House Finance hears developers and staff on gas-line tax proposal, AVT raised to 15¢ in House Resources version

JUNEAU — Lawmakers spent the afternoon on an extended presentation and Q&A about House Bill 381, the Alaska gas-line bill, hearing developers and Department of Revenue advisers explain tax comparisons, project phases and community protections included in the House Resources' version of the proposal.

What was presented: Representatives from Glenfarn and its advisers — Adam Prestige (Glenfarn) and Mark Begich (Brownstein/Hill, project adviser) — and Frank Richards (president, Alaska Gasline Development Corporation) reviewed slides comparing Alaska's current oil-and-gas property tax regime with other jurisdictions. Richards said Alaska's property tax on oil-and-gas property is high relative to competing U.S. jurisdictions and that an alternative volumetric tax (AVT) could improve competitiveness.

House Resources changes summarized: Calvin Zullo, staff to the House Resources Committee, outlined how version A became version T: the AVT was raised from 6¢ to 15¢ per 1,000 cubic feet to better approximate replacement of roughly two mills of property tax (acknowledging uncertainties); the ramp-up period was removed so the AVT would apply at first gas; and the committee added a revenue distribution formula to allocate 50% proportional to pipeline mileage among corridor jurisdictions (and the unorganized borough) and 50% to a population-based community assistance fund distributed to all communities.

Treatment of specific facilities and municipal negotiation: Zullo said the gas treatment plant (GTP) and the Kenai LNG facility are excluded from the AVT and remain subject to municipal property tax to preserve the ability of boroughs to negotiate payment-in-lieu-of-tax (PILT)-style agreements. That carve-out is intended to let the Kenai and North Slope boroughs negotiate direct arrangements with the developer over local tax treatment.

Conditional triggers and community protections: Version T includes conditional-effect language: before most tax benefits take effect the project developer must (1) commit to construct a Fairbanks spur line before phase 2, (2) create a $40 million community impact fund to address construction impacts (25% of a community's construction impacts may be prepaid), and (3) negotiate project labor agreements with qualified Alaskan labor. Zullo said these elements were negotiated to secure community buy-in while preserving project financeability.

Key exchanges: Legislators asked about PILT precedents, whether municipal noncash equity would complicate financing, valuation of pipeline versus LNG/treatment components, workforce/labor agreement timing ahead of final investment decision (FID), and how federal tax credits (for example, 45Q or other federal incentives) might affect project financing. The developer and state advisers said PLAs and municipal negotiations are expected to be finalized before FID and that some components (pipeline, treatment plant, export facility) are valued differently for financing purposes.

What wasn't decided: No committee vote was taken on HB381. Several members requested more detailed comparisons and revenue modeling (including DOR and Gaffney & Klein work scheduled for a future session). Zullo said Department of Revenue and Gaffney Klein presentations will follow in subsequent meetings to provide more detailed revenue estimates and comparisons with competing jurisdictions.

Ending: Co Chair Foster set additional hearings and scheduled presentations from the Department of Revenue and Gaffney & Klein to follow. The committee adjourned at 4:55 p.m.