Legislature(2013 - 2014)
2014-03-18 Senate Journal
Full Journal pdf2014-03-18 Senate Journal Page 2035 SB 138 CS FOR SENATE BILL NO. 138(FIN) "An Act relating to the purposes, powers, and duties of the Alaska Gasline Development Corporation; relating to an in-state natural gas pipeline, an Alaska liquefied natural gas project, and associated funds; requiring state agencies and other entities to expedite reviews and actions related to natural gas pipelines and projects; relating to the authorities and duties of the commissioner of natural resources relating to a North Slope natural gas project, oil and gas and gas only leases, and royalty gas and other gas received by the state including gas received as payment for the production tax on gas; relating to the tax on oil and gas production, on oil production, and on gas production; relating to the duties of the commissioner of revenue relating to a North Slope natural gas project and gas received as payment for tax; relating to confidential information and public record status of information provided to or in the custody of the Department of Natural Resources and the Department of Revenue; relating to apportionment factors of the Alaska Net Income Tax Act; amending the definition of gross value at the 'point of production' for gas for purposes of the oil and gas production tax; clarifying that the exploration incentive credit, the oil or gas producer education credit, and the film production tax credit may not be taken against the gas production tax paid in gas; relating to the oil or gas producer education credit; requesting the governor to establish an interim advisory board to advise the governor on municipal involvement in a North Slope natural gas project; relating to the development of a plan by the Alaska Energy Authority for developing infrastructure to deliver affordable energy to areas of the state that will not have direct access to a North Slope natural gas pipeline and a recommendation of a funding source for energy infrastructure development; establishing the rural capital energy fund; requiring the commissioner of revenue to develop a plan and suggest legislation for municipalities, regional corporations, and residents of the state to acquire ownership interests in a North Slope natural gas pipeline project; making conforming amendments; and providing for an effective date" was read the third time. 2014-03-18 Senate Journal Page 2036 Senator Meyer moved and asked unanimous consent to abstain from voting due to a conflict of interest. Senator Coghill objected. Senator Meyer was required to vote. Senator Micciche moved and asked unanimous consent to abstain from voting due to a conflict of interest. Senator Coghill objected. Senator Micciche was required to vote. Senator Coghill moved that the bill be returned to second reading for all amendments offered today. Without objection, the bill was returned to second reading. Senators Dunleavy and Hoffman offered Amendment No. 1 : Page 2, line 11: Delete "rural capital" Insert "Alaska affordable" Page 11, line 21: Delete "Rural capital" Insert "Alaska affordable" Delete "rural capital" Insert "Alaska affordable" Page 12, line 1: Delete "rural capital" Insert "Alaska affordable" Page 54, line 7, following "manner.": Insert "For those citizens for whom there is no economically viable infrastructure available, the plan must recommend the means for directly underwriting the energy costs of the citizens to make their energy costs more affordable." Senator Dunleavy moved for the adoption of Amendment No. 1. Senator French objected, then withdrew his objection. There being no further objection, Amendment No. 1 was adopted. Senators French, Ellis, Gardner, Wielechowski offered Amendment No. 2 : 2014-03-18 Senate Journal Page 2037 Page 13, line 19, following "unless": Insert new material to read: "(A) the agreement or negotiated contract provides that the state is the majority owner of the Alaska liquefied natural gas project defined in AS 31.25.390; and (B)" Page 15, line 13, following "unless": Insert new material to read: "(A) the agreement or negotiated contract provides that the state is the majority owner of the Alaska liquefied natural gas project defined in AS 31.25.390; and (B)" Page 24, following line 1: Insert new bill sections to read: "* Sec. 30. AS 42.08.220(b) is amended to read: (b) The commission may (1) review and approve recourse tariffs filed by an in- state natural gas pipeline carrier under this chapter; (2) review and approve contracts; (3) investigate, on its own motion or after receiving a formal complaint, a dispute (A) related to rules, regulations, services, practices, and facilities that are not subject to the dispute resolution provisions in an in-state natural gas pipeline carrier's contracts or recourse tariff; (B) presented by a complainant that does not have a contract with the in-state natural gas pipeline carrier; (C) related to the conduct of an in-state natural gas pipeline carrier's open season under AS 42.08.300; to resolve the dispute, the commission may order an expansion of an in- state natural gas pipeline or order an open season under the terms provided for an expansion or open season in this chapter or AS 38.35.121(a)(4) [AND (c)]; or (D) related to an unreasonable diminution in quantity or quality in the provision of service to a public utility that (i) is a violation of the in-state natural gas pipeline carrier's tariff or contract with the public utility; (ii) has not been resolved by the in-state natural gas pipeline carrier; and 2014-03-18 Senate Journal Page 2038 (iii) will result in immediate injury, loss, or damage to the peace, health, safety, or general welfare of the public as clearly demonstrated by specific facts shown by affidavit or verified complaint; (4) adopt regulations that are necessary and proper to the performance of the duties of the commission under this chapter, including regulations governing practices and procedures of the commission; regulations adopted by the commission may not be inconsistent with state law; (5) initiate, intervene in, and appear personally or by counsel and offer evidence in and participate in, proceedings before an officer, department, board, commission, or court of this state involving an in-state natural gas pipeline carrier and affecting the interests of the state; and (6) appoint a qualified, unbiased, and impartial administrative law judge with experience in the general practice of law to conduct hearings under this chapter; the administrative law judge may perform other duties in connection with the administration of this chapter and other laws; an administrative law judge hired to conduct hearings under this chapter shall have been admitted to practice law for at least five years immediately before appointment under this paragraph. * Sec. 31. AS 42.08.300(d) is amended to read: (d) An in-state natural gas pipeline carrier shall conduct an open season for an expansion of its pipeline system when it has received one or more requests for firm transportation service from potential shippers that meet the pipeline's creditworthiness requirements and that, in the aggregate, would enable the expansion of the pipeline's system on a commercially reasonable basis. [AN EXPANSION OF THE PIPELINE SYSTEM IS NOT COMMERCIALLY REASONABLE IF THE EXPANSION WOULD CAUSE THE PIPELINE TO BE A COMPETING NATURAL GAS PIPELINE PROJECT FOR PURPOSES OF AS 43.90.] * Sec. 32. AS 42.08.370(a) is amended to read: (a) A contract entered into by an in-state natural gas pipeline carrier may provide for expansion [UNLESS THE EXPANSION WOULD CAUSE THE PIPELINE TO BE A COMPETING NATURAL GAS PIPELINE PROJECT FOR PURPOSES OF AS 43.90]." 2014-03-18 Senate Journal Page 2039 Page 25, line 9: Delete "sec. 30" Insert "sec. 33" Page 31, line 18: Delete "sec. 37" Insert "sec. 40" Page 53, line 14: Delete "AS 31.25.080(f) is" Insert "AS 31.25.080(c), 31.25.080(f); and AS 38.35.121(c) are" Page 56, line 4: Delete "30, 37, 39, and 55 - 61" Insert "33, 40, 42, and 50 - 64" Page 56, line 6: Delete "Section 38" Insert "Section 41" Page 56, line 7: Delete "secs. 62 and 63" Insert "secs. 65 and 66" Senator French moved for the adoption of Amendment No. 2. Senator Coghill objected. The question being: "Shall Amendment No. 2 be adopted?" The roll was taken with the following result: CSSB 138(FIN) am Second Reading Amendment No. 2 YEAS: 4 NAYS: 16 EXCUSED: 0 ABSENT: 0 Yeas: Ellis, French, Gardner, Wielechowski Nays: Bishop, Coghill, Dunleavy, Dyson, Egan, Fairclough, Giessel, Hoffman, Huggins, Kelly, McGuire, Meyer, Micciche, Olson, Stedman, Stevens and so, Amendment No. 2 failed. 2014-03-18 Senate Journal Page 2040 Senators Wielechowski, Ellis, French, Gardner offered Amendment No. 3 : Page 2, line 7, following "project;": Insert "relating to oil and gas or gas only leasing; requiring that a minimum work commitment be included in each oil and gas and gas only lease and that a proposed plan of development be included in an application for an oil and gas or gas only lease;" Page 15, following line 30: Insert a new bill section to read: "* Sec. 16. AS 38.05.180(h) is amended to read: (h) The commissioner shall [MAY] include terms in any lease that impose [IMPOSING] a minimum work commitment on the lessee to implement the plan of development submitted by the lessee under (jj) of this section. Except as provided in (m) of this section, these terms must be made public before the sale, and may include appropriate penalty provisions to take effect in the event the lessee does not fulfill the minimum work commitment. If it is demonstrated that a lease has been proven unproductive by actions of adjacent lease holders, the commissioner may set aside a work commitment. The commissioner may waive for a period not to exceed one two-year period any term of a minimum work commitment if the commissioner makes a written finding either that conditions preventing drilling or exploration were beyond the lessee's reasonable ability to foresee or control or that the lessee has demonstrated through good faith efforts an intent and ability to drill or develop the lease during the term of the waiver." Renumber the following bill sections accordingly. Page 16, following line 15: Insert a new bill section to read: "* Sec. 18. AS 38.05.180(x) is amended to read: (x) A lessee conducting or permitting any exploration for, or development or production of, oil or gas on state land shall provide the commissioner access to all noninterpretive data obtained from that lease; shall provide the commissioner access to all information necessary to perform an economic analysis under (kk)(2) of this section, including the capital, operating, 2014-03-18 Senate Journal Page 2041 production, and development costs and an estimate of total reserves; and shall provide copies of that data and information, as the commissioner may request. The confidentiality provisions of AS 38.05.035 apply to the information obtained under this subsection." Renumber the following bill sections accordingly. Page 17, following line 23: Insert new subsections to read: "(jj) The commissioner shall require each bidder for an oil and gas lease or gas only lease and each lessee applying for an extension or renewal of an oil and gas lease or gas only lease to submit a plan of development for exploring, developing, and producing from the lease within the period of the lease or the extension or renewal of the lease. The commissioner shall review each plan of development and determine whether the proposed plan of development is reasonably expected to develop the lease in the best interest of the state. The plan of development shall be included in a lease along with penalties for failing to comply with the plan of development and other terms of the lease. A bidder may not be a "qualified bidder" for the purposes of (f)(1) of this section if the commissioner finds that the bidder has not submitted a proposed plan of development that is in the best interest of the state or that the person that submitted the plan of development is not reasonably capable of implementing the plan. (kk) The commissioner shall (1) review each oil and gas lease or gas only lease each year for the purpose of determining whether a lease is being developed in the best interest of the state, whether the lessee is complying with the plan of development applicable to the lease, and whether revision of a development plan, including the planned rate of development, would provide the maximum benefit to the people of the state; (2) every five years, perform an economic analysis on each participating area and determine whether the participating area is capable of increased production in paying quantities over the current rate of production or plan of development; (3) enforce the terms of each oil and gas lease or gas only lease, including imposing any applicable penalty or other remedy 2014-03-18 Senate Journal Page 2042 for noncompliance, within a reasonable time after finding that a lessee is out of compliance with the terms of the lease; (4) submit a report to the legislature before the first day of each regular session that lists each oil and gas or gas only lessee that is found to be out of compliance and the action by the commissioner to bring the lessee back into compliance or to terminate the lease. (ll) For the purposes of (jj) and (kk) of this section, a plan of development for a cooperative or unit under (p) of this section is the plan of development for a lease within the cooperative or unit, except where a different plan of development is established for a lease within the cooperative or unit. (mm) For purposes of (kk) of this section, (1) "participating area" means that part of an oil and gas lease unit area to which production is allocated in the manner described in a unit agreement; (2) "production in paying quantities" means production in quantities sufficient to yield a return in excess of drilling, development, and operating costs." Page 17, line 24: Delete "sec. 17" Insert "sec. 19" Page 21, line 16: Delete "sec, 27" Insert "sec. 29" Page 25, line 9: Delete "sec, 30" Insert "sec. 32" Page 31, line 18: Delete "sec. 37" Insert "sec. 39" Page 53, following line 14: Insert a new bill section to read: "* Sec. 60. The uncodified law of the State of Alaska is amended by adding a new section to read: 2014-03-18 Senate Journal Page 2043 APPLICABILITY. AS 38.05.180(h), as amended by sec. 16 of this Act, and AS 38.085.180(jj), enacted by sec. 19 of this Act, apply to a proposed lease sale and the renewal or extension of a lease on or after the effective date of secs. 16 and 19 of this Act." Renumber the following bill sections accordingly. Page 53, lines 24 - 25: Delete "sec. 23" Insert "sec. 25" Page 56, line 4: Delete "16, 17, 23 - 27, 29, 30, 37, 39, and 55 - 61" Insert "17, 19, 25 - 29, 31, 32, 39, 41, and 57 - 64" Page 56, line 6: Delete "Section 38" Insert "Section 40" Page 56, line 7: Delete "secs. 62 and 63" Insert "secs. 65 and 66" Senator Wielechowski moved for the adoption of Amendment No. 3. Senator Coghill objected. The question being: "Shall Amendment No. 3 be adopted?" The roll was taken with the following result: CSSB 138(FIN) am Second Reading Amendment No. 3 YEAS: 5 NAYS: 15 EXCUSED: 0 ABSENT: 0 Yeas: Ellis, French, Gardner, Hoffman, Wielechowski Nays: Bishop, Coghill, Dunleavy, Dyson, Egan, Fairclough, Giessel, Huggins, Kelly, McGuire, Meyer, Micciche, Olson, Stedman, Stevens and so, Amendment No. 3 failed. 2014-03-18 Senate Journal Page 2044 Senators French, Ellis, Gardner, Wielechowski offered Amendment No. 4 : Page 13, line 18, following "project;": Insert "the licensee receiving the license issued under AS 43.90 or an affiliate of the licensee that received the license under AS 43.90 may not, without competitive bidding, be a party to a contract under this paragraph that takes effect after the effective date of this paragraph and provides for the state to acquire an equity interest in a North Slope natural gas project or for the transportation of natural gas received by the state as royalty-in- kind or under AS 43.55.014;" Page 15, line 11, following "project;": Insert "the licensee receiving the license issued under AS 43.90 or an affiliate of the licensee that received the license under AS 43.90 may not, without competitive bidding, be a party to a contract under this paragraph that takes effect after the effective date of this paragraph and provides for the state to acquire an equity interest in a North Slope natural gas project or for the transportation of natural gas received by the state as royalty-in-kind or under AS 43.55.014;" Senator French moved for the adoption of Amendment No. 4. Senator Coghill objected. The question being: "Shall Amendment No. 4 be adopted?" The roll was taken with the following result: CSSB 138(FIN) am Second Reading Amendment No. 4 YEAS: 7 NAYS: 12 EXCUSED: 0 ABSENT: 1 Yeas: Egan, Ellis, French, Gardner, Olson, Stedman, Wielechowski Nays: Bishop, Coghill, Dunleavy, Fairclough, Giessel, Hoffman, Huggins, Kelly, McGuire, Meyer, Micciche, Stevens Absent: Dyson and so, Amendment No. 4 failed.