2024-01-18                     Senate Journal                      Page 1366
SB 194                                                                                                                        
SENATE BILL NO. 194 BY THE SENATE RULES COMMITTEE                                                                               
BY REQUEST OF THE GOVERNOR, entitled:                                                                                           
                                                                                                                                
          "An Act relating to temporarily reduced royalty on                                                                    
          oil and gas from pools without previous commercial                                                                    
          sales in the Cook Inlet sedimentary basin; 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, indeterminate, Department of Natural                                                                        
          Resources                                                                                                             
                                                                                                                                
Governor's transmittal letter dated January 16:                                                                                 
                                                                                                                                
Dear President Stevens:                                                                                                         
                                                                                                                                
Under the authority of Article III, Section 18 of the Alaska                                                                    
Constitution, I am transmitting a bill relating to temporarily reduced                                                          
royalty on oil and gas from pools with no previous commercial sales in                                                          
the Cook Inlet sedimentary basin.                                                                                               
                                                                                                                                

2024-01-18                     Senate Journal                      Page 1367
This bill is a key component of the State's efforts to incentivize and                                                          
develop critical energy resources in the Cook Inlet. To meet the needs                                                          
of the current environment, the bill modernizes a long-standing royalty                                                         
reduction statute. The bill provides a royalty rate of five percent for oil                                                     
or gas pools in the Cook Inlet sedimentary basin that have not                                                                  
previously produced oil or gas for commercial sale. The proposed                                                                
statutory changes, similar to the existing framework, would apply to                                                            
existing leases and future leases provided that the oil or gas pool has                                                         
not previously produced for commercial sales and the lease is part of a                                                         
unit. The payment of royalty on oil or gas at five percent under the bill                                                       
would apply for 10 years following the commercial sale of that                                                                  
production.                                                                                                                     
                                                                                                                                
The reduced royalty rate of five percent in the bill would not apply to                                                         
leases that already have a royalty rate of five percent or less due to                                                          
other incentives. The bill would not apply to leases issued with only                                                           
net profit shares and no royalty rate.                                                                                          
                                                                                                                                
This bill has an immediate effective date to allow the Department of                                                            
Natural Resources to implement these incentives as soon as possible.                                                            
This bill is part of my broader strategy for Cook Inlet and attracting                                                          
investment to Alaska.                                                                                                           
                                                                                                                                
I urge your prompt and favorable action on this measure.                                                                        
                                                                                                                                
Sincerely,                                                                                                                      
/s/                                                                                                                             
Mike Dunleavy                                                                                                                   
Governor