Amended NPR-A grant program bill moves

Bill addresses getting money from National Petroleum Reserve-Alaska lease bonus and royalty payments into Permanent Fund

Kristen Nelson

Petroleum News

A firefight between the state and the North Slope Borough appears to have been averted — at least for this session of the Alaska Legislature — with a compromise worked out in the House.

The issue is the 50 percent of federal lease bonus and royalty monies from the National Petroleum Reserve-Alaska that go to the State of Alaska, funds Congress has said should go first to communities impacted by oil and gas development in NPR-A.

Sen. Gary Wilken, R-Fairbanks, introduced a bill last year to address how these federal monies are allocated between communities impacted by development and the state Permanent Fund.

The federal allocation was established in 1980. In 1986 the Alaska Superior Court ruled that the monies were to be used for assistance to impacted communities before any other state use and said it was the responsibility of the Alaska Legislature to examine and evaluate the claimed needs, rank them, and meet those needs out of the NPR-A revenues. The grants are currently administered by the Alaska Department of Community and Regional Affairs.

Wilken said the way Congress directed the monies to be spent — for impacts first — created a conflict with the Alaska State Constitution, which specifies that at least 25 percent of “all mineral lease rentals, royalties, royalty sale proceeds, federal mineral revenue sharing payments and bonuses” the state receives shall be placed in the Permanent Fund.

His solution, introduced in Senate Bill 171 last year, was to create a committee within the Legislature to review the grants and to set up a mechanism to ensure that 25 percent of the federal monies go to the Permanent Fund. While grants to impacted communities would still have first call on the funds, if 25 percent of the monies were not left to go into the Permanent Fund in a given year, then the deficit amount would carry over from year to year until the Permanent Fund received the full 25 percent.

The North Slope Borough opposed the bill, especially distribution of grant monies by a committee of legislators, and there were acrimonious hearings in Senate committees last year.

The Senate passed an amended bill this February.

A version of the bill dealing with just one issue has now moved out of House committees.

A committee substitute from the House Community and Regional Affairs Committee cut out the legislative committee, focusing on ensuring that 25 percent of NPR-A monies reaches the Permanent Fund. Wilken told House Finance May 2 that only 6 percent of NPR-A funds have reached the Permanent Fund since 2000 and said the bill puts into place a mechanism to fix that problem.

How the distribution of the grant monies has been made is “equally troubling,” but Wilken said that issue has been put aside in the spirit of compromise for another day.

When Wilken testified April 27 in Community and Regional Affairs he said that he had met with the North Slope Borough and others in trying to find a middle ground — the committee substitute, taking out legislative allocation of grants, was the result.

Dennis Roper, special assistant to North Slope Borough Edward Itta for government and external affairs, told Community and Regional Affairs that the borough has followed the issue very closely. The borough did not ever feel the legislation was necessary, he said, but can live with the committee substitute.

Roper also said he appreciated discussions in Senate President Ben Stevens’ office on how to revolve the issues. He described those discussions as “difficult” but said they took place in a “fair and cordial atmosphere.”

Roper said the borough believes the Department of Community and Regional Affairs has done a good job in managing the grants.

He also said the borough appreciates the work done in 1980 by U.S. Sen. Ted Stevens in Washington, D.C., in working on this program to make the North Slope Borough a partner in NPR-A development.

Roger said there is no question that the subsistence lifestyle is the heart of the issue.