The Alaska Senate Resources Committee is examining broad tax abatement provisions in the governor's gas pipeline legislation that could exempt pipeline-related purchases and services from state and local taxes.

The committee has been reviewing Senate Bill 280, which includes language that would abate taxes on oil and gas production, pipeline property, income, licenses, excises, fees, and charges related to the purchase, use, consumption, or ownership of property or services during pipeline construction, operation, and maintenance. The scope of the abatement and whether it applies statewide or only in pipeline corridor areas remains unclear.

"There's a very interesting part of the bill and it's in Section 6 on pages 5 and 6, and it talks about the volumetric tax and the abatement of taxes during construction, and the taxes that would be abated include any taxes on oil or gas production and pipeline property," a committee member said. "Also, gross or net income tax, license, excise, any fees, charges, or other tax on or relating to the purchase, use, consumption, or ownership of property or services."

The committee plans to question the Department of Revenue about how broadly the abatement applies. One concern is whether pipeline employees would be exempt from sales taxes on everyday purchases like cigarettes, and whether they would need special identification cards to claim the exemption.

The abatement would continue during construction, operation, and maintenance of the pipeline. Once gas flow reaches one billion cubic feet, a six-cent-per-MCF tax would take effect, increasing by one percent annually. In year two, the tax would be 0.061 cents per MCF.

"I mean that does not even account for inflation," a committee member said.

The committee has also heard concerns from mayors about how pipeline impacts on their communities would be funded.

The Resources Committee plans to meet daily for the next three weeks to work through the bill. The committee is also moving forward with House Joint Resolution 18, which expresses support for the gas pipeline project.

"We have been scouring the bill," a committee member said. "The mayors met with us and had concerns. And we are very much respecting those concerns about how the impacts will be paid for as they come through their district."

The committee member said many House members were not aware of all the taxes that would be set aside under the bill.

"While we're being encouraged to move quickly on this, we are moving quickly with all due diligence, and we're asking a lot of questions, and we'll continue to do that," a committee member said.