The state of Alaska could see as much as $175 million in annual oil and gas revenue under an amendment approved last week by the Senate Resources Committee.
Anchorage Democratic Sen. Bill Wielechowski proposed the amendment, which would institute a tax on large companies organized as S-corporations that don’t otherwise pay corporate income taxes in Alaska. The new revenue would be earmarked for renewable energy and grid upgrade projects.
“The intent of this amendment is to get what we assume will be over $100 million, perhaps $175 million, per year going forward, have that money go to desperately needed renewable energy projects, electrical grid projects and upgrades across the state and make our tax code a little more fair,” Wielechowski said during the hearing.
The underlying bill is Gov. Mike Dunleavy’s House Bill 50, which would set up a system for carbon storage in Alaska.
Alaska’s oil and gas industry contributes to state coffers through several tax streams, including production taxes, royalties, property taxes and corporate income taxes. However, corporate income taxes only apply to those with corporate income, which isn’t the case for one of the state’s largest oil field operators, Hilcorp Energy.
The Texas-based Hilcorp Energy, which acquired BP’s North Slope assets in 2020, operates as an S-Corporation. This means its profits are taxed through individual income taxes rather than corporate income taxes. For Alaska, this translates to the company’s profits going untaxed because Alaska doesn’t have a personal income tax.
The issue has long been of interest to Sen. Wielechowski, who has been one of the most outspoken supporters of increasing taxes on the state’s oil and gas industry, but it was met with mixed support from the members of the Senate Resources Committee.
Republican Sens. James Kaufman and Click Bishop opposed the amendment, saying they needed more time to review the measure. Kaufman said it should stand as its own legislation. Anchorage Democratic Sen. Matt Claman also opposed the measure but said the solution should be to tax all S-Corporations rather than just ones making more than $4 million in annual profit as was proposed by Sen. Weilechowski’s amendment.
The measure passed 4-3 with the support of Sens. Wielechowski, Cathy Giessel, Scott Kawasaki and Forrest Dunbar.
However, the legislation faces an uphill battle to get approval from the House and Gov. Mike Dunleavy, who are both far more friendly with the oil and gas industry. Hilcorp, unsurprisingly, has also opposed the amendment.
In a hearing with the Senate Finance Committee, Department of Natural Resources Commissioner John Boyle described the current version of HB50 as “festooned with baubles and trinkets of all sorts and stripes,” referring to the several amendments that have since been added to the measure.
While the hearing has so far focused largely on the underlying carbon storage proposals — which have been met with skepticism over claims that they could be a windfall revenue source for the state — Boyle said that the governor opposed taxing S-Corporations.
“No, the governor does not support this bill with all the amendments that are included,” he said. “Most problematic, obviously, is the provision that relates to S-Corp taxes. We believe that goes beyond the fairway, so to speak, in terms of the issues that are now incorporated into the bill.”
The bill still needs to clear the Senate Finance Committee before it heads to the Senate floor for a vote. It will then return to the House for approval before going to the governor. The legislative session is set to end next week.
Matt Acuña Buxton is a long-time political reporter who has written for the Fairbanks Daily News-Miner and The Midnight Sun political blog. He also authors the daily politics newsletter, The Alaska Memo, and can frequently be found live-tweeting public meetings on Twitter.