Legislature(1995 - 1996)
05/05/1995 08:44 AM House O&G
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
JOINT HOUSE SPECIAL COMMITTEE ON OIL AND GAS
AND HOUSE RESOURCES STANDING COMMITTEE
May 5, 1995
8:44 a.m.
HOUSE RESOURCES COMMITTEE MEMBERS PRESENT
Representative Joe Green, Co-Chairman
Representative Bill Williams, Co-Chairman
Representative Scott Ogan, Vice Chairman
Representative Alan Austerman
Representative John Davies
Representative Pete Kott
Representative Irene Nicholia
HOUSE RESOURCES COMMITTEE MEMBERS ABSENT
Representative Ramona Barnes
Representative Eileen MacLean
HOUSE SPECIAL COMMITTEE ON OIL AND GAS MEMBERS PRESENT
Representative Norman Rokeberg, Chairman
Representative Tom Brice
Representative Gary Davis
Representative Scott Ogan
Representative Bill Williams
HOUSE SPECIAL COMMITTEE ON OIL AND GAS MEMBERS ABSENT
Representative Bettye Davis
Representative David Finkelstein
COMMITTEE CALENDAR
*HB 334: "An Act exempting certain natural gas exploration
facilities from regulation for purposes of preparation
of discharge prevention and contingency plans and
compliance with financial responsibility requirements."
HEARD AND HELD
(* First public hearing)
WITNESS REGISTER
PAUL CRAIG, President
Z-Energy, Inc.
2900 Boniface, No. 610
Anchorage, AK 99504
Phone: 563-5686
POSITION STATEMENT: Supported HB 334
ERIK OPSTAD, President
E.A. Opstad & Associates
P.O. Box 190754
Anchorage, AK 99519
Phone: 345-6346
POSITION STATEMENT: Supported HB 334
DAVID JOHNSTON, Chairman
Alaska Oil and Gas Conservation Commission
3001 Porcupine Drive
Anchorage, AK 99501
Phone: 279-1433
POSITION STATEMENT: Suggested changes to HB 334
DAVID LAPPI, President
Lapp Resources
4900 Sportsman Drive
Anchorage, AK 99502
Phone: 248-7188
POSITION STATEMENT: Supported HB 334
BRECK TOSTEVIN, Assistant Attorney General
Environmental Section
Department of Law
1031 W. 4th, No. 200
Anchorage, AK 99501
Phone: 269-5274
POSITION STATEMENT: Commented on HB 334
ROBERT MINTZ, Assistant Attorney General
Oil, Gas and Mining Section
Department of Law
1031 W. 4th, No. 200
Anchorage, AK 99501
Phone: 269-5255
POSITION STATEMENT: Commented on HB 334
BETTY COX
Brady & Company
1031 W. 4th, No. 400
Anchorage, AK 99501
Phone: 276-5617
POSITION STATEMENT: Commented on HB 334 and bonding and insurance
GRANT DOYLE, Chief Executive Officer
A.G. Midland Co., Inc.
P.O. Box 80327
Fairbanks, AK 99708
Phone: 488-8883
POSITION STATEMENT: Supported HB 334
ED COLLAZZI, Environmental Specialist
Industry Oil Spill Contingency Planning
Department of Environmental Conservation
410 Willoughby, Suite 105
Juneau, AK 99801
Phone: 465-5275
POSITION STATEMENT: Suggested changes to HB 334
PREVIOUS ACTION
BILL: HB 334
SHORT TITLE: EXEMPT NAT.GAS FACILITY FROM BOND & PLANS
SPONSOR(S): RESOURCES
JRN-DATE JRN-PG ACTION
05/03/95 1815 (H) READ THE FIRST TIME - REFERRAL(S)
05/03/95 1815 (H) OIL & GAS, RESOURCES
05/05/95 (H) RES AT 08:00 AM CAPITOL 124
05/05/95 (H) O&G AT 08:00 AM CAPITOL 124
ACTION NARRATIVE
TAPE 95-65, SIDE A
Number 000
The joint meeting of the House Special Committee on Oil and Gas and
House Resources Committee was called to order by Chairman Norman
Rokeberg at 8:44 a.m. House Special Committee on Oil and Gas
Members present at the call to order were Representatives Rokeberg,
Brice, Ogan, and Williams. Members absent were Representatives B.
Davis, G. Davis and Finkelstein. House Resources Committee members
present at the call to order were Representatives Green, Williams,
Ogan, and Austerman. Members absent were Representatives Barnes,
Davies, Kott, MacLean, and Nicholia.
CHAIRMAN NORMAN ROKEBERG noted a quorum was not present for either
committee. He said the committees would hear HB 334. He stated a
work draft committee substitute, version F, is before the
committee.
HB 334 - EXEMPT NAT. GAS FACILITY FROM BOND AND PLANS
REPRESENTATIVE BILL WILLIAMS made a MOTION to ADOPT CSHB 334(O&G).
CHAIRMAN ROKEBERG asked if there were any objections. Hearing
none, the MOTION PASSED.
CHAIRMAN ROKEBERG noted for the record that Representative DAVIES
had joined the committee.
PAUL CRAIG, PRESIDENT, Z-ENERGY INCORPORATED, testified via
teleconference and expressed support for HB 334. He said oil spill
contingency planning and financial responsibility for oil spills is
good public policy and should be upheld, specifically for oil
production facilities, but not natural gas facilities. He stated
the importance of exempting gas facilities from oil spill
contingencies, bonding, and planning has already been recognized.
Unfortunately, the exemption goes downstream from the wellhead but
does not go upstream to the natural gas reservoir. The result is
having a $1 million oil spill contingency bonding and planning
requirement in place for natural gas wells and exploratory wells in
the state.
MR. CRAIG stated the Alaska Oil and Gas Conservation Commission
(AOGCC) has both the technical expertise and data to give
knowledgeable opinions about the probability of encountering oil in
a well being drilled. The state's stratigraphic wells, which can
be drilled very easily, are already exempted from oil spill
planning and oil spill contingency if they are not thought to be
drilled into a hydrocarbon bearing structure.
Number 155
MR. CRAIG said the current bonding requirement precludes
development of important resources, such as coalbed methane, for
rural communities and villages. He stated the requirement to put
up $1 million in assets to back up a bond basically makes drilling
these type of projects uneconomic. That requirement also puts up
a barrier which stops independents from doing business in Alaska.
He pointed out there is an estimated 8,000 independents doing
business in the Lower 48 and only a couple doing business in
Alaska. He explained providing an environment that is attractive
to Alaska owned, small independent oil and gas companies is good
for Alaska and good for the oil and gas industry. He strongly
encouraged the legislature to pass HB 334 and recommended any
provisions included in HB 334 would exclude the continuation of oil
spill contingency bonding.
CHAIRMAN ROKEBERG asked Mr. Craig if he had a copy of the committee
substitute, version F and a copy of the memo from Mr. Johnston of
the AOGCC.
MR. CRAIG said he had a copy of the committee substitute but not
the memo from Mr. Johnston.
CHAIRMAN ROKEBERG recalled that Mr. Craig had said bond costs make
drilling uneconomic. He asked Mr. Craig to give the committees a
brief idea of how he justifies that statement.
Number 220
MR. CRAIG responded bonding, unlike insurance, has different
requirements. If he has to get a $1 million bond, he must prove
that he can repay that $1 million. Therefore, he would have to tie
up $1 million in liquid assets. He stated if he goes to the
Sacramento Valley, where environmental concerns are paramount, he
can drill a well and the bonding requirements would be
approximately $25,000 to $50,000 total for the entire well. He
said to tie up $1 million in assets or find investors willing to
tie up $1 million in assets to drill a coalbed methane well to
serve a rural village of 200 residents does not make economic
sense.
MR. CRAIG noted it is a time when very little money is going to
exploratory drilling of hydrocarbon wells, and natural gas wells in
particular. In talking with numerous independents from the Lower
48 regarding (indiscernible) gas project in Alaska and when they
hear the bonding requirements, they either hang up or laugh. He
stated there is already a $100,000 bonding requirement, through the
AOGCC, for the purpose of making sure the site is plugged,
abandoned, and cleaned up appropriately. He said if a $1 million
oil spill contingency bond is added on top of the AOGCC bond, it is
simply not attractive and creates an environment where it
economically does not make sense to develop reserves in Alaska when
it is much more inexpensive to develop reserves in the Lower 48 or
internationally.
(Representative NICHOLIA joined the committee.)
CHAIRMAN ROKEBERG wondered if Mr. Craig has a project or plan on
the near-term horizon that HB 334 would assist.
MR. CRAIG stated Z-Energy would like to drill a natural gas well on
the north end of the Beluga Gas Field. He said investors are
interested in the project and are willing to participate in
drilling costs. He stressed one of the major barriers he is
facing, in terms of getting firm commitments for participation, is
there are no investors who will consider tying up $1 million in
assets to participate in an exploratory natural gas well of this
nature. He pointed out passage of HB 334 would allow Z-Energy to
proceed with that particular project during the current drilling
season.
Number 286
ERIK OPSTAD, PRESIDENT, E.A. OPSTAD & ASSOCIATES, testified via
teleconference and expressed support for passage of HB 334 to
eliminate the bonding requirements for natural gas wells. He
stated from personal experience, the bonding requirements in the
state of Alaska impose an enormous hurdle for small operators such
as himself. He stated small operators simply do not have the
capital to put up, or will investors put up the dollars required to
allow drilling gas properties in the state. As a consequence, the
small operators do all their work outside.
MR. OPSTAD said in 1994, his company and his partners spent
approximately $3.5 million drilling wells in the state of
California and they were successful. He stated his company did not
spend that money in Alaska because they cannot justify it. As a
consequence, the royalties being generated as a result of that
activity are benefiting the state of California and the jobs which
are part and parcel to that activity are also going to Californians
rather than Alaskans, even though much of the funding for that
activity came from Alaska.
MR. OPSTAD stated he sees no benefit to the environment by having
the bonding requirement. He said it has been his experience that
natural gas wells are benign in terms of their environmental
impact. He felt the AOGCC is fully capable of determining whether
or not a proposed drilling location and depth is likely to have any
significant probability of encountering oil. He expressed support
for the continuation of the bonding requirements for oil wells but
sees no necessity for having bonding requirements for natural gas
wells.
Number 338
DAVID JOHNSTON, CHAIRMAN, AOGCC, testified via teleconference and
stated HB 334 would authorize the commission to classify certain
exploration activities as being likely to encounter oil and gas for
the purposes of oil discharge prevention and contingency plans
required by AS 46. He said HB 334, as written, would also require
AOGCC to establish a bond amount for natural gas exploration
facilities to ensure surface clean up in the event oil is
encountered and spilled. He pointed out the commission does not
object to classifying these types of exploration activities in this
manner and added the commission has worked with the Department of
Environmental Conservation (DEC) informally in the past on similar
activities.
MR. JOHNSTON said the AOGCC does recommend a few changes to HB 334
and had faxed a copy of the proposed changes the day before.
However, in a meeting the previous night, additional changes were
recommended. He stated he would review those changes, even though
the committee did not have them before them.
MR. JOHNSTON stated the first proposed change is in Section 1. AS
31.05.030 is proposed to be amended by adding a new subsection to
read: "(i) When requested by a person proposing to explore for gas
by means of drilling a well, the commission may evaluate the
likelihood that the well will penetrate a formation containing oil.
If the commission concludes with reasonable certainty that the well
will not penetrate a formation containing oil, the commission shall
so certify."
CHAIRMAN ROKEBERG asked if the changes could be faxed to the
committee.
MR. JOHNSTON said as soon as he gets back to the office he could
fax them. He stated the changes are not in writing at this time.
REPRESENTATIVE ALAN AUSTERMAN asked if the changes were being
proposed to CSHB 334(O&G) or the original bill.
MR. JOHNSTON said the changes are proposed for the committee
substitute, version C.
CHAIRMAN ROKEBERG requested that before Mr. Johnston faxes the
changes to the committee to make sure they conform with version F.
MR. JOHNSTON stated in Section 3, AOGCC proposes AS 46.04.030 be
amended by adding a new subsection to read: "(s) If a well
certified by the Alaska Oil and Gas Conservation Commission under
AS 31.05.030(i) penetrates a formation containing oil, the operator
of the exploration facility (1) shall notify the department, the
Alaska Oil and Gas Conservation Commission, and all other
appropriate state agencies; and". He said the reason for the
proposed change is the original bill said something about notifying
the oil spill response cooperative designated in the permit. He
pointed out AOGCC does not issue permits which have the oil spill
response cooperative designated.
(Representative G. DAVIS joined the committee.)
REPRESENTATIVE SCOTT OGAN stated he is having a hard time following
the changes Mr. Johnston is proposing verbally. He requested Mr.
Johnston to fax something to the committee.
Number 456
MR. JOHNSTON stated AOGCC proposes changing Section 5 by adding a
new subsection to read: "(n) If a well certified by the Alaska Oil
and Gas Conservation Commission under AS 31.05.030(i) penetrates a
formation containing oil, the operator of the exploration facility
shall cease all activity until the bonding requirements of (b) of
this section are met."
MR. JOHNSTON said the problem AOGCC was having with the current
version is that Section 5 would have the commission establishing a
bond amount. Currently, the commission does not have the expertise
in-house to evaluate the type of surface damage which might result
from oil being spilled. Traditionally, that has been a function of
DEC. He stated if the commission began judging what that damage
was, another program would need to be built and staff would need to
be added. He thought it would be simpler if when oil is
encountered during exploration activities for natural gas, the
operator cease operations and then comply with bonding requirements
previously established by AS 46.
REPRESENTATIVE AUSTERMAN asked how often operators encounter oil
when exploring for natural gas.
MR. JOHNSTON stated one in ten wells in the state find oil.
Therefore, with only a 10 percent chance, the question can be asked
why is bonding required for any well. He said what is desired is
some reasonable certainty that the well will not encounter oil. In
those cases where there is sufficient well control in a nearby
facility, the commissioner can make that call. If a very shallow
program is being considered, such as coalbed methane, again that
call could be made by the commissioner as it would not be likely to
encounter oil. In another situation, in the Interior of the state
where a deep program is being proposed, that comfort level is not
there to say oil will not be encountered.
Number 504
REPRESENTATIVE DAVIES stated it sounds like AOGCC is comfortable in
having the expertise to make the fundamental geophysical and
geological determination called for. He wondered in those cases
where AOGCC is not comfortable, would AOGCC feel comfortable in not
certifying.
MR. JOHNSTON replied that is correct. He said if AOGCC did not
have the data, they would not certify.
REPRESENTATIVE DAVIES asked Mr. Johnston if he was referring to all
drilling exploration when he mentioned one in ten wells encounter
oil or was he referring to those exploring for natural gas.
MR. JOHNSTON stated he was talking about all exploration activities
in the state.
REPRESENTATIVE DAVIES asked if AOGCC certifies the operator is
drilling for gas and only expects to find gas, what is the history
of circumstances where they encounter oil.
MR. JOHNSTON said there is no history as those situations have
never been looked at. He stated that data is not available.
CHAIRMAN ROKEBERG recalled Mr. Craig had said his company is
contemplating drilling near the Beluga Gas Field. He asked how
much geophysical or other information does AOGCC need to have to
determine that a company will be going after gas as opposed to
other hydrocarbon formations.
MR. JOHNSTON stated first the company would have to submit their
actual drilling proposal to AOGCC, so the commission would
understand exactly where they were proposing the well and at what
depths they were planning to go to. Then the commission would look
at surrounding wells in the vicinity. He said for example in the
Beluga River area, there are a number of wells which have
established very good well control. In that particular case, the
commission could say with reasonable certainty that if a company is
going to dig at that particular depth, they would not likely
encounter oil. Whereas, if a company proposed a deeper well which
exceeded the depth of the surrounding wells in that region, the
commission may not have that comfort level and probably would
withhold the certification.
MR. JOHNSTON stated there is one additional proposed change to
amend Section 6 by adding a new subsection to read: (c) Except as
provided in AS 46.04.030(s) and 46.04.030(n), the provisions of AS
46.04.030(b) and AS 46.04.040(b) do not apply to the operation of
an exploration facility to the extent that it is used to explore
for gas by means of drilling a well certified by the Alaska Oil and
Gas Conservation Commission under AS 31.05.030(i).
Number 572
DAVID LAPPI, PRESIDENT, LAPP RESOURCES INC., testified via
teleconference and expressed support for HB 334. He urged the
legislature, when they are looking at the business climate in the
state of Alaska, to continuously evaluate the cost of doing
business for private industries. He said the bonding and
insurance, as it relates to oil and gas exploration and
development, is a key factor in the cost of doing business. He
noted he had submitted testimony in writing and hoped it had been
distributed.
MR. LAPPI stated he would like to see the three agencies requiring
bonding and/or insurance get together and roll the financial
responsibility, bonding, and insurance requirement into one
package. Therefore, an operator coming to the state or an operator
in the state would not have to deal with three separate agencies to
get the bond. He said that would be of great assistance in
reducing administrative work and helping the operators along in the
business climate.
MR. LAPPI commented on AOGCC's proposed change to require an
operator to stop operations if he encounters oil and purchase the
appropriate bond. He pointed out if the primary purpose is still
to produce gas and oil is not going to be produced, the well is
continuously cased with field casings cemented in place, the
operator proceeds to produce gas and that oil is safely contained
by a casing program, he felt the state should go back after the
production of gas begins and review the requirement for any oil
spill contingency bond if the operator is not actually going to
produce the oil. He urged the legislature to pass HB 334.
Number 620
BRECK TOSTEVIN, ASSISTANT ATTORNEY GENERAL, ENVIRONMENTAL SECTION,
DEPARTMENT OF LAW, testified via teleconference and said he had
some legal drafting concerns regarding the coordination of AOGCC
and DEC's programs. He stated Sections 2 and 4 create exemptions
in the oil spill contingency plan responsibility requirements. He
felt those two sections were unnecessary because the way the
legislation has been drafted in the past, there has been a unified
exemption contained in AS 46.04.050 which is contained in Section
6 of the bill. He said as long as the exemptions in Section 6 are
dealt with, Sections 2 and 4 are not needed, and would avoid making
it complicated.
MR. TOSTEVIN said in regard to Section 5, it is a policy call as to
whether or not financial responsibility is going to be required,
but language should be used that refers to financial responsibility
and not tie it to surety bonds, because that is only one method of
financial responsibility allowed under AS 46.04.040. AS 46.04.040
allows self-insurance, insurance, surety, guarantee, letters of
credit or other forms approved by the department.
Number 649
ROBERT MINTZ, ASSISTANT ATTORNEY GENERAL, OIL, GAS, AND MINING
SECTION, DEPARTMENT OF LAW, testified via teleconference and said
the changes suggested are legal. He stated there are some
differences in language between AOGCC's statute AS 31 and DEC's
statute AS 46. For example, the conservation act uses the term gas
but not natural gas and AS 46.04 uses the term natural gas. He
added that AS 46 provides that financial responsibility and
contingency fund requirements are triggered by operation of a
facility but facility is not a concept used by the commission.
MR. MINTZ noted that many of the changes Mr. Johnston suggested are
an attempt to avoid confusion because of the different languages
and different concepts used in the two acts. He stated the work
draft uses the term natural gas exploration facility and the term
natural gas is not necessary. He said the term exploration
facility is sufficient.
TAPE 95-65, SIDE B
Number 000
REPRESENTATIVE OGAN clarified the gas versus natural gas language
is inclusive to include coalbed methane.
MR. MINTZ responded there is no problem with that.
BETTY COX, BRADY AND COMPANY, testified via teleconference and
stated she will offer her experiences in working in the oil
industry from a bonding and insurance standpoint. She noted
everyone keeps referring to a $1 million bond (indiscernible). She
said she has worked with the AOGCC in regard to bonding and meeting
the financial responsibility requirements of AS 46.04.040. She
agreed with Mr. Tostevin that a bond is not the only method of
meeting those requirements.
MS. COX said for a smaller operator, a bond is not the ideal way to
approach the financial requirements because bonding companies look
at that type of obligation as a financial guarantee. She explained
just because someone has $1 million in cash does not necessarily
mean the bonding company will approve and support that person with
a $1 million bond. The bonding company looks at the long term and
whether a company will be around ten years in the future to pay if
there is a loss.
Number 073
MS. COX stated insurance is readily available both with financial
responsibility and without financial responsibility. She said she
is not sure whether or not a natural gas exploration facility comes
under financial responsibility requirements. The costs on the
insurance varies from operation to operation and can be quite
expensive. However, she felt insurance would be cheaper than a
bond because on an independent operation, unless the company is
worth $50 million, not only will there be a bond premium, the
company will have to post $1 million cash.
MS. COX said from an insurance basis, for a $1 million exploration
well, her company would go to its carriers and establish a
commercial general liability policy that would provide third party
coverage for property damage and bodily injury and would also
include pollution. At the same time, they would purchase a side-
by-side pollution liability policy that could provide
(indiscernible) both pollution coverage for the company's own
spills and own property and that of the public. She stated the
minimum premium would be approximately $50,000. The premium would
be based on the entire operation.
Number 112
MS. COX stated she had been successful in writing a bond for an
independent. She said in trying to write the bond, she contacted
AOGCC for information to determine how many people had posted bonds
and contacted every one of them in trying to sell her clients to
them. She told committee members every single one turned her down.
She thought the only companies having bonds with the state
currently are probably very large companies, such as the major oil
companies. She noted when she placed the calls, she was told two
people had posted cash.
MS. COX said writing the bond was a very long process. She finally
found a bonding company willing to work with her on the bond. She
stated the first year the bond was collateralized 50 percent. It
was a $200,000 bond, so the bonding company kept $100,000. She
noted they were successful at the anniversary premium date in
getting the collateral released.
MS. COX told committee members the difference between bonding and
insurance is that with bonding, if there is a loss, it has to be
paid back and with insurance, the company does not have to pay it
back.
CHAIRMAN ROKEBERG recessed the House Special Committee on Oil and
Gas and passed the gavel to Co-Chairman Green to conduct business
with the House Resources Committee.
Number 440
CHAIRMAN ROKEBERG called the joint meeting of the House Special
Committee on Oil and Gas and the House Resources Committee back to
order.
GRANT DOYLE, CHIEF EXECUTIVE OFFICER, A.G. MIDLAND CO, INC.,
testified via teleconference and expressed support for HB 334. He
asked committee members to imagine a home-grown energy industry
that is (indiscernible) to protecting (indiscernible), not because
there are laws and regulations requiring the protection but rather
because of the workers, the owners, the investors, the mangers,
their children and their grandchildren. He said they are all
concerned that Alaska remain a beautiful, clean, and healthy place
to live.
MR. DOYLE asked committee members to imagine a home-grown energy
industry which not only pays royalties to the state and pays
salaries to Alaskans but also spends and invests the profits in
Alaska, investing for the future. He said imagine the state's
rural villages being heated and generating electrical power with
clean, economical, and abundant natural gas. He stated imagine no
more leaking tanks and lines to contaminate water supplies and
endanger fish and game stocks; no more paying two to three dollars
for 180,000 BTUs of energy.
MR. DOYLE stressed it is past time to allow Alaskans to directly
participate in Alaska's energy interest. He stated gas does not
spill. He asked why the state requires writing contingency plans
and purchasing spill bonds for natural gas. He said it is time to
bring energy decisions home but first the state must prepare
itself. The Alaska energy industry, owned, operated, and managed
by Alaskans is long past due. He urged the legislature to pass HB
334 and eliminate the requirement to write a spill contingency plan
in order to drill for natural gas which cannot spill. He urged the
legislature to eliminate the requirement to post a $1 million oil
spill bond for natural gas.
Number 490
ED COLLAZZI, ENVIRONMENTAL SPECIALIST, INDUSTRY OIL SPILL
CONTINGENCY PLANNING, DEPARTMENT OF ENVIRONMENTAL CONSERVATION
(DEC), stated the department has no objection to modifying its
requirements for natural gas exploration facilities based on an
informed judgement and a certification from the AOGCC. He said the
department has several concerns with HB 334 as written. He noted
Section 1 refers to a reasonable probability and the department
believes the certification should reflect a reasonable certainty
since there is an argument there is reasonable probability that any
exploratory well will not hit a producing formation. He added the
department would support Mr. Johnston's suggested language.
MR. COLLAZZI agrees with Mr. Tostevin in regard to Sections 2 and
4. Both of those sections are inconsistent with the department's
existing law because the department puts all of the specific
exemptions to its requirements in AS 46.04.050 and there is no need
to add the change in either Section 2 or 4. The definition of
exploration facility and the exemptions would specifically exempt
those facilities certified by AOGCC.
MR. COLLAZZI said Section 3 seems to describe limitations on the
exemption which is granted in Section 6. He thought that might be
more appropriately placed in AS 46.04.050 because it describes
limitations and modifications to the exemption itself. He stated
Section 5, as written, proposes to amend the DEC law and the
department believes it needs some clarification. He noted Section
5 refers to a surety bond and in looking at the law, the department
was wondering if that bond was intended to be an additional oil
spill clean up bond that would be attached to or in addition to the
bond AOGCC presently requires for plugging and abandonment. If so,
he suggested it be put into AS 31, AOGCC's laws rather than
attempting to modify AS 46, DEC's laws.
MR. COLLAZZI stated if the intent is to make this part of DEC's law
and amend Title 46, what is essentially being done is exempting
natural gas exploration facilities from DEC's present financial
responsibility requirements and then requiring financial
responsibility again in an amount not specified. He thought it was
a round-about way of doing that if that is the intent. He said the
DEC does not have bonding specialists on staff but administers the
program (a one-person program) based on specific financial
responsibility amounts the legislature sets. Therefore, if the
intent of Section 5 is to require the DEC to require a lesser
amount based on a determination from AOGCC, the department would
ask either that lesser amount be specified in the law or that AOGCC
be tasked with determining what that amount is. He stressed if
this section is intended to amend Title 46 and not Title 31, he
suggests the language be replaced with surety bond by financial
responsibility because there are several different ways to
demonstrate financial responsibility under the DEC's laws.
MR. COLLAZZI commented in Section 6, there is a typo. He stated
the reference should be to AS 46.04.030(b) not AS 46.04.030(a) as
(a) refers to oil terminal facilities and (b) refers to exploratory
facilities. He added the comments he heard from Mr. Johnston
sounded reasonable regarding Section 6 also.
Number 558
REPRESENTATIVE AUSTERMAN told Mr. Collazzi the committee would
appreciate receiving his comments in writing.
CHAIRMAN ROKEBERG stated because of the technical nature of HB 334
and the fact there is a significant amount of work needing to be
done on the bill, HB 334 will be held at this time. He noted other
reasons for holding HB 334 include there is no fiscal note attached
to the bill, there needs to be several amendments made to
incorporate the language Mr. Johnston suggested, and additional
input from the state and industry is needed. He agreed there is a
need for immediate legislation in this area. He assured everyone
who is interested in seeing HB 334 passed, that the House Special
Committee on Oil and Gas will give the bill serious consideration.
CHAIRMAN ROKEBERG said in talking with Speaker Phillips, it is the
opinion of the Speaker, Representative Green and himself that there
is not adequate time to consider HB 334 during this session. He
stated if timing warrants and a window of opportunity does arise,
the committee may revisit the bill because the committee does
recognize the importance of HB 334.
ADJOURNMENT
There being no further business to come before the joint meeting of
the House Special Committee on Oil and Gas and the House Resources
Committee, Chairman Rokeberg adjourned the meeting at 10:06 a.m.
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