House Resources gas line bill would cost municipalities $13B under governor's plan

The governor's version of House Bill 381 would cut Alaska municipal property tax revenue by more than $13 billion over the life of the Alaska LNG project, the Department of Revenue told the House Finance Committee on Thursday.

Municipalities would collect over $17 billion in cumulative revenue through 2062 under current law if the project proceeds. The governor's bill would replace property tax with a 6-cent-per-thousand-cubic-feet volumetric tax across the entire project.

The House Resources version before the committee applies the volumetric tax only to the pipeline. It retains property tax on the gas treatment plant and LNG facility. That structure would increase municipal revenue above current law levels, according to Department of Revenue modeling.

Dan Stickel, chief economist at the Department of Revenue, said municipalities could negotiate down the property tax on those facilities or replace it with a negotiated equity share under the House Resources version.

The North Slope Borough and Kenai Peninsula Borough would receive the largest shares under that version. The gas treatment plant sits in the North Slope Borough. The LNG facility would be located in the Kenai Peninsula Borough. Both facilities would remain subject to property tax unless the boroughs negotiate alternative arrangements.

The House Resources version includes a sunset provision in 2056. After that date, the volumetric tax would revert to current-law property tax.

The governor's companion bill, House Bill 2001, would allow the legislature to appropriate between zero and $90 million in community impact aid. That aid would come from state general funds, reducing the state's net revenue from the project.

Representative Andy Josephson, an Anchorage Democrat, questioned how municipalities would handle increased demand for services during construction and operation without the property tax revenue from the governor's version.

Stickel said he could not speak for the administration but would provide a follow-up response.

The House Resources version would generate $781 million in annual state revenue and $583 million in annual municipal revenue once full export operations begin in 2033, according to the department's modeling. That compares to about $1 billion in annual state revenue under current law.

Both versions would reduce state revenue compared to current law. The governor's version would cut cumulative state revenue by about $7 billion over the project's life. The House Resources version represents a smaller reduction.