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Legislature passes several resource bills in final days Approved: lease acreage increase, gasline bonds, tax credits, RCA extension Kristen Nelson Petroleum News Editor-in-Chief
The Alaska Legislature, which adjourned May 21, passed a number of resource bills in its closing days, bills which increased acreage and offered incentives for development. This is the first year of the two-year session. The Legislature reconvenes Jan. 12.
Among bills with the most bipartisan support were increases in acreage, both for coal and for oil and gas leases.
House Bill 283, doubling the acreage of state coal leases an individual or company may hold, passed the Senate unanimously and will go to the governor for his signature. Also popular in the House, where it passed 34-1, the bill increases the state coal lease limit from 46,080 acres to 92,160 acres. The bill was sponsored by Hugh Fate, R-Fairbanks, and brings Alaska statute in line with recent changes in federal coal acreage limits in the Lower 48 states.
House Bill 246, increasing the amount of state oil and gas lease acreage an individual or company can hold, passed the Senate unanimously. The House concurred on Senate changes. This is an administration bill. It increases the upland acreage limit for oil and gas leases from 500,000 acres to 750,000 acres, except for land north of the Umiat Meridian baseline.
The increase was recommended by the Alaska Division of Oil and Gas because new state programs conducive to holding larger blocks of land have been initiated since the original limits were imposed, including areawide leasing, shallow gas leasing and exploration licensing. New areas of the state have also been opened to leasing as a result of some of the programs, such as the gas-prone Brooks Range Foothills. Bonds for gas pipeline Another bill with broad support was House Bill 267, gas pipeline financing through the use of Alaska Railroad bonds. The bill, sponsored by Vic Kohring, R-Wasilla, was approved 20-0 in the Senate and 35-0 in the House. The bill authorizes the Alaska Railroad to issue tax-exempt bonds to raise funding for construction of a natural gas pipeline from the North Slope.
HB 267 authorizes the Railroad to issue up to $17 billion in bonds for the pipeline.
Kohring said this bill complements the reauthorization of the Alaska Stranded Gas Development Act, passed earlier in the session. That bill, sponsored by Hugh ‘Bud’ Fate, R-Fairbanks, allows the state to negotiate with producers for a payments in lieu of taxes and royalty adjustments for natural gas sales. Oil and gas incentives, tax credits The Legislature also passed royalty, incentive and tax credit measures.
The most recently passed, House Bill 28, by Vic Kohring, R-Wasilla, and Norman Rokeberg, R-Anchorage, provides a more flexible method to calculate oil and gas royalties, allowing the state to encourage production of oil and gas fields that might be marginal or not economically feasible under the current system. This bill passed the House 36-0, and the Senate 20-0.
House Bill 57, royalty gas contracts, by Mike Chenault, R-Nikiski, gives the commissioner of the Alaska Department of Natural Resources authority to negotiate royalty contracts on natural gas and includes manufacturers in the process. This goal here is to keep Agrium’s Nikiski fertilizer plant operating because of the importance of the plant to the Kenai Peninsula’s economy. It passed the House 30-6, the Senate 16-4; the House concurred with Senate changes 28-8.
House Bill 61, also by Chenault, creates a new income tax credit for exploration and development of natural gas reserves south of the Brooks Range. The bill passed the House 33-4, on reconsideration, it passed the Senate 20-0; the House concurred with Senate changes 34-0. This credit sunsets Jan. 1, 2013.
Senate Bill 185, by Tom Wagoner, R-Kenai, started life as a royalty reduction bill for oil produced from Cook Inlet fields and platforms as they near the end of production capability, with a goal of keeping facilities operating as long as possible. The bill was amended at the request of the governor to include tax credits for exploration in the next four years.
On the Cook Inlet royalty reduction, Wagoner said: “The choice is simple. Provide these smaller oil producers some monetary incentive in the form of royalty relief or lose the royalty revenues all together as these producers pack-up and leave Alaska. To me the choice is easy.”
He said the royalty reductions will keep “critical infrastructure in place in the event that new deposits are discovered.”
The tax credit amendment is aimed at bringing the cost of exploration in Alaska more in line with costs of exploration in other oil provinces around the world.
The vote in the House was 32-4, the vote in the Senate to concur with House amendments was 14-6. RCA, Alaska Energy Policy Task Force The Legislature approved extension of the Regulatory Commission of Alaska. The Senate approved House Bill 111 20-0; the House had approved that measure 36-0.
House Concurrent Resolution 21, sponsored by John Harris, R-Valdez, establishes a nine-member Alaska Energy Policy Task Force to review and analyze the state’s current and long-term energy needs.
The task force will submit a report to the Legislature on a Railbelt energy plan by Dec. 31, and a plan for non-Railbelt areas by March 31; the task force terminates April 15. The resolution passed the House 34-0 and the Senate 18-1. Permanent fund deposits House Bill 11, by Norman Rokeberg, R-Anchorage, was approved by the Legislature. The bill changes the statute that directs 50 percent of Alaska’s mineral revenues to the Permanent Fund and returns the amount to the constitutionally required 25 percent. The bill passed the Senate 11-9; the House concurred with Senate amendments by a vote of 21-12.
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