(SitNews) Ketchikan, Alaska - The Alaska Senate today approved a program to resolve nearly $1 billion owed to small oil and gas companies and reinvigorate work in the state’s oil patch.

Governor Walker requested the bill as part of his Alaska Economic Recovery Plan. It allows Alaska to issue bonds to pay the final debts carried over from the outdated oil tax credit system. Last year, state legislators voted to end the program that offered tax credits to small companies exploring and producing from new oil fields. HB 331 will clear Alaska’s balance sheet by bonding to make the remaining payments at no additional cost to the state. 

Rather than waiting years for their payments, small oil and gas companies will be paid their credits now at a discounted rate. Alaska will use the savings to pay the interest on the bonds that will be used to close the debts immediately. HB 331 means promises made under the old oil tax credit system will be fulfilled fairly, efficiently, and at no extra cost to Alaskans. Alaska’s three largest oil and gas companies were not eligible to receive the credits.

“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. This will close out old debts to oil and gas entities, help companies invest in their operations, and put Alaskans to work,” said Governor Walker.

“Refinancing the debt we owe in tax credits will un-freeze global capital for Alaska projects across economic sectors,” said Sen. Cathy Giessel (R-Anchorage). “We look forward to these companies resuming exploration and development that puts Alaskans to work and supports Alaska’s revenue stream.”

Alaska offered the incentives to attract small, new companies to the state’s oil and gas fields. For nearly a decade, the Legislature paid the tax credit incentives as they came due. An oil price collapse and ensuing state deficits reduced payments to the required minimum, which were further reduced by veto. Companies were unable to meet financial obligations to lenders. Capital markets froze for smaller oil and gas businesses, stalling important work in Cook Inlet and the North Slope that delivers energy to Alaskans, state revenue, and good-paying jobs.

“This legislation will help the state satisfy a significant debt we owe the small, new companies who answered our call to do business in Alaska’s oil fields,” said Sen. Peter Micciche (R-Soldotna). “They came, they did their part. Today the Senate has ensured the state will follow through on its commitment at a discounted cost to the state.”

The Legislature closed out the tax credit incentive program in 2017, ending cash payments for oil and gas tax credits beginning July 1, 2017, a move that was expected to save the state $200 million through the end of 2017 and up to $200 million each year in the future. This year, the Walker administration proposed issuing bonds to generate funds to pay off credits earned to date, allowing the state to pay the debt up-front instead of over time. Participating companies would receive a slight value reduction, which would cover the state’s borrowing costs. 

“Somehow it became OK for Alaska to not pay its bills a few years ago,” said Senate President Pete Kelly (R-Fairbanks). “Even though I am not thrilled with this mechanism, it allows us to get back to work, stop some of the layoffs and pay what we owe.” 

HB 331 passed the Senate by a vote of 14 to 5 and the House 23 to 15, for a combined vote of 37 to 20. The bill now goes to the governor’s desk to be signed into law.

Reporting and Editing by Mary Kauffman, SitNews

Source of News:

Office of the Governor
www.gov.alaska.gov

Alaska Senate Majority
www.akleg.gov

 

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