HB 394: "An Act authorizing a program of natural gas and coal bed methane development licensing and leasing; relating to regulation of certain natural gas exploration facilities and coal bed methane exploration facilities for purposes of preparation of discharge prevention and contingency plans and compliance with financial responsibility requirements; amending the duties of the Alaska Oil and Gas Conservation Commission as they relate to natural gas exploration activities and coal bed methane exploration activities; and amending the exemption from obtaining a waste disposal permit for disposal of waste produced from coal bed methane drilling."
00HOUSE BILL NO. 394 01 "An Act authorizing a program of natural gas and coal bed methane development 02 licensing and leasing; relating to regulation of certain natural gas exploration 03 facilities and coal bed methane exploration facilities for purposes of preparation 04 of discharge prevention and contingency plans and compliance with financial 05 responsibility requirements; amending the duties of the Alaska Oil and Gas 06 Conservation Commission as they relate to natural gas exploration activities and 07 coal bed methane exploration activities; and amending the exemption from 08 obtaining a waste disposal permit for disposal of waste produced from coal bed 09 methane drilling." 10 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 11 * Section 1. AS 31.05.030 is amended by adding a new subsection to read: 12 (i) When requested by a person proposing to explore for gas or coal bed 13 methane by drilling an onshore well, the commission may evaluate the likelihood that 14 the well will penetrate a formation containing oil. If the commission concludes with
01 reasonable certainty that the well will not penetrate a formation containing oil, the 02 commission shall so certify. 03 * Sec. 2. AS 38.05.035(a) is amended to read: 04 (a) The director shall 05 (1) have general charge and supervision of the division and may 06 exercise the powers specifically delegated to the director; may employ and fix the 07 compensation of assistants and employees necessary for the operations of the division; 08 and is the certifying officer of the division, with the consent of the commissioner, and 09 may approve vouchers for disbursements of money appropriated to the division; 10 (2) manage, inspect, and control state land and improvements on it 11 belonging to the state and under the jurisdiction of the division; 12 (3) execute laws, rules, regulations, and orders adopted by the 13 commissioner; 14 (4) prescribe application procedures and practices for the sale, lease, 15 or other disposition of available land, resources, property, or interests [INTEREST] 16 in them, including disposal of interests in land under licenses and leases authorized 17 under AS 38.05.180(dd); 18 (5) prescribe fees or service charges, with the consent of the 19 commissioner, for any public service rendered; 20 (6) under the conditions and limitations imposed by law and the 21 commissioner, issue deeds, leases, or other conveyances disposing of available land, 22 resources, property, or [ANY] interests in them; 23 (7) have jurisdiction over state land, except that land acquired by the 24 Alaska World War II Veterans Board and the Agricultural Loan Board or the 25 departments or agencies succeeding to their respective functions through foreclosure 26 or default; to this end, the director possesses the powers and, with the approval of the 27 commissioner, shall perform the duties necessary to protect the state's rights and 28 interest in state land, including the taking of all necessary action to protect and enforce 29 the state's contractual or other property rights; 30 (8) [REPEALED 31 (9)] maintain such records as the commissioner considers necessary,
01 administer oaths, and do all things incidental to the authority imposed; the following 02 records and files shall be kept confidential upon request of the person supplying the 03 information: 04 (A) the name of the person nominating or applying for the sale, 05 lease, or other disposal of land by competitive bidding; 06 (B) before the announced time of opening, the names of the 07 bidders, and the amounts of the bids; 08 (C) all geological, geophysical, and engineering data supplied, 09 whether or not concerned with the extraction or development of natural 10 resources; 11 (D) except as provided in AS 38.05.036, cost data and financial 12 information submitted in support of applications, bonds, leases, and similar 13 items; 14 (E) applications for rights-of-way or easements; 15 (F) requests for information or applications by public agencies 16 for land that [WHICH] is being considered for use for a public purpose; 17 (9) [(10)] account for the fees, licenses, taxes, or other money received 18 in the administration of this chapter, including the sale or leasing of land, identify their 19 source, and promptly transmit them to the proper fiscal department after crediting them 20 to the proper fund; receipts from land application filing fees and charges for copies of 21 maps and records shall be deposited immediately in the general fund of the state by 22 the director; 23 (10) [(11)] select and employ or obtain at reasonable compensation 24 cadastral, appraisal, or other professional personnel the director considers necessary for 25 the proper operation of the division; 26 (11) [(12)] be the certifying agent of the state to select, accept, and 27 secure by whatever action is necessary in the name of the state, by deed, sale, gift, 28 devise, judgment, operation of law, or other means any land, of whatever nature or 29 interest, available to the state; and be the certifying agent of the state, to select, accept, 30 or secure by whatever action is necessary in the name of the state any land, or title or 31 interest to land available, granted, or subject to being transferred to the state for any
01 purpose [; 02 (13) REPEALED 03 (14) REPEALED]. 04 * Sec. 3. AS 38.05.035(e)(6) is amended to read: 05 (6) before a public hearing, if held, or in any case not less than 21 days 06 before the sale, lease, or other disposal of available land, property, resources, or 07 interests in them other than a sale, lease, or other disposal of available land or an 08 interest in land for oil and gas under (5) of this subsection, the director shall make 09 available to the public a written finding that, in accordance with (1) of this subsection, 10 sets out the material facts and applicable statutes and regulations and any other 11 information required by statute or regulation to be considered upon which the 12 determination that the sale, lease, or other disposal will best serve the interests of the 13 state was based; however, a written finding is not required before the approval of 14 (A) a contract for a negotiated sale authorized under 15 AS 38.05.115; 16 (B) a lease of land for a shore fishery site under AS 38.05.082; 17 (C) a permit or other authorization revocable by the 18 commissioner; 19 (D) a mineral claim located under AS 38.05.195; 20 (E) a mineral lease issued under AS 38.05.205; 21 (F) a production license issued under AS 38.05.207; 22 (G) an exempt oil and gas sale under AS 38.05.180(d) of 23 acreage offered in a sale that was held within the previous five years if the sale 24 was subject to a written best interest finding, unless the commissioner 25 determines that new information has become available that justifies a revision 26 of the best interest finding; [OR] 27 (H) a lease sale under AS 38.05.180(w) of acreage offered in 28 a sale that was held within the previous five years if the sale was subject to a 29 best interest finding, unless the commissioner determines that new information 30 has become available that justifies a revision of the best interest finding; or 31 (I) a gas license or lease or coal bed methane license or lease
01 in an area for which that licensing and leasing is authorized under 02 AS 38.05.180(dd); 03 * Sec. 4. AS 38.05.180(b) is amended to read: 04 (b) The commissioner shall biennially prepare and, between the first and the 05 15th day of the first regular session of each legislature, notify the legislature of the 06 availability of, 07 (1) a five-year proposed oil and gas leasing program consisting of a 08 schedule of proposed lease sales and specifying as precisely as practicable the location 09 of tracts proposed to be offered for oil and gas leasing during the calendar year in 10 which the proposed program is made available to the legislature and the following four 11 calendar years; and 12 (2) a proposed gas licensing and leasing program and coal bed 13 methane licensing and leasing program. 14 * Sec. 5. AS 38.05.180 is amended by adding a new subsection to read: 15 (dd) To encourage development of the state's natural gas deposits and coal bed 16 methane for in-state use, the director, with the approval of the commissioner, shall 17 establish a program of gas licensing and leasing and coal bed methane licensing and 18 leasing. In addition, the director may issue licenses under this subsection on land that 19 was previously subject to a valid state or federal gas lease. Under the authority 20 granted in this subsection: 21 (1) the director shall make preliminary written determinations of the 22 state land that may be subject to the provisions of this subsection; the determinations 23 shall be given public notice using the methods described in AS 38.05.945(b); after 24 completion of the comment period and evaluation of the comments received, the 25 director shall issue a written determination of the state land that is subject to the 26 provisions of this subsection; 27 (2) the director may not issue licenses under this subsection to a 28 licensee so that, at any one time, the licensee holds licenses under this subsection on 29 more than 23,040 acres; 30 (3) a license issued under this subsection gives the licensee 31 (A) the exclusive right to explore, for a term not to exceed two
01 years, for gas deposits or coal bed methane on unleased state land described in 02 the license; the right to explore is limited to gas deposits and coal bed methane 03 within 3,000 feet of the surface at the drill site; and 04 (B) unless the license is terminated under (5) of this subsection, 05 the option to convert the license for all or part of the state land, into a gas 06 lease or coal bed methane lease upon fulfillment of the work commitments 07 contained in the license; 08 (4) a license issued under this subsection 09 (A) is not subject to the acreage limitations imposed by 10 AS 38.05.140(c) or 38.05.180(m); 11 (B) must be conditioned upon an obligation to perform a 12 specified work commitment, in total for the term of the license, expressed in 13 dollars of direct exploration expenditures; 14 (5) if the licensee fails to complete the licensee's total specified work 15 commitment, as measured by the licensee's direct exploration expenditures, the license 16 terminates; 17 (6) the following procedures apply to the issuance of a license under 18 this subsection: 19 (A) the licensing process is initiated by the director preparing, 20 or a prospective licensee submitting to the director, a proposal that identifies 21 a specific area to be subject to the license, proposes specific minimum work 22 commitments, and states the minimum qualifications for a licensee as 23 established by regulations adopted by the department; a prospective licensee 24 may initiate a proposal only in response to a call for proposals by the director 25 or during a period specified in regulations adopted by the director; the 26 regulations must provide for at least one period for that purpose during each 27 calendar year; 28 (B) if the director initiates the licensing process under (A) of 29 this paragraph, the director shall publish notice of the proposal in order to 30 solicit comments and competing proposals; 31 (C) within 30 days after receipt of a proposal from a
01 prospective licensee under (A) of this paragraph, the director shall either reject 02 it in a written decision or give public notice of the intent to evaluate the 03 acceptability of the proposal; the director shall solicit comments on a proposal 04 for which public notice is given under this paragraph, and shall request 05 competing proposals; 06 (D) the director may make a written request to a prospective 07 licensee for additional information on the prospective licensee's proposal; the 08 director shall keep confidential information described in AS 38.05.035(a)(8) 09 that is voluntarily provided if the prospective licensee has made a written 10 request that the information remain confidential; 11 (E) after considering proposals not rejected under (C) of this 12 paragraph and public comment on those proposals, the director shall issue a 13 written finding addressing all matters set out in AS 38.05.035(e) and (g), 14 except for AS 38.05.035(g)(1)(B)(xi); if the finding concludes that the state's 15 best interests would be served by issuing a gas or coal bed methane license, the 16 finding must (i) describe the limitations, stipulations, conditions, or changes 17 from the initiating proposal or competing proposals that are required to make 18 the issuance of the license conform to the best interests of the state, and (ii) if 19 only one proposal was submitted, identify the prospective licensee whom the 20 director finds should be issued the license; the director shall attach to the 21 finding a copy of the license to be issued and the form of lease that will be 22 used for any portion of the license area subsequently converted to a lease under 23 this subsection; 24 (F) if only one prospective licensee submits a proposal and the 25 finding under (E) of this paragraph concludes that a license should be issued 26 to that prospective licensee, the prospective licensee has 30 days after issuance 27 of the finding within which to accept or reject the issuance of the license, as 28 limited or conditioned by the terms contained in the finding; the license to be 29 issued and the form of lease that will be used shall be attached to that finding; 30 the prospective licensee must accept or reject the issuance of the license in 31 writing;
01 (G) if competing proposals are submitted, and the finding under 02 (E) of this paragraph concludes that a license should be issued, the director 03 shall issue a request for competitive sealed bids, under procedures adopted by 04 the director by regulation, to determine which prospective licensee should be 05 issued the license; the finding provided to the prospective licensees and the 06 public under (E) of this paragraph must contain notice that (i) the director 07 intends to request competitive sealed bids, (ii) a prospective licensee who 08 intends to participate in the bidding must notify the director in writing by the 09 date specified in the notice, and (iii) a prospective licensee's notice of intent 10 to participate in the bidding constitutes acceptance of issuance of the license, 11 as limited or conditioned by the terms contained in the finding and by the 12 license to be issued and the form of lease to be used that have been attached 13 to that finding, if the prospective licensee is the successful bidder; the 14 successful bidder is the prospective licensee who submits the highest bid in 15 terms of the minimum work commitment dollar amount; 16 (7) if the licensee requests and the director determines that the work 17 commitment obligation related to the license has been met, the director shall convert 18 to one or more leases all or part, as the licensee may indicate, of the area described 19 in the license; a lease issued under this subsection 20 (A) is subject to the acreage limitations imposed by 21 AS 38.05.140(c); 22 (B) is subject to AS 38.05.180(j) - (m), (o) - (u), and (x) - (z); 23 (C) must be conditioned upon a royalty in amount or value of 24 not less than 12.5 percent of production; 25 (D) must include an annual rent of $3 per acre or fraction of an 26 acre initially paid to the state at inception of the lease and payable annually 27 after that until the income to the state from royalty under that lease exceeds the 28 rental income to the state under that lease for that year; and 29 (E) is subject to other conditions and obligations that are 30 specified in the lease. 31 * Sec. 6. AS 46.03.100(f) is amended to read:
01 (f) This section does not apply to discharges of solid or liquid waste material 02 or water discharges from the following activities if the discharge is incidental to the 03 activity and the activity does not produce a discharge from a point source, as that term 04 is defined in regulations adopted under this chapter, directly into any surface water of 05 the state: 06 (1) mineral drilling, trenching, ditching, and similar activities; 07 (2) landscaping; 08 (3) water well drilling or [,] geophysical drilling [, OR COAL BED 09 METHANE DRILLING]; [OR] 10 (4) drilling, ditching, trenching, and similar activities associated with 11 facility construction and maintenance or with road or other transportation facility 12 construction and maintenance; however, the exemption provided by this paragraph does 13 not relieve a person from obtaining a permit under (a) of this section if 14 (A) the drilling, ditching, trenching, or similar activity will 15 involve the removal of the groundwater, stormwater, or wastewater runoff that 16 has accumulated and is present at an excavation site for facility, road, or other 17 transportation construction or maintenance; and 18 (B) a permit is otherwise required by (a) of this section; or 19 (5) the discharge or disposal of waste material or water from 20 activities associated with coal bed methane exploration drilling. 21 * Sec. 7. AS 46.04.030(b) is amended to read: 22 (b) A person may not cause or permit the operation of a pipeline or [AN 23 EXPLORATION OR] production facility in the state or, except as provided in 24 AS 46.04.050(c), may not cause or permit the operation of an exploration facility 25 in the state unless an oil discharge prevention and contingency plan for the pipeline 26 or facility has been approved by the department and the person is in compliance with 27 the plan. 28 * Sec. 8. AS 46.04.030 is amended by adding a new subsection to read: 29 (s) If an onshore well certified by the Alaska Oil and Gas Conservation 30 Commission under AS 31.05.030(i) penetrates a formation containing oil, the operator 31 of the facility
01 (1) shall notify the department and the Alaska Oil and Gas 02 Conservation Commission; and 03 (2) may not conduct further exploration activity except in compliance 04 with an oil discharge prevention and contingency plan for the facility 05 (A) approved by the department; or 06 (B) pending the department's decision on plan approval. 07 * Sec. 9. AS 46.04.040(b) is amended to read: 08 (b) A person may not cause or permit the operation of a pipeline or [AN 09 EXPLORATION OR] production facility in the state or, except as provided in 10 AS 46.04.050(c) for a well that has not penetrated a formation containing oil, may 11 not cause or permit the operation of an exploration facility in the state unless the 12 person has furnished to the department, and the department has approved, proof of 13 financial ability to respond in damages. Proof of financial responsibility required for 14 (1) a pipeline or an offshore exploration or production facility is 15 $50,000,000 per incident; 16 (2) an onshore production facility is 17 (A) $20,000,000 per incident if the facility produces over 18 10,000 barrels per day of oil; 19 (B) $10,000,000 per incident if the facility produces over 5,000 20 barrels per day but not more than 10,000 barrels per day of oil; 21 (C) $5,000,000 per incident if the facility produces over 2,500 22 barrels per day but not more than 5,000 barrels per day of oil; 23 (D) $1,000,000 per incident if the facility produces 2,500 barrels 24 per day or less of oil; 25 (3) an onshore exploration facility is $1,000,000 per incident. 26 * Sec. 10. AS 46.04.040 is amended by adding a new subsection to read: 27 (n) If an onshore well certified by the Alaska Oil and Gas Conservation 28 Commission under AS 31.05.030(i) penetrates a formation containing oil, the operator 29 of the facility may not conduct further exploration activity until the requirements of 30 (b) of this section are met. 31 * Sec. 11. AS 46.04.050 is amended by adding a new subsection to read:
01 (c) Except as provided in AS 46.04.030(s) and 46.04.040(n), the provisions of 02 AS 46.04.030(b) and 46.04.040(b) do not apply to an onshore exploration facility used 03 solely to explore for natural gas or coal bed methane by means of drilling a well that 04 has been certified by the Alaska Oil and Gas Conservation Commission under 05 AS 31.05.030(i). 06 * Sec. 12. REVISOR OF STATUTES TO REVISE REFERENCES. Due to the deletion 07 of repealed paragraphs in AS 38.05.035(a) by sec. 2 of this Act, the revisor of statutes shall 08 amend cross-references to the affected paragraphs in AS 38.05.035(a) that appear in the 09 following statutes: AS 38.05.133(e), 38.05.180(j)(6)(B), 38.05.275(c), and AS 41.09.010(d).