Commentary

Legislators stop shortsighted effort to allow 'double dipping' on oil infrastructure

For years the state handed out tax credits as if they were Alaska flag pins.

And once the cash credits went out the door, there was no follow-up analysis to see what the state was getting in exchange for its money. There was no incentive to keep close tabs on the situation.

With the oil price collapse, that has finally started to change.

I take it as a good sign that an attempt Wednesday to continue the old practice of easy money met with healthy skepticism in the House Finance Committee from members of both parties.

This small step in the right direction came with the defeat of an amendment that would have allowed companies to get state loans for oil and gas infrastructure and then state tax credits based on those loans.

Fairbanks Rep. Tammie Wilson and Wasilla Rep. Lynn Gattis proposed the amendment to the bill that would create a new oil and gas loan fund within the Alaska Industrial Development & Export Authority.

The fund is needed, the Walker administration says, to provide loans to small and intermediate oil and gas companies for infrastructure projects.

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The bill, as revised, would allow a company to get AIDEA loan financing for a portion of a project and to use tax credits, but only for additional expenses not financed by AIDEA loans. There's logic to that approach.

But Wilson and Gattis proposed an additional amendment to House Bill 246 that would allow tax credits to be granted even to portions of  a project already getting state-backed AIDEA financing.

"Is that double-dipping?" Fairbanks Rep. Steve Thompson asked Gene Therriault, the former North Pole senator who is now a manager at the Alaska Industrial Development and Export Authority.

Therriault explained the amendment this way:  "AIDEA has loaned you money, you've built surface infrastructure, you would also be able to apply for a credit on that expenditure."

In other words, yes.

Anchorage Rep. Dan Saddler liked the Wilson/Gattis amendment and said this would likely mean new oil production and more investment. Wilson said the amendment was needed because the state may not be cashing in tax credits in a prompt manner and both types of support are warranted.

Of course, the companies would love to have both, but Wilson offered no evidence to justify that as a state policy.

Most of the Republicans and Democrats on the committee agreed that the Wilson/Gattis plan was an invitation to double dip.

"We're paying our own loans back with our own credits," Republican Rep. Mark Neuman said.

Fairbanks Democratic Rep. David Guttenberg said the amendment represented the kind of thinking that makes people cynical about the state getting involved in business. Anchorage Rep. Les Gara said companies should either get loans or credits, but not both.

Fred Parady, the deputy commerce commissioner, said the administration agreed that one or the other would be best. The amendment failed 7-2.

Let's hope this is the start of a trend.

With its current financial troubles, the state needs to look much more closely at what it offers in oil and gas tax credits and what it stands to get back.

The questions need to be asked before programs begin and continue as long as the subsidies exist. Until the past year or so there was little thought about the need for monitoring because the state had plenty of cash coming in.

Information and disclosure is key. Another small step in the right direction is the provision in the oil and gas tax credit bill, House Bill 247,  that calls for an end to some of the secrecy about tax credits.

That bill, which was transmitted to the governor this week, requires an annual report to show which companies received tax credits and how much.

That this information has been classified as confidential in the past is one of the main reasons why hundreds of millions in annual cash payments have not received much scrutiny.

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With the new disclosure rule, we still won't know exactly how the credits have been spent, but I expect this move will generate pressure for the release of more information.

These are state investments of a sort and they should not be kept secret.

Dermot Cole is a Fairbanks columnist for the Alaska Dispatch News. The views expressed here are the writer's own and are not necessarily endorsed by Alaska Dispatch News, which welcomes a broad range of viewpoints. To submit a piece for consideration, email commentary(at)alaskadispatch.com.

Dermot Cole

Former ADN columnist Dermot Cole is a longtime reporter, editor and author.

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