House votes to borrow $1 billion for oil and gas deal

In a 23-15 vote Thursday afternoon, the Alaska House of Representatives approved a plan to borrow a billion dollars from global bond markets and send the money to small oil and gas companies.

House Bill 331, drafted by Gov. Bill Walker and modified slightly in the House, will advance to the Senate, where rapid approval is expected despite constitutional concerns raised by the Legislature’s own legal department.

The vote was along neither party nor caucus lines. Rep. Sam Kito III, D-Juneau, and Rep. Justin Parish, D-Juneau, voted against the idea. Two members of the House Republican Minority were excused absent.

Alaska faces a multibillion-dollar annual deficit, but it also owes some $800 million in tax credits promised to oil and gas drillers for work done in Alaska. Another $200 million in claims is expected under a program the Legislature ended last year.

“We can fulfill our side of this bargain,” said Rep. Jason Grenn, I-Anchorage and the lawmaker carrying the bill in the House for Walker.

Rather than stick to a schedule of payments that could require spending hundreds of millions of dollars in the next few years, HB 331 restructures the debt.

“I think it’s better to have something that is predictable,” said Rep. Andy Josephson, D-Anchorage, who said the restructured system creates a “disciplined, sustainable, kind of predictable formula” for repayments.

If approved by the Senate and Walker (something expected since Walker drafted the original version), HB 331 will allow the state to borrow money and pay the credits immediately. The state will make interest and principal payments later on.

Instead of owing $206 million in the fiscal year that starts July 1, the state might owe as little as $27 million, reducing the annual deficit.

Ordinarily, borrowing money to pay a debt will incur greater costs later on, but the state believes it can encourage oil and gas companies to accept less than they are owed in order to be paid more quickly.

Several of the companies have leveraged their expected tax credits (which can be sold to other companies), and are facing severe financial straits because the state has delayed payment.

Ken Alper, tax director of the Alaska Department of Revenue, said after the vote that none of the 37 companies expected to receive credits has said they will refuse to participate in the revised payment plan.

One potential drawback lies in the legal basis used for the plan. The Alaska Constitution prohibits borrowing money without voter approval, except under specific circumstances. To get around that restriction, HB 331 creates a shell corporation that will borrow the money and handle the transactions on behalf of the state. Payments to that corporation, authorized on an annual basis by the Legislature, would be the corporation’s only revenue.

That raised flags with the Legislature’s legal department. In a memo last month, attorney Emily Nauman wrote that there is a “substantial risk” that a court could find the approach unconstitutional, if it were challenged.

Since that memo, the bill has been rewritten, but Nauman told the House Finance Committee on Tuesday that she still feels there is a constitutional risk.

The Alaska Department of Law has offered a competing interpretation of the constitution and says that the idea is legally sound.

In either event, the advancement of HB 331 was seen as a key request by members of the House’s Republican minority. This year’s state operating budget requires spending some $700 million from the Constitutional Budget Reserve, and using the reserve requires 30 votes in the Alaska House of Representatives. The House’s majority coalition has only 21 members, so the budget will require minority support.

House Minority Leader Charisse Millett, R-Anchorage, said earlier this week that members of her caucus have different opinions on HB 331 (something evidenced Thursday by the vote tally) but that reducing the state’s budget is a priority.

HB 331 will do that by reducing the immediate need for cash, and leaving the door open for minority support of the budget, if lawmakers so choose.


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


More in News

(Juneau E
Aurora forecast for the week of Nov. 27

These forecasts are courtesy of the University of Alaska Fairbanks’ Geophysical Institute… Continue reading

The Southeast Alaska village of Metlakatla. (Photo courtesy of the Alaska Department of Transportation and Public Facilities)
Biden administration could wade into lawsuit over Southeast Alaska tribal fishing rights

The Biden administration could jump into a high-profile lawsuit involving a Southeast… Continue reading

The gates are locked at the Pipeline Skate Park at midday Thursday, after Juneau’s Parks and Recreation Department announced the facility will be open limited hours until further notice due to an increase in vandalism and drug paraphernalia. (Mark Sabbatini / Juneau Empire)
City: Pipeline Skate Park open reduced hours due to ‘sharp increase’ of vandalism, drug activity

Extra patrols by police and parks staff also planned for facility at Jackie Renninger Park.

A car drives by Mendenhall River Community School on Back Loop Road on Thursday morning. (Mark Sabbatini / Juneau Empire)
Woman, two children struck by vehicle while crossing road near Mendenhall River Community School

Victims in stable condition, initial investigation shows driver not at-fault, according to police.

“The Phantom of the Opera” is screened with a live musical soundtrack at the Gold Town Theater in April. Three of the musicians are scheduled to perform Sunday during two screenings of the 1928 silent film “The Wind.” (Courtesy of Gold Town Theater)
This weekend’s lineup at the Gold Town Theater really blows

Xmas Bazaar Xtravaganza nearly sold out already, but seeing “The Wind” to live music a breeze.

Scant patches of snow remain at the base of Eaglecrest Ski area on Wednesday despite snowmaking efforts that occurred during the weekend, due to warmer temperatures and rain this week. The opening date for the ski area, originally set for Dec. 2 and then delayed until Dec. 9, is now undetermined. (Photo courtesy of Eaglecrest Ski Area)
Eaglecrest opening delayed again, target date now TBD

Warm temperatures and rain thwart efforts to open ski area on Saturday.

Work crews continue removing hundreds of truckloads of debris from Zimovia Highway since the Nov. 20 landslide in Wrangell. (Photo courtesy of the Alaska Department of Transportation and Public Facilities)
Clearing work continues at Wrangell slide; fundraising grows to help families

Juneau, with several thousand pounds of food collected in drive, among many communities assisting.

The front page of the Juneau Empire on Dec. 4, 2005. (Mark Sabbatini / Juneau Empire)
Empire Archives: Juneau’s history for the week of Dec. 10

Three decades of capital city coverage.

Staff of the Ketchikan Misty Fjords Ranger District carry a 15-foot-long lodgepole pine near the Silvis Lake area to a vessel for transport to Juneau on Nov. 30. (Photo courtesy of the U.S. Forest Service)
Together Tree departs Ketchikan for Governor’s Residence in Juneau

Annual Holiday Open House featuring 21,350 cookies scheduled 3-6 p.m. Dec. 12.

Most Read