The $100 million question inside Alaska's gas-line bill

One of the biggest unsettled questions in Alaska's gas-line tax bill is whether to close what supporters call the "S-corporation loophole" — a quirk of tax law that lets Hilcorp, the private company running Prudhoe Bay and most of Cook Inlet, skip the corporate income tax its competitors pay.

The mechanics trace to 1980, when Alaska repealed its personal income tax. Publicly traded oil companies like ConocoPhillips and ExxonMobil are C corporations and pay state corporate income tax. Hilcorp is a privately held S corporation, whose profits pass through to its owner — Texas billionaire Jeff Hildebrand — and would normally be taxed as personal income, except Alaska no longer has one. So the income is taxed nowhere. Sen. Bill Wielechowski, an Anchorage Democrat who has pushed to close it for years, frames it as fairness: "Exxon pays the tax, ConocoPhillips pays it, BP paid it for decades," while Hilcorp pays zero. The state estimates closing it would raise $100 million to $190 million a year — real money as Alaska stares down a budget gap squeezing schools and the Permanent Fund Dividend.

But the opposition is substantive, which is why it keeps failing. When the Senate attached the tax to an earlier bill this spring, the House rejected it, with several bipartisan-majority members joining Republicans. Their argument: singling out one class of producers with a new tax creates the investment uncertainty Alaska can't afford. That lands hardest on Cook Inlet, where Hilcorp supplies the gas that heats most of Southcentral Alaska amid a looming shortfall.

Hilcorp has warned a "vague and uncertain" tax could force it to re-examine the billion-plus dollars it plans to invest there — leverage, critics say, but a threat lawmakers take seriously when Anchorage's heat is downstream. The industry also argues the measure was never properly modeled and raises constitutional questions as a tax aimed at a narrow class of companies.

Wielechowski floated a far larger future figure tied to the gas line, arguing the exemption could eventually cost hundreds of millions a year from Glenfarne alone — though the developer originally testified it would pay the tax. That provision, like the Hilcorp question, remains unresolved before the conference committee.