Legislature(2011 - 2012)BELTZ 105 (TSBldg)
02/09/2012 03:30 PM Senate COMMUNITY & REGIONAL AFFAIRS
| Audio | Topic |
|---|---|
| Start | |
| SB148 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | SB 148 | TELECONFERENCED | |
SB 148-GAS PIPELINE PROPERTY TAX EXEMPTION
3:35:39 PM
CHAIR OLSON announced the consideration of SB 148.
3:35:52 PM
SENATOR BILL WIELECHOWSKI, sponsor of SB 148, said the bill
would waive state property taxes during construction for a
natural gas pipeline with a design capacity of 500 million cubic
feet per day. He said companies involved in the project would
save an estimated $600 million while the state would recoup its
tax abatement via lower tariffs.
SENATOR MENARD asked if the Department of Revenue (DOR) voiced
concerns.
CHAIR OLSON asked about the fiscal note's status.
3:38:26 PM
MICHELLE SYDEMAN, Staff for Senator Wielechowski, Alaska State
Legislature, Juneau, said the bill had three zero fiscal notes.
She said DOR noted that state royalties could increase from
higher valued gas via lowered tariffs.
SENATOR MENARD asked if the departments involved in a gas
pipeline supported SB 148.
MS. SYDEMAN answered that she did not know. She said the bill
would assist in the Governor's efforts to get a pipeline built
for a possible Liquefied Natural Gas (LNG) facility for Asian
markets.
3:39:56 PM
STEVE VAN SANT, State Assessor, Municipal and Regional
Assistance Division, Department of Community and Economic
Development, said the department had not taken a position on SB
148.
CHAIR OLSON asked why there was no fiscal note showing the loss
of property tax revenue.
MR. VAN SANT said the Department of Community and Economic
Development (DCCED) zero fiscal note would go through DOR. He
noted that municipalities would be allowed to levy a local
property tax.
3:41:13 PM
MS. SYDEMAN said SB 148 would not discriminate between pipeline
projects. She noted that during the Alaska Gasline Inducement
Act (AGIA), it was estimated that a $500 million state
investment would increase state revenues by $1.2 billion. She
said a large pipeline could bring in as much as $66 billion in
revenue and an instate bullet pipeline would generate $10
billion. She said the revenues would be particularly important
to the state as oil production continued to decline.
3:44:01 PM
She said a large pipeline would create 10,000 construction jobs
with $6 billion generated from instate spending. She said an
instate pipeline would create 9,500 construction jobs with
another 50 to 75 workers being employed on an ongoing basis.
She said a gas pipeline would provide a stable supply of
affordable energy to Interior and Southcentral. She said a
pipeline would provide the impetus for additional oil and gas
development.
She said congress had provided a variety of incentives to build
a pipeline via $21 billion in loan guarantees, accelerated
pipeline tax depreciation and a tax credit for a $12 billion gas
treatment facility in Prudhoe Bay.
3:47:05 PM
MS. SYDEMAN said the state could provide additional incentives
with direct subsidies, loans, equity investment, lowering or
deferring production taxes and financing cost overruns.
3:50:10 PM
She said waiving state property taxes was a first step to make a
project more economical. She said the risk-free plan was
straightforward and signaled the state's willingness to
participate in the project.
CHAIR OLSON commented that deferred property tax was a good
idea. He asked why tax abatements were not implemented in the
past and was the idea thought of during the AGIA debate.
SENATOR WIELECHOWSKI answered that a similar proposal was
presented in the Alaska Stranded Gas Development Act (ASGD), but
waiving municipal taxes was also included. He said no money
would be lost if a pipeline did not get built. He said giving
something to make the economics better would lead to significant
revenues coming into the state.
3:52:26 PM
CHAIR OLSON asked about other gas pipeline inducements and what
effect SB 148 would have.
SENATOR WIELECHOWSKI answered that he did not know. He said he
did not think there was interplay with other incentives.
CHAIR OLSON asked about the influence on new borough formation.
SENATOR WIELECHOWSKI said new boroughs were specifically
exempted and would not be impacted.
CHAIR OLSON asked if communities in the Unorganized Borough
would be able to assess taxes.
SENATOR WIELECHOWSKI answered that communities formed with
taxing authority would be able to tax.
SENATOR MENARD asked about grandfather rights for newly formed
boroughs.
3:54:49 PM
MS. SYDEMAN responded that boroughs organizing in the future
would be able to develop a taxing authority.
SENATOR MENARD responded that there could be potential problems
if a pipeline developer committed and property taxes changed.
MS. SYDEMAN answered that pipeline companies would expect the
possible formation of new boroughs with taxing authority.
SENATOR MENARD commented that new boroughs should be
grandfathered and not be allowed to collect taxes.
SENATOR WIELECHOWSKI responded that allowing new boroughs to
assess taxes would be addressed with Legal Services.
SENATOR MENARD commented that much of that land was privately
owned and asked what protects the industry from someone turning
their land into a borough.
SENATOR WIELECHOWSKI answered that private property owners would
be able to receive a property tax.
3:58:00 PM
SENATOR KOOKESH responded that he disagreed with the last
statement and said people have the right to form a borough.
SENATOR MENARD responded that she supported boroughs too. She
said her intent was to require formation prior to project
development.
CHAIR OLSON asked if there was a time limit or sunset date for a
property tax holiday. He said he was concerned about stretching
out the construction period for continued tax exemptions.
SENATOR WIELECHOWSKI replied that there is no time limit and was
worth considering.
SENATOR KOOKESH commented that he did not understand the need to
add a sunset clause. He said companies building pipelines were
motivated to generate income rather than continue to receive a
tax break.
SENATOR WIELECHOWSKI answered that he agreed.
CHAIR OLSON stated that proposing a sunset date would be
intended to move a project along.
SENATOR KOOKESH commented that he did not read that intent in
the bill.
4:01:29 PM
LARRY PERSILY, Federal Coordinator, Alaska Natural Gas
Transportation Projects, said the legislature must look at all
options to improve the odds of getting a natural gas pipeline,
provide energy for Alaskans and attract billions of dollars of
new investment.
He said the competition was very fierce to attract the billions
of investment needed for a gas project. He said there was over
$250 billion in LNG export projects under development around the
world today. He said shale gas has filled the North American
market and presented extremely tough price competition for any
new supplies from Alaska.
4:02:05 PM
SENATOR ELLIS arrived.
CHAIR OLSON asked what the chance of success was by offering
property tax abatements. He asked if $600 million in property
tax savings should be increased or decreased.
4:04:02 PM
MR. PERSILY answered that a property tax incentive by itself
would not be enough to attract a gas pipeline. He said property
tax abatement was one piece of a fiscal structure for a price
competitive project.
CHAIR OLSON asked to clarify that the tax incentive amount does
not necessarily make or break a possible deal.
MR. PERSILY answered that the number would be determined by the
size of the project.
4:06:51 PM
JIM GREELEY, State Petroleum Property Assessor, Alaska
Department of Revenue, Anchorage, said he was available to
answer questions.
JOYCE LOFGREN, Economist, Tax Division, Alaska Department of
Revenue, said she was available to answer questions.
CHAIR OLSON asked what properties were going to be taxable.
MR. GREELEY answered that the bill did not specify any terminals
or plants. He said all of the costs associated with a pipeline's
installation would be taxable.
4:08:27 PM
BARBARA HUFF TUCKNESS, Director, Governmental and Legislative
Affairs, General Teamsters Local 959, said any encouragement or
incentive to create new jobs would be a good thing.
4:10:56 PM
DON ETHERIDGE, Lobbyist, Alaska AFL-CIO, said the bill would be
a step towards creating jobs for a lot of Alaskans. He said the
long run outcome far outweighed the cost of not charging
property taxes. He said inexpensive natural gas could spur
industries to move into the state.
4:12:30 PM
CHAIR OLSON asked if Alaskan manpower would be ready to build a
specialized pipeline.
MR. ETHERIDGE answered that continual training occurred in
Fairbanks. He said it was doubtful that enough trained
individuals would be available to meet the demand for 10,000
workers. He said training would continue to get as many Alaskans
ready to work.
CHAIR OLSON asked if there was adequate training funding from
the state.
4:14:07 PM
MR. ETHERIDGE said reduced federal funding for training would
require additional funds from the state.
SENATOR MENARD asked how many trainees had left for jobs in
other states.
MR. ETHERIDGE answered that he did not know.
CHAIR OLSON asked how municipalities would be affected.
MR. GREELEY answered that municipalities would not be affected.
4:17:09 PM
At ease from 4:17:09 p.m. to 4:17:30 p.m.
4:17:30 PM
CHAIR OLSON asked Mr. Bullock to explain the two amendments in
the bill packet.
4:17:50 PM
DON BULLOCK, Legislative Counsel, Legislative Affairs Agency,
said the first amendment, 27-LS0990\M.2, clarified that DOR
would continue property assessment for municipalities to assess
uniform rates.
He said the first part of the second amendment, 27-LS0990\M.3,
amended the title about certain gases of 500 million cubic feet
or more in a pipeline as the trigger for allowing the property
tax exemption. He said the second part of the amendment required
that North Slope gas be transported south of 68 degrees north
latitude.
4:20:04 PM
MR. BULLOCK said property tax suspension was used during the
construction of the Trans Alaska Pipeline System (TAPS).
CHAIR OLSON asked what the suspended tax was for TAPS.
MR. BULLOCK answered that he did not know.
SENATOR MENARD asked if the same tax holiday was used for TAPS.
MR. BULLOCK answered no. He said the circumstances were
completely different for TAPS. He said the current bill
incentivizes the gas pipeline prior to development.
4:22:47 PM
MS. SYDEMAN said the two proposed amendments were important to
make sure that the exemption did not apply to lines solely from
one facility in the North Slope to another. She said the other
amendment was to assure that there would be a single way of
assessing the value of the pipeline so each municipality did not
have a different methodology.
CHAIR OLSON asked if there were any letters from boroughs
affected by the proposed pipeline.
MS. SYDEMAN answered no. She said she expected letters of
support after the municipality and borough tax clarification.
4:24:08 PM
CHAIR OLSON said SB 148 would be held in committee.
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