JUNEAU -- Alaska has few incentives to owning a stake in a natural gas pipeline from the North Slope to the Lower 48, said a Department of Revenue report.
But the report stopped short of warning against such an investment.
"Ultimately it's a public policy call in terms of how much direct involvement the state should have in developing its resources," said Larry Persily, deputy director of the Department of Revenue.
The report, ordered by the Legislature amid talk in the oil industry about such a project, was released Jan. 31.
It concluded that Alaska does not have the money to own a great share of the project without tapping into the Alaska Permanent Fund and its financing options are uncertain.
If the state owned the pipeline facilities, it could cost up to $14 billion that would not begin to show a return for seven years, the report said.
Declining oil revenues have left Alaska with an $865 million deficit that is projected to grow to $1.1 billion by next year. The state's Constitutional Budget Reserve is expected to be empty by 2004.
The prospects of financing such a project through loans is unclear, the report said.
Gov. Tony Knowles has asked for approval of a large general obligation bond package to pay for school construction and maintenance to public facilities.
If the bond package is approved by the Legislature and voters, it could exhaust the state's capacity to take on debt, the report said.
"The only way we could see state financial participation being a benefit is if there were a way under the law to seek tax-exempt financing," Persily said.
The Revenue Department also concluded that oil companies do not need financial assistance and oil and gas interests interviewed for the study do not favor having Alaska as a shareholder.
The industry commissioned its own $100 million study to determine whether the cost of a gas pipeline would be profitable.
The oil companies' report, which considered routes through both Alaska and Canada, has been completed.
Results of the report have not been made pubic, but the industry has tentatively said neither route appears economically viable.
Sen. John Torgerson, R-Kasilof, who chairs the Joint Committee on Natural Gas Pipelines, said the report will be useful in helping lawmakers to decide a course.
"We knew that there was going to be barriers in any direction we went," Torgerson said.
But he said he had hoped the Department of Revenue would answer the most pressing question of whether Alaska should be a shareholder in the project.
While the report repeatedly cautioned about the pitfalls of investing in or owning a pipeline, it never conclusively recommended one course or another.
"I'm certainly not going to discount anything that's in there, but I think I would have been happy with a summary that says, 'no' rather than 'maybe,' " Torgerson said.
