the project in partnership with Glenfarne, which owns 75%.