SMAJ-20260505-1250

[FOREIGN LANGUAGE] This press conference, uh, good to see you all again. Um, good afternoon. Thanks for being here. This, of course, is the 106th day of the legislative session. Two weeks, a little bit more than that remaining.

Joined by Senator Giesel, Senator Likowski, Senator Steadman, Senator Hoffman, and myself. On Monday, the Senate Resource Committee introduced a new committee substitute for Senate Bill 280, Governor's Gas Line Bill. Senator Giesel, and the Resource Committee has been working hard on that issue. And Senator Giese, could you give us an update on what that new CS entails and process moving forward on the bill? Sure.

So what we introduced was a committee substitute for the Supporting a Gas Line for Alaskans Act, the SAGA Act, pardon me. This particular version has added a Dalton Highway maintenance surcharge. The surcharge idea came from the governor in a tax bill that he put forward to us. He had proposed 15 cents per barrel of oil going through taps. We've changed that a little bit to 30 cents to be used to maintain the road.

One of the main impacts that we're going to experience from a gas pipeline project, of course, relates to our transportation systems. Roads, particularly that will be transporting people as well as pipeline. So we need to make sure that that is, that is taken care of. We also clarified some legislative oversight and accountability for AGDC, things like that. So we also put into it a failure contingency.

In other words, if the project doesn't actually come to commercial fruition, a lot of the policies that we've placed in the bill will expire. So those are big pieces. This morning, from 9 to 11, we held our 24th hearing on a bill that was sent to us on March 20th. So we're working 5 days a week on it, and today we heard from Glen Farn and AGDC giving us some input on the piece of legislation. So taking that into account, We will look to consider modifications of the— in the next CS.

We have already met with the Alaska Oil and Gas Association and the Alliance, as well as RDC. They've offered us input and we've made modifications which appear in Version H. So we're continuing to take input and do our due diligence as state fiduciaries. Thank you, Senator Giesel. The 24th hearing, that's remarkable, and appreciate all the efforts you and your committee have put to this issue. So important.

Last week, the Senate Finance Committee completed its work on the fiscal year 2027 operating budget. Putting together a budget like this is never simple. This year you face real constraints with the volatile oil market, pressure on state services, responsibility of making decisions that affect every Alaskan. And they did that work carefully and deliberately. And with a $73 barrel of oil as a balance of budget.

So on Wednesday, the Senate will take up the budget on the floor. On Thursday, the plan is to work through the amendments and third reading, making sure that every member of the legislature of the Senate has the opportunity to be heard on this. Senator Hoffman has chaired the process with great care, and I'll ask him now to walk through what the committee prioritized and what Alaskans should know about this, this budget. Well, as a comparison to start off with, just in total dollars, the governor's amended budget was $15.33 billion. The House passed a budget $1 billion less, $14.33 billion.

And the Senate version is even lower than that at $13.85 billion. So those are the general numbers in total funds, not getting into the specific items. The combined operating and general fund spending balances the budget at $73 a barrel, $2 below the spring forecast, with over 47 million left over for supplementals next year. Treating the spike of oil as a windfall, the budget conservatively builds reserves to the CBR, which in FY26 was $3.5 billion. We've concentrated this year— the spike in oil as a result has resulted in higher energy costs.

For all Alaskans. I think that is probably more so than any other state in the union. With that, we've concentrated on spending one-time funds in several different areas to affect school districts, municipalities, and individuals that are going to be facing high energy costs. With that in mind, we added $150 in energy relief to the permanent fund dividend of $1,000, bringing that to $1,150.

We fully funded $30 million payout to community assistance next year.

And filled up the Community Assistance Fund with $90 million so that there will be a full $30 million payout in FY '28. Additionally, the base pay of $20 million to communities is included in the budget to help with higher fuel cost and shipping costs for those communities. School districts— the school district grants of $29 million is added to the budget to help higher fuel costs. We looked at each school district's highest cost of energy over the past 3 years and granted a 30% increase in that number. So each school district will be receiving, receiving that amount of funds.

The Department of Corrections has been one of our fastest growing areas in government. We've funded an independent third-party study to identify, evaluate, and analyze the primary cost drivers within the Department of Corrections. This is $650,000, and we did this in collaboration with the department. This should provide data to help the next governor and the legislature make informed decisions to get a handle on the Department of Corrections growth. Base Student Allocation Adequacy Study.

This is something that has been discussed by the Senate Education Committee. So we've included $400,000 to do the Base Student Allocation Adequacy Study. This will help the next administration and legislature with informed decisions making— when considering investment direction for education. Fully funding the Alaska Retirement and Management Board's recommendation by including $38 million for that. Funding a 5-year average wildfire amount, which is $60.6 million.

And a 5-year average for disaster relief funds of $48 million. We're including reverse sweep that hasn't been in the budget for many years, and we're doing this after the reverse sweep was implemented. The administration— there's been less than $8 million that are swept into the CBR, but Many days and weeks were added to the accounting work to close out each of these subfunds. Getting the votes of the reverse sweep will speed up the annual comprehensive financial report, which will give, uh, financial information to the administration and the legislature much earlier, which is basic, uh, sound financial management. Finally, in education, a one-time investment of $111 million outside the BSA fund, combined with the $19 million in energy relief, this is over $140 million going to school districts.

Those are the highlights. Thank you, Mr. President. Thank you, Senator Hoffman. Enormous work. You all kept that as a balanced budget with a $73 based oil.

Okay. Well, thank you so much. And let's go on for questions anybody has. If anybody has a question, try to answer it. Reminder, make sure we have your name and affiliation for the record.

Hi, Eric Stone with Alaska Public Media. I wanted to ask about the resources hearing this morning and sort of like where things stand on the gas line bill. In addition to the governor's press conference yesterday, the governor said that he expected that a tax of maybe 6 cents, maybe 10 cents would be doable. I'm not sure exactly where he landed on that, but I guess I'm curious how you're— how you're viewing the argument from Mr. Begich this morning that like any additional tax just goes— is going to be paid by consumers or primarily by consumers because the— because of the nature of the LNG market. You know, we're not price setters, we're price takers.

I'm just curious how you guys are thinking about that as you develop the next version of— or if this is the final version of the Resources Committee substitute for Senate Bill 280. How are you guys thinking about that? Thank you, Eric. Senator Giesel. Well, Eric, I'm going to have Senator Wilkowski go through some numbers, but first and foremost, what we've been told by Mr. Begich as well as AGDC themselves They actually can go forward without this bill.

They don't need this bill authorizing them to proceed. They have the permits, they've got the FERC authorization, they can go forward without the bill. It's true, they will have the $20 mil property tax in place. So, so really, if they want any kind of tax reduction, they need to help us with this bill, giving us actual numbers so that we can credibly set a realistic AVT, alternative volumetric tax. But I'll let Senator Wilkowski go through some numbers.

Thank you, Senator. Senator Wilkowski. Thank you. I, and I do think that's important to reiterate that we heard again this morning that we do not need to pass a bill for this project to go forward. They can go, they can go forward right now.

And, and, and that it was very interesting discussion this morning because what we heard was The, the billion dollars in property tax cuts that the people of Alaska are being asked to give by the governor, it does not, it's not really help the project go forward. It, what it really does is, according to the testimony we heard this morning, was it lowers the amount that, uh, the people of Alaska, well, in South Central anyway, and hopefully Fairbanks, will pay for their natural gas. And we've heard from the Department of Revenue, that's 43 cents $1 billion in tax cuts gets 43 cents reduction in, uh, in, uh, MCF of gas. To put that into perspective, uh, the, uh, we asked Enstar how much does an average Anchorage consumer use in gas. It's about 128 MCF.

Multiply 43 cents times 128, you get $55. So to put this in perspective, the, uh, the, uh, the Alaska is being asked to give up $1 billion in property taxes for the average homeowner in Anchorage to save $55. Now to put that in another perspective, $1 billion in property taxes is not spread equally. Some communities would lose more, but the statewide property taxes are about $300 million of that. And so when you divide $300 million by 600,000 Alaskans who get their PFDs.

That's $500 a person. Okay, so the average Alaskan is being asked to give up $500 in person— per person. It could be used for education, could be used for snowplowing, could be used for infrastructure, could be used for a PFD. The average Alaskan is being asked to give up $500 roughly in state revenue for $55 per household in savings. And that's just in South Central.

That doesn't benefit the people in rural Alaska. So, uh, I feel comfortable going back to my constituents and saying, uh, you know what, would you rather have $2,000 per household of a family of 4 or $55 in savings? I think I know where my constituents are on that. So the, the numbers just don't, just don't work up. And, uh, you know, if, if what we heard today is, is accurate in that you're You really don't need that 43 cents to make the project work, but that's just going to be passed on to the consumers.

I don't think that's a good deal for Alaskan consumers, personally. Well, thank you for that perspective, Senator Wolkoski. And Eric, second question? Yeah, I just wanted to follow up on that a little bit because I don't think I heard what you guys are saying this morning in Senate Resources. What I heard is that if the bill doesn't pass or if some sort of tax restructuring doesn't pass, they'd have to go back to the drawing board, and it's not clear what the outcome of that reexamination of the project would be.

I guess I just wanted to push back on that a little bit. How is that— I mean, how are you taking that from what they said this morning? I heard that very clearly from the representative for the governor's office, that the savings would be passed on to consumers. It did not factor into the IR. That was crystal clear.

Go back and listen to the to the statements again. I will say this, uh, look, we want the project to happen, and if, if this— if, if cuts are needed to make the project happen, let's have that discussion. But let's all work from the same numbers. Let's not work from numbers that are a decade, a decade old. Let's— I think we all know this project's not— we're not going to cost $46 billion.

And so I think it's important for us to have starting points on what the actual numbers are because If it needs tax relief, let's figure out what, what the relief is. Let's figure out what the number is. But I also think another, another aspect of this that needs to be evaluated is why is it only the people of Alaska being asked to forego $1 billion in revenue when we also heard from the Department of Revenue last week that the producers on the North Slope stand to make an 83%.

An 83% rate of return from their gas sales. From $1.50 a gas gets $1.05 profit. Why are the people of Alaska the only ones being asked to give up 43 cents of, of, uh, off the cost of this project? Maybe that number could be split. Maybe it's the producers give up 22, we give up 22.

But I, I don't know why only the people of Alaska are being asked to forego a billion dollars in, in our revenue and not the producers who stand to make an 83% rate of return according to the Governor's office. Thank you, Senator Wilkowski. Back to Senator Giesel. So, Eric, the main point here is that we're not able to get the real numbers. You heard us ask Lynn Farn this morning, tell us what each of the components will cost, and they were very reluctant to even give us ballpark numbers.

On Monday, we're going to have the Department of Revenue before us again modeling version H. So that's the bill we just put on the table yesterday. Glenn Farn, AGDC, our Department of Revenue, and our consultants, Gaffney Klein, are all collaborating on a model that, uh, that they're using to give us forecasted numbers. And so we'll see that again on Monday. Again, we'll ask these kinds of fiscal questions. We're hoping that along the way we can actually get some concrete agreement on reasonable numbers.

But the fact is, we can't keep asking the people of Alaska to give up revenue to get a gas pipeline. One of the questions that I would ask, you know, the other— what are the other options? Well, the other option is importing gas, right? And we have heard that that would be about $17 an MCF. Well, I guess I would ask Alaskans, do you care where the gas comes from?

And how much are you willing to pay for it? That's what you need to weigh out. If it doesn't matter where it comes from, but the cost is what matters, then that's what we need to drill down to. How can we get the cost of our own gas down low enough, but also not give up so much revenue, uh, by the people of Alaska? Thank you, Senator Giesel.

Well, you can see we're all struggling with this, both the Senate and the House, and it's in both is it's in the Resources Committee. We're trying to find a way to move that along to the Finance Committee. A lot of questions that have been unanswered. Yes. Uh, Mari Kanagi with Anchorage Daily News.

I have a question for Senator Steadman on your vote to sustain the governor's veto of the elections bill. I've heard speculations of quid pro quo behind this vote. Did you exchange your vote for support from the governor on capital budget funding? That's pretty laughable. Um, I've supported, uh, some of the override requests and not others.

An override request is totally different than a budget or a vote on a bill, and I did vote not to override the governor on this because I'm concerned about the implementation timing. I don't trade bills, and the governor's well aware of that. We've had this discussion for 13, 14 years, however long he's been in the Senate and then as governor. So the short answer to that is no. I probably have as many vetoes out of the governor's desk than anybody else.

Someday, I guess when he's done, we should tally them up for entertainment. But the answer to that is no. And no, no, no, but hell no. He's gonna do what he does with the budgets. And that's how I handed the capital budget over to him.

I said, this is what we're gonna recommend that you sign and authorize and implement to maintain and expand our state. And you can do with it whatever you want. And that was the discussion of the capital budget. So, and the answer to that's no. And I don't have any bills in play.

Neither. And not only do I not do a quid pro quo or bill trading with the governor, I don't even do it with other legislators. Because once you do that, your soul's sold and you're done in this building. So it's a good question, but off the mark by a mile. Thank you, Senator Steppen.

Senator Stevens, James Brooks from the Alaska Beacon. This question is for you. Your—. Half of your district is not connected to the rail belt. It wouldn't be directly affected by the gas pipeline.

Kodiak Electric Association doesn't get PCE, so there's not side effects from that. What do you think of the idea of giving up state tax revenue in order to subsidize the gas pipeline, and do you think it's worth it? Well, I appreciate the question because I know you were a resident of Kodiak for a while, and you have to understand that Kodiak got its dams because of a Legislature. Without the Legislature, the Fort Dam pool would never have existed. So we in our community are indebted to the state and the Legislature for providing access to monies to build that dam.

And I feel the same thing is true in the rest of Alaska. Once you're in the Legislature, I know people complain about us becoming statesmen, but you really do have to pay attention to the entire state. And so yeah, I'm very concerned about what happens to the rail belt where over half of our population, enormous part of our population, will be affected by what happens with this gas line. So I'm really anxious to see us find answer, but I'm also concerned about several steps along the way. Senator Hoffman has made it very clear that there are 3 major issues that we have to face before we can get to the end of this answer and end of this question.

We really have not got the answers yet. I mean, where, where are the communities? Where are the, the boroughs in all this? How can we fund this without knowing how the impact's going to be on them? And do we have the support from them?

The question of where are the, um, where are the producers? I mean, they're not at the table. You know, they should be here. We should know what they are planning to do or not planning to do. We know that they will profit, but we don't know how much.

So all of those questions, and then being financially responsible for the entire state budget, I think those are issues that we all have to weigh, even though it may not affect our home district. It's— we're all in this together.

Thanks. Can I just add a little bit to that? Because as reference, Senator Stevens had mentioned the dams in Kodiak, but we have 3 dams in Southeast Alaska built at the same time. Sitka jumped out of that group and did their own, Green Lake, and then there's Swan and Tyee. So that was a process that went across the state, one up Copper River also.

So, and how goes Anchorage, there goes the rest of the state. So we have a vested interest, those of us that are not residing along the rail belt to make sure the rail belt is successful. And one of the biggest advantages Anchorage has had for decades is the cost of energy. So there's, there's definitely connection. And I would thank the Resources Committee for recognizing that and trying to share some of the potential, if there is any, revenue off of the property tax arena.

On a gas line with those Alaskans that are not along the corridor, that don't have the ability or will ever have the ability to get to the natural gas. Thank you, Senator Steppen. Yes, sir. Mark Sabatini, Junior Independent. Senator Giesler, you said this gas line could proceed without the legislation pending.

So for you and anyone else, I'm curious, what's your thoughts on the practical impacts if folks say, look, there's 2 weeks left, this is just a long, big, complicated thing, let's just deal with it next year. What's the practical impact of doing that to the gas line project?

Well, Mark, right now we are aware that they have reached a Class 2 cost estimate, so that's pretty good, right? Class 1, of course, is, is perfect, right? On the pipeline only. So there's still the gas treatment facility and the LNG plant. Now, right now they're telling us Phase 1 has also changed.

It's not just the pipe anymore, it's the pipe and a small gas treatment plant on the North Slope. So that means the amount— the cost here has gone up a little bit. Things have had to re— rejigger. So So these things are still evolving. That's not unusual for a giga project like this.

So rushing through this, we're going to make mistakes if we do this too fast, if we don't give the company themselves time to actually figure out the cost of this, uh, more than a Class 2. They, they haven't even mentioned where they are for the, um, LNG plant yet. So, so it's complicated. I'm thinking back to when I first came to the legislature in 2011 and we were just passing HR 4, HB 4, and was it SB 138 that set in place the structure for Alaska Gas Line Development Corporation? Well, then I actually was looking at a picture today that from 2015 where we're all sitting at a table in the LIO in Anchorage with a gas pipeline hearing.

That's when the four producers were just starting to step out of the project.

And handed over to the new governor, at that time Governor Walker, with a new CEO for AGDC. So, so you can see how many years we worked on the producer-led project, and they were completely transparent with the numbers on what it was gonna cost, uh, each piece, who was gonna do what. Here, we got the bill on March 20th. So it's a process. I think Senator Wielechowski has more to add.

Senator Wolkowski. Yeah. Can't reiterate enough, they can build it now. Okay? And I would just want, you know, there have been 15 at least projects, natural gas pipeline proposed projects since statehood, at least 15, at least 6 in my tenure here.

And at least 4 of us were here during AGEA. And I remember that very well, 2008. And there was a stampede for us to pass that bill. And to fork over $500 million to TransCanada. And if you didn't pass it, you were deemed to be not supportive of a gas line, not supportive of low-cost energy, and we passed it.

And I think a lot of people probably ended up regretting that, 'cause it cost us almost $400 million in lost— in general fund money. And then we've had promises in Senate Bill 21 that we're gonna give huge tax breaks and get, among other things, a gas line. And so this has been a leverage point for many, many, many years. The fact of the matter is, is that according to the department's own projections, Department of Revenue's own projections, in phase 1, best case scenario, when this comes out, Anchorage South Central is looking at $23 gas. Okay?

It's $10 to $13 now. That's assuming the costs don't rise. And that's assuming you can get gas for $1.50. The more realistic, more likely scenario is more like $27 to $30 gas. Okay, that's phase one.

That's according to the governor's own projections. So, uh, and then we're— and it's not to mention the, the hundreds of millions of dollars in, in money that the state stands to lose because our gas structure is tied to our oil structure. We have a gross gas tax, we have a net oil tax, but you can write off the expenses on building a gas line project off of your oil taxes. According to DOR presentations, that's hundreds of millions of dollars that will cost us before the pipeline is even built. So when Alaskans think, oh, you got nothing to lose, yeah, you do, okay?

Because you're potentially looking at $27 gas with this project versus $17 another way. Not to mention you got 19 trillion cubic feet of gas sitting in Cook Inlet. So this is not like you just pass it and nothing bad could happen. If we don't get this right, we stand to lose. Hundreds of millions of dollars, and people of Alaska stand to have locked into rates that are, uh, twice as much as they are now and going up from there.

Thank you. Thank you, Senator Wolkowski. So, um, in answer to your question, Mark, uh, you know, we are all, um, uh, concerned, uh, even fearful of, of unintended consequences of making a mistake, of finding something, uh, doing something, agreeing something on a quickly— on a quick basis without really taking the time to get it exactly right. So, you know, you ask what's When is this going to happen? Well, honestly, I don't see us coming to a conclusion in 2 weeks and a couple of days.

That's a lot to do for the House and the Senate to come together and to conclude this entire issue of the gas line. So what happens? Well, the governor has the opportunity to call us back into a special session immediately, or he'd call us into a special session in August, or whenever he chooses. But there's a lot of work yet to do, and I think you're seeing the concern around this table of the mistakes we could easily make. Follow-up.

Very quick, because we're running out of time. The governor obviously feels some urgency because he's in town and he said he's here to talk to you all about this. What, if any, discussions have taken place or been scheduled, and what do you see coming from those? I have not been contacted by the governor. Has anyone else?

I'm not even sure that he's here. But yes, Senator Wolkoski. I can only speak for myself, and again, I can speak for having gone— and all of us have been through numerous gas line proposals and numerous oil tax proposals. And I can tell you, in the past, I was visited almost every single day by either a commissioner, a deputy commissioner, a tax director. I talked to Pat Galvin, who was the commissioner of DOR under Governor Palin.

And when he was running ACES and running AGEA, he had 25 people in town who would fan out every single day to meet with legislators, to talk about their concerns, to talk about what modeling they need, to talk about who was going to talk to which legislators. And I've seen that consistently through administrations, whether I've agreed with them or not. And I can tell you, for me personally, I've had zero conversations with the governor about this. I've had zero visits to my office from his Commissioner of DNR, zero on this issue, zero from his DOR Commissioner, zero from the Tax Director, zero from anybody in the administration. Okay?

So if this is a number one priority, if this is something we critically need to do, it'd be helpful if we were getting the information that we need, and we're just not getting it. Next up is Jeff Landfield with the Alaska Landmine. Jeff, go ahead.

Hi, um, I just wanted to ask, you know, this gas line has been talked about, but my question is broader on energy. Um, Kenstar's storage is down to 4 BCF, capacity is 13. Philcorps' storage, which is much more, they have 21 BCF, but So that's for Chugach Electric, and some of that's to meet the contract in the future. Uh, NEA is already looking at leasing or finding storage for diesel in the event there's not enough gas pressure so they can burn diesel to avoid gas. It was very cold this winter.

If we have some kind of rolling blackout or energy failure Who do we blame? You guys, the utilities, the governor? Who does the public blame if we have, you know, an energy crisis next year if it's cold again? You know, if there's rolling blackouts and rolling brownouts because of gas supply? Thank you, Jeff.

Senator Wilkowski. I'll take that. Thanks, Jeff. Look, this is not about blaming anyone. What I will say is this: There's not gonna be rolling brownouts this winter.

There is not. There, uh, what I will say is there are trillions of cubic feet of gas in Cook Inlet. We know this for a fact. There are 19 trillion cubic feet of gas. In the history of the state, we've used about 9 out of Cook Inlet.

That means there's at least a 100-year supply, probably a 150-year supply of gas at our doorstep in Cook Inlet. And for whatever reason, you have Hilcorp controlling 90% of the leases there. And for whatever reason, the governor has chosen to not enforce the leases there. He's gotten letters, multiple letters from me. He's gotten multiple letters from the utilities.

He's gotten letters from NSTAR, from Chugach Electric, from other utilities asking him, "Governor, why did you not enforce the consent decree that required the oil billionaire from Texas who owns Hilcorp to produce on his leases? Why didn't you do that?" He's— "Why didn't you enforce the leases as they're required to?" explore, develop, and produce. Why was that not done? Why did he not do anything when Governor Trump— or President Trump yanked the tax credits for renewable energy all up and down the rail belts that had us slated to get 500 megawatts of renewable power in line in the next few years? And those were yanked, and all those projects went away, and we lost all that additional electrical generation that we would have had?

Why did he not do anything when President Trump yanked a billion dollars in renewable energy projects all across Alaska? All of these things would have helped, but instead we are in this dire situation now. It's very unfortunate. Thank you, Senator Wielekowski. Um, well, my plan, Jeff, was to blame you, but, uh, last question from Corinne Smith with the Alaska Beacon.

[FOREIGN LANGUAGE] Hi, thank you. My question is for Senator Hoffman regarding an area of reductions in the operating budget from the Senate side, and that is state funding for support services for victims of violent crime. And there was a reduction from $1.2 million to $600,000 for the Council of Domestic Violence and Sexual Assault. I was wondering about that priority. It was the only reduction, I believe, in the DPS budget proposal, and advocates are concerned about that.

So I was wondering if you could speak to that. Thank you. Senator Hoffman. That is a very important question.

Domestic violence is something that needs to be addressed. The Senate version— this is not the final version. Thank you, Senator Hoffman. How we doing? We better wrap it up.

Wrap it up. Thanks everyone so much. Sorry we couldn't get all the questions you had, but next, next week. Thanks.