Gov. Mike Dunleavy on Friday introduced a bill in the state Legislature that would eliminate property taxes for the Alaska LNG megaproject, but create an alternative tax that would generate a smaller amount of revenue.

Lawmakers said Friday that they were still reviewing the bill, but one said it appears to be a “massive tax cut” that could exceed $1 billion in lost potential revenue to the state.

A borough mayor also indicated that municipalities that would host project infrastructure would lose out on significant property taxes and don’t currently support the measure, though they are working with the governor’s office and project officials on options.

Dunleavy said in an interview Friday that the goal is removing a financial barrier for the project so that it can be built.

At that point, it will provide an array of long-running benefits that the state does not currently receive from the North Slope’s vast but long-stranded natural gas, he said.

That includes a large number of jobs and affordable gas for Alaskans and businesses, including to support potential new undertakings such as data farms or fertilizer manufacturing, he said.

Also, even if his bill is passed, the project still would bring in significant royalties and production taxes, he said.

Over 30 years, the project still will generate $26 billion for state and local taxes and royalty revenue, Dunleavy said, referring to figures from the Alaska Department of Revenue. An oil and gas analyst interviewed for this article questioned those numbers.

Jeff Turner, a spokesperson for the governor, said in an email that the Department of Revenue is updating its Alaska LNG analysis “to incorporate spring modeling” and will share information on those figures next week.

Dunleavy said that if nothing is built, the state gets nothing from the project.

Recent events involving the U.S. war on Iran, including Israel and Iran bombing major gas infrastructure, underscore the need for a project that can safely export gas to meet strong demand in Asia, he said.

“So it’s a catalyst to billions upon billions upon billions of dollars and decades of future (revenue), not to mention the thousands of jobs and the other economic benefits from that,” Dunleavy said of the project.

Awaiting a final investment decision

The state has unsuccessfully pursued a version of Alaska LNG for generations.

Government agencies, private developers and major oil companies have never been able to get it built. The huge price tag has been a key impediment.

Under the current plan, majority owner Glenfarne is working with the Alaska Gasline Development Corp., a state agency and 25% project owner.

Alaska LNG has preliminary but nonbinding deals in hand with gas producers and buyers. Many observers say this project is farther along than past ones that failed.

Dunleavy said he recently met with the Taiwanese ambassador, Alexander Tah-Ray Yui.

“The country is very excited about moving ahead on hard agreements, especially now,” he said, following events in the Middle East.

Glenfarne has not yet made a final investment decision to build the project, a step originally expected in December.

Phase one calls for building an 800-mile pipeline to deliver natural gas from the North Slope to Southcentral Alaska, starting in 2029.

Phase two includes construction of a plant and shipping terminal in Nikiski. At that point, vast quantities of liquefied natural gas, or LNG, can be shipped overseas to Asian companies. That would start in 2031.

Glenfarne has recently updated an old cost figure of $44 billion for the project. But the company, based in New York, has not disclosed the new estimate, as well as other financial details.

Dunleavy said it’s common for a privately led project seeking investors and customers to hold on to proprietary information.

“I think there’s going to be enough information that can be shared publicly that will give legislators enough comfort that Alaska is better off with a massive project such as this, as opposed to better off without it,” he said.

Some Alaska lawmakers, who must decide what fiscal terms they should provide the project, if any, have said Glenfarne has not given them the financial information to judge the project’s potential benefits and risks.

A big ‘buzz cut’

The governor’s new measure proposes taxing the volume of gas flowing through the pipe, rather than taxing the assessed value of the oil and gas infrastructure, the governor’s office said in a prepared statement.

The alternative tax would be 6 cents per every thousand cubic feet of gas. That tax rate would increase 1% annually.

The alternative tax would not kick in until the project reaches an average flow of 1 billion cubic feet daily or 10 years after gas starts flowing, whichever comes first.

The project, once in full production with exports to Asia, is expected to move 3.5 billion cubic feet daily.

The bill removes the front-end tax burden for the project, reducing risks for potential investors, the governor’s office said.

It creates a predictable revenue stream, unlike property tax assessments that can be challenged, his office said.

Those benefits can help result in cheaper natural gas prices for Alaskans, the statement said.

Larry Persily, an oil and gas analyst and former Alaska deputy commissioner of revenue, said the alternative tax would provide a little over $75 million in the tax’s first year, if the project moves 3.5 billion cubic feet of gas daily.

In comparison, the property tax currently on the books would bring in $1 billion annually, for a project assessed at $50 billion.

“The bill today is not even a hair cut,” Persily said.

“It’s like a buzz cut on property taxes. It’s pretty substantial,” he said.

About a decade ago, when Persily was chief of staff to former Kenai Peninsula Borough Mayor Mike Navarre, he worked with a group of municipalities that tried to determine a fair property tax for an earlier, failed version of the project.

The group realized property taxes needed to be reduced to help make the project economic against global competitors.

But they still believed some property taxes were needed to support services provided by the state and boroughs.

They looked at a reduction that would still bring in about $630 million annually in property taxes, he said.

“The question is, how much of a discount should you provide and how should you structure it, to cover costs to the municipalities for all the services they will need to provide in association with the project,” he said.

Persily also said he doesn’t think the project will generate $26 billion in state and local taxes and royalties over 30 years.

He said a key source of revenue, production taxes and royalties, are based on the sale of gas as it first comes out of the ground, when its value is expected to be low compared to what it finally sells for.

“It seems a little gold-plated,” he said of the long-term revenue estimate. “Many Alaskans feel like this will be next Prudhoe Bay. But it’s not the same as oil in terms of profitability and tax revenue.”

Sen. Bill Wielechowski, a Democrat and vice chair of Senate Resources, said early Friday that his office is still reviewing the bill.

It appears the proposal could remove more than $1 billion in annual taxes from the state, compared to current statutes, he said.

“The rough look so far is that is a massive tax cut,” he said.

Glenfarne calls for swift action

GaffneyCline, a consultant for the Alaska Legislature, has said that legislative action will likely be needed on issues such as property taxes and “fiscal stability” before the project developer can make a final decision on investment.

The consultant has said property tax relief can provide critical savings early in the life of the project when costs are high.

Adam Prestidge, president of Glenfarne Alaska LNG, said in a prepared statement Friday that the state is facing a growing energy crisis, as natural gas production from the aging Cook Inlet basin near Anchorage continues to wane.

Glenfarne has been discussing property taxes with state and local leaders with the idea of minimizing energy costs for Alaskans, Prestidge said.

“State and local policymakers including members of the legislature, independent analysts, and the legislature’s own oil and gas consultants have all recognized that reforming Alaska’s current system is a key step in advancing a North Slope natural gas project,” Prestidge said.

“Acting swiftly on this measure is the most important step the Legislature can take to ensure that Alaskans will finally benefit from bringing Alaska’s North Slope natural gas to market,” he said of the bill.

Grier Hopkins, mayor of the Fairbanks North Star Borough, said in an interview Friday that officials from his borough and others that would host some of the project’s infrastructure do not agree with the terms of the bill.

The borough officials have been meeting regularly with officials from the governor’s office, the Alaska Gasline Development Corp. and Glenfarne, he said.

“The conversations have gone well, but this is not what we agree on, and I don’t support this specifically for Fairbanks,” he said.

Only 2 miles of the pipeline will travel through the Fairbanks borough. But the proposed bill will remove about $350,000 in annual property tax revenue, based on his own rough estimate, he said.

Other boroughs would see larger reductions, such as the North Slope and Kenai Peninsula boroughs, whose boundaries would encompass some of the project’s major facilities.

The Fairbanks borough is focused on getting affordable gas from the project, he said.

“So we still need to keep working with the governor and the Legislature to come up with something that’s going to work for the municipalities, which all have really different needs,” he said.

Lawmakers looking for more project details

Senate Majority Leader Cathy Giessel, a Republican and chair of the Senate Resources Committee, told reporters this week that lawmakers have not received enough information from Glenfarne about the costs of the project.

That makes it hard to know what steps should be taken to support it, she said.

The Senate Resources Committee has introduced a bill that proposes new guidelines on the project, including allowing the Legislative Budget and Audit Committee to conduct annual audits of the Alaska Gasline Development Corp.

Among many other steps, it would allow legislators to sign non-disclosure agreements in order to receive critical financial information.

Giessel said in an interview Friday that the members of the committee support Alaska LNG. They want to make sure it’s properly structured to benefit Alaskans, she said.

She plans to soon call on the borough mayors to appear before the committee to provide input on the bill.

She’ll also be looking to hear from GaffneyCline and other experts about their views on the bill, she said.

“It’s great that the public can now see what the governor is proposing,” she said. “These are local taxes that are being curtailed.”

“This affects their revenue to manage a large increase in their population and a huge increase in their property use” that will come with the project, she said.

Wielechowski, the Senate Resources vice chair, said the Dunleavy administration also needs to provide details to lawmakers about the project and the bill.

“The burden is on him to come forward and explain to the people of Alaska why he needs to give away a billion dollars a year,” he said.