Bills aim to spark interest in inlet

Sen. Tom Wagoner, R-Kenai, chair of the Senate Resources Committee, introduced legislation and resolutions through the committee last week that would give companies tax credits and other incentives to explore for oil and gas in the Cook Inlet basin.

The House also introduced similar bills and resolutions.

"We're all working on this together," Wagoner said.

The bill gives a 20 percent production tax credit for companies that want to explore for oil or gas in the inlet.

It also would allow companies to drill wells closer together than has been allowed in the past.

Under the proposed legislation, the commissioner of the Alaska Department of Natural Resources Oil and Gas Division would have discretion on whether to allow a company to have the tax credit, Wagoner said. Knowing up front whether a company qualifies for tax credits will help spur exploration, he said.

The bill, and three resolutions he introduced this week, are in response to a joint Senate and House Resources Committee hearing held in Kenai in February. The hearing was to allow industry leaders involved in the inlet to tell the state the kinds of incentives needed to rekindle interest in oil and gas in the region.

Senate Bill 163 is a modification of SB 185 passed in 2003. The modification directs incentives at the inlet region. Because wells in Cook Inlet are close together, the region was not able to participate in the incentive program laid out in SB 185, Wagoner said.

"Some people may say that we're trying to give away the farm," he said, referring to letting go of too much state revenue in incentives.

"You're not giving away the farm if it's not getting explored," Wagoner said.

Mary Jackson, chief of staff for Wagoner, said it has been a struggle to get people exploring in the region. She said she hopes this will spur exploration efforts.

The proposed bill has a $20 million cap on incentives companies can receive. Wagoner said that figure is debatable.

"It's a carrot to spur some exploration," he said.

Proven oil reserves in the inlet basin are projected to run out by about 2016. Currently there are no significant oil exploration efforts taking place in the region.

The Senate and House Resources committees also introduced three resolutions targeting oil and gas operations in the region.

One resolution encourages the Regulatory Commission of Alaska to expedite a decision on regulation of the Cook Inlet Gathering System, the pipeline that transfers gas from the west side of the inlet to the east side. That pipeline is privately owned by Marathon and Unocal.

Agrium wants it to be regulated as a common carrier pipeline, allowing producers on the west side to transport gas to the east side.

The second resolution asks regulatory agencies to streamline the permitting process for oil and gas leases, making the process less complicated.

Responding to concerns over the costs and procedures associated with abandoning oil and gas platforms in the inlet, the third resolution urges the governor to direct the Division of Oil and Gas to define procedures for platform abandonment.

"Anything that encourages exploration in Cook Inlet would be good," said Leonard Gurule, senior vice president for Forest Oil Co. "We would be excited about anything."

Forest Oil owns the Osprey platform in the inlet as well as onshore oil and gas operations on the west side of the inlet. They also have a 47 percent interest in Unocal's platforms.

Gurule said he wants to see incentives that are not prescriptive and applicable across the board.