Legislators are midway through the second special session of the year, called by Republican Gov. Mike Dunleavy in his pursuit of steep tax cuts for a long-sought-after large-diameter natural gas pipeline that would span the state, and yet things look further away than they did when lawmakers first gaveled out of the regular session without a deal in May.
A planned vote last week was scrapped as the House, Senate and governor remain at odds over the deal, with the main point of contention being whether the state should tax the profits of privately held oil and gas companies, including the one pursuing the pipeline project, as they already do for publicly traded companies. The issue has persisted since the privately held Hilcorp took over BP’s assets in 2019, with the difference between how each company is incorporated costing the state about $100 million annually.
Industry-skeptical legislators in the Senate see the pipeline bill as the prime opportunity to force the issue, arguing that the lack of corporate income taxes on privately held companies introduces yet another potential financial pitfall for the massive infrastructure project. Already, lawmakers are skeptical that the project will deliver on its key selling point — affordable energy for Alaskans — and are wary about exposing the state to additional risk.
The Senate’s majority has supported extending the state’s corporate income taxes to S-corporations operating in the state’s oil and gas industry, mainly landing on developer Glenfarne and the privately held Hilcorp, which took over BP’s assets in 2019.
“I think it’s extremely important for protecting the finances of Alaska. It doesn’t burden the project,” Anchorage Democratic Sen. Forrest Dunbar told the Alaska Beacon, noting that the pipeline isn’t taxed until it starts making a profit.
Dunbar has been one of the key proponents of closing what has come to be known as the “S-Corp loophole.” Earlier in the year, the Senate added the provision to a House bill in an attempt to force a vote, only for the House — which has a slim majority of industry-friendly lawmakers between the Republican Minority and the Bipartisan Majority — to kill the bill.
And while the one-and-a-half 30-day special sessions have brought a lot more certainty to the sprawling project, they have also brought several developments that have galvanized skeptical lawmakers in the Senate.
First and foremost, several senators obtained a copy of the confidential agreement between developer Glenfarne and the Alaska Gasline Development Corporation. While confidential agreements are allowed under existing law, there’s been considerable concern that the terms may not be particularly favorable to the state, even though the state is already giving up an estimated $16 billion in local and state tax revenue.
Of particular interest are provisions that would allow Glenfarne to recoup its 75% ownership of the project from the state. While that could only have happened under a specific set of circumstances, essentially, if the state were to force Glenfarne out of the project, what was almost more damaging was the mealy-mouthed, lie-by-omission explanation that Glenfarne and AGDC officials gave when asked whether such a provision existed.
“There is no scenario where we will ask the state for money,” Glenfarne Alaska president Adam Prestidge told the Senate Finance Committee.
“There is a different provision around making the developer leave, which would require a payment,” AGDC’s Adam Kissinger told the committee, but as far as the developer quitting themselves and no longer pursuing diligent development efforts, no, there was never even a discussion of a payment in regards to that.”
The problem was that at the time, they didn’t know senators had seen the agreement.
“It’s hard sitting at the table when you knew some of the answers weren’t as direct and accurate as they should be,” Senate Finance Committee co-chair Sen. Bert Stedman told the Alaska Beacon.
And then it didn’t help the day following the Alaska Beacon’s report on the confidential agreement, an Alaska Gasline Development Corporation board member was reported as comparing lawmakers’ questions about the project’s details to mosquitoes.
“A mosquito can turn a peaceful evening into a defensive operation. A Legislature can turn a straightforward issue into a long campaign of hearings, amendments, delays and procedural buzzing,” board treasurer Dennis Michel said during a June 25 board meeting. “Both are persistent, too. A mosquito can keep circling until it finds bare skin. Lawmakers circle around taxes, amendments, compromises until it finally lands, or at least until someone, everyone in the room, has been bitten by the process.”
The attitude broadly reflects what pipeline backers have faced when facing legislative skepticism about the project. Questions like project costs, revenue to the state and worries about overruns that would land on Alaskans’ energy bills have been labeled as the usual naysaying, with several supportive lawmakers frequently reiterating that a high tax won’t raise anything if it scares away developers.
Michel just put a fine point on it.
“So, yes, mosquitoes in the Legislature are both part of life in Alaska, irritating, relentless, and somehow always present just when people are trying to get something done,” he said.
As expected, the comments have gone over about as well as a mosquito bite with lawmakers, several of whom were on the board meeting call and heard them in real time. To them, the project has already been marred by a lack of transparency on the part of the governor, the state and developer Glenfarne. She noted that lawmakers, not Michel, were elected by voters to represent Alaskans’ interests, not those of corporations.
“I think there’s been such distrust sown in this project that I don’t see how we can proceed forward at this point,” Giessel told the Alaska Beacon. “It almost feels like there needs to be a restart where everybody comes to the table and stops hiding the ball, stops hiding the information, and the disrespect and demeaning language stops, and we start over with mutual respect and mutual collaboration.”
The second special session is set to expire at the end of next week. Dunleavy could likely call a third special session, which, if it starts immediately after the second, would overlap with the state’s Aug. 18 primary election.
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.
