CSSB 319(FIN): "An Act relating to shallow natural gas; and providing for an effective date."
00 CS FOR SENATE BILL NO. 319(FIN) 01 "An Act relating to shallow natural gas; and providing for an effective date." 02 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 03 * Section 1. AS 38.05.177(a) is amended to read: 04 (a) The provisions of this section 05 (1) apply to gas, whether methane associated with and derived from 06 coal deposits or otherwise, [DEVELOPED] from a field if a part of the field 07 [SOURCE THAT] is [ONSHORE AND] within 3,000 feet of the surface; and 08 (2) do not apply to authorize lease of 09 (A) land 10 (i) that is subject to an oil and gas exploration license or 11 lease issued under AS 38.05.131 - 38.05.134; or 12 (ii) that is leased under AS 38.05.180; 13 (B) the land (i) that is proposed to be subject to an oil and gas 14 exploration license or lease issued under AS 38.05.131 - 38.05.134; or (ii) that 15 is described in and part of a proposed oil and gas leasing program prepared
01 under AS 38.05.180(b); however, the commissioner may waive the limitations 02 of this subparagraph; 03 (C) the land that is held under a coal lease entered into under 04 AS 38.05.150, unless the applicant for a shallow natural gas lease is also the 05 lessee under AS 38.05.150 of that land; or 06 (D) the valid existing selections of the Alaska Mental Health 07 Trust Authority made for the purpose of reconstituting the mental health trust 08 established under the Alaska Mental Health Enabling Act, P.L. 84-830, 70 09 Stat. 709 (1956), that become subject to management under AS 38.05.801, or 10 of land that has been designated by law for or is subject to designation for 11 conveyance to the Alaska Mental Health Trust Authority; however, after 12 consultation with the Alaska Mental Health Trust Authority, the commissioner 13 may waive the limitations of this subparagraph. 14 * Sec. 2. AS 38.05.177(b) is amended to read: 15 (b) For the purpose of exploring for and developing shallow natural gas 16 reservoirs, upon application, the director may lease to a person land for which the state 17 owns the subsurface rights. A person applying for a lease under this subsection 18 (1) shall specify the area to be leased; the area to be leased may not 19 exceed 5,760 acres; a lessee may not hold more than an aggregate of 100,000 20 [46,080] acres of land under leases entered into under this section; 21 (2) may be required to pay a reasonable application fee of up to $5,000 22 [$500]. 23 * Sec. 3. AS 38.05.177(c) is amended to read: 24 (c) The [WITHIN 20 DAYS OF RECEIPT OF A LEASE APPLICATION, 25 THE] director shall give notice under AS 38.05.945 of receipt of the lease application 26 and call for comments from the public. The director's call for public comments must 27 provide opportunity for public comment for a period of not less than 60 days. If, after 28 review of information received during the public comment period, the director 29 determines that the discovery of a local source of natural gas would benefit the 30 residents of an area, the director shall execute a lease for the area described in (b) of 31 this section. The director shall execute the lease [WITHIN 90 DAYS] after
01 completion of a title search, the close of the public comment period, and [OR], if 02 review is required under AS 46.40, [WITHIN 30 DAYS] after the final consistency 03 determination is made under AS 46.40 [, WHICHEVER IS LATER]. A lease entered 04 into under this subsection gives the lessee the exclusive right to explore for, develop, 05 and produce, for a term of three years, natural gas on the state land described in the 06 lease; the right to explore for, develop, and produce is limited to gas [DERIVED] from 07 a field if a part of the field is [NATURAL GAS] within 3,000 feet of the surface. 08 * Sec. 4. AS 38.05.177(f) is amended to read: 09 (f) A shallow gas lease must provide for payment to the state of annual rent in 10 the amount of $1 [50 CENTS] per acre. The rent is due and payable on the date 11 [DATES] determined in the lease. [THE DIRECTOR SHALL MAIL THE LESSEE 12 ONE WRITTEN NOTICE, CERTIFIED RETURN RECEIPT REQUESTED, THREE 13 WEEKS BEFORE THE DUE DATE OF THE RENT. IF THE LESSEE FAILS TO 14 PAY RENT, THE DIRECTOR SHALL TERMINATE THE LEASE.] 15 * Sec. 5. AS 38.05.177(j) is amended to read: 16 (j) A lease does not give the lessee the right to produce oil. A lease gives 17 [DOES NOT GIVE] the lessee the right to produce gas only to the extent [FROM 18 SOURCES] that it is from a field if a part of the field is [ARE NOT] within 3,000 19 feet of the surface. If a well drilling for natural gas under a lease authorized by this 20 section penetrates a field, no portion of which is within [FORMATION CAPABLE 21 OF PRODUCING GAS BELOW] 3,000 feet of the surface, or penetrates a formation 22 capable of producing oil, the owner or operator 23 (1) shall notify the department and the Alaska Oil and Gas 24 Conservation Commission; and 25 (2) may not conduct further operations in the drilled well until the 26 facility complies with all applicable laws and regulations relating to oil and gas 27 exploration and production; however, this paragraph does not prevent the owner or 28 operator from conducting activities that may be required by the Alaska Oil and Gas 29 Conservation Commission to plug, plug-back, or abandon a well. 30 * Sec. 6. AS 38.05.177(k) is amended to read: 31 (k) The commissioner [OF NATURAL RESOURCES] may
01 (1) adopt only the regulations that are reasonable and that are 02 necessary to implement, interpret, or make specific the provisions of this section or to 03 establish procedures to govern application of the provisions of this section; and 04 (2) in addition to any requirement for a bond under AS 38.05.130, 05 establish by regulation a form and amount for statewide, areawide, unit-wide, or 06 per-lease bonds sufficient to secure damages that may be caused by the activities 07 of a lessee, or the lessee's successors or assigns, related to a shallow natural gas 08 lease entered into under this section; if the commissioner acts under this 09 paragraph, the commissioner 10 (A) shall require a person applying for a lease under this 11 section to post the bond as a condition for the director's executing the 12 lease; 13 (B) may not require a bond posted under this paragraph 14 from a person applying for a lease if the person has already posted a bond 15 covering the person's statewide oil and gas leasing activities in an amount 16 of at least $500,000. 17 * Sec. 7. AS 46.03.100(f) is amended to read: 18 (f) This section does not apply to discharges of solid or liquid waste material 19 or water discharges from the following activities if the discharge is incidental to the 20 activity and the activity does not produce a discharge from a point source, as that term 21 is defined in regulations adopted under this chapter, directly into any surface water of 22 the state: 23 (1) mineral drilling, trenching, ditching, and similar activities; 24 (2) landscaping; 25 (3) water well drilling, geophysical drilling, or coal bed methane 26 drilling or other natural gas drilling to recover gas from a field if a part of the field is 27 within [RESERVOIR AT A DEPTH OF LESS THAN] 3,000 feet of the surface; or 28 (4) drilling, ditching, trenching, and similar activities associated with 29 facility construction and maintenance or with road or other transportation facility 30 construction and maintenance; however, the exemption provided by this paragraph 31 does not relieve a person from obtaining a permit under (a) of this section if
01 (A) the drilling, ditching, trenching, or similar activity will 02 involve the removal of the groundwater, stormwater, or wastewater runoff that 03 has accumulated and is present at an excavation site for facility, road, or other 04 transportation construction or maintenance; and 05 (B) a permit is otherwise required by (a) of this section. 06 * Sec. 8. AS 46.04.040(b) is amended to read: 07 (b) A person may not cause or permit the operation of a pipeline or an 08 exploration or production facility in the state unless the person has furnished to the 09 department, and the department has approved, proof of financial ability to respond in 10 damages. Proof of financial responsibility required for 11 (1) a pipeline or an offshore exploration or production facility is 12 $50,000,000 per incident; 13 (2) an onshore production facility is 14 (A) $20,000,000 per incident if the facility produces over 15 10,000 barrels per day of oil; 16 (B) $10,000,000 per incident if the facility produces over 5,000 17 barrels per day but not more than 10,000 barrels per day of oil; 18 (C) $5,000,000 per incident if the facility produces over 2,500 19 barrels per day but not more than 5,000 barrels per day of oil; 20 (D) $1,000,000 per incident if the facility produces 2,500 21 barrels per day or less of oil; 22 (3) an onshore exploration facility is 23 (A) $25,000 per incident for a facility used solely to explore for 24 shallow natural gas by means of drilling a well to explore for gas, whether 25 methane associated with and derived from coal deposits or otherwise, from a 26 field if a part of the field [SOURCE THAT] is within 3,000 feet of the 27 surface; and 28 (B) except as provided by (A) of this paragraph, $1,000,000 per 29 incident. 30 * Sec. 9. AS 38.05.177(i) is repealed. 31 * Sec. 10. The uncodified law of the State of Alaska is amended by adding a new section to
01 read: 02 TRANSITION: REGULATIONS. Notwithstanding sec. 13 of this Act, the 03 Department of Natural Resources may proceed to adopt regulations necessary to implement 04 the changes made by this Act. The regulations take effect under AS 44.62 (Administrative 05 Procedure Act), but not before the effective date of the statutory change. 06 * Sec. 11. The uncodified law of the State of Alaska is amended by adding a new section to 07 read: 08 TRANSITION: CONVERSION OF CERTAIN EXISTING LEASES UNDER 09 AS 38.05.177. On or after July 1, 2002, and before October 1, 2002, upon application of the 10 lessee, the Department of Natural Resources is authorized to convert leases entered into under 11 AS 38.05.177 and in existence on the effective date of secs. 1 - 9 of this Act to leases that are 12 consistent with the provisions of this Act. 13 * Sec. 12. Section 10 of this Act takes effect immediately under AS 01.10.070(c). 14 * Sec. 13. Except as provided in sec. 12 of this Act, this Act takes effect July 1, 2002.