Walker’s oil tax credit bond plan gets industry backing
Gov. Bill Walker’s plan to pay off nearly $1 billion in owed oil and gas tax credits received broad industry support on Monday.
Walker wants to sell up to $1 billion in bonds, so the state can buy back the exploration credits which lured smaller companies to Alaska.
Rather than repay the minimum under state law over several years, the state to the House Finance Committee to support Walker’s plan. None appeared in person.
“The industry would prefer that these credits would be paid in full,” said Kara Moriarty, executive director for the Alaska Oil and Gas Association. “And we would prefer there is not a discount rate. But, we also understand the balance of having certainty, even at a reduced rate, getting paid sooner rather than later are very important to our member companies.”
Two years ago, Rep. Lance Pruitt (R-Anchorage) floated the idea of a bond package but says he couldn’t fully develop a plan the way Walker could by tapping into resources throughout his administration. Pruitt says it’s essential for the state’s economic future.
“We need to pay these credits because it will reestablish the trust and faith not just in terms of the oil and gas investment,” he said, “but in terms of anyone who might want to do business with the state of Alaska or do business in Alaska.”
The bill cleared the House Resources Committee two weeks ago, and the Finance Committee first heard the bill for the first time on Saturday afternoon during a four-hour hearing.
Deputy Revenue Commissioner Mike Barnhill told the committee paying off all the credits can help rejuvenate work already started by cash-strapped smaller oil companies looking to advance their projects and discoveries.
He also noted that scaling back payments in recent years has created an uncertain investment climate.
“The uncertainty regarding the tax credits, which this committee is very aware of, has led to projects being stalled, it’s led to credit being frozen,” he said. “While there are a variety of ways to addressing the tax credits and how to pay them off, our perspective is let’s do it in a way that directly addresses the uncertainty in the oil and gas sector, particularly that sector that is populated by small oil and gas exploration companies.”
Committee Vice Chair Les Gara (D-Anchorage) eventually fired back at that assessment, saying the state has always met its statutory obligation with payments to companies holding credits.
”I can’t tell you how angry that makes me,” Gara said. “From 2008 to 2015, we paid way more in tax credits than what were (sic) required to by the statute. Way more. Any bank, any oil company that decided to participate in the tax credit program had to have read the statute as to what we were obligated to pay.”
The House Finance Committee will continue with hearings on Walker’s bill Tuesday with public testimony.
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