Legislature(2025 - 2026)SENATE FINANCE 532
01/23/2025 09:00 AM Senate FINANCE
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 | |
| Production Forecast: Department of Natural Resources | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SENATE FINANCE COMMITTEE
January 23, 2025
9:00 a.m.
9:00:08 AM
CALL TO ORDER
Co-Chair Hoffman called the Senate Finance Committee
meeting to order at 9:00 a.m.
MEMBERS PRESENT
Senator Lyman Hoffman, Co-Chair
Senator Bert Stedman, Co-Chair
Senator Mike Cronk
Senator James Kaufman
Senator Jesse Kiehl
Senator Kelly Merrick
MEMBERS ABSENT
Senator Donny Olson, Co-Chair
ALSO PRESENT
John Boyle, Commissioner, Department of Natural Resources;
Travis Peltier, Petroleum Reservoir Engineer, Division of
Oil and Gas, Department of Natural Resources; Derek
Nottingham, Director Division of Oil and Gas, Department of
Natural Resources: Senator Cathy Giessel; Representative
Julie Coulombe.
SUMMARY
PRODUCTION FORECAST: DEPARTMENT OF NATURAL RESOURCES
9:01:44 AM
Co-Chair Hoffman introduced his staff.
Co-Chair Stedman introduced his staff, and he introduced
Co-Chair Olson's staff.
Senator Kiehl introduced his staff.
Senator Merrick introduced her staff.
Senator Cronk introduced his staff.
Senator Kaufman introduced his staff.
9:06:58 AM
Co-Chair Hoffman stressed that there was intense work this
legislative session on the financial decisions for the
state. He introduced the committee room staff.
^PRODUCTION FORECAST: DEPARTMENT OF NATURAL RESOURCES
9:08:57 AM
JOHN BOYLE, COMMISSIONER, DEPARTMENT OF NATURAL RESOURCES,
introduced himself, and the staff of Department of Natural
Resources (DNR). He spoke about the positive trajectory of
natural resource investment.
Co-Chair Hoffman queried the effect of President Trump's
priorities on the oil and gas exploration and investment in
the state.
9:16:41 AM
Commissioner Boyle replied that there were a number of
executive orders that would effect Alaska and energy in
general. He expected renewed interest in streamlining the
permitting processes to ensure projects will move more
quickly. He felt that it would incentivize companies to
invest in the state.
Co-Chair Hoffman queried the objective as it pertains to
gas development.
Commissioner Boyle replied that it was known that gas
existed in the Cook Inlet. He hoped to continue to
incentivize continued investment in the Cook Inlet. He
understood that there were some challenging economics
related to the area, such as royalties. He remarked that
the stated had taken administrative steps to help
incentivize investment. He noted that there was examination
of other state mechanisms related to the management of
leases and units.
9:22:11 AM
TRAVIS PELTIER, PETROLEUM RESERVOIR ENGINEER, DIVISION OF
OIL AND GAS, DEPARTMENT OF NATURAL RESOURCES, discussed the
presentation, "Fall 2024 Oil Production Forecast" (copy on
file). He spoke to slide 2, "Acronyms." He pointed to slide
3, "Agenda":
• Introduction and Forecast Preview
• FY2024 in Review
• DNR Fall 2024 Production Forecasting Approach
Fall 2024 Forecast Results and Summary
• Appendix
Mr. Peltier addressed slide 4, "Fall 2024: North Slope
Annualized Forecast."
9:27:25 AM
Senator Kiehl wondered the significant difference between
DNR projections and the operator projections.
Mr. Peltier replied that the operator charts were from
current producing fields.
Senator Kiehl was weary about the forecasts.
Co-Chair Stedman requested a disclosure that pointed out
the issue of the comparison between the high and the low.
He wondered whether all the royalties were the same.
Mr. Peltier responded that DOR was aware of the various
royalty rates, and were built into the Revenue Sources
Book.
Co-Chair Stedman stressed that the committee had to deal
with royalties, and asked what the royalties would generate
under the forecast.
9:31:19 AM
DEREK NOTTINGHAM, DIRECTOR DIVISION OF OIL AND GAS,
DEPARTMENT OF NATURAL RESOURCES, replied that there was
table in the Appendix section of the presentation, which
could address the royalties
Co-Chair Stedman felt that a response to the committee
could be detailed about the bifurcation of location and
generation.
Mr. Peltier spoke to slide 6, "FY 2024 as Forecasted by DNR
in Fall 2023: How did we do?"
• Actual FY2024 production was within DNR's forecasted
range
• DNR's mean forecast was 2 percent higher than actual
FY2024 production
• Factors currently shaping the forecast horizon:
• Industry interest continues in Brookian age
plays (i.e., Nanushuk) across the North Slope
• Recent Federal regulatory and leasing
restrictions present challenges but may
materially change with new administration
• Equipment constraints (as Pikka and Willow ramp
up) and overall inflation are affecting North
Slope exploration project costs and operations
9:42:59 AM
Senator Kiehl wondered why a "steep turnaround" might be
considered a bad thing.
Mr. Peltier replied that it was maintenance activity, and
could actually be considered a good thing. He noted that
there were factors that related to weather had significant
impact on the production and maintenance.
Co-Chair Stedman wanted to know whether there would be an
offset of the revenue.
Commissioner Boyle provided an overview, and remarked that
there was robust investment by the operator in the Prudhoe
Bay field.
Co-Chair Stedman felt that there was unexplained upward
production.
Mr. Peltier pointed out the website listed at the bottom of
slide 6, and explained that the Alaska Oil and Gas
Conservation Commission (AOGCC) worked to create
interactive charts available to the public.
Mr. Peltier looked at slide 7, "FY 2024 as Forecasted by
DNR in Fall 2023: Monthly Forecast with Daily Actuals."
9:55:16 AM
Co-Chair Stedman requested an explanation of some fields
were gas-constrained, and why some fields were water-
constrained.
Mr. Peltier replied that most operators on the North Slope
tried to maximize oil production.
Co-Chair Stedman hoped that the information would be
provided to the committee.
Co-Chair Hoffman requested that information.
Mr. Peltier addressed slide 10, "Status Update of Key
Future Projects: North Slope":
KRU Nuna-Torok
Conoco project funding approved in 2023, and
subsequently DNR approved drill site 3T expansion
activities. Construction activities are ongoing,
and first oil is anticipated in 2025.
Production start-up December 2024.
Peak rate up to 20,000 bopd
Mustang
Finnex, LLC took over for AIDEA as Unit Operator
in October 2023.
Pad expansion, pipeline tie-in, pad restart
activities approved and Finnex completed drilling
of two development wells in 2024. Production
start-up within the last month.
Peak rate up to 4,000 bopd
CRU Minke
This Conoco project was not included in the Fall
2023 forecast by the Alaska Division of Oil and
Gas.
CD5-32X drilled in area of interest, and Minke
Oil Pool application submitted to AOGCC in 2024.
A producer-injector well-pair is planned for
2025.
Depends on results of initial well pattern
Pikka Phase 1
Santos construction and drilling activities
ongoing, and project first oil anticipated in Q2
of 2026.
Project construction and drilling activities are
ongoing. Project first oil anticipated in Q2 of
2026.
Peak rate: 80,000 bopd
Pikka Phase 2
Santos project not shared in testimony in January
2024 by the Alaska Division of Oil and Gas.
Conceptual engineering, cost estimation, and
schedule development activities on-going. Plan to
move to FEED stage in 2025 and FID 2027.
Peak rate: An additional 80,000 bopd capacity to
the Pikka production facility
Willow
BLM ROD on SEIS issued in 2023 and Conoco started
construction activities in April 2023. FID
announced December 2023. First oil expected in
2029.
Project construction is ongoing. Project first
oil anticipated in 2029.
Peak rate: 180,000 bopd
10:03:58 AM
Co-Chair Stedman queried the royalty rate and detail for
each project.
Mr. Nottingham replied that not all were equal in their
royalty share. He remarked that Willow was on the Natural
Petroleum Reserve-Alaska (NPRA) federal leases. He
explained that the state did not collect a traditional 12.5
percent royalty on the federal leases. He noted that the
federal government royalty was 15.66 percent, and the state
received a 50 percent share of that royalty which went back
into the local communities. He stated that PIKA was mostly
on state land, with various royalty shares with a mix of
Native private land.
Co-Chair Stedman requested more information about the issue
when having conversations with DOR.
Co-Chair Hoffman asked for a snapshot of the impact of
180,000 barrels per day would mean to the community in the
field.
Senator Kiehl wondered whether any developers paid the
states corporate income tax.
Commissioner Boyle replied that he believed that the
companies were structured to pay corporate income tax.
10:08:08 AM
Mr. Peltier addressed slide 11, "FY 2024 Summary: Cook
Inlet":
Highlights (FY 2024 vs. FY 2023)
• All fields are generally expected to see a
year-on year decline
• Compared to FY2023, in FY2024 Cook Inlet
production decreased by 5 percent (450 bopd)
• Oil from the Cook Inlet basin critical to the
supply of in-state refineries
Decreases
• Beaver Creek, Granite Point, Hansen,
McArthur River and Swanson River
experiencing natural decline
• Redoubt Shoal natural decline and well
attrition partially offset by rate-adding
well work
• Kenai Loop and Middle Ground Shoal are
both effectively offline
• Increases
• Trading Bay and West McArthur River
offsetting natural decline with rate-adding
well work
Mr. Peltier highlighted slide 13, "DNR Forecast Process:
Projects/Pools Included In Forecast":
• DOG performed bottoms-up decline curve forecasts for
all producing pools
• Forecast of current production uses AOGCC
publicly available data
• 40 pools (ANS and CI), producing as of
6/30/2024
• DOG engaged with operators through DOR-arranged in-
person and in writing interviews
• 16 projects under development/under evaluation were
researched/reviewed
• Forecasts for these projects use confidential
information from operators
• Future production from these projects was
adjusted and risked for scope of contribution,
chance of occurrence and start date
• 15 located in ANS, 1 located in CI
Mr. Peltier pointed to slide 14, "Categories Of Production:
Ongoing/Current Vs Future Production":
2025-01-23 Fall 2024 Oil Production Forecast 14
Current Production (CP):
• Ongoing production from existing fields
• Features and considerations:
• Well and facility uptime
• Operator spending to maintain base
production
• Reservoir management
Projects Under Development (UD) and Under Evaluation
(UE):
• Future production requiring new investments
• Rate contribution:
Uncertainty in future well performance
• Uncertainty in project scope
• Project occurrence and timing:
• Uncertainty in timing (including outright
project cancellation/deferral)
• Commerciality risk (economic,
regulatory, etc.)
Mr. Peltier addressed slide 15, "Major Projects Under
Evaluation (UE) Considered In Fall 2024 Forecast":
General Characteristics:
? Projects that were not online by end of FY2024
(data cut-off date of 6/2024)
? Higher risk factors than currently producing
fields
? Known discoveries with identifiable operators
? Require major investments
North Slope Major Projects:
? Willow
? CRU Narwhal CD8
? CRU Minke
? Horseshoe Stirrup
? Pikka Unit Dev.
? Pikka Phase 2
? Pikka Phase 3
? Quokka/Mitquq
? Mustang
? Nuna-Torok
? Theta West
? Talitha
? Alkaid
? PTU Expansion
? Sourdough Project
10:15:48 AM
Mr. Peltier looked at slide 17, "Fall 2024: North Slope
Annualized Forecast
? Short Term:
? DNR forecasts FY2025 annualized average daily
statewide production at 474 MBOPD, and North
Slope production at 466 MBOPD, with a range of
424
MBOPD and 510 MBOPD
? Long term:
? Long-term forecast reliability is gauged by
general comparison between DNR and operators'
aggregate forecasts. Operators' long-term outlook
falls within
DNR's long term forecast range
? Specific differences are expected and do
highlight DNR's ground-up uncertainty analysis on
all included projects
? Outlook on production assumes that operators' plans,
and other project drivers remain unchanged
Co-Chair Stedman queried the process of the interaction,
and asked how often the industry shared their projections.
Mr. Peltier replied that conversations with operators
occurred twice a year.
Mr. Peltier pointed to slide 18, "FY2025 As Forecasted By
DNR In Fall 2024: Monthly Forecast With Daily Actuals."
Mr. Peltier discussed slide 19, "Fall 2024: AK Statewide
Annualized Forecast (Expected Case With Production
Categories)":
? Current Production (CP) remains the backbone of
state production in near and medium term
? Under Development (UD) segment represents production
expected from wells drilled in FY2025
? In the first 7 years, the new forecast is lower than
the Spring 2024 Forecast due to greater than expected
decline rates in key fields and less than expected
production results from recent development projects
? Under Evaluation (UE) begins to play a more
significant role in production in the next five to ten
years as Pikka, Pikka Phase 2, Willow, and other major
projects materialize
10:21:44 AM
Co-Chair Hoffman remarked that the chart did not reflect
the potential federal regulation changes.
Mr. Peltier replied that he wanted to wait and see how the
regulations would affect the forecast.
Senator Cronk wondered whether there was any substantive
improvement to the process of aggregating the information.
Mr. Peltier replied that the team that composes the
forecast continually examines ways to improve calculations.
Mr. Peltier addressed slide 20, "Fall 2024: Production
Forecast Summary":
? DNR forecast continues to use the best information
available to DNR/DOR to generate production outlooks
for oil fields within the state, with a focus on
generating accurate near term and realistic long-term
forecasts
? Fall 2024 forecast is a static view on production;
DNR's outlook is updated annually (Fall and Spring) to
incorporate latest operator plans and the State's
official updated price outlook at the time of the
forecast
? DNR's Fall 2024 outlook shows mean annual production
of approximately 475 500 MBOPD in the first few
years of the outlook period, while increasing towards
the middle and end towards 660 MBOPD based on the
current snapshot of operators' plans
? Production estimates from projects under evaluation
account for several considerations such as technical
factors, commercial factors, and project execution
risks
10:25:44 AM
Mr. Peltier thanked the committee.
Senator Cronk stressed that the state was not lessening the
standards of the best resource development in the world.
Commissioner Boyle hoped to see a further examination of
the permitting process.
Co-Chair Stedman thanked DNR for the new presentation of
the charts and the effort to make the information generally
more understandable.
Co-Chair Hoffman discussed the following day's agenda.
ADJOURNMENT
10:29:33 AM
The meeting was adjourned at 10:29 a.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| 012325 SFIN DNR Fall 2024 Production Forecast Presentation.pdf |
SFIN 1/23/2025 9:00:00 AM |
Presentation: Departmentof Natural Resources |