Legislature(2009 - 2010)BUTROVICH 205

02/08/2010 03:30 PM RESOURCES


Download Mp3. <- Right click and save file as

* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
*+ SB 208 DNR STUDY ON NATURAL GAS TELECONFERENCED
Heard & Held
*+ SB 203 COOK INLET GAS STORAGE FACILITIES TELECONFERENCED
Heard & Held
*+ SB 228 TAX INCENTIVES FOR GAS-TO-LIQUID TELECONFERENCED
Heard & Held
+= SB 195 MAKE GOLDSTREAM PUBLIC USE AREA PERMANENT TELECONFERENCED
Moved SB 195 Out of Committee
+ Bills Previously Heard/Scheduled TELECONFERENCED
                                                                                                                                
                SB 208-DNR STUDY ON NATURAL GAS                                                                             
                                                                                                                                
3:36:40 PM                                                                                                                    
CO-CHAIR   WIELECHOWSKI   announced  SB   208   to   be  up   for                                                               
consideration.                                                                                                                  
                                                                                                                                
MICHELLE SYDEMAN,  staff to Senator  Wielechowski, sponsor  of SB
208,  explained  that  many  share a  growing  concern  over  the                                                               
dwindling reserves  of natural gas  in Cook Inlet. Last  year the                                                               
committee  heard  testimony  on  this  topic  from  Kevin  Banks,                                                               
Director, Division  of Oil  and Gas,  and Bob  Swenson, Director,                                                               
Division  of Geological  and Geophysical  Survey,  both with  the                                                               
DNR. They were  all shown a chart that is  in their packets today                                                               
that is known  as "The Waterfall Chart,"  which depicts declining                                                               
production  from Cook  Inlet wells.  Unless  there is  additional                                                               
exploration  and  identification  of  new reserves  by  2012  the                                                               
possibility  exists  of  homes  and  businesses  in  Southcentral                                                               
Alaska not having sufficient gas.                                                                                               
                                                                                                                                
She  said  that  earlier  this  year  the  DNR  completed  a  new                                                               
assessment  of  known  possible and  probable  reserves  in  Cook                                                               
Inlet. The review  concluded that if sufficient  investing in the                                                               
Inlet  were  made,  supplies  could last  a  great  deal  longer,                                                               
certainly into  the next  decade. This  would be  especially good                                                               
for the  local economy  since gas produced  locally would  not be                                                               
subject to expensive tariffs or other transportation costs.                                                                     
                                                                                                                                
MS. SYDEMAN  said the  challenge still  remains of  deciding what                                                               
actions the  state should take  if any  at all to  encourage more                                                               
natural gas exploration and production in the Inlet.                                                                            
                                                                                                                                
3:37:34 PM                                                                                                                    
SENATOR HUGGINS joined the committee.                                                                                           
                                                                                                                                
3:37:43 PM                                                                                                                    
MS.  SYDEMAN remembered  the  June 4  meeting  in Anchorage  when                                                               
producers from Cook  Inlet were asked what could be  done to help                                                               
them feel  more comfortable investing  there. So, she  said, this                                                               
bill examines which incentives are  most likely to work and which                                                               
would  simply  transfer precious  state  dollars  from the  state                                                               
treasury  to  companies  that  otherwise  might  have  sufficient                                                               
incentive  to invest  in the  Inlet if  proper market  conditions                                                               
exist. It  asks if the state  can take steps other  than lowering                                                               
tax rates or increasing credits  that might have a greater effect                                                               
on  private  sector  behavior.   This  question  is  particularly                                                               
compelling in  light of  the very modest  tax rates  and generous                                                               
tax credits  the producers  in the Inlet  already enjoy,  and the                                                               
fact that the  Legislature has gone to lengths  to encourage more                                                               
gas  production  in the  Inlet.  It  asks  to what  extent  those                                                               
incentives are working, because that is not exactly known now.                                                                  
                                                                                                                                
Before  the  state  leaps to  offer  additional  incentives,  Ms.                                                               
Sydeman stated,  this bill  seeks to  answer questions  like what                                                               
other jurisdictions are doing to  promote more investment. If the                                                               
small  size of  the  market in  Alaska is  an  impediment to  new                                                               
exploration and production,  which they all heard  last June, are                                                               
can the  state take steps  to enhance  the market to  ensure that                                                               
producers see a  return on their investment in  a reasonable time                                                               
frame?  Could it  commit  to buying  proven  reserves upfront  so                                                               
investors don't have  to wait years to  realize their investment,                                                               
for instance?                                                                                                                   
                                                                                                                                
MS. SYDEMAN  said last week  they heard testimony that  the state                                                               
already reimburses  companies for roughly 45-65  percent of their                                                               
exploration costs.  Given this  fact, how  can the  state partner                                                               
more  effectively  with industry  to  ensure  that the  needs  of                                                               
Alaskans for a  long-term, affordable and reliable  source of gas                                                               
are met?  Would it be  worthwhile to consider establishment  of a                                                               
state entity  like ANGDA  to partner with  the private  sector to                                                               
explore in areas  where a critical need for gas  exists? She said                                                               
this bill calls  for a speedy analysis of  these questions before                                                               
new  incentives  are  enacted.  It  asks  Department  of  Natural                                                               
Resources (DNR) and the Department  of Revenue (DOR)to assess the                                                               
effectiveness  of  existing  incentives, propose  new  incentives                                                               
they believe  will be useful and  then look more broadly  at what                                                               
other strategies  the state  might employ  to make  sure Alaskans                                                               
don't  tumble down  the cliff  depicted in  the waterfall  chart.                                                               
Most   importantly,  it   calls  for   this  work   to  be   done                                                               
expeditiously -  by November 1  of this year, so  the legislature                                                               
can act swiftly  next year once the foundation  for more informed                                                               
decisions has been laid.                                                                                                        
                                                                                                                                
3:41:39 PM                                                                                                                    
KEVIN BANKS,  Director, Division  of Oil  and Gas,  Department of                                                               
Natural  Resources  (DNR),  said   he  was  available  to  answer                                                               
questions on SB 208.                                                                                                            
                                                                                                                                
SENATOR  WAGONER said  he  wanted  Mr. Banks  to  talk about  how                                                               
important  the market  is  versus the  incentive  to explore.  He                                                               
thought  they had  already incentivized  gas exploration  in Cook                                                               
Inlet as much as possible some years ago.                                                                                       
                                                                                                                                
3:42:45 PM                                                                                                                    
MR. BANKS responded that was a  good point and that the waterfall                                                               
chart  is  as  much  a  function of  decline  in  demand  in  the                                                               
marketplace as it is a  decline in production. The real challenge                                                               
in the Cook  Inlet market is that it has  essentially three large                                                               
sellers of gas  and three or so  consumers of gas in  the form of                                                               
the  electric  utilities  and  the  local  distribution  company,                                                               
EnStar. As a consequence, the  marketplace has few players. So he                                                               
likes  to say,  "The market  is  free, but  it's not  necessarily                                                               
competitive."                                                                                                                   
                                                                                                                                
3:44:10 PM                                                                                                                    
Furthermore,   he   remarked,   it's   challenged   because   the                                                               
contracting arrangements  among all  of the parties  don't always                                                               
come due  at the same time.  So, one contract will  expire and it                                                               
may be the  only time that buyers and sellers  are interacting in                                                               
the marketplace  until another contract is  negotiated. There are                                                               
very few  indicators of what  the market  price is or  should be,                                                               
and  it's  difficult to  know  what  market incentives  exist  to                                                               
encourage  new production  in the  kind  of "surplus  production"                                                               
that the  Inlet has enjoyed  for so long -  the lack of  which is                                                               
creating some anxiety about future supplies.                                                                                    
                                                                                                                                
3:44:59 PM                                                                                                                    
SENATOR STEDMAN  asked if he has  seen any changes since  the PPT                                                               
was passed and if they need to review that work.                                                                                
                                                                                                                                
MR. BANKS answered that at the  moment, the tax rate that applies                                                               
to gas in the Cook Inlet  is only about $17.07/mcf, and as prices                                                               
for gas  change in time, that  number will remain the  same under                                                               
the current  tax regime. Tax credits  can be used in  Cook Inlet,                                                               
but he  didn't know how  the credits  and tax rate  interact with                                                               
each  other;  DNR  might  better  respond to  that.  It  was  his                                                               
impression that the tax and  royalty provisions that apply in the                                                               
Cook Inlet exert kind of a light touch on production there.                                                                     
                                                                                                                                
Several  fields  have  only  a 5-percent  royalty  as  result  of                                                               
legislation  that  was  done  10 years  ago.  He  mentioned  that                                                               
Armstrong is  developing the North  Fork Unit  - one of  those 5-                                                               
percent royalty fields.  So in a sense, a lot  of the stimulus in                                                               
terms of tax and royalty incentives  is already in place. Then to                                                               
follow  on  from  Senator  Wagoner's   point,  it  would  behoove                                                               
legislators  to try  to get  a  better understanding  of how  the                                                               
market interacts,  so they might  considering doing  something to                                                               
expand it.                                                                                                                      
                                                                                                                                
CO-CHAIR WIELECHOWSKI  said this  is one of  the first  things he                                                               
looked  into when  elected over  three years  ago and  they still                                                               
don't have  an answer. Some of  the lowest tax and  royalty rates                                                               
in  the  nation  are  in  Cook Inlet;  so  that  looks  like  the                                                               
incentives that are  in place are not working and  his thought is                                                               
to step  back and  get some experts  to evaluate  how exploration                                                               
can be spurred.                                                                                                                 
                                                                                                                                
3:48:40 PM                                                                                                                    
SENATOR  WAGONER said  no  one  will explore  and  drill for  gas                                                               
without a  market or  a place to  put it. Right  now there  is no                                                               
place  to put  it; the  only  outlet is  the LNG  plant. Has  any                                                               
producer other than  ConocoPhillips or Marathon put  any gas into                                                               
the LNG plant?                                                                                                                  
                                                                                                                                
MR. BANKS said he didn't know.                                                                                                  
                                                                                                                                
3:49:48 PM                                                                                                                    
JOHN  IVERSON,  Director,  Tax Division,  Department  of  Revenue                                                               
(DOR),  said  that exploration  in  Cook  Inlet is  very  heavily                                                               
incentivized from a tax credit perspective.                                                                                     
                                                                                                                                
SENATOR  HUGGINS stated  that  it  appears that  this  area is  a                                                               
victim  of a  lack of  effort and  the subject  gets just  probed                                                               
whenever  it comes  up. He  has listened  to the  department talk                                                               
about all  the gas there  and he has seen  the charts and  all we                                                               
have  to do  is go  get it.  The two  jack-up rigs  the Murkowski                                                               
administration  talked  about "just  went  away."  Right now  the                                                               
state  has an  in-state gas  coordinator that  is supposed  to be                                                               
working on things  like this. Enstar and ANGDA  have been working                                                               
on it, the  Railbelt consolidation is going on,  and then there's                                                               
the RCA  that no  matter what  solution they  come up  with, they                                                               
tend  to  be  able  "to  just screw  it  up"  because  long  term                                                               
contracts can't be  used. He asked Mr. Banks if  he was "Mr. Cook                                                               
Inlet," programmatically, what  three things would he  do in Cook                                                               
Inlet?                                                                                                                          
                                                                                                                                
3:53:19 PM                                                                                                                    
MR. BANKS  answered that he  looks at the problem  from different                                                               
perspectives.  Number  one, the  size  of  the market  is  pretty                                                               
small; number two,  the Cook Inlet region  has enjoyed relatively                                                               
low gas prices because it  had a surplus of productive capability                                                               
- people looking for oil found  large gas fields. It was actually                                                               
cheaper to just drill another  producing well than to do anything                                                               
else. If we  want to go back  to the time where we  had this kind                                                               
of surplus  productive capacity,  then that  tends to  mean there                                                               
are  different kinds  of problems  to  solve. First  of all,  the                                                               
market  must be  bigger.  It has  to have  some  kind of  support                                                               
either in exports or some other  kind of demand. The issue, then,                                                               
is if gas  can be found for prices that  are attractive for those                                                               
kinds of projects.                                                                                                              
                                                                                                                                
3:55:21 PM                                                                                                                    
MR. BANKS said he is convinced  that Cook Inlet has a fair amount                                                               
of gas in the ground, and the trigger  to get it to market is not                                                               
just a  matter of price, although  that is important. A  place to                                                               
put  it  is also  needed;  and  this requires  increasing  costly                                                               
investments.                                                                                                                    
                                                                                                                                
He said the he would look for  ways to expand the market, ways to                                                               
export, and create  situations within the market  today that will                                                               
solve  some of  the  more critical  problems.  For instance,  the                                                               
supply on an  annual basis as indicated in the  supply studies is                                                               
part of the problem, but gas  supply is also needed in the winter                                                               
when it's  cold and consumption  rates are high. Storage  will be                                                               
needed  for  that.   They  also  need  to  make   sure  that  the                                                               
infrastructure for supplying  gas to homes will not  break down -                                                               
so reliability  is another  factor. Also  some kind  of mechanism                                                               
should be considered so that a  lessee or a producer doesn't have                                                               
to strand his supply  of gas in order to give  the state peace of                                                               
mind knowing  that it has a  sufficient supply of gas  - whatever                                                               
that means.                                                                                                                     
                                                                                                                                
3:56:46 PM                                                                                                                    
SENATOR HUGGINS  said effort are going  on right now to  work LNG                                                               
imports and  he characterizes that as  - okay we can't  solve our                                                               
problems,  so we'll  buy somebody  else's product  and invest  in                                                               
their jobs. He  hangs his head when he thinks  about it. He asked                                                               
Mr. Banks if he was aware of those efforts.                                                                                     
                                                                                                                                
MR. BANKS answered no.                                                                                                          
                                                                                                                                
SENATOR HUGGINS remarked, "Call  the Railbelt Consolidation guys,                                                               
because they're doing it."                                                                                                      
                                                                                                                                
MR. BANKS  asked if he  was referring to the  integrated resource                                                               
development plan.                                                                                                               
                                                                                                                                
SENATOR HUGGINS said that is part of it.                                                                                        
                                                                                                                                
CO-CHAIR WIELECHOWSKI  agreed with  him and  said that  all these                                                               
groups  have  been studying  these  problems  for years,  but  no                                                               
comprehensive plan has been developed for it.                                                                                   
                                                                                                                                
3:58:22 PM                                                                                                                    
SENATOR  STEDMAN asked  Mr. Banks  to  clarify what  he means  by                                                               
expanding and "unstranding" the Cook Inlet area.                                                                                
                                                                                                                                
MR. BANKS  replied that he  means if the goal  is to be  where we                                                               
used to be with  excess gas supply, the only way  to have that is                                                               
to  have a  larger  market.  But the  industrial  LNG market  was                                                               
created to take up excess  supply. When consumers needed the gas,                                                               
there  was an  opportunity to  direct production  into the  local                                                               
market.  To  the  extent  that  the reserves  on  the  graph  are                                                               
"stranded" it means that people  are not drilling for these kinds                                                               
of supplies of  gas because they know that unless  they can enter                                                               
into some  kind of agreement  with a  local utility, there  is no                                                               
point in drilling today. So, a  producer will wait until it has a                                                               
supply  contract with  certain supply  requirements that  must be                                                               
met  and then  make  the drilling  commitments  to satisfy  those                                                               
requirements. It  seemed to him  that a broader market  with more                                                               
players would create conditions for more production.                                                                            
                                                                                                                                
4:00:27 PM                                                                                                                    
SENATOR STEDMAN asked  what part the long  term pricing contracts                                                               
play into this and how do  they incentivize producers to drill if                                                               
they aren't  able to get  a long term  contract to make  it worth                                                               
their while to go drill.                                                                                                        
                                                                                                                                
MR. BANKS  replied that  he was  hitting on  all the  issues that                                                               
surround the  problems with  getting more  production out  of the                                                               
Cook Inlet,  and he didn't  disagree with anything he  said. Even                                                               
the possibility of  LNG exports from Cook Inlet in  the future, a                                                               
new  industrial use,  or the  reestablishment  of Agrium's  plant                                                               
will truly depend  on the price of gas. How  the marketplace with                                                               
so few  players gets to that  price is a real  challenge. He said                                                               
he shares  everyone's frustration  that he  has heard  here today                                                               
about how  the market itself  doesn't seem  to be taking  care of                                                               
what  residents' expectations  are  for that  region  - that  new                                                               
supplies will be  produced there. So, something else  needs to be                                                               
examined  as a  possibility.  A structure  like  ANGDA should  be                                                               
explored and that is what that kind of study is doing.                                                                          
                                                                                                                                
4:02:49 PM                                                                                                                    
SENATOR  WAGONER  suggested  the  he discuss  the  Armstrong  re-                                                               
drilling on  the North Fork  of the  Anchor River and  talk about                                                               
the  history of  that gas  field where  oil was  explored in  the                                                               
early '70s,  but gas  was found. The  wells were  capped, because                                                               
there was no market or transportation for it.                                                                                   
                                                                                                                                
MR.  BANKS explained  that North  Fork and  several other  fields                                                               
that are now  under way in the last several  years are an example                                                               
of fields  that had been discovered  very early on in  the search                                                               
for  oil, but  because  of  the lack  of  transportation and  the                                                               
technology that  existed in those  days the gas  wasn't produced.                                                               
Now Armstrong is bringing in  different technologies that weren't                                                               
even  available when  the  gas  was discovered  and  they have  a                                                               
commitment to  sell 10 bcf  to Enstar. Presumably the  price will                                                               
be satisfactory to Armstrong to  encourage their development, and                                                               
those are  a bit higher  than what  the weighted average  cost of                                                               
gas is today in the Cook Inlet.                                                                                                 
                                                                                                                                
4:05:25 PM                                                                                                                    
SENATOR HUGGINS  recalled that  the state has  one lease  for gas                                                               
storage.                                                                                                                        
                                                                                                                                
MR. BANKS  answered that three  gas storage facilities  exist now                                                               
in the Cook Inlet  - one is on federal land  at Swanson River and                                                               
two are on state land.                                                                                                          
                                                                                                                                
SENATOR  HUGGINS said  one is  proposed by  ANR, a  subsidiary of                                                               
TransCanada, and it appears that it  has been put in limbo by the                                                               
Regulatory Commission of Alaska  (RCA) and their connotation that                                                               
there  potentially  has  to  be legislation  before  it  will  go                                                               
forward.                                                                                                                        
                                                                                                                                
MR.  BANKS said  he wouldn't  say that  judging by  the level  of                                                               
activities his division is entering  into and that the department                                                               
is  involved  with  in  terms   of  permitting  the  project  and                                                               
developing the  storage lease. It  is correct that the  RCA ruled                                                               
that it  regarded its jurisdiction  as muddled over  the question                                                               
of  whether or  not they  would  regulate storage  there, but  he                                                               
wasn't sure  to what extent  that is going  to hold up  a project                                                               
that still has an 18-month  timeframe before production goes into                                                               
it.                                                                                                                             
                                                                                                                                
4:07:31 PM                                                                                                                    
SENATOR   HUGGINS   said   if  modifications   have   to   happen                                                               
legislatively,   would   he   be    correct   in   assuming   the                                                               
administration would  bring forward some legislation.  Does there                                                               
have to be a fix?                                                                                                               
                                                                                                                                
MR. BANKS replied that he  didn't know what the administration is                                                               
planning on  doing on  that issue, but  he knew  some discussions                                                               
were going  on in  the other  body with the  chairman of  the RCA                                                               
now.                                                                                                                            
                                                                                                                                
SENATOR HUGGINS said he is supportive  of his efforts to get some                                                               
things  done. Lawmakers  need some  answers,  because they  can't                                                               
just "dilly dally  on the sidelines" while people  end up without                                                               
any gas.                                                                                                                        
                                                                                                                                
CO-CHAIR MCGUIRE  asked what kind  of outreach his  division does                                                               
or how it  interfaces with potential commercial  consumers in the                                                               
Cook  Inlet.  For  instance,  she said,  Alberta  has  an  active                                                               
portion of  its department looking  for those  industrial anchors                                                               
that will  be a  part of  developing these  basins and  trying to                                                               
match them up with potential explorers.                                                                                         
                                                                                                                                
4:09:05 PM                                                                                                                    
MR. BANKS  replied that  the department  doesn't have  a specific                                                               
outreach to that  kind of consumer, but it does  spend a lot time                                                               
with the potential producers and  potential new producers. It was                                                               
an attempt  of theirs  in licensing the  LNG plant  where exports                                                               
are  now occurring  to encourage  the operators  of the  plant to                                                               
offer the  services of the LNG  plant to other suppliers  as part                                                               
of an  RFP that  they were  to publish just  prior to  the export                                                               
license  period to  begin. They  did that  without much  success.                                                               
When  the opportunity  arises  the department  steps  up, but  it                                                               
doesn't do  that kind  of advertising and  promoting that  she is                                                               
thinking about.                                                                                                                 
                                                                                                                                
4:11:04 PM                                                                                                                    
CO-CHAIR MCGUIRE  asked who is  leading the charge  in developing                                                               
Cook Inlet,  and said  perhaps the  administration is  the better                                                               
branch of  government to do  this. She remembered last  year that                                                               
no one was interested in gas  storage in the Interim and then she                                                               
started   hearing   rumors   that   TransCanada   had   been   in                                                               
conversations with the  department and is on the fast  track to a                                                               
storage facility.  How is the  department participating  in those                                                               
negotiations?                                                                                                                   
                                                                                                                                
4:12:54 PM                                                                                                                    
MR.  BANKS  thanked her  for  the  encouragement to  develop  new                                                               
markets for  the state's gas.  He said that  he went to  China in                                                               
December and  met with petrochemical companies  along with Harold                                                               
Heinze and  some legislators  as part of  his "ongoing  duties as                                                               
assigned" in  trying to  find potential  gas markets  in general.                                                               
With respect to  the TransCanada project, they are  thought of as                                                               
the applicant for  the AGIA pipeline, but  their subsidiary, ANR,                                                               
has  a lot  of storage  capacity  in facilities  in the  Midwest,                                                               
particularly in  Michigan. So becoming  a potential sponsor  of a                                                               
storage  facility   whose  role  it   is  only  to   provide  the                                                               
warehousing  of the  gas and  pumping it  out when  it is  needed                                                               
hasn't been  done yet  in the  state of Alaska.  ANR came  to the                                                               
department about  six months ago  and they are working  through a                                                               
process to  gain the appropriate  permits and the land  they will                                                               
need  for the  surface operations,  and the  DNR is  helping them                                                               
prepare the lease agreements that  will make it possible for them                                                               
to  operate a  storage facility  on the  state's mineral  estate.                                                               
That  company and  the current  lessee have  agreements; some  of                                                               
those  discussions are  ongoing and  confidential so  he couldn't                                                               
say  too much.  He  related  that the  department  has had  other                                                               
sporadic  conversations with  other  sponsors in  the Cook  Inlet                                                               
region; he has gotten the sense  that the sponsors have gone back                                                               
to do  some more homework and  he full expects them  back as time                                                               
goes on. He  said, "There are more than just  the TransCanada ANR                                                               
proposal  that may  come  to  fore here  in  the  next couple  of                                                               
years."                                                                                                                         
                                                                                                                                
CO-CHAIR  MCGUIRE said  a second  example occurred  to her  - the                                                               
first one being  AGIA - of when the government  decides to really                                                               
fast  track  and  put  together  a  series  of  permits,  advice,                                                               
authority, and  bring suppliers together.  She would like  to see                                                               
Alaskan companies  coming forward and maybe  the department could                                                               
come up with a process to  get more information out to them about                                                               
the opportunities.                                                                                                              
                                                                                                                                
SENATOR STEDMAN  went to  page 3, line  1, that  said, "identify,                                                               
evaluate and recommend additional  incentives that may be enacted                                                               
by the legislature for increasing  exploration and development of                                                               
gas" and  suggested softening it to  "that may be enacted  by the                                                               
legislature" because  they are  really trying to  come up  with a                                                               
solution.                                                                                                                       
                                                                                                                                
He went  to a similar item  on line 4 says,  "determine the cost,                                                               
feasibility, and  a proposed organizational  structure for  a new                                                               
state  entity".  He  said  some   are  a  little  gun  shy  about                                                               
continually creating  new state entities; Cook  Inlet already has                                                               
too many  entities running around.  This issue has been  going on                                                               
for  several years  and it  seemed  more like  a long-term  price                                                               
issue to him.                                                                                                                   
                                                                                                                                
4:19:08 PM                                                                                                                    
MR. BANKS  said on  that last  point, their  supply study  had an                                                               
observation that  bringing in  the new  resources will  cost more                                                               
than in  the past and  that the right  kind of price  signal will                                                               
have to  be available to  producers to do  it. He agreed  that an                                                               
"organizational structure" might be a  "long reach" and that they                                                               
should look at  all possibilities. However, he  thought this bill                                                               
intended to look  for a more active role by  the state to achieve                                                               
some new supply.                                                                                                                
                                                                                                                                
SENATOR STEDMAN  said he still  thought that until  the long-term                                                               
price issue  is solved, they  can do everything  including paying                                                               
an explorer directly to explore  and even that wouldn't solve the                                                               
problem. He said lowering the tax  rate in Cook Inlet three years                                                               
ago didn't produce  the results they were hoping for  then and he                                                               
did not want  to create another state bureaucracy  that would not                                                               
lead to a solution.                                                                                                             
                                                                                                                                
CO-CHAIR  WIELECHOWSKI said  Cook Inlet  has some  of the  lowest                                                               
taxes in  the country and  very low  royalty rates, but  it's not                                                               
getting exploration.  If the  producers who  have the  leases are                                                               
not willing  to develop the leases  they have, he said,  let's do                                                               
it ourselves.                                                                                                                   
                                                                                                                                
4:22:55 PM                                                                                                                    
SENATOR WAGONER  said if  they really want  the "free  market" to                                                               
work,  they should  have a  five year  sunset and  keep RCA  from                                                               
having oversight  on gas  contracts. Basically  that gas  has one                                                               
major  user, Enstar,  and with  the RCA  controlling the  market,                                                               
they won't  see much  exploration in Cook  Inlet other  than what                                                               
can be  put under contract. Taking  RCA out of the  picture would                                                               
stimulate some exploration and production.                                                                                      
                                                                                                                                
CO-CHAIR  MCGUIRE  said  she and  Senator  Wielechowski  diverged                                                               
philosophically  on   this  particular  method  of   solving  the                                                               
problem, but  they don't diverge on  the need for it.  That sense                                                               
of frustration  is pretty unanimous,  but the need in  Cook Inlet                                                               
is "dire."  She thought in a  state that depends so  much on this                                                               
resource someone  should be  tasked with  bringing people  to the                                                               
table to chat  with other folks - like the  tourism and fisheries                                                               
industries do.                                                                                                                  
                                                                                                                                
SENATOR STEDMAN  said he supported  the concept of the  bill, but                                                               
they need to look back at  what incentives they have already done                                                               
in Cook Inlet  over the last decade -  reducing taxes, increasing                                                               
credits,  and ring-fencing  Cook Inlet  - that  were supposed  to                                                               
address this issue.                                                                                                             
                                                                                                                                
CO-CHAIR  WIELECHOWSKI said  that is  a  good point  and he  also                                                               
thought they  should look at what  has been done in  the past and                                                               
not repeat themselves on something that isn't working.                                                                          
                                                                                                                                
4:29:31 PM                                                                                                                    
JERRY MCCUTCHEON,  representing himself, Anchorage,  Alaska, said                                                               
this  is a  Kevin Banks  problem.  They don't  need to  encourage                                                               
further Cook  Inlet gas production  with tax breaks  or whatever;                                                               
they need to enforce the leases in Alaska's constitution.                                                                       
                                                                                                                                
4:31:12 PM                                                                                                                    
CO-CHAIR WIELECHOWSKI announced a recess.                                                                                       
                                                                                                                                
4:31:17 PM                                                                                                                    
CO-CHAIR WIELECHOWSKI called  the meeting back to  order at 4:31.                                                               
He closed  public testimony  and announced that  SB 208  would be                                                               
set aside for further work.                                                                                                     
                                                                                                                                

Document Name Date/Time Subjects
SB 203 Bill Packet - Part 1.pdf SRES 2/8/2010 3:30:00 PM
SB 203
SB 203 Bill Packet - Part 2.pdf SRES 2/8/2010 3:30:00 PM
SB 203
SB 228 Bill Packet - Part 1.pdf SRES 2/8/2010 3:30:00 PM
SB 228
SB 228 Bill Packet - Part 2.pdf SRES 2/8/2010 3:30:00 PM
SB 228
SB 195 - Bill Packet - Part 1.pdf SRES 2/8/2010 3:30:00 PM
SB 195
SB 195 - Bill Packet - Part 2.pdf SRES 2/8/2010 3:30:00 PM
SB 195