03/27/1996 09:15 AM Senate FIN

                                                                               
       SENATE BILL NO. 112                                                     
       "An Act establishing a discovery royalty credit for the                 
       lessees of  state land  drilling exploratory  wells and                 
  making    the first discovery  of oil  or gas in  commercial                 
  quantities."                                                                 
                                                                               
  Co-chairman  Halford said  there was  a  question on  SB 112                 
  regarding any  cumulative effect  and Senator  Leman's staff                 
  was present  to answer  any questions.   Also  Ken Boyd  via                 
  teleconference.                                                              
                                                                               
  Annette Kreitzer, staff aide to  Senate Resources Committee,                 
  said she  was not aware of any cumulative effect in the bill                 
  that would allow  for a floor lower  than the 5% that  is in                 
  the bill.  That is what the intent was.                                      
                                                                               
  Ken Boyd, Director, Division  of Oil & Gas said  that within                 
  the bill itself there was no opportunity to go below 5%.  He                 
  did explain that if one were granted discovery royalties for                 
  ten years  and the bill  provides for  5%, at some  point in                 
  time of the  life of  the field,  even though  there is  the                 
  discovery royalty provision, one could apply under HB 207 to                 
  go to a  floor of 3%.   But that is as  low as it would  go.                 
  Senator  Sharp  said  that  would  have  to  be  a  separate                 
  application with separate  approval and justification.   Mr.                 
  Boyd concurred.  Senator Rieger asked about the leases under                 
  the  old  discovery royalty  credits  provisions.   Mr. Boyd                 
  advised that the  discovery royalty provision came  from the                 
  Federal law  when Alaska  became a  state and  from 1959  on                 
  lease issues  had discovery royalty provisions.  The law was                 
  repealed  in 1969  just prior  to lease  sale 23.   All  the                 
  leases that were in effect during this time have a discovery                 
  royalty provision.                                                           
                                                                               
  Senator Sharp moved CSSB 112(RES)  and without objection the                 
  bill was  reported out  with individual  recommendations and                 
  previous  fiscal   note  from  the   Department  of  Natural                 
  Resources $91.0.                                                             
                                                                               
  ADJOURNMENT                                                                  
                                                                               
  Co-chairman Halford recessed the meeting at 11:10 a.m. until                 
  1:30 p.m. today pending availability of a quorum.