Good afternoon. I'll call this meeting in the House Finance Committee to order
I let the record reflect that it is 1 33 p.m. On Thursday January 22nd
2026 a present today are representative Ballard representative Hannon representative Moore representative Bynum
representative staff represent Thomas chef ski
Alvin and the three co-chairs
Mr.. Foster Josephson and Schruggie
Messers
Also present today are Hough Finance Committee staff, Committee Assistant Helen Phillips page to Lula Lestufka,
Secretary Brie Wiley, and Secretary Leah Frazier.
We also have our moderator Emily Mesh from the Legislative Information Office with us. Before we start, please mute your cell phones.
Today's meeting, we will hear the Department of Revenue present its fall 2025 revenue forecast.
Yesterday we heard about anticipated production.
I was thinking that it's not really a fair fight in a contest between anticipated
production, anticipated revenue.
This department has a greater challenge for reasons that we all know.
In today's meeting, as I said, we'll hear from revenue as it presents its forecast.
With us today from the Department of Revenue, our Janelle Earls Acting Revenue Commissioner.
Dan Stickel chief economist for the tax division also
The oh sorry acting commissioner, please come forward if you will the two of you and we'll put your names on the record and begin your presentations
Thank you, it's great to be here Janelle Earls acting Commissioner and
Administrative Services director for The Department of Revenue
Today, I am going to turn it over to Chief Economist Dan Stickel.
He should be able to answer any questions you have far better than I would be
able, too, and I will let him go ahead and present.
Thank you, Eric.
Mr. Stichl.
All right.
For the record, Dan Stickl, Chief economist with the Department of Revenue.
And thank you for the opportunity to come before the committee and
12, 2025 revenue forecast.
Do not do what I thought it was going to do.
All right, slide two is just an overview of what
I'm going go over in the presentation today.
So this presentation's broken into three sections.
The first section of the
presentation is some background about the revenue
Second part of the presentation walks through the revenue forecast beginning with total state revenue and then drilling down into unrestricted state revenues
And then the final section of that presentation is a detailed walk through of our assumptions around the oil and gas
Slide four
So on on slide four so the revenue forecast was released on December 11th of 2025 and then our full revenue sources book was
released
On December 18th, so this is the official revenue forecasts that's used to
Underlie the governor's initial budget proposal to the legislature. We will have a
updated revenue for cast later this spring to underlie. The final budget negotiations process
Our revenue forecast is available on our website at tax.alaska.gov.
The full revenue sources book which has over 100 pages of detailed information about all of the state's revenue
sources, as well as revenue forecasts going back for many, many years.
Slide 5.
Slide five focuses on some of key assumptions behind the revenue
forecast.
Discrete scenario within a range of potential outcomes and that's
Just one one important aspect of the forecast that we want to make sure that folks keep in mind
Is that some of these variables may come in higher or lower than expected?
For investments, we are assuming a 7.6%
Return for the remainder of fiscal year 2026 for that permanent fund we included
actual revenue through the end of October and then apply that assumption for the remainder of
the fiscal year. The long-term return assumption is 7.3% in this forecast.
The federal revenue forecast incorporates all known funding as of the beginning of December
for fiscal years 26 and fiscal Year 2027. For fiscal
out look as provided by Office of Management and Budget.
Our petroleum revenue forecast is based
on an Alaska North Slope oil price of $65.48 per barrel
for fiscal year 2026, declining to $62 per
barrel for Fiscal Year 2027.
And then looking at the non-patrolium
sort parts of the revenue forecasts,
the
General thesis here is relatively stable economic conditions.
The corporate income tax forecast did incorporate a bit
of a slowdown for the end of fiscal 25 and the beginning
of Fiscal 2026, but then steady growth thereafter,
no recession baked into the forecast.
For tourism, we are basing the forecasts
level of tourists 1.7 million cruise passengers per year. So that's remaining near the record levels. We've seen the last couple of years
in the fishing industry we
Incorporated an assumption a couple years ago of a five-year time frame for recovery
from the
2024 low values and based on the preliminary data that we've seeing for
2025 it looks like we are on that recovery path
So things have turned up
slightly in that industry and then finally mining industry
I'm sure everyone has seen the the news out there about record gold prices approaching $5,000 and record silver prices
We based our mining revenue forecast on the futures market outlook as it
As it was at the beginning of December
Mr. Stuckel question from representative Hannah
Thank you, co-chair Josephson.
Good to see you in 2026, Mr. Stickle.
What's our average been?
We're halfway through fiscal year 26.
Our revenue projection was based on 65.48.
What has it been for six months?
Rep handed through the chair.
I don't have that number off the top of my head.
What I can tell you is that.
The oil prices are tracking very, very close to forecast so far for fiscal 2026.
Okay. Okay, thank you.
Okay? So we'll go to non-patrillion.
Excuse me, the revenue forecast you've mentioned.
Anything more on slide five?
No, sir. Ready to move on to slide six.
So, slide six is a visual that we like to show.
This shows the relative importance of different sources of total state revenue for the recently
completed fiscal year 2025.
This is total revenue from all sources regardless of restriction.
currently. So the state's revenue is really a three-legged stool with
investment earnings, federal revenue, and petroleum revenue comprising the vast
majority of state revenue and all other sources collectively accounting for a
little over 7% in fiscal year 2025. Obviously these other industries are
important to the State economy but in terms of
current state revenue 93% of revenue comes from the investment federal and petroleum
Okay, and then slide seven is the same slide, but focusing just on the unrestricted revenue
So the revenues that are
Available for general appropriation by the legislature and typically the source of most of the budget discussions.
So in terms of unrestricted state revenue, 90% of
the state's unrestricted revenue comes from investment earnings and petroleum, and everything else accounts for about 10%
of unrestricted state revenues.
Mr. Stickle, a question from Representative Valerie.
Hi, thanks for being here.
On, I think it was page six, it doesn't matter, but on the investment
Could you tell me how much of that goes to the overhead to pay board members and our investment?
givers
Rep. Allard through the share. I don't have that number off the top of my head
We'd be happy to follow up with that could you find out the percentage that go to that? Okay. Thank you
Okay, we'll go, to slide eight and nine
Sure, so slide nine shows total state revenue from all sources. This is the information that was on the picture earlier in in table form
We're showing this for fiscal year 2025 as well as the forecast for fiscoll 26 and fiscal 27
So in the revenue forecast and the state budget revenues are broken out into four different categories of restriction
The first category is the unrestricted general funds.
These are revenues that can be appropriated by the legislature for any purpose and
are typically the focus of most of the budget discussions.
The next category, is designated general fund revenues.
These're revenues, that are technically available for appropriation, but
customarily are used for some specific purpose.
An example here is that the state's vehicle rental tax is deposited into a special account.
to fund tourism development and marketing.
The next category is other restricted funds,
and these are funds that are truly restricted
in some way and how they can be used
and are not truly available for general appropriation.
An example here is that under federal law,
all of the revenue that the state takes in
from the commercial passenger vessel.
tax the head tax on cruise ships that has to be used to support the cruise ship
industry for specific purposes and then finally all federal revenue coming in
to the state has be use for certain specific purpose and we consider that
its own category of of restricted receipts so in total for 2025 total state
revenue from all sources amounted to 19.2 billion
dollars and we're forecasting 17.8 billion dollars for fiscal 26 and 15.3 billion
dollars
for Fiscal 27.
Question? Representative Galvin? Yeah. Thank you. That's through the chair.
Thank You, Mr. Stickle, for being here. And my question is around the federal
revenue. It looks like I'm looking from last year's numbers to this year numbers.
and there is a substantial reduction it looks like and so what I guess I'm trying to understand
where it's coming from. I assume it is healthcare but maybe also DOT and is that going to be later
in this presentation? Sure. Rep Galvin through the chair. So we don't have a lot of detail on
the majority of this presentation is focused
on the unrestricted revenues would defer to OMB
for detailed discussion on federal receipts.
What I can tell you is some of that decline
from fiscal 25 through 26 and 27 has to do
with how multi-year capital projects are appropriated for
and there was some one-time funding
around broadband infrastructure investments.
Thank you very much provide more detail on that representative Hannon. Thank You co-chair Josephson mr.
Stickle under other restricted revenue the investment revenue to my mind
Shows a substantial decline over two fiscal years and I am curious because our other investments are
Expected to grow so what is that restricted?
Investment revenue with a two billion dollar plus decline in two fiscally years
representative Hanan through the chair.
So that difference in the other restricted investment revenue
has to do with permanent fund earnings
and how we reflect that in The Revenue Sources book.
So the 5% of market value draw, we
show that as unrestricted investment
revenue.
And what we do is any earnings of the fund
above and beyond that 5 percent draw
are shown as other restrictive investment
revenue?
So that's basically the additional permanent fund earnings.
And so fiscal year 2025 was a very strong year
for market returns.
Fiscal year 2026 has been very
strong so far a year to date.
And that declined for the rest of 26 and then 27 just
represents a return to what we think
is a more normal rate of returns with the 7.6%.
return for the permanent fund for
the rest of this year and then 7.3% for next year.
Great, not great but thank you.
So Mr. Sticklett, it doesn't necessarily reflect in terms of our budgeting for FY27
cause for immediate panic. It doesn t reflect fewer dollars in the state economy, for example,
or less available to spend since we're not spending more than 5%.
Am I right? Chair Joseph Smith correct. Okay.
Slide 10.
So slide 10, so for the rest of the presentation, I'm going to be focused on the unrestricted
portion of The Revenue Forecast, since that is where there's the greatest flexibility and
So slide 10 summarizes the key changes to the unrestricted forecast from our spring forecast
that was released back in March of 2025 and then the fall forecast that
was release in December. So for oil prices our forecast was decreased by $2.52 per barrel for
fiscal year 2026 and by five dollars per barrels for fiscal years 2027 and that reflects the most
In terms of oil production, as you heard yesterday,
the forecast for fiscal 26 was decreased by 7,000 barrels per day,
but then for Fiscal Year 27 was increased by 28,00 barrels
per days.
In terms of the bottom line unrestricted revenue outlook, the fiscal year 2026 forecast was decreased by
181 million dollars and then the fiscoll year 27 forecast
was decrease by
119 million
dollars, and the lower oil price outlook was the primary reason for both of those decreases, okay?
Slide 11
So slide 11
Just gives a summary of those unrestricted general fund revenues.
Investment revenue is the largest source of unrestricted revenue driven by the percent
of market value transfer from the permanent fund that began in fiscal year 2019.
Investments generated about $3.8 billion of unrestricted revenue in Fiscal 25,
Petroleum revenue generated 1.9 billion dollars of unrestricted revenue in fiscal 25 and forecast at 1 point 4 billion
dollars in each of fiscal 26 and fiscal 27. And then non petroleum revenues generated a little over
600 million dollars, of unrestricted revenue and Fiscal 25, and we're forecasting $624 million in
All in all from a total unrestricted revenue of $6.3 billion in fiscal year 2025, we're expecting
that to decline to $5.9 billion dollars in Fiscal 26 and then recover slightly to
$ 6.2 billion dollar in the Fiscal 27. Okay. And the next few slides will provide a little
more detail on each of those three categories of unrestricted revenues. Starting with the
The permit fund transfer alone is expected to generate about two-thirds of the state's unrestricted revenue in each year over the next ten years.
That transfer contributed $3.7 billion in fiscal 25,
where forecasting $ 3.8 billion and fiscal 26 and $4.0 billion fiscal 27.
unrestricted investment revenue that primarily represents earnings on the balance of the state
general fund on that cash balance that amounted to a hundred and thirty six million dollars in
fiscal 25 and we are forecasting slight reductions to that number in fiscal 26 and 27 based on
the lower prevailing interest rate environment for cash and equivalence.
Slide 13 shows that estimated transfer from the permanent fund to the general
fund for the 10-year forecast. We're looking at over $3.8 billion each year
steadily increasing to $5.3 billion by the end of the ten- year forecast in real
terms inflation adjusted that transfer remains fairly steady at around $ 3. 8
The forecast is based on a 7.3% long-term return assumption for the permanent fund and a 5% of market value calculation.
And given that the 5 percent calculation is base on an average fund value for
the first five of the last six fiscal years, that approach to the calculation makes us a relatively stable.
source of revenue to the state and removes a lot of the year-to-year volatility.
Okay.
Slide 14.
So turning on to unrestricted petroleum revenue on slide 14, so there's four main sources of unrestricted
petroleum revenues.
The oil and gas production tax is the State's severance tax on petroleum.
For the North Slope, that consists of a net profit tax with a gross minimum tax floor.
current prevailing price and cost levels in the industry,
we are expecting that total production tax revenue
will be at or below the minimum tax floor
for every year in a 10 year forecast.
In fiscal 25, the production text brought in $635 million
were forecasting $316 million in fiscal 26
and $286 million on fiscal 27.
Next, the state levies a petroleum corporate income tax on qualifying oil and gas corporations
doing business in the State.
That tax brought in $133 million in fiscal 25, and we're forecasting $140 million
in Fiscal 26 and $175 million dollars in FY27.
property tax on all oil and gas property in the state.
That's a 20 mils or 2% property, tax.
And any municipal taxes are allowed as a credit against that.
So that the total tax property on oil
and Gas property is 20 mills.
The state's share of that tax amounted to $134 million
in fiscal year 2025.
and we're forecasting a little over $140 million per year in fiscal 26 and 27.
Royal teas from oil and gas production are the final category and actually the largest
single source of unrestricted oil-and-gas revenue brought in about $1 billion in
fiscal year 2025 and forecasted over 800 million dollars in
And just to note, the royalties numbers here,
this is just the unrestricted general fund portion.
The permanent fund receives between 25 and 50%
of all royalty revenue, and then the public school trust fund
receives an additional 0.5% of that revenue.
And then again,
the third section of the presentation will dive
into the detailed assumptions that went
into this petroleum revenue forecast.
On the mineral bonuses, rents and interest, that does not include mineral royalties or
taxes.
I mean, typically I see a number closer to 100 million on total take from minerals for
the state.
Sure.
Representative Josephson.
So, this mineral bonus is an interest line.
This is only the bonuses rents, and interests related to oil and gas.
Okay, any mining royalties and probably could probably
could have labeled that line a little more clear.
What of the 600 million that is non petroleum related
is hard rock minerals?
Do you know?
You have a previous slide that shows the six hundred million.
Representative Josephson through the chair.
So it's a significant number, especially forward looking.
I think we are forecasting that that.
that number when you look at total contribution from
mining tax corporate tax and royalties that is expected to be over a hundred million dollars per year in coming years and
that forecast was
Created before we had the record or gold and silver prices. That is absolutely an area for optimism
I'd be happy to revert to the committee with precise numbers if that's helpful
That's okay. It's something north of a 100 million
That's correct.
Okay.
Slide 15.
Sure.
Yeah.
So moving on to slide 15 and this is that unrestricted, the non petroleum revenue here.
So the largest component of non- petroleum revenues is various taxes and within that
corporate income tax is the larger component.
corporate income tax generated $229 million
from non petroleum corporations.
We're forecasting that at $215 million in fiscal 26
and $250 million dollars in Fiscal 27.
Within that corporate-income tax number,
we're actually projecting a bit of a slowdown
for some of the sectors like retail
and wholesale and transportation,
but that's being offset by
increased revenue expectations from other sectors like mining that we discussed in tourism.
Another tax to call out here is that mining license tax, but it brought in $43 million in
fiscal year 2025. We forecast that that will increase to $62 million dollars in fiscal
year 2027. That's the state's severance tax on mining.
In total, taxes generated about $468 million of unrestricted revenue in fiscal year 2025,
and we're expecting that to generate about 511 million dollars of unrestricted revenue
in Fiscal Year 2027.
The remainder of the unrestricted non petroleum revenues are a variety of different revenue
Non-patrolium rents and royalties, miscellaneous revenue like dividends and state owned corporations.
One piece that I did want to call out to the committee was a change that we made for
this particular revenue forecast looking at programmer seats.
So over the interim, we worked with the Office of Management and Budget to dig in on programmer
The amount of any of those program receipts above and beyond what is actually being used
by the agency generating the receipts or being carried forward.
And so beginning with this revenue forecast, any program receipt that are surplus and not
carried-forward, we're showing those as unrestricted general fund revenue, whereas previously some
So in total we're looking at about a little over 60 million dollars of program receipts that fall into this category of
being above and beyond what's being generated and used by the program and so that's now being shown as
unrestricted revenue
Representative Hannon
Thank You co-chair Joseph said mr. Stickle my question is about the large passenger vessel gambling tax. I guess I'm surprised
that it's not growing more because we've seen such a large uptick
and continued expected growth in cruise ship passengers.
I'm not a cruiser but certainly my perception is
they all the large ones have casinos and they're generating.
That to me doesn't look like it is reflecting that half a million more
passengers we had this summer and then it flattens out for two years.
They're not gambling or we just don't know ahead of time how many of them are gambling.
Sure, rep handing through the chair so that revenue source,
the large passenger vessel gambling tax, which is a tax on the income earned by those casinos and gambling operations.
That revenue sources actually been growing quite a bit over recent years.
So in fiscal year 23 generated $18 million.
In fiscal year 24 generated $27 million.
And so this revenue source has consistently kind of exceeded our expectations.
And basically the assumption here is that things will level off and
will get a relatively stable contribution from that revenue
source per passenger.
And my, go ahead.
Perhaps the hand is then stabbed.
As you're describing it in relation to the number of passengers
and where I
Assume its fewer old people are coming and they're doing work
Yeah, so yeah, I'm so representative Hannah through the chair
So this revenue source has grown as gambling has expanded and the numbers of passengers is increased if you look at
I'm looking at Pendix 8.2 of the revenue sources book where, you know, this this
revenue source was generating seven eight ten million dollars per year. And it's
really ever since we've come out of
the the COVID. The revenue from this is really taken off. So instead of looking
at seven, eight, ten, million, dollars, per
year, now we're looking
at thirty million. Dollars per
year and the forecast. It's a naive forecast that basically says the
revenue is going to stay at those
Higher levels, we're not anticipating a further increase.
We're also not
anticipating
a retrenchment back to lower levels.
Okay, thank you.
Represented the staff.
Yeah, think you could just send through the chair
to Mr. Stickle.
Always a pleasure to see you
And I have a question
Actually on the previous slide. I pulled my RSP out to just verify this. We have 9.6 million in in-parry
Roltees as listed as unrestricted revenue
Explain please if you could because that money in my mind is probably restricted, but through the chair
Mr. Stick representative staff to the Chair and thanks for thanks. For bringing that up. So
We did make a change in how National Petroleum Reserve revenues are classified in the fall 2025
forecast. So prior to this forecast, the entire amount of payments from the National
Petroleum reserve, and that represents the federal government shares 50% of bonuses,
Previous to this forecast, the entire amount of those payments were treated effectively
as a pass-through to the communities, and we showed those as restricted revenue.
It was determined that that did not accurately capture federal law or state statute.
And then the passage of the One Big Beautiful Bill Act also brought changes
to how NPRA revenues will be treated in the future.
And so, in recognition of The One big Beautiful bill act,
And the reality that those monies will be used in multiple ways under the statute beginning in fiscal year 2027 we're now showing the NPR revenues as divided between unrestricted revenue with 25% going to the permanent fund and 0.5%
going into the public school trust fund.
Obviously, the federal law, we have a different state statute of how we apportion this money through a water fall.
So, did I hear right saying that you are calculating basically this 9.6 would be utilizing that formula approach in state
statute through the chair?
Mr. Stickel.
that up on the screen. It's on slide 14. So the 9.6 million of NPRA royalties bonuses
and rents in fiscal year 2027, that represents the expected unrestricted share of the NPLA
royalties. That's the 74.5%, which is the anticipated total transfer to the state after
All mister go to follow-up through the chair director's tickle. Okay. Well, I
Mentally I'm having a hard time understanding how we are even arriving at this number because that doesn't those two things don't even go an effect until the
Project's spend is exhausted and isn't that correct through. The chair mr. Stickle
Representative stop through, the Chair
So for in terms of revenue that's being received by the state
so there are ongoing any bonuses from
ongoing lease sales. There is an annual rental payment that's made to the federal government.
The state, the NPRA royalties are being paid for current production at the Musis
tooth unit as well as for a portion of the Colville River unit. So there is a small
stream of revenue to NPGRA currently and that is being shared 50% with the state. I believe you
A very large increase in those revenues that's expected a few years down the road when the willow field comes online
And so yeah, this revenue stream will go from being tens of millions of dollars to being hundreds of million of
Dollars once will comes on line
Fall
Oh, are we taking
money from these communities that would otherwise go to them if we had not used this revenue as
Unrestricted through the chair mr. Stuckel representative step through. The chair
Any further questions I defer those to Department of Law and other doing evaluation on the NPR a revenue is I figured
That'd be a tough one. So thanks mister Stickel consistent with where I think
Represent the staff is going
There are smart people on both sides of this debate
and there will be a litigation on this issue
if it hasn't commenced.
That's what I'm reading in the press at any rate,
that the local governments are not going
to quietly go away on the topic.
In other words, they don't read H.R.1
the way the administration does.
Is that at least true?
Representative Josephine to this chair,
I can speak to the change that we made
in The Revenue Forecast
and what the numbers are behind that.
As far as the potential litigation, I would defer those questions to the Department of Law.
They're evaluating these issues.
Okay.
That's a good answer.
Let's go back to slide 15.
I wanted to ask you about program receipts.
Does that suggest that the state is providing some service for a fee?
Is that why there are receipts?
relating to the topics above passenger vessel fisheries, et cetera.
Sure. Representative Josephson or Chair Josephsen.
So, you know, program receipts is kind of a large category in the state budget.
It's not my particular area of expertise,
although I learned a lot more about it this past summer than I ever thought I would.
Receipts that are returned to a specific program to kind of fund the operation of that program
so an example here is that the division of motor vehicles they collect about 70 million dollars per year of
Motor vehicle registration and licensing fees the cost of operating the motor vehicle division is considered programmer seats
And so those revenues are returned to department of administration to provide that service
but there is a
surplus they actually collect more revenue than that takes to
Operate that division in fiscal year 2025
The amount required was 21 million to operate the division, and then there was 32 million of additional surplus revenue that was returned to the general fund.
That's helpful.
And there's several examples like that, that's one of the more prominent examples.
And just quickly, at a curiosity, mostly, on the large passenger vessel gambling tax, there is someone on
the vessel that is monitoring where in the water the vessels located, is that right?
some mile marker, then the tax is engaged and incurred.
Is that how that works?
Chair Josephson, so the companies do track
the amount of time that they're in state waters
versus non-state waters,
and that does factor into the calculation there.
Okay.
We don't have a...
we don't have a department of revenue official standing on the boat monitoring that actively but
that could be a very relaxing job however but we'll leave that aside sounds like fun to me
let's go to slide 17 sure so then the final portion of the the slide deck looks at some of
the detailed assumptions around the petroleum revenue forecast so slide seventeen starting
oil price forecast for Alaska North Slope crude oil compared to the prior spring revenue forecast.
As I mentioned earlier we use the futures market as the basis for our revenue
forecast so the forecast uses as many years as are available in this case through fiscal year
2023 is based on the features market and then we apply an inflation assumption beyond that.
provides a timely and transparent source of our revenue forecast and so we were able to generate
The price forecast on December 5th using that
Futures prices for that first week in December and then we release the forecast the following week
Again the fiscal year 26 forecast
Was reduced by two dollars and fifty two cents to sixty five dollars forty eight cents
The fiscal year 27 forecast was reduced by $5 per barrel
to $62 per baril.
Once you get out into the longer term,
the forecast is actually similar to the spring forecast.
So the change in the forecasts was really kind
of reflecting an anticipation of a little bit
of an oversupplied situation for the next few years,
but then resolving later in forecast period.
Slide 18, this is a slide that we updated just yesterday.
It shows a comparison of our forecast to a few other sources of oil price forecasts.
So we compare.
Our Alaska North Slope oil price forecast to Brent forecasts from the current futures market,
from an average of oil market analysts and from U.S. energy information agency.
Brent is chosen. It's a benchmark crude that typically prices very close to Alaska
North slope crude. I think currently that differential between Alaska and Brent
is it's hovering right around zero.
The current futures market is almost unchanged from when we prepared our forecast in early
December.
So we are right on track in terms of if we were to update the oil price forecast today.
The short-term energy outlook from the Energy Information Agency is actually suggesting a
quite a bit lower price with prices into the low to mid-50s next year and the year after
forecast price is a little bit higher than what we're saying and what the futures markets
saying. And I know this is the slide that we show every time we do the forecast presentation
and typically the lines are clustered pretty close together. So this a bit of a bigger
What we're thinking is the EIA uses a statistical forecast.
They look at, you know, supply demand and other fundamentals, and they're seeing a potential
for an oversupplied situation in the market based on those fundamental factors that's
going to drive down oil prices.
And so it looks like the futures market is projecting a little bit more of an uncertainty
in risk premium.
That's something that is not explicitly factored into the Energy Information Agency forecast
And so that's likely a significant piece of what's driving the higher outlook in the
features market versus the Energy Information Agency.
And then some of the analysts are actually a little bit more bullish on oil prices in
coming years.
For instance, Goldman Sachs, a widely followed market analyst, they're pointing to the possibility
that the current lower prices will actually lead to an under-supplied situation in 2028
demand growth remains strong. What I would say is historically the futures
market, all oil price forecasts are wrong. Historically the errors from the
futures market have been the lowest so that has been
the most accurate source and so we feel comfortable with a forecast that's
within the range of these other sources. Okay. Let's carry on page 19.
Yeah, so moving on to slide 19 and carrying on my previous thought that
Price forecasts never come in exactly as projected so this shows what what would happen to revenues if if prices were a little different than
Forecast for fiscal year 2027 based on our sixty two dollar per barrel oil price forecast
The total unrestricted revenue not counting the permanent fund is about two point two billion dollars
And near the forecast price, each $1 increase or decrease in Alaska price
leads to about a $30 million change in unrestricted general fund revenue.
Given the progressive nature of the state's oil tax system,
once you get up to higher prices, it's a little bit higher, a dollar per dollar.
But around the forecasts,
it is about $ 30 million per $ 1 of ANS price.
Okay
slide 20
slide twenty shows
Our oil production all 25 forecasts compared to the prior forecasts
This is the the same data that was presented yesterday by Department of Natural Resources
In general, we're showing a fairly stable production forecast
with 457,000 barrels per day in fiscal 2026
and then increasing to 517, 000 barrels
per days in fiscoll 2027.
I should say stable and increasing.
In fiscal 27 is when we really start to see
the production impacts from the startup of PICA
and oil production is expected to increase back
over 500,00 barrels a day for the first time
in several years.
We have a couple years of natural slight declines
in fiscal 28 and 29, but then in Fiscal 30,
we start to see the impacts of the Willow field coming online
as well as Phase 2 of The Pick-A Project in our forecast,
and we are forecasting over 600,000 barrels per day
in Fiskel year 2032, and then over 650,00 barrels
per days in the Fiscal Year 2033.
The changes from the spring forecast were fairly minor.
The biggest change you see is just some moving around
of production in the 27th through 29 window.
And that really just represents kind of firming up
the timelines and expectation around the field startup
for PICCA and Willow.
I think there's a lot more confidence and certainty
of PICA coming on in a very new future.
Okay.
Slide 21 shows our allowable lease expenditures or costs for the North Slope
and how those have changed over the past couple years as well as a 10-year forecast.
So these are the costs of production. They're reported on tax returns and they impact the calculation of our oil and gas production tax.
They are also an important measure of company investment and activity in the state.
In fiscal year 2025, North Slope expenditures totaled $8.7 billion.
That is by far the highest value on record since the state started collecting the data
in fiscal years 2027.
We saw continued ramp up and massive spending at major new developments like PICA and Willow
and a fairly robust exploration activity. So there was just a lot of activity last year,
a lotta money being invested in the oil patch in Alaska. For capital expenditures, those came in
at $5.6 billion in fiscal 25. We are forecasting that that was the high watermark, but continuing to forecast
relatively robust levels of capital expenditures
at over $3 billion per year over the next decade.
Looking at operating expenditures,
those came in at $ 3.1 billion in fiscal year 2025
and were forecasting slow but steady increases there
due to a combination of new developments coming online
as well as general cost inflation in the oil patch
Definitely something that we've seen the last few years and it's been increasing those
operating costs and challenging the economics of some of the fields as well.
So even though we read about cuts in personnel in the industry, decrease in workers, it is
inarguable that the investment is there, that it was as you noted 8.7 billion last year
On record, I guess. Yeah, chair chair joseph's and get the the 8.7 billion. That was real money that was spent last fiscal year
represent Hannon
Thank You co-chair josus and mr. Stickle remind me of
How long the capital expenditure deductions against taxes owed can be paid out on a project so?
Will a week spec to come online first oil by 2030
It's an expensive endeavor, prices have gone up, how long are there limits of how
long they can take those tax, those expenditures against taxes owed?
Representative Hannon, through the chair.
So in terms of, you know, looking at our production tax system, and we do have a.
a whole presentation that gets into all the details we'd be happy to bring before the committee
at your pleasure. For the net profit share of the production tax, we allow an immediate deduction
of capital expenditures. We don't require a depreciation. So to the extent that a company has
income and revenue from projects on the slope, they would be able to use
to reduce the net profits portion of the tax calculation in the year incurred.
Now, if the company is a new entrant or does not have sufficient other revenue,
and they enter into a net operating loss situation, then they would earn a carried forward lease expenditure.
Those carried forwards lease expenditures, there's different provisions around whether or not you're
able to apply them against, you can't use those to, reduce tax against the gross minimum tax floor.
But those carried forward lease expenditures can be carried
forward indefinitely.
However, they decrease in value by one-tenth of the prior year's
ending value after the eighth or 11th year that they were
from when they weren't earned.
So you can carry them forward eventually forever,
but at some point,
they do start declining in-value.
We call that the down lift.
Follow-up.
Wrap in.
A record year of capital expenditure on the North Slope
That's not generating
New oil yet because there's always a delay so that 8.7 8 point 3 or 8,7 billion
That could stretch out for another decade against
taxes owed
Representative hands with the chair a portion of that yes
So we're a very significant portion of that will be applied against the tax calculate or was applied
against a tax calculation in 2025.
We're estimating that about 6.4 billion of the 8.7 billion was
applied in the Tax calculation, in fiscal year 2025, but then that the above and beyond that,
2.3 billion, that becomes carried forward lease expenditures that could potentially be used to impact future tax liabilities.
And they can go beneath the 4% floor of its gross value with GVR new oil. Is that right?
Chair Joseph said so the carried forward lease expenditures cannot be used to reduce tax liability below the floor
Okay, and actually we we see that there's a significant amount of those carried for release expenditures that are not
anticipated to be
Used in the revenue forecast because companies
You know, they'll be subject to that minimum tax floor
the
The minimum-tax floor, which is currently a 4% gross tax
So there are certain
credits that can be used to reduce tax below that 4% minimum tax floor.
That's the per taxable barrel credit for new oil can
be use to reduced taxes below below the floor if a company
does not use other per taxable barrel credits.
Okay.
And we may hear something about this tonight, I'm told, but
We'll see what happens.
All right.
Represent staff.
Thank you, Joseph.
Through the chair, Mr. Sticker,
Mr Stickwell, I got you here.
I've been kind of chopping the bit to get you in front and ask you this.
You have a gross minimum, basically stretching out in per petuity in terms of tax liability.
And I'm looking at this chart and I see blue line go down.
orange line go up slightly and I'm curious of how we are calculating these
expenditures out in so many out years still allowing a gross minimum because
it would seem like to me like obviously it makes sense you have a big capital
injection that that lords down toward right off but then with the capital
investment fall off I don't see how you project companies that the gross
minimum for the next 10 15 years through the chair.
represent a staff through the chair.
So the question is,
can you rephrase the questions?
Yeah, I'll be super simple, thanks.
Ripped in.
Yeah I think Coach, you're just into the chairs.
So how, why are we projecting companies
at the gross minimum for so many out years through
the Chair?
Sure.
I'm just representing staff
through The Chair.
So in the production tax calculation,
there's two calculations that are kind of done side by side.
There's a net profits tax calculation and then there's
a gross minimum tax floor calculation.
So, and the fact of the matter is with relatively low oil prices
and relatively high spending,
now that's the combination of
large investments that are being made as well as
some significant inflation that
has taken place in the industry,
there is a lower amount of production tax value or profit.
And so we are anticipating that the 4% gross tax that most
companies will be paying that that 4%, gross, tax will
be higher than the net profits tax after credits for most
companies on the slope for the foreseeable future.
Follow on this, Coach.
Yes, follow up.
Yeah, thanks.
So just to be specific, how long is the four
Representative stat through the chair, so we are projecting that production tax revenue will be at or below
The minimum tax floor for the entirety of the 10-year revenue forecast
Thanks, I got some others in the whole later. Thanks representative Bynum
Thank you coach your justice and through to the Chair just for clarity you said relatively low oil prices. Could you?
Define what you mean by that.
Are you talking about the current projection for 27
at the 62?
Or are you taking about potentially some other number
as far as when you say relatively low?
I mean, though, it's a very vague term.
Yeah, so represent Biden, I'm through the chairs.
So when I said relatively well,
I was kind of comparing to this era
we had of oil prices closer to $100 per barrel.
And we are, you know, the
Forecast is that prices will remain in this $60 to $70 range over the entirety of the 10 year forecast. Thank you
Yes, representative staff. Yep. Thanks coach. You're just in through the shared mr. Stickle. No, I have my thoughts a little bit more in order
Um, is there any type of delta benchmark you can help give me to kind of understand
The values at which we get there so when we talk about
Cost-increased capital in a case low the oil price relatively with increasing inflationary costs in development
like is there a delta or a benchmark that
You know I can kind of point to we do this for price per production
It's like you say are we at gross minimum at $60 a barrel of not at 65 through the chair?
Mr. Stickle sure representative staff through the chair and that's a good point. So each company has a unique
Portfolio of operations and a kind of economic situation on the slope
in the aggregate
We expect around $64 per barrel for fiscal year 27
is kind of the crossover point
between gross and net tax.
So we're actually very close to that level
where we expect total production tax revenue
to exceed the minimum tax floor.
What I can say is there's a wide range.
So, we have some companies that will pay above
the minimum tax floor at around $60 per barrel, and then we have other companies that wouldn't exceed their
Tax floor until well over a hundred dollars per barrel and it really depends on
You know, how much are those companies investing? What are their producing assets in fault, mr.
Good. Yes, follow up. Okay, so
Here's where I'm having struggling to understand okay if my range is 60 to 100
right? How am I projecting every company basically rather let's not say every
company but the like tangible producers at the gross minimum for 10 plus years
the chair. Mr. Stuckel. Yeah it represents staff through the chairs so in aggregate
in the revenue forecast so what we do is we forecast tax liability for every
field for ever individual company using you know proprietary information that we
published in the revenue sources book is an aggregate calculation.
So in aggregate, we are expecting that production tax revenue will be at
or below the minimum tax floor.
However, that aggregate is made up of companies that are paying above their
minimum-tax floor, at their minimum
tax for, and below their
minimum
tax
for. So we have companies in all three of those situations and every year in
the
revenue forecast.
Yes, representative staff follow-up. Okay, so that kind of begs the last question here through the chair
What give me a an indicator that would basically change that calculus
What would be the most likely in your opinion would it be price prediction would?
Be like less investment than anticipated or would we maybe not as high as rising of operational inflation through this year?
Mr. Stickle sure representative stats for the chairs, I would look at the
Three or four main variables which are the variables that we've presented here
So it's going to be it your oil price. It's your Oil production
It you're spending and then finally it the transportation costs, which is my next slide. Thank you. Look at those four variables
All right, slide 22 transportation cost and the four of variables again are price tariff mr. Chair price production
Lease expenditures and transportation. Cost got it
So, yeah, which is a great segue to transportation costs on slide 22.
So these are the costs, also caught net back costs.
These are costs of moving oil from the North Slope to market on the West Coast.
These were important to look at because they impact the value of every barrel of oil for
both tax and royalty purposes.
So transportation cost, they include all the cost of getting the oil to the market.
largest, the largest pieces here are the marine transportation costs which are
the tanker, tanker charges from getting oil from Valdez to the West Coast
markets and then the Trans-Alaska pipeline tariff for getting
oil, from the North Slope down to Valdiz. There's also a variety of other small
transportation charges including feeder pipeline tariffs, quality bank, things like that.
So, in fiscal 2025, the average transportation cost for Alaska oil was $10.55 per barrel.
And we're actually forecasting that that number will be stable and declining over the 10-year
time horizon of the forecast.
And the reason there is that any higher costs are being offset by increased production into
the pipeline.
For example, you're taking a fixed cost of operating the Transylasca pipeline and you
are dividing that over many, many more barrels with the new production coming in from Willow
and Picpa in particular and that's actually decreasing the cost or transportation for
all the barrels on the slope.
That part seems simple for sure.
All right, and then slide 23, which is my last content slide.
So this shows how state petroleum revenues vary by land type.
The basic concept here is that not all oil is the same.
Historically, most oil production came from state land,
but that it has been changing with some of the new developments.
And this slide also expanded a little bit this forecast
enacted by the One Big Beautiful Bill Act.
So in terms of petroleum revenues, production tax,
corporate tax property tax.
Those are fairly straightforward.
They apply to everything in the state
and within the states three mile limit.
The royalty rates, those vary based on the.
the ownership of the land.
So the state receives all royalty for production on state land,
including state waters up to three miles offshore.
For NPRA, currently 50% is shared with the State.
For certain leases issued after July of 2025,
that share will increase to 70%,
beginning in federal fiscal year 2034
under the OB-3 or the One Big Beautiful Bill Act.
For federal waters, three to six miles offshore, the state receives a 27% share.
For cook inlet leases issued under OB3, that will increase to 70% in fiscal, federal fiscal year 2034.
For Federal waters beyond the six-miles offshore there's currently no direct state revenue share,
beginning in 2034.
For ANMAR production, Arctic National Wildlife Refuge,
the state receives a 50% share and that will increase
to 70% in federal fiscal year 2044 for all leases,
including current leases.
And then finally, for any production from private land.
So for instance, this includes a portion of the production
from the PICA field.
The state levies a tax on the royalty interest, that taxes 5% of the private landowner royalty value for oil and one and two thirds percent for gas.
So the state gets 5 percent royalty on private lands?
Chair Joseph said, so the State, the the Royalty on Private Land goes to the land owner and we levy a
tax of 5%, on that value of that royalty share.
Okay.
And does this 70% figure we see over and over from HR1 is that bringing us to
parity with the Gulf of Mexico? Is that the numbers used in the gulf of
Mexico, Gulf America, I guess, is, that was the goal right to be treated the same way?
Chair, Chair Joseph said that is my understanding that it was intended to
I don't have the exact Gulf of America rates at my fingertips, okay
Okay
Representative Hannon
Thank you chair, Josephson. I think my question is actually not for you as our chief economist, but for the acting commissioner
and I'd like an update on the
audits for oil compliance negotiated settlements
I know that
They may not be completed, but if you could give us a status update of where we are on those miss a rather
Acting Commissioner Earls
Thank you through the chair to representative Hannon. We are
Working with the ledge auditor on the audits, so they are I don't believe that they aren't complete
Follow-up representative hannon follow-and. Thank You chair joseon. Can you remind me will we have?
seven years, potentially, of audit information, or are we only looking at five years of
audit and information on those negotiated settlements?
Through the chair to Representative Hannon, I believe it went back to 2018.
Okay.
One more.
Do you bet?
I'll follow up representing the hand in for the Acting Commissioner.
And I will, just so you know,
I'll ask the auditor the same question, which is do we have an expected timeline of when we'll have that information completed
Representative Hannah through the chair. I don't have
any
Update on that as of right now. Thank you
Okay
Active Commissioner mr. Stickle
You're a fan favorite.I think from this committee you're welcome anytime
Do the presenters have anything else they'd like to add?
Okay.
Joseph Senn, no, thank you for the opportunity to present the forecast.
All right, with no additional questions, I'd
like thank the two of you, for your presentation.
Our next House Finance Committee meeting is scheduled for tomorrow, January 23rd at 1.30.
At that meeting, we'll hear from the Office of Management and Budget, as it presents.
It's overview of the Governor's FY 27 operating budget.
Certainly an important day and so we will adjourn this meeting at 2.38 p.m. Thank you everyone