Gov. Bill Walker wants to settle a debt with the oil industry -- about $800 million worth.  

Walker wants to sell up to $1 billion in bonds so the state can buy back the outstanding oil and gas exploration credits.

Rather than repay the minimum under state law over several years, the state will buy back the credits in full, but it would come at a discounted rate to the companies who hold these credits.

The state designed the credit program several years ago to attract smaller companies to explore for oil and gas. It worked, but low oil prices made it difficult to pay off these credits as quickly as the state hoped.

The proposal is part of a bigger fiscal plan Walker put forth in December when he introduced his budget.

On Wednesday, Revenue Commissioner Sheldon Fisher explained the plan to the House Resources committee.

“What this allows is that these companies can clean up their balance sheet,” Fisher said. “They can get a clean audit because they don’t have outstanding debt at that point, and then they can access other sources of capital that they will reinvest. So it won’t necessarily be the exact same money that will come back into the Alaskan economy but it will allow these companies to attract money.”

House Rep. Chris Birch (R-Anchorage), who serves on the House Resources Committee, said he was initially skeptical but believes this is the right way to proceed.

“I’m one for settling our debts,” he told committee members. “I think the Legislature has a duty and responsibility to do that, and to me, this is a reasonable solution. It provides predictability and closure.”

So far, the budget, which was recently passed by the House and sent to the Senate, has the state paying down $49 million based on a statutory formula.

Should HB331 pass, it would be reduced to $27 million.

“It wasn’t the intention that this be a big gain for the state,” he said. “Our goal was to balance a number of competing interests and be fair to everyone. We wanted to assure the Legislature as well Alaskans as a whole that the discount that the credit holders were accepting would compensate the state and Alaskans for this structure.”

House Resources expects to hear the bill again Friday and will consider amendments by committee members.

The Senate Resources Committee has already passed its version and sent it to the Senate Finance Committee.

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