CSHB 395(O&G): "An Act relating to the recovery of shallow natural gas and the regulation of shallow natural gas operations; and providing for an effective date."
00 CS FOR HOUSE BILL NO. 395(O&G) 01 "An Act relating to the recovery of shallow natural gas and the regulation of shallow 02 natural gas operations; and providing for an effective date." 03 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 04 * Section 1. AS 31.05.030(j) is amended to read: 05 (j) For exploration and development operations involving shallow natural 06 gas, the commission 07 (1) may not issue a permit to drill under this chapter if the 08 operations of the person to whom the permit is to be issued would involve 09 producing gas from an aquifer that serves as a source of drinking water for 10 human consumption or that is used for agricultural purposes; 11 (2) shall 12 (A) regulate the hydraulic fracturing of shallow natural gas 13 wells to assure protection of drinking water quality; 14 (B) if reinjection of produced water is required by the state,
01 require reinjection of the water to depths below known sources of 02 drinking water for human consumption or that is used for agricultural 03 purposes; 04 (C) regulate the disposal of wastes produced from the 05 operations; and 06 (D) for the purposes of AS 46.04.030(b), [THE 07 COMMISSION SHALL] determine whether a well drilled for shallow natural 08 gas may penetrate a formation capable of flowing oil and, if so, whether the 09 volume of oil encountered will be of such quantities that an oil discharge 10 prevention and contingency plan will be required. 11 * Sec. 2. AS 31.05 is amended by adding a new section to read: 12 Sec. 31.05.098. Public forum process concerning shallow natural gas. (a) 13 For the purpose of resolving public health, safety, welfare, or environmental 14 complaints about potential or actual shallow natural gas exploration and development 15 operations, the commission shall, by regulation, develop and implement a public 16 forum process by which to achieve informal resolution of the complaints within 60 17 days of the filing of the complaints. The commission may provide that, if resolution 18 of the complaints is not achieved through the informal process established by 19 regulation, a party may petition the commission to take action on the complaint under 20 AS 31.05.060 - 31.05.085. 21 (b) The commission's regulations adopted under this section shall provide for 22 scheduling a public forum at a location reasonably proximate to the land that is the 23 subject of or that is affected by the complaint and reasonable public notice and 24 opportunity to be heard. If the public forum is not personally convened and conducted 25 by a majority of the members of the commission, the person conducting the forum 26 shall prepare and submit to the commission a report of the forum proceedings. The 27 report prepared under this subsection is a public record. The commission shall review 28 the report and may require modification of a rule or of a plan of operation or 29 development of a shallow natural gas lease. 30 * Sec. 3. AS 31.05.170(14) is amended to read: 31 (14) "shallow natural gas" means coal bed methane, natural gas drilled
01 for under a lease authorized by AS 38.05.177, or natural gas drilled for in a well the 02 true vertical depth of which is 3,000 [4,000] feet or less unless the commissioner of 03 natural resources has exercised discretion to allow recovery of gas as authorized 04 by AS 38.05.177(j), in which case "shallow natural gas" also means gas subject to 05 the exercise of that discretion; 06 * Sec. 4. AS 38.05.177(a) is amended to read: 07 (a) The provisions of this section 08 (1) apply to gas, whether methane associated with and derived from 09 coal deposits or otherwise, from a field if a part of the field is within 3,000 feet of the 10 surface unless the commissioner exercises discretion to allow recovery of gas as 11 authorized by (j) of this section, in which case the gas to which the provisions of 12 this section apply includes gas subject to the exercise of that discretion; and 13 (2) do not apply to authorize lease of 14 (A) land 15 (i) that is subject to an oil and gas exploration license or 16 lease issued under AS 38.05.131 - 38.05.134; or 17 (ii) that is leased under AS 38.05.180; 18 (B) the land (i) that is proposed to be subject to an oil and gas 19 exploration license or lease issued under AS 38.05.131 - 38.05.134; or (ii) that 20 is described in and part of a proposed oil and gas leasing program prepared 21 under AS 38.05.180(b); however, the commissioner may waive the limitations 22 of this subparagraph; 23 (C) the land that is held under a coal lease entered into under 24 AS 38.05.150, unless the applicant for a shallow natural gas lease is also the 25 lessee under AS 38.05.150 of that land; or 26 (D) the valid existing selections of the Alaska Mental Health 27 Trust Authority made for the purpose of reconstituting the mental health trust 28 established under the Alaska Mental Health Enabling Act, P.L. 84-830, 70 29 Stat. 709 (1956), that become subject to management under AS 38.05.801, or 30 of land that has been designated by law for or is subject to designation for 31 conveyance to the Alaska Mental Health Trust Authority; however, after
01 consultation with the Alaska Mental Health Trust Authority, the commissioner 02 may waive the limitations of this subparagraph. 03 * Sec. 5. AS 38.05.177(c) is amended to read: 04 (c) The director shall give notice under AS 38.05.945 of receipt of the lease 05 application and call for comments from the public. The director's call for public 06 comments must provide opportunity for public comment for a period of not less than 07 60 days. In addition to the requirements of AS 38.05.945(b), the director shall 08 provide notice in at least two newspapers of general circulation in the vicinity of 09 the proposed action at least twice and at intervals of not less than five days 10 between publications and shall provide notification by direct mail to each 11 resident, municipality, and community council in the vicinity of the proposed 12 action. If, after review of information received during the public comment period and 13 consideration of public comments received, the director determines that the 14 discovery of a local source of natural gas would benefit the residents of an area, the 15 director may [SHALL] execute a lease for the area described in (b) of this section. 16 The director shall execute the lease after completion of a title search, the close of the 17 public comment period, and, if review is required under AS 46.40, after the final 18 consistency determination is made under AS 46.40. The director may not execute a 19 lease under this subsection unless the director first provides notice of intent to 20 award the lease in at least two newspapers of general circulation in the vicinity of 21 the proposed action at least three times and at intervals of not less than five days 22 between publications and shall provide notification to each municipality and to 23 each community council in the vicinity of the proposed action. A lease entered 24 into under this subsection gives the lessee the exclusive right to explore for, develop, 25 and produce, for a term of three years, natural gas on the state land described in the 26 lease; the right to explore for, develop, and produce is limited to gas from a field if a 27 part of the field is within 3,000 feet of the surface unless the commissioner exercises 28 discretion to allow recovery of gas under (j) of this section. 29 * Sec. 6. AS 38.05.177(f) is amended to read: 30 (f) A shallow gas lease must provide for 31 (1) payment to the state of annual rent in the amount of $1 an [PER]
01 acre; the [. THE] rent is due and payable on the date determined in the lease; if [. IF] 02 the lease payment is not received by the due date, the director shall mail the lessee one 03 written notice, certified return receipt requested; if [. IF] the lessee fails to pay the 04 rent within 30 days after [OF] receipt of the notice, the director shall terminate the 05 lease; 06 (2) appropriate setbacks governing the placement by the lessee or 07 the lessee's agent of compressor stations on the lease, to ensure that the owner 08 will not forego the peaceful enjoyment of the property owned; setbacks developed 09 under this paragraph must be determined with reference to the population 10 density of the parcel or parcels subject to the lease, the size of the owner's 11 parcels, and the general character of the land subject to the lease; the terms of 12 the lease must require the lessee or lessee's agent to negotiate to meet the 13 requirement of this paragraph, but the owner may not unreasonably withhold 14 agreement; 15 (3) reasonable and appropriate measures to mitigate the noise of 16 compressors, engines, and other equipment operated by the lessee or the lessee's 17 agent of compressor stations on the lease to ensure that the owner will not forego 18 the peaceful enjoyment of the property owned; noise mitigation measures 19 developed under this paragraph must be determined with reference to the 20 population density of the parcel or parcels subject to the lease, the size of the 21 owner's parcels, and the general character of the land subject to the lease; the 22 terms of the lease shall require the lessee or lessee's agent to negotiate to meet the 23 requirement of this paragraph, but the owner may not unreasonably withhold 24 agreement; 25 (4) action to require the lessee or the lessee's agent to restore, 26 reclaim, or abate the adverse effects of the exploration and development 27 operations using natural revegetation or reseeding using endemic plant species; 28 the lease may require the lessee or the lessee's agent to consult with the director 29 of the division of agriculture. 30 * Sec. 7. AS 38.05.177(j) is amended to read: 31 (j) A lease does not give the lessee the right to produce oil. A lease gives the
01 lessee the right to produce gas only to the extent that it is from a field if a part of the 02 field is within 3,000 feet of the surface. Except when the commissioner exercises 03 discretion to allow recovery of gas at a depth of not more than 4,000 feet, a lessee 04 may not recover gas at a depth greater than 3,000 feet unless the lessee first 05 obtains a lease under AS 38.05.180. If a well drilling for natural gas under a lease 06 authorized by this section operates at a depth that is greater than permitted by this 07 subsection, or penetrates a field, no portion of which is within 3,000 feet of the 08 surface, or penetrates a formation capable of producing oil, the owner or operator 09 (1) shall notify the department and the Alaska Oil and Gas 10 Conservation Commission; and 11 (2) may not conduct further operations in the drilled well until the 12 facility complies with all applicable laws and regulations relating to oil and gas 13 exploration and production; however, this paragraph does not prevent the owner or 14 operator from conducting activities that may be required by the Alaska Oil and Gas 15 Conservation Commission to plug, plug-back, or abandon a well. 16 * Sec. 8. AS 38.05.177(k) is amended to read: 17 (k) The commissioner [MAY] 18 (1) may adopt only the regulations that are reasonable and that are 19 necessary to implement, interpret, or make specific the provisions of this section or to 20 establish procedures to govern application of the provisions of this section; [AND] 21 (2) may, in addition to any requirement for a bond under 22 AS 38.05.130, establish by regulation a form and amount for statewide, areawide, 23 unit-wide, or per-lease bonds sufficient to secure damages that may be caused by the 24 activities of a lessee, or the lessee's successors or assigns, related to a shallow natural 25 gas lease entered into under this section; if the commissioner acts under this 26 paragraph, the commissioner 27 (A) shall require a person applying for a lease under this 28 section to post the bond as a condition for the director's executing the lease; 29 (B) may not require a bond posted under this paragraph from a 30 person applying for a lease if the person has already posted a bond covering 31 the person's statewide oil and gas leasing activities in an amount of at least
01 $500,000; 02 (3) shall, if a bond is sought under AS 38.05.130, before the 03 amount of the surety bond to be posted is determined by the director, require as 04 a condition for issuing the bond that the director, after notice and an opportunity 05 to be heard, determine that, to exercise rights under the reservation as set out in 06 AS 38.05.125 and the lease, the lessee has demonstrated that access and entry 07 upon the land of the owner is reasonably necessary or convenient to render 08 beneficial and efficient the complete enjoyment of the property and the reserved 09 rights; the lessee has the burden of demonstrating compliance with the 10 requirement of this paragraph; and 11 (4) shall require the lessee to provide written advance notice to the 12 owner of initial entry onto the property of the owner at least 30 days before 13 initial entry. 14 * Sec. 9. AS 38.05.177 is amended by adding new subsections to read: 15 (p) Under AS 38.05.130 as applicable to shallow natural gas exploration and 16 development that is authorized under this section, if 17 (1) the owner and the lessee enter into an agreement by which the 18 state, or its lessees, successors, or assigns, will make provision to pay the owner of the 19 land for all damages, the parties shall incorporate in the agreement the provisions 20 described in (f) of this section that are negotiated; 21 (2) the owner and the lessee do not enter into an agreement by which 22 the state, or its lessees, successors, or assigns, will make provision to pay the owner of 23 the land for all damages, and the lessee proceeds to request the director to set the 24 amount of a surety bond, the owner may, in conjunction with notice and the 25 opportunity to be heard, provide the director with the owner's comments about the 26 appropriate location of wells, roads, and other improvements that may be made by the 27 lessee or the lessee's agent to secure the lessee's rights under the lease. 28 (q) In (f), (k)(3), and (p) of this section, "owner" means the property owner 29 whose property is subject to the reservation described in AS 38.05.125(a). 30 * Sec. 10. AS 46.03.100(f) is amended to read: 31 (f) This section does not apply to discharges of solid or liquid waste material
01 or water discharges from the following activities if the discharge is incidental to the 02 activity and the activity does not produce a discharge from a point source, as that term 03 is defined in regulations adopted under this chapter, directly into any surface water of 04 the state: 05 (1) mineral drilling, trenching, ditching, and similar activities; 06 (2) landscaping; 07 (3) water well drilling, geophysical drilling, or coal bed methane 08 drilling or other natural gas drilling to recover gas from a field if a part of the field is 09 within 3,000 feet of the surface unless the commissioner of natural resources has 10 exercised discretion to allow recovery of gas as authorized by AS 38.05.177(j), in 11 which case it includes the gas subject to the exercise of that discretion; or 12 (4) drilling, ditching, trenching, and similar activities associated with 13 facility construction and maintenance or with road or other transportation facility 14 construction and maintenance; however, the exemption provided by this paragraph 15 does not relieve a person from obtaining a permit under this section if 16 (A) the drilling, ditching, trenching, or similar activity will 17 involve the removal of the groundwater, stormwater, or wastewater runoff that 18 has accumulated and is present at an excavation site for facility, road, or other 19 transportation construction or maintenance; and 20 (B) a permit is otherwise required by this section. 21 * Sec. 11. 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 unless an oil discharge prevention and 24 contingency plan for the pipeline or facility has been approved by the department and 25 the person is in compliance with the plan. This subsection does not apply to an 26 exploration or production facility used solely to explore for or to develop or produce 27 shallow natural gas resources, except that this exemption does not apply if the Alaska 28 Oil and Gas Conservation Commission determines under AS 31.05.030(j)(2)(D) 29 [AS 31.05.030(j)] that 30 (1) a well drilled for shallow natural gas may penetrate a formation 31 capable of flowing oil; and
01 (2) the volume of oil encountered will be of such quantities that a 02 contingency plan will be required. 03 * Sec. 12. AS 46.04.040(b) is amended to read: 04 (b) A person may not cause or permit the operation of a pipeline or an 05 exploration or production facility in the state unless the person has furnished to the 06 department, and the department has approved, proof of financial ability to respond in 07 damages. Proof of financial responsibility required for 08 (1) a pipeline or an offshore exploration or production facility is 09 $50,000,000 per incident; 10 (2) an onshore production facility is 11 (A) $20,000,000 per incident if the facility produces over 12 10,000 barrels per day of oil; 13 (B) $10,000,000 per incident if the facility produces over 5,000 14 barrels per day but not more than 10,000 barrels per day of oil; 15 (C) $5,000,000 per incident if the facility produces over 2,500 16 barrels per day but not more than 5,000 barrels per day of oil; 17 (D) $1,000,000 per incident if the facility produces 2,500 18 barrels per day or less of oil; 19 (3) an onshore exploration facility is 20 (A) $25,000 per incident for a facility used solely to explore for 21 shallow natural gas by means of drilling a well to explore for gas, whether 22 methane associated with and derived from coal deposits or otherwise, from a 23 field if a part of the field is within 3,000 feet of the surface unless the 24 commissioner of natural resources has exercised discretion to allow 25 recovery of gas as authorized by AS 38.05.177(j), in which case it includes 26 the gas subject to the exercise of that discretion; and 27 (B) except as provided by (A) of this paragraph, $1,000,000 per 28 incident. 29 * Sec. 13. AS 46.04.900(25) is amended to read: 30 (25) "shallow natural gas" means coal bed methane, natural gas drilled 31 for under a lease authorized by AS 38.05.177, or natural gas drilled for in a well the
01 true vertical depth of which is 3,000 [4,000] feet or less unless the commissioner of 02 natural resources has exercised discretion to allow recovery of gas under 03 AS 38.05.177(j), in which case "shallow natural gas" also means gas subject to 04 the exercise of that discretion; 05 * Sec. 14. This Act takes effect July 1, 2004.