AGDC tells House Finance that Alaska property tax is 10 times higher than competing LNG projects

Alaska Gasline Development Corporation officials told the House Finance Committee Wednesday that the state's property tax structure is the single largest obstacle to making the Alaska LNG project competitive with other global LNG developments.

Matt Kissinger, AGDC's commercial director, said the corporation commissioned Gas Strategies to compare Alaska's property tax framework with other jurisdictions. The analysis found that Alaska's statutory property tax would result in costs "a whole order of magnitude, so kind of 10 times higher than the next highest," Kissinger said. The next highest was Cove Point, Maryland, at about $50 million per year, followed by LNG Canada at around $27 million per year. Under current Alaska statute, the project could face property taxes "well over $800 million a year," he said.

The corporation has known property taxes were a major issue since at least 2020, when it conducted an economic stage-gate analysis. That analysis identified three major levers to improve project economics: federal loan guarantees, lower gas prices, and property tax restructuring.

Frank Richards, AGDC president, said the issue is particularly acute because the Alaska LNG project is a natural gas project rather than an oil project. "The margins are much smaller than an oil project," Richards said.

The committee heard the testimony as part of its review of House Bill 381, which would replace the existing assessed-value property tax with an alternative volumetric tax based on pipeline throughput. Current law levies a 20-mill annual property tax equal to 2% of assessed infrastructure value. A 2% tax on the project's last public cost estimate of $44 billion would yield about $880 million in annual property tax revenue. HB 381 would exempt the project from state and municipal property taxes during construction, hold property tax in abeyance during a ramp-up period, and then apply a volumetric tax beginning when commercial operations start. The bill summary projects total revenue from a $0.15 per mcf alternative volumetric tax would be about $10 million in 2029 after commercial operations begin, increasing to $196 million in 2033. The committee substitute says municipalities could partially or totally exempt, defer, or impose alternate tax rates on LNG-related property.

Representative Will Stapp questioned why the corporation waited until late March to bring property tax legislation to the legislature if three studies had identified it as a major issue. "Obviously here we are in special session given the time constraints," Stapp said. "And I'm just curious if you guys knew about this for so long, why wasn't at least a skeleton structure presented for us last year or year before or year before that?"

Richards acknowledged the timing was unfortunate. "Should we have been more proactive and more forceful in saying, 'You guys need to do this now'? In hindsight, that's probably the case," he said. He explained that the volumetric tax structure now before the legislature came out of discussions with the boroughs rather than from AGDC. Nicholas Fulford, an energy consultant who has worked on Alaska LNG issues since 2013, told the committee that alternatives to property tax have been debated for years, including work on a payment in lieu of tax under Governor Parnell's Municipal Advisory Gas Project Review Board.