Senate Resources hears bill to cut sliding per‑barrel oil credit, tie credits to capital spending; fiscal impact uncertain

Juneau — The Alaska Senate Resources Committee held the first hearing on Senate Bill 112 (committee substitute) on Wednesday, a bill that would modify the state’s per‑barrel production tax credits by capping the sliding credit and tying the amount a producer may claim to qualified capital expenditures at a lease or property.

Sponsor Senator Bill Wilkowski told the committee the change is intended to restore aspects of the tax framework that were altered after SB21 (the 2013 More Alaska Production Act) and to limit credits that exceeded capital spending in recent years. Wilkowski said, “you shouldn't be getting more in tax credits than you're actually spending there.”

What the substitute would do: The committee substitute modifies the sliding per‑barrel credit so the maximum credit at low oil prices would be $5 rather than $8, and it adds a new subsection that prevents a producer from claiming per‑barrel credits in excess of its qualified capital expenditures for that same lease or property in the calendar year. The substitute includes applicability language beginning 01/01/2025, uncodified transitional provisions for tax payments and allows Department of Revenue rulemaking with a retroactive effective date specified to January 1, 2025.

Fiscal modeling and uncertainty: Sponsor staff and committee slides presented Department of Revenue‑style modeling that estimated the combined provisions could produce roughly $190 million for FY 2026 in one scenario and continue to yield amounts (declining over time) though estimates varied; sponsor materials presented a $100–$180 million range for early years. Department of Revenue staff cautioned that modeling tax‑payer behavioral responses is highly uncertain. Dan Stickel, chief economist at DOR, told the committee, “it is extremely difficult, if not impossible, to predict with certainty how taxpayers will respond to a tax change,” and the department submitted an indeterminate fiscal note to reflect that uncertainty.

Key policy details and questions from senators: Committee members asked whether the bill would force DOR to calculate credits at the level of individual leases or at unit/allocation levels. Former DNR Commissioner Mark Myers, called by staff as a resource, explained that production and costs are allocated back to leases through participating area and unit procedures and said the lease‑level language aligns with existing allocation practices. Senator Clayman asked about carryforwards; Wilkowski confirmed the new subsection bars carryforward of unused credits under that provision.

Historical context and scale: Sponsor materials asserted the sliding per‑barrel credits have cost the state several billion dollars since enactment; slides presented to the committee estimated about $8.9 billion in credits paid to date and projected additional credits under prior law. Witnesses noted that the sliding credit was added late in the 2013 session and that modeling at the time assumed higher long‑run oil prices than have materialized.

Next steps and committee action: Senator Wilkowski moved to adopt the committee substitute as the working document for the hearing. An objection for purposes of discussion was entered and later withdrawn; no roll‑call vote was recorded on adoption for the hearing. The committee concluded the hearing and set the committee substitute aside for future deliberation; additional witnesses and modeling (including outside consultant work mentioned by staff) were expected in subsequent sessions.

Ending: The committee paused further action on SB112 and scheduled deeper review with Department of Revenue, Department of Natural Resources, and outside modelers at a later hearing.