Walker hopeful plan to pay off oil tax credit debt with bonds will pass this session

Independent Gov. Bill Walker addresses the Alaska Legislature on Jan. 18 for his fourth state of the state address. Walker has until Wednesday at midnight to fill the vacant District 40 House seat. House Democrats must approve the pick. (Photo by Skip Gray/360 North)

A proposal to issue bonds to pay off about $900 million in tax credit debt to oil and gas companies hasn’t gained much traction in the Legislature.

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Gov. Bill Walker included it in his budget in December.

Since then, the bill has had no hearings in the House and just one in mid-February in the Senate. Walker said Tuesday that he’s still hopeful that it will make it through this session.

“Well, I actually have heard some fairly positive things about that from various legislators, once they understand it,” Walker said. “I think there was some confusion initially and so we spent some time with them and so I think there’s some interest in that.”

Most of the credits are owed under a now-defunct cashable credit program that was designed to entice new companies to explore and produce oil and gas in the state.

The bill would allow companies to opt into a program that would pay credits now, but at a discount. The cost of borrowing the bonds would be built in to the discounted rate, so the state won’t lose money.

Sen. Natasha Von Imhof, R-Anchorage, said there are some things that make the bill attractive.

Right now, the state makes a minimum payment on the balance it owes. Last year it was about $73 million, this year it jumped to over $200 million.

“That wildly variable payment, it’s hard to predict and hard to budget for. A bond will create, theoretically a locked in payment,” Von Imhof said.

Pat Galvin is the chief operating officer at Great Bear Petroleum, a private oil exploration company.

“The worst thing for the state is if the companies that did this work basically fall apart and go bankrupt and disappear, then you won’t get other companies willing to come up because they’ll just see a bunch of dead companies lying around,” Galvin said.

Galvin said the outstanding credit debt has already done a lot of damage to the state’s reputation. But, he sees this proposal as one that could help fix that problem.

Rashah McChesney is a photojournalist turned radio journalist who has been telling stories in Alaska since 2012. Before joining Alaska's Energy Desk , she worked at Kenai's Peninsula Clarion and the Juneau bureau of the Associated Press. She is a graduate of Iowa State University's Greenlee Journalism School and has worked in public television, newspapers and now radio, all in the quest to become the Swiss Army knife of storytellers.

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