Alaska Legislature: Senate Finance - June 5, 2026 9:00am

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I'll assign the Finance Committee to order. Today's June 5th. We're in state capital, Senate Finance Room. Present today, Chairman Olson, Chairman Sedman, Senator Keel, Senator Merrick, Senator Cronk, Senator Coffman, myself, Senator Hoffman. We have a quorum to conduct business.

It's six months minutes after nine today. We have one item on this morning's agenda that is a presentation by aogcc. I invite Greg Wilson, the Commissioner, to the table to make his presentation. I think. Is he online?

He's online, yeah. Mr. Please introduce. Who else is with you? Commissioner?

Yeah. Good morning, Mr. Chairman. This is AOTCC chairman Tom McKay, and we're in our conference room here in Anchorage. And with me is my fellow commissioners Greg Wilson and Jesse Kamlowski, along with our senior reservoir engineer, Dave Roby. And it's our privilege to speak to you this morning.

Can you see our slides? Okay. Yes, we can. All right, so what I'm going to do, Mr. Chairman, is turn the presentation over to Commissioner Greg Wilson and he will be narrating the slides for you and we'll go ahead with it here. Now, again, thank you for having us this morning.

Okay, after each slide, can you pause and we'll see if there's any questions by members of the city on the finance committee. Mr. Wilson, please proceed, identify yourself and proceed with your presentation. Thank you much. This is Commissioner Gregory Wilson and good morning meeting co chairs and committee members. We're happy to have this opportunity to discuss the regulatory environment around major gas sales with respect to algcc.

And I do want to point out last week there were a couple of statements made by operators that we will address in context here as we get to the regulations, but a few things that need clarification or correction regarding that testimony last week. So with that, we will go to slide 2, which is the agenda. And it's a relatively dry presentation around regulations. I apologize, but it, I think, addresses the issues. So by way of agenda, a couple of introductory slides on the LGCC mission, Cycling versus Blowdown and Resource at Risk, and then slides on the statutory authorities that are delegated to ALGCC regarding major gas sales, and then the regulatory environment at ALGCC related to major gas sales.

We will touch on the Prudhoe Oil Pool and Thompson Oil Pool. ALGCC approved gas offtake allowables. And then in summary, one of the main points of summary is that major gas sales from the Prudhoe Oil Pool and the Thompson Oil Pool is consistent with the agency's statutory mission to prevent waste and ensure greater ultimate recovery. Before we proceed, I would like to acknowledge the President's of three senators that have been with us throughout the hearings. Senator Bjorgman, Senator Myers and Senator you proceed.

Slide 3. The AOGCC mission statement as distilled from our statutory obligations is to protect the public interest in exploration and development of Alaska's valuable oil, gas and geothermal resources through the greater or through the application of conservation practices designed to ensure greater ultimate recovery and the protection of health, safety, fresh groundwaters and the rights of all owners to recover their share of the resource. With that we'll go to slide four.

Yes, and so these terms are probably becoming fairly familiar to the members, but we will go through just very quickly cycling. You produce gas, condensate and oil. You re inject most of the gas to slow the reservoir pressure decline and then provide secondary and enhanced recovery support.

Blow down means may sound extreme with the term blowdown, but with blowdown you are not sacrificing the liquids in the reservoir, but you're producing and selling the gas. And condensate pressure is going to decline faster, which reduces the liquids recovered and can increase the condensate dropout in the reservoir. But understand that in a blowdown environment, using Prudhoe Bay as the example, you're still going to be re injecting more gas than you're diverting off for sales. You're still going to be doing pressure maintenance and possibly doing enhanced recovery with the CO2 stream as a miscible injectant. And so there will still be significant liquids production in a blowdown environment.

And so the trade off between the two. Cyclin tends to recover more liquids but reduces recoverable gas and that's burned to sustain cycling. It keeps the lights on, the heat on, that sort of thing. And I'll point out that over the life of Prudhoe bay, more than 8tcf of gas has been burned in this environment. The present blowdown opportunity for major gas sales recovers more total energy in barrels of oil equivalents and eliminates some elements of risk.

And so I'll address those two things in the next couple of slides.

Are there any questions regarding these two terms or three terms? There are no questions at this time, Commissioner.

Slide 5 resource at risk at present, Prudhoe is thought to have less than a billion barrels of oil remaining reserves and then about 4 billion barrels of oil equivalence in the gas. And I'll address that bvoe down below which barrels of oil equivalents. That's a unit used to compare Oil and gas volumes on an energy equivalent basis, but should not be interpreted as a measure of economic value. And so then just some down below, some equivalents there, a BoE is about 5.8 million million British thermal units, which is a barrel of oil, which is about 6,000 cubic feet of gas, depending on the gas chemistry. Unfortunately, our one pretty figure is that match down below which emphasizes one British thermal unit is about the equivalence of a kitchen match.

And so we convert the gas in the reservoir to barrels of oil equal equivalents for this discussion. And so there's about 4 billion barrels of oil equivalents in the gas at crude oil. With the numbers that have been expressed this year, I would say that it's probably more like about 3.7 billion barrels of oil equivalents in the gas at Point Thompson. We're Talking about approximately 300 million barrels of condensate condensate in this discussion. And that number we spoke to House or Senate Resources last month regarding the condensate available in Point Thompson.

The number shared with ALGCC fairly recently regarding Point Thompson is about 6 TCF of gas and production.

Production statistics show there's about 55 barrels of condensate per million cubic feet of gas. And so with about 6tcf of gas, that would be 330 million barrels of condensate in place in the reservoir. Obviously you're not going to produce all of that condensate. Some is going to drop out in the reservoir. But for discussion's sake, about 300 million barrels of condensate and then that 6 TCF of gas using the conversions down below would be about 1 billion barrels of oil equivalents.

And so major gas sales achieves greatest ultimate recovery in terms of boes at the lowest risk, consistent with ALGCC mission of preventing waste and ensuring greater ultimate recovery. And when I talk about risk, I mean, we don't venture too far into this realm, but it's more or less the bird in the hand. You have a gas, potentially have a gas sales project, which means that there is a means of commercializing the gas in the reservoir. And so you would risk that close to one as opposed to if there wasn't a major gas sales right now, you would have to discount those barrels of oil equivalents in the gas. Are there any Questions on slide 5?

Any questions on slide 5? Seeing none, please proceed.

And so now we'll look at some of the statutory authorities delegated to the ALGCC related to major gas sales. And you can see a number of these are around the issue of waste but O3OB investigate if waste exists or is imminent. And waste it's at the bottom there. The definition of waste is in 170 15. But by waste there's the normal and customary use of the term waste.

But in addition it would be an inefficient or inappropriate means of development of a reservoir could result in waste by leaving a resource in the ground. And so that adds to the definition of waste for ALGCC purposes and State of Alaska purpose purposes. 030D9 filing and approval of plans of development and operation to prevent waste and ensure greater ultimate recovery is a significant one here. 030-E-F. The Commission may regulate the quantity and rate of production of oil and gas from a well or property.

And then O3O E1G the commission may regulate underground injection of gas for purposes of storage. And we're not talking about carbon storage here. We're talking about natural gas storage, such as what's done on the Kenai Peninsula. 095 Prohibits the waste of oil and gas. And then 150D establishes the civil penalty amount for wasting gas.

And so next we will proceed then to the regulatory environment that ensures these statutory obligations are met by the aotcc. Are there any questions on the statutory environment? No questions yet. Thank you.

And so in Title 20, Chapter 25 of the Alaska Administrative Code we're drawing upon selected regulatory authorities related to major gas sales.

Article 1 We include here for completeness sake, although it's peripheral to major gas sales. But in there you'll find all the regulations regarding drilling, sundry well interventions, bonding units, well spacing, those sorts of things. But like I said, it's peripheral to the discussion today. But just assure that, you know, the LGCC does take its obligations seriously when it comes to of the drilling, bonding and other obligations under Article 1, Article 3 production practices. We will develop that a little bit further on subsequent slides.

Article 5 enhanced recovery. We will develop that one a little bit further. And then Article 6, General Provisions, a couple of key regulations regarding major gas sales. And517 deals with the plan of reservoir development and operation. 520 Is fueled and pool regulation and classification and in 535 enforcement.

And I want to point out that the misstatements that I spoke of earlier, at least from our opinion, the misstatements regarding the regulatory readiness of some of the pools on the North Slope are related to plans of development and the pool regulation and classification. Then Article 9 carbon storage. It's a new authority of the ALGCC. We have developed our regulations now as companion to this carbon storage statutes and those have been adopted by the ALGCC and signed by the Lieutenant Governor. We are in the process of applying for class six primacy from any.

Are there any questions on slide seven? There are none, Mr. Wilson. Thank you. We'll proceed to slide eight. We did want to point out some functions outside of the ALGCC authority.

Just for clarity. We don't do evaluation of project economics. We don't do forecasting of reserves, production, prices and revenue. No forecasting nor modification of royalties or taxes.

We do not routinely do reservoir volumetrics. What we do is monitor and meter production. And so those that do forecasting and economics use the numbers that are metered by the ALTCC and posted on our website for purposes of of those three bullets.

Any questions on slide eight? Senator Keel? Thank you, Mr. Chairman. Mr. Wilson, could you maybe help a little bit with how you do some of the analysis about maximizing recovery? It seems to me that a piece of that has to look at economics piece of that means you have to have some sense of what the reserves are because you.

You have to operate within the bounds of rationality. Right? Alaska doesn't require companies to go down and scrub the rocks to get every possible molecule of oil off. That wouldn't make any sense. What are your sources of data?

How far do you go? I understand you don't get to every piece of pipe, but how far do you go in both understanding what's down there and looking at the economics of it? When you say how far is far enough?

Mr. Wilson? Senator Keel, through the chair, I want to clarify that although our staff doesn't routinely do volumetrics, we certainly deal with volumetrics when it comes to plans of development and pool rules recoveries. But. But most of that is provided by the operator or if we feel there's a need, we would get a third party opinion on volumes and production practices. And with that I'm going to turn it over to our senior reservoir engineer Dave Roby to talk just a little bit about some of the points of your question.

Mr. Robey, please identify yourself. Hi, I'm Dave Roby. I'm the senior reservoir engineer at the aogcc. Senator Keel through the chair for both Point Thompson and Prudhoe, the AOGCC entered into a data room situation with the operators BP and Nexon Mobile at the time where they provided AOGCC staff, AOGCC staff access to their confidential information in the control rooms. These room was up here in Alaska.

Exxon was down in Houston. So we look at the data that they were generating and look at all their project economics volumetrics, the risks to the volumetrics, this, that and the other at that time. So we, we do have the ability to get in and get access to that data so that we can make informed decisions. And that information did include project economics showing the economics of the project under various different scenarios of development.

Senator Keel, thank you. So it's, I mean I think it's just helpful for Alaskans to know that while you're not making go no go decisions on a field, you do have the access to information you need to make sure that a company isn't coming in and maximizing short term cash flow, leaving hydrocarbon in the ground long term. That's useful perspective. Thanks. Thank you Senator Kiel.

Mr. Wilson, please proceed. This is Commissioner Wilson for the record. And I do want to also point out that we do have the ability and a full to file requests of information from the operators. And so if we feel there's something that's lacking, we have that authority to request that information.

With that we will proceed to slide 9.

On slide 9, article 3 is production practices. And so production practices, the regulations surrounding production practices include measurement equipment for custody transfer. We do the metering before a resource is severed from the lease. We do metering and then those volumes are reported on our website and provided. You know for you whether it's the DNR dor the general public.

But those numbers are available on production of oil, gas and water and also injectants, gas disposition, prevention of waste. There is a form that the operators file on a monthly basis. It's our form 10, 422. Yeah, I apologize but that on that form it lists what gas has been sold, what gas has been reinjected, what gas has been flared, et cetera. And so we look at that on a monthly basis and determine if there is any inappropriate flaring of gas or waste of gas.

We also regulate gas oil ratio limitations for a given reservoir to see that it's being developed properly. And this would be a situation where you might drop the pressure too soon. And if there's questions on that, Mr. Roby can explain a little bit more about discussing gas oil racial limitations. Then we also regulate underground disposal of oil field waste and underground storage of hydrocarbons. And that's with our Class 2 authority.

We have primacy over the EPA on Class 2. And it can be waste, but it can also be storage of natural gas. And so that's an example of that is the natural gas storage in Cook Inlet. Any Questions on slide nine,. See Senator Stedman.

Thank you, Mr. Chairman. So is Point Thompson a gas field or an oil field? And I have a couple other questions.

Chair Steadman, by last, Dave Roby. Okay. Oh, this is Dave Roby. Sorry. By last statutes of regulations by Thompson is an oil field because the gas oil ratio is under a hundred thousand standard cubic feet per barrel liquid produced, it's approximately 20,000.

So it's technically a. An oil field. It was a gas field. We wouldn't have to establish a gas optical out. Yeah, it's hard to understand with this speaker system we have in place here.

So you guys might be a little close to your microphones. I'm not quite sure, but we get a lot of echo here.

And then are you familiar with and can update the committee on the current status of Point Thompson and the difficulty with, with the liquids and potential need for additional drilling and or additional wells to meet some of the reservoir objectives or dynamics they thought that they thought was in place.

Senator Steadman, through the chair. This is Greg Wilson. Commissioner Greg Wilson and I will start with an answer regarding Point Thompson. Currently there are two ejectors, one producer and then a new producer has just been drilled there at Thompson. Some of the issues with the field, they've seen issues of condensate banking.

And so if condensate banking around the wellbore and what that means is that the condensate rather than dropping out at the surface, the condensate is dropping out in the reservoir. And that condensate would be very hard to recover. Not only the, but it impedes production because of its blocking pore spaces around the wellbore. So that's one of the issues. A second issue that has been identified by the operator is compaction of the reservoir as pressure drops near the wellbore.

And so the compaction also reduces pore space that's available to deliver the gas and condensate to the wellbore. So those are a couple of the issues that have developed at Point Thompson. They're not.

The operator should be able to overcome those issues with the proper drawdown rates, the pull on the gas, that sort of thing. And but I do want to identify those as a couple of the issues right now with the two well with the one producer well that they have and the two injector wells with that. I will turn it to senior reservoir engineer Dave Roby if he wants to add anything to that discussion. Mr. Robey. This is Dave Robey.

Point Thompson has drilled the new development well because they were unable to meet the 10,000 barrel a day design capacity of the pilot project doing out there with a single well. The issue started because it said had the condensate banking. So in order to keep the grates up, they had to pull on on the well harder which lower the pressure than the reservoir near the well more. And then that caused the reservoir compaction. So now that.

So that ended up making the well incapable producing enough to meet the requirements for the specifications of the plant. So they built the second well so they'd have more available gas at a lower drawdown pressure to go to fulfilled development. They'll need to put in more wells obviously than the four that they currently have in place. And those based on testimony from Hill Corp. Last week. The well that just drilled cost $180 million.

Some of their not cheap wells.

And in addition to that, the resort compaction issue will probably affect those wells also. So probably in a situation where they initially might drill say 10 wells, but then the reservoir compaction kicks in and then we'll have to drill another five to 10 wells in order to keep the rates up so they can deliver their 1 million cubic feet a day or 1.1 billion cubic feet a day that the gas optic allows.

Senator Steadman. So thank you, Mr. Chairman. So the new developments in Point Thompson, is it going to inhibit gas sales to the project that we're working on here at the table?

Senator Segman, this is Dave Roby again. What they've done at Prudo so far, nothing of that will inhibit the gas sales. In fact, it'll all help gas sales. If they go to gas sales, they can take their two existing injectors and convert those to production and then they have the two existing producers and then they'll have to go more producers in order to meet the billion barrels building cubic feet a day requirement. And they also have to build expanded facilities in order to handle that much gas to the surface because the current facility is only designed for 200 million cubic feet a day.

And then the same similar questions at Northstar. That was the other location Hill Corp. Has that appears to be the supply for the gas line we're working on. What's the status and of gas takeoff at Northstar?

Senator Steadman, through the chair first, I want to correct. I'm sorry, this is Commissioner Greg Wilson. I want to correct a statement by senior reservoir engineer Dave Roby. He said Trudeau when he meant to say Thompson just a moment ago. Just for the record, regarding North Star, at present there is not a Gas offtake agreement or gas offtake order for North Star.

The data is available. It's not something that would delay major gas sales and it's something that's certainly achievable with engagement with the operator. But there's not an existing gas offtake order for major gas sales from North Star. Senator Steadman? Yes.

And then the other question. At some point during the presentation today we would be nice to address Prudhoe Bay and potential loss of oil and the value there. There's been some concerns expressed by the Department of Revenue that the state could face that under particular scenarios that aren't too far fetched. Are you familiar with with that and are you guys going to touch on on impacts of value loss of Prudhoe Bay and oil?

Yeah. Senator, Senator Steadman, through the chair. Yes. You know I addressed it briefly and we can address it in more detail. But at Prudhoe, the blowdown scenario at Prudhoe, it doesn't mean that liquids production stops and as I said, in fact there is still more gas being injected into the field for secondary and enhanced recovery.

There's more gas being injected into the field than is being diverted for major gas sales. Water flood could and would continue and then there would be a CO2 stream potentially available for as a miscible injectant for enhanced oil recovery. And so there would still be a significant amount of liquids produced even in a blowdown scenario. We would need more detailed modeling from the operators and or third party to make better decisions about how much oil loss would happen in a blowdown scenario at Prudhoe. And with that again I'm going to turn it over to senior reservoir engineer Dave Roby to see if he has anything to add to that discussion.

Mr. Robey, Mr. Evans, Mr. Roby, again quick touch on the value consideration brought up. From what I've seen, the part of revenue is assuming the gas will be sold for a $50 the MCF and says there's six or yeah, six MTF per barrel for a barrel of oil. Cleansley that means a barrel of oil equivalent of gas would be worth $9 which is of course much lower than the actual price of gas. That's about as far as I can get into economics. But there is a significant difference in the value of the oil and the gas.

The question is we understand that the oil flow is not going to stop but if it's going to be reduced and substantially reduced, that is the dilemma that we're facing if we don't have that information center statement. Yeah thank you, Mr. Chairman. I think it's really difficult when we have our speaker system the way it is to understand a lot of the presenters, especially when you get into technical and very important discussions like we're having here today. But I think, Mr. Chairman, what we should do, we have a presentation coming up from the Department of Revenue again on projections, and we need to synchronize that information with AOGCC so we have a good understanding of the potential impacts or probabilities, because in dollars, because as I recall, Department of Revenue was talking somewhere up a billion dollars, a significant amount under various price scenarios. And we need to just understand that when, as we go through the decision process.

Thank you, Senator Steadman. Senator Coffman, thank you.

If you can, could you just describe the time frame that it might take? We've had conversations here at the table about North Star. Other reservoirs have been discussed. What, what's the time frame for getting an authorization to pull gas off of a reservoir, for example, with North Star? How much processing time is required to go through all the data and make that determination?

And what's the risk factor that somehow in that process that we don't, you know, we don't get a successful authorization?

Senator Coffman, through the chair, the time frame, it's going to, in part be pool or field dependent. But in the case of North Star, that's a known entity it's been producing for a long time. Some of the gas in North Star is actually Prudho PO gas that has been moved to Northstar. And so there is a considerable amount of production data and reservoir information on North Star. And so that could move relatively quickly to a gas offtake order for that pool.

By quickly. There are certain constraints that we have on noticing a hearing and then on making a decision regarding the hearing and taking public comments, that sort of thing, but by relatively quickly, a matter of months, and you could have a gas offtake order for a field that's a known entity like North Star.

Mr. Wilson, your mic is working fine. If Mr. Roby needs to answer questions, I would advise that he use your micro mic because his MIC is causing lots of reverberation. Senator Coffman, thank you. So that timeframe that you described and the certainty of it, so the chance that there's a hiccup, you think the reservoir is so well known that it's almost a done deal, so to speak, that there's no variability in whether or not that authorization would be issued once you ran through the process.

This is Commissioner Wilson again. I Apologize. I'm not sure who just spoke there,. But that was Senator Coffman. Senator Coffman, through the chair, yes, that's correct.

With Point Thompson. I mean, Northstar is well known by the ALGCC and well known by the operator. It's been producing for a long time. The liquids in the Ibishak Formation at Northstar is largely produced at this point. And they have been within that North Star unit, they have been developing shallower formation, the Kaparic river formation, for the oil there.

And so, like I said, it's a known entity, been producing a long time. And so I think the data is available to rapidly proceed to gas offtake for most. But the offtake order is not in place for Northstar. I just want to emphasize that point, Senator Coffman. Thank you.

And I ask these questions because it's been kind of conversationally put forth that that's available for the potential gas project. And I just want to be clear on the record with where we're at on that. Do you know if there's been any inquiry to start that?

To my knowledge, Senator Coffman, through the chair. To my knowledge, there has not been inquiries regarding gas offtake. That's an engagement that can easily happen because of maturity of the North Star unit, but that engagement has not happened at this point. Senator Kaufman, thank you. I'm good.

I just wanted to get clarity on that, and I appreciate it. Thank you. Thank you, Senator Kaufman. Mr. Wilson, please proceed.

And so slide 10, article 5. Enhanced recovery. I just wanted to point out that the Commission will issue an order authorizing the injection of fluids of function primarily to enhance the recovery of oil and gas that are appropriate for enhanced recovery, and that does play a part in major gas sales. Enhanced recovery is happening in the Prudo oil pool at present. But in addition, there would be a major source of CO2 available for enhanced recovery in Prudhoe, and it would be regulated here by regulation 402A.

Senator Kiel, thank you. Excuse me. Thank you, Mr. Chairman. So, in terms of what you inject to enhance or what companies inject to enhance oil recovery, is it all the Same? Is enhancing CO2 as effective as enhancing methane?

Does one tend to change the composition of the oil and clog up well bores? Are they six of one, half a dozen of the other? Or is there a preferable.

Yeah. Senator Coughlin, through the chair. Senator Keel,. My apologies, Senator Keel through the chair.

CO2 is an approved injectant at Prudo at present, and it is very effective at reducing the Surface tension to produce more oil. But it gets beyond my expertise. And again I'm going to turn it over to senior reservoir engineer Dave Roby. Senator Nikhil, through the chair. This is Dave Roby.

Can you all hear me better now? Much better. But I think you're still a little bit close to the mic.

That's a microphone.

CO2 is currently a significant component of the miscible injected that they're using in Prevo bay. It's mixed with the other hydrocarbon or hydrocarbons that are produced from the gas. So that mixture is what's called miscible, which means when they inject it in the reservoir, it all gets absorbed by oil and it physically changes the properties of the oil so it'll flow easier and increase recovery. CO2 on its own can do the same exact process. The pressure that you detach, inject, that might be a little bit different depending on the composition of the, of the substance you're injecting to do it.

But it would act very similar to what they're currently doing in terms of missile injection at the field. Senator Keel. Thanks, Mr. Chairman. Thank you. Senator Keel, please proceed.

Commissioner Wilson.

This is Commissioner Wilson addressing Slide 11. And so this is Article 6, Plan of Reservoir development and operations.

Part of that regulation is before commencement of regular production from an oil or gas pool, the operator shall, my emphasis on the shall, but shall submit to the commission a plan of respiratory development and operation. And that's in order to prevent waste, protect correlative rights and promote greater ultimate recovery of oil and gas. And it is here that I want to point out that Great Bear has not approached the ALGCC with a plan of development and operation for their discoveries south of Prudhoe Bay. And so that was one of the clarifications regarding testimony that the committee received last week. Are there any Questions on slide 11?

Yes, Senator Steadman, what committee are you referring to?

Yeah, my apologies, that was House Finance last week. Okay, well this is Senate Finance, so you might want to restate that. And what was the issue?

The issue was that I don't have the testimony in front of me specifically. But Great Bear implied that they had satisfied all the ALGCC regulations to go to production with their discoveries. And what I am saying is that they have not satisfied 517 here putting a plan of development before the ALGCC. And it's within that plan of development that we will learn more about the discoveries. And in that plan of development and in the order that we would issue thereafter, there would be a Gas offtake within that plan of development approved by the algcc.

It can be done here. It could also be done in the pool rules that we will discuss on the next slide. Senator Steadman, and this is the Pantheon project you're referring to Great Bear that's been quoted or show it up in some of the presentations dealing with the gas line.

Fields that are going to be produced to supply gas to that line. Is that correct?

Senator Steadman, through the chair? Yes, that is correct. It's Great Bear Pantheon and it was statements made in the House finance hearing of last week regarding their discovery south of Prudho. Senator stoodman. Thank you Mr. Chairman.

I think the committee here has discounted that concept as a non bankable source to facilitate financing of this project at this time. Thank you Senator Steadman. Please proceed.

Senator Steadman, through the Chair. I do want to emphasize what I was discussing is the regulatory context and environment for Great Bear Pantheon without regard to the producibility or deliverability of their discoveries. Understood.

Are there any further questions on slide 11? Seeing none,.

We'll proceed to Slide 12. Still Article 6, Fuel and Pool regulation and classification. I have portions of the regulation reproduced here, but the commission will issue an order other words then but classifying the pool as an oil or gas pool pool in a field and prescribing rules which we refer to then as pool rules to govern the proposed development and will establish requirements that the commission considers necessary to again prevent waste, protect fresh water, protect correlative rights and ensure a greater ultimate recovery of oil and gas. And then based on operating and technical data it's common pool orders can be amended so within the pool rules, which is you can also have the gas offtake defined within the pool rules. And that is the context for the Prudhoe oil pool and the Thompson Oil Pool.

Those gas offtake orders are within the pool rules for those respective fields or pools.

Are there any questions on slide 12? See no questions on slide 12. Slide 13.

So slide 13 again, article 6, regulatory steps to gas offtake major gas sales. So this is kind of summarizing in the greater context here. But gas offtake can be approved within the plan of reservoir development and operation or it can be developed in in the pool rules. The field and pool regulation classification. And so the gas offtake rates that are presently in place for major gas sales are the 2015 crude oil pool.

That's the pop there. Prudhoe Oil pool Conservation Order 341F Rule 9 states that 3.6 billion standard cubic feet per day can be produced from the crude oil pool gas. And in 2015, the Thompson Oil Pool Conservation Order 719, Rule 8 defines that 1.1 billion standard cubic feet per day can be produced from the Thompson oil pool. And again emphasizing. But I think we've done that already, but emphasizing that the Prudhoe Oil Pool and the Thompson Thompson Oil Pool are the only pools on the North Slope currently authorized to sell gas to a major gas sales project.

There are other gas offtakes allowed, but they are very small in comparison to 341F and 719. And they're for other purposes for other units. Are there any Questions on slide 13? Senator CO. Coffman. Thank you, Commissioner Wilson.

This is Senator Coffman. And I know that there's been talk of gas pipelines for a long time, but it really seems that we're at a tipping point right now where the gas production versus oil production economics, we're starting to get to a maturity in the reservoirs where it's starting to make more sense than it ever has. Is that that accurate or would you like to temper what I'm saying?

Senator Kaufman, through the chair, I would agree with that statement. You know, we stated the AOGCC mission statement several times with our statutory obligations, and we do feel that major guests that at this time is consistent with that mission statement of promoting greater ultimate recovery. I do want to emphasize that gas sales does not mean that we're foregoing any further liquid sales, that the reservoirs will continue to be developed for liquids while gas sales are occurring. And so it's not just an either or situation, but as was pointed out earlier, that volume of oil in a gas sales environment needs to be better quantified. Senator Kaufman, thank you.

Yes, I guess just a layman's perspective on that. So you've got two curves. You have the production curve of oil and the potential production curve of gas that's been used to help migrate oil through the formation and pressurize oil to help lift it. And so you get to a point where those curves come to a point where it's reasonable, the economics are there, the derivative value makes it where it's reasonable to start taking gas because its beneficial value is no longer as strong a case as it was when those curves were not quite at the point where we're at now.

Senator Coughlin, through the chair, I wouldn't disagree with that statement either. I think you know, these offtake orders were developed in 2015 by prior commissioners, but the story is more compelling today than it was in 2015 for sure. And if you look at the curves you were describing, if it wasn't such a large field, you would say that Prudhoe has reached the point of diminishing returns. But it is a large field and there is still significant oil to be produced from the reservoir. Again, emphasizing that it's not an either or situation if we go to gas sales.

Senator Coffman, thank you. And I guess the value, relative value. So the way I like to think of it is that oil is to gold as gas is to silver. So the relative values of that, if you can, if you're in a mine and you have an opportunity to get gold, you go for that. The silver's still there.

But after a while that may make the economic sense that you're part of the total value chain.

Senator Coffman, through the chair, that's a good analogy. And I would emphasize at this point, I mentioned earlier the element of risk, and there is the potential differing gas sales at this time that you would not have a future opportunity for gas sales, in which case you forego the 4 billion barrels of oil equivalent in Prudhoe and the 1 billion barrels of oil equivalent in Point Thompson. And so there's an element of risk, risk that needs to be quantified by an economist. That's not what we do here at algcc. But potentially you would want to assign a risk factor to those barrels of oil equivalent if you were to forego major gas sales at this time.

Senator Coffman, thank you again, Commissioner Wilson. This is Senator Coffman. So if I hear you correctly, what you're saying is that our remit relative to the Constitution is to assure best value production for best benefit of our resources. And so if we get to a point where we have that barrel of oil equivalent and we're not producing it, we're starting to ignore the Constitution in that sense that we have an opportunity, but we're not pursuing it because in some ways we're all dressed up at the. There's no place to go if we don't have a beneficial transmission system for the gas.

Senator Kaufman, through the chair, I do not disagree.

The role of the ALGCC is to promote the greater ultimate recovery from the fields. The issues of economics, you know, I would defer to the DNR and the DOR to make some of those decisions, but our statutory and regulatory goal is to promote the ultimate recovery from the fields, which includes not only the liquids, but the barrels of oil equivalents in the fields. Thank You. Thank you, Senator Coffman. Further Questions on slide 13.

Senator Keel. Thank you, Mr. Chairman. I guess Chair Wilson, I was confused by those answers. Is the commission's mission to maximize the recovery of BTUs or the recovery of value?

Yeah, we don't look at it, I guess in terms of BTUs, but that was one of the equivalents that I was pointing out earlier. But we do look at it in terms of the barrels of oil equivalent in looking at greater ultimate recovery from the fields. Now, we do not venture into the value realm again, I would say that that would be more in the realm of the Department of Natural Resources and the Department of Revenue to enter into the value realm. But our part in the process is to promote the greater ultimate recovery overall. Senator kiel.

Thank you, Mr. Chairman. The reason I ask is that I think there was conversation a few minutes ago about a barrel of oil equivalent in gas having a value like $9 versus a barrel of oil, which, you know, we cry a little bit when it's 60. And right now we're doing pretty well on the budget within at 105 or 110. So there, that's not something the commission looks at. That's something that the legislature has to look at.

Is that, am I understanding that correctly?

We don't routinely assign dollar values to the resource. But that was the. The notional value of the gas was put out there to provide greater context. That is something that I think should and could be done by Department of Natural Resources and Department of Revenue to put this in better context. But without doubt, the barrel of oil equivalence of gas does not have the same worth as a barrel of condensate or a barrel of oil.

The larger resource still in the reservoir is in the form of gas, not oil and not condensate. And the balancing act is to see that the greater ultimate recovery of all of those happens. It's not like I said, it's not an either or situation, but it's a balancing act to see that the greater recovery of all of those is recovered from the reservoir from the MCC standpoint. Senator kiehl. Thank you, Mr. Chairman.

And I'll agree with the last one. As long as you know, we as the legislature on behalf of Alaskans do balance the dollar value as well as. The. Total quantity hydrocarbon. So.

So then shifting back a little bit, two big fields, pools you call them, with gas offtake agreements, another one that you said seemed comparatively straightforward should you get an application.

Several other big mature pools on the slope are those do Those just have different geology, different reservoir characteristics that would suggest that they should not or could not take gas off yet. Or have you just not had anybody ask, you know, Kupara, Alpine, some of the larger and more mature fields.

Senator Keel, through the chair, this is Commissioner Wilson again, and you are correct, there are quite a few. There's a long list of pools being developed on the North Slope. And there is a difference to the geology, the oil chemistry, the makeup of the fluids in the reservoir. There are a number of fields on the North Slope or a number of pools on the North Slope that do not have a gas cap associated with them. What most do or all do is have solution gas.

But that can be relatively minor in comparison to the major gas caps that we're talking about with the Prudhoe oil pool and the Thompson oil pool. So we spoke of Northstar, which. Which does have a significant amount of gas in it. The number escapes me off the top of my head with maybe about a half of bcf, I mean, TCF of gas. And then Endicott would be another in that same realm of about a half a TCF of gas at Endicott.

And so it would be up to the operator to approach the AOGCC to get off, take orders for gas sales from other fields that have a significant amount of gas. Senator Kiel,.

Thank you. And that's helpful to have too. You guys have the reservoir, folks, and it's not something that a lot of legislators have detailed knowledge of.

Generally speaking, as you know, the North Slope has really good rocks and good prospectivity. Should we be thinking about. What kind. Of timeframes is it worth the legislature thinking about as new fields get developed to gas offtake, if there's a way to make money off that gas? Prudhoe's been in operation since I was in short pants.

Should we expect it's all going to take that long or how long is it worth just having in our minds as a concept when we think about new fields going in?

Yeah. Senator Kiehl, through the chair, this is Commissioner Wilson again. And I would say that the Prudhoe oil pool is kind of the exception to the rule, and so is the Thompson oil pool, that they were discovered fairly early on in the history of the North Slope, but with gas that had no means of commercialization. And as I pointed earlier, that there are a number of pools that have been discovered on the North Slope without a gas cap. You know, for instance, the Kaparak river field has relatively low gor.

Oil. Gas. Oil ratio oil. And so you get a certain amount of gas on production, but it does not have a gas cap in the Parak river field and many other fields are similar to that. And the heavier the oils get, the more likely it is that there is no gas cap or very little gas associated with that oil.

As far as new fields, we've seen the length of time that it takes right now for something, for instance like the pickup oil field as it's worked its way to development. There is a lot of permitting that needs to be done on the surface that's beyond the realm of the ALGCC to bring a field to development. But upon discovery you may have several years of delineation and then you have have at least a year or more of laying gravel depending on the size of the field developing your pipelines.

So that would be the case for something more in the realm of the Picka oil field and what we're seeing presently for the Willow oil field. It's taking years to bring those fields to development and then neither of those are in the same class as Prudhoe or the Thompson oil pool when it comes to gas. They have associated gas in those fields but if there's gas caps they're relatively minor. And so you know, there would potentially be a contribution to major gas sales, but there would have to be a pipeline to the point of sale for these discoveries also. And the economics of a small gas accumulation and building a gas pipeline for gas sales, you know, again it's beyond the realm of what the LGCC does, but it could be that it is very uneconomic to bring small gas to the point of sale just because of construction of the gas fuel.

And so you know, really at present we've spoken of the major accumulations that are ready to deliver gas. The Prudhoe oil pool, the Thompson oil pool and then potentially with gas offtake orders, North Star and Endicott, you know, with further delineation and completing the break inventory process perhaps, you know, Great Bear, but at present those are deals that are in discussion and I guess we're not looking too far beyond that at this point. Senator kiel. Thank you Mr. Chairman. I asked the question in artfully and so I'm teasing out parts of the answer.

Some substantial oil pools are not going to have gas. It makes any sense to sell old oil fields that have gas in quantity probably can start selling soon.

Should should we expect with a way to sell gas when there's a new oil field that has gas in quantity? AOGCC is going to allow major gas sales pretty much right away or, or is that something that they're going to need to cycle for a long time before you start selling it?

Senator Kiel, through the chair, you know it's going to be field dependent. If an operator were to discover a gas field with no oil, then the decision is fairly straightforward on gas offtake. But if the oil or if an oil pool had major associations, gas, which means it's dissolved in the oil, or had a significant gas cap but also had significant oil, then conservation of resource would dictate something more in line with the early development of Prudhoe where you need that gas for voidage replacement, you re inject that gas for voidage replacement in the reservoir as part of your secondary recovery and perhaps also either re injecting or injecting water into that reservoir as secondary recovery. And so you use the gas as part of the workhorse to get as much oil out of the reservoir until you reach that point of diminishing returns before you would have gas sales or gas offtake that would be allowable. And so that would be a consideration if a new field was brought to us that that had significant gas but also significant oil.

No, it's not a foregone conclusion that you would start blowdown from day one because you would potentially lose a significant oil resource in the process. And with that I will turn it over again to senior reservoir engineer Dave Robey if he wants to add anything to that discussion. This is Dave Robey.

Prudo Bay is a, is a perfect example. We found another Prudhoe bay today. Even though it has a huge gas cap. At the time of discovery there was much more oil resources in Prudhoe Bay than there was gas. So by delaying the gas sales from Prudhoe we ended up recovering an additional something like 5, 6 billion barrels of oil out of Prudhoe Bay.

That would not have come out had they fall through with the initial plan of going to gas sales within five years of discovery. So it's going to depend very much on the individual characteristics of the field and all that. We can't really say one way or the other how a certain field will go until we see the data for that field and have a chance to analyze it and make a decision at that point in time. Fair enough. Thank you, Mr. Chairman.

Thank you, Senator Kiel. Further questions from Senate Finance members ON Slide number 13. Seeing none. Slide 14, Commissioner Wilson.

Slide 14 again. This is Commissioner Wilson. I wanted to address the, the issue of carbon storage. Since now the ALGCC has the authority to regulate carbon storage in the state of Alaska. And as I said earlier, we are in the process of applying for primacy from the EPA to then be the sole authority over carbon storage in the state of Alaska.

But at present, an entity would need a permit both from the AOGCC and from the EPA for, for carbon storage in Alaska. Now, there are two types of there's carbon storage, long term sequestration of carbon, but then there's also Class 2 injection, where the ALGCC does have primacy for Class 2 injection of CO2 and other oil field wastes or injectants. We presently have that authority and primacy over the eclipse epa, the new regulations on carbon storage. You know, you would need a carbon storage facility permit, you would need a Class 6 well permit, authorization to eject. We would do storage capacity determinations.

We would be metering the CO2 volumes and then, you know, we would look at enhanced oil recovery versus storage. Which, which category is it falling into? But we do want to note that the ALGCC does not determine eligibility for 45Q credits on carbon storage. And you know, it's very likely that the best use of CO2 from the crude O gas at present would be in the Class 2 realm on Enhanced oil recovery, as senior reservoir engineer Dave Roby spoke of earlier. Are there any 14 questions on 14?

See none. We do have one question on 14 from Senator Stedman. You mentioned the 45Q credit. Could you define what that is and why it's relevant?

So Senator Steadman, through the chair, as I said, as I said, we do not determine the eligibility for 45Q credits, but that is a tax credit in the federal code that is given to operators that do long term sequestration. And now in the one big beautiful bill also applies to enhanced oil recovery. And so Class 2 injection of carbon dioxide for enhanced oil recovery purposes. And so there is a monetary benefit of up to $85 per ton with the 45Q credits both in long term sequestration. And now with the one big beautiful bill, enhanced oil recovery, $85 per ton for CO2 sequestration.

And that is a credit on the federal side.

And that's a credit against a corporate income tax or what revenue stream is it credited against?

You're stepping beyond my area of authority or expertise to make a definitive statement.

Thank you, Senator Steadman. Further Questions on slide 14.

Commissioner, slide 15.

And this is Commissioner Greg Wilson. Summary of what we've discussed here today. Stressed a number of times that a big part of our mission here at the ALGCC is to prevent waste and ensure greater ultimate recovery. The ALGCC supports major gas sales from the Prudhoe Oil Pool and the Thompson Oil Pool because they are consistent with the agency's statutory mission. The Prudhoe Bay and Point Thompson oil pools are currently the only fields with LGCC approved gas offtake allowables to support major gas sales.

The approved allowable gas offtake rates for the Prudhoe Oil Pool and the Thompson Oil Pool are more than sufficient to meet the Alaska LNG project's end times. Anticipated phase one and phase two demand of approximately 3 point up to 3.3 BCF per day. And I want to stress that from a resource recovery perspective, the greatest risk is that major gas sales never occur.

That conclusion of our presentation, but we are more than willing and happy to to take additional questions on any of the slides or other topics. There is a question from Senator Coffman. Thank you, Commissioner Wilson. This is Senator Coffman speaking. And if we think of this mission to maximize the benefit of resource development, we're considering this gas pipeline to go from the slope down to ultimately Tidewater and beyond.

Who's looking at the big picture in terms of we've got reserves on the slope, we've also got reserves and Cook Inlet. And how are we looking at that as an integrated management plan to assure that we're getting best total value from both as we make this transition. So and in phase one of the pipeline where we're not exporting it, there's still going to be gas produced and Cook Inlet. So who's looking at that big picture to assure that we have a management plan to optimize our gas recovery for the benefit of Alaskans and perhaps we avoid prematurely starting to import gas during that transition phase and somehow just strand another asset, but this time in Cook Inlet because we're not considering the whole master plan, we're not managing the curve of gas delivery from the slope against the curve of production from Cook Inlet.

So Senator Coffman, through the chair, this is Commissioner Wilson. What I will say for starters is that when it comes to Cook Inlet gas production, the aogcc in cooperation with the operators, is doing everything we can to get every cubic foot of gas out of that basin for local consumption. And so there is no management practice from the LGCC perspective when it comes to Cook Inlet at present that plays into major gas sales. I understand that the operators in Cook Inlet that are solely in Cook Inlet may be very concerned about the timing of major gas sales and how it plays into their economics for their individual efforts that are focused only on Cook Inlet. But that is beyond the scope of what the ALGCC does as it comes to the interplay of the economics, both North Slope and Cook Inlet.

But we are doing everything we can to maximize continued production of gas in Cook Inlet. That, as we all know, is no longer going to be able to meet consumption demand for South Central.

Senator Coffman, beyond that, you know, we are not the authority to look at the interplay between production off of the North Slope and production in Cook Inlet. But we will do what we feel is, you know, consistent with our mission when it comes to the North Slope and the interplay between liquids production and gas production. But when it comes to Cook Inlet, the liquids production is very minuscule by comparison. And the gas production is of utmost importance now and for the near term future. And so we're doing everything we can to see that that production is maximized.

Senator Coffman, thank you. Yeah, it's just a kind of a master plan sort of thing that I wonder about who has eyes on it. And again, we want to optimize recovery of and ultimately monetization or best use of our resources. So I just think it's something to consider as we go forward. It's not really within the scope of this bill, perhaps, which is really tax treatment for construction of a gas line, but I think it's something that's on the mind of some.

Thank you. Thank you, Senator Coffman. Further questions of Senate Finance members on the summary or on the presentation? At this point, seeing none. Do we have any closing comments by any of the commissioners that they would like to make to the Senate Finance Committee at this time?

Thank you. Chairman Hoffman. This is chair Tom McKay and I. I just want to thank Commissioner Wilson and Commissioner Kemlowski and my engineer, Dave Roby here for doing a great job today explaining some fairly, fairly complex subjects. And we look forward to continued dialogue. If you have any further questions that come to mind, please let us know how we can support your efforts.

And we certainly wish you luck in these most serious deliberations. So with that, I'll close and wish you a good day. Thank you. Further closing comments by any other commissioners.

See. This is Commissioner Wilson. I just. This is Commissioner Wilson. I just want to thank you for your time today, your patience with me, and I enjoyed your questions, and we are our doors open if there are additional requests.

Please feel free to make requests relevant to the topics today of the ongcc, and we will do our best to gather that information and provide it to the legislature. Thank you. That concludes today's agenda. Our. Our next meeting is scheduled for Monday morning, June 8th.

There is a. We are going to be meeting an hour later at 10am we will be receiving updates on modeling from the Department of Revenue. With that, do we have any additional things to come before the committee? With that, we are adjourned until Monday morning.