HCR 1: Relating to a new Alaska liquefied natural gas project.
00HOUSE CONCURRENT RESOLUTION NO. 1 01 Relating to a new Alaska liquefied natural gas project. 02 BE IT RESOLVED BY THE LEGISLATURE OF THE STATE OF ALASKA: 03 WHEREAS there are abundant, known natural gas resources on Alaska's North Slope 04 with the Prudhoe Bay field containing about 26 trillion standard cubic feet, the Point 05 Thompson field estimated at three to five trillion standard cubic feet, and, perhaps, two to six 06 trillion standard cubic feet at the Kuparuk, Lisburne, and Endicott fields considered together; 07 and 08 WHEREAS, particularly with the Prudhoe Bay field, natural gas coexists and is 09 produced with marketable oil and, lacking a market for much of the gas, it has been returned 10 to the reservoir where it provides for enhanced long-term oil production and is saved for 11 future gas sales; and 12 WHEREAS the major Prudhoe Bay leaseholders and others have pursued a costly 13 variety of options for future gas sales, each driven by a perception of market potential; and 14 WHEREAS, in recent years, liquefied natural gas (LNG) delivered to Asian markets
01 has emerged as an option of substantial interest, but given strong international competition to 02 supply the Asian LNG market, it is clear that prudent sponsors and investors will require that 03 a new Alaska LNG project show economic viability with competitively, not premium, priced 04 LNG; and 05 WHEREAS the LNG market is a unique commodity business because there is no 06 global spot market for LNG as there is with oil; hence, development of an LNG project 07 requires substantial dedicated investment for the production, transportation, and use of the gas 08 to be produced; and 09 WHEREAS, to make investment in a new Alaska LNG project viable, gas owners, 10 facility owners, gas buyers, host governments, financial institutions, and other participants 11 must contractually join to form a long-term (20 to 30 year) business structure to ensure a 12 reliable competitively priced gas supply results from the project and to realize a competitive 13 return on project investment; and 14 WHEREAS substantial additional facilities will be required for the development of 15 Alaska's North Slope gas resources for delivery to the Asian market, including a gas 16 conditioning plant on the North Slope to produce pipeline quality gas while appropriately 17 handling rejected carbon dioxide, a gas transmission pipeline to tidewater from the 18 conditioning plant, an LNG production plant and storage facility at tidewater, a marine 19 terminal, LNG oceangoing tankers, and miscellaneous supporting infrastructure; and 20 WHEREAS the current estimated cost of facilities needed for a new Alaska LNG 21 project is about $15,000,000,000, with a range of uncertainty around this estimate, and not 22 included in this estimate are the substantial investments required of the gas buyers for LNG 23 receiving terminals, gas transmission and distribution systems, and gas-fired electrical power 24 plants; and 25 WHEREAS, due to the significant up-front investment, a new Alaska LNG project 26 will require a fast ramp-up to a minimum production level of approximately two billion 27 standard cubic feet of gas per day, or 14 million tons per annum, of LNG, which represents 28 a significant share of the anticipated growth in demand in the Asian market; and 29 WHEREAS, following the discovery of the Prudhoe Bay field, changes in legislation 30 or interpretations of legislation by state agencies have resulted in unpredicted state tax 31 increases and in litigation between the state and the petroleum industry over state taxes and
01 royalties to be paid for oil and gas; and 02 WHEREAS any major new commitment such as would be required for a new Alaska 03 LNG project must, by necessity, be backed by a long-term, stable, and appropriate fiscal 04 regime consistent with the long-term agreements established between LNG buyers and sellers; 05 and 06 WHEREAS the state historically has enacted legislation allowing the state to 07 contractually grant fiscal relief to attract new industry, a notable example being the 08 Marathon/Phillips Kenai LNG plant; and 09 WHEREAS other host governments of competing LNG projects have encouraged their 10 projects by providing stable fiscal terms for the lives of the projects, fiscal relief, and direct 11 financial participation; and 12 WHEREAS the Department of Revenue and Department of Natural Resources have 13 studies showing under realistic assumptions that a new Alaska LNG project is not 14 economically attractive for investment at this time, and that, for the project to become 15 attractive for investment, requirements include increased certainty about market price and 16 demand, definition of what is likely to be a complex business structure, substantial reduction 17 in and narrowing of uncertainty about facility capital costs, and appropriate stable fiscal terms 18 from the state; and 19 WHEREAS an important potential benefit of an LNG project is the employment of 20 Alaska residents and Alaska-based businesses in the construction and operation of the project, 21 but, in order to assist in achieving a commercially viable project, there will be a need for 22 competitively priced goods and services; and 23 WHEREAS access to natural gas for local Alaska community use may be provided 24 by an LNG project, an additional public benefit; and 25 WHEREAS the major Prudhoe Bay leaseholders plan to focus on reflecting market 26 needs in the design and structure of an LNG project, will continue their already substantial 27 efforts to reduce the range of cost uncertainty and identify further cost reductions for the 28 project, and plan to develop possible project structure alternatives; and 29 WHEREAS the Nineteenth Alaska State Legislature passed House Joint Resolution 30 54 in support of an LNG project; 31 BE IT RESOLVED that it is the wish of the Twentieth Alaska State Legislature that
01 the state provide a stable and appropriate fiscal and regulatory environment to give a new 02 Alaska liquified natural gas (LNG) project the best opportunity to become economically 03 attractive, and it is the intention of the legislature to support efforts to provide such an 04 environment; and be it 05 FURTHER RESOLVED that the Alaska State Legislature encourages the Governor 06 to work with leaseholders of North Slope natural gas resources, the legislature, and the federal 07 government to develop and complete an LNG project to transport and market North Slope 08 natural gas; and be it 09 FURTHER RESOLVED that the Alaska State Legislature respectfully requests the 10 Governor to identify fiscal conditions that would best facilitate an LNG project; and be it 11 FURTHER RESOLVED that the Alaska State Legislature respectfully requests the 12 Governor to develop with the leaseholders of the North Slope gas resources a contract for 13 execution with the parties that appear likely to be sponsors of an LNG project that sets out 14 the nature, degree, and duration of the fiscal terms that best facilitate the LNG project and 15 provides for the contractual guaranteeing of those terms; and be it 16 FURTHER RESOLVED that the Governor is respectfully requested to submit an 17 LNG project contract to the legislature for ratification along with enabling legislation required 18 or advisable to authorize the state to formally enter into the contract; and be it 19 FURTHER RESOLVED that the Alaska State Legislature requests potential project 20 sponsors to find suitable measures to 21 (1) support and encourage qualified Alaska businesses and residents to 22 participate in construction and operation of an LNG project; and 23 (2) ensure that, if the project is constructed, it will be configured and operated 24 where technically and economically feasible so that natural gas can be marketed to Alaska 25 communities; and be it 26 FURTHER RESOLVED that the Governor is respectfully requested to work closely 27 with the Alaska Congressional delegation and the Prudhoe Bay leaseholders to identify 28 appropriate federal actions that would best facilitate the advancement of an economically 29 attractive new Alaska LNG project; and be it 30 FURTHER RESOLVED that the Governor is respectfully requested to consider and 31 to report to the legislature the form of participation in an LNG project by the state.
01 COPIES of this resolution shall be sent to the Honorable Ted Stevens and the 02 Honorable Frank Murkowski, U.S. Senators, and the Honorable Don Young, U.S. 03 Representative, members of the Alaska delegation in Congress.