The head of a powerful state Senate committee is calling for stronger legislative oversight and changes to state oil and gas taxes as the developer of the Alaska LNG project approaches a final investment decision.
Backers say it’s an effort to ensure the state gets a fair deal if a North Slope gas pipeline moves forward, but others worry it could have a chilling effect on the project.
Anchorage Republican Sen. Cathy Giessel calls Senate Bill 275 “The Alaska Gasline Transparency and Accountability Act.” It would update state law to reflect what she says is a very different project than lawmakers envisioned when creating the Alaska Gasline Development Corp., a state agency tasked with advancing the project.
“It's our responsibility to make sure that we are getting value for this gas,” Giessel said at a recent news conference.
First, some background: The Alaska Gasline Development Corp. last March turned over 75% of the Alaska LNG project to the private developer Glenfarne in an effort to spur progress on the long-dreamed pipeline. The project includes an 800-mile pipeline taking gas from the North Slope to Southcentral for in-state use and for export, a processing plant on the North Slope, and a plant in Southcentral Alaska that would liquefy the natural gas for export on tanker ships.
The bill, officially sponsored by the Senate Resources Committee Giessel chairs, is sprawling and complex. A document from Giessel’s office lists 16 different topics covered in the 37-page bill.
Giessel said the bill is all about making sure the state, and Alaskans, actually benefit if the pipeline goes forward. For now, she said, she’s not sure Alaskans will.
“What we're looking at is how to ensure that this pipeline actually brings gas to Alaskans that we can afford, and that it doesn't leave us with a tremendous debt or or infrastructure that's only partially completed because a company went bankrupt and left the state,” she said.
Transparency is one focus of the bill. Since Glenfarne took over the Alaska LNG, Giessel has repeatedly expressed frustration over the privately held firm’s refusal to publicly share cost estimates and other key financial details, citing concerns that disclosure could undermine commercial negotiations.
“They're not used to understanding what we need to know and what our focus is,” she said. “At this point, I think we … have a failure to communicate.”
The bill would seek to allow legislators and their staff to view non-public information, like updated cost estimates or internal projections, after signing nondisclosure agreements. Other provisions would require the disclosure of major investors and gas buyers associated with the project, and it couldn’t do business with a foreign entity without lawmakers’ approval.
Other pieces of the bill would change the state’s oil and gas tax system to make sure the state makes money from the gasline. Companies wouldn’t be able to deduct their spending on natural gas leases from their taxes on oil, for instance, or sell gas at below-market prices to drive down the state’s royalty. It would also add a 15-cent surcharge on each thousand cubic feet of gas liquefied for export and make large private oil and gas firms organized as S corporations subject to state income taxes.
The bill is relatively new — it just had its first hearing on Friday, making it difficult to say how far it’ll go in the two months or so remaining in the legislative session. Two more hearings are scheduled for Wednesday and Friday.
Already, though, the bill is facing pushback. Fairbanks Republican Sen. Robb Myers, a member of the all-Republican minority caucus, said some of the provisions make sense, like one that would bolster the Legislature’s authority to audit the gasline agency.
But for the most part, he said, the bill goes too far.
“It’s a lot more going on than just oversight and accountability and transparency,” Myers said. “This is the state moving to take over more and more of the project.”
The sheer fact that the bill exists, whether it passes or not, could have a chilling effect and make investors and gas customers less likely to commit to the project, he said.
“If the attitudes in this bill that are expressed are what we are projecting out to investors, especially where we're altering the deal at this stage of the development, who's going to want to invest with us?” he said.
Giessel and some other allies in the Democrat-heavy bipartisan coalition that controls the Senate say they’re not trying to block the project, though Giessel said she did not review the bill with Glenfarne before rolling it out publicly.
Glenfarne, in a statement from spokesperson Tim Fitzpatrick, said it was reviewing the bill and had not taken a formal position on it. But the company emphasized that the project had “significantly advanced under the intentional framework established by the Legislature” — the framework Giessel’s bill seeks to modify — and that the project would deliver reliable, affordable energy for Alaskans and hundreds of millions of dollars in tax revenue.
“Alaska LNG has earned widespread support from Alaskans due to the many benefits this project will deliver,” Fitzpatrick said.
Property tax relief, Fitzpatrick said, was Glenfarne’s primary ask of the Legislature this session. Ahead of lawmakers’ return to Juneau this January, Gov. Mike Dunleavy proposed a 90% property tax reduction for the Alaska LNG project. Consultants contracted by the Legislature have discussed the idea as one way to make the project more likely to proceed, though municipalities have said property tax cuts would make it difficult to balance their budgets.
Dunleavy plans to introduce a bill on the subject this week, his spokesman said.
