Governor: Alaska back in the oil and gas game

Murkowski thanks Legislature for cooperation on energy legislation

Kristen Nelson

Petroleum News Editor-in-Chief

Thanks to the Legislature, Alaska is back in the game as far as being a competitive oil and gas province, Gov. Frank Murkowski told the Resource Development Council's annual meeting June 13 in Anchorage.

The governor reviewed some of the legislation passed this session, and thanked the Legislature for its cooperation in putting things “in the state's toolbox” that make Alaska more competitive for oil and gas investment. The state hasn't been competitive in resource development, the governor said, and “capital goes to the highest return and the least risk — and it can go very quickly.”

The state was no longer competitive for investment with Russia, Mexico or Canada, he said. “But the action of the Legislature … now puts Alaska right in the middle…” in attractiveness for investment.

“Another item in the toolbox is the commitment to put in about 70 to 80 miles of road north of Atigun Pass to the west on state land. That's going to open up an area for oil and gas leasing and we feel we can recover enough cost from the sale of the leases to pay for the road,” Murkowski said.

He characterized legislation such as moving the Habitat Division into the Department of Natural Resources and substantially amending the state's coastal zone management program as “putting the (state's) house in order.”

The governor also mentioned the possibility of federal help for the state's oil industry. If a federal $3 a barrel incentive for heavy oil is passed, the governor said, the state could see a big increase in heavy oil production from the North Slope.

“We've got more heavy oil at West Sak than we have oil at Prudhoe Bay,” Murkowski said.

Right now, the governor said, Alaska is faced with the “sobering reality” that only three or four exploration wells are planned on the North Slope this coming winter.

“That's absolutely totally inappropriate in an oil-bearing province,” he said.

As far as changes in the state to make it more competitive as an oil and gas province, Murkowski said: “I think we're off to a pretty good start. … I'm happy to say, we're back in the game.”

More bills signed

House Bill 145, the governor's office said, attempts to address an imbalance, created under court cases, that has granted a special status to special interest litigants with respect to attorney fees and costs. It limits the award of fees and costs to only those portions of the suit that were devoted to the assertion of a constitutional right, only on those portions that prevailed, and only if the claimant did not have sufficient economic incentive to bring the suit.

House Bill 86, sponsored by Rep. Bud Fate, R-Fairbanks, provides that a person who obtains an injunction in the course of a bad-faith legal challenge to a state-permitted project will be held civilly liable for damages caused by the injunction. The bill also provides that the a coastal zone consistency determination may only be appealed by the applicant or the coastal district. A third provision states that a permitted project in Cook Inlet is considered legislatively approved and does not require added agency action and is not subject to judicial review.

House Bill 283, also by Rep. Fate, doubles the limit of the total aggregate acreage a person may hold in coal leases or permits, from 46,080 to 92,160 acres. The increase is supported by the Department of Natural Resources, and is consistent with federal law that also has increased the amount of federal leases that can be held.

House Bill 246 increases the amount of onshore chargeable acreage an oil and gas lessee may hold from 500,000 acres to 750,000. Of those, no more than 500,000 acres may be located north of the Umiat baseline. This change will allow companies to maintain their North Slope interests, while being able to lease and explore acreage in some of Alaska’s frontier basins. The bill also transfers authority to conduct audits of revenues from royalty and net profit shares generated by state oil and gas leases from Department of Revenue to DNR.