Legislature(2003 - 2004)

2004-02-27 Senate Journal

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2004-02-27                     Senate Journal                      Page 2306
SB 348                                                                                            
The following letter dated February 26 was read, stating:                                           
Dear President Therriault:                                                                          
In accordance with AS 38.06.050(a) and AS 38.06.070, I am                                           
transmitting a copy of the Alaska Royalty Oil and Gas Development                                   
Advisory Board's resolution unanimously approving a royalty oil                                     
contract between the state and Flint Hills Resources Alaska, LLC, for                               
the sale of Alaska North Slope royalty oil. Legislative approval for the                            
contract is required by AS 38.06.055. Also enclosed for reference is                                
the Best Interest Finding of the Commissioner of the Department of                                  
Natural Resources (DNR) dated February 12, 2004, and the signed                                     
DNR worked hard to secure favorable terms to the state and complete                                 
negotiations of the contract. That hard work will now pay dividends to                              
all Alaskans. Under the contract, the state will supply 24,000 to 77,000                            
barrels of North Slope royalty oil to Flint Hills Resources Alaska,                                 
LLC. The department forecasts that state royalty revenues under the                                 
contract will be approximately $0.30 per barrel higher than if the                                  
royalty were taken in value from the North Slope producers. This will                               
result in increased revenues from $2.6 million to $8.4 million per year.                            

2004-02-27                     Senate Journal                      Page 2307
The contract uses Alaska North Slope spot prices to determine the                                   
royalty in-kind price. This along with a fixed transportation price                                 
eliminates the need for retroactive adjustments - which removes the                                 
risk of the state losing value in royalty re-openers.                                               
I urge your prompt consideration and approval of the contract.                                      
Sincerely yours,                                                                                    
Frank H. Murkowski