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Gov. Mike Dunleavy on Wednesday introduced a new natural gas pipeline bill that he characterized as a compromise between conflicting philosophies on oil and gas taxes that he wants lawmakers to pass during the ongoing special session.
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The new bill would nearly eliminate property taxes that would be charged on the operator of a yet-to-be-built gas pipeline. Dunleavy and Glenfarne, the Texas-based investment company that is now the main sponsor of the gas pipeline project, have argued in recent months that such concessions are a major requirement for the project to be built.
The special session is due to end in less than two weeks. Lawmakers are still evaluating the proposal, but on Monday members of the Senate’s bipartisan majority expressed reticence to make quick decisions on a gasline bill.
Dunleavy’s new bill contains a concession to a tax previously sought by the Senate majority. It would also impose a small corporate income tax on certain private oil- and gas-producing corporations. Those companies, also known as S corporations or pass-through corporations, are currently exempted from such taxes in Alaska law. For now, the main corporation that would be affected is Hilcorp, a privately held Texas-based company that operated the Prudhoe Bay field and other North Slope assets that used to be owned by BP. Several legislators view Hilcorp’s exemption from corporate income taxes as a loophole that should be closed.
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The governor said legislators should pass his bill in what is now the third special session he has called on the subject.
“I have never been in favor of new taxes on Alaska’s producers, and I still am not,” Dunleavy said in a statement. “This bill is a compromise that removes a significant barrier to moving the gas line forward. Given the robust discussion and work that has already gone into this bill, I am hopeful the legislature can swiftly pass a bill that will help the AK LNG project get the financing it needs to start construction as soon as possible.”
The 2% tax rate Dunleavy proposed on petroleum-producing S corporations is significantly lower than the lower than tax rates legislative leaders have previously proposed, which went up as high as 9.4%.
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