April 30, 1999 --- Vol. 5, No. 22April 1999

Senate passes bill allowing Alaska Oil and Gas Conservation Commission to collect a charge for operating wells

Senate Bill 134, "An Act authorizing the Alaska Oil and Gas Conservation Commission to determine the amount of and to collect a charge for operating wells," passed the Senate by a vote of 16 to 1 on April 28. Notice of reconsideration was given that day but the bill was not taken up for reconsideration April 29 and has been transmitted to the House.

The bill repeals the oil and gas conservation tax, the previous funding mechanism for the commission, and authorizes the commission to allocate expenses of investigation and hearing and to employ additional professional staff.

Sen. Drue Pearce, R-Anchorage, was the original bill sponsor; Sen. Rich Halford, R-Chugiak, was added as a sponsor.

The old oil and gas conservation tax was based on the volume of oil produced in the state - but the commission's work is driven by the number of wells in the state and production has been decreasing while the number of wells has been increasing, commission Chairman Bob Christenson told the Senate Resources Committee April 12. Because funding has been based on production, he said, and the number of wells is increasing while production is decreasing, fewer employees have more work to do.

That, said Sen. Drue Pearce, R-Anchorage, is the reason she introduced Senate Bill 134, which would provide a stable basis of funding for the commission. Funding for the commission would be based on operating wells; the bill also allows the commission to allocate expenses of investigation and hearing "among the parties, including the commission, as is just under the circumstances."

The bill also authorizes the commission to add to its professional staff: one petroleum engineer, one reservoir engineer, one petroleum geologist and one inspector.

House Special Committee on Oil and Gas hears bill proposing Alaska Gas Corp.

On April 29 the House Special Committee on Oil and Gas began a discussion of House Bill 170 which would establish the Alaska Gas Corp. as the funding vehicle for a North Slope liquefied natural gas project. The committee also heard amendments which would allocate 25 percent of profits from the project to communities in the state based on size - with a minimum of $50,000 a year guaranteed. Amendments proposed would also guarantee unlimited gas supplies (at wellhead cost plus transportation charge to a given point on the pipeline) to local communities who build pipelines to the main gas line from the North Slope or make other provisions to take gas from the line such as LNG facilities.

The immediate goal of the legislation is a study of the proposal to be done between sessions.

The corporation would issue tax-free revenue bonds, allowing a substantial reduction in financing costs for the project and allowing, backers said, Alaska North Slope LNG to be placed in the market at a low or mid-range price, rather than at a high price.

In addition to members of the committee, Mayor Hank Hove of the Fairbanks North Star Borough, Mayor David Cobb of the City of Valdez and Mayor Ben Nageak of the North Slope Borough have been involved in discussions of the proposal and it was the mayors who proposed the amendments guaranteeing a share of profits and an opportunity to purchase natural gas to the state's communities.

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