Alaska Governor to Introduce LNG Bill with Corporate Tax on Pass-Throughs

Gov. Mike Dunleavy plans to introduce a new Alaska LNG bill that would impose a maximum 2% corporate income tax on certain privately held oil and gas businesses while exempting the LNG project itself.

Rachel Bylsma, Dunleavy’s deputy chief of staff, said the tax would begin on January 1, 2030. Earlier versions set the start date in 2029.

Dunleavy signaled the shift in a statement on August 10 as lawmakers continued negotiations during the third special session. He said the project needed legislation that could attract financing.

“If we want to build the Alaska LNG project, we must pass legislation that makes the project financeable. I’ve had productive conversations with legislators and stakeholders, and those discussions are helping shape an updated version of a bill I’ll introduce soon.”

The proposed rate would apply to oil and gas companies organized as S corporations and LLCs, including privately held operators such as Hilcorp. The Alaska LNG project would not pay the new tax.

The measure follows the defeat of House Bill 381, which passed the Senate 11-8 on July 16 but ended in a 19-19 House tie after Dunleavy threatened a veto over the tax provision. He called the proposed change a “dealbreaker” and a “poison pill.”

The governor called the third special session beginning July 27, 2026, keeping the gasline negotiations open after HB 381 collapsed. Lawmakers now have until August 25, 2026, when the session is scheduled to expire.

Dunleavy is accepting a smaller tax to keep the gasline plan alive

The proposal would narrow a dispute over who pays Alaska’s existing tax. Publicly traded companies such as ExxonMobil currently pay the state corporate tax, while privately held businesses such as Hilcorp generally do not because of their structure.

The existing rate is 9.4%. The compromise would instead place a 1% to 2% charge on qualifying businesses, with the maximum rate set at 2% in the version Dunleavy plans to introduce.

Hilcorp stands as the clearest example. The company would face the new levy, while the LNG development would remain outside it.

Sen. Bill Wielechowski, D-Anchorage, has advocated closing the gap. After the Senate vote, he said:

“If you want a gas line, everybody’s got to compromise, and I think that’s ultimately what you saw today.”

Senate President Gary Stevens, R-Kodiak, said August 10 that discussions were moving toward a 2% tax. He also indicated that “legislative leaders were already aware of the emerging compromise.”

Senate Majority Leader Cathy Giessel, R-Anchorage, and House Speaker Bryce Edgmon, I-Dillingham, are among the legislative leaders involved in the negotiations.

The project’s tax break would replace a property levy

Legislative leaders have paired the company tax with relief for the proposed gasline. The bill would replace the project’s current 2% property tax, described as a 20 mill levy, with a volumetric tax based on the amount of gas transported.

Supporters say that change could reduce the project’s tax burden by about 85% over 30 years. The proposed 807-mile pipeline would carry natural gas as part of the wider development.

The Alaska Department of Revenue estimates the project could produce $26 billion in tax and royalty revenue over 30 years. The state would receive $22 billion, while local municipalities would receive $4 billion.

The department separately estimated that the new company tax could produce between $0 and $100 million per year under current production. With a full Alaska LNG buildout, it projected $102 million in additional revenue in 2033.

Dan Stickel, the department’s chief economist, has been involved in the revenue analysis.

Rising construction costs are adding pressure to the negotiations

The project’s official cost estimate ranges from $44.5 billion to $54.5 billion. Dunleavy recently said the final price could reach “upwards of $65, $70 billion” as inflation and capital costs rise.

That estimate has drawn skepticism from lawmakers. Sen. Jesse Kiehl, D-Juneau, said the project has “always been economically challenged.”

Brendan Duval, CEO of Glenfarne Group, the lead project developer, has said the pipeline cannot secure financing without the tax concessions. The company’s position has made the property-tax provisions central to the legislative talks.

Dunleavy had initially opposed the broader company tax and argued in July that a 9.4% levy would discourage investment. He also described the provision as a “parasite.” The reduced rate represents an effort to preserve the gasline’s tax treatment while addressing the Senate’s demand to close the existing gap.

Leaders are working against an August deadline

Dunleavy is pushing lawmakers to reconvene on August 20 to complete the legislation. Senate leaders have warned that the remaining schedule may not allow enough time for a thorough review.

The negotiations concern both HB 381 and its Senate counterpart, Senate Bill 280. The Senate passed the compromise gasline measure before the House tie stopped it.

The White House backed Dunleavy’s broader tax reform in a letter issued on May 4, 2026, through Alex Meyer, its director of intergovernmental affairs. The letter said a “stable and competitive policy environment is critical.”

The reduced tax is aimed primarily at privately held oil and gas operators, but the exemption for the LNG project is intended to preserve its financing case. Earlier legislative proposals delayed the company tax until 2029; the newer version moves that date to January 1, 2030, with additional descriptions of implementation tied to the start of “first gas.”

Stevens’ warning about the compressed schedule leaves lawmakers balancing the tax compromise against the project’s changing cost estimates. The special session’s August 25 expiration is the next fixed deadline.