Special Session Update: Deliberating tax breaks for an LNG mega-project
If approved, House Bill 381 codifies three decades of massive state and municipal tax breaks for a 800 mile privately developed natural gas pipeline.
Dear friends and neighbors,
This week marks the final days of the First Special Session of the 34th Alaska State Legislature. On the last day of the Second Regular Session, Governor Dunleavy called a 30-day special session to address a single item of business: passing legislation to secure decades of state and municipal tax breaks for a privately developed natural gas pipeline that would stretch 800 miles from the North Slope to Cook Inlet. If completed, the proposed Alaska Liquid Natural Gas (LNG) project would be one of the largest energy infrastructure projects in North America.
You might be wondering why the Governor summoned lawmakers back after the constitutional 121-day regular session. The answer is quite simple. After months of asserting that no legislation was needed to begin construction on the 800-mile privately developed pipeline, the Governor introduced HB 381 in March, leaving lawmakers only two months to consider the complex legislation and the long-term implications of reducing state and municipal revenue generated by the pipeline by 90% for over 30 years.
Below is a detailed analysis of HB 381 as of June 17, 2026. Although the bill recently passed the Alaska State House, the legislation is still far from complete. Here’s why:
One of the main focuses of HB 381 is to secure affordable energy for Southcentral Alaska. However, the bill proposes a 90% tax cut for over 30 years for the private pipeline developer, Glenfarne.
While many believe that tax cuts can incentivize mega-projects and lead to their completion, Alaska relies heavily on revenue from resource extraction (oil, gas, and minerals). A 90% tax cut for Glenfarne raises concerns that our state and local governments may not have enough funds to support essential services such as sanitation, schools, and roads, which directly impact our communities and families.
Furthermore, HB 381 goes too far in trying to incentivize a mega-project that, just a year ago, the Governor and Glenfarne claimed they did not need any assistance or legislation to begin construction.
HB 381 is currently under consideration in the Senate, and I expect that the legislation will undergo significant changes before a final vote is taken in the Alaska State Senate later this week.
For full transparency, unless major amendments are made to the bill, I do not support the version that passed out of the Alaska State House.
The proposed “Alternative Volumetric Tax” (AVT) replaces the traditional property tax on pipeline infrastructure with a new system based solely on gas volume. This shift highlights how developers could benefit from substantial tax breaks under HB 381.
AVT is a novel concept that has never before been applied to a gas or oil pipeline project in the U.S., but similar models exist in countries like Azerbaijan (where I served 4 years in the U.S. Peace Corps). While I understand the excitement surrounding the Alaska LNG project (and I share the enthusiasm for affordable energy rates for Alaskans), I am greatly concerned about the pressure lawmakers face to vote in favor of it without fully understanding the implications.
Alaskans are justified in being skeptical of this mega-project. Glenfarne, the private developer involved, is the 18th entity to consider building a natural gas pipeline from the North Slope to Kenai. The company was relatively unknown in Alaska until last year, when the Alaska Gasline Development Corporation (AGDC) unilaterally entered into a contract giving Glenfarne a 75% controlling interest in the Alaska LNG project.
Yes, you read that correctly: AGDC relinquished 75% of Alaska’s ownership stake in the pipeline project, significantly limiting the state’s ability to maximize its benefits.
Furthermore, as currently written into authorizing documents, Alaska has also contractually given up control of the Alaska North Slope basin, where the LNG mega-project is proposed to start, thus making it quite challenging (if not impossible) for smaller gas producers to get involved in the future.
Clearly, I am quite skeptical of this proposed mega-project.
Over the past several decades, many highly intelligent individuals with substantial financial resources have evaluated the project but ultimately decided to withdraw their support. This is not due to a lack of natural gas; there are approximately 35 trillion cubic feet of proven natural gas reserves on the North Slope. The challenge lies in the fact that the gas is over 800 miles away from the location where it needs to be transported to be shipped across the Pacific Ocean. As we know, that distance is not just any 800 miles; it involves traversing tundra, permafrost, mountains, rivers, and forests. Transporting natural gas from the North Slope to international markets would require one of the largest mega-projects in U.S. history.
The developers of the Alaska LNG estimate the cost at between $44.5 billion and $54.5 billion; however, a significant percentage of mega-projects experience cost overruns; a prime example is the uncompleted Cooper Landing Bypass. If expenses become too high or the risks too great, developers can withdraw and return to Texas, leaving Alaskans to face rising energy costs and the uncertain hope that perhaps the pipeline project will succeed on its nineteenth attempt.
Below is a detailed breakdown of House Bill 381, along with some of the key provisions that were removed from the bill before it passed the House of Representatives last week.
Please note: The next few days will be quite busy in the Alaska State Legislature. Unfortunately, state law requires candidates for elected office to cease using their official channels 60 days before an election, so I will not be able to send any additional updates via email or on my social media after Saturday. I apologize for this inconvenience and encourage you to watch KTOO Gavel to Gavel or AKL.TV to stay informed.
with gratitude,
@lgtobin
House Bill 381: What is in the bill? What is not in the bill?
On June 12, 2026, the Alaska House of Representatives passed House Bill 381, providing tax breaks to the developer of the long-sought-after Alaska LNG project. The central feature of House Bill 381 is the replacement of the traditional state property tax on pipeline infrastructure with a novel, untried-in-the-U.S. alternative volumetric tax (AVT) levied on gas throughput.
The AVT would apply after the temporary tax abatement period ends (approximately 5 years later or once gas starts flowing through the pipeline, whichever is earlier).
AVT rates would be adjusted annually for inflation of not less than 1% and no more than 2% (which really doesn’t keep up with inflation).
Property subject to tax abatement or the AVT would be exempt from municipal taxation (such as large office buildings downtown).
The AVT would terminate if construction of the first 730 miles of the gas pipeline is not completed by January 1, 2032.
The bill excludes property subject to the AVT from school funding calculations.
The bill requires the construction of a Fairbanks spur line connecting Interior Alaska to the gas system. The spur line must begin operations within 2-years after the “commencement of commercial operations of a major component of the natural gas project.”
The current version of the bill includes several consumer protection provisions designed to address concerns that Alaskans could otherwise face higher energy costs if project economics deteriorate.
A natural gas price cap of $16 per MMBtu for Alaska utilities, indexed for inflation (but not capped like the AVT).
Protections intended to prevent Alaska ratepayers from bearing project cost overruns.
Statutory reinforcement of proposed fixed-price gas supply arrangements to provide long-term price stability.
HB 381 includes language calling on Alaska Gasline Development Corporation (AGDC) to negotiate an option for the state to acquire an interest in a revenue-generating project.
AGDC must immediately notify the Alaska State Legislature about this option.
AGDC must obtain legislative approval before proceeding.
Additionally, language was included in the bill requiring the Legislature to act as a prudent investor.
