05/06/2024 03:30 PM Senate RESOURCES
| Audio | Topic |
|---|---|
| Start | |
| SB194 | |
| Adjourn |
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 194 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
ALASKA STATE LEGISLATURE
SENATE RESOURCES STANDING COMMITTEE
May 6, 2024
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
SENATE BILL NO. 194
"An Act relating to temporarily reduced royalty on oil and gas
from pools without previous commercial sales in the Cook Inlet
sedimentary basin; and providing for an effective date."
- HEARD AND HELD -
PREVIOUS COMMITTEE ACTION
BILL: SB 194
SHORT TITLE: REDUCE ROYALTY ON COOK INLET OIL & GAS
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR
01/18/24 (S) READ THE FIRST TIME - REFERRALS
01/18/24 (S) RES, FIN
02/23/24 (S) RES AT 3:30 PM BUTROVICH 205
02/23/24 (S) Heard & Held
02/23/24 (S) MINUTE(RES)
03/20/24 (S) RES AT 3:30 PM BUTROVICH 205
03/20/24 (S) Heard & Held
03/20/24 (S) MINUTE(RES)
04/26/24 (S) RES AT 3:30 PM BUTROVICH 205
04/26/24 (S) Heard & Held
04/26/24 (S) MINUTE(RES)
05/06/24 (S) RES AT 3:30 PM BUTROVICH 205
WITNESS REGISTER
JOHN CROWTHER, Deputy Commissioner
Department of Natural Resources (DNR)
POSITION STATEMENT: Answered questions during the discussion of
SB 194.
DEREK NOTTINGHAM, Director
Division of Oil and Gas (DOG)
Department of Natural Resources (DNR)
POSITION STATEMENT: Answered questions during the discussion of
Amendment 1 to SB 194.
JOHN BOYLE, Commissioner
Department of Natural Resources (DNR)
Anchorage, Alaska
POSITION STATEMENT: Answered questions during the discussion of
Amendment 2 to SB 194.
JHONNY MEZA, Commercial Manager
Division of Oil and Gas (DOG)
Department of Natural Resources (DNR)
Anchorage, Alaska
POSITION STATEMENT: Answered questions during the discussion of
SB 194.
BRETT HUBER, Chair
Alaska Oil and Gas Conservation Commission
Anchorage, Alaska
POSITION STATEMENT: Answered questions during the discussion of
Amendment 3 to SB 194.
ACTION NARRATIVE
3:31:45 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 Wielechowski, Kawasaki, Kaufman, Dunbar,
Claman, Co-Chair Bishop, and Co-Chair Giessel.
SB 194-REDUCE ROYALTY ON COOK INLET OIL & GAS
3:32:22 PM
CO-CHAIR GIESSEL announced the consideration of SENATE BILL NO.
194 "An Act relating to temporarily reduced royalty on oil and
gas from pools without previous commercial sales in the Cook
Inlet sedimentary basin; and providing for an effective date."
3:32:59 PM
CO-CHAIR GIESSEL solicited a motion.
3:33:08 PM
CO-CHAIR GIESSEL moved to adopt Amendment 1, work order 33-
GS2381\A.1.
33-GS2381\A.1
Nauman
3/19/24
A M E N D M E N T 1
OFFERED IN THE SENATE
TO: SB 194
Page 1, line 2, following "basin;":
Insert "relating to royalty deferral for certain
gas lessees;"
Page 8, following line 26:
Insert a new bill section to read:
"* Sec. 2. AS 38.05.180 is amended by adding new
subsections to read:
(mm) For a lease issued to a small producing
lessee, the department shall defer payment of the
state's royalty share of gas production due to the
state under a lease entered into under this section if
the commissioner, after considering the benefits and
detriments of the royalty deferment, makes a written
finding that the royalty deferment is in the best
interest of the state. The commissioner shall adopt
regulations for the payment of royalties deferred
under this subsection. A deferment under this section
terminates on the earlier of
(1) the calendar year in which a lessee no
longer qualifies as a small producing lessee; or
(2) 10 years after the later of
(A) the date of first commercial production
of gas from the lease; or
(B) July 1, 2024.
(nn) In (mm) of this section, "small producing
lessee" means a producer that, during the previous
calendar year, produced less than an average of
15,000,000 cubic feet of gas per day."
Renumber the following bill sections accordingly.
Page 8, following line 27:
Insert a new bill section to read:
"* Sec. 4. The uncodified law of the State of
Alaska is amended by adding a new section to read:
TRANSITION. To comply with AS 38.05.180(mm),
added by sec. 2 of this Act, the commissioner of
natural resources shall enter into lease negotiations
with a lessee holding a lease issued before the
effective date of this Act to modify the lease to
allow the royalty deferment required by
AS 38.05.180(mm). No other terms in a lease may be
changed in a negotiation described in this section."
Renumber the following bill section accordingly.
3:33:15 PM
CO-CHAIR BISHOP objected for purposes of discussion.
3:33:22 PM
CO-CHAIR GIESSEL said that Amendment 1 would defer the royalty
for small producers. She explained that a "small producer" is
defined as a producer that processes less than 15 million cubic
feet of gas per day. She stated that approximately 6-7 Cook
Inlet producers meet this criterion. She noted that both
Cosmopolitan and Kitchen Lights Units would qualify, while
Hilcorp would not. She added that Hilcorp has indicated that
royalty reduction would not be beneficial.
3:35:02 PM
SENATOR CLAMAN asked if "small producer" is defined by the total
volume produced or by the volume of individual leases.
3:35:17 PM
CO-CHAIR GIESSEL directed attention to page 1, line 20 of
Amendment 1, which defines a "small producing lessee" as "a
producer that, during the previous calendar year, produced less
than an average of 15,000,000 cubic feet of gas per day."
3:35:35 PM
SENATOR KAUFMAN asked if deferring the royalties would result in
a balloon payment at the end of the period.
3:35:49 PM
CO-CHAIR GIESSEL replied that the wording was chosen by the
drafter in Legislative Legal Services. She indicated that her
intention was to have no future payment and suggested that there
may be a more appropriate word than "defer".
3:36:04 PM
SENATOR KAUFMAN shared his understanding that the wording must
clearly indicate that this is not a deferral for which a future
payment can be expected.
3:36:22 PM
CO-CHAIR GIESSEL noted that the term "royalty relief" was used
in SB 194.
3:36:38 PM
SENATOR WIELECHOWSKI asked if the Department of Natural
Resources (DNR) uses the term "royalty relief."
3:36:55 PM
JOHN CROWTHER, Deputy Commissioner, Department of Natural
Resources (DNR), said that many of the statutes related to
royalty set a numeric number to identify a minimum value for
various actions. He agreed that "defer" could be interpreted to
indicate a future payment. He suggested that "waiver" likely
implies that there will be no payment. He added that words such
as "waiver" or "released from" may effectuate the intent of the
Amendment sponsor.
3:37:56 PM
SENATOR KAUFMAN indicated that he would support clarifying this
language.
3:38:18 PM
SENATOR CLAMAN moved to adopt Conceptual Amendment 1 to
Amendment 1:
CONCEPTUAL AMENDMENT 1 to AMENDMENT 1
Page 1, line 2:
Delete "deferral"
Insert "waiver
Page 1, line 7:
Delete "defer"
Insert "waive"
Page 1, line 10, in two locations:
Delete "deferment"
Insert "waiver"
Page 1, line 12:
Delete "deferred"
Insert "waived"
Page 1, line 12:
Delete "deferment"
Insert "waiver"
Page 2, line 10:
Delete "deferment"
Insert "waiver"
Authorization was given for Legislative Legal Services
to make technical and conforming changes.
3:39:19 PM
CO-CHAIR GIESSEL objected for purposes of discussion.
3:39:24 PM
SENATOR WIELECHOWSKI said that this seems to adequately change
the language in Amendment 1 to conform with what DNR suggested
would more accurately reflect the intent of the amendment's
sponsor.
3:39:38 PM
CO-CHAIR GIESSEL removed her objection; she found no further
objection and Conceptual Amendment 1 to Amendment 1 was adopted.
3:39:46 PM
CO-CHAIR BISHOP referred to the 15 million cubic feet of gas per
day and inquired about the harvest output per day in Prudhoe Bay
for the liquified natural gas (LNG) project.
3:40:13 PM
MR. CROWTHER replied that, as currently contracted, the Prudhoe
Bay harvest project is producing approximately 2 billion cubic
feet (Bcf) per year. He shared his understanding that the
facility has some expansion capacity. He indicated that
calculating the daily harvest amount would require additional
time. He noted that a Prudhoe Bay lessee producing those gases
does produce and sell some volume of gas in addition to the gas
sales to harvest.
3:40:58 PM
CO-CHAIR GIESSEL pointed out that SB 194 is confined to Cook
Inlet.
3:41:06 PM
SENATOR KAUFMAN asked if Amendment 1 would encourage a company
to break itself into fractions in order to qualify as a small
producer and whether any changes should be made to mitigate
this.
3:41:33 PM
MR. CROWTHER replied that if a producer attempts to reassign
assets, interests, and holdings that are currently held by
existing units and leases, this is subject to review. DNR has
the ability to review and approve those assignments based on the
best interest of the state. He surmised that, while the language
in Amendment 1 does not foreclose the scenario in question, the
practical realities of the challenges and complexities of the
process would limit the likelihood of this occurring.
3:42:23 PM
SENATOR KAUFMAN directed attention to Amendment 1, line 11 and
asked if this best interest language is adequately bracketed
within the current regulations.
3:42:48 PM
MR. CROWTHER replied that the best interest finding is something
DNR does frequently and expressed confidence in this process. In
answer to the earlier question related to potential
restructuring, he noted that the best interest finding could
take into consideration corporate structuring that might make a
producer eligible for royalty relief that was not otherwise
intended to lawfully benefit from this exemption.
3:43:22 PM
SENATOR KAUFMAN asked for clarification that this would be part
of the scope of the best interest determination.
3:43:28 PM
MR. CROWTHER replied that it could be, if it were relevant to
the circumstances in the application.
3:43:38 PM
SENATOR DUNBAR asked if the intent is for Amendment 1 to apply
to all gas produced by small producers - or if it would apply
only to new gas.
3:44:06 PM
CO-CHAIR GIESSEL replied that the intent is for Amendment 1 to
apply to all gas produced by small producers.
3:44:15 PM
CO-CHAIR GIESSEL stated that the intent was for Amendment 1 to
apply only to the Cook Inlet Basin. She asked if the amendment
was drafted to apply to Cook Inlet only - or if it could be
interpreted more fully.
3:44:47 PM
DEREK NOTTINGHAM, Director, Division of Oil and Gas (DOG),
Department of Natural Resources (DNR), answered that, as
currently written, Amendment 1 applies statewide.
3:45:01 PM
CO-CHAIR GIESSEL said the title of SB 194 refers to "Cook Inlet
sedimentary basin" and asked if Amendment 1 was drafted to the
wrong part of the bill. She directed attention to SB 194, page
4, line 2, [Section 1, subsection (f)(5)] which refers to "Cook
Inlet sedimentary basin."
3:45:34 PM
MR. CROWTHER replied that SB 194 as drafted amends AS
38.05.180(f). He explained that subsection 180 (f)(5) includes
language delimiting the application to Cook Inlet. He stated
that, if Amendment 1 adds a new subsection, and does not include
language delimiting the application to Cook Inlet, it would be
generally applicable. He noted that the limitation likely rules
out current operators within the state; however, it does not
necessarily prospectively rule out future operators that qualify
under the volumetric limitation.
3:46:30 PM
SENATOR WIELECHOWSKI moved Conceptual Amendment 2 to Amendment
1:
CONCEPTUAL AMENDMENT 2 TO AMENDMENT 1
Page 1, line 20 in front of "producer":
Insert "Cook Inlet"
Page 1, line 22 following "day":
Insert "Cook Inlet Basin"
3:47:18 PM
CO-CHAIR GIESSEL objected for purposes of discussion.
3:47:25 PM
CO-CHAIR GIESSEL removed her objection; she found no further
objection and Conceptual Amendment 2 to Amendment 1 was adopted.
3:47:32 PM
SENATOR DUNBAR commented that SB 194 is intended to apply to
prospective activities rather than to incentivize activities
that are currently happening. He noted that Amendment 1 would
apply to both prospective and current gas production activity
and contains a best interest finding requirement. He asked
whether DNR could potentially determine it to be in the state's
best interest to approve a waiver for gas that would otherwise
be produced.
3:48:35 PM
MR. CROWTHER replied that Amendment 1 applies to the potential
royalty waiver for very small producers. He explained that
current producers of this size are not producing significant
revenue or a significant volume of gas. He surmised that a small
amount of royalty deferment on an existing production of gas may
enable those producers to take steps toward expansion, thereby
bringing more gas to market. In this case, the best interest
finding would weigh the cost of waiving royalties on an existing
production against the benefits of how a waiver might translate
into new gas availability in Cook Inlet. He deferred questions
of intent to the sponsor of Amendment 1.
3:49:43 PM
SENATOR DUNBAR asked how the state would avoid a "pure wealth
transfer" from Alaskans to the oil companies. He pointed out
that while these companies may be small in terms of oil and gas
companies, they are large companies by the standards of average
Alaskans. He questioned how DNR might justify a best interest
finding that would increase the profit margins of those
companies without evidence that this would lead to additional
gas production (i.e. production that would not otherwise occur).
3:50:18 PM
MR. CROWTHER replied that DNR would likely evaluate the volume
and scope of waived royalties and associated representations and
commitments (including commitments to lease plans of exploration
and development and other relationships with the state) to
pursue additional development. He explained that DNR must
consider all aspects and weigh available information (including
information submitted by the public or other interested
parties). He noted that DNR is similarly tasked with weighing
the benefits of royalty waivers for existing projects in other
areas of statute - and whether this would extend the life of the
project and bring the state additional revenue.
3:51:58 PM
SENATOR WIELECHOWSKI referred to page 4, lines 6-8 of SB 194 and
asked whether, upon the adoption of Amendment 1, a company
producing more than 15 million cubic feet of gas per day would
still be eligible for royalty relief.
3:52:24 PM
MR. CROWTHER replied that, as DNR understands it, Amendment 1
would create a separate waiver that is unrelated - and in
addition to - the core changes (including royalty reduction)
that SB 194 makes to existing statute AS 38.05.180(f)(5).
3:52:49 PM
SENATOR WIELECHOWSKI asked whether Amendment 1, when combined
with the royalty reduction already in SB 194, could result in
additional royalty reduction for some small producers.
3:53:08 PM
MR. CROWTHER replied that he believes there is a small degree of
overlap.
3:53:22 PM
SENATOR DUNBAR asked for confirmation of his understanding that
SB 194 applies to both oil and gas production, while Amendment 1
applies only to gas production. He surmised that a producer
could be producing less than 15 million cubic feet of gas while
simultaneously producing a much larger volume of oil; however,
the waiver would only apply to the gas production.
3:53:51 PM
CO-CHAIR GIESSEL agreed and added that this is the intention of
Amendment 1.
3:53:55 PM
MR. CROWTHER concurred and added that DNR interprets Amendment 1
as applicable solely to gas production.
3:54:04 PM
SENATOR KAUFMAN directed attention to Amendment 1, page 1, line
6, which relates to the DNR Commissioner's best interest
finding. He wondered if this should include a timeframe - and,
if so, what DNR would consider an adequate timeframe for making
this determination.
3:54:55 PM
MR. CROWTHER acknowledged that processes within DNR can
sometimes move slowly; however, he agreed that these projects
are time sensitive. He stated that any aspect of SB 194 that
increases gas supply (he noted that Amendment 1 would fall into
this category) would be prioritized. He briefly described the
best interest finding process - which can take anywhere from 3-6
months for priority projects. He stated that DNR would aim for
the 90-day range for the projects addressed by Amendment 1 and
added that anything below this would make it difficult to meet
public notice and constitutional protection requirements.
3:56:04 PM
SENATOR KAUFMAN asked if specifying a 90-day timeframe would be
too strict.
3:56:21 PM
MR. CROWTHER replied that DNR would endeavor to meet this
timeline. He added that, while it is ultimately the will of the
committee, it would be challenging to definitively meet this
deadline.
3:56:48 PM
CO-CHAIR BISHOP agreed that timing is important but pointed out
that HB 50 (which was recently reported from committee) would
require many new regulations to be drafted by DNR. He cautioned
against establishing an unrealistic timeline for DNR to both
draft those new regulations and hold itself to a strict 90-day
timeframe for best interest findings.
3:57:51 PM
CO-CHAIR BISHOP removed his objection.
3:57:53 PM
CO-CHAIR GIESSEL found no further objection and Amendment 1, as
amended, was adopted.
3:58:00 PM
CO-CHAIR GIESSEL solicited a motion.
3:58:03 PM
SENATOR WIELECHOWSKI moved to adopt Amendment 2, work order 33-
GS2381\A.2.
33-GS2381\A.2
Nauman
3/25/24
A M E N D M E N T 2
OFFERED IN THE SENATE BY SENATOR WIELECHOWSKI
TO: SB 194
Page 1, line 1:
Delete "oil and"
Page 4, line 6:
Delete "an oil or"
Insert "a [AN OIL OR]"
Page 4, line 8:
Delete "oil or"
Page 4, line 12:
Delete "] oil or ["
Insert "OIL"
3:58:21 PM
CO-CHAIR GIESSEL objected for purposes of discussion.
3:58:24 PM
SENATOR WIELECHOWSKI said that Amendment 2 would eliminate oil
from the royalty reduction proposed by SB 194. He noted that the
intention of SB 194 is to incentivize gas production and he has
heard concerns about the reasoning behind also incentivizing oil
production. He asked for DNR's perspective on this issue.
3:59:02 PM
JOHN BOYLE, Commissioner, Department of Natural Resources (DNR),
Anchorage, Alaska, explained that in Cook Inlet, oil production
drives gas production. He stated that most producers in Cook
Inlet are looking for oil. He provided a hypothetical scenario
to illustrate how the oil market could be positively impacted by
increased gas production. He acknowledged that the economics of
gas production are challenging; however, he reiterated that
making gas production more economically attractive would likely
lead to increased oil production. He offered Cosmopolitan field
as an example of a location where increased gas production could
lead to a significant amount of new oil production. He said that
incentivizing gas production would help make gas production more
economically attractive and including oil production would
further incentivize these projects. He opined that, in order to
see a policy benefit of incentivizing additional investment in
the Cook Inlet, it is necessary to reduce royalties on both oil
and gas.
4:02:17 PM
SENATOR WIELECHOWSKI asked whether a producer is obligated to
sell gas that it finds when looking for oil.
4:02:31 PM
COMMISSIONER BOYLE shared his understanding that a producer
would be obligated to sell the gas if there is a willing buyer
and a market.
4:02:40 PM
SENATOR WIELECHOWSKI opined that there are many willing buyers
and a market. He asked about the internal rates of return for
oil versus gas in Cook Inlet (in hypothetical fields).
4:03:17 PM
MR. NOTTINGHAM said that modeling has shown that rates of return
for oil and gas projects range from 15-20 percent. He noted that
Blue Crest has shown very good rates of return for the
Cosmopolitan oil project; however, DOG is unsure of the
project's risk profile. He stated that DOG has not specifically
modeled an oil project to understand potential rates of return.
4:04:12 PM
SENATOR WIELECHOWSKI opined that this is an important point and
questioned whether the royalties for oil projects should be
lowered if the rates of return are 30-50 percent.
4:04:29 PM
MR. NOTTINGHAM replied that the modeling could be done. He noted
that there are currently no plans for drilling oil wells in the
Cook Inlet and shared his understanding that no oil wells have
been drilled in the Cook Inlet since 2018. He explained that
this is due to challenging economics for oil drilling.
4:05:09 PM
SENATOR WIELECHOWSKI asked whether natural gas is used for
enhanced oil recovery in Cook Inlet.
4:05:20 PM
MR. NOTTINGHAM replied that natural gas is used in the Swanson
River field for pressure maintenance.
4:05:30 PM
SENATOR WIELECHOWSKI asked how many mcf of gas is used per day.
4:05:36 PM
MR. NOTTINGHAM replied that he does not know the specific
amount, but shared his understanding that it is a small
percentage of the overall demand in Cook Inlet.
4:05:57 PM
SENATOR WIELECHOWSKI shared his intention to withdraw Amendment
2 and requested modeling.
4:06:09 PM
MR. NOTTINGHAM said that the modeling is being done; however,
the official numbers are not yet available.
4:06:31 PM
JHONNY MEZA, Commercial Manager, Division of Oil and Gas (DOG),
Department of Natural Resources (DNR), Anchorage, Alaska, agreed
that modeling is being done for oil and noted that previous
modeling focused on gas only.
4:07:05 PM
COMMISSIONER BOYLE said that it is important to consider that,
currently, all oil produced in the Cook Inlet is being refined
at Marathon's refinery in Nikiski, Alaska and is later used by
Alaskans. He stated that Cook Inlet oil production is declining.
He emphasized the importance of manufacturing/value-added jobs -
and pointed out the current limits to in-state resource
refinement/manufacturing. He opined that the royalty relief for
both gas and oil production is important to ensure continued
Cook Inlet oil production and in-state oil refinement. He added
that this would also continue to provide jobs.
4:08:36 PM
CO-CHAIR BISHOP commented there was an oil refinery in
Fairbanks; however, it could not secure a long-term royalty
agreement with the state and closed as a result.
4:09:06 PM
SENATOR WIELECHOWSKI said he would withdraw Amendment 2, pending
modeling from DOG.
4:09:11 PM
CO-CHAIR GIESSEL treated Amendment 2 as withdrawn.
4:09:14 PM
CO-CHAIR GIESSEL solicited a motion.
4:09:17 PM
SENATOR CLAMAN moved to adopt Amendment 3, work order 33-
GS2381\A.7.
33-GS2381\A.7
Nauman
3/26/24
A M E N D M E N T 3
OFFERED IN THE SENATE BY SENATOR CLAMAN
TO: SB 194
Page 1, line 2, following "basin;":
Insert "requiring the Alaska Oil and Gas
Conservation Commission to publish a report related to
oil and gas waste;"
Page 1, following line 4:
Insert a new bill section to read:
"* Section 1. AS 31.05.030 is amended by adding a
new subsection to read:
(o) Each year, the commission shall
(1) prepare a report documenting each case
of oil and gas waste in the state during the preceding
calendar year and the actions taken by the commission
in response to the waste; and
(2) by the first day of each regular
session of the legislature, deliver the report
prepared under this subsection to the senate secretary
and the chief clerk of the house of representatives
and notify the legislature that the report is
available."
Page 1, line 4:
Delete "Section 1"
Insert "Sec. 2"
Renumber the following bill sections accordingly.
4:09:20 PM
CO-CHAIR GIESSEL objected for purposes of discussion.
4:09:23 PM
SENATOR CLAMAN said Amendment 3 adds language requiring that the
Alaska Oil and Gas Conservation Commission (AOGCC) publish an
annual report on oil and gas waste. He acknowledged that he
recently offered the same language as an amendment to [HB 50]
and explained that this would increase the likelihood of this
provision's passage.
4:09:57 PM
CO-CHAIR GIESSEL said that a letter was received from AOGCC and
Brett Huber is available to comment on the proposed reports.
4:10:20 PM
BRETT HUBER, Chair, Alaska Oil and Gas Conservation Commission,
Anchorage, Alaska, said that this is an intricate legal
discussion, and the aforementioned letter was quite lengthy. He
asked for guidance on where to focus his comments.
4:11:00 PM
CO-CHAIR GIESSEL asked Mr. Huber to briefly respond to Amendment
3.
4:11:33 PM
MR. HUBER said that AS 31.05.030(b) tasks AOGCC with
investigating whether waste exists or is eminent. He briefly
described the ways in which this is done, which includes monthly
gas distribution reports from each producer for each facility.
AOGCC uses this information to determine whether there has been
any waste. The gas distribution reports are made available
online for the legislature and the public. He explained the
process that occurs when AOGCC makes a waste determination and
how the penalty amount is determined. He noted that monthly oil
disposition reports are not required; however, when potential
waste is discovered, an investigation follows. As with gas waste
determinations, an oil waste determination is done via a public
process. This information is made available in real time. He
emphasized that all applications, permits, etc., are carefully
reviewed to determine any potential for waste. Any potential for
waste is addressed in the permit or order issued. He noted that
this information is also available on AOGCC's website in real-
time.
MR. HUBER stated that 20 AAC 25.540(b) requires AOGCC to conduct
a hearing upon receiving written request to do so - on any
matter that is under its jurisdiction. He added that this has
been done several times when someone has reported potential
waste - and a public order is issued to share the findings (i.e.
whether waste has occurred) upon conclusion of this public
process. He turned his attention to Amendment 3 and expressed
concerns regarding the expectations of the waste report
requirement. He stated that AOGCC would have no problem
compiling its current reports into a single report to the
legislature. However, he expressed concern that the report
required by Amendment 3 would also include additional
investigation of the improper use or waste of privately held
hydrocarbons in the state. He asserted that AOGCC is well-
equipped to do its work, which includes regulating the
underground and ensuring that the state receives its portion of
any oil and gas produced. He argued that AOGCC is not an
"environmental watch dog" that looks for any potential leak of
private hydrocarbon. He said that environmental concerns should
be addressed by the Department of Environmental Conservation
(DEC). He expressed concern with the broad language of Amendment
3, which could potentially apply to private vehicles and home
heating and does not clearly define "waste".
4:15:01 PM
SENATOR KAWASAKI asked for confirmation that AOGCC currently
records flaring and excessive flaring.
4:15:19 PM
MR. HUBER replied yes and added that this is part of the gas
disposition report. He explained that AOGCC allows minimal
flaring for emergency situations, production testing, or repairs
in line. He clarified that, as a rule, flaring is disallowed. He
noted that the gas disposition reports are done monthly per
facility.
4:15:52 PM
SENATOR KAWASAKI asked for confirmation that this is on the
AOGCC website.
4:16:01 PM
MR. HUBER confirmed that the monthly gas distribution reports
are published on the AOGCC website. He added that this
information is utilized by DOR and DNR.
4:16:24 PM
SENATOR KAUFMAN expressed opposition to Amendment 3.
4:16:47 PM
CO-CHAIR BISHOP said that he understands the concerns that
Commissioner Huber expressed.
4:17:30 PM
CO-CHAIR GIESSEL commented that in its letter to the Senate
Finance Committee, AOGCC stated that these responses to waste
reports sometimes result in litigation, which complicates the
issue of reporting. She expressed a reluctance to support
Amendment 3.
4:18:23 PM
SENATOR CLAMAN acknowledged the comments and concerns expressed
by Mr. Huber; however, he opined that concerns related to
tracking individual vehicles to ensure efficiency is an overly
broad interpretation of the language in Amendment 3. He argued
that the language should be considered in the context of the
waste that AOGCC typically regulates.
CO-CHIAR GIESSEL found the objection was maintained and asked
for a roll call vote.
[4:19:13]
A roll call vote was taken. Senators Dunbar, Claman,
Wielechowski, and Kawasaki, voted in favor of Amendment 3 and
Senators Kaufman, Bishop, and Giessel voted against it. The vote
was 4:3.
4:19:37 PM
CO-CHAIR GIESSEL announced that Amendment 3 was adopted on a
vote of 4 yeas and 3 nays.
4:19:47 PM
SENATOR WIELECHOWSKI moved to adopt Amendment 4, work order 33-
GS2381\A.10.
33-GS2381\A.10
Nauman
4/24/24
A M E N D M E N T 4
OFFERED IN THE SENATE BY SENATOR WIELECHOWSKI
TO: SB 194
Page 1, lines 1 - 2:
Delete "pools without previous commercial sales
in"
Page 1, line 5, through page 8, line 26:
Delete all material and insert:
"* Section 1. AS 38.05.180 is amended by adding new
subsections to read:
(mm) Except as provided in (nn) of this section
and notwithstanding and in lieu of a requirement in
the leasing method chosen of a minimum fixed royalty
share or the royalty provision of a lease, for leases
issued in the Cook Inlet sedimentary basin, the lessee
shall pay a royalty of 50 percent of the minimum fixed
royalty share or another royalty provision for
qualified new gas produced by the lessee. The royalty
reduction in this subsection
(1) applies only to qualified new gas
produced from a well drilled before July 1, 2031; and
(2) terminates on the earlier of either
(A) 10 years following the commencement of
commercial production of qualified new gas that begins
after July 1, 2024; or
(B) the date on which a commercial quantity
of qualified new gas is shipped out of the state.
(nn) The royalty reduction in (mm) of this
section does not apply if
(1) the royalty is already reduced under
another subsection of this section to an amount less
than the reduction under (mm) of this section; or
(2) the lessee declines to accept a royalty
reduction under (mm) of this section in writing before
the commencement of commercial production of qualified
new gas that begins after July 1, 2024.
(oo) In (mm) and (nn) of this section,
(1) "firm gas sales contract" means a gas
purchase contract requiring the delivery and purchase
of fixed amounts of gas over a period of time;
(2) "qualified new gas" means gas supplied
through a firm gas sales contract entered into between
the lessee and a utility regulated under AS 42.05 and
produced from
(A) a field or pool that the commissioner
determines has not previously produced gas for
commercial sale before January 1, 2024;
(B) a field or pool that has previously
produced gas, but did not produce gas during calendar
year 2024; or
(C) a well that did not exist on January 1,
2025, if the commissioner determines that production
of that gas from the field or pool from an existing
well was not economically feasible."
Page 8, line 27:
Delete "and AS 38.05.180(dd)"
Insert "; AS 38.05.180(f)(5), and 38.05.180(dd)"
Page 8, following line 27:
Insert a new bill section to read:
"* Sec. 3. AS 38.05.180(mm), 38.05.180(nn), and
38.05.180(oo) are repealed July 1, 2041."
Renumber the following bill section accordingly.
4:19:50 PM
CO-CHAIR GIESSEL objected for purposes of discussion.
4:19:54 PM
SENATOR WIELECHOWSKI said that Amendment 4 is offered for
discussion, and he would like to hear from DNR. He stated that
this amendment would cut the royalty by 50 percent and would
require companies to have new gas in production within 7 years.
Companies that meet this production goal could continue claiming
the deduction for an additional 10 years - or until they sell
gas out of state. He explained that the intention is to speed up
the gas production timeline in order to address the current gas
crisis. He indicated that the 7-year production requirement
could be reduced further. He stated that Amendment 4 applies
solely to gas produced under firm gas-sales contracts with
Regulatory Commission of Alaska (RCA) regulated utilities. This
would ensure that the gas goes to the utilities that are facing
gas shortages. He directed attention to Amendment 4, page 2,
lines 6-15 and said that this definition of qualifying gas was
borrowed from HB 223.
4:22:09 PM
MR. CROWTHER noted that, as with Amendment 3, the exclusion of
oil in Amendment 4 presents a risk. He pointed out that the
eligibility time restraint, the firm sales contract requirement,
and the administration of the these decrease the certainty that
producers would be eligible for the royalty relief. He stated
that, from DNR's perspective, these types of requirements must
be very focused, manageable, and optimal so that they do not
disincentivize production. He acknowledged that there is
immediate need for increased gas production; however, he argued
that the 7-year requirement could challenge projects. He
expressed opposition to Amendment 4.
4:23:49 PM
MR. NOTTINGHAM agreed and indicated that providing longer
timeframes for projects to get off the ground offers a better
incentive to begin production. He acknowledged the urgent need
for increased production and noted that the proposed solutions
are temporary; however, he said that a long-term solution is
needed to mitigate future issues (e.g. in 2035-2040) with mature
fields. He said that incentivizing projects that would fill
those gaps is beneficial, and DOR would like to see new projects
come online. He stated that the firm contract requirement is an
obstacle to potential development, as contracts tend to have
punitive clauses related to non-performance that could be a
challenge for small producers. He said that utilities see risk
with small producers bringing gas to market. He added that DOG
would like to see more gas come to market and let the natural
flow of the market work out the contracts.
4:26:29 PM
SENATOR DUNBAR commented that Amendment 4 highlights the
challenges that result from a lack of modeling. He recalled
DNR's recent presentation on SB 194, which indicated that the
resulting gas production would be sufficient to fulfill the
state's demand for gas. He commented that Amendment 4 could
produce the same result with less fiscal impact. He highlighted
the ways in which both SB 194 and Amendment 4 rely on
assumptions - without a full understanding of the potential
impact of the proposed changes. He emphasized the need for
modeling to better understand the impact of both SB 194 and
Amendment 4. He asked if this makes sense.
4:27:44 PM
MR. NOTTINGHAM replied that this does make sense. He recalled
that the modeling in the presentation highlighted cases with a 5
percent royalty and zero royalty - and the effects this would
have on the inferred cost of supply to the railbelt utilities.
He shared his understanding that this did not include data
related to the resulting impact on the rate of return for a
particular project. He stated that DOG has this modeling and
would provide it to the committee.
4:28:35 PM
SENATOR DUNBAR opined that the primary question is how much gas
production would increase for each change. He acknowledged that
there are many factors involved, making it difficult to know the
exact amount. He commented that, at this point, it is "feeling
in the dark" with respect to how much each ratchet changes.
4:29:14 PM
SENATOR WIELECHOWSKI recalled that DNR previously expressed
support of a 5-7-year production initiation requirement. He
shared his belief that this is a reasonable way to encourage
producers to move quickly. He emphasized the immediate need for
gas. He asked whether DNR would support the 57-year
requirement.
4:30:07 PM
MR. CROWTHER replied that DNR understands the desire and
rationale behind setting a time by which projects must initiate.
He said that a 7-year window captures known, near-term projects
that DNR hopes to incentivize immediately - as well as a small
window allowing for additional leasing and exploration to mature
into a project. He stated that leaning closer to 5 years would
primarily include existing projects in full development and
offered examples. He reiterated that 7 years would potentially
allow for more (i.e. incentivize materially) new exploration
while 5 years is less likely to do so. He emphasized that less
than 5 years would raise significant issues for full field
developments that DNR hopes to see. He noted that SB 194 would
hopefully result in immediate activity that would continue for
several years.
4:31:35 PM
SENATOR WIELECHOWSKI clarified that Amendment 4 requires that
gas production begin within 7 years - and if this requirement is
met, the producer can continue to claim the deduction for ten
more years. He noted that this is a total of 17 years and
commented that this is a long time. He opined that this
encourages companies to get projects running- and gas to market
- quickly. He reiterated that companies would then have 10
additional years to recover and asked if Mr. Crowther was aware
of this aspect of Amendment 4 when he offered his analysis of
the amendment.
4:32:08 PM
MR. CROWTHER replied yes. He stated that DNR's conceptual
support for the 7-year window recognizes the reality that
getting in and getting started within the required timeframe
would result in certainty and surety of recouping the
investment. He reiterated concerns regarding timeframes shorter
than 7 years. He said that DNR understands the intent and the
need. He shared his understanding that the goal is near-term
relief and immediate action and expressed appreciation of this
goal. He explained that DNR does not want to make the process
too restrained and potentially disincentivize anything that
would benefit the gas supply.
4:33:05 PM
SENATOR WIELECHOWSKI asked what percent of gas sold in Cook
Inlet historically goes to firm gas sale contracts.
4:33:15 PM
MR. NOTTINGHAM replied that the majority of the firm gas
contracts are through Hilcorp. He surmised that a change in the
market share of all producers' gas input into the system would
change that dynamic.
4:34:02 PM
MR. MEZA replied that is correct. He said that for 2023, the
share of firm gas contracts sold from Cook Inlet was between 77-
85 percent.
4:34:22 PM
SENATOR WIELECHOWSKI commented that this is a large percentage
and is much higher than he expected. He shared that utilities
have expressed that they want firm gas sale contracts. He opined
that, with such a high percentage, this is something to
incentivize. He asked if the firm gas sale price is typically
lower than other gas sale prices (for utilities).
4:35:04 PM
MR. MEZA said that he cannot provide exact values and explained
that that firm gas sale contracts are negotiated at the moment
the contract is executed. Interruptible contracts are negotiated
every time a sale occurs. He added that, theoretically, the gas
sale price could be lower for either contract type.
4:35:33 PM
SENATOR WIELECHOWSKI directed attention to Amendment 4, page 2,
lines 6-15, which defines what gas would qualify for royalty
reduction. He asked for DNR's perspective on this provision.
4:35:48 PM
MR. CROWTHER replied that DNR has seen these constructions
related to "not previously producing fields," "fields that have
previously produced gas," and "wells that did not exist if they
were not economically feasible" in HB 276. He surmised that
these are functional categories for SB 194 and noted that in the
companion legislation, these categories were recently amended
for greater functionality and clarity. However, as written,
these categories are generally applicable and achieve the intent
of promoting new gas and not providing relief for existing and
under development wells.
MR. CROWTHER stated that, regarding firm gas sales contracts,
DNR understands the legislative policy intent as it relates to
supply security and securing contracts. He explained that, from
DNR's perspective, project sanction is a binary decision (e.g.
to drill a well or not). Therefore, tying royalty relief
completely to subsequent gas sales contracts (i.e. a company
receives the relief - or it does not - based on the status of
the subsequent contract) creates uncertainty regarding the
project's sanction decision. He emphasized that he does not want
to intrude on the committee's policymaking. He said that DNR
would be happy to work with the committee to determine how to
further incentivize firm sales in relation to other sales. He
emphasized the importance of increasing producers' confidence
during the decision-making process.
4:37:50 PM
SENATOR WIELECHOWSKI reiterated that utilities have communicated
that they want firm gas sales contracts. He commented that
royalty relief is essentially giving away millions of public
dollars. He opined that public dollars should go towards
reducing the energy costs for ratepayers. He argued that firm
sale gas contract requirements achieve the state's intended
goal. He commented that Amendment 4 would give producers the
choice of receiving the relief (which would significantly impact
their internal rate of return) in exchange for giving a firm gas
sale contract. He said that he would be happy to work with DNR
on this.
4:38:35 PM
SENATOR WIELECHOWSKI said he would withdraw Amendment 4.
4:38:41 PM
CO-CHAIR GIESSEL found no objection and Amendment 4 was
withdrawn.
4:38:50 PM
CO-CHAIR GIESSEL solicited a motion.
4:38:54 PM
SENATOR WIELECHOWSKI moved to adopt Amendment 5, work order 33-
GS2381\A.14.
33-GS2381\A.14
Nauman
5/2/24
A M E N D M E N T 5
OFFERED IN THE SENATE
TO: SB 194
Page 4, lines 7 - 8:
Delete "has not previously produced for
commercial sale oil or gas"
Insert "first begins producing oil or gas for
commercial sale on or after the effective date of this
Act and before July 1, 2029,"
Page 4, lines 13 - 15:
Delete "for [FIELD THAT OCCURS IN THE] 10 years
following the date on which the production for
commercial sale commences"
Insert "[FIELD THAT OCCURS IN THE 10 YEARS
FOLLOWING THE DATE ON WHICH THE PRODUCTION FOR SALE
COMMENCES]
Page 4, line 18, following "lease":
Insert "; the royalty reduction in this paragraph
applies until the earlier of either
(1) 10 years following the commencement of
production of oil or gas for commercial sale; or
(2) the date on which a commercial quantity
of oil or gas produced for sale from the Cook Inlet
sedimentary basin is shipped out of the state"
4:38:55 PM
CO-CHAIR GIESSEL objected for purposes of discussion.
4:38:58 PM
SENATOR WIELECHOWSKI said that Amendment 5 is more focused and
contains a sunset provision similar to the one found in
Amendment 4. However, Amendment 5 shortens the timeframe for
initial production from 7 years to 5 years. In addition, the
producer would receive the royalty reduction for an additional
10 years - or until the company sells commercial quantities of
oil or gas out-of-state. He noted that this does apply to both
oil and gas - but emphasized the 5-year limit in contrast to SB
194. He reiterated his understanding that DNR is amenable to the
5-7-year timeframe and asked DNR to comment.
4:40:08 PM
COMMISSIONER BOYLE said that DNR would be more comfortable with
a window that is longer than 5 years. He expressed appreciation
for the intent to incentivize and speed up new oil and gas
production. He said that a 7-year window provides an extra
margin, but it is a policy call for the committee.
4:40:47 PM
SENATOR DUNBAR moved to adopt Conceptual Amendment 1 to
Amendment 5:
CONCEPTUAL AMENDMENT 1 TO AMENDMENT 5
Page 1, line4:
Delete 2029
Insert 2031
4:41:04 PM
CO-CHAIR GIESSEL objected for purposes of discussion.
4:41:07 PM
SENATOR DUNBAR said that this would change the timeframe from 5
years to 7 years. He added that he has heard this same concern
from other sources.
4:41:12 PM
SENATOR WIELECHOWSKI said he believes the department would
support Amendment 5 if Conceptual Amendment 1 was adopted.
4:41:20 PM
COMMISSIONER BOYLE said yes, DNR would support Amendment 5 with
this change.
4:41:27 PM
CO-CHAIR GIESSEL removed her objection; she found no further
objection and Conceptual Amendment 1 to Amendment 5 was adopted.
4:41:43 PM
SENATOR WIELECHOWSKI reiterated his understanding that DNR
supports Amendment 5, as amended.
4:41:51 PM
MR. CROWTHER agreed that DNR supports Amendment 5, as amended.
He expressed appreciation for the committee's consideration of
the timing factor.
4:42:00 PM
CO-CHAIR GIESSEL removed her objection; she found no further
objection and Amendment 5, as amended, was adopted.
4:42:11 PM
CO-CHAIR GIESSEL solicited a motion.
4:42:13 PM
SENATOR KAUFMAN moved to adopt Amendment 6, work order 33-
GS2381\A.15.
33-GS2381\A.15
Nauman
5/2/24
A M E N D M E N T 6
OFFERED IN THE SENATE BY SENATOR KAUFMAN
TO: SB 194
Page 4, line 11:
Delete "a royalty of five percent"
Insert "the [A] royalty percentage set out in
this paragraph [OF FIVE PERCENT]"
Page 4, line 13:
Delete "for"
Page 4, lines 14 - 15:
Delete "] 10 years following the date on which
the production for commercial sale commences"
Insert "10 YEARS FOLLOWING THE DATE ON WHICH THE
PRODUCTION FOR SALE COMMENCES]"
Page 4, line 16:
Delete "of five percent may"
Insert "percentage described in this paragraph
does"
Page 4, line 17:
Delete "five percent in"
Insert "the applicable percentage of"
Page 4, line 18, following "lease":
Insert "; the royalty rate under this paragraph
is
(A) 0.1 percent for oil or gas produced on
and after January 1, 2025, and before January 1, 2028;
(B) 0.1 percent for gas produced and five
percent for oil produced on and after January 1, 2028,
and before January 1, 2031;
(C) five percent for gas produced and five
percent for oil produced on and after January 1, 2031,
and before January 1, 2036"
4:42:15 PM
CO-CHAIR GIESSEL objected for purposes of discussion.
4:42:17 PM
SENATOR KAUFMAN said Amendment 6 attempts to accomplish the goal
of producing gas for the railbelt quickly, while incentivizing
producers and managing risk. He pointed out that SB 194 does not
currently reflect modeling. He directed attention to Amendment
6, page 1, line 23, which defines the royalty relief rate. He
explained that this is designed to bias towards expeditious gas
production by decreasing the royalty rate to 0.1 percent for oil
and gas produced between 2025-2028. Tier B would maintain the
0.1 percent rate for gas production but would increase the rate
for oil to 5 percent between 2028-2031, while tier C increases
both oil and gas rates to 5 percent for 2031-2036. He reiterated
that this would create a bias for early, focused gas production.
He said that this would help ensure companies do not bias new
production and let older production sit. He commented that a
larger window may be needed.
4:45:29 PM
SENATOR WIELECHOWSKI said that he appreciates the tiered
concept. He surmised that this incentivizes more immediacy in
production - and companies could be incentivized even further by
the zero percent royalty reduction adopted earlier. He added
that it would be helpful to see modeling. He asked for DNR's
perspective.
4:46:15 PM
MR. CROWTHER replied that DNR supports Amendment 6, as it
increases the competitiveness of projects and biases toward
immediate action. He expressed appreciation for the sliding
scale design. He indicated that DNR would need to further
consider Amendment 6 and how this would impact the timing of
certain projects in light of the adoption of Amendment 5.
4:47:28 PM
SENATOR KAUFMAN expressed appreciation for the discussion of
Amendment 6. He stated that he respects the need for modeling.
He emphasized that any modeling must take into account the many
parameters that need to be balanced and offered examples.
4:48:19 PM
SENATOR KAUFMAN said he would withdraw Amendment 6.
4:48:28 PM
SENATOR WIELECHOWSKI acknowledged that Amendment 6 may be a
better approach than Amendment 5. He said that he would
encourage the committee to reconsider that amendment and instead
adopt Amendment 6, if it is shown to be a better option.
4:49:01 PM
CO-CHAIR BISHOP concurred with Senators Kaufman and
Wielechowski. He said that he would like to have further
discussions with DNR on Amendment 6 - and how it ties together
with Amendment 5 - in order for the state to receive the best
possible benefit.
CO-CHAIR GIESSEL stated that Amendment 6 was withdrawn.
4:49:36 PM
CO-CHAIR GIESSEL solicited motion.
4:49:40 PM
SENATOR WIELECHOWSKI moved to adopt Amendment 7, work order 33-
GS2381\A.16.
33-GS2381\A.16
Nauman
5/3/24
A M E N D M E N T 7
OFFERED IN THE SENATE
TO: SB 194
Page 4, lines 6 - 8:
Delete "that, subject to determination by the
commissioner, has not previously produced for
commercial sale oil or gas"
Page 4, line 11, following "on":
Insert "qualified new"
Page 4, line 12, following "or":
Insert "qualified new"
Page 4, line 18, following "lease":
Insert "; in this paragraph,
(A) "firm gas sales contract" means a gas
purchase contract requiring the delivery and purchase
of fixed amounts of gas over a period of time;
(B) "qualified new gas" means gas supplied
through a firm gas sales contract entered into between
the lessee and a utility regulated under AS 42.05 and
produced from
(i) a field or pool that the commissioner
determines has not previously produced gas for
commercial sale before January 1, 2024;
(ii) a field or pool that has previously
produced gas, but did not produce gas during calendar
year 2024; or
(iii) a well that did not exist on
January 1, 2025, if the commissioner determines that
production of that gas from the field or pool from an
existing well was not economically feasible;
(C) "qualified new oil" means oil produced
from
(i) a field or pool that the commissioner
determines has not previously produced oil for
commercial sale before January 1, 2024;
(ii) a field or pool that has previously
produced oil, but did not produce gas during calendar
year 2024; or
(iii) a well that did not exist on
January 1, 2025, if the commissioner determines that
production of that oil from the field or pool from an
existing well was not economically feasible"
4:49:42 PM
CO-CHAIR GIESSEL objected for purposes of discussion.
4:49:45 PM
SENATOR WIELECHOWSKI withdrew Amendment 7.
4:49:59 PM
CO-CHAIR GIESSEL stated that Amendment 7 was withdrawn.
4:50:03 PM
SENATOR WIELECHOWSKI moved to adopt Amendment 8, work order 33-
GS2381\A.17.
33-GS2381\A.17
Nauman
5/5/24
A M E N D M E N T 8
OFFERED IN THE SENATE BY SENATOR WIELECHOWSKI
TO: SB 194
Page 1, line 2, following "basin":
Insert "and reports related to the royalty rates"
Page 4, line 18, following "lease":
Insert "; a lessee may decline to accept a
royalty reduction under this paragraph by notifying
the commissioner in writing before payment of a
royalty to the state for oil or gas eligible for the
royalty reduction under this paragraph"
Page 8, following line 26:
Insert a new bill section to read:
"* Sec. 2. AS 38.05.180 is amended by adding new
subsections to read:
(mm) Notwithstanding the requirement that
information be kept confidential under
AS 38.05.035(a), 38.05.133(e), or any other law, the
commissioner shall prepare a report related to royalty
reductions under (f)(5) of this section and shall, by
February 1 of each year, deliver the report to the
senate secretary and the chief clerk of the house of
representatives, notify the legislature that the
report is available, and publish the report on the
department's Internet website. A lessee receiving a
royalty reduction under (f)(5) of this section shall
provide the department with the information necessary
for the department to produce the report. At the
request of a legislative committee, a representative
of the department shall appear in that committee to
review the report. The commissioner may aggregate
information in the report by project or by area if
lease areas are in reasonably close proximity and the
information reported is materially accurate. Upon
request, the commissioner shall provide information
aggregated in the report, broken down by lessee or
lease, at the option of the requester. The report must
include,
(1) for each lease area or project
producing oil or gas receiving a royalty reduction
under (f)(5) of this section,
(A) the name of each lessee receiving a
royalty reduction;
(B) the starting date of the royalty
reduction;
(C) the name of each lessee named on the
lease;
(D) the name of each person with an
ownership interest in the lease or in the lessee or,
if more than 10 people have an ownership interest in
the lease or lessee, the 10 persons with the highest
percentage of ownership interest in the lease or
lessee;
(E) the lease identification number;
(F) a description of the location of the
lease;
(G) the total lease acreage;
(H) a summary of the project producing the
oil or gas receiving the royalty reduction;
(I) the number of firm gas sales contracts
the lessee currently holds with utilities regulated
under AS 42.05;
(J) the volume of gas receiving the royalty
reduction produced by the lessee
(i) in the preceding calendar year; and
(ii) cumulatively, beginning the calendar
year the lessee first received the royalty reduction;
(K) the volume of oil receiving the royalty
reduction produced by the lessee
(i) in the preceding calendar year; and
(ii) cumulatively, beginning the calendar
year the lessee first received the royalty reduction;
(L) for each lessee that produced gas that
received the royalty reduction, the royalty payments
for that gas received by the state
(i) in the preceding calendar year;
(ii) cumulatively, beginning the calendar
year the lessee first received the royalty reduction;
(M) for each lessee that produced oil that
received the royalty reduction, the royalty payments
for that oil received by the state
(i) in the preceding calendar year;
(ii) cumulatively, beginning the calendar
year the lessee first received the royalty reduction;
(N) a summary of the exploration work
performed by the lessee during the period for which
the lessee received the royalty rate under (f)(5) of
this section, and the results of the exploration work;
(O) whether the royalty rate under (f)(5)
of this section has expired or been terminated; and
(2) for each lessee declining to receive
the royalty rate under (f)(5) of this section, the
name of the lessee and the lease identification number
of the lease for which the royalty rate has been
declined.
(nn) The commissioner shall provide adequate
notice, in writing, of the royalty reduction under
(f)(5) of this section and the reporting requirements
of (mm) of this section to a lessee that is or may
become eligible for the royalty reduction under (f)(5)
of this section."
Renumber the following bill sections accordingly.
Page 8, following line 27:
Insert a new bill section to read:
"* Sec. 4. AS 38.05.180(mm) and 38.05.180(nn) are
repealed February 2, 2040."
Renumber the following bill section accordingly.
CO-CHAIR GIESSEL objected for purposes of discussion.
4:50:07 PM
SENATOR WIELECHOWSKI said that Amendment 8 is a reporting
requirement and was drafted with input from DNR. He shared his
understanding that DNR supports the amendment. He explained that
it would require producers receiving royalty relief to provide
certain information to the public. He commented that this would
ensure transparency. He noted that it also includes a provision
allowing lessees to decline the royalty relief if they do not
want to provide this information.
4:50:44 PM
MR. CROWTHER said that DNR supports Amendment 8 and understands
the need for public information about this program. He stated
that DNR would be happy to administer this reporting requirement
if it is the will of the committee.
4:51:09 PM
SENATOR CLAMAN pointed out that there may be conforming issues
with Amendment 1 and Amendment 8. He clarified that this does
not indicate opposition to Amendment 8.
4:51:43 PM
SENATOR KAUFMAN said that he supports Amendment 8.
4:51:51 PM
CO-CHAIR GIESSEL removed her objection; she found no further
objection and Amendment 8 was adopted.
4:52:16 PM
CO-CHAIR GIESSEL held SB 194, as amended, in committee.
4:52:30 PM
There being no further business to come before the committee,
Co-Chair Giessel adjourned the Senate Resources Standing
Committee meeting at [4:52] p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| SB 194, version A.pdf |
SRES 2/23/2024 3:30:00 PM SRES 5/6/2024 3:30:00 PM |
SB 194 |
| SB 194 Sponsor Statement 2.23.24.pdf |
SRES 2/23/2024 3:30:00 PM SRES 5/6/2024 3:30:00 PM |
SB 194 |
| SB 194 Sectional Analysis, version A 2.23.24.pdf |
SRES 2/23/2024 3:30:00 PM SRES 5/6/2024 3:30:00 PM |
SB 194 |
| SB 194 DNR Fiscal Note 1.16.24.pdf |
SRES 2/23/2024 3:30:00 PM SRES 5/6/2024 3:30:00 PM |
SB 194 |
| SB 194 Amendment #A.2.pdf |
SRES 5/6/2024 3:30:00 PM SRES 5/8/2024 3:30:00 PM SRES 5/9/2024 2:00:00 PM |
SB 194 |
| SB 194 Amendment #A.7 DCCED Response Letter 5.6.24.pdf |
SRES 5/6/2024 3:30:00 PM |
SB 194 |
| SB 194 Amendment #A.7.pdf |
SRES 5/6/2024 3:30:00 PM SRES 5/8/2024 3:30:00 PM SRES 5/9/2024 2:00:00 PM |
SB 194 |
| SB 194 Amendment #A.10.pdf |
SRES 5/6/2024 3:30:00 PM SRES 5/8/2024 3:30:00 PM SRES 5/9/2024 2:00:00 PM |
SB 194 |
| SB 194 Amendment #A.16.pdf |
SRES 5/6/2024 3:30:00 PM SRES 5/8/2024 3:30:00 PM SRES 5/9/2024 2:00:00 PM |
SB 194 |
| SB 194 Amendment #A.17.pdf |
SRES 5/6/2024 3:30:00 PM SRES 5/8/2024 3:30:00 PM SRES 5/9/2024 2:00:00 PM |
SB 194 |
| SB 194 Amendment #A.1.pdf |
SRES 5/6/2024 3:30:00 PM SRES 5/9/2024 2:00:00 PM |
SB 194 |
| SB 194 Amendment #A.14.pdf |
SRES 5/6/2024 3:30:00 PM SRES 5/9/2024 2:00:00 PM |
SB 194 |
| SB 194 Amendment #A.15.pdf |
SRES 5/6/2024 3:30:00 PM SRES 5/9/2024 2:00:00 PM |
SB 194 |