Legislature(1995 - 1996)

03/06/1995 08:05 AM House RES

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
               HOUSE RESOURCES STANDING COMMITTEE                              
                         March 6, 1995                                         
                           8:05 a.m.                                           
                                                                               
                                                                               
 MEMBERS PRESENT                                                               
                                                                               
 Representative Joe Green, Co-Chairman                                         
 Representative Scott Ogan, Vice Chairman                                      
 Representative Alan Austerman                                                 
 Representative Ramona Barnes                                                  
 Representative Pete Kott                                                      
 Representative Irene Nicholia                                                 
                                                                               
 MEMBERS ABSENT                                                                
                                                                               
 Representative Bill Williams, Co-Chairman                                     
 Representative John Davies                                                    
 Representative Eileen MacLean                                                 
                                                                               
 OTHER LEGISLATORS PRESENT                                                     
                                                                               
 Representative Pete Kelly                                                     
                                                                               
 COMMITTEE CALENDAR                                                            
                                                                               
 Overview on Coalbed Methane                                                   
                                                                               
 HB 170:  "An Act relating to intensive management of identified big           
          game prey populations."                                              
                                                                               
          HEARD AND HELD                                                       
 HRES - 03/06/95                                                               
 *HB 195:  "An Act repealing the laws authorizing milk marketing               
           orders and the milk advisory board."                                
                                                                               
           SCHEDULED BUT NOT HEARD                                             
 *(first public hearing)                                                       
                                                                               
 WITNESS REGISTER                                                              
                                                                               
 TOM SMITH, Geologist                                                          
 Division of Oil and Gas                                                       
 Department of Natural Resources                                               
 3601 C. Street, Ste. 1380                                                     
 Anchorage, AK   99503                                                         
 Phone:  762-2547                                                              
 POSITION STATEMENT:  Gave an overview on coalbed methane                      
                                                                               
 DAVE JOHNSTON, Chairman                                                       
 Alaska Oil and Gas Conservation Commission                                    
 3001 Porcupine Drive                                                          
 Anchorage, AK   99501                                                         
 Phone:  279-1433                                                              
 POSITION STATEMENT:  Made comments on coalbed methane                         
                                                                               
 DAVE LAPPI, Representative                                                    
 Lapp Resources                                                                
 4900 Sportsman Drive                                                          
 Anchorage, AK   99502                                                         
 Phone:  248-7188                                                              
 POSITION STATEMENT:  Made comments on coalbed methane                         
                                                                               
 PAUL CRAIG, President                                                         
 Z-Energy                                                                      
 2900 Boniface Parkway                                                         
 Anchorage, AK   99504                                                         
 Phone:  563-5686                                                              
 POSITION STATEMENT:  Made comments on coalbed methane                         
                                                                               
 REPRESENTATIVE PETE KELLY                                                     
 Alaska State Legislature                                                      
 State Capitol, Room 513                                                       
 Juneau, AK   99801                                                            
 Phone:  465-2327                                                              
 POSITION STATEMENT:  Prime Sponsor HB 170                                     
                                                                               
 SANDRA ARNOLD, Representative                                                 
 Alaska Wildlife Alliance                                                      
 P.O. Box 202022                                                               
 Anchorage, AK   99520                                                         
 Phone:  277-0897                                                              
 POSITION STATEMENT:  Opposed HB 170                                           
                                                                               
 MICHAEL TETREAU                                                               
 P.O. Box 3046                                                                 
 Seward, AK   99664                                                            
 Phone:  224-3175                                                              
 POSITION STATEMENT:  Opposed HB 170                                           
                                                                               
 JIM RAMSDELL                                                                  
 P.O. Box 2004                                                                 
 Seward, AK   99664                                                            
 Phone:  224-2301                                                              
 POSITION STATEMENT:  Opposed HB 170                                           
                                                                               
 MARK LUTTRELL, President                                                      
 Eastern Kenai Peninsula Environmental                                         
   Action Association                                                          
 P.O. Box 571                                                                  
 Seward, AK   99664                                                            
 Phone:  224-5372                                                              
 POSITION STATEMENT:  Opposed HB 170                                           
                                                                               
 OLIVER BURRIS                                                                 
 2801 Talkeetna                                                                
 Fairbanks, AK   99709                                                         
 Phone:  474-0437                                                              
 POSITION STATEMENT:  Supported HB 170                                         
                                                                               
 SAM HARBO                                                                     
 Professor Emeritus of Wildlife                                                
   Management & Statistics                                                     
 P.O. Box 10201                                                                
 Fairbanks, AK   99710                                                         
 Phone:  457-7815                                                              
 POSITION STATEMENT:  Supported HB 170                                         
                                                                               
 ACTION NARRATIVE                                                              
                                                                               
 TAPE 95-28, SIDE A                                                            
 Number 000                                                                    
                                                                               
 The House Resources Committee was called to order by Co-Chairman              
 Green at 8:05 a.m.  Members present at the call to order were                 
 Representatives Green, Ogan, Austerman and Kott.  Members absent              
 were Representatives Williams, Barnes, Davies, MacLean, and                   
 Nicholia.                                                                     
                                                                               
 REPRESENTATIVE JOE GREEN stated there would be a presentation on              
 coalbed methane.  He noted there had been a test well drilled near            
 Wasilla last year.  He announced the meeting is on teleconference             
 in Anchorage, Fairbanks, and Seward.                                          
                                                                               
 Number 040                                                                    
                                                                               
 CO-CHAIRMAN GREEN stated one of the questions he hoped would be               
 answered during the presentation is what coalbed methane is.  He              
 wondered if coalbed methane is a mineral, oil or gas.  He also                
 questioned if coalbed methane is handled as a gas well or as a                
 function from a mineral interest.                                             
                                                                               
 TOM SMITH, GEOLOGIST, DIVISION OF OIL AND GAS, DEPARTMENT OF                  
 NATURAL RESOURCES (DNR), gave an overview using slides.  He stated            
 methane is a natural gas.  He said as organic material is turned              
 into coal by heat and pressure it gives off gas.  First, the coal             
 gives off biogenic or swamp gas.  As the higher rank coals are                
 reached, particularly the bituminous and anthracite ranks, the coal           
 gives off thermogenic gas.  He stressed higher rank coals will have           
 more gas.                                                                     
                                                                               
 MR. SMITH stated coalbeds are unique in that they are the source of           
 the gas and the reservoir target.  A coal stores high                         
 concentrations of methane due to the microporosity in the coal.  He           
 said to produce coalbed methane, there is a need to get the water             
 out first, which is a big difference between conventional gas and             
 coalbed gas.  In the fractures in the coal, there are large volumes           
 of water present.  In order to get the gas to move, there is a need           
 to lower the pressure on the coal by dewatering it.  Then the gas             
 will move out of the coal into the cleats or fractures toward the             
 well bore.  As water is gradually pumped out, gas production will             
 increase.  He noted that after seven or eight wells are drilled in            
 a particular area, the wells do better because the pressure has               
 been lowered in a large area of coal seams.                                   
                                                                               
 MR. SMITH told committee members that coal gas or methane gas has             
 long been a nuisance to miners.  He said it was not until the 1970s           
 that coalbed methane production was done before mining occurred,              
 which led to the first commercial gas production in Alabama's Black           
 Warrior Basin in 1980.  He pointed out the methane resource is very           
 new compared to conventional oil and gas.  He stated another main             
 producing basin in the lower 48 is the San Juan Basin in Colorado             
 and New Mexico.  He noted production of methane is in seven or                
 eight coal basins in the lower 48 currently.                                  
                                                                               
 Number 157                                                                    
                                                                               
 MR. SMITH stated in 1992, the San Juan Basin produced 436 billion             
 cubic feet of gas from about 2,000 wells, which is approximately              
 double the current Cook Inlet production.  In the Black Warrior               
 Basin, 92 billion cubic feet of gas was produced.  He noted the               
 coals in the Black Warrior Basin are much thinner.  The San Juan              
 Basin wells produced 400,000 to 1 million cubic feet a day which              
 compares to the average well rate in Cook Inlet (from conventional            
 gas) of about 6 million cubic feet and some of the North Slope                
 wells producing 2 million cubic feet.  He noted the methane                   
 resource will involve smaller wells, but not significantly smaller.           
                                                                               
 MR. SMITH showed a slide which indicated how new the methane                  
 resource is.  The productions curves showed that in the last five             
 years, much has been learned.  He also presented a slide showing              
 what a typical well looks like.  He said there is an up hole motor            
 which drives a down hole pump which has two lines coming out--one             
 for gas and one for water.  He displayed several slides showing               
 different wells and what is needed to get the well into production.           
 He noted the coals have to be stimulated to get production which              
 sometimes is more expensive than drilling the well.  He showed an             
 experimental field in Alabama.  He said water will always be a                
 problem with coalbed methane.  In Alaska, discharging any water               
 into the surface waters is not allowed.  In Alabama, the water is             
 treated, aerated and discharged into some of the larger rivers,               
 with monitoring stations down stream.                                         
                                                                               
 Number 225                                                                    
                                                                               
 MR. SMITH stated Alaska has a lot of coal--about one-half of the              
 United States (U.S.) total reserves.  He calculated Alaska's coal             
 could contain a huge resource--1,000 trillion cubic feet of gas.              
 He noted, however, perhaps only ten percent will be recoverable.              
 He explained much of Alaska's coal is bituminous rank which is                
 needed for coalbed methane production.  He showed a slide                     
 indicating the locations of coal occurrences and basins in Alaska.            
                                                                               
 MR. SMITH said when evaluating the coal basins, he looked at coal             
 rank.  He stated the coal has to be a certain rank to be                      
 productive.  Some lower rank coals are productive but that is a               
 rare occurrence.  Ideally, the coal should be shallow--above 4,000            
 feet.  A good reservoir extent and thickness is needed, just like             
 a sandstone reservoir.  He added that a simple structure is best.             
                                                                               
 MR. SMITH said many of the areas in Alaska are less potential                 
 because they are subbituminous and lignite or lower rank coal.  The           
 North Slope and Cook Inlet are the big players in both the low rank           
 and the high rank coals.  He stated the North Slope is one of the             
 biggest coal basins in the world.  He pointed out the areas                   
 interested in coalbed methane production are the bituminous and               
 high rank coals such as in the North Slope and the Cook Inlet.  He            
 noted the three large areas in the Interior also--the Kobuk, the              
 upper and lower Koyukuk, and the Alaska Peninsula.  He added these            
 three basins have had little exploration and the resources are                
 probably very rough.                                                          
                                                                               
 Number 286                                                                    
                                                                               
 MR. SMITH said the western North Slope, northern Cook Inlet, and              
 the edges of Cook Inlet have high potential to provide world class            
 reserves of coalbed methane.  He stated areas for local production            
 which would provide for village use would be the Alaska peninsula,            
 Kobuk, and the upper and lower Koyukuk.  He pointed out there is              
 additional potential from the subbituminous and lower rank coals.             
 Coalbed methane is just now getting into those areas.  He noted               
 there are a few areas where there is production from those lower              
 rank coals.                                                                   
                                                                               
 MR. SMITH showed a slide indicating the size of artubic basins in             
 Alaska.  The slide contained production figures for the San Juan              
 Basin, the Cook Inlet and the North Slope.  He noted that the San             
 Juan Basin shows coalbed methane only and the Cook Inlet and North            
 Slope areas are conventional production.  He said the San Juan                
 Basin produces double that of Cook Inlet just from coalbed and has            
 an estimated 50 trillion cubic feet of reserves, compared to the              
 remaining reserves in Cook Inlet of roughly 2.8 trillion cubic                
 feet.  He noted the basin area in Cook Inlet is almost twice as               
 big, seven times the coal reserves, and the accumulated thickness             
 is much thicker than San Juan.  He felt because of that, Cook Inlet           
 has a huge potential and added it would make economics quite                  
 different if 50 trillion cubic feet of reserves in Cook Inlet was             
 shown instead of 2.8 trillion cubic feet.                                     
                                                                               
 Number 303                                                                    
                                                                               
 MR. SMITH said there was $150,000 available for the program and               
 they were able to drill a 1,245 foot deep core hole.  They tried to           
 collect samples from the Northwest Coal Project in deadfall                   
 syncline but every time they tried to drill below permafrost, they            
 lost their drill string.  Therefore, no samples were received from            
 the project.  He stated compiling all of the coal and coalbed                 
 methane information for the entire state resulted in the report in            
 committee members folders.                                                    
                                                                               
 MR. SMITH stated the well was drilled approximately two miles west            
 of Wasilla and was drilled in an area that previously was                     
 identified as having high potential for coalbed methane.  He                  
 presented a slide showing the rig used for drilling and several               
 slides on the process.  He noted they had nearly 100 percent                  
 recovery.  He explained the good coals were put in canisters to               
 determine how much gas they contained.  There is about one foot of            
 core in each canister and over the two or three month time period,            
 the gas was taken out and they got about eight liters of gas.  He             
 said they logged the hole and then plugged the hole with benseal,             
 along with a 20 foot cap of cement.                                           
                                                                               
 Number 405                                                                    
                                                                               
 MR. SMITH reviewed what was determined during the project.  He said           
 almost 1,000 feet of core was received.  They encountered 37 feet             
 of coal with the thickest being six and one-half feet.  He showed             
 the results which indicated increasing gas with depth, which is               
 good.  He stated the second column of numbers on the slide are the            
 numbers to be focused on--the 63 to 245--the increasing gas with              
 depth which is in cubic feet per ton and is calculated on a dry ash           
 free basis--all of the ash and moisture is out of the coal--and is            
 calculated out to cubic feet per ton.  Therefore, there is a                  
 standardization.  He stressed the bottom number of 245 is good for            
 that depth and rank of coal.  In the Black Warrior and San Juan               
 basins, the cubic feet per ton gas ranges from approximately 300 to           
 500, which is at deeper depths.                                               
                                                                               
 MR. SMITH stated they have multiple targets--shallow increasing gas           
 with increasing depth.  He said in the reservoir plate, which may             
 be around 3,000 feet, that could translate to 300-400 cubic feet              
 per ton of gas.  He displayed a slide showing a well which got up             
 to 245 cubic feet per ton.  He pointed out there are fractures and            
 cleating in the coals.                                                        
                                                                               
 Number 435                                                                    
                                                                               
 MR. SMITH stated what they do know is the gas content, the rank and           
 composition of the coals, how much gas the coals have, etc.  He               
 said what they do not know is the absolute permeability.  He noted            
 the only way to determine that is through production testing.  He             
 felt the private industry would take the well one more step and               
 actually test some things in the future.                                      
                                                                               
 CO-CHAIRMAN GREEN noted for the record that Representative NICHOLIA           
 had joined the committee.                                                     
                                                                               
 REPRESENTATIVE ALAN AUSTERMAN wondered when the gas is first                  
 formed, if that is a one-time situation or does the coal continue             
 to form gas.                                                                  
                                                                               
 MR. SMITH responded the coal is putting out gas continuously.  As             
 the coal is shallow buried, it gives off small amounts of biogenic            
 gas.  He said the coal they drilled was a combination of about 50             
 percent biogenic gas and 50 percent thermogenic gas, which is                 
 typical of coalbed gas.  He noted the coal produces biogenic gas              
 until it gets buried to a certain depth with temperature and                  
 pressure.  Then when the coal reaches bituminous rank, it produces            
 a lot more gas.  He stated the coals in the Cook Inlet are still              
 giving off gas.  He told committee members most gas production in             
 the Cook Inlet is actually coalbed gas migrated into sandstone.               
 The gas is being produced out of the sandstones there.                        
                                                                               
 Number 481                                                                    
                                                                               
 REPRESENTATIVE SCOTT OGAN asked if the disposal of water is an                
 insurmountable problem.                                                       
                                                                               
 MR. SMITH stated the disposal of water could be a problem.  He                
 referred the committee to a sheet in their folders called "Issues             
 Concerning Coalbed Methane Development".  He said one of the issues           
 concerns the market.  In order to break into the market in Cook               
 Inlet, the coalbed methane has to be proven a reliable and                    
 productive source.  There has to be proof than an X number of cubic           
 feet can continually be produced.  In the rural areas, however,               
 there may be a totally different economic situation.  A small well            
 which would be uneconomic anywhere else, could provide a bush                 
 community with the gas they need, converting diesel generators over           
 to gas.                                                                       
                                                                               
 MR. SMITH told committee members another issue is cost.  He said a            
 drawback for major oil companies is the cost.  In Cook Inlet a                
 500,000 cubic feet a day well is going to look good but for a major           
 oil company, the size will not cover its overhead.  He felt it is             
 going to take small companies and small operators to produce this             
 resource.                                                                     
                                                                               
 Number 525                                                                    
                                                                               
 MR. SMITH said the third issue is regulations.  He noted there was            
 somewhat of a conflict on regulations when he drilled the well near           
 Wasilla.  He explained they permitted as a coal exploration, which            
 on the outside it looked like the regulations fit this type of                
 operation closer than the Alaska Oil and Gas Conservation                     
 Commission's (AOGCC) regulations.  Currently, the commission is               
 looking very closely at changing their regulations to accommodate             
 small-scale, low-cost operations.  The commission is changing their           
 permitting process and bonding requirements.                                  
                                                                               
 MR. SMITH stated the next problem with regulations is the water               
 disposal.  The Alaska Department of Environmental Conservation                
 requires a $1 million bond for exploration drilling.  However, no             
 bond is required for gas production wells.  He said these coalbed             
 wells will be gas production wells but it is somewhat up in the air           
 how those wells will be classified by AOGCC.  He noted the first              
 wells will really be exploratory wells but in order to determine              
 whether or not they are going to produce gas, there is a need to              
 put them on production.  He stated the potential for environmental            
 damage is not out of the ground but is off the storage on the rig.            
 He felt there are a number of circumstances which indicate these              
 wells do not need the huge bonding required for an oil well.                  
                                                                               
 MR. SMITH pointed out that another issue is the disposal of                   
 drilling wastes and produced water.  He said on his well, they used           
 all non-toxic drilling muds and put the cuttings into a reserve               
 pit.  At the end of the operation, the reserve pit was dried out              
 and grated over.  He stated there were no environmental problems              
 involved.  He explained that current regulations make disposal of             
 drilling wastes and any produced water very difficult.  If the                
 water is fairly fresh and can be treated and discharged in the                
 surface, such as the Susitna River or some large surface stream,              
 there will be no damage.  He stressed water disposal will be                  
 expensive if it has to be injected back into the formation.  He               
 added that the quality of water will not be known until someone               
 starts producing the water.                                                   
                                                                               
 Number 589                                                                    
                                                                               
 MR. SMITH noted there is much talk about the royalties charged and            
 getting leases available.  He said new statutes are being written             
 for royalty reduction, which he felt coalbed would fall under.  He            
 stated they are looking at new ways to get more leases out but have           
 the 035 best interest finding and the coastal zone management plan            
 to contend with.  He thought maybe some of the large block licenses           
 may work for the coalbed methane program.  He noted there may be              
 ways to streamline the best interest finding.                                 
                                                                               
 MR. SMITH stated he did not feel there would an ownership problem.            
 Agencies recognize that coalbed gas is going to fall under oil and            
 gas regulations.  Coalbed methane is a movable hydrocarbon, whereas           
 coal should fall under mining.  The ownership on state land can be            
 taken care of by putting a couple of stipulations in the lease                
 forms like Colorado does.  He noted that Colorado is the only                 
 state that addressed ownership in their leasing.  Other states have           
 very few problems in regard to state land--it is administered under           
 their oil and gas regulations.  The biggest problems and lawsuits             
 coming in are on private land or where there is a combination of              
 private and federal lands.  He noted there are some portions of               
 Alaska lands which also have federal coal rights left and that                
 could be a potential problem.                                                 
                                                                               
 Number 635                                                                    
                                                                               
 DAVE JOHNSTON, CHAIRMAN, AOGCC, testified via teleconference and              
 stated the commission is very interested in the development of                
 coalbed methane.  He noted in terms of regulations of this                    
 activity, the AOGCC does have some interest.  Primarily, that                 
 interest would be in looking at the disposal of wastes generated,             
 protection of fresh water, and the protection of the correlative              
 rights of adjacent property owners.  Coalbed methane is a movable             
 resource, which involves a situation where adjacent property owners           
 can have their resources moved out from under them by development             
 of a well on their neighbor's property.  Because of that, there is            
 a great need to protect the interests of those adjacent property              
 owners.  He stressed that is the basic principle of why                       
 conservation commissions were created originally.  Generally, the             
 commission's thoughts tend to go to the more deeper resource                  
 associated with oil and gas.                                                  
                                                                               
 MR. JOHNSTON recalled that Mr. Smith had pointed out a few problems           
 with the regulations as currently written, which were tailored more           
 for the deeper resource as found in the North Slope and Cook Inlet            
 areas.  He stated AOGCC is engaged in a significant rewrite of its            
 regulations and one aspect of that rewrite will be to take a look             
 at the need of those people who are drilling to very shallow                  
 horizons, which coalbed methane would fall under.  AOGCC will be              
 tailoring changes to accommodate different casings, different                 
 completion techniques, etc.  AOGCC will also be altering the                  
 requirements of bonding, probably allowing a provision that would             
 allow an operator to come before the commission and submit                    
 information that would justify a lowering of the bond amount, which           
 then could be approved by the commission.                                     
                                                                               
 MR. JOHNSTON said the AOGCC stands ready and willing to work with             
 the operator and other individuals to ensure this resource is                 
 extracted.  He is particularly excited about the possibility of a             
 viable resource for Native communities.                                       
                                                                               
 Number 681                                                                    
                                                                               
 DAVE LAPPI, LAPP RESOURCES, testified via teleconference and stated           
 Mr. Smith did an excellent job overviewing the concerns which                 
 private industry might have in regard to coalbed methane                      
 development in Alaska.  He said his company is currently involved             
 in a study for the Department of Community and Regional Affairs,              
 examining the possibility of supplying gas to Native villages, both           
 from conventional sandstone reservoirs and from coalbed methane               
 reservoirs.  He felt there is going to be a good opportunity in the           
 state to get at least a few of the villages off of diesel fuel and            
 on to a cleaner and more environmentally acceptable fuel.                     
                                                                               
 MR. LAPPI said he also has concerns about access to state lands.              
 Many of the places coalbed methane might be found may not be                  
 available in a timely manner under the current state leasing laws.            
 Explorations licensing, which was passed last year, may be                    
 (indiscernible) and may cause some of the concerns about access to            
 state lands.  He stated one of his thoughts on access to state                
 lands, as far as the leasing laws go, is it might be appropriate to           
 do a best interest finding on all state lands and then allow the              
 leasing to take place where those best interest findings determine            
 it is appropriate.  He stressed this would involve a major effort             
 by the state to identify those areas, out of all the state lands,             
 which are appropriate for leasing.                                            
                                                                               
 TAPE 95-28, SIDE B                                                            
 Number 000                                                                    
                                                                               
 MR. LAPPI said all the state lands would not necessarily have to be           
 on a five year leasing schedule.  He noted it might be possible to            
 allow applicants to apply for leases in areas that are not on the             
 current schedule.                                                             
                                                                               
 MR. LAPPI stressed regulatory change is another area of concern.              
 He felt AOGCC is taking the steps to address those concerns to                
 allow low cost drilling.  He said bonding is another concern.  If             
 someone is trying to drill a well with a low cost structure to                
 supply a village with 100 families, for example, they cannot afford           
 to put up a $1 million bond and hundreds of thousands dollars for             
 other things.  He stressed the cost of the bonds, in some cases,              
 would exceed the costs of drilling the well.  With only 100                   
 customers, they cannot afford to carry those costs in an economic             
 fashion.  He felt bonding requirement changes would allow coalbed             
 methane development to proceed, especially in rural areas.                    
                                                                               
 MR. LAPPI stated water disposal is another concern, especially in             
 areas close to big rivers.  For example, there are many communities           
 along the Yukon River that have good potential for coalbed methane.           
 He noted the Yukon River has a huge flow--about 100,000 cubic feet            
 per second average and about 1 million cubic feet per second at               
 flood stage.  He felt there should not be any problem, on a                   
 scientific basis, allowing a few hundred or a few thousand gallons            
 of water a day to be mixed in.  He stressed it would not have any             
 impact on water quality in the Yukon.  He said those kinds of                 
 concerns could be addressed, especially if there is an ability to             
 see through the politics and get back to the science.                         
                                                                               
 Number 060                                                                    
                                                                               
 MR. LAPPI stated low cost pipelines are another area the state may            
 want to look at.  He noted the Canadians are laying coil tubing               
 pipelines on the surface in tundra areas and non-populated areas.             
 They are using those pipelines as either temporary or in some                 
 cases, permanent pipelines to transport gas as far away as 50-60              
 miles--from the source to the market.  He felt the state of Alaska            
 could probably do a similar thing.                                            
                                                                               
 MR. LAPPI said the final issue he wished to discuss is a royalty              
 reduction.  He felt, especially in the rural areas where expensive            
 diesel fuel purchased in the lower 48 and shipped up is being                 
 displaced, it might be appropriate to completely eliminate the                
 royalties on gas used in the villages in rural Alaska.  He pointed            
 out the state would probably come out ahead if it could encourage             
 the use of a local indigenous resource like coalbed methane,                  
 instead of importing the expensive diesel fuel.                               
                                                                               
 Number 095                                                                    
                                                                               
 REPRESENTATIVE OGAN asked if there is any rough estimate on the               
 percentage of villages in the bush community that could be served             
 by coalbed methane.                                                           
                                                                               
 MR. LAPPI responded at least one-half of the villages in the bush             
 could be served by coalbed methane or conventional gas.  He stated            
 it is not going to be easy to locate the gas reserves because many            
 of these basins have not received any deep exploratory port hole              
 yet.  He felt it would be a long-term project to get this to                  
 happen.  He recalled a climatological study hole that was drilled             
 in Fort Yukon last summer by the U.S. Geological Study (USGS).  He            
 said the USGS actually finished the drilling of the well because              
 they found a gassy coal at about the 1,200 foot depth and that coal           
 was at least 29 feet thick.  He noted the well is in downtown Fort            
 Yukon.  This is the first time anyone has intercepted a coal in               
 that basin, because no one has done much deep drilling.  He                   
 stressed if some exploratory holes are dug, the resource will be              
 found there.                                                                  
                                                                               
 Number 129                                                                    
                                                                               
 REPRESENTATIVE OGAN wondered how coalbed methane is stored.  He               
 asked if coalbed methane has to be compressed or is it under                  
 natural pressure.                                                             
                                                                               
 MR. LAPPI replied coalbed methane wells usually produce gas at a              
 very low pressure.  He added that water production is needed to get           
 the gas to flow.  He said in the case of a shallow natural gas                
 well, there may be several hundred to 1,000 PSI pressure depending            
 on the depth of the sandstone.  In most cases, there would be a               
 need to provide a compression facility at the surface, near the               
 well, to compress the gas and then get it into a pipeline if it is            
 going to be transported any distance.  In the case of a village,              
 there may not be a need to compress the gas much to distribute it.            
                                                                               
 REPRESENTATIVE OGAN asked if coalbed methane can be stored in                 
 tanks.                                                                        
                                                                               
 MR. LAPPI said yes.  He stated compressed natural gas (CNG) is used           
 as an energy source in some parts of the world.  From an economic             
 point of view, CNG suffers from the fact that the energy density is           
 very low.  He explained a better alternative for transporting                 
 natural gas is to liquefy it and turn it into liquified natural gas           
 (LNG) which has to be stored at very low temperatures.  However,              
 technology is improving and he felt LNG will be used in the state             
 of Alaska to transport and store natural gas in the future.                   
                                                                               
 Number 180                                                                    
                                                                               
 PAUL CRAIG, PRESIDENT, Z-ENERGY, testified via teleconference and             
 stated his company is an independent gas and oil exploration                  
 production company attempting to get off the ground as an                     
 independent operating in Alaska.  He said his company's first                 
 project is a north Beluga gas well in the Beluga gas fields.  One             
 of the barriers he faced was the $1 million bond required for oil             
 spill contingency, as well as the oil contingency plan.  He                   
 encouraged the legislature to review the issue and recognize the              
 AOGCC has the technical expertise in place to make a determination            
 whether or not there is a risk for oil spills in exploratory wells.           
 He noted in the case of coalbed methane, they would be drilling               
 into a known gas reservoir with no heavy hydrocarbons in the                  
 vicinity.  He said it becomes an onerous burden for the small                 
 operator.  He stressed it is important that science and common                
 sense prevail.                                                                
                                                                               
 MR. CRAIG noted a similar natural gas well in Sacramento Valley in            
 California--bonding requirements never exceed $50,000 for a natural           
 gas well and bonding averages about $25,000.  He wondered if                  
 changes in the $1 million bonding requirement for natural gas wells           
 would require legislative action or if it could be revised through            
 regulation under the current statute.                                         
                                                                               
 CO-CHAIRMAN GREEN noted for the record that Representative BARNES             
 had joined the committee.                                                     
                                                                               
 CO-CHAIRMAN GREEN thanked everyone on teleconference and Mr. Smith            
 for his presentation.                                                         
                                                                               
 CO-CHAIRMAN GREEN recalled a statement was made that there might be           
 a possibility of discharging treated water into the Yukon and he              
 reminded the committee there is an adage which has become very                
 popular--"dilution is no solution to pollution."  He recalled there           
 was concern about who might have regulation of coalbed methane                
 wells and he felt AOGCC was the proper entity.  He pointed out that           
 sand, limestone, fractured shale, etc., are all varieties of                  
 reservoirs which produce gas and it seemed logical that coal could            
 be a reservoir and produce gas.  He felt operations should be under           
 the oversight of AOGCC.                                                       
                                                                               
 CO-CHAIRMAN GREEN recalled that Mr. Smith had given an example of             
 a piece of coal which actually could hold more gas in place, per              
 unit volume, than a sandstone reservoir.  He told committee members           
 that porosity in itself is not the answer.  For example, if a large           
 building had many rooms in it and no windows and doors, it would              
 have a tremendous porosity but no permeability.  If one or two                
 doors are opened, it has very low permeability but still has the              
 porosity.  He said gas has a tremendous viable potential,                     
 especially for the remote villages but probably not in an                     
 exportable commodity because of that problem.                                 
                                                                               
 MR. SMITH stated six or seven years ago, Colorado was in the                  
 situation that Alaska is in now.  Colorado rewrote some regulations           
 to do coalbed methane wells and to cover their leasing.  Now, one-            
 third of their production is from coalbed methane and that state              
 only has a very small percentage of the San Juan Basin.                       
                                                                               
 CO-CHAIRMAN GREEN announced the sponsor of HB 195 could not be                
 present.  Therefore, the committee would go on to hear HB 170.                
 HRES - 03/06/95                                                               
 Number 322                                                                    
                                                                               
 HB 170 INTENSIVE MANAGEMENT OF GAME                                         
                                                                               
 REPRESENTATIVE PETE KELLY, PRIME SPONSOR, stated since the bill,              
 itself, was discussed a week ago, he would not overview the bill              
 again.  He said there are people on teleconference who would like             
 to make comments and also answer questions.                                   
                                                                               
 REPRESENTATIVE BARNES made a MOTION to ADOPT CSHB 170(RES), version           
 G dated March 3, 1995.                                                        
                                                                               
 CO-CHAIRMAN GREEN asked if there were any objections.  Hearing                
 none, the MOTION PASSED.                                                      
                                                                               
 CO-CHAIRMAN GREEN noted there was a hand out which compares version           
 C to version G of HB 170.                                                     
                                                                               
 REPRESENTATIVE KELLY stated there is no substantive changes in                
 version G, only a tightening up of the language.                              
                                                                               
 Number 389                                                                    
                                                                               
 SANDRA ARNOLD, REPRESENTATIVE, ALASKA WILDLIFE ALLIANCE, testified            
 via teleconference.  She stated she has spoken with many biologists           
 who all say the same thing about HB 170 and that is, it is                    
 biologically unachievable unless there is an intention to have a              
 predator level at zero.  She stressed many Alaskans value the fact            
 that Alaska is different--it still does have abundant predators and           
 spends 6 percent more dollars each year on dealing with wildlife in           
 non-consumptive activities.  She noted she keeps hearing that the             
 Alaska Department of Fish and Game (ADF&G) needs to stop managing             
 people and start managing the resource.  She felt people management           
 is and has always been an inherent part of wildlife management.               
 She pointed out urban hunters should be more than willing to take             
 a year off from moose hunting or travel a little farther to where             
 the caribou and moose are abundant, rather than scream for more               
 predator control.                                                             
                                                                               
 MS. ARNOLD wondered why no one has talked about the cost of HB 170.           
 Intensive management of game is very costly.  She said if what the            
 bill asks for is possible, it would be quite expensive to achieve.            
 The sustained yield principle is complex and cannot be taken care             
 of in a two page bill.  She noted it is easy to understand                    
 concepts--a balanced budget is an easy to understand concept but it           
 is very difficult to obtain.  She stressed it takes time, research,           
 and a non-stop effort to get wildlife to do what is desired and HB
 170 will not change that fact.  She told committee members to let             
 HB 170 die and the existing SB 77 be negated.                                 
                                                                               
 MS. ARNOLD felt the state should start over and try to come up with           
 a coherent, state-wide predator/prey management policy--one that              
 has broad-based support and where a diverse group of people are               
 invited to the table to discuss.  She said this issue will go on              
 and on and there will be lawsuits, controversies, etc.  In the                
 meantime, the resource will suffer.  She stated her organization              
 would love to settle the issue and move on.  They would gladly come           
 to the table in good faith to try and work out a compromise.  She             
 stressed HB 170 and SB 77 are only going to perpetuate the strife             
 over predator control in Alaska and continue to divide Alaskans.              
                                                                               
 Number 433                                                                    
                                                                               
 MICHAEL TETREAU, SEWARD, testified via teleconference and stated              
 public lands should not be used for single species management.  He            
 said management which favors one or two species also favors equally           
 certain interest groups and not the general public.  Public lands             
 should be managed to maintain natural eco-system processes.  He               
 noted single species management practiced in the past has resulted            
 in unexpected and undesirable results.  He stated the bill also               
 references the restoration of the abundance or productivity of                
 identified big game prey populations.  He stressed there is a big             
 difference between abundance and productivity.  He felt                       
 productivity should be used, not abundance.                                   
                                                                               
 MR. TETREAU stated HB 170 also eliminates the possibility of                  
 placing restrictions on methods or means of taking game, access to            
 game, or human harvest of game.  He said the people cannot be                 
 ignored and any game management should take a holistic approach.              
 He noted throughout the bill, the term big game prey is used as               
 opposed to large ungulates or moose and caribou.  He felt the true            
 intent of the bill is nothing more than predator control.                     
                                                                               
 Number 458                                                                    
                                                                               
 JIM RAMSDELL, SEWARD, testified via teleconference and stated when            
 he heard of HB 170 he wondered how anyone could bring up such                 
 legislation when Alaska is still reeling from the recent outcry               
 over wolf control efforts.  He realized the bill was just another             
 effort by lawmakers to control Alaska's wild in an effort to boost            
 (indiscernible).  He said he is a wildlife lover and deals with               
 many of the tourists coming to Alaska to view the wildlife and feel           
 the state's wild spirit.  He stated he could not believe the                  
 legislature, by their actions, would not care what tourists and               
 outsiders say, while standing with outstretched hands, taking                 
 millions and millions of tourist dollars.                                     
                                                                               
 MR. RAMSDELL stated there is much more to the issue than just                 
 predation including weather, food supply, bull/cow ratios, and                
 hunting pressure.  He said in view of past legislation, freezers              
 full of moose, caribou, and deer can do much more damage than good.           
 He recommended HB 170 be killed.                                              
                                                                               
 Number 479                                                                    
                                                                               
 MARK LUTTRELL, PRESIDENT, EASTERN KENAI PENINSULA ENVIRONMENTAL               
 ACTION ASSOCIATION, testified via teleconference and stated if HB
 170 is not taken seriously, this bill is just a nuisance bill and             
 gets in the way of real wildlife management.  He felt the sponsors            
 are guilty of what environmentalists are often accused of--filing             
 lawsuits to allegedly delay or try to up the costs of a particular            
 agency action.  He said if HB 170 is taken seriously and there is             
 some wildlife management (indiscernible) in this bill, he felt it             
 is still a bad bill and the conclusion is that wolves are bad, they           
 should be killed and moose are good, we need them.  He stressed               
 there is much more involved in the way people interact with                   
 wildlife and there is much more to the ecology of predator/prey               
 relationships.  He recommended HB 170 be killed.                              
                                                                               
 Number 510                                                                    
                                                                               
 OLIVER BURRIS, FAIRBANKS, testified via teleconference and stated             
 he is a retired wildlife biologist.  He stressed he is not a legal            
 wordsmith on the construction of the bill but expressed his major             
 concern is the neglected management on non-management of the                  
 state's wildlife resources, primarily moose and caribou.  He                  
 pointed out that most Interior moose populations are only one-tenth           
 to one-half of former levels.  He noted 90-95 percent of the calves           
 are killed before they reach 16 months of age, where they could               
 contribute to the harvest by humans.  He added that 75 percent are            
 killed before their first winter, meaning a high winter loss is not           
 being looked at in most of the situations.  Moose harvest,                    
 typically, is only about three to five percent of the annual calf             
 crop of these moose and caribou populations.                                  
                                                                               
 MR. BURRIS said no where does anyone come close to harvesting 30-50           
 percent of the harvestable surplus which is obtainable through any            
 reasonably active management program and does not require the zero            
 elimination of predators.  Active management can support high                 
 densities of predators.  Areas have been seen where active                    
 management programs were in place and predator density was restored           
 to the number per square mile per area density much higher than               
 what it was before the active management program started.  He                 
 stressed the idea there is a need to eliminate predators to have an           
 active management program is false.                                           
                                                                               
 Number 537                                                                    
                                                                               
 SAM HARBO, PROFESSOR EMERITUS OF WILDLIFE MANAGEMENT & STATISTICS,            
 FAIRBANKS, testified via teleconference and stated there are                  
 compelling environmental arguments for greater utilization of                 
 northern ungulates.  He said more and more ecologists are                     
 recognizing that greater dependence and greater utilization on                
 local resources is the environmental way to go.  Environmentalists            
 arguing against greater utilization on local resources,                       
 particularly renewable resources such as moose, caribou and sheep,            
 are on the wrong side of the environmental issue.  He pointed out             
 they have left their value system get in the way of sound                     
 environmental reasoning.                                                      
                                                                               
 MR. HARBO stated active management, which he believes the bill                
 should be called, over prey populations undoubtedly is going to               
 require greater effort and hence, costs on the part of the                    
 department.  He said it does not take much effort by the department           
 to manage a moose population if only about one and one-half percent           
 of the population is being taken, which is restricted to bulls                
 only.  He felt passive management does not cost much.  Active                 
 management is going to cost more.  He stressed the environmental              
 advantages of utilizing local resources and much greater returns at           
 the local level warrant, in very selected areas, more management              
 than what is occurring currently.                                             
                                                                               
 CO-CHAIRMAN GREEN recalled that Mr. Burris had mentioned a low                
 number between one and one-half and three percent of human harvest.           
 He wondered if Mr. Burris was talking about the entire herd.  He              
 noted that Mr. Burris had talked about a 75 percent mortality of              
 newborns that were not harvested.  He asked if the three percent              
 involve those who mature later or of the entire herd.                         
                                                                               
 MR. BURRIS responded the figures he used involve looking at the               
 number of offspring being born into the population.  He said the              
 harvest by humans normally equals...he was not talking about the              
 harvest of calves but the harvest of some adults in the                       
 population...to between three and five percent of those calves                
 which are being born into the population each year.                           
                                                                               
 CO-CHAIRMAN GREEN clarified there would be 75 percent killed by               
 other causes and three percent of a number of calves born would               
 ultimately be harvested.                                                      
                                                                               
 MR. BURRIS said that is correct.  He stated when the overall                  
 figures are looked at on the number of calves being born, and those           
 who survived until at least 16 months of age are looked at, it will           
 be found that only five to ten percent of those calves have                   
 survived to 16-18 months of age.                                              
                                                                               
 CO-CHAIRMAN GREEN clarified if 100 calves are born, 75 of those               
 will die before they have their first winter and by the time those            
 calves reach 18 months, there will only be five or ten calves.                
                                                                               
 MR. BURRIS said that is correct.                                              
                                                                               
 CO-CHAIRMAN GREEN clarified that of those five or ten calves, three           
 are harvested.                                                                
                                                                               
 MR. BURRIS responded the equivalent of three are harvested.                   
                                                                               
 CO-CHAIRMAN GREEN clarified between 30-60 percent of the                      
 harvestable calves are currently being harvested.                             
                                                                               
 MR. BURRIS said that was correct and added after all other                    
 mortality has taken place.                                                    
                                                                               
 CO-CHAIRMAN GREEN stated the sponsor is saying, therefore, let us             
 get into that 75 percent and reduce that percent so the numbers               
 reaching 18 months will go up.                                                
                                                                               
 MR. BURRIS stated that is correct.                                            
                                                                               
 CO-CHAIRMAN GREEN announced HB 170 will be rescheduled at a later             
 date.                                                                         
 ADJOURNMENT                                                                   
                                                                               
 There being no further business to come before the House Resources            
 Committee, Co-Chairman Green adjourned the meeting at 9:30 a.m.               
                                                                               

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