Legislature(2025 - 2026)BUTROVICH 205
03/12/2025 03:30 PM Senate RESOURCES
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| Audio | Topic |
|---|---|
| Start | |
| Presentation(s): Alaska Lng: Update on Qilak Lng | |
| SB112 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | SB 105 | TELECONFERENCED | |
| *+ | SB 112 | TELECONFERENCED | |
ALASKA STATE LEGISLATURE
SENATE RESOURCES STANDING COMMITTEE
March 12, 2025
3:30 p.m.
DRAFT
MEMBERS PRESENT
Senator Cathy Giessel, Chair
Senator Bill Wielechowski, Vice Chair
Senator Matt Claman
Senator Forrest Dunbar
Senator Scott Kawasaki
Senator Shelley Hughes
Senator Robert Myers
MEMBERS ABSENT
All members present
OTHER LEGISLATORS PRESENT
Representative Ky Holland
COMMITTEE CALENDAR
PRESENTATION(S): ALASKA LNG: UPDATE ON QILAK LNG
- HEARD
SENATE BILL NO. 112
"An Act relating to credits against the oil and gas production
tax; and providing for an effective date."
- HEARD & HELD
PREVIOUS COMMITTEE ACTION
BILL: SB 112
SHORT TITLE: OIL & GAS PRODUCTION TAX
SPONSOR(s): RULES
02/26/25 (S) READ THE FIRST TIME - REFERRALS
02/26/25 (S) RES, FIN
03/12/25 (S) RES AT 3:30 PM BUTROVICH 205
WITNESS REGISTER
MEAD TREADWELL, Chief Executive Officer
Qilak LNG
Lloyd's Energy
Anchorage, Alaska
POSITION STATEMENT: Presented Qilak LNG Update.
DAVID CLARKE, Chief Operating Officer
Qilak LNG
Anchorage, Alaska
POSITION STATEMENT: Assisted with the presentation Qilak LNG
Update.
HUNTER LOTTSFELDT, Staff
Senator Bill Wielechowski
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Presented SB 112 on behalf of the Senate
Rules Committee, Senator Wielechowski, Chair.
MARK MYERS, representing self
Fairbanks, Alaska
POSITION STATEMENT: Answered questions on SB 112.
DAN STICKEL, Chief Economist
Tax Division
Department of Revenue (DOR)
Juneau, Alaska
POSITION STATEMENT: Answered questions on SB 112.
ACTION NARRATIVE
3:30:15 PM
CHAIR GIESSEL called the Senate Resources Standing Committee
meeting to order at 3:30 p.m. Present at the call to order were
Senators Myers, Hughes, Claman, Dunbar and Chair Giessel.
Senator Kawasaki arrived immediately. Senator Wielechowski
arrived during the course of the meeting.
^PRESENTATION(S): ALASKA LNG: UPDATE ON QILAK LNG
PRESENTATION(S): ALASKA LNG: UPDATE ON QILAK LNG
3:31:09 PM
CHAIR GIESSEL announced the presentation Alaska Liquid Natural
Gas (LNG): Update on Qilak LNG
3:31:32 PM
MEAD TREADWELL, Chief Executive Officer, Qilak LNG, Lloyd's
Energy, Anchorage, Alaska, presented the Qilak LNG Update. He
introduced himself and his colleague, David Clarke. He briefly
described their experience in the oil and gas industry and
service to the state of Alaska. He said the [Qilak] team had
extensive relevant expertise and that he, as former lieutenant
governor, helped create the AK LNG project and monitored Arctic
icebreaker developments while chairing the Arctic Research
Commission. He noted that some legislators had been briefed
already but wanted the public to receive an update as well.
3:33:14 PM
MR. TREADWELL moved to and narrated slide 2:
[Original punctuation provided.]
Today's Presentation
? Project description and update
? What does Qilak LNG seek in the market?
? Proposed Asian Working Groups on Alaska LNG
? What can the State of Alaska do to help?
MR. TREADWELL emphasized that Alaska had repeatedly focused on a
single approach to commercializing North Slope gas, which
allowed other regions, such as Texas and Louisiana, to advance
multiple LNG projects with varying economics. To address both
the commercialization of North Slope gas and the Railbelt energy
crisis, he argued that Alaska needed to diversify its project
strategies. He said Governor Dunleavy had supported efforts
toward the Asian LNG market, however, he maintained that the
state should devote more attention and "mind share" to the
direct-export project from the North Slope.
3:34:48 PM
MR. TREADWELL moved to slide 3:
[Original punctuation provided.]
Vast Alaska Gas Supplies Available to Alaska/Exports,
but how?
AKLNG (proposed overland pipeline)
$44 Bn, 20 [Million tons per annum] MTPA project
800-mile pipeline to ice-free port
Over $500 M spent on Feasibility
[Slide 3 consists of a map of the North Slope with the
following AKLNG associated locations and stakeholders:
Northstar 0.8 tcf Hilcorp
Prudhoe Bay 24 tcf Hilcorp
Point Thomson 6 tcf Exxon
Mackenzie River Delta ~7.5 tcf Various
Endicott 1.6 tcf Hilcorp]
MR. TREADWELL deferred to Mr. Clarke to speak to the composition
of gas and the terms of settlement at Point Thompson. He
emphasized that there was plenty of gas for more then one
project.
3:35:06 PM
DAVID CLARKE, Chief Operating Officer, Qilak LNG, Anchorage,
Alaska, explained that the four currently developed North Slope
gas fields held about 32 trillion cubic feet (TCF) of reserves,
with at least another 100 TCF of probable gas, enough to support
more than one LNG project. He highlighted Point Thomson because
it is a high-pressure gas-condensate field currently limited to
processing 200 million cubic feet per day; providing an outlet
for up to 540 million cubic feet per day would allow the field
to triple its condensate production. He also noted that Point
Thomson required less offshore distance to reach adequate water
depth for LNG carriers. Additionally, he pointed out that
Canada's nearby Mackenzie Delta contained three major gas fields
with another 7.5 trillion cubic feet (TCF), and that [Qilak] had
advised the Northwest Territories that a similar development
concept could work for their gas resources.
3:36:35 PM
MR. TREADWELL moved to slide 4. He stated that the [Qilak]
project was enabled by two technologies that did not exist 15
years ago: advanced ice-capable LNG tanker designs and the
miniaturization of LNG facilities, which allowed 46 million-
ton, and larger, LNG plants to be built on ships or barges in
controlled shipyard environments, reducing costs and overruns.
He emphasized that when Alaska's political leadership chose to
focus solely on a pipeline, Russia had already taken a different
approach, moving forward with the Yamal LNG project. He said
Yamal which has been shipping LNG 2,600 miles through Arctic ice
year-round, sometimes even supplying ports like Boston. In
comparison, he emphasized that the distance from Point Thomson
to the Bering Strait ice edge in the worst ice conditions was
only about 600 miles:
[Original punctuation provided.]
Arctic LNG A Proven Concept
[A map of Russia, and Alaska and the Arctic Ocean
comparing the distances to transport LNG from Yamal
LNG in Russia to the Bering Strait, ~ 2600 Miles
versus from North Slope LNG to the Bering Strait, ~
600 Miles]
Yamal LNG is a 2,600-mile trip from Yamal to the
Bering Strait (where sea ice dissipates), whereas
Qilak LNG would be only 600 miles
3:38:00 PM
MR. TREADWELL moved to slide 5, Russia began shipping LNG
through the Arctic, reliably, in 2017, a ceremonial photo of
Russian president Vladimir Putin pressing a button. He observed
that many Americans grew up worrying that Russian leaders might
press buttons. He said the button President Putin pushed in
December of 2017 began the shipping of LNG from Yamal.
3:38:16 PM
MR. TREADWELL moved to slide 6, Russia's Yamal Project, a
satellite photo of the Yamal LNG project in the spring of 2011
with the caption: Yamal was a greenfield project in 2011. Alaska
was focused on a pipeline to Canada at that time. He said the
cost to get gas to Calgary, Canada was more than the value of
the gas in Calgary at the time. Under Governor Parnell the
decision was made to focus on exporting gas to Asia and the
Alaska Gasline Development Corporation (AGDC) was established.
He noted that the Yamal LNG project had reached final investment
decision (FID) in 2011.
3:38:56 PM
MR. TREADWELL moved to slide 7, Russia's Yamal Project, a
satellite photo showing significant infrastructure, YAMAL,
Summer 2016, captioned: By 2016, Russia, using modules delivered
from Asia via the Bering Strait, completed the Yamal project.
3:38:59 PM
MR. TREADWELL moved to slide 8, Russia's fully completed project
was about the same capacity as the proposed AKLNG project in
Nikiski. A photo of the Yamal LNG project, Summer, 2019.
3:39:29 PM
MR. TREADWELL moved to and narrated slide 9. He noted that the
Yamal expansion received large amounts of capital commitment
from China and Japan. He said the decision to put the LNG
modules on a floating barge at the mouth of the river was made
at this time, demonstrating the viability of the near-shore
floating LNG concept:
[Original punctuation provided.]
Russia's plans for expansion of Yamal continue, using
the same near-shore concept as Qilak LNG
[Slide 9 includes 2 conceptual images of the Yamal LNG
expansion.]
Arctic LNG 2 Project status stalled now with
sanctions after Ukraine War
? Front-end engineering design (FEED) was completed in
October 2018
? Final investment decision made in September 2019
? EPC-contract with TechnipFMC was signed
? More than 90 percent of equipment for the project
contracted
? Russian government will cover 60 percent of the
shipping terminal cost of $2.17 bn
3:40:14 PM
SENATOR CLAMAN asked whether LNG was being shipped from Yamal to
locations other than Japan.
3:40:27 PM
MR. TREADWELL said pre-sanctions [Ukraine war], Russia was
shipping gas to: Europe and Asia: Japan, Korea, China. He said
there was consideration to develop a facility in Kamchatka that
would receive gas and send it from there in conventional
tankers. He said they were waiting for more icebreaking tankers
to reach full production and they were clearly capable of
serving markets in both the Atlantic and Pacific oceans.
3:41:12 PM
SENATOR DUNBAR asked whether the government of Russia funded the
original operating terminal at Yamal and if so, how much the
government invested.
MR. TREADWELL recalled attending a 2008 meeting with European,
American, and Russian energy experts during a period of high oil
prices. He said Russian representatives made clear their
intention to enter the Asian market rather than rely solely on
Europe, with Yamal as their leading project. He noted that he
had followed this development for many years and addressed
questions about subsidies, explaining that Novatek and its
partners had paid market prices for LNG equipment and tankers,
and that tanker operations were contracted at fair rates to
independent shipping companies. While Russia invested in
infrastructure, he emphasized that the Yamal project ultimately
functioned as a major cash-flow generator for the country.
3:43:20 PM
MR. CLARKE observed that Russian costs were opaque, but it was
known that the Yamal onshore project was logistically difficult
and very expensive to build. He said this was why subsequent
development consisted of nearshore LNG facilities that were
built in a shipyard and then floated to the location, a more
predictable venture than building a large plant onshore in the
Arctic.
3:44:23 PM
MR. TREADWELL moved to and narrated slide 10. He noted the shape
of the icebreaker, with its spoon-shaped stern and V-shaped bow:
[Original punctuation provided.]
Qilak LNG will use next generation icebreaking
tankers, proven by Yamal
[Slide 10 includes a schematic rendering of an
icebreaker: Yamal Arctic LNG and a photo of an ice-
breaker traveling through an icy sea.]
Rated to Arc7 (IACS Polar Class 3)
? Icebreaking capacity (astern): 2.1 m
Double-Acting Ship (DAS) concept
Example of globalization in the Arctic
? Designed in Finland
? Built in South Korea
? Operating in Russia by international carriers
15 built since the launch of the Christophe de
Margerie in 2016
3:45:13 PM
MR. TREADWELL moved to slide 11. He said the propulsion for the
icebreaker was provided by azipods which can swing 360 degrees
allowing the ship's bow to become the stern and vice versa. He
described the nature of the ice encountered by the ships as they
travel to the Bering Strait:
[Original punctuation provided.]
Yamal Mk I Dual Acting LNG Carrier Azipods
Inset underwater photo captioned, View taken from
below the vessel in ice test tank
Shipyard photo captioned, Ice breaking stern of LNG
Carrier with three 15MW Azipods
3:45:45 PM
MR. TREADWELL moved to and narrated slide 12:
[Original punctuation provided.]
LNG Shipping Solution for Arctic Waters
[Slide 12 includes three photos of LNG vessels
traversing open water and ice.]
[Slide 12 includes a Pacific-centered hemisphere map
locating Yamal, Korea, Japan, China, Philippines,
North Slope Alaska, AKLNG and Mackenzie Delta.]
Shipping Distances:
From Alaskan North Slope to:
(NM)
Ice Limit ~600
Tokyo 3350
Inchon 4100
Shanghai 4200
Manila 5050
Saigon 5700
Bangkok 6300
USGC ports ~6,000 NM longer via Panama Canal
~11,500 NM longer via Cape H
? Double Acting Technology (DAT) ice class LNG
carriers have increased capability to traverse ice
up to 2.1m thick
? The U.S. Coast Guard Polar Security Cutter (PSC)
program has received multi-year funding commitments
expected to complete 2 of 3 new heavy polar
icebreakers for deployment coincident with Qilak.
? Air and water quality risks with an LNG project are
far lower than previous oil exploration and
production projects permitted in the region even
during winter months
? Warming ocean temperatures have resulted in later
ice formation and earlier breakup in the Beaufort,
Chukchi and Bering Seas and also an increase in the
proportion of annual ice which is easier to navigate
through than multiyear ice. Southerly winds have
left the Bering Sea with comparatively less ice in
recent years
3:47:04 PM
SENATOR MYERS inquired about the number of months each year that
these ships could operate.
3:47:13 PM
MR. TREADWELL said they could operate all twelve months.
3:47:19 PM
SENATOR KAWASAKI recalled a map of LNG tanker movements around
the globe and noted minimal activity in the Pacific. He asked if
there was any LNG production on the east side of Russia at
present, for example Sakhalin.
3:47:59 PM
MR. TREADWELL said Japan's nearest LNG source was Sakhalin
Island. He said existing supply contracts [between Japan and
Russia] are coming up for renewal and may become available to
the U.S. He explained that when the Ukraine war began, the U.S.
sanctioned many areas but allowed Japan to continue purchasing
Russian gas, likely to give Japan time to secure alternative
supplies. Since then, Japan has been slow to renew its contracts
with Russia.
3:48:50 PM
SENATOR KAWASAKI acknowledged Mr. Treadwell's experience and
sought his opinion about President Trump's discussions with the
Prime Minister of Japan. He noted that there seemed to be more
excitement, but that it was difficult to gauge.
3:49:22 PM
MR. TREADWELL said there would be specific mention [of
interactions between President Trump and the leaders of other
countries later in the presentation. He reflected on productive
discussions and growing interest in Alaska's gas resources and
emphasized that Alaska has enough gas for two separate projects.
He said it was important to communicate this clearly to
stakeholders and noted that Japanese officials responding to
President Trump's outreach were aware of both proposed projects.
3:50:22 PM
MR. TREADWELL moved to slide 14 and deferred to Mr. Clarke.
MR. CLARKE narrated slide 14. He said the structure would house
the LNG plant and accommodations on the top deck, store one and
a half to two shiploads of LNG in its hull and include a dock
for weekly loading. The expected dimensions will roughly be 340m
× 80m × 33.5m and require at least 15m of water depth. He noted
that a similar design was studied for the Mackenzie Delta and
originally estimated at $5 billion, but detailed engineering
later suggested about $4 billion in 2020. With inflation, the
team is confident in the $5 billion estimate. He said the
project benefitted from a very short pipeline, six to nine
miles, reducing risk compared to long-distance pipelines. He
said the overall cost estimate equates to about $1,250 per ton
of capacity.
[Original punctuation provided.]
Exporting LNG from Alaska's North Slope
Reduced shipping cost to Asia vs Yamal
? Yamal LNG is a 2,600-mile trip to the Bering Strait,
whereas Qilak LNG will be only 600 miles
Round Trip + 6 Port Days
? Asia in Summer: 22 days
? Asia in Winter: 25 days
Near Shore LNG Facility (NSLNG)
? Built under controlled conditions in a shipyard (can
be pre-commissioned)
? Floated to site and ballasted down on seabed
(displacement 270,000t)
? Storage in hull, LNG plant on topsides, dock for
unloading
? Dimensions: 340m x 80m x 33.5m6 9 mile pipeline
[Slide 14 includes the map displaying the arctic
routes from Yamal to the Bering Strait and from North
Slope LNG to the Bering Strait.]
3:53:17 PM
MR. TREADWELL moved to and narrated slide 15. He focused on the
financial expectations for the project, which he said
represented a small but good start for commercializing North
Slope gas, adding that another field, such as Endicott, could
help complete a 20-year contract to pay for the project. He
explained that the Capex of $1,012$1,150 per ton placed the
project in the "sweet spot" of global LNG competitiveness and
was cheaper than several pipeline-heavy projects in Alaska and
Canada. He said [Qilak] could deliver gas for under $6/MMBtu,
which would keep the project viable even in lower price
environments, benefit Alaska through more reliable royalties and
taxes, and make lenders more comfortable about the project's
competitiveness and risk:
[Original punctuation provided.]
Qilak LNG Investment Highlights
ExxonMobil is a Reliable Supplier that will Provide
Treated (Liquefaction Spec Gas Supply) Gas; and is an
Experienced Upstream Operator Globally and in the
Arctic
Management Team with Deep Experience and Strong
Political Support in Alaska, East Asia and Washington,
D.C.
Cost-Advantaged LNG Solution with Significant Savings
vs. USGC, Western Canada, East Africa and AUS/PNG -
Target LNG Quality ~1,060 [British Thermal Units per
standard cubic foot] BTU/scf, Suitable for All Key Far
East Markets Including Japan, Korea and China
Opportunity to Open a New Leading Global Gas Province
to LNG Development Beginning with Developed Resource
at Point Thomson (Potential of 20+ [million tons per
annum/year] Mtpa in a Rising Market)
Buyer Interest in Core Asian Markets to Downstream
Projects (~13 Mtpa). [memorandums of agreement] MOUs
in Place with China, Japan, Philippines, and Thailand
Proven, Cutting-Edge Technology Solution to Mitigate
Arctic Challenges and Risks
4 Mtpa
Export Capacity of Qilak LNG 1 Terminal
560 [million cubic feet per day] MMcfd
Minimum feedgas supply in ExxonMobil HoA
20 Years
Duration of feedgas HoA with ExxonMobil
$1,000 - $1,250
Expected capex per ton of liquefaction capacity
<$6 / [million British thermal units] MMBtu
Expected delivered cost to East Asia
14 Days
Shipping days to premier East Asian offtakers
3:55:42 PM
MR. TREADWELL moved to and narrated slide 16:
[Original punctuation provided.]
Asia's Closest U.S, Source of Natural Gas Offered by
Qilak LNG
Lower upstream costs from a prolific conventional
source and proximity to Asian demand provide a
differentiating LNG proposition
[Slide 16 includes a map captioned, Qilak LNG is
~2,000 Miles Closer to Market than Yamal LNG. The map
illustrates the shipping routes from LNG Hubs to
Inchon South Korea:
North Slope, AK
Sabine Pass, TAX CREDIT
Yamal, Russia]
Qilak LNG Shipping Costs Superior to USGC LNG
? 50% shorter route to Asian markets
? Avoids the Panama Canal fees and bottlenecks
? Long Term geopolitical benefits for Korea, Japan,
Philippines from circumventing passage through
potentially conflicted South China Sea
? Fewer vessels required due to shorter distance
~5,000 miles from Qilak LNG to Asia
~10,000 miles from USGC to Asia
? Capability to ship year-round has been
demonstrated by performance data from Yamal LNG
and shipping simulations
[Slide 16 includes a bar graph comparing the cost of
shipping LNG from Qilak to Asia, 30 percent lower,
with the cost to ship from the US Gulf Coast to Asia.]
MR. TREADWELL highlighted Qilak LNG's competitive position,
noting it was the closest LNG source to Japan, only slightly
closer than Nikiski or Point Thomson, though without the need
for an 800-mile pipeline. He said shipping from Alaska to Tokyo
was therefore highly competitive, and even more advantageous
compared to Gulf Coast LNG, which faced longer routes and Panama
Canal constraints. He also emphasized the broader shift in
global LNG, noting that fracking enabled major export growth
from the Gulf Coast and led to many independent LNG projects
replacing Russian gas in Europe and supplying markets like South
America. He said Qilak's strengths were its favorable cost
placing it firmly in a competitive "sweet spot."
3:57:31 PM
SENATOR DUNBAR asked whether there were currently floating
platforms operating in arctic environments. He referred to the
Merchant Marine Act/Jones Act and asked whether the platform
would be built at an Asian shipyard or in a lower 48 shipyard,
delivered through the Panama Canal.
3:58:06 PM
MR. TREADWELL addressed Senator Dunbar's second question. He
noted that Senator Myers was working on SJR 11 which focused on
Jones Act issues related to Alaska gas. However, he said the
barge and gravity-based structure were not required to conform
to the Jones Act and compared [the floating platform] to other
artificial islands and offshore oil and gas facilities. He
deferred to Mr. Clarke.
3:58:57 PM
MR. CLARKE said two of the three near-shore LNG facilities were
installed in the arctic. He said they produced for a while but
were currently not producing because of the limited supply of
ice-breaking ships.
3:59:24 PM
MR. TREADWELL and Mr. Clarke noted upcoming meetings would
clarify the cost for the required ice-breaking ships, expected
to be around $390 million.
3:59:52 PM
MR. TREADWELL noted that Hanwha, the manufacturer of the ice-
breaking ships, recently purchased a shipyard in Pennsylvania,
which may satisfy Jones Act stipulations. He said the state of
Alaska could help as a partner in the feasibility study by
focusing on two or three core issues on gas to Alaskans.
4:00:30 PM
MR. TREADWELL moved to and narrated slide 18:
[Original punctuation provided.]
Anticipated Project Timeline / Steps
Pre-Construction:
2025: Complete Award pre-FEED
Feasibility Studies pre-FEED Contract
2026 NEPA Filing Award FEED Contract
2027 Complete FEED Continuation of
Detailed Design
2028 Target FID
Construction:
2029 LNG Facility Begins Award Contract for
Construction LNGC and Icebreaker
Construction
2030 LNGC and Icebreaker
Construction
2031 Pipeline Infrastructure
Construction
2032 Complete Pipeline LNG Facility
Infrastructure
Installation
Commissioning LNG Plant Start-Up
First LNG Cargo
(Jan 2033)
4:01:25 PM
MR. TREADWELL moved to slide 19 and deferred to Mr. Clarke for
narration:
[Original punctuation provided.]
Environmental, Social and Corporate Governance
Supplying the developed and developing economies of
Asia with natural gas represents an opportunity to
reduce global carbon emissions
1. Environmental
? Qilak is committed to reducing greenhouse gas
emissions by using gas as a bridge fuel
? Upstream fugitive methane emissions from the
Point Thomson conventional gas field are orders
of magnitude less than from typical L48
unconventional gas fields which supply USGC LNG
projects
? Investors looking to make "green" (sustainable)
investments in LNG should prioritize the Alaskan
Arctic (Qilak) versus the USGC and Western Canada
due to lower global GHG impacts.
? All CO2 removed from feed gas will
2. Social
? Extensive engagement with local stakeholders to
minimize impact on subsidence activities, e.g.,
ongoing dialogue with the Alaska Eskimo Whaling
Commission (AEWC)
? Qilak will maximize local hire during the
engineering, construction and operational phases
and investigate ways to provide affordable fuel
to Alaskan coastal communities
? Project will generate significant tax revenues to
support local communities and for the Alaskan
State
3. Corporate Governance
? Maintenance of Arctic Food Security to native
communities is a core corporate value
? Qilak will provide the opportunity for local
native corporations to invest in the project
? Aspirations to become a leader in sustainable
Arctic shipping
? Currently investigating the Arctic Economic
Council investment protocol and other commitments
to sustainability and inclusion
4:02:56 PM
MR. CLARKE moved to and narrated slide 20:
[Original punctuation provided.]
Qilak North American LNG Project with the
Lowest Greenhouse Gas Emissions
Peer-reviewed scientific analyses have concluded that
the level of methane emissions from the North Slope
are approximately two orders of magnitude less than
from the gas fields that supply the U.S. Gulf Coast
LNG plants.
Production of LNG in the Arctic is up to 31 percent
more efficient than in hot regions (e.g. GOM, Middle
East).
[Slide 20 includes a bar graph and photos illustrating
the: Relative 100-Year Greenhouse Gas Emissions Across
LNG Projects (Kg Co2e/MWh) for:
Chinese Coal (Low Tech)
Chinese Coal (High Tech)
USGC LNG (Shale Gas)
Kitimat LNG (Monteray Shale)
Qilak LNG (Point Thomson)
Upstream Gas/Coal Extraction, Gas Liquefaction,
Tanker/Rail Transport, LNG Regasification, Power Plant
Operations]
4:03:43 PM
MR. TREADWELL commended the Alaska legislature and the governor
for progress on carbon sequestration initiatives and noted that
it was specifically requested by Japan. He highlighted emerging
technologies such as converting captured carbon into graphite
and said Qilak invited some companies to contribute to the
project's feasibility study to explore these options.
4:04:43 PM
MR. TREADWELL moved to slide 22. He explained that LNG from
Point Thomson could potentially be shipped to Nikiski,
seasonally or year-round using an icebreaking tanker, allowing
flexible contracts with Railbelt utilities. He said LNG trading
was common in the global market, so Point Thomson gas delivered
to Nikiski could be backed by swaps with other suppliers if
needed, while still ensuring emergency supply.
4:06:09 PM
MR. TREADWELL advocated that the state study three options:
building a Jones Actcompliant tanker, seeking a Jones Act
waiver, or relying on LNG trades. He said these options matter
not only for railbelt LNG supply but also for potential markets
such as Hawaii, Pacific Islands, and Alaska coastal communities.
He urged updates to the Alaska Energy Authority (AEA's) decade-
old gas-to-communities study and recommended broadening the
scope of SJR 11 to consider all shipping and regulatory
pathways.
4:07:34 PM
MR. TREADWELL highlighted technological advances and flexibility
and said ISO container LNG shipments could support intrastate
distribution, with filling possible at either Point Thomson or
Nikiski. He reported that shipyards in the U.S. and abroad were
exploring ice-capable vessels and suggested that federal
attention to U.S. shipping competitiveness might expand. He
stressed that addressing Jones Act issues was not intended to
challenge labor unions, but to solve the practical problem of
how to move gas to Alaskans by ship:
[Original punctuation provided.]
Gas to Alaskans
Providing an affordable supply of gas to remote
Alaskan communities is a priority for Qilak
Alaska Railbelt:
? Preference is to use LNG produced in Alaska over
foreign LNG from Canada or Mexico
? Three options should be assessed:
? Qilak to build one Jones Act compliant LNGC to
deliver LNG from the North Slope to a
distribution hub (e.g. Nikiski has 3 existing
LNG tanks)
? Obtain a Jones Act waiver to allow Qilak LNGCs
to deliver within Alaska
? Qilak LNG cargo swap with vessels originating
from West Coast ports in Canada or Mexico,
which would eliminate need for Jones Act
compliant vessels
Coastal Communities:
? LNG could be delivered to coastal communities in
ISO containers (filled at Nikiski or offshore
using New Fortress Energy's ISO Flex System)
? Recommend updating AEA's 2014 study
[Slide 22 includes a photo of a barge loaded with ISO
containers.]
4:10:39 PM
MR. TREADWELL moved to slide 23. He said [Qilak] has a
competitive opportunity to bring North Slope gas to market and
cautioned against relying on a single project, [AKLNG]. He
observed that North Slope gas was discovered incidentally and
that high-gas prospects, such as parts of ANWR, won't attract
investment until Alaska solves the challenge of shipping its
gas. He pointed out that, without a solution, the state cannot
benefit from associated royalties and revenues. He emphasized
the need to pursue multiple options, highlighting that the
[Qilak] team was strong and competing in the same global
marketplace as the state-owned [AKLNG]:
[Original punctuation provided.]
Project Summary
Highly competitive opportunity to commercialize
prolific Alaskan gas resource using Near Shore LNG
("NSLNG") technologies
A pioneering approach to moving North Slope gas to
market
? Since 2017, Russia has moved approximately 16.5
million tons per year of LNG from Yamal, year-
round, by icebreaking tanker much of it through
almost daily ship passage of the Bering Strait.
Scalable opportunity through "design one,
build many" philosophy
? Facility expected to export 4 Mtpa of LNG to
customers in East Asia
? No Jones Act restrictions associated with Near
Shore LNG Facility
? Transaction to be structured as equity in Qilak
Post-transaction, Qilak to remain
controlling shareholder
Subsequent capital raise expected to finance
post-FID development
? Qilak ambition is to access and monetize 30+
[trillion cubic feet] Tcf of proved reserves in
North Slope of Alaska (another 100 Tcf of
probable reserves)
Heads of Agreement signed with ExxonMobil to
provide 20-year feed gas supply from Point
Thomson (six-eight Tcf)
Gas supply projected to last well beyond 20
years
Potential for multiple projects to address
broader stranded gas opportunity
20-year project to sell $38Bn in LNG1 with
approximately $5Bn CAPEX and identified
offtake
? Qilak LNG targeting completion by 2032, at a time
where LNG demand is forecasted to exceed current
LNG supply under construction
? Several Downstream projects are under
consideration that would provide Qilak LNG with
access to key growth markets across Asia
4:12:05 PM
MR. TREADWELL moved to and narrated slide 26:
[Original punctuation provided.]
Feedback from Japan from Trump - Ishiba Summit
[Slide 26 includes a photo taken during the summit
captioned, On February 7, Japanese Prime Minister
Shigeru Ishiba met United States President Donald
Trump for the first time at the White House.]
Japanese Prime Minister Ishiba Shigeru and US
President Donald Trump confirmed at their summit that
the US will increase exports of liquefied natural gas
to Japan.
At a news conference after the summit, Trump said,
"Japan will soon begin importing historic new
shipments of clean American liquefied natural gas in
record numbers."
What the Japanese press and institutions are
reporting:
? PM Ishiba: LNG prices from U.S. should be
"reasonable" from the standpoint of Japanese benefit
? Alaska LNG (i.e. AKLNG) exports to Japan will
provide a diversified LNG source, US/Japan energy
security and reduction of Japan-US trade deficit
? LNG will be bought by private companies, taking
account of price, re-sale possibility and extension-
timing of existing contracts
? Inside Japanese government, besides the uncertainty
of Alaska LNG project realization, uneasy voices
have been heard about possibility of high pipeline
cost could put on LNG price, resulting in higher
domestic electricity bills than current level
? High ranking official of METI "LNG buyers who judge
on LNG procurement have to focus on whether price of
Alaska LNG can be cheaper than other competing LNG
projects." and the review of Alaska LNG at Japan
side will be paying close attentions on how such
commercial issues as price and re-sale possibility
could meet Japan's needs.
4:13:20 PM
MR. TREADWELL moved to slide 26. He noted past examples where
high-level engagement, Reagan and Nakasone [Japan], Trump and
Walker, advanced Alaska natural gas discussions. He said Asian
buyers' interest in direct-export LNG options from Alaska helped
motivate the Qilak project. He said Qilak:
[Original punctuation provided.]
It is reasonable to think that follow-up to the summit
will consider multiple Alaska LNG projects
Qilak LNG has urged Asian customers to study both LNG
options from Alaska. There are several scenarios
? A Japan working group (WG) scenario: to be
established by METI (Ministry of Economy, Trade
and Industry) and managed by JOGMEC (Japan
Organization for Metals and Energy Security).
Analyze respective economics of all options
(geology, CCS, GBS and pipeline etc.)
? The WG would report to the Director, Resources
Development Dept at METI) who may interview
potential Japanese investors/buyers (to check
their interest in investment in upstream/LNG
plant (tolling)/pipeline and LNG off-take)
? U.S/Japan joint WG might be set up depending upon
the progress of such WG activity in Japan and
possibly triggered by METI Minister (Muto) to
U.S./Alaska
? All options for exporting LNG from Alaska could
be reviewed (AKLNG and Qilak LNG)
? Duration of WG review is currently unknown
(unlikely to be concluded in 2025)
Korea US working group
? South Korea and the US have agreed to establish a
working-level group to discuss a gas pipeline
project in Alaska, energy, shipbuilding, tariffs
and non-tariff barriers, South Korea's Industry
Minister Ahn Duk-geun said on March 4th, 2025
MR. TREADWELL encouraged Alaska leaders to attend an
upcoming LNG conference in Japan, because Alaska has large
gas resources and multiple viable export routes.
4:15:42 PM
SENATOR WIELECHOWSKI arrived.
4:16:07 PM
MR. TREADWELL moved to and narrated slide 27:
[Original punctuation provided.]
Way Forward
Key benefits of completion of Feasibility Study
1. Tie down costs and economic viability and
profitability of project, including projections
for Alaska revenues from royalties, taxes.
2. Fulfill commitment to ExxonMobil/Point Thomson
Unit and complete gas sales and operational
procedures with them necessary to work together
on project
3. Obtain commitments for LNG offtake from Asian
buyers
4. Bring in partners for next phase of project
5. Have essential project description and data
needed to begin permitting process
What does Qilak LNG seek in the market?
1. LNG Market is still growing, but customers want
small order quantities; our size is good
2. Strategic and financial partners ready to join
but de-risking with Feasibility Study and Permits
is issue
3. 25 percent of Qilak LNG can meet Alaska's needs
Qilak LNG is a viable option for coastal Alaska
MR. TREADWELL summarized that [AKLNG] was working to de-risk
their project by reducing costs and the [Qilak] project sought
to de-risk their project through permitting. He reiterated hope
that the state would support both projects.
4:17:10 PM
MR. TREADWELL moved to and narrated slide 28:
[Original punctuation provided.]
What can the State of Alaska do to help?
Support Federal Permitting Path:
? Offshore permitting path with MARAD/BOEM may
require Executive Order, Legislation, or Lawsuit
? Obtain DOE export licenses; license already
granted for Pt Thomson gas export for various
projects
Reiterate State Support in the Marketplace:
? Governor has said State of Alaska supports both
projects
? Qilak LNG founded as markets pushed back on AKLNG
in first Trump Administration
? Backstop de-risking for all projects, if for one
? An AEA study re-do on Gas to Alaskans study could
be State participation in QilakLNG feasibility
study (SJR 11)
Summary:
Don't put all Alaska's eggs in one basket.
(US Gulf states and Western Canada have multiple LNG
projects, too)
4:19:18 PM
CHAIR GIESSEL thanked the presenters.
SB 112-OIL & GAS PRODUCTION TAX
4:19:30 PM
CHAIR GIESSEL announced the consideration of SENATE BILL NO. 112
"An Act relating to credits against the oil and gas production
tax; and providing for an effective date."
4:19:56 PM
CHAIR GIESSEL solicited a motion.
4:20:08 PM
SENATOR WIELECHOWSKI moved to adopt the committee substitute
(CS) for SB 112 work order 34-LS0566\I, as the working document.
4:20:19 PM
CHAIR GIESSEL objected for purposes of discussion.
4:20:25 PM
SENATOR WIELECHOWSKI explained that Senate Bill 21, 2013,
originally proposed a 25 percent oil tax rate with no credits,
but the Senate raised it to a 35 percent rate with a $5 per-
barrel credit. The House later increased the credit to $8 per
barrel. Modeling at the time assumed unrealistically high oil
prices, and the larger credit has since cost the state about
$8.9 billion. He said SB 112 sought to return the per-barrel
credit cap from $8 back to $5, matching the Senate's original
version. Prior testimony from the Department of Revenue
indicated that a $5 cap would keep producers competitive, and
former Commissioner Lucinda Mahoney noted that the governor
would support this change if the legislature did as well. The
proposed adjustment is expected to generate $100$180 million in
additional annual revenue.
4:23:38 PM
HUNTER LOTTSFELDT, Staff, Senator Bill Wielechowski, Alaska
State Legislature, Juneau, Alaska, presented the summary of
changes for CS 112, version I:
[Original punctuation provided.]
Senate Bill 112
Oil & Gas Production Tax
Summary of Changes
34-LS0566\N to 34-LS0566\I
Section 2. On page 3, lines 4-5, Amends AS
43.55.024(j):
Adds in a final $0 per-barrel credit tier for
when the gross value of a taxable barrel of oil
is at or above $120.
4:24:15 PM
CHAIR GIESSEL removed her objection.
4:24:25 PM
CHAIR GIESSEL found no further objection and CSSB 112 was
adopted as the working document.
4:24:35 PM
MR. LOTTSFELDT provided the sectional analysis for CSSB 112,
version I:
[Original punctuation provided.]
Senate Bill 112
Oil & Gas Production Tax
Sectional Analysis for Version I
Section 1. Amends AS 43.55.024(i):
Adds language to conform to the new subsection (k)
under section 3 limiting the application of the $5
per-barrel credit for new fields receiving a gross
value reduction.
Section 2. Amends AS 43.55.024(j):
Adds both conforming language for subsection (k) under
section 3 and reduces the per-barrel credit slider
from an $8 to $1 slider to a $5 to $1 slider.
Section 3. Adds a new subsection (k) to AS 43.55.024:
This new subsection will tie the amount of per-barrel
credits a producer may claim to the amount of
qualified capital expenses that producer incurs on
their property or leases. Limits a producer's ability
to carry forward unused per-barrel credits.
Section 4. Adds an applicability section:
This Act applies to credits from oil production on or
after January 1, 2025.
Section 5. Adds a new uncodified law section:
This section addresses the transition of tax payments
under this Act.
Section 6. Adds a new section of uncodified law:
This section addresses the Department of Revenues
ability to make regulations retroactive.
Section 7. Adds a new section of uncodified law:
Sets a retroactive date of January 1, 2025.
Section 8. Sets an immediate effective date.
4:26:15 PM
SENATOR MYERS asked for an explanation of the mathematical
formula and its effects in Section 3.
4:26:38 PM
MR. LOTTSFELDT said the intent of Section 3 was to tie the
amount of per-barrel credit a producer receives for barrels
produced each year to capital expenditures in that same year.
4:27:26 PM
SENATOR MYERS noted terminology used by Department of Natural
Resources (DNR) and the oil companies, specifically:
? unit
? lease
? participating area
SENATOR MYERS asked for clarification of the terms and which of
them were addressed by SB 112, Section 3 as "each lease or
property".
4:28:26 PM
MR. LOTTSFELDT said "lease" or "property holding" in Section 3
applied to the [specific] producer. He noted that there were
individual leases and participation by multiple producers in one
unit, as in Prudhoe Bay. He said the intent was to encompass the
range of holdings a producer may have.
4:29:05 PM
SENATOR MYERS asked whether SB 112 would require the Department
of Revenue to calculate taxes at the level of each small,
individual lease rather than at the broader unit level (e.g.,
Prudhoe Bay, Kuparuk, Endicott). He noted that leases started
out small and were later combined into units. He asked whether
the intent was to separate tax reporting for every individual
lease within those units.
4:30:03 PM
CHAIR GIESSEL suggested that experts available online may be
able to answer Senator Myers's questions.
4:30:56 PM
MARK MYERS, representing self, Fairbanks, Alaska, explained that
ownership of oil was tied to individual leases, but production
occurred from a shared pool of oil. All leases overlying that
pool were grouped into a participating area within a larger
unit. Units were typically bigger than the proven reservoir to
allow for expansion. Production and costs were allocated back to
each lease through this unitization process. He opined that
using "lease" in the language for SB 112 was appropriate, as
production and costs were allocated to the lease level.
4:31:59 PM
SENATOR MYERS asked for confirmation that the "lease or
property" language in SB 112, Section 3, would not require the
Department of Revenue to track taxes at the individual lease
level, and that the Department of Revenue (DOR) can continue
tracking at the unit level instead.
4:32:37 PM
MR. MYERS explained that allocation to individual leases was
already handled through established processes. As a field
developed and boundaries changed, producers continually
recalculated and agreed on each lease's equitable share of
production. He noted that the state participated in setting the
participating area, which determined unit size. He explained
that all oil was produced through shared facilities, and
allocations ensured every lessee received their fair share. He
said the value per barrel was allocated back to each individual
lease in an orderly, existing system.
4:33:43 PM
SENATOR DUNBAR asked how SB 112, Section 3, would change
practices for producers on the North Slope from the way they
operate currently.
4:34:47 PM
MR. MYERS said he did not think it was different in terms of the
way barrels and costs per barrel were allocated. He said the
change was to limit the amount of credit a producer can claim
based on the amount of capital.
4:35:17 PM
SENATOR WIELECHOWSKI said SB 112, Section 3, ensured that
companies would not receive more in tax credits than the amount
they spend on qualified capital expenditures. He said for
example that if a company spent $100 million in Prudhoe Bay, its
tax credits could not exceed $100 million. He emphasized that
the goal of SB 112, Section 3 was to encourage investment while
preventing credits from surpassing real spending. He noted that
in practice, the change would have a minimal effect because
companies generally did not receive credits above their
expenditures.
4:36:26 PM
SENATOR DUNBAR asked for confirmation that SB 112 applied to
capital expenditures in producing fields and not to fields in
development, like the Willow project.
SENATOR WIELECHOWSKI concurred and explained that the language
[of SB 112, Section 3] limits a producer's tax credits to no
more than the qualified capital expenditures for that specific
lease or property. He said a producer could not apply credits
that exceed what they spent on that property.
4:37:01 PM
SENATOR CLAMAN asked whether, under the language of SB 112,
Section 3, any unused portion of the capital-expenditure-based
tax credit disappeared at the end of the calendar year. For
example: if a producer has $300 million in qualified capital
expenditures but only $200 million of tax liability to apply
credits against, would the remaining $100 million in credits be
forfeited, since the subsection says unused credits may not be
carried forward.
4:37:57 PM
SENATOR WIELECHOWSKI affirmed that the credit could not be
carried forward.
4:38:02 PM
SENATOR CLAMAN asked how that differed from today.
4:38:09 PM
SENATOR WIELECHOWSKI said the impact of SB 112 would be minimal.
He said the presentation included ten-year future modeling by
Department of Natural Resources (DNR).
4:38:28 PM
SENATOR CLAMAN clarified his hypothetical example: If a producer
had $300 million in credits but can only use $200 million in the
first year, under current law the remaining $100 million could
be carried forward and used the next year. His question was
whether SB 112 would change that, meaning the extra $100 million
would no longer be usable in year two.
4:38:54 PM
SENATOR WIELECHOWSKI explained that two separate mechanisms were
involved:
? Carry-forward of lease expenditure deductions
? Carry-forward of the per-barrel tax credit
SENATOR WIELECHOWSKI said SB 112 would affect only the per-
barrel credit, limiting the ability to carry it forward. SB 112
would not affect companies' ability to carry forward lease
expenditure deductions. DOR's modeling suggested the overall
impact of this change over the next decade to be minimal.
4:39:51 PM
MR. LOTTSFELDT moved to slide 2. He explained that there were
currently two types of per-barrel production tax credits:
? A flat $5 credit for new production fields that qualified for
a gross value reduction (GVR).
? A sliding per-barrel credit that provided $8 when oil is $80
or less, then gradually decreased as oil prices rose, dropping
to $1 at $140$150, and becoming zero above $150.
MR. LOTTSFELDT explained that the sliding credit was a form of
reverse progressivity, designed to offer more support when oil
prices were low and less when prices were high and production
more profitable.
[Original punctuation provided.]
Where we currently are:
Current Law: The State of Alaska's major North Slope
production fields receive a credit per-barrel of
taxable oil. The amount of that credit is based on the
sliding scale of average gross wellhead value.
$8/barrel at less than $80;
$7/barrel at $80 to less than $90;
$6/barrel at $90 to less than $100;
$5/barrel at $100 to less than $110;
$4/barrel at $110 to less than $120;
$3/barrel at $120 to less than $130;
$2/barrel at $130 to less than $140;
$1/barrel at $140 to less than $150;
$0/barrel at $150
4:40:55 PM
MR. LOTTSFELDT moved to and narrated slide 3:
[Original punctuation provided.]
Where did Per-Barrel Credits come from?
? SB 21, from 2013, the "More Alaska Production Act"
(MAPA), was introduced with no per-barrel credits.
? A flat $5 per-barrel credit was added by the Senate
before passing the body. This version of SB 21 was
supported not only by the Senate, but the Governor
and Industry as well.
? The House made the flat $5 per-barrel credit apply
to new fields. The House then added a sliding scale
per-barrel credit that went $8 to $1 for oil prices
$80 and below, up to $150 and below.
4:41:57 PM
MR. LOTTSFELDT moved to slide 4. He emphasized that the price of
oil was much lower in reality than had been modeled for Senate
Bill 21, 2013:
[Original punctuation provided.]
There was little time to consider these changes
? SB 21 was sent back from the House with these new
per-barrel credits the day before adjournment.
? The Senate on the last day of session voted to
concur with the changes made by the House.
? The new per-barrel credits were modeled on a
forecast average Alaska North Slope ($ANS) price of
$106.2, the real average price over the same period
was $61.1.
4:44:18 PM
MR. LOTTSFELDT moved to and narrated slide 6:
[Original punctuation provided.]
Chapter 8
4
Historical Production Tax Credits and Forecast
FY 2015 - FY 2034
Since 2014 Alaska has lost $8.6 billion to per-barrel
credits
[Slide 6 contains a table of various tax credits for
the oil and gas industry from FY 2015 through FY 2024,
highlighting the per taxable barrel credit, AS
43.55.024(i)-(j).]
Source: 2024 Fall Revenue Sources Book
4:44:28 PM
MR. LOTTSFELDT moved to and narrated slide 7:
[Original punctuation provided.]
Chapter 8
4
Historical Production Tax Credits and Forecast
FY 2015 - FY 2034
The State of Alaska is projected to give out another
$6.5 billion in the next 8 years.
[Slide 6 contains a table of various tax credits for
the oil and gas industry from FY 2025 through FY 2034,
highlighting the per taxable barrel credit, AS
43.55.024(i)-(j).]
Source: 2024 Fall Revenue Sources Book
4:44:40 PM
SENATOR MYERS recounted a past conversation where someone
involved in creating the per-barrel credits explained that they
were designed to introduce progressivity into Senate Bill 21,
like Alaska's Clear and Equitable Share (ACES) used a
progressive tax rate that increased by small increments, for
example, a quarter-percent, as prices rose. He asked whether the
state was now saying it lost money because of per-barrel credits
under Senate Bill 21, and if that implied the state would also
have lost money under ACES, which used a different but still
lower level of progressivity and a lower tax rate?
4:45:39 PM
MR. LOTTSFELDT said forego may be a better term than lost. He
explained that the state was foregoing revenue.
4:46:06 PM
MR. LOTTSFELDT moved to and narrated slide 8. He pointed out
that between 2016 and 2021 the production tax revenue was less
than the amount of incentive the state was giving in per barrel
credits:
[Original punctuation provided.]
History of production tax revenue vs. per-barrel
credits
[Slide 8 contains a line graph comparing revenue to
the State of Alaska through Production Tax vs Per-
Barrel Credits.]
Sources: 2024 Spring Forecast & 2024 Fall Revenue
Sources Book
4:46:36 PM
MR. LOTTSFELDT moved to and narrated slide 9:
[Original punctuation provided.]
Per-Barrel Credits Have Not Incentivized Investment on
the North Slope: Expenditures
[Slide 9 includes a table illustrating Qualified
Capital Expenditures for the Prudhoe Bay Unit and for
all other Alaska North Slope (ANS) producers.]
Source: DOR Reported ANS Lease Expenditures and
Capital Lease Expenditures: CY 2014 CY 2023 & DOR's
response to SRES 3.3.25
4:46:59 PM
SENATOR MYERS noted apparent contradiction in how the per-barrel
credits were being described. They're said to provide tax
progressivity, yet also said to incentivize investment, two
purposes that don't obviously align. If, in 2013 [Senate Bill
21], the credits were primarily intended to make the system
progressive, then SB 21 already had separate provisions designed
to encourage new development through allowable lease
expenditures. He asked why it mattered now whether the per-
barrel credits incentivized investment, if their original
purpose was progressivity rather than investment.
4:47:47 PM
MR. LOTTSFELDT clarified that the per-barrel credit was not
traditional progressivity but reverse progressivityproviding
more benefit at lower oil prices to incentivize production and
maintain jobs.
4:48:40 PM
SENATOR MYERS asked whether the intent under the previous Alaska
Clear and Equitable Share (ACES) was also to incentivize
production.
4:48:57 PM
MR. LOTTSFELDT said he would follow up when he could provide an
accurate answer.
4:49:07 PM
CHAIR GIESSEL noted that the legislature's intent to support new
[oil and gas] development and gross value reduction was designed
to incentivize new oil development on the North Slope, offering
temporary reductions based on price. She suggested that expert
testimony was available to explain and answer questions.
SENATOR MYERS affirmed that he would appreciate the opportunity
for explanation questions when appropriate.
4:49:59 PM
MR. LOTTSFELDT moved to and narrated slide 10, Per-Barrel
Credits Have Not Incentivized Investment on the North Slope:
Credits. He highlights that in 2021, Prudhoe Bay received an
estimated $448 million in per-barrel credits but only spent $106
million on qualified capital expenditures, showing a significant
gap between credits received and actual investment.
4:51:14 PM
SENATOR DUNBAR observed that there appeared to be no clear
correlation between the credits collected and capital spending
in Prudhoe Bay.
MR. LOTTSFELDT affirmed that credits and capital expenditures
appeared unrelated.
4:51:43 PM
SENATOR DUNBAR asked whether any regression analysis had been
done to determine how much additional production or capital
spending is generated per dollar of tax credit, such as
increasing the credit cap from $8 to $9.
4:52:31 PM
DAN STICKEL, Chief Economist, Tax Division, Department of
Revenue (DOR), Juneau, Alaska, said no such analysis had been
done because predicting how taxpayers will react to tax changes
was extremely difficult. He acknowledged that changes in per-
barrel credits may influence tax-payer decisions, but the
Department of Revenue does not try to estimate the exact impact
on investment or production.
4:53:29 PM
SENATOR DUNBAR said his question might be 12 years too late. He
reflected that it seemed odd to create incentives without
knowing their impact. He acknowledged the complexity but noted
that the policy involved hundreds of millions of dollars. He
added the wish that such analysis had been done earlier, and
hoped some modeling existed at the time.
4:53:58 PM
SENATOR HUGHES noted a claim by former Department of Revenue
(DOR) Commissioner Brian Fechter that changing the credit from
$8 to $5 wouldn't affect investment. She noted the claim did not
appear to be based on any documented analysis. She asked whether
any written modeling or supporting materials existed and, if so,
requested that they be provided to the committee.5
4:54:39 PM
MR. STICKLE said he could not speak to past officials'
statements and acknowledged that while the Department of Revenue
had done various analyses and hired consultants over the years,
he didn't know what specific analysis Deputy Commissioner
Fechter relied on when making his claim.
4:55:09 PM
SENATOR HUGHES noted that if any analysis existed, DOR should
still have it. Since no written work appeared to exist, she
asked whether DOR could confidently say the credit change would
not affect production, revenue, or royalties.
4:55:38 PM
MR. STICKLE said he would not say with certainty that a tax
change would not impact production. He referred to the fiscal
note from the Department of Revenue (DOR), OMB Component Number
2476, dated March 7, 2025. He said it was an indeterminate
fiscal note in part because SB 112 would be expected to impact
taxpayer behavior.
4:56:11 PM
SENATOR WIELECHOWSKI asked Mr. Stickle or another expert
available online to explain the lessee's legal duty to produce
oil in Alaska, specifically the obligations required when a
company holds a state lease.
4:56:31 PM
MR. STICKLE deferred to Department of Natural Resources (DNR).
4:56:40 PM
CHAIR GIESSEL noted that there was not a DNR representative
available online. She said there would be more hearings on SB
112 with representation from DNR as well as documentation and
modeling from past policy decisions.
4:57:21 PM
MR. LOTTSFELDT resumed the presentation on SB 112, speaking to
slide 10. He pointed out that in 2021, Prudhoe Bay producers
received about $448 million in credits but spent only $106
million on qualified capital costs, and SB 112, Section 3, aimed
to narrow that gap.
4:57:51 PM
SENATOR HUGHES noted that Covid-19 may have affected production
in 2021.
MR. LOTTSFELDT acknowledged her observation.
4:58:16 PM
MR. LOTTSFELDT moved to slide 11. He quoted former Alaska
governor Jay Hammond:
[Original punctuation provided.]
"Development that actually costs the state remains
Alaska's least understood and most pressing economic
problem. Few politicians seem concerned that we do not
extract enough wealth from new resource development to
offset its costs."
-Governor Jay Hammond
[Slide 11 includes a photograph of Governor Hammond.]
4:58:50 PM
SENATOR MYERS asked whether the per-barrel tax credits resulted
in foregone state revenue so large that it failed to cover state
costs such as Department of Natural Resources (DNR) and
Department of Environmental Conservation (DEC) oversight, and
Department of Transportation and Public Facilities (DOTPF)
maintenance of the Deadhorse airport and the Haul Road.
4:59:25 PM
SENATOR WIELECHOWSKI answered that Alaska's current tax
structure [under Senate Bill 21] resulted in three consecutive
years of effectively negative oil taxes, meaning the state paid
companies more in credits than it collected in taxes. He argued
that this fails the constitutional requirement to obtain maximum
value from the state's resources. He noted that oil once funded
90 percent of Alaska's budget but currently funded only about 30
percent. He likened it to an employee volunteering for a salary
cut from $90,000 to $30,000 and then struggling to pay bills,
asserting that Senate Bill 21 massively reduced revenue and
harmed the state's fiscal position.
5:00:42 PM
SENATOR MYERS asserted that a wholistic conversation would be
necessary to consider not only the severance tax, but also
royalties and other revenue the state received from oil
companies.
5:01:00 PM
SENATOR WIELECHOWSKI concurred and emphasized that one of the
largest producers on the North Slope was currently paying zero
corporate income taxes and there should be continued hearings on
that.
5:01:15 PM
CHAIR GIESSEL referred to the graph on slide 8. She pointed out
that during 20212024, the four dollar-per-barrel minimum tax
was crucial for the state, especially when oil prices briefly
went negative during COVID. She said that the minimum tax
essentially "saved" the state's bacon in those years.
5:01:54 PM
MR. LOTTSFELDT moved to and narrated slide 12:
[Original punctuation provided.]
What SB 112 does
SB 112 reduces the sliding-scale per-barrel credit by
$3 and ties credits received to the amount of capital
investment by the producer:
? Sliding per-barrel credits vary between $5 for
oil priced at $80 or less and $1 for oil priced
at $120 or less, and $0 thereafter.
? Producers may only claim credits commensurate
with their qualified capital expenses from the
same year.
The new investment caveat encourages investment
spending on projects in Alaska that will maintain
production, create jobs for Alaskans, and promote
industry growth.
5:02:59 PM
MR. LOTTSFELDT moved to slide 13, How much does SB 112 raise? He
said the table in slide 13 contained modeling for SB 112 by DOR
for fiscal years 2026 through 2035:
? Row 1: projected revenue gain from the three-dollar credit
reduction.
? Row 2: projected revenue with unchanged credit amount; but
linking credits to qualified capital spending (SB 112, Section
3).
? Row 3: Combining both changes, projected to bring in about
$190 million in FY26, tapering to about $100 million by FY35.
5:04:20 PM
CHAIR GIESSEL held SB 112 in committee.
5:04:44 PM
There being no further business to come before the committee,
Chair Giessel adjourned the Senate Resources Standing Committee
meeting at 5:04 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| 2025.03.11 DOR-TAX Fiscal Note.pdf |
SRES 3/12/2025 3:30:00 PM |
SB 112 |
| 2025.03.11 SB 112 Presentation Version I.pdf |
SRES 3/12/2025 3:30:00 PM |
SB 112 |
| CSSB112B 2025.03.05.pdf |
SRES 3/12/2025 3:30:00 PM |
SB 112 |
| SB 112 Sectional Anaslyis Version I.pdf |
SRES 3/12/2025 3:30:00 PM |
SB 112 |
| SB 112 Sponsor Statement Version I.pdf |
SRES 3/12/2025 3:30:00 PM |
SB 112 |
| SB 112 Summary of Changes Version N to Version I.pdf |
SRES 3/12/2025 3:30:00 PM |
SB 112 |
| SB112A 2025.03.05.pdf |
SRES 3/12/2025 3:30:00 PM |
SB 112 |
| 2025.03.12 QilakLNG Presentation to Senate Resources Committee.pdf |
SRES 3/12/2025 3:30:00 PM |