This morning the Alaska Legislature met in joint session and overrode Gov. Tony Knowles' veto of House Bill 380, the Cook Inlet oil royalty bill that grants a temporary 5 percent royalty reduction for six fields in Cook Inlet.
“House Bill 380 will provide jobs for Alaskans and will result in deposits into the Permanent Fund and General Fund," said Rep. Mark Hodgins, (R) Kenai, the bill’s sponsor, in a written statement from the House and Senate majorities. "To date, these six fields have not produced one nickel for Alaska. Not one nickel for the Permanent Fund and not one nickel for the General Fund. For 30 years these fields have sat idle; hopefully House Bill 380 will be the incentive needed to jump start them into development.”
The fields that qualify under HB 380 were all discovered more than 30 years ago and have remained undeveloped.
"I'm really surprised that the governor turned his back on the small independent oil companies and the individual Alaskans who own leases in Cook Inlet," said Sen. Drue Pearce, (R) Anchorage, who sponsored companion legislation in the Senate. "The governor was quick to go to the major oil companies, including the foreign company that is the state's biggest producer, to ask them what he might do for them when he was first elected. The Badami Bill and the Northstar Royalty Reduction were passed at his instigation. His attitude today toward the oldest production area in the state, which is in serious decline, is exactly the opposite of his attitude toward the big companies.”
“HB 380 is a giveaway bill, clear and simple. It requires no up front economic justification and should oil prices rise, Alaskans will not share in the benefits and our Permanent Fund will get short-changed,” said Knowles in response to the override of his veto.
The bill was supported by most of the Cook Inlet producers and explorers, but opposed by Alaska Department of Natural Resources oil and gas division director Ken Boyd on the grounds that it does not require an economic evaluation and provides no upside potential for the state.
"There has been no analysis that demonstrates Cook Inlet fields are not economic at 30 or 40 million barrels," said Boyd. He believes the improved technology that is spurring development of smaller fields on the North Slope is coming to Cook Inlet and will improve the economics of the inlet's smaller fields.