With a little more than a week remaining in Republican Gov. Mike Dunleavy’s special session, the gasline subsidy bill is nearing a vote in the House — without one of the big-ticket items advocated for by allies of the North Slope Borough.
The House Finance Committee wrapped up its work on a bill to significantly cut taxes for the 800-mile pipeline project on Wednesday. And in doing so, the North Slope Borough and the Kenai Peninsula Borough — future homes to the most valuable pieces of AKLNG, the multibillion-dollar liquefaction and treatment facilities — saw their ability to directly negotiate with the project erased.
The provisions that allowed the North Slope Borough and the Kenai Peninsula Borough to negotiate alternatives to their property tax systems — such as an ownership stake in place of the 90% tax cut that Dunleavy and developers are seeking — emerged from the House Resources Committee and were among the most contentious provisions of the legislation. While it was seen as a way for the North Slope to secure the same kind of generational benefit that the community did from the oil industry, backers warn that the project is already barely economically viable, even with the 90% cut.
While developer Glenfarne has offered concessions in other areas — like price controls and cost overrun protections — they’ve been firmly opposed to leaving any part of the tax equation unresolved in the legislation.
Glenfarne and state officials have also argued that they have already been in negotiations with local governments, pointing to agreements to set up an impact aid fund intended to cover the impacts from construction costs as well as changes that ensure more funding flows to local governments. At several points, Republican lawmakers have made a point of asking whether private developer Glenfarne would like an even bigger tax break, for officials to point out that they don’t because it would run contrary those negotiations.
That said, other local governments also have different views on the project.
Fairbanks, for example, is intent on securing a source of natural gas to replace far costlier trucked LNG and diesel. 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. The North Slope, meanwhile, has long benefitted from collecting vast sums of taxes from some of the state’s most valuable oil and gas infrastructure and isn’t particularly keen on watching the state sign away that money.
So, House Finance Committee lawmakers looking to advance the project in one way or another — industry-friendly Republicans and moderate independents from Anchorage — removed the North Slope-favored tax provision in a sprawling amendment during the final stage of mark-up on the bill, and they did so with little debate on that particular provision.
“A compromise is difficult, and rarely is everyone happy in a situation like this. I’m doing what I can to try to enable this project and give it a fighting chance, while still protecting the state’s interest. I think this amendment moves a significant way in that direction,” said Rep. Calvin Schrage, an Anchorage independent who caucuses with the mostly Democratic Majority and is one of the committee’s three co-chairs. “I will be supporting this today, as I think it gets us closer to something that is viable and gives this project a fighting chance.”
As they did on several other amendments, Schrage and independent Anchorage Rep. Alyse Galvin broke from the Majority to vote along with minority Republicans — who were frequently seen conferring directly with project developers throughout the amendment process — to advance the project on terms amenable to the developers.
Schrage’s fellow co-chairs of the House Finance Committee — Reps. Neal Foster and Andy Josephson, both Democrats — opposed the change.
“It’s difficult for me to know whether this much forgone revenue is required to make the project economical,” said Josephson, noting that there’s been a lot of anxiety about whether they’re forcing local governments to give up too much for too long. “They talk about municipalities as being creatures of the state; we create them, but we have to nurture them, and I don’t know that there’s enough nurturing in this bill, in this amendment.”
Foster, who represents Nome, echoed many of the concerns shared by his fellow rural lawmakers.
“I think it’s a good effort to try to come to some kind of resolution with the North Slope, but I am persuaded by their argument that the resource comes from the region,” he said, “and they’d like to have more say over what they do within their region.”
But for Republicans, the fact that the North Slope community contains the heart of the state’s oil and gas industry — feeling both the benefits and the costs of industry — carried little weight in the face of the AKLNG project’s broader claims about more affordable energy for Southcentral communities or promises of job growth and economic development.
“I just want to reiterate to my district that the resources in the state of Alaska belong to all Alaskans,” said Eagle River Republican Rep. Jamie Allard, later adding, “I think what we did today, actually this last few weeks, is good, and it’s good for every single child, man and woman, across the state of Alaska.”
The legislation is set up to appear on the House floor as early as Friday, where it will face a similar amendment process before it reaches a vote and can be sent over to the Senate, which has also been actively holding hearings on its own version of the legislation.
Given Galvin and Schrage’s support for the bill at this stage — not to mention House Majority Leader Chuck Kopp, a moderate Republican who spearheaded the attempt to get the AKLNG bill passed in the final days of the regular session — means the bill is all but certain to clear the House in a largely similar format to what passed out of the House Finance Committee.
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. Several share Josephson’s concerns that the 90% cut in taxes — mostly in the form of lost local property taxes — is truly a fair trade for a project that may not ultimately provide cheaper energy to Alaskans.
The special session is set to expire on June 19.
The notable changes from the House Finance mark-up process
- Approved two measures aimed at protecting Alaskans from escalating costs under the project, essentially enshrining the proposed fixed-price contract between Enstar and the project in state law. As I wrote about previously, those cost protections are better than nothing, but reinforce that the real prize here is the export project, which won’t be guaranteed even if they build the pipeline.
- Approved another measure to spread out the tariff for the Fairbanks spur line over all customers, not just in-state users. That means the cost for the spur line would also be borne by international buyers.
- Approved an amendment that would remove the option for local governments, specifically the North Slope Borough and Kenai Peninsula Borough, to negotiate alternatives to collecting property or throughput taxes. Developers worry that giving the local government control exposes the project to uncertainty, while communities see it as giving up too much.
- Removed the option for municipalities to negotiate alternatives to the volumetric taxes, setting the pipeline tariff at 13 cents for the processing facilities and the 6 cent tax for the pipeline. That’s a hike of 1 cent on either end of the project from initial proposals.
- Split the difference on the confidentiality provisions between the developer’s desire to keep things secret and lawmakers’ need to have transparncy, clarifying that the Legislature should at least now the details of a proposal before they pony up additional money into the project.
And some notable rejections:
- Another attempt to extend the state’s corporate income taxes to all oil and gas companies failed once again by a slim 5Y-6N margin, with Anchorage independent Rep. Calvin Schrage joining the Republicans to vote against the change.
- The same went for another change that would have imposed a surcharge on the oil and gas industry to fund maintenance of the Dalton Highway. A growing concern for the state budget, it’s been bitterly opposed by the oil and gas industry, which argues it already pays plenty of taxes. Rep. Schrage also cast the deciding vote on this one.
- Legislators also narrowly rejected an attempt to put LNG imports under the purview of state utility regulators. Arguing that it’d increase costs, Rep. Alyse Galvin, I-Anchorage, joined the Republicans in defeating the change.
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.
