Legislature(2007 - 2008)CAPITOL 120
04/12/2007 03:00 PM OIL & GAS
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|Alaska Oil and Gas Conservation Commission|
* first hearing in first committee of referral
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HB 183-OIL & GAS CONSERVATION COMMISSION 4:09:06 PM CHAIR KOHRING announced that the next of business would be HOUSE BILL NO. 183, "An Act relating to the regulation and permitting of drilling and other operations by the Alaska Oil and Gas Conservation Commission, to civil penalties assessed by the commission, to reconsideration and appeal of decisions and the allocation of costs in investigations and hearings before the commission, and to information filed with and fees of the commission; and providing for an effective date." 4:09:14 PM CHERYL SUTTON, Staff to Representative Ralph Samuels, Alaska State Legislature, informed the committee that HB 183 was introduced through House Rules Committee at the request of the Legislative Budget and Audit Committee and the Alaska Oil and Gas Conservation Commission (AOGCC). She offered the Committee Substitute (CS) and noted that it reflects changes that are the result of interactions between the AOGCC, the Alaska Oil and Gas Association (AOGA), and other industry members. 4:11:07 PM REPRESENTATIVE DOOGAN moved to adopt CSHB 183, Version 25- LS0586\O, Bullock, 4/11/07, as the working document. There being no objection, Version O was before the committee. 4:11:39 PM JOHN K. NORMAN, Chair, Alaska Oil & Gas Conservation Commission (AOGCC), Department of Administration, informed the committee that VERSION O addresses updates to the Alaska Oil and Gas Conservation Act. The original act was enacted as Chapter 40, SLA 1955, by the territorial legislature. He noted that [CSHB 183] was proposed by the AOGCC in order to update and clarify the statutes governing the AOGCC. The bill contains the authority for the AOGCC to require permits for the underground storage of gas, and specific statutory authority to regulate for the public safety and health as recommended by Legislative Budget and Audit. Mr. Norman stated that the AOGCC was already active in this field, and that even with the change in statute, AOGCC will not interfere with regulations already put in place by the Department of Labor (DOL) or the Department of Environmental Conservation (DEC). In addition, CSHB 183 will modify AOGCC authority regarding water well testing for coal bed methane. Mr. Norman pointed out that the appellate provisions of the original act have been subject to the AOGCC's consistent interpretation, and that interpretation was upheld by the Alaska Supreme Court, cite Allen et al versus Alaska Oil and Gas Conservation Commission, Pacific Reporter, 147 P.3d, page 664 (Alaska 2006). He said that the result is that appeals from the AOGCC will be handled in the same manner as any other agency. 4:18:53 PM MR. NORMAN turned to the subject of permitting fees. This bill will remove the $100 permitting fee charged for a drill permit. Mr. Norman said that this fee generates a nominal amount that does not cover the cost of processing the permits and, in fact, creates extra bookkeeping. The AOGCC recommended eliminating the fee because the bulk of the regulatory fees are paid in a different manner and future electronic filing will supersede paper check refunds. Another provision of the bill will move more information into the public domain at an earlier time. He noted that information on applications for permits to drill is held confidential for 24 months. Using models from other states, the AOGCC recommended determining the length of the confidentiality period on an individual basis and writing new regulations regarding proprietary information. 4:23:04 PM MR. NORMAN told the committee that another provision of CSHB 183 will specify that information, provided to the AOGCC by an operator on a voluntary basis, will not be held confidential in the event of the subsequent filing for a hearing or a petition. Mr. Norman said that a change in the penalty provision will increase the penalty to the maximum of $100,000 for a single violation and up to $10,000 per day for a continued violation. The additional penalty allows the AOGCC to assess penalties on violations of a short, but serious, nature. The penalty provision also grants the AOGCC the ability to assess the penalty of two-times the market value for the wasting of gas. Finally, the change in statute includes the addition of criteria that will be applied by the commission when determining findings. 4:28:24 PM REPRESENTATIVE DOOGAN asked what violation qualifies for a $100,000 fine from the AOGCC. 4:28:44 PM MR. NORMAN responded that an example would be a penalty levied for falsification of test results or reports. 4:30:00 PM REPRESENTATIVE OLSON asked about the provisions for the pigging of feeder lines. 4:30:18 PM MR. NORMAN answered that the pigging of feeder lines is not within the jurisdiction of the AOGCC. The commission's focus is on the operations and drilling that take place under the earth. As operations move upstream, the jurisdiction transfers to the Department of Environmental Conservation or the U. S. Department of Transportation. 4:31:28 PM REPRESENTATIVE DOOGAN asked whether there are substantive changes to the bill by the committee substitute (CS). 4:31:43 PM MS. SUTTON directed the committee's attention to the updated sectional analysis for the CS. MR. NORMAN informed the committee that the industry indicated its concern about the penalty provision. In response, the AOGCC made subtle changes to Sec. 7, the confidentiality statute. In addition, in Sec. 8, there are wording changes intended to address the industry's concern that it would retain its right to object to the public disclosure of information, despite the wording in the statute. Mr. Norman said that Sec. 14 is a consolidation of several provisions in the original bill. 4:35:41 PM REPRESENTATIVE KAWASAKI asked whether the bill is the result of an audit or recommendations by the AOGCC commissioners. 4:36:24 PM MR. NORMAN replied that the commissioners initiated all of the changes; however, a legislative auditor advised that the AOGCC should be concerned about environmental and worker safety issues and that its authority over these issues should be stated in statute, or by an agreement with other state agencies. He explained that the AOGCC is involved with environmental and worker safety and, in fact, references to safety are found in its statutes and in regulations. However, the AOGCC recently concluded a large enforcement action that emphasized the lack of its specific authority for the regulation of safety issues. This lack of authority contributed to the commissioner's desire for the changes in the statute. 4:38:38 PM CHAIR KOHRING opened the hearing to public testimony. 4:39:00 PM JUDY BRADY, Executive Director, Alaska Oil and Gas Association (AOGA), informed the committee that her organization has no major objections to the bill and supports CSHB 183. 4:41:14 PM MARK WORCESTER, Senior Counsel, Anchorage Legal Department, ConocoPhillips Alaska, Inc., told the committee that Mr. Norman and his staff have taken a step forward to update the regulations, and are willing to work with the oil and gas industry. He said that ConocoPhillips Alaska, Inc. supports the bill and encourages its passage. 4:44:14 PM CHAIR KOHRING closed public testimony. He then asked Mr. Norman whether the changes in the statute will loosen restrictions or pose additional restrictions on the coal bed methane industry. 4:46:00 PM MR. NORMAN expressed his belief that the coal bed methane industry will not be affected by the bill. He said that this provision is a technical course correction and that, normally, production testing poses no threat to fresh water. Strengthening the bill gives the AOGCC the authority to oversee development and address legitimate concerns, but does not target non-conventional gas. 4:47:07 PM REPRESENTATIVE KAWASAKI requested further explanation on the change in Sec. 5 regarding coal bed methane. He noted that "regular" was added and "production testing" was deleted. 4:47:38 PM MR. NORMAN explained that "regular" production refers to a discovery that leads to commercial production. Removal of the requirement of a water well test program and gathering of baseline information applies to the early phase of the discovery, and poses no threat to water supplies. The change clearly states that, at the time of the commencement of regular production, the testing requirements will be implemented. 4:49:45 PM REPRESENTATIVE KAWASAKI questioned whether the change is contrary to the voter approved initiative. 4:50:03 PM MR. NORMAN expressed his belief that the change is not contrary to any initiative of which he is familiar. 4:50:12 PM REPRESENTATIVE OLSON moved to report CSHB 183, Version 25- LS0586\O, Bullock, 4/11/07, out of committee with individual recommendations and the accompanying fiscal notes. There being no objection CSHB 183(O&G) was reported from the House Special Committee on Oil and Gas.