Download AudioAs Alaska continues to grapple with a major budget shortfall, one line item promises to be particularly controversial: tax credits for oil and gas producers.The state projects that credits will reach $700-million this year. That number has about tripled since 2010, with much of the increase going to producers outside the North Slope, especially in Cook Inlet.Now, a group of lawmakers is tackling the issue head-on.On Tuesday (Sept. 22), State Senator Cathy Giessel, Republican of Anchorage, opened the second session of her tax credit working group by posing the big question: “Our question really on the table today is, are the credits working, [and] are they still needed?”The answer, at least from the oil and gas companies themselves, was a resounding yes.Tuesday’s session focused on Cook Inlet producers, and company after company said the renaissance in drilling in the past half-decade was the direct result of tax credits.“Without the tax credits, Furie wouldn’t be here,” Bruce Webb, of Furie Operating Alaska, said. “If tax credits went away, we’re stubborn enough to stay and work through it, but it would decelerate the further development and exploration.”Webb told lawmakers that the credits are crucial for smaller operators to secure financing for projects. Companies like Furie borrow against the credits, using that funding to pay for exploration and infrastructure.And companies reminded lawmakers that just a few years ago, Southcentral was preparing for a natural gas shortage. They said new investment has led to a secure energy source, jobs for local communities and royalties for the state.At the end of the day, companies said, they’ve built credits into their business plans. Any changes should be gradual, said Benjamin Johnson of BlueCrest Energy, which hopes to tap the inlet’s Cosmopolitan gas field.“Bottom line is, we can’t commit to Cosmopolitan gas development unless we have either the existing tax credits or a reasonable alternative,” Johnson said. “We just need some stability. We need to know what it is we’re dealing with. We can’t have uncertainty on this.”But these days, uncertainty is the name of the game for everyone dependent on state funding – from the classroom to the gas field.Giessel said she hopes to convene one more hearing on Cook Inlet, before the working group turns its attention to the North Slope.The group hopes to draft a set of proposals by December 1.