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Legislators pre-file oil and gas bills for 2002 session Rep. Whitaker proposes Alaska Gas Corp. and requirement to sell gas; Rep. Fate proposes changes to exploration credits, royalty reductions Kristen Nelson PNA Editor-in-Chief
Four oil and gas bills were pre-filed Jan. 4 for the 2002 session of the Alaska Legislature, which begins Jan. 14, two by Rep. Jim Whitaker, R-Fairbanks, and two by Rep. Hugh Fate, R-Fairbanks.
Fate’s bills extend existing legislation — chronologically or geographically.
Whitaker’s bills propose major changes, one establishing a public corporation to build a gas pipeline and the other authorizing the Department of Natural Resources to require natural gas development from state oil and gas leases. Alaska Gas Corp. Whitaker’s House Bill 302 would establish a public corporation, the Alaska Gas Corp., within the Department of Revenue to develop “a project plan to evaluate whether construction and operation of a natural gas transmission pipeline project by the corporation is feasible.”
Maximum benefit to the people of the state from the sale of Alaska North Slope natural gas, the intent language of the bill says, “may be realized only through public ownership of a corporate entity that performs the essential government function of providing transportation infrastructure that otherwise may not be provided…”
The bill provides that the Joint Committee on Natural Gas Pipelines of the 22nd Legislature will report to the governor, speaker of the house and president of the senate no later than the first day of the 23rd Alaska Legislature “based on conclusions drawn by qualified engineering, consulting and other entities considered appropriate as to whether the construction and operation of a natural gas transmission pipeline… (as defined in this bill) by a public corporation is feasible.”
The project to be evaluated includes the gas transmission pipeline and related property and facilities from Prudhoe Bay to the Interior and from there either along the Alaska Highway through Canada or to tidewater on Prince William Sound or both. Gas sales required The other bill pre-filed by Rep. Whitaker, HB 311, would limit the ability of the Department of Natural Resources to issue or extend oil and gas leases containing natural gas capable of being produced in paying quantities — unless the lessee contracts to sell gas from the lease.
The bill would change the statute so that oil and gas leases would only be automatically extended while both oil and gas are being produced from the leases. Current law provides leases “shall be automatically extended if and for so long thereafter as oil or gas is produced in paying quantities…” North Slope leases, for example, produce only oil.
Under the proposed legislation, leases would only be renewed if the lessee agrees to an amendment requiring it “to contract to sell the gas that is produced from the lease…”
The bill also provides that if there is more than one “qualified bona fide purchaser … the commissioner shall issue or extend the lease only if the lessee enters into an agreement with the qualified bona fide purchaser that, in the judgment of the commissioner, provides the greatest long-term return to the state.”
Small oil producers would be exempt from the requirement to also sell gas. Credits extended The bills pre-filed by Rep. Fate extend existing exploration and royalty credits.
HB 307 would delay to June 30, 2007, the last date for hydrocarbon exploration geophysical work or drilling of a stratigraphic test well or exploratory well to qualify for an exploration incentive credit. June 30, 2004, is the current expiration date.
HB 308 extends discovery royalty credits established for Cook Inlet to oil or gas discoveries in the Tanana River drainage basin. The law now provides for discovery royalty credits in the Cook Inlet sedimentary basin on leases entered into before March 3, 1997. The bill would not affect Cook Inlet leases.
Tanana River drainage leases would be eligible for the royalty credit for leases in existence before HB 308 becomes law.
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