Hilcorp tells gas line caucus its tax opposition is not opposition to the pipeline

Hilcorp Alaska's senior vice president told the Alaska Gas Line Caucus on Thursday that a targeted income tax on his company would raise the cost of the gas sold into the proposed North Slope pipeline, and that opposing that tax is not the same as opposing the project.

"Recent headlines have suggested that our position at Hilcorp, that we oppose this targeted income tax on Hilcorp, is against gas line development. And that's simply not true," Luke Sargey said. He said a July 23 letter he sent to the Alaska State Legislature explains the company's position. Hilcorp operates Prudhoe Bay and Point Thomson, the fields expected to supply the project, and Sargey said the company is negotiating long-term pricing and supply agreements with Glenfarne. Uncertainty over the tax, he said, "makes it hard for us to get comfortable with what our position is going to be and enter into binding commercial agreements."

The Alaska State Legislature opened its third special session of the year on the gas line tax bill on July 29, with the deadlock centered on a pass-through entities corporate income tax that would reach privately owned oil and gas companies including Hilcorp. Gov. Mike Dunleavy has said he would veto versions of the bill carrying that expansion. The underlying measure would replace the state's 20-mill petroleum property tax on project property with a volumetric tax on gas moved through the line.

The supply picture framed much of the session. Enstar President John Sims said that if gas deliveries hold at their current rate, the utility will be 3 billion cubic feet short this coming winter, the equivalent of 18 days in midwinter when it could not serve any customers, and 1 billion cubic feet short, or about six days, if deliveries arrive as expected under normal weather. "It is urgent," he said, adding that neither a pipeline nor an LNG import terminal can be built in time for this winter. Matthew Kissinger of the Alaska Gasline Development Corporation said the current property tax structure would require the project to "kick out an extra billion dollars a year," which he said the project cannot carry, so "the pipeline just doesn't get built unless we get these barriers out of the way."

Other panelists urged caution. Kenai Peninsula Borough Mayor Peter Micciche said lawmakers should focus on interim supply and low-cost options, protect affected communities, and "don't panic," warning that early gas will be expensive. John Hendricks of HEX, which is drilling in Cook Inlet, said the state should keep investing in the basin rather than treat the pipeline as a replacement: "Don't walk away from Cook Inlet." Commissioner Kathy Muñoz of the Department of Labor and Workforce Development and Alaska Workforce Investment Board chair Patrick Rose said a new department analysis projects about 6,600 workers needed at peak Alaska LNG construction, and roughly 8,600 when other large projects are counted. Alicia Maltby of Associated Builders and Contractors urged lawmakers not to mandate a project labor agreement across the whole project.