As Alaska lawmakers approach the end of a second consecutive special session considering a bill that would offer tax relief to the Alaska LNG project, legislators are still deeply divided on the best way forward. Lawmakers have tentatively planned a vote on a final draft for Thursday, but a conference committee working on the bill has not met publicly since unveiling a “work draft” ahead of the Independence Day holiday.
Two lawmakers who have been vocal about what the bill should or should not include — and what’s at stake for the future of Alaskans’ energy costs and the state treasury — appeared on Alaska Public Media’s “Talk of Alaska” on Tuesday.
Here’s a rundown of some of the key points that Anchorage Democratic Sen. Bill Wielechowski and Big Lake Republican Rep. Kevin McCabe discussed with host Lori Townsend and callers from across the state.
Lawmakers agree tax breaks are needed, but differ on what conditions should be attached
The main point of the bill proposed by Gov. Mike Dunleavy in March — replacing a 2% annual property tax that would apply to the pipeline with a much smaller tax on pipeline throughput — is a point of consensus, both lawmakers said.
A “20-mill property tax, front-loaded during construction, when there's no revenue and debt service is the highest, makes the project unfinanceable and untenable,” McCabe said.
But they differ on what conditions should come with that tax relief.
“I think we've come to an agreement on that there should be property tax breaks,” Wielechowski said. “The question now is, what other protections should Alaskans be afforded?”
Wielechowski pointed to four major items included in a bill approved by the Senate last month but rejected by Gov. Mike Dunleavy and the state House.
One would set out requirements for wages and the use of Alaska workers and apprentices. Another would prevent pipeline developer Glenfarne from seeking financial compensation from the state if the project fails to move forward. A third would set a 2032 deadline for the completion of the first phase of the project, an in-state pipeline.
Glenfarne said the provisions would hurt its ability to find financing for the project, and the conference committee has pared back those provisions significantly in its latest working draft.
The fourth, and most significant, condition is one that remains included in the draft bill: a provision that would expand the state’s corporate income tax to cover pass-through entities like LLCs and S corporations in the oil and gas industry.
Owners typically report those companies’ profits as personal income, and since Alaska has no personal income tax, large LLCs like Glenfarne and large oil and gas producer Hilcorp currently do not pay them. Those could bring in as much as $100 million per year, according to the Department of Revenue, and more once the pipeline project begins exporting gas.
That tax “guarantees that the state, when Glenfarne makes a lot of money, the state gets a portion of it,” Wielechowski said.
Republicans in both the state House and Senate, along with business groups and Glenfarne, have opposed expanding corporate income taxes to cover companies like Hilcorp and Glenfarne, saying that doing so risks chilling investment in the state. Opponents point in particular to Hilcorp’s investment in legacy oil and gas fields as something that could be at risk, and Glenfarne said last month the tax change "increases financial burdens on the project and signals uncertainty to investors."
McCabe and other Republicans, including Gov. Dunleavy, have urged lawmakers to instead pass a “clean bill” that does not include the provisions opposed by Glenfarne, including the pass-through entities tax.
“Those are the kinds of discussions that are a little bit further down the road — that we should be having, certainly, we want to have those discussions,” McCabe said. “But right now, the simple question is: Can you give us, Legislature, a different structure with our taxes to allow us to get financing?”
Should the federal government invest in the project?
President Donald Trump has repeatedly called out the Alaska LNG project as a priority for his administration, and the Trump administration has put significant effort behind initiatives to enhance what it calls “energy dominance.”
The Trump administration has taken equity stakes in dozens of companies it hopes to boost. So, should the federal government invest in the project?
That “might be a mistake,” McCabe said, in part because the federal government doesn’t directly pay state taxes.
“What are the federal strings that come with that?” he asked. “If the federal government decides to, say, federalize a portion of it or even buy into it, is there going to be a cost? Certainly, there will be a cost in the revenue that would come to Alaska.”
The federal government could also impose other requirements — a change to the route and “other things that we might not necessarily want,” McCabe said.”
“We would have to look at that on its merits when it came,” McCabe said.
Though Wielechowski stopped short of saying the federal government should make a direct investment in the Alaska LNG project, he said he was puzzled that the developer had told lawmakers it would likely not take advantage of billions in loan guarantees initially set up by a George W. Bush-era law, which he said could drive down the cost of financing the $54.5 billion project.
“He's got these federal loan guarantees, and Glenfarne is refusing to even apply for them, and going out and saying we'll pay billions more in interest rather than go through the federal loan guarantees,” Wielechowski said. “That just sets off some bells and whistles for a number of us in the legislature and for the public in general. Why would they not take advantage of that?”
Glenfarne Alaska LNG President Adam Prestidge told lawmakers last month that the developer had heard “very strong interest by private infrastructure banks” and that private financing could help it deliver the project on a faster timeline.
“When we lay all economic factors out on the table, we find that using the federal loan, the federal funding, is close in terms of overall economic impact on the project to going through the private market,” Prestidge said.
What does it mean to get the ‘maximum benefit’ for Alaska’s resources?
Article 8 of Alaska’s state Constitution directs the Legislature to “provide for the utilization, development, and conservation of all natural resources belonging to the State, including land and waters, for the maximum benefit of its people.”
For Wielechowski, that means the state should be compensated for “socializ(ing) the risk” of the project.
“If the state of Alaska is going to fundamentally give them massive tax breaks, we should get something at the back end,” Wielechowski said. “Otherwise, we're not going to be able to afford education. We're not going to be able to afford to pay any PFD at all. We're not going to be able to fix our roads, our ports, our bridges.”
But that leaves out another major benefit, McCabe argued — protecting Alaskans from the high cost and higher risk of relying on imported gas, seen as the only viable alternative to bringing gas off the North Slope.
“Here's the biggest thing: the maximum benefit to Alaskans includes gas to Alaskans,” McCabe said. “That's what we're all forgetting.”
Can lawmakers come to an agreement that satisfies the House, the Senate and the governor?
Though the lawmakers laid out strikingly different views of what the final gas pipeline tax bill should look like, both said they hoped they could find a compromise that allows the project to move forward.
“I think it’s something that we need,” Wielechowski said. “Look, we've got to fund our government. We have education. We've you know people want a bigger PFD, and you can't keep giving away our resources and continue to afford to pay for the things that Alaskans need.”
McCabe underscored the urgency but reiterated that the Legislature should focus first on easing the financial case for the Alaska LNG project, then turn its attention to ways the state can share more of the benefits with residents.
“If we don’t get the project built, there will be no money to fund education. There will be no money to fund the (Permanent Fund dividend). So the objective of this bill is to get the project built,” McCabe said. “100% tax of zero is still zero, so let’s figure out how we’re going to fund government after the money is flowing, because right now it looks like it is not going to go anywhere.”
