With less than a year left in his term, Alaska Gov. Mike Dunleavy has set his sights on the latest in a long line of attempts to advance an 800-mile natural gas pipeline connecting Alaska’s North Slope to export terminals in Southcentral Alaska.
Last year, he handed the reins of the project to private New York-based developer Glenfarne, renewing sweeping promises of state profits and lower-cost energy from a project that has yet to pencil out in the several decades it’s been pursued.
This year, months after he first floated the idea, Dunleavy has asked legislators to approve massive tax breaks for the pipeline, which he claims is a do-or-die moment for the project. While some sort of tax breaks have been discussed well before Glenfarne or even Dunleavy became involved, the depth and perpetuity of the cuts proved to be eye-popping for local governments and state legislators.
The tax scheme proposed by Dunleavy would cut local revenue from the project by about 90%, replacing the property tax with a complicated ramped tax on gas throughput. That’d leave local governments with a $12 billion revenue gap over the project’s 36-year lifetime. Meanwhile, Dunleavy’s proposed gas tax system would net the state about $22.5 billion.
For local governments shouldered with additional infrastructure needs — roads, fire and rescue, housing and education, to name a few — the proposal has been seen as “a bottom offer” that could leave several already-pinched communities worse off.
Legislators sympathetic to those concerns have proposed an alternative that would raise far more revenue. In technical terms, the rewrite would leave the property tax elimination in place but replace it with a much higher tax on throughput — with a steep cut for in-state gas — as well as a roughly $800 million upfront impact payment to affected communities.
In annual revenue terms, the changes would take the bill from generating about $75 million annually to raising $625 million.
That, unsurprisingly, has led to pushback from the governor and the industry, who have long been reflexively against taxes in nearly any form — extending to Dunleavy’s veto of a bill that would have raised taxes on vapes.
But what’s been more surprising is the lack of agreement on what’s actually necessary to advance a project that is allegedly set to break ground in about a year.
While Glenfarne, the Dunleavy administration and several industry groups have panned the new version of the bill for raising taxes, it’s not clear whether the changes are actually a death knell for the project or simply make a profitable project less profitable.
A particularly telling set of exchanges came from last week’s Senate Resources Committee hearing, where lawmakers heard from several industry groups that had the tricky task of opposing the changes while seemingly acknowledging that, yes, there would be an impact on local communities.
“RDC encourages a tax structure that is fair to municipalities while concentrating costs to industry partners during value-generating time periods, rather than the earliest and most capital-intensive phases of the project,” Resource Development Council Executive Director Connor Hajdukovich told the Senate Resources Committee last week, adding, “I’m not sure that this version of it is moving in the right direction.”
That’s a fair bit different than what the governor’s administration said when it claimed the changes would kill the project or Glenfarne’s claims that it “could” delay the project, which, it should be noted, has already been delayed from Glenfarne’s initial schedule that would have had them making a final investment by the end of last year.
And when legislators asked what the ideal piece of legislation would look like, it became pretty clear that the industry didn’t have much agreement beyond their opposition.
“I don’t have specific language for you on that piece,” Hajdukovich said. “I realized there was a discussion that you know, how much the state gets, how much local communities get. … And again, I don’t have a solid policy on that.”
Asked about the provisions of the lawmakers’ rewrite of the bill, which still enacts most of the revenue-collecting measures when the gas would actually start flowing, he was similarly non-committal.
“We don’t have an established position on the framework that we’re looking for,” he said. “We don’t have a policy on that yet.”
Did RDC support the governor’s version? Was that the “clean” version of the bill that the industry wants them to advance post haste?
“We don’t have a stated policy on the Governor’s bill,” he said. “We’re looking for negotiations to continue between the parties that are in place to better the framework for the future of the project.”
“So,” asked Anchorage Democratic Sen. Bill Wielechowski, “do you think the Legislature should just stay out of it and let the local communities negotiate themselves?”
Hajdukovich said, no, of course, legislators should be involved, but when pressed for any details, he was still non-committal except to reiterate the need for a friendly tax structure for the industry, “ideally with long-term benefits to the state and to the municipalities.”
Why it matters
The rewritten bill largely reflects a dramatically different attitude among legislators toward the oil and gas industry, marked by increased skepticism and decreased patience. Where lawmakers were once prone to take industry warnings about the impact of taxes at face value, the state’s worsening fiscal situation — as well as a political system that benefits centrists who don’t automatically toe the industry-friendly party line – has led legislators to push for increased revenue from the industry.
The same committee that rewrote this bill also dramatically rewrote the governor’s tax bill, ditching the deeply unpopular sales tax for higher taxes on the oil industry.
Where promises of jobs and economic growth once drove legislators to pass industry-friendly tax breaks, the shine of that has come off greatly in recent years. It turns out a large chunk of those jobs don’t go to Alaskans, and as the state’s financial situation has continued to crumble despite the heady promises the industry and its boosters made in pitching their tax cuts.
And it’s particularly notable that at the center of much of this is Anchorage Republican Sen. Cathy Giessel, who more than a decade ago helped spearhead the passage of massive oil tax cuts in the form of 2013’s Senate Bill 21. A decade and a fair bit of moderation later, Giessel has been one of the lead voices in arguing that the state needs to do a better job at investing in itself and advocating for the revenue to do so.
“If you were sitting in these seats, how would you take this forward with the same responsibilities that we hold?” she said. “Your members come to my office and probably every office sitting at this table and say to us, We need more education funding. The roads are in terrible condition. They need to be repaired. What about the Dalton, it erodes every year? What about child care? Why isn’t the state subsidizing child care so that we can go to work? You know, these are the kinds of things that we face, and that’s our authority to tax and therefore support state services.”
Matt Acuña Buxton is a long-time political reporter who has written for the Fairbanks Daily News-Miner and The Midnight Sun political blog. He also authors the daily politics newsletter, The Alaska Memo, and can frequently be found live-tweeting public meetings on Bluesky.
