House Resources Committee advances Alaska LNG tax overhaul, adopts pipeline AVT and spur-line amendments

The House Resources Committee on May 6 voted to report House Bill 381, an overhaul of taxation for the Alaska LNG project, out of committee after adopting two substantive amendments that change how the proposal treats pipeline throughput tax, local property taxation and the timing of a Fairbanks spur line.

Amendment 28, offered by Co-chair Representative Freer and explained to the committee by Calvin Zullo, staff to Representative Freer, replaces multiple AVT rates across project components with a single alternative volumetric tax of 15¢ per 1,000 cubic feet (MCF) applied at first gas on the pipeline. Zullo told the committee: "Amendment 28 simplifies the AVT structure ... it's set at 15¢ per 1,000 cubic feet of pipeline throughput, and it's applied at first gas." The amendment removes a separate AVT on the LNG facility and the gas treatment plant, instead enabling those facilities to be taxed under municipal property tax or allowing the boroughs to take equity in lieu of property tax revenue.

The Department of Revenue and other witnesses told the committee the change will shift some tax incidence. David Herbert, commercial analyst for the Department of Revenue, said the amendment would reduce the total property tax the North Slope gas treatment plant would pay by about 10 percent in the project scenario discussed, "which under current property tax law would be about the equivalent of $24,000,000 per year," a figure he framed as illustrative of future assets rather than the current tax base.

Project sponsors and some members raised concerns about project finance and statutory mechanics. Adam Prestige of Glenfarn, the project sponsor, told lawmakers that Glenfarn "doesn't view Amendment 28 as ... a legislative option that does work for the project" and warned that breaking out taxes, issuing equity for tax relief and adding more negotiation points could make an already complex, generational project harder to finance and deliver. Matt Begich and other members flagged a statutory issue: moving the gas treatment plant out of Title 43 and into municipal property taxation under Title 29 could, without a legislative exemption, subject the property to a borough's single mill rate rather than allow a negotiated differential rate.

Legislative legal staff and counsel advised ways to address that concern. Emily Nauman of Legislative Legal Services said the phrase "begin construction" in the spur-line language is not defined in statute and would be interpreted by the commissioner of revenue; Andrew Dunmeyer (Legislative Legal) pointed to AS 29.45.050, including subsection (m) (municipal economic development exemptions), as an existing statutory avenue municipalities might use and recommended adding targeted exemption language if the committee intends to authorize special municipal treatment.

The committee adopted a conceptual fix to Amendment 28—adding language modeled on AS 29.45.050 to allow municipalities to adopt limited exemptions or deferrals by ordinance so they may negotiate variable treatment for project property—and then approved Amendment 28 as conceptually amended on a roll-call vote of 8 yeas and 1 nay.

On Amendment 29, sponsor Co-chair Divert described new language intended to make the Fairbanks spur-line commitment demonstrably achievable: rather than a fixed hard deadline, the amendment requires that, on or before completion of the pipeline phase identified in the bill (conceptually set at 730 miles for the record), the entity responsible for the spur line must in good faith begin permit applications and other necessary regulatory steps, and once all permits are issued and regulatory requirements satisfied, construction of the spur line must begin within one year. Emily Nauman advised that the commissioner of revenue would determine whether "begin construction" has occurred; proponents said the language balances commitment to Fairbanks with the practicalities of permitting and project sequencing.

Members debated litigation and force majeure risks, timing, and whether the spur could be built ahead of demand. Witnesses and sponsor representatives acknowledged those risks and said contractual details and future committee review could address them. After committee debate the conceptual change (changing 750 miles to 730 miles in the drafting) and Amendment 29 as conceptually amended were adopted in committee roll call.

Mary DeVries, mayor of the Matanuska-Susitna Borough, provided public testimony supporting the volumetric tax approach and urging protections for local revenue distribution and education funding; she noted her borough had adopted a supporting resolution and asked the committee to preserve the bill’s goals of statewide affordability while ensuring affected municipalities receive tax distributions.

Co-chairs and members closed by thanking staff, sponsors and stakeholders for extensive work on the bill. Co-chair Divert moved HB 381 as amended (work order 34-GH2038) from committee with attached fiscal notes and technical changes; after a roll-call vote the committee voted to report the bill out of committee by 8 yays to 1 nay. The bill will proceed to subsequent committees for further consideration.

What’s next: HB 381 is scheduled to continue through the legislative process; members said statutory refinements (notably clarified exemption language under Title 29 and finer contractual terms) and finance committee review remain necessary before final action.