Alaska's Dunleavy says proposal will spur development, stave off natural gas shortage

Alaska Gov. Mike Dunleavy wants to reduce the state's proceeds from oil and gas development in Alaska's Railbelt to attract new businesses.

The proposed bill would lower the state's royalty floors in Cook Inlet for the next decade, which the governor said would have a minimal effect on the state's revenues but would help the state's looming natural gas shortage.

Cook Inlet gas royalties brought in $45.2 million to Alaska during fiscal year 2022 and accounted for just 3.6% of all royalty income in the past 10 years, according to the governor's office.

“There are known gas resources in Cook Inlet that are currently economically challenged. Governor Dunleavy’s proposed legislation gives DNR additional tools to incentivize exploration, development, and production to get more natural gas to Alaskans,” Department of Natural Resources Commissioner John Boyle said. “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.”

Members of the House Majority said they support Dunleavy's proposal, which will be detailed when the Legislature meets in January.

“The looming natural gas shortage in the rail belt is one of the most important issues our state currently faces.” said Rep. Tom McKay, R-Anchorage, chairman of the Resource Committee. “My office has spent much of the interim focused on potential policy solutions and it is extremely encouraging that the governor's office is similarly concerned. We owe it to Alaskans to find local solutions for jobs and economic stability and look forward to working with the Dunleavy administration on this matter in the House Resources Committee.”

Dunleavy said the proposal makes sense.

"If we maintain the status quo, much of that gas will be left untapped because it doesn’t make good business sense for operators," Dunleavy said in a statement. "Alaskans should not have to resort to importing LNG when it is available right outside our door.”

If passed by the Legislature next year, the bill would only apply to new pools and fields. The governor plans to introduce other energy-related initiatives, he said.