Gov. Bill Walker’s plan to pay off nearly $1 billion in oil and gas tax credits has cleared the first major hurdle.

The House passed his proposal to sell up to $1 billion in bonds so the state can buy back the outstanding exploration credits. Rather than stagger minimum payments over several years, the state would buy back the credits in full but at a discounted rate.

The credit program was originally designed to attract companies to Alaska to explore for oil and gas deposits. It worked both for the Cook Inlet and North Slope basins, but when oil prices dropped, the state slowed down repayments running up a sizable tab.

The state could no longer afford the program and shut it down last year, but credits remained on the books. The legislature and the administration want to clear the books of the remaining credits.

Bill supporters say it will help enhance the state’s investment climate with some of the repurchased credits being reinvested into current projects.

Others, however, say the state needs a more comprehensive plan before embarking on debt they fear may affect the state’s credit rating.

 Anchorage Independent Jason Grenn carried the bill on the House floor for the administration.

“No matter how you feel about the cashable credit program, how it started, or what it’s accomplished, the fact remains, while the program has ended, we still have an outstanding obligation that needs to be addressed,” Grenn said. “And that is the goal of House Bill 331.”

Juneau Democrat Sam Kito, however, said the bill puts more pressure on a state already strapped for cash.

“This really goes in the wrong direction, in my opinion,” Kito said. “What this does, rather than try to live within our means and come up with a fiscal plan, that we will instead take out a loan. We will instead take out a credit card.”

The bill passed by a vote of 23-15. The bill still needs the Senate’s approval.

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