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HB0271c -1- CSHB 271(FIN)
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CS FOR HOUSE BILL NO. 271(FIN)
IN THE LEGISLATURE OF THE STATE OF ALASKA
THIRTY-FOURTH LEGISLATURE -SECOND SESSION
BY THE HOUSE FINANCE COMMITTEE
Offered: 5/8/26
Referred: Rules
Sponsor(s): REPRESENTATIVE FIELDS
A BILL
FOR AN ACT ENTITLED
"An Act relating to the royalty rate for leases within the Cook Inlet sedimentary basin; 1
relating to a report on leases receiving royalty relief; and providing for an effective 2
date." 3
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 4
* Section 1. The uncodified law of the State of Alaska is amended by adding a new section 5
to read: 6
LEGISLATIVE FINDINGS AND INTENT. (a) The legislature finds that 7
(1) the Cook Inlet is an important source of natural gas for the Southcentral 8
region of the state; 9
(2) without a modification of the royalty rate, production from leases in Cook 10
Inlet is not economically feasible because of declining production and rising costs; 11
(3) gas production in Cook Inlet is necessary to ensure reliable and affordable 12
energy supply for Southcentral and Interior utilities and ratepayers, to protect jobs, and to 13
reduce reliance on imported fuels; and 14
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(4) granting royalty modification for certain leases in Cook Inlet is in the best 1
interests of the state because a royalty modification is projected to extend gas production from 2
the leases for use by state residents and to maximize economic benefits to the state, when 3
compared with no modification. 4
(b) It is the intent of the legislature that failure to meet the condition set out in sec. 4 5
of this Act not have the effect of annulling or amending a royalty modification under 6
AS 38.05.180(j) that exists on or before the effective date of this Act. 7
* Sec. 2. AS 38.05.180 is amended by adding new subsections to read: 8
(mm) Under (j) of this section, beginning January 1, 2026, the commissioner 9
shall modify the leases within the Kitchen Lights Unit so that the royalty rate for 10
leases within the Kitchen Lights Unit is three percent if the lessee can demonstrate that 11
the royalty rate, as modified under this subsection, will result in cost savings to end 12
users of natural gas. Royalty calculations may be audited by the department at any 13
time. The royalty modification under this subsection may be terminated if the 14
commissioner determines that the royalty modification was assigned without approval 15
of the commissioner, consistent with (j)(5) of this section. In this subsection, "Kitchen 16
Lights Unit" means leases with division of lands numbers 389196, 389197, 389198, 17
389507, 389514, 389515, and 389923. 18
(nn) Under (j) of this section, beginning January 1, 2027, the commissioner 19
shall modify the leases within the Cook Inlet sedimentary basin so that the royalty rate 20
for leases within the Cook Inlet sedimentary basin is five percent if the lessee can 21
demonstrate that the royalty rate, as modified under this subsection, will result in cost 22
savings to end users of natural gas. Royalty calculations may be audited by the 23
department at any time. The royalty modification under this subsection may be 24
terminated if the commissioner determines that the royalty modification was assigned 25
without approval of the commissioner, consistent with (j)(5) of this section. This 26
subsection does not apply to leases modified under (mm) of this section. 27
(oo) Every five years, the commissioner shall prepare a report on the leases 28
receiving royalty relief under this section. Every five years, beginning January 1, 29
2031, the commissioner shall deliver the report not later than the first day of the 30
regular session of the legislature to the senate secretary and the chief clerk of the 31
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house of representatives and notify the legislature that the report is available. The 1
commissioner shall certify the accuracy of the information in the report and certify 2
that the report is consistent with information reported to other agencies of the state. 3
The state may audit information published in the report. The report must set out 4
(1) the amount of oil and gas produced from the leases in the preceding 5
five-year period, including the cumulative amounts of oil and gas produced over the 6
five-year period and the annual amount of oil and gas produced for each year covered 7
by the report; 8
(2) unless the information is otherwise confidential, financial and 9
operational information for the leases for the preceding five-year period, including 10
capital expenditures, operating expenditures, average cost of production, average 11
realized sales price for oil and gas produced from the leases, and development activity 12
occurring in the leases, including the number of wells drilled, completed, and 13
producing and other significant capital projects or enhanced recovery efforts occurring 14
in the leases; 15
(3) the amount of royalty revenue received from the leases during the 16
preceding five years; 17
(4) a discussion of the effects on the state of the royalty modification 18
under this section, including the total amount of royalty revenue received by the state 19
under the modified royalty rate, an estimate of royalty revenue that would have been 20
received without the modification, and an analysis of the extent to which the royalty 21
modification has affected production, investment, and continued operation of the 22
leases; 23
(5) a description of the future of the unit, including anticipated 24
production over the next five years, planned development activities, and conditions 25
necessary for continued operation of the leases; and 26
(6) an analysis of the effects on energy costs for state residents 27
resulting from royalty modification under this section and from production from the 28
leases, including, if practicable, the effect on regional energy prices. 29
* Sec. 3. The uncodified law of the State of Alaska is amended by adding a new section to 30
read: 31
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RETROACTIVITY. Section 1 of this Act and AS 38.05.180(mm), enacted by sec. 2 1
of this Act, are retroactive to January 1, 2026. 2
* Sec. 4. The uncodified law of the State of Alaska is amended by adding a new section to 3
read: 4
CONDITIONAL EFFECT. (a) Section 2 of this Act takes effect only if, before 5
December 31, 2031, a lessee within the Kitchen Lights Unit transports a jack-up rig to Cook 6
Inlet and uses the jack-up rig to drill a well for the purpose of discovering or extracting gas 7
from the Cook Inlet sedimentary basin. 8
(b) If the commissioner of natural resources determines that the condition in (a) of 9
this section has been met, the commissioner of natural resources shall notify the revisor of 10
statutes in writing within 30 days after making the determination. 11
(c) In this section, "jack-up rig" means a mobile drilling platform with extendible legs 12
for support on the ocean floor. 13
* Sec. 5. If this Act takes effect under sec. 4 of this Act, it takes effect the day after the 14
commissioner of natural resources determines, under sec. 4(b) of this Act, that the condition 15
in sec. 4 has been met. 16