Alaska LNG Tax Bill Stalls on $54.5 Billion Gas Line Project

On August 13, 2026, leaders of the Alaska House and Senate said they would not reconvene the Legislature to take up Gov. Mike Dunleavy's (R) compromise gas line tax bill, leaving the tax change behind the Alaska liquefied natural gas (LNG) project stalled with the third special session set to end August 25. The governor's bill is based on House Bill 381, which would replace the state's 20-mill (2%) oil and gas property tax with a far smaller tax on gas throughput, a reduction of 80% to 90% versus current law, with a House Finance Committee adviser putting the cut at roughly 85%. HB 381 has been stuck since July 16, when the House rejected the conference committee version 19-19, two short of the 21 votes needed, minutes after Dunleavy threatened a veto over a corporate income tax provision attached in the Senate.

The Department of Revenue has told lawmakers the up-to-$54.5 billion project "will not proceed without property tax relief," according to Alaska's News Source, and lead developer Glenfarne had planned an FID on Phase One by the end of 2026. As this alert publishes, the third special session has produced no floor votes, and lawmakers have met only in brief technical sessions since July 27.

Alaska levies a 20-mill (2%) statewide tax on oil and gas property under AS 43.56, with municipal levies credited against the state tax. Applied to a $54.5 billion project, that structure taxes the project from first gas, before it earns export revenue. The property becomes taxable when gas starts flowing to in-state customers, as soon as 2029, and the processing plants needed for exports are expected online by 2033. HB 381, introduced at Dunleavy's request on March 20, 2026, replaces the property tax with an "alternative volumetric tax" (AVT) on gas moving through the system.

What HB 381 Would Do

The AVT converts a fixed cost into a variable one. The governor's original bill set the AVT at 6.0 cents per thousand cubic feet (mcf), escalating 1% annually, according to the Department of Revenue fiscal note. The conference committee's work draft adopted July 2 moved to split rates by project phase: 6.2 cents per mcf before the LNG plant enters commercial operation, 10.6 cents per mcf once it does, and a doubling to 21.2 cents per mcf after 10 years, per Petroleum News. Exhibit 1 compares the bill with current law.

The House-passed version also attached conditions for the project. The June 12 bill added a commitment to a Fairbanks spur line, up to $80 million in community impact reimbursements, priority for Alaska union labor, and a $16-per-unit price cap on project gas sold to in-state utilities, according to Alaska Public Media. Glenfarne has since flagged the price cap as a growing economic concern. "A $16 project energy price cap and tax-driven cost increases make project economics increasingly challenged," spokesman Tim Fitzpatrick said by email, according to the Alaska Beacon on July 17.

A Worked Example: Property Tax vs. Throughput Tax

Exhibit 2 compares annual tax under current law and each version of the bill. It applies each rate to full design throughput of 3.5 billion cubic feet per day (the DOR scenario), or about 1.28 billion mcf per year, after ramp-up. The original 6.0-cent rate escalates 1% annually, reaching 6.56 cents per mcf in year 10.

These figures rest on simplifying assumptions. The $1.09 billion figure treats assessed value as equal to announced project cost with no depreciation. Actual AS 43.56 assessments would decline over time, which is why DOR's cumulative 30-plus-year estimate, $10.6 billion in combined state and municipal revenue forgone through 2063, implies a smaller average annual gap than the year-one snapshot. Throughput, in-service dates, and rates are DOR's scenario for the House-passed version. The conference version's split rates differ, and the governor's August 12 compromise leaves the AVT schedule unchanged.

How the Bill Died Twice, and What the Third Session Has Produced

The House has passed the tax swap on its own and has rejected every version carrying the rider. The House passed HB 381 on June 12, 34-5. The Senate rewrote it on June 19, passing it 12-8 with the pass-through tax attached. Dunleavy rejected that version the same night and convened a second special session on June 20, after which the House formally rejected the Senate's changes and a six-member conference committee took over. The conference substitute, advanced 4-2 on July 16, kept a modified pass-through tax: delayed to 2029, applied at up to 9.4% to pass-through oil and gas companies with more than $1 million in taxable income, with Alaska LNG project income expressly exempted and DOR estimating up to $100 million a year in new revenue. That was not enough for the governor or the House's all-Republican minority, and the package failed 19-19 that evening.

Senate negotiators said the conference version was their final offer. Sen. Bert Stedman (R-Sitka), a member of the conference committee, said the governor "was definitely told on several occasions when we were negotiating this bill that this is our last and final offer. The bill goes down, it's dead. There's no playing around," according to the Alaska Beacon.

The third session opened with technical sessions only. The Legislature convened on July 27 in a technical session, the brief formality that satisfies the constitutional call, and leadership declined to bring members to Juneau without an agreement in hand. "It does no good to spend all that money to bring legislators into Juneau and really not have any kind of an agreement at hand or have a path forward," House Speaker Bryce Edgmon told Alaska's News Source. Through the first week of August the administration's bill remained in drafting, and majority leaders in both chambers said they had not seen it.

On August 12 the governor introduced a compromise bill. The bill is identical to the July 16 conference version of HB 381 except for three changes: the pass-through tax is set at a flat 2% rather than the conference version's graduated rate of up to 9.4%; its effective date is pushed to January 1, 2030, or first commercial gas through the pipeline, one year later than the conference version; and a provision that could have reduced state education aid to boroughs receiving gasline tax revenue is removed. "I have never been in favor of new taxes on Alaska's producers, and I still am not," the governor said in the release. "This bill is a compromise that removes a significant barrier to moving the gas line forward." He urged lawmakers to reconvene on August 20.

Senate majority leaders were skeptical. Senate Majority Leader Cathy Giessel (R-Anchorage) called the 2% levy a "low-fat milk version of a corporate income tax" and said the S corporation tax was not the only sticking point. "There were other deciding factors in this bill," she said, citing workforce provisions she called watered down and conflicting project cost figures, according to Alaska's News Source. "Everyone in the legislature wants a pipeline, just not at any cost," Senate President Gary Stevens (R-Kodiak) said. Giessel said it would be a challenge to get "11 members in the Senate" and 21 House members to Juneau "right now, or even in the coming months." Industry groups, for their part, objected that the 2% tax would begin in 2030 even if the project never delivers gas.

The Session Calendar

The session has 10 days left. The third special session convened July 27 and, under Alaska's 30-day constitutional limit, must conclude by August 25. As this alert publishes on August 15, the Legislature is on day 20 of 30, with no bill on a floor calendar. The August 18 primary election falls inside the session, and every House seat is on the ballot. Dunleavy, who is term-limited, leaves office in early December, and the 35th Legislature convenes in January 2027. After the July 16 vote, Stevens said, "I sort of feel you need to go to the next Legislature."

Leaders of both chambers say the governor's bill lacks the votes to pass. Late on August 12, the House majority coalition said "intractable differences have emerged on the Governor's bill relating to property tax relief for the gas line." On August 13, Speaker Edgmon and Senate President Stevens said they would not bring members back to take it up. "The votes just aren't there," Edgmon told the Alaska Beacon, and Stevens said, "I think we've reached the point, honestly, where we need to turn it over to the new governor." The House's 19-member minority asked the majority to call the House back to Juneau. That evening, Dunleavy wrote on social media, "There's little reason to keep the session going," according to Alaska's News Source. Exhibit 3 lays out the calendar.

What to Do Now

This is for project sponsors, lenders, producers, and municipalities whose plans depend on Alaska's tax terms for the gas line. Leaders of both chambers have said they will not take up the governor's bill before the session ends August 25. If you want a read on what that means for a specific project, reach out to our team.

References

1. Alaska State Legislature, House Bill 381, 34th Legislature, bill status and documents (2026).
2. LegiScan, Alaska HB 381, 2025-2026 session, history and votes.
3. Alaska Department of Revenue, Fiscal Note 2 for HB 381 (March 20, 2026).
4. Alaska Public Media, Alaska House passes tax cut for North Slope gas pipeline, sending bill to Senate (June 12, 2026).
5. Juneau Independent, Senate passes modified gasline bill, but Dunleavy says it's unacceptable and second special session will begin Saturday (June 19, 2026).
6. Alaska Beacon, Alaska House rejects Senate's LNG gas line bill, lawmakers say negotiations will continue (June 20, 2026).
7. Petroleum News, New bill version out: conference committee HB 381 work draft includes pass-through entities tax (July 12, 2026).
8. Alaska Public Media, Committee sets Alaska LNG tax cut bill, including expanded corporate tax, for final vote (July 16, 2026).
9. Alaska Beacon, After governor's veto threat, Alaska House votes down tax break for proposed natural gas pipeline (July 16, 2026).
10. Alaska Public Media, Dunleavy, rejecting corporate tax change, calls third Alaska LNG special session (July 16, 2026).
11. Office of Gov. Mike Dunleavy, Statement on HB 381 (July 16, 2026).
12. Alaska Beacon, Hilcorp killed Alaska LNG bill, some legislators say, but governor calls the claim 'bulls**t' (July 17, 2026).
13. Alaska's News Source, A third special session on the gas line begins next week. What makes it different than the last two? (July 20, 2026).
14. Alaska's News Source, Dunleavy urges lawmakers to pass LNG bill they haven't seen (August 6, 2026).
15. Alaska's News Source, Governor adds contested provision to gas line tax bill, Senate Majority Leader calls it 'low-fat milk version' (August 10, 2026).
16. Office of Gov. Mike Dunleavy, Governor Dunleavy Introduces Compromise AK LNG Tax Legislation (August 12, 2026).
17. Alaska's News Source, Governor introduces 'compromise' Alaska LNG legislation that includes a corporation tax (August 12, 2026).
18. Must Read Alaska, Industry leaders respond to special session gasline legislation (August 13, 2026).

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