2019-04-15                     House Journal                      Page 0619
HB 134                                                                                                                        
HOUSE BILL NO. 134 by the House Rules Committee by request of                                                                   
the Governor, entitled:                                                                                                         
                                                                                                                                
     "An Act authorizing the commissioner of natural resources to                                                               
     modify a net profit share lease."                                                                                          
                                                                                                                                
was read the first time and referred to the Resources and Finance                                                               
Committees.                                                                                                                     

2019-04-15                     House Journal                      Page 0620
The following fiscal note(s) apply:                                                                                             
                                                                                                                                
1.  Indeterminate, Dept. of Natural Resources                                                                                   
2.  Indeterminate, Dept. of Revenue                                                                                             
                                                                                                                                
The Governor's transmittal letter dated April 12 follows:                                                                       
                                                                                                                                
"Dear Speaker Edgmon:                                                                                                           
                                                                                                                                
Under the authority of Article III, Section 18, of the Alaska                                                                   
Constitution, I am transmitting a bill authorizing the renegotiation of                                                         
North Slope net profit share leases.                                                                                            
                                                                                                                                
The bill would authorize the commissioner of the Department of                                                                  
Natural Resources to modify North Slope net profit share leases where                                                           
net profit share has hindered development of known oil and gas pools                                                            
within units as a result of the percentage of profits returned to the state                                                     
in addition to royalties and taxes. Modifications to net profit shares                                                          
would be consistent with the existing royalty modification process.                                                             
The bill would allow the commissioner to modify a net profit share                                                              
lease to encourage production, prolong production or economic life of                                                           
an oil or gas field or pool. A modification, however, could not result in                                                       
a share reserved to the state of less than 10 percent of the net profit                                                         
derived from the lease.                                                                                                         
                                                                                                                                
The benefits of the bill would include incentivizing development and                                                            
production of known oil and gas resources within units in production                                                            
or in non-unitized areas with net profit share leases. An increase in                                                           
development and production on the North Slope would generate                                                                    
additional revenue for the state; that result requires modification of                                                          
leases to reflect production realities.                                                                                         
                                                                                                                                
I urge your prompt and favorable action on this bill.                                                                           
                                                                                                                                
Sincerely,                                                                                                                      
/s/                                                                                                                             
Michael J. Dunleavy                                                                                                             
Governor"