SRES-260514-1530

I call Senate Resources Committee meeting to order. Today is Thursday, May 14th, 2026, and the time is 3:30 PM.

Please turn off cell phones. Committee members present today: Senator Rauscher, Senator Myers, Senator Dunbar, and myself, Chair Giesel. I am expecting Senator Kawasaki and Senator Wilkowski to join us after Senate State Affairs adjourns. I believe Senator Clayman is on his way as well. But regardless, we have a quorum to conduct business right now.

Thank you, Heather and Chloe, who are helping us out with the minutes and with the audio. Today we're hearing Senate Bill 280, Supporting a Gas Line for Alaskans Act. This is our 30th hearing on this bill. Welcome, Senator Clayman. Today we have a committee substitute before us.

Senator Dunbar. Madam Chair, I move the committee sub— committee adopt the Senate Resources Committee substitute for Senate Bill 280, work draft 34-GS2038.

L as our working document. And I'll object for purposes of discussion. And Paige Brown, my staff, is at the table to explain the changes. Ms. Brown. Thank you, Madam Chair, members of the committee.

For the record, Paige Brown, staff to Senator Giesel. The summary of changes document was included in members' packets. I'll read over some of the larger changes. From version W that was adopted yesterday in committee to version L. The short title Supporting a Gas Line for Alaskans Act was added.

Section 2 was removed of version W and expands provisions addressing constitutional concerns related to education funding. Version L establishes a $15 billion threshold for pipeline cost overruns so that they may not be recouped from consumers. Removes provisions allowing AGDC to share confidential information with legislators and legislative agents in executive session. Replaces legislative approval requirements for subsidiary relationships with foreign entities with legislative notification requirements. Incorporates the governor's proposal from Senate Bill 227 increasing the gross minimum tax floor from 4% to 6%.

Renames the Pipeline Corridor Maintenance Fund as the Dalton Highway Pipeline Corridor Maintenance Fund. Removes a section requiring disclosure of the prevailing value of oil or gas. Clarifies that marine export terminals are included within the definition of taxable property. And, um, the alternative volumetric tax was amended during Phase 1 of the pipeline. The alternative volumetric tax would be 6 cents on the gas treatment plant, 6 cents on the pipeline.

Once Phase 2 was reached, The alternative volumetric tax would be 10 cents on the gas treatment plant, 15 cents on the pipeline, and 15 cents on the LNG terminal. Um, there was also conditional language added for the alternative volumetric tax applicability and property tax exemptions tied to deposits into the Community Impact Fund, and it phases out the alternative volumetric tax and property tax exemptions if funding requirements aren't met within certain time frames. It establishes the Alaska Gas Line Community Impact Fund. It requires a $50 million deposit for application of the alternative volumetric tax and property tax exemptions and requires annual deposits of $30 million for 5 years during construction to maintain that alternative volumetric tax and property tax exemptions. And then lastly, added a 10-year sunset on property tax exemptions and the alternative volumetric tax after the LNG terminal begins operations.

Thank you, Ms. Brown. So, questions from committee members? Senator Rauscher. Thank you, Madam Chair. I appreciate everything that we heard.

I have a concern. Bullet point number 3 establishes $15 billion.

Threshold for pipeline. Does that mean $14 billion and we recover— we, we, we cover the costs? Is that what this is saying? Ms. uh, Kawasaki, would you please come forward? Uh, let's see, let me find this in the bill.

Ah, there it is. It's on page 7, line 27. And I'll make a— if you look at line 25, it says, may not recoup cost overruns from the construction of the first phase of the gas pipeline by increasing rates charged to a utility. So to define cost overrun, we identified $15 billion. We understand that the cost estimate is actually less than that, but had to set in a definition of what a cost overrun would be.

Ms. Kawasaki, can you elaborate? Sure. Thank you, Madam Chair. Good afternoon, members of the committee. Sonya Kawasaki, Senate Majority Legal Counsel.

Through the chair, Senator Rauscher, thank you for the question. This was a change from the prior version of this bill where we hadn't defined what a cost overrun was, and we felt that we needed to set some parameters, um, so that between AGDC, which is the requirement for AGDC to ensure that cost overruns are not passed on to Alaskan consumers, and then there's a similar section now in the bill established for the RCA oversight, and it was to provide parameters for RCA to be able to judge whether cost overruns were being passed on to Alaskans. And it was based off of testimony from the developer and ADDC on how much the Phase 1 pipeline was expected to cost. Follow-up? Follow-up, Senator Rauscher.

Thank you. I appreciate the answer, but I thought Glenn Farn had told us that We weren't going to pick up the tab if there were cost overruns, and I'm just trying to understand where we're at here now. That's absolutely true, Senator Rauscher. This simply puts that statement into writing.

Welcome, Senator Wilkowski. Further questions?

All right, seeing— yes, Senator Dunbar. I, I would just say, um, I guess this isn't a question, just, just to note. Okay. Uh, yesterday, or was it the day before? I think it was yesterday, Senator Rauscher, when you ran your amendment, your amendment that reduced it from a million, a million dollars a mile to $500,000 a mile.

Uh, and that equated to a reduction from $800 million to $400 million. And I'll just note that this latest version, um, with a $50 million deposit and the $30 million ongoing and removing the million dollar a mile means that we have sort of come down again. And now it's $200 million. Um, which, uh, I should just say is about equivalent to the $250,000 amendment that Senator Rauscher made. Yesterday.

So given that that amendment failed, I would— well, I'll just say that this is a 75% reduction from where the bill initially was. So it is a major change. And I'm not making a statement whether that's good or bad. I'm just saying it is a very large difference from the bill as initially proposed. Thank you, Manager.

Thank you, Senator Dunbar. Further questions? Senator Clayman. I just had a mechanical question about the cost overrun provisions that you were discussing with Senator Rascher. And so my example would be for this first phase of the pipeline, if the cost— if the expected cost is $10 billion and it costs in the end $12 billion, does it mean —that they can charge consumers the $2 billion cost overrun, but they can't charge the overrun after it gets to $15 billion?

Ms. Kawasaki? I'm not sure I followed it, but it's an attorney question, so—. It might be a logic question. Thank you, Madam Chair. Sonia Kawasaki, Senate Majority Legal Counsel.

Senator Clayman, through the chair, the way that I would interpret this provision actually might functionally work the way that you were concerned with. I don't— at the time that we requested this figure to be set into the bill, I don't know that we really— we believed, I think, that the cost would be over $15 billion, and we were trying to set a firm figure to it. If the developer is indicating now that the number will be lower than $15 billion, I think it would be in the interest of Alaskans to lower the dollar figure that we have in the bill right now. Senator Clayman. So—.

So what the intention is that the $15 billion represents a figure lower than the expected cost to build Phase 1. And for the, yeah, first phase of the gas pipeline, so that the $15 billion is a figure to say we're not going to be below that in any estimation, at least as we sit here today.

Senator Klayman, through the chair, I would say that the $15 billion was sort of an estimate of where we thought that the developer was landing on the Phase 1 feed estimate at the moment, except that we thought that it would be lower than the Phase 1 feed estimate. So that, um, that was the limitation, that Alaskans would not have to pay for overruns if they came in under that estimate, at that estimate. Yes. Senator Clayman, it was the maximum.

No, I'm— well, the reason I'm asking the question is if the estimate is that it— if we were thinking that they can actually build that phase for less than $15 billion and this is the figure, say they can build it for $12 billion and that's what they think it's going to be, and then they run over cost to $13 billion, that appears that the consumer is picking up the extra billion.

Under the provisions in this section. Senator Clayman, through the chair, um, your reading or your interpretation of this section is something that I do think that the committee needs to consider. The policy team that was reviewing it and setting that, uh, dollar figure, I understood that the anticipation was that that was a rough estimate, but still under what the developer was expecting. Now, given that we do not have firm economic figures from the developer, it's very hard to set, you know, a determination for cost overruns that we would not like to pass on to Alaskan consumers, but that was the attempt. And so thank you for pointing out what you noticed with this provision, and it is something that we will have to consider moving forward.

Thank you, Senator Klayman. Senator Myers. Thank you, Madam Chair. Um, on that same note, how does the cost overrun provision then interact with the provision right after it that gives us the caps on what can be charged in-state anyway? If the cost does overrun but it, but it stays under the $15 billion, but then we end up with with, you know, but that means that they would have to charge more than $12 for the— on the wholesale side, then which provision do we go with?

Senator Myers, through the Chair, I— those provisions are not supposed to act in tandem with each other. The provisions dealing with the price caps are set price caps. And they were based on public statements by the governor. And if you are speaking to if the— a cost overrun occurs in the scenario that Senator Clayman raised, I mean, that it's not the intent to pass on any cost overruns to Alaskans, even if those cost overruns come in below $15 billion. Provision would have to be sort of fleshed out.

The price caps provisions are just based off of public statements, and they, um, limit the cost per MCF to Alaskans by rate. We are somewhat assuming that the public statements from the governor are informed statements. In other words, that he has more in much more in-depth information than we ourselves have. So we're trusting those numbers. Senator Myers?

Yes, on that note though, how do you pass on a cost.

Overrun if you can't raise a rate? So if we're saying on the one hand we're going to give you a little bit of leeway recognizing, you know, cost on the steel went up or it was harder to find workers or whatever, you know, because these things happen, but then you're still not allowed to raise the rate, then is it just a distinction without a difference then?

Through the Chair, Senator Myers. I suppose if the cost overrun— I suppose if there was a cost overrun and it was below $15 billion under Senator Clayman's scenario, then the price caps would definitely work. Um, but I would say that we have to address Senator Clayman's concerns. Um, the price caps are intended as sort of a backstop to whatever concern or whatever prices might be passed on, um, in light of what the governor has stated that Alaskans can expect to pay.

Okay, I'll just add You know, we have virtually no information that's concrete related to the cost of this project, but statements have been made to us that no cost overruns will be passed on to consumers. So we're putting it in. We're just putting in what we've heard, what we know about this project, and holding people to what they tell us. And that includes the cost of gas for Alaskans.

Further questions about the committee substitute version L?

All right. Seeing none, one of the pieces of the bill is an adoption of the governor's suggestion from Senate Bill 227 to increase the gross minimum tax floor from 4% to 6%. And so we are embracing that suggested change and, um, have asked the Department of Revenue to model that for us. And that is why, uh, Mr. Stickell has joined us again today.

So I will invite him forward. Yes, Senator Dunbar? I'm sorry, did we actually adopt the committee substitute? Thank you. I will remove my objection.

Thank you so much. And that brings the version before us, version L, before the committee as our working document. Thank you, Senator Dunbar. Welcome, Mr. Stickle.

Thank you. Dan Stickle, Chief Economist with Department of Revenue. For the record, the presentation that we have delivered and ready here today is very similar to the presentation that I gave earlier this week for the prior version of the bill. I'm just updating it. Updated to reflect the provisions of Version L. Very good.

Thank you. And I know we have several other follow-up requests from the committee that we are frantically working on. We are doing as much as we humanly can. So appreciate your patience on those additional requests. We appreciate your work.

Thank you.

And I will add that Owen Stevens is an online commercial analyst from your department. Excellent.

And so, if it's all right, what I might do is move quickly through some of the slides that are similar to what I presented earlier this week and then really focus on the slides that are updated information. That would be great. Thank you. All right. So, slide 2 is our list of acronyms and definitions.

Slide 3 is our presentation overview.

Moving on to the Version L legislation and revenue impacts. Again, slide 5 is our disclaimer. This is not an official statement about an official tax interpretation, and there's a lot of complexity in the oil and gas production tax. So just keeping that in mind. So what would this— what would this bill do on slide 6?

So a lot of the information is similar to the previous version H. Increased oversight and disclosure for AGDC and related commercial analysis support required from Department of Revenue. Firmer language around receiving fair value of oil and gas for royalty and tax purposes, and then changes to revenues related to oil and gas and LNG.

So, DUR-specific impacts on slide 7. So we have the property tax exemption, the imposition of the alternative volumetric tax, the infrastructure maintenance surcharge. Point 4 is a point that was introduced in this bill. So this is a minimum tax floor on oil is increased in this bill. We have a pass-through entity tax, the valuation requirements for oil and gas, the requirement to assist with equity investment decisions, limits on— and then the next two items are not DOR direct impacts, but we have the limits on gas sale prices to utilities and then Community impact payments.

This was another significant change to this bill. So in the previous version of the bill, there was a community impact fee that would be administered by Department of Revenue. In this bill, it's been replaced with an impact payment that does not directly go through Department of Revenue. So it's a smaller, a smaller total dollar amount involved, and that routes through Department of Commerce rather than going through Department of Revenue. And so when I go through the presentation, I'm really going to focus on that minimum tax floor and then the community impact payment, which are the two that really— the significant changes from a revenue modeling standpoint.

Very good. I see no questions. So slide 8, on the fiscal note, once again we're showing an indeterminate fiscal note because there's many moving pieces and uncertainty around where whether the, the AK LNG project proceeds with or without changes to the tax system. This bill further makes changes to the upstream oil and gas tax system, and we can't say with certainty how that will impact upstream decision-making.

No questions. Slide 9 is the property tax exemption. No changes to the This slide from what I presented earlier this week.

And slide 10 being the alternative volumetric tax. This is also similar to the version— H version of the bill with rates would be 6 cents for the gas treatment plant and then increasing to 10 cents and 15 cents once throughput thresholds are reached. And then LNG would be a 15-cent alternative volumetric tax.

Very good. Do you have a question, Senator Wolkowski? I do. Just on the— where the administration is on the AVT. I know the governor's initial proposal was 6 cents, and then at a press conference he mentioned 10 cents.

I'm just curious if The administration's position is that it should be 10 cents now. Senator Wilkowski, through the chair, so I can't speak to the administration's official position. Follow-up. Who might— should we just take it from the governor's press conference that it's 10 cents, or is there— who do we— who should we ask to find out what the governor's position is? Sure.

Senator Wilkowski, through the chair, so I will bring that to my leadership and we'll get back to the Committee.

Very good. Any other questions on this slide, slide 10? All right. Seeing none.

So slide 11 puts dollar amounts to that alternative volumetric tax with total proceeds ramping up to $478 million. Once full project throughput is achieved, with $181 million of that being unrestricted general fund for the state. So 81% of the revenue for the AVT is shared with municipalities, and half of the other revenues are shared with municipalities.

Senator Myers. Yeah, uh, thank you, Madam Chair. So, Mr. Stickel, I've got a question for you that I didn't see addressed directly in your slides here. Um, in the new version of the bill before us, we've got a 10-year sunset on the AVT.

Um, and so, um, my question is about what happens when we switch back to current law in 2042-ish. Um, we just saw a news article come out yesterday that said that after a 10-year truce, um, we're likely looking at another very expensive lawsuit, uh, between the state and municipalities, uh, and the, uh, and, and the, uh major producers over the value of taps. Are we anticipating that when we switch back to the, to current law property taxes, that we would probably have a very expensive lawsuit that starts up then as well? And would that then be compounded by the fact that we've got, we would then have 10 years of history of this thing being out there but not being taxed and then but then trying to figure out how inflation and depreciation play into it. Sure, Senator Myers, through the chair.

So two things on that. So first of all, thank you for mentioning the 10-year sunset. That is an important change that was implemented in this bill that I neglected to mention on the previous slide. But yes, the alternative volumetric tax would sunset 10 years after, um, the start-up of LNG exports. And so that's an important provision of the bill.

As for what happens after that sunset, it would refer to current law, which is the current 20 mils property tax. We would need to do assessment and appraisal out of Department of Revenue for the pipeline at that time. That's far enough out that we have not included the required position. It would be an additional position. We haven't included that in the fiscal note at this time.

That would be Beyond the time horizon of the fiscal note, there would be a cost associated with that. And we would levy that— we would do that appraisal and levy that tax as we do any other tax. There would be an appeal process, and certainly it would be the right of the property owner to take that up to the real— through the appeal process, potentially to court. I can't speculate on whether they would do that and what the outcome would be. Follow-up, Senator Myers.

Can you speculate on what the cost to the state might be to go through the full legal process? Uh, Senator Myers, to the chair, I, I can't. Um, if there— we, we do have some existing resources to handle, uh, normal, um, normal assessment and appeal process. And some Department of Law resources. Certainly if there was major litigation of the scale of what we saw with the Trans-Alaska Pipeline, that would be, you know, that would be an additional cost potentially on down the road.

Okay. Thank you. I will add that we did hear from our consultant, Gaffney Klein, that this is a typical scenario in Louisiana and Texas. The 10-year sunset. So it's been incorporated.

Very good. I see no other questions on this slide. All right, moving on to slide 12. So the infrastructure maintenance surcharge— this is the 30 cents per taxable barrel of oil. This remains in the bill, same as the previous version.

Slide 13 is the production tax minimum tax floor. We have to 2 slides on this, and I know we're working on an additional set of slides that will have some more, potentially some more information on this concept. That was not quite ready to, to go prime time just yet today, but we are working on that for the committee. So this bill, the previous version had increases to the gross tax rate for gas. That's been removed from the bill.

This bill increases the minimum tax floor for oil, which also sets the minimum tax for North Slope oil, which as I mentioned earlier this week, also sets the floor for combined oil and gas production tax statewide that a company pays. So currently that tax floor, when Alaska North Slope oil price is $25 or higher, which hopefully will always be the case, that The current gross minimum tax floor is 4% of gross value. This bill would raise that to 6% of gross value.

And this would apply to oil produced beginning in 2027 from the North Slope. If oil were to average less than $25 per barrel for an entire calendar year, the lower percentage tax rates are unchanged in this bill. There is no sunset or repeal provision for this bill, so the tax rate would be increased. And even after that 10-year time horizon when the alternative volumetric tax repeals, this 6% gross tax would remain in place as the minimum tax floor. Very good.

This was a suggestion from the governor. I know he did have a sunset provision on his suggestion. Senator Roscher, did you have a question? Yeah, thank you, Madam Chair. So is this from Does this pertain to the project oil that comes about because of the project or across the fields altogether from now on?

Yeah, Senator Rauscher is the chair, so this would be for all fields. From now on. For all oil produced on the North Slope after January 1st, 2027. Okay. All right, thank you.

Again, this was a suggestion from the governor in some Senate Bill 227. Senator Myers. Thank you, Madam Chair. So, uh, Mr. Stickler, it's my understanding that the break-even price for pretty much every field up there is significantly above $25. So it— the— is the $25 mark— does that really even matter, uh, whether it's 4 or 6% at that dollar figure?

Sure, Senator Myers, through the chair. So that $25 mark was put in place in the 2000s when we switched over to a net— from a gross tax to a net tax in 2006. And those triggers were not inflation adjusted and they've remained in place. So, yes, hopefully we never go below the $25. I think that was a more— maybe a more meaningful reference point in 2006 when we had, you know, recently had years where oil was below $25 than it is now.

Well, we did go below it in 2020, but just for a little while.

Follow-up, Senator Myers? No, thank you. All right, Senator Rauscher. Yeah, thank you. Um, the 4%, the 6%, and just have to— my mind doesn't go all the way back to 227 as quick as I should, but what was the projected gain from something like that?

Do you have that? Senator Rauscher, through the chair. So I don't have the 227 fiscal note in front of me. The governor did introduce a temp— it was a temporary increase from 4 to 6% with that would repeal after, after several years or a certain production threshold. And that was introduced as part of a comprehensive fiscal plan that had several other elements to it as well.

The following slide does put some numbers to the minimum tax increase in terms of revenue. Okay, great. We can go on to slide 14. Sure. So yeah, so slide 14 puts some numbers to this.

So we modeled out the, the increase to the revenue floor under the spring 2026 revenue forecast. Um, so under the official revenue forecast, the increased revenue ranges from a $3 million reduction up to $185 million increase in any given year. Now, why could there be a reduction in revenue when you raise the minimum tax floor? So we have, uh, carryforward lease expenditures, and the application of carryforward lease expenditures are limited by the minimum tax floor. And so when we do our modeling, we actually have a situation where if you raise the minimum tax floor, it will increase revenue in a given year, but potentially reduce the amount of a carryforward lease expenditure that can be applied in that year.

Those lease expenditures would then carry forward to a subsequent year and be able to reduce tax revenue in a subsequent year. Subsequent year. So on looking over a several-year period, raising the tax floor is absolutely a tax increase and a revenue increase to the state, but it's not necessarily a tax increase in every single given year. A follow-up, follow-up, Senator Rauscher. Thank you, Madam Chair.

So if I remember right, there was an amendment on 227 which actually hardened the floor. Is there anything like that in here, or does that not exist? In this particular version? Senator Rauscher, through the chair. So this version would keep the hardness of the floor as is under current law, which was also how it was introduced in the version of Senate Bill 227 as introduced by the governor.

So most per-taxable— sliding scale per-taxable barrel credits are limited by the minimum.

Floor. The application of carryforward lease expenditures are limited by the, the minimum tax floor. Per-taxable barrel credits for new fields, GVR-eligible fields, the $5 credit, those credits can be used to go below the minimum tax floor if a company does not utilize any sliding scale per-taxable barrel credits. So it's a somewhat soft floor. Floor to those particular new field credits.

One last follow-up. Yes, Senator Rosier. Thank you, Madam Chair. So I'm trying to understand, are we defining what a new oil would be under this? Holes that are drilled, hasn't been brought to production, holes that weren't drilled— is there a definition as to what this actually pertains to as far as new oil?

Yes, Senator Rauscher, through the chair. So new oil is kind of the colloquial term. In statute, it's referred to as the gross revenue reduction, or GVR, and that is a provision for qualifying new fields. That is new production, new units, new— certain new participating areas, and potentially certain acreage added to a particular participating area. So these are— this is new production from— New units.

Essentially new units and new fields. And that qualifies for a tax reduction for 3 to 7 years, depending on the price of oil. I'm sorry, one more. Yes, please, keep asking. NPR.

Senator Rauscher, through the chair, so the gross value reduction applies anywhere on the North Slope? —Including NPRA. Thank you very much. And so for those 3 to 7 years, depending on if oil prices are above or below $70 per barrel, if oil prices don't exceed $70 for 3 years or more, then it's a 7-year exclusion. If oil prices exceed $70 for 3 years, then the exclusion expires.

But for whatever— between 3 and 7 years, for whatever period of time, the project qualifies for that gross value reduction status, they get a— they get to exclude a portion of their gross value from their production tax calculation. That's the gross value reduction. There's also a separate per taxable barrel credit for that particular production, and it's instead of a sliding scale credit, it's a flat $5 per taxable barrel credit for that production. And those are the credits that can be used to go below the minimum tax floor potentially. Thank you.

So, so before we go on, I take the recordings of these meetings and I send them out in my newsletter for regular folks to listen to. So for clarity, the term hardening the floor means that by setting the floor, the minimum tax rate, at 6% of the gross value, hardening it would mean preventing all of these various deductions from lowering the tax below 6% gross value. True, Mr. Sickel? Yes, Madam Chair. So, simply put, to harden the floor would mean to not allow those GVR per taxable barrel credits to be used below the minimum tax floor.

Very good. It's a term we use around here, and you mentioned the floor being a softened floor, or soft, that is, meaning that these deductions can take their tax— their tax liability below the 6% we're setting it at. True? Yes, Madam Chair. All right, thanks.

I just wanted to— because the public listening to this is gonna— but I think one of the things of extreme value is that they understand how complex our tax structure is. And as legislators, we have to really think carefully because there's so many different moving parts. Senator Wielekowski. Thank you, Madam Chair. Just a comment, but for the listening public out there who are watching us, because I know many people are, this committee, this is one of the reasons we passed a gross tax.

Because, and this just goes out of this committee, it's up in Finance now, but this just goes to show how absolutely insane our tax structure is. That we have a floor that was designed to protect us and that was designed so that you couldn't go below it so that we could protect the state's cash flow. And by raising the floor, we could actually stand to lose $50 million. It's just an absolutely insane tax policy. Thank you.

With that—.

So, Mr. Stickel, I think we were still on the first bullet point, uh, and I— and you hadn't even gotten to the second one yet, so I'll let you keep going. Sure. And, and, Madam Chair, just to, just to reiterate, um, as we discussed In the last hearing, the order of operations presentation, I did present that to the Senate Finance Committee earlier this session. I believe it is a committee document and went into extreme detail on all of these nuances regarding the production tax system. And so it can be a little overwhelming to try and summarize a 2-hour committee hearing into a sound bite.

But I do my best. But that is a great reference and we try to make that useful for folks. Thank you.

So yeah, so the— Mr. Sickel, pause for one second. Senator Wilkowski had another comment. Someone just sent me a copy of the fiscal note that you prepared in the governor's bill, which would have done the same exact thing as we're suggesting here. This was for 227? Yes.

Yes, okay. And you didn't have any negatives in it. You didn't have a loss to the state in there as I'm reading it. It. And you anticipated revenues of $147 million in FY 2028.

And, um, and I'm just curious, was it just further analysis that caused you to fine-tune these numbers, or why is it so different than what you previously estimated? Sure, Senator Wilkowski, through the chair. So I believe, and I'm not positive, that the fiscal note for 2027 was based on the fall revenue forecast. So that is one potential difference, is fall revenue forecast versus spring revenue forecast. Forecast, different oil price assumptions, different assumptions around carryforward lease expenditures.

During the fiscal note time horizon, we are not showing a negative number under this, this version of the proposal either. That potential negative number comes beyond the fiscal note time horizon. So the fiscal note horizon goes out through 2032. Our official 10-year revenue forecast goes out through 2036. And so some of these potential negative impacts come at the end of the 10-year revenue forecast as new fields are coming online and use— starting to use those carryforward lease expenditures that they earn for current investments that are taking place.

Very good. Did you have a follow-up? No. Senator Dunbar. Thank you, Madam Chair.

Um, so I know it's impossible to— we've got different taxpayers, different fields, and I'm not asking you to be specific at each price point, but is it fair to say that given the high price of oil currently, and it's projected by some to stay high for quite some time. If we are experiencing prices similar to where they are now, that the taxpayers in general would not be at the floor, and so this wouldn't have much of an impact? Senator Dunbar, through the Chair, so at current prices over $100 per barrel, an increase to the minimum floor would have less impact. There are still taxpayers that are paying at the minimum tax floor under current prices. Wow.

But fewer. Okay. Thank you. Thank you. Thank you, Madam Chair.

Very good. All right. I will let you get back to the bullet points on the slide. Sure. So that the first bullet point was the increased— the changes to revenue in any given year under the 10-year time horizon.

And then the second bullet point, we're estimating under the spring revenue forecast, holding all else equal, no changes to, to company behavior, a $71 million increase for fiscal year 2027. That represents a half year of impact, and then an average of $137 million of increase for fiscal years '28 through 2032, which is the remainder of the fiscal note time horizon.

With— and now what happens when you add the AKLNG project? So the incremental impacts of adding oil and gas from the AKLNG project, those range by year. In some years, it could be a reduction reduction of up to $50 million, and then in some years an increase of up to $243 million per year, with an average of $198 million of incremental revenue from the higher tax floor from fiscal years '28 through 2032, which are the fiscal note— fiscal note-related years that would be impacted by AKLNG with our AKLNG modeling.

Excuse me, those prior numbers were the total impacts for the minimum tax floor with AKLNG layered on top of our spring revenue forecast. There's the negative $50 up to the $243 million, and then the incremental from AKLNG is from negative $47 up to $75 million, with an average of $49 million incremental from '28 to '32 and $59 million on average from 29 to 32.

And so we ran those numbers and asked, well, how are— why are the incremental impacts from AKLNG negative in some years? And so what's going on there is we're actually showing higher production with AKLNG due to the assumption of increased liquids from Point Thompson and a higher overall value of resource being produced by the companies. So under— with AKLNG, there are many years where we're showing that under the baseline, companies would be paying under the net profits tax, whereas without AKLNG, they would be paying under the gross minimum tax floor. And so if you raise the floor, it raises that baseline, and so you're getting a higher amount of revenue before AKLNG, but since companies are paying under the net tax under AKLNG, the AKLNG-related revenue stays the same before and after the minimum tax. And so that delta between not having AKLNG and having AKLNG actually is smaller with a 6% minimum tax floor.

And so that's why the incremental impact of AKLNG can be negative in some years. So I would encourage, you know, we include that as information that we thought would be helpful and illustrate some of the nuances of the production tax, but would encourage focus on these first two bullet points, and in particular, the average impacts over the fiscal note time horizon, which would be an average of $137 million without AKLNG and an average of $198 million with AKLNG.

Very good. Interesting. I see no questions.

All right. Slide 15 is the pass-through entity tax. This would extend the, the current— would apply a tax similar to the current corporate income tax to upstream producers that are not currently paying the tax, as well as the midstream operator of the project, which we assume is not going to pay— is not subject to corporate income tax. That is the— this is similar as the prior version of the bill.

And slide 16 laid out the revenue impacts for that.

Slide 17 is the new valuation requirements under the bill. So this strengthens up some of the language around requiring tax to be paid on fair market value for production tax purposes, changes some language from a "may" to a "shall" that we have to— we don't have discretion within Department of Revenue. On allowing a tax below fair market value or allowing a tax not to be paid. That's the same as the prior version of the bill. Slide 18 is also similar to the prior version of the bill.

So if AGDC negotiates for participation in a project, they're required to negotiate a state option for an investment and DOR. Will cooperate with the legislature in analyzing those investments and making recommendations to the legislature.

Other key provisions, so on slide 20. So as I mentioned, the community impact fee, which was $1 million per mile of pipeline installed in the prior version of the bill, that's been removed and replaced with a community impact fund, which would be administered by Department of Commerce. So we don't— we mention this because it's an important fiscal element of the bill, even though it's not a revenue-specific item that would strictly fall under our fiscal note. But there's a $50 million one-time construction impact payment and then up to $30 million per year for an additional 5 years. And those go into special funds administered by Department of Commerce to provide grants for impacted communities to help them cover costs associated with gas development.

We have the provision that was mentioned earlier that cost overruns from construction of the Phase 1 pipeline may not be recouped through utility costs charged to Alaskans. And a cost overrun is defined as a cost of construction for the Phase 1 pipeline of over $15 billion.

And then finally, the, the limit on charges to utilities for gas sold for in-state cannot exceed the $12 per thousand cubic feet after completion of the Phase 1 pipeline and cannot exceed $5 per thousand cubic feet after completion of an LNG export facility. And then again, those numbers are not inflation adjusted.

These two provisions, the provisions around the cost overruns and the, the, the price caps for end state, those have been incorporated into the modeling that we'll be showing later.

Very good. No questions on those slides.

So in terms of implementation costs, similar fiscal note, actually the, the same implementation costs we had on the prior version of the bill. So we're requesting 4 positions to administer the pass-through entity tax, the new alternative volumetric tax, and increased valuation and audit requirements, and then the commercial analysis involved with the state equity analysis for the legislature. There would be some work related to the minimum tax change.

That would be largely one-time work. We think we can absorb that with existing staff.

Gotcha. Capital request is on slide 23. So we're assuming— we're asking again for the $1 million for the tax revenue management programming changes and $250,000 for contractual costs to assist with commercial analysis support. And so the fiscal notes shown on Slide 24 in terms of our budgetary ask, this is the same as we had had for the previous version of the bill. Good.

Moving on to detailed project modeling, Slide 26 are the key assumptions. Again, these are unchanged. Modeling a— $46.2 billion base project cost and a gas purchase price of $1.50 per thousand cubic feet, with Phase 1 production from a to-be-determined field on the North Slope requiring gas treatment, Phase 2 production anchored by Prudhoe Bay and Point Thompson.

Slide 27 just highlights the scenarios modeled. And again, the modeling shows the impact of each scenario if the full project proceeds.

Slide 28 is our current law cash flow summary and cost of supply summary, similar to what we've shown before.

Slide 29 again is the— 280 as introduced version. And then slide 30 is the version L of the committee substitute.

And so total cost of supply for in-state, we're assuming a break-even price of $4.78 under this committee substitute. That compares to $4.86 under current law and $4.43 3 cents under the bill as introduced by the governor. So a, a modest decrease in the breakeven cost of supply for in-state. For LNG delivered into the global market, we're looking at $8.97 per 1,000 cubic feet under this version of the bill. That compares to $9.07 under current law.

So it is a modest reduction compared to current law, but a bit higher than the $8.48 under the bill as introduced by the governor.

The next couple slides are state revenues by year, broken out by revenue component. Slide 31 is the current law, again with some reductions for the first— reductions for the first couple of years as upstream operators make investments in new production and are able to deduct some of those lease expenditures in their production tax calculation. And then under current law, if the bill would go forward, about $1 billion per year of annual state revenues once full exports begin. Slide 32 being the bill as introduced by the governor with about $800 million per year of additional state revenues with full exports. And then slide 33 being under the current version of the bill.

So the revenues to the state are a little bit higher— or a little bit lower than current law for the first decade of operations, but then they're actually higher than current law later in the time horizon of the analysis as the alternative volumetric tax expires. After the, the 10 years of export. And then the provisions around the expanded corporate income tax to pass-through entities and the increase to the production tax, those provisions remain in effect. Before you leave this slide, Senator Dunbar. Thank you, Madam Chair.

A couple of comments, and if I say anything that is mistaken, I'd like Mr. Stickle to correct me. But I'll say these graphs are a little bit They have different numbers on the y-axis, so you can't really just look at the shape of them, if that makes sense, for those who might just have them in their possession.

The scale is a little bit different from one page to the next. Nevertheless, Mr. Stickle, I appreciate it. I have been since the beginning sort of perhaps obsessively trying to make it so that the revenue doesn't go negative in 2028. To 2032. It looks like we have achieved that.

And I'll say that the last time we had this discussion, you stated that this, this chart does not take into account the corporate income taxes from entities that are not directly involved in the AKLNG project from whom we would receive revenue in 2028 through 2032, uh, 2031, and perhaps fully make this non-negative. Is that still the case with this graph that other taxpayers not directly connected to the project are not included? Senator Dunbar, through the Chair, that is correct. So we estimated a range of $0 to $100 million per year of potential in any given year of potential revenue for upstream operators not currently subject to corporate income tax. And that's not included in this.

These corporate income tax numbers do represent the portion of upstream property tax associated with AKLNG-induced development. Understood. Thank you. Yes, that would be a potential increment of between $0 and $100 million per year on top of these numbers. Very good.

Thank you. Thank you, Madam Chair. Senator Myers. Yeah, thank you, Madam Chair. Mr. Sickel, you brought up the, um, the AVT expiring and going back to current law property taxes, but I'm trying to interpret that on your graph because it looks like current law— it looks like property taxes, which I believe is the dark blue bars on the bottom, um, once you hit 2033, they're basically the same all the way out.

So what, what am I missing here? Sure, Senator Myers to the Chair. So if you look very closely, there is actually a little bit of a bump up there in 2041.

So we have— it's a small bump up, but there is a little bit of a bump up when we go from AVT to property tax. Okay. Follow-up, Senator Myers. Yeah, if you don't have this number with you right now, this is fine. If you could respond in writing.

I'm just curious if the difference is that small, I'd be curious to see what those numbers were. And again, going back to the possibility of a lawsuit, I would just kind of question if, you know, not only question if it's worth it, because, you know, we're not only changing the rate, but we're changing tax form. You know, what we talked about with regard to Texas and Louisiana, you know, they put in a was it a 10 or 15-year tax break that sunsetted out, which is fine, but we're not just changing our tax rate, we're also changing our tax form in part because we're trying to avoid lawsuits in which, you know, in the long run nobody really wins. So I'd be curious to see what that dollar figure difference is. Sure.

And Senator Myers to the Chair. So one One point, um, in the modeling, the dollar numbers are fairly similar. The alternative volumetric tax does have an inflation assumption, so that would be assumed to increase annually over time. Our property tax assumptions are based on our assumed capital cost for the project and an assumption that inflation and depreciation will roughly balance out over time. Mm-hmm.

So depending on inflation and depreciation and ultimately capital cost and value of the project, there is a range of uncertainty around the property tax revenues once we get out a decade or more. And that's a significant uncertainty to the project. A lot more certainty around the value of the alternative volumetric tax. So that's just a little bit of color on that comparison. We'd be happy to provide the numbers in writing to the committee.

I think my lifeline would actually have those available if you'd like them now. Yeah, that'd be great if he knows them. Sure. Owen Stevens is online and so is David Herbert. Who would be the person to touch base with, Mr. Stickle?

I think—. Either one? Either of them. All right. So, Mr. Stevens, Mr. Herbert, whoever would like to reply to Senator Myers, he can repeat his question too if you didn't quite catch it.

Um, yeah, thank you. Owen Stevens for the record. Um, let me just, uh, pull up those information now. Um, so we're looking at the, uh, the question, if you can confirm, um, the question is the comparison between, uh, property taxes, the state, as we go across, as we change, um, from AVT to property tax. So the total state property tax that we see in nominal dollars in 2040, we list $213 million, and then $242 million in 2041.

But the key change there is that there's also a change in the proportions of the— that's ABT or property tax revenue, there's a change in proportions that go from, um, go from the, um, the state and the— sorry, the split between the state and municipalities. Um, so, and so there's a larger increase, um, in the municipality revenue. So you're seeing from 2040 to 2041, you're seeing an increase for the municipalities in total of $352 million to $498 million.

Any follow-ups, Senator Myers? Not right now, thank you. All right. Thank you, Mr. Stevens. Sure.

Further questions? All right, seeing none. Thank you. Again, Dan Steckel for the record, and that was actually a good A good point that Owen made, just a caveat, that these are the state revenues only. And so this is separate from the municipal revenues, and that's also an important aspect to keep in mind when thinking about that repealer, is we're repealing for both the state and the municipal.

Yes.

So moving on to slide 34, these are the heat map, so-called heat map charts. That we've been producing. This first chart shows the in-state gas breakeven price at a range of purchased gas prices from the North Slope producers. Again, our baseline assumption is $1.50 per thousand cubic feet, and then we show a range of different prices ranging from $1 to $5 for purchase price. Our base capital assumption is $46.2 billion, and we show a range of potentially higher capital cost assumptions, and what would that, what would that breakeven in-state cost of supply be assuming the full project goes forward and the producer or the midstream developer is targeting a 10% internal rate of return on their investment over a 20-year time horizon?

And so that breakeven cost, again, $4.86 per 1,000 cubic feet under current law, and $4.78, so 8 cents less, under this version of the bill.

All right, I see no questions. Slide 35, being that same sensitivity analysis, For delivered LNG into the global market, this is the key chart to look at in terms of competitiveness of the project. So under current law, $9.07 per 1,000 cubic feet would be that breakeven delivered price into the market with the range around that. That would've dropped to $8.48 under the version of SB 280 introduced by the governor. And that would be $8.97 under Version L. So a $0.10 per 1,000 cubic feet reduction from current law for breakeven LNG price.

Questions? Seeing none. All right. And then slide 36, it's our usual conclusion slide. So significant project for— with revenue to the state and governments and additional economic impacts as well.

This version of the bill would result in a tax decrease overall to the midstream, would be a tax increase overall to the upstream.

And once again, with the gas tax or gas rate caps in place for in-state sales, an in-state only line would not make sense under this bill for the developer. So it's really that all or nothing proposition under this version. Person at the bell. Very good. Questions?

Seeing none, thank you very much, Mr. Sickel. All right. And thanks for preparing this so quickly. Sure. And then just one note.

We did include an appendix. I'd be happy to go through it or leave it to the committee. Sure. I'm sorry to do this. What the appendix was is we looked at what what those metrics would look like if we did not sunset the alternative volumetric tax, which is to the question from Senator Myers, and so we've provided that information.

Gotcha. On that note, Madam Chair. Yes, Senator Myers. Thank you, Madam Chair. Mr. Stickell, I'm comparing slide 33 to slide 40.

I think I've got the right ones here.

It actually looks like if we don't sunset the AVT, we actually make more in the long run. Is that what I'm reading right? Senator Myers to the Chair, so under— if we don't sunset the AVT, we assume that there would be a 2.5% annual inflation to that value. And so that would inflate into the future, whereas under the property tax, we assume a stable property tax value. So yes, we end up making more revenue under the AVT.

Under all of the assumptions of the project. Again, the project cost being a key assumption there and what the assessed value of the project would be. Okay, thank you. And the many billions to the municipalities. And yes, and again, to Senator Drummond-Baugh through the chair, that's correct.

So this is just the state revenue portion. It does not look at the municipal revenue portion.

Very good. Thank you.

All right. Any other questions or comments from committee members related to version L?

All right. Seeing none, that concludes our agenda for today. So we will adjourn until tomorrow morning at 9:00 a.m. when again for the 31st time we will address Senate Bill 280. So we will adjourn at this time. Let the record reflect the time is 4:38 PM.