Currently, Alaska owes nearly $900 million to companies in the form of oil tax credits. A bill that would have the state issue bonds to pay those companies is on the move in the legislature.
Gov. Bill Walker introduced companion bills in the House and Senate this session. Each lays out of a plan for the state to issue bonds to quickly pay down the debt it owes to oil and gas companies.
The House Resources committee voted Tuesday morning to pass its version of the bill along to the next committee. But, the committee’s co-chair Rep. Geran Tarr, D-Anchorage, said she doesn’t support it.
She said the state would be swapping one type of interest-free debt for another that could have less favorable repayment terms. If the state issues bonds and then fails to make payments, that could affect its credit rating.
“It means that we would have to prioritize it over other important state needs like public safety, if there were such a time as everything falls out from under us. So that’s difficult for me,” Tarr said.
The state’s tax credit bill stems from a program that was designed to encourage companies to explore and develop new oil fields in the state. The state used to pay off the balance of the credits each year, but as oil prices sank the Walker administration pulled back and made minimum payments on what the state owes.
For three years, oil and gas companies — and some banks — have repeatedly told lawmakers that the unpaid credits are hurting development in Alaska.
Pat Galvin, Chief Commercial Officer of Great Bear Petroleum, said the unpaid credits harmed companies’ ability to get financing for exploration and development.
Great Bear has exploration wells on the North Slope that are on hold.
“The funding is held up because of the uncertainty over these tax credit payments,” Galvin said.
A companion Senate bill has moved into the Senate Finance committee as well. From there, the bills must move to the House and Senate floors to be voted on.