Legislature(2021 - 2022)

2022-04-04 House Journal

Full Journal pdf

2022-04-04                     House Journal                      Page 2275
HB 410                                                                                                                        
HOUSE BILL NO. 410 by the House Rules Committee by request of                                                                   
the Governor, entitled:                                                                                                         

2022-04-04                     House Journal                      Page 2276
     "An Act approving and ratifying the sale of royalty oil by the State                                                       
     of Alaska to Marathon Petroleum Supply and Trading Company                                                                 
     LLC; and providing for an effective date."                                                                                 
was read the first time and referred to the Resources and Finance                                                               
The following fiscal note(s) apply:                                                                                             
1. Fiscal, Dept. of Natural Resources                                                                                           
The following report was enclosed and is on file in the Chief Clerk's                                                           
     Dept. of Natural Resources                                                                                                 
     Division of Oil and Gas                                                                                                    
     Final Best Interest Finding and Determination for the Sale of                                                              
     Alaska North Slope Royalty Oil to Marathon Petroleum Supply                                                                
     and Trading Company LLC                                                                                                    
     March 18, 2022                                                                                                             
     (as required by AS 38.06.050 and AS 38.05.183)                                                                             
The Governor's transmittal letter dated March 23 follows:                                                                       
"Dear Speaker Stutes:                                                                                                           
Under the authority of Article III, Section 18, of the Alaska                                                                   
Constitution, I am transmitting a bill relating to approval and                                                                 
ratification of the sale of royalty oil by the State of Alaska to                                                               
Marathon Petroleum and Trading Company LLC (Marathon).                                                                          
The Commissioner of the Department of Natural Resources (DNR)                                                                   
has determined that it is in the best interest of the State to take royalty                                                     
oil in-kind from leases on the North Slope. To this end, DNR has                                                                
negotiated a proposed contract titled "Agreement for the Sale of                                                                
Royalty Oil between and among the State of Alaska, and Marathon                                                                 
Petroleum Supply and Trading LLC, a Delaware Limited Liability                                                                  
Company and Marathon Petroleum Corporation, a Delaware                                                                          
Corporation" (Proposed Contract). This bill would approve and ratify                                                            
the Proposed Contract.                                                                                                          

2022-04-04                     House Journal                      Page 2277
The Proposed Contract obligates the State to deliver between a                                                                  
minimum of 10,000 barrels per day (bpd) and a maximum of 15,000                                                                 
bpd to Marathon. Based on yearly average forecasts, Marathon's                                                                  
nominations under the Proposed Contract could represent 15 percent                                                              
to 31 percent of the State's North Slope royalty oil. The State will                                                            
receive a price for its royalty oil that will equal or exceed the price it                                                      
would have received had it elected to keep its royalty in-value. In total,                                                      
the Proposed Contract is expected to net the State roughly $3 to $13                                                            
million in revenue above what the State would receive by taking the                                                             
royalty in-value.                                                                                                               
The State currently sells royalty oil to Marathon under a one-year                                                              
contract, which, due to its short duration, did not require legislative                                                         
approval. The current contract terminates on July 31, 2022. The                                                                 
Proposed Contract would take effect on August 1, 2022 and terminate                                                             
on July 31, 2025.                                                                                                               
The bill is the culmination of diligent analysis and public process that                                                        
are imperative for responsible resource stewardship. DNR and the                                                                
Alaska Royalty Oil and Gas Development Advisory Board (Board)                                                                   
considered the fiscal, economic, societal, and environmental impacts                                                            
and benefits of the agreement. DNR issued a Final Best Interest                                                                 
Finding and Determination on the agreement that included analysis of                                                            
the factors for the sale of royalty oil in AS 38.05.183. The Department                                                         
did not receive any comments from the public on the sale during the                                                             
public comment period that ended on March 2, 2022. Additionally, the                                                            
Board held two public hearings on the sale. In accordance with AS                                                               
38.06.050, the Board voted to approve a written recommendation and                                                              
report on March 9, 2022, recommending legislative approval of the                                                               
This bill would allow the State to obtain the maximum value for its                                                             
royalty oil. I urge your prompt and favorable action on this measure.                                                           
Mike Dunleavy