Alaska’s Oil Tax Debate Heats Up Amid Carbon Sequestration Bill Amendments
In a recent move by Alaska lawmakers, a significant amendment to House Bill 50 could see Hilcorp Alaska paying an additional $100 million in state taxes annually. The bill, which aims to establish a framework for carbon sequestration, has been the subject of heated debate as it introduces a tax hike for privately owned oil and gas companies like Hilcorp.
Hilcorp, a key player in Alaska’s oil industry and the largest producer of Cook Inlet natural gas, has expressed concerns that the proposed tax increase could affect its investment strategies and contractual obligations. Luke Saugier, Hilcorp Alaska’s senior vice president, highlighted the potential impact on over $1 billion in planned investments and ongoing negotiations for gas supply in Southcentral Alaska.
The amendment, proposed by Sen. Bill Wielechowski, aims to close the so-called S-corporation loophole, leveling the playing field between privately owned and publicly owned oil companies regarding state corporate income taxes. The Alaska Department of Revenue’s projections indicate that this change could bring in substantial revenue for the state, with estimates of $190 million for the current fiscal year and around $122 million for the next.
While some legislators, like Anchorage Republican Sen. Cathy Giessel, support the tax hike as a means to fund essential services such as education and behavioral health, others express concern. Sen. James Kaufman warns that such abrupt tax policy changes could deter future investment in Alaska’s oil and gas sector.
The bill’s journey through the legislature has been complex, with various amendments added along the way. One such amendment encourages the use of additional revenue for renewable energy projects or electrical grid improvements. However, Governor Mike Dunleavy’s administration has voiced opposition to the tax increase on Hilcorp, labeling it as the most problematic provision in the bill.
As the Senate Finance Committee takes up the amended bill, the fate of the carbon sequestration measure hangs in the balance. With discussions ongoing about potential carbon storage projects between the White House and Japan, Alaska’s approach to managing its natural resources and fostering investment continues to be a topic of intense scrutiny and debate.
