Legislature(2005 - 2006)CAPITOL 124
01/24/2006 05:00 PM House OIL & GAS
| Audio | Topic |
|---|---|
| Start | |
| Overview/update from Alaska Oil & Gas Conservation Commission | |
| HB300 | |
| Overview/update from Alaska Oil & Gas Conservation Commission | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| = | HB 300 | ||
ALASKA STATE LEGISLATURE
HOUSE SPECIAL COMMITTEE ON OIL AND GAS
January 24, 2006
5:05 p.m.
MEMBERS PRESENT
Representative Vic Kohring, Chair
Representative Norman Rokeberg
Representative Ralph Samuels
Representative Nancy Dahlstrom
Representative Berta Gardner
Representative David Guttenberg
MEMBERS ABSENT
Representative Lesil McGuire
OTHER MEMBERS PRESENT
Representative Kurt Olson
Representative Jay Ramras
COMMITTEE CALENDAR
OVERVIEW/UPDATE FROM ALASKA OIL & GAS CONSERVATION COMMISSION
- HEARD
HOUSE BILL NO. 300
"An Act relating to the qualifications of the member of the
Alaska Oil and Gas Conservation Commission who need not be
certified, trained, or experienced in either the field of
petroleum engineering or the field of petroleum geology."
- MOVED CSHB 300(O&G) OUT OF COMMITTEE
PREVIOUS COMMITTEE ACTION
BILL: HB 300
SHORT TITLE: OIL & GAS CONSERVATION COMMISSION MEMBER
SPONSOR(s): REPRESENTATIVE(s) KOHRING
05/04/05 (H) READ THE FIRST TIME - REFERRALS
05/04/05 (H) O&G, RES
01/24/06 (H) O&G AT 5:00 PM CAPITOL 124
WITNESS REGISTER
CATHY P. FOERSTER, Commissioner
Alaska Oil & Gas Conservation Commission (AOGCC)
Department of Administration (DOA)
Anchorage, Alaska
POSITION STATEMENT: Presented an overview/update from the
Alaska Oil & Gas Conservation Commission.
DANIEL T. SEAMOUNT, JR., Commissioner
Alaska Oil & Gas Conservation Commission (AOGCC)
Department of Administration (DOA)
Anchorage, Alaska
POSITION STATEMENT: Testified that it's good insurance for all
members of the commission to have a fundamental understanding of
the industry he/she regulates.
ACTION NARRATIVE
CHAIR VIC KOHRING called the House Special Committee on Oil and
Gas meeting to order at 5:05:22 PM. Representatives Kohring,
Samuels, Gardner, and Guttenberg were present at the call to
order. Representatives Rokeberg and Dahlstrom arrived as the
meeting was in progress. Also in attendance were
Representatives Olson and Ramras.
^OVERVIEW/UPDATE FROM ALASKA OIL & GAS CONSERVATION COMMISSION
CHAIR KOHRING announced that the first order of business would
be an overview/update from the Alaska Oil & Gas Conservation
Commission.
5:06:24 PM
CATHY P. FOERSTER, Commissioner, Alaska Oil & Gas Conservation
Commission (AOGCC), Department of Administration (DOA), informed
the committee that the AOGCC is a quasi-judicial [state]
regulatory agency. She said that the AOGCC is responsible for
"everything from the wellhead on down into the reservoir" in oil
and gas operations on all of Alaska's private and public lands
and waters, except Denali National Park and Preserve. The AOGCC
regulates drilling and production for oil and gas. In addition,
the AOGCC protects correlative rights, which means that if there
are two landowners and one feels that the other landowner is
infringing upon his/her rights to get his/her oil and gas out of
the ground, the AOGCC steps in to ensure that the correlative
rights of both landowners are being protected. The AOGCC also
prevents waste of hydrocarbons and promotes greater ultimate
recovery of hydrocarbons. The AOGCC also protects Alaska's
fresh groundwaters. She stated that the AOGCC has been given
the opportunity to manage the Class II Underground Injection
Control (UIC) program of the Environmental Protection Agency
(EPA), which includes any injection of fluids in an oil and gas
operation. Examples of injected fluids include: enhanced oil
recovery fluids, saltwater, and waste disposal.
5:08:40 PM
MS. FOERSTER explained that within the AOGCC's mission, the
AOGCC has "a few key" goals and strategies. The first key goal
of the AOGCC is to prevent the physical waste of the hydrocarbon
resource. The AOGCC evaluates every drilling proposal that is
submitted. She stated that every time a company wants to drill
a well in Alaska, it has to get permission from the AOGCC to do
so. The AOGCC ensures that during drilling operations, a
company is using sound engineering practices that don't harm the
groundwaters and don't cause waste of oil and gas, either during
drilling or production, or in the event of abandonment of a well
that's not successful. Once there are ongoing operations, the
AOGCC has five full-time inspectors that travel throughout the
state inspecting operations. She informed the committee that
the AOGCC also evaluates any new reservoir development to ensure
that the operator's proposed plans to extract the oil and gas
from the ground are consistent with good oil field practices to
maximize ultimate recovery.
5:10:27 PM
MS. FOERSTER specified that another goal of the AOGCC is to
promote greater ultimate recovery. The AOGCC watches what's
happening in all of the existing fields by reviewing data that
comes in from the wells in the fields in order to track how the
operator is doing versus how the operator said he/she is doing.
This helps ensure that the operator really is doing what will
get the most gas out of the ground. The AOGCC is able to review
information that quickly tells the AOGCC whether good or bad
things are happening. For example, an oil reservoir needs to
maintain fairly constant pressure in order to avoid anything
that would decrease ultimate recovery. She explained that if
the pressure starts to drop, the AOGCC has to either inform the
operator to "shut in," add the water injection well, or offer a
mitigating step that will achieve the correct. When the AOGCC
reviews approved development plans and drilling proposals, it
does so with an eye for greater ultimate recovery, she noted.
5:11:41 PM
MS. FOERSTER identified independently assessing oil and gas
development as another key goal of the AOGCC. She stated that
the AOGCC reviews every step of an operator's proposal and ties
it back to the statutes in "Title 31" to ensure that everything
is in accordance with those laws.
5:12:15 PM
REPRESENTATIVE GUTTENBERG referring to AOGCC's jurisdiction from
the wellhead down asked, "Where do you define the end of the
wellhead?"
5:12:48 PM
MS. FOERSTER answered that in a drilling operation, AOGCC has to
ensure that the blowout preventer equipment is in good working
order. If there are surface safety valve systems, AOGCC ensures
that they are working properly and connecting with sub-surface
safety valve systems. At or near the surface, the AOGCC works
with: the blowout prevention equipment, diverters, and safety
valve systems.
5:13:16 PM
REPRESENTATIVE GUTTENBERG clarified that the AOGCC works with
everything at a "gathering facility," but probably not after it
goes on a "gathering line" out to a "production center."
5:13:26 PM
MS. FOERSTER confirmed that Representative Guttenberg's
clarification was correct and added, "We're pretty much on the
drill site."
5:13:31 PM
REPRESENTATIVE GUTTENBERG referring to inspection of the
wellheads, inquired about industry standards and whether there's
an international industry standard, and how the standards have
evolved to take into account Arctic drilling and conditions.
5:13:58 PM
MS. FOERSTER informed the committee that the AOGCC applies
American Petroleum Institute (API) standards for their
operations. Also, she said that where local industry has asked
that AOGCC "up the ante" because of special considerations,
AOGCC has done that. However, typically AOGCC "sticks to" API
standards.
5:14:24 PM
REPRESENTATIVE GUTTENBERG inquired as to how often the vapor
recovery and pressures numbers are checked.
5:14:43 PM
MS. FOERSTER explained that operators have different reporting
requirements depending upon the pool rules that are in place.
She said that typically the AOGCC receives the data every six
months, year, or two years, depending on the field and the
criticalness of getting the data. However, the operators
receive the data on a "much more" frequent basis and AOGCC's
experience has been that it's in the best interest of the
operators to maximize the recovery.
5:15:34 PM
MS. FOERSTER identified another key goal of the AOGCC as
protecting Alaska's underground sources of drinking water. The
AOGCC reviews every application for any sort of injection to
ensure that there's no way for the injected fluid to migrate to
a locale that not supposed to. She explained that the review
includes the geology/connectivity of the different reservoirs in
which it's acceptable to inject things into, and the possibility
that those reservoirs might be "in communication" with places
that it shouldn't. In addition, the review includes the
mechanical integrity of the wellbores to ensure that there
aren't any leaks or cement breakdowns that would allow fluid to
enter a path in and around the wellbore and move to a place
where it's not supposed to go.
5:16:27 PM
MS. FOERSTER moved on to the AOGCC's goal of protecting
correlative rights. She explained that the AOGCC provides every
landowner with the opportunity to get his/her fair share of the
resources. If a landowner feels like that's not happening for
him/her because of something that the AOGCC is able to help
control, the AOGCC will step in and adjudicate the dispute(s).
For example, she explained that a typical oil or gas well has a
certain drainage area that it covers, and if a landowner's well
is too close to another lease line, he/she would be draining oil
or gas that belongs to another landowner.
5:17:38 PM
REPRESENTATIVE GUTTENBERG inquired as to how often the situation
that Ms. Foerster mentioned occurs.
5:18:00 PM
MS. FOERSTER said that the situation has "not been an issue"
since she's worked for the AOGCC, although she said that she has
heard of a "few" cases in the past in which an individual or a
company has asked the AOGCC to provide relief. She added that
the AOGCC determines the field rules based on science.
5:18:34 PM
MS. FOERSTER highlighted that there's a lot of confusion
regarding the roles of the AOGCC, the Department of Natural
Resources (DNR), the Department of Environmental Conservation
(DEC), and the AOGCC's relationship with the oil companies. She
explained that the oil companies own a significant portion of
the resource by virtue of having leased the right to develop and
produce it from the landowner. The landowner is the primary
owner and typically receives a smaller percentage [of the]
royalty. The two regulatory bodies, who don't have any
ownership in the resource, but have a regulatory responsibility
in the production of the resource are the DEC and the AOGCC.
She further explained that the DEC's role is primarily on the
surface, with an environmental protection responsibility, while
the AOGCC's role is more resource conservation with a
groundwater protection responsibility.
5:20:39 PM
MS. FOERSTER informed the committee that the AOGCC's
headquarters are in Anchorage. She said that it also has a
field office in Deadhorse, with some living arrangements for the
inspectors there. The AOGCC tries to keep two inspectors on the
[North Slope] at all times, although sometimes there is only
one. The remainder of the AOGCC inspector staff covers the
Matanuska-Susitna Valley and Cook Inlet. She clarified that the
AOGCC has five inspectors who rotate between Cook Inlet, the
Matanuska-Susitna Valley, and the North Slope.
5:21:40 PM
MS. FOERSTER explained that the AOGCC divides its technical
staff into an "east team" and a "west team," on both the North
Slope and in Cook Inlet. The "east team" consists of the North
Slope, Prudhoe Bay, and all of the satellites of Prudhoe Bay,
while the "west team" includes Kuparuk and its satellites as
well as the National Petroleum Reserve-Alaska (NPR-A).
5:22:04 PM
REPRESENTATIVE ROKEBERG inquired as to whether NPR-A is under
the AOGCC's jurisdiction or whether the AOGCC has an agreement
with the federal government to work in the NPR-A.
MS. FOERSTER reiterated that the AOGCC regulates [oil and gas
development] on all land in Alaska whether it's private, public,
or federal. She added, "When someone drills in N-PRA, they'll
come to us for a permit as well." In further response to
Representative Rokeberg, she noted that the AOGCC has "east" and
"west" teams in Cook Inlet.
5:23:16 PM
MS. FOERSTER discussed the AOGCC's highlights in 2005, which
include approval of 88 orders and other approvals, approval of
216 drilling wells, and approval of 388 sundry applications.
She explained that a sundry application is necessary when an
operator wants to "get onto a well" and do something other than
drill, such as something that will change the mechanical
condition of the well or the reservoir, or change the wells
producing or injecting status. Another key accomplishment that
she mentioned is that the AOGCC had five enforcement actions in
2005, which occur when an operator has violated AOGCC statues
and/or regulations.
MS. FOERSTER, moving on to highlights of rulings and findings,
stated that eight AOGCC orders either established or modified
"pool rules." Seven orders either approved or extended pilot
projects, which are shorter in duration than a full field
development. Typically, pilot projects try out something new to
determine whether it's going to be good or bad for the
reservoir. She explained that the short duration is important
so that the AOGCC is able to "pull the plug" if something
harmful is occurring. On the other hand, if something good for
the reservoir is occurring, the AOGCC is able to extend the
project. If the pilot project does something "really good" for
the reservoir, the AOGCC will make it part of the "pool rules."
She noted that the AOGCC had eight orders approving or modifying
enhanced oil recovery and two orders approving underground
storage of hydrocarbons, which is something new in Alaska. She
informed the committee that two operators in the Cook Inlet
requested the approval of the AOGCC to use existing gas
reservoirs in Cook Inlet to store gas that's produced during the
low-demand months so that during the peak-demand months in the
winter they can continue to produce all of their wells and draw
from the storage reservoirs to meet the peak demand. She opined
that it's important that the AOGCC regulate underground storage
of hydrocarbons because there are some risks associated with it.
5:27:24 PM
MS. FOERSTER, continuing her discussion of 2005 AOGCC highlights
of rulings and findings, stated that nine orders were approved,
modified, or denied for disposal injection operations. She
explained that the AOGCC denies something when it believes that
it will create waste and/or be harmful to the fresh waters.
Also, there were four orders to streamline operations and reduce
the paperwork required for routine wellwork/day-to-day
operations in the field.
5:27:59 PM
MS. FOERSTER, referring to a graph of Alaska oil and gas
activity over the last 50 years, explained that the numbers of
permits, active wells, and active reservoirs have all been
increasing. In regard to approved permits, she said that
although the number has dropped "a little bit," it's not because
people are doing less, rather the well operations are getting
more complex and more time consuming. Therefore, she said that
the activity level has remained "very, very high." She opined
that it has gotten more challenging to keep up with as the
complexity of the work has increased.
5:29:35 PM
REPRESENTATIVE GUTTENBERG inquired as to whether the decreased
number of approved permits has anything to do with the amount of
decreased time for construction in the winter.
5:30:00 PM
MS. FOERSTER opined that the impact of decreased time for
construction in the winter is "fairly small," and that the
biggest impact is that the work is taking longer on the
routine/multi-lateral drilling. In regard to cumulative annual
well activity, she stated that drilling permits have "dropped a
little bit," but the "biggest drop" has be in the sundry
permits.
5:30:47 PM
MS. FOERSTER, in regard to the more complex wellwork, stated
that the AOGCC's permit workload has increased due to having to
maintain a higher level of technical knowledge. Examples of
advances in wellwork are enhanced oil recovery techniques and
approval of pentilateral wells, in which branches are drilled
off of the main bore as well as branches drilled off of the
branches.
5:32:26 PM
MS. FOERSTER, in regard to exploratory well permits, explained
that there are "a few" operators that have continued to explore.
However, in 2002, BP stopped exploring. In the first five
years, there were two to five companies that were drilling, and
in 2005, there were 12 companies that were drilling. She stated
that as more operators begin drilling, AOGCC's work "gets a
little harder."
5:35:12 PM
CHAIR KOHRING inquired as to whether AOGCC staffing is adequate
for the workload.
5:35:17 PM
MS. FOERSTER replied that the AOGCC currently has "a couple of"
vacancies it is actively working to fill. In addition, she said
that the AOGCC has asked for "a few" new positions in this
year's budget. She added, "We'd rather operate lean and mean
than overstaffed."
5:35:59 PM
CHAIR KOHRING said that it's his hope that in the future, Alaska
will see a greatly expanded oil and gas industry, as it is
Alaska's "ace in the hole" economically, and that he'd liked to
see more activity. He asked, "If that were to occur, do you
foresee a substantial need for increased staff and perhaps, even
an increase in the number of commissioners?"
5:36:10 PM
MS. FOERSTER answered, "We don't see it now," and reiterated
that the AOGCC has asked for some small increases. In addition,
she said that the AOGCC has asked for funding of contractors to
do "very specialized things" that the AOGCC hopes will diminish.
5:36:36 PM
CHAIR KOHRING asked if there would ever be a scenario in which
the AOGCC would need more than three commissioners to handle the
work that is required.
MS. FOERSTER said that it's always a possibility.
5:37:20 PM
REPRESENTATIVE SAMUELS asked for clarification of the vertical
well and extended reach well slide in the handout.
MS. FOERSTER explained that in the past, when only vertical
wells were drilled, "clever" operators would tilt their drilling
rigs. Therefore, agencies such as the AOGCC adopted rules that
required distance from lease lines. She added that the distance
is not the surface distance from the lease line, rather the
reservoir penetration distance from the lease line, in order to
protect the drainage radius of an operator.
5:38:57 PM
REPRESENTATIVE ROKEBERG inquired as to how the number of "bore
holes" inside a multi-lateral wellbore are counted and whether
each bore requires an individual permit.
MS. FOERSTER informed the committee that every bore requires its
own permit and the AOGCC maintains records on every bore that's
drilled from the time an operator applies for a permit, until an
operator "abandons" a well.
5:39:50 PM
REPRESENTATIVE ROKEBERG asked if Ms. Foerster if she was able to
recall the maximum number of [bores] in one multi-lateral well.
MS. FOERSTER answered that the AOGCC is starting to see
pentilateral wells, in which there are five bores, all drawing
from the same reservoir into the same main bore.
5:40:09 PM
REPRESENTATIVE ROKEBERG inquired as to whether the AOGCC expects
more than five branches in the future.
MS. FOERSTER explained that the operators are getting "very,
very" good at drilling the multi-lateral wells and are finding
that it's cheaper than drilling a "brand new" well, and makes
less of a "footprint" than drilling a "brand new" well.
Therefore, to the degree that the operators can continue to
expand their technology, she answered, "Why not, let them put as
many extensions as they can."
5:40:51 PM
REPRESENTATIVE ROKEBERG asked if [adding branches] increases the
numbers of permits.
MS. FOERSTER reiterated that every time an operator drills a new
penetration, a new permit to drill is required. In further
response to Representative Rokeberg, she explained that the time
frame of the process to add additional bores varies from well to
well. Although an operator doesn't have to start from the
surface and drill a new well, there are certain operations that
are added to the process that would not be necessary if the
operator was drilling a new well. Therefore, she stated that
adding a bore can be more complex. In addition, as a result of
the other wellbores that are open, there's an increased risk of
making a mistake. Ms. Foerster explained that an operator has
to isolate the existing bores in a manner that isn't damaging or
permanent, and such that they are accessible after the
additional bore is completed. Then an operator has to cut a
window in the pipe to create an opening for the additional bore.
The next step is a deliberate process in which measuring and
adjustments occur while drilling. Therefore, to ensure that
mistakes aren't made, an operator ends up taking more time to
add an additional bore than he/she would to drill a new well.
5:43:37 PM
CHAIR KOHRING, in regard to the "actual" production of oil,
asked how the production levels are monitored, and whether
monitoring is a function of the AOGCC. More specifically, Chair
Kohring asked if the state is able to verify what the industry
is reporting, to ensure that the state is getting its "fair
share" of the royalties from the production of oil.
5:44:07 PM
MS. FOERSTER explained that production volumes are reported to
both the AOGCC and the DNR. The DNR receives the production
volumes for revenue purposes and the AOGCC receives them for the
reservoir management and injection purposes. The production of
oil and gas, and the injection of every fluid, goes into the
calculation of the AOGCC's regulatory cost charge. The industry
pays the cost of the AOGCC and the cost is allocated to the
different members of the industry based on the volumes of fluid
that are produced and injected.
5:45:18 PM
MS. FOERSTER discussed key challenges and projects of the AOGCC.
One key challenge is determining the impacts of major gas sales
upon ultimate hydrocarbon recovery from Prudhoe Bay and Point
Thomson reservoirs. Before one produces gas in an oil
reservoir, one [should] get all of the oil out first because
producing the gas before all of the oil has been produced will
result in a loss of some of the oil. She explained that there
are variables that impact the loss: the timing with which it's
done, how much of the oil is left, the volumes with which the
gas is withdrawn, and the mitigating steps that the operators
take to offset the oil losses. The AOGCC is involved in a study
that is reviewing the reservoir model and its use in planning
and predicting for Prudhoe Bay, such that a matrix of the
allowable gas offtake will depend on the timing and mitigating
steps.
MS. FOERSTER stated that the AOGCC is currently conversing with
the Point Thomson operator to reach a similar agreement and do a
similar study for Point Thomson. However, the issues will be
different because there are questions as to whether Point
Thomson should be produced as an oil reservoir or as a gas
reservoir. She explained that there's a significant amount of
gas condensate associated with the Point Thomson reservoir and
producing it as a gas reservoir has the potential of creating
loss of some of the condensate resources. The AOGCC needs to do
a similar study to ensure that whatever development plan is
pursued for Point Thomson is one that maximizes total
hydrocarbon recovery. Another key challenge is to facilitate
expanded statewide exploration and development. She stated that
the AOGCC doesn't want to be a "permitting bottleneck."
5:48:38 PM
MS. FOERSTER stated that another key challenge of the AOGCC is
to respond to the needs for revising AOGCC's regulations as the
industry moves into new areas, such as nonconventional resource
recovery, shallow gas, and gas storage. The AOGCC needs to be
responsive to the changes and ensure that it is appropriately
regulating new things as they arise. She said that the AOGCC is
working to provide information via the Internet to make it
possible for anyone interested in investing in Alaska to access
the data to make good investment decisions.
5:49:45 PM
MS. FOERSTER stated that another key challenge is to continue to
provide appropriate regulation over the underground injection
activities in Class II and to take primacy for Class I
injection, if allowed by the EPA.
5:50:06 PM
REPRESENTATIVE GARDNER, in regard to making Alaska oil and gas
information available on the Internet, asked where the AOGCC
draws the line between confidential information and information
that the it is able to make available to everyone.
MS. FOERSTER answered, "Our line is very clear and solid."
Information with confidential status either has confidentiality
for a set time period or it has confidentiality forever. In
further response to Representative Gardner, she informed the
committee that the AOGCC's statutes determine how information is
categorized. She stated that another key challenge is
responding to the changing conditions in a mature oil field,
where the infrastructure is aging and the operations are
changing. The AOGCC ensures that operations are safe and that
resources are being maximized.
5:52:32 PM
MS. FOERSTER explained that the AOGCC is responsible for
monitoring gas disposition in Alaska, and therefore every
thousand cubic feet (mcf) of gas that is produced must be
accounted for in order to prevent waste. She mentioned that the
AOGCC's [gas disposition monitoring] process needs revision.
AOGCC's final key challenge is to continue to evaluate ways to
increase efficiency, reduce costs, encourage new operators to
enter the state, and encourage operators in Alaska to remain.
HB 300-OIL & GAS CONSERVATION COMMISSION MEMBER
5:54:43 PM
CHAIR KOHRING announced that the next order of business would be
HOUSE BILL NO. 300, "An Act relating to the qualifications of
the member of the Alaska Oil and Gas Conservation Commission who
need not be certified, trained, or experienced in either the
field of petroleum engineering or the field of petroleum
geology."
5:55:07 PM
CHAIR KOHRING, sponsor of HB 300, explained that HB 300 "adds
some substance" to the requirements for the public seat on the
three-member AOGCC. As a result of the oil and gas industry's
technical nature and complexity, Chair Kohring opined that it
makes sense to require that an appointed individual has a
background in the oil and gas industry. The law [referring to
the public seat of the AOGCC] currently reads "Need not be
certified, trained, or experienced in either the field of
petroleum engineering or petroleum technology." However, the
proposed committee substitute (CS) says that the public member,
"Shall have training or experience that gives the person a
fundamental understanding of the oil and gas industry in the
state."
5:57:12 PM
REPRESENTATIVE SAMUELS moved to adopt CSHB 300, Version 24-
LS0997\F, Kane, 1/23/06, as the working document. There being
no objection, Version F was before the committee.
5:57:42 PM
DANIEL T. SEAMOUNT, JR., Commissioner, Alaska Oil & Gas
Conservation Commission (AOGCC), Department of Administration
(DOA), stated that the AOGCC can support HB 300. He noted that
although the AOGCC doesn't feel like there's been any
demonstrative problems with lack of experience by the public
member in the past, oil and gas operations are becoming much
more complex and it's good insurance for all members of the
commission to have a fundamental understanding of the industry
he/she regulates.
5:59:29 PM
CHAIR KOHRING noted that [HB 300] is "definitely not" an
indictment of past members who have served on the AOGCC.
5:59:51 PM
REPRESENTATIVE SAMUELS asked if "fundamental understanding" is a
term of art or if common sense should apply.
MR. SEAMOUNT explained that the term "fundamental understanding"
allows for some flexibility. The AOGCC doesn't currently have a
definition for it.
MS. FOERSTER further explained that while the AOGCC felt that it
was appropriate to "tighten up" the requirement "a little bit,"
the AOGCC didn't want to restrict good applicants who might be a
little unorthodox or might not meet a tight requirement. She
said that it would be a loss to the state if such people were
kept from applying.
6:02:10 PM
REPRESENTATIVE ROKEBERG opined that an appointment to the AOGCC
public seat should not be a political reward but rather should
be based on competence.
6:03:11 PM
CHAIR KOHRING, upon determining that no one else wished to
testify on HB 300, announced the closure of public testimony.
6:03:17 PM
REPRESENTATIVE SAMUELS moved to report CSHB 300, Version 24-
LS0997\F, Kane, 1/23/06, out of committee with individual
recommendations and the accompanying zero fiscal note. There
being no objection, CSHB 300(O&G) was reported out of the House
Special Committee on Oil and Gas.
^OVERVIEW/UPDATE FROM ALASKA OIL & GAS CONSERVATION COMMISSION
6:03:39 PM
CHAIR KOHRING announced that the final order of business would
be the continuation and conclusion of the overview/update from
the AOGCC.
6:04:01 PM
REPRESENTATIVE ROKEBERG, referring to prior testimony regarding
the "Prudhoe Bay takeoff rating," asked if the study Ms.
Foerster spoke of is the same study on which the committee
previously heard testimony.
MS. FOERSTER explained that when the AOGCC went to the
legislature during the previous session and requested a
significant amount of money to embark on a study, the AOGCC
feared that it would end up being a study that it would have to
do alone and for which it would have to build its own model
without the cooperation of the industry. She said that [such a
study] would have cost a lot of money, taken a lot of time, and
there wouldn't have been a guarantee that the AOGCC would
achieve a result with as high quality as the existing operator's
model would have given the AOGCC. Fortunately, the AOGCC has
been able to work with the operator and the other owners to
reach an agreement in which the AOGCC can utilize the
[operator's] expertise, through both the AOGCC's existing
reservoir engineering staff and a consultant that it has hired.
The consultant has 25 years of reservoir modeling experience,
much of which has been in Prudhoe Bay, she noted.
6:07:19 PM
REPRESENTATIVE ROKEBERG asked if the AOGCC has an estimate of
how much time it will take to complete the study.
MS. FOERSTER related that the AOGCC is confident that it will be
able to [complete the study] in six months because the AOGCC
will have full access every working day to the model. If the
AOGCC reaches the end and is in need of an extension, the
agreement allows a reasonable extension. However, she added
that the AOGCC doesn't think that it will need an extension.
6:07:58 PM
REPRESENTATIVE ROKEBERG, in regard to Point Thomson, inquired as
to the status of AOGCC's agreement with ExxonMobil as well as
the timeframe.
MS. FOERSTER explained that the AOGCC is still in the "early
stages" of dealing with ExxonMobil. She opined that she's
hopeful that the AOGCC will have an agreement by this summer [of
2006] to begin a similar six-month process [with ExxonMobil].
6:09:04 PM
REPRESENTATIVE ROKEBERG inquired as to whether ExxonMobil's
modeling is as good, since it isn't in production.
MS. FOERSTER informed the committee that in the 1970s in Prudhoe
Bay, the AOGCC determined an allowable gas offtake, which was
2.7 billion [standard cubic feet per day]. She said that it was
based on a "very good" model, although it had no production data
with which to do a history match. Now the AOGCC has a lot more
data with which it is moving forward on the new "Prudhoe
studies." Although ExxonMobil's ability to analyze the data has
improved, its model isn't nearly as good as it will be after
there's been production.
6:10:25 PM
REPRESENTATIVE ROKEBERG asked how the AOGCC will be able to
complete the study in six months if it doesn't have good data.
MS. FOERSTER explained that the less data that the AOGCC has to
evaluate, the quicker it can complete the evaluation. However,
the AOGCC recognizes that the evaluation will be less reliable.
6:11:34 PM
MS. FOERSTER stated that an AOGCC permit is required for the
drilling of a well, alteration in configuration of a well, or
injection of anything into the ground. In regard to the AOGCC
permitting process, she explained that the operator has to apply
to the commission with what he/she feels would be the necessary
supporting documentation. For example, for a permit to drill,
the operator informs the AOGCC of the depth of drilling,
provides a map of the well's projectory, informs the AOGCC of
the type of cement and amount to be used, and the type of pipe
to be used. The AOGCC uses the aforementioned information to
determine whether the well will not violate the correlative
rights of other operators, will be undamaging to the
groundwaters, and will be a good oil field operation that will
be a lasting safe well allowing maximum recovery. She stated
that for each type of permit, the AOGCC looks at very specific
information to ensure that it is able to "check off all of those
boxes." Based on the AOGCC's technical staff's analysis of the
above information, a recommendation is made to the commissioners
to either approve or deny the permit.
6:14:16 PM
MS. FOERSTER noted that AOGCC's drilling permit approval time
has remained at about seven days for the "last couple of years."
CHAIR KOHRING added that [the permit approval time has remained
at about seven days] despite the fact that the process has
become more complex.
MS. FOERSTER further added that the requirements that the AOGCC
has placed on the operators have gotten more stringent.
6:15:32 PM
MS. FOERSTER stated that the sundry application decisions take
about four days, and are typically less complex because the
operators are doing something to an existing well.
6:16:07 PM
MS. FOERSTER, in regard to wellwork in the sundries, explained
that it could be either abandoning a completion, adding or
plugging perforations, or stimulating producing pools. She
added that the AOGCC is seeing a lot of repairing wells, and
that wasn't something it saw in the past. As the wells are
aging, to maintain the mechanical integrity and keep the
operation safe, there's been a lot of repairing. The AOGCC has
seen several suspensions, but hasn't seen a lot of abandonments.
Rather than abandoning a well, the operator is going back into
the well and drilling multi-laterals. The operators use the
existing wellbore to go some place new so that they don't add to
the footprint, and so that they can get to "things" cheaper.
6:17:02 PM
MS. FOERSTER explained that when the AOGCC regulates underground
injection, it can be enhanced recovery, which can be through
water, miscible injection (MI), dry gas, and CO2 injection. She
clarified that CO2 is a greenhouse gas and as hydrocarbon gases
are produced, CO2 is taken off of it and something has to be
done with it. For many reservoirs, CO2 is a good enhanced oil
recovery tool. Therefore, operators are going to use the CO2 to
produce more oil. She stated that the AOGCC is also increasing
its vigilance over gas storage and it's the responsibility of
the AOGCC to monitor waste disposal.
MS. FOERSTER explained that as part of the AOGCC's permit
approval process, the AOGCC approves the conservation orders
that determine whether a well will be produced as an oil or a
gas well. She added that there are restrictions on the amount
of gas that can be produced out of an oil well, typically in a
gas:oil ratio. For every barrel of oil produced out of a well,
an operator can only produce a certain amount of gas. If the
operator produces more than the allowed amount, [the gas
production] will be restricted or the operator won't be allowed
to produce the well at all without re-injecting the gas into the
reservoir.
MS. FOERSTER added that the AOGCC also looks at allowable
offtake rates by well or pool, in both oil and gas, because
there are maximum efficient rates for improving ultimate
recovery. In addition, the AOGCC has performance monitoring
requirements. She also mentioned well spacing to protect
correlative rights. Sometimes the AOGCC grants special spacing
rules that are closer together and closer to the lease lines to
acknowledge that a reservoir might not have as big of a drainage
radius as the statewide rules would allow.
6:20:26 PM
MS. FOERSTER explained that the AOGCC has different reporting
requirements based on the parameters of the reservoir. For
example, if the AOGCC is concerned about water production, it
will require water reporting on a more frequent basis. She
summarized that each conservation order makes the rules as the
specific reservoir requires. In regard to special development
considerations, if there are spacing exceptions for valid
reasons and offset operators don't object to them, then the
AOGCC is able to grant them. She mentioned that Contingency
Plan (C-Plan) exemptions are spill-response plan requirements.
CHAIR KOHRING noted that the committee is "very" familiar with
C-plan exemptions.
6:21:46 PM
MS. FOERSTER described annular disposal. She said that in a
remote operation, where there aren't disposal wells nearby, the
AOGCC wants to encourage an operator to "go out and explore,"
and part of the encouragement is to minimize the costs of the
operator. It costs a lot to take all of the drilling waste in a
remote location and move it to a disposal location. Therefore,
in some circumstances, the AOGCC allows annular disposal into
the exploratory well. She then described an information
dissemination special development consideration.
6:24:09 PM
REPRESENTATIVE ROKEBERG, in regard to Point Thomson and the
potential loss of condensates from the gas versus liquid study,
asked if it is going to be separate from the takeoff, or is it
integral to the AOGCC's whole study of the unit. Also, he asked
if the AOGCC is privy to ExxonMonbil's $100 million study.
6:24:39 PM
MS. FOERSTER informed the committee that it is integral to the
entire development. She said that from the AOGCC's perspective,
the main concern is preventing waste and maximizing ultimate
recovery. The number one objective in these studies is ensuring
that both oil and gas recoveries are optimized so that the total
hydrocarbon recovery is maximized. Non-confidential data has
been shared with the AOGCC by ExxonMobil, she noted. However,
due to the depth of analysis necessary, the AOGCC needs to look
at data that ExxonMobil is not yet willing to make public.
Therefore, the AOGCC has to reach an agreement with ExxonMobil
that will allow the AOGCC to review ExxonMobil's confidential
data. The AOGCC is trying to work toward a study similar to the
one done with BP in Prudhoe Bay.
6:25:37 PM
REPRESENTATIVE ROKEBERG inquired as to whether the AOGCC is
involved with the Division of Oil & Gas (DOG) in its approval
for the annual plan of development.
MS. FOERSTER explained that the Department of Natural Resources'
(DNR) process and the AOGCC's processes are separate. However,
if the DNR has a hearing or presentation that involves something
that the AOGCC is working on, then the AOGCC will also attend
the hearing or presentation, and vice versa. The AOGCC and the
DNR have to be careful that neither violates confidentiality
agreements in which the other isn't involved. In addition, she
added that the AOGCC and the DNR also have to be careful that
they maintain independence from each other because they regulate
"totally different things".
6:27:28 PM
ADJOURNMENT
There being no further business before the committee, the House
Special Committee on Oil and Gas meeting was adjourned at 6:27
p.m.
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