The development of oil and gas plays a major role in Alaska-financially, politically, and environmentally. I'd like to introduce to you an agency that serves a vital function in the area of oil and gas development-the Alaska Oil and Gas Conservation Commission (AOGCC).

The AOGCC was created to represent Alaska's interests in matters related to oil and gas development. The Commission is an independent, quasi-judicial agency created by the legislature to promote the conservation and efficient production of Alaska's oil and natural gas while protecting health, safety, and the environment. The Commission functions as the regulatory agency overseeing the underground operation of the Alaska oil industry on private and public lands and waters.

The origins of the AOGCC go back to 1955. The commission went through many changes-including being abolished and later incorporated into the Department of Natural Resources (DNR). With the advent of production from Prudhoe Bay in 1977, the legislature became concerned about the appearance of a conflict of interest. DNR represents the state as an owner of oil and gas rights and was also acting as the regulator of other owners of oil and gas rights. To obviate its concern, the legislature restored the commission, effective January 1, 1979.

Because the AOGCC plays such a vital role in Alaska's oil and gas development, I introduced two pieces of legislation this session to ensure future funding for the commission and improve the commission's efficiency - Senate Bill 133 and Senate Bill 134.

Senate Bill 134 secures funding for the AOGCC by repealing the existing Oil and Gas Conservation Tax and, instead, instituting a program receipt system designed to provide stable funding for the Commission.

The Oil and Gas Conservation Commission serves a vital function and it is imperative that we provide stable funding for the commission. Functions of the commission have traditionally been funded solely from a tax on the production of oil and gas. That funding system doesn't work anymore because the scope of the commission's work has expanded, while income from oil and gas production has declined. SB 134, and its program receipt system, ensures the vital work of the commission will continue despite falling oil production levels.

Senate Bill 133 creates the Regulatory Commission of Alaska (RCA). It abolishes the Alaska Public Utilities Commission (APUC), which regulates public utilities and pipeline carrier services, and transfers those duties to the new RCA. SB 133 also establishes the groundwork for eventually merging the AOGCC into the new state regulatory agency, if warranted. In the meantime, the bill requires AOGCC to relocate to the same building as the new RCA to save administration costs by sharing office space, clerical staff, and record keeping facilities.

Another important aspect of SB 133 is a provision authorizing Legislative Budget and Audit (LB&A) to prepare a report addressing both the new Regulatory Commission of Alaska and the AOGCC, and their functions. The report will make recommendations on possible changes that will best serve the interests of the State of Alaska. That report is due on the first day of next year's legislative session.

As Alaska moves into the new millennium, it's important that we demand maximum value from our investments. Given the $1 billion budget gap, we must continually look for ways to redesign our current government structure, seeking every possible efficiency, and streamline operations. Any future changes to the AOGCC should continue to enhance its ability to serve and protect the interests of the state and its residents.

Senator Drue Pearce