Alaska Legislature: Senate Resources, 5/4/26, 3:30pm

I call Senate Resources meeting— committee meeting to order. Today is Monday, May 4th, 2026, and the time is 3 PM. Please turn off your cell phones. Committee members present today: Senator Rauscher, Senator Kawasaki, Senator Myers, Senator Clayman, Vice Chair Senator Wielechowski, and I'm Senator Giesel. I believe that Senator Dunbar will be along shortly, but we have a quorum to conduct business today.

Thank you to Heather and Chloe, who are faithfully here keeping the records and keeping the audio working. So today before us we have Senate Bill 280. This is a bill entitled Supporting a Gas Line for Alaskans Act. This is the 23rd hearing that we've had on this bill in the last 2 months. The governor submitted the bill to us on March 20th.

So we have been aggressively working this subject since then. Today we have before us a committee substitute. This is committee substitute version H. Senator Wielechowski. Madam Chair, I move the committee adopt the Senate Resources Committee substitute for Senate Bill 280, work draft 34-GS2038/H, as in Healy, as our working document. And I'll object for purposes of discussion.

Discussion. I'm inviting to the table my staff, Paige Brown. Paige is going to go through the changes from version G to version H, and then she'll be followed by Sonya Kawasaki, Senate Majority Legal Counsel. Ms. Brown, summary of changes. Thank you, Madam Chair, members of the Senate Resource Committee.

For the record, Paige Brown, staff Senator Giesel. The changes from version G to version H of Senate Bill 280 are as follows. In version H, we added a Dalton Highway, Highway Maintenance surcharge of 30 cents per barrel on non-royalty oil and related conforming changes to ensure the surcharge cannot be offset by credits or deducted. We remove these expenditure provisions from version G relating to limiting gas-related deductions against oil production tax Um, it removes public transparency and disclosure requirements including the AGDC project database and related reporting provisions. Removes required publication of prevailing value determinations for royalty and production tax purposes while retaining the valuation standard.

Eliminates the special alternative volumetric tax appeals process, reverting to the standard tax appeals process. Adds the Regulatory Commission of Alaska enforce protections on pipeline rates, including prohibition on passing through cost overruns and establishing rate caps. Clarifies in-state utility priority over exports for pipeline capacity. Expands legislative oversight and accountability of AGDC, including legislative approval for subsidiary sales, bonds, foreign ownership, investment relationships. Required state participation option in revenue-generating projects.

And a requirement to use competitive bidding and Alaska Bidder Preference in procurement. It makes AGDC subject to the Open Meetings Act, increasing transparency in decision-making. Clarifies AGDC tax treatment, including limiting tax exemption and exempting AGDC-owned portions from the new entity tax. It expands petroleum property tax to include LNG plants and marine terminals. It clarifies the alternative volumetric tax structure, including proportional liability for multiple owners and with the exclusion of LNG refrigeration gas.

It revises the failure contingency to allow continuation if a major project component is operational by January 1st, 2032, and adds an effective date for the new pipeline corridor maintenance surcharge for July 1st, 2027. Thank you. Um, with that, I'm going to ask Sonia Kawasaki, Senate Majority Legal Counsel, to take us through individual sections of the bill, summarizing the changes so that members and the public.

So that the public can see where these items are in the bill and the changes that have been made in it. Ms. Kawasaki, welcome. I— one moment, Ms. Kawasaki. Let me also add that Mr. Dan Stickel, Chief Economist, Tax Division, is— Department of Revenue is available for questions, and so is Nick Fulford. With Gaffney Klein.

Ms. Kawasaki, welcome. Thank you, Madam Chair. Good afternoon, Madam Chair and members of the Senate Resources Committee. For the record, I'm Sonya Kawasaki, Senate Majority Legal Counsel. This afternoon we'll go over changes of the SB 280 CS that was released today, which is version H, before you.

So first of all, the new name of this act is Supporting a Gas Line for Alaskans Act, or the SAGA Act. Um, the SB 280 version H Senate Resources CS makes some technical changes, some clarifying changes, and some conforming changes. And establishes some substantive changes from the prior CS.

So the first item is, in exercising its purposes, ADDC must act as a fiduciary in the best interest of the state. And this is under Section 8, which is on page 3.

The next, um, pause for a moment. Why is that important? Why would, why would that be in the bill? Um, Madam Chair, uh, prior— the current language in law that has, um, ADDC's, um, best interest of the state in mind as it performs its duties and exercises its purposes did not include fiduciary duties, and fiduciary duties are generally an elevated standard of care, and those standards have legal ramifications if they are not followed. And so we thought it would be important to add fiduciary duties to AGDC because the structure of the Glenfarn/ADGDC relationship Piers is relatively new to State of Alaska business models, and we were just a little bit more concerned about the interest of the state being looked after by AGDC, and we wanted to make sure that we added it to the bill.

Thank you.

The next bullet, the CS modifies existing AGDC procurement law. Which is establishing that the board must adopt regulations reflecting competitive bidding principles, um, and equitable opportunities to vendors and address emergency situations. And, um, where bidding is involved, would incorporate a mechanism for Alaska bidder preference. And this, um, provision was modeled off of existing laws that, um, the Alaska Housing Finance Corporation and the Alaska Industrial Development and Export, um, Authority has to follow some level of regulations that would, um, address competitive bidding principles. In current law, ADDC didn't have that requirement.

It had a requirement to come up with its own procurement procedures by the board. And when I reviewed those procedures, the procedures were simply that if the contract would be under $5 million, that the executive director could approve of the contract unilaterally, and above $5 million, it had to be approved by the board. So we were sort of putting a little more sideboards on that and trying to ensure that Alaska businesses receive preference.

Very good. The next item, um, in the prior version of this CS, there were two limitations that were meant to reduce energy rates to Alaskans specifically, and they were to prevent the passing on of cost overruns from the pipeline construction as charges to Alaskans. And then we had price caps that we added for for prior to the exportation facility coming online and after the export facility coming online, and that was $12 prior to and $5 after per 1,000 cubic feet. And those were based on statements by Governor Dunleavy on what the expectation was for gas prices to Alaskans, the— how low they were, are expected to be. So we just added those to the last bill under AGDC duties.

Um, in this bill, we made sure to add it to RCA, our Regulatory Commission of Alaska oversight duties. And from my understanding, they can implement it because they will receive the documentation they need in order to ensure that, um, these provisions would be enforceable. Ms. Kawasaki, to make it perhaps clearer, in other words, we retained these two elements and we moved them to the RCA jurisdiction. Is that correct? Um, Madam Chair, thank you for the question.

I understood, although it would take me a little bit to confirm, but I understood that it was going to be added to the RCA provisions of law and not removed from the AGDC duties. So it should appear in both places. Thank you. Thank you for that clarification. Sure.

Senator Kawasaki. Yes, thank you, Madam Chair. This is about the last section, which had to do with the competitive bidding and nonsole source. We already have allegedly an EPC contractor assigned. That's what Glen Farnes told us about the pipeline.

And what happens in the case in which that contractor is not utilizing competitive bidding?

Through the chair, Senator Kawasaki, thank you for the question. Generally speaking, in terms of contract law, we cannot impair an existing contract. And so if there is existing contracts that are already been authorized Under our prior law, I think only to the extent that it doesn't disrupt the new— the new requirements wouldn't disrupt that contract, would it be enforceable. Follow-up? Yeah, just because it seems like the— we've heard from Glenfarm, they'd like to put pipe in the ground beginning in December of this year, meaning they would have had to purchase pipe or at least have pipes on agreement now.

I mean, essentially now. So I'm just curious if that would prohibit them, or if they may have already done it, then we're still fine at this point. Thank you. Senator Kosaki, one of the things I think about is the construction of man camps, for example. Who will the vendors be to supply those man camps with food and whatever else, you know, going forward?

So yes, certainly whatever's already been adopted, we can't do anything with.

All right, any other questions on slide number 2? Seeing none, I'll let you move on, Ms. Kawasaki. [Speaker:MS_KAWASAKI] Thank you, Madam Chair. The first bullet on page 3, slide 3, is a technical change. In the last CS, we had added that essentially Alaskans would, through the public utility as carriers, be— Alaskans would receive priority over— Alaskans would receive priority through the public utilities' shipping agreements with the pipeline.

And it turns out that this is not the model that Glenfarn is utilizing. Glenfarn is going to be its own shipper, and so we just had a technical change that would apply that same principle to the gas sales agreements. And so if capacity in the— if capacity in the pipeline is reduced, that Alaskans would receive priority through their gas sales agreements of— through their utilities.

Thank you. I don't see any questions on that.

The next bullet is— we deleted certain changes addressing the legislature's ability to obtain information currently protected by existing confidentiality agreements, and these included requesting to sign nondisclosure agreements and obtaining information in executive session. The reason for these removals is that I understood that Our members were hesitant to sign nondisclosure agreements.

Because, um, there was a desire to be able to share information with their constituents, and having to contain it, um, and not be able to speak freely about it by having to sign a nondisclosure agreement and potentially be subject to, um, penalties for publicly disclosing information on accident, um, was not desirable anymore. And that is a similar concept to why we removed the executive session possibility of reviewing information only in executive sessions.

Senator Clayman has a question. So the prior idea was we would try to have some means in which legislators and potentially legislative staff could learn more details about the project in some kind of a confidential structure. And in this version of the bill, that will no longer be an option either. It will be information that we can receive publicly or we won't receive it at all.

Through the chair, Senator Clayman, thank you for the question. There are still provisions in the bill that would address the parties who signed a confidentiality agreement, could still waive the confidentiality terms that they have signed, and they could also consent to coming before committees, coming before Legislative Budget and Audit Committee. On their own, consenting on their own. And, um, we also are seeking some technical changes to the provisions that allowed for, um, certain terms to not be confidential moving forward once the bill is enacted, so that certain things that I've heard legislators' concerns over would be project economics summaries, potential estimates of those economics, And those would be still made public under the bill. Follow-up?

But the basic place is that to the extent right now that we aren't getting much information from AGDC or from Glenfarn, the option of going to confidentiality agreements as a means for us to learn more about it isn't in the bill. It ends up becoming what do they choose to do. We're back in sort of the place of what might they choose to disclose. But we're not going to be doing that. We're not going to learn it confidentially.

Senator Clayman, Glenfarm has actually offered to the legislature to have these confidential disclosures. And so to have it in the bill seemed a bit of an overreach. Consequently, portions of it were deleted, as Ms. Kawasaki shared.

Further questions? No, I mean, they've— I think they've told us before they'd be willing if we enter into a confidentiality agreement, they'll share it with us. But if we're not entering into a confidentiality agreement, then we don't have the information. Thank you, Senator Clayman. Further questions?

All right. The next bullet point. Sure. Thank you, Madam Chair. The next bullet point on page 3 is the third bullet point, technical changes to merge separate accounting requirements of revenue generated from an option contract that's been exercised to acquire a revenue— or an interest in a revenue-generating project, and the revenue generated from a subsidiary of the corporation.

We merged it into one section just for clarity on the— where the revenue lands and the ability to appropriate it.

I see no questions. Now we are on slide 4.

Madam Chair, under slide 4, the first— the first bullet, we deleted requirements of ADDC to establish an online public disclosure database. That was at this point in time seen as unnecessary and a little tedious and At the time that we were seeking it, it was to provide more enlightenment to the public on who would be investing in this project and who the gas purchasers would be. But I think at this moment we are not going to require that level of detail from— of disclosure from ADDC.

All right. Next bullet point. The next bullet point is we have deleted gas purchase agreements from the list of legal relationships with foreign entities that would require legislative approval. This is in response to a comment from Senator Myers in a previous hearing where he noted that we had a list of items that met the requirement of a legal relationship from which the legislature had to approve, and gas purchase agreements was in that list, and it is not desired by the policymakers for, in the first instance, that probably all of the gas purchase agreements that will be made for exporting will be completely foreign entities, and we know that already. So I think there is not as much of a concern on that particular relationship.

Any questions on that?

All right, seeing none. The third bullet on slide 4 has to do with prevailing value determinations for royalties. At— in our past CS, we had included a publication requirement where the value would be published as well as a summary of how that value was determined as well as the report on the, um, the determination by the Department of Revenue— Department of Natural Resources Commissioner would have been able to be accessed publicly. We removed that because we received a lot of input from industry and concerned members of the public that this might actually cause a problem that would allow producers to lower potential values that are costs that they would have expected to have Glenfarm purchase gas from them. And then that would result in lower actual potential revenues to the state of Alaska.

And we wanted to avoid that potentiality. So we removed the reporting requirements from the prevailing value determination. The actual determination itself is still part of the bill, and so in this instance, Department of Natural Resources will still be conducting a prevailing value determination. It just won't be made public. And then similarly for the prevailing value determination for production taxes, we included, um, a requirement of the Department of Revenue to publish that value and publish the reporting on it.

And we have now deleted that as well for the same reason as we did for the prevailing value for royalties. Okay. So we'll pause there. Any questions on that? As Ms. Kawasaki indicated, the industry certainly expressed concern about the publication and what that would do in terms of setting prices and things like that.

All right. That takes us to slide 5, I believe. And Madam Chair, I completely apologize because I realized as I sat down here this afternoon that I missed a slide or a bullet on one of the most important aspects of the CS, which is that we deleted the limitation on gas lease expenditure deductions from the ability to deduct against oil taxes. So that provision doesn't appear in your bill because it's a deletion and is omitted from the bill. And what we had to remind the committee, what we had been trying to do is attempt to separate oil and gas lease expenditures and then prevent gas lease expenditures from being deducted against oil taxes over a concern that it was going to reduce our revenue substantially.

And, um, unreasonably, but it was very difficult to determine a method to separate oil from gas lease expenditures, and we, in receiving a lot of feedback from industry, um, we just decided to avoid that concern. We will save it for another day on how to make that determination. So, to make it a simplified statement, the bill doesn't change oil tax law.

That's correct, Madam Chair. I want the public to be sure to understand that, okay? And, and that was a lot of explanation that you had. I wanted to put it in very simple terms for the public who are listening and the industry who also had concerns about that. Senator Rauscher, you had a question.

Thank you, Madam Chair. So it's a net tax I don't understand your question. What is it? Well, oil is a net tax, and gas, we had talked about earlier, was a gross tax, and now this is all net tax. Gas continues in law as a gross tax.

Oil continues in law as a net tax. There's no change. What we were doing previously.

Was trying to separate the deduction for gas production costs, those capital investments that would be made to pull gas out of the ground, prevent it being used against the tax you would owe on oil. They're both coming out of the same hole. It is difficult to separate them. We certainly heard that from owners of the, um, Point Thompson unit. All right, thank you.

Senator Dunbar. Thank you, Madam Chair. I think you explained it very well. I was pushing early on in this to do what's called decoupling, where we would— you couldn't count your gas expenses against your oil taxes. We heard from the director, Director Stickel, that is very difficult and complicated to accomplish.

It was reflected in their fiscal note. And so I am a little bit disappointed, but I, you know, I think this CS listens to the Department of Revenue and listens to the AOGA testimony, which was that that would be extremely difficult to do. And so it's been removed from this version. And, you know, if there is a reopening of oil taxes, it'll be a much more detailed conversation in the future. Thank you, Senator Dunbar.

And just for the public, AOGA is the Alaska Oil and Gas Association. Using acronyms, of course, can be confusing to the public, and I want the public to understand what we're doing in this bill. Further questions about the provision that— I will add, I appreciate very much Ms. Kawasaki presenting this and putting this, this presentation together about the changes in the bill, uh, and thank you for catching the omission of that particular change. Thank you for doing that. All right, so I think we're on slide 5 now.

Thank you, Madam Chair, and I'd be happy to just, um, add in a slide to augment on that lease expenditures provision just so that it completes the presentation. Um, slide 5.

We had to modify the language of the S-corp tax to ensure that state corporations are exempt from the tax, but that they're— the qualified entities and partnerships with the state corporations are not exempt. And then we also added a caveat in the S-corp tax in particular that AGDC must file a tax return that is not confidential, and that only extends to ADDC. It does not extend to other state corporations.

Senator Kawasaki, you look like you have a question. No. All right, okay. Any questions on that? All right, moving on to the second bullet point on that piece.

The second bullet point has to do with technical changes to the new S-Corp tax where we deleted a reference for— to— about filing— a filing mechanism for tax returns. The reference in the— that provision in the prior CS seemed to reference corporate income tax, and we don't think that that— it applied directly. And so rather than modify that provision, we omitted it because the The tax— the S corp tax can be applied regardless of if we add a requirement for filing tax returns because Department of Revenue knows how to seek taxes that we put to law.

All right, seeing no questions, the last bullet point on slide 5. Thank you, Madam Chair. The last bullet point has to do with amending the types of income subject to the S corp tax. Specifically, we have clarified that income from marine transportation of LNG, LNG produced in the state, is covered by the tax. And we also removed the reference to income produced from sales of gas in the state.

The rationale for Clarifying that the income from marine transportation is specifically for LNG produced in the state was to cover the concern that there is some gas transportation that is occurring from locations in the state to other locations in the state, and we didn't want to sweep them into this and end up into this tax and end up them extending those costs to the small communities that they serve. Senator Dunbar. Thank you, Madam Chair. So I'm looking at the prior version, the prior CS, page 22, section 23, and I remember the Alaska Oil and Gas Industry Association, excuse me, also raised concerns here. I think it was section F and subsections F and G, and they, you know, pointed out there might be very small carriers like Crowley or whomever that are taking transporting oil and gas.

And it looks like you've deleted subsection F and then changed the marine transport to just LNG. And of course, none of the folks that ship stuff inside Alaska use LNG because you'd have to, you know, you'd have to regasify and all the rest of it. So is that an accurate summation of what you did, Ms. Kawasaki? Through the chair, Senator Dunbar, thank you for that summary. And that is my understanding of how— why we modified the language in those two subsections.

Okay, very good. Well, I appreciate that you made that change. Thank you. Thank you, Senator Dunbar, for pointing that out. That is something again we heard from the Alaska Oil and Gas Association.

Senator Myers. Thank you, Madam Chair. So, um, Miss Kawasaki, I'm not sure how tax law starts to work with foreign-owned companies. Let's say that one of our, uh, prospective East Asian customers decides to send their own ship or they contract with a transportation company and send it here, and so it's not a U.S.-owned company, can we still— are they still subject to Alaska's tax law? Would we still be recouping some money from them if they're picking up the LNG here in-state?

Through the chair, Senator Myers, this Tax would apply to the income that is— comes from business in Alaska, and I guess it would— I would have to research how that business transaction occurs and whether they are making income in the state of Alaska from that ex— or sorry, from that marine transportation. Okay, thank you.

Ms. Kawasaki, well, you'd be speculating, but because it would be a foreign country and only the federal government can impose taxes with international trade, likely we would not be able to tax that entity. Would you say, or is that speculation? Chair, I do know that I— if I responded at all, I would be speculating. But I also do know that we do tax foreign entities who are, say, oil producers in the state, and they are required to file as corporations, so they are taxed as corporate entities. Um, and— but I know that— I mean, that is oil produced in the state.

Um, so I— that particular nexus having to do with transportation, I mean, I think I would just have to research Senator Meyer's question and get back to the committee. Thank you. It would be an interesting question to pose related to the transport of oil from Valdez. Very good. Further questions, Senator Myers?

No, thank you. Anything else from anyone? All right. Let's see. Are we on slide 6 now of the explanation of changes?

All right. Very good.

So, Madam Chair, this slide This section, this slide goes over a new surcharge and pipeline corridor maintenance fund that we've established in the CS version H. It is, it basically establishes that the infrastructure maintenance surcharge of 30 cents per barrel produced in the state of oil will be imposed on oil producers, and then revenue from the new surcharge will be placed in a new pipeline corridor maintenance fund, and that fund will be available for appropriation for maintenance and operations costs incurred to the state along the Dalton Highway corridor, or as it's written right now, other impacted areas. And Madam Chair, this committee probably remembers that this concept was actually introduced by the governor in his fiscal plan, which was for our body, SB 227, earlier in the session. And it was an interesting concept that I think that a lot of members were willing to test out in other areas of policy. And so we adopted it for this CS, and I might add that we increased it from what the governor proposed, which was 15 cents per barrel to 30 cents per barrel, in part because we have now learned since the governor.

Had introduced his bill that the Interior— the Secretary of the Interior, the federal government, has purported to hand over the Dalton Corridor to Alaska for purposes of mining development. And so we had concerns that there was going to be even more impacts to the Dalton Highway corridor that needs more updating in maintenance. So that was part of why we raised the amount from what the governor had originally proposed. Thank you, Ms. Kawasaki.

The project company, Glenfarn, has stated that it is their intention to repair any roads that are damaged during the construction of this project. They in fact can't do that. Our roads are federally regulated. We have state law related to mix design for asphalt, concrete, what gravel should be used in certain areas. And so that would be still a cost incurred on the state to repair those roads.

So I know Senator Dunbar was particularly interested in this, and so that would be the intention of this. Senator Dunbar, did, Do you have any idea how much revenue would be brought in by this 30 cents? Well, I'm trying to remember. I think the governor's version of 15 cents would bring in about $25 million, I believe. I think I'm looking at $25, $26, so twice that would be about $50.

But I remember from our conversations there, and I believe at the Finance Subcommittee regarding transportation, that even that isn't isn't enough to do the, the maintenance that the Dalton Highway requires. Uh, that is, I think the estimate was something closer to $80 million needed to fix yearly to fix the Dalton. And so this is partial, um, but it's not, you know, it's, it's a lot closer. Um, I've also heard the, the number $450 million as a reference to the upgrades that Dalton Highway will need for the new larger heavier pipe that will be involved in this project. But I, I I can't, to be honest, I don't remember where that number comes from.

And so I think Senator Wilkowski said it once, and I don't want to, perhaps he'll be able to inform us on that. But, you know, we, regardless, we are going to have to maintain and upgrade that corridor in order, both because of this construction, but also for the pipe itself, but also for things like upgrades at Point Thompson. And we know from the governor's own bill that we needed some source of revenue, even if it was just the status quo, that is, the Dalton Highway is poorly maintained. But I see Senator Myers has hands up, and he understands how poorly maintained that road is better than I do. So I'll just say that I appreciate the inclusion of this bill, of this.

I think it's necessitated by the, um, both the additional construction and frankly, um, I'll just say this is a little bit, a little bit off topic, Madam Chair, but we had testimony from Director Stickle, that rather than use a complicated new system like decoupling to try to address our revenue going negative in the short term, we should pull the policy levers we already have. So I saw that you have the S corp in here still. That's a policy lever we have. And then this is a policy lever that I believe would be easy to implement because in the governor's original fiscal note for this, there is no requested additional people at DOR. And I know that we'll hear from Mr. Stickell later, but that's what the fiscal note says to the governor's proposal 227.

So I believe this can be implemented easily, easier at least than decoupling. Thank you, Madam Chair. Thank you, Senator Dunbar. Senator Myers, your expert opinion? Well, I'll provide my expert opinion, then I have my own question for Ms. Kawasaki.

Sure. [Speaker:COMMISSIONER_MAY] So if I remember right, the $450 million figure came from DOT regarding what they've got programmed in the STIP for the next few years. It's not directly related to the gas line. It's what they kind of already had planned. And again, since that's a STIP, a large portion of that is going to be federal money as well.

If I remember right, DOT told me last year that they spend approximately $20 million a year to maintain the Dalton. Now, they could use some more. Not going to tell you— not going to tell you that, but that's just— that's a current state of it. But to that point then, my question from Ms. Kawasaki, when this version— when the version of the governor's bill that had this concept in it, although at a different dollar figure, was before us, we got an answer in writing from DOT that said that the money that would be collected likely would end up supplanting existing funds to the Dalton or maybe other highways along the way, the Richardson, et cetera. So in effect, while the state was bringing in more money, it wouldn't have actually helped with that— help actually improve the situation on the Dalton Highway or any of the other roads in question.

My question is how in this bill, in this version before us, do we have anything in here that's going to make sure that we're adding to rather than simply displacing the funds that are currently being spent?

Through the chair, Senator Myers, thank you for the question. In the bill, we did not set any alternate parameters other than the appropriations authority. And so to the extent that there should be either a formula or a statement of intent or something like that, On adding to current funding for the Dalton Highway, we haven't added that. So that is something that the committee might consider. Okay, thank you.

Further questions? Senator Dunbar. Thank you, Madam Chair. Well, just to Senator Meyer's point, though, we have a constitutional prohibition on dedicated funds, right? So we do this pretty often.

We try to raise money for things, but ultimately Every time we raise money, it could be supplanting other money unless you make a dedicated fund, which we're not going to do. So, well, we're trying with a constitutional amendment elsewhere, but yeah. Yeah, so transportation— is that— I guess I'll ask Ms. Kawasaki, is that an accurate statement of what's going on here? Um, through the chair, Senator Dunbar, that is accurate. You as the legislature has the appropriations authority, and the only constitutionally dedicated funds are in the Constitution and that would preclude any forcible appropriations for certain projects or special interests through just regular lawmaking authority.

Thank you, Madam Chair. Senator Kosaki. Thank you. I guess this is just a comment in general that I like the idea that we're We're taking this maintenance surcharge. I think it's a simple way to do it, but it is tagging along the oil produced in the state, and the pipeline corridor for the oil pipeline is different than the— you know, we're just talking Dalton is 400 miles to Fairbanks and then another 300+ down the Richardson corridor.

And I'm wondering, not representing the Valdez area like the senator across the way, but I mean, shouldn't they be entitled to some of that money? I feel like the cost causers should be the cost payers. So I agree with it, but I just want to make sure that it's— I guess it is subject to appropriation, but I don't know if there's any— I didn't have a question there, just mostly a statement about where the money goes and where the money comes from. Sure. You know, because it's not— because we haven't created a dedicated fund here.

It is intent, so to speak, and it does talk here about the Dalton Highway corridor. Uh, you're right, that's the Richardson, um, and that may not be a bad idea either. The Richardson can use some work as well. Senator Myers. Yeah, I was reminded of something, Madam Chair.

You mentioned that Glenfarn said they wanted to pay for road maintenance, but you stated that they would be prohibited from doing so because it is a state-maintained road and we are subject to some federal laws on that. So I was speaking to DOT last year about some issues on the Dalton and asking, you know, kind of if we wanted to get the oil companies involved, how much that— kind of what the legal ramifications of that were and stuff. They informed me that that it is possible for that to happen. They just have to sign a memorandum of understanding with DOT and it can— so what would prevent Glenfarm from doing the same thing and doing the maintenance as they suggested they would do?

Senator Myers, they certainly could become a contractor. We have contractors that do the work for DOT. But you're right, they do sign on to the standards for construction of our roads, the standards for materials. Those standards include mixed designs for asphalt, concrete, cement, pardon me, and what kind of gravel, the particular grades of gravel go onto a road. I don't know that Glenfarm would be interested in becoming a road contractor, road construction contractor, but you're right, possibly that could happen.

So to that point, Madam Chair, my understanding from what DOT was sharing with me is that they weren't— they weren't asking the oil companies to become a contractor. They were simply saying they had to sign an MOU. They— you are correct, they would have had to follow the state standards, and I think there was some issue about the state still being in charge of scheduling the maintenance, but the oil companies could do the work and pay for it themselves, and they wouldn't, they wouldn't have to sign a formal contract with the state, just a memorandum of understanding. So the, um, we didn't go too far into it, but that was my understanding of it. And it sounds like Glenfarm could do the same thing, if I understand.

Thank you, Senator Myers. We won't speculate on that distant possibility, but, uh, interesting. Further questions on the Dalton Corridor? Maintenance Fund? All right, seeing none, are we to slide 7 then?

Um, for the record, Sonia Kawasaki, Senate Majority Legal Counsel. Um, Madam Chair, on slide 7, the first bullet, um, we clarified that current petroleum property taxes, when they are applicable, are in place of taxes for an LNG export facility and a marine terminal This is existing— existing law for petroleum property tax covers certain elements of infrastructure, and the LNG export facility and marine terminal were simply added as conforming language to that provision. Ms. Kawasaki, just again for the public in case they don't have the PowerPoint in front of them, the subject is now changed to the proposed volumetric tax. The governor has suggested this type of tax rather than a PILT. That's a payment in lieu of taxes.

This is a different form of that. Um, so just clarification for the public, you might hear a lot of talk about a PILT. This is the format of that, the proposed volumetric tax. And so what you're saying here then is that this will be based on throughput Ms. Kawasaki, could you explain how this will be a volumetric tax? Thank you, Madam Chair.

Um, in the prior CS, um, the— well, when the governor introduced his, um, SB 280, it was introduced as a volumetric tax. With the Senate Resources prior CS, we had reformulated that structure of the volumetric tax quite a bit and kept the volumetric tax principle because it is easier to apply. There are less disputes over the— in terms of property tax would be over assessments. And so it was an easier model. And so we adopted the volumetric tax or the alternative volumetric tax, AVT, as our base model, but we just restructured it so that Basically, there is a different tax rate applied to each of 3 components, the first one being the pipeline, the second one being the gas treatment plant located on the North Slope, and the final one being the export facility located in Nikiski.

And the different tax rates in the bill right now that are preserved in this CS are 15 cents on the pipeline, 15 cents— sorry, per billion cubic feet on the pipeline, 15 cents on the gas treatment plant and 25 cents on the LNG export facility. Thank you, Ms. Kawasaki. And again, just for clarification, the volumetric tax was proposed by the governor in the original bill. I also want to welcome Representative Donna Mears, who has joined the meeting. Thank you for attending today.

Are there any questions about that? Senator Myers? Yeah, thank you, Madam Chair. So, um, We've explicitly stated an LNG plant or marine terminal, but we didn't explicitly state the gas treatment plant in that section. Is there a particular reason?

Ms. Kawasaki?

Madam Chair, this was a request to— sorry, Senator Myers, through the chair. This was a request to Legislative Legal to conform this area of law. And so I will have to look into that for Senator Myers because I did know that the pipeline is already included in the list. And so adding the LNG plant and the marine terminal was, um, drafted, and I will have to check into the gas treatment plant. Thank you.

Senator Dunbar. Thank you, Madam Chair. And this might be mistaken, but my understanding from the way the 20 mil property tax works is that the assumption has always been that the gas treatment plant does fall within it. That is to say, if you look at the section before that, the exploration for production or pipeline transportation of gas or unrefined oil or property I think it's either that or a different provision in the law that already captures the gas treatment facility in the 20 mils. And so we're exempting it.

The question— I could be mistaken about that, but that was my understanding of how the law worked. My question is, and I guess I just want to highlight this, Ms. Kawasaki, when I hear marine terminal, I think Alyeska, I think a bunch of other ferry docks around the state. But— and so initially I was sort of concerned. I saw that, I was like, uh-oh, we'll be sweeping in a bunch of stuff here. But then if you go to Page 30, Section 42.8, they define marine terminal means terminal, those facilities required to receive liquid natural— liquefied natural gas from the boundary of the liquefied natural gas plant.

So I guess the interpretation here, is it correct that this is pretty narrowly defined as a marine terminal just for LNG export because you're receiving it from the LNG treatment plant? Ms. Kawasaki. Thank you, Senator Dunbar. Through the chair, that was the intent, and that was the intent. Thank you for asking.

These, these definitions were borrowed from another area of law under AGDC that related to the Alaska liquefied natural gas project, and these two components were part of that definition. So the intent is, you're correct, to apply to export facilities. Thank you, thank you, Madam Chair. Other questions? All right, let's go to the second bullet point on slide 7.

The second bullet point, Madam Chair, has to do with a qualified property. This is just a clarification that when the qualified property is subject to the new alternative volume— volumetric tax, that if that qualified property has multiple owners, that every owner will pay in proportion proportion to their ownership share. I would consider that a technical or clarification change. Thank you. I see no questions.

The third bullet point. The third change is a technical change to ensure that inflation adjustments to the alternative volumetric tax rates begin 10 years after commencement of commercial operations when based on each of the existing— or exist— sorry, each of the 3 components coming online separately experiencing the commencement of operations.

Very good. I see no questions. So to the last bullet point. Yes, Madam Chair. The last bullet point clarifies that a natural gas— that natural gas consumed as fuel for operations for the LNG facility itself, including— now this was the change to under the bill, the CS, is that if it's used for refrigeration purposes, it's also not considered throughput for the purposes of taxing under the ABT.

Thank you. We also included in that gas that's reinjected at— up on the slope as well as not being taxable as natural gas produced. Correct. Madam Chair, I believe that's in a different section, but yes, that we do not consider that as gas that will be produced and taxed as under the production tax prevailing value principles unless the Department of Revenue just performs that requirement on its own, because I've heard from testimony that Department of Revenue sometimes does apply tax to— for other purposes than we were trying to address with the bill. Right.

But it was not our intent that gas reinjected would be mandatorily taxed. And so just to clarify that. Again, we heard from the industry significant concern about that. Good. Any questions on these bullet points then on slide 7?

All right. Seeing none, we'll go to slide 8.

Madam Chair, slide 8 is our next to the last slide and The first bullet just addresses the repealer's applicability and transition and retroactivity sections, and they are just conforming to the new changes of the CS.

One of the ones— one of two retroactive sections that we had originally in the first CS had to do with the gas lease expenditures.

That retroactivity section has been removed because we no longer will, um, attempt to, um, decouple gas and oil lease expenditures in this version of the CS. Very good. I don't see any questions. And then the last bullet point, conditional effect. Yes, the conditional effect just needed to receive some clarity on when the new alternative volumetric tax would expire and revert to existing property tax structure, and that was if the gas pipeline was not begun construction on January 1st, 2028, or this is the second clause that would revert the AVT back to regular property tax was if that one major component of the liquefied natural gas project wasn't complete by January 1st, 2032.

Very good. And what is completed? How is that defined? Madam Chair, in this case, completed means that the commercial operations have begun. Thank you.

Any questions on that? Anything on Slide 8? Very good. That concludes the changes. Ms. Kawasaki?

Yes, Madam Chair. Thank you. Senator Myers. Yeah, thank you, Madam Chair. So, Ms. Kawasaki, got a question for you.

It wasn't covered in your presentation, but it is covered in the summary of changes that we got. We're now subjecting ADC— excuse me, AGDC to the Open Meetings Act. And I was curious if most other state corporations, the railroad, ASME, AHFC, etc., are subject to the Open Meetings Act as well. I'm sorry, Madam Chair, Senator Myers, could you point me to that section? That is a new section in the bill.

Or the page. Well, I've got it on the— I found it on the summary of changes. I don't have it on the section of the bill just yet. It's Section 17.

Madam Chair, Senator Myers, this is a conforming section. Section 17 is this clause in bold, "as otherwise provided in this chapter." And this is actually not subjecting the corporation to the Open Meetings Act. What this does is allow the corporation to come up with the regulations that were going to be adopted for procurement For the procurement changes.

So if I may read, it's very short. Except as otherwise provided in this chapter and except for the Open Meetings Act, it does not apply to this chapter. The corporation shall make available to the members public copies of the regulations adopted under B through E of this section.

Okay, so it is not accurate to say then that we're subjecting AGDC to the OMA in its entirety then?

Madam Chair, when I read this section this morning, I thought that I understood, so I will have to get back to Senator Myers on it.

Thank you, Ms. Kawasaki. Senator Dunbar. I just wanted to note that I appreciate everybody using the term subjecting when they talk about the Open Meetings Act, having come from the Anchorage Assembly. It does sometimes feel that way.

Any further questions?

All right. Thank you for that. Seeing no further questions, I am going to remove my objection to adopting version H, as in Healy, as our working document. Is there— are there further objections? Seeing none, this version is now before us as our working document.

So, any other comments about the CS? Questions to be asked? I think Senator Rauscher is indicating he has one. Yes. Thank you.

Alright. So our amendments were due at 5 today and they will fit in with this new CS somehow? Okay. Thank you. You can certainly see if they do.

As Ms. Kawasaki pointed out, there were sections removed. Confidentiality stuff was taken out. Oil tax structure changes or were changed or removed so you can compare amendments to those sections and see if they still apply. Thank you.

All right, good. With that, I will point out that Mr. Stickel is here if anyone has any questions for him. They will— he and Mr. Fulford, or excuse me, Glenn Farn and AGDC will be presenting to us tomorrow on Tuesday. But if there's any questions for Department of Revenue— Senator Dunbar? Thank you, Madam Chair.

Yes, if Mr. Stickel is available to use a little bit of this time since we always seem to run out of time with him. Yes, we do seem to always run out of time. Welcome, Mr. Stickel. I appreciate you being here. I also appreciate you being ready to answer any questions about it.

I'll do my best. Yes. Dan Stickel, Chief Economist with Department of Revenue. How may I be of assistance? Senator Dunbar?

Thank you, Madam Chair. Thank you, Mr. Stickel. So I had mentioned before about the fiscal note from 227. And the fiscal note from 227 talks about the fact that you can— you could absorb the changes to the production tax in existing staffing. But it doesn't mention the 15-cent surcharge at all.

I mean, it talks about it in collecting the revenue, but it doesn't have it in the implementation costs. And so I interpreted that to mean that you did not require additional staff to implement that surcharge. Is that a fair interpretation of the 227 fiscal note? Senator Dunbar, just for clarification, you're referring now to the Dalton Highway surcharge. Is that correct?

Okay, because I didn't hear those words and I know the public is listening, so they may not know what you were referring to. Apologies. Thank you, Madam Chair. Sure. Senator Dunbar, through the chair, again, we are in the process of digesting the bill and thinking through our fiscal note more broadly.

The surcharge to fund the pipeline corridor in the governor's bill of Senate Bill 2227 as introduced That was patterned under the existing surcharges that exist under the oil and gas production tax. So there's actually two different surcharges. They add up to a nickel a barrel presently, and the new surcharge would be basically copy-pasting that exact same language. And so it would be administered along with the production tax, and so that aspect of it would not have an additional workload. Follow-up, Senator Dunbar.

Unfortunately, Ms. Kawasaki has, has departed. But my understanding, and perhaps you can answer this, Madam Chair, is that this surcharge was— the surcharge language in, in this CS for 280 was designed to mirror or come very close to mirroring the governor's language in SB 227. Is that correct? Um, that is what was requested of legislative drafting. Senator Dunbar, yes?

Sure. And so, Senator Dunbar, through the chair, um, again, this isn't a —final decision, but I think the preliminary interpretation would be that we could administer that portion of the bill with existing resources. Aside from some initial programming costs to set up the new surcharge in the system. Very good, thank you. Thank you, Madam Chair.

Senator Wielekowski. Thank you, Madam Chair. You've been modeling And working on models with the understanding that the cost estimate for this project is roughly $46.2 billion, do you still believe that number to be accurate? Senator Bullockowski, through the Chair, that's the assumption that we have in the modeling. I have heard anecdotally, you know, from sources that the number might be higher than that.

And that's the reason why we've included sensitivity analysis in our analysis showing what things— what the different metrics would look like if the cost was higher than that. Senator Wilkowski. Has Glenfarn provided you with an updated estimate on what they think the cost will be? Senator Wilkowski, no, through the chair. Follow-up?

Glenfarn hasn't said anything to you about what they think the cost will be? Senator Wilkowski, through the chair, they're holding that information confidential. Senator Wilkowski. When you said you've heard anecdotally that it might be higher, who have you heard that anecdotally from? Senator Wilkowski, through the chair, I've heard the discussions in the building.

I've heard, you know, various— in various presentations, other numbers have been discussed. And, you know, just looking at the cost of projects around the world, there has been cost inflation in the oil and gas sector. What we're seeing for oil and gas projects more broadly on the slope is that there has been a period of costs exceeding inflation. And so You know, to expect that a cost estimate from.

Late 2010s or early 2020s would increase faster than 2.5% inflation, that would be a reasonable assumption. Follow-up. If you were to assume that the cost of this project were to have increased proportionately with the cost that you're seeing increases on the North Slope, what do you believe the estimate of this cost to be? Sen. Wilkowski, through the Chair, I'd have to We saw several years of double-digit inflation and high single-digit inflation so far in the 2020s. So you could be looking at something in the order of a 20% higher cost.

And that's just purely speculation based on what we're seeing for some of the other costs on the slope. Follow-up. Different line of questioning, if I could. Did you—. I saw a press release I believe from the White House, urging the legislature to adopt tax cuts, property tax cuts.

It seemed a little unusual. Have you been in contact with the White House about the economics of this project and about the need for tax cuts? Senator Bullockowski, through the Chair, I have not personally. I understand the Governor's office has. Follow-up.

Have you been, or anyone in the department, prepared any analysis for the White House about what these cost estimates— why these cost estimates might be needed? Senator Bullockowski, through the chair, so we have shared extensive analysis with department leadership and governor's office. And so I can't say whether and which of those have been passed on to the White House.

Other questions for Mr. Stickel?

Seeing none, thank you very much for being here.

All right. Would you like me to stick around for the—. That would be great. Gaffney Klein piece? That would be great.

Next up, we are going to have Gaffney Klein. Mr. Fulford is here. He had made some— he had made a presentation to us last week, and he, in collaboration with Mr. Stickle, had identified that they needed to share assumptions related to this project, and those assumptions modified what Mr. Fulford presented to us. And so Mr. Fulford is here to present those modifications. Welcome, Mr. Fulford.

Thank you, Chair Giesel. It's Nick Fulford for the record, just checking that you can hear me fine. Very well, thank you. Excellent. So if I might go straight to slide 3, I wanted to just briefly introduce today's discussion with some comments about the economic modeling process and how it relates to where we're at with the project, which is obviously you know, a much more complex, a much higher degree of complexity than just a few weeks ago.

And also appreciate the opportunity to correct two of the slides from that presentation last week, particularly relating to corporate income tax.

As you pointed out, Madam Chair, we've had an opportunity to meet with Mr. Stickel and the DOI team 2 or 3 times over the last few days to look at our respective approaches to modeling, look at the assumptions that go into it. And so I did have some recommendations in terms of a way forward which we could adopt here on in, really, as we reach these much higher levels of detail. So with that, I would move to slide 4.

And first of all, I think the discussion even today at committee and over the last few committee meetings— I mean, I don't know if it's exactly my place to do so, but I want to congratulate the committee and the staff on the degree of detail that's now being discussed with these various bills going forward, because they do reflect that These LNG projects are highly complex. They involve a series of upstream and midstream features, and of course Alaska's tax framework in itself is relatively complicated. So clearly we, as the legislative consultant, we strive to keep pace with these changes and to model them appropriately, and While we hadn't fully completed our diligence process on the numbers, I did share those two slides last week, which regrettably contained an error in the model, which we'd like an opportunity to correct today. And as I say, also discuss a way forward in a fashion that we can avoid that happening in future. So unless there are questions, without further ado, I wanted to put up a corrected slide This is slide 6 of the current pack, which shows 3 things on here, really the, the alternative volumetric tax divided into 2 sections, the section which is allocated to local communities and the boroughs, the amount which is payable to the state, and then thirdly, at the bottom of the bar chart, you can see there the state corporate income tax going forward.

What you can see here— and these are nominal numbers, by the way, so they are inflated as they go forward— but as you can see, the— after the start of the escalation mechanism, which as we've heard begins 10 years after operations, the volumetric tax revenues projected to rise from about $600 million to about $1 billion at the— at the— essentially at the end of the model here, which is a 30-year project. State corporate income tax, on the other hand, is projected to reach just over $350 million in 2050 and over $400 million in 2060. So as you look at the two combined, the volumetric tax and the state corporate income tax, we hit a number of about $1.2 billion per annum. In 2050 and 1.5 billion in 2060. And I should say that these numbers are the result of the collaborative discussion with Mr. Stickle and his team.

So these represent numbers which are from what I think I would describe as the model hosted by DOR as opposed to the DOR model, and, and I'll explain why I use that terminology in a moment. This, I believe, at the last meeting Senator Myers asked if we had modeled the impact fee, which at that time wasn't included in our model. It's one of the differences. But with this— with this chart you can see there in the construction phase, you can see the effect there of the $1 million per mile of pipeline impact fee, which sits at the beginning.

So if there are no questions on that slide, I'll move to the same data presented in a cumulative fashion, which again—. Please pause, and I have Senator Myers with a question. Oh yeah, thank you, Madam Chair. Thank you, Mr. Crawford, for putting the impact fee on there. That's helpful.

There's been some speculation about the corporate income tax side. And, um, you've always included it on here. We've heard from DOR that they're assuming not. I'm curious, uh, looking over these types of projects as, as you often do, um, if you believe in general, not knowing Glenfarn specifically, but in general, do large-scale LNG projects tend towards creating a C-Corp tax filing in order to make it easier to get financing?

Thank you, Senator Myers. And through the chair, perhaps there are two considerations really. One is the sheer scale of what's going on here. These are globally impactful projects and the We're talking billions of dollars of lending and investment. And so the more conventional— shall we say the more conventional corporate structuring tends to be more attractive to the banks and the lenders who would look at a project of this sort.

Okay. Thank you. Senator Wielechowski. Thank you, Madam Chair. Mr. Fulford, thank you for coming today.

What is the amount of equity that you're assuming the developer will put into this project? Is it still 70-30% and what is the actual amount you're expecting?

Yes, it's our initial, shall we say, simplified model and the assumptions by DOR include a 70-30 debt equity split. Obviously, as the— with the passage of time, With the debt service payments and debt drawdown, you'd expect that debt to disappear such that the project would move to ownership by the developers. Follow-up. And then what is, what is the amount of equity you anticipate the developer putting into this project?

So the, uh, through the chair, uh, Senator Wielekowski, the based on, you know, the for round numbers, let's, let's choose $50 billion. It would be $15 billion of equity and, um, 35 of debt at the start of the project. Follow-up. And then profit-wise, what is, what is the amount of profits that you anticipate the developer generating on this project in the first— roughly per year in the first 10 years, just a rough estimate.

Thank you, Senator Wielechowski. And I think, you know, as with the level of detail that we're looking at now in the project and the reconciliation that we're doing currently between our model and the one hosted by DOR, I'd respectfully prefer to answer that question in writing, if possible, unless Mr. Stickel has a view.

Mr. Stickel? Sure. Dan Stickel, Chief Economist with the Department of Revenue. I'm looking at our response to Question 2 of a committee response we gave today, where we did give some metrics for state equity investments at 25%. And just kind of grossing those up to the 100%, we'd be looking at about $17 to $18 billion of total investment equity cash into the project in nominal terms, about $16.5 billion in real terms.

And that would be for 100% project. And then over the first 10 years of production, we'd be looking at about $7.3 $7.3 billion in net cash flows. And we would be happy to parse those further.

Okay. A follow-up. When you say $7.3 billion in net cash flows, what is the net profit over 10 years?

Senator Wielechowski is the chair, so we would have to run that. We are looking for 10 years of net profit for the midstream. That is something that we could run and get back to you. [Speaker:COMMISSIONER TUCKER] Mr. Stickle, a question in a moment.

Is this the May 4th letter from the Department, from your Department? [Speaker:MR. STICLE] It is, Madam Chair, and we gave information around the equity investments and the return for state equity, and then later in that analysis, we also gave information around producer profits from the project. We did not specifically break out the midstream profits, and we'd be happy to do that. Thank you, Mr. Stickel. For the public who are listening, this letter from the Department of Revenue dated May 4, 2026, is posted on BASIS, for reference.

Senator Wielechowski. Thank you. Just to clarify on this model that we're looking at, page 6, I guess, that corporate income taxes were— you've developed here, am I correct to assume that that's only for the developers? That's not including producer corporate income taxes?

Mr. Fulford? Yes, Senator Willoughby, through the chair. This is— this data that you're seeing here and on the next page is purely for the midstream, so the GTP, the pipeline, and the liquefaction plant.

Senator Clayman? Back to Mr. Sickel, you were making references to the letter dated May 4th. Can you give a little more direction? Portion of the letter you were referencing? Sure.

Senator Clayman, through the chair again, Dan Stickle for the record. I was looking at the responses to question 2 of the letter. Okay.

Thank you. So in the response to question 2 are various charts showing the different permutation of ideas. For the structure and what profit would be experienced. Yes, Senator Wielechowski, question. Yeah, thank you.

So just doing some rough math here, I thought I heard that the amount of— is debt-to-equity split 70/30, and the amount of equity from Mr. Stickle, I thought I heard was $17 or $18 billion. And I just plugged in $17 billion is 30% of what? And it's $56 billion. Is that $56.67 billion? Does that sound about right?

Senator Wielekowski, through the Chair, not doing mental math. I was looking at nominal dollars. So in Yeah, I know. I mean, we will get back to the committee with detailed analysis on that. I'm remiss for trying to do mental math on the fly.

Thank you, Mr. Stickell. Senator Wilkowski. Unless my phone is wrong, which it's not. Was possible, I guess. I just typed in $17 billion is 30% of what, and it said $56.6 billion.

So is that the project estimate now, $56.67 billion instead of $46 billion? Is that the number you based on when you were performing this calculation? Uh, no, Senator Wilkowski, through the chair, so the, the $46.2 billion in real terms, um, the $17 to $18 billion, that was in nominal terms. The real equivalent to that would be about $16.4 billion.

Senator Wolkowski—. That math, math's out.

Senator Wolkowski, it's interesting you come up with the $56.6 billion. Certainly one of the folks engaged with Glenfarm has stated publicly on a widely viewed podcast that it actually is $57 billion now. As I recall, $57 billion was the number quoted, so that's possibly pretty close, but we don't actually know.

All right, so we're still with Mr. Fulford's presentation. We're on slide number 6. Are we ready to move to slide number 7? Looks like it. Mr. Fulford, let's— slide 7.

Okay, thank you, Madam Chair. So slide 7 contains essentially the same data, um, as on slide 6, but in cumulative terms to give you a sense of the broader contribution of the project to the state under the assumptions that we've provided here. So, uh, what you can see, I think the main takeaway from this graph is that the state— well, state and the borough impact of the AVT is quite material, more so than the imposition of corporate income tax. So as you get to the year 2050, there's roughly about a $1.2 billion contribution— sorry, a $12 billion contribution to the state and to the local economies, of which about half is made up of corporate income tax and state revenue from the volumetric tax. At the end of the period modeled, which is a 30-year project, the numbers reach just over $30 billion in total, of which about half is state revenue, which accrues from the corporate income tax, and the alternative volumetric tax.

I think just picking up some of the commentary that we've just been talking about, as we look at the project, there are some large features which impact quite significantly on whether the project is likely to be investable or not. Capital cost is one of them, and this is probably one of the others. As we look at the ability of the project to support taxes and revenues and so forth, you know, this is one of the features that we'll look at, I'm sure, in the coming days and weeks. And that's a point I wanted to pick up briefly on the next slide, if I may. Slide 8.

So again, coming back to the methodology, one of the common elements of methodology between our approach, which is certainly much more simplistic than the model hosted by DWR, but both of them are effectively tuned to a given project return. One of the differences in approach is the— Model hosted by DOR is currently set to a 10% pretax return. Ours was using a 10% post-tax, but nevertheless, um,.

You know, the way these models work is that you fix the return for the investor and then the taxes follow. An alternative way of looking at the project is that there's a certain revenue available essentially from selling LNG in the market and everything else follows from that. So, you know, as we think about things like capital cost, taxes, and so forth, it's often useful to put that other lens on. And look at— start at the endpoint, which is how much you can sell the gas for, and then how much capital cost, for example, can be supported and how much taxation can be supported. So just as an illustration on this slide, I plotted out what would be the contribution to landed LNG sales price from the volumetric tax.

And you can see it starts off at about 60 cents an MMBtu and moves up to just over a dollar with inflation at the end of the project. I also plotted percent-wise. I used two numbers for that. I used an $8 landed price in Asia, which corresponds to roughly what the forward price was before the conflict in the Middle East, and I've also plotted it at $11, which is if you like, a kind of consensus long-term view on where prices will stabilize. So in percentage terms, it adds about a 4 to 6.6% addition to the landed sales cost.

And, you know, I think it's just useful to consider that as we consider the broader economics of the project, whether it be capital cost or taxation or any other feature.

And with that, I will—. Any questions on slide 8?

Mr. Fulford, this is just an observation. You are very fond of the colour green on these slides, but it makes them virtually indecipherable. When looking at them. I don't have a problem with color blindness, but I have to really try to figure out which shade of green goes with which item you have here. I would plead with you to please choose contrasting colors for these lines.

I mean, if I were the public, I would have no idea what line went where. And same on the swoop graph that you present on slide 7. So, uh, we hope that the public will be able to understand what we're talking about here. It makes a huge difference that the public understands what the cost of this project is and what the legislature is trying to do in terms of supporting an Alaska pipeline project for Alaskans. So we are now, I believe, on slide 9, and you have some recommendations on slide 10.

That's correct, Madam Chair, and thank you for the feedback on the materials. Like you, we aim to deliver materials that are useful to the public, and that's very good commentary, and we'll make sure we rectify that in future. So in terms of recommendations going forwards, the— I used the term the model hosted by DOR as opposed to DOR model simply because I think in being able to meet with DOR and discuss where we're at with Mr. Stickel and the modeling, essentially the model that DOR are using is broadly speaking you can trace its origins right back to SB 138, and in fact, you know, back in I think 2014, I remember when we were engaged by DOR that the discussions around this standardized model that was being used at the time. So it has a long heritage. It has been through multiple administrations.

It's had input from a wide range of consultants and producers and others. So it's a very well tried and tested model which I think reflects where we're at now in terms of dialogue about the project. And with suitable checks and balances, I think would present, you know, an excellent basis on which to carry out some of this modeling that we've been talking about today, whether it's to do with the capital costs or the taxes and so forth. Now, obviously, we can play a role with alongside DOR, for example, looking at the model aside. You know, we're currently working on two other standardized LNG models from different parts of the world.

So I think it would, it would be informative to compare with that. We can do a kind of audit on the model if that is appropriate. I think probably above all we can sit down with DOR and look at different assumptions that have been used on other projects, whether it is to do with rates of return. Depreciation methodology was one of the ones that came up in our dialogue with DOR. So with appropriate controls and guidelines, I think our firm recommendation would be to adopt the model hosted by DOR as a kind of a standardized tool for addressing the sorts of things that have come up at today's hearing.

Thank you, Mr. Fulford. I have a question for Mr. Stickel.

As far as collaborating, you and Mr. Fulford, are you also working with AGDC in evaluating what the assumptions will be and what the model will look like? Chair Casey, yes, and that's part of our process. Every forecast, when we update the model with new assumptions, we collaborate with AGDC and seek their input. Very good. I know that the governor has spoken clearly about hoping that there's collaboration going on.

So I wanted to make sure that that was publicly clear. Senator Wielechowski, did I see your hand up? Yeah, I know in past oil tax discussions predominantly, there have occasionally been models that have been created. I know Gaffney and Klein did one back in 2007. It was very helpful.

And I'm wondering if If there could be a publicly made model that was available where people could plug in various rates, maybe property tax rates or ACV rates, maybe cost of the project, corporate income tax rates, things like that, so that we could, we could see how the decisions that we made, the policy decisions that we made impacted the economics of the project. Is that possible to get? And Dan Stickle for the record, Senator Wielechowski, through the chair, in theory, yes, a simplified version of the model is something that could be created.

In the next 3 weeks, that would be an incredibly daunting task. There's a lot of complexity to the modeling. It hasn't really been set up to be public-facing. Just in terms of structure and shortcuts and formulas and such. But in theory, there's no reason we couldn't ultimately do that if given time and resources.

Thank you for that, Mr. Sickel. And I can imagine it would be a daunting task, which again brings to bear The thought that we were given this bill on March 20th and we're being urged by the governor to conclude our work on it in just 3 more weeks. Daunting task, not only for you but for us as well. Senator Myers, was your hand up also? Yeah, thank you, Madam Chair.

So I've got a question for Mr. Fulford. So, Mr. Fulford, you and Mr. Stickell have both expressed that your modeling has been on assumption of a 10% rate of return. And I was wondering if you could— and if this is in future in writing, that's perfectly fine— if you could kind of walk us through what a rate of return calculation looks like a little bit. A couple of meetings ago, I think Senator Wielechowski was doing a little bit of rough math and was coming up with a 50% rate of return. And so Obviously, if we're that far off, somebody somewhere is missing some calculations.

And so I'm just curious if you could kind of walk us through how we come up with that percentage, what that means for the company.

Thank you, Senator Myers, and appreciate the opportunity to respond to that. And unfortunately, I think the data we had on our slide last week because of the inaccuracies in it, and any sort of derivation or assumptions which came from that aren't really appropriate. So I think I said it actually at the meeting that the model.

And again, a few minutes ago, the model— you set the rate of return and everything else follows from that. So however you set the taxes, however you set the capital cost, obviously we can model it differently, but currently the analysis that you've seen has all been based on a 10% rate of return assumption. In terms of what the appropriate rate would be for an investor, again, I think I mentioned last time that for a gas— for a straightforward gas pipeline supported by very creditworthy shippers and tariff contracts, it wouldn't be unusual to see a return somewhat less than that. In the upstream oil and gas world, typically the risks and the variation outcomes is significantly higher, so you'd see typically a higher rate of return. LNG tends to be somewhere in the middle for the liquefaction.

The GTP is probably similar. So, and it hinges really on the investors, their appetite for risk, and what other projects they might have available to them to invest in. I'm happy to discuss more on a different occasion. Senator Myers, follow-up. Yeah, just real quick.

So I wasn't asking about, you know, what rate of return is best. I was just curious as to what the calculation that, you know, when a company sits down and says, what's the rate of return on this project going to be, what that calculation looks like, you know, what the formula is, so to speak.

Well, thank you, Sundramayas, and I may invite Mr. Stickel to comment as well, but ultimately it's a cash flow model. It discounts the value of money back to the present day, and ultimately it's what revenues are required to drive that 10% return on the initial investment. I think Mr. Stickel would have a more sophisticated answer, perhaps. Mr. Stickel. Sure, Dan Stickel, Chief Economist with Department of Revenue.

So our modeling, we assume a 20-year, kind of a 20-year of full production as kind of the time horizon that companies would be making their investments based on. That is the assumed length of time for the debt that would be issued through the project. And so it's over that 20-year time horizon that we assume the 10% pretax rate of return would be targeted through the project. Looking at the letter dated May 4th, under question 4, we did have a response that looked at this. In our modeling, so we assume the 10% rate of return over the first 20 years of full export operations.

We do assume that the project will continue beyond the 20 years. And so if you look at 30 years of exports, it works out to about a 12% total rate of return over that 30-year time horizon. Okay. Very good. Well, that brings us to the end of our time today.

Thank you, Mr. Fulford. Thank you, Mr. Stickel, for being with us. At this time, we're going to set aside the Supporting a Gas Line for Alaskans Act, otherwise known as Senate Bill 280. It is version H that we're dealing with now. H as in Healy, which ironically relates to coal.

Um, we will be hearing this bill tomorrow for the 24th hearing, uh, at 9 AM tomorrow morning here in this room. At that time, we're going to have Glen Farnon, AGDC, before us. We believe, uh, that Mr. Prestidge will be available. He is arriving tomorrow morning. We believe Mr. Richards and Mark Begich will be joining us as well, and possibly Mr. Kissinger.

So that's the next meeting tomorrow morning, 9:00 AM. At this time, we will stand adjourned. Let the record reflect the time is 5:08 PM.