Published in Alliance Newsletter
Pearce Proud of Legislature’s Accomplishments
By Senator Drue Pearce
Republican Senate District F
Thank you for the opportunity to provide an update of recent activity by the Legislature related to the Alaskan oil and gas industry.
The mood in Juneau has been cautious as oil prices dipped to a low of $10.11 per barrel. Due to the slide in oil prices, the fiscal gap between general fund revenues and spending will reach more than $1.2 billion for FY 98 and 99. This projection underscores the importance of the Republican-led Majorities commitment to our five year plan to close the fiscal gap.
On behalf of the Republican-led Majorities, I thank the Alliance for their continued support of further budget reductions. It is a time for tough decisions and we appreciate the encouragement to do what is best for all Alaskans.
The key to keeping our financial house in order is to try to keep spending more in line with the revenues generated by our state. We must remain focused on our goal to provide a positive business environment and incentives for industry to invest in Alaska, which will result in increased revenues. I introduced two measures that will help make Alaska’s business environment more enticing to industry investment.
At the request of the Alliance, I sponsored Senate Concurrent Resolution 20, a resolution in support of the state’s Areawide Leasing Program. This resolution puts the 20th Legislature on record in support of the state’s beneficial, cost saving Areawide Leasing Program. The Resolution passed both chambers by a vote of 17-0 in the Senate and 36-0 in the House. This resolution will further support areawide implementation and help bolster the Alliance’s public awareness campaign.
It should be clear to all Alaskans the Legislature remains committed to Areawide Leasing!
I am also the sponsor of Senate Bill 256, which provides royalty reductions for certain shut in and undeveloped fields in the Cook Inlet basin. SB 256 and the companion bill, House Bill 380 (HB 380) sponsored by Representative Mark Hodgins, a Kenai Republican, were offered in response to some disturbing decline trends in the Cook Inlet area and provides an incentive to increase activity. The bill is designed to provide a 71/2% royalty reduction to a number of fields in the Cook Inlet basin that were discovered as much as 30 years ago but have never been developed. The fields that qualify for the royalty reduction under the bill's definition are:
In addition to possibly stimulating the development of several known undeveloped fields, the bills have the potential to leverage additional exploration and development in the vicinity of new infrastructure, including pipelines and associated facilities, required to develop those known fields. Any new oil and gas production resulting from the development of these fields will in turn reduce the average cost of producing existing reserves, and extend the economic life of both existing and new Cook Inlet production and transportation infrastructure. This will obviously be a tremendous boost to the Alaska support industries.
To further ensure that Alaska’s oil and gas support industry benefits from any production resulting from this royalty reduction incentive, the bills require a company applying for the royalty reduction to complete a plan of local hire and local contracting before being granted the royalty reduction.
HB 380 passed the House and Senate on April 20 with bipartisan support of 53 members. It is obvious that the Legislature supports this straightforward royalty reduction to further stimulate development in our oil and gas industry. We hope this will provide the necessary incentive for independent companies to continue investment in the Cook Inlet region.
The bill is currently on the Governor’s desk. Unfortunately, he opposed this straightforward incentive approach as it went through the House and Senate and it is unclear whether he will veto the bill.
Once again, the Republican led Majorities thank you for your support. We are especially grateful to the members of the Alliance for your ongoing newspaper advertisements. The public is well served if we work together to make Alaska an attractive place to do business.