Gasline Incentives Pass Congress, Head For President; Mark Major Milestone Toward Line Construction
Washington, D.C. - Alaska Sen. Lisa Murkowski welcomed final passage of two key Alaska gas line tax incentives saying that they should help either a pipeline to the Lower 48 or an all-Alaska liquefied natural gas project to tidewater proceed to construction. The Delegation also succeeded in placing a loan guarantee to reduce investor concerns about the non-completion of the line and a series of important regulatory and administrative provisions to speed line construction -- provisions originally won by Murkowski in the comprehensive energy bill - in the military construction appropriations bill that won Senate passage following the final vote on the tax measure. The loan guarantee will require the government to pick up 80 percent of the cost of the first $18 billion of the project should it not be completed.
"These tax incentives represent a key piece that will allow companies to proceed with a project to get Alaska's huge reserves of natural gas to market. The puzzle isn't finished, but the federal outline is now done and we're closer than ever before to adding the finishing touches," said Murkowski after the Senate approved a major tax bill that included the gas line incentives, sending the measure to the President for signature.
"Given all the obstacles we have had to overcome in this presidential election year, it is great news for Alaskans that the key federal tax incentives are now in place. These provide the economic incentives that will be needed to get Alaska's gas to market," said Murkowski.
"With these incentives and the high prices for natural gas there is no reason Alaska won't be seeing the tens of thousands of jobs that a gas project will bring and the hundreds of millions of dollars of revenues from royalties from the state's one-eighth share of the gas and in severance and property taxes on the gas and pipeline facilities," said Murkowski.
She commented after first the House and then Senate approved a corporate tax bill (H.R. 4520) that includes the two key tax incentives needed to bring Alaska gas to market. The tax provisions include: allowing gas owners to amortize the cost of all Alaska-built segments of a pipeline from their taxes over seven instead of 15 years, a change that will save line owners an estimated $441 million over the life of the line, $150 million in the first 10 years, according to final estimates from the Senate Joint Tax Committee; and allowing an enhanced oil recovery tax credit for the cost of a needed gas conditioning plant on the North Slope of Alaska to process gas before it goes into a line. That provision should save the companies $295 million more in taxes in the first decade of the project.
Both provisions were structured to provide aid either to a trans-Alaska highway pipeline route to the Lower 48 or for an all-Alaska line that will move gas to tidewater in Southcentral Alaska where the gas would be liquefied for shipment to West Coast markets.
These provisions -- along with an 80 percent, $18 billion loan guarantee to protect financiers against the risk that the line won't be finished, and expedited permitting and streamlined court review all contained in the military construction appropriations bill that also passed this afternoon - should be sufficient so that private firms can finance and build the up to $20 billion project, said Murkowski.
Murkowski, who had met with Chairman Thomas and spoken with other conferees in recent weeks, said the way is now cleared at the federal level for a decision on line construction to be made.
The military construction spending bill also includes vital regulatory and administrative changes. Besides the loan guarantee, the regulatory provisions added to the spending bill include:
- A ban on a northern route for the line - specifically preventing a pipeline from running across submerged lands in the Beaufort Sea.
- A streamlined permitting and expedited court review process to speed construction and limit unnecessary judicial or regulatory delays. Specifically, the provisions create the Office of the Federal Coordinator for Alaska Natural Gas Transportation Projects, which will be responsible for speeding construction of an Alaska gas line. The bill protects all of the right-of-way, and permitting certificates granted for an Alaska gas line under the 1976 Alaska Natural Gas Transportation Act. The bill also requires any judicial complaints about a pipeline to be heard in an expedited process by the U.S. Court of Appeals in Washington, D.C.
- The Federal Energy Regulatory Commission is established as the lead agency for a single environmental review that must be completed within 18 months of receiving a completed application, and issue a permit within 60 days after that.
- Provisions that allow Alaska to control in-state use of the gas to facilitate use for heating or construction of a petrochemical industry in state.
- Provisions to guarantee that current and future gas producers in Alaska will be able to compete to get their gas through the pipeline to market.
- A provision that authorizes $20 million for a worker job training program in Alaska, including $3 million for construction of a Fairbanks training facility. The bill requires the Secretary of Labor to make grants to the state to fund training programs, including Alaska Natives, so they can work on the roughly $20 billion project.
Provisions promoting Alaska-hire provisions.- And provisions to encourage the manufacture of steel in the United States to be used in the pipeline and encouraging the companies to give Alaskans a chance to play a ownership role in the gas project.
The loan guarantee is considered by many the most important financing provision since it assures investors they will not lose money should gas prices drop so dramatically as to prevent completion of any line once construction starts. The guarantee should reduce the interest rate needed to attract financing for the line, thus reducing its cost, while also protecting investors who will be financing the largest private construction project in the nation's history.
Murkowski noted that the Energy Information Administration estimates that natural gas demand in America will rise by more than 50 percent by 2025, leaving the nation utterly dependent on imported liquefied natural gas, unless the Alaska project is built - Alaska able to supply the nation with 4.5 billion cubic feet of gas a day from the state's reserves of at least 36 trillion cubic feet of natural gas located at Prudhoe Bay. The gas project will fuel thousands of direct and indirect jobs in Alaska and supply the state with between $450 million and nearly $1 billion a year in revenues in the future.