Alaska Legislature: MSC2-20260716-0800

I call this meeting of the Conference Committee for House Bill 381 to order. The time is 8:07 AM on Thursday, July 16th, 2026. Good morning, everyone. Present today in the Senate, we have Chair Hoffman, Senator Steadman, and Senator Cronk. And in the House, Speaker Edgeman, Representative Ruffridge, and myself, Chair Schraggy.

Today, the conference committee will consider a new committee substitute for House Bill 381 to use as our working document. Accordingly, I move that the conference committee adopt work draft 34-GH2038/e as the working document for HB 381 and ask for an objection for the purposes of an explanation of changes. Senator Hoffman. Mr. Chairman, I object for purposes of discussion. Thank you, Senator Hoffman.

The committee will now walk through the explanation of changes. I want to note that all drafting decisions adhere to conventions of limited free powers, and we have a memo from legislative legal to that effect. I also want to emphasize that this draft reflects extensive input from the administration, AGDC, and the project developer to ultimately arrive at what I believe is a strong and balanced work product. With that, I will now invite Eric Gunderson, my Chief of Staff, and Pete Eklund, staff to Senator Hoffman, up to the table to walk us through the explanation of changes.

Gentlemen, when you're ready, please put yourselves on the record and begin with your walkthrough.

Thank you, Chair Schraggy. For the record, this is Eric Anderson, staff to Chair Schraggy. Um, good morning, members of the committee. Today I will provide a brief overview of the summary of changes between the previous work draft version Q and the new work draft version E. I'll note that available for questions we have Emily Nauman and Megan Wallace with Legislative Legal as well as Legislative Finance. In committee members' packets today, there are various documents including the Conference Committee Substitute 2, Version E, a redline comparison between the previous Version Q and Version E, a summary of changes between the two versions, a sectional analysis for the current Version E, as well as a legal memo affirming the Conference Committee Substitute is within the powers of limited free conference.

I'll now move on to the changes. In Section 11, the CS amends subsection J6 to specify that a confidentiality agreement may make information provided for investment decisions related to an equity option in the revenue-generating project confidential after the expiration of the option if that option expires or is not exercised. This clarifies that the information related to the state making an investment decision is only available during that period unless the state becomes an investor.

In Section 14, the CS amends subsection G to specify that investment information needed for the state to act as a prudent investor in evaluating the state's option to acquire an interest in a revenue-generating project must be provided if requested by the legislature to the Commissioner of Revenue. That information shall include necessary confidential or commercially sensitive information. Further specifies that the information provided to the commissioner is not a public record. This information, upon request by the legislature, shall be provided to the legislature and allows the corporation to redact information that is financially or commercially sensitive. And Mr. Gunderson, there's been a request that you note the page, uh, that that change can be found on, if possible, please.

Happy to. Um, that in the red line would be pages 15 through 16. Thank you.

Um, in this section, there is also a technical change in subsection G in G4, replacing any other entity participating in a revenue-generating project with the project developer of the revenue-generating project. This change came as a recommendation from AGDC based on concerns that the previous language was very broad and could inadvertently capture potentially project investors. In Section 19, this would be page 20 and 21 in the red line, um, the CS adds new subsection I extending the allowable use of reasonable redactions estimated ranges, summaries, or status indicators to protect confidential or financially or commercially sensitive information to the information required to be published on the dashboard as well as the biannual reports to the legislature. This largely replaces the language in the previous Section F and adds financially sensitive information to the allowable redactions.

Moving on to Section 20, this would be pages 22 in the red line. Um, in this section, the CS amends Section 3125 requiring that the full legal name of each party to the transaction regarding foreign ownership changes be included and allows the corporation to redact confidential or commercially or financially sensitive information in the notices or declarations. In this section, there is an additional technical change replacing requiring with resulting in. This is to also capture optional filings with the Department of Treasury. The CS also adds— amends subsection 2, clarifying the definition of a subsidiary of the corporation to include subsidiaries directly or indirectly owned by the corporation.

This protects the state in the event that equity option for AGDC is depleted and ensures we continue to have access to this information. In Section 21, this would be page 23 in the red line, there is a technical and conforming change to the definition of project developer, adding unless context requires otherwise. This relates to a change in Section 14. In Section 23, this would be page 24 25 of the red line. Um, the CS amends Section 4205338, um, C2 by adjusting the definition of cost overrun to include the construction budget agreed to at the initial closing of construction funding, replacing the previous cost estimate at the financial investment decision.

Um, this would provide more accurate cost estimate that would then be provided to RCA when approving gas supply supply contracts.

In Section 24, this would be page 27 in the red line, the CS amends Section 4320.019 to specify that the taxable income of a qualified entity shall be calculated as if the entity were a C corporation and allows them to apply credits or deductions against tax liability as if they were a C corporation. This also exempts income from Alaska liquefied natural gas project, and entity is exempt from federal income taxes. Um, the substantive change is exempting the AK LNG project. There are also a few largely technical changes suggested by alleged legal based on the presentation from the Department of Revenue.

Moving on to Section 34, this would be page 40 in the red line. The committee substitute amends the effective date for the qualified entity tax to take effect January 1, 2029. This was previously 2028, so this extends the effective date for this section to now 3 years. The CS also adds new subsection B establishing an informational tax tax return for the most recent completed tax year before January 1st, 2028, and clarifying that no tax is due under the informational tax return before January 1st, 2029. It specifies that the same penalties for a late return or failure to file a return apply to the informational return.

In Section 36, this would be page 41 in the red line, the ACS amends subsection A-1 to increase the amount paid to the state by the project developer within 60 days after financial final investment decision on Phase 1 from $40 million to $50 million. It adds language stating that it is the intent of the legislature that $10 million from this amount be appropriated to workforce development projects for the AK LNG project. This includes but is not limited to the Alaska Teamster Training Center, the Fairbanks Pipeline Training Center, the Instructional Service Center in Kenai, and the Alaska Vo— Tech— Vocational Technical Center. It also amends subsection A.2 to clarify that the project developer has committed to require contractors to enter into project labor agreements for Phase 1. This largely conforms with changes made in the previous version for Phase 2.

And specifies that this requirement applies to works performed in Alaska. In subsection A.2.B., there is a change to clarify that the project labor agreement required for Phase 2 applies to construction of Phase 2 of the natural gas project.

Um, the CS also amends subsection 4 to specify that the equity option available to the state municipalities if exercised, would be through investment in the Alaska Gas Line Development Corporation's holding— holdings. This is largely clarifying language and how the options would be executed, and that would be on page 41 of the redline. Moving on to the final change in Section 38, this would be at the very end of the redline on page 44. It amends the effective date for the qualified entity tax from January 1, 2028 to January 1, 2029. Thank you, Mr. Gunderson.

Appreciate the explanation of changes. With that, Senator Hoffman, you had the objection. Mr. Chairman, I remove my objection. Thank you, Senator Hoffman. Are there additional objections from members of the committee?

I'll object. All right. Representative Ruffridge, would you like to speak? Speak to your objection. Yes, thank you, Mr.

Chair. Just a couple of questions on some of the changes that are made in this work draft. First one is found on page 27 of the red line, line 26. There's a phrase here: income of an Alaska liquefied natural gas project as defined in AS 3125.390 is, I guess, exempted from the provisions of this proposed new income tax. I'm wondering how we define income of an Alaska liquefied natural gas project, and would that include sales of natural gas from producers into, into the gas pipeline proposal?

Thank you, Representative Ruffridge. I believe that would be best addressed by Legislative Legal Services Director Emily Nelman. Ms. Nelman, are you available to speak to Representative Ruffridge's question?

Yes, for the record, this is Legislative Legal Services, and, um, through the chair to Representative Ruffridge, the term is not further defined, so it would be up to the Department of Revenue to determine the scope of that exemption, but it's my understanding that it is intended to exempt from the income tax, any income related to the AK LNG project. Follow-up, Representative Ruffridge. Uh, thank you, uh, Chair Sharagi. So that in essence, uh, this is something that we would define later and could potentially include, uh, the income generated from, uh, sales of natural gas for the purposes of transporting gas through a gas treatment plant all the way down to Tidewater, because that would be part of the natural gas project. Director Nelman.

Again, for the record, Emily Nelman, Legislative Legal Services, through the Chair.

I believe that would be correct. Department of Revenue certainly would have a better handle on how that this section would be applied in that instance. I would also just circle back around to note the fact that this section of law is an Alaska entity tax. So, to the extent that— you know what, scratch that, never mind. That point wasn't particularly helpful.

The last point wasn't particularly helpful, I'm sorry. But I think yes, the answer to your question would be yes, the Department of Revenue would be the best source of interpreting this exemption. Representative Ruffridge. Mr. Chair, do we have Department of Revenue available to ask that question to?

We do not. Is it possible to obtain them today? That would require an add ease. Possible by the end of the meeting. Let's take that up at a later time.

Thank you, Mr. Chair.

Additional questions, Representative Rufford? Still me? Yes, I believe so. Okay. I think my second question is on the applicability on the redline version.

This is page 40, lines 14 through 26.

This might actually be a question for the Department of Revenue as well. I was wondering if there is other entities that we require to file a one-time informational tax return with the department, and if that's, if that's something that the state has requested businesses to do prior to this language in this bill.

Thank you for the question, Representative Ruffridge. That would likely be best addressed by the Department of Department of Revenue. I do not believe that this has been done in the past, to answer your second part of your question.

Okay. And then I think I might have a third question, Mr. Chair, for the Department of Revenue as well. That's back on page 27, lines 11 and 12. This is a new line in the red line that it is taxable income from a qualified entity shall be determined as if the qualified entity were taxable as a C corporation I'm wondering if that is— so we had this discussion in the last committee meeting where taxable as a C corporation under AS 432011.

432011 Has a completely different tax structure listed out than the one that we see here in Section 24. How do those two things live together if we're defining this thing as a thing that is different, but we're linking them together. I'm not certain how that works from a legal perspective. That might be a good question for Ledge Legal if they're online. Yes, Ledge Legal is still online.

Director Nowman, are you able to speak to that question?

Yeah, again, for the record, Emily Nowman, Legislative Legal Services. Through the Chair to Representative Ruffridge, I will circle back to this question. I did have one comment on your previous question about the informational tax return. I am aware of tax returns that are currently filed that have zero-dollar amounts. For instance, nonprofit corporations that are registered corporations in the state of Alaska still file a corporate income tax return even though they owe no taxes.

So there are other instances where Department of Revenue receives tax returns despite the fact that no tax is due. I don't know if that's helpful. Related to your question at hand, the intent of this section is to help guide these entities which do not otherwise keep quote-unquote "keep books" as C corporations, in other words as independent entities from their owners, to calculate their income as if they were a C corporation. So setting out the same income apportionment, deductions and credits as they would as if they were a C corporation under the existing Alaska laws which rely heavily on the federal income tax laws. It's not— the purpose of the section is not to apply the rates in 4320.011, and but rather to say that the net income to which the rate in of the section is applied should be calculated as if they're a C corporation paying taxes under that section.

The purpose of the section really is to wrap in the existing portions of 4320 so that these qualified entities are treated as if they are C corporations except for the alternative tax rate.

Thank you. Through the Chair, Director Nauman, so I appreciate the context for that, but this line 1 does not say any of that. It says that taxable income of the qualified entity will be determined essentially under AS 4320-011. That's how I read that. And then I think a second question sort of along with that is, I mean, a C corporation and a pass-through entity are entirely different from an accounting perspective.

Is this line essentially directing the companies that we're talking about in this current section to essentially keep two different Books. Director Nauman.

Director Nauman, are you possibly on mute or are you taking a moment to prepare for your response? Oh, sorry. Again, this is Emily Nauman, Legislative Legal Services. I think my line cut out for part of that question. I can answer the part of the question that I heard, which as I understand it through the Chair, Representative Breffridge, you were concerned that perhaps the language that the taxable income of the entity shall be determined as if the qualified entity were a C corporation was problematic.

I personally don't have those concerns. Again, it will be up to the Department of Revenue to interpret this section, and I would point out that That section is not related to the calculation of tax, which the tax amount is calculated under A, but rather it's the calculation of taxable income. So you're right that C corporations and these pass-through entities may keep their books differently because they're different types of entities and currently pay taxes under different tax structures under the federal government. This section is meant to direct these entities to essentially keep a separate set of books to determine their taxable income and their apportioned income and their deductions and credits as if they were its own freestanding entity. This may require some of these corporations or these pass-through entities to calculate income in a new way to meet the requirements of this tax.

Again, Department of Revenue will be the best ones to say whether or not they see problems with this language, but it was our best attempt to respond to some of the concerns that were expressed in the previous conference committee meeting about this language. Thank you. Representative Ruffridge. Yeah, one final question, I think, for the legal services until we can get Department of Revenue. But I guess in your experience, Director Nauman, this seems highly unusual to essentially direct companies doing business within the state of Alaska to function in their accounting department as a corporation that they are not.

So they would have to potentially hire a whole separate structure in order to I guess from a legal perspective, can you essentially direct a company to function like a type of corporation that they are not?

Director Nelmen. Through the chair, Representative Rafferty, you know, certainly there are all sorts of taxes all over the Alaska statutes which require businesses to calculate certain subsets of income, of income, to keep keep track of the number of fish that they catch, the number of cigarettes that they sell, etc. So this is not a novel concept in terms of the state directing entities to keep separate sets of books. Those entities are going to be the best source of information about how they currently keep those books, if they prefer to share that with the legislature or not. I would also, I guess, bigger picture remind the committee that This income tax only applies to oil and gas production and, and transportation entities making over $1 million a year.

So I would presume that whatever subset of entities we're capturing here probably, hopefully, already have some accounting departments that would be able to do these calculations. Again, I am not the best person to testify towards that, that would be the entities that would be put to the test.

Additional questions from committee members? Mr. Chairman? Speaker Edgeman. Could we have the staff sort of describe for the listening public the iterative process that got us here today in terms of our working relationship, maybe returning, you know, going from the micro now back up to the macro, how this bill, the language in the bill was derived, you know, the working relationship that the staff certainly had and how we got to this point where we have a bill that sort of attempts to reach in between the version that the House passed and the Senate passed and then come to some kind of a meeting of the minds, if you will, between all of that. Yes, thank you for that question, Speaker Edgeman.

Mr. Gunderson, are you able to speak to that? Sure. Um, through the chair, thank you for the question, Representative Edgeman. As you alluded to, this has been a very collaborative process. We've— on my end, we— our office has worked extremely closely with our colleagues in the Senate, as well as countless meetings with the developer, AGDC, the third floor, legislative legal.

We've made a lot of progress both trying to find a balance between the interests of the legislature and what's been included in the various iterations of the bill, as well as making sure those interests align with what can allow the project to move forward. Mr. Gunderson, is it true that we've put out work product, received feedback from those entities that you just described, put out work product, received feedback, and at each stage incorporated in a collaborative process, in a collaborative manner, that feedback? Through the Chair, that is correct. Thank you. Speaker Edgeman, additional follow-up?

Yes, Mr. Chairman, thanks for the indulgence. And the purpose of my question was one, to sort of lay out the process that actually took place and the collaboration that took place, but also to maybe help illustrate that the Conference Committee is doing work when it's in fact not meeting publicly. In fact, we've had our staff working quite diligently. I think, you know, our partners, AGDC and the Governor's Office, the developer itself has had to take time to digest, to present, to come back to us, to consider proposals that may or may not have been entertained. All of that took time in the background.

And I just wanted to make sure that anybody observing this, this morning is, you know, have a pretty good sense of just the amount of work that it took to get into this product. And, you know, is the bill in front of us perfect? Not by any stretch. I don't think to anyone's sort of, you know, sense of what could be in the bill or might not be in the bill. But I think it's a product that's, you know, is a vehicle that hopefully will get us there in the end.

And that was the goal, at least my personal goal as a member of this conference committee. And I just want to again underscore that a lot of work went into this that perhaps wasn't there for the public to see day in and day out. Yes, thank you, Speaker Edgeman. It has been a substantial undertaking for this committee. Additional— Senator Steadman.

Just for some added clarity, I think there was a lot of concern and indigestion dealing with the pass-through tax. That's the subject of the discussion here. And how the tax flows through the calculations, there's a lot of concern. It's not the same Subchapter S as a corporation and that the rate that's on the table, a 9.4%, is extremely high by some views. I particularly happen to have that view.

And how to deal with it. And one of the solutions that we talked about and the one that's in the bill here is a delayed effective date out to '29, tax year '29, and asking the impacted parties to submit hypothetical tax returns to the Department of Revenue so they can look through them, so they can get a good feel for, you know, what we're actually dealing with, and come back to the next legislature with cleanup language and I would expect a rate adjustment to something that would flow and be equitable to both the industry and the state and have a balance. So that is why we have this rather— or lightly used process of hypothetical.

Tax returns submitted, because it's really hard to know what we're dealing with until Department of Revenue gets the data, and they don't have it. So we don't have the ability to ask and get an accurate— well, we can ask, but we won't get an accurate fiscal note on what we're dealing with until that time frame moves on past us, which will be a couple years. So that's why it looks a little odd. But in my opinion, it's better to be careful and get it right with a delayed date than make a big mess. That's what we're trying to avoid.

Thank you, Senator Stebbins. Representative Ruffridge. Mr. Chair, I respectfully disagree.

I think in my experience from any perspective, not just this legislature, but just watching how things work in the general rule of life. If we pass this language forward, if it's the intention to have a new legislature fix it and reduce a tax, I don't— I'm not certain I've really ever seen that be a possibility to reduce a tax at a future date. We're going to put in a tax rate that that I think many of us would already say is too high for a lot of reasons. We haven't reduced the corporate tax rate that we have now. Why would we reduce this one at a future date?

And I think that that brings really forward the question of, you know, this is not something that we heard it in committee before that is ready for prime time. You know, I think Speaker Edgeman talks about collaborative effort, and I mean, that is certainly a nice narrative to have, and there is obviously a lot of work that a lot of people have put forward to this bill, but collaborative it has not been. It has been essentially closed-door sessions, some work. This is— I saw this for the first time this morning.

So, I mean, we can call it collaborative, but this is certainly an effort that has been work done by a small subset of people. And I think we should be right to be concerned about this language that's in here, and we should be right to have questions about adopting language that we think that we have to go fix. It is not in our wheelhouse to fix things in the future, especially if it means a tax rate going down. I haven't seen it. Senator Stubman.

Like I said in my previous statement, some of us feel that the 9.4% tax is high, and apparently you're one of them, along with me. There's other colleagues of ours that have a different opinion, a completely different opinion, and we're trying to get a balance here.

And as far as us lowering our property— or excuse me, our tax rates, we've got a property tax reduction in front of us today, right now on the table. I can give you numerous examples when we've lowered oil taxes to the point where it was actually virtually negative to the state.

There's lots of those examples, so I'm highly confident that when the Department of Revenue gets data and comes back to the legislature in a year or two years out, that they're going to have specific recommendations to us to implement. It'll all be cleanup language, and I would not be a bit surprised if there's a rate reduction in it. That's, you know, Senator Steadman's opinion. Not everybody has that opinion, So we'll see how it plays out.

Thank you, Senator Steadman. Senator Hoffman. Thank you, Mr. Chairman.

I would have to say that there's been extensive work on the piece of legislation. The problem that this legislature is facing is that we are within a window. That has been explained time and time again.

People understand what's happening back in Washington, D.C.

The need for a long-term solution for gas for the rail belt is in play.

If we had more more time to deal with this most complex issue, I'm sure we could come up with the— with an adequate solution. The problem is that we are here in special session in a finite moment. Senator Steadman and I have spent numerous hours on previous pieces of legislation, months and months, in fact summers, on other attempts to try to get a gas line built.

We could— if we had the time to delve into this, I'm sure we could come up with something that would satisfy everyone at this table, the administration and the general public. But the fact of the matter is that because of the window, because of the circumstances that we are presented with, we have done what I believe is the, the best work product And acknowledging the shortcomings, it's not unheard of in crime bills, in many other pieces of legislation, that additional work is expected by the next legislature to address them, to have new eyes on it, and to make the necessary corrections. I think that for the most part, the intense work that has been performed by our legal department, by the administration, by the contractors, and specifically the interests of the State of Alaska are fairly represented in this particular piece of legislation. If it's the will not to pass a bill, that is not my option. The problem again, we are here in special session and as the Speaker said, we've done what we've been able to accomplish in this short window..

And although I'm not going to be here during the 35th Alaska Legislature, I expect that extensive additional work will be had. But again, we are faced with this window of opportunity. Our congressional delegation in Washington, D.C. has expressed that to us on many different occasions. So I'm here to support this particular piece of legislation and hopefully we get a work product. I've worked on numerous pieces of legislation in the past for gas lines and there always has been high expectations.

But I will say that I believe that this particular opportunity that we have before us is the best opportunity that I've seen in, in many, many years. So I'm here to support this particular piece of legislation with the understanding that additional work has to be made, but there are people up in the rail belt that are expecting a product. They are facing— it's not an issue that I believe that affects my region of the state, which has, I would say, some of the highest energy costs, multitudes of 2, 3, 4, and 5 times and even higher cost of energy. But that is something that needs to be addressed at a later time, and I'm here to support this particular piece of legislation. Thank you, Mr. Chairman.

Thank you, Senator Hoffman. Additional discussion from committee members?

Representative Ruffridge, do you maintain your objection? I do. All right. With that, I would like the clerk to please call the roll.

Please. Senator Steadman. I make a motion. Mr. Breyfus.

Back on the record at 8:44 AM. For the committee and for the public's information, we have a motion on the table currently to adopt the committee substitute as our working document. That motion is before us. There is an objection from Representative Ruffridge, and I'm asking the recorder to please call the roll at this time. Senator Steadman?

Yes. Senator Cronk? No. Senator Hoffman? Yes.

2 Yay, 1 nay. Representative Edgeman? Yes. Representative Ruffridge? No.

Chair Schraggi. Yes. 2 Yea, 1 nay. With 2 yeas in the Senate and 1 nay, as well as 2 yeas in the House and 1 nay, the work draft is adopted as our committee substitute. I will now ask for a motion to report the conference committee substitute out of committee.

Senator Hoffman, do I have a motion? Yes, Mr. Chairman. I move that the conference committee report out conference committee substitute for House Bill 381, work order 34-GH2038/e, Newman, dated July 14, 2026, with individual recommendations and attached previous fiscal notes, and authorize legislative legal to make the necessary technical and conforming changes. Is there an objection? I object.

Representative Rufford, would you like to speak to your objection? Mr. Chair, first of all, I thought potentially we would be able to hear from the Department of Revenue on some of those questions before moving out a bill that we did not have those answers to. Secondly, I actually would try to amend a few of these sections in here, and so I think motioning to move this bill from committee at this time would be not, not something that I would support.

And given that, I don't know, Mr. Chair, since we already have a motion on the table, potentially me making a motion to amend our work draft now that we've adopted it as our working document would be out of order. Is that correct? Senator Hoffman, would you like to withdraw your motion? Brief it is.

Brief it is.

Back on the record at 8:46 AM. Senator Hoffman. I do not withdraw my motion. In that case, yes, a motion to amend the committee substitute would be out of order. Thank you, Mr.

Chair. Is it possible, uh, before we move forward with this, to hear from the Department of Revenue? Brief it is.

Back on the record at 8:47 AM. Given that we have a tight timeline to wrap up this special session and floor schedule scheduled for today, I do not believe it's feasible to get Department of Revenue before this committee.

Mr. Chairman, Speaker Edgeman, I just want to say that the bill before us I think achieves the central goal of providing property tax relief on a liquefied natural gas project in a very remote, expensive area of the globe to do business.

But that property tax relief at the initial stages of a natural gas project where capital costs are very extensive and operational costs are certainly very extensive at the very beginning as well, that this bill achieves that underlying objective. I think it also attempts to address, and I say attempts to address because I agree with earlier comments by both Senator Steadman and Representative Ruffridge, that we're probably going to have to come back, I think as Senator Hoffman alluded to as well, and make additional adjustments to this bill. Because this, if there ever was an imperfect process for a bill of this magnitude, it is here and now. We got this bill in the midterm of this session and so on and so forth. We've all heard that narrative time and time again.

But in terms of meeting the objective of providing property tax relief that it takes for the developer to go out and get the financing, the partnerships, whatever it takes to get this thing into FID later on this year as the developer Senator Burr said at the very end of that table and told us repeatedly that that was their goal. I think this bill gets us there. Now, is there other areas of this bill that are tied to ratepayer protection or cost overruns or taxation or confidentiality or all the other provisions that we have put in this bill, you know, deserve a second look at it? I would argue yes, that is the case. There's timelines built in here that go out into time that provide the legislature that ability to come back and look at things.

And so for those reasons, I hope we can get this bill to each body, get the necessary support. Hopefully the Governor can agree to go along with the bill, and then we work in the future future with the developer who should have more information to provide to the legislature that at least from this conference standpoint we didn't have in its entirety right now. I don't think that is a stretching of reality in any way. So imperfect bill, imperfect process, imperfect everything else, but I think it's important to get this thing forward and achieve the underlying goal, which is to provide property tax relief so this project can attempt to move forward. Thank you, Speaker Edgeman.

It's my hope— or Senator Cronk, please. Thank you, Mr. Chair. I just want to say, um, I, I think the public does need to know that there's a lot of work behind the scenes that our staff do, whether it's this bill or other bills, that is— they don't see that work, right? And I know there's a lot of work that went into here.

And, um, for myself, I'm going to vote no, obviously, but I want explain why I'm going to vote no, because I, I, again, I just saw this and in my, you know, the, the people that I, I represent, you know, and lead, you know, the caucus haven't seen this. So they're asking, hey, can we at least, uh, have this, have it, have it in our hands, go through the bill, and hopefully we can make a decision based on that. So I just want to explain that, but I do appreciate all the work that, um, the staff has done, um, because there's a lot of work that went into getting where we're at. And again, nothing's perfect, but I appreciate that. Thank you, Senator Cronk.

I appreciate that. I will say, just to dovetail off of that, the amount of work that staff have put into this has been incredible. Just speaking for my staff, many very late evenings and up today at 4 AM, and that has been the case on many days. And so just appreciate your acknowledgment of the very hard work that has gone into this. And I very much respect your position and your vote that you expect to make.

For myself, I too want to see this committee substitute, this bill move forward. It is an imperfect piece of legislation. I think the entire process has been imperfect, whether we're talking about the actual development of the project. We've seen that be an iterative process where the plans have changed, the cost estimates have changed, and that's okay. We expect as we move through the process for us to learn more and to further refine what is before us.

And the important part is that we make continued progress. And I believe that's true for this legislation as well. My goal has been consistently through this process to try and facilitate good discussion between the stakeholders and come up with a product that, as I have said in the press before, Maybe no one is fully happy with and fully pleased with, but it is a compromise piece of legislation that ideally a majority of legislators in both bodies can support, and we can show the state and investors in this potential project that we do support the development of the Alaska Natural— liquefied natural gas line.

And I think that's what we're doing today. We're showing that we are willing to do the hard work to support this project, to make progress, and we very well will likely have to come back and further refine this proposal. But by moving this forward and hopefully passing it through the legislature, we're able to show that progress, show that we're willing to do that hard work and keep this project moving forward. And it's for those reasons that I'm pleased to support this. Have this bill to where it is today in front of our committee and with a motion to move it out.

Senator Steadman. I just, in retrospect, to kind of put this in scale, what we're talking about, a project that was discussed in around $10 billion is actually, by the time we got a little transparency on this, looking more like $17 to $18 billion for the in-state gas line. The property tax is already exempt for construction. This bill would address after first gas, and the property tax that's in place is 20 mils set in 1974. There'd be over $300 million in property tax paid, and the folks along the rail belt would have to pay that.

So there's that issue. But the bigger issue, no gas line is going to be built for 20 mills, $300-something million every year on First Gas when there's, you know, we don't have enough volume currently in the state to warrant the line as it exists. We have to double it, double our volume. So something has to give. I think if we're erring, we're erring on possibly maybe giving up a little too much.

But it's to the benefit of the Alaska citizens on that. So it's really not the end of the world in that regard. Someday we're going to have to deal with this 20 mil tax rate that was put in in 1974. But that's not today. So just to— and I'd like to also add, this does not get us a project.

Get a project. There's been a lot of marketing around the state that this is the, you know, the hinge that's going to open the door and we're going to get a project. That's complete marketing nonsense. It does not get this project economic. There's more hurdles that have to be crossed.

It's just a step in the direction. And I think that should be clear to all the Alaskans that this does not get us a project. It helps in that direction is all it does. And we have very few tools in the legislature to help, but this is one of them. So with that, Mr. Chairman, I'm going to support moving this document forward.

It's a compromise between both bodies and amongst the individuals that were tasked to put a document together. That would be broad enough to get support within both bodies. I just wanted to make that clarity, Mr. Chairman, about the magnitude of what we're dealing with here. It does not get us a project, but it's a step in the right direction. Thank you, Senator Steadman.

Representative Ruffridge. Thank you, Chair Sharagi. I want to say I agree very strongly with the last comments from Senator Steadman that this has been billed as the, the bill that either makes a pipeline be built or does not make a pipeline be built, and that just really is not true. This is one step in a very lengthy process. And I want to say from my perspective, there's a lot of issues within this conference committee document that make it to to where I don't believe that I can support it coming out of the committee today.

I think there's some additional work that needs to be done. I wish that that was something that we could have taken a little extra time today. Our session is not over until the 19th of July. We do have some days left. Not hearing from the Department of Revenue about a large-scale change to our income tax structure seems a little irresponsible and maybe premature.

Premature to rush forward on some of those things without taking some due diligence time, which is I think really the intent of many of us here as well as our staff, is to take those due diligence efforts and really we are going to be asked to make a decision on something that we frankly have all said at this table probably needs fixed.

That is an odd place for me to be. There's a few other items within this bill that I think are problematic and potentially need to be adjusted. The first one is found in Section 2, which is the required local contribution language. If we're going to be really frank with the public, with each other, the bill that is sitting before us actually mirrors very closely with a a few changes at the request of the developer from language that had to deal with AGDC and all those things. But it mirrors very strongly the bill that passed on the Senate floor and frankly was not concurred with.

That's the reason we're here. And we haven't really made too many changes, and now we're going to ask for the folks that initially senators who initially had not supported that to now support it. I'm confused as to how we're going to expect a different result. But one of the big changes that was made on the Senate floor was a sunset of the required local contribution language. This committee removed that, in effect saying that both the House and the Senate agreed that required local contributions should not be a thing touched by this bill.

And then we decided as a conference committee apparently, if we move this forward, that no, we'd rather, we'd rather affect required local contribution. And, and, uh, it— that, that seems targeted. It seems targeted to very specifically affect only 2 communities in the state. That seems like a mistake, and, and that's something that should be addressed. Mr.

Chair, I think the language about a new income tax without a significant an effort from the Department of Revenue to understand how this would work and move forward is also— puts, I think, the entire thing in some sort of a risk category. And the risk, Mr. Chair, I think is that if we move this thing forward, we're going to put uncertainty not only to the gas line project, which gas line project already lives in a world of uncertainty. Now we're going to provide a world of uncertainty to the producers of the natural gas to go into the gas pipeline. That's what I heard from Director Nauman.

And then we're also going to potentially put that same uncertainty to providers of natural gas throughout the state. That is a concern to me as well. We, we have an issue in front of us that we absolutely must address. The understanding of how this tax— income tax would function.. And we didn't want to take the time today to hear from the Department of Revenue about how that would function.

And that's a concern to me. I think there is an additional concern that links the start of the S corp tax to— and an income tax to a date certain. That is also a thing that I think many of the things in this bill— Speaker Edgeman spoke about this I think very well. Are very uncertain. There's nothing here— Senator Steadman said it as well— nothing in here that guarantees a pipeline to be built.

But we have guaranteed in this bill that we have a whole lot of work to do to try to implement a new income tax at some point in the future. We've essentially done the thing we've all said we don't do, which is bind the hands of a future legislature to do some sort of work. And finally, Mr. Chair, I think one of the things issues that we have not talked about at all in this committee. It's been a concern since this bill came out of the Senate Finance Committee.

Is, uh, Senator Steadman, I think, spoke about it quite well. The need for a property tax structure change in the state of Alaska, I think no one disagrees with. In order to have a pipeline built or any project of any nature that scales across the whole state, we, we would probably have to address our our property tax. But when we go into that and we address that in this bill, that's found on page 33, we initially say that on the commencement of commercial operations of the LNG plant, we're going to break out these AVT percentages. And we recognize that those percentages would naturally go to the places where the large infrastructure is located.

Which is, I think, the right thing to do. But what we do later on, on line 16 and line 18, is we double that AVT as we go through this project if it gets built. But those revenues do not go to the places where the property tax is being overrun by state law. It now is going to go to community assistance, and then in line 7, go to the state. The precedent we're setting here is not a good one.

It is saying that the state of Alaska can go into your municipality, exempt property taxes, and then take the tax for the state's own use.

We should think about that for a second. That's what this bill says. Municipalities— well, we'll give you a little bit at the start, But as this thing scales up, we're going to take the rest. I don't think that's how property tax has worked in the past. This seems novel to me, and we are potentially putting this forward as an option that we think is going to get support.

It's certainly not something I can support. I think it would be something that needs quite a bit of additional effort and work, and for those reasons I will not be be supporting that moving from committee today.

Additional discussion from committee members? Is the objection maintained? Yes. Would the recorder please call the roll? Oh, one moment.

We'll brief at ease, 9:03 AM.

Back on the record at 9:03 AM. Again, Just for those that are watching, to make sure there's clarity on what is being voted on, there's a motion before the conference committee to move the committee substitute that was just adopted a moment ago out of the conference committee to be forwarded to the floor. There's been an objection by Representative Ruffridge. He's maintained that objection. And with that, I'd like to ask the recorder to please call the roll.

Senator Cronk. No. Senator Steadman? Yes. Senator Hoffman?

Yes. 2 Yea, 1 nay. Representative Ruffridge? No. Representative Edgeman?

Yes. Chair Schraggi? Yes. 2 Yea, 1 nay. All right, from the Senate we have 2 yeas and 1 nay, and from the House we have 2 yeas in one name, meaning that Work Draft 34-GH2038/E is moved from committee.

We will take a brief at ease to allow members to sign the committee report. We're at ease.

Back on the record at 9:06 AM. Before we adjourn today, I want to again thank the committee members, Legislative Legal, especially Emily Nelmen and Megan Wallace, and all of the support staff for their work throughout this process. I also want to extend my appreciation to our legislative staff who have put in countless hours, including Eric Gunderson, Amanda Andemo, Caroline Hamp from my office, Pete Eklund from Senator Hoffman's office, Amarie Leelake from Speaker Edgman's office, Rose Foley from Senator Steadman's office, all of whom have put in an incredible amount work into this process. Additionally, I'd like to thank AGDC, particularly Matt Kissinger, for his consistent availability and input, along with the team at Glenfarm and the governor's office. While there's always a desire for more input, we've had extensive conversations with them and received considerable input throughout this process, which has been appreciated and helpful.

Uh, I am highly optimistic that this bill is going to show support for this project and set us up for success while still safeguarding the interests of the state. But we shall see what the ultimate fate of this bill is moving forward. For my part, this is the best work product that we were able to put forward, and I'm proud that we did accomplish this work product and get it to where it is today. So again, I want to thank committee members for all their input into this process and getting us here. With that, Senator Hoffman, do I have a motion?

Mr. Chairman, I move that the conference committee be adjourned. Not hearing any objection, the conference committee is adjourned at 9:08 AM. Thank you.