Alaska House Nears Approval of Tax Incentive for $54 Billion LNG Pipeline

A major proposal tied to Alaska's long-discussed LNG project is gaining momentum in Juneau, though significant questions remain about whether the massive development will ultimately move forward.

(P&GJ) — Alaska lawmakers appear poised to approve a tax incentive package aimed at improving the economics of the proposed Alaska LNG project, according to reporting by the Alaska Beacon.

The measure would significantly reduce taxes on the planned natural gas pipeline and related facilities in an effort to help advance the multibillion-dollar development.

The legislation, which advanced unanimously from the House Finance Committee, would replace portions of the project's existing property tax burden with a lower throughput-based tax structure. Committee estimates indicate the change would reduce taxes on the project by roughly 85% over a 30-year period.

SEE ALSO: Alaska LNG Project Signs Labor Deal for 12,000 Construction Jobs

The proposal is tied to the Alaska LNG project, an estimated $44.5 billion to $54.5 billion development that would include an 807-mile pipeline transporting North Slope natural gas to Southcentral Alaska and a planned LNG export facility on the Kenai Peninsula.

Project developer Glenfarne has argued that tax relief is necessary to improve the project's competitiveness in global LNG markets and attract financing. State lawmakers have spent months reviewing the proposal, including during the current special legislative session.

Under the latest version of the bill, Glenfarne would receive an initial tax-free period after gas begins flowing through the system and then pay taxes based on volumes moving through the pipeline and associated facilities. The measure also includes conditions requiring labor agreements, construction of a pipeline spur to Fairbanks and contributions to a community impact fund.

Supporters say the legislation could improve the project's chances of moving forward and help secure long-term natural gas supplies for Alaskans. However, several lawmakers and analysts have cautioned that tax incentives alone will not determine whether the project is ultimately built.

As reported by the Alaska Beacon, state officials and consultants have told lawmakers that the project's economics remain sensitive to construction costs, natural gas prices and future LNG market conditions. Even with tax relief, developers will still need to secure customers, financing and regulatory approvals before construction can proceed.

The House is expected to consider the legislation before it moves to the Senate, where lawmakers have expressed a wider range of views on the proposal and its potential risks to the state.