03/27/1995 03:40 PM Senate RES

 SRES - 3/27/95                                                                
                                                                               
               SB 112 DISCOVERY ROYALTY CREDIT                               
 CHAIRMAN LEMAN brought up SB 112 as the first order of business               
 before the Senate Resources Committee.  The chairman stated it is             
 the intent of the committee to take testimony on SB 112 and hold              
 the bill for further work.  The chairman called the first witness.            
                                                                               
 KEVIN TABLER, Manager, Union Oil Company, testifying from                     
 Anchorage, thanked the committee for working on this legislation.             
 Mr. Tabler thinks SB 112 has merit.  He brought the committee's               
 attention to page 3, line 23, and asked the committee to look at              
 the definition of "geologic structure."  On page 3, line 24, Union            
 Oil thinks the language "of production" should be inserted after            
 the word "years."                                                             
                                                                               
 Number 094                                                                    
                                                                               
 CHAIRMAN LEMAN responded it is the intent of the committee to                 
 encourage a faster production.  He is not sure that encouragement             
 would be there if the language "of production" was inserted on page         
 3, line 24.  However, he recognizes that delays out of the control            
 of oil companies can occur, so the committee will consider that               
 suggestion.  The chairman asked Mr. Tabler if he has any specific             
 comments about further defining "first discoveries."                          
                                                                               
 Number 106                                                                    
                                                                               
 MR. TABLER replied he does not have any further specific comments             
 at this time.                                                                 
                                                                               
 CHAIRMAN LEMAN asked Mr. Tabler to contact the committee if he                
 comes up with any further suggestions.                                        
                                                                               
 SENATOR TAYLOR asked Mr. Tabler to explain why he would like to see           
 the language, "of production" added on page 3, line 24.                     
                                                                               
 MR. TABLER responded there may be delays between first discovery              
 and the point of first production.                                            
                                                                               
 Number 124                                                                    
                                                                               
 KEN BOYD, Acting Director, Division of Oil & Gas, Department of               
 Natural Resources, testifying from Anchorage, recommended that the            
 commercial standard be separated from the exploratory standard.  It           
 needs to be made clear that discovery means just that.  Another               
 issue already touched on regards geologic structures.  Scale of               
 geologic structure needs to be further defined.  There is not a               
 good definition of geologic structure.  Mr. Boyd thinks it would be           
 better to separate the distinct hydrocarbon accumulations.  He                
 would be glad to work with the committee on developing those                  
 definitions.  His last concern is that the bill not give a royalty            
 reduction to all production on a lease, but just to the new                 
 discoveries on a lease.                                                       
                                                                               
 CHAIRMAN LEMAN noted that the committee would be working with Mr.             
 Boyd on clarification of language in SB 112.  The chairman asked if           
 anyone else wished to testify.                                                
                                                                               
 Number 193                                                                    
                                                                               
 SENATOR HALFORD asked if there is anything in SB 112 clarifying               
 that the Alaska Oil & Gas Conservation Commission (AOGCC) will                
 still be able deal with the rate of production, if that is contrary           
 to the long-term maximum yield of a field.                                    
                                                                               
 CHAIRMAN LEMAN commented that was a good question.  He asked if               
 anyone from the AOGCC was on-line in Anchorage and could testify              
 regarding that question.  The chairman asked Mr. Boyd if he could             
 respond to that question.                                                     
                                                                               
 MR. BOYD does not believe that would be a problem.  He thinks the             
 AOGCC would continue to have authority over all those issues.  He             
 doesn't thinks any company would rush to damage the formation.  Mr.           
 Boyd thinks Mr. Tabler's point regarding lead-time before                     
 production is of more concern.  He thinks the AOGCC would have                
 complete authority over the concern raised by Senator Halford.                
                                                                               
 SENATOR HALFORD just wanted to make clear that the AOGCC would                
 still have the authority to handle such a problem.                            
                                                                               
 CHAIRMAN LEMAN, hearing no further testimony or questions,                    
 announced that SB 112 would be held.  SB 112 will be taken up again           
 sometime after April 5, 1995.