Legislature(2015 - 2016)BUTROVICH 205
03/13/2015 03:30 PM Senate RESOURCES
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| Audio | Topic |
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| Presentation: Alaska's Oil and Gas Competitiveness Report 2015 | |
| Adjourn |
* first hearing in first committee of referral
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ALASKA STATE LEGISLATURE
SENATE RESOURCES STANDING COMMITTEE
March 13, 2015
3:31 p.m.
MEMBERS PRESENT
Senator Cathy Giessel, Chair
Senator Mia Costello, Vice Chair
Senator John Coghill
Senator Peter Micciche
Senator Bill Stoltze
Senator Bill Wielechowski
MEMBERS ABSENT
Senator Bert Stedman
COMMITTEE CALENDAR
PRESENTATION: ALASKA'S OIL AND GAS COMPETITIVENESS REPORT 2015
- HEARD
PREVIOUS COMMITTEE ACTION
No previous action to record
WITNESS REGISTER
THOMAS HENDRIX, JR., Chair
Alaska Oil and Gas Competitiveness Review Board (OGCRB) and
Vice President, Oil & Gas
Carlile Transportation Systems, Inc.
Palmer, Alaska
POSITION STATEMENT: Presented Alaska's Oil and Gas
Competitiveness Report 2015.
JERRY BURNETT, Deputy Commissioner
Department of Revenue
Juneau, Alaska
POSITION STATEMENT: Presented information related to the report
on Alaska's Oil and Gas Competitiveness.
ACTION NARRATIVE
3:31:32 PM
CHAIR CATHY GIESSEL called the Senate Resources Standing
Committee meeting to order at 3:31 p.m. Present at the call to
order were Senators Costello, Coghill, Wielechowski, Stoltze,
and Chair Giessel. She noted that Senator Stedman was excused.
^PRESENTATION: Alaska's Oil and Gas Competitiveness Report 2015
PRESENTATION: Alaska's Oil and Gas Competitiveness Report 2015
3:32:10 PM
CHAIR GIESSEL announced a report from the Alaska Oil and Gas
Competitiveness Review Board.
3:33:01 PM
THOMAS HENDRIX, JR., Chair, Alaska Oil and Gas Competitiveness
Review Board (OGCRB), and Vice President, Oil & Gas, Carlile
Transportation Systems, Inc., Palmer, Alaska, presented Alaska's
Oil and Gas Competitiveness Report 2015. He provided his
background that he said suits him well for being on this board.
3:33:49 PM
JERRY BURNETT, Deputy Commissioner, Department of Revenue (DOR),
introduced himself.
MR. HENDRIX noted their work did not support the required
statutory requirements of the board. The factors that brought
that about was that the first board meeting was very late in
getting started, there had been an administrative change and
several new board members came on board, but they have had 10
subsequent board meetings since then, so they have been
diligent.
3:35:25 PM
MR. HENDRIX explained that the board was formed as a part of SB
21 and was created to establish and maintain salient data
regarding oil and gas exploration, development, and production
and to advise the Alaska Legislature on the state's fiscal
system, labor pool, and regulatory competitiveness. The statute
mandates that the board give recommendations on or before
December 31, 2015, but there are no recommendations in the
report. They have compiled the data they feel it will get them
in delivering the board's work.
He described that the board is made up of:
Two public members:
-Joey Merrick who is a business manager and secretary for Alaska
Laborers Local 341
-Rodney Brown who is the business manager for the UAA Local 375)
Three administration department heads:
-Department of Revenue Commissioner Randall Hoffbeck
-Kristin Ryan who is Spill Prevention and Response Coordinator
at the Department of Environmental Conservation (DEC)
-Mark Myers who is Department of Natural Resources commissioner
One commissioner:
-Alaska Oil and Gas Conservation Commissioner Gallagher
Three oil and gas subject matter experts:
-Petroleum Engineer, Pete Stokes with Petrochemical Resources
-Geologist, Curt Freeman, President, Avalon Development
-CPA, Tom Malone, private citizen
Two industry trade group representatives:
-Thomas Hendrix, Alaska Support Industry Alliance
-Kara Moriarty, Chair, Alaska Oil and Gas Association (AOGA)
MR. HENDRIX invited Mr. Burnett to talk about how the DOR is
handling staffing and support for their efforts.
3:38:35 PM
MR. BURNETT related that the DOR fiscal note had enough funding
for board administrative help and travel. A special assistant to
the commissioner works closely with the board in writing the
report and handling the meetings. Tim Ryherd, a DOR Commercial
Analyst, provided technical support, but due to changing of
administrations and the late start, an RFP was not funded (about
$300,000) but it is still needed. Receipt of funding will affect
the length of time it takes the board to do its work.
MR. HENDRIX's next slide listed Alaska's resource development
peer groups or its competition, all located in North America,
Europe, Pacific Regions, and in the Arctic. All jurisdictions
had concessional type fiscal arrangements, tax and royalties
similar to Alaska, have similar sized reserves in undiscovered
resource potential and have a history of significant hydrocarbon
production. They are: Alaska, California, North Dakota,
Oklahoma, Texas, U.S. Gulf of Mexico OCS, U.S. Alaska OCS,
Alberta, Canada-Northwest Territories, Canada-Beaufort Sea,
Australia, Norway and the United Kingdom.
He said this list came from work the state had already done and
all of the departments had been very helpful in gathering data
assimilated into a report.
3:42:04 PM
MR. HENDRIX showed a graph depicting peer resource potential
indicating that Alaska has about one-third of the nation's
reserves.
He explained that he broke down Alaska's land and lease sales
into three sections: federal lands, private lands and state
lands. Federal lands (61 percent) are vast and locked up; state
lands (27 percent) have more potential for development in the
short term and Alaska has more consistent reliable lease/sale
programs than the federal government. Private land (12 percent)
is the smallest offering, contrary to many of its peers.
3:43:53 PM
MR. HENDRIX showed the effects of passing SB 21 on drilling
activity in Alaska on an AOGCC slide of total drilling including
workover rigs and water wells for disposal and noted that this
measurement is different than the next Baker Hughes' slide of
drilling rig activity. He explained that the activity doesn't
show the boom and bust cycles to the degree that one sees in
some peer groups, like North Dakota and Texas, where the rigs
are immediately laid. In Alaska, the number of active drilling
rigs is pretty consistent, but it could be improved, and the
board might find that Alaska might be a good place to do
business during low oil prices.
3:46:12 PM
MR. HENDRIX described the current North Slope infrastructure and
the challenges it has. He spoke of the excellent maintenance of
the Dalton Highway, the "road to resources," but he added that
the board will need to examine access to resources in terms of
ports, bridges, and roads in order for the state to stay
competitive.
He showed a map of infrastructure in the Cook Inlet and six
Frontier Basins. Cook Inlet has 34 fields all connected to
infrastructure going to oil and gas processing facilities; he
said that Kenai is booming right now. The six Frontier Basins
include areas around Fairbanks, Glennallen, Kotzebue, Emmonak,
Egegik, and Port Mueller. They are harder to get to, but some
activity is being seen in the Fairbanks area.
3:49:56 PM
MR. HENDRIX said in order for Alaska to be competitive in the
oil and gas industry, trained and available workforce are
priorities. He said they will develop a measurable metric to use
in looking at what plans are out there to have a robust
workforce for. He pointed out that two private folks on the
board are representatives of labor and the study of labor is
going to be a key piece of the research the board will do.
He introduced the regulatory and permitting structure slide,
another key issue that keeps popping up. There is no measurement
to tell the board how difficult it is to deal with the state
when it comes to getting permits, but every yellow box on the
slide is something that could effectively be changed or fixed.
The process should be simple and effective and one that is not
costly to the producers.
3:52:55 PM
SENATOR MICCICHE joined the committee.
MR. HENDRIX showed a slide depicting the large number of
permitting requirements. The next slide described Alaska's oil
and gas fiscal system in 2014 and showed the four main
components that generate state revenue. It didn't show the
federal and local taxes generated from production. His next
slide was not meant as a comparison, but showed the petroleum
fiscal regimes of peer groups. For instance, Norway and
Australia in deep water fiscal regimes have high taxes but no
royalty.
3:55:34 PM
MR. HENDRIX explained that the RFP mentioned earlier will
require $300,000 to commission a third-party study. The study
has been scoped to help the board come up with recommendations.
He said the board is strong and has been working hard.
3:57:14 PM
MR. BURNETT added that the draft RFP was not included in the
budget request because of the lateness of the first board
meeting. If the funding comes through they could get the RFP on
the street. It was discussed with the governor and the board is
trying to make sure that there is a publically funded
independent look rather than coming from any one industry group.
MR. HENDRIX said if the board does not receive the funding it
can't deliver the required report that is already late. After
the December 2015 report the next one is due on January 15,
2017. Should they not be funded and go through an almost entire
year delay, legislation will be needed to change the deadlines
for 2017 and 2021.
4:00:33 PM
SENATOR MICCICHE asked if there is a reason they wouldn't issue
the RFP just to have a better understanding of what the study
costs.
MR. HENDRIX said he was not versed in state protocol, but he
thought they would put out an RFP and ask for a price of doing
it. Then he found out that meeting the state's protocols meant
writing it the way it is.
MR. BURNETT said the board could write a request for information
(RFI), but the board was confident that the $300,000 is close to
the cost having done studies over the years. It would be limited
to up to $300,000 and be done on a bid basis.
4:02:22 PM
SENATOR STOLTZE said the trend has been knowing how much the
state has sort of sets the price and asked if they could do some
fishing before putting all the gear together.
MR. HENDRIX said they could do "fishing," but want to be able to
execute on a contract.
MR. HENDRIX thanked the committee for its time and the
Department of Revenue, the Department of Natural Resources, the
Department of Labor and Workforce Development, Department of
Transportation and Public Facilities, the Department of
Environmental Conservation and the Alaska Oil and Gas
Conservation Commission for their help on the report.
4:03:57 PM
CHAIR GIESSEL said it is a formidable undertaking and thanked
Mr. Hendrix for taking it on.
4:04:34 PM
There being nothing further to come before the committee,
Chair Giessel adjourned the Senate Resource Standing Committee
at 4:04 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| Alaskas Oil and Gas Competitiveness Report 2015 Presentation.pdf |
SRES 3/13/2015 3:30:00 PM |
|
| Alaska's Oil and Gas Competitiveness Report 2015.pdf |
SRES 3/13/2015 3:30:00 PM |
|
| OGCRB RFP Final Drafted Version 2-25-15.pdf |
SRES 3/13/2015 3:30:00 PM |