Developers of the Alaska LNG project are pressing lawmakers to pass a tax bill proposed by Gov. Mike Dunleavy on Friday.
The Alaska Gasline Development Corp. and its private-sector partner Glenfarne told the House Resources Committee on Wednesday that Dunleavy’s proposal to replace property taxes with a tax based on pipeline throughput is an essential step to moving the pipeline forward.
Wearing a button printed with the phrase “Build the Line,” Glenfarne Alaska head Adam Prestidge told lawmakers the tax proposal would drive down the cost of gas, both for in-state consumers and the global liquefied natural gas export market.
“This alternative tax proposal is a key element in doing that,” he said. “Anytime you have a major cost associated with the project, that cost is ultimately borne by those who pay for the gas.”
Prestidge said a tax based on gas volumes would align the state’s incentives with Glenfarne’s — the more gas flowing through the pipeline, the more tax it would pay.
“It is a critical part of the development path for any major piece of infrastructure like this,” Prestidge said.
The state’s current property tax on oil and gas infrastructure is equivalent to an annual tax of 2% of the project’s value.
But Prestidge and other advocates for the gasline, including former Democratic U.S. Sen. Mark Begich, who is working with the governor’s office to advance Alaska LNG, said that would translate to a tax burden an order of magnitude higher than the tax similar projects pay in other markets.
The state Department of Revenue’s chief economist, Dan Stickel, reviewed projections showing the tax change would reduce the cost of gas to Alaskans by 9% and to the export market by 7%. The projections are subject to a number of assumptions, including the project’s financial terms, gas production and market conditions.
Stickel’s projections showed the tax bill would also cut state and local revenue from the gas pipeline: $7 billion in state revenue and $13 billion for municipalities. Even so, Stickel said, the governor’s tax proposal would raise $22.5 billion for the state and $4 billion for municipalities over the next 35 years.
But Stickel offered a key caveat.
“The developer and the Alaska Gasline Development Corp. have stated that the project will not go forward without property tax relief,” Stickel said.
Glenfarne, however, doesn’t appear ready for quite that hard a sell.
Reached by phone, a spokesperson for the company, Tim Fitzpatrick, would not confirm that property tax relief is make-or-break for the project as a whole. But Fitzpatrick pointed to numerous analyses presented to the Legislature that had identified the 20-mill property tax as a major barrier to a gas pipeline.
Gov. Mike Dunleavy, in an interview with KDLL in Kenai on Friday, put it more bluntly.
“Zero times 20 mills is what? Zero,” he said. “You don't get anything if there's no project. There's nothing.”
The bill needs a majority vote in the House and Senate and the consent of the governor to become law. But legislators from both parties said Wednesday they were frustrated with the desire to pass the bill quickly with only about half of the four-month regular legislative session remaining.
Rep. Donna Mears, an Anchorage Democrat, said she was concerned that legislators have only a years-old estimate of the project’s total cost — $46 billion, a 2023 estimate of $44 billion adjusted for inflation.
The lack of an updated public cost estimate makes it hard to evaluate whether the bill represents a good deal for Alaskans, Mears said.
“We're being asked to make decisions on a number that is not real and that does not include the potential for cost overruns,” she said. “We don’t have enough information.”
Sen. Cathy Giessel, an Anchorage Republican who chairs the Senate Resources Committee, proposed a bill earlier this month that could require gasline developers to share more information with lawmakers. In a hearing on Monday, Begich, the former U.S. senator-turned-gasline advocate, said the bill was “not necessary.”
“We understand the desire by the committees to have more information available, and that's why we're here today,” Begich said. “We'll be here more than once, and we look forward to that.”
Glenfarne has said publicizing specifics like overall cost estimates could compromise negotiations with other private-sector partners. But Matt Kissinger, the Alaska Gasline Development Corp.’s chief commercial officer, said he was familiar with current cost estimates and that the $46 billion price tag was “within reason.”
Some other legislators said they were concerned about the tax break’s impact on local governments that would host the gasline. Mayors have raised concerns that an increased demand for local services from workers involved in pipeline construction and operations could essentially force them to subsidize the project.
A group of five local mayors whose jurisdictions would host the pipeline is scheduled to discuss the proposal with the Senate Resources Committee on Friday.
