Senate Resources Committee hears consultant on LNG tax, disclosure and competitiveness

Nick Fulford, senior director for gas, LNG and energy transition at consultancy Gaffney Klein, told the Alaska Senate Resources Committee on May 7 that the legislature needs a way to review commercially sensitive project economics without releasing proprietary data publicly as it considers tax changes tied to the "Supporting a Gas Line for Alaskans" bill (referred to in the transcript as SB 280).

Fulford told the committee there are three items the panel should focus on: (1) creating a ring‑fenced disclosure process so legislative staff can audit project economics, (2) clarifying where gas supply and upstream contracts set the price that ultimately determines government take, and (3) understanding how LNG sells in world markets so the state can judge competitiveness. "The two core assumptions with that model are the capital cost of the project and the price of the gas," Fulford said, urging sensitivity analysis on both.

Why it matters: choices about the tax framework — a volumetric alternative value tax (AVT) at 55¢ per MCF in current drafts or a lower ad valorem/profit tax alternative (the transcript referenced a 6¢ ABT scenario) — interact with the upstream contract price to determine whether the project remains investable and how much revenue the state could collect. Committee members pressed that without better reconciliation between Department of Revenue modeling and sponsor commercial inputs, legislators risk settling tax policy without key fiscal sightlines.

Disclosure and auditing: Fulford recommended a small "clean team" of subject‑matter experts, potentially drawing on DOR, the Department of Natural Resources and Department of Law, with external facilitation. That team would audit assumptions and present sanitized results to the legislature so lawmakers can weigh tax options without exposing proprietary commercial negotiation positions. He said the DOR model could be an "excellent starting point" but stressed auditing assumptions (for example, depreciation methodology and cost of debt) is as important as checking the math.

Upstream vs midstream economics: Several senators warned that upstream producers can, through contract design and set prices, shift economic rent away from the midstream and potentially reduce state revenues. Vice Chair Sen. Wilikowski said the situation felt politically fraught, alleging the governor and project sponsor were aligned in ways that complicate legislative oversight. Fulford replied that how the gas price is indexed or net‑backed (for example, tolling arrangements versus percentage netbacks tied to an LNG sales price) strongly affects who captures value and that these indexing choices had not been fully discussed.

Competitiveness and price breakpoints: Fulford presented comparative calculations showing where Alaska could compete with Asian oil‑indexed LNG contracts and with U.S. Gulf Coast exports. Using recent contract indexation averages (~12.4–12.5% oil linkage) and the Department of Revenue base‑case inputs, Fulford said Alaska could deliver competitively at certain oil price levels and gas assumptions. He quantified thresholds: under the currently proposed AVT (55¢/MCF) Alaska could lose its Gulf Coast cost advantage if upstream gas rose above roughly $1.65 per MCF or if CapEx ran about 16.5% over the base case; under a 6¢ ABT scenario the project tolerates a higher upstream price (about $2.17) or larger CapEx overruns (~31%) and still remain comparable to Gulf Coast exports, according to Fulford's slides and explanations.

Market context and lenders: Senators asked whether recent global price spikes (cited in the hearing as driven by conflict in the Middle East) make the project more attractive to investors. Fulford acknowledged a cyclical surge in interest but emphasized LNG projects are multi‑decade decisions where short‑term price jumps do not guarantee long‑term financing, and lenders will require detailed, iterative due diligence before supporting a final investment decision.

Key quantitative points discussed publicly at the hearing: current AVT discussed in the session is 55¢ per MCF; an alternate ABT scenario discussed in Fulford's slides was 6¢ per MCF; DOR heat‑map modeling used a $1 upstream price in the materials Fulford referenced while producers have discussed $1.50 upstream pricing; a forward Henry Hub used in Gulf Coast comparisons was cited as $3.55 for 2030; Fulford's Gulf Coast-to-Asia landed‑cost example produced roughly $9.28 per MMBtu under the slide assumptions.

Committee reaction and next steps: lawmakers repeatedly urged faster, more transparent analysis before committing to tax changes this session. Senator Dunbar and others highlighted the sensitivity of outcomes to whether the upstream price is $1 or $1.50 per MCF and asked for reconciled numbers. No formal vote or motion was taken on the bill during the hearing. Fulford concluded that iterative progress, a managed alternative tax framework and a more transparent, ring‑fenced information flow would help resolve impasse points.

The committee adjourned at 10:11 a.m.; its next meeting was scheduled for May 8, 2026 at 3:30 p.m., at which time members planned to consider governor appointees to several boards and commissions.