SENATOR LEMAN closed the hearing on SB 150 and announced SB 151 OIL & GAS EXPLORATION INCENTIVE CREDITS to be up for consideration. MR. EASON explained SB 151 is not related to SB 150, but it is intended to have many of the same goals as the large block licensing proposal. That is, to encourage the earlier exploration and evaluation of lands throughout the state, so the state will be in a better position of understanding the oil and gas potential of its lands and have better information from which to manage those lands. It is intended primarily for application where the Title 38 exploration incentive credit is not available. In the current legislation, in addition to the state owned lands, credits would be available for operations conducted on private lands. Under Title 38 there are no limitations on the maximum amount of credits that could be offered by the state over the years. Under the proposed bill there is a $50 million cap, the state's share for one project being no more than $5 million. One major difference for the geophysical exploration is that there is no requirement for the exploration to be conducted on land that is scheduled for sale. That gives them the flexibility to review any project that is proposed in advance. Number 534 SENATOR SHARP asked if this was an increase from 25% from eligible costs that was offered in previous years? MR. EASON said that was correct. The bill that was under consideration last year treated all lands equally and this bill treats private lands with more a more allowable credit which was a decision predicated on the likelihood that although those lands will have some value to the state, it is likely to be a reduced value simply because of the remoteness of those lands. Number 550 SENATOR HALFORD asked if the $50 million limit was the combined limit for the entire term of the legislation which goes until 2003. MR. EASON said the $50 million limit would apply to geophysical surveys or wells drilled under this proposal. This is a cost sharing arrangement that is not to pay for their entire program, but it is to encourage them to cross that hurdle in those situations where they are at, or very near, the point of making a decision, but for the participation of the state. SENATOR HALFORD did not disagree with it being cost sharing and not cost shifting, but he thought the limitation to be unrealistic if it was to be any real incentive for major exploration. SENATOR LEMAN asked what the impact would be if the limitation were lifted. MR. EASON said it would increase the state's exposure in an undefined way. He explained there is similar exposure under Title 38. TAPE 93-5, SIDE B Number 580 SENATOR HALFORD asked if the 10-year term was too long. He suggested using the $50 million allowance in the first 2 years and saying if you don't do it in the first 2 years, you don't get it. MR. EASON said there are some strong arguments to be made for that suggestion. SENATOR HALFORD commented that if you know the credit is going to continue, you don't have the incentive to accelerate your program. MR. EASON said his view was entirely correct. However, there have been a number of good developments on the North Slope and in Cook Inlet that have created a euphoria that has translated to several different companies outside the state who haven't been participants here. That, in itself, provides the biggest incentive. The time to look is now. In his opinion, people will be inclined, for a lot of different reasons, to pick projects that may be eligible early on. REPRESENTATIVE GREEN asked if the anticipated work commitment is time related or just within the 10-year period. MR. EASON explained once the state has committed to being a participant, they would put some time limit on the performance so they could keep the money available for other worthwhile projects. Number 519 SENATOR HALFORD asked if the credits could be assigned by the qualified applicant to any other person, meaning another tax payer, or if the credit could be sold. MR. EASON said that was the intent in recognition that, for instance, geophysical companies operating in Alaska have no royalty or severance tax obligations. It gives them the opportunity of using the credit by selling or trading it to others who can use it. SENATOR HALFORD asked how long they could hold the credit before they start to do the work. MR. EASON said there is no set limit in the statute, and that would be addressed in regulations. In general terms, they would try to establish a balance that allows for sufficient time.