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HB 364: "An Act establishing a moratorium on the issuance of state shallow natural gas leases in the vicinity of Kachemak Bay, and directing the commissioner of natural resources to reacquire shallow natural gas leases on the Kenai Peninsula within the moratorium area; and providing for an effective date."

00                             HOUSE BILL NO. 364                                                                          
01 "An Act establishing a moratorium on the issuance of state shallow natural gas leases in                                
02 the vicinity of Kachemak Bay, and directing the commissioner of natural resources to                                    
03 reacquire shallow natural gas leases on the Kenai Peninsula within the moratorium                                       
04 area; and providing for an effective date."                                                                             
05 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA:                                                                
06    * Section 1.  The uncodified law of the State of Alaska is amended by adding a new section                         
07 to read:                                                                                                                
08       PURPOSE.  (a)  Under AS 38.05.184, since 1976, the state-owned tide and submerged                                 
09 land and water seaward of the mean higher high water line of Kachemak Bay between Anchor                                
10 Point and Point Pogibshi has been placed off-limits to conventional oil and gas leases.  In                             
11 legislative findings accompanying the Act that set out the closure, the statute declares that                           
12 "Kachemak Bay is an area of extraordinary abundance and diversity of marine life that has                               
13 provided, and will continue to provide in the future, a basis for one of the state's most                               
14 important commercial fisheries; that recent information discloses that even minute quantities                           
01 of oil released into the marine environment may be harmful to the larval forms of crabs and                             
02 other marine life and that the existence of gyral currents within the bay may increase the                              
03 likelihood of oil coming into contact with these valuable commercial fish and shellfish                                 
04 species; and that therefore oil and gas development in the bay, at this time, presents an undue                         
05 hazard to this valuable state renewable resource."  In addition, the legislature, under                                 
06 AS 38.05.177(m), has placed Kachemak Bay off-limits to the issuance of leases for shallow                               
07 natural gas exploration and development.                                                                                
08       (b)  The legislative findings that support the 1976 closure of Kachemak Bay apply                                 
09 with equal force to justify prohibition of issuance of upland leases for shallow natural gas                            
10 exploration and development in the area adjacent to Kachemak Bay, to prevent the release of                             
11 the ground water produced as an unwanted byproduct of shallow natural gas extraction that                               
12 may find its way into the state's navigable water.  Therefore, to provide additional protection                         
13 to the marine life of Kachemak Bay consistent with the findings set out in AS 38.05.184(a), it                          
14 is the purpose of this Act to extend the moratorium on the issuance of state shallow natural                            
15 gas leases in the vicinity of Kachemak Bay to adjacent upland areas, and to direct the                                  
16 reacquisition of the shallow natural gas leases that were entered into in the moratorium area                           
17 before the effective date of this Act.                                                                                  
18    * Sec. 2.  AS 38.05.177(a) is amended to read:                                                                     
19            (a)  The provisions of this section                                                                          
20                 (1)  apply to gas, whether methane associated with and derived from                                     
21       coal deposits or otherwise, from a field if a part of the field is within 3,000 feet of the                       
22       surface; and                                                                                                      
23                 (2)  do not apply to authorize lease of                                                                 
24                      (A)  land                                                                                          
25                           (i)  that is subject to an oil and gas exploration license or                                 
26                 lease issued under AS 38.05.131 - 38.05.134; or                                                         
27                           (ii)  that is leased under AS 38.05.180;                                                      
28                      (B)  the land (i) that is proposed to be subject to an oil and gas                                 
29            exploration license or lease issued under AS 38.05.131 - 38.05.134; or (ii) that                             
30            is described in and part of a proposed oil and gas leasing program prepared                                  
31            under AS 38.05.180(b); however, the commissioner may waive the limitations                                   
01            of this subparagraph;                                                                                        
02                      (C)  the land that is held under a coal lease entered into under                                   
03            AS 38.05.150, unless the applicant for a shallow natural gas lease is also the                               
04            lessee under AS 38.05.150 of that land; [OR]                                                                 
05                      (D)  the valid existing selections of the Alaska Mental Health                                     
06            Trust Authority made for the purpose of reconstituting the mental health trust                               
07            established under the Alaska Mental Health Enabling Act, P.L. 84-830, 70                                     
08            Stat. 709 (1956), that become subject to management under AS 38.05.801, or                                   
09            of land that has been designated by law for or is subject to designation for                                 
10            conveyance to the Alaska Mental Health Trust Authority; however, after                                       
11            consultation with the Alaska Mental Health Trust Authority, the commissioner                                 
12            may waive the limitations of this subparagraph; or                                                       
13                      (E)  land and water within the Kenai Peninsula Borough                                         
14            east of Cook Inlet and south of the north boundary of Township 5 South,                                  
15            Seward Meridian.                                                                                         
16    * Sec. 3.  The uncodified law of the State of Alaska is amended by adding a new section to                         
17 read:                                                                                                                   
18       REACQUISITION OF CERTAIN SHALLOW NATURAL GAS LEASES.  (a)  The                                                    
19 commissioner of natural resources shall enter into negotiations to reacquire, by purchase in                            
20 the name of the state, the title to or accountable interests in shallow natural gas leases entered                      
21 into under AS 38.05.177 before the effective date of this Act within the boundaries described                           
22 in (d) of this section.                                                                                                 
23       (b)  In lieu of cash payment for a negotiated repurchase of a leasehold interest                                  
24 described in (a) of this section, the commissioner of natural resources may authorize a credit                          
25 of the purchase price plus interest at the rate prescribed in AS 09.30.070 to be granted to the                         
26 seller, to be applied against future lease bonus or rental payments, permit fees, royalties, or oil                     
27 and gas taxes that may become owing on new production from other leases or property held                                
28 by the seller for oil and gas development, including shallow natural gas development.  The                              
29 commissioner may also negotiate to reimburse, in like manner by credit provision a                                      
30 reasonable amount to compensate the lessee for expenses and other costs incurred by the                                 
31 lessee.                                                                                                                 
01       (c)  If the commissioner of natural resources is unable to negotiate a satisfactory price                         
02 for repurchase of a leasehold interest described in (a) of this section, the commissioner may                           
03 acquire a leasehold interest described in (a) of this section through exercise of the power of                          
04 eminent domain.                                                                                                         
05       (d)  The provisions of this section apply to shallow natural gas leases issued under                              
06 AS 38.05.177 before the effective date of this Act on the land and water described in                                   
07 AS 38.05.177(a)(2)(E), added by sec. 2 of this Act.                                                                     
08    * Sec. 4.  The uncodified law of the State of Alaska is amended by adding a new section to                         
09 read:                                                                                                                   
10       APPLICATION OF SECTION 2 TO LAND CURRENTLY LEASED IN THE                                                          
11 VICINITY OF KACHEMAK BAY FOR SHALLOW NATURAL GAS EXPLORATION                                                            
12 AND DEVELOPMENT.  The provisions of AS 38.05.177(a)(2)(E), added by sec. 2 of this                                      
13 Act, apply to prohibit the issuance or reissuance of a lease under AS 38.05.177 entered into                            
14 before the effective date of this Act if the lease terminates because of the failure to extend the                      
15 lease under AS 38.05.177(d) or if the lease terminates by the operation of AS 38.05.177(h).                             
16    * Sec. 5.  This Act takes effect immediately under AS 01.10.070(c).