Legislature(2009 - 2010)BUTROVICH 205

03/08/2010 03:30 PM Senate RESOURCES

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Moved CSSB 220(RES) Out of Committee
Moved CSSJR 27(RES) Out of Committee
Moved CSSB 274(RES) Out of Committee
Moved CSSB 208(RES) Out of Committee
Moved SB 144 Out of Committee
+ Bills Previously Heard/Scheduled TELECONFERENCED
                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                                                               
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                                                               
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                                                               
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                                                               
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.                                                                 

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