Dunleavy offers new gasline bill with limited S-corp tax; legislators say it’s too little, too late

Mark Sabbatini
1 hour ago
3 min read

Governor proposes ‘compromise’ 2% tax rather than rate up to 9.4%; House and Senate leaders say bill doesn't have support to pass, and business groups express opposition

By Mark Sabbatini

Juneau Independent

Gov. Mike Dunleavy on Wednesday unveiled a gas pipeline bill that continues to seek large tax breaks for its developers, but with what he calls a "compromise" imposing a new tax on some corporations — albeit at a significantly lower rate than legislators have sought in previous bills.

But the bill has essentially been declared dead on arrival by legislative leaders in the House and Senate, who were being asked by Dunleavy to return to the Alaska State Capitol on Aug. 20 to consider it — giving them less than a week before the end of a third special session this summer to consider gasline legislation. A coalition of business groups also issued a statement opposing the bill.

"The Legislature’s decision to not return to Juneau to take action on the proposed property tax change needed to advance the Alaska natural gas pipeline project is deeply disappointing and has consequences that extend well beyond this session," Dunleavy wrote in a message on his Facebook page Wednesday evening.

"We will continue to pursue all viable options to advance the Alaska natural gas pipeline project. Ensuring reliable and affordable energy for Alaskans is both an economic necessity and a responsibility to current and future generations. The challenge remains, and we will continue working to address it."

Dunleavy has for months been proposing a massive property tax cut for developers of the Alaska LNG Project, arguing it is a necessary incentive to make the project economically viable. Legislators resisting the project say too many details are lacking specifics — including the project’s likely costs and profits — and have also backed an alternative bill with a so-called "S Corp" provision that makes privately owned oil and gas companies subject to the state’s corporate income tax.

The tax is currently imposed on publicly traded companies (referred to as "C Corps") at a variable rate of up to 9.4%, depending on income. Dunleavy, in a press release, stated his bill proposed a flat 2% S Corp tax that would take effect in 2030, the latter provision being one year later a bill drafted earlier this summer by a joint House-Senate committee.

"This bill is a compromise that removes a significant barrier to moving the gas line forward," Dunleavy said in a prepared statement.

The governor, in a social media message earlier this week, asked legislators to reconvene on Aug. 20. The deadline for the current special session is Aug. 26.

However, majority caucus leaders in the House and Senate said there appears to be no viable way to pass the bill.

"Unfortunately, intractable differences have emerged on the Governor's bill relating to property tax relief for the gas line," a statement issued Wednesday by the House Majority Caucus declares. "The proposed HB 4001 does not appear to have the support needed to pass the Alaska House, with opposition being expressed by both Majority and Minority members."

"What we want to make clear to Alaskans, to the project developer Glenfarne, and to all those watching from afar is that support for the AKLNG project as a whole is not in question," the statement adds. "The Legislature and the Governor have repeatedly expressed their strong support for the gas line, which has not wavered."

Senate President Gary Stevens, R-Kodiak, said during a press conference Monday he doesn’t believe the Legislature will have enough time to consider the details of Dunleavy’s bill. Stevens told the Anchorage Daily News on Wednesday he doesn’t intend to reconvene the Senate to consider the legislation.

"A majority of those in the Senate believe that this is an issue that needs to be left to the next governor and the next Legislature, where they really have the time to delve into all the details,” he told the newspaper.

A coalition of four business groups also issued a statement expressing opposition to Dunleavy’s bill, based on the 2% S Corp tax going into effect "even if the Alaska LNG Project never delivers phase one volumes of gas or is ultimately abandoned."

"That raises a serious question about whether this tax is truly part of a gasline incentive package or instead represents a new, stand-alone tax on Alaska's oil and gas industry," added the statement by The Resource Development Council for Alaska, The Alaska Support Industry Alliance, Alaska Chamber of Commerce, and Alaska Oil and Gas Association.

"We appreciate the willingness to compromise, but a smaller targeted tax is still a targeted tax— and it should not become permanent regardless of whether the project it was intended to support ever moves forward."

• Contact Mark Sabbatini at editor@juneauindependent.com or (907) 957-2306.