Borough sees increase in oil property values

The values of some oil and gas properties in the Kenai Peninsula Borough jumped in the most recent state assessment, producing about $1.1 million more for the borough in property taxes.

Much of that increase comes from the Nikiski area, where the tax values for the year increased by approximately $559,991, according to the borough’s fiscal year 2017 budget.

The increase allowed for a mill rate decrease for residents of Nikiski from 2.90 to 2.80 for the next year. The borough assembly approved the new mill rate at its June 7 meeting.

Another portion of the increase comes from the Anchor Point Fire and Emergency Medical Service Area, which surrounds the unincorporated community of Anchor Point and reaches into Cook Inlet to include the Cosmopolitan development, where BlueCrest Energy is drilling for oil. The projected tax collection for oil and gas in the area is expected to increase by about $129,852, according to the budget.

The state taxes oil and gas properties at a flat 20 mills. When the property’s value increases, so does the amount paid. The state Department of Revenue assesses the properties annually, said State Petroleum Property Assessor Jim Greeley.

The increase comes from additional investment in the area, stemming from Furie Operating Alaska’s Kitchen Lights Unit northwest of Nikiski and BlueCrest’s Cosmopolitan development. The Kenai Peninsula has seen about a decade of increases in oil and gas property value, he said.

“There’s been about a 10-year trend of increase in (oil and gas property) values on the Kenai,” Greeley said. “Statewide, I would characterize them as stable.”

The state collected more than $125 million in oil and gas property taxes in fiscal year 2015, according to the Department of Revenue’s annual Oil and Gas Property Tax report. That is slightly less than in fiscal year 2014, when the state collected a little more than $128 million, but more than the approximately $99.2 million it collected in fiscal year 2013.

The infrastructure investments by Furie and BlueCrest are the main driving forces in the increase, Greeley said. Oilfield service companies’ properties are included in the oil and gas assessments, he said.

Though the Alaska LNG Project has been in the process of purchasing about 600 acres of land in the Nikiski area, it would not have an effect on the property tax values. The land is not being used for oil and gas purposes at present, said Larry Persily, the special assistant on oil and gas to Borough Mayor Mike Navarre.

“Right now, it’s just undeveloped land that happens to be owned by an oil and gas venture, but it’s not oil and gas property,” Persily said. “It’s only oil and gas property if it’s used in production, exploration or pipeline.”

The Alaska LNG Project will likely not materialize for a number of years — the project team is still completing its resource reports and preparing its Environmental Impact Statement to submit to the Federal Energy Regulatory Commission, which will then take some time to review the application. Workers will be conducting water tests, borehole drilling and marine work in the Nikiski area this summer, and the project will contract with demolition crews to remove 20 structures on the land the project has acquired so far, according to an emailed update from Josselyn O’Connor, the community stakeholder advisor for the project.

Though the project managers are also looking at moving the Kenai Spur Highway to allow for the approximately 800-acre facility to be built, there is no planned work on the highway relocation for the summer, according to the email.

Reach Elizabeth Earl at elizabeth.earl@peninsulaclarion.com.

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