05/04/2005 03:30 PM Senate RESOURCES
| Audio | Topic |
|---|---|
| Start | |
| HB26 | |
| HB71 | |
| HB286 | |
| Adjourn |
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 71 | TELECONFERENCED | |
| + | HB 26 | TELECONFERENCED | |
| + | HB 286 | TELECONFERENCED | |
ALASKA STATE LEGISLATURE
SENATE RESOURCES STANDING COMMITTEE
May 4, 2005
3:36 p.m.
MEMBERS PRESENT
Senator Thomas Wagoner, Chair
Senator Ralph Seekins, Vice Chair
Senator Fred Dyson
Senator Bert Stedman
Senator Kim Elton
Senator Gretchen Guess
Senator Ben Stevens
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
CS FOR HOUSE BILL NO. 26(FIN)
"An Act relating to short-term commercial fishing crewmember
licenses; and providing for an effective date."
HEARD AND HELD
CS FOR HOUSE BILL NO. 71(FIN) am
"An Act providing standards for the interpretation of certain
terms in state oil and gas leases and unit agreements, requiring
development, production, processing, and marketing of gas that
is determined to meet those standards, and setting a maximum
time limit on that activity; extending and amending the
requirements applicable to the credit that may be claimed for
certain oil and gas exploration expenses incurred in Cook Inlet
against oil and gas properties production (severance) taxes, and
amending the credit against those taxes for certain exploration
expenditures from leases or properties in the state; and
providing for an effective date."
HEARD AND HELD
HOUSE BILL NO. 286
"An Act amending the manner of determining the royalty received
by the state on gas production by directing the commissioner of
natural resources to accept, under certain circumstances, the
transfer price of the gas if established by transfer price order
of the Regulatory Commission of Alaska; and providing for an
effective date."
MOVED SCS HB 286(RES) OUT OF COMMITTEE
PREVIOUS COMMITTEE ACTION
BILL: HB 26
SHORT TITLE: SHORT-TERM COM FISHING CREWMEMBER LICENSE
SPONSOR(s): REPRESENTATIVE(s) MOSES BY REQUEST
01/10/05 (H) PREFILE RELEASED 12/30/04
01/10/05 (H) READ THE FIRST TIME - REFERRALS
01/10/05 (H) FSH, RES, FIN
02/09/05 (H) FSH AT 8:30 AM CAPITOL 124
02/09/05 (H) Heard & Held
02/09/05 (H) MINUTE(FSH)
02/16/05 (H) FSH RPT CS(FSH) 4DP 1NR
02/16/05 (H) DP: WILSON, ELKINS, LEDOUX, THOMAS
02/16/05 (H) NR: SALMON
02/16/05 (H) FSH AT 8:30 AM CAPITOL 124
02/16/05 (H) Moved CSHB 26(FSH) Out of Committee
02/16/05 (H) MINUTE(FSH)
02/23/05 (H) RES AT 1:00 PM CAPITOL 124
02/23/05 (H) Scheduled But Not Heard
02/28/05 (H) RES AT 1:00 PM CAPITOL 124
02/28/05 (H) Moved CSHB 26(RES) Out of Committee
02/28/05 (H) MINUTE(RES)
03/01/05 (H) RES RPT CS(RES) 7DP 2NR
03/01/05 (H) DP: KAPSNER, LEDOUX, SEATON, ELKINS,
CRAWFORD, SAMUELS, RAMRAS;
03/01/05 (H) NR: OLSON, GATTO
04/25/05 (H) FIN AT 1:30 PM HOUSE FINANCE 519
04/25/05 (H) Moved CSHB 26(FIN) Out of Committee
04/25/05 (H) MINUTE(FIN)
04/26/05 (H) FIN RPT CS(FIN) 7DP 1NR
04/26/05 (H) DP: HAWKER, HOLM, MOSES, KELLY, FOSTER,
MEYER, CHENAULT;
04/26/05 (H) NR: JOULE
04/28/05 (H) TRANSMITTED TO (S)
04/28/05 (H) VERSION: CSHB 26(FIN)
05/01/05 (S) READ THE FIRST TIME - REFERRALS
05/01/05 (S) RES, FIN
05/04/05 (S) RES AT 3:30 PM BUTROVICH 205
BILL: HB 71
SHORT TITLE: OIL& GAS EXPLORATION CREDIT & LEASE TERMS
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR
01/12/05 (H) READ THE FIRST TIME - REFERRALS
01/12/05 (H) W&M, O&G, RES, FIN
02/11/05 (H) W&M AT 8:30 AM CAPITOL 106
02/11/05 (H) Moved CSHB 71(W&M) Out of Committee
02/11/05 (H) MINUTE(W&M)
02/14/05 (H) W&M RPT CS(W&M) NT 3DP 1AM
02/14/05 (H) DP: MOSES, GRUENBERG, WEYHRAUCH;
02/14/05 (H) AM: WILSON
02/17/05 (H) O&G AT 5:00 PM CAPITOL 124
02/17/05 (H) Heard & Held
02/17/05 (H) MINUTE(O&G)
03/15/05 (H) O&G AT 5:00 PM CAPITOL 124
03/15/05 (H) Moved CSHB 71(O&G) Out of Committee
03/15/05 (H) MINUTE(O&G)
03/18/05 (H) O&G RPT CS(O&G) NT 1DP 5NR
03/18/05 (H) DP: KOHRING;
03/18/05 (H) NR: SAMUELS, GARDNER, KERTTULA,
DAHLSTROM, ROKEBERG
04/01/05 (H) RES AT 1:00 PM CAPITOL 124
04/01/05 (H) Scheduled But Not Heard
04/04/05 (H) RES AT 1:00 PM CAPITOL 124
04/04/05 (H) Moved CSHB 71(RES) Out of Committee
04/04/05 (H) MINUTE(RES)
04/05/05 (H) RES RPT CS(RES) NT 3DP 5NR
04/05/05 (H) DP: ELKINS, RAMRAS, SAMUELS;
04/05/05 (H) NR: OLSON, GATTO, CRAWFORD, SEATON,
LEDOUX
04/11/05 (H) FIN AT 1:30 PM HOUSE FINANCE 519
04/11/05 (H) Heard & Held
04/11/05 (H) MINUTE(FIN)
04/14/05 (H) FIN AT 1:30 PM HOUSE FINANCE 519
04/14/05 (H) Bill Postponed To 4/15
04/15/05 (H) FIN AT 1:30 PM HOUSE FINANCE 519
04/15/05 (H) Moved CSHB 71(FIN) Out of Committee
04/15/05 (H) MINUTE(FIN)
04/18/05 (H) FIN RPT CS(FIN) NT 5DP 2NR
04/18/05 (H) DP: HAWKER, CROFT, FOSTER, MEYER,
CHENAULT;
04/18/05 (H) NR: WEYHRAUCH, KELLY
04/27/05 (S) RES AT 3:30 PM BUTROVICH 205
04/27/05 (S) Scheduled But Not Heard
04/28/05 (H) TRANSMITTED TO (S)
04/28/05 (H) VERSION: CSHB 71(FIN) AM
04/29/05 (S) RES AT 3:30 PM BUTROVICH 205
04/29/05 (S) <Pending Referral>
05/01/05 (S) READ THE FIRST TIME - REFERRALS
05/01/05 (S) RES, FIN
05/02/05 (S) RES AT 3:30 PM BUTROVICH 205
05/02/05 (S) Heard & Held
05/02/05 (S) MINUTE(RES)
05/04/05 (S) RES AT 3:30 PM BUTROVICH 205
BILL: HB 286
SHORT TITLE: VALUE OF ROYALTY ON GAS PROD./ TAX CREDIT
SPONSOR(s): REPRESENTATIVE(s) SAMUELS
04/26/05 (H) READ THE FIRST TIME - REFERRALS
04/26/05 (H) O&G, L&C
04/28/05 (H) O&G AT 5:00 PM CAPITOL 124
04/28/05 (H) Moved Out of Committee
04/28/05 (H) MINUTE(O&G)
04/29/05 (H) O&G RPT 5DP
04/29/05 (H) DP: KERTTULA, SAMUELS, MCGUIRE,
ROKEBERG, KOHRING
04/30/05 (H) L&C AT 1:00 PM CAPITOL 17
04/30/05 (H) Moved Out of Committee
04/30/05 (H) MINUTE(L&C)
05/02/05 (H) L&C RPT 5DP 2NR
05/02/05 (H) DP: CRAWFORD, LYNN, KOTT, ROKEBERG,
ANDERSON;
05/02/05 (H) NR: LEDOUX, GUTTENBERG
05/02/05 (H) TRANSMITTED TO (S)
05/02/05 (H) VERSION: HB 286
05/03/05 (S) READ THE FIRST TIME - REFERRALS
05/03/05 (S) RES, FIN
05/04/05 (S) RES AT 3:30 PM BUTROVICH 205
05/04/05 (S) Moved SCS HB 286(RES) Out of Committee
05/04/05 (S) MINUTE(RES)
WITNESS REGISTER
ADAM BERG
Staff to Representative Carl Moses
Alaska State Capitol
Juneau, AK 99801-1182
POSITION STATEMENT: Commented on HB 26 for the sponsor.
PAUL SHADURA, President
Kenai Fishermen's Association
Kenai AK
POSITION STATEMENT: Supported HB 26.
CHRIS CONDOR, Board Member
Juneau Charter Boat Association
Juneau AK
POSITION STATEMENT: Opposed HB 26.
JACK CADIGAN, Captain
M/V CADIGAN
Juneau AK
POSITION STATEMENT: Opposed HB 26.
RICK BIERMAN, Owner
Whaleside Lodge, Shelter Island
Juneau AK
POSITION STATEMENT: Commented on HB 26.
JERRY MCCUNE
United Fishermen of Alaska
Juneau AK
POSITION STATEMENT: Supported HB 26.
BONNIE ROBSON, Oil and Gas Attorney
Legislative Budget and Audit Committee
Alaska State Capitol
Juneau, AK 99801-1182
POSITION STATEMENT: Commented on HB 71.
REPRESENTATIVE RALPH SAMUELS
Alaska State Capitol
Juneau, AK 99801-1182
POSITION STATEMENT: Commented on HB 71.
SARAH NEILSON
Staff to Representative Samuels
Alaska State Capitol
Juneau, AK 99801-1182
POSITION STATEMENT: Introduced HB 286 for sponsor.
JIM POSEY
Municipal Light and Power (ML&P)
Anchorage AK
POSITION STATEMENT: Supported HB 286.
KATHY GIARD, Chairman
Regulatory Commission of Alaska (RCA)
701 W Eighth Ave Ste 300
Anchorage, AK 99501
POSITION STATEMENT: Supported HB 286.
MARY JACKSON
Staff to Senator Wagoner
Alaska State Capitol
Juneau, AK 99801-1182
POSITION STATEMENT: Introduced SCS HB 286(RES).
ACTION NARRATIVE
CHAIR THOMAS WAGONER called the Senate Resources Standing
Committee meeting to order at 3:36:33 PM. Present were Senators
Dyson, Seekins and Chair Wagoner.
CSHB 26(FIN)-SHORT-TERM COM FISHING CREWMEMBER LICENSE
CHAIR WAGONER announced CSHB 26(FIN) to be up for consideration.
3:37:06 PM
ADAM BERG, staff to Representative Carl Moses, sponsor,
explained that CSHB 26(FIN) allows the purchase of a seven-day
commercial fishing crew member license for $30. The only option
available now for crew members is an annual license, which is
$60 for residents and $180 for non-residents.
The reason for introducing the bill is to try to give commercial
fishermen more opportunities to earn a living by charging
tourists to participate hands-on in the commercial fishery.
Right now they can only observe. Secondly, it would allow
commercial fishermen temporary short-term help, such as
relatives and friends, at a lower cost.
3:38:46 PM
SENATOR ELTON joined the committee.
3:39:40 PM
SENATOR GUESS joined the committee.
SENATOR DYSON said the Coast Guard Auxiliary asked him if
conformity with the Code of Federal Regulations (CFR) 46 had
been discussed.
MR. BERG replied that the Juneau Charter Boat Operators
Association asked that question of Sue Jorgenson with the Coast
Guard, and she responded if an individual pays for the
opportunity to go out fishing on a commercial vessel, that
vessel is then considered a vessel for hire and would have to
follow the same Coast Guard rules that charter boat operators
follow now.
SENATOR DYSON asked if this isn't a backdoor way around Coast
Guard licensing procedure.
MR. BERG replied that is correct.
3:41:36 PM
SENATOR ELTON asked if this bill would have any implications on
the Fishermen's Fund.
SENATOR STEDMAN joined the committee.
MR. BERG replied that an amendment was offered saying that
short-term crewmembers aren't allowed any type of compensation.
Currently, 39 percent of the first $60 of any license goes to
the Fishermen's Fund. That doesn't change under this bill, which
has an indeterminate fiscal note from the Department of Labor
and Workforce Development.
3:43:35 PM
SENATOR STEDMAN asked if the commercial fishermen would fall
into the category of six-pack license requirements.
MR. BERG replied that they would have to have a six-pack
license, be enrolled in the random drug testing program and the
vessel would have to be documented for coastwise as well as
fishery type 1 personal floatation devices - in addition to the
survival suits that are required on commercial boats.
3:44:38 PM
PAUL SHADURA, President, Kenai Fishermen's Association,
supported HB 26. Its approach is reasonable and adds a lot of
dynamics to the commercial fishing industry. It offers a
survivalist type of experience for those who are interested and
would probably not affect any other users in any way. A lot of
people have family members come up and visit them and currently
hiring them for a couple of days is prohibitively expensive.
3:46:37 PM
CHRIS CONDOR, Board Member, Juneau Charter Boat Association,
opposed HB 26, because it has all kinds of holes and dangers in
it for tourists, especially.
You're going to put people who have never been on a
boat out in these type of seas. Despite all the safety
precautions a charter boat has, they're [commercial
boats] in much more dangerous situations.... In those
seas something is going to happen.... In these
disclaimers when they talk about these releases,
they're not worth the paper they're written on when
you talk to a lawyer about them....
If someone gets into a problem out there, we're going
to have a real bad PR problem about that. You can see
it any time...we lose a tourist. It's real bad PR for
Alaska.
Furthermore, he said the charter boat license and insurance
requirements would be prohibitive. Another consideration was how
enforcement would be conducted and he surmised that a Coast
Guard person would have to board each vessel to check out the
people on it. He also thought it was an unfair bill for the
charter fleet saying:
If you want to be a commercial fisherman, be a
commercial fisherman. If you want to be a charter
fisherman, be a charter boat fisherman. If you want to
do both, that's fine too, but you have to do it
separately, not combined. I can't sell my catch. The
commercial fleet would never allow me to do something
like that. It's just not fair.
3:50:41 PM
JACK CADIGAN, Captain, M/V CADIGAN, suggested amending the bill
to address licensing short-term people who would not be
compensated on commercial boats. Because of the unusual activity
of taking tourists out, commercial boats should be required to
display an appropriate decal, which would be similar or
identical to that of charter boat operators, so that enforcement
doesn't necessarily have to board the vessels.
MR. CADIGAN pointed out a the further issue of whether the fish
would be counted as sport or commercial fish allocations and
whether the tourist passengers would be allowed to keep any fish
caught without having to purchase them via a fish ticket. In any
case, he asked how the catch would be identified and allocated
under current regulations.
He suggested requiring vessels operating under the authority of
this legislation to comply with all applicable regulations under
CFR and with all Alaska licensing requirements apropos to
sportfishing guides and sportfishing business licenses unless
non of the personnel who are acting as crewmembers are in any
sort of a paid status.
3:55:05 PM
RICK BIERMAN, Whaleside Lodge, Shelter Island, said last year
the Legislature passed comprehensive regulations on the guided
sport fishing industry regarding vessel safety and operator
responsibility. Now it is proposing to put his clients on
commercial fishing boats without the same safeguards contained
in those regulations. He said a commercial fishing boat is a far
more dangerous environment than a charter boat. The Coast Guard
also stated that enforcement isn't practical unless vessels
somehow indicate they have passengers for hire and he suggested
requiring vessels to carry a prominent sticker that identifies
them as carrying tourists.
3:57:36 PM
He was also concerned that since this bill creates a whole new
fishing experience in Alaska, his clients will now have a choice
to come to his lodge and be restricted to three king salmon a
year, bag, possession and gear limits or they could rent a
commercial vessel and catch as many fish as they want. "There is
nothing in this bill that says the operator of the vessels can
include those fish in the price of the adventure." He insisted
that the tourists should have to buy the fish they catch;
otherwise they would be circumventing sport regulations that
happen to be good regulations.
3:59:11 PM
Further, he said the people who use this license should be
required to prove they have liability insurance.
3:59:43 PM
SENATOR DYSON asked who from the marine insurance industry could
comment on lines of liability protection for the short-term
people.
MR. BIERMAN replied that he didn't know of anyone locally, but
Charter Lakes Insurance Company in St. Paul writes 50 percent of
the liability for charter boats.
CHAIR WAGONER commented that he looked at this bill from the
commercial point of view and ran away from it because of the
liability and insurance he would be required to have.
4:01:21 PM
JERRY MCCUNE, United Fishermen of Alaska, supported HB 26.
However there were some misconceptions he wanted to clarify.
Commercial fishermen already need to have most things on board
already and are required to carry liability between $300,000 and
$1 million for crew. Some of his members have gillnetters and
they come to town, take their net off, take two or three clients
out and already have the same equipment a charter boat does. He
did agree that commercial vessels being used for charter should
be readily identifiable as such.
4:04:40 PM
SENATOR ELTON asked how he would address the allocation issue
for guests.
MR. MCCUNE answered:
If you were a commercial vessel and you were taking
people out for the commercial experience, which I
haven't a whole lot of this going on - myself, I
haven't had any requests for this. You're commercial
fishing; you've got to have all the commercial
permits, all the other charter stuff to go along with
it. You've got to have your card; they gotta have
their crew licenses and that would go on a fish
ticket.... You deliver, you've gotta have a fish
ticket. It's just like a commercial fishing boat.
Now if you take some of the fish and give them to your
clients, which is perfectly legal also, you could do
that. But any fish delivered to a tender has to have a
fish ticket and it's going to go down as commercial,
not sport.
CHAIR WAGONER related that in his fishery halibut has to be
marked as "retained catch" and must come off your IFQ.
SENATOR ELTON remarked that tourists are limited to three king
salmon per year, but a person on a commercial boat could take 10
kings, for instance, have them smoked and take them home.
MR. MCCUNE replied that as a commercial fisherman, he has to
report all the kings he catches, even the ones he's taking home,
so ADF&G has an accurate count of fish.
SENATOR ELTON repeated that his point is that a person hiring a
charter boat is limited to taking three kings for the season,
but if he goes out on a commercial troller he could and take 10
kings.
4:10:22 PM
CHAIR WAGONER said he understands this is to give people the
experience of being on a commercial boat and he, personally,
doesn't give his crew king salmon or halibut. If this goes
through, that is an allocation issue and should be taken up by
the Board of Fisheries.
4:11:11 PM
SENATOR ELTON responded that a person may expect to get some
fish out of the commercial experience. It could even be used as
a marketing tool.
CHAIR WAGONER acknowledged that would be an issue, but the Board
of Fisheries was the proper forum to set policy.
I think if we do anything, if this bill goes forward,
I think we want to make the intent of the Legislature
- this is not a meat fishery. We are not creating a
meat fishery. It's real dangerous when we do that.
4:12:43 PM
CHAIR WAGONER said he would hold the bill and get input from the
insurance industry and the Board of Fisheries.
CSHB 71(FIN)am-OIL& GAS EXPLORATION CREDIT & LEASE TERMS
CHAIR WAGONER announced CSHB 71 (FIN) am to be up for
consideration and that he had asked Ms. Robson in the last
meeting to provide more information for the record.
BONNIE ROBSON, oil and gas attorney and consultant to the
Legislative Budget and Audit Committee on gas pipeline issues,
said she wanted to cover six different points with regard to HB
71.
4:15:05 PM
First, and very importantly, I want to talk about what
we didn't hear on Monday. Second, I would like to
correct some incorrect statements or impressions left
on Monday.
Third, I heard concern over what is the right standard
for 'reasonable profitability' on Monday and I think
we should discuss that as well. Fourth, there was some
dispute about how the duty would be enforced, how the
duty to develop and market gas when 'reasonably
profitable' would be enforced. Fifth, I think
strategically, we need to talk about the time for
invoking the duty and what that means for you today.
And, sixth, discuss some options available to the
committee at this point in time.
First, what did we not hear on Monday. If you think
back a couple of weeks ago, Spencer Hosie testified
before a combined committee, LB&A and this committee
and he testified that there was in oil and gas leases
an obligation to develop and market oil and gas when
reasonably profitable to do so. He was before you on
behalf of the Administration and you did not hear from
lessees at that time. He was emphatic that there is,
in fact, a duty or an obligation to develop and market
gas when reasonably profitable to do so.
On Monday, you heard from the other side. You heard
from lessees, you heard from industry representatives.
And I did not hear anyone deny that the duty exists. I
think I listened carefully. Nobody denied the
obligation was there; nobody suggested that lessees
can warehouse leases long-term without having an
obligation to develop and market. They did dispute how
you would go about enforcing that duty and what would
be the standard for measuring 'reasonable profit,' but
nobody disputed that the obligation was there.
The second thing that you did not hear on Monday is no
one disputed that seven years was a reasonable time-
clock for getting the gas to market once there had
been a determination that it would be reasonably
profitable to do so. As we mentioned on Monday,
particularly for the State of Alaska and for the other
project participants, time is money. It's a lot of
money. At current gas prices, every year delay of this
pipeline project costs the state and its
municipalities on the order of $2 billion - rough
order of magnitude $150 million per month for a year
delay in this project.
This bill, HB 71, includes a seven-year time clock
once there has been a determination that a project
would be reasonably profitable to get that gas
developed and to market and nobody disputed that on
Monday - that seven years was a reasonable timeframe.
Next I'd like to move on to correct some
misimpressions, I think, created on Monday and I don't
mean to suggest that these misimpressions were
intentional. I think sometimes the person at the table
did not have a full familiarity with some of the oil
and gas leasing history of this state and that might
be the source of some misimpressions. But, as I said,
there was no dispute about whether the obligation, the
duty to develop and market exists when reasonably
profitable and that exists currently under leases and
unit agreements.
It's important to know the origins of the state's
leases and unit agreements. There was some suggestion
that perhaps these were contracts of adhesion. I don't
believe that's so. With regard to the state's oil and
gas lease form, it used to be in regulations and I
think all of you know that for anything to be adopted
as a regulation, it must go through a public and
industry comment period. So, that lease form was
developed through a public process and initially put
into regulations. It's no longer in regulations, but
that's its origin, so there was public comment.
4:18:43 PM
SENATOR ELTON asked what a contract of adhesion is.
MS. ROBSON explained:
There are times when because of uneven bargaining
power between two parties to a contract, one party
might actually be relieved of its obligations under
the contract - because it was a contract of adhesion,
you didn't have any choice. Here, because we're
talking about the State of Alaska and the largest
international petroleum companies, so there isn't the
disequilibrium in bargaining power. But there was some
concern these were 'take it or leave it' contracts and
an implication that maybe that should bear on whether
the duty to develop and market should be enforced and
how.
SENATOR ELTON thanked her for the clarification.
MS. ROBSON continued:
So, the lease form adopted through a public process
and then if we turn and think about how the state's
oil and gas leases are put out to bid, it's through a
competitive bid process. If you think about the
competitive bidding process, typically there's one bid
variable price, often the bonus bid. You can try for
two bid variables; that complicates things. Usually
any contract by competitive bid - all the terms of the
contract are spelled out and there's one bid variable
- something like prices. So, I don't think that this
body wants to think of every competitive bid in the
oil and gas industry and in the United State of
America as a contract of adhesion or a 'take it or
leave it' contract. That's simply the process that's
used in the competitive process. That's how our
state's oil and gas leases are by and large
distributed.
4:20:24 PM
SENATOR SEEKINS argued that the process still fits the
definition of a contract of adhesion.
MS. ROBSON disagreed and said that contracts of adhesion happen
most often where you have two parties of unequal bargaining
strength.
SENATOR SEEKINS said it's generally applied to situations where
one party would have no meaningful chance to negotiate the terms
of a contract.
MS. ROBSON responded: "Actually that's not correct. Specifically
with regard to the obligation we're talking about here in the
oil and gas lease forms there's some language and we didn't
cover it Monday and I think it's important that we talk about it
today. In paragraph 20 entitled "Diligence" it reads:
4:22:11 PM
'Diligence - Lessees shall exercise reasonable
diligence in producing and shall abide by and conform
to regulations of lessor related to the matters
covered by this paragraph in effect on the effective
date hereof or herein after in effect if not
inconsistent with any specific provision of this
lease.'
There is elsewhere in the lease a provision that
generally only the regulations in effect at the date
the lease was issued governed the operations under the
lease, but this specific paragraph with regard to
diligence and the obligation to diligently produce oil
and gas allows the lessor to proceed to adopt
regulations thereafter covering this subject matter -
regulations such as how you define 'reasonable
profitability.'
4:23:06 PM
SENATOR SEEKINS asked if there is an integration clause in
lease.
MS. ROBSON replied that that such a clause would be conditioned
by the specific language on diligence in paragraph 20.
4:23:56 PM
MS. ROBSON said with regard to unit agreements:
I think with unit agreements, particularly for Prudhoe
Bay and the Pt. Thompson unit, are instrumental to the
enforcement of the duty in this instance. The unit
agreements were negotiated and there are reams of
paper now in archives that were generated as part of
negotiating the specific terms of the unit agreements
for Prudhoe Bay and Pt. Thompson. So, in any case, you
had the state sitting down with the lessees at Prudhoe
Bay and Pt. Thompson and negotiating those terms
including the language in those unit agreements that
allows the Department of Natural Resource from time to
time to alter or modify the quantity and rate of
production from the unit area. So, you do have terms
in both the leases and the unit agreements specific to
this obligation that gives to the State of Alaska, as
lessor, to the DNR, the ability to set obligations
regarding production and to alter and modify the
quantity and rate of production.
Another area, I think on Monday, where there was some
incorrect impressions left is what are the
consequences of this obligation, the duty to develop
and market gas when reasonably profitable to do so.
There was a picture painted that this legislation was
intended to force lessees to pay $20 billion for new
investment or lose their interest at Prudhoe Bay. And
that's a dramatic statement. I believe it's an
overstatement. If we look at the consequences of the
obligation, there at least three different ways that
you can comply with the obligation to develop and
market Prudhoe Bay and Pt. Thompson gas when
reasonably profitable to do so.
First of all, you can sell the gas in the field and
you can leave it to somebody else to spend their
capital to build the new gas treatment plant at
Prudhoe Bay for gas processing and to build a
pipeline. So, if there is an offer to purchase gas at
Prudhoe Bay and Pt. Thompson, that offer includes a
reasonable profit to the lessees of those units. Then
they can comply with their obligations under the
leases and the unit agreements simply by selling the
gas. That's a low risk operation, particularly at
Prudhoe Bay where they're producing over 8 bcf per day
right now and they are paying to put in back in the
ground. If somebody is there offering to pay to take
that gas and put it through their own new gas
treatment plant and their own pipeline and the price
offered includes a reasonable profit, then that is one
method of compliance.
The second method of compliance is if somebody else is
willing to spend their capital to build this pipeline,
the lessees could ship their gas on the pipeline and
then they would be in the position to capture the high
side. When gas prices go high, they would be there -
of course having the obligation to pay for the
pipeline transportation. That's a second method of
compliance.
A third method - they could choose to build a new gas
treatment plant and the pipeline themselves. So three
different ways to comply with the obligation after
there's been a determination that there's a reasonable
profit to be made from developing and marketing North
Slope gas.
4:27:59 PM
If the lessees decide not to purchase gas when a
reasonable offer is made and decide not to ship their
gas on somebody else's pipeline when another party
offers to build that pipeline and decide not to build
a pipeline, all when there's been a determination that
it would be reasonably profitable to do so, so they
will not be in compliance with their lease. They will
be in breach. And the remedy - I think it's an
overstatement to say they're at serious risk for
losing all of their interest at Prudhoe Bay. More
probably, what I see happening is certainly under HB
71 with the seven-year time clock, if there was a
determination that there was a reasonable profit to be
made, seven years came and went and they were not
marketing their gas, they may be liable to the State
of Alaska for royalties as if they had developed and
marketed their gas.
Other possible remedies - at Prudhoe Bay potentially
severing the oil interests from the gas interests
leaving the oil interests with the current lessees,
possibly leaving some of the gas interest because some
of that gas is marketed as NGLs blended in with crude
and for local use. But having some of the gas
interests severed and returned to the state.
4:29:02 PM
Also, at Pt. Thompson is a particular case. You have
to realize some of those leases are more than 40 years
old and Pt. Thompson is a world-class field. It has
not been developed. There's not even the first
development well there now and if the lessees have the
opportunity after a determination that it would be
reasonably profitable to market that gas, they have
the opportunity to sell it to a third party or ship it
on somebody else's pipeline or build the pipeline
themselves and they don't take it, it may be
appropriate for the state to seek the remedy of return
of those leases so that the state could relet those
leases to a party who would make it a priority to get
that gas to market.
4:29:52 PM
There was concern expressed from several different
sides on Monday about whether the language written
into HB 71 provided the right standard for reasonable
profitability and if you'll recall there was a dual
part standard for the pipeline piece of it, for the
regulated piece. Built into the statute was a rate of
return equal to or higher than FERC would allow. For
the unregulated production operations, the rate of
return talked about was a 10-year simple average of
the return on capital employed for oil and gas
companies, discretioned with DNR as to what would be
the group of oil and gas companies used, but our
example used the four largest international petroleum
companies and the three largest Alaska companies. And
right now if you look at the previous 10-year average,
you get to a 14 percent return on capital employed
that is return on all forms of capital - debt and
equity. So that if this pipeline project is financed
80 percent debt and 20 percent equity as is envisioned
with the federal loan guarantee, that the return on
equity could be as high as 46 percent under the
language in this bill. And there was some question
about whether that's a reasonable standard. I tell you
quite frankly I would have some concerns about that,
but for some information that unfortunately I'm not in
a position to share with you today, because of the
confidentiality requirements.
But the important point today is that there is not a
single standard or only one standard for what could be
reasonable. There are a number of possibilities of
what could be used as a standard for reasonable
profit. There have been suggestions, in fact, from
consultants we are using with regard to gas pipeline
issues that the cost of capital - different from the
rate of return on capital employed - but the cost of
capital could be one measure. You could also look at
the return on equity as another measure and we did
hear from industry that perhaps it would be
appropriate to look to venture capital. There was some
discussion about venture capital earning in the low 20
percents. The thing to think about there is that
venture capital is 100 percent equity. There is no
borrowing; there is no cheap capital in the form of
debt when you're talking about venture capital. So,
actually the suggestion from AOGA or the discussion
about 20s, low 20s rate of return indicative of what
is appropriate for venture capital and maybe for this
project, could be a lower rate than what could be
allowed under this statute.
This statute, as I mentioned, could go as high as a 46
percent return on equity. Compare that to your low 20s
percent return on equity return on venture capital
that was discussed here on Monday. I think the
important point to recognize here today is that
there's not going to be agreement within this room by
all parties on what the appropriate standard is for
measuring reasonable profitability and that may be an
issue that if you don't chose to resolve today could
be looked at in the Interim; it could be looked at
next session. It is an important issue not only for
this bill, but it's also an important issue as you
begin to think about gas pipeline issues under the
Stranded Gas Act and any proposal that may come to
you.
4:33:42 PM
There was some industry suggestion on Monday that the
free market should be the standard - that basically
you should leave it to the lessees to decide what is
the rate of return appropriate. Again, that means in
effect there is no duty to develop and market when
reasonably profitable. If you leave a lessees
obligation to the lessee to decide and enforce, it is
effectively no obligation at all.
4:34:19 PM
Another question that came up and was discussed on
Monday was just how is the duty enforced - the duty to
develop and market when reasonably profitable.
To think the lessees came in here and urged in the
first instance it should be the court system making
the determination whereas there was discussion of this
bill providing for DNR to make the initial
determination. And there is a reason for that
difference of perspective. The lessees, I think, would
see certain benefits in having the court system make
the initial determination. It forces DNR or the
Administration to be the one to file suit and it is
not easy or undertaken lightly in this state for the
Administration to sue big oil. It's an advantage if
industry forces the state to be the one to take the
matter to the courthouse.
The second advantage industry may see in leaving the
trial court as the one to make the initial
determination is that if there is no DNR decision
preceding going to court, then there is no deference
accorded the DNR decision. And the third thing is that
it may provide an opportunity for lessees to withhold
information until such time as you get into court.
4:36:32 PM
As we discussed before, we think under the status quo
that, in fact, the decision is first to be made by DNR
whether you're looking at the leases or the unit
agreements. Earlier today we talked about the language
in the lease agreements - in the paragraph 20 specific
to diligence - saying that the Administration, the
Department of Natural Resources, had the ability to
adopt regulations on the subject matters covered in
the paragraph on diligence after the adoption of the
lease and the lessees would be bound by that. So, that
the Administration could, in fact, adopt standards on
reasonable profitability in accordance with
preexisting lease terms and make a determination as to
whether those standards had been met.
Same thing with the unit agreements where after hard
negotiations, the lessees gave DNR the ability to
alter or modify from time to time the rate of
production from the unit areas.
The advantages, of course, from the Administration and
the State of Alaska's perspective of having DNR being
the initial decision-maker is that if industry doesn't
like the decision issued by DNR, they have to take the
matter to court. Also, DNR's decision would be
entitled to some level of deference in the court
system as to some issues and finally, there would be
the ability and, in fact, the incentive for industry
to provide information to DNR when it is making its
decision pre-court and so information actually gets
exchanged at an earlier point in time and informs
DNR's decision-making.
In any case, HB 71 did not do anything to alter the
status quo as to who is the primary decision-maker,
the first decision-maker on this duty. There is no
language in there that is intended to shift. So, if
the debate remains open, if you're unpersuaded that
DNR is to be the initial decision-maker, the
legislation did not intend to alter the current
situation and, if in fact, the trial courts are to be
the initial decision-maker, that would not be changed
by HB 71.
4:38:10 PM
Two more points - strategically what is the best time
for invoking the duty to develop and market when
reasonably profitable to do so? This is important to
you today because it may frame the time period within
which you want to act on this matter. And I think on
Monday you heard some people say, 'Not now, because of
Stranded Gas Act negotiations. Don't upset the balance
of those negotiations. Worry about this later.' And
you also heard some people say, 'Now would be a good
time.' People who know what's going on in those
negotiations thought it would be an appropriate time,
but let's look practically at how the duty would be
invoked and enforced and whether it matters whether
you act now or next session or at all.
Of course, Prudhoe Bay is the lynch pin for getting
this gas to market. And so if we look at the annual
plans of development for the main reservoir at Prudhoe
Bay and what is the time frame for DNR raising any
issue about whether that gas should be developed and
marketed because it's reasonably profitable, the
lessees at Prudhoe Bay will not be obligated to file
their next proposed plan of development until March
30, 2006 and DNR will have until June 30 of next year
to act on their proposed plan of development. And so
whether you act on this matter today or next year,
that will not necessarily change how DNR would go
about enforcing the obligation that already exists in
the leases and unit agreements - because a new plan of
development isn't to be filed with DNR until the end
of March. And as I believe was pointed out by at least
one of the senators on Monday, it looks like the
obligation, the duty, is already there and so maybe
you never need to act on this matter. But certainly it
is not time critical and I don't mean to suggest that
at the end of this session.
4:40:23 PM
Pt. Thompson - a little bit different. The next
proposed plan of development has to be filed July 1 of
this year and DNR will have until the end of September
to act on that and decide whether or not they are in
compliance with that. DNR may or may not choose to
raise the issue of the duty to develop and market with
regard to Pt. Thompson in this year's plan of
development. Again, Pt. Thompson is important to the
gas pipeline, but Prudhoe gas is the number one issue
there. Also, Pt. Thompson, you have a situation, as I
mentioned before, where you've had leases - some held
for decades - and there's been no development or
production there. So, DNR may choose to take it up
this year. That would certainly be their prerogative
if that obligation already exists.
4:41:22 PM
In closing, I would like to talk about what options I
see available to this committee today. I see one of my
jobs is to provide you with different options on ways
to proceed and certainly there are four that are
immediately apparent.
First, you could act on the legislation as is or with
some revisions to the standard on what constitutes
'reasonably profitable.' And if you think about it,
what you do have then in HB 71 is a compliment of
exploration incentive credits in which the state
undertakes some of the risk of exploration. It agrees
to effectively cover the cost of up to 40 percent of
the cost of new exploratory wells. So, it makes
exploration less risky and yet the new sections 1 and
2 of this bill say when that exploration is
successful, when you have a reservoir that would be
reasonably profitable to develop, we are affirming our
belief in your obligation to go ahead and develop that
gas.
A second alternative would be drop the reasonably
profitable standard from the proposed legislation,
keep the exploration incentive credits and keep the
seven-year clock. There was no dispute raised on
Monday about the seven-year clock, so that would be
another alternative.
How would the seven-year clock then work without this
definition of reasonably profitable included? Well,
the way it would work is if DNR in the course of
enforcing the preexisting obligation to develop and
market gas found that there was, in fact, an
obligation to do so at this point in time, you would
be providing guidance that you expected to see that
gas to market in a maximum of seven years.
The third alternative would be to separate the
language on exploration incentive credits and the
reasonably profitable legislation including the seven-
year clock into separate bills with the exploration
incentive credits being acted on this year and the
reasonably profitable sections 1 and 2 considered next
year.
A fourth alternative would be again to separate the
exploration incentive credits from the reasonably
profitable legislation, act on the EIC's exploration
incentive credits this year and simply recognize that
there already is an existing duty and obligation to
develop gas when reasonably profitable to do so and
leave it to the administration to enforce it under the
pre-existing standards without any further definition
and no time clock, but as DNR or the Administration
saw appropriate at the time they saw appropriate. With
that, I'll conclude my remarks.
4:44:23 PM
SENATOR SEEKINS asked if data from an exploratory well is made
freely available to the state to be able to consider the
commercial applicability of that field.
MS. ROBSON replied that it depends on whether or not the well is
on state acreage.
There are some requirements with regard to oil and gas
wells drilled on state acreage about data that must be
provided to the state. There are different rules that
apply when it is not on state acreage - subject to
state oil and gas lease.
SENATOR SEEKINS said he heard there may be some Security
Commission regulations on what kind of data can be released and
when.
4:45:44 PM
MS. ROBSON replied:
There are rules with regard to the requirement that
well data be provided to the Department of Natural
Resources when the well is on state leased lands and
some of that data, I believe, is released after two
years, but, again, I am not the best person to answer
that question.
She offered to follow up on this question.
4:47:08 PM
SENATOR ELTON reflected that Spencer Hosie asserted a right that
was reaffirmed through the adoption of the amendment on the
floor. He asked if the amendment ere taken out and HB 71 passes
without it, has the Legislature clouded the state's assertion of
that right.
MS. ROBSON replied:
There may be a variety of ways in which you could act
with regard to HB 71 and I didn't mean to suggest how
it is that you would go about separating the
exploration credits from the sections 1 and 2 on
reasonable profit.
SENATOR ELTON asked if one of those mitigators could be a letter
of intent saying that removal of the amendment does not mean the
state can't assert the rights.
MS. ROBSON replied that Representative Samuels would know more
about that subject than she does.
4:48:31 PM
SENATOR GUESS asked if HB 71 is saying the standard will be a
simple 10-year average and that's the only standard that the
commissioner of DNR can apply regarding reasonability or is it
just one standard of a number of standards that may be applied.
MS. ROBSON replied that the bill requires that the 10-year
average be applied.
There would be discretion as to what oil and gas
companies were used in the sample group of companies,
but the 10-year simple average of return on capital
employed is, at this stage, non discretionary. That
could certainly be changed.
SENATOR GUESS asked if that is the only standard that can be
used.
MS. ROBSON answered:
There is some language in section 1 on findings,
subpart 13, that talks about there may be a number of
comparisons that would be appropriate to make - to the
cost of capital, to the cost of equity, to return on
capital employed or to return on equity. And so, the
findings language indicates that there may be a
variety of potentially reasonable standards. The
section 2 language, as it currently reads, does not
give discretion in terms of choosing a different
standard.
4:50:54 PM
REPRESENTATIVE RALPH SAMUELS said he wanted to give a brief
snapshot of the thinking that went into the amendment to HB 71.
I'm not an attorney and I won't apologize for that
either. So, I know that you've heard from plenty of
industry lawyers and I know that you've heard from Ms.
Robson twice.... I was in and out of meetings on
Monday and I tried to listen in to some of the
testimony and I realize full well what the reaction
was going to be going into this.
I did catch part of one presentation and I
wholeheartedly agreed with a lot of what was said.
Ken Conrad testified and he's an executive with BP and
I have met him several times over the past year and I
have a lot of respect for Mr. Konrad. He is
articulate, he knows the oil and gas industry better
than I will ever know the oil and gas industry and he
has some very good points. One of the main
thrusts...was who is going pay if the state's numbers
are wrong and we have now forced investors to do
something which they know is wrong and they're going
to lose money on. Who is going to make it right? He
was a little over the top on the un-American comments
and this and that, but all in all, that's an extremely
valid point. Who would pay if our numbers were wrong?
And philosophically speaking, the point of the
amendment and to get the debate going is the fact that
it cuts both ways. Who is going to pay if the numbers
are right and the project is not developed? The jobs
that are lost for Alaskans. A lot people testified are
the people that want the jobs - the jobs that are
lost. The money to the state.
So, they're both extremely valid points and the point
of the amendment was to make sure that both points are
up for debate before we adjourn. I hope in my soul
that we come back here some time this fall and we have
a vote. And I think that to push something of this
magnitude off, if you listen to the Hosie testimony,
whether you agreed with it or you do not agree with
it, if it is left hanging out there, the water will
get muddy at the end when we can least afford to have
muddy water on this entire project.
I think that all of us as members, all elected people
in this building right now, 61 of us, including Frank
Murkowski, who's been doing this a whole lot longer
than all of us combined, will never have a bigger
choice to make than this gas pipeline - 30, 40 years
worth of things, grandchildren - a legacy. We're
fortunate to be serving at this time, but along with
that honor of serving right now comes the
responsibility to know everything that you can about
every possible aspect of this project - duties, rights
and responsibilities, both of industry and of the
state. If we're scared to discuss it, then I think
that come fall it's going to be problematic. And that
was the point behind amendment 1 - knowing full well
what the lawyers were going to say and the fact that
the water was going to get muddy now and I honestly
believe that it was better now and I felt it was a
duty to do better now than it was going to be to do it
later.
That being said, Mr. Chairman, I also wholeheartedly
agree with the original concept behind HB 71. I think
exploration tax credits - quite frankly they work. We
look at the Nenana Basin; we look at the Alaska
Peninsula where I grew up and those folks have come
around to think that it is probably a good thing to
try to open the door a little bit.
So, with that, as you and I have discussed previously,
Mr. Chairman, I wholeheartedly agree with the
[indisc.]. I've got a copy of the CS for 286 right
here. To take the tax credits, the rather non-
controversial part of this bill - it had - on the
House side I believe 30 or 35 votes supporting it. It
was pretty uncontroversial. To move those forward
under a different vehicle and not move forward with HB
71, I think, was in the best interest of the
Legislature and the state at this time. So, that was
kind of the thinking behind it.
4:56:08 PM
And I'd like to add just a couple of remarks here that
I'm pretty troubled by. Those of us in the public
life, you end up getting a pretty thick skin and you
get it pretty quick or you don't last. It's as simple
as that. But I am troubled by some of the personal
comments that have been made about Amendment 1 towards
myself. And not a lot, but I wanted to go on the
record that there are very few people in this
building, and most of them are probably sitting in
this room right behind me, that know more about a gas
line than I do as far as the process goes that are not
professionals at this. And I would not have done this
had I not thought it was in the best interest of
moving the gas line forward. So, with that I don't
know how appropriate that comment is, but I did want
to get it on the record that I thought that some of
the comments made were clearly inappropriate and I've
got as thick a skin as any of the rest of you do.
So.... I appreciate you having this hearing.
4:57:34 PM
SENATOR SEEKINS asked if he had ever been able to sneak anything
through in the middle of the night in this building.
REPRESENTATIVE SAMUELS replied no and pointed out that he
hearings were being held right now.
We have six or eight days left. We wanted to make sure
we had some hearings on this subject so that that
Hosie testimony is not just hanging out there and
waiting until the fall. The sharks are circling around
this project. It will get attacked no matter what deal
is cut. No matter who it is cut with, it is going to
get rocks thrown at it.
CHAIR WAGONER agreed that this is a work in progress. He thanked
Representative Samuels for his testimony and announced an at
ease.
4:59:16 PM At ease 4:59:53 PM
HB 286-VALUE OF ROYALTY ON GAS PRODUCTION
CHAIR WAGONER announced HB 286 to be up for consideration.
SARAH NEILSON, staff to Representative Samuels, explained that
HB 286 is a housekeeping bill that was brought forward by
Municipal Light and Power (ML&P) that used to contract with
Shell and then bought Shell's interest in the field. The
Department of Natural Resources (DNR) agreed to let ML&P
continue to receive the current statute treatment based on the
ML&P Shell contract even after ML&P bought Shell's interest.
That contract expires at the end of this year and this bill
simply amends current statute by adding language that allows DNR
to use the gas transfer price set by the Regulatory Commission
of Alaska (RCA), much like DNR uses the contract price for gas.
The transfer price is the rate the ML&P is required to charge
itself for the gas that it uses. The proposed change is
consistent with the purpose of the original law and will help
insure that Anchorage electric consumers have certainty in their
electric rates.
5:01:38 PM
JIM POSEY, Municipal Light and Power, supported HB 286. It will
make sure there is a process for the RCA to determine price and
it's a simple change.
5:02:31 PM
KATHY GIARD, Chair, Regulatory Commission of Alaska, explained:
I have looked at this bill and also have looked at our
recent orders that we issued regarding the setting and
the establishment of the transfer price. And the
process that I wanted to talk to you about, which
normally occurs annually - ML&P will come before the
RCA and will provide their proposed transfer price to
us; we will evaluate it; we will put it out for public
notice. If the public advocate, which is represented
in the Attorney General's office, has any questions,
they will come in and look at it. We'll hold a
hearing. So, there's a pretty good public process for
this transfer price to be set. I wanted to come and
tell you that and give you the confidence that I don't
believe the DNR will have a challenge with the results
of the transfer price being too low. I think that it's
calculated; it's well laid out in an order that we
issued - U 97.35, which I can make available to you.
5:04:59 PM
SENATOR GUESS moved to adopt SCS HB 286(RES), version F. There
were no objections and it was so ordered.
MARY JACKSON, staff to Senator Wagoner, explained that the SCS
to HB 286 now contains the oil and gas exploration credits. Most
of the incentives have already been before the committee in the
form of SB 53, but there are some changes. It extends the
exploration credits adopted in 2003 to every place in Alaska
south of the Brooks Range through 2010. The reason is that the
Nenana Basin, Red Dog, Healy and finally Cook Inlet were added
and so the issue was that as each one was added, the title got
larger and there finally came a point where they said let's just
make it "south of."
Cook Inlet is still in the title, however, and the reason is
because there are specific standards for Cook Inlet and those
were talked about before this committee in SB 163. The Cook
Inlet standards were within three miles and 10 miles rather than
outside of three miles and outside of 25 miles.
The credits in this bill are different than the HB 71 credits in
three other areas. One clarifies a situation that arose with
exploration credits that were passed in. A regulation was
adopted and there was some confusion about where and when those
credits applied.
This bill says exploration credits from the original
piece of legislation are effective through 2007, but
exploration credits that will be effective in this
piece of legislation are under the different
standards....
The intent of the Legislature was that this was
exploration incentive credits. It was not the intent
of the Legislature that these credits be extended
forever, a, and, b, that it only be for exploration.
It was not intended that they be for, like,
delineation wells, as an example....That clarification
is one that has been agreed to by both the Department
of Natural Resources and the Department of Revenue.
The other thing that we've done is HB 71 excluded ANWR
(Arctic National Wildlife Refuge). ANWR was in the
original exploration credits that are still going
through to 2007. So, this bill deletes the provision
that deleted ANWR. So, ANWR is still in as it was
always in.
It's important to recognize that those credits expire
in two years - the original credits - and that there
is at least one company that has stepped to the plate,
so to speak, and is undergoing some work on the slope
in anticipation of ANWR and were prepared to use the
credits. The credits were extended; this bill keeps
them in ANWR.
5:09:11 PM
The other thing that this HB 286 does is that it does
delete sections 1 and 2 of HB 71 that was in front of
you. Now sections 1 and 2 are, of course, the sections
that referenced the findings and determined the seven
years and the rate of return that Ms. Robson spoke to
previously. It's important to note [that] that House
bill is still in the possession of this committee.
5:10:21 PM
SENATOR ELTON asked if this means that ANWR is eligible until
2007 or another date.
MS. JACKSON answered that ANWR is eligible until 2007 as it was
eligible in the original legislation.
CHAIR WAGONER expressed that was always the purpose. The
Governor has always said this is to do two things - increase
exploration and fill up the pipeline with oil and create jobs.
It was misunderstood, because it also applied at the time to the
National Petroleum Reserve - Alaska (NPR-A) - even though those
were federal lands.
5:11:41 PM
SENATOR GUESS asked Ms. Jackson to comment on credits in Healy
and Red Dog.
5:12:13 PM At ease 5:15:01 PM
MS. JACKSON replied that she had just passed out information on
the Usibelli Coal Mine, which is in the Healy Basin, and
information on the Red Dog Mine. Both entities had an interest.
The discussion for these is similar to those other regions -
they had an interest and let's do what we can to get these
explorers going and offer them the credits as well.
SENATOR GUESS asked if the purpose is first for gas development
for the Red Dog Mine or gas development for the region.
MS. JACKSON replied that she didn't want to speak for industry,
but understood it to be for both.
SENATOR GUESS asked if the state would have its same portion of
royalty gas in those situations so if the state wanted to use
the gas it could, even if the Red Dog decided not to.
CHAIR WAGONER replied that depends on whose gas it is and whose
land it's on. If it's on state land, yes; if it's on private
land, no.
5:18:50 PM
SENATOR GUESS said she supported the tax credits, but was a
little worried at the breadth of language on page 3, lines 22
through 23. She said she was comfortable with Nenana, Healy, Red
Dog and Cook Inlet, but asked if anything else falls under this,
like coalbed methane.
MS. JACKSON replied no. She has asked if there might be anything
in Southeast and the answer was that there might be in some old
wells that were drilled off of Yakutat. "The whole point of the
legislation is to try to get things going - to develop."
5:20:23 PM
SENATOR GUESS said the current SCS has an immediate effective
date and SB 53 had a contingency effective date and the other
bill had a no effective date. She asked if the effective dates
in the SCS CSHB 286(RES) were all correct.
MS. JACKSON replied yes. She explained that the reason it has an
immediate effective date is because the original HB 286 had an
immediate effective date.
SENATOR GUESS wanted to make sure a contingency effective date
wasn't needed, because HB 53 had one.
MS. JACKSON reassured her that it wasn't needed in this bill.
5:21:28 PM
SENATOR SEEKINS moved to pass SCS HB 286(RES) with individual
recommendations and the attached fiscal note. There were no
objections and it was so ordered.
CHAIR WAGONER adjourned the meeting at 5:22:55 PM.
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