HB 250: "An Act establishing a North Slope Gas Commercialization Team to develop recommendations regarding a North Slope gas project; and providing for an effective date."
00HOUSE BILL NO. 250 01 "An Act establishing a North Slope Gas Commercialization Team to develop 02 recommendations regarding a North Slope gas project; and providing for an 03 effective date." 04 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 05 * Section 1. FINDINGS. The legislature finds that 06 (1) Alaska's North Slope contains abundant natural gas resources, with 07 approximately 26 trillion standard cubic feet of recoverable natural gas in the Prudhoe Bay 08 field, an estimated three to five trillion standard cubic feet in the Pt. Thompson field, perhaps 09 two to six trillion standard cubic feet in the Kuparuk, Lisburne, and Endicott fields combined, 10 and other as yet unquantified gas resources; 11 (2) natural gas in at least the Prudhoe Bay field coexists and is produced with 12 marketable oil and, lacking a market for much of the gas, it has been returned to the reservoir 13 where it provides for enhanced long-term oil production and is saved for future gas sales; 14 (3) although the major Prudhoe Bay leaseholders and others have examined
01 at considerable cost a variety of options for future development and sale of North Slope gas, 02 a project in which North Slope gas is delivered to Asian markets as liquefied natural gas 03 (LNG) has emerged as an option of particular interest; 04 (4) the Department of Revenue recently commissioned a study by a leading 05 expert on tax and royalty systems applicable to oil and gas development; the study concluded 06 that the project is uneconomic now and that, given certain assumptions, the state's current tax 07 and royalty structure, relative to that of other current and potential LNG-exporting countries, 08 reduces the economic feasibility and competitiveness of a North Slope gas project in at least 09 two ways: first, by requiring investors to pay large amounts to the state early in the project's 10 life; and second, by failing to adjust the state's share of the project's economic value relative 11 to the project's profitability; 12 (5) this study also concluded that the North Slope producers' estimated project 13 costs of $15 billion must be reduced substantially, the federal tax regime must be changed, 14 perhaps through the adoption of accelerated depreciation and investment tax credits, a willing 15 market for the gas must be found, and the time from the commencement of the project to the 16 achievement of its target capacity should be shortened, if possible, to help make the project 17 economically feasible and competitive; 18 (6) this study recommended that the state amend the tax and royalty structure 19 applicable to the project and increase the certainty and stability of that structure; 20 (7) the executive branch recently signed memoranda of understanding with 21 the three major Prudhoe Bay leaseholders and Yukon Pacific Corporation establishing a 22 framework for cooperation and shared responsibility for the work that needs to be done to try 23 to make a North Slope gas project economically feasible and competitive; these memoranda 24 recognized that 25 (A) an important potential benefit of the project is the employment of 26 Alaska residents and Alaska businesses in the construction and operation of the project; 27 (B) competitively priced goods and services are needed to assist in 28 achieving a commercially viable project; and 29 (C) the parties are determined to find suitable voluntary measures to 30 successfully ensure that a maximum number of Alaska residents and Alaska businesses 31 that are qualified, or capable of being qualified, are hired to construct and operate the
01 project; 02 (8) the Twentieth Alaska State Legislature passed 1997 LR 2 (CSHCR 1 03 (WTR)) in further support of a North Slope gas project, and encouraged the governor to 04 identify changes to the state's tax and royalty structure that would best facilitate a North Slope 05 gas project and develop with the leaseholders of the North Slope gas resources a contract, for 06 execution with the parties that appear likely to be sponsors of a project, and enabling 07 legislation that incorporates these changes; 08 (9) modification of the state's tax and royalty structure, although an important 09 step, by itself is insufficient to make the project a reality; significant cost reductions, 10 formation of a project structure, favorable market conditions, and modifications to the federal 11 tax regime are also required; 12 (10) any proposals by the governor for changes to the state's tax and royalty 13 structure should be made to the legislature only after careful examination of the potential 14 ramifications of the changes, under a wide range of economic conditions, in light of the 15 (A) numerous complex and interrelated issues that the changes would 16 raise; 17 (B) non-renewable nature of the resources that the project would use; 18 (C) strain on public services that the project would create; 19 (D) numerous stakeholders whose interests must be considered; 20 (E) legislature's intent that such changes establish the extent of the 21 state's share of the project's benefits well into the 21st century; 22 (F) uncertain nature of the project's costs, scope, and structure; and 23 (G) state's obligation to provide for the utilization, development, and 24 conservation of North Slope gas resources for the maximum benefit of Alaskans; and 25 (11) consistent with 1997 LR 2, the establishment of a North Slope Gas 26 Commercialization Team is appropriate to research, to enter into discussions with leaseholders 27 of North Slope gas resources and others, and to make recommendations to policymakers on 28 these important matters. 29 * Sec. 2. NORTH SLOPE GAS COMMERCIALIZATION TEAM; REPORT. (a) There 30 is established a North Slope Gas Commercialization Team to research and recommend changes 31 to state law, and in particular, changes to the state tax and royalty structure, to improve the
01 economic feasibility and competitiveness of a North Slope gas project. The members of the 02 team are 03 (1) the commissioner of revenue, or the commissioner's designee; 04 (2) the commissioner of natural resources, or the commissioner's designee; 05 (3) the commissioner of commerce and economic development, or the 06 commissioner's designee; 07 (4) the commissioner of labor, or the commissioner's designee; 08 (5) the attorney general, or the attorney general's designee; and 09 (6) other state officers or employees appointed by the governor. 10 (b) The governor shall designate a chair from the members of the North Slope Gas 11 Commercialization Team. A member appointed under (a)(6) of this section serves at the 12 pleasure of the governor. 13 (c) The North Slope Gas Commercialization Team shall gather, compile, and analyze 14 information regarding ways to improve the economic feasibility and competitiveness of a 15 North Slope gas project through changes in state and federal statutes and regulations and 16 existing state leases. 17 (d) The North Slope Gas Commercialization Team shall prepare a report that includes 18 the following: 19 (1) recommended terms that could be a basis for a contract to be entered into 20 between the state and the potential sponsors of a North Slope gas project that reflect 21 (A) the changes to the state tax and royalty structure needed to improve 22 the economic feasibility and competitiveness of the project; and 23 (B) other provisions that are needed to make a contract binding, to the 24 full extent permitted by the Constitution of the State of Alaska, and to make it 25 consistent with the public interest and the state's obligation to provide for the 26 utilization, development, and conservation of North Slope gas resources for the 27 maximum benefit of Alaskans; 28 (2) recommended provisions that could be included in any legislation needed 29 or appropriate to 30 (A) enter into a contract; 31 (B) provide an appropriate and stable long-term fiscal environment for
01 the project; 02 (C) provide an appropriate and stable regulatory structure for, and aid 03 permitting of, the project; 04 (D) ensure, consistent with the limits imposed by state and federal law 05 and the need for competitively priced goods and services, that a maximum number of 06 Alaska residents and Alaska businesses that are qualified or capable of being qualified 07 are hired to construct and operate the project; 08 (E) protect the environment and the health and safety of workers and 09 the public; and 10 (F) provide natural gas to Alaska communities where economically, 11 technically, and legally feasible; and 12 (3) recommendations regarding 13 (A) whether state participation in a North Slope gas project is 14 appropriate or advisable and, if so, the manner and scope of that participation; and 15 (B) further action necessary to ascertain or alleviate the anticipated 16 socioeconomic impacts of a North Slope gas project. 17 (e) The North Slope Gas Commercialization Team shall deliver its final report to the 18 governor by February 13, 1998 and notify the legislature that the final report is available, 19 except that if the North Slope Gas Commercialization Team determines that additional work 20 needs to be done to develop a comprehensive set of recommendations, the team shall, by 21 February 13, 1998, provide to the governor and the legislature an interim report on the work 22 that the team has completed, the work remaining to be done, the reasons for the additional 23 time needed, and the anticipated date on which the final report will be provided to the 24 governor and notification of the report's availability will be provided to the legislature. 25 * Sec. 3. MEETINGS AND RECORDS. (a) The North Slope Gas Commercialization 26 Team shall solicit suggestions for or comments on the recommendations to be included in the 27 final report required by sec. 2 of this Act from interested members of the public and shall hold 28 a public meeting under AS 44.62.310 - 44.62.312 to vote on and issue its final report, 29 including its recommendations. 30 (b) Notwithstanding (a) of this section or a provision of AS 44.62.310 - 44.62.312, 31 the North Slope Gas Commercialization Team is not a governmental body or public entity for
01 purposes of AS 44.62.310 - 44.62.312. 02 (c) Notwithstanding AS 09.25.100 - 09.25.220, records requested by the North Slope 03 Gas Commercialization Team from a potential sponsor of a North Slope gas project and 04 working documents prepared by the team that analyze or incorporate the requested records 05 shall be kept confidential if the records or working documents contain sensitive, proprietary, 06 or privileged information and the potential sponsor requests that the records or working 07 documents be kept confidential. 08 * Sec. 4. LEGAL ASSISTANCE. The Department of Law shall provide legal assistance 09 to the North Slope Gas Commercialization Team. 10 * Sec. 5. PERMANENT RECORD RETENTION; CONFIDENTIALITY. On or before 11 the date that the team's final report is provided to the governor under sec. 2 of this Act, the 12 North Slope Gas Commercialization Team shall transfer to the custody and control of the 13 Department of Revenue all records in the possession of the team, including the team's 14 working documents and records requested from others. Notwithstanding AS 09.25.100 - 15 09.25.220 and sec. 6 of this Act, after the transfer the Department of Revenue shall continue 16 to keep confidential all records and working documents that were required to be kept 17 confidential under sec. 3(c) of this Act. 18 * Sec. 6. Sections 1 - 4 of this Act are repealed on the date that the governor notifies the 19 revisor of statutes and the lieutenant governor that the final report prepared under sec. 2 of 20 this Act was provided to the governor. 21 * Sec. 7. This Act takes effect immediately under AS 01.10.070(c).