Alaska Legislature: Senate Finance - June 19, 2026 9:01am

I'll send the Finance Committee to order. It's June 19th. We're in the State Capitol Senate Finance Room. It is 10 minutes to 10. Present, our Chairman Olson, Chairman Steeves, Senator Kiehl, Senator Merrick, Senator Kaufman, Senator Cronk, and myself, Senator Hoffman.

This morning we have only one item on today's agenda, that being HB 381, oil and gas property tax and municipal tax.

We have a CS to introduce at this time. Good morning. Ask for a motion to adopt the CS. Senator Steadman. Mr. Chairman, I move that the Finance Committee adopt committee substitute for House Bill 381 Finance version S before the committee as our working document.

And I will object to have Mr. Pete Eklund to the table to explain the CS to the committee, also available for questions on the CS Will be Emily Newman, the Director of Legislative Legal Services Online, and Alexi Painter, the Director of Legislative Finance.

Good morning, Mr. Chairman. My name is Pete Eklund, staff to Senator Hoffman in the Senate Finance Committee.

The committee substitute you have in front of you, Mr. Chairman, I would like to say up front, I guess, I would actually like to thank a few people, Mr. Painter here and Connor Bell from Legislative Finance, Emily Nauman and Megan Wallace from Legal, and then also Tim Gruessendorf and Kelly Goode and Liz Harpold and others. It was a team effort, Mr. Chairman, I guess I would say, to come up with this CS. And the version that came over from the other body, just in general, Mr. Chairman, was cobbled together over probably multiple negotiations over multiple points of time. So there was a lot of redundancy in that bill. There was a lot of kind of technical cleanup things that could make the bill flow better and make more sense.

So, Mr. Chairman, Ms. Nallman will talk a little bit more about that later, but I just wanted to—. Thank you. Point that out, that we've attempted to basically take out redundancy and make the bill, for lack of a better word, flow better and make more sense to the reader.

And Mr. Chairman, I'll kind of lead off with one of the bigger aspects of this bill, the most important aspects of the bill here in front of you. So The most significant change is that the committee substitute in front of you does not use capital expenditures as a component of the tax rate or the collection of the tax. Instead, it returns to a single tax rate at each stage of the project. These rates were developed to match the effective tax rate under the House version of the bill based on the Department of Revenue's modeling of the bill. So during Phase 1, the committee substitute sets the tax rate at 6.2 cents per 1,000 cubic feet, which is a blend of the 6-cent tax on the pipeline and the other body's version, and the impact of the— we've been referring to a mini gas treatment plant, Mr. Chairman, that would be— have to be put in place in Phase 1..

And that many, many gas treatment plants would have been taxed at 13 cents in the other body's version of the bill. During Phase 2, the committee substitute starts the tax rate at 10.6 cents per 1,000 cubic feet, which matches the effective rate for Phase 2 on slide 40 of Department of Revenue's presentation to this committee on Monday, the 15th. Thank you. The tax rate then doubles after 10 years and doubles again in 2060. The last tax increase is in place of the sunset provision in the other body's version of the bill.

Note, all these tax rates grow with inflation, bounded between 1% and 3%. And that is a change from the other body's version where the inflation was capped at growing at 1 to 2%. And we'll talk about that more later in the bill and we'll have a presentation from Mr. Painter to get into the aspects of that. The split of the tax between the local governments and the state is also fixed in this committee substitute rather than depending on capital expenditures. The splits are designed to match the effect of the House version as modeled on slide 42 2 of Department of Revenue's presentation last Monday.

These changes are intended to make the tax easier to understand and much easier to administer.

Now into some of the different sections of the bill, Mr. Chairman. In Section 2, the other body's version of the bill exempted property subject to abatement and to the Alternative Volumetric Tax, the K-12 required local contribution. The version in front of you subjects a portion of the AVT to the required local contribution in the ratio of 2.65, which is in statute the local contribution mill rate, to 20, which is the maximum petroleum property tax. In effect, this subjects 13.25% of the ABT, or the Alternative Volume Metric Tax, to the required local contribution. Because House Bill 28 became law yesterday, Section 2 exempts the portion of the required local contribution attributable to the ABT from the 4% cap on annual increases contained in the in that bill.

Section 17, Mr. Chairman, was a previous Section 14 on AGDC revenue flow.

Section 17 establishes the Alaska Liquified Natural Gas Project Bond Fund.

This fund may be spent without further appropriation for the purposes of paying bonds issued by the corporation only. Associated costs with bonds. It establishes that revenue of AGDC, or the Alaska Gas Line Development Corporation, will be deposited into a separate account in the general fund, and that the legislature may appropriate from that account into the bond fund and for the corporation's budget. The remainder of any net revenue generated by AGDC would go to the general fund. Thank you.

Section 18 is a previous Section 15 with dealing with AGDC bond issuance and refunding notification processes. The other body's version of the bill allowed the legislature to disapprove of revenue bonding by AGDC by passing a bill within 90 days. This version switches that to require affirmative approval of bonds within 90 days when the corporation wants to bond. Section 19 was previous Section 16. It deals with AGDC reporting requirements.

It's been updated to include capital expenditures and to create a publicly accessible project dashboard on the corporation's website. Senator Kaufman. Thank you. I appreciate that last comment. Is there a sectional analysis that some are— I don't have one.

Is there a sectional on the table that we are looking at? Mr. Eklund. Through the Chair, Senator Koppen, what I am reading to you, I guess I should have said this more straightforward at the beginning. This is changes from the other body's version. It is not a sectional analysis.

We did not have time to prepare a sectional analysis. I'm sorry. It would just be nice if we had something to follow as you're going through this. If it's not a new bill with a section, let's at least have some sort of description of changes just to work against this pretty big stuff. I think it would be a good thing to have.

Thank you, Senator Kaufman. Mr. Eklund. Thank you, Mr. Chairman. Section 22. It's a new section and it establishes the Alaska Affordable Heating Fuel Fund.

Creates the new Alaska Affordable Heating Fuel Fund modeling off existing Alaska Affordable Energy Fund. This provides that the legislature may appropriate 20% of gas royalties from an LNG project remaining after depositing— deposits into the permanent fund. The fund is used for programs that will reduce the cost of heating fuel in areas of the state that do not have access to the gas pipeline.

Section 26 was a previous Section 25, and it deals with the tax abatement and the alternative volumetric tax. Replaces the previous component-weighted base tax, as I stated earlier, on throughput with a single tax rate on throughput of the project, applying to the entire project, escalating over time. And Mr. Chairman, this is where I would have Mr. Painter kind of go over the handout you have in front of you. Mr. Painter. For the record, Alexi Painter, Legislative Finance Division, so I will refer to the handout that is up on the screen and I think in your packets for the members.

So in this committee substitute, in Phase 1, as Mr. Eklund said earlier, the tax will be 6.2 cents per 1,000 cubic feet. That was kind of a rounded version of the effective tax rate of the House version during that phase of the project. So that bill had a 6-cent tax on the pipeline component and and then a 13-cent tax on the gas treatment plant. With the smaller gas treatment plant, that blends to a rate of about 6.2 cents, just rounded to the nearest cent of a cent in this bill. And when this tax takes effect, the revenue split is in box A there.

So 6% goes off the top to North Slope Borough because that'll be the location of the mini gas treatment plant. And then the remaining revenue is split equally to municipalities by pipeline mileage. And then to community assistance. So that's a small change from the previous, the House version. In the House version, it went to other, to local governments throughout the state by the per capita calculation with community assistance.

This goes through the regular community assistance distribution, which includes base payments as well.

Starting when this tax takes effect, which would be 5 years after Phase 1 first gas or 500 million per day average throughput. All tax rates grow at a rate equaling CPI, but not less than 1% and not more than 3%. I should note one other change in this— minor change in the CS is that the House version, when the abatement period ends, if it ends due to— the throughput definition, the tax would take place after that 30-day period. This bill goes back and applies the tax on the first day of that 30-day period. There's not essentially a tax-free month of gas once they've hit that throughput method or milestone.

When we get on to Phase 2—. Senator Steadman. Could you define what is Phase 1 and Then we're going to go on and then might as well tell us what Phase 2 is before you tell us what it— what is this? Yes. Senator Sedman, through the chair, one of the changes in the CS is to actually put definitions of those terms in the bill.

So those are in the bill. But Phase 1 is the pipeline portion only to the— that would end in the Mat-Su Borough. Phase 2 is the AK LNG component that would bring the pipeline across Cook Inlet to, Kenai Peninsula and then add the AK LNG plant as well as an expanded gas treatment and carbon capture facility on the north slope. Okay. Thank you, Senator Steadman.

Mr. Painter. Okay. So starting in Phase 2, the tax rate is 10.6 cents per 1,000 cubic feet. This is the same as the effective tax rate as modeled by DOR under the House version. And as Mr. Eklund said, you could see that in the presentation from Monday.

This just fixes that rather than have it vary if capital costs change from what are projected now. And then this, again, these rates will all grow with inflation based on those 1 to 3% sideboards.

This initial tax will be— will go through the distribution in Box B. So this provides 48.4% of the tax to Kenai Peninsula Borough, 27% for the North Slope Borough, 9.5% by pipeline mileage. That again includes both of those local governments, but also others in the state. 9.5% To community assistance, and then 5.6% to the state as general fund revenue. And these amounts are again the approximate result of the House version of this bill, just without the weighting.

So assuming the capital costs match the DOR projections, then this would make no substantial change, but it doesn't require collecting capital cost data. So then this bill has a couple of new provisions that were not in the House version. So the first is that after 10 years after Phase 2 begins, there is an additional levy. So in addition to the 10.6 cents, there is another 10.6 cents $10.6 million. So essentially, the tax doubles at that point.

And then, of course, these are growing with inflation. And that new amount, that new $10.6 million goes entirely through the community assistance formula. So when the tax doubles, that first— that initial split is left for that same amount of revenue, then the additional marginal revenue will go through community assistance. In 2060, the tax will double again, so going from 21.2 cents to 42.4 cents. And then the additional amount of revenue raised by that, that tax increase will go entirely to the general fund as UGF revenue.

The other body's version, rather than this, in 2060 had a sunset that returned to the mill rate formula. Instead, this keeps the AVT but at a higher rate. And so again, those earlier shares continue, but as the taxes increase, the increased amount goes to a different place. Senator Steadman. Yes, thank you, Mr. Chairman.

Could I get some help in a rough conversion into the millage rate equivalency? Because most folks understand millage rate because they get it property tax bill every year if they need it or not. Through the Chair, Senator Steadman. So the mill rate for the other body's version I think worked out to about 2.4 mills. And so the initial amount here for Phase 2 would be about that 2.4 mills.

Then that would double, so 4.8 mills, and then double again to 9.6 mills. $1.6 Mil, something like that. Of course, property value is not going to be fixed over the life of the project. So it is possible that after 30 years, the project will be worth less because it will be 30 years old or they will have done work and the value will go up. It removes that variable.

But if you are going from today's values, those would be the rough conversions. Senator Steadman. Just for clarity, what is the What does the statute say now for those watching at home, you know, trying to figure out what are we changing? What's the current law say? Through the chair, Senator Severson, the current statute is 20 mills, except for the AKLNG plant that is exempt from the state rate and only subject to the municipal rate on the Kenai Peninsula Borough, which varies, but it's about 7 to 9% or 7 to 9 mills.

So I think while we say it's 20 mills overall for the full project, the effective rate under the current property tax would be less than 20 mills because of that provision. Senator Steadman. But again, just for clarity, there is no property tax for construction. So what we're talking about here is after construction. Because under the current law, there is— we took out the property tax on construction.

Construction years ago because of the onerous burden it would put on a project during construction for the cash flow issue of everything going out the door, nothing coming in. Is that not correct? Through the Chair, Senator Sullivan, that's correct. Senator Keele. Thank you, Mr. Chairman.

Mr. Painter, you appreciate those rough mill equivalencies. Those are based on construction cost of what? Through the Chair, Senator Kiel, those were based on $54.5 billion. Through the Chair, this is Pete Eklund, staff to Senator Hoffman. It was $58.6 billion is what the analysis was built on.

Right, in nominal terms. Real is $55.4. Senator Keehl. Thank you, Mr. Chairman. So if the project's components end up costing a whole lot more than that, retaining some of that value, the mill equivalent will be lower and that will just be lower, right?

This is a straight fixed cents per 1,000 cubic feet regardless of the value? Through the Chair, Senator Keehl, yes. Thank you. Thank you, Senator Keehl. Mr. Painter.

That was the question. That's the conclusion of my portion. I'll turn it back over to Mr. Eklund. Mr. Eklund. Thank you, Mr. Chairman.

Pete Eklund for the record. Other changes, the CS in front of you deletes prior Section 4359.025, which provided for a certification by the Department of Revenue Commissioner that the project included a Fairbanks Spur Line to be eligible for the abatement and the AT. This requirement was redundant in— with Section 32. So this is one of the areas where we moved some redundancy.

Also, it adds a new potential termination of the abatement period and the alternative volumetric tax if a final investment decision is not reached by January 1st, 2028, and if construction of the pipeline component is not completed by December 31st, 2032. It removes a potential termination based on the start of the construction because it wasn't needed after these two new termination switches were added. There were conforming changes that are made due to moving away from using capital expenditures. And definitions are added for final investment decision. There's definitions for Phase 1 and Phase 2 also included in the bill.

Mr. Chairman? Senator Steadman. Sorry, I just couldn't keep up flipping these pages. When we talk about FID and the potential target dates, can you reference that again so I can find it in the CS, please? Sure.

So, Mr. Chairman, on page 36 of the bill, you can find the definition of Phase I and Phase II. Is that it? 27. And on page 27, you can find the definition for final investment decision. Sorry, Mr. Chairman.

Sorry. For the record, Alexi Painter. On page 27 are those termination dates. So the revised Section 4359.050 on page 27 has the potential terminations of the tax abatement and AVT. Senator Steadman?

Jay, could you please repeat what the termination is? Determination on— this is line 21, page 27, just so it's clear to everybody, because this is something that's a little different.

Mr. Ecklund? Yes, Mr. Chairman. So on page 27, there's the tax abatement under The tax abatement and the AVT do not apply to a natural gas project if by January 1st, 2028, a final investment decision has not been made on Phase 1 of a natural gas project, or number 2 there, on December 31st, right, or by December 31st, 2032, construction of a gas pipeline associated with Phase 1 of the natural gas project has not been completed. So you have to come into FID by January 1st, '28, and complete Phase 1 by December 31st, 2032. Understood.

And then isn't there another truncation date in '37? What is that? Yes, the 2037 date there, Mr. Chairman, in 3, was left over from the other body's version. And that essentially says at this point you have to start flowing gas by 2037. So that's—.

Senator Steadman? That's to export in '37? Through the chair, Senator Steadman. Or is it just the gas? It's phase 1 gas.

Okay. Senator Steadman. Well, if they have to be completed by '32, Why do we give them 5 years to turn the gas on? Mr. Chairman, you are— through the chair, Senator Steadman, it's a very good question. Late last night when we were finishing some of the details of the draft, we recognized that it doesn't make a whole lot of sense.

There's probably not going to be 5 years between the completion of Phase 1 and before they flow first gas. But it was— we just left it in there because it was in by the other body. It could be taken out. It is essentially almost meaningless at this point. Thank you, Mr. Chairman.

I just thought I'd bring that up. I just noticed that. Thank you. Thank you, Senator Steadman. Mr. Eklund?

Mr.— oh, Senator Cronk. Thank you, Mr. Chair. I'm looking at page 27, line 26. That hard December 31st, 2032 date is, I don't, that's very damaging.

I say, how did, you know, there's so many factors that we, you know, we don't control or happens out there. So if you put a hard construction date on there, I'm not sure. That allows this to even go forward because we're putting a hard date on there and this is a big project. So I don't think that's a, personally, I think it's a very damaging thing to have in this bill to have a set date that this has to be built by. We don't control, I mean, what if COVID, something like COVID hits again and all of a sudden we have to delay everything and then so the project's upside down, so.

Thank you. I'm not sure that's a great thing to have in there. Senator Steadman. Mr. Chairman, I think in consideration of this bill, there's been a lot of concern out of the rail belt with the declining volume in Cook Inlet furnishing gas to mainly the Anchorage Bowl area. And I think this date has some similarities with the declining production and contract termination dates.

So there's a lot of interest in putting that in. Also, I'd like to add, I think if they meet the previous date of final investment decision by January 1st of '28 and start construction, I think there'd be probably be some flexibility by the legislature in the event that there was some unforeseen black swan events or something that messed up the construction, slowed it down intentionally, or whatever to, you know, we can change these and modify these going forward. This is not in the Constitution. So I would think there would be some consideration under good faith. Mr.

Chair. Trying to get the project constructed, but that's the essence of this portion of the bill, as I recall. Thank you, Senator Steadman. Mr. Ecklund. Thank you, Mr. Chairman.

Section 27, Mr. Chairman, we modified, deals with the municipal impact— Page number, please. Page 31. Okay, thank you.

It modifies the Municipal Impact Grant Fund that was included in the other body's version of the bill. Smooths the natural gas project Municipal Impact Grant Fund from uncodified law into AS4433. This language was in Section 28 of the other bodies' version of the bill. So Mr. Chairman, the— let's see, this do we talk about?

I'll talk more about the changes that we made to how the impact fund works here in a second, Mr. Chair— in a minute, Mr. Chairman. On page 31, line 26, there's a new section 28 that repeals the in-state natural gas pipeline fund that was for AGDC and the Alaska liquefied natural gas project fund that was under AGDC. These two funds have no remaining money and are no longer needed. Section 32 on page— page 33. Page 33.

It's a previous Section 31, and it sets conditions which must be met. So it makes the abatement and the tax abatement and the AVT, or the Alternative Voluntary Tax statutes, conditioned on the following items.

The project developer paying $40 million into an impact fund within 60 days of the final investment decision on Phase 1, and contractually agreeing— committing to paying another $40 million within 60 days of FID, Final Investment Decision, on Phase 2.

Further, Mr. Chairman, the Department of Commerce and Community and Economic Development would— Department would be overseeing and writing regulations for the application and disbursement of funds in that impact fund for both Phase 1 and Phase 2. And that's a change from the other body's version of the bill. In the other body's version of the bill, on that second $40 million, from $40 to $80 million, the project developer, there was a reasonableness test. And that reasonableness test by the project developer for the impact funds have been removed.

Second, the primary property owner must enter into project labor agreements for construction of a gas pipeline.

The project developer is is committing to constructing a Fairbanks Spur Line. This portion is substantially the same as the House version except that for the addition of, to the extent allowable by federal law, before requiring that the cost be spread to export consumers. And so, Mr. Chairman, to restate that, for the cost of the Fairbanks Spur Line to be spread to export consumers, it has to be allowed by federal law.

Mr. Chairman, there was many technical and conforming changes, and I believe Ms. Nauman is online, and she could best speak to those, Mr. Chairman. Thank you, Mr. Eklund. Any questions of Mr. Eklund at this point?

[FOREIGN LANGUAGE] Senator Steadman. Again, I apologize. It's just a rush here at the end on our final day, so we've been all working hard and doing yeoman's work, especially the staff, to try to get this document in front of us as soon as possible. But can I reference page 32, line 10? And that's the definition of final investment decision.

I just— I see where it talks about Phase 2. Help me with Phase 1 FID, final investment decision.

Mr. Ecklund. Thank you, Mr. Chairman. Phase— there's a different section that I'm looking for where there's the definitions of Phase 1 and Phase 2.

Sorry, what? 35. Senator Steadman. Can you repeat the question? Senator Steadman, can you repeat your question, please?

Yes. So we have two phases, Mr. Chairman, Phase 1 and Phase 2, and we've been concentrating on Phase 1, which is just the pipeline and final investment decision, and that's when everything comes together and basically it's the go moment. And to proceed with construction, 'cause all the financing and everything's laid out, I see on page 32, line 10, they talk about the final investment decision and what it means, but it's referencing Phase 2. I'm wondering the connection with Phase 1 to ensure that Phase 1 is properly defined for FID on that trigger date of January 1, 2028. Through the Chair, Senator Steadman, yeah.

The trigger date of January 1st, 2028 is tied to Phase 1, final investment decision on Phase 1. There is a reference to Phase 1 and to Phase 2 regarding the municipal impact funds and deposits of $40 million within 60 days of— excuse me, that's also tied to Phase 1. Mr. Chairman. Go ahead, Mr. Painter. For the record, Alexi Painter, Legislative Finance Division.

So, Senator Steadman, the definition on page 32 is specific to a report that AGDC is required to prepare relating to Phase 2. The more general definition of final investment decision is on page 28, beginning line 12. That is a more general definition that includes includes the— that is broader, not just applying to Phase 2. Seriously? So one of the issues with the bill is that some of the definitions have to be in several different places.

So that should be the correct definition. Senator Steadman. Okay, so Phase 1 final investment decision is defined on page 28, line 12. Then that is triggered on that January 1st of '28. I think that's just making sure it's correct.

It's correct. At least I'm understanding the bill correctly. Thank you, Senator Steadman. Further questions of Mr. Eklund or Mr. Painter at this time? Senator Field and Senator Cronk.

Thank you, Mr. Chairman. For whichever one of you is prepared to answer it, The question about a slice of the alternate volumetric tax being required to go to schools in a couple of districts that get it, I'm trying to sort of understand the impact of that. Do you have a rough dollar estimate of what that would be in Phase 1 and Phase 2? It's about an eighth of— Ammunis AVT, right?

Through the Chair, Senator Keele, I do not have that number off the top of my head. I've calculated that number. I just, I don't want to guess. I can get back to you with that, or if Ms. Nauman can testify, I can get back to you by the end of the committee meeting. Through the Chair, Senator Keele, the one point, data point that I do recall is You're correct, it's about 13.25%, it's 13.25% of the ABT would be counted towards required local contribution.

In 20, it's either 2234, I believe, or 2036 in Mr. Stickle's presentation, the expected revenue going to the North Slope Borough would be about $40 million, but they're subject to the 45% cap, this new provision doesn't have an impact on them. I believe the Kenai Peninsula Borough's revenue in that year was going to be about $69 million, so it would be 13.25% of that. Senator Keel. Thank you, Mr. Chairman. I'm trying to think, right?

One of the great things we hope for with this bill, if a gas line goes forward, is there will be a lot of growth. There should be a lot more kids in school. I'm just trying to balance what the state will pay, what the muni will pay. I'll run through those numbers. Thank you.

Thank you, Senator Keogh. Senator Cronk. Thank you. My question is similar, on the same line, for my friends from Kenai. How much of the fiscal impact will be to the Kenai Peninsula Borough per year with the changes made to the required local contribution in Section 2?

Through the chair, Senator Cronk, if it would be okay, I can get back to you later in this meeting if I can just look it up. I can get back the answer back to you. Follow-up. Thank you. So how much will Cape Kenai Peninsula Borough lose in education funding?

You know, are they going to have to pay the same amount to make up what they could possibly lose?

So through the chair, Senator Cronk, so when the AVT starts coming in, in, for Phase 2, I mean, for Phase 1, it is a very small amount of money. I mean, very small, kind of negligible amount. But for Phase 2, it would subject, of their AVT revenue, 13% of it. So they would keep 87%. It doesn't include the community assistance portion.

So the $69 million that Mr. Eklund referenced was the total amount they would get. That includes— [SPEAKING GERMAN] portion that would go through community assistance, so it is actually less than that that this would apply to. So I will get you the exact number, but essentially when the AVT comes in, they would get, you know, let's say $60 million or $67 million of new revenue, and they would begin paying in something like $6 million or $7 million of that as an additional required local contribution. But I will get you the exact number. Thank you.

Thank you. Follow-up. Senator Cronk. Thank you, Mr. Chair.

I just have a question. There are—. I would say there are some really substantive changes in here. Is there any way possible that we would be able to hear from AGDC or even the producer Glen Farm about the impact of a couple of these major things that are in this bill? I mean, I'm really— I mean, I don't really want to put a bill out here that can't work.

I mean, I think I think that's all of our goal is to have a bill that allows it to work. I'm really concerned a couple of things in here might just be the poison pill on this bill. I'd hate to see that. Is that a possibility? Well, after the presentation we'll take an ideas and decide how to go forward.

But it is the intent. We have a deadline.

Of today, we have full agenda including a joint session. Potentially we have to have floor amendments. We have to allow for time to send it to the other body so that they can deliberate. And Senator Cronk, the—. Yes.

Our intent is to get action on all of these points. And that is the dilemma that we're facing. We've had extensive dialogue with the administration to date. And at some point, we need to proceed down the path of getting a bill across the floor. [SPEAKING RUSSIAN] And any delays such as you're suggesting may make sense.

There are a lot of other things that may make sense, but the problem is the timeline that we have. And I'm sure you're well aware of that, the consequences of delays that are unforeseen at this point. To get this across the finish line are monumental. Thank you, Mr. Chair.

Further questions?

With that, Ms. Nauman, please proceed with your presentation on technical amendments. Good.

For the record, this is Emily Nauman, Legislative Legal Services. I did not have a presentation prepared to go through specifically the technical amendments, but I'm happy to answer any questions about them if anyone has any specific ones. The specific question is that there are substantial amount of technical amendments in the legislation, they are all technical that we're referring to at this point. Is that correct?

For the record, to the Chair, again, Emily Nowlin, Legislative Legal Services. Yes, the only changes that our office made besides the substantive changes requested in accordance with the CS were technical in nature. We cleaned up some cross-references, made clear how interest— how, excuse me, inflation adjustments apply. Related to the AVP. We added some cross-references to be sure that there weren't multiple stacked draws on gas royalty revenue.

That isn't an issue now, and it isn't an issue under the bill. It shouldn't become an issue, but we had sort of many places in statute where we were drawing on the that royalty revenue and wanted to, you know, put them all in one place so that a future legislator or a future bill drafter would know to look at all those statutes to be sure we don't end up with some percentage over 100% of the royalty draws— or, sorry, of the royalty— oil and gas royalty amounts.

And I'm trying to think of any other of the larger substantive changes, but those are the— or technical changes, excuse me. But those are the ones that immediately that immediately come to mind. Thank you, Ms. Nauman. Do members of the Senate Finance Committee have questions of Ms. Nauman at this point?

With that, I will take a brief at ease.

So Finance Committee will come back to order. I would remove my objection at this point. I object. I remove my objection at this point. Is there additional objections to adopting this CS?

I object. There's objection. I want to speak to my objection. Please speak to your objection. I appreciate solid work done on this bill.

I respect the people that were just testifying. I know good solid work is being done. The process of this thing, I mean, the public knows that— I don't know if they know this, but I've been here every day waiting for committee hearings that don't happen. And finding out, you know, after the fact sometimes that they didn't happen and that they weren't going to happen because this is being worked, you know, kind of privately and doing a lot of work and, you know, the final results look pretty good. We've got a big question on page 27 with respect to the construction timeline of it possibly being a deal killer with respect to finance.

Financing, because it leaves open the problem that one— one problem that pops up could possibly threaten that, and that is going to make it very hard for anyone that's going to finance this to consider that, because any force majeure— I don't know if that's covered here— a pandemic, something, an earthquake or whatever, could put them in jeopardy. And so I think And AGDC is right here in the room, but we are told that we have to take them at ease. We can't even bring them up to speak to potential concerns that might be in this piece of work that was done not through the committee process, but through private huddles. So I am going to remove my objection to adopting this, but I think that we ought to at least hear from AGDC on that subject. Thank you.

So having said that, I'll remove my objection. Is there further objection to adopting the CS? Mr. Chairman, just a comment. Senator Keele. Thank you.

Just a comment, Mr. Chairman. I apologize, I stepped out of the room. I have no objection to moving the bill. I wanted to flag for the members—. The motion is to adopt the CS.

Yes, Mr. Chairman. May I make one comment before we proceed? I apologize for being absent. I'm slow on the uptake. There is a legal memo distributed.

One of the questions we asked was about what property is subject to this AVT and what property can still be taxed by a municipality. Administration didn't bother to respond to that question. There's actually an excellent answer. It's a good answer. And it is here in this memo.

I've asked that it be placed on basis as well. The bill doesn't need a change, but I think it's very important that what is taxable and what is subject not to property tax with this other is on the record. And so thank you for letting me just flag that for members and the public. Thank you, Senator Keele. Is there further objection to adopting the CS?

The CS is adopted. Is there further discussion regarding the CS that's before the committee at this point? Senator Steadman. Thank you, Mr. Chairman. Senator Kehl brought up the legal memo in front of us.

Maybe, Mr. Chairman, we can consider having him kind of explain just the essence of that for those at home so they could follow along. Thank you, Senator Steadman. Senator Keogh. Thank you, Mr. Chairman. Very briefly, the next to last line on the first page is the crucial thing.

The list of property that is subject to the AVT, and so you can't have a property tax on it in your muni, is exclusively property through which natural gas flows. That is the quote. The list of property is exclusively property through which natural gas flows. So what that means and why it is important is we are not exempting anybody's office building in Downtown Anchorage. We're not exempting anybody's warehouse or laydown yard, their heavy equipment or their rolling stock, and certainly not the executive's house.

If gas moves through it or it's permanently attached to that and the property that sits on, no muni tax. AVT. That's going to be billions and billions and billions of valuation. That's the point of the bill. But the appurtenant stuff is all still subject to— Taxation.

What other taxes already exist. So that is going to matter a huge amount for Alaska municipalities that provide services. We're not cutting them out. Thank you, Senator Keel. Senator Steadman.

Further discussion by Senate Finance members on the CS that has been adopted? Seeing none, Senator Steadman.

Mr. Chairman, I move committee substitute for House Bill 381, version S, finance from committee with attached physical notes and individual recommendations. We will take roll call.

Senator Keele. Yes. Senator Merrick. Yes. Senator Cronk.

Yes. Senator Kaufman. Yes. Senator Steadman? Yes.

Senator Hoffman? Yes. Senator Olson? Yes. 7 Yeas, 0 nays.

Thank you for that. That concludes this morning's meeting. I would like to thank specifically the many hours that Pete Eklund put into this project. I know he's been here 6 o'clock in the morning to 8, 9, 10 o'clock at night for several days. The staff of the members of Senate Finance Committee, all the hours that all the Senate Finance members have put into this, the dialogue with AGDC, the administration, many, many meetings, many, many hours that have been put into this piece of legislation.

I'd also like to thank the the staff of— that work to make this move so smoothly in— at the table. They've done omen's work. As is with any major piece of legislation, it is not perfect. There are concerns that members have at this table, people have. [FOREIGN LANGUAGE] In the other body, there are concerns that the administration has.

It has been the task of this committee to try to concentrate on a piece of legislation specifically to get a gas line built. I believe that there is going to be further deliberation both by the full body of the Senate and anticipate additional amendments at that time. But the reason that we're proceeding today with passing the committee bill out is so that we have ample time for members to draft any amendments that that they may see fit to improve the legislation for consideration of the full body. I would invite any members of the Senate Finance Committee to give comment at this time before we adjourn.

Senator Stegman. Thank you, Mr. Chairman. I just want to kind of reiterate some of the comments that the Chairman made. It's been— there has been a lot of dialogue with the administration, AGDC, and members here, and the other legislation that's been circulating around the building, trying to come up with something that focuses on getting to a gas line and not an obstacle to block construction of the gas line. So we will— and we're watching the clock, and that's what we're racing today.

So the concern this morning was to get this legislation adopted on the table here so members could write amendments as needed and we'll have them discussed on the floor. But for the public, you can't write an amendment to a bill that doesn't exist until it gets out of Finance. So we had to get this bill adopted. So we can start the amendment process. And of which I'd like to note, Mr. Chairman, that Ledge Finance has been working diligently preparing some of the amendments that they know that's coming because there's been numerous requests from members for inclusions in this bill that— items that were not included that will be put forth in amendments on the floor today.

So we're trying to expedite that action also. And I just want, again, to thank Legislative Finance for going out of their way to actually start that process several days ago to help us meet our deadline of midnight tonight. Again, a special thanks goes out to Emily working wee hours of the morning for several days. Without the many, many hours that they've been put into this when all of us were sleeping, this would not be before us. Again, special thanks to you, Emily, and hopefully you can get back to a more normal life.

With that, we are adjourned.

Thank you.