SRES-260423-0900

Resources Committee meeting to order. Today is Thursday, April 23rd, 2026, and the time is 9:00 AM. Please turn off your cell phones. Committee members today present: Senator Rauscher, Senator Myers, Senator Dunbar, Senator Clayman, Vice Chair Senator Wilkowski, and I am Senator Gisol. We have a quorum to conduct business.

I expect Senator— excuse me— Senator Kawasaki will be along shortly. Thank you, Heather and Susan, for helping us operate today, keeping records and keeping the audio running. Our subject matter today is Senate Bill 280. And we will be hearing from the oil and gas industry representatives today. So leading out is the Alaska Oil and Gas Association.

Mr. Steve Wachowski is the president and CEO, and so I will welcome him to the table. [FOREIGN LANGUAGE] Good morning. So if you would identify yourself for the record and give us your testimony.

Good morning, Chair Giesel and the members of the committee. Thank you for the opportunity to testify today. For the record, my name is Steve Wachowski, President and CEO of the Alaska Oil and Gas Association, AOGA. I'm still new in my role, and this is my first testimony before this body, so I will give a longer than normal introduction this morning. I grew up in Anchorage, living in Vice Chairman Wielekowski's district and graduating from Bartlett High School.

I now live in Chair Giesel's district. My incredible wife and I have 3 young boys, and in addition to my role at AOGA, I also serve in the Alaska National Guard. As I am sure Senator Dunbar can attest, It's not just a part-time job, it's an adventure. AOGA is the professional trade association representing the majority of oil and gas production, exploration, refining, and transportation activities in Alaska. AOGA's members are proud to be one of the bright spots in Alaska's economy.

As highlighted in the recently released McKinley Research Group report, the oil and gas industry supports more than 70,000 jobs and contributed $3.5 billion in state and local revenue in FY25.

We are expected to invest $22 billion from 2025 to 2030 and contract with more than 1,000 Alaska businesses each year. With your permission, Madam Chair, we ask that the report be put in the record. On tax matters, our positions are developed carefully and with member review because these issues are complex and very consequential. First, we support the goal of delivering gas to Alaskans and monetizing North Slope gas resources for the benefit of all Alaskans. A large-scale North Slope gas project is important for Alaska's long-term economic future.

We acknowledge that it is a challenge to fund multi-billion dollar projects in Alaska that will incur a tax burden years before production starts and revenue is generated. However, AOGA cannot give unqualified support to broad property tax relief without acknowledging that municipal buy-in is imperative to the process. It is important to highlight the millions in property taxes paid to local communities by AOGA members. For context, in FY25, the industry paid nearly $720 million in property taxes to the state, $576 million of which was distributed to local communities. This revenue matters to them and is a critical piece of our social license to operate in Alaska.

So we appreciate the committee taking this issue on. That said, this committee substitute, SB 280 version G, has expanded beyond the purpose of resolving a long-standing challenge to gas line project economics posed by current oil and gas property tax structure. That is where our concerns begin. It now includes provisions decoupling oil and gas lease expenditures, taxpayer confidentiality, and prevailing value sections, as well as an income tax on pass-through entities. All of these additions would immediately and retroactively impact current oil and gas operations regardless of any future gas line project.

My testimony will cover multiple sections of the CS from sections 20 through 33 to which AOGA is opposed. I'll start with our review of and opposition to sections 28 through 30. It is unclear what problem in existing law this legislation is intended to address. Particularly before the commencement of a major North Slope gas project.

Currently, oil production on the North Slope results from exploration for and the development of oil, not gas. When an oil well produces fluids, the fluids are a mixture of oil, water, and gas that is sent to a processing facility. At the facility, oil is separated from water and gas. Water is cleaned and reinjected to help with oil production, and the gas is used in operations or reinjected for reservoir pressure. The separated oil is then transported to market.

Senate Bill 138 in 2014 and its implementing regulations recognize that lease expenditures are incurred to produce oil and that to produce oil, the cost of removing water and gas is to prepare the oil for market. Yet Sections 28 through 30 may be read to assume oil production inherently includes— this is—. Oh, I was going to wait until—. Sorry. Okay.

Inherently includes page 24, lines 15 through 19, cost to explore for development or produce gas deposits located in the state of 68 degrees north, end quote, when it does not. Since legislative changes are presumed to be made on purpose And to be meaningful, not cosmetic, this proposed change puts both taxpayers and the Department of Revenue in a precarious position. How is a taxpayer supposed to prove that lease expenditures of oil were for oil production when producing that oil necessitates the removal of gas? Lease expenditures are incurred to explore for, develop, and produce oil. To attempt an allocation of oil cost to gas will be artificial, subjective, and almost certain to create disputes for both taxpayers and DOR.

Mr. Wilkowski, could you pause for just a moment? I see that you have, um, Marie Evans, Vice Chair Tax Committee from AOGA, on. So will we hear from her in terms of how logistically, or, or on a piece of paper This is difficult to do. Yes, ma'am. She's available at the end of my testimony for question and answer.

And if committee members have questions, should we interject them now or wait till you're finished? I defer to your preference, Madam Chair. Well, Madam Chair, I prefer we do it now. The being that the subject is before us and we have the page turned to page 24 of the bill, it might be helpful now. Yeah, I'm only a third of the way through, so let's— we can press and ask questions.

Okay, then people won't forget. Yes, ma'am. Forget what the topic was. Senator Dunbar, you have a question? Yes, thank you, ma'am.

And, you know, typically we sort of go slide by slide, and so it feels a little more—. Understood. Please ask your question. Yes, so, and this is for the drafters of the CS as well. So I think the intent was when we had these discussions with Department of Revenue that the revenue never go negative out to 2032 because of these lease expenditures associated with getting gas, getting out gas that would be sold into the, the project.

And that's distinct from the gas that is used in everyday operations by the North Slope to be reinjected to, to, um, to, for enhanced oil recovery and for other reasons. And so, uh, that was sort of my understanding of what we are doing, but it seems to be that the interpretation that AOGA is pointing to, and perhaps it is the, the plain reading of the text, is that those typical operations are also caught up in this. And so I guess my question would be to— do we have Mr. Stickel online? We do not. Okay, but I will have my staff staff attempt to get him online, as well as Emily Nauman.

Very good. Yeah, I'd like to ask sort of what the interpretation is for the people that drafted, or from the state's perspective, of these sections. And then I'll say that if we're building a legislative record here, I'd like to put on the record that my intent with the CS— and, and I might have to offer an amendment to make it the case is that typical gas extraction and reinjection is not caught up in these provisions, but rather we're talking about the larger scale investments that drive our revenue into the negative on Mr. Stickel's slide until 2032, things like investment in Point Thompson, um, and things like that. And so, um, I, I guess my question for you, um, uh, Mr. Wachowski, or for your attorney is, do you think it is possible to interpret these sections in the way that I want them to be interpreted, or do you think they need to be amended? And if they are, could you suggest how they could be amended such that typical operations on the Slope are not impacted?

Through the Chair, I'll defer to Marie Evans, our Vice Committee Task—. Sure. Ms. Evans, can you hear us?

She probably has to be unmuted and that takes a moment or two. Yes. There we go. Great. Hello?

Hello, Ms. Evans, can you hear us? I can. Great. We can hear you as well. If you would introduce yourself for the record, have you— and if you've heard the question and the discussion, if you could respond.

We can also repeat it if you need. Okay, my name is Marie Evans and I am the vice chair of the tax committee for the Alaska Oil and Gas Association.

Very good. Did you hear the question or would you like it repeated?

I think we should probably repeat the question for me. I was listening, but there it was long. Senator Dunbar, Would you mind repeating the issue that you're questioning? Sure. For sections 28 through 30, is it possible to interpret them as only applying to oil and gas related to the project as opposed to ordinary operations on the slope?

And if it's not, what is your suggested amendment to make that the case?

Senator Dunbar, through the chair, It is possible to interpret it that way, that it would only apply to a gas project. The difficulty with statutory ambiguity is that it's going to rely on the Department of Revenue's regulations to interpret what the committee meant for the entire legislative body. So, in putting together the comments that Mr. Workowski has conveyed this morning, when we see a theme of statutory ambiguity and if more than one person can read it differently, we feel we should bring it to the committee's attention. So, being a lawyer, I could argue it either way, but I don't think that's helpful —for implementing tax legislation. Follow-up, Madam Chair?

Follow-up, Senator Dunbar. Well, the good news is we are currently building the record to help future folks interpret it the way that I think most people on this committee want it to be interpreted, which is not to impact typical operations on the slope, but rather only deal with the gas that is going to be sold into the project. And so my follow-up question again is, how would you amend this language so we only achieve that goal?

You— and I am going to speak without AOGA's, you know, full tax committee approval here, but you could tie the language propose language to— I think it's Title 31 of a gas— an actual natural gas project that you're looking to develop. You could— we could probably propose some different language with Ms. Nowlin, Alaska know, the alleged legal, um, but I would have to, I would have to kind of work on some language, or now I would have to work on some language. It's a little hard to do that off of live.

Very good. Well, um, thank you, Senator Dundar. I'll just say thank you for raising this issue. I believe that we can have it resolved. I think that Ms. Nauman and the committee will be able to develop language to achieve the, uh, the goals that AOGA has set forth for us in this regard.

So I'm going to interject here that in Section 26, the language here is actually— it says repealed and reenacted, but item number 1 is already in state law. It was repealed and reenacted. In other words, it's rewritten here by the drafter, but the original language or current language right now because this bill is not real yet. If oil and gas is produced but not sold, the department may require the tax to be paid upon the basis of the value of the oil or gas of the same kind, quantity, et cetera. But this number 1 is actually simply a rewrite of what is already state law.

So just bringing that out, and it has been brought to our attention that it is implying something that we don't mean. If it's being reinjected for EOR, for example, pressurize the field, etc., it is not intended that it be taxed. So I do believe we need to clarify that section. I saw a hand raised by Senator Clayman. Is that true?

Yes. Ask your question, please. Thank you, Madam Chair. Ms. Evans, I appreciate the notion that you can argue it either way, but you with AOGA have a particular position. How long would it take you to actually draft language that you could submit to the committee chair that— so they could review your suggested changes to Sections 28 to 30, so we're not just asking LedgeLega what do they think, but we actually get to take a look at what you think?

How long would that take you? [FOREIGN LANGUAGE] I don't actually know how long it would take to draft in English. I am happy to get with the AOVS Act Committee and I'll get back to you.

Thank you, Ms. Evans. I do have Dan Stickel online now and Emily Nauman, if anyone has questions for them. I have one more question. Senator Clayman. And then somewhat related, Ms. Evans, what is your current understanding?

I know we have no gas being sold from the North Slope, but in terms of gas that is specifically gas that is reinjected Under current law, it appears that we have the ability to tax the gas that's re-injected. Is it your understanding that we are taxing any of the current oil producers for gas that they are re-injecting to increase oil production?

Uh, Senator Klayman, through the chair, I think we may have pivoted from the discussion on decoupling oil and gas lease expenditures to another section on the taxation under what would be currently 4355.020F. So I just want to make sure that When I am answering the question, our discussion had originally started with lease expenditures, and I think you're asking a question on a different section regarding the department's— the new language where the department is actually going to be allowed to tax oil and gas that it currently does not. Tax.

The direct answer to your exact question is right now oil and gas used in operations such as gas being repressurized is not taxed or production taxed. Thank you. Further questions? Senator Myers. Yeah, thank you, Madam Chair.

So, um, Mr. Rakowski, Probably we run into is you drill a hole, oil and gas come out of the same hole. So now we're going to say you're only allowed to deduct a proportion of the expenses for drilling that hole as opposed to the whole thing, in effect.

So the question is, from a practical effect, what is— what's the practical effect? In order to recover your costs now, you're effectively left with two 2 options. Either A, you raise the gas price, or B, you drop oil production so that you're not losing as much, so to speak. Which of those 2 is more likely? I think through the chair, Senator Myers, I get at that a little bit later in my testimony.

I am on page 3 of 7. So, but at the end of the day, some wells will become uneconomic if they're decoupled. And I apologize, Madam Chair, I know I have technical testimony. We got this bill like 72 hours ago, and we would have preferred to have slides to reference as well. So I appreciate you struggling with me through this.

No, that's, that's great, and we will probably have you back. Yes, ma'am. Later as well. I see no other questions. I'll let you proceed.

On the North Slope, oil and gas operations are fully integrated. This kind of change can artificially inflate taxable oil value and, depending on how costs are allocated, could make otherwise uneconomic production uneconomic, leaving barrels in the ground. Related to that, sections 29 and 30 of the bill directs the state to allocate cost using a BTU equivalency. That may sound technical, but in practice it can significantly shift costs in a way that increases tax exposure and does not fairly represent the cost to produce oil. As an example, Prudhoe Bay is currently producing around 245,000 barrels a day of oil.

It also produces and, and injects approximately 7.7 BCF of gas a day. Using a BTO BTU ratio of 6 MCF of gas to 1 barrel of oil, the result is 84% of BOE is gas that is being reinjected. Using this BTU equivalency could unintentionally disallow reasonable costs associated with oil production from being deducted against production tax liability and could ultimately jeopardize future oil recovery. Moving on to section— can Can I move on to Sections 20, 21, 26, and 27? Pause for a moment.

Are there any questions?

All right. Go ahead and proceed. Thank you. Thank you, ma'am. Section 20 creates an additional and unnecessary valuation process for state oil and gas royalties.

Current statutes, regulations, and leases already contain provisions to ensure that the state receives fair market value for its oil and gas. There are, quote, higher of provisions as well as, quote, minimum value provisions in the new form leases. This new Section 20 provision creates a cumbersome administrative burden on the Department of Natural Resources to determine a monthly prevailing value, quote, before the lessee even files their royalty reports and may contradict current lease language. From our review, it appears that Section 21 proposes to amend AS 43.05.230A by making it lawful for the Department of Revenue to disclose what is currently taxpayer confidential information. Section 26 repeals AS 4355.020F in its entirety and reenacts it to establish a mandatory valuation standard for tax purposes.

Section 27 then adds a new sub— sub— Section 27 then adds a new subsection (o) to 4355.020 requiring the Department of Revenue to make specified disclosures for the valuation related to both oil and gas. These disclosure requirements take immediate effect and apply regardless of whether a natural gas project is involved. Similar to royalty valuation, there are already statutes and regulations in place to ensure that the state gets fair market value for production of tax purposes. AOGA members are unaware of any valuation problems in the existing statutes that require a policy shift to repeal and reenact AS 43.55.020F and impose a mandatory monthly price for production tax purposes determined and published by DOR to the due date for for the monthly production tax filings and to require new public disclosures by the department for both oil and gas. We respectfully caution the committee that our review of these sections raised antitrust concerns because it appears the Department of Revenue will be required to publish, coordinate, and share proprietary oil and gas prices.

By sharing competitively sensitive data, this new proposed process heightens the risk of antitrust violations. I'll pause there before I move on. Madam Chair? Yes, Senator Myers. Yes, so Mr. Wachowski, are you telling me that this section of the bill would effectively require the companies you represent to violate federal law?

Um, through the Chair, I'll defer to AOGA Tax Committee Vice Chair Marie Evans on that question. Ms. Evans?

Commissioner Myers here, Chair.

I can't say that if enacted exactly as worded, this will require a violation of a federal law. What I can say is that the ambiguity of what Department of Revenue is going to have to do to comply with this gives me a lot of concern because if data is derived from reports of current sales and marketing, we have a concern that the participation and the reporting could be associated with conduct that could lead to antitrust inquiries by DOJ or allegations.

Um, follow-up, Senator Myers. Yeah, I'm just curious, allegations of what exactly?

Allegations that competitors are not supposed to know each other's prices.

So, for instance, when we have an AOGA meeting, we review that we are all competitors and we will not discuss price because this is such a sensitive topic. And I will advise that I am not an antitrust lawyer. I would recommend let Google weigh in on this. But I do want to bring it to the committee's— we wanted to bring it to the committee's attention that it will really depend on how Department of Revenue implements this proposed language. And it raised concerns among our members.

Okay. So I'm going to ask Mr. Stickel, who is online, Mr. Stickle, while you're getting online, we often, I know, at the finance table ask questions about specific companies' pricing, rate of return, questions like that. And you inevitably respond to us that you can't give specific company pricing and details. You pool those numbers.

How would you manage this kind of information, the prevailing value? I know statutes exist that you already have in place related to prevailing value of commodities.

To the Chair, this is Dan Stickel, Chief Economist with the Department of Revenue. So this is a complicated issue that we would have to work through in detail. I know in the upcoming fiscal note, we are going to be requesting multiple new positions to support the significant additional workload on the department to implement this. So it's something that we would work through, and we would certainly, as part of the regulations process, we would certainly reach out to industry and hear their concerns. There would be— and we would work with Department of Law and potentially outside counsel to try to square the circle on this issue.

You know, could we potentially withhold some of the information deeming it taxpayer confidential? How do we weigh the direction in the bill to provide the detailed information publicly on a regular basis versus addressing the taxpayer confidentiality concerns. That would be something that we would have to work through.

So I share the concerns that, uh, Ms. Evans has raised. Thank you. Uh, Ms. Nauman, I know you're also on— oh, you probably have about 2 minutes left before you have to leave the meeting, but, um, do you have any comments here about the confidentiality violations?

This is Emily Nowlin, Legislative— excuse me, this is Emily Nowlin, Legislative Legal Services, Cherokee. So, you know, I don't have the information to answer that question, so I think it would be, yeah, my place to even attempt it. All right, thank you. We will request you to explore that at a later time. And I know you have to leave the meeting now.

Thank you for joining. All right. Further questions at this point, committee members? All right. Seeing none.

Mr. Wachowski. Thank you, Madam Chair. And I will note, Senator Meyer, um, through the chair, that, um, we take antitrust very seriously. Any AOGA board meeting, we have independent counsel there present for expressly that purpose. Um, and they aren't cheap.

Sections 23 through 25 of this bill proposes a new income tax on privately held oil and gas pass-through entities with, quote, taxable income greater than $1 million, which includes producers, processors, as well as oil and gas transporters by pipeline and maritime transportation. As AOGA has previously testified, this proposal represents a significant policy shift that has not received adequate vetting or independent modeling and continues to raise serious concerns regarding its structure, its potential impacts, and its targeted and retroactive nature. Last year, my predecessor, Eddie Olga, submitted a letter to the Senate Finance Committee outlining several core concerns with this pass-through entity framework. Many of those items remained unresolved. These comments included the inconsistent treatment of tax loss years, impractical implementation timelines and retroactivity, unclear aggregation and reporting requirements, and fundamental structural differences in how pass-through entities are taxed.

To date, there has been no independent analysis showing which businesses would be impacted or how far this policy reaches. Depending on interpretation, it could affect Cook Inlet producers, private explorers and wildcatters, gas line developers, carbon sequestration and storage companies, and even private transportation transporters and maritime fuel shippers. The provision assumes parity between pass-through entities and C corporations that does not exist in practice. These structures are fundamentally different in how they are taxed and how they treat losses and income, and applying a corporate tax— style tax to pass-through entities risk creating new inequities. At a time when independent operators and private capital are playing a critical role advancing development in both the North Slope and Cook Inlet.

This kind of targeted policy chills investment in areas where it is needed the most. Stepping back, the core issue is this: this bill combines a major infrastructure policy with multiple complex tax changes all at once. In our view, that creates risk. Alaska's tax system is interconnected. Small changes in one area can have large unintended consequences elsewhere.

Without full modeling and a deliberate process, it's very easy to get that wrong. And just as important, investors are watching how these decisions are made. Stability and predictability matter, especially in a basin with long project timelines like Alaska. So our recommendation is straightforward. Keep the bill focused.

If the objective is to advance a North Slope gas project, focus on the framework, the property tax structure, and making sure communities are protected. Then take the broader tax changes like the pass-through entity tax and production tax modifications and evaluate those separately with the time and analysis they require. Alaska has a real opportunity here, but large projects depend on certainty. The state's role should be to reduce risk, not introduce new layers of it. AOGA stands ready and is committed to work with the committee to get it right.

Thank you, and I'm happy to answer more questions. Senator Dunbar. Thank you, Madam Chair. Thank you for your testimony, Mr. Wachowski. So you said stability and predictability matter.

Isn't that a pretty strong argument against passing this bill at all? I mean, in the original form, we're talking about creating a new kind of tax we've never even had in Alaska, getting rid of a property tax system we've had for decades that ties into things like the school funding formula, ties into the way local governments function. I mean, we're at being asked to go from 20 mills to an effective 2 mills, but beyond that, institute a really complicated new system. And the original version of the bill also touched on sales tax and bed tax and every other ancillary tax too. So that stability argument, which I've heard the industry make a number of times, isn't that an argument for just leaving the status quo that we've had for decades in place and not passing SB 280 in any form?

Senator Dunbar, through the chair, um, I think at the end of the day, our argument is that this is not a small tweak. This is a significant structural change. And that could stand on its own. We're here that we're not taking note that it's your job to address tax issues. We're here to offer assistance and help and then help the committee understand impacts to us and future revenues for the state.

Thank you. Thank you, Madam Chair. Senator Myers. Yeah, thank you, Madam Chair. So I'm looking at the bill here.

We've got in Subsection F, from the sale of oil or gas produced in the state. What page are you on, please, Senator? Page 22, line 14 and 15. All right, thank you. So from the sale of oil or gas produced in the state makes me think about, you know, the guys that— well, guys that used to bring heating oil to my house.

Now I'm on— now I'm on natural gas. And then it says from the marine transportation of oil or gas produced in the state, which makes me think about Crowley or Vitus or maybe one or two of the other companies that are taking oil and gas products to the villages off the road network. Has AOGA done any modeling yet on how much cost this tax could add to those sales to consumers, either locally coming through trucks or out through the the river network throughout the state? Through the chair, Senator Meyer, no, we have not modeled it. We have heard concerns voiced from some of those, especially maritime fuel shippers, that this could be a hit at a time when villages are going to be facing record fuel costs, and that's a concern for us.

I will note Rebecca Logan from the Alliance, she represents many of those companies you just mentioned. Okay. And she will be testifying after me. Okay. And then one other.

Senator Myers. Yeah, thank you. So, um, this is a slightly different version, but the, the concept of, uh, moving the C-Corp tax to apply to S-Corps, at least in the oil and gas field, has been kicked around for a couple of years now. Um, have you guys done any modeling, uh, either through AOGA or any of your member companies on what it would do to— what applying that tax would do to oil and gas production within the state?

Through the chair, Senator Meyer, I don't have any specific modeling at hand. I do know that we took a look at the varying provisions on this pass-through tax. We— by our count, there were 7 separate bills, separate flavors of what this would be floating around the building. Today. I do know that every dollar that is unavailable to be reinvested, particularly in the Cook Inlet, is a problem for Cook Inlet producers.

They— we need dollars available to be able to reinvest and keep energy flowing for Southcentral Alaska. Okay, thank you. Thank you. Senator Wilkowski. Yeah.

Oh, pardon me, I'm sorry, Senator Kleiman was next. I beg your pardon. Go ahead, Senator Clayman.

Mr. Warkowski, at a significant level, this version of Senate Bill 280, AOGA does not support in large measure, correct? Yes, sir. I believe I specifically pointed out the sections that we oppose. Okay. As written.

And follow-up? Follow-up. If we go back to the original version introduced by the governor, Did AOGA support that in whole or in any part? Did they support it? Uh, through the chair, thank you.

That's a great question. I think in general we support the construction of a pipeline, but I defer back to the beginning part of my testimony. We want to make sure it's done right by the communities, and so we are not taking a position on any different approach than the current property tax structure. So we have not taken a position on SB 280 directly. Just one more follow-up.

Yes, follow-up, Senator Clayman. So now directing specifically to the governor's proposal to do away with the existing property tax structure and go to a different gross value approach. On that specific provision, is AOGA still taking no position on that proposal as well?

Through the chair, could you restate your question on gross? You mean a gross tax on gas? The move down to 2% from the current 20% structure, that's part of what the governor is proposing, and he's proposing this as the only way the pipeline will go through is if you do away with your existing property tax structure and go down to the 2% structure. Where is AOGA on that specific proposal the governor has made? Through the chair, thank you for the clarification.

AOGA is not taking a position on specificities—. Specifics of that. Thank you. Senator Bullockowski. Yeah, thank you.

On the S corp provision, there's a duty to produce. You would agree with that for the industry. Oil companies have a duty to produce when they take out a lease in the state? Through the chair, yes, I do, Senator. Thank you.

And follow-up? Follow-up? Has— have you done, or AOGA done, any modeling about how the S-Corp provision would impact rates of return for fields or any production that might be occurring or is projected to occur? Through the chair, Senator Giesel— sorry, through the chair, Senator Wielechowski, Vice Chair.

I know we've done modeling in general on impacts. I do not know specifically if we've done modeling on that S corp tax pass-through. I'll have to get back to you on that. Follow-up. Yeah.

Prudhoe Bay, for example, do you know what the rate of return is at Prudhoe Bay at current oil prices?

Through the chair, Senator Giesel, I do not. I know for like our membership dues, we have a calculation of throughput, employees, leaseholdings. I know that you can derive a lot of information by combining publicly open data from AOGCC and from DOR, but AOGA does not track profitability, individual property profitability of each field. Follow-up. Do you have any data that you can provide us that would show the impacts of the rate of return currently versus if we were to pass this S-Corp provision for production?

Development at Prudhoe Bay or Cook Inlet?

Senator, through the chair, Senator Wielechowski, I think with this version of the bill, we aren't even sure which companies it applies to. So my predecessor talked— we think it could apply to two AOGA member companies.

I would need to check with them and our committee and get back to you to see if we could provide said modeling and data. Follow-up, Senator Wielekowski. Because the law is that the producers have to produce when they can make a reasonable rate of return. You would agree with that?

Through the chair, Chairman, I'm not a lawyer, but yes, I would agree with that sentiment in general. Okay. And if you have any evidence that this would make any fields or developments uneconomic. Could you provide us with that information if we were to pass this escrow provision?

Through the Chair, Vice Chair Wolakowski, we are committed to working with this committee. So we will work. I think I'd like to understand a little bit better what you're getting at. But absolutely, we're committed to working with this committee. Follow-up.

I'll tell you exactly what I'm getting at. Um, the, the law is that when producers take out a lease in the state of Alaska, just like Texas, just like Louisiana, just like North Dakota, just like any other state in the country, they have a legal obligation to produce, develop, explore, market the gas or oil when they can make a reasonable profit. And so, uh, if, if, um, it's, it's not whether you can get more, you can make more money somewhere else in the world You took out— not you in particular, but a company comes to Alaska, they take out a lease, they get 87.5% of the value of that production. The state gets 12.5% via royalty, 16.6% on some new releases. They have a legal obligation to produce if they can make a reasonable profit.

We've heard from DNR over the years, we've heard from AOG over the years that a reasonable profit is anywhere from 10% to 25%. And so if, if in enacting an S corp provision or any other oil tax provision reduces that profit below that such that the company can no longer make a reasonable profit, they got a good argument that we shouldn't do it. But the numbers that I've seen, and this is going back years, but I remember during the ACES debate back in 20, 2012, no, 2006, '07, that the rates of return at Prudhoe Bay were over 100%. In subsequent debates, we've seen 70%, 80%, 90% rates of return, which are well above, you know, what the courts have deemed and what DNR has testified and others have testified is a reasonable rate of return. So I guess the point I'm getting at is, if this provision, if this S corp provision will make— will create a situation where the companies can no longer make a reasonable rate of return, please provide us that information.

On particular fields, particular— specific data. Don't come in and just say, well, it's, you know, we think it's going to create more risk or chill investment. That's not the legal analysis. The legal analysis is show us the numbers. That's the legal analysis.

We don't do that in this state, unfortunately. If you're in Texas, Louisiana, North Dakota, somewhere, if a company refuses to produce, they get sued and they go to court and they lose those cases routinely. Dozens Hundreds of cases all around the country like that. Uh, and, and so our tax policy should be based on reasonable rates of return. That's what the law is.

And so you can say it chills investment, you can say it creates risk. The law is how does it impact the rate of return? And I, I don't believe, based on the data that I've seen, that implementing an S corp, uh, closing the S corp loophole, which BP paid for decades, Conoco pays Exxon pays is in any way, shape, or form detrimental to, in a significant way, to rates of return. But if you have other information, please provide us that.

Through the Chair, Vice Chair Wilkowski, I'd be remiss if I didn't point out that, you know, DOR has even been on the record in a low-price environment, the projects in Alaska already suffer marginal economics. It takes, unlike Texas and North Dakota, where you can drive on a road with power, drill a well and pump and get oil immediately, it can take decades to get oil out of certain, particularly in the greenfield in Alaska.

And I'd be remiss if I didn't point out, in the ACES, oil was $15 to $20 higher on average than it is under the current tax structure. So, and I'd also be remiss if I didn't point out that the DOR went on record saying in the low price environment, the state actually makes more from SB 21 than they do, than they would under ACES. So there is some important context. I think you have to also factor in throughput and taps and price And my intention is not to hide the ball with you, so whatever information I can help provide the committee, I'll be committed to help work with you on, sir. Follow-up.

Thank you, and I appreciate that. And what would be very helpful is if— get us data. You could get us the lifting costs. What does it cost to produce a barrel of oil in Prudhoe Bay? You could get us the rate of return at Prudhoe Bay for Hilcorp, Conoco, and Exxon.

Exxon. You could get us the, uh, the rate of return at Prudhoe Bay for those companies. You can get us the net present value at Prudhoe Bay for those companies. Can you get us that information? That'd be very— and you can get us how much profit Hillcourt made last year and how much profit Exxon and ConocoPhillips made in Alaska.

We can get Conoco, they're publicly disclosed. Can you provide us with that information? That'd be extremely helpful. And, and also, by the same token, how implementing an S corp tax would implement those, would change those numbers for any affected companies. That would be fantastic if you could get us those numbers.

Can you get us those? Sir, I have got to go back to— sorry, through the Chair, Vice Chair Wolakowski, I have got to go back to my committee. But again, we are very sensitive to any sort of antitrust concerns. I am not sure a yoga would be the appropriate venue to relay that information to you.

So I'm gonna, I'm gonna follow up on Section 23 and just— first of all, this is not— this would not just affect two of your companies. The current permutation of this proposal begins with net income. This is taxable income. This is not gross, this is net, over $1 million would be the first tax bracket. So originally the one that you refer to actually started at a $5 million profit or higher.

And this is— why this is even being offered is the fact that Alaska has no personal income tax. These companies that you're referring to that are S corporations and LLCs would be paying taxes if the state had a personal income tax. So it really isn't outside the realm of logic.

So I have a real— I understand your argument that that this targets a single industry. I totally understand that. There are certainly physician offices, large groups of physicians, large legal entities that would fall into these tax brackets as well if it were broadened. I acknowledge that totally. But these are not unreasonable.

Other states have personal income taxes, and these very same companies work in those states, and they pay corporate tax. So, so I really— so I feel that your argument that this will decimate their fiscals is kind of— it doesn't make any sense. Senator Dunbar. Thank you, Madam Chair. Um, Mr. Wilkowski, is the developer of this pipeline project a member of AOGA?

Through the chair, uh, Senator Dunbar, uh, Glenfarn is not a member of AOGA. Thank you. I, I just want to know for the record again, Madam Chair, um, because it happened in private but we need to bring it to the public as much as we can. Glenfarn's leadership has told us directly that an S corp tax like this one will not impact whether or not they construct this pipeline. The, the head of that told us directly to our face that, um, that is not in their calculation of whether or not they build this pipeline, largely because for many of the original years they're not going to have any income in the state.

That's what we're trying to address here is pushing their tax burden out further. So I appreciate Mr. Wachowski's testimony on this, but I think it's important to note that the central focus of this bill being Glenfarm— Glenfarm had said— has said they do not oppose, or at least they would not be impacted by exactly this kind of provision. Thank you, Madam Chair. Thank you, Senator Dunbar. Are there other comments that you had?

Mr. Wolkowski? Chairman Giesel, no.

Senator Clayman, question.

Would you be able to submit your comments in writing? That would be very helpful. Through the chair, Senator Clayman, absolutely, yes. And I want to take mercy on your staff here, so we will be within the hour submitting our comments. Thank you.

Very good. The, the reason that that's particularly important is you've gone into some detail, and we do want to address the issues you've brought before us, several of which had been identified by others, and we are in the process of correcting. But, but we appreciate it. Senator Myers. Yeah, thank you, Madam Chair.

So, uh, Mr. Murkowski, um, an alternative to building a pipeline that's been floated for, I don't know, a year, year and a half. So, um, there's a couple entities out there that have talked about putting an LNG liquefaction facility directly on the slope, um, and shipping through icebreaking tankers, something like that. Um, we've, you know, uh, obviously that wouldn't be as good for, you know, it, it monetized the gas, but it wouldn't be as good for the state. We wouldn't get gas to Alaskans because of the Jones Act. We wouldn't get the construction jobs, some things like that.

You know, the economic impact would be very narrowly focused on the North Slope. Has AOGA done any modeling in differences on things like gas price or, you know, potential taxes paid if we went through another— through a version of that rather than pipeline?

Through the chair, Senator Meyer, I do not believe— I'm going to have to check. I do not believe we've done any other modeling as an organization. I can't speak to individual member companies that have the gas resources. Okay. I do know in general, like, we would again like to get this gas to market for the benefit of all Alaskans.

Okay. Thank you. Madam Chair. I'll just interject, actually, that idea has existed for more than 10 years. Mead Treadwell first brought it forward that I'm aware of, and probably someone before that.

Senator Dunbar. Thank you, Madam Chair. Senator Myers just reminded me, and I think Senator Kawasaki would ask this question if he were here, but this version, unlike the governor's original version, includes a spur line to Fairbanks. Does AOGA have a position on the spur line to Fairbanks?

Through the chair, Senator Dunbar, we have not taken a position on the specifics of where the project would go. Okay, very good. Thank you, Madam Chair. All right, Senator Wilkowski. Just so we're clear, your testimony was that you think that the local communities should be compensated and that the way the original governor's bill was proposed, that did not compensate them sufficiently?

Through the chair, Senator Wielechowski, no, I think that we want to ensure that local communities derive the proper benefit. That is not our call. I think we want to defer to the mayors, to this committee, to the governor, and to Glenfarm on what that may look like. But we just wanted to reinforce that our member companies do pay a lot in property taxes. We know the value that provides us and it gives us a social license to operate.

So sir, it was, I guess, more of a reminder that that is a very important critical center of gravity in our view. Follow-up, Senator Wilkowski. The governor's proposal, so the TAPS currently pays, I think he said $700+ million in property taxes The governor's proposal is $74 million only after it's completed and is producing or processing, flowing more than a BCF, which is probably at least 5 years away. Do you think $74 million for the entire state is a sufficient amount of property taxes?

Through the chair, Senator, I can't speak to that, what is fair. Again, I can speak to the that the high top— I don't know exactly, I don't have the numbers on hand of what TAPS specifically pays. As I mentioned in my testimony, we did pay in FY25 $720— over almost $720 million in property taxes. So that's TAPS, that's Cook Inlet, that's Prudhoe Bay, that's Pikka, that's Willow. And we do know that that's very important to these communities, but I can't assign a number sir, to what, what would be fair.

Follow-up. I mean, I— there's a reason you, you brought it up and you said local communities should get compensation, and they— TAPS currently pays $720 million, and the governor's proposal is about 10% of that. And that's a gasification plant, that's an LNG plant, that's construction phase. I mean, I think $74 million is is lower? Do you think it should be higher?

Senator, well, uh, through the chair, Senator Wielekowski, um, what I can speak to— take, take for instance the North Saltboro. 96% Of their tax base is derived from oil and gas property taxes. That pays for schools, pays for clinics, pays for teachers, pays for cops, pays for courts. Pays for environmental staff, pays for wildlife staff. We know how important that is to the community.

We operate in their backyard, some would argue in their garden, and so we know how critical that is. Again, sir, I, I can't pin me down on what a price or what fairness is. That is, that is best a discussion to have with Mayor Just Mayor Pocatuck. Just one last follow-up. So should we— would you recommend— because we're being asked to set the number in statute, and you're saying let the mayors basically decide.

I mean, should we just say we're not going to do anything and let the mayors decide what the number is? Because we can do that. I mean, there's the do-nothing option, which is we just don't pass anything and let the mayors decide.

Through the chair, Vice Chair Wielekowski, since my senator— I'm staring at her right now— like, that's— we expect you to make the hard calls on that, sir and ma'am, and we have faith that you can do that and weigh the needs of, you know, the communities, your districts, and the state. And so I am not arguing that just letting the mayors make the call. I think it's got to be— again, we're encouraging a discussion and a constructive working relationship with the mayors and the governor's office in Glen Farm to find a solution.

You know, I appreciated you bringing up what the taxes that you pay to the North Salt Lake Borough mean to them in terms of the expansive implications for, for all the costs they incur. I was looking at the most recent FERC EIS. It was a 2020 document that is extensive. I mean, it's hundreds of pages long, but it goes into exactly that in assessing the impact on our whole state, and mostly through, of course, the local governments that the pipeline and this project would pass through. And it did mention the impact on wildlife that would be experienced, as well as roads and, you know, all the normal things we think of.

And you brought up courts. Yes, that will be an issue as well. As someone who was here during the building of TAPS, I can firsthand acknowledge those were impacts. So just in defense of what we're trying to do, That is exactly what we're trying to address for local governments, and it sounds to me like you're acknowledging that those impacts are very real as well. So, Mr. Wilkowski, just to review again, I think you indicated your interest or your concerns in the bill were— was it Sections 20 to 30?

I may have gotten that wrong. I just wanted to clarify which specific sections you started out with. Mentioning?

Madam Chair, Sections 20 through 33. Through 33. Okay, very good. That just gives us a specific target to look at again, and we'll look forward to working with you going forward. Thank you very much for taking the time to be here and the expense of being here.

Juneau is not an inexpensive place to come. Thank you. We will be having you back. Thank you, ma'am. The next person on the list would be Rebecca Logan.

Ms. Logan had to step off because she's actually involved in a conference and was having to speak at 10 o'clock to another organization on a panel. So we will invite her on another day. This one didn't work out for her. So next up will be Connor Hajduković. He is the Executive Director of the Resource Development Council.

And so welcome, Mr. Hajduković. And again, thanks for coming all the way to Juneau to speak to us in person. [FOREIGN LANGUAGE] Thank you, Madam Chair and members of the committee. And thank you for the opportunity to testify today. For the record, my name is Connor Hajduković, the Executive Director of the Resource Development Council for Alaska, also known as RDC.

Briefly, RDC is a statewide organization representing Alaska's 5 core industries, resource industries: oil and gas, mining, timber, fisheries, forestry, and tourism. Our membership includes over 400 businesses, Alaska Native corporations, local governments, labor, and individual Alaskans. RDC's purpose is is to encourage a strong, diversified private sector in Alaska and expand the state's economic base through the responsible development of our natural resources. This is a mission I personally am passionate about, having grown up in Fairbanks, graduated from Lathrop High School, UAF, and now living in Anchorage. I certainly support, uh, efforts to grow Alaska's economy through responsible resource development.

So RDC strongly supports advancing the Alaska LNG project. In fact, RDC was founded, uh, to gather support for a gas line, uh, from the slope in 1975. 50 Years later, we are arguably closer than ever before to making that vision a reality. The project has cleared major federal permitting, uh, hurdles, secured a private sector partner, and seeing a level of political and public support that we have not yet seen before. We continue to see support for the project at the highest levels of the federal government.

As recently as last week in DC, we met with the Secretary of the Interior, and he continued to tout this project as a top priority directly to our group of Alaskans. In addition, the administration has opened the door to the use of the Defense Production Act recently, which has been used to advance other strategic resource projects such as the Graphite One project. All of this to say, we likely won't see this level of federal support again in our lifetimes. I appreciate my fellow trade association partners, the Alliance, who was unable to testify, but AOGA, and their analysis of the committee substitute. I would broadly align RDC with their concerns, particularly surrounding increasing upfront costs to the project and restrictions that are difficult or impossible to meet for industry.

While I will not be able to give as detailed of a position as AOGA did on specific sections, given the breadth of my membership and the fact that the CS was— we were unable to look at the language until a few days ago, and I have not been able to meet with my board on that. I will be relying on previous RDC policies in that regard. So generally speaking, RDC is supportive of a clean bill. Focused on moving the project forward without extraneous issues. One issue which AOGA brought up is the pass-through entity tax in Section 23.

RDC's position is that tax policy should be broad-based, predictable, and applied consistently. Our issue with this section is when taxes target a specific industry or group of companies, it can create uncertainty and unintended consequences for investment decisions. RDC has, has an established policy which— policy on that, which I'm happy to share with the Committee at a later date. RDC very much appreciates the Legislature's focus on ensuring that communities along the gas line are supported, particularly since RDC's membership includes municipalities as well as different communities, and we encourage continued dialogue between the municipalities and Glenfarm. RDC encourages a tax structure that is fair to municipalities while concentrating costs to industry partners during value-generating time periods rather than the earliest and most capital-intensive phases of the project.

Finally, the use of Alaskan companies and workforce for construction and operation is very important to RDC's membership and should be encouraged. However, we do not support requiring it in a way that would jeopardize the project's viability. Stability. From a state energy perspective, this project is essential, particularly given the short-term energy supplies in Cook Inlet and the long-term needs for cheap energy required for future resource development projects in the state. At a time when we're seeing working-age Alaskans leave the state in concerning numbers, this project represents an opportunity to support thousands of jobs— of construction jobs— and hundreds of long-term positions.

Beyond oil and gas though, from mining to tourism, forestry, and fisheries, cheap, reliable energy is essential to our state's growth, and the economic impacts of a project of this scale has— could have multiplier effects that are well beyond what we can calculate today. Uh, for instance, the oil and gas industry has a 1 to 14 multiplier effect on jobs. I would conclude with reflecting on one of the legislature's core responsibilities, which I've heard cited in this committee many times, to develop Alaska's resources for the maximum benefit of Alaskans. RDC greatly appreciates this committee's commitment to this responsibility. I would like to point out that there are benefits beyond state revenues for Alaskans, such as growing the economy, providing jobs, and providing cheap and reliable energy.

While RDC cannot support this committee substitute as drafted for some of the reasons that AOGA has pointed out and, um, and other reasons I am hopeful that the legislature continues to work towards a resolution that allows this project to move forward expeditiously for the benefit of all Alaskans. Thank you for your time. Thank you, Mr. Hajdukovic. Senator Dunbar. Thank you, Madam Chair.

Thank you, Mr. Hajdukovic, for being here. So in your testimony, you said that you wanted communities along the pipeline to be compensated and that you wanted a system that was broad-based, predictable, and applied. So is it fair to say the RDC opposes the governor's original version of this bill? Because it did neither of those things, right? The— what's, what's broad-based, predictable, and applied is the property tax system we've been using for so long.

It also compensates the, the communities along the— on the way. But what we're being asked to do is create a new, extremely complicated tax system that Alaska has never done before and set it off for 10 years and not compensate the, the the communities in the original bill. So is it fair to say the RDC opposed the original bill, which also had a lot of extraneous issues in it? I mean, just given your testimony, the, the short answer is RDC doesn't have a position on, on the governor's bill. Um, I will say, you know, as it, as it relates to taxes in general, typically we'd like to see any tax changes tied to a fiscal plan.

That ensures that funds are used wisely. But we, we certainly are partners with municipalities, and again, my, my membership is, is quite broad, and coming to consensus on specific provisions and specific bills can be difficult. But the fact that we have such broad support for this project, I think, is significant. Thank you. Thank you, Madam Chair.

Thank you. Senator Myers. Thank you, Madam Chair. So, um, Mr. Dukovich, you brought up the— our constitutional obligation to create maximum benefit for Alaskans. Would you, uh, agree that maximum benefit for Alaskans is more than just maximum revenue to the state, that it also includes lower energy costs and the other economic spillovers?

Through the chair, Senator Myers, I would personally agree with that. I don't think that— I don't know that I can speak as fully as a policy for RDC, but absolutely, if you were to speak to any of our membership, I think you would find that there are benefits beyond state revenues that Alaskans benefit from. Follow-up, Senator Myers. Yeah. Has your— as we've been talking about this project for the last year or two now, has your membership talked about other ways in which they benefit other than just state revenue?

How lower energy costs could help out some of your other industries?

Through the chair, Senator Myers, I can't say I've done like a survey of our membership on that topic. It's something that if you're interested in, I can follow up on and get a little bit better grasp of exactly the benefits that my membership would be seeing. Um, yeah, beyond, beyond the general statement of, of cheaper energy is typically, you know, useful for, for the resource development industries that I support. Yeah, I'd be very interested in that, Madam Chair. And if you don't mind, I've I've got a separate line of questioning.

I believe we might have somebody from either alleged legal or Department of Law on. I have Emily Nauman was able to join us again from legislative legal. Okay. Do you have a question for her? Yeah, I do.

So, Ms. Nauman, if you can hear me, Mr. Hargitukhovich brought up the Defense Production Act that was invoked by President Trump at the beginning of the week. That has kind of started the rumor mill up. Around here a little bit, and one of the possibilities that has come up is that the federal government has expressed for some time now that they want this project to move forward, but that they may be developing some frustration with us here in the legislature. And so one of the things that they may be contemplating is effectively nationalizing the project, taking federal ownership, having the federal government then pay for and own and/or operate the project in the end. If that happened, what would be the tax implications to the state municipalities as far as property tax or any other potential tax?

For the record, this is Emily Nauman, Legislative Legal Services, through the chair, Senator Myers. You know, I haven't thought about that question, and I'd certainly be happy to do some research and think about the potential tax implications of that. Um, Senator Myers? Yeah, just one last thing. Um, so my understanding is that if the federal government owns it, we can't tax it.

Um, and there may be some minor tweaks in there here and there, um, you know, regarding contractors or something like that, but Is that broadly the case?

Again, through the chair, I'm not sure. I have to do some research and I'm happy to do that and get back to you. Okay. Thank you. Senator Myers, and for the rest of the committee, my staff is pursuing actually bringing a specialist in this subject to speak to the committee.

I sent to the committee a link to that person's name, as well as a piece that— several pieces he had written on. I'm going to quote from the last paragraph of something he wrote on it in 2025, so it's fairly recent. Put simply, the overarching problem with the DPA, Defense Production Act, is that it takes the same economic approach that failed the Soviet Union. While the DPA may have its place in addressing genuine market failure during wartime, its expansive and ambiguous authority too often makes it a tool of first resort for politicians who can't be bothered to address the underlying causes of scarcity in the market. In 2022, I called the DPA the Pandora's box of bad policy.

3 Years and many invocations later, this is still true. So this is the— one of the people we found as an expert. This is from R Street, which is known as a Republican, extremely conservative think tank in Washington, D.C. Again, we're looking for additional specialists in this subject, but it's definitely a relevant topic. So thank you for bringing that up, Senator Myers. Senator Wilkowski, your hand was up.

Thank you. Thank you for coming and testifying. If— and maybe a kind of a general question, but can you help the committee and from RDC's perspective, what would your ideal piece of legislation look like to progress the gas line going forward?

Senator, through the chair, I don't have I don't have specific language for you on that piece. I think generally speaking, it is what can move this forward. I realize there was discussion at, you know, how much the state gets, how much local communities get.

And again, I don't have a solid policy on that, but I think we are looking for ways in which we can, we can move the project forward. Move the project forward, and I'm not sure that this version of it is moving in the right direction. Follow-up, Senator Wilkowski. And, and I appreciate that you don't think this moves us in the right direction. That's why I'm asking you, what moves us in the right direction?

How— what can we do to move this progress in the right direction specifically? Do we do the— do you support the volumetric tax? Do you What do you support exempting all taxation or taking away all taxation abilities from local communities? What do you think? What does RDC think moves this in the right direction since you don't think this bill does?

Through the chair, Senator, we don't have an established position on that framework that we're looking for. I was able to have some policy on some specific sections of it. But yeah, generally speaking, we don't, we don't have a policy on that yet. Could I interject something here, Senator Wilkowski? Mr. Hajduković, you said that you were having a board meeting soon.

I thought perhaps tomorrow. Did you mention having a board meeting soon? Through the chair, no, not, not particularly soon, but we do have them regular, you You know, every few— 2 months we do the executive committee meeting, which is really the ruling— the governing body of my board of directors. Gotcha. Okay.

That— it might be helpful if they could opine and answer some of these type questions. Senator Wilkowski, follow-up? Do you think the governor's version or the governor's original bill moves us forward towards a gas line?

Senator, through the chair again, we don't have a stated policy on the governor's bill.

I think the, you know, the parties are in place. You have, of course, the state, the municipalities, and Glenfarm, as well as other stakeholders. And we're looking for negotiations to continue between the parties that are in place. To better the framework for the future of the project. Follow-up.

So do you think this— the legislature should just stay out of it and let the local communities negotiate themselves? Is that RDC's position? Through the Chair, Senator Wielechowski, no. I mean, you certainly have a part to play in all of this, and I understand the difficult position that the legislature has been placed in, in, in many ways in this project. But I guess to answer your question simply, I don't, I don't think you should solely put it in the hands of the municipalities.

I think all parties should be involved in the solution. Follow-up: any specific advice on how we should be involved? Should we do a volumetric tax? Should we, should we keep the local property tax structure? Should we Do what?

As Senator Rykowski, through the Chair, I will say I won't pick and choose between those tax structures, but something that can benefit lower costs in the most high-intensive periods of cost, which is early in the project, ideally with long-term benefits to the state and to the minist— municipalities.

Thank you, Mr. Hajduković. Senator Clayman has a question, but before he asks it, I would ask you and AOGA to specifically tell us how, if you were sitting in these seats, how you would take this forward with the same responsibilities that we hold. The constitutional responsibility for maximum benefit for the people. And don't forget the other constitutional responsibility: to never surrender the authority to tax. Because your members come to my office, and probably every office sitting at this table, and say to us, we need more education funding, the roads are in terrible condition, they need to be repaired, what about the Dalton?

It's It erodes every year. What about childcare? Why isn't the state subsidizing childcare so that we can have childcare so we can go to work? You know, these are the kinds of things that we face, and that's our authority to tax and therefore support state services. We just released a single audit last night.

This is the audit that the state does every year on our departments, how well they're performing. Across the board, the deficiencies in that single audit, that is the performance of our departments, is insufficient staff, new staff, untrained staff. We have trouble maintaining a workforce that is competent to perform the duties that you depend on, specifically the Department of Environmental Conservation, Natural Resources, and Revenue. Revenue needs 30 new auditors. So with all of those things in mind, I would be interested in what your boards would do if you were sitting at these tables.

But I do have a specific question for you. How large is your board? How many members are on your board of directors? Chair Giesel, we have 78. 24 Is our executive committee, so that's the governing body, really, and then they have 5 officers within that.

Yeah, it is large. Yes, yes, yes. We have 60 people on this board of directors plus one executive that of course makes the final decision. But in any case, thank you. I know Senator Clayman had had his hand up.

Thank you very much, Madam Chair. Just a couple of questions. You had articulated that RDC does not support the LLC provision for a limited set of entities. Has RDC taken taken a position about having all LLCs, all 11,700 of them in the state, all pay taxes regardless of the industry they're in? Has ARDIE taken a position on that?

Senator Clayman, through the Chair, we have not taken a position on that. I think, you know, we focused on the bill at hand and would be open to having a policy should a bill come out that that would affect all LLCs or S corps. Any follow-ups, Senator Clement? One more. You also stated that RDC's part of their position about new revenues, they want the new revenue, if we have new revenue, that it be used wisely.

And I'm curious about RDC. Does it have a specific position about what it views as wise use of new revenue, and specifically— so this is a two-part question. In a general perspective, does RDC have a position of what constitutes wise use of new revenue, and very specifically in that, is using new revenue to pay dividends or increase dividends a position that RDC has taken? And I mean permanent fund dividends, not any other kind of dividends. Through the Chair, Senator Clayman, we do not have a standing policy on you know, dividend amount, or actually really pretty much any direct spending that the legislature might use.

We do have, uh, in our guiding policy documents, a rough outline of what a fiscal policy looks like, which unfortunately I don't have it in front of me, but includes, you know, a spending cap and adhering to the 5% POM MV draw and a number of other things that I'm happy to provide you with. Follow-up, Senator Clayman. Thank you, Madam Chair. In those— I know you've got certain policies about spending caps and whatnot, but does that policy have any suggestions of how the money is spent? Which, of course, the choices that we get to make is the legislature, and I think the chair is asking if you were in our positions, what choices would you recommend Has RDC made any suggestions about how to prioritize our spending?

Senator, through the chair, um, I, I might have to get back to you on that. I know, for instance, one of our policies is to make sure that we're maximizing the benefit of federal, uh, infrastructure dollars. So we were a big supporter of like the Meet the Match campaign, um, that's been going on, that sort of thing. But I, uh, no more specifics than that that I can Thank you. Since you bring up maximizing federal infrastructure or federal tax benefits, the single audit also speaks to that.

We missed many opportunities again because insufficient or untrained or new staff in our state government departments. So thanks for bringing that up. Senator Rauscher, did I see you? No. Further questions?

Senator Wilkowski. Yeah, thank you. You mentioned also that any taxes should be broad-based, and I'm curious what broad-based taxes the RDC would support in light of the fact that we have a structural $2 billion deficit going forward.

Senator Wilkowski, through the chair, we— I would have to comment as those policies come up. And I will say, I maybe could have been more prepared, but I was more prepared to speak to this particular piece of legislation and some broad priorities. But I do appreciate these questions, and I'm happy to get back to the committee on some of these issues. That would be great, Mr. Hajduković. You mentioned, you know, the— overarching policy or preference from RDC for the percent of— not spending more than the percent of market value.

You mentioned 5%. We're actually under consideration of lowering that. Be interested in your, your board considering what if the percent of market value was lowered to 4.5%, which essentially reduces the amount of revenue that we would have to spend, essentially lowering even our spending cap, reducing it yet more, how we would continue to fund state services.

I know the bill is specific to a gas pipeline proposal, but it really encompasses these global issues. That this board, this committee, and the legislature has to face. Senator Dunbar. Thank you, Madam Chair. It's a generational project, um, as everyone knows.

So, Mr. Haduvec— excuse me— bringing it back to the bill specifically you're prepared to testify on, uh, in Section 23, um, the previous, uh, the previous testifier had, had testified that some of the ambiguity there might lead to, um, uh, taxation on smaller, um, deliverers of gas and oil. I know some of them are your members. Would you— and so specifically I'm looking at page 22, line 14 and 15, um, that Senator Myers also brought up, um, would you support amending out that language. Now, it would do the opposite of sort of what you've described. It would make it narrower and have fewer companies have the tax applied to, but some of the folks that would be exempted from such a deletion would be some of your members.

So would you support that kind of amendment to this bill?

I would defer to— if AOGA's tax policy expert is still online, I, I would appreciate her perspective on that question. Can I follow up before we do that, Madam Chair? Marie Marks has signed off. She is no longer available. Dan Stickle and Emily Nauman are.

Senator Dunbar. Well, just say, um, AOGA's membership and your membership— I would guess that every AOGA member is a member of your organization, but not vice versa, right? And so if we were to remove those provisions, I would suggest it might have relatively little impact on AOGA, but more impact on RDC. I might be mistaken about who composes the different organizations, but we are talking about small in-state companies, smaller in-state companies. So I guess do you think RDC would support that kind of amendment?

Senator, through the Chair, Senator Dunbar, sorry, can you give me the specific lines there? And I will say I'm not a tax expert, and so I may have to get back to you on this. [Speaker] Yeah, that's fine, we can get back to it. Page 22, lines 14, 15, and 16, that's in Section 23. AOGA has raised some concerns that provision might sweep in more companies than we intend, although as the chair has pointed out, it would only be companies who have a net profit of $1 million or more.

So we're not talking about the smallest mom-and-pop shops, even if we take the broadest view. But yeah, if you— if RDC is able to take a position on that kind of amendment, I'd appreciate it. Not even a position, but if you get back to me on that, I'd appreciate it. Thanks. For clarity for people that don't have the bill in front in front of them and the public who are listening.

This is the S corporation, S corporation LLC tax section, and the two line— or the two items are companies that are involved in the sale of oil or gas produced in the state and marine transportation. So specifically, Mr. Hajdukovich, for the chair, if I may respond, um, I would also point out some of what AOGA's testimony about the, now, the lack of analysis and modeling and I think some of what you're getting at is, is who would this affect, and I'm not sure that that is entirely clear yet. Follow-up, Senator Dunbar. Those arguments against lack of modeling, uh, and not to, not to disrespect what Mr. Stickell has done because they've done really good work, but looking at all the ancillary effects, especially the governor's original version that got rid of the bed tax and the sales tax and all of that.

We don't have the modeling for the original bill to— we're taking a leap of faith if we want to pass this massive tax cut, um, as the governor originally, um, proposed. So I, I'll say you can always point to a lack of modeling with these kind of things because of how complicated things are and how interconnected they are. So thank you, Madam Chair. I'll also point out that this was actually initially presented by the current governor's tax— excuse me, not tax— Department of Revenue Commissioner back in 2019 or 2020. So this is not a new idea.

It was presented by them, it was actually modeled by them, and, and has been discussed for the past 2, possibly 3 years. So again, it's not a new issue. The broadening of it is new in this bill. Because of the confidentiality issues, even Mr. Stickle can't tell us who specifically would be affected. He can aggregate numbers and make an estimate, but he can't tell us specifically because of confidentiality that we put in place.

Senator Rauscher. Thank you, Madam Chair. As far as lowering the taxes and how it affects our revenue, lowering many of them could actually be increasing our revenue to the state if the alternative is the gas line can't be built because it doesn't pencil out.

Is this a question, Mr. Rauscher? I'm making a statement. All right, thank you. Senator Wielkowski. Yeah, I would just point out that one of the reasons we can't model some of this information, particularly the S corp provision, is because of taxpayer confidentiality laws that we have in place, which I would point out we've tried to fix for probably the last 15 years and industry has opposed every single attempt to fix them.

Senator Myers. Mr. Burchett. Thank you, Madam Chair. So to Senator Dunbar's point about who might be affected by those couple of provisions in the S corp tax here, I believe Mr. Workowski said that they are expecting that the folks affected by those two lines specifically are primarily members of the Alaska Support Industry Alliance, not so much members of RDC or AOGA. And so I was hoping— I don't know what's I know we've got a meeting scheduled for tomorrow, but I wasn't sure who was speaking.

I was hoping Ms. Logan would be able to speak either tomorrow or Monday to address some of those concerns. As I mentioned earlier, Senator Myers, we will be rescheduling her. I can't commit to tomorrow. Tomorrow's calendar is full. Okay.

And I can't commit to her calendar. We'll see what she's available. But I did say that Rebecca Logan will be testifying. Further questions?

Thank you very much, Mr. Hajduković, for joining us. We've given you a lot of questions to get back to us on, and if you wouldn't mind sharing your written testimony with us, that would be great, so we could refer back, and it helps guide any changes we would make. Absolutely. I can supply that digitally. Very nice.

Thank you. Thank you. All right. With that, that ends the meeting agenda for today. Uh, our next meeting will be tomorrow, the 24th, at 3:30 PM, uh, continuing on this subject.

Tomorrow we have presenting to us the Alaska Municipal League, uh, Mr. Nils Andreassen, and we will have the Regulatory Commission of Alaska speaking to us as well on several questions that we've had. So at this time, the meeting will stand adjourned. Let the record reflect the time is 10:33 PM. 3 AM.