Legislature(2005 - 2006)BUTROVICH 205

04/20/2006 03:30 PM STATE AFFAIRS

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03:37:03 PM Start
03:37:31 PM HB300
04:20:19 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Heard & Held
Bills Previously Heard/Scheduled
        HB 300-OIL & GAS CONSERVATION COMMISSION MEMBER                                                                     
CHAIR GENE  THERRIAULT announced that  HB 300 would be  the first                                                               
order  of business.  He asked  Representative Kohring  to present                                                               
the bill.                                                                                                                       
3:37:31 PM                                                                                                                    
REPRESENTATIVE  VIC  KOHRING,  Sponsor  of HB  300,  stated  that                                                               
because  of the  complexity  and  expansion of  the  oil and  gas                                                               
industry, the public seat on  the Alaska Oil and Gas Conservation                                                               
Commission (AOGCC) ought  to have at least  some understanding of                                                               
the industry.  He noted that there  are three seats on  the AOGCC                                                               
and two require expertise in  the field. Currently the third seat                                                               
doesn't require any kind of  petroleum background. He argued that                                                               
the  third  position ought  not  be  a  wide-open spot  with  the                                                               
opportunity for on-the-job training.                                                                                            
If the person doesn't have  fundamental knowledge he or she would                                                               
have to learn  from scratch. He drew a parallel  to the standards                                                               
for the Regulatory  Commission of Alaska and said  it makes sense                                                               
to hold AOGCC to the same standard.                                                                                             
3:40:23 PM                                                                                                                    
SENATOR KIM ELTON asked about the administration's position.                                                                    
REPRESENTATIVE KOHRING  responded the administration  didn't have                                                               
a problem  with the bill  after he  changed the requirement  to a                                                               
fundamental  knowledge of  the industry  as  opposed to  specific                                                               
SENATOR ELTON asked what fundamental knowledge means.                                                                           
REPRESENTATIVE KOHRING replied that  is intentionally generic and                                                               
vague so that the governor is able to make the determination.                                                                   
SENATOR  ELTON  commented  without  a definition  it  provides  a                                                               
loophole and  gives the governor  absolute discretion  to appoint                                                               
3:43:24 PM                                                                                                                    
JOHN NORMAN,  Chair, Alaska Oil  and Gas  Conservation Commission                                                               
(AOGCC),  testified  that the  bill  would  further the  goal  of                                                               
having knowledgeable  and responsible  oil and gas  regulation in                                                               
Giving background  on the AOGCC, he  explained that it is  one of                                                               
the  oldest  and most  important  regulatory  commissions in  the                                                               
state. The AOGCC was created in  1955 in a remarkable and forward                                                               
thinking  legislative  act.  The  commission  consists  of  three                                                               
commissioners who are appointed by  the governor and confirmed by                                                               
the Legislature for staggered six-year terms.                                                                                   
Under current statute, one commission  member is required to be a                                                               
petroleum  engineer,   the  second  must  be   a  geologist  with                                                               
petroleum  experience,   and  the  third  position   requires  no                                                               
particular   training   or   experience.   The   commission   has                                                               
jurisdiction over all oil and gas  wells drilled in the state and                                                               
its  work  is  becoming  increasingly  complex  as  the  industry                                                               
changes.  The commission  has the  authority to  conduct subpoena                                                               
hearings, engage  in rule  making and  to adjudicate  and resolve                                                               
disputes among conflicting  owners of oil and gas  rights. It can                                                               
impose  penalties   and  can  order  unitization   of  pools  and                                                               
integration of interests to avoid  multiplicity of facilities and                                                               
to ensure greater recovery of oil and gas resources.                                                                            
MR.  NORMAN opined  that  the change  proposed in  HB  300 is  in                                                               
keeping and is  a step in the right direction.  He noted that the                                                               
commission website has  a detailed description of  the powers and                                                               
3:48:58 PM                                                                                                                    
SENATOR  ELTON noted  that legislators  aren't  required to  have                                                               
specific experience or  knowledge in a particular  arena but that                                                               
the list of legislative duties  is similar. He suggested that the                                                               
notion of having  a public member who has  no specific experience                                                               
gives  the  governor  the opportunity  to  appoint  someone  from                                                               
"outside the box." Also, the  three commissioners have a staff of                                                               
20 or  21 people most of  which have specific expertise.  Just as                                                               
legislators deal  with highly qualified staff  on complex issues,                                                               
he  questioned   whether  there  isn't  value   in  having  AOGCC                                                               
commissioners do the same.                                                                                                      
MR.  NORMAN said  the comparison  is valid,  but legislators  are                                                               
required to deal with a broad  range of issues while the AOGCC is                                                               
a very  specialized agency. On  a daily  basis there is  at least                                                               
one  permit and  numerous applications  and conservation  orders.                                                               
There isn't time  for on the job training, but  this doesn't mean                                                               
that  a commissioner  must come  from  the industry  and have  an                                                               
industry mindset.                                                                                                               
3:55:17 PM                                                                                                                    
SENATOR WAGONER observed that sometimes  it's the person with the                                                               
least amount  of knowledge that  asks the best  questions because                                                               
having everyone thinking on the  same track isn't always the most                                                               
beneficial. Noting  that AOGCC  has a  tremendous staff,  he said                                                               
someone  who is  accustomed to  analyzing information  and making                                                               
decisions  might  be more  effective  than  someone who  is  more                                                               
familiar   with  the   industry.   He   questioned  whether   the                                                               
commissioners didn't rely heavily on staff.                                                                                     
MR.  NORMAN  responded  staff   does  give  recommendations,  but                                                               
decisions are  ultimately up to  the three commissioners.  If the                                                               
third  commissioner doesn't  have experience  he or  she will  be                                                               
severely handicapped and Alaska won't  be well served in the long                                                               
run, he opined.                                                                                                                 
CHAIR  THERRIAULT asked  whether the  bill is  addressing a  past                                                               
problem or a potential problem.                                                                                                 
MR.  NORMAN  replied  the  bill   addresses  a  potential  future                                                               
problem. Over the  years the third commissioner has  by and large                                                               
met the  requirements set forth  in the bill. He  reiterated that                                                               
commissioners  could obtain  experience without  working directly                                                               
in the industry.                                                                                                                
The  bill  doesn't  craft  tight  sideboards;  it  allows  future                                                               
governors  and  Legislatures  considerable  latitude  to  make  a                                                               
determination on qualification.                                                                                                 
4:03:59 PM                                                                                                                    
CHAIR  THERRIAULT  recapped  the   questions  Senator  Elton  and                                                               
Senator  Wagoner  had  raised  and   asked  the  sponsor  if  the                                                               
administration  would   oppose  the  legislation   as  originally                                                               
REPRESENTATIVE  KOHRING said  the  administration requested  more                                                               
generic language and he complied.                                                                                               
CHAIR THERRIAULT noted that the  original bill contained specific                                                               
requirements  that didn't  necessarily speak  to a  background in                                                               
oil  and  gas, but  that  the  current  requirements call  for  a                                                               
fundamental  understanding of  the industry.  He asked  why there                                                               
was a change in emphasis from  a background in business to one in                                                               
oil and gas.                                                                                                                    
REPRESENTATIVE KOHRING replied in  hindsight he would have worded                                                               
the bill  differently to  include a  background in  the petroleum                                                               
4:08:27 PM                                                                                                                    
SENATOR ELTON  voiced the concern  that without a  definition for                                                               
"fundamental  understanding"  there  is the  opportunity  for  61                                                               
different interpretations.  He asked  the sponsor to  think about                                                               
how to avoid that difficulty.                                                                                                   
SENATOR CHARLIE HUGGINS  asked if this would  preclude the former                                                               
mayor of Wasilla from serving on the commission.                                                                                
REPRESENTATIVE  KOHRING  said it  probably  would,  but the  bill                                                               
isn't directed at past members.                                                                                                 
SENATOR  HUGGINS noted  that the  position  is well  compensated,                                                               
which might draw  candidates, but if the  language were tightened                                                               
the  administration and  the other  commissions might  not be  as                                                               
REPRESENTATIVE KOHRING said that is his assumption.                                                                             
CHAIR THERRIAULT asked if the  director of Boards and Commissions                                                               
would  screen and  filter the  applicants before  the names  were                                                               
submitted to the administration.                                                                                                
REPRESENTATIVE KOHRING  replied he  would expect  that to  be the                                                               
CHAIR THERRIAULT announced  he would hold the bill.  He asked Mr.                                                               
Norman  if  the  language  designating the  three  positions  was                                                               
established in 1979.                                                                                                            
MR.  NORMAN  said  yes;  Legislator   Irene  Ryan,  a  geologist,                                                               
inserted  that  language.  At  Statehood  the  commission  had  a                                                               
petroleum engineer a geologist and  a third member from Union Oil                                                               
management.  Reflecting  on  the  40-year history,  he  said  the                                                               
commissioners  have typically  had  experience  in the  industry.                                                               
However, the  appointees without experience in  the industry have                                                               
not been a problem, he said.                                                                                                    
CHAIR THERRIAULT expressed interest  in when the designations for                                                               
the positions were made.                                                                                                        
MR.  NORMAN said  he would  provide  the specific  dates, but  he                                                               
recalled that sometime in the mid  1960s it was recognized that a                                                               
certain level  of expertise was  important. The majority  of past                                                               
commissioners  had training  in  the industry  and  that is  what                                                               
industry expects, he asserted.                                                                                                  
CHAIR THERRIAULT  said he would  ask his  staff to work  with the                                                               
sponsor to  find out why  the policy  call was made  requiring no                                                               
specific  training, experience  or  knowledge  before making  the                                                               
suggested change.                                                                                                               
REPRESENTATIVE KOHRING said he would help gather the history.                                                                   
CHAIR THERRIAULT held HB 300 in committee.                                                                                      

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