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Legislature has bills on S corps taxes, production credits, AGDC
Kristen Nelson Petroleum News
The Alaska Legislature is considering bills related to the oil and gas industry, including a bill requiring that corporate income taxes be paid by companies not organized as C corporations, a bill reducing production tax credits and a bill requiring that the Alaska Gasline Development Corp. include a lateral to Fairbanks.
SB 92 Senate Bill 92, by Sen. Robert Yundt, R-Wasilla, would charge corporate income tax to any company, however organized, making more than $5 million in profits from oil production or transportation in the state.
Hilcorp, organized as an S corporation, rather than a C corporation, appears to be the only company which would be impacted.
The bill has referrals to Senate Resources and Senate Finance and had its first hearing in the Senate Resources Committee Feb. 19, with the committee hearing public testimony on the bill March 3.
In his sponsor statement, Yundt said the bill "works to level the playing field and ensure that all oil companies that come to Alaska to extract our mineral wealth are charged at the same rate regardless of whether they are designated as an S corporation or a C corporation," with the 9.4% corporate income tax in the bill only applying to entities with profits of more than $5 million.
The bill is retroactive to the first of this year.
In a fiscal note the Alaska Department of Revenue's Tax Division estimated income from the bill would be $185.77 million for fiscal year 2026, dropping to $126.486 million in fiscal year 2027. The large drop is because of the bill's Jan. 1, 2025, effective date, which adds six months to FY26 fiscal year revenue, which is the basis for Revenue's figures.
Income falls steadily thereafter, with Revenue officials telling the committee that the percentage of oil produced by S corporation entities is expected to drop over time -- presumably with the addition of oil from Pikka and then Willow, both of which are being developed by C corporations.
A committee substitute is being prepared, but the next hearing on the bill had not been public noticed when this issue of Petroleum News went to press.
SB 112 Senate Bill 112, by the Senate Rules Committee, would change per-barrel tax credits.
Senate Rules said in a Feb. 26 press release that the bill "reforms Alaska's per-barrel oil tax credits to create a fairer and more sustainable tax structure for the state."
The committee said SB 112 reduces sliding-scale per-barrel production tax credits, which currently range from $8 to $1 to $5 to $1 per barrel.
The tax credits were introduced in 2013 in Senate Bill 21, and when that bill left the Senate, the credits were capped at $5 per barrel. The House, however, increased the credit to $8 -- a change which was not analyzed in the Senate.
SB 112 also has "an investment match requirement, ensuring that tax credits are only granted if they align with qualified capital expenditures," the Rules Committee said, encouraging producers to reinvest in Alaska's economy.
The Department of Revenue told the Joint Fiscal Policy Working Group in 2021 "that cutting the oil tax credits from $8 to $5 would have minimal impact on oil company investment in Alaska," with legislative consultants also testifying that the reduction "would have minimal impact on oil company investment in Alaska."
The bill has referrals to Senate Resources and Senate Finance.
It had not been scheduled for a hearing when this issue of Petroleum News went to press.
HB 119 House Bill 119, introduced by Rep. Will Stapp, R-Fairbanks, would require that a spur line to Fairbanks be included in the Alaska LNG Project.
That requirement would be added to the charter governing AGDC, with existing statutory language amended to add "an in-state natural gas pipeline advanced under this paragraph must include a direct spur line to the City of Fairbanks and the Fairbanks North Star Borough."
In his sponsor statement for the bill, Stapp cited legislative findings in HB 369, which established AGDC, as stating "the state's significant reserves of natural gas should be made available on a priority basis in the state to enhance employment opportunities, expand the state's economy, and supply a significant portion of community energy needs."
Stapp noted that the 2020 U.S. Census found the Fairbanks North Star Borough to be home to nearly 95,655 residents, 32,515 residing in the City of Fairbanks, making the Fairbanks North Star Borough Interior Alaska's largest community and the City of Fairbanks the state's second largest city by population. He said AGDC has maintained "that the development of a spur line to Fairbanks and 34 other identified communities, although technically feasible, would need to be evaluated prior to construction."
The bill has referrals to the House State Affairs Committee, and to House Resources, with a first hearing scheduled for March 6 in House State Affairs.
--KRISTEN NELSON
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