SRES-260515-1530

I call Senate Resources Committee meeting to order. Today is Friday, May 15th, 2026, and the time is 3:30 PM. Please turn off your cell phones. Committee members present today: Senator Rauscher, Senator Kawasaki, Senator Dunbar, Senator Myers, Vice Chair Senator Wielekowski, and I'm Senator Giesel. Senator Clayman may be joining us later.

We have a quorum to conduct business. Thank you to Heather and Chloe who are helping us out staffing this today. This is our 32nd meeting on SB 280, supporting a gas pipeline for Alaskans. Act. First item of business today, we have an amendment that we had set aside earlier, an amendment from Senator Myers.

It's numbered G3, which we will take up at the very beginning. It relates to a gas pipeline spur to Fairbanks. Senator Myers. Thank you, Madam Chair. So just to make it clear for the public, I'll go ahead and move G-3 again.

All right, and I will object for purposes of discussion. Thank you, Madam Chair. So, um, it's my understanding that the concern the committee has is that it wants to exempt a spur. Uh, they're okay with exempting a spur that goes to a utility or to residential customers, but do not want to exempt a spur that serves only a single-use commercial industrial customers such as a mine or a data center, something along those lines. I believe that the definition of spur used in the bill does a good job of making that distinction already.

Ms. Kawasaki has expressed to me concerns that those definitions don't work, but neither she nor members of the committee have been able to express to me a better way of doing it. She did suggest to me a couple of days ago that I craft an amendment to address just the Fairbanks spur, and I expressed to her that the problem with that is that we are talking about potentially two different spur projects in the Fairbanks area that could satisfy the language for the spur in the bill. The original concept that we've been talking about for years is a spur to directly connect the IGU network to the mainline. That's what we want. That's what I'm trying to make tax-exempt.

What has come up recently is a spur that bypasses IGU and the borough residents and goes directly to either Fort Wainwright and/or Eielson Air Force Base. For the potential data centers that are being discussed by the Department of Defense, or potentially power plants for the— more likely at Fort Wainwright for the power plant. I don't mind feeding those projects through the IGU network, but I don't want to reward Enstar with a tax break for bypassing the residents. Again, I believe that the definition of spur in the bill works for those purposes. I'm fine with more changes, better clarity, or tighter definitions if they keep the core concept of exempting spurs that go to utilities, residents, communities, but not to single-use commercial or industrial customers.

But I wasn't able to do anything to the amendment because I couldn't get clarity on what specifically needed to change. This bill still has another committee of referral where it can be addressed if specific changes can be identified. It is my understanding that the members of the committee expressed their support for the concept of the amendment, even if there were some misgivings on specific definitions. And I hope that the members will support moving the amendment forward possibly express specific concerns that are found in the next committee to fix there. I was also able to speak to Mayor Hopkins this morning about the amendment, and they do support exempting the spur so they don't have to pass a cost on to ratepayers.

So with that, Madam Chair, I'll ask for support from the committee on the amendment.

Thank you, Senator Myers. I believe that committee members have received a resolution from, I think it's the City Council of Fairbanks. Mm-hmm. Um, but they're pretty— and they're pretty specific about supporting, uh, the concept of a spur for the citizens, um, to serve the city of Fairbanks and the North Star Borough.

So that's great. It's something we've put into this bill, so I'm hoping that this city council will support Senate Bill 280 as we've drafted it. Ms. Kawasaki, would you like to come forward and comment on the language that's used in the bill and the focus on the citizens who live and Fairbanks.

Thank you, Madam Chair. Um, good afternoon, members of the committee. For the record, Sonya Kawasaki, Senate Majority Legal Counsel. Um, I would caution potentially that the amendment probably is not narrowly focused enough. Well, one, it doesn't just cover Fairbanks, and I understand from Speaking to members that they would be comfortable with supporting an exemption to the Fairbanks Spur to Fairbanks.

I'm sorry, the Spur to Fairbanks. But outside of the Fairbanks area, it's more difficult to and less comfortable to make those decisions right now. The bill does already contain support for the Fairbanks Spur specifically, and it's also been talked about for years for this gas pipeline. So in a sense, it would make sense or it would be a meritorious policy consideration for the committee to consider an exemption for the Fairbanks Spur. But again, this amendment doesn't focus on the Fairbanks Spur.

Spur, it focuses— or it is broad enough to capture any local communities along the route. And the definition that's been referenced in the amendment is a reference to an existing definition in the bill right now, but that definition I would say is very broad. In the first instance, it describes a spur line as a natural gas transmission line that branches from the main natural gas pipeline to deliver natural gas to a local community. And I think that even that term of art in itself seems fairly broad if the idea would be to focus the tax break on especially delivering to residential communities and the businesses that support those residential communities. And so I think that if the goal of the committee would be to work through an amendment for the Fairbanks area itself, we would— even under Senator Myers' suggestion or Senator Myers' proposal, we'd still want to sort of tailor the definition a little bit more narrowly.

The current definition in the bill was meant for a different purpose, and so it is actually broad because it, it was supposed to make sure that spur lines did not receive the tax benefits from the alternative volumetric tax. So if you decide to sort of flip that policy and target those areas with a tax break, then you might want to consider narrowing that definition for that purpose. Thank you, Ms. Kawasaki. For the public who are listening, we are on version L of the bill. On page 7, lines 20 and 22, says a gas pipeline advanced, operated, or owned in whole or in part by the corporation or subsidiary of the corporation must include a direct spur line to serve the City of Fairbanks and the Fairbanks North Star Borough, which is actually the wording of this resolution from the City Council of Fairbanks.

Hmm, perhaps they read the bill. Um, additional definition of spur line is on page 42 of the Senate version of the bill, and it is on 42, and it is Lines 14 through 20, and it defines here the alternative tax does not apply to a spur line. A spur line means a natural gas transmission line or lateral line that branches from the main natural gas pipeline project to deliver natural gas to a local community or utility distribution system. So we— it was intended to be pretty specific. That it was for the population of a community, not an industrial development, not a private business such as a data farm.

Senator Dunbar. Thank you, Madam Chair. And I'll confess, and maybe I share Senator Myers' frustration a little bit in that I think we are all trying to get to the same goal, which is a spur line to serve the residents of Fairbanks. And I'll have to be corrected by the Senator is from Fairbanks, but that means the utility that serves Fairbanks. And to me, it makes more sense rather than mess with the definition of spur line, looking at Senator Myers' amendment on page 1, line 13, I want to just run an idea by you, Ms. Kawasaki.

If we were to— so it says, of a natural gas pipeline project or spur line. If we were to narrow that to, or spur line that serves a Fairbanks utility, and then we leave the spur line definition alone, but we just say that for this tax break, it's just a spur line that serves a Fairbanks utility, would that fulfill the sort of twin goals of not exempting, you know, industrial-only uses and allow the Fairbanks utility to receive this gas. Now, I don't know enough about Fairbanks. All three of you know more than me in terms of is there essentially one utility or would have to be narrowed even further. Ms. Kawasaki.

Sure. Thank you, Senator Dunbar, through the chair. That— the proposal that you just made would get the committee closer to what I feel like the members my sense of what the members are interested in who want to only exempt the Fairbanks residential service to— of the spur line and not have a byproduct or unintended consequence that results in a data center or something of that nature or under the current proposal of Senator Myers might even be allowing a mining district or something to be taking advantage of the spur line. It seems to me that the spur line tax deduction— seems to me the members that I've surveyed on the committee would like to see the spur line focused on only a Fairbanks spur and the residents of the Fairbanks area and the businesses that serve them. And so that would be something along the lines of the public utility.

And then the third kind of concern that I feel like the amendment itself raises is if you look at the first 6 lines, those reference the municipal— current municipal property tax. And I understood from speaking to members that the current municipal property tax was not something that they would be wanting to delve into because I mean, I understand it was nice that Senator Myers reached out to the mayor of the Fairbanks North Star Borough, but I think that the members would probably feel more comfortable having more assurances that the Fairbanks North Star Borough would definitely not want to have their assessments exempted from property tax against a spur line. So those are sort of the 3 categories of things that I would want— expect the committee to focus on if they want to pursue a policy like that. Thank you. Do you have follow-up, Senator Dunbar?

Um, I'll wait to hear from Senator Meyer first. Thank you, Madam Chair. Um, well, actually, Senator Kawasaki was next. Just to clarify what we're talking about, this— we do have— so we have the Interior Gas Utility. It's the one utility that does both commercial and residential in the city.

But there are other power plants, and I'm just wondering if we confine it to that, if we can find it— I, I don't know if this is confining, too confining, or too restrictive, because you know that the downtown power plant that does, um, uh, does distributed heat uses coal, and of course they want to switch off, and the water plant uses coal to heat water. So I'm curious if that— and the university has its own power plant, Eielson has a power plant, Fort Wayner has a power plant. So do we— are we restricting that from happening? Because right now the volume that's necessary in Fairbanks is very tiny. I mean, it's— there's just not enough, not enough demand.

And, you know, we hope to grow demand, but it's— but we just don't— we just don't have it. This will definitely I think both grow demand and potentially be— this could potentially be used for lots of other industrial uses in the Fairbanks area. So I'm wondering if this is too confining language.

Well, if I may. Senator Myers. Yeah, and to that point that Senator Kawasaki is making, if you say, you know, use by a utility, talking about Fort Wainwright, Fort Wainwright has a power plant that they're trying to replace— well, I should say considering replacing. Trying depends on what year. Um, then they're considering putting in a gas power plant instead.

For at least half of Fort Wainwright is inside of the city of Fairbanks, and so that makes that definition again a little difficult. And so saying if we're going to serve, you know, say a utility that inside of the city of Fairbanks, does Doyon Utilities, which is also one of the partners up to build the spur, that also runs the power plant on Fort Wainwright, does that qualify as a utility inside of Fairbanks? You know, we could try to narrow it down to a natural gas utility, but then we start, as Senator Kawasaki said, then we start to get into are we becoming too restrictive then? So that then if GVA decides that they want to create a power plant using gas from IGU, do they then potentially lose the gas— the tax exemptions and things like that? So as I said, I liked the definitions that were in the bill originally.

I never— I understand that Ms. Kawasaki thought that it didn't work and was too broad. I couldn't understand exactly why. So yeah, I understand what Senator Dunbar is doing and I think it gets close. But I'm just thinking about the ways that could be manipulated as well. Senator Dunbar.

Thank you, Madam Chair. I'll just say, first of all, I'm not comfortable with this amendment. Unless it is only applied to Fairbanks, because I do think there could be unintended consequences if we allow the broad amendment to go through. So I'm trying to find some way to— the spur line itself is just a sort of Fairbanks project this time. When we talk about the spur line, we're talking about Fairbanks.

I know there are other spurs, but that's what we're talking about. And so the way I tried to conceive it is, you know, if it services a Fairbanks public utility, the pipeline itself, then it would be exempt. And then if there are other customers as well, they could also sell to those customers. That's fine. So long as they are servicing the— and then I look to the people of Fairbanks, the good people of Fairbanks to figure out the specific language.

Is it the primary public gas utility in Fairbanks? Is it a public utility that services residential customers in Fairbanks? I'm sort of agnostic to that. But my interpretation would be It's tax exempt because it services them, but then it also could service other folks as well, if that makes sense. Uh-huh.

And so— but I think this doesn't strike me as an insurmountable legal challenge. If we could just get a halfway decent definition of what it means to go to Fairbanks, then I think we're good. And we can move on from this amendment. So again, I propose that services of Fairbanks Public Utility, if there is a alternate language. Let's, let's put that on the table and let's amend this amendment and move on.

It's my preference. Madam Chair, if I may. Senator Myers. Yeah, thank you, Madam Chair. So if, if Senator Dunbar wants to put that forward as a— excuse me— as a conceptual amendment there on line 13 of the amendment, and then we'd have to I believe delete— oh no, no, that one, that one's just fine.

Um, then I, uh, I think I can— I think I can live with that.

Senator Dunbar, could you repeat your specific language and perhaps offer it as an amendment to the amendment? Thank you, Madam Chair. Um, I offer an amendment to the amendment on page 1, line 13, after the word spur line. To insert that services a Fairbanks gas utility, probably make the most sense. It services a Fairbanks gas utility.

Um, is there— I, I can alter that though if, um, Ms. Kawasaki has—. I'll object. And then, okay.

Ms. Kawasaki, do you have suggestions, Ms. Kawasaki, about how I might have phrased that better? Um, through the chair, uh, Senator Dunbar, no, I appreciate what you're proposing here. I think it does seem like it would cover the situations where I have had discussions with members on what the aim would be. Um, I just— two things I would note is I— we would need conforming amendments based on the Section 32 on the next page, which is the reversion back to existing law, which is an aspect of the bill when, in the event that the— well, when the alternative volumetric tax repeals.

But— and that is not insurmountable. The only other thing I think I would Question the maker of the amendment to the amendment is whether or not you actually did want to include the municipal property tax in the exemption, because I know I specifically chatted with you about that and you were, you were sort of in the mindset of allowing the municipality to not have, not be subjected to a full exemption, but to negotiate their own terms with the gas spur— or sorry, I'm sorry, the spur line owner. Senator Dunbar. Thank you, thank you, Ms. Kawasaki. I think if we have that conversation, we should have it next after we resolve this issue.

That is to say, it would be a separate amendment to the amendment to delete that section. And we can have that discussion, but first I would like to resolve this issue. So it sounds like that would It sounds like this language would accomplish what we are seeking to accomplish.

Senator Kawasaki. Thanks. And so we just had the discussion about other utilities that may in fact use gas off the line. We are basically restricting this to a Fairbanks Gas utility, and there's only one Fairbanks Gas utility right now in Alaska— or in Fairbanks, in the Fairbanks region. Can I follow up, Madam Chair?

Senator Dunbar. I would say that this is a sufficient condition for this to get— that is, the gas line to be tax-exempt, but it doesn't preclude it from servicing other organizations. That is to say, the way I read it here, if the spur line services a Fairbanks Gas Utility, then it is tax-exempt. It is silent as to whether it can also service other customers. And my interpretation would be, yes, you have fulfilled your only duty to get this tax exemption, which is service this IGU.

And then if you also sell to whomever, that, that doesn't cost you the tax exemption. That would be my interpretation of this amendment. Mm-hmm. But what I don't want to do is put an amendment that says that or other customers, because then they could just service those other customers and not sell to IGU. Senator Kawasaki.

Yeah, I, I don't, I don't know how to write it either. I, I think we all know what we want to have happen, and I just also, just thinking about this, don't want to, um, make it so that it wouldn't make sense to have the largest volume of gas in that tea to come to the Fairbanks area or to come to the interior because we're, I mean, we are thirsting for power, whether it's gas, whether it's, I mean, we process here our own heating oil, but electricity doesn't, and we have to produce our own electricity nearby. We're not getting hardly anything from the lower or from the South Central area anymore because of the, the gas supply and the inability to supply electrons up north. And so we're kind of isolated, and that's the whole interior region, all the villages. And so I don't want to constrict a line that— I don't want to make it a constricted line where we could grow or we could make it larger.

And that's just looking out for the interior, and that's looking out for Fairbanks, and that's what I've been elected to do. Senator Dunbar. Yeah, I would say that again, my interpretation of my own amendment is that it does not restrict things in that way. It just says they must do that. But I would also posit that if for some reason someone interpreted it that way, the solution might be just those other users would purchase the gas from IGU.

I don't know if that works that way, but that power plant could use IGU as an intermediary. I assume IGU is the one who would build the transmission lines. So—. To that point—. Senator Myers.

Yeah. So as of right now, IGU is the gas utility in Fairbanks, and there has been talk of if GVA, for example, was going to build a gas power plant, they would connect to IGU's network to do so. I would hope as well that Fort Wainwright and Eielson would do the same if we can make sure that the spur does not bypass IGU. So that had been discussed with Fort Wainwright, at least had been discussed about 2 years ago. So I'm trying to make sure that we stay that way.

So the amendment to the amendment is not unchangeable in the future. Mm-hmm. So perhaps for the time being, it defines what we're aiming for. And next year, with more clarity, perhaps the words can be changed. Well, I know the words can be changed.

None of this is permanent. Senator Rosier. That's a good point. So the question is, why is it restricting only to Fairbanks and not other spur lines?

Well, I can answer that because Fairbanks had an offtake proposed in the bullet line in multiple other permutations of a gas pipeline, and they are the second largest city. Is there, is there another utility along the corridor that you would view as a priority, Senator Rosier? Now I'm just trying to understand all of the off-takes and how we're viewing them and how we view where their off-takes end up towards servicing the people that they're servicing and are we doing it fairly, that's all. The original— well, it's not original. The most recent project, the Producer Line, had 5 off-takes, one of them at the Yukon River.

I don't think we're proposing that. I know we're not proposing that. We're proposing the second largest city in the state to have an offtake from a pipeline that is running directly by. So it is the priority at the moment. Certainly more can be added in other years.

Senator Dunbar? Yeah, I'll just say to your question, Senator Rauscher, for me I don't want there to be unintended consequences. There are existing, you know, things that could be interpreted as spur lines on the North Slope. I'm not totally sure what their tax status is right now, and I don't want to accidentally sweep them into this. I'll say also there's been talk about running a spur to, um, the Donlin Mine, and it might be worthwhile to eventually exempt it, but I think that's a separate policy discussion we should have when that is built.

So that's why I want to limit it at this time because the unintended consequences of existing spurs, and I don't want to— I want to give future sort of policymakers the opportunity to take these one at a time if there are large industrial projects proposed. That's why I want to narrow it to Fairbanks at this time. In addition, this is an additional cost to the pipeline project, and so proposing multiple spurs doesn't seem prudent. Senator Kowalski. I was just going to withdraw my objection to the amendment that Senator Dunbar introduced.

I don't think discussion is completed yet, so if you would hold off on your withdrawal. Okay. Senator Wilkowski. Oh, thank you. I, I, um, just on the overall amendment, um, I think we should be careful in granting tax exemptions.

I think we get into a lot of trouble over the years in granting overly broad tax exemptions that we have a very, very hard time down the line reining in. And I am too concerned about unintended consequences. We don't know what spur lines might exist on the North Slope. We don't know if there will be spur lines that run off, that run to multi-billion-dollar data centers. We've heard talk about that.

That would inadvertently lose revenue to the state or local communities. So I think this is a measured approach. Targeted approach. Future legislators can change it if necessary.

All right, I see no further discussion. Senator Kawasaki, do you maintain your objection? No, I withdraw my objection. Is there further objection to the amendment to the amendment? That amendment to the amendment reads on line 13 of page 1: Or spur line that services of Fairbanks Gas Utility Then continuing on, is exempt from state taxes.

There's no further objection. That amendment has been— that amendment to the amendment G-3 of G-3 has been adopted. So we're back to Amendment G-3. Is there further discussion? Senator Dunbar.

Thank you, Madam Chair. I wanted to again go back to the conversation that Ms. Kawasaki had raised. About the first 6 lines here, and my understanding is that also exempts it not just from the, uh, the state oil and gas property tax but also municipal taxes. If I'm misinterpreting that, please let me know, Ms. Kawasaki, but I want us to have a sort of conversation about whether or not we want to do that. It's only going to be Fairbanks now, but I guess I'd like to hear from the senators from Fairbanks about whether we think they should be prevented from levying their municipal taxes.

Ms. Kawasaki.

Thank you, Madam Chair. For the record, Sonya Kawasaki, Senate Majority Council. To go back to that discussion through the chair, Senator Dunbar, the reference on page 1, line 2 of the amendment and page 1, lines 5 and 6 refer back to the— actually the version G of the bill, which was now I think 3 versions ago, but 3 CS versions ago.

The primary portion of this amendment— or sorry, that policy implementation is on line 6. Which states, or a spur line as defined under 4359.01, and in context of the bill, on page 3, line 3, following 4359.01, this section addresses a municipality's ability to levy tax on a qualified property. As defined under the AVT, and it goes on to state if the qualified property is subject to the alternative volumetric tax levied under 4359.010, or, and adding in the amendment, or, quote, a spur line as defined in 4359.010. So it would prevent the municipality from levying a tax at all.

And I, I am uncertain if that is the direction the members want to go, um, as far as limiting the municipality of, uh, the Fairbanks North Star Borough from being able to come up with different terms of a tax or use its municipal tax. Thank you. Senator Myers. Yeah, thank you, Madam Chair. So, um, speaking with Mayor Hopkins this morning, he did bring up a similar concern But I did inform him that the current version of the bill now puts a 10-year sunset on the AVT, and at which point it would revert back to current law, and he was satisfied with that.

So, Ms. Kawasaki, does that— how does that change what is being offered here?

Mm-hmm. Madam Chair, let me just double-check the section that has to do with, um, the repeal.

Um, I believe, I believe that's right. It's kind of hard for me to determine on the spot here. I believe it's accurate because the items related to the alternative volumetric tax do receive a repeal at the 10-year sunset. And if not, I believe under our drafting— the— our legislative legal department's drafting rules that we could request that it becomes part of this amendment if it doesn't already.

But I believe what Senator Myers is stating is correct, and at least under the intention of the committee, um, as for the tenure appeal.

So there's nothing that needs, uh, additional changes on page 2 of the amendment, line 1. I mean, obviously, uh conforming change related to the statute reference.

Madam Chair, I believe under the current amendment being offered, or the amendment to the amendment that was already accepted, and then I think right now we are considering the ability of the municipality to still assess their a tax through regular municipal property tax. This definition of spur line on page 2, line 1 would be— would fit with the amendment for defining the spur line to Fairbanks Gas Utility as Senator Dunbar proposed because that definition of spur line would now be focused on the Fairbanks North Star Borough Gas Utility. And the only other thing that I can see off the top of my head would be on page 2, lines 22 to 24, which says delete, quote, property associated with a spur line remains subject to taxation under 4356.010. That would then need to be accepted because— accepted for the new provision of only accepting Fairbanks— or as to a Fairbanks gas utility. So all other property in the state that may be subject to state and local— state and municipal property taxes as to spur lines would still be governed by the language that exists in the bill that the amendment would have modified if it was going to be directed at all communities all over the state.

Ms. Kawasaki, I'm going to ask you to take this amendment. There's, there's just too many moving parts here that we're adjusting on the fly, not actually knowing what needs to be adjusted to conform this amendment to the current bill, which is version L. So I'm going to ask you to take the amendment to the amended— the amended amendment to legislative legal, as well as your own scrutiny on the various statutes cited and their— the implications of any of these changes, and bring it back to the committee. All right, so Senator Myers, again, I'm going to set the this amendment aside. I am going to instruct you to work with— Ms. Kawasaki, please. Okay, thank you.

Very good. So I'll put down today's date, which I think is about the 15th, and we'll set this amendment aside again. Okay, that takes us to— the explanation of changes related to Version L that we were unable to complete this morning. So we have a few more pieces to examine. Ms. Kawasaki, are you ready to do that?

Yes, Madam Chair. All right. I think— I think we were on slide 14, but you can correct me Correct, Madam Chair. All right. You're on.

Thank you. So back to slide 14, we had just started the new— the version L community impact program that has received some updates from the last version of the bill. The construction— we created a community impact program that basically consists of two accounts, two funding accounts. The first one is the Gas Line Construction Impact Account, and this is on page 45. These are on page 45-47, and this is Section 46, and it is Section 43— or I'm sorry, 4433850, subsection B.

This fund would receive $15 million of a receipted one-time payment from the developer to the state. We, in conferring with the developer to the gas line project, understood that they would be able to receipt money to the project ahead of starting construction. This was not the dollar figure they proposed, but we, we, um, In our policy team meetings, we came up with $50 million for the initial account of funding that will be distributed, and this will be distributed to communities along the pipeline corridor who will face impacts, and it will be distributed by DCCED, and the parameters would be based on need, severity of impacts, and relationship to effects of construction, and in essence then DCCED would be authorized to distribute the grants and then annually as the grants are disbursed, report back to the legislature on these grants. The reason we came up with this sort of methodology is based on a lot of what the mayors were concerned with along the project corridor and the expectation or the hope that they could receive impact funding ahead of the feeling the impacts of the construction. And so we were trying to find a way for those funds to get out to these communities quickly enough to meet those concerns.

And part of that concept will be an appropriation of these funds ahead of the construction period once the developer receipts the funds to the state. Thank you. So DCCED stands for the Department of Commerce, Community and Economic Development that has a similar program to this now.

The purpose of this is that we are agreeing to virtually removing their, their taxing authority, very much limiting it. And we know that there will be impacts from construction of a project like this. We've already experienced it when we built TAPS. And so this is to help the communities manage the traffic, the public safety issues, all of those kinds of things. Is that true, Ms. Kawasaki?

That's correct, Madam Chair, yes. Thank you. Those sorts of impacts, community impacts that are direct and indirect from the consequences of construction of the pipeline through those communities. Thank you. Just underscoring it and trying to make it understandable for the average person who might be listening to this presentation.

Is there any discussion about this information on this slide 14? All right, seeing none, we're ready to move to 15.

Madam Chair, the second sort of subaccount that we set up for the Community Impact Program would apply statewide. There would— we would require the developer to pay $30 million annually to the state And again, the Department of Community Commerce and Economic Development would distribute these grants via the existing Community Assistance Program in law, and that would be received by all communities in Alaska under that program. And after 5 years of these impact payments from the developer, the program— this program would expire. And so we have essentially an initiating impact— construction impact program that would be for the communities along the pipeline suffering from effects of the construction of the pipeline. And then we have a $30 million annual distribution through the CAP program going out to all the communities in Alaska because there was a concern that probably all the communities would actually feel some, um, uh, effects of the construction of the pipeline.

Ms. Kawasaki, was the distribution from the Community Assistance Program based on population or need? What was the— what is the determining factor for that distribution? Um, Madam Chair, the Community Assistance Program is distributed from DCCED, and it's based on population of every community. And so it is done by formula in current law. So it's based on population.

Yes. Thank you. All right. I see no questions on slide 15, so moving to slide 16.

Two items of note that I wanted to make related to the new Community Impact Program consisting of the two subaccounts are related to conditional and timing effects. First of all, the AVT will not initiate unless the Gas Line Construction Impact account receives the $50 million receipt from the developer. Which at which point the legislature can appropriate those funds. Um, so the ABT— the benefit of the ABT to the developer will not begin until the developer pays the $50 million. And then the second condition is that the ABT is suspended and the petroleum property tax that's in law right now is restored whenever the developer fails to make one of the annual payments of $30 million.

To the statewide gas line impact account. And in that sense, we felt that that would be an incentive for the developer to make those payments annually as needed from the state. Thank you, Ms. Kawasaki. You know, I think it might be helpful to express that this is not a— these payments, the $50,000 and the $30,000 $1.5 million are not taxes. They're investments in the state of Alaska as a corporate citizen of the state, here to develop our resources.

So it is not a tax, it's an investment on the part of the company that is developing our gas resources. Senator Dunbar. Thank you, Madam Chair. You know, I've had the chance to read the, the House version of the AVT bill. I think most of us have at this point, you know, sort of a conversation happening back and forth.

And I believe— I want to ask you, Ms. Kawasaki— they have similar language for their Community Impact Fund, I believe, although I think theirs is even more strict. That is, it doesn't just get suspended for a year. I think they just fully repeal the AVT, but I could be mistaken. I know they have trigger language for a number of things, including a PLA, which is which is not in our bill. But do they have any language around— I think they have a $40 million account.

Do they have any language in there that is similar, sort of ties the AVT's existence to the Community Impact Fund? Through the chair, Senator Dunbar, they do, and I believe it's a $40 million payment. And that payment, the alternative volumetric tax does not begin until that payment is ready to be made. Although my understanding with that bill is that the funds will be distributed by the developer in that version of the bill, in the House's version of the bill right now. But there is a similar condition for start of the AVT in their bill.

Okay. Thank you. Thank you, Madam Chair. Further questions or comments? Seeing none, are we on slide 17 now?

Oh, sorry, just a couple things I did want to say about the Community Impacts Program, Madam Chair. Just to remind everyone that 10 years ago when the discussion was from the developer-led project that the Community Impact Program was for these one-time— this one-time payment from the developer for the communities impacted was going to be $800 million, and so we have come down a long way based on what our discussions with Glenfarm have been about really needing to be conscientious of their need to lower their costs on the front end. And so with this— these changes, ours now is at about $200 million between the $50 million initial start upfront payment and the $30 million annually. It's $200 million, which I know Senator Rauscher is probably happy to hear because it was a concern of his the other day when he offered his amendment to lower the amount from the developer from our last version of the bill. And the other thing I just wanted to— oh, I'm sorry, I covered my two final comments on this section.

Ms. Kawasaki, what was the previous version of the bill? What was the amount? Um, I—.

Our—. It, it, uh, I think it actually matched what we thought that the PILT was going to be for the Community Impacts Program, um, 10 years ago, and that was the $800 million.

All right, any other questions? Very good. Moving on then, I believe, to Slide 17.

Madam Chair, this is a significant provision now that we've placed into the current CS, which is that the alternative volumetric tax structure will sunset in 10 years following commencement of commercial operations of the LNG export facility. We tied it to the export facility because at that point the developer would be into exporting to the foreign markets, and at that point they're expected to be receiving a fair amount of revenue. And based on concerns from our mayors and the sheer magnitude of the tax cut, it made sense to allow at that point the ABT to sunset. Senator Dunbar. Thank you, Madam Chair.

I am glad that this got included. I sort of wish we had started with this at the very beginning. I think it's a very logical provision. I don't think it will actually happen. That is to say, I don't think— I do think the ABT structure is probably superior to the property tax.

Tax structure. However, I think these kind of provisions will force that conversation in about, you know, 15 years, depending on when commercial operations begin. And I think a future legislature will probably come to the same conclusion that I hope we do, which is that the AVT is worthwhile and should be continued. But I like these kind of provisions because they're a forcing function to bring a very large policy discussion, uh, back in front of the legislature and the people of Alaska. So I, I appreciate the inclusion of this provision.

Thank you. Senator Myers. Thank you, Madam Chair. So kind of continuing on that point, um, we talked last, uh, yesterday, I think, um, we talked yesterday about the, uh, idea, you know, we were copying from Louisiana and Texas where they get a 10 or 15-year exemption Um, but we also had talked previously with Mr. Fulford and a couple of others about the issues regarding, uh, the lawsuits that inevitably come around, and he even mentioned that those happen in, uh, Texas, Maryland, a couple other places. Um, so why did we go this route rather than simply saying after 10 years we go up to a much higher level of the AVT that mimics something close to what we would expect to get from property taxes on the project.

Through the Chair, Senator Myers, the consideration here was multifaceted. We received input from communities along the pipeline route that are concerned about the reduction to taxes at all. And it— we did take into consideration what our consultant had provided to us as far as information as to Texas and Louisiana repeals, and which also matched a decade. And the reason, from our understanding, is that at that point, the project is fully online and able to fare through the bumps of financial costs on the front end. And raising the alternative volumetric tax, I would say we hadn't thought of that.

I mean, we thought of giving the communities comfort, and I do understand what you're saying, that there's problems with litigation as far as the assessment values, but we do also know that from the assessment values and the current law that they actually do bring in more money than this alternative volumetric tax. And so all things considered, I think, is why we ended up with settling on this 10-year repeal. Okay, okay. Further questions, uh, related to the sectional review? For Senator Rauscher.

Thank you, Madam Chair. So What does the $14.9 billion look like in application? I'm just trying to understand how that would apply. How does it work? What's the math on that?

And I'm—. In my mind, I guess I divided it by 500,000 people who might be utilizing the gas in-state, coming up with $30,000, and then take that and divide it by 40 years, you get $750 a year, and you take that, divide it by 12, you get $62.50 per monthly bill, or what does it look like? I'm just trying to understand. Mr. Rusher, I'm not following where you get the original number. Could you be a little more specific?

Well, I'm saying they got $14.9 $15 billion over cost, overruns. We pay for those as customers. Who gets these overruns? I'm sorry, I don't understand. Start from the beginning.

Well, $15 billion, we don't— over $15 billion, we don't pick up the tab. Under $15 billion, we do. So $14.9 billion— So we're back to a section of the bill. Right. Okay.

Now I'm following you. $14.999999 $1.2 Billion, whatever it is. I'm trying to figure out what that looks like in application for the ratepayer. We can look at the heat map. We can actually revert back to a Department of Revenue heat— what's called heat chart that shows us the overruns.

Senator Rosier, I'm going to suggest that that's a really great question that we should address. Let's see, we've got it on page 34 of a revenue presentation on May 11th.

We do have some folks that wish to testify today related to the bill, and this would be a great question because tomorrow we will be having the Department of Revenue join us. Mm-hmm. And so that might be an opportunity. Senator Dunbar, did you have some response immediately? Yes, please.

And if folks want to correct me, they certainly can. I think that assuming that the base capex is $11 billion, which I don't think many of us think is realistic, but that is the number that has been presented to us, $15 billion is almost is exactly equal to a 40% cost overrun. And so if you look at the break-even price on page 34 that Senator— that the Chair indicated, that would be at $1.50 gas, $6.01 would be their break-even price. And so of course, that's before the— what is it, I think additional $4 for transportation costs from NSTAR, so you'd be talking $10 gas, which is better than what we're facing now, at least, if that's how it works. There's also an NSTAR $20 monthly customer charge.

Yeah, I would just add, I, I— it's a monthly, so it's not per cubic feet. And I should follow up, Madam Chair. Yes, that is assuming that Phase 2 goes forward, and that's our cheap gas If Phase 2 doesn't go forward and it's just Phase 1, then I mean, the gas becomes so expensive that it's almost not worth talking about. But we'll hear more from folks about that. But anyway, that'd be a great question to ask the Department of Revenue tomorrow.

Senator Rosha, thank you.

Further comments on the sectional? Very good. Then at this time I'm going to open public testimony.

I am going to— we have invited in the past the Alaska Oil and Gas Association as invited testimony. They have supplied us with a letter and Mr. Steve Wilkowski is present today, the president and CEO. I will invite him forward as an invited testifier today. Welcome, Mr. Wachowski. Good afternoon, Chair Giesel, members of the committee.

For the record, my name is Steve Wachowski. I'm the president and CEO of the Alaska Oil and Gas Association, AOGA. AOGA respectfully opposes SB 280 version L. This legislation intended to help deliver a gas line for Alaska has now been transformed into a sweeping oil tax increase rushed through the process without meaningful economic analysis that includes price and investment sensitivities, sufficient public vetting, or clear understanding of the long-term consequences. This committee substitute would impose a new 30-cent-per-barrel tax on every barrel produced in Alaska and raise the minimum production tax floor from 4% to 6%, a 50% increase. These are major fiscal changes that could significantly impact future investment, jobs, production, and throughput in TAPS.

Yet there has been no robust independent modeling presenting— presented showing the long-term impacts on Alaska's competitiveness, future investment decisions, or even future state revenues. The very companies expected to invest billions of dollars into future gas and pipeline infrastructure are now being targeted with significant oil tax increases inside the same bill. Large-scale Alaska energy projects require enormous long-term capital commitments and development timeline measured in decades. Investors carefully evaluate fiscal stability when deciding where to allocate capital. Raising the minimum tax floor from 4 to 6% also pushes Alaska further towards a regressive tax structure that would rank among the highest production tax burdens in North America, particularly during the lower price environments.

That is especially disruptive during periods when prices soften and companies are already reassessing investment and spending decisions. Alaska has recently seen renewed, renewed momentum. Major projects under construction, increasing investments, and growing optimism about the future throughput in TAPS. The committee should be careful not to undermine that momentum through rushed and unvetted tax increases attached to legislation that should remain focused on improving the economics and long-term viability of an Alaska Gas Line project. We respectfully urge the committee to keep this bill focused on the gas line itself and remove the oil tax provisions from this legislation.

Thank you. Thank you, Mr. Wachowski. Uh, Senator Dunbar, a question? Yes, thank you, Madam Chair. Thank you, Mr. Wachowski.

Mr. Wachowski, um, when you came before this committee a few weeks ago, there was a provision in the bill having to do with lease expenditures, and we tried to decouple gas and oil lease expenditures. We know that this gas line will lead to significant new gas lease expenditures that will cause a reduction in existing oil taxes, um, to the point where for the first few years of construction, um, more than just first few years of construction, we also have negative revenue associated with this project. And so your testimony and the testimony— not testimony, but the advice from our Department of Revenue was don't go down this route. It's impossible to decouple, practically speaking, expenses, uh, gas and oil lease expenditures. And so we removed that from the bill, but we are left with that challenge of the negative impact of the gas lease expenditures on the oil revenue.

And so we asked Department of Revenue, what's the, what's the way that we can try to adjust this problem that's caused directly by the project? And these are some of the solutions that they suggested. So my question to you is, since we removed that decoupling provision, how would you advise us to deal with that problem caused by the project?

Through the chair, Senator Dunbar, could you— sorry, repeat what the problem you're trying to get after is again? There are significant lease expenditures associated with the gas line project that are associated with producing gas. Places like Point Thompson, but everywhere. And it is impossible to decouple them from the oil, uh, lease expenditures. And so the gas project directly causes us to lose revenue and go negative on, uh, our oil revenue side.

And that causes things like closing elementary schools in my district. We've talked about that. So if we can't decouple, how do you suggest we deal with the negative revenue implications of this project in the construction years? Through the chair, Senator Dunbar, thanks for the question.

I wasn't necessarily prepared to talk about— I think, thank you for working with us and taking our input, and I'm committed to make sure that you have access to us so you can make well-informed decisions. I will say we do think the Department of Revenue's estimations of lease expenditures for the Phase 1 to get the gas to the pipeline were pretty aggressive, uh, but we're going to have to get back to you on how and why and a position on that, sir. Okay. And also, follow-up, Senator Dunbar, if there's anyone else who's going to testify on this topic today, I would urge them to also answer this question because it is a crucial one and it is caused by the fact that we cannot decouple oil and gas lease expenditures. But thank you, Mr. Wilkowski, for your answer.

Thank you, Madam Chair. Through the Chair, Senator Dunbar, to be clear, you're talking about the project's tax burden. This isn't overall oil production taxes in Alaska. It is—. To bring it— I just want to be able to bring you back some information.

Senator Dunbar. Thank you, Madam Chair. No, it is the overall because the lease expenditures associated with the project branch out The, the lease expenditure monies can go against existing production taxes, so it is the total revenue amount. Um, and it's, it's a challenge created by the project, but it goes beyond what I think most Alaskans would think of as cost associated directly with the project. Thank you, Manager.

Mr. Wachowski, I think what we're appreciating, having spoken with AOGCC, that's the Oil and Gas Conservation Commission, that Point Thompson is an exceedingly complex reservoir and will be very expensive to continue to develop for gas, and those expenditures will affect the rest of our oil revenue as they will be deductions from the tax structure. So that's part of— I don't know that I've explained totally what Senator Dunbar is getting at, but that's how you might look at it.

Senator Wilkowski? Yeah, thank you. Thank you for your testimony. Is there— you testified that AOGA opposes the bill. There are 73 sections.

Are there any sections at all that you support in the bill?

Through the Chair, Vice Chair Wilkowski, Sir, I'm prepared. I came up during public testimony. This wasn't invited for me, so normally, I, you know, given some time, we could have a robust technical analysis like we gave you last time, sir, but I apologize. I'm not prepared to go section by section today. Follow-up, Senator Wilkoski.

You came before us and testified last time. You had concerns about the lease expenditure provision. We worked. Took that section out based on your testimony, quite frankly. And we added a new section that we worked with that wasn't recommended but was suggested by our Department of Revenue as a way to solve the problem.

And so, want to work with you, but we can't work with you if you don't give us ideas on how to fix the problem. We have a cash flow problem in this state. We have a $2 billion structural deficit going forward. So if you have suggestions, as Senator Dunbar asked, please let us know how you would suggest we deal with that lease expenditure issue that has us causing— that is causing us to lose millions, tens of millions of dollars, probably hundreds of millions of dollars in the first few years. My other question is, you said this would result in a significant oil tax increase.

How do you define a significant oil tax increase? What is the industry considered to be a significant oil tax increase?

Through the chair, Senator Giesel, I think I said it in my testimony. I think a 50% increase is significant.

Follow-up, Senator Wilkowski? Just for the public, that sounds like a lot, but it's the floor. It's actually a 4-6% minimum tax increase, which DOR testified actually could save the industry money in certain circumstances. It could actually end up costing the state tens of millions of dollars. So is it— I mean, is there any tax increase at all that the industry would support?

Would you support a penny-a-barrel tax increase for the Dalton Highway? Through the Chair, Vice Chair Wilakowski, I think to your point on, you know, the potential raising of the floor that could save us $10 million, that's our point. I think AOGA values and our members value stability in the system and not changing year by year, just because, again, as I've testified before, Alaska is a long-lead investment in a low-price environment. The economics are marginal operating up here. And so I think we value stability.

And it goes back to earlier in the beginning of the session, Department of Revenue in front of this committee testified that in the low-price environment under SB 21, the state was making more revenue under ACES. And you didn't see me, when I got invited to come testify, complain about that fact. I think we value the stability so investment decisions can be— multi-billion-dollar investment decisions can be made, sir. Follow-up, Senator Wilkowski. You value stability except when you want tax cuts and tax breaks.

But I mean, would you support a A penny increase? We've got— so the problem we have on the Dalton Highway is it's going to cost us $450 million in repairs that are used predominantly for the industry. That's funded predominantly by the general fund. $450 Million over the next 6 years, that's $75 million a year. Would the industry support any increase at all?

You testified against the toll road. You testified against a 30-cent increase. Would you support a penny increase? A 2-cent increase? Senator, through the chair, Vice Chair Wilkowski, sir, the challenge with the toll road or structures, I mean, sir, we pay taxes already in the form of property taxes, production severance taxes, royalties that go into the general fund to then pay for those roads.

Sir, and I think one of our biggest fundamental issues is we're going to oppose targeted taxes that just target the oil and gas industry. And so that's, I think, where you see the divergence, sir. So—. Follow-up, Senator Wilkerson. Are there any projects that will become uneconomical because of the changes that are being proposed?

Sir, through the Chair, Vice Chair Wilkowski, you mean with the two tax provisions in this bill? Sir, I would have to get back to you on that analysis on specific fields.

Thank you, Mr. Wilkowski, for being here. Was— did you have follow-up? I would point out that the alteration in the minimum tax— we, we call it the floor for public that are listening— this is the minimum tax of 4% to 6% was suggested by the governor. We didn't pick that. We read it in a bill the governor gave us.

The surcharge on flow-through taps in order to support the road that supplies the North Slope again was a suggestion from this governor. We simply adopted his suggestion. So, so I appreciate you being here. And our questions, of course, are not targeted against you. Our statements not against you as an individual.

You represent an association which represents all of the oil companies. So our questions are directed at that. Um, are there further comments? Thank you very much for being here today and for taking the time to testify. We now have, uh, 3 folks that have signed up online to testify.

So I'm going to start with Alan Hippler. He's calling in from Anchorage. Mr. Hippler. The guidelines are the same as usual. It is a 2-minute time limit for public testimony.

Please begin by identifying yourself for the record, even though I've stated your name, because the secretary does need that officially. Following Mr. Hippler will be Ken Hakabay. Mr. Hippler, welcome. Thank you, Madam Chairman. This is Alan Hippler from Anchorage, Alaska.

And my testimony would be that the whole point of this initial bill was to establish an attractive gas and royalty tax regime to attract investment to our state. Remember, we're competing against natural gas deposits all over the rest of the world. So it may in theory still be profitable after we raise taxes again and again. But we're competing against other investments. For example, consider Nigeria.

They burn off natural gas on the coast of Nigeria. The reason that's not easily monetized is because Nigeria is a risky place to invest. The government has a history of randomly changing the deal after investments take place in Nigeria. They don't really have a strong rule of law. Our job today and for you is to make sure that investors feel Alaska will not be changing the deal all the time.

It means keeping these tax structures stable and providing decades of assurance for natural gas, because these gas investments take decades to pay off. We have a, a really short-term opportunity here to take advantage of a federal administration that allows a stable and transparent permitting process. Remember, just 2 years ago, we had a federal administration that bypassed permitting process and rule of law and shut down the NPRA. We don't know if the future will be friendly to rule of law. All we know is that right now, for the short term, we have a window where we have rule of law and a permitting process where that will be allowed and protected.

We can't mess this up. So I'm asking you to focus on making Alaska attractive to investment. Thank you so much. I appreciate your work. Thank you very much for your testimony.

Uh, next up is Ken Hakabay calling in from Wasilla. He'll be followed by Ben— I'm going to guess it's Boettcher. Mr. Hakabay, welcome.

Thank you, Ms. Chairman and members of the committee. I'm calling in today to call for protective amendments in Senate Bill 280 on behalf of Alaskan citizens. We've all heard well-intended language about spur lines in this very meeting, yet we still can't determine whether this project will deliver affordable and plentiful fuel for Alaska. Or bind us in indentured servitude to an ill-conceived grifting machine. Every attempt to quantify and guarantee this project's central promise of affordable fuel has been denied or deflected.

Spur lines without ironclad contracts are not opportunities. They are risks placed squarely on the ratepayers. In past carbon control legislation, our legislators insisted Alaskans wouldn't pay for carbon fees and taxes. Yet under this bill, we as Americans will do exactly that and subsidize the carbon carbon capture and funnel the 45Q tax credits to foreign investors and then pay for the entire apparatus ourselves through our utility rates. This is not responsible stewardship.

It is a moral hazard built on incomplete information. At minimum, I urge you to adopt an amendment that explicitly disallows all carbon capture process costs from the rate case. If the project can't stand on its own economic merits without shifting these costs onto Alaskan families and American taxpayers, businesses, we should not force the public to bear them. We have a moral duty to tell the truth. Without these protections, SB 280 risks turning a potential engine of prosperity into a mechanism that extracts wealth from the very people it claims to serve.

I really do beg you to amend this bill, and I appreciate the opportunity to speak again. Thank you very much, Mr. Huckabee. Next up then is Ben Botiger. Welcome.

Thank you. Ben Besker, I'm the energy policy analyst for Cook County Keeper, and I appreciate the scrutiny your committee has given this bill. But having watched several presentations from the Department of Revenue and the consultants for your committee, it seems clear to me that the need for any version of a tax break has not been well established and that the potential benefits of this project in terms of relieving Alaskans from high energy bills are very far from certain. And that I think you should resist pressure to pass tax breaks for this project without actually understanding the project, project economics. You've seen price modeling by the Department of Revenue showing that the Phase 1 project does not really stand a chance of providing affordable gas, much less beating the cost of imported LNG without a nearly free ride on public services.

Even then, the chances slim, relying on improbably low prices from North Slope drillers, no significant cost overruns, and even then will only likely be behind the imported LNG. And fundamentally, the base capital cost used in that modeling is a guess. And Glenfarm, as you know, still has not shared their feed cost estimate for the Phase 2 project, the one that finally delivers on promised cheap energy. Nobody at all really has a good idea of how many tens of billions of dollars it will cost Glenfarm that they don't begin to plan the Phase 2 feed setting until the end of this year. And that unknown cost is very significant.

The phased project amounts to jumping down a hole and hoping that the Asian gas market throws us a rope. And we don't know what that rope is going to cost. With prices for steel and labor outpacing inflation, any analyst has suggested that getting up to $60, $70, or even $80 billion is probable. So for all the information exchange, the essential information remains missing. Mr. Boucher, Mr. Boucher, the benefit of it Thank you.

Thank you for your testimony.

All right. That concludes the folks that have signed up for public testimony today. So I will close public testimony for today. That concludes our meeting. So our next meeting will be tomorrow morning.

I know there is excitement. Tomorrow morning. And that meeting will be at 10:00 a.m. in this room. We will be again for the 33rd hearing of the Supporting a Gas Line for Alaskans Act. At this time, we will—.

Just really quick statement, Madam Chair. Yes, Senator Kousaki. I just appreciate that you're taking a lot of public testimony. I got an email from somebody that was alarmed or wasn't able to testify at a certain time, but we've taken testimony now. At 9:00 a.m., we took testimony.

That later on the Fairbanks folks, you were able to come in and testify. Appreciated that. And then you took testimony just now. There's also ways to testify, and that's through email. And if folks can send email to the Resource Committee, we will get those, and it'll be part of the permanent record.

[email protected]. Thank you. Thank you, Senator Kawasaki. Yes, and that's Senate Resources without any dots in between anything. Thank you.

Thank you, Senator Kawaseki. I appreciate that. Yes, all right. And tomorrow we will be hearing from the Department of Revenue. So at this time, the meeting will stand adjourned.

Let the record reflect the time is 4:49 PM.