Alaska Legislature: Senate Resources, 4/21/26, 9am

I call Senate Resources Committee meeting to order. Today is April 21st, 2026. The time is 9:00 AM. Please turn off your cell phones. Committee members present today: Senator Rauscher, Senator Kawasaki, Senator Dunbar, Senator Myers, Vice Chair Senator Wilkowski, and I am Senator Giesel.

I believe Senator Clemon will be along shortly. We have a quorum to conduct business. Thank you, Heather and Kyla, for helping us out with audio and record keeping. On today's agenda, we have two bills. The first one is House Bill 117, Commercial Fishing Setnet Gillnet Cooperatives, and then Senate Bill 280, Oil and Gas Property Tax.

First of all, HB 117, which we heard yesterday, Commercial Fishing Set Gilnett Cooperatives. I will invite Representative Louise Stutz and her staff to come forward. While they're doing that, we have— we had an amendment deadline set yesterday and we have 2 amendments. Members should have those 2 amendments at their desk.

And I will invite Senator Wilkowski to introduce or move the first amendment. Thank you, Madam Chair, and good morning. I would move Amendment I.1. I'll object for purposes of discussion. Senator Wilkowski.

Okay. This amendment is— deals with the trawl fishery, the state commercial trawl fishery, and it gives the Department of Fish and Game, the commissioner, the ability to establish and manage an electronic monitoring program for vessels participating in a state commercial trawl fishery. In recent years, electronic monitoring has been increasingly adopted to collect data in the federal fisheries, and this would extend that authority by the commissioner to allow that or require that in the state fishery— trawl fisheries. It only apply— would only apply to vessels that already participate in federal fishery managed under Federal Law 50 CFR Part 679 in the Bering Sea, Aleutian Islands, or the Gulf of Alaska, and also that have electronic monitoring equipment on board.

This amendment would not require vessel owners to purchase or install electronic monitoring equipment. It would apply to those that already have it on hand. It would take effect on January 1, 2027. It also allows the state electronic monitoring program to coordinate with other state and federal agencies such as the National Marine Fisheries Service, NOAA. The department has informed us that there is no fiscal note— there would be a zero fiscal note associated with it.

And I understand the Department of Fish and Game is on hand to answer any questions. Thank you, Madam Chair. Thank you, Senator Wielechowski. We do have Commissioner Doug Vincent Lang online from the Department of Fish and Game. Commissioner, do you have comment about this amendment relating to electronic monitoring of fishing vessels using trawl gear?

Yeah, I just got unmuted, Senator, Madam Chair. During the 2024— oh, for the record, my name is Doug Vincent Lang. I'm the Commissioner to the Alaska Department Commissioner of the Fish and Game. During the 2024 legislative session, the governor introduced two companion bills on electronic monitoring for commercial fishing vessels. These bills would have authorized the Board of Fisheries to establish electronic monitoring in state-managed fisheries and provided the Commissioner of Fish and Game with the authority to implement the program.

A bill is needed because Alaska statutes only provide authority for onboard observers. There is no provision in state law to allow for electronic monitoring. The general feedback the department received on the bill was that it was too broad. Since then, we have discussed with the sponsor of the amendment, Senator Wielechowski, potential sideboards for authorizing electronic monitoring program in Alaska statutes. The amendment before you has a narrower scope and limits the electronic monitoring program to vessels that already have electronic monitoring systems on board to participate in the federal trawl fishery in the Gulf of Alaska, Bering Sea, or Aleutian Islands.

Under this language, an electronic monitoring program could only be implemented in the Prince William Sound pelagic trawl pollock fishery or the Aleutian Islands Subdistrict bottom trawl Pacific cod fishery. It would not apply to state beam trawl shrimp fisheries or other fisheries because there are no comparable federal beam trawl fisheries in state waters. Implementation cannot require a vessel owner to purchase or install new equipment beyond what is already federally required. And it requires the commissioner to make specific findings similar to onboard observer statuses— statutes such as determining that electronic monitoring is a practical data gathering or enforcement tool and will not unduly disrupt the fishery, can be conducted at reasonable cost, and can be coordinated with federal programs managed by the National Marine Fisheries Service and other agencies. Other than the sideboards I just mentioned, the only major difference between this amendment and the prior governor's bill is that the authority to establish and implement electronic monitoring program is vested solely with the Commissioner.

From a fisheries management standpoint, the department is open to this change. This is because the Board of Fisheries still has the authority to establish total bycatch limits in state fisheries such as those in the Prince William Sound pelagic trawl pollock fishery.

The department can then use electronic monitoring as an effective data collection enforcement tool to monitor those limits in the fishery. Having the authority vested with the commissioner would streamline the process, and the commissioner would still need to follow the sideboards for electronic monitoring that are set out in statute. Ultimately, this is a call for the legislature to make. In summary, the department supports adding the option for electronic monitoring program statute. It adds another important tool in the toolbox for us to use, to use in managing Alaska's fisheries.

We have no concerns about the additional sideboards in this amendment. They are neutral on whether the authority to establish such a program should be under the department or the Board of Fisheries. We leave that up to the legislature. Regarding fiscal impact, there are no direct costs associated with the electronic monitoring provisions. This is a permissive statutory change that would allow electronic monitoring programs to be established in state waters.

The department would first need to determine and establish by regulations which fisheries will require electronic monitoring on board and the number of vessels subject to those requirements. Any cost for the state program under this amendment would be limited to the raw— to data review, storage, and transmission. While there are no immediate costs associated with this legislation, future funding may be necessary for a new electronics monitoring program. The department may be able to absorb at least some of these costs. However, this new program may require hiring and training new staff or contracting with another agency for data transmission, storage, or review.

Currently, the federal program contracts with the Pacific States Marine Fisheries Commission. If needed, ADF&D would request additional funding through the budget process to implement the program, providing for legislative review and funding requests. However, I suspect any kind of additional costs associated with the amount of activities occurring in state waters versus federal waters would be relatively small. With that, thank you, Madam Chair, for your opportunity to provide some comments. Thank you, Commissioner.

For the public who are listening, this amendment is posted on BASIS. The main content of the amendment can be found on page 4, starting on line 7, where it describes the optionality— that is, the vessels already have to have the monitoring systems on board— and it goes into the details that the Commissioner just articulated. I want to ask Representative Stutes, do you have any comment on this amendment? Thank you, Madam Chair, and good morning to the committee. I do.

I certainly support this amendment. I think it's It's a great amendment. I think the fact that it is specifically tailored so that the electronic monitoring can only be required when you're having engaged in trawl fishing in state waters, I think that's important. It doesn't apply to any other fisheries at this time, just the trawl fisheries. It does not open the door to electronic monitoring in other fisheries other than the trawl fisheries, and it's only applied to boats that currently have the electronic monitoring equipment on them, which is, I think, important to note too.

This amendment will provide additional important data to the Department of Fish and Game and the Board of Fisheries, which will help them make important decisions, not knee-jerk decisions, decisions, and I think it's a necessary incremental step where we are all concerned with bycatch and, and other issues, and this allows us to collect the appropriate data we need to assess those issues. So I'm fully supportive. Very good. Thank you, Representative Stutes. I'm going to remove my objection to this amendment.

Is there further objection? Seeing none, objection— excuse me, Amendment I.1 has been adopted. There is a second amendment. Senator Wilkowski. Madam Chair, I would move Amendment I.2.

And I'll object for purposes of discussion. Senator Wilkowski. This amendment adds transition language that specifies that until the Board of Fisheries establishes the maximum cooperative size in each administrative area, that the maximum size, the maximum allowable number of permits per group is 5. We heard from several testifiers yesterday that from Bristol Bay expressing concern about some potentially large groups that are currently operating there. This amendment addresses those concerns by capping the number of people that may fish as one cooperative at 5 permits until such time as the regulation package is passed in that administrative area.

As the Board of Fisheries is on a 3-year cycle and the bill has an immediate effective date, this will ensure a low cap in each area until that area weighs in during a local meeting. As stated by the bill sponsor, every area is different. Each area, including Bristol Bay, will have a locally held Board of Fisheries meeting on cycle so that folks can weigh in on the size of the groups that are appropriate for their fishery, providing maximum local input and local control. However, until that meeting occurs, should this amendment pass, this amendment will keep the number low and prevent consolidation. Thank you.

Thank you, Senator Wilkowski. So this amendment again is on basis, for the people who are listening online, and relates to the underlying bill which has to do with set net— set gill net entry issues cooperatives.

Representative Stutes, do you have any comments about this amendment? I'm fully supportive of this amendment and I'm delighted with it because I know that specifically there were some areas concerned about large groups. And as was stated, those numbers will be set by the Board of Fish. But until then, we can protect those areas by having a cap of 5 permits per unit, and that seemed to be a number that was satisfactory with all of the stakeholders when we were trying to come to a meeting of the minds on some of the issues in this legislation. So I think it's a great thing, and I think it's real protective as well.

Thank you, Representative Stutes. I'm going to ask the Commissioner to speak to it, and as I do, I will call to members' attention an email exchange that I had with Commissioner Vincent Lang yesterday related to unforeseen, unintended consequences, control of these cooperatives. He responded with some specific information. This will be posted on BASIS later today for the public, but basically indicating that the Board of Fisheries will address and manage these cooperatives. Commissioner, would you speak specifically to this amendment?

Yes, Madam Chair, I'd be glad to. We think this is a reasonable step. I will note that we are aware of at least a couple of different cooperatives and setting up operations in Bristol Bay. So we were a little bit surprised to hear that there weren't cooperatives operating in that area. So I think setting a 5 limit is a reasonable approach until the Board of Fisheries has an opportunity to hear public comment and decide what the maximum number should be.

So we're very supportive of this amendment. Thank you. Thank you, Commissioner. Major Frenzel, you are online also. Major, do you have any concerns or comments about this amendment or the bill in general?

[FOREIGN LANGUAGE] No, I do not. The only concerns are the ones I addressed yesterday and just the unintended consequences regarding potential permit problems.

Thank you very much, Major. Senator Kawasaki, a question? Yeah, thank you, Madam Chair. I support the amendment. I just had a question for whoever can answer as to whether in any of these current administrative areas there's any one with 5 permits, any co-ops with 5 permits currently or more?

Uh, let's ask the Commissioner if he has that information. Commissioner?

Um, I'd have to do a little bit of research, but I would think that a cap of 5 would cover a vast majority of the cooperatives that are operating out there right now. But I'll dig into a little bit more and get something to the chair. But I would think almost all the cooperatives are a cap of 5 until the board gets to it would not be crippling because right now it's illegal. I pointed out it's illegal to do it right now under those current law statutes. So 5 would at least allow some kind of continuation of the current practices that are going on.

Senator Kawasaki, did that answer your question? Yes. All right. Mr. Green, did you have comment? Through the chair, Senator Kawasaki, 5 is a—.

Identify yourself for the record, please. I'm sorry. Through the chair, for the record, Matt Greening. Senator Kawasaki, 5 is a pretty average number. I just have some kind of brief notes that we took when we were formulating this bill and there are a lot of cooperatives that are 5 or under.

And I will notice with the amendment, it's transition language too. So it still allows through the Board of Fisheries local meeting for folks to weigh in. And in an area like Kodiak, it's probably going to be larger. In an area like Bristol Bay, it'll probably be smaller.

Very good. I'm going to remove my objection to the amendment. Is there further objection to the amendment? Seeing none, Amendment Number 2 has been adopted. Those were the 2 amendments that I received related to this bill.

I did leave public testimony open, and so I'm going to open it again today. I'm looking online. I see no one signed up to testify. Is there anyone here in the room that wishes to testify on House Bill 117? Seeing no one, I'm going to close public testimony.

For the public who are listening, just clarification, we just passed two amendments. One includes electronic monitoring in state waters for trawling vessels. The details are in the amendment that is posted online. And a second amendment that sets the number at 5 for limited entry permits per cooperative that this bill would make legal. So, and that would be under the control of the Board of Fish with sideboards in place.

So further discussion from the committee? Senator Clayman. I think this is a question for the bill sponsor, but under the existing subsection 3 of section 2 of the bill, This new amendment says they— if there's no regulations, they can't go more than 5. But as I read subsection 3, they also can't go less than 3 in the number of permits together in a cooperative administration. Through the chair, Senator Clayman, for the record again, Matt Greening, staff to Representative Louise Stutes.

That's correct. They can't set the maximum size through regulation at less than 3.

So you could have a group that was 2, but the maximum limit cannot be set lower than 3. Follow-up, Senator Clayman. Does that mean the Board of Fish could say we're not going to allow any, or does the Board of Fish have to allow at least groups of 3 if they choose to cooperate? Through the chair, Senator Clayman, I believe the wording on Page 2, line 3, 2 or more set gillnet entry permits. That part's in statute, so the statute will say that you can have 2 or more.

The amendment caps it at 5 until such time as they set the regs, but they can't set the regs lower than 3 for a maximum size.

If that answers your question. Follow-up? Follow-up, Senator Clayman. If you've got 2 or more on line 3 of On page 2, and then on lines 15, 16, and 17, no cooperative may be limited to fewer than 3. How does the 2 and 3 intersect?

The 2 is in statute, so it basically just makes clear that we're allowing cooperative deliveries, cooperatives in general. And then the thought process was with putting that they cannot establish the maximum size at less than 3, that that we wanted to allow at least, because that was the lowest number we heard from anybody, that all the testifiers, nobody said that they wanted— 3 to 5 was the lowest number we heard. So we wanted to honor that, that basically what we heard in public testimony. Thank you. Senator Clayman, you arrived a little late, and so I will call out to you the email exchange I had with the commissioner yesterday.

It is there at your desk. If fishermen— what he states is if fishermen and communities in a region do not support cooperative fishing structures, the bill could— the board could simply take no action on proposals. So it is possible that an area may say we don't want any of these cooperatives, zero, in which case the Board of Fish will provide that for that community. So it is locally controlled to that degree. Thank you.

You're welcome. Further questions or discussion? Seeing none, Senator Wilkowski, I will look for a motion. Madam Chair, I move CS for House Bill 117 version 34-LS0557/i as in Iggy Aggie as amended from committee with individual recommendations and attached zero fiscal notes. Legislative legal drafting has authority to make conforming changes.

Is there objection? Seeing none, House Bill 117— 1117 as— 117, pardon me— as amended moves out of committee. We will sign the transmittal documents at the conclusion of our meeting. Madam Chair, I want to say thank you very much, and I also would like to let the committee be aware of the fact there was some concern yesterday by a couple of testifiers, and I had an opportunity to talk to those testifiers both yesterday afternoon and this morning as well and clear up some of the confusion with them. So it's— there wasn't— there isn't the pushback that there was we heard yesterday.

I'm going to leave it at that. Thank you, Representative Stutz. All right. With that— Thank you. With that, we will move on to our next subject, which is Senate—.

Thank you, committee. Appreciate it. Which is Senate Bill 280, oil and gas property tax municipal tax. Yesterday we adopted version G as our working document, and we did a high-level review. Today we're going to do a more in-depth study.

Sectional, and here to present a sectional is my staff, Paige Brown. She will be assisted by Sonya Kawasaki, Senate Majority Legal Counsel, through part of the presentation. Ms. Brown, I'm going to have you begin with the written sectional.

Thank you, Madam Chair, members of the committee. For the record, Paige Brown, staff to Senator Giesel. Ms. Brown, could you bring the microphone a little closer? There we go. It was hard to hear from you.

I'm just going to read through the sectional analysis, and if anybody has any questions, members can interrupt. Section 1 amends the education funding statutes. To exclude qualified pipeline property from the property value calculation used to determine a district's required local contribution. Section 2 amends the definition of local contribution to ensure that a pipeline tax revenue shared with municipalities under the new, um, alternative volumetric tax provisions does not count towards a district's required local contribution. Section 3 amends the municipal petroleum property tax cap to exclude pipeline property subject to the new AVT or community impact fee from the cap calculation.

Section 4 is the companion to Section 3, restoring the original language, language if the failure contingency in Section 45 is met. Section 5 prohibits municipalities from levying regular property taxes on qualified pipeline property that is subject to the AVT. Section 6 amends the Community Assistance Distribution Statute to include AVT revenue shared with municipalities as part of the per capita distribution. Section 7 is the companion to Section 6 and restores original language if the failure contingency in Section 45 is met. Section 8 amends AGDC's general powers to conform with the new legislative approval requirements added in Section 14 and the foreign entity provisions in Section 18.

Section 9 adds new powers of AGDC requires maximizing use of in-state contractors, requires transportation agreements to prioritize in-state utilities if capacity is reduced, requires AGDC to pursue a direct spur line to Fairbanks, prohibits recouping construction cost overruns through utility rate increases, and caps the gas sale price to Alaska utilities at $12 per thousand cubic feet before LNG plant completion, and $5 per 1,000 cubic feet after. Section 10 conforms AGDC's confidentiality authority to reflect the new restrictions added in Section 13. Section 11 allows AGDC to enter confidentiality agreements with legislators and legislative agents to facilitate release of confidential information to the legislature. Section 12 adds an exception to AGDC's confidentiality protection— protections for information required to be publicly disclosed under Section 18. Section 13 adds new limitation on AGDC confidentiality agreements.

It prohibits subsidiaries from entering into confidentiality agreements, allows party to waive— parties to waive confidentiality to release information to legislators or legislative agents, requires AGDC to enter into a confidentiality agreement with the legislature upon request to allow release of information, allows information released to legislators to be discussed in executive session under certain conditions, prohibits confidentiality agreements from concealing fiscal risks to the state ownership structure or the state's investment option, and allows economic information to be protected only if parties agree it would cause competitive harm and agree to release reasonable estimated range— ranges. Section 14 requires legislative approval before AGDC may transfer transfer, sell, or dispose of an ownership and management interest in a subsidiary. Subsidiary. Section 15 requires AGDC to negotiate a state investment option whenever it enters a revenue-generating project. The option must be approved by the legislature before being agreed to and must allow the state at least 12 months to exercise it.

Requires AGDC and state agencies to cooperate with the legislature in evaluating evaluating investment options. Revenue from any option is deposited into a separate general fund account subject to appropriation. Section 16 requires revenue generated by an AGDC subsidiary to be deposited into a separate general fund account subject to appropriation rather than retained by AGDC. Section 17 requires legislative approval before AGDC or any subsidiary may issue bonds. Section 18 adds 3 new sections to the AGDC statutes.

It requires AGDC to maintain a publicly available searchable database disclosing ownership, investor, lender, creditor, and gas purchase agreement information for each project, updated at least quarterly. AGDC is shielded from civil liability for publishing required information, requires legislative approval before AGDC or a subsidiary may enter into a legal relationship foreign entity. Requires AGDC to notify legislative leadership of any significant ownership change involving an entity in a legal relationship with AGDC or a subsidiary. Section 19 adds definitions for foreign entity and subsidiary of the corporation, including partially owned subsidiaries. Section 20 requires DNR, before taking royalties in value, to base that value on prevailing market value for oil or gas of the same kind kind and quality for that field or area, and to publish the determination and supporting reasoning on the department's website for at least 10 years.

Section 21 adds an exception to the prohibition on disclosure of taxpayer information to allow publication of prevailing value determinations as required by Section 27. Section 22 excludes the new AVT and community impact fee from the Tax Appeals Office's jurisdiction consistent with the existing exclusion from petroleum property tax. Section 23 imposes a new corporate income tax on oil and gas pass-through entities, sole proprietorships, partnerships, LLCs, and S corporations with income from oil or gas production, transportation, treatment, LNG processing, or marine transport in the state. It uses a bracketed rate structure from 0% on income under $1 million up to $260,000 plus 9.4% on income over $5 million. It excludes entities already subject to the standard corporate income tax or part of a unitary group with such a corporation.

Section 24 is a conforming amendment replacing corporation with taxpayer on the income tax return filing statute, and Section 25 is also a conforming amendment replacing corporation with taxpayer in the combined reporting statute. Section 26 repeals and enacts the prevailing value provision of the production tax statute to require that tax base be based on prevailing market value for oil or gas of the same kind and quality for the first— for the relevant field or area, prohibiting use of below market or no-cost sales as the basis for valuation. Section 27 adds subsections establishing the methodology for production tax prevailing value determinations and requiring the department to publish each determination and its reasoning on the department's website for at least 10 years. Section 28 excludes for oil produced on or after January 1st, 2026, costs related to North Slope gas exploration and development from deductible lease expenditures for oil production tax purposes. Section 29 is a conforming amendment to the lease expenditure statute reflecting the exclusion of gas costs from oil lease expenditure deductions.

Section 30 codifies the exclusion of North Slope gas lease expenditures from oil production and tax deductions and directs the department to establish an allocation method between oil and gas costs, including consideration of BTU equivalent barrel allocation. Section 31 modifies the pre-operations property tax exemption for natural gas pipeline pipeline property to cover all property used or committed for construction, operation, or maintenance of a pipeline project subject to the new ABT or impact fee, enabling the community impact fee to apply during construction. Section 32 is the companion to Section 31, restoring the original narrower pre-operations exemptions if the failure contingency in Section 45 is met. Section 33 adds a new chapter establishing the alternative volumetric Aviation Tax and Community Impact Fee. The AVT applies beginning the day after commencement of commercial operations at rates of 15 cents per 1,000 cubic feet each for the gas treatment plant and pipeline throughput and 25 cents per 1,000 cubic feet for LNG plant throughput, fixed for 10 years, then adjusted annually by the Urban Alaska, um, Consumer Price Index.

The AVT replaces all other property taxes on qualified property and does not apply to spur lines. The community impact fee is $1 million per mile of pipeline installed in the prior year due during construction. Returns and payments are monthly for the AVT and annual for the impact fee. Late payments accrue a 10% penalty plus interest. AVT revenue is allocated as follows: the gas treatment plant, 50% goes to the North Slope Borough, 50% to the state.

For the pipeline, 50% divided among the communities along the route by mileage, 50% statewide per capita through the community assistance formula. And the LNG processing plant, 50% to the Kenai Peninsula Borough, 50% to the state. Impact fee revenue is appropriated to the Department of Community and Commerce and Economic Development for grants to municipalities experiencing direct impacts from pipeline construction or operation. Includes appeals, throughput measurement regulations and definitions. Section 34 repeals the statutory restriction on RCA regulation of LNG import facilities currently in Senate Bill 180.

Section 35 repeals the AVT community impact fee and related conforming provisions if the failure contingency in Section 45 is met. Section 36, um, is applicability of the AGDC confidentiality, subsidiary notification, and foreign entity provisions apply to agreements and relations— relationships entered into on or after the effective date of those sections. New confidentiality rules apply to existing subsidiary agreements as if the subsidiary were the corporation. Section 37 The applicability, the public disclosure requirements in Section 18 apply retroactively to ownership and gas purchase agreement information received by AGDC since July 1st, 2024. Section 38, applicability, the pass-through entity income tax applies to tax years beginning on or after January 1st, 2026.

Section 39, more applicability, the prevailing value provisions apply to oil and gas produced on or after the effective date of those sections. Section 40 is transition. Existing AGDC participation options must allow the state at least 180 days after the effective date to exercise them. AGDC must notify legislative leadership of any existing operating options within 30 days of the effective date. Section 41, more transition.

AGDC must make its first public disclosure publication by January 1, 2022. 2027 Covering ownership and gas purchase agreement information since July 1, 2024. Section 42 waives interest and penalties for the entity tax for tax years ending before January 1, 2027. The tax due for those years must be paid by January 1, 2027. Section 43 authorizes the Department of Revenue to adopt regulations retroactively to implement the entity tax and lease expenditure provisions.

Section 44 relates to retroactivity. The entity tax conforming income tax amendments and lease expenditure exclusions are retroactive to January 1st, 2026. Section 45 establishes the failure contingency. The repeal provisions in Section 35 take effect if the construction of a natural gas pipeline has not begun by January 1st, 2028. or the commercial operations have not commenced by January 1st, 2032. Requires the Commissioner of Revenue to notify the Revisor of Statutes of each condition's status.

Defines construction of a natural gas pipeline as requiring both steel pipe laid and welded in an excavated trench and at least one work camp established along the route. Section 46 repeals AVT and property tax exemptions if the construction condition is not met by January 1st, 2028. Section 47 repeals the ABT and property tax exemptions if the commercial operations condition is not met by January 1st, 2032. And Section 48 is an immediate effective date for the rest of the bill. Thank you, Ms. Brown.

Ms. Kawasaki, you had a presentation to go into more depth on the alternative volumetric tax and community impacts program. I'll let you begin. Thank you, Madam Chair. Good morning, Madam Chair and members of the committee. For the record, Sonya Kawasaki, Senate Majority Legal Counsel.

Um, first I wanted to see if there were any other questions on any other provisions of the bill other than the alternative volumetric tax or Community Impacts Program, which we presented yesterday. Are there any questions from committee members? Seeing none. Thank you. So this presentation will go through the ABT, as in the Senate Resources Committee Substitute, which is version G, and also the Community Impacts Program, which is a new concept to Senate Bill 280 through the CS.

I wanted to go over the background for the rationale for the revisions that have formulated in SB 280. Basically, in 2014, a municipal advisory group was formed and it consisted of state and local officials. And I believe there was an Anchorage Daily News article that was made available to members and maybe posted on BASIS. And it described this, the work of the MAG group, and that the producers at that time had agreed to $15.7 billion over 25 years of what we know as PILT, which is Payments in Lieu of Taxes, property taxes. And that was the agreements by— that was the agreement by the producers at that time.

And that average out for over the 25 years is about $628 million per year. And at that time, Meg was unable to agree on the allocation methodology. So the number was set and agreed to between the producers and the advisory group, but the allocation of and distribution of that dollar figure wasn't agreed to. And the other aspect that was for— that was considered and agreed to by the producers was an impact program that covered the construction period of the pipeline, and that was going to be an additional $800 million over 5 years of construction. If you'd pause there, please.

So what you're referring to is the previous, most previous pipeline project proposal. There have been multiple, at least 4 or 5, but this one between 2014 and 2016 was proposed by ExxonMobil, ConocoPhillips, and BP at the time, the 3 producers. So when you refer to the producer proposal, proposed pipeline, that's what you're referring to. Is that correct? That's correct, Madam Chair.

Thank you. Thank you. And so when we talk about the alternative volumetric tax and, and, and the abatement of taxes prior to actual production of gas through the pipeline, what the producers had agreed to during the construction years was an average of $628 million a year to be distributed to the communities along that pipeline for impact, to, to cover the cost of public safety, transportation— that means their roads— uh, healthcare that might be required, all those social things that are needed when there's a large influx of a workforce. So what you say here in the third bullet is they couldn't agree on an allocation methodology. Could you elaborate on what that means?

Sure, Madam Chair. My understanding is that the municipalities and the three producers and the state couldn't agree on how to allocate the amount that was agreed to and the— and for annual payments and So, and I think I had— my understanding is that the MAG group sort of disbanded at that point. So the MAG group, just talking to people that were there at the time, were thinking about taking the $628 million and distributing it along the pipeline based on the mileage the pipe was going through each area. So for Fairbanks, for example, that's about 2 miles, whereas other areas it was 100 or 300 miles. And so obviously the amount of money that would go to those various areas varied significantly, and yet the impact was different.

Fairbanks being a hub community would bear a huge influx of the workforce. They did, certainly under TAPS. We experienced that already. And all the materials coming in, the laydown areas, etc. So for— I know, Senator Wilkowski, you were here during that original— that proposal, the producer proposal.

Do you have any other historic recollections or comments you wanted to make?

Okay, thank you. I just thought I would throw it open. Senator Myers? Yeah, during that discussion with the MAG and among the legislature, what kind of modeling was done about how this size of a payment would affect the economics and the viability of the project, especially in the early years? Well, since I wasn't on that committee, I couldn't tell you that.

We'd need to ask actually either the mayors or the staff that were present at that time. So tomorrow and in the ensuing days this week, Wednesday, Thursday, and Friday, we will have people before us that may have been present. I don't know that they had any modeling other than their calculators. I have 2 miles, divide that up between the, you know, 400, 800-mile pipeline, how many dollars per mile, things like that. But it was highly controversial, and as Ms. Kawasaki points out, they actually never came to agreement.

But this is what— the $628 million is what the producers that were going to propose this pipeline at the time were willing to offer as impact during construction. Senator Myers. Yeah, just, I think we had— when Mr. Begich and AGDC were here, couple weeks ago, something that they emphasized to us is that big difference between a producer-led project versus a developer-led project is the economics are very different. The, the developers are willing to take a, a lower profit margin, but then at the same time they also have a lot less margin for error compared to the producers. The producers are willing to take more risk and And so I'm wondering, even if the economic— even if the producers said that the economics for them worked out at the time, and of course they're much larger companies with much more financial resources, if this is then going to— even if we try to transplant that idea from then to now, if because we have a different type of company trying to build it, if this would then put the project out of the realm of economic possibility?

That's an interesting question, Senator Myers. At the same time, I believe the impacts are what we're looking at here on the local communities who have to cover the costs. What, what, what is the cost to Alaskans during construction?

Further comments about this particular piece of information? Senator Rauscher. Thank you, Madam Chair. So I'm just wondering, I understand what they were getting at, what they were doing, but that never worked out.

It didn't pencil out. So I'm just wondering, trying to look back at that, you're looking back at something that didn't work. This is true. This is a very marginal project. Whether the proposed builders have deep pockets or whether they're a private company with less deep pockets counting on loan guarantees at low interest rates and other investors.

But the point here is the impact on Alaskans and the cost to Alaskans has to be taken into account also.

Senator Wilkowski. Thank you, Madam Chair. Just looking at the Municipal Advisory Gas Project Review Board executive summary, which was their annual report in 2015, they noted that This— that group was formed as a consequence of the enactment of Senate Bill 138 and also an administrative order signed by the governor, Administrative Order No. 269. And they note that they were charged with advising the governor on municipal involvement in the North Slope natural gas project, including framework.

And the last paragraph— well, not the last paragraph, but last paragraph on page 3 of the executive summary notes that based on input from the Municipal Advisory Gas Project Review Board regarding a high-level understanding of a structure for CPILT, which is construction-related payment in lieu of taxes, and OPILT, which is operations-related payment in lieu of taxes, the Department of Revenue and Alaska LNG Project Participants ExxonMobil, ConocoPhillips, and BP worked together to generate proposals with respect to CPIL and OPIL and reached a tentative alignment that was presented to the Municipal Advisory Gas Project Review Board for consideration and feedback. So this proposal, which was $628 million per year plus impact payments of $800 million over 5 years, That was a tentative agreement. I find it hard to believe that the producers would have agreed to a tentative agreement, um, that was vastly, uh, out of proportion to what they thought they could probably do economically. I—. There's probably reasons the project failed for other reason— other reasons, and probably the biggest one, quite frankly, was the industry, uh, when they look to decide where they can get their highest rate of return and they're looking at Prudhoe Bay, which maybe they can get— we've heard in the past triple-digit rates of return, over 100% rates of return, versus a pipeline where they can get a 10 to 12% rate of return.

They're clearly going to put their money where they can get that higher rate of return. And so, so I suspect that's probably ultimately what led them to decide not to go forward on the project, was simply they could get a much higher rate of return investing their money elsewhere. And also, you And of course, you have to factor in BP had the Gulf spill at some point in time, which I'm not sure how that timeframe factored in there. But we can't know the full reasons why the project didn't go forward, but we do know that they had a tentative alignment. And so I would surmise that it's probably pretty close to what they could have afforded at the time.

Senator Myers. Yeah, along that 10-year alignment, so I'm curious what the timing of that was, because what I'm looking at here is if they agreed to $15.7 billion over 25 years, was that— had they agreed that that would be paid out at the beginning, you know, paid out every year, or had they agreed to a more backloaded structure? Because, you know, we've heard heard multiple times from industry that when you have a large-scale capital project, that it works out better to have the tax— it works out better for the economics if you have the taxes on the back end rather than on the front end, because that then gives you— that gives them the ability to, you know, pay back creditors, et cetera, and make the project economics work, paying down the cost of it for Capital Curvy.

So was there, was there a, um, was there a timeline agreement in there as well, or just a total dollar figure agreement? My understanding, Senator Myers, was the companies understood the impacts that would happen during construction. They were not unfamiliar with that. Um, we have that Evidence from the construction of TAPS that some of us at the table remember. And so this was to be during the time of construction.

Further questions, Senator Myers? Well, I wasn't around when TAPS was done. My stepmom was, and she was living in Fairbanks at the time. She told me that it was it was nutty enough that she left town and moved to Eagle for 7 years as a result. But—.

So I've heard some of those stories. Not trying to minimize some of those pieces. I do have kind of 2 thoughts on it or some of those impacts. One is that we're talking about a state that at the time had something like I think about 40% of the population that we currently have. They brought in a workforce of around 20,000, and right now we're hearing estimates for the workforce of about 10 to 12.

So there will be some impacts, but not nearly as much as there were then. The other part is, I think we need to factor in the impacts on the other end as well, which is, you know, actually getting a— actually getting a stable gas supply in state and what that can do for us. Will we potentially run into some impacts, some negative impacts in the short term? Yes. But we're going to, you know, we have to balance those out with the positive impacts in the long term of, you know, people having lower gas costs and, you know, not having warnings from NSTAR, from the electric utilities about possible brownouts.

So, you know, I think, you know, just trying to front-load the dollar figures at the front, I think, misses part of the story. I'll also add the other part of the story. We had an income tax at that time on those 20,000 employees that came in on their high wages, very high wages. We also had an education head tax that everyone paid that earned a wage in those days. Today we have neither.

Further comments? Senator Coffman— er, Klieman.

I'm not aware of any, but was there any even legislation introduced in 2014 to 2016 that would implement what was discussed by the municipal advisory group? I'm not aware of any, but I'm curious. I don't recall any. Ms. Kawasaki, do you have any recollection? Through the chair, Senator Clayman, I don't believe there was legislation enacted that would establish the PILTS agreement.

It was basically a consideration among the advisory group to come to terms that they could all agree to. Follow-up? Follow-up, Senator Kline. Not so much— Ms. Kawasaki, not legislation enacted because that would have been a much longer process, but my curiosity was whether there was even legislation introduced that we could go take a look at. Senate bill or House bill, whatever.

Maybe it didn't go very far, but at least it was introduced and we could look at that if you know of any. Through the chair, Senator Clayman, I apologize, I don't have that knowledge on hand and I could look into it for you. There may be other members who were here at that time who might be able to speak to it. Senator Kawasaki. Thank you.

So I was here during that time and it was really interesting because we had just seen North Dakota boom, right? North Dakota had just exploded with this, um, um, you know, where they went from a tiny, tiny budget smaller than ours and production smaller than ours to way, way past ours. And they're still way up above us. But it was always talked about in like, what, what did, what did they, how did they screw up and what can we learn from it? So they did a lot of things like, uh, And I don't know, this didn't come to a bill.

It never came to a head, but it did come to a lot of presentations on how they managed this growth, this explosive growth. And they did things like they, they raised their senior property tax exemptions. They actually raised them. And then the state paid for them, which they don't now, which we don't now. They did that because they, they, because property values just skyrocketed and people were getting just getting these tax bills that they couldn't afford.

They changed a lot of things like they allowed municipalities to build or to have tax abatement for a certain number of years because they needed single-family dwelling housing. They had, I mean, just a bunch of things when it came to education because they have a different education, they have a similar education to our system, for the way they allocate funding to school districts. So there were like a— I mean, there was a host of probably 20 or 30 different types of tax things that were implicated. And since this— and they also wanted to make sure that the state— it went to the state, but then it was just distributed to the communities, because the communities in a lot of cases didn't have a lot of the wherewithal to be be able to tax or to get any benefit from what was happening around them. And so I'll just say that there are actually quite a bit of studies of what municipalities had done during that timeframe in 2006, '07, '08 in North Dakota that we tried to come up with proposals, and none of them actually came up to legislation, I don't think, though.

Very good. Thank you. Senator Dunbar. Thank you, Madam Chair. I'll be brief because I'm looking forward to the next couple of slides for a more in-depth conversation.

But I'll say that what you— the conversation you just had and that Senator Kawasaki just had gives me— I think there's a strong rationale for including the education head tax in this bill. And I know there are perhaps concerns about single subject rule, but I don't think— I don't— I think those can be overcome because I think it might work better, uh, to have such a revenue measure in place to deal with some of our impending challenges to this, to the school budgets, than something like this. Um, but it's something to, to, uh, not this, I'm sorry, the per mile, but something to consider. Um, and I think I'm going to ask for that amendment at least to be drafted, and we'll talk more about whether or not I should introduce it. Thank you, Madam Chair.

Thank you, Senator Dunbar. Senator Kowalski— er, Ms. Kawasaki, you have slide number 2 that goes into more history.

I do, Madam Chair. Thank you.

A couple of things I did want to state just for the benefit of the discussion. I do think that the agreed-to MAG number had to do with a sort of recognition of what the impacts were to the communities and what the producers were willing to pay in lieu of their taxes to the communities. And so I would assume too that the producers understood their own project economics at that time. And another detail that I think was important for that time that was raised by the administration is that the PILT agreed to was going to is to provide certainty for the producers to move forward with the project. And so in that respect, if we can provide certainty by coming up with legislation that provides a payment in lieu of taxes or an AVT, that it is a similar concept that we are trying to pursue here.

So the next slide is slide number 2. I just wanted to point out that there was a guidance letter from 7 of 9 of the members of the House Resources Committee back in 2015, then, um, I'm sorry, 2014, and this is for passage of SB 138, which was concerning the AK LNG, uh, uh, legislation. And the letter was, um, in advance of the negotiations expected by the administration and, um, producers and other, um, interested parties on, um, the contracts that would form and eventually that the legislature under that bill would end up approving in bylaw. And this letter, um, confirmed that any change to property taxes enabled via payment in lieu of taxes may not reduce the revenue that would have been received by the state and municipalities to less than what they would have otherwise received under current property tax statutes. And so that was one of the goals of the House Resources Committee, and they wanted to make sure that it ended up in the guidance letter.

And you can see that it was dated April 15, 2014, and the names of the members who signed it. Very good. Thank you. Next slide. So with that in mind, continuing on the rationale, basically the concept for this committee substitute is to attempt to reclaimate the total annual revenues.

At full project capacity in line with the work of the 2015 Municipal Advisory Group. And, I have a resource document that basically said that the amount that would have been attributable to each, component of the Alaska, uh, North Slope Gas Line Project would be the gas— the gas pipeline valued at $170 million, for the PILT, the gas treatment plant, or now which are considering the carbon capture facility, would be $170 million for the PILT, and the LNG export facility would be valued at $285 million in PILT payments, and that approximates, or that adds up to $625 million. Madam Chair. Thank you. Senator Dunbar.

Thank you, Madam Chair. I have a question for Ms. Kawasaki and then for Mr. Stickel if he is on the line. Mr. Stickel is online. Very good. So, Ms. Kawasaki, these numbers, 170, 172, 85, are these what the MAG was proposing?

This is 2015 MAG, or is this roughly what the revised AVT in the CS would produce? Thank you, Senator. Senator Dunbar, through the chair, this, uh, I apologize, this slide is demonstrating what the MAG had considered for each component. And then as we move forward through the slides, you'll see the relationship to the AVT and the CS. Follow-up, Madam Chair.

Follow-up, Senator Dunbar. Uh, is it safe to say though that you attempted to hit close to these numbers at the AVT? That is, the AVT produces about this much revenue? I think I can't remember if you said $610 million or is it this exact $625 that's created by ABT? Through the chair, Senator Dunbar, that's correct.

It is $610 million, and moving forward in the slides, we'll re— we'll review that number from yesterday. Thank you. Uh, thank you, Madam Chair. I—. Well, it's important that I establish that now because I want to sort of— I want to frame the rest of this conversation through a question to Mr. Stickel.

But I'll just say, to revisit a point I made last year— I'm sorry, yesterday. Feels like last year. Feels like yesterday. Uh, yeah, probably much the same. Uh, if you take half of that, and let's say it's a little bit smaller of a number, but for the LNG export facility, that's $142.5 million.

And let's even drop that to $130 million or something like that. This gets back to my point about that is a huge amount of money for the Kenai Borough to get that isn't counted against, uh, their contributions to the schools vis-à-vis the state formula. And that does create an awful lot of equity concerns. I think for me, I think constitutionally, but we'll set that to the side. I know there's gonna be more conversation about that.

Mr. Stickell, I have a question for you. Mr. Stickell, uh, Senator Dunbar has a question for you. So I was looking back through your presentation and trying to put this in context, and I'm not sure— I have some scribbled notes here. I don't think you wrote it into your fiscal note because your fiscal note assumed that things dropped to $2 mils, and that's why, uh, and that is why the project went forward. But let's assume— and I think you have done this, and I have some scribbled notes here that I think you did do this— let's assume that the project goes forward and we don't pass this bill, that is, that we're at $20 mils.

What is the revenue that would be produced in that scenario by our current property tax regime? I think you said it was something like $800 to $900 million per year, but I want to make sure that that is correct. Mr. Stickel. This is Dan Stickel, Chief of Commerce with the Department of Commerce. Department of Revenue to Senator Dunbar through the chair, and I believe we're going to be providing detailed analysis to the committee supporting this number as one of our follow-ups to previous questions.

Um, but under current law, over life of project through 2062, if the project were to proceed regardless of tax relief under our baseline assumptions. We assume $7.5 billion of total state property tax over life of project and $15.6 billion of local property tax over life of project for a total of $23.1 billion of property tax burden. Senator Dunbar, question? Yes. So I know it's not smooth.

That is to say, it probably starts at a lower number and ramps up. But approximately what is that per year?

Senator Dunbar, through the chair, looking—. Looks like about $800 million to me, but that's just in my head. Yeah, I have a state revenue number before me. It's about $240 million. And then, excuse me, I believe I provided this information on the record during a previous committee hearing.

Yeah, I was looking through your presentation trying to find it, and I believe it would have been on Slide 30 of a presentation, let me see, dated March 30th, 2026. And Mr. Sickel is correct. Actually, I wrote down $250 million property tax, State of Alaska, current, current law, but $240, $250. [Speaker:DR. WILLIAM BURRUS] And then more to the, more to the municipalities, correct? More than twice that to the municipalities, it looks like.

Correct. Yeah. So to, to Senator Dunbar, to the chair, um, so just pull this up. Once full operations began under the current loss scenario, um, we were looking at about $736 million per year of total, uh, property tax burden, and that broke out $239 million to the state and $497 million to the municipalities. Okay, very good.

Thank you, Mr. Stickell. Thank you, Mr. Stickell. If I could just—. Senator Dunbar, follow-up. I think that's an important— that's important context here, right?

So this, uh, this is $625 million a year. That seems like a large increase, but actually it's still more than $100 million lower per year than our current structure. So, you know, I, I sort of suspect that this bill will get revised further both here and at the Finance Committee. But if it were to pass as is, at least with just the ABT portion, this would still represent a very large $100 million per year tax cut for the property. So that's the point I wanted to make, ma'am, just to put it in context.

And I know there is the per mile that we're going to talk about more later, but just comparing the AVT to the property tax. And the last thing I'll say— I'm sorry, Madam Chair— is the AVT, of course, also by going with an AVT instead of a lowered property tax, you also address the sort of primary concern that the Governor has brought to us, which is they don't have to pay the AVT until they're actually in commercial operations. And so it's not only a large tax cut, it also solves the, the central problem of paying things up front versus paying them when you're in commercial operations. Thank you, Madam Chair. Thank you, Senator Dunbar.

Senator Wilkowski. Thank you. And, um, maybe a question for Ms. Kawasaki, but if this, the $736 million we just heard in total property taxes was based on an estimated project cost of $46 billion. If the project costs go up by— which many people are expecting at probably 20% at least, uh, and maybe, maybe this is for Mr. Sickel, uh, I would presume you'd have a similar property tax increase. So if the project costs went up 20%, would you see property taxes go up by 20% roughly?

Mr. Stickel.

Yeah, to Senator Wilkowski, to the chair, that's the assumption that's based— that is baked into our modeling, is that property taxes would relate to initial construction costs. Okay, and then maybe a question for Senator Wilkowski, for Ms. Kawasaki. So if you have $736 million and you assume a 20 20% overrun, you are another $150 million on top of that. And to Ms. Kawasaki, then, the $625 million, is that tied to property taxes? In other words, if the project is over cost by 20%, does that number increase or decrease or stay the same?

Through the chair, Senator Wilkowski, This— I think you're asking if there would be a value escalator in the case of something like overruns or the property— the value of the project increases. We had not worked that into this formula. So— but it is something that we might consider. Follow-up, Senator Wielekowski. So to Senator Dunbar's point, it could vary.

Instead of just a $100 million difference, it could— is very likely much more. It's probably more like $200 or $300 million difference if you assume that there's a cost increase for the project.

That's all. Thank you. Thank you, Senator Wilkowski. Moving on to the next slide, Ms. Kawasaki. Slide 4.

We're on slide 4 for the public who are listening. Ms. O'Connor, you have the floor. Good morning. Sure. Yes, thank you, Madam Chair.

And I also just want to, for the discussion purposes, I guess I myself as sort of an outsider on the whole project development process, I don't believe that Glenfarm came to, or the 8 Star entity came to the legislature when we found out that they were forming and warned us that there would be this significant request for a decrease in property taxes. And so I guess I would also wonder if they had considered it or, you know, to what extent they actually need the massive significant property tax cuts that they would be receiving under the governor's version of the bill. So the next slide, slide 4. Senator Myers. Yeah, to that point, I mean, maybe they didn't necessarily come to us last fall, but Wood Mack did flag property taxes as a significant contributor to cost and the overall cost of the gas in the report that they gave us a year ago.

And it's my understanding that property taxes for a pipeline have been flagged as a potential problem all the way back to the late '90s, going back to the Stranded Gas Act. Days, and so much so that I discovered a bill filed in 2012 that would give a property tax holiday that came from Senator Wilkowski. So I did notice, you know, the issue has been out there even if Glen Farn didn't come to us directly, you know, last spring. Thank you, Senator Myers. Ms. Kawasaki, slide 4.

So the next slide has to do with the rates that are broken down in the bill, and they are under Section 33, page 28. It is— in the bill, we have established actual rates that are 15 cents per 1,000 cubic feet for the gas pipeline. These are volumetric rates. And 15 cents per 1,000 cubic feet for the gas treatment plant. And then 25 cents per 1,000 cubic feet for the LNG export facility, with the sort of notion that the export facility is a more expensive piece of real property.

Real property. And so we think that this sort of structure provides more of a clear separation and direct correlation to the taxes, where Phase 1 pays the pipeline ABT while Phase 2, the LNG export facility and the gas treatment plant, would begin to pay once they are commercially operational, operational themselves. And then this would enable a more targeted sharing methodology with local governments.

All right, slide 5.

Um, under slide 5, we see examples of The tax rate is applied to first flow in the first example. So this is first flow through the gas pipeline, at which time that it's only operational for in-state use to South Central Supply. And currently that's experiencing about 65 billion cubic feet per year. And so at 15 cents per thousand cubic feet tax rate, that payment would be about $10 million annually. But then when the other two components come online, which are the gas treatment plant and the LNG export facility, we would see a compounded gas tax rate of 55 cents per thousand cubic feet, and that would be on exports of 2.7 billion cubic feet per day, and the estimated ABT for that example is $610 million.

All right, slide 6 talks about the allocation of this.

The allocation methodology that we've established in the bill would provide 50% on the— sorry, excuse me— on the gas pipeline itself, which is 807 miles in total when it's complete, would be 50% to municipalities along the corridor based on miles of pipeline And then for the unorganized boroughs, along the way, the state would retain those proceeds, and then the other 50% would be apportioned to communities through the Community Assistance Program, which is under the Department of Community and Economic Development. And that is a per capita rate, and it's apportioned to all communities all over the state. Phase 2, the gas treatment plant, the North Slope would receive 50% of the revenue proceeds and the state would receive 50%. The export facility, again, Kenai Peninsula Borough would receive 50% and the state would receive 50%. Senator Dunbar.

Thank you, Madam Chair. Just something just occurred to me. So, just when we're getting into the details. Does this pipeline cross federal land at any point? And if so, is that apportioned?

And then for the portion that is going to be under Cook Inlet, how is that going to be apportioned? Is that— does that go to the state for those miles?

Senator Dunbar, through the chair, I would have to research that. I apologize, I don't have the answer at hand right now. I guess it's a relatively small question, Madam Chair. It's just interesting given the specificity we're using here. Thank you.

It is, Senator Dunbar. So online, and, and I'm not sure who would best answer this, but we have of course Mr. Stickel. We also have Ryan Farnsworth, he's with the Department of Law. We have Emily Nauman, of course, legal drafter. And we have Nicole Tham.

She is the operation manager, Division of Community and Regional Affairs.

I think it's fine, Madam Chair. It's a little bit of a rabbit trail, and we'll— I'll maybe ask one of those folks in writing at a later date. Thank you. Well, we can certainly submit it to Ms. Nauman to find out where she would recommend the question go. Who would determine that.

Further questions related to the allocation? Seeing none, moving to slide 7. Slide 7, we see an estimated total value of AVT revenue for full— projects at full development. So this is a chart that sort of breaks down what we would suspect that the communities and the state would receive under this the AVT proposed by the bill. And as you see under the Fairbanks, Matsu and Kenai Peninsulas, they would receive funding under the CAT program per capita, but since they have also some cities that are established within those boundaries, they would also receive their own separate distributions.

Very good. Slide 8.

Slide 8.

So these are just some other features of the AVT structure. The first one is that it remains in lieu of state and local property taxes, which was also proposed on the governor's bill. Or it is just incidental to the creation of the tax. I should have said here also that it eliminates the other provisions that would have made the ABT in lieu of other local and sales taxes, and we just eliminated that from this CS. The next item is the ramp-up period that was established in the governor's version of the bill has been eliminated because we moved to the commercial operations when that will be the timeframe at which the tax begins being paid.

And then after 10 years of commercial operations for any respective component, there is an inflation adjustment that is made annually based on CPI.

—Versus what?

The 1%? Oh, the 1% in the governor's bill. Yes, the governor's bill proposed a 1% escalator, which was purported to be attributable to inflation-proofing, but since it doesn't match inflation rates generally, then it wouldn't have escalated the, the amount due to a proportional amount to inflation.

The fourth item is that the ABT of this bill also does not apply to a spur line, which is the same as the governor's bill, same policy proposed there. And the next item is that currently in the bill that it retains the exemption for consideration for full taxable real property value for the value of in a school district for the local contribution limit, which I know Senator Dunbar has raised a few times in these hearings. It is retained in the bill as the governor introduced it. And then the final bullet on this page is that the termination date of the governor's bill was going to be January 1st, 2040 if commercial operations were not if there were no commercial operations by that date. But in our bill, we established that the construction is not started on the gas line by January 1st, 2028, that that could end up repealing the AVT provisions.

And the other condition might be is if it was if the operations of the pipeline, the commercial operations, were not in effect by January 1st, 2032. Senator Dunbar. Thank you, Madam Chair. So I have a question for Ms. Nowlin. Before that, I'll say I, I have received a barrage of texts from several people related to my question telling me that it wasn't a very good question.

Uh, the federal land status doesn't matter. Uh, it's just the, you know, which which municipal unit is going through, essentially. And then also, um, that the Cook Inlet portion is split between Mat-Su and Kenai, that extends out into the inlet, at least for the majority of that pipeline. So good to note. Um, the, uh, the question I have for Ms. Nowman, again, it has to do with the full and taxable real property exemption that is kept here.

So I, I think there's sort of two different things. There's the question of whether the property is kept out of the full taxable real property calculation. There's also the issue of the AVT revenue itself, if that makes sense. And so is there any way to, um, to keep the real property value that full taxable value outside of that, um, to maintain this exemption, um, while still having all or a portion of the AVT revenue count towards the local share. And, and I guess what I'm looking for is a way that they're not left better off— I'm sorry, they're not left worse off.

Municipalities aren't in any way left worse off, but we can at least in part, reduce those equity concerns, which I do think are going to be really accentuated by this system if we start bringing in this kind of revenue.

Ms. Nowman, did you decipher a question there?

Are you ready for me? Yes. Okay. For the record, this is Emily Nowlin, Legislative Legal Services. Through the chair to Senator Dunbar, certainly what you're describing is draftable.

We can put something like that in the bill. I think from my understanding of the bill and the governor's intent for at least part of those changes is that the administration was expressing a concern that valuing this property would be difficult. While we could put something like that in the bill, I think there's a practical question about whether or not it could be executed, and that's not a question that I can answer. I can only, you know, speculate that that was the reason and say that the bill as it's currently drafted doesn't require any entity, including the state, to value that property. So that might be the linchpin there.

Follow-up question, Senator Dunbar. So this might be for Mr. Stickell then, but if Ms. Nauman wants to wants to answer, I appreciate it. So let's, let's take that premise the governor has put forward that is difficult to calculate the full real property value. And so we do maintain this exemption. However, we want to find some way to address our equity concerns.

And so we're going to put all or part of the AVT into the local contribution formula, um, how would that work? And how could it be done in such a way that the boroughs aren't left worse off, um, but we address our equity concerns? And that's question for either or both Mr. Stickel and Ms. Nauman.

When you ask it to two people, you ask it to no one. I got it. Mr. Stickel, do I hear you signing on? Sure, yeah, this is Dan Stickel, Chief Economist with the Department of Revenue. We would have to, we would have to kind of look at different options.

You know, we certainly could with additional resources, we could do do a full assessment and appraisal on the pipeline to establish a valuation and a pro forma, you know, what would the tax be on the pipeline project. We would have to understand exactly what the policy goals are regarding the local contribution. That's not my specific area of expertise.

Senator Dunbar.

Yeah, I don't think the idea is to reach the full taxable real property value, although I suppose if you were setting the mill at 2 mills, it would be very low. If the— if it was set to the equivalent, the mill equivalent to the AVT level, we're at, then that would be more useful, although that number is likely to fluctuate as this bill goes through the process. I'm just— I'm going to go back to you, Ms. Nauman. You have previously flagged this equity issue. I think that it is a real issue that will cause us to lose a constitutional challenge to this bill, to this structure.

I mean, you, you're going to have children on one side of Cook Inlet with a huge valued much, much higher than kids just on the other side of the inlet in Anchorage. And so I just— or Turnagain Arm, rather. But I just— I'm wondering what your thoughts on how to structure this AVT in a way that addresses those equity concerns.

Again, this is Emily Nowen, Legislative Legal Services, through the chair to Senator Dunbar. I have not had the chance to do the additional analysis that we spoke of yesterday afternoon, and so I don't have any additional thoughts on the issue, but I will include that in the memo I'm working on for you. Thank you. Thank you, Madam Chair. Thank you, Senator Dunbar.

Alright, moving on to slide 9. Thank you, Madam Chair. For the record, Sonya Kawasaki, Senate Majority Legal Counsel. The last substantive slide again goes over— now we're switching from the AVT to the Community Impacts Program, which is a fee and allocation program on revenue that will come to the state through the developer through, um, impact— for impacts to the community along the line of the pipeline. The developer is assessed $1 million per mile of pipeline constructed in the prior year.

And then the legislature may appropriate funds for activities, services, and facilities in the communities that experience actual impacts due to that construction. And then the grant program is established in DCCED, to which the impact communities may apply. And then DCCED would annually report to the legislature on the program, including the amounts that were distributed, the further eligibility of those communities, and then making recommendations for awards in the future. So, Ms. Kawasaki, this now is impact during construction, for clarity for the public who are listening in. Madam Chair, that's correct.

These are construction impacts during the pipeline construction. Thank you. Senator Dunbar. Thank you, Madam Chair. I believe we have Mr.

Richards online. Mr. Richards is not online. I do not see him. Hmm. Do we have anyone from AGDC here?

Uh, well, we have their lobbyist, uh, Mr. Begich, and that's all. Okay. I was, I was led to believe we would have one of somebody from AGDC online. I guess I'll address this question to Mr. Begich then, if that's all right.

Yes, Mr. Begich, a question from Senator Dunbar. And I'm sure we are going to get into much more detail about this with, um, with AGDC and with Glenn Farn. But Mr. Begich, I'd like to hear your initial thoughts on this. And I guess I'd like to know, you know, this does at least partially address the governor's concerns, correct? Because it does delay a number of the payments, and Ultimately, it's a big chunk of money, but not relative to the massive size of the project.

So do you have a sense of what Mr. Richards and the AGDC board thinks of this provision? Mr. Bagich. Thank you very much, Madam Chair. Mark Bagich, working on behalf of the State of Alaska via Brownstein High contract with the governor's office. And Senator Dunbar, I'm pretty sure Frank is online, but he may be on the listening line, uh, is my understanding now.

But, uh, your provision that you're talking about is regarding the upfront construction impact dollars, is that correct? Yes.

So, you know, first let me just say, in a broad sense, we're going to take a look at the bill total and give you responses and so forth by section as we move forward. But in regards to the impact, anytime you put money on the front end of a project without the flow of the project, meaning the actual volume going through, uh, in the early days, it will impact the price of the cost, or the cost of the gas to the local communities because they're the first customers of the pipeline. That's the general sense. We understand where you're going with it, but I think there's— anytime you put stuff on the front end, you will pay for it over the whole of the project, because it will be incorporated into the construction cost as a cost to the project, versus down the road when you put the tax on it, it is just an expense line that is added to the final price per unit versus the construction cost. Senator Dunbar.

Thank you, Madam Chair.

I understand what you're saying, Mr. Begich. On the other hand, the state's costs are upfront when it comes to impact. You know, during the construction phase is when we will see some of the most significant impacts to places like Fairbanks and Kenai and North Slope. And so particularly Fairbanks. So how would you suggest that we address that?

That's what this attempts to do.

Well, again, Mark Baggett through the Chair. Senator Dunbar, I think, you know, we're in discussions on a daily, if not hourly, it seems, with the mayors. As a matter of fact, I'll be on a call in about 30 minutes minutes with another mayor. I think the mayors understand the impacts, but as you look at the project, even under the current laws, you know, under, uh, 138, there is no requirement. And as pointed out earlier, um, there was legislation in the past not to burden the front end of the project, or you won't have a project because you'll have to whip that into the construction costs.

So saying that, totally understand it. That's why we're in these discussions with mayors who understand how these impacts happen and where they are going to impact them and where. For example, you know, the reverse is true. If you're in— I'll use Denali as an example, Denali Borough. They have no facility.

They just have pipe. And once a pipe is completed, the impact to a community is almost zero. Because it has nothing to it. There's just once in a while maintenance on it, but it's not like there's a camp or a town or a village or something built around it to support the pipe. So it has a reverse too.

And so we're trying to find a balance of a continued cost into the project for local communities that we can predict over a period of time. But if you burden it on the front end, at that level, you will impact the cost for sure. There's no two ways about that. But I understand your concern. That's why we have had these individual and group conversations with the mayors.

And I think we're moving down a path with most of the mayors at this point to resolve these issues. Follow-up, Senator Dunbar? No, thank you, Madam Chair. Further questions? All right.

Seeing none, I believe that was your last slide, Ms. Kawasaki. Is that true? It is true, Madam Chair. Thank you very much. All right, thank you.

I'm sorry, Madam Chair. Senator Dunbar, I have another question I was going to ask on the additional discussions and questions slide. Uh, Senator Dunbar, so what— one of the, uh, concerns raised by the chair and Senator Wielechowski and myself was the way that the original bill was written, 280. It didn't just implicate property taxes. It talked about all taxes that had to do with this project.

It had, you know, the bed tax, the sales tax from municipalities that have it, all of it. And I assume that those provisions have been excised from the CS, but I haven't heard you say it on the record.

Through the Chair, Senator Dunbar, thank you for that question. I apologize. I stated it on the record, but I did I did not add it to the slide. There was a slide that I should have added it to, but that has been excised from our version of the CS for SB 280. It was very difficult to even understand the intent behind that and also the mechanics behind it.

And so— and also the outcome behind it, or that would occur. So it was not something that was seriously considered for the CS. And as you recall, Senator Dunbar, even Mr. Stickell suggested the committee could adjust that particular section. I agree. Thank you, Madam Chair.

Thank you, Ms. Kawasaki. Thank you. So with that, we'll be setting this bill aside. This concludes our meeting.

We do have a transmittal document to sign for House Bill 117, which is being passed around at this time. So please don't leave till you sign that. Our next meeting will be tomorrow, that's Wednesday, April 22nd at 3:30. We will again be taking up this bill. One of the topics will be hearing from some of the mayors at that time.

So we will stand adjourned. Let the record reflect the time is 10:35 AM.