New projects will pay $173 million/year in royalties at peak
Alaska Native corporations have a direct stake in North Slope oil production that will increase when new oil projects now planned go into production. Three new projects by themselves will pay $173 million a year to Native corporations at peak production, according to information provided to state legislators by the state Department of Natural Resources.
Arctic Slope Regional Corp., the Alaska Native development corporation for the state’s northern region, owns a share of subsurface mineral inter- ests in several oil discoveries on the slope as well as two fields that are producing, the Alpine field on state lands and GMT-1 in the National Petroleum Reserve-Alaska. Under terms of the Alaska Native Claims Settlement Act of 1971, or ANCSA, ASRC shares 70 percent of its oil royalties with other Na-
tive regional and village corporations formed under ANCSA. That means almost all of Alaska’s Native people, who are shareholders in ANCSA regional or village corporations, have a financial stake in oil development on the slope.
Data presented to legislators by the state DNR illustrates the Native holdings in three new oil projects. DNR showed that at GMT-1, which is producing, ASRC receives 82 percent of the royalty share; in GMT-2, a nearby project now in construction, ASRC will receive 8 percent of the royalties.
At Pikka, a new project on state lands, ASRC will receive 17 percent of the royalties. When GMT-1 reaches its peak of about 30,000 barrels per day ASRC’s share of royalty will total $102.5 million per year of $125 million per year in total royalty, according to the DNR estimates; when GMT-2 reaches its peak, also 30,000 barrel/day, ASRC’s royalty will be about $12 million per year of $149 million in total royalty.
Combined royalties paid to ASRC at peak production for these three projects, a total of $102.5 million at GMT-1; $11.9 million at GMT-2 and $58.6 million at Pikka, is $172 million a year. This does not include ASRC’s royalty share from the Alpine field production, which was not included in the DNR presentation. Alpine royalties would be in addition, and they would be substantial.
When Pikka reaches its expected peak of about 120,000 barrels/day, ASRC’s royalty share will be about 17 percent of a total $345 million/year in royalties paid, or $58.6 million net. However, ASRC actually nets only 30 percent of the royalties received because 70 percent is shared with other Alaska Native regional and village corporations. Of the $173 million total royalty expected at peak years of production, ASRC’s share is $51.9 million a year with the remaining $121.1 million to be paid to other Native corporations.
The revenue-sharing is required under terms of the 1971 Alaska Native Claims Settlement Act, which established the Native corporations and the settlement for aboriginal land claims. ANCSA established the surface land ownership and subsurface mineral rights of the new Native corporations.
Royalty is similarly shared from other resource projects on Native-owned lands, such as from the Red Dog lead and zinc mine in northwest Alaska, which is on lands owned by Nana Regional Corp. However, if oil is discovered on a Native-owned inholding in the Arctic National Wildlife Ref- uge, where ASRC is the owner of mineral rights, revenues would not be shared with other Native corporations. That is due to the unique manner in which the rights were transferred to ASRC by the Department of the Interior through an exchange for ASRC-owned surface lands in the Gates of the Arctic National Park. Some efforts are underway in Congress to provide a small royalty share from ANWR to other Native corporations, however.