Alaska House recesses 10 days as gas line conference committee begins

The Alaska House of Representatives sent HB 381, the tax framework for the proposed Alaska LNG gas line project, to a conference committee Monday after rejecting Senate amendments 12 to 28, then voting unanimously to recess until July 1.

Before the concurrence vote, the House passed HCR 301 by 40 to 0, a carryover resolution allowing HB 381 and the work done during the second special session to carry forward into the newly convened third special session. The Majority Leader said the resolution allowed the body to "carry the work forward into the next special session that we had done as a complete package rather than starting over from ground zero."

After the House failed to concur, the Speaker appointed a conference committee chaired by Representative Schragg, with Representative Edgeman and Representative Ruffridge, to meet with a like committee from the Senate. The House then passed HCR 302 by 40 to 0, authorizing the recess. The body is set to reconvene Wednesday, July 1, at 10:30 a.m.

What Is at Stake

The House rejected concurrence after the Majority Leader walked through major changes the Senate made to HB 381. The Senate version added school funding cushions for districts with sharp enrollment drops, repealed the existing in-state natural gas pipeline fund and replaced it with a single Alaska LNG Project Bond Fund, and required AGDC's board to conduct an annual asset review with an independent audit.

The Senate version also reversed bond approval rules. Where the House version allowed AGDC to issue bonds unless the legislature voted to stop it within 90 days, the Senate version requires the legislature to actively approve any bond issuance within 90 days. A new Alaska Affordable Heating Fuel Fund would set aside 20 percent of the state's royalty gas revenue to help lower heating costs in areas without direct pipeline access.

The alternative volumetric tax was redesigned to a single flat rate starting at 10.6 cents per 1,000 cubic feet when the LNG plant begins operations, doubling to 21.2 cents after ten years and again to 42.4 cents in 2060. The Senate version also removed the House's 2060 sunset on the tax break, making it permanent.

The Majority Leader singled out a pass-through entity income tax provision, inserted on the Senate floor, as particularly problematic. The provision would add a graduated income tax on pass-through entities that produce, transport, treat, store, or process oil or gas in Alaska, ranging from zero on income below $1 million up to 9.4 percent on income over $5 million. He argued it was "economically counterproductive at the moment the state is trying to attract final investment decision on Phase 1 and Phase 2 of the gas pipeline."

Johnson Puts Recess Terms on the Record

Minority Leader DeLena Johnson used the floor to put her concerns on the record. "What we don't want to happen is we do not want to take it up, gavel out, not come back for a month, and sometimes things like that have happened," Johnson said. "I just want to put on the record the conversation that I've had with you, Mr. Speaker, and what I understand the intention to be."

She described the plan as adjourning while the conference committee works: "the intention is to adjourn to, I think, around the 1st of July. With the intention that the conference committee will be meeting during that 10 days that we won't be in session, but they will have the opportunity to take things up, that people would be working in good faith and come to a resolution on this."

Johnson also flagged HB 3002, a second governor's bill introduced Monday relating to the elimination of income taxes on pass-through entities, and noted that HB 3001, a broader governor's bill covering natural gas project property taxation and related subjects, was referred to the Finance Committee the same day. The Speaker indicated HB 3001 was unlikely to be the vehicle going forward.

Johnson closed: "My hope and my goal and my conversation has been that there will be a good faith effort to pass legislation that will continue the conversations that we're having, and that this won't be an excuse to not be here."

The Speaker confirmed her account from the floor. The conference committee begins work during the recess, with the full House scheduled to return July 1.