Legislature(2009 - 2010)SENATE FINANCE 532
03/29/2010 09:00 AM Senate FINANCE
Audio | Topic |
---|---|
Start | |
SB217 | |
SB219 | |
SB284 | |
SB117 | |
SB239 | |
SB243 | |
SB279 | |
Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
+= | SB 217 | TELECONFERENCED | |
+= | SB 219 | TELECONFERENCED | |
+= | SB 279 | TELECONFERENCED | |
+= | SB 284 | TELECONFERENCED | |
+ | SB 117 | TELECONFERENCED | |
+ | SB 239 | TELECONFERENCED | |
+ | SB 243 | TELECONFERENCED | |
+ | TELECONFERENCED | ||
= | SB 305 | ||
SENATE BILL NO. 243 "An Act removing the royalty obligation for geothermal resources." 9:34:30 AM MIKE PAWLOWSKI, STAFF, SENATOR LESIL MCGUIRE, SPONSOR, explained that the bill attempts to find a rational royalty regime for the development of geothermal resources on state lands in Alaska. Originally, the bill started out as a complete negation of all royalty on geothermal. However, in working with the administration and in the Resources Committee, understanding was reached that a geothermal lease still is actually a property right and, therefore, while geothermal resources themselves are not exportable, some royalty is necessary to maintain the state's interest in that the state has issued a lease for the geothermal resources. There is one major geothermal project currently being developed on state land. Mr. Pawlowski related that Section 1 of the bill establishes a federal royalty rate of 1.75 percent on gross income for the first ten years, followed by 3.5 percent of gross income for the following ten years. The goal of the bill is to find a rational royalty regime that attracts development and ensures a fair return to the state. 9:36:32 AM Co-Chair Stedman asked how many geothermal facilities in the state pay a royalty. Mr. Pawlowski said that there currently were none. Several projects under development are not on state land. Co-Chair Stedman requested an explanation of what geothermal energy is and what happens after it is extracted. Mr. Pawlowski understood that geothermal energy comes from hot rocks in the ground. Water under pressure flows upwards and drives turbans producing electricity. The water is re-injected to maintain pressure. Co-Chair Stedman summarized that it was "hot water" and the hotter the water, the more value it has. As long as the water is re-injected into the ground there is no loss of the resource. Co-Chair Stedman recalled a discussion about California where water is not re-injected and there are depletion issues in reservoirs. Mr. Pawlowski reported that there was an extensive discussion of this topic with the Department of Natural Resources and with the Alaska Oil and Gas Conservation Commission. 9:38:55 AM Co-Chair Hoffman asked for more information about a geothermal project in Anchorage. Mr. Pawlowski replied that it is Ormat Technology's Mt. Spurr Project. Co-Chair Hoffman asked how much revenue would come to the state in the first ten years from that project, under this legislation. Mr. Pawlowski referred to information in the packets which calculates the revenue over the first 25 years. Co-Chair Hoffman asked what that total would be. Mr. Pawlowski said it would be $38 million. Co-Chair Hoffman asked how the tax on natural gas is calculated. Mr. Pawlowski clarified that the tax on natural gas in Cook Inlet is calculated as a royalty. The lease of land for geothermal land is, in effect, a property right, and a certain amount of royalty is in the state's best interest, which is why the federal rate of 1.75 percent is used. Under current law the rate is 10 to 15 percent. 9:40:40 AM Co-Chair Stedman asked for a definition of "geothermal land lease" versus "volume of water use". Mr. Pawlowski related that for a geothermal lease, a specific land area is leased and the right to develop the geothermal resource is conferred. He could not explain the volumetric development of a geothermal resource. Senator Olson spoke of the modification of the federal rate and wondered if other geothermal projects would receive the same break. Mr. Pawlowski referred to Section 2, page 2, lines 3 - 5, which directs the Commissioner of the Department of Natural Resources to offer the royalty rates to any exiting lessee. Co-Chair Stedman noted two zero fiscal notes, one from the Department of Revenue and one from the Department of Natural Resources. 9:42:37 AM PAUL THOMSEN, DIRECTOR, ORMAT TECHNOLOGY, (via teleconference), related that his company has leased the acreage of Mt. Spurr in order to develop the first commercial geothermal power plant in Alaska. He spoke in support of the bill. He agreed with bringing the royalty rate down to the federal level in order to allow the development to be more competitive and allow a savings to ratepayers. Senator Olson asked what the risks to the project are if the bill does not get passed. Mr. Thomsen explained that since they do not export and they are operating in a regulated market, if the royalty rate is high, then a higher rate will be charged to the utility. He said if rate is where it is today, it would require the utility to fund a power purchase price at 14 cents. The project already has a low rate of return. He maintained that the ratepayers are looking for a lower range. Senator Olson asked where else in the United States there are geothermal projects and what their royalty rates are. Mr. Thomsen replied that there are power projects in Hawaii, California, and Nevada. There are also third-party projects in Wyoming and Utah. Almost all are on federal lands operated by the Bureau of Land Management and pay federal royalty rates. California and Hawaii are exceptions. California has a very high royalty rate of 10 percent, but on a very small project. Western states tend to have a high state royalty rates. 9:47:18 AM CATHY FOERSTER, ENGINEERING COMMISSIONER, ALASKA OIL AND GAS CONSERVATION (AOGCC), (via teleconference), explained that the royalty portion of the bill does not affect AOGCC. The part of the bill that does affect AOGCC transfers some, but not all, authority for the regulation of geothermal operations from DNR to AOGCC. The authorities transferred are the authority to regulate drilling and production operations, the authority to protect correlative rights, and the authority to prevent physical waste of the resource. The DNR will retain its authorities over correlative rights and prevention of waste pertaining to state lands. These authorities are consistent with AOGCC oil and gas operations. Ms. Foerster continued to say that AOGCC already has in place the expertise to take on these authorities. Most importantly, AOGCC has experienced drilling engineers who know what to look for when approving a drilling or well work permit to ensure safety and good operational practices, and experienced field inspectors. Co-Chair Stedman pointed out that the bill before the committee is Version E, the original bill. He requested comments on the lease rates. 9:50:05 AM Ms. Foerster addressed the question about the impact on geothermal operations if the bill does not pass. She noted that there would be an additional cost to DNR to hire a contract for the needed expertise previously described. Co-Chair Stedman clarified that the bill would be set aside and brought back later. 9:50:52 AM KEVIN BANKS, DIRECTOR, DIVISION OF OIL AND GAS, DEPARTMENT OF NATURAL RESOURCES (via teleconference), explained DNR's involvement and how the bill would affect the department. He related that DNR has the authority to manage geothermal lands in Alaska and to take care of safety issues related to geothermal drilling. The current bill would create a situation where DNR would be competitive with federal lands that could be developed for geothermal resources. He acknowledged that the economics of a geothermal project differ substantially from an oil and gas project. The development of a geothermal resource will depend on establishing fairly long-term contracts with existing utilities. The price of the electricity sold to in-state utilities must be competitive with existing sources of energy. Mr. Banks thought that Ormat provided an interesting discussion of the three parts of their economics and costs. He offered to discuss those if requested. Mr. Banks noted that there were 16 previous lease sales on Mt. Spurr. He said there was a proposal to put forth a best interest finding on a lease sale at Mt. Augustine. He pointed out that DNR also has oversight at the Naknek Project. 9:53:59 AM Mr. Pawlowski thanked the committee for hearing the bill. SB 243 was HEARD and HELD in Committee for further consideration.
Document Name | Date/Time | Subjects |
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AHFC Vets Loan Activity.pdf |
SFIN 3/29/2010 9:00:00 AM |
SB 217 |
SB217 AHFC Vets Sec Analysis.pdf |
SFIN 3/29/2010 9:00:00 AM |
SB 217 |
SB 217 Vets Bonds Sponsor Statement.pdf |
SFIN 3/29/2010 9:00:00 AM |
SB 217 |
00 Sponsor Statement CSSB219.pdf |
SFIN 3/29/2010 9:00:00 AM |
SB 219 |
04 Summary of Changes_E.pdf |
SFIN 3/29/2010 9:00:00 AM |
SB 219 |
05 Sectional Analysis.pdf |
SFIN 3/29/2010 9:00:00 AM |
SB 219 |
06 Alaska Data Graphs.pdf |
SFIN 3/29/2010 9:00:00 AM |
SB 219 |
07 TBI Scorecard and Dashboard 032009.pdf |
SFIN 3/29/2010 9:00:00 AM |
SB 219 |
08 Medicaid BrainInjury Program Costs.pdf |
SFIN 3/29/2010 9:00:00 AM |
SB 219 |
09 StateofAlaska_Services_Congenital_Degenerative_BrainInjury.pdf |
SFIN 3/29/2010 9:00:00 AM |
SB 219 |
10 Acquired Brain Injury Definition.pdf |
SFIN 3/29/2010 9:00:00 AM |
SB 219 |
11 Letters of Support.pdf |
SFIN 3/29/2010 9:00:00 AM |
SB 219 |
13 Summary of Changes_S.pdf |
SFIN 3/29/2010 9:00:00 AM |
SB 219 |
SB 219 Amendment 1.pdf |
SFIN 3/29/2010 9:00:00 AM |
SB 219 |
Explanation of CS SB 279 (S FIN).doc |
SFIN 3/29/2010 9:00:00 AM |
SB 279 |
SB 279 About the SAFE Act by HUD.pdf |
SFIN 3/29/2010 9:00:00 AM |
SB 279 |
SB 279 Back-Up.pdf |
SFIN 3/29/2010 9:00:00 AM |
SB 279 |
SB 279 Letters of Support.pdf |
SFIN 3/29/2010 9:00:00 AM |
SB 279 |
SB 279 SAFE Mortgage Licensing Act.pdf |
SFIN 3/29/2010 9:00:00 AM |
SB 279 |
SB 279 Sectional Analysis.pdf |
SFIN 3/29/2010 9:00:00 AM |
SB 279 |
SB 279 Sponsor Statement.pdf |
SFIN 3/29/2010 9:00:00 AM |
SB 279 |
SB 279 Talking Points by Lorie Hovanec.pdf |
SFIN 3/29/2010 9:00:00 AM |
SB 279 |
AG Opinion 02.19.10.PDF |
SFIN 3/29/2010 9:00:00 AM |
SB 284 |
CSSB284(JUD) Sectional Analysis.pdf |
SFIN 3/29/2010 9:00:00 AM |
SB 284 |
Explanation of Changes CSSB284 JUD.doc |
SFIN 3/29/2010 9:00:00 AM |
SB 284 |
Leg. Legal Opinion 01.25.10.PDF |
SFIN 3/29/2010 9:00:00 AM |
SB 284 |
Leg. Legal Opinion 03.17.10.PDF |
SFIN 3/29/2010 9:00:00 AM |
SB 284 |
00 Sponsor Statement SB 117.pdf |
SFIN 3/29/2010 9:00:00 AM SFIN 4/2/2010 9:00:00 AM |
SB 117 |
03 SB 117 Summary of Changes.pdf |
SFIN 3/29/2010 9:00:00 AM SFIN 4/2/2010 9:00:00 AM |
SB 117 |
04 SB 117 Sectional Analysis.pdf |
SFIN 3/29/2010 9:00:00 AM SFIN 4/2/2010 9:00:00 AM |
SB 117 |
05 Costco Letter SB 117.pdf |
SFIN 3/29/2010 9:00:00 AM SFIN 4/2/2010 9:00:00 AM |
SB 117 |
07 Elerding Attachment.pdf |
SFIN 3/29/2010 9:00:00 AM SFIN 4/2/2010 9:00:00 AM |
SB 117 |
NCSL Ignition Interlock Device.pdf |
SFIN 3/29/2010 9:00:00 AM SFIN 4/2/2010 9:00:00 AM |
SB 239 |
SB 239 Sponsor Statement.pdf |
SFIN 3/29/2010 9:00:00 AM SFIN 4/2/2010 9:00:00 AM |
SB 239 |
SB 239 Support Letter APOA.pdf |
SFIN 3/29/2010 9:00:00 AM SFIN 4/2/2010 9:00:00 AM |
SB 239 |
Akutan Support Letter.pdf |
SFIN 3/29/2010 9:00:00 AM |
SB 243 |
Changes to SB 243 in Version E.docx |
SFIN 3/29/2010 9:00:00 AM |
SB 243 |
Geothermal Royalty Rates.docx |
SFIN 3/29/2010 9:00:00 AM |
SB 243 |
Ormat SB242 and SB243 for Senate Resouce Hearing 11-Mar-10 ver0 (2).pptx |
SFIN 3/29/2010 9:00:00 AM |
SB 242 SB 243 |
SB 243 Sectional.pdf |
SFIN 3/29/2010 9:00:00 AM |
SB 243 |
USGS Geothermal Packet.pdf |
SFIN 3/29/2010 9:00:00 AM |
SB 243 |
HB 300 Budget Amendments 0326Pkt#1.pdf |
SFIN 3/29/2010 9:00:00 AM |
HB 300 |
HB 300 Buget Amendment Pkt #2 0326.pdf |
SFIN 3/29/2010 9:00:00 AM |
HB 300 |
SB117-Stedman.pdf |
SFIN 3/29/2010 9:00:00 AM SFIN 4/2/2010 9:00:00 AM |
SB 117 |
CS Senate Bill 279--Talking Points (S FIN).pdf |
SFIN 3/29/2010 9:00:00 AM |
SB 279 |
CS for SB 279 (S FIN).pdf |
SFIN 3/29/2010 9:00:00 AM |
SB 279 |
CSSB217(FIN)-New DOR-AHFC-3-28-10.pdf |
SFIN 3/29/2010 9:00:00 AM |
SB 217 |
SB 217 Proposed CS Version R SFIN 032910.pdf |
SFIN 3/29/2010 9:00:00 AM |
SB 217 |
SB 219 Proposed CS Version P SFIN 032910.pdf |
SFIN 3/29/2010 9:00:00 AM |
SB 219 |
SB 284 amendment 1 032910.pdf |
SFIN 3/29/2010 9:00:00 AM |
SB 284 |
SB 279 Amendment 1 032910 .pdf |
SFIN 3/29/2010 9:00:00 AM |
SB 279 |