Alaska governor signs oil and gas bills

Legislation includes incentives and tax credits, shallow gas bill

Petroleum News Anchorage Staff

Alaska Gov. Frank Murkowski has signed a number of oil and gas bills this month.

He signed two bills June 11 in Wasilla: House Bill 28, sponsored by Rep. Vic Kohring, R-Wasilla, and Rep. Norman Rokeberg, R-Anchorage, is a fix to the state’s existing royalty reduction statute, and gives the commissioner of the Department of Natural Resources broader authority to decide at what level the royalty reduction should be set for marginal or unprofitable fields.

House Bill 267, sponsored by Kohring, authorizes the Alaska Railroad to issue up to $17 billion in tax-exempt bonds to finance building a gas pipeline.

Murkowski signed four bills June 11 at the Kenai Chamber of Commerce, where he praised members of the Legislature who worked to pass the legislation, especially Senate Bill 185, which contains severance tax credit provisions to encourage new exploration drilling for oil and gas.

“Why is this incentive necessary,” he asked?

“Simply because Alaska is no longer competitive. We don’t see the capital being invested here because other oil regions are offering better incentives. This tax credit, for exploration at least three miles from an existing well, and at least 25 miles from a unit under a plan of development, will provide the incentive to bring Alaska from dead last to about the middle, in terms of actual cost per dollar spent on exploration wells.”

SB 185, sponsored by Sen. Tom Wagoner, R-Kenai, also has a royalty reduction provision for older Cook Inlet platforms that will encourage continued oil production. “Continued production from these declining offshore reserves means continued jobs for the Kenai Peninsula and continued revenue to the state of Alaska,” Murkowski said.

Bills assist Agrium, Kenai pipeline

“This bill will help the Agrium plant at Nikiski stay in operation, although the plant will still be challenged by the need for a long term source of gas,” Murkowski said. “Our hope is that HB 57 will be one piece of the puzzle that keeps it in operation, providing solid job opportunities for the people of the Kenai Peninsula.”

HB 61, also by Chenault, is designed to stimulate gas exploration in areas south of the North Slope by authorizing an exploration credit of 10 percent against state corporate income taxes. The credit may be given only where there has not been commercial production, and where exploration leads to production of gas for sale and delivery.

SB 151, by Wagoner, amends a statute allowing a North Slope natural gas pipeline to charge separate rates for “firm” transportation, and “interruptible” transportation service, to make that provision available to any natural gas pipeline carrier operating in Alaska. Some shippers require “firm” transportation, which reserves availability of pipeline capacity, and is guaranteed by a reservation charge, while other shippers prefer “interruptible” service, the cost of which is based on shipments actually made and is subject to pipeline capacity and space availability.

“This change will allow greater flexibility for Kenai Kachemak Pipeline, as well as future pipeline companies, to respond to the needs of their customers,” Murkowski said.

Shallow gas development bill signed

The bill amends statutes that exempt oil spill discharge prevention and contingency plans by expanding the exemption to cover both exploration and production facilities, not just exploratory drilling, on a state shallow gas lease; allows the Alaska Oil and Gas Conservation Commission, in the case of shallow natural gas exploration or development, to streamline the approval of a variance from its regulations affecting a single well or single field; grants the commissioner of the Department of Natural Resources the ability to waive local planning authority approval and requirements relating to compliance with local ordinances and regulations, if the department clearly demonstrates an overriding state interest; and deems shallow natural gas projects that are conducted under the oversight and regulation of the commission and the departments of Natural Resources, Environmental Conservation and Fish and Game consistent with the Alaska Coastal Management Program.