Should Alaska impose higher taxes on its oil and gas industry? For several candidates in the crowded race for governor, the answer is a resounding yes.

Alaska's oil revenue has made up the backbone of the state budget since oil was found on the North Slope 50 years ago, but after more than a decade of budget woes, the question of whether the state is getting an adequate share of its resource is at the heart of a gubernatorial race that could shape the state's future.

It's been 13 years since the Alaska Legislature passed Senate Bill 21, overhauling the state's oil taxes. At the time, the oil industry promised that the new tax regime, while lowering state revenue in the near term, would eventually lead to greater oil production and more oil jobs. Since then, the number of oil jobs has decreased and the state's oil income has gone from making up a majority of annual revenue to an ever-smaller share, now eclipsed by earnings from the Permanent Fund.

Former Gov. Bill Walker, who was at the state's helm for the first four years of the new SB21 tax regime, said this week that he was skeptical of it from the start, but wanted to give it a chance after it withstood a 2014 ballot initiative that sought to repeal it.

"We looked at it and said, 'This could be a colossal disaster for the state,' and it turns out that it has not been good," said Walker's running mate, former Revenue Commissioner Randy Hoffbeck, in an interview this week. "The amount of revenue that's been generated isn't what was promised, the amount of oil in the pipeline isn't what was promised, and frankly, it's become a very difficult tax system to administer, because essentially, the industry controls all the data."

Now running for governor for the fifth time, Walker says he plans to propose what would be a drastic change: transitioning to a gross value structure that could bring in $1 billion in new annual revenue from oil companies to the state.

That would be a departure from the current net profits tax, which has been criticized as opaque and ripe for abuse from the oil industry.

That new revenue, if it materializes, could be transformative for the state budget. Gov. Mike Dunleavy — who is termed out from seeking reelection — has regularly proposed deficit budgets during his tenure, with calls to draw $1 billion or more from savings each year.

"When oil prices went down, (oil companies) could lay down drill rigs. I couldn't lay down education," said Walker, an independent who launched his gubernatorial run earlier this month with a promise to focus on the state's fiscal crisis.

Walker and Hoffbeck say that by applying a 13% tax on the gross value of Alaska's oil production, the state can raise $1 billion annually in additional revenue if the price of oil averages $70 per barrel or less. That revenue can then be used to bolster the state's education system and other critical services that have seen declining investment as oil revenue has dwindled, Walker said.

"There's a lot of positive talk about the things that we can do — build, baby, build — and we're trying to say how we're going to pay, baby, pay," said Walker, echoing former Alaska Gov. Sarah Palin's famous "drill, baby, drill" mantra.

"We know that's not necessarily a winning message, but it's a message that we think is necessary at this time in this campaign, for people to recognize where we are," said Walker.

Proposals to alter Alaska's oil taxes — which have regularly come up during recent legislative sessions — have reliably been met with outcry from industry leaders and some Republican lawmakers, who claim that any change to the tax system would hamper investments in the state. That industry opposition has been effective in deterring tax overhauls in recent years.

Among the 18 candidates running to be Alaska's next governor, specific fiscal policy proposals are hard to come by, particularly when in the realm of oil and gas. Putting forward such a proposal is inviting scrutiny from an industry with a proven track record of spending massive sums to defeat politicians and political causes.

Candidates in the governor's race have so far preferred to speak in broad terms about the need to "cut red tape," ensure the state receive a "fair share" and "hear directly from Alaskans" — rather than speak about particular tax policies.

Walker is attempting to counter the platitudes with specific plans, starting earlier this month with a controversial proposal to eliminate the Permanent Fund dividend after a one-time payout of $10,000 per eligible Alaskan. His latest ideas include both the gross value tax on Alaska's oil, and a plan for the state to take on a permitting process for new oil projects on federal land, potentially allowing smaller oil companies to enter what are traditionally considered to be expensive and difficult-to-access areas.

"It's kind of like moving into an apartment you can't live in until it's furnished, but it takes 10 years to furnish it, and you got to pay rent while you're trying to get the furnishings," said Walker. "So we're saying, 'Let's do the permitting process ourselves as an owner-state.'"

'A fair share'

Despite a lack of specifics, Walker is not the only one among the slate of gubernatorial candidates to favor an overhaul of Alaska's oil tax structure.

Two Democrats in the race — former lawmakers Tom Begich of Anchorage and Jonathan Kreiss-Tomkins of Sitka — said this week that they would be open to considering a gross value tax for Alaska's oil as part of an effort to increase the state's revenue, though they both said they were open to other ideas as well, like eliminating per-barrel tax credits.

"Regardless of what we finally end up with as a broader structure of revenue for the state, the first move has to be the oil and gas tax issue, and working to ensure that we have a fair share of our resources," said Begich.

Begich said that he is hearing increasing calls on the campaign trail to reconsider the state's taxes on Outside oil companies after a decade of faltering revenue that has forced cuts to spending on schools and other state services.

"Across the state, people resent the way the industry has driven us to this question, where we're not even sure we can fund our education system," said Begich. "Going to community meeting after community meeting, people are ready to get their fair share from an industry that they believe changed the rules back when SB21 passed."

Already, some members of the Legislature have indicated they are looking to launch a conversation on the state's oil tax structure. The Senate Resources Committee put together a legislative package earlier this year that included a gross value tax on oil produced in Alaska.

Among lawmakers' other ideas were eliminating per-barrel tax credits, which was estimated earlier this year to potentially bring in hundreds of millions of dollars in new annual revenue, and applying the state's corporate income tax to privately held oil and gas companies, known as S corporations. That includes Hilcorp, which is among the state's biggest oil and gas producers, and Glenfarne, the developer seeking to build a new natural gas pipeline in Alaska.

Such a change, which has been estimated to be worth more than $100 million in new annual revenue to the state, is supported by Begich and Kreiss-Tomkins.

"Closing that loophole is consistent with a broader compact between the oil industry and the state of Alaska," said Kreiss-Tomkins, the only candidate in the race who voted against SB21 when it was before the Legislature in 2013.

"I felt like the state was giving up too much upside on our oil resource," he said this week.

He said any ultimate change to Alaska's tax structure will be the result of work with the Legislature, so as a candidate for governor, he is "not hard over on any one thing."

The third Democrat in the race, Anchorage Sen. Matt Claman, said he's not advocating for any specific change to Alaska's oil tax structure, though he does think it's "appropriate" to review the tax system implemented in 2013.

'Some archaic system'

Among the candidates who are more skeptical about possible changes to Alaska's oil taxes are most of the 12 Republicans in the race.

Former Labor Commissioner and state Sen. Click Bishop said in a statement this week that Alaska "should always be open to reviewing its oil and gas tax structure, but any changes need to be approached carefully."

Bishop said he does not have "a predetermined proposal" to address Alaska's taxes. Instead, he said he favors convening a review of the current system to determine whether changes are needed.

Republican Matt Heilala, a podiatrist and businessman running for office for the first time, said there may be room for some changes to Alaska's revenue system, but the prospect of raising taxes "really does put a pall on the enthusiasm of industry coming to Alaska."

"I think that tax structure needs to be adjusted or at least reassessed once per decade," Heilala said. "You don't want to be in some archaic system that is not benefiting your partner in industry." When asked if he would support any specific changes to the current oil tax structure, Heilala did not name any.

Republican former Revenue Commissioner Adam Crum, running for office after serving in Dunleavy's administration, said that the longstanding tax structure implemented in Senate Bill 21 should be kept in place.

"I think we have to keep our oil taxes stable," said Crum, reasoning that though it has not translated to significant new state revenue, the tax structure has led to more investment in oil exploration on Alaska's North Slope.

"What we're seeing now is Alaska is an incredibly difficult place to invest, and get a substantial return, so it takes a lot of time," said Crum.

Republican former state Sen. Shelley Hughes said Alaska is already at the "top edge" of oil taxation, and "if you nudge up more, you will have a problem, where they're going to go somewhere else in their portfolio."

"We have had companies pick up and pull up stakes and leave, so that's not unheard of, so we have to be very cautious of that," said Hughes.

Numerous prominent Republicans in the race, including former Anchorage Mayor Dave Bronson, former state Attorney General Treg Taylor and businesswoman Bernadette Wilson, either did not respond to an interview request or declined to be interviewed on the topic of oil and gas taxes.

Hughes and Heilala said that rather than focusing on increasing state revenue, they want to see more cuts to state spending, in part by relying on artificial intelligence to find inefficiencies in the annual budget.

"I respect the opinion that they've already tried to look at it, but you know what, they've not used modern technology, and that's what's actually making it all possible now," Heilala said.

Walker and Hoffbeck said that Alaska has already made massive cuts to its spending — many of which they oversaw when they were in office between 2014 and 2018. Now, they say they want to consider where more investments are needed, and how to pay for those investments.

"Specifics are dangerous in a campaign because they can become a target," Walker said. "We have made ourselves a target because we refuse to allow this election to go by without some specifics out there."

©2026 Anchorage Daily News. Visit at adn.com. Distributed by Tribune Content Agency, LLC.