Legislature(2003 - 2004)

02/24/2004 03:27 PM O&G

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
HB 395-SHALLOW NATURAL GAS                                                                                                  
                                                                                                                                
[Contains discussion  of HB  420, which was  merged into  HB 395,                                                               
Version V; contains discussion of SB 312]                                                                                       
                                                                                                                                
Number 0085                                                                                                                     
                                                                                                                                
CHAIR KOHRING announced that the  only order of business would be                                                               
HOUSE  BILL NO.  395, "An  Act  relating to  shallow natural  gas                                                               
leasing and the regulation of shallow natural gas operations."                                                                  
                                                                                                                                
CHAIR  KOHRING noted  that a  proposed committee  substitute (CS)                                                               
combines HB 420, which  deals with water issues, and HB  395.  He                                                               
explained  that  the  bill  would   be  held  over  after  public                                                               
testimony  because there  are so  many  other bills  in both  the                                                               
House  and the  Senate,  and because  the  Department of  Natural                                                               
Resources  (DNR) is  still going  through a  review process  that                                                               
could result  in other  additions to the  bill.   He acknowledged                                                               
the arrival of Representative Crawford.                                                                                         
                                                                                                                                
Number 0169                                                                                                                     
                                                                                                                                
RICHARD VANDERKOLK,  Staff to Representative John  Harris, Alaska                                                               
State  Legislature, spoke  on  behalf  of Representative  Harris,                                                               
sponsor.   Agreeing  that Version  V  is an  amalgamation of  two                                                               
bills previously  heard, HB 420  and HB  395, he said  there have                                                               
been no significant changes to the content of the two.                                                                          
                                                                                                                                
Number 0247                                                                                                                     
                                                                                                                                
REPRESENTATIVE  ROKEBERG  moved  to  adopt the  proposed  CS  for                                                               
HB 395,  Version 23-LS1314\V,  as  the working  document.   There                                                               
being no objection, Version V was before the committee.                                                                         
                                                                                                                                
Number 0300                                                                                                                     
                                                                                                                                
MR. VANDERKOLK referred to a  change in Section 1, paragraph (2),                                                               
a  permissive  statement for  the  regulation  of reinjection  of                                                               
water through hydraulic fracturing.   He said that section is now                                                               
a standard practice, or a mandate,  for the regulation.  He noted                                                               
that  in Section  5, page  4, lines  17 and  18, notification  by                                                               
direct mail  was added because  constituents and  sponsors really                                                               
wanted to  see a greater sense  of awareness for the  public.  On                                                               
page  5  [Section 6],  lines  13-19,  provisions for  water  well                                                               
testing [were  added].   He explained that  the testing  would be                                                               
done by  the lessee,  who is  required to test  the water  and to                                                               
present  results  to  the  owner.   Finally,  in  Section  7  and                                                               
throughout  is  a standardized  reference  to  what is  meant  by                                                               
shallow and  natural gas  leasing.   The hard cap  at a  depth of                                                               
3,000  feet is  still included;  now, however,  by administrative                                                               
discretion, there  is a  1,000-foot buffer.   He said  those were                                                               
the only changes created by merging the two bills.                                                                              
                                                                                                                                
Number 0459                                                                                                                     
                                                                                                                                
REPRESENTATIVE ROKEBERG  asked about the rationale  for the water                                                               
well  testing requirement.   He  wondered if  it was  to allow  a                                                               
baseline by the lessee.                                                                                                         
                                                                                                                                
MR.  VANDERKOLK  explained that  [Section  6,  paragraph (2)]  is                                                               
another provision  for the lessee  to attend to the  guarantee of                                                               
water quality  assurance for  all wells  before coal  bed methane                                                               
operations begin.   It's a  provision just for the  lease itself,                                                               
he noted.                                                                                                                       
                                                                                                                                
Number 0530                                                                                                                     
                                                                                                                                
REPRESENTATIVE  ROKEBERG asked  if the  lessee or  operator would                                                               
test the property owner's source of water.                                                                                      
                                                                                                                                
MR. VANDERKOLK said he believes that is the case.                                                                               
                                                                                                                                
REPRESENTATIVE ROKEBERG responded that  it sets the baseline data                                                               
for water quality standards.                                                                                                    
                                                                                                                                
Number 0580                                                                                                                     
                                                                                                                                
REPRESENTATIVE HEINZE  referred to page  3, where it  talks about                                                               
getting permission  from the commissioner  to allow  for recovery                                                               
of gas  to 4,000 feet.   She asked if  that happens when  gas has                                                               
not  been hit  or when  the seam  is bigger  than expected.   She                                                               
asked how it  is defined to allow recovery to  go the extra 1,000                                                               
feet.                                                                                                                           
                                                                                                                                
MR. VANDERKOLK  said he believes administrative  discretion comes                                                               
into  play  if  shallow  natural  gas  is,  in  fact,  below  the                                                               
threshold [of  3,000 feet] and  it can  be proved that  the extra                                                               
buffer is  needed.  The sponsor  still wanted to maintain  a hard                                                               
cap,  he added,  and it  was agreed  that 4,000  feet was  a fair                                                               
number.                                                                                                                         
                                                                                                                                
Number 0655                                                                                                                     
                                                                                                                                
REPRESENTATIVE HEINZE referred  to page 4 and asked  who pays for                                                               
the ads in the papers, postage, printing, and so forth.                                                                         
                                                                                                                                
MR. VANDERKOLK replied that the  notification by mail and the ads                                                               
referred to  in lines 26-31 are  costs incurred by DNR.   He said                                                               
there was  one fiscal note  of approximately $10,000 for  all ads                                                               
in  the original  version of  HB 395.   The  real change  in this                                                               
proposed CS is the requirement for notification by direct mail.                                                                 
                                                                                                                                
REPRESENTATIVE HEINZE asked if it was $10,000 per well.                                                                         
                                                                                                                                
MR. VANDERKOLK  said he believes it  is per area, and  that there                                                               
would be  a legal  notice.   He noted that  the sponsor  is still                                                               
waiting for  fiscal notes  from the  Department of  Revenue (DOR)                                                               
and DNR.                                                                                                                        
                                                                                                                                
Number 0757                                                                                                                     
                                                                                                                                
REPRESENTATIVE  CRAWFORD pointed  to  page  8, subparagraph  (B),                                                               
lines 21-24,  and noted that there  is a limit of  1,500 feet and                                                               
that it  says "the  activities appear  to be  probable hydrologic                                                               
consequences of the lessee's activities  on the lease".  He asked                                                               
why the limit  is at 1,500 feet, and inquired,  "What if the well                                                               
was at 1,550 feet and  the activities appeared to have hydrologic                                                               
consequences?   It  would be  the same  cause and  have the  same                                                               
consequences."                                                                                                                  
                                                                                                                                
MR.  VANDERKOLK said  he wasn't  certain why  1,500 feet  was the                                                               
absolute cap.   He referred to  existing law in AS  38.25.130 and                                                               
pointed  out that  damages are  already guaranteed.   He  said he                                                               
thought the idea was to have  general locations so it doesn't get                                                               
out of hand.                                                                                                                    
                                                                                                                                
Number 0876                                                                                                                     
                                                                                                                                
ERIC MUSSER,  Staff to Representative  Vic Kohring,  Alaska State                                                               
Legislature,  explained  that  because the  restoration  fund  is                                                               
established as  a presumed  liability, and as  a result  of those                                                               
probable  hydrologic consequences,  a  great  deal of  discussion                                                               
went into  distances, existing well  locations, and  drafting the                                                               
provision.   It  was  determined [1,500  feet]  was a  reasonable                                                               
baseline area surrounding an existing property owner's well.                                                                    
                                                                                                                                
REPRESENTATIVE CRAWFORD, in response  to Mr. VanderKolk's earlier                                                               
statement  about the  property owner's  being protected  if there                                                               
are consequences, asked  if it "trumps" that protection  if it is                                                               
1,550 feet.                                                                                                                     
                                                                                                                                
MR.  MUSSER said  the potential  could exist;  that could  be the                                                               
case   as   it   relates   to   a   well-replacement   situation,                                                               
specifically.                                                                                                                   
                                                                                                                                
Number 0999                                                                                                                     
                                                                                                                                
REPRESENTATIVE KERTTULA  asked if the  owner has to go  out, take                                                               
the tests, and maintain them.                                                                                                   
                                                                                                                                
MR. MUSSER replied that [the  sponsor] tried to address community                                                               
and  public  concerns  relative  to  establishing  that  baseline                                                               
criteria,  and consulted  with those  in the  industry.   The end                                                               
result is that  the lessee is now responsible  for conducting the                                                               
test and  providing the department with  a copy of the  test.  He                                                               
indicated the requirement was on page 5, line 13.                                                                               
                                                                                                                                
Number 1058                                                                                                                     
                                                                                                                                
REPRESENTATIVE KERTTULA said the lessee  would do the testing and                                                               
get the baseline, and then the  owner, according to page 8, would                                                               
have to  receive and  "maintain" the record.   She  asked whether                                                               
"maintain" meant "just keeping them."                                                                                           
                                                                                                                                
MR. MUSSER explained that once the  lessee tests the well, if the                                                               
lessee  is   going  to  be  conducting   activities  within  that                                                               
parameter, the lessee  must provide any owner of the  well a copy                                                               
of the  testing results,  which will show  the purity,  the flow,                                                               
and the general condition  of the well.  The owner  has to keep a                                                               
copy, which  would preclude anybody  from walking up at  a future                                                               
date with no documentation.                                                                                                     
                                                                                                                                
Number 1115                                                                                                                     
                                                                                                                                
REPRESENTATIVE KERTTULA said she has  the same exact concern that                                                               
Representative Crawford has.  She explained:                                                                                    
                                                                                                                                
     If it's  obviously a  hydrologic consequence,  then I'm                                                                    
     assuming you  intend the person  to be paid out  of the                                                                    
     fund, and maybe that's the  way to restructure this, is                                                                    
     to point out that it's  only if it's just a "probable."                                                                    
     It's  a  lesser degree  of  proof,  I  guess.   But  if                                                                    
     someone   could  prove   that  it   was  a   hydrologic                                                                    
     consequence, you'd want the money  paid out of the fund                                                                    
     to the landowners.                                                                                                         
                                                                                                                                
MR.  MUSSER  said that  is  the  intent, the  presumed  liability                                                               
component.   If it's in all  likelihood a result of  the drilling                                                               
activity, the owner gets a new well.                                                                                            
                                                                                                                                
REPRESENTATIVE KERTTULA remarked:                                                                                               
                                                                                                                                
     But  only  if they're  within  1,500  feet, right  now.                                                                    
     What  if they  can prove  it's the  consequence of  the                                                                    
     drilling  and they're  outside the  1,500 feet?   1,502                                                                    
     feet?    They  should  get  recovery,  shouldn't  they?                                                                    
     Maybe that's the restructuring that  needs to happen in                                                                    
     this,  is to  point  out  that if  they  can prove  it,                                                                    
     they're going to get it, and  it's only if it's down at                                                                    
     this lower  degree of  probable consequence,  you know,                                                                    
     you can't  really prove  it, but  it's probable,  ... I                                                                    
     can work with you on that.                                                                                                 
                                                                                                                                
Number 1233                                                                                                                     
                                                                                                                                
REPRESENTATIVE  HOLM said  he  noticed  discussion in  [paragraph                                                               
(2), page  2, lines  13-14] of  "hydraulic fracturing  of shallow                                                           
natural  gas  wells  to  assure   protection  of  drinking  water                                                           
quality".  He  asked if [hydraulic fracturing]  had ever occurred                                                           
previously upon development of coal bed methane.                                                                                
                                                                                                                                
MR.  VANDERKOLK  replied  that  he  was not  aware  of  the  data                                                               
suggesting that  there is a direct  correlation between hydraulic                                                               
fracturing and serious  contamination of a water  table, but what                                                               
is done  with the water  afterwards has  been a problem  in other                                                               
states.    Reinjection is  the  key  aspect  there, he  noted,  a                                                               
reinjection  to a  depth separate  and  much lower  than that  of                                                               
potable water.                                                                                                                  
                                                                                                                                
REPRESENTATIVE HOLM  responded that the purpose  of [the wording]                                                               
is for  reinjection, and not so  much that the fracturing  is the                                                               
problem.                                                                                                                        
                                                                                                                                
MR.  VANDERKOLK   replied  that  hydrologic  fracturing   is  the                                                               
standard method for puncturing into the coal bed.                                                                               
                                                                                                                                
Number 1344                                                                                                                     
                                                                                                                                
REPRESENTATIVE HOLM referred to page  6 [lines 16-18], which says                                                               
in part,  "Except when the  commissioner exercises  discretion to                                                           
allow recovery of gas  at a depth of not more  than 4,000 feet, a                                                           
lessee may not  recover gas at a depth greater  than 3,000 feet".                                                           
He requested clarification.                                                                                                     
                                                                                                                                
MR.  VANDERKOLK  explained   that  it  is  a   reference  to  the                                                               
commissioner's  discretion;  there is  an  absolute  hard cap  of                                                               
shallow natural  gas leased at  4,000 feet, but  general practice                                                               
at  3,000 feet.   Administrative  discretion would  allow another                                                               
1,000-foot buffer.                                                                                                              
                                                                                                                                
REPRESENTATIVE  HOLM offered  his  understanding:   "In  essence,                                                               
what  we're saying  is that  this coal  bed methane  is all  from                                                               
3,000  feet up  unless the  DNR commissioner,  or whoever,  makes                                                               
that decision."                                                                                                                 
                                                                                                                                
MR.  VANDERKOLK   mentioned  Alaska  Oil  and   Gas  Conservation                                                               
Commission (AOGCC).                                                                                                             
                                                                                                                                
Number 1380                                                                                                                     
                                                                                                                                
REPRESENTATIVE ROKEBERG  referred to  page 8 [paragraph  (B)] and                                                               
the issue of 1,500 feet,  and said he agreed with Representatives                                                               
Kerttula and Crawford.  "We're  talking, fundamentally, about 1/4                                                               
mile away from  the drill site," he remarked.   He described that                                                               
as delimiting, and  said it seems having  an arbitrary limitation                                                               
of 1,500  feet is  not equitable.   He  said he  could appreciate                                                               
trying  to  set  limits,  but  it  looks  as  if  there  are  two                                                               
standards:   a defined distance,  and a standard of  causality of                                                               
"appears to be probable," which is  pretty low.  He said there is                                                               
a natural corollary between the distance and the level of proof.                                                                
                                                                                                                                
REPRESENTATIVE  ROKEBERG   recommended  following  Representative                                                               
Kerttula's line  of thinking  to delete  a specific  distance and                                                               
raise  the  standard  a  little   bit.    Typically,  constituent                                                               
elements  that change  the water  quality by  measurement may  be                                                               
found, but  more often turbidity  and cloudy water would  show up                                                               
first.   He continued to  explain that water aquifers  are found,                                                               
like oil, in  different areas, depths, and widths.   He concluded                                                               
by  saying the  level of  proof that  appears to  be probable  is                                                               
almost a joke.   He gave an example of when  the aquifer might be                                                               
drained by natural causes and the driller blamed by the owner.                                                                  
                                                                                                                                
Number 1573                                                                                                                     
                                                                                                                                
REPRESENTATIVE  KERTTULA said  she has  the same  concerns.   She                                                               
remarked  that  she  likes  the   expanded  notice  sections  [in                                                               
Version V], because it is important  for people to understand the                                                               
leasing that is about to happen,  but she had a concern about the                                                               
landowners and how they were  defined.  She suggested, instead of                                                               
saying "residents" -  because there could be thousands  of them -                                                               
that "owners" should be used if  there are good enough records to                                                               
figure out  who they may  be.  She  asked Mr. VanderKolk  if he'd                                                               
considered this change.                                                                                                         
                                                                                                                                
MR. VANDERKOLK  deferred the  "well portion"  to Mr.  Musser, but                                                               
said he was open to the will of the committee.                                                                                  
                                                                                                                                
REPRESENTATIVE KERTTULA  reiterated that  the broad notice  was a                                                               
great step forward.                                                                                                             
                                                                                                                                
Number 1648                                                                                                                     
                                                                                                                                
REPRESENTATIVE  HEINZE asked  for  clarification  on the  bonding                                                               
issue  and  the 1  percent  amount.   She  asked  if  there is  a                                                               
$250,000  cap specifically  for water  reclamation, and  then, if                                                               
any money is taken out, 1  percent comes back, in effect, keeping                                                               
the amount at $250,000.                                                                                                         
                                                                                                                                
MR. MUSSER replied that is correct.                                                                                             
                                                                                                                                
CHAIR KOHRING opened the hearing to public testimony.                                                                           
                                                                                                                                
Number 1694                                                                                                                     
                                                                                                                                
ROBERTA  HIGHLAND,  Homer, thanked  the  sponsor  for adding  the                                                               
public  notification [to  the bill],  although she  said she  was                                                               
somewhat confused about residents  versus landowners.  She agreed                                                               
that direct  mailing should be  a part [of  the bill].   She said                                                               
she  appreciates  changing  the  water  quality  testing  to  the                                                               
lessee.   She  voiced concern  about the  dense population  areas                                                               
that have  been included in  the shallow natural gas  leases, and                                                               
wondered if something  about the mix not working  very well could                                                               
be included  in the  bill.   She pointed out  a problem  in Homer                                                               
because DNR did not  know what kind of land was  put on the table                                                               
for leasing:   the drinking  water reservoir, schools,  and dense                                                               
populations.   She  opined that  in this  day of  computers [such                                                               
information] should not be a surprise  to anyone.  It is a little                                                               
embarrassing for  DNR to put out  that land and then  discover it                                                               
was a drinking  water reservoir, she suggested.   She wondered if                                                               
[this bill] was a place for that missing link.                                                                                  
                                                                                                                                
MS.  HIGHLAND voiced  another  concern, that  none  of the  bills                                                               
addresses the hundreds of thousands  of acres of presently leased                                                               
land across the state; she wondered  if that could be included in                                                               
this  bill  with retroactive  dates.    She recalled  questioning                                                               
Patrick  Galvin  from [DNR]  as  to  how  lands could  be  leased                                                               
without regulations  in place.   She said  she thinks he  said it                                                               
was a fairly normal process to  lease and then do regulations; if                                                               
that  is  true,  she  said,   there  would  be  room  to  address                                                               
regulating those  areas, because  that issue  is causing  so much                                                               
grief,  outrage, and  distrust.   She  requested  ideas from  the                                                               
committee.                                                                                                                      
                                                                                                                                
Number 1875                                                                                                                     
                                                                                                                                
CHAIR  KOHRING  addressed   restrictions  on  dense  development,                                                               
saying  there were  no specific  provisions  in this  legislation                                                               
regarding that topic, but it  could be addressed by the committee                                                               
as a future subject.   Responding to Ms. Highland's concern about                                                               
DNR's leasing  lands that have  now been determined to  be water-                                                               
sensitive in terms  of water quality and  quantity, he maintained                                                               
that  current regulations  in place  deal with  that matter.   He                                                               
noted that  [Version V]  addresses this in  terms of  a provision                                                               
directly related  to impacts on water,  which was part of  HB 420                                                               
and  is  rolled  into  this  legislation.    Last,  assuming  Ms.                                                               
Highland was  referring to lease  buy-backs, he pointed  out that                                                               
they weren't part  of this legislation; however,  some bills that                                                               
may or may not come before the committee do address the issue.                                                                  
                                                                                                                                
Number 1948                                                                                                                     
                                                                                                                                
MS.  HIGHLAND  explained  that   land  directly  under  [Homer's]                                                               
drinking water  reservoir -  the lake  - was  leased, and  she is                                                               
trying  to get  a  link for  DNR, which  didn't  know the  actual                                                               
ownership of the  land.  She said the buy-back  is a major issue,                                                               
but if  something simpler would  fix it,  her area would  love to                                                               
see it.                                                                                                                         
                                                                                                                                
CHAIR KOHRING  suggested that Mr.  Myers could address  the water                                                               
issues.                                                                                                                         
                                                                                                                                
Number 2011                                                                                                                     
                                                                                                                                
MARK  MYERS, Director,  Division of  Oil and  Gas, Department  of                                                               
Natural Resources,  clarified that under the  shallow gas leasing                                                               
program,  DNR does  not  choose  the land  to  be  leased; it  is                                                               
applicant-driven.    The  applicant  applies for  the  land,  and                                                               
anything that  is not currently  in a statewide  leasing program,                                                               
or  under an  exploration  license,  is eligible.    That is  the                                                               
nature of the program, he said.  He continued:                                                                                  
                                                                                                                                
     As far as the issue  of the surface estate, in general,                                                                    
     basically,  we  use  the  stipulations  and  mitigation                                                                    
     measures.   For instance,  people have to  separate the                                                                    
     actual act  of leasing versus any  activity that occurs                                                                    
     on the lease.   Any activity near an  existing or known                                                                    
     reservoir  would be  heavily  regulated.   There  would                                                                    
     probably be no surface  occupancy allowed in [the] near                                                                    
     vicinity.  Any drilling in  that area would probably be                                                                    
     for  conventional gas,  directionally  drilled at  much                                                                    
     deeper  depths underneath  the lake,  so, the  drilling                                                                    
     would  occur at  1,000- to  3,000-feet depths,  and the                                                                    
     aquifer they're using is right on the surface.                                                                             
                                                                                                                                
     So,    again,     you're    hydrologically/geologically                                                                    
     separate.   Unless those could be  assured, we wouldn't                                                                    
     issue a  permit to drill; neither  would AOGCC; neither                                                                    
     would  DEC [Department  of Environmental  Conservation]                                                                    
     allow it.   There are multiple bites of  the apple, but                                                                    
     I think one  of the confusions is,  people separate out                                                                    
     the  regulatory function  on activity  versus the  very                                                                    
     act of  leasing.  We  lease near  a river on  a regular                                                                    
     basis,  ... but  we  do have  setbacks, distances  away                                                                    
     from  the river  that are  substantial, to  protect the                                                                    
     surface values of the river.                                                                                               
                                                                                                                                
MR.  MYERS pointed  out that  the regulatory  tools are  in place                                                               
when the  leases are  issued, as well  as standard  practices and                                                               
negotiated  terms  with  the  lessee  as  part  of  the  plan  of                                                               
operation, which also  includes the surface owner.   He mentioned                                                               
areas   in   the   [Matanuska-Susitna]  area   where   additional                                                               
regulatory functions  may be looked  at for the coal  bed methane                                                               
process going on there.  He  reiterated that he thinks people get                                                               
confused with  the act of  leasing versus actual activity.   Most                                                               
leases never get  explored, he added.  To put  those resources to                                                               
developing and  examining surface-parcel  private leasing  is not                                                               
practical,  nor is  it  done  here or  elsewhere,  he  said.   He                                                               
indicated that in SB 312, the  whole program would change to hold                                                               
a best-interest finding;  there would be plenty  of public output                                                               
and  comment, and  those leases  would be  chosen by  DNR, rather                                                               
than an advocate group.                                                                                                         
                                                                                                                                
Number 2176                                                                                                                     
                                                                                                                                
REPRESENTATIVE ROKEBERG  asked Mr. Myers  for his opinion  on the                                                               
impacts of  any regulations on the  existing leases.  He  said it                                                               
was  his  understanding,  under  the  initial  coal  bed  methane                                                               
legislation,  that  DNR  was  granted   the  authority  to  write                                                               
regulations.   Whether it  did or  not seems to  be an  issue, he                                                               
remarked.   He repeated his question  about retrospective impacts                                                               
of any new regulations and/or statutes.                                                                                         
                                                                                                                                
MR. MYERS responded that he thinks  there are two issues.  One is                                                               
the  regulation of  activity  on  the leases,  and  those are  an                                                               
appropriate  place for  statutory or  regulatory control  on coal                                                               
bed methane drilling, in general.   Specific terms on the leases,                                                               
such  as   depth,  however,  are   lease  contract   rights,  and                                                               
restricting  the depth  requirements  on existing  leases is  not                                                               
within  the legislature's  authority, he  opined.   He said  [the                                                               
legislature] does  have the  ability to change  the way  coal bed                                                               
methane  is  regulated  through   statutes  or  adoption  of  new                                                               
regulations.    The original  coal  bed  methane legislation  did                                                               
restrict DNR's  typical authority on regulations,  by saying only                                                               
those regulations necessary could be applied.                                                                                   
                                                                                                                                
MR.  MYERS  said one  thing  DNR  did  was to  carefully  develop                                                               
stipulations and  mitigation measures with the  leases, which are                                                               
extensive  in  allowing  DNR discretion  to  determine  setbacks,                                                               
noise abatement,  and water  quality issues.   He said  the tools                                                               
are  available, but  might not  be  as specific  as people  would                                                               
like,  so the  recommendations  may lead  to  specifics for  each                                                               
individual plan of operation.                                                                                                   
                                                                                                                                
Number 2290                                                                                                                     
                                                                                                                                
REPRESENTATIVE ROKEBERG replied,  "Then I take it  your answer is                                                               
yes and no, depending on what it is?"                                                                                           
                                                                                                                                
MR.  MYERS said  that's  correct.   It  is  a  mixture of  strict                                                               
standards that  are controlled by regulation  and other standards                                                               
that are more general by stipulations of mitigation.                                                                            
                                                                                                                                
REPRESENTATIVE ROKEBERG  cited an example  of a new  fund created                                                               
in the  bill, and asked  if the fund  would be applicable  to the                                                               
current outstanding leases that have been issued by DNR.                                                                        
                                                                                                                                
MR. MYERS said  if it is a tax, he  believes [the legislature] is                                                               
free to regulate a  tax on the industry because it  is not a part                                                               
of the lease-contract relationship, nor is it required to be.                                                                   
                                                                                                                                
Number 2350                                                                                                                     
                                                                                                                                
CHAIR KOHRING asked  Mr. Myers when DNR expected  to conclude the                                                               
workshops that  have been going on  since November.  He  said the                                                               
committee  is interested  in looking  at  recommendations by  DNR                                                               
that could be parlayed into legislation.                                                                                        
                                                                                                                                
MR. MYERS answered  that there have been four  workshops, so far,                                                               
with  the fifth  this  Saturday.   In  two  weeks  a report  will                                                               
follow,   then   recommendations   will   go   forward   to   the                                                               
commissioner, and  probably by May  a final report will  be made.                                                               
In the  interim, DNR has posted  an organized list of  all of the                                                               
public comments on the web  site.  Finally, the commissioner will                                                               
need time to sort through and develop additional guidelines.                                                                    
                                                                                                                                
Number 2424                                                                                                                     
                                                                                                                                
CHAIR KOHRING  noted it  could be a  process that  would continue                                                               
into the  next [legislative]  session as  far as  any prospective                                                               
legislation.                                                                                                                    
                                                                                                                                
MR. MYERS agreed that was likely.                                                                                               
                                                                                                                                
CHAIR KOHRING  noted that Representatives Gatto  and Stoltze were                                                               
present and invited them to join the committee [at the table].                                                                  
                                                                                                                                
The committee  took an at-ease.   The meeting was called  back to                                                               
order at 4:17 p.m.                                                                                                              
                                                                                                                                
Number 2485                                                                                                                     
                                                                                                                                
REPRESENTATIVE CRAWFORD  questioned Representative  Kohring about                                                               
the at-ease.                                                                                                                    
                                                                                                                                
CHAIR  KOHRING replied  that he'd  felt the  need to  discuss the                                                               
timing of moving the legislation.                                                                                               
                                                                                                                                
Number 2519                                                                                                                     
                                                                                                                                
REPRESENTATIVE  KERTTULA thanked  Chair Kohring  for coming  back                                                               
into the  room and said she  was remiss in not  objecting because                                                               
it shouldn't have happened unless it was executive session.                                                                     
                                                                                                                                
REPRESENTATIVE  ROKEBERG replied  that  they were  not trying  to                                                               
hide from anybody.                                                                                                              
                                                                                                                                
CHAIR KOHRING announced that public testimony would continue.                                                                   
                                                                                                                                
Number 2560                                                                                                                     
                                                                                                                                
ROBERT  ARCHIBALD,  Homer, said  this  is  a  step in  the  right                                                               
direction.   He  said he  has been  fairly disenchanted  with the                                                               
coal bed  methane gas  issue.   He mentioned  the testing  of the                                                               
water by the  lessee and suggested language that says  it be done                                                               
by  a third  party.   He  also said  he  believes the  1,500-foot                                                               
requirement is lax  on the hydrological consequences.   He said a                                                               
number of people  were not present today to  testify because they                                                               
were not notified of the meeting.   He repeated that the bill was                                                               
a step in the right direction and thanked the committee.                                                                        
                                                                                                                                
[Chair Kohring  mentioned that Chuck Logsdon  from the Department                                                               
of Revenue  was prepared to answer  revenue-related questions via                                                               
teleconference.]                                                                                                                
                                                                                                                                
Number 2678                                                                                                                     
                                                                                                                                
MYRL THOMPSON,  Spokesman for Ogan  is So Gone, Wasilla,  said he                                                               
represented  2,200  registered voters  from  District  H for  the                                                               
recall [of  Senator Ogan].   He said  the bill is  a step  in the                                                               
right direction  but does not  go far enough  in many areas.   He                                                               
said he has some contention  with the 1,500-foot distance because                                                               
a lot  of the well drillers  in his area  know that a lot  of the                                                               
aquifers  are huge,  some  described as  underground  lakes.   If                                                               
something were  to happen outside  of the 1,500-foot  range, what                                                               
recourse would people  have if their wells are  polluted or their                                                               
aquifer is damaged, he asked.                                                                                                   
                                                                                                                                
Number 2737                                                                                                                     
                                                                                                                                
MR. THOMPSON responded to Mr.  Myers' statement about the $10,000                                                               
cost of  publishing ads  for the  area.   Recalling mention  in a                                                               
Senate meeting  of a $1-per-head  cost of sending out  notices to                                                               
each private  property owner  affected, he asked  if that  was in                                                               
addition to the  $10,000.  Following up on Mr.  Myers' mention of                                                               
SB  312  and  best-interest  findings, he  pointed  out  that  it                                                               
doesn't affect  the people in the  [Matanuska-Susitna area] whose                                                               
lands  are   already  leased  and   the  lands  that   are  under                                                               
application.  He said he was  glad public testimony [on the bill]                                                               
was opened,  but added  that notification  came very  late today.                                                               
He  said  he appreciated  the  fact  that  the meeting  would  be                                                               
extended to  another date.   He suggested that the  committee get                                                               
information  from  the  ongoing  DNR  workshops.    He  made  the                                                               
correction that there  had only been three  workshops; the fourth                                                               
one would  be tomorrow  night, and  another one  will be  held in                                                               
Willow.  He  said the information could be obtained  on the [DNR]                                                               
web site.                                                                                                                       
                                                                                                                                
Number 2813                                                                                                                     
                                                                                                                                
MR. THOMPSON responded to the  hydraulic fracturing discussion by                                                               
saying no  one had  mentioned that  a number  of test  wells were                                                               
tested expressly, after the fact,  for residue fracturing fluids,                                                               
and 23-62 percent of the fracturing  fluids were left in the well                                                               
as residue.   He suggested there  could be a long-term  effect if                                                               
it  got into  aquifers.   He noted  that earthquakes  could be  a                                                               
possible cause of damage.                                                                                                       
                                                                                                                                
MR.  THOMPSON  spoke  about  a   core-drilling  appeal  that  was                                                               
overruled, and  said they were  told it would be  very low-impact                                                               
and  last about  3-5 days.   Instead,  it has  lasted about  five                                                               
weeks, and they  are through one-half of a core  hole.  He opined                                                               
that  the  company   was  badly  mistaken  or   given  the  wrong                                                               
information, and if  they were wrong about a core  hole, they can                                                               
certainly be  wrong about a lot  of other things that  could have                                                               
detrimental impacts to the community.   He stated his support for                                                               
the buy-back.                                                                                                                   
                                                                                                                                
MR.  THOMPSON asked  about a  section  of HB  395 that  mentioned                                                               
compensation for surface  owners.  In response  to Chair Kohring,                                                               
he said  the original  HB 395,  Section 5,  subsections (f)(2)(A)                                                               
and (B),  refers to  $300 a  month for each  wellhead and  $600 a                                                               
month for a compressor [station].   He asked if this was still in                                                               
the proposed CS.                                                                                                                
                                                                                                                                
MR.  MUSSER replied  that the  proposed CS  is a  new version  of                                                               
legislation that supersedes  the previous one, and  that the fees                                                               
referenced by Mr. Thompson have been removed from the bill.                                                                     
                                                                                                                                
Number 2965                                                                                                                     
                                                                                                                                
MR.  THOMPSON said  the people  he represents  will want  to know                                                               
that.                                                                                                                           
                                                                                                                                
CHAIR KOHRING  thanked Mr.  Thompson for  his testimony  and said                                                               
the 1,500-foot issue,  as well as the "frac  fluids" issue, would                                                               
be reevaluated.                                                                                                                 
                                                                                                                                
TAPE 04-5, SIDE B                                                                                                             
Number 2980                                                                                                                     
                                                                                                                                
CHAIR KOHRING said the issue  of the buy-back could be considered                                                               
by subsequent  committees.   He said  meetings are  noticed under                                                               
the  title "Bills  Previously Heard"  [scheduled  in BASIS,  when                                                               
committee  schedules are  posted] and  that is  why this  bill is                                                               
before the  committee today.  He  said it would possibly  come up                                                               
again on Thursday, depending on possible proposed CS changes.                                                                   
                                                                                                                                
MR. THOMPSON said he hoped that meeting would also be open to                                                                   
the public.                                                                                                                     
                                                                                                                                
MR. MYERS acknowledged that the speaker was correct that the                                                                    
fourth DNR meeting hadn't occurred; it is tomorrow night.                                                                       
                                                                                                                                
Number 2914                                                                                                                     
                                                                                                                                
CHAIR KOHRING asked if there was any further public testimony;                                                                  
he then closed the public hearing.  He announced that HB 395                                                                    
would be held over.                                                                                                             
                                                                                                                                

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