Alaska Legislature: Senate Finance - June 16, 2026 9:00am

Call Senate Finance Committee to order. Today is June 16th, 2026. We're in Senate Finance Room, State Capitol.

It is quarter to 10. Present today are Chairman Olson, Chairman Steadman, Senator Keele, Senator Merrick, Senator Cronk, Senator Kaufman, and myself, Senator Hoffman. We have two items on today's calendar, first being continuation of HB 381, oil and gas property tax that we started yesterday, and the other is the Fairbanks Spur Line that we may have to delay for this afternoon's agenda. But first, we plan to pick up, as I stated, on the Fairbanks Spur Line. I invite Matt Kissinger, the Alaska Gas Development Corporation, and Adam Prestwich with Glenfarm to the table to introduce themselves, put their mouths on the record, and continue with their presentation from yesterday.

Before we get started, we have Senate President Stevens, Senator Bergman, Senator Myers, Senator Rauscher, and Senator Yunt in the audience with us. [NON-ENGLISH SPEECH] Mr. Kissinger. Good morning, Chair Hoffman. Good morning, members of the committee.

I'm Matt Kissinger, commercial director of AGDC, for the record. Good morning. Adam Prestidge, president of Glenfarm Alaska LNG. I would like to start off by just recapping some of what we discussed yesterday before we transition on to the AGDC provisions. We talked about the tax provisions of this bill, which were negotiated quite carefully and originated in our AGDC's economic stage gate.

But really the tax issues around this project were identified a long, long time ago, and they've been known for many, many years, for more than a decade. As you say, right now we're relying on a very archaic way of taxing.

We then moved on from the tax provisions and talked about the utility buyer protections. And these are great protections for the Alaskan consumers. It sets this price cap. It ensures that cost overrun risk can't be transferred to the buyers in Alaska. And these are great protections, and it really is a, a well-crafted balance.

Last night I was reflecting on some of the comments around Well, this AVT isn't done. You know, we use a standard mill rate tax across everything in the U.S. But I would counter that Alaska is a little bit different because Alaska is an owner state. And because of Article 8 of our Constitution, we are more like a lot of the international regimes where the state is a participant and owns the resource and it's for the state's benefit that the resource is developed. In a lot of these jurisdictions, when you're building a pipeline, you would create something called a host government agreement.

And these host government agreements deal with taxes, tax stability, the benefits to the project from the state and state support. And I started to look through some of the HGAs that I've worked on in Azerbaijan, Georgia, Turkey, and compared it with what we have crafted here. And it's really quite interesting, actually. You have many of the elements, of the same elements that you'd look for. You have a form of fiscal stabilization.

Host government agreements go much further. They provide for true fiscal stabilization clauses, but we can't do that. We're up against the limits of the Constitution of not binding future legislatures. But we have at least created an ad valorem, or an alternative volumetric tax system that is easily predictable and well understood, easy to model, easy to understand, and aligns everybody in that the more throughput, the more we all win. The less throughput, the more we all have pain.

Community benefit obligations are always in these host government agreements, and I think that we have a lot of community benefit obligations. We talked about the impact funding. But you also have those two mechanisms I just spoke of, the price protections for Alaskans. And these are very similar to some of the benefit obligations that you'd get in the host government agreement. And then finally, state participation rights.

And this is very different from other regimes across the US, but very common in host government agreements where there is some sort of preemptive or back-in right for the state. So you're right. The volumetric taxing is not that common across the U.S., but I'd say it has been common on at least a couple of key pipelines that I've worked on and know about. The Baku-Tbilisi-Jeyhan oil pipeline, which is a long— sort of a longer, bigger pipeline than TAPS, and the South Caucasus pipeline for gas, which again is longer, a little bit smaller diameter, but fairly close to what we're building here, and quite similar in a lot of ways. And it's that those pipelines pay a volumetric tax as they transit through both Georgia and Turkey to move that oil and gas.

And it's proven to be a very sustainable way of doing this. This is almost 20 years that these— in fact, it's more than 20 years now that these pipelines have been operating successfully. [Turkish] without a lot of litigation, without the cost to communities of having to do this litigation that we always are seeing on TAPs. So I just wanted to start with that. I also wanted to clarify a few things.

One is, what happens if we don't go to FID? Because we've received this question a number of times. And I want— I wanted to have Adam up here, Mr. Prestige, on the record so that we could explain. What happens is the developer under our contracts, between AGDC and Glenfarm, developer Glenfarm, they have to continue diligent development efforts until they achieve an FID. And we have laid out sort of 10 criteria of what it means to, you know, commit to— or to undertake diligent development efforts.

And what diligent development efforts ultimately requires is a lot of money for them to continue spending. So they have to keep spending money to advance this project until we get to an FID or until they call mercy on that. And if and when that happens, and hopefully it does not happen, but if and when that happens, there is no payment obligation of the state back to Glenfarm. There is no payment obligation under that circumstance. And Adam, if you'd like to add on to that.

Sure. [FOREIGN LANGUAGE] For the record, agree with what Mr. Kissinger has said. Glenfarn is developing the Alaska LNG Project at our own risk and at our own expense. There's no request for the state to continue to put in additional development cash, and there is certainly no right or expectation for Glenfarn to be reimbursed for any of our development expenses by the state. And I agree very, very much that if Glenfarn were to find that the project had failed or we were unable to be successful and we abandoned the project— again, we don't ever— we don't see that happening because we're confident in the project.

But if that ever did happen, Glenfarn would have no recourse, no ability or expectation or request to be reimbursed. We're doing this at our own risk. To underscore that, the proof of that, when Glenfarn was negotiating to come in to take on this project, there was a concept on the table that was an ADA backstop. And it was being considered a bit by the legislature. There was a bit of press about it where the concept was that ADA would provide a reimbursable or reimbursement guarantee of up to $50 million to cover the cost of engineering studies on the pipeline.

With the concept being that if the engineering studies resulted, in an unviable project, or the project failed to go forward, then that up to $50 million could be reimbursed by ADA, by the state, to the developer. We took a look at that, and we thought that that didn't align with the way that we want to take on this project, where we don't have an expectation or request from the state. The reason for that is that we're confident in this project. We also know that the state's put a lot into it. We're not asking for more.

We're asking for the opportunity to be able to take it on ourselves and bear that risk ourselves. So at that time, we made the decision not to pursue that. We asked AEDA to stand down, and we've continued to fund— we've paid for the engineering study. It was successful. We've continued to fund all of the expenses of developing this project ourselves.

So under that scenario, unless the legislature decides to take the investment option, there is no scenario that that Glenfarm sees that under any scenario that there would be a cash call by the state of Alaska or by Glenfarm. Chair Hoffman, that is 100% true and correct. There is no scenario where we will ask the state for money. Even the state investment option is an option to the state. It doesn't come with a formal request or pressure from Glenfarm to make that investment option.

That is the state's decision. And Mr. Kissinger, would you agree with that statement? Chair Hoffman, yes, I agree with that statement 100%. Senator Kiel. Thank you, Mr. Chairman.

Gentlemen, I appreciate the enthusiasm and the optimism, and I hope we get to success. What about ownership of project assets and intellectual property, whether that's the FERC license permits or engineering studies or those things. How is ownership of those resolved? God forbid this thing doesn't go. Senator Keel, through the chair, those would stay with 8 Star.

And so what you would have is you would have a withdrawal from 8 Star by the developer, but 8— and AGDC would become the 100% owner of 8 Star again, as we were, and all that would reside with 8 Star exactly as it did before Glenfarm came into the project, actually. Is there provision for compensation for those at the withdrawal of one party? Senator Keele, through the Chair, no, there is not. Senator Keele. I think that's excellent.

Is there any chance we could take a look at that part of the agreement? Senator Keele, through the Chair, please allow us to discuss that in terms of our confidentiality and what each party is willing to waive. Thank you. Thank you, Senator Keele. Further questions?

Senator Steadman. You boys are so speedy today. I'm still back at the opening. Hahaha. So let's back up a little bit.

Maybe Mr. Kissinger, could you please identify yourself, who you're employed with, and for the record before you start so there's no misunderstanding? Yeah. Please. Senator Steadman, through the chair, I am employed through an agency by AGDC. So I'm contractor staff to AGDC.

I work directly for a consulting company called HOK. And they provide basically, they provide the back office support. So my paycheck, et cetera, comes from HOK. All my direction comes from AGDC and fundamentally from the president of AGDC, Frank Richards. While I'm at it, if I may, I'd like to talk a little bit about my background as well to put that on the record.

Okay. Please. So I moved to Alaska when I was 18. So I'm one of these, I came here as soon as I could type people. I went to UAF to become an environmental engineer.

4.5 To 5 years later, I walked out with a petroleum engineering degree. It was the best decision I've made in my life. I started with BP in Alaska. I had interned with ARCO up on the North Slope, but I started with BP as a petroleum engineer, and I very quickly moved into what we call business development, negotiating deals like this. I cut my teeth on the new-build vessels for BP, where we bought 4 new-build vessels for over $1 billion, and I crafted the final financial memorandum for that.

And then I moved to Azerbaijan, where I spent 5 years through the full construction of the BTC pipeline and the SCP pipeline. This is where my background around those pipelines come. I negotiated over 30 agreements there, aligning—. Thank you. Mostly the various projects around a single terminal, and then doing the business development and expansion projects for BTC that we were envisaging at the time.

I moved on from there to Russia. I worked in Russia on a joint venture between BP and TNK-BP. It was a very difficult venture, to be honest. A lot of shareholder disputes, and I was there throughout the shareholder disputes. Really fighting for BP's share in that and trying to work our way through that.

Came back to Alaska and I worked on the Denali Project. I negotiated the UJV for Denali Canada, as well as a number of the other provisions for the Denali Project. That Denali Project was a BP-ConocoPhillips 50/50 joint venture to move gas to the lower 48, and then there was an Agyaa sort of effort that Canadian Gas was running parallel to that with TransCanada, and ultimately Exxon joined that, and the four forces came together when shale gas in the US made that project irrelevant. I moved there from— from there to Jordan and did a full extensive, not just exploration project in Jordan, but a development which included— a development planning project which included expanding the Arab Gas Pipeline, which runs from Egypt into Jordan, up through Syria into Turkey. That was around the time of the Syria War.

And so we abandoned that effort but gained a lot of good experience on that. Left Jordan and I hiked the PCT for one year. So I hiked the Pacific Crest Trail for one year and then I moved to Alaska, back to Alaska in 2017 to really, I felt, to bring the experience that I had gained overseas, back to Alaska to try and move this project forward. And I've been doing that ever since. Senator Stidman.

Thank you, Mr. Kissinger. It's good for the public to hear your background. I don't think anybody at the table is concerned about that as far as you not having a background. The point that I bring up is, you know, when we work on this project, it's nice to know who's who's an employee of the state, who's hired support to help, like in your case, AGDC, which is fine. We don't— I don't think anybody has any issue with that.

It's just a disclosure. And the same dealing with the administrative branch. If they have consultants or they have lobbyists, we need to know The relationship, that's the issue. That's why I want, you know, so I'd recommend when you start your presentation, you throw that on the table, you know, because there's no, it's no, it's, it only becomes an issue when it's not disclosed directly. That's the concern.

And the other day we asked you the same question and today you went a little bit further through your background, but that's not the issue. So let me back up a little bit. Because there was a mention of Alaska's dissimilar than everybody else in the lower 48, which is true in that we own the subsurface. But we're not too dissimilar from Alberta or Saskatchewan in that the Crown owns the subsurface there. So there's a lot of similarities.

When we take a look at —tax structure change we're looking at, the throughput tax, that is different than used in the states. We have kind of a hybrid production sharing contract concepts with old tax and royalty concepts from years ago. So we've got a hybrid situation here because we own the subsurface. But when we look at places like Turkey and Azerbaijan, what you were referencing is basically a tax of volume going through a pipeline through a country on its way to some other place. That's different from Alaska.

This is all in-house. We're just moving it from the North Slope down to Tidewater to get it on the ocean. [SPEAKING NATIVE LANGUAGE] and get it to market. So it is substantially— I look at it substantially dissimilar than what's going on in Eastern Europe or the Middle East and other areas. So there's always an interest in that regard as far as when we have something new.

So I just thought I'd mention that because this structure we have— Mr. Chairman? In front of us is dissimilar in North America by more than it has similarities. I'm not saying it's good or bad, it's just different, right? And we need to understand that. So, Mr. Chairman, if I could just move to the last part of the discussion dealing with potential impacts, because there is concern that if there's total failure in this, and nobody hopes for or wants that to happen, it's certainly not in the best interest of anybody, that the dataset that is in control of H-STAR, the holding company.

If Glenfarm exits, is there going to be a request back to the state to have to buy that data back, or do you just say one day, you got to excuse me, I'm cleaning out my desk and hitting the road, here's my forwarding address if I left anything behind in my desk, here's all the documents, goodbye, there's no monetary change or nothing, it just seems a the LOD. So can you help me with that? Senator Steadman, through the chair. So we need to remember that Glenfarm doesn't own any of this data. That 8STAR owns all this data.

And Glenfarm are a 75% member of 8STAR and AGDC are 25% member of 8STAR. If Glenfarm were to decide to terminate their 75% membership, that's really what that would look like. So they are leaving the club essentially, but the club keeps all the information. We would be the only member of the club at that time, AGDC would.

Senator Steadman. Was there preliminary discussions when all this came together about any exit strategies and purchases, buybacks, any of that stuff? It just seems kind of odd to me.

Senator Steadman, through the Mr. Chair, there is a different provision around making the developer leave, which would require a payment. But as far as the developer quitting themselves and no longer pursuing diligent development efforts, no. There was never even a discussion of a payment in regards to that, them leaving. So if I could, Mr. Chairman.

So under that scenario, say things do go down the drain for— can't get financing or whatever, you know, markets collapse, whatever the issue is, and you can't move forward, then Glenfarm can just hold the line, hold their position, and stammy other opportunities for the state to get a gas line until we squeeze them out or they leave? Because if they don't want to leave voluntarily, then we have to buy them out? Senator Steadman, through the Chair, so you have to remember that they are required to continue with diligent development efforts until they leave. Diligent development efforts is a thoroughly defined provision within the agreements. I think there are 10 elements to it.

The fundamental aspect of diligent development efforts is that it requires them to expend large sums of money to continue investing into the project. And so it's very different than situations where a producer gets a lease and then they're able to just sit on the lease without any investment and hold on to a lease. In this example, they have to continue expending efforts and resources and money into the project. Mr. Stegman. Well, we got Point Thompson, we understand leases and how things can drag on fairly thoroughly, I think.

So who sets the value in the event that there is divorce and we have to squeeze Glenfarm out? How do you come up with the value of what we would have to pay them or how would they do that? How would you do that?

Mr. Kissinger.

So ultimately it would be set through sort of the same mechanism as when you are doing taxation and you get a fair market value. And so it would be the value that was brought to the project from their involvement. So you'd sort of take the current value of it and subtract the value of the project when they started, and that difference would be the payment. But again, that's only in case of divorce. There are confidential mechanisms that would trigger that right, and so that right would first have to be triggered, actually.

And that's— and that would be by missing certain milestones. Senator Stigman. But who sets that value? If I go buy my used car, because I haven't bought a new one in a long, long time, I can go walk up and down the lot and check prices. But I can't walk up and down any area that I know of to get a comparison of what the pipeline value is worth.

There's no comparative values. How do you set that value? Senator Steadman, through the chair, it would come through an expert in valuations. It would become— but it would be a third party, independent third party that would determine that value. It wouldn't be a negotiated value.

Senator Steadman—. Sort of similar to the Kelly Blue Book. Is that in your document? An independent third party evaluation? Senator Steadman, through the chair, yes, it is.

Senator Steadman. Was it in the draft documents in early discussions?

Senator Steadman, through the Chair, I can't recall exactly when that came into the discussions as we negotiated these agreements. I would think that it was actually fairly early in the process of negotiating these agreements. And if I could—. Senator Steadman. So what kind of value enhancement —triggers—I mean, it's—what does that incorporate?

Because some of my colleagues have expressed concern that if we increase, you know, value on the project, that would be possibly used as a negotiating point for a value increase in the project on this divorce or the exit strategy in a divorce, for lack of a fancy legal term because I'm not a lawyer. Senator Steadman, through the Chair, I'm not quite following the question. Apologies. So when you look at the value enhancement, you're talking about what value was brought to the table or over this timeframe on this project, and if you're in a position, if the state's in a position or AGDC is in a position where we have to buy Glenfarm out. You're telling me there's a third party that comes in and takes a look at it and assesses the value increase that Glenfarm has put on the table.

But does that include in any way potential incentives and assistance that may come from legislative changes? Representative Steadman, through the chair, I may need to refresh my memory, but as I recollect, it would be based on the value that they bring to it. So I would argue during that arbitration process that they didn't bring that particular value that was associated with any state support. Senator Steadman. Who is bringing the value of the tax change to the table?

And who benefits from it financially?

Representative Steadman through the chair— that's Senator Steadman through the chair. Apologies. Apologies. Spent a lot of time in front of the other house the last few weeks. Some people would like me to go there, I'm sure.

Maybe go other places. Senator Steadman through the chair. I'm not sure that I can answer that question, to be honest. I think that's a nuance that would be worked out through the arbitration process. I don't think that it's quite— it's not— that's not laid out in agreement, I should say.

That's left to the arbitration process. Chair Hoffman, if I can add a comment. Please. This is Adam Prestidge, Glenfarm Alaska. For clarification, this is a scenario that we're describing where Glenfarm would be in breach of contract of its obligation obligation to continue to develop the project.

And so as Mr. Kissinger stated, Glenfarm is under an ongoing obligation to continue to develop the project. We bear that obligation to do that at our own cost and our own risk. So this is kind of an outside scenario of what happens, as you would have in any joint venture agreement, if the whole thing falls apart and the state decides to to take an action. It's a protection for the state ultimately. Again, if Glenfarm were to determine the project had failed or if Glenfarm were to decide to abandon the project, we wouldn't have any way to seek any recourse or any reimbursement for what we have done.

I would say this is a very valuable dialogue because there are rumors abound in this building Many questions are revolving around this, particularly in the Senate. So I appreciate the committee taking the time to address these issues. Senator Steadman, do you have any further before I go to Senator Kaufman? Just one quick thing, and that's on the cost overrun issue, just so there's clarity. The impact of the— on the citizens of the state, as long as we maintain our 25% position in 8 Stars of Gold and we're not an equity investor in the pipeline or the liquefaction plant or the conditioning plant, there is no recourse.

Once we become an investor, say we take a 10% position in the pipeline, then there would be exposure. On capital calls if there's cost overruns or dilution issues or all the other benefits and drawbacks an equity owner would be exposed to in the gas line. Is that correct? Senator Sedman, that's correct. When we say that the state and the ratepayers are not subject to the risk of cost overruns, we make a decision about where to put that risk.

The risk needs to go somewhere. And so if the state and the ratepayers aren't exposed to that risk, then that risk is ultimately borne by the equity investors and the lenders. And so that risk would be borne by those that come in to be equity investors. If the state chose to become an equity investor alongside all the other investors, then the state would have exposure to the risk in that sense. But if the state did not choose to be an equity investor, then obviously the state and the ratepayers have no risk of exposure cost to overruns.

Senator Steadman. I just got one other quick question. On 8 Star Gold, my understanding of the arrangement is the state of Alaska, through AGDC, does not face any dilution issues under 8 Star Gold. Is that correct? The holding company.

Senator Steadman, through the chair. So yes, AGDC cannot be diluted out of 8 Star Alaska. Right. As we've discussed in previous hearings, 8 Star Alaska, currently 100% owner of the pipeline, and when they raise capital for the pipeline, they will issue equity. So our indirect ownership of 8 Star Pipeline, which right now would be 25% because it's owned 100% by 8 Star Alaska, which we own 25% of, that will definitely be diluted.

That's That's the mechanism that was designed. So 8 Star, we can't get diluted under 8 Star, the holding company. We understand that. Glenfarm, 75%. How is that exposed to any potential dilution or other investors, or is it— explain their position.

Senator Steadman, through the chair, there is a lockout on their ability to transfer or leave 8 Star Alaska as well. So both sides are sort of married into 8 Star Alaska and unable to share— to sell down our respective ownerships of that until after the pipeline is in commercial operation and after the other two projects have both achieved an FID. Only then—. Oh. Or 10 years.

The shorter of duration. So if you reach 10 years, then they can sell down on that. But Senator Sullivan, in terms of the— this is Adam Prestidge. In terms of the dilution risk and the dilution of 8 Star and the 25% and 75%, Glenfarm is in the exact same situation as AGDC where if our interest in 8 Star is diluted diluted, sorry, if the AGDC interest is diluted at the 8 Star Holdco level, the Glenfarm interest is as well. Interesting.

'Cause there is some confusion on this. So I understand AGDC's got a 25% holding of that. Glenfarm owns the other 75%. We need to clearly understand when that 75% can change ownership either through dilution or just sale, right? Or however that mechanism could work.

And there are several tripwires that were just mentioned, FID or first gas or whatever. Could you delineate that, Mr. Privilege, for us so we can understand the position that— Yes, sir.

If you'd allow, Senator Steadman, we're testifying in another— later this afternoon. If you'd allow, we'll just walk through those on a mechanical list. I don't want to misstate anything. That would be fine. I think the accuracy is— I'd rather wait and have it accurate than have somebody misspeak.

So that would be— I'm going to give you time to think through that, how you want to lay that out for us. Thank you, Senator Steadman. Senator Kaufman. Thank you. Mr. Kissinger, you and I have been talking a bit about what a dashboard would look like.

My belief is that transparency is a, you know, a great way to build faith in the program going forward. So of the— you mentioned the 10 points, so my colleague was referring to a marriage and divorce, so I guess we'd say this was the prenup. So it sounds like there was a 10-point prenup which essentially delineates the performance attributes that are expected. Most of them are tagged to dollars raised, dollars spent in pursuit of the goal, it seems like. Senator Kaufman, through the chair, they're not tagged to, but they would incur just through the natural course of what they are.

So like maintaining all the permits is obviously one. We wanted to protect everything that we as AGDC put into H-STAR, we wanted to ensure was protected. And so the top one is that they have to maintain all permits and not let anything lapse. Okay, Senator Kaufman. Thank you, and would— so if this dashboard is produced and maintained and let's just say we pass this legislation and so the kind of the, in the public interest, would that, would you envision that dashboard to be up and running and be carrying performance against some of those attributes, or would they still, how would the reporting be handled in view of the confidentiality and all of that?

What might we see if we had such a dashboard. And one reason why I ask is I'm wondering if it should be something that we describe what the reporting is, that there would be a dashboard and maybe what some of the essential elements would be. That would be one thing we could put in the bill for transparency purposes. So just open that for conversation around these elements that are essential and that which could be reported and whether it could be reported in a useful way to build confidence. Thank you.

Senator Kaufman, through the Chair. The conversations, these conversations began, I'd say, in the Senate Resources Committee where we heard loud and clear that there was a need for more transparency. I don't think it is just for the legislature. I think it is for the public at large. So as you mentioned, in your office we discussed having a dashboard.

I think I will have to go back through the points of diligent development efforts and see how they fit, but I would see having at least, you know, several of those more measurable points being on the dashboard, absolutely. Other things that I have envisaged being on the dashboard, a lot has been said about FID dates. You know, we are going to do FID last December, I believe it was the first one, and then it was April of this year. Now people talk about third quarter of this year. But we've— on our AGDC side, we're not mentioning when an FID is, because it's very difficult to predict when an FID is.

An FID will be when we get all these different things lined up. And so I— and this is that dashboard tracking the elements that go into an FID. So where are you with respect to the upstream gas sales agreements? Right now we have gas sale precedent agreements. We need definitive agreements.

So that's not a green, that's a yellow. And the same goes with the downstream agreements. Those aren't green, those are yellow, but they're on track. They're not red, they're not fallen off, they just need to be turned into definitive agreements. A tremendous amount of work has been done by the developer in a single year.

And getting to the point where we have these preliminary agreements, not just for upstream and downstream gas, but also your EPC contractor your construction contractors for the actual pipeline, your supply of that pipe. All of these things have to be done. Your RCA approval of any gas sale agreement to a utility within Alaska. These things all have to be done ahead of a true financial close, and we all know that. And so I think that this dashboard would be a great way for the public to be able to track how these things are progressing, especially as we're putting them out there in the public through press release anyway.

Thank you. Senator Kaufman. Thank you. I'd like to look at how we flesh that out and codify whatever needs to be in order to assure that we don't have to get into the weeds, but I think it would be a good thing to have in the legislation around this. Thank you.

Thank you, Senator Kaufman. Senator Merrick. Thank you, Chair Hoffman. Good morning, gentlemen. Speaking about rumors, can you please explain why you are not seeking federal loan guarantees?

Happy to talk about that a little bit more in more detail in the session this afternoon, which we're planning on. What I will comment on is the priorities for 8STAR, Glenfarnon and AGDC together, is to deliver the lowest possible cost gas as soon as possible to Alaskans. Mm-hmm. And so when we look at the different ways of financing the project, and when you're a developer, you've got to pick different methods and different ways of bringing all the pieces together. One of them is the financing.

And so when we say, what is the best path to delivering low-cost— to a low-cost financing that can be done in a timeline that suits Alaskans' needs. That's the question that we evaluate all financing options under. What we have seen in the market over the last few months has been a very strong interest by private infrastructure banks, and these are the big major global banking institutions, they're household names, from banks in the United States and worldwide, a very real interest interested in lending to this project. When you look at those as, as an alternative to funding from the federal government, one thing that stands out is that a lot of these infrastructure banking institutions have a lot of experience lending to projects just like this, large oil and gas pipelines. They have teams that do basically exclusively this.

That factors into it. And then when we look at kind of the cost of capital comparison, we have to look at not only the published interest rates, but also what are the additional fees and costs to the project of going with any given option. When we lay all economic factors out on the table, we find that taking— using the federal loan, the federal funding is— Is the best option. Is close in terms of overall economic impact on the project to going through private markets. Senator Merrick.

Thank you, Mr. Chairman. I look forward to further discussion this afternoon's meeting. I'm sure, Mr. Chairman, that you've heard the rumors that Glenfarm was not providing the feds with the information they needed. So we'll look further into that.

Thank you. Thank you, Senator Merrick. We have been joined by Senator Kawasaki, so We do have a quorum with the Senate President. Please proceed. Just the last point I wanted to make before we move on to the AGD provisions and allow Adam to sit back down is we support the bill as it is right now.

This HB 381 as it came out of the House was a very comprehensive bipartisan effort that we feel has achieved a lot of balance and I tried to point that out by the in comparison with the host government agreements. This combination of some fiscal certainty for the project. And when we talk about the duration, we can address some of the comments of Canada being a better analog, because you will see that Canada has a lower tax rate for the life of the project. It's not a 10-year thing.

You also have these community benefit obligations and the state participation. Education rights, these are all very well balanced within the current bill. Anything to add? Well, I'll just— this is out of prestige. I'll again express in concurrence with Mr. Kissinger that HB 381 was very carefully put together with a lot of input from many different stakeholders, including the municipal working group, the different delegations representing different areas of the state, as well as obviously the state's interest.

Glenfarm supports House Bill 381. There are, I'd say, a few small technical changes that we'd recommend being made to kind of clean up some of the language, but nothing substantive or really that changes the economics. So in general, we think that— Thank you. HB 381 is a good bill that would allow the project to move forward. So I'd say that this Senate Finance Committee is probably the most experienced Senate Finance Committee in the state's history, and we are in the process of doing our due diligence, and I'm sure this committee is going to come up with recommended changes to strengthen the legislation.

Further questions? Please proceed. All right.

Chair Hoffman, if I may now have Fairbank— AGDC President Frank Richards join me at the table. We will go through these AGDC provisions and we can have Adam sit down. Please, Mr. Richards.

Mr. Chairman, members of the Senate Finance Committee, for the record, my name is Frank Richards, President of the Alaska Gas Line Development Corporation. And before we proceed into the provisions, I wanted to take the opportunity to address two things certainly that I've heard very often from Senator Stedman. Senator Steadman. Thank you, Mr. Chairman. And that is around the impacts of what AGDC has in our powers and duties in terms of the ability or the concern that AGDC would put in place mechanisms that would have recourse of the project coming to the state of Alaska.

For years, Senator Steadman has been steadfast in making that representation that we should not do that. And so I believe you heard today from Mr. Kissinger and Mr. Pressage was that was not the case in our agreements. So just wanted to give a shout-out to Senator Stidman for being steadfast in his thought that we as AGDC do not have the ability to put the state in jeopardy of future cost overruns. Second, I would like to again address my colleague to the right, Mr. Kissinger. As the organization, when AGDC was founded by the legislature, there was clear legislative discussion at the that AGDC, as a state corporation, not grow into a large bureaucratic entity.

That we be lean and mean, and that we utilize our contracts to bring in expertise for the likes of project management, for commercial development, for stakeholder outreach, and utilize those— that expertise, whether it be in the state or out of the state, to accomplish those goals and move forward. Thank you. We as an organization, AGDC, are very small. We have a handful of employees and we utilize the services of expert Alaskans like Mr. Kissinger to supplement that. And Matt has been an invaluable asset to AGDC now since 2017.

And I feel very fortunate that he's remained as an asset with AGDC. And I think that what you've heard from him in his testimony and is the level of expertise that he brings to bear. It is the discussions that we've had initially with Glenfarm and ultimately the negotiations. It was with Matt's expertise that we hammered out those agreements and looked out for the interest of the state of Alaska in those agreements so that we had what was a working arrangement where the developer Glenfarm would come in and bear the cost of this project taking us to final investment decision. That was key because we understood clearly from the legislature that there was not going to be any more money to be able to move this project forward from the state of Alaska.

So we at the time were looking to bring in a developer that would make that commitment, and that's what Glenfarm did. The state of Alaska has already invested over a billion dollars in pipeline, uh, to date. So we are very interested in getting a gas line built. Senator Steadman. Thank you.

I just, hopefully you didn't take my comments earlier of any disparaging issues dealing with Mr. Kissinger. I don't have any issues with him. The concern I have is disclosure of who is employed by who, who the consultants are, who the lobbyists are so we understand who is at the end of the table. That is the only issue. I don't have any concern with his background, his loyalty to AGDC.

I know he looks out after the state's interest. I don't have concerns about that. I just want disclosure so the public knows who is at the end of the table and their relationships. Thank you, sir. Senator Steadman, please proceed.

This is Matt Kissinger for the record. So these AGDC provisions, which there are quite a few of them, we'll walk through these. A lot of this came from the robust discussion that we had in the Senate Resources Committee. And as I said, we heard the message loud and clear that we needed more transparency, we needed more information flow. And so hopefully what we walk you through here addresses many, if not all, of those concerns.

The AGDC provisions are set out here. I will walk through nearly all of these in a deeper level of detail in the following slides. But essentially one is to create AGDC as a fiduciary of the state. Right now we are required to act in the best interest of the state. This is a small change to it to also include that we are acting as a fiduciary.

No issues with that. The AGDC has to follow the procurement procedures in line with the Administrative Procedures Act. You'll see the detail around that. There are new limitations on AGDC's ability to dispose of assets or dispose of our ownership in subsidiaries, requiring legislative review of that. There are investment options for municipalities through a co— a co-venture with AGDC.

We have quite a bit on confidentiality restrictions and sort of changing these to fit what's needed for the project, but at a certain time period have a trigger that ensures that information is available to the legislature when there's decisions to be made. And it also restricts us from binding the state in any way, putting future liabilities on the state. AGDC disposal approvals, again, that's just tied to the earlier one, and this is why I've grouped these a little bit differently as we go through the deep dive, you'll see. Future state investment options, which is similar to the investment options for municipalities. That's all tied into AGDC's 5 to 25% carve-out that we have for the option to participate.

Section 13 just closes some of the language to enforce Section 6. Section 14 deals with AGDC revenue flow and what happens as revenues come from the project into AGDC. And this is an area where we were trying to achieve a system that allowed AGDC to serve any revenue bonds and to pay out any co-investors, such as a municipality that might be co-invested with us, and then have the rest go to the general fund. The language in the agreement doesn't exactly match that. I believe it's due to the restrictions around how appropriations are done.

Section 15 requires legislative review for AGDC to issue any revenue bonds. I believe that's similar to how the railroad revenue bonds are dealt with. 16 Has to do— and 17 really have to do with notifications to the legislature, reporting to the legislature on a biannual basis, and reporting whenever there's a more than 10% ownership change. And this is not in a subsidiary. That's to any entity that we have a legal relationship.

Relationship with. So that goes further than just subsidiaries.

We talk about the AGDC subsidiary definition as subsidiaries that AGDC has control of. And then another report from AGDC on the effectiveness of this act that we would have to put out before an FID on Phase 2. And then finally another notification on when there are options available for the state investment. This is a notification requirement to the Senate of the— the President of the Senate, the Speaker of the House, and the chairs of the finance committees of both bodies. With that, I'll move on to the deep dive unless there's any questions.

Please. AGDC as a fiduciary. So right now the language reads Alaska Gas Line Development Corporation is a public corporation government instrumentality acting in the best interest of the state. This adds the acting in the best interest and as a fiduciary of the state.

We have spoken with our legal advisors on how this impacts AGDC. I think the common view is we are already acting as a fiduciary. This may require some more structure or reporting around how we do that., but ultimately it's no change to how we operate. Senator Kaufman.

Thank you. I guess just for the folks at home, we throw terms around sometimes, and there may be folks listening who are wondering what is a fiduciary? What's the basic definition of that functionally? What's the difference? And if we could just flesh that out just in case people are wondering what that term may mean.

Sure. Senator Kaufman, through the Chair, it really, as far as I understand, I'm not a lawyer as I've just walked through my background, but as we have understood it, it's that you have a financial responsibility to the state. And this is actually quite common or it is similar to a normal corporation in the US where the board of directors of the corporation would generally have a fiduciary duty to the shareholders of that corporation. I think this just enforces that or solidifies that slightly more. Mr. Chairman, Frank Richards to Senator Kaufman.

What we found out in our review of this is that it will place some liabilities then on our board of directors. And so we're then considering what the insurance premium impacts will be to AGDC. And then also in our annual independent audit, whether or not those independent auditors will have more guidance to follow to be able to complete their audit for AGDC as a fiduciary. Senator Kaufman. Thank you.

I just wanted to surface kind of the deeper meaning behind that word. Thank you. Thank you, Senator Kaufman. Please proceed.

As I said, Section 6 and Section 13 refer to AGDC procurement procedures.

It requires the Board of AGDC to adopt— already we are required, the Board of AGDC is required to adopt procurement regulations. This changes that a little bit to include competitive bidding procurement methods to meet emergency and extraordinary circumstances. And complying with the 5% preference for Alaska bidders. So it's a slight change to what we have to do, but again, fundamentally in line with our business practices.

Senator Kiel. Thank you, Mr. Chairman. So, but this refers to AGDC's procurements from this point on. At this point with With Glenfarm operating 8STAR and 8STAR owning all of the assets of the project, what's left for AGDC to procure? Senator Kiel, through the chair, you know, any further efforts that AGDC takes on, for example, this would refer to, or just in our governance of 8STAR, it would it would bind us, but you are correct.

This would not reach into the 8 Star organization. The 8 Star is a private company with a private developer, would not be subject to these standards. Yeah. Thank you, Senator Kiel. Please proceed.

Mr. Chairman, again, Frank Richards. To Senator Kiel's question, again, AGDC since our creation has essentially been following standard practices to make sure that— and actually conduct competitive bidding opportunities. And so when we were the prime developer of this project, we would actually go out and do competitive bids. So it wasn't just sole source contracts that we had. And so we were essentially following the intent of these provisions already.

And now what this requires is putting that into regulation. Thank Thank you. You, Senator Keogh. Please. Any further questions on slide deck 15?

Slide deck 16. AGDC JV and disposal limitations. So this is similar to as we sold our interest in 8STAR, so any future transactions would be subject to this. Section 11 and Section 7 work together. And it really— It adds in a small mechanism into our existing statutes that have a fairly large impact.

It's right now we may transfer, sell, or otherwise dispose of an ownership management interest in a subsidiary of the corporation. We do, as we enter into contracts, we do have an obligation to consult with the Department of Revenue, the Commissioner of Revenue, and the Commissioner of Natural Resources. But this adds a legislative opportunity to disapprove of such disposals. It creates a 90-day period. This is not 90 legislative days.

We need to operate on a normal commercial timeline. And so it is 90 days, but we see this as hopefully sufficient time for legislature to call them into— themselves into session if needed to disapprove anything that they were objecting to.

Any questions on slide deck 16? Slide deck 17. Slide 17 has to do with investment options. This is referred to as involvement in revenue-generating projects, and this really has to do with this— the options that we carved out. So we already carved out these 5 to 25% options for the 8-star structure.

This requires that if we negotiate with an entity for participation in a project, then the option must be negotiated for a state to acquire an interest. So it just means that any future option, for example, expansions of the system, et cetera, we would have to carve out that state right to acquire interest. Before being op— —exercise the option must be approved by the legislature by law. I think there was a pathway where we, as AGDC, could have used revenue bonds to fund participation in these projects. And I think that this mechanism, along with another one I'll describe later, removes that ability for AGDC to act unilaterally in such a manner.

We have to allow at least 6 months to exercise after original notification. I think we've discussed this 6-month timeline. Some have felt that 6 months feels short, and we just want to emphasize the view from the other side, from the investors that have already made their commitment, are going to be preempted out, and the level of risk that could change in a project over a term, even a 6-month term, but any term greater than that. So we feel very strongly that the 6 months is the right balance. The state may not make an investment unless approved.

Department of Revenue must cooperate and assist the legislature in making that decision. And AGDC and any participating party must also assist the legislature. And then Section 8 adds on this sort of municipal element to it. So the municipalities may invest in any portion that's not taken by the state. So let's say we carve out a 25% option and the state decides or elects to invest in 15% of it, that would leave 10% left.

We have under our uncodified law the requirement to make that available to Alaskans, and that is something that we're working on, what we colloquially call the pick, click, and invest. But something like this. But more importantly, this would now allow a municipality to move into that position after the state has made its election. [SPEAKING NATIVE LANGUAGE] The municipality would not invest directly into the project. The municipality would make an investment into an AGDC vehicle, and AGDC would invest into the project.

That's for governance reasons within the project. So that's an important element of it. And then it also adds an element that AGDC shall use in-state contractors and suppliers. This is just added into Section 8. It doesn't necessarily hang with the rest of it.

So can private entities do joint ventures and be a minority owner in the municipality's opportunity to invest?

Chair Hoffman, I'm not entirely sure I understand. So say regional corporation. Wants to go in with the municipality of Anchorage and be a 25% investor and Anchorage is 75% investor, is that allowed under this legislation? Chair Hoffman, yes, it is allowed. It's not disallowed.

And in fact, in complying with that uncodified law, we've always extended that to be Alaskan corporations as well. And so regardless of this, we would anticipate an avenue for Alaska Native corporations to invest directly into the project— or direct— to invest through AGDC into the project. Great. Further questions on slide deck 17?

18, Please proceed. Slide 18 has to do with the confidentiality restrictions. We had a lot —of robust bipartisan conversation around this last week. And really, again, this— a lot of this conversation originated in Senate Resources and carried through into House Finance, where we hopefully struck the right balance. It adds this— in Section 9, it just adds subject to restrictions to AGDC's ability to enter into confidentiality Agreements.

Agreements. And then these restrictions are laid out in Section 10. Section 10 adds a whole new subsection. It provides a method to release information that is under confidentiality, albeit through the parties agreeing. It allows for information subject to confidentiality agreement to be shared in a legislative committee if the parties consent and if one or more parties is there to testify.

But really—. Excuse me. One of the important things is the confidentiality agreement may not prevent compliance with administrative court order. That's normal. May also mean, may not make any terms confidential that could extend to or encumber the state or may lead to a significant fiscal liability, obligation, risk, appropriation, or other state funding or in-kind payments.

For example, we talk about gravel, using gravel for payment. To the state. We cannot make any terms confidential. And this is a really important one. We cannot make any terms confidential related to the existence of a state interest option.

And this is this timeline that we sort of struck is while AGDC negotiates options, we need to be able to negotiate those options in confidence. The counterparties are going to require that. Nobody will deal with us if they can't deal with us in confidence during that period of time. But once that agreement is in place and there's this existence of an option, we are required to report to the President of the Senate, Speaker of the House, and the chairs of the two finance committees that this option exists and when it can be exercisable. And then once it's exercisable, we're required to provide the financial information for the state to be a prudent investor, meaning the same financial information that all the other investors got., which would include modeling, would include pro formas and financial cost information, future economics, et cetera.

Confidentiality agreements may only make project economics or cost confidential to the extent the disclosure may not cause commercial or competitive harm. And then there's a mechanism that we have to summarize them to the extent that they don't cause that harm. Thank you. Any questions? Proceed.

Section— or slide 19 talks about AGDC revenues. So section 14 and section 15 kind of come together with this. Revenues from any subsidiary or resulting from an interest option get deposited into separate accounts of the general fund under the current language. Then the legislature may appropriate the annual balances to pay for the bonds issued issued by AGDC for the distribution to those co-investors, and third, for AGDC operations. This is one area where, you know, there is a strong preference to not have a requirement for an appropriation in order to service bonds, because I think it would be very difficult to sell people bonds if the future payments of those are subject to appropriation.

Likewise, if the municipalities are investing investing in this project through an AGDC vehicle, I think, you know, they are more disincentivized to make that investment if they know that their future revenue flow has to be appropriated. And that was where we were trying to get to, but through the final drafting of the bill, it became our understanding that those had to be appropriated. So the language that ultimately came out was like that. We would entertain a fix to that by using the Alaska LNG Fund. Mr. Chairman, Frank Richards.

Again, I would say this is also for Alaskan companies or Alaska Native corporations. For their consideration, any revenues on their equity investment would then have to come to the state of Alaska and then be appropriated back to them. So that again may cause them to reconsider consider this investment because they are not sure or they would hope that there would be an appropriation at a timely basis to them for their revenue stream for their investments.

Section 15 then deals with and closes this sort of liberty that AGDC had with respect to the revenue bonds and as I mentioned before, requires that we have to notify President of the Senate, Speaker of the House, Chairs of the Finance committees of both houses any time we intend to issue revenue bonds. The legislature then has 90 days to disapprove that. Again, these are days, not legislative days, because once again, we need to be able to operate in the commercial timeframe for issuing things like this. It does not apply to refunding bonds, so this is where you are rebonding your old bonds, and doesn't apply if the total outstanding bonds of AGDC are less than $5 million.

And slide 20 has to do with other AGDC reporting notifying. We have twice a year, we shall deliver a report on natural gas pipelines to the state, in the state to the Commissioner of Revenue. Have to notify the governor and legislature as well as publish notice on the Alaska Online Public Notice System that the reports available, provide a qualitative assessment and update of the timeline, budget, and cost containment progress. The report also must provide a current status of the projects, including construction status, projected timeline for completion, description of remaining phases, and provide an assessment on the effect of the projects in the state labor market. And going back to Senator Kaufman's comments, this is an area where you could quite easily also require that we have a dashboard on our online system as well.

Section 17 requires that AGDC notify the President of the Senate, Speaker of the House, and the chairs of each finance committee anytime there is an entity with a legal relationship to AGDC plans to make a significant change in ownership structure, which we have defined as more than 10%. So anytime there is more than a 10% —change in anywhere within the 8-star structure, because again, this isn't limited to subsidiaries, then we would have to make that notification. This is in line with the Department of Energy requirements. So when you have a Department of Energy export authorization, there's a requirement that under any change of control, which they define as a 10% change, you have to notify the Department of Energy of that change in ownership. Thank you.

Ownership to the entity that holds those export authorizations.

Section 27 also adds one more report that is done before Phase 2 of final investment decision, and that's really on just the effectiveness of this legislation and how it's worked through those years. Thank you.

That's it for the AGDC provisions. Happy to entertain any other questions or we can excuse Mr. Richards and—. Questions? Mr. Chairman. Those provisions, Senator Kiel.

Just one on the technical element of the change of control. 10% Change over what time period? Does the Fed How does it define that?

It doesn't define over a time period, but it does include accumulation of incremental changes. So it would be assumedly over the life of the project as you have incremental changes. Once they add up to a 10% ownership, then you would have to make this disclosure. Senator Kiel. Mr. Chairman, Frank Richards to Senator Kiel again.

This is the authorization. Authorization timeframe, so I'm assuming it would be during that time where they have authorized that.

Senator Steadman. Thank you, Mr. Chairman. Some of my colleagues have expressed concern about foreign entities buying into the control or buying into shares of our pipeline project. Could you help the committee understand if there's any concerns there or— Because we've had in the past, maybe almost 2 decades ago, a letter from Communist China with the stamp of their approval that they would go ahead and build a line and labor and anything else we wanted years ago. I don't think the State Department would have been very excited about it, but some of us still have that letter as part of a little historical collection.

Can you help us with that? Sure. Senator Steadman, through the Chair, I'd point to the federal CFIUS process as the primary check on any—. Explain CFIUS. Apologies.

CFIUS stands for the Committee on Foreign Investment in the United States. And this is a committee that is there just for that purpose of evaluating foreign ownership in U.S. entities and the negative impacts that they may have. But further to that, we've put in protections within the agreements between AGDC and Glenfarm where we have the definition of prohibited persons, and AGDC would have to approve any transaction with prohibited person. It's quite an extensive definition. I think we'd be happy to provide that definition.

Yes. Would have to get the approval of our partner, but I believe they would agree to that. It is sanctioned individuals, obviously, but it also extends into individuals that would just have a negative reputational impact on the project. So there is quite a broad definition of that. Senator Steadman?

No, I think that kind of covers it. So basically it's federal control. Senator Steadman, through the chair, it's federal control, but it's also an AGDC control element because we can stop Glenfarm from doing anything such transaction with prohibited person. Further questions on that section? Seeing none, we will proceed to the sunset.

If I may ask Adam Prestnich to join me again, Chairman.

The sunset provisions are contained through a web of sections, 21, 23, 26, 32, and 34. And these are, a lot of them are quite technical, but they really point to the department, the Commissioner of Revenue making the determination that Glenfarm have first met the requirements and so are subject to the AVT, and then later these sunset. Through these provisions. And they sunset on January 1, 2060. I would like to invite Mr. Prestidge to explain the requirement for that date, which I believe we will talk more later today.

Sure. This is Adam Prestidge for the record. There have been a lot of questions about why this would need to be such a long effectiveness on this tax arrangement. And the reason for that is that this project is structured under project finance where the construction of the project is being financed through loans and investments, but primarily through loans from institutions that would be repaid over a 30-year period of time. And so an effort to keep the cost of the project lower and to keep the cost of gas lower is to spread the debt payments over a longer period of time.

That's why we've ended up with a 30-year loan. [SPEAKING SPANISH] If you're looking at the life of the 30-year loan, any lender or investor is going to look at the economics of that— of the project on that 30-year forecast and can the project handle its debt service payment— its debt payments over that period of time. And so having the tax reduction apply for that time, that equal amount of time to the loan is very critical in— for the economic viability of of the project.

I have heard quite a few times that Gaffney Klein has made comments about a 10-year abatement in comparison, even going so far as to say that he thinks that Gaffney Klein's opinion is that the project only needs a 10-year abatement. That is factually not correct. The Department of Revenue has a financial model that would back that up. If there were to be a shorter-term abatement that then ended reverted back to 20 mils, it would severely challenge the economics of the project, and lenders and investors would simply look at that 30-year forecast, they would calculate the tax reduction during that short period of time, and then the financial burden on the project if the tax were returned up to 20 mils, and as I said, that really makes the project not— Yes. That really challenges the project's viability.

One question to that would be, well, how about we just put on a short-term abatement and then sometime during that period of years we come up with an adjustment to the mill rate so there isn't a 20 mills at the end of that abatement period. But unfortunately, that doesn't— that doesn't work for providing certainty up front to the lenders and investors who will fund construction. And so when the financing sources are looking to put money into pay for the construction of the project, they're going to be taking the most conservative forecast of the cost of the project and the financial burdens on the project. And so if there's any possibility that after a period of time the tax rate would revert back to 20 mils, that's what lenders and investors would assume will happen because they'll take the most conservative view. And so that's the reason why the 2060 date is is so important.

The 2060 is a timeline that sets out a few years for construction period followed by 30 years of operations and 30 years of debt service payments. This is Matt Kissinger for the record.

There was a comment made on the House floor last week that the legislative consultant had indicated that the industry was moving more towards shorter and shorter term contracts. Contracts. And really, this long— the nature of these long-term contracts of the LNG industry is really what differentiates it so much from the oil industry and oil developments. And I just wanted to correct that, that statement that in 2025, the United States developers of LNG projects entered into sales and purchase agreements for 40 million tons of LNG, so double what our project is across the whole U.S. 95% of those contracts were for 20-year contracts. So it does change as, as easier projects come about, they're able to find their way into shorter contracts.

This is not one of those projects. This is a very difficult project. And like a lot of the other ones that are moving through now, because the easy ones have been done, more and more are requiring these longer-term contracts. Question on slide 22, Senator Steadman. I think some of the discussion here is we're dealing with time value of money.

And then we deal with that with the oil industry all the time when we do incentives, credits, whatever, trying to get marginal fields economic so we can expand our production. One of the challenges we have is, you know, Department of Revenue, who we are relying on for modeling, doesn't have the information. And it has improved a little bit the last few weeks, and that has been helpful.

But even as far as, you know, they started here a few months ago with their base case in dealing with their costs, which are probably about 50% off, which really throws the model into orbit, I guess. It is— it's got some use, but it's not as useful as it should. So there is concern with that when we take and do a change like in this case we're looking at changing our property tax. And we'll just— I think we could agree to agree that 20 mils is excessively high. Some other number should be it.

That's 2% of the value. That's pretty high. So there needs to be some concession or a change given to help the project get economically more viable. Okay? So the challenge we have is measuring that.

For what we put on the table, what's the benefit to the probability of moving the gas line into the economic green zone, which it's not today under anything I've ever seen. So, Yesterday I asked the Department of Revenue to boil down their data set to just show us the impact of the concession that is being asked for. What's the marginal change? You know, it's nice to look at capital cost, operating cost, timelines, and all that other stuff. But we don't control any of it.

All we can control here is the incentive or the concession you're asking for to give it or not give it. So I'd like to have that data set or that data point analyzed by your guys' internal data and your own model because you guys have the inside information. You got better information than Revenue has and better information than the Frankly, the governor has. That's pretty clear and conversation's pretty quick. So I'd like to know what is the economic benefit of that change.

We don't have tax on construction. We took that off years ago for the LNG conditioning plan and the pipeline. There's no interest in taxing the project through construction.

So the issue at hand is the conditioning plant on the north slope that would be under 20 mils after construction and after it's operating. 20 Mils on the pipeline after it's constructed and it's operating. And then the liquefaction plant's a whole different animal. It's down around 7 mils. All right?

So what is the economic impact of this— concession being asked for on the pipeline itself, not the conditioning plant, not the liquefaction plant, but the pipeline, and how does it move the economic model and cash flows. That's what we want to see. Sure. If we ask the oil industry that, when would they offer concessions? They come in and roll through the data and they'll have their AOGA, their trade group, come in, in the aggregate of everybody that's impacted, then the companies will come in and they'll talk about, well, it's good for us.

One company might say it's good for us, one will say they're neutral, and the other one says it's bad for us, because they all have different capital structures. And we just deal with it. We have to deal with the aggregate. But here we're dealing with one entity. Yes.

And I have yet to see what is the economic impact of the projections of the concession. No one's showed us that. Does it move the return 10 basis points? Does it move 50 basis points? Does it put you clear in the green light zone so it goes to FID tomorrow?

We have no idea. Senator Simpson, we'd be happy to work on something and put something together. To answer that question. We work with Department of Revenue and also just independently as well. Senator Stegman.

I think that would be helpful. You know, the Department of Revenue, your data set would be different. I would like you to use the, you know, capital projections that we put on the table here a few weeks ago with their 20% or 15%, whatever you're going to use for contingencies, so we've got a reasonable expectation of the final number. What, you know, we're not, you know, and give us as much detail as you're comfortable with. We know the term that you've talked about is 30 years of debt service.

We know that, you know, we can look up the federal rate. You can, we can gauge if it's half a percent, three-quarters of a percent, 1% over or whatever. And so we can look at the marginal impact. That's—. Okay.

Really where the rubber hits the road. Sure. Okay, I understand. Thank you, Senator Steadman. Further questions on slide deck 22?

Mr. Chairman. Senator Keehl. Thank you, Mr. Chairman. I'm seeing so many charts, I'm forgetting. At one point I thought we were looking at 30-year debt on the pipe and 20-year debt on the plants at the top and bottom.

Bottom end. Is that incorrect? So it is 30-year debt on the pipe, and we haven't started— we haven't structured what the debt would be on the LNG facility or the North Slope, the gas treatment facility yet. It could be shorter, it could be 30 years. So that's something that is unstructured.

That is not final for the LNG facility. Senator Keehl. Thank you. And the duration of your preliminary sales agreements, are those 20-year, which I think is sort of the industry standard, are those 30-year? For Senator Keehl, through the chair, Adam Prestidge, the gas pipeline sales would be 30 years to line up with the 30-year term.

And for the LNG facility, the expectation would be that they are industry standard of approximately 20 years. Senator Keel. Thank you. So just to follow up on that, with less than 30 years of sales agreements, you're pretty confident you'll be able to secure 30-year debt. How does that work if this has to match?

Senator Keogh, through the chair. You would go into the 20-year LNG sales contract would expire, and it would go into either an extension period or a period of time where it is sold into a liquid commodity market. It's very different from the gas pipeline. There is not a liquid global market for gas delivered on the Alaska LNG pipeline, and so we need to have secured sales. On the LNG facility, however, there is a global market, and so if after the term of a 20-year sales contract it expired and there were still commitments, those sales would enter into the broader commodity market.

Senator Kiel. Thank you, Mr. Chairman. Very helpful. Helps me get my mind around it. And then not to take away from Senator Steadman's question, but We have heard and seen about some Gulf Coast states that have 10-year property tax abatements.

What are the mechanisms they use to apply those to their total project finance with the abatements not necessarily lasting the full term of their likely 20-year debt? Senator Keelthru, the chair. Similar to what I'm describing, so if you had a shorter-term abatement in, you know, Texas or Louisiana, you'd factor in the cost burden on the project during that 10 years, which would be zero. And then for the remainder of the term, you'd calculate whatever the— whatever the region— whatever the jurisdictional tax is at that time. And the differentiation is those are not— those are not 20 mils in those jurisdictions, and so those are not so negative towards the project.

And then—. You know, this is the last point I'll make is the structure is also one that was the result of our work with the municipal working groups where the— one of the downsides of having an upfront abatement where there is zero tax followed by reverting to a mill rate is that there would obviously be no revenue generated to the state or the municipalities during that period of time. And so our view working with the municipality— Municipality Working Group was that it's more attractive to have a revenue line that starts with day one of operations and runs through the duration of the project. Further questions on slide deck 22?

Seeing none, we'll move on to technical. Okay, with that, I don't need Adam here for the rest of this. The following are the technical sections sections— I call them technical sections because they really just enact the rest of what we walked through by changing language here and there. Section 1 being the findings and intent. Section 2, remove property from the local contribution calculation.

So this is for your educational requirement. Section 3, remove— removes it from municipal property taxation. Section 20, removes it from state property taxation. Section 22 is just a conforming section to Section 20, doing that. Section 24 again removes from state property taxation from the definitions.

Section 29 ensures that all these AGDC limitations are on a go-forward basis. And then Section 35 establishes an immediate effective date. Questions? Questions on the technical provisions?

That concludes the presentation. Mr. Kissinger, Mr. Pritchard, do you have any closing comments? I think I would just reiterate the opening comments that it is our feeling that the bill as it worked its way through the other committees and especially the work work done in the House Finance Committee has created a very well-balanced bill that we feel quite good about. And so we look forward to engaging over the next few days, hopefully moving that forward. Any final questions by Senate Finance members?

Seeing none, is there anything else to come before the committee? With that, that concludes this morning's meeting. I apologize to the committee for not taking— or not normal 1-hour break. We got started a little bit late, and I apologize for— to assure that we don't continue to fall behind on the work that the Senate Finance Committee does. With that, we are adjourned until this afternoon at 1:30, where we will be hearing a presentation on the Fairbanks Spur Line.

Thank you. Hello. Hello.