The Weekly Top 3 (7.20.2026)

Welcome to The Weekly Top 3 — our look at the top 3 things on our mind here at Alaskans for Sustainable Budgets — for the week of July 20, 2026.

This week, our top 3 issues are these: 1) we discuss the results (that will surprise many) from comparing the income tax rate on middle-income Alaska families resulting from PFD cuts against the income tax rates on middle-income families in other states (2:10), 2) we try to bring some clarity to the seeming confusion about where the Southcentral gas supply sits heading into the next winter and beyond (17:05), and 3) we explain why we draw a straight line from the failure of the legislature earlier this session to treat Dunleavy’s proposed sales tax seriously to where we are now on the S-corp tax (37:18).

The Weekly Top 3 is a regular weekly segment on The Michael Dukes Show. The Show broadcasts on Facebook and YouTubeLive as well as via streaming audio from the Show’s website weekdays from 6–8am. We join Michael weekly in the first hour of Tuesday’s show, from 6:25–7am, for a discussion between the two of us about our three issues.

Transcript

Welcome And Weekly Top Three

SPEAKER_01 0:10

This is Brad Keith, Managing Director of Alaskans for Sustainable Budgets. Welcome to the Weekly Top Three, the Top Three Things On Our Mind here at Alaskans for Sustainable Budgets for the week of July 20th, 2026. The Weekly Top Three is a regular segment on the Michael Duke Show. The show broadcasts on both Facebook Live and YouTube Live, as well as via streaming audio from the show's website weekdays from 6 to 8 a.m. I join Michael weekly in the first hour of Tuesday show from 6.10 to 7 a.m. for a discussion between the two of us about our three issues. We post the podcast of our discussion following the show on the Alaskans for Sustainable Budgets Facebook, YouTube, SoundCloud, Spotify, and Substack pages, also on the Alaskans for Sustainable Budgets website, as well as the projects page on national blog site, medium.com. You can find past episodes of the weekly top three also at the same locations. Keep in mind that in addition to these podcasts during the week, you can also follow and participate in the discussion with us of these and other issues affecting Alaska's fiscal and economic condition by following us on the Alaskans for Sustainable Budgets Facebook page and through our posts on Twitter. This week, our top three issues are these. First, we discuss the surprising results from comparing the income tax rate on middle-income Alaska families resulting from PFD cuts against the income tax rates on middle-income families in other states. Second, we try to bring some clarity to the seeming confusion about where the South Central gas supply sits heading into the next winter. And third, we explain why we draw a straight line from the failure of the legislature earlier this session to treat Governor Dunleavy's proposed sales tax seriously to where we are now on the S-Corp tax. And now, let's join Michael.

PFD Cuts Compared To State Taxes

SPEAKER_00 2:10

Well, Brad, um I hate to do it, but I gotta rip the band-aid off. Let's get into it, I guess. Uh let's start off with number one, where Brad has another statistic about the impact of the PFD. I didn't bring the slides up, so I'll get those going. But that's where we're gonna start off. So so hit me with it, Brad.

SPEAKER_01 2:31

So once I get a once I get a spreadsheet going, um, it's hard for me to stop um because I have all these databases I can go to and and start, you know, trying to trying to put the numbers that I've got in perspective. Uh last week we did a uh we did a segment on the PFD and and and what the PFD cuts look like as a tax on adjusted gross income. And this these aren't just cuts, these aren't just the impact on the PFD itself. This isn't a share of the PFD. It's when you add the PFD cut to to income to adjusted gross income, and then calculate the impact of the PFD cut on total adjusted gross income, which is the way you do income taxes or or any taxes. Um and and we looked at at that last week. And then that showed over the span of time the PFD cuts as a as a share of adjusted gross income, Alaska adjusted gross income, uh going up and down, but over the last several years since 2023 uh sort of just going up. Um and and showing from 2023 doubling from 2. whatever that is, 6% to over 5.4% uh in the most recent, uh, in the most recent cut. So that's that that was an effort to look at what PFD cuts are doing to average income. And I want to stress, I think it's important to understand, this is middle, this is the impact on middle income families. This isn't the impact on lower income families or upper income families because PFD cuts are so regressive, it's much less, it's much less than that 5.4% on upper income families, it's much more than that 5.4.4% on lower income families. This is an effort to look at it right in the middle, what the effort, what the impact is on middle income families. So I had that. I had that number. And then I have databases that deal with adjusted gross income in other states, average adjusted gross income in other states, which you can get from the IRS statistics. And I had income on from the tax foundation on what the state income tax rates are in other states. And this is, and so this week, what I did was calculate was look at what the impact of PFD cuts are on Alaska families as a as a share of income compared to the income tax rates that you find in other states that have that have income taxes. And this is all the states, this chart is all the states that have uh have uh state level income taxes. And what you see is that the PFD cut that we have in Alaska uh is um uh again uh on an average income, a middle income Alaska family, middle income Alaska household, which is what all of these are calculated on, middle income households. The PFD cut, the Alaska's PFD tax, is the third largest tax on adjusted gross income of any state that has a tax on adjusted gross income. Um Idaho is the is the top Idaho. I mean, that that was a surprise because you would think of uh people normally think of Idaho as a very conservative state, but it has a flat rate income tax of 5.8% uh in Idaho. And then Oregon's the next highest. And again, a lot of these states, somebody will say, well, California is a lot higher than that. Well, they have higher marginal rates. They have higher rates that apply to upper income families, and they have lower rates that apply to lower income families. This is the this is the average, this is the impact on middle income families. This is the impact on on the average adjusted gross income in each state under each state income tax. So it's I'm just trying to look at at how each state deals with middle income families. And you and so Idaho's the Idaho's the top at 5.8 percent, uh, Oregon is at 5.6%, Alaska with the PFD tax is at 5.3%. And then you go all the way through all the states, you've got you've got uh uh New Mexico, you've got Louisiana, you've got other states in there, Oklahoma has a has an income tax, and North Dakota is at the bottom with uh 0.6%. Again, the impact on middle-income families uh in North Dakota of 6%. So when people say, well, you know, PFD cuts, they aren't much, don't worry about those. As a share of income of middle income families uh uh in Alaska, the PFD tax is currently now uh putting Alaska as the third highest uh tax uh um in the in the US, state level tax in the U.S. Now that bounces around. I mean, if if you if you look back at the at the prior chart, you can see that the that the tax rate sort of depends on the year. Um uh so it's 2.61 in 2023, it was 3.93 in 2025, and so on. But on a on the the latest tax rate, the one that the that the legislature enacted this past year, uh that's that's hitting Alaskans this year is 5.4. And when that translates over to the average impact, um uh when it translates over to the impact, it's the it's the third largest uh state. So I it is, I mean, it it PFD cut people try to minimize the impact of PFD cuts. They try to minimize the impact of of PFD cuts on the Alaska economy, they try to minimize the impact of PFD cuts on on outmigration, they try to minimize the impact on on what it's doing to Alaska households. But when you stack it up against what's going on elsewhere in the US, you see that PFD cuts, uh, the impact on Alaska is significant and and indeed huge uh compared to the other states that have uh that have state income taxes.

SPEAKER_00 8:38

It is uh it's astonishing to look at for folks on the radio. Brad's got this graduated chart that starts on the left with the highest in Idaho at 5.8 and runs all the way to the smallest in North Dakota with 0.6, and Alaska is this big red bar right in the middle. And again, people aren't thinking, I mean, we got people arguing with us, Brad, on this program that say, oh no, it's not a tax because you never saw the money, so it's not really a tax. It's just, it's just free money that they're taking away. You know, you just lost some of your free money. But again, I can't remember if it was Milton Friedman, I think it was Milton Friedman that made some comment about how one of the you know evilest things was the withholding tax because we never see it, so we never feel the cost. And that's part of what we're looking at here. The money is withheld. I mean, we just talked about, you know, $670 million, roughly, $678 million was the cost of a thousand dollar PFD for every applicant in the state of Alaska. If they'd paid the full PFD, it would have been closer to $2 billion. Can you imagine the impact of $1.4 billion on the economy? Forget about individuals, forget about people and business owners buying tires or putting heating oil in the tank or buying TVs or just reinvesting in their business or starting up a business. $1.4 billion a year for the last almost 10 years now has been sucked away from the people of Alaska. And that's a huge, huge impact.

SPEAKER_01 10:06

Yeah, in discussions I'm I'm having, I'm I'm finally, you know figuring out what really, I mean, what hits up people when they say, oh, it's free money. To me, and and I explain this to others, to me, what the PFD is is Alaska's equivalent of oil royalties. I mean, there's oil royalties to mineral interest owners in Oklahoma and Texas and Louisiana. Those royalties go to private sector individuals. The private

Why PFD Cuts Feel Invisible

SPEAKER_01 10:35

sector individuals then then spend those or do whatever they do with them in the private economy in those states, and it generates a significant amount of activity in the private economy in those states. In Alaska, because we own the resource in common, because it's a commonly held resource, we distribute, we distribute our uh oil royalties, same sort of same sort sort of thing as in the other states. We distribute our royalties through the form of the PFD. I mean, it's not any different. It's how it's how the the private sector component of the mineral interest income is distributed to the mineral interest owners. And and and so when you when you look at it that way and you look at the statutory, the statutory framework for what that mineral interest owner share is supposed to be, um, and then you look at the government withholding it and diverting it withholding it and diverting it. I mean, that's that's as clear a tax as in Oklahoma, where when when a producer is getting ready to mail the royalty check to the mineral interest owner, the producer has to withhold and divert to the state a share of that mineral interest distribution, the share of that royalty distribution to the state as tax. It's the same thing that's that's going that's going on up here. I mean, people who don't want to look at it that way are usually in the top 20%, and they say, oh, it's a trivial amount, don't worry about it. Well, it's trivial to them, but it's not trivial to middle and lower income Alaska families. And that's and this chart is a way of trying to express that that what we're doing up here in Alaska with these diversions, with these withholdings and diversions, is huge compared to what's going on uh with taxes in other states.

SPEAKER_00 12:20

But don't worry, they're gonna get it right this next time. They they're gonna get it right this time, Frank says. I beg to differ. We the people do not own the royalty, the legislature owns it, right? I mean, that has the effect of it. I mean, they have the effect of owning it at this point, they can decide whatever the hell they want to do with it.

SPEAKER_01 12:39

So, so that so in my again, states governed by statutes, right? We're governed by laws, and the laws are in the statutes. It it it to me, what's going on in Alaska is no different, frankly, than goes on in the lower 48 when you have a family family royalty trust. I've set up a few of those when I was down in the lower 48. And what a family royalty trust is a family owns the mineral interest. And so there's an administrator that brings in the that that receives the mineral revenue, the royalty revenue. And sometimes they invest it. I mean, sometimes it's sort of like the permanent fund, right? They invest it and and and generate additional returns before they distribute it. You do that to sort of equalize the the revenue across time. And and so it's a family royalty trust. There's an administrator who's who is administering the trust according to the trust rules and distributes and is to distribute the proceeds according to the to the trust rules to the to the family members. To me, that's that that's we've got that set up in Alaska. We have a huge family. We have, we have, you know, we own the mineral interest in common, so it's it's the residents of the state. But there are there are trust rules set by statute, and the trust rules are supposed to provide for the uh for the distribution. To me, what's going on is the equivalent of in a lower 48 mineral interest trust, the administrator saying, Oh, you don't need all that money. I'm I need I need to buy a new Rolls-Royce or I need to buy a new uh a new house, or I need to take a long vacation in Europe. Uh so I'm gonna keep that money, a portion of that money for my needs, uh, instead of distributing it according to the trust rules to the to the to the trust members, uh, trust beneficiaries. And and that's that's what to me is is going on in Alaska. We have, I mean, I've I've been around this stuff a long time. I've been around Lower the way Lower 48 operates, I've been around the way royalties operate a long time. And to me, it's what we're doing in Alaska is very normal. We have a setup, we have a trust set up, we have a trust administrator, we're supposed to be distributing the proceeds of the trust to the trust beneficiaries. And and what we've got is the trust, the trust administrator just converting uh a portion of the money uh uh to their to their own benefit. When a government does it, you call that taxes. I mean, when the government withholds, I mean it's like government employees, right? And government employees are paid by the government, but the state withholds a portion of their in in in other states, the state withholds a portion of their distribution to their employees and diverts it to other government uses. That's what's going on here. The administrator is failing to follow the rules of the trust. And um and they can do that because the legislature has those powers in Alaska, but that doesn't make it any less of a tax uh on the on the beneficiaries of the trust when the government does it.

SPEAKER_00 15:32

It's uh yeah, and it's it's tough to fight this. That's the thing. I mean, everybody's joking. Well, it's just Randy that's saying it. I know it's Randy that's just saying it in the chat room. But the problem is there's a ton of people out there who believe exactly like Randy. Well, it can't be a tax because they're not calling it a tax. And so it can't really be. But again, whether it's called a tax or it's called a uh fuzzy bunny, whatever it is, it has the same effect on the economy. It has the same effect on average Alaskans. It has the same effect uh on everyone. And and the effect is, again, that it grows the government while stifling the private economy. That's exactly what the effect is in the long run, Brad.

SPEAKER_01 16:11

Yeah. And this chart, this chart is to show is growing government. We're taking more out of the pockets of middle income families in Alaska through this tax than than is taken out in the other, except for two, except for Idaho and Oregon, taken out in any other state that has a that has an income tax. We are tax heavy in Alaska. So when people say, oh, Alaska doesn't have any taxes, I you know, to me, they don't they don't know what they understand, they don't understand what they're saying.

SPEAKER_00 16:40

They don't made that argument for years that we're the most heavily taxed state in the nation because if you took all that revenue and put it directly to the people and then taxed them back, every person in the state's paying twenty thousand plus dollars per person in taxes, essentially, because it's all coming from those royalties and from that revenue and from the permanent fund. We're all getting uh we're all getting screwed on that deal. Brad Keithly, Alaskans for sustainable budgets and the weekly top three.

Southcentral Gas Deliverability Explained

SPEAKER_00 17:11

We're on to number two. Number the confusion around South Central gas, Brad, and there's a lot of it. I mean, we've had we saw the RCA decision, we saw all this other stuff, uh, we see what's going on with uh with uh NSTAR and Chugach and and Hill Corp and everything else, and we're like, do we have a crisis or don't? We had a conversation with John uh uh Hendricks from Hex the other day. Do we have a crisis or don't we have a crisis? What is the confusion around the South Central gas?

SPEAKER_01 17:47

Yeah, the thing that triggered this was an article in the uh Alaska Public Uh Media News, the headlines of which was natural gas supplies, quote, not looking good, close quote, for South Central this winter, NSTAR says. Um, and and that sort of, I mean, that sort of encapsulated the confusion to that that that I think is going on about what's going on. Um, so keep in mind there are two different uh measures of gas uh that's important for this purpose. One is deliverability, how much can NSTAR deliver on a day, and the other is supply, total supply, how much does NSTAR deliver in a year? Those are two and those are two entirely different things. Um and and they are they are related in that they both relate to gas, but they are two entirely different things. When NSTAR says that natural gas supply is not looking good for South Central this winter, what they're saying is we don't have deliver we may not have deliverability. We may not be able to meet peak day or near peak demands uh in South Central for gas uh on the coldest days or on the days of highest demand. Um and that is due to the the lack of of being able to turn on the faucet and immediately getting all you need. NSTAR has a storage field that will supply some of that. So they get it two different ways in the winter. One is normal supply that's coming through their pipeline that producers are delivering on any given day coming through the pipeline. That means that meets a portion of the winter demand. The remainder of the winter demand is met through uh met through storage. And NSTAR has a storage field that helps supplement its deliverability on uh on any given day. That storage field over the course of the over the course of a winter, it may be full at the beginning of the winter, but that storage field as it's pulled at during the course of the winter will start will start playing down. Um it's a it's what the industry calls a huff and puff. So you can so you can refill it during the course of the winter if you have if you have semi-warm days, days that you don't have full demand, but we don't have many of those in Alaska over the course of the winter. So basically you start you start full and then you start gradually going down uh over time as uh as the winter winter plays on. And the and the real issue is whether as you get toward the end of the winter, uh uh the end of the of the whether you have really cold days at the beginning, which causes you to pull down a lot of storage right at the beginning. And then what happens later in the winter if you have another set of cold days, you don't have as much storage availability, you don't have as much storage deliverability uh as you had at the beginning, and so you may have a tough time meeting that late deliverability. I think that's what Sims is talking about uh in this coming winter. That coupled with the the pipeline deliveries, the field deliveries that he's getting from producers may not been be as strong as they've been in the past uh in the course of the winter. So you may be more reliant on your storage to give you deliverability that previously had come from uh from pipeline deliveries. That's that's an issue. That's an issue that we had, frankly, we've had the for the last few years uh as pipeline gas has sort of drifted down in terms of the winter volume as and as the storage field has from time to time undergone some issues uh in uh in adding to the deliverability when you get to when you get to cold days. That's one issue. Then we've got additional issues about what's happening in the long term. As the supply from the cook inlet supply, overall supply from the cook inlet annual supply plays down, you've got less and less in the pipe on cold winter days. You hit you're more and more dependent on deliverability uh coming from storage. And I think that is not not this coming year, but I think as you look at future years, That's where NSTAR has been focused on developing this additional storage field that was the subject of the RCA decision earlier this month. NSTAR needs views the need for additional deliverability as it as we get farther farther out in the future as the supply from existing pipeline supplies and existing producer supplies start playing down. And the RCA uh, well, a combination of things have put that up in the air. NSTAR applied to the RCA for what they called advance approval, preliminary approval of the storage field, so they so they would know they would be able to cover the recover the costs of they asked to be able to recover the costs of the storage field once they build it uh in rates. Um the RCA turned that down because the RCA said a couple of reasons. One, they said uh the the Department or Natural Resources hasn't approved the storage field yet. There's a dispute about who owns the storage field, there's a dispute about whether it can operate as a storage field. And so the RCA said, well, it's too preliminary to to deal with this issue because you don't have resolution out of the DNR, which you need, about whether this storage field, uh, who owns the storage field, who owns the the poor space.

SPEAKER_00 23:25

And who's the who's the to the two people? Is it NSTAR and Hillcorp? Is that just finding out who owns the field?

SPEAKER_01 23:31

It is. Hillcorp has has made claim uh that they own the poor space. Uh and uh NSTAR believes another producer owns the poor space, the producer from whom they're buying uh what's called pore space. It's the space that into which you can put gas. Um uh poor gas, I guess. Um two different terms, but but having the same meaning. Um and and and there's a question about who owns the poor space uh in the field. And so DNR's got to resolve that. And the RCA said, and DNR has yet to resolve it. And so the RCA said, well, until until you resolve it, uh we don't know whether this is a real field or not, a real project or not. And we're not gonna approve a blank check for you on something that we don't know is real and something that we can't, you know, sort of evaluate

Storage Fields And Winter Peak Risk

SPEAKER_01 24:20

and understand and and and get our get our arms around. But NSTAR, I don't think anybody disputes, I don't think the RCA would dispute, certainly I don't think the RCA would dispute that NSTAR needs additional storage capacity uh as the fields, as the as the production from the fields, particularly the deliverability from the fields, the winter day deliverability from the fields in the in the cook inlet, uh the cook inlet play town play down. NSTAR also needs this storage space. Um uh if we when we go to LNG imports, and we are going to go to LNG imports at least for e time. When we go to LNG imports, NSTAR also needs the delivery, also needs the storage because the best time to buy LNG is in the summer. Uh that's when the prices are lowest. Japan doesn't have the Asian markets, don't have a lot of storage over there, so they tend to buy what they need on peak. They tend to, you know, buy a lot in in the winter day, in the winter months. Uh, and so the prices in the winter months are much higher than the prices in the summer months. So NSTAR, which does have the ability to develop storage, wants to develop storage to be able to buy LNG uh in the summer uh and store it. And there's other, I mean, Hex, uh John's uh John's company, uh uh Hex, uh Bluecrest down at uh down off Anchor Point. Those companies can uh are capable of producing gas, but they can't commit to it on a firm basis because they're not sure that how their wells are going to produce during winter. They're not they're not willing to make the financial commitment to say we will, we will absolutely produce, we'll invest whatever it takes to produce. And what John wants to do, what Sims wants to do is to buy their gas on an interruptible basis whenever they have it, um, in the summer, in the winter, whenever they have it, and put it into the storage field to enhance his deliverability as the pipeline deliverability from the lower 48 uh from the Cook Inlet Wells uh plays out. So, I mean there are issues all through that all through that cycle, but that's what's going on. It's an issue about deliverability uh from NSTAR's standpoint, it's an issue about deliverability. Will we have the gas on the cold days? And that relate and that revolves around two things that revolves around storage and it revolves around the deliverability coming from their pipeline supplies.

SPEAKER_00 26:42

So 2027 is the is the is the predicted date in which we hit the the true crunch, right? We've already been on the verge a couple of times, and this last winter was super brutal, uh, and there was already talk. And and now they're saying in 2027 it could be bad enough that they could have rolling blackouts, uh, you know, where they shut things down, or they, you know, they they and and that's when people start asking questions was you know, what does that mean? Does that mean I won't be able to heat my home or keep the lights on for periods of time? Or what does that mean? I mean, where are we at? Why are we? I mean, we're one year away from this or less going into this next winter. We're you know, we're five, six months away from this. And if not now, then when? What is, you know, why is the RCA holding it up? Why is NSTAR taking so long? What's the DNR doing? Give me, you know, what walk me through what happens if this deliverability doesn't uh doesn't get delivered.

SPEAKER_01 27:37

Well, you you're never gonna turn houses off. Houses are gonna be the absolutely last thing you turn off because if you turn off a house, if you cut gas supplies to a house, you got all sorts of things, you got all sorts of problems getting it restored. Um, so you don't have explosions. And so, and so the houses are the absolute last thing you ever turn off. Uh, what you have is you have a uh a hierarchy of of things that you turn off uh as you as you start having deliverability problems, things you turn off in order to preserve the pressure you need to deliver it, uh to deliver it to homes. And I think the top of the list in the South Central area is uh is uh MEA, uh, which has a uh dual-file dual-fired boiler or dual-fired electric electric generation capacity. They can either fire it with uh natural gas or they can fire it with diesel fuel. And I think that's at the top of the list in terms of things you turn off. You turn off the gas to that, um, and you and you start firing it with, or you limit the gas to that, and you start firing that generator with uh with diesel fuel. So I I don't think I don't think we're really talking about rolling blackouts, at least in the in the near term. I don't think we're really talking about rolling blackouts. I think we're talking about about things that will have an economic impact because diesel fuel is more expensive than gas, at least currently. Um, and um and and and so there will be a higher charge, a higher cost to running the generator on diesel fuel than on than on gas. And then you've got JBAR. Uh you can turn down the gas on JBAR. That's what we've done before uh when we had a when we had a deliverability issue a couple of years ago, NSTAR had a storage, a storage deliver a storage well down that wasn't operating uh perfectly uh when they hit peak. Uh and so they had to do some temporary reductions. And I think there was a reduction at J Bear. So you've got a pri you've got a you've got a hierarchy of things that uh that get turned down. We're not gonna have rolling blackouts uh from a from a gas standpoint, we're not gonna have rolling uh cutoffs uh to homes in South Central. That will be the absolute last thing uh that goes. Uh I mean I guess we'll have other ways to deal with it.

SPEAKER_00 29:57

I guess that's good to know, but then the question still becomes what what's being done about the deliverability if if NSTAR is is premature and the RCA is like you're still premature and the DNR hasn't decided. And I mean, where where do we go from here? I mean, again, this is all again, us we're we're all under the assumption now that the gas line is dead. And so where do where do we go from here on this? What happens what happens next, Brad? Quickly.

SPEAKER_01 30:24

Uh DNR's got to get attacked together and make a decision on that field. That would be that would be helpful. If they decide it's Hill Corps and it's not and it's not the the supplier to NSTAR, not the person that, not the company that's selling it to NSTAR, NSTAR has to go find other storage um and has to go develop other storage. And Sims has said they have other places in mind. They're going to be more expensive, uh, but they have other places in mind. But I think the key to that particular little little issue is getting DNR to decide who owns that field and whether that field's capable of being operated as a as a as a natural gas uh storage unit. And then from there, I mean, here's here's the thing that really is conf is is troubling me. We aren't making a whole lot of

RCA Decision And DNR Pore Space

SPEAKER_01 31:05

progress on the LNG imports. Everybody says we're going to need LNG imports, even if the big line goes, we're going to need LNG imports for a period of time. People are talking about that, but there's no LNG facilities, importation facilities being built. And so it's, I mean, we have a lot of people talking about having them and and maybe some plans are on the board, but we're not we're not building them. So if we're if we're facing you know a declining deliverability from product from existing production facilities, even if you build new storage fields, that's not going to solve the entire problem. And it and and we need to kick in with these LNG facility importation facilities at some point, and we're not getting them off the ground. So two things DNR, get DNR off the ground on the immediate issue of the of deliver of the storage field, and and focus on getting an LNG importation facility built.

SPEAKER_00 31:56

Craig is feeling very spicy this morning. Uh Craig says electricity prices will double throughout the state over the next year, but it's all fine to Brad. I don't think that's what he's saying. I don't think you're hearing what he's actually saying, Craig. Um that I think that's not what that what he's saying is that's a bad thing. Uh we were talking about that before the show, Brad and I. That's a bad thing. If electricity prices double, it's I mean, it's it's gonna be tough. We already saw what happened in Fairbanks, right?

SPEAKER_01 32:24

Yeah. Look, there's there's only one situation under which electricity prices don't don't do that. I mean, they do that, they do that if we keep going down the track we are now with declining cookinlet production uh and and LNG importation. That's gonna that's gonna double electricity prices. The we're gonna do that if we build the big line and we don't have international buyers. The cost of the big line, $16. I mean, what what everybody declared victory when when Glenfarn said, oh, we'll cap the price or we'll fix the price at $16 uh MMBTU for uh for in-state deliveries. That's a huge price. It's a huge price jump from where we are now. What we're about 10 now, so it's a huge price jump. Uh may or may not be higher than LNG imports. LNG imports may be less than that. Uh, but that's a huge price jump. So we're we're we're headed there. It ain't it ain't me, it ain't Willikowski, it ain't anybody who's who's who's liking that, but we're heading there uh with with in the in the only case that we're not is if is if the big line has international buyers and the international buyers pay a proportionate share of the pipeline. I mean, there's a there's a question, a real question in my mind that I've written about a couple of times in the landmine, there's a real question about whether the international buyers actually pay a proportionate share of the pipeline or whether we're stuck paying $16 for in-state volumes forever, even if we get international buyers. But the only circumstance under which it's under which we're gonna get electricity prices down is if we is if international buyers come in and pay a proportionate share of the big line. And we are we don't have anybody, we don't have any international buyer that's committed to do that. So it's where we are.

SPEAKER_00 34:09

Yeah, no, and no, uh Chris, uh uh the or Craig, uh the importing the LNG would not triple the electricity prices. Um, it is still the most economical of all the other options that we have on the table, including Cook Inlet gas, which is gonna be, again, that's gonna make it tougher on some of the producers in Cook Inlet if we start importing that gas as well. There's lots of moving parts to this thing. And uh, you know, I know a lot of people don't want to hear that, but Brad and I, before the gas line really, the gas line discussion really got started, you know, looking at all the options, importing was the only viable option uh in the short term and even into the long term, uh, as far as that goes. I mean, Frank says coal, but I mean, coal requires building of new plants and everything else. I mean, we're talking about now. We're talking about not five years from now. We're talking about now. How do we survive the five years?

SPEAKER_01 35:03

And what Craig is what Craig continually overlooks is building the big line uh and not having international buyers paying a proportionate share of the big line, which are, which are two separate things. Building the big line and not having international buyers share a proportionate share of the pipeline is also gonna triple electricity prices. I mean, is also gonna is also gonna have the same impact as importing LNG. It's not gonna trickle triple electricity prices, but it's gonna have the same impact as importing LNG. The price, the price difference between the big line without international buyers paying a proportionate share of the cost of the line and LNG is minimal. Imported LNG is minimal. So that's happening under either condition. The the only condition under which we get better and under which Alaska gets better is the big line with international buyers paying a proportionate share of the cost of the big line. And that's not we don't have anybody on the hook willing to do that right now.

SPEAKER_00 35:57

Well, and you were saying we, I mean, we haven't even moved on this import facility. I know we've talked about Nikiski. I know that that NSTAR is talking about wanting to build something in the on, you know, in the in the uh Point McKenzie and everything else. Where, I mean, where's it going? Where's the import? I mean, we we gotta get on this off the stick here, right? I mean, this has gotta this has gotta go.

SPEAKER_01 36:17

Yeah, I mean, one big question is Glenfarn, NSTAR has hooked their hooked their uh their their future to Glenfarn building an import facility. And if Glenfarn walks, um uh are they gonna finish the import facility? Uh we've got one. There's there's a turnaround of the of the old Kenai LNG export facility that Hillcorp now owns, and that's gonna provide some uh some uh uh capability of importing of importing LNGs, of importing LNG. But NSTAR said they don't want to use that one for whatever reason. And and so you know, we may have some resolution there or some uh solution there, but we don't have people contracting or committing to it yet. So it's it's we got you're right, we got all these moving parts and they're not settling down.

SPEAKER_00 37:09

Right, right. They're all moving in different directions. That's the thing. It's like a it's like a rowboat with 15 people in it, and everybody's rowing in a different direction at this

Alaska Deficit And Revenue Reality

SPEAKER_00 37:18

point. Continuing now, Brad Keithly, Alaskans for sustainable budgets. Probably the probably the strongest, the strongest statement that Brad has made in a while. There's a straight line from the failure of the legislature earlier in this session to treat Dunleavy's proposal sales, uh proposed sales tax seriously to where we are now on the S-Corp tax. There's a straight line from Dunleavy's proposed sales tax to the S-Corp tax, and Brad's about to connect the dots. Okay, where are we at, Brad?

SPEAKER_01 37:50

$1.9 billion. I I I haven't started any other segment with that this week, but okay. I I want to get this one started. $1.9 billion. That's the deficits that the state's running. When you look at the tenure, when you look out 10 years and you look at projected revenues and you look at projected spending, just holding spending to inflation, spending increases to inflation. When you look out 10 years, we're running an average of $1.9 billion deficits uh over that period of time. And I know people uh will say, oh, we're gonna we're gonna solve that through spending cuts. To do spending cuts, you'd have to cut spending over that period of time 25%, 20 by 25% every year. Um, and you would have to do that over the full full 10-year uh period. Uh, and you know, and that's more than Dunley proposed. That's that's a bigger percentage of spending cuts than Dunley proposed even in 2019. And he couldn't get 16 Republicans, he couldn't get 16 in the legislature, 16 out of 60 to back him up on uh on the threatened vetoes to get down to that level. So he didn't do the vetoes down to that level, and we ended up with high with with increased spending, and we've had increased spending going on uh since. So while spending cuts, spending modifications, spending control uh is a part of the solution, that is not the total solution. We need revenues to deal with with that with that $1.9 billion gap. Dunleavy, to his credit, proposed at the beginning of the session uh to try to deal with that gap, uh, a portion of that gap through the statewide sales tax. And and the legislature uh the how it had one hearing basically in house finance, and the house finance committee members took turns throwing up all over it, uh, saying, well, this doesn't work. We don't like that. They had AML, the Alaska Municipal League in there testifying about why it wouldn't work. I mean, it was just it was just a festival of people throwing up on this proposal. It would have worked. I mean, Dunleavy had just had ICER make a presentation demonstrating why not only it could work, but why it was in Alaska's best interest to work as opposed to continuing to use PFD cuts uh uh as a way of closing that fiscal gap, uh, and why it was better for Alaska families and why it was better for the Alaska economy to do the to do the statewide sales tax. But the legislature just threw up all over it. So what you have, I mean, legislators who say, oh, you know, we we we we can't consider uh this this escort clos closing the escort loopholes as a portion of anything. Uh we need a separate bill. What you have is a straight line between where we began the session in terms of, well, we can't do that. We can't do uh a seasonal sales tax, we can't, you know, help close this budget deficit through a seasonal sales tax. To me, you have a straight line from there to the end where you know, okay, you can't do that. We got to go find other things. People don't want to do that. We got to go find other things as a way of helping to close the $1.9 billion deficit. The S-Corp, the S Corp fix is one way of doing that. And now we get and and we got to the end of the session and say, well, people were saying, well, you can't do that either. So, you know, it's you just what to me, what what we what we're doing is we're going from one thing we've tried with Dunleavy's um uh seasonal sales tax, good proposal, solid proposal, backed up by ICER, backed up by by good solid analysis. Legislators throw up all over that. Okay, well, we go to the next, we go to the next thing, and the next thing is closing the escort loophole loophole. And now we have legislators, late legislators at the end of the session saying, well, you can't do that either. I mean, that's a bad thing. That's a bad thing, also. I it it's a we we're gonna have to address this issue someday. Um and and it's getting worse the longer we address it, but don't address it because spending is going on. Uh, we're not having people push back on spending who would if they had to pay a portion of it. Um, and and and it just keeps getting worse and worse. So we're gonna have to address it someday. The S-corp uh fixing the S-Corp loophole was one way, it was another way to try to address it. And now we have people saying you can't you can't do that either. There's a lot of stuff that went on last week. Uh, but I think Dunley V's veto threat, uh, frankly, from my perspective, will be the thing I look back as the biggest, uh, as the biggest thing that happened last week. We were at the high watermark. Yeah, and I know people, some people didn't like it, but we were at the high watermark of of the gas line legislation. We had the property tax fix that Glen Farn said they needed. Even at the end, and I and I was upset by this, but even at the end, we had the legislature, the conference committee willing to take the S-corp tax off of Glen Farn. Now, maybe it was, as Rob Myers has pointed out, maybe it was just sort of a temporary, uh a temporary diversion uh that they were going to go back and do it later on. I think they can do a test. I I think they could do it, uh, the S-corp fix to Glen Farn, and I think it wouldn't affect project economics. I've argued that before, but but they had taken it off of Glen Farn. They'd taken the escort fix off of Glen Farn. So you had you had a bill that that did everything Glenn Farn said they wanted, property

Sales Tax Rejected Then S Corp Fight

SPEAKER_01 43:20

tax fix. The legislature, the conference committee had taken out all that stuff about control that Glen Farn had objected to. You had a fairly clean bill on Glen Farn, and then you had the S Corp fix with it. Uh, a necessary, a needed element of getting to that $1.9 billion. And Dunleavy's veto message, I'm I we're gonna I I'm gonna look back at that and I'm gonna say that's that's where things went south. Uh, because we had a clean bill or fairly clean bill, we had the S Corp fix along with it, which was dealing with the with the revenue uh issues that we've got in the state. It was on its way to him. If he hadn't hadn't have said he was going. to veto it. There's an open question in my mind about whether it would have gotten through the House and gotten to him. And he just said he he wasn't going to put up with it. So I think, I think that we're going to look back on that as the high watermark, at least of this legislature, in terms of uh in terms of in terms of gas line legislation. There's been the leadership of both bodies now have sent uh messages to their members saying don't bother to show up for the opening day. It's going to be a technical session and really not being very clear on anything that's going to go on during this coming special session. I don't expect much from it. And I think we're going to you know get to the end of the year, the end of this legislature and that's it. We we we had the high water mark. For whatever reason Dunlevy decided not to not to take the offer that was on the table and we end the we end the year without any legislation without any resolution on on the gas line. But going back to the beginning there to me is a clear is a clear line from the beginning of the session where people threw up on this on the proposed seasonal sales tax and the end of the session where people are throwing up on the escort fix. There's got to be revenues in here someplace and and if you're going to keep throwing up on them on on proposals on how to get those revenues then we're never going to get this fixed.

SPEAKER_00 45:21

Well again my argument on this is if the gas line was so important and so and so needed this fix was so needed, why muddy the waters again with the I mean I agree that we need to examine an escort tax. I mean I that may make make me unpopular but that's just the way it is we should examine it. But I think that if the gas line was so important, why did we have to muddy the waters with it at this point? Is it just because otherwise it wouldn't get passed? I mean it didn't get passed anyway but is is that the argument because uh otherwise we could have just passed a clean bill with just the volumetric tax and probably be on our way to something bigger. Why, you know why now?

SPEAKER_01 46:02

I'm not sure we wouldn't be on our way to something bigger. But but I I think there's I think there's I think there they are co-equal issues. I think that yes the the LNG line is important. I think it's it's important for a lot of reasons but also fixing our fiscal situation is important. And to me frankly it's a bigger issue. If we don't get our fiscal situation fixed we're going to tax ourselves into oblivion um uh trying to trying to deal with the with the with what we've built here um and I think it's a co equal uh co equal argument is was it appropriate in this bill because it's the only way that that the S-corp fix was ever going to get passed maybe was it appropriate in this bill because we're talking about gas we're talking about gas producers and we're talking about a a gas line oh the oil and gas industry and the S Corp fix is applicable to the oil and gas industry was appropriate for that yeah it I I think so but but it it you can't we we shouldn't say oh there's just one issue just we need to pass something for one issue and we'll get to this other issue later on. We won't I mean I we won't I mean people who say oh we'll consider the escort bill on a on a on a separate track Jamie Allard said yeah let's consider the escort bill on a on a separate track and I won't vote for it then either I mean it's just I we've got to deal with with the fiscal issue. And if dealing with the fiscal issue means it comes as a package with with other issues then so be it. But we've got to deal with the fiscal issue and throwing up on the sales tax the sales tax proposal at the beginning of the session frankly I look back on those Republicans who threw up on on all the members of the legislature who threw up on that fix and said look it's on you it's in part on you that we got down to this escort that we got down to this escorp issue at the end. If you're not going to fix revenues there then we've got to fix revenues someplace and it came up here and we've got to fix revenues and so it's timely to to do it here as well. Doom and gloom Brad doom and gloom uh that's I mean that's that's kind of where we're at here um again I I I understand your point of saying uh we'll come back to it later they never come back to it but again the idea of passing something like that without the full process without going through without public hearings without everything else it just it irks me it just irks me and I but I understand your position I'm just saying it would have been we would have been potentially closer to a gas line if we just left it as a clean bill uh and unfortunately we can't but but farther away from a budget fix Michael I mean I mean deeper into the hole on on fixing the the fiscal issue I you know people who say oh we haven't we haven't considered the S-Corp fix enough we haven't you know studied it enough we've had the S Corp ish issue since Hillcorp bought BP people have thought about the S Corp issue people have worked on the S-Corp issue people have analyzed the S Corp issue I've analyzed the S-Corp issue there's been there's been thought about it given to it work on it since since since Hillcorp bought BP so to say oh it's coming out of the coming out of the thin air or coming out of the blue and and dropping into this no it's dropping into this because we got S Corps involved in this we've got S Corps involved in the in terms of the pipeline we've got S Corps and involved in terms of the gas suppliers to it Hillcorp uh certainly is one of the is one of the gas suppliers to uh

Veto Threats Election Path Forward

SPEAKER_01 49:30

to the to the project we've got S Corps involved in it so so if we're gonna get an S-corp fix it's appropriate to fix it at the time that we have S Corps involved in something that's that's that's before the legislature where do we go from here Brad where we're we're what happen now that the now that the the special session is dead and we could see that the next special session they're already going to technical gavel in gavel out where do we go from here what what happens now? I think it goes to the election it goes to the next governor and the next governor uh makes proposals about how to deal with it and hopefully the next governor makes you know proposals also about how to deal with the with the fiscal is fiscal shape uh that we're in uh and we and we go with it from there and Hillcorp may or may not stick around I mean Hillcorp uh Glenfar may or may not stick around they should but you know they may they may decide that that they've had enough of this fun and go off someplace else um and so we and so we just deal with the cards that we have at that time as I said I think we hit the high water mark I think Dunlevy should have said I will sign the bill I don't like it nobody likes pieces of it but I will sign the bill I think he should have said that with the S Corp fix in it. And I think he should have signed the bill and then we would be off then we then we a we would have some uh uh uh addressing of our fiscal issues and b we would have you know the gas pipeline wherever the heck Glennfarne said they needed the gas line to be and we'd be off I think he should have done that um but he didn't so we're at as I said at some point in previous in previous segments look if if if Dunlevy bill if Dunlevy if the S Corp fix gets through as it should and if Dunlevy vetoes the bill that's on Dunley and I think it's on Dunleavy I think I think we got to the end of this process uh uh horrible process as it was I think we got to the end of this process we saw where it was going to be and Dunleevy said you know not going to do it so he was saying not going to do it both to the S-corp fix and to the gas side the gas pipeline side of it when you said that I think Kevin nails the whole thing in a nutshell when he said when we did away with the income tax we created the issue um and I think that's I mean that's what Hammond was talking about Hammond said at the time Hammond said don't don't eliminate it just zero it out because we may need to bring it back at some point I'm paraphrasing here but that's essentially what Hammond had said he said don't don't don't eliminate it just zero it out and leave it on the books and uh and and that's

Hammond’s Income Tax Sword And Wrap

SPEAKER_01 52:05

where we're at. Yeah I mean what what Hammond talked about was was having it hang there like the sword of Damocles right if you can't get your fiscal house in order the damn the the income tax kicks in uh and and and this is and and that's how and that's how we deal with it which would have put pressure on the top 20% would have put pressure on you know anybody subject to the income tax to start push back start pushing back on spending. I mean that's what Hammond I'm you know I reread I reread parts of of uh Hammond's books uh from time to time and it's just the guy was just genius I mean he saw how this whole thing he saw how this whole thing worked he said you know if you want to if you want to get legislators to stop doing something tell them there will be a tax if they if they continue doing it. If you want legislators to close the fiscal gap tell them there will be a tax uh if they don't close the fiscal gap and they'll and they'll start closing the fiscal gap. So yeah I Kevin and I have diverted on a lot of issues but we'll uh we'll agree on that one. If if the sort of Damocles, if we'd held that sort of Damocles over legislators, we'd be in a different place today.

SPEAKER_00 53:08

Brad Keithley, Alaskans for sustainable budgets uh the weekly top three we're pretty much out of time at this point, Brad. Appreciate you coming on board. Uh thanks for uh thanks for being part of it. We will uh I guess we'll we'll see what happens in the coming weeks here. We'll see what happens next week. Thanks for having me Michael I appreciate it.

SPEAKER_01 53:27

It's always good to hear from you my friend well that's a wrap for another week's edition of the weekly top three from Alaskans for Sustainable Budgets. Thank you again for joining us remember that you can find past episodes on our YouTube, SoundCloud, Spotify, and Substack pages and keep track of us during the week on Facebook and Twitter. This has been Brad Keithley, Managing Director of Alaskans for Sustainable Budgets. We look forward to you joining us again next week for the next edition of the Weekly Top Three