SRES-260505-0900

I call Senate Resources Committee meeting to order. Today is Tuesday, May 5th, 2026, and the time is 9:00 AM. Please turn off your cell phones. Committee members present today: Senator Kawasaki, Senator Myers, Senator Dunbar, Senator Clayman, Vice Chair Senator Wilkowski, and I'm Senator Giesel. We have a quorum to conduct business.

And thank you to Heather and Kyla who are helping us out today. Today the subject of our meeting is the Supporting a Gas Line for Alaskans Act, otherwise known as Senate Bill 280. This is our 24th hearing of this bill in the last 2 months since the governor submitted it to us on March 20th. Today, invited to speak to the committee is our members of the Alaska Gas Line Development Corporation, as well as Glen Farn. And I would— I'm very pleased to welcome Mr. Adam Prestidge here today.

I see Frank Richards is on the phone, or on— yeah, on the phone. We also have David Herbert, Commercial Analyst, Tax Division, Department of Revenue, and Owen Stevens, Commercial Analyst, Department of Revenue, both in the Tax Division. Mr. Begich— Mark Begich has also signed on. So, I know he's catching his breath, so how about if we start with Frank Richards and let Mr. Prestidge catch his breath. I know he just arrived.

Mr. Richards, welcome to the meeting. We welcome your comments about the latest committee substitute for the Supporting Alaska— Supporting a Gas Line for Alaskans Act.

Madam Chairman, can you hear me? Yes, loud and clear. Welcome. Thank you, Madam Chair. For the record, my name is Frank Richards.

I'm the president of the Alaska Gas Line Development Corporation. And I apologize, Madam Chair, we have been looking at the Senate version or the Committee Substitute Version H and still pouring through it to look at what the changes were to see what the impacts are. So I do not have any prepared remarks today specifically on Version H, but we'll be happy to answer questions. And again, as Mr. Petsos comes forward, we'll be able to talk through again the roles and responsibilities between HBDC and Glenfarm as the project developer. Thank you, Mr. Richards.

All right, I guess he's thrown it to you, Mr. Prestidge. So welcome. Thank you.

Thank you for coming. I realize you just arrived a few minutes ago. You're very welcome. Happy to be here and appreciate all of, uh, the work and time and attention from this committee.

Do you have any feedback to offer us concerning the latest committee substitute or other updates related to the project itself? A little bit in the same boat as Frank. I flew up to return to Juneau overnight last night, and so kind of digesting the committee substitute with a pretty short run of time, which, you know, is fine. I understand that's how things work. So happy to answer questions about it.

I think in terms of the overall update on the project, We see a lot of progress being made, both with the Senate bill and the companion, the version of the bill in the House. I think there's a good dialogue and a good, you know, a lot of good reflections on how these two bills can be shaped to advance the project. And I just want to reiterate that the perspective that we have when we talk about changes to this bill and objectives of this bill, The primary objectives that we have continued to be, can we deliver— how can we deliver the lowest cost gas to Alaskans? How can we do so as quickly as possible? Obviously, safety is always the highest priority in how we operate.

But here, related to this bill, lower— lowest cost and certainty to bring the project online are our priorities.

Well, thank you for that. Um, we are actually seeking from you some concrete numbers. Uh, right now the bill proposes an AVT, alternate— alternative, um, tax value, uh, of 15 cents per MCF on the gas treatment plant, 15 cents per MCF on the pipeline, and 25% on— or 25 cents on the LNG plant. If these numbers— we're interested in your feedback, concrete feedback on that. We also, of course, have made a few policy changes related to AGDC and the project itself as far as transparency.

We removed, of course, the publication of a lot of information and things like that. But we're still requesting an Open Meetings Act implementation and, and other policies. We really are looking for, for concrete feedback from you. Okay, absolutely. The other thing I would say to both you and Mr. Richards, the bill was sent to you as soon as it reached our hands.

The governor yesterday made it pretty clear that he expects this to be a final product by May 20th. So this committee is meeting every day on this bill. I realize it may seem like a short timeframe to you to get the bill 2 days ago or a day ago, but for us it's the same deal. So—. Well, and Madam Chair, sorry to interrupt.

Far be it for me to have any complaints about how quickly things are moving. I understand that's the nature and I'm often on the other side of this conversation.

On the tariff itself, if you tally up the stacked tariffs that are presented in this bill, 15 cents, 15 cents, and 25 cents, you end up with a 55-cent per MCF tax. I would describe that as very burdensome for the project and potentially prohibitively so in terms of having a Phase 1 project go forward on any of the timelines that we've discussed in terms of having an FID in the near future. So I would characterize attacks at that level as something that would send— that would require some real reconsideration at the drawing board of how the project is structured and taken forward. And I don't know what the outcome of that kind of re-examination of the project would be. Well, thank you for that.

Just for clarification, Phase 1 is a pipeline, and recently you've also added the gas treatment facility to that Phase 1 approach. Is that accurate? Madam Chair, just a clarification. When we say the gas treatment facility, what that has historically always referred to is a 3.9 BCF a day gas treatment facility to bring North Slope gas down to the specifications required for LNG. There's a much, much smaller, probably less than a tenth of the size, gas treatment facility required for Phase 1 to bring North Slope gas down to utility-grade gas, but significantly smaller than the gas treatment facility.

Understood. Thank you for that clarification. But when you say 55 cents in MCF is very burdensome for Phase 1, Phase 1 is actually 15 cents for the pipeline and 15 cents for a gas treatment facility. [Speaker:COMMISSIONER MAY] Thank you for that clarification.

The way to look at that— the way to look at that is 15 cents on Phase 1 would still be a doubling of the tax on the project. The remaining tax on Phase 2 obviously puts Phase 2 in jeopardy, and what you end up putting at risk then is the probability of— or how quickly could we bring the remaining portions of the project online that would have the effect of lowering, dramatically lowering, the cost of gas on the project, the cost of gas delivered on the pipeline. Thank you. Further questions? Senator Wielechowski.

Thank you, Madam Chair.

Trying to understand your numbers because normally the way— I'll just tell you in my experience when we do projects like this, at least for me having served on this committee for almost 20 years, going through AGIA, going through ACES, going through SB 21, I've had commissioners, deputy commissioners, tax directors in my office every day when we do projects. You know how many visits I've had on this one by commissioners, deputy commissioners? Zero. Not a single one. And I don't know if other committee members have had the same.

So, so from my perspective, uh, when you say 55 cents is burdensome, let's, let's talk numbers. I mean, this is all about the numbers from my perspective. You can, you can sit there, and I wouldn't expect you to say anything less because I've seen producers, I've seen people who are impacted by tax decisions. They all— they always say that. I mean, it's your job.

Your job is to get the maximum value for your company. And our job is to get the maximum value for the people of Alaska. You understand that, right? We're not trying to kill the project. We're just trying to do our constitutional obligation.

You understand that, right? Yes. Okay. And so to that end, I want to try to break down— because you say 55 cents is overly burdensome. And the governor said you know, some things are overly burdensome.

And, you know, it's just sort of analogous that we're being asked to decide, you know, a decision that will impact generations of Alaskans within a few weeks, and the governor couldn't implement an elections bill within 26 weeks. Just to put things in, you know, into perspective here. That said, What is the cost of your project? [Speaker:MR. BOLL] The cost of the project hasn't been— well, I should revise that. The most recent published cost of the project has been approximately $46 billion.

We conducted a FEED process to re-estimate the cost of the pipeline itself. That was completed in December, and we have not released the results, the economic results of that FEED process publicly. Okay. I'm not sure if I can follow up. Yes, follow up.

So, and again, I'm— do you understand the challenge that we're working with? When— if you're saying 55 cents is too much, and you want 6 cents, I guess, and the governor said yesterday, well, maybe 10 cents, I don't know, he nearly doubled his— he negotiated against himself and went up to 10, I guess, yesterday in his press conference. In order for us to come up with the number that we think is fair to the people of Alaska and to you, we need the numbers. Like, I can't make— I'm not going to vote on a bill without numbers. I'm not going to vote on a bill that's going to take away $1 billion in potential future taxes and revenue from my— from communities across Alaska without having firm numbers.

And so we can wait all summer if we have to. But if you're not going to give us the numbers or we're not going to get firm numbers, or if the Department of Revenue is not going to give us firm numbers, Um, from my perspective, this bill should not go to the floor because I am not going to commit generations— me personally, I don't want to commit generations of Alaskans to billions of dollars in tax breaks without firm numbers. You wouldn't, you wouldn't commit that. You're, you're working the numbers. I'm sure you've probably got a whole team of tax analysts and tax accountants and attorneys who are working this, scrutinizing every single penny.

And you can understand how we would want to do the same, right? I can, yes. Okay. So can we get some— and I know it puts you in an awkward position to do this, but we are just not— we have to get the numbers from somewhere. And we all know it is not $46 billion.

I think we all know that. It is not $46 billion, is it? What we have said is that the DOR's numbers are a good representation of the construction cost of the project. The assumptions that have gone into those numbers and those estimates are good assumptions, and the escalation that they have applied is the same escalation that we have applied in our estimates. And so when it comes to estimating kind of the impact of this tax, the DOR numbers are generally representative of the, I guess, the quantum of kind of the tax adjustment that we're seeking.

Follow-up? So you're saying that we should rely on $46 billion to come to calculating what? I'm saying that— I'm saying that it's not an unreasonable starting— an unreasonable place to calculate that from, yes. Follow-up? Senator Dunbar.

Thank you, Madam Chair. I have two questions. The first is, we have spoken— we spoke yesterday and we spoke in the past about roads and road upgrades. And our understanding, and I think you have said this publicly before too, you, Glen Fornan, AGDC, that the project plans to pay for a number of upgrades and repairs to roads. Can you—.

Or maybe Mr. Richards might be the more appropriate person— explain how exactly that would work and which roads we're talking about? Are you talking about just the access roads that are sort of immediately adjacent to the project, or are we talking about things that are a little more far afield like the Richardson Highway and the Dalton Highway? And if so, um, you know, there are a variety of federal requirements when you do those kind of— that kind of road maintenance. Would you be doing it on your own? Would you be doing it as a contractor in the aegis of the Department of Transportation?

How would you actually accomplish those upgrades if those are the roads you are going to do, or is it just access roads immediately adjacent to the project? So thank you, Senator Dunbar.

We have a commitment and an expectation that the project will repair and maintain any damage or any use to roads that are caused by the construction activities of the project. And the first way that that's handled is our construction contractors include that in the price that they bid for their work of construction on the project. Those bids include crews and time and labor for actual road work, road repairs. We also anticipate entering into a highway use agreement with the Department of Transportation that will help basically create the details for some of the things you are asking about. And so that is the general premise of the project is that we are planning to and have already counted financially for repair of all road use.

But maybe with that, I will ask if I can hear from Frank Richards on that point as well. Mr. Richards?

Here, um, thank you, Madam Chair. It took them a while to unmute me, but, uh, again, for the record, Frank Richards, VDDC, through the chair, Senator Dunbar. Again, what Adam described is a highway use agreement that has been the concept from the initiation of the project with DOT, and this is really around not only the permits required to be able to gain access to the highways and driveway permits and oversize and overweight permits, but it's also around the operational and maintenance needs during the project itself. So, yes, specifically about the individual highways, and so you can envision that this project will run from the North Slope through South Central Alaska, so it will include the Dalton Highway, it will include portions of the Elliott, it will include the Parks Highway, and even portions of the Seward Highway for any materials that will be hauled from directly from, from Seward. But also it will include the Kenai Spur Highway, and this is an area where the Kenai Spur Highway currently runs directly through the LNG plant location, so it will need to be relocated.

So work that we had done previously came up with an alternative design and ultimately cost estimate to be able to accomplish that, and that will be borne essentially by the project to be able to design and construct that highway to National Highway System standards so that DOT would be eligible to receive that road once it's in its final form and add it to its inventory of highway responsibilities. So that is, uh, again, one of the— at the far end of what was needed to make this project, uh, work with DOT in a cooperative manner to be able to address the transportation impacts during construction but also long-term in terms of what will be necessary for the project to work with DOT to make sure that ongoing operations and ongoing construction projects are sequenced and timed in such a way that it's not as directly impactful to the project. Because it's going to be very, very hard for a pipeline construction project to be able to be working directly through a highway construction project. Construction zones that will impact the cadence and ultimately the cost of that project. So, the cooperation from the Department has been exceptional.

The communications are good. As you know, the Commissioner of the Department of Transportation sits on as a member of the AC/DC Board. So, we are actively engaged with the Commissioner and his team to make sure that the DOT is highly aware of the actions and the planning efforts necessary to execute this transformational project. Follow-up, Senator Dunbar. Thank you, Madam Chair.

So, uh, you mentioned that there is a cost estimate you have for the portion in the Kenai. Could you share with us what that cost estimate is, and then your other cost estimate, the total amount you expect the project to spend, both through the highway use agreement but then through any other necessary expenditure of funds. And then also I'll say, you know, the governor proposed a surcharge on oil to pay for upgrades and more repairs to the Dalton Highway. We have now included the governor's proposal in this bill. Do you feel that a repair fund like that to the Dalton Highway would assist the project in the needed upgrades.

Mr. Richards. Is that directed to me? Yes, Mr. Richards. Okay, thank you very much. Senator Dunbar, through the Chair again, the work that AGDC undertook for the design of the Kenai Spur Highway was when the project was given to us by the producers where they provided 75% ownership rights in the Alaska LNG project to AGDC.

They gave us then the responsibility for establishing what was going to be the Kenai-Spurt Highway relocation. So it was affectionately at that time called a spaghetti map, and the residents of the communities of Kenai and Nakiski were very upset because there was no determination on what was going to be the preferred relocation route. So we took essentially essentially working with a local Alaskan road— highway design firm to be able to come up with the alternatives and ultimately landed on the relocation that goes essentially directly around the LNG plant site. That— at that time, we asked them to provide us with a Class 3 cost estimate. It was in the range of about $40 million to relocate the Kenai Spur Highway around the LNG site, and that was going to be constructed under a design-build concept.

That is something that we included in our package of information when Glenfarm became the project lead, and so that now falls within the working responsibilities of Glenfarm's engineering, procurement, and construction contractors to be able to move forward with that effort. And I think that that is still being discussed because again the main focus of recent times has been around developing the pipeline in Phase 1 and updating the cost estimate to accomplish that. In regards to the overall maintenance and operations cost that will— it will take to be able to accomplish this, I think that there's an ongoing discussion now with the Department of Transportation and specifically looking at the maintenance hours that they are currently staffed for specifically, let's say, on the Dalton Highway. And if they're only staffed for 12 hours a day but likely will need 24-hour days, uh, operations or maintenance or avalanche control, then we're going to need to be able to put a cost to that and then identify the best way to be able to accomplish that. DOT, as you know, has challenges in hiring of operators, uh, for their ranks, uh, specifically those in those camp locations on the Dalton Highway.

So it'll be an opportunity to be able to look for ways to best resource that through either DOT direct hires or through contracting efforts, or as Adam described with the pipeline contractors. Follow-ups? In regards to the Dalton Highway, if I should continue, ma'am? Yes, please. Please continue.

All right. In regards to the Dalton Highway, again, in my former life as a DOT Representative, the Dalton was one of our primary focuses to be able to have it in as good a condition as possible. And, um, in the 2010s and early 2010s, we put forward a significant amount of money that was appropriated by the legislature to help improve the Dalton Highway and resurface it, and as well as to improve the maintenance on it. And I understand that through the challenges of the budget, that that is not kept up. So the opportunity to be able to have a funding source necessary to be able to assure that the maintenance and operations teams along the Dalton Highway have sufficient funds will be fabulous because that is really the lifeline for Alaska and the oil fields that provide us with the revenues that provide us significant tax and royalty revenues, but also inputs into our permanent fund.

So having it in the best shape as possible is very beneficial for oil and gas development. The production of oil and gas and ultimately the operation of the Alaska LNG project. Brief follow-up, Madam Chair. Follow-up, Senator Dunbar. Thank you, Madam Chair, and thank you, Mr. Richards.

That's a very— that was a very good detailed answer. I just want a little more specificity on the— you talked about the $40 million for Kenai. I understand that the overall maintenance operation costs are sort of currently being discussed with DOT, but could you give us a rough order of magnitude? Are we talking tens of millions of dollars? Are we talking hundreds of millions of dollars?

Could you, could you provide us with that?

Uh, through the chair, Representative Ben-Bar, I don't have that number right off the top of my head, but realizing that the DOT's maintenance and operation budget, if I remember correctly, is less than $100 million statewide, and that's for all facilities, highways, airports, buildings, etc. So in regards to the highway operations needed to keep the roads in operational good condition during construction, it would be significantly less than that. So significantly less than $100 million. Thank you. Thank you, Madam Chair.

Senator Kawasaki. Yeah, thank you, um, Madam Chair. I had a question. It's regarding the H version of the bill. Uh, in Section 9 of the bill, there was an addition about the Administrative Procedures Act, and specifically it talks about Will it have— will you be able to apply competitive bidding principles and provide vendors in state or to provide for vendors in state?

And so they have the 5% rule for in-state Alaska bidders. And I know that you said that at a prior meeting that you've already got your EPC contractor. So I'm curious, will you be able to, under that EPC contractor, be able to reflect your competitive bidding principles and like a veterans— Alaska veterans preferences, those types of things?

Mr. Prestidge? Yes. Senator Kawasaki, thank you for that question. Just to reiterate One of our core principles for Glenfarn, for 8STAR, in pursuing this project in Alaska is to prioritize working with Alaska-based companies, Alaska Native corporations, and hiring Alaskans for this project. And that's a foundation that goes to the Alaska Advantage principles in the joint venture agreement between Glenfarn and AGDC, which AGDC has presented on before.

And so it goes back to that very foundation. In reinforcing that, and I guess backing up that commitment, we have done dozens and dozens and dozens of meetings with Alaskan contractors. We put on a contractor summit and had over 120 Alaskan contracting firms hear about the project. That was back in October. We conducted We conducted bidding processes on about 10 different scopes of work on the pipeline and had many, many Alaskan contractors involved in that.

We've appointed groups of primary pipeline construction firms for the main spreads of the pipeline. We've— and we've— in those appointments, we've included several or for multiple Alaska Native corporations to potentially work with those main pipeline construction firms. In addition, many of the additional scopes of work, such as early works, logistics, and many others, will include Alaska corporations or Alaska contractors. So that's very important to us. On the details, you'll have to Pardon me, Senator Kawasaki, I'd like to get a little bit more familiar with the exact details of how the language is written in, uh, in version H. However, um, just on a principle basis, uh, we're committed to do that.

At the same time, our principles of delivering gas at a low cost to Alaskans is, is an important counterbalance. So as, as with anything, uh, there are two sides to the equation. Uh, so we wouldn't want to say that we will hire Alaskan firms or hire Alaskans at all costs because eventually that could become prohibitive. And so we want to find the right balance and that's what we're endeavoring to do. Follow-up, Senator Kawasaki?

No, I guess we'll hear a little bit more. And again, it's Section 9 of the new bill, version H. Senator Clayman. Thank you, Madam Chair. Mr. Prestidge, you describe one of the components of the current version of Senate Bill 280 the 3-tier tariff, and your words, I believe, were that it was too burdensome on the project. So let me ask, if we pass Senate Bill 280 in its current form with these 3 tiers of tariffs at 55 cents, does that mean Glenfarm walks away from the project, or where are you if this bill is what we pass?

Senator Klaiman, that's a challenging question. To answer because I can't foresee exactly what the outcome would be. I know that we would have to take into account a tax that is significantly higher than, frankly, what we anticipated on this project when we came into it. When we looked at assumptions and considered guidance from industry experts, from Wood Mackenzie, and in general, comparisons to other similar projects in North America. And so quite frankly, we would have to reexamine the entire project and come up with a plan on how to take it forward.

And so I don't know what the time— what timeline that would require or what the outcome would be. Follow-up, Senator Clayman?

Follow-up question on that particularly. If this is the measure that the legislature passes and the government— governor signs, would it be fair to say that you might not start construction right away, but you might stay around and try to work a different package that was better for purpose of the project going forward?

Senator Clement, I think that is one potential outcome.

Follow-up, Senator Clayman? So let's take another scenario. I mean, we're in this 15-day window till the end of session. Another scenario is let's say the legislature, they don't adopt Senate Bill 280, they don't adopt what they're working on in the House, they don't adopt what the governor proposed originally. We can't agree on anything, and what you have is the existing tax structure.

I assume, well, So is Glenfarm ready to go forward in that circumstance as well? Senator Clayman, that also would require a careful reexamination of the project.

When we viewed the governor's bill with the 6 cents per MCF day, per MCF on the pipeline, we viewed that as— fair in terms of industry comparisons to other projects, probably a little bit higher than what some of our competing projects pay to export LNG out of Canada. But, but, but a number— a tax that would allow the project to go forward quickly and to go to FID as quickly, quickly this year. And so that's the assumption that underpins that timeline and the cost of gas, quite frankly, that we're negotiating with NSAR and other utilities and buyers in Alaska. And so a significant change from that would, would, like I said, require significant reexamination of how we take the project forward. Follow-up, Senator Clayman.

So is it fair to say, at least from Glenfarm's perspective today, that the, the only structure that's under, under discussion going forward that Glenfarm is confident that they could go forward and get to FID as fast as possible is if we adopt the governor's bill just as written with no changes? Senator Clayman, um, what I'll say to that is that this is a, this is a very challenging project, um, and it has been, as, as you're all very well aware, uh, decades of different attempts to try and take that project forward. We came into this project a little more than a year ago believing that there is a way to take the entire project forward and particularly to solve the need for Alaskans by taking the pipeline itself forward first, which is a, which is a challenge, as anyone can look at and realize, you know, how the limited capacity on the, on a large pipeline that it will use. And so there is a, a window of kind of financial feasibility that is needed in order to make phase 1 work. I will say that in response to your question, is, is only the governor's bill, is that the only version that works?

I'd say there are other things. Answer that question, I'd say is no, because there are other elements that we believe can be added and we have basically discussed and agreed to add. Some of those include additional community benefit agreements and arrangements, community impact fund to compensate with cash for actual disruptions to communities from construction, Fairbanks Spur Line, which has been very significantly discussed But we have agreed to incorporate that as— or we are supportive of incorporating that as part of the project with certain conditions around permitting and regulatory approvals. And then last, we've agreed also that we think it makes sense to have— to allow municipalities to participate in the equity investment of the project alongside the State of Alaska's 25% or within the State of Alaska's 25% equity options. So those are, those are elements that I'd say are additional to the governor's bill that we would be supportive of and that we think would still facilitate the project going forward successfully and quickly.

Thank you. Senator Wilkowski. Thank you. Just, just to clarify, you don't need us to pass legislation for permitting or anything anything else to build this gas line? This is just all about the bill from the governor, the bill that you're seeking from us is just economics.

You don't need any other legislation to go forward on this, is that right? To my knowledge, Senator Wilkowski, there's nothing else needed. Okay. Follow-up. Follow-up, Senator Wilkowski.

So just getting back to the numbers. So $46.2 billion project. The DOR has been assuming a debt-to-equity ratio of 70/30, is that right? Is that what you're assuming? It's in— I think that's a good assumption.

It's within, you know, plus or minus 5 or 10%. Okay. It will— and pardon me, Senator Bullockowski— some of these things are not final yet. And so while we're negotiating with banks and equity investors, numbers like that in particular can move and shift. And so I also want to be careful to not create an early expectation among the committee or the public.

But I'd say that 70/30 is a traditional debt-to-equity ratio for a project like this. Follow-up. And what, what is the cost estimates that you're using for the gas treatment plant, the gas line, and the LNG plant?

So as I've stated, we conducted the FEED on the pipeline, and so we have a, we have a updated Class 2 estimate on the cost. What we are relying on for the remainder of the project is the engineering that was performed prior to Glenfarn's participation in the project. It was conducted by very well-qualified engineering and construction firms, and then we essentially have escalated that with inflation. So, so what are those numbers for gas treatment plant and gas line and, and LNG plant? Pardon me, Senator Wilkowski.

I don't have those numbers in front of me to present right now, and we'd have to come back to you on that. Would Senator Wilkowski— Frank Richards is on. Sure. Mr. Richards, can you articulate those numbers?

Thank you, Madam Chair. Again, for the record, Frank Richards, AGDC, and I believe the number that Senator Wilkowski is referring to is the inflated numbers from Department of Revenue. Is that correct? Senator Wilkowski, I, I'm just trying to figure out the economics of this project because I don't have the numbers that I believe I need. So I'm asking you what the cost of the gas treatment plant is, the gas line is, and the LNG plant— the three separate numbers, the cost estimates.

Understood, Senator Wilkowski. Again, through the chair, again, based on what ATDC had previously provided, and I think would have been upgraded by, or completed by the Department of Revenue is— was around a $44 billion project, now estimated around $46 billion. So in round numbers, again, the gas treatment plant is between $10 to $11 billion. The pipeline itself is approximately $16 billion. So that's $27— $26, $27 billion.

And then the liquefaction facility was A little bit north of $20 billion.

Follow-up? Thank you, that's great. Okay, and then what, what is the return on equity that you're estimating?

Is that for Mr. Richards again? Madam Chair, Senator Wilkowski.

Sorry, Madam Chair, was that directed to me? Can I, can I ask a question? Senator Wilkowski. When I ask AGDSC I see a question. Are you answering on behalf of Glenfarn?

Are you like— should I ask that question separately? Are you— or will I get the same answer if I ask Glenfarn as if I ask AGDC? I guess I want to just clarify that. Mr. Prestidge, how would you answer that question? The way I'd answer that question is that we're seeking industry standard infrastructure rates of They are very different from a lot of other industries.

Project finance rates of return rely on being stable and low risk, and therefore they are relatively lower compared to a lot of other industries. If you will pardon me, Senator Wielechowski, I think I would ask that that question be directed to some of the committee's advisors to provide examples of what industry standard rates of return for project finance infrastructure projects would be. Follow-up? Yeah, and I would do that, except the problem is we did ask our advisor to calculate some corporate income tax rates, and it showed that you had a 50% return on equity. Should I rely on that number?

No, that's extremely—. What's your return on equity that you're expecting? Significantly lower. What's your return on equity? I can't say that to the committee right now.

Wow. Okay, well, Mr. Richards, can you answer that question? Mr. Richards.

Through the Chair, Senator Wolkowski, again, what we provided in the testimony from both AGDC and from the Department of Revenue was based on a 10% IRR.

Follow-up. Is—. Okay, so you are saying that for this project you're anticipating a 10% internal rate of return?

To the Chair, Senator Wilkowski, that's what we have identified in the model that has been presented by the Department of Revenue. Follow-up. And, and so how about return on equity?

Mr. Richards. Senator Wilkowski again. Sorry, Madam Chair, Senator Wilkowski. Through the Chair, when I referred to the 10% rate of return, that was the return on the equity. Follow-up, Senator Wilkowski.

Yeah. And just so I can understand who the consultants are working for here and who everybody is working for is— so we've got the state, Department of Revenue, and then you've got AGDC and Glenfarn. Is the State Department of Revenue working directly with Glenfarn to coordinate the analysis, the numbers on this, or are they providing separate numbers? And you're asking Mr. Richards? Yes, I'm asking Mr. Richards.

Okay. Mr. Richards?

Thank you, Madam Chair. Senator Lukoski, through the Chair, the Department of Revenue has been working with AGDC essentially soon after our creation in developing the model that they've been presenting to the committee. This has been a model that has been in development now and modified over the last decade or so. It's been peer-reviewed by other outside consultants as well as in consultation, again, formally when our partners were with the producers. So the validation of the model has been set.

The accuracy of the model is good. The inputs that Department of Revenue is using is coming from collaboration with AGDC. Follow-up. Is, is AGDC or the State Department of Revenue sharing that model with Glenfarn?

Through the Chair, Senator Wilkowski, again, the outputs of the model have been shared with Glenfarn and the public. Follow-up, Senator Wilkowski. So here's my concern. This is basically a negotiation, a public negotiation, and the state's trying to get as much as we can, and Glenfarn is trying to get as much as they can. And do you identify that as being a conflict when our state DOR, who is tasked with following our constitutional obligation to get the maximum value for the resources, working with basically the— in this case, I know we're aligned on a lot of things, but in this particular case, they're trying to get as much as they can and we're trying to get as much as we can.

Do you see any conflict there with the state Department of Revenue basically consulting with and advising and providing, sharing data with our competitor, basically? Senator Bolkowski, may I step in? I want to clarify, I don't view this as a negotiation where Glenfarm is trying to get the most that we can out of this. I think that that would not be a successful way to try to take this project forward. Our objective is to have the lowest cost gas gas for Alaskans and have certainty on the project.

If we were trying to, um, make the most money we possibly could out of this, uh, you'd see there are ways to do that, which would include having a higher cost of gas for Alaskans. That's not what we're trying to do. We— this needs to be a project that goes forward fairly. The RCA will review and approve our gas sales agreement, so there's a high degree of transparency there. There's also— just want to remind everyone the State of Alaska investment option, which allows the State of Alaska at FID to have the option to buy into the equity alongside all of the other investors.

And so there's an extremely high level of transparency and financial analysis that will occur at that point. And so, quite frankly, we're having a lot of these conversations anticipating that the State of Alaska will have financial advisors and a full review of all of the project's financials. And I'm going to be back in front of you at that point, I would imagine. And, you know, I need to be able to have a transparent and genuine conversation at that point where you recognize we haven't come into this project looking to make as much money as we possibly can on the backs of Alaskan ratepayers, because that's not our objective. Follow-up, Senator Wilkowski.

I appreciate your your statements, and please don't take what I'm saying wrong in any way. But please understand that the Senate version G will generate roughly $600 million for Alaskan communities, and the version the governor is proposing will generate $74 million. And so we're talking a wide gulf here. And somebody is going to make that difference there, that $500 $26 million difference. And, and that money goes somewhere, and it goes to your internal rate of return, or whoever ultimately buys the equity in this, it goes to their rate of return.

And it's as simple as that. So, so it's not— I know, I know you're not a charity. Are you organized as a charity, a nonprofit? I don't think you are. Are you?

No. And it's— you have a fiduciary duty to make as much money as you can for your investors, is that right? Yes. Well, I know actually, I don't know if we have fiduciary duty around a public corporation, but yeah. Okay.

Um, Senator Wilkowski, um, one more and then I'm going to move on. So a couple other senators are waiting. Yep, I understand. What is the— the governor has said publicly multiple times that he expects the cost of gas to Alaskan consumers to be between $4.50 and $4.75. $1.5 Billion.

Is that an accurate— are those accurate numbers?

Senator Murkowski, I think the final cost, the final price of gas to be delivered under the full execution of the project, which includes LNG and 3.5 approximately BCF a day flowing of gas Those are still being finalized, but what I can tell you is our contract with NSAR does anticipate a price sold to NSAR under a 30-year agreement if the entire project were built out, and that price is within a few cents higher than what— than the number you stated there.

Senator Myers. Yeah, thank you, Madam Chair. So my understanding is that the conversations around the modeling of DOR primarily been conducted by Mr. Begich. Is he online? Could he chime in on this?

Mr. Begich is online. Mr. Begich, welcome to the committee. Senator Myers has a question for you.

Madam Chair, thank you very much, and Senator, on the various comments that were made, it goes to the crux of the question that Senator Wilkowski asked. The modeling as described by Adam and Frank, have been done by the Department of Revenue. But let me make sure there's a clear understanding of how the ATV works. The alternative tax— well, AVT, the Alternative Volume Metric Tax— whatever you put on that is going to the consumers. And I want to clarify a point that was just said by Senator Wolekowski, that if you lower the tax It does not go to the return or the profit or anything of this project.

It goes away. It is not charged to anyone. It just goes away. That is a pass-through operational cost. So if you raise it, you are raising it on two things.

It goes to the consumer. It will go into the NSR rate. The true gas rate, MEA rate, you pick it, they'll pay it. That's how that is done. It's an operational cost.

Second, the higher you raise that, the less competitive we are when we get ready to export. Export is based on pennies on the dollar. Our competition is Canada right now. And they have figured this out and are moving rapidly to garner as much Asian business as they can. In order to hold the market.

On top of that, the issue that people are laying out, and I understand the concern, and I just want to make it very clear, this money that is difference between the 6 cents and the 55 cents that you all are proposing on the final project, that money, if you don't— if you keep it at 6, does not go— that difference does not go in the pockets of anybody. Except the residents of Alaska. They do not pay it. And it also creates a competitive nature for us when we deal with the export in the future. I want to— there seems to be confusion that every dime you give up here, every penny you give up, somehow HSTAR profits more.

That is not the case. That is not accurate. And I want to make sure that's clear. On the modeling, and I'll clarify what Frank is saying, And that is Frank represents AGDC. AGDC, under their confidentiality agreements between them and Glenfarm, are able to give certain data to Department of Revenue, which then they model.

And then Revenue takes it to one more step. As you know, with the heat charts they have presented to you time and time again, shows you variations on cost of the product, meaning the gas off the slope. And the construction costs with various cost overrun models. Now, cost overruns up to several hundred percent. They give you that to give you the variance of what could happen under certain circumstances.

On the cost issue, which I know keeps being brought up, there are variances, and you've heard Glen Farn, AGDC, AGSTAR say that they accept the Department of Revenue's numbers recognizing they have done some inflation adjustments onto it. Where that lays in the future, as they've said here multiple times, specifically to specific questions by senators, that on cost overrun, they will protect the consumer on that with language. They're happy to do that. On several sections of the bill, maybe Section 12, that lays out caps That does not work. You're, you're, I understand what you're saying, that the governor said certain things, just like politicians may say certain things that may not be as firm and accurate because they're in the press conference or you all are in some event.

What we're saying is the price at the end of the day of the product, if everything goes as we anticipate with export, export lowers the cost to consumer by increasing the volume lowering the cost of the capital over the Alaska consumer. We are anticipating, based on the models, $5 to $6 in that range. Uh, but prior to that, it's just pipe. It will be competitive. It may not be exactly the same as export or import that may be required.

It will be within the range of acceptable levels. The difference is— the difference is very clear. If you make a decision to delay the project, two things will happen for sure. The cost of the project will go up, guaranteed. Second, the conditions we're in and the competitive nature will change radically.

And what I mean by that is Canada has figured out we are their competition. First to market controls the market. We have an opportunity to do this. The conditions that we're working in will change. So I get the questions and happy to whip through some of these with you, but the caps don't work.

You're setting artificial numbers. And you may say, well, the governor said it. Okay, governor said it. Doesn't mean it's the market. We're talking a multibillion-dollar project that the state of Alaska residents will gain billions of dollars in savings over time if we get going.

So I'm— I understand the questioning angles here, but we're here on the same goal. If anyone on the committee objects to building a pipeline, okay, we get it. But I don't think so. I think we're all on the same page. And so we're here to work with you.

And again, construction cost is not a variant on the price. The price is— the ABT tax is to control the cost of the product to the Alaska consumer. And to get us competitive in the world market on a project that has been kicked around, talked about, multiple versions for 40 to 50 years. So that's— I'm sorry, Senator, I didn't mean to ramble on there and get out of chair, but I, I'm listening to this discussion, and if you want to get to the point of what works, your price model per unit does not work. We want to be competitive in the world market.

Thank you, Senator— or Mr. Begich. Uh, back to Senator Myers. Did you have a follow-up? Yeah, thank you, Madam Chair. So, uh, Mr. Begich, you've identified the Canadians as our primary competitor here, and I'm curious, uh, if you have numbers available as to what the Canadians are charging to East Asian customers for their gas.

Mr. Begich?

Madam Chair, Senator, I'm going to turn to Frank. I know Matt has presented these in the past, and I can't— I think Adam can, but let me pause for a second if I can and then come back based on their answer, if I can, to Adam or Frank to give some very specifics if possible. Mr. Richards.

Thank you, Madam Chair. I apologize, I do not have the price that LNG Canada is charging to its customers. I'll defer to Mr. Prestidge. Thank you. Mr. Prestidge.

Uh, Senator Myers, what I'll, what I'll say to that is, uh, we have some indications, or we have some— we do have information and understanding of where the general market is, um, for gas coming out of Canada. It's not something that I feel comfortable representing to the committee on because I'm not— that's my purview is not as an industry analyst. I will say our view is that Alaska LNG exports can be competitive with that under the right conditions. And those conditions include the tax arrangement that we've put forward. I will note that we've heard from Gaffney Klein and multiple scenarios that the Canadian projects benefit from a lower tax arrangement than even what is proposed in the governor's bill.

And so that's certainly something that I believe they use to their competitive advantage. Senator Myers, we'll submit that question to Mr. Fulford and ask him for a prompt answer. Appreciate it. Did you have a follow-up? No, right now I am.

All right. The next person on my list is Senator Dunbar. Thank you, Madam Chair. And I'll just note, um, British Columbia has a personal income tax that goes from a rate of 5.6% up to 20.5% for income over $265,000. With that funding, they can both give a subsidy to a pipeline project and pay for universal healthcare and a bunch of other things.

And so, Senator Myers, if you want to work with me on that, I'm open to it.

But, uh, and yeah, so they are able to provide a variety of subsidies with their income tax money. But my question is for, um, is for Mr. Begich as well, because I know he's online. Um, and I guess this is also for you, Mr. Prestige. And so two questions. The first is, um, we know that, uh, it's true, I mean, you said that if we, if we increase the volumetric tax, that price will be passed on to consumers.

But when the project is at full capacity, 95% of the gas will be exported. So I hope you're not, and I don't think you were suggesting that the volumetric taxes applied to the LNG portion or to export would be somehow borne by Alaskan consumers. I mean, 95% of it will go into the international market and we hope it will be competitive. But I mean, that's certainly the case, right? And then the second question is, so, Mr. Begich, you've made statements in the past.

I believe you said they were taken out of context, but talking about maybe $53 billion or $57 billion for the all-in cost for the project. And I want to give you a chance to clarify that. And I also want to ask you, Mr. Prestige, is if you've done the additional feed, as you said beginning, why not share those numbers with us? I mean, if, if they are a bit higher, that's a good argument for this tax cut. That, you know, I don't really understand what competitive advantage you get by close holding the numbers for the cost of construction when it's such a massive project and the request is for such a large tax break.

So I know there's a couple of questions, and Mr. Begich, if you could answer some of those, I appreciate it. Yes, Senator Dunbar. It might be helpful if you just did one at a time. Senator Begich, do you recall what Senator Dunbar's question was?

Madam Chair, Senator, I do. He had two questions for me, one on the price that I've stated, but also on how is the volumetric tax qualified on the three components of the project. So the pipeline, for your first question, Senator, the— again, this is Mark Begich. On behalf of the state governor's office as a contractor. The pipeline bears the cost.

You're correct. What goes on the export is done to the export market. But again, when you add to the export market too many pennies—and I say that literally, pennies—to the price of what goes on, that product that we sell in an open market that is not determined by what we think the price is, but by the market conditions. If you put that price too high, we're not selling the volume we need, which then has a direct impact to lowering the cost to the consumer. But you're correct on the tax.

The tax is on the pipeline. The pipeline is for the consumers of Alaska. But where we get the biggest benefit is when we're exporting. And if we have that price on the export too high because we've added a tax that's beyond what the market can bear, and we end up having a higher cost to our consumers because we don't get the volume. I don't know if that answers that question for you, if you want to follow up on that before I go to the second one, but I'm happy to pause for a second, Senator.

No, that's fine. Thank you.

I'm sorry, could you go on to the second question, Senator Begich?

Yes, Madam Chair and Senator, they mute me every time I finish my last word, so I apologize. I have to wait for someone to unmute me. To your second question, which was the number I've used in a presentation among a group of former legislators, many that you have served with and others have served with, in a discussion, it was hypothetical based on a 25% cost increase. And I did that to Worst case scenario, in my view, this is my view, not based on an analysis done by Department of Revenue or Glen Farn or AGDC. I just took the number that you all are working on, added 25%.

And why did I do that? Because they were curious, which was a very fair question, if the state bought into the project, what would be the equity position? What would be the maximum cost? And I was trying to give them a high number just so they— it's not as high as they think. And what I mean by that, is, let's just say we'll use the number that Frank just said on the pipeline, $16 billion.

If you take that number, the assumption is, well, the state has to come with 25% of that. Incorrect. This was actually the discussion we had on that call. Uh, $16, it is not correct. You have to take out the debt, and then what's remaining is what is equity that then the state can buy into at 25% or up to 25%.

I calculated just using a number to help them illustrate what these costs could be to the state if they decide to invest, and that's how I come to the number. Did that answer your question, Senator Dunbar? Thank you, Madam Chair. But if I could ask a brief follow-up to Mr. Prestige— Mr.

Prestige, um, on the— is it Prestige? Prestige. Prestige. Okay, I apologize. Mr. Prestidge, so if you have updated numbers on the cost, why not share them?

I mean, if they are higher, that's a good argument for why we need to have a tax cut to adjust. So why not share them? I don't understand. Senator Dunbar, I agree. First, I agree with what Mark Begich is saying.

Describing the competitiveness of the LNG market. It really is a market where, you know, cents, nickels can, can make a difference between a successful project or not. And so there's a very narrow and intensely negotiated competitive window that goes into the answer to your question of, of why not disclose that. First of all, Again, when the state has its option to invest equity, those numbers will be crystal clear because the project will have FID'd and will be known and those numbers will be final. So you have got that to basically— you have got that to hold us to some accountability, if you will.

But more importantly, where the project is right now, is in the final stages of negotiating many commercial elements to the project. And so those commercial elements include this— the cost of gas being sold into the pipeline, the cost of gas being sold out of the pipeline to domestic buyers, the cost or the price of LNG being sold to buyers globally, the price that contractors are bidding for all of the different scopes of work for constructing the project. Each of those is in, I'd say, late-stage negotiation, but we're still closing those deals. And disclosing our cost estimates and disclosing what we have on our side of the model puts the project at a competitive disadvantage in each of those negotiations. And I can tell you, like, I've lived it many times where I will sit there I'm sitting there often on a call or in a meeting and I will listen to the counterparty try to back-calculate what they think the cost of the product is that we're selling using what they've seen as public information.

And it creates a real challenge for being able to commercialize the project. One last follow-up, Madam Chair. Thank you, Senator Dunbar. One last follow-up. Thank you.

What you— if we're going to understand, if we're going to get all the numbers after FID and we'll understand the cost. Does it make sense for us to then pass some version of the governor's bill with a 1-year— basically with a 1-year expiration date? That is, we pass something, we see the actual numbers, and we come back next year and see if what we passed was the right thing. Senator Dunbar, I, uh, I understand, uh, the premise of the question. Again, it's a challenging project.

There are so many moving parts. One of those moving parts is that we do need lenders to lend into the project and equity investors, and they need to know a certainty or they have a predictability to the loan or the investment that they're making where they can see the next 30 years with some certainty, and that's how we're going to pull together the many billions of dollars for this project. I will say, for what it's worth, you know, and I know this is unsatisfactory for for various reasons, but we have expressed a willingness to enter into NDAs. I understand that is not tenable for many of the committee members. We have expressed an openness to executive sessions to be able to provide this information under more confidentiality protection.

So it really is that confidentiality protection that— and preserving that competitive of privacy, I guess, if you will, that is driving our concern here. And we are open to finding ways other than public committee hearings to discuss project costs. Thank you. Thank you, Madam Chair. Mr. Prestidge, for you to give us information in confidence, in confidential executive sessions, puts us at a real disadvantage.

Because now we have to craft a bill based on what you've told us privately, and yet we can't tell the public what those numbers are. It doesn't work very well. Senator Wielechowski? Yeah, thank you. I want to get back to some comments that I heard from Mr. Begich, and that is that the cost just gets passed through and they don't impact the internal rate of return.

If that's the case, just go ahead and build the line. Because the numbers that, you know, without us doing anything, because the impacts are disproportional. What we've heard, or what we know, is that if this, out of, especially if it's $57 billion, which I think we all know is probably where the number is, if not higher, The state and the communities will lose $1 billion per year in property taxes.

And, uh, and, and so the governor's plan would drop that down to $74 million. And, um, and the state share of that is $300 million roughly. And, uh, and so that comes out to, uh, every man, woman, and child in the state of Alaska, uh, giving up, whether it's in a PFD or whether it's education funding or snowplow operations, roughly $500 per Alaskan. In exchange for what we've heard from DOR is 43 cents, a 43-cent cut per MCF. And we've heard from— we got my office contacted NSTAR and we found in communication with them that the average Anchorage consumer uses about 128 $128 MCF per year.

And so when you multiply $128 MCF by 43 cents, that comes out to $55 a year. The state of Alaska is asking us— or the governor is asking us to give up a billion dollars for our communities, for the state of Alaska, $300 million for the state roughly, for $55 in, in reduction in fuel prices. Um, the average family of 4 and that's per household. The average family of 4 is giving up $2,000 of state money, just state money. That's not even including local property tax money to get $55 in cost savings.

That's not a good deal. And so from my perspective, I feel perfectly comfortable going back to my constituents and saying, you know what, we'll take the gas instead of at $4.50, tack on 43 cents, so it will be $4.93. $1.9 Billion. That'll still be great. We'll still take that.

But we're going to save $1 billion in property taxes. I think that's a good deal since it doesn't impact your internal rate of return. It doesn't— it just gets passed on. Go ahead and build the gas line. And I feel perfectly comfortable going back to my constituents and say, you know what, we'll pay 43 cents more, but you're going to get $500 per person more in value.

And the communities will get a heck of a lot more than that.

My question, Madam Chair, is the cost— so I want to break this down. So cost of gas, what are you estimating the cost of gas to be that you are able to purchase it off the North Slope? Senator Wilkowski, I believe public cost estimates for gas off the North Slope have been in the range of $1.50 per MMCF. Follow-up. Okay.

And then what are you projecting the cost of the tariff in Phase 1? For the gas line and the GTP plant? Senator Murkowski, that's not a number that I believe we've made public yet. That number would be made public once we have executed an agreement with Enstar and that agreement has been filed with the Regulatory Commission of Alaska. Okay.

I'm just trying to understand the governor's $4.50 number. Price for gas. And so can I assume that it's less than $3?

Under the full execution plan, the full utilization of the project?

Yes. In that range. Follow-up? And— but that's not what the governor said. He didn't say— he didn't say in his piece that he put out that was in Phase 2.

He just said you're getting gas for $4.50, $4.75. He didn't delineate between Phase 2. Are you saying that the governor is wrong and that you don't get that in Phase 1? Is it higher than $4.50 or $4.75 in Phase 1? Senator Murkowski, I don't recall the governor's specific comments.

I think the model we've designed is a model that delivers gas to Alaskans under a Phase 1 pipeline. It gets the pipe built. And then once the LNG facility comes online and utilizes the full capacity of the pipeline, then the transport cost per unit on the pipeline goes down significantly. Follow-up. So what is the cost to Alaskan consumers under Phase 1?

So, Senator Murkowski, that, that will be submitted to the regulatory commission as soon as possible. Follow-up. I'm wondering if Mr. Richards can give us a number. What is the cost estimate? We've heard from the governor, it's $4.50.

He didn't delineate between phase 1 or phase 2. What is the number to Alaskan consumers for phase 1 gas? To the burner tip at the consumer's home. Mr. Begich.

Madam Chair, to the senator, first off, I think you've heard from Adam regarding the rate structure, which will be— they're negotiating with AmStar as we speak. That will be public information. The public have all the time in the world to have that conversation. But to your specific question, uh, Senator, okay, he didn't do any aid. Okay, however you want to say that, it's not going to be $4.50 when the pipe is only the pipe.

Does that help clarify that question? Senator Wielechowski, just want to know what the number is. That's your question. You're challenging the governor. I just want to know what the phase one number is.

The governor said $4.50. I just want to know what the number is. Is he right? Is he wrong? What's the number?

The number that you're, you're quoting and restating from the information that you have from the governor at $4.50, I think that's what you said, that will not be the price that consumers will pay if it's only a pipeline. That is a fact. Today, consumers pay on the new contracts out of Cook Inlet $13-plus, and they're going up from there, as you've heard from the president of Enstar. So if you're trying to say the governor wasn't forthright, I can't— I'm not going to give any comment on that point. You disagree with them, you disagree with them.

But the $4.50 is not for the Phase 1 type only. So hopefully we can stop that battering back and forth, frankly, Madam Chair and the Senator, because that's just a useless conversation. If your question is— if your concern is how will this project compare to import fuel and the comparison on price, if that is your question, I'm happy to answer. You have two choices. If you import, there's one thing that will surely happen: the state will get nothing in revenue stream.

Two, the Alaskan consumer will be subject to foreign entities, a concern you stated in your S version you keep bringing up. So We are now subject to foreign natural gas. Third, we will not create jobs for Alaskans. Four, we were dependent on world stability, which is not really in the world these days, versus Alaskan gas, jobs for Alaskans, value for Alaskans. If the gas line completes the way we anticipate it with export, it will save consumers $1,450 per family in the South Central region per year.

That's real money to consumers. And the last statement I'd make on this: will it be a little bit higher than import? Potentially. Potentially. But our risk is greater.

The risk of depending on foreign oil or natural gas would be a significant mistake. And also, All the money you're talking about is irrelevant because they will not collect it because you will not have the pipe in your jurisdiction producing that oil and gas. And lastly, to your concern, Madam Chair, to the Senator, the concern you have, just pass it on, $55. I don't know what your numbers come from. I'm not here to debate them.

That's your political statement in your speech today. But I'm just telling you right now, Every dollar you save to consumers is a dollar in their pocket in an economy that is struggling, in a state that has no direction in the sense of its economy right now because energy is the bottom line. All we've seen from cooking the gas, NSTAR and others, we've seen 20, 30% increases and we need to solve this problem. That is the issue. But if your issue is that the governor make a statement not delineate between phase 1, phase 2, Okay, yes.

But $4.50 is not what you will get if we just build the pipeline. But the pipeline is the riskier part of the project. Once you build the pipeline, import-export is our target. Why? Because that will lower the cost across the board.

We will benefit from selling our natural resources, which is what our Constitution talks about—take our resource, get the highest and best value—to foreign entities that will buy it from us that we can lower the cost to consumers. That seems like a pretty good deal when we can sell it to someone else and lower our cost and consumers in our state benefit. Mr. Begich, you have— well, it's been stated here that AGDC and our Department of Revenue are collaborating. So the, what are called heat charts, sensitivity matrices, which are submitted to us by our Department of Revenue, you, should reflect working with— well, it's not you, it's actually Mr. Richards and AGDC. And at $1.50 with the Senate Bill 280 that the governor introduced and $1.50 at the wellhead price for natural gas shows a breakeven price of $4.43.

But we know that Enstar has infrastructure costs. And they tack on a little over $10, $10, $11. So it's unrealistic to even tell consumers that $5 gas is what they'll experience. It's gonna be at least $15, if not more. Now that's for the in-state.

If we look at the LNG heat map, at $1.50, as the governor introduced it, it says $8.48. So that, I believe, is what it will cost after the whole thing is constructed, full construction.

So the numbers don't add up. And when the governor says $5, it's deceiving to the public. So that's what we're trying to get to here. What is the actual cost that the public— what's the realistic cost for the public? Senator Wielekowski, did you have follow-up?

I did. Yeah, thank you. Um, I, I, well, I, I will just say, um, you know, I know, um, just on Cook Inlet gas, I, I would remind the public, uh, that, uh, there is 19 trillion cubic feet of gas in Cook Inlet controlled 90% by an outside Texas billionaire that I have requested and the utilities have requested to Governor Dunleavy and his attorney general that he enforced their leases, and he previously enforced the consent decree before it expired. That was the real answer to how you get low-cost gas in Cook Inlet. You have a governor who did nothing and let a Texas billionaire control our Cook Inlet gas.

That's predicament one. Predicament two was we had, uh, uh, 400 to 500 megawatts of renewable power lined up all up and down the rail belt, uh, via tax credits from the federal government that, uh, that were yanked by the President of the United States. And our congressional delegation did nothing to stop that, by the way, nor did Governor Dunleavy, costing us 400 to 500 megawatts of power, renewable power, all up and down the rail belt that would have solved a lot of our gas problems. That said, we're basically The governor took a gun and pointed it at our heads and said, "You're going to have to do this gas line project and pay exorbitant prices." That's why we are where we are. And so all I was asking, Mr. Begich, was the governor said $4.50.

What is the phase 1 number? That's all I'm asking. I just wanted to know from you or from anybody what the phase 1 number was.

Senator Clayman. Senator Bullockowski, if I could—. Oh, gas at the burner tip. Just a simple question. Just give me the number.

Tell the people of Alaska what the number is. Mr. Prestidge. Senator Bullockowski, I think earlier in this session you mentioned these numbers, and I have— well, I've explained that in phase 2, our contract with Enstar anticipates the cost of gas lowering to a number that is not far off from that $4.50 range. Okay, so follow-up, Senator Wielechowski. So you're saying Phase 1, just so we're clear, the gas price for consumers in South Central will be $4.50?

No, that's roughly—. Not what I'm saying. I'm referring to Phase 2. I'm asking about Phase 1. With respect to Phase 2, uh, with Phase 1 I think what's been stated here is that the cost of gas would be competitive against alternatives, including Cook Inlet gas, LNG imports, and that cost of gas will be publicly known as soon as we have executed an agreement and filed it with the regulatory commission.

I'm going to ask for about the fifth time, what's the number? Give me a rough number. Senator Murkowski, I can't give you that number. It's subject to confidential negotiations. You have no idea what can you give me a range?

Senator Likowski, I think the range that I can give you is in— if you look at where's the cost of gas coming out of the Cook Inlet, where's the cost of LNG prices now, it's— you know, call those numbers the mid-teens. That's your range. Okay. Thank you. Senator Clayman, did you have a question?

I do have a question in two areas. Mr. Prestidge, I want to go back. There was a question asked about the debt-to-equity ratio, and there was a description was 70 to 30— 70-30 was a debt-equity ratio, and your answer was that's within 5 to 10%. And so I just want to explore that debt-equity ratio. The simple math on 10— within 10— 5 to 10% would be just take— change the number by 10% either, and that would give us a debt-equity ratio not of 70-30, but on one side 60/40, 60% debt, 40% equity.

Another number, if you did that, 80/20. If I, if I take 10% of 70%, then I'd be doing 7% adjustments and I'd be 77% debt, 23% equity, or 63% debt, 37% equity, using the high end of your 5 to 10% accuracy number. And, but let's just make it simply the straight 10, the 60/40 or 80/20 debt equity. My read on that is if you shift from a 70/30 to an 80/20, the entire package of this project changes dramatically. And so saying, oh yeah, it's within 5 to 10% is all over the map.

And I'm just wondering. If we're at an 80/20 debt-equity, does the project even remotely have a chance of going forward? Now you've got much higher debt costs at 80% and much less equity. At 80/20, is it even within the realm of going forward? Senator Clayman, my response to that is— my response to that question was that I think 70/30 is a good representative indication of where you would typically expect to finance, project finance a project like this.

There are some variations to what the market will tolerate. It goes into how the project is structured, and it is highly, highly negotiated, and Glenfarn is negotiating that with financial sources right now, and so I really can't speak to where we have that, where we expect to have that number, I can't commit to it. We're still negotiating. I don't know exactly what it will be. Senator Cohen, a follow-up.

But if we're talking—. If that 70/30 is within 5 to 10% of reality, I'm interested in what— let's say you're not at 70/30. What does 80/20 debt equity or 60/40 debt equity do in terms of how Glenfarm looks at the project? I know you can't disclose any specific numbers, But that's a— those numbers are hugely different on your debt equity from 70/30, and it's your words that gave me this 5 to 10% play in those numbers. So I'm trying to get an understanding of what those mean to you as the representative of Glenfarm.

Senator Clayman, as a project developer on a particularly challenging project, We have got to be prepared for a range of different outcomes. We have got to identify, you know, if certain numbers move certain ways, we need to make adjustments other places. And so that is just part of the task of the developer. I am sorry, I can't give you a more specific answer right now. Follow-up, Senator Klima?

Harry, you had some discussion, talk about the state's option to be able to invest. That we'll have equity options. And when we have our exercise for the debt, for the equity options, then we're going to learn a whole lot more than we know today, because then we'll be looking at it as an investor. And I'm looking at the different components just under the estimate that I think Mr. Richards provided of $10 to $11 billion for the treatment plant, $16 billion for the gas line, $20 billion for the LNG plant, totaling around $46.2 billion. Let's just say the state is gonna be choosing to exercise its right to invest in the project.

What do you see as a minimum amount for the state to meaningfully be able to invest to take advantage of its option to have equity? I mean, is that $100,000? Are we really talking the state needs to be able to invest $1 billion to be a meaningful investor and get it, have a, point to play in the project. Sure, sure. So I, I'll use the numbers that were described here.

Let's say the gas treatment facility, let's call that $10 billion. If that's financed on a 70/30 debt-to-equity, $7 billion of that would be funded via project finance debt, and that would leave $3 billion for equity. The state's equity option is to invest between $5 5% and 25% in equity. And so you would be looking at, on this example that we are using right now, between 5% and 25% of $3 billion. So that would be $750 million to get to the 5%, if I am doing my math right, and I may be getting it wrong.

Bear with me a second. Maybe I am doing that at 25% and not at 5%. That is 25% or so. $750 Million. Right.

And— Follow-up? Thank you, Madam Chair. Does Glenfarm offer any suggestions on how the state, in our tight budget days, come up with $750 million that we would need if we want to have that play at 25%? Unfortunately, Senator, it's a bit outside of our expertise to give advice on that. However, I recognize that there are certain things that are available— sorry, before I get into that, I would say we are generally supportive of however the state chooses to do that, whether it is through existing funds, existing investment funds, participation by municipalities, or the issuance of bonds to fund that portion.

Thank you. Senator Myers. Thank you, Madam Chair. I have a question for Mr. Richards. Um, so Mr. Richards, in the, the latest version of the bill that got released yesterday, um, we removed some of the, um, pieces about nondisclosure agreements with, uh, legislators and the like, but there are some new, um, restrictions on who AGDC may enter into nondisclosure agreements with and what information may or may not be covered on them.

They're in Section 14 of the bill. I'm curious if you have had a chance to examine those and what your response is and if any of those might put AGDC at a competitive disadvantage anywhere.

Mr. Richards?

Madam Chair, Senator Myers, through the chair again, yes, you're referring to Section 14, which is on the confidentiality provisions. And from my reading of this, it essentially, it will limit AGDC's ability to enter into likely confidentiality agreements because when the would-be counterparties look at AGDC and the opportunity then for the information that is, AGDC is going to be held in confidence, uh, maybe then shared with the legislators. I think it would be an extremely challenging, um, position to put AGDC in, in the business case. And that's when we go back to the original intent of AGDC by the legislature, was that we would act in the best interest of the state. And we're given the responsibility to hold information confidential.

And I will tell you that what we have done during our existences, as we have discussions with interested parties, whether they be prior investors, whether they be partners with the project, whether they be off-takers of the project, it was that we would sign confidentiality agreements right at the outset of our discussions. And that was key to the business practices that those entities are used to and allowed them to have an open and free discussion with AGDC without the consideration that information that AGDC would be holding would then not be shared with anybody else without consent by both parties. So it, from my estimation, it would impose again extreme challenges for us to act in the best interest of the state because likely the opportunities that we hope to be able to have discussions with may not become available to us just because of this provision. Okay, thank you. Thank you, Mr.

Richards. That 15-year-old law was for a different project with 3 producers and the state, and those 3 producers were exceedingly transparent— multiple meetings, no question-answering disclosure. Related to costs. So we are in a very different scenario right now. Senator Dunbar.

Thank you, Madam Chair. For Mr. Richards and Mr. Prestidge, yesterday the White House issued a statement in support of SB 280. I think based on the timing, it's clear that he was voicing support for the committee substitute, but regardless, More seriously, we also had an invocation of the Defense Production Act, and we've heard people here testimony trying to puzzle out what that meant. And so has the White House communicated to you how they intend to use the Defense Production Act to support the project? Are we talking about offtake agreements?

Are we talking about equity investment? They have about between $1 and $2 billion in that fund. Are they talking about getting additional funds. What has the White House communicated to you about how they're actually going to use the Defense Production Act to help the project? Senator Dunbar, the White House hasn't communicated any intent on how they would do that to us.

Mr. Richards, can you describe to us how the Defense Production Act could be used to assist this project from your view? Mr. Richards.

Through the chair, Senator Dunbar, again, We've not had that conversation directly with the White House either. When you look at the Defense Production Act, as you heard from the consultant that presented to the committee last week, that again, there are provisions that that was— Defense Production Act was set up for the latitude that the administration has now in executing their, their take on the Defense Production Act is yet to be known to us. Ideally, though, one of the key issues of this, this project moving forward is around energy security, and not only for the citizens of the state of Alaska, but also for our military bases. And so that is key, that as you heard from Mr. Begich, if we are beholden to importation of LNG as the ended because the project does not move forward, then we would be in a position of relying on foreign sources of energy, not only for our in-state needs but also for our military bases. And that's probably untenable for those military bases because, again, any blockade of shipments to Alaska would put those military bases in jeopardy.

So, ideally, if the Department of Defense has an opportunity to be able to help in underpinning this project, that would be helpful. But it is yet to be determined how that will be achieved. Follow-up, Madam Chair? Mr.— excuse me, Senator Dunbar, Mr. Begich is actually affiliated with the Governor's Office. I wonder if he might have more information with that direct communication between the Governor and the President.

Mr. Begich? Uh, any comments on the Defense Production Act and how it might be implemented here?

Madam Chair, thank you, and Senator Dunbar, thank you for the question. And I'm not privy to the personal conversation the governor may have had with the president or anyone related to, but I can tell you the general sense of it as my experience in the federal government. Um, this item, in my advice to the governor on this, has been that this defense act has an impact if they utilize it. It helps move the bureaucracy of the federal government, for example, on financing or things of that nature that may be necessary. If they believe they need to make an economic investment to help a project move forward, that's always in the realm.

But it opens up the door for the president to unilaterally make decisions without Congress's input, just doing it on behalf of the country if it has a need or purpose. In this case, as he has declared, that this has a national interest, this natural gas line. So there's a lot of tools in the box. It's a question of how they use it. But it also highlights the importance of the project among the federal agencies.

So it does help in any processes we need within the bureaucracy, but it could open up other doors of impact and financial impact. Senator Dunbar. Thank you, Madam Chair. I guess I'll just say first, I would welcome an economic investment by the federal government in this project. That would be great.

And second, if, as Mr. Richards stated, this is about getting gas to our military bases, then that is further evidence that the President supports the committee substitute because it includes a spur line to Fairbanks and Eielson and Wainwright, and the original version doesn't. Thank you, Madam Chair. Thank you. Senator Myers. Yeah, thank you, Madam Chair.

So I've got a question for Mr. Prestidge. You talked about not wanting to release the cost estimates because of the competitive pressure that then that puts on on the price that you're selling the gas for to the end consumer, primarily the East Asian consumer. Um, if you did release those cost estimates and then incurred that pressure, would that then put pressure on you to attempt to buy the gas from the producers on the North Slope at a lower cost, which would then, uh, impact our production taxes and royalties?

Senator Myers, that is one potential outcome.

If any time you push down the price of the project, you are going to have to find ways of trying to make that up anywhere else in the project, and eventually it just gets to the point where it is not economical to build the project. So that is ultimately, you know, the worst-case outcome that we are trying to to avoid. Okay, thank you. Further questions?

All right. Senator Giesel, if I may. Actually, Mr. Prestidge, I'm not seeing any more questions from the committee, and I wondered if you wanted to offer a wrap-up, closing comments on what you like or don't like about the bill, which is actually the subject today. Certainly. And if I may, there's two Two points that we haven't really touched on that I thought might be helpful to give some feedback on.

One is a requirement for legislative approval of foreign ownership and investment relationships. Comments on that are that, first of all, kind of negative or, like, bad actor type foreign foreign participation in the project is prevented by a number of federal laws. You have OFAC laws, you have CFIUS laws that prevent that type of unwanted participation in a U.S. project. We view the idea of having legislative approval over any type of foreign financial relationship as basically, you know, a very difficult result, you know, a very burdensome administrative hurdle to add. Much of the project finance community, much of the project finance that would participate in a project like this is international, whether based out of Canada, banks and equity investors in Europe or Asia.

And so we would look at it as a significant hindrance to have to seek legislative approval for participation by very ordinary course financing sources for a project like this. Additionally, I just want to suggest that when it comes to disclosures of different transaction participations in the project, the project— considering that it is permitted by the Department of Energy and the Federal Energy Regulatory Commission does have numerous disclosure obligations. And so I'd suggest, and if you'll allow, spend some time perhaps making more specific suggestions, that there are instances where disclosures are required to the Department of Energy, such as when we enter into an LNG offtake agreement, when there's a change of control of ownership that triggers disclosure obligations that might be considerable as a proposal that could work within some of this framework. Thank you for that. I appreciate that input.

Any other closing remarks that you might want to add? Not at this time, Senator. I think we've made our point that— appreciate the efforts by the committee. And again, I want to reiterate our objective as a private company participating in this project remains to be delivering gas to Alaskans and seeing this project actually go forward. So that's our goal here.

Thank you. I appreciate that. And so that actually will conclude our meeting today on this bill, which is called the Supporting a Gas Line for Alaskans Act. So I think we're both on the same page there. Our next meeting will be tomorrow afternoon at 3:30, and we're going to take a break from the Supporting a Gas Line for Alaskans Act, because we do have some other work to get done.

We have 3 House bills that will be up: House Joint Resolution 44, Supporting Native Corporation Business Development Program; House Bill 93, Residential Requirements Hunting, Trapping, Fishing; and House Bill 79, Naming Vic Fisher Shoup Bay Marine Park. So at this time, we will stand adjourned. Let the record reflect the time is 4:00 Excuse me, 10:42 PM.