The Senate on Friday overwhelmingly backed Gov. Bill Walker’s plan to pay off nearly $1 billion of credits to the oil industry.

It’s another significant piece of legislation that brings lawmakers closer to adjournment with five days remaining in this session.

“I’m pleased the Legislature is fulfilling Alaska’s past promises to pay tax credits to small independent explorers in exchange for investing in our state,” Walker said in a prepared statement. “This will close out old debts to oil and gas entities, help companies invest in their operations, and put Alaskans to work.”

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

The tax division says there are slightly more than $800 million in outstanding credit certificates, but it’s expecting upwards of another $200 million.

Of that, $100 million is expected to be sold to the major North Slope lease holders, who will, in turn, use those credits against their taxes.

Rather than re-pay the minimum under state law over several years, the state will buy back the credits in full, but at a discounted rate.

The bill represents another step toward restructuring a part of the state’s tax regime, but doing so without creating investment angst through the oil and gas industry.

Bill supporters say paying off the credits will enable these smaller companies to return to their fields by reinvesting into work that has been scaled back until the credits could be paid.

“We are highly prospective,” said Senate Majority Leader Peter Micciche (R-Soldotna). "We are (hearing) nothing but incredible news from the North Slope, some of it in Cook Inlet. We need a stable environment with long-term projects to be mutually successful.”

Critics, however, say the priority is misplaced.

“How can we possibly go back to our constituents and say, 'Sorry, we have to bail out several billionaire bankers, but we can’t pay our PFD debts to the tens of thousands of single mothers, kids, seniors?'” said Sen. Bill Wielechowski (D-Anchorage). "Let’s just call this bill what it is – a bailout for billionaires.”

Last year under HB 111, the Legislature revamped the credits program designed to attract investment from smaller oil companies.
Oil companies can now earn credits once they start producing oil rather than during the exploratory phase.

But the Legislature and the administration still wanted to clear the books of remaining credits owed to oil companies.

This credit program originally was designed to attract smaller companies to explore for oil and gas throughout the state.

But recent chronically low oil prices made it difficult to purchase these credits at the pace they once could, and the state was running up a sizable tab.

This has forced Walker to pay the minimum under state law, but not nearly as much as the Legislature and industry sought.

With Friday's passage, the bill heads to Walker's desk for his signature.

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