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Vol. 11, No. 2 Week of January 08, 2006
Providing coverage of Alaska and northern Canada's oil and gas industry

Old, new bills on agenda

House Ways to hear gas, oil tax bills; another proposes uniform permit app

Kristen Nelson

Petroleum News

The 24th Alaska Legislature reconvenes for its second session Jan. 9, and while it is waiting, along with the rest of the state, for a gas pipeline fiscal contract to review, it has other oil and gas issues on its agenda.

House Ways and Means has already scheduled hearings on two oil and gas tax measures introduced last session: House Bill 63, by Rep. Les Gara, D-Anchorage, an oil severance tax bill and HB 223, a natural gas pipeline incentive/gas tax, by Rep. Eric Croft, D-Anchorage, bills designed to garner more revenue for the state under high oil prices and to tax gas if a gas line is not built.

Other legislators have pre-filed matching House-Senate bills which address oil and gas permitting issues.

Rep. Berta Gardner and Sen. Gretchen Guess, both Anchorage Democrats, pre-filed bills requiring adoption of a “unified permit application form by the natural resource agencies; and providing for online permit applications.”

HB 336 and Senate Bill 203 give the state’s resource agencies — the departments of Environmental Conservation, Fish and Game and Natural Resources — until July 1, 2007, to adopt a unified permit application form. Following the adoption of the form, “the unified permit application shall be the only application required for any permitting action by the resource agencies when a project requires permits from two or more resource agencies.” The bills also provide that the resource agencies will make the uniform forms available in both electronic and printed formats.

Natural resource agencies would be required to provide permit application information on the Internet by July 1, 2007, and by July 1, 2008, to have an interactive application on the Internet, “or other means for an applicant to determine what permit or permits” the applicant must obtain from each resource agency, along with “information concerning the procedure for each agency’s review of a unified permit application.”

By July 1, 2008, each agency must also have in place the process for submitting the unified permit application on the Internet.

Permitting an issue

Industry has complained about the number of different permit applications required by different departments.

John Barnes, Marathon Oil’s Alaska manager, has tabulated and talked about the number of permits required for work on the Kenai Peninsula, where Marathon is a major natural gas producer and explorer.

Geological consultant Arlen Ehm raised the issue of multiple, and different, forms at a House Special Committee on Oil and Gas hearing in November. The committee had asked what the Legislature could do to encourage independent activity in the state. Gardner is a member of the committee.

Ehm told the committee that Lower 48 independents aren’t interested in coming to Alaska because of high entry costs, high operating costs, high risk, permitting problems, excessive bureaucracy, excessive environmental constraints, long lead time, remote exploration targets, seasonal operational restrictions, lack of infrastructure and seasonal access.

Ehm said the state can’t do anything about most of those problems, but it can address permitting problems. He said companies looking at Alaska have all heard “horror stories about the permitting process.”

He recommended cataloguing existing regulations for permitting, developing “a unified integrated information gathering system covering all agencies thereby avoiding duplication,” putting this online where applicants can access it and where all the agencies can retrieve applications filed online.

Ways & Means hearings

The House Special Committee on Ways and Means has scheduled a hearing on HB 223 for Jan. 11 and on HB 63 for Jan. 13.

This will be the first hearing for the bills. HB 63 was introduced in January 2005; HB 223 was introduced in March 2005.

In his sponsor’s statement Gara said HB 63 recognizes that smaller and older fields need some severance tax relief, but provides for a minimum production tax of 5 percent, a “modestly” higher tax at higher oil prices and a lower tax at lower oil prices.

Gara characterized HB 63 as the “Alaska fair share bill.”

While the state is still negotiating with the North Slope producers for gas pipeline fiscal terms, those negotiations have been expanded to include oil taxes. Changes in the state’s oil taxation would require legislation.

Gara has also pre-filed HB 332 and HB 333, which would provide what he describes as a “modest increase in oil taxes” to fund education enhancements. HB 332 would provide schools with funds to hire parental involvement coordinators as well as funding financial incentives for teachers to obtain masters degrees, Gara said in a Jan. 4 statement. HB 333 would create a fund to reinstitute public pre-school for parents who want their children to attend school before Kindergarten. Gara and Rep. David Guttenberg, D-Fairbanks, are the sponsors of HB 340, which would levy a supplemental income tax on oil revenue for postsecondary and vocational education and create grant programs for postsecondary and vocational education students.

Croft’s gasline now act

Croft said in his sponsor statement that HB 233 “is a useful tool for guaranteeing construction of a gas pipeline from the North Slope, encouraging exploration for natural gas, and for filling the state’s structural budget deficit until that pipeline gets built.” Croft’s proposal is to charge “a fee for storing Alaska’s gas in the largest gas fields,” a fee which would go away once a gas pipeline is completed.

Croft is also gathering signatures to put this proposal on the ballot as an initiative.

The annual tax would be 3 cents per thousand cubic feet of gas at Prudhoe Bay and Point Thomson; once a pipeline is built and gas is flowing, Croft said, a company could get the amount of the tax back as a credit against severance tax on natural gas shipped in the line.

Energy studies, energy reimbursements

Rep. Ethan Berkowitz, D-Anchorage, has introduced a bill to create the Alaska energy research and development program in the Alaska Energy Authority, with a Committee on Alaska Energy Research and Development to assist in program development.

The goal of the program would be to “improve the development and application of reliable and cost-efficient alternative energy sources in the state to reduce the cost of energy paid by Alaska communities and make them less dependent on nonrenewable fuels and costly energy supplies.”

Senators Gene Therriault, D-North Pole, and Al Kookesh, D-Angoon, co-sponsored two bills, SB 214 and SB 215, proposing to use some of the state’s oil tax revenues for energy assistance and weatherization and as an energy dividend for 2005.

Therriault said in mid-December that the proposals would give back a portion of the state’s current budget surplus to Alaska by a $250 energy rebate, additional funds for Power Cost Equalization and $10 million for the Low Income Weatherization Program (see story in Dec. 18, 2005, issue of Petroleum News).

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