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

Jasmine Chavez, a crew member aboard the Quantum of the Seas cruise ship, waves to her family during a cell phone conversation after disembarking from the ship at Marine Park on May 10. (Mark Sabbatini / Juneau Empire file photo)
Ships in port for the week of July 20

Here’s what to expect this week.

Bartlett Regional Hospital’s crisis stabilization center during its unveiling on June 14, 2023. (Clarise Larson / Juneau Empire file photo)
Bartlett Regional Hospital shuts down programs at recently opened Aurora Behavioral Health Center

Crisis stabalization program halted at center due to lack of funds and staff, officials say.

A car on Gastineau Avenue is partially buried by a mudslide that occurred during record rainfall on Sunday, July 14, 2024. (Photo by Simba Blackman)
New July rainfall record set for Juneau with a week to go; Suicide Basin nears 2023 fill level

No more heavy storms expected this month, according to forecaster.

The Alaska Permanent Fund Corp. Board of Trustees votes for a new chair and vice chair during a meeting in Fairbanks on Wednesday. (Screenshot from APFC livestream)
Ellie Rubenstein resigns from Permanent Fund board, Ethan Schutt displaced as chair in wake of email allegations

Trustees elect new chair, vice chair Wednesday morning; Rubenstein announces resignation hours later

Police and other emergency officials treat Steven Kissack after he was shot on Front Street on Monday, July 15, 2024. (Mark Sabbatini / Juneau Empire file photo)
Names of officers involved in death of Steven Kissack released, along with more details of standoff

JPD states Kissack threatened to kill officers; one officer who fired gun cleared in 2016 shooting.

U.S. Rep. Mary Peltola, D-Alaska, speaks on Jan. 4, 2024, at a town hall meeting on the possible Albertsons-Kroger grocery merger. The meeting was held at the Teamsters Local 959 headquarters in Anchorage. Peltola said on Tuesday she has not decided whether to support her party’s likely candidate, Vice President Kamala Harris. (Yereth Rosen/Alaska Beacon)
Rep. Mary Peltola withholds support for Kamala Harris, is ‘keeping an open mind’

Congresswoman says she’s considering Harris presidency’s affect on Alaska as an oil-dependent state.

People arrive for a service at Resurrection Lutheran Church on Sunday. (Mark Sabbatini / Juneau Empire)
Lawsuit: Resurrection Lutheran Church leaders have been ousted, clarity in ‘ministerial work’ needed

Pastor Karen Perkins, two others targeted in long-brewing feud at church known for helping homeless.

(Michael Penn / Juneau Empire file photo)
Police calls for Sunday, July 21, 2024

This report contains public information from law enforcement and public safety agencies.

(Michael Penn / Juneau Empire file photo)
Police calls for Saturday, July 20, 2024

This report contains public information from law enforcement and public safety agencies.

Most Read