The Alaska LNG tax reform bill (HB 381) died in the House with a 19-19 vote and two members excused. This marked the latest setback in Governor Mike Dunleavy’s push for a volumetric tax structure to replace the high petroleum property tax. Earlier in 2026, Dunleavy introduced SB 280 and HB 381, both of which were used by the Senate to push a new tax that would require oil and gas pass-through entities to pay taxes as if they were C-corporations. Dunleavy has called a third special session, which will begin July 27.
Although the gasline bill was a major focus of the regular session, the Legislature failed to pass a bill providing a workable tax structure for the project. The Governor seems intent on calling special sessions until the Legislature succeeds in passing a bill. However, the Senate has consistently prevented the passing of the bill by insisting on the expansion of corporate income tax— an expansion unpopular with conservative legislators. Dunleavy has drawn a hard line at this tax expansion, saying he will veto the bill if it contains the new tax which liberal legislators argue “closes the S-corp loophole.”
Opponents of the S-corp (or pass-through entity) tax claim the tax will deter investment, hamper the project’s economics, and unfairly punish industry leaders such as Hilcorp essential to the project’s realization. On the other hand, proponents of the new tax argue that it corrects an unfair “loophole” in the system, drives needed State revenue, and encourages industry leaders to be “good corporate citizens.”
How Did We Get Here? A Brief Look at AK LNG’s 40 Year History
For more than four decades, the promise of a natural gas pipeline from Alaska’s North Slope has loomed large over Juneau. It has been a recurring ambition that has drawn governors, lawmakers, and special sessions into repeated cycles of high-stakes debate, ambitious legislation, and stubborn deadlock.
In the 1970s and into the 2000’s, the project began as competing federal and private concepts with the Alaska Legislature largely playing a supporting role. Lawmakers endorsed varying route ideas such as an Alaska Highway corridor through Canada or an all-Alaska LNG export path. Without a decisive legislative package to force alignment between state interests and producer timelines, the body remained reactive rather than directive. Successive proposals faded without steel in the ground.
The political calculus shifted dramatically in 2007. Governor Sarah Palin introduced the Alaska Gasline Inducement Act, or AGIA, framing it as a way to build a pipeline on Alaska’s terms without surrendering sovereignty. The Legislature passed AGIA in May 2007.
A ceremonial signing followed the next month. The law offered up to $500 million in state matching funds and other benefits in exchange for strict project commitments. In 2008, lawmakers awarded the exclusive AGIA license to TransCanada, later joined by ExxonMobil.
Yet producers stayed reluctant to lock in firm shipping capacity. Low natural gas prices and soaring capital costs rendered the effort uneconomic. The AGIA agreement was terminated around 2014 after open seasons failed to produce viable commercial support. This left the state with sunk costs and no pipeline.
Lawmakers turned to a new institutional approach between 2010 and 2014, driven by reports of declining Cook Inlet supply and rising fears of local energy shortages. In 2010 the Legislature passed House Bill 369, creating the Alaska Gasline Development Corporation.
Three years later, House Bill 4 established AGDC as an independent public corporation of the state. Then in April 2014, Senate Bill 138 expanded AGDC’s mission and authority so it could develop a full Alaska liquefied natural gas project on the state’s behalf. It also allowed AGDC to acquire equity interests and assist the Department of Natural Resources and Department of Revenue in maximizing the value of state gas.
Despite the expanded statutory power and ongoing state funding for studies and permitting, the major North Slope producers— ExxonMobil, BP, and ConocoPhillips— exited the joint venture by roughly 2016. They cited costs and market conditions. AGDC became the sole developer.
The Legislature continued appropriating money for applications, including the 2017 Federal Energy Regulatory Commission filing. The project advanced through permitting, with FERC authorization arriving in 2020. Yet Final Investment Decision remained elusive.
From 2016 through 2024 the pattern persisted. AGDC pushed forward under legislative mandates while lawmakers explored ownership structures and federal partnerships. Appropriations kept the work alive. The fundamental obstacles— securing long-term commercial agreements and crafting fiscal terms attractive enough for private capital— proved intractable.
In 2025, Glenfarne Group became the lead developer and majority owner of the Alaska LNG project, acquiring 75% ownership while the state retained 25% through AGDC. This private-sector partnership marked a significant shift away from full state control, aiming to bring industry expertise and accelerate progress toward construction. Glenfarne has advanced preliminary commercial commitments with major North Slope producers and moved Phase 1 pipeline efforts forward, targeting in-state gas delivery by 2029 if fiscal and regulatory hurdles are cleared.
Cumulative state spending on studies mounts even as skepticism has grown over the absence of actual construction. Producer-state misalignment, fights over revenue sharing between the state and municipalities, caucus disagreements over precise fiscal terms, and the chronic difficulty of locking in commercial commitments have kept the project in a holding pattern of studies, permits, and political theater. Nearly half a century after the first serious proposals, Alaska’s lawmakers remain locked in the same struggle: how to turn a long-held energy ambition and campaign promise into a real-life pipeline.
