Alaska LNG tax bill ties $26.5B in revenue to volume, not value

The Alaska LNG tax bill would generate $22.5 billion in state revenue and $4 billion in local revenue by taxing gas volume rather than property value, the Alaska Department of Revenue told the Senate Finance Committee on Wednesday. The shift trades higher potential property tax revenue under current law for a fixed volumetric tax intended to reduce litigation and uncertainty.

SB 2001 proposes an Alternative Value Tax that eliminates the property valuation process and bases state and borough revenue solely on the volume of gas pumped through the pipeline. Under current law, the project would generate $750 million per year in property tax revenue once at full capacity in 2033, Dan Stickel of the Department of Revenue said. The Alternative Value Tax replaces that with a rate of six cents per thousand cubic feet for the pipeline and 12 cents for the treatment plant and LNG facility.

The bill continues a months-long debate over revenue trade-offs. Senate Finance heard testimony in January on an $18 billion revenue trade-off for the tax break, and the bill stalled in February as lawmakers demanded project cost data. Mayors opposed the bill over local revenue losses, citing concerns that municipalities would forfeit hundreds of millions in annual property tax under the volumetric structure.

"The core purpose of the legislation is to create a policy framework for replacing certain state and municipal property taxes with an alternative volumetric tax," Stickel said.

Glenfarne, the company developing the project, stated the project requires tax certainty to proceed. Without SB 2001 tax reform, the company said the project will not move forward.

The bill retains property tax for the treatment plant and LNG facility subject to municipal election, Stickel said. The Department of Revenue issued an indeterminate fiscal note, stating there is no certainty on whether the project proceeds with or without tax changes.