Legislature(2005 - 2006)CAPITOL 124
03/01/2005 05:00 PM House OIL & GAS
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| Confirmation Hearing || Overview: Alaska Oil and Gas Conservation Commission | |
| Adjourn |
* first hearing in first committee of referral
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+ teleconferenced
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ALASKA STATE LEGISLATURE
HOUSE SPECIAL COMMITTEE ON OIL AND GAS
March 1, 2005
5:09 p.m.
MEMBERS PRESENT
Representative Vic Kohring, Chair
Representative Nancy Dahlstrom
Representative Norman Rokeberg
Representative Ralph Samuels
Representative Beth Kerttula
MEMBERS ABSENT
Representative Lesil McGuire
Representative Berta Gardner
COMMITTEE CALENDAR
CONFIRMATION HEARING(S)
Alaska Oil and Gas Conservation Commission
Daniel Seamount - Anchorage
- CONFIRMATION(S) ADVANCED
OVERVIEW: ALASKA OIL AND GAS CONSERVATION COMMISSION
- HEARD
PREVIOUS COMMITTEE ACTION
No previous action to record
WITNESS REGISTER
DANIEL SEAMOUNT, Commissioner
Alaska Oil and Gas Conservation Commission
Anchorage, Alaska
POSITION STATEMENT: Testified as appointee to the Alaska Oil
and Gas Conservation Commission.
ACTION NARRATIVE
CHAIR VIC KOHRING called the House Special Committee on Oil and
Gas meeting to order at 5:09:47 PM. Representatives Dahlstrom,
Kerttula, Kohring, Rokeberg, and Samuels were present at the
call to order.
^CONFIRMATION HEARING
^OVERVIEW: ALASKA OIL AND GAS CONSERVATION COMMISSION
CHAIR KOHRING [announced that the committee would consider the
confirmation of the appointment of Daniel Seamount to the Alaska
Oil and Gas Conservation Commission.]
DANIEL SEAMOUNT, Commissioner, Alaska Oil and Gas Conservation
Commission (AOGCC), presented an overview of the AOGCC. He
directed attention to "slides" printed in a handout available in
the committee packet. The first slide contained a photograph of
the Alpine oil field, which he explained is one of the newest
fields using the latest technological advances. It has a very
small footprint, about 100 acres, and produces from an area of
over 20,000 acres, he said.
5:12:39 PM
MR. SEAMOUNT pointed out that the AOGCC basically has nothing to
do with the surface, but instead, "we worry about what goes on
in those 22,000 acres that are accessed by these high,
horizontally-reaching well bores." He then turned to slide 2,
which contains the following AOGCC mission statement:
Protect the public interest in oil and gas resources
and protect underground supplies of drinking water.
5:13:36 PM
MR. SEAMOUNT gave a brief overview of the presentation agenda as
written on slide 3. He noted that AOGCC is extremely busy
because permitting is at an all-time high. He said:
In two days, [AOGCC] ... is going to be holding its
most important hearings in the last 20 years, and that
is to look at the issue of potential waste due to the
gas line project. And we may not have time to get
into that, but I'm always willing to come back and
discuss that at some later time. ... [Another issue
is] offshore Cook Inlet future, and that would concern
what are we going to do with the platforms; are we
going to throw them away or are we going to go after
some ... resources that will probably never be
accessible unless we preserve some of those platforms
for awhile?
5:15:10 PM
REPRESENTATIVE SAMUELS asked, regarding the gas line oversight,
"How do you make the determination on what would be an
acceptable loss of potential oil production in order to get a
project going?"
MR. SEAMOUNT responded that AOGCC would first do an analysis to
determine if there will be waste and how much of it. Then they
would decide what to do about it. He said, "Ultimately the
decision rests in the legislature's hands, because you guys
represent the people. I doubt that you would accept a lot of
waste."
5:16:51 PM
SAMUELS remarked, "But at the end of the day, there's going to
be a tradeoff. ... And you'll come up with a recommendation, or
do you come up with a number, saying, 'This is how much we're
going to leave in the ground by taking this much gas off'?"
MR. SEAMOUNT replied that, by statute, AOGCC makes the decision
of what is an acceptable production rate.
5:17:43 PM
REPRESENTATIVE ROKEBERG asked what "waste" was referring to.
MR. SEAMOUNT answered, "Under the present plan of producing gas,
we would be wasting liquids: oil and natural gas liquids. And
that waste could be up into the hundreds of millions of barrels,
the same amount that you'd have in an alpine field; something
that industry's looking for right now."
5:18:32 PM
REPRESENTATIVE ROKEBERG asked what the timeframe was to do the
study.
MR. SEAMOUNT responded that, if AOGCC does the study
independently, it would probably take three years. He explained
that this is why they've asked to have the supplemental for $1.2
million fast-tracked, and then the AOGCC would start its own
independent study. He commented that he would prefer to have
industry do the study and "have us look over their shoulders"
but there appear to be confidentiality issues that are
"stretching things out." He remarked, "We need to get this
analysis done as quickly as possible."
5:19:33 PM
REPRESENTATIVE ROKEBERG inquired as to how the analysis can be
completed quicker.
MR. SEAMOUNT replied that industry has dozens of geologists and
engineers that are highly qualified and have the equipment. He
said:
I assume that they will do this analysis on their own.
If we could be partners with them through this
analysis, not have any real secrets as far as
conservation is concerned, and ... be able to relay
this information to the public and to the legislature,
that'd probably be the most efficient way to do it.
But, understandably, there are partners involved, and
lawyers involved, and information that goes out has to
be sanctioned, and I see that as too much of a
roadblock ... to us working together.
5:20:28 PM
REPRESENTATIVE ROKEBERG asked if it "would be much quicker to do
it that way".
MR. SEAMOUNT answered that it would probably be about the same
amount of time.
REPRESENTATIVE ROKEBERG remarked that Mr. Seamount had indicated
that there would be research and mitigating measures taken
during the course of the study, and he questioned how the three-
year timeframe fits into an accelerated project. He asked,
"Would you assume that you would make the study, and that the
project could go forward notwithstanding whatever conclusions
you may reach, or is there a chicken-and-egg situation?"
5:21:37 PM
MR. SEAMOUNT replied, "Theoretically it's possible. We would
make a ruling that said that ... the gas rates talked about are
not approvable, and there may be a problem there."
5:22:00 PM
REPRESENTATIVE ROKEBERG asked if AOGCC would make that ruling
early or would they have to wait three years before ruling, or
if there could be an interim ruling.
MR. SEAMOUNT responded that he hadn't thought about it, but it
seemed that an interim ruling would be possible.
5:22:51 PM
REPRESENTATIVE ROKEBERG remarked that perhaps AOGCC should think
about this issue.
REPRESENTATIVE SAMUELS commented that if the AOGCC doesn't rule
for three years, "is anybody going to be willing to start doing
anything three years from now? Just counting on you saying you
can do anything at all when you might come out and say [that]
there's too much waste to do anything but 3-B, and 3-B doesn't
pay the bills."
MR. SEAMOUNT mentioned that the AOGCC is starting on Thursday
with this process, and he'll have a lot more information for the
committee after Thursday's hearing.
5:23:59 PM
CHAIR KOHRING asked Mr. Seamount, "I'd like to know why you're
seeking this position and ... what some of your goals are as a
member of the [AOGCC]."
MR. SEAMOUNT responded that he was seeking the position because:
I want to continue this extremely challenging,
exciting job serving the people of the state. There
is a lot to do. Permits are at an all-time high.
We've got this very important issue of conservation
concerning the gas pipeline. We are in a process of
facilitating expanded statewide exploration and
development, including NPRA [National Petroleum
Reserve - Alaska], and exploration licensing areas
that are outside Cook Inlet and the North Slope. I
think there's a real exciting time in the near future
for the state, and I would like to be part of it.
MR. SEAMOUNT continued:
We are going electronic. We're putting together a
website to where all of our information can be
accessed ... from anywhere in the world by people that
are interested in potentially investing in Alaska.
And they can see what kind of great opportunities
exist here without having to spend money and fly up
here. So there's going to be a lot more investors
taking a look at the state, I think, because of our
accessibility through the website.
5:25:35 PM
MR. SEAMOUNT continued:
We've got to maintain an active role in protecting
Alaska's underground injection control program. ...
There is a bill out there ... where we're taking over
responsibility from the EPA [Environmental Protection
Agency] for certain types of injector wells, which
will ... help to streamline the permitting process,
[and] get some of these projects onboard faster.
5:26:19 PM
MR. SEAMOUNT continued:
We've got mature oil fields out there. The
infrastructure is getting older; what do we do with
it? Do we take it away and throw it in the Aleutian
trench like people are ... thinking of doing with our
platforms, or can we do something with them to access
resources...? 96 percent of the oil generated in Cook
Inlet has never been found. Where'd that oil go? And
we can use those platforms to look for that extra oil.
5:26:48 PM
MR. SEAMOUNT continued:
We're also looking at waste from gas flaring. Alaska
has one of the best records of not wasting gas due to
flaring but I think we can do better there. ... In
Alaska, the amount of gas flared is 0.2 percent of the
gas produced. ... But there's room for even more
improvement. 0.2 percent of 8 bcf [billion cubic
feet] a day is a lot of gas.
5:27:30 PM
CHAIR KOHRING commented that the committee is working on a bill
that would be an incentive to encourage some of the deep-well
drilling.
MR. SEAMOUNT pointed out that AOGCC is working on ways to
increase its efficiency. He said that it reduced costs by over
$800,000 last year and is looking to reduce costs further this
year. He remarked, "I believe we can run the agency a bit
cheaper than we have in the past."
5:28:39 PM
CHAIR KOHRING asked Mr. Seamount to list some of his
accomplishments at the AOGCC.
MR. SEAMOUNT pointed to "the web-based dispersal of information
worldwide" which was started in 2000, the year he was originally
appointed. He also stated that the AOGCC has decreased the time
it takes to get a drilling permit from over 20 days down to less
than 10 days.
5:29:23 PM
CHAIR KOHRING made the personal observation that Mr. Seamount
has a good relationship with his constituents and that he comes
highly recommended in the industry.
REPRESENTATIVE SAMUELS asked Mr. Seamount how much of his job is
geology and how much is administration.
MR. SEAMOUNT replied that he does very little geology anymore;
most of his job now is managerial.
5:31:03 PM
CHAIR KOHRING asked Mr. Seamount, "In the course of your work
over the last five years, have you come across any major
irregularities, in terms of your oversight observations as to
what's going on on the North Slope and insuring that the state
is in fact getting what we're suppose to?"
MR. SEAMOUNT replied, "Alaska's blessed in that it has world
class operators."
CHAIR KOHRING clarified that he was not implying that the
industry is not being scrupulous in their operations; he was
just wondering if Mr. Seamount had discovered anything that he
disagreed with regarding how the industry reported things.
MR. SEAMOUNT responded that there will always be disagreements
between the AOGCC and the industry, but he hadn't seen anything
major. He noted that the AOGCC always has incident
investigations going on; currently there are about 12
investigations.
5:33:07 PM
REPRESENTATIVE ROKEBERG [moved to forward the name of Daniel
Seamount to the joint session of the House and Senate for
confirmation.] There being no objection, the confirmation of
Daniel Seamount was advanced from the House Special Committee on
Oil and Gas.
5:34:27 PM
MR. SEAMOUNT turned to slide 4 and pointed out that the AOGCC is
a quasi-judicial state regulatory agency, not a resource agency.
He explained the four main areas of AOGCC oversight: prevention
of physical waste of hydrocarbon resources, promotion of greater
ultimate recovery, protection of fresh water, and protection of
correlative rights.
MR. SEAMOUNT pointed out that slide 5 shows how the AOGCC fits
in with ADEC [Alaska Department of Environmental Conservation],
ADNR [Alaska Department of Natural Resources], and industry. He
said, "We're regulatory, we're not so much into the economics of
the situation, and we're sub-surface."
5:37:00 PM
MR. SEAMOUNT noted that slide 6 shows the AOGCC oversight
strategy, and that its regulations are 20 AAC 25 and Statute
Title 31. For regulatory and adjudicatory duties, he explained,
the AOGCC has two teams of two reservoir engineers, two
petroleum engineers, and two petroleum geologists that work on
drilling permits, sundry permits, all order decisions,
compliance reviews, and field studies. AOGCC also performs
inspections and it polices the sub-surface operations on oil
fields. It has one engineer and five on-site inspectors. He
noted that AOGCC has two inspectors on the North Slope at all
times. He said:
Our inspection program is probably the most complete
of any agency in the state. ... And we inspect well
control equipment. We make sure that the meters are
accurate. ... We make sure that the wells have
integrity and that they're not going to leak and spill
into other zones. We do equipment checks, ...
incident investigations, and at times we do other
inspections when we have requests from the interested
public.
5:38:30 PM
CHAIR KOHRING commented that it is unusual that the commission
is so small, with only three members. He asked if the gas and
oil industry operations in Alaska grows, the AOGCC would need
more commissioners.
MR. SEAMOUNT answered, "I'm not sure if we need more
commissioners. We may need more staff."
5:39:48 PM
CHAIR KOHRING remarked that he would support putting additional
money into staff for AOGCC.
MR. SEAMOUNT noted that one of the engineers is overwhelmed with
incident investigations, and he would like to hire an
investigator to do this work.
5:40:21 PM
MR. SEAMOUNT, in response to questions by Chair Kohring, said
that the AOGCC is within the Department of Administration. He
said he didn't know if the AOGCC had received any additional
funds for this year.
5:41:03 PM
MR. SEAMOUNT moved to slide 7, which lists the AOGCC's principle
clients, including: individual Alaskans, oil and gas industry,
ADNR, ADEC, Alaska Department of Revenue, EPA, U.S. Department
of the Interior, U.S. Department of Energy, trade organizations,
and other interest parties. He said, "We serve everybody, and
that includes the environmental community." He then turned to
slides 8 and 9, which listed oil and gas operators and owners on
the North Slope and in Cook Inlet/Mat-Su Valley. The number of
operators and owners has quadrupled since the year 2000, he
remarked. He said, "Right now we have two work sites: one in
Anchorage and one in Deadhorse. We have two teams ...: a west
team that looks at Kuparuk, offshore Cook Inlet, [and] West Cook
Inlet; and an east team that looks at Prudhoe Bay and the Kenai
Peninsula." He noted that there has recently been a well
permitted for Copper Basin.
5:42:38 PM
MR. SEAMOUNT pointed out that the AOGCC has oversight over
everywhere in the state except for Denali National Park and
Preserve. Slide 11 contained an organizational chart for AOGCC.
He said that there are 27 staff members as well as temporary
employees on occasion. Slide 12 showed how AOGCC is organized
on the North Slope between the two teams, while Slide 13 showed
the team organization in Cook Inlet.
5:43:35 PM
MR. SEAMOUNT turned to slide 14 and explained:
[The map on slide 14] shows that the present
production is on the North Slope around Prudhoe Bay
and in Cook Inlet, and all the shaded areas are areas
that have oil and gas potential. So I believe, as an
exploration geologist, that there is a lot of oil left
to be found in this state. ... Recently DNR has opened
up areas in Bristol Bay, which has active oil
seeps.... [It] looks a lot like Cook Inlet. Actually
the first oil field in Alaska was in the Gulf of
Alaska. Chukchi Basin, to the north has tremendous
amounts of potential oil left to be found.
5:44:27 PM
MR. SEAMOUNT explained that slides 15, 16, and 17 listed the
AOGCC goals and strategies for fiscal year 2006. Slide 18
listed AOGCC primary services, which include holding hearings
and open meetings, he noted. He said that AOGCC holds an open
hearing about every week and about 16 hearings a year.
5:45:46 PM
MR. SEAMOUNT turned attention to slide 19, a diagram showing how
technology has improved over time. "These well bores are
getting more and more complex," he said, "and they're taking
more of our time to evaluate." He pointed out that the well on
the left side of the slide is a vertical drilled well in the
pre-1970s, and the well on the left is an extended reach well,
which has multilateral well bores with up to five well bores
coming out of one "mother bore". "And we're permitting more and
more of those," he commented.
5:47:03 PM
MR. SEAMOUNT said that slide 20 depicted an extended reach well
map showing that wells can reach up to four miles out from the
well surface location, and "there's even talk of going up to
seven miles."
CHAIR KOHRING asked, "Does that mean we could actually drill
outside of ANWR [Arctic National Wildlife Refuge] and get
underneath there, and get the oil anyway?"
MR. SEAMOUNT responded, "You could do that now ..., if the
federal government would let you. ... You could do that
technically, but I don't think legally you could get away with
it."
CHAIR KOHRING commented, "Maybe that would be the solution, as
opposed to Congress opening up ANWR per se; just opening up the
ability to be able to drill underneath the ... formations, from
a different location."
MR. SEAMOUNT replied that he didn't think it would be possible
to get the "sweetest spot of ANWR from outside, unless you
somehow drill from offshore, and there might be some real
problems doing that."
5:48:18 PM
MR. SEAMOUNT moved to slide 21, which was a graph showing Alaska
oil and gas activity from the 1950s to 2010. He said:
Right after 1960 was a spurt of drilling at Swanson
River, and that's the reason why we became a state:
because we showed that we had the resources, that we
could be a real member of the United States. And then
after that [were] ... the discoveries in Cook Inlet;
all the platforms went up and you had another spurt of
activities. ... On the left [of the graph] it shows
the number of well permits per year, and then it died
off. And then there was the discovery at Prudhoe Bay
and Kuparuk, and you see up to 305 wells were
permitted in one year during that part of the
activity. The crash of the oil prices brought us down
to under 150 permits per year, and then a steady
increase in the number of wells, up to the present,
where we're at second all-time records. In fact,
probably ... since 1998, I'll bet you during that time
period that's the most number of wells permitted that
we've seen in the state, and that includes Prudhoe and
Kuparuk times.
5:49:31 PM
MR. SEAMOUNT pointed out that the graph on slide 21 also showed
the number of active wells that the AOGCC has to inspect, "and
we just hit 4,000 wells this year." Numbers of reservoirs are
also on the graph, and he said that there are 100 currently. He
then turned to the graph on slide 22, entitled "Alaska's Daily
Oil and NGL Production Rate". He said:
It's broken out through areas of the state, like Cook
Inlet, Colville River, other North Slope fields, [and]
Prudhoe Bay. ... At the very beginning you see the
increase in production due to this spurt of activity
here in the Cook Inlet, and then it kind of dies off.
And then of course Prudhoe Bay hits, and with this
activity, you can see we're getting up to two million
barrels a day at one time. And then you see the
steady decline. One thing that's kind of disturbing
is you see the steady decline in production; it was
arrested for a bit by Alpine and North Star
development but you can see activity is going up, and
still all that extra activity still isn't spurring
production as much as it has in the past with these
huge discoveries like Kuparuk and Prudhoe Bay.
5:50:56 PM
MR. SEAMOUNT reiterated that there was an all-time high in
permits presently, and last year AOGCC was at an all-time high
in orders. In response to Chair Kohring, he explained that an
order would be some sort of decision that the AOGCC would make
on a request from a party: "they'd want pool rules, they'd want
disposal injection order.... An order could be concerning a
decision we've made on an adjudication of a spat between two
parties. And orders take quite a bit of work; it takes a lot of
legal writing.
5:51:45 PM
MR. SEAMOUNT pointed out, "[Annual well work actions] were at a
record in 2004. We had a high number of drilling permits, a
record number of well workover permits, and a record number of
other. ... It probably has something to do with the price of
oil."
5:52:30 PM
MR. SEAMOUNT, in response to Chair Kohring, stated that [the
current high interest in Alaska by the oil and gas industry] is
due to a combination of legislative bills and the price of oil.
MR. SEAMOUNT turned to slide 26, containing a graph of permit
approval times over the last few years. He noted that in fiscal
year 1999 through 2001, the AOGCC was taking about 15-20 days
for a permit approval, and in one quarter it took an average of
over 30 days per permit, which he felt was unacceptable. He
said that the AOGCC started emphasizing that it needed to look
at the permits completely and approve them in a reasonable
amount of time. Currently, permitting takes about 7 days, he
said, while at the same time the numbers of permits have been
increasing as well. He commented that the AOGCC approves about
one permit every working day now, which equals about 250 per
year.
5:54:14 PM
MR. SEAMOUNT said that slides 27 and 28 list the AOGCC's key
challenges and projects. The first challenge is to determine
the impacts of major gas sales upon ultimate hydrocarbon
recovery from Prudhoe Bay and Cook Inlet.
5:54:58 PM
CHAIR KOHRING asked if Mr. Seamount had ever denied permits.
MR. SEAMOUNT replied that the AOGCC does deny some permits. He
said:
Often we find problems with the permits, with the
compliance ... with regulations, or they ask us for a
waiver that we don't feel can be granted, and we'll
deny that part of it. And then they'll take the
permit back, rework it, and give us one that is
compliant. So it looks like we approve 99.5 percent
of the permits, but I would say that probably 30
percent of the permits ... require some sort of work
before they're approved.
5:56:14 PM
CHAIR KOHRING encouraged Mr. Seamount to speak to the committee
at a later date regarding old Cook Inlet platforms, because the
committee is working on legislation to address the issue.
MR. SEAMOUNT commented, "Before we get rid of those platforms,
... every one of those wells ought to be drilled another 5,000
feet deeper. Go down to where the oil's coming from, and just
see what's down there."
5:58:03 PM
CHAIR KOHRING announced that the next committee meeting would be
on March 3, focusing on the topic of viscous oil.
ADJOURNMENT
There being no further business before the committee, the House
Special Committee on Oil and Gas meeting was adjourned at
5:58:50 PM.
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