Enrolled SB 243: Relating to geothermal resources; relating to the royalty obligation for geothermal resources; transferring from the Department of Natural Resources to the Alaska Oil and Gas Conservation Commission authority over permitting and inspection of geothermal wells; providing for a regulatory cost charge for geothermal wells; and providing for an effective date.
00Enrolled SB 243 01 Relating to geothermal resources; relating to the royalty obligation for geothermal resources; 02 transferring from the Department of Natural Resources to the Alaska Oil and Gas 03 Conservation Commission authority over permitting and inspection of geothermal wells; 04 providing for a regulatory cost charge for geothermal wells; and providing for an effective 05 date. 06 _______________ 07 * Section 1. AS 31.05.030 is amended by adding a new subsection to read: 08 (m) The commission has jurisdiction and authority over all persons and 09 property, public and private, necessary to carry out the purposes and intent of 10 AS 41.06, except for provisions in AS 41.06 for which the Department of Natural 11 Resources has jurisdiction. 12 * Sec. 2. AS 38.05.181(g) is amended to read: 13 (g) Each geothermal lease shall be conditioned upon payment by the lessee of
01 a royalty of 1.75 percent [NOT LESS THAN 10 PERCENT BUT NOT MORE 02 THAN 15 PERCENT] of the gross revenues derived from the production, sale, or use 03 of geothermal resources under the lease during the first 10 years immediately 04 following the date the geothermal resource first generates gross income and 3.5 05 percent of the gross revenues derived from the production, sale, or use of 06 geothermal resources under the lease after that first 10-year period. Royalties 07 may be taken in kind rather than in value if the commissioner determines that taking in 08 kind would be in the best interest of the state. 09 * Sec. 3. AS 41.06 is amended by adding a new section to read: 10 Sec. 41.06.005. Jurisdiction over geothermal resources. (a) The commission 11 has jurisdiction under this chapter over geothermal wells to prevent waste, to protect 12 correlative rights, and to ensure public safety. 13 (b) The Department of Natural Resources has jurisdiction under this chapter 14 over management of geothermal leases and units in the public interest and to effect 15 development. 16 * Sec. 4. AS 41.06.010 is amended to read: 17 Sec. 41.06.010. Waste prohibited; investigation. The waste of geothermal 18 resources in the state is prohibited. The commission may investigate to determine 19 whether waste exists or is imminent, or whether other facts exist that justify or 20 require action by the commission to prohibit waste. 21 * Sec. 5. AS 41.06.020 is repealed and reenacted to read: 22 Sec. 41.06.020. Authority of commission; application. (a) The commission 23 has jurisdiction over all persons and property, public and private, necessary to carry 24 out the purposes and intent of this chapter. 25 (b) The authority of the commission applies to all land in the state lawfully 26 subject to the police power of the state, including private land, municipal land, state 27 land, land of the United States, and land subject to the jurisdiction of the United 28 States, and to all land included in a voluntary cooperative or unit plan of development 29 or operation entered into in accordance with AS 38.05.181. When land that is subject 30 to the commission's authority is committed to a unit agreement involving land subject 31 to federal jurisdiction, the operation of this chapter or a part of this chapter may be
01 suspended if 02 (1) the unit operations are regulated by the United States; and 03 (2) the conservation of geothermal resources is accomplished under the 04 unit agreement. 05 (c) This chapter applies 06 (1) to wells drilled in search of, in support of, or for the recovery or 07 production of geothermal resources; 08 (2) when a person engaged in drilling activity not otherwise subject to 09 the provisions of this chapter encounters geothermal resources, fluid, or water of 10 sufficient heat or pressure to constitute a threat to human life or health unless the 11 drilling operation is subject to oil and gas drilling regulation under AS 31.05; 12 (3) in areas and under conditions in which the commission determines 13 that drilling may encounter geothermal resources, fluid, or water of sufficient heat or 14 pressure to constitute a threat to human life or health. 15 (d) To the extent the provisions of AS 31.05 do not conflict with the 16 provisions of this chapter, the provisions of AS 31.05 are applicable to wells drilled in 17 search of, in support of, or for the recovery or production of geothermal resources. 18 (e) Nothing in this chapter limits the authority of the department 19 (1) over geothermal resources under AS 38.05.181; or 20 (2) to approve and manage geothermal units or operations that include 21 state land. 22 * Sec. 6. AS 41.06.030(a) is amended to read: 23 (a) The commissioner shall require the filing and approval of a plan of 24 development and operation on a [EACH PRODUCING] geothermal system that 25 includes state land [AND MAY ISSUE WELL-SPACING AND POOLING 26 ORDERS, LIMITS ON PRODUCTION, AND REINJECTION REQUIREMENTS, 27 IN ORDER TO PREVENT WASTE, PROMOTE MAXIMUM ECONOMIC 28 RECOVERY, AND PROTECT CORRELATIVE RIGHTS]. 29 * Sec. 7. AS 41.06.030(b) is amended to read: 30 (b) Lessees of all or part of a geothermal system that includes state land may 31 enter into a unit agreement for cooperative development, with the approval of the
01 commissioner. The commissioner may suspend or modify the approved development 02 plan in accordance with the unit agreement. 03 * Sec. 8. AS 41.06.030(c) is amended to read: 04 (c) If the owners of at least two-thirds of the leasehold interests in a 05 geothermal system ratify a unit agreement approved under (b) of this section by the 06 commissioner, the commissioner may enforce the agreement as to lessees not a party 07 to the agreement by allocating production under the principle of correlative rights and 08 by apportioning costs and revenues. 09 * Sec. 9. AS 41.06.030 is amended by adding a new subsection to read: 10 (e) The commissioner may adopt regulations under AS 44.62 to carry out the 11 purposes and intent of this chapter for duties assigned to the department, including the 12 promotion of maximum economic recovery. 13 * Sec. 10. AS 41.06 is amended by adding a new section to read: 14 Sec. 41.06.035. Reservoir management; commission's regulations. (a) The 15 commission may issue well-spacing and pooling orders, place limits on production, 16 and impose reinjection requirements for the purpose of preventing waste and to protect 17 correlative rights in a geothermal system. 18 (b) The commission may adopt regulations under AS 44.62 and issue orders 19 appropriate to carry out the purposes and intent of this chapter for duties assigned to 20 the commission, including orders regarding the establishment of drilling units for 21 pools as set out in AS 31.05.100 and orders regarding unitized operation and 22 integration of interests as set out in AS 31.05.110. 23 * Sec. 11. AS 41.06.040(a) is repealed and reenacted to read: 24 (a) The commission shall adopt regulations under AS 44.62 (Administrative 25 Procedure Act), issue orders, and take other appropriate action to carry out the 26 purposes and intent of this chapter, including adopting regulations to prevent 27 (1) geothermal resources, water or other fluids, and gases from 28 escaping into strata other than that in which they are found, unless in accordance with 29 an approved reinjection program; 30 (2) contamination of surface and groundwater; 31 (3) premature degradation of a geothermal system by water
01 encroachment or otherwise; 02 (4) blowouts, cavings, and seepage; and 03 (5) unreasonable disturbance or injury to neighboring properties, prior 04 water rights, prior oil or gas rights, human life, health, and the natural environment. 05 * Sec. 12. AS 41.06.040(b) is amended to read: 06 (b) The commission [COMMISSIONER] shall require [CAUSE] the 07 operator of a geothermal well [OR WELLS] to file an adequate individual or blanket 08 surety bond [BONDS] to ensure compliance with regulations adopted under this 09 section. 10 * Sec. 13. AS 41.06.040(c) is amended to read: 11 (c) The commission [COMMISSIONER] shall require a geothermal operator 12 to notify the commission [DEPARTMENT] if the operator discovers significant 13 quantities of hydrocarbon substances, helium, or fissionable materials. 14 * Sec. 14. AS 41.06.040(d) is amended to read: 15 (d) The commission and its staff [COMMISSIONER] may enter upon any 16 property, public or private, to inspect a geothermal operation for compliance with 17 regulations adopted under this section. 18 * Sec. 15. AS 41.06.050 is repealed and reenacted to read: 19 Sec. 41.06.050. Permits to drill. (a) A person shall apply for and receive a 20 permit from the commission before drilling a well in 21 (1) search of geothermal resources; or 22 (2) support of the recovery or production of geothermal resources. 23 (b) The application required in (a) of this section must contain sufficient 24 information to enable the commission to determine if the operation of the well will 25 interfere with or impair a prior water, oil, or gas right. 26 (c) A person must submit a separate permit application for each well. The 27 permit application must be in the form or format required by the commission and 28 include all information required by the commission. 29 (d) As soon as practicable after receiving an application under (a) of this 30 section, the commission shall approve or deny the application for a permit to drill. 31 (e) In making the determination under (d) of this section, the commission shall
01 consider whether the 02 (1) proposed well will significantly interfere with or substantially 03 impair a prior water, oil, or gas right; 04 (2) proposed well is contrary to a provision of this chapter, a regulation 05 adopted by the commission, another law, or an order, stipulation, or term of a permit 06 issued by the commission; and 07 (3) applicant is in violation of a provision of this chapter, a regulation 08 adopted by the commission, another law, or an order, stipulation, or term of a permit 09 issued by the commission; the commission shall consider the magnitude of the 10 violation. 11 * Sec. 16. AS 41.06 is amended by adding a new section to read: 12 Sec. 41.06.055. Regulatory cost charge for geothermal wells. (a) Each 13 person that, on the first day of a state fiscal year, operates a well within the jurisdiction 14 of the commission for which a permit to drill has been issued under AS 41.06.050 15 shall pay to the commission an annual regulatory charge for each well that has not, 16 before the first day of that state fiscal year, been 17 (1) plugged and abandoned; and 18 (2) reported as abandoned in accordance with regulations of the 19 commission. 20 (b) The commission shall annually determine the regulatory cost charge to be 21 paid under this section. The regulatory cost charge to be paid by a person for a state 22 fiscal year must be based on the total volume during the most recent calendar year for 23 the wells described in (a) of this section of which the person was the operator on the 24 first day of the fiscal year as a percentage of the total volume during the same calendar 25 year for all wells described in (a) of this section. In this subsection, "total volume" 26 means the sum of the volume of all geothermal resources produced from a well and all 27 fluids and substances injected or otherwise artificially introduced into the well. 28 (c) The commission shall determine the regulatory cost charges levied under 29 this section so that the total amount to be collected approximately equals the 30 appropriations made for the operating costs of the commission that have been incurred 31 under this chapter for the fiscal year.
01 (d) The commission shall collect the regulatory cost charges imposed under 02 this section. The Department of Administration shall identify the amount of 03 appropriations made for the operating costs of the commission under this chapter that 04 lapse into the general fund each year. The legislature may appropriate an amount that 05 is at least equal to the lapsed amount to the commission for its operating costs under 06 this chapter for the next fiscal year. If the legislature makes an appropriation to the 07 commission under this subsection that is equal to or greater than the lapsed amount, 08 the commission shall reduce the total regulatory cost charge collected for that fiscal 09 year by a comparable amount. 10 (e) The commission may adopt regulations relating to the investigation of the 11 accuracy of reported information and for collecting required payments under this 12 section. 13 * Sec. 17. AS 41.06.060 is repealed and reenacted to read: 14 Sec. 41.06.060. Definitions. In this chapter, unless the context otherwise 15 requires, 16 (1) "commercial use" means the sale of heat or power to a third party; 17 (2) "commission" means the Alaska Oil and Gas Conservation 18 Commission created under AS 31.05.005; 19 (3) "correlative rights" means the right of an owner of each property in 20 a geothermal system to produce without waste the owner's just and equitable share of 21 the geothermal resources in the geothermal system; a just and reasonable share is an 22 amount, so far as can be practically determined and so far as can be practically 23 produced without waste, that is substantially in proportion to the quantity of 24 recoverable geothermal resources under the owner's property relative to the total 25 recoverable geothermal resources in the geothermal system; 26 (4) "geothermal fluid" means liquids and steam at temperatures greater 27 than 120 degrees Celsius or any commercial use of liquids and steam naturally present 28 in a geothermal system at temperatures less than 120 degrees Celsius; 29 (5) "geothermal resources" 30 (A) means the natural heat of the earth at temperatures greater 31 than 120 degrees Celsius, or any use of that heat for commercial purposes,
01 measured at the point where the highest-temperature resources encountered 02 enter or contact a well or other resource extraction device or any commercial 03 use of the natural heat of the earth; 04 (B) includes 05 (i) the energy, including pressure, in whatever form 06 present in, resulting from, created by, or that may be extracted from 07 that natural heat; 08 (ii) the material medium, including steam and other 09 gases, hot water, and hot brines constituting the geothermal fluid 10 naturally present, as well as substances artificially introduced to serve 11 as a heat transfer medium; and 12 (iii) all dissolved or entrained minerals and gases that 13 may be obtained from the material medium, but excluding hydrocarbon 14 substances and helium; 15 (6) "geothermal system" means a stratum, pool, reservoir, or other 16 geologic formation containing geothermal resources; 17 (7) "operator" means a person drilling, maintaining, operating, 18 producing, or in control of a well; 19 (8) "owner" means the person who has the right to drill into or produce 20 from a geothermal system and to appropriate the geothermal resources produced from 21 a geothermal system for that person and others; 22 (9) "waste" means, in addition to its ordinary meaning, physical waste, 23 and includes an inefficient, excessive, or improper production, use, or dissipation of 24 geothermal resources, including 25 (A) drilling, transporting, or storage methods that cause or tend 26 to cause unnecessary surface loss of geothermal resources; 27 (B) locating, spacing, drilling, equipping, operating, producing, 28 or venting of a well in a manner that results or tends to result in reducing the 29 ultimate economic recovery of geothermal resources; 30 (10) "well" means a well drilled, converted, or reactivated for the 31 discovery, testing, production, or subsurface injection of geothermal resources.
01 * Sec. 18. AS 41.06.030(d) and 41.06.040(e) are repealed. 02 * Sec. 19. The uncodified law of the State of Alaska is amended by adding a new section to 03 read: 04 APPLICABILITY; AMENDMENT OF EXISTING LEASES. (a) Section 2 of this 05 Act applies to a lease for a geothermal resource or the renewal of a lease for a geothermal 06 resource entered into on or after the effective date of sec. 2 of this Act. 07 (b) The commissioner of natural resources shall offer the royalty rates in 08 AS 38.05.181(g), as amended by sec. 2 of this Act, as an amendment to a lease or a renewal 09 of a lease entered into before the effective date of sec. 2 of this Act. 10 * Sec. 20. The uncodified law of the State of Alaska is amended by adding a new section to 11 read: 12 TRANSITION: REGULATIONS. (a) To the extent the regulations are not 13 inconsistent with the language and purposes of this Act, regulations relating to geothermal 14 wells adopted by the Department of Natural Resources under AS 41.06 before July 1, 2010, 15 remain in effect as valid regulations implementing this Act. The Alaska Oil and Gas 16 Conservation Commission may administer and enforce regulations previously adopted under 17 AS 41.06 relating to geothermal wells until the Alaska Oil and Gas Conservation Commission 18 adopts regulations in accordance with this Act. 19 (b) The Alaska Oil and Gas Conservation Commission may immediately proceed to 20 adopt regulations necessary to implement the changes made by this Act. The regulations take 21 effect under AS 44.62 (Administrative Procedure Act), but not before July 1, 2010. 22 * Sec. 21. The uncodified law of the State of Alaska is amended by adding a new section to 23 read: 24 REVISOR'S INSTRUCTIONS. The revisor of statutes is instructed to change the 25 catch line of AS 41.06.030 from "Reservoir management" to "Unitization." 26 * Sec. 22. Section 20 of this Act takes effect immediately under AS 01.10.070(c). 27 * Sec. 23. Except as provided in sec. 22 of this Act, this Act takes effect July 1, 2010.