VOLUME 3 | ISSUE 2 | JUNE 2026
LEGISLATURE CALLED INTO SPECIAL SESSION
gas pipeline tax legislation, but the issue is likely to return next year. It has been more than a decade since the last major change in oil taxes and some legislators argue that a performance review of the tax is merited. Alaska’s production tax is a net prof- its-type tax with a complex web of tax cred- its and deductions that make it one of the most complicated petroleum tax systems in the world, tax experts have said. Alas- ka changed its oil and gas tax from a tax on gross revenues to net income in 2006, an initiative pushed by former Gov. Frank Murkowski. In the following years, changes were made that made the tax complicated and unpredictable to the point that it deterred new investment by companies. Major changes in 2013 corrected that, in Senate Bill 21, so that it became more predictable. The changes led to major new industry in- vestments in drilling and exploration and to projects now in construction, like Willow, and newly in production, like Pikka. But while SB 21 has performed in en- couraging major developments, some peo- ple feel that problems may be developing,
and that the complex structure of tax cred- its in the law have led to unexpected effects. Overall, the tax could be simplified so it is more transparent, it is argued. This is an is- sue for next year. Meanwhile, Gov. Dunleavy did lead an initiative for revenue diversification this year with a proposed state sales tax. Dunleavy is known for his opposition to almost all forms of tax but recently did endorse the sales tax as the least harmful among options. Alaska is one of the few states with no state sales tax or state personal income tax. For years, its budget has been supported by oil revenues and, more recently, a portion of earnings of the state’s $80 billion-plus Alaska Permanent Fund. However, oil and financial markets are volatile, making Alas- ka vulnerable to market downturns over which it has no control. For years, many have argued that a broad-based tax paid by citizens should be part of the state’s revenue matrix. Dunleavy argued that a sales tax is better than a per- sonal income tax, the most oft-mentioned alternative broad-based tax. However, this was strongly opposed by municipalities that
now have sales taxes, which include most of the state’s local governments. Local governments feared that the compounding of local and state sales taxes would discourage local purchases, encour- aging consumers to buy out of state and losing business for Alaska merchants. There were also concerns that a sales tax would affect lower-income residents more than those with medium-to-higher incomes. There were a number of other accom- plishments. In housing, a bill passed that gives municipalities more flexibility in ex- panding targeted property tax exemptions for rehabilitation of distressed properties, and low-income and first-time homebuy- ers. In education, a bill was passed for a pilot student loan repayment program for teachers, to help in recruitment and reten- tion. There was a lot of work done to improve public employee pensions to help with re- cruitment and retention. The Legislature passed the bill, but it was vetoed by the gov- ernor, who issued concerns with the legisla- tion. The Legislature attempted to override the veto, but it failed.
State lawmakers run out of time in resolving differences on tax bills BY TIM BRADNER THE STATE LEGISLATURE’S 2026 REGULAR SESSION WAS MOSTLY SMOOTH AND PRODUC- TIVE, UNTIL THE END. That’s when an upset over gas pipeline tax legislation disrupted things. Lawmakers had finished much of their regular work on bills, but things broke down over the pipe- line bill. Gov. Mike Dunleavy called legisla- tors into a special session to continue work. No legislator disagrees on the impor- tance of the gas pipeline or even the need to solve a problem with state property tax- es that cloud its financing. But lawmakers simply ran out of time in resolving com- plex differences between versions of bills in House and Senate committees. The work continues. Overall, the 120-day session was pro- ductive. Serious problems were addressed in energy, education and health care. Not all bills passed, however, and the governor may yet veto some bills that passed. Still, the Legislature showed it can move quickly to respond to serious issues when they arise, most recently the fuel crisis affecting rural communities. Due to the war in Iran, fuel prices have doubled in some western Alaska communi- ties where there were already high prices. There may now be problems in fuel supply, too. Responding to this, a bill to expand state bulk fuel loans was introduced late in the session and moved quickly through the House and Senate. Higher loan limits, in- creased from $750,000 to $1.5 million, will enable communities to pay companies de- livering fuel. The loans have to be paid back the following year, however. The Legislature also added money for rural Power Cost Equalization, a program
The effort for a major review of the production tax did not gather steam partly because legisla- tors were preoccupied with the gas pipeline tax legislation, but the issue is likely to return next year. It has been more than a decade since the last major change in oil taxes and some legisla- tors argue that a performance review of the tax is merited.
where mining companies are exploring. For a while, it appeared the Legislature might move to increase oil and gas taxes. A major overhaul of the state petroleum pro- duction tax statute was pushed early in the Resources Committee in the Senate, but the bill stopped in the Senate Finance Commit- tee. There were also efforts for a targeted tax aimed at oil and gas producers organized as S-Corporations. In Alaska, corporations organized as ordinary C-Corporations pay the state’s corporate income tax, but S-Cor- porations do not pay the tax because the li- ability is passed to shareholders. But since Alaska has no personal income tax, no tax is paid. This has irked some legislators and proposals were made that S-Corporation producers pay a special tax of a similar amount they would have paid if they were a C-Corporation. This passed the Senate as an amendment to a bill authorizing a sale of state royalty oil to Marathon Petroleum for its refinery at Nikiski. The state House did not accept the amendment, however, main- ly on the grounds that it seemed unfair to tax one major producer, Hilcorp Energy, which is an S-Corporation. The effort for a major review of the pro- duction tax did not gather steam partly be- cause legislators were preoccupied with the
that helps rural homeowners deal with high electricity costs, and also reinforced pro- grams to help low-income families with as- sistance in paying high heating bills. These measures will be paid for, ironically, with higher state oil revenues coming into the treasury. The bump in oil income also allowed the Legislature to fund a backlog of de- ferred maintenance in schools around the state and at the University of Alaska. Years of tight budgets had put school adminis- trators in the position of deciding between sustaining classroom teaching or tackling maintenance issues. Maintenance typically took a backseat, leading to leaky roofs and malfunctioning boilers in many schools. There’s widespread support for this in the Legislature. “There is no question Alaska has signif- icant infrastructure needs. Many schools, public buildings, transportation systems and utilities across the state are aging,” said Rep. Kevin McCabe, R-Big Lake, a conser- vative Republican but also a strong support- er of infrastructure investment. McCabe also applauded the Legislature’s support for transportation projects, such as receiving federal funds to continue work on the West Susitna Access Project, a proposed 99-mile industrial access road to reach areas in the western Matanuska-Susitna Borough
FORT KNOX MILL (KINROSS)
FAIRBANKS
MANH CHOH
LUCKY SHOT
ANCHORAGE
JOHNSON TRACT
PRODUCTION
ADVANCED STAGE EXPLORATION (RESOURCES / RESERVES) EARLY STAGE EXPLORATION
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www.AKRDC.org
ALASKA RESOURCE REVIEW JUNE 2026
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