Alaska Legislature: House Resources, 5/1/26, 1pm

Good afternoon. This meeting of the House Resources Committee will now come to order. It is now 1:05 PM, Friday, April 17th— May 1st. Friday, May 1st. Happy May 1st, everyone.

2026 In Capitol Room 124. Members present are Representative Fields, Representative Kloom, Representative Hall, Representative Mears, Representative Prox, Representative Elam, Co-Chair Representative Freer, and myself, Co-Chair Representative Daibert. Please let the record reflect that we have a quorum to conduct business. Please take this time to silence your cell phones for the duration of the meeting. Thank you.

I would like to thank Cheryl Cole from Records and Renzo Moises from the Juneau LIO for staffing the committee today. Thank you all so much.

So today we have Senate Bill 230 from Senator Rauscher back before the committee. This is the second hearing on this bill in House Resources. We received two amendments before the amendment deadline from Representative Fields, but I do understand that we will not— they will not be offered. Senator Rauscher, would you like to come forward and speak to the bill, you and your staff?

So for the record, Senator Rauscher, District I want to thank Co-Chairs Dybert and Co-Chair Freer and the members of the House Resource Committee for hearing SB 230 Jonesville PUA again. As a brief recap, SB 230 adds a section of land in the Juneau Public Use— Jonesville Public Use Area that was inadvertently left out in error from the original legislation that passed in 2018. As it is currently left out of the public use area, it creates a dangerous situation for campers in the area and nearby homeowners because it is not subject to the trash dumping regulations or the shooting reg that may occur as the DNR is writing those. The bill also removes a section of land as a technical fix because this borough land— to be clear, SB 230 does not add any land that was not intended to be in the public use area when the original legislation was passed. During the process, we worked very hard with the sponsor of HB 321, Representative Josephson, to incorporate several of the amendments into SB 230 that he had wanted.

And the amendments we chose from the sheet was about half of what was there. And these were a mix of 8 critical habitat areas and wildlife refuges that were also have technical boundary fixes and that's it. Those that are listed in it, I believe, are Cape Newenham State Refuge, Eisenbeck State Refuge, Palmer Hay Flats State Refuge, Port Muller Critical Habitat Area, Igigiit Critical Habitat Area, Pilot Point Critical Habitat Area, Fox River Flats critical, and Kachemak Bay critical habitat area. And so, go ahead and thank you. That's my— yeah.

Thank you, Senator Rauscher, for your— where you're at in the bill. We do have a committee substitute for Senate Bill 230 that we drafted with input from Representative Josephson and his staff, Joe Meehan, that that worked with Senator Rauscher's office that incorporates some of the boundary changes from House Bill 321 from Rep. Josephson. Co-chair Freer, do you have a motion? Thank you, Co-chair Daibert. I move that the House Resources Committee adopt the draft committee substitute for Senate Bill 230, work order 34-LS1333/n, as our working document.

I will object for purposes of discussion.

Could staff to Representative Freer, Calvin Zulo, come, come forward to the table and speak to the parts of— I apologize, brief video? No, I can restate my motion. I apologize, I had the wrong version. So, uh, Co-Chair Freer, do you have a motion? Yeah, thank you, Co-Chair Diver.

I move that the House Resources Committee adopt the draft committee substitute for Senate Bill 230, work order 34-LS1333/h, as our working document. Thank you. I will object for purposes of discussion. And could Calvin Zulo, staff to Co-Chair Freer, come to the table and speak to the parts of HB 321 that are added to the CS?

Thank you, Co-Chair Dybert. For the record, Calvin Zulo, staff to Representative Freer. As the senator mentioned in his opening remarks, this CS adds boundary changes to Cape Newenham State Refuge. Eisenbeck State Refuge, Palmer Hay Flats State Refuge, Port Moller Critical Habitat Area, A'giig Critical Habitat Area, Pilot Point Critical Habitat Area, Fox River Flats Critical Habitat Area, and Kachemak Bay Critical Habitat Area, correcting errors in authorizing legislation.

Is there any discussion? Representative Prox. Yes, thank you. Just to clarify, if the committee substitute is adopted, then this big long amendment is not needed?

May I? Rep— yep, Co-Chair Freer. Thank you. Through Co-Chair Dibert to Representative Prox. That is correct.

As stated at the start of the meeting, the two amendments that were previously offered by Representative Fields will not be offered in lieu of adopting the CS. Okay. And I might ask— I was going to say Representative— Senator Rauscher, what your thoughts are on the CS. Senator Rauscher, for the record, District O. I appreciate the question. Through the chair, or through the co-chair, over to Representative Prox.

I support the CS because of the things that I had mentioned. We worked very hard with the chair of the committee, and we appreciate the fact that they were able to work with us, as well as the sponsor, Representative Josephson. So I do— I'm supporting it, and I appreciate all the work everybody put into this. Yes. Okay, thank you.

That— and I really appreciate the work because that part of clearing up the boundaries does need to be done, and we don't have to go into arguments about everything else. So, and which—. To the chair, I have to leave. I have an appointment, but my staff was there as Isabelle. All right, thank you, Senator Rauscher, bringing this piece of legislation forward.

Best of luck out there.

Is there any further discussion? Seeing none, I remove my objection. If— is there further objection to adopting the CS?

Seeing none, the CS is adopted. I would entertain a motion to move the bill from committee. Thank you, Co-Chair Dibert. I move Senate Bill 230, Work Order 34-LS1333/h, with technical and conforming changes from committee, with individual recommendations and attached fiscal notes.

Is there any objection?

Okay, seeing none, the House Resources CS for Senate Bill 230 passes from the committee. We will now take a brief recess to sign the committee report. And prepare for our next presentation. Brief it is.

Back on the record in House Resources. Next up, we have invited testimony on House Bill 381, the Governor's AKLNG property tax bill, from the mayors of the Fairbanks North Star Borough, My Home Borough, and mayors from the Kenai Peninsula. So first Next up, I have Mayor Greer Hopkins from the Fairbanks North Star Borough, who is on Teams. Mayor Hopkins, welcome back to House Resources. It's a pleasure to have you back.

If you can hear me, please put yourself on the record and begin your comments.

Hello, Co-Chair Daibert, members of the community. Can you hear me as well? We can hear you. All right, good. I'm not on Teams, I'm calling in, so I was concerned about that one.

So glad the technical aspects are working. Uh, thank you very much for having myself and Mayor Machicki back in front of the committee. Uh, we really appreciate the time and breadth that the legislature on both bodies has given to the mayors, uh, representing the local impacts in our local communities. And where a lot of the impacts, both positive and potentially negative or just different, from this gas line will be most profound. So I do just want to say once again, thank you for the opportunity to give input multiple times.

These conversations, as we all know, started back in January, late January, early February with the Alaska Gas Line Development Corporation and representatives from the governor's office. And so We have been involved since the beginning of this session, which of course means for an incredibly expedited timeline. These conversations could have started a year ago or more, but we are here today, and I appreciate the expediency that this committee is moving forward with also. You know, we're working off of the committee substitute for Version G. Is that the correct version that we're working off of and has been adopted by the committee? Correct.

Okay, great. Uh, so thank you for that. You know, the original version that was put forward by the governor, HB 381, um, got the project moving with the tax exemptions, uh, and tax reductions that, um, the— they thought were necessary. These incentives represented a significant public subsidy, as we know. And deviation from current statute.

But it got the project moving and gave it the financial infrastructure that it needed. But for us at the local level, especially here in the interior, it did not get the businesses, homes, residents, and community here the— any access to affordable gas, or for that matter, any access to gas at all. Off of that line. This new committee substitute corrects that by conditioning those tax benefits on delivering real statewide value through getting Alaska gas to Alaska— Alaska gas to Alaskans at the Alaska price. You can see that, you know, right on page 1, legislative finding number 1, the project maximizes the benefits to the state by ensuring direct affordable access to natural gas for the residents of the state.

I think that is an important line that highlights the need that this bill shows and then follows through with for the residents of the Fairbanks North Star Borough. So the main crux of where we are looking at, and I'll be talking today, is mostly going to be on page 8. the committee substitute under section dealing with eligibility. What this committee substitute does is ensures that in order to get the tax benefits outlined in this bill, very similar to what the governor moved forward with, then it has to include a gas line move or a spur line to the Fairbanks North Star Borough moving forward. It does not require Glenfarm to build that. It does not require a change in permitting at the FERC level for that spur line.

It does not require anybody in particular to move forward with it, but it does require a spur line to move forward. And the importance of that is there's been a lot of concerns that if the— a spur line is required in the FERC permitting within the project, it's itself, it could delay or stop the entire project from moving forward. And this does not do that. This takes a different route that makes the tax benefits contingent on Alaskans in the interior getting access to that gas at the same price as all of the other Alaskans who will be getting access to the gas off of this line. It's going to be required to have sufficient capacity to serve reasonably projected residential, commercial, and industrial demand within the interior.

And one of the important parts of that is, you know, just yesterday, myself, Mayor of Elysean City, and representatives from Alaska Housing Finance Corporation, from the Department of Defense, and a number of other entities were doing a tour of Elysean Air Force Base yesterday to talk about areas that AI data centers could go out and be built and lease land on the Air Force through a request for proposals, an RFP, put forward by the Department of Defense, with Senator Sullivan specifically saying I also need to be on that list of potential pages. That demand could be served through this spur line, and that language right there on lines 17 and 18 is important. Um, you know, I— the language on page 8 under this section is— I support it. Um, it is good language. There's a couple tiny tweaks that I believe need to be made.

Uh, first of all, you know, I want to make sure that the language— you can see it on line 23, as well as lines 15 and 16— are not specific to the different areas of the Fairbanks-North Starboro but just residents in general of the Fairbanks North Star Borough. So I'll be working with the co-chair to tweak how that references the residents here because a lot of the North Pole area also has access to Interior Gas utility infrastructure. As the initial reason for the Interior Gas utility being created was to assist in improving our air quality, and then the air quality in the North Pole area also needs to be addressed and could certainly be helped through affordable gas being delivered through a spur line to the infrastructure that is already out there and potentially expanded. Um, the other language that we're looking to be tweaked is on lines 19, 20, and 21, dealing with a hard timeline for when the spur line would need to be built. And that, uh, change is already being worked on.

I had a meeting yesterday with representatives from Glenfarm as well as Commissioner Dibert's office to ensure that the spur line development does not hit unforeseeable and uncontrollable obstacles, maybe in the permitting process, for example, that, you know, somewhere along the line outside of the control of Glenfarm or anybody who's looking to build the spur line might not be able to control different timelines or impacts from permitting. So, we're going to be working to tweak that language and coming back to the committee with an amendment for that. But that was an understanding between both Glenfarn and us here in the Interior, that we can overcome that, that we can find language that works together for us. Because I can understand where Glenfarn is coming from, that they say to me in that meeting and then outside of that and in our Tiger Team meeting today, that they are supportive of finding a way to ensure that a spur line gets built. And so they do not want to stop that.

They're not interested in trying to separate it from this project in our dialogue, but they want to make sure that when obstacles out of their control show up, it is not something that can put the entire project on either off of the burner or on the back burner. So we're going to be working with language, and I strongly believe that we can come for, uh, find that agreement within the next few days. Um, and appreciate Glen Barnes' work on that being their main concern. Additionally, you know, lines 29 through 31 at the bottom of page 8 is important in that we here locally pay for the same access to gas that the rest of Alaskans on this infrastructure will be getting. You know, the Fairbanks North Star Borough is not looking to get rich off of this spur gas line.

We, we only have 2 miles of the line, and I'm not looking to reroute the major line or anything like that to get myself and our, and our community more revenue. We want to make sure that the gas that's delivered is affordable in the same way that's affordable to all the, all other Alaskans. And this rolls the tariff, the cost for building and operating it and maintaining the spur line into the full system, meaning, you know, we're going to be paying the same tariff as Anchorage, and Anchorage is going to be paying the same tariff as us. When we have to— once we get that gas into our interior gas utility infrastructure that delivers it from the city gate to the homes and businesses and institutions here, we'll be paying as Fairbanksans only that tariff for our infrastructure. Same as, you know, communities south of us paying for the NSTAR tariff.

That is on them, not on us. Same as we'll be paying the Interior Gas Utility Tariff, and Anchorage and Mat-Su and Kenai won't be paying for the AIGU tariff. We will all be paying to get access into that distribution infrastructure together as Alaskans. And that's what's really important in this bill here. So I really want to thank both co-chairs for working hard to ensure that what the Interior has been asking for, for over a decade since this route was set up and permitted, is coming to fruition today.

It's been a big concern that if we don't have an opportunity to get language like this in, then Gaa'axaa gas will not be sent to all Alaskans along this route. Out of an affordable way. Additionally, if, you know, that language on lines 29 through 31 are not there, then we're not going to be looking at affordable gas here in the interior. That would be borne on the backs— that means the cost of constructing the spur line to just get gas to our infrastructure, distribution infrastructure here locally, would be borne on some 3,500 Natives, and that would make it unaffordable at the local level for the spur line to ever happen or for a single person here to want to convert to natural gas, whether it's Golden Valley Electric Association wanting to deconstrain our generation capacity or an AI data center or somebody on Eielson Air Force Base ever wanting to get access to this gas. And so the affordability of it is as essential as access to it.

This language does that, and I think that's very important, and I say thank you for that. You know, this bill also— this language in this committee substitute puts the oversight of the requirements for the spur line in under the Regulatory Commission of Alaska. That's going to ensure fair and non-discriminatory rates and is a generally used structure for infrastructure just like this and is a good route to make sure that there's a place for the disputes and a place for regulation to make sure that the profit, um, needs and the costs of this infrastructure are adequately borne within that tariff. Um, but, you know, once we're looking at what might that tariff cost, uh, earlier this week there was presentations from consultants to the House Resources Committee that said, you know, once phase 2 of is built, the— that tariff would be a total of $0.02 on top of whatever else is going to be for delivery to the liquefied natural gas customers across the Pacific and across the world. So it would be a very small rate and keep that— it's not going to be increasing the cost to make it uneconomic at the national and international level.

So You know, we are, as we've been described, a rounding error financially on the cost of this project when we're looking at the cost of a spur line, whether it's the one that was put forward in the Senate Resources fiscal note or the one that was discussed with MSAR yesterday between myself and Mayor O'Neill and MSAR and Glenfarm. Somewhere in the neighborhood of $180 million. It's, you know, a rounding error on a $40 billion-plus project. So, you know, this is important to make sure Alaskans are getting Alaskan gas. This is a way that is affordable to everybody, shared costs to make sure that everybody gets access and there's good regulatory language in place that makes sure that it is fair and equitable for everybody.

So thank you for your time today. And happy to answer any other questions and look forward to the amendment process going forward as well.

Thank you, Mayor Hopkins. Thank you for your words and for being here this afternoon. Really appreciate you, um, and your thoughts on how this would affect Fairbanks. And I just wanted to say, uh, previous hearing, we do have a couple of questions in the queue that the spur line is estimated to cost roughly $150 million to $200 million and included in the cost of the overall project would add only about 2 cents to the cost of gas from the project once exports are started. And that is what the legislature's oil and gas consultant said at a hearing recently.

So I agree, if we don't believe a spur line would pencil out, if it's not included in the overall project, um, i.e., if Fairbanks folks have to pay the full tariff, it will make gas so expensive that industrial and military sources probably won't utilize gas and the residential base won't expand. But if it is delivered for essentially the same price as Southcentral, then it will be much easier to expand the volume of gas utilized, and it will make the gas cheaper for everyone. So a little pain early on, but benefit down the line. No pun intended. So with that, Mayor Hopkins, I do have Representative Fields, Elam, and then Mears.

Thank you through the chair. So Glen Farnham has been meeting with legislators and having small group meetings as well as individual meetings. And one of the issues they mentioned at a meeting yesterday is concern, which Mayor Hopkins referenced, around the conditional effect language about begin construction on a spur line. And Mayor Hopkins, I was curious about— sort of alternate language that nonetheless guarantees a spur line would be built and wonder if, um, a less risky conditional effect might be signing a notice to proceed versus beginning construct— construction. We want to have a requirement, we want to minimize risk from exogenous factors such as permitting, lawsuits, etc., and I wonder if an NTP might be a less risky but still guaranteed way of achieving that conditional effect.

Uh, Representative Fields, to the chair, thank you for that. Those are some of the similar ideas, similar to some of the ideas that we bantered back and forth in our short meeting yesterday between, um, the mayor here and Glenfarm and Enstar, as well as requiring expedited timelines when within our authority, like at the regulatory commission, apparently they can do, I believe it's 480 days, we could shorten that timeframe so they'd have to expedite it. Making sure the permitting is moving forward was another stage or another opportu— way that we looked at making sure things are moving, but not putting in a hard deadline for that. I would ask that the members of the committee allow myself and Co-Chair Diver to work with Glen Farn on language that works for both sides, um, and not try to introduce an amendment on your own without being part of those discussions. So, um, that is something that we'll discuss.

So please keep your powder dry and allow us to have those discussions internally and come back with a mutually agreeable answer, um, in time for the committee to move forward and keep this bill moving forward. Um, uh, follow-up? Yes, please. Um, yeah, I'm not I'm just going to draft the amendment separate from you all. I assume you all are doing that.

I just want to explore the concept. Um, I did want to note, um, if we distribute the cost of the spur line across existing customers, it actually is pretty expensive. It's about almost $500 per household. So one thing that I'm curious about is I think we need to explore a little refinement to the language, spreading that cost across the system to ensure it spread to all customers, including export and military, because if you just apply it to residential and local business customers, it actually is pretty expensive. So I wanted to flag that as an issue where, in my opinion, we need a little more refinement for the bill.

And I wanted to ask Mayor Hopkins to, to think about how to structure it. We would not want a scenario where, say, RCA approves rate case where, oh great, 300,000 South Central customers get to pay for Fairbank Spur Line and then there is an export agreement and no one in Korea pays anything for it. That would not be very fair for South Central. I just flag it as an area for additional refinement of the language. I don't know if Mayor Hopkins has any thoughts on that.

But the cost is actually quite significant for existing customers if we don't get export customers to pay for it. [FOREIGN LANGUAGE] The more hands on deck to pay to support tariffs, the lighter the load for all. So if we can get international companies to help support that as well as part of the project and ensuring that they get, you know, what's going to be a very steady supply of very good quality gas here from Alaska, which is a benefit to them, making sure that they're not going to be subject to the threat of war moves in the future or, you know, hopefully no international wars that impact our borders and our shores. That's something that I think we can certainly work on language for. Thank you, Mayor Hopkins.

And before I go to the next question, I just wanted for the record to welcome Senator Kawasaki to the House Resources Committee this afternoon. Uh, Mayor Hopkins, I have Representative Elam. Thank you. Um, I, I appreciate the advocacy for your your community, and I support, you know, getting inexpensive energy and natural gas to Fairbanks. But I do feel the need to maybe push back just a little bit.

Getting a FERC permit is not for the faint of heart. And so to put contingency language saying that we won't start shoveling on this project on a FERC license or FERC permit is, is pretty tough to to say that that's what we're going to do. You know, and I don't know, there's no other spur lines along the north-south loop here. And, you know, again, I support Fairbanks getting inexpensive energy, natural gas, a pipeline. I want to see this whole thing.

But, you know, I'm on the Kenai Peninsula. I represent the District of Nikiski. And so We're not getting a spur line to Seward or to Homer. We're not, you know, nobody— we've spent the last 50 years working on infrastructure throughout this whole area. So I want to support getting this put in, but, you know, the real purpose of this project is economic development across all of the state of Alaska and energy, cost-effective energy for all of us.

And so Where are you at on getting your FERC license or FERC permits now?

Thank you, Representative Elam. Through the chair, the language in that we're working with and discussed with Glen Farn yesterday would— that removes the 2-year hard start for the spur line would allow for the permitting to be going in place for the spur line while the taps have already been turned on and are operating for the major line. So it divests the construction of— it will, when the amendment comes forward, divest spur line timeline from the major line, but ensuring that, you know, the permitting process is moving forward would be important. And as you all know, there are no specific projects moving forward at this time because nobody knows if this line is going to happen, if this legislation passes or not, um, before they're able to get a, uh, the idea and the planning for a spur line moving forward. Whether it's going to be a joint venture that has been mentioned in this committee in the past, um, that they can start that conversation the day after the legislative session when this passes and can start that.

And even with this language in the bill currently, it would allow them 6 6 years from now to be able to make sure that, that permit for a 30-mile line is in place. Or, uh, with the amendment that we're working on, could be longer than 6 years, so, and would not impact the start of the major line. And you're absolutely right, Representative, the access to the gas is also there in the presentation, as well as economic development. And you don't see economic development in the second largest city in the state without affordable access to this gas. And here in Fairbanks, we won't be— no one is going to— no one's going to convert to gas if it's more than what we're looking at now at the $24 to $25 per MCF that we're paying now.

And that same consultant that said it was going to be 2 cents, I believe, also said it was going to be $18 to the price of gas. So you tag on a full price of a spur line among 3,500 residents here in Fairbanks, plus our local infrastructure, and you're looking at over $30 per MCF here. So economic development is essential as well as access to the gas. And this spur line language that we're talking about allows that to happen without impacting and without threatening the major line. Follow up.

Follow up. I agree, and I appreciate that. I just want to make sure, you know, that we're not losing traction on the project. And, you know, we've only got a couple of weeks of session left. And so it's a priority to get, you know, all of this stuff working together.

And so I want to work with our friends up here in Fairbanks and across the state. But, you know, I also want to make sure that we have contingency language in here that allows us to be able to capitalize on these opportunities. You know, right away. Thank you. Thank you, Representative.

He goes to the chair, and then I share that goal, and I'm looking forward to the conversations with Glenfarm because I believe we can find that, um, that language before that does not put the project at risk and moves access to Alaska's gas for Alaskans at an Alaskan price in time to not hold it up in committee either. Thank you. Uh, thank you, Mayor Hopkins, and I just want to add to the As a follow-up to that, just as a reminder, the folks in the Interior consider the pipeline to South Central the spur line to Anchorage. So I just had to get that in. Next question is Representative Mears, Mayor Hopkins.

Thank you. I've got two things. Representative Colon, let me know if you want me to parse them and get back in line. But the first one is a bit more of a comment, but, uh, Mayor Hopkins, if you got some things that you want to add to it. So since we're talking at the moment about the Fairbanks spur line, this is reminding me a lot of the conversations we're having around our electrical distribution infrastructure and the comment from Representative Saller the other day about a postage stamp rate.

So there's a couple different ways you can look at rates. You can look at a postage stamp rate, meaning there's a vast infrastructure that we all share in the cost before. Some, some places are more expensive, some places are less expensive to provide that service. It's exactly the— I think it's a very strong corollary to that, you know, electrical system so that we are moving in the path so that it doesn't matter how much transmission line there is between the cheapest power on the rail belt in Bradley Lake to get up to Fairbanks by accumulating all the costs of the system along the way. So that's what we're getting at with Fairbanks Spur Line being included basically in the gas line backbone as like this— the major infrastructure.

And then the community is responsible for all the distribution and the smaller bits upon that. And the smaller communities kind of come off of that. So that's a very similar sort of thing. To me, I am standing in solidarity with the folks in the interior to have Fairbanks included in that backbone because there's a significant amount of demand that gets generated by being able to bring those customers online. Not just, um, the residents of Fairbanks, but the university, the bases, um, uh, GVEA has got a large industrial load.

So having them on there benefits everyone throughout the system because the more units of gas are being sold, the more that those larger infrastructure costs are being, being built out. So, Mayor Hopkins, I don't know if you had anything you wanted to, um, to, to add to that thought. Thank you, Representative Mears. Um, just on that note, you know, just two small things. One thing, it is not a Fairbanks spur line.

It is a spur line to the residents of the borough that includes North Pole, the North Pole area, who already have access to natural gas for— from— in a number of neighborhoods through the Interior Gas Utility. And so it's not just for Fairbanks, but for the greater borough area. So it's important to know that it's a broad impact to this community. And on that broad impact page is the aspects of national defense from Eielson Air Force Base and Fort Wainwright, potential to get access to this affordable gas. Fort Wainwright has the oldest operating coal plant in the entire country within their borders that gives them heat and power, and that has gone out recently from time to time and then could put war readiness and defense of our nation's borders at risk.

And so, you know, this could deliver access to enough gas to bring that online. And Eielson, while the coal plant out at Eielson Air Force Base is not as old, being able to supply them with affordable gas through this spur line would be essential as well. So that would also increase the base load and spread out the cost with a large amount of demand and potential growth as we see both of those bases being increased in scope and, and, um, and what they're looking at having in terms of service members and equipment. So it's important for national defense as well, as you mentioned, with the bases. Follow-up.

Uh, thank you, Mayor. As I— as the representative from North Pole is sitting to my side here, I was aware that I was talking about a larger, uh, group of folks than, than were in my words, so I'll thoughtful about expanding my vocabulary there. Um, but, uh, the second thing I wanted to, to talk about that is a little bit of a newer concept in Alaska that we've brought into the committee substitute here that is getting traction is, um, basically taking the legislature out of the negotiations of the boroughs for what the community's needs are for construction impacts. By having Community Benefit Agreements. And I think that warrants a little bit more discussion.

I have some ideas in my mind of things that might be helpful. I don't know where— that might be a little bit further down the process from where you guys are in negotiating with the project developers. But I just wanted to share and get your thoughts on, on some things that could be included. So some things that are typical to be thoughtful about are, you know, like direct infrastructure impacts that Hey, this road that's going out there needs to be upgraded in order to serve construction traffic. We need to—.

Like, our community desires to have a certain amount of local hire, and we need to have that negotiation. We would appreciate a, like, a welding training program for our graduates, you know, on these things to prepare them for the workforce. Force. And then there's other things that are— that can be an advantage to a community because there's a large construction project coming. So I'd had a conversation earlier today, say for example, the borough had land in which was utilized for a laydown yard, but instead of having a dollar cost negotiated, it was it was an infrastructure upgrade that wasn't related to the community.

And I had another idea. Representative Holland mentioned, hey, we've got housing shortage, and there's— these camps are being mobilized, you know, in-state. And what happens to things after the project are done? So can there be a negotiation? Hey, you can utilize this borough land to set up this man camp, and once the project Project is complete, here's the negotiated deal in which the borough can acquire that man camp that's up to a certain, you know, construction standard that we can utilize for housing in the community after the project.

So I don't know if those ideas are starting to percolate and if you're starting to have those conversations, but I think more conversations we're having around CBAs will be helpful, not just for this project, but like as we look at other infrastructure development and other projects within the state?

Definitely. Thank you. Thank you, Representative Mears. I'll try to take all of those things in general from the last to the first. One of the things— you're absolutely right, looking at housing is important.

We had our third Gas Line Tiger Team meeting here just this morning. And one of the things they said at the first of those is that they're not looking at building houses in communities, uh, because the, the work camps are going to be mobile. They're going to pick them up and move them camp to camp to camp, location to location to location, as construction along the corridor is occurring. So, um, that is something we had floated to them, especially in terms of you know, how do we share in equity, how do we share in infrastructure after the fact. And that is— that was something we were very interested in and had come up in their conversations with AGDC earlier on in session, but does not look like that's necessarily the direction that Glen Barnes is looking to go.

But I don't want to speak for them, but that was the indication we got, was they're not building homes, they're having mobile homes built around and building a number of homes would be a substantial cost for their opera, their construction plans. In terms of where they— that camp could be, and even more so where the pipe offload from the Alaska Railroad and pipe laydown facilities would be, is something that we've been in conversations with the Alaska Railroad and with Glenfarm about. Currently, the, the plan initially was to have that offload out on— those of you from Fairbanks will know, out on the Murphy Dome Road area where the railroad first comes into the Fairbanks North Star Borough nearest its farthest outlying road, and then driving on two very narrow roads, very windy dark roads, Gold Stream Road out to the Stephen Elliott Highway to get to Dalton and go up, and then out Sheep Creek Road crossing 2 more railroad tracks and some very sharp turns to get to the Parks Highway. That is not ideal for safety nor for construction ease of those trucks driving. So I'm trying to be in conversations with Glenfarm and the railroad about another parcel of borough land where we own nearly 600— or just over 600 acres, I believe, that is on the railroad as well, but out the Richardson Highway between the Badger exits that would allow them to just hop— to offload at the railroad and then hop on the Richardson Highway and then head out to speech or head out to parks very easily without going through town and without going through residential roads that are not built for the industrial demand.

We had conversations this morning at the Gas Line Tiger Team about that, and those will be ongoing. Um, they do— we do not need to put language in legislation for that, but that is things we're talking about. The impact on the infrastructure that we have for us, you know, would not be directly, uh, impacting any of our road service areas here in town. And as a second-class borough without a road powers, we only have road service areas for some of the neighborhood roads. But what it would impact most of all is our fire service areas that provide, um, EMT service along much of the Parks Highway, uh, and much of the Seas Highway.

As those trucks are moving north, there will be accidents, there will be concerns, there will be impacts on those roads, and the safety concerns would drive up costs for our fire service areas. And so how we work with them that community service agreement could be beneficial. So that's the way we've been looking at it. You know, other cost reimbursements for us, we have an enterprise fund for solid waste. So as they drop off waste at our municipal landfill, they would be paying the tipping fee.

So it would be a reimbursable rate. You know, that structure for both solid waste and for emergency services is different in each of the municipalities. It's different for Denali Borough, it's different for North Slope Borough, it's different for the Kenai Borough. So I don't want to talk for them, but that is one of the aspects of this bill that is good. And the discussion that we've been having as the mayors is both good and complicated, is that each individual borough is very different in how we're structured and what our needs are.

And as the governor and Glenfarm look to get away from current statute this requires further discussions and details at the local level. And so a community benefit agreement could be a good avenue for that, as well as the opportunities for municipalities to elect between the, the volumetric input tax versus an equity stake. And so that language in here that allows municipalities to make that decision also allows a decent separation from current statute and for this project to continue to move forward by having those negotiations locally and not having to go through, you know, committees to understand what we need as mayors and what we need as road service areas and fire service areas, and allows it to— the project to move forward without holding it up in those specific negotiations in the legislature. Uh, follow-up, um, thank you. Through the co-chair to Mayor Hopkins, this is exactly what I'm imagining happening with community benefits agreements that I really I appreciate that those are the conversations that you're having.

It's a discussion, it's a negotiation, it's these are the things that are important to our community. And thank you for bringing up solid waste. It's a big part of, you know, my professional life before this, that these are all impacts that communities have. And like Kenai Peninsula Borough, you're— I'm looking over at Representative Elam— that's paid by property taxes by residents. And then, you know, there's commercial rates as well.

So very different circumstances for the different communities. So there's sort of 3 tiers of potential impact to communities from this. Looking at the community benefits agreements, negotiated things, including an impact fund. Then looking at the alternative volumetric tax is the thing that communities benefit from the resource, which is, you know, we talk about— I'm looking at Representative Procs now— libraries. So, like, if the community needs a new library, it's not part of the community benefits.

Benefit agreement, but as the ABT goes along, as the project matures, as money comes through the line, the benefit to the community comes through the ABT for that community build-out. And then, of course, there's that third one, Mayor Hopkins, that you brought up, which is the investment for an equity stake, which is an additional bit that if the community's got the ability to invest in the project to have additional income. So I think I'm liking the way that this is stacking up, that there's opportunities that The costs aren't— from the project aren't going to get pushed down to communities in the short term and pushed down onto local property taxpayers. Um, and then the benefits to the project come later as the volumes go up. Um, and that's in addition to, to lower, um, and reliable energy rates.

So I, I like how this is starting to, to, to shape up. And like, as we're having more conversations, it's getting a little more clear to me what these very specific things are, and hopefully I'm getting a little better articulating them as we move forward as well.

Thank you, Representative Mears, for your words, and that was eye-opening for me too from our meeting the other day. On just the more people we could get on will help us in the long run. That we need to incentivize Fairbanks to get online for those reasons. Mayor Hopkins, I have Representative Calhoun.

Thank you, Chair. Mayor Hopkins, I think most of my questions have been asked already, but I wanted to see if you had any thoughts about the volumetric tax. The original bill had $0.06. This one has up to $0.20, $0.05 for the pipeline. Did you have any thoughts about that?

Is the ABT— obviously the spur line is really important to you guys, but do you have any strong feelings about what that ABT tax would be?

Um, thank you, Representative. To the chair, you know, I don't. Um, the, the opportunity for an equity stake for communities that would have more infrastructure through their borders is important. Making sure that it's available for revenue to support communities like the Denali Borough that does not have a property tax is a benefit for the— in the side of the volumetric tax, whether— whatever that amount is. And so I think it's— I don't have an opinion one way or the other.

I believe that's going to be your hard question, is what is that threshold that supports the state meets its needs as well as gets the project the financing that it needs to be able to move forward. So I'm sorry, I don't have much to say because it's, it's not a problem for me what that number is for, for us. We only have, of course, as I said multiple times, 2 miles of line going through our borough. So whether it's 20 mils or 5 cents or 6 cents per MCF, we're not going to be getting a ton of revenue from it, uh, so other things are more important. Okay, that's helpful.

Thank you. Uh, thank you, Mayor Hopkins. And I just want to follow up on that, that the 20 cents per thousand cubic feet of gas for export— export, um, while this is more than the tax Dunleavy proposed, uh, it's still a dramatically reduced tax compared to the current property tax laws would require. So, and we have a final question from Representative Fields. Actually, just a request that the committee hear from the mayor of Anchorage or one of her representatives about anticipated cost to Anchorage too, because largely the quote mayor's discussions have excluded Anchorage, even though Anchorage will see see the greatest impact.

I just want to hear quantification of the cost before we move forward on the bill. Thank you. I mean, I value Fairbanks' input too, but Anchorage will see the most impact. Thank you. Thank you, Representative Fields.

Uh, Representative Prox.

Yes, thank you. Uh, I, I guess I want to— going back to page 8 Lines 19 and 20, the spur line starting and completion.

Right now, I guess the estimate is 2029 for the, uh, completion of the pipeline itself, and then as I recall, don't hold me to this, but 2032 for the conditioning plant and the liquefaction plant. And the flow rate is going to— assumed to increase considerably. But during the interim, there's— well, there's some doubt about whether a spur line could do the interior any good because of the agreements IGU has with Harvest Petroleum. Have you thought about that, and are we requiring starting too soon? If we have a pipeline sitting in place that, that can't potentially do us some good, then we're just wasting interest expense on the construction.

So when— what are your thoughts on the ability for the Interior to take advantage of the spur line? Thank you, Representative Frocks, to the chair. Yes, those conversations have been happening. We talked with Interior Gas Utility, and one of the main triggers for that severability of that clause of that contract that they have with Harvest and Hilcorp, Harvest for the the liquefaction of the gas to put onto the ITU-owned trucks from the slope and driven down, and Hilcorp for the gas that goes into the liquefaction that Harvest runs.

The main point in the ability to get out of that contract and switch to gas to the line is the cost of gas that comes to Fairbanks. Citygate, so the borough here, um, and it's around $19 per MCF that we need to be able to get under to allow Hilcorp to have the decision if they get out of that contract. So the affordability of the gas coming through that spur line is essential for us to be able to get access to it. So your point to your question, uh, Representative Prox, Highlights the need for the language in this legislation that we need to make sure it's affordable and accessible for us to be able to utilize it here and switch from truck gas to, uh, to gas line gas. But the— much of the infrastructure, um, that IGU would be getting out of, they still own and can be moved to benefit other parts of the state.

It could be, we could move it to the, somewhere in the Fairbanks North Star Borough and liquefy gas here and truck it down to, you know, to Clear or to the Richardson Highway, communities along the Richardson Highway that won't get access to this. And so there's a lot of potential benefits to ensuring that the gas coming from the spur line is affordable and gets below that $19 threshold, and so can be certainly beneficial. So that's why the language in this legislation is important, is to be allowing that deferability clause to even start taking effect. Follow-up? Yep, follow-up.

So I guess then, just to clarify the question, my understanding is that IGU has a take-or-pay contract with Harvest Petroleum. And it sounds like you're working on a way through that contract. There is a way off, but you're working on the details? The cost— thank you, Representative Proxim, for the clarification. Generally correct.

The cost— the trigger that's built into that contract that allows Hillcorp, not Harvest, but Hillcorp, to get back out of that contract is around $19 per MCF. That has to come here to the IGU infrastructure. Okay, quick one and follow-up. Do you have, I guess, at least— maybe it's a broad light, but is there a line of sight to getting to some solution to that in a reasonable time?

Oh, absolutely, Representative Prox. That language is in their contracts. It is there. And so if we can get a gas line that delivers accessible or affordable gas, then it does— that we're not just seeing light at the end of the tunnel, we're at the end of the tunnel.

But the— well, for instance, moving, moving the, um, liquefaction plant from the North Slope to Fairbanks, is that something that there is some reasonable option that we think might happen, as an example. There are— Representative Proctor, the chair— there are options. I don't think besides these are options on the table, the discussions have gone any further than that at this time. So we wouldn't be— I don't want to speak for Interior Gas Utilities work or the, you know, the energy infrastructure and co-ops along the Richardson or Spear Air Force Base or anything like that. But there are options, but they're not fully fleshed out yet at all.

So that would have to be a next step. Yeah, okay, thank you. I just want to make sure we're not getting into a contract that, if you will, falls apart. That's, that's my concern. And, and I realize that the first No, I, I realize that it's definitely, you know, nothing is set in stone at this point.

I understand that, but just so we're aware of that. Absolutely, Representative Fox. Sorry for interrupting. Um, and of course, like I said, the first step important is language similar to this in the legislation. So thank you for that, uh, those points and those questions.

Okay.

Different question, if somebody else had others. I think we don't have any other, so different topic. Okay, and would you say that H-Star and Glenfarm have the same understanding of the allocated cost provision on 27 through 31?

Do they—. That did not come up in our conversations yesterday when we were talking about lines 19 through 21, um, and the only concerns that they voiced to us were those lines 19 through 21. So I would believe that they are the same understanding based on the scope of that conversation that we had. Okay, thank you.

Any further questions or comments? Seeing none. Mayor Hopkins, thank you so much for being here. I think we're through with our thoughts and our comments. Just thank you so much for your time.

I'm not sure if you could stay online or not for Mayor Machicki's comments on the new CS, but if you are available, you might be reached out within the next hour.

Um, thanks. I do have to jump off, um, but so I apologize for that. Mayor Machicki is, um, more knowledgeable and can, uh, on these facts than I am and can certainly probably answer any other questions. If there is a follow-up, um, we will be able to respond in writing to answer any questions that might come up for the Fairbanks North Star Borough. On that note, I just want to say a bill that, you know, could potentially deliver a gas line and is in essence 14 pages long is remarkable.

So good work on keeping it shorter and briefer and simpler. Those are how things get done down there. And I think there's a lot of hope for this seeing the light. So thank you. Appreciate your time.

And we will respond in writing to any questions that I'm not here for. So thank you. Thank you very much. Excellent. Thank you, Mayor Hopkins.

Have a good rest of your day. Thank you both. Thank you. Thank you, members of the committee and co-chairs. All right.

So I'm going to move next right into our next guest speaker. Mayor Machicki, if you can hear us, state your name. We see you on Teams. And begin your testimony.

We are unmuted. There we go. Hello everyone. Thank you, House Resources, for having us online today. And Co-Chair Dilbert, I hope I say your last name as well as you say mine.

That's pretty impressive. Dibert. Pardon? Representative Dibert. I get it all the time though, so that is okay.

I actually texted another representative to make sure I said it right and I still messed it up. Thank you for having us today. House Bill 381, I'm going to be very general on my comments and then I'll be available for questions. I have to say I really appreciate your efforts to cover the interests of the affected, most affected communities. I represent Kenai Peninsula Borough.

It's the size of West Virginia, but the area that provides all of the gas in south-central Alaska is fairly condensed, if you will. Cook Inlet, the west side, it began in '57 with Swanson River. Proud to have that role through all these years, obviously, where getting to the point where we're going to need some other gas to enter the market, um, for the long-term stability of natural gas, not only here but hopefully through, throughout the spine of Alaska. Very important to us. I appreciate that you're, um, focused on affected communities, uh, construction costs and community impacts.

43% Of the value of this This project will be in the Kenai Peninsula Borough. We will live with it for 2 generations. We want to remind folks we currently have the authority to negotiate a deal right now under Title 29. We have with many other facilities through the years. Haven't heard any complaints on our ability to understand their challenges.

I suggested the volumetric tax. My background in the industry. It's a way to share in, um, when there is not a lot of value moving through a line or a project, and then benefit more significantly when it is. It also allows us to ensure that facilities remain in place when they're not operating. So I'll just give you two examples.

We've been kind to the old Kenai LNG facility and that I managed for years, the Agrium facility, um, that leaves the holding cost low so that hopefully they'll be there for other uses in the future. I hear talks about Kenai LNG possibly becoming an import terminal. We know if there are large volumes of natural gas, there's a high likelihood that the Nutrien Now facility next door may come online to produce ammonia, which is a feedstock for hydrogen production around the world. We'd like to see those facilities come back online. We support an economically feasible project.

Kenai Peninsula Borough is very supportive. We understand the risk to commerce if we don't have a long-term affordable source. And what we're dealing with here is that tension or balance between covering costs to communities and not increasing the price to where we're no longer competitive. This is a challenging project. So I, I had a meeting today with Glenn Farn and AGDC.

In fact, I spent the morning at the project site with the former Minister for Foreign Affairs of Japan, Kamikawa Yoko. It was a delightful visit. We went to the site. It was raining sideways, and I kept explaining to her, "This is summertime. Enjoy it.

This is what it's like here." We've been very invested with investors and developers to promote this project. So let's get to the tough part. I don't think it's tough. We are in negotiations with Glenfarn. We had a very serious discussion today.

Any rumors of any of these communities being greedy or having their hand out was eliminated by a bill that reduced the taxable value by 90%. Why are property taxes there? They are there to cover the costs of local communities and hopefully develop or deliver some peripheral benefits to those communities as well. Well, comparing who's impacted the most, we're having to realign our highway. We will be living with thousands of workers for 4 years.

We will live with that facility in perpetuity.

Comparing that to a pipeline corridor where a pipeline is then buried 36 inches and will have minimal impacts. Other than construction, kind of a night and day thing, and you seem to recognize that, and we appreciate it. We're not saying that the others won't be affected. We hope we all receive the benefits, but we will be living with it, and pretty significant impact. When I worked through their worksheets, impacts to— this is very tiny print.

I normally don't need reading glasses, but I do today, on solid waste, roads, fire, EMS, recreation, education during construction is around $10 million a year working through the project's worksheets that they provided. So there are very real impacts that will increase during operations. That's fine. That's just kind of what it looks like. But we do have kind of a bottom, and I don't want to talk about what the bottom looks like for the Kenai Peninsula Borough.

The impacts are different for every community, and I appreciate that the bill recognizes that and allows some individual negotiation. I think that's imperative moving forward. Again, I want to make sure that folks do understand that We are working with, as the other communities are, with the developers and AGDC for a fair outcome. A fair outcome does not have us rubbing our hands together on profits. A fair outcome is where I can look at the 62,000 people I represent and say, I'm comfortable that you will not be subsidizing this project.

And that is the bottom line. So if it's being framed in any other way, I ask you to push back. I think you have, all of you on this committee. That is not the case. We are negotiating in good faith.

I had ideas early on about a volumetric tax. I think that's fair. I don't believe in just taxing something because it's standing. I believe that a tax should be a sliding scale related production and impact, if you will.

I had other ideas about construction impacts being based on actual costs. We don't care to make money on construction impacts. We want to be able to face the people we represent. So when I was down there with all of you, I put my hand on a Bible for Serving the people of the state here, I put my hand on the Bible for the 62,000 people that call the Kenai Peninsula Borough home. And I have to look them in the eye and tell them that we're covered.

That again, I've used this term, little old ladies in Nakiskiil, Alaska will not be subsidizing a global project. And there will be benefits on affordable gas. Not going to use the word cheap, I'm going to use affordable gas. So that's kind of what I'm going to say today. I'm going to stand by for any comments.

You had a lot of questions. I do have a pretty extensive background in the industry for longer than some of you have been alive. Um, I know I'm holding up well for an old guy, but If I can help with any of your questions, I'm happy to answer them.

Thank you, Mayor Machicki, for your words and for being here this afternoon. Are there questions from the committee?

I see Representative Prox and then Representative Kloom.

Thank you. Through the chair, good to hear from you now, Mayor Machicki. I would like to discuss a little bit between the cost— well, let me preface. During construction, all of the impacts of construction are in addition to what it is already costing you to run the borough or the city. True?

That is a fact, yes. Okay. And then once it's built, the project itself doesn't necessarily create impacts. It's the people that move in, go to work there, live there, build a house. It's the people that move in that make the impact to the local municipalities in My way of thinking about it.

And we have sort of the same problem in Fairbanks-North Starboro.

So I can't agree with that.

And I know it's— prox. I appreciate your comment and the way that you're looking at it, but a large facility with hundreds of employees employees, hundreds of peripheral businesses supporting that facility, the traffic on the water, the traffic on the highway, the interconnects we'll have to do after the highway is realigned, all have ongoing costs. Road maintenance, solid waste, they have ongoing costs. If we add a significant amount of students to our school district and the funding formula remains the way it is, it'll be a substantial impact. It does not evaporate for any of our facilities.

It continues in perpetuity as long as they exist. We have requirements, they will have requirements for their emergency response plans. We're an intimate part of that. We train, we support, great partnerships. But there are ongoing costs as long as the facility operates.

And actually, there are typically ongoing costs after the facility ceases to operate for a much smaller proportion of those same expenses. So there are community impacts to a large operating facility in a small community.

Okay. Follow-up? Follow-up? Yes, I agree that there are some, but I'm wondering what the division is between the cost imposed by the facility itself as opposed to the rest of the development. If the facility wasn't there, the businesses and the new people wouldn't be there.

And the underlying reason is that the The gas, the resource itself, belongs to everybody in the state. And I would argue that in— and including the Fairbanks North Star Borough, but North Slope, Valdez, and Fairbanks have developed more with the oil pipeline, um, and the taxes that were imposed by that, then— and that was money that could not go to rural areas and etc. And in— there's some— at some point it becomes unfair. I don't know where it is, and of course I'm prejudiced in favor of the Fairbanks-North Star Borough, but I recognize that other places in Alaska are to the degree that it drags down the value of the gas at the wellhead, if you will, if nothing else.

At some point it becomes out of balance and we need to be thinking about that.

I don't know if there was a question there, but I do want to ask you the purpose for property taxes at all.

The purpose for property taxes? Is for generally on the value of an asset to cover their share of local costs. [Speaker] Right. [Speaker] We are essentially eliminating nearly all of the property taxes and removing their ability to share in the operation of our community. A little bit of a fairness issue, and you're supporting us Furline, which I—.

Point well taken. —Find interesting. And that's okay because we're supporting every impacted community along the pipeline right-of-way and others.

But the bottom line is they become members of this community and drive that growth that increases costs. And some will build new houses. The 4 years of construction is— sort of a pandemonium style of impact. The 40 years of operation afterward, if you're saying that the Marathon Refinery doesn't have an impact in our community on a daily basis, I would have to disagree with you. So we're hoping to, we're hoping to cover the cost of those impacts, not make a bunch of money, but hopefully our community will continue appreciating the industry because they're not picking up someone else's share of the impacts.

Yeah, point well taken. It's just I wanted to raise the subject publicly so we know we're thinking about it. Yes, thank you. Thank you, Representative Prox. Representative Kluhm.

I'll let Rep. Elam go before me. Okay. Okay, thank you.

Representative Elam, your mayor. Thank you, Mayor Machicki. I appreciate you hopping in and having a conversation with us. I'm just wondering, um, from your perspective and what you've been hearing as we've been going through this process, um, you know, there's going to be a Phase 1 and a Phase 2 approach, and I'm just wondering if you've got a better idea on what Phase 1 impacts might be on the Kenai Peninsula because it seems like a lot of the shipping and stuff is going to be coming in. I would imagine there's going to be some kind of impacts on the western side of the peninsula as we start at least doing some kind of preparations.

But I'm wondering what your perspective is on that. [Speaker:COMMISSIONER_HARRIS] Mayor? [Speaker:COMMISSIONER_MAYOR] I should say that, yes, thank you. I should do that through the chair thing. I appreciate that.

Um, sorry, I apologize for that. Yes, through the chair, Representative Elam, um, those are great questions. I am much more focused on a fair, um, level of support for the community for the long term than nickel and diming a project on construction impacts that in my view have also benefits as well, right? When it, when it comes to road construction and hard costs like that, I want to have a way to be, to cover our costs as a borough for construction costs. When I think about all the pipe coming into Seward and other pipeline impacts, I have to tell you my level of concern is much lower.

However, I don't want to soften the fact that I'm supporting other communities communities that will have substantial construction impact. So I'm supporting everyone affected from the North Slope through the Five Boroughs. Um, if we are able to come to agreement on a fair level of throughput or AVT compensation over time, I'm much less concerned on what I view as a much smaller proportional impact during construction. And construction will have substantial impacts in Phase 2. Phase 1, I don't want to fluff our impacts in the Kenai Peninsula borough.

We have a railroad, we have a harbor in Seward. Like to see those guys get to work. That's a good thing. I'm not going to exaggerate impact on the borough. Is that a fair answer?

Yeah, no, that sounds good. I appreciate that, and I appreciate all the expertise you've brought to the conversation. Okay, thank you, Representative Elam. Uh, Representative Kluhm. Thank you.

Thank you, Chair. Um, hi, Mayor Machicki. It's good to see you. Thank you for being here. So my question to you is kind of the same as I, uh, posed to Mayor Hopkins.

So I'm wondering your thoughts on the volumetric tax rate. The original bill had 6 cents. This has up to 20 cents. How important is that number to you, and what are your thoughts around that? Well, I don't like negotiating— oh, Mayor Machicki.

Through the chair, Representative Colon, I don't like negotiating online. I do have some suggestions for the bill, kind of working with some of the others, and we'll get some things to you. I like the spirit of the bill, I will tell you that.

Just to be perfectly honest, I don't think Sixth Sense makes me feel that the Kenai Peninsula Borough will not be at risk. I would like to look at my constituents and tell them that they're not at risk. So I appreciate the spirit of the bill of recognizing the multigenerational impact of a large facility operating in a small community. I do support the volumetric tax. I do support that this shouldn't create a shift in the funding formula for schools.

That is imperative.

From an industry perspective, and I've been on all sides of this table, these tables, if you will, with far more experience than essentially anyone working on the project or that has been involved except for a few of the contractors.

A volumetric tax is a fair way to not negatively impact the economics of a project that we always knew had property tax challenges. So I was involved in former renditions. There's been several. We always knew that the 20 mil property tax structure was problematic on this project. There's not enough fat, if any, in this project for the traditional mil rate structure.

But with that being said, I do like The fact that when they're making money, we are most highly compensated for our costs. And prior to that, we don't have a negative impact on the project. I believe that an AVT— I call it throughput. For those that don't know what an AVT means, when they're moving a lot of volume, we are compensated at a higher rate than when they're moving being almost nothing. And I think that is a fair way to tax— to be clear, it's still a tax— to tax a project when nearly everyone in Alaska can benefit from the successful execution of.

And follow-up? Yep, follow-up. So, Mayor, when you say you feel like Sixth Sense puts your people at risk. Are you referring to subsidizing the project when you say risk? I am.

I am uncomfortable with that level covering the cost of the Kenai Peninsula Borough over time while still keeping a very supportive community. So I'm a mayor. I have to help people understand that in my heart, I believe that a well over $100 million a year tax reduction is the right thing to do. And I have to guarantee them that they're not at risk to help cover the cost of this project. And at 6 cents, I don't, I don't feel like I can do that.

And a follow-up? Yeah, follow-up. So, Mayor, how do you— so in the bill, it, it opens up an opportunity for equity in the structures down there. Are you— is that something you're interested in?

Uh, maybe. I, uh, depends on once we understand the true cost to our community. That is likely something I would be uncomfortable with initially, um, but could potentially get there when I understand what what the long-term operation— operational impacts are to the people of the Kenai Peninsula Borough. That makes sense. And can I have one more follow-up?

Follow-up, Mayor, so what's the general sense of the people in KPB? Are they excited for the project? Are they nervous? Are they more concerned? Or like, what's the sense of the community around this?

It's a mixed bag on— okay, so what is not a mixed bag is there's about 8 people not supportive of the project of 62,000. Um, maybe there's, maybe there's 10. Maybe. Um, we are very supportive of the oil and gas industry and have been since '57. We recognize the value to our community, as most Alaskans do, right?

Mm-hmm. Uh, depending on where you live, but very much so here. They are concerned with that reduction and aware of it. Um, and, um, I feel like the project is coming— has come to the table on trying to understand that, and I think we'll get there. Um, just enough is a risk to the taxpayers of the Kenai Peninsula Borough.

And I— they understand that. Some have said, particularly those closest to the facility, that we should be holding out for property taxes because it's what everyone else has to pay. And I'm happy to go to bat and convince them that this project is very challenged at a 20 mil tax, um, no rate, the traditional 20 mil system. So, um, I think we get there. I hope we get there to the point of where I have to be able to look them in the eye.

I don't— everything about me, I tell everyone the same thing. I don't have a different answer for different groups of people. I I don't have a great memory, so I tell the truth all the time, right? But I do want to be able to look them— I have to be able to look them in the eye before I can say I like this outcome. Um, Sixth Sense doesn't get me there.

So, uh, I don't think we're terribly far apart. I think we do get there. Um, but yeah, I, I, again, in my heart, I take I take this business quite seriously. I am the tip of the spear for the people of the Kenai Peninsula. And we've got some struggles here with escalation of assessments.

We do have a significantly lower mill rate than most places, but we've been hit now with educational shifts. They're all aware of that. I don't want to pile everything into here. Almost no support from the state lately on things that were promised in the past. You are all experiencing that in your communities.

We get no reimbursement for exemptions, mandatory exemptions. The school funding is dropping precipitively, precipitously. There's almost no capital support, almost no road support. A lot of these things are kind of unheard of right now. So we're making it on our own.

We just can't afford to pick up someone else's costs, and at 6 cents, I can't make that guarantee to them. Thank you, Mayor. That was really, really helpful. I appreciate it. Thank you.

Thank you, Mayor. We have Representative Mears.

Thank you. Through the Chair, good afternoon, Mayor Machicki. I've got, I think, 2 questions for you as well, but the first one is different than for Mayor Hopkins, but But the second one will be largely the Senate. Same about CBAs. So, coming off of this topic of what is a suitable long-term AVT for your community, I do appreciate the AVT approach.

I think it's more reasonable with the project that as the volume goes up and as there's income coming in, then that's what that's what gets spent off. It's easier to measure. I appreciate all those things about it. One of the things about House Bill 381, the version in front of us with the CS, is instead of just a 6-cent on what's going through the pipeline, it splits up into pieces. So it's got gas treatment plant, which of course is North Slope Borough plant infrastructure, then the pipeline, which has got that apportionment for for length, and then it's got the, um, the LNG facility down near you.

So instead of just saying, you know, 6 cents on a portionment, does that splitting it up into the, into the 3 sections, just like, um, 8Star has split up the, the corporate structure into 3, does that— and I don't, I don't want to talk about what that number is, but just the change in that structure, do you think that will fundamentally help Kenai Peninsula Borough with its larger impacts on the project long-term? Well, I understand your intent and I have some suggestions. I'm a little bit worried about the stacking.

And I have some suggestions for that. I guess my interest was kind of a system-wide with a little bit of premium at the end for the community that's going to be living with the facility in perpetuity. Well, in perpetuity, in my perpetuity, maybe not in all of yours, but certainly for the next 50 years. This will operate for a very long time. So I have some suggestions for that.

I am— This could be a very simple structure that's very clear. I think it complicates and possibly affects the project in a way that maybe you intended, maybe it doesn't. So I'd like to discuss that if we can. Follow-up? Okay, follow-up.

Thank you. Through the co-chair to Mayor Machicki, what I'm looking at in my role on the Resources Policy Committee is to not muck with that and leave that to the folks in finance. I know other folks in the committee might have other desires to do that, but I— there's— my lane is wide enough to deal with on some other policy issues. So getting into my second piece of it on the policy stuff, getting into community benefits agreements. So in my mind, CBAs basically take the legislature out of the negotiation with communities and say, hey, you directly deal with folks, set up, like, what are your needs, what do you negotiate for dollars, what do you need to negotiate for, you know, other things in kind, and then the impact fund that goes along with that CBA process.

Could you share with— I don't know if you heard me opine about this with Mayor Hopkins, but could you share with us a little bit about what kind of— what needs that the Kenai Peninsula Borough is looking at that are a little bit more specific to you that— and what you thought— what you think about getting us out of the picture so that you can negotiate directly? Mayor Vachiki. [Speaker] Yeah, I'm sorry. Dang it. You would think I'd be better at this after all these years.

Through the chair.

So there's a couple different ways to do that.

I personally, so from my former life, communities can get very creative. Remember, there's that tension between adequately compensating communities and not negatively impacting ratepayers in the future, right? It's, uh, I'm not sure that we know what all those impacts are going to be, but I personally think, you know, I like the idea of some amount up front in case so that we don't have to float the project for lower level costs. I also like the idea of a list of qualified costs that would be covered by a fund going forward, right? So what it does is it keeps squabbling from going back and forth of, we need more library books at our library, so we expect you to, right?

I mean, it's not really a direct impact thing.

Qualified cost to me is what's actually happening in our schools. We don't know what that looks like going forward. We can assume from their studies of what that might be. Or this subdivision was so negatively impacted by the relocation of the highway, these are real costs on transportation necessities for these 500 residents. I don't know what that looks like, but I would like those qualified costs.

Um, and I don't know that it needs to be exhausted, but it should be related to the project. So I think that needs a little bit more time to flesh out. I'm kind of willing to get something to you if you'd like on sort of my view, which— not the smartest guy in the world, just kind of been there. But I will tell you that for every project, there's going to be things that you did not foresee being an impact to a community, and there are going to be things that you think are going to be a huge impact that don't materialize at all. And because of that inability to determine what every impact will be to every community along the way, it would be nice to have a system for reimbursement as well as perhaps some level of upfront dollars that would keep us from funding the project in advance.

As you know, working through our systems, you have to appropriate dollars in advance It takes a couple meetings. We don't know how long it would take to be reimbursed from the project. It would be nice for there to be a system that you could essentially invoice for covering qualified costs that are caused relatively directly by the project, if not directly in its entirety. Follow-up? Follow-up?

Thank you. Through the co-chair to Mayor Machicki, I hear that. I hear that. Desire to have some certainty, some, you know, like what is and what isn't. I am not thinking that I would like to be part of that process.

And that is something that is a direct negotiation between the individual communities and the project developer, partially because I see some of it's not money. It's other community needs that, you know, having a large project around you might be able to benefit from. And you will— I am not a mayor. I have not been on my local assembly, just my, you know, community council. And, you know, I've worked for a utility and I work for the muni.

But, you know, like, I don't know what those things are. And they're so different. And we deal with a million things. And I I'm personally not in the spot where I think that we should be doing that negotiation. I think setting up the framework that the boroughs have got the negotiation power, and we're saying our bit doesn't happen unless your bit happens.

So that's how we have things set up, is we're saying that you don't get this benefit unless you've made these agreements with the local communities. And I, I'm liking it, but I want to make sure that it works for everyone and that having an open— like an open-ended process from our end has enough enforcement for you as well. But like I see the CBAs as a contract and, you know, maybe that contract has got a renegotiation point that, hey, you know, we think it'll be this, but we'll look at this again in 3 years or, you know, at this point in the project. But that's not up to us. I see that all being— I'm sorry— all on your shoulders.

Thank you, Rep. Mears, and thank you for your words, Mayor Machicki. I'm going to go to Representative Hall.

Thank you, Madam Co-Chair. Thank you for being here, Mayor Machicki. Your words are profound, and I really appreciate your overall experience in helping us navigate this process. And you mentioned a couple of times the BSA funding formula and just the overall, like, the long-term impacts when it comes to Phase 2 of the project in particular. Can you please share additional context as far as what you mean by the funding formula and what could or should be considered, um, as far as potential changes in the formula?

Yes, um, of course this is resources, um, but I will tell you it's related to my concerns about subsidizing a project. Um, through the chair again, Representative Machicki. Yes, I, I am. So yes, I will say that we're holding our own in a challenging environment where Things have changed. I think that it's time for the state to grow up and looking at longer-term comprehensive solutions to budgeting like we do at the Kenai Peninsula Borough where CPI-based budgeting, we try to beat 2.5% every year.

Education, we escalate by 2.5% automatically, which puts more attention on the other borough costs. The shift— you passed a BSA increase last year that I supported. The way the foundation formula works, we were eroded by $4 million in just one year.

It needs some work. But when I think about all those other concerns I have on funding critical services, one of them being education in my borough, I really have to worry about new costs, right? We're, we're surviving. We would like to work together on a more collaborative, long-term, comprehensive funding plan for education. And I'm a pretty conservative guy that leads a pretty conservative borough.

But reality is reality. And the thief in the night called inflation is reality. So if I think about stacking another risk on what we're barely managing now, we're underwater. So that is primarily my concern. And if you're taking property taxes away by approximately 90%, you cannot include the real property value of these assets in the school calculation, or we're out of money by like 2 years after it exists, right?

At least until we get our arms around the foundation formula snapshot in time 40 years ago that has changed dramatically as Alaska has developed. So that's— does that clarify my concern? Thank you very much, Mayor Machicki. It does. I appreciate your comments.

Thank you. Thank you, Mayor. Uh, Representative Elam. Thank you. Um, yeah, I've appreciated the conversation as well.

Um, I, I guess My last kind of thought that I've been marinating on has, you know, I got— had the opportunity to serve on the Borough Assembly with Mayor Machicki for a bit of time there as well. But when we start talking about impacts on communities and what things look like, you know, having a Phase 1, Phase 2 approach on the project I think that is nice for, you know, the project, but my question would be is what does it look like if, say, Phase 2 doesn't materialize and, you know, for whatever reason something separates and you've got just a Phase 1? What does that look like for the Kenai Peninsula under this particular tax structure? It doesn't look like anything, and it would be very challenging because the price of gas would be difficult for everyone. So I don't know that I want to get into my feeling about divorcing Phase 1 and 2.

That's where we are. Um, but you can call me anytime there, Bill. I mean, Representative. I, I wish they were in more conjunction, and I understand the logic. Right now, um, there would be essentially no tax revenue unless they wanted a more direct connection to the grid, but it would be decades, potentially decades, before a volume equal to what Cook Inlet is using today would move through that line.

So that's just something to think about. We still have Cook Inlet production.

If we can't get the price of gas down where it's competitive, it might actually encourage additional Cook Inlet production. There are a lot of other things that can happen, but we hope that these two things are essentially married and maybe become engaged in a very short period of time. I don't know if you can visualize a pipeline being on one knee and an export terminal not being, but it is imperative that they are. It is imperative that they are. And I think everyone knows that.

Just if I can go back on a question. When you talked about what the legislature should be doing, I agree with you on the agreements. I'm a guy that doesn't need anything changed in the legislature because of my Title 29 authorities. I can pen a deal right now after going to my assembly with an agreement, and I don't know what happens with this bill, but I'm interested in doing that. I think there are minor pieces that need to happen, obviously the 4356 and protecting from the educational shift from the state to locals.

I guess I don't know if there are any other questions, but it's kind of imperative that you get it right.

This is a great big deal. And I know you have a lot of pressure on you, and I was raised a Catholic, so I'm pretty good with guilt.

I don't accept it where it's not due to me, and it's not yours. It's not your burden on the fact that this came to us relatively late, and we must get it right for our current residents, citizens, our kids, our grandkids. This has an enormous potential impact, both positive and, if we don't get it right, potentially significantly negative. So I really appreciate you taking the time to understand this and, and get it right and protect communities without enriching them, um, and, and striking that tension or balance and working as hard as you can to get to get it right because I, I, it's that important. It's, it says generational impacts in both directions.

Thank you. Um, and I just wanted to kind of put on record, I, I want Phase 1 and 2. I don't want just one, please. So yeah, we don't want to see divorces. Yeah.

Thank you, Mayor. And, uh, Representative Prox has a final thought. In the last few minutes here. Yes, through the chair, thank you very much for taking the time to talk to us today. It really has been helpful.

I do appreciate your perspective and respect your understanding way more than mine from both sides of the table. So I appreciate that. Thanks again. And I have free time, more than you do. But if we could get together, I have more discretionary time after 5 even.

So it would help me a lot if we could arrange something to work this out. Thank you. Thank you, Representative Prox. See no further hands or mics raised. I do want to just for the record, Mayor Machicki, that I did miss a question from Representative Fields.

He might be reaching out to you. He's been in and out, I think, doing other state business. So I apologize to Rep Fields for that. Madam Chair, if I may. Yes.

So I get out of your hair here as soon as possible. I— you can reach out to me anytime. And I texted Representative Fields— I'm trying not to use first names— said, where are you going? So I look forward to his question, and all of you can reach out to me anytime. If, if you're not in my phone, Representative Edom has my number, and I'm, I'm more than willing to spend as much time as possible talking about this important project.

Thank you, Mayor, for that. Thank you so much. And I just want to say, like, the impacts on our communities is a big, a big thing. Like, I know exactly where Mayor Hopkins said on Spinach Creek Road, it's a dark windy road, there's a sharp corner onto a highway, there's 500 residents that are going to be affected. And I know those things because it's my community.

So I just really appreciate— and Anchorage has, you know, you will be impacted, we're all going to be impacted. And I just really appreciate that you understand the impacts on our communities and appreciate your advocacy, voicing that with all the stakeholders for our communities. And we are attempting to ensure the impacts are accounted for in the bill that passes out of this committee, Mayor. So thank you for your time, and I'll be reaching out to you. Or we'll be reaching out to Representative Elam to get in contact with you if we need to.

All right, thank you. Thank you all for your time and service.

Thank you. That completes the agenda for House Resources Committee meeting today. Our next House Resources Committee meeting will be on Monday, May 4th at 1:00 PM. We will have updated modeling from the Department of Revenue with— on House Bill 381 and consider amendments. Big day.

The time is 2:58 PM, and this hearing from the House Resources Committee is now adjourned.