Good morning everybody, I'd like to go ahead and call the Senate Finance Committee to
order.
It's January 23rd, 2026, times 932, sorry for the delay.
We were having a meeting with dealing with our potential gas line this morning, so we
had to take care of that before we started here.
to silence our cell phones, and we will proceed with me today as Senator Olsen, Senator Keel,
Senator Merrick, senator Koffman, sir, Cronk, sinner, Hoffman.
And we are going to talk about the revenue forecast.
And for the upcoming year, we've invited the department to come.
And then we have the.
We have here we've got a acting revenue commissioner Janelle Earls and we have
familiar face
Mr. Stickle down stickle like to have you both come forward
Jump into hot seats
Maybe the acting Revenue Commissioner could
Introduce yourself to the community committee for a little bit. I'd like to note that Senator Giesell's here on the audience
Give us a bit about your background
And tell us about
How you're gonna make sure that all the compliance measures are in check at the Department of Revenue before we go forward it seems to be a
issue that's
timely
Good morning. Thank you for having us here. My name is Janelle Earls, Acting Commissioner
and Administrative Services Director for the Department of Revenue. I have about 21 years
of experience with the state, mostly working in budget and finance. 13 years were with
the department of health and social services and I've been with The Department
Oh, about a year and a half, almost two years.
And I just like to thank you for having us here today.
And you'll follow all your fiduciary duties?
I will, to the best of my ability.
I'll be good, and we'll talk about that in future meetings,
that subject in probably more detail than some would like.
But it's an issue.
Mr. Stickel are you going to help out your new boss or you're gonna let her hang the poor
Gal out on the table
For the record dance tickle chief economist with the Department of Revenue
Mr.. Chairman, so I think I will give the I'll take the lead on going through the presentation
Active commissioner will be available if there's anything you want a policy type question on
Okay, Ms. Earl, we're not too scary.
We're no, you're new to the job.
So we'll have Mr. Stickelst on this numerous times.
He can do it off the back of the, with no notes.
So will it let you get up to speed
before we have real discussions with the department
with you, how's that?
Thank you.
Yeah.
Okay. Mr Stikkel, go ahead and take us through
the presentation and
We will be concentrating and taking a look at the separation of barrels
GVR barrels both 20 and 30 percent
So kind of keep that in mind as you go through this to try to delineate that and we'll kind
of point that out
And we will have another presentation in the future to the committee on that subject
Yeah, Mr. Chairman, and to point out, related to the GVR versus non-GVR that has to do
with a provision of the production tax code that provides an incentive for the first several
years of production from Newfields, we don't have a detailed breakout of that in the presentation
today.
We do have two tables in The Revenue Sources book.
total production expected from GVR and non-GVR,
and then Appendix D provides an accounting
of lease expenditures from
GVR and Non-JVR fields,
and we'd be happy to work with the committee
on providing any additional detail
that you'd like after this presentation.
Thank you.
So, ready to jump in?
Yep.
All right, so thank you for the opportunity
to come present the fall revenue forecast.
Slide two of the presentation just provides an overview of how we're going
to approach the presentations. So the first section provides some background
about the forecast, walks through our key assumptions. Then I will walk through
the state revenue forecast beginning with total state
revenue and then going into detail on the unrestricted portion of state
revenue. And then the last section of
the presentation will walked through are assumptions around the oil forecast in
So slide four the revenue forecast was the fall revenue
forecast Was released on December 11th, and then we released the full revenue
Sources book a week later on december 18th. The revenue sources book is an annual
publication which over a hundred pages long has detailed information on all of
the state's revenue. Revenue sources we maintain
statistical models for all of the state's revenue sources produce a 10-year revenue forecast and that
document as well as all of our historical revenue forecasts are located on our website tax.alaska.gov.
So this fall forecast formed the basis for the governor's initial budget proposal
that was released in mid-December and then we will be doing an updated revenue forecast
later in the spring that will used to underlie the final budget decisions being made.
Slide 5 walks through our key assumptions for the revenue forecast.
So to reiterate, our forecast represents one scenario within a range of potential outcomes
and there's uncertainty around several of the variables in the forecast, oil price is
A range of uncertainty around the forecast for the investment revenue forecast we incorporated actual
returns through the end of October of 2025 the projected
return for their permanent fund is 7.6 percent annualized for The remainder of
fiscal 26 and then a long-term assumption of 7 point 3 percent annually
For the federal revenue forecast we worked with the Office of Management and Budget to incorporate
known information around federal funding as of early December for a fiscal year is 26 and 27
for fiscal years 28 and beyond we simply assumed an inflation assumption based on the 2027
budget numbers
The petroleum revenue forecast is based on an Alaska nor slope oil price of $65.48 per
barrel for fiscal year 2026 and $62 per barrel fiscal years 2027 that represents the latest
information available in the futures market for expected future oil prices as of early
looking at non petroleum revenues so there's a variety of other revenues that
flow into the into forecast for corporate income tax we assumed a bit of a
slowdown for 25 in beginning of 26 there is no recession built into our
Stable passenger accounts around 1.7 million cruise visitors that assumes that the tourism activity will remain
Fairly constant around the record levels. We've seen in recent years
Looking at fisheries taxes in particular, calendar 23 and 24 were very challenging in
that industry.
Last year we instituted an assumption of a five-year recovery from those 2024 lows.
Based on the preliminary data we're seeing for 2025, it looks like we are on track towards
And then the mining industry is an area of some optimism given the strong metals prices
that we've seen.
We do use the futures market to inform our forecasts there and as we have all seen, some
of those prices for gold and silver in particular have actually continued to increase since
Slide six is a graphical depiction of our total state
revenue that the state brought in in fiscal year 2025.
The Alaska's revenue is basically a three-legged stool,
so the top three sources of revenue to the State,
our investment earnings, federal revenue, and petroleum
revenue.
Collectively, those three source brought
in 93% of total State revenue in Fiscal Year 2025,
and all other sectors and industries while important to the state economy brought in
only about 7% of total state revenue. Alaska currently does not have a broad-based state
sales or income tax, so our reliance on these three sources is somewhat unique for Alaska.
And then slide 7 is a similar graphic just looking at the unrestricted general fund revenues.
available for general appropriation by the legislature and
90% of those revenues are coming from investments primarily the percent of market value draw from the permanent fund and then petroleum revenues
With all other sources contributing about 10%
of unrestricted state revenue in fiscal year 2025
So the next section of the presentation walks through
some of the numbers in that revenue forecast
starting with slide nine that looks at the total state revenue for fiscal year 2025 as well as the forecast for
fiscal 26 and 27
So in our revenue forecasts and in state budget documents
revenues are broken into four categories based on the the level of restriction around those revenues
The first category is the unrestricted general funds.
These are usually the focus of most of the budget discussions.
These revenues that are available for appropriation
by the legislature for any purpose
and have no restrictions around how they can be used.
The next category of revenues are designated general fund revenues.
These technically available
for appropriations but customarily used for some specific purpose.
An example here is that the state's vehicle rental tax is deposited into a special account
within the general fund and customarily appropriated for tourism, marketing, and development activities.
Then we have the other restricted revenues.
These are revenues that are truly restricted and how they can be used in some way.
And an example, here, is the commercial passenger vessel tax restricted by federal law.
revenues generated by that tax must be appropriated for specific uses that directly support the
cruise ship industry and passengers. And then finally all federal revenues are
treated as their own category of restricted as the federal government places certain provisions
around how those funds have to be used. So for fiscal year 2025 total state revenue from all
sources was about 19.2 billion dollars and we are forecasting 17.8 billion for Fiscal Year
And so for the remainder of the presentation, I'll be focused on the unrestricted general funds portion of
the revenue as that's the
The area that has the most discretion in the budget. So slide 10 looks at what we were forecasting in
the spring 2025 forecast that was released in March and how that changed for
the fall 2025 forecasts that were released
in December
So, in terms of Alaska North Slope oil prices, we decreased our forecast by $2.52 per barrel
for fiscal year 2026 and by five dollars per barrel for Fiscal Year 2027.
In terms oil production, as we heard yesterday, the Fiscal year 2020 forecast was reduced
By 2027 forecast was increased by about 28,000 barrels per day and that is primarily based on
increased confidence around the pick a field coming online in the very near future. Our total
unrestricted revenue forecast decreased by $181 million for the current fiscal year and by
and the primary reason for that reduction to the forecast was the lower price outlook.
investment revenue is the largest source of unrestricted revenue, contributed about $3.8 billion in fiscal year 25, we're expecting that to increase to $4.1 billion by fiscal
year 2027, followed by petroleum revenues, which generated $1.9 billion of
unrestricted revenues in Fiscal 25 and we are forecasting $ 1.4 billion
and then non petroleum revenues which generated 639 million dollars in
fiscal 25 and we're expecting a little over 600 million in fiscal 26 and 694
million and fiscal 2027. So those are the unrestricted revenue components and
then the next set of slides will walk through the detailed breakout of each of
these three categories of unrestricted revenues.
starting with the investment revenue on slide 12.
So the permanent fund transfer is the largest portion here.
That's the percent of market value transfer
from the fund each year.
That generated $3.7 billion in fiscal year 2025
for forecasting $ 3.8 billion
in Fiscal 26 and $4 billion on Fiscal 27.
This is
Very important to the state accounts for about two-thirds of our unrestricted general fund revenue just from that permanent fund transfer
For each year in the ten-year forecast going forwards
In addition to that Permanent Fund transfer there's a small a modest amount of other investment revenue
136 million in fiscal 25
And we're expecting that to decline to about $81 million by fiscal 2027.
This represents earning, primarily earnings on the general fund balance, cash balance.
And the reason we are expecting a decline in that particular line item is just the lower prevailing interest rate for cash and equivalence.
Slide 13 provides a little bit more detail and a 10-year outlook for the percent of market value transfer from the permanent fund that
Transfer is expected to
Remain fairly stable in real inflation adjusted terms at around three point eight billion dollars per year
In nominal dollars of the day terms that will increase to five point three billion
Dollars by fiscal year 2036
Our assumption is based on a
5% market value calculation, so it's based
on 5 percent of the ending value of
the fund for the the first five of
the last six fiscal years that makes it
a fairly stable revenue source to the state.
We assume a 7.3 percent long-term annual return
on the Fund to generate this revenue forecast.
Mr. Chairman, our inflation assumption is two and a half percent annually.
So that we're going to go backwards then?
Mr Chairman the forecast here is a 7.3 percent long-term return assumption, two
and half-percent inflation when you balance that against additional additions to the fund
based on the permanent funds share of royalty deposits,
we expect that the transfer will be relatively stable
in real terms.
So let me rephrase that.
Holding the purchasing power constant,
not accounting for future contributions.
Could you add that up for me?
Mr. Chairman, we'd be happy to run some numbers on that?
I can tell you that five plus two and a half of seven and half and you're going to make
seven point three going backwards, 200 basis points.
So the point being to the committee members, the five percent payout is on the high end.
That's the more important to me.
If the goal is to continually grow the permanent fund over time.
Go ahead, next slide.
All right, moving on to slide 14,
detailed breakdown of petroleum revenues,
unrestricted petroleum revenue.
So there's four main sources here.
The first is the oil and gas production tax.
This is The State's severance tax on petroleum resources.
For North Slope Oil, it consists of a net profits tax
At current oil prices, and company spending levels,
we are expecting that total production tax revenue
will be at or below the floor
for each of the next 10 years in the forecast.
For fiscal year 25, there was about $635 million
of production-tax revenue,
we're forecasting $316 million for fiscal years 26
and $286 million dollars for Fiscal Year 2027.
Next is the petroleum corporate income tax.
This is levied by the state on qualifying oil
and gas corporations doing business in the State.
Generated $133 million in fiscal 25
we're forecasting $140 million
in Fiscal 26 and $175 million
in Physical 27.
This State has a property tax on all oil
and Gas property in The State,
this is a 20 mils tax
against which any municipal taxes on oil and gas property are allowed as a credit.
So the amount shown here is just the remaining state portion of the property tax revenue.
But that generated $134 million to the state and fiscal 25 and a little over $140 million
per year forecast for fiscal 26 and 27.
And then finally, the largest source of unrestricted petroleum revenue in dollars terms is state
royalties brought in about a billion dollars in fiscal year 2025 and forecast at a little
Worth noting on the royalties number is this represents just the unrestricted general fund portion of the Royalties
The permanent fund does receive between 25 and 50 percent of state royalties
As well as the public school trust fund receives
0.5 percent
Mr. Stickle when we have you back
breaking down the barrel increases into three categories legacy then 20 percent
GVR and 30% GBR, I think we'll ask you to put the numbers together in the aggregate for
that presentation and also royalties. The concern there is production is going to increase,
royalties are going increase and our severance tax is gonna be at the floor or near the
And I think there's some interest to look at the mechanics of that as the order of operations.
When we do that, and have you walk through this GVR and the gross value point of production
percentage against the, are the net production tax, or net protection tax value?
value of the 20% or 30% against the net and the impact of piercing the floor and
the growth in the barrels over time and you could we can go out 10 years because
you've mentioned that but we want to concentrate probably on the next five
zeroed in so we don't get too fixated a decade out we've got to not go
before we get there, year 10.
So we're gonna look at year three,
year five, and we'll work with you on that.
But that's gonna be the focus
and I've also asked DNR, Department of Natural Resources,
whose area of governance is the royalties
to start breaking out the barrel projections
to those three categories.
So we can keep track of those three categories, sum up the barrels, and we have our total barrels.
But all barrels are not equal to the treasury.
So that's kind of the flavor of what's coming.
I just thought I'd let the public know and yourself.
And Mr. Chairman, we're happy to work with the committee on however you'd like to see the data broken out.
So and then later in the presentation we'll have a detail. We have the question on the slide. Yes
Thank you, mr. Chairman
Mr. Stickler, are you planning to talk about the NPRA line?
Senator keel through the chair, I'd be happy to
So senator kel through chair as you noted
We have a line in here for NPRA royalties and related revenue.
So this represents the 50% share of revenue
from the National Petroleum Reserve for any bonuses, rents,
and royalties received by the federal government.
Those are shared with the state of Alaska.
Historically, the entire amount of those payments was treated
as a pass-through to communities in the North Slope.
borough via NPRA impact grants and so up through fiscal year 2026 we actually reflected that
as restricted revenue in the forecast. It was determined that that treatment did not accurately
capture federal law or state statute. In addition there was passage of the one big beautiful bill
treated in the future and the combination of those two things led to a kind of revisit of how
those revenues are being reflected in their revenue forecast and so beginning in fiscal year
2027 we are showing those as unrestricted revenues the 74.5 percent and this the permanent fund is
receiving a 25% revenue share in the public school trust fund is receiving
a 0.5% revenues share. So what you see here in fiscal year 2027 under the
unrestricted NPRA revenues represents the 74. 5% expected unrestricted share of
those revenues. Thank you Mr. Chairman.
triple B act. And that didn't change where the money goes. It only changed the split
of the Money. The subsection on how the
money is to be used didnít change a comma. What change in the federal law led the department
to decide this was now unrestricted revenue?
There was, you know, as I mentioned, there was a determination that the prior treatment of
considering that as restricted revenue did not accurately capture the federal law in the state
statute. And beyond that, I would defer any questions to Department of Law who is evaluating
these issues. I think there's been a request by one of the members that we actually take a look
at this issue in more detail, kind of, the history of it,
our state statutes, the new interpretation,
or the updated interpretation for the committee.
So we'll have that in the future,
and that's been requested by one of the members.
And we will get with the department on
and how we're gonna get it on the calendar and win,
and when things get, you know,
give them time to prepare and all that,
but we'l do that.
Next slide, please. All right moving on to slide 15 which shows some additional detail around the
unrestricted non petroleum revenues
So the largest portion here is taxes and the large portion of that is the
Corporate income tax for non- petroleum corporations
Generated about two hundred and twenty nine million dollars in fiscal year 2025 or forecasting
two-hundred and fifteen million for the current fiscal Year
and $250 million for fiscal year 2027.
Adding in other taxes, we are estimating $456 million
of total non-petrolium tax revenue in fiscal 26
and 511 million dollars in Fiscal Year 20 27.
In addition to the taxes, other non petroleum revenues include things like royalties on mining resources,
various charges for services, licenses and permits, and some miscellaneous revenues like dividends from state corporations.
We did add a line here for unrestricted program receipts.
For this forecast, that was a change that we made over the summer in consultation with Office of Management and Budget.
And what we did here is we worked through all of the program receipts authority in the state and looked at how much of
the programmer seats being collected are actually being used by the programs generating the receipts.
And based on that evaluation, there is a portion of program receipt revenue that
surplus revenue above and beyond what is being used by the generating program or
being carried forward and we are showing that surplus
revenue as unrestricted general fund revenue whereas prior to this project we
worked on over the summer there was kind of a mix of ways that we were
reflecting that some of it was still being shown as restricted revenue some
was being showed as unrestricted.
But in total, a little over $60 million of those surplus programmer seats are now being shown as unrestricted revenue.
And so the final section of the presentation will walk through some of our detailed assumptions around the petroleum revenue forecast.
Starting with our oil price forecast on slide 17, this chart shows our fall.
forecast for oil, Alaska North Slope oil prices compared to the prior spring revenue forecast.
We do use the futures market as the basis for our revenue forecasts that provides a timely
and transparent methodology for producing the oil forecast, we generated our forecast
Compared to the spring forecast there was a a modest reduction to
the forecast for the current fiscal year and the next couple of fiscal years
with the five dollar reduction. To the fiscal
year 27 forecast being the the most significant reduction once we get into
the later years towards the end of the revenue forecast the
forecast was actually very similar to what we had in the
spring forecasts.
So the market is really looking at the potential for an over-supplied situation kind of presently and for the next couple of years
But then that that will hopefully resolve later in the revenue forecast
Slide 18 looks at our forecast compared to a couple other sources we compare our
Alaska oil price forecast to bring forecasts from a cup of different
sources, we use Brent because it's a benchmark crude that price is very similar to Alaska
crude.
I think the difference between Alaska and Brent crude yesterday was like one cent.
So we're trading very, very close, gives us a good comparison.
Usually when I show this chart, the lines are stacked pretty close together and you know
Right in the range and everyone's forecasting about the same thing
Looks a little different this year. So in terms of the futures market that outlook hasn't changed much since we produce the revenue forecast
We're right on right-on track with the current futures Market
The short-term energy look from the energy information agency is actually
Looking at quite a bit lower prices into the low to mid 50s for the next year or two
But analysts on the other hand, on average,
are forecasting prices a little bit higher than we are
and what the futures market's saying.
And so we've looked into that and the Energy Information
Agency, they have a statistical model
that uses fundamental factors based on supply and demand.
They are seeing a oversupplied situation in the market
and they're expecting that that will lead to lower prices
to balance the markets.
I incorporate more risk premiums and then the EIA doesn't incorporate that directly.
So our best guess there is that the futures market is incorporating more premiums around
potential for geopolitical issues and uncertainty than what's being incorporated by the
price difference there.
And then finally, some of the analysts are actually a little bit more bullish in future
years.
One example is Goldman Sachs is actually pointing to the possibility of an undersupplied situation
come 2028 as the lower prices that we see currently combined with strong global economic
growth lead to demand outpacing supply.
we, our forecast falls in the middle of that range, but just points to, again, the possibility
for some uncertainty around what future prices will bring.
And slide 19 then takes that concept around price uncertainty and puts it into dollar
terms.
for fiscal year 2027, we're forecasting $2.2 billion
of unrestricted general fund revenue,
if you don't count the permanent fund transfer.
And around that forecast price, each change,
each $1 change in the oil price
equates to about $30 million of unrestricted state revenue.
So we used to be at 45 million into 40 and a 35 and we were at 30.
do you see a basement there, Mr. Stickle?
Sure, Mister Chairman, so this is based on,
we are forecasting for production tax in particular
that most companies will be paying at or below
the minimum tax floor for the foreseeable future.
And so I think this $30 heuristic
is kind of around the floor.
Further to the left on this chart, if you had a situation where once you get to higher
prices or lower spending levels if get a
situation, where more companies are paying above the minimum tax floor, then that dollar
per dollar amount does change.
So it's 30 millions back of the envelope, numeric, the members in the legislature should
Okay, that's correct sir. Okay. Thank you
Slide 20 looks at oil production this is kind of a summary of some of the information we saw from Department of Natural
Resources we show our
fall 2025 forecast compared to the prior spring 2025
forecast, we are seeing a trend of increasing production for
fiscal year 27. We're expecting that production will once
again exceed 500,000 barrels per day on average as the pick
comes online. And then we have a couple years of kind of stable
just the continued decline of existing fields
before we have even more new fields come online,
but then later in the forecast,
Willow coming online and the phase two of the pickup project.
And so by 2032 we
have production peaking over 600,000 barrels per day
and then over 650,00 barrels
per days in fiscal year 2033.
production is, it's optimistic.
We have new oil coming soon.
So this is the money table.
So we're going to convert those barrels to dollars.
And if, I know we have this commingled data that we
have to use in the revenue source book,
is it possible when you come back with the GVR breakouts
that you can allocate expenditures to those categories
so we can see how those category perform.
And then we sum them up when we get our total revenue
and our totals barrels, is that a possibility or?
Mr. Chairman, yes, I think we could do that.
And again, happy to work with you and the committee
on exactly how to present that?
Yes, that would be good.
Senator Gill.
Well, thank you, Mr Chairman.
I just, you know, the disconnect.
You talked about the money table between the production forecast and the revenue forecast
is awfully stark.
I just thought I'd know, right?
This looks pretty good.
You'd think we'd be looking at revenues, but when I looked earlier in the forecast, the
revenue production kind of looked like a dog's breakfast, so we may want to dig in just a
little bit to how we've set the split.
I think the split is set for us with the age of the development
But we could also ask the department to give us a
Forecast of those three component parts into developments
What developments are coming in the future the next several years because that makes a big
Impact also on dealing with a production tax
So, we'll work with you, Mr. Stickle, on how to try to put that data, I guess, the data
request.
You've got to build it and put it together, and we can roll that in.
We can do a summary of the order of operations, but then just drill into that component that
Let's let you just less familiar with the splitting of the barrels.
All right, so the next slide, slide 21 looks at another piece of this revenue puzzle, which is allowable lease expenditures.
These are the costs and investments made by the industry into the state.
an important metric on industry investment taking place.
They are also part of the production tax calculation
for the net profits portion of that calculation
in that these costs are allowed as a deduction.
In fiscal year 2025, we saw Alaska North Slope expenditures total
That is, by far, the highest amount that we have on record
since we started tracking this data in the mid-2000s.
So lots of money being spent on the slope,
lots activity taking place.
with the new fields, Pika and Willow kind of headlining
that activity, but there was also lots of development work
taking place at some other new developments
of robust exploration season and robust work taking
place, at existing legacy fields.
For capital expenditures, the capital expenditure's portion
of that was $5.6 billion in fiscal 25.
We are forecasting that that was kind of the high watermark for the foreseeable future
but forecasting over three billion dollars a year of North Slope capital spending going forward.
That's still a very robust level of company spending on a historical basis.
And then for operating expenditures, those came in at $3.1 billion in fiscal year 2025.
We are forecasting continued increases in operating expenditure.
There's been some cost inflation on the slope that is driving the higher operating costs.
We also have the cost of operating new units that are coming online, baking into that number.
Can you talk a little bit about how you risk adjust the capital expenditures?
I was expecting larger numbers out in front of us because of the forecast of development.
The next several fields that the industry is looking at and then there's also an interest
in some new operators coming in.
So how do you adjust that or do your risk adjust it, how you come up with that forward
number?
For our forward projections, we develop a baseline projection for spending at each field.
We do get information from field operators about their plans for at least the next five
years.
Sometimes longer,
we also look at recently reported...
information, both publicly and confidentially, and so we have a kind of an assumption around
spending for each of the fields in the forecast.
In terms of risking, we do try to tie that to the production forecast, at this point,
the first phase of PICA is essentially a certainty there's no risking there for some of
Willow in the second phase of PICCA any risk adjustments are fairly minor
but for a new field that is
Less certain and further out we do try to align the
the the cost forecast to the production forecast and so if we're you know if
We have a 50% risk factor on the Production forecast we would attempt to Align the
the lease expenditure forecast with that as well.
So to the extent that production were to be coming in higher
than what we forecast,
we would also have a corresponding increase
to expected spending.
And then just remind us on the carry forward expenditures
when they time out and get,
are getting really time-out,
but they get a little inflation adjusted
time value of money adjustment.
Can you remind this of that?
Sure for the so for The lease expenditures to the extent that a company has
revenue
Coming in they are able to use
Lease expenditures a hundred percent in the year incurred to offset the net profits portion of their tax calculation
We don't have any depreciation schedule required
And so for an existing producer making an investment that's typically going to be the case.
If you do have a new entrant or a company that is spending so much on their new developments
that their spending exceeds the revenue that they're taking in from other operations, then
they would enter into a net operating loss situation.
And those excess lease expenditures above and beyond what's deductible in the tax calculation
annual loss. That carried forward annual
loss can be used in the production tax
calculation to potentially offset future
tax revenues limited by the minimum
tax floor. And that carried
forward
annual
loss is available indefinitely.
there is a what we call a down lift provision where after the 8th or 11th
year that the carried forward annual losses incurred that it decreases by 10
percent of the prior year ending value in each year. So companies do earn a
potential benefit for spending even if they don't have enough current tax
There's a potential feature offset.
We're actually forecasting that given current oil prices
and spending levels, that most of the,
that a portion of those carried forward losses
that are incurred will never actually be applied.
Okay, and there's the bills,
but you have two more slides so you can't run away yet.
All right, Mr. Chairman. So the next slide slide 22 looks at transportation costs, similar history and forecast.
These transportation cost are the cost of getting oil from Alaska to market and they apply to both the production tax or the tax calculations as well as the royalty calculations.
Trans-Alaska pipeline or TAPS tariff, which is the tariff for getting oil from the North
Slope down to Valdez.
We're actually forecasting that the TAPS tariff will decrease over the time horizon
of the forecast, and that's because you're taking a fixed cost of operating the pipeline
and dividing that over many more barrels as Pica and Willow come online,
which reduces the cost or transportation for all barrels going down the pipe line.
The other major transportation cost is the marine transportation costs, which is
the cost of getting the oil from Valdez to the West Coast market and
collectively total transportation
costs average ten dollars and fifty five cents per barrel in fiscal year
2025 and we are forecasting that those will remain the total
Transportation cost will remains steady and even decrease a little bit remaining around that ten dollar per burial range
over the next decade and the last slide of content is slide 23 shows how state petroleum
revenues vary by land type. I'd be happy to walk through each of these in detail or leave
this with the committee in the spirit of time at your discretion.
I think you could leave it with a committee. We're pretty familiar with it. It's nice to
All oil is not equal, now all barrels are not
equal.
Sure.
Adding some complexity.
Yeah.
Mr. Chairman, one important change to this slide from prior years is that the One Big
Beautiful Bill Act did make some changes to how federal revenues, revenue sharing is done
with the state.
Land beginning with federal fiscal year 2034 the state will receive a 70% share of revenues
And that's a change from prior years. Okay, and we'll go into that more detail with senator Cronk and then senator Kauffman
Thank you, mister. I just have a question
Um, you know obviously we're talking about revenues. Um I'd like to have better sense of the cost environment for development in Alaska
I'm in the role of inflation has played so
Is there a way we could get the department to provide like a five-year look back on how inflationary pressures have impacted the cost of oil development in Alaska and it may be even nationally?
Because, you know, we're a lot of people that want to, hey, well, let's get more money out of this, but the costs of development has increased also.
Sure. Senator Conk to the chair so I can point you to Appendix D of the revenue sources book, which has a history of total costs.
In terms of the Alaska-specific operating environment,
that's absolutely something we've heard from operators.
In term of more broadly looking at global and national trends.
cost inflation in the oil industry is absolutely been an issue for we had two
years of double-digit cost-inflation in calendar 21 and 22 and then you know
three straight years amid single-digit cost inflation so across the Oil Patch
costs are higher and combined with the moderate oil price that makes a
challenging environment. We could, Senator Cronk, we've had in
the cost environment. We can look at maybe doing that in the future, having them come in and
talk about an aggregate because they all got their secret information from each other, but
what the industry is facing, what they have faced, and how they see it going forward.
at this table, I asked about the peace risk effect
on revenues lowering the price of oil.
But recently, in recent days,
the refining risk on the West Coast has come up
as West coast politics are becoming antagonistic
to refining and the idea that refining may be moving
out of the west coast market to some extent.
I'm just wondering, does any work get done
Risk modeling of what that might look like just a as an outlier should should something some major move in the availability
Of we talk about the west coast market, but what happens if that becomes attenuated because of
The refiners no longer feeling they can do business there
Senator Kaufman to the chair that's not something that we've looked at in in a lot of detail
Be happy to give that some thought
We have any other questions for that?
I'd like to thank Stickle for coming forward today and thank the Acting Commissioner
Revenue, Janelle Earls.
We're not such a scary lot, you know, and we've got a good employee there that can
walk through this detailed stuff from memory, so I just rely on your experienced crew and
And remember your fiduciary duties and the keel won't be on top.
The boat will actually be floating right side up, which is good.
With that, we are going to conclude today.
We are gonna reconvene Monday morning, 9 AM.
We're gonna put on the table the governor's FY 27 budget request.
We gonna have the office and management of budget, come to the committee and
Later in the week as we follow up, we'll have legislative finance walk through the budget with some
recommended adjustments, and we will start piecing the the Budget together and pick up some of these
presentations we talked about in next several weeks. We are adjourned at 10.25.