Legislature(1995 - 1996)
04/16/1996 10:11 AM O&G
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HOUSE SPECIAL COMMITTEE ON OIL AND GAS April 16, 1996 10:11 a.m. MEMBERS PRESENT Representative Norman Rokeberg, Chair Representative Scott Ogan, Vice Chair Representative Gary Davis Representative Bill Williams Representative Tom Brice Representative Bettye Davis Representative David Finkelstein MEMBERS ABSENT All members present COMMITTEE CALENDAR *HOUSE BILL NO. 381 "An Act relating to oil and gas conservation and recovery." - MOVED CSHB 381 (O&G) OUT OF COMMITTEE (* First public hearing) PREVIOUS ACTION BILL: HB 381 SHORT TITLE: OIL AND GAS CONSERVATION & RECOVERY SPONSOR(S): REPRESENTATIVE(S) GREEN,B.Davis JRN-DATE JRN-PG ACTION 12/29/95 2366 (H) PREFILE RELEASED 01/08/96 2366 (H) READ THE FIRST TIME - REFERRAL(S) 01/08/96 2366 (H) OIL & GAS, RESOURCES 03/26/96 (H) O&G AT 10:00 AM CAPITOL 124 03/26/96 (H) MINUTE(O&G) 04/16/96 (H) O&G AT 10:00 AM CAPITOL 124 WITNESS REGISTER REPRESENTATIVE JOE GREEN Alaska State Legislature State Capitol, Room 24 Juneau, Alaska 99801 Telephone: (907) 465-4931 POSITION STATEMENT: Sponsor of HB 381 DAVID JOHNSTON, Chair Oil and Gas Conservation Commission 3001 Porcupine Drive Anchorage, Alaska 99501-3120 Telephone: (907) 279-1433 ACTION NARRATIVE TAPE 96-15, SIDE A Number 000 The House Oil & Gas Special Committee was called to order by Chairman Norman Rokeberg at 10:11 a.m. Members present at the call to order were Representatives Rokeberg, Ogan, Gary Davis, and Brice. A quorum was present. This meeting was teleconferenced to Anchorage. HB 381 - OIL AND GAS CONSERVATION & RECOVERY Number 0083 CHAIRMAN ROKEBERG announced that the agenda was HB 381, "An Act relating to oil and gas conservation and recovery." REPRESENTATIVE JOE GREEN, Sponsor of HB 381, read from a sponsor statement, "HB 381 clarifies that the powers of the Alaska Oil and Gas Conservation Commission, commonly called AOGCC, to prevent waste, protect correlative rights and realize ultimate recovery on all state land lawfully subject to its police powers prevails over a contrary decision by DNR (Department of Natural Resources). AS 31.05.027 states, `The authority of the commission applies to all land in the state lawfully subject to its police powers.' However, recently the Administration has raised the specter of overlapping jurisdiction. I believe that a clear, concise line of authority from the legislature to the independent agency is important for the development of our hydrocarbon resources." Number 0151 REPRESENTATIVE GREEN said the AOGCC is charged by statute with correlative rights and the prevention of ultimate waste. Under this authority, AOGCC has the police power to "force unitization where they have enough people wanting to form a unit and some individual who may decide that they don't want to, in the effort of maintaining the best, ultimate recovery program, they have the police power to force a pool unit." He said in the state of Alaska, with the exception of the Swanson River federal unit, all units are on state owned mineral leases and the DNR acts as royalty owner. The DNR, as royalty owner, has exercised authority to grant or not grant formation of voluntary units and this authority has worked well in the Prudhoe Bay unit and the Kuparuk River unit. He said there are issues over what the overlapping authority between AOGCC and the DNR. Number 0321 REPRESENTATIVE GREEN said, if you have a unit with one horizon with production going into a common facility treating oil, water and gas and this unit is combined with another unit, a problem over DNR or AOGCC jurisdiction occurs. He said the biggest item of contention is with gas metering and the liquids involved in the North Slope production. Number 0386 REPRESENTATIVE GREEN referred to pages 81 and 82 of a document titled, "Decision Regarding Jurisdiction," written by the DNR, which says the DNR commissioner has the authority and duty to investigate and issue orders preventing economic and physical wastes, which is also the AOGCC charge. The document also states the authority of the DNR commissioner and the AOGCC, over parts of the Miscible Injectant/Natural Gas Liquids (MI/NGL) dispute, are overlapping. He said when there are overlapping decisions it creates problems. Number 0525 REPRESENTATIVE GREEN said when a voluntary unit has been affected, on a voluntary basis, the DNR would make the decision. He said HB 381 establishes, when it comes to correlative rights or waste, that the AOGCC would have authority to modify actions of the DNR. He said this provision is found in HB 381, on the second page, "but the provisions of (p), the unitization portion of 180 Statute, section and this subsection may be modified by the AOGCC by an order under AS 31," the statute under which the AOGCC operates. Number 0587 CHAIRMAN ROKEBERG asked for clarification on the language, "the prevention of physical wastes." Number 0638 REPRESENTATIVE GREEN said, in Title 31, physical waste refers the actual waste of the resources such as inappropriate flaring or not developing the reservoir with the best method for maximum, ultimate recovery. He said one of the things determined by the AOGCC is the maximum efficient rate, the rate at which the operator cannot exceed withdrawals. He said an operator, who has invested money to develop, by blowing the wells too hard can create damage in the reservoir which affects ultimate recovery. He said AOGCC is charged with ensuring that this situation won't happen. He said the reservoir in Prudhoe Bay was capable of producing 2 million or 3 million barrels of oil per day, but the maximum efficient rate at which they were authorized to operate was 1.5 million barrels per day. He said the purpose of setting this rate was to maximize ultimate recovery, rather than maximize immediate return. Number 0727 REPRESENTATIVE FINKELSTEIN referred to the letter from the Attorney General, dated March 4, 1996, and said it addresses the question raised by Chairman Rokeberg on whether the decisions on royalty reductions would be covered under HB 381. He said there seems to be a number of topics within HB 381 which are economic topics and reading through existing law 31.05.030, regarding the powers and duties of the AOGCC, he said he did not find anything in the statutes that relate to these economic relations and expressed concern over this issue. Number 0799 REPRESENTATIVE GREEN said HB 381 has nothing to do with economic waste, and said economic waste is not a charge of the AOGCC. He said HB 381 relates to, by statute, the charge of the AOGCC. He said reducing royalty or economic waste would not be a purview within the AOGCC's authority. Number 0829 REPRESENTATIVE FINKELSTEIN said the conclusion of the Attorney General, in his letter, is that HB 381 would allow the issues of royalty reduction and economic waste to become part of the province of the AOGCC. He read the Attorney General's letter, "maximizing economic and physical recovery of resources may be a consideration in many determinations made by the commissioner...if the purpose, in fact,...is to insure a greater ultimate recovery of oil and gas , then that determination,... will be subject to modifications by the commission" and said the letter makes a different conclusion from the conclusion made by Representative Green. He said the Attorney General said these issues, royalty reductions and other economic determinations would, under HB 381, allow the AOGCC to override the commissioner of DNR. Number 0892 REPRESENTATIVE GREEN said royalty reduction would only be given as an incentive to produce and would contribute to the ultimate recovery. He said this charge would be required by the AOGCC and "probably would never be an issue." He said an ultimate recovery increase would be to the benefit of both the AOGCC and the DNR. He said, "when the economic situation would result in less ultimate recovery, or that there was a jurisdictional dispute as to how facilities are monitored to determine allocations between units, but that is not an economic waste...I guess you could track that to economics if the field operating netback costs were different from one field to another or the allocations of the operation of the facility were somehow different from the allocations of the fluids going through it, but I think that's not an issue of the conservation commission." Number 0939 REPRESENTATIVE FINKELSTEIN said in HB 381 the area that the AOGCC would modify the action of the DNR would be to "ensure a greater ultimate recovery of oil or gas". He said there is a previous section that relates to the waste of oil and gas, but clarified that anything insuring a greater ultimate recovery of oil or gas, as the Attorney General states would include royalty reductions. He said, because this is a subsection of 180 that relates to insuring a greater ultimate recovery of oil or gas, which is what the royalty reduction provision does, then the AOGCC would become the final arbiter on that decision. Number 1012 REPRESENTATIVE GREEN said, "when there is going to be an ultimate increase, because of a royalty reduction, that will be the same argument that conservation commission would make, they wouldn't by statute be able to say, no, you can't do that because you are going to get more oil, that is the whole purpose of prevention of waste." Number 1044 REPRESENTATIVE FINKELSTEIN said if the DNR commissioner turned them down, the AOGCC could say that they get final determination when it is to insure a greater ultimate recovery of oil or gas and AOGCC is going to modify the termination or action of the commissioner of DNR by overriding their decision in order to give the oil or gas company the royalty reduction. Number 1067 REPRESENTATIVE GREEN said this is an economic consideration by the applicant and is not a purview of the AOGCC. He said AOGCC is not empowered to make an operator go out and spend more money or do something to produce, they are charged with ensuring the method by which the oil or gas company uses, not whether or not he can produce because of a royalty reduction. Number 1093 REPRESENTATIVE GREEN said when an oil or gas company finds the economic limit and shows cause that he can no longer operate under the conditions set forth, wants to abandon the wells, the AOGCC does not have the authority to say, "no, you won't shut in." He said the DNR can help an operator by assisting them with a reduction in royalty burden. He said it is not within the purview of the AOGCC. Number 1127 REPRESENTATIVE FINKELSTEIN said he agreed with Representative Green in regards to the old law, but said HB 381 would change the law. He read from HB 381, "the commission may modify the determination of the commissioner of natural resources, authorized by another subsection of 180 which includes royalty reduction, if the purpose of the determination is to insure a greater ultimate recovery of oil or gas." He said HB 381 changes the law by amending it to say the commission can do this in any case where there is an issue of greater ultimate recovery of oil or gas. He said the Attorney General, in the aforementioned letter, agreed with this conclusion. Number 1165 REPRESENTATIVE FINKELSTEIN said the Attorney General states, under the new law, the AOGCC would take over various areas which were not under their original statutory purview. Number 1183 REPRESENTATIVE GREEN said he respectfully disagreed with the Attorney General's opinion and said the AOGCC could answer this question. Number 1204 CHAIRMAN ROKEBERG said this was a discussion of economic waste versus physical waste and asked for a definition of physical waste. Number 1247 REPRESENTATIVE GREEN said the prevention of physical waste was a determination of the most efficient and ultimately the best way to develop the reservoir to get the most recovery. He said well spacing, well rates and field rates are all methods utilized. He said it is not within the purview of the AOGCC to determine how many wells would need to be drilled, 80 versus 60 wells. He said, on the 60 wells the operator decided to drill, the AOGCC would determine co-mingling in the well bore, completion types and rates of production. He said if you withdraw too fast you can dissipate reservoir energy and leave recovery that otherwise would have been producible. He said, if the operator decides they cannot continue production when the rate falls to 100 barrels a day, the AOGCC cannot force the operator to continue. Number 1332 REPRESENTATIVE GREEN said the DNR can reduce royalties to provide an economic basis to allow the operator to continue production. He said there would be no reason for conflict to occur between DNR and AOGCC regarding royalty reduction. He reiterated Representative Finkelstein's concern about the possibility that AOGCC could force DNR to reduce the royalty, but he said this is an economic consideration and the AOGCC has no authority to do that. Number 1360 CHAIRMAN ROKEBERG said the charge of the AOGCC is to prevent physical waste not to reduce economic waste, although there are economic benefits to preventing physical waste. Number 1409 DAVID JOHNSTON, Chair, Oil and Gas Conservation Commission, was next to testify via teleconference from Anchorage. He discussed a hearing, currently being held, on whether the AOGCC should order compulsory unitization of the Prudhoe oil pool. He said this hearing was the result of hearings held last year on the proper mix between natural gas liquids and miscible injectant. He said these hearings last year created the needed emphasis for HB 381. He said the AOGCC hearings were followed by hearings from the DNR in conjunction with the Department of Revenue (DOR). Number 1468 MR. JOHNSTON said, in the jurisdictional brief prepared by the DNR relative to their authority to hold this particular hearing, the brief indicated that there was certain ambiguity existing between the jurisdiction of the AOGCC, under AS 31, and the jurisdiction of DNR, under AS 38. He said if there is ambiguity on jurisdiction then there is probably a need for HB 381. He said AOGCC believes the statute, AS 31.05.027, is clear that the jurisdiction extends to all lands within the state of Alaska including federal lands, state lands and Native lands. He said, generally, the jurisdiction of the AOGCC is authority relative to conservation principles such as the prevention of waste, prevention of correlative rights and the realization of accident recovery. Number 1527 MR. JOHNSTON said the AOGCC view HB 381 as a bittersweet bill, because on one hand they feel their statutory authority is clear but on the other hand if there are individuals that feel there is ambiguity with the statutes as currently written then perhaps it is appropriate to clarify this to avoid confusion on the part of various Departments and the decisions that are rendered. He said, potentially, the AOGCC could get into a "catch 22" situation with this (indiscernible) issue if the AOGCC renders one decision and the DNR renders an opposite decision, if this had happened the issue would probably been resolved by the courts. Under HB 381 there would be no need for court action, because it would make the authority of AOGCC, at least when it pertains to conservation issues, superior to that of the DNR. Number 1592 CHAIRMAN ROKEBERG clarified that AOGCC has authority in AS 31.05.027. MR. JOHNSTON said this was correct and read from the statute, "the authority of the commission applies to all land in the state lawfully subject to its police powers including land of the United States and land subject to the jurisdiction of the United States. The authority of the commission further applies to all land included in voluntary cooperative or human plans of development or operations entered into in accordance with AS 38.05.180(p)." Number 1621 CHAIRMAN ROKEBERG referred to Section 2, of HB 381, "in the other subsection of 38.05.180 which could include 180(j), the royalty reduction under HB 207," and asked if AOGCC had an opinion on this. Number 1638 MR. JOHNSTON said he could not see the AOGCC ever being concerned with royalty reduction. He said if the royalty owner wished to lower his royalty it is within his prerogative to do so, but he could not see that there would be any need for the AOGCC's attention in that regard. He said this would not be an issue of physical waste, correlative rights or an issue of ultimate recovery. Number 1672 CHAIRMAN ROKEBERG said HB 381 provides for a specific application to 180(p), (q), (u), or any subsections of 180. He asked if the areas of overlap between the DNR and the AOGCC were specifically in (p), (q), (u) or if they were in other subsections of 180 that come into play. Number 1690 MR. JOHNSTON said principally, the overlap occurs in (p), (q) and (u), although, generally, the DNR statute does indicate a particular concern that the state has relative to the prevention of wastes, correlative rights and the realization of ultimate recovery. He said, it appeared to him, as AS 38 directs DNR, because of the interest of the state in achieving agreements that would protect correlative rights insuring ultimate recovery and preventing waste, it gives DNR certain authorities to negotiate those agreements to insure that those things are realized. He said this authority raises the possibility that an eventual conflict would arise between the DNR and the AOGCC's interpretation of prevention of physical waste, correlative rights and the realization of ultimate recovery. Number 1761 CHAIRMAN ROKEBERG said this would be prevented under Section 3 of HB 381. He referred to the DNR report conclusion that there are overlapping jurisdictions between the DNR and the AOGCC, but said the report goes on to say, "which has paramount authority or what are the limits of each agency's authority need not be decided." He said the report talks about one specific case, but added that this appears to be a problem which would be resolved in HB 381. Number 1797 MR. JOHNSTON said the Department of Law (DOL) might also be of assistance. Number 1808 CHAIRMAN ROKEBERG asked his opinion on "your authority, if this is the overlap, of the existing statutory regime." Number 1828 MR. JOHNSTON said the AOGCC would have the superior jurisdiction in terms of the narrow issue having to do with physical waste, correlative rights and ultimate recovery. He said if there is confusion over this jurisdiction, then HB 381 would be appropriate to avoid jurisdictional disputes. Number 1859 CHAIRMAN ROKEBERG asked what the involvement was of the DOL. MR. JOHNSTON said the Attorney General was asked to look at the statutes of both the DNR and the AOGCC to make a determination of whether there was ambiguity. He said he was not aware of the status of this inquiry. Number 1891 REPRESENTATIVE GREEN said Representative Finkelstein expressed concern over the language of HB 381 in that it could force DNR to reduce royalty to allow for an operator to continue production and asked if this was a possibility given the AOGCC charge. Number 1931 MR. JOHNSTON said he did not think this was the case. He said the AOGCC had hypothetical discussions on this issue, relative to the Milne Point, and AOGCC concluded that there was no AOGCC role in royalty reduction. He said this issue relates to correlative rights in that certain rights have been established between the lessor and the lessee. He said, once a particular royalty was established in the lease document, it establishes the correlative rights issue between the lessor and the lessee and the AOGCC would not have an interest in changing that, it would be outside the jurisdiction of the AOGCC. Number 1990 REPRESENTATIVE FINKELSTEIN said he was not asking whether the current members of AOGCC would feel it was appropriate to modify the determination by the commissioner on these matters, rather he stated that HB 381 would give them the power to do so. He clarified that Mr. Johnston had the most recent copy. He referred to the beginning of HB 381 and said the commission may modify the determination of the commissioner of natural resources authorized by another section of 38.05.180, which Chairman Rokeberg mentioned included royalty reduction, if the purpose of the determination was to ensure a greater ultimate recovery of oil or gas. He referred to the letter from the Attorney General and said that the royalty reduction provision fits in because it is another subsection of 180 and because it is to insure a greater ultimate recovery of oil or gas. He said his question isn't whether or not the AOGCC would decide it would work on these issues, but would this section of HB 381 give the commission the power to intervene as the Attorney General has suggested. Number 2054 MR. JOHNSTON said HB 381 was also written to protect the correlative rights of persons and said he did not think the AOGCC would move to a direction changing the arrangements between the lessor and the lessee, he could not imagine that this would be a factor for the AOGCC and would be prevented by the statute which governs the AOGCC. He said the governing statute would prevent the AOGCC from engaging in any sort of attempt to overturn or order a reduction of another royalty which has been established by the DNR. Number 2102 REPRESENTATIVE GREEN said he indicated that the governing statute of AOGCC gives no authority on an economic basis and royalty reduction is economic. MR. JOHNSTON said he would agree that this statement was correct. Number 2144 REPRESENTATIVE FINKELSTEIN said the statement that AOGCC wouldn't do this keeps being mentioned, but the question is could AOGCC be involved in royalty reduction under the new law that is being formulated under HB 381 which would override the old law. He said the Attorney General, the one who will decide whether or not there is an issue of the authority of the AOGCC, has stated that HB 381 allows for AOGCC involvement in royalty reduction. He said Mr. Johnston's reference to protecting correlative rights is a list of "ors," there are three items on the list, each one of them has an "or" statement between them, so any one item on the list is, by itself, enough to allow the commission to modify the determination of the action of the commissioner of DNR. He said because there is no "and" in the list, it doesn't have to meet all three requirements, it only has to meet one of these requirements. Number 2193 REPRESENTATIVE GARY DAVIS stated that this list does have the word, "or" and then asked for examples of correlative rights. Number 2203 MR. JOHNSTON said correlative rights, defined by statute, is a provision directing the AOGCC that the owner of each property in a pool has the right to recover his just (indiscernible) net share of production. He said, generally, the AOGCC regards the property right which has been agreed to by the lessee and the lessor. He said this sharing would not be something that the AOGCC would not be involved with as long as there was the assurance that the lessee and the lessor had received their just (indiscernible) net share. He said, if the lessor wanted to lower the royalty rate, the AOGCC would have no problem with that. He said, under the current statute, the AOGCC would not have the authority to overturn a decision or substitute their judgement for that of the lessor. If the Attorney General perceives something different it would raise concerns but, under the statute, he did not see that as under the authority of the AOGCC. Number 2277 REPRESENTATIVE GARY DAVIS said this is interpreted as property rights and asked if it was also interpreted as contractual rights. Number 2283 MR. JOHNSTON said, within the agreements that the companies negotiated amongst themselves, that would be a subject of contractual rights as well. In other words, correlative rights are more fully articulated in the contract that the owners of the resources, the working interest owners have negotiated amongst themselves. CHAIRMAN ROKEBERG said it was his intention to hold HB 381 over and expressed concern about Section 1 and 2, the entire leasing statute of AS 38.05.180. He asked that a letter be drafted to the Attorney General's office requesting additional information about why they haven't been able to correct this issue. Number 2338 REPRESENTATIVE GREEN said this issue is outside of the intent of HB 381 and proposed Amendment 1 on page one, line seven and again on page two, line five, that after AS 38.05.180 insert, "excluding subsection (j)," and said this would alleviate any concerns. He said it is not the intent of HB 381 to get into that jurisdiction. Number 2367 REPRESENTATIVE BRICE moved Amendment 1 to HB 381. Number 2375 REPRESENTATIVE FINKELSTEIN said the issue he raised was just an example of the economic determinations that could be affected by HB 381. He said royalty reduction was the most prominent issue. Number 2389 REPRESENTATIVE OGAN said HB 381 would go next the House Resources Committee. He said the issue concerned is (j) and if you exclude (j) it would fix the problem. CHAIRMAN ROKEBERG stated that Representatives Finkelstein and Bettye Davis joined the committee meeting at approximately 10:15 a.m. Number 2425 REPRESENTATIVE FINKELSTEIN said he would move to amend Amendment 1 as the proposed Amendment 1 would imply that all other economic decisions besides (j) were going to be subject to override by the AOGCC. He said the amendment to the Amendment 1 would say, "does not apply to economic decisions including (j)." REPRESENTATIVE BILL WILLIAMS objected to the amendment to the proposed Amendment 1. REPRESENTATIVE FINKELSTEIN said the amendment to Amendment 1 reflects the discussions where everyone stated that HB 381 is not intended to apply to economic decisions, including royalty reductions, and said he did not know how else to incorporate this language into the proposed amendment to the Amendment 1 except to use the words that the sponsor and the AOGCC used. CHAIRMAN ROKEBERG asked that the amendments be handled separately. TAPE 96-15, SIDE B Number 0000 REPRESENTATIVE GREEN, "NGL dispute there may be economic consequences of that decision and this amendment to the proposed Amendment 1 might preclude that, even though that is not the intent." Number 0019 REPRESENTATIVE FINKELSTEIN withdrew the amendment to Amendment 1. He objected to the proposed Amendment 1 because the amendment would make HB 381 worse as there are many other economic decisions that AOGCC could decide as being in their province. The proposed Amendment 1 would make the issue raised by the Attorney General's letter worse, not better, because saying that HB 381 does not apply to the subsection (j) regarding royalty reduction would imply that all other economic decisions that DNR is involved in would be subject to override by the AOGCC. He said making an exception confirms the other possible economic decisions, the exception proposed in Amendment 1 is too narrow. Number 0057 CHAIRMAN ROKEBERG said he disagreed, the issue is overlap of definition of authority and the proposed Amendment 1 makes a statement consistent with the allocation of authority between the two agencies. Number 0081 REPRESENTATIVE FINKELSTEIN withdrew his objection to Amendment 1. Hearing no other objections, Amendment 1 was incorporated into CSHB 381 (O&G) by the House Special Committee on Oil and Gas. Number 0086 REPRESENTATIVE FINKELSTEIN made a motion to move Amendment 2. REPRESENTATIVE OGAN objected to the proposed Amendment 2. REPRESENTATIVE FINKELSTEIN said people keep saying that economic decisions are not within the particular duties of the AOGCC, but HB 381 gives the powers and duties on 030, which runs through a number of things including (f), (g), and (h), and said this will become (i) and economic decisions will become part of the powers of AOGCC. He said HB 381 will become part of the statutes stating what AOGCC can do, it reads, "the commission may modify determination that relates to that is made the DNR on relating to insuring a greater ultimate recovery of oil or gas." He said common sense tells you that this language will allow the AOGCC into a lot of areas that the commission has said they don't have a lot of interest in, but they will be able to override those and even though the current commission members may not feel the need to do this, it will allow future commission members to do so. He said, if the common sense side of the argument does not convince you on this point, there is a letter from the Attorney General confirming that this is the case. Number 0137 REPRESENTATIVE GREEN reiterated that the Attorney General's concern was the royalty reduction which has been excluded from CSHB 381 (O&G). He said those jurisdictional portions are in AS 31 now, so this is the limit that they are going to do, CSHB 381 (O&G) does not give AOGCC any authority on economic waste. It is not the intent, nor the desire, to grant an economic waste jurisdiction to the AOGCC. Number 0172 REPRESENTATIVE FINKELSTEIN said the Attorney General did not say royalty reduction was their only concern, this was a response to the question that Chairman Rokeberg happened to ask them. Chairman Rokeberg only asked them about royalty reduction and referred to page one of the letter where it says, "does this apply to royalty reduction," and said the Attorney General did not answer any other question because it was not asked. He said the same exact logic applies to other economic decisions and it is the reason that the DNR opposes CSHB 381 (O&G). He said economic waste would be part of their new standards, the powers and duties of the AOGCC would include overriding DNR on economic decisions. He said everyone on the committee can say that they don't intend for this to occur, but then the committee is not supporting Amendment 2 which would correct this situation. Number 0199 REPRESENTATIVE GARY DAVIS said having the AOGCC determine actions preventing waste to oil or gas to insure greater ultimate recovery relates to economic decisions. He said these issues are environmental and economic. Number 0214 REPRESENTATIVE GREEN said those are the charges currently in Title 31 and the statute is reiterated in CSHB 381 (O&G) to make sure that no one misconstrues that the AOGCC is trying to anything other than what they are entitle to, but said it has nothing to do with economics. The bill says that if you get involved, this is what you have to do but it does not say you will build this many wells, you will operate this way, it doesn't get involved in economic waste the way it was discussed in royalty reduction. Number 0238 REPRESENTATIVE GARY DAVIS read, "to insure greater ultimate recovery of oil or gas," and asked why that is included. REPRESENTATIVE GREEN said to make sure that when a reservoir was tapped it was done in the most efficient and ultimately the best manner achieved under current technology. If the operator went out and said he was going to drill one well, and if there were not fault traps or any other way to prevent the migration of all that oil to that one well over a millennium, the AOGCC could not force him to drill another well. If the AOGCC came in and told the operator that they were not going to recover oil behind this fault, you will have to drill a well there. He said the rate at which the operator produces oil cannot exceed a certain number of barrels per day as it would create damage to the reservoir. He said the AOGCC cannot force the operator to extract it at a rate that may be economic to them. He reiterated that the AOGCC is not charged with economic waste. Number 0274 A roll call vote was taken on Amendment 2. Representative Finkelstein voted yes. Representatives Rokeberg, Ogan, Gary Davis, Williams, Brice and Bettye Davis voted no. Amendment 2 failed to be adopted to CSHB 381 (O&G) by the House Special Committee of Oil and Gas. Number 0290 REPRESENTATIVE OGAN made a motion to move CSHB 381 (O&G) with attached fiscal note and individual recommendations. REPRESENTATIVE FINKELSTEIN objected to the motion. Number 0297 A roll call vote was taken on the motion to move CSHB 381 (O&G). Representatives Rokeberg, Ogan, Gary Davis, Williams, Brice and Bettye Davis voted yes. Representative Finkelstein voted no. CSHB 381 (O&G) was moved from committee by the House Special Committee of Oil and Gas. ADJOURNMENT There being no further business to come before the House Special Committee on Oil and Gas, the meeting was adjourned at 11:06 a.m.