12 ALASKA RESOURCE REVIEW SPRING 2025 Pair of Senate bills aim to tax oil production, specifically Hilcorp BY TIM BRADNER THE ALASKA LEGISLATURE IS SHORT OF MONEY TO BALANCE THE STATE BUDGET. LEGISLATORS ARE LOOKING TO RAISE NEW REVENUES AND NOT SURPRISINGLY, THEY LOOK FIRST TO TAXPAYERS WHO DON’T VOTE – OIL AND GAS COMPANIES. As lawmakers wrestle with rising school costs and inflation impacts on state operations, two bills were introduced in the Senate to bring in more income. One proposal, SB 92, is the so-called “Hilcorp” tax, which imposes a special state income tax on companies organized as “S” corporations. It would effectively apply only to Hilcorp Energy, a major Alaska producer. The second is SB 112, a proposal to lower a per-barrel production tax credit allowed since 2013 to Alaska producers as an incentive. The Senate leadership has decided to hold SB 112 until next year but SB 92 was being promoted as the Legislature entered the final week. Since a committee-introduced bill must be supported by all of its members this means that the Senate leadership, which heads a coalition of Democrats and moderate Republicans, has signed off on the bills. The Senate’s Republican Minority, consisting of six conservative senators, will oppose the bill. SB 92 faces challenges in the House where the coalition Majority holds control by one vote. The House Republican Minority will oppose the bill and Gov. Mike Dunleavy said he will likely veto it if it passes. Hilcorp is organized as an “S” corporation exempt from state corporate income taxes. Larger oil producers are “C” corporations, which do pay the tax. SB 92 would set up a special income tax that would apply to S corporations that are large oil and gas producers. Hilcorp argues that its form of corporate organization, which is common for privately-held businesses, has been known to the Legislature since 2012 when the company entered the state. No concerns have been raised about it until recently, and the company has meanwhile been praised for its performance in restoring Cook Inlet natural gas production, which was in fast decline in 2012, and for increasing oil production on the OIL PRODUCERS TARGETED IN BUDGET SHORTFALL Hilcorp is organized as an S corporation, different than other large oil producers classified as C corporations that pay taxes to the state. CONTINUED ON PAGE 14 VOLUME 2 | ISSUE 2 | SPRING 2025
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