Legislature(1997 - 1998)
05/07/1997 03:50 PM RES
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HJR 35 ENCOURAGE FED TAX CHANGE FOR GAS PIPELINE CHAIRMAN HALFORD announced HJR 35 to be up for consideration. REPRESENTATIVE MARK HODGINS, sponsor, said he represented the House Special Committee on Oil and Gas. He said HJR 35 encourages federal legislation to improve federal fiscal terms for the trans Alaska gas pipeline project. The project now is in the range of $12 - $15 million and if the project is to go forward, they need to come up with strategies which lessen those costs. This resolution asks our delegation to introduce enabling legislation to reduce some of the federal take on this project. Their portion, based on $3.50 cost of gas, is about $26 billion. This project is based on Dr. Pedro Van Muir's report and it seems reasonable at this point to continue on with it. CHAIRMAN LEMAN asked if he could comment on an article on gas to liquids. REPRESENTATIVE HODGINS said that if they were to go to the gas to liquids, there appears to be about a 30% - 40% loss of gas. There are 35 trillion cubic feet of gas on the North Slope and they would be losing a lot of gas. He didn't think technology was in place to make it economically viable. Dr. Van Muir said the cost differential would be twice as expensive as BTUs for crude oil. It needs to be down to 1.25 to make it competitive with natural gas that they do have. REPRESENTATIVE HODGINS said he thought it was important to stay the course with the present project, but if things come up that would enhance another project, they should look at it also. He noted that the State's take with the same scenario would be about $12 - $13 billion out of a total project revenue of $150 billion. The federal government gets the biggest stake out of the trans Alaska gas line. CHAIRMAN LEMAN asked if the Van Muir report had undergone sufficient peer review for him to believe it's a credible document. REPRESENTATIVE HODGINS replied that it gives them a good place to start. Number 225 SENATOR SHARP said he was on the Task Force over the last year and this new technology was discussed at length and it was brought up by one of the major oil companies. Experts told them at that time the technology is in its infancy. REPRESENTATIVE HODGINS said that Exxon has a $100 million project at Katar doing this very thing. Part of the technology involved is being in a very temperate area; the North Slope would come under that maybe two days per year. Number 261 MR. PAUL FUHS , Yukon Pacific Corporation, supported HJR 35. He pointed out that the combined State and federal take of the project is about 40% of the economic rents, a huge burden on any project, which is why it's legitimate to look at some tax breaks. In some cases, he said, if you reduce the federal taxes, you increase the State take, because the federal taxes are written off before the State calculates its State revenue. MR. FUHS said that Idaho National Energy Labs did a big report in conjunction with Lockheed Martin on gas to liquid and they said if you give a $5 - $6 a barrel premium to the middle distillate gas to liquids, there are a lot of paraffins formed which is why you need a temperate climate. He said the market wants LNG; Japan, Taiwan, and Korea have all based their electrical generation and domestic distribution of home heating and cooking fuels based on LNG. He said Hitler developed the LNG technology in World War II when he couldn't get fuel and now the price has come down somewhat. The time to use gas to liquids is when the pipeline gets down to $300,000 barrels per day when it will not be economic. A small gas to liquids gas plant at that time (around 2009 - 2016) could extend the life of the pipeline significantly. The study shows that if you don't do that at the time, you spend a billion barrels of oil in the ground. It's economic at a field level, but the pipeline is shut down because the flow-through is too small. Number 314 SENATOR LINCOLN asked since it's a resolution could it be written in a way that would expand where they are sending it, like the Energy Council. REPRESENTATIVE HODGINS responded that he could probably get a concurrence from the House if they made a change, but he thought it was important to get it off and it would go to our congressional delegation who would know who else to pass it to. SENATOR LEMAN said they could mention something like that in a transmittal letter. SENATOR LEMAN moved to pass HJR 35 from committee with individual recommendations and $0 fiscal note. There were no objections and it was so ordered.