Alaska's Hilcorp loophole benefits Texas billionaire, while state government looks the other way

It was obvious in 2019 when Hilcorp announced plans to buy BP’s operations in Alaska that the state had to fix its income tax on oil companies to keep the playing field level in Alaska.

The income tax on Alaska oil companies, a product of an era when all major Alaska oil companies were C-corporations, does not apply to limited liability companies like Hilcorp, now one of the largest operators in Alaska.

But Gov. Mike Dunleavy did nothing to correct the law, which made it easy for the Legislature to do nothing, a government failure that amounts to an annual gift of tens of millions or $100 million a year to HiIcorp owner Texas billionaire Jeff Hildebrand.

The revenue department has a “fiscal model” on its site that says applying the corporate oil income tax to Hilcorp and other so-called “pass through entities” would generate $69 million this fiscal year and $128 million in the next fiscal year. That would mean treating Hilcorp the same as the other oil giants.

Dunleavy and legislative opponents of a fair oil tax system have been negligent, blocking all efforts to fix the broken law or discuss the magnitude of the annual loss in public. The Legislature blocked hearings on SB 186 in 2020, a proposal from Sen. Bill Wielechowski to provide equal treatment to Hilcorp.

Alaska news organizations have given scant coverage to the Hilcorp loophole, leaving Alaskans uninformed about the scale of this financial scandal and the benefit to Hildebrand.

Repairing the broken oil tax law should be a priority for 2023.

Hilcorp registered in Alaska in 2011, as Hilcorp Alaska, LLC, 100 percent owned by Hilcorp Energy I.L.P., based in Houston.

In December 2021, the state Department of Revenue predicted the income tax on oil companies—paid by Exxon, ConocoPhillips and others—would bring in $240 million this fiscal year after years of low returns and losses.

Now with higher oil prices and profits, the prediction is up to $390 million for this fiscal year, with nothing from Hilcorp.

Meanwhile, Hildebrand is ranking higher on the billionaires list, with Forbes saying his net worth is up to $10.6 billion, the 172nd richest person in the world.

Your contributions help support independent analysis and political commentary by Alaska reporter and author Dermot Cole. Thank you for reading and for your support. Either click here to use PayPal or send checks to: Dermot Cole, Box 10673, Fairbanks, AK 99710-0673