SB 92, SB 112 still loom despite not gaining passage Alaska has experienced more than a decade of stability in its oil and gas tax policies, which has helped fuel a surge of new investment in North Slope drilling. That has now led to new fields being developed and new oil coming into the Trans-Alaska Pipeline starting next year. Officials with companies operat - ing on the Slope credit the state’s tax policies for encouraging the new in - vestment. Tax stability came close to unraveling, however, in the 2025 state legislative session due to the conflu - ence of a number of factors, includ - ing an extremely tight state budget, a clamor for more funding for schools, reductions in federal funding and a political alignment in the Legislature that put coalitions of Democrats and moderate Republicans in charge. Conservative Republicans who op - pose tax changes were largely side - lined, although they remain influ - ential. None of the changes secured approval by the end of the legislative session in late May, but they remain at an advanced stage of passage in the Legislature for the 2026 session, which begins in January. Gov. Mike Dunleavy has mean - while signaled his opposition to tax changes which could mean a veto if one or more bills pass in 2026. How - ever, as was shown when the Legis - lature overrode the governor’s veto of an education funding bill this spring, the governor does not really have the final say in the matter. The oil tax bill that gained the most traction, at least in the Senate, was Senate Bill 92, which would cre - ate a special tax on major oil produc - ers organized as “S” corporations, a structure that has them pay no state corporate income tax, although they pay other taxes and the state royalty. Most oil producers are organized as “C” corporations that do pay the state corporate income tax. If it were to pass, SB 92 would apply only to Hil - corp Energy, a major producer on the North Slope and Cook Inlet. The special tax proposed in SB 92 would be a kind of in-lieu tax. It would not change the status of the taxpayer other than providing for a special tax to bring in revenue that would have
Photos by Judy Patrick If it were to pass, Senate Bill 92 would apply only to Hilcorp Energy, which is organized an an “S” corporation.
been paid had the taxpayer been a C corporation. SB 92 was initially sponsored by Sen. Rob Yundt, R-Mat-Su, but Yundt withdrew his sponsorship so that the Senate Resources Committee became the sponsor. The bill is now in the Senate Rules Committee. A second oil tax bill active in the 2025 session was Senate Bill 112, sponsored by the Senate Rules Com - mittee, which is chaired by Sen. Bill Wielechowski, D-Anchorage. Wiel - echowski has also proposed the change in previous years. The bill is in the Senate Resources Committee. SB 112 would lower the state pro - duction tax credit allowed to North Slope producers from $8 per barrel to $5 per barrel, which would result in an indirect tax increase on North Slope oil production. The production tax credit was part of a complex series of tax changes made in 2013 when the Legislature revamped the state’s oil production tax. The net effect of the changes in
2013 was to restructure the state pro - duction tax credit to make Alaska more competitive in attracting in - vestment, which history has shown it accomplished. The changes were complex, however. They included an increase in the base production tax rate paid by producers from 25% of net income to 35% that was offset by the production tax credits. In combi - nation, the changes were designed to incentivize new production. SB 21 was controversial, however, and its passage prompted a citizen ballot proposition to repeal it. That proposition failed in the 2014 state election, however. North Slope producers responded to the SB 21 with a flurry of new drill - ing in 2014 and 2015 that led to the Pikka and Willow discoveries and the construction now underway. There have been no serious efforts in the Legislature to change the tax or its parts until this year, in SB 112.
— Tim Bradner
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