Dunleavy administration may divert federal oil revenue from North Slope
- Alaska Beacon
- Dec 17, 2025
- 4 min read
Documents published by the Alaska Department of Revenue show a multibillion-dollar long-term change in the way money from federal oil leases is handled
By James Brooks
Alaska Beacon
Alaska Gov. Mike Dunleavy’s administration is proposing to divert money from a program intended to compensate North Slope communities for the side effects of oil and gas drilling on federal land near them.
As Dunleavy prepares to unveil a long-term fiscal plan, the state is proposing to use at least some of that money across Alaska instead.
“Definitely a big deal,” said Alexei Painter, director of the Legislative Finance Division, which analyzes the budget on behalf of legislators.
The National Petroleum Reserve-Alaska Impact Mitigation Grant Program sends millions of dollars from the federal government to North Slope communities each year.
It’s funded through revenue generated by oil production on federal land in the North Slope, and it is expected to grow significantly in coming years as more oil is produced from projects like Willow, which is located in the vast petroleum reserve between Utqiagvik and the Prudhoe Bay oil field.
The Willow project alone, for example, is expected to generate $3.1 billion for the grant program between 2029 and 2053, a boon for the borough’s 10,583 residents.
But in documents published recently, the Department of Revenue has reclassified money for the program as “unrestricted,” meaning it could be spent in a variety of ways.
During a Wednesday meeting of the Alaska Permanent Fund Corp. board of trustees, CEO Deven Mitchell told the board that he had just heard “that there’s been a federal law change” that could see more money end up in the Permanent Fund.
Mitchell couldn’t recall where he had read about that change, but it appears in the state’s newly published revenue forecast, which covers the fiscal year that starts July 1.
In several footnotes, the Department of Revenue describes a shift in policy. Currently, revenue from the leasing of federal land in the petroleum reserve is deposited in “a special revenue fund” dedicated to a particular purpose.
That changes with the new fiscal year, when “these payments will be divided between unrestricted revenue (74.5%), the Permanent Fund (25%) and Public School Trust Fund (0.5%).”
That would mean money from NPR-A would end up in the state’s general-purpose accounts, usable for services statewide or the Permanent Fund dividend.
Last year, the department wrote, “The federal government dictates that shared NPR-A revenue must be used for specific purposes, and therefore it is considered restricted revenue in this forecast.”
This year, that sentence doesn’t appear.
Comparing the two forecasts shows the difference. Last year, the department labeled NPR-A revenue as “restricted,” or locked in to a particular purpose. In the new fall forecast, it’s “unrestricted,” or available for general use.
While only $9.6 million in NPR-A revenue is expected in the next fiscal year, the state forecasts that amount will rise significantly after the end of the decade — to more than $200 million per year by 2033.
Speaking to reporters last week, an official with the Office of Management and Budget said the Alaska Department of Law was evaluating how changes to federal law in the Big Beautiful Bill Act will change the distribution of revenue to the state and local communities.
That act, passed with the enthusiastic endorsement of Republicans in Congress and President Donald Trump, calls for the state to receive 70% of revenue from oil and gas leases on federal land in the National Petroleum Reserve, Arctic National Wildlife Refuge and Cook Inlet, starting in fiscal year 2034.
The Department of Revenue concluded that clause will ultimately have little effect.
“Since all current and forecasted production in the NPR-A is located on leases issued before 2025, only a small portion of revenue within the current forecast period is expected to receive the 70% share,” the department wrote in its new forecast.
More important for the short term, the Act contains a clause stating that “for each of fiscal years 2025 through 2033, 50 percent (of federal-land oil revenue) shall be paid to the State of Alaska.”
Previous federal law contained a 50-50 split but also contained a clause stating that “in the allocation of such funds, the State shall give priority to use by subdivisions of the State most directly or severely impacted by development of oil and gas leased under this Act.”
That priority doesn’t appear in the Big Beautiful Bill.
As a result, the Alaska Department of Law is determining whether the state may choose to keep that money for direct uses instead of sending it to communities, the OMB official said.
As a precondition for the interview, reporters agreed to allow the official to speak on background and not be quoted directly.
The Alaska Department of Law did not respond to an emailed inquiry about the effort, nor did staff for any of Alaska’s three members of Congress, who were instrumental in adding that language to the Big Beautiful Bill Act.
The North Slope Borough was unable to comment before deadline Wednesday. Officials from VOICE of the Arctic Inupiat, an organization that has acted as a local booster for oil production, also did not return a message seeking comment.
• James Brooks is a longtime Alaska reporter, having previously worked at the Anchorage Daily News, Juneau Empire, Kodiak Mirror and Fairbanks Daily News-Miner. Alaska Beacon is part of States Newsroom, the nation’s largest state-focused nonprofit news organization.
