Legislature(1995 - 1996)
02/07/1996 03:43 PM Senate RES
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* first hearing in first committee of referral
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SENATE RESOURCES COMMITTEE
February 7, 1996
3:43 P.M.
MEMBERS PRESENT
Senator Loren Leman, Chairman
Senator Drue Pearce, Vice Chairman
Senator Rick Halford
Senator Georgianna Lincoln
Senator Lyman Hoffman
MEMBERS ABSENT
Senator Steve Frank
Senator Robin Taylor
COMMITTEE CALENDAR
SENATE BILL NO. 114
"An Act relating to high cost marginal oil wells."
PREVIOUS SENATE COMMITTEE ACTION
SB 114 - See Resources minutes dated 3/8/95, 3/17/95, 4/7/95,
and 5/10/95.
WITNESS REGISTER
Ken Boyd, Director
Division of Oil and Gas
Department of Natural Resources
3601 C Street, Ste 1380
Anchorage, AK 99503-5948
POSITION STATEMENT: Opposed SB 114.
ACTION NARRATIVE
TAPE 96-12, SIDE A
Number 001
SRES 2796
SB 114 HIGH COST MARGINAL OIL WELLS
CHAIRMAN LEMAN called the Senate Resources Committee meeting to
order at 3:43 p.m. and announced SB 114 to be up for consideration.
He highlighted the differences in the proposed CS. In the previous
version the certificates (for a high cost marginal well) were good
for one year and in this version they are good for five years.
In the previous version API gravity was less than 15 degrees and in
this version it's less than 20 degrees so it applies to a broader
range of oil.
The third difference is that previously credit could be applied to
suspend obligation to pay royalty on the first 100 barrels of daily
production per well and this version says the exemption could apply
to the first 300 barrels of daily production.
The credit still cannot be combined with any other program and in
this version drilling must take place on or after July 1, 1996, and
before July 1, 2006.
Number 54
KEN BOYD, Director, Division of Oil and Gas, said he felt a little
odd about commenting on a bill that is under a statutory authority
that is not his own. Most of the bill is under Title 31 which is
AOGCC with the exception of section 3 which concerns how royalty
payments would be made.
In general, MR. BOYD said, the administration believes these types
of reductions can be handled under existing law and HB 207.
Page 2, line 10 of SB 114 requires the lessee to demonstrate some
need and he thought that was better than the house bill version.
However, the level of scrutiny here stops with the commission and
there was no legislative oversight.
In summary, MR. BOYD said, he thought that HB 207 was the better.
It is existing law that will get them where they want to go with
heavy oil.
MR. BOYD said he hadn't discussed this with industry or AOGCC. He
didn't think they had a way for industry to demonstrate need, yet,
and noted there are no economics in their mandate.
Number 112
SENATOR LEMAN said the language as drafted does create a little bit
of a question, but it was the committee's intention that this be a
holiday with definite terms established for it.
SENATOR LEMAN said that legislative oversight may be appropriate,
also.
MR. BOYD offered to work with the committee on this issue.
Number 138
SENATOR LEMAN announced an at ease from 3:50 p.m. to 3:54 p.m.
SENATOR PEARCE moved to adopt the CS to SB 114. There were no
objections and it was so ordered.
SENATOR LEMAN noted that he had talked with AOGCC earlier and they
would be willing to testify, but that the CS didn't really change
what they would be doing.
SENATOR HALFORD mentioned that the fiscal notes were out of date.
SENATOR PEARCE said that HB 207 had three parts. The first one was
for new fields that were not in production, the second was for
fields that were in production, but were going to be shut in
because they were at the end of their life, and the third was for
shut in fields to bring them back on production. Under which of
those three can you do specifically, Schrader Bluff or Milne Point
heavy sands, she asked. MR. BOYD answered that (b) would prolong
the economic life of a oil or gas field. He said the real guts of
the bill would allow for production that would not otherwise be
economically feasible.
MR. BOYD added that the bill (HB 207) could be amended to
specifically mention heavy oil. He offered to show a letter on
this issue to the committee. SENATOR PEARCE said she would like to
see it before the bill came back up.
SENATOR LEMAN thanked everyone for their participation and
adjourned the meeting at 4:00 p.m.
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