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Legislators propose gas lease buyback Prefiled bills include help for small mining operations Larry Persily Petroleum News Juneau Correspondent
The state of Alaska would buy back shallow natural gas leases on the lower Kenai Peninsula and impose a moratorium on any new leases in the region, under legislation proposed by two of the area’s House and Senate members.
“This is not a general statement that we don’t want to drill for gas,” said Rep. Paul Seaton, a freshman Homer Republican. Nothing in the legislation would affect conventional oil and gas drilling anywhere in Cook Inlet or on the Kenai Peninsula, Seaton said.
Seaton’s bill, House Bill 364, and an identical measure, Senate Bill 250, sponsored by Kodiak Republican Sen. Gary Stevens, were among the first batch of bills filed in advance of the Jan. 12 opening of Alaska’s 121-day legislative session.
The lawmakers are working together “in response to overwhelming constituent feedback opposing shallow natural gas development” in the area, Seaton said in a prepared statement.
About 23,000 acres are under lease for coalbed methane exploration on the Kenai Peninsula near Homer, a little more than 100 air miles south of Anchorage. The Legislature in 1976 closed Kachemak Bay, in front of Homer, to oil and gas leasing. This year’s proposal would extend the closure to adjacent upland areas. Fisheries key reason for closure “The findings that justified closing Kachemak Bay to oil and gas development in the ’70s still apply today and should be extended to protect the mainland habitat,” Seaton said, citing the area’s abundant commercial and sport fisheries and marine life.
The legislation would not address similar opposition from residents of the Matanuska-Susitna Borough north of Anchorage to almost 230,000 acres of coalbed methane leases in their area.
The lease buyback provision would require the state to either negotiate a cash payment for the leases or a credit that could be applied against future state lease bonuses or rentals, permit fees, royalties or oil and gas taxes.
The state Natural Resources commissioner would be allowed under the legislation to take back the leases by eminent domain if negotiations fail to reach a sales price.
Also among the pre-filed bills introduced Jan. 2 are: Savings proposed for small mining operations Fairbanks Republican Bud Fate wants the state to help small mining operators by granting them lease rental and royalty breaks.
House Bill 344 would give small operators a 5 percent reduction in their per-acre state mining lease rental fees for up to five years after claims are located. The bill also would cut small operators’ royalty payments to the state from the current 3 percent of net income to 1 percent for the first three years of production.
The fee and royalty reduction would apply only to placer miners holding 20 or fewer mining claims totaling less than 800 acres, and hard rock mining operators holding 50 or fewer claims totaling less than 2,000 acres.
Fate’s bill also would allow miners to take as a credit against future production royalties an amount equal to their net losses during the first three years of production on a claim.
“HB 344 will not solve all the financial problems for the small miner but will show them that we are opened for business and want to help in any way we can,” Fate said. Bill aims to help protect property owners Senate President Gene Therriault wants legislators to clarify state statute for determining when property owners are financially harmed by subsurface leaseholders’ oil and gas development and how to compensate them for any damages.
Therriault, a North Pole Republican, represents a district that includes Sutton in the Matanuska Valley, where many residents are complaining that potential coalbed methane development could damage their property and lower its value.
Senate Bill 240 attempts to help answer “the big gray area” of making property owners whole if subsurface development damages their property, Therriault said. Measure would help Bristol Bay leasing Unalaska Republican Carl Moses’ House Bill 335 would allow the Department of Natural Resources to get started a year earlier on preparing a report to lawmakers on proposed oil and gas lease sales. Moses represents the Bristol Bay area of Western Alaska, which the state is looking at for oil and gas leasing.
The bill would allow the department to present to legislators in January 2006 a report on potential Bristol Bay leases instead of waiting until 2007. The governor is looking for legislative approval to fund the lease preparations in fiscal 2005.
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