Senate committee advances bill to tax pass-through oil and gas entities amid industry warnings

At an April meeting of the Alaska Senate Resources Committee, members voted to send the committee substitute of Senate Bill 92 — a measure to extend Alaska's corporate income tax to certain pass-through oil and gas entities — to the Finance Committee with an attached indeterminate fiscal note.

The bill, as written in the committee substitute, would apply a 0% tax on qualifying pass-through oil and gas entity income up to $5,000,000 and a 9.4% rate on income above that threshold, apportioned to Alaska under the state's existing oil-and-gas apportionment rules and retroactive to Jan. 1, 2025 (the 2025 tax year).

Why it matters: proponents say the change would capture tax receipts from business structures that currently bypass the state corporate income tax; opponents — including a major Alaska operator, Hillcorp Alaska — warned the change would disrupt investment decisions at a time of rising production and capital spending on the North Slope and in Cook Inlet.

Hillcorp Alaska's senior vice president, Luc Sorge, told the committee Hillcorp has invested billions since arriving in Alaska and argued the bill "undermines that stability that has led Hillcorp to make tremendous advancements on the North Slope," saying the measure targets "independently owned oil and gas companies" and risks chilling future investment. Sorge described Hillcorp's recent spending and production gains at Prudhoe Bay and Milne Point, and said Hillcorp contributes "well north of a billion dollars a year to overall state of Alaska revenues." He also cited a company estimate the incremental production created under Hillcorp's stewardship (the "wedge") is worth roughly $7 billion to the state over 10 years under a $70-per-barrel price assumption and said a five-year production-tax impact of the wedge was about $600 million (figures he identified as company calculations).

Dan Stickel, chief economist for the Alaska Department of Revenue, presented the department's fiscal analysis and cautioned the impact of the bill is "indeterminate." Stickel said the department lacks complete worldwide income and apportionment data for affected entities and provided a modeling range: the fiscal note's scenario shows roughly $50 million in fiscal 2025 (half year) rising to about $130 million in fiscal 2027 under the department's central price forecast, while stressing the legal and data uncertainties mean the impact could be as low as $0 or as high as about $150 million per year in higher-price scenarios. He also showed a sample per-barrel effect under one set of assumptions: a state corporate income tax would transfer roughly $0.40 per barrel of producer profit to the state (about a 2 percentage-point shift in government take in the department's illustration at the assumed price).

Committee debate and amendments focused on scope, parity, rates and grandfathering. Senator Myers offered amendments to (a) apply the tax to all pass-through businesses statewide (failed, 1-6), and (b) narrow the measure so it would apply only to oil-and-gas companies (failed, 2-5). Senator Hughes proposed a lower 5% rate amendment (failed, 2-5) and a grandfathering amendment to exempt pre-2026 acquisitions (failed, 2-5). The committee adopted a technical amendment to clarify that entities meeting the unitary-business test would be treated as a single taxable taxpayer under the substitute (adopted by unanimous voice; no roll call recorded).

Votes at a glance:

- Amendment L.3 (expand tax to all pass-throughs across the economy): moved by Sen. Myers — Failed, 1 yes (Myers), 6 no (Wilikowski, Kawasaki, Hughes, Dunbar, Clayman, Giesel).

- Amendment L.4 (limit tax to oil & gas entities only): moved by Sen. Myers — Failed, 2 yes (Myers, Hughes), 5 no (Dunbar, Clayman, Wilikowski, Kawasaki, Giesel).

- Amendment L.5 (reduce rate to 5%): moved by Sen. Hughes — Failed, 2 yes (Hughes, Myers), 5 no (Dunbar, Wilikowski, Kawasaki, Clayman, Giesel).

- Amendment L.6 (withdrawn by sponsor): withdrawn.

- Amendment L.7 (technical clarification: unitary-business language to ensure affiliated oil-and-gas entities are aggregated for taxation under the substitute): adopted (no roll-call recorded; amendment adopted after objections were removed).

- Amendment L.8 (grandfather acquisitions before Jan. 1, 2026): moved by Sen. Hughes — Failed, 2 yes (Hughes, Myers), 5 no (Clayman, Wilikowski, Kawasaki, Dunbar, Giesel).

- Final committee motion: Report committee substitute for Senate Bill 92 as amended to Finance with individual recommendations and the Department of Revenue's indeterminate fiscal notice, and authorize legislative legal to make technical and conforming changes — Adopted, 5 yes (Kawasaki, Wilikowski, Dunbar, Clayman, Giesel), 2 no (Hughes, Myers).

What remained unresolved: the Department of Revenue emphasized data limitations (worldwide income, apportionment factors) and the department's fiscal note explicitly described a wide range of possible outcomes, from zero to roughly $150 million annually under different price and profit assumptions. Hillcorp repeatedly said it has not been able to model precisely how the bill would change its internal returns and said the measure could force the company to scale back Alaska investment; the company declined to provide firm internal profitability figures in open committee session.

The committee took no public testimony at the meeting; the chair opened and closed the public comment period with no registered speakers.

Looking ahead: the bill will proceed to the Senate Finance Committee with an indeterminate fiscal note. Finance staff will likely be asked to run additional models, to the extent that data from affected companies or the Department of Revenue can be obtained under confidentiality.

Ending note: committee discussion referenced statutory mechanics (apportionment, royalty rates, gross-value-reduction eligibility) and the broader policy tension between maximizing near-term state revenue and maintaining a stable tax and investment climate for independent producers that the state has courted in recent years.