Senate Democrats pull a sneak attack on Hilcorp, HEX, cramming taxes into an unrelated bill

By SUZANNE DOWNING

March 25, 2026 – The Alaska Senate’s March 25 floor session saw a routine contract ratification bill turn into a surprise tax policy fight after the Democrat-led Majority added new tax language to House Bill 194, targeting Hilcorp and HEX/Furie. The entire floor session went sideways after the amendment passed, forcing a title change for constitutional reasons, forcing a reconsideration vote, and setting up a battle in the House, which would then decide whether to concur with the sweeping changes.

House Bill 194 originally arrived in the Senate as a narrow measure to ratify the State of Alaska’s royalty oil sale contract with Marathon Petroleum, a long-standing agreement viewed as a stable and reliable source of state revenue. It could hardly have been less controversial.

That changed during Wednesday’s floor session, when Sen. Forrest Dunbar of Anchorage introduced an amendment creating a new tax structure aimed at certain privately held oil and gas companies. The amendment lowered the income threshold and applied to S corporations, partnerships, sole proprietorships, and LLCs that are not taxed as corporations — entities with less than $1 million in revenue — a change that could set precedent for expanding taxes on a broader range of Alaska businesses. While the immediate focus falls on Hilcorp and HEX, as well as Glenfarne and BlueCrest, for example, the framework opens the door to wider business taxation.

The move drew an objection on the floor because the bill had strayed far beyond its original scope. The objection triggered a roll call vote and ultimately required a title change to the bill, since the Alaska Constitution requires legislation to reflect its subject matter. Expanding a narrow contract ratification into a tax policy bill made the broader title necessary.

The amendment, and the process used to attach it, drew immediate criticism from the Senate Republican Caucus, which argued the Democrat Majority used a narrowly focused bill as a vehicle to advance new taxes without warning.

“Southcentral Alaska is facing an energy crisis,” said Senate Minority Whip Robb Myers. “To target taxes on the very companies who are working to provide the natural gas we need to keep our homes warm and the lights on is shooting ourselves in the foot for a quick buck.”

Sen. Cathy Tilton also raised concerns about the procedural legitimacy of the move.

“A relatively simple and straightforward contract ratification shouldn’t be used as a backdoor for a major new tax policy,” Tilton said. “Our caucus questions the procedural standing of the amendment.”

Republicans argue the amendment may jeopardize timely approval of the royalty oil contract, potentially delaying a revenue stream the state has relied on for decades.

The Alaska Oil and Gas Association also weighed in, saying it “strongly opposes the amendment offered on the Senate floor to attach a new tax on privately held oil and gas operators to an unrelated royalty-in-kind bill.”

The group said the tax amendment “represents a major policy shift that has not been adequately vetted or modeled and raises serious concerns with its structure and approach. It targets a narrow group of producers with a discriminatory tax, reversing long-standing policy and creating uncertainty for investment at a time when Alaska should be encouraging development—especially in areas like Cook Inlet where reliable energy supply is critical.”

AOGA also noted that Alaska eliminated income taxes on these businesses decades ago, warning that reversing that policy for a select segment of one industry creates uncertainty and sends the wrong signal when additional investment is needed.

The organization urged the House of Representatives to set aside the bill and instead allow the contract ratification to move forward separately.

As it stands, the bill is in reconsideration in the Senate, needing 14 votes to do the title change and not having enough. They cannot send the bill without the title change. If if passes, the House must then decide whether to concur with the Senate’s sweeping changes. If it declines, the bill could stall or be sent to conference, delaying ratification of the Marathon royalty oil agreement and prolonging the dispute over the new tax policy. In the end, if it gets to the governor’s desk, he will have to decide if he needs to break out his veto pen. But vetoing the bill that has the Marathon contract in it would harm the state, something that the maker of the amendment has no doubt already considered.