The Alaska House on Friday passed a bill reducing taxes on the planned Alaska LNG project in a bipartisan vote. The 34-5 vote came in hopes of improving the financial case for the 800-mile natural gas pipeline that would bring North Slope gas to Southcentral Alaska for in-state use and export.
The bill would replace a 2% annual statewide oil and gas property tax with a per-unit tax on gas flowing through the pipeline. It amounts to a substantial tax cut for the project, an 80% to 90% reduction compared to current law. Without it, developer Glenfarne told lawmakers the future of the project would be in doubt.
Rep. Chuck Kopp, an Anchorage Republican and the House majority leader, said lawmakers worked across party lines and caucuses to find consensus.
“What we have in front of us is a compromise,” he said. “It doesn't necessarily represent everyone's idea of perfect, but it does move this project forward. House Bill 381 has a tax structure that investors can take to the bank (and) set them up for success, and it's paired with protections that communities can count on.”
The tax would start to bring in revenue in 2031, ramping up to $131 million per year by 2033, according to Department of Revenue projections Kopp cited in his speech. Most of that — 93% — would flow directly to five boroughs along the pipeline route and the municipality of Anchorage.
Taxes and royalties on the gas itself would bring in substantially more than the pipeline tax, according to the projections. All in, the Department of Revenue expects a total of $23 billion by 2062, about $600 to $700 million per year.
The protections Kopp alluded to include a commitment to build a spur line to Fairbanks, provide up to $80 million to reimburse communities for construction costs, and prioritize Alaska union labor.
They also now include price controls. Utilities would pay no more than $16 per unit of gas from the project — higher than current prices, but about in line with new contracts for gas from Cook Inlet and cheaper than projections for the cost of imported gas, according to a presentation from Southcentral gas utility Enstar.
Lawmakers on both sides hailed the vote as a historic step bringing the long-dreamed gas pipeline project forward. But they also sounded a note of caution.
“This bill does not guarantee a natural gas pipeline will be built, and I think the public and Alaskans need to understand that,” said Eagle River Republican Rep. Dan Saddler. “This is not a guarantee, but this removes an important obstacle.”
Five Democratic lawmakers voted against the bill. Rep. Robyn Frier of Utqiagvik said she wanted the bill to allow local communities to negotiate their own tax deals with developer Glenfarne. Lawmakers rejected an amendment that would do so by a 12-27 vote.
Juneau Rep. Sara Hannan said she’d heard from constituents urging her to vote no over concerns about the climate impact of the project. She also said she wanted more information about how the project would take advantage of tax credits for carbon sequestration. A key element of the project is a treatment plant that would remove carbon dioxide from the extracted gas before it’s transported down the pipeline.
Anchorage Rep. Andy Josephson said he was concerned the 30-plus-year tax break was too big a giveaway, citing testimony from the Legislature’s oil and gas consultant. Nick Fulford of GaffneyCline told lawmakers that tax relief at the start of a project was much more valuable than tax relief 15 or 20 years down the road.
“That issue, in some respects, is more important than the tax rate, because 10 years is not terribly long,” Josephson said. “According to the expert, that would provide the incentive you need for investment.”
Glenfarne and Gov. Mike Dunleavy, who called a special legislative session to consider the bill, each issued statements applauding the House for passing it.
“This is an important victory for Alaska's future,” Dunleavy said.
The bill now heads to the Senate, where key leaders have viewed the proposal with substantially more skepticism. The special session ends June 19.
