Alaska Legislature OK’s royalty oil sale

The Alaska Legislature passed a bill approving the sale of state royalty oil to Flint Hills Resources, operator of the refinery at North Pole.

Senate Bill 86 received unanimous support in both the Senate and the House.

Gov. Sean Parnell offered the bill, as legislative approval was required to execute a five-year contract his administration negotiated with Flint Hills.

Under the contract, the state will supply 18,000 to 30,000 barrels per day of royalty crude to Flint Hills.

Royalty oil is the state’s share of the oil that companies produce from leased, state-owned land.

If Flint Hills buys the maximum volume under the contract, it will equate to roughly half of the state’s projected daily North Slope royalty oil through fiscal year 2019, a state Department of Natural Resources analysis said.

The Flint Hills contract is forecasted to yield between $3.5 billion and $5.9 billion in state revenue.

The contract will follow an existing 10-year contract that expires on March 31, 2014.

The state has two choices for monetizing its royalty oil. It can sell directly to a customer such as Flint Hills, or it can allow North Slope producers to market the oil along with their own production.

The state has been selling some of its royalty oil to the North Pole refinery since it began operations in 1979. It’s the state’s largest refinery, producing predominantly jet fuel.

Flint Hills is a subsidiary of Koch Industries Inc. of Wichita, Kan.

—Wesley Loy