Senate Finance demands Phase 1 pipeline math before Alaska LNG tax vote

Senator Bert Stedman pressed the Department of Revenue on Monday to produce standalone Phase 1 pipeline economics before the Alaska Senate Finance Committee acts on a proposed property tax break for the Alaska LNG project. The hearing is part of the special-session consideration of Governor Dunleavy's alternative tax framework for Alaska LNG. Under current law, property tax is not due during construction as long as AGDC is involved in the project. The bill would extend that exemption to effectively apply during Phase 1, then replace certain state and municipal property taxes with a temporary abatement period followed by an alternative volumetric tax. The abatement lasts for the first five years of commercial operations or until project throughput reaches 500 million cubic feet per day, whichever comes first. The tax framework is contingent on the developer meeting eligibility conditions, including a $40 million deposit into a municipal impact grant fund, a commitment to negotiate a project labor agreement, and a commitment to construct a Fairbanks spur line. That concession would delay state and municipal property-tax collections the department has estimated could reach roughly $750 million per year at full operations, providing relief to Alaska LNG developer Glenfarne in exchange for moving toward a final investment decision.

Stedman said the blended full-project numbers the department has been presenting obscure the central question: whether the tax concession is actually necessary to reach a final investment decision on the pipeline, or whether it goes further than needed. He also raised the possibility that Phase 2, the LNG export terminal, might never happen, making it essential to evaluate Phase 1 pipeline economics on their own terms.

"The issue at the table is the gas line," Stedman said. "What would be nice if we could see an analysis on the gas line itself and also the marginal impact of the change in property tax from the 20 mills to the 2 mills, which is basically what's on the table. And the delta dealing with financing, if it's 80% leverage, 70% leverage, different interest costs, looking at the cash flows just like we do when we get into the oil stuff."

Phase 1 Pipeline and Tax Timeline

Phase 1 of Alaska LNG is the 739-mile pipeline from the North Slope to Southcentral Alaska, structured as a financially independent phase separate from the LNG export terminal. Stedman also asked for the marginal impact of each additional mill of equivalent tax rate on project economics.

Department of Revenue Chief Economist Dan Stickel said the department had produced a Phase 1 analysis and would provide it for the version of the bill that passed out of the Alaska State House, along with a detailed model-assumptions document. He noted the constraint: "given the time and resource constraints with a special session that ends in 4 days, we have maintained our baseline model assumptions at this point." Stickel also told the committee that "each additional mil of equivalent mil rate on the full project would be equivalent to about 5 cents of AVT revenue."