Senators narrowly approved a change to extend the state’s corporate income tax to oil and gas companies like the privately held Hilcorp, a path that could see the state generate about $100 million in new annual revenue.
And most oil-friendly Republicans are having none of it.
The changes were tacked on as an amendment to HB 194, dealing with the sale of Alaska’s royalty oil to the Kenai-based Marathon Petroleum refinery on Wednesday, and would address an issue that’s been on the table since Hilcorp bought BP’s Alaska operations in 2019. Because Hilcorp is organized as a passthrough S corporation, its profits are taxed at the personal income tax level, which Alaska does not have.
That means the corporate income taxes that BP paid — and that are paid by most other large operators in the state — aren’t paid by Hilcorp or its billionaire owner, Jeffery Hildebrand.
“This technical difference in the oil and gas sector is now costing us, by some estimates, more than $100 million a year,” said Sen. Forrest Dunbar, D-Anchorage, while pitching the amendment on the Senate floor. “If you go back and listen to the debates and discussions at the time … they expected that we would fix this technicality. I believe they are shocked, perhaps amused, perhaps laughing at us behind closed doors that we have not yet done so. We have lost hundreds of millions of dollars they expected to pay for no good policy reason.”
And while legislators have been buoyed by high oil prices stemming from Trump’s war on Iran, they say the state needs more dependable, predictable revenue sources, such as corporate income taxes. Several supportive legislators framed the extension of the corporate income tax to Hilcorp and other large passthrough corporations as fulfilling the Alaska Constitution’s mandate that legislators develop the state’s resources to the maximum benefit of the people.
Most pointed to the state of the state’s K-12 education system, which has been rife with headlines of school closures, ballooning class sizes and dwindling opportunities as schools continue to struggle with funding shortfalls.
“We are fortunate today that the war exists because, again, it is bailing us out,” said Sen. Lyman Hoffman, the Bethel Democrat who co-chairs the Senate Finance Committee. “We have school districts and schools in my district that are falling apart. We have classrooms that are way too large throughout the state of Alaska. … Even if this is passed, we’re going to be facing an additional need for another half a billion dollars.”
Hoffman, who has announced his plans to retire from the Legislature, has one of the longest careers in the Legislature, and he stressed that Republican Gov. Mike Dunleavy is one of the most conservative governors he’s worked with. He said that if Dunleavy’s proposing supplemental budgets that ask for $500 million in spending rather than more cuts, then something has to give.
“That tells me that we’ve nowhere else to cut,” he said during the Finance Committee hearing on Wednesday morning. “We’ve hit the bottom.”
Others pointed out that when Hilcorp officials were seeking legislative approval to enter Alaska’s oil industry, they said they anticipated legislators would enact the tax changes and that they would pay them without protest.
Still, opponents of the measure echoed many of the talking points we’ve heard from an oil and gas industry that has long opposed taxes while making sweeping, largely detail-free claims that it would decimate investment, jobs and the overall state economy. Those claims of broad economic benefit are starting to carry less weight, especially in light of a significant number of jobs going to Outside workers.
Sen. Jesse Bjorkman, whose district includes the refinery that was the subject of the underlying bill, railed against the changes, arguing they needed to carefully model the changes so they don’t decimate investment, jobs and the overall state economy.
“Some folks might say we have to act now, but I think it’s very apparent that acting right now in this way could be problematic,” he said, noting that the changes would likely “chloroform the underlying bill.”
The insistence that changes to oil and gas taxes need to be studied ad nauseam is getting less and less traction as legislators run up against oil company stonewalling. Legislators have frequently complained that the rampant secrecy — especially the Dunleavy administration’s handling of oil taxes — leaves them unable to properly vet the proposed changes.
Of course, they argue, oil companies will oppose taxes by any means necessary, including using catastrophic terms. Why wouldn’t they?
Even Bjorkman seemed to concede that it’s a delay tactic, noting that legislators may eventually be right to act in the face of the continued lack of information.
“There will come a time, I believe, that we don’t have enough information, or there has not been substantial modeling, where that won’t be an acceptable answer or excuse to not take action anymore,” he said. “That will happen, but I’m a no vote on this amendment because we do need a legitimate plan.”
But what that legitimate plan is, or how they will actually ever arrive at it, is an open question and one that many Republicans have refused to meaningfully engage on, instead insisting that everything needs to be done all at once, and no single part to address the state’s fiscal crisis can proceed until then.
For Sen. Hoffman, it’s been a maddening impediment to progress.
“We need recurring revenue,” he said, pleading with his fellow legislators to take even a baby step toward solving the state’s deficit. “If not this – if you want to vote no – tell me what you’re going to do to assist the state and to help your constituents get their students educated, have adequate police protection and public safety. I don’t see a solution.”
Sen. Cathy Giessel, a moderate Anchorage Republican who’s one of the few Republicans to openly support increasing taxes on the oil and gas industry, said following the vote that the underlying idea has already been studied and modeled at great length. She stressed that it’s time for lawmakers to get serious about making meaningful investments in the future, pointing to simple things like help for abused children or early childhood education that legislators will soon struggle to fund.
“There’s a saying out there, Our children are the message we send to a future that we ourselves will never see,” she said. “We need to think about that. What are we funding for the next generation?”
While both the amendment and the underlying bill passed the Senate, Republicans blocked the supermajority votes needed to change the bill’s title to include the tax, an issue that could increase the chances the bill doesn’t become law.
Still, given that any legislation will still need to make it through the House and be signed into law by the governor, who has gone as far as vetoing a tax on vapes to be consistent about his opposition to any and all taxes, the failure of the procedural vote won’t likely matter in the long run.
The change, as with any new tax, will likely have to wait until Alaska has a new governor.
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 Bluesky.
