Senate counsel answers municipal questions on SB 280; callers urge LNG pipeline for jobs and lower energy costs

At a May 16 hearing of the Alaska State Senate Resources Committee, Senate majority legal counsel Sonia Kawasaki responded to written questions from the Alaska Municipal League about Senate Bill 280, the bill's alternative volumetric tax and community-impact provisions tied to a proposed LNG pipeline. Counsel described a 10-year sunset, funding mechanics and reporting expectations, and committee members then took public testimony from four callers who urged lawmakers to approve the project to create jobs and reduce local energy costs.

Kawasaki told the committee the Alaska Municipal League had raised a core concern that providing a project-specific tax abatement or lower tax method could set a bad precedent for future projects. "I'm hoping that the 10 year sunset helps mitigate this or provide a higher level of comfort for the municipalities," Kawasaki said, describing the sunset as tied to when an LNG facility comes online.

She described a Department of Revenue "indirect expenditures" report that the department produces biennially and said AML suggested adding estimates of foregone revenue from exemptions and deductions. Kawasaki said the bill's alternative volumetric tax (AVT) is designed to avoid the need for current property valuations and that producing determinate revenue-loss estimates for the indirect expenditures report could be difficult under the AVT structure.

On how new revenue would be distributed, Kawasaki said the bill anticipates directing some AVT revenue into existing community distribution mechanisms. She noted a statutory community assistance fund provision that permits a one-third distribution when the fund balance reaches at least $15,000,000, and she said the bill envisions an initial $50,000,000 appropriation to the Department of Commerce, Community, and Economic Development (DCCED) for construction impacts in pipeline communities. Kawasaki said DCCED would be expected to distribute those funds as grants and report back to the legislature.

Kawasaki emphasized that the legislature's appropriation authority is a constitutional requirement for the initial funding. She also described an ongoing developer-funded impact stream referenced in the discussion: "the other impact funds that are the annual $30,000,000 from the developer for five years" to be distributed statewide through the community assistance program. Kawasaki said municipal leaders previously told staff they wanted clearer mechanisms so cities and boroughs could access their shares, and she invited AML to help flesh out distribution details.

Following the counsel presentation, four people who had signed up to testify called in. Thomas Mason said he supports the House resources version of the legislation because it does not impose controls on LNG pricing, which he described as an "uneven framework" that could discourage investment. "I don't feel like the bill as it stands will actually result in a pipeline being built," Mason said.

John Ketchum of Anchorage, who said he has worked in oil and gas for about 40 years and serves on the board of a workforce development nonprofit, urged the legislature to consider economic benefits beyond state revenue. "This project will bring several years of billions of dollars of economic activity to the state," Ketchum said, arguing the pipeline could bring high-paying jobs and help reverse long-term population decline.

Reuben McNeil of Fairbanks said Alaskans are struggling with high local energy costs and urged action. "We're dealing with $5.19 a gallon gas here in Fairbanks," McNeil said, and he described high electricity prices in his community as part of the urgency for a pipeline.

Dixie Banner (calling from LaSalle) also urged lawmakers to approve a pipeline to restore jobs and criticized what she described as a need for greater accountability and transparency in state government.

The committee closed public testimony and the chair said the Department of Revenue would present modeling at the panel's next meeting. The committee adjourned at 3:53 p.m.

What happens next: the committee noted it will hold further hearings, including a presentation from the Department of Revenue on modeling for the bill. The record will remain open to written testimony submitted to the committee email address provided on the hearing notice.