The Senate bill to close the loophole that enriches billionaire Jeff Hildebrand to the tune of $100 million a year or more moved out of the Senate Resources Committee Wednesday.

Hildebrand is the Texas oil man who owns Hilcorp. He doesn’t have to pay the Alaska oil company corporate income tax because of the way his company is organized.

Ignore the oil company propaganda about this bill. The Legislature needs to recognize that this is one small step toward preserving state services and the Permanent Fund Dividend.

Even Gov. Mike Dunleavy said in 2021 he would support this bill if the Legislature approved it, according to his revenue commissioner at the time.

Exxon and ConocoPhillips pay the oil company income tax, created under an old state law that did not envision a major oil company using the corporate structure Hilcorp operates under.

Hilcorp claims the bill would not level the playing field, but it would “tilt the playing field” against Hilcorp by forcing it to pay a tax the other North Slope companies have always paid.

Here is a Hilcorp slideshow that doesn’t mention the billionaire owner’s tax-advantaged status. It also doesn’t mention the profits Hilcorp makes in Alaska. Or how much Hilcorp pays in state and local taxes.

“To single Hilcorp out and treat us differently than the more than 55,000 other LLCs and S corps in Alaska seems deeply unfair,” Hilcorp Alaska Senior Vice President Luke Saugier protested to the Senate Resources Committee Wednesday.

“The State of Alaska under three different governors was fully aware of our structure when it approved each one of our transactions. However, now, after Hilcorp has invested billions of dollars and dramatically increased production on the Slope and in the Cook Inlet, we are being unfairly targeted,” he claimed.

It is not “deeply unfair” because the tax in question is an income tax paid only by oil companies. It is deeply dishonest of Hilcorp to claim it is being unfairly targeted.

Asked by Sen. Bill Wielechowski if Hilcorp had modeled how much it would have to pay under the bill to close the loophole, Saugier said the company doesn’t know and is unable to figure that out.

Asked by Wielechowski what the internal rate of return at Prudhoe Bay, Milne Point and Cook Inlet, Saugier said that is secret. He also refused to say if the return was higher or lower than 20 percent or if the bill would reduce the internal rate of return below 20 percent. He said he would not disclose that information even if he had it.

Wielechowski said he had a hard time understanding Hilcorp’s position in that Saugier said passage of the bill would force Hilcorp to scale back operations in Alaska, yet the company would not say how much the bill would cost in taxes and whether it would reduce the rate of return below 20 percent.

Wielechowski said there is state modeling that said the tax would cost about 40 cents a barrel when oil is selling for $68 a barrel.

“We have no evidence at all showing that this will impact the investment or production,” said Wielechowski.

The Dunleavy administration made a similar argument four years ago when on Aug. 5, 2021 and again on Aug. 10, 2021, Revenue Commissioner Lucinda Mahoney testified that Dunleavy would support ending the Hilcorp loophole, if the Legislature took the lead and adopted the change.

No one should believe the current claims from Dunleavy spokesman Jeff Turner that Mahoney somehow “misspoke” when she said over and over again that Dunleavy would follow the lead of the Legislature on these tax measures.

In a followup 9-page letter on October 1, 2021 to legislators, Mahoney made no mention that anything she had said about Dunleavy’s support for revenue measures was false.

The Legislature should have closed the Hilcorp loophole in 2020 when it bought out BP. Since then many hundreds of millions that could have gone to state services, including the Permanent Fund Dividend, went to Hildebrand’s pockets in Texas.

The oil industry propaganda, which is thoughtlessly copied and repeated year after year, never mentions this high-stakes cash flow Outside.

I call your attention to a letter to the editor of the Anchorage Daily News from former Gov. Frank Murkowski, who has correctly sized up the problem.

“Hilcorp replaced BP when it purchased its Alaska assets in 2020. Hilcorp is an S corporation whereas the other primary producers are C corporations, and as such the latter pay corporate income taxes. This flaw must be corrected. Hilcorp should pay its fair share,” he said.

“I would encourage the legislature and the governor to address this inequity as quickly as possible,” Murkowski wrote.

The bill advanced to the Senate Finance Committee on a 5-2 vote. The yes votes came from Sens. Cathy Giessel, Scott Kawasaki, Forrest Dunbar, Bill Wielechowski and Matt Claman. The no votes came from Sens. Shelley Hughes and Robert Myers. The finance committee will review the bill before it goes to the Senate floor.

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Bill to close $100 million Hilcorp loophole advances in Alaska Senate