1995-02-27                     Senate Journal                      Page 0405
SB 101                                                                       
SENATE BILL NO. 101 BY THE SENATE RULES COMMITTEE                              
BY REQUEST OF THE GOVERNOR, entitled:                                          
                                                                               
"An Act relating to adjustments to royalty reserved                           
to the state to encourage otherwise uneconomic                                 
production of oil and gas; relating to the depositing                          
of royalties and royalty sale proceeds in the Alaska                           
permanent fund; and providing for an effective                                 
date."                                                                         
                                                                               
was read the first time and referred to the Resources and Finance              
Committees.                                                                    
                                                                               
Fiscal note published today from Department of Natural Resources.              
Zero fiscal notes published today from Department of Revenue,                  
Department of Natural Resources.                                               
                                                                               
Governor's transmittal letter dated February 27:                               
                                                                               
Dear President Pearce:                                                         
                                                                               
                                                                               

1995-02-27                     Senate Journal                      Page 0406
SB 101                                                                       
Under the authority of art. III, sec. 18, of the Alaska Constitution,          
I am transmitting a bill relating to the reduction of royalties reserved       
to the state to encourage otherwise uneconomic production of oil and           
gas from marginal fields and to prolong the production life of                 
declining fields.                                                              
                                                                               
The bill would change existing royalty reduction provisions to grant           
the commissioner of the Department of Natural Resources greater                
discretion to provide royalty relief to lessees when necessary and             
clarify the commissioner's authority to grant such relief under                
various provisions in AS38.05.180.                                             
                                                                               
The proposed changes will require the lessee to make a clear and               
convincing showing that a royalty reduction is necessary and is in             
the best interest of the state.  The commissioner may condition                
granting of a royalty reduction in any way necessary to protect the            
state's best interests, such as increasing the state's royalty share if        
the price of oil or gas rises.                                                 
                                                                               
Finally, the bill maintains the royalty contributions to the permanent         
fund so that the fund would never receive a royalty less than that             
provided under existing statutes.                                              
                                                                               
I urge your favorable action on this bill.                                     
                                                                               
						Sincerely,                                                               
						/s/                                                                      
 						Tony Knowles                                                            
						Governor