HRES-260429-1300

This meeting of the House Resources Committee will now come to order. It is now 1:17 PM on Wednesday, April 29, 2026, in Capitol Room 124. Members present are Representative Colon, Representative Hall, Representative Mears, Representative Elam, Co-Chair Representative Dybert, and myself, Co-Chair Representative Freer. Let the record reflect that we have a quorum to conduct business. Please take this time to silence your cell phones for the duration of the meeting.

I'd like to thank Cheryl Cole from Records and Renzo Moises from the Juneau LIO for staffing the committee today. Today in House Resources, we have a presentation commenting on the committee substitute for House Bill 381, the AK LNG property tax bill. For Mr. Nick Fulford, Senior Director for LNG and Energy Transition at Gaffney Klein Energy Advisory. Following Mr. Fulford's presentation, we will have Mr. Dan Stickel from the Department of Revenue back before the committee to respond to committee comments and questions on House Bill 381. Finally, today we will hear public testimony on House Bill 381.

Up first, we have on Teams Mr. Fulford of Gaffney Klein. Mr. Fulford, please put yourself on record and begin your presentation.

Thank you, Madam Chair. For the record, this is Nick Fulford from Gavin Klein, and I'm just doing a quick check that you can hear me fine.

Yes, Mr. Fulford, thank you. We can hear you just fine. Okay. Thank you very much, Madam Chair. So maybe we could go straight to slide 3 in the interest of time, talk about the agenda for today.

Um, I wanted to set the scene for my comments on the committee substitute, uh, really with some broader sort of strategic considerations about how this fits into the, the project development, how it's viewed by some of the other project stakeholders, and internationally indeed. Um, following that, I was going to dive straight into looking at the breakeven analysis and really what the AVT proposal in front of us today translates into in terms of delivered cost of gas to Asia.

Equally, obviously, significant effort in the Committee Substitute has gone into addressing some of the considerations around the Fairbanks Spur. So we've done some financial analysis around that to put that into context in terms of what that would look like in terms of a spread tariff and so forth. Then really the second part of my talk today deals with equity participation by the borough. I wanted to highlight a couple of fairly unique features of the GTP and perhaps ways in which that might influence things, but then really to finish off talking about some of the Canadian projects which revolve quite significantly around affected communities and equity participation. And then the rest of the world, which kind of really comes back to Papua New Guinea that we talked about last time.

So with that introduction, I will.

We'll go to slide 4 unless there are any questions. Thank you, Mr. Fulford. Just want to let the record reflect that we are joined by Representative Sadler at 1:20 and Representative Prox at 1:21. Thank you. Please proceed.

Thank you, Madam Chair. So dealing with slide 4, then what I'd like to do is sort of cast your mind back to the discussion we had at the last committee meeting where I was present. And the breakeven matrix that was produced by Department of Revenue. And in that dialogue I described how really for the project to be viable we're sort of looking effectively at the top left-hand corner of that matrix. So for the project to work the cost of gas into the project has to be manageable.

And above all, of course, the capital costs need to be within bounds. But of course the other key consideration around that zone of profitability, if I can call it that, is the fiscal framework, which has a fundamental effect on project returns and indeed whether the project even succeeds or not. And what I would say is, you know, in terms of the numbers that we'll look at today, we're talking cents rather than dollars, and it might seem insignificant in some ways, but the reality is that incrementally each step towards a profitable outcome for the project is key. And you never know quite what it is that's going to kind of close that gap between investors being unwilling to invest and a project where you gather the support and investment. So having said that, the other feature which we talked about as well on this committee and which runs effectively through the entire thread of what you do is this constitutional duty to ensure that whatever whatever the split ends up being between government and project sponsors, that the project is being developed in a way which is in the best interests of the state.

So, you know, if you like, there's the counterargument that, okay, the project needs to be profitable, but equally your duty is to make sure that appropriate taxation is being applied to, to create that value for, for citizens of Alaska. Um, so again, another nuance which, um, it's good to remember is that the LNG business, although all our discussion at this committee has been around the Alaska LNG project, um, globally there's there's a pool of capital which is considering LNG projects all over the world, whether they be on the Gulf Coast in Canada, Sub-Saharan Africa, Australia, and ultimately the, the people who deploy this capital, regardless of jurisdiction, they look at risk and return and they will always select the lowest risk and the highest return jurisdiction to invest in. So, so again, as we think about the bill today, it's good to remember that ultimately investors have choices and whatever we might feel is appropriate for Alaska, it may cause that capital to drift away and be invested elsewhere. Finally, we talked about it a little bit at previous hearings, but my goodness, there's such a lot of activity in the LNG market today, really driven by what's happened in Qatar. So a lot of major LNG buyers, their LNG procurement plans have had to change quite markedly because of the absence of, or at least the potential absence and certainly significant delays in Qatar.

And so from that point of view, collaborative, constructive progress between the legislature, the project developers, and indeed the upstream gas producers is something which is good to be able to demonstrate, and it's something that will attract people. To the state. So, turning to the right-hand side, I think we don't have to remind ourselves that the project itself would be completely transformative for the state's economy.

And in that context, it's good to remember that you can never really arrive at a perfect taxation regime for a project. It's all based on projections, assumptions, and so forth. So you can never really arrive at a perfect solution. And so the thing to bear in mind is to arrive at a good enough solution which enables the project to go forward. And of course, for Alaska particularly, we have this added element of gas supply to south-central Fairbanks.

Which again has a very important role in terms of the future of the state. So again, another quick reminder: in British Columbia, the taxation regime is broadly similar, slightly more favorable even, to what it is here in Alaska, not including property tax or this volumetric tax. So already in looking at a property tax substitute, we're looking at a feature which doesn't really apply in Canada. It's a complex equation because their upstream tax is a little different to yours, but it's worth bearing in mind that there is essentially a slightly more favorable tax environment to the south. And as we look at competition, yeah, absolutely.

Competition from Canada is probably what you need to worry about with the current market events. I think it's highly likely that LNG Canada will, will go for FID on Phase 2, which would be another 14 million tonnes of LNG output.

You've got the projects just, you know, literally a few hundred yards south of the border in BC and, and a number of others which, which are of interest. And finally, Gulf Coast. You know, we've— that there are a host of differences between a Gulf Coast LNG supply and Alaska, but all the same, right now it's those Gulf Coast prices that are determining the marginal price of LNG globally. So with that kind of landscape, I'll move to slide 6 unless there are any questions. Thank you, Mr. Fulford.

Just want to let the record reflect that we were joined by Representative Fields at 1:27. Representative Sadler, sure, do you want to wait and do questions at the end, or can we do them as we go?

We can, I think. With the interest of time, we do also have a follow-up presentation from the Department of Revenue, and we also have public testimony listed. I would prefer that we go at the end if we can, unless there are any pressing questions. I don't want to do a whole lot of back and forth. Do a little, just real quick.

Uh, Mr. Pulpher, you say on slide 4, time is of the essence. How pressing is our timeline?

Well, as I mentioned, uh, Representative Sadler, through the chair, uh, the, um, I think it would be wrong to sort of underestimate the effects of these sort of recent geopolitical changes and particularly the impact on, on the LNG industry. So, um, a lot of governments, Asian governments in particular, and Europeans for that matter, are urgently reviewing the security of supply arrangements, where the gas is coming from. And over the next months and perhaps a year or two, there will be significant changes in terms of new projects coming to the fore and other projects falling by the wayside. So in this climate, The Alaska project has these huge strategic benefits.

You know, it, it exists in a place where the rule of law is well established, that there's an established upstream. The gas is proven. There's no doubt at all as to whether the gas is actually there. And of course, you have this very short shipping distance and much easier shipping logistics just to get to Asia. So I would expect that a lot of countries who perhaps weren't looking very hard at Alaska 6 months ago are now examining it quite closely.

So over the next few months and.

Year, perhaps, I see the opportunity to attract new interest to Alaska. And one way to do that is to move forward with a firm fiscal regime for the project. Thank you. Thank you, Mr. Fulford. And we will hold the rest— the remainder of questions to the end of the presentation.

Please proceed to slide 6, Mr. Fulford. Okay, thank you very much, Madam Chair. So this, this slide really shows the kind of transition, the passage from where we were with the current property tax legislation. Scenario 2 shows where we would be if you remove property tax completely, and you can see there, there's a saving of well, anyway, very material saving there in terms of delivered cost to Asia, which is what this axis on the left represents.

So obviously starting from that point where you've removed property tax completely, as you incrementally add some other kind of surcharge or alternative volumetric tax, you can see that you're building back up in terms of that that delivered cost. So, so the good news is that compared to the existing property tax arrangement, the, the AVT proposed in the committee substitute still generates around a 20-cent per mmbtu saving in terms of delivered cost to Asia. So coming back to that zone of profitability, it's, it's incrementally improving it compared to where we were with property tax.

The, the other benefits which apply not only to the project as a whole, but perhaps more especially to the affected communities, and particularly bearing in mind how important stability and predictability is in tax revenues. One of the things this mechanism does bring is that kind of long-term stable taxation stream, which from a municipal planning, state planning point of view, obviously is hugely advantageous. And of course, this AVT would continue as long as the project continues. It doesn't have the same features that property tax would have where, where it's a declining revenue. The other advantage is that because it's volume related, it relates fully to the amount of gas being produced by the project.

So for example, for expansions, for additional trains, there'd be a very direct linkage between additional AVT revenues and what the project is doing. Which you don't really see if it's purely linked to capital investment and property tax.

So then you move on to the downsides. And, you know, as I've mentioned a couple of times even this afternoon, it represents an additional tax charge over and above the federal and state corporate income tax. It doesn't— offer any, you know, tax holidays, front-end mitigation, which often is something that LNG projects like to see to help bridge the gap to an economic investment. And for external stakeholders who are looking at the project, you know, deciding whether to engage in a kind of a purchase arrangement, it's something which represents an additional tax, a higher cost of delivery, and so it may disincentivise some people from looking at the project as we go forward. So I'm going to change gear on the next slide and deal with the Fairbanks spur, which is significant element of the committee substitute contact.

So this would be on slide 7. So as I say, changing gear to the Fairbanks Spur, the capital cost quoted for that spur is between $150 and $200 million. I'm not quite sure how dated that is, but It's a good enough figure to work with for the purposes of today. So if you look at the Fairbanks consumption today with the IGU, you're looking at around 100— about a BCF and a half per annum of residential primary load, a bit of commercial. So if you were to say, well, what pipeline tariff would those customers have to pay?

To support a $200 million spur, it comes out to about $12 to $14 per MBTU. So obviously to that you have to then add the cost of the broader pipeline network. Now whether that would be just the section from the slope down to Fairbanks or whether it would be the entire pipe pipeline remains to be seen, but obviously there would be a significant charge for that as well. And then of course you have to consider the upstream gas purchase price, which in the context of this is, is the least of the, of the contributors, uh, kind of a dollar and a half or so. Um, one of the immediate conclusions that this leads to is building volume through that pipeline is of key importance So for example, if you switched 100 megawatts of power generation from particularly oil or diesel, very high-cost fuel, over to natural gas, 100 megawatts at a reasonably realistic load profile, it would be 3 to 4 BCF per annum.

That in itself would reduce the tariff to about $4. So again, it's this— you can see the impact of volumes on the tariff. So now we turn the question to if, as I think is proposed in the committee substitute, if we impose those costs on the entire pipeline network from the Slope down to Nikiski, And assuming that this is in an environment where you're flowing 3.3 Bcf a day for the LNG, the incremental cost of supporting that pipeline is, is just 2 cents an MBTU. Um, you're adding $200 million to what is a $10-11 billion capital investment. So in that sense, you know, the impact on the the overall tariff is, is relatively small.

Um, what does become more material is if you look at the Phase 1 of the pipeline only, where, um, you, you've got a $300 to $500 million scuffs a day flow through the line. So if you were to spread the cost across, for example, the South Central customer base, then everybody would be paying 20 or 30 cents an MMBtu in addition to what they'd be paying otherwise in order to fund that spur. So that would feed through to electricity prices as well, of course, because of the impact of where the gas sits. So I'm sure we'll come back to that in questions, but for now let's move on to slide 9. Thank you, Mr. Fulford.

And at this point—. Oh, just want to recognize that we have Representative Aishide also in the room and former Representative Jesse Sumner also joined us in the room.

Okay, thank you very much, Madam Chair. So switching here now again to this question of borough equity in the elements of the LNG project. Project. So I just wanted to briefly highlight some fairly unique features of the gas transmission plant, which is that it will need to be designed and the ownership framework for it will need to be compatible with one of the mechanisms that typically is used to monetize the federal tax credits under 45Q. Usually this is done through a tax equity structure, which is a very complex mechanism for, well, essentially selling the credits elsewhere, or simply a credit sale where the tax credits are sold at so many cents on the dollar.

So all that to say that those features may somewhat complicate ownership. Equity from the borrower. But having said all that, my understanding is that an equity participation through the AGDC 25% option is certainly feasible.

Likely beneficial ownership as opposed to any kind of management role on the unit, the GTP in this case.

So I think that straightforward equity, my understanding is absolutely available.

And the other feature which I've talked about before, which often that goes with these types of equity participation is a carried interest. And again, my understanding is that a carried interest is likely to be less attractive to the project partners. But in the context of the North Slope Borough, for example, there are a host of ways in which financing could be organized for that. So I think the conclusion is that through the AGDC option equity participation by the borough is on the table. The dialogue is more likely to be around pricing and how that potentially features with the broader dialogue.

So moving on, I've only got 2 more slides and then we can come back to questions. I know time is short. So I wanted to talk about Canada because as you think about equity participation by impacted parties, most of the Canadian projects that are active at the moment, LNG Canada probably being the exception, not only benefit from equity participation by particularly the indigenous tribes and so forth that are heavily both impacted and also benefit quite significantly. Many of these projects, you'll notice, are actually being driven by First Nations communities whose land these LNG projects are being built on. So, you know, Cedar LNG, for example, that's perhaps one of the clearest, simplest examples of a project being pursued by the host community, in this case, the Haisla Nation.

Wood fibre is another one where it's the Squamish Nation there who are certainly a big part of it. Xeela shims, which is the one, just a few hundred yards from Alaska. Again, that the land on which that terminal is being built is tribal land and the, the local indigenous community are naturally taking a significant part in that. The only part of that, I believe, which is fixed or which is agreed so far is a 50% interest in the pipeline. I think the, the ownership around the actual LNG liquefaction facility is still under, under guidance.

And then the newest one of all on the other side of Canada in Hudson Bay is a Cree Indigenous community there who are pursuing that. So, you know, some very interesting parallels. Which I'm sure would be the source of considerable insight. But I just wanted to put it out there that in Canada, certainly, borough and community involvement in the project is taken to a different level. So final slide.

We talked about Papua New Guinea last time, and to be honest, since we talked about it, I've been looking for other examples that have similar lessons, and I'm not sure that there really are very many which involve impacted communities and equity, whether it be carried or paid for. So last time I talked quite a lot about the PNG LNG project, ExxonMobil, Santos. There's a newer project under development, it's called Papua LNG, and essentially it's following many of the same features that the earlier project did with awarding equity to landowners, but really through the government agency set up to do this, that's the MRDC, the Mineral Resource Development Company.

So with that, as I say, in the interest of time, I'll stop my commentary there and happy to take questions as directed by the Chair. Thank you so much, Mr. Fulford. I've got Representative Sadler, then Representative Fields. Thank you, Madam Chair. Mr. Fulford, on slides 10 and 11, I need a little more clarity in simple language about the middle column, Community Indigenous Equity Forum.

Not so much equity percentage. I'm not sure what SPV is. I don't understand those different elements of equity. Can you just speak informally of which— what those are and how they achieve them? Because the technical, the esoteric term equity option doesn't give me a lot of information.

So an SPV is a special purpose vehicle, which is a corporation set up specifically to usually develop a certain piece of infrastructure. So, like AGDC? So think of it as a kind of a— think of it more as the combination of AGDC and Glenfarm. Good. Because certainly with many of these projects, you basically start with nothing.

And so the SPV would be the very first step in setting up a corporate body, which ultimately would be set up with different types of shareholding and so forth. So that's really what that is. I hope that helps. [Speaker:CHAIRMAN BRYANT] So you're saying basically to issue stock shares? Is that what you're saying?

The equity mechanism is stock shares?

And I'd like to—. [Speaker:DR. RICHARD SHARP] Thank you. [Speaker:CHAIRMAN BRYANT] Go ahead. [Speaker:DR. RICHARD SHARP] Through the Chair, essentially I would say that's exactly the process. And again, the terminology equity option reported, looking down that column, volume chain equity element feed pipeline, I do not understand those terminologies, what they mean in terms of how there is equity participation by the impact community.

Just expanding those a little bit more, please, put it in usable language. So thank you, Representative Sutherland, through the chair. Apologies for some of the summaries here. Value chain equity, in the same way that Alaska, you have the GTP, you have the pipeline, you have the liquefaction. The, the equity interests in those different elements in the value chain could be different.

And certainly with the Kaseela Shims project, the, the element in the value chain which has been established is, is the pipeline with a 50% equity interest by the community whose land the liquefaction is being placed on. I tried to delve deeper into that. Obviously, there's not a huge amount of money, a huge amount of information in the public domain. So, so I think that's a good example where equity in the LNG plant is still probably under discussion. There are 3 bodies active in that project.

There's the First Nations community there's a group of gas producers from BC, and then there's a Houston-based development company, which, you know, you could see as being a little bit like Glenfarm. So, so how the equity in the LNG will end up between those three elements remains to be seen.

I still confess that I do not understand how to read that value chain equity element feed pipeline PRGT, whatever that is, and plant equity unclear. I do not know what conclusion to draw from that. Thank you, Representative Sadler. I think you can— if you have further questions, maybe it would be appropriate online. There are other—.

As long as everyone else understands it, I'm the only one.

We do have limited time here. We do. Representative Fields. Uh, thank you through the chair, Mr. Fulford. So I just want to make sure I'm clear with the slide with the two rows for PNG.

It looks like you're saying that in PNG they did something similar to what we're contemplating. The landowners got an equity share in exchange for basically use of their land. They did not buy that equity, is that correct? They did not buy it with cash. Uh, thank you, Representative Fields, uh, through the chair.

The, um, the equity was— well, there was a— there's a royalty element which isn't paid for, but in terms of equity in the project, uh, that has to be funded And assistance in funding that came from the federal— well, came from the federal government. So the equity interest, it wasn't a carried interest. It had to be funded. But it was done based on borrowing against future earnings. Essentially, that's how it was done.

Can I ask a question? Representative Fields. Okay. So the federal government gave money to the pipeline developer to help build it and then somehow transferred that to the local government. Is that how it worked?

I just want to understand exactly how this equity stake developed.

Thank you, Representative Fields, and I'll explain that to the best of my knowledge.

A little bit like the Glenfarm AGDC relationship, there was a similar relationship and commercial framework agreed between Exxon Santos and the, essentially, the government government body, which equivalent to AGDC if you like to look at it that way. Then the government body assigned or facilitated the transfer. I think they had 19% and 4% of that was then assigned to impacted communities and other provincial entities along the pipeline routing. That 4% equity ownership was assistance in funding. It was provided by the AGDC equivalent or the government based on anticipated future revenues from flowing LNG.

Okay, that's how that worked. A follow-up, Representative Fields. Um, could you go to the California— or sorry, the BC tribes slide? And I just wanted to ask the same Question. So—.

Slide 10, Representative Sadler. Equity percentage reported, for example, the wood fiber LNG equity option plus regular role, was this similar where some level of government paid for equity with cash or was there a provision of equity in exchange for foregone revenue or land access or something else?

Uh, thank you, Representative Fields. Through the chair, um, I can, I can try to dig into that a little bit more and see what else I can find out, but at the moment I don't feel qualified to answer that question in detail. Can I just close with a request on that? Through the chair, I want to understand how many of these projects have an equity stake where there was not cash paid for it. That's really what I'm curious about.

Thank you.

Thank you, Representative Fields. I can look into that and see if I can provide you a written comment. Thank you, Mr. Fulford. Representative Elam. Thank you.

I appreciate the presentation. On slide— it's page number 4 on the PDF there, and it's the strategic considerations. And so I have kind of a multi-part, I guess, question related to the text in the green field there, you know, about the Alaska LNG project that would transform the state economy through tax revenues, employment, wider gasification. I was hoping you could maybe expand upon that just a little bit, but then also wondering your perspective on House Bill 381 here as we have adopted the CS. Um, I'm wondering, uh, when we start talking about the competitive cost of delivery being competitive with like the Gulf Coast, also with our Canadian neighbors, are, in your opinion, are we still maintaining, um, competitiveness within those areas?

And then also, uh, from that strategic perspective, are we looking at, um, HB 381 with RCS, uh, making it any potentially more challenging as things become more competitive for capital? Thank you, Representative Yllam, through the chair. That's obviously quite a wide question, so I'll try to parse it a little bit. So, you know, I think as everyone has read, it's been widely reported, you know, as you think about the Alaskan economy and tax revenues and so forth, The— I think I had it on one of my very early slides, but if you say that there's 100 TCF of gas on the North Slope looking for a market, and if you apply today's Asian price of— call it 10— well, it's actually more than that, but call it $10. So that's around about a trillion dollars of market value.

Now obviously you have to produce the gas, export it, and take it. But, but whichever way you look at the LNG project, it has huge numbers associated with it, which if you then, if you then impose those huge numbers on a state as small as Alaska in terms of population and economy, it, it creates this kind of binary outlook for the economy. It's with the LNG project and without it, and the two look very different. So it depends on which lens you look at that through, but it is a transformative project. And that's why I've made parallels with Mozambique, Tanzania.

There are many parallels that don't work, frankly, between Alaska and those countries, but one of the parallels that do— Trinidad, Trinidad would be another good example— where that one project increases GDP very significantly, creates jobs, it grows the economy, it improves standard of living. So maybe that's the answer to the first one. So then on the second part of the question, any tax imposed on the project will somewhat effect the cost at which that LNG can be delivered profitably to, to markets overseas.

So there's, there's that element to it. There's element number one is you need to be able to create a project through the setting of taxes. And of course, the project developers, there's a host of things they need to do as well. It's not like it's just a tax-setting exercise. But the role the government plays in setting tax ideally needs to focus on creating a viable project and not raising the cost of delivery to the point where it's not competitive.

But then there's a second thing to consider, which is, well, if, if LNG investor has $10 billion to, excuse me, invest, will they do it in an environment with lower risk and higher returns? Yes, they will. So, so there's a sort of a double-edged angle to the setting of taxes. You know, one is whether the project is competitive or not and investable. And the second is whether it will still invest, attract capital in what is a global, global market.

I hope that helps. Thank you, Mr. Fulford. We've got one follow-up from Representative Yeelem. We have a few other folks in the queue. I'm also looking at time.

We do have 23 slides in the presentation from the Department of Revenue. We've got public testimony noticed for this bill, so we can do Representative Elam's follow-up, one more question, and then if there are further questions for Mr. Fulford, we can please submit them in writing to [email protected]. So follow-up, Representative Elam, and then Co-Chair Dibert. Thank you, I appreciate the answer. I guess, you know, one of the things that I was just kind of contemplating there is When we start talking about being competitive, uh, mostly with the, the Canadian resources there, do we know approximately how much of their field is already encumbered, is already sold?

Um, you know, because if there's global capacity issues with all the stuff going on in the Middle East, that in my opinion puts us at a strategic advantage. If they're at 80 or 90% capacity and we're at next to nothing, then we would obviously be a good sourcer for that, for that resource.

Uh, thank you, Representative. And, um, I think I'll answer that question. I'll try and keep it brief and to the point. So, big difference between Alaska and Canada. Uh, the Canadian gas resources are connected through a series of, you know, cross-country, cross-state pipelines into the Lower 48.

And as, as additional LNG capacity is built, as the pull on U.S. domestic and Canadian gas resources increases, it will pull prices up everywhere. Particularly in the Gulf Coast, because that's where the big demand is for the LNG. But it will have an incremental effect in BC. So the more pressure is put on Lower 48 domestic gas prices because of the LNG, because of all the data centers, the power generation, that will create a more expensive gas environment in BC, which will have to be supported by their LNG customers because that's the way they, they.

Works there. Alaska is completely unconnected. So whatever happens to Henry Hub, it has no effect effectively on Alaska. So that's probably the biggest advantage that, you know, there's a low-cost, very plentiful source of gas. And if I were an Asian buyer, I would be very— looking very carefully at the potential for cost escalation because of the sheer amount of LNG being built on the Gulf Coast.

Thank you. I hope that helps. Yes, thank you. Thank you, Mr. Fulford. And final question for Mr. Fulford, Co-chair Dibert.

Thank you, Co-chair Freer. Through the chair to Mr. Fulford, thank you for being here. I just have a few thoughts on the spur line slideshow. I think 7, slide 7. Mm-hmm.

Of course. Just the first and second bullet. Is it fair to say that the cost of building the spur included in the overall project has little impact on the overall project, the price of it.

Thank you, Co-chair Tyburton. Through the chair, in a scenario where there's over 3 BCF of gas flowing down that mainline, an additional $200 million of CapEx to amortize and some OpEx as well As I said, it makes 2 cents difference.

And, you know, that's a lower order of magnitude difference to what we're talking about, for example, with the AVT or property tax or any of these other things we've been debating. So it would be true to say that the impact on the project as a whole is of a lesser order of magnitude. Than many of these other features. Two cents, and then it would be to you. Thank you.

One follow-up. Follow-up. Thank you, co-chair, Mr. Fulford. And then just another thought. In Fairbanks, I just had my fuel tank— I don't have natural gas boiler, so I have heating fuel, oil— and just filled my tank at $5.90 a gallon.

And then, which is like you said, high cost of fuel in Fairbanks.

And then when I see bullet 2, where it's for— it could be $14, that would it be fair to say that added to the cost of building the pipeline, it's— that's not very enticing to customers in Fairbanks? Whether it's military, residential, or businesses. Thank you.

Thank you, Koji Daibut. And in the interest of time, just a very brief response to that. I think every time you look at the economics, whether it's the Phase 1 gas pipeline or the Fairbanks Spur, the prevailing thought you're left with is economies of scale. So as you can see that, you know, a BCF and a half of residential commercial load is a very small amount of gas on which to, to fund, you know, a $200 million pipeline. If you can add another 100— well, you know, what would that be, like 300 million scuffs a day?

From a power source, if you can add a military base, industrial applications, very quickly that cost begins to come down. And around the world, these major gasification projects are undertaken and all of them encounter this ramp-up problem. Of how you can fund what is a very expensive pipeline from a very few customers to start with. So all of them have to consider some kind of, you know, subsidy or mechanism for making the gas appealing enough for people to sign up for in order to achieve those volumes that you need to make it work. So there are a number of mechanisms for doing that, but I probably cannot go into those today.

Happy to do so on another occasion. Thank you, Mr. Fulford. We do have another follow-up on this particular question, final follow-up, and then we will transition. Representative Prox. Yes, very good.

Thank you. Through the chair, uh, this— the ability to generate the gas flows through the spur line is speculative to some degree at this point. Do you have any information or any thoughts about how likely it is to achieve the 3.4 BCF flow rate?

Thank you, Representative Thornton. Through the chair, We can do generic analysis around the economics of gas-fired generation versus oil and diesel, for example.

But, you know, if you start with, you know, a dollar, dollar-fifty, $2 gas at the end of the pipe, and you then apply particularly if you apply the kind of tariff that would, that would emerge from the full LNG project, which, which could be just another dollar in terms of getting gas from the slope down to Fairbanks.

You're left with a very appealing end price compared to any of these other fuels, even coal, probably. So, so it is entirely— the ingredients are there to create a rapidly growing gas demand in the Fairbanks area, mainly by switching industrial and power load to gas. But, but the way in which it's done obviously is the key. Yep. Okay.

Thank you. Thank you, Mr. Fulford. We're going to take a— thank you so much for being here. And again, if there are any further questions for Mr. Fulford, please send them to House Resources. We're going to take a brief at ease while we move on to the next presentation.

Back on record in House Resources. We are moving on to our presentation from Mr. Dan Stickle, Chief Economist from the Department of Revenue. Mr. Stickle, thank you for being here again. Please put yourself on record and be You may begin your presentation. All right.

Thank you. Dan Stickel, Chief Economist with Department of Revenue, for the record. And this presentation is just going through some slides discussing our response document to the questions on our previous presentation, which was discussing a response document to a presentation earlier in the month.

So, slide 2 over— kind of lists out the various questions that we'll be responding to, and then I have detailed slides on each of these questions. So the first question was, can the cumulative revenue sensitivity results be converted into tables showing annual income at specific volume levels? So we've included as a committee document some detailed— detailed spreadsheets over life of project showing these revenues, but then we have them here in slide form. So slide 3 presents what the annual municipal revenues from property tax would be under the full AKLNG project if it were to go forward under current law. You see that those start out in the $50 million range during the first phase of production, ramping up to nearly $500 million per year to the Municipalities from the project and then an additional about $50 million for property tax to the North Slope Borough from additional upstream development assumed to be associated with the project.

Slide 4.

Here is the similar metrics under House Bill 381 as introduced. So should mention all of the analysis here is based on House Bill 381 as introduced. This does not incorporate the proposed committee substitute that's currently before the committee. But so on Slide 4, the alternative volumetric tax would kick in beginning in 2031 once the project reaches the 1— Bcf per day, 1 billion cubic feet per day threshold for the alternative volumetric tax and then ramp up to about $65 million per year to the municipalities by 2035. The North Slope Borough would still get that additional upstream property tax associated with new development related to the project upstream as well.

[FOREIGN LANGUAGE] And then the next set of slides just go through a few of our assumptions around a Phase 1 only scenario. Several of the questions kind of got at this question of what if the full project doesn't go forward? What if we only have the first iteration of the pipeline and only the in-state portion of demand and don't get that full project for Phase 2? And so we've developed a set of scenario assumptions here. So the pipeline cost is assumed to be $11.6 billion.

That's a real 2026-dollar term. We have assumed for this version of the analysis that the Great Bear Project would not be a source of gas, so we're assuming a source of gas that would require gas treatment. This could be fields like Northstar or Point Thompson or other fields on the slope. It could be, you know, coming from Prudhoe Bay. What— and since we don't have detailed estimates of those gas treatment costs from AGDC or the operator.

We have assumed a similar gas treatment cost under Phase 1 to what we're assuming under the full project.

I have a question. That says Senate Bill 280. Is that 381 or—. Chair Freer, so Yes, if we— that's a typo, excuse me. Okay, thank you.

Represent— uh, quick question, Representative Mears. Uh, I think this just emphasizes that we do need to dig more into what a Phase 1 gas treatment looks like because there's assumptions that you're making, uh, so we just need more data so that we can make those proper assumptions. Thank you. Mr. Stickel? Yeah, sure.

And Representative Mears, through the chair, we've listed We think that's probably directionally correct. There's— so the level of treatment would be less than what's required for— significantly less than what's required for the full project, given that the treatment is only needed to get gas to utility grade of 2% CO2 instead of export grade, which is 50 parts per million or less. But that's kind of balanced against the fact that with the Phase 1 only project, we wouldn't have the economies of scale of the full project. Thank you, Mr. Stickell. Uh, quick question, Representative Sadler.

Yeah, uh, no, I guess the question is, okay, on the first, second bullet, capital expenditure $11.6 billion, does that come down if the pipeline is not over-engineered to handle Phase 2? I see some provisions in the next bullet point that says limits some of the stuff, but is it possible to bring that $11.6 billion cost down if you just say it's just not going to have the export facility capacity? Sure, yeah, Representative Sadler, through the chair, absolutely. So the $11.6 billion, this assumes the full 42-inch pipeline is built as Phase 1, which is the current project plan that we would build the 42-inch pipeline and then it would be available to support the full export project. Certainly, if the developer were to re-engineer those estimates and come up with more of a bullet line with a smaller diameter that would not support the 3.5 billion cubic feet per day of throughput, that would, that would reduce the capital cost.

Represent Fields through the chair, following up on the previous question around gas supply. I don't think there's been a lot of discussion of where Glenfarn is going to procure the gas, and I just wanted to confirm my understanding, and it might not be accurate, that there's relatively low CO2 gas roughly equivalent to what is needed in South Central from Point Thompson, and that the point at which you're reaching export volumes, you would be probably treating gas with higher CO2 quantities from units being produced by Hilcorp, and then you would need the larger-scale gas treatment plant. But at a more of an in-state use, you would not need to incur those larger capital costs for a full-on high-volume gas treatment plant. And I see Matt Kissinger here is here, and maybe he would be a better person to respond to that. But I just want to get that on the record and see if my understanding is wrong.

Mr. Stickel, do you want to take a stab at that? Or Mr. Kissinger, would you like to join us?

For the record, this is Matt Kissinger, Commercial Director, AGDC, from Anchorage, Alaska, through Chair Freer, Representative Fields.

The utility grade, as you see here, is about 2% CO2. The gas out of Point Thompson is higher than that. Around 4% is our understanding. Northstar is another place where you could source gas. There have been the press releases on where we have the gas sale precedent agreements from, and so that would be Northstar, Point Thompson, and Prudhoe Bay that we're looking for, in addition to Great Bear Pantheon should they be successful.

But of course, we have to plan for reality. And so we are putting in this treatment to be able to take that sort of 4% from Point Thompson and 5% from North Star down to 2%. It is a little bit complex because this gas treatment for Phase 1 has different stages that it does. There's dehydration, whereas the North Star gas may come over dehydrated, so it wouldn't have to go through that part of it. And this is sort of where you get to kind of put part of the stream through the gas treatment in Phase 1 depending on where the stream comes from.

If it's all from Prudhoe Bay, then it would all have to go through there because Prudhoe Bay is about 13 percent CO2. If it's Northstar Point Thompson, the Northstar gas may go through part of it, the chiller or the compression, but maybe not the treatment part. But all of it does have to get treated for Phase 1 as well as Phase 2. Just very different world. Follow-up?

Through the chair, so it sounds like maybe my understanding was incorrect insofar as you actually still have to make the capital expense of a gas treatment plant whether it's coming from Point Thompson or Prudhoe. It might just flow differently through the facility depending on CO2 content. Yeah. Representative Fields, through the Chair, that is correct. But again, it is very different than in Phase 2 where you have to get down to that 50 parts per million.

So it is a very different kind of per-unit cost offset by the fact that you have, you know, much fewer units. So—. Yeah. Okay. Thank you.

Thank you. Mr. Stickel, please proceed. All right. Again, for the record, Dan Stickel with Department of Revenue. So slide 6 continues with our Phase 1 assumptions.

So for Phase 1 demand, we are assuming an initial in-state demand of 65 billion cubic feet per year in 2029. We assume that that will increase to 110 billion cubic feet per year by 2041. The 65 billion cubic feet per year starts with what, what we see as the un— the potential unfilled demand as current gas supply contracts expire, which would be about 15 billion cubic feet per year for utilities and then basically have the, the AKLNG project gradually fill that in-state demand over time. We do assume an anchor customer at 50 billion cubic feet per year. That anchor customer was modeled on a restart of the Agrium fertilizer plant.

That could also be a large data centers, a large metal mine like the Donlin Mine, or other industrial baseload.

Slide 7 touches on the pricing assumptions. So I talked about that anchor customer. So we assume that the anchor customer would require a reduced price to make the economics for their operation work. So we're assuming a $6 per 1,000 cubic feet price to the anchor customer, and then a higher price for utilities and residents to offset that. Now, to, to be clear, providing that lower price to the anchor customer, given the economies of scale on the pipeline, that does— having them in there even at the lower $6 price does reduce the price to everybody that's consuming demand from the pipeline.

So those are kind of the assumptions that underlie the Phase 1 modeling. And then we jump back to this question of municipal revenues. Slide 8 is the annual municipal revenues under current law if the AKLNG project were to go forward and only Phase 1 was constructed. So you see that municipalities would receive property tax amounting to about $73 million per year by 2035. And then we We would expect some small amount of additional upstream development associated with the gas for North Slope Borough property tax as well.

Representative Sadler. Thank you. I have to ask this. So this is Phase 1 only, which is not the preferred model in current law, which we've heard is an impediment to project. Is this kind of a doomsday scenario?

I mean, how much credence should we give? I mean, this is again Phase 1, just the pipeline loses the economies of scale of the large project, including Phase 2. And current law, we know, allows the local property taxes. This does not seem to be a very likely scenario. How important is it for us to look at this to understand what that means, unless it's simply to compare what the doomsday alternative is.

Representative Sadler, through the chair. So yes, this is to understand, we had multiple questions from members of the committee and others around what if— so the project will give a final investment decision to Phase 1, which is the pipeline only, and then the remainder of the project will be two separate investment decisions. So the question that's been asked is, How does all this analysis look if that Phase 1 proceeds and the rest of the project doesn't? So I think it's a legitimate question to ask. Obviously, the hope and the plan is that the full project proceeds and that the Phase 1 will literally just be the first phase of the full project.

Follow-up, Representative Prox. Quick one. Does this assume that the current law generates— no, excuse me— that the value average volume tax generates the same revenue as the current law with the 2%— I mean, 2 mil tax rate? Sure. Representative Proksch to the Chair.

So no, and the following slide actually addresses what would happen if House Bill 381 as introduced was passed. Past. Okay, I have to—. Representative Sadler, thank you. Slide 8 again, total property— project property tax, far end 2035, $73 million.

Then we have the total upstream, which is the North Slope or upstream. So isn't it more fair to say the total project property tax would be 73 plus 8, $81 million? Uh, Representative Sadler, through the chair, so when we look at total property tax to the municipalities generated by the project Yes, that would be accurate. We do break it out because the project property tax is the property tax paid by the midstream component, and that is the part of the tax that's being addressed by House Bill 381. The North Slope upstream property tax would be unchanged by the bill before the committee.

Okay, sister. Thank you, Mr. Stickle. And just— these are questions from a previous hearing. This does not reflect any of the changes that we incorporated when we adopted the CS. So this is 381 as proposed by the Governor.

This is not 381 as we CS'd it. So just— Mr. Stickle. All right. Moving on to slide 9. So slide 9 is— What would annual municipal revenue look like if 381 is introduced, was passed, and only Phase 1 moved forward?

So the, the bill sets a threshold of 1 billion cubic feet per day for implementing the alternative volume metric tax. So that threshold would not be triggered during the, the time horizon of the fiscal note, and so there would be no AVT revenue under the bill as proposed during the time horizon of the fiscal note.

So slide 10 moves on to the next question that we had, and this was to provide a conversion of flow rate to revenue for the initial 6 cents per 1,000 cubic feet alternative volumetric tax for various flow rates such as 100 million, 200 million, $250 million, $500 million, and $750 million cubic feet per day. And so what we've done on this slide is we have done the math breaking out those different flow rates times the 6 cents per 1,000 cubic feet and then how that would break out between the state and the various boroughs. Thank you, Mr. Stone. Representative Zaffir. Thank you.

On the chart, the first total, $219— I don't understand total. Total of what? —Total annual revenue is $2. Please read that slide to me, please. Sure.

Representative Sadler, through the Chair, so at 100 million cubic feet per day and a 6 cents per 1,000 cubic feet alternative volumetric tax, that would math out to $2.19 million per year. Very good. Representative Fields. Through the Chair, I assume that Mr. Sickel could make a similar chart for the AVT as structured in the current statute. CS.

That would be helpful. Representative Fields, through the chair, we would be happy to do that. Thank you. And just for, um, uh, for the committee's awareness, we, we requested that information from the Department of Revenue, but we know that there are amendments that are coming, and so we asked them to hold off on modeling until we have more— until we have other numbers. Representative Fields, um, Through the Chair, that makes sense.

I think as we consider amendments, I would certainly appreciate seeing— I think the current CS is an aggregate 20 cents. 5, 5, And 10. Just understanding 20 cents across all the facilities, not necessarily the degree of complexity, separate gas treatment plant, pipeline, and so on, but just a comparison. It would help me. Yeah.

Thank you. Thank you, Representative Fields. Sure. And to Representative Fields, through the Chair, so these— this math is fairly scalable. So this is a straight 6 cents on the full project, and so, you know, mathing this up from 6 cents to 20 cents should scale.

Through the Chair, a key difference with the current CS is that there is a weight for population. So we would gain an understanding of the impact on Fairbanks Anchorage that would be very different from this slide. And that's math I'm not capable of doing. Thank you. Thank you, Representative Fields.

Mr. Stickle. All right. Yeah, we are happy to work with the Committee. We worked all weekend analyzing the proposed CS and we were asked to hold off on finalizing that modeling pending potential amendments. So we are— we have done a lot of work and we are ready to do more.

Thank you, Mr. Stickle.

Moving on to Slide 11, we were asked for what is the definition of commercial operations and this is defined here in AS 4356.02 OD. Commercial operations is defined as the commencement of commercial operations, means the first flow of natural gas in the project that generates revenue to the owners of the natural gas pipeline project. So fairly, fairly straightforward definition there. Slide 12. On the next question, we were asked to model alternative tax structures where the alternative volumetric tax were to trigger at lower throughput levels, and a range of throughput levels was given ranging from 100 to 750 million cubic feet per day.

And so what we've done here is we've provided two scenarios, one where the alternative volumetric tax applied from the start of the project, which is assumed to start in— start production in 2029, And that would be starting with in-state sales. So our in-state sales started about 165 million cubic feet per day. And so what this shows is a scenario where the ABT would apply immediately from the project start.

Representative Fields. Through the Chair, this is at 165,000 MCF or 100— okay. Representative Fields, through the Chair, no, this is the full project assuming Phase 1. This assumes that that threshold was set at 165 million cubic feet or below. Thank you.

Basically, anything below that and the AVT would kick in starting in 2029 when the project starts. Anything between 165 million cubic feet cubic feet per day and 1 billion cubic feet per day, we would assume that the AVT would kick in in 2031 when exports begin. Yeah.

All right. So slide 13. Yeah, so this gets at the next question, which was if DOR can provide revenue modeling for lower throughput scenarios. Had some discussion and decided We would show the in-state— these questions are really getting at what happens if only the in-state pipeline happens. So what we've done here is we have shown what the— what our analysis would look like in terms of cash flows to the various stakeholders and then cost of supply if there was only the in-state portion of the pipeline, holding the rest of our baseline analysis constant and following the assumptions I went through earlier.

So on slide 13, there would be a weighted average cost of supply in 2033 would be $14.55 per thousand cubic feet. That's under current law. That is a weighted average with, again, the, the $6 per thousand cubic feet to the baseload.

Consumer and then a higher, about $22.70 to utilities.

Okay. Would you just repeat those numbers again, please? Just 6 and—. Representative Sadler, through the chair, so we assume in real terms a $6 per 1,000 cubic feet to the baseload consumer. That would be a little higher in nominal terms.

To get this weighted average, we assume about a $22.70 cost of service to the in-state utilities under this scenario, which is if only the in-state portion of the line goes forward with a 42-inch pipe under current law. Thank you.

And that compares to slide 14, which is the similar slide under House Bill 381, as introduced. So under this scenario, the in-state breakeven price on a weighted average basis would be the $12.45 per 1,000 cubic feet, which again would be the, the lower price to the base load consumers, and then about $18.60 per 1,000 cubic feet to utilities.

The next slide, on slide 15. So we had presented some analysis on state equity investments and what the returns on those were. And the question was, at what year would the state break even on an equity investment? Under the current law scenario, assuming the project went forward, the break even on an investment in equity would be 2039. And under the proposed legislation, the breakeven on the investment would be 2038.

And then the final question that we analyzed, we were asked to model different escalation rates to the alternative volumetric tax. So under House Bill 381 as introduced, there is after— there is a 1% annual increase To the alternative volumetric tax, we were asked to model 1.1%, 1.5%, and 1.75%, and those results are included on slides 16, 17, and 18. And then we also included on slide 19 a scenario with a 2.5% assumption, which is our working official assumption for long-term inflation. And what you'll see here is that the alternative— this escalation rate has a very minimal impact on the project economics. So it's increasing a significantly reduced tax by a small amount, regardless of if it's a 1% or a 1.75% increase.

And the most material impacts from that escalation factor happen later, later in project life. And so you'll see when you're comparing these cost of supply numbers that the differences are actually a rounding error. And so the only number in these slides that actually changes is on slide 20, which is the 2.5% scenario. The real LNG breakeven price shifts by one penny. So this— which specific assumption you use for the escalation has a de minimis impact on the project economics.

And those were— that was the slides of substance for the presentation. All right. Thank you so much, Mr. Stickle. I am sure there are questions. Any— Co-chair Dibert?

Thank you. Through the Chair to Mr. Stickle, thank you for your presentation. I just wanted more— not really a question, but a comment on slide— sorry, slide 8. Just wanted to point out Fairbanks North Star Borough. You can see the data there, and I just think of my community and why I talk about the spur line.

And why, you know, what we are giving up, how important it is to build the spur line and make it be part of the overall project because to incentivize our borough and our community members to— it takes 7,000 workers to build this, to construct the pipeline. That is going to affect our community. So that is why just— It would be good for our community of Fairbanks. Thanks. Oh, thank you, Coach Dybert.

Uh, Representative Klon. Thank you, Chair. Through the chair, so I had a question on page 15. So under current law, the break-even is 2039, but if we zero out the property taxes, it's only a year longer. I, I guess so, or a year shorter.

So I guess I don't understand. I thought that would be longer timeframe than just 1 year. I mean, the proposed legislation that this HB 381 and current law is a pretty big difference. So I just didn't know why it was such a short time. It doesn't seem like much of a difference.

Sure. Representative Colon, so that just reflects, yeah, the shift in the revenue timing. So there would be an earlier return on investment without those property tax outlays. Be happy to follow up with additional walkthrough of that or call on a lifeline if you'd like further explanation. So follow up, follow up.

So all those additional capital outlays only brings it down a year, right? Because I thought it would, it would help pay it off faster. I guess. Sure, Representative Colon. So the, the total capital outlay is the same.

Okay. What happens, what changes is the property tax burden. We are assuming the same return on investment. We're assuming that same 10% return on investment under both scenarios. Okay.

And again, that is a modeling assumption. You know, it's entirely possible that with the lower tax rate that there would be a higher rate of return. And if that were the case, then the breakeven would show more of a delta to current law. Okay, thank you. Thank you.

Representative Fields. Thanks. I was hoping we could go back to the slide about distribution of cost of the Fairbanks spur line, which I think was actually in Nick Fulford's presentation. And maybe this question is for Nick Fulford, maybe It's from Mr. Stickle. But I wanted to ask about— well, there's a big difference between if the cost is spread across many customers, including export customers, and if it's only borne by basically South Central customers.

And I think the slide was valuable insofar as it showed if only South Central and Fairbanks customers pay the cost of the spur line, it's actually very expensive. For just people in the rail belt. So I wanted to ask, and I think Mr. Fulford, um, and maybe we need further conversation with Ledge Legal, I want to make sure in the bill we can say all customers will be proportional to volume paying the cost of the Fairbanks Spur. I don't want to have a scenario where we're paying for it but the export customers aren't, because it is a very, very significant cost on consumers. So I don't know who the right person to address that is, but I think the numbers were pretty valuable that we discussed from Mr. Fulford.

Thank you, Representative Fields. We do have Nick Fulford still on the line. So, Mr. Fulford, I'm not sure if you heard Representative Fields' question, if you want to take a stab at it. Yes, I did hear the question. Thank you.

And just a few brief remarks on that. Gas transmission systems work in two ways. The tariff is typically designed as what they call a postage stamp system where everyone— it doesn't matter where you put the gas in, where you take it out, it's the same tariff for everybody. Then the other alternative is to charge by distance, you know, where there are different tariffs depending on how this happens. So what we're really talking about here is turning the Fairbanks spur into part of this kind of postage stamp environment where the cost of the entire pipeline network is just smeared across all customers.

So it's, you know, these tariff systems are designed to address things like what we've been discussing in Fairbanks, which is a small group of customers who benefit enormously from a gas supply but don't necessarily— you know, it isn't necessarily appropriate for them to pay the full cost. So, you know, this is something which is encountered all over the world with the development of gas networks. So this idea of supporting the cost amongst a large group of customers is quite a normal one.

Follow-up. I guess if that's the case, I mean, I do hope that we can inquire with Ledge Legal about the right way to write the bill so that.

The costs will be spread with a postage stamp rate across all consumers. And to Mr. Fulford, maybe guidance from other jurisdictions about how they approach things like this might be valuable. I just, I don't know if the current bill is specific enough that that cost will be spread across all customers versus only in-state customers, and that is my interest in making sure it is spread across all customers. Thank you. Thank you.

And Representative Souther, you are in the Thank you. I will echo that. Fairbanks may want— Fairbanks is cold and dark, they want gas, I understand that. But if they're going to enjoy the benefit of the entire system and the cost efficiencies obtained by the pipeline and the gas treatment and LNG, then they should be expected to pay in the cost of supporting those. If they want to get the benefit, they need to pay some cost, I guess.

And to Mr. Stickel, I'm going to ask you kind of a— maybe a philosophical question. I can't find the slide, but Has it ever been considered to just have no state property tax at all? If the goal is to reduce the burden on this project and we are arguing about when you put it on, what the rate is, how it accelerates, is it conceivable— maybe Mr. Fulford can answer the question— is it conceivable to have no property tax on this project, at least for the first, I don't know, 10 years? Not reduced, but none? Sure.

Through the record, Dan Stickel. To Representative Sadler through the Chair. And that's certainly a policy option. The bill as proposed would remove property tax from the project, full stop. And then it would apply the alternative volumetric tax only after a conclusion of a ramp-up period.

It's certainly within the legislature's prerogative to not apply that alternative volumetric tax. I'm sure that would be attractive to the project economics and then, you know, the associated challenges to the municipalities. Is that something the Department has ever even looked at or modeled? Representative Sadler, through the Chair, so we have not— we haven't put out the modeling of what the cost of supply would be.

You know, the detailed project benefits that we put out break out the components of the tax, so it would be pretty straightforward to remove the AVT revenue from the analysis. So you could, but you haven't, but you could? Yeah, absolutely.

Thank you, Representative Sadler. Representative Mears? Thank you. Through the Chair to Representative Sadler, I wanted to push back a little bit on this concept that if Fairbanks is going to get benefit from the line, they should pay for that bit of benefit for the line. One could also make the argument, why should Fairbanks then have to pay for the amount of line that goes from Fairbanks down to the South Central Region?

So I don't think it's an equivalent argument. It's a complete system that hits a large amount of population, and in my mind, the Fairbanks spur should be included in the larger project.

Representative Sadler. I don't want to debate, but the postage stamp thing says— I assume the stamp goes to pay for the entire Postal Service, not just the post office in your hometown. Thank you, Representative Sadler. I do want to just note that we do have folks online for public testimony, and not seeing any further questions. If there are further questions for the Department of Revenue, again, you can send those in via email to [email protected].

And so with that, thank you again, Mr. Stickel, for being here. Thank you to Mr. Herbert for being on the line. Um, we will now move on to public testimony, which we'll hear for the rest of today's meeting. At the end of today's meeting, I intend to leave public testimony open so that we can continue hearing from the public at a later date. With that, I am opening public testimony on House Bill 381.

First up on public testimony, we have Mike Koons from Wasilla. Mr. Koons, please put yourself on record, state your affiliation, and begin your public testimony.

Yes, ma'am, I got you here, but can you hear me? Yes, we can hear you. Okay, good. Yeah, my name is Mike Coons, and I'm speaking for myself. I support HB 381 as written.

SB 275 is basically an exact opposite to HB 381, and that SB 275 taxes so much that the LNG project could be in jeopardy. Sounds like the new CES does what 275 is doing by upping the 6-cent tax —tax to the 20-cent tax harms the consumer. Is this a means to put this in jeopardy like 275 does? 381 Is far more reasonable and supports basically all phases of the pipeline, which increases the likelihood of completion. HB 381 removes front-end tax burden and aligns the taxes with production.

That de-risks the project for investors and creates a more predictable revenue stream that is objective based on volume rather than tied to property tax assessments that are inherently subjective and would be repeatedly contested. This tax structure also benefits consumers in Alaska by phasing in taxation. 2381 Creates a phased tax structure consistent with international LNG investment norms, construction through first gas ramp-up period, then full operations. Once property taxes start, that will be more than— they cannot do more than what any borough or community charges their citizens. Hopefully the Mat-Su Borough will be going away from property taxes and others will follow our lead.

That would be a huge saving to the LNG line. The benefit of the LNG pipeline isn't just revenue the government— government coffers, but more importantly, it includes affordable and abundant energy for Alaskans that attracts new industry and creates new jobs. Frankly, I would just as soon see no taxation. The more we tax, the higher the cost to the consumers. If our legislature can just do the functions of government as per the Constitution, the cost of government will plummet and the need to tax oil and gas and gasoline diesel tax at the pump would be negated.

Lastly, no subsidies for changing out heating systems, much less any other subsidies. Thank you. Thank you, Mr. Coons. Next up for public testimony, we have Chuck Heath out of Anchorage. Mr. Heath, put yourself on record, state your affiliation, and begin your public testimony.

Mr. Heath, are you on the line? Can you hear me? Yes, we can.

OK. Sorry about that. This is Chuck Heath. I'm in Anchorage. And I'm speaking for myself, as Lai Kwan Alaskan and someone who grew up in the valley, the Matanuska Valley, during the first pipeline boom, and seeing the benefits that it provided just just to the folks in our area, the exponential growth and just the improved services that the pipeline provided us from medical facilities to better food options to whatnot.

So, just that firsthand experience is something that that I think we need again today, as we seem to be in a kind of a slump up here right now. This gas line project is really exciting to me, just to think about the added benefits it adds to the whole pipeline corridor, to the different projects that would benefit from it, from the Livengood Prospect, North Dakota, thanks to the Donlin line to data centers, which seems to be the future of industry right now, plus any of these probable manufacturing facilities that could be built in Port Mac at the end of the line—styrene plants, other manufacturing plants, whatnot. It's, uh, I think this, this line is going to provide so much such a boom to our whole economy and so many, so many new jobs. It's going to increase our population with skilled workers at a time when our population is decreasing. As a father of 3 children who I hear talk of they can't wait to get out of the state because there's nothing to do, or there aren't very many opportunities up here.

I want these, uh, this line to provide opportunities for them too, the benefits that it would provide. And then lastly, of course, you know, I'm in Anchorage now, so we read almost daily about the looming gas shortage in our area and when we're going to run out of Cook Inlet gas. And, um, and I think this line is a is a great solution for that. So thank you very much for hearing me out. Uh, thank you, Mr. Heath.

Uh, next up online for public testimony, we have Sean McDermott out of Homer.

Mr. McDermott, please put yourself on record, state your affiliation, and begin your public testimony.

Thank you, Madam Co-Chairs and members of the committee. My name is Sean McDermott, and I work on climate and energy issues with the Fairbanks Climate Action Coalition. I'm calling today to express opposition to moving HB 381 or similar property tax legislation forward. We've been seeing project representatives continuing to offer justifications for massive subsidy by Alaskans using assumptions based on speculative economics.

Without detailed public cost estimates from AGDC and Glenfarm, there's really no way for legislators and Alaskans to know the true costs and impacts this project will have on our communities. We've repeatedly heard from project advocates that the economics of this megaproject are marginal, but tenuous viability is not justification for the legislature rushing ahead with public subsidies for the project. We heard in Senate Resources that project consultant Mark Begich recently shared a cost estimate $11 billion higher than AGDC's— $46 billion a year. And both are likely low by tens of billions of dollars. AGDC has continued to rely on cost estimates in the Mackenzie report also about the project's viability, even though one of the report's key assumptions is that almost all of Fairbanks will be connected to natural gas within a few years.

The reality, as we've been hearing, is that there's still no plan or permits to construct or pay for a Fairbanks spur line. There isn't existing infrastructure for interior utilities to actually use natural gas, and the cost to convert homes and connect to the natural gas could be upwards of $15,000 for individual homeowners. In the March 25th hearing, AGDC's Matt Kissinger told this committee that Phase 1 of the project, the in-state pipeline meant to get Alaska into affordable gas, will not actually provide cheaper gas. The AGDC also just told this committee again that another key claim, that Great Bear Pantheon would be able to provide the first gas to the pipeline without requiring the North Slope gas treatment facility, is also not accurate. This process has exposed glaring gaps in what project proponents have claimed and what is true.

And we urge you not to reward project secrecy with a public subsidy. Alaskans deserve full cost transparency and to have the scope of community impacts publicly shared and paid for. I appreciate this committee's efforts to understand the significant impact this project will have on Alaskans. It's a generational impact. Please do not rush to pass this legislation.

Thank you for the opportunity to comment today. Thank you, Mr. McDermott. Um, I forgot to ask, is there anyone in the room that would like to offer public testimony?

Okay, um, as I said, we are going to leave public testimony open so that we can continue hearing from the public at a later date. Um, we are just about out of time. We've got to get back to the floor. So that completes the agenda for House Resources Committee meeting today. Our next House Resources Committee meeting is Friday, May 1st, when the committee will have House Bill 381 back before the committee in addition to Senate Bill 230 from Senator Rauscher.

—Relating to the Jonesville Public Use Area.

The time now is 2:54 PM, and this hearing of the House Resources Committee is now adjourned.