Legislature(2011 - 2012)BUTROVICH 205

03/28/2012 03:30 PM RESOURCES


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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
*+ SB 145 OIL/GAS PRODUCTION TAX CREDITS: NENANA TELECONFERENCED
Heard & Held
+= SB 215 GASLINE DEV. CORP: IN-STATE GAS PIPELINE TELECONFERENCED
Scheduled But Not Heard
*+ SB 219 DISPOSALS OF STATE RESOURCES TELECONFERENCED
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
         SB 145-OIL/GAS PRODUCTION TAX CREDITS: NENANA                                                                      
                                                                                                                                
3:32:41 PM                                                                                                                    
CO-CHAIR WAGONER announced consideration of SB 145.                                                                             
                                                                                                                                
CO-CHAIR  PASKVAN  moved  to  bring  CSSB  145(  ),  version  27-                                                               
LS1078\I, before the committee for discussion purposes.                                                                         
                                                                                                                                
CO-CHAIR WAGONER objected for discussion purposes.                                                                              
                                                                                                                                
3:33:33 PM                                                                                                                    
SENATOR WIELECHOWSKI joined the committee.                                                                                      
                                                                                                                                
3:33:40 PM                                                                                                                    
At ease from 3:33 to 3:34 p.m.                                                                                                  
                                                                                                                                
3:34:34 PM                                                                                                                    
CO-CHAIR WAGONER asked for the motion to be restated.                                                                           
                                                                                                                                
CO-CHAIR  PASKVAN  moved  to  bring  CSSB  145(  ),  version  27-                                                               
LS1078\D, before the committee for purposes of discussion.                                                                      
                                                                                                                                
CO-CHAIR WAGONER objected for discussion purposes.                                                                              
                                                                                                                                
3:35:09 PM                                                                                                                    
MARGARET DOWLING, staff to Senator Tom  Wagoner, said SB 145 is a                                                               
companion to  HB 276,  which has  had six  hearings in  the House                                                               
Resource Committee  and currently  resides in House  Finance. She                                                               
said SB 145 initially intended  to provide tax credits that would                                                               
be  meaningful  enough to  attract  exploration  in some  of  the                                                               
remote  areas  of  the  state identified  by  the  Department  of                                                               
Natural Resources  (DNR) as  potential for  holding hydrocarbons.                                                               
The areas  are so remote  that it  is hard to  attract investors.                                                               
Another  feature about  these areas  is that  they are  within an                                                               
approximate  range of  populated areas  that are  struggling with                                                               
fuel  costs  and  unreliable resources.  For  example,  Fairbanks                                                               
spent $660  million on space  heat at about $4.20/gallon  and has                                                               
an  average kilowatt-hour  of  about  23 cents  and  it has  been                                                               
struggling for  many years to  come into compliance with  EPA air                                                               
quality  standards. In  Cooper Bay,  the city  administrator said                                                               
that  people  are  pulling  boards   off  buildings  for  heating                                                               
purposes.                                                                                                                       
                                                                                                                                
CO-CHAIR  WAGONER noted  Senator Giessel  and Senator  Coghill in                                                               
the audience.                                                                                                                   
                                                                                                                                
MS. DOWLING said that the Nenana  Basin is just 50 miles north of                                                               
Fairbanks  and  has  already had  some  exploration  seismic  and                                                               
drilling; it has  a potential for gas and possibly  oil. So after                                                               
extensive consultation  with the Department of  Revenue (DOR) and                                                               
the Department  of Natural Resources (DNR)  and other communities                                                               
interested  in the  concept,  the bill  was  expanded to  include                                                               
exploration drilling in other basins. That  is what is in the CS,                                                               
which was also expanded to include seismic.                                                                                     
                                                                                                                                
She   said  the   original  intent   of  the   bill  guided   the                                                               
conversation: to  serve Alaskans not only  to increase production                                                               
for  exports but  also to  promote  exploration for  oil and  gas                                                               
resources in the  frontier basins where there is  a potential for                                                               
serving local and regional use.                                                                                                 
                                                                                                                                
3:39:20 PM                                                                                                                    
MS. DOWLING  said they always  kept the state's public  policy in                                                               
mind to balance risk with the  potential for some return for that                                                               
investment.                                                                                                                     
                                                                                                                                
She  said  Version D  includes  the  six geographical  areas  for                                                               
exploration identified  by DNR as having  potential for discovery                                                               
of hydrocarbons  within proximity  to existing  communities. With                                                               
the addition  of these areas  it also  increased the cost  of the                                                               
bill. To address that they limited  the number of credits and the                                                               
value; so,  as the bill stands  today there are four  total wells                                                               
anywhere in  those areas and  no more than  two wells in  any one                                                               
area.                                                                                                                           
                                                                                                                                
The  tax credits  are for  80  percent of  the total  exploration                                                               
expenditures for  work performed  or $22.5 million,  whichever is                                                               
less.  She  pointed  out  that  it's  15  percent  more  than  is                                                               
currently  available under  existing statute.  The total  maximum                                                               
credit is  $90 million. It  only applies to work  performed after                                                               
2012 and  will expire  in 2016 like  other AS  43.55.025 credits.                                                               
The tax credit  is not stackable with other  credits either under                                                               
this section or AS 43.55.023.                                                                                                   
                                                                                                                                
To ensure  the investment  is warranted  and projects  are sound,                                                               
Ms.  Dowling  said some  prequalification  criteria  by DNR  were                                                               
built in - for instance:  well location, proximity to a community                                                               
in  need of  energy  resources, proximity  to infrastructure  and                                                               
technical aspects like  whether there is seismic  mapping or data                                                               
sufficient to identify a particular trap.                                                                                       
                                                                                                                                
MS.  DOWLING said  to guarantee  return on  investment the  state                                                               
concurred  that more  data  would  be a  positive  return.   More                                                               
geophysical  data will  assist current  and future  explorers and                                                               
attract new investment and development  to the state, which leads                                                               
to  the  potential  of building  infrastructure,  and  increasing                                                               
production,  tax revenue  and royalties.  Therefore, seismic  was                                                               
added  because, in  addition to  data from  exploration drilling,                                                               
seismic  will  yield  additional  information from  some  of  the                                                               
unexplored remote  areas.   They allowed credits  for a  total of                                                               
four projects  with no more than  one seismic project in  any one                                                               
of  the areas  and  a  75 percent  credit  for total  exploration                                                               
expenditures  or $7.5  million,  whichever is  less.  This is  10                                                               
percent more  than existing statute. The  total maximum potential                                                               
credit  is $30  million.  The seismic  project  has similar  pre-                                                               
qualifications as the well drilling.                                                                                            
                                                                                                                                
Because the focus  was on getting more information  for the state                                                               
and for public  use, she said they added data  on private land to                                                               
the   existing  requirement   for   all   seismic  and   drilling                                                               
exploration data on  state land be turned over to  the state, but                                                               
in  addition, if  someone wants  a credit  on private  land, they                                                               
must obtain written  consent from the owner to  disclose the data                                                               
to  DNR. Additionally,  the  confidentiality  period for  seismic                                                               
changes from 10 years (in current statute) down to 2 years.                                                                     
                                                                                                                                
3:44:10 PM                                                                                                                    
MS. DOWLING  said the final consideration  in these conversations                                                               
was about  what happens if an  explorer is successful -  and he's                                                               
in the  middle of  nowhere with  very little  infrastructure (for                                                               
instance) and would be subject to  North Slope tax rates. So they                                                               
came  up with  a maximum  seven-year, 4  percent credit  on gross                                                               
production  following  commencement   of  commercial  production.                                                               
After  the seven  years, the  tax rate  reverts back  to existing                                                               
statute. This tax break doesn't apply  to North Slope oil or gas,                                                               
not to royalty gas and oil, not  to Cook Inlet gas or oil and not                                                               
to gas  used in the state.  The bill gives no  breaks on royalty,                                                               
corporate income tax or property tax.                                                                                           
                                                                                                                                
She said  it does provide explorers  willing to take the  risk to                                                               
explore  in these  remote areas  some predictability  seven years                                                               
out.  That  will  help  them   in  getting  financing  for  their                                                               
infrastructure and  other costs associated with  working in these                                                               
remote frontier areas.                                                                                                          
                                                                                                                                
SENATOR  STEVENS  said  it  seemed   to  him  that  it  would  be                                                               
advantageous to have  all six areas explored and he  was sorry to                                                               
hear it  was reduced  to four.  Which four and  wouldn't it  be a                                                               
better idea to get all six?                                                                                                     
                                                                                                                                
MS. DOWLING  replied that the  original concept of the  six areas                                                               
was proposed  by DNR and  in contemplating how many  wells should                                                               
be allowed  a credit the  cost to  the state became  sizeable. It                                                               
was a public  policy decision on the House side  working with the                                                               
agencies to limit it to four.                                                                                                   
                                                                                                                                
SENATOR WIELECHOWSKI  said he  appreciated her  work on  this. He                                                               
asked if this credit is stackable with other deductions.                                                                        
                                                                                                                                
MS. DOWLING deferred to the Department of Revenue (DOR).                                                                        
                                                                                                                                
CO-CHAIR WAGONER  said he  would ask  the department  after other                                                               
presenters.                                                                                                                     
                                                                                                                                
SENATOR WIELECHOWSKI said Senator Wagoner's  jack up rig bill had                                                               
a  provision  that required  a  successful  company to  repay  50                                                               
percent  of its  credits and  asked if  this bill  had a  similar                                                               
provision.                                                                                                                      
                                                                                                                                
MS. DOWLING  replied that was part  of the original bill,  but it                                                               
became less  attractive because depending  on the  value invested                                                               
it  would put  a  company  in the  position  of choosing  between                                                               
existing credits and  this credit based on  speculation about the                                                               
future for production. It was decided  to simplify and add just a                                                               
small percentage over  what is available in  the existing credits                                                               
to make the future a little more predictable.                                                                                   
                                                                                                                                
SENATOR WIELECHOWSKI said  he has no problem with  this for local                                                               
needs, but he  was concerned about protecting  the state treasury                                                               
if there  is a large  find (which  they all hope  for) especially                                                               
for the seven  years. The typical decline curve for  an oil field                                                               
is that  it peaks within the  first couple years and  then spikes                                                               
down dramatically.                                                                                                              
                                                                                                                                
MS.  DOWLING responded  that  issue had  been  discussed and  the                                                               
timeframe for extending the credit  is a policy question for this                                                               
body to decide.  They used seven years  to provide predictability                                                               
to explorers  so they could  get financing in exchange  for their                                                               
risk in exploring in remote areas.  The sponsors of the bill were                                                               
looking  for   ways  to  provide   more  predictability   to  the                                                               
companies.                                                                                                                      
                                                                                                                                
3:52:39 PM                                                                                                                    
CO-CHAIR WAGONER said  this started out as a bill  getting gas to                                                               
Fairbanks the fastest  way possible. All of a sudden  the need is                                                               
throughout the  state and  it's hard to  argue against  the other                                                               
needs.  The  bill matured  and  grew,  but  it has  tight  enough                                                               
controls that  it won't get  out of  hand. He explained  that the                                                               
Cook  Inlet Stampede  bill was  crafted in  the later  part of  a                                                               
session by  rolling it  into another bill  and they  didn't think                                                               
through the  credits, because  right now if  a company  drills to                                                               
the depth they have to to  get those credits, they have to decide                                                               
on taking the  65 percent credit or the drilling  credits for the                                                               
exploration -  and that $25  million if they have  producible gas                                                               
or oil all  of a sudden becomes $12.5 million.  He thought the 65                                                               
percent credit was more doable  than drilling credits, because in                                                               
Cook Inlet they  were trying to get more than  one person to come                                                               
in with jack up rigs, and that was successful.                                                                                  
                                                                                                                                
3:54:15 PM                                                                                                                    
JAMES MERY,  Senior Vice President, Lands  and Natural Resources,                                                               
Doyon, Limited, said  he had worked with Doyon for  a little over                                                               
30  years. He  said that  Doyon, Limited,  is one  of the  Alaska                                                               
Native  Claims  Settlement  Act   regional  corporations  and  is                                                               
residenced in Fairbanks;  it has over 18,000  shareholders and is                                                               
the largest private landowner in  Alaska owning over 12.5 million                                                               
acres.  They have  a number  of operating  businesses and  employ                                                               
several  thousand  people  here  and  "outside."  Most  of  their                                                               
flagship  organizations  operate  in  the oil  field  and  remote                                                               
services sector of Alaska businesses.                                                                                           
                                                                                                                                
MR. MERY said he would give  them a background on how the natural                                                               
resources segment  of Doyon operates,  because it  feeds directly                                                               
into  the  importance  of  the  two major  pieces  of  the  bill.                                                               
Basically, Doyon doesn't do anything  with traditional lands, but                                                               
they have areas for development  purposes in hard rock mining and                                                               
oil  and  gas. Their  business  model  is  like a  junior  mining                                                               
company; they  are not  a development  company or  producer. They                                                               
are an  explorer; they  generate ideas about  not just  their own                                                               
lands but about  nearby state lands. Nenana is a  good example of                                                               
that.  They gather  market and  geological data  and assemble  it                                                               
into an  acreage package. They  acquire as much heritage  data as                                                               
possible; some  of it  is in  the public  domain that  they might                                                               
have to pay a lot of money  for. Then they begin to explore doing                                                               
everything  from surface  studies  to air  and ground  geophysics                                                               
such  as seismic  and gravity.  Then  they do  some drilling  for                                                               
hydrocarbons and hard minerals.                                                                                                 
                                                                                                                                
MR. MERY said Doyon is very  different from most of the companies                                                               
that talk  to the legislature. They  are about as Alaskan  as you                                                               
can  get  with   many  shareholders  living  here.   Two  of  the                                                               
communities are  close by  the Nenana  Basin, in  particular, and                                                               
all  over   the  Yukon   Flats.  These   people  need   jobs  and                                                               
opportunities. Doyon's  home office is  in Fairbanks and  many of                                                               
their subsidiary  offices are in  Anchorage; many  are successful                                                               
oil field services.  They pay a lot of  dividends to shareholders                                                               
and all that money stays in the state.                                                                                          
                                                                                                                                
MR. MERY  said he thought  Doyon had  more reasons to  make these                                                               
areas  work than  other companies  - meaning  no disrespect.  But                                                               
they can't do  this on their own; they need  help from the state,                                                               
which  they have  been getting  via  the credits  that are  truly                                                               
appreciated; but they  need help from industry, too.  Even on the                                                               
North Slope  companies partner up  to spread the risk;  Doyon has                                                               
to do the same thing.                                                                                                           
                                                                                                                                
3:58:39 PM                                                                                                                    
He showed maps of the  Interior basins that were relatively close                                                               
to some  infrastructure, some relatively  close to the  TAPS (the                                                               
Nenana Basin  is one). He  said Doyon has an  exploration license                                                               
with  the  state on  almost  500,000  acres  at Nenana  and  that                                                               
license expires this  year. They have to take leases  if they are                                                               
going to  move forward and  start paying  rentals to the  state -                                                               
which will happen later this year.                                                                                              
                                                                                                                                
MR. MERY  said they had  been the  operator of this  project only                                                               
since 2010. They have other  partners, a company in Denver called                                                               
Rampart,  Arctic   Slope  Regional  Corporation,   Usibelli  Coal                                                               
Mining, and Cedar  Creek (from Minnesota), but they  are the only                                                               
ones  left exploring.  Everyone  else has  lost  interest in  the                                                               
project and they are the only  one (along with the state) that is                                                               
funding an  125 mile seismic program  that is going on  right now                                                               
on the northern Nenana Basin.                                                                                                   
                                                                                                                                
He said  these basins, and  Nenana in particular, have  seen work                                                               
in the  past. The big companies  have been there as  early as the                                                               
60s, but  more recently in  the 80s. Some  work has been  done on                                                               
oil  (not gas),  but  these companies  left  when their  business                                                               
models  changed in  the mid-80s  when the  price of  oil crashed.                                                               
Doyon started  there as a  gas-for-Fairbanks project, but  is not                                                               
there today  because of the chaos  in the natural gas  markets in                                                               
Alaska, in  particular, because of  small lines versus  big lines                                                               
issues. And Doyon thinks natural  gas will be transported down to                                                               
Fairbanks  in an  LNG-type project  by truck.  That project  does                                                               
"gut the  economics" of a  natural gas project at  Nenana because                                                               
there just wouldn't be enough left  after bringing it down by LNG                                                               
and moving it to the big industrial users.                                                                                      
                                                                                                                                
Fortunately,  when they  drilled  their well  there  a couple  of                                                               
years ago, even  though it wasn't commercial, Mr.  Mery said they                                                               
saw  a very  active  petroleum system  and  excellent oil  source                                                               
rocks and  that has  encouraged them  to "soldier  on."   He said                                                               
they expect to find gas there and  hopefully find a way to put it                                                               
to some productive use.                                                                                                         
                                                                                                                                
4:01:57 PM                                                                                                                    
He  said the  Yukon Flats  has three  Nenana Basins  with similar                                                               
geology. Some  work was done by  the major companies a  few years                                                               
ago  and Doyon  picked  it up  and ran  with  it doing  extensive                                                               
geochemical  surveys in  the light  bed sediments.  Light oil  is                                                               
pervasive throughout in  micro-seeps and shows a  lot of promise.                                                               
But they are at  a point where they need help. They  get a lot of                                                               
push back -  not on the geology  so much as what  happens if they                                                               
find something and because of  the lack of infrastructure and the                                                               
high cost of  entry into Alaska. So, the two  pieces of this bill                                                               
address a lot  of this market push  back with a boost  to the tax                                                               
rate on the exploration side for a limited period of time.                                                                      
                                                                                                                                
CO-CHAIR  PASKVAN asked  what  would lead  him  to conclude  it's                                                               
better  to go  with  the structure  under SB  145  at 80  percent                                                               
versus the current system at 65 percent.                                                                                        
                                                                                                                                
MR.  MERY answered  through Doyon's  own  experiences with  costs                                                               
both in  drilling and in  seismic they  have figured it  would be                                                               
far more beneficial  than the .025 credits, but  not farther away                                                               
from the grid.                                                                                                                  
                                                                                                                                
CO-CHAIR  PASKVAN  asked  because  Doyon is  so  close  to  roads                                                               
already in Nenana if 65 percent would be better for that region.                                                                
                                                                                                                                
MR. MERY replied it's possible, but not absolutely.                                                                             
                                                                                                                                
CO-CHAIR PASKVAN  asked what  this structure  does for  a company                                                               
like Doyon on the back end.                                                                                                     
                                                                                                                                
MR. MERY replied that  it's not what it does for  them so much as                                                               
that it helps them find  other companies outside that aren't here                                                               
and  bring  them   up.  New  entrants  have   the  perception  of                                                               
complexity  and progressivity  and they  get scared.  Even people                                                               
who  understand what  they are  getting  into will  have to  hire                                                               
lawyers and  accountants for a  month or  two to figure  out what                                                               
their  tax  will  be.  The  flat  rate  is  simple  and  easy  to                                                               
understand for  a company's critical period  of capital recovery.                                                               
He  said  they   are  not  targeting  huge   companies,  but  the                                                               
"wildcatters."                                                                                                                  
                                                                                                                                
4:08:39 PM                                                                                                                    
LANCE   MILLER,   Vice   President,  Resources,   NANA   Regional                                                               
Corporation, Kotzebue,  said their  specific area of  interest is                                                               
the Kotzebue  Basin and part of  the Selawik Basin. It  is a Cook                                                               
Inlet-size basin, about  380 miles by 80 miles, much  of it going                                                               
off-shore into  the Chukchi Sea,  but their focus is  onshore. He                                                               
said Doyon  had been  pioneering the  way looking  for investors,                                                               
but NANA's story has been mainly minerals from that region.                                                                     
                                                                                                                                
He  said in  2010, according  to Export  Council Alaska  data, 25                                                               
percent  of the  exports from  Alaska were  due to  Red Dog  zinc                                                               
alone. On an average year about  23 ships take ore to smelters in                                                               
Canada,  Europe and  Asia. "So,  we actually  do export  from the                                                               
region and have that capability."                                                                                               
                                                                                                                                
SENATOR STEVENS  asked if  the exports were  in volume  or dollar                                                               
value.                                                                                                                          
                                                                                                                                
MR. MILLER replied in dollar value.                                                                                             
                                                                                                                                
SENATOR WIELECHOWSKI asked if that excluded oil.                                                                                
                                                                                                                                
MR.  MILLER replied  yes. The  NANA Basin  had two  stratigraphic                                                               
wells drilled in  1974 about 60 miles apart. In  those days a lot                                                               
of the majors would actually just  drill the wells to look at the                                                               
stratigraphy rather  than try to  hit the hot  prospects, because                                                               
they  have the  longer term  view and  do more  research than  an                                                               
independent  might. There  are about  1500 miles  of 2-D  seismic                                                               
work.  Since  receiving  data  in  the  mid-90s,  NANA  has  been                                                               
compiling it  and has an  agreement with a  petroleum independent                                                               
out of California to market it.                                                                                                 
                                                                                                                                
He  said in  the early  2000s  they went  to all  the majors  and                                                               
better  known companies  and while  people know  it geologically,                                                               
it's overshadowed by  Prudhoe and Cook Inlet. So, it  really is a                                                               
new game: for minerals it's the  juniors and for oil and gas it's                                                               
the  independents  that  might  take  the risk  on  some  of  the                                                               
challenging basins.                                                                                                             
                                                                                                                                
4:13:04 PM                                                                                                                    
MR. MILLER said their work  has identified about nine significant                                                               
geologic   targets   for  hydrocarbon   accumulation,   basically                                                               
structural and stratigraphic traps.                                                                                             
                                                                                                                                
CO-CHAIR PASKVAN asked if he is talking oil, gas or both.                                                                       
                                                                                                                                
MR. MILLER  said that's a good  question; it's often viewed  as a                                                               
gas basin, but a lot of  the recent work shows potential for oil.                                                               
They  won't know  until they  drill, but  the hydrocarbon  system                                                               
could lend itself to oil as well.                                                                                               
                                                                                                                                
4:14:07 PM                                                                                                                    
CO-CHAIR PASKVAN asked  what he would do if  he found significant                                                               
gas. How do you market it? Where does it go?                                                                                    
                                                                                                                                
MR.  MILLER  answered   first  they  hope  for   a  discovery  of                                                               
significance.  But it  would go  to the  local markets:  villages                                                               
like Kotzebue  and the  Red Dog.  They have  been working  with a                                                               
company for exporting  LNG to Asia that is paying  a higher price                                                               
for natural gas  the US is. All are possibilities  and it depends                                                               
on the size.                                                                                                                    
                                                                                                                                
CO-CHAIR PASKVAN said when they  talk about export potential they                                                               
always hear about ports and asked what their capacity is.                                                                       
                                                                                                                                
MR. MILLER answered  that everything has been looked  at from Red                                                               
Dog to  Cape Blossom  to Nome  to a  further south  pipeline. The                                                               
shipping  season at  Red Dog  is July  to late-October  basically                                                               
depending on insurance for ice shipping.                                                                                        
                                                                                                                                
SENATOR WIELECHOWSKI said he assumed most  of the gas would go to                                                               
Red Dog because it uses an enormous amount of power.                                                                            
                                                                                                                                
MR. MILLER replied about 15 - 20 megawatts.                                                                                     
                                                                                                                                
SENATOR WIELECHOWSKI asked what would happen if they find oil.                                                                  
                                                                                                                                
MR. MILLER  replied that would be  a great game changer  and it's                                                               
not that far to  get over to TAPS. But he  emphasized it would be                                                               
purely  wildcat prospectivity.  Incidentally,  he  said the  term                                                               
"wildcat" came  from early 1900s in  Texas and guys took  a flyer                                                               
out away  from the known  fields; and  people just said  they are                                                               
just going out where the wild cats roam.                                                                                        
                                                                                                                                
4:17:39 PM                                                                                                                    
SENATOR STEVENS  remembered Standard Oil  was in the  Port Moller                                                               
area  in  1912  and  asked  if there  has  been  any  exploration                                                               
development in this area.                                                                                                       
                                                                                                                                
MR. MILLER  replied that  the two red  dots represented  SoCal or                                                               
Chevron wells  from 1974. One  went down to  8400 ft. and  one to                                                               
about  6300 ft.  and they  were looking  at the  geology and  not                                                               
targeting high  prospectivity targets.  This is  when one  of the                                                               
first deals was done between  an Alaska Native Corporation and an                                                               
oil company in Alaska.                                                                                                          
                                                                                                                                
He wanted  to mention that  the frontier basins are  getting more                                                               
attention  now from  explorers  and  in the  past  they had  been                                                               
overshadowed  by   the  North   Slope  in   terms  of   size  and                                                               
infrastructure in that it has a road and you can get things.                                                                    
                                                                                                                                
4:19:46 PM                                                                                                                    
A rig  located in their  area would be  close to tide  water, but                                                               
the  rig  would  probably  be  captured there  for  a  year.  The                                                               
Kotzebue Basin  has geologic  risks, which is  why some  of these                                                               
incentives are helpful.  The incentives on the front  end and the                                                               
simple tax  rate on the  back end  would really help  attract the                                                               
needed risk capital.  With the remoteness of  the state, projects                                                               
often necessitate being large. So,  a worst case of success might                                                               
be where you find  gas and there is enough for  local use but not                                                               
enough to make it economic.                                                                                                     
                                                                                                                                
4:21:22 PM                                                                                                                    
ELIZABETH  HENSLEY, Corporate  and  Public  Policy Liaison,  NANA                                                               
Regional Corporation,  related that this  bill is a  priority for                                                               
NANA and the Northwest Arctic  leadership team, which consists of                                                               
NANA, the Northwest Arctic Borough,  the Northwest Arctic Borough                                                               
school District  and Maniilak  Association (provides  health care                                                               
throughout the region).                                                                                                         
                                                                                                                                
She said "The  Cost of Energy in Northwest Alaska"  said that the                                                               
average cost  of one gallon  of gas is  $7.92 and Kobuk  pays the                                                               
highest rate  at $10.46 per  gallon. Buckland pays the  lowest at                                                               
just $6.25 per  gallon. The average price for a  kilowatt hour of                                                               
diesel generated  electricity is $.68; the  residents at Shungnak                                                               
pay the highest at $.92  per kilowatt hour and Kotzebue residents                                                               
pay the lowest at $.41 kilowatt.  She heard that people in Juneau                                                               
pay  $.11 1/2  per  kilowatt.  She said  the  average per  capita                                                               
income  in northwestern  Alaska  is $21,000  per  year, which  is                                                               
$10,000  below  the rest  of  the  state  according to  the  2010                                                               
census,  and 20  percent of  the population  is living  below the                                                               
poverty  level.  Yet residents  in  Northwest  Alaska are  paying                                                               
really high  costs for energy. If  this bill passes, it  would be                                                               
very  helpful in  incenting exploration  for oil  and gas  in the                                                               
region, which  could help offset  the really high cost  of energy                                                               
for citizens who need to heat  their homes and businesses as well                                                               
as for other development projects in the region.                                                                                
                                                                                                                                
SENATOR  WIELECHOWSKI asked  if  she would  support an  amendment                                                               
that  allows for  this to  apply to  gas and  oil used  for local                                                               
needs as opposed to export.                                                                                                     
                                                                                                                                
MS.  HENSLEY said  she would  have to  talk about  that with  her                                                               
leadership and asked what his concern is with exports.                                                                          
                                                                                                                                
SENATOR WIELECHOWSKI  replied the bill originally  started out as                                                               
a way  to supply low cost  energy to local communities,  which he                                                               
supports, but it has expanded  greatly. His concern is protecting                                                               
the state's treasury and,  if there is a big find  of a couple of                                                               
billion barrels of oil, exporting  while ensuring local needs are                                                               
met.                                                                                                                            
                                                                                                                                
MS. HENSLEY  replied that she  would be interested  in discussing                                                               
that, but NANA supports the bill as written at this time.                                                                       
                                                                                                                                
CO-CHAIR WAGONER said he would hold SB 145 in committee.                                                                        
                                                                                                                                

Document Name Date/Time Subjects
1-SB 145 Hearing Request 020412.pdf SRES 3/28/2012 3:30:00 PM
SB 145
2-Draft CSSB 145 (_) Oil and Gas Production Tax Credit Certain Basins.pdf SRES 3/28/2012 3:30:00 PM
SB 145
3-Draft CSSB 145 Sponsor Statement 032112.pdf SRES 3/28/2012 3:30:00 PM
SB 145
4-Draft CSSB 145 Sectional (Res) 032312.pdf SRES 3/28/2012 3:30:00 PM
SB 145
5-SB 145 Map Frontier Basin Final re areas version D 3.8.12 (1).pdf SRES 3/28/2012 3:30:00 PM
SB 145
6- SB 145 Cost of Energy in Northwest Alaska.pdf SRES 3/28/2012 3:30:00 PM
SB 145
7-SB 145 Kotzebue regional map.pdf SRES 3/28/2012 3:30:00 PM
SB 145
8-SB 145 Kotzebue basin info 20181.pdf SRES 3/28/2012 3:30:00 PM
SB 145
9 SB 145 Support Docs.pdf SRES 3/28/2012 3:30:00 PM
SB 145
10-SB 145 NANA Kotzebue Basin OG opportunity.pdf SRES 3/28/2012 3:30:00 PM
SB 145
1 SB 219 SRES Hearing Request Memo 3-21-2012.pdf SRES 3/28/2012 3:30:00 PM
SB 219
2 - SB 219Transmittal Letter.pdf SRES 3/28/2012 3:30:00 PM
SB 219
3 - SB0219A.PDF SRES 3/28/2012 3:30:00 PM
SB 219
4 - SB 219 Sectional Analysis.pdf SRES 3/28/2012 3:30:00 PM
SB 219
5 - SB 219 Briefing Paper.pdf SRES 3/28/2012 3:30:00 PM
SB 219
6 - SB0219-1-2-022912-DFG-N.PDF SRES 3/28/2012 3:30:00 PM
SB 219
7 - SB0219-2-2-022912-DOT-N.PDF SRES 3/28/2012 3:30:00 PM
SB 219
8 - SB0219-3-2-022912-DNR-Y.PDF SRES 3/28/2012 3:30:00 PM
SB 219
2 - Replacement Draft CSSB 145 ver D.pdf SRES 3/28/2012 3:30:00 PM
SB 145