Last summer, Gov. Bill Walker postponed hundreds of millions of dollars in oil tax credit payments for the second year in a row.
“We just didn’t have the cash flow to fund those at this point,” Walker explained after announcing the budget veto in July.
Now, companies that were counting on those credits say they’re feeling the ripple effect — companies like BlueCrest Energy. It planned to use the tax credit money to pay off a loan it received from the state’s public financing corporation, Alaska Industrial Development and Export Authority (AIDEA).
BlueCrest now estimates a $60 million setback in its finances because of Walker’s cut, and is asking to delay repayment on its $30 million AIDEA loan.
“What we’ve asked for is a little bit of reprieve,” said John Martineck, chief operating officer of BlueCrest Energy. “It’s just like your balancing your household finances, if somebody took $60 million out of your household finances, you’d have to change the way you do your business.”
BlueCrest isn’t the only one renegotiating. The Alaska Oil and Gas Association (AOGA) says several of its smaller members have had to do something similar.
But while BlueCrest may be borrowing from a public corporation, delaying the loan repayment won’t come out of the state budget.
“We are entirely self sustaining, that is the key point to understand,” explained Karsten Rodvik, external affairs officer for AIDEA. “We’re making this investment because it’s a good business decision, we expect to make a return on it.”
When there is a return on the loan, some of that money will help pay for troopers, schools and other public services. Oil tax credits, public financing and the state budget are all intertwined, much like a series of dominos carefully placed to keep the ripple effect from causing a crash.
In a statement Thursday, Walker said:
“Although the State has fully met its credit reimbursement obligations under the law, we understand the difficult financial position many companies are currently facing and have encouraged state agencies to be flexible whenever possible in working with companies to get through these trying times.”
Ken Alper, director of the state’s tax division, estimates the state will owe around $650 million in tax credits to oil companies by June 2017.
AIDEA board members voted unanimously to approve BlueCrest’s request. The company will make interest-only payments on the loan for the next year.
Several Alaskans spoke against the resolution at AIDEA’s board meeting Thursday, citing concerns about the company’s plans to use fracking techniques to extract oil from the Kenai Peninsula.
“At this point, we’re grasping at straws to try and prevent this frack,” said Homer resident Amy Christiansen. “I’m not going to quit. I’m going to go after them as long as I can because I don’t want to see the Kenai Peninsula become oil, and industry and trucks on the road all the time.”
But AOGA says fracking in Cook Inlet isn’t new.
“It’s the same fracturing process, it’s not a new process, it’s been happening in Alaska. It’s not new,” said AOGA CEO Kara Moriarty. “It’s been happening in Cook Inlet and on the North Slope. In fact, you would not have the production you have today if you were not able to use hydraulic fracturing.”
Cook InletKeeper, a nonprofit organization, has requested change in state fracking regulations. The Alaska Oil and Gas Conservation Commission will take public comment on the topic at a meeting on Dec. 15.
Correction: An earlier version of this story misspelled Karsten Rodvik and Amy Christiansen’s names. This has been amended.