Session: State Capitol, Room 427 Juneau, AK 99801-1182 Phone: (907) 465-2828 Fax: (907) 465-4779 Interim: 35477 Kenai Spur Highway, Suite 101 B Soldotna, AK 99669 Phone: (907) 260-3041 Fax: (907) 260-3044 345 W. Sterling Highway, Suite 102 Homer, AK 99603 Phone: (907) 235-0690 Fax: (907) 235-4008

Sponsor Statement for SB 143
Right-of-Way Leasing Act: Application Cost

An Act authorizing the Department of Natural Resources to enter into agreements with a person or persons desiring to own an oil or natural gas pipeline proposed to be located on state land for the purposes of providing for payment of the reasonable costs incurred in preparing for activities before receipt of an application under the Alaska Right-of-Way Leasing Act and for activities relating to the processing of an application under that Act; and providing for an effective date.

Released: March 16, 2001

One of the legislature's priorities is commercialization of North Slope gas. Any sponsor of a pipeline project will have to obtain a right-of-way across state lands. Senate Bill 143 bill would authorize the state to be reimbursed for work performed by the State Pipeline Coordinator's Office (SPCO) in preparing to receive and process an application for a right-of-way lease. It also clarifies that an applicant must reimburse the SPCO for costs incurred in processing an application whether or not the application is granted.

AS 38.35.140 provides that a lessee shall reimburse the state for all reasonable costs incurred in processing an application filed for a right-of-way lease. Although the SPCO has entered into an agreement with a lessee seeking renewal of a lease to reimburse the state for costs incurred before receipt of the renewal application, legislative legal services has questioned whether this is authorized under existing law and whether the state can be reimbursed for costs incurred before the receipt of an application. The SPCO anticipates that it will be asked to perform substantial work by prospective gas pipeline lessees this year in anticipation of filing applications later this year or early next year. Much of the cost of this work would clearly be reimbursable to the state if the prospective lessee actually had a pending application. It is important to insure that the state is reimbursed for the significant cost that it will incur in performing work in anticipation and furtherance of the application process.

Additionally, the SPCO, in the past, has required a prospective lessee to reimburse the state for costs incurred in processing an application even if the application has not been granted. This bill would conform the law to existing practice between the SPCO and prospective lessees to make clear that the state must be reimbursed for the costs of processing an application whether or not the lease is ultimately granted. Prospective lessees cannot expect the state to pay for services requested by them on routes that ultimately are not selected or on applications that may ultimately be withdrawn, suspended, or otherwise not granted.

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