Legislature(2001 - 2002)
04/24/2002 09:16 AM FIN
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HOUSE BILL NO. 307 "An Act delaying to June 30, 2007, the last date by which hydrocarbon exploration geophysical work must be performed or drilling of a stratigraphic test well or exploratory well must be completed in order for a person to qualify for an exploration incentive credit." This was the first hearing for this bill in the Senate Finance Committee. REPRESENTATIVE HUGH FATE, the bill's sponsor, explained to the Committee that this bill would facilitate further natural gas and oil exploration in Alaska by extending the exploration incentive credit for petroleum exploration activities an additional three years. He noted that any seismic research obtained by private industry exploration processes under this agreement would not be proprietary and copies of the findings would be available to the State. He stated that this stratigraphic information is beneficial to the State and is an incentive for offering lease-sales. He shared the history of drilling and exploration in the Tanana area. MARK MYERS, Director, Division of Oil & Gas, Department of Natural Resources, testified via teleconference from Anchorage and shared with the Committee information about the State's Exploration Incentive Credit (EIC) program. He communicated that this program was created in 1994 to allow the State to acquire more geophysical data information that it could not obtain under normal circumstances on un-leased or private land. He stated that the program provides for exploration incentive credits that could be applied toward royalties and taxes. He told of a total program cap of $30 million, and an individual project cap of $5 million. He detailed how the credits might be issued and stressed that the data supplied by the research is beneficial. He noted that some data would be confidential for a limited amount of time and then become available to the State and other entities. Mr. Myers stated that the EIC program has not been extensively used by industry because the information garnered from the research could be "shown to a third party." He furthered that the State has at times, denied an EIC, as sufficient geophysical or geological information was already available on the area. Senator Austerman asked the benefit of this program, if no corporate tax credits have been applied since 1994. SFC 02 # 75, Side B 10:03 AM Mr. Myers stated that the program "is applicable to frontier basins where there is very little or limited geological information." He stated that drilling activity has declined since this legislation was first enacted, as there is "a fundamental shift" occurring with the increased economic interest in gas, particularly with the prospect of a natural gas pipeline. He stated that this program could be used in the future, to gather baseline data from multiple basins. Mr. Myers, responding to a question posed by Senator Ward, stated that the intent of the program focuses on the value of obtaining data, not so much as being a stimulus for exploration. He concurred; however, that a "positive benefit" would be derived by the State contributing a credit toward the cost of developing a well, provided that the criteria for the exploration meets the needs of the State. Representative Fate stated that several exploration projects are being discussed for areas of rural Alaska, and if the EIC program could provide the incentive for these projects to occur, there would be an economic stimulation in those areas. He stressed that, "there are multiple advantages of this type of incentive." Senator Austerman voiced concern about the State's fiscal gap and budget, and noted that the State derives tax revenue from its natural resources, and this EIP credit would reduce those monies. Senator Green moved to report "House Bill 307 out of Committee with individual recommendations and accompanying fiscal notes." There being no objections, House Bill 307 was REPORTED from Committee with a previous zero fiscal note, dated January 30, 2002, from the Department of Revenue and a previous zero fiscal note, dated January 30, 2002 from the Department of Natural Resources.