05/07/1997 03:50 PM Senate RES

                                                                               
        HJR 35 ENCOURAGE FED TAX CHANGE FOR GAS PIPELINE                      
                                                                              
  CHAIRMAN HALFORD  announced  HJR 35  to be up for consideration.             
                                                                               
  REPRESENTATIVE MARK HODGINS,  sponsor, said he represented the House         
 Special Committee on Oil and Gas.  He said HJR 35 encourages                  
 federal legislation to improve federal fiscal terms for the trans             
 Alaska gas pipeline project.  The project now is in the range of              
 $12 - $15 million and if the project is to go forward, they need to           
 come up with strategies which lessen those costs.  This resolution            
 asks our delegation to introduce enabling legislation to reduce               
 some of the federal take on this project.  Their portion, based on            
 $3.50 cost of gas, is about $26 billion.  This project is based on            
 Dr. Pedro Van Muir's report and it seems reasonable at this point             
 to continue on with it.                                                       
                                                                               
  CHAIRMAN LEMAN  asked if he could comment on an article on gas to            
 liquids.   REPRESENTATIVE HODGINS  said that if they were to go to            
 the gas to liquids, there appears to be about a 30% - 40% loss of             
 gas.  There are 35 trillion cubic feet of gas on the North Slope              
 and they would be losing a lot of gas.  He didn't think technology            
 was in place to make it economically viable.  Dr. Van Muir said the           
 cost differential would be twice as expensive as BTUs for crude               
 oil.  It needs to be down to 1.25 to make it competitive with                 
 natural gas that they do have.                                                
                                                                               
 REPRESENTATIVE HODGINS said he thought it was important to stay the           
 course with the present project, but if things come up that would             
 enhance another project, they should look at it also.  He noted               
 that the State's take with the same scenario would be about $12 -             
 $13 billion out of a total project revenue of $150 billion.  The              
 federal government gets the biggest stake out of the trans Alaska             
 gas line.                                                                     
                                                                               
  CHAIRMAN LEMAN  asked if the Van Muir report had undergone                   
 sufficient peer review for him to believe it's a credible document.           
  REPRESENTATIVE HODGINS  replied that it gives them a good place to           
 start.                                                                        
                                                                               
 Number 225                                                                    
                                                                               
  SENATOR SHARP  said he was on the Task Force over the last year and          
 this new technology was discussed at length and it was brought up             
 by one of the major oil companies.  Experts told them at that time            
 the technology is in its infancy.   REPRESENTATIVE HODGINS  said that         
 Exxon has a $100 million project at Katar doing this very thing.              
 Part of the technology involved is being in a very temperate area;            
 the North Slope would come under that maybe two days per year.                
                                                                               
 Number 261                                                                    
                                                                               
  MR. PAUL FUHS , Yukon Pacific Corporation, supported HJR 35.  He             
 pointed out that the combined State and federal take of the project           
 is about 40% of the economic rents, a huge burden on any project,             
 which is why it's legitimate to look at some tax breaks.  In some             
 cases, he said, if you reduce the federal taxes, you increase the             
 State take, because the federal taxes are written off before the              
 State calculates its State revenue.                                           
                                                                               
 MR. FUHS said that Idaho National Energy Labs did a big report in             
 conjunction with Lockheed Martin on gas to liquid and they said if            
 you give a $5 - $6 a barrel premium to the middle distillate gas to           
 liquids, there are a lot of paraffins formed which is why you need            
 a temperate climate.  He said the market wants LNG; Japan, Taiwan,            
 and Korea have all based their electrical generation and domestic             
 distribution of home heating and cooking fuels based on LNG.                  
                                                                               
 He said Hitler developed the LNG technology in World War II when he           
 couldn't get fuel and now the price has come down somewhat.  The              
 time to use gas to liquids is when the pipeline gets down to                  
 $300,000 barrels per day when it will not be economic.  A small gas           
 to liquids gas plant at that time (around 2009 - 2016) could extend           
 the life of the pipeline significantly.  The study shows that if              
 you don't do that at the time, you spend a billion barrels of oil             
 in the ground.  It's economic at a field level, but the pipeline is           
 shut down because the flow-through is too small.                              
                                                                               
 Number 314                                                                    
                                                                               
  SENATOR LINCOLN  asked since it's a resolution could it be written           
 in a way that would expand where they are sending it, like the                
 Energy Council.                                                               
                                                                               
  REPRESENTATIVE HODGINS  responded that he could probably get a               
 concurrence from the House if they made a change, but he thought it           
 was important to get it off and it would go to our congressional              
 delegation who would know who else to pass it to.                             
                                                                               
  SENATOR LEMAN  said they could mention something like that in a              
 transmittal letter.                                                           
                                                                               
 SENATOR LEMAN moved to pass HJR 35 from committee with individual             
 recommendations and $0 fiscal note.  There were no objections and             
 it was so ordered.