A key Alaska Senate committee is out with a new take on the governor’s proposal to cut taxes for the Alaska LNG project — with a much smaller tax cut.
The Senate Resources Committee rolled out the new version of Gov. Mike Dunleavy’s bill Monday afternoon.
The original bill introduced by Dunleavy would exempt the Alaska LNG project from an existing 20-mill property tax and replace it with a 6-cent tax on each 1,000 cubic feet of gas moving through the pipeline, estimated to bring in approximately $75 million per year, a roughly 90% tax reduction.
The committee’s new version of the bill, approved preliminarily in a 5-2 vote, would also exempt the project from property taxes but would impose a significantly higher volumetric tax on gas throughput — up to 55 cents per 1,000 cubic feet of gas processed for export, with a lower tax on in-state gas. That would raise an estimated $625 million per year once the pipeline is fully operational.
Additionally, the Senate Resources Committee’s bill would impose a one-time fee — $1 million per mile of line constructed each year, roughly $800 million in total — to compensate communities during the years-long construction process.
Anchorage Republican Sen. Cathy Giessel, who chairs the Senate Resources Committee, said the dollar figures were based on a mid-2010s tentative agreement between major gas producers and municipalities.
Project developer Glenfarne, the Dunleavy administration and oil and gas consultants working with the Legislature have all said repeatedly that the project would likely require tax relief to make financial sense. But municipalities that would host the pipeline or serve as construction hubs have said they’re concerned the steep tax cut proposed by Dunleavy could lead local taxpayers to essentially subsidize the multibillion-dollar project.
“The point here is, the impact on Alaskans and the cost to Alaskans has to be taken into account,” Giessel said at a hearing on Tuesday.
Sen. Forrest Dunbar, an Anchorage Democrat, said the higher tax included in the new version of the bill would still represent significant tax relief for the project.
“I sort of suspect that this bill will get revised further, both here and at the Finance Committee,” he said. “But if it were to pass as-is, at least with just the (volumetric tax) portion, this would still represent a very large 100 million dollar per year tax cut for the property.”
The new version of the bill also integrates some other priorities of Giessel and other Senate leaders proposed in another bill. It would impose corporate income taxes on oil and gas pass-through companies organized as S corporations, including major oil and gas producer Hilcorp, prevent companies from counting gas-related expenditures against their oil tax liability and seek to allow legislators to view confidential information about the project.
It also includes some new provisions. Notably, the Senate Resources Committee’s bill would cap the price of in-state gas sold to Alaska utilities at $12 per 1,000 cubic feet before an export terminal goes into service, and $5 per 1,000 cubic feet afterward. It would also require Alaska’s gasline agency, the Alaska Gasline Development Corp., to pursue a spur line that would connect Fairbanks to the larger pipeline, a major priority for Interior legislators.
Glenfarne and Dunleavy both say the changes would increase the cost of gas from the pipeline — and could mean the pipeline isn’t built at all.
In a statement, Dunleavy’s communications director, Jeff Turner said the new version of the bill “puts the entire project at risk by dramatically increasing the cost of the project.” He urged senators to work with the governor to produce a friendlier bill.
“The reality is simple. Without meaningful tax restructuring, this project will not move forward,” Turner wrote. “Governor Dunleavy urges the Senate to work with his administration to return this bill to a form that keeps Alaska competitive, protects our future, and ensures this critical project becomes a reality.”
In a separate statement, Glenfarne warned that the Resources Committee’s new version of the bill would “ultimately raise the cost of energy for Alaskans and could indefinitely delay the delivery of North Slope gas” as Southcentral Alaska stares down a looming natural gas shortage.
