Legislature(2015 - 2016)BARNES 124
03/18/2015 01:00 PM RESOURCES
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SJR 13-OCS OIL & GAS EXPLORATION/DEVELOPMENT 1:02:54 PM CO-CHAIR NAGEAK announced that the first order of business is CS FOR SENATE JOINT RESOLUTION NO. 13(RES), Supporting oil and gas exploration and development on the outer continental shelf offshore of the state; opposing attempts to prohibit future oil and gas development in the Beaufort and the Chukchi Seas, including the Hanna Shoal area; and requesting that the federal Administration cease and desist from restrictions that adversely affect active or future leases in high petroleum potential areas in the Beaufort and Chukchi Seas, including the Hanna Shoal area. 1:03:25 PM CHAD HUTCHISON, Staff, Senator John Coghill, Alaska State Legislature, introduced CSSJR 13(RES) on behalf of the sponsor, Senator Coghill. He explained the resolution is in opposition to recent efforts by the federal executive branch to further restrict areas in the Chukchi and Beaufort seas as it relates to oil and gas development. The specific concern is the Hanna Shoal area in the Chukchi Sea. There are some active and adjacent leases where it is felt there will be a negative effect. There is concern about the ability to renew those active leases that are currently in the area and there is a concern that some of the mitigation costs associated with designating the Hanna Shoal as an environmentally sensitive area will further prohibit oil and gas development in that area. MR. HUTCHISON began a PowerPoint presentation consisting of maps of the area being talked about. Drawing attention to slide 2, a map of the Beaufort Sea provided by the Bureau of Ocean Energy Management (BOEM), he said the different colored boxes denote the activity. Green indicates the historic leases that the oil companies have had in the past and blue indicates areas of high petroleum potential. Red indicates federally restricted areas, of which one is a subsistence area by Barrow and another a subsistence area by Kaktovik. These were previously restricted by the Bush Administration and every five years the restriction goes forward; the Obama Administration has continued the same restriction from 2012 to 2017. Yellow indicates active leases, none of which are in the restricted areas. Moving to slide 3, he noted that the leases shown in green around Barrow and Kaktovik are the historic leases and said the oil companies generally don't have an ongoing interest in those. The active leases shown in yellow are the ones about which the sponsor is most concerned. He said slides 4 and 5 provide a less cluttered view of what the proposed area looks like that the Obama Administration is moving forward with. 1:06:16 PM MR. HUTCHISON brought attention to slide 6, stating the real concern is in the Chukchi Sea, which has a lot more activity. He said the blue color indicates the areas with high petroleum potential. There are more active leases as can be seen by there being a lot more areas depicted in yellow. The red line near the coast on slide 6 is the 25-mile buffer zone. The only thing existing in that 25-mile area are historic leases that are no longer of interest to the producers. The pink and red areas near Barrow indicate the subsistence area for Barrow in which there are no active leases, so there is not really any resistance to that portion of it. The key area in the middle, the Hanna Shoal area, is indicated by the yellow circle. It has been studied the previous five years. Within that yellow circle are historic and active leases as well as a large area with high petroleum potential. Turning to slide 8 he explained that this area is important because Shell has three active leases that are adjacent to the Hanna Shoal area. Repsol has seven leases actually in the Hanna Shoal area itself and another five leases in the adjacent area that deal with similar petroleum prospects. The concern is that designating an area as [environmentally sensitive] will decrease the ability to renew those leases beyond 2022 and will increase the mitigation costs to the oil producers. Mr. Hutchison said slide 9 shows further clarification as to what some of the proposed area looks like. Slide 10 indicates the withdrawn areas [located within the draft proposed program area]: the 25-mile buffer area, the subsistence area around Barrow, and the Hanna Shoal area, which is the new component to all this. 1:09:30 PM CO-CHAIR NAGEAK said his statement is, "Here we go again." He continued: It really upsets me that people who live there, most of them ... have been working on this issue for years and years and years. All along the coast working with the whalers, working with the industry, working with everybody and going through the issue of reliance on our resources offshore and onshore. And here we go again. We have all this potential, but it really comes to us as Native people and all people who live along the coast where we rely on renewable resources. We also rely on nonrenewable resources for our tax base and for our livelihoods. A lot of people work in that area.... Without the oil industry we wouldn't be who we are today. CO-CHAIR NAGEAK noted that just a few weeks ago the President began considering placing the 1002 Area [in the Arctic National Wildlife Refuge] near where he was born into a Wilderness. When oil was discovered it was found out that the United States of America had to do land claims. While doing the land claims the federal government also created [Native] corporations. He continued: What are corporations? Well, they're an instrument to make money. And why did the government give us corporations when we wanted tribes? Well, they gave us corporations and they ... locked up the areas where our resources are or our resources have been. Since time immemorial our people used those resources.... So, here we go again. What are we to do when the government of the United States in infinite wisdom gave us an instrument to say ... "go enrich yourself but in the meantime we'll lock up every piece of land, every piece of water ... and you're not going to have anything." That is exactly what it is right now. We didn't ask for corporations. But then for the past several years this has been happening after working diligently for years and years and years working with the industry, with the government, with everybody. And so what are we to do? There is one federal agency who's locking up everything ... for those of us who depend on the resource and ... another agency who's willing to work with us and finding ways to make sure that everything is protected in that area where they are going to open up or they have opened up areas for oil and gas exploration. So we have two agencies ... that have given us heartache and hope at the same time. So what are we to do? What [are] a whole lot of my families going to do in Kaktovik when they have a resource right underneath their feet but they can't use it? 1:14:39 PM REPRESENTATIVE JOSEPHSON understood that in the announcement referred to by the resolution, the President also authorized some exploratory development in a very preliminary stage from Virginia down to the South Carolina coast. He said as far as he knows President Obama is the first to allow that. He asked whether the sponsor thinks that these restrictions in the Arctic are due to Shell's performance in 2012. MR. HUTCHISON replied that his personal opinion is that from [the President's] perspective it might be related to that, as well as related to an overreaching philosophical decision as it relates to climate change and environmentally sensitive areas. 1:16:04 PM CO-CHAIR NAGEAK opened public testimony. 1:16:23 PM KARA MORIARITY, President and CEO, Alaska Oil and Gas Association (AOGA), Anchorage, Alaska, spoke in support of SJR 13. She said the Alaska Oil and Gas Association (AOGA) is the professional trade association for the oil and gas industry in Alaska and its members represent the majority of the producers, explorers, refiners, marketing, and transportation activities in the state. The association's members have been operating in the Arctic for more than 40 years. Oil and gas development is the backbone of Alaska's economy, and as the largest undeveloped energy basin in the U.S. the Arctic Outer Continental Shelf (OCS) is the next generation of energy security for the U.S. The Arctic OCS holds enormous oil and gas resources, estimated by the Department of Interior at approximately 27 billion barrels of oil and 132 trillion cubic feet of natural gas. In comparison, the Trans-Alaska Pipeline System (TAPS) has carried more than 17 billion barrels in just over 30 years. So, TAPS has played a critical link in the nation's energy security, transporting crude oil from Alaska's North Slope to West Coast markets. The OCS development in the Beaufort and Chukchi seas could feed into TAPS and maintain its viability for many more years to come. Oil and gas development in the Arctic OCS means more jobs for Alaskans. Development of the Chukchi and Beaufort seas is predicted to produce an annual average of 35,000 direct and indirect jobs representing a total payroll of over $70 billion. MS. MORIARITY noted that since 1971, 84 wells have been drilled in the Arctic OCS, all without incident. Industry has worked with communities to incorporate traditional knowledge in decision making, establish Conflict Avoidance Agreements, and impose seasonal drilling limitations. New regulations and further research has further ensured that development and environmental protection can co-exist. Three AOGA member companies hold leases within the withdrawn areas or directly adjacent to it. While the federal withdrawal language states that "nothing in this withdrawal affects the rights under existing leases in the withdrawn areas," there are still many unknowns for the operators, such as the ability to renew active leases or how the transport or building of infrastructure into a pipeline would be affected. The prior four lease sales scheduled in the Beaufort and Chukchi seas were included in the Bureau of Ocean Energy Management's previous five-year leasing plan, but were withdrawn and subsequently not held. It is AOGA's fear that additional restrictions or delays will limit the opportunities for development in the Arctic OCS. MS. MORIARITY said that as the sea ice stays open longer and other countries move forward with exploration and development in their waters and transportation through the ice-free Northwest Passage, Alaska's arctic seas could be left largely unattended. With little infrastructure in place communities along Alaska's north coast will be at the greatest risk with no ability to respond. Development of the Arctic OCS for exploration and development would bring that infrastructure to a very rural onshore area and the industry's continued presence would provide security and response capabilities should they be needed. She said AOGA supports SJR 13 to maintain all of the proposed leasing areas in the Beaufort and Chukchi seas and to resist additional restrictions on leasing in the final program. 1:20:46 PM CO-CHAIR NAGEAK closed public testimony after ascertaining no one else wished to testify. 1:21:18 PM REPRESENTATIVE TARR stated she has concerns about the resolution. Four of the five areas withdrawn were previously withdrawn so there has been a history under both Democratic and Republican administrations to exclude those areas from leasing. She understood from what she has read that the new area was picked for its biological importance, the subsistence needs of the people living nearby, and to ensure that the marine animals and endangered whales swimming through those areas are protected and will be there for future generations. She said she is cautious because the revenue issue has not yet been resolved so the state doesn't stand to gain much from this OCS development and she would like to see this matter resolved before moving forward. 1:22:44 PM CO-CHAIR NAGEAK reiterated that this issue has been worked on for a very long time and studies have been done. The North Slope Borough has a diploma wildlife management and he was a drafter for many years of that diploma. He has been in offshore and onshore issues for more than half his life. He has watched all of this happening. His first job right after high school in 1969 was in Prudhoe Bay, so he has been involved in oil issues for a very long time and in working with the industry and others. So it is upsetting when things like this happen. In the late 1980s and early 1990s a look was taken at how the offshore rigs would work and there was a rig right outside of Barrow. This rig was put in the area where the Chukchi and Beaufort seas meet, which is a very volatile area. In the summer he has been near it many times while hunting. He shared his experience of being right in front of Barrow while hunting and seeing all kinds of animals when suddenly the ice began coming in very fast. The community knows how that area is and how dangerous it is and this has been told to everybody who comes up to do work in that area. Discussions about what the administration wants to do will be continued in his community as well as in this committee 1:26:34 PM REPRESENTATIVE JOSEPHSON stated he will not be objecting to the resolution. CO-CHAIR TALERICO offered his appreciation of Co-Chair Nageak's input on this issue because it is rare for the committee to get actual firsthand knowledge and experience from someone who thoroughly knows the area. 1:27:17 PM CO-CHAIR TALERICO moved to report CSSJR 13(RES) out of committee with individual recommendations and the accompanying [zero] fiscal note. There being no objection, CSSJR 13(RES) was reported from the House Resources Standing Committee.