By SUZANNE DOWNING
Gov. Mike Dunleavy on Friday introduced legislation aimed at overhauling how Alaska would tax one of its most ambitious energy projects in decades, proposing a shift away from a traditional property tax model toward a production-based system tied directly to the flow of natural gas through the Alaska LNG pipeline.
The proposal would replace the current 20-mill property tax, equivalent to 2% of assessed infrastructure value, with what is known as a volumetric tax based on how much gas actually moves through the system, rather than the physical infrastructure. The Dunleavy Administration says the change is designed to remove a major financial hurdle in the early years of the Alaska LNG (AKLNG) Project, when construction costs are high but revenues have yet to materialize.
Under the existing structure, the project faces a significant fixed tax burden upfront, regardless of whether it is generating income. Dunleavy’s plan instead delays taxation until the project is operational and ties long-term payments to throughput, a model the administration argues is more predictable and less prone to disputes over infrastructure valuation.
“The Alaska LNG Project is one of the most significant economic opportunities in our state’s history,” Dunleavy said in a statement. “This legislation removes a structural barrier that was standing between Alaska and decades of energy security, jobs, and revenue.”
The bill lays out a phased approach to taxation. During construction and up to first gas, the project would remain exempt from state and municipal property taxes, consistent with current law. Once operations begin, property taxes would be held in abeyance during a ramp-up period until the pipeline reaches sustained throughput of 1 billion cubic feet per day over 30 days, or for up to 10 years—whichever comes first.
After that point, the project would transition to a volumetric tax set at $0.06 per thousand cubic feet of gas transported, with the rate increasing by 1% annually.
State officials argue the shift aligns Alaska with global LNG investment standards and reduces financial risk for developers, including Glenfarne, the lead partner on the project. The administration also emphasized that lowering upfront costs could ultimately benefit Alaska consumers, since early tax burdens under the current system would likely be passed on through higher energy prices.
Revenue from the new tax would be split between the state and local governments based on where project infrastructure is located. The Department of Revenue estimates the structure could generate more than $26 billion over 30 years, including roughly $22 billion for the state and nearly $4 billion for municipalities.
The legislation includes a backstop provision: if the project has not begun commercial operations by Jan. 1, 2040, the alternative tax system would be repealed and the existing property tax structure reinstated.
Dunleavy said the proposal reflects the state’s constitutional obligation to develop its natural resources for the maximum benefit of its residents, pointing not only to government revenue but also to broader economic impacts.
“The benefit of the LNG pipeline isn’t just revenue to government coffers,” he said. “It includes affordable and abundant energy for Alaskans. That attracts new industry, makes it cheaper to operate schools, and creates new jobs.”
The AKLNG project would transport natural gas from the North Slope through an 807-mile pipeline to a liquefaction and export facility in Cook Inlet, while also providing in-state access to gas supplies. Long viewed as a cornerstone opportunity for Alaska’s energy future, the project aims to commercialize vast gas reserves that have remained stranded for decades.
