Dunleavy is now asking Alaskans to subsidize the AK LNG project

The credibility of the Alaska LNG project is eroding further by the day. Governor Mike Dunleavy is now asking Alaskan communities to subsidize pipeline construction with a massive property tax cut to the tune of 90 percent. According to Department of Revenue figures shared with the legislature, the five boroughs along the 800-mile-long pipeline route would be subsidizing the project to the tune of about $5 billion by 2042. 

In reality, legislators and borough mayors have no idea how much money Glenfarne and Gov. Dunleavy are really asking them to leave on the table. Alaskans have no reason to trust any of the numbers the state or the developers — Glenfarne and the Alaska Gasline Development Corporation (AGDC) — have publicly shared. It’s beyond time, for example, to stop taking the decade-old construction cost estimate of $44 billion seriously. Other analysts and legislators say they expect it to be tens of billions of dollars more. Speculation isn’t actually necessary; Glenfarne has updated cost estimates, they are just keeping those numbers secret. 

This persistent lack of transparency makes developers’ appeal for a state subsidy through a property tax cut completely unreasonable. A 90 percent reduction in municipal property taxes is a radically higher number in foregone revenue if the LNG project costs $70 billion. Or because we are all just guessing here, how about $90 billion or $120 billion?

So what’s actually in this tax legislation, and what will that cost Alaskans?

One element of the bill lowers the current 20 mill — a one dollar on every thousand dollars of assessed value — property tax on oil and gas infrastructure to 2 mills. State economists estimated that this would decrease municipal revenue by $13 billion, or about $360 million a year through 2062. But those numbers depend on the actual costs of the project — so the more it costs to build, the higher municipal property taxes would be.

Instead of annual taxes based on the assessed value of the pipeline or liquefaction facility infrastructure, the governor’s office is proposing payment based on how much gas is flowing through the pipeline. This Alternative Volumetric Tax (AVT) — only 6 cents per thousand cubic feet of gas (mcf) — wouldn’t kick in for ten years, or until the 30 day average flow of gas reached 1 billion cubic feet, whichever came first. 

That volume of gas is far more than Alaskans could ever use in a day, meaning this tax on gas flow wouldn’t come into play until the liquefaction plant — the most expensive part of the project — is built, and gas is being exported. As the legislation is written, Glenfarne could also keep the flow of gas just below that threshold to make sure they weren’t paying the volumetric tax before the ten years is up, yet another way Alaskans would lose out.

Who does this legislation — and the AK LNG project as a whole — benefit? (Spoiler: It’s not Alaskans.)

Mayor Josiah Patkotak of the North Slope Borough, who regularly navigates oil industry dynamics, recently told legislators that the only thing North Slope communities stand to gain from the project is property tax revenue, which this legislation essentially erases. 

Mayor Grier Hopkins of the Fairbanks North Star Borough said that because only two miles of pipeline would run through the borough, and a Fairbanks spur line isn’t part of the project, the Interior doesn’t stand to benefit even without the tax breaks. “Our community doesn’t get revenue, and doesn’t get gas,” he told legislators in March.

Mayor Peter Micciche of the Kenai Peninsula Borough, who supports the idea of the LNG project, also expressed concerns that costs were shifting from the state to municipalities. Proposed tax cuts in the bill seemed to extend broadly to anything that could be associated with AK LNG construction activity. “Where does that end, contractors’ lunches? Bed taxes?” Micciche asked, adding, “We will be severely impacted, and the [tax] reduction of 90 percent does not align with the impact on the community.”

In short, it’s entirely possible that boroughs would see no financial benefits from the project for 10 years, but the costs to Alaskan communities would start right away. Heavy truck traffic would wear out roads, an influx of outside workers would raise demands on fire and EMS services, housing availability would shrink — impacts that would cost municipalities tens of millions of dollars. 

Alaskans can’t afford to pay for Glenfarne and AGDC’s pipedream. Instead of subsidizing this megaproject, Alaska should be investing in real solutions. Around the state, some communities have already made huge strides toward more affordable, sustainable energy. Kodiak’s grid is almost 100 percent powered by wind and hydro, Galena offsets hundreds of thousands of gallons of fuel usage each year with solar and biomass, and Nome has integrated wind and battery storage to save on fuel costs. 

Communities have different energy needs, but all Alaskans deserve affordable energy rates. That means adding renewables and diversifying energy grids, not letting Railbelt utilities get trapped in long-term gas contracts at exorbitant rates. 

Glenfarne and AGDC continue to ask for legislators and Alaskans to trust them, but Alaskan utilities can’t run on empty promises.