Legislature(2001 - 2002)

04/10/2001 05:30 PM O&G

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
SB 156 - BEST INTEREST FINDING UNDER AK LAND ACT                                                                              
                                                                                                                                
TAPE 01-28, SIDE A                                                                                                              
Number 0047                                                                                                                     
                                                                                                                                
VICE  CHAIR FATE  announced the  next order  of business,  CS FOR                                                               
SENATE BILL  NO. 156(RES), "An  Act amending the Alaska  Land Act                                                               
to  clarify the  requirement of  a single  written best  interest                                                               
finding required for the sale,  lease, or other disposal of state                                                               
land  or  resources or  an  interest  in  them, and  relating  to                                                               
certain   disposals   involving  multiphased   development;   and                                                               
providing for an effective date."                                                                                               
                                                                                                                                
Number 0081                                                                                                                     
                                                                                                                                
SENATOR  DRUE PEARCE,  Alaska  State  Legislature, presented  the                                                               
sponsor  statement  for   SB  156,  noting  that   the  bill  was                                                               
introduced by  the Senate Resources Standing  Committee [of which                                                               
she  is vice  chair].   She explained  that the  bill amends  the                                                               
Alaska Land  Act to clarify  the requirement that  the Department                                                               
of  Natural  Resources  (DNR)  prepare   a  single  written  best                                                               
interest finding for multiphase development projects.                                                                           
                                                                                                                                
SENATOR PEARCE provided  some history.  In  1994, the legislature                                                               
passed SB 308 in reaction to  a series of decisions by the Alaska                                                               
Supreme Court  concerning what the  court characterized  as DNR's                                                               
"phasing"  of  its review  of  various  mining  and oil  and  gas                                                               
projects;  that  bill  explicitly  allowed  project  phasing  and                                                               
precisely  defined  the  scope   of  the  best  interest  finding                                                               
determination.  At  the time, the legislature was  aware that the                                                               
post-disposal    phases   -    exploration,   development,    and                                                               
transportation -  would be subjected to  numerous federal, state,                                                               
and   local  laws,   as  well   as  regulations,   policies,  and                                                               
ordinances; would be reviewed by  numerous agencies; and would be                                                               
subject to public review and comment.                                                                                           
                                                                                                                                
SENATOR PEARCE  explained that while  the legislature  did intend                                                               
that  there would  be a  detailed review  of the  project at  any                                                               
later phase,  the legislature did  not intend that the  DNR would                                                               
have  to issue  another best  interest  finding as  part of  that                                                               
review.   However,  the Alaska  Supreme  Court recently  declared                                                               
that the DNR  is obliged, at each phase of  development, to issue                                                               
an entire  best interest  finding relating  to that  phase before                                                               
the proposed development may proceed.                                                                                           
                                                                                                                                
SENATOR PEARCE told  members [CSSB 156(RES)] is  intended to make                                                               
it clear that, first, no  other best interest finding is required                                                               
after  the  disposal phase;  second,  the  best interest  finding                                                               
shall  be  based  upon  known  information  or  information  made                                                               
available  to  the director,  even  if  all potential  cumulative                                                               
impacts of the  project are not known; and,  third, public notice                                                               
and the  opportunity to comment  shall be provided at  each phase                                                               
of  an oil  and  gas project.    The intent  is  that the  phases                                                               
subject  to   this  notice  are  exploration,   development,  and                                                               
transportation.  She  noted that the Division of Oil  & Gas (DNR)                                                               
had  testified before  the  Senate  Resources Standing  Committee                                                               
that the administration is in support of the bill.                                                                              
                                                                                                                                
Number 0336                                                                                                                     
                                                                                                                                
SENATOR  PEARCE pointed  out  that beyond  the  time required  to                                                               
develop a best interest finding at  every phase of a project, the                                                               
best  interest finding  also could  be  costly.   A typical  best                                                               
interest finding  for a  lease disposal,  for example,  costs the                                                               
Division  of  Oil  &  Gas  approximately  $75,000;  this  doesn't                                                               
include  costs  for other  agencies  such  as the  Department  of                                                               
Environmental  Conservation (DEC)  or  the  Alaska Department  of                                                               
Fish & Game (ADF&G).                                                                                                            
                                                                                                                                
SENATOR  PEARCE said  although the  division has  never issued  a                                                               
best interest  finding for  an exploration  well, it  estimates a                                                               
minimum cost of $50,000; with  approximately 15 wells planned for                                                               
the 2000-2001 drilling  season on state land,  the division would                                                               
have spent  an extra $750,000 if  required to do a  best interest                                                               
finding for  each well.   Although the division  hasn't estimated                                                               
the cost  for doing a  best interest finding for  the development                                                               
phase,  it would  likely  be  at least  as  expensive  as for  an                                                               
exploration well.                                                                                                               
                                                                                                                                
SENATOR PEARCE informed members  that present to answer questions                                                               
was  Patrick Coughlin,  special counsel  to the  Senate Resources                                                               
Standing Committee, who had experience  working with the division                                                               
when  SB 308  was  passed.   She  noted  that  Jim Eason,  former                                                               
Division of Oil & Gas director, had  worked on SB 308, as had Ken                                                               
Boyd, director of  the division at the time, who  had brought the                                                               
problem  [to  the  attention of  the  Senate  Resources  Standing                                                               
Committee] last fall before he left the division.                                                                               
                                                                                                                                
Number 0583                                                                                                                     
                                                                                                                                
CAROL   CARROLL,   Director,   Division  of   Support   Services,                                                               
Department of  Natural Resources, came  forward on behalf  of the                                                               
DNR.  She advised the  committee that the administration supports                                                               
this  bill and  agrees there  should  be only  one best  interest                                                               
finding, at the disposal phase when  doing a disposal.  She noted                                                               
that  the DNR  does a  preliminary best  [interest] findings  and                                                               
gives  the public  many opportunities  to participate  before the                                                               
findings and the disposal are finalized.                                                                                        
                                                                                                                                
MS. CARROLL pointed  out that the bill provides that  in order to                                                               
phase oil and  gas activities, post-disposal phases  also must be                                                               
subject  to public  notice and  participation.   Furthermore, the                                                               
DNR believes  [the bill] requires  the Division  of Oil &  Gas to                                                               
promulgate regulations  in order  to provide  to the  public both                                                               
notice  and the  means to  participate.   Ms. Carroll  noted that                                                               
online to answer  technical questions was Bill Van  Dyke from the                                                               
Division of Oil & Gas.                                                                                                          
                                                                                                                                
Number 0720                                                                                                                     
                                                                                                                                
REPRESENTATIVE  OGAN asked  why the  zero fiscal  note [from  the                                                               
DNR] doesn't reflect a cost savings.                                                                                            
                                                                                                                                
MS. CARROLL answered that it reflects  what the DNR is doing now,                                                               
which is  what is stated  in the bill.   She explained that  as a                                                               
result of  the court case  in the  year 2000, the  department had                                                               
not yet  started doing best  interest findings for each  phase of                                                               
development; therefore, there is no fiscal impact.                                                                              
                                                                                                                                
Number 0848                                                                                                                     
                                                                                                                                
JUDY BRADY,  Executive Director,  Alaska Oil and  Gas Association                                                               
(AOGA),  testified via  teleconference  in support  of the  bill,                                                               
noting that AOGA  had testified on the Senate side  as well.  She                                                               
characterized this  as an  important step  forward to  make clear                                                               
what  the  legislature has  always  intended  regarding the  best                                                               
interest findings.                                                                                                              
                                                                                                                                
MS. BRADY  said AOGA continues  to struggle with the  language on                                                               
page 5, lines  21-26, however.  She expressed the  need to assure                                                               
the  public and  to ensure  there are  public notice  and comment                                                               
allowed for major  changes regarding major phases of  oil and gas                                                               
development.   She  expressed her  understanding that  under that                                                               
language, if there  is an oil and gas project  outside of coastal                                                               
zones,  the  DNR  will [promulgate]  regulations  so  that  those                                                               
phases that  normally would be  noticed under the  Alaska Coastal                                                               
Management Plan (ACMP) program will be noticed instead by DNR.                                                                  
                                                                                                                                
MS.  BRADY  continued,  offering that  [AOGA's]  experience  with                                                               
language involving public notice and  regulations in the past has                                                               
been  that  if there  is  any  possible  way to  misconstrue  the                                                               
language, someone will do so.   She said [AOGA] is trying to work                                                               
now  with the  offices of  Senator Pearce  and Senator  Torgerson                                                               
[chair  of the  Senate  Resources Standing  Committee] to  ensure                                                               
that  everyone's  understanding  is   clearly  reflected  in  the                                                               
language  [of  the  bill].    She  indicated  those  efforts  are                                                               
continuing.                                                                                                                     
                                                                                                                                
Number 1054                                                                                                                     
                                                                                                                                
SENATOR  PEARCE  suggested  there  is   no  need  to  change  the                                                               
language, but said  her own intent, as the bill  is passed on the                                                               
House floor,  is to read into  the record the intent  just stated                                                               
by Ms. Brady, along with  "the best interest findings intentions"                                                               
that she  herself had stated.   She clarified that the  intent of                                                               
the paragraph  [page 5, lines 21-26]  is to make sure  that there                                                               
is  public  notice; it  will  either  be  given pursuant  to  the                                                               
coastal zone  management program  or pursuant to  the regulations                                                               
adopted by the  department [DNR], but will  not impose additional                                                               
work under the coastal zone management program.                                                                                 
                                                                                                                                
SENATOR  PEARCE   reiterated  the  intent  of   streamlining  the                                                               
process, as was  intended with [SB] 308 in 1994.   In response to                                                               
Vice  Chair  Fate, she  specified  that  she wouldn't  provide  a                                                               
letter of intent but would just  provide a statement on the House                                                               
floor when the bill passed.                                                                                                     
                                                                                                                                
Number 1157                                                                                                                     
                                                                                                                                
REPRESENTATIVE OGAN asked whether it  would be appropriate to add                                                               
language  to  the  "purpose"  section of  the  bill,  to  provide                                                               
clarification.                                                                                                                  
                                                                                                                                
SENATOR  PEARCE said  no.   She explained  that the  language had                                                               
been  worked in  every  direction possible,  and  the more  words                                                               
there were,  the more  confusion would exist  and the  more words                                                               
there  would be  for a  third party  to try  to decide  what [the                                                               
legislature] intended.  She reiterated  her preference of stating                                                               
on the House floor what the bill does and doesn't do.                                                                           
                                                                                                                                
MS. BRADY,  in response to  Representative Ogan, said  she thinks                                                               
Senator Pearce's  reading the intent  into the record would  go a                                                               
long way  towards clarifying  it to the  court, any  other party,                                                               
and the agencies.   She agreed with Senator Pearce  that "we have                                                               
been struggling  with language and so  far have not come  up with                                                               
any brilliant  solutions."  In further  response, she highlighted                                                               
the dilemma:   Alaska has a dual set of  regulations, through the                                                               
ACMP process  and the  agencies as  well; in  fact, on  the North                                                               
Slope, local borough  regulations are also overriding.   There is                                                               
almost no way to make that clear in the statute itself.                                                                         
                                                                                                                                
REPRESENTATIVE  OGAN  suggested   perhaps  the  committee  should                                                               
discuss the  supreme court's  "clear statement  doctrine" rulings                                                               
and look at  perhaps incorporating language into  some bills that                                                               
give the administration the ability to interpret regulations.                                                                   
                                                                                                                                
Number 1521                                                                                                                     
                                                                                                                                
SENATOR PEARCE stated that there is  a very clear interest on the                                                               
part  of the  Senate Resources  Standing Committee  to make  sure                                                               
there  is pubic  notice; part  of  the reason  the committee  had                                                               
struggled over  this paragraph [on page  5] was to make  it clear                                                               
that there  is to  be proper  public notice, but  not to  have it                                                               
fall under  two different regulatory  regimes - the  coastal zone                                                               
management program and  the areas outside of that,  both of which                                                               
the   [statutory]  language   must  fit   when  regulations   are                                                               
promulgated.  Therefore,  the intent is to have  public notice be                                                               
pursuant to  one or the other,  and not to impose  any additional                                                               
work under the coastal zone management program.                                                                                 
                                                                                                                                
Number 1583                                                                                                                     
                                                                                                                                
REPRESENTATIVE OGAN  recalled that the Cook  Inlet areawide lease                                                               
sale went  through perhaps the  most extensive public  process in                                                               
the  state's  history,  after  which  the  governor  created  the                                                               
"stakeholders' group"  and opened it  up to another  process that                                                               
was, in  some people's minds,  outside the scope of  the statutes                                                               
and regulations.   Noting  that the  department has  testified in                                                               
favor  of this  bill,  he  asked whether  the  bill would  affect                                                               
something like the additional public process in that instance.                                                                  
                                                                                                                                
SENATOR PEARCE  responded that she  herself was "one of  the most                                                               
vocal detractors" of that stakeholders'  process, not because she                                                               
didn't think  it was useful to  have people get together  to talk                                                               
through  the questions  and concerns,  but  because she  believes                                                               
there   was   no   statutory   authority   to   incorporate   the                                                               
recommendations from that process  into regulations, for example.                                                               
If  one good  thing came  out of  the stakeholders'  process, she                                                               
said it was  a clear understanding by some  concerned people that                                                               
even if  SB 308 was being  implemented, there would still  be the                                                               
right to public comment at every step.                                                                                          
                                                                                                                                
SENATOR PEARCE  explained that  when there is  a lease  sale, the                                                               
successful  company brings  a proposal  for an  exploration well,                                                               
after  which  there is  another  opportunity  for public  comment                                                               
during the permitting process.   Under CSSB 156(RES), there would                                                               
not  be  another  best  interest finding,  but  would  be  public                                                               
comment.     She   stated  her   belief  that   members  of   the                                                               
stakeholders' group  who represented the commercial  fisheries in                                                               
Cook Inlet,  in particular,  had felt  more comfortable  with the                                                               
areawide  lease   sale  after  realizing  they   would  have  the                                                               
opportunity for  public comment  at every step.   Noting  that it                                                               
was the  "environmental community"  opposing the lease  sale, she                                                               
suggested it is  important to have the language in  the bill that                                                               
talks about the  public process "because that's  how we've helped                                                               
other users reach a comfort level."                                                                                             
                                                                                                                                
Number 1798                                                                                                                     
                                                                                                                                
REPRESENTATIVE  OGAN asked  whether Senator  Pearce believes  the                                                               
bill  will   help  to  mitigate   future  "stakeholder-group-type                                                               
scenarios."                                                                                                                     
                                                                                                                                
SENATOR PEARCE  replied, "We do  not have any power  over whether                                                               
or  not  the  third  floor   decides  to  pull  together  another                                                               
stakeholder group;  as a  matter of  fact, I  would say  that the                                                               
pipeline council that they put together is somewhat the same."                                                                  
                                                                                                                                
VICE  CHAIR FATE  asked whether  there was  further testimony  or                                                               
discussion; none was offered.                                                                                                   
                                                                                                                                
Number 1851                                                                                                                     
                                                                                                                                
REPRESENTATIVE DYSON made  a motion to move CSSB  156(RES) out of                                                               
committee with  individual recommendations and the  attached zero                                                               
fiscal note.   There being no objection, CSSB  156(RES) was moved                                                               
out of the House Special Committee on Oil and Gas.                                                                              
                                                                                                                                

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