The Alaska House passed a bill today that would allow the state government to issue bonds to pay off tax credits owed to oil and gas companies.
The state owes the companies more than $800 million in credits.
The measure, House Bill 331, would allow the state to pay the credits off quickly. Anchorage independent Rep. Jason Grenn said this will allow more investment for oil development and exploration.
“Let’s do it in a way that directly addresses the uncertainty, particularly for small oil and gas exploration companies,” Grenn said. “Getting these tax credits off our books in a shorter timeline frees up those frozen credit markets. It allows new development to continue and it provides certainty in a time when our economy needs it most.”
State payments for the credits slowed as oil prices fell. But companies have said the delayed payments have hurt development. Both industry and labor unions support the bill.
Juneau Democratic Rep. Sam Kito III opposed the bill. He said the state shouldn’t commit to paying the tax credits early when state spending exceeds state revenue.
“I can’t say that we have our fiscal house in order,” Kito said.
The state would receive a discount of roughly 5 to 10 cents on the dollar, to cover the cost of issuing the bonds.
The bill would lower this year’s budget, since the initial cost of the bonds will be lower than the amount the state would have to pay in credits if the Legislature doesn’t pass the bill.
The vote on the bill was 23 to 15. Thirteen of the 22 members of the mostly Democratic majority voted against the measure. But all but two of the 16 voting members of the Republican minority – Reps. David Eastman of Wasilla and Mark Neuman of Big Lake — voted for it. Reps. Mike Chenault of Nikiski and Steve Thompson of Fairbanks were absent.
The bill now heads to the Senate.