With 5 days left in the legislative session, the Alaska State Senate Resources Committee is investing much of their time on Senate Bill 280, a 7-page bill originally introduced to provide the Oil & Gas industry with tax breaks in order to encourage investment in the Alaska LNG project. After a string of amendments and rewrites, the now 52-page-long bill, SB 280 version L, now hits the Oil & Gas industry with four new taxes.
Rather than appeal to investors, the State has prioritized driving its own revenue. The new taxes now included in SB 280 are an alternative volumetric tax (ATV), tax on pass-through entities, an infrastructure maintenance surcharge, and a raised minimum tax floor.
The ATV would apply at rates of $0.06/mcf for gas treatment plant or carbon capture facility throughput before throughput exceeds 250 million cubic feet per day, increasing to $0.10/mcf after that threshold is reached. The tax would also apply at rates of $0.06/mcf for pipeline throughput before throughput exceeds 250 million cubic feet per day, increasing to $0.15/mcf after that threshold is reached. Finally, the tax would apply at a rate of $0.15/mcf for LNG plant throughput beginning at commencement of commercial operations. Rates would be adjusted annually for inflation based on CPI for urban Alaska.
The second tax hit is a proposed tax on pass-through entities involved in “producing, treating, supplying, transporting, or processing oil or gas, including LNG processing, marine transportation of LNG produced in the state, and carbon capture or carbon storage activities.”
The bracketed tax rate on pass-through entities, which will be taxed “as if the qualified entity were taxable as a C corporation,” is as follows:
| Taxable income | Tax rate under SB 280 version L |
| Less than $1 million | 0 |
| $1-2 million | 5% |
| $2-3 million | 6% plus $50,000 |
| $3-4 million | 7% plus $110,000 |
| $4-5 million | 8% plus $180,000 |
| $5+ million | 9.4% plus $260,000 |
These taxes on pass-through entities would apply retroactively starting January 1, 2026.
The third tax hit is a new production tax surcharge labeled “Infrastructure Maintenance Surcharge.” It proposes a $0.30 per taxable barrel of oil produced. Proceeds would be directed to a Dalton Highway pipeline corridor maintenance fund. No tax credits, deductions, or other allowances would be allowed to offset this fee, and it would begin July 1, 2026.
The final hit would be to increase the minimum tax floor for production tax on North Slope oil from 4 percent to 6 percent of the gross value at the point of production when the average price per barrel for Alaska North Slope crude oil for sale on the United States West Coast is more than $25. This tax would apply to oil produced on and after January 1, 2027.
According to the fiscal note from the Department of Revenue’s Tax Division, revenues resulting from this bill are “indeterminate.” The fiscal note fails to analyze the economics of the bill beyond stating, “The revenue impact could be positive or negative and could impact state finances by hundreds of millions of dollars, or more, per year. Key uncertainties include the impact of this bill on whether the Alaska LNG project moves forward, and detailed final project cost and timing.”
Despite the fiscal note’s assessment of uncertainty, the presentation given by Chief Economist Dan Stickel shows a clear revenue increase for the State with SB 280 version L, although less than the State wanted with version H. However, version L significantly slashes municipal revenues. Here is a look at the math:
| State Revenues | Revenue increase with SB 280 as introduced ($) | Revenue increase with SB 280 version H ($) | Revenue increase with SB 280 version L ($) |
| 2042 | -2.6 billion | 0.8 billion | 0.4 billion |
| 2052 | -4.9 billion | 4.4 billion | 3.1 billion |
| 2062 | -7.2 billion | 10.5 billion | 7.7 billion |
| Municipal Revenues | |||
| 2042 | -5 billion | -0.8 billion | -1.5 billion |
| 2052 | -9.2 billion | -1.3 billion | -1.6 billion |
| 2062 | -13.3 billion | -0.4 billion | -1.6 billion |
The bill in its current form would also require the State to hire four new positions: a Corporate Income Tax Auditor 3, a Commercial Analyst, a Tax Auditor 3, and an Oil & Gas Revenue Auditor 4. This is estimated to cost $852.1 million, which would eat up the State’s revenue increase in 2042 and approximately 16% of the 2052 revenue. That leaves an estimated positive revenue of $10.3 billion in 35 years.
For comparison, SB 280 as introduced would have decreased State revenue by $14.7 billion in 35 years, which would have made investment in Alaska LNG substantially more attractive to investors. Unfortunately, SB 280 version L does not provide any incentive to invest in Alaska LNG.
According to a statement from the Alaska Oil and Gas Association today: “What began as legislation intended to help deliver a gasline for Alaska has now been hijacked into a sweeping oil tax increase rushed through the process without meaningful economic analysis, public vetting, or a clear understanding of the consequences. These changes jeopardize not only the prospects of a future gasline, but also continued oil investment and development on the North Slope.”
