Alaska governor's race survey: how much should companies pay in oil taxes?

Legislative discussion of Alaska’s system of oil production taxes gained increasing traction this year, as the state grapples with a structural deficit. 

Legislative leaders say they’ve had conversations about hiring consultants that could review the tax system, which has in the past been a key revenue source for the state. Late in this year's legislative session, Senate leaders unveiled a proposal that would have eliminated some key, company-friendly provisions in the existing law. It didn’t pass, but the topic is likely to generate substantial debate next year.

This week, Alaska’s gubernatorial candidates weigh in on whether they’d change the current production tax system — the foundation of which was put into place by a major 2013 tax rewrite, Senate Bill 21.

We also ask them which musical album they'd take to a remote Bering Sea island, St. Matthew.

Republicans Bernadette Wilson and Treg Taylor did not respond to this edition's questions; we sent them multiple requests. New entrants into the governor's race since the survey was circulated include Bill Walker and Lesil McGuire; we'll add them to our next edition.

Previous surveys include: climate change, schools funding, Alaska's LNG project, the s-corp tax loophole, the PFD and ferries, and health care costs.

Have suggestions for future survey questions? Email nat[at]northernjournal[dot]com.

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Question 1

Alaska's oil and gas production tax is projected to generate $464 million for the state in the next fiscal year, while companies will produce some $12.3 billion worth of taxable oil, according to the Department of Revenue.

Should the oil and gas production tax structure be changed? Please explain your answer.

Question 1.1

If yes, do you have a target for how much more or less production tax revenue you think the state should be generating? And which aspects of the production tax would you propose changing? Some examples are contained in the latest version of Senate Bill 227, which would reduce the overall production tax level, limit carried-forward annual losses and eliminate per-barrel tax credits and the gross value reduction.

Question 2

To Northern Journal's knowledge, Alaska doesn't have many desert islands. It does, however, have St. Matthew Island in the Bering Sea, which is one of the most remote places in the state.

If you were marooned on St. Matthew, which record, CD, tape or digital music album would you want to keep you company, and why?

Republican podiatrist Matt Heilala

1. I remain agnostic on whether Alaska’s oil and gas production tax structure should be changed pending advisement from oil and gas tax experts. Any evaluation of the tax structure must have nothing to do with budgetary shortfalls or fiscal gaps but must be based on fair market approaches and what is feasible for industry to choose Alaska as their number one choice if they invest, creating stable high paid jobs for working Alaskans. Each project must be negotiated separately for the unique needs of them.

Current considerations and the proposals being discussed are generally threatening projects from moving forward. They create uncertainty, reduce competitiveness, and discourage companies from committing capital here.

This last week in Florida, governors from 11 states in the south and southeast convened at the Boom Belt symposium discussing their basic principles that have created a boom for their respective states, among them low and stable tax regimes for industry. There is no excuse that Alaska is not a Boom Belt-type state as we have far more assets, resources, and energy opportunities than all of those 11 states combined.

Our responsibility is clear: get our state to genuine prosperity so our young adults choose to live, work, and raise families right here in Alaska. 

1.1. I have no target for how much more or less production tax revenue the state should be generating. Our focus must be on creating the conditions that attract major new investment and increased production.

Blanket limits on carried-forward losses or elimination of credits should be approached carefully if they introduce new uncertainty that could still deter projects.

Current proposals are threatening forward momentum by keeping Alaska less attractive than competing jurisdictions. We must fix that so companies choose Alaska first, delivering the high-wage jobs that keep our families and our young people here.

2. If marooned on St. Matthew, I would keep “The Joshua Tree” by U2. As a teen, this album was my constant companion during my tough first year skippering in Bristol Bay at age 18. While I love alternative acts like The Cure, OneRepublic, Blue October, Imagine Dragons, and The XX — plus classics like Pink Floyd — its anthemic sound and themes of searching, hope, resilience and longing perfectly match this remote Bering Sea isolation.

Democratic former state Sen. Tom Begich

1. I’ve called for real change in oil and gas taxes. Our average take for decades —taxes and royalties — was 27% of gross. In the Palin Administration, it was even higher: 36-38%. After 2013’s SB 21, that average fell to 16.5–18% of gross. SB 21 secured the industry lower taxes, credits, and cash payments while Alaskans lost our fair share. They promised increased throughput and employment, but those never materialized. Instead, majors left and BP sold to a company that used a loophole to forgo $100 million in annual taxes. That pattern will repeat if we don’t change policies now. We must: 1) modify our corporate tax to eliminate the “Hilcorp Loophole”; 2) eliminate the tax credits for our legacy fields — they’re fully developed, made profit and don’t need these credits which lower our effective tax rate to 4%; and 3) ensure tax policy, at the very least, returns us to our historic 27% threshold — no different, and even less, than most jurisdictions in the world. The multinationals using our oil operate in one of the safest areas in the world. As oil regions are threatened, they know they have to develop their product here. As they earn record petroleum revenues year on year, we should at least get our fair share. As governor, I will.

1.1. I lay out those changes in the answer above. Since SB21 we have received $4.5 billion in revenue, but paid out $5.6 billion in production tax credits. That just doesn't make sense. It's welfare for multinationals. We should also "ring fence" — that is to say, ensure that we don't apply tax incentives and production cost write-offs for new production against revenue generated from older production. Incentivize development where appropriate, but don't give credits to fields that are already mature. These are Alaska's resources and should be used for Alaska's future.

2. I hate to say this, but if you are marooned you won't have electricity - so I'd take a guitar and write an album reflecting the beauty of rural Alaska and the Bering Sea. Never get bored of writing.

Click Bishop, Republican former state senator

1. When we talk about total oil production, it's important to keep in mind that Alaska collects oil revenue in four main ways: royalties, production taxes, property taxes, and corporate income taxes. The total amount of taxes paid to the state comes from more than just the production tax. Also, Alaska and the North Slope are more expensive places to develop than other states.

Just last week, we celebrated the first oil production from Pikka, and we are seeing Willow start to come online too. These projects took literally billions of dollars of upfront investment to accomplish. To keep more projects moving forward, our state needs to provide fiscal stability for this kind of investment to help bring production from other new fields.

Any changes in oil and gas taxes must be made in a way that makes sense and recognizes that we have industry partners to develop the resource and increase production. We see that happening today, as the Legislature is currently in a special session to consider a proposal by Gov. Dunleavy to change the property tax laws related to the development of North Slope natural gas.

1.1. Alaska has a long history of changing its oil tax policy, often every seven years or so. This is one of the longest periods without a major change. Rather than setting an arbitrary target for production tax revenue, my goal is a stable, predictable tax structure that encourages investment, supports new production, and ensures Alaskans receive a fair return. As governor, I would bring together industry leaders, lawmakers, and the administration to review the system before proposing changes. Through a collaborative process, we can develop durable policies that provide certainty for investors, taxpayers, and Alaska's future.

2. Creedence Clearwater Revival’s Greatest Hits. It speaks for itself.

Dave Bronson, Republican and former mayor of Anchorage

1. Alaska collects oil revenues through a combination of royalties, production taxes, property taxes and corporate income taxes. People often focus on the state's 4% minimum production tax, but that single figure does not reflect the full amount oil producers pay to the state. When all revenue mechanisms are considered, Alaska's effective government take is approximately 10.6% — more than twice the roughly 4% average in other oil-producing states.

Equally important is the need for stability and predictability in Alaska's tax and fiscal policies. Oil and gas projects require enormous upfront investments and often take years, if not decades, before companies realize a return on investment. Investors make decisions based on the rules in place when those commitments are made. So in short: No. Continually changing the tax structure or altering the economic playing field in the middle of the game creates uncertainty, discourages investment and undermines long-term development. Sound business policy requires consistency so companies can confidently invest, create jobs and develop Alaska's resources while providing sustained revenue to the state.

1.1. Sound business policy depends on consistency and predictability. Companies are more willing to invest, create jobs, and develop Alaska’s resources when they can rely on a stable business environment. These investments generate long-term economic benefits and sustained revenue for the state. Altering the tax structure risks undermining the strong partnerships that currently exist and could discourage future investment by creating concerns about an unpredictable and constantly changing regulatory landscape.

2. Creedence Clearwater Revival — Cosmo's Factory

Democratic state Sen. Matt Claman

1. Alaska adopted the current net profit production tax structure, SB 21, in 2013. It has successfully encouraged major investment in our oil fields. But after 13 years, natural production decline and rising industry costs make it the right time to review, update and modernize the structure.

Alaskans want a strong industry, a reasonable tax structure that encourages continued investment and a fair share for the state. Alaska’s tax structure is among the most complex in the world. We should work to modernize and simplify that structure to better support industry and better protect the state’s fair share, including when oil prices are low.

As governor, I will lead an effective, collaborative process with the Legislature, industry, and Alaska stakeholders to modernize and simplify our oil and gas production tax. The work will include review of the minimum tax floor (currently 4%), the per-barrel credits, and other key provisions. While this effort will take time — two years or more — the outcome will be less risk for the state in low price environments and a simplified system that reduces administrative burden.

1.1. N/A

2. Bruce Springsteen, Born to Run. I’ve liked the album since it came out over 50 years ago. It has good songs, good rhythm, a trumpet solo, harmonica riffs and a hopeful message for getting off the island and back home to family and friends.

Former Alaska revenue commissioner Adam Crum, Republican

1. No.

I disagree with the premise of the question because it focuses on only one component of the revenue Alaska receives from oil and gas. While the production tax is projected to generate about $464 million next fiscal year, that is only part of the state's petroleum revenue stream.

According to the state's spring forecast, Alaska is expected to receive $1.883 billion in unrestricted petroleum revenue and another $549.8 million in designated or restricted petroleum revenue, for a total of roughly $2.433 billion from the industry. Looking only at the production tax significantly understates oil and gas's contribution to revenue.

Just as importantly, Alaska is projecting an increase in oil flowing through the trans-Alaska pipeline system for the first time in many years. That is the result of private-sector investment made possible by a stable and predictable tax system.

Alaska has spent decades changing oil taxes and creating uncertainty. We are finally seeing the benefits of stability. My focus is not on changing the tax structure but on increasing production, attracting investment and putting more oil in the pipeline. More barrels mean more jobs, more economic activity and more revenue for Alaska.

1.1. As stated above, I oppose changing Alaska's oil tax structure. We are finally seeing the benefits of stability through record investment, strong lease sales, major new developments, and renewed global interest in Alaska's resources. Companies make investment decisions on projects that span decades, not election cycles. Constantly changing the rules creates uncertainty and discourages investment.

Because I do not support changing the tax structure, I do not have a target for increasing or decreasing production tax revenue. My goal is to increase production. More barrels moving through the trans-Alaska pipeline system generate more jobs, more economic activity, and more revenue for Alaska under the current system.

2. I have eclectic taste. If I have to choose, I’d go with Guardians of the Galaxy Awesome mix vol. 1 and 2 because of its diverse genres. It has “Spirit in the Sky” by Norman Greenbaum and “Ain’t No Mountain High Enough” by Marvin Gaye and Tammi Terrell. Vol. 2 has songs like “Brandy” by Looking Glass, plus Sam Cooke, ELO, Glen Campbell and Jay and the Americans. You can listen to these on repeat.

Traditional healer Meda DeWitt, independent

1. Yes. Alaska's Constitution promises Alaskans the maximum benefit from our shared resources (Art. VIII), and right now, we are leaving money on the table. By the Department of Revenue's own projection, $464 million on $12.3 billion of taxable oil is an effective production tax of roughly 3.8%, below the 4% floor the law is meant to guarantee. Decades of mismanagement in Juneau left us a net-profits system that analysts call one of the most complex in the world, layered with deductions, per-barrel credits, and a gross-value reduction that has allowed some producers to pay little in years when they pumped billions out of the ground.
   
   We can do better, and we can do it without punishing working families. I support moving toward a simpler, gross-based structure that is predictable for companies and honest with Alaskans, and closing the corporate income tax loophole that lets a major North Slope operator pay no state corporate tax at all. Maximum benefit is not anti-development. It is the deal our founders wrote down, and Alaskans deserve to see it honored.

1.1. My target is the constitutional one: a fair share for the people who own the resource. As a benchmark, the gross-tax approach in SB 227 was projected by its sponsor to roughly double current oil production revenue, moving us from about $464 million toward the $900 million range, with no new tax on residents. I would eliminate the per-barrel credits and the gross value reduction that erode the 4% floor, and tighten the carryforward of losses so deductions cannot wipe out our take in high-price years. I favor a transparent gross-based rate paired with our royalty, with the precise rate set through open modeling with the Legislature rather than behind closed doors.

2. A CD of all the Elder and family interviews I have done over the years, with every recording of my kids' voices mixed in. Those recordings hold our language, our stories, and the people who made me. Marooned at the edge of the Bering Sea, I would not be alone for a second. The Elders would keep teaching, my kin would be around me, and I would hear my children laugh.

Mat-Su borough mayor Edna DeVries, Republican

1. I would consider support restructuring but only after we have put a restraint on our expenditure side of the budget.

Simplify the system so Alaskans and the production payers have a more transparent system. So all can see what we’re actually getting.

Modestly increase the state’s share at higher prices while preserving competitiveness at lower prices.

Prioritize stability and predictability over special‑interest carve‑outs and opaque credits.

In short, we should change the structure to secure a fairer, more transparent share for Alaskans while keeping investment viable. In many ways, the state has been a very greedy animals.

1.1. I am interested in perusing the following sections of committee substitute for Senate Bill 227: Section 2: Reduces production tax from 35% to 17%. Section 4: Creates a new subsection for a payment schedule. Section 12: Creates a new subsection to establish a production tax value for oil produced on and after January 1, 2027. Section 14: Limits carry-forward annual loss language to 40% of annual tax liability.

2. Thankful, Old Rugged Cross, Battle Hymn of the Republic, and Just as I am.

Shelley Hughes, Republican former state senator

Alaska’s oil and gas production tax cannot be evaluated in isolation. The state collects oil revenue by four methods: royalties, production taxes, property taxes and corporate income taxes. Using only one of these — the production tax, especially the 4% minimum by itself — misrepresents what companies pay.

Alaskans should keep in mind:

• Alaska’s total effective government take is 10.6%, 2.5 times the 4% average in other oil producing states.

• In FY25, the industry paid roughly:

• $1B+ in royalties
• $700M in property taxes
• $600+M in production taxes
• $130+M in corporate income taxes

• Alaska is a costly and often risky operating environment with long timelines from discovery to first oil, making cost recovery critical.

Before changing our production tax, policymakers must study the actual tax numbers alongside global competitiveness, and whether Alaska is deterring new investment. Stability, predictability and competitiveness matter if the goal is more production, more jobs, and more revenue long term.

1.1. Any changes to production taxes should focus on one goal: increasing long-term state revenue by encouraging sustained production, not short-term gains that discourage investment.

Rather than setting an arbitrary revenue target, Alaska should focus on policies that increase throughput in the trans-Alaska pipeline system, because higher production also grows royalties, property taxes and corporate income taxes.

Any reform should preserve the ability to deduct legitimate operating and capital costs, avoid making Alaska an outlier at the top of the global cost curve, and evaluate limits on losses or credits only in the context of competitiveness and project economics.

The best way to grow production tax revenue is to grow production.

2. As I would be dining primarily on voles, such fine cuisine requires the "Ratatouille" soundtrack. As for aural delivery method, I'd have to go with the LP so I can spin it when the battery runs out. (This response honors my recently deceased husband who loved to crack jokes and who also spent time hanging out in the Bering Sea — on St. Lawrence Island — caring for patients.)

Jonathan Kreiss-Tomkins, Democratic former state representative

1. Yes.

Most urgently and obviously, the S-corp loophole that lets one large producer (Hilcorp) skip the corporate income tax that others (e.g., ConocoPhillips) pay makes no sense. The loophole must be closed and the playing field must be leveled.

I am also the only candidate for governor who voted against SB 21 back in 2013. While I felt that the pre-2013 tax structure (ACES) needed to be amended in various ways, I felt SB 21 was a substantial overcorrection. More specifically, I felt that Alaskans conceded too much revenue upside in high price environments with SB 21 (such as this year, when North Slope crude has sold for well north of $100/bbl).

More broadly, I would like to see a fair, durable structure. We’ve relitigated oil taxes every few years for a generation. Sometimes industry has agitated for changes to our tax structure (as was the case with SB 21); sometimes it’s been Alaskans concerned the state is not getting its fair share. Ideally, we settle on a structure that is fair for all parties, and that can last for decades.

1.1. SB 227 raises important policy questions. Carried-forward losses, per-barrel credits, and the gross value reduction are all policy levers that need a serious look. Whether each is trimmed, capped, or left alone is a broader conversation for legislators, producers, and the Department of Revenue.

I will commit to championing a transparent oil tax reform process that results in a tax structure that is fair for Alaskans and also continues to promote North Slope investment.

2. Dire Straits’ Brothers in Arms. I grew up in the CD era. In my late teens I went on a long trip by myself and brought a CD player and only a few CDs, including Brothers in Arms. It got a lot of play and the trip made a lot of memories. The album has a special place in my heart.