Legislature(1993 - 1994)
03/30/1993 05:10 PM Senate O&G
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* first hearing in first committee of referral
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= bill was previously heard/scheduled
SENATE SPECIAL COMMITTEE ON OIL & GAS
March 30, 1993
5:10 p.m.
MEMBERS PRESENT
Senator Loren Leman, Chairman
Senator Rick Halford
Senator Bert Sharp
Senator Judith Salo
Senator Al Adams
MEMBERS ABSENT
All Present
COMMITTEE CALENDAR
SENATE BILL NO. 134
"An Act establishing credits for purchasers of state royalty
oil for expenditures made by those purchasers on qualifying
capital investments to be applied against liquidated
purchase arrearages established in contracts, settlements,
or final judgments; and providing for an effective date."
SENATE BILL NO. 151
"An Act providing for oil and gas exploration incentive
credits for certain activities on certain land in the state;
and providing for an effective date."
PREVIOUS ACTION
SB 134 - See Oil & Gas minutes dated 3/17/93, 3/18/93,
3/23/93, and 3/24/93.
SB 151 - See Oil & Gas minutes dated 3/16/93 and 3/23/93.
WITNESS REGISTER
Jim Baldwin, Assistant Attorney General
P.O. Box 110300
Juneau, Alaska 99811-0300
POSITION STATEMENT: Commented on CSSB 134.
Jack Chenoweth, Attorney
Legislative Legal Counsel
Legislative Affairs Agency
130 Seward St.
Juneau, Alaska 99801-2105
POSITION STATEMENT: Commmented on CSSB 134.
Gene Burden, Vice President
Tesoro Alaska Petroleum Company
3230 C Street
Anchorage, Alaska 99503
POSITION STATEMENT: Commented on CSSB 134.
Ken Boyd, Deputy Director
Division of Oil and Gas
Department of Natural Resources
P.O. Box 107034
Anchorage, Alaska 99510-7005
POSITION STATEMENT: Commented on CSSB 134.
ACTION NARRATIVE
TAPE 93-12, SIDE A
Number 001
SENATOR LEMAN called the Special Committee on Oil and Gas
meeting to order at 5:10 p.m. and announced SB 134 CREDITS
AGAINST PURCHASE OF ROYALTY OIL to be up for consideration.
SENATOR HALFORD moved to adopt the CS for SB 134. There
were no objections and it was so ordered.
Number 62
JIM BALDWIN, Assistant Attorney General, said there are
still major defects in the bill. The Permanent Fund
provisions of the bill give MAPCO an advantage over Tesoro,
because Tesoro has no clause for a cash payment or term in
its settlement agreement.
There was discussion on this issue and SENATOR LEMAN called
an at ease for a few minutes. MR. BALDWIN explained that
amendment #4 doesn't solve the basic problem of the credit
taking away the legislature's power to spend the state's
money.
On page 4, line 26 of the CS MR. BALDWIN explained the state
would also have to forego payment under any judgement or
settlement for a period up to 10 years.
MR. BALDWIN said the title of the bill is also defective.
The body of the bill says the credit can be applied not only
against so-called liquidated purchase arrearages, but
against any other debt owed the state. This bill goes
further than any royalty oil settlement; it goes into any
other lawful debt owed to the state.
Number 250
SENATOR LEMAN asked Mr. Chenoweth to explain the intended
parameters of the bill. MR. CHENOWETH said it was not
intended to go beyond the royalty oil obligations. He said
he wondered if, practically speaking, you would ever run
into the situation where the amount of the credit would
exceed the amount of the outstanding balance on liquidated
purchase arrearages. He thought that could be deleted.
Number 286
SENATOR LEMAN moved to adopt amendment #1. SENATOR ADAMS
objected to all 7 amendments. A vote was taken: Senator
Leman, Senator Sharp, and Senator Salo voted yes; Senator
Adams voted no, and the motion carried.
Number 306
SENATOR LEMAN moved to adopt amendment #3. There were no
objections and it was so ordered.
SENATOR LEMAN asked Mr. Chenoweth to explain amendment #4.
MR. CHENOWETH explained that the committee wanted to see
some commitment to pay, at least partially, in cash. He
tried to make a provision identifying the amount to be paid
coupled with language that would take 25 cents from the
first dollar and put it into the Permanent Fund and take 75
cents and put that into the general fund, etc. He was
asked, however, to draft the CS so that all of the first
amount that comes in goes into the Permanent Fund until that
obligation is satisfied. The general fund take is delayed
and the Permanent Fund payment is advanced.
SENATOR LEMAN moved amendment #4. SENATOR SHARP objected
for discussion.
GENE BURDEN, Tesoro Alaska, said they have roughly $100
million obligation to pay the state. Under the previous
version $25 million would go to the Permanent Fund.
Amendment #4 would require one third of the remaining $75
million be paid before a credit could be taken.
SENATOR LEMAN said he understood his concern and would make
his intentions clearer. SENATOR SALO agreed.
SENATOR HALFORD asked if the royalty on any of the later
royalty conversions show 50% to the Permanent Fund?
Number 505
KEN BOYD, Deputy Director, Division of Oil and Gas, said he
wasn't familiar enough with all the contracts to know which
leases are involved with the contract. He thought that all
of them were under the 25% provision, however.
SENATOR LEMAN requested a vote on amendment #4. Senator
Salo and Senator Halford voted no; Senator Leman, Senator
Sharp, and Senator Adams voted yes, and amendment #4
carried.
Number 525
SENATOR LEMAN moved amendment #5. SENATOR HALFORD objected.
SENATOR LEMAN said on page 3, line 22 "7th" is changed to
"3rd" making this an incentive for settlement, because they
would have a shorter window of time to claim the credit.
MR. BURDEN said in Tesoro's case its settlement was January
29, 1993 and if this bill passes it is 6 months into its 3
years. It is hard for a multi-million dollar project to be
conceived, planned, and completed in 3 years and urged the
committee to stay with the 7 years.
SENATOR SALO asked if that was the intent. SENATOR LEMAN
said no, the intention was for the credit to be claimed
within 7 years of the effective date.
Number 554
SENATOR LEMAN moved to amend amendment #5 to delete lines 21
-24 and on line 19 delete "the later of." There were no
objections and it was so ordered.
There were no objections to amendment #5 and it was adopted.
Number 565
SENATOR LEMAN moved to adopt amendment #7. MR. CHENOWETH
explained this is consistent with amendment #4 saying that
as the dollars come in, the first 25 cents go into the
Permanent Fund and the balance gets put into the general
fund.
There were no objections and amendment #7 was adopted.
TAPE 12, SIDE B
Number 580
SENATOR SHARP moved to pass CS for SB 134 as amended with
fiscal note from committee with individual recommendations.
SENATOR ADAMS objected. SENATOR LEMAN asked for a vote.
Senator Leman, Senator Halford, Senator Sharp, and Senator
Salo voted yes; Senator Adams voted no, and CSSB 134 was
discharged from committee.
Number 567
SENATOR LEMAN announced SB 151 OIL & GAS EXPLORATION
INCENTIVE CREDITS to be up for consideration.
MR. BOYD said he would be available to answer any questions.
SENATOR ADAMS moved to adopt amendment #1. SENATOR HALFORD
objected. SENATOR ADAMS explained amendments #1 and #2
concerned the confidential provision and would give
discretion to DNR, through the Oil and Gas Conservation
Commission, to extend confidentiality. After one has
invested handsomely in the lease activities, it does not
make sense for him to give away the advantage of information
before he can use the information.
MR. BOYD did not agree with that amendment. The purpose of
the bill is for the state to obtain data that it will be
able to use in marketing its own position. The wells will
be drilled on non-state land. Current exploration incentive
credits are on state lands. He supported data being
released in 2 years and not longer.
SENATOR LEMAN asked for a vote. Senator Leman, Senator
Halford voted no and Senator Adams voted yes and the motion
failed.
SENATOR LEMAN announced an at ease.
Number 550
SENATOR HALFORD moved to pass SB 151 with individual
recommendations. SENATOR ADAMS objected. SENATOR LEMAN
asked for a vote. Senator Leman, Senator Halford, and
Senator Sharp voted yes; Senator Adams voted no, and SB 151
was discharged from committee.
Number 511
SENATOR LEMAN adjourned the meeting at 6:10 p.m.
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