Dunleavy sets June 19 deadline for LNG tax bill

Governor Mike Dunleavy set a June 19 deadline for the Alaska State Legislature to pass his LNG volumetric tax bill, saying the current property tax structure blocks the Alaska LNG Project and warning he will call lawmakers back into special session one hour after adjournment if they fail to act.

"Our current property tax structure is a major hurdle to moving forward, and we need to fix it," Dunleavy said in a June 5 statement. "The legislature has until June 19 to agree on a bill that will move the project forward."

Dunleavy transmitted SB 280 / HB 381 to the legislature in March and called a special session in May to prioritize tax relief for the project. The proposal would replace the existing oil and gas property tax with a volumetric tax of six cents per thousand cubic feet of gas transported through the pipeline, increasing by 1 percent annually at full operations. The Alaska Department of Revenue estimates the proposal would reduce property tax collections by roughly 90 percent compared to existing law, cutting revenue to the state and municipalities.

Under current Alaska law, the Alaska LNG Project would be exempt from state and municipal property taxes during construction. Dunleavy's bill would extend that relief after commercial operations begin, holding property tax in abeyance until throughput averages 1 billion cubic feet per day over 30 consecutive days or 10 years elapse, whichever comes first.

"This property tax is going to— on a $50 billion project, at $20 million, it's going to be about $1 billion a year that has to be paid to the state by investors even before gas flows," Dunleavy said in prior remarks. "So the key here, as the Secretary says, is get the gas flowing, solve those issues."

Adam Prestidge, representing the Alaska Gasline Development Corporation, told lawmakers that the six-cent rate underpins the project timeline and cost assumptions. "When we viewed the governor's bill with the 6 cents per MCF on the pipeline, we viewed that as fair in terms of industry comparisons to other projects, probably a little bit higher than what some of our competing projects pay to export LNG out of Canada," Prestidge said. "A significant change from that would require significant reexamination of how we take the project forward."

Dunleavy has said he will call a special session immediately if the legislature does not pass the bill. "Immediate. It is 1 hour after. You cannot do it any later than 1 hour after adjournment. There will be a special session," he said at a prior conference.

If commercial operations for Alaska LNG have not begun by January 1, 2040, the proposed alternative tax structure would terminate and the standard oil and gas property tax would be restored.