Alaska Legislature: Senate Resources — April 30, 2026 9:00am

I call Senate Resources Committee meeting to order. Today is Thursday, April 30th, 2026, and the time is 9:00 AM. Please turn off your cell phones. Committee members present today: Senator Rauscher, Senator Kawasaki, Senator Dunbar, Senator Myers, and Vice Chair Senator Wilkowski. Senator Clayman is away on other state business.

We have a quorum to conduct business. Thank you to Heather and to Chloe who are helping us out today with audio and records. I'm going to start out immediately by making sure, uh, people know I'm setting an amendment deadline for this bill for Monday, May 4th at 5 PM. I'll repeat that later in case you forget. Um, our subject today is, uh, SB 280, and we have Speaker Philip Rossetti.

He is a senior fellow at the Energy and Environment Division at R Street Institute. So welcome, Mr. Rossetti. If you would introduce yourself for the record, we would welcome your testimony. Thank you, Chairwoman. I'm Philip Rossetti.

I'm a senior fellow for Energy and Environment at the R Street Institute, which is a public policy Institute, so think tank based in Washington, D.C. We specialize in free market policy, and I specifically focus on energy environmental economics. Very good. I invited, invited Mr. Rossetti here today to talk about the Defense Production Act. He's written on this subject in the past and has some information to share with us about it. So I would welcome your discussion of the subject, Mr. Rossetti.

Absolutely. For basic overview, the Defense Production Act was first adopted in 1950. It was during the Korean War. It largely combined powers that had been delegated to the president under World War II as part of the two War Powers Acts that had been passed. The thinking was that it was necessary for the president to have the authority to prioritize certain contracts and activities in the private sector to facilitate national defense.

A lot has changed since that time, and the Defense Production Act as it was initially envisioned had a number of authorities, including the ability to set wages, which, uh, many of those have lapsed. The current Defense Production Act now has two broad authorities that are typically used. One is called Title I authorities, which is the ability of the president to to prioritize certain contracts for national defense. So this can be acquiring materials for weapons procurement and things of that nature. And then there's Title III authorities, which largely revolve around what's called the Defense Production Act Fund.

The president essentially has a fund that he can use to subsidize and purchase and make loans to certain industries that are viewed as essential to the national defense. That explicitly includes energy industries. And this, um, the limitations on the president's use of the DPA fund, as well as these sort of interventions under Title III, require that there must be some sort of market rate compensation for these sort of subsidies, and that federal Congress has to be notified. However, there is an exception to this, which is what is called Title— Section 303(a)(7), which permits the president to waive these requirements. So in effect, when the president waives these requirements, which the president did on April 20th, he is permitted to use the DPA fund for these purposes without adhering to these normal constraints.

I'm happy to offer any insight I can on the DPA and how that impacts energy and environmental economics. Well, thank you. Um, uh, of course we have a, uh, giga project proposed up here, uh, for a gas treatment facility, a pipeline, and an LNG facility. Uh, estimated cost is $47 billion, which we think is rather low. Um, but how do you see the Defense Production Act coming into play with a project like this.

We know certainly that the president has, when he initially took office, named Alaska's energy as a priority for his administration, and we are, we are interested in how the DPA may be called into play.

So there are a number of ways that the DPA could be used in this, and it is hard to speculate too much on, on what the president may or may not do. In this case, the authority has been delegated to the Secretary of Energy at the Department of Energy. But traditionally, the way the DPA is utilized in these situations is to provide grants or loan guarantees to projects to help them capitalize. Now, in the case of natural gas, where you already have a large capital investment in these projects, it's harder to know how much of a difference the DPA funds can make because they're relatively small in comparison to the total capital cost of these projects. Loan guarantees can cover a larger portion of that cost, and the scope of that depends somewhat on limitations and the estimated subsidy value of the risk of the project.

But it is worth noting that the DPA, especially in this case on April 20th when the President invoked the DPA, does physically permit the federal government to engage in offtake agreements. So there may be purchase requirements that are made and to facilitate that, but it is hard to know exactly what that will look like. Traditionally, these projects are in the, you know, tens of millions of dollars in terms of receiving DPA aid and rarely exceeds $100 million. So, for these sort of large-scale projects, I think we're starting to enter into some uncharted territory of how the DPA can be utilized. It's worth knowing that the DPA's 303(a)(7) authorities are fairly recently to be used in such a manner.

The Biden administration was the first to explicitly invoke 303(a)(7) in such a manner. And their scope of application was relatively small. So it's hard to know, but it's also worth noting that under Title I authorities, prioritization can still be given if such projects are viewed as in the national defense. And the DPA does expressly permit the application of these authorities for projects that may be of benefit to our overseas allies. So to the extent that there might be foreign purchases of natural gas that are considered as important to national defense, that can still fall under the DPA.

Thank you. Senator Dunbar, you had a question. Thank you, Madam Chair. Um, thank you, uh, for being here again, um, uh, Mr. Rossetti. So using the DPA for something like an offtake agreement or even a loan guarantee would that impact the ownership status of the assets of the pipeline or the LNG facility?

So my understanding is that it would not impact the ownership because these grants should be given to a private company or it's a prioritization by a company's private contract. Now it's worth noting that there is also what's called Title VII authorities, which are not so much an application of authority under the DPA but are actually a sort of liability limitation under the DPA. So if there is a requirement for a company to engage in contracts as part of the DPA and they otherwise would have liabilities like antitrust liabilities, those can be waived as part of the DPA. And this was used, you know, sometimes during disaster relief when FEMA would prioritize reconstruction, which of course necessitated allocation of materials towards such purposes and alleviate that liability. In this case, I can't speculate too much on that because, again, this is relatively novel to be considering the application of the DPA on such a large project, but my initial reading of this is that it would not.

Very good. Thank you, Madam Chair. Senator Rauscher. Thank you, Madam Chair. So, You, you use—.

Mr. Rosales, you used the word compensation earlier, so I'm wondering, in this particular situation where it's not built yet or it's still in a planning and it's still in a phase where they're putting the parts together, what at this point would be compensatable, if anything?

Again, that's something that is hard to know because it typically— it depends a lot on the specific project. But oftentimes a DPA can be used as part of a, like, a cost sharing where a grant is awarded to a company and DPA covers a portion of those costs. There could be procurement costs, there could be purchases.

The authority that's delegated to the Secretary of Energy in this case is fairly open-ended, so it'll be up to the Secretary to determine if and how such authorities would be used. But again, this is— it's, it's one of those situations where the letter of the law is fairly vague in that matter, and the historical precedent, uh, is, is pretty, pretty small to know. So a lot of this is kind of speculation as to what this might look like. And this is also one of the reasons I've largely cautioned against reliance on the DPA as a market tool, because of these sort of potential impacts and private sector capital allocation and how it influences their decisions. Follow-up?

So I was just wondering, uh, compensation, is it something that you would have to ask for with an attorney? Is that how that works to to talk to, I don't know, whoever's in, you know, you said it was the Director of Energy. Would that be the person an attorney would go to defending whoever believes they needed to be compensated? So in this case, it would be up to the Secretary of Energy as to who is being compensated and what amounts. So it would not, my understanding of it is that would not necessarily be a a requirement where an attorney would have to petition this.

It would be up to the design of the Secretary, which could take the form of a grant. It could take the form of a loan guarantee. In times past, we do see that there's sometimes a direct collaboration between government and a private firm. So, I'm not sure about the sort of specific procedures, but that's going to be whatever is created by the Secretary of Energy as part of the directive from the president to apply the DPA in this manner. Thank you.

Senator Wilkowski. Thank you. What would you say is the likelihood of the federal government effectively nationalizing this $46 billion gas line project? I would say low. I, I don't know enough about this sort of specific project to say what the administration may or may not do.

But I can say that the potential impact of such an intervention into private sector decisions would be enormous. Uh, and it would almost certainly do more harm than good. And I would hope that, uh, there's a good understanding that such interventions into markets are, uh, are going to sow the more long-term problems than they would resolve. Now, I think when we look at past utilizations of the DPA, probably the best sort of corollary is the time when the DPA was not actually used, which is when there was a refinery scarcity back in 2022, 2023. The Biden administration was considering, or at least talking about, using all of their available authorities to remedy such shortage, and they had sent a letter to refiners to that end, which was— and my reading of that was a potential application of the DPA.

However, the DPA was not used in such a manner, and I would suspect that part of that is the recognition that those sort of interventions do not actually remedy scarcity. They simply transfer ownership and also have a deterring effect on future capital entry into these markets. So I would say it's, you know, very low. I'm also not sure if the DPA being used in such a manner would hold up in court because of the requirements for just compensation in other areas of the law. But again, this is— the authorities on the DPA are relatively broad, so it's hard to know exactly where that authority ends.

Follow-up? Other questions? Senator Kawasaki. Thank you. Uh, thanks for being here, Mr. Rossetti, this morning.

The Fairbanks interior has a specific, um, nuanced use of the Defense Production Act recently, in that we recently saw a mine come to Fairbanks. It's the US Antimony Corporation, and we did a tour as they just announced that they were going to utilize the Defense Production Act to provide I can't remember, like $250 million from the Department of Defense. And the reason was because antimony is a critical mineral used in hardening metals for munitions. And so these— this is a Montana company came up to Fairbanks, is extracting this from the west side of the Fairbanks Mountains and then bringing it, trucking it, I guess, down to Montana for refining. Are there other examples of that in which Defense Production Act was used, maybe to a minor degree?

I mean, this is obviously a $50 billion project, and that was a $50 million project. But are there other examples you might be able to give us?

Uh, so I will say that there are several mines that have received DPA funding. If you're asking me for a specific example off the top of my head, I couldn't give you one. But also during the Biden administration, there were attempts to use DPA. I believe Mitsubishi might have received some funding for clean energy purposes. So this is relatively common in the sense that, you know, we're talking about like dozens rather than like, you know, single-digit applications.

But one thing to keep in mind is we see this more utilized in the mining space, not just because of the sort of capitalization issue, but because of the permitting difficulties that mines frequently encounter. So it's estimated that it takes about 29 years from mineral discovery to operation commencement to get a mine started in the United States. Uh, an argument for the utilization of the DPA in that case has been that the prioritization of a mine can help to, uh, cut some of that timeline. My sort of, uh, our sort of policy understanding, though, is if there are artificial reasons for that timeline, which largely boil down to permitting considerations and a lot of the National Environmental Policy Act's vagaries, remedying those is not only a sure path to accelerating the market entry of those resources but also remedies the problem that we might have in the application of the DPA, which is that there are only so many projects that the DPA could touch. So there are probably projects out there that have a potential for market entry and a value to the U.S. economy, but they might not be eligible or likely to benefit from the DPA.

Thank you. Senator Dunbar. Thank you, Madam Chair. Thank you again, Mr. Rossetti. And you know what's interesting about this project is they already have the permits, and they probably will need some additional permits at some point, and And they'll probably get challenged, some of those permits.

But the bulk of the permitting has been done at the cost of hundreds of millions of dollars and a decade of work. So that's in hand. And so when the specter of the DPA is used with regard to this project, it's got to be something different. It's got to be either the offtake agreements, like you were saying, or some infusion of capital. And so my question is, if, if it's applied that way, well, in prior cases where it might have been used that way, has anyone sued to stop it?

And I'm not talking about people suing for their just compensation. I'm talking about, is there any third party that could sue to stop it? Who has standing to stop it, I guess, is sort of my question, um, in a case like this.

So that's a good question, and I'm not aware of any specific examples of that, uh, because when I think about some mines that have— or projects that were held up because of litigation concerns and some potential, uh, legal liabilities, uh, such as like Rhyolite Ridge, which is a lithium mine in Nevada, uh, they— it seems to me that in those cases the BPA was used to potentially mitigate some of those liabilities. But at the same time, the liability limitation is not— it's not a blanket, you know, and it's not extensive. So I would say that if there are— if a party has standing to litigate against this project in its current form, whether they're litigating against some aspect of the project or they're litigating against the permit quality, or if they're— if we're talking about LNG exports, of course, there are also federal approvals required. So my understanding is that that standing would still remain, but I don't think that the DPA's application, if it were to be applied, would worsen or increase a legal vulnerability. Follow-up, Madam Chair.

Follow-up. So what you're saying is there really is no one, except maybe Congress, I suppose, and they wouldn't use litigation, that could say, you are misusing the DPA, and like, we're suing you to stop using the DPA this way? [Speaker] This is where I think you're getting into a very interesting policy question, which is that sort of limitation on the DPA's authority has rarely been explored. So the reading of the DPA, as I understand it, does grant broad authority, which it would be up to Congress to limit. I think the operative legal question is if Congress permissibly can delegate this authority away to the president, uh, and to what extent that authority is given from Congress to the president.

That's the legal question that, to my knowledge, hasn't been explored adequately yet. When I think about past times that the president has used a, a broad economic authorities intervene in markets. I think of what was called the Nixon shocks, which was back in, uh, during the Nixon administration, uh, price controls were set on wages and, uh, as well as on goods, and led to a lot of inflation, or stagflation is what it was called at the time, uh, and a huge amount of scarcity. But the— it was Congress that ultimately said this is not going to work, and they did not enhance or extend any of those authorities for the Nixon administration. So in this case, ultimately Congress is the body that is responsible for limiting the DPA.

But if that— if the DPA was used in such a way, for example, as mentioned earlier, to nationalize a project, I would imagine that that would certainly be right for a court case. And I think, you know, I'm not a lawyer, but I suspect that there would be a very strong legal argument to say that Congress had never intended the DPA to be utilizable in such a fashion. So it's that lack of definition and that lack of constraint on the defined scope of authority of the DPA that makes this such a challenging issue to tackle. Thank you. Thank you, Madam Chair.

Other questions? [Speaker:SENATOR_MCCARTHY] So, Mr. Rossetti, we have a lot of military bases here in Alaska that are along the corridor of this pipeline. Fairbanks has an Army and an Air Force, as does Anchorage. And energy cost and availability is a huge issue. So it sounds like actually this DPA program could be used to partially, uh, move this project forward.

Would that possibly apply? The, the application of the DPA to move a project forward to facilitate the energy provision for military bases is, uh, that is within the scope of the DPA. In fact, back in 2019, I believe it was, there was an attempt to use the DPA in such a fashion to force military bases to procure electricity from particular sources. At the time, that was something that I noted would be potentially problematic because it was based on technology types rather than any kind of cost of the resources or reliability considerations. So this is something where it theoretically can and probably could be used in that way.

And there is some precedent for that. It is certainly up to the administration to decide what they believe is the most secure form of energy. And that is a pretty well-tread legal area. But it's— yeah, I think that that's probably the better way of thinking about it. To the extent the federal government has military bases, it is within their authority to say what energy they buy.

Thank you. Senator Dunbar. Thank you, Madam Chair. Well, it's just an interesting point, um, and I, I don't think— Mr. Rossetti, we're not expecting you to know the sort of fine details of this project, but that would be a good argument for running a bullet line or some smaller diameter line to those bases. But that's not the project we're talking about.

We're talking about LNG facility huge pipe, um, and a CO2 facility as well, none of which would be needed for those bases but are needed for energy export. So, uh, it would be an interesting argument, but I feel like it'd be ancillary to the actual functioning of the project.

It's one of those areas where, uh, I, I agree with you completely, and I'd say that, uh, one of the challenges we have here is the criteria for applying these don't— they're not always defined by reliability or some, some sort of metric. Oftentimes it's more about a strategic vision, which can change, and typically if the president is able to argue that, then it can be assumed that they have some authority to implement it. So again, this is one of the challenges with the DPA that has such a broad application. Very good. Other questions?

Senator Kawasaki. So, um, uh, thank you, Madam Chair. So I'm reading the, uh, announcement about the DPA. Specifically, uh, it cites, pursuant to Section 303 of the Act, the most cost-effective, expedient, and practical alternative method for meeting the need, which is this natural gas for ourselves and for our allies, um, is using this DPA provision. And it says, um, it's mostly because of financing constraints, long-lead equipment, construction schedules, and permitting delays.

Does that sound like— I mean, does that sound reasonable? To a person who sort of has some experience in it that the DPA could be used? So I hesitate to— yeah, thank you. I hesitate to use a judgmental word such as reasonable or not. But to get into kind of the economics of the question, the concern is if there is a demand for these goods without the DPA.

Because if there's already demand, if you already have people who are buying natural gas, then they're already going to be funding these efforts. And the infusion of more capital doesn't actually remedy that. There's also the concern that it can actually lead to what we sometimes refer to as these like invisible victims in economic policy, where you have projects that otherwise would be profitable and benefiting under the current circumstances, but because they're not prioritized or permitted because of a government intervention that is aiding a different project, then we have foregone that potential benefit. So my recommendation from a policy perspective is it's always best to let the market determine that, and to the extent that you might have a genuine national defense need that is undercapitalized, I think that's a more compelling argument for such a policy. We see that with weapon procurements.

You know, there's not a profit usually in securing the national defense. That's more about, you know, the collective security that the government is intended to provide. But in the energy space, people do buy energy, and their profit motivation for efficiency and growth is already present.

Follow-up, Senator Kawasaki? Yeah, just one last question, because the company that is involved, or the big company that's involved in this project in Alaska, is also involved in another project to deliver LNG, though on a different coast. It's the Gulf Coast area.

So I guess my state— I guess, is it— is that— does that have some relevance in the fact that they are— they're doing a private project in the lower 48? There's this project that's competing. One project they don't need public capital or federal money for, this one they need a lot for. Um, what do you think about that argument?

I just want to clarify, in terms of the public capital being allocated to a project for a benefit? Yes. All right, so the, the— from an economics perspective, I'm sort speaking as someone who works on this a lot, what we always want to be cautious of is what we call opportunity costs, because the government doesn't have money, it has other people's money. So every dollar that the government spends either must be paid for by taxing someone else or by taxing someone in the future because the money is borrowed now, which is typically what is happening, which means they're paying for it plus interest. The lost opportunity for that dollar to be spent somewhere else is something that we have to weigh against the investment that is being made by the government in this case.

And conventionally, we would say that the holders of capital are more efficient at identifying the productive uses of their capital rather than government is. It's something that we call the knowledge problem. From Friedrich Hayek, an Austrian economist, who noted that no matter how smart government officials are, they operate under limited knowledge, and therefore they, they can't perfectly allocate resources. So in this sense, that opportunity cost is something that is hard to know but is still present, and that's why whenever we have an intervention like that, it is important to be able to articulate if there is a genuine market failure that is being remedied here. The market failure being essentially an economically productive opportunity that for whatever reason government hasn't— or sorry, that the market hasn't prioritized, which might be national defense.

It could be environmental reasons, et cetera. So that's where I kind of land on is look for the market failure, and that can tell you if the intervention is is going to have a benefit or harm.

Senator Myers. Yeah, thank you. Uh, thank you, Madam Chair. Mr. Rossetti, um, appreciate you being here today. So basically what I'm hearing from you today is, is kind of the, the classical liberal, um, economic viewpoint that, uh, with, with very few exceptions, it's a bad idea for government to intervene in a market.

Is that largely correct?

Yeah, I work at a free market think tank, so yeah, we prefer free market. OK. You get no argument from me on that one. So I have some other government interventions that we have talked about here recently as potential policies that I was wondering if I could just run past you and see how you felt about them. I'm looking at 5 different ones right now, um, such as, uh, you require disclosure of business information to a legislator, but there's no penalty for the legislator if that confidential information is then disclosed publicly. Um, we've got statutory deadlines for both the beginning and the completion of a large construction project, or it faces a tax penalty.

Um, we got price caps. What's worse, those price caps are not inflation adjusted. We've got legislative approval of contracts, including sales contracts after the product in question has already been separated from government ownership. It's the government has already sold it to one party and then it's gone to another party and now it's the sale from the third party. And then publishing online ownership stakes, lenders and creditors, all kinds of— of contact information about them, notification of ownership changes, contact information and names of all persons from any of those companies with signing or negotiation authority, publishing online the value of all of those ownership stakes and any potential changes, and then publishing online anybody that is buying anything from the project as well.

Do those sound like reasonable government interventions to you or not?

So, give me a little bit more clarification on your question. Are you asking if those policies in applying to, are you asking about a specific project or a sort of condition that government has imposed on private contracts or under like a DPA-funded project? Uh, so those are, those are policies that we're considering potentially here in the legislature as apply to our potential, uh, pipeline and LNG project, right? Um, it's hard for me to make a specific judgment on that because there is a, uh, I think if you're talking about a normal sort of, uh, private enterprise where someone, like if I'm going to buy coffee, you know, it doesn't make sense that, uh, my purchase of a coffee should be published. When we get into some of the concerns about like natural gas, you run into laws like the Natural Gas Act, which require essentially that there has to be a certain amount of information transparency that shows that there isn't a preferential contract award that's given.

So I'd have to go through the specifics of the law. It's a to focus on that. But essentially, uh, it's required that these projects are actually having a free opportunity for the access to the resource and the pipeline, usually. So, uh, that's kind of my understanding. So I think, uh, I don't want to speculate too much on that, but I'd say from an economics perspective, having, uh, more costs associated with a transaction makes it less efficient.

What we call transaction costs and can have an economic toll. So to the extent that those should be minimized, I think that's appropriate. But I also want to be cautious about some of the other obligations that are unique to the natural gas industry. And sometimes there's a concern about what is the least cost way of facilitating requirements that they might have to comply with, which is— I'm not equipped to answer on that specific project. But, uh, I could look into that if that's something of interest.

Okay, thank you. You know, Mr. Rizzitti, I was, um, interested in your, your discussion about the knowledge deficit that government has resulting in errors, right, in policies. And that's exactly the issue that we're facing in this particular project. I mentioned $47 billion. Well, we don't actually know that that's the cost because the information that we're receiving from the private sector developer is extremely limited.

And yet the proposal before us is to completely eliminate all property tax for the duration of the construction and for 10 years after production begins. So it's a significant, um, uh, significant ask from our fiscal responsibilities. Completely removing abatement of property tax is a huge loss of revenue to communities who will be impacted by a massive influx of workforce and materials. And so the transparency issues that we are— the transparency requirements we're looking at placing on this actually helps us in making decisions about policy related to our tax regime. So it's very complicated and probably unusual, probably something that you don't encounter a lot.

You know, you talk about private sector. Well, it is a private sector company, but government is being asked to pony up a whole lot of money to make this private sector endeavor go forward.

So just some information. Senator Dunbar, question? Thank you, Madam Chair. I'd just like to bring it back a little bit to sort of where we started, uh, Mr. Rossetti, about the DPA. And you'd, you'd said this would be a novel application of the DPA to essentially subsidize, uh, the construction of a mega project as opposed to sort of a common during existing resources or existing, you know, private facilities.

And I guess I'd like you to put a finer point on that. If the federal government did come in and somehow infused a tremendous amount of capital, would you see that— and it wasn't challenged— would you see that as an expansion of the DPA's current understanding? And would— I think you have an article, something about Pandora's box, So I don't want to make this too leading question, but the next president and the president after that, would they have a new tool on their hand to say, I don't know, build a mega gigantic wind farm or, you know, anything else? You know, would this be an expansion for the next president? I would say yes.

That's because when you look at the recent applications during the Trump administration of the DPA, that is actually what we're really seeing is the Biden administration and their expansion of the use of the DPA is essentially what, what leads the current administration to conclude that they can use it in a similar and perhaps even larger fashion. So to the extent that if this, these uses of the DPA are viewed as appropriate and if Congress does not limit that authority and if Congress continues to to extend the, the authority of the DPA and continue to fund the DPA fund, then the next president will be able to use it. And we do see this trend, particularly in regulatory authority, where presidents tend to probe the limits of what is permissible in the interpretation of a statute. And I think part of the incentive for that is when you are in the position of governing, then you're going to try to be using and expanding all the tools available to you. So there's a natural incentive for policymakers to do that.

But I'd say that's the natural inclination. The more it's used, the more you're going to see reliance and potential expansion of it. Follow-up? I'll just say, Madam Chair, the metaphor I have used for executive— I've heard used for executive authority is Velociraptor is testing an electric fence. Thank you, Madam Chair.

Very good. Further questions? All right, seeing none, thank you very much, Mr. Rossetti, for joining us today. Um, appreciate your input on this and answering our questions. Thank you for having me, Madam Chair.

All right, all right, I'm going to take a brief at ease.

Back on the record. So that concludes our meeting today. We had hoped other folks would be available, but they are not. So our next meeting will be tomorrow. It'll be— that'll be May 1st at 3:30 in the afternoon.

We will be hearing from the Department of Natural Resources. That will be the Division of Oil and Gas as well as Mining, Land and Water. And we will be opening public testimony. So at this time, the meeting will stand adjourned. Let the record reflect the time is 9:40 AM.