By SUZANNE DOWNING
July 16, 2026 – Gov. Mike Dunleavy said Thursday he will veto House Bill 381 if it reaches his desk with the Senate’s controversial S corporation tax provision intact, while simultaneously calling lawmakers back to Juneau for another special session later this month to continue negotiations.
The announcement marks the latest twist in the Legislature’s months-long effort to pass legislation intended to support the Alaska LNG Project, a bill that has evolved far beyond its original purpose. The Alaska Story has reported extensively on the changes to HB 381, including the addition of new tax provisions, the feckless conference committee negotiations, and growing opposition from Alaska’s business community.
In a statement released Thursday, Dunleavy praised the conference committee’s work on the bill’s original objectives but drew a firm line over the new tax language.
“I appreciate the hard work the conference committee has put into this important legislation to provide property tax relief and advance the Alaska LNG pipeline to deliver gas for Alaskans,” Dunleavy said. “That work has brought us close to a bill that would serve the people of Alaska well.”
But he said the Senate-added S corporation tax provision creates too much uncertainty.
“However, including the S Corp tax provision introduced by the Senate raises serious concerns,” he said. “By the conference committee’s own admission, this provision has not been adequately debated, tested, modeled, or analyzed.”
Dunleavy noted that HB 381 began as a narrowly focused measure replacing construction-phase property taxes with a volumetric tax once natural gas begins flowing through the pipeline.
“The bill started as simple property tax relief and a straightforward volumetric tax as a replacement,” he said. “The S Corp tax provision in the bill is neither simple nor straightforward and could have unintended consequences that destabilize the business environment in Alaska and negatively impact Alaskans.”
The governor then delivered his clearest message yet to lawmakers.
“If the legislature passes the bill in its current form, I will veto it.”
Rather than allowing negotiations to end with the Legislature’s scheduled July 19 adjournment, Dunleavy announced he is calling lawmakers into another special session beginning July 27 in Juneau.
“We are close to having a bill that will help deliver natural gas for Alaskans,” he said. “To allow work to continue toward a positive outcome, I am calling a special session beginning July 27 in Juneau.”
He said he remains committed to working with legislators to produce a measure he can sign.
“I will continue to collaborate with the legislature and look forward to signing legislation that helps move this project forward so we can provide a reliable source of energy for Alaskans for decades to come.”
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The governor’s announcement comes as opposition to the conference committee version of HB 381 has continued to grow. Earlier Thursday, the Alaska Chamber of Commerce, Alaska Oil and Gas Association, Alaska Support Industry Alliance, and Resource Development Council for Alaska jointly urged lawmakers to reject the latest version, arguing it injects targeted industry and income taxes into legislation that was originally intended to advance the Alaska LNG Project.
Dunleavy’s veto threat raises the stakes for the final days of the current special session. Lawmakers now face a choice between stripping the disputed tax provisions before adjournment, sending the governor a bill he has already pledged to reject, or postponing the debate until the July 27 special session.
The announcement also confirms that, despite months of negotiations, Alaska’s effort to establish a stable tax framework for one of the largest infrastructure projects in state history remains unresolved. What began as a relatively straightforward proposal to improve the financing structure for the Alaska LNG Project has become a broader battle over Alaska’s tax policy—one that now appears likely to continue into yet another special session.
