Press Release: Legislature's Royalty Bill Succeeding

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Session:
State Capitol, Room 119
Juneau, AK 99801-1182
Phone: (907) 465-4993
Fax: (907) 465-3872

Interim:
716 W 4th, Suite 500
Anchorage, AK 99501-2133
Phone: (907) 269-0200
Fax: (907) 269-0204

For Immediate Release:	February 21, 2001
Contact:	Senator Drue Pearce at (907) 465-4993

(JUNEAU) - On Wednesday Sen. Drue Pearce (R-Anchorage) offered congratulations to Forest Oil Co. on their Redoubt Shoal oil discovery and pointed out that a bill passed by the Twentieth Legislature helped make production of this oil financially viable.

"I am pleased to see that the royalty reduction bill we passed had the desired effect," said Pearce. "Redoubt Shoal was identified as a field that needed a break to be financially viable, and now Forest Oil has used the advantage of the lowered royalties to drill the first of three test wells and hit oil."

House Bill 380, sponsored by Rep. Mark Hodgins (R-Kenai), and cross sponsored by Pearce, passed in 1998 and was designed to encourage the development of older, economically marginal Cook Inlet oil and gas reserves by reducing the royalty rate lessees pay for six specific fields if they were brought into production by Jan.1, 2004. The reduced royalty rate of 5 percent would be in effect for 10 years and only extend to the first 25 million barrels of oil and first 35 trillion cubic feet of gas produced. All of the fields specified in the bill were discovered more than 30 years ago, but had always been too expensive to develop.

Increased oil and gas production will benefit state and local governments by revenues generated through taxes and royalties. Alaska workers will also benefit due to provisions in the bill that called for hiring state residents and using in-state firms for work in connection with development of the specified fields.

The Legislature passed the bill in 1998, only to see Governor Tony Knowles veto it. HB 380 became law following a veto override.

"I was puzzled when Gov. Knowles chose to veto our bill even though he signed similar legislation for the North Star Field," said Pearce. "I'm just glad that the Legislature chose to override his veto and make operation of this older Cook Inlet field financially viable."

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Attachments:

Sponsor Statement for HB 380
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