‘Duty to develop’ bill raises concerns in Alaska

JUNEAU, Alaska — A bill intended to get more oil in the trans-Alaska pipeline would instead have a chilling effect on leasing and “kill development,” the executive director of the Alaska Oil and Gas Association said.

Kara Moriarty testified this week before the Senate Resources Committee on SB209, which would require oil and gas companies interested in an exclusive lease of state lands to submit a plan for exploration, development and production. Under the bill, the Department of Natural Resources would review the plans and determine if they would reasonably develop resources in the best interest of the state before qualifying the company to bid on a lease. Work plans would be included in lease terms, and the department would have to review leases annually to ensure plans are being followed.

The bill, sponsored by Sen. Bill Wielechowski, D-Anchorage, is aimed at timelier development of Alaska’s oil and gas resources. Currently leases go to the highest bidder. But Wielechowski has said there are concerns that some companies are sitting on oil-rich leases, waiting for something like a tax change, while investing elsewhere.

Moriarty, in written remarks, called the process set out in SB209 an “intrusive exercise” that will drive out explorers. She said none of her 16 member companies believe the bill will result in more development or oil in the pipeline.

“This bill was described as being a ‘pro-development bill that simply seeks to get more oil in the pipeline.’ We respectfully and emphatically disagree,” she said. “We think this bill would do the exact opposite and kill development before it even has a chance of happening because it will have a chilling effect on the very first step of the development process, the leasing program.”

She pointed to a December lease sale, which she said attracted 219 bids. If the bill had been in effect, some companies would have had to submit dozens of different development plans because a plan would have been required for each sought-after lease, she said. Royale Energy, for example, would have needed to submit 87 different plans of development, she said.

Additionally, she said companies should not be forced into making commitments before it can evaluate and understand a lease’s potential.

Wielechowski said Moriarty had some very good comments and that he hoped to work with Moriarty’s group to address some of the concerns that she raised. In an interview Tuesday, he said he does not want the bill to be onerous but he also wants to improve upon a situation where he said it appears that nothing is happening on 25 percent of the state’s leases.

“We want to be in a situation where parties are in alignment from the start,” he said. “I don’t see what’s wrong with saying to companies, We expect some basic things.”

Wielechowski said his intent is not to require a formal plan of development up front but rather minimum work commitments.

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