05/06/2025 09:00 AM Senate FINANCE

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."                                                                                          
                                                                                                                                
9:11:30 AM                                                                                                                    
                                                                                                                                
SENATOR GIESSEL, SPONSOR, reintroduced the bill.                                                                                
                                                                                                                                
9:15:33 AM                                                                                                                    
                                                                                                                                
LUKE SAUGIER, HILCORP ALASKA,  ALASKA SENIOR VICE PRESIDENT,                                                                    
discussed  the presentation,  "Senate Finance  Committee: SB
" (copy on  file). He began with slide  2, "Hilcorp Alaska                                                                    
Overview                                                                                                                        
                                                                                                                                
     ? Overview:                                                                                                              
          - Employee Count: 1,700                                                                                             
          - Contractor Count: 2,500                                                                                           
          - Gross Oil Production: 350 kboe/d                                                                                  
          - Net Oil Production: 159 kboe/d                                                                                    
          - More than 700  partnerships with local business,                                                                  
          generating over $750 million  in annual spend with                                                                    
          Alaska vendors                                                                                                        
     ? Hilcorp Alaska Key Events:                                                                                             
          2012 - Hilcorp enters  Alaska with the purchase of                                                                  
          Chevron's Cook Inlet assets                                                                                           
          2014  -   An  acquisition  from  BP   expands  our                                                                  
          operations to include the North Slope                                                                                 
          2020 -  Hilcorp buys BP's remaining  assets in the                                                                  
         state, becoming Alaska's largest operator                                                                              
          2024 -  Hilcorp's footprint  on the  Slope expands                                                                  
          as Eni and Chevron exit the state                                                                                     
          - Hilcorp  purchases the  Spartan 151  jack-up rig                                                                  
          to prevent it from leaving Alaska                                                                                     
                                                                                                                                
9:19:14 AM                                                                                                                    
                                                                                                                                
Mr. Saugier pointed to slide 3, "Setting Records at Milne                                                                       
He addressed slide 4, "Milne Point Case Study, Finding New                                                                      
Opportunities and Growing Production":                                                                                          
                                                                                                                                
     Development Highlights:                                                                                                    
                                                                                                                                
          ?   Grew   production   by   250   percent   since                                                                  
          acquisition in 2014                                                                                                   
               - 127 wells drilled (14 with coiled tubing)                                                                    
               - 58,000 bbls of polymer solution injected                                                                     
               daily                                                                                                            
               - 60 percent more produced fluid processed                                                                     
               daily vs pre-acquisition                                                                                         
               - 21 ESP to jet pump conversions                                                                               
               - Two new pads constructed                                                                                     
               - Increased field production by more than                                                                      
               30,000 BOPD since acquisition, more than                                                                         
               doubling production                                                                                              
               - Tripled proved reserves since acquisition                                                                    
               while replacing runoff                                                                                           
               - Invested $1.5 billion in development                                                                         
               capital                                                                                                          
                                                                                                                                
9:23:00 AM                                                                                                                    
                                                                                                                                
Mr. Saugier looked at slide 5, "Operating Efficiency":                                                                          
                                                                                                                                
     Ownership and Alignment                                                                                                    
     • Investing in equipment upgrades                                                                                          
     • Empowering employees to make decisions                                                                                   
     Urgency                                                                                                                    
     • Field and office alignment results in innovative                                                                         
     wins                                                                                                                       
     • Improving operating efficiency requires hundreds of                                                                      
     small wins                                                                                                                 
     Integrity and Innovation                                                                                                   
     • Investing in new wells                                                                                                   
     • Reduce emissions                                                                                                         
     • Operate safely and responsibly                                                                                           
                                                                                                                                
Senator Merrick  recalled Mr. Saugier  stating that  it cost                                                                    
almost ten times more to do  business in Alaska than it does                                                                    
in Texas.  She wondered  why there was  continued investment                                                                    
in Alaska.                                                                                                                      
                                                                                                                                
9:27:12 AM                                                                                                                    
                                                                                                                                
Mr.  Saugier  replied  Alaska had  been  beneficial  to  his                                                                    
company.                                                                                                                        
                                                                                                                                
Co-Chair  Stedman asked  about the  participation of  credit                                                                    
for the project.                                                                                                                
                                                                                                                                
Mr.  Saugier replied  that there  had been  a slow  movement                                                                    
toward providing capital for the project.                                                                                       
                                                                                                                                
9:29:47 AM                                                                                                                    
                                                                                                                                
Senator  Kiehl queried  whether the  share of  cost was  the                                                                    
same as the share to the state.                                                                                                 
                                                                                                                                
Mr. Saugier replied in the affirmative.                                                                                         
                                                                                                                                
Mr.  Saugier discussed  slide 6,  "The Hilcorp  'Wedge.'" He                                                                    
looked at slide 7, "The Hilcorp 'Wedge.'"                                                                                       
                                                                                                                                
9:44:10 AM                                                                                                                    
                                                                                                                                
Co-Chair  Stedman  looked  at  slide 7,  and  asked  for  an                                                                    
explanation of the production tax.                                                                                              
                                                                                                                                
9:45:56 AM                                                                                                                    
                                                                                                                                
Senator  Kiehl wondered  whether Hilcorp's  entrance "tilted                                                                    
the playing field" against the other two owners.                                                                                
                                                                                                                                
Mr. Saugier replied  that major international c-corporations                                                                    
were different than independent oil producers.                                                                                  
                                                                                                                                
Senator  Kiehl felt  that  the  different company  structure                                                                    
showed a higher profit.                                                                                                         
                                                                                                                                
Mr. Saugier felt that was a misconception.                                                                                      
                                                                                                                                
Senator  Kiehl  wondered  whether  the bill  would  not  let                                                                    
Hilcorp make deductions outside of Alaska.                                                                                      
                                                                                                                                
Mr. Saugier did not know.                                                                                                       
                                                                                                                                
9:49:55 AM                                                                                                                    
                                                                                                                                
Senator Cronk  queried the  total number  of barrels  of oil                                                                    
per day produced by Hilcorp in Alaska.                                                                                          
                                                                                                                                
Mr. Saugier replied that  Hilcorp kept approximately 135,000                                                                    
barrels of oil  per day, and operated  significantly more of                                                                    
that.                                                                                                                           
                                                                                                                                
Senator  Kaufman that  there was  a  disincentive caused  by                                                                    
even a  "hint" of  impending change.  He wondered  about the                                                                    
net value  argument, and asked  for clarification  about the                                                                    
net dollars.                                                                                                                    
                                                                                                                                
Mr. Saugier  replied that the  current slide showed  a value                                                                    
increase from 2019 to present day.                                                                                              
                                                                                                                                
9:53:49 AM                                                                                                                    
                                                                                                                                
Senator Kiehl asked about a  perspective of the entire North                                                                    
Slope. He remarked  on the major fields that were  yet to be                                                                    
explored,  and  one  that  had   production.  He  wanted  to                                                                    
understand  that  difference and  the  role  of the  tax  in                                                                    
question.                                                                                                                       
                                                                                                                                
Mr.  Saugier  replied  that Hilcorp  brought  a  new  80,000                                                                    
barrels  per  day, but  he  could  not  speak to  the  other                                                                    
investments.                                                                                                                    
                                                                                                                                
10:00:30 AM                                                                                                                   
                                                                                                                                
Senator  Cathy  Giessel  reintroduced a  statement  made  on                                                                    
February 6, 2020.                                                                                                               
                                                                                                                                
SB  92  was   HEARD  and  HELD  in   committee  for  further                                                                    
consideration.