Three weeks into a special session, the state House is on the verge of passing a bill cutting taxes for the Alaska LNG project. It could head on to the Senate as soon as Friday, according to legislative leaders.
The 11-member House Finance Committee approved a draft of the proposal, House Bill 381, unanimously on Wednesday.
“I think the vast majority of us, and Alaskans, really want to see the best chance possible be provided to move forward with this transformational project,” said Fairbanks Republican Rep. Will Stapp ahead of the vote to move the bill forward.
That bill is the only reason lawmakers are still in Juneau.
Gov. Mike Dunleavy called the special session last month exclusively to consider legislation that would replace a shared local and state oil and gas property tax with a much smaller per-unit tax on gas flowing through the planned 800-mile pipeline bringing North Slope gas to a liquefied natural gas terminal on the shores of Cook Inlet. Project developer Glenfarne has said the tax relief is necessary to ensure the project, which the firm estimates could cost up to $54.5 billion, can receive financing.
Rep. Calvin Schrage, an Anchorage independent and co-chair of the House Finance Committee, said their weeks of work and dozens of tweaks yielded a bill he can get behind.
“Obviously, there's been many disagreements along the way, but I'm proud of the work product that we're moving forward out of committee,” he said.
The core of the bill — the tax cut — is similar to the governor’s most recent proposal, though a slightly smaller reduction. It would likely bring in 80 to 90 percent less revenue than the 2% annual property tax currently on the books, though formal projections were not available.
The House’s proposal increases the governor’s proposed tax rate by about 10%. Legislative budget analysts told senators Wednesday that the governor’s proposal, a complex mix of taxes on each of the major components of the project, would amount to a roughly 90% tax cut compared to the existing property tax.
The volumetric tax would kick in no later than five years after the pipeline starts delivering gas, or sooner if exports ramp up quickly.
The bill now also includes a number of concessions that advocates hope will soothe skeptics. One of the biggest is price controls, which have been a sticking point for legislators worried that cost overruns could saddle Alaskans with expensive gas and high energy bills.
Alaska utilities would pay no more than $16 per unit of gas from the project under the House’s version of the bill. That’s higher than current rates in Southcentral Alaska, but cheaper than projections for imports and about in line with contracts for new gas out of Cook Inlet. That rate would rise with inflation.
The bill would also require Glenfarne, the developer, to make a few key commitments — a spur line to Fairbanks, reimbursing local communities for up to $80 million of their costs during construction, and negotiating agreements with labor unions.
Glenfarne and a number of Alaska unions took a step toward that last goal at a ceremony in Chugiak, north of Anchorage, on Thursday by signing an agreement to “maximize participation by qualified Alaska workers.”
It’s a big step, said Bronson Frye, the president of the Building and Construction Trades Council of Southcentral Alaska.
“The decisions we make, particularly in Juneau in the next week or so, will shape the future of our state,” he said. “We have a chance to create thousands of good-paying jobs. We have a chance to expand construction union apprenticeship opportunities. We have a chance to strengthen Alaska's economy while investing in Alaska's people, and that's why this moment is so important.”
Glenfarne Alaska LNG President Adam Prestidge said the developer supports the draft headed for the floor.
“I think the message for lawmakers has been loud and clear here today, that there is tremendous excitement and enthusiasm,” he said. “There is an opportunity here to be seized.”
Also notable is what’s out of the bill: namely, an option for boroughs to negotiate their own tax treatment with developer Glenfarne in exchange for partial ownership of some of the project’s components. That’s been a priority in particular of the North Slope Borough, but Glenfarne told legislators it sees that as unworkable. Disagreement over that provision, which was supported by most bipartisan majority members and opposed by most Republicans, snarled efforts to pass a tax bill in the closing days of the regular session.
Now, the rest of the House gets a crack at it.
House Speaker Bryce Edgmon, a Dillingham independent leading a bipartisan coalition, said he expects the bill to move through the House fairly quickly — maybe even in one day.
“I think the decision-making in front of us is fairly clear for most members,” Edgmon said. “You never know, but, yeah, my hope would be to get it out in one day, if at all possible.”
The House minority leader, Palmer Republican Rep. DeLena Johnson, said she’s expecting it to be a long but productive day.
“It's exciting to see this move because I do think it makes a big difference, as far as getting a gas line built,” she said.
Gov. Mike Dunleavy issued a statement on social media praising the bill shortly after the vote to move it to the floor.
“This legislation provides the certainty and stability needed to move the Alaska LNG Project forward, strengthen our economy, create thousands of good-paying jobs, and deliver long-term benefits for Alaskans,” he said.
If the bill passes the House, it’ll head to the Senate, giving the upper chamber about a week to pass its own version. Senators have been holding hearings on a similar bill in parallel as the House worked on its draft.
The special session is set to end June 19.
