Senators, from left, Bill Wielechowski, Cathy Giessel, Gary Stevens and Bert Stedman respond to questions after the governor’s State of the State speech in Juneau on Jan. 22, 2026. (Marc Lester / ADN)

The Alaska Senate Resources Committee on Monday significantly revised Gov. Mike Dunleavy’s proposed property tax cut for the Alaska LNG megaproject with a new bill designed to raise much more revenue for the state and local communities.

The governor’s office, in a statement Tuesday, said the measure could endanger the project, preventing Alaskans from receiving numerous benefits including lower energy costs and new economic opportunities.

The wide-ranging substitute approved by the committee in a 5-2 vote would keep the property tax elimination proposed by Dunleavy.

But it would add an $800 million community impact fee at the start of the project, associated with the construction of the cross-Alaska pipeline that would deliver natural gas from the North Slope.

The substitute also would sharply increase the volume-based tax proposed by Dunleavy to replace the property tax, to $610 million annually at full project operation — up from about $75 million annually — based on amounts of gas-flow through the pipe.

The new, larger figure is based on a similar amount proposed about a decade ago for an earlier version of the project to ensure local communities had enough revenue to meet their needs, Sen. Cathy Giessel, chair of the Senate Resources committee and a supporter of the substitute bill, said in a hearing Tuesday. That version of the project died after the oil companies that owned much of it backed out, calling it uneconomic during a period of low gas prices.

The current project’s “impact on Alaskans, and the cost to Alaskans, has to be taken into account,” Giessel, an Anchorage Republican, said in a hearing Tuesday.

Proponents say the substitute bill also would ensure that companies involved in oil and gas transport and production pay a tax on income, helping address a gap in the state’s corporate income tax that favors some companies in the industry, such as Hilcorp, a producer that could supply gas to the project. That tax would start at $1 million of taxable income and peak out at 9.4% for $5 million or more.

The new measure would also require more disclosure from the project developer, majority owner Glenfarne and its partner, the state’s Alaska Gasline Development Corp.

It would also cap the cost of in-state gas from the project, a move intended to establish protections for utility customers.

‘No pipeline, no jobs, and no new revenue’

Dunleavy has argued that his bill will help enable construction, resulting in $26 billion for state and local taxes and royalty revenue over 30 years, even with the property tax replaced with the smaller volumetric tax.

But lawmakers and borough mayors have raised concerns that the governor’s proposal will not produce enough income for communities that will face extra expenses as an influx of workers adds costs for road maintenance, schools, housing and emergency services as the pipeline and other massive facilities are built.

Jeff Turner, spokesperson for Dunleavy, said in a statement Tuesday that the governor’s bill was designed to remove the “burdensome” property tax that the Legislature’s consultant, GaffneyCline, has said could be a big up-front hurdle for the project, and replace it with the volumetric tax.

The governor’s bill “ensures the state receives revenue once gas is flowing and can save Alaskan households an average of $1,450 per year in energy costs” versus anticipated costs for imported gas, Turner said, citing Department of Revenue estimates covering 30 years.

“The Senate Resources version puts the entire project at risk by dramatically increasing the cost of the project,” Turner said. “That means higher energy costs, no pipeline, no jobs, and no new revenue for Alaska.”

“The reality is simple,” he said. “Without meaningful tax restructuring, this project will not move forward.”

“Governor Dunleavy urges the Senate to work with his administration to return this bill to a form that keeps Alaska competitive, protects our future, and ensures this critical project becomes a reality,” Turner said.

‘Maximum benefit’ for Alaskans

Giessel voted for the substitute with Democrats Bill Wielechowski, Forrest Dunbar and Matt Claman from Anchorage and Scott Kawasaki from Fairbanks.

Republicans Robert Myers of North Pole and George Rauscher of Sutton voted against it.

Wielechowski said Monday that the increased revenue proposed in the substitute is designed to meet the state constitutional requirement of “maximum benefit” for Alaskans when resources are developed.

He said the bill is expected to be amended as it moves through the Legislature.

Myers said the substitute bill straps the project with excessive oversight and much higher costs.

“This just feels like we’re doing everything we can to make sure we do not get a gas line built,” he said in an interview Monday.

Without a gas line, the state could lose an opportunity to support new industries or projects such as large mining endeavors, he said.

The state will also miss the opportunity to add gas production to the oil production that has long existed on the North Slope, he said.

“We talk all the time about diversifying our economy, and this is one way in which we can actually accomplish it,” he said.

Glenfarne: Substitute could cause delays

Dunleavy introduced his bill in March.

The Resources Committees in both the Senate and House have spent weeks reviewing its potential impacts.

The money produced by the governor’s proposed volumetric tax amounted to a 90% reduction in the property taxes the project could potentially generate under existing state law.

That could save the project close to $1 billion annually in up-front costs.

The project’s first phase would transport natural gas from the North Slope to Southcentral Alaska for in-state use starting in 2029, after the nearly 800-mile pipeline gets built.

Phase two would also add exports of liquefied natural gas overseas to Asian buyers starting in 2031, from an LNG plant and terminal that would be built in Nikiski.

The project is estimated to cost $46 billion, based on figures that are many years old.

The substitute also:

• Prevents gas lease expenditure deductions against oil production taxes, addressing lawmakers’ concerns that the megaproject’s high costs could severely reduce a key state revenue.

• Sets a maximum price for the gas sold to utilities in Alaska, at $12 per thousand cubic feet in phase 1 — a bit higher than existing costs for locally produced gas, though those costs are rising — and $5 per thousand cubic feet in phase 2.

• Prevents the state gas line agency from increasing rates on utility customers to cover cost overruns.

• Requires the state gas line agency to pursue a spur line off the main pipeline to deliver gas to Fairbanks.

• Increases ability for lawmakers to acquire confidential information about the project without signing non-disclosure agreements.

• Sets requirements on the state gas line corporation for using in-state contractors and suppliers in the project’s development.

Glenfarne said in a statement Tuesday that the substitute, if approved, would slow development.

“If adopted, these changes will ultimately raise the cost of energy for Alaskans and could indefinitely delay the delivery of North Slope gas at a time when Alaska is facing a major energy shortage without a viable plan B,” Glenfarne said.

Governor Mike Dunleavy and Brendan Duval, CEO and founder of Glenfarne Group LLC, talked about construction of an Alaska LNG pipeline during the Alaska Sustainable Energy Conference at the Dena’ina Center in Anchorage on Thursday, June 5, 2025. (Bill Roth / ADN) US energy secretary: ‘Our team is on it’

Alaska LNG has received strong support from President Donald Trump, who on Monday issued an executive action invoking the Defense Production Act to advance development of LNG projects.

Energy Secretary Chris Wright told U.S. Sen. Lisa Murkowski in a hearing Tuesday that Alaska LNG is the administration’s “number one” priority for energy infrastructure.

Wright said it’s a “multi-generational” project that can deliver gas to Asian countries without traveling through a chokepoint like the Strait of Hormuz, where energy shipments have been disrupted following the U.S. war with Iran.

Wright also said Alaska LNG has “proven tricky.”

“I wish we were up there right now breaking ground,” he said. “The problem is the pipeline is hard to finance, and you have to build the pipeline first.”

“The LNG export terminal is not hard to finance, but we can’t finance that without financing the pipeline,” he said. “So, we are just working every avenue we can, and a growing amount of our team is on it.”

“It’s important for our country and critical for Alaska,” he said.