KENAI \u2014 Gov. Bill Walker reiterated a call Monday for a fix to Alaska\u2019s budget deficit while also signing into law a tax credit designed to incentivize fertilizer company Agrium to reopen its Nikiski plant.<\/p>\n
With the sponsor, Speaker of the Alaska House of Representatives Mike Chenault, R-Nikiski, looking on, Walker signed the bill after speaking at a joint Kenai and Soldotna chambers of commerce luncheon in Kenai on Monday.<\/p>\n
\u201cThis one is different than the other ones we\u2019re doing up north,\u201d Walker said. \u201cThis (tax credit) is one (in which) the benefit to Agrium will be three, four, five million dollars with a maximum of five years, and the benefit on the revenue side is four, five times that.\u201d<\/p>\n
The Legislature passed the bill, HB 100, on April 17. It extends a corporate tax income credit to urea and ammonia manufacturers, who use methane from natural gas to make fertilizers and other products. Effective July 1, 2017 the company would receive a tax credit equal to Agrium\u2019s potential gas supplier\u2019s royalty payment to the state, making the credit budget neutral. According to the fiscal note on the bill, Agrium would consume approximately $15 million in royalty gas but only have corporate tax liability of between $3 million and $4 million. Because the bill will not allow the tax liability to drop below zero, the state\u2019s payments would be capped there.<\/p>\n
Agrium\u2019s return is not a given, but a representative of the Calgary, Alberta-based company said in a previous Peninsula Clarion interview the company was in talks with potential gas suppliers in Cook Inlet.<\/p>\n
The company\u2019s return to Alaska would benefit not only the Kenai Peninsula\u2019s economy \u2014 rippling outward with added jobs and taxes to the local government \u2014 but also around the state, Walker said.<\/p>\n
\u201cThe benefits of Agrium go far beyond the actual people doing the work,\u201d he said at the luncheon. \u201cIt benefits Alaska significantly. And then there\u2019s the value-added opportunity.\u201d<\/p>\n
With the administration at work on a new fiscal plan proposal for the next Legislature to consider, Walker said he has \u201cmoved from optimistic to hopeful\u201d about a budget fix. After the Legislature\u2019s failure in the last session to pass any new sources of revenue for the state budget, opting instead to draw down on the state\u2019s Constitutional Budget Reserve to fill the budget deficit, Walker issued a number of vetoes to the state\u2019s fiscal year 2017 budget, including appropriating half the earnings of the Permanent Fund.<\/p>\n
The vetoes have not been popular, but he saw them as necessary to address the budget deficit, he said.<\/p>\n
\u201cIt will be devastating if we go through all of our savings and then sit down and try to fix this,\u201d Walker said at the luncheon.<\/p>\n
He also participated in an afternoon worksession with the Kenai Peninsula Borough Assembly to discuss options and challenges for the budget. Assembly members asked questions about Walker\u2019s proposals for fixing the budget, ranging from whether the governor\u2019s administration would consider incentivizing alternative energy development to whether a budget fix could wait a year or two to see if oil prices rose again.<\/p>\n
To the latter question, Walker said he would like to wait but didn\u2019t want to take the risk.<\/p>\n
\u201cI\u2019m willing to take the political risk associated with what I\u2019m doing rather than the fiscal risk to the state\u2019s future,\u201d Walker said. \u201c\u2026 If we wait a couple of years and we\u2019re wrong and (the price of oil) doesn\u2019t bounce back up, at that point we need probably $120 oil to fix the budget, (and) then obviously the impact will be zero dividend and income taxes multiple times higher.\u201d<\/p>\n
Another major source of discussion was the future of the Alaska LNG Project. Since the governor\u2019s administration announced its intention of pursuing a state-led project at the end of August, a number of questions about the future structure and execution of the project have arisen. One of the concerns among the three producer partners \u2014 BP, ExxonMobil and ConocoPhillips \u2014 was how to reduce the cost of the project. Walker said one way to do that would be to leverage the state\u2019s position to obtain tax-exempt status for the income generated by the project and tax-exempt financing for the bonds to fund the project.<\/p>\n
Walker said in an interview that he was \u201cvery confident\u201d the state could obtain the exemption for the pipeline from the Internal Revenue Service based on a precedent on a previous pipeline project planned for Valdez.<\/p>\n
\u201cWe\u2019ll go through a new application process \u2014 it\u2019s not complicated \u2014 to basically say income of the entity would be exempt from federal taxes, which is a pretty significant exemption,\u201d he said. \u201cIt had to show it was a political subdivision of the state in order to qualify. \u2026 in our scenario, we aren\u2019t a subdivision of the state. We are the state. So I would think it would be even clearer for the state.\u201d<\/p>\n
If it were tax-exempt, though, one of the casualties could fall on local governments in loss of payment in lieu of taxes, or PILT. Walker assured the assembly during the Monday worksession that some form of a PILT program would exist if the project goes forward.<\/p>\n
One thing is certain, he said: the state is not giving up on the project. The producers have signaled their intention to continue their involvement, if not as partners, and approximately $600 million of preliminary work has already gone into the planning. If the project does not go forward, \u201cI\u2019m going to lose on the field, not forfeit in the dugout,\u201d he said.<\/p>\n
\u201cIt\u2019s by far the biggest get-well card in our hand by far, by magnitudes,\u201d Walker said.<\/p>\n
\u201cWe\u2019re in a pretty good position from the standpoint of being able to carry on where the work will be done at the end of this year, not incurring more risk at all or more financial obligations \u2026 there\u2019s two things you need for a successful LNG project. You need gas, and you need a market. We certainly have that, so we\u2019ll see.\u201d<\/p>\n
\u2022 Elizabeth Earl is a reporter for the Peninsula Clarion and can be reached at elizabeth.earl@peninsulaclarion.com.<\/p>\n","protected":false},"excerpt":{"rendered":"
KENAI \u2014 Gov. Bill Walker reiterated a call Monday for a fix to Alaska\u2019s budget deficit while also signing into law a tax credit designed to incentivize fertilizer company Agrium to reopen its Nikiski plant. With the sponsor, Speaker of the Alaska House of Representatives Mike Chenault, R-Nikiski, looking on, Walker signed the bill after […]<\/p>\n","protected":false},"author":434,"featured_media":22049,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_stopmodifiedupdate":false,"_modified_date":"","wds_primary_category":4,"footnotes":""},"categories":[4],"tags":[230],"yst_prominent_words":[],"class_list":["post-22048","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-news","tag-state-news"],"_links":{"self":[{"href":"https:\/\/www.juneauempire.com\/wp-json\/wp\/v2\/posts\/22048","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.juneauempire.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.juneauempire.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.juneauempire.com\/wp-json\/wp\/v2\/users\/434"}],"replies":[{"embeddable":true,"href":"https:\/\/www.juneauempire.com\/wp-json\/wp\/v2\/comments?post=22048"}],"version-history":[{"count":0,"href":"https:\/\/www.juneauempire.com\/wp-json\/wp\/v2\/posts\/22048\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.juneauempire.com\/wp-json\/wp\/v2\/media\/22049"}],"wp:attachment":[{"href":"https:\/\/www.juneauempire.com\/wp-json\/wp\/v2\/media?parent=22048"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.juneauempire.com\/wp-json\/wp\/v2\/categories?post=22048"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.juneauempire.com\/wp-json\/wp\/v2\/tags?post=22048"},{"taxonomy":"yst_prominent_words","embeddable":true,"href":"https:\/\/www.juneauempire.com\/wp-json\/wp\/v2\/yst_prominent_words?post=22048"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}