Gov. Sean Parnell signed into law a pack of incentives that could give oil and gas exploration in Cook Inlet a shot in the arm, but the onus is now on the producers, according to state lawmakers.
Parnell approved Senate Bill 309 on Monday afternoon at the Kenai Peninsula Economic Development District Inc. building in Kenai.
The legislation is aimed at stimulating both drilling deeper into Cook Inlet as well as jumping up gas development in existing fields while making changes to the state's production tax laws.
"On a multitude of fronts this legislation should help drive more jobs and more revenue across our oil and gas industry," Parnell said in a speech before the signing.
The bill was called a collaborative effort, and included a hodge-podge of legislation from senators Tom Wagoner, R-Kenai; and Lesil McGuire, R-Anchorage; Rep. Mike Chenault, R-Nikiski; and Parnell.
"The bill was born out of conversations that many of us were having in the building about how to incentivize drilling in Cook Inlet," McGuire said to the crowd in Kenai. "We realized in Anchorage and of course on out here that the Cook Inlet is the backbone of our economy."
Lawmakers said they worked with Inlet operators who stand to benefit from the incentives and credited Marathon Oil Co., Escopeta Oil and Gas and Renaissance Oil and Gas, among others.
"It's now up to the companies that this bill allows to come in and get the incentives to take the next step. We hope we see a lot of that in the next couple years," Wagoner said.
Whether those companies take that initiative will remain to be seen.
Carri Lockhart, the Alaska production manager for Marathon, who attended the event, said the bill would help to make Inlet prospects more appealing for them.
"This bill is not a silver bullet in passing exploration or developments on its own," she said. "What it will do is help to level the playing fields with projects that we have elsewhere in our operations that have to compete for finite capital."
Lockhart said Marathon helped to author the tax credit portion of the bill.
The company has been very vocal in the recent past that Southcentral's days of buying cheap gas may be numbered as the market here doesn't demand exploration or expansion.
They've also said the local utility market doesn't offer enough of an economic incentive.
"If you can have competitive projects it can build confidence in your future supply, which will hopefully enable future contracts," she said.
The signing of the bill is also good news for Escopeta.
The Houston-based independent company has been working on bringing a jack-up rig to Cook Inlet, but company president Danny Davis has told legislators in hearings that the company has had difficulty in raising financing.
With the state picking up most of the cost of the initial drilling, Escopeta has said it believes it can get the financing and have the rig in Cook Inlet as soon as this summer.
Davis was not immediately available for comment on Monday afternoon to provide an update on the progress of bringing a rig north.
Escopeta is targeting a number of prospects in its Kitchen Unit, a group of offshore leases south of ConocoPhillips' Tyonek gas platform.
Parnell did acknowledge that the bill's signing comes at a somewhat awkward time given the oil spill that continues to spread in the Gulf of Mexico from a sunken deepwater off shore rig.
He noted however the bill is aimed at both on and off shore development, and said: "The bottom line is, we want to do it right and we want to incentivize more jobs and more investment."
Dante Petri can be reached at email@example.com
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