Legislature(2007 - 2008)BARNES 124
04/30/2007 01:00 PM RESOURCES
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SB 109-OIL & GAS CONSERVATION COMMISSION 2:37:02 PM CO-CHAIR GATTO announced that the next order of business would be CS FOR SENATE BILL NO. 109(RES), "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." 2:37:29 PM CHERYL SUTTON, Staff to Representative Ralph Samuels, Alaska State Legislature, explained that Representative Samuels introduced SB 109 and the companion bill, HB 183, at the request of the Alaska Oil and Gas Conservation Commission (AOGCC). The AOGCC requested this legislation to update and improve the governing statute, Title XXXI. She stated that HB 183 is exactly the same as CSSB 109(RES) and this same version passed without objection from the House Special Committee on Oil and Gas. She deferred to John Norman for any further questions. 2:38:33 PM JOHN NORMAN, Chair, Alaska Oil and Gas Conservation Commission (AOGCC), stated that SB 109 is a comprehensive update of the Alaska Oil and Gas Conservation Act, first adopted by the Territorial Legislature in 1955. He stated that Section 1 of SB 109 removes from the Act outdated territorial provisions relating to appeals of decisions by the Commission from other agencies. 2:41:03 PM MR. NORMAN explained that Section 3 adds public health and safety to the AOGCC area of oversight. This is consistent with what the commission is already doing and follows the recommendations from the Declaration of Purpose of the Model Oil and Gas Conservation Act. He said Section 3 also clarifies the AOGCC authority to regulate natural gas storage. He explained that South Central Alaska has seasonal variations of demand for gas and has a need to identify reservoirs and inject gas into the ground to store for peak demand. He added that all the bill provisions have a zero fiscal note, and that the bill allows the law to conform to the industry developments and standards. 2:42:53 PM MR. NORMAN explained that Section 7 proposes to retain the two year period of confidentiality only for exploratory wells and stratigraphic test wells, not on the development of routine oil and gas well drilling. MR. NORMAN presented that Section 5 modifies that the coal bed methane water testing program is required only when a well goes into production, not during exploratory production testing which poses no threat to water quality. There was a brief discussion comparing the definitions of "assure" and "ensure". 2:46:28 PM MR. NORMAN noted that Section 4 increases the civil penalties assessed by the commission to be no more than $100,000 for the initial violation and no more than $10,000 per day for each subsequent day of violation. He informed the committee that the civil penalty for wasting gas is increasing to two times the fair market value. CO-CHAIR GATTO asked if flaring is considered wasting gas. MR. NORMAN responded that there is always some flaring for safety. 2:48:49 PM CO-CHAIR GATTO allowed that there is no penalty for flaring to protect us, but there is a difference with flaring to get rid of gas. MR. NORMAN said that this is already addressed in the legislation and that it is further monitored by the commission. He pointed out that there are monthly accounting reports of gas disposition. He continued, explaining that Section 12 deletes the $100 fee for a permit to drill as the fees are more efficiently collected through the regulatory cost charge. He noted that the bill makes a number of housekeeping and wording changes and that the AOGCC supports the bill. CO-CHAIR GATTO asked if Mr. Norman is a commissioner of the AOGCC. MR. NORMAN replied that he is the chairman of the commission. 2:51:46 PM REPRESENTATIVE WILSON asked how it is ascertained that a company is flaring too much. MR. NORMAN explained that the commission receives monthly gas disposition reports, and that the reports must exactly track the gas. He noted that the commission also has inspectors in the field, both in Cook Inlet and the North Slope. CO-CHAIR GATTO asked how often there is blatant incorrect reporting. MR. NORMAN stated that a few times a year there is incorrect reporting, but that overall there is a very high level of compliance. 2:54:03 PM REPRESENTATIVE WILSON asked about the cost of time charge addressed in Section 11. MR. NORMAN identified that the need to charge arose during a very lengthy investigation of falsification by an operator's employee. The investigation required many hours of engineers' time so this will allow the Commission to assess and recover these costs from the operator. REPRESENTATIVE WILSON asked what the hourly charge will be. MR. NORMAN replied that he did not have the rate, but it will be calculated based on the staff member used. He allowed that it will be infrequently used, but it is an enforcement tool to ensure the violator bears the responsibility. 2:56:29 PM REPRESENTATIVE ROSES asked to clarify that gas flaring is for safety. MR. NORMAN explained that gas comes up with oil and that although safety flaring can be for several reasons, it most commonly helps to avoid fires or explosions caused by a sudden abundance of gas. REPRESENTATIVE ROSES asked if a system to deliver the gas directly to a pipeline eliminates the necessity for the flare. MR. NORMAN replied that some flare might be necessary depending on how the gas is handled. He explained that flaring is not allowed to simply burn off the gas. 2:59:23 PM REPRESENTATIVE ROSES posed that should a pipeline be available for a company to put gas into and they are still flaring, is this considered a waste of gas by not delivering it. MR. NORMAN presented that flaring for safety or for fuel is permissible. He reported that the burden is on the operator to demonstrate why they are not putting it into the pipeline. REPRESENTATIVE ROSES asked about re-injection. MR. NORMAN replied that reinjection is not wasting gas. 3:01:15 PM CO-CHAIR GATTO turned the gavel over to CO-CHAIR JOHNSON. REPRESENTATIVE GUTTENBERG asked about the commission sentiment for having extended authority to determine gas takeoffs. MR. NORMAN noted that the commission is an independent, quasi- judicial body. He allowed that the commission does not set offtake rates unless an operator requests it. For this legally structured process, the commission receives an application, publishes it, and takes public testimony. He said that gas sales from Prudhoe Bay have been discussed for the past 30 years. The commission has not tried to update the offtake rate of 2.9 billion cubic feet (bcf) per day. He allowed that the commission has done the research and is ready with a new rate, but they would be short circuiting the legal process. 3:05:26 PM REPRESENTATIVE GUTTENBERG allowed that the House Resources Standing Committee is trying to write a bill to induce a company to enter the bidding. REPRESENTATIVE SEATON asked if Section 2, subparagraph (B) requires that information be filed more quickly. MR. NORMAN replied that the request for information in 90 days is a realistic amount of time to receive the information. 3:08:20 PM REPRESENTATIVE SEATON asked for a definition of "completion" and asked for clarification that Section 2 (B) will provide more information than is currently required. MR. NORMAN defined "completion" as bringing it into production. He informed that Section 2 identifies in more detail the types of information and specifies the response period is 30 days for reports, and 90 days for logs. He said that this section does not provide any more information than was received previously. 3:10:34 PM CO-CHAIR JOHNSON opened up public testimony. KARA MORIARTY, External Affairs Manager, Alaska Oil and Gas Association, said that the AOGCC has answered the AOGA questions and that AOGA supports the current bill version. CO-CHAIR JOHNSON closed public testimony. 3:12:34 PM REPRESENTATIVE SEATON asked if the reference in Section 4 applies to the new horizontal drilling technology. MR. NORMAN said that Section 4 keeps pace with the new technology including the ability to have multiple completions within one well. 3:13:30 PM REPRESENTATIVE SEATON moved to report CSSB 109(RES) out of committee with individual recommendations and the accompanying zero fiscal notes. There being no objection, CSSB 109(RES) was reported out of the House Resources Standing Committee.