Legislature(1993 - 1994)
01/31/1994 05:00 PM House O&G
| Audio | Topic |
|---|
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SB 151 - OIL & GAS EXPLORATION INCENTIVE CREDITS KEN BOYD, DEPUTY DIRECTOR, DIVISION OF OIL & GAS, DEPARTMENT OF NATURAL RESOURCES (DNR), testified via Anchorage that SB 151 extends a program that has existed on state lands for ten years. He said though the exploration incentives program already exists in Title 38, the state is able to grant exploration incentive credits on wells that are determined by the commissioner of the Department of Natural Resources to (indiscernible). He explained that during the review process for a sale area, a confidential briefing is given to the commissioner of DNR. At that time a petroleum economist, after having looked at all the terms and conditions, recommends to the commissioner the bonus payment, the terms of the lease and among other things, exploration incentive credits. He stated the purpose of exploration incentive credits is to get wells drilled earlier than requested by the terms of the lease. In exchange for that, the state agrees to a certain percentage of the well cost. He said that those terms and conditions vary from lease sale to lease sale, but that more recently the terms have generally been in the range of 15 to 20 percent of the cost of certain wells. MR. BOYD said SB 151 will expand the program to nonstate lands, but there are certain differences from the existing program. He stated the first difference occurs on page two, line five. He indicated the difference is that under current statute, there is a slightly narrower definition of the taxes for which the exploration incentive might be applied and they are mostly severance taxes. He said SB 151 has a broader tax statute that includes other kinds of taxes. He stated the reason for that is the entities, Native corporations for example, may not have any lease holding in the state. He explained they may have old leases, they may not pay rents or royalties, or they may not have any bonus payments to pay, so the state broadened the tax statute to give them the opportunity to apply their credits. He referred to page two, lines 12 through 14 as having a time cap. MR. BOYD explained the intent of the bill, as it was originally written, was to have the program for ten years. He stated the bill passed the Senate in 1993 which, of course, would have been ten years, but now that it is 1994, the committee may wish to consider the date being moved to 2004. He explained that SB 151 would treat the data somewhat differently (page two, lines 19 through 29). He said the data that is derived from any of the test, stratigraphic, or exploratory wells are held for 24 months and then are released to the public. He explained that under current statute, there is a two year period of confidentiality, but at the end of that period, if wells are meeting certain tests and conditions, the confidentiality period may be extended for a longer time. He stated the company has the option to do that. He said that with SB 151, at the end of 25 months the well would be made public. He referred to page three, line two, explaining that SB 151 reduces the cap to 25 percent, the maximum the state will be willing to allow as an exploration incentive credit on nonstate lands. He said, while the state believes that it receives a benefit or potential benefit from participating in these wells on nonstate land, the state believes the real benefit it will obtain is in getting the data on the nonstate lands. He indicated that the state feels this cap is a reasonable amount to allow. He said in some cases the state will always get some severance taxes and some other payments, but that it usually does not get the bulk of the royalties. He explained what the state is really looking for in this program is information. He said that if one looks at a map of the state of Alaska, especially at the interior basins, it is a hodge podge of ownership. There are state lands that are mixed with federal lands which are intermixed with private lands, quite often Native land. He said that if a well is drilled on state land, then the state gets the data; if the well is drilled on nonstate lands, it does not always get the data; and if the well is drilled on private lands, the state does not have a right to the data. He testified that in certain cases determined by the DNR commissioner, the state may wish to have the information that comes from a privately drilled well, because it may be next to state lands and could provide valuable information for the exploration of adjacent state lands. He stated that the program under SB 151 is not mandatory. The commissioner has the discretion to not accept any program or any offers made to him or her. Mr. Boyd referred to page three, line six, section (f), and stated that the $50,000,000 in total is meant to be over a period of ten years. He said these terms are different than the exploration incentive credit program that exists now, and under current statute there is no time limit or cap on the program. He indicated that the rest of the provisions of the bill were the same as current statute. Number 132 CHAIRMAN GREEN asked the committee members if they wished to address either of the areas that Mr. Boyd mentioned, either page 2, line 14 to change the July 1, 2003, program date to 2004 to comply with the ten year program that was envisioned, or page three, line nine regarding the $50,000,000 cap. Number 149 REPRESENTATIVE GARY DAVIS made a motion to amend page two, line 14 to read 2004. REPRESENTATIVE PETE KOTT seconded the motion. CHAIRMAN GREEN indicated for the record that he did not believe the date change amendment was a recommendation by DNR, he thought it was pointing out fact. Number 166 BECKY GAY, EXECUTIVE DIRECTOR, RESOURCE DEVELOPMENT COUNCIL, testified via teleconference from Anchorage. She thanked the committee for the opportunity to testify in support of SB 151. She stated when most people think of oil development, they think of development, production, or construction, but exploration is actually the lifeblood of the oil and gas industry. She stated the industry has high upfront costs and risks. She indicated that the Resource Development Council (RDC) believes that SB 151 will give a true incentive to explore Alaska lands, including nonstate lands. She said there is so much acreage off limits or not offered in Alaska, that the RDC feels this is a definite step forward. She stated SB 151 will augment and broaden the scope of the present leasing system, and it will encourage new players, both large and small, in exploration. She said SB 151 will encourage prospecting for smaller, local targets, such as village natural gas opportunities, which would help Alaska. She indicated that the state will still receive revenues, particularly severance taxes, on any lands that are nonstate, so she felt there was a definite incentive for the state to move forward on SB 151. She said SB 151 will enhance the value of nearby sate lands, even if those lands are not being explored at that moment and it will maximize the odds of discovery since it does apply to all of the aforementioned lands. She felt that SB 151 was a long-term economic strategy for a more stable resource climate and it would help Alaska to become less dependent upon mega-projects and a less risky, more sound way to proceed with oil and gas. She stated the RDC supports SB 151 as written, especially in light of the judicial rulings on oil and gas lease sales. She said the RDC believes SB 151 would send a clear signal that oil and gas is still viewed by the administration and the legislature as a part of Alaska's long-term economic future. Number 197 CHAIRMAN GREEN commented that the committee had not heard from village or regional corporations, possibly due to problems with arriving by plane into Juneau, although he did not know if those groups were planning to testify. He stated there was some discussion in 1993 about the difference in the amount of credit between state and nonstate property. He said the village corporations and regional corporations had expressed some concern about that. He asked Mr. Boyd if he had heard anything recently about that issue. Number 209 KEN BOYD stated he had not heard anything recently on that issue. He said, he did know that the DNR commissioner had met with representatives from Native organizations and explained to them that the state believes the benefit derived to the state is in proportion to the amount of money that it is willing to credit. He stated that, even though the cap on state land under existing statute is 50 percent, in the last six or seven lease sales none of the incentive credits offered have been above 20 percent. He said that only one credit in state history has been offered at 30 percent. Number 220 CHAIRMAN GREEN indicated he would accept a motion to move SB 151 out of committee with individual recommendations. Number 224 REPRESENTATIVE KOTT made a motion that the committee move SB 151 as amended by the House Oil and Gas Committee to House Judiciary, the next committee of referral. Number 226 REPRESENTATIVE JOE SITTON seconded the motion. There were no objections. Number 228
| Document Name | Date/Time | Subjects |
|---|