Legislature(2023 - 2024)BUTROVICH 205
05/09/2024 02:00 PM Senate RESOURCES
Note: the audio ![]()
and video ![]()
recordings are distinct records and are obtained from different sources. As such there may be key differences between the two. The audio recordings are captured by our records offices as the official record of the meeting and will have more accurate timestamps. Use the icons to switch between them.
| Audio | Topic |
|---|---|
| Start | |
| SB194 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 194 | TELECONFERENCED | |
SB 194-REDUCE ROYALTY ON COOK INLET OIL & GAS
2:01:37 PM
CO-CHAIR GIESSEL announced the consideration of SENATE BILL NO.
194 "An Act relating to temporarily reduced royalty on oil and
gas from pools without previous commercial sales in the Cook
Inlet sedimentary basin; and providing for an effective date."
CO-CHAIR GIESSEL stated the committee would continue its
discussion from [May 8, 2024] on SB 194. She said it is the
intent of the committee to finish hearing a presentation from
GaffneyCline, revisit amendments, and move SB 194 from
committee.
2:02:54 PM
NICHOLAS FULFORD, Senior Director, Gas and Energy Transition,
GaffneyCline, Houston, Texas, presented Gaffney Modeling on SB
194. He stated that on May 8, 2024, the committee concluded
discussion with a series of financial projections based on a
model developed by GaffneyCline. He said the model focused on a
potential new gas development in Cook Inlet and included
scenarios involving royalty relief for 10 years and
indefinitely. He noted that, at the committee's request, he
worked with the Department of Natural Resources (DNR) to
reconcile the models. He intended to present an illustrative
case to assist the committee in forming its recommendations:
[Original punctuation provided.]
Model Reconciliation
Model structure and methodology
o Mechanics and methodology is consistent.
o Small property tax modification was made to GC
model to reflect typical DNR modelling approach
o Since DNR is using monthly profiles and the GC
model is based on annual, some difference remain
in NPV/IRR but we believe conclusions are broadly
aligned.
o GC model does not yet reflect waterfall royalty
concept option
Assumptions:
o GC/DNR have reconciled their assumptions about
utilization factor (differences between actual
daily nomination and max production) and agreed a
factor for the model
o GC's cost estimation arises from an industry
standard, detailed costing tool, updated regularly
and with location specific factors. DNR have
focused more on specific project opportunities in
the public domain. In general GC suggests higher
capex and opex than the assumptions used by DNR
o GC model also has an assumption for Abandonment
CAPEX, though this does not materially influence
results.
Oil
o GC model does not yet reflect oil scenarios, but
we have assessed the DNR approach to oil modelling
and agree with the methodology
With these features reconciled, we have focused on
two scenarios, a 250bcf offshore new gas development
tied back to onshore, using a "base case" and a
"downside case" which involves a lower utilization
rate, and higher capex/opex
MR. FULFORD stated that the modeling conclusions reached were
based on consistent methods between GaffneyCline and the
Department of Natural Resources (DNR). He noted that a small
adjustment was made to the property tax modeling and the gas
decline model to align with DNR practices in Alaska. He
explained that differences remained, such as GaffneyCline's
model using annual intervals while DNR's operates monthly,
causing minor phasing issues. He also mentioned that their model
does not yet incorporate a proposed royalty waterfall and that
both parties agreed to include a utilization factor to account
for storage efficiencies and daily production.
2:05:16 PM
MR. FULFORD said the other main difference was that GaffneyCline
used a sophisticated, industry-standard cost estimation modeling
approach that includes detailed inputs such as platform weights
and drill depths. He noted the model is updated quarterly,
making it relatively current. This approach formed the basis for
their economic modeling assumptions and development concepts. He
stated that, in general, the capital expenditures (Capex) and
operating expenses (Opex) produced by their model were somewhat
higher than those used by DNR, which tended to depress the
economics. He said another feature, though relatively minor, was
the inclusion of abandonment Capex, which investors typically
factor into models and is becoming increasingly important,
especially in Cook Inlet. He reminded the committee that
[GaffneyCline's] modeling does not yet include the oil scenarios
analyzed by DNR. However, he confirmed that they reviewed DNR's
methodology and process and found them sound. Based on DNR's
assumptions, he stated support for the figures DNR presented.
2:06:51 PM
MR. FULFORD moved to slide 3:
[Original punctuation provided.]
Model Output for 250bcf Base Case (10 year relief)
Base Case
[Left side of slide]
Royalty Relief Case NPV10 IRR COP Payback
Gas12.5 percent 81 18 percent 2046 8
Gas0 percent 176 26 percent 2046 6
Gas5 percent 138 23 percent 2046 7
Gas6.25 percent 128 22 percent 2046 7
Downside Case
[Right side of slide]
Royalty Relief Case NPV10 IRR COP Payback
Gas12.5 percent -34 7 percent 2045 11
Gas0 percent - 56 15 percent 2045 9
Gas5 percent - 20 12 percent 2045 9
Gas6.25 percent 11 11 percent 2045 9
MR. FULFORD said he developed two scenarios for the committee's
review. The left scenario represents the base case economics for
a 250 billion cubic feet (BCF) Cook Inlet gas development, using
assumptions aligned with potential investments discussed by
producers. He described it as reflecting best-estimate capital
and operating costs and an efficient production regime with
minor limitations. The right scenario reflects a downside case,
accounting for risks such as aged infrastructure, slot
reclamation, and tie-in tariffs for existing facilities, which
could significantly affect project economics. He emphasized that
investors may prioritize this downside scenario when evaluating
capital deployment due to associated risks discussed in the
previous meeting.
MR. FULFORD stated that under the base case scenario with the
current gas royalty rate, the project yields an internal rate of
return (IRR) of approximately 18 percent. He noted that public
statements from companies such as BP, Exxon, and Shell indicate
a general IRR target of 15 to 20 percent or higher, particularly
for oil, with gas requiring even higher returns due to added
risk.
2:09:38 PM
MR. FULFORD said under the downside scenario, the IRR drops to 7
percent, which he characterized as suboptimal; however, removing
the gas royalty raises it to about 15 percent. He concluded that
an IRR range from 15 to 26 percent, depending on royalty terms
and scenario, outlines the spectrum of outcomes a developer
might consider, and said the two tables offer a clear summary
for discussion of SB 194.
2:10:41 PM
SENATOR WIELECHOWSKI asked if the downside case is a comparison
of the pessimistic DNR case for new offshore gas only.
2:11:03 PM
MR. FULFORD replied he believes so.
2:11:09 PM
SENATOR WIELECHOWSKI noted a significant disparity in the status
quo, particularly regarding internal rate of return (IRR) and
net present value (NPV) assumptions. He highlighted that under a
12.5 percent royalty rate, the downside case IRR was 14.5
percent in one model versus 7 percent in the GaffneyCline model.
He observed that GaffneyCline used a 10 percent NPV discount
rate, while the other model used 15 percent. He pointed out
further discrepancies, such as GaffneyCline showing a 6.25
percent IRR for gas versus 20.7 percent in the alternative model
and asked for clarification on the reasons behind using a lower
net present value.
2:11:50 PM
MR. FULFORD explained that two key factors contribute to the
discrepancies in IRR and NPV between the models. First, he noted
that the Department of Natural Resources (DNR) model includes
only half a year of production at the front end of the profile,
which affects the NPV and IRR. Second, he stated that the DNR
model does not account for production inefficiencies such as
storage or adjustments in daily nominations, whereas the
GaffneyCline model includes a 90 percent utilization factor. He
acknowledged the existence of discrepancies not yet fully
resolved but emphasized that the models are directionally
aligned.
2:12:57 PM
SENATOR WIELECHOWSKI said the optimistic case between the models
appears fairly similar, but the pessimistic case shows a
significant difference. He characterized the situation as a
"battle of the experts" and stated that he personally leans
toward the Department of Natural Resources (DNR), given their
daily involvement with the data and familiarity with the Cook
Inlet basin. He acknowledged that GaffneyCline joined the
process recently and questioned whether GaffneyCline believes
its expectations are more realistic than those of DNR.
2:13:40 PM
MR. FULFORD responded that much of his commentary is informed by
global trends and international project data, which GaffneyCline
used as a proxy for conditions in Cook Inlet. He acknowledged
that while their modeling aims to reflect the cost base and
environment of Cook Inlet, he respects DNR's deeper, day-to-day
familiarity with the region and ongoing discussions with
producers. He emphasized that the GaffneyCline model
incorporates substantial riskssuch as permitting challenges,
environmental assessments, aging infrastructure, and
negotiations with facility and pipeline ownerswhich may
influence the higher operating expense (Opex) assumptions. He
concluded that while their model highlights these risks, the DNR
downside case may better reflect the specific realities of Cook
Inlet.
2:15:53 PM
SENATOR WIELECHOWSKI stated that he believes everyone is aware
of which project the modeling refers to and expressed confidence
that DNR has had extensive discussions with the project owner.
He asked whether GaffneyCline has had any direct conversations
with the project owner involved in the modeling.
2:16:12 PM
MR. FULFORD replied no, GaffneyCline has not spoken to any of
the development companies.
2:16:24 PM
SENATOR KAWASAKI asked Mr. Fulford for a high-level response on
what other jurisdictions engaged in natural gas development are
doing outside of the Cook Inlet Basin.
2:16:45 PM
MR. FULFORD stated that several of his earlier slides addressed
the question, but summarized that many oil and gas jurisdictions
are reassessing their fiscal terms and regulatory frameworks to
compete for a shrinking pool of investment capital. He explained
that a key trend is recognizing that each asset type requires
tailored treatment, and instead of applying uniform fiscal
regimes, governments are increasingly targeting specific sub-
basins or development types. In the case of dry gas, he said the
development conditions can be so unique that legislation must
often be designed specifically for the asset. He concluded that
Alaska's consideration of SB 194 reflects this global trend of
asset-specific fiscal assessment.
2:18:51 PM
SENATOR KAWASAKI stated that during his involvement with House
Bill 280 in 2010, he felt the state was chasing a goal without
long-term stability in its fiscal regime. He noted that while
the approach initially showed results, it ultimately lacked
durability. He pointed out that major shifts occurred since
then, including the United States becoming a net exporter of
natural gas and the rise of hydraulic fracturing. Comparing
Alaska's current position to other regimes nationwide, he said
the outlook appears bleak if the state must commit significant
funds with no guaranteed gas return. He expressed opposition to
subsidizing projects that are not economically viable.
2:19:52 PM
MR. FULFORD responded that while the question contains both
technical and policy elements, he could offer insights from his
experience in the gas industry. He emphasized that Cook Inlet
holds a pivotal role in Alaska's economy due to its importance
in supplying gas to electric and gas utilities. Unlike regions
such as the shallow water Gulf of Mexico, where gas enters a
mature, supply-and-demand-driven wholesale market, Cook Inlet
serves a much more localized and unique market. He added that he
has been surprised by how significantly capital has withdrawn
from the oil and gas sector, largely due to climate policy and
related concerns. However, he observed early signs of a slow
return of capital in the past six months, driven by growing
recognition that without reinvestment, regions like Alaskaand
othersface serious challenges in energy costs and supply. He
expressed hope that a combination of royalty reductions and
renewed investor interest in traditional energy infrastructure
could help bring in investment and additional new supplies.
2:22:20 PM
SENATOR WIELECHOWSKI stated that if the royalty in Cook Inlet
were reduced to 0 percent, the internal rate of return (IRR)
would increase from 18 to 26 percent in the base case and from 7
to 15 percent in the downside case. He then asked Mr. Fulford
for his opinion on the likelihood of a producer moving forward
with the project and bringing the gas to development under those
conditions.
2:22:48 PM
MR. FULFORD replied that the question is obviously tricky to
answer. He said that based on the modeled numbers, mitigating
some of the downside risks would likely make an investor more
comfortable about moving forward with the project. He added that
other factors come into play, including actions that gas buyers
could take to strengthen the investment case. He stated that the
nature of the dialogue between Cook Inlet producers, the context
of infrastructure and storage, and various other elements could
all move the needle and make development more feasible. He noted
that some of this involves potential actions by the legislature,
some by regulatory agencies, and some by the developers
themselves.
2:24:13 PM
SENATOR WIELECHOWSKI said the project appears to carry enormous
risk, but also has the potential to secure Cook Inlet's power
supply and support Alaska's economy for at least a decade. He
stated that the development could effectively solve gas prices
for that period, and if the cost is around $120 millionthe
Department of Natural Resources' (DNR) estimate of lost royalty
revenueit does not seem like a bad investment. However, he
acknowledged that it is not a guaranteed outcome. He referenced
an alternative provision involving reserves-based lending, which
has not been modeled, and asked Mr. Fulford for his perspective
on a scenario where the state directly funds the project. He
suggested this approach may be more certain and financially
beneficial to the state, depending on how the terms are
negotiated.
2:25:37 PM
MR. FULFORD stated that he agreed with most of the point made by
Senator Wielechowski. He said that based on the project's
economics, the state's cost of capital, and the lending
mechanisms available through various captive agencies, providing
reserves-based lending could be a prudent step forward. He
explained that this approach would effectively hedge the state's
exposurepotentially losing gas royalties but gaining
appropriate interest on loans made to the project. He added that
while such a strategy might not be suitable in jurisdictions
without a direct connection between gas resources and the
broader economy, in Alaska's case, where that link is critical,
it appears to be an appropriate use of state resources.
2:26:50 PM
SENATOR WIELECHOWSKI asked whether there is a better path
forward, emphasizing that the state must act. He reflected on
past efforts involving tax breaks, deductions, and incentives
like bringing in jack-up rigs, which provided only temporary
solutions. He stated that the situation now feels like "the
cliff," with limited options remaining. He referenced the
current policy choices under considerationroyalty relief at
various levels, potential reserves-based lendingand stressed
that with heat and electricity for 70 percent of Alaskans at
stake, the consequences are serious. He asked for a
recommendation and if there is a better alternative.
2:27:41 PM
MR. FULFORD said he is happy to offer directional comments but
emphasized that management and policy decisions ultimately fall
under the jurisdiction of the legislature. Referring to his
final slide from the previous day, he noted that state lending
is clearly one lever that may remove "one feature from the log
jam." He added that another material factor though not part of
the modeling request is the presence of five or six key gas
buyers, including power generators, industrial users, and gas
utilities, each with different demand profiles and risk
tolerances. He explained that in other countries, governments
have acted as aggregators on the buy side, creating a mechanism
to pool and allocate gas among these varied buyers, which would
not happen if each buyer acted alone. He suggested that a buyer
cooperative model, with the state playing an intermediary role,
could reduce risk for Cook Inlet gas developers. While he
acknowledged the complexity of such a structure, he said the
concept may be worth consideration.
SENATOR GIESSEL said that it sounds like an RRC and an RTO.
2:29:59 PM
SENATOR DUNBAR stated that even a 7 percent internal rate of
return (IRR), while insufficient for a private investor, may
still be acceptable for the state. He pointed out that some
state accounts and entities currently earn much lower returns.
He suggested that if Alaska could invest at that rateor ideally
achieve something higherwhile also securing gas supply for Cook
Inlet, it would be a sensible move. He said this aligns with
what he interpreted Mr. Fulford as indicating [that state
involvement could both support energy needs and generate a
reasonable financial return.]
2:30:38 PM
MR. FULFORD explained that a 7 percent IRR might be acceptable
for a wind or solar project, as, in today's world, capital is
generally more willing to support those types of developments.
However, he noted that the trend for oil and gas is moving in
the opposite direction, with investor expectations significantly
higher. He said that for a private oil and gas investor, a 7
percent IRR would fall far below what could be considered
acceptable. He acknowledged, however, that from the state's
perspective, the return profile might be viewed differently.
2:31:39 PM
SENATOR DUNBAR stated that the Permanent Fund Dividend earns
approximately a 9 percent return and is regarded as well-
managed. He emphasized that an investment by Alaska in Cook
Inlet, with the understanding that the gas produced would
directly serve constituents and neighbors, justifies accepting a
lower return and a different risk profile. He expressed hope
that the provision remains in the final legislation.
2:32:17 PM
SENATOR KAUFMAN said that when evaluating an investment, it's
essential to assess both the risk profile and the expected
returns. He noted that the lack of interest from investors in
Cook Inlet reflects not only a static economic view but also a
dynamic, probabilistic assessment similar to a Monte Carlo
analysis that considers not just whether a bad year might
occur, but when it occurs and how it affects returns. He
highlighted global uncertainties, such as the resolution of the
RussiaUkraine conflict and its impact on gas markets, which
underpin GaffneyCline's globally oriented presentation. He
stressed that Cook Inlet faces significant local constraints,
including complex geology, harsh environmental conditions, and
infrastructure limitations. These are compounded by broader
policy dynamics like portfolio standards aimed at reducing
hydrocarbon reliance and the potential for North Slope gas
monetization, which could saturate the market. He stated that
given these constraints, the state's options are limited to
either direct capitalization of the project or indirect support
through royalty reductions.
2:35:18 PM
SENATOR KAUFMAN emphasized that while fine-tuning financial
projections is important, the primary objective should be to
stimulate gas development. He argued that royalty relief could
incentivize producers to invest but acknowledged the need to
address the broader risk landscape. He then asked whether
reduced royalties alone could provide sufficient incentive for
investment, or if a more complex solution is necessary to move
projects forward.
2:35:59 PM
MR. FULFORD said that one positive aspect of the current
analysis is that the project economics fall within a range where
policy changes can make a meaningful difference. He explained
that if the numbers were either clearly unviable or extremely
strong, altering the royalty structure would have little impact.
However, in the downside case, removing the royalty
significantly mitigates the weaker financial outcomeprecisely
the scenario investors are most concerned about. He stated that
for that reason, royalty relief would likely be viewed very
positively and could be a deciding factor for investment.
MR. FULFORD added that other measures discussed, such as lending
mechanisms and structured financial support, would further
enhance the project's attractiveness. These tools could shift
the investment outlook enough to prompt developers to reevaluate
and reengage. He concluded by emphasizing the importance of the
broader signal sent by legislationthat the state is committed
to supporting development and is willing to work with developers
to make it happen.
2:38:18 PM
At ease.
2:40:33 PM
CO-CHAIR GIESSEL reconvened the meeting.
2:40:37 PM
CO-CHAIR GIESSEL said the committee would consider 8 amendments
to SB 194.
2:40:50 PM
CO-CHAIR GIESSEL moved to rescind action in adopting Amendment 1
(A.1).
2:41:04 PM
SENATOR KAUFMAN objected for purposes of discussion.
2:41:08 PM
CO-CHAIR GIESSEL said her intent is to withdraw Amendment 1
(A.1) because it is non-essential.
2:41:25 PM
SENATOR KAUFMAN removed his objection.
2:41:30 PM
CO-CHAIR GIESSEL found no further objection, which brought
Amendment 1 (A.1) before the committee. She withdrew Amendment 1
(A.1).
CO-CHAIR GIESSEL sought confirmation that Amendment [2] (A.2)
would remain withdrawn.
SENATOR WIELECHOWSKI answered in the affirmative.
2:41:51 PM
CO-CHAIR GIESSEL stated Amendment [3] (A.7), by Senator Claman,
was adopted [at a previous meeting] on a vote of 4:3. She stated
since Amendment [3] (A.7) has no fiscal impact and there being
no objection, it will remain adopted.
2:42:27 PM
CO-CHAIR GIESSEL asked if Amendment [4] (A.10) remained
withdrawn.
SENATOR WIELECHOWSKI stated he was not offering Amendment [4]
(A.10).
CO-CHAIR GIESSEL stated Amendment [4] (A.10) remained withdrawn.
2:42:42 PM
CO-CHAIR GIESSEL stated Amendment [5] (A.14), as amended, was
adopted by unanimous consent. The amendment to Amendment [5]
(A.14) changed the year on line 4 to 2031.
2:43:13 PM
At ease.
2:44:09 PM
CO-CHAIR GIESSEL reconvened the meeting and restated that
Amendment [5] (A.14), as amended, remained adopted.
2:44:29 PM
CO-CHAIR GIESSEL stated Amendment [6] (A.15), by Senator
Kaufman, was previously withdrawn.
2:44:37 PM
SENATOR KAUFMAN moved to adopt Amendment [6] (A.15).
33-GS2381\A.15
Nauman
5/2/24
A M E N D M E N T [6]
OFFERED IN THE SENATE BY SENATOR KAUFMAN
TO: SB 194
Page 4, line 11:
Delete "a royalty of five percent"
Insert "the [A] royalty percentage set out in
this paragraph [OF FIVE PERCENT]"
Page 4, line 13:
Delete "for"
Page 4, lines 14 - 15:
Delete "] 10 years following the date on which
the production for commercial sale commences"
Insert "10 YEARS FOLLOWING THE DATE ON WHICH THE
PRODUCTION FOR SALE COMMENCES]"
Page 4, line 16:
Delete "of five percent may"
Insert "percentage described in this paragraph
does"
Page 4, line 17:
Delete "five percent in"
Insert "the applicable percentage of"
Page 4, line 18, following "lease":
Insert "; the royalty rate under this paragraph
is
(A) 0.1 percent for oil or gas produced on
and after January 1, 2025, and before January 1, 2028;
(B) 0.1 percent for gas produced and five
percent for oil produced on and after January 1, 2028,
and before January 1, 2031;
(C) five percent for gas produced and five
percent for oil produced on and after January 1, 2031,
and before January 1, 2036"
2:44:41 PM
CO-CHAIR GIESSEL objected for purposes of discussion.
2:44:43 PM
SENATOR KAUFMAN explained that the purpose of Amendment [6]
(A.15) is to shape an incentive structure that communicates
urgency and establishes an economic rationale for acting
quickly. He stated that the amendment sets an initial royalty of
0.1 percent for oil and gas produced between January 1, 2025,
and before January 1, 2028. The rate then increases to 1 percent
for gas and 5 percent for oil produced between January 1, 2028,
and before January 1, 2031. Finally, the royalty becomes 5
percent for oil and 5 percent for gas from January 1, 2031, and
before January 1, 2036.
SENATOR KAUFMAN addressed the question of why oil is included
when the state is focused on gas, explaining that oil acts as a
strong incentive "oil is to gold as gas is to silver." The
analogy illustrates the value of incentivizing exploration. He
concluded that a powerful, front-loaded incentive structure will
attract producers sooner and encourage faster development
compared to a flat-rate approach that lacks a clear signal of
urgency.
2:46:43 PM
SENATOR DUNBAR said he supports the concept of Amendment [6]
(A.15) but would like to tweak the numbers and may offer a
conceptual amendment to the amendment. He pointed to slide 6 of
the DNR presentation, which shows the pessimistic case and
models both gas and oil. He noted that gas is set at zero, and
oil at 6.25 percent is still profitable across all projects and
scenarios, even more so at 5 percent. His concern with the
current [royalty] waterfall structure is that it sets oil at 0.1
percent during the first period, and he said, "We're not trying
to incentivize things that are going to happen anyway."
SENATOR DUNBAR proposed the following adjustments:
a) keep gas close to zero and oil at 5 percent;
b) keep gas close to zero and raise oil to 6.25 percent;
c) increase the final step from 5 percent to 6.25 percent.
He said that if the pessimistic case is accurate, then even at
6.25 percent the projects still go forward, and the state loses
less revenue. He reiterated his support for the idea of front-
loading the incentive but said his only issue with the [royalty]
waterfall is giving a break to oil that DNR modeling suggests
doesn't need it.
2:48:36 PM
CO-CHAIR GIESSEL invited DNR to comment.
2:48:55 PM
JOHN BOYLE, Commissioner, Department of Natural Resources (DNR),
Anchorage, Alaska, answered questions on Amendment [6] (A.15).
He stated that the Department is supportive of the concept in
Amendment [6] (A.15). He described it as a novel approach to
incentivizing quick action, which aligns with the Department's
policy intent behind offering the bill. He called the proposal a
relatively straightforward yet elegant solution to address the
need for urgency. He also emphasized the importance of including
royalty relief for both oil and gas, noting that doing so
supports the overall health of the Cook Inlet ecosystem. He
concluded that, based on how the amendment has been presented so
far, the Department is very supportive.
2:50:08 PM
JOHN CROWTHER, Deputy Commissioner, Department of Natural
Resources, Anchorage, Alaska, agreed on Amendment [6] (A.15).
2:50:19 PM
SENATOR KAUFMAN said that, personally, he views the current
proposal as a framework and believes more work is needed. He
emphasized the value of additional modeling to fine-tune the
royalty structure, including both the rates and the timing. He
stated that while the structure is sound, the specific numbers
percentages and timeframesshould continue to be debated and
refined. He noted that although a graphic presentation is not
available at this stage due to the bill moving forward today, it
would be helpful in the future to visualize the timeframes and
rates in order to find the "sweet spot." He concluded that
having a clear, well-calibrated structure would not only inspire
confidence but also have real impact in the marketplace.
2:51:32 PM
SENATOR DUNBAR stated his intent to offer a conceptual amendment
to Amendment [6] (A.15). He said he agreed with Senator
Kaufman's point about the need for further refinement of SB 194
in the Finance Committee, but emphasized that he does not want
to send the bill to Finance with oil royalties dropping to zero
at any point. He noted that a zero oil royalty was not part of
the governor's original proposal and that modeling indicates
such a reduction is unnecessary. He expressed concern that
sending the bill forward with a zero oil royalty would give the
impression that the Resources Committee ignored the modeling
data.
SENATOR DUNBAR offered Conceptual Amendment 1 to Amendment [6]
(A.15), authorizing Legislative Legal Services to make technical
and conforming changes:
CONCEPTUAL AMENDMENT 1 TO AMENDMENT [6]
BY SENATOR DUNBAR
Page 2, line 1, following "for":
Delete: "oil or"
Page2, line 1, following "produced':
Insert: "and 5 percent for oil produced"
Page 2, line 3, following "and":
Delete: "five"
Insert: "6.25"
Page 2, line 5, following "and":
Delete: "five"
Insert: "6.25"
2:53:15 PM
CO-CHAIR GIESSEL found no objection and Conceptual Amendment 1
to Amendment [6] (A.15) was adopted. Amendment [6] (A.15), as
amended, was before the committee.
2:53:30 PM
CO-CHAIR GIESSEL asked what the production tax rate is in Cook
Inlet.
2:53:39 PM
MR. CROWTHER replied that he did not want to misstate the exact
formulation or percentages and said the Department of Revenue
would be the appropriate source for that information. He noted
that it would be an easy question for them to answer. He added
that, to his understanding, Cook Inlet has a very low, flat
production tax and does not include the complex elements found
in the North Slope production tax.
2:54:07 PM
CO-CHAIR GIESSEL stated her belief that Mr. Crowther was correct
and recalled legislation passed in 2018 addressing the issue.
She noted that someone in the audience also confirmed this. She
asked committee members to keep in mind that when discussing
royalty rates, the production tax in Cook Inlet is very low
close to zero- and it is the last remaining portion of revenue
the state receives from Cook Inlet.
2:54:47 PM
CO-CHAIR GIESSEL removed her objection. She found no further
objection and Amendment [6] (A.15), as amended, was adopted.
2:55:30 PM
CO-CHAIR GIESSEL said Amendment [7] (A.16) was withdrawn at the
committee's last meeting.
2:55:35 PM
CO-CHAIR GIESSEL solicited a motion.
2:55:36 PM
SENATOR WIELECHOWSKI said he was not offering Amendment [7]
(A.16).
2:55:42 PM
CO-CHAIR GIESSEL said Amendment [7] (A.16) remains withdrawn.
2:55:48 PM
CO-CHAIR GIESSEL stated the committee is on Amendment [8] (A.17)
and solicited a motion.
2:56:09 PM
SENATOR WIELECHOWSKI said Amendment [8] (A.17) relates to
reporting, DNR supports the amendment, and it should remain in
SB 194.
2:56:17 PM
CO-CHAIR GIESSEL said the adoption of Amendment [8] (A.17) was
maintained.
2:56:24 PM
CO-CHAIR GIESSEL said Senator Wielechowski asked to revisit
Amendment [5] (A.14).
2:56:36 PM
SENATOR WIELECHOWSKI stated that, in light of the adoption of
Amendment [6] (A.15), as amended, Amendment [5] (A.14) likely
presents a conflict. He said he wanted to confirm this with
Senator Kaufman.
2:56:50 PM
SENATOR KAUFMAN stated his belief that it might.
2:56:54 PM
SENATOR WIELECHOWSKI moved to rescind action in adopting
Amendment [5] (A.14).
2:57:03 PM
CO-CHAIR GIESSEL found no objection and the action in adopting
Amendment [5] (A.14) was rescinded.
[SENATOR WIELECHOWSKI withdrew Amendment 5 (A.14).]
2:57:29 PM
CO-CHAIR GIESSEL stated, in summary, the committee adopted
Amendment [3] (A.7), Amendment [6] (A.15), and Amendment [8]
(A. 17).
2:57:58 PM
CO-CHAIR GIESSEL solicited the will of the committee.
2:58:15 PM
SENATOR WIELECHOWSKI moved to report SB 194, work order 33-
GS2381\A, as amended, from committee with individual
recommendations and attached fiscal note(s). He said that
Legislative Legal has the authority to make any technical and
conforming changes.
2:58:32 PM
CO-CHAIR GIESSEL found no objection and CSSB 194(RES) was
reported from committee.
| Document Name | Date/Time | Subjects |
|---|---|---|
| SB 194 GaffneyCline Modeling 5.8.24.pdf |
SRES 5/9/2024 2:00:00 PM |
SB 194 |
| SB 194 DNR Modeling 5.8.24.pdf |
SRES 5/8/2024 3:30:00 PM SRES 5/9/2024 2:00:00 PM |
SB 194 |
| SB 194 GaffneyCline Modeling 5.9.24.pdf |
SRES 5/9/2024 2:00:00 PM |
SB 194 |
| SB 194 Amendment #A.1.pdf |
SRES 5/6/2024 3:30:00 PM SRES 5/9/2024 2:00:00 PM |
SB 194 |
| SB 194 Amendment #A.2.pdf |
SRES 5/6/2024 3:30:00 PM SRES 5/8/2024 3:30:00 PM SRES 5/9/2024 2:00:00 PM |
SB 194 |
| SB 194 Amendment #A.7.pdf |
SRES 5/6/2024 3:30:00 PM SRES 5/8/2024 3:30:00 PM SRES 5/9/2024 2:00:00 PM |
SB 194 |
| SB 194 Amendment #A.10.pdf |
SRES 5/6/2024 3:30:00 PM SRES 5/8/2024 3:30:00 PM SRES 5/9/2024 2:00:00 PM |
SB 194 |
| SB 194 Amendment #A.15.pdf |
SRES 5/6/2024 3:30:00 PM SRES 5/9/2024 2:00:00 PM |
SB 194 |
| SB 194 Amendment #A.14.pdf |
SRES 5/6/2024 3:30:00 PM SRES 5/9/2024 2:00:00 PM |
SB 194 |
| SB 194 Amendment #A.16.pdf |
SRES 5/6/2024 3:30:00 PM SRES 5/8/2024 3:30:00 PM SRES 5/9/2024 2:00:00 PM |
SB 194 |
| SB 194 Amendment #A.17.pdf |
SRES 5/6/2024 3:30:00 PM SRES 5/8/2024 3:30:00 PM SRES 5/9/2024 2:00:00 PM |
SB 194 |