Dunleavy proposes state royalty revision to incentivize Cook Inlet gas investment


Could a lower royalty structure attract more private investment back to Cook Inlet for gas production?

Today, Alaska Gov. Mike Dunleavy proposed to find that out, with the announcement of legislation that would make investment more attractive to a gas field that is proven, and has been productive since just after Statehood.

“Royalty is the main economic lever DNR can adjust in the Cook Inlet Basin to incentivize new activity and increase energy security. Royalty drives economics, and economics drive projects,” explained Department of Natural Resources Commissioner John Boyle.

Cook Inlet gas royalties averaged just 3.6% of state royalty income from FY13-22. In FY22, that amounted to $45.2 million, the governor’s office said. Royalties from this existing production will not be reduced by the proposal, and it will only apply to new pools and fields that are brought online and are not currently generating royalties for the State.

“Given the looming energy supply gap for Railbelt utilities and the level of production under the current regulatory environment, the Governor’s proposal is squarely aligned with the Alaska Constitution’s mandate to develop state resources for maximum use consistent with the public interest,” Commissioner of Revenue Adam Crum said.

The bill will be introduced at the beginning of the 2024 legislative session. If passed, new drilling and development activities would be incentivized immediately and new production from onshore could be realized shortly thereafter. Offshore developments may take several years to come online with the new terms. With the potential to unlock hundreds of additional billions of cubic feet of gas, these new supplies alone could meet our Railbelt’s annual demand of approximately 70 billion cubic feet for several years. 

These volumes will supplement the significant volumes of gas that are already under contract for the next decade. 

The Dunleavy Administration will also be rolling out other energy related initiatives across the state that will lower the cost and increase the stability of energy for Alaskans for both the short term and for years to come, his office said.


    • If there is any Federal permitting required at all, it will be slow walked or outright blocked by this administration.
      And, the odds of there being no permitting required are… zero.
      Dunlevey is wasting his time with this.

      • All waters 3 miles off shore fall under Federal jurisdiction, so the center of the Cook Inlet is. NOAA is currently looking at creating a federal salmon fishery there right now.

      • Construction in a traditionally navigable waterway will require a U.S. Army Corps of Engineers Section 10 (Rivers and Harbors Act) permit. Exploration and development in Cook Inlet will also require consultation with the National Marine Fisheries Service–Cook Inlet is home to a protected population of Cook Inlet beluga whales and most of the inlet is designated as critical habitat. There are additional federal permits that oil and gas projects require, such as from the Pipeline and Hazardous Materials Administration. So, there are federal permits (in addition to State permits) that will be required.

      • There are Federal Waters in Cook Inlet. Any in water work must be permitted by the Army Corps of Engineers. If there are wetlands involved same thing. Permit required.
        Is it possible they might disturb archeological sites? Yes, so that is another requirement for consultation, and/or permitting. Historical Preservation Act.
        Are there migratory birds in the area? The Migratory Bird Act comes into play, and if there is a possibility of a take, permitting is required.
        How about marine mammals? Yep. Marine Mammal Protection Act, which will require a permit if there is a possibility of a take.
        Finally, will a single dollar of Federal Funds be used for this endeavor? If so, pretty much every other Federal law comes into effect as well.

  1. “Given the looming energy supply gap for Railbelt utilities and the level of production under the current regulatory environment, the Governor’s proposal is squarely aligned with the Alaska Constitution’s mandate to develop state resources for maximum use consistent with the public interest,” Commissioner of Revenue Adam Crum said.” I just read this same justification from the state for forcing through a timber sale in Whale Pass and it’s total BS. In effect: “The State Constitution is forcing us to do it!” Is reducing royalties, the profit that goes to the state for the extraction of our natural resources…cash that directly benefits all Alaskans, actually consistent with the public interest? Or does it just sweeten the pot for Big Oil? This state seems to have a history of paying, in essence, corporate interests to come reap profits off our natural resources while shortchanging the rest of us while gaslighting us with idiotic statements about how the oil companies won’t come to Alaska because the royalties are too high. The oil companies are making a profit and unless the royalties rise enough to cause them to take losses they’ll continue to extract our resources for their benefit…and, as a tangential benefit, ours. Does lowering the royalties increase incentives to explore and produce? Sure it does because it increases profitability and making money is what it’s all about. So as long as Big Oil can make a normal or better profit they’ll be here taking our oil and gas. The state has all of the negotiating power here but our wish washy bureaucrats are either too inept to exercise it or they’re getting something out of selling us out. You decide.

    • you just gave an oblique example of trickle down economics. grandpa Ronnie and the orange blossom tulip gave massive tax cuts beginning in 80’s and ending in 2020. extractive resource states are always held captive by the corporations entitled to rape, plillage and plunder till they go bankrupt before leaving town.

      as a believer in Angus Deaton, there are better economic practices through correct policies. just cracked his book and have to say I think he is onto something.

  2. Typical Republican tax giveaways to the billionaire class. Do as little as possible Mike does not possess the skills to think outside of the make Jeffrey Hildebrand richer box.

    • Isn’t that the same argument AholeC used in NY to keep Amazon out of her district/area?
      Giving a company a tax break to incentivize construction and jobs is not a give away to the billionaire class. It is a reduction in the amount that could be collected, to get jobs, businesses, etc… all paying into the tax system.
      But, I am sure your intellect, which is apparently on par with perhaps the most moronic member of Congress, is correct, and everyone else is wrong.

      • If the state intends to start giving away our resources maybe they should find another way to fund government. Other states can offer incentives as increased employment brings in revenue through taxes. Alaska lacks those taxes. Maybe start taxing S-Corps.

  3. If Dunleavy could/would rein in the hostile bureaucrats at the AOGCC and RCA, it would make Alaska a more desirable place to invest in the gas and oil industry. Looking back at the last few decades, these two bureaucratic state agencies have made a regulatory mess in the state. In the Cook Inlet area, we have been paying more for natural gas with the looming threat of shortages entirely created by these agencies.

  4. His still standing Tall. Not much for the Alaskans but for the oil companies and their royalties, standing tall with Parnell. Such a great thing that SB21 is, paying the oil companies back to increase their profit margin from AK.

    • You don’t live in Southcentral Alaska, or use natural gas or electricity do you? Maybe you don’t know what heats homes and provides electricity for the vast majority of Alaskans.

  5. Unfortunately for Dunleavy, oil and gas companies have memories. And bad memories mean unwillingness to take the risk of oil exploration in Alaska. A key example: Caelus. Caelus, a small company that produced oil from an island off the North Slope, entered into an oil tax credit agreement with the State. Then Walker decided to stop tax credits to Caelus, which caused cash flow problems for them and they had to bail and sell out to ENI. Walker killed this oil company. When governors pull the rug out from under oil companies, they go elsewhere. Such is the situation in AK. Alaska is too politically risky a place for them to do business. That has been proven many times.

    • On the Smith Bay project , the governor cheated Caelus out of the $100M tax/incentive credit and refused to pay it . This was after discovering 2-6B barrels of recoverable oil in place . Their finance company pulled the plug on project . One of the largest oil finds on slope in over 30 years ! Crying shame ! This resource just sits in the ground with no capital for development ! Caelus spent nearly $200M dollars on the project . It is bigger discovery than ConocoPhillips Willow and on State lands to boot

  6. Or, think of the fundamental core of economics: supply and demand. We have the supply, they don’t. If it’s valuable to them (high demand), then at some point they will pay a sensible price set by us, not them.

  7. The new group, “Alaskans for higher heating bills” will be strongly against this effort. People who have no need for heat and microwave all of their meals have a strong case against natural gas.

  8. Caelus. An oil producing company that was killed by Gov. Walker (by him withholding tax credit payouts and driving them to bankruptcy). The oil and gas industry still remembers the Caelus carnage. And they will not take the risk to invest in this third world political nightmare called Alaska. Sorry Dumbleavey.

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