Exploration incentive credit bill stalls in Senate Resources Committee

Kristen Nelson

Chairman John Torgerson of the Senate Resources Committee said March 18 that the committee will hold House Bill 307, which extends exploration incentive credits, pending work on legislative intent and more information on how the state’s various oil and gas incentives can overlap.

The bill, sponsored by Rep. Hugh Fate, R-Fairbanks, passed the House Feb. 20. It extends by three years the state’s current exploration incentive program, which allows the commissioner of the Department of Natural Resources to approve credits against royalties and taxes for exploration data, if the information gained would be beneficial to the state.

Division of Oil and Gas Director Mark Myers told the committee that DNR is neutral on the bill. Credits for this program have not been used, he said, although there have been two applications. One application was denied because the state didn’t see value in the information the company wanted to gather. In the other case, he said, Anadarko Petroleum Corp. applied for a credit for seismic data in the National Petroleum Reserve-Alaska, but decided not to accept the state’s offer to pay 18 percent of the seismic program because the state would have then had the right to show Anadarko’s seismic to other companies.

Goal to increase competition

The request to extend the program came from Andex Resources LLC, which has applied for an exploration license in the Nenana Basin.

Jim Dodson of Andex told the committee that were the exploration incentive credits available, the company’s program could be larger: more extensive seismic, or 3-D seismic instead of 2-D seismic or a deeper well. It lets our money go further, he said, and the gain for the state is more data and encouraging more exploration in the state.

Torgerson asked if Dodson knew the program wasn’t applicable on state leases, and Dodson said Andex was interested in using the program on the area the company would hold under an exploration license, not on leased acreage.

Torgerson asked Myers how many companies would qualify under exploration licensing, and Myers said the state has granted one license and has three applications, including the one from Andex.

Myers said the exploration incentive credit would allow a company’s exploration dollars to go further in an exploration license area, but said making exploration dollars go further probably wasn’t the original intent of the bill.

Myers said DNR was also concerned that exploration incentives be for work in addition to the dollar commitment which is the bid item on an exploration license.

Both Torgerson and Sen. Rick Halford asked Myers for information on how the exploration incentive credit could be combined with other incentive programs to decrease state income.