Legislature(2023 - 2024)BUTROVICH 205
02/08/2023 03:30 PM Senate RESOURCES
Note: the audio ![]()
and video ![]()
recordings are distinct records and are obtained from different sources. As such there may be key differences between the two. The audio recordings are captured by our records offices as the official record of the meeting and will have more accurate timestamps. Use the icons to switch between them.
| Audio | Topic |
|---|---|
| Start | |
| Presentation(s): Overview of the Tax Structure for Cook Inlet | |
| Presentation(s): Department Overview by the Department of Natural Resources (dnr) | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
SENATE RESOURCES STANDING COMMITTEE
February 8, 2023
3:31 p.m.
MEMBERS PRESENT
Senator Click Bishop, Co-Chair
Senator Cathy Giessel, Co-Chair
Senator Bill Wielechowski, Vice Chair
Senator Scott Kawasaki
Senator James Kaufman
Senator Forrest Dunbar
Senator Matt Claman
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
PRESENTATION(S): OVERVIEW OF THE TAX STRUCTURE ON COOK INLET BY
THE DEPARTMENT OF REVENUE (DOR)
- HEARD
PRESENTATION(S): OVERVIEW OF THE DEPARTMENT OF NATURAL
RESOURCES (DNR)
- HEARD
PREVIOUS COMMITTEE ACTION
No previous action to record
WITNESS REGISTER
DAN STICKEL, Chief Economist
Economic Research Group
Department of Revenue (DOR)
Juneau, Alaska
POSITION STATEMENT: Answered questions and provided information
about the tax structure for Cook Inlet.
BRANDON SPANOS, Deputy Director
Tax Division
Department of Revenue (DOR)
Anchorage, Alaska
POSITION STATEMENT: Answered questions and provided information
about the tax structure for Cook Inlet.
JOHN CROWTHER, Deputy Commissioner
Department of Natural Resources
Anchorage, Alaska
POSITION STATEMENT: Participated in the Department of Natural
Resources (DNR) overview.
BRENT GOODRUM, Deputy Commissioner
Department of Natural Resources
Anchorage, Alaska
POSITION STATEMENT: Participated in the Department of Natural
Resources (DNR) overview.
MIA KIRK, Acting Director
Division of Agriculture
Department of Natural Resources
Palmer, Alaska
POSITION STATEMENT: Answered questions during the Department of
Natural Resources overview.
BRENT GOODRUM, Deputy Commissioner
Department of Natural Resources
Anchorage, Alaska
POSITION STATEMENT: Participated in the Department of Natural
Resources (DNR) overview.
JOHN BOYLE, Commissioner-Designee
Department of Natural Resources
Anchorage, Alaska
POSITION STATEMENT: Participated in the Department of Natural
Resources (DNR) overview.
ACTION NARRATIVE
3:31:49 PM
CO-CHAIR CATHY GIESSEL called the Senate Resources Standing
Committee meeting to order at 3:31 p.m. Present at the call to
order were Senators Dunbar, Claman, Wielechowski, and Co-Chair
Bishop and Co-Chair Giessel. Senators Kaufman and Kawasaki
arrived shortly thereafter.
^PRESENTATION(S): OVERVIEW OF THE TAX STRUCTURE FOR COOK INLET
DEPARTMENT OF REVENUE (DOR) DISCUSSION ABOUT THE TAX STRUCTURE
FOR COOK INLET
3:32:41 PM
CO-CHAIR GIESSEL announced that the Department of Revenue would
respond to the lingering questions about the tax structure for
Cook Inlet.
3:33:21 PM
DAN STICKEL, Chief Economist, Economic Research Group,
Department of Revenue (DOR), Juneau, Alaska, introduced himself.
CO-CHAIR GIESSEL requested answers to the following:
• The tax rate for Cook Inlet.
• Whether expenditures in Cook Inlet could be deducted from a
company's North Slope liabilities.
• The revenue implications for the state if a company,
Hilcorp specifically, is an S corporations.
MR. STICKEL clarified that DOR cannot talk about specific
taxpayer information so the presenters would be talking in
generalities when they discuss corporations that are and are not
subject to corporate income tax.
He convey that in terms of the overall fiscal system in Cook
Inlet, the state receives revenue primarily from four main
sources:
• State royalty applies to production from state-owned lands.
• Corporate income tax applies to C corporations. Statewide,
most companies doing business in the oil and gas industry
are C corporations. For companies that are subject to
corporate income tax, the top marginal rate is 9.4 percent.
• Property tax is a 20 mill assessment, or 2 percent of the
assessed value of the property. A credit for any municipal
taxes offsets that, so the company pays 20 mills and the
state receives a portion.
• Severance/Production tax is applied to the production of
oil and gas and paid to the state.
3:35:38 PM
MR. STICKEL explained that the severance/production tax in Cook
Inlet changed January 1, 2022 so there are both before and after
regimes, for gas taxes in particular. The base tax rate is 35
percent of the production value. It is a net profits-based tax.
Production tax value is the calculation similar to a net profit
calculation. That applied to both oil and gas prior to January
1, 2022. After that date, the 35 percent net continued to apply
to oil, but for gas it changed to a 13 percent gross tax rate.
That change applied statewide for all gas production. It
originally was intended to line up with a potentially major gas
sale from the North Slope.
MR. STICKEL stated that there is no tax floor in Cook Inlet.
Currently, no significant tax credits apply. A small number of
companies receive the small producer credit that is being phased
out. The other major tax credits for Cook Inlet were repealed
effective January 1, 2018. Tax ceilings are in place for oil and
gas. The tax ceiling for oil is $1 per barrel. For oil, run
through the tax calculation, apply the 35 percent of production
tax net rate, and what's owed is either the 35 net tax or the
$1/bbl ceiling.
3:35:49 PM
SENATOR KAUFMAN joined the meeting.
MR. STICKEL continued to explain that a tax ceiling also applies
to gas. It distinguishes between fields in production prior to
April 1, 2006 and fields that came into production after that
date. That date was tied to the state's switch from a gross tax
system to a net tax system that was implemented in 2006 with the
petroleum profits tax (PPT) legislation. For the gas fields that
were producing prior to April 1 2006, the tax ceiling is based
on the effective gross tax rate in place for the preceding 12
months. Depending on the field, those ceilings range from zero
to about $0.25 per thousand cubic feet (Mcf). For any fields
that came into production post April 1, 2006, the tax ceiling is
$0.177/Mcf. As of 2006, that represents the average gross tax
rate for all fields.
3:39:11 PM
SENATOR KAWASAKI joined the committee.
MR. STICKEL added that starting in 2022 when gas changed to a
gross tax, a producer that has both oil and gas production is
able to apply all of their lease expenditures against the net
tax calculation for oil.
He asked if there were questions.
3:40:00 PM
SENATOR CLAMAN asked him to expand on the question of what
expenses can be deducted against fields on the North Slope
versus Cook Inlet.
MR. STICKEL explained that production tax has what's referred to
as a ring fence. It describes how lease expenditures can apply
between different fields. For example, for a field on the North
Slope a producer calculates their tax on a slope-wide basis.
This means that any expenditures in one field can be used to
offset revenue from production in another field. In response to
a question, he confirmed this was specific to the North Slope.
For Cook Inlet, each field has its own calculation, which means
a producer cannot use expenses from one field to offset revenue
from another field. The producer also cannot apply any of those
expenses against North Slope production.
3:41:27 PM
SENATOR WIELECHOWSKI asked if he had responded to the committee
questions in writing.
MR. STICKEL answered no but the department would provide written
responses.
SENATOR WIELECHOWSKI said it would be helpful to have the
numbers on a single sheet for reference. He recapped his
understanding of the explanation of the taxes and asked if it
was accurate.
MR. STICKEL said he'd be happy to update a presentation the
division delivered last session and provide that to the
committee.
CO-CHAIR GIESSEL asked him to send it to her office.
SENATOR WIELECHOWSKI said the committee was looking for levers
to pull to get more gas from Cook Inlet, so it was important to
know those tax rates. He asked how much the state had collected
the last couple of years in taxes and royalties from Cook Inlet.
3:43:02 PM
MR. STICKEL said an analysis was prepared last year that looked
at total taxes and royalties. For FY2021 the estimate was $65
million from Cook Inlet and the estimate for FY2020 was $68
million. He noted that the department was in the process of
updating the analysis for FY2022.
SENATOR WIELECHOWSKI asked how many barrels were produced.
MR. STICKEL answered that for FY2021, there was 10,600 bbl/day
of oil production from Cook Inlet and about 222 million cubic
feet (MMcf) per day of gas production.
SENATOR WIELECHOWSKI asked how much in taxes and royalties the
state was receiving per barrel per day from Cook Inlet versus
the North Slope compared to what the producers and federal
government were receiving.
MR. STICKEL said he would follow up with the information.
3:44:39 PM
CO-CHAIR BISHOP asked if he could prepare an order of operations
specific to Cook Inlet.
MR. STICKEL agreed to provide the information.
3:45:06 PM
SENATOR DUNBAR asked him to confirm the taxes and royalties the
state collected from Cook Inlet for FY2021 and FY2022.
MR. STICKEL said the analysis prepared last year showed that for
FY2020 Cook Inlet revenue was estimated at $68 million and
revenue for FY2021 was estimated at $65 million.
SENATOR DUNBAR asked if that was from just gas or gas and oil
combined.
MR. STICKEL answered that those revenue numbers were from gas
and oil combined. He added that property and income tax were
difficult to assign to either oil or gas.
SENATOR DUNBAR commented that it was a little surprising that
the state only received $65 million in total revenue from oil
and gas together from Cook Inlet. He asked for help
understanding both how to stimulate gas production and how that
revenue compares to all the activity in Cook Inlet.
MR. STICKEL said the forthcoming graphic will highlight the key
elements of the fiscal regime, including tax ceiling, tax rate,
the way lease expenditures are applied, and tax credits, which
no longer apply. The analysis will show that the production tax
burden is relatively low for Cook Inlet. He acknowledged that
the analysis could be expanded to look at property tax.
CO-CHAIR GIESSEL stated that her office would distribute the
analysis that Mr. Stickel agreed to provide.
3:48:19 PM
SENATOR CLAMAN requested the graphic also describe how the
department calculates what a producer actually pays. He
commented that because of the cap, producers probably aren't
always paying 35 percent.
3:49:07 PM
SENATOR WIELECHOWSKI asked for the total amount of tax credits
the state had provided for Cook Inlet. He noted that he'd heard
conflicting numbers.
MR. STICKEL said he would follow up with the information.
SENATOR WIELECHOWSKI asked if the tax division had done an
analysis of the incentives that worked and did not work. He
listed examples that included tax credits, jack-up rigs, cutting
credit royalties to zero, and reducing tax on oil and gas.
MR. STICKEL replied that they were in the process of updating
prior analyses that looked at the correlation between enacting
tax credits and what happened to oil and gas production in Cook
Inlet; and what companies that received tax credits went on to
do in terms of lease expenditures and production.
3:50:42 PM
SENATOR WIELECHOWSKI asked whether the department was working on
any sort of an ask from Cook Inlet producers.
MR. STICKEL said he would defer the policy question about what
the department was working on, but he could speak to the
analysis that the tax group was working to update.
SENATOR WIELECHOWSKI asked whether someone from the department
was available to answer policy questions.
MR. STICKEL answered that some leadership members of the Tax
Division where available online.
CO-CHAIR GIESSEL asked Brandon Spanos to respond to Senator
Wielechowski's question.
3:51:29 PM
BRANDON SPANOS, Deputy Director, Tax Division, Department of
Revenue (DOR), Anchorage, Alaska, stated that he would defer to
the Commissioner of Revenue. He'd been in the position for a
month and did not have that information.
SENATOR WIELECHOWSKI said he understood, but the answer was
important. He didn't want the committee and legislature to be
rushed into making a decision about Cook Inlet, but the
situation was approaching crisis level because some utilities
were going to run out of gas in just two years. He opined that
getting an import facility for LNG up and running would take
five years and it may take even longer to build a gasline. He
said he has the feeling that an "ask" is coming and he'd like
the committee and legislature to be prepared for that. He
restated the importance of getting the information from the tax
division sooner rather than later.
CO-CHAIR GIESSEL advised that she would ask the commissioner of
Revenue to come before the committee and answer the question.
3:53:28 PM
CO-CHAIR BISHOP said diversification is key, and then commented
on what would have happened if Susitna [Susitna Watana Dam] had
been built in 1984.
3:53:51 PM
SENATOR KAWASAKI said he too anticipates a forthcoming "ask"
from the utilities. He emphasized that the lack of affordable
gas is critical throughout the Railbelt, but particularly so for
people in the Interior and Fairbanks region. If there's going to
be a substantive policy change or an "ask" for the Cook Inlet
region, it's better to know that sooner rather than later.
CO-CHAIR GIESSEL noted that Mr. Stickel would take the
committee's specific question to the commissioner.
^PRESENTATION(S): DEPARTMENT OVERVIEW BY THE DEPARTMENT OF
NATURAL RESOURCES (DNR)
PRESENTATION(S): OVERVIEW OF THE DEPARTMENT OF NATURAL
RESOURCES (DNR)
3:55:58 PM
CO-CHAIR GIESSEL announced the consideration of an overview of
the Department of Natural Resources. She listed the individuals
who would participate in the presentation.
3:56:40 PM
At ease
3:58:08 PM
CO-CHAIR GESSEL reconvened the meeting and welcomed John
Crowther.
3:58:21 PM
JOHN CROWTHER, Deputy Commissioner, Department of Natural
Resources, Anchorage, Alaska introduced himself and provided a
brief biography. He relayed that Commissioner-Designee Boyle
would arrive subsequently to provide introductory remarks about
himself as he assumes the leadership of the department.
MR. CROWTHER read the department's mission statement from the
Alaska Constitution. It provides a unique directive to maximize
the value of resources for the public. The department takes its
mission seriously and the organizational chart shows the
professionals who provide leadership over seven divisions and
two key offices. [The organizational chart may be found on slide
2 of the presentation.]
4:01:58 PM
BRENT GOODRUM, Deputy Commissioner, Department of Natural
Resources, Anchorage, Alaska, introduced himself and provided a
brief biography.
4:02:35 PM
MR. GOODRUM explained that the Division of Agriculture works to
protect Alaska's natural resources and ecosystems through a
variety of programs. A state priority is to improve food
security by getting more land into production through
agricultural land sales, improving infrastructure, leveraging
USDA agricultural production programs, and continued support for
market access for agricultural producers.
The 2022 season was challenging and harvests were poor. The
division responded by implementing a food security cost
assistance incentive grant program. Nearly $500,000 is being
distributed to 43 commercial livestock producers statewide in
phase one. The Alaska Barley Transportation Support Grant
Program that is underway is in response to the shortage of
Alaska-grown livestock feed. The state is seeking to cover
transportation costs to import critically needed livestock feed.
MR. GOODRUM described a joint program with the Division of
Mining Land and Water. It was the first successful land sale
offering of 27 parcels. This was nearly 2,000 acres within the
Nenana Totchaket Agricultural Project area. Successful bidders
are currently working on farm development plans.
MR. GOODRUM highlighted that division inspectors helped to
facilitate the export of over $140 million in logs and peonies
in 2022. The division manages about $1 million in specialty crop
grants and $4 million in micro grants that are focused on food
security. Last, the Agricultural Revolving Loan Fund continued
to provide loan opportunities for new and expanded agricultural
programs.
4:05:43 PM
SENATOR WIELECHOWSKI expressed interest in the reimbursement to
commercial farmers for livestock feed. He noted that of the
$450,000 that was distributed to 43 individuals, about one-third
or $147,000 went to just one individual. He asked for an
explanation.
MR. GOODRUM deferred to Mia Kirk.
4:06:52 PM
MIA KIRK, Acting Director, Division of Agriculture, Department
of Natural Resources, Palmer, Alaska, offered her understanding
that a $147,000 receipt was submitted. It was not a
reimbursement. The division reimbursed 40 percent of the
eligible receipts that were submitted and that's what happened
with that specific receipt.
SENATOR WIELECHOWSKI asked if this was a state or federal
program and how it worked if one-third could go to one
individual.
MS. KIRK reiterated that the $147,000 was a receipt. The
division reviewed the applications for eligibility and
established a 40 percent reimbursement for the eligible receipts
that were submitted. The individual who submitted the $147,000
receipt would have been reimbursed 40 percent, or close to
$60,000.
4:09:47 PM
MR. GOODRUM reviewed the Division of Forestry and Fire
Prevention. He noted that fire prevention was added to the
division's name by Executive Order on July 1, 2022. He stated
that the division is tasked with wildland fire management over
150 million acres, primarily to protect life and property.
He reported that last year the Lime Complex fire in Southwest
Alaska was the largest in the nation, encompassing more than
865,000 acres. This area saw little fire activity in the past.
In 2022, 30 fires each burned more than 40,000 acres. A total of
592 fires statewide were attacked aggressively, which limited
216 fires that occurred in critical protection zones, resulting
in just 109 acres being consumed.
MR. GOODRUM reported that with help from the legislature, the
division established a fuel mitigation section that proactively
mitigates hazardous fuels and establish and maintain strategic
fire breaks around homes, businesses, and communities.
MR. GOODRUM reviewed the 2022 firefighting activities that were
accomplished with legislative support. He spoke to slide 6:
Legislative Support in 2022
Building Firefighting Capacity: DOF received the first
half of the $8 million needed to increase our
firefighting forces to Preparedness Level 3,
including:
• Lead firefighters, training & fuels specialists,
GIS analyst, critical support staff
Passed Emergency Firefighter (EFF) Bill:
GF funds can now pay EFFs for non-emergency hazardous
fuels work.
• Creates stable employment for rural Alaskans
• Rebuilds village fire crews
• Diversifies rural economies
Reinstated the Wildland Fire Academy
• Provides training to new firefighters to build
expertise and help rebuild our village fire
crews.
Added 6 new firefighting crew support vehicles
Provided seasonal wildland firefighters with health
care
4:12:42 PM
MR. GOODRUM reviewed the following about the division's
strategic plan that was implemented in 2022:
Strategic plan will reduce suppression costs &
increase public safety
1. Implement the second phase of a self-sufficient Alaska
firefighting force that will:
• Provide for public safety
• Protect critical infrastructure, Alaskan investments
and communities from wildland fire
• Reduce suppression costs by containing fires at
smaller footprints
• Reduce the need to rely on expensive and potentially
unavailable Lower-48 resources
2. Create a network of hazardous fuels treatments around
communities that:
• Increases public and firefighter safety
• Includes the use of local contractors
• Creates community involvement and builds skills and
preparedness for wildland fire
4:13:07 PM
MR. GOODRUM stated the division manages 47 million acres of
forest on state land for commercial timber sales and public use.
Timber sales are the primary source of wood for local sawmills
and value-added wood product manufactures throughout the state.
They are also an important source of woody biomass for heat and
electricity, primarily in the Interior. The division also builds
and maintains roads on state lands. He highlighted that in 2022
the division sold 9.4 million board feet in 34 timber sales,
worth $1.7 million. The industry contributed 1,580 jobs and $110
million to the Alaska economy in 2022.
4:14:13 PM
SENATOR DUNBAR asked how closely the division had been working
on carbon sequestration, and the different strategies to
effectively reduce fires in boreal forests in the Interior.
4:15:23 PM
JOHN BOYLE, Commissioner-Designee, Department of Natural
Resources, Anchorage, Alaska, stated that the department was
working to answer questions related to carbon sequestration.
Some information suggests that there are sustainable forestry
opportunities, particularly in the Interior. The department is
looking at whether its statutory and regulatory structure are
fit for purpose. A criticism from potential investors is that
the current lease terms and the mechanisms might not give the
industry the predictability and needed board feet to justify a
$200 million investment in forest infrastructure.
COMMISSIONER-DESIGNEE continued to say that addressing these
concerns entails revitalizing an industry in decline and
providing new opportunities to actively manage forests to
improve the quality of the timber and reduce susceptibility to
wildfire. Through this process comes the "additionality" element
that is essential for a carbon offset project.
[The concept of an "offset" requires the concept of
additionality. To offset some harm, it's necessary to show that
the activity "caused" some equivalent extra good to occur
elsewhere. Additionality is about this causal question.]
COMMISSIONER-DESIGNEE emphasized that revitalizing and building
the forest industry is an important factor for success in the
carbon offset realm. This entails cutting beetle-killed trees
and thinning forests.
4:19:13 PM
SENATOR CLAMAN referenced the bullet on slide 8 that highlighted
34 timber sales totaling 9.4 million board feet, worth $1.7
million. He asked if those sales were consistent with sales over
the last 10 years on state lands.
COMMISSIONER-DESIGNEE BOYLE replied the forest harvests
fluctuate, but 2021 was one of the largest harvests in about a
decade totaling about 15 million board feet. Most of the sales
are in Southeast and the state has very limited forest lands
remaining to offer for timber sales.
SENATOR CLAMAN expressed confusion about conflicting amounts and
dates between the information on the slide and the response.
COMMISSIONER-DESIGNEE BOYLE clarified that he was talking about
the large harvest in 2021 when he said last year. He deferred to
Mr. Goodrum for the exact numbers.
MR. GOODRUM offered to provide a historical look at Division of
Forestry sales and the board feet associated with each sale.
SENATOR CLAMAN asked for a 10-15 year look back.
MR. GOODRUM agreed to provide the information.
4:22:34 PM
MR. CROWTHER advanced to slide 9. He described the Division of
Geological and Geophysical Surveys as a world class scientific
organization. The division's mission clarifies that it is about
applied science, not just theory. He reviewed the different
sections and highlighted several accomplishments.
Mineral Resources Section is responsible for characterizing
minerals throughout the state. He directed attention to the
bulleted accomplishments on the slide and highlighted geologic
mapping.
• Completed new geologic mapping of 2,317 square miles
in eastern Interior (Yukon-Tanana upland)
This area has existing mining activity and the mineral resources
section is further characterizing the geology for explorers to
understand where additional deposits may lie.
4:24:31 PM
Energy Resources Section looks at oil and gas, coal, geothermal,
and other energy potential. He directed attention to the
bulleted accomplishments on the slide and highlighted the
published research in an international journal.
• Important research on the controls on reservoir quality
in the Nanushuk Formation published in international
petroleum journal
MR. CROWTHER stated that both the mineral resources and energy
resources sections operated in partnership with the US
Geological Survey and use federal funding to complete their
resource assessment work. The division works hard to bring those
funds into Alaska.
4:25:18 PM
CO-CHAIR BISHOP highlighted that it was the on the ground work
of DNR geologists that led to the Prudhoe Bay discovery.
MR. CROWTHER agreed it was fair to say that the state's geologic
capacity going back to the identification of the earliest oil
fields on the North Slope was critical in the discovery and
characterization. That extemporary geologic work was repeated
with the Nanushuk Formation.
4:26:29 PM
Engineering Geology Section is about understanding the
environment. He spoke briefly to the bullets and noted that this
section was in the field the day after Cyclone Merbok to assess
high water marks and the impacts of flooding to better
understand them in the event of future storms and inform future
construction, rebuilding, and relocation activities to increase
safety.
• Visited 138 field sites as part of ASTAR
construction materials and hydrology
investigations on the North Slope.
• Collected 691 square miles of new lidar and nine
square miles of new nearshore bathymetry to
support hazard assessments all over the state.
• Deployed science response teams to landslides at
Seward, Skagway, Juneau, and Denali Village, and
to western Alaska coastal communities impacted by
Extra-Tropical Cyclone Merbok.
• Published 22 hazards-related DGGS reports and
datasets and an additional four papers in peer-
reviewed journals.
4:27:42 PM
Geologic Information Center is the technical brain that enables
data collection in the field and allows data to be published and
processed for access.
Volcanology Section houses the Alaska Volcano Observatory that
monitors and assesses volcanic activity throughout the state. A
variety of sensing and geologic characterization helps predict
activity. Federal funding drives the activity so the division
works with federal partners. He highlighted the recently
completed field work in the Aleutian Chain to switch from analog
to digital sensors.
• Completed the 4-year "Analog to Digital" project
upgrading volcano monitoring stations, resulting in
improved ability to forecast and detect volcanic
unrest and eruptions.
Geologic Materials Center is a state library of natural resource
information that, in some instances, goes back 100 years. About
10 years ago the legislature provided funding to update and
modernize the facility. That modern facility is filled with
geologic samples and mining material, and is regularly accessed
by explorers from around the world.
Alaska Geospatial Office (AGO) coordinates and standardizes the
way geospatial information is utilized throughout the state
system. This is not only state government, but also local
authorities seeking to provide updated and real-time geospatial
information to residents.
CO-CHAIR GIESSEL noted that geologists would talk to the
committee when they considered sequestration.
4:30:34 PM
MR. CROWTHER advanced to slide 12 that highlights things the
division plans to work on in calendar year 2023. He said this
includes work to characterize geologic hazards, characterize
mineral and energy resources, and make the data more accessible
using advances in technology.
4:31:24 PM
MR. GOODRUM advanced to slide 13 to review the Division of
Mining, Land and Water. He spoke to the following:
Mission:
Provides for the appropriate use and management of
Alaska's state-owned land and water, aiming towards
maximum use consistent with the public interest.
The Division of Mining, Land and Water manages more
than 160 million acres a land base comparable in
size to California and most of Oregon combined.
DMLW supports core missions of the Department
including acquiring and disposing of land and
resources; providing use of and access to state lands
for the public; fostering responsible development of
lands; managing resource data; and protecting the
State's natural resource assets consistent with the
public interest.
4:32:16 PM
MR. GOODRUM advanced to slide 14 to review some of the Division
of Mining, Land and Water accomplishments in FY2022:
FY2022
• Generated $32.5M in revenues to the state through
authorizations for use of state lands and waters,
royalty payments, and land sales.
• A total of 20,098 acres of municipal entitlement
land was conveyed to 3 different Boroughs.
• Sold 148 parcels of land to the public, totaling
approximately 1,497 acres of land.
• Offered approximately 2,000 acres of Agricultural
land in the Nenana-Totchaket Agricultural Project
and featured approximately 27 parcels ranging in
size from 20-320 acres each.
• Generated $5.4M in revenue from land sales for the
Land Income Disposal Fund.
Provided support for Governor Dunleavy's Unlocking
Alaska Initiative asserting, on behalf of all
Alaskans, state ownership, management and control over
submerged lands and navigable waters and over RS 2477
rights-of-way and other state easements across Alaska
by:
• Commencing litigation against the Federal Government
to remove clouds from state title on navigable
rivers.
• Winning a substantial victory for majority of the
North Fork and Middle Fork of the Fortymile River.
• Developing the State Transportation Plan for the
Fortymile area to be completed in FY2023.
• Conducting extensive fieldwork to support Quiet
Title Act litigation on rivers across the state and
all RS 2477 rights-of-ways located within the Yukon-
Charley Rivers National Preserve.
• Pursuing a Joint Reconciliation Initiative to
potentially expand land entitlement to both the
State and Native Corporations.
• Issuing authorizations for Crescent Lake within Lake
Clark National Park & Preserve.
4:33:35 PM
MR. GOODRUM advanced to slide 15 and described the
organizational retooling the Division of Mining, Land and Water
underwent in the last few years. Statewide policy teams were
created to improve efficiency, consistency, and customer
service. The division now settles about 81 percent of permit
applications for the use of state lands within 30 days. More
than 30 statewide policies were developed that enhanced
consistency and two new over-the-counter permit programs were
created. These efforts have reduced backlogs in land
applications by 32 percent and water applications by 42 percent.
MR. GOODRUM highlighted that the division also continues to
support efforts to enhance the growth of the mariculture
industry in Alaska.
4:34:46 PM
MR. CROWTHER displayed slide 16 and reviewed the Division of Oil
and Gas. He read the mission statement:
Mission: Manage lands for oil, gas & geothermal
exploration and development in a fair and transparent
manner to maximize prudent use of resources for the
greatest benefit of all Alaskans; facilitates safe &
environmentally conscious operation & maintenance of
common carrier pipelines.
MR. CROWTHER stated that the State of Alaska is one of the most
respected petroleum provinces in the world. Nearly 18 billion
barrels have been produced from the North Slope and the division
sees the potential for billions more. The division holds lease
sales, manages and unitizes the leases, and permits the
developments as projects proceed. The division also plays an
important role in receiving and managing the state's royalty. He
noted that the Department of Revenue handles the tax portion of
that revenue stream.
MR. CROWTHER highlighted the following accomplishments in
FY2022:
• Verified and receipted $1.8 billion in royalty, net
profit share lease revenues, rents, bonus bids, unit
actions, and federal payments.
• Oversaw activities on 37 oil and gas units and five
lease operations, conducted five area wide lease
sales and managed 1,719 lease actions.
• Area-wide lease sales resulted in $568 thousand in
bonus bids and more than 19 thousand acres leased.
• Collected $227,000 in leasing application fees and
$15.5 million in lease rent payments.
• Royalty audits resulted in recovering $3.3 million
in royalty and Net Profit Share Lease revenue,
including interest.
• Entered into two new multi-year Royalty-In-Kind
contracts with Marathon and Petro Star.
MR. CROWTHER also noted that the division manages the release of
tax credit seismic information to the public, as provided in
statute. He noted that the program that provides credits for
explorers shooting seismic was no longer available. However,
provisions of those laws obligate that data be disclosed to the
public after the statutory period, often for ten years.
4:38:38 PM
CO-CHAIR BISHOP offered his understanding that anybody can look
at the rocks after the information is released, as provided in
statute.
MR. CROWTHER answered yes; the information is available for a di
minimis, at-cost fee.
4:39:22 PM
MR. CROWTHER displayed slide 17 and highlighted the first bullet
about the new unitization activity on the North Slope. It
indicates that an explorer has characterized a resource and is
working on subsequent development. In those units the operator
is building on its sanction of the Pikka project. He said the
department looks forward to further characterization in those
new units.
MR. CROWTHER also highlighted the right-of-way lease
applications and permits the department has issued. Finally, in
keeping with its mission regarding not just oil and gas but also
geothermal, the division had a best interest finding for the
geothermal prospect that was issued in FY2022. The division
continues to promote the development of the geothermal resource
and looks at ways to improve that program so more activity can
happen in the geothermal space in Alaska.
4:40:39 PM
MR. GOODRUM advanced to slide 18 and stated that the Division of
Parks and Outdoor Recreation operates the largest state park
system in the nation. The division supports public safety,
economic development, education, and resource management as it
provides access to world-class outdoor recreation opportunities.
He mentioned record traffic, the increased number of permits
issued, the improved reservation system, and the new electronic
fee stations.
MR. GOODRUM specifically mentioned the following:
• Park Rangers responded to 42-plus Search and
Rescues.
• Office of Boating Safety's 366 classes, 54 pool
sessions reached 10,332 participants; 221,919 since
inception.
• Office of History & Archaeology's State Historic
Preservation Office reviewed 2,111 projects, signed
14 major agreements and made substantive amendments
to 9 other major agreements.
• Office of History & Archaeology's State Historic
Preservation Office reviewed 2,111 projects, signed
14 major agreements and made substantive amendments
to 9 other major agreements
SENATOR DUNBAR expressed interest in the Alaska Long Trail
project. He asked about the prospects of it being built, the
likely construction costs, and whether those funds would be
included in a future budget.
MR. GOODRUM offered his understanding that money for the project
was included in the capital budget. He added that it was
challenging because the network of land ownership along the
route from Seward north to Fairbanks was so diverse. He said the
division is still in the learning phase, but recognizes that
this trail is an exciting opportunity.
4:44:00 PM
SENATOR CLAMAN commented that while he appreciates the idea of a
global plan before moving forward with the trail system, he
didn't believe it was practical. He suggested that a patchwork
approach like Anchorage took on the Coastal Trail was more
likely to be successful. He voiced his frustration that the
governor had vetoed Long Trail monies the last few years that
could have started the project. He emphasized the huge support
for this trail and that most people recognize that it won't be
built in one year.
4:45:14 PM
MR. CROWTHER advanced to slide 19 and explained that the Office
of Project Management and Permitting (OPMP) was responsible for
permitting all large projects that require multiple
authorizations and chooses to be facilitated by a state
organization. The intent is to provide a one-stop-shop for
project applicants to receive information and direction from all
state, federal, and local authorities. The office works to
ensure that permitting is consistent, defensible, transparent,
and timely.
4:46:21 PM
MR. CROWTHER advanced to slide 20 and provided commentary.
Large Project Coordination: These include major oil and gas
developments and major mining developments. He noted that the
list has both prospects and operating mines because mines must
be continuously permitted throughout their operations. Major
transportation projects have also received coordination through
OPMP. These include the Ambler Access Road and the West Susitna
Access Road. The OPMP team has also coordinated hydroelectric
projects, as illustrated on the slide.
Federal Plans and Activities: In the last several years, OPMP
has spent more time tracking and managing federal actions. He
stated that while federal permitting is part of project
development under any administration and project structure, the
suite of federal actions that potentially restrict activity in
Alaska have been significant under the Biden administration.
With appropriations from the legislature, an increasingly
important role for OPMP has been tracking and responding to the
federal actions related to the Alaska National Interest Lands
Conservation Act (ANILCA), the federal permitting process that
needs to move forward, and federal regulatory actions that
affect the development of lands and resources in the state.
Federal Programs and Grants: He noted that OPMP also performs a
variety of grant management activities.
4:48:02 PM
MR. GOODRUM advanced to slide 21 and summarized the mission of
the Support Services Division:
Mission: Provide client-focused, efficient and cost-
effective financial, budget, procurement, human
resource, information technology and recording
services to the Department of Natural Resources and
the public.
He stated that the division has processed an increasing number
of e-recordings in recent years, and revenue generation has been
steady. He noted that the marked revenue uptick in FY2021 was
due to the all-time high number of home refinancings and
recording of those documents. He directed attention to the
critical functions outlined in the mission statement, all of
which are critical to a smooth functioning department.
4:49:09 PM
MR. CROWTHER advanced to slide 22 to review the Trust Land
Office. He explained that this office works within DNR to manage
Alaska's Mental Health Trust lands. Those lands are endowed to
the Mental Health Trust for the benefit of trust beneficiaries
and to run the programs that are run by the Mental Health Trust
Authority. He directed attention to the list of revenues the
trust generated last year. Of the $11 million that was generated
last year, $3.6 million came from mineral and energy assets.
Land sales generated more than $3.4 million, thereby creating
additional revenue for taxing authorities.
MR. CROWTHER highlighted the following Trust Land Office
initiatives bulleted on slide 23:
• Subdivision development on multiple Trust parcels
statewide to offer in future land sales and leasing.
• Icy Cape Minerals Project drilling program leading
to a prefeasibility study.
• Easements program to capture revenue from existing
and new utility infrastructure.
He confirmed an earlier statement about the important role the
Mental Health Trust Authority plays in providing timber to the
timber industry in Southeast Alaska. He noted that the Trust
Land Office was continuing to work to execute the land exchange
with the US Forest Service, pursuant to federal approvals next
year.
4:51:29 PM
COMMISSIONER-DESIGNEE BOYLE discussed the Office of Commissioner
and the Department of Natural Resources (DNR) as a whole. He
spoke about the incredible culture at DNR and the dedicated and
highly skilled professionals who work there. They go above and
beyond to serve the interests of the state. Maintaining that
culture is key to retaining and attract talent. He made the
following observations:
- In FY2022, DNR worked to reduce the backlog of administrative
appeals. Some of the decisions that have been rendered in recent
months may significantly influence investment for development in
the state. Recognizing that timely response to appeals is
important, the department created an associate director position
to focus on processing these appeal packages.
- DNR actively promotes Alaska resources to global investors.
The team at the Division of Geological & Geophysical Surveys was
instrumental in the department being able to market the
attractiveness of the Nanushuk Formation on the North Slope. The
fruits of that work are apparent in the Pikka and Willow
projects. It feeds in to new entrants and facilitates reaching
out to the Department of Defense and the Department of Energy to
showcase Alaska's ability to be a key resource supplier. This is
important to national security and the nation's ability to
transition to different forms of energy in the future.
- Statehood defense is another area of focus for the department.
Commissioner-designee Boyle mentioned reimplementation of the
Roadless Rule for the Tongass; the EPA's preemptive veto on the
Pebble Mine Project; statehood land entitlement selections,
particularly along the Dalton Highway; and the Willow project in
the NPRA. Litigation on these issues is to protect the interests
of the state so it's possible to grow and develop the natural
resources called for in the Statehood Act. The compact with the
federal government said the state would be able to utilize its
resources to build infrastructure and provide quality of life
for residents. He opined that the preemptive veto of the Pebble
project disregards the state's ability to manage and protect its
resources through state processes. These issues merit time,
attention, and resources to push back when necessary but also
find areas of alignment.
- It's important for the department to be customer-service
oriented in terms of the ability to process permits, appeals,
and leases timely to attract investment and enable business and
commerce to move forward. It is incumbent on the department to
keep that focus in mind.
COMMISSIONER-DESIGNEE BOYLE concluded his comments saying that
the department was eager to talk with the committee in
forthcoming weeks about the forthcoming carbon bills and working
through the issues to fulfill the Article VIII mandate to
develop, conserve, and maximize the resources in the best
interest of the people.
4:59:49 PM
SENATOR CLAMAN asked if the Pebble Mine decision was one of his
highest priorities as commissioner.
COMMISSIONER-DESIGNEE BOYLE answered yes, in the context of the
state being able to conduct its own permitting regime for
development on state land.
5:00:23 PM
SENATOR WIELECHOWSKI asked if the administration had plans to
file a lawsuit or intervene in a lawsuit regarding the EPA
decision on Pebble Mine.
COMMISSIONER-DESIGNEE BOYLE offered his understanding that the
administration was discussing that issue.
CO-CHAIR GIESSEL thanked the presenters.
5:01:25 PM
There being no further business to come before the committee,
Co-Chair Giessel adjourned the Senate Resources Standing
Committee meeting at 5:01 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| 2023 02 08 SRES DNR Overview Presentation.pdf |
SRES 2/8/2023 3:30:00 PM |
|
| DOR Response to SRES 03.30.23.pdf |
SRES 2/8/2023 3:30:00 PM |