Rokeberg proposes modification of royalty incentives for marginal fields

Petroleum News Alaska Staff

Rep. Norman Rokeberg, R-Anchorage, introduced a bill Feb. 8 allowing the Department of Natural Resources to modify the royalty for fields, or portions of fields, which are uneconomic.

“I think it’s important that we have an incentive program in place in this state for the development of marginal oil and gas fields,” Rokeberg said in a statement. “We don’t need to leave oil in the ground in Alaska. It’s important for our economy that we get as much production and revenue from our oil fields as we can.”

Rokeberg said the state has had laws to encourage production from marginal oil and gas fields, and in 1995 the Legislature passed House Bill 207 to lower state oil royalties to encourage production, or to raise them when economic conditions warranted it. That law, he said, has been described as unusable, unintelligible and overly burdensome, and the only effort to seek such incentives in the past seven years was denied.

He said House Bill 394 provides modification of the state’s royalty share on a sliding scale or other mechanism based on a change in the price of oil or gas and other relevant factors, including production rate, projected ultimate recovery, development costs and operating costs.

“Alaska needs to be able to compete in the global market”, Rokeberg said. “Companies operating in Alaska are competing on a global basis for capital dollars to expand exploration and production and to keep operating in Alaska. When fields are uneconomic, we need to have a workable plan in place allowing for a reduction in the state’s royalty share if that will keep a field in production or allow for development of a new field that might otherwise be uneconomic.”

Rokeberg said no company or person encouraged him to introduce his legislative remedy. He said he has wanted to correct the problems created by HB 207 for years, to help the state better meet its financial obligations by encouraging the maximum use of known oil resources.