Legislature(1993 - 1994)

04/17/1993 09:40 AM Senate FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
                                                                               
  SENATE BILL NO. 50:                                                          
                                                                               
       An Act making appropriations  for capital projects; and                 
       providing for an effective date.                                        
                                                                               
  Department of Natural Resources:                                             
                                                                               
  NICO BUS,  Chief, Financial Services, Department  of Natural                 
  Resources,  came  before  the committee  to  speak  to three                 
  projects.    The first  project  was the  RS  2477 Assertion                 
  Project from the federal government in the amount of $720.0.                 
  He said it was  not part of the original  Governor's budget.                 
  The state  has been  informed that  there is  a deadline  to                 
  present the  recommendations for approximately  1,500 right-                 
  of-ways to  the Congress by May 1.   The $720.0 pays for the                 
  mapping and  identification for this  presentation in  order                 
  for  the state  to receive  title and  ownership.   Co-chair                 
  Pearce asked  the difference  between this  request and  the                 
  request in the original SB 50 from the Governor for $2,265.0                 
  for owner state assertion  and land selections.  He  said in                 
  the land selection capital project,  $175.0 was included for                 
  the most critical right-of-ways.   The department understood                 
  that would be all that was asked for and those would be used                 
  as  test cases dealing with the federal government.  Because                 
                                                                               
                                                                               
  of the time frame of the  statue of limitations, the request                 
  was amended to include all right-of-ways.                                    
                                                                               
  The next  project was  the  Alaska North  Slope Royalty  Oil                 
  Price Reopeners for $100.0 enabling the state to discuss oil                 
  price and methodology with the large oil companies.  It will                 
  buy expert advice  on such  things as transportation  costs,                 
  capitalization, destination value, etc.  It will be  used as                 
  a contingency fund if there is a need for it.                                
                                                                               
  The last amended  request was funding  for the Alaska Oil  &                 
  Gas  Conservation  Commission  for $100.0  to  evaluate  the                 
  Alaska Prudhoe Bay Reservoir models that large oil companies                 
  have done.   This  is important for  the state  in order  to                 
  maximize  the  production of  oil  and determining  the most                 
  appropriate time for gas  sales.  The money will be used for                 
  consultants to evaluate  the existing  models.  SENATOR  TIM                 
  KELLY  asked why the  full time state  consultants could not                 
  take  on this  project.  Mr.  Bus said  that their  time was                 
  already being taken  up by North  Slope work with the  large                 
  oil companies to insuring production is up to standards.  In                 
  answer to  Senator Sharp, Mr. Bus explained  that the Alaska                 
  Oil  & Gas Conservation  Commission's responsibility  was to                 
  maximize  existing  reservoir  analysis  for  the  state  to                 
  optimize production.   The reservoir in  the request is  for                 
  future oil and  gas explorations.   Co-chair Pearce  pointed                 
  out that  their is  a confidentiality  issue that  may be  a                 
  problem if the commission was asked to share information.                    
                                                                               
  Co-chair Pearce  asked how  many models  would be  analyzed.                 
  Mr. Bus said that  the oil companies are asserting  that the                 
  most advantageous  time to  sell gas  would be  in the  year                 
  2000.    This  reservoir  study  would make  an  independent                 
  determination  regarding the oil company's conclusion.  RAGA                 
  ELIM, Special  Assistant, Department  of Natural  Resources,                 
  said that there were  three models by oil companies  and the                 
  request would retain  a consultant who would  evaluate these                 
  existing models and provide an  independent analysis of that                 
  information to help the state determine the appropriate time                 
  to shift to gas sales.                                                       
                                                                               
  SHELBY  STASTNY,  Director, Office  of Management  & Budget,                 
  said  that  the chairman  of  the commission  had  told him,                 
  because of the intense  pressure to start gas sales  and the                 
  oil  companies reluctance to  agree that it  is not feasible                 
  for at least ten years, this independent study was needed to                 
  make a determination for the state.                                          
                                                                               
  Co-chair  Pearce said  that  the  latest  phase of  the  gas                 
  handling facility on the north slope  was going on line this                 
  year.  Since all the gas in Prudhoe  Bay is being reinjected                 
  to help produce oil,  she felt that the companies  know what                 
  they are talking about  and that they are using  all the gas                 
  right  now.    She  felt  the  state  would  lose  some  oil                 
                                                                               
                                                                               
  production if gas  was sold off  at the  present time.   She                 
  agreed that the state needed this  information as a base for                 
  decision making.                                                             
                                                                               
  In answer to Senator  Kelly, Mr. Elim said that there is one                 
  vacancy on  the Alaska  Oil &  Gas Conservation  Commission.                 
  Mr.  Elim said that  the vacancy must be  filled by a public                 
  member.                                                                      
                                                                               
  SENATOR STEVE RIEGER asked for  an explanation regarding the                 
  difference between gas sales and reinjection.  Mr. Elim said                 
  that the  oil  companies have  given  their time  frame  for                 
  optimum gas revenues to be between 2015 and 2030.   There is                 
  increasing interest for potential gas sales.  Given the time                 
  frame that the state  is hearing from the oil  industry, the                 
  state is asking for  independent information to find  out if                 
  that  information is accurate.  Senator  Rieger said that he                 
  would like to know what  the dynamics would be to cause  the                 
  interests of the state to diverge from the oil companies.                    
                                                                               
  Mr. Stastny  said that  according to  Harold Hines,  special                 
  assistant to oil & gas commission in the Governor's  office,                 
  when gas sales do  begin it will be around  $300-500 million                 
  of revenue a year.  It seemed that the oil companies may not                 
  have that same  interest since they  have a pipeline of  oil                 
  and have enough gas to satisfy customers from other sources.                 
  So  he  could see  a  divergent  interest  occurring at  the                 
  present time.                                                                
                                                                               
  Department of Public Safety:                                                 
                                                                               
  C. E. SWACKHAMMER, Deputy Commissioner, Department of Public                 
  Safety, said  that the department  had two items  for budget                 
  amendments.  The first was a  $50.0 appropriation to correct                 
  the  ventilation  system  in  the  Kodiak  jail  which is  a                 
  settlement of  a  lawsuit.    He  explained  that  the  poor                 
  condition  of  the Kodiak  jail  caused inmates  to  bring a                 
  lawsuit against  the city.   This request would  provide the                 
  state's contribution for clean air for prisoners.  In answer                 
  to Senator Sharp, he said that the Kodiak jail is a contract                 
  facility but  it was cheaper for the  state to help with the                 
  jail improvements than  to build  a new facility.   He  said                 
  that the jail would eventually need to be replaced.  He said                 
  $50.0 would pay the state's portion of the lawsuit.                          
                                                                               
  Mr. Swackhammer said that the request  of $150.0 was for the                 
  cost of seizing vessels that  were caught fishing illegally.                 
  Last year vessels from 20 to 200 feet were seized.   It will                 
  result  in income to the state for  penalties.  If the state                 
  decides  to  be aggressive  to  correct the  illegal fishing                 
  activity, then seizure  must be made  and the funds must  be                 
  provided to accomplish the seizures.   Discussion was had by                 
  Senators Jacko, Rieger, Co-chair Pearce, and Mr. Swackhammer                 
  regarding the high  cost of moving  the seized vessels.   In                 
                                                                               
                                                                               
  answer to Senator Sharp, Mr.  Swackhammer said cost recovery                 
  had been realized  through fines in  the amount of about  $1                 
  million.  Mr.  Stastny said that last year  the money had to                 
  be taken  out of other budget  items to fund  the seizure of                 
  three  vessels  and that  was  when  it was  decided  that a                 
  revolving  fund  be  established  for  this  purpose.    Mr.                 
  Swackhammer  said  that legislation  was  being  drafted and                 
  would  be  ready  next session  between  the  Departments of                 
  Public Safety, Fish &  Game, and Law to develop  a fund such                 
  as Mr. Stastny described.                                                    
                                                                               
  Senator Jacko asked for  a detailed break down of  the costs                 
  for moving  the three seized vessels.   Mr. Swackhammer said                 
  that he would provide that information to the committee.                     
                                                                               

Document Name Date/Time Subjects