By SUZANNE DOWNING
Aug. 12, 2026 – Gov. Mike Dunleavy introduced compromise legislation Wednesday that would establish the tax and oversight framework for the Alaska LNG project, making a significant concession to lawmakers in hopes of securing enough votes to move the long-delayed gasline toward financing and construction.
The legislation transmitted to the Alaska Legislature on Aug. 12 is nearly identical to the conference committee version of House Bill 381 that failed during the previous special session. It makes three changes intended to bridge the remaining differences between the governor, House members and the Senate majority.
Most significantly, Dunleavy has agreed to accept a new corporate income tax on S corporations, although at a lower, flat rate of 2%.
The governor has consistently opposed imposing a new tax on Alaska businesses. The original version of HB 381 introduced by his administration contained no S corporation tax, and the House passed the gasline legislation without one.
The new tax was added after the bill reached the Senate, along with several other provisions unrelated to the construction-phase tax framework sought for the Alaska LNG project.
Under Dunleavy’s compromise, the 2% S corporation tax would not take effect until Jan. 1, 2030, one year later than proposed in the conference committee bill, or when the pipeline begins delivering commercial gas, whichever provision in the bill controls its implementation.
The legislation also removes language that could have reduced state education funding to boroughs receiving tax revenue from the gasline. That returns the bill to the governor’s original position on the required local contribution and reduces the potential financial impact on affected municipalities.
Breaking: Dunleavy to release gasline compromise bill this week that has a 2% S-corporation tax
“I have never been in favor of new taxes on Alaska’s producers, and I still am not,” Dunleavy said. “This bill is a compromise that removes a significant barrier to moving the gas line forward.”
“Given the robust discussion and work that has already gone into this bill, I am hopeful the legislature can swiftly pass a bill that will help the AK LNG project get the financing it needs to start construction as soon as possible,” he said.
The administration emphasized that the bill introduces no concepts that have not already been considered by lawmakers. Each of its major provisions appeared in an earlier version of HB 381 and has already been debated during the Legislature’s regular or special sessions.
Dunleavy released the legislation eight days before lawmakers are scheduled to reconvene in Juneau on Aug. 20, giving them time to review the limited changes and prepare for a vote.
The original HB 381 was intended to give investors certainty about how the Alaska LNG project would be taxed during construction. It would replace traditional local property taxes during that period with a predictable payment structure tied to pipeline throughput.
The House passed a comparatively clean version of the governor’s bill in June. The Senate later expanded it by adding the S corporation tax and several other provisions, including labor requirements, reporting mandates and changes affecting the project’s timeline and financing.
Alaska’s Senate majority lays groundwork to sink new gasline bill — and blame Dunleavy
A six-member conference committee attempted to reconcile the House and Senate versions. The resulting compromise retained an S corporation tax and several Senate priorities, but it failed in the House on a 19-19 vote July 16. The special session expired July 19 without a bill reaching the governor’s desk.
Dunleavy subsequently called lawmakers back into a third special session, but the Legislature has conducted only technical sessions while negotiations continued.
The new bill represents a substantial movement by the governor. By accepting even a reduced and delayed S corporation tax, Dunleavy is yielding on the issue that created some of the deepest divisions during the earlier negotiations.
Senate President Gary Stevens had already indicated that a 2% S corporation tax was under discussion as part of a possible agreement.
The question now is whether the concession will attract enough support from the Senate majority without losing conservative House members who opposed attaching a new business tax to the gasline legislation. All members of the House are up for reelection and those who vote for a tax may pay a penalty with voters in conservative districts.
The administration wants the Legislature to act quickly when lawmakers return Aug. 20. The Legislature will only have five days, making passage unlikely.
4 thoughts on “Dunleavy introduces compromise gasline bill, accepts 2% S corporation tax”
It won’t be enough for the” leave it in the ground!!” Types like Wielechowski andGiesselThey want us freezing in the dark
A 2% tax on all S Corporations? Or just oil and gas S corporations? A large exemption before tax is due?
An ignominious move by our current governor; this is a camel’s nose slipped under the tent. There is absolutely nothing preventing a future legislature from increasing the tax rate and making it even more costly to do business in AK. Sadly, Dunleavy will be remembered for this more than for getting a gas line project moving forward (if he does). And those will not be fond memories.
You realize, of course, that any future legislature can pass legislation increasing or creating new taxes regardless of this bill right?