Legislature(1995 - 1996)
05/10/1995 01:07 PM Senate RES
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SENATE RESOURCES COMMITTEE
May 10, 1995
1:07 p.m.
MEMBERS PRESENT
Senator Loren Leman, Chairman
Senator Drue Pearce, Vice Chairman
Senator Steve Frank
Senator Robin Taylor
COMMITTEE MEMBERS ABSENT
Senator Rick Halford
Senator Georgianna Lincoln
Senator Lyman Hoffman
COMMITTEE CALENDAR
HOUSE BILL NO. 119
"An Act exempting schools from certain fees charged by the
Department of Environmental Conservation; and providing for an
effective date."
SENATE BILL NO. 114
"An Act relating to high cost marginal oil wells."
PREVIOUS SENATE COMMITTEE ACTION
HB 119 - No previous action to record.
SB 114 - See Resources minutes dated 3/8/95, 3/17/95, 4/7/95.
WITNESS REGISTER
Representative Gene Kubina
State Capitol
Juneau, AK 99801-1182
POSITION STATEMENT: Prime Sponsor of HB 119
Kit Ballentine, Section Chief
Division of Environmental Health
Department of Environmental Conservation
410 Willoughby Ave., Suite 105
Juneau, AK 99801
POSITION STATEMENT: Testified in support of HB 119
Annette Kreitzer, Staff to Senate Resources Committee
State Capitol
Juneau, AK 99801-1182
POSITION STATEMENT: Offered information on CSSB 114(RES)
Jim Eason, Contractor
Senate Resources Committee
State Capitol
Juneau, AK 99801-1182
POSITION STATEMENT: Answered questions on CSSB 114(RES)
Jon Tillinghast
One Sealaska Plaza, #301
Juneau, AK 99801
POSITION STATEMENT: Testified in support of CSSB 114(RES)
ACTION NARRATIVE
TAPE 95-60, SIDE A
Number 001
CHAIRMAN LEMAN called the Senate Resources Committee meeting to
order at 1:07 p.m.
HB 119 EXEMPT SCHOOLS FROM CERTAIN DEC FEES
SENATOR LEMAN brought HB 119 before the committee as the first
order of business.
REPRESENTATIVE GENE KUBINA, prime sponsor of HB 119, explained
that in 1992, DEC was authorized to require user fees for kitchen
inspections, etc., however, they did not start charging school
districts this fee until this year. Several school districts have
requested that legislation be introduced that will expect them from
paying the user fee. He noted an exemption for charities was
provided through regulations after passage of the original bill.
SENATOR LEMAN asked if other things like water and waste disposal
are exempt from DEC user fees. REPRESENTATIVE KUBINA responded
that the legislation is specifically directed at the cafeteria
facilities.
Number 90
KIT BALLENTINE, Division of Environmental Health, Department of
Environmental Conservation, voiced the department's support for HB
119.
Ms. Ballentine related that the department's fee exemptions apply
to charitable organizations defined as 501.C3 under the IRS code.
The problem with school districts is that they are nonprofits, but
they are not charitable organizations so they don't apply under
that federal code exemption. She said she believes this is also
true with the domestic and waste water permits and drinking water
plan reviews, but she doesn't think that school districts are being
charged for these plan reviews.
Number 181
SENATOR TAYLOR moved HB 119 be passed out of committee with
individual recommendations. Hearing no objection, it was so
ordered.
SB 114 HIGH COST MARGINAL OIL WELLS
Number 190
SENATOR LEMAN brought SB 114 before the committee as the next order
of business, noting there was a proposed Resources CS. He said his
intent was to adopt the committee substitute, but to not move the
legislation out of committee so that it can be worked on during the
interim.
SENATOR PEARCE moved that CSSB 114(RES) be adopted as a working
document. Hearing no objection, the motion carried.
Number 214
ANNETTE KREITZER, staff to the Senate Resources Committee,
explained that changes were made in the legislation in response to
previous industry testimony and ideas put forth in previous
hearings by the committee.
An earlier draft of the bill required a six-month period for which
the certificate is sought and the well being in production for at
least 120 days before it could be certified as a high cost marginal
well. The new committee substitute changes it to one month and 20
days in production.
Also, the credit of $2.00 per barrel has been decreased to $.25 per
barrel of production. The credit may not exceed the lower of
$125,000 per well or $500,000 per producer. The credit must now be
used within one year as opposed to the previous five years.
The committee substitute also contains a new section that relates
to North Slope test or development wells. It provides that the
credit would be allowed on the production of the first 100 barrels
per well and the credit cannot be combined with other credits. It
also provides that the weighted average has to less than 15 degrees
API. It is for wells where drilling began on or after July 1, and
the well has to be located north of the Umiak baseline.
Number 245
SENATOR LEMAN commented that right now if it is $.25 per barrel of
production and if there is a one-eighth royalty, that is equivalent
to a $2.00 per barrel of royalty oil. There has been discussion on
another piece of legislation of a royalty reduction in the order of
$.50 to $.80 a barrel. This is a greater one, and even that may
exceed the value of the state's royalty share at $2.00 a barrel.
SENATOR FRANK asked if this was referring to royalty, or was this
for other taxes. ANNETTE KREITZER responded that for the Cook
Inlet wells the credit could be applied against oil or gas rental,
royalty payments, or taxes that are due, or oil and gas bonus
payments. For the North Slope development wells the credit can be
taken against the production tax.
Number 275
JIM EASON, Contractor, Senate Resources Committee, responding to
Senator Leman's comment on the reduction exceeding the value of the
state's royalty share, said it is unlikely that the well-head value
of the oil would be so low that a $2.00 credit against it would
zero out the royalty.
SENATOR LEMAN noted that previous testimony was that two wells on
the North Slope would have qualified under the previous definition
of "high cost marginal wells" and he didn't know if this would
change the number of wells that would qualify. All of the wells,
with the exception of those two, would have been in Cook Inlet.
JIM EASON agreed, and he added that as things currently are on the
North Slope, he's not sure that any wells would qualify for that
particular provision, but as time passes, it is likely that they
will.
Number 340
JON TILLINGHAST, representing Occidental Petroleum, introduced Ed
Behm, Alaska Asset Manager for the company. He noted there were a
number of OXY USA officials present in the Capital City to talk
with legislators and executive branch officials on the challenge of
encouraging heavy oil production on the North Slope.
Mr. Tillinghast thanked the committee for raising the issue of how
to encourage heavy oil production on the slope. He referred to the
West Sak Sands Schrader Bluff Field, which is the largest known and
delineated but undeveloped field in North America, and said one of
the state of Alaska's greatest challenges over the next two or
three years is to figure out how to encourage development of that
field in the relatively near future while there is still a pipeline
to ship that oil through. He added that CSSB 114(RES), for the
first time, raises that issue and they want to work with the
committee on the legislation in the interim, as well as during the
next session.
Number 357
SENATOR LEMAN asked Mr. Tillinghast if he saw any problem on timing
of passage of the legislation if the committee works through the
interim to try to get the bill into a position where it can be
moved fairly early next session. JON TILLINGHAST answered that it
was not a problem.
SENATOR LEMAN asked Mr. Tillinghast if they see the bill as
something workable that could provide some benefit. JON
TILLINGHAST answered that he thinks there will be testimony and
research work done on specific numbers, but, in terms of
encouraging a new field and encouraging capital investment, the "
royalty holiday approach" is the best way to influence initial
capital investment.
Number 400
There being no further witnesses to testify on SB 114, SENATOR
LEMAN stated it is likely the committee will hold its first interim
hearing in September. He then adjourned the meeting at 1:35 p.m.
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