Alaska pauses plan to borrow $1 billion for oil-company payouts

Eric Forrer, left, and Joe Geldhof, right, have sued the state of Alaska in an attempt to stop a plan that calls for borrowing up to $1 billion from global bond markets to pay oil and gas tax credits owed by the state. They are pictured May 22, 2018 in an interview at the Juneau Empire. (James Brooks | Juneau Empire File)

Eric Forrer, left, and Joe Geldhof, right, have sued the state of Alaska in an attempt to stop a plan that calls for borrowing up to $1 billion from global bond markets to pay oil and gas tax credits owed by the state. They are pictured May 22, 2018 in an interview at the Juneau Empire. (James Brooks | Juneau Empire File)

State officials confirmed Tuesday that a billion-dollar bond issue is on hold amid a pending lawsuit by two Juneau men.

The bonds, authorized by the Legislature and Gov. Bill Walker under House Bill 331, are intended to pay oil and gas companies for work performed under a now-defunct rebate program intended to encourage oil drilling.

That program pledged tax credits to companies, but the state has declined (through budgetary vetoes by Walker) to pay more than minimum payments on that debt. Now, HB 331 plans to borrow money from global markets to pay the debt. Companies will be encouraged to take a haircut on the amount the state owes them. If they do so, they will get their money faster. That haircut will compensate for the cost of borrowing the money, the state expects.

Before Walker signed the bill into law, Eric Forrer launched a lawsuit to stop it. That case, Forrer v. Alaska, has been referred to Superior Court Judge Jude Pate. Joe Geldhof is representing Forrer; Assistant Attorney General Bill Milks has filed motions on behalf of the state.

The state is seeking the lawsuit’s dismissal, and oral arguments have not yet been scheduled.

In a Tuesday afternoon presentation to the Legislative Working Group on Oil and Gas, state tax division director Ken Alper told legislators that the bond issue envisioned by HB 331 is on hold and unlikely to go forward until the lawsuit is settled.

Deven Mitchell, the state’s debt manager and the person who would issue the bonds, confirmed that there are no plans to issue them until the superior court decides the case. (The case is likely to be appealed regardless of result.)

While nothing prevents the state from borrowing $1 billion and proceeding with the HB 331 plan before a verdict, there is a risk associated with that, Mitchell said.

“The risk is that if the state doesn’t prevail in the lawsuit, then the bonds would be declared null and void, and they’d need to be paid off,” he said.

The state would have to repay the money, plus interest, and it would end up in a worse financial position than it was beforehand.

Mitchell and Mike Barnhill, deputy commissioner for the Alaska Department of Revenue, said that if the state gets a positive verdict from the superior court on the legality of HB 331, it may proceed with the sale even if the case is appealed to the supreme court.

“That would be the first waystation, if you will,” Barnhill said of a superior court ruling’s influence on the go/no-go decision.

If bonds can’t be issued before the end of the fiscal year (June 30, 2019), the state operating budget approved by the Alaska Legislature allows the Department of Revenue to spend up to $100 million from the state general fund on a payment toward that $1 billion oil and gas credit debt.

Barnhill said the department will be following the legal process and will update the public in the fall about whether or not it is likely that bonds will be issued this fiscal year.


• Contact reporter James Brooks at jbrooks@juneauempire.com or 523-2258.


More in News

The Norwegian Bliss arrives in Juneau on Monday, April 14, 2025. (Jasz Garrett / Juneau Empire file photo)
Ships in port for the week of May 11

This information comes from the Cruise Line Agencies of Alaska’s 2024 schedule.… Continue reading

Rep. Jeremy Bynum, R-Ketchikan, speaks to Rep. Calvin Schrage, I-Anchorage, during a vote on amendments to the state’s capital budget on Monday, May 12, 2025. (James Brooks/Alaska Beacon)
Amid budget struggle, Alaska has little money for new construction or renovation

State’s capital budget about to pass Legislature with no projects for individual legislators’ districts.

Sen. Bert Stedman, R-Sitka, at center, sits among senators during a joint session of the Alaska Legislature on Wednesday, May 14, 2025. (James Brooks/Alaska Beacon)
Most Alaskans nominated for state boards and commissions get Legislature’s approval this year

One nominee was rejected on a 0-60 vote, which may be a first for the Alaska Legislature.

A person uses a garden hose in an effort to save a neighboring home from catching fire during the Eaton Fire on Jan. 8, 2025 in Altadena, California. (Mario Tama/Getty Images)
Dozens of members of Congress from both parties plead with Trump to unfreeze FEMA grants

Sen. Murkowski part of group drafting letter urging FEMA to begin spending already OK’d by Congress.

The six members of a joint House-Senate conference committee appointed to resolve differences in their versions of next year’s proposed state budget sign documents at their initial meeting Tuesday, May 13, 2025, at the Alaska State Capitol. (Mark Sabbatini / Juneau Empire)
PFD of $1,000 or $1,400? Ban on abortion funds or not? Fate of state’s budget now in hands of six legislators

Conference committee seeks to resolve 400 differences in House, Senate budgets as session nears end.

Boxes of sugary cereal, including those from General Mills, fill a store’s shelves on April 16, 2025, in Miami, Florida. (Joe Raedle/Getty Images)
US House Republican plan would force states to pay for a portion of SNAP benefits

State costs would increase with higher error rates — Alaska currently has the highest.

Juneau Board of Education members including Will Muldoon (foreground), whose seat is currently open after he resigned April 21, meet at Thunder Mountain Middle School on Sept. 10, 2024. Five candidates for the open seat are scheduled to be interviewed on Saturday at TMMS. (Mark Sabbatini / Juneau Empire file photo)
Five people seeking open seat on Juneau school board set for public interviews on Saturday at TMMS

Former board member Steve Whitney, recent runner-up candidate Jenny Thomas among applicants.

Jörg Knorr, a solo travel journalist from Flensburg, Germany, smiles after taking a photo on Sunday, May 11, 2025. (Jasz Garrett / Juneau Empire)
German kayaker sets off to circumnavigate Admiralty Island

He made friends along the way in his mission to see Alaska.

A cruise ship docks in downtown Juneau on April 30, 2025. (Mark Sabbatini / Juneau Empire file photo)
As foreign tourists stay away, US could lose $12.5 billion this year, tourism group says

Border detentions, confusion over visas deterring visitors, according to World Travel & Tourism Council.

Most Read