Legislative lawyers flag constitutional risks in Alaska LNG clawback language

Three legal memos from the Alaska State Legislature's Division of Legal and Research Services warn that the Senate-passed version of HB 381 carries constitutional vulnerabilities that lawyers cannot fully assess because the AGDC-Glenfarne agreement remains confidential. The bill would replace the traditional state property tax on Alaska LNG pipeline infrastructure with an Alternative Volumetric Tax based on gas throughput. It also ties into school-funding formulas in ways that could shift costs onto Kenai Peninsula Borough taxpayers.

Chief Counsel Megan A. Wallace wrote July 1 that the bill's no-cost reversion mandate, language added on the Senate floor with the adoption of amendment S.14, may substantially impair a paid clawback provision in the AGDC-Glenfarne agreement. "It is difficult to fully analyze the potential claims, as the agreements at issue remain confidential and have not been made public," she said. She also flagged Takings Clause exposure, noting Alaska's constitution "must be interpreted generously in favor of the property owner and offers Alaska property owners broader protection than does the federal" constitution. AGDC testified June 26 that it would seek legislative approval or look for another developer if it wanted to exercise the paid clawback provision.

A separate memo from Legislative Counsel Ian E. Walsh concludes that allowing AGDC to spend project revenue without annual appropriation would likely violate Alaska's dedicated funds clause. A third memo, from Director Emily Nauman, concluded that the Senate bill's existing exemption language in section 29 is already sufficient to exempt natural gas project property from oil and gas property taxes under AS 43.56, and that adding a separate definition amendment would create an impermissible "stuffed definition."

The constitutional questions are not the only unresolved issue in conference. The Senate Finance Committee version of HB 381 would include roughly 13% of AVT revenues in the Required Local Contribution calculation used to set school-funding obligations, a change the House version does not make. The source memo notes that the timing of this RLC calculation is ambiguous. The Legislative Finance Division recommended that if the Senate Finance Committee version is adopted, the timing be explicitly specified to avoid ambiguity.

The Kenai Peninsula Borough faces the largest projected impact. Legislative Finance Division modeling shows its incremental RLC burden reaching about $9.4 million by fiscal year 2040 under the Senate Finance provisions. The Senate added an amendment on the floor sunsetting that RLC exposure five years after a Phase 2 final investment decision, but LFD modeled the sunset as effectively preventing any RLC from being paid on AVT at all, given the projected FID timeline.

Senator Jesse Bjorkman, who represents the northern and central Kenai Peninsula, argued on the Senate floor that the RLC language shifts costs onto local taxpayers who were not party to the original deal. "Because this eats away at that revenue, our local taxpayers now on the Kenai Peninsula are going to be asked to pay more taxes to cover those costs," he said. "That simply wasn't the deal."