Court challenge may await long-term gas pipeline deal
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CONTRACT: Critics are likely to argue that taxing authority is compromised.
By MATT VOLZ, The Associated Press
and LARRY PERSILY, Anchorage Daily News
(Published: January 27, 2005)
JUNEAU -- State negotiators are trying to cut a long-term fiscal deal for a North Slope natural gas pipeline, while also realizing that such a contract could end up in court on a constitutional challenge.
The state's answer could be to take its chances in court, look for a change in state law to fix any legal problems or push a constitutional amendment to resolve any worries.
All of the options are possible, but there will be no decision until the state finishes its review of the legal risks of a long-term contract setting out state and municipal payments in lieu of taxes on a North Slope natural gas pipeline project, said Steve Porter, deputy commissioner at the Department of Revenue.
"We believe the Stranded Gas Act is constitutional, or we wouldn't be here," said Porter, a member of the state's gas line negotiating team.
Critics likely will argue a gas line contract in lieu of taxes from pipeline developers would give away the state's taxing authority, said Dan Dickinson, the state's Tax Division director.
"It's our belief that this will be controversial enough that somebody will file a lawsuit," Dickinson said.
"The constitutionality concerns are known to the negotiating team and they are being evaluated very carefully," said Becky Hultberg, Gov. Frank Murkowski's spokeswoman. "They take the issue seriously but their analysis has not yet concluded."
The state is negotiating with two applicants for a contract setting out fiscal terms for state and municipal revenues from the proposed North Slope gas line. Talks are under way with BP, Conoco Phillips and Exxon Mobil, which have joined on a pipeline proposal, and with Trans Canada, a Calgary-based pipeline operator that claims rights to the project from a 1970s U.S.-Canada agreement.
A contract negotiated under the state's Stranded Gas Development Act could set tax, royalty and other terms for up to 35 years. The North Slope producers say those terms are important for providing the financial certainty they need before committing to a project estimated to cost as much as $20 billion.
Legislative approval is required for any contract to take effect, and Murkowski has said he would like to have a proposal ready for legislative consideration this session.
Because of the requirement for at least 30 days of public comment, and the expectation of extensive legislative hearings, many lawmakers are starting to question whether they would have enough time to hear the issue before the session ends in May.
The issue could be postponed to a special session later in the year, especially if legislators don't see the draft contract in the next month.
Article IX of the Alaska Constitution says: "The power of taxation shall never be surrendered. This power shall not be suspended or contracted away, except as provided in this article."
Negotiators are weighing whether a long-term stranded gas contract would break that article by taking away the state's ability to adjust tax rates for such a long period.
The North Slope producers and Trans Canada are each proposing a gas pipeline that would run from the North Slope into Canada, connecting with the existing pipeline grid in northern Alberta for moving the gas across North America. |
