HB 381 gas tax splits billions among boroughs, state across three phases

Boroughs and community assistance programs collect the bulk of Alaska LNG gas-tax revenue in the bill's early phases, while the state general fund receives one-half of the total tax after 2060. That shifting balance is the core of a comparison the Legislative Finance Division released on HB 381, contrasting the House-passed version with the current Senate committee substitute. The Senate version uses fixed tax-rate values where the House version weighted components by capital costs.

How the Phases Work

Phase 1 sets the tax at 6.2 cents per mcf. The North Slope Borough receives 6 percent off the top, reflecting its role as the site of the gas treatment plant. The remainder splits 47 percent to pipeline-mileage municipalities and 47 percent to community assistance. Tax rates grow annually with CPI, with a minimum 1 percent increase and a maximum of 3 percent, beginning when the tax takes effect. That trigger is defined as either five years after Phase 1 first gas or 500 mmcf per day throughput.

Phase 2 raises the rate to 10.6 cents per mcf, directing 48.4 percent to the Kenai Peninsula Borough, 27 percent to the North Slope Borough, 9.5 percent by pipeline mileage, 9.5 percent to community assistance, and 5.6 percent to the state general fund. Legislative Finance Division analyst Alexi Painter described those figures to the Senate Finance Committee as "the approximate result of the House version of this bill, just without the weighting."

Ten years after Phase 2 gas production begins, the rate doubles by adding another 10.6 cents per mcf, bringing the nominal total to 21.2 cents. The actual rate will be higher because the inflation factor has been compounding since Phase 1 first gas, subject to the 1 to 3 percent annual sideboards. After the doubling, half of the total tax continues to be distributed per the Phase 2 Box B formula and the other half goes through the Community Assistance formula already established in law.

In 2060, the total rate increases by an additional 21.2 cents per mcf, reaching a nominal 42.4 cents per mcf. The actual rate will again be higher due to accumulated inflation adjustments. The comparison notes this replaces what the House-passed version had set as a reversion to 20 mills on January 1, 2060. After that point, the total tax divides into three buckets: one-quarter through the Box B revenue split to boroughs and pipeline-mileage municipalities, one-quarter through the community assistance formula, and one-half to the state general fund. Revenue attributable specifically to the 2060 increase goes 100 percent to the general fund, while the rest continues to be distributed as before.