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Alaska Governor to Push Pipeline Tax Incentives

Alaska Governor to Push Pipeline Tax Incentives

Giving it one more try in his last two years in office, Alaska Gov. Tony Knowles expects to introduce legislation this fall that would lower the tax barriers for potential stranded natural gas projects --- such as a possible natural gas pipeline --- to bring gas from the North Slope to the Lower 48 and gas-to-liquids facilities.

Knowles said the long-proposed pipeline, which he has endorsed for years, would create jobs, new industries and fatten up the state's Permanent Fund.

For nearly 20 years, industries and state officials have worked to create a pipeline to market Alaska's North Slope natural gas, where reserves may be well above the proven 35 Tcf. So far, however, the high costs have deterred potential projects.

Now, however, Knowles believes the time is right, with natural gas prices at an all-time high and consumer demand increasing. The governor recently outlined tasks facing the state before the pipeline could become reality. Among the problems to overcome, which Knowles estimates could take as long as two years, will be acquiring state and federal rights of way; obtaining extensive permits; and updating already completed federal environmental impact statements.

Changing the tax system is one thing he wants to begin now, however. Two years ago, Knowles introduced a bill to allow the sponsor of a liquids-to-natural gas project to negotiate with the state for payments instead of taxes. That bill failed in the legislature. This time, he hopes to convince his state legislators that a pipeline has to be built with tax incentives.

"The idea is to lessen the tax burden during construction and the early years of production, before the project produces a healthy cash flow," he said. New legislation, he said, would create a more efficient taxation system, and give investors more economic stability, without reducing Alaska's revenue share.

His proposed bill also would allow companies to make payments instead of taxes to reduce the initial development costs. Tax revenues would be collected after the project was completed.

Carolyn Davis, Houston

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