The AKLNG subsidy bill — cutting taxes on the long sought-after megaproject by about 85% for the next three decades — advanced out of the House on Friday on a 35 to 4 vote.
While the finer points of the project are still out in the ether, the special session has brought some clarity to the project as well as a few concessions that helped win over many of the skeptical lawmakers. In-state gas prices are capped, the state’s exposure to cost overruns is limited and the tax breaks are contingent on project labor agreements, direct payments to local communities to cover the impacts during construction and an agreement to build a spur line that would deliver natural gas into the Fairbanks area. For many of the chamber’s progressive members, the bill still isn’t perfect but it was a vast improvement over what the governor initially introduced.
“I wish that we had more of the information that we requested,” said Rep. Andrew Gray, D-Anchorage. “I wish that we weren’t kind of flying blind and just assuming good intentions from industry, but I do believe that the bill in front of us has important safeguards and is better than the previous bills that we have looked at.”
As it’s proposed, the cost of gas from the pipeline would be capped at $16 per MCF to in-state customers. That’s higher than what folks in the Anchorage area are paying, but cheaper than what utilities expect the imported natural gas they’ll need to replace flagging supplies of Cook Inlet will cost. The prices come down if and when facilities necessary to sell natural gas to potentially lucrative international markets come online, a decision that’s separate from the pipeline itself. If those facilities are never built and the pipeline only ever serves in-state customers, it would require the state to triple its current natural gas demand to begin to see prices fall from the $16 figure to today’s prices.
In the big picture, the project’s economics are still on shaky ground. That’s because the tax break — which replaces a 2% property tax with a tax based on the amount of gas that goes through the system — makes a far smaller impact on the project’s underlying economics than, say, the cost of the project itself or the price of natural gas from North Slope producers. As several presentations over the three weeks of the special session show small changes to either of those factors could quickly erase any tax benefits, leaving the project struggling to be profitable.
“To be sure, this bill does not guarantee a natural gas pipeline will be built, and I think the public and Alaskans need to understand this is not a guarantee, but this removes an important obstacle to that,” said Eagle River Republican Rep. Dan Saddler. “A high tax on no pipeline gets you no money, a lower tax on a real pipeline gets you money as well as all the benefits.”
Opposition to the bill was limited, with just a handful of lawmakers voicing concerns about the state giving up too much for too long. North Slope Rep. Robyn Frier said she still supported the project, but complained the tax break gave too much away on behalf of her community. Frier had pushed to give the North Slope Borough — which will be home to the costly carbon capture and removal facilities needed to treat North Slope gas before it’s put into the pipeline — a stronger position in negotiating its alternative to property taxes.
“We are going cold in rural Alaska. And Just feel like we don’t want to be on the table, we want to be at the table. We want the ability to negotiate,” she said, when offering an amendment to restore that power, which was voted down.
Regional differences
It’s a good reminder that attitudes about the 800-mile pipeline project connecting the North Slope to Southcentral Alaska vary greatly by each community.
Fairbanks, for example, is intent on securing a source of natural gas to replace far costlier trucked LNG and diesel. In an interview with me, Fairbanks North Star Borough Mayor Grier Hopkins stressed that any shot at securing a source of affordable natural gas for the Interior was critical, pointing to fast-escalating costs for heating oil and diesel-powered electrical generation. At one hearing, he said even $19 per MCF would be a big relief to Fairbanks, where gas rates are currently reaching toward $25 per MCF delivered to customers.
“For us in the borough, the revenue from the line is secondary,” he told me. “I think there’s legitimate questions for what the state should look at giving away in these taxes, in terms of transparency, in terms of jobs, in terms of being an equity stakeholder, and what that looks like, and what the language is becoming clearer in the House and Senate Finance Committees, but we need to be able to afford to live here. … Making sure you know we’re seeing the benefits of affordable gas is important, and what affordable means for Fairbanks is different than what affordable means for other parts of the state”
Anchorage, where gas has historically been more plentiful and affordable than Fairbanks, is anxious about flagging local gas supplies and is looking down the barrel of expensive imported LNG. For many of the Anchorage folks, the cap intended to keep gas cheaper than imported gas is a big win. The North Slope, meanwhile, has long benefited from collecting vast sums of taxes from some of the state’s most valuable oil and gas infrastructure and hasn’t been particularly keen on watching the state sign away that money.
While the energy concerns and promises of economic growth ultimately won out in the House, the big hurdle for the legislation and the project has and remains to be the Senate Finance Committee, which has more lawmakers from rural and coastal communities that won’t see the direct benefits of piped natural gas anytime soon. Lawmakers have tried to thread that needle by designating some of the AKLNG revenue for affordable energy fund that’d ostensibly be aimed at helping rural communities grapple with their energy bills.
Whether that actually smooths things over will be seen this week as the Senate gets underway with the House version of the bill, but as Fairbanks Rep. Ashley Carrick said during the debate, the House bill was ultimately what was achievable under the current layout of the Legislature.
“As we’ve talked about this project as a generational investment and a generational historic opportunity, we always have to remember that we are, per constitution, meant to develop our resources for the maximum benefit of Alaskans,” she said. “I believe that this legislation comes as close as we can, given all the political, the economic, and the social circumstances of our state and our various communities, to accomplishing that by providing the spur line and providing funding for the Affordable Energy Fund.”
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.
