Legislature(2009 - 2010)HOUSE FINANCE 519
04/15/2010 08:30 AM House FINANCE
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
+ | SB 13 | TELECONFERENCED | |
+ | SB 32 | TELECONFERENCED | |
+ | SB 83 | TELECONFERENCED | |
+ | SB 139 | TELECONFERENCED | |
+ | SB 159 | TELECONFERENCED | |
+ | SB 172 | TELECONFERENCED | |
+ | SB 174 | TELECONFERENCED | |
+ | SB 220 | TELECONFERENCED | |
+ | SB 234 | TELECONFERENCED | |
+ | SB 243 | TELECONFERENCED | |
+ | SB 258 | TELECONFERENCED | |
+ | SB 266 | TELECONFERENCED | |
+ | SB 279 | TELECONFERENCED | |
+ | SB 312 | TELECONFERENCED | |
+ | TELECONFERENCED | ||
+= | SB 305 | TELECONFERENCED | |
CS FOR SENATE BILL NO. 243(FIN) "An Act relating to geothermal resources; relating to the royalty obligation for geothermal resources; transferring from the Department of Natural Resources to the Alaska Oil and Gas Conservation Commission authority over permitting and inspection of geothermal wells; providing for a regulatory cost charge for geothermal wells; and providing for an effective date." 2:11:10 PM SENATOR LESIL MCGUIRE, SPONSOR, discussed the policy changes made regarding geothermal resources. She explained that geothermal harnesses energy from the heat in the earth's core. Alaska provides good geothermal opportunities. The bill reflects on a royalty rate for geothermal energy allowing investors to take advantage of the rate. She explained the 10 percent royalty rate was established for geothermal energy 26 years ago. The rate was deduced to be a placeholder alongside hydrocarbons before a true understanding of geothermal potential existed. 2:15:17 PM Senator McGuire stressed that the value of the land leased from the Department of Natural Resources (DNR) does convey a use and a royalty is therefore deserved. The bill sets a rate commiserate of 1.57 percent of gross revenues derived from production, sale, or use of geothermal resources for the first ten years, which is the federal rate. The next ten years will require 3.5 percent of the gross income. In crafting the bill, a competitive rate was desired. The goal was a rate that was not higher than the federal government which might disincentivize investment on state land. Senator McGuire remarked on the importance of the second part of the bill. She explored the history of a company called Naknek Electric who began drilling in Pikes Ridge leading to research of the topic by a commissioner of the Alaska Oil and Gas Conservation Commission (AOGCC). Findings were that the seismic and the geological data had not been analyzed in a method consistent to that of hydrocarbon drilling leading to new methods that better protect workers and the resource. The statutory fix proposed in SB 243 is a result of this work between AOGCC and DNR. The bill states that AOGCC will assume responsibility for regulating the conservation of a geothermal resource to prevent waste. She added that DNR will oversee leasing, unitization, and general land management. 2:19:19 PM Senator McGuire expressed enthusiasm for state resources including geothermal. Co-Chair Hawker acknowledged that the state did not have a regulatory structure related to geothermal energy. He commended the work done on the legislation. MICHAEL PAWLOWSKI, STAFF, SENATOR LESIL MCGUIRE, provided a sectional for the bill. Section 1 amends AS 31.05.030 clarifying that the Alaska Oil and Gas Conservation Commission (AOGCC) has jurisdiction over the exploration and development of geothermal resources; except for the management of leases and units. Section 2 amends the royalty rate for geothermal resources in AS 38.05.181(g) to reflect federal royalty rates; 1.75% of gross income during the first 10 years and 3.5% of gross income thereafter. Section 3 adds a new section to AS 41.06 delineating jurisdiction over geothermal resources between the AOGCC and Department of Natural Resources (DNR). Section 4 amends AS 41.06.010 to allow the AOGCC to investigate the waste of geothermal resources. Section 5 repeals and reenacts AS 41.06.020 to set out the jurisdiction of the AOGCC over all land in the state and to allow for the suspension of the application of chapter 06 on federal land if similarly regulated by Federal government and clarifies the application of the chapter. Section 6 amends AS 41.06.030(a) to clarify that a plan of development and operation for a geothermal resource must be filed with the AOGCC. Section 7 amends AS 41.06.030(b) to clarify that unitization by DNR of a geothermal resource system under AS 41.06.030 when the geothermal resource system includes state land. Section 8 amends AS 41.06.030(c) to conform to the changes made in section 7. Section 9 amends AS 41.06.030 by inserting a new subsection (e) that allows the commissioner of DNR to adopt regulations necessary to implement the purposes and intent of chapter 6. Section 10 amends AS 41.06 by adding a new section 41.06.035 allowing the AOGCC to issue orders and impose requirements to prevent waste and protect correlative rights on any geothermal operation. This section also allows the AOGCC to adopt regulations. Section 11 repeals and reenacts AS 41.06.040(a) governing the authority of the AOGCC to adopt regulations governing the safe development of a geothermal resource. Section 12 amends AS 41.06.040 (b) to allow the AOGCC to require a geothermal operator to file a surety bond. Section 13 amends AS 41.06.040(c) to require notification of the AOGCC rather than the DNR is geothermal exploration encounters hydrocarbons and other fissionable materials. Section 14 amends AS 41.06.040(d) to replace the commissioner of DNR with the AOGCC for the purposes of authorizing inspection of a geothermal operation. Section 15 repeals and reenacts AS 41.06.050 governing the AOGCC permitting process for geothermal exploration and development drilling. Section 16 amends AS 41.06 by adding a new section 41.06.055 authorizing a regulatory cost charge for geothermal wells. Section 17 repeals and reenacts AS 41.06.060 providing definitions for AS 41.06 Section 18 repeals AS 41.06.030(d) governing lease operations under an approved plan of development and AS 41.06.040(e) the exemption from AOGCC authority of geothermal resources. Section 19 adds a new section to the uncodified law of the State of Alaska that applies the royalty rates established by section 2 to leases entered into or renewed after the effective date of the act and directs the commissioner of DNR to offer the royalty rates established by section 2 to an existing lessee. Section 20 adds a new section to the uncodified law of the State of Alaska that governs the transition of authorities over geothermal resources established in this act. Section 21 adds a new section to the uncodified law of the State of Alaska that gives direction to the revisor of statutes. Section 22 immediate effective date for section 20 Section 23 effective date of July 1, 2010 2:26:46 PM Vice-Chair Thomas asked about Section 13. He wondered if a company struck hydrocarbons, would they stop drilling for water. Mr. Pawlowski responded that the quantity of hydrocarbons is often the deciding factor. If hydrocarbons are found, it is important that AOGCC knows, because the weight of the mud used in the drilling operations is important. Vice-Chair Thomas imagined that the royalty rate would change. Representative Foster remarked on discussions about development of the Pilgrim Hot Springs north of Nome. With the springs existing on private versus state land, he wondered if the royalties will apply. Mr. Pawlowski pointed out Page 2 Line 25, which explains that the authority of the commission to regulate geothermal extends to all land in the state, including private, municipal, and state land. The regulation of the operation would remain the same, but the royalty rates would not apply. 2:30:47 PM KEVIN BANKS, DIRECTOR, DIVISION OF OIL & GAS, DEPARTMENT OF NATURAL RESOURCES (via teleconference), addressed the question about geothermal found on private land. He agreed that all of the statutory authorities drafted in the bill are already in place. The bill removes authority given to DNR and transferred them to AOGCC who has the staff for management and safety. Mr. Banks responded to the question regarding oil found during an attempt to drill for geothermal. He stated that if the oil is on state land, a discussion about the lease must occur. The leases provided are either for oil or geothermal, but not both. If oil was found, it would not be complicated to issue an oil or gas lease allowing the state to receive the appropriate royalties. On private land, the owner would communicate the changes. Mr. Banks replied to the question concerning changes in the royalty, he stated that "something is better than nothing." He stated that a royalty rate of 1.75 percent for the first ten years, rising to 3.5 for the second ten years, makes private land competitive with federal land. 2:34:05 PM Representative Gara pointed out the definition of geothermal, which is divided into "geothermal fluid" and geothermal resources." He wished to ensure that the definition in the bill did not inadvertently include other valuable resources. He requested a list of other possible exemptions. He asked if the definition of geothermal was clear enough to avoid the loss of royalties. Mr. Banks replied that the bill expands the definition of geothermal. The current statutes have a limit of 120 degrees Celsius increasing the likelihood that electricity could be created with a geothermal resource less than 120 degrees. The addition of the commercial use provision, defined as sales of power, heat to a third party lead to access to those types of resources. Representative Gara reiterated concerns about inadvertently lowering the royalty on oil, gas, minerals, or gold. Mr. Banks assured that the language applies only to heat or hot liquids Vice-Chair Thomas queried the lease rate when hydrocarbons were discovered when drilling for geothermal. Mr. Banks explained hypothetically that if a driller does not have an oil and gas lease; when drilling on public land for geothermal, the driller is governed by the geothermal lease. The company would not be permitted to produce the oil and gas. The department would be summoned to form an oil and gas lease with either a competitive process or a decision made by the commissioner. He pointed out that if oil and gas is found, the company is tapping into a resource that requires a separate lease. 2:38:40 PM CATHY FOERSTER, ENGINEERING COMMISSIONER, ALASKA OIL AND GAS CONSERVATION COMMISSION, DEPARTMENT OF ADMINISTRATION (via teleconference), explained that the royalties portion of the bill does not affect the AOGCC. The important sections are those that transfer some but not all authorities from the DNR to the AOGCC. The authorities transferred are those that regulate drilling and production operations, protect correlative, prevent fiscal waste of the resource, and protect the fresh ground water. The DNR will retain pertaining authorities. Ms. Foerster stressed the importance of AOGCC's expertise, which allows them to take on the additional authorities. She announced the experienced drilling engineers who approve the permits ensuring safety and good operational practices. She also mentioned the experienced field inspectors who competently test equipment to ensure that it works properly. The transfer of authority requires no fiscal impact. If the bill does not pass, a cost to allow the DNR to contract the necessary expertise will require state funding. Co-Chair Hawker asked if adequate regulatory authority is drafted into the legislation. Ms. Foerster replied the legislation provides everything needed by AOGCC. Co-Chair Hawker closed public testimony. Mr. Pawlowski described three fiscal notes. The first is a zero fiscal note from DNR. The second fiscal note is from AOGCC under the Department of Administration (DOA) and also has zero fiscal impact. The third zero fiscal note is from the Department of Revenue (DOR). All three of the fiscal notes have positive revenue potential for the state. 2:44:23 PM Co-Chair Hawker explained that the action of creating the regulatory structure does not lead to a financial consequence for the state, with the state hoping for positive numbers. Mr. Pawlowski agreed. Vice-Chair Thomas MOVED to report CSSB 243(FIN) out of Committee with individual recommendations and the accompanying fiscal notes. There being NO OBJECTION, it was so ordered. HCS CSSB 243(RES) was REPORTED out of Committee with a "do pass" recommendation and with attached previously published fiscal notes: FN2 (REV), FN3 (DNR, FN4 (ADM). 2:49:23 PM AT EASE
Document Name | Date/Time | Subjects |
---|---|---|
K version CE Workdraft.pdf |
HFIN 4/15/2010 8:30:00 AM |
CS WORKDRAFT Kversion SB 305 SB 305 |
Summary of Changes to SC workdraft K SB 305.pdf |
HFIN 4/15/2010 8:30:00 AM |
SB 305 |
sb13_2009 summary 3-9-09[1].pdf |
HFIN 4/15/2010 8:30:00 AM |
SB 13 |
SB 13 - Sponsor Statement 2-10-09 (H)FIN.pdf |
HFIN 4/15/2010 8:30:00 AM |
SB 13 |
SB 13 Sectional Summary 26-LS0076A (H)FIN.pdf |
HFIN 4/15/2010 8:30:00 AM |
SB 13 |
CS SB 83 (L&C) section analysis.pdf |
HFIN 4/15/2010 8:30:00 AM |
SB 83 |
SB 83 Gov Transmittal Letter.pdf |
HFIN 4/15/2010 8:30:00 AM |
SB 83 |
Explanation of Changes between SB 83 and CSSB 83.pdf |
HFIN 4/15/2010 8:30:00 AM |
SB 83 |
SB139 Sponsor Statement Revised.PDF |
HFIN 4/15/2010 8:30:00 AM |
SB 139 |
SB 139 Data Health Care Professions Loan Repayment Program Concept Proposal.PDF |
HFIN 4/15/2010 8:30:00 AM |
SB 139 |
SB 159 Sponsor Statement H FIN.pdf |
HFIN 4/15/2010 8:30:00 AM |
SB 159 |
SB172 Sectional.PDF |
HFIN 4/15/2010 8:30:00 AM |
SB 172 |
SB172 Sponsor Statement.PDF |
HFIN 4/15/2010 8:30:00 AM |
SB 172 |
Sectional Analysis.pdf |
HFIN 4/15/2010 8:30:00 AM |
SB 174 |
Changes to SB 220 in SB 220 FIN[1].pdf |
HFIN 4/15/2010 8:30:00 AM |
SB 220 |
Sectional on SB 220, version Y.doc |
HFIN 4/15/2010 8:30:00 AM |
SB 220 |
Sponsor Statement for SB 220.docx |
HFIN 4/15/2010 8:30:00 AM |
SB 220 |
HCS CSSB 234 Sponsor Statement.docx |
HFIN 4/15/2010 8:30:00 AM |
SB 234 |
Summary of Changes to HCS CSSB 234.docx |
HFIN 4/15/2010 8:30:00 AM |
SB 234 |
Sponsor Statement[1] SB 258.pdf |
HFIN 4/15/2010 8:30:00 AM |
SB 258 |
Support Documents[1] SB258.pdf |
HFIN 4/15/2010 8:30:00 AM |
SB 258 |
Sponsor Statement - SB 266.doc |
HFIN 4/15/2010 8:30:00 AM |
SB 266 |
HCS for CS for SB 279_LC_ Sectional Analysis.pdf |
HFIN 4/15/2010 8:30:00 AM |
SB 279 |
SB 279 Sponsor Statement.pdf |
HFIN 4/15/2010 8:30:00 AM |
SB 279 |
SB 279 Back-Up.pdf |
HFIN 4/15/2010 8:30:00 AM |
SB 279 |
2010 04 12 SB312 Port of Call Payments.pdf |
HFIN 4/15/2010 8:30:00 AM SFIN 4/14/2010 9:00:00 AM |
SB 312 |
SB 312 Sectional Analysis.docx |
HFIN 4/15/2010 8:30:00 AM SFIN 4/5/2010 10:00:00 AM |
SB 312 |
SB 312 Sponsor Statement.docx |
HFIN 4/15/2010 8:30:00 AM SFIN 4/5/2010 10:00:00 AM |
SB 312 |
SB 305 SECTIONAL for CS.pdf |
HFIN 4/15/2010 8:30:00 AM |
SB 305 |
SB305 sponsor statement.docx |
HFIN 4/15/2010 8:30:00 AM |
SB 305 |
HCS CSSB305(RES)(title am)-REV-TAX-04-13-10 decoupling.pdf |
HFIN 4/15/2010 8:30:00 AM |
SB 305 |
2010 04 15 Historical Rev Distribution 3Yrs.pdf |
HFIN 4/15/2010 8:30:00 AM |
SB 312 |
2010 03 02 D Wood Calculations FY2008_09.pdf |
HFIN 4/15/2010 8:30:00 AM |
|
SB 13 Support Letter.pdf |
HFIN 4/15/2010 8:30:00 AM |
SB 13 |
SB 220 Amendments #2 3 4.pdf |
HFIN 4/15/2010 8:30:00 AM |
SB 220 |
SB 305 Amendment Hawker.pdf |
HFIN 4/15/2010 8:30:00 AM |
SB 305 |
SB 172 Amendment #1 Hawker.pdf |
HFIN 4/15/2010 8:30:00 AM |
SB 172 |
Sponsor Statement 243.docx |
HFIN 4/15/2010 8:30:00 AM |
|
Corrected Sectional Analysis Sb 243 version P.docx |
HFIN 4/15/2010 8:30:00 AM |
SB 243 |
H FIN Comments on SB 305 4-15-10 FINAL.pdf |
HFIN 4/15/2010 8:30:00 AM |
SB 305 |
Qualifying For the AGIA Tax Inducement - H FIN 4-15-10.pdf |
HFIN 4/15/2010 8:30:00 AM |