House Resources, 4/27/26, 1pm

This meeting of the House Resources Committee will now come to order. It is now 1:05 PM Monday, April 27th, 2026, in Capitol Room 124. Members present are Representative Fields, Representative Glom, Representative Representative Mears, Representative Elam, Representative Sadler, Co-Chair Representative Dybert, and myself, Co-Chair Representative Freer. Let the record reflect that we have a quorum to conduct business. Please take this time to silence your cell phones for the duration of this meeting.

I'd like to thank Cheryl Cole from Records and Renzo Moises from the Juneau LIO for staffing the committee today. Today in House Resources, we will consider the draft committee substitute for House Bill 381 relating to property taxes for the Alaska LNG project. Which was distributed to members last Friday. Co-chair Dibert, do you have a motion? [FOREIGN LANGUAGE] Co-chair Freer, I move that the committee adopt the draft Resources Committee substitute for House Bill 381, Work Order 34-GH2038/G, as our working document.

Thank you, Co-chair Dybert. I will object for the purposes of discussion before we have my staff, Calvin Zulo, explain the changes and go over the sectional analysis. Co-chair Dybert and I are extending the previously set amendment deadline for this committee substitute. It was previously set by email for tomorrow at 4:30 to Friday, May 1st at 4:30 PM. This committee substitute was developed with input from borough governments and other stakeholders, but as our offices prepared for today's hearing and received back from the Administration over the weekend, we did identify some places where the language does not entirely reflect our intent.

This extended amendment deadline will give us more time to work with Committee members, stakeholders, the Administration, project developer. With that, Mr. Zullo, please come to the table and explain the changes that this CS makes.

I will also note— We do have Emily Nauman, the Director of Legislative Legal Services, on the line for questions, Dan Stickel, the Chief Economist with the Department of Revenue, Matt Kissinger, the Commercial Director for AGDC, as well as Frank Richards, the President of AGDC. So, thank you, Calvin. Thank you. For the record, Calvin Zulo, staff to Representative Freer and committed to House Resources.

So the first change is Section 1. It adds some legislative findings, new intent language that essentially says that the special tax treatment in this bill is provided to—. Can you speak up, sir? Is that better? Just speak louder.

Can't hear you. The new intent language is there to establish that the project maximizes the benefit to the state by ensuring direct and affordable access to natural gas to the residents of the state, and that communities are affected by the natural gas project are protected from the negative impacts of the project.

The biggest change is the change to the alternative volumetric tax and the creation of new equity options. This committee substitute taxes the three major project components separately so that the gas treatment plant and the Arctic carbon capture facility on the North Slope, the pipeline, and the LNG import and export facility in Nikiski are all taxed separately.

We changed the ramp-up period so taxes are abated for the project for 6 years or until 250 million cubic feet of average daily throughput is achieved. Sections 6 and 16 create an equity or AVT option for the North Slope Borough and the Kenai Peninsula Borough. The gas treatment plant and the LNG facility would be taxed under AS2945 Municipal Property Taxes until an option is chosen, and though taxes are still abated during that ramp-up period, so neither 2945 taxes or the AVT that they could choose to put on the project would apply.

The pipeline AVT would be set at 5 cents per 1,000 cubic feet of throughput. 50% Of that revenue would be distributed proportionally to municipalities in the state based on the percentage of pipeline within property tax jurisdiction. And then the other half of that AVT revenue would be distributed according to population using a formula based on the Community Assistance Fund. There would be a conditional AVT on the gas treatment plant. Set at 5 cents per 1,000 cubic feet of throughput.

Current language has revenue distributed to communities on a per capita basis under that community assistance formula. That was a miscommunication with legal in the drafting. We intended for that revenue to go entirely to the North Slope Borough or the Kenai Peninsula Borough. Representative Fields. Yeah, I actually support keeping it as written.

Because that substantially affects the full value of the pipeline. So I support AVT revenue for the entire project being distributed as requested in the CS. In that situation, as the bill is currently drafted, the North Slope Borough and the Kenai Peninsula Borough would be electing to essentially distribute revenue from, uh, the facility in their borough to large population centers like Anchorage and Fairbanks. So they would be electing to not take property tax on those facilities and then direct that revenue to communities that— it sort of defeats the purpose of the election. Follow-up.

Follow-up. So I think the one of the previous CSs that had a higher AVT share, so if you have a higher AVT share, you can just do it on the pipeline if you have 15, 20 cents. If it goes down to 5 and then 50% of that is distributed per capita, that's, I would say, a grossly insufficient share for impacted communities— Fairbanks, Anchorage. Um, so I guess my request would be either have a higher AVT share for the pipeline itself, or if we don't do that, then have the AVT calculated across the three southern— I think either way is going to work. But this is not sufficient revenue to address impacts in Anchorage.

So I just want to flag that for the co-chairs and maybe something to work on over the next few days. And that is the intent, is this is the initial hearing. We got the language back the way that we got it back, and we already identified some areas of the CS that needs to— that needs more work. So happy to continue having that conversation. I'd like to let the record reflect that we are joined by Representative Prox at 1:10 and Representative Sadler.

Thank you, Madam Chair. I got two questions. One little one, um, Mr. Zulu said something was an error. I wasn't quite sure, couldn't hear what he was referring to. Did Legal make a drafting error?

Please specify where that was. But before I go there, I just want to ask, you want to conduct this and just let him read through the section and then begin to ask questions, or is this our only run-through? How do you want to conduct this? Um, we— I think we can ask questions as we're going through. So if you have questions about the sectional, please feel free to.

Okay, then pauses are good, but then please, if you would— Yes, please explain what you said. Uh, thank you, Representative Sadler. Through the chair, for the record, this is Calvin Zulo, staff to Representative Freer. Um, the, the drafting error— and it wasn't quite a drafting error on legal's part as much as a miscommunication between myself and the drafter— um, is that the current language for these conditional AVTs on the gas treatment plant and the LNG facility are directed into the Community Assistance Fund formula. We intended for that revenue to be directed to the respective boroughs, the North Slope Borough and the Kenai Peninsula Borough.

So the gas treatment plant, if the North Slope Borough elected to take AVT, would get all of that AVT on that component of the project, for example. [Speaker:COMMISSIONER MAY] The extent to which you can refer to pages or sections is going to be appreciated.

I have a sectional analysis that I can go through after this.

AVT would now be adjusted for inflation annually using Anchorage CPI smoothed over 5 years. The first adjustment would come 1 year after the ramp-up period ends and AVT is applied. There is a delinquent tax penalty for AVT set at 15% of the delinquent amount and increase in interest on the delinquent taxes. Version A of HB 381 had a penalty of 10%, but there was a separate statute that applied a 5% penalty that we have exempted the penalty from under this bill.

We created conditions for eligibility for AVT and the tax abatement during the ramp-up period. To be eligible for AVT and tax abatement, the project must include plans for a lateral spur line to Fairbanks scheduled to begin operations 2 years after the first component of the project begins commercial operations. Defined as the first day that it has throughput of gas. The costs of financing, construction, operations, or maintenance of the spur line must be shared across the pipeline system, and the RCA is directed in this legislation to certify that the project is designed to maximize in-state use of natural gas and that other conditions for abatement have been met, including that cost-sharing provision.

The bill has a provision that says that if commercial operations of the project— again, defined as the first day that a component has throughput of natural gas— has not begun by 2030, then the abatements in the AVT expire.

There is also new conditional effect language. Before HB 381 takes effect, the Commissioner of Revenue must determine that the project developer has committed to enter into a community benefit agreement with communities within 50 miles of the pipeline corridor. Where borough governments exist, one community benefit agreement would be required between the borough government and the project developer on behalf of the communities within the borough. The project developer would have to have committed to creating an impact fund to compensate communities for actual and direct costs associated with the project as negotiated in community benefit agreements. The project developer would have had to have committed to negotiate a project labor agreement and committed to begin construction on a Fairbanks Spur Line within 2 years of the completion of the first 750 miles of pipeline.

There were provisions of Version A that were removed from Version G. Language exempting the project from all municipal sales and use taxes was removed from the bill. And then broad exemptions from AS 2945 property taxes were narrowed to apply only during the ramp-up period and to project components where an AVT is collected instead. Uh, there's also a redline comparison of Version A and Version G that was distributed to members and is available on BASIS.

And, um, any questions? Thank you, Calvin. Are there any questions from committee members? I do. Representative Colon.

Thank you, Chair. Through the Chair, so this new conditional effect language, so the conditions are— I see words like committed to creating an impact fund, committed to negotiate, and committed to begin construction. It comes to the community benefit agreement, that has to be like written and done as a condition of the pipeline? The condition— the intent of this was that the project developer would have to have committed to the Department of Revenue to begin negotiation on these. It was not intended that, say, if there were a community within that corridor that decided not to enter into a community benefit agreement, that would delay project initiation.

Okay. Follow-up, Representative Sadler? Thank you. I think we need to make sure we understand what committed to. For example, committed to negotiate a project labor agreement.

This is conditional language. This is in effect a gatekeeping or a kill switch until these conditions are in effect, the ABT cannot take place. So a commitment to negotiate a project labor agreement, does that imply Achieving a project labor agreement, committed to beginning construction, does that actually require construction? I just want to make sure the language is not— I just want to make sure I understand what the language— if we're setting conditions, they have to be clear. Thank you, Representative Sadler.

Through the Chair, Representative Sadler, and again, for the record, this is Calvin Zulo, staff to Representative Freer. We use the language committed to. We took that from the project labor agreement language in a GEA. That bill had similar language asking for a commitment. And again, the determination that a commitment has been made would be made by the Commissioner of Revenue.

Okay. And I— oh, great, it was taken from a GAO. What does it mean?

It means that the Department of Revenue, the Commissioner of the Department of Revenue believes, has determined that a commitment has been made. So it's just this assertion. That's a low bar. [Speaker:COMMISSIONER ARKOOSH] Well, we understand that there are already conversations that have been ongoing about a project labor agreement. There is an MOU that has not been completed yet, but they have been in communication with folks with the Building Trades Association to reach a project labor agreement.

Representative Elam. Thank you. Um, I, I appreciate you running through kind of the initial, uh, conversation here of the changes from the CS. I'm just— I guess I'm wondering, um, there's, there's several conditional things, and I, I'm wondering if, if a few of those are going to, um— I don't want to add stuff that's going to cause us to potentially you know, lower the likelihood of the project being able to go through or its success. And so I am wondering if any of these conditional areas are areas that are going to cause us to lower the likelihood of the project being successful.

Calvin? Mr. Zullo? Well, I can't speak for the co-chairs. And again, for the record, this is Calvin Zullo, staff to Representative Freer.

Through the chair to Representative Elam, the intent is not to lower the likelihood of the project. The intent is to ensure that communities are taken care of, that as this project is developed, that needs are met. Okay. Representative Mears. Thank you.

Through the chair to Representative Elam, So the way I see these things is that the legislature is only one area where there's responsibility to make sure that needs are being met. And we, in some ways, can't speak for municipalities or labor. So it recognizes that those are also important stakeholders, but they don't need to finish their process for our due diligence. So they're— it kind of like separates those processes out. So we don't— does that make sense?

So that we're not waiting on them. We're saying these are important stakeholders that you have to have buy-in from. So you got buy-in from us, buy-in from communities, buy-in from labor, and that, um, I think keeps those in separate buckets.

Representative Fields, was yours a follow-up to this question? Okay. Representative Fields. Yeah, through the Chair, just to help answer Representative Elam's question. Yeah, I agree.

I think with the reworked CBA language, it's going to be pretty clear. It doesn't reduce the likelihood of the project happening at all. It just ensures there's due diligence and progress toward those CBAs. And then in terms of the PLA, that is the same language from the Alaska Gas Line Inducement Act going way back. So I'd say the legislature has had essentially the same policy on this forever.

Modern discussions of the pipeline and the MOU discussions are ongoing. The PLA discussions are ongoing between the developer and the building trades, and it's obvious the PLA is needed to execute the project. So I just, I just think it's kind of recognizing the same reality the legislature has recognized for two decades. Member Chair, brief at ease. Brief at ease.

Back on record in House Resources. Thank you. We can— are we okay? The volume should be up and hopefully folks in the room can hear the conversation. Did you have any follow or was there any other follow-up on that question?

Representative Prox? Yes, I'm wondering Well, to whomever, have the municipalities itemized the impacts and the estimated cost of those impacts? There has to be a distinction between the actual impact of this project versus things we could do in the future if it results in increased population and all of that stuff. But it's too— you don't necessarily deserve a new football field because this pipeline is being built, but you probably are going to have to have some more police protection temporarily, as extreme examples to illustrate the point. So have we gotten some sort of an estimate from the municipalities of what impact they are expecting?

Thank you, Representative Prox, for the question. I think that we— when we hear from the municipalities, they are still in negotiations as well. But this is language that— some of the language that they were in agreement on. And my staff, he's gone back a few slides from the presentation and can speak to that. [Speaker:MR. ZULOW] Thank you.

Through the Chair, Representative Prox, again, for the record, Calvin Zulow, staff to Representative Freer. The language directing the CBA agreements says that they should include an estimate of actual and direct costs from municipalities established in those CBAs negotiated with the project developer between the community.

That is, to speak to your question, is that it's not just a slush fund for communities. They have to identify what costs they are and impacts they're experiencing. So if there are impacts to— for in Fairbanks, for example, for the Fairbanks Pipeline Training Center, those anticipated costs, if there are impacts to the port in Anchorage because they're within that 50-mile corridor, if there are housing needs that are on you know, in the Kenai Peninsula. So those are for the actual and direct costs associated with it.

Okay. But we have not seen any of that yet, is that correct? That's correct. Okay. Thank you.

Representative Sadler. Thank you, Mr. Chair. I'm looking at this slide and the changes here. I understand from Mr. Miguel that the Commissioner of Revenue must determine that the project developer has made this commitment, that commitment, that commitment.

Commitment. Is there any standard for that, or is there any— if somebody, a community, a person, an entity disputes that, is there any avenue of appeal of that determination? Not seeking to make that happen, but it's a semi-vague statement. And also, I don't know if a Community Benefit Agreement is a contract that's binding. It seems a little soft.

I understand the goals, but the mechanisms seem to be a little bit squishy. Please flesh them out for me.

Through the chair, Representative Sadler, this is Calvin Zulo, staff to Representative Freer. Can you repeat your first question? Well, is there any level of appeal? The Commissioner of Revenue must determine the project developer has— if someone disagrees with that determination, is it appealable? Does it go to the Superior Court, or is it just—.

There's no mechanism for appeal in the bill. I'm sorry? There is not a mechanism for appeal in the bill. Once the Commissioner of Revenue has made the determination, the act takes effect. Okay, and then the community benefit agreement, is that a contract or is that just a gentleman's agreement or what's— what is that?

Um, the assumption is that those agreements would be binding once they're entered into with Glenfarn and the communities. That is the intent of the language. And no real mechanism, again, just a handshake agreement or Glenfarn would make a commitment to the Commissioner of Revenue, uh, I mean if you're interested in an amendment to make that stronger. I'm just trying to see what the— I understand getting a commitment, but this is a $40-50 billion project and people are going to want hard edges as to what the conditions, you know, are and are not. So I think we need to define clearly what committed is and what level of enforcement there's going to be.

Thank you, Representative Sadler. And as this is our first stab at this version of the CS and we've set the amendment deadline for a later date, I hope that we have the opportunity to have those conversations and figure out if there is a way to put a mechanism in place for an appeal process. Representative Mears, do you have a follow-up on this question? I do. Thank you.

Through the chair to Representative Sadler. So with the community benefit agreement, a lot of that, that's pushing that back down to local control. And the teeth and the enforcement and what's contained in there is up to the local communities. So that's taking out of the hands of the legislature and letting the local communities guide those agreements.

Representative Sather. My concerns stand on behalf of the communities. How do they know it's been met or not? There has to be some trigger, some standard, some enforcement.

We would be happy to. I would look for it. Great, thanks. Are there further questions? Representative Prox.

Oh, sorry, I've missed my— we started having a conversation and I missed my cue, so I'm going to go back to co-chair Dibert.

I think these are all really great questions. I—. Sorry, my question— I rose my hand a while ago. It goes back to, you know, the new sections and the CS and all these questions about Will this halt the project? There's been a lot of discussions, and I really appreciate what Representative Mears followed up with— lots of communication.

But I think it would be— and Representative Prox's questions about how this would impact our communities, like with, we'll need more police, we'll need more teachers. We'll have to get DOT involved to take care of our roads. And these are all things that communities need to know the cost of, and it would be beneficial, I think, somewhere soon, now that we have a CS, to invite our mayors back to answer those questions. That's all I— just a comment, not really a question. Thank you, Co-chair Dibert, and that is the intent.

We do plan on bringing the borough mayors back before the committee. To go over this. We also, we are also anticipating a presentation hopefully from the Department of Revenue to model some of the new numbers, and then to have AGDC as well as Glenn Farn and all of the folks that have been having these conversations, the negotiations between the project labor agreement, the negotiations between the municipalities, to come back and go over the, the CS and, and again have the opportunity to make any necessary amendments.

Is this a follow-up to this question, Representative Elam?

I think so. Representative Elam? I guess when we're talking about the CS here and kind of to what Representative Prox was bringing up there, it seems that this really kind of opens it up to a lot of municipalities. And I guess my concern would be is, is there's going to be several areas that are more impacted than others. And I guess I just would be in the— there's a lot of municipalities along that path, and so I would be concerned that we open it— we would want to be careful not to open up to too many agreements compared to specific areas that are being significantly impacted.

Um, that's all I had to say. Uh, thank you, Representative Ehlmeier. I appreciate that. So in the bill And specifically on this slide, it says that a CBA would be required for a borough government and the project developer on behalf of the communities within the borough. So it would— so like the city of Soldotna would be incorporated into the Kenai Peninsula Borough.

Wasilla and Palmer would be within the Mat-Su Borough. Anchorage would be within the municipality of Anchorage. So that's the intent is not to open it up to all of the city local governments, but folks that aren't represented, or maybe in an unorganized borough, might be impacted. Representative Fields. Sorry, I have to go up to Finance for a bill hearing.

Do y'all want to vote on adopting that CS or wait? Can we, um, well, we've completed the presentation. Calvin does have a sectional analysis. We can adopt the CS and then go over the sectional analysis and continue conversation if that is the will of the committee. I just don't want to leave y'all hanging.

I appreciate that. I have to go to a bill hearing up in Finance, and I didn't know if we want to take the vote on the adoption of CS and proceed with discussion. That's all. Thank you, Representative Fields. So, yes, adiós.

Shenanigans. Back on record. In-house resources. We can continue the discussion, Representative. Actually, I have in the queue, I've got Representative Prox, and then I'll add you in there, Representative Sadler.

I'm in there somewhere. You are.

Representative Prox. No, press on. I will—. All right. Representative Klobuchar.

Oh, well, this is under— still under conditional effect language. So, well, first of all, I appreciate this version. It's very municipal-focused. And even though we're seeing some— maybe some adjustments that need to be made, I really appreciate the work that's been put into this version. I think I see a light at the end of the tunnel with this version, and that makes me very excited.

So my specific question was, under the conditional language, we have begin construction of a spur line within 2 years. And so I've talked to the Chair about this, but I think it's important to discuss on the record my concern about a specific timeframe with that. There are a lot of things with the spur line that's out of our control. Probably Glenfarm and a lot of people's control, like environmentalists taking things to court, um, uh, um, any kind of public discourse, maybe with a utility up there. It sounds like it's a little bit complicated.

I don't have a problem with putting spurline language in here, um, but if you are— if this is conditional on building the pipeline, We don't really know if they'll begin construction when this starts, and so I just, I guess, wondering where the 2 years from the completion of the pipeline came from, because you can't really confirm that that early in the game. So, I didn't know if you had anything to say about it. Thank you, Representative Kollom, and I might ask my co-chair to to comment on the spur line language. I know that she was working really closely with her borough mayor to construct language to make sure that we've received commitments from— I mean, they're verbal commitments. They've said yes, you will— that's why the outtake is there.

Yes, you will have a spur line. But we just wanted to, I guess, sort of formalize that. Co-chair Dibert. Yeah, thank you. Through the co-chair, To Representative Kulum, thank you for bringing up the spur line.

The language for this has come through many meetings and lots of talks. And personally, for me, whenever I have these meetings, I'm, you know, I, when I talk to my community and the people who live in Fairbanks, we have Some of the— we have the highest energy costs in the state, and right now I just filled up my fuel tank where it was $5.90 a gallon, and that was roughly $1,700. And when I talk to people in my community, they want to see me address lowering our energy costs and I have to— I promised I would do whatever I can for my community and have these discussions. And so with the help of my mayor, that 2 years is what we landed on.

I personally asked for a year because we have to have some language where there's a promise where we could lower the energy costs for Fairbanksans. And if I could go back to my community this summer and talk to them at coffees and at the door saying, "This is what I worked very hard on," it's something that I could be very proud about.

And we're not trying to delay the project. 2 Years gives time to get permits in order and also give time for Fairbanks residents to switch over to using gas. Instead of heating fuel or wood. Right now Fairbanks is working on deploying— switching our boilers to gas boilers instead of fuel boilers. That takes time.

2 Years gives residents time to switch over and also businesses. And just anything to help lower our costs. For energy and heating our homes. Thank you so much. Did you have a follow-up, Representative Kuhl?

Yeah, I did. So thank you for that, and I totally understand the cost of energy in Fairbanks, and I've always supported the spur line. That's not the issue. One— well, one of my issues is, so this is 2 years after the gas line's done, so now we're talking probably 6, 8 years from now. But, and I'm just, I guess I would like to see some accounting for things that are beyond their control.

Like what happens if it doesn't start within 2 years? The pipeline is already built. And so it's in the conditional language. It doesn't, maybe it can be language in the bill, but I don't think it makes sense to be in, maybe like a commitment to construct the spur line in as quickly as possible or something. But I think having that as conditional could possibly in some ways delay the project.

But let's say it doesn't. I guess I'm just not sure that it should be in the conditional language is what I'm wondering about. Thank you, Representative Kollum. Representative Mears, is there a follow-up to— okay, Representative Mears. Thank you, through the chair to Representative Kollum.

[Speaker:MS. KELLY] So it's a commitment to begin and it's 750 miles, so it's not full pipeline completion. So like as you're getting done here within 2 years, you can see that— and hopefully it's a written commitment— you can see that happening. So it's making sure that as the project is being developed, and this is more I think on AGDC than Glenfarm at this point. You can see that path happening. But since it's a commitment to starting it and not shovel in the ground hard requirement, then if something like that does come up, I don't think it negates the project going forward.

So I think that is a strong enough language that, hey, yes, we're going to do this, but also not precluding moving forward if— construction happens. I meant to say that like life happens and other things kind of delay, right? Yeah, that's—. I just—. Yeah, I mean, it says committed to begin construction, so I guess that has a broad meaning what that would look like.

So, Mr. Zullo? Uh, thank you, uh, to Representative Colon's question and Representative Muir's comments. There is also separately in Section 16 of the bill as an eligibility requirement for receiving the alternative volumetric tax treatment under the bill that 2 years after the first throughput of natural gas through any of the project components that a Fairbanks Spur Line is operational. So that's separate from the conditional language. There is also an eligibility requirement that 2 years after first gas, that there is an operational spur line to Fairbanks.

Just to note for the committee's discussion. Thank you. Uh, Representative Elam. Thank you. Um, I, I appreciate the conversation about the Fairbanks spur.

Completely agree, getting, you know, low-cost energy to all Alaskan residents, top priority. My question or concern might be is that I think a lot of the work that we're doing here with HB 381 is to ultimately get to being able to make a financeable project. And so my only concern would be is what does it do to the ability to get to an investment decision, because I don't know what the full status of the Fairbanks Spur pipeline is, because I do want to make sure that we get that. But my question would be, and it will probably be for Glen Farn or AGD, would be what does that do to the investment, you know, the ability to be able to get financing for the project. I don't expect any of us to have that answer.

It's just sort of—. Well, Matt Kissinger—. Yeah, we do have Matt Kissinger on the line. I will say that I would really like an offtake on the North Slope as well. But yeah, Mr. Kissinger, did you hear the question?

Are you able to respond to Representative Elam?

Yes. Thank you, Chair. This is Matt Kissinger calling in from Anchorage, Alaska. Representative Elam, through the Chair, I think, you know, I guess it adds a slight bit of risk to the investor in that, you know, there could be a loss of the abatement/ABT in case that this one met, but it is a fairly small amount in the scheme of the total project. And so I don't know that the amount itself would add any extra complexity to the financing.

I don't believe that it would. Not measurable. Okay, thank you. Uh, thank you. Representative Sadler, you're next in the queue.

Thank you. I guess the question I would ask of, uh, of AGDC, if, uh, what it It sounds like you're saying spur line, not a big deal. Why wasn't the spur line considered included in the original or current description of the project if it's a de minimis impact to the financing? [FOREIGN LANGUAGE] Through the Chair, Representative Fadler, through the Chair, the main reason for that really has to do with the permitting of the project. As you know, this is not project permitted pipeline is permitted as a, as an LNG facility.

Uh, the pipeline and the gas treatment plant on the North Slope are connected actions. They're just connected parts of the one single facility which extends all the way from the North Slope to Nikiski. And so the definition of a pipeline, a spur line departing from that system and, and, uh, going into Fairbanks has never met that definition. Um, it it would be regulated, as we know, under the state regulations, for example, rather different than the rest of the project. So that's the reason why it has, uh, never been included.

It is always been anticipated to progress simultaneously with the mainline. There are complexities around it, as, uh, Fairbanks does not have a mature, uh, gas consumption base, and of course the complications around the IGU contract for truck-to-north slope LNG, and these things need to be worked around. That's the reason why it wasn't included. Okay, well, and follow-up to my question a while ago is, yeah, actually the 750— the first 750 miles of pipeline, my understanding is that is not the full intended length of the pipeline. Why 750, and how do you determine completion?

Mr. Zullo, do you want to take a stab at that question or do we want to—. I think you may have—. Mr. Kissinger.

Yes, sorry, I didn't realize that was for me. Representative Sadler, through the Chair, it really is referencing just the Phase 1 because the Phase 1 is approximately 750 miles.

So completion of the first 750 miles of pipeline, that envisions a complete ready-to-turn-on pipeline phase, Phase 1, is that correct? That is correct. That's correct. Okay. Okay.

And Mr. Kistner, how would you define completion? Would it imply operation?

Well, I would consider completion to be the physical completion and entry into commercial operations. It is what in the industry we call the COD, or the commercial operations date. Okay. Okay. That is my question.

I will get back to queue. All right. Representative Prox. They answered my question as well. Thank you.

Okay.

Representative Kloh. Oh, I've got Sadler, then Colombe. Oh, okay, okay, okay. So it's me or Sadler. We'll go— we just had a few questions from Representative Sadler.

We'll go to Representative Colombe, then back to Representative Sadler. Okay, thank you, Chair. Uh, so I would like to go back to the slide. I'm sorry they're not numbered, but it's all volumetric tax, ABT, and equity options.

So I just want to clarify. So we've got, um, 5 cents on 3 different projects, right? But the, the gas treatment and the LNG, that 5 cents, the intention of the bill is only going to North Slope or Kenai? Uh, and it's actually, uh, through the chair, uh, Representative Kahlom, Calvin Zulo staff to Representative Freer. It's, uh, 5 cents on the gas treatment plant $0.10 on the LNG facility.

And the intent of the bill is, yes, to have that revenue directed to the borough government that would make the election, either AVT or equity in the project. But as the bill is drafted now, it goes into the community assistance. I got it. Okay, thank you for that clarification. Follow-up.

And in the middle, the ramp-up period, so taxes are abated for 6 years or until 250 million cubic feet what was the original bill? Was it 10 years and—. 10 Years and $1 billion. $1 Billion. Okay, thank you.

And, and that is not something that, uh, Representative Colon, just so you know, that's still something that we're kind of toggling with too. That's not a set-in-stone 6 years. 6 Years is what the Department of Revenue said that they anticipated. Basically, 2033 is when they would achieve that throughput. Um, so we put 6 years in there, but that's not We're not married to that language or that part of the amendment.

Or the CS. Thank you. Representative Sadler, I've got you back. Thank you. Turning to the slide labeled Eligibility for AVT and Tax Abatement.

The second, I guess the second sub-bullet basically says this legislation directs the Regulatory Commission of Alaska to make a certification about the design to maximize in-state use of natural gas. That's—. I'm not sure if that is within our authority. I'm not sure if that's within RCA's authority. It almost sounds like that's something the Alaska Oil and Gas Conservation Commission might be asked to verify or to assert that this is the maximum use of in-state gas.

So I guess I'd ask the sponsor of the CS to explain how do you expect RCA to make that determination or how do you think that would work? Mr. Zullo, if you can chime in on that. Through the Chair, Representative Sadler, Calvin Zuluft after Representative Freer. This is language that we received from the Fairbanks Borough and we ran with it. I understand that the co-chairs would be happy to have the RCA before the committee to talk about whether this is workable.

And again, happy to work with everyone. So, follow-up? Follow-up. So we don't know quite how, but this came from the Fairbanks North Star Borough. And it's included in here.

So who should I ask? I'll ask that question of whom. Uh, we will have the borough mayors back before us, and unfortunately we don't have them on right now.

Um, uh, Co-chair Dybert, do you want to work on it, or do you want to We can— can we direct that question? Can we take note of that question and then come back? Yeah, and actually we should ask RCA if this is an authority they can— if they can take a legislative direction to come to a decision, that would seem to impinge on their authority just a bit. Okay. And there are other bills that are moving within committees that address RCA's ability to deal with Alaska LNG or not, and so that's probably probably inappropriate.

We can definitely have RCA come back before the committee.

Representative Prox. Yes, thank you.

I guess whomever was involved with this particular section, we'd have to define max maximize in-state use and other conditions for abatement. That's pretty vague. So we'd have to get some idea of what we mean by that. Because it— arguably, it is not designed to maximize in-state use. It's that which is— can be used in-state.

We're not intending to run a line down to Delta Junction or Valdez or out to Tanana or something like that, which I think is understood, but I wonder if that has to be clarified to not open this up to someplace that thinks they should have gotten gas out of this.

And then other conditions of abatement. Well, that's open-ended, right? Um, and I think, you know, with the— I'll turn to Mr. Zullo. Uh, Representative Prox, through the chair, uh, Calvin Zullo, staff to Representative Freer. Uh, other conditions for abatement, those conditions are all spelled out in Section 16 of the bill.

Oh, as spelled out in that section, that's what you meant? Okay, very good. And then follow-up. Follow-up. The—.

As far as just even maximum value of petroleum, that is the Oil and Gas Conservation Commission, and I believe they have already weighed in on this, that the proposed offtake of gas from the North Slope fields is approved by the Oil and Gas Conservation Commission. Commission. Was that— just so we're understanding that that's a ready-made, or were we talking about something else? Or do we want to acknowledge that in the contract? I think that we are talking about something else, Representative Prox, and I think the intent was— one of the concerns that we heard is that the cost of the spur would be passed on to the ratepayers in Fairbanks, and that was what we were trying to protect the Fairbanks ratepayers in this language.

Yeah, that was the intent, was to— I think that was the intent, was to protect the ratepayers in Fairbanks.

Well, the reason I'm kind of picking it apart intentionally, because everything is open up for lawsuits, and we want to try and anticipate those and not make something that lets some community or somebody else think that it meant something else than the file a lawsuit. Thank you, Representative Prox. Representative Sadler. Thank you. Turning to Section 22, I guess page 2 of the, of the sectional analysis, I understand the desire to have some adjustment to the AVT rate, and I see that this CS would have that rate adjusted by the consumer protection for the anchorage.

My question is this: I know that there are different inflation rates. There's core inflation, there's different things. And I would want to make sure if we do include that kind of escalation that I heard from the Department of Revenue, at least that that was an appropriate index because it may reflect the price of, you know, loaf of bread, jug of wine kind of thing, as opposed to the cost that actually affect the price of natural gas. So there may be a more precisely targeted inflation rate. So I just want to lay that out there.

Thank you, Representative Stadler. And I believe you had some amendments that would address that in the previous version, and that's a discussion that we're—. You're going to ask me how I justify mine. It was—. We'll find out.

Representative Colon. Yeah, I had a—. Thank you, Chair. Through the Chair, I had a question on the ABT and equity options slide continued.

So it's 50% of the volumetric tax revenue is distributed proportionally to municipalities and the state based on the percentage of pipeline within the tax jurisdiction. And then 50% goes to— according to population municipalities. I guess— so there was a little bit of controversy in the Senate version of the bill that the state would be appropriating the money to municipalities. Clarification on— maybe just clarify what those two bullets mean, and do we have to appropriate the money to the municipality? Through the Chair, Representative Calom, Calvin Zuloft, Staff to Representative Freer.

Yes, the language in the bill says subject to appropriation by the legislature. This is a funding formula. The legislature would still have to make these appropriations every year. Okay, so a follow-up. Follow-up.

So the state receives all the money, and then the state appropriates municipalities according to this formula? Yes. The alternative volumetric tax would be collected by the Department of Revenue and distributed to municipalities. Okay.

Representative Sadler. And I think to go one step further, the issue of whether the state is obligated to do things, we actually can claim if there's a subject to appropriations, we can just say, well, we didn't have the money, we didn't appropriate it, you're not getting it. That would, if I were a municipality, municipality, I'd have some pause.

Price goes up, price goes down. Thank you, Representative Sadler. Representative Prox. Yes, thank you. The—.

Says 50% AVT goes to proportionally to municipalities and state based on the percentage of pipeline within property tax.

That's— okay, so that's not exactly what I was thinking of. But at any rate, then the other 50% goes to according to population. So it looks the way it was written, it could be interpreted that the municipalities that have pipeline running through their jurisdiction get two bites at the apple. Was that the intent or was that separate? Representative Prox, through the chair Calvin Zulo, Staff Director Representative Freer.

Yes, it is possible that municipalities would get payments from both of these portions. The miles of pipe percentage is going to benefit mostly small communities. With lots of miles. So for example, the North Slope Borough. The other half is designed to share the revenue with bigger communities like Fairbanks or Anchorage that have little or no miles of pipeline but would still have impacts.

Okay. And follow-up? Follow-up?

The specific word says pipeline, and are the conditioning facilities and the liquefaction facilities Separate? Through the chair, Representative Prox, yes, they would be taxed separately under this bill. Okay.

Representative Klobuchar. Yeah, so through the chair, was— did any of the mayors express any concern about the appropriation language? Is there any— was there any options to just pay the municipalities directly? Or was it— I guess, was there any conversation about that? Are they concerned about the appropriation part?

Um, Representative Colom, through the chair, I think there would be a concern about dedication of funds if we were to make it state law that without appropriation money went directly to the boroughs. If we had boroughs collect AVT themselves, that would be a different question, but that might also be an unfunded mandate that they're not interested in. How so? To have the capacity to collect AVT. I—.

Oh, when we're talking about the— I mean, the 5 boroughs that we're meeting, we've got— we've got 4 of them are currently receiving property tax, 1 does not at all. And their capacity to be able to do that, they have the most that is set to gain. But I think there's one of the boroughs that we heard from has 12 employees. So I think it's just capacity of the boroughs, and maybe, maybe they get— they seek assistance from AML, or maybe, or it goes in the route that we have it with the Department of Revenue. Yeah, so there's no, like, legal issue with the boroughs being paid directly.

It's just some of them don't really have the capacity of the infrastructure to actually accept it or figure it out.

Through the chair, Representative Kholm, if I understand your question, if the Department of Revenue collects the money and it's state revenue, there would be a concern about directly appropriating that money without the legislature's involvement, just constitutionally. If we change this structure so that municipalities are responsible for collecting the AVT, then, then no, probably not. Yeah, I think that's That's what I was heading toward, like eliminate the middleman, eliminate the worry about what Rep. Sadler said, where the legislature just says we're not appropriating that, because that happens, to see if there was another way. I guess when the mayors are here, I'd like to hear what they say. Like, I don't really care either way, but I think there is— it can be risky having the state appropriate it.

So I'd I think they would be concerned about that, maybe. I definitely hear concern, Representative Klobuchar. Representative Sadler. So what I think I hear you saying is that the municipalities would love it if the money flowed directly through the state right to them, but that circumvents our appropriation authority. So basically you're saying they have to give it to the state, it has to be subject to appropriations, we can spend it, and they're willing to accept that risk, which is always a little bit present.

Is that fair? Through the chair, Representative Sadler, just to state that the municipalities have not expressed that they would love anything, that that's just how we have structured this section of the bill. Clearly there's things they would love that we're seeing here. Thank you. Different question, actually, right?

Yeah, thank you, Mr. Zullo. Just want to— this is again our first bite at the apple, and we're fleshing it out. I appreciate the conversation. Conversation. Representative Sadler.

Thank you, Madam Chair. Just for reference, the AVT and equity options continued. Third bullet point. Current language has revenue distributed to communities on a per capita basis. I would like to know what the definition is intended to be for per capita because some parts of our state have a fair amount of temporary workers who come and work on shift.

So I don't know if that per capita would mean permanent, you know, long-term permanent residents or part-time residents or people that just happen to work there. So I would be looking for a more clear definition of that, which could be very impactful when it comes to sharing the money. So I would be looking for that clarification. Representative Sadler, through the Chair, Calvin Zuloft, Staff to Representative Freer. The formula there is modeled on the Community Assistance Fund formula, which— so the second half of that formula is distributed by population.

And we are using that language that we have copied. And Emily Nauman is on the line, too, and can speak about how that works. So I respect that. I have no doubt that that is true. But does that mean permanent or part-time?

What is the community assistance program? If I may, Representative Sadler, and I am not— I can't speak to municipal charter off the top of my head. Believe that when we're talking about folks, particularly in the North Slope, and that are working in the industry in Prudhoe Bay, sometimes those are— they're considered part-time residents and they're able to be calculated. I don't know what the formula is off the top of my head. Madam Chair, I would, I would like to direct this question to Emily Nauman.

Okay, Miss, Miss Nauman, did you hear the question? Glad to focus it.

She's not online. Oh, she is no longer on the line.

Okay, uh, uh, we will work with legal to get an answer to that specific question, Representative Sadler. Thank you. Representative Prox. Yes, thank you.

Well, currently the— based on percentage— well, I guess it wouldn't matter, but the— yeah, there is some— there are some boroughs for the first part of this that you could argue are getting a windfall based on their population. And we'd have to look into the future somewhat for— the initial pipeline doesn't require compressor stations, and the— eventually, I believe there are going to be 3 or 4 compressor stations, and that is going to affect the communities near those compressor stations, as opposed to— we'll use the Denali Borough just as an example— that there is very little, all else being equal, very little ongoing impact to the Denali Borough But they have got a pretty fair distance of pipeline within their borough relative to the Fairbanks North Star Borough and, well, certainly Anchorage and even Kenai and maybe even the Matsu Borough. I'm not sure, but there's a it doesn't really reflect impact on people. It—. So some are going to get a windfall, some will not.

I guess, is that something that has been thought about? It seems to me that just directing that, it's a benefit.

To the whole population of Alaska. Some of them happen to be on near the rail belt, whereas other communities are not going to get ancillary benefits from the pipeline itself.

I guess I'll think about it. Sorry, I'm critical, but I don't know why. Thank you, Representative Prox. Maybe it's just that it wasn't my idea. I'll bet that's it.

Well, let's work offline. Yeah, I'm going to think about that. Representative Kollom? Yeah, I know we want to get to the sectional. I was just wondering if you can tell me, so the original bill didn't start with legislative findings.

I'm not really sure what findings do. I assume it's just like clarifying the intent of the bill, or do you have any background on where that came from? Representative Kollom? Through the chair, Calvin Zulo staff to Representative Freer. The legislative intent language is just to establish that the special tax treatment is established to be in the interest of developing a project.

So, so just so that people in the future don't expect that they can have property taxes waived for something that isn't in such vital interest to the state. Is there a follow-up? Follow-up? Is there a difference between legislative intent and a legislative legislative finding? Is the same?

Through the chair, no. It's the same. All right, thank you. Thank you, Chair. Thank you.

And, uh, we— it looks like we've got Emily back on the line. Miss Nauman is back on the line, and Representative Mears pulled out the statute book and she has a— she has an answer to Representative Sadler's previous question. So, Representative Mears. Uh, thank you, through the chair. So, uh, 2960 D. C, for purposes of this section, the population of a municipality, reserve, or community shall be determined by using the numbers of permanent fund dividend recipients or other population data that the department determines is reliable.

For purposes of determining the population of a borough, the population of each city in the borough shall be deducted from the total borough population. So, it sounds like yes, having that threshold of a PFD D is much more folks that are permanently living there rather than just kind of transiting through. But a more thorough answer from that would probably come from DCCED. Actually, if we— Madam Chair? Representative Sather?

If we have gone to the trouble of getting Ms. Noma on the line, maybe I could ask her that question. So my question specifically is whether the per cap— the distribution of a portion of the ABT funds to communities on a per capita basis. How is the per capita defined? Is that the people who— I think we just heard— receive a permanent fund dividend and who include that community as their permanent residence? Is that what we're talking about?

Miss Nauman, Miss Nauman, are you on the line? Yes, can you hear me? Yes, we can hear you. Can you hear me now? Yes.

Okay, great. I apologize for before. I went to pick up my phone and accidentally hung it up. Instead. So it's been that kind of Monday.

Through the chair to Representative Sadler, and for the record, this is Emily Nauman, Legislative Legal Services. For purposes of the bill in 4259.040(b)(2), per capita is not specifically defined. I will say that the statute that Representative Mears just quoted from is the same statute that this language is pulled from. The Department of Revenue will decide, since they are the agency that will be executing this statute, how per capita is defined. And it is probable that they would look towards the definition in 2960.860, just because that's the language that this was modeled after.

But it does not guarantee by the bill. The department could probably— or the department could interpret per capita to be be anything reasonable in their execution of this law. And I know that matters to your home borough, Fregatney. Yeah. If I could continue too, I would say that, you know, this is an amount determined by the legislature because the legislature is going to be the one that appropriates it.

So I guess even if the department calculates this number for the legislature, the legislature does have the opportunity to recalculate it based on what what they think per capita basis might be. Okay.

Thank you. Thank you so much, Ms. Nauman, for being on the line.

Are there further questions from the committee? Actually, actually, are we going through the section? Yeah, let's, let's take a brief at ease.

We are back on record in House Resources. Uh, we are going to go through the sectional analysis before we move on adopting the this version of the CS. I also want to let the record reflect, and I apologize for not acknowledging earlier, that Representative Eichide is also here in House Resources with us. Thank you for being here. So I'll turn it back over to you, Calvin, or Mr. Zulo.

Uh, thank you, Madam Chair. Uh, for the record, Calvin Zulo, staff to Representative Freer. Uh, so Section 1, that's the intent language that we've discussed. Section 2 and Section 3 exempt the revenue from— under this bill, everything except for AS2945 revenue that Kenai and the North Slope Borough might get from local contribution calculations for school funding. Section 4 modifies the municipal property taxes to exclude natural gas property that is taxed taxed under the volumetric tax.

Section 5, sunset Section 4 effective July 1st, 2046. There is a 20-year sunset in this bill.

Section 6 creates a new statute allowing the North Slope Borough and the Kenai Peninsula Borough to either receive a share of the state-collected volumetric tax or take an equity interest in the project in lieu of property taxes on the gas treatment plant or the LNG facility. Facility, respectively. Excuse me. Section 7 requires the Regulatory Commission of Alaska to certify a natural gas project pursuant to the eligibility requirements established elsewhere in the Act. Section 8 amends AS 4356, that's oil and gas property taxes, to exempt property subject to either the temporary abatement or the alternative volumetric tax established by this Act.

Section 9 further amends AS 4356 property tax statutes to exempt only property subject to the volumetric tax once the abatement— once the ramp-up period ends.

Section 10 is another repealer after the sunset. It restores the oil and gas property tax to its original form with no exceptions for natural gas project property. Section 11 amends the municipal property tax statute. That's 29-45, excuse me, to allow municipalities to exempt natural gas property tax— property from taxation when they have made the volumetric tax election under Section 6 of the bill. Section 12 is another sunset.

Section 13 broadens the existing exemption from AS 29-45 property taxes to cover property subject to either the new temporary abatement or the volumetric tax, replacing the prior language that limited the exemption to AGDC pipeline property. Property.

Section 14 further narrows the exemption to AS 2945 property taxes to cover only property subject to the volumetric tax, uh, once the abatement period ends.

Uh, Section 15 is another sunset.

Uh, Section 16, this is the meat of the bill. This, uh, creates the new statutory framework It creates several— it's a whole new chapter of Alaska Statutes 43. This creates the ramp-up period, the alternative volumetric tax on gas throughput after the ramp-up period. It has the eligibility requirements, including that for the Fairbanks Spur Line being operational 2 years after first gas. It has the allocation of tax revenues to municipalities in the state.

Some administrative appeals procedure, and a January 1, 2030 termination if commercial operations have not begun. Some rulemaking authority and definitions. Section 17 amends the volumetric tax provision to remove the limitation tying its start date to the end of the ramp-up period, effective once the ramp-up period ends.

Section 18 and amends the 2030 termination clause to refer only to the volumetric tax, not the abatement, after the abatement ends. And there's a new definition of commencement of commercial operations specific to that section. Section 19 repeals the municipal election option for the abatement and the temporary abatement statute itself once the ramp-up period ends. Section 20 sunsets Sections 2, 3, 6, 7, 8, 16, effective July 1, 2046. Section 21 requires the Alaska Gas Line Development Corporation to deliver a report to the legislature before FID on Phase 2 of the Alaska LNG Project to evaluate how this statute has been implemented and to suggest any further legal changes.

Section 22 specifies that the inflation adjustment to the volumetric tax rate begins on January 1 after the first full the full year in which the volumetric tax rates apply. That's the CPI adjustment. Section 23 makes most of the act's provisions contingent on the Commissioner of Revenue determining that the project property owner has committed to community benefit agreements with nearby communities, the creation of an impact fund, a project labor agreement, and beginning spurline construction within 2 years of completing 750 miles of pipe. Section 24 makes Section 24 makes the post-ramp-up sections take effect automatically upon the Commissioner's determination that the ramp-up period has ended. Sections 25 through 26 specify that the conditionally effective sections take effect the day after the Commissioner of Revenue makes the relevant determinations under Sections 23 and 24.

Section 7 sets July 1, 2046 as the effective date for the full repeal. That's the sunset clause. And that's the conclusion of the sectional, Madam Chair. Thank you to my staff, Calvin Zulo, for providing the sectional analysis.

Are there— is there further discussion before we adopt the CS?

Seeing and hearing none, I remove my objection for adopting the committee substitute before us. Are there any further objections?

Seeing none, the draft committee substitute is adopted as our working document. As you draft amendments, please make sure they are drafted to version G of the bill. And again, we set the amendment— we reset the amendment deadline to 4:30 PM on Friday, May 1st. I'm happy to work with committee members, other members in the legislature on any amendments.

If there are no further questions, I think that concludes our— Representative Sadler? If we got another hour—. We do. We have Mr. Richards and I think Matt Kissinger on. I would not mind giving them the opportunity to offer their thoughts on this.

Yes, absolutely. Mr. Kissinger, what would you like to offer your thoughts on this version that we just adopted?

Hello, Chair, uh, Chair Freer and Representative Saddler. Um, I'd probably like to reserve my thoughts on it in total. I would like I would like to just provide one clarifying answer to what I answered earlier to Representative Elam with respect to the financing of the Fairbanks Spur. And I would say, you know, we are working very hard at finding language that would affect a spur line, would get a spur line built. The financing of it, while I said it wouldn't be complicated in comparison to to the full pipeline, it should be noted it has to be a separate financing.

It cannot be rolled together with the mainline financing. It's going to be different investors. The banks need to be secured differently. It's different contracts, etc. There are a number of ways to work the Fairbanks spur to make it work economically, and we don't want to be overly prescriptive.

We want to make sure that we keep all of these options open. With respect to a lot of the other, we feel that this has moved a long way in the right direction. So, we appreciate that. And we do feel like there, I think it was said earlier by Representative Kawoma, there's light at the end of the tunnel.

Thank you, Mr. Kissinger. I'm grateful for your comments.

Representative Prox. I have to get this in. Is the light a freight train coming or is that daylight?

Representative Sadler. Thank you. And I believe I heard Mr. Frank Richards of AGDC is also available, if he could give us his thoughts and not use your speakerphone.

Mr. Richards, are you available?

Oh, he's dropped off. Did that just— uh, Representative Sadler, are— do you have other— oh, looks like we also lost Mr. Kissinger. Did you hear my questions coming? Uh, no, I just think we have the time in the committee to have these gentlemen— they arrange their schedules. I'd appreciate hearing their thoughts.

Wouldn't mind going through section by section with them to see what their thoughts are, but it might be asking a bit much. But we would just like to hear Mr. Richard's thoughts as well.

Yeah, thank you, Representative Sadler. Unfortunately, they both dropped off the line. Representative Kollom. Thank you, Chair. Until they come back on, I guess, could you explain Section 2, how that is relating to local contribution, just for the record, for the public.

What does Section 2 actually mean?

Through the Chair, Representative Kahlom, Calvin Zulo staff to Representative Freer. So the local contribution is calculated based on the value of property tax that a community receives. This clarifies that AVT doesn't count in terms of that calculation. So AVT revenue is not treated as property tax revenue for that purpose. Follow-up.

So do you— I don't know if you know this, but if for some reason they do get property taxes, that would be included in the local contribution? Yes. So for the North Slope Borough and the Kenai Peninsula Borough, it is possible for them to get property tax under this bill. There's no language in here that makes that not apply to local contribution. And one more follow-up.

So the 20 mils that people get for the pipeline, existing pipeline, is that under local control? That's— that's— 20 mils is the rate in 4356. 2945 Allows municipalities to set their own rates. My understanding is that in the Kenai Peninsula Borough, that's a rate of 7 mils, and in the North Slope Borough, that's a rate of 17.99 mils. That's my understanding.

I could be wrong. Yeah, I guess my question was Is that excluded? Are those taxes excluded from the local contribution? Do you know? No.

They're not? They're not. Okay. Yeah, I was just looking for precedent, like what is happening now. Thank you.

We do maybe have Dan Stickel on the line as well from the Department of Revenue. Other folks keep dropping off. Representative Proxer. I have a related thought on the local contribution. That we need to check with the Department of Law and/or the Department of Education to see if that impacts the disparity test for federal impact date.

Could. Don't know. Through the chair, Representative Prox, I would just note that that language exempting the AVT from local contribution calculations was in version A of the bill and was submitted by the administration. Just a note. Right.

But that didn't occur to me until just now that we need to make sure that that is considered by the Department of Education and the Department of Law. Thank you, Representative Prox. We will include—. Just clarification, but, but in the bill, the ABT is exempt from local contribution, correct? Correct.

The only issue that that could happen is if North Slope and KPB opt out for a property tax, then we— that, that isn't necessarily exempt from the local contribution, which might affect the disparity test, correct?

Well, that's where it gets complicated. I believe currently that the value of the Trans-Alaska Pipeline is included in the true and full assessment for purposes of the local contribution to education. So if you take that out, that enables the municipalities to contribute more. And there are some municipalities right now that the federal government thinks, oddly enough, are contributing more than they're allowed to education. They're looking for equity, and that's the, that's the trouble that we're getting into with the disparity disparity test.

Anchorage, as an example, is contributing more than is allowed under the disparity test, and I believe Juneau is in the same boat. That seems really counterintuitive, but it's law, it's not common sense. Through the chair. I think it might be best to defer this conversation until we have law and education before the committee. Yep.

Yeah, that would be great. Representative Sadler, we do have— I just want to let you know, we do— I think Matt and Frank are— or Matt, Mr. Kissinger, Mr. Richards are both back on the line. Great. Well, I will defer this question and ask my original question to Mr. Richards, if I may. Mr. Richards, uh, I assume you've had a chance to look over this new CS version of this bill as the director of AGDC.

What are your thoughts, sir?

Madam Chair, Representative Sadler, thank you. For the record, my name is Frank Richards, president of the Alaska Gas Line Development Corporation. And again, yes, we have had the opportunity to look at version G that the committee's been talking about today. I appreciate the movement that the committee substitute has made. I think there's still work to be done to make this in line with what the original intent of the bill was, which was really to shift away from the existing oil and gas property tax leverage and not have it as an option or to have a volumetric— alternative volumetric tax, but to actually have that as the new law to be able to allow for this project to be to then have a tax regime that will make it more in line with what is currently— our competitors have in their jurisdictions.

So I appreciate the willingness of the committee to work on this bill to make it— move it forward, to make it better for the citizens of Alaska, but also to make it so that the project is truly going to be an economically viable project to execute. Follow-up? Good answer, but I'm going to make it a little more pointed. So I think I hear you saying that our competitors in the world market pretty much have one tax system, or the alternatives to the regular local property taxes. This version, as I understand it, would give municipalities a lot of flexibility and a lot of options.

Does that make the task of AGDC of trying to bring this to an FID more challenging or less challenging to do?

Through the chair, Representative Stadler, I would say that again, the rates that have been incorporated into Virgin G are higher than the original rates that were in the governor's submitted bill. So that will create more of a challenge in terms of the economics of the project, as more taxes would be placed onto the project. Project. But in regards to your question around the other jurisdictions where there are LNG— competing LNG projects being developed, the structures in those jurisdictions vary quite significantly. And I think that the committee heard from Gaston Klein around the different alternatives that exist in some of those jurisdictions as alternatives to the tax rates that they have in including tax holidays or alternative tax structures that they have available to them.

So what we had presented through the governor's bill was this alternative volumetric tax that was in line with the conversations that we were having with the boroughs and the borough mayors about what was the best way to be able to proceed forward. And the alternative volumetric tax was supported by those communities in our conversations. Negotiations. And does the change— um, so thank you, Mr. Richards. I understand that this is a— this, this new version has some changes from that original version.

Do those changes, uh, change AGDC's view of this?

Through the chair, Representative Sadler, I would like to reserve my comments on this until we see the next version of the bill and what is actually incorporated in those amendments. I think that there are some aspects of these changes in version G that are positive, but some are challenging. Yeah. Well, if I could kind of pre-place a couple questions, or a question.

The question of allowing municipalities the option to invest and place them essentially on the same level as the state, although there are structure to some differences. That is a fairly substantial change in the financing structure, and I will be very curious to learn of your thoughts on how that affects the viability of the project there. So that will be a question that will be coming.

And I have got a different question. Thank you, Representative Sadler. I look forward to answering that question. I look forward to the answer. A question, I guess, through Mr. Zulu.

In Section 6, I want to make sure I understand the language. In Section 6 of this version. Does this allow the North Slope Borough to invest only in the gas treatment plant and the Kenai Peninsula Borough to invest only in the LNG facility, or is there a mix and match? Could the Kenai Peninsula Borough invest in the gas treatment plant? Can someone provide clarity to me?

Uh, Representative Sadler, through the chair, uh, this is Calvin Zulo. I do not believe that they'll be financed separately. I believe that Phase 1 is financed altogether, which includes the gas treatment plant, the pipeline, and the LNG facility. I don't understand your answer, sir. I'm sorry.

Madam Chair, if I may, this is Frank Richards. Go ahead, Mr. Richards. If I could clarify that again, there will be multiple equity raises for the Alaska LNG project, the first of which we hope will be the Phase 1 pipeline equity raise. And so that will be solely for the equity necessary for constructing the first 739 miles of the pipeline. Then there'll be an equity raise for the second portion of the pipeline to complete it all the way to McFiske.

And that may be doing— being done concurrently while there are equity raises for the gas treatment plant, as well as an equity raise for the liquefaction facility. In McKeeskey. So the— what AGDC has reserved through our preemptive rights with Glenfarm is the opportunity— we've allowed for the opportunity or option for the state or subsidiaries of the state to be able to invest in up to 25% of those various equity raises. But I don't see that there's any provisions that would exclude burrows from making a selection to invest in any or all of the subprojects. Okay.

Follow-up? Follow-up. I think— so that it's clear that the Kenai Peninsula Borough is not limited to investing only in the LNG facility. They can invest in whatever they have the inclination and ability to do so. Okay.

And actually, here's a point I want to probe too. You specified the first 739 miles of pipeline. And for the first equity raise and then identified a second equity raise which you said, I think, the last miles of the pipeline plus the gas treatment. Help me understand the differentiation between the first 739 miles of pipeline and the remainder. Please list that out for me.

Through the Chair, Representative Chambliss, the first 739 miles will run from Prudhoe Bay, considered the location of the gas treatment plant, to an intersection and closest intersection to Anistar's existing Beluga pipeline. And the reason that it was shortened 739 miles was to allow for less construction cost to be able to deliver gas into the existing South Central natural gas distribution system. The second phase of the project would extend the pipeline from that Mapo 739 to the edge of Cook Inlet, and then there's 38 miles beneath Cook Inlet, and then the remaining 11 or 12 miles from the tidewater to the Nikiski facility. And that's—. You need a total of 807 miles of the pipeline.

Very good. Okay, thank you. Representative Elam. Thank you. In Section 6, I see that it creates the, the new statute, and I'm just looking at the sectional analysis summary because I didn't want to get too nuanced.

But I'm— I guess my question is, is that it allows the North Slope and Kenai Peninsula boroughs to either receive a share of the state-collected tax or equity. And so I guess my question is As far as the, the municipalities being able to invest in the project, is it just in like in-kind services or through deferred revenues from the investment, or does it require actual capital cash investment?

Uh, through the chair, Representative Elam, as this section is designed, the intent is that they would receive equity in lieu of the foregone— like, they would basically be trading their foregone property tax revenue under 2945 for equity as if that were a cash payment. Okay. Does that— may I follow up? Follow up. Does that complicate financing, um, or create risk in that area, uh, when we start talking about financing the project and capitalization of building it?

Uh, thank you for your question. Representative Elam, I'll defer that to Mr. Kissinger, Mr. Richards. Yes, hello, Representative Elam. Through the chair, this is Matt Kissinger. The, um, any kind of carried interest, that's what we would consider that, is a carried interest where someone earns equity, uh, yet they're not paying in.

That reduces the equity we then have available to go out to the market and raise the capital for the project. So it does complicate it and it complicates it quite a bit. And then the form that that equity takes is a further complication to it. If there's a right to back into that equity, it means you have to go out, line up the actual investors, but then caution them that they're going to be pushed out potentially from some of their investment at a later date. You have to work in some kind of an interest during that period, and these investors are needing to put money to work into a project that is not gonna be benefiting them in that case.

So it does complicate the financing quite a bit. Okay, thank you. Can I do a follow-up to that? Representative Klum. Mr. Kissinger, so what if a borough wanted to pay cash for it?

That it wasn't a trade, but they actually put money as equity. Is that an issue?

Representative Colon, through the Chair, no. And in fact, that's really where the 25% reservation that AGDC has can quite easily come into play. And so the boroughs in this case would be able to, in a way, co-invest with AGDC. In that 25%. Yeah.

Okay. The pathway for that's already written. All right. Thank you. Same question, different question.

Yes. And thank you to that point, Representative Sattler. I want to make sure, so we talked about the 5% to 25% state equity option. Would, as it's written right now, I don't know if you can tell or not, but would the borough's equity investment be taken from that 5% or up to 25% of the state, or would it be in addition to the state's potential equity investment?

Representative Sadler, through the Chair, it would form part of the 25%. It would be within the state's share, okay. Correct. Correct. Representative Prox.

Yes, thank you. Then in that case, if they were paying cash in to get equity interest, I can see where that's kind of neutral for the project. District. But another detail we might want to check with legal or somebody to see if owning a piece of a pipeline is within the power of a municipal government. Mm-hmm.

Mm-hmm. Good question. Yeah, we are happy to—. Representative Proctor, Chair Freer, if I may, I can provide probably some insight into that. Mr. Kissinger?

[FOREIGN LANGUAGE] So through the chair, they wouldn't necessarily have to invest directly into the project company. AGDC could be the investment vehicle into the project company, and through a special purpose subsidiary of AGDC, we could have the beneficial ownership held by the municipalities. So the revenues that AGDC would earn would go into that subsidiary and be remitted back to the municipalities, but that wouldn't require the direct investment or the direct governor— governance of these subsidiaries by the municipalities.

Kind of to follow up on that question, Mr. Kissinger, I have a question. So if this state is, you know, 6 months after we reach FID, we're gonna have to make a really important decision whether to invest either 5%, 25%.

Is there a way or a mechanism, maybe by statute, that we could prioritize? I mean, if that, if that is something that we proceed with, it would be the state having the option, and then municipalities prior to anybody else having the ability to, I guess, yeah. Representative Fryer, through the chair, um, there is no mechanism that I know of that's already established that would do that, but I don't see how that would be a problem. Representative Sadler. That was Mayor Freer, just joined us.

Have you been listening in, Greer? No, no one else has joined us. That was Mr. Kissinger and it's Freer. Apologies. I just thought I heard—.

Oh no. Okay, hard time here. So, Mr. Kissinger, just to clarify, so you're saying that the state would have priority in investment and the municipalities as well?

What I'm saying is that the state, uh, the AGDC has the preemptive right is what it's called. It's preemptive right that says that, um, every time there's a capital raise, when other investors come into the project, AGDC can elect to preempt 25% of their respective investments. So for example, let's say that a teacher's fund or a large investment fund came into the project and invested and they wanted 20% of the total project equity, we would be able to back into 5% or 25% of that particular transaction. And each time that there is capital raised, we have that right. We would then be able to extend that right through this subsidiary of AGDC.

We'd be able to extend the benefits of that right to the state, to municipalities, to AGDC sister corporations, et cetera. Great. Thank you.

Representative Sadler. And not to get too deep into the financing, I was going to ask where, where the state stands in the investment stack. I think it sounds like you're saying they just hold out the possibility, the potential, that between 5 and 25% of the investment might have to go to the state or municipalities. Does that come with any cost in trying to attract or induce other investors? In other words, are they going to be less likely to invest or offer a lower amount amount of investment if they know they have to take a 25% cut from what they would like to invest?

This is like big project financing, but I'm just thinking if we were able to provide some certainty that we would go no more than 10%, would that give us a couple more basis points advantage with the other investors?

Representative Sadler, through the Chair, it certainly does add a complication. It is a mechanism That is used internationally, at least in the upstream side of the oil and gas industry where state oil and gas companies are able to back into investments in the upstream at the point of financial decision, thus avoiding exploration risk. In this case, we were avoiding all the remaining development risk. So Glenfarmer carrying us through all the remaining development risk moment risk, and then we have this back-in right. Certainly, if you're an investor coming into the project, it is more complicated to come in when you know that you can be preempted on 25% of it than if you didn't have that.

And the more certainty that we can provide in the state's decision to preempt, the sooner that we can do it, the value that we intend to preempt up to, will provide more certainty guarantee to the financing of the project. Okay. And that just— if I could— that kind of just goes to show, you know, we operate in our legislative framework and so forth and our own timetables, but financing works with its own obligations and parameters and protocols, and decisions we make may have unintended consequences in the financing process. Thanks. Thank you, Representative Sadler.

Representative Ehlund. Thank you. I guess while we have the folks here on the phone, I guess the question I have is, is this CS process, what we're doing, this is helping you guys get to a step of being able to come to FID in a reasonable fashion, or, you know, we're helping make progress that direction, correct?

Yes, absolutely. Okay, thank you.

Is there any further discussion? Representative Prox— oh, uh, we'll go to Representative Prox and then Representative Mears. Okay, through the chair, um, this bill is— it's— this committee substitute as currently written is conditional upon the project reaching agreement, project labor agreement, and agreements with municipalities.

Is there a way to get those agreements ahead of time? It just, it kind of seems like we should know that before those agreements are made because that could materially affect the profitability of the project. Do you agree, or can— is it okay to wait until those other agreements are made in place?

Mr. Kissinger.

Representative Trax, through the chair, I think the longer that we wait on any of this, the more uncertainty we are pushing into the system. These are being worked in parallel. The project labor agreements are being worked right now. You know, certainly we do hope to have them done at the earliest to take that— those complications away and provide the further certainty. But to wait would put us into working in series rather than working in parallel and would unnecessarily delay it.

Mr. Zula. Just to clarify through the chair, Representative Frocks, Calvin Zula, staff to Representative Freer. Again, the requirement in the bill is that the project developer makes a commitment to the Department of Revenue. We don't in this language require that CBAs are finalized before this conditional effect takes effect.

Yes, I understand that. Through the Chair, I'm sorry. I understand that part of it, but it affects the negotiation strategy if there's— if this is conditional on agreements or intent to do something that have not yet been made that puts the next parties in line in a better position to get more. It would seem to me it puts the project at a negotiating disadvantage. It was just a clarification.

I'm sorry for— I didn't mean to.

Representative Proxson, it's our understanding that those Conversations are ongoing with, of course, with the municipalities and the Building Trades Association. So hopefully those are resolved before this gets passed. But, but we thought it was important to include that conditional language in there. If there was a PLA tomorrow, I would be stoked. Yes.

Representative Sadler. Thank you. And kind of to that point, Madam Chair, time is of the essence. We are looking at the calendar. We have about a month or a little bit less until adjournment.

So I'd like to offer the gentle opportunity for Mr. Kissinger, Mr. Richards to tell us how valuable is it for the legislature to make decisions on the property tax issues in the time available to us now.

Represent Sadler through the chair, I'm I would believe that it is critical. This is something that we highlighted. It has been highlighted for more than a decade, but certainly we highlighted this when AGDC went through our own internal economic stage gate back in 2020, where we found that the project is economic, but it's not robust. This is not a, a, a great project, which is why it has not been done and why it's so difficult. Any delay is just adding uncertainty during a time when there's a considerable amount of momentum, and it could be wasting that momentum.

I'd go back to the presentations that have been made by the Department of Revenue and then followed by Gaffney Klein, where they created these heat maps that showed across across the top the different pricing scenarios and across the side the different cost overrun or capital scenarios. And in that, if you tied it back as Gaffney Klein did to where the market is, you saw that under the current statute there's a very small envelope where the project remains competitive. With the statute that we had originally proposed, that window was expanded, but not enormously. It was expanded to the area where we believe we can attract the investors. We're doing all this right on the margin.

So when we're asked a question, what happens if we increase the ABT to 20 cents, for example, that's $200 million a year out of the project. Year after year after year. And that has, of course, the impact of narrowing that window that we talked about. And so while we do understand the needs of the communities and we did the benchmarking with, uh, GAT Strategies out of London, looking at where this project sits with respect to property tax and total take in comparison to other jurisdictions and found that we were a whole magnitude, a whole order of magnitude higher than those jurisdictions. That's where we derived that original number, which was first 2 mils and then later the 6 cents per MMBTU, alternative volumetric tax.

Any increased taxation, any further taxation stresses this project. And so, we are trying to find the exact right balance between the project moving forward and those needs of the community. [FOREIGN LANGUAGE] This is Frank Richards for the record, President of BGDC. And to Representative Fowler's question, time is of the essence. And I would again suggest that the work that the committee is doing is extremely important.

The timeline is very, very short. We stand by and ready to help at any time, day or night, to be able to work through language changes to make this the best bill for the state of Alaska. But again, it is critical to be able to help this move forward, ideally to be able to allow for gas to flow from the North Slope to meet the needs of Interior and Southcentral Alaska, because we are facing an energy crisis. And one of the best ways to make that— to achieve achieve a reasonable source is to have a tax structure that is achievable. This is not just described, so please, um, Godspeed.

Absolutely. Thank you, Mr. Richards. I was going to make the same comment that Representative Saller did. I think we're today, we're day 98, and so our timeline is going down. Representative Mears has a Commissioner Tschuck.

Thank you. Through the Chair to the gentleman from AGDC, this is relevant to the CS, but it's a little bit more directly on the project. As we have been talking about Phase 1 and Phase 2, Phase 1 as it was imagined 2 years ago was pipeline only, but as things are progressing, the likelihood of the source of gas for that was Great Bear Pantheon, and that is— seems less and less likely over time. So if indeed we're unable to get gas from Great Bear Pantheon, which does not require a gas treatment plant, does not require extra pipeline, where are we? Do we need to— are we looking at having gas treatment for Phase 1?

Are we looking at additional pipeline pipeline? Are we looking at an additional capital investment to Phase 1 than we were talking about 2 years ago?

Representative Mears, through the chair, the Pantheon opportunity— and again, we always are hopeful that that opportunity continues to mature and evolve— it has always been an immature opportunity. We always recognized that. And so the design for for Phase 1 always actually contemplated that in the absence of a tremendous success from Great Bear Pantheon, we would still be drawing substantial amount of gas from the other reservoirs, if not all of it, in, in the case that they do not move forward. And so the design for Phase 1 has always included some amount of gas treatment. There's a big difference between the gas treatment needed for Phase 1 and the gas treatment needed for Phase 2 because of the downstream requirements.

For Phase 1, we would be going to what is traditionally known as utility gas or pipeline gas. In the lower 48, uh, that is generally around 2% CO2. And so we would, we would be removing, in the case of Prudhoe Bay, you're around 13 around 13%. In the case of Point Thompson, I believe it's around 4%. And there's some other fields that we can also draw gas from that are closer to 5%.

We'd be needing to go from those percentages down to 2%. The real cost in the LNG gas treatment requirement is that you have to get down to 50 parts per million, because when you take the methane down to Nikiski and liquefy it, you're liquefying it a temperature of -263°F, and at that temperature, the CO2 would be turning into ice. And so it's not technically feasible to have CO2 in your production stream. And so it has always been included, but it does not make the— it doesn't have a magnitude of impact on the total cost that it has in— in Phase 2. The EPC that has designed and taken the class— the Class 4 cost estimate down to a Class 2 cost estimate on the mainline pipeline has included gas treatment in their design for that Phase 1.

And so we do already have a fee level design on the gas treatment needed for Phase 1. Follow-up, follow-up. Through the Chair to Mr. Kissinger. So this is the first I think I have heard this discussed, that we are looking at gas treatment, but on a very different scale. And I appreciate that clarification that you are looking at it, that it is not as much as a Phase 2 gas treatment.

If I am recalling, on the order of scale of about $10 billion, if I am recalling, $10 billion with a B. So what What would a Phase 1 gas treatment for utility-grade gas from Prudhoe Bay look like? A little bit more technical details and scale of that would be appreciated. Representative Mears, through the chair, I think we'd be looking at substantially the same technology, which is in the case of the— the LNG project that's using amine. It's an amine system to remove the CO2.

And what you're able to do is you're able to build a smaller train for that Phase 1 that could still treat even to the levels that amine does, which is, you know, substantially all of the CO2 could be removed. But you wouldn't have to treat all the stream. So you'd be creating a blended stream on the outlet that's closer to 2%.

But substantially, it's the same system, just scaled down dramatically to the point where it's potentially truckable even. Follow-up? Follow-up? Through the chair to Mr. Kissinger, so we only have a— you just gave us a vague idea that it doesn't substantially affect the cost estimate for Phase 1. Can you add some numbers to that?

Representative Mears to the chair, unfortunately I'm unable to provide the numbers to that, but I can say, you know, it's dramatically, dramatically different than in Phase 1 or Phase 2.

Representative Souther. Thank you. Just for discussion purposes, I can see what they're talking about is having a small train that could operate and then put it into the pipeline and the outtake would be a blended— it would meet whatever parameters, pipeline gas standards. That same small train could be kept operational and supplement a larger 1 or 2 or 3 trains up at the top north. So that's a seemingly an eloquent and elegant solution.

At what cost? I think they've kind of factored it in because that was kind of new to me as well. Representative Mears, to follow up, so as getting back to the bill through the chair, so we're talking about gas treatment plant and we've got definitions in here. So I think something that we need to be aware of as well as, you know, getting some advice on you. So does that smaller envisioned gas treatment plant fit under this definition of an AVT, or are we only talking about the Phase 2 larger gas treatment plant?

Mr. Kissinger, Mr. Kissinger. Apologies, Representative Mears, to the chair. I didn't realize that that question was for, uh, was for me. Um, the way I read the CS is that it would be included in that definition.

Thank you. And through the Chair to the committee, I think we need to be thoughtful about, is the gas treatment plan, as we're looking at the AVT, does that only account for the small volume that is treated and then gets blended back into the larger amounts? So I think that's further committee discussion on, it's not the same volume— is it the same volume as what's going down the pipeline that has kind of been through a treatment plant, or is it only the portion that gets treated? So I think that's a discussion that we'll need to have here.

Thank you, Representative Mears.

Well, I appreciate all the committee's questions and all of your work viewing the CS. Got leaked last week, so you you got extra time to, to review it, um, and all of your thoughtfulness, and look forward to future hearings. Um, that completes the agenda for our House Resources Committee meeting today. Our next House Resources Committee meeting will be on Wednesday, April 29th, when the committee will have Gaffney Klein back before the committee to discuss House Bill 381. Hopefully Mr. Kissinger, Mr. Richards are also able to join us and other folks, Mr. Stickell as well, and, and Emily Nauman, so that we can continue to ask some questions and figure out what the solution is.

So with that, House Resources is adjourned at 2:58 PM.