Gov. Mike Dunleavy has identified the legislation as his top priority.
Gov. Mike Dunleavy speaks about the proposed Alaska LNG project during a press conference in Anchorage on May 4. JUNEAU — With five days remaining until the legislative session must conclude, lawmakers are hard at work negotiating a bill meant to advance the development of the Alaska LNG megaproject.
Lawmakers are seeking to draft a compromise that will withstand a veto from Gov. Mike Dunleavy and garner enough votes to pass in the House and Senate, bridging the divide between disparate priorities sought by Dunleavy and leaders of both chambers. The negotiations have subsumed other priorities in recent days, scrambling caucus alliances and drawing lawmakers into closed-door meetings as lobbyists promoting the project — including former U.S. Sen.
Mark Begich, who isLegislators have held dozens of committee meetings for several weeks trying to determine the right level of tax breaks needed to support the gas line without cutting too deeply into the revenue that local communities and the state will need to address project impacts.that substitute versions of the bills in both chambers don’t go far enough to reduce the tax burden on the project and incentivize investment that could lead to construction. Behind closed doors, House Majority Leader Chuck Kopp has been negotiating directly with Dunleavy and other lawmakers on a new version of the bill, Kopp said Friday.
That legislation could be introduced directly on the House floor on Saturday, circumventing the committee process. House and Senate members have so far favored approaches that would generate more revenue than Dunleavy’s proposal for the state and local jurisdictions if the gas line is built. But a promise from Dunleavy on long-sought public pension reform could soften majority legislators’ position.
Kopp said Dunleavy has indicated that though he has previously opposed the pension bill, he may allow it to become law if lawmakers adopt a gas line bill that adheres to his specifications.last month, seeking to reinstate defined benefits for Alaska’s public employees, including teachers and public safety workers, for the first time since 2006. Dunleavy’s deadline to veto it or let it become law is Monday, further pressuring lawmakers to act quickly on the gas line.
House Speaker Bryce Edgmon, a Dillingham independent, said it was challenging to reach agreement on a complex bill with such a “compressed timeline. ”Dunleavy has called Alaska LNG “the biggest project in the world” and the most important issue before legislators. The state faces a shortage of locally produced natural gas that has raisedAlaska LNG would tap long-stranded gas from the state’s North Slope oil fields and ship it 800 miles to Southcentral Alaska.
It would deliver gas to Alaskans starting in 2029, and deliver liquefied natural gas, or LNG, to Asian entities starting in 2031.a decade ago. Gas line developer Glenfarne has updated the cost of the project but has not publicly released the new figure, saying that could affect ongoing negotiations with gas providers, gas buyers and contractors.
Several lawmakers have complained about a lack of information from the project developers — Glenfarne and the state’s Alaska Gasline Development Corp. — as they consider a multibillion-dollar tax break to support it. The missing details include the gas line’s current anticipated cost and clear details on what price the gas is expected to bought and sold for, they have said.the bill halfway through the session in late March.
Its key feature proposes to eliminate the state’s property tax to save the project upfront expense. The governor proposed an alternative volumetric tax, based on the amount of gas transported, at 6 cents per every thousand cubic feet of gas. He has argued that the project may not happen without the tax break. It would still result in $26 billion in royalties, production taxes and other state and local revenue over 30 years, he said.
But they propose a higher alternative volumetric tax than the version introduced by the governor, among other changes. The Senate substitute has proposed the highest volumetric tax by far. The House has proposed a 15-cent volumetric tax when the project is in full operation, more than double the governor’s proposal.
It also sets requirements for a roughly 75-mile spur line to Fairbanks; allows the Kenai and North Slope boroughs to negotiate a tax break with the developer for plants in their backyards; and requires payment of a $40 million community impact fund to deal with the costs of construction. Some of those provisions are included in a newly drafted version of the bill that resulted from negotiations with the governor.
The Senate has proposed a 40-cent tax, more than six times higher than the governor’s plan, at full operation. The Senate version gives the project an upfront break on property taxes, replacing them with the volumetric tax, but the exemption ends 10 years after full operations commence. It would bring in $6 billion more than the current tax system, over 30 years, according to Department of Revenue Sen.
Bill Wielechowski, an Anchorage Democrat who serves as vice chair of the Senate Resources Committee, said that he was not involved in the negotiations on a new version of the bill meant to appease Dunleavy. The Senate Resources Committee is scheduled to continue working on its version of the legislation over the weekend.
That version would support modestly lower gas prices, as a break-even point for the project, compared to current law, said Dan Stickel, chief economist for the Alaska Department of Revenue. It would also raise taxes on the oil industry, including a 30-cent per barrel fee to pay for Dalton Highway road maintenance. Those measures prompted an outcry in recent days from the Alaska Chamber of Commerce and trade associations that support the oil industry.
Senators have said their measures will help counteract potentially huge losses in state revenue when oil companies deduct expenses against their production taxes as they upgrade fields to provide gas to the project. The Alaska Oil and Gas Association said in a statement from trade groups that Senate Resources has “hijacked” the Alaska LNG bill to increase taxes on the oil industry without enough analysis.
“Alaska’s oil and gas industry makes investment decisions on projects that require billions of dollars in capital and development timelines measured in decades,” said Steve Wackowski, the group’s president. It’s something investors must consider as they weigh development in the state, he said. Alex DeMarban is a longtime Alaska journalist who covers business, the oil and gas industries and general assignments. Reach him at 907-257-4317 or alex@adn.com.
Iris Samuels is a reporter for the Anchorage Daily News focusing on state politics. She previously covered Montana for The AP and Report for America and wrote for the Kodiak Daily Mirror. Contact her at isamuels@adn.com.
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