The Alaska Legislature’s debate on tax breaks for the Alaska LNG project isn’t over yet.
Gov. Mike Dunleavy called lawmakers back for a third special session on the issue Thursday afternoon after threatening to veto a draft advanced by a conference committee that included a controversial tax change subjecting some private oil and gas companies to Alaska’s 9.4% corporate income tax.
The pass-through entities tax, sometimes called the “S corp tax,” was a dealbreaker, Dunleavy said at a news conference Thursday evening.
“That’s what killed this particular iteration of the bill,” he said alongside members of the House’s and Senate’s Republican minority caucuses.
The new special session is set to begin July 27.
The proclamation came minutes before the House was set to begin debating a bill that would replace a large property tax with a smaller tax on gas pipeline throughput.
The Senate passed the bill with a slim 11-8 majority Thursday afternoon. It failed in the House 19-19 after Dunleavy issued his veto threat.
Rep. Calvin Schrage, an Anchorage independent who led efforts to craft the latest version of the bill, said the bill would have given the developer a realistic shot at moving the project forward.
Income from the Alaska LNG project would have been exempt from the expanded corporate tax, a change made Thursday morning at the request of lead developer Glenfarne, Schrage said.
“This bill would have given them a fighting chance,” he said. “It would have shown progress to the financers, it would’ve shown that the state of Alaska supports their efforts, that we were willing to put in place a radically different tax structure to enable this project.”
But Dunleavy said his concerns over the tax change extended beyond the effects on the pipeline developer. The tax would likely have captured much of its revenue from Hilcorp, a privately held company and one of the largest operators in Alaska’s oil and gas industry.
“We were concerned about what that could do for investment on the (North) Slope, investment in (Cook) Inlet,” Dunleavy said.
Minority Republicans and one member of the majority caucus, House Majority Leader Chuck Kopp, voiced strong opposition to the tax.
“We should not attach a controversial tax provision to one of the most consequential energy bills in a generation in front of this body,” Kopp said. “We are simultaneously asking investors to spend tens of billions of dollars here in Alaska, while signaling the rules that govern those investments will probably change after the fact.”
Kopp’s opposition is a significant obstacle in the House, controlled by a 21-19 bipartisan majority caucus.
House and Senate leaders said they were skeptical another special session would be productive as lawmakers turn their attention to this fall’s elections. The July 27 start of the new special session comes just over three weeks before the primary election scheduled for August 18.
“The things that we want apparently are not the things governor wants,” said Senate President Gary Stevens, a Kodiak Republican. “So it's going to be hard to find a compromise.”
