Follow our reviews of the 2014 legislative sessions (upcoming)

The sudden drop in crude oil prices, nearing $80 per barrel on Oct. 15, has sent shudders through the state government. Ironically, the Department of Revenue has just started work on the Fiscal 2016 production and revenue forecast, which will be published in late November or early December. The drop in oil prices, which may last a while, pundits say, would undermine current FY 2015 revenues and push the $1.4 billion deficit that was projected at a $104/barrel average higher. In previous years a rule-of-thumb was that each $1 drop in oil prices, if it stayed low for the year, cost the treasury $50 million. Revenue officials say that’s more complicated now with the new SB-21 oil tax in effect. We’ll have to wait a few weeks until the revenue forecast to glimpse the future. (More on this in our upcoming Alaska Economic Report).

Alaska North Slope oil producers appear to have halted a long-term decline in annual production, state production data showed.
For the first 10 months of the state’s 2014 fiscal year, production has averaged 532,700 b/d, data through April showed. Preliminary data for May and June indicates the trend is likely to hold.
Average production for the 2013 fiscal year was 531,600 b/d. The state fiscal year runs from July 1 through June 30.
The figures are subject to adjustment, said Cherie Nienhuis, a petroleum analyst with the Alaska Department of Revenue, but the data indicates the state will end its current fiscal year on June 30 with North Slope output roughly on par with the previous year.

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Singapore’s Sovereign Wealth Fund (that nation’s Permanent Fund) is looking at an Alaska investment, Alaska Dispatch publisher and Anchorage Daily News owner (after May 5) Alice Roghoff told an Alaska World Affairs luncheon May 2. Roghoff was speaking on Arctic issues with former Lt. Gov. Fran Ulmer, who is chair of the U.S. Arctic Research Council.

Roghoff, a businesswoman, has been active on Arctic issues for years and is the co-founder of Arctic Circle, a private nonprofit that hosts seminars and conferences on matters affecting Arctic nations including the U.S. Her message May 2 was that there is a woeful lack of infrastructure on the western Alaska coasts to respond to emergencies from increased shipping–oil spills, vessel, crew and passenger emergencies, and the region needs new investment in docks and other facilities. Read the rest of this entry »

Alaska is back in the liquefied natural gas export business. The first LNG tanker has called at the ConocoPhillips LNG plant at Nikiski, near Kenai, since late 2012. This follows the company’s reactivation of the plant this spring, company spokeswoman said Friday. The plant has been in a suspended status since late 2012.

The tanker is the Excel, owned and operated by the Belgium-based Exmar shipping group, and it landed Friday morning, May 2. ConocoPhillips could not say how long it will take to load the vessel or the destination of the cargo, although presumably it is in Asia.

The company plans six LNG shipments this year at approximately one-month intervals. ConocoPhillips has authorization from the U.S. Department of Energy to export LNG from the Kenai plant for two years. Read the rest of this entry »

The education bill compromise (HB 278) and the capital budget (SB 119) are last items of business today. A revamped version of Knik Arm crossing legislation (HB 23) was adopted Friday morning. Knik Arm and educatin were the big stumbling blocks for adjournment, amnd the disagreement over the form of the Knik Arm bridge bill developed just this week. We spelled out major provisions of the SB 278 compromise in our report yesterday, Bulletin No. 9.

The compromise on HB 23, now passed, basically has the Knik Arm Bridge and Toll Authority, or KABATA, left with the authority to operate the bridge and collect tolls but for the state Dept. of Transportation and Public Facilities to build it.

A few bills are still hanging on House and Senate calendars this morning.

One important one that has now passed is SB 99, which makes changes in the Alaska Industrial Development and Export Authority’s SETS energy loan program, and also gives AIDEA authority to help finance two proposed Southeast underground mining projects, the Niblack multi-metals prospect and the Bokan Mountain rare earths prospect. A late amendment to the bill would also allow further state financing for the Blue Lake hydro expansion project at Sitka.

Here are some actions from Thursday:

Senate backs entrepreneurs’ security exemption, HB 308

HB 308, exempting three categories of securities issuances from state reporting requirements, and a small fee, passed the Senate on an 18-1 vote, Thursday. The bill exempts so-called “friends and family securities” issuances to ten or fewer persons, or 25 or fewer persons in Alaska, or offerings to holders of securities from the same issuer. The bill also allows Alaska Native Claims Settlement Act corporations to treat so-called “after born” stock issuances like original stock offerings in 1971. Sen. Pete Kelly (R-Fairbanks did not comment before casting the lone vote against the bill.

Scrap metal sales records bill passes legislature, HB 305

Alaska is joining the 49 other states in a crackdown on theft of new and scrap copper and other high value metals with Senate passage of HB 305, Thursday. House Speaker Mike Chenault’s original bill repealed an antiquated section of law requiring junk dealers to hold a business license and also be licensed by the Dept. of Revenue. State builders. Scrap dealers, builders, public utilities and police agencies asked for the addition of new terms requiring metal buyers to keep detailed records of all purchases of $100 or more for five years, including identification, vehicle and contact information of the seller.

Alaska is the only state without a law like HB 305, said Sen. Kevin Meyer, before the Senate vote. The bill takes effect Jan. 1, 2015. Sen. Hollis French, a former state prosecutor, said classification of false entries in a buyer’s records as a Class A misdemeanor, punishable by up to a year in jail, was too severe and cast what he called a “cautious no” vote.

Transportation Infrastructure Fund dies in Senate Finance Committee

Rep. Peggy Wilson, Thursday afternoon, confirmed the death of HJR 10, her proposed constitutional amendment to reestablish the dedicated transportation projects fund. The resolution, which passed the House twice in recent years, did so again this year on a 34-4 vote, March 13. It reached the Senate Finance Committee on April 2. Cochairman Kevin Meyer (R-Anch.) said it would “absolutely never, ever” leave the committee, according to Wilson.

The state Legislature’s 2014 session is headed toward its required April 20 adjournment. As of today, the Senate has passed the operating budget back to the House. Next stop is the conference committee. The Senate Finance Committee has also released its first draft of a capital budget with appropriations to finish the partly-built University of Alaska Anchorage engineering building, to fund more work on the billion-dollar Knik Arm bridge, and to add funds, but not complete, the partly-built engineering building at the University of Alaska Fairbanks and the extension of the Alaska Railroad to Port MacKenzie on Knik Arm, in upper Cook Inlet. Read the rest of this entry »

Buccaneer Energy has formed a project team to plan development of a natural gas discovery at the Cosmopolitan offshore Cook Inlet prospect, company CEO Curtis Burton said in a teleconference with investors Sept. 10.

“Cosmo has turned out to be substantially nicer than we had ever hoped for,” when the asset was acquired from Pioneer Natural Resources, Burton said.

The plan is to work toward development of a gas discovery in the upper reservoir sections of the field and to work on further testing and possible development of a deeper oil reservoir, he said.

Buccaneer has now moved the Endeavour jack-up rig from the “Cosmo No. 1” well to its “Southern Cross” prospect in north Cook Inlet, and plans work on another well in the “North West Cook Inlet” prospect, but will bring the jack-up rig back to Cosmopolitan for more drilling and testing this winter, Burton told investors in the call.

Buccaneer is part-owner of the Endeavour rig along with Ezion Holdings of Singapore and the Alaska Industrial Development and Export Authority, the state’s development finance corporation.

“We have started the permitting for the new drilling we need to do,” this winter at the location, he said. Cosmopolitan is just offshore Anchor Point and south of the parts of Cook Inlet affected by winter ice.

Buccaneer is meanwhile also drilling another onshore gas well at its small Kenai Loop gas field near the city of Kenai. The “KL-4” gas well is almost drilled to its bottom location. It will take some additional time to run tests on the well and set casing before a decision on a gas production test can be made, Burton said.

The company is also sorting out issues with the Alaska Oil and Gas Conservation Commission on Kenai Loop that would affect decisions on the well, he said.

Following completion of that drilling, the mobile rig being used there, which is owned by Buccaneer, will be moved to the West Eagle prospect east of Homer, where it will drill a test well.

In other news on Cook Inlet exploration, industry sources have reported that Furie Operating Alaska, another independent exploring offshore prospects, has completed its planned drilling for the season and will be moving the jack-up rig it is using, the Spartan 151, back to Port Graham for winter storage.

Company officials could not speak the status of the company’s program but the source, asking to remain unidentified, said Furie is continued to work on development planning for a gas discovery made in late 2011.

Production tests on the discovery were done this summer, the sources said, but there is no information on gas reserve estimates. Furie Operating privately-owned and does not routinely release information on operations.

Buccaneer is a public company, in contrast, that is traded on the Australian stock exchange and under rules of that exchange must make detailed information available on its operations for investors.

When legislators open their 2013 session in Juneau, the knotty oil tax problem awaits them. Despite the new Republican-led leadership in the Senate, the Legislature will proceed cautiously in considering proposals to reduce the state’s oil production tax. The issue is highly complex and controversial, and the new Republican Senate leaders, while sympathetic to the need for changing the tax, will realize they must move carefully.

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There’s more gloomy information on the Southcentral Alaska gas supply situation. Enstar Natural Gas Co. is about the begin 2013 with about 4.2 billion cubic feet of its gas requirement for the year unmet, meaning not under contract. Enstar’s total annual gas need is about 33 billion cubic feet, so this is a significant amount and the largest supply deficit the utility has ever had at the start of a year. Enstar’s gap grows to about 50 percent of its requirements by 2016. The electric utilities also see gas supply gaps out there. There are new gas wells coming on line, but they will not bring in enough supply to make a significant dent in the gap.

Will this make things worse? We hear one Beluga gas field owner is reluctant to fund its one-third share of the proposed $50 million 2013 capital budget for the field. These are funds needed for new wells and other work needed to keep the field operating at peak performance to produce gas.

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