Legislature(2021 - 2022)
2022-03-25 Senate Journal
Full Journal pdf2022-03-25 Senate Journal Page 2120 SB 239 SENATE BILL NO. 239 BY THE SENATE RULES COMMITTEE BY REQUEST OF THE GOVERNOR, entitled: "An Act approving and ratifying the sale of royalty oil by the State of Alaska to Petro Star Inc.; and providing for an effective date." was read the first time and referred to the Resources and Finance Committees. The following fiscal information was published today: Fiscal Note No. 1, Department of Natural Resources In accordance with AS 38.06.050 and AS 38.05.183, a report of the final best interest finding and determination for the sale of royalty oil was transmitted. Governor's transmittal letter dated March 23: Dear President Micciche: Under the authority of Article III, Section 18, of the Alaska Constitution, I am transmitting a bill relating to approval and ratification of the sale of royalty oil by the State of Alaska to Petro Star Inc. (Petro Star). 2022-03-25 Senate Journal Page 2121 The Commissioner of the Department of Natural Resources (DNR) has determined that it is in the best interest of the State to take royalty oil in-kind from leases on the North Slope. To this end, DNR has negotiated a proposed contract titled “Agreement for the Sale of Royalty Oil between and among the State of Alaska, Petro Star Inc., and Arctic Slope Regional Corporation” (Proposed Contract). The bill would approve and ratify the Proposed Contract. The Proposed Contract obligates the State to deliver to Petro Star 12,500 barrels per day (bpd) between January 1, 2023, and December 31, 2024 (years one and two of the contract), and between 10,000 bpd and 12,500 bpd between January 1, 2025, and December 31, 2027 (years three to five of the contract). Based on monthly average forecasts, Petro Star’s nominations under the Proposed Contract could represent 19 percent to 22 percent of the State’s North Slope royalty oil. The State will receive a price for its royalty oil that will equal or exceed the price it would have received had it elected to keep its royalty in-value. In total, the Proposed Contract is expected to net the State roughly $17 to $19.8 million in revenue above what the State would receive by taking the royalty in-value. The State currently sells royalty oil to Petro Star under a one-year contract, which, due to its short duration, did not require legislative approval. The current contract terminates on December 31, 2022. The Proposed Contract would take effect on January 1, 2023 and terminate on December 31, 2027. This bill is the culmination of diligent analysis and public process that are imperative for responsible resource stewardship. The Department and the Alaska Royalty Oil and Gas Development Advisory Board (Board) considered the fiscal, economic, societal, and environmental impacts and benefits of the agreement. DNR issued a Final Best Interest Finding and Determination on the agreement that included analysis of the factors for the sale of royalty oil in AS 38.05.183. The Department did not receive any comments from the public on the sale during the public comment period that ended on March 2, 2022. Additionally, the Board held two public hearings on the sale. In accordance with AS 38.06.050, the Board voted to approve a written recommendation and report on March 9, 2022, recommending legislative approval of the agreement. 2022-03-25 Senate Journal Page 2122 The bill would allow the State to obtain the maximum value for its royalty oil. I urge your prompt and favorable action on this measure. Sincerely, /s/ Mike Dunleavy Governor