Legislature(2009 - 2010)BUTROVICH 205
03/08/2010 03:30 PM Senate RESOURCES
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* first hearing in first committee of referral
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SB 208-DNR STUDY ON NATURAL GAS 4:04:01 PM CO-CHAIR MCGUIRE announced SB 208 to be up for consideration. CO-CHAIR WIELECHOWSKI moved to adopt version C, [CSSB 208(RES) 26-LS1235\C, Bullock]. There were no objections and it was so ordered. 4:04:38 PM MICHELLE SYDEMAN, staff to Senator Wielechowski, explained that subsection (3) that called for the Department of Natural Resources and the (DNR)Department of Revenue (DOR) to determine the cost, feasibility and a proposed organizational structure for a new state entity that would take a more active role in the exploration, development and marketing of gas from Cook Inlet was removed after Senator Stedman raised concerns about it. In (2) on page 3, line 6, "or proposals" was added to a requirement that DNR and DOR identify and evaluate and recommend additional incentives or "other proposals" that might increase exploration for and production of gas in Cook Inlet. The third change was to the date for completion of this work by the DNR and DOR from November 1, 2010, to December 1, 2010. The intent of this bill is to provide the Legislature with an analysis of its options for increasing Cook Inlet gas production before the start of next session. An immediate effective date was added for the bill giving the department the full seven months in which to do this analysis. CO-CHAIR MCGUIRE asked if they envisioned a process for selecting individuals who would help the state carry out this task. MS. SYDEMAN answered that there are two options: the DOR already has some petroleum economists they would be willing to devote to this time permitting and outside consultants, if needed, for which a $200,000 fiscal note was provided. An existing Gaffney Kline contract could be amended to include this work, as well. There were concerns with putting an RFP out and having that work accomplished by the start of the next legislative session. CO-CHAIR MCGUIRE said she was glad of the bill that could help trigger oil and gas development in Cook Inlet. She knew the RCA not approving contracts has been a part of it, and Cook Inlet had had incentives, but exploration is not happening. They have heard the Basin is expensive and that gas storage might play a role, but everybody is drilling in Texas and Canada. She asked if anyone wanted to testify. SENATOR HUGGINS asked what would be happening in lieu of this bill and how would the Legislature know about it and why isn't it already happening. CO-CHAIR WIELECHOWSKI agreed and said this bill is more out of frustration than anything else with development in Cook Inlet. This should be occurring right now and he didn't know why it hasn't. 4:10:23 PM CO-CHAIR MCGUIRE asked if DNR would like to respond to Senator Huggins' point. What is being done from the DNR perspective to look at lack of development in Cook Inlet and how might that be carried out? KURTIS GIBSON, Deputy Director, Division of Oil and Gas, Department of Natural Resources (DNR), answered that he sees the bill is a positive approach to trying to resolve the complex issue of motivating explorers in the Cook Inlet basin to bring on additional reserves. He said he supported SB 208. In December they released a report that detailed the results of their analysis of remaining reserves for the five major producing fields in the Cook Inlet. From the division's perspective, they welcome the opportunity to expand their charge and examine not just what is the appropriate incentive for explorers but what can be done to tighten up what is a structurally unsound market. It's a step in the right direction. CO-CHAIR MCGUIRE said she was talking to Mark Myers, Gas Pipeline Office, DNR, and her point was seeing the Division of Oil and Gas take a leadership role on some of these issues: Cook Inlet, Nenana Basin, Gubik, the issue of delivering in-state gas to Alaskans, developing a value-added natural gas industry, and those kinds of things. They would go a long way in taking the focus off of the AGIA war which process is proceeding on its own merit. MR. GIBSON said they know and stand ready to assist in any way they can. CO-CHAIR WIELECHOWSKI moved to report CSSB 208(RES), version C from committee with individual recommendations and attached fiscal note(s). There were no objections and it was so ordered.