Legislature(2013 - 2014)

2014-01-29 Senate Journal

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2014-01-29                     Senate Journal                      Page 1470
SB 146                                                                                                                        
SENATE BILL NO. 146 BY THE SENATE RULES COMMITTEE                                                                               
BY REQUEST OF THE GOVERNOR, entitled:                                                                                           
          "An Act approving and ratifying the sale of royalty                                                                   
          oil by the State of Alaska to Tesoro Corporation and                                                                  
          Tesoro Refining and Marketing Company LLC; and                                                                        
          providing for an effective date."                                                                                     
was read the first time and referred to the Resources and Finance                                                               
The following fiscal information was published today:                                                                           
 Fiscal Note No. 1, indeterminate, Department of Natural                                                                        
Governor's transmittal letter dated January 28:                                                                                 

2014-01-29                     Senate Journal                      Page 1471
Dear President Huggins,                                                                                                         
Under the authority of Article III, Section 18 of the Alaska                                                                    
Constitution, I am transmitting a bill approving and ratifying the sale                                                         
of royalty oil by the State of Alaska to Tesoro Refining and Marketing                                                          
Company, LLC (Tesoro).                                                                                                          
Tesoro's Nikiski refinery is the largest tax payer in the Kenai                                                                 
Peninsula Borough and supplies products to 31 company-owned                                                                     
Alaska retail outlets and 44 "branded" outlets operated by franchise                                                            
owners. This legislation would allow Tesoro to continue supplying                                                               
these outlets with fuel, which will help strengthen Alaska's growing                                                            
economy. Tesoro is a key economic engine in Alaska and specifically                                                             
the Kenai Peninsula, employing 200 Alaskans in full-time, high                                                                  
paying positions. The Nikiski refinery produces approximately two to                                                            
three million gallons per day of refined petroleum products, mostly                                                             
consumed in Alaska.                                                                                                             
This bill would approve and ratify an "Amendment to the Agreement                                                               
for the Sale of Royalty Oil." The amendment would extend the                                                                    
existing contract by one year, providing for the sale of the State's                                                            
royalty oil to Tesoro Refining and Marketing Company, LLC,                                                                      
allowing for royalty oil deliveries to continue until January 31, 2016.                                                         
The contract provides for sale of between 5,000 and 15,000 barrels per                                                          
day of the State's royalty oil, subject to certain nomination provisions.                                                       
The royalty oil will be sold at a price calculated to equal or exceed the                                                       
value the State would obtain for the royalty oil if it was taken in-value                                                       
and sold by the producers rather than taken in-kind and sold by the                                                             
State to Tesoro.                                                                                                                
The Alaska Royalty Oil and Gas Development Advisory Board                                                                       
reviewed the proposed amendment through a public hearing process                                                                
and, in accordance with AS 38.06.050, issued a written                                                                          
recommendation on December 11, 2013, for the legislative approval of                                                            
the sale. A copy of the agreement for the sale of royalty oil to be                                                             
amended, the resolution recommending approval, and the report                                                                   
required by AS 38.06.070(c) are available from the Department of                                                                
Natural Resources.                                                                                                              

2014-01-29                     Senate Journal                      Page 1472
Extending the 2013 Tesoro contract is in the State's best interest and is                                                       
important to several hundred private-sector employees in the Kenai                                                              
Peninsula Region, as well as the economy throughout the state of                                                                
I urge your prompt and favorable action on this measure.                                                                        
Sean Parnell