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Pipeline-for-pension deal falls apart as the Alaska Legislature’s regular session nears end

By: James Brooks, Alaska Beacon

At left, House Majority Leader Chuck Kopp, R-Anchorage, talks with experts on the proposed trans-Alaska natural gas pipeline during a break in debates Monday, May 18, 2026. To Kopp’s immediate right is Joelle Hall of the Alaska AFL-CIO. At center, gesturing, is former U.S. Sen. Mark Begich, now an adviser to Gov. Mike Dunleavy. (James Brooks photo/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. 

Rep. Chuck Kopp, R-Anchorage, speaks Monday, May 18, 2026, on the floor of the Alaska House of Representatives. (James Brooks photo/Alaska Beacon)

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. 

From left to right, Reps. Jeremy Bynum, R-Ketchikan, Neal Foster, D-Nome, and Robyn Niayuq Frier, D-Utqiagvik, talk about an amendment to the gas pipeline bill on Monday, May 18, 2026. (James Brooks photo/Alaska Beacon)

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.

Alaska Gov. Mike Dunleavy’s legislative director, Jordan Shilling (left) and his deputy legislative director, Forrest Wolfe, watch as assistant legislative director Victoria Schoenheit delivers the veto message for House Bill 78 to the House clerk on Monday, May 18, 2026. (James Brooks photo/Alaska Beacon)

“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.”

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In Alaska Legislature’s last days, a key question: How much to subsidize the gas pipeline?

By: James Brooks, Alaska Beacon

Gov. Mike Dunleavy speaks about at a May 4, 2026, news conference about his property tax bill intended to help draw investment in a massive natural gas pipeline. The news conference was held in his Anchorage office. (Photo by Yereth Rosen/Alaska Beacon)

Alaska Gov. Mike Dunleavy is urging state lawmakers to act on his proposal to cut state taxes by $7.2 billion over the next 36 years to subsidize construction of the proposed trans-Alaska natural gas pipeline.

Failing to act, he said, could keep the pipeline from being built at all. 

“This bill is too important. This concept is too important,” Dunleavy said. “This is not setting up a tax for the lemonade stand down here in the corner by the hot dog stand. This is the biggest (natural gas) project on the planet.”

But some state lawmakers are skeptical about the size of the governor’s proposed subsidy. Two alternatives — one in the House and the other in the Senate — are advancing through committees in the final weeks of the session.

Other legislators believe the pipeline already makes financial sense and no change is needed.

As a result, four different paths await state legislators in their last weeks, and it isn’t clear which one they’ll take — or whether the governor will call legislators into special session on the issue.

There’s also been no agreement with cities and boroughs affected by the proposed tax cut. There’s also no public agreement with North Slope gas producers or the state’s labor unions.

At the core of the problem facing lawmakers is how much — if any — subsidy is needed in order to attract investors who would pay for building the pipeline project in two stages. 

The first stage would involve a pipeline from the North Slope to Cook Inlet for in-state use. The second stage would construct processing plants at the north and south ends of the pipeline, allowing larger volumes of gas to be exported overseas.

If both phases of the project are built, Department of Revenue economist Dan Stickel told legislators on Tuesday, the result would be cheaper natural gas than currently available from Cook Inlet.

“If the full project goes forward, it’s a significant reduction in cost to Alaskans,” he said.

Rep. Zack Fields, D-Anchorage, noted that Alaskans could be locked into high natural gas prices if the second phase is never built or if both phases are built but no exports take place.

For a hearing last week, the Department of Revenue estimated that under that scenario, prices in Anchorage would exceed $27 per thousand cubic feet by 2033, more than double current prices.

It’s unclear how likely that worst-case scenario is.

The larger the subsidy, the greater the chance that the project is built in full and the lower the price of gas for Alaskans, project proponents say.

“Our objective is to have the lowest cost gas for Alaskans and have certainty on the project,” said Adam Prestidge, president of Glenfarne Alaska, the project’s developer.  

A problem, some legislators say, is that they’re working without information. Glenfarne, an international firm that last year bought 75% of the project and became its developer, has not shared its latest estimate for how much the pipeline will cost.

“I think it’s important for us to have starting points on what the actual numbers are, because if it needs tax relief, let’s figure out what the relief is,” said Sen. Bill Wielechowski, D-Anchorage.

Legislators also don’t know how much North Slope gas producers will charge for the gas, or what international buyers will pay for it. 

Some of that information is impossible to know — legislators are trying to anticipate the price of natural gas in 2033 and beyond, once the pipeline is up and running. 

Other information is being kept confidential until a final investment decision or when proposed prices are submitted to state regulators, something that’s months away at the earliest.

Legislators are being asked to take action within weeks.

“We’re not really competitive in the global market if the (cost) overrun is 40%,” said Rep. Julie Coulombe, R-Anchorage, on Tuesday.

The gas pipeline’s publicly stated cost on Tuesday was $46 billion, but most legislators believe the true figure is higher.

“I think it’s really $57 billion … if not higher,” said Sen. Bill Wielechowski, D-Anchorage, relying on a prior statement from former U.S. Sen. Mark Begich.

Begich, a Democrat, lost to Gov. Mike Dunleavy in the 2018 governor’s election. Now, Begich is a paid adviser, hired by Dunleavy’s administration on a $100,000 contract.

In a Tuesday hearing, Begich said lower taxes would not increase profits for investors or developers and would simply lower the end cost of gas for consumers.

“If you lower the tax, it does not go to the return or the profit or anything of this project,” he said. 

“I am just telling you right now, every dollar you save consumers is a dollar in their pocket in an economy that is struggling,” Begich said.

Under his calculations, Wielechowski said, the average Southcentral Alaska family would save $55 per year if the pipeline is built and produces gas according to the latest available cost analysis from the Department of Revenue. 

The subsidy needed to create that savings amounts to a loss of $500 per Alaskan per year, he said, money that could be used for the Permanent Fund dividend or state services.

“That’s not a good deal,” he said of the exchange.

The latest available version of the Senate proposal shows an increase in revenue to the state, rather than a subsidy. Instead of earning $27.9 billion through 2062, the state would earn $42.1 billion.

“I would describe that as very burdensome for the project and potentially prohibitively so,” Prestidge said. 

“I will characterize that tax at that level as something that would require some real reconsideration of the drawing board of how the project is structured and taken forward,” he said.

In the House, discussions have been less acrimonious. The House Resources Committee on Tuesday morning discussed a proposed a subsidy of less than $5.9 billion, smaller than the governor’s concept but similar in other regards. 

“It would be a tax reduction but a smaller tax reduction than proposed by the governor,” Stickel said of the House proposal.

On Tuesday afternoon, the committee worked methodically through a long series of amendments to its plan, frequently consulting Prestidge and Begich about how each might affect financial negotiations.

The House and Senate bills are each in an early stage of development. If passed by the resources committees, each would have to pass through their respective finance committee before advancing to a floor vote and on to the other half of the Legislature.