The Alaska Legislature on May 21 opened a 30-day special session on the governor’s pitch to dramatically cut property taxes on the proposed multibillion-dollar trans-Alaska natural gas pipeline and export project in order to encourage its construction.
Gov. Mike Dunleavy called the session, but one of the first challenges facing him and other tax-cut proponents is convincing skeptical legislators that a tax break is needed at all.
While Dunleavy and pipeline developer Glenfarne — a privately owned energy project developer — have called the tax break a critical step toward construction, senior legislators have reason for skepticism.
To date, Glenfarne has not released an updated estimate for how much the project will cost. The last public estimate is more than a decade old. It also has not released estimates for the price of gas to be carried by the pipeline, which would bring the fuel to the state’s population center in Southcentral Alaska.
Most legislators left Juneau to head home after the regular session ended on May 20, leaving House and Senate Finance Committee members to review the tax legislation and try to find a compromise. Lawmakers can return to the Capitol when needed for further hearings and votes.
“There’s that whole thing about buying a pig in a poke,” said Senate President Gary Stevens, R-Kodiak. “That’s the problem we’re facing. The farmer buying a pig in a bag has never seen the pig, never known how healthy it was. And that’s what we’re being asked to do. We’ve got to see the pig, we’ve got to know the details, and that’s what I think you’ll be seeing in our finance committee this coming special session.”
The pipeline project, formally called Alaska LNG or AKLNG, envisions an 800-mile pipeline from the North Slope to Cook Inlet. At the northern end would be a gas treatment facility that collects gas from feeder pipelines connected to oil and gas wells across the North Slope.
That facility would strip carbon dioxide from the raw natural gas, allowing the clean gas to be shipped down the pipeline. The carbon dioxide would be reinjected deep underground.
At the southern end of the pipeline would be an export terminal on the Kenai Peninsula. The gas would be kept super-cooled into a liquid and loaded onto tankers for shipment to Asia and other buyers. Most of the North Slope gas would be exported overseas.
The state-owned Alaska Gasline Development Corp., which owns 25% of the project, has previously estimated that the entire project would cost a combined $46 billion, but that prediction is more than a decade old.
During the just-completed legislative session, legislators heard estimates in excess of $65 billion, and Glenfarne officials said the pipeline alone will cost in the “mid teens” of billions of dollars.
To improve the venture’s economics, the governor has proposed eliminating state and municipal property taxes on the entire project and instead implementing a tax on the volume of gas moving through the pipeline. That would cut expected state revenue by $7 billion through 2063. Cities and boroughs that collect the bulk of the property tax revenue would lose out on $13 billion during that period.
Speaking on May 21 during the Alaska Sustainable Energy Conference in Anchorage, Glenfarne CEO Brendan Duval offered conflicting statements about the project’s financing.
At one point, he said that he had sufficient investments to construct the pipeline without any tax break. But later, talking with Dunleavy, he said the tax bill is “a critical condition” for pipeline construction.
“Please talk to your mayors, your elected officials, your legislators, your community leaders, your union leaders, and get them behind (this) to call to arms. Let’s get this thing over the line, and we can get this state the gas that it needs right now,” Duval said.
Variations of a North Slope gas pipeline project have been proposed, planned and promoted for almost 60 years, ever since oil and gas were discovered at Prudhoe Bay.
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