2019-04-15                     Senate Journal                      Page 0824
SB 111                                                                                                                        
SENATE BILL NO. 111 BY THE SENATE 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                     Senate Journal                      Page 0825
The following fiscal information was published today:                                                                           
 Fiscal Note No. 1, indeterminate, Department of Natural                                                                        
          Resources                                                                                                             
 Fiscal Note No. 2, indeterminate, Department of Revenue                                                                        
                                                                                                                                
Governor's transmittal letter dated April 12:                                                                                   
                                                                                                                                
Dear President Giessel:                                                                                                         
                                                                                                                                
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