Senate Finance hears $18 billion revenue trade-off for Alaska LNG tax break

The Alaska Senate Finance Committee heard Monday that a proposed tax break for the Alaska LNG project would reduce state and municipal revenues by $18 billion over the project's life, but the analysis rests on construction cost assumptions developed before the project's newest private partner joined.

Dan Stickel, chief economist for the Alaska Department of Revenue, told the committee his modeling assumes a $46.2 billion construction cost in 2026 dollars, a figure developed before Glenfarn became a partner. Senator Bert Stedman, co-chair of Senate Finance, said the uncertainty makes the revenue projections unreliable. "We're being told here at the table it may cost 45 billion or it may cost 90 billion," Stedman said. "It's not an acceptable answer."

What the numbers show

Stickel's analysis shows Senate Bill 2001 would replace property tax with an alternative volumetric tax, reducing total state revenues from $29.7 billion to $22.8 billion and municipal revenues from $17.3 billion to $6.2 billion over the project's 30-year operating life. The tax change would lower the delivered LNG price from $9.07 to $8.55 per thousand cubic feet in 2033, when the project reaches full capacity.

The volumetric tax structure sets rates at 6 cents per thousand cubic feet for gas flowing through the pipeline, and 12 cents for gas through the treatment plant and LNG facility. The project would also receive a temporary tax abatement until it reaches 500 million cubic feet per day of throughput or five years from commercial operations, whichever comes first.

Stickel said the committee version creates a smaller tax decrease than the governor's original bill because it keeps property tax on the treatment plant and LNG facility, subject to municipal election or negotiation. Section 19 creates a mitigation fund of up to $90 million per year for impacted municipalities and the state. Municipalities would still receive separate revenue from the alternative volumetric tax, estimated at $106 million once the project reaches full operations in 2033.

What happens next

Senate Finance will hear additional testimony from the Alaska Gasline Development Corporation on Thursday. The committee has previously heard from municipal officials opposing the tax break.