Alaskan legislators try to force gas owners' hand on pipeline

Juneau (Platts)--2May2005

Alaskan state legislators have tacked an amendment onto a bill extending
exploration tax incentives that would give the state the authority to force
lease owners to develop oil and gas reserves. The state House of
Representatives passed House Bill 71 with the new language added by floor
amendment. The bill, which also extends a current exploration tax incentive
law to 2010, is scheduled for hearings in a state senate committee Tuesday.

The amendment is aimed at North Slope producers BP, ConocoPhillips and Exxon
Mobil Corp, which hold leases with an estimated 35 trillion cubic feet of
proven gas reserves. The companies, which are planning a gas pipeline from the
North Slope to the continental US, are in talks with the state on an agreement
under the state Stranded Gas Act that would allow special tax and royalty
terms for a gas project. State legislators are frustrated with the slow pace
of negotiations and added the amendment to HB 71 to give the administration
more leverage with the producers.

Gov Frank Murkowski, who is personally supervising the talks with producers,
which are now described as in an advanced stage, did not ask for the amendment
to the tax bill and may oppose it. The language was developed by state Rep
Ralph Samuels, co-chair of the House Natural Resources Committee, following a
presentation to legislators by San Francisco attorney Spencer Hosie on the
obligations of leaseholders to work diligently to develop their leases. 

Hosie, who is also under contract to the state Dept of Law, advised
legislators that the state can act to compel producers to develop resources if
it believes a project is "reasonably economic." The amendment gives the
Commissioner of Natural Resources guidance in statute on the interpretation of
terms in existing state oil and gas leases on due diligence and obligations to
develop discovered resources. In making a decision as to whether a project is
reasonably economic, the amendment would allow the commissioner to rely on
results of an economic model to predict project rates of return.

This story was originally published in Platts Natural Gas Alert
http://www.naturalgasalert.platts.com

Copyright © 2005 - Platts

Please visit:  www.platts.com

Their coverage of energy matters is extensive!!.