Legislature(2013 - 2014)HOUSE FINANCE 519
04/07/2013 01:30 PM House FINANCE
| Audio | Topic |
|---|---|
| Start | |
| SB21 | |
| HB193 | |
| HB76 | |
| HB193 | |
| HB129 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 21 | TELECONFERENCED | |
| += | HB 129 | TELECONFERENCED | |
| + | HB 76 | TELECONFERENCED | |
| + | HB 193 | TELECONFERENCED | |
| += | SB 18 | TELECONFERENCED | |
| + | TELECONFERENCED |
HOUSE BILL NO. 129
"An Act relating to approval for oil and gas or gas
only exploration and development in a geographical
area; and providing for an effective date."
Representative Costello MOVED to ADOPT the proposed
committee substitute for HB 129, Work Draft 28-GH1970\U
(Bullock, 4/5/13). There being NO OBJECTION, it was so
ordered.
5:47:12 PM
JOE BALASH, DEPUTY COMMISSIONER, DEPARTMENT OF NATURAL
RESOURCES (DNR), relayed that the department had worked on
changes to the substantive portion of the bill in Section
2. He noted that Section 1 included a lengthy set of
findings and determinations in response to a recent Alaska
Supreme Court decision [Sullivan v. Resisting Environmental
Destruction on Indigenous Lands]; the language directed DNR
to follow the existing statutory guidance in AS
38.05.180(a) in order to adopt regulations to implement the
court's finding in terms of the state's interests (public
and otherwise) for the advancement of exploration and
development.
Mr. Balash pointed to Section 2 and relayed that
Legislative Legal Services had recommended a couple of
clarifying changes. The department had no concerns with the
changes.
Co-Chair Stoltze noted that the bill was heard previously
and that public testimony had been closed.
Mr. Balash added that DNR staff was available online for
technical questions.
5:49:12 PM
Representative Costello pointed to the findings section and
wondered if it was common for the legislative branch to
mention a decision made by another branch of government.
Mr. Balash believed the language was appropriate. He
communicated that the agency was addressing a decision by
the Supreme Court, which determined that it was the
legislature's prerogative related to how DNR would
implement the aspect of the case requiring that DNR take a
continuing hard look at decisions beyond the leasing phase.
The language was modeled on language that had been adopted
by the legislature approximately 12 years earlier.
Co-Chair Stoltze agreed that the language was not unique.
He recalled fighting a past effort by the Alaska Railroad
to overturn an Alaska Supreme Court decision related to a
Native village in his district.
5:51:41 PM
Representative Gara wanted to ensure that the bill would
not extend the amount of time a company with an oil and gas
lease would have to develop the land. He stated that
currently companies were provided a specific amount of time
under a lease to develop; if the lease was not acted upon
the state had the right to lease the area to another party.
Mr. Balash replied a lease could be held no more than 10
years unless the terms specified a shorter period. The only
way for a party to continue to hold the lease was through
production, a certified well, or unitization. The
legislation would not impact the existing requirements; the
language related to the decisions made by DNR when granting
permission to explore or develop the lease.
Representative Gara asked for verification that current law
provided three public comment periods (when the lease came
out, when the development plan was released, and in one
other circumstance), but the legislation reduced the number
down to one.
Mr. Balash replied that after the leasing phase there would
be an opportunity for public notice and comment for
exploration and another opportunity for comment on the area
in question for development. He stated that under current
practice there may be multiple public notices/comments for
each one of the phases; the change to one public comment
period per phase would provide more efficiency in
considering decisions. He furthered that DNR wanted to hold
public comment on the frontend in order to have a more
meaningful decision making process.
Representative Gara asked for verification that the bill
would maintain the two levels of public comment, but a
broader combination of leases would be combined into one
public comment period.
Mr. Balash responded in the affirmative. He explained that
the intent was to enable a given decision to affect more
than one lease, rather than having lease-by-lease
decisions. He detailed that the number of leases included
in a decision would be dependent on the circumstances; some
leasing areas lent themselves to larger geographic scopes.
For example, DNR would be more discerning related to public
comment on the east side of Cook Inlet, which was more
populated than the west side.
5:56:21 PM
Representative Gara noted that he tended to want to speed
up development on most of the leases rather than letting
them lag. He understood that residents in some communities
wanted to proceed with caution. He stated that when the
system was lease by lease the development plan would be
known; however, if many leases were combined it would be
harder to meaningfully comment on leases that may be at
different stages. He wondered how the department would deal
with the potential issue.
Mr. Balash pointed to a distinction between exploration and
development. He explained that the exploration activity was
likely to be on a broader scope than the development
decision; exploration and development would have separate
decisions associated with various phases of development. He
shared that currently leases were sold to companies coming
to the state for exploration. Under the bill there would be
a public notice and decision document affecting leases;
once a resource was located there would be a separate
decision that would likely narrow the scope from the larger
body of leases to those under which the resource had been
found. He furthered that the details on the implementation
of decisions would be determined under DNR regulations.
5:59:08 PM
Co-Chair Stoltze handed the gavel to Co-Chair Austerman.
Co-Chair Austerman pointed to legislative findings in
Section 3 and asked if the direction to continue analyzing
the cumulative impact of a project was already addressed
within current DNR regulations.
Mr. Balash replied that the examination of multiple factors
beyond the cumulative impacts was undertaken in the
department's 10-year best interest finding conducted for
the leasing phase. He expounded that each year DNR
conducted a call for additional information, which allowed
the public and communities to bring items to the
department's attention; other departments frequently
brought new reports, studies, and findings to DNR. The
items were all taken into account before the department
moved forward with annual lease sales. He relayed that the
Supreme Court decision mandated that DNR could not stop
considering the impacts.
Co-Chair Austerman asked whether the cumulative effect was
included. Mr. Balash replied in the affirmative.
Co-Chair Austerman asked whether the cumulative effect was
included in new regulation. Mr. Balash replied that DNR
considered cumulative effects as part of the best interest
finding in the leasing stage; the department continued to
look at the information as time went by as the face and
speed of development changed in a given area. He furthered
that DNR was considering the items, but the regulations
would direct it to specify when or where the consideration
took place.
Representative Kawasaki asked for the impact of each of
court's legislative findings under the legislation. Mr.
Balash asked for a specific example.
Representative Kawasaki pointed to Section 5 related to
consideration and analysis by the department, Section 7
related the department's continued look at new information
and changing circumstances, and Section 8 related to
meaningful public notice by the department. He believed the
items were subjective and asked for comment.
Mr. Balash replied that Sections 5 and 7 fell under the
prior topic discussed with Co-Chair Austerman. He
elaborated that the best interest finding was done on a 10-
year cycle for each sale area; the document was
comprehensive and considered a multitude of items specified
in statute. He stated that 10 years was a long time between
findings; therefore, DNR did a call for information each
year in order to make sure findings remained relevant. He
elaborated that the call was publicly noticed and provided
an opportunity for other agencies and the public to
comment. He explained that Section 7 related to the annual
call and Section 5 acknowledged that the department's
current process made the creation of an entirely new
finding for decisions unnecessary.
6:04:51 PM
Representative Kawasaki asked for an explanation of the
changes included in Section 2 and about their necessity.
Mr. Balash answered that the changes made had not been due
to the Supreme Court case. He relayed that the changes
helped bring clarity to the meaning of the substantive
section. He pointed to a write up of specific changes
included in member's packets (copy on file), which
referenced the page and line numbers from the original
bill. He detailed that the words "without regard to
individual lease boundaries" had been deleted because the
topic was related to area-wide decisions. He communicated
that DNR had no problem with the change. He furthered that
per a recommendation by Legislative Legal Services the
sentence had been revised to read "an approval applies to
an exploration or development commencing during a period
for up to 10 years. The language created an upper limit and
pertained to decisions that were made in an exploration or
development context; the decision would define the length
of time.
Mr. Balash continued to explain the changes in Section 2.
He addressed a clarifying change from the language
"specified period" to "a period specified under the
approval." The length of time would not automatically be 10
years and would be determined in the decision made. He
relayed that the department had no problem with any of the
changes. The fourth change added the language "or group of
leases" to follow the word "leases" in the bill. He noted
that the word "area" was mistakenly used twice in a
sentence and subsequently had been deleted.
Vice-Chair Neuman discussed a gas well that had been
drilled in Big Lake. He explained that the company had
drilled some monitoring wells in response to concern from
locals; the lease had subsequently transferred to another
company. He noted that commitments had been made to check
for contaminates over time. He wondered who was responsible
for transfers and whether it was associated with the lease
contract.
6:09:09 PM
Mr. Balash replied that each case was different; however,
the obligations of the lease or any permits would change
hands from lessee to lessee. He relayed that transfers of
interest in a lease had to be approved by the Division of
Oil and Gas. The department looked to see whether the
company taking over a lease would take on the existing
obligations (e.g. obligations on older properties with
abandonment liabilities).
Vice-Chair Neuman cited language on page 3 of the
legislation: "the director may approve exploration for
development for all or part of an area previously approved
for oil and gas leasing." He further discussed the drilled
area at Big Lake and relayed that the cleanup had not been
ideal. He pointed to the 10-year lease maximum under the
legislation and wondered if a similar scenario could happen
again; if so, he doubted it would be approved by DNR.
6:09:46 PM
Mr. Balash answered that the bill's language addressed the
different phases regarding a previously approved leasing
area. He discussed circumstances when DNR had determined it
was in the state's best interest to dispose of property
interest on a piece of land; the division would still need
to make a decision for exploration and development phases,
but in order for property to be disposed of DNR was
required to do a best interest finding.
Vice-Chair Neuman continued to speak to the issue in Big
Lake. He shared that the drilling had been approved by DNR
on private property and the property owner had been
concerned about the situation.
Mr. Balash answered that Alaska had a split estate where
the mineral interest was reserved for the state and the
surface area could be sold to private individuals in some
cases. The state had the ability to make decisions that
affected private owners, but DNR had regulations and
processes that governed under the circumstances. He
furthered that DNR would be required to provide public
notice that a lease was in question if the lease was on
private land. He relayed that the department's decision
would be subject to appeal and/or litigation if an
individual was concerned about the area in question.
6:14:46 PM
Vice-Chair Neuman surmised that the Big Lake land owner had
not wanted to go to the expense of suing the state.
Representative Munoz commented that the purpose was to look
holistically at a geographical area to determine the
parameters of development that would be allowed. She
believed the goal was to provide the public with a better
understanding of what types of activity would occur within
a certain area.
Mr. Balash replied in the affirmative. He communicated that
DNR wanted its process to be more meaningful and to engage
the public in a way that would allow the department to
guide its decisions on the front-end as opposed to a piece-
meal process. He pointed out that the North Slope Borough
had provided a letter of support for the legislation. The
department believed that engaging the borough would be
holistic and would help everyone involved to reach an
affirmative decision in a better way.
Representative Costello discussed the fiscal impact note
from Department of Natural Resources that included $134,000
in FY 14 for one non-permanent position.
Representative Costello cited language from the fiscal note
analysis section: "without regard to individual lease
boundaries." She believed the language had been removed
from the bill and wondered about the impact. Mr. Balash
replied that there would not be a fiscal impact.
Representative Gara stated that the bill would result in
fewer public hearings. He surmised that subsequently there
would be less employees required. He remarked that the
state was facing fiscal challenges and he was not convinced
the fiscal note made sense.
Mr. Balash answered that the department was asking for a
non-permanent employee to maintain current work done and to
help compile regulations that would guide the new program.
Once the transition was made, the division expected to be
able to perform its job more efficiently. He could not
quantify the change, but the goal was for the department to
make preparations to do more with less.
6:19:58 PM
Representative Gara noted that the division had existing
staff to handle multiple hearings. He believed the
development of regulations could be done with its current
staff and with the help of the Department of Law (DOL). He
did not believe a new position was necessary.
Mr. Balash answered that DNR would have to reimburse DOL
for work done. He clarified that public notice and comment
periods were held, but there were not a tremendous number
of public hearings held on the decisions. He furthered that
the department would continue to review plans once an
exploration decision had been made. He explained that the
public comment period would be truncated.
Representative Gara OBJECTED to the fiscal note. He MOVED
to AMEND the fiscal note to zero. He stated that there were
DOL attorneys who worked specifically on regulations. He
believed the work could be done with existing employees
with some potential overtime work.
A roll call vote was taken on the motion.
IN FAVOR: Gara, Kawasaki
OPPOSED: Munoz, Holmes, Neuman, Wilson, Costello, Thompson,
Stoltze, Austerman
The MOTION FAILED (2/8).
Representative Costello MOVED to REPORT CSHB 129(FIN) out
of committee with individual recommendations and the
accompanying fiscal note. There being NO OBJECTION, it was
so ordered.
CSHB 129(FIN) was REPORTED out of committee with a "do
pass" recommendation and with one new fiscal impact note
from the Department of Natural Resources.