The state Legislature is considering several bills of interest to business as lawmakers wind down their regular 2007 session.
One measure would give the state-owned Alaska Railroad Corp. approval to issue $2.9 billion in tax-free industrial development revenue bonds to finance Agrium Corp.'s planned coal gasification project at its Nikiski fertilizer plant, near Kenai. House Bill 229 also includes authorization for new rail track and equipment needed for the railroad to move coal to a Cook Inlet port for loading on barges.
The bill was before the Senate Finance Committee May 9 after being approved earlier by the state House.
Other business-related bills are active as the Legislature approaches its required May 16 adjournment.
A proposal to increase the state's match for tourism marketing expenditures is in an advanced stage of consideration in the senate. It is Senate Bill 144. A similar bill is in the state House. Other tourism-related bills that are active include measures related to disclosure of fees for ground tours sold to tourists on board cruise ships.
Another bill, House Bill 228, would continue a freeze on allowable payments for medical care to injured workers who have filed workers' compensation claims has passed the House and passed the Senate May 9. The bill is now on the way to Gov. Sarah Palin.
Getting this bill through is important because an existing “cap” on workers' compensation medical fees, set at 2004 levels, will expire in September. If the cap expires physicians and other medical service providers will increase fees to current prevailing rates, which will likely cause an increase in workers' compensation insurance premiums paid by employers by an estimated 5 percent to 6 percent, according to Linda Hall, director of the Division of Insurance.
House Bill 228 would maintain the cap at 2004 levels but would allow medical providers to increase fees by the same amount as general inflation, as indicated by the national Consumer Price Index. That would still likely result in a small increase in workers' compensation insurance premiums, Hall said. An increase of 1 percent to 2 percent is estimated by the division.
Alaska has the highest premiums for workers' compensation insurance in the nation, although premiums for many businesses declined last year, the Division of Insurance said.
The Agrium financing by the Alaska Railroad would be the first use of its authority to issue tax-exempt bonds for a non-railroad purpose. When the railroad was sold to the state by the federal government, its authority to issue tax-exempt bonds for industrial development went along with it. Congress eliminated tax-exempt private industrial development financing by public entities some years ago, but allowed the Alaska Railroad to retain its authority.
The Agrium bonds would be the first major tax-exempt financing the railroad has attempted, however. Whether the bonds really qualify for tax-exempt status would depend on a ruling from the Internal Revenue Service, which must be obtained before the bonds can be sold.
Agrium's project involves switching from natural gas to coal as a feedstock in the manufacture of ammonia and urea fertilizer at its Nikiski plant. Gas production is declining in Cook Inlet producing fields and the fertilizer plant has had to cut production to a seasonal basis.
A gasification plant would make a synthesis gas from coal, essentially replacing natural gas for the plant. Coal would be purchased from a coal mine at Healy, in Interior Alaska, that is operated by Usibelli Mine, Inc. The Alaska Railroad would move the coal to the Port of Anchorage, where it would be loaded on barges for transport across Cook Inlet to Nikiski.
A longer-term plan the railroad could consider is construction of a rail spur line from near Willow to the Matanuska-Susitna Borough's Port Mackenzie, on Knik Arm across from Anchorage, so that coal could be moved to the borough's port, which is built to handle storage and loading of bulk commodities.
Tim Bradner can be reached at tim.bradner@alaskajournal.com.
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