Gov. Mike Dunleavy has proposed eliminating traditional property taxes for the Alaska LNG project to encourage development of the proposed $45 billion, 807-mile gas pipeline from the North Slope and export facilities in Nikiski on the Kenai Peninsula.
The bill also would exempt the project from municipal taxes, including property and any sales taxes.
Instead, under the governor’s proposal, a tax based on the volume of gas — instead of a traditional property tax based on the assessed value of the steel and equipment — would be levied after the pipeline starts delivering significant quantities of gas from the North Slope.
In a statement, Dunleavy said his legislation “removes a structural barrier” that would help get the gas line built, boosting the state’s economy.
The volume-based payment in lieu of full property taxes, according to Alaska Department of Revenue estimates, would equate to a 90% reduction in property tax revenues to the state and municipalities, once the pipeline is at full capacity.
Municipal governments are expected to take the biggest hit from that change, particularly the North Slope Borough, where the gas production and processing facilities would be built, and the Kenai Peninsula Borough, where the gas liquefaction plant and marine terminal would be built, estimated to cost at least $20 billion.
If the project was built under current property tax law, the municipalities would collect an estimated $360 million a year, according to the Department of Revenue fiscal analysis. Under the governor’s proposal, the boroughs would receive about 10% of that amount.
It would be about the same percentage reduction for the state’s share.
Separate from the property tax break, the state is expected to collect over $22.5 billion in new revenue from the project over its first 36 years, primarily from production taxes and royalties, according to state economists.
Lawmakers have questioned why such a sharp reduction in property taxes is needed.
Anchorage Democratic Sen. Bill Wielechowski, vice chair of the Senate Resources Committee, spoke at a March 24 news conference. He said legislators would look closely at Dunleavy’s proposed tax break and determine whether a 90% cut in property taxes is appropriate.
“I don’t know anybody in the Legislature who doesn’t want a gas pipeline. The question is, what is it going to take to get it?” Wielechowski said.
A pipeline from the North Slope to deliver gas to market has been a dream in Alaska for decades. But prior efforts have all fallen short.
Supporters say its prospects have never been stronger. Key permits are in hand, several Asian nations are interested in buying Alaska’s gas, and President Donald Trump has voiced support for the project.
Former Democratic U.S. Sen. Mark Begich has been hired by the Dunleavy administration on a one-year $100,000 contract to help advance the pipeline.
Glenfarne, a New York-based company, signed on to develop the project in January 2025. It owns 75% of the venture, while the Alaska Gasline Development Corp., a state agency, owns the remaining 25%.
The economics of the project remain uncertain.
The $44.7 billion construction estimate is a few years old, and Glenfarne has declined to release an updated number.
Alaska’s current tax structure levies a 2% property tax on the assessed value of oil and gas exploration, production and transportation infrastructure, much the same as municipal property taxes are levied on homes and businesses. Dunleavy’s proposal would adopt an alternative of 6 cents per 1,000 cubic feet of natural gas, about $75 million a year to be shared between municipalities and the state.
The payments would start once the pipeline delivers an average of 1 billion cubic feet of gas per day, about one-third of its capacity, or 10 years after gas starts flowing, whichever comes first.
In 2015, before the North Slope oil and gas producers walked away from the project and turned over development to the state, the companies had agreed to pay a negotiated $630 million a year in payments in lieu of property taxes.
Dan Stickel, economist with the Department of Revenue, on March 25 said the department is not examining Dunleavy’s bill as a tax cut because it would help spur the pipeline and potentially lead to new state revenue.
Stickel told the House Resources Committee that the state gas corporation and Glenfarne have said the project will not move forward without property tax relief.
Adam Prestidge, president of Glenfarne Alaska LNG, wore a pin in a House Resources Committee hearing that said, “Build the Line.”
Anchorage Republican Sen. Cathy Giessel, chair of the Senate Resources Committee, cited higher costs like public safety that could be borne by communities along the proposed pipeline route. Under the governor’s proposal, it could take years before municipalities would collect any payments in lieu of property taxes, she said.
“That’s a long time for these communities to have no property tax,” she said.
The Alaska Beacon is an independent, donor-funded news organization. Alaskabeacon.com. The Wrangell Sentinel contributed reporting for this story.
