1997-04-14                     Senate Journal                      Page 1127
SB 174                                                                       
SENATE BILL NO. 174 BY THE SENATE RULES COMMITTEE                              
BY REQUEST OF THE GOVERNOR, entitled:                                          
                                                                               
An Act establishing a North Slope Gas                                         
Commercialization Team to develop                                              
recommendations regarding a North Slope gas                                    
project; and providing for an effective date.                                  
                                                                               
was read the first time and referred to the Resources and Finance              
Committees.                                                                    
                                                                               
Fiscal note published today from Department of Revenue.                        
                                                                               
Governors transmittal letter dated April 11:                                   
                                                                               
Dear President Miller:                                                         
                                                                               
Developing our enormous North Slope natural gas resources is a                 
significant opportunity  for creating Alaska jobs and providing a              
secure economic base upon which to build Alaskas future.  This bill            
I transmit today establishes the North Slope Gas Commercialization             
Team to identify and develop steps  the state can take, in                     
cooperation with the North Slope leaseholders and other potential              
sponsors, to make a North Slope gas project a reality.                         
                                                                               
To date, the development of North Slope natural gas resources has              
not been economically feasible or competitive with alternative                 
sources of energy.  North Slope leaseholders estimate a $15 billion            
cost for the facilities to develop these resources, including a gas            
conditioning plant, an 800-mile pipeline, a liquefaction plant to              
convert natural gas into liquefied natural gas (LNG), LNG storage              
facilities, and LNG tankers.                                                   
                                                                               

1997-04-14                     Senate Journal                      Page 1128
SB 174                                                                       
There is relatively little the state can do to reduce the capital costs        
of a North Slope gas project.  There are steps the state can take to           
improve a projects economic feasibility and competitiveness.  The              
state has received guidance from a report commissioned by the                  
Department of Revenue.  This report reviews Alaskas tax and                    
royalty structure, evaluates the competitiveness of the project                
internationally, and recommends in general terms possible                      
modifications to the states tax and royalty structure to  improve the          
economic feasibility and competitiveness of a project.                         
                                                                               
The Administration also has received guidance from the legislature.            
In House Concurrent Resolution 1,  the legislature requested  the              
governor and North Slope gas resource leaseholders develop a                   
contract to execute with sponsors of an LNG project, as well as                
appropriate enabling legislation.  The contract and legislation would          
establish the nature, degree, and duration of the fiscal terms that            
would best facilitate a project.                                               
                                                                               
This bill creates the administrative structure necessary to evaluate           
recommended changes to the tax and royalty system and carry out                
the wishes of the legislature as expressed in HCR 1.  The North                
Slope Gas Commercialization Team would determine how to improve                
the economic feasibility and competitiveness of a North Slope gas              
project while protecting the public interest.   The team also could            
help develop legislation to enable the state to enter into the contract,       
provide a stable fiscal and regulatory structure for the project, aid          
permitting, ensure a maximum number of Alaska residents and                    
Alaska businesses are hired to construct and operate the project,              
protect the environment, health and safety of workers and the public,          
and provide natural gas to Alaska communities.                                 
                                                                               
This bill is an important step forward in developing Alaskas North             
Slope natural gas resources.  I urge your prompt consideration and             
passage of this bill.                                                          
                                                                               
						Sincerely,                                                               
						/s/                                                                      
						Tony Knowles                                                             
						Governor