Legislature(2015 - 2016)BARNES 124

03/11/2015 01:00 PM House RESOURCES

Audio Topic
01:02:26 PM Start
01:03:38 PM HB100
01:32:03 PM HB132
01:48:09 PM Presentation(s): Middle Earth Tax Credits
02:41:19 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Heard & Held
-- Public Testimony --
+ Middle Earth Tax Credits Presentation TELECONFERENCED
-- Testimony <Invitation Only> --
+ Bills Previously Heard/Scheduled TELECONFERENCED
Heard & Held
-- Will Reconvene at 6:00 p.m. Today --
                    ALASKA STATE LEGISLATURE                                                                                  
               HOUSE RESOURCES STANDING COMMITTEE                                                                             
                         March 11, 2015                                                                                         
                           1:02 p.m.                                                                                            
MEMBERS PRESENT                                                                                                               
Representative Benjamin Nageak, Co-Chair                                                                                        
Representative David Talerico, Co-Chair                                                                                         
Representative Mike Hawker, Vice Chair                                                                                          
Representative Bob Herron                                                                                                       
Representative Kurt Olson                                                                                                       
Representative Geran Tarr                                                                                                       
Representative Craig Johnson                                                                                                    
Representative Paul Seaton                                                                                                      
Representative Andy Josephson                                                                                                   
MEMBERS ABSENT                                                                                                                
All members present                                                                                                             
COMMITTEE CALENDAR                                                                                                            
HOUSE BILL NO. 100                                                                                                              
"An Act establishing a credit against the net income tax for an                                                                 
in-state processing facility that manufactures urea or ammonia;                                                                 
and providing for an effective date."                                                                                           
     - HEARD & HELD                                                                                                             
HOUSE BILL NO. 132                                                                                                              
"An Act relating to the support of the Alaska liquefied natural                                                                 
gas project by the Alaska Gasline Development Corporation."                                                                     
     - HEARD & HELD                                                                                                             
PRESENTATION(S):  MIDDLE EARTH TAX CREDITS                                                                                      
     - HEARD                                                                                                                    
PREVIOUS COMMITTEE ACTION                                                                                                     
BILL: HB 100                                                                                                                  
SHORT TITLE: UREA/AMMONIA FACILITY TAX CREDIT                                                                                   
SPONSOR(s): REPRESENTATIVE(s) CHENAULT                                                                                          
02/09/15       (H)       READ THE FIRST TIME - REFERRALS                                                                        
02/09/15       (H)       RES, FIN                                                                                               
03/11/15       (H)       RES AT 1:00 PM BARNES 124                                                                              
BILL: HB 132                                                                                                                  
SHORT TITLE: AGDC SUPPORT OF NATURAL GAS PROJECTS                                                                               
SPONSOR(s): REPRESENTATIVE(s) CHENAULT                                                                                          
03/02/15       (H)       READ THE FIRST TIME - REFERRALS                                                                        
03/02/15       (H)       RES, L&C                                                                                               
03/06/15       (H)       RES AT 1:00 PM BARNES 124                                                                              
03/06/15       (H)       Heard & Held                                                                                           
03/06/15       (H)       MINUTE(RES)                                                                                            
03/11/15       (H)       RES AT 1:00 PM BARNES 124                                                                              
WITNESS REGISTER                                                                                                              
TOM WRIGHT, Staff                                                                                                               
Representative Mike Chenault                                                                                                    
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Presented HB 100 on behalf of                                                                            
Representative Chenault, prime sponsor.                                                                                         
STEVE WENDT, Manager                                                                                                            
Agrium Kenai Nitrogen Operations Facility                                                                                       
Kenai, Alaska                                                                                                                   
POSITION STATEMENT:  During the hearing on HB 100, offered                                                                    
ADAM DIAMOND, Manager                                                                                                           
Government Relations                                                                                                            
Agrium U.S. Headquarters                                                                                                        
Denver, Colorado                                                                                                                
POSITION STATEMENT:  During the hearing on HB 100, offered                                                                    
RENA DELBRIDGE, Staff                                                                                                           
Representative Mike Hawker                                                                                                      
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Presented changes in committee substitute                                                                
Version P, CSHB 132.                                                                                                            
JAMES MERY, Senior Vice President                                                                                               
Lands and Natural Resources                                                                                                     
Doyon, Limited                                                                                                                  
Fairbanks, Alaska                                                                                                               
POSITION STATEMENT:   Doyon, Limited presented  "Interior Oil and                                                             
Gas Exploration," Park of "Middle Earth."                                                                                       
JOE BOVEE, Vice President                                                                                                       
Land and Resources                                                                                                              
Ahtna, Incorporated                                                                                                             
Glennallen, Alaska                                                                                                              
POSITION    STATEMENT:       Presented    "Ahtna   Natural    Gas                                                             
KEN ALPER, Director                                                                                                             
Tax Division                                                                                                                    
Department of Revenue                                                                                                           
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:   During the  presentation of  "Ahtna Natural                                                             
Gas Opportunities," answered questions."                                                                                        
GRETA SCHUERCH, Corporate and Public Policy Liaison                                                                             
NANA Regional Corporation                                                                                                       
Kotzebue, Alaska                                                                                                                
POSITION  STATEMENT:     Presented  "NANA   Regional  Corporation                                                             
Hydrocarbon Exploration Efforts."                                                                                               
ACTION NARRATIVE                                                                                                              
1:02:26 PM                                                                                                                    
CO-CHAIR  BENJAMIN NAGEAK  called  the  House Resources  Standing                                                             
Committee meeting to order at  1:02 p.m.  Representatives Hawker,                                                               
Herron, Olson, Talerico,  and Nageak were present at  the call to                                                               
order.   Representatives  Seaton,  Josephson,  Tarr, and  Johnson                                                               
arrived as the meeting was in progress.                                                                                         
            HB 100-UREA/AMMONIA FACILITY TAX CREDIT                                                                         
1:03:38 PM                                                                                                                    
CO-CHAIR NAGEAK  announced that  the first  order of  business is                                                               
HOUSE BILL  NO. 100,  "An Act establishing  a credit  against the                                                               
net  income   tax  for  an  in-state   processing  facility  that                                                               
manufactures  urea or  ammonia;  and providing  for an  effective                                                               
1:04:29 PM                                                                                                                    
TOM WRIGHT, Staff, Representative Mike Chenault, Alaska State                                                                   
Legislature, paraphrased from the following statement [original                                                                 
punctuation provided]:                                                                                                          
     House Bill  100, Mr. Chairman, creates  a new corporate                                                                    
     income tax credit for owners  of facilities used in the                                                                    
     manufacture and sale of urea and ammonia.                                                                                  
     When  gas is  produced  from a  state  lease the  state                                                                    
     receives   a  royalty.   If  an   "in-state  processing                                                                    
     facility"  that   "manufactures  and  sells   urea  and                                                                    
     ammonia"  purchases  gas as  feed  stock  from a  state                                                                    
     lease, a  credit is established  under this bill.   The                                                                    
     amount of the credit is  the amount of the royalty paid                                                                    
     to the  state.  The credit  can be used to  abate state                                                                    
     income taxes under AS 43.20.   The amount of the credit                                                                    
     cannot  be  used  to reduce  the  taxpayer's  liability                                                                    
     below zero.                                                                                                                
     According to  a McDowell study, conducted  by Agrium, a                                                                    
     reopened Agrium  facility using  a single  train, would                                                                    
     consume  approximately 28  billion cubic  feet (BCF)  a                                                                    
     year of gas with an  estimated 21 BCF coming from state                                                                    
     leases.   It is  anticipated the total  royalty payment                                                                    
     to  the  state  would   be  approximately  $15  million                                                                    
     annually, assuming a wellhead value of $5.70 per MCF.                                                                      
     Benefits from  a single  train production  would result                                                                    
     in  140 direct  jobs  with a  payroll  of $14  million.                                                                    
     Approximately  340   total  jobs  to   include  direct,                                                                    
     indirect, and induced, within the  state with a payroll                                                                    
     of approximately  $30 million.   It is  anticipated all                                                                    
     employees will be Alaska residents.                                                                                        
     Plant rehabilitation would cost  about $275 million and                                                                    
     require  a temporary  work force  of 440  workers which                                                                    
     translates to  a payroll  of $75  million over  the two                                                                    
     year rehabilitation timeframe.                                                                                             
     It  would  place  Agrium  as   one  of  the  top  local                                                                    
     taxpayers   in  the   Kenai  Peninsula   Borough,  with                                                                    
     approximately  $2.2  million  in  tax  revenue.    This                                                                    
     doesn't  include sales  tax revenue  new  jobs will  be                                                                    
     generated ... will generate.                                                                                               
     In  light   of  the  Cook  Inlet   tax  credits,  small                                                                    
     producer's tax credits expiring in  2016, a new user of                                                                    
     Cook Inlet gas would continue to encourage additional                                                                      
       exploration and development of gas fields in Cook                                                                        
1:07:04 PM                                                                                                                    
REPRESENTATIVE JOSEPHSON asked whether  the improvements would be                                                               
$275 million or $75 million.                                                                                                    
MR.  WRIGHT advised  Representative  Josephson that  improvements                                                               
would be $75 million.                                                                                                           
1:07:37 PM                                                                                                                    
The committee took a brief at-ease.                                                                                             
1:08:23 PM                                                                                                                    
STEVE WENDT, Manager, Agrium  Kenai Nitrogen Operations Facility,                                                               
stated he has been with Agrium U.S., Inc., for 23-years.                                                                        
1:08:52 PM                                                                                                                    
ADAM DIAMOND,  Manager, Government  Relations, Agrium  U.S. Inc.,                                                               
Headquarters, introduced himself.                                                                                               
1:09:01 PM                                                                                                                    
MR. WENDT corrected the testimony  of Mr. Wright and advised that                                                               
rehabilitation  costs  will be  $275  million.   He  stated  that                                                               
Agrium is  headquartered in Calgary,  Alberta, Canada  and Agrium                                                               
U.S.  Incorporated,  which  owns the  Kenai  Nitrogen  Operations                                                               
(KNO) facility in  Kenai is located in Denver,  Colorado.  Agrium                                                               
produces  all three  major NPK  fertilizers  [NPK represents  the                                                               
value of  the three  macro-nutrients used  by plants,  the macro-                                                               
nutrients are  nitrogen (N), phosphorus  (P) and  potassium (K)].                                                               
He  pointed out  that its  products are  sold worldwide,  and the                                                               
Kenai  Nitrogen Operations  (KNO) facility  started initially  in                                                               
1968 with production  beginning in 1969.  By 1978  it had doubled                                                               
in  size and  he pointed  out  that Agrium  U.S. Incorporated  is                                                               
considering  restarting that  1968 model  of a  facility.   It is                                                               
capable of  producing approximately  one million tons  of ammonia                                                               
and  urea on  an  annual basis.    He offered  that  when it  was                                                               
previously open it  had approximately 300 employees,  was a major                                                               
contributor to  the Kenai Peninsula  Borough property  tax rolls,                                                               
spent approximately  $75 million  annually in Alaska  for natural                                                               
gas of approximately  $15 million on an annualized  basis went to                                                               
approximately  400  vendors in-state.    He  opined that  it  was                                                               
difficult   to  close   KNO  and   believes  Agrium   took  every                                                               
opportunity to keep the facility open,  but were unable to do so.                                                               
When KNO shut down it partnered  with the Department of Labor and                                                               
opened  a  transition center  in  Kenai  to help  transition  its                                                               
workforce  to  other  jobs  and   training  was  involved.    The                                                               
legislation that has passed in  the last few years to incentivize                                                               
exploration  and production  in Cook  Inlet has  been successful.                                                               
In  2007,  when  the  plant shut  down,  the  company  considered                                                               
selling the  plant and  subsequently the  activity in  Cook Inlet                                                               
inspired KNO  to take  another look  at restarting  the facility.                                                               
He remarked that it is encouraged  by new gas discoveries and the                                                               
potential  for KNO  to  restart.   He  asked  that the  committee                                                               
consider  taking  a  subsequent  action to  support  KNO  thereby                                                               
creating an additional market for  gas, and additional incentives                                                               
for explorers and  producers in Cook Inlet.  He  pointed out that                                                               
with the assistance  of the legislature, KNO will  make the Kenai                                                               
project the most compelling project  it can make before its board                                                               
of directors  - as it  will have  to compete with  other projects                                                               
for  a limited  amount of  capital that  Agrium would  be putting                                                               
1:14:05 PM                                                                                                                    
REPRESENTATIVE  HERRON   asked  Mr.  Wendt  why   that  site  was                                                               
initially chosen.                                                                                                               
MR.  WENDT   opined  that  the   Cook  Inlet  gas   resource  was                                                               
significant and that UNICAL desired to monetize that resource.                                                                  
1:14:57 PM                                                                                                                    
MR.  DIAMOND  advised  that   Agrium  Kenai  Nitrogen  Operations                                                               
Facility (KNO)  supports HB  100.  He  highlighted that  in order                                                               
for any  facility to benefit  from HB 100  they would have  to be                                                               
operating, and would have to  be purchasing gas from state leases                                                               
thereby  generating   state  revenue  in  the   form  of  royalty                                                               
payments.  In the case of KNO, the  plant is not open as it would                                                               
take   an  upfront   commitment  on   the  part   of  Agrium   of                                                               
approximately $275  million to get the  plant to that point.   He                                                               
further highlighted  that there  is nothing in  HB 100  that will                                                               
directly impact  the royalty payments  the state receives  as the                                                               
royalty number  is there as a  reference to ensure that  the bill                                                               
would remain  revenue neutral or  revenue positive to  the state.                                                               
He said  that KNO  recognizes the budget  situation in  Alaska is                                                               
tenuous at  this point and  it is important  to note that  HB 100                                                               
would not impact any existing revenue  stream in the case of KNO.                                                               
The plant  is not  operating and  its Alaska  income tax  bill is                                                               
currently approximately  $30,000-$40,000.   He opined  that there                                                               
is not  a current stream of  revenue this will impact.   In fact,                                                               
he suggested,  that if  this helps the  project proceed  it would                                                               
generate a significant new revenue  stream in the form of royalty                                                               
payments from the gas.                                                                                                          
1:16:54 PM                                                                                                                    
REPRESENTATIVE  HAWKER  questioned   whether  Mr.  Diamond  would                                                               
guarantee it  will not make  this business decision  without this                                                               
credit, and whether he will  guarantee it will make this business                                                               
decision with the credit.                                                                                                       
MR. DIAMOND advised  that this credit will help  the project, but                                                               
he could not  guarantee whether it will or will  not push it over                                                               
the edge as that decision is  over his pay grade.  He highlighted                                                               
that there is a limited  amount of capital expenditures a company                                                               
has  and this  project  will  compete with  other  projects.   He                                                               
advised that  he is trying to  put the best project  before those                                                               
decision makers, and the bill will absolutely help the process.                                                                 
1:17:57 PM                                                                                                                    
REPRESENTATIVE  HAWKER asked  whether there  are other  corporate                                                               
operations outside  of Alaska, and will  the corporate operations                                                               
be solely inside Alaska if the plant is reopened.                                                                               
MR.  WENDT  replied  that there  are  corporations  worldwide  as                                                               
Agrium  U.S. has  facilities in:  Alaska; Kennewick,  Washington;                                                               
Sacramento,  California;  Border,  Texas;  Northland,  Ohio;  and                                                               
Conda, Idaho;  are the major manufacturing  facilities associated                                                               
with  Agrium U.S.  Inc.; and  it has  an extensive  retail outlet                                                               
system through the lower-48.                                                                                                    
REPRESENTATIVE HAWKER  noted that Agrium has  extensive worldwide                                                               
holdings and  the credit it  is proposing  in the bill  is credit                                                               
against its  Alaska State  Corporate Income Tax.   He  noted that                                                               
the  taxable  income is  determined  by  factors within  Agrium's                                                               
control relating to its apportionment  of its income and expenses                                                               
on a worldwide  basis to Alaska.  He asked  whether its corporate                                                               
tax allocation policy would result  in the legislature granting a                                                               
credit  in Alaska  for earnings  that were  actually attributable                                                               
under an allocation policy to activities outside the state.                                                                     
MR. DIAMOND responded that the  credit being discussed here would                                                               
be  against  the  state  income   tax  and  that  income  tax  is                                                               
determined partially based on U.S.  Federal Tax, which would vary                                                               
depending on  how well Agrium  does.  In  the event Agrium  has a                                                               
good year the  state apportionment will be  higher and conversely                                                               
if it has a bad year it would  go the other way.  He advised that                                                               
on   initial   conversations   with   Agrium's   accountants   it                                                               
anticipates  the  Alaska  State  Income   Tax  would  be  in  the                                                               
neighborhood of $3-$4 million annually.                                                                                         
1:20:29 PM                                                                                                                    
REPRESENTATIVE HAWKER advised Mr. Diamond  that he did not answer                                                               
the question because  that taxable income ...  is that determined                                                               
on  an  Alaska  statewide  water's  edge basis,  or  is  that  an                                                               
allocation of its  various ... allocations are  a multiplicity of                                                               
factors  in the  case of  Agrium with  payroll gross  revenue and                                                               
assets.    He  explained  that the  state  corporate  income  tax                                                               
allocation  is not  resultant from  Agrium's discreet  activities                                                               
within the State of Alaska.   He pointed out that it is important                                                               
for him  to understand where  that taxable income is  coming from                                                               
and  whether  the   legislature  is  giving  a   credit  that  is                                                               
subsidizing taxable activity outside the State of Alaska.                                                                       
MR. DIAMOND  advised he does  not have  the answer but  will take                                                               
the question back to Agrium and provide him with an answer.                                                                     
1:21:25 PM                                                                                                                    
REPRESENTATIVE  JOSEPHSON pointed  to  the  McDowell Group  study                                                               
"The  Economic Benefits  of Reopening  the Agrium  Kenai Nitrogen                                                               
Plant," assumes  that gas  used by  Agrium will be  new gas.   He                                                               
asked  the  dynamics  of  the  Cook Inlet  market  and  why  that                                                               
assumption is made.                                                                                                             
MR. WENDT  stated he  was not  sure he  understood Representative                                                               
Josephson's question  regarding the dynamics  of Cook Inlet.   He                                                               
advised that  through incentives  the legislature  previously put                                                               
into place  there is considerable increased  activity, equipment,                                                               
and manpower,  working in Cook  Inlet to explore and  produce not                                                               
only from existing fields but looking  at new fields.  He advised                                                               
they  are meeting  regularly with  all  of the  producers in  the                                                               
state and found  that although they'll need to be  proved up with                                                               
infrastructure put  in place  to put  into production  that there                                                               
are potentially significant new discoveries in state.                                                                           
1:22:57 PM                                                                                                                    
REPRESENTATIVE JOSEPHSON  stated he is not  unsympathetic to this                                                               
bill and asked  whether this is a matter of  the industry priming                                                               
the pump, turning the valve,  and producing the gas Agrium needs,                                                               
or  whether that  (indisc.) has  already been  purchased and  the                                                               
state is earning royalty on it.                                                                                                 
MR. WENDT  responded that the  majority, if  not all, of  the gas                                                               
Agrium hopes to  put under contract would be new  gas that is not                                                               
currently  being   produced  and  the  state   is  not  currently                                                               
receiving a royalty.                                                                                                            
1:23:43 PM                                                                                                                    
REPRESENTATIVE  HAWKER pointed  out  that  Agrium is  essentially                                                               
looking  for a  subsidization  from  the State  of  Alaska for  a                                                               
project specific activity within the  borders and confines of the                                                               
state.   He  asked  whether Agrium  considered  a mechanism  that                                                               
would assure  the legislature  that the  credit was  generated by                                                               
the  investment and  income producing  assets in  the state.   He                                                               
suggested a  restrictive physical asset investment  tax credit so                                                               
the  state is  not subject  to the  vagaries of  literally multi-                                                               
state and, in this case, worldwide income tax allocations.                                                                      
MR. WENDT said he  could only comment on HB 100,  and that he has                                                               
not looked at other options.                                                                                                    
1:24:43 PM                                                                                                                    
REPRESENTATIVE  SEATON   stated  there   is  a   situation  where                                                               
ConocoPhillips is  not operating  at full volume  as it  does not                                                               
have  enough gas.   He  pointed  out that  if ConocoPhillips  had                                                               
access to the  additional gas then corporate income  tax would be                                                               
paid on  that gas, the state  would receive the royalty,  and the                                                               
$0.17 per MCF production tax.   He said he is trying to ascertain                                                               
how the  state indicates it is  going to utilize the  gas so that                                                               
it  doesn't generate  any corporate  income  tax.   He offered  a                                                               
scenario that Donlin Creek wanted to  put in a gas line and build                                                               
it and  then asked  how the  state would be  in position  to tell                                                               
Donlin Creek that  it will have to pay corporate  income tax, yet                                                               
Agrium does  not.   He reiterated  Agrium's comments  saying, the                                                               
amount of  gas used  and the  royalty amount  is always  going to                                                               
exceed its net  income tax liability.  He  related that basically                                                               
the state would be saying that  for ten years Agrium doesn't have                                                               
to pay  any net income  tax, and  questioned how that  relates to                                                               
any other potential use of the gas.                                                                                             
MR. WENDT answered that for  Alaska there are additional benefits                                                               
to  Agrium  coming  on  line  in that  Agrium  previously  was  a                                                               
supporter and a supplier to  the local agricultural community and                                                               
it would be a positive impact  on food security within the state.                                                               
He offered that Agrium provides  urea to the aviation industry in                                                               
the  state,  and  that  all  of  the  agricultural  industry  and                                                               
aviation  industry  products  were  at a  reduced  cost  to  them                                                               
because  of  transportation, et  cetera.    He pointed  out  that                                                               
Agrium  would become  a Kenai  Peninsula Borough  tax payer,  and                                                               
would  provide jobs  which  are  substantial to  the  state.   He                                                               
opined  there  are  a  number  of reasons  Agrium  would  have  a                                                               
positive impact on the state.                                                                                                   
1:28:07 PM                                                                                                                    
REPRESENTATIVE  SEATON related  that in  a previous  conversation                                                               
Mr.  Wendt had  indicated Agrium  would be  a big  carbon dioxide                                                               
user and  could use  pipeline quality  gas rather  than liquefied                                                               
natural gas quality  carbon dioxide.  He reminded  Mr. Wendt that                                                               
he had  indicated he would  provide the committee with  the gross                                                               
amounts of carbon dioxide Agrium  could utilize in the Cook Inlet                                                               
area in  its manufacturing process  thereby alleviating  the huge                                                               
expense  for the  gas treatment  plant on  the North  Slope.   He                                                               
commented that another potential benefit  to the state, in one of                                                               
the  proposals that  had come  forward, was  looking at  pipeline                                                               
quality with gas coming down from  the North Slope instead of the                                                               
carbon dioxide all taken out on the North Slope.                                                                                
MR. WENDT  acknowledged that  he does not  have the  number today                                                               
and  further stated  his  notes  indicate that  he  does owe  the                                                               
committee that information  and would get back  to the committee.                                                               
He  advised that  "Yes,"  Agrium  can take  natural  gas off  the                                                               
pipeline  that contains  percentages  of carbon  dioxide and  use                                                               
that  with no  problem in  its plant.   He  said that  a previous                                                               
governor  set up  a  pipeline task  force of  which  Agrium is  a                                                               
member.   He described that  it has been through  many iterations                                                               
now that the  standard has gone so many  different directions ...                                                               
this has back as far as  2007, where Agrium has continued to have                                                               
interest in gas pipeline from the  North Slope.  He remarked that                                                               
Agrium  has   provided  information   to  the  state,   or  these                                                               
committees, each time  they have made a  request for information.                                                               
He  posited  that Agrium  continues  to  be interested  in  being                                                               
considered a potential customer.                                                                                                
1:31:09 PM                                                                                                                    
REPRESENTATIVE SEATON  pointed out  that there are  two different                                                               
kinds of  projects the state has  been looking at and  one of the                                                               
holdups on  one of those  projects is  that it would  have higher                                                               
carbon dioxide levels  than normal.  He noted that  it would be a                                                               
substantial benefit to the state on  that project, if it comes to                                                               
fruition,  of  being  able  to use  carbon  dioxide  in  Agrium's                                                               
manufacturing project.   In that  regard, he said,  Agrium should                                                               
provide the information to the committee in its proposal.                                                                       
1:31:55 PM                                                                                                                    
CO-CHAIR NAGEAK held over HB 100.                                                                                               
          HB 132-AGDC SUPPORT OF NATURAL GAS PROJECTS                                                                       
1:32:03 PM                                                                                                                    
CO-CHAIR  NAGEAK announced  that the  next order  of business  is                                                               
HOUSE  BILL NO.  132,  "An Act  relating to  the  support of  the                                                               
Alaska  liquefied  natural  gas  project by  the  Alaska  Gasline                                                               
Development Corporation."                                                                                                       
1:32:30 PM                                                                                                                    
CO-CHAIR  TALERICO   moved  to   adopt  the   proposed  committee                                                               
substitute  (CS), labeled  29-LS0623\P, Nauman,  3/11/15, as  the                                                               
working  document.   There  being  no  objection, Version  P  was                                                               
before the committee.                                                                                                           
1:33:13 PM                                                                                                                    
RENA DELBRIDGE,  Staff, Representative Mike Hawker,  Alaska State                                                               
Legislature, paraphrased  from the  following summary  of changes                                                               
from  HB  132\E  to  CS   for  HB  132\P,  [original  punctuation                                                               
     The CS  expands on  the bill  title to  more accurately                                                                    
     reflect  the contents  of the  bill.   Previously,  the                                                                    
     title related  to "the support of  the Alaska liquefied                                                                    
     natural gas  project by the Alaska  Gasline Development                                                                    
     Corporation."  However,  the   bill  includes  sections                                                                    
     related  to AGDC's  purpose, powers  and duties  and to                                                                    
     the instate natural gas pipeline  fund. Also, the title                                                                    
     now mentions an effective date,  which is added in this                                                                    
     Page 3, line 3, and Page 4, line 10                                                                                        
     The bill temporarily  prohibits AGDC from participating                                                                    
     in an in-state  project in which a majority  of the gas                                                                    
     is intended to  be exported. The CS  includes a project                                                                    
     in which a  majority of the gas is  intended for export                                                                    
     by AGDC or by another party.                                                                                               
     Page 3, lines  8-9; Page 3, lines 19-20;  Page 4, lines                                                                    
     The   bill  restricts   AGDC's  activities   until  the                                                                    
     earliest  of three  dates. One  of these  dates is  the                                                                    
     time at  which the  state and  other parties  enter the                                                                    
     next  development  phase of  AK  LNG.  The CS  requires                                                                    
     "contractual   agreements  to   undertake  FEED",   and                                                                    
     deletes the word "study" after "FEED."                                                                                     
     Page 5, line 26                                                                                                            
     Changes  the   term  being  defined  from   "front  end                                                                    
     engineering   and   design   study"   to   "front   end                                                                    
     engineering and design."                                                                                                   
     Page 6, line 16                                                                                                            
     Adds  an immediate  effective  date. Previously,  there                                                                    
     was no effective date.                                                                                                     
1:35:53 PM                                                                                                                    
MS. DELBRIDGE stated that is extent of changes to the committee                                                                 
substitute and requested an opportunity to clarify two pieces of                                                                
testimony made on Friday.                                                                                                       
1:36:25 PM                                                                                                                    
CO-CHAIR NAGEAK brought a letter from the House Resources                                                                       
Standing Committee co-chairs to Governor Bill Walker, dated                                                                     
March 9, 2015, to the committee and public.                                                                                     
1:36:37 PM                                                                                                                    
MS.  DELBRIDGE  referred to  the  letter,  and stated  that  last                                                               
Friday there was  a discussion related to statements  made by the                                                               
Governor  Walker in  a press  conference  regarding bringing  the                                                               
market  to  Alaska  in  the   2012  TransCanada  solicitation  of                                                               
interest held  under the terms  of the Alaska  Gasline Inducement                                                               
Act (AGIA) license.  She advised  that at the time of the hearing                                                               
she had indicated  that she did not think the  letter from Alaska                                                               
Gasline Port Authority  (AGPA) back to TransCanada  had been made                                                               
public.    She  pointed  to  a  letter,  provided  to  the  House                                                               
Resources  Standing Committee,  which  did not  come from  Alaska                                                               
Gasline Port  Authority (AGPA),  but was  within a  collection of                                                               
documents AGPA submitted  to the U.S. Department  of Energy (DOE)                                                               
in pursuit  of an export license  for LNG.  She  related that the                                                               
letter appeared  to be a  letter in response to  the solicitation                                                               
of  interest that  TransCanada held.   She  encouraged the  House                                                               
Resources  Standing Committee  to  maintain its  request for  the                                                               
actual letter as  she was not able to ascertain  that this letter                                                               
is  the response,  yet  it might  be.   She  stated  she was  not                                                               
certain  whether  the letter  is  the  complete response  to  the                                                               
solicitation of  interest as the  letter itself does  not contain                                                               
much  detail.   She further  stated she  has included  a host  of                                                               
letters from potential Asian partners  that AGPA also supplied in                                                               
conjunction with its DOE export  license application that appears                                                               
to be  part of the  solicitation of  interest letter.   She noted                                                               
that these letters may or may  not be part of AGPA's solicitation                                                               
response  to  TransCanada's  non-binding offer,  and  stated  her                                                               
intention is to  make certain the clarification was  made in that                                                               
the letter  has not been in  the public domain, but  is certainly                                                               
part of a public document.                                                                                                      
1:38:44 PM                                                                                                                    
MS.  DELBRIDGE  offered that  the  second  clarification is  that                                                               
during  the  hearing  last  Friday,   she  described  AK  LNG  as                                                               
essentially  a  structure  in which  there  was  equal  ownership                                                               
segments  including,  the   state,  ExxonMobil  Corporation,  BP,                                                               
ConocoPhillips.   She precisely  advised that  AK LNG  is roughly                                                               
commensurate  with the  gas share  of  each entity,  in that  the                                                               
state has 25 percent presuming  the state makes a royalty-in-kind                                                               
decision and that tax is  paid as gas, ExxonMobil Corporation has                                                               
roughly 33  percent interest,  ConocoPhillips roughly  22 percent                                                               
interest,  and BP  roughly 21  percent.   She  remarked this  was                                                               
discussed in  conjunction with a  question regarding  whether the                                                               
state was  a minority  partner in  AK LNG,  and her  response was                                                               
that the  state is one  of four  equal 25 percent  each partners.                                                               
In  the regard,  she  wanted  to put  that  clarification on  the                                                               
1:39:53 PM                                                                                                                    
REPRESENTATIVE JOSEPHSON  surmised that  the 25  percent interest                                                               
Ms. Delbridge asserts  Alaska holds is subject  to the conditions                                                               
of the  contract with TransCanada, which  considerably diminishes                                                               
the state's share.                                                                                                              
MS.  DELBRIDGE answered  that the  state  has 25  percent of  the                                                               
liquid faction facility, and within  its agreement with the other                                                               
entities  it still  has the  25  percent with  the gas  treatment                                                               
plant  and pipeline.   She  noted that  the state  has chosen  to                                                               
bring  TransCanada  in  and  turn  over  some  of  its  share  to                                                               
TransCanada  on  that  segment.   She  posited  there  were  some                                                               
avenues  within the  Memorandum of  Understanding (MOU),  and the                                                               
agreements,  for  the  state   and  TransCanada  to  periodically                                                               
reevaluate  that relationship  as the  FEED decision  approaches.                                                               
She related  that while it is  currently the case, it  will be up                                                               
to  the  legislature,  and  the  state involved  in  the  AK  LNG                                                               
negotiations, to determine the final shape.                                                                                     
1:40:59 PM                                                                                                                    
REPRESENTATIVE  JOSEPHSON  pointed  out  that HB  132  speaks  to                                                               
exporting no more  than Alaska uses domestically.   He questioned                                                               
why that determination  was made as opposed to  something more or                                                               
less than  that, and  whether it relates  to the  existing export                                                               
project of ConocoPhillips.                                                                                                      
MS. DELBRIDGE  responded "in no way  did it attempt to  relate to                                                               
ConocoPhillips's existing  export project,"  as the  decision was                                                               
made in looking  for a way to avoid a  competing LNG project, and                                                               
to  somehow cap  the  size  of the  project  that Alaska  Gasline                                                               
Development Corporation (AGDC)  can go forward with  to ensure it                                                               
is not primarily  an export project.  She advised,  at that point                                                               
there  are  different avenues  to  review  as  there could  be  a                                                               
volumetric limitation  on it.   She noted that the  sponsor chose                                                               
to go with simply a majority  believing that then it could not be                                                               
a dedicated LNG  project called an in-state project.   She stated                                                               
that in-state  demand currently is  probably between 200  and 250                                                               
million cubic feet, and that being  said the sponsor did not want                                                               
to put  a volumetric  cap because  if AGDC is  able to  build in-                                                               
state demand  and work that  into its project, the  sponsor wants                                                               
that  to  be a  great  as  possible.    For example,  she  noted,                                                               
regarding a  value added industry  desiring to participate  in an                                                               
in-state pipeline,  it could  grow significantly  and, therefore,                                                               
so could the availability for export projects.                                                                                  
1:42:39 PM                                                                                                                    
CO-CHAIR NAGEAK asked if there is  an objection to a letter being                                                               
written by staff.                                                                                                               
MS. DELBRIDGE  offered that the  committee has  already submitted                                                               
the letter to  Governor Walker requesting that  information.  She                                                               
advised she  wanted to clear up  her statement on the  record and                                                               
explain  that  she  believes  the   committee  should  keep  that                                                               
previously sent letter  as an ask to make sure  the committee has                                                               
the correct document.                                                                                                           
1:43:16 PM                                                                                                                    
REPRESENTATIVE JOSEPHSON  asked the  source of the  documents she                                                               
presented today.                                                                                                                
MS. DELBRIDGE replied  that they came from  AGPA's application to                                                               
the U.S.  Department of Energy  (DOE) for an LNG  export license,                                                               
and she  could provide a docket  number and link to  the web site                                                               
where they are  all listed.  She advised this  was within several                                                               
volumes of  backup material  AGPS provided to  DOE after  DOE had                                                               
some questions on the original application.                                                                                     
1:43:54 PM                                                                                                                    
REPRESENTATIVE  SEATON   referred  to  the   previous  discussion                                                               
regarding competing projects  as if they were the same.   At that                                                               
time,  Representative Seaton  brought to  her attention  that the                                                               
producers generally  have a much  higher hurdle rate  or internal                                                               
rate of return when doing production  profit tax (PPT) that was a                                                               
minimum  of 15  percent, sometimes  up to  25, 27  percent before                                                               
they  make final  investment decision  on a  project.   He opined                                                               
that  utilities  generally  have   a  final  investment  decision                                                               
internal rate  of return numbers  more in the 6-9  percent range.                                                               
In  that  regard,  these projects  might  be  contemplated  quite                                                               
differently  because  of  the  rates  of  return  that  might  be                                                               
required  whether  it is  by  a  producer sponsored  project  and                                                               
financed, or whether it is  a buyer sponsored project through the                                                               
long-term contract.   He asked  that Ms. Delbridge  address those                                                               
issues as the  FEEDs are competitive projects  for anything other                                                               
than gas and whether they are quite dissimilar that way.                                                                        
MS.  DELBRIDGE  answered that  not  enough  is known  about  this                                                               
alternative  project  to  be conclusive  that  it  would  involve                                                               
utilities.  She advised there  has been some indication among the                                                               
people  brought to  Alaska as  potentially interested  parties in                                                               
the past  have included utilities.   However, there  are entities                                                               
that are  essentially trading companies, such  as Mitsubishi, and                                                               
they certainly  are not a utility  and may have its  own internal                                                               
needs.    Without  any  sense  of guarantee  that  this  goes  to                                                               
utilities and  an understanding of  what is what, she  opined, it                                                               
is difficult to be clear on  whether or not they are competing in                                                               
that manner as  it depends on the system that  is put together in                                                               
the end.   She stated that she cannot speak  to what was garnered                                                               
from the members during the PPT  debate from who, from what.  She                                                               
advised that  she has  heard from the  companies that  while they                                                               
have their  hurdle rate,  or their internal  rate of  return that                                                               
they look to, but there can be  a lot of other factors going into                                                               
their decision making.   They are the ones that  need to be clear                                                               
with the  committee on what  they are looking for  in conjunction                                                               
with that, she remarked.                                                                                                        
1:46:55 PM                                                                                                                    
[HB 132 was held over.]                                                                                                         
1:47:05 PM                                                                                                                    
The committee took an at-ease from 1:47 p.m. to 1:48 p.m.                                                                       
^PRESENTATION(S):  Middle Earth Tax Credits                                                                                     
           PRESENTATION(S):  Middle Earth Tax Credits                                                                       
1:48:09 PM                                                                                                                    
CO-CHAIR NAGEAK  announced that the  next order of business  is a                                                               
presentation   entitled  "Interior   Oil  and   Gas  Exploration"                                                               
conducted by Doyon, Limited.                                                                                                    
1:49:06 PM                                                                                                                    
JAMES MERY,  Senior Vice President, Lands  and Natural Resources,                                                               
Doyon, Limited,  said he  is the Senior  Vice President  of Lands                                                               
and Natural Resources at Doyon,  Limited, and has been with Doyon                                                               
since 1980.   He  remarked that his  presentation is  offering an                                                               
update on exploration Doyon has  been involved in within Interior                                                               
Alaska, which he described as part  of "Middle Earth."  He stated                                                               
that Middle  Earth is a  creature of  the legislature, but  it is                                                               
defined within the credit statutes  as everything outside of Cook                                                               
Inlet and south of the Brooks Range.                                                                                            
1:49:22 PM                                                                                                                    
MR. MERY referred  to slide 2, and stated  his presentation would                                                               
cover Doyon exploration in Nenana  and Yukon Flats basins in that                                                               
there are similarities and difference  between the two.  His main                                                               
focus will be on Nenana as  that is where most of Doyon's efforts                                                               
have been  over the  last several  years, including  drilling and                                                               
two seismic programs, and  in the fall of 2014 a  3D program.  He                                                               
stated that within  these two basins is the  presence of prolific                                                               
hydrocarbon systems,  source traps,  and seals.   He  noted their                                                               
recent well in 2013  where a lot of wet gas was  seen which is an                                                               
indicator of an oil lease system.   He remarked he will close out                                                               
his presentation  with the importance of  the exploration credits                                                               
program and  what it has meant  to the activities Doyon  has been                                                               
performing that enabled it to get as far as it has gotten.                                                                      
1:50:21 PM                                                                                                                    
MR. MERY  referred to  slide 3, and  described Doyon,  Limited as                                                               
the  Alaska   Native  Claims  Settlement  Act   (ANCSA)  regional                                                               
corporation  for  Interior Alaska,  and  is  the largest  private                                                               
landowner in  the state with  over 19,000 shareholders  of Native                                                               
American  descent.    He  pointed  out that  Doyon  has  a  large                                                               
operation focus in Alaska and  most of the operating entities are                                                               
oil  field support,  primarily Doyon  Drilling, and  a number  of                                                               
other  support  industry  providers of  services  throughout  the                                                               
state.    Doyon  also  focuses  on Interior  oil,  gas  and  hard                                                               
minerals exploration.   In 2014  Doyon had profits, after  tax of                                                               
$23 million in revenues, of over $350 million.                                                                                  
1:51:16 PM                                                                                                                    
MR.  MERY referred  to slide  4, and  indicated it  is a  general                                                               
locater map  of the Nenana  Basin and Yukon Flats  Basin relative                                                               
to Cook Inlet and  the North Slope.  He referred  to slide 5, and                                                               
stated it  is a  focus on  some of the  land ownership  issues, a                                                               
sense  of  the   scale,  and  also  to  note   the  proximity  of                                                               
infrastructure which is  something a person doesn't see  in a lot                                                               
of  places  in  Alaska.     He  said  it  is  relatively  gifted,                                                               
especially the Nenana Basin with access to infrastructure.                                                                      
1:51:53 PM                                                                                                                    
MR. MERY referred to slide 6,  and pointed out that regarding the                                                               
Nenana  Basin, Doyon  is focused  on  400,000 acres  of State  of                                                               
Alaska leases, with a small presence  of Doyon lands.  He advised                                                               
that  under   the  seven  year   terms,  Doyon  pays   the  state                                                               
approximately $1.2 million  a year in rentals.  He  said that the                                                               
Doyon lands are shared with  the village corporation, Toghotthele                                                               
Corporation, and  that it  has provided a  number of  services to                                                               
Doyon.  He  noted there is no federal  ownership nearby, however,                                                               
the northern  third of  the lease  bought is  in the  Minto Flats                                                               
State Game  Refuge where  oil and  gas is  conditionally allowed.                                                               
He  pointed out  that  with  regard to  Yukon  Flats, Doyon  owns                                                               
approximately  1.5 million  acres  that are  prospective oil  and                                                               
gas, and  three separate sub-basins  with no time  constraints or                                                               
holding costs.  He pointed  out that Nenana Basin is on-the-clock                                                               
and is  not on the  lands Doyon owns in  Yukon Flats.   There are                                                               
three  ANCSA  villages  with surface  ownership.    The  adjacent                                                               
federal lands are  within a national wildlife refuge  and are off                                                               
limits to any  oil and gas exploration and, he  described them as                                                               
"a most uncooperative bunch of people."                                                                                         
1:53:47 PM                                                                                                                    
CO-CHAIR   NAGEAK   asked  the   name   of   the  three   village                                                               
MR. MERY replied that they  are corporations for Stevens Village,                                                               
Beaver and  Birch Creek.  He  noted there are other  areas in the                                                               
Yukon  Flats but  those are  the  areas Doyon  believes there  is                                                               
1:54:07 PM                                                                                                                    
MR. MERY referred  to slide 7, and explained that  the two basins                                                               
have similar  geology in  that they are  deep, young  basins with                                                               
potential source rock, coals, coal  shales, and possibly lake bed                                                               
shales,  with trapping  opportunities as  well.   He pointed  out                                                               
that oil is Doyon's primary target, and gas is its secondary.                                                                   
1:54:30 PM                                                                                                                    
MR. MERY referred  to slide 9, [no slide 8]  and said it provides                                                               
history of prior exploration by  major oil companies, both in the                                                               
1960s and  1980s.  He  remarked there  is some seismic  left over                                                               
from those  projects, and two  shallow wells on the  basin flanks                                                               
that  were  fundamental  and  stratigraphic  test  wells.    More                                                               
recently, during 2005,  2012, and 2014, there  were three seismic                                                               
campaigns basin-wide,  and two deep  well in the central  part of                                                               
the basin in 2009  and 2013, called Nunivak #1 and  #2.  He noted                                                               
there have been  numerous studies over time  and has re-evaluated                                                               
licensed heritage data from major  oil companies out there in the                                                               
earlier days.   He  pointed out  that Doyon  had partners  in the                                                               
early days  that left  Doyon, but  Doyon has  picked up  the pace                                                               
considerably since they've  gone.  He stated  that Doyon believes                                                               
it has  more reasons to  make this project work  as it is  in its                                                               
back yard, Minto  and Nenana are on the flanks  of the basin, and                                                               
if it has success  it is creating new markets for  all of the oil                                                               
field support industry groups that were in business then.                                                                       
1:55:57 PM                                                                                                                    
MR. MERY referred to slide 10,  and described it as a close-up of                                                               
Nenana  Basin  plus  an  especially  gifted  infrastructure  with                                                               
respect  to opportunities  to  monetize oil  in  particular.   He                                                               
referred to slide 12, and  stated it depicts a geophysics defined                                                               
Nenana Basin.   He referred  to slide  12, and stated  the Nenana                                                               
Petroleum  System source  is  excellent oil  and  wet gas  source                                                               
rocks in  coals and  coal shales.   Doyon  has drilled  wells and                                                               
found  that the  source goes  deep into  the hot  kitchen of  the                                                               
basin  where oil  and  natural gas  should  be actively  expelled                                                               
today, actually.   He offered that  Doyon knows the basin  is hot                                                               
based  on information  from the  wells and  projections performed                                                               
from the heat measurements in the  wells to generate oil and gas.                                                               
Doyon found migrated wet gases  (propane, butane, pentane, and et                                                               
cetera.) in  the well bore.   He described that a  wet gas system                                                               
is sometimes indicative of something  that should be oily in most                                                               
of  the  analogs   for  these  kinds  of  basins,   if  they  are                                                               
productive, there  will be gas and  oil fields and mixed  gas and                                                               
oil fields.   He described world class reservoirs  out there that                                                               
have been  seen through the drill  bit as well, and  there should                                                               
be many opportunities to trap hydrocarbons.                                                                                     
1:58:47 PM                                                                                                                    
REPRESENTATIVE JOSEPHSON referred to  heritage lines and surmised                                                               
Mr. Mery was referring to pre-1971 lines.                                                                                       
MR.  MERY answered  that the  heritage lines  are basically  line                                                               
that are  out there that Doyon  did not shoot in  an earlier era,                                                               
and in particular he is discussing  shale lines that were shot in                                                               
approximately 1981.                                                                                                             
REPRESENTATIVE  JOSEPHSON surmised  they  were  shot after  Doyon                                                               
took title of the land.                                                                                                         
MR.  MERY explained  that these  were mostly  on State  of Alaska                                                               
lands, where most of Doyon's leases are located.                                                                                
1:59:32 PM                                                                                                                    
MR.   MERY  referred   to  slide   13,  and   advised  it   is  a                                                               
representation  of the  basin being  over 20,000  feet deep,  and                                                               
there should be plenty of  heat to generate hydrocarbons from the                                                               
immature source  rocks seen higher up  in the system.   He stated                                                               
they are  much deeper  in the  system and can  be tracked  on the                                                               
1:59:50 PM                                                                                                                    
MR. MERY  referred to slide 14,  and advised it is  regarding the                                                               
Nunivak #2  well of which is  the first well Doyon  operated.  He                                                               
pointed out that  a lot of permits are necessary  to drill a well                                                               
and most  are run  through the  state system.   He  described the                                                               
relationship between Doyon and the  State of Alaska as "great" in                                                               
that the state  is helpful, diligent, and very  professional.  He                                                               
further  described  Doyon  as having  "great"  relationship  with                                                               
local communities  who are supportive of  Doyon's activities, and                                                               
that Doyon hires and works locally with contractors.                                                                            
2:00:37 PM                                                                                                                    
MR. MERY  referred to  slide 15,  and offered  it depicts  a road                                                               
system Doyon built  which is focused a few miles  west of Nenana.                                                               
He referred to slide 16, and  described it as the manner in which                                                               
the Nenana  River is  crossed in  the summer  time when  Doyon is                                                               
drilling.  He pointed out there  will be a bridge over the Nenana                                                               
River connecting  to the  Parks Highway System.   He  referred to                                                               
slide  17, and  noted it  depicts  the countryside  and the  road                                                               
system.   He referred  to slide  18, and advised  it is  the most                                                               
recent  well site  which is  approximately 11  miles due  west of                                                               
2:02:23 PM                                                                                                                    
MR. MERY referred to slide  19, and addressed that Doyon believes                                                               
it has  all of  the elements  of an active  and prolific  wet gas                                                               
and, hopefully, an oil system.   Doyon knows that the hydrocarbon                                                               
system  should   be  extensive  as   it  has   performed  seismic                                                               
throughout the basin,  through modeling in that  it believes that                                                               
the basin given  the thick packages of source  rock could produce                                                               
billions of  barrels of oil and  trillions of cubic feet  of gas.                                                               
He said that Doyon saw a lot of  wet gas in the well bore and not                                                               
so much  for oil and  that Doyon substantially de-risked  the gas                                                               
promise in  the Nenana Basin.   He  pointed out that  with nearby                                                               
infrastructure  the North  Slope size  accumulations just  simply                                                               
are  not  needed,  although  $50  per barrel  (bbl)  oil  is  not                                                               
helpful.  He opined that  a relatively small accumulation can get                                                               
Doyon started and there should be  plenty more of those if it can                                                               
get the first one going.                                                                                                        
2:03:32 PM                                                                                                                    
MR. MERY referred to slide 20,  and advised that Doyon needs more                                                               
seismic, primarily  on the north end  of the basin where  many of                                                               
Doyon's State  of Alaska's  leases are located.   He  pointed out                                                               
that  Doyon is  looking hard  at  drilling in  2016, within  that                                                               
area.   He referred to slide  21, "Nenana 2014 3D  and 2D Seismic                                                               
Area," and said  it depicts the 3D area, the  road already there,                                                               
with some of  the multiple landownership issues  and proximity to                                                               
Nenana.  He  related that Doyon is right off  the road system for                                                               
this portion of  the basin.  He referred to  slide 22, and stated                                                               
this has been  the wettest summer in the history  of the Interior                                                               
and the  workers had a rough  time of drilling the  holes for the                                                               
seismic program  and collecting data was  difficult because there                                                               
are extensive areas of burn in the past and a lot of dead falls.                                                                
2:04:52 PM                                                                                                                    
MR. MERY  referred to slide  23, and said  that oil would  be the                                                               
best  economic  case for  both  Doyon  and  the state.    Startup                                                               
minimum  economic field  size  for  this part  of  the world,  is                                                               
somewhere  between 25  and 50  million barrels  of oil  depending                                                               
upon oil  price.   He stated that  Doyon clearly  sees structures                                                               
out there  that would hold  that much and  more.  He  pointed out                                                               
that there is plenty of  room in the Trans-Alaska Pipeline System                                                               
(TAPS) via truck, rail, or  feeder pipeline, and that Doyon views                                                               
the chances of success with the next  well as one in five, to one                                                               
in ten.  He explained that in the  event gas is found it could be                                                               
stranded for  a number  of years as  there may not  be much  of a                                                               
Fairbanks  market for  the next  10-12 years  due to  all of  the                                                               
other  projects,  Cook  Inlet trucking,  state  take-over,  those                                                               
sorts of  things.   He clarified  that he was  not making  a case                                                               
that  "people shouldn't  do  that,"  and Doyon  does  not have  a                                                               
product to  offer right now  but it  is a complicated  factor for                                                               
Doyon.  He  questioned whether the producers and  the state would                                                               
allow Nenana gas into an  export line and liquefaction plant, and                                                               
if so under reasonable terms.  He  noted that gas has been so de-                                                               
risked at this  point that there is a 50/50  chance of commercial                                                               
success the next time Doyon drills.                                                                                             
2:06:38 PM                                                                                                                    
MR. MERY referred to slide 24,  and offered Doyon's thanks to the                                                               
legislature for  the credits  program in  place because  they are                                                               
essential to the activities Doyon  has performed in the Interior.                                                               
He noted there is one in  particular that has not worked well for                                                               
Doyon  and with  a bit  of  tweaking it  could work  better.   In                                                               
general,  he offered,  these programs  have worked  exceptionally                                                               
well and  hopefully will result in  a brand new industry  for the                                                               
interior part of the state, and new revenue for the state.                                                                      
2:07:28 PM                                                                                                                    
REPRESENTATIVE HAWKER stated he  appreciates Mr. Mery's testimony                                                               
and that  the credit structure  has worked.   He offered  that he                                                               
believes  that  the  big  money  is a  mega  oil  discovery,  but                                                               
sometimes a company gets gas.   He asked when Doyon expects to be                                                               
able to  prove up and provide  an estimate of proven  reserves of                                                               
gas on  its properties  as opposed to  the probable  and possible                                                               
MR.   MERY   said    that   theoretically,   realistically,   and                                                               
optimistically,  if  Doyon drills  next  winter  with success  it                                                               
would be looking  at a couple of seasons  of delineation drilling                                                               
and then  Doyon would have  a handle  on its confidence  level on                                                               
the resource and 2018 is the most optimistic case.                                                                              
2:09:09 PM                                                                                                                    
REPRESENTATIVE HAWKER  asked whether  Doyon intends  to follow-up                                                               
and prove-up its gas reserves.                                                                                                  
MR. MERY answered that if Doyon was to find only gas ...                                                                        
REPRESENTATIVE HAWKER restated his question  in that Mr. Mery has                                                               
indicated strong gas shows, wet  gas shows, and gas substantially                                                               
de-risked with  a 50/50 chance  of commercial success.   He asked                                                               
whether  Doyon  intends  to  prove-up its  gas  and  pursue  that                                                               
MR. MERY responded  that it is a decision for  the Doyon, Limited                                                               
Board of  Directors, and in  the event  Doyon found only  gas the                                                               
next time  it drills,  Doyon would  have to  think long  and hard                                                               
about that because its focus is  on oil.  If Doyon can't monetize                                                               
something for  10-20 years  then Doyon would  have to  think hard                                                               
about spending more money, he opined.                                                                                           
2:10:20 PM                                                                                                                    
REPRESENTATIVE HAWKER  stated in that  situation he was  not sure                                                               
which was  cart and  which was  horse.  He  remarked that  in the                                                               
event  Doyon  cannot tell  Representative  Hawker  it intends  to                                                               
pursue monetization  of its resource,  then naturally it  will be                                                               
stranded for  a decade  or more,  and naturally  it would  not be                                                               
able to make the Fairbanks market.   Although, he pointed out, if                                                               
Doyon  was aggressive  and  competitive that  the  market is  out                                                               
there for the  grabbing today.  He asked that  Mr. Mery take that                                                               
information back to the Doyon Board of Directors.                                                                               
MR. MERY responded in the affirmative.                                                                                          
2:10:48 PM                                                                                                                    
REPRESENTATIVE SEATON asked how long the state leases run.                                                                      
MR. MERY  replied that  they came out  of several  groupings, but                                                               
basically somewhere in the 2019-2020 timeframe.                                                                                 
2:11:10 PM                                                                                                                    
REPRESENTATIVE  JOSEPHSON requested  a  thumbnail  sketch of  the                                                               
credits Doyon is receiving, how  that is working, and what system                                                               
is being used.                                                                                                                  
MR. MERY  answered that  Doyon tried  different things  over time                                                               
and most  recently used the  .023 credits, although  .025 credits                                                               
have been used in the past.                                                                                                     
REPRESENTATIVE JOSEPHSON asked the value of those credits.                                                                      
MR. MERY said it  depends if they are on the  system as there are                                                               
different  programs  with  different requirements  and  different                                                               
eligibility of  costs, but  roughly Doyon  is receiving  $0.60 on                                                               
the dollar, more or less.                                                                                                       
2:12:17 PM                                                                                                                    
The committee took a brief at-ease.                                                                                             
2:13:11 PM                                                                                                                    
JOE   BOVEE,  Vice   President,   Land   and  Resources,   Ahtna,                                                               
Incorporated,  said  he  is  the   Vice  President  of  Land  and                                                               
Resources for  Ahtna, Incorporated.   In follow-up to  Mr. Mery's                                                               
testimony, he referred to the  slide entitled "Oil and Gas Basins                                                               
in Alaska"  and stated that there  are six oil and  gas basins in                                                               
Alaska.   He referred to  the slide entitled "New  Frontier Basin                                                               
Tax Credits,"  and said that  currently Ahtna is  exploring under                                                               
the New Frontier Basin and Middle  Earth tax credits.  He offered                                                               
that there are different provisions  within tax credit scenarios,                                                               
et  cetera.   He emphasized  that without  the tax  credits Ahtna                                                               
would  not be  here today.   He  referred to  the slide  entitled                                                               
"What  is  Currently  Known  About Gas  Prospects  in  the  Ahtna                                                               
Region,"  and  stated that  the  geologic  structure of  interest                                                               
currently  under  state  land  is  that  it  has  a  44,000  acre                                                               
exploration  license  with the  State  of  Alaska, and  over  the                                                               
previous 30-40 years  and specifically the last  5-10 years Ahtna                                                               
has spent millions of dollars  exploring that region.  Geological                                                               
data and  past exploration give  strong natural  gas indications,                                                               
he  offered, and  the formation  is  accessible to  south-central                                                               
Alaska  population   centers,  state  highway  road   system  and                                                               
tidewater,  however, technical  drilling  challenges  are due  to                                                               
high pressure water zones identified in previous wells.                                                                         
2:14:28 PM                                                                                                                    
MR.  BOVEE referred  to the  slide entitled  "Copper River  Basin                                                               
Natural Gas,"  and stated  that the map  shows the  area outlined                                                               
where most  of the exploration  is performed, and inside  the red                                                               
line  is approximately  2 million  acres primarily  owned by  the                                                               
State of  Alaska and  to a  lesser degree Ahtna.   The  white box                                                               
depicts  where   the  state  exploration  license   is  currently                                                               
located.     He  referred  to  the   slide  entitled  "Geological                                                               
Summary,"  and  offered that  the  chart  depicts previous  wells                                                               
drilled and  shows that it  is conducive to natural  gas deposits                                                               
and entraps and holds the natural  gas there.  He referred to the                                                               
slide  entitled "Current  Prospects,"  and stated  that in  2013,                                                               
Ahtna  was awarded  an  exploration license  on  44,000 acres  of                                                               
state land,  approximately 10-15  miles west  of Glennallen.   He                                                               
explained  that   in  early  2014,   Ahtna  partnered   with  two                                                               
exploration partners,  Rutter &  Wilbanks of Midland,  Texas, and                                                               
Santa  Petroleum of  Welland, Australia.    He further  explained                                                               
that in early 2014, Ahtna  re-processed approximately 90 miles of                                                               
pre-existing seismic from the 1970s  to 1980s, and basically tied                                                               
in  some of  the previous  seismic with  what has  been performed                                                               
more recently in  the 2000 era.  Subsequent  to re-processing the                                                               
90 miles,  he said that  Ahtna identified a structure  within the                                                               
State  of Alaska  license area  and conducted  an additional  40-                                                               
miles of  new seismic last winter.   He pointed out  that the job                                                               
finished  on time  and slightly  over budget  in that  there were                                                               
problems with  a warm  winter in  Copper Basin.   He  stated that                                                               
usually between November and December  there are days or weeks of                                                               
at least 30 to 50 degrees  below freezing.  However, he remarked,                                                               
this  year   there  were  only   several  days  of   below  zero.                                                               
Preliminary data  shows the outline  of a crest of  gas structure                                                               
12-14 miles  west of Glennallen, and  less than 2 miles  from the                                                               
Richardson Highway.   He pointed to a map  depicting well target,                                                               
state  exploration  license area,  and  oil  and gas  exploration                                                               
wells which  are accessible.   Ahtna is pleased with  the results                                                               
of  the seismic  data  that  has been  re-processed  and the  new                                                               
seismic performed  last year.   He referred to  a cross-sectional                                                               
of  the seismic,  and  stated  that Moose  Creek  was drilled  by                                                               
Rutter & Wilbanks  in the early 2000 and the  Ahtna 1-19, showing                                                               
some  structure   was  performed   in  the  mid-2000s,   and  the                                                               
exploration  target now  being pursued  on state  land is  to the                                                               
right.    He  described  them   as  similar  depths  and  similar                                                               
structures,   however,  with   lessons   learned  from   previous                                                               
experiences in  exploration Ahtna  has performed, it  knows there                                                               
will probably be high water  pressures, certain amounts of depths                                                               
so  it  hired  and  contracted  with  professional  engineers  to                                                               
eliminate that.                                                                                                                 
2:18:01 PM                                                                                                                    
MR.  BOVEE  referred to  the  slide  entitled, "Range  of  Market                                                               
Opportunities," and stated  Ahtna has a small  market there which                                                               
has probably  withheld any development  in the last  20-30 years.                                                               
Ahtna  was looking  at options  and basically  if it  can produce                                                               
thousands of BTUs or cubic feet  per day there would never be any                                                               
development.   In  the event  millions of  BTUs a  day, it  would                                                               
probably only be for local  development, and if Ahtna can produce                                                               
billions it would probably be  in-state or international markets.                                                               
Ahtna's  focus  would  be  to  at least  get  gas  to  the  local                                                               
residents of the  Copper Basin at this time.   He referred to the                                                               
slide entitled,  "Development Options," and  noted that it  is an                                                               
illustration regarding what Ahtna  has looked at, and preliminary                                                               
ideas and  suggestions from  experts.  He  referred to  the slide                                                               
entitled, "Local Market  is Viable," and stated  the local market                                                               
price is  approximately $3.50  per gallon, but  there is  still a                                                               
savings of roughly  40-50 percent over the  current diesel market                                                               
in  the region.    He  opined that  is  consistent with  Interior                                                               
Alaska and rural  Alaska rates so there is  an undeniable savings                                                               
from natural gas.                                                                                                               
2:19:11 PM                                                                                                                    
MR. BOVEE referred to the  slide entitled, "Ahtna Gas Development                                                               
Timeline,"  and offered  that  currently Ahtna  is  in the  green                                                               
section.     He  highlighted  that   to  date  Ahtna   has  spent                                                               
approximately  $3 million  in  the last  year  and one-half,  and                                                               
plans to  spend another  $1.3-$1.5 million  in the  next four-six                                                               
months  with the  drilling plans  scheduled for  a drilling  rig,                                                               
subcontractors,  permitting process,  and so  forth.   He advised                                                               
that if  all things stand, Ahtna  will drill a first  well on the                                                               
state license area sometime in  December-January 2016, and at the                                                               
end  Ahtna  will have  expended  close  to $10-$15  million,  and                                                               
expects to come  up with gas for  the local or in-state  gas.  He                                                               
referred to the slide entitled,  "Conclusion and Next Steps," and                                                               
stated  that Ahtna  will  engineer  and design  a  new well  with                                                               
completion  prior to  June 2016.   He  pointed out  that the  New                                                               
Frontier Basin tax credits expire  June 30, 2016, but Ahtna would                                                               
like to tweak some of these  and possibly continue on for another                                                               
year or two.   He advised that some of the  tax credit issues are                                                               
confusing  and  when talking  to  DNR,  a  person should  have  a                                                               
lawyer, accountant, and a world  champion arm wrestler because it                                                               
not  all  cut and  dry.    He  opined  that the  legislature  had                                                               
intended to  incentivize some of the  under-explored Middle Earth                                                               
areas which has  helped a lot as  Ahtna would not be  where it is                                                               
today.  Additionally,  Ahtna is 50-60 percent  confident that gas                                                               
would be found there as all  the wells ever drilled in the basin,                                                               
the previous  40-50 years have had  gas shows, and the  last well                                                               
drilled had gas but  Ahtna was not able to quantify  it or give a                                                               
quality assessment  to it.   He opined  that Ahtna knows  what it                                                               
did wrong and  will do it right  the next time.   In the process,                                                               
Ahtna  is  processing a  Regulatory  Commission  of Alaska  (RCA)                                                               
application  for   local  gas  distribution  and   continuing  to                                                               
determine  and  develop  markets,  such as  a  pipeline  only  to                                                               
Glennallen, a  pipeline to some  of the  neighboring communities,                                                               
possibly a micro LNG plant, or an electrical intertie.                                                                          
2:21:37 PM                                                                                                                    
REPRESENTATIVE HAWKER referred to  the slide, "New Frontier Basin                                                               
Tax  Credits," wherein  Ahtna requests  changes to  the .025  tax                                                               
structure, wherein  the first item is  to reduce well depth.   He                                                               
asked whether  the only well  depth requirement for  .025 credits                                                               
had to do with the "Cook Inlet stampede."                                                                                       
MR. BOVEE opined that the wells  have to be 10,000 feet or proven                                                               
that the well has hit the ceiling or the floor of the structure.                                                                
REPRESENTATIVE  HAWKER  asked  whether   that  requirement  is  a                                                               
regulatory matter or a statutory matter.                                                                                        
MR. BOVEE  answered that it is  a statutory matter.   With regard                                                               
to .025,  he opined, because there  is .025 Middle Earth  and New                                                               
Frontier, that under the .025  the commissioner has the authority                                                               
to determine  whether the structure  has been fully drilled  to a                                                               
certain  depth.    Under  the New  Frontier,  he  suggested,  the                                                               
provision  is not  there and  the commissioner  cannot make  that                                                               
decision.  He reiterated that  to extend allowable credits beyond                                                               
2016 ... 2022  would be preferable to give Ahtna  more time as it                                                               
is not  going to be  out there just  drilling one more  well, and                                                               
allow for  a faster  recovery of  the tax credits.   The  way the                                                               
.025 Middle  Earth tax  credits work,  Ahtna is  just now  in the                                                               
process  of   submitting  its  expenses  and   invoices  but  the                                                               
Department of Revenue  advised Ahtna that it will be  over a year                                                               
before Ahtna would receive any tax  credits back.  He pointed out                                                               
that under the .023  it is usually less than 3-6  months so it is                                                               
a shorter  time period and the  cost of money has  to be assessed                                                               
to before ...                                                                                                                   
2:23:29 PM                                                                                                                    
REPRESENTATIVE HAWKER  asked whether  the provision in  .025 that                                                               
you are  concerned about  a depth  ... he  advised he  is pulling                                                               
this  out  of the  tax,  (M)  subsection  of .025  talking  about                                                               
hydrocarbons likely  to be found  or reached 12,000 feet  or more                                                               
to a vertical depth, and asked whether that is the concern.                                                                     
MR. BEVEE replied "I believe so, yes."                                                                                          
2:24:43 PM                                                                                                                    
KEN ALPER,  Director, Tax Division,  Department of  Revenue, said                                                               
the Frontier Basin credit regime was  modeled in many ways on the                                                               
Cook  Inlet stampede  which  passed several  years  earlier.   He                                                               
described it  is a  higher level of  credit in  specific targeted                                                               
areas that have a depth requirement  in order to qualify for that                                                               
specific credit.                                                                                                                
REPRESENTATIVE HAWKER  referred to  the first line  of subsection                                                               
(M), regarding the persons that  drill the first four exploration                                                               
wells in  the state.   He  asked whether this  is limited  to the                                                               
first four wells or actually a much broader provision.                                                                          
MR. ALPER  responded that  the Frontier Basin  credit is  tied to                                                               
the first four  wells ... you'll see some  latitude and longitude                                                               
type information  in that statute  which is talking  about target                                                               
areas, one  of which is the  area from which Ahtna  is targeting.                                                               
In that  regard, until such time  as the fifth application  for a                                                               
Frontier  Basin credit  comes in,  the Department  of Revenue  is                                                               
receiving  them, he  opined,  and it  is  his understanding  that                                                               
Ahtna would be among those first four.                                                                                          
2:26:14 PM                                                                                                                    
REPRESENTATIVE SEATON  pointed out that with  the state's current                                                               
deficit  situation  it  is somewhat  concerning  when  discussing                                                               
large  tax  credits  to  encourage  activities  ...  normally,  a                                                               
company  takes  partners  to  supply  part  of  the  capital  for                                                               
explorations and when it is successful  they are a partner in the                                                               
income that comes from that.   He further pointed out that in the                                                               
past  the  state  had  the  position that  it  would  partner  to                                                               
encourage exploration and  development, and as soon  as there was                                                               
production the  state would back  out of the partnership  and not                                                               
take anything other than the royalty  or production tax.  He said                                                               
that as  the committee moves  forward and discusses  expanding or                                                               
extending credits to remember the  state's current situation, and                                                               
especially   if   the   legislature   has   given   special   tax                                                               
considerations to certain areas, he  related that the state would                                                               
have to look at being a true  partner in some aspect if the state                                                               
is extending capital  credits and those kind of things.   He said                                                               
he  wants  the  committee  to  start  thinking  in  a  manner  of                                                               
investing and not just giving away credits.                                                                                     
2:28:13 PM                                                                                                                    
REPRESENTATIVE  HAWKER noted  that  with regard  to the  Frontier                                                               
Basin  tax credits,  the  legislature  identified six  particular                                                               
areas, limited  it to four  wells, and specifically said  that no                                                               
more than  two of  those may  be in any  one of  those individual                                                               
areas - the one through six.  He  opined that it would seem to be                                                               
a fairly  constraining thing for  Doyon.  He surmised  that Doyon                                                               
was not discussing relief from  that provision, but more from the                                                               
12,000 feet, vertical  depth provision.  He pointed  out that the                                                               
current  requirement is  that  before  approving the  exploration                                                               
well "the commissioner of natural  resources shall consider," and                                                               
it does not  state "thou may or  thou may not," but  wanted it to                                                               
consider  that  the targeted  and  planned  depth and  range  are                                                               
designed  to   penetrate  and  fully  evaluate   the  hydrocarbon                                                               
potential  of the  proposed prospect  and reach  the level  below                                                               
which economic  hydrocarbons are  likely to be  found.   In other                                                               
words, he  stated, if the state  is giving tax credits  and Ahtna                                                               
has a well  mobilized, the state wants the company  to go all the                                                               
way  down and  not just  hit  a shallow  pocket but  look at  the                                                               
entire depth of  the prospect there, but then it  says, "or reach                                                               
12,000 feet."   He described it  as an "or" situation  with a lot                                                               
of complications  that will take  a fair amount  of consideration                                                               
before he would contemplate making a change.                                                                                    
MR. MERY answered  that the problem is not the  10,000 foot depth                                                               
as that just identifies a potential  problem due to the nature of                                                               
these  basins  including the  extreme  difficulties  in going  to                                                               
depths that  are not  essential in Doyon's  view to  evaluate the                                                               
opportunities.  He described the  bigger is the Frontier specific                                                               
credits  sitting  under  .025.    He  stated  that  the  list  of                                                               
allowable  expenses  under .025  is  restrictive  in that  an  80                                                               
percent well  and 80 percent credit  is not an 80  percent credit                                                               
as it  is more like  a 60-65 percent credit.   He opined  that it                                                               
doesn't deliver  what the legislature  intended and  through more                                                               
recent  discussions with  DNR he  is much  more comfortable  that                                                               
they  will  ...  because  there  is  flexibility  that  they  can                                                               
accommodate Doyon.  He highlighted  that the real focus should be                                                               
on picking up  the special 80 percent credits for  wells that are                                                               
sitting under  .025 and simply  sliding them  up under .023.   He                                                               
indicated that Doyon is not asking  for more wells or money, just                                                               
to put them in a place where  the full benefit of the 80 percent,                                                               
and the state  will get the money  back a little bit  sooner.  He                                                               
pointed out that because of these  problems no one has used these                                                               
and now everyone is up against the wall on the sunset date.                                                                     
2:32:05 PM                                                                                                                    
REPRESENTATIVE  HAWKER  asked whether  the  real  element is  the                                                               
differential here ...  he said he understands it  is the velocity                                                               
of  money but  is  the real  issue the  .023's  being a  directly                                                               
refundable credit, is that what is really facilitating this.                                                                    
MR. MERY responded that they both  are refundable, but there is a                                                               
longer list of allowable credits under .023 than under .025.                                                                    
REPRESENTATIVE  HAWKER  stated that  the  ultimate  issue is  the                                                               
additional  expenditures that  are allowable  under .023  and not                                                               
MR. MERY answered "Correct."   He further answered that Doyon can                                                               
get  60-65  percent under  .023  today  and  get the  money  back                                                               
quickly.  If  Doyon uses the .025 specialty 80  percent credit it                                                               
will still going  to get the same 60-65 percent  back and it will                                                               
take Doyon a year or two to get it back, he explained.                                                                          
2:33:04 PM                                                                                                                    
The committee took a brief at-ease.                                                                                             
2:34:11 PM                                                                                                                    
GRETA  SCHUERCH,  Corporate  and   Public  Policy  Liaison,  NANA                                                               
Regional Corporation, said  NANA Regional Corporation appreciates                                                               
the opportunity to provide comments  on Middle Earth tax credits.                                                               
She  advised  that in  addition  to  being NANA's  corporate  and                                                               
public policy  liaison she is  also a shareholder.   She referred                                                               
to the  slide entitled, "NANA Regional  Corporation," and advised                                                               
that NANA's  mission is to improve  the quality of life  for more                                                               
than 13,500  Inupiat shareholders by maximizing  economic growth,                                                               
protecting   and   enhancing   lands,   and   promoting   healthy                                                               
communities with  decisions and  behaviors guided by  the Inupiat                                                               
Ilitquisiat,  which  is  its  traditional   value  system.    She                                                               
referred  to  the  slide  entitled,   "Alaska  -  Kotzebue  Basin                                                               
Hydrocarbon  Potential NANA  Regional  Corporation," and  pointed                                                               
out  that the  figures  show  the location  of  the  area in  the                                                               
Kotzebue Basin  with potential  for gas.   NANA shares  Doyon and                                                               
Ahtna's position  on the Middle Earth  tax credits due to  a dire                                                               
need for  affordable energy in the  region.  She referred  to the                                                               
slide entitled, "Need for Energy,"  and advised that residents in                                                               
Northwest Alaska are paying between  $6 and $11.00 per gallon for                                                               
gasoline and  heating fuel.   Lower energy costs  through natural                                                               
gas  will  offer sustainable  solutions  to  the region's  energy                                                               
crisis.   She referred to  the slide entitled, "Kotzebue  Oil and                                                               
Gas  Project  History," and  remarked  it  shows the  history  of                                                               
exploration in  the Kotzebue Basin  and that the initial  work in                                                               
the basin was conducted by Chevron,  in the 1970s, with two wells                                                               
drilled  to  approximately  6-8,000 feet  together  with  seismic                                                               
work.  She  referred to a slide entitled,  "Local Geography," and                                                               
noted the  map shows  the Kotzebue  Basin.   She referred  to the                                                               
slide entitled,  "Exploration History  and Data," and  advised it                                                               
shows the seismic data collected and  the red dots show the wells                                                               
drilled by Chevron.                                                                                                             
2:37:39 PM                                                                                                                    
MS. SCHUERCH  referred to the slide  entitled, "Primary Reservoir                                                               
Targets,"  and  pointed  out  that  it is  a  cross  section,  or                                                               
vertical  slice  through the  earth.    She said  the  geological                                                               
section is a  correlation between the two wells  drilled 60 miles                                                               
apart from the  Chevron work.  She addressed  the stratigraphy of                                                               
mixed shales  and sandstones  are interpreted  by a  geologist to                                                               
have yielded  some perspective zones  and significant  pole seams                                                               
over  100 feet  thick were  also encountered  in the  well.   She                                                               
referred to  the slide entitled,  "TODAY - Advancing  the Basin,"                                                               
and said that  NANA's new efforts lead to  five companies signing                                                               
confidentiality  agreements   in  2014,  and  one   company  from                                                               
overseas making  two site  visits.   However, the  company deemed                                                               
the  basin  as  too  high  of  a  geological  risk  to  fund  the                                                               
exploration in  total.   She offered  that there  is no  deal and                                                               
because  of this  NANA continues  to evaluate  how it  could help                                                               
fund seismic  work to de-risk  the geology and  technical aspects                                                               
of the basin.   She referred to the slide  entitled, "How and why                                                               
'de-risk'  the  geology of  the  basin,"  and commented  that  in                                                               
receiving more information  in the way of seismic  data NANA will                                                               
have a better  chance of defining potential  targets for drilling                                                               
as  companies  want  to  see more  geological  information.    If                                                               
successful,  more  data  will  add greater  value  for  NANA  and                                                               
additional seismic data is required  to lower the risk, she said.                                                               
She referred  to the slide  entitled, "Next Steps,"  and conveyed                                                               
that NANA's next  steps is continuing to look  for partners which                                                               
is challenging,  although the state's incentives  have helped the                                                               
progress to  date.   NANA continues  to evaluate  self-funding of                                                               
the seismic  work, continues to  work with interested  parties on                                                               
data review for  potential funding, and aims for  seismic work in                                                               
2015-2016  or 2016-2017.   NANA  thanks the  legislature for  its                                                               
help to alleviate the cost of  living and cost of energy in rural                                                               
areas.   She remarked that while  NANA does not know  if there is                                                               
natural gas, it continues to  move the project ahead to determine                                                               
the   potential  in   that  discovery   of   natural  gas   would                                                               
significantly  help this  area where  some  residents are  paying                                                               
$11.00 per gallon to heat their homes.                                                                                          
2:40:13 PM                                                                                                                    
REPRESENTATIVE  OLSON asked  whether 10  years ago  test drilling                                                               
and  test holes  were bored  within about  20 miles  of Red  Dog,                                                               
possibly not by NANA's corporation.                                                                                             
MS. SCHUERCH replied  that she does not know the  answer but will                                                               
get back to the committee.                                                                                                      
2:41:19 PM                                                                                                                    
The House  Resources Standing Committee  meeting was  recessed at                                                               
2:41 p.m. and reconvened at 6:00 p.m.                                                                                           

Document Name Date/Time Subjects
3.11.15 HRES HB 100 H.pdf HRES 3/11/2015 1:00:00 PM
HB 100
3.11.15 HB 100 Fiscal Note.pdf HRES 3/11/2015 1:00:00 PM
HB 100
3.11.15 HRES HB 100 - Sponsor Statement.pdf HRES 3/11/2015 1:00:00 PM
HB 100
3.11.15 HRES HB 100 Agrium Overview.pdf HRES 3/11/2015 1:00:00 PM
HB 100
3.11.15 HRES AK Corp Tax Forms 6000 and 6300.pdf HRES 3/11/2015 1:00:00 PM
3.11.15 HRES HB 100 Corp Income Tax Credit Overview.pdf HRES 3/11/2015 1:00:00 PM
HB 100
3.11.15 HRES HB 100 - AS 38 05 135.pdf HRES 3/11/2015 1:00:00 PM
HB 100
3.11.15 HRES HB 100 Agrium McDowell Group Econ Impact Final Report 5 22 13.pdf HRES 3/11/2015 1:00:00 PM
HB 100
3.11.15 HRES HB 100 Agrium McDowell Group Econ Impact Final Report Refreshed Jan 2015.pdf HRES 3/11/2015 1:00:00 PM
HB 100
3.11.15 HRES Middle Earth Presentation - DOYON March 2015.pdf HRES 3/11/2015 1:00:00 PM
3.11.15 HRES Middle Earth Presentation - Ahtna Natural Gas Overview.pdf HRES 3/11/2015 1:00:00 PM
3.11.15 HRES CSHB 132 - Version P.pdf HRES 3/11/2015 1:00:00 PM
HB 132
3.11.15 HRES CSHB 132 Summary of Changes CS version P.pdf HRES 3/11/2015 1:00:00 PM
HB 132
3.9.15 HRES Committee Letter to Gov HB 132.pdf HRES 3/11/2015 1:00:00 PM
HB 132
3.11.15 HRES DNR Paul Decker Frontier Basins Presentation.pdf HRES 3/11/2015 1:00:00 PM
3.11.15 HRES HB 132 L Willis Testimony 3.6.15.pdf HRES 3/11/2015 1:00:00 PM
HB 132
HB 100 HRES LOS - M Stynsberg.pdf HRES 3/11/2015 1:00:00 PM
HB 100
HB 100 HRES Homer Electric Company LOS.pdf HRES 3/11/2015 1:00:00 PM
HB 100
3.11.15 HRES HB 100 AK Garden & Pet Supply Inc LOS.pdf HRES 3/11/2015 1:00:00 PM
HB 100
3.6.15 HRES HB 132 - H Heinze comments 3.17.15.pdf HRES 3/11/2015 1:00:00 PM
HB 132