Legislature(2025 - 2026)BUTROVICH 205
04/02/2025 03:30 PM Senate RESOURCES
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| Audio | Topic |
|---|---|
| Start | |
| SB92 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 92 | TELECONFERENCED | |
SB 92-CORP. INCOME TAX; OIL & GAS ENTITIES
3:30:57 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."
3:31:44 PM
INTIMAYO HARBISON, Staff, Senator Cathy Giessel, Alaska State
Legislature, Juneau, Alaska, highlighted supporting documents
for SB 92. He noted documents from Legislative Research related
to the total number of states that currently tax S-Corporations.
In addition, there is a document from Legislative Research
highlighting tax liabilities (focusing specifically on Texas,
Florida, and Nevada). Emails from the Department of Revenue are
also included. He also noted several documents from John
Letourneau.
3:33:07 PM
CHAIR GIESSEL noted that the documents from Mr. Letourneau would
not be discussed.
3:34:37 PM
LUKE SAUGIER, Senior Vice President, Hilcorp Energy Company,
Houston, Texas, said he would provide an update on Hilcorp's
business operations and how various measures could impact
industry stability. He expressed excitement regarding a recent
liquified natural gas (LNG) pipeline project agreement. He
indicated that Hilcorp would continue to work to meet near-term
demand in Cook Inlet. He noted a recent agreement between
Hilcorp and Furie Operating Alaska for work to be done in summer
2025.
3:36:35 PM
MR. SAUGIER advanced to slide 2, a map showing Cook Inlet and
the North Slope, and provided an overview of Hilcorp Alaska:
[Original punctuation provided.]
Hilcorp Alaska Overview
Highlights
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
Cook Inlet
Production (kboe/d) 25
Percent Gas 56 percent
Well Count 323
North Slope
Production (kboe/d) 134
Percent Oil 100 percent
Well Count1 1,728
3:38:43 PM
MR. SAUGIER advanced to slide 3, a graph showing 2014-2025
legacy production and Hilcorp redevelopment at Milne Point. He
stated that Hilcorp has invested over $1 billion at Milne Point.
Hilcorp has invested over $750 million in Milne Point for 2024-
2025. Hilcorp has drilled more than 161 new wells, 430 miles of
lateral footage, and produced more than 110 million barrels of
oil over the 10 years of ownership. Production has grown
significantly during that time. Currently, production is over
51,000 barrels per day. He said this number is expected to
surpass 60,000 barrels per day within the next 3-4 years. He
said that production growth at Milne requires significant
capital investment and briefly discussed those plans.
3:40:45 PM
MR. SAUGIER advanced to slide 4, containing a graph titled
"Milne Point Production," showing legacy development and Hilcorp
development from 2005-2025, and discussed Milne Point
development highlights:
[Original punctuation provided.]
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
Impact of Milne Growth
Hilcorp's Milne Point Development has provided an
incremental $500mm in revenue to the State
• $290 million Property Tax
• $130 million Royalties
• $80 million Production Tax
MR. SAUGIER briefly discussed how Alaskans viewed Hilcorp when
the company first began work in the state. He said Hilcorp's
largest Alaskan investment to date was its acquisition of BP's
remaining Alaska assets. This included the 27 percent stake in
Prudhoe Bay. He briefly discussed Prudhoe Bay's role in the
Alaskan oil industry and emphasized the importance of this
acquisition. He noted that Hilcorp is operating on behalf of
other interests and therefore receives a percentage (roughly 23
percent per barrel) of profits.
3:42:55 PM
MR. SAUGIER advanced to slide 5, containing a graph illustrating
Prudhoe Bay trends under Hilcorp and the previous operator from
2016-2021, and discussed Hilcorp's operating efficiency:
[Original punctuation provided.]
Operating Efficiency
Hilcorp's Core Values Drive Success
Keys to Success
• Ownership & 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 & Innovation
• Investing in new wells
• Reduce emissions
• Operate safely and responsibly
MR. SAUGIER directed attention to the graph on slide 5 and
discussed how BP's reduction in investments led to declining
production rates in Prudhoe Bay. He briefly discussed the impact
of outside forces discouraging investment in Alaska and offered
examples.
3:44:30 PM
MR. SAUGIER stated that Hilcorp is subject to market pressures
and estimated that Hilcorp lost two-thirds of the banks in its
credit group because of the company's assets in Alaska. He
emphasized that bank credit is important to Hilcorp, which is a
private company and therefore does not have access to public
capital markets. He said Hilcorp has consistently sought to
change the anti-Alaska development narrative. He noted
historical concerns related to loss of state revenue due to
Hilcorp's exclusion from the corporate net income tax. He quoted
a KTUU article titled, "BP Pull Out Could Effect State Revenue"
to illustrate -- how the loss of BP's corporate net income tax
would impact the state. The article suggested that increased oil
production could bridge the gap and cover the loss in revenue.
The article also quoted Kara Moriarty of the Alaska Oil and Gas
Association, who suggested that private oil companies may have
been exempted from the tax to entice new investment. Ms.
Moriarty was also quoted as stating that the State of Alaska
should focus on increasing production, as the bulk of Alaska's
oil revenue comes from production taxes and royalties - and not
corporate income taxes. He agreed that Alaska was seeking new
investors and stated that Hilcorp answered that call. He
indicated that Hilcorp answered the call when the investment was
risky. He stated that Hilcorp has invested billions of dollars
and production has increased. He asserted that, although Hilcorp
has not been subject to the corporate net income tax, the State
of Alaska has experienced higher oil revenues under Hilcorp than
under BP.
3:47:22 PM
MR. SAUGIER reiterated that the State of Alaska has benefitted
from significantly higher oil revenues due to increased oil
production under Hilcorp. He noted that Hilcorp has worked with
Conoco Phillips and Exxon to increase investments in Prudhoe Bay
and offered examples. Production is no longer declining in
Prudhoe Bay. He emphasized that this is a reversal from the
prior two decades of decline. He briefly discussed the benefits
of increased production for Alaskans and the State of Alaska. He
said that Hilcorp's 2025 Alaska budget is larger than previous
years. Additionally, Alaska makes up a significant portion of
Hilcorp's overall company at nearly 70 percent.
3:49:38 PM
MR. SAUGIER advanced to slide 6, containing a graph illustrating
2010-2028 production (2025 forecast, 2019 forecast, and actual).
He stated that the State of Alaska has reported significant
increases in production as a result of Hilcorp's work on the
North Slope (at Prudhoe Bay and Milne Point). He explained
Hilcorp's work in Prudhoe Bay. This has included billions of
dollars in spending focused on drilling new wells, fixing
existing wells, adding facilities to grow production, etc.
Hilcorp is currently operating seven oil rigs on the North Slope
(plus three in the Cook Inlet). Hilcorp plans to drill a well at
Point Thompson in 2026. He stated that these major capital
investments play a critical role in Alaskan employment and in
generating revenues for North Slope communities and for the
State of Alaska.
MR. SAUGIER directed attention to the graph on slide 6, noting
that the data is from the Department of Revenue forecast. He
pointed to the black line on the graph and noted that in the
fall of 2019, production in Prudhoe Bay had been in decline for
ten years. This decline was expected to continue. He directed
attention to the solid and dashed green lines on the graph,
which indicate Hilcorp's production levels. He pointed out that
the forecast for Hilcorp is a drastic difference from that of
the prior operator. He emphasized that the resulting "wedge" is
the result of Hilcorp's investment in the assets. From 2019-2029
the wedge is worth nearly one quarter of a billion barrels of
additional production. He noted that each year, the wedge gets
larger and offered examples to illustrate the difference between
the forecasted amount and what is delivered. In 2025, the
difference between the expectation (under the previous operator)
and what Hilcorp is delivering is roughly 30 million barrels of
additional oil production for the State of Alaska. He opined
that this makes a clear statement about Hilcorp's firm
commitment to Alaska's energy future. He expressed pride in the
work Hilcorp has done to revitalize Cook Inlet and increase
production on the North Slope. He stated that certainty and
stability are essential for any oil company for making long-term
investments. This ultimately generates increased production
revenues and royalties for the state.
3:53:25 PM
MR. SAUGIER said that SB 92 undermines stability. He reiterated
and emphasized that stability on the North Slope has enabled
Hilcorp to produce millions of barrels of additional oil. He
asserted that SB 92 does not recognize the unique structure and
operations of independent gas producers. He noted the current
potential for future growth and suggested that this is not the
time to target independent companies with new taxes that would
hinder progress and investment. He stated that SB 92 overlooks
the significant investments made by private oil and gas
companies that increase production on the North Slope and in
Cook Inlet - and which has likewise resulted in increased
revenues (royalties and production taxes) for the State of
Alaska. He asserted that SB 92 would threaten Alaska's oil and
gas industry by substantially raising the oil and gas taxes.
MR. SAUGIER stated that SB 92 targets Hilcorp and other
independently owned gas companies and tilts the field against
them. He pointed out that Alaska has worked for years to
incentivize these companies to come into the state. He opined
that focusing solely on how much money can be made from the
industry is the wrong approach and would have a negative impact
on investments and growth. He stated that this would send a
chilling message to future investors. He said that Hilcorp has
sought industry and/or financial partners for exploration
opportunities in Alaska and has often heard concerns regarding
tax policy stability in the state. He stated that a reputation
for instability is not a good thing. He said that if SB 92 were
to pass, Hilcorp would be forced to scale back its work Alaska.
He noted that SB 92 would impact overall investment in Prudhoe
Bay. He noted that this would also negatively impact Conoco
Phillips and Exxon.
3:55:57 PM
MR. SAUGIER concluded that SB 92 and similar legislation has not
been modeled and analyzed by independent experts. He directed
attention to the Department of Revenue fiscal note, which
indicates a high level of uncertainty due to a lack of
information. In addition, the fiscal note states that
significant regulatory changes are required to implement the
changes made by SB 92. He stated that SB 92 does not acknowledge
that it is now more difficult to finance and approve fossil fuel
projects, which disincentivizes companies from investing in
Alaska and creates a cooling effect on new development. He
stated that SB 92 does not account for the complex nature of oil
and gas accounting and offered examples. He indicated that
applying a blanket tax structure over independent oil and gas
companies is problematic.
3:58:11 PM
MR. SAUGIER said Hilcorp is structured as a Limited Liability
Company (LLC) and briefly explained the reasons for this. He
emphasized that Hilcorp is an American-owned independent
business that does not have access to the same resources as a
large, multi-national public corporation. He reiterated that
Hilcorp is smaller and nimbler and thus has fewer resources. He
noted that Hilcorp is structured the same in all jurisdictions
and has been structured this way for the duration of its time in
Alaska. He noted several benefits to Hilcorp's smaller size and
private ownership, including an efficient management structure
and less susceptibility to pressure from those targeting Alaska.
He opined that Hilcorp aligns well with Alaska's long-term
interests. He pointed out that Hilcorp is known as a late-life
investor that can produce oil and gas from aging fields well
after other companies have moved on. He noted several benefits
of Hilcorp's efficient management structure and offered
examples. He stated that Hilcorp is working hard to sustain
development in Cook Inlet and SB 92 targets Cook Inlet natural
gas producers. He asserted that SB 92 targets Cook Inlet
producers at a time when additional investment is needed to
bring natural gas to market. He stated that small, nimble LLCs
are the future of Cook Inlet and North Slope investment;
however, SB 92 would drive that much needed investment
elsewhere.
4:00:20 PM
MR. SAUGIER noted discussion that SB 92 would level the playing
field. He disagreed and reiterated that SB 92 would tilt the
playing field against the companies that the State of Alaska
worked for decades to incentivize to come to Alaska. He noted
that many Alaskan companies are structured as LLCs and S-Corps.
He argued that to single Hilcorp out from the 55 thousand LLCs
and S-Corps in Alaska is deeply unfair. He stated that the
previous three Alaskan governors were aware of Hilcorp's
structure when approving the company's transactions. However,
Hilcorp is being unfairly targeted after investing billions of
dollars and dramatically increasing production on the North
Slope and in Cook Inlet.
MR. SAUGIER directed attention to SB 112, which would change the
sliding scale credit and would have an immediate and substantial
negative impact on Hilcorp and its partners on the North Slope.
He stated that both SB 112 and SB 92 would impact planned
investment levels, including upcoming capital investments. This
would impact future royalties and production taxes. He stated
that Alaska is a critical pillar to the Hilcorp strategy;
Hilcorp is dedicated to investing the necessary capital to
deliver increased production, new jobs, and a long future in the
state. However, it is difficult to commit to long-term
investment when the fiscal regime is subject to continued
uncertainty. He commented that rule changes make continued work
difficult - despite having invested billions of dollars. He said
Hilcorp can only respond to those changes; unfortunately, this
would mean shifting capital outside of Alaska. He emphasized
that Hilcorp is excited about its future in Alaska, is proud of
its accomplishments in the state, and is looking forward being a
part of the Alaskan economy and community well into the future.
4:02:54 PM
SENATOR DUNBAR directed attention to the appendix on page 10,
which shows a $600 million North Slope production tax as a five-
year impact of the Hilcorp wedge. He asked if the production tax
is based solely on the wedge or if it is the total production
tax Hilcorp pays. He asked how much Hilcorp pays annually in
state and local taxes, royalties aside.
4:03:41 PM
MR. SAUGIER said the $600 million is only on the wedge. He said
that this amount is the value provided to the State of Alaska
for having Hilcorp as the steward of the North Slope assets. He
said that at $70/barrel, it is worth roughly $7 billion to the
State of Alaska over a ten-year period. He noted that this is
based on price assumptions; however, he emphasized that the
wedge brings great value to the state. With respect to the total
amount of state and local taxes Hilcorp pays, he said that, on
average, Hilcorp contributes over $1 billion each year to
overall State of Alaska revenues.
4:04:54 PM
SENATOR DUNBAR noted that the documents on Hilcorp's assets in
Louisiana and Texas indicate the total amount of state and local
taxes Hilcorp pays in those locations. The document for Alaska
speaks to overall economic impact. He pointed out that in
Alaska, the State of Alaska is the royalty owner, while in other
states the royalties are held by private landowners. He repeated
his question regarding how much Hilcorp pays annually in state
and local taxes, royalties aside.
4:05:36 PM
MR. SAUGIER said he is unfamiliar with the documents regarding
Louisiana and Texas. He said he does not know how much Hilcorp
pays in state and local taxes.
4:05:51 PM
CHAIR GIESSEL clarified that the pages in question were taken
from the Hilcorp website. She directed attention to an
additional chart from the Hilcorp website, with a yellow header,
which identifies the six areas where Hilcorp operates, including
state and local taxes paid in each state.
4:06:48 PM
SENATOR DUNBAR said that it would be helpful to know how much
Hilcorp pays in state and local taxes (e.g. property taxes and
production taxes) less royalties, as this would provide
additional context for determining policy impact.
4:07:37 PM
SENATOR WIELECHOWSKI directed attention to slide 10, which shows
an additional $600 million in production taxes and 167 million
barrels. He estimated that this is $3.59/barrel in production
taxes. He asked how much per barrel profit Hilcorp made in that
timeframe.
4:08:06 PM
MR. SAUGIER said Hilcorp is a private company and does not
disclose profits.
4:08:21 PM
SENATOR WIELECHOWSKI said that it is challenging to model the
impacts of SB 92. He noted earlier testimony that SB 92 would
force Hilcorp to scale down in Alaska. He said that the State of
Alaska has an obligation to ensure it receives a maximum value
for its resource. He indicated that it is reasonable to request
this information. He asked whether Hilcorp has modeled how much
the additional taxes imposed by SB 92 would cost.
4:09:16 PM
MR. SAUGIER clarified that profit information is provided to DOR
and DNR and that information is confidential. He said modeling
the impacts of SB 92 has been challenging due to the complexity
of the federal tax code.
4:10:21 PM
SENATOR WIELECHOWSKI asked for clarification that Hilcorp does
not know how much the additional taxes would be.
4:10:34 PM
MR. SAUGIER replied no. He said Hilcorp has not successfully
modeled the specific impacts of SB 92; however, he expressed
confidence that it would have a chilling effect.
4:11:03 PM
SENATOR WIELECHOWSKI pointed out the federal laws governing oil
production, which require active production for leases with a 15
percent minimum rate of return. He asked what the rate of return
is at Milne Point.
4:11:55 PM
MR. SAUGIER said he would not disclose that information outside
of the appropriate oversight and governmental agencies.
4:12:10 PM
SENATOR WIELECHOWSKI asked whether the rate of return is higher
or lower than 20 percent at Prudhoe Bay, Milne Point, and Cook
Inlet.
4:12:21 PM
MR. SAUGIER replied that he would not disclose that information
in an open committee hearing.
4:12:28 PM
SENATOR WIELECHOWSKI asked whether SB 92 would cause Hilcorp's
internal rate of return to drop below 20 percent at Prudhoe Bay,
Milne Point, or Cook Inlet.
4:12:41 PM
MR. SAUGIER replied that he could not answer because it is
challenging to accurately model the impacts of SB 92. However,
he stated that if this information was available, he would not
disclose it in an open hearing.
4:13:06 PM
SENATOR WIELECHOWSKI asked if there was any indication that the
internal rate of return would come close to 20 percent or remain
well above 20 percent. He asked for a rough estimate.
4:13:24 PM
MR. SAUGIER replied that he would not discuss that information
in an open committee hearing.
4:13:32 PM
SENATOR WIELECHOWSKI expressed difficulty understanding the
testimony that SB 92 would force Hilcorp to scale back in
Alaska, considering that Hilcorp does not know how much the
additional taxes would be and cannot confirm whether SB 92 would
cause the rate of return to drop below 20 percent. He indicated
that this puts policymakers in a difficult position.
4:14:03 PM
CHAIR GIESSEL noted the arrival of Senators Merrick and
Coulombe.
4:14:17 PM
SENATOR HUGHES directed attention to documents provided by
Hilcorp and compared the San Juan Basin to Alaska. She surmised
that it is less expensive for Hilcorp to operate in the San Juan
Basin. She noted a variety of differences between these
locations and emphasized the high cost of doing business in
Alaska. She noted that Hilcorp has listed state and local tax
paid in San Juan to just over $191 million. She recalled that
the government would receive $1 billion in production taxes,
property taxes, and royalties. She said that a 50 percent
decrease would result in higher state and local taxes for a
similar production amount. She opined that this is reasonable.
She referred to a CPA document and briefly discussed this. She
shared her understanding that Hilcorp would not receive the 20
percent s-corporation deduction referred to in that document.
She shared her understanding that Hilcorp would pay roughly $80
million more than a c-corporation as a result. She stated that
SB 92 would put Hilcorp at a disadvantage. She surmised that the
original intention was to create a balanced playing field. She
asked for further information regarding Hilcorp's expenses in
other locations. She also asked about federal tax implications,
noting that the CPA documents indicate that Hilcorp would pay
significantly more.
4:17:09 PM
CHAIR GIESSEL interjected, saying the data quoted by Senator
Hughes was inaccurate, and reminded her that the committee was
not discussing the CPA documents at this hearing.
4:17:21 PM
MR. SAUGIER said that he could not speak to the complexities of
the federal tax code. He offered context for the cost of
operating in Alaska compared to other areas. He stated that
operating an oil rig to fix a well in the San Juan Basin is
roughly one tenth of the cost for the same operation on the
North Slope. He suggested that it is reasonable to say it is ten
times as costly to operate in Alaska. He offered an example to
illustrate the challenges of operating on the North Slope.
4:19:27 PM
SENATOR MYERS asked for additional details regarding the status
of Prudhoe Bay infrastructure when Hilcorp took over in 2020.
4:19:45 PM
MR. SAUGIER said that when Hilcorp took over in 2020, the
infrastructure and facilities had not been well-maintained. He
stated that the previous operator did not perform regular
maintenance (or drill new wells) in order to maximize profit. He
stated that this is supported by the data from that timeframe.
He said that this was intentional, as BP considered Prudhoe Bay
to have a short life. He emphasized that Hilcorp takes a
different approach, managing Prudhoe Bay with the next 50 years
in mind.
4:21:05 PM
SENATOR MYERS asked if it is fair to say that part of the
production tax and corporate income tax paid by the previous
operator was due to BP deferring maintenance.
4:21:26 PM
MR. SAUGIER opined that this is a fair assumption.
4:21:37 PM
SENATOR WIELECHOWSKI asked if the issue of corporate income
taxes came up during Hilcorp's acquisition of assets and, if so,
what Hilcorp's stance was at that time.
4:21:55 PM
MR. SAUGIER said that he is not aware of any specific discussion
related to corporate income tax. He stated that Hilcorp has
always operated with the same structure in all its locations.
4:22:28 PM
SENATOR WIELECHOWSKI asked whether Dave Wilkins is still at
Hilcorp.
4:22:38 PM
MR. SAUGIER said Mr. Wilkins was with Hilcorp at that time but
has since retired.
4:22:43 PM
SENATOR WIELECHOWSKI offered a quote from a 2020 Joint Resources
Committee hearing during which Mr. Wilkins stated that Hilcorp
does not have an opinion on corporate income tax and would pay a
corporate income tax if implemented by the Legislature. He asked
if Mr. Saugier recalled that testimony.
4:23:16 PM
MR. SAUGIER replied no. He explained that he was focused on
assets in other states at that time.
4:24:02 PM
DAN STICKEL, Chief Economist, Tax Division, Department of
Revenue (DOR), Juneau, Alaska, introduced himself.
4:24:18 PM
MR. STICKEL advanced to slide 2 and provided an overview of the
request DOR received from the Senate Resources Standing
Committee:
[Original punctuation provided.]
Bill Sponsor Request to Department of Revenue
• "Fiscal Policy Analysis" for CS SB 92 \L
• Similar to SB 114 presentation to Senate Finance
on May 1, 2023
• SB 114 (2023) included both production tax and
corporate income tax provisions, while SB 92
(2025) includes only corporate income tax
• Similar presentation outline, except for "order
of operations" and effective tax rate slides for
production tax
4:25:06 PM
MR. STICKEL advanced to slide 3 and provided a presentation
overview:
[Original punctuation provided.]
Presentation Overview
• Background & Tax Program History
• Proposed Legislation
• Updated Fiscal Note Summary
• Distribution of Profits
• Appendix: Distribution of Profits with Higher and
Lower Cost Producer
4:25:58 PM
MR. STICKEL advanced to slide 5 and discussed the various legal
entities:
[Original punctuation provided.]
Types of Legal Entities
• Individual files an individual income tax
return
• C-corporation income taxed on corporate tax
return
• "Pass-through entities"
• Sole proprietorship one individual owner
• Partnership at least two owners,
individual or corporate
• Limited Liability Company one or more
owners, individual or corporate
• S-corporation up to 100 individual owners
• Note: Pass-through can own other pass-
through, for example an S-corp can be an
owner of an LLC or partnership
• Other entity types: Benefit, Closely held, Co-op,
LLP, etc.
4:27:59 PM
MR. STICKEL advanced to slide 6 and gave an historical review of
the oil & gas corporate income tax:
[Original punctuation provided.]
Oil & Gas Corporate Income Tax: Historical Review
• Alaska Net Income Tax Act 1949
• Uniform Division of Income for Tax Purposes Act -
1959
• Multistate Tax Compact (MTC) 1970
• Revised to include adopting Internal Revenue Code
(IRC) by reference unless excluded 1975
• Separate Accounting 1978-1981
• Repealed Individual Income Tax and "Created" S-
Corporation "Exemption" 1980
• Adopted Current Oil & Gas Apportionment Factor on
worldwide income 1981
• Current tax brackets (reduced tax for small
businesses) 2014
MR. STICKEL stated that Alaska's corporate income tax has
changed over the years. At its inception, the tax rate was 10
percent of federal income tax liability. This was applied to
both individual and corporate income tax. The corporate income
tax apportionment requirement was established in 1959 as part of
the Uniform Division of Income for Tax Purposes Act. This was
done to create uniformity amongst state tax codes nationwide and
avoid taxing the same income across multiple states. The
Multistate Tax Compact established the standard, three-factor
apportionment methodology. He briefly described this
methodology. The 1975 tax revision was based on Alaska taxable
income rather than federal tax liability. At that time, Alaska's
tax rate was 5.4 percent plus a 4 percent surtax, for a total of
9.4 percent. He said this remains the top marginal rate for
corporate income taxes. He briefly explained how the State of
Alaska uses the Internal Revenue Code. He noted that from 1978-
1981, the successful start of Prudhoe Bay production led to
discussions regarding taxing oil companies and utilizing
newfound oil wealth. He briefly discussed how the 2014 tax
bracket adjustments benefited smaller businesses.
4:31:45 PM
MR. STICKEL advanced to slide 7 and provided an overview of the
oil and gas corporate income tax current fiscal regime:
[Original punctuation provided.]
Oil & Gas Corporate Income Tax: Current Fiscal Regime
• Applies to C-Corporations only
• Many, but not all, companies in Alaska
• "Alaska Taxable Income" determined using an
"apportionment factor"
• Non-Petroleum based on U.S. "water's edge"
activity, apportioned to Alaska based on
Alaska's share of property, payroll, and
sales
• Petroleum based on worldwide activity,
apportioned to Alaska based on Alaska's
share of property, production, and
sales/tariffs
• Bracketed tax rate, with highest rate of 9.4
percent on taxable income over $222,000
MR. STICKEL said Alaska follows the Internal Revenue Code when
determining an entities taxable status. Alaska does not have a
personal income tax.
4:33:11 PM
MR. STICKEL advanced to slide 9 and discussed how SB 92 would
impact corporate income tax:
[Original punctuation provided.]
Primary Bill Provisions
• Oil & Gas Corporate Income Tax extended to pass-
through entities
• Retroactive to January 1, 2025
4:33:39 PM
MR. STICKEL advanced to slide 10 and discussed the mechanics of
this change:
Oil & Gas Corporate Income Tax
• Current law, only C-Corporations are subject to
Alaska's corporate income tax Oil and Gas and
Non-Oil and Gas Proposed Legislation Provisions -
SB 92 (CS)
• Would tax oil and gas pass-through entities with
"taxable income" over $5 million at a rate of 9.4
percent (no tax on income up to $5 million)
• "Taxable income" defined as income from the
production of oil or gas from a lease or property
in the state or from the transportation of oil or
gas by pipeline in the state
• Applies only to entities that do not flow through
to a C-corporation. No impact on current tax on
C-Corporations
4:34:40 PM
MR. STICKEL advanced to slide 11, containing two tables. The
first table shows corporate income tax brackets, taxable income
and current statute tax rates for C-Corporations. The second
table shows Corporate Income Tax brackets taxable income and CS
SB 92 (RES) tax rates for SB 92 Qualifying Entities. He
discussed how SB 92 would impact existing tax brackets:
[Original punctuation provided.]
Oil & Gas Corporate Income Tax Brackets
• Top marginal rate would be the same for C-
Corporations and qualifying passthrough entities
• The $5 million exclusion would be larger for
qualifying passthrough entities than C-
Corporations
MR. STICKEL said there are several tax brackets for C-
Corporations. The top bracket of 9.4 percent applies to taxable
income over $222,000. SB 92 would create two tax brackets for
qualifying pass-through entities. The first is a zero percent
tax rate on income up to $5 million. The second is a 9.4 percent
tax rate on income above $5 million. The top marginal rate would
be the same for all oil and gas companies. Pass through entities
would have a slightly higher level of income excluded before
paying tax. Some of the smallest pass-through entities would
likely avoid taxation.
4:35:37 PM
MR. STICKEL advanced to slide 13 and offered a disclaimer:
[Original punctuation provided.]
Disclaimer
• Fiscal Impact of SB 92 (CS) is Indeterminate
• DOR does not have complete data about the
worldwide income and apportionment factors for
qualifying companies
• Range of impacts per Spring 2025 Forecast is zero
to $150 million/ year
• One possible scenario is based on a simple "scale
up" methodology
• All analysis presented is based on this one
scenario within a range of potential outcomes
MR. STICKEL directed attention to the DOR fiscal note, which
states that SB 92 could have a zero impact on some companies. He
offered examples to illustrate this possibility. He briefly
explained the "scale up" methodology, which provides a rough
estimate of one potential scenario for potential revenues.
4:36:49 PM
MR. STICKEL advanced to slide 14, containing a table displaying
fiscal scenario potential impacts for FY 2025-FY 2034:
[Original punctuation provided.]
Oil & Gas Corporate Income Tax: Fiscal Scenario
CS SB92 (RES) Potential Fiscal Impact Scenario:
• Fiscal Impact is indeterminate, with a potential
range from zero to $150 million/ year
Assumptions:
• Ownership structure for Alaska oil and gas
production as of the Spring 2025 Forecast,
including announced transactions
• Profitability for non-C corporations is similar
on a per-barrel basis to that of C corporations
• Revenue is based on production activities,
excluding pipeline ownership or other in-state
assets
• A single non-C corporation taxpayer, taxed as of
January 1, 2025, at a rate of 9.4 percent for
income over $5,000,000
MR. STICKEL said slide 14 illustrates the "scale up" scenario by
fiscal year, beginning with fiscal year (FY) 2025. He explained
that 2025 represents 6 months of potential revenue (an estimated
$50 million) due to the January 2025 effective date. The
potential revenue increases to as much as $130 million in FY
2027. A decline is expected in later years, leading to revenues
of roughly $80 million in FY 2033. He explained that production
for non-C-Corporations is expected to decline in later years. He
reiterated this data represents one possible scenario in the
range of zero to $150 million per year.
4:37:59 PM
SENATOR HUGHES asked whether the estimate assumes that activity
level and pace of production would remain the same over time.
She noted the potential for companies to invest elsewhere and
questioned whether that possibility is considered.
4:38:35 PM
MR. STICKEL acknowledged that the impact of a company's response
to the tax increase is unknown. He said that this is one reason
the fiscal impact in the official revenue forecast is
indeterminate. He explained that the estimates on slide 14
assumed that the company's behavior would remain the same. In
addition, non-C-Corporations and C-Corporations are assumed to
have the same level of profit (for corporate income tax
purposes).
4:39:11 PM
MR. STICKEL advanced to slide 15, containing a bar chart showing
the potential impacts of CSSB 92 (RES) fiscal scenario at
various ANS prices. He explained the importance of considering
revenue impacts over a range of oil prices, as the actual price
is unknown. He noted that FY 2025 represents a 6-month impact
and uses a combination of actual and forecast prices. He noted
that the impacts of expanding the corporate income tax to pass-
through entities vary based on price. At low prices, there is
little profit to tax. $100 and above per barrel could
potentially result in revenues at or above $200 million per
year.
4:40:24 PM
MR. STICKEL advanced to slide 17 and discussed the various
assumptions used in upcoming slides:
[Original punctuation provided.]
North Slope Distribution of Profits
• Based on Spring 2025 Forecast for FY 2026
• Assumes "typical" barrel of oil production
• Assumes typical lease expenditures for a producer
• $20.77/ bbl. capex, $15.84/ bbl. opex
• Assumes a single taxpayer on state land, 12.5
percent royalty
• Assumes $2.00 per barrel property tax
• Assumes 4.25 percent effective state corporate
income tax, 21 percent federal corporate income
tax
• 4.25 percent is based on historical analysis
for companies subject to state corporate
income tax
• Does not include any potential changes in company
behavior or investment as a result of this
proposal
4:41:55 PM
MR. STICKEL advanced to slide 18 and discussed the government
take per barrel for FY 2026. Slide 18 contains an infographic
illustrating the status quo with and without state corporate
income tax (CIT). He referred to the section depicting the
status quo with state CIT and explained that this scenario
results in a profit of $23.09/barrel. The producer would keep 39
percent of that profit, state and municipalities would receive
51 percent, and the federal government would receive 10 percent.
He contrasted this with a company not subject to the state
corporate income tax. In this scenario, the profit would be 2
percent higher. He explained that the State CIT would take about
40 cents per barrel (2 percent) and transfers that from the
producer to the state. State CIT is deductible against federal
CIT; therefore, 10 cents per barrel is transferred from the
federal to state government (for companies subject to state
CIT).
4:43:17 PM
MR. STICKEL advanced to slide 19 and discussed government take
at various oil prices for companies subject to state CIT. Slide
19 contains a bar chart illustrating the status quo with state
corporate income tax, forecast CapEx. He pointed out that state
and municipal governments take 100 percent of the profits at
$40-$50. He explained that companies pay royalty, property tax,
and a minimum tax floor for production tax regardless of whether
there is any profit. He noted that the lowest amount of
government take is around 53 percent ($80-$90/barrel). Beyond
this, the government take increases. He reiterated that this
analysis does not account for possible changes in capital
expenditures that would result from higher or lower prices.
4:44:50 PM
MR. STICKEL advanced to slide 20 and discussed government take
at various oil prices for companies not subject to state CIT.
Slide 20 contains a bar chart to illustrate the status quo
without state corporate income tax, forecast CapEx. In this
scenario, the state and municipal share is slightly lower while
the producer and federal shares are slightly higher.
4:45:13 PM
MR. STICKEL advanced to slide 21 and continued to discuss total
government take. Slide 21 contains a graph to illustrate total
government take for non-gross value reduction (non-GVR)
production (status quo, forecast CapEx) with CIT and without
CIT. He said the total government take is 100 percent of profit
(or greater) until $54/barrel. The lowest total government take,
which occurs at roughly $84/barrel, is 51 percent (with state
CIT) and 49 percent (without CIT). He explained that GVR is a
provision in the production tax statute that allows for a
benefit against the production tax (and a lower production tax
liability) for new fields for the first 3-7 years of production.
He noted that this slide shows total government take (with and
without state CIT) for non-GVR production (e.g. legacy fields
such as Prudhoe Bay and Kaparuk).
4:46:29 PM
MR. STICKEL advanced to slide 22 and discussed total government
take for GVR production. Slide 22 contains a graph to illustrate
total government take for GVR production (status quo, forecast
CapEx). For example, a new producing area within an existing
unit that qualifies for the new field benefit. He noted that
this data does not line up directly with major new fields (e.g.
Pikka and Willow projects), as this analysis is based on a 12.5
percent royalty rate (whereas current those fields have a 16.7
percent royalty rate). He drew attention to the difference
between the GVR and non-GVR eligible fields. He noted lower
government take for GVR eligible fields. Government take is
greater than 100 percent of profit until roughly $54/barrel.
4:47:31 PM
MR. STICKEL advanced to slide 23 and discussed government take,
retrospective and prospective. Slide 23 contains a chart to
illustrate the government share of profits, historical (from
2010 onward) and forecast as of Spring 2025. He said government
take was consistently 60-70 percent for most years through FY
2017. In 2016, low oil prices resulted in decreased profits; at
that time, the state and municipalities took over 90 percent
government take (due to royalties, property tax, and minimum tax
floor for production tax). He discussed the significant impact
of the Tax Cuts and Jobs Act of 2017, which reduced the federal
CIT from 55 percent to 21 percent. This significantly reduced
government take. He noted that near-term forecast has lower oil
prices and significantly higher government spending. Government
take is expected to be 55-65 percent for the next 5-6 years
before dropping down to 50-55 percent towards the end of the
forecast period. He said the difference between the rate with
state CIT and the rate without state CIT is around 2 percent
most years.
4:49:48 PM
MR. STICKEL advanced to slide 24 and discussed fiscal analysis
takeaways:
[Original punctuation provided.]
Fiscal Analysis: Takeaways
• Fiscal Impact is uncertain and indeterminate
• Alaska is a high-cost jurisdiction so there is a
limited amount of "profit" to share between
stakeholders
• At forecast price, state CIT adds about 40 cents/
barrel to government take or about 2 percent of
total distributable income
• Assuming typical effective tax rate
• Each company and field has unique economics, so
this simple analysis should be taken in context
• Impacts on individual companies may be more less
than estimated here
4:50:58 PM
MR. STICKEL concluded his presentation. He noted that the
appendix slides include sensitivity analysis.
4:51:36 PM
CHAIR GIESSEL opened public testimony on SB 92; finding none,
she closed public testimony.
4:52:28 PM
CHAIR GIESSEL solicited a motion.
4:52:33 PM
SENATOR MYERS moved to adopt Amendment 1, work order 34-
LS0540\L.3.
34-LS0540\L.3
Nauman
4/1/25
A M E N D M E N T 1
OFFERED IN THE SENATE BY SENATOR MYERS
TO: CSSB 92(RES), Draft Version "L"
Page 1, lines 1 - 2:
Delete "producing or transporting oil or gas"
Insert "with income derived from a source"
Page 2, lines 16 - 17:
Delete "from the production of oil or gas from a
lease or property in the state or from the
transportation of oil or gas by pipeline"
Insert "derived from a source"
4:52:47 PM
CHAIR GIESSEL objected for purposes of discussion.
4:52:53 PM
SENATOR MYERS explained that Amendment 1 would expand the tax on
pass-through entities to include all businesses in Alaska. He
said this would create parity for all industries. He noted that
other industries have pass-through entities that are not taxed.
He indicated that he has heard comments that private sector
growth is a cost for government, as it does not pay into
government coffers for the services that it requires. He stated
that Amendment 1 would ensure that the private sector pays into
the government. He surmised that this could also benefit the
private sector by increasing the government's interest in the
private sector. He noted comments that a state CIT is one way
for the state to receive the maximum benefit for its natural
resources and directed attention to Article 8, sections 1 and 2
of the Constitution of the State of Alaska.
SENATOR MYERS stated that SB 92 applies the state CIT to one set
of natural resources. He noted that other natural resources
(fishing, mining, etc.) have C-Corporations. He opined that all
natural resources should be treated the same if the intention is
parity, equality, and receiving the maximum benefit for natural
resources from state government. With respect to whether SB 92
would increase revenue for state government, he quoted the 2024
Revenue Resources book which showed $210 million from oil CIT in
FY 2024. This same amount is projected for FY 2025. $177 million
in non-oil CIT in FY 2024 and $210 million projected for FY
2025. He asserted that, if increasing revenue for state
government is the goal, the legislature should not ignore the
non-oil sectors. He stated that he is not generally a proponent
of higher taxes; however, he supports an honest discussion of
what is at stake.
4:56:05 PM
SENATOR HUGHES stated that she would not support Amendment 1.
She said that a corporate income tax is different from a
severance tax. She stated that Amendment 1 conflates these. She
said that a severance tax is an oil production tax. She said she
would not support raising taxes without a constitutional
spending cap.
4:56:39 PM
CHAIR GIESSEL maintained her objection and asked for a roll call
vote.
4:56:43 PM
A roll call vote was taken. Senator Myers voted in favor of
Amendment 1 and Senators Wielechowski, Kawasaki, Hughes, Dunbar,
Claman and Giessel voted against it. The vote was 1:6.
4:57:04 PM
CHAIR GIESSEL announced that [Amendment 1] failed on a vote of 1
yea and 6 nays.
4:57:14 PM
CHAIR GIESSEL solicited a motion.
4:57:15 PM
SENATOR MYERS moved to adopt Amendment 2, work order 34-
LS0540\L.4.
34-LS0540\L.4
Nauman
4/1/25
A M E N D M E N T 2
OFFERED IN THE SENATE BY SENATOR MYERS
TO: CSSB 92(RES), Draft Version "L"
Page 1, following line 3:
Insert a new bill section to read:
"* Section 1. AS 43.20.011(e) is amended to read:
(e) Each [THERE IS IMPOSED FOR EACH] taxable
year, a tax is imposed on [UPON] the entire taxable
income derived from sources within the state of every
corporation primarily engaged in the production of oil
or gas from a lease or property in the state or the
transportation of oil or gas by pipeline in the state.
The [DERIVED FROM SOURCES WITHIN THE STATE A] tax is
computed as follows:
If the taxable income is: Then the tax is:
Less than $25,000 zero
$25,000 but less than $49,000 2 percent of the taxable income
over $25,000
$49,000 but less than $74,000 $480 plus 3 percent of the
taxable income over $49,000
$74,000 but less than $99,000 $1,230 plus 4 percent of the
taxable income over $74,000
$99,000 but less than $124,000 $2,230 plus 5 percent of the
taxable income over $99,000
$124,000 but less than $148,000 $3,480 plus 6 percent of the
taxable income over $124,000
$148,000 but less than $173,000 $4,920 plus 7 percent of the
taxable income over $148,000
$173,000 but less than $198,000 $6,670 plus 8 percent of the
taxable income over $173,000
$198,000 but less than $222,000 $8,670 plus 9 percent of the
taxable income over $198,000
$222,000 or more $10,830 plus 9.4 percent of the
taxable income over $222,000."
Page 1, line 4:
Delete "Section 1"
Insert "Sec. 2"
Renumber the following bill sections accordingly.
Page 3, line 14:
Delete "This"
Insert "Section 2 of this"
Page 3, line 19, following "tax":
Insert "under AS 43.20.019, added by sec. 2 of
this Act,"
Page 3, line 20:
Delete "this Act under AS 43.20.019, added by
sec. 1 of this Act,"
Insert "sec. 2 of this Act"
4:57:17 PM
CHAIR GIESSEL objected for purposes of discussion.
4:57:21 PM
SENATOR MYERS explained that [Amendment 2] would change the
current corporate tax structure so that it applies only to oil
and gas companies (regardless of corporate structure). He shared
his belief that the committee would like to make the state CIT
into an oil and gas tax, without parity in other resources or
contributions from other industries into state government. He
stated that Amendment 2 is upfront with that policy. He
suggested that a policy that applies only to oil and gas would
remove barriers to doing business in Alaska and allow greater
economic growth.
4:58:14 PM
CHAIR GIESSEL found the objection was maintained and asked for a
roll call vote.
4:58:22 PM
A roll call vote was taken. Senators Myers and Hughes voted in
favor of Amendment 2 and Senators Dunbar, Claman, Wielechowski,
Kawasaki and Giessel voted against it. The vote was 2:5.
4:58:41 PM
CHAIR GIESSEL announced that [Amendment 2] failed on a vote of 2
yeas and 5 nays.
4:58:55 PM
CHAIR GIESSEL solicited a motion.
4:58:58 PM
SENATOR HUGHES moved to adopt Amendment 3, work order 34-
LS0540\L.5.
34-LS0540\L.5
Nauman
4/1/25
A M E N D M E N T 3
OFFERED IN THE SENATE BY SENATOR HUGHES
TO: CSSB 92(RES), Draft Version "L"
Page 1, line 7:
Delete "9.4"
Insert "five"
4:59:01 PM
CHAIR GIESSEL objected for purposes of discussion.
4:59:03 PM
SENATOR HUGHES briefly noted the differences between federal
deductions for C-Corporations and S-Corporations. She also noted
that Massachusetts has a state CIT of 4.5 percent (this does not
apply until $9 million is reached). She opined that it is
reasonable to lower the tax rate and explained that Amendment 3
lowers the tax rate to five percent.
5:00:01 PM
CHAIR GIESSEL found the objection was maintained and asked for a
roll call vote.
A roll call vote was taken. Senators Myers and Hughes voted in
favor of Amendment 3 and Senators Dunbar, Wielechowski,
Kawasaki, Claman, and Giessel voted against it. The vote was
2:5.
5:00:27 PM
CHAIR GIESSEL announced that [Amendment 3] failed on a vote of 2
yeas and 5 nays.
5:00:34 PM
CHAIR GIESSEL solicited a motion.
5:00:50 PM
CHAIR GIESSEL moved to adopt Amendment 4, work order 34-
LS0540\L.7.
34-LS0540\L.7
Nauman
4/1/25
A M E N D M E N T 4
OFFERED IN THE SENATE BY SENATOR GIESSEL
TO: CSSB 92(RES), Draft Version "L"
Page 2, line 5:
Delete "The department shall"
Insert "For the purpose of determining the tax
due under this section, the department shall
(1)"
Page 2, line 6:
Delete "for the purpose of determining the tax
due under this section"
Page 2, line 8, following "entity":
Insert "; and
(2) except as provided in (c) of this
section, include in the calculation of taxable income
of the qualified entity income that is attributable to
an entity that is part of a unitary business with the
qualified entity paying tax under this section"
5:01:01 PM
SENATOR WIELECHOWSKI objected for purposes of discussion.
5:01:18 PM
INTIMAYO HARBISON, Staff, Senator Cathy Giessel, Alaska State
Legislature, Juneau, Alaska, explained that Amendment 4 includes
clarifying language for the adopted committee substitute for SB
92.
5:01:38 PM
SONJA KAWASAKI, Legal Council, Senate Majority Caucus, Alaska
State Legislature, Juneau, Alaska, explained that Amendment 4
clarifies and makes certain the income of entities that meet the
test for a "unified business with a taxpayer" under SB 92 would
be subject to tax with a taxpayer. She said that, as currently
written, entities in the same general industry as oil and gas
producers or pipeline transportation of a petroleum product
would be considered a unitary business under current
regulations. She referred to a letter from the Department of
Revenue dated March 11, 2025, responding to questions related to
this concept and explained that Amendment 4 would settle any
ambiguity on this issue.
5:02:53 PM
CHAIR GIESSEL noted that the letter from DOR is in the committee
packet and asked Ms. Kawasaki to summarize the issue and the
response from DOR.
5:03:07 PM
MS. KAWASAKI explained the concern, which was related to
whether, if enacted, SB 92 would enable a group of entities in
the oil and gas industry to aggregate into one entity for tax
purposes. She briefly described the five related companies that
could potentially aggregate in this way. She said that according
to the Department of Revenue, the income from those companies
would be combined for tax purposes, according to the unitary
business test under current law. She noted that this is the
first question contained in the March 11 letter from DOR.
Clarification is necessary to avoid this.
5:04:47 PM
CHAIR GIESSEL asked for confirmation that the unitary business
reference is found on line 14 of Amendment 4.
5:05:10 PM
MS. KAWASAKI replied yes.
5:05:28 PM
SENATOR MYERS directed attention to the March 11 letter from DOR
and asked for confirmation of his understanding that without
Amendment 4, all five entities would be taxed, while Amendment 4
would only tax two of those.
5:05:50 PM
MS. KAWASAKI replied no. She explained that, according to the
committee substitute (CS), DOR would have already applied the
unity test (and determined that those five entities would be
taxed as one). She explained that Amendment 4 clarifies the
intent of SB 92.
5:06:35 PM
SENATOR WIELECHOWSKI removed his objection.
5:06:39 PM
CHAIR GIESSEL found no further objection and [Amendment 4], work
order 34-LS0540\L.7 was adopted.
5:06:54 PM
CHAIR GIESSEL solicited a motion.
5:06:57 PM
SENATOR HUGHES moved to adopt Amendment 5, work order 34-
LS0540\L.8.
34-LS0540\L.8
Nauman
4/2/25
A M E N D M E N T 5
OFFERED IN THE SENATE BY SENATOR HUGHES
TO: CSSB 92(RES), Draft Version "L"
Page 1, line 5:
Delete "If"
Insert "Except as provided in (e) of this
section, if"
Page 2, following line 8:
Insert a new subsection to read:
"(e) The tax under this section does not apply
to income from an asset that was acquired before
January 1, 2026. Income from an asset acquired before
January 1, 2026, shall be taxed under the laws
applicable at the time of acquisition. The Department
of Revenue shall adopt regulations that establish the
method to determine an asset acquisition date."
Reletter the following subsection accordingly.
Page 3, line 6:
Delete "AS 43.20.019(e)"
Insert "AS 43.20.019(f)"
Page 3, line 16:
Delete "AS 43.20.019(e)"
Insert "AS 43.20.019(f)"
5:07:02 PM
CHAIR GIESSEL objected for purposes of discussion.
5:07:04 PM
SENATOR HUGHES explained that Amendment 5 creates a grandfather
clause and ensures that the 9.4 percent income tax would apply
only to new oil and gas acquisitions after January 1, 2026. She
said companies that invested in Alaska under the prior tax
framework did so with long-term expectations based on those
rules. She opined that creating a grandfather clause would
maintain Alaska's credibility as a stable place to do business.
She indicated that the State of Alaska recruited independent
operators to assume ownership of these assets and made
commitments to those independent operators. Amendment 4 would
honor those commitments. She directed attention to a memo from
DOR which shows an increase in production volume, royalties, and
revenue to the state. She noted that there may be a future
question of equal protection and stated that this would ensure
that oil related business seeking to do resource development
work in Alaska can do so with confidence and those plans would
not be upended by substantial tax change. She clarified that, in
this case, the substantial change would be a new tax on a
business that did not exist when the company began work in the
state.
5:08:55 PM
CHAIR GIESSEL invited further discussion.
5:09:01 PM
CHAIR GIESSEL found the objection was maintained and asked for a
roll call vote.
A roll call vote was taken. Senators Hughes and Myers voted in
favor of Amendment 5 and Senators Claman, Wielechowski,
Kawasaki, Dunbar and Giessel voted against it. The vote was 2:5.
5:09:23 PM
CHAIR GIESSEL announced that [Amendment 5], work order 34-
LS0540\L.8 failed on a vote of 2 yeas and 5 nays.
5:09:40 PM
CHAIR GIESSEL solicited the will of the committee.
5:09:43 PM
SENATOR WIELECHOWSKI moved to report SB 92, work order 34-
LS0540\N, as amended, from committee with individual
recommendations and attached fiscal note(s). Legislative Legal
Services has the authority to make any technical and conforming
changes.
5:09:59 PM
SENATOR HUGHES objected. She said that the committee has not
heard an independent economic analysis of the impacts of SB 92.
The long-term impacts on oil and gas production, state revenues,
and economic growth are unknown. She noted that one
consideration has been whether the state would collect more
revenue without adopting SB 92 or whether adopting this
legislation would lead to more revenue over time. She briefly
discussed the Laffer curve theory, which indicates a point at
which negative returns begin. She emphasized that the point is
unknown and opined that the Senate Resources Standing Committee
(rather than the Senate Finance Committee) is responsible for
understanding the impacts on oil and gas production. She stated
that the committee has not fulfilled this responsibility;
therefore, she does not support moving SB 92 from committee.
5:11:11 PM
SENATOR WIELECHOWSKI noted that the impact of SB 92 is unknown -
both to the legislature and to the companies potentially
impacted. He noted the company's unwillingness to provide
information regarding rate of return and profits. He directed
attention to the presentation by DOR which showed a 40 cent per
barrel difference (at $68/barrel). He shared his belief that
this would have no impact on investment. He recalled testimony
several years earlier that indicated a rate of return of over
120 percent at Prudhoe Bay. He pointed out that there is no
current testimony that would rebut that information and surmised
that the current rate of return at Prudhoe Bay is well over 50
percent. He recalled that the rate of return (supplied by
previous testimony) is over 30 percent. He emphasized that there
is no evidence that SB 92 would impact investment or production.
He shared his belief that, based on this, SB 92 should be moved
from committee.
5:12:30 PM
SENATOR MYERS agreed that the impact of SB 92 is unknown. He
surmised that it could impact multiple companies. He noted that
increasing natural gas production in Cook Inlet has been a focus
for several years due to the upcoming natural gas shortage. He
commented that the tax would apply to natural gas production as
well as oil rigs and import facilities. He said that [Amendment
1] addressed all the concerns he has heard regarding the need
for SB 92; however, the amendment was rejected. Considering
this, he questioned why there is support for SB 92. He opined
that SB 92 would target a single company and would negatively
impact the State of Alaska's relationship with companies in the
future (both within and in addition to the oil and gas
industry). He emphasized his belief that SB 92 is bad policy and
said he would not support moving it from committee.
5:14:49 PM
CHAIR GIESSEL said the legislature is charged with the
responsibility to ensure the State of Alaska receives the
maximum benefit for its resources. She asserted that the number
of companies does not matter. She pointed to the high levels of
investment in the North Slope and Cook Inlet and surmised that
the rate of return is quite good for both.
5:15:17 PM
CHAIR GIESSEL found the objection was maintained and asked for a
roll call vote.
A roll call vote was taken. Senators Kawasaki, Wielechowski,
Dunbar, Claman, and Giessel voted in favor of moving SB 92, as
amended, from committee and Senators Hughes and Myers voted
against it. The vote was 5:2.
5:15:41 PM
CHAIR GIESSEL announced that CSSB 92(RES) was reported from the
Senate Resources Standing Committee on a vote of 5 yeas and 2
nays.
| Document Name | Date/Time | Subjects |
|---|---|---|
| Hilcorp - Where We Operate Extracted Data.pdf |
SRES 4/2/2025 3:30:00 PM |
SB 92 |
| Legislative Research Alaska Business Entities and Taxation.pdf |
SRES 4/2/2025 3:30:00 PM |
SB 92 |
| Legislative Research on S-Corps in Other States.pdf |
SRES 4/2/2025 3:30:00 PM |
SB 92 |
| Hilcorp - Where We Operate.pdf |
SRES 4/2/2025 3:30:00 PM |
SB 92 |
| SB 92 Email DOR to Senators 3.4.25 re Meeting Follow Up & Docs.pdf |
SFIN 4/9/2025 9:00:00 AM SRES 4/2/2025 3:30:00 PM |
SB 92 |
| SB 92 Email DOR to SRES Staff 3.11.25 re DOR Response to Questions.pdf |
SRES 4/2/2025 3:30:00 PM |
SB 92 |
| IRS Qualified Business Income Deduction.pdf |
SRES 4/2/2025 3:30:00 PM |
SB 92 |
| IRS 2024 Form 6251.pdf |
SRES 4/2/2025 3:30:00 PM |
SB 92 |
| SB 92 CPA Examples - $1B Net Taxable - Pre Ak Tax.pdf |
SRES 4/2/2025 3:30:00 PM |
SB 92 |
| L.3.pdf |
SRES 4/2/2025 3:30:00 PM |
SB 92 |
| L.4.pdf |
SRES 4/2/2025 3:30:00 PM |
SB 92 |
| L.5.pdf |
SRES 4/2/2025 3:30:00 PM |
SB 92 |
| L.6.pdf |
SRES 4/2/2025 3:30:00 PM |
SB 92 |
| L.7.pdf |
SRES 4/2/2025 3:30:00 PM |
SB 92 |
| L.8.pdf |
SRES 4/2/2025 3:30:00 PM |
SB 92 |
| SB 92 DOR Presentation to SRES.pdf |
SFIN 4/9/2025 9:00:00 AM SRES 4/2/2025 3:30:00 PM |
SB 92 |
| SB 92 Hilcorp Senate Resources Committee Presentation.pdf |
SRES 4/2/2025 3:30:00 PM |
SB 92 |