Gov. Mike Dunleavy has serious issues with the Democrat-controlled State Senate’s decision to insert an S Corp tax provision into what he was hoping would be a clean bill to advance the Alaska liquefied natural gas pipeline project.
In June, House Bill 381 passed the House along a bipartisan vote of 35-4 but has been held up in the Senate, resulting in two special sessions this summer, with a third on the way.
The original House-approved version aims to replace a 2% annual oil and gas property tax with a tax based on the actual flow of gas through the pipeline. This would give developer Glenfarne an 80% tax reduction, a move the company says is necessary to make the 800-mile North Slope to Southcentral pipeline project pencil out.
The latest version of the bill was approved by the Senate Conference Committee on July 16, and essentially creates a new income tax on certain oil and gas pass-through entities by restructuring Alaska’s tax system to specifically target a small number of oil companies in Alaska.
“If the legislature passes the bill in its current form, I will veto it.”
“I appreciate the hard work the conference committee has put into this important legislation to provide property tax relief and advance the Alaska LNG pipeline to deliver gas for Alaskans,” Dunleavy stated on July 16. “However, including the S Corp tax provision introduced by the Senate raises serious concerns. By the conference committee’s own admission, this provision has not been adequately debated, tested, modeled, or analyzed.”
Dunleavy noted that HB 381 started as a “simple property tax relief and a straightforward volumetric tax as a replacement.”
Introducing a new S Corp tax provision in the bill complicates the legislation, he said.
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“[A]nd could have unintended consequences that destabilize the business environment in Alaska and negatively impact Alaskans,” Dunleavy noted. “If the legislature passes the bill in its current form, I will veto it.”
Despite his misgivings, Dunleavy said the bill is very close to being satisfactory, and he has decided to call a third consecutive special legislative session this summer to allow lawmakers to finish the bill. That will begin on July 27 in Juneau.
“I will continue to collaborate with the legislature and look forward to signing legislation that helps move this project forward so we can provide a reliable source of energy for Alaskans for decades to come,” Dunleavy concluded.
12 Comments
Keep up the good work, Governor Dunleavy!!!
Define good!
Anything that is done or made that is not in line with any demonic forces of this world. Demonicrats would be one of those forces that is against the goodness all around us!
Well, I can think of the most recent. Good, better and best! This one is the BEST for Crime Boss Dunleavy!! The Chinese National attorney working with/in the Department of Law as an employee who has expired visa and Chinese Government passport with the full knowledge of the Crime Boss Dunleavy and the AGs past and present. The FBI is asking questions of every AG and will look into the Crime Boss’ decision making skills for sure. How much time does a political person serve in prison for these types of crimes? Crfime Boss Dunleavy needs to be held accountable . Don’t you agree ?
Agreed! This issue should be above this stupid effort for a fraudulent gasline! Treg Taylor and Mike Dunleavy need to be in jail for treason!!!
With you Dave there is very little good that Our Governor has done over the past 7 plus years… The Gas Line will not be his legacy ! Nor the Legislature’s . Taking any money from local tax’s for local services is just more thievery , period.
No pipeline won’t provide any taxes, either. Moreover, it won’t provide gas to heat homes or generate electricity. Your greed will cost you, and everybody else, too.
Joel, why are there Gemini AI summaries inserted into stories and comments? Don’t support liberal big tek!
A bipartisan vote of 35-4. What don’t these senator’s understand.
Get off your high horse and pass a clean gas bill.
SUMMARY ANALYSIS
HB 381 Version E and the Suspension of Borough Property Tax Powers
Purpose
This summary condenses the analysis of HB 381 Version E into a shorter document for use with the broader white paper. The focus is narrow: where the Legislature claims authority to remove or suspend borough property tax power, what Version E actually does, and why the constitutional questions remain unresolved.
Bottom Line
The Legislature can argue that borough property tax authority is delegated by state law and therefore can be defined, limited, or amended by general law. That is the legal hook. But that authority is not unlimited. The Alaska Constitution also says the taxing power shall never be surrendered and shall not be suspended or contracted away except as provided in Article IX. Therefore, HB 381 Version E must be judged by substance, not label.
If Version E is a true general-law exemption supported by a clear public purpose and a record proving maximum benefit to Alaskans, the State will defend it as lawful. If it functions as a project-specific suspension of borough taxing authority to secure a private financing arrangement, while withholding material financial information from the public, it remains constitutionally vulnerable.
1. The Claimed Legal Hook
The Legislature will likely rely on two points. First, boroughs and municipalities possess only the taxing authority delegated and defined by state law. Second, Article IX allows tax exemptions to be granted by general law. On that theory, the Legislature may amend AS 29.45 and AS 43.56 to remove certain project property from ordinary municipal and state property taxation and replace it with another tax system.
That is the State’s best argument, but it is not the end of the inquiry. Article IX also contains a hard limit: the taxing power may not be surrendered, suspended, or contracted away. Article IX also requires public purpose. Article X favors maximum local self-government and liberal construction of local powers. Article VIII requires maximum use and maximum benefit of state resources consistent with the public interest. Those provisions require a real public record, not only legislative findings.
2. What Version E Actually Does
Version E keeps the central tax trade: ordinary property tax treatment is replaced by temporary tax abatement and then an Alternative Volumetric Tax (AVT). Version E states that project property subject to tax abatement or the AVT is exempt from municipal taxation under AS 29.45. It also excludes such property from certain municipal tax cap and school-funding value calculations. Source: CCS2 HB381 Ver.E.pdf, lines 208-237 and 243-256.
Version E also amends AS 43.56 so property subject to the HB 381 abatement or volumetric tax is exempt from state oil and gas property tax and municipal oil and gas property tax. The replacement system begins with a temporary tax abatement and then imposes AVT on project throughput. Source: CCS2 HB381 Ver.E.pdf, lines 257-286.
The bill contains legislative findings that the tax treatment is necessary to advance a major natural gas project, maximize benefit by ensuring direct and affordable gas access, and protect affected communities. It also states the Act is not intended to serve as precedent for other property or taxpayers. Source: CCS2 HB381 Ver.E.pdf, lines 33-53.
3. The Main Constitutional Concern
The problem is not that the Legislature lacks any authority to legislate municipal taxation. The problem is whether this particular structure crosses the line from a general-law tax exemption into a practical suspension of local taxing power for one project.
A constitutionally safer bill would preserve future taxing power, clearly state that no tax authority is surrendered or contracted away, restore ordinary taxation if enforceable milestones are not met, and disclose enough public financial information to prove the exchange benefits Alaskans. Version E moves some safeguards onto paper, but it does not fully cure the concern.
4. Why the Municipal Concern Remains
Borough property tax power is not just an accounting detail. It funds local services, schools, emergency response, roads, and long-term borough planning. When HB 381 removes project property from ordinary municipal assessment, the State must show what boroughs lose, what they receive instead, and why that exchange is in the public interest.
The bill counts only a portion of AVT revenue toward the required local contribution formula and excludes abated/AVT property from full and true value calculations. This means the school-funding effect must be modeled and publicly explained. Source: CCS2 HB381 Ver.E.pdf, lines 208-237.
5. The Transparency Problem
Version E improves some legislative access to information, but also expands the ability to keep information confidential. The Summary of Changes says investment information may be provided to the Commissioner of Revenue and, upon request, the Legislature, but the information is not a public record and AGDC may redact financially or commercially sensitive information. The same summary extends reasonable redactions, estimated ranges, summaries, or status indicators to dashboard and biannual report information. Source: CCS2 HB381 Summary of Changes 7.16.26.pdf, lines 197-214.
This may help legislators receive some information, but it does not fully answer Article VIII maximum-benefit concerns. The people may still be unable to see the project economics needed to judge whether Alaska is receiving fair value for tax relief, resource access, public corporation assets, rights-of-way, and other public advantages.
6. Milestones and Cost Protections
Version E defines FID for Phase One as more than a press release: the developer must have firm debt and financing commitments, binding EPC agreements, offtake agreements sufficient to underwrite construction and operation, a cost estimate, and a final resource report. Source: CCS2 HB381 Ver.E.pdf, lines 494-510.
The bill also contains deadlines: no Phase One FID by January 1, 2028; no completed Phase One pipeline by December 31, 2034; or no commercial operation of at least one major component by January 1, 2037 means abatement/AVT status does not apply. But the Commissioner may extend dates for extraordinary circumstances, including judicial delays or lack of judicial decisions. Source: CCS2 HB381 Redline Q to E.pdf, lines 647-660.
Version E also keeps a $16/MMBtu ceiling for certain public utility gas supply contracts and says the RCA may not approve contracts that recover construction cost overruns from utility customers or increase rates if throughput decreases. Source: CCS2 HB381 Redline Q to E.pdf, lines 325-351. These are meaningful provisions, but $16 is a ceiling, not a guarantee of truly affordable gas.
7. The Conference Committee Memo Is Procedural, Not Constitutional
The July 15 Legislative Legal memo says Version E is within the limited powers of free conference under Uniform Rule 42. It does not say Version E satisfies Article VIII, Article IX, Article X, or all constitutional public-interest requirements. Source: CCS2 HB381 Legal Memo – Conference Committee Powers.pdf, lines 15-23.
That distinction is critical. A bill can be procedurally within conference committee powers while still leaving unresolved questions about public purpose, local taxation, dedicated funds, transparency, and maximum benefit.
8. Recommended Demands Before Final Passage
A written constitutional finding that no taxing power is surrendered, suspended, or contracted away.
A borough-by-borough comparison of current-law property tax revenue versus AVT revenue and mitigation payments.
A school-funding impact model showing effects on required local contribution and full-and-true-value calculations.
Disclosure to legislators of the full AGDC-Glenfarne agreement, including clawback, abandonment, reimbursement, ownership, and default provisions.
A public summary of project economics sufficient to prove Article VIII maximum benefit, including cost, financing, tax loss, in-state gas price, and municipal impacts.
A Department of Revenue model of expansion risk if other resource infrastructure later demands AVT-style treatment.
Strict restoration of ordinary state and municipal property taxation if project milestones are not met, with narrow limits on administrative extensions.
Clear subject-to-appropriation language for project-related funds to avoid dedicated-fund concerns.
Conclusion
HB 381 Version E appears to be a political compromise designed to preserve project financeability, give legislators oversight language, provide limited mitigation, and move the gasline package to a final vote. But it is not a complete constitutional cure.
The Legislature may define borough taxing authority by general law, but it may not use that power to surrender, suspend, or contract away the taxing power for a private project without a clear public-purpose record. The central question remains: Has the State proved, on the public record, that replacing borough property tax authority with abatement and AVT provides maximum benefit to the people of Alaska? Until that question is answered, Version E remains constitutionally vulnerable.
Where the Spirit of the Lord is, there is liberty. – 2 Corinthians 3:17
Summary Analysis – HB 381 Version E
Our governor is like our president: he can’t accept being a loser.
SO does everyone agree that a ceiling price of $16 MMBTU upper limit for Alaskans is a good thing being proposed during the special sessions?
Current Henry Hub price per MMBtu for 2026 Highest at $7.72 (JAN) $3.62 (FEB) $3.04 (MAR) $2.77 (APR) $2.94 (MAY) $3.15 (JUN) [Average $3.87 per MMBtu for six month period]. It has never been above $13 (JUNE 2008 $12.69). MT pays an average $8.47 per Mcf (~ $8.17 per MMBtu) and Idaho pays between $6.70 and $7.77 per MMBtu. Wyoming residential: Ranges from $9.91 to $12.62 per MMBtu, depending on the month. Industrial: Averages $3.92 to $4.23 per MMBtu, hovering near historical state lows. Of course Alaska is a captive LNG market being held hostage to ENSTAR, HILCORP, IGU retail pie-in-the-sky pricing not tied to henry hub pricing.