CSHB 223(FIN): "An Act relating to royalty rates and payments for certain oil and gas; relating to state loans for oil and gas development projects in the Cook Inlet sedimentary basin; relating to the creation of subsidiaries related to development projects in the Cook Inlet sedimentary basin by the Alaska Industrial Development and Export Authority; relating to the Cook Inlet reserve-based lending fund and the payment of dividends from the fund; relating to a report to the legislature related to oil and gas development projects in the Cook Inlet sedimentary basin; and providing for an effective date."
00 CS FOR HOUSE BILL NO. 223(FIN) 01 "An Act relating to royalty rates and payments for certain oil and gas; relating to state 02 loans for oil and gas development projects in the Cook Inlet sedimentary basin; relating 03 to the creation of subsidiaries related to development projects in the Cook Inlet 04 sedimentary basin by the Alaska Industrial Development and Export Authority; relating 05 to the Cook Inlet reserve-based lending fund and the payment of dividends from the 06 fund; relating to a report to the legislature related to oil and gas development projects in 07 the Cook Inlet sedimentary basin; and providing for an effective date." 08 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 09 * Section 1. AS 38.05.180 is amended by adding new subsections to read: 10 (mm) Notwithstanding and in lieu of a requirement in the leasing method 11 chosen of a minimum fixed royalty share or the royalty provision of a lease, for leases 12 issued for land south of 68 degrees North latitude from which commercial production 13 of oil or gas begins after July 1, 2024, and before January 1, 2035, the lessee shall pay
01 a royalty of three percent for qualified new gas and 6.25 percent for qualified new oil, 02 unless payment is lower under another subsection of this section. A royalty rate in this 03 subsection applies until the earlier of 04 (1) 10 years following the commencement of commercial production; 05 or 06 (2) the date on which a commercial quantity of oil or gas produced by 07 the lessee from land south of 68 degrees North latitude is shipped out of the state. 08 (nn) In (mm) of this section, 09 (1) "qualified new gas" means gas produced from 10 (A) a field or pool that the commissioner determines has not 11 previously produced gas for commercial sale before January 1, 2024; 12 (B) a field or pool that the commissioner determines has not 13 produced gas during the preceding six months but that has previously produced 14 gas; or 15 (C) a well that did not exist on January 1, 2025, if the 16 commissioner determines that production of that gas from the field or pool 17 from an existing well was not feasible; 18 (2) "qualified new oil" means oil produced from 19 (A) a field or pool that the commissioner determines has not 20 previously produced oil for commercial sale before January 1, 2024; 21 (B) a field or pool that the commissioner determines has not 22 produced oil during the preceding one year but that has previously produced 23 oil; or 24 (C) a well that did not exist on January 1, 2025, if the 25 commissioner determines that production of that oil from the field or pool from 26 an existing well was not feasible. 27 (oo) Notwithstanding and in lieu of a requirement in the leasing method 28 chosen of a minimum fixed royalty share, or the royalty provision of a lease or an 29 existing royalty settlement agreement, for gas that is produced from leases that include 30 land north of 68 degrees North latitude and that is subsequently liquefied or used in 31 the liquefaction or transportation process, the lessee shall pay a royalty rate of three
01 percent if the lessee agrees to sell the gas to a publicly owned utility or a utility 02 regulated under AS 42.05 at a rate that reflects the discounted royalty rate provided 03 under this subsection. The royalty rate under this subsection applies until the earlier of 04 either 05 (1) 10 years following the first commercial use of liquefied natural gas 06 receiving the royalty rate under this subsection; or 07 (2) the date on which a commercial quantity of liquefied natural gas 08 produced from the lease receiving the royalty rate under this subsection is shipped out 09 of the state. 10 * Sec. 2. AS 44.88.088(a) is amended to read: 11 (a) The authority shall adopt a policy for payment of a dividend from the 12 revolving fund, the Alaska Industrial Development and Export Authority sustainable 13 energy transmission and supply development fund (AS 44.88.660), [AND] the Arctic 14 infrastructure development fund (AS 44.88.810), and the Cook Inlet reserve-based 15 lending fund (AS 44.88.850) to the state each fiscal year. The dividends for a fiscal 16 year shall be made available by the authority before the end of that fiscal year. The 17 authority shall notify the commissioner of revenue when the dividends for a fiscal year 18 are available for appropriation. The amount of the dividend payable from the 19 (1) revolving fund for a fiscal year may not be less than 25 percent nor 20 more than 50 percent of the net income of the revolving fund for the base fiscal year; 21 however, in no event [,] may the dividend payable from the revolving fund for a fiscal 22 year exceed the total unrestricted net income of the revolving fund for the base year; 23 (2) Alaska Industrial Development and Export Authority sustainable 24 energy transmission and supply development fund (AS 44.88.660) for a fiscal year 25 may not be less than 25 percent nor more than 50 percent of the net income of the 26 Alaska Industrial Development and Export Authority sustainable energy transmission 27 and supply development fund for the base fiscal year; however, the dividend payable 28 from the Alaska Industrial Development and Export Authority sustainable energy 29 transmission and supply development fund for a fiscal year may not exceed the total 30 unrestricted net income of the Alaska Industrial Development and Export Authority 31 sustainable energy transmission and supply development fund for the base year;
01 (3) Arctic infrastructure development fund (AS 44.88.810) for a fiscal 02 year may not be less than 25 percent nor more than 50 percent of the net income of the 03 Arctic infrastructure development fund for the base fiscal year; however, the dividend 04 payable from the Arctic infrastructure development fund for a fiscal year may not 05 exceed the total unrestricted net income of the Arctic infrastructure development fund 06 for the base year; 07 (4) Cook Inlet reserve-based lending fund (AS 44.88.850) for a 08 fiscal year may not be less than 25 percent nor more than 50 percent of the net 09 income of the Cook Inlet reserve-based lending fund for the base fiscal year; 10 however, the dividend payable from the Cook Inlet reserve-based lending fund 11 for a fiscal year may not exceed the total unrestricted net income of the Cook 12 Inlet reserve-based lending fund for the base year. 13 * Sec. 3. AS 44.88.178 is amended to read: 14 Sec. 44.88.178. Creation of subsidiaries. The authority may create one or 15 more subsidiary corporations for the purpose of acquiring, constructing, owning, 16 operating, or financing a project financed under AS 44.88.172 or 44.88.850. A 17 subsidiary corporation created under this section may be incorporated under 18 AS 10.20.146 - 10.20.166. The authority may transfer assets of the authority to a 19 subsidiary created under this section. A subsidiary created under this section may 20 borrow money and issue bonds as evidence of that borrowing [,] and has all the 21 powers of the authority that the authority grants to it. Unless otherwise provided by the 22 authority, the debts, liabilities, and obligations of a subsidiary corporation created 23 under this section are not the debts, liabilities, or obligations of the authority. 24 * Sec. 4. AS 44.88 is amended by adding a new section to read: 25 Sec. 44.88.385. Cook Inlet oil and gas development projects; report. The 26 authority shall evaluate oil and gas development projects that have the potential to 27 increase oil and gas production from the Cook Inlet sedimentary basin. Each year, the 28 authority shall prepare a report related to those oil and gas development projects and 29 shall, by the first day of each regular session of the legislature, deliver the report to the 30 senate secretary and the chief clerk of the house of representatives and notify the 31 legislature that the report is available. At the request of a legislative committee, a
01 representative of the authority shall appear in that committee to review the report. For 02 each oil and gas development project, the report must include 03 (1) a cost estimate for the project; 04 (2) the potential recoverable gas from the project; and 05 (3) the amount necessary to be appropriated to the Cook Inlet reserve- 06 based lending fund to finance the project. 07 * Sec. 5. AS 44.88 is amended by adding a new section to read: 08 Article 10A. Cook Inlet Reserve-Based Lending. 09 Sec. 44.88.850. Cook Inlet reserve-based lending fund. (a) The Cook Inlet 10 reserve-based lending fund is established in the authority. The fund consists of 11 appropriations made to the fund by the legislature, money or other assets transferred to 12 the fund by a vote of the members of the authority under AS 44.88.050 from any other 13 fund controlled by the authority, and unrestricted loan repayments, interest, or other 14 income earned on loans, investments, or assets of the fund. The fund is not an account 15 in the revolving fund established in AS 44.88.060, and the authority shall account for 16 the fund separately from the revolving fund. The authority may create additional 17 accounts in the fund. Subject to agreements made with the holders of the authority's 18 bonds or with other persons, the authority may transfer amounts from an account in 19 the fund to another account in the fund. The authority may not transfer to another fund 20 in the authority amounts that were appropriated to the fund by the legislature. 21 (b) The authority may use money in the fund to make one or more reserve- 22 based loans to fund oil and gas development projects the authority considers necessary 23 to increase oil and gas production from the Cook Inlet sedimentary basin. 24 (c) The authority shall set the interest rate for a reserve-based loan under this 25 section. The interest rate may be less than the cost of funds to the authority. In this 26 subsection, "cost of funds" means earnings, expressed as an annual interest rate, the 27 authority would receive on a comparable financial security. 28 * Sec. 6. AS 44.88.900 is amended by adding new paragraphs to read: 29 (20) "oil and gas development project" means a development project to 30 produce proven oil or gas reserves; 31 (21) "reserve-based loan" means a loan made against and secured by
01 an oil and gas field or undeveloped or developed oil and gas assets. 02 * Sec. 7. AS 31.05.030(i); AS 38.05.180(f)(5), and 38.05.180(dd) are repealed. 03 * Sec. 8. AS 38.05.180(mm) and 38.05.180(nn) are repealed January 1, 2045. 04 * Sec. 9. This Act takes effect immediately under AS 01.10.070(c).