Alaska House Rewrites LNG Tax Bill, Raising Rate While Empowering Boroughs

The Alaska House Resources Committee voted 8-1 Wednesday to advance a substantially rewritten version of the governor's Alaska LNG tax bill, raising the proposed pipeline tax while giving boroughs new authority to negotiate property taxes on gas facilities.

Governor Dunleavy introduced legislation in April to replace oil and gas property tax with a volumetric tax based on gas throughput for the Alaska LNG project, projecting $26 billion in revenue over 30 years.

The committee's Amendment 28 sets a single alternative volumetric tax of 15 cents per thousand cubic feet of pipeline throughput, applied at first gas with no abatement period. That rate is higher than the governor's proposed 6 cents but lower than the 20 cents the committee had previously drafted. The amendment removes the three-tier tax structure that had applied different rates to the pipeline, gas treatment plant, and LNG facility.

Co-Chair Representative Freer said the 6-cent rate "was based on a project that would be approximately $46 billion from a number that AGDC put out in, I think, 2023," adding "I think 15 cents kind of relates more to what the actual project cost may be."

The amendment also removes the gas treatment plant on the North Slope and the LNG facility on the Kenai Peninsula from the alternative volumetric tax system. Instead, it subjects them to municipal property taxes under Title 29. Committee aide Calvin Zullo said this "empowers those two boroughs to further reduce the tax burden on the project unilaterally based on negotiations with the project developer."

After legal counsel raised questions about whether existing statutes would allow boroughs to negotiate variable mill rates without additional authorization, the committee adopted a conceptual amendment providing an exemption using language similar to existing economic development provisions in state law. The amendment also allows boroughs to take equity in the project in lieu of property tax revenue.

The legislation terminates the alternative tax structure if commercial operations have not begun by January 1, 2040, reverting to standard property tax.

Adam Prestidge, representing project sponsor Glenfarn, expressed concern about the increased tax burden. "The governor's bill proposed an AVT tax of 6 cents that was applied on the entire project, 6 cents total," Prestidge said. "What I see here with this proposal is a 15 cents on the pipeline itself, leaves in place another 10 cents on the LNG facility, and then an unknown tax on the gas treatment facility."

Calvin Zullo clarified that the amendment applies no volumetric tax to the LNG facility. "Under this amendment there is no 10-cent AVT applied to the LNG facility," Zullo said. "It's just the 15 cents on the pipeline. The LNG facility and the gas treatment plant on the North Slope are taxed under municipal property taxes."