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Dear
Neighbors,
I
am writing from Juneau, where the Legislature is in special session
to work on one of the most important decisions Alaska has faced in
years: changing our oil and gas property tax law to help make the
Alaska LNG pipeline project happen.
I
strongly support the AKLNG project. Alaska needs affordable,
reliable energy. We need jobs, investment, and long-term economic
growth. A successful LNG project could help deliver all three. My
goal is simple: help move this project forward while making sure
Kenai Peninsula families and businesses are protected from project
costs that should not fall on local taxpayers.
What
Is the AKLNG Project?
AKLNG
is a proposed 800-mile natural gas pipeline running from the North
Slope to Cook Inlet, with a liquefaction export facility next door in
Nikiski. Glenfarne Group, a private energy developer, owns 75% of the
project. The state-owned Alaska Gasline Development Corporation
(AGDC) owns the other 25% on behalf of all Alaskans.
The
project has two phases:
·
Phase One
(2027–2029): Build the pipeline and begin delivering North Slope gas
to homes, businesses, and utilities in Southcentral Alaska.
·
Phase Two:
Add a liquefaction terminal in Nikiski to cool gas into liquid form
and ship it to buyers in Asia.
The
project is gaining serious traction. Six international buyers have
signed preliminary purchase agreements for a combined 13 million tons
of LNG per year. Major North Slope producers including
ConocoPhillips, ExxonMobil, and Hilcorp are engaged to supply the
energy Alaska needs and for production of LNG for export.
Construction partnerships are in place, and President Trump has made
AKLNG a national priority.
Why
Your Energy Bills Are So High Right Now
Cook
Inlet natural gas supplies are running low. As local gas reservoirs
are depleted and Cook Inlet reserves are more costly to produce,
prices have gone up and producers have stopped offering firm
long-term contracts. ENSTAR testified this week that new natural gas
supply coming from Cook Inlet costs $16MMBtu. That is the main reason
your utility bills have risen so sharply.
The
AKLNG pipeline would provide a solution by connecting our homes and
businesses to the massive, largely untapped gas reserves on the North
Slope. Glenfarne and ENSTAR have announced that the cost of gas for
their contract would be $16 per MMBtu under Phase One, and drop
significantly, potentially to around $5 per MMBtu, once exports begin
in Phase Two. That drop happens because export revenue from Asian
buyers helps cover the cost of the project, spreading it across a
much larger volume of gas. Everyone benefits when the pipeline is
full.
What
the Legislature Is Being Asked to Do
Right
now, Alaska law requires the AKLNG project infrastructure to pay a
roughly 2%, or 20 mils, annual property tax based on its assessed
value, even before it moves a single molecule of gas or earns a
dollar of revenue. The law was written in 1973, well before the
growth of the modern global LNG market and is not competitive with
other jurisdictions. This “pay before you pump” tax is a significant
barrier to getting lenders and investors to finance a project this
large at an economical rate.
Legislation
under consideration would replace the 20 mil property tax with a tax
based on the volume of gas flowing through the pipeline. The more gas
moves, the more tax is paid, and per-unit energy costs drop. Three
separate independent analyses: Gas Strategies in 2020, Wood Mackenzie
in 2022, and GaffneyCline in 2025 have all identified the current
property tax structure as a major financing obstacle. This is not a
new problem.
Also,
proposed Legislation would provide money from an impact fund that
would serve as payment in lieu of taxes to the Kenai Peninsula
Borough (KPB) and other communities with direct impacts during the
construction phases of the project. The central Kenai Peninsula is
unique in Alaska with regard to project impacts because the LNG
facility will be constructed directly within our community. KPB
taxpayers should not pay for these impacts. They need to be
accommodated for by the project.
Importantly,
this property tax change is not a giveaway. Alaska’s Department of
Revenue projects that the new structure will generate $22.5 billion
in state revenue and $4 billion in local revenue over the life of the
project. But only if the project gets built. Zero taxes are collected
on a pipeline that never gets financed.
What
About the Costs?
Glenfarne
estimates Phase One will cost between $13 and $17 billion to build.
The full two-phase project is estimated at $44 to $55 billion. These
are real numbers, but they are still estimates, the final engineering
work has not been done yet on all phases of the project, so there is
still uncertainty.
Some
people say we should wait for more precise numbers before changing
the property tax structure for this project. I understand that. But
buyers are signing contracts now, and construction partnerships are
already in place. The better answer is to pass sound policy today
that can be adjusted as we learn more. Tax laws can be updated. A
lost project cannot be recovered.
How
We Protect Kenai Peninsula Families
Supporting
this project and protecting local taxpayers are not opposites. Here
is what I am insisting on:
·
No cost
overruns on your utility bill. Glenfarne has publicly committed to
supporting a law that prevents construction cost overruns from being
passed to ratepayers or the state. I want that commitment written
into the legislation.
·
Guaranteed
local funding. If the property tax changes, the Kenai Peninsula
Borough must receive real, secured compensation when Phase Two
construction begins, not promises based on wishful thinking. The
immediate impact from project construction will be increased highway
traffic, strain on Borough roads, Fire and EMS services, solid waste
and schools. When there are impacts to the Kenai from the project,
then the AKLNG project needs to bear those costs, not you the
taxpayer.
·
State
oversight. AGDC’s 25% ownership stake gives Alaska a seat at the
table and a voice in major decisions. That must be protected and not
diluted.
·
In-state gas
comes first. The project’s governing documents guarantee in-state
customers priority access to more than double our current gas demand.
Those protections need to be enforceable, not just promises.
The
Bottom Line
The
Legislature’s job here is not to pass economic judgement on this
project. That is what developers, investors, and the market are for.
Our job is to improve a tax structure that is a hurdle to the AKLNG
project, while making sure our communities are protected.
I
will continue fighting to protect Kenai Peninsula families and
maintain strong state oversight while advancing a project that can
create good-paying jobs, strengthen our energy security, and help
lower utility costs for Alaskans.
I
will keep you updated as the session moves forward. Call or text me
anytime. My personal cell phone number is 907-394-6796.
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