Legislature(2025 - 2026)BUTROVICH 205
03/03/2025 03:30 PM Senate RESOURCES
Note: the audio ![]()
and video ![]()
recordings are distinct records and are obtained from different sources. As such there may be key differences between the two. The audio recordings are captured by our records offices as the official record of the meeting and will have more accurate timestamps. Use the icons to switch between them.
| Audio | Topic |
|---|---|
| Start | |
| Confirmation Hearing(s) | |
| SB92 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| += | SB 92 | TELECONFERENCED | |
ALASKA STATE LEGISLATURE
SENATE RESOURCES STANDING COMMITTEE
March 3, 2025
3:30 p.m.
DRAFT
MEMBERS PRESENT
Senator Cathy Giessel, Chair
Senator Bill Wielechowski, Vice Chair
Senator Matt Claman
Senator Forrest Dunbar
Senator Scott Kawasaki
Senator Shelley Hughes
Senator Robert Myers
MEMBERS ABSENT
All members present
OTHER LEGISLATORS PRESENT
Senator Kelly Merrick
Representative Robyn Niayuq Burke
Representative Jeremy Bynum
Representative Julie Coulombe
COMMITTEE CALENDAR
CONFIRMATION HEARING(S)
- HEARD
SENATE BILL NO. 92
"An Act establishing an income tax on certain entities producing
or transporting oil or gas in the state; and providing for an
effective date."
- HEARD & HELD
PREVIOUS COMMITTEE ACTION
BILL: SB 92
SHORT TITLE: CORP. INCOME TAX; OIL & GAS ENTITIES
SPONSOR(s): SENATOR(s) YUNDT
02/10/25 (S) READ THE FIRST TIME - REFERRALS
02/10/25 (S) RES, FIN
02/19/25 (S) RES AT 3:30 PM BUTROVICH 205
02/19/25 (S) Heard & Held
02/19/25 (S) MINUTE(RES)
03/03/25 (S) RES AT 3:30 PM BUTROVICH 205
WITNESS REGISTER
JESSIE CHMIELOWSKI, Appointee
Alaska Oil and Gas Conservation Commission (AOGCC)
Anchorage, Alaska
POSITION STATEMENT: Testified as the appointee for Alaska Oil
and Gas Conservation Commission.
SENATOR ROBERT YUNDT, District N
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Sponsor of SB 92.
KARA MORIARTY, President
Alaska Oil and Gas Association (AOGA)
Anchorage, Alaska
POSITION STATEMENT: Testified in opposition to SB 92.
MICHAEL WILLIAMS, Corporate Tax Manager
Tax Division
Department of Revenue (DOR)
Anchorage, Alaska
POSITION STATEMENT: Answered questions on SB 92.
JERRY WEBRE, President
Little Red Services
Anchorage, Alaska
POSITION STATEMENT: Testified in opposition to SB 92.
LESTER BLACK, Incoming President
Alaska Support Industry Alliance
Anchorage, Alaska
POSITION STATEMENT: Testified in opposition to SB 92.
KELLY DROOP, Regional Manager
Pape Kenworth
Anchorage, Alaska
POSITION STATEMENT: Testified in opposition to SB 92.
KATIE CAPOZZI, President
Alaska Chamber of Commerce
Anchorage, Alaska
POSITION STATEMENT: Testified in opposition to SB 92.
LEILA KIMBRELL, Executive Director
Resource Development Counsel for Alaska
Anchorage, Alaska
POSITION STATEMENT: Testified in opposition to SB 92.
THOMAS WALSH, Managing Partner
Petrotechnical Resources of Alaska, LLC (PRA)
Anchorage, Alaska
POSITION STATEMENT: Testified in opposition to SB 92.
CAROLINE STORM, Executive Director
Coalition for Education Equity
Anchorage, Alaska
POSITION STATEMENT: Testified in support of SB 92.
ACTION NARRATIVE
3:30:44 PM
CHAIR GIESSEL called the Senate Resources Standing Committee
meeting to order at 3:30 p.m. Present at the call to order were
Senators Myers, Dunbar, Kawasaki Claman, Wielechowski, Hughes
and Chair Giessel.
^CONFIRMATION HEARING(S)
CONFIRMATION HEARING(S)
COMMISSIONER, ALASKA OIL AND GAS CONSERVATION COMMISSION
3:31:39 PM
CHAIR GIESSEL announced the confirmation hearing of the Alaska
Oil and Gas Conservation Commission (AOGCC) appointee Jessie L.
Chmielowski.
3:32:09 PM
CHAIR GIESSEL reviewed AS 31.05.009 describing the
qualifications for members of the AOGCC.
[Original punctuation provided.]
Sec. 31.05.009. Qualifications of members. Members
shall be qualified as follows:
(1) one member shall be a petroleum engineer who
(A) holds a certificate of registration as an
engineer under
AS 08.48 and, under regulations adopted to implement
that chapter, has qualified as a petroleum engineer;
or
(B) has earned a degree from a university in
the field of engineering and has at least 10 years of
professional subsurface experience in the oil and gas
industry in drilling, well operations, production
process operations, reservoir engineering, or a
combination thereof; for the purposes of this
subparagraph, a person meets the requirement of
earning a degree in the field of engineering if the
person obtains an undergraduate or graduate degree in
engineering that meets the requirements for program
accreditation by the Engineering Accreditation
Commission of the Accreditation Board for
Engineering and Technology and the person completes
university or industry training specific to petroleum
engineering that illustrates application of
engineering principles to the problems encountered and
methods used in the petroleum industry, including
drilling, production, reservoir engineering, fluid
flow through subsurface formations, and hydrocarbon
transportation;
(2) one member shall be a geologist who
(A) holds a certification as a professional
geologist under AS 08.02.011 and has professional
experience in the field of petroleum geology; or
(B) has earned a degree in the field of
geology from a university accredited in the field of
geology and has a minimum of 10 years professional
experience in the field of petroleum geology; and
(3) one member who shall have training or experience
that gives the person a fundamental understanding of
the oil and gas industry in the state [NEED NOT BE
CERTIFIED, TRAINED, OR EXPERIENCED IN EITHER THE FIELD
OF PETROLEUM ENGINEERING OR THE FIELD OF PETROLEUM
GEOLOGY].
3:33:12 PM
CHAIR GIESSEL noted that Ms. Chmielowski was a re-appointment to
the position.
3:33:44 PM
JESSIE CHMIELOWSKI, Appointee, Alaska Oil and Gas Conservation
Commission (AOGCC), Anchorage, Alaska, testified as the
Commission-Designee for Alaska Oil and Gas Conservation
Commission. She served on the commission for six years and said
it would be an honor to continue to serve the AOGCC's mission to
safeguard Alaska's oil, gas, and geothermal resources. She said
she led the team in securing federal grants, establishing
Alaska's first orphan well plugging and abandonment program,
which has received $50 million in grants with an additional $43
million potentially available. The funding will be used to plug
nine wells in the southcentral region this year and to ensure
all orphan wells are remediated. She also prioritized advancing
carbon capture, use, and storage (CCUS) initiatives and was
working to gain primacy for Class VI wells from the EPA, having
submitted a draft regulation package to the Department of Law
and the EPA.
3:35:26 PM
MS. CHMIELOWSKI highlighted her experience in resource
development, particularly in overseeing public hearings,
drafting rules, and issuing orders for significant oil fields.
She noted key achievements such as orders for Santos' Pikka
field and ConocoPhillips' Coyote and Minke fields, and her role
in addressing ConocoPhillips' [2022] CD1 gas release.
Additionally, she represented Alaska on the national level with
the Interstate Oil and Gas Compact Commission (IOGCC), securing
federal funding for orphan wells and serving on the steering
committee. She stated her strong commitment to Alaska,
emphasizing the value of continuity and her desire to sustain
the state's natural resources for future generations.
3:36:45 PM
SENATOR DUNBAR asked whether there were concerns about the
availability of federal funds for abandoned wells. He noted that
funding had been paused.
3:37:22 PM
MS. CHMIELOWSKI affirmed the temporary pause on funding. She
said states were able to withdraw funds for well plugging and
abandonment as of a week prior with IOGCC approval. She noted
that the Secretary of the Interior was a former chair of the
IOGCC and was familiar with and supportive of the well plugging
and abandonment program.
3:37:50 PM
SENATOR MYERS asked Ms. Chmielowski to describe her professional
philosophy toward regulating oil and gas on the spectrum between
following the letter of the law and protecting people, the
resource and the environment without going beyond that
protection.
3:38:23 PM
MS. CHMIELOWSKI said her philosophy was pro-responsible
development following good oil field practices and state
regulations. She said [AOGCC] decisions were based on
engineering, geology and the law to address and adapt to new
circumstances as they arose; to protect Alaska's resources for
the long term.
3:38:52 PM
SENATOR MYERS posed a hypothetical in which a law wasn't
effectively providing protection and was impeding operations. He
asked whether Ms. Chmielowski would be willing to recommend
modifications to or removal of statutes or regulations.
3:39:33 PM
MS. CHMIELOWSKI said there was a frequently used process to
grant variances or waivers to regulations. She said a variance
may be enacted to meet the intention of a regulation with an
outcome that is equal to or better than that required. She said
a waiver of regulations may be employed with good technical
justification which would allowing something to proceed even
though it does not satisfy the letter of the law.
3:40:10 PM
SENATOR MYERS suggested that a company might violate the letter
of the law, but not endanger the resource, personnel or the
environment. He asked whether AOGCC would consider those factors
when determining a potential penalty for the company.
3:40:33 PM
MS. CHMIELOWSKI said it would. She said AOGCC generally worked
with operators on the front end to plan and prevent violations.
She said there were nine criteria AOGCC employed for enforcement
decisions, including environmental impact and gains to the
company resulting from the violation. She said [AOGCC might
issue] a violation rather than a financial penalty.
3:41:12 PM
SENATOR KAWASAKI asked how frequently AOGCC employed variances
or waivers and whether she knew what the commissions [variance
and waiver] record was since she was appointed.
3:41:41 PM
MS. CHMIELOWSKI said the records of decisions and actions [by
AOGCC] could be provided to the committee. She said AOGCC
preferred to work with operators on the front-end to prevent
violations and help operators be successful. She emphasized
however that when operators fail to follow approved programs,
AOGCC must follow up, especially in the case of safety issues.
She noted a significant event that occurred during her tenure:
the [ConocoPhillips] CD1 gas release which resulted in a large
AOGCC investigation, a hearing and a public process. She said a
significant penalty of over a million dollars resulted.
3:42:50 PM
SENATOR WIELECHOWSKI asked whether there was currently a vacancy
on the commission.
3:43:00 PM
MS. CHMIELOWSKI said the public commissioner position was
currently vacant. She said the AOGCC operated on a quorum of
two.
3:43:14 PM
SENATOR WIELECHOWSKI asked how long the position had been
vacant.
3:43:19 PM
MS. CHMIELOWSKI said the position was vacated in July 2024.
3:43:26 PM
SENATOR WIELECHOWSKI noted that the position had been vacant for
eight or nine months and opined that was a long time.
3:43:33 PM
MS. CHMIELOWSKI said during her tenure there had been at least
two times that the public commissioner position had been vacant
for 6 months.
3:43:45 PM
SENATOR WIELECHOWSKI asked for the purpose of the AOGCC public
commissioner.
3:43:59 PM
MS. CHMIELOWSKI said the position was required by statute and
she surmised the intent was to represent the public in general
rather than engineering or geology perspectives. She said the
commissioners all consider the public process and protecting the
public interest to be a critical role of the AOGCC. She noted
that a third commissioner would be required in the case of a
split opinion between the two commissioners in place.
3:44:28 PM
SENATOR WIELECHOWSKI said it seemed like a long time to have the
position representing the public remain vacant. He asked the
appointee to define the mission of the AOGCC.
3:44:50 PM
MS. CHMIELOWSKI said the major goals of AOGCC were to:
• encourage greater recovery of hydrocarbons
• prevent the waste of hydrocarbons
• protect the rights of the owners of hydrocarbon resources
• protect fresh groundwater sources
• protect human health and safety during well operations
3:45:10 PM
SENATOR WIELECHOWSKI noted that one of AOGCCs goals was to
prevent waste. He asked whether Ms. Chmielowski was familiar
with a 2017 Cook Inlet gas leak by Hilcorp.
3:45:30 PM
MS. CHMIELOWSKI said she was not working at AOGCC at the time of
the leak, but that she was aware of it.
3:45:37 PM
SENATOR WIELECHOWSKI said there were questions at the time about
whether gas leaking into the inlet was waste and whether it was
something AOGCC could act on. He asked whether she knew how much
gas leaked in the 2017 incident.
3:46:00 PM
MS. CHMIELOWSKI said she did not know the number and was not
sure it had been determined.
3:46:09 PM
SENATOR WIELECHOWSKI asked whether she agreed that gas leaking
into Cook Inlet in that [2017] instance could be considered
waste.
3:46:17 PM
MS. CHMIELOWSKI referred to a letter from the AOGCC dated June
2024 which she opined more eloquently defined waste as it
applied to upstream oil and gas operations. She said the 2017
leak was not waste over which AOGCC had jurisdiction. She said
there was a specific definition of upstream oil and gas waste
that was consistent across multiple states' oil and gas
commissions.
3:46:58 PM
SENATOR WIELECHOWSKI quoted from the June 2024 AOGCC letter,
"The primary purpose behind the prohibition against waste is to
maximize ultimate resource recovery." He opined that gas leaking
into Cook Inlet would be a loss to the state and a failure by
the resource developer to maximize resource recovery. He asked
whether Ms. Chmielowski agreed.
3:47:37 PM
MS. CHMIELOWSKI said her interpretation of resource recovery was
from the subsurface. She explained that recovery began at the
subsurface and waste was prevented by properly managing the
reservoir, by drilling wells in the correct locations and by
ensuring proper reservoir pressure, etc. She said once the
resource had been measured and the owner paid their share, the
definition of oil and gas recovery from upstream oil and gas
conservation law had been satisfied.
3:48:09 PM
SENATOR WIELECHOWSKI asked whether any other agency investigated
the [2017] gas leak.
3:48:17 PM
MS. CHMIELOWSKI said several agencies investigated, including
Department of Environmental Conservation (DEC), Pipeline and
Hazardous Materials Safety Administration (PHMSA) and others.
She said she could provide that information.
3:48:34 PM
SENATOR WIELECHOWSKI whether it was her opinion that AOGCC would
not be responsible to investigate a similar large gas leak in
the future.
3:48:57 PM
MS. CHMIELOWSKI said AOGCC did investigate [the 2017 gas leak]
and would investigate future gas leaks to determine the source
of the leak, the nature of the material leaked and whether AOGCC
had jurisdiction.
3:49:10 PM
SENATOR WIELECHOWSKI asked whether AOGCC would have jurisdiction
and would investigate if there was a future gas leak like the
leak that occurred in Cook Inlet in 2017. He asked whether AOGCC
would issue potential remedies or act in response to a similar
gas leak.
3:49:43 PM
MS. CHMIELOWSKI said the AOGCC would investigate and would have
power to act only as AOGCC was authorized which was upstream of
the fiscal meter.
3:50:04 PM
CHAIR GIESSEL opened public testimony on the appointment of
Jessie Chmielowski to the Alaska Oil and Gas Conservation
Commission (AOGCC).
3:50:24 PM
CHAIR GIESSEL left public testimony open.
SB 92-CORP. INCOME TAX; OIL & GAS ENTITIES
3:50:52 PM
CHAIR GIESSEL announced the consideration of SENATE BILL NO. 92
"An Act establishing an income tax on certain entities producing
or transporting oil or gas in the state; and providing for an
effective date."
3:51:43 PM
SENATOR ROBERT YUNDT, District N, Alaska State Legislature,
Juneau, Alaska, briefly introduced SB 92. He said the goal of SB
92 was to level the playing field and ensure that all oil and
gas companies that work in Alaska were taxed on the same level
playing field, whether they're a C corporation or an S
corporation. He emphasized that S corporations outside of oil
and gas [sector] who make less than 5 million a year would not
be included in SB 92.
3:53:00 PM
CHAIR GIESSEL opened public testimony on SB 92.
3:53:50 PM
KARA MORIARTY, President, Alaska Oil and Gas Association (AOGA),
Anchorage, Alaska, testified on behalf of AOGA in opposition to
SB 92. She explained that AOGA, a professional trade association
for oil and gas producers, required unanimous consensus of
members on tax matters. She said AOGA opposed SB 92 claiming
that it imposed a new discriminatory income tax on select firms.
She said SB 92 targeted pass-through entities in the oil and gas
sector with incomes exceeding $5 million, affecting a small
number of companies out of over 11,000 S corporations in Alaska.
She highlighted unintended consequences of SB 92, including
retroactivity, potential double taxation, and the impact on
business confidence and fiscal stability. She urged proper
modeling and analysis, noting the potential impacts of SB 92 to
Alaska tax policy and to the industry's ability to remain
competitive under additional pressure from stagnant oil prices
and reduced investments. She emphasized positive contributions
of the oil and gas industry to Alaska's economy, including
increased production and job creation, and urged the committee
to reject SB 92.
3:58:22 PM
CHAIR GIESSEL asked where AOGA anticipated double taxation under
SB 92.
3:58:40 PM
MS. MORIARTY noted the need for clarification and said analysis
and modeling of SB 92 would help identify those issues. She
suggested major corporations in Alaska may have private
subsidiaries and LLCs that would be subject to taxes under SB 92
in addition to the corporate income tax they already paid.
3:59:13 PM
CHAIR GIESSEL asked whether AOGA's concern would be removed if
double taxation was addressed.
MS. MORIARTY answered potentially.
3:59:32 PM
SENATOR CLAMAN noted AOGCC's unanimous decision by members to
oppose SB 92 and the perception that SB 92 targeted one or more
entities. He asked whether AOGCC membership took a position
regarding legislation that would apply to all S corporations in
Alaska rather than just one or two.
4:00:06 PM
CHAIR GIESSEL clarified that the question was for AOGA members,
not AOGCC.
SENATOR CLAMAN affirmed.
4:00:23 PM
MS. MORIARTY said there were currently 16 AOGA member companies
that all opposed SB 92. She said AOGA had not analyzed
legislation that would tax all 11,000 plus corporations in the
state and said such legislation had not been introduced to the
legislature.
4:01:06 PM
SENATOR CLAMAN asked whether AOGA found that C corporations were
currently experiencing double taxation.
4:01:28 PM
MS. MORIARTY said it was her understanding that C corporations
were paying taxes legally required by the corporate income tax
system.
4:01:45 PM
SENATOR WIELECHOWSKI asked whether it was Ms. Moriarty's
understanding that [British Petroleum] BP paid the corporate
income tax during the several decades they did business in
Alaska.
4:02:00 PM
MS. MORIARTY said it was her understanding that BP paid all
their legally required taxes in the state of Alaska.
4:02:08 PM
SENATOR WIELECHOWSKI asked if it was also her understanding that
Exxon, Conoco and Santos paid corporate income taxes in Alaska.
4:02:15 PM
MS. MORIARTY said that it was her understanding that all AOGA's
member companies paid all their required taxes in the state of
Alaska. She recalled several years prior when there were
negative income taxes because prices were so low, sometimes
negative.
4:02:40 PM
SENATOR WIELECHOWSKI asked for the rationale behind one of the
major producers not paying corporate income tax while all the
rest do. He asked why that one company should get preferential
treatment.
4:02:56 PM
MS. MORIARTY said it was fair to say that companies were
attracted to Alaska for a variety of reasons. She pointed out
that in 1980 Alaska chose not to have an income tax for
individuals as well as pass-through entities. She said Hilcorp
was a private company when they came to Alaska thirteen years
ago and they came to Alaska to invest millions and now billions
of dollars in Cook Inlet and the North Slope. She said the law
was in place at that time.
4:03:51 PM
SENATOR WIELECHOWSKI asked whether she recalled that when BPs
assets were being purchased [by Hilcorp], there were discussions
about the fact that, as an S corporation, Hilcorp would be
exempt from the taxes incurred by a C corporation. He said there
were calls for that to be fixed.
4:04:12 PM
MS. MORIARTY said she did recall that and referred to a recent
memo from the Department of Revenue, highlighting an increase in
production in Prudhoe Bay, a 45-year-old field, since Hilcorp's
arrival on the North Slope. She pointed to Hilcorp's track
record in Alaska - creating jobs and revitalizing Cook Inlet
which, she suggested, delayed the necessity for the legislature
to make a policy decision.
4:05:34 PM
SENATOR HUGHES emphasized the constitutional mandate to maximize
resource development benefits. She questioned whether the
concept of fair share in oil resource development should
encompass corporate taxes. She differentiated between corporate
tax, applicable to all industries, and the specific taxes
related to oil production. She noted that oil production tax and
royalty take are more significant revenue sources for the state
than the general corporate tax. She sought confirmation on
whether the fair share included corporate taxes or was limited
to oil-specific taxes.
4:06:50 PM
MS. MORIARTY answered that the concept of a fair share was
subjective, including in the context of corporate income tax.
She suggested that from an industry perspective, the government
take included:
• royalties paid to the state as the landowner
• production taxes
• corporate income taxes
• property taxes paid to local governments
MS. Moriarty highlighted local property taxes, noting that they
were crucial for communities like the Fairbanks North Star
Borough. She emphasized that the oil and gas industry viewed all
these taxes as part of the government's take, and that the
decision to include corporate income tax in determining the
maximum benefit to the people [of Alaska] was up to the
legislature.
4:08:52 PM
SENATOR HUGHES opined that maximum benefit included production
taxes and royalties, not corporate taxes. She concurred that
modeling for SB 92 was necessary. She asked whether it was
AOGA's view that increased taxes led to decreased investment,
decreased jobs and ultimately decreased production.
4:09:36 PM
MS. MORIARTY answered that, for any business, higher payments to
government leaves less capital for businesses to invest back
into themselves. She said this reduction in funds limits
expansion. She suggested that front-line contractors in Alaska
could offer further insight due to their direct exposure to
policy effects.
4:10:32 PM
CHAIR GIESSEL stated that SB 92 related to oil and gas companies
that are not organized as C corporations. She said these
companies typically have fewer than 100 shareholders and do not
have non-resident aliens as shareholders. She noted the
Department of Revenue (DOR), Tax Division's reluctance to name
the specific company or companies affected by SB 92 and asked if
AOGA would be willing to disclose whether there was only one
company that would be affected by SB 92 or if there were others
that could be impacted.
4:11:38 PM
MS. MORIARTY answered that two of AOGAs member companies were
registered as S corporations in the state of Alaska and that
they very well could have profits over $5 million.
4:12:09 PM
SENATOR WIELECHOWSKI referred to recent lease expenditure
numbers provided by the Department of Revenue compared with
figures from 2015:
• In 2015, Prudhoe Bay had $773 million in capital expenditures,
which declined to $346.7 million in preliminary 2024 figures.
• Operating expenditures (OPEX) in 2015 were $2.5 billion, but
they dropped to $1.37 billion in 2020.
• The number of jobs in the oil industry at Prudhoe Bay declined
from over 15,000 in 2013 to approximately 8,000, representing
a roughly 50 percent reduction.
SENATOR WIELECHOWSKI concluded that tax cuts did not lead to
increased investment or job creation at Prudhoe Bay.
4:13:49 PM
MS. MORIARTY countered that the significant oil price crash in
2015 and 2016 led to a loss of jobs and increased efficiency
among operators. She highlighted the new operator on the North
Slope in Prudhoe Bay for their focus on driving costs to the
lowest levels and contributing to efficiency improvements. She
said that despite the economic downturn, production in Prudhoe
Bay surpassed forecasts, indicating improved efficiency and
higher production rates. She stated that the change in tax
policy in 2013 aimed to direct expenses towards production,
which is now evident in the increased efficiency and production
levels. She said contractors were busier currently than they
were in the pipeline days because of projects like the Pikka
project and the National Petroleum Reserve in Alaska (NPRA), and
an uptick in business and drilling wells in Prudhoe versus
maintenance projects.
4:16:09 PM
SENATOR WIELECHOWSKI noted the failure of the initiative
referendum in 2014 and its subsequent impact on job losses and
investments. He said that despite oil prices remaining above $90
per barrel post-referendum, BP announced layoffs of around 400
to 475 employees. He emphasized the contradiction between
promised job creation and actual job cuts by BP.
SENATOR WIELECHOWSKI agreed with the concept of government take
as a comprehensive measure including corporate income tax and
acknowledged the difficulty of determining the optimal value or
benefit derived from natural resources. He asked whether [a
structure in which] some companies pay no tax in one component
[of government take] was achieving the maximum benefit [for the
state].
4:17:19 PM
MS. MORIARTY said [AOGA] companies were adhering to the current
policy and laws, which led to a significant return to the state
in increased royalties and production. She theorized this would
not have been the case considering the shift of Prudhoe Bay in
the BP portfolio. She reiterated that the current contractor may
not pay corporate income tax, but she said they have been good
for the state of Alaska regarding royalties, production for the
long term and extending the life of the field.
4:18:16 PM
SENATOR WIELECHOWSKI recollected the More Alaska Production Act,
which initially promised increased oil production to 1 million
barrels per day within a decade. He noted current output was
below 500,000 barrels daily and that recent growth was not on
state-owned lands, but in the federally owned lands in the
National Petroleum Reserve-Alaska (NPRA), where the state
offered $1 billion in tax incentives but does not receive any
royalties due to federal ownership.
4:19:04 PM
CHAIR GIESSEL noted that the memo under discussion from
Department of Revenue (DOR) was in response to questions from
the committee following the February 20, 2025 hearing of SB 92.
She said the memo was available to the public online.
4:19:40 PM
SENATOR DUNBAR noted that government structured tax incentives
or tax cuts to incentivize something and would not offer
incentives for something already in place. He noted the
observation that when Hilcorp came to Alaska, they were a
private corporation, and were aware Alaska didn't have a
corporate income tax on S corporations. He asked whether it was
Ms. Moriarty's assertion that had they expected to pay a
corporate income tax, Hilcorp would not have purchased BPS
assets.
4:20:14 PM
MS. MORIARTY said she was not suggesting that and said Hilcorp's
corporate status had not changed since they came to Alaska.
MS. MORIARTY recalled participating in debates regarding the
goal of producing a million barrels per day. She explained that
the sources of oil production for that goal included offshore
resources, oil from federal lands such as ANWR and NPRA, and
increased drilling in both new areas and existing fields.
4:21:33 PM
SENATOR DUNBAR asked whether Willow or Pikka were S
corporations.
4:21:55 PM
MS. MORIARTY said they were not.
4:22:00 PM
SENATOR DUNBAR asked whether those corporations which were
making by far the largest investments in the state, were paying
corporate income taxes.
4:22:06 PM
MS. MORIARTY said due to tax-payer confidentiality, she did not
know their corporate income tax returns looked like. She
reiterated that, to her knowledge, all AOGA member companies
filed taxes legally in the state of Alaska.
4:22:23 PM
SENATOR DUNBAR asked when Santos began making serious
investments in Alaska.
4:22:34 PM
MS. MORIARTY said the original parent company was OilSearch. She
did not recall the year they first picked up leases in Alaska.
4:22:54 PM
SENATOR DUNBAR asked whether Santos was a C corporation when
they entered the state and whether they were currently a C
corporation.
4:23:00 PM
MS. MORIARTY affirmed that, from her knowledge, they were.
4:23:36 PM
SENATOR MYERS posed a hypothetical situation in which a C
corporation had a wholly owned subsidiary which handled their
pipelines. He asked whether the corporation would be double
taxed on revenues that first passed through the pipeline-
owned/operated corporation under SB 92.
4:24:32 PM
MICHAEL WILLIAMS, Corporate Tax Manager, Tax Division,
Department of Revenue (DOR), Anchorage, Alaska, answered that,
double taxation would not necessarily result in the example
described. He explained that typically a group of corporations
operate as a C corporation and if they own a Limited Liability
Company (LLC) outright, or 100 percent, then the LLC will be
treated as a corporation as is the rest of the C corporation. He
offered an alternative to the hypothetical in which the LLC was
half owned by a C corporation and half owned by some other
entity for which the LLC was pass-through. In that situation he
said the LLC would become a taxable entity if it had more than
$5 million in income: half the income would attribute to the
owners of the LLC and the other half to the C corporation. So,
he said, for the C corporation there was the potential for
double taxation. He said DOR suggested ways to fix that in SB
92.
4:26:14 PM
CHAIR GIESSEL recognized Senator Merrick, Representative Burke
and Representative Bynam.
4:26:22 PM
CHAIR GIESSEL opened public testimony on SB 92.
4:26:47 PM
JERRY WEBRE, President, Little Red Services, Anchorage, Alaska,
introduced himself and said Little Red Services operated on the
North Slope and strongly opposed SB 92. He reported that
Hilcorp's production had increased significantly, from 17,000
barrels per day when BP sold the field to 50,000 barrels per
day, providing substantial resources to the state. He said
passing SB 92 could create higher energy costs, harm Alaskan
suppliers and jobs, and disincentivize further investment in
2025, as Hilcorp planned to invest $1 billion to increase
production on the North Slope and in Cook Inlet. He also said
Hilcorp planned to spend $200 million per year in Cook Inlet.
MR. WEBRE said given Alaska's need for economic growth and new
investment and the departure of so many oil and gas operators,
it was not the time to raise taxes on the industry. He said
proper modeling and analysis were needed to assess the full
impact on affected businesses. He said the Little Red Services
team urged the legislature to promote healthy relations with
producers and not discourage producers from investing in Alaska.
4:30:27 PM
SENATOR WIELECHOWSKI asked for the source of the numbers
provided in the testimony:
• $1 billion planned investment by Hilcorp
• $200 million per year investment in Cook Inlet
• etc.
SENATOR WIELECHOWSKI explained that the legislature did not have
access to that information and asked whether that data and its
source could be provided to the committee.
4:30:51 PM
MR. WEBRE said it was industry knowledge, gathered from working
in the business and talking with clients.
4:31:01 PM
SENATOR WIELECHOWSKI asked for written documentation.
MR. WEBRE said he could not provide written documentation.
4:31:12 PM
CHAIR GIESSEL recognized Representative Coulombe.
4:31:37 PM
LESTER BLACK, Incoming President, Alaska Support Industry
Alliance, Anchorage, Alaska, introduced himself and said the
Alaska Support Industry Alliance, was a 46-year-old professional
trade organization with over 500 member companies and 35,000
employees in Alaska. He said the Alliance opposed SB 92, arguing
that targeting one company, Hilcorp, in one industry was not a
well-thought-out tax policy and could lead to uncertainty, which
is harmful to investment. He highlighted the negative impact of
retroactive tax changes, citing the exit of British Petroleum as
an example of how such policies can jeopardize future growth and
investment in Alaska. He pointed out that SB 92 would affect 125
Alaskan companies that work for Hilcorp, many of whom were
Alliance members, and asserted that smaller Alaskan companies
would be disproportionately impacted compared with larger
companies based outside Alaska.
Mr. Black observed support from the current administration in
Washington DC for significant growth in Alaska's resource
development. He acknowledged the effort to address budget
shortfalls in the short term but warned that unstable tax
policies could jeopardize Alaska's private sector, natural gas
supply, and future tax revenues. He urged against the passage of
SB 92.
4:34:48 PM
KELLY DROOP, Regional Manager, Pape Kenworth, Anchorage, Alaska,
testified in opposition to SB 92. In addition to her position at
Kenworth, Ms. Droop said she also served on the Resource
Development Council and the Alaska Support Industry Alliance.
She expressed concerns about SB 92's potential impact on
Alaska's private sector, oil and gas industry, and overall
business climate. She warned that altering tax policy post-
investment could deter future investments, jeopardizing
affordable energy and Alaska businesses. She urged the
legislature to maintain stability to foster growth and the tax
base rather than increasing tax rates after companies have made
investment decisions.
4:36:24 PM
KATIE CAPOZZI, President, Alaska Chamber of Commerce, Anchorage,
Alaska, introduced herself and testified against SB 92,
expressing strong opposition on behalf of the chamber, which
represented over 700 businesses and 58,000 workers. She said SB
92 conflicted with the chamber's policies to support the oil and
gas industry and to oppose new targeted taxes for any industry.
She argued that SB 92 could jeopardize one in six jobs in Alaska
and undermine the state's energy sector by discouraging
investment and production, potentially reducing state revenue in
the long term. She said SB 92 lacked independent economic
analysis and could set a precedent for taxing other S
corporations in other industries, such as fishing, banking and
medical care. She urged against the passage of SB 92.
4:39:14 PM
CHAIR GIESSEL noted testimony based on a perception that SB 92
targeted oil and gas producers and that taxation would be more
acceptable if it were more broadly applied. She noted Ms.
Capozzi's apparent concern that SB 92 would lead to broader
application [of corporate taxation] to other S corporations and
asked for clarification.
4:39:57 PM
MS. CAPOZZI noted that there had not been legislation
introducing taxes on all S corporations, but she acknowledged
that the Chamber was likely to oppose such measures. She said
that signaling to any potential future business investor that if
a business is successful and making money, that business might
be the next target for a change in the tax system does not
promote a positive investment climate in the state.
4:40:42 PM
SENATOR WIELECHOWSKI noted that the state had a $536 million
deficit between the current closing fiscal year and the next. He
asked whether the Chamber could offer any support for the
legislature as it worked to close the deficit.
4:41:10 PM
MS. CAPOZZI said the Chamber advocated for a sustainable fiscal
plan and emphasized the need for a functioning spending cap
before considering broad-based tax measures. She said a spending
cap was essential to ensure fiscal responsibility and prevent
excessive spending during deficits. Without this assurance, she
said the business community was hesitant to support broad-based
revenue measures.
4:42:06 PM
SENATOR WIELECHOWSKI asked what spending cap level the Chamber
would support. He noted that to achieve a zero deficit would
require a spending cut of $350 million. He asked what sort of
broad-based measures the Chamber would support, for example a
sales tax or personal income tax.
4:42:35 PM
MS. CAPOZZI noted that spending caps were proposed every year
but did not get far enough to have hearings or to be vetted. She
said there had not been a proposal that allowed for analysis and
meaningful work toward a solution.
4:43:13 PM
SENATOR WIELECHOWSKI asked whether the Chamber would consider
supporting a sales tax or personal income tax as broad-based
measures.
4:43:22 PM
MS. CAPOZZI said that until there was a serious spending cap in
place, she did not anticipate Chamber proposals or support for
revenue measures.
4:43:40 PM
SENATOR DUNBAR noted past advocacy by the Chamber for a spending
cap. He asked whether the Chamber envisioned a spending cap that
included the [Permanent Fund Dividend] PFD or if the PFD would
be outside of the spending cap.
4:44:03 PM
MS. CAPOZZI said Chamber membership had differing opinions on
whether a spending cap would include the PFD. She argued that
the opportunity to have hearings on a spending cap would allow
for analysis and vetting of various options. She said the
Chamber did not have a position regarding whether the PFD would
be in or out [of a spending cap].
4:44:37 PM
SENATOR WIELECHOWSKI noted the claims that SB 92 was targeted on
the [oil and gas] industry. He observed that in 2013 the
legislature passed SB 21 and voters tried to repeal SB 21 in
2014. He recalled that the [the oil and gas] industry made a
series of promises during that time, that if the legislature
massively cut oil taxes, there would be more jobs, more
investment, more revenue for the state, a growing permanent fund
dividend and a million barrels of oil per day. He asserted that
[instead], the state has:
• 50 percent of the jobs
• 50 percent of the investment
• much less than 50 percent of the state revenue
• about 25 percent of the PFD
• less than 500,000 barrels [of oil] per day
SENATOR WIELECHOWSKI maintained that SB 92 was not a target on
the industry. He said the oil and gas industry did not fulfill
the promises made [to the state] in exchange for massive tax
cuts.
4:46:04 PM
LEILA KIMBRELL, Executive Director, Resource Development Council
(RDC) for Alaska, Anchorage, Alaska, introduced and outlined the
RDC's representation of various industries including fishing,
tourism, timber, mining, and oil and gas. She emphasized RDC's
long-standing advocacy for a strong private sector, responsible
fiscal policies, and stable tax policies to encourage long-term
investment and economic expansion. She asserted that SB 92 does
not align with these principles, as it unfairly targets S
corporations in the oil and gas sector without considering other
sectors with similar income thresholds. She highlighted SB 92's
retroactive nature and suggested potential legal and
constitutional issues. She suggested SB 92 could negatively
impact future resource development and Alaska's competitiveness.
MS. KIMBRELL warned that SB 92 could lead to less investment,
development, production, and job opportunities, ultimately
reducing state revenue and threatening long-term economic
growth.
4:49:22 PM
SENATOR HUGHES noted RDC's representation of the mining
industry. She said support for SB 92 was in part based on the
non-renewable nature of oil and gas. She noted that mining also
involved non-renewable resources and that there were S
corporations in the mining industry. She asked whether RDC was
concerned that the mining industry [might be targeted] next.
4:50:13 PM
MS. KIMBRELL affirmed RDC's concern that a measure targeting one
industry for revenue could lead to future targeted revenue
attempts for other industries. She said it was important to
recognize the chilling message sent by SB 92 to investors in
other resource development industries such as mining.
4:50:57 PM
SENATOR HUGHES noted RDC's concerns regarding constitutionality.
She opined that SB 92 narrowly targets specific resource
development companies for the 9.4 percent corporate tax,
suggesting it may infringe on equal protection rights. She
observed that the current 9.5 percent corporate tax applies to
all C corporations, but SB 92 would apply only to S corporations
in resource development. She suggested that SB 92 should be
referred to the Judiciary Committee and to Department of Law
(DOL). She asked whether RDCs constitutionality concerns were
for the broader implications or were more focused on the single
company.
4:52:43 PM
MS. KIMBRELL acknowledged the complexity of thoroughly analyzing
a legislative bill and concurred with calls for rigorous
modeling [of SB 92]. She deferred the recommendation for
subsequent committee referral to the appropriate legislative
body.
4:53:35 PM
SENATOR HUGHES clarified that it was not her intention that SB
92 be applied to all S corporations to address questions of
equal protection.
4:54:21 PM
THOMAS WALSH, Managing Partner, Petrotechnical Resources of
Alaska, LLC (PRA), Anchorage, Alaska, testified in opposition to
SB 92. He stated that SB 92 targeted Hilcorp and would also
impact other independent explorers and smaller companies
exploring in Alaska, which could discourage investment in the
state. He highlighted Hilcorp's arrival in Alaska in 2012 when
Cook Inlet gas production was declining, and said their
investments delayed a gas supply crisis by 15 to 20 years. He
said Hilcorp's investments in Cook Inlet and the North Slope
were essential for maintaining gas supply and revitalizing oil
production from legacy fields. He argued that SB 92 would create
a major disincentive for independent operators to invest in
Alaska, which he said was not in the best interest of Alaskans.
MR. WALSH found it ironic that the proceeds of SB 92 would fund
energy projects, given Hilcorp's pivotal role in sustaining the
state's energy infrastructure.
4:57:38 PM
SENATOR WIELECHOWSKI commented regarding testimony charging SB
92 with targeting one specific company. He noted that the
committee asked Department of Revenue (DOR) which entities would
be impacted by SB 92 and DOR declined to specify.
4:58:09 PM
SENATOR DUNBAR noted that Mr. Walsh suggested SB 92 proceeds
would be spent on grid upgrades and explained that the
legislature could not designate [revenue] funds to any specific
spending. He said there was still hope for Federal grants [for
grid support]. He emphasized that education funding was his
highest priority.
4:58:52 PM
CHAIR GIESSEL explained that previous iterations of SB 92 did
indicate that revenue generated should fund energy projects.
4:59:09 PM
SENATOR DUNBAR apologized to Mr. Walsh and said he was not aware
of that history.
4:59:42 PM
CAROLINE STORM, Executive Director, Coalition for Education
Equity, Anchorage, Alaska, testified in support of SB 92. She
emphasized the urgent need to address the chronically
underfunded school system in Alaska and pointed out that 20
students in Sleetmute were attending school in a condemned
building. She argued that the legislature must raise revenue to
meet its constitutional obligation to fund education and
maintenance projects. She urged the committee to pass SB 92 to
address these critical funding gaps.
5:01:02 PM
CHAIR GIESSEL kept public testimony on SB 92 open.
5:01:09 PM
CHAIR GIESSEL held SB 92 in committee.
5:01:44 PM
CHAIR GIESSEL discussed the cash credit program initiated in
2012, in which the State of Alaska provided cash payments to
companies that invested in drilling [oil and gas] wells. She
said the program resulted in significant financial strain, with
billions of dollars spent on cash credits the state could not
afford. She highlighted the unique challenge Alaska faces due to
the absence of a personal income tax since 1980 and said other
states without personal income tax have developed alternative
methods to tax companies, particularly S corporations and LLCs.
She emphasized the need to address this taxation issue to
stabilize the state's financial situation.
5:03:22 PM
There being no further business to come before the committee,
Chair Giessel adjourned the Senate Resources Standing Committee
meeting at 5:03p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| Jessie Chmielowski AOGCC Resume 2024_Redacted.pdf |
SRES 3/3/2025 3:30:00 PM |
|
| 3.3.25 DOR Response to SRES SB92 Questions.pdf |
SRES 3/3/2025 3:30:00 PM |
SB 92 |