Legislature(2003 - 2004)

04/01/2004 03:25 PM O&G

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
HB 364-NATURAL GAS LEASES NEAR KACHEMAK BAY                                                                                   
                                                                                                                                
CHAIR KOHRING  announced that the  first order of  business would                                                               
be  SPONSOR   SUBSTITUTE  FOR  HOUSE   BILL  NO.  364,   "An  Act                                                               
establishing  a  moratorium  on the  issuance  of  state  shallow                                                               
natural  gas  leases  in  the   vicinity  of  Kachemak  Bay,  and                                                               
precluding the  commissioner of natural resources  from reissuing                                                               
or otherwise extending  leases within the moratorium  area if the                                                               
leases fail to produce gas  in paying quantities within the terms                                                               
of the lease  or if there is  a breach of a term  or condition of                                                               
the lease;  and providing  for an effective  date."   [In packets                                                               
was  a  new  proposed  committee  substitute  (CS),  Version  23-                                                               
LS1464\S.]                                                                                                                      
                                                                                                                                
[Tape recording began at this point.]                                                                                           
                                                                                                                                
TAPE 04-12, SIDE A                                                                                                            
Number 0006                                                                                                                     
                                                                                                                                
REPRESENTATIVE PAUL SEATON, Alaska  State Legislature, sponsor of                                                               
SSHB 364,  explained that this legislation  applies to conditions                                                               
under which the director of the  Division of Oil & Gas may extend                                                               
leases  that  aren't producing  paying  quantities  of gas.    It                                                               
allows the  director the option  to not issue leases  for another                                                               
three years  if they're  just being held  speculatively.   If the                                                               
director  just didn't  renew those  leases based  on his/her  own                                                               
judgment, there  could be a  takings claim that it  was arbitrary                                                               
and  capricious; however,  if the  director  follows the  statute                                                               
[proposed in this bill], if there is  a work plan in place and so                                                               
forth,  then  the  extension  would  be made.    In  addition  to                                                               
preventing a takings  claim against the state,  this prevents re-                                                               
leasing  of  those  leases  to someone  else  under  the  shallow                                                               
natural gas program.                                                                                                            
                                                                                                                                
REPRESENTATIVE  SEATON said  nothing in  the bill  prevents those                                                               
leases from  being incorporated  into an  areawide lease  sale if                                                               
the new  gas-only program goes  forward.  It  makes incorporation                                                               
into  an   areawide  lease  sale   more  likely,   he  suggested;                                                               
currently, if  there is a shallow  natural gas lease on  top of a                                                               
deeper  gas  find,  there  is a  difficult  situation  in  Alaska                                                               
relating to  correlative rights,  and the Division  of Oil  & gas                                                               
has a  policy of  not issuing  two sets of  leases, one  atop the                                                               
other, with  the shallow natural  gas program.  This  bill allows                                                               
the director to  determine whether it's in the  best interests of                                                               
the state to  extend those leases; if they're  not extended, that                                                               
specific  area  wouldn't  be  available  for  additional  shallow                                                               
natural gas leases.                                                                                                             
                                                                                                                                
Number 0285                                                                                                                     
                                                                                                                                
REPRESENTATIVE  ROKEBERG   said  he  didn't  have   an  amendment                                                               
prepared, but voiced concern about  these lands' being off-limits                                                               
to  development.   Suggesting these  lands should  be covered  by                                                               
areawide  leasing  but  aren't,  he said  he'd  be  reluctant  to                                                               
support this  legislation "if we're  just going to lock  up lands                                                               
again."                                                                                                                         
                                                                                                                                
REPRESENTATIVE  SEATON  responded  that if  this  legislation  or                                                               
similar provisions  don't go forward, it  would preclude areawide                                                               
lease sales  from incorporating this  area; this will be  under a                                                               
shallow natural gas  lease, and the division has a  policy of not                                                               
doing an  areawide lease sale if  there is a shallow  natural gas                                                               
lease, for reasons relating to  correlative rights because of the                                                               
various depths.                                                                                                                 
                                                                                                                                
Number 0560                                                                                                                     
                                                                                                                                
REPRESENTATIVE ROKEBERG  said he thinks  it's a bad  policy, even                                                               
though he  could understand Mr. Myers' position  because there is                                                               
some gray area about the depth and so forth.                                                                                    
                                                                                                                                
CHAIR KOHRING noted that he'd promised  to bring this bill up for                                                               
a vote, said he respected where  the sponsor was coming from, but                                                               
expressed concern that this legislation  isn't the most conducive                                                               
to development of resources.                                                                                                    
                                                                                                                                
Number 0623                                                                                                                     
                                                                                                                                
REPRESENTATIVE McGUIRE  moved to  report CSSSHB 364,  Version 23-                                                               
LS1464\Q,  Chenoweth, 3/4/04,  out of  committee with  individual                                                               
recommendations and  the accompanying  zero fiscal notes.   There                                                               
being no objection, it was so ordered.                                                                                          
                                                                                                                                
REPRESENTATIVE KERTTULA pointed out  the new proposed CS, Version                                                               
23-LS1464\S.                                                                                                                    
                                                                                                                                
Number 0684                                                                                                                     
                                                                                                                                
REPRESENTATIVE McGUIRE  moved to  rescind the  committee's action                                                               
in reporting the bill from  committee.  There being no objection,                                                               
it was so ordered.                                                                                                              
                                                                                                                                
Number 0722                                                                                                                     
                                                                                                                                
REPRESENTATIVE HOLM moved  to adopt the proposed  CS, Version 23-                                                               
LS1464\S.   There being  no objection, Version  S was  before the                                                               
committee.                                                                                                                      
                                                                                                                                
Number 0782                                                                                                                     
                                                                                                                                
REPRESENTATIVE McGUIRE  moved to  report CSSSHB 364,  Version 23-                                                               
LS1464\S, out  of committee  with individual  recommendations and                                                               
the accompanying zero fiscal notes.                                                                                             
                                                                                                                                
CHAIR KOHRING  announced that CSSSHB  364(O&G) was  reported from                                                               
the House Special Committee on Oil and Gas.                                                                                     

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