New estimate projects 50% less Alaska state revenue from proposed Willow oil project
- Alaska Beacon
- 8 hours ago
- 3 min read
Some state officials have pinned their hopes on new oil revenue as a solution to the state’s ongoing budget woes
By James Brooks
Alaska Beacon
A report published by the Alaska Department of Revenue last month says the state treasury will benefit far less from the new Willow oil project than previously estimated.
According to the department’s new estimate, Alaska’s state treasury will net $2.6 billion from the development between 2029, when Willow is expected to begin producing oil, and 2053, the end of its expected productive life.
That’s down 50% from $5.2 billion expected in a 2024 estimate, and from $6.3 billion forecast in a 2023 estimate.
Fairbanks writer Dermot Cole first noted the decline on his website.
Under all three estimates, Willow’s operator, ConocoPhillips, would receive more in state-paid tax credits than it generates the state in tax revenue.
Under Alaska’s current oil tax system, oilfield developers receive tax credits for their lease expenses — the cost of drilling for new oil or producing from an existing field.
Those credits can be applied against production taxes elsewhere on the North Slope, or on oil from a new well, reducing the amount of money the state receives in taxes.
The new estimate lowers the expected price of oil and increases the cost of production across the North Slope, thus increasing the amount of tax reductions that could be applied to North Slope oil. It also takes into account a slightly different development plan that reduces expected production by 6%.
“Of these changes,” the department wrote in an emailed response to questions, “the increase in slope-wide lease expenditures had the greatest impact on state revenue.”
The department confirmed that the amount of tax reductions exceeds the new projected state revenue from Willow.
“Yes, in our Willow project analysis the total tax credits applied against tax liability over the duration of the analysis do exceed the revenue to the state from the Willow project over the duration of the analysis,” the department said by email. “This is true under both the 2024 and 2025 versions of the analysis. These credits do not represent cash out the door but rather an offset to taxes due based on the volume of oil produced.”
Willow is the largest oil and gas development to date on federal land within the National Petroleum Reserve-Alaska, to the west of Prudhoe Bay.
That area, believed to be home to significant oil reserves, is almost entirely untapped, and some state officials have said they believe that revenue from NPR-A would be particularly important as the state tries to bring expenses and revenue in line over future years.
The new estimate diminishes that hope. It predicts that peak production in 2030, Willow will be generating less than $300 million per year for the state treasury.
The state of Alaska isn’t the project’s only fiscal beneficiary. Under federal and state laws, 16.67% of production is paid in royalties to the federal government, with half of that money being redirected to the state, which uses it for grants to North Slope Borough communities.
This year, $31 million was split across four communities and the North Slope Borough.
Over the next 27 years, the state estimates those communities and the borough will share $3.1 billion. The borough itself will receive $1.2 billion from local property taxes. The federal government would receive $5.8 billion.
ConocoPhillips, the producer, would receive $10.3 billion, the state estimates. That’s up from $9.8 billion in the 2024 estimate and $9.9 billion in the 2023 one.
• 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.
