The recently announced $5.6 billion sale of BP assets to smaller oil company Hilcorp means large-scale shifts in ownership of Alaska’s prodigious North Slope oilfield. It also means Alaska could lose out on millions of dollars previously provided to the state in the form of petroleum corporate income tax revenue from BP.
According to both companies’ licenses, BP is categorized as a C-corporation and Hilcorp is not.
Hilcorp, owned by Texas based Hilcorp Energy I.L.P, is registered as a limited liability company, more commonly referred to as an LLC.
Why does this matter? Only C-corporation’s are required to pay the state’s petroleum corporate income tax to the state. In the past, this tax has been payed by oil giants like Exxon, ConocoPhillips and BP. As an LLC, Hilcorp is exempt from paying the tax.
Reports on how much BP paid the state in petroleum corporate income tax each year is not public information. However, according to the Department of Revenue spring 2019 forecast, petroleum corporate income tax was estimated to contribute $195 million in fiscal 2019 and $210 million in fiscal 2020 to the state’s general fund. BP owned about 26% of the Prudhoe Bay oilfield.
Genevieve Wojtusik, special assistant to Revenue Commissioner Bruce Tangeman, confirmed in a Tuesday email that final numbers for this past fiscal year will be released later this year.
“Final FY 2019 revenue and an updated FY2020 forecast will be provided in the fall 2019 forecast which comes out in December,” Wojtusik wrote.
With BP out of the game in Alaska and Hilcorp taking over, the state will lose out on the corporate taxes previously paid by BP. After a season of politically charged budget cuts from newly elected Gov. Mike Dunleavy on the basis of a state deficit, the loss of tens of millions in oil revenue does not bode well.
A group of Alaskans have introduced a proposed ballot measure that would rework the state’s oil and gas tax credit system to provide the state with more revenue created by oil development.
While the measure does not stand to change regulation on which corporations pay corporate petroleum income tax to the state, the measure proposal notes that if the tax credit system is reworked to benefit the state more, Alaska could see an additional estimated $1 billion in oil and gas revenue per fiscal year.
The ballot measure, introduced last month before the BP-Hilcorp sale was announced, has yet to be approved.
Contact staff writer Erin McGroarty at 459-7544. Follow her on Twitter: @FDNMPolitics.