ANCHORAGE, Alaska (KTUU) – Alaska’s legislative session will be ‘dominated’ by debates over whether to guarantee billions in taxpayer-backed incentives for a liquified natural gas pipeline, House Speaker Bryce Edgmon told Alaska’s News Source Tuesday, saying lawmakers still need critical details from developers before making a decision that could transform the state’s economy or saddle residents with massive debt.
“You’re asking all the same questions that I think we in the legislature are asking,” House Speaker Bryce Edgmon, NA-Dillingham, said when asked if the state can financially afford risking revenue on the project under a continually-constricting budget.
The $50 billion Alaska LNG project, according to numbers estimated by GaffneyCline, a state-contracted energy consulting firm, requires state support to move forward. Among a laundry list of asks, the consulting group says Alaska may need to promise investors if future tax increases or regulatory changes hurt their profits, taxpayers will cover the losses.
“It’s going to take significant time to get a related piece of legislation through the legislature,” Edgmon said.
Time is critical, the speaker added, because legislation of this nature won’t be speedy and could take an entire session – if not two.
“Ordinarily, a bill of this nature could take two sessions and not one, but if, in fact, the AKLNG project is at a stage where things need to move pretty quickly, … any advance time, any sort of extra opportunity to work on this issue before we get to Juneau would be a great help,” Edgmon said.
A spokesperson for Glenfarne, the majority owner and lead developer of the project, said they are active in providing information to the state legislature.
“Glenfarne is making rapid progress on Alaska LNG and regularly meets with legislators to provide updates and discuss important state and local policy considerations,” Glenfarne communications director, Tim Fitzpatrick, said in an email Wednesday. “We appreciate the legislature’s continued engagement to help make Alaska LNG a success for the state.”
Legislative Budget and Audit Committee members understand the high stakes, which is soon to become a reality after GaffneyCline suggested policies the state may need to adopt in January.
“If it’s unsuccessful, it could be detrimental for generations,” warned Sen. Bert Stedman, R-Sitka and Senate Finance Committee Co-Chair.
“There is a good reason to be cautiously optimistic about the outcomes of the gas line,” Rep. Cathy Tilton, R-Wasilla, told Alaska’s News Source on Tuesday.
“I think the legislature needs to keep open communications with all the parties involved and with the governor as well to know what it is that we need to put forward so that we can do that quickly,” Tilton added.
Nick Fulford, GaffneyCline senior director and global head of gas & LNG, laid out what the energy consulting group believes needs to be placed down by the legislature to make the pipeline happen – requests worth billions in property tax breaks for investors.
When Edgmon asked if legislation would be a key component, Glenfarne Alaska LNG president Adam Prestidge, said it would be “a very important part of the legislative agenda.” Glenfarne would not comment on whether specific policies were being pursued.
Property tax changes
Alaska’s property tax poses the biggest financial burden to the project, GaffneyCline says. The estimated $50 billion construction cost would trigger $1 billion in property taxes in the first year alone.
“Because you’re bringing stakeholders into the picture who have a vested interest in what’s happening at the property tax level, they want to know what the impact is going to be on their local communities, their local taxing jurisdictions and so forth,” Edgmon said.
Early-stage taxes hit the project hardest because of the massive upfront costs and long development timeline, according to the GaffneyCline presentation.
“Due to the capital and time required to develop the pipeline and facilities, taxes and duties that are implemented at early stages of the project can have a disproportionately adverse effect on the economic value and returns,” the energy consulting group’s presentation reads.
Other states have provided massive tax breaks to attract LNG projects. Louisiana has provided property tax abatements worth $4.9 billion to Sabine Pass, $3.7 billion to Cameron LNG and $2.9 billion to Calcasieu Pass.
Taxpayer Guarantees
The developers also want what’s called “fiscal stability,” according to the GaffneyCline presentation to lawmakers.
In plain terms, they said this would mean if Alaska raises taxes on the project later, or imposes new environmental regulations that costs money, the state would compensate investors to maintain their original profit expectations.
Those guarantees can mean a “tax freeze,” or freezing the tax system for the project’s life, according to GaffneyCline. If changes are made, “the government makes other beneficial adjustments or otherwise compensates investors to retain the original economic impact.”
“Will the project even come unless we present the right scenario?” asked House Majority Leader Chuck Kopp, R-Anchorage. “You mentioned the buyers want 20–30 years of stability … our fiscal framework might be a little bit out of alignment, if I’m hearing you correctly.
“If those things are all true, our needs, our situation, us being out of alignment, we’re going to have to look at possibly a reality that this line doesn’t even get [built.]”
Fulford said it may be opportunistic for the state to start from the ground up.
“One way the state can approach this is to start with a clean sheet of paper, and evaluate all these different features, including affordable energy for the state, and design a framework which is fit for purpose, and creates that equitable split between the product developers and the state,” Fulford said.
Edgmon said Tuesday the discussion on fiscal stability should be one up for debate.
“I think we’d definitely be willing to take a look at it, but the devil clearly is in the details and it’s really hard to respond to any sort of specific questions without having the legislation in front of us,” he said.
Timeline pressure
Lawmakers face intense time pressure to act before the project’s final investment decision, known as a FID.
“Unless the Governor, God forbid, held us into a special session on December 17th or 19th, we won’t have the kind of time in a 24-hour day to entertain these sorts of issues before (final investment decision),” Rep. Andy Josephson, D-Anchorage, said during the meeting.
The project is nearing the end of federal permitting approvals. As of publication, the project awaits just one final environmental permit, expected by December, according to the Permitting Council.
A source familiar with the pipeline developments said to expect an FID early next year.
If the governor calls a special session, the legislature must receive 30-days’ notice (with certain exceptions for disasters, according to the Alaska statute).
However, if the legislature calls a special session, requiring two-thirds of all lawmakers to vote for one, the body can choose when to convene.
Edgmon said there are currently no plans for a special session.
“If there is legislation related to the Alaska LNG project or a special session we will make an announcement,” governor spokesperson Jeff Turner said in an email Tuesday. “Keep in mind that legislation sponsored by the governor can’t be pre-filed. It would be released on the first day of the session.”
The governor held a special session in August with plans to pass an education reform package of bills and create a Department of Agriculture. That session resulted in those bills being sent to committee and an override in the governor’s line-item veto of $51 million in education funding.
Federal Support and Market Conditions
GaffneyCline also suggests, “tariff setting for gas supplies to Southcentral and the Interior” be established.
The onus for tariffs, however, falls not on the state legislature, but the U.S. Congress.
Sen. Dan Sullivan, R-Alaska, believes that while there are no guarantees for the pipeline, he was optimistic for it’s potential.
“I tell people, ‘Hey, it’s not there yet, but I’ve never seen more momentum,’” Sullivan told Alaska’s News Source Monday. “I’ve never seen a federal government from President Trump on down who are trying to make it happen … if we get this done, think about it, low-cost energy for 50 to 100 years, we could do anything.
National momentum
As momentum keeps moving for a pipeline in Alaska, both LNG supply and demand are expected to boom globally, according to GaffneyCline’s presentation. Liquefaction, or the process of turning gas into liquid, is expected to increase by 42% by 2030, reaching about 594 million tons per year, the presentation showed. So too is demand expected to rise, growing by 56% by 2035, though the report does not say exactly how much LNG that would mean.
In the summer, Gov. Mike Dunleavy, R-Alaska, vetoed several bills and cut more than $100 million from the state budget, largely due to reduced state revenues from oil price declines.
“The oil situation has deteriorated,” Dunleavy said in a video statement before his budget was revealed. “The price of oil has gone down; therefore, our revenue is going down.
“Basically, we don’t have enough money to pay for all of our obligations. So, as a result of that, you’re going to see some reductions in this year’s budget.”
The pipeline project has support from both the state and federal levels. President Donald Trump has pledged to ensure an LNG project gets built “to provide affordable energy to Alaska and allies all over the world.”
On Jan. 20, Trump signed the “Unleashing Alaska’s Extraordinary Resource Potential” executive order, which the administration says prioritizes “the development of Alaska’s liquefied natural gas (LNG) potential, including the sale and transportation of Alaskan LNG to other regions of the United States and allied nations within the Pacific region.”
Despite the optimistic timeline, Alaska has seen multiple LNG pipeline proposals fail over the past two decades due to financing challenges, regulatory delays and market conditions.
Environmental groups and some Alaska Native groups have also raised concerns about the pipeline’s potential impact on wildlife and traditional lands.
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