The state of Alaska and an oil company operating in Cook Inlet settled a dispute over millions of dollars in unpaid tax credits on Tuesday, after the state said it has set aside money for partial payments until a larger dispute, also playing out in bankruptcy court, is resolved.
Miller Energy Resources on Aug. 2 had asked the U.S. Bankruptcy Court in Alaska to have the state set aside money for payments of tax credits, claiming it is owed $5.2 million.
Miller Energy was the parent of Cook Inlet Energy, but the two companies and affiliates filed for bankruptcy in October 2015. Proceedings in that case are still ongoing, but Cook Inlet Energy has reorganized and operates in Cook Inlet and the North Slope. It's still owned by another company, but that company now is Glacier Oil and Gas.
Tuesday's agreement, involving the state and the two entities, puts tax credit payments to Cook Inlet Energy on par with other oil companies that are also receiving only partial annual payments from the state. The state has trimmed the payments in recent years after a severe drop in state revenues after oil prices crashed three years ago, officials said.
"We just wanted to be treated like any other company," said Carl Giesler, chief executive of Cook Inlet Energy.
Cook Inlet Energy also wanted to make sure that money owed to Miller Energy wasn't paid to competing Alaska companies, Giesler said. The agreement does that.
The state's cashable credit program, ended this year by lawmakers, has provided large state subsidies to support oil field exploration.
But state officials in recent years have paid only the legal, annual minimum, slowing the payments to help reduce Alaska's giant fiscal gap. This year, for example, state officials agreed to pay oil and gas companies $77 million, though the state owed more than $700 million.
Though the state has set aside the money Miller Energy claims it is owed, the payments are on hold while a larger dispute is settled between the state and Cook Inlet Energy, according to Tuesday's filing.
That larger argument involves rights the state may have to collect money after the October 2015 bankruptcy filing.
The state has been auditing taxes and tax credit payments made to oil companies dating back to 2011. If the state finds something, such as an overpayment of tax credits, companies are expected to pay the state back, said Ken Alper, Alaska Tax Division director.
In the state's view, Cook Inlet Energy could be liable for money owed to the state that is discovered in an audit of pre-bankruptcy transactions.
But Cook Inlet Energy disagrees.
Giesler said Cook Inlet Energy is cooperating with the audits. But he said the state has limited options for collecting money for issues that occurred before the bankruptcy.
"Bankruptcy draws a line in the sand," Giesler said. "To the extent they find something, there are only so many remedies available to the state."