Alaska Legislature: Conference Committee On HB 381, 7/2/26, 10:30am

Good morning. I call this meeting of the Conference Committee for House Bill 381 to order. The time is 10:46 AM on Thursday, July 2nd, 2026. Members present today, we have in the Senate Chair Hoffman, Senator Steadman, and Senator Cronk. In the House, Representative Edgeman, Representative Ruffridge, and myself, Chair Schraggy.

Today the conference committee will consider taking up a new committee substitute for House Bill 381 to use as our working document. With that, I move that the House Conference Committee adopt Work Draft 34-G HB 381, HB 2038/Q as the working document for HB 381 and ask for an objection for the purposes of an explanation of changes. Mr. Chairman, I object for purposes of discussion. Thank you, Senator Hoffman. The committee will now walk through the explanation of changes.

I'll note that all drafting decisions follow the conventions of limited free powers and that a legal memo from legislative legal is included in today's document. To confirm that all changes are within the scope of our conference committee powers. Additionally, I want to emphasize that this draft committee substitute is not a final decision on conferenceable items, and I look forward to continued conversations with all of you as we further work to refine HB 381. With that, I'd now like to invite Eric Gunderson, my chief of staff, and Pete Eklund, staff to Senator Hoffman, up to the table to walk us through the explanation of changes.

Gentlemen, when you're ready, please put yourselves on the record and begin with the explanation of changes.

Good morning, members of the conference.

Committee. For the record, this is Eric Anderson, staff to Chair Schraggy. Today I'll be providing a summary of changes for House Bill 381, work draft version Q. For the summary, I will be discussing changes made between version SA as passed on the Senate floor and version Q, which is the committee substitute. Up until this point, we've largely been using version S, which is the Senate Finance version S as the basis, but just in order to make clear that we're working within the bounds of limited free powers, going from version S.A. is more clear and straightforward.

Before I move on, I'd like to briefly mention the documents provided to members and the public for today.

For members is House Bill 381, version Q. This is the committee substitute before members. There's a version Q summary of changes. There's a version Q sectional analysis. This also notes which sections of the committee substitute and underlying bills are conferenceable and which version we, um, adjust from in this working draft.

There's also 4 legal memos regarding to the munici— There's also 4 legal memos, one regarding the municipal property tax exemption, one on the abandonment and clawback language added on the Senate floor, as well as AGDC appropriation powers. There's also an additional legal memo affirming that the CS is within the powers provided to the committee under limited free powers.

There's also a document outlining the taxes in House Bill 381. This is identical to what was provided to committee members in Senate Finance when version S was adopted. There's also a memo from Legislative Finance Division explaining the required local contribution provisions in HB 381. I will also note that we have Alexi Painter and Connor Bell with Legislative Finance, Emily Nauman and Megan Wallace with Legislative Legal, all available to answer questions. I'll move on to Section 1.

This is the legislative findings and intent. Um, the new language amends the language outlining the legislature's finding that the project labor agreement, also known as a PLA, and apprenticeship utilization requirements are necessary to advance the project. The work draft removes reference to prevailing wage. This aligns with changes in later in Section 37. This would be Section 36 in version S.A. Our understanding is that this was a component of the binding MOU signed earlier this— or last month and would be a standard component of the PLAs.

Moving to Section 2, this is AS 1417.410B. We amend subsection 2A to clarify the timing for calculating the required local contribution for alternative volumetric tax, also known as AVT, treatment collections, specifying that the calculation occurs during the second preceding fiscal year. This is also the most recently closed fiscal year, and this change was suggested by Legislative Legal. Moving on to Section 3. AS 14-17-410B, this section is removed.

This is language added on the Senate floor returning to the structure, and this returns to the structure in version, version S. The removed language would have sunset the required RLC for the AVT 5 years after the final investment decision, also known as FID, on Phase 2. Modeling from Director Payne Painter and the Department of Revenue indicated this sunset would have effectively prevented any RLC from being paid on the AVT. Moving to Section 11, this is—. Are we going to wait to the end to ask questions, or is that something we can do in, in between? Yeah, thank you for the question, Representative Ruffridge.

I intend to wait until the end, and then members can get their thoughts and questions on the table. Thank you. Please continue, Eric Anderson. Thank you, Chair Schraggy. Um, again, for the record, Eric Anderson, staff representative Schraggy.

Moving on to Section 11, um, this is Section 12 in version S.A. This covers AS3125090F. Um, the work draft removes language stating that a confidentiality agreement may not make information provided to other investors confidential. Um, it adds new subsection J7 specifying the non-confidential filings with the Federal Energy Regulatory Commission, also known as FERC, the U.S. Department of Energy, the Committee on Foreign Investment in the United States, known as CFIUS, or other public regulatory agencies with authority over the Alaska LNG Project may not be made confidential. This relates to the reporting requirements found later in the bill.

Also, if committee members have questions on what type of reports and filings would be covered under this, I'd be happy to follow up with supporting documents.

Moving on to Section 17, this is Section 18 in Version S.A., and this is AS3125. Section 3125.155 is amended by adding language limiting the project developer from seeking monetary reimbursements for any value added to the project based on the alternative tax structure, um, enacted in this bill. This replaces prior language prohibiting the lead party from seeking financial recourse or reimbursement for project failure or abandonment, as well as language requiring that if key milestones are not met All shares and assets must be transferred to the corporation or another department at no cost within 6 months of failed action or abatement. There's a legal memo dated July 1, 2026, addressed to Senator Hoffman, subject Recourse for Failure or Abandonment of the Project Provision, outlining some legal concerns with the language that was added on the floor, and this is included in members' packets.

Moving on to Section 19, which is Section 20 in version S.A. This is AS3125270. Um, the CS— or the work draft amends the biannual reporting requirements in subsection D to remove reference to budget cost containment and estimated payroll dollars. The amended language specifies that reporting on total capital expenditures for each major component is required only to the extent the state is, is an equity investor in the revenue-generating project. Adds new subsection D6 specifying non-confidential documents filed and approvals received since the last report in connection with the natural gas pipeline project, including filings with FERC under the Natural Gas Act, filings and approvals from the U.S. Department of Energy related to free trade and non-free trade export authorizations and notices or declarations filed with the U.S. Department of Energy for review by CFIUS shall be included in the biannual report.

And then subsection E, clarifying required information for the public dashboard. References to cost and financing are removed. References to construction procurement and material risk register are updated to risk mitigation actions undertaken, progress on construction, and procurement status. Um, this last portion is largely just a language cleanup for clarity.

We add new subsection I requiring the corporation to notify the President of the Senate, Speaker of the House, and Finance Committee chairs of both bodies upon commencement of construction of a gas pipeline.

Defines commencement of construction as laying and welding multiple sections of steel pipe in an excavated trench and establishing at least one work camp along the pipeline route for use during construction. And hopefully those members will share the notice because I know no one in the building wants to miss, uh, the first construction ceremony. Moving on to Section 20, Section 21 in version S.A. AS 3125. Uh, the work draft amends Section 3125-280 to expand prompt notice requirements to include situations in which an entity in a legal relationship with the corporation enters into a transaction requiring a notice or declaration to the U.S. Treasury for CFIUS review. This also requires inclusion of a copy of the notice or declaration and expands the list of officials receiving notice to include the governor.

It's also amend Section 3125.285 regarding legislative notification of ownership changes, specifying that notice must include the name of the new owner or otherwise describe the changes in ownership structure. Um, we go on to define significant change in ownership, which was in the previous version of the bill as a change resulting in an entity holding more than 5% ownership interest in the natural gas pipeline or 10% ownership interest in a gas treatment plant, also known as GTP, liquefied natural gas plant, or marine terminal. Moving on to Section 21, this is Section 22 in version S.A, AS3125390.

This is a technical change adding the previously used definition of project developer to AS3125390. In Section 23, this is also Section 24 in version S.A., under AS4205, we amend Section 435B, changing the consumer price index adjustment from Alaska CPI to to US CPI. This was a request from the project developer earlier in committee. CPI and adjusting the time frame to the first 5 of the previous 6 calendar years to conform with this change. This specifies that the inflation adjustment for gas supply contracts shall be made under the terms of the contract but may not exceed 3%.

There was previously language setting a 1% minimum adjustment for gas supply contract inflation adjustments, and the work draft removes that.

We also amend Section 4205.438 with conforming language. This is to maintain uniform definitions of project developer in Phase 1. In Section 24, also 25 in version S.A., this is AS AS 4320.019. This removes reference to 26 USC 1361 and replaces it with AS 4320.011. This is consistent with the Department of Revenue recommendations and current federal law.

In Section 29— this is Section 30 in version S.A. We amend Section 3509-020 to clarify when the alternative volumetric tax takes effect. Based on a Department of Revenue request for clarification, this clarifi— clarification makes clear when the annual inflation adjustment begins, which is the year after Phase 1 begins for both the 6.2 cents starting rate for Phase 1 and 10.6, um, for Phase 2. This also changes Alaska CPI to US CPI to conform with changes made in Section 24.

Um, moving on, we amend Section 4359.050 regarding termination of status of— if construction for Phase 1 has not been completed. This moves the deadline from December 31, 2032 to December 31st, 2034. This also allows the Commissioner of Revenue to reasonably extend deadlines due to a force majeure event. This is—. Includes an event, an event of war, riot, act of God, unusually severe weather, or other causes beyond the project owners or developers' reasonable ability to foresee or control, including operational failure of existing facilities or delays caused by judicial decisions or lack thereof, but not including changes in commercial or financial markets affecting natural gas or LNG prices.

There is also a conforming change in D1, maintaining the uniform definition of project developer. Moving to Section 30 and 32, both of these are conforming changes to maintain a uniform definition definition of project developer.

In Section 33, this is Section 34 in version S.A., this is under the uncodified law. The work draft amends subsection D, specifying that within 30 days of the corporation— within 30 days, the corporation shall notify the governor President of the Senate, Speaker of the House, and Finance Committee chairs of both houses of any notices qualifying under ownership change or foreign investment notice requirements that occurred before the effective date of these sections. In Section 36, um, this is also Section 37 in version S.A., modifies language added on the floor regarding the conditional effect language for PLAs Amended language clarifies that PLAs are between contractors and appropriate labor representatives, requires the project developer to require all contractors to enter into PLAs, and specifies that an in-state apprenticeship program must be a part of the PLA. Clarifies the timeline for PLAs, which is requiring that contractors have entered into a PLA for Phase 1 and signed a binding commitment to require PLAs for Phase 2. This is in order for the new tax structure to take effect and is part of the conditional language.

Um, under the conditional language section, we add new subsection 4, um, creating a condition that the tax for the structure to take effect, um, after FID on Phase 1, only if the state and applicable municipalities have been given at least 180 days to determine whether to exercise an equity option in the natural gas project. Um, there's also a technical and conforming change in subsection C2 to maintain a uniform definition of financial investment decision, and in C6 to maintain a uniform definition of project developer. There are also a number of other minor technical changes made by the drafters These are included in the summary of changes, but if the committee would like, I'd also be happy to briefly run through them.

If not, that concludes my overview of the summary of changes. Thank you, Mr. Gunderson. With that, questions and comments? Representative Ruffridge. Mr. Chairman—.

Oh, excuse me. Senator Hoffman. I remove my objection. All right. Is there further objection to adopting the work draft?

I'll object. All right, there's an objection from Representative Ruffridge. Representative Ruffridge, would you like to speak to your objection? Just a few questions, Mr. Chair.

First question I believe is found right away in sections 2 and 3 regarding required local contribution. So we were given the memo from Legislative Finance Advance, and it seems to indicate at the end, and I will just read, that the Senate added an amendment on the floor that sunset the RLC for the ABT 5 years after final investment decision on Phase 2 of the project. Functionally, this prevents RLC from being paid on ABT. There was no required local contribution found in the House bill. And so this says, with the assumed lag, this would mean no RLC is ever paid before the section is repealed, meaning that it may effectively match the House version.

I think the question I have as a result of this, uh, memorandum is the question of whether or not the sections that we're looking at here are actually conferenceable. That's my first question. If the Senate bill that was passed functionally did not have AVT apply to required local contribution and the House bill also was missing it, I believe the right action for the committee to take to have that— I think it might be a non-conferenceable section according to this. And so I'd like to ask either Emily Nauman or Alexi Painter for their input on both of those, if that's possible, Mr. Chair.

Absolutely, Representative Ruffridge. I think because they're effectively the same but not technically the same, it is conferenceable, and there is a memo that says that the changes made in this committee substitute are within our powers. But we do have legislative legal online, and let's go to them. Ms. Nowman or Ms. Wallace, are you available to address Representative Ruffridge's question?

Sure. This is Emily Naman. I'll go first. And Emily Naman, sorry, Legislative Services. I can start to answer that question, and Megan can add anything else additional that she sees fit.

She's the expert on the conference committee powers. But I will say that we did consider this change to be largely technical in that the previous language in the version that passed the Senate didn't specify the time period for making the calculations required in that section, and so the time period was added. Related to how that calculation works, I think you probably want to talk to Alexi. Megan, do you have anything to add?

This is Megan Wallace, Legislative Legal Services. I agree with the testimony from Ms. Nauman that the provisions with respect to to the local contribution are comprehensible and changes to those sections are permissible under the uniform rules.

Thank you. Follow-up, Mr. Chair? Representative Ruffridge, follow-up. Thank you.

So I'm not actually referencing the simple technical changes. I'm referencing the fact that the entirety of Section 3, which was the amendment on the Senate floor that essentially allowed the Senate floor version to match the House version, which was to effectively remove AVT from required local contribution, is entirely removed in this draft document before me.

I believe that that is the item that I'm saying is potentially an issue. Legislative Legal, I believe that would be a question for Ms. Wallace.

Sure, I can take that. This is Megan Wallace, Legislative Legal Services.

Um, in the section in which you're referring to does not appear in the House version, and the language, um, that would— is not in this draft is taking something out that was put in on the Senate floor. There's no— I guess I'm— you're not reverting to the language that was in the House version because what is in the bill before you is different than the language that was passed by the House. And so because this section is conferenceable in general, you can make changes to that section as the conference committee deems appropriate. And so, in my opinion, there is no issue with the changes that are proposed in this draft. Follow-up, if I may, Mr.

Chair. Follow-up, Representative Ruffridge. Thank you. So in effect, what you're saying is that even though the— even though— so Section 3 was not present in the House version, and that is because required local contribution and AVT were not linked in the House version at all, then the Senate version passed as an amendment on the Senate floor Section 3 to essentially do the exact same thing as the House, which was to have AVT not apply to required local contribution. So what— in effect, by taking out Section 3, you are saying that the Senate version did not allow AVT to be required to apply to required local contribution, and the House version did not require AVT to apply to local contribution, but now you're saying by the removal of Section 3 that AVT can apply to require local contribution, thereby making a substantive change in this conference committee to the effect of the bill on required local contribution.

And you think that that is appropriate? Chief Counsel Wallace.

Again, this is Megan Wallace, Legislative Legal Services. When we look at— the provisions which are subject to change by the conference committee, we look at the changes that were made in section by section in the bill. In the Senate's version, the Senate made changes to AS 14-17-410B in Section 2, and then also had certain changes in Section 3 which do not appear in this draft. In the House version, the House did not make the changes for which are appearing in Section 2, and the, the section— the changes to required local contribution, which were identical in both both the House version and the Senate version, which are changes made to Alaska Statute 14-17-510, are identical and non-conferenciable, remain in these versions. And so, yes, if the— the conference committee can make the changes proposed here because the changes to the conferenciable section are permissible under the uniform rules.

Irrespective of the impact, the substantive impact that those changes might have. Additional comments, Representative Ruffridge? Yeah, so what I hear you say in a nutshell is the effect of the language is irrelevant. It's just the fact that the language exists or doesn't exist. Ms. Wallace?

That's correct. Wow, alright. Thank you, Mr. Chair. I have further questions, but I'll defer to others.

Questions from other committee members or comments?

Mr. Chairman. Speaker Edgeman. Yeah, just to make a quick comment, if I might, while others are entertaining questions or further comments on the bill itself, but just to note that the changes before the conference committee are largely the product of working with Alaska Gas Line Development Corporation representatives. This is the sort of the intermediary, if you will, the state's representative in terms of working directly with the private developer. And you can certainly, you know, correct me if I'm mistaken, but most of what— again, it's before the conference committee— was worked with AGDC, was working with a representative from the Governor's office and also making technical conforming changes, if you will, working with Ledge Legal.

That's the essence of the product before us. Is that not basically correct? Thank you for that question, Speaker Edgeman. No, that is largely correct. As members will recall, at our opening conference committee meeting, we discussed that there was broad agreement with the Senate finance version of HB 381, which largely made technical changes to the work done in the House.

And then from there, in discussions with the administration and AGDC, as you referenced, we worked through the other changes made to the bill to try and find common ground and technical tweaks that would make some of those provisions better work for all those involved. And so what you see here today in terms of substantive changes are largely the byproduct of work with the administration and AGDC to better conform these to their needs and project viability. Additional comment, Mr. Speaker?

Thank you for that sort of further clarification on the comment I made, Mr. Chairman. And I want to state for myself as one of 6 conferees at the table here that the objective remains to get a workable product that the governor can agree with and ultimately can just take those initial steps to get this project underway. Thank you, Mr. Speaker. Additional questions or comments from committee members?

Representative Ruffridge. Thank you, Mr. Chair. On page 33, this is on line 24 of the work draft document, the redline version. It changes the proposed tax income on certain oil and gas pass-through entities from defining it via the IRS Code to just our own statute.

We—. The summary of changes sort of glosses over what that does, and I'm wondering if someone could explain that for me on the record. Mr. Gunderson. Sure, thank you for the question, Representative. Through the chair, for the record, Eric Gunderson, staff representative.

This was a recommendation made by the Department of Revenue during their presentation previously before the committee. The federal statute it references is outdated at this point and fledgling, and the department recommended referencing state statute instead of federal statute so we wouldn't have to go in and amend the language in there every time the federal law is changed. Understood, thank you. Follow-up, if I may? Yes, follow-up, Representative Ruffins.

Thank you. AS4320.011, which is the language adjusted on this in Section 24, references a completely different tax dollar structure.

Is that confusing?

Mr. Gunderson, and can you just reiterate, I believe this was suggested by the Department of Revenue. Is that what you had stated? Through the chair, um, yes, Chair Schrag, this was recommended by the Department of Revenue. I may defer that question to legal if they have any comments. Representative Rufford, would you like to hear from legislative legal on this one?

Yes, thank you. To the extent they can provide feedback, I'm guessing that's probably a question for Director Nowlin. Director Nowlin.

For the record, this is Emily Nowlin, Legislative Legal Services. This change was made in response to a suggestion by DLR. As Mr. Gunderson explained, we replaced a reference to federal law, which was stale, with a reference to state law, which we have. Has. We will know if it changes, so it won't, you know, become obsolete as federal law changes.

The section specifically, B1 there, refers to the way the income is apportioned to the state under the multistate tax compact, where amended for specific industries in state law. And the reference is really about treating these alternate entities like a C corporation for purposes of apportionment. So the language says, for the purpose of calculating taxable income under this section, the qualified entity— and I'm summarizing here— shall apportion their income in accordance with the multi-state tax compact as if the qualified entity were a C corporation taxable under 4320. So I don't think it's implied that the tax rates would be adopted in this section. It's is really pointing the department to treating the qualified entity as if it were a C corporation when it determines its apportionable income or its income that will be apportioned to the state for purposes of determining the amount of income subject to tax under this section.

Thank you. Follow-up, Mr. Chair? Does AS 4320.011 define a C corporation? Director Nelmen.

Through the Chair, again, Emily Nelmen, Legislative Legal Services. No, it does not, but corporation in itself is assumed to be a C corporation for purposes of our existing corporate income tax. So it, to me, is reasonable and rationally follows that we're having the department treat these alternate entities as if they were a C corporation for purposes of setting up the tax. Okay, follow-up again, Mr. Chair.

Representative Ruffridge. Previously, this section defined what a C corporation was by attaching it to IRS code, but now if we attach it to our statute, we lose the definition of a C corporation. And if we attach it to that statute, which is clearly defining the tax rate of entities under this section. How does that not cause confusion when we're trying to apply that from the Department of Revenue's perspective? Director Nelmen.

Through the Chair, again, this is Emily Nelmen, Legislative Legal Services.

I hear your concern. Confusion with this section. I guess, you know, that's a question for the Department of Revenue whether or not they see problems implementing this language as it's drafted. I believe, confusingly, the previous definition actually referenced the federal definition to S corporations, which was part of the issue that Department of Revenue flagged in their presentation.

I don't know I don't know really what else to say. This was my best effort at correcting the issue in a way that helps prevent our reference to federal law that could fail. But I, you know, I'm open to suggestions if you have any. Understood. Thank you.

Mr. Chair, is the Department of Revenue available? The Department of Revenue is not available today. Okay. Thank you, Mr.

Chair. Absolutely. Additional questions or comments? Representative Ruffridge. I'll defer to others for Other questions?

Other questions or comments from committee members? Senator Steadman? No, I'm ready to take action. All right, very good.

Representative Ruffridge, I believe you're the only one seeking additional comment. Excellent, thank you. So, thank you, Mr. Chair, in the new Section 20 where we talk about foreign investment transactions.

We add language in here that says that the corporation, and I believe that this is referencing AGDC, shall promptly provide written notice to the governor, the president of the Senate, a whole bunch of other folks, if an entity in a legal relationship with the corporation, that's new language.

This says— yeah, an entity in a legal relationship with the corporation enters into a transaction. Is this—. I believe is the FERC language that we referenced in the— and I'm wondering if there's clarification on what transactions would require a party to file notice under this Department of Treasury language that's here. If that is a large number of items, if that is— it seems a little vague.

Mr. Gunderson. Through the Chair, I do not have that information before me. At this time, but I'd be happy to follow up with committee members and provide a list of what that may entail. Thank you, Mr. Gunderson. Representative Ruffridge.

Thank you, Mr. Chair. And maybe this is a question for the committee at large. What is the purpose of providing notice in this case to— well, it would be us, the Finance Committee, and the governor about these transactions. If this is already publicly available information under the Department of Treasury for review, what is the purpose for us wishing to have this information?

Thank you for the question, Representative Ruffridge. I think there's value in having that information provided to members of the legislature proactively as opposed to the legislature having to go out and seek that information for review. I know that it was expressed by committee members and others that the legislature be provided as much transparency and information as possible, and this is in accordance to that belief.

Understood. Thank you, Mr. Chair. I was just potentially wondering what, what that, what that information would But we ask for a lot of information that we rarely use. I'm wondering what this information would be used for.

Thank you for the question, Representative Ruffridge.

Okay. I think I had one further question on the FERC items. And I apologize, Mr. Chair, this is some new language for me. Me.

No apologies necessary, Representative Ruffridge, and it is the intent of the committee for members to have some time to review this working document. That's part of the purpose behind putting it on the table today, so that all of us and members of the public and engaged stakeholders will be able to review, scrutinize, and suggest improvements to this document. Understood. Thank you. I think it is, uh, Mr.

Chair, the new Section 19. There's quite a bit of new language here regarding an Alaska Online Public Notice System and the corporation's internet website, a report.

And this again references a number of documents filed with approvals from the Federal Energy Regulatory Commission. So I believe the Federal Energy Regulatory Commission already has public access to those documents. This language then, Mr. Chair, is just saying that this would have— is it appropriate to say potentially a link to these documents, or are those documents to be loaded onto our own state database? Mr. Gunderson, are you able to speak to the substance of this amendment or this language change?

Through the chair, the goal of this language, this relates to the public dashboard that's going to be maintained. I think the benefit of including these documents there is just ease of access so the general public doesn't have to visit federal websites. They can go to one location to find out anything they're seeking regarding the AK LNG project. Okay, thank you, Mr. Chair.

Absolutely. Additional questions or comments, Representative Ruffridge? Uh, not at this time, thank you. Okay, very good.

With that, are there additional questions or comments from committee members? Representative Ruffridge, is the objection maintained? Uh, yes, Mr. Chair, I believe that my objection will be maintained And I believe that there is some items within this conference committee document that are potentially problematic. I understand that the will of the committee is to adopt it as a work draft and a work draft only.

But I think we're headed down a path where if you think, Mr. Chair, of just a molecule of gas For example, a molecule of gas in this state, if we are to produce a project, it's going to go through royalty payment. That's step number 1. It's going to be taxed for its production. It's going to be taxed for its gas treatment, taxed for its transport, taxed for its export, and then also pay sales tax on its use in the state.

And this working document, I think, proposes that the company or companies or entities developer attempting to make profit or, you know, a business opportunity off of the sale or transport or export of that gas are then taxed again by our state and then taxed again by the federal government. And I think, Mr. Chair, from my perspective, I think we should ask ourselves on this committee, is the working document right now headed in the best interest of Alaskans? Maybe it is. I certainly still have some concerns.

And I think that we've been hearing from this committee level that time is critical. We have an open window. And I know Alaska is geographically diverse, and maybe some of that critical element isn't as pertinent to each of the committee members. Gas line project potentially doesn't affect each of us the same. But I believe we really don't have the luxury of waiting to deal with some of these issues further.

And I believe we need a plan to utilize our stranded natural gas. Cook Inlet production— we've heard that over and over and over again— is not keeping up. Potentially by 2029, our utilities are going to have to make a decision. Do we burn diesel? And there's people at this committee table that know a lot about burning diesel.

It's not ideal. Or we import natural gas, and these are both negative options, or we have before us a document that I think maybe could help us get down the road a pace where we can have another option. So I think we have a duty at this table, and I think that duty is something that we've all taken seriously, to help solve that problem. I worry about a few provisions in this bill right now that maybe go a step too far. I think that we're worried about solving a provision that we've been worried about for longer than I've served in the Legislature.

That's the S-Corp provision. And we've known for decades that our property tax system is unworkable for a project of this magnitude. We've had a chance to do that before, we didn't take it. We have a chance in front of us to do that now. And I think we don't need to put additional barriers in front of this thing.

I see in this bill additional barriers, and maybe that's the intention, is to try to find a fine line that we can draw that brings people together on this. But Mr. Chair, I think we've heard over and over that we have to protect the state's interest. That's what we've heard from the table. I want to ask the question, what about protecting the interest of our constituents, who I think have been worried for quite some time about what the answer is going to be to their energy solutions, and we're seeking maximum government take.

I think in here we've asked that question, how much can we extract from this project? And I think we've missed the fact that we are asking potentially to put on the line jobs, cheap energy, and potentially a boon to Alaska's economy in the form of revenue. This project brings forward a significant amount of revenue if it's built, and I think we, we might be putting some of those things at risk while we're asking for reports, while we're asking to meddle in required local contribution as well as talk about S corp taxes. I appreciate the work that this committee has done. I think that there has been a lot of serious work.

I appreciate the work of AGDC and the developer and the administration and all of the committee members. I do believe, Mr. Chair, that time is of the essence. We don't have frankly, a lot more time as the conference committee. I think this special session is ending soon.

And I think that we can probably— we can probably say with pretty good confidence that this is a step. I think it will remain to be seen whether it's a step in the right direction, but it certainly needs more work.

And I hope we're intending to do that work. With those comments, I'll remove my objection. All right. The objection has been removed. Thank you for those comments, Representative Ruffridge.

With the objection removed, is there any further objection from committee members? Seeing none, work draft 34-GH2038/Q is adopted as our committee substitute.

Additional comments or questions from committee members? Senator Steadman. Thank you, Mr. Chairman. Yeah, I have a little different view.

We have a property tax established in 1974 for 20 mils of our oil and gas. And that is a significant tax. And it hasn't been updated. And it particularly deals with the North Slope. We have eliminated that 20%, or excuse me, 20 mil rate.

For the construction of the gas line during the construction phase several years ago. So there is no property tax. Now we're looking at relinquishing most of that tax on a gas line.

But the economics of putting the project forward do not work at 20 mils. You cannot get it over the line. We're talking about a couple hundred million dollars a year more in debt service. So they need some relief through construction and, and then after first gas to make their economics work. And that's what we're talking about here.

And then we're scaling down the— which would be the old 20 mil rate— we're scaling that down substantially for the first over the next several years, and then we ratchet it back up as their economics become more favorable. We are not changing the severance tax. We're not changing the corporate income tax. We're not changing the royalty rates. The gas is taxed at the point of production before it goes into the liquid— or before it goes into the treatment plant.

We're looking at the treatment plant through Tidewater. We're not looking at upstream. So there is a portion in this bill dealing with the pass-through entity tax that we'll be working on the next few weeks. But this is a significant reduction in the tax burden on this gas line in any way you cut it. And some of us are concerned maybe we are a little too aggressive in that direction.

But, uh, if you take the tax rate to zero, it still doesn't get this project over the line financially. So there's more work to be done by the developer to get this project economic. And I look forward to, uh, construction of the gas line at some point. Hopefully this is the project that does it, but we'll wait and see. I'm ready to take action on this CS so we can continue to work on it, Mr. Chairman.

Thank you, Senator Steadman. Senator Cronk. Thank you, Chair Schroeder. Yeah, I echo the sentiments of Representative Ruffridge somewhat, but also, um, look at all the work that we have done. The House did good work creating a bill.

I believe the Senate did good work fixing things that were in that bill and presenting something that is workable. Obviously, there are parts of this that are questionable to move this project forward, but I think in all of our, you know, we have constituents on both sides, hey, don't do this or do this, but I think in general public, the importance of this project moving forward, especially, you know, and I don't wanna say especially for the Interior, but especially for the Interior, there's little hope up there right now. Energy costs are extreme. And I know this doesn't fix things right away. This is going to be a process out.

But, um, I appreciate the work here, and I, and I, you know, I appreciate the— what we're going to do when we come back. I, I think, you know, we have to really dig into what, what we're talking about here, uh, to make this a workable bill for Alaskans. So I look forward to that. Thank you for those comments, Senator Cronk. Other comments from committee members?

Seeing none, I'll just add that, or mention again, that this is an iterative process that we're going through. I know some members are going to not like what is in the bill or aspects of what's in the bill, or they'll feel that pieces are missing. That's normal. What I can tell you is that we're going to continue to work through this process, continue to work on this committee substitute. This is not the final product and it will be refined further.

I know we've had some positive feedback from stakeholders that we're moving in a good direction, including from the project developers, that we've made— that they're encouraged by the conversations that we're having here. And we do intend to continue to have those conversations. I want to take a quick moment, just because we have made significant progress, to recognize the incredible amount of work that's gone into putting this together.

Really, a lot of individuals who oftentimes don't get much thanks have put a lot of work into into this some very long hours. So I want to take a moment to thank in particular our legislative legal team for the long hours they put in, including Director Nelman and Chief Counsel Wallace. They've worked tirelessly. Additionally, I want to thank the IT, legislative information offices, the recording secretaries, the clerks, the finance staff, my staff and the staff of the committee members and our families for the support that they provided. We're not done yet, but there's been a lot of work that's gone into this so far.

I just I just want to thank them again for the hard work that they are doing. Looking forward, we're going to take a few days off for Fourth of July weekend and to give everyone an opportunity to digest what's in this committee substitute, this work draft. We will have further meetings, and I will keep members apprised of those future meetings. Expect information on that in the very near future. With that, I believe our agenda today is complete.

I'm going to look to committee members one more time for any additional questions or comments. Comments? And not, not seeing any, we are going to be adjourned at 11:37 AM.