House O&G bills in Finance; Senate has House's carbon storage
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Kristen Nelson Petroleum News
With less than a month remaining in this legislative session, bills related to energy -- specifically the impending Cook Inlet natural gas shortage -- and the governor's geothermal bill from last session have reached House Finance while the governor's carbon storage bill passed the House April 17 and is being heard in Senate Resources.
House Finance Co-Chair Rep. Neal Foster told the committee April 4 that he wanted to get energy bills before the Finance Committee or on their way an introduction, whether the committee moves them or not.
Furthest along The energy bill which has moved the furthest is the governor's carbon storage bill, HB 50, introduced last year and passed by the House April 17. HB 50 was heard and held in Senate Resources April 22 with invited and public testimony April 24; it also has a referral to Senate Finance. HB 50 would allow the Alaska Department of Natural Resources' Division of Oil and Gas to lease land for carbon storage projects, establish a regulatory regime within the Alaska Oil and Gas Conservation Commission and allow AOGCC to pursue primacy for Class VI carbon dioxide injection wells.
A goal of the bill is to establish another source of revenue for the state, but CCUS, carbon capture, utilization and storage, would also allow oil and gas companies to meet financing requirements that they capture carbon dioxide.
Another governor's bill introduced last year, HB 74, now in House Finance, would change how geothermal is licensed, basing it on the existing exploration licensing program used for oil and gas. It would allow more time for companies to identify a geothermal resource and convert it to leases. The current geothermal program requires a company to prove a commercial discovery; under HB 74, the requirement to convert to leases would be based -- as with exploration licensing -- on completion of a work commitment.
The bill also increases the amount of acreage available for a geothermal permit.
HB 394, by Rep. Tom McKay, would allow the Regulatory Commission of Alaska to regulate third-party natural gas storage. In the sponsor's statement McKay said HB 394 would provide a regulatory framework to encourage expansion of natural gas and liquefied natural gas storage facilities "but also ensures these critical pieces of energy infrastructure operate efficiently and remain economically viable." In addition to CINGSA, Cook Inlet Natural Gas Storage Alaska, a facility which RCA regulates and which provides commercial storage, producers have storage in the Cook Inlet basin which they use for their own gas. The bill had hearings in both House Finance and House Labor and Commerce and went to the House Rules Committee April 22.
In House Finance HB 223, by Rep. George Rauscher, was passed out of House Resources March 11. It would eliminate state royalty on gas produced outside of the North Slope, if explored for or produced after June 3, 2023, and if that gas is first offered for sale to an in-state electric or heating utility. The royalty would be reduced by 50% if the gas doesn't meet the offered for sale criteria.
HB 257, by McKay, out of Resources Feb. 14, would make Cook Inlet seismic and geophysical data available without cost to qualified individuals -- unless that data is required to be held confidential under state statute. Cook Inlet data currently accounts for less than 5% of statewide sales of such data, at an estimated revenue loss of $35,000 per year.
HB 387, a Resources Committee bill, out of Resources March 25, would create a tax credit to support bringing a jack-up rig to Cook Inlet by July 1, 2026. The credit would cover the total cost of purchasing and transporting a jack-up to Cook Inlet. Offshore prospects require a jack-up, and the one currently in Cook Inlet is tied up doing development work.
HB 388, a Resources Committee bill, out of Resources April 9, would establish a reserve-based lending fund at the Alaska Industrial Development and Export Authority. The bill does not allocate monies to that fund. The amount of the loan would be based on the oil and gas reserves held by the borrower. The bill is meant to address the high capital cost of new projects in Cook Inlet.
HB 393, another Resources Committee bill, out of Resources April 9, would reduce royalties on Cook Inlet wells drilled after July 1, 2024, to zero for gas wells and to 5% for oil wells; oil and gas from wells drilled before July 1, 2024, would pay 5% royalty. The bill also provides for deduction of capital expenditures for oil or gas development from the royalty burden, excluding the North Slope.
--KRISTEN NELSON
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