Debunking the Myth: 45Q Tax Credits Aren’t Hurting Alaskans

Unpacking the Fear: Why 45Q and HB50 Are No Tax Trap

I’m skeptical that human CO2 emissions drive climate change as much as Al Gore and others claim. I have been since his “Inconvenient Truth” video came out. Drawing from books like Fossil Future and The Quest, I see natural forces and past shifts like the Little Ice Age, ocean cycles like El Niño, and CO2’s fading impact outweighing the human role. I don’t deny the climate changes, (it always has) but I think urban heat and shaky science exaggerate the human link. Spending trillions on mitigation, like 45Q credits, for a measly 0.17°C drop by 2100 is a bad deal. I backed HB50 for Alaska’s economy, not some “climate-cultist” push; adaptation beats costly emission cuts any day.

However, there’s a lot of chatter out there lately, on the radio, and especially on social media, claiming that the 45Q tax credits are somehow draining Alaskans' wallets. Some feel the need to spread the disingenuous narrative that this federal “perk” for industrial carbon capture is an unfair burden for Alaskans. They say it's coming straight from our federal tax dollars and HB50, Alaska's carbon storage law, could pave the way for a carbon tax for Alaskans or even a corporate sellout. Some even advocate for getting rid of HB50, or the 45Q program entirely, to lower their tax burden.

That whole argument is built on shaky ground and the simple math, as well as the facts, just don’t support it. So, let’s break it down, not that I think any of the vocal anti-carbon-tax group will read past this point.… BUT, if you want the real information; if you have an open mind, please read this.

First off, the critics claim that 45Q is a drain on Alaskan taxpayers, but let’s look at the numbers. Yes, 45Q is funded by federal tax revenue, and we Alaskans do pay our share of federal income taxes. However, out of the roughly $3.5 trillion the federal government takes in each year, the 45Q program costs about $1.5 billion annually. Alaska’s 733,000 residents contribute around $7.7 billion to the federal coffers. So, when you do the math, Alaska’s share of 45Q’s cost is just $3.3 million, that’s about $4.50 per Alaskan every year. To put that in perspective, that’s less than the price of a gallon of diesel in rural Alaska ($6) or a sliver of our 2023 Permanent Fund Dividend ($1,312). It’s a drop in the bucket compared to the $23 billion Alaska receives back in federal spending each year. Calling 45Q “harm” to Alaskans is a stretch, it's like blaming a single snowflake for the avalanche.

Even if we repealed HB50, or Congress ditched 45Q, the kicker is it wouldn’t change our federal income tax rates one bit. The amount we’re talking about, $3.3 million, or 0.043% of our federal tax contributions, is such a small fraction of the overall budget that cutting it wouldn’t lower your tax rate. What would happen? The money would just get shifted elsewhere, maybe to defense or Medicare. We’d still pay the same amount in federal taxes because our taxes are not levied by program. They are levied by the percentage of your income. Even if HB50 went away at this point it wouldn’t stop the Alaska LNG project. That pipeline is already well on its way, with Glenfarne Group locking in 75% ownership. But HB50 helped grease the wheels, providing a state framework for companies like Glenfarne to tap into 45Q and pitch carbon capture to investors. Keep in mind that no one wants to ship CO2 in a pipeline that is supposed to carry Natural Gas. And, while many of us (including me), think that we should just bleed the CO2 off into the atmosphere like we have done in the past, the reality in the world today is that it needs to be captured and controlled.

Here’s where it gets interesting, the 45Q tax credits could actually benefit Alaskans. For example, our North Slope oil producers could possibly tap into these credits for enhanced oil recovery and carbon storage. That means more money flowing into Alaska, not out. If Alaska’s oil industry captured a million tons of CO2 a year, it could generate up to $60 million in credits, boosting jobs and royalties in an industry that still makes up 81% of our state revenue. So for Alaskan’s $4.50 investment, which they are going to pay anyways, we get more jobs, more oil company investment, and more churn in our economy. Is this a bad thing? And AKLNG, the $44 billion pipeline project, depends on this too. Their carbon capture plant plans to store 7 million tons of CO2 annually, and the 45Q credits could help secure funding. Even Japan, a key LNG buyer, is now looking to buy Alaska’s gas because of the state’s carbon capture capabilities; and that’s something Governor Dunleavy is actively working on.

What about the claim that HB50 is a steppingstone to a carbon tax? Unfortunately, that’s a stretch too. HB50 is not a tax, it’s a revenue tool that leases land for CO2 injection in wells 2800 feet below the surface. And CO2 has not been stored in Alaska yet that I know of. Frankly, there’s not a single Alaskan politician out there pushing for a carbon tax, not in a state where we have no income or sales tax, and oil is our lifeblood. There is no looming attempt to tax Alaskans for CO2 emissions from their home heating or from a car’s tailpipe. And let’s be clear, there’s no federal carbon tax in the works either. I believe that the small nod, in HB50, to 45Q credits, are a carrot, not a stick. Could HB50’s framework one day pave the way for a carbon tax? Maybe - but that’s wild speculation at this point. Alaska’s tax-averse nature make that scenario look unlikely.

As for the logistics of 45Q, the idea that it’s causing harm just doesn’t hold water. Alaska’s vast and sparse terrain makes large-scale carbon capture difficult. We don’t have the same infrastructure as Texas, and direct air capture is too expensive to scale here. No Alaskan is losing land and sequestration, should we ever use it, is not dangerous as some have claimed. In fact, these credits and the AKLNG project could actually help stabilize our oil industry, keeping the state’s economy from further decline. They could also help energy developers like Flatlands Energy find the venture capitalists who will fund a coal-fired power plant in the Mat-Su. For $4.50/year per Alaskan, would you want the electric companies to be able to purchase power at $.10/kWh? Does the savings in your energy bill offset the cost to you in taxes? I guess we all have to answer that question.

So why are there so many questions and accusations around this? I believe it’s a mix of distrust toward Washington, Big Oil, and the green agenda. Social media amplifies these fears, blending real concerns - like the decline of oil production, with exaggerated threats of looming carbon taxes. But the truth is simple, there’s no burden on Alaskan wallets here. No environmental damage. No tax traps. HB50 didn’t just unlock 45Q, it helped attract Taiwan and Japan’s interest in our LNG, which is a win for Alaska. Repealing 45Q or HB50 won’t reduce your federal tax bill, it’s a mosquito on a moose’s back in the grand scheme of things. My opinion is that Alaskans have huge financial issues to tackle, but this is not one of them.