Legislature(2025 - 2026)ADAMS 519
01/22/2026 01:30 PM House FINANCE
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 | |
| Presentation: Department of Revenue Fall Forecast | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
HOUSE FINANCE COMMITTEE
January 22, 2026
1:33 p.m.
1:33:14 PM
CALL TO ORDER
Co-Chair Josephson called the House Finance Committee
meeting to order at 1:33 p.m.
MEMBERS PRESENT
Representative Neal Foster, Co-Chair
Representative Andy Josephson, Co-Chair
Representative Calvin Schrage, Co-Chair
Representative Jamie Allard
Representative Jeremy Bynum
Representative Alyse Galvin
Representative Sara Hannan
Representative Elexie Moore
Representative Will Stapp
Representative Frank Tomaszewski
MEMBERS ABSENT
Representative Nellie Unangiq Jimmie
ALSO PRESENT
Janelle Earls, Acting Commissioner and Administrative
Services Director, Department of Revenue; Dan Stickel,
Chief Economist, Economic Research Group, Tax Division,
Department of Revenue.
SUMMARY
PRESENTATION: DEPARTMENT OF REVENUE FALL FORECAST
1:33:36 PM
Co-Chair Josephson reviewed the meeting agenda.
^PRESENTATION: DEPARTMENT OF REVENUE FALL FORECAST
JANELLE EARLS, ACTING COMMISSIONER and ADMINISTRATIVE
SERVICES DIRECTOR, DEPARTMENT OF REVENUE, introduced
herself and turned the presentation over to her colleague.
DAN STICKEL, CHIEF ECONOMIST, ECONOMIC RESEARCH GROUP, TAX
DIVISION, DEPARTMENT OF REVENUE, provided a PowerPoint
presentation titled "Fall 2025 Forecast Presentation: House
Finance Committee," dated January 22, 2026 (copy on file).
He reviewed an overview of the presentation on slide 2. The
presentation included a background on the revenue forecast
key assumptions, the revenue forecast beginning with total
state revenue and drilling down into unrestricted state
revenue, and a detailed walkthrough of the division's
assumption around the oil and gas revenue forecast. He
moved to slide 4 showing a background of the fall revenue
forecast. The revenue forecast was released on December 11,
2025, and the Department of Revenue's (DOR) Revenue Sources
Book was released on December 18, 2025. He explained that
it was the official forecast used in developing the
governor's budget proposal. The department would release an
updated revenue forecast in the spring. He noted that the
forecast and historical forecast information was available
on the department's website. He advanced to the fall
forecast assumptions on slide 5:
Fall Forecast Assumptions
• The economic impacts of financial and geopolitical
events are uncertain; Department of Revenue has
developed a plausible scenario to forecast these
impacts
Key Assumptions:
• Investments: Stable growth in investment markets,
7.60% for remainder of FY 2026 for the Permanent
Fund. We included actual revenue through the end of
October and then applied that assumption for the
remainder of the fiscal year. The long term return
assumption was 7.30% for FY 2027+
• Federal: The forecast incorporates known funding as
of December 1, 2025. FY 2028+ assumed to grow with
inflation
• Petroleum: Alaska North Slope oil price of $65.48
per barrel for FY 2026 and $62.00 per barrel for FY
2027
• Non-Petroleum: Stable economic conditions. 1.7
million cruise passengers, five-year recovery for
fisheries taxes, minerals prices based on futures
markets
• The revenue forecast is inherently uncertain and
represents one scenario among a range of many
possible scenarios
Mr. Stickel elaborated on the slide. He noted that the
forecast represented one scenario within a range of
potential outcomes. He explained that some of the variables
may come in higher or lower than expected. Under non-
petroleum revenue he noted that the corporate income tax
forecast incorporated a slowdown for the end of FY 25 and
the beginning of FY 26 with steady growth thereafter. There
was no recession included in the forecast. Cruise
passengers were projected to remain near the record levels
seen in the past couple of years. The preliminary 2025
fishing industry data showed slight recovery and an upturn.
He referenced news about record gold prices approaching
$5,000 and record silver prices. The mining revenue
forecast was based on the futures market outlook at the
beginning of December.
1:39:54 PM
Representative Hannan noted that the revenue projection for
FY 26 was based on an oil price of $65.48. She asked what
the average had been for the past six months.
Mr. Stickel replied that he did not have the number on
hand. He reported that oil prices in FY 26 were tracking
very close to the forecast.
1:40:43 PM
Mr. Stickel turned to slide 6 titled "Relative
Contributions to Total State Revenue: FY 2025." The slide
showed an illustration highlighting the relative importance
of different sources of total state revenue. He remarked
that Alaska had no statewide sales or income tax and the
state's revenue was a three-legged stool with 93 percent
coming from petroleum, federal sources, and investment
earnings. He noted that all other revenue sources
collectively accounted for a little over 7 percent. He
moved to slide 7 showing unrestricted state revenue. He
explained that unrestricted revenue was available for
general appropriation by the legislature and typically the
source of most budget discussions. He detailed that 90
percent of the state's unrestricted revenue came from
investment earnings and petroleum, while all other sources
accounted for about 10 percent.
Representative Allard asked how much of the investment
earnings went towards paying board members and investment
managers.
Mr. Stickel answered that he would follow up with the
information.
Representative Allard asked for the information as a
percentage.
1:42:50 PM
Mr. Stickel addressed the total revenue forecast on slide 9
including historical data from FY 25 and forecasts for FY
26 and FY 27. He explained that revenues were broken out
into four categories of restriction. Unrestricted general
funds (UGF) could be appropriated by the legislature for
any purpose and were typically the focus of most budget
discussions. Designated general funds (DGF) were
technically available for appropriation but were
customarily used for a specific purpose. For example, the
state's vehicle rental tax was deposited into a special
account to fund tourism development and marketing. Other
restricted funds were truly restricted in terms of use and
were not available for general appropriation. For example,
under federal law, all of the revenue the state took in for
the commercial passenger vessel tax on cruise ships had to
be used to support the cruise ship industry for specific
purposes. All federal revenue coming into the state had to
be used for specific purposes and was considered its own
category of restricted receipts. The total FY 25 state
revenue was $19.2 billion. The department was forecasting
$17.8 billion in revenue for FY 26 and $15.3 billion for FY
27.
Representative Galvin observed there was a substantial
difference in the federal revenue from FY 26 to FY 27. She
assumed the reduction pertained to healthcare and possibly
Department of Transportation and Public Facilities. She
asked if the information would be covered later in the
presentation.
Mr. Stickel replied that the majority of the presentation
focused on unrestricted revenues. He deferred to the Office
of Management and Budget (OMB) for detail. He relayed that
some of the decline from FY 25 through FY 27 was related to
how multiyear capital projects were appropriated for.
Additionally, there was some one-time funding for broadband
infrastructure investments in the past.
1:45:56 PM
Representative Hannan remarked on a substantial $2 billion
decline in investment revenue under the other restricted
revenue category over two fiscal years. She observed that
other investments were expected to grow. She asked for an
explanation of the decline.
Mr. Stickel answered that the difference in the other
restricted investment revenue pertained to how Permanent
Fund earnings were reflected in the Revenue Sources Book.
The percent of market value (POMV) draw of 5 percent was
shown as unrestricted investment revenue. He explained that
any earnings of the fund above the 5 percent draw were
shown as other unrestricted investment revenue. He detailed
that FY 25 was a strong year for market returns and FY 26
had been strong year to date. The decline in the rest of FY
26 and FY 27 represented a return to a more normal rate of
return with a projected 7.6 percent return and 7.3 percent
return respectively.
Co-Chair Josephson asked for verification that the
projection did not necessarily reflect fewer dollars in the
state economy or less money available to spend on FY 27
budgeting because the draw did not exceed 5 percent.
Mr. Stickel agreed.
1:47:41 PM
Mr. Stickel moved to slide 10 titled "Unrestricted Revenue
Forecast: FY 2025 and Changes to Two-Year Outlook." He
noted the remainder of the presentation would focus on the
unrestricted revenue forecast because the specific funding
category had the greatest flexibility and discretion around
how the monies were used. The slide summarized key changes
from the March 2025 spring forecast and the December 2025
fall forecast. The oil price forecast was decreased by
$2.52 per barrel for FY 26 and by $5.00 per barrel for FY
27, which reflected the most recent information from
futures markets. The oil production forecast decreased by
7,000 barrels per day for FY 26 and increased by 28,000
barrels per day for FY 27. The bottom line unrestricted
revenue outlook was decreased by $181 million for FY 26 and
$119 million for FY 27. The lower oil price outlook was the
primary reason for the decreases.
Mr. Stickel moved to slide 11 titled "Unrestricted Revenue
Forecast: FY 2025 to FY 2027 Totals." He detailed that
investment revenue was the largest source of UGF revenue,
driven by the POMV transfer from the Permanent Fund that
began in FY 19. Investments generated about $3.8 billion in
UGF revenue in FY 25. The forecast for UGF revenue was $3.9
billion in FY 26 and $4.1 billion in FY 27. Petroleum
revenue generated $1.9 billion of UGF revenue in FY 25 and
was forecasted at $1.4 billion in FY 26 and FY 27. Non-
petroleum revenues generated slightly over $600 million of
UGF revenue in FY 25 and was forecasted to be $624 million
in FY 26 and $694 million in FY 27. The total UGF revenue
in FY 25 was $6.3 billion, which was expected to decline to
$5.9 billion in FY 26 and recover slightly to $6.2 billion
in FY 27.
1:50:35 PM
Mr. Stickel addressed unrestricted investment revenue
totals from FY 25 to FY 27 on slide 12. The Permanent Fund
transfer was projected to generate about two-thirds of the
state's unrestricted revenue annually over the next ten
years. The transfer contributed $3.7 billion in FY 25 and
was forecast at $3.8 billion in FY 26 and $4 billion in FY
27. Additionally, there was $136 million in FY 25 that
primarily represented earnings on the cash balance of the
state General Fund. The number was projected to be slightly
lower in FY 26 and FY 27 based on the lower prevailing
interest rate environment for cash and equivalents.
Mr. Stickel moved to slide 13 titled: Unrestricted
Investment Revenue: Percent of Market Value (POMV) Transfer
Forecast." The forecast was over $3.8 billion per year,
which steadily increased to $5.3 billion by the end of the
ten-year forecast. He relayed that in real terms -
inflation adjusted - the transfer remained fairly steady at
around $3.8 billion. The forecast was based on a 7.3
percent long-term return assumption for the Permanent Fund
and a 5 percent POMV calculation. Given that the 5 percent
calculation was based on the average fund value of the
first five of the past six years, the approach to the
calculation provided a relatively stable source of revenue
and removed much of the year-to-year volatility.
1:52:44 PM
Mr. Stickel reviewed four primary sources of unrestricted
petroleum revenue for FY 25 to FY 27 on slide 14. The first
was the oil and gas production tax (the state's severance
tax on petroleum). For the North Slope, it consisted of a
net profits tax with a gross minimum tax floor. He detailed
that at the current prevailing price and cost levels in the
industry, the department expected total production tax
revenue to be at or below the minimum tax floor for every
year in the 10-year forecast. In FY 25, the production tax
brought in $635 million with a projected decrease to $316
million in FY 26 and $286 million in FY 27. The second
source of unrestricted petroleum revenue was a petroleum
corporate income tax levied on qualifying oil and gas
corporations doing business in Alaska. The tax brought in
$133 million in FY 25 and was projected to bring in $140
million in FY 26 and $175 million in FY 27.
Mr. Stickel stated that the third unrestricted petroleum
revenue source was a 20 mills or 2 percent property tax on
all oil and gas property in the state. He noted that any
municipal taxes were allowed as a credit against the
property tax so that the total property tax on oil and gas
property was 20 mills. The state's share of the tax
amounted to $134 million in FY 25 and was forecast at
slightly over $140 million per year in FY 26 and FY 27. The
fourth and largest source of unrestricted petroleum revenue
was royalties, which brought in about $1 billion in FY 25
and was forecasted to bring in over $800 million in FY 26
and FY 27. He highlighted that the royalties numbers on the
slide were limited to the UGF portion. He detailed that the
Permanent Fund received between 25 and 50 percent of all
royalty revenue and the Public School Trust Fund received
an additional 0.5 percent of the revenue. He noted that the
third section of the presentation would address the
detailed assumptions used in the petroleum revenue
forecast.
1:55:09 PM
Co-Chair Josephson referenced the mineral bonuses, rents,
and interest line under royalties on slide 14. He asked if
it did not include mineral royalties or taxes. He typically
saw a number closer to $100 million on total take from
minerals for the state.
Mr. Stickel clarified that the mineral bonuses, rents, and
interest line was only related to oil and gas and did not
include any mining royalty.
Co-Chair Josephson asked what portion of the $600 million
that was non-petroleum related pertained to hard rock
minerals.
Mr. Stickel answered it was a significant number,
especially forward looking. The total contribution from
mining tax, corporate tax, and royalties was expected to be
over $100 million per year in coming years. He noted that
the specific forecast was created prior to record gold and
silver prices. He stated it was an area for optimism. He
offered to follow up with precise numbers.
Co-Chair Josephson declined the offer for additional
information and understood the number was somewhere over
$100 million.
Mr. Stickel reviewed unrestricted non-petroleum revenue on
slide 15. The largest component of non-petroleum revenue
was various taxes, with the majority comprised of corporate
income tax. In FY 25, the tax generated $229 million and it
was projected to bring in $215 million in FY 26 and $250
million in FY 27. The department was projecting a bit of a
slowdown in the tax generated by some of the sectors such
as retail, wholesale, and transportation, but it was being
offset by increased revenue expectations for other sectors
such as mining and tourism. He continued reviewing the
slide and noted that the mining license tax brought in $43
million in FY 25 and was expected to increase to $62.4
million in FY 27. In total, taxes generated about $468
million of unrestricted revenue in FY 25 and were projected
to generate about $511 million in FY 27. The remainder of
the unrestricted non-petroleum revenues were a variety of
different revenue sources including licenses and permits,
charges for services, non-petroleum rents and royalties,
and miscellaneous revenue (e.g., dividends from state owned
corporations).
Mr. Stickel highlighted a change made in the revenue
forecast related to program receipts. He explained that
over the interim, the department worked with OMB to
identify any program receipts above and beyond what was
being used by the agency generating the receipts or being
carried forward. Beginning with the current fall revenue
forecast, any surplus program receipts that were not
carried forward were shown as UGF revenue. Previously, some
were UGF revenue and some were DGF revenue. In total, about
$60 million in program receipts fell into the category of
being above and beyond what was generated and used by a
program.
1:59:22 PM
Representative Hannan asked about the large passenger
vessel gambling tax. She was surprised it was not growing
more because of the large uptick and continued expected
growth in cruise ship passengers. She did not believe the
number reflected the 500,000-passenger increase seen the
past summer. She observed that the tax was projected to
flatten out for two years. She asked if passengers were not
gambling or if the number of individuals gambling was not
known ahead of time.
Mr. Stickel replied that the large passenger vessel
gambling tax was a tax on the income earned by casinos and
gambling operations. The revenue had been growing
substantially in recent years. The tax generated $18
million in FY 23 and $27 million in FY 24. He explained
that the revenue source had consistently exceeded the
division's expectations. The forecast assumed that the
number would level off and the state would receive a
relatively stable contribution from the specific revenue
source per passenger.
Representative Hannan surmised that the tax did not grow in
relation to the number of passengers. She assumed fewer old
people were coming.
Mr. Stickel clarified that the revenue source had grown as
gambling had expanded and the number of passengers
increased. He referenced Appendix A-2 of the Revenue
Sources Book and highlighted that in the past the specific
revenue source had generated $7 million to $10 million
annually. He reported that the revenue had taken off after
the COVID-19 pandemic. Instead of bringing in $7 million to
$10 million annually, the tax was generating $30 million
per year presently. He explained the forecast was a naïve
forecast that assumed revenue would remain at the higher
levels with no increase or decrease anticipated.
2:01:58 PM
Representative Stapp looked at NPR-A [Natural Petroleum
Reserve-Alaska] royalties, rents, and bonuses unrestricted
petroleum revenue of $9.6 million [in FY 27] on slide 14.
He thought the money was likely restricted. He asked for an
explanation.
Mr. Stickel responded that a change had been made to how
NPR-A revenues were classified in the fall 2025 forecast.
Prior to the fall forecast, the entirety of the payments
from NPR-A (the federal government shared 50 percent of
bonuses, rents, and interest from NPR-A with the state)
were treated as a passthrough to communities and the
revenue had been shown as restricted. He explained it had
been determined that it did not accurately capture federal
law or state statute. He elaborated that the passage of the
[federal] One Big Beautiful Bill Act (OB3) also brought
changes to how NPR-A revenues would be treated in the
future. In recognition of the One Big Beautiful Bill Act
and the reality the monies would be used in multiple ways
under the statute, beginning in FY 27, the forecast would
show the NPR-A revenues divided between unrestricted
revenue with 25 percent going to the Permanent Fund and 0.5
percent going to the Public School Trust Fund.
Representative Stapp referenced state statute directed how
the money was to be apportioned through a waterfall. He
asked if the $9.6 million would utilize the formulaic
approach in state statute.
Mr. Stickel turned to slide 14 and explained that the $9.6
million of NPR-A royalties, bonuses, and rents in FY 27
represented the expected unrestricted share of 74.5
percent. He elaborated that it was the anticipated total
transfer to the state after backing out the Permanent Fund
and Public School Trust Fund share.
Representative Stapp did not understand how the number had
been reached. He asked for verification that "those two
things" did not go into effect until the project spend was
exhausted.
Mr. Stickel replied that in terms of revenue received by
the state, there was an annual rental payment made to the
federal government for any bonuses from ongoing lease
sales. He explained that NPR-A royalties were being paid
for current production at the Moose's Tooth Unit and for a
portion of the Colville River Unit. There was a small
stream of revenue to the NPR-A currently, which was being
shared 50 percent with the state. He believed
Representative Stapp may be referring to a very large
increase in expected revenue several years in the future as
a result of the Willow field coming online. The revenue
stream would go from being tens of millions of dollars to
hundreds of millions of dollars once Willow came online.
2:06:01 PM
Representative Stapp asked if the state was taking money
from communities that would otherwise go to communities if
the revenue was not used as unrestricted.
Mr. Stickel deferred any further questions to the
Department of Law (DOL), which was doing evaluation on the
NPR-A revenue topic.
Co-Chair Josephson remarked that there were smart people on
both sides of the debate, and he surmised there would be
litigation on the issue if it had not commenced. He was
reading in the press that local governments were not going
to be silent on the topic. He asked for verification that
communities did not read HR 1 in the same way as the
administration.
Mr. Stickel responded that he could speak about the change
in the revenue forecast. He deferred any questions related
to litigation to DOL.
Co-Chair Josephson looked at the program receipts line on
slide 15. He asked if it suggested the state was providing
a service for a fee. He asked if it was the reason there
were receipts relating to other items shown on the slide
such as the passenger vessel gambling tax and fisheries.
Mr. Stickel answered that program receipts was a large
category in the state budget. He noted that it was not his
area of expertise, although he had learned a significant
amount about it in the past summer. He explained that
program receipts were comprised of receipts returned to a
specific program to fund the program's operation. For
example, the Division of Motor Vehicles (DMV), housed under
the Department of Administration (DOA), collected about $70
million annually in motor vehicle registration and
licensing fees. The cost of operating the DMV was
considered program receipts; therefore, the revenues were
returned DOA to provide the service. However, DOA collected
more revenue than it took to operate DMV. He detailed that
in FY 25 the amount required to operate DMV was $21 million
and $32 million in additional surplus revenue was returned
to the General Fund.
2:08:56 PM
Co-Chair Josephson asked for verification that pertaining
to the large passenger vessel gambling tax, there was
someone on the vessel monitoring the ship's location. He
thought that once a ship left a certain mile marker the tax
was engaged.
Mr. Stickel answered that cruise companies tracked the
amount of time their ships were located in state water
versus non-state water, which was factored into the
calculation. He noted that there was not a DOR official on
the boat monitoring the issue.
2:09:46 PM
Mr. Stickel relayed that the final portion of the
presentation looked at some of the detailed assumptions of
the petroleum revenue forecast. He turned to slide 17
titled "Petroleum Detail: Changes to Long-Term Price
Forecast." The slide showed the fall 2025 oil price
forecast for Alaska North Slope (ANS) crude oil compared to
the prior spring revenue forecast. The forecast used
futures market forecast for as many years as were
available. The data on the slide used the futures market
through FY 23 and an inflation assumption was applied to
the forecast beyond that timeframe. He explained that it
provided a timely and transparent source of the revenue
forecast. The department generated the price forecast on
December 5 [2025] using futures prices for the beginning of
December. The FY 26 forecast was reduced by $2.52 per
barrel to $65.48 per barrel and the FY 27 forecast was
reduced by $5.00 per barrel to $62 per barrel. He noted
that farther out in the future, the forecast was similar to
the spring forecast. The change [between the two forecasts]
reflected an anticipation of a bit of an oversupply
situation for the next several years that resolved later in
the forecast.
Mr. Stickel moved to slide 18 titled "Petroleum Detail:
Nominal Brent Forecasts Comparison as of January 21, 2026."
A chart on the slide included a comparison between the
futures market, an average of market analysts, and the U.S.
Energy Information Agency (EIA). He explained that Brent
was a benchmark crude that typically priced very close to
ANS. The current differential between ANS and Brent was
hovering around zero at less than $1. The current futures
market was mostly unchanged since the division prepared its
forecast in the beginning of December. The short-term
energy outlook from the EIA suggested a significantly lower
price into the low to mid $50s in the next two years.
Analysts on average were forecasting prices a bit higher
than the futures market and the department's forecast. He
noted that the difference was a bit larger than typically
shown between the different sources. He explained that the
EIA used a statistical forecast looking at supply, demand,
and other fundamentals and they were seeing a potential for
an over supplied situation in the market, which would drive
down oil prices. The futures market was projecting a bit
more of an uncertainty and risk premium, something that was
not explicitly factored into the EIA forecast. He stated it
was likely a significant piece of what was driving the
higher outlook in the futures market versus the EIA. Some
of the analysts were more bullish on oil prices in coming
years. For example, Goldman Sachs was pointing to the
possibility that the current lower prices would lead to an
undersupply situation in 2028 and beyond as demand growth
remained strong. Historically all oil price forecasts were
wrong, but the errors from the futures market were the
lowest and it had been the most accurate source. The
department felt comfortable with a forecast that was in the
range of the other sources shown on the slide.
2:14:18 PM
Mr. Stickel advanced to slide 19 titled "Petroleum Detail:
UGF Relative to Price per Barrel (without POMV): FY 2027."
The slide showed what would happen to revenues if prices
were different than the forecast. For FY 27, based on the
$62 per barrel forecast, the total unrestricted revenue
(excluding the Permanent Fund) was about $2.2 billion. He
explained that near the forecast price each $1 increase or
decrease led to a change of about $30 million in UGF
revenue. Given the progressive nature of the state's oil
tax system, at higher oil prices the change was a bit
higher per $1 difference. He moved to slide 20 titled
Petroleum Detail: Changes to North Slope Petroleum
Production Forecast. He noted that the same data had been
presented to the committee the previous day by the
Department of Natural Resources. In general, the production
forecast was fairly stable and increasing with 457,000
barrels per day in FY 26 and 517,000 barrels per day in FY
27. He highlighted that production impacts from the startup
of the Pikka field coming online started to be evident in
FY 27. Oil production was expected to exceed 500,000
barrels per day for the first time in several years. The
slide showed a couple of years of natural slight declines
in FY 28 and FY 29. Impacts of the Willow field coming
online and phase 2 of the Pikka project began in FY 30. The
department was forecasting over 600,000 barrels per day in
FY 32 and over 650,000 barrels per day in FY 33. The
biggest change from the spring forecast was some moving of
production in the FY 27 through FY 29 window, which
represented firming up the timelines and expectation around
the field startup for Pikka and Willow. He believed there
was much more confidence and certainty of Pikka coming
online in the very near future.
2:17:06 PM
Mr. Stickel addressed historical data and forecast
information for North Slope allowable lease expenditures on
slide 21. The slide showed the cost of production, which
was reported on tax returns and impacted the calculation of
the oil and gas production tax. Additionally, the allowable
lease expenditures were an important measure of company
investment and activity in the state. In FY 25, North Slope
expenditures totaled $8.7 billion, which was by far the
highest value on record since the state started collecting
the data. There was continued ramp up and massive spending
at major new developments like Pikka and Willow, as well as
significant investments in other producing fields and
fairly robust exploration activity. He stated there was a
lot of activity and money invested in Alaska's oil patch in
the past year. He detailed that capital expenditures were
$5.6 billion in FY 25. The forecast showed the number as
the high water mark, but the forecast showed relatively
robust levels of capital expenditures at over $3 billion
per year over the next decade. Operating expenditures were
$3.1 billion in FY 25, and the department was forecasting
slow but steady increases due to a combination of new
developments as well as general cost inflation in the oil
patch. He noted that cost inflation had been evident in the
past several years, which had been increasing operating
costs and challenging the economics of some of the fields.
Co-Chair Josephson remarked that even though there had been
articles highlighting staffing cuts in the industry, it was
inarguable that the investment was there. He highlighted
that the $8.7 billion in spending the previous year was a
record number.
Mr. Stickel replied that the $8.7 billion was real money
spent in the last fiscal year.
Representative Hannan asked how long the capital
expenditure deductions against taxes owed could be paid out
on a project. For example, Willow was expected to come
online in FY 30. She noted it was an expensive endeavor and
prices had increased. She asked if there were limits to how
long a company could take expenditures against taxes owed.
Mr. Stickel responded that the department had a
presentation addressing all of the details of the state's
production tax system. He offered to provide the
presentation in the future. The state allowed an immediate
deduction of capital expenditures for the net profits share
of the production tax; depreciation was not required. To
the extent a company had income and revenue from projects
on the North Slope, it would be able to use 100 percent of
the capital expenditures to reduce the net profits portion
of the tax calculation in the year incurred. He elaborated
that if the company was a new entrant or did not have
sufficient other revenue and entered into a net operating
loss situation, it would earn a carried forward lease
expenditure. A carried forward lease expenditure could not
be used to reduce tax against the gross minimum tax floor,
but they could be carried forward indefinitely; however,
they decreased in value by one-tenth of the prior year's
ending value after the eighth or eleventh year from the
time they were earned. He expounded that the lease
expenditures could be carried forward indefinitely, but at
a certain point they began declining in value, which was
called "the down lift."
2:21:39 PM
Representative Hannan referenced the record year of capital
expenditures on the North Slope that was not yet generating
new oil because there was always a delay. She asked if the
$8.7 billion could stretch out for another decade against
taxes owed.
Mr. Stickel confirmed it was the case for a portion of the
$8.7 billion. He explained that a very significant portion
of the number was applied against the tax calculation in
2025. The department estimated that about $6.4 billion of
the $8.7 billion was applied in the tax calculation in FY
25. The additional $2.3 billion became carried forward
lease expenditures that could potentially be used to impact
future tax liabilities.
Co-Chair Josephson asked if companies could go below the 4
percent floor with GVR [gross value reduction] new oil.
Mr. Stickel answered that carried forward lease
expenditures could not be used to reduce tax liability
below the floor. A significant amount of the carried
forward lease expenditures were not anticipated to be used
in the revenue forecast because companies were subject to
the minimum tax floor. There were certain credits that
could be used to reduce tax below the 4 percent gross tax
minimum tax floor including the per taxable barrel credit
for new oil, if a company did not use other per taxable
barrel credits.
Co-Chair Josephson noted that the committee may hear
something about the issue that evening [during the
governor's State of the State address].
Representative Stapp looked at the graph on slide 21 and
observed that the blue line [showing capital expenditures]
was decreasing and the orange line [showing operating
expenditures] was increasing slightly. He asked how the
department was calculating the expenditures so far into the
future while still allowing a gross minimum. He considered
the capital investment decline and did not see how the
department could project companies with a gross minimum for
the next 10 to 15 years.
2:24:46 PM
Mr. Stickel asked Representative Stapp to rephrase the
question.
Representative Stapp asked why the department was
projecting companies at the gross minimum for so many out
years.
Mr. Stickel explained that within the production tax
calculation the net profits tax calculation and the gross
minimum tax floor calculation were done side by side. He
detailed that with relatively low oil prices and relatively
high spending - a combination of large investments being
made and significant inflation in the industry - there was
a lower amount of production tax value or profit. The
department was anticipating that the 4 percent gross tax
would be higher than the net profits tax after credits for
most companies on the North Slope for the foreseeable
future.
Representative Stapp asked how long the foreseeable future
was.
Mr. Stickel replied that the department was projecting that
production tax revenue would be at or below the minimum tax
floor for the entirety of the ten-year revenue forecast.
2:26:31 PM
Representative Bynum asked for clarity on what Mr. Stickel
meant by relatively low oil prices. He asked if Mr. Stickel
was referring to the projected $62 per barrel for FY 27 or
some other number.
Mr. Stickel answered that when he used the words
"relatively low," he had been making a comparison to the
past era of oil prices that were closer to $100 per barrel.
The forecast was for prices to remain in the $60 to $70 per
barrel range over the entirety of the ten-year forecast.
Representative Stapp asked if there was any benchmark to
help understand values. He referenced the inflationary
capital cost increase. For example, he asked if they were
at gross minimum at $60 per barrel, but not $65 per barrel.
Mr. Stickel responded that each company had a unique
portfolio of operations and economic situation on the North
Slope. The aggregate the division expected was around $64
per barrel for FY 27. He described it as the crossover
point between the gross and net tax. He explained it was
very close to the level where the department would expect
total production tax revenue to exceed the minimum tax
floor. He noted there was a wide range. He detailed that
some companies would pay above the minimum tax floor at
around $60 per barrel and other companies would not exceed
their tax floor until well over $100 per barrel. He
elaborated that it depended on how much the companies were
investing and their producing assets.
2:28:57 PM
Representative Stapp asked how the department was
projecting all tangible producers at the gross minimum for
over ten years if the range was $60 to $100 per barrel.
Mr. Stickel answered that the division forecast tax
liability for every field and individual company using
proprietary information available to the department. The
number published in the Revenue Sources Book was an
aggregate calculation. In aggregate, the department was
expecting that production tax revenue would be at or below
the minimum tax floor; however, the aggregate was comprised
of companies paying at, below, and above the minimum tax
floor.
Representative Stapp asked for an indicator that would
change the calculus. He used oil price, lower than
anticipated investment, and a lower than expected increase
in inflation as examples.
Mr. Stickel replied that the four primary variables
included oil price, oil production, spending, and
transportation cost. He noted that the next slide pertained
to transportation cost.
2:30:45 PM
Co-Chair Josephson asked for a repeat of the four
variables.
Mr. Stickel replied that the variables were price, lease
expenditures, production, and transportation cost. He moved
to slide 22 and discussed North Slope transportation cost
of moving oil from the North Slope to market on the West
Coast. The transportation costs impacted the value of every
barrel of oil for tax and royalty purposes. He elaborated
that the costs included getting the oil to market. He
pointed to a bar chart on slide 22 and explained that the
largest portion was the marine transportation cost [shown
in blue] for tankers getting oil from Valdez to the West
Coast market. The orange portion of the bars represented
the Trans-Alaska Pipeline System (TAPS) tariff for
transporting oil from the North Slope to Valdez. There were
also a variety of other small transportation charges
including feeder pipeline tariffs, quality bank, and other
items. The average transportation cost for ANS crude was
$10.55 per barrel in FY 25. The department was projecting
the number would be stable and declining over the ten-year
forecast horizon. Any higher costs were being offset by
increased production into the pipeline. He used the TAPS
tariff as an example and explained that it took a fixed
cost of operating TAPS and dividing it over many more
barrels with the new production coming in from Willow and
Pikka, which was decreasing the transportation cost for all
of the barrels on the North Slope.
2:32:50 PM
Mr. Stickel looked at slide 23 titled "State Petroleum
Revenue by Land Type." He explained that not all oil was
the same. Historically, most oil production came from state
land, but that was changing with some of the new
developments. The slide expanded the forecast due to some
of the changes from federal royalty enacted by the One Big
Beautiful Bill Act (OB3). He detailed that in terms of
petroleum revenues, production, corporate, and property
taxes were fairly straightforward and applied to everything
in the state and within the state's three-mile limit.
Royalty rates varied based on the ownership of the land.
The state received all royalties for production on state
land and state waters up to three miles offshore. For NPR-
A, currently 50 percent was shared with the state and for
certain leases issued after July 2025, the share would
increase to 70 percent beginning in federal fiscal year
2034 under OB3. For federal waters three to six miles
offshore the state received a 27 percent share. For Cook
Inlet leases issued under OB3, the share would increase to
70 percent in federal fiscal year 2034. For federal waters
beyond six miles offshore, there was currently no direct
state revenue share, but for Cook Inlet leases issued under
OB3 there would be a 70 percent lease share beginning in
2034. For Alaska National Wildlife Refuge (ANWR)
production, the state received a 50 percent share, which
would increase to 70 percent in federal fiscal year 2034
for all leases including current leases. For any production
from private land (including a portion of production from
the Pikka field), the state levied a tax on royalty
interest. The tax was 5 percent of the private landowner
royalty value for oil and one and two-thirds percent for
gas.
Co-Chair Josephson asked if the state received a 5 percent
royalty on private land.
Mr. Stickel answered that the royalty on private land went
to the landowner and the state levied a tax of 5 percent on
the value of the royalty share.
Co-Chair Josephson asked if the 70 percent from HR-1 [also
known as the One Big Beautiful Bill Act or OB3] brought the
state to parity with the Gulf of Mexico. He asked for
verification that the goal had been to be treated the same
way.
Mr. Stickel responded that it was his understanding. He did
not have the details on hand.
Representative Hannan directed a question to the DOR acting
commissioner. She asked for a status update on the audits
for oil compliance negotiated settlements. She understood
they may not be completed.
Acting Commissioner Earls answered that the department was
working with the legislative auditor on the audits. She did
not believe the audits were complete.
Representative Hannan asked if there would potentially be
seven years of audit information on the negotiated
settlements. Alternatively, she wondered if there would
only be five years of information.
Acting Commissioner Earls believed the information went
back to 2018.
Representative Hannan asked if there was an expected
timeline for completing the information. She planned to ask
the auditor the same question.
Acting Commissioner Earls replied that she did not have any
update at the present time.
Mr. Stickel thanked the committee for the opportunity to
present the forecast.
Co-Chair Josephson thanked the presenters. He reviewed the
schedule for the following day.
ADJOURNMENT
2:38:35 PM
The meeting was adjourned at 2:38 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| H.FIN DOR Fall 2025 Forecast Presentation 01.22.26.pdf |
HFIN 1/22/2026 1:30:00 PM |
|
| DOR Response to H.FIN questions on Fall Forecast 01.22.26.pdf |
HFIN 1/22/2026 1:30:00 PM |