HFIN-260508-1330

Okay, I'm going to call this meeting of the House Finance Committee to order. Let the record reflect that the time is currently 1:39 PM on Friday, May 8th, 2026. And present we have, uh, let's see, looks like Representative Allard is supposed to be online, but I don't see her. Representative Allard, are you— oh wait. No, Representative Ellard, are you there?

Okay, I will check for her a little later. We do have Representative Stout, Representative Kuchar-Schmidt,.

Bragy, Representative Kocher-Josephson, Representative Galvin, Representative Hannan, myself, Co-Chair Foster. And before we start, if folks could mute their cell phones. And we have 3 items on the agenda today. The first is the introduction of Senate Bill 23, Civics Education. We did hear this bill just recently.

At this meeting, we're going to review the fiscal note for House Bill 388. That is the bulk fuel loan Cap bill, so that will be the second item. And then the third item will be an introduction of House Bill 381, the oil and gas property tax bill. Folks may have received an email saying that that item was not going to be heard at this afternoon's meeting. However, originally we hadn't received the full hearing packet, but I think things are now complete, so we have added it back onto our schedule.

So we do have three items on the agenda today. And so first up, I'd like to invite Senator Stevens as well as his staff, Mr. Tim Lamkin, to please come to the table, put yourselves on the record and go ahead and— oh, I'm sorry. We've seen you so, so many times this week that I confused this bill with another bill that you have. So this will be the first hearing of this bill. And thank you for being here this morning.

Thank you, Mr. Chairman. Appreciate it. Senator Gary Stevens, Kodiak. I really do appreciate hearing this bill on civics education. Senate Bill 23 is one of many efforts we need to be making to restore the faith of the people and also the understanding of our system of government, particularly by our younger generation.

That's what this is all about. It calls for an establishment of a civics program graduation requirement where students have to do one of three things: either a semester course, which many schools do, but frankly most don't, on civics; or pass a civics test, as new immigrants have to do when they become citizens, or complete a civics project. So, 3 ways to do it in order to graduate from high school. What this bill does is to task our State Board of Education with providing a clear list of curriculum resources that are out there to help our school districts do just that. And they are all— there are all of them out there.

There's iCivics program, you may have heard of that. It's a very excellent program. The material is there. All the districts have to do is to apply it, and it's there for free. So what we do— hope to do is to kindle a spirit within our education system of helping foster citizenship, voting, and community engagement among our young people.

That's a fundamental purpose. That's the reason we started having public education was to create citizens. It's also a purpose consistent with our founding fathers when education was first established, the division of an education system intended to create good citizens within our republics— within our republic. I'll just mention briefly, I wanted to have somebody testify here, but George Washington, he's not available. But Washington did say some fascinating things about how important this is.

He said he viewed education as critical for a thriving republic. He said a primary object— this is George Washington— a primary object should be on the education of our youth in the science of government. An unusual term, but the science of government is the word he used. And he said, "What specifics of knowledge can be equally important— what specifics of knowledge can be equally as important as creating citizens?" So that's the way Washington thought, and I think he's absolutely right. Education serves to educate our citizens and in what a term he called was just— a just way of thinking.

So, Mr. Chairman, I know if you've talked to students, young people in our communities, often they have no idea of the government we have. They have no idea of the branches of government. They have no idea of the difference between the state and the federal and the local government. So I think it's essential that we get our children, our young people, back to understanding what it means to be a citizen. Thank you, Mr. Chairman.

Great. Thank you very much for that introduction. We do have also with us Representative Moore, Representative Bynum, Representative Jimmy, and Representative Tomaszewski. And I'm doing another check to see if we have Representative Allard online. I don't see Representative Allard.

So, uh, with that, before we go to questions, I just want to let folks know that available for questions when we do come back to that is Ms. Kelly Manning, Deputy Director of Innovation and Education Excellence. Um, and, um, let's see here. Also, I would like to note that we do have invited testifiers. We have 3 folks And so we are going to go straight to invited testimony and then we will come back to questions. So first up we have got Dr. Sean Healy, Chief Policy and Advocacy Officer for iCivics.

Mr. Healy, if you could put yourself on the record.

Good afternoon. My name is Sean Healy. I am the Chief Policy and Advocacy Officer at iCivics. Can you all hear me clearly? Yes, we can.

Thank you. Good. Well, honor to be here, and I salute Senator Stevens for supporting this bill and sponsoring this bill. As really echoing his comments, a comprehensive civic education is vital for developing the civic knowledge, skills, attitudes, and behaviors that are necessary for young people to be engaged in our constitutional democracy throughout their lives. And I think it's especially important in this 250th anniversary year.

We're just a couple months away from that big celebration. We are the legacy organization of Justice Sandra Day O'Connor. She founded us in retirement. She was very concerned about the state of civic knowledge in the country, as Senator Stevens articulated. And I think her money line was that civic knowledge isn't passed through the gene pool.

We have to develop it through each successive generation. I represent our policy team at iCivics. We're the leading curriculum provider of civic education resources in the country. And we've put forth policy recommendations for states. One of them is to make sure there is dedicated instructional time for civics.

We know from national testing data, the Nation's Report Card, that students do remarkably better on the National Assessment of Educational Progress in civics. If they have a des— dedicated course in civics. Uh, two, civics has to be central to state standards. Three, it's really critical that we assess it. Of course, this bill gets into that.

Uh, it's also critical that we, uh, recognize students in schools that demonstrate excellence in civics. And it's important that we invest in our teachers and provide them with professional learning opportunities. Every year we do, uh, a scan of state policies. And our scan last year showed that 37 states have a high school civics course requirement. Of course, Alaska, if you adopt this legislation, would join that mix and be the 38th state.

Only 5 states have a middle school requirement, although most states have instruction in middle school via standards. That includes Alaska. 29 States have some form of assessment. So this bill would bring Alaska in that mix. And 19 states recognize either students or schools for excellence in civic education.

So once more, Alaska would be part of that group. And 44 states, which include Alaska, provide professional learning opportunities for teachers via their state agency. It's, it's important to say we're not sentenced to this current predicament. That Senator Stevens spoke about where there is widespread civic ignorance, deep distrust of our institutions and one another, and toxic political polarization, states across the country are embracing civic learning as a means to strengthening and sustaining our constitutional democracy. By our count, since 2021, 34 states have adopted 56 policies to strengthen Civic education just this spring, 40 states are including, by our count, 239 bills addressing civic education, and at least 148 of them are pro-civics.

They align with our recommendations. That includes Senate Bill 23. I will say at this point of the spring, already 15 of these bills have been signed into law by governors. And I'll end by saying, back to the 250th year We're about to celebrate that. And the young people in particular, if we point to today's kindergartners, they are the class of 2038.

They will graduate on the 200th anniversary of the ratification of our U.S. Constitution. And I think legislation like Senate Bill 23 is an investment in them. It's an investment in the next generation. And once we get to this next this seminal celebration, I think they'll be much more equipped to participate in our democracy at the community level, at the state level in Alaska, and nationally. Thank you for this opportunity and, uh, stand in strong support of Senate Bill 23.

Thank you very much, Mr. Healy. Do we have any questions of the committee? Seeing none, appreciate your calling in for your invited testimony. Next up we have Cindy Mika if you could put yourself on the record.

Good afternoon, Chair. Good afternoon, Chairs and members of the committee. For the record, my name is Dr. Cindy Micah, and I'm the superintendent for the Kodiak Island Borough School District. Thank you for the opportunity to provide.

Testimony and strong support of Senate Bill 23. In the Kodiak Island Borough School District, we already recognize the importance of civics education and currently require each student to earn 1 half credit in civics as part of our graduation requirements. After reviewing the standards outlined in this bill, I can confidently say that our current course already aligns to the expectations and we would not need to make any adjustments to our programming. We have also been able to deliver this course using high-quality free resources and appreciate this bill formalizing the state's role in identifying and maintaining a list of open educational resources for districts to access. This is a practical and cost-effective approach that supports both consistency and local flexibility.

From a graduation requirement standpoint, the bill fits well within Alaska's existing framework. The state currently requires 21 credits for graduation, including 3 credits in social studies. Within those 3 credits, districts already have flexibility, and in practice, students have approximately 2.5 credits of choice within social studies after meeting Alaska Studies requirements. This allows for districts to incorporate physics without increasing the overall credit burden for students. While I recognize that not all districts currently include a dedicated civics requirement within their graduation expectations, as Kodiak Island Borough School District does.

This is exactly why the standards outlined in this bill are so important. Every student, regardless of where they attend school, should graduate with a clear understanding of how our government functions, the rights and responsibilities of citizenship, and how to engage in civic life. These are fundamental skills for participation in our communities, our state, and our democracy. The content expectations in this bill, ranging from foundational documents and the structure of government to civic participation Participation and Major Public Issues reflects what students need to be informed— need to know to be informed and engaged citizens. I also want to commend the changes in Version T that were provided for flexibility for districts and students.

Allowing students to meet the requirements through a course, an assessment, or a project-based demonstration respects different learning styles and local district approaches. Additionally, removing the requirement to pass a single high-stakes assessment is a positive step that supports students' success while still maintaining rigor and accountability for our students. Senate Bill 23 strikes the right balance between setting clear expectations for civics education and allowing local districts the flexibility to meet those expectations in ways that both best serve their students and communities. Thank you for your consideration and for your continued support of Alaska students. Great, thank you very much, Dr. Micah.

I have a question. Representative Hannon. Thank you, Dr. Micah. Thank you, Mr. Chairman. Dr. Micah, have you worked at any other school districts in Alaska?

No, I have not. Have you encountered any other school districts that did not already require a civics or government class to graduate? Dr. Micah. Through the chair, I believe there are some. Just in speaking with the other superintendents and Survey went out for the House Education Committee where the various superintendents were able to respond to that.

Representative Vanden. Thank you. Do you know the results of that?

I don't. Through the chair, I do not have those on me, but those were provided to the House Education Committee prior to them passing it out. Okay. Thank you. I'll turn to staff to see if we can get that data.

Mr. Lampkin.

For the record, Tim Lampkin, staff to Senator Stevens. Through the chair, Representative Hannon, the last survey that I did in looking at each individual website of all of 50-some school districts— and in regulation every district has to have 3 credits of social studies, but that social studies includes things such as geography, economics, and U.S. government and U.S. history. So there are not necessarily all districts that have U.S. government or history courses out there, but they do have social studies requirements. If that helps answer your question. Mr. Chairman, that's a very good point.

And Senator Stevens— I would like to underline the fact that some districts are doing an excellent job. I think Juneau does. I think Anchorage does. But so many of our smaller districts do not do this. And I think it should be a requirement of all citizens of Alaska to have knowledge of our government.

And just for the record, that was Senator Stevens. Representative Hammond. Mr. Chairman, and thank you to the sponsor. As you know, this was my content area in Alaska for 30 years. I've taught American government and the vast majority, all our large school districts required to graduate Anchorage, Fairbanks, Juneau, Matsu, Ketchikan, Kodiak.

So I'm trying to figure out which districts don't and try and make sure for the districts that don't require it, what we do to in incentivize them besides mandating them. So if it's Yupik School District that doesn't require it because they don't feel like they have access to government simulations, I want to make sure that we're creating instead of just a dictate from us, because again, most students in Alaska are already doing this because they're from major districts that require it. Making it meaningful for the few rural districts that may not require it to do it in a way that is meaningful and successful. Because I always knew as a teacher of both requirements— required courses in social studies and electives, they didn't come for the requirements. They endured required courses for their options and electives.

And I would love to have kids motivated that government is their choice and their elective and they want it. But I don't want to make them feel like they don't have a choice in that. So trying to figure out what rural districts aren't and what it is that we need to do to inspire them to be committed to it. Mr. Lampkin. Follow-up, Tim Lampkin.

So thank you for that question, and I'm prepared to go through a quick summary of what— how the bill is structured that will address that very question, I think. Meanwhile, I would point out that the state standards were adjusted and adopted in December of 2024, which you may know, that very substantially expanded and focused on civics. So the standards are now there, adopted in the previous adoption was in '06, but there are now state standards in place that every school district has presumably since then begun to align themselves with. And with that, if I could mention the very beginning, the most substantive part of this bill in the various renditions that it's had over the years is Section A, whereas if a district feels it doesn't have the resources and curriculum and assessments and so forth, that this directs the Department of Education to develop and point and post on their website a list of which there is a vast amount of resources freely publicly available, not subject to copyright. That they would point to those resources, post that list on their website so that any district, any student, any teacher, any parent could go to that website and access those resources.

A wide range of them, not just curriculum assessments, but project-based assessments and activities in classrooms, videos, and all sorts of things. Representative Hannan, anything further? No. Okay. Representative Stapp, did you have a question?

Yeah. Thank you, uh, Co-Chair Foster. Through the chair, I mean, I like this bill. I think I like this bill. I actually appreciate the fact fact that you're actually talking about comparative systems of government.

And earlier this House committee passed a bill that said we wanted people to be able to pre-register to vote at 16, so I hope we can pass this one too so they actually know, uh, what exactly they're supposed to be voting on by the time they turn 18. So thanks. Representative Bynum, do you have a question for Dr. Micah? Oh, I'll wait for the bill sponsor. Okay, any further discussion or questions for Dr. Micah?

Okay, seeing none, Dr. Micah, thank you very much for your testimony. Next, we're going to go to our last invited testifier, and that is, uh, Ms. Susan Nedza. If you can put yourself on the record.

Co-chairs and members of the committee, my name is Susan Nedza, and I'm the superintendent for Hoonah City School District. I'm also a certified counselor and have been tracking graduation requirements both in Alaska and in other states for 20-plus years. I am here today to speak in in support of SB 23 civics education. There is nothing more important than teaching students about how their country works and how to engage at all levels as they grow into future leaders at the local, state, and national level. In the same way that we want students to be able to read and write and do math calculations, we can't simply expect them to know how to lead and engage as citizens unless we teach it.

Civics has other benefits as well, such as teaching critical thinking about a range of topics Students learn to analyze complex political issues from multiple perspectives, evaluate sources, distinguish fact from opinion, and construct evidence-based arguments. Debates and discussions develop reasoning and persuasive communication abilities. By teaching civics, students— by teaching civics, students are more likely to vote, volunteer, and engage in their communities when they understand how government works.

Teaching civics equips students with knowledge, skills, and confidence to be active, thoughtful participants in a democratic society. I have in the past been concerned about cost and about tests creating barriers for schools and students. This version before you offers pathways that eliminate my concerns. Schools will be provided with free curriculum connections through DEED. There is an option of teaching this as a standalone course or over time embedded in existing courses.

And best of all, there are options options for students to take and pass a standalone course, take a test, or demonstrate mastery through a portfolio. This allows all types of schools and all types of students to meet this very important requirement without undue burden. For all those reasons I've outlined, I support SB 23. Thank you again. Great, thank you very much, Ms. Nezda.

Do we have any questions? Representative Hannon. Thank you, Ms. Nezda. Uh, thank you, Mr. Chairman. Does Hoonah School District require government or civics currently to graduate?

Through the chair, yes. Hoonah City School District adopted this a year ago, so for 2 semesters civics has been taught here and will be ongoing. Representative Hannan. Thank you, Chair Foster. Ms. Desdoe, before it was a requirement, was it an elective and taught or was it not taught at all?

Ms. Nezda. Through the chair, it was not taught at all, although components of civics are certainly embedded in things like U.S. history. So that was taught here. And I've also experienced that in other districts in Alaska where it has not been taught at all or embedded. Representative Pannon.

Thank you, Chair Foster. Ms. Nezda, does your curriculum that you're using in Hoonah currently cover tribal government in the civics course, or do they cover that in perhaps your Alaska history requirement that is required for graduation? Ms. Netza.

Through the chair, we have both in our AK history. We have a very tight connection with our tribe here. So HIA and our Huna Heritage Foundation support us in that and help us with that. We also have a new course this year as an elective that is Hoonah history where the students connected again both with HIA and with Hoonah heritage and our elders to assist with that. I know again I have experienced in other districts where we had a standalone half-credit tribal government class that usually butted up against U.S. history half-semester and half-semester tribal.

So that's how we handle it here in Hoonah and how I've observed that around Alaska. Thank you. Further questions for Ms. Netza? Seeing none. Thank you very much for your testimony, for calling in.

And so with that, we're going to go to questions for the sponsor. And the first question is Representative Bynum. Yes, thank you, Co-Chair Foster. Through the chair, Senator Stevens, appreciate you bringing this forward. I really do, really do full-heartedly support I support the concept here.

One of my very close friends was a government teacher for many years, many, many years, and she would be very proud that you are bringing this forward if she was still with us. One of my questions really revolves around the idea or concept behind actually putting the credit requirement in statute. This concept, it has come up before. For other topics. And when I went through the statutes and I looked, there really isn't a very clear guidance in statute for credit requirements.

They are all done through administrative code. I was just wanting to get the idea of there was— what the thought process behind only this one topic for the credit requirement in statute instead of pursuing the administrative code route. Thank you, Representative Bynum. So this has evolved through several iterations of this bill, and where it is now is an opportunity— sorry, I'm coming down with a cold— but an opportunity for students to go take 3 approaches to it, either take a class or to do the test, which actually Representative Stapp just took. I'd encourage all of you to take it, 100 questions, and/or to do sort of a program working with elections or trying to find out trying to get something passed through your city council.

So lots of approaches to that. But in any event, I'd really encourage you all to take this test. It's 100 questions, and new citizens are required to take it. I think it's really important to realize that this is not a high-stakes exam like we have had in the past with high school exam that we required of students. This is not that at all.

If you take the test, I'm sure Representative Stapp got 100%, but he could get as little as 70% and still pass it. And take the test as often as you want. I hate to admit, as a college professor, I missed a question on the Supreme Court, but the next time I took the test, I got 100% because I knew that answer. And maybe I'll ask Tim Lampkin to explore further that, your question, Representative Bynum. Mr. Lampkin.

Tim Lampkin, staff to Senator Stevens, through the chair, Representative Bynum. As mentioned earlier, this legislation has gone through many iterations since roughly 2015 or so, and it's about awareness. Putting, putting this in the statute codifies what is existing essentially in regulations. It's in our state standards. This brings attention to an issue that it started off with the U.S. naturalization immigration test.

You may be acquainted with that. That's— it's in your packet. It's the one that Representative Steff filled out, or that's a rendition of it. But this was brought to our awareness a decade ago or so that what's beginning to seem to be happening in our education system and our young people growing up that decreasingly understand our system of government, our democracy. And that test that's given by the federal government from folks that want to come and become citizens of the United States, it's a roughly 100, 120 question that they pick 20 from and they have to to pass 60%.

So, uh, to pass in grade school, we know that that would be a D. That would be a pretty low score. And that the last time that the data was looked at, or that I reviewed the data on that subject and the pass rate, was that, um, it's roughly 88% of our immigrants coming into the country were successfully passing that at 60% level. And that cohorts of students in, I believe it was the state of Texas and maybe Virginia at the time, taking the same test that our graduating seniors were passing it at about a 6 to 8% level. And so that was sort of a stark contrast that perhaps we need to put more attention and focus on this subject area. And that is why you're seeing it being codified in statute.

Representative Bynum, thank you. Through the chair, would you be willing to share the score that Representative Stepp achieved on his test? I will say it looks to me like he has 100%, and I will check it out to make sure. But I did give this test to the entire Senate, and I told them to return it to me and I would grade it. No one returned it to me.

And I did have a serious follow-up. Representative Bynum. Thank you. Two quick follow-up questions. One has to do with the element of charter schools and the homeschool programming having this as being a requirement.

And then secondly, was there any consideration of adding this coursework into the performance scholarship requirements? Mr. Lampkin. Through the chair, Representative Bynum. So first, as regards charter and home schools, to my understanding, of course I'm not an educator or an administrator in our school system, but as I would expect, that any student in this— any public school student in our state is subject to the same graduation requirements whether they're in a brick-and-mortar school, at a charter and homeschool, uh, first of all. But secondly, as regards the performance scholarship, um, we have not looked at that specifically.

I think the, the APS program is more spec— more generalized to their— at their, their GPA, their grade point average. Whether they take, um, this specific course and get an A on it and so forth, um, I don't believe is—. Is—. That might be problematic to include qualifiers for the APS if how depending on how they score with civics. But I would point out that the way the bill is structured, if they, they can satisfy this requirement if they pass the test, if they take a course, semester course, or they achieve a project-based assessment, that, that being, say, they run a campaign of banning chewing gum in their school, or maybe they ban vaping in their schools, or they put in a stop sign or so forth.

That, that'd be a project-based assessment. If they pass any one of those three, then they qualify. But if they pass all three, then there, there's language in the bill that would drive the department to develop regs to give them sort of a feather in their cap, a special seal on their diploma that they have demonstrated excellence in civics. Is that— that's sort of the, the carrot, if you will, of the bill, is to try to incentivize students to pursue even further, not just do one of the three, but continue to strive. Representative Bynum, just a final, final comment is that when I go look at the statute 14-43-820 Alaska Performance Scholarship Program Eligibility, that in there they actually do list things like mathematics, language arts, foreign.

Careers of science, social studies, foreign language, and other things. So, you know, I think it would probably be— if we are really trying to encourage this as a thing, maybe that is something to consider. And then additionally, if it were up to me and it were up to Ms. Stone, she would tell me that you should require 2 semesters instead of 1. But I appreciate you bringing it forward. Okay.

Representative Galvin. Thank you, Co-Chair Foster. To just highlight the comment around whether the scholarship applicants should have a line in our statute, I think that anyone who applies for the scholarship would be a graduate by the time they're in the university system. And if according to this law, they will have taken civics or pass through this test or they have a portfolio piece. So I think it's sort of a given that anyone who has— who is applying will have passed through the civics hoop within this bill.

Okay. Any further comments or questions? Seeing none, Senator Stevens, any final comments before we set the bill aside here? No, thank you very much, Mr. Chairman. I appreciate you taking the time to visit this.

I think it's an important issue and I agree with Washington that we need to make sure that all of our young people are citizens of our country. Great. Thank you very much. Okay. With that, we're going to set the bill aside for now and we'll come back to it.

So with that, I'm just going to take a real quick brief at ease.

Okay, and I will call House Finance back, back to order. And the time is currently 2:14 PM on Friday, May 8th, and the next item of business before us is the House Bill 388. It is the Bulk Fuel Loan Cap Bill. We reviewed— see, we're going to review the fiscal notes. I will take questions from the members.

We do have the amendment that's still being worked on, so we'll come back to the amendment as soon as it's done, whether that be today or at the next meeting. So with that said, I'd like to invite up Mr. Brody Anderson as well as Mr. Paul LeBoul, if if you could both come up and put yourselves on the record available for questions. We do have Mr. Alexi Painter, Alex, legislative fiscal analyst, and so they're going to walk us through the fiscal notes. And I think Mr. Anderson, you're going to go first. So Mr. Anderson, if you could put yourself on the record.

Thank you for the record. Brody Anderson, staff to Representative Foster. I have the easiest part today, just walking the committee through the hard copy fiscal note that is in front of you. This is a House Finance prepared fiscal note. It's a little bit different than the ones that we're familiar with coming over from the department.

Starting from the top, this bill is in— this fiscal note is in relation to House Bill 388. It is the affected area, is called— is in the portion of the operating budget called fund transfers, the appropriation. Mr. Anderson, I'm sorry, I just want to It's the OMB component number, just for the record, so we have that. Thank you, Mr. Chairman. For the record, it is OMB component number 2824.

Perfect. And there is no control code for this one. Great. Thank you. So the affected area is fund transfers.

The appropriation is loan funds. And the allocation is Bulk Fuel Revolving Loan Fund. This is an indeterminate fiscal note. That is in front of you. The exact number is unknown at this time, so the amount is indeterminate, and it is based on the increased borrowing caps.

Additional funds will be necessary for the bulk fuel revolving loan fund, uh, and so, uh, in order to fulfill the demand of the potential increase in loans, that is the fiscal note that is in front of you currently right now. And, um, I know Mr. LeBowl and Mr. Painter are available for additional questions, and I guess the key words would be probably the amount necessary to provide the loans. Would that be accurate? Mr. Chairman, Paul LeBoul, staff to Representative Foster.

Yes, Mr. Chairman, that's correct. Okay, thank you. Okay, any questions of the committee regarding the fiscal notes? And Mr. LeBoul, maybe if you could talk— we talked a little bit about where the money would come from. I think that's going to be part of maybe the amendments, but is there anything else that you can maybe tell us about?

Yes, Mr. Chairman, thank you. Paula Bull, staff to Representative Foster. It essentially kind of works like the waterfall concept that's been going around here, just without stating it. So the funding that— the surplus that's available in FY26 will essentially be the amount that's allowable to be transferred in. And so But only the amount necessary.

So for instance, if there was a $500 million surplus, it would still only be the amount necessary. It would not be the whole amount. Got a question, Representative Galvin.

Thank you. And I, I, I just want to make sure I'm understanding this properly. So the way the amendment likely will be written will be that The dollar figure has no cap, and we've altered from— I think it was $750,000 to $1.5 million per loan, and we have no cap to know how many loans at this point because we don't know how many will be applying. And so— and if it's a loan, I presume that the dollar— dollars would come back into the state, but we are presuming that those— the dollars that come back into the state will go into a revolving— into a fund that will stay there for that purpose. So whatever dollars are going into that will be not dollars that will be part of our UGF to use for other things.

So I just want to make sure we are clear because it is a zero fiscal note, that doesn't mean that we are not taking funds out of our presumably available UGF funds. Is that correct? Mr. LaBolle. Paul LaBolle, staff to Representative Foster. Are we talking about the fiscal note or are we talking about the potential amendment?

Well, I think it is both because the amendment— I am trying to understand what the amendment will do to this fiscal note of $0. Should it come into play, or even should the bill, underlying bill, come into play, because there is going to be funds coming from somewhere in order to fill these loans. And maybe if we could just assume that there is no fiscal note at this.

Point. And so without that before us, Mr. LaBolle, as things currently stand, can you explain?

Okay. Yeah. Paul LaBolle, staff to Representative Foster. Let me take a stab at this. So assuming without the fiscal note before you and without any amendment—.

But we do have the fiscal note before us, so if you can assume that—. Oh, assume the fiscal note but don't assume the amendment? Correct. Okay. Just the fiscal note to the bill, the fund source is UGF.

It's just whatever the surplus for FY26 is. Correct. Thank you. And a follow-up, if I may. Follow-up, Representative Galvin.

This department, or the bulk fuel loan, DCCED currently has, I believe, $22 million in already. And so we are presuming then the waterfall would move into this— that same department and be used only if needed. But it will be— it's hard for me to know like what that amount is. It's a little complicated, which I know is why the amendment is on hold. But I'm just wanting to know then, it's essentially a zero fiscal note because it's not going to cost the state anymore to be that transfer of funds.

Is that correct? Is that why it's a zero fiscal note? Mr. LaBulle. Thank you, Mr. Chairman. Paul LaBulle, staff to Representative Foster.

It's actually an indeterminate fiscal note, not a zero fiscal note. Thank you. That makes more sense. Okay. I would— if we were going to speak to the amount that is in the current loan program, I would defer to Director Painter.

In terms of the mechanics of how this works and the amount, you are correct that there's no way to know how much it would be. It may in fact be zero. We just don't know, which is what we ended up kind of liking about this model of funding the program, because there was some concern about if we did the, the regular process, which would have been no fiscal note and an appropriation made from the fund, that appropriation may be in excess of what's needed, or it might be less than what's needed. Whereas this, we're funding the amount that's needed, but we have a backstop in that it's only the amount necessary, and there has to be a surplus in order for that to go into effect.

Follow-up, Representative Galvin. Thank you. And maybe this is a question for represent— for Mr. Painter. So I believe there's other waterfalls that I've seen language for in our work, and perhaps we can hear more about that from other leadership chairs, co-chairs. But does one take precedent over another if there's more than one waterfall?

Is it— are we going to first waterfall to take care of our many communities who are suffering from high fuel costs, or if there were other waterfalls, and I'm not sure if we need to put in prioritization there or not. Thank you, Representative Galvin. Maybe if I could have Mr. Painter come up and— two issues. I know that there are various proposed waterfalls, and so that is one consideration, and that's something that the conference committee will have to sort out. But then I think just looking at the mechanics of how all of this works, I think, Mr. Painter, you could probably shed some light on that.

Then after we do that, I will let maybe Representative Bynum just give us a preview of what he's thinking about in terms of how we do this. And then we'll come back to questions just to try to get everybody on the same page here. And then we'll come back to questions, and that would be Representative Hannan. So with that, Mr. Painter. Mr. Chairman, for the record, Alexi Painter, Legislative Finance Division, through the Chair, Representative Galvin.

So the way in the other bodies' operating budget how their waterfall appropriations are structured. They take place after any other appropriation made that takes effect in FY26. So they are amending language that was in House Bill 53 last year that appropriated any surplus into the statutory budget reserve, any surplus from revenue over $6.3 billion into the statutory budget reserves. They amended that language to say before you put the money in the SBR, first it goes into an energy relief payment that would go out in FY 27 and then into K-12 outside the formula funding. But that was after all other appropriations.

So if this appropriation came in, it would be before that appropriation. Representative Galvin. I just want to make sure I understood you correctly or heard you correctly. So before the energy and K-12 dollars, before that, if there's need for the fuel loans those dollars would roll into the fuel loans first and then that— how long would it take for those dollars to come back to the state? What is the loan length usually?

Mr. Peicher. Through the Chair, Representative McGovern. So typically they have— they are paid off by the following May when the next grant cycle happens. That would go back into the funds. This language is excuse me, this fiscal note essentially allows an appropriation of the amount needed to add into the fund.

So then the payments would go back into the fund, into the revolving loan fund, where it could be used for future loans next year. Or if the legislature found, well, prices are back down, we don't expect to need all of this money, the legislature next year could reduce the capitalization at that point if prices are back down. Representative McGelvin. Is it okay, co-chair, if we ask what the fund amount is presently? If you have that.

Mr. Painter. Through the chair, Representative Galvin, the department has said that they currently have $22 million, but that's as of, I think, March, the end of March. Their loans are typically paid off by May, so that may grow by the time that they would actually be giving the next cycle out. We've asked how many loans they have outstanding and we haven't gotten that information back yet. Thank you.

Okay. Actually, maybe we'll go to Representative Hannan first and then we'll look at the amendment, proposed amendment. Representative Hannan. Thank you, Co-Chair Foster. Mr. Painter, this fiscal note that we have now added is attempting to capture excess revenue from FY26, and you described the waterfall, etc.

But the loans— the expanded loan cap in House Bill 388, although there— it may take effect immediately, many of the applicants for it aren't going to be until FY27. So how do we capture enough money in a waterfall to capitalize for loan applications we don't have? Because what I heard you say is it would— if this were passed with an amendment that's going to actualize it, that we're capitalizing it in its beginning of it, but only to the extent necessary. But we're not going to have those applicants yet, so we're not going to know how much is necessary. Or am I misunderstanding the timing?

Mr. Painter. Through the chair, Representative Hannan, my understanding of the timeline is that typically they do the grant applications in May with the goal to secure fuel deliveries sometime in August or so. So they may be dispersing the loans in July, so, or, you know, ordering the fuel at that point. So while that may cross the fiscal years, I think the department could ensure that they have a known universe of applicants at that point to make sure that they draw the money that's needed. With the state finances, generally, just because the fiscal year ends on June 30th, a lot of items don't get resolved until the end of what we call the reappropriation period at the end of August.

So as long as something has been put in the books by the end of August, then it can take effect if it was a valid item for that current fiscal year. So I think with the timing, the amount will be known by the end of August for sure in order to secure delivery this year. So I think it should work. The department could speak to that, and if that's, that's an issue, then potentially You know, we could tweak that later on, but without talking to the department, they should be able to make that work given the reapropriation period. Representative Hannon.

Yeah, Mr. Chairman, I guess my— you know, I've heard nothing but support at the table as this bill has come forward and talked about. And I think all of us share the concern of trying to make sure that people in need are going to be able to get fuel ordered.

Although maybe be the most active time for applicants, if the maximum applicant— application amount allowed currently is $750, I would guess that that is what people are applying for. If we are doubling that, but their application— you know, we are May 8th and this bill is probably going to take until one of the waning days of session to pass into law. So I just— I guess I'm going to footnote that I still am going to be an advocate for us to do an explicit additional capitalization of that fund. It may not be $50 million. It may only be a few, but I want to make sure that if we are expanding the capacity of the program, that we are able.

To make sure there's money there for the bulk fuel purchases to be done. And so I hope that besides a waterfall of money that we're not going to know about, that we'll have a few million to put into expanding the capitalization of that fund.

Great, thank you. Let's see, in the queue I've got Representative Bynum and Josephson. I just wanted to add to those comments. One thing just to keep in mind is when the presentation was given to us, the average loan size was just over $350,000 with, I think, 3 applicants that were over the $750,000— or how did they— anyway, the average loan size is about $350,000, and the current program allows— has a cap of $750,000. And so if you double fuel prices, You know, is it possible that maybe the program is fully capitalized right now?

That that's possible. And so I just throw that out there to keep that in mind. Obviously, it's better to have more capitalization as a just-in-case. And working through that is, is going to be what we do potentially through this amendment. And so, Representative Bynum, if you'd just like to give folks a kind of a brief preview of what you're looking at, and then we'll take up that amendment when we get it in writing.

Sure, thank you, Co-Chair Foster. Ultimately, no matter what we do, we need to appropriate money. And that appropriation for money can be out of '26 or it can be out of '27. If there's not sufficient revenue from '26 to cover the amount of appropriation that we think we might need, that creates a problem for the fund. If we don't have a dedicated appropriation from '27 for this fund to capitalize it, that creates a potential problem.

We can fix this by just putting, for example, $100 million into this fund, and then it will have plenty of money to do the loan program. The problem with that is taking and finding the $100 million to appropriate, and then making sure— I mean, if it is coming from GF, then of course you would then be leaving it in that fund, and then a future legislature could come in and say we don't need $150 million in this loan program and move it out. So what the amendment is attempting to do is it's attempting to let us define an amount of money to appropriate that would be sufficient, but without permanently appropriating it into this fund. It would automatically revert that appropriation when loans are made and payments are made back, that it would restore that appropriation back to its source. Initially, when we had talked, we had talked about PCE being a potential place because of the size of the PCE fund is so large that it wouldn't cause a substantial impact on the fund at all, and the mechanism is meant to restore all the funding plus interest.

But the way that we are trying to draft the amendment is not to directly point to a specific fund because we want to make sure that the legislature has the— basically under their authority to find the fund source that they want to appropriate from, and then they would make the appropriation. So, and then ensure that it gets paid back if it's not needed and/or if the loans are given and then those loans come back. So it'll be a first— it'll be a last out and a first in on the repayment of the loan— of the transfer of the appropriation into the fund, loan fund. So that's kind of the concept. It's a little complicated.

It's definitely challenging because of available dollars if we're using UGF or if we're going to use a different fund source. And we'll take that— we'll discuss this more when we get into it. I think maybe my trying to put it into a nutshell, I think previously we were looking at if the fund fell short, then we would just take it from the PCE fund and then repay it when, you know, when possible. And in this situation, the amendment just says we're not going to take it from PCE. We're going to take it from anywhere else that there's, you know, excess funds anywhere.

And but I think we'll get into more of the nuts and bolts later. Representative Josephson, do you have a comment or question? Yes, for Mr. Painter. Through the co-chair, Mr. Painter, on, on this draft fiscal note, I just want to make sure I understand. The committee hasn't adopted this yet, but, um, is this written in such a way that FY26 residual dollars would occupy space and not get in the queue with the energy relief of $150 per Alaskan and then the K-12, $111 million.

So this would be— this would not have to get in that line. It would— it would be in a privileged position before those two items. Mr. Painter. Kucha Josephson. Yes.

So because the conference committee couldn't If the conference committee chose to adopt the Senate FY26 appropriations, they come after every other appropriation. If they adopted this appropriation as a fiscal note appropriation, that would come before any waterfall appropriation. And to be clear, unless oil prices dramatically fall, there will be enough revenue available before any waterfalls to put money into this fund. And if oil prices dramatically drop, then there's probably not the need in the first place. So I'm fairly confident that there would be the money to put as much as needed into this fund in FY26 if it comes before any waterfalls, which is how it would be structured.

Follow-up, Representative Justice. The critical part is what comes after. So, um, my caucus, for example, has made education a top priority. My only concern with the fiscal note is I don't know— we're unsure how many applicants there will be for this fund. And if the Senate structure is adopted as to most of the K-12 one-time funding, then this could crowd out some of that without sustained high ANS prices.

And so I have some concerns about this fiscal note if it's going to jump the queue in that way.

Is that— Mr. Painter, could I have those concerns? Go to Justin. That's fair, that because it would come before, if you prioritize one of the other items above this, then that might not be desirable, which you could address by putting it, you know, later in the queue. But The conference committee, I think that might go beyond the conference committee's powers to adopt an appropriation for a fiscal note to slot it somewhere later in an existing waterfall. There's nothing in the bill language about it being a lower priority than K-12 waterfalls and things like that.

So it might be viewed as a new appropriation if they tried to do something like that at conference committee based on their typical powers. Last follow-up. And there's nothing we can do now in possession of this bill to create that structure where we say this is third in the queue after what's called the energy kicker and, and the one-time funding. Mr. Painter. Through the chair, Representative Josephson, I think the legislature could include intent language in the bill indicating that that was the will of the legislature.

You know, and I would really defer to legislative legal and, you know, Chief Counsel Megan Wallace on questions of the conference committee's powers. So I don't want to go too much into speculation about potential structures, but I think there would be options, and I would defer to Megan Wallace on those options. [Speaker:COMMISSIONER MILLER] All right. Thank you, sir. When we have our next meeting, when we bring up the amendment, we'll make sure that alleged legal is online.

Mr. LaBolle. Yeah, thank you, Paul LaBolle, staff to Representative Foster. I would note that if we used a methodology for capitalizing the fund other than the fiscal note, say an appropriation in the capital budget to capitalize the fund, that too would be in line ahead of the waterfall.

Thank you. Any further questions? Okay, seeing none, thank you very much, Mr. Painter. Mr. LaBolt, we're going to go and set the bill aside. If we could— somebody could make sure that we have ledge legal available at the next meeting.

And so with that, we've been here for just over an hour. I think we're going to have a fairly complex Robust presentation next, so I just want to let people get up for a moment, use the bathroom, grab some coffee. Maybe if you could be back in 2 minutes. I know it's going to be a little longer than that, but shoot for 2 minutes and we'll be at ease.

Okay, I'll go ahead and call House Finance back on record, back to order. The time is currently 2:46 PM on Friday, May 8th, and the next item of business before us is House Bill 381. That is the oil and gas property tax and municipal tax bill. And, um, let's see, first up, what I'd like to do maybe is move things around a little bit. I'd like to invite up Mr. Calvin Zulo, staff to the House Resources Committee.

If you could please come up to the table. I know that the governor had started with a version and then it went through House Resources. And so what I'd like to do is maybe roll out the version that's come out of House Resources. And then after that, then we'll have Mr. Mark Begich come up up speaking on behalf of the administration, and then after that, Glen Farn will also be up to give us their thoughts on the current version of the bill that's before us. So, Mr. Zullo, if you could put yourself on the record and tell us about what the bill that came out of House Resources does.

Thank you, Co-Chair Foster. For the record, this is Calvin Zullo, staff to the House Resources Committee. And I will— I'll just walk through a sectional analysis of version T of HB 381. That's the Resources Committee substitute that the committee just moved out on Wednesday. And if we could maybe just give everyone just a moment to find the section.

I think there are going to be two pieces of paper that you're referring to, two documents, and that is the sectional, and then the second one is the summary of changes. I think as we've walkthrough, you will be talking about the difference between the first bill and the resources version. So just want to give everyone an opportunity to find those two documents. There is a summary of changes that is a table. It compares version A of the bill with version T of the bill.

And that is a table. It says version H. And Mr. Zullo, can you say that again? We are seeing a version H. H. Did you say something else? I said, through the Chair, I said version T. Version H was an earlier version that was delivered to us this morning, but it had a drafting error, so it had to go back to legal. Okay.

Does anyone— Representative Hannan? So, through the Chair, Mr. Zullo, so the chart that referred to version H is accurate to the changes, although The document itself is version T for changes separate than that chart. Mr. Zullo, through the chair, Representative Hannon. That's correct. Okay.

Okay. And then the other one that you will be referring to is your sectional analysis. And I'm just wanting to make sure everyone has that.

And I think everyone does. So with that, Mr. Zullo. Thank you, Co-Chair Foster. Again, for the record, Calvin Zullo, staff to the House Resources Committee. Section 1 of CS HB 381 sets out new legislative intent language.

It basically says that the tax treatment is designed to advance the AKLNG project, to maximize benefits through affordable gas access, and to protect communities from the impacts of the project. Sections 2 and 3 exempt project revenues broadly from local contribution calculations for education. Section 4 authorizes municipalities to apply local property tax to project properties to adjust the mill rate in negotiation with the project developer.

Section 5 allows municipalities hosting the gas treatment plant or the LNG import and export facility to, in lieu of local property taxes, take an equity stake in the project. Section 6 conditionally directs most project revenue to a Constitutional Alaska Education Fund. This is conditional on the creation of a Constitutional Education Fund. Section 70— sorry, excuse me— Sections 7 and 8 direct 20% of gas royalties from an Alaska LNG project to the Renewable Energy Fund. This replaces language from SB 138 from the 28th Legislature.

That directs 20% of AKLNG royalty revenue to an affordable energy fund.

Section 9 amends the oil and gas property tax statutes to exempt projects subject to an alternative volumetric tax.

Section 10 repeals Section 9 in January 2056. There are several repealer sections in this bill. I'll mention them as they come up. Section 11 implements Section 5, which creates the equity option. Section 12 repeals Section 11 in 2056.

Section 13 broadens existing property tax exemption language. The existing property tax exemption is— applies to AGDC property before construction. Section 14 sunsets Section 13 in 2056. Section 15 exempts a gas treatment plant or related project property from AS 4356, the oil and gas property tax statutes, and applies municipal property tax statutes to that property.

Section 16 is the heart of the bill. It enacts a new Chapter 59 in AS 43. This establishes a 15-cent-per-1,000-cubic-feet alternative volumetric tax on pipeline throughput. It exempts the pipeline from, uh, 4356 property taxes. Uh, it adjusts, uh, that AVT for inflation after 1 year of operation.

Um, there's no, uh, abatement period under this bill. The version A, uh, included an abatement of, uh, all taxes for either 10 years or until the project achieved 1 billion cubic feet of average daily throughput. Um, there are eligibility requirements in Section 16, including a Fairbanks Spur Line, and it does allocate revenue from that AVT, 50% proportional to property tax jurisdiction along the pipeline corridor, and then 50% to all communities in the state using a formula similar to the Community Assistance Fund.

Uh, Section 17, uh, is a sunset provision. Section 18 repeals, uh, AS3705-610, which is the part of SB138 that created the Affordable Energy Fund. Um, Section 19 requires the Alaska Gas Line Development Corporation to submit a report to the legislature before Phase 2 of the AK LNG project receives FID. Covering the impact of this legislation and suggesting further changes required to induce Phase 2.

Section 20 is an effective date for the inflation adjustment on the AVT rate.

Section 21 is conditional effect language for some of the core provisions of this. It requires the Commissioner of Revenue to certify that the project developer has made a commitment to create a $40 million community impact fund. Negotiate a project labor agreement, and then commit to construct a Fairbanks Spur Line before gas exports begin.

And then Section 22 makes the Alaska Education Fund conditionally effective. Section 23 is an effective date for some of the sunset provisions. And then Sections 24 through 27 are also effective date provisions. Great. Thank you very much, Mr. Zullo.

I know that there's a lot of information here. That we are going to be delving into. But before we get into questions for now, I just want to try to get as much information on the table as possible for now, and then we will go to questions. I think there is going to be plenty of time for that. So, Mr. Zullo, if you would like to either remain up or be on standby, you are welcome.

I would like to next invite up Mr. Mark Begich from Northern Compass Group, and he will be speaking on behalf of the administration. If you would like to come up and yourself on the record. And then after that we will have Glen Farn come up. And so do we have a question, Representative Froegge? Yeah, quick question just for you, Mr. Co-chairman, if I may.

Just in terms of time management, can you give us some expectation as to what you are hoping to cover today and when you expect we will be done? I just want to be mindful of time and what you are hoping to actually accomplish this afternoon. If we could get through a presentation by Mr. Begich as well as by Glen Farn, If we have a few questions, maybe we will take a few. If we are done early before— I think our normal adjournment time is 3:30. I can easily go another hour and I would be okay.

But if folks have time— if other commitments at 3:30, we can try to stay on course. Rep. Sinemchroggi, do you have anything? I don't think my next obligation is until 4:00, so I could go a little late. I was just curious as to what what the plan was. So thank you.

I think the big question will just be how long do we want to go with questions? And I was just going to gauge the committee, and if we start getting tired, then we'll, we'll just hold off on questions and we won't go long. But my intent was not to be here till 6 or 7 or 8 at night. So, Mr. Representative Bynum. Oh, thank you, Co-Chair Foster.

I, I think from my perspective, for me, I'm going to probably just try to soak in the information here unless something really creeps up I'm going to try to think about this and bring back questions as long as we will be bringing back the opportunity for questions. I think there's going to be a lot of things that the committee are going to want to see. I know that there's questions about, you know, consultants think, questions about what the other body has done to the bill, maybe having a comparison of what's happened there. There's going to be some requests for modeling and there's public testimony. We've got to— we definitely want to do our due diligence on this, so I think there will be plenty plenty of time for questions.

So with that, Representative Tomaszewski. Yeah, thank you, Co-Chair Foster. With the gas line bill in front of us today, I'm ready to go till midnight. So whenever, whenever, it's up to you, Mr. Chair.

Thank you. We can, we can certainly do that too. I'm very flexible. So, Mr. Bagich, thank you for being here. If you could put yourself on the record.

Absolutely. Thank you, Mr. Chairman. Mark Bagich. I work with Brownstein High, which is a contract with the state of Alaska through the Department of Law and the Governor's Office, and they subcontract to Northern Compass Group, which is company that I own and operate. I have been working on this project both in the— through the, as I mentioned, Governor's Office, Law Department, AGDC, for the last 5 years plus on this, working through the many iterations of where we are today.

So I'll give some commentary general, and then I'll jump right into it. I—. As many of you just got the documentation first, thank you to the committee allowing us to be here today, and frankly to your staff members who worked quickly getting this paper together. As a former staff to the legislature, I know exactly the pain and agony they just went through to get big documents to you, so thank you for allowing us. First, I want to say just some general thoughts.

The goal of this legislation that was presented to the Resource Committee that worked on it, and I believe they did a very good job. There's a lot of things still we are concerned with, but generally it moved in a direction that we can continue to work on and get a we believe, a workable product. Um, 3 goals that we have. The first is energy to South Central, which is a desperate need as gas is running out of the Cook Inlet region. The second is dollars for the state, as you are the owners of the resource that's in the ground.

And third is jobs for Alaska. That's how we look at everything, what I will present to you. Also, I want to make sure when Glenfarn comes up, um, Mr. Chairman, that even though the state is a partner with them on the project, there will be times when we disagree because we represent the state's interest. And the state's interest, as I mentioned, were those 3 items in that order. So sometimes we have a little friction, but we are here to present a project, hopefully in a unified way.

Let me just kind of jump into it. Again, I was literally— I'm glad there was a civics course debate because I was busy working through the CS as quickly as I could. So I'll walk through some of the sections of concern that we have, if that's helpful. I won't be able to work off the document that was done by staff because I just got that one a few seconds ago, but I will— the administration will respond to you on these differences in writing also. But first, as we look at the bill itself, a couple things I want to point out is Section 3, 4, and 5.

These are ones that worked in through the amendment process. There are some concerns we have on two elements in essence.

Is the first is the, the right to the municipalities to have an option to pick between the AVT tax or mill levy. What that does is create two tiers of taxes. And in this bill, later on I'll point out, there is an amount for the volumetric tax of, I think it's proposed in the proposal here at 15 cents, if I recall. We had proposed 6 cents. So that's a fundamental difference that we have.

But more importantly, Mr. Chairman, and to the members, that's just on the pipeline. And then on the treatment plant and the export facility, this element that I'm referring to right now gives it the right to the city or the municipalities of North Slope Borough and the Kenai Peninsula Borough to select their mill levy, which makes it very troublesome. Because we will not know that value as we're trying to figure out the cost and some certainty. So that's just the fundamental on that, that the right in this two-tiered system. The second part, which is really under Section 5, I want to say subsection C, which is the equity issue.

Within the project, the State of Alaska has a current equity position of what they call carried interest. In the holding company, which is the one that holds the 3 projects: pipeline, treatment, and the export facility. In the top one, the holding company, the state has a 25% interest, carried interest. There's no risk, no requirement of investment, no cost over and associated, nothing. You get it because you brought the project to the table.

The other 3 elements, you have the right to invest in it. At a later time we can talk about that, I'm sure. And the state of Alaska has a right to invest between 5 and 25%. Your pick, how you fund it, how you do it, but it's a cash-in and then you get a percentage of each one of those projects that you decide. Why I'm describing this is because the way this is written, what happens in this situation is if, let's say, you're a community that has a $10 mil and you say to the project, I'll give you— we'll charge you $2 mils, this allows them to take the $8 mils they forgave in equity.

The problem with that is we're raising equity for the project, which means you gotta raise cash to build the project. So this is not cash, because right now you gotta start with the premise that you have no property taxes, you have no revenues for this project. So this requires then the project to go raise more money, more cost, more equity investors, and more interest cost to the project. So it does not work in that situation. So that's Two fundamental issues on that.

There's some here we don't really have an opinion on, how you appropriate the money, meaning Constitutional Education Fund, those things. That's your purview, not ours. And now I say that on the project behalf. Now, the governor, you might have different decisions on that. I'll leave that to you all.

But on the appropriations, when you go to section— and I'm just going through as quickly as I can— there's a couple sections we have to review and compare to the original. But when you look at Section— looking for the number— it is Section 15. And it's subsection— it's down at the very end of it, just before you read Section 16. Section 15, this is where the language goes in to move the gas treatment plant into Title 29 activity, which is state statutes for municipal code. That section is where this variable rate could come up.

We would have to negotiate with them separately. We don't know what that rate would be. Anytime— and I know the Chairwoman from Resources did a great job in explaining how they would fall under Title 29. But under Title 29, that subsection they're utilizing will require them to do an ordinance municipality. They do regulation.

It is not a simple done, one in, one out. The City of Anchorage, when I was mayor, we did several of these. They're complicated because you want to make sure they don't have unintended consequences. And I can talk more about that if you want, but that's a concern we have. But it relates back to the original Section 5.

The next item is right after that, Section 16. This gets into the rate structure I mentioned to you. In the original bill presented by the administration, it was 6 cents across the board. That meant 6 cents on the treatment plant, the export plant, and the pipe. What it really meant, the flow-through, the total flow-through.

And why I want to say this is because there is confusion by some members within the bodies, two bodies, that if you put 6 cents on the pipeline, that means everybody's 6. That's how we see it. But some are putting 6 cents on the pipeline, then you add on the treatment, then you add on the gas, the export, next thing you know you're back to the original number. That's not the intent of this. We're trying to create some certainty in the number.

So we obviously agree— disagree with the 15 cents on the gas line component. We still disagree with the two separate entities at this point until we have an understanding of how that all works. Second, there is an inflationary number in here. We had in the original bill 1%. We did hear a lot of discussion and the one— the number that was put in here is Consumer Price Index.

The product that is sold is done on a market basis. What I mean by that is when you put the product and you export it, it's based on market conditions, not inflation. It is based on what the market will bear and how you manage that. We recommended through some conversations informally of a floor and a ceiling, a 1% floor and a 2% ceiling. So there's some predictability on the inflation adjustment.

That's not in the bill, but we recommend that because if you have consumer price index only, again, it's a commodity. One thing you will notice, if you recall during COVID the price of oil went to negative and then went way up. Because it's a demand product, not an inflationary product. And that's a very important distinction between this and other types of products. The last is— I'm just— not the last thing, there's one more note.

This is just my— I'll take my hat off of everything and just say as a mayor, we heard as a former mayor, but also I'll put my hat back on as mayors have told us under one component of this, the allocation of their money is designed by this legislation to be an appropriation by the legislation back to the communities. I don't think you're going to hear a lot of positive from communities about that. They like to collect their own taxes and expend their own money. So I'm just pointing that out, that we don't care how you do that, but I think it is an issue that we're going to have to deal with from our end, and you'll probably have to end up dealing with it. Mr. Chairman, I'm trying to be as quick as I can because— oh, last item on page 13, Section 20.

We had some debate. We agreed, both administration and Glenfarn agreed, and Glenfarn really had to agree because they have to put the money up. We recognize certain communities, 6 communities we've identified, will have impact by the construction of a pipeline and/or the 2 facilities. So we felt like there should be an impact fee or an impact cost, and it was recommended around $30 million, which we put in there. That would be funded by the private developer.

So it would not be funded by the state. There's no requirement. And then the administration, the legislature would figure out the correct way to distribute that. We have recommended that it be done kind of like how you do emergency preparedness or emergency response. People have to prepare and show what their actual direct costs were from the impact of the construction.

On top of that, we also agreed— and I say we because Glenburn had to agree on this one, but we asked them to do this— and that is there would be a 25% advance to the communities because the construction will start sooner than you actually see the full impacts. And we felt like they should have some resources to deal with that as the construction is occurring. Those are the immediate issues, Mr. Chairman. Obviously, we want to just as you go through the CS as quickly as we can. I tried to do it here and check some notes and give you some responses, at least so you can kind of see.

But generally, we will say that the Resource Committee was very helpful in many ways. There's things that they clarified. They took out something which we mistakenly, I think, worded, and that was on— the way it was worded, that anything in sales tax, that if you went— if you were a worker there, Mr. Chairman, and you were working on the pipeline, but you went down to the grocery store and bought some, somehow our language said you would be exempt from taxes. That was not the intent. They cleaned up some language for us, gave us some extended times to make sure the financing could be done.

So very positive in that aspect, and we look forward to working with this committee. Great, thank you very much, Mr. Bigich. I wonder if you or somebody on the team there might be able to just come up with a short one-page, two-page of just kind of what you talked about, that, um, a summary of the concerns that you have with the current version? We will absolutely do that and we will try to do a comparison of notation. Absolutely.

Appreciate it. Thank you. Let's see, we will take one or two questions and then we will jump right into Glenfarm. I know there is a lot of information here, but I think we will just kind of take our time and absorb it as we go along. Representative Bynum.

Thank you, Co-Chair Foster. Through the Chair, thank you very much for being here. I think one of the other things that might.

Be very helpful from a visual perspective is to talk a little bit about— or not talk about, but be able to demonstrate a little bit about what it is that you envision for the revenue from the line, gas line, going, including royalties and taxes. I think right now that there's a lot of numbers being thrown around. You hear about mill rates, payment in lieu of taxes, royalties, and the different communities that might be involved. So it would be very helpful to have a visual that really kind of shows how that revenue is going to then be distributed. We talk about the annual value to Alaska.

I'd like to know where that annual value is going with a quick glance. That'd be very helpful. Mr. Chairman, again, Mark Begich for the record. Representative, thank you for that question. We do have some documentation.

We'll be happy on the high scale or like $50,000 level. First, there's about $800 million on an annualized basis to the state, and that is based on the full capacity of both in-use state and export. That is split into several categories. Obviously corporate tax, royalties, production tax, as well as some additional elements on taxes. That is on an annualized basis about $22, $23 million on what we always model these on 30 years, because that's how the contracts work.

We believe there's plenty more gas here. Don't be thinking that 30 years is all gone. But— and then on the flip side, from the local governments, we estimate around $4 billion over that same period of time that the local governments that are impacted or would be swapping for this new type of tax. And that we'll give you a chart. We've done several of these, but we do have a quick simple one like this and then we have one that takes special glasses to see, much smaller.

So, but we'll absolutely prepare that for the committee. Thank you. I'd just like to recognize that we also have with us the co-chair of the Resources Committee here, Representative Freer. And I do have a few folks in the queue, but I just wanted to maybe ask as we're trying to adjust here and get our minds thinking on the gas line. Mr. Zullo, I would be curious along the lines of, um, Representative Bynum's question to Mr. Begich, trying to get some of the background here.

I'm wondering if maybe at our next meeting or the meeting after, if you could just put together a short PowerPoint that just shows what the Resource Committee did and kind of the thinking behind what happened. And so, for example, you started with the governor's budget I mean, the bill. And then you made a number of changes, and I'm kind of looking for maybe just the high-level changes and some of the thinking as to why that occurred. And then that'll kind of help us to kind of get caught up to speed with, you know, where things are. Mr. Zulu.

Thank you, Co-Chair Foster. Again, for the record, Calvin Zulu, staff to Representative Freer in the House Resources Committee. Yes, I'd be happy to put something like that together. Okay, great. Thank you.

So questions, or we'll take a few questions, then we'll jump into the Glenfarm presentation. So next up, I've got Representative Stapp and then Hannan. Representative Stapp. Yeah, I think, Co-Chair Foster, through the chair to former Senator Begich, thanks for being here. Absolutely.

I don't know if it's appropriate. I got a kind of a list of asks just to kind of give homework to get stuff out of the way. If I could do that now, or you want me to wait for the Glenfarm people? Now is fine. Yeah, I think Co-Chair Foster threw the chair to Senator Bagage.

Well, I mean, for me it would be helpful to see basically what 1 cent on the volumetric does to the end-user price and to the financing cost structure, right? Just to kind of understand. It's hard to kind of, I think, public to get their hands around, like we talk about 15 cents or 6 cents and that doesn't seem like a really big number, but it probably is a big number on the actual price per gas. Second one is reviewing the PowerPoint. I know that you have other jurisdictions that have done these types of projects, it would be helpful to see like a comparison of Canada LNG, not so much on the annual tax burden cases, but just compared to what we're talking about in terms of total state take.

Right. So like, what does this current volume at term tax look like as opposed to what they did in Canada? Because that's the only other project on the West Coast. LNG is a very similar project. So it'd be helpful, I think, for people to finance to kind of look at that for comparison.

And I think I'll just leave it there. Thanks. Great. Mr. Begich. Mr. Chairman, Mark Begich for the record.

Representative, yes, we can get those. And you actually pointed out something, if I can share with the committee. Canada is really our competition now. They have really changed their dynamics of what they're doing, especially in the last 3, 4 years, because they see the market and frankly they see us as the biggest market changer. And so I will absolutely make sure that occurs.

And then the pricing, we do have some modeling. It's a great exercise and more than likely we We can get that to you in an Excel sheet if you and your staff would like to utilize that for your own kind of what does it do, what does it not do. We can make that happen. Okay. Thank you very much.

Representative Hannan. Thank you, Co-Chair Foster. Good to see you, Mr. Begich.

I want to drill down just for a second on the question that you answered for Representative Bynum and you said $800 million in corporate tax to the state taxes and fees. And I— it's my understanding that 8 Star wouldn't be paying a corporate tax, Glen Farms, an S corp, wouldn't pay a corporate tax. So could you tell me, in that calculation of corporate taxes to the state for ours, how— who are the players? I mean, versus a theoretical it could generate that. —Of the corporations currently and publicly noticed as involved, to my understanding, are not corporate taxpayers to the state or structured in a way that they would be paying the corporate income tax.

Mr. Begich. Mr. Chairman, again, Mark Begich for the record, Representative. I listed all categories, so I want to make—I'll give you the global, shrink it, then be detailed. First off, as I mentioned, a little around $800 million of that.

The state's property tax take during that same period—and I'll use these on instead of per year, I'm just going to do the bulk number because that's how I have them listed. So over the period of time of 30 years, it's about $22 billion, $22.5 billion. Of that, about $500 million is estimated based on this alternative tax for property taxes for the state. State gas royalties, about $9.54 billion. Of that, it's broken down into state general funds, permanent fund, school fund, because there's an assignment that, and Rural Affordable Energy Fund.

So those are— that's contained within that number. Additional oil revenue, and this is because when you start moving gas, you have condensate and other situations that will produce about $665 million of that gross number. The production tax is about $9.9 billion over that same period. That includes the upstream development as oil production, which is a value you get because when you start moving gas from one of the fields, There's a secondary— the reverse occurs. You get oil while we're moving gas out.

On the corporate tax, a couple of entities, and of course these are all developed by Department of Revenue. So when you have Department of Revenue here, they can walk through even more detail how they calculated this. As you know, they can't disclose within the corporate tax structure who each person pays, but you do have entities that are selling gas to the project. And they will be paying a corporate tax on that. That is approximately $1.826 billion of that $22.5 billion.

Does that help? Give me that final figure again. $1.826 Billion. And that's because they're selling gas into the system and there are going to be corporate taxes that they'll be liable for. Representative Hannan.

And that's— all those figures you were citing, Mr. Baggett, were over 30 years, correct? Yes. And we have a—. And then let me just affirm that 8 Star would not be a corporate taxpaying entity, nor is Glenfarm. Yeah, 8 Star is currently— has nothing.

It's not a revenue stream producer. Right. What I'd like to do, Madam Chair, or Mr. Chairman and Representative, is make sure I'm going to have Glenfarm answer that question because that's their policy on how they do their taxes. And I say that because again, the revenue department does not specify who the corporate taxes are collected from in a public arena, as that's proprietary information for the taxpayers. I'd rather them tell you how they're going to do that, and they'll do that next week.

Okay. Although I'm going to say it's not really through the chair. It's not their policy that decides if they pay taxes. It's our policy. So I just want to affirm what I understand from the public record is they are an S corp and would not be subject to our taxes.

And I understand that the identity of corporate taxpayers into our oil and gas revenue that revenue has, but sometimes it gets— you might have heard we've had a little political issue over S corp and C corp issues. And so I just want to make sure in working on this legislation that that's all clear to us. Mr. Bagish. Mr. Chairman, again, Mark Bagish for the record.

Totally understand. My understanding of Glenfarn, they are a limited liability corporation. That's why I want to make sure they clarify exactly what they are so you have the correct identifier. And that's at this time. HSTAR— and he'll explain those two differences, but just want to make sure.

Okay, and we'll go to our last question, then we'll go to Glenn Farnes. So with that, Representative Bynum. Thank you, Co-Chair Foster. Appreciate Rep. Hannon for bringing up.

—Topic.

The question really revolves around this idea of how we are going to be getting revenue from the project and how do we make it— how do we put the rates in place so we can have it financed and get it built. Has there been any consideration of how an expansion of S-Corp tax in in the state of Alaska would impact the future of the project. Mr. Begich. Mr. Chairman, through the chair— Mr. Chairman, again, Mark Begich for the record, representative. We have been in many committee hearings that have brought this issue to us, even though it's not the Finance Committee at this point until today.

The key on this project is, as you know, for 40, 50 years it's been a very challenged project. Financially. There are several things that are working in our favor today. You know, we have two wars going on with less gas on the market. We have cooking oil that's gone up from an $8 base rate to almost $13 in the latest rate, so that therefore the pressure of prices going up and that component that you're referring to is not in the modeling.

And it's a good policy discussion, as Representative said earlier. We are— and I'll again let Glen Farn answer that question. They will have an opinion, I'm sure, on this. But right now, it is a very challenged project. The most important thing about the project is once you build the pipeline, that first section, that's what we're talking about today, the next two components, I don't want to say are easier, but they become more— the risk is in the pipe.

People have always said they'll never build a pipeline. If you don't build a pipeline, you can never get to the next two components. So the pipeline is the margin, and the margins that the company— and I say the company, which you will own a portion of as the state of Alaska— is a very marginal rate of return. It is a rate of return, but it's not like the larger companies that may have proposed in the past. Thank you.

Thank you. Okay, thank you very much, Mr. Begich. We'll go ahead and have Glenfarn come up next. And so I'd like to invite up Mr. Adam Prestige, president of Glenfarn Alaska LNG. And also we have online, just folks— so folks know for questions, Matt Kissinger, commercial director of Alaska Gas Line Development Corporation, otherwise known as AGDC.

And so if you could please put yourself on the record, and I believe we've got a PowerPoint here. Thank you, Mr. Chair. Adam Prestidge from Glenfarm, Alaska. It's a pleasure to be here with you today.

We'd like to go through some slides to talk about the, the nature of the project and most importantly to start with why this project is so important and delivers such benefits to the state of Alaska. And actually representing the state of Alaska, If we may start with— I'll ask Mark Begich to speak to the first couple of slides about the project's impact on the state of Alaska. [SPEAKING AKUTAK] Mr. Chairman, thank you very much. We wanted to make sure you got the comparisons out of the way so you understood the difference in the legislation.

But it's really important to think about this project. As I said, it's a transformational project. It has incredible impact long-term. As I mentioned already in the discussion, there will be millions of dollars of potential revenue stream. It has been a project that's been stuck for many years because of the condition conditions of the market weren't there, but also just the ability to find the right kind of developer to do this project that doesn't— or looks at it from a long-term growth.

But let me be on the second slide that— I don't know if they're going to pop or if we have to push a button, but I'll just leave it. We really have two choices. And the two choices are in South Central when it comes to our number one priority, and that is getting gas to the facility. Thank you. She's giving me the cue here.

Thank you. Um, is you have really two, um, choices. Right now, South Central is running out of gas in the Cook Inlet region, proven by the last time there was, uh, minimal or no leases that were acquired. Um, the price has gone up from $8 to $13 a unit plus. If you import, here's what happens.

You import from, uh, countries that we have no control over. We do not build a pipeline, which means the jobs that would be associated with that don't exist. The revenue stream, because it's not our gas, doesn't go to the state. You don't get any of that. Our price point is subjected to the market conditions out of our control, meaning we don't control the resource.

We don't control if they have an issue, for example, in the Middle East that's occurring right now where you can't get 25% of the LNG that's needed in the market out of a little strait that's being controlled. If we were one of those that somehow we had an importing company that we were buying from that depended on that, we would not see that gas. We would be at risk versus an in-state project. In-state project has a variety of things. It has an ability to bring energy security to the state because it's our resource.

All the revenue stream from that gas comes to the state of Alaska in the sense of selling our gas instead of leaving it stranded. It has money that goes into— I think it's about $1.4 billion over 30 years into to the Rural Energy Fund. And the other thing about the project that I think is important is not only does it give us security, it allows the state to take advantage of the export component. Adam will go more into detail, but let me just give you kind of in the broad sense. You build the pipeline, we sell about 200 million units to Alaskans right now.

That's our total consumption of gas. May grow, of course, with economic growth, about 200 million. The pipe's capacity is 3.2 billion. And when you figure out that at the end of the day you're going to be able to take that larger volume, spread it over the capital costs, and the price you pay here, because it will be close to on either side of the export cost in the first outing on this, it won't be— people want the cheapest gas possible. We got to build the pipeline first.

You know, Fairbanks is dealing with $25 a unit. Double what down in Anchorage in the Cook Inlet region is right now. This will give a comparison and a competitive nature with import. But the minute you start increasing volume over that capital cost, the price goes down because now you're spreading it over a much higher volume. We anticipate— I always stay on the high side on this.

DNR has different revenues down to as low as I think $4.36 a unit. I like to say around $6 a unit. That's my own impression, but still that's lower than our lowest price we've had in a decade in the Cook Inlet region. That is why this project is of high value today. I'll stop there and I'll turn it back to Adam.

And I think we do have a question. Representative Galvin. Well, thank you. I believe it is for Mr. Precision.

He may be already covering this, but through the chair, we have had Several meetings. Thank you. This is a very exciting time for Alaska once again. And I'm seeing some changes here on this slide from one of our prior presentations. So I just ask if you would please explain.

We've moved from 10,000 jobs to 12,000 jobs. That's significant and exciting as well. And if you could explain that change from when I first heard about it. Secondly, it says low-cost energy, and I've heard all sorts of things around energy costs to Alaskan consumers. So if you could review— I know when you talked about that initially, I was very excited to run home and share that with my constituents.

And now there is so much fear out there around costs to homeowners, and if you would please cover that as well. Thank you. Prestidge, if you could put yourself on the record. Thank you. Adam Prestidge from Glenfarm, Alaska, through the Chair, responding to Representative Galvin.

Thank you very much for those comments. It's good to be back here speaking with you again. First, if you will allow me, The 12,000 jobs includes— it's a figure that includes both the direct labor on the pipeline itself, as well as the direct labor on the other components of the project, as well as some indirect jobs. So if you allow, the next time I speak, or I can follow up with you with the exact breakdown of those numbers. So I think that's just the distinction.

And I'm glad you brought up the energy cost question, because that is the real component, the real benefit and the real goal here for why we are developing this project. What Alaska LNG and the Alaska LNG Pipeline deliver to Alaskans is the opportunity to have some of the lowest cost gas anywhere in North, North America. The way that's achieved is that if the LNG facility achieves a final investment decision and starts construction anywhere during the period of time while the pipeline is being constructed, then on the first day of operations of the pipeline, the pipeline will be delivering and selling very low-cost gas to Alaskans. And so as long as the LNG facility has achieved FID before completion of construction of the pipeline, then day one, very low-cost.

Gas. And when I say very low-cost gas, I mean some of the lowest in, in, in the country by far. To put another way, uh, the only way that we start by delivering relatively higher-cost gas on the pipeline— and I'll talk about where that, where that pricing sits relative to alternatives— but the only way that we end up with higher-cost gas coming out of the pipeline is if there is no FID on the LNG export facility until beyond 2029. And I can personally tell you I think that's unlikely I think there is a very strong probability of FID for the LNG export facility. I think it will be much, much sooner than 2029.

The customer interest is there, the financial interest is there, the permits are there. So it's a very promising and high probability project in my opinion. So that is really the key and the promise for the project. We have to be practical. We have to look at hypotheticals.

And so there is a component of this where we've designed this project to work financially, even if the LNG facility never does come online. And the way the project works is to sell natural gas under a contract to utilities. And I've mentioned before that those contracts are in late-stage negotiation. As soon as they're executed, they'll be submitted to the Regulatory Commission of Alaska with full transparency over price, pricing mechanics, everything else. And so I can't go into those details quite yet, but what I can say is the pricing in those contracts is competitive against the alternative pricing options for natural gas, whether it's coming out of the Cook Inlet or being imported as LNG.

Representative Galvin. Thank you, Co-chair Foster, through the chair. You mentioned FID in two different ways. I wonder if you could describe what FID means. What exactly would be a surefire understanding for us that we've reached FID?

What does that look like? Certainly. Thank you. Representative Galvin, through the Chair, what I want to remind the committee— and we haven't had the opportunity to present it here before, so maybe it's not a reminder, it's new information— The project is broken into phases, and so historically the Alaska LNG Project incorporated as one consolidated project the 800-mile pipeline, the large gas treatment facility on the North Slope, and the relatively large LNG export facility in Kenai. And that was the, the concept that was prevailing, you know, through 2005 to 2022 really, was that that entire project would go forward in one giant financing, one very large construction project.

And I think that one of the reasons that the project didn't go forward is just because that the scale of that would be just frankly one of the largest infrastructure projects ever undertaken in the world, if not the largest. So as a solution to that, one of the strategies that AGDC incorporated around the time that Glenfarm started to have conversations about coming into the project, is to break the project into phases. And that's what we've done now. Phase 1 being a standalone gas pipeline from the North Slope that is financially successful, financially viable, even if there is no LNG exports. And so then the second phase, Phase 2, would be to add an LNG export facility, the gas treatment facility on the North Slope, and then use the full volume, the full transport capacity of the pipeline.

So I make that distinction because those two phases have separate FIDs. Each needs to be independently financially viable to make this work. Uh, three, thank you very much. So there would be a separate FID for the facility on the North Slope, for the pipeline, for the export facility. A final investment decision is a fairly well-understood term within the infrastructure world.

It is essentially the moment when all of the financing has been arranged and committed, so that's debt financing and equity financing. All of your permits, all your major permits are in place, and the construction contractors start working to build the project. And it's a relatively clear moment in time. Thank you. Okay, Representative Josephson.

Uh, thank you, Mr. Chairman. Um, through the chair, Mr. Prestidge, I hadn't heard that you believed— and you may have said this in countless meetings that I couldn't attend— but that you believe even without export your price will be competitive with, I guess, Cook Inlet legacy options or import. Is that— in other words, is that accurate that you think if you never export a molecule you can deliver to NSSTAR, for example, at a competitive price to the other two options? Mr. Prestidge. Representative Justin, through the chair, what I mean by that to be very clear, is that the price that we would sell to NStar under a Phase 1 model where no LNG ever comes online is competitive with the, the new contracts that are being offered to NStar to sign for new production out of the Cook Inlet.

We know that NStar's current contracts have expiration terms on them, and they're— and they're— that, that production will, will cease. And contracts that extend are being offered right now are in the same— are relatively comparable. Okay. And then—. Representative Josephson?

Yes, if I could. I don't understand everything on this slide except what 80% support means. I don't know what that means. Mr. Bagich? Mr. Chairman, thank you very much.

Again, Mark Bagich for the record. Representative, that is most polling data that we've seen is in a very high level. And this is, as you know, in politics, poll numbers like that are not bad. So that's what that is. Okay.

Okay. Please proceed with the— actually, we've got a question. Representative Hannon. Thank you. And this is just in the lower right corner of your slides, it says strictly private and confidential.

And I'm wondering if—. It's not now. Okay. Well, just wanted to make sure and put on the record that Even though it says that these are not confidential documents that we are seeing on the public record with the press in the room. Mr. Chairman, please— oh, Mr. Bigich.

Clearly understand that that was probably one of our formats of the document when we insert things in, and that was still remaining. Okay, and please proceed with the presentation.

There we go. Thanks.

At the core of our discussion in this bill, Adam Prestidge for the record, is a tax arrangement that would allow the project to go forward. As we mentioned, this is a large challenging project. The legacy of attempts to take this project forward is well understood and decades long. It is an expensive project to build and it also is Unlike, unlike other businesses in the energy industry, it is a, it is a project that works economically based on a relatively small margin, high volume, and high certainty business model. What I mean by that is this is an infrastructure business model where essentially 8Star is selling a service of transporting gas on a pipeline.

We're not taking what I would categorize as commodity risk with commodity upside. So our profits and losses aren't exposed to variations in energy markets, and so we don't stand to benefit very largely when oil and gas prices go up in the market. We're selling a service at a fixed cost. What that means is it's so critical for a project like this to have a tax arrangement that makes— that helps make the economics of the project work and that is consistent and reliable so that when lenders, investors are coming in to look at whether they want to fund the project and see whether this is a good investment for them to make, they can have an understanding that the tax arrangement, the tax burden on the project allows the project to be viable and also provide some predictability to the project going forward. And that's not a concept that is unique to this at all.

What we've put here on this slide is just a high-level indication or a high-level summary of similar arrangements for other projects. For example, Glenfarn is also the lead developer and owner of the Texas LNG project, an LNG export facility in Brownsville, Texas. That is very, very close to FID. There we enjoy a payment in lieu of taxes agreement with the county where the project resides, very similar to— in some respects to what we are talking about here. You see similar types of arrangements for large projects in Louisiana, New Jersey, really in many states around the country, and those can vary from— either complete tax abatements for a long period of time with a tax kicking in at the end of a period of time, or a significant reduction in tax.

And again, that comes from a recognition that mega projects like these are challenging.

Economically challenging and can bring a lot of benefits to the community if the community helps to support to bring the project along. And I do want to recognize Representative Sapp. We hear your request for information on Canadian project comparisons. We'll deliver that. I had a question.

Representative Tomaszewski and then Joselson. Representative Tomaszewski. Thank you, Co-Chair Foster. More, more of a statement, I guess. In my time in the Fairbanks North Star Borough Assembly, we actually negotiated a PILT agreement with the Trans-Alaska Pipeline in, you know, a payment in lieu of taxes.

And that seems to be working well. It really takes away the constant negotiation of the property value year-to-year negotiations that would take place in it. I think it was maybe even a 5-year, and maybe they adjust then after a 5-year, but something to take into consideration. We actually have done it here in the state, and we do it in the North Star Borough. Thank you.

Mr. Bigich. Mr. Chairman, Representative, thank you for that. One thing I should have said too, the reason why we are very supportive of the volumetric tax is because under the old system that we are trying to replace, it goes into property taxes. Assessment on these projects. If you go to a smaller community, they may not have the toolset to do that.

Lots of these end up in litigation over the valuation of the property. The state has several that are multi-year litigation, and frankly, to compete against a large company on valuations when you're a small community becomes very expensive. Usually it's outside legal counsel that they have to hire. Just a point for the record, Mr. Chairman. Okay.

Representative Josephson. Yes, on slide 4, when we see the term PILT, or in South Carolina, the Fee in Lieu of Taxes, that is always generally synonymous with tax cuts, right? I mean, that is really what we are talking about. Is that fair?

Representative Josephson, through the Chair, I think the way you could look at it is a reduction of of a tax that's based— an annual tax that's assessed based on value in exchange for a predictable scheduled payment that the project sponsor agrees to make. And just for the record, that was Mr. Prestidge. Any further questions? Yes, I want to follow up on something. Thank you, Chairman Foster.

I wanted to follow up on something Representative Hannan said about corporate income taxes. As developer, She noted that you're an LLC, but you're not going to be the owner of the pipe or the other components, the gas treatment or liquefaction. You're the— it's almost like you're the playwright of a play, and these other folks are the actors and the directors and that sort of thing. You're— You're not likely to own the equipment, is that right? So to get to the answer on her question, we'd have to know the entity that does.

Mr. Prestidge? Representative Josephson, through the Chair, Adam Prestidge, Glenvarn. I wouldn't— I don't think that's entirely correct. And so the way this is set up is that 8STAR owns all of the equity right now of each of the subprojects. And 8STAR, of course, is a joint venture between the state of Alaska and Glenfarm.

So right now we co-own 100% of the equity of these projects. When we go to the market to finance and to raise the cash to build these projects, we'll sell equity to other equity investors. But we likely will either invest in some additional dollars ourselves. We'll also retain some of the equity just as the developer. The way these deals are structured is you retain some ownership.

And so our expectation is that we definitely are part of the long-term ownership of the project. And I just want to give a reminder, Glenfarnon owns and operates over 60 infrastructure assets up and down the Americas. We own those projects for the long term. We're not a firm that has built its model out of short-term coming into developments and then selling them. We're not a fund.

So we don't have timelines that require us to exit investors. We really come into projects that we believe have a good model and a good future and want to stay in them long term. So that's what— that's our intent here. To answer your specific tax question, there would be a consideration that other equity investors will be invested into the project, and so there will be a consideration of that.

Glenfarn is not an S corp, has never been an S corp. We are an LLC, so I understand that. I understand the pass-through nature of an LLC. Okay, thank you. This might be a good time to bring up maybe a suggestion that I have, which is kind of feels like we've kind of jumped into this without building a good foundation. And I wonder, I'm sure that there's a PowerPoint somewhere out there, and I'm not sure who might, who could do this, but just knowing who's NSTAR, you know, what's the state's position, what's Glenfarm's position, you know, How are the agreements packaged?

Just all the basic stuff, just so that we can kind of, I guess, go from there. So, Mr. Begich. Mr. Chairman, thank you very much. We can do that. There's, you know, sometimes when we enter the equation, as you're sensing, we always, as we do a PowerPoint, the very first PowerPoint we did with one committee, we got to 3 pages out of 40, because it's such an intense, big project.

We would be happy to. We have specific documents that show the structure, who owns what, what the investment opportunities are for the state in the future, kind of that what I call a project description, you might say. And we'll augment that with some of the work we've done with the committees. And if that's helpful, we'll put that together. Absolutely.

That would be great. Thank you. Further questions on this slide? Seeing none, we'll— Mr. Prestidge. Representative Foster— Chair Foster, Adam Prestidge.

If I could, I would like to just take a moment to go to Slide 12 and just highlight—. His staff is working hard here. Hang on. I am just trying to find—. There we go.

Thank you. I want to remind— I want to make clear to the Committee that this project is not Glenfarm alone developing such a large and complicated infrastructure project. Over the last year of our ownership, we have brought in very important partners to join us in this effort. And so that includes the firm Worley, the largest engineering firm in the world.

Baker Hughes is a committed strategic partner alongside us. They're one of the largest oil and gas services companies and equipment manufacturers in the world for this type of work. POSCO out of Korea, another strategic partner and investor in the project. Is a very large steel manufacturer out of Korea, an LNG buyer and trader. And then another firm that to this point is confidential, a very large U.S.

Equipment manufacturer. And there's actually an additional partner not on this list, a very large Greek shipping firm that would love to be shipping the LNG on tankers out of Alaska. You look at those and those are the firms that have stepped in as strategic partners directly into the project as of now. Mark, do you mind going one more? And that— but beyond even that, Representative Josephson, you made the description of kind of the developer's role as a playwright.

I think that is one good description. I think another term that I like to use is a quarterback. Bringing together many different pieces, many different parties to all work together to accomplish something really big and complicated. And so the parties that have joined with us and aligned with us in public commitments of different kinds of contracts do include the producers, Exxon, ConocoPhillips, Great Bear, uh, some of the, the, the best and most sophisticated pipeline construction firms in the world, Worley, Moztech, Qantas, CGM, US Pipeline, uh, SPE, and Barnard. And then some of the largest, most capable pipe producers, just to name a few of the firms that have joined in here with us.

And so, want to be clear, kind of the volume and the mass of top-tier, super sophisticated partners that are working on this project with us. [FOREIGN LANGUAGE] Great. Okay, thank you, and please proceed.

Thanks, Mark.

So Adam Prestidge, for the record. I spoke for a moment about the concept of tax incentives in other states. It applies to LNG projects in other states and worldwide. And so what we have here on the list, coming from a firm called Gas Strategies that provided information, that conducted a study for AGDC several years ago, is a comparison of tax arrangements that have been granted to similar LNG projects. And I can tell you that that is a very, very standard thing for LNG projects in this industry because these projects are so large and capital intensive and difficult.

And so, in some of the lower 48 projects, you see 10-year exemptions, zero tax paid, and then entry into a PILT payment arrangement. The, the COVID Point LNG export facility in Maryland has a similar PILT and then a long-term reduction. We'll talk more in a subsequent session.

The Canadian projects benefit from a suite of fiscal incentives to be able to make sure that their gas is low cost and competitive. That's a significant impact on Alaska LNG because we're selling a similar product that has a lot of the same energy security benefits to our Asian allies. Even countries that might not seem at first glance to be super business favorable, Russia, Nigeria, recognize that in order to get projects of this magnitude done, And there need to be significant tax arrangements put in place to help put them forward. But if I may, Chair Foster, I believe we have representatives from AGDC on the line who historically oversaw the collection of this information and also have been involved in the historical recognition that tax adjustments will be required here. So if I can ask, I think it's Matt Kissinger, to comment on that.

Mr. Kissinger, if you could put yourself on the record.

Yeah, thank you, Chair Foster. This is Matt Kissinger for the record, the commercial director at AGDC. If I could just quickly do a sound check, can everyone hear me all right? Uh, yes, we can hear you great, thank you. Excellent.

Um, I'd like to go back and discuss the history of the project and kind of describe how we got to this point. Where we're focused so much on property tax. If you go back, the first phase of the project, I like to call the producer-led phase, and of course this is when the state was joined with ConocoPhillips, ExxonMobil, and BP to move the project forward. That, that model was never really going to work, and you can see that the producers themselves, those three producers, have not built any infrastructure, any major pipelines or any major LNG facilities in the US for the last 20 years and even further, actually. And the reason for that is they require a much higher cost of capital.

That's what their investors are looking for. And they also have their own internal capital allocation processes where other projects around the world were always beating out Alaska. So it's not that Alaska LNG was not economic, as some people continue to believe and continue to opine on. It's that the producers were just never in a position to move this kind of project forward. What has really happened over the last 20 years is the emergence of these dedicated infrastructure companies, some of them that you've never heard of but have carried out very large projects across the U.S. 5, 10 years ago, people would not have heard of Cheniere.

Cheniere is now one of the largest producers of LNG in the world. Venture Global, another name that people wouldn't have been familiar with, and now are building up again one of the largest LNG portfolios in the world. And the same goes with the pipelines where you move from some producer-led pipelines, though that goes almost all the way back to TAPS. And really since that time you've had your, your Kinder Morgans, Yersempre and others that have stepped into that role. We moved from the producer-led effort and into this state-led effort.

It was around 2016 when the— the end of 2016 when the project was handed to the state. And we spent several years with this state-led effort where we were going to work with foreign governments and we were— AGDC was going to lead this project. And that was also really not a credible path board because AGDC was never in a position to lead the project, uh, nor really should it be, uh, or could it be. In 2019, there was a major change at AGDC. There was a real shakeup of the board, uh, new leadership was brought in, and this is where we started what I like to call the alignment-first model.

This is where, uh, we find a developer, so you could also call it developer-led model, But it's more than that. It's aligning between the oil companies upstream, a developer to carry out the midstream, and working with the commercial arrangements rather than government-to-government arrangements across Asia to find the buyers and ultimately put together what we would call, you know, project finance. Project finance is different than balance sheet finance, which is where this project was under the producer effort. Project finance means that the project is underpinned by credible contracts with creditworthy parties, both on the upstream side and the downstream side. And that allows you to not have recourse to the developers and allowing for much smaller developers, but the recourse is actually to the project and to those, those contracts.

One of the first things we did as we entered this alignment-first model was we initiated a stage-gate process. And we were told, let's go through an economic stage gate and determine whether it is worth spending any more effort on this project. Exxon and BP joined us in about 2019. They actually provided funds and subject matter experts, and we optimized the project. We spent about a year optimizing the project based on modularization and source country strategies and other things.

I think we had about 10 different, uh, items that we had optimized the project on, and mostly engineering items. And that brought the cost estimate down. And with that lower cost estimate, we went through our economic stage gate. What we found in that economic stage gate was that the project is competitive. It, it can deliver LNG to Asia for less than the Gulf of Mexico can or the US Gulf Coast.

And, and really, that's who you need to beat. You don't need to beat the lowest cost supply of LNG. You need to beat the marginal supply of LNG. And the marginal supply of LNG with a lot of depth, because there are a lot of projects, is the US Gulf Coast. So we were competitive, but we were more middle of the pack.

And for a project of this magnitude where you don't just have the LNG facility, but you obviously have the pipeline, and a large gas treatment plant on the north slope, uh, to remove the CO2. You need to be better than just the center of the pack. And so we realized that there are further optimizations needed, uh, to be done. And there were 3 that stood out when we went through that economic stage gate. The first one was gas price.

The producers were, uh, under their efforts had, um, assume quite a lot— a high gas price. But this is unprocessed gas. People have to remember that this is not marketable gas. We have to take the gas the producers give us and we have to remove the CO2. The reason for that is, is, is, A, the gas coming out of the ground in Prudhoe Bay, at Northstar, at Point Thompson is not even of utility grade, which is usually around 2% CO2.

Let alone LNG grade, which you need 50 parts per million or less, because when you liquefy LNG, you're cooling it down to -263°F, and in that process, CO2 would turn into ice. So it's a technical limitation. And so the gas price had to be— had to come down, and we focused a lot on that. We negotiated, um, uh, for— I'd say for years at this point on that to bring the gas price down into what I say is the, the $1.50 range where we are now. The second thing that we identified was the loan guarantees.

So this project had received loan guarantees from the federal government through the Alaska Natural Gas Pipeline Act of 2004. And this was— it was $18 billion worth of federal loan guarantees where the federal government provides the full faith and credit of the U.S. government. But they were only for use on a pipeline to go down to North America. Now, these loan guarantees, they're CPI adjusted. So if you CPI adjust from October of 2004 until today, you'll find that these are over $30 billion now.

But again, we weren't able to use it on the Alaska LNG project until the bipartisan infrastructure law came around. And this is where our congressional delegation inserted language and allowed us to use the loan guarantees on this project. So we dealt with gas price, we dealt with the loan guarantees. The next item that really stood out to be optimized was property taxes. But we didn't really know where we even stood with respect to property taxes and in comparison to our competitors.

So we needed benchmarking and we brought in Gas Strategies at that point, is an intelligence service out of London. Highly regarded. And we asked them to benchmark our taxes, our property taxes in Alaska for this project against Texas, Louisiana, a host of foreign countries including Canada, Mozambique, others. And what they found was that the tax— the property taxes in Alaska were a whole order of magnitude, so 10 times that of the next highest. And, and I think you saw that on the previous slide.

This is an overwhelming burden for a project that is already incredibly difficult. And as I said, marginal economic, but marginal. And so.

And so we realized that we had to do something about this. And, um, and because we saw that the— that it was sort of a whole order of magnitude higher, that's where the 2 mils came from. We went from 20 mils in our minds. We said, look, this project could work at 2 mils. The 2 mils was rightly changed into the alternative volumetric tax, which does provide a lot more alignment and also provides more relief during Phase 1 when the burden of those taxes would actually just be borne by the Alaskan consumers anyway.

Gas Strategies are not the only ones to have identified this. Wood Mackenzie also identified it in their competitive analysis of the project that they did in 2022. And the legislature— your own advisors, Gaffney Klein, have also identified this on numerous occasions. So Alaska's property tax framework is truly a significant burden on an already challenged project, and, and that is why we are here today. And with that, I'll hand back over to Adam unless there are any questions.

Thank you, Mr. Kissinger. What I'd like to do— we have a number of people actually who need to take off. I'd like to have the full committee here as we are discussing these issues, and I hate to bring up questions and then end up having to review those again later. So what I'm going to do is first of all recognize that earlier we had Representative Underwood join us, and thanks for being here. In the lineup of questions when we start back up again, I have Representative Hannon, Representative Bynum, Representative Galvin, Representative Josephson, Representative Stapp, And so we will pick up where we left off.

Rep. Sam Schraggi, go ahead. Thank you, Coach Oster. Just in terms of process, if it would be acceptable to you, I would request that to the extent that we have requested additional materials, if those are ready ahead of our next committee hearing, if they can be disseminated via email over the weekend, I am more than willing and would be eager to review those materials ahead of our next committee hearing so that we can try to be very efficient with our time. I know that this is an extremely big lift given the amount of time we have left in session, but I'm committed to doing what I can to make sure that I am understanding where we're at, where we need to go, and can be productive with our time. So that would be my request, Mr. Chairman.

Thank you. Representative Bynum, then Moore. Representative Bynum. Yes, thank you, Co-Chair Foster. The gentleman on the line had mentioned a number for the loan guarantee, and I just did I didn't hear what it was.

Mr. Kissinger, can you repeat that? Sir? Yes, certainly. Through the chair, the loan guarantee is a federal loan guarantee. Again, it is a loan guarantee program that was legislated through the federal act, the Alaska Natural Gas Pipeline Act of 2004.

And so these loan guarantees, again, they were $18 billion in 2004 dollars, October of 2004. And they were originally to be used for the pipeline to North America. They were later adjusted or modified through the bipartisan infrastructure law so that they can be used on this project. Thank you. Okay, Representative Moore.

Mr. Chairman, those were inflation adjusted to about $30 billion now. Perfect. Representative Moore. Uh, yes, really quick, uh, thank you, Co-Chair Foster. And then Along with the request from Coach Schragg, if staffer— I'm sorry, Zula, is that correct?

If he could have that, you requested a slideshow, a slide deck, something like that. If we could have that prior to the next meeting as well, that would be super helpful. Thank you. And just to summarize, I know that two of the requests that I had was one, just kind of an overview of what the Resource Committee did, kind of going from the governor's bill to the resources bill, some of the major changes, and then maybe a little bit of the background as to why the changes were made. And then the other one was just getting a little more back into the history of kind of how this has all come together, the structure of the organizations and their stake in it and so forth.

And I'll come over to Representative Hanna in a moment. And then I think there might have been another request out there. Feel free to raise your hand. And if you remember what that was, then, Representative Stepp. Yep.

Yeah, I think, Chair Foster, I was hoping I could maybe just add to my list of requests I gave to you earlier. I thought of one more. Yes, Representative Stepp. To the chair, to Mr. Bagegard, Mr. Prestidge, just a little more homework. It would be helpful, I think, if I could get some sort of table that gives me some sort of comparison of how a volume metric cent works with the producer price number, right?

So if you understand what I'm talking about, right? Like, what is that? —Number. Mr. Biggich. Mr. Chairman, thank you.

So are you asking does it have a relationship to the price of what they're charged? Yeah, so follow up, Mr. Co-Chair, just through that. Wood Mackenzie has a dollar in producer price and the AGDC guys said $1.50. It would be nice, like, what does that actually mean in terms of our state take here on this volumetric thing?

Like, what does that do? Through the chair. Information to be forthcoming. Mr. Baggett. Yes, Mr. Chairman.

Yes, we actually have a chart that's done by Department of Revenue that has two components. One is that price variation, you know, just to give you kind of a range what that could mean, and also a cost overrun, which I will say for this record, from the state perspective, the costs are run on their side, not ours. And but we'll— we have a very— they call them heat charts, but we'll absolutely Okay. Mr. Chairman. We've got Q, Representative Josephson.

Representative Cannon. Sorry. Cannon. Thank you. And I think mine is a homework assignment for Mr. Kissinger because he was focusing on the property tax burden in Alaska and referencing the other jurisdictions.

So if we're using the slide for its Texas, New Jersey, Tennessee, Louisiana, Oklahoma, and South Carolina, and I'd like to know the other statewide tax burdens in those states. If they have an income tax on LNCs, if they have a statewide sales tax, because we're talking about property tax in isolation, but I think most other states have other taxes that would apply. Okay. And for the full committee, if you have any other requests, certainly I absolutely welcome it, because as was mentioned earlier, the The more we can get now, the more we'll be able to be efficient with our time. Representative Josephson.

Yes, in an informal meeting I had with Senator Bagich and Mr. Prestidge, I noted an interest in— I understand the $800 million per year issue, but while I may not be here, this plus-6-months decision point where the state invests perhaps billions of dollars, that the project is more intriguing to me if I can know what could come later. And if there were numbers at 5% investment, 15% investment, 25%, that would be super helpful. And I don't know if it's knowable. But— Mr. Bagich. Mr. Chairman, through the Chair, Representative, yes.

And it will be hypothetical based on, you know, value of investment. I've actually done it myself on an Excel sheet because one of the questions we get is if the state wants to invest in the pipeline, even though it's a separate issue down the road, what does that mean? What is the dollar? And I give kind of a range based on construction costs and so forth. And yes, we can give you some hypotheticals.

Also, we can create in such a way you can manipulate it. So you can say, well, what if And that's, I think, a very helpful tool, especially for staff. And just a clarification, one thing, when you asked Ms. Josephson about the kind of ownership, I want to give you an example that probably really crystallizes it because it's what I do. The hotel business I have now is very similar. I owned it with my partner Sheldon Fisher 100%.

Then we went and raised equity, which ended up about 75% of it. We still own 25%, so we're the operational manager partner. So we, we are in charge of it. We pay taxes for our share and all of that. So that's maybe an example that might be helpful.

And it, for me, it's even though our hotel is this big compared to this project, it's a good example of the same type of business model. Thank you. Representative Galvin. Thank you, Co-chair Foster. Through the Chair, I believe this would be an ask of Mr. Kissinger.

In his description of kind of the story of what— how this has come along, one thing that was referred to was how the cost estimate was brought down, and if I could hear more about the where the cost estimate is from where it was, any of that sort of information, especially for this first piece that we're talking about, which is the pipeline build. So to get a sense of that, I think would be helpful for all of us. Thank you. Thank you. Okay, I think we've got a fair amount of homework for our meeting that will be in 2 hours.

I think you'll have that ready by then. Mr. Chairman, I would say I hope I get 100%, as the representative.

Civics course. Representative Stepp has set a high bar. Representative Stepp, any comments? Good luck.

Okay, so with that, in recognition of the fact that I think a number of folks are going to be leaving because it is Mother's Day this weekend, we will not be having House Finance tomorrow. And so our next meeting is scheduled for Monday, May 11th, at 9:30 in the morning. And if there's nothing else to come for the committee, we'll be adjourned at 4:10 PM.