Dunleavy proposes 92 percent property tax cut for gas line
After an unexplained delay of more than three months, Gov. Mike Dunleavy finally introduced his plan to nearly eliminate property taxes for a proposed gas pipeline Friday.
Dunleavy has still not reached agreement with the municipal governments that would stand to not receive most of the tax revenue—he probably wanted a deal before introducing the bill—but he can’t wait any longer because the session is half over. There is little time now for a thorough review.
Dunleavy said in late 2025 that he wanted a 90 percent property tax cut, but there is no hint in his press release or the accompanying fiscal note about that. His proposal is to replace the property tax with a much lower tax that is based on the volume of gas transported by the pipeline.
The fiscal note attached to House Bill 381 and Senate Bill 280 is inadequate.
It conceals the size of the proposed property tax break, except to say it’s needed. It conceals the impact of the Dunleavy tax break on local governments. It conceals whether any independent analysis went into this before the governor settled on the exact size of the tax break.
According to my rough math, if this is a $50 billion project, instead of a property tax of about $1 billion per year, Dunleavy is proposing an alternative tax of about $76 million per year, a reduction of about 92 percent. Most of the $76 million would go to the North Slope, Denali, Mat-Su and Kenai boroughs.
(The fiscal note only says that the tax would be 6 cents for 1,000 cubic feet of gas. And that the pipeline could carry 3.5 billion cubic feet per day by 2033, forcing readers to do the math themselves.)
Dunleavy is proposing to suspend the new alternative tax for 10 years after pipeline operations begin or until the amount of gas in the pipeline reaches 1 billion cubic feet per day. After that the alternative tax of 6 cents kicks in.
It may well be that the existing property tax rate should be reduced. But the size of the cut needs to be backed up with something more than a declaration by Dunleavy that a 6-cent tax is the right number for the state and local governments.
Here is the text of the tax bill, a complicated document that is supposed to be explained in English through the fiscal note.
Brandon Spanos, the acting tax director, who is serving under Janelle Earls, the acting revenue commissioner, should be required to produce an intelligible fiscal note for legislators and the public before the first hearing Wednesday at 1 p.m. in the House Resources Committee.
Here is the Anchorage Daily News coverage on the bill.
The bill does not simply reduce the property tax on oil and gas property related to the pipeline from 20 mills to 2 mills, which is what Dunleavy said last year was his plan.
“By taxing based on the volume of gas that flows through the pipeline, we are ensuring that Alaska receives its fair share of the resource,” Dunleavy said in his press release.
Who settled on 6 cents as a fair share? Why not 16 cents? Or 60 cents?
Dunleavy and his allies, including gasline lobbyist Mark Begich, will say that if the Legislature doesn’t approve the tax break the pipeline will not be built because it won’t be economic. They will say this is not a 92 percent tax cut because without the tax cut there would be no taxes and no project.
Glenfarne should reveal to legislators and the state what it now think the pipeline project will cost. That should be discussed before the 92 percent tax cut is approved.
“While former political opponents like us may seem like unlikely allies, we are not going to let this once-in-a-generation opportunity slip away because of old politics. There is an old saying that potholes aren’t political — and neither are pipelines. We urge all members of the Legislature to join us in a unified effort to deliver secure, affordable energy.”
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