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Alaska legislative update: Stranded gas reauthorized Governor recommends increasing onshore lease acreage limit Kristen Nelson Petroleum News Editor-in-Chief
Alaska Gov. Frank Murkowski signed House Bill 16 April 7. The bill re-authorizes the Alaska Stranded Gas Development Act, allowing the state to negotiate fiscal terms for an Alaska gas pipeline with project sponsors.
The 1998 stranded gas act had an application deadline of June 30, 2001. HB 16 extends that deadline to March 31, 2005. The 1998 act applied only to liquefied natural gas projects. HB 16 expands qualified projects to include a natural gas pipeline or any other technology that commercializes the shipment of natural gas.
Requirements for qualified sponsors have also been changed: under a list of one or more criteria which a qualified sponsor must meet, the net worth requirement has been lowered from at least 33 percent to at least 10 percent of the estimated cost of a qualified project and the criteria for an unused line of credit has dropped from at least 25 percent to at least 15 percent of the estimated cost of project construction. Frontier lease acreage increase proposed A bill from the governor, introduced April 4, would increase the upland acreage limit for oil and gas leases, except for land north of the Umiat Meridian baseline. The current limit in state oil and gas lease acreage, per company, is 500,000 upland acres and 500,000 offshore acres.
"In the past few years," the governor said in an April 3 transmittal letter for House Bill 246 (Senate Bill 172 is the companion bill), "the Department of Natural Resources has been encouraging exploration of frontier areas such as the North Slope Foothills. The bill would increase the maximum upland acreage to 750,000, of which no more than 500,000 acres could be located north of the Umiat Meridian baseline.
"Thus," the governor said, "companies would be able to lease and explore acreage in Alaska's frontier basins while still maintaining their interests on the North Slope."
In a fiscal note accompanying the bill, Mark Myers, director of the Division of Oil and Gas, said that while it is impossible to predict what the increase in revenues might be from passage of the bill, there would be "positive revenue impact to the state from additional bonus bids, rentals, and eventually, production royalties." Extension of C-plans goes to governor Senate Bill 74, extending the renewal period for oil discharge prevention and contingency plans from three years to five years, passed the House April 7 and is awaiting transmittal to the governor. The act takes effect upon the governor's signature.
In his letter of transmittal, the governor said the five-year renewal period would streamline the review for both the state and industry, "while maintaining Alaska's strong oil spill prevention and response standards" and would allow the Alaska Department of Environmental Conservation to focus "on the actual testing of oil spill prevention and response readiness through in-the-field inspections, drills, and exercises…" The governor said the renewal period for federal oil spill response plans is five years.
The Senate amended the bill, finding "that focusing on the actual testing of oil spill prevention and response preparedness through in-the-field inspections, drills and exercises is our most effective means of ensuring spill prevention and response readiness" and environmental protection.
Plans already in place will be extended for two years or for a shorter period if requested by the plan holder, as long as the plan is in place on the day before the effective date of the act and the plan has no uncorrected violations.
Air permitting reform clears House The House unanimously approved House Bill 160 revising the state's emission control permit program. The April 4 vote was 38 to zero. A fiscal note on the bill, prepared by John Kuterbach, environmental conservation manager in DEC's Division of Air and Water Quality, said the bill revises "DEC's program to reflect national precedents, court case decisions and permit best practices." The bill differentiates major source from minor source permits and regulates "minor sources in a simpler way, with reliance on standardized permit conditions that incorporate best management practices." Current permits and practices for minor sources remain in force until minor source permit regulations are established.
The permit fee structure has also been changed "to make costs predictable and reliable for permittees." Regulation of natural gas pipelines House Bill 204, regulating natural gas pipelines, was moved out of House Resources April 9. The bill amends legislation passed in 2000 which allowed contract carriage for transportation of natural gas from the North Slope. HB 204 removes the North Slope reference, making contract carriage applicable to gas pipelines anywhere in the state. It is of interest to Marathon Oil and Unocal, partners in the Kenai Kachemak Pipeline under construction on the Kenai Peninsula to carry natural gas from Ninilchik to Kenai. The bill allows pipelines to charge different rates for firm (contracted) service and interruptible service (on an as-needed basis).
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