Alaska Legislature: Senate Finance - June 10, 2026 1:30pm

Call Senate Finance Committee to order.

It is a couple— 1:33 in the afternoon on June 10th. Present today: Senator Olson, Senator Keehl, Senator Merrick is online, Senator Kaufman, myself, Senator Hoffman. We have a quorum to conduct business. We have two items on today's agenda. First, we're going to be hearing from invited testimony from the Kenai Peninsula Borough.

Mr. Peter Machicki, please come forward, identify yourself, and enlighten the committee.

Thank you, Mr. Chairman. I appreciate the invite today. Good afternoon, Senators. Been a while since I've been in this room.

I wanted to paint a little picture of our community and its relationship to this project. Kenai Peninsula Oil and Gas began with the discovery of Swanson River in '57, which had a lot to do with our statehood. By the '70s, the area was producing approximately 250,000 barrels a day of oil oil peaked in the mid-'70s and production has declined since. But the extra natural gas, because we have a tiny little market, resulted in additional offshoots. Late '60s brought Title 29 property tax facilities such as the Desoro Refinery, which is now Marathon, Collier's Ammonia Urea Facility, which is now Nutrien,, and the Phillips Petroleum Kenai LNG facility, now Harvest, in the facility I operated for nearly 4 decades.

The long-term, commercially successful international liquefied natural gas industry was essentially invented on the Kenai Peninsula with the optimized cascade system. The peninsula is very proud of that fact. I recently opened a Glenfarm AGDC investor event in Kenai where I shared late '60s historic photos of the agreements signed with Japanese buyers. And construction photos from that time, as well as all the vessels that went through the facility from 1969 until the Excel in 2015. Kenai supports the industry and is ready, willing, and capable to support future long-term operations.

We actually hold an annual Community Industry Appreciation Day in August, and our annual Soldotna Progress Day celebrates the arrival of natural gas to homes in the Central Peninsula 65 years ago. Through all that history and a mix of onshore large facility Title 29 and offshore and pipeline infrastructure 4356 property taxes, no one's ever discussed— began the discussion with a 90% reduction. That's okay. Things change, and every commercial situation has very different tax economic challenges. However, two things we ask you to consider.

There's a purpose for property taxes and there's a definition of subsidy. Property taxes is the sharing of municipal costs to every user that enjoys those services. And subsidy is when someone has to pay for someone else's decision. So our primary reason for being here today is to kind of discuss what we're facing. We have the lowest mill rate of any other 4356 community at approximately 9 mills.

More are double or more of our mill rate. We have a history of supporting facilities. We negotiate with them. The AVT is an interesting conversation because we work with facilities when they have closed down to keep their holding cost at a minimum. Why?

Because we want them to remain in service or be available to come back into service. Which is a possible situation here with nutrient and ammonia production. Um, we enjoy revenue at their peaks and we work with them when things are tough for them, so we share in the burden and the risk. Um, we also want to keep those facilities from being reduced to gravel for future uses. Again, back to the AK LNG project we're discussing today.

You've heard about what they pay in Texas or wherever, but few discussions I've heard are apples-to-apples comparisons to the total take. I'm not here to talk about that. I'm here to fight for enough. Not for a lot, but for enough. I placed my hand on the Bible for 62,000 souls that call the Kenai home and to ensure that we receive enough so that senior citizens and families from Nikiski are not covering the cost or subsidizing a giant global project.

I— when in 2012 and '14 AGDC started buying up properties in the area of the project, they've got about two-thirds of the acreage that they need. They've got about 600 acres. They purchased 151 parcels. And I'm just going to talk about a woman named Janice whose husband built their house, their home, in the '60s. They raised their children there.

Her home was bought out. I helped with some of the negotiations. They didn't start well, they ended just fine. And she's very happily relocated after a major adjustment in a senior center in Nokiski. We can adjust.

We will adjust to changes. But I do want to talk about the changes. 42.7% Of the value of this project will be located in the Kenai Peninsula Borough. 900 Acres, 3 liquefaction trains, 2 240,000 cubic meter storage tanks, terminal facilities, 2 berths in Cook Inlet, moving up to 2.5 BCF a day, which means a ship or 2 will always be present. This project will nearly double the population in Akiski for 4 years during construction.

It is nearly 9 times the footprint and 13 times the production capacity of similar projects the small community has experienced in the past. It's a large project. It will require the relocation of our highway since two-thirds of the facility footprint is located on the east side of the highway, one-third on the west side of the highway, the inlet side. We're not exactly sure where the highway will have its final location, but we do know that it will bisect Nokiski from the remainder of the peninsula. While we contribute to and absorb the cost, reconnecting subdivisions in the area, and we're supportive.

We're ready and capable to support the challenge as partners with taxpayers that require the respect to not be left holding the bag. We've worked through the Northern Economic Study. I'm sure you've seen the impact study. It's— I've written some of these resource documents for FERC permitting in the past. We understand the costs.

Um, we've collected the data on approximate cost for solid waste, general government, education, roads, fire, EMS, hospitals, recreation, regulatory, municipal tasks that are requirement of AKLNG's 49 CFR Part 192 and 193 permitting, um, U.S. Coast Guard Marine Terminal Response Plans. We know there will be capital cost training like fire and EMS equipment upgrades. We know what we know, but we need some room to deal with what we don't know about this important project and the associated costs. We're also excited about the potential for Nutrien and other offshoots into industries that will occur aside from the pure LNG and natural gas play regarding the economics of this project. Peripheral ammonia production is important as a feedstock for hydrogen for 45Q credits in addition to the planned gas treatment plant 45 I'm sorry, 45V for the planned gas treatment, 45Q carbon credits.

It means more potential, more jobs, and the only chance for a successful project that delivers relatively affordable gas to Alaskans. We're all in on this project on the Kenai. I've been involved with former iterations of the project during both my former employment with ConocoPhillips and sitting beside you in these chairs. I do believe the current momentum could actually arrive at a successful project. We need the gas, and for goodness' sakes, we all know we need the commerce.

We always knew that property tax discussions had to occur. Wish they'd started earlier. They didn't. That's water under the bridge. But the original governor's bill left us woefully short on the Kenai.

Too short. Taxpayers I answer to would have absolutely been left holding the bag at some level, when any level is unacceptable and unaffordable. Next door neighbors and all Nokiski taxpayers pay approximately 9 mills for their homes and businesses as partners and contributors to KPB services. The LNG liquefaction facility and marine terminal is expected to cost between $23.6 and $28.4 billion. At 9 mills, AKLNG would be paying between $212 and $215 million annually.

At the 12 cents plus the community impact fund in the House version, the project will be paying in the low to mid-30% range of all other Nikiski taxpayers. Approximately a 70% reduction. That's okay. 90% Was too much. 70 Is in the ballpark.

As partners in the industry willing to support gas and much-needed commerce for Alaskans, we can make that work. I can look my constituents in the eye and explain with a high level of confidence that it will cover our costs in spite of the inevitable surprises we will find going forward. If there's a little left beyond that, perhaps over time we can afford to repair some schools, reconnect, repair, and pave a few roads, afford a new cell at the landfill, which will increase by approximately 12% because of this project, and help rebuild a community. Perhaps one day we'll be able to help solve affordable housing and energy issues and connect the 35% of the Kenai Peninsula that yet have natural gas today in 2026. The Kiski is a tiny community at the north end of the Kenai Peninsula.

As noted by Northern Economic Study, we're by far the most proportionally affected community on the project and the only community that will be living with this giant active facility in a small town and on our coast for the next half century. We're thrilled. With the right partnership, adequate taxation that amounts to enough, and quality operating entity at the helm, Much like I experienced through my career, new generations will build their lives from the opportunities provided in many diversified careers directly and indirectly through AKLNG. The key to that sentence is adequate taxation, not excessive, but adequate to cover our costs. We do not have our hands out to get rich.

Our hands are ready to go to work through a partnership with a reasonable entity that has demonstrated willingness to accept our reasonable terms and not further stress the economy of our community. I currently have the statutory right under Title 29 to negotiate a deal. If you take that right away, please make sure you protect our community from harm.

Don't— you don't have to make us wealthy, but you must keep us whole. You have the choice in your hands between Alaskans like the folks on the Kenai holding the bag for 2 generations or enough in local taxes to provide for a healthy 30-plus-year partnership absent of local taxpayer subsidies. Thank you for the invitation to testify and for caring about finding the right balance that supports this project and actually helps Alaskans. Thank you, Mr. Mayor. Do members of the Senate Finance Committee have questions of Mayor Machickie?

Senator Kiel. Thank you, Mr. Chairman and Mr. Mayor. It's hard not to call him Mr. President. Mr. Mayor, appreciated your comments. Can you talk to us about the interaction of the borough's other major revenue source, your sales tax, and how that will interact with this project should the export project come to pass?

It's very hard to say. So we have a dedicated education tax since we became a borough, and that dedication— dedicated education tax is our 3% borough sales tax. It's very difficult, and it's been difficult from the studies to determine, just like the amount of jobs. We know that there's going to be mid-200 jobs at the facility. Used to be double that at the other facilities, but through automation and the way facilities are constructed today and operate today.

It's a much lower job count. We don't know what the offshoot employment is going to look like, and because of that, it's hard to say. Are we going to grow our economy like we did in the late '60s? Because if you see a trend— and I purposely didn't do a presentation. I started putting one together and it had that trend, and you watch when the plants came in that you had a substantial bump We built several subdivisions that are still around today.

The companies built some of the housing. That housing stuck around for decades. I think I sold the last ConocoPhillips house in like 2014 or something like that. It's hard to say. So I really don't have a good answer for you.

I mean, that's part of what we need to learn. Is there going to be enough funding from the— other revenue sources to cover the costs of schools, um, and other issues. What we know is, um, through the shift in taxation because of the foundation funding formula, that our local contribution grows every year. Thank you for passing a bill that slowed that growth, limited it to 4%. Um, I think we're at about 8% of a shift last year.

So sales tax does not even come close to covering that cost, nor school bond debt, nor capital for repairs and maintenance. So be hard to say if we can shift more property taxes to the other school responsibilities and if there will be substantial growth in sales tax to cover the cost of the classroom, if you will. Senator Kiel. Well, thank you, Mr. Chairman. Just, you know, it's that interesting dilemma during the boom, presumable of initial construction, presumably there will be a lot of folks spending money.

But then once it levels out, I think you're, you know, I don't know if your 200-job estimate is spot on or close, but it certainly has some connection to the broader community as we I appreciate what you said about enough. As we try and figure that out, it's worth looking at. Thank you. If I may, Mr. Chairman. Mr. Mayor.

Senator Keele, what we don't know is if Agrium fires up, that's an old plant that had hundreds of employees. We'd like to see that occur. It's going to be largely dependent on the price of feedstock, natural gas., that's available to that facility. That doesn't require a Phase 2. Um, we're all very hopeful that a Phase 2 FID is announced almost immediately if a Phase 1 is announced because of the delta between what Alaskans will be paying for gas as well as the potential other industries that might arise out of that availability, the commerce that could occur.

So those are all questions that we can't answer at this point, but other facilities could return to operation and that job count would actually be a plus. So we lost the hundreds we lost there when the LNG, the facility I operated, shut down. With AK LNG, if the others should come back, we could at least get back to where we were. And we all, as the rest of you are experiencing, we have housing shortages just like everyone else. The borough's willing to invest.

We have substantial land in the area. We'd be willing to invest and support growth of additional housing. Our goal was always that we were partners with the project. When there are thousands of people living in a camp, that perhaps that could be the precursor to establishing new housing as well. Those discussions are still taking place and we'll see what that looks like as the project goes forward, if the project goes forward.

Further questions? Senator Kaufman. Just more of a comment maybe, but it might open some conversation. You were talking about the staffing levels and, and indeed, in the years since you and I started in hydrocarbons upstream downstream stuff, The construction processes have changed from stick-built, in other words, building pieces and parts right on site, to much more of a modularized approach. SeaLift modules modularized.

It's always been a thing in Alaska, but more than ever. So that reduces the workforce on the ground with whatever fiscal impacts that that has. There's maybe revenue you get or don't get, or expenses you don't have depending on that. And then I think the same thing goes for operations. Increasingly facilities are automated and whereas you might have had manual valves, you have automated control valves and DCS or digital control systems that are handling.

So the footprint of building and then operating these plants is a bit different than it's been. Maybe there is a challenge to get a good comparison. I just wanted to mention that. I appreciate that, Mr. Chairman. There is a— we started with pneumatics.

Maybe you didn't. I don't know if we are exactly the same age or not, but I started with pneumatics, which was labor intensive and took a lot of bodies. During construction, there is an enormous amount of civil work that will require a lot of employees. There is no doubt that the thousands of employees will be necessary. Again, depending on the price of feedstock and fuel, those older plants possibly firing up would be sort of a blend, a hybrid between modern control systems and labor-intensive operation, which would be a welcome addition to the area as well.

Not that we don't value the jobs that will occur, and there will be other businesses. There will be service providers, there will be contractors, there will be people on site. Companies don't employ as many now, but that means an army of contractors is necessary. I would assume there will be new buildings, new providers of parts and services, sort of like the old days on the Kenai, and that's a welcomed addition. I don't see Cook Inlet gas dropping off for a while, depending on the price of the competitive North Slope gas that comes into the area.

So that industry staying alive for a decade would be— or more— would be a welcome addition if we didn't just shift jobs from the inlet to onshore facilities and we were actually adding positions It would be welcome growth to the Kenai. Further questions? Thank you, Mr. Mayor, for coming down here and presenting in person. Thank you. Before we move on, I would like to say there's been some discussion regarding the North Slope.

They were invited, but we have not been able to solidify time as of yet. Just wanted to put that on the record. That brings us to the second item. We have a presentation on the fiscal analysis of Senate Bill 2001. We have Alexi Painter and Connor Bell.

Please come forward and give us the presentation.

Thank you, Mr. Chairman. For the record, Alexi Painter. I'm the Director of the Legislative Finance Division, and Connor Bell will assist me if I get lost. So before we get into the meat of the presentation, we were asked to provide this slide with some conversions because there have been a lot of different figures for how to count gas, and so this is an attempt to put that in one place and have a handy reference sheet. So generally, the Department of Revenue's modeling shows natural gas prices based on mcf, which is 1,000 cubic feet, m for 1,000 in this case.

And when you're converting a measure of heat, the British thermal units, 1 million British thermal units is about 0.963 mcf. So pretty close, but not quite exact. And then sometimes you'll see bcf, that's a billion cubic feet, or, you know, 1 million 1,000, right? So you'll see just that conversion. And then in terms of heat— of energy content, 1 barrel of oil is about 6 MCF equivalent.

And so, natural gas in its gaseous state is often measured in volume like MCF, but LNG is often measured by weight. So, million tons, tons spelled that way is for metric ton. So 1 megaton of LNG is equivalent to 48 million MCF, or 48 billion cubic feet of natural gas. ATDC then often uses daily amounts for gas— just natural gas— with an annual amounts for LNG. So you'll see both things.

The LNG facility is planned to process 20 million tons per annum, which is about 2.6 billion cubic feet per day. So hopefully that's helpful to have that in one place. Obviously not a lot of content that makes sense at the moment. Okay, so the purpose of this presentation is to provide a fiscally focused sectional analysis of the bill. So we're not going to cover the non-fiscal sections having to do with AGDC's powers and things like that.

And we only have simple tax calculations. We don't have detailed modeling other than a slide that has some data from Department of Revenue from their modeling. So we're not doing our own modeling. We're going to cover Sections 2, 3, 16 through 19, 22, 25, and 26, and skip over the rest of the bill that is not purely fiscal sections. So the hope is that we can help bring some clarity to how these sections operate.

So starting with Section 2. This deals with the required local contribution. It exempts property subject to the alternative volumetric tax, or AVT, from the required local contribution for K-12, or RLC. Alaska statutes currently provide the municipalities must contribute the lesser of 2.65 mills of real and personal property or 45% of prior year basic need to schools.. And this section exempts all the property that's getting the AVT or the moratorium— tax moratorium before the AVT kicks in from that required local contribution.

There's nothing in this bill that incorporates the AVT into the required local contribution. So the communities will be getting added revenue from the AVT as sort of a property tax replacement., but there's nothing that brings that into the RLC format, uh, formula. And we see this in some areas where there's payments in lieu of taxes, in other cases where there's not necessarily brought into the RLC. So it's not an unprecedented situation, although it is a larger amount. So this provision affects the Denali Borough, Mat-Su Borough, Fairbanks North Star Borough to a very small extent, Kenai Peninsula Borough.

The North Slope Borough that will receive AVT revenue already hits 45% cap. So this essentially has no impact on them. There's others that hit the cap, but they, they don't receive any revenue from the ABT. And in addition, House Bill 28 that the mayor referred to caps the growth of the required local contribution of 4% per year. If that bill is signed, then even if you didn't have this exemption from the required local contribution, it would take a very, very long time to phase in that revenue because it could only grow 4% per year.

So the added amount on top of the natural growth in the property tax would be pretty small. So the impact in this section is perhaps a little less than it appears, assuming that House Bill 28 is enacted.

Please proceed. Okay, so Sections 3, 16, and 17 are all various exclusions from the property tax itself and from the property tax calculations. So Section 3 excludes the property subject to the AVT from the calculation of property tax caps. There's a section in statute that says that municipalities can't just tax infinite amounts. They have, they have a formula for how much they're able to do.

That's why you see, for example, the North Slope Borough has a property tax rate of 17.99 mills. That's because their cap is they can't exceed, they can't go to 18 mills. So they're right under that cap. And it says that the property subject to the AVT is not really included in how this is calculated, which is kind of a conforming change. Section 16 exempts property subject to the abatement and AVT from the existing 20 mil oil and gas property tax.

And then Section 17 conforms the definition of taxable property to exclude projects that are subject to the abatement and AVT. Questions on slide 5? Seeing none, please proceed. Okay. Getting into more of the heart of the bill, Section 18, which is the temporary tax abatement and the AVT.

So it creates Chapter 59 in Title 43. And so the next few slides will use references within Section 18 because that's a very substantive section. So the new Chapter 4359.010 provides a tax abatement, so no taxes at all until the earlier of 500 MCF of daily average throughput for a 30-day period or 5 years after the commencement of commercial operations. So there's no tax at all until one of those two things is triggered and then it switches to the AVT. And this only applies— so the abatement itself only applies if the project's plans include a spur line that serves the city of Fairbanks and Fairbanks North Slope Borough as determined by DOR.

So in order to get the abatement in Senate Bill 2001, the project has to have plans that include a spur line. And then if the construction on Phase 1 of this pipeline— of this project has not begun by January 1st '32, then the AVT and the abatement is terminated. So they have until the beginning of 2032 to actually get this started for any of this to take effect.

Questions on slide number 6? Seeing none, Mr. Painter. So going on to slide 7. So the next part, 4359.020, imposes the actual AVT And it subjects that to the same requirement as the preceding section for the Fairbanks Spur Line. So again, not that Fairbanks Spur Line has been built, but that there are plans that incorporate it.

The rate for the AVT is a blend of multiple rates, weighted by the capital expenditure weight of each category. So there's a 6 cents per MCF rate for the pipeline component. That's Phase 1. And then there is a 12-cent per MCF rate for the gas treatment plant and carbon capture facility component, which is part of Phase 2, and then a 12-cent per MCF tax component for the LNG plant. And then we'll see some sample calculations of how that works, but essentially the— this— each of these rates will be weighted by the capital expenditures of the relative amounts to come up with a blended tax rate $0.02 for each MCF of gas that flows through the line.

The tax rate grows theoretically with CPI each year, but it can't grow less than 1% or more than 2%. So very narrowly bounded within that after that first initial year. And the payments are made monthly like the oil and gas production tax, not annually like the existing property tax.

So just to make sure I understand all 3 moving pieces in the, in the AVT. For ease of imagination, let's call it a $70 billion project. 10 For the treatment, 20 for the pipe, and 40 for LNG, just for illustration. So about 3.9 billion cubic feet a day— for a full project, going to go through the gas treatment plant on the slope. But over the course of getting to sales, I think I heard that we're looking at 2.9 comes out into an LNG tanker.

So the way this is written, if I've got it right, you do a proportion of 3.9 billion cubic feet 3.9 cubic feet times 6 cents, and then you take— or excuse me, 12 cents for the gas treatment plant. 3.9 Times 12 cents for gas treatment. And then you take a seventh of that, because the gas treatment plant costs a seventh of the total, and that's what goes— is paid in alternate tax for the gas treatment plant. Do I have that about right? Through the Chair, Senator Kyl, it might help if I go through the next slide that goes through some sample calculations.

Calculations. Thanks. Just try to get through this. I agree, it's very confusing. Um, okay, so we're going to use for these sample calculations, we'll use the Glenfarns high-end cost estimate, which is the $54.5 billion total.

And that says that Phase 1, that pipeline component, is $16.9 billion, the LNG portion is $28.4 billion, and then the gas treatment plant is $9.2 billion. So Phase 1, in-state use only, right, is all taxed at $0.06 because there's only that one component, the one $0.06 component. When you move to Phase 2, different types of gas will be taxed differently because they'll go through different portions of the pipeline. Each MCF will be taxed based on what it— where it goes through. So in-state use would go through— and this is my understanding of the bill, and if any of this is incorrect, then maybe the developer could help, but My understanding is that for in-state use, it'll— the gas will go through the gas treatment plant, it'll go through the pipeline, but it won't go through the LNG facility.

And so for that gas, the in-state gas, the tax calculation would be $0.06 times the $16.9 billion plus $0.12 times the $9.2 billion divided by the combined cost of the components of those portions. That works out to about $0.08 per MCF. As a combined rate. For out-of-state gas, the export component, we add in the LNG plant. So in addition to the two things we had above, now we have 12 cents times $28.4 billion divided now by the total project cost of the $54.5.

That gets us to about 10 cents per MCF, a little bit higher. And so the different types of gas, each MCF is taxed at an appropriate rate. So you can, to turn this into an actual calculation of revenue, you would take the throughput for where it's going times the tax rate times 365 days. And that's what we'll do on the next slide, if I can walk through one more slide before we hopefully get to your question. Okay, so again, using the Hive project case, And then just using— to try to have round numbers, 500,000 MCF per day in-state and then 25— 2.5 million MCF per day for export.

So for that, you would take— for the in-state, the revenue amount would be 6 cents times 500,000 times 365. That gets you $11 million per year. And then, uh, to try to turn that into a mill rate with a $16.9 billion project cost, that's a property tax rate about 0.65 mills, something like that. For Phase 2, your annual AVT revenue would be 8 cents times 500,000 times 365 plus 10 cents times 2.5 million times 365, and that's $107.3 million. And so that's roughly with that higher end cost estimate, that's a mill rate of about 1.97 mills.

And then if you would, if we were at the low end cost estimate, the mill rate equivalent is about 0.83 for the in-state for Phase 1 only and then 2.43 for the export component. So if we go back to Senator Keel's question, I think For calculating the tax, you can do it on each unit in the statute is one MCF. And so for each unit, it's either in-state or it's out-of-state. You don't have to create a blended rate of both, essentially. You can just kind of, for each MCF, it either goes in-state and has the 8 cents or it goes out-of-state and has the 10 cents.

Senator Keehl. Couple of questions, if I may, Mr. Chairman.

Slide 7 says 6 cents and 12 cents. This slide says 8 cents and 10 cents. Help, where did I get lost? Through the chair, Senator Keel. So when you are translating the 6 cents and 12 cents over the components, you come up with a combined rate for each MCF.

So the 6 cents and 12 cents that apply to in-state gas and Phase 2 comes up with a blend— a combined rate of 8 cents. And then for export, 6 cents and then 12 cents for the two components comes up with 10 cents as the blended rate. Thank you. I appreciate you trying to save a math step, but I'm trying to understand the proportionality that gets into that. So maybe Senator Kiel, maybe first question on slide 9 here.

For this hypothetical Phase 1 thing, where does the bill calculate the AVT, going into the pipe or coming out of the pipe? Because it's going to be burned at compressor stations along the way. Is that subject?

Through the Chair, Senator Kiel, my understanding of the bill is that it takes the entire project cost. Take just the project cost up to a certain point where the offtake occurs. Mr. Chairman, I asked the question inelegantly. Is gas that is burned, uh, for power to power the project itself, gas that is burned to run compressor stations that move it from the North Slope to its user, is that subject to the AVT, that gas? Through the chair, Senator Kyl, I'm not sure.

Senator Whitehouse. So, Mr. Chairman, I don't remember exactly the numbers as we did this part of the bill, but I think certainly at the full export project, it's a substantial portion of the gas that will be burned to power the project. It's not a bad thing. We just need to make sure we know whether it's taxable or not.

So that, I guess, is a key question for me on how the AVT works. It is a complexity there. Because it will be a big deal when we're trying to run, you know, 3-point-some-odd billion cubic feet in, but we're selling 2.6 or whatever that number is.

Let me pause there and see if I have— see if I can process. Thank you. Thank you. Further questions on slide number 10 or 9?

Please proceed, Mr. Painter. So going on to slide 10. So going further in this section, in Section 18, AB 4359-030 provides the municipalities will directly collect the tax for the portion of the project property that's located in that municipality, weighted again by the capital costs. And the next slide will show DOR's projection of what those are. So the state will collect the tax for the unorganized borough, and DOR will adopt regulations to determine how much the state and each municipality may levy by determining that project, the capital project weight.

The remainder of Section 18 is just administrative procedures and definitions. I don't think we need to get into that here, but it has quite a bit about that as well.

So slide 11, this is data from the Department of Revenue that they were kind enough to turn around very quickly, um, and I appreciate their quick response. So this shows using their base CAPEX scenario and then increasing it by 18% because that gets to the $54.5 billion total to match the Glenfarn High case. And then the table on the top shows the CAPEX expenditures attributable to each municipality, and then to the unorganized borough, that then drive the distribution of revenue, because the taxes collected by each municipality based— weighted on how much of the capital expenditures are in that municipality. The bottom table then shows the revenue summary of where that revenue goes. And so you can see that in the bottom table, revenue begins in FY '31 with just the in-state portion, and then going as the export begins, this higher number.

And you can see the— their projection that the total AVT— we'll use FY 2034 as an example because that's when you have the full project online for the full year. So the total AVT collection projected by DOR in that year is $124 million. The state would receive $15 million of that on behalf of the unorganized borough. The municipalities would receive $109 million of that. Most of that is going to the Kenai Peninsula Borough, $55 million, and the North Slope Borough, $40 million, because they have the most expensive amounts of the projects.

You can see that Fairbanks, it rounds to zero. They have pretty minimal capital costs in Fairbanks for the portion of the pipeline that would go through there. They would receive an amount, it just rounds, rounds down to zero. The Denali Borough would get $4 to $5 million, and then the Mat-Su Borough would get $8 to $10 million over these years for the portion of the pipeline that crosses through there. And so Department of Revenue had originally prepared this back for the original governor's bill.

We couldn't find this information for Senate Bill 2001, so we're hoping this is helpful to see where the money is actually going. Between the state municipalities under this bill. Questions on slide number 11? Please proceed. And one thing I noticed, these numbers do not tie to the simplified calculations because they're assuming a higher project volume and inflation.

So I was trying to— for the simple calculations, we have lower numbers because we're not including the higher project volume and the inflation.

Okay. So going on to Section 19, and this is out of tax and into budget things. So more in my comfort area. Section 19 creates the Alaska Liquified Natural Gas Project Mitigation Fund subject to appropriation. The legislature may appropriate up to $90 million of broadly undefined revenue received by the state of Alaska from an AK LNG natural gas project.

It doesn't define what that means. As we saw, very little of the actual AVT is going to the state, but we would get royalties from natural gas, we would get production tax, and this section doesn't really define how the state would come up with $90 million versus another figure, it's just subject to appropriation. And I would note that 20% of gas royalties from this project are already designated in statute for the Alaska Affordable Energy Fund. So there may be competing designations of these funds. We would probably consider this a UGF fund because it's not really specific about where the revenue is coming from.

So this fund is in addition to the direct collection of the AVT in Section 18. So the municipalities that are on the project path would receive— would collect direct property tax or not property tax, but AVT amounts. And this would go through the state from additional funds. And so it provides the funds would go to the boroughs we saw before, North Slope Borough, Fairbanks North Slope Borough, Denali Borough, plus the Municipality of Anchorage, and then Matsu Borough and Kenai Peninsula Borough. So Municipality of Anchorage is not directly on the project path, but because they're impacted, Section 19 gives revenue to them.

So Section 19 then says that if the amount appropriated into the fund is $30 million or less, then the distribution would be equal to all 6 boroughs. So at $30 million, it'd be $5 million to each. If it's between $30 and $60 million, they each get $5 million, plus anything above that amount would be equally distributed between the North Slope Borough and Kenai Peninsula Borough. If the amount is greater than $60 million, then those amounts plus proportional distributions based on population to all municipalities in the state and only municipalities, not like community assistance that also goes to unorganized amounts, it's just municipal governments other than any benefiting from a spur line. So initially Fairbanks would be included.

If there was a Fairbanks spur line down the road, then I guess they would no longer receive distributions under this section.

Questions on slide 12?

Seeing none. Okay, so getting to Section 22, which is community impact grants, and then 25 and 26 conditional effect. So Section 22 provides the legislature may appropriate $40 million received by the project sponsor to the Department of Commerce, Community and Economic Development for payment of community impact grants, quote, for imp— activities, services, or facilities that offset actual or expected effects of construction of a natural gas pipeline. The department has given pretty broad discretion on how to distribute the funds. It doesn't have a formula.

It just says that they'll take requests from the communities and then will prioritize the funds based on the needs of the community, the severity of the effects caused by the construction of the pipeline, and the correlation of the effect to the construction of the pipeline. So $40 million we get from the project sponsor— right now that'd be Glenfarm— give to Commerce to then give to communities based on, um, the perception of their need. Sections 25 and 26 of the bill make the property tax abatement and AVT sections of the bill conditional on a few items that the primary owner of the property subject to this and making commitments. So it doesn't say they have to do these things. It says they have to commit to, uh, 3 things.

One is paying $40 million for the community impact grants. Note it doesn't say they have to pay $40 million. It says they have to commit to paying $40 million. They have to commit to negotiating a project labor agreement, and they have to commit to construct a spur line. If they don't do those things, then those sections of the bill don't even become effective.

In addition, with the Fairbanks Spur Line, in order to actually receive the property tax abatement, they still have to— they have to remain committed to the spur line, I suppose. But for these— any of these to even take effect in law, they have to commit to doing all three of these things. So this is a one-time payment, but the construction is over up to 3 years, and I guess the boroughs are happy with that. I haven't heard any objection to a one-time payment. I know that there's been some modifications to the amounts in the other body, but this is a one-year transaction.

Mr. Chairman, yes. And I know I should have noted on the last slide with the last fund, those additional grants, those are— since they are based on revenue, during the abatement period, we wouldn't be receiving any revenue to be putting into that. So, you know, potentially we could be getting production tax or other things. We wouldn't be getting the AVT during that portion. But none of that would kick in until there's actually revenue coming from the project.

So the only thing that anybody's getting before the project is constructed is the $40 million. Existing statutes exempt property from an AK LNG line during construction from property tax. So that doesn't need to be done through this bill. That's already exempt. So it's just the $40 million upfront.

So if we go back to slide number 12, Any rough calculations of how much would be made available under different scenarios, the $90 million figure that you have for the energy fund? Mr. Chairman, we have not done calculations based on that. We could come back to the committee with calculations based on what that— for what that 20% would be based on the Department of Revenue's modeling. Any further questions that members of the Senate Finance Committee may have? Senator Keild and Senator Kaufman.

Mr. Chairman, just an observation. In those early years, even if the in-state line was kicking it just shy of $500,000 MCF a day, royalty and production tax should come to about $45 million. So I hope nobody is counting on greater than 60 going into a fund. Senator Kaufman. Thank you.

Again, a comment, I guess. So one of the challenges with the impacts are going to be front-end loading of some things need to be done before activities start significantly with respect to transportation. Et cetera. So I think that's an interesting element of the administration of impact that we have to consider. Thank you, Senator Kaufman.

Any further questions or comments regarding the presentation? Again, thank you, Mr. Painter. That concludes the work today. Brief edict.

Call to send the Finance Committee back to order.

With that, as I stated, that concludes the work of the Senate Finance Committee this afternoon. We have our next meeting scheduled for tomorrow morning at 9:00 a.m. We may not have one depending on what transpires, but it is scheduled in case it's needed. Anything else to come before the committee? Seeing none, we are adjourned.