By: James Brooks, Alaska Beacon
A high-stakes quid pro quo deal fell apart in the Alaska Capitol on Monday as legislators failed to approve a tax break for the proposed trans-Alaska natural gas pipeline and Gov. Mike Dunleavy vetoed a bill that would have restored public pensions in the state.
The failure leaves public employees with a 401(k)-like retirement system and legislators likely to head into a special session for further work on a gas pipeline bill.
Rep. Chuck Kopp, R-Anchorage and the Legislature’s lead negotiator on the planned deal, said on Monday night that “the pension was a good vehicle to help get people there and be more conciliatory towards this gasline legislation than they otherwise would have been. Now that the governor has vetoed the pension, I expect the conciliatory attitudes will suffer.”
Monday was the deadline for Dunleavy to enact or veto House Bill 78, which would have created a new pension plan for Alaska’s public employees. Alaska has not offered a pension since 2006, when lawmakers closed the pension plan to new employees after an actuarial error led to significant underfunding.
Days ahead of Monday’s veto deadline, Dunleavy offered a deal to legislators — pass a tax break for the proposed gas pipeline, and he would allow the pension bill to become law.
“We said we wanted the gasline bill passed in an acceptable form to the governor’s desk before the deadline on the (defined benefit) bill,” said Jeff Turner, the governor’s communications director. “At that point, he could allow a (defined benefit) bill to go into law.”
Dunleavy told reporters at a news conference earlier this month that the gas pipeline bill should be the Legislature’s top priority.
In March, he introduced two identical bills, one in the House and one in the Senate, with his ideas. Legislators have since held dozens of hearings on those ideas.
If enacted, the governor’s proposal would largely exempt the gas pipeline and supporting infrastructure from state and local property taxes levied on petroleum property. In place of the property tax, the state would levy a tax on gas transported by the pipeline.
The pipeline’s lead developer, multinational firm Glenfarne, has said the change is necessary for it to successfully obtain financing needed to build the pipeline project.
Alaska LNG, as it is known, would ship gas through an 800-mile pipeline, from the North Slope to Southcentral Alaska. As currently planned, the first phase of the project would deliver gas to Alaskans in 2029 and the second phase would allow foreign exports by 2031.
While state legislators generally support the idea of a pipeline, they have balked at the governor’s planned tax breaks, particularly because Glenfarne has thus far declined to provide new estimates for the cost of construction or its expected cost of gas when the pipeline is complete.
That has made it impossible for them to determine whether the proposed tax break is too large, too small, or just right.
House and Senate each took the governor’s ideas and amended them. Both increased the proposed gas tax — formally known as an “alternative volumetric tax” — mandated construction of a spur line to Fairbanks and required Glenfarne provide early payments to communities affected by pipeline construction.
Senators went further, proposing price controls on gas shipped through the pipeline to Alaskans, an end to a tax exemption that would benefit Glenfarne, and small increases to the state’s oil taxes.
With both bills far from completion, Kopp began negotiating with the governor’s office on a possible compromise.
Kopp has been supporting a pension revival for a decade, and sought a deal that would accomplish two personal goals that also are among the legislative majorities’ top priorities.
On Monday, after days of work, he introduced a compromise gas pipeline proposal as an amendment to Senate Bill 180. That bill was originally written as a one-sentence change to state law pertaining to liquefied natural gas import terminals.
Kopp’s amendment, 22 pages long, was adopted, and House lawmakers began debating, one after another, hours of amendments to Kopp’s amendment.
In the back of the House chambers, advisers to the governor — who have been working closely with Glenfarne — provided feedback on whether each amendment was acceptable.
One amendment from Rep. Robyn Niayuq Frier, D-Utqiagvik, derailed that process. Adopted on a 21-19 vote by the House, it would allow the North Slope Borough to negotiate directly with Glenfarne on taxes.
Frier represents the North Slope Borough, and because the project’s large gas treatment plant would be located there, the borough would lose a disproportionate amount of tax revenue with a switch from property taxes to the alternative volumetric tax.
“The amendment was completely necessary,” Frier said afterward, explaining that the borough had been asking for it.
The Kenai Peninsula Borough, planned site of the export terminal, accepted the alternative tax, and lawmakers from that region did not propose amendments similar to Frier’s.
Frier said North Slope officials talked with all of the stakeholders, with the governor’s office and Glenfarne.
“We always knew this was going to be an issue, and I don’t understand why this is such a big deal. They could have been negotiating. They should have been negotiating,” she said.
Frier said that rather than try to push through a major bill in a single day, she would like to see lawmakers focus on House Bill 381, the House’s gasline bill, in a 30-day special session.
“We need to do the proper vetting, we need the modeling, we need it to go through the Department of Revenue. … We need people to weigh in, not trying to shove this in at the last minute. This is not good process,” she said.
Lawmakers in favor of Kopp’s compromise were unable to quickly reverse Frier’s amendment, and the Senate adjourned shortly after 10 p.m., leaving no avenue for Kopp’s amendment to pass through the Capitol on Monday.
Kopp said afterward that he had negotiated a deal to sidestep Frier’s amendment, but with the Senate adjourned until after the window to veto the pension bill, he said the governor was uninterested.
“He feels like the outcome has to be 100% controlled. … The House was in position to send over a good gasline bill. The governor simply did not care, because he had to have it in the bag. To me, that’s disappointing, and to me that was very shortsighted,” Kopp said.
With the deal dead, the House adjourned for the day just after 10:30 p.m. The governor’s veto message arrived in the House clerk’s office shortly afterward, at 10:39 p.m.
“I share the Legislature’s goal of strengthening recruitment and retention for Alaska’s public workforce,” the governor said in his veto message. “However, House Bill 78 contains unresolved legal, tax, administrative, and fiscal issues that create uncertainty for the State, employers, employees, and the retirement systems themselves.”
Kopp, visibly frustrated, sat in his office after the House’s adjournment.
“He has no allies in the Senate that can help him on the gasline. I was his No. 1 ally in the entire Legislature,” Kopp said, “and he killed the pension bill that I carried. That was his thank you to me. So, I’ll remember that.”
