What! They Don’t Pay Taxes?

An oil rig engaged in winter exploration at ConocoPhillips' Willow project is seen in 2019. (Photo provided by ConocoPhillips)

By Frank Murkowski

Hilcorp, in acquiring BP’s Alaska assets, follows a record of cooperation with our state government that by working together each will formulate a tax solution that will be instrumental in the continued development of Alaska’s energy industry.

The current deliberations from our legislative body on an appropriate tax structure must be fair and equitable in the interests of both Hilcorp and Alaska. So far, the deliberations have failed to reach a resolve, and the tax issue appears to be at a stalemate.

The acquisition of BP’s Alaska holdings by Hilcorp in 2020 meant that the profits on those assets would not be subject to Alaska’s corporate income tax. Hilcorp, just like all S Corps, limited partnerships and limited liability companies, is not covered by the state’s corporate tax code, which was written decades before such business structures gained popularity.

I have formerly experienced similar stalemates and found that occasionally questions that appear to be unresolved can be addressed with the decision-making roles involving the head of the corporate-state offices. Therefore, I would suggest that our governor consider inviting the principals of Hilcorp to Alaska to see if they can resolve the stalemate or plan a meeting at Hilcorp’s convenience.

Everyone in Alaska doing business pays taxes. Hilcorp, now one of our state’s largest and expanding corporations in the energy field, does not currently pay a corporate tax or an equivalent tax. That is wrong and should be changed without further delay by the administration.

It’s ironic that at this same time, the governor is demanding that the state surrender 95% of its rightful property tax revenue related to the gas line corridor proposal by Glenfarne.

British Petroleum had a long and favorable association with our state government and was very instrumental in developing our energy industry. They were major taxpayers inasmuch as they generated substantial revenue. According to an Anchorage Daily News article dated March 29, 2018, titled “BP reports annual profit for Alaska business at $118 million, with massive tax-cut boost: BP on Thursday reported paying taxes and royalties to the state of Alaska of about $543 million in 2017.”

Our legislature needs to replace the revenue that formerly came in from BP. The legislature and the state of Alaska must work to resolve the tax issue. The state can no longer ignore the revenue stream which funds so many critical needs of young Alaskans, particularly in the area of education.

It’s evident with each passing day, with the tax question unresolved, the state is losing potential tax revenue. As an alternative, my suggestion might expedite a solution. The principals, our governor, or his designee, and Hilcorp officials, CEO Greg Lalicker and chairman and founder Jeffery D. Hildebrand should plan a visit that would resolve the concerns of both parties and would be equitable.

It is important to recognize the necessity of Alaska as a favorable location for corporations to come to Alaska and invest in our huge natural resource potential. Perhaps this meeting could possibly create a solution to be mutually beneficial and set some precedent.

• Frank Murkowski is a former Alaska governor and U.S. senator.