Hilcorp secretly helped kill gasline bill
There is a compelling and simple reason to end the Hilcorp loophole and do it in the gasline bill, one that nearly all Republican legislators and Gov. Mike Dunleavy are either unaware of or hoping that the public will never learn about.
State income from oil and gas production taxes would take a $220 million total hit from 2029 to 2032 under the gas pipeline plan because the oil companies would be able to deduct lease expenditures from their tax bills, according to the Department of Revenue.
That’s real money.
The department says that instead of collecting $1.1 billion over those four years from oil and gas production taxes, the state would receive $900 million because of a provision in the law that is either a feature or a flaw, depending upon your point of view.
Ending the Hilcorp loophole would help offset that loss and level the playing field so that Hilcorp is paying the same state corporate income tax as ConocoPhillips and ExxonMobil.
The compromise gasline bill rejected by the state House and Dunleavy would have applied the state corporate income tax to Hilcorp, but not to Glenfarne and the developers of the Alaska LNG project.
That is why Sen. Bill Wielechowski’s statement that Glenfarne was OK with the bill until the oil and gas industry pushed back sounds more and more plausible.
The Anchorage Daily News has this story on Hilcorp’s role in killing the plan.
The Alaska Beacon has this story on Hilcorp’s role in killing the plan.
It’s a given that Texas billionaire Jeff Hildebrand, who is worth $10 billion, wants the loophole to remain in place.
The oil industry support groups that depend on Hildebrand’s company are naturally going to support exactly what he wants and call it great for Alaskans.
But that’s not necessarily good for people who are not polo-playing Texas billionaires.
Under existing law, Hilcorp, as well as those two other giants, is able to deduct its expenditures for natural gas development from what it pays Alaska in oil production taxes.
The exact size of the decline in oil production taxes from a gas pipeline is not clear, but the state estimates a loss of $72 million in 2029, $82 million in 2030, $42 million in 2031 and $24 million in 2032.
These are expected reductions from the amounts paid mainly by Hilcorp, ConocoPhillips and ExxonMobil.
Sen. Forrest Dunbar said that in trying to respond to these pending losses, the Senate Resources Committee asked the Department of Revenue for advice.
“The short version is that gas lease expenditures can be counted against oil tax revenues. So during the construction phase and before export, the producers, including Hilcorp will be significantly reducing their oil production tax revenues to Alaska,” he said.
“We initially proposed ‘decoupling’ gas and oil lease expenditures, so the companies would get the write-offs, it would just be carried forward to when they are paying gas taxes. AOGA (Alaska Oil and Gas Association) came and testified that that was impossible. Dunleavy's DOR said it would be extremely complicated and costly to calculate what was a gas lease expenditure and what was an oil lease expenditure.”
“So we asked, how do we prevent oil lease expenditure losses? The DOR suggested that we could do one of several things more easily: 1) increase the oil minimum tax floor 2) harden that floor against certain types of credits or 3) close the S-Corps loophole. Of those three, the S-Corp was the smallest change to our oil tax system, so seemed to make the most sense.”
None of the Republican legislators who drone on and on about how Hilcorp should not be required to pay a tax paid by other companies want to talk about this.
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