Legislature(1993 - 1994)
04/17/1993 09:40 AM Senate FIN
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* first hearing in first committee of referral
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= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SENATE BILL NO. 50:
An Act making appropriations for capital projects; and
providing for an effective date.
Department of Natural Resources:
NICO BUS, Chief, Financial Services, Department of Natural
Resources, came before the committee to speak to three
projects. The first project was the RS 2477 Assertion
Project from the federal government in the amount of $720.0.
He said it was not part of the original Governor's budget.
The state has been informed that there is a deadline to
present the recommendations for approximately 1,500 right-
of-ways to the Congress by May 1. The $720.0 pays for the
mapping and identification for this presentation in order
for the state to receive title and ownership. Co-chair
Pearce asked the difference between this request and the
request in the original SB 50 from the Governor for $2,265.0
for owner state assertion and land selections. He said in
the land selection capital project, $175.0 was included for
the most critical right-of-ways. The department understood
that would be all that was asked for and those would be used
as test cases dealing with the federal government. Because
of the time frame of the statue of limitations, the request
was amended to include all right-of-ways.
The next project was the Alaska North Slope Royalty Oil
Price Reopeners for $100.0 enabling the state to discuss oil
price and methodology with the large oil companies. It will
buy expert advice on such things as transportation costs,
capitalization, destination value, etc. It will be used as
a contingency fund if there is a need for it.
The last amended request was funding for the Alaska Oil &
Gas Conservation Commission for $100.0 to evaluate the
Alaska Prudhoe Bay Reservoir models that large oil companies
have done. This is important for the state in order to
maximize the production of oil and determining the most
appropriate time for gas sales. The money will be used for
consultants to evaluate the existing models. SENATOR TIM
KELLY asked why the full time state consultants could not
take on this project. Mr. Bus said that their time was
already being taken up by North Slope work with the large
oil companies to insuring production is up to standards. In
answer to Senator Sharp, Mr. Bus explained that the Alaska
Oil & Gas Conservation Commission's responsibility was to
maximize existing reservoir analysis for the state to
optimize production. The reservoir in the request is for
future oil and gas explorations. Co-chair Pearce pointed
out that their is a confidentiality issue that may be a
problem if the commission was asked to share information.
Co-chair Pearce asked how many models would be analyzed.
Mr. Bus said that the oil companies are asserting that the
most advantageous time to sell gas would be in the year
2000. This reservoir study would make an independent
determination regarding the oil company's conclusion. RAGA
ELIM, Special Assistant, Department of Natural Resources,
said that there were three models by oil companies and the
request would retain a consultant who would evaluate these
existing models and provide an independent analysis of that
information to help the state determine the appropriate time
to shift to gas sales.
SHELBY STASTNY, Director, Office of Management & Budget,
said that the chairman of the commission had told him,
because of the intense pressure to start gas sales and the
oil companies reluctance to agree that it is not feasible
for at least ten years, this independent study was needed to
make a determination for the state.
Co-chair Pearce said that the latest phase of the gas
handling facility on the north slope was going on line this
year. Since all the gas in Prudhoe Bay is being reinjected
to help produce oil, she felt that the companies know what
they are talking about and that they are using all the gas
right now. She felt the state would lose some oil
production if gas was sold off at the present time. She
agreed that the state needed this information as a base for
decision making.
In answer to Senator Kelly, Mr. Elim said that there is one
vacancy on the Alaska Oil & Gas Conservation Commission.
Mr. Elim said that the vacancy must be filled by a public
member.
SENATOR STEVE RIEGER asked for an explanation regarding the
difference between gas sales and reinjection. Mr. Elim said
that the oil companies have given their time frame for
optimum gas revenues to be between 2015 and 2030. There is
increasing interest for potential gas sales. Given the time
frame that the state is hearing from the oil industry, the
state is asking for independent information to find out if
that information is accurate. Senator Rieger said that he
would like to know what the dynamics would be to cause the
interests of the state to diverge from the oil companies.
Mr. Stastny said that according to Harold Hines, special
assistant to oil & gas commission in the Governor's office,
when gas sales do begin it will be around $300-500 million
of revenue a year. It seemed that the oil companies may not
have that same interest since they have a pipeline of oil
and have enough gas to satisfy customers from other sources.
So he could see a divergent interest occurring at the
present time.
Department of Public Safety:
C. E. SWACKHAMMER, Deputy Commissioner, Department of Public
Safety, said that the department had two items for budget
amendments. The first was a $50.0 appropriation to correct
the ventilation system in the Kodiak jail which is a
settlement of a lawsuit. He explained that the poor
condition of the Kodiak jail caused inmates to bring a
lawsuit against the city. This request would provide the
state's contribution for clean air for prisoners. In answer
to Senator Sharp, he said that the Kodiak jail is a contract
facility but it was cheaper for the state to help with the
jail improvements than to build a new facility. He said
that the jail would eventually need to be replaced. He said
$50.0 would pay the state's portion of the lawsuit.
Mr. Swackhammer said that the request of $150.0 was for the
cost of seizing vessels that were caught fishing illegally.
Last year vessels from 20 to 200 feet were seized. It will
result in income to the state for penalties. If the state
decides to be aggressive to correct the illegal fishing
activity, then seizure must be made and the funds must be
provided to accomplish the seizures. Discussion was had by
Senators Jacko, Rieger, Co-chair Pearce, and Mr. Swackhammer
regarding the high cost of moving the seized vessels. In
answer to Senator Sharp, Mr. Swackhammer said cost recovery
had been realized through fines in the amount of about $1
million. Mr. Stastny said that last year the money had to
be taken out of other budget items to fund the seizure of
three vessels and that was when it was decided that a
revolving fund be established for this purpose. Mr.
Swackhammer said that legislation was being drafted and
would be ready next session between the Departments of
Public Safety, Fish & Game, and Law to develop a fund such
as Mr. Stastny described.
Senator Jacko asked for a detailed break down of the costs
for moving the three seized vessels. Mr. Swackhammer said
that he would provide that information to the committee.
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