Gas Line Developer Warns Tax Hike Would Delay Project, Jeopardize 2029 Deadline

The developer of Alaska's proposed natural gas pipeline warned Wednesday that version T of House Bill 381, which sets a 15-cent-per-thousand-cubic-feet volumetric tax on gas moving through the pipeline, would force Glenfarn Alaska LNG to reconsider its timeline for a final investment decision. The governor's original bill proposed a 6-cent rate.

"If version T of the bill were passed, it would cause a delay of FID," Adam Prestidge told the House Finance Committee. "When we look at FID right now, that's something we anticipate in the coming months, certainly this year."

Prestidge said Glenfarn largely supports the bill but raised what he called "triple stacking" of taxes as his central objection. He argued that the bill's structure would layer the 15-cent volumetric tax on top of separate property tax arrangements that the North Slope Borough and Kenai Peninsula Borough could negotiate with the developer.

"Irrespective of intent, the practical impact of the way this is structured would stack each of these taxes on top of each other," Prestidge said.

Calvin Zullo, staff to Representative Freer on the House Resources Committee, disputed that interpretation. He said the intent was not to stack taxes but to allow the developer to negotiate lower mill rates with the two boroughs that would have municipal property taxes applied to gas treatment plants and LNG facilities.

Legislative drafting attorney Emily Nauman, appearing online, addressed the drafting questions directly. She explained that sections 4 and 5 include exemptions allowing negotiated tax arrangements with municipalities. She clarified that references to the Fairbanks spur line in two different sections of the bill both point to the same spur line definition. One establishes it as an eligibility requirement for the alternative volumetric tax. The other makes it a condition for the tax law to take effect.

The developer also raised concerns about language allowing municipalities to take equity stakes in the project in exchange for tax reductions. Prestidge said that provision would not work from a project development standpoint.

"It takes real cash dollars to pay for the labor, the pipe, machinery to actually build the project," he said. "Giving away equity for free just dilutes all the other equity investors and essentially ruins the economic model."

Prestidge told the committee that if the LNG export facility reaches final investment decision within four years of pipeline construction completion, delivered gas prices to Alaskans would fall in the $5 to $6 range.

"So long as the LNG facility FIDs anytime in the next 4 years before completion of construction of the pipeline, then gas delivered to Alaskans will be in the $5 range, $5, $6," he said.