State senators are closely examining a House-passed bill offering tax cuts for a North Slope natural gas pipeline as they near Friday’s deadline to end a special session on the issue.
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Many of their concerns center on a theme: what’s at risk for Alaskans if things don’t go according to plan?
At a hearing on Tuesday, senators pressed executives with the Alaska Gasline Development Corp. and pipeline developer Glenfarne on what would happen if the project falls apart.
Glenfarne Alaska LNG President Adam Prestidge told lawmakers it was hard to imagine any scenario in which the state would be on the hook. The structure of the project, along with price controls included in the bill lawmakers are considering, mean only Glenfarne and investors who buy equity in the project would bear the risk of cost overruns or project failure, Prestidge said.
“If Glenfarne were to determine the project had failed, or if Glenfarne were to decide to abandon the project, we wouldn’t have any way to seek any recourse or any reimbursement for what we have done,” Prestidge said.
Glenfarne turned down a $50 million offer from the Alaska Industrial Development and Export Authority that would have paid for some development work if the project ultimately did not move forward, he added.
Alaska Gasline Development Corp. executive Matt Kissinger told senators the only way the state could be on the hook is if it forced Glenfarne out. The agency’s contract with Glenfarne requires the company to move the project forward, so it couldn’t simply sit on the rights and stall progress, Kissinger said.
“At a very basic level, we are obligated to not sit and do nothing,” Prestidge said.
Another key question on senators’ minds is just how big a tax cut is necessary to allow the project to move forward. One prominent Senate Democrat, Anchorage Sen. Bill Wielechowski, has repeatedly said he’s not convinced the project needs any tax reduction at all to move forward. Sen. Cathy Giessel, an Anchorage Republican, said she’d like to see the Legislature defer a decision until next year.
Sitka Republican Sen. Bert Stedman said he thinks there needs to be sometax relief to make the project viable. But so far, he said he hasn’t seen anything from Glenfarne showing how big that tax break needs to be.
The Department of Revenue told senators Monday the tax breaks currently under consideration represent an approximately 89% reduction from the property tax currently on the books — and a 96% cut for the first phase of the project, which would deliver gas from the North Slope to Southcentral Alaska for in-state use.
“There needs to be some concession or a change given to help the project get economically more viable,” Stedman said. “The challenge we have is measuring that. For what we put on the table, what’s the benefit?”
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Prestidge said he’d come back with answers soon.
But the clock is ticking: the 30-day special session has to end by Friday.
Senate President Gary Stevens, a Kodiak Republican, said it’s unclear when the bill will move to the Senate floor. He says some members of his caucus want to see changes before passing it back to the House for a concurrence vote. Meanwhile, senators are also expecting some veto override votes late this week, which further complicates the timeline, he said.
Sen. Robb Myers, a Fairbanks Republican in the minority caucus, said he’d like to see a small change to the bill that passed the House 34-5 on Friday — a tax break for a spur line that would connect Fairbanks to the main pipeline.
“If we apply current law taxes to that spur line, that adds approximately $1,000 per customer per year to our bills in Fairbanks,” he said. “If you want people to adopt natural gas, that’s not a way to do it.”
Myers said he expects the Senate to pass some form of a gas pipeline tax bill before the special session ends — though it remains to be seen what changes the Senate might make to the House’s bill.
“I’m hopeful. Kind of the conversation that I’m hearing around the building is, I think we’re going to get there,” Myers said. “We’ll see what it looks like.”
The clock is also ticking on Southcentral’s gas supply. The Department of Natural Resources told senators Tuesday that current forecasts show demand outstripping supply by the early 2030s, with suppliers forced to dip into storage as early as 2031. The forecasts do not account for Anchorage’s recent colder-than-average winter, Department of Natural Resources officials said.
Imported gas would likely cost more than gas from the pipeline, according to estimates from Southcentral’s gas utility, and both would be substantially more expensive than current rates of roughly $10 per 1,000 cubic feet.
Glenfarne reached a preliminary deal with utility Enstar to provide gas for an inflation-adjusted rate of $16 per million British thermal units, roughly equivalent to 960 cubic feet of gas. That’s the maximum price specified in House Bill 381, the bill lawmakers are considering.
Glenfarne also announced a preliminary deal with Anchorage’s Chugach Electric on Monday.
Gov. Mike Dunleavy said last month that if lawmakers didn’t pass an acceptable bill during this special session, he’d call them right back for another.
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