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.”
Suzanne Downing: Legislative delay of gasline is now code for ‘deny’
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.
7 thoughts on “Governor Dunleavy: ‘If the legislature passes the bill in its current form, I will veto it’”
Unfortunately, these traitorous Legislators won’t take Dunlevy seriously, most likely just laughing at the his warning. They know, beyond a shadow of doubt, they won’t be held accountable, won’t suffer and potential financial and/or physical pain. That’s unfortunate, as politically inclined vigilante’s might be emboldened by these traitorous actions, might take matters into their own hands?!?!
Not sure how much your veto matters, Guv.
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With due respect, Guv, you never answered what we asked you on June 28 at
https://thealaskastory.com/mike-dunleavy-alaska-has-waited-long-enough-for-the-gasline/
and for the umpteenth time again, with a really cool update, at
https://thealaskastory.com/the-art-of-the-poison-pill-how-the-alaska-senate-is-killing-alaskas-energy-future/
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…so remind again what difference does your veto make?
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We apparently got stuck with 25% ownership in this thing, but nobody, your Honorable Self included, answers our questions about it! Big ticket item like this, you don’t ask on our behalf?
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What the hell, Guv? We weren’t -still aren’t- for, or against, this thing. But it’s increasingly clear nobody in Glenfarme or Government can, or will, answer our questions about it. Instead all we get is repeated verbal flatulence, cheerleading, complaining, bullsh*t …which answers nothing!
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We elected you, Guv, to represent us, not Glenfarme, maybe if you ask ’em nicely, they’d answer our questions?
You know all the Democrat majority bickering, stalling, delaying of the progress toward building the All-Alaska Gasline is a political gift to the AkGOP if their leaders knew how to use it in districts
Used well It would easily replace compromised Republicans with real Republicans from reddish districts even flipping some blue seats while sending a Republican back into the Governor’s office in 2027
But your AKGOP chairwoman and staff, district presidents, and committee members are not smart to use such a campaign gift from the left to flip seats and send rhino Republicans home
Governor Dunleavy would make a fine US Senator replacement to open up the seat US Senator Murkowski been hold too long, but also his strategic nature and his professional connections would make him a fine AKGOP Chair just what Alaska GOP needs. They need a Chairman who can set the districts on the Right direction with elected neighbors who truly believe in a Republican form government.
Because all these negotiations around the Gasline bill is all the work of living is an example of what we get when our leaders are working under a Democratic (Democracy) form government.
A democratic form government is just tyranny and too much BS that you are moving forward but you really are just running laps while calling it progress forward
If the gas line bill does not pass we will be buying gas shipped in from thousands of miles away in ships to heat our homes businesses and public buildings. With this volatile world we will be one ship away from freeze up. Common sense says that being a seller vs buyer is the best path with the ancillary benefit of insured supply.. Something is not right here. The legislators standing in the path of this project are being promised something that is not visible. We will find out. We always do.
If we become dependent on LNG tankers that will be the source for the next 100 years with billions paid to people opposing this project. Interest in resource development will drop to zero because of attitude. Once again politicians are voting for their interest not the people’s interest. They are laughing in the back rooms of Juneau.even though some have cried on camera. What a bunch.
SUMMARY ANALYSIS
HB 381 Version E and the Suspension of Borough Property Tax Powers
Purpose
This summary condenses the analysis of HB 381 Version E into a shorter document for use with the broader white paper. The focus is narrow: where the Legislature claims authority to remove or suspend borough property tax power, what Version E actually does, and why the constitutional questions remain unresolved.
Bottom Line
The Legislature can argue that borough property tax authority is delegated by state law and therefore can be defined, limited, or amended by general law. That is the legal hook. But that authority is not unlimited. The Alaska Constitution also says the taxing power shall never be surrendered and shall not be suspended or contracted away except as provided in Article IX. Therefore, HB 381 Version E must be judged by substance, not label.
If Version E is a true general-law exemption supported by a clear public purpose and a record proving maximum benefit to Alaskans, the State will defend it as lawful. If it functions as a project-specific suspension of borough taxing authority to secure a private financing arrangement, while withholding material financial information from the public, it remains constitutionally vulnerable.
1. The Claimed Legal Hook
The Legislature will likely rely on two points. First, boroughs and municipalities possess only the taxing authority delegated and defined by state law. Second, Article IX allows tax exemptions to be granted by general law. On that theory, the Legislature may amend AS 29.45 and AS 43.56 to remove certain project property from ordinary municipal and state property taxation and replace it with another tax system.
That is the State’s best argument, but it is not the end of the inquiry. Article IX also contains a hard limit: the taxing power may not be surrendered, suspended, or contracted away. Article IX also requires public purpose. Article X favors maximum local self-government and liberal construction of local powers. Article VIII requires maximum use and maximum benefit of state resources consistent with the public interest. Those provisions require a real public record, not only legislative findings.
2. What Version E Actually Does
Version E keeps the central tax trade: ordinary property tax treatment is replaced by temporary tax abatement and then an Alternative Volumetric Tax (AVT). Version E states that project property subject to tax abatement or the AVT is exempt from municipal taxation under AS 29.45. It also excludes such property from certain municipal tax cap and school-funding value calculations. Source: CCS2 HB381 Ver.E.pdf, lines 208-237 and 243-256.
Version E also amends AS 43.56 so property subject to the HB 381 abatement or volumetric tax is exempt from state oil and gas property tax and municipal oil and gas property tax. The replacement system begins with a temporary tax abatement and then imposes AVT on project throughput. Source: CCS2 HB381 Ver.E.pdf, lines 257-286.
The bill contains legislative findings that the tax treatment is necessary to advance a major natural gas project, maximize benefit by ensuring direct and affordable gas access, and protect affected communities. It also states the Act is not intended to serve as precedent for other property or taxpayers. Source: CCS2 HB381 Ver.E.pdf, lines 33-53.
3. The Main Constitutional Concern
The problem is not that the Legislature lacks any authority to legislate municipal taxation. The problem is whether this particular structure crosses the line from a general-law tax exemption into a practical suspension of local taxing power for one project.
A constitutionally safer bill would preserve future taxing power, clearly state that no tax authority is surrendered or contracted away, restore ordinary taxation if enforceable milestones are not met, and disclose enough public financial information to prove the exchange benefits Alaskans. Version E moves some safeguards onto paper, but it does not fully cure the concern.
4. Why the Municipal Concern Remains
Borough property tax power is not just an accounting detail. It funds local services, schools, emergency response, roads, and long-term borough planning. When HB 381 removes project property from ordinary municipal assessment, the State must show what boroughs lose, what they receive instead, and why that exchange is in the public interest.
The bill counts only a portion of AVT revenue toward the required local contribution formula and excludes abated/AVT property from full and true value calculations. This means the school-funding effect must be modeled and publicly explained. Source: CCS2 HB381 Ver.E.pdf, lines 208-237.
5. The Transparency Problem
Version E improves some legislative access to information, but also expands the ability to keep information confidential. The Summary of Changes says investment information may be provided to the Commissioner of Revenue and, upon request, the Legislature, but the information is not a public record and AGDC may redact financially or commercially sensitive information. The same summary extends reasonable redactions, estimated ranges, summaries, or status indicators to dashboard and biannual report information. Source: CCS2 HB381 Summary of Changes 7.16.26.pdf, lines 197-214.
This may help legislators receive some information, but it does not fully answer Article VIII maximum-benefit concerns. The people may still be unable to see the project economics needed to judge whether Alaska is receiving fair value for tax relief, resource access, public corporation assets, rights-of-way, and other public advantages.
6. Milestones and Cost Protections
Version E defines FID for Phase One as more than a press release: the developer must have firm debt and financing commitments, binding EPC agreements, offtake agreements sufficient to underwrite construction and operation, a cost estimate, and a final resource report. Source: CCS2 HB381 Ver.E.pdf, lines 494-510.
The bill also contains deadlines: no Phase One FID by January 1, 2028; no completed Phase One pipeline by December 31, 2034; or no commercial operation of at least one major component by January 1, 2037 means abatement/AVT status does not apply. But the Commissioner may extend dates for extraordinary circumstances, including judicial delays or lack of judicial decisions. Source: CCS2 HB381 Redline Q to E.pdf, lines 647-660.
Version E also keeps a $16/MMBtu ceiling for certain public utility gas supply contracts and says the RCA may not approve contracts that recover construction cost overruns from utility customers or increase rates if throughput decreases. Source: CCS2 HB381 Redline Q to E.pdf, lines 325-351. These are meaningful provisions, but $16 is a ceiling, not a guarantee of truly affordable gas.
7. The Conference Committee Memo Is Procedural, Not Constitutional
The July 15 Legislative Legal memo says Version E is within the limited powers of free conference under Uniform Rule 42. It does not say Version E satisfies Article VIII, Article IX, Article X, or all constitutional public-interest requirements. Source: CCS2 HB381 Legal Memo – Conference Committee Powers.pdf, lines 15-23.
That distinction is critical. A bill can be procedurally within conference committee powers while still leaving unresolved questions about public purpose, local taxation, dedicated funds, transparency, and maximum benefit.
8. Recommended Demands Before Final Passage
A written constitutional finding that no taxing power is surrendered, suspended, or contracted away.
A borough-by-borough comparison of current-law property tax revenue versus AVT revenue and mitigation payments.
A school-funding impact model showing effects on required local contribution and full-and-true-value calculations.
Disclosure to legislators of the full AGDC-Glenfarne agreement, including clawback, abandonment, reimbursement, ownership, and default provisions.
A public summary of project economics sufficient to prove Article VIII maximum benefit, including cost, financing, tax loss, in-state gas price, and municipal impacts.
A Department of Revenue model of expansion risk if other resource infrastructure later demands AVT-style treatment.
Strict restoration of ordinary state and municipal property taxation if project milestones are not met, with narrow limits on administrative extensions.
Clear subject-to-appropriation language for project-related funds to avoid dedicated-fund concerns.
Conclusion
HB 381 Version E appears to be a political compromise designed to preserve project financeability, give legislators oversight language, provide limited mitigation, and move the gasline package to a final vote. But it is not a complete constitutional cure.
The Legislature may define borough taxing authority by general law, but it may not use that power to surrender, suspend, or contract away the taxing power for a private project without a clear public-purpose record. The central question remains: Has the State proved, on the public record, that replacing borough property tax authority with abatement and AVT provides maximum benefit to the people of Alaska? Until that question is answered, Version E remains constitutionally vulnerable.
Where the Spirit of the Lord is, there is liberty. – 2 Corinthians 3:17
Summary Analysis – HB 381 Version E