Legislature(2015 - 2016)CAPITOL 106
11/03/2015 08:00 AM House RESOURCES
| Audio | Topic |
|---|---|
| Start | |
| HJR301 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HJR301 | TELECONFERENCED | |
ALASKA STATE LEGISLATURE
HOUSE RESOURCES STANDING COMMITTEE
November 3, 2015
8:02 a.m.
MEMBERS PRESENT
Representative Benjamin Nageak, Co-Chair
Representative David Talerico, Co-Chair
Representative Bob Herron
Representative Craig Johnson
Representative Kurt Olson
Representative Paul Seaton
Representative Andy Josephson
Representative Geran Tarr
MEMBERS ABSENT
Representative Mike Hawker, Vice Chair
OTHER LEGISLATORS PRESENT
Representative Chenault
Senator Stoltz
COMMITTEE CALENDAR
HOUSE JOINT RESOLUTION NO. 301
Opposing the recent decisions to cancel future lease sales in
the Chukchi and Beaufort Seas and to deny the suspension of
Shell and Statoil's leases; urging the United States Department
of the Interior to continue to promote oil exploration in the
Chukchi and Beaufort Seas; urging the United States Bureau of
Safety and Environmental Enforcement to reconsider and approve
requests from Shell and Statoil for lease suspensions in the
Chukchi Sea Planning Area and Beaufort Sea Planning Area; and
urging the ongoing efforts to develop offshore oil and gas in
the Arctic Outer Continental Shelf.
- MOVED OUT OF COMMITTEE
PREVIOUS COMMITTEE ACTION
BILL: HJR301
SHORT TITLE: SUPPORT O&G LEASES ON ARCTIC OCS
SPONSOR(s): REPRESENTATIVE(s) GATTIS
11/02/15 (H) READ THE FIRST TIME - REFERRALS
11/02/15 (H) RES
11/02/15 (H) READ THE FIRST TIME - RULED IN ORDER
11/02/15 (H) SUSTAINED RULING OF CHAIR Y26 N12 E2
11/03/15 (H) RES AT 8:00 AM CAPITOL 106
WITNESS REGISTER
REPRESENTATIVE LYNN GATTIS
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Presented HJR 301 as prime sponsor.
BARBARA HUFF-TUCKNESS, Director
Governmental and Legislative Affairs
Alaska Teamsters Local 959
Juneau, Alaska
POSITION STATEMENT: During the hearing on HJR 301, testified in
support.
KARA MORIARTY, President and CEO
Alaska Oil and Gas Association
Anchorage, Alaska
POSITION STATEMENT: During the hearing on HJR 301, testified in
support.
ACTION NARRATIVE
8:02:11 AM
CO-CHAIR BENJAMIN NAGEAK called the House Resources Standing
Committee meeting to order at 8:02 a.m. Representatives Johnson,
Seaton, Josephson, Tarr, Herron, Talerico, and Nageak were
present at the call to order. Representative Olson arrived as
the meeting was in progress. Representative Chenault and
Senator Stoltz were also in attendance.
HJR301-SUPPORT O&G LEASES ON ARCTIC OCS
8:03:23 AM
CO-CHAIR NAGEAK announced that the only order of business would
be HOUSE JOINT RESOLUTION NO. 301, Opposing the recent decisions
to cancel future lease sales in the Chukchi and Beaufort Seas
and to deny the suspension of Shell and Statoil's leases; urging
the United States Department of the Interior to continue to
promote oil exploration in the Chukchi and Beaufort Seas; urging
the United States Bureau of Safety and Environmental Enforcement
to reconsider and approve requests from Shell and Statoil for
lease suspensions in the Chukchi Sea Planning Area and Beaufort
Sea Planning Area; and urging the ongoing efforts to develop
offshore oil and gas in the Arctic Outer Continental Shelf.
8:04:27 AM
CO-CHAIR NAGEAK offered the following statement [original
punctuation provided]:
1. In total, Shell Oil has invested approx. $7
billion to purchase and prosecute its Alaska leases.
External factors have delayed this project, including
new requirements that have restricted the season
length, multiple federal court and administrative
challenges, appeals, and remands that have impacted
the federal government's ability to permit Shell's
exploration activities.
Since 2007, Shell has missed out on six drilling
seasons due to delays associated with legal challenges
and permit delays.
Since July of 2014, Shell has had a request pending
with the DOI for a five-year lease extension.
2. Challenging and unpredictable federal regulatory
environment for Alaska Arctic offshore exploration.
Ever-changing regulatory framework that would not
allow for both rigs to drill at the same time; it only
allowed 1 well in 7 year. The 2015 season only
allowed one well that cost $1.4 Billion to complete.
The Federal Governments reduction of the 2015 program
to one well was devastating to Shell and the Federal
Government rejection of modifying that restriction for
2016 gave Shell little choice but to cancel future
exploration.
8:05:13 AM
CO-CHAIR NAGEAK pointed out that the area he represents has,
over the years enjoyed its resources with regard to taxation,
revenues for governing, and employment, not only for the North
Slope Borough but also the State of Alaska. He expressed
frustration in that the North Slope's people are restricted from
exploring and drilling on their own lands, and he questioned
what is left for their grandchildren.
8:07:59 AM
REPRESENTATIVE LYNN GATTIS, Alaska State Legislature, offered
the following sponsor statement [original punctuation provided]:
Mere months after approval of a single exploratory
well on the Arctic outer-continental shelf, and days
after Shell announced it was no longer exploring for
oil and gas in the Arctic; the Obama administration
and the Department of the Interior cancelled
previously scheduled future lease sales in the Chukchi
and Beaufort Seas. At the same time, the United
States Bureau of Safety and Environmental Enforcement
denied Shell and Statoil requests for lease
suspensions in the same areas.
REPRESENTATIVE GATTIS related that once again, the federal
government is stifling Alaska's economy and way of life by a
decision to cancel future lease sales and deny lease extensions,
thereby crippling the Alaska Outer Continental Shelf (OCS). She
said the administration's decision is likely setting the program
back 20-years in that companies are forced to go through the
entire permitting process of years of bureaucracy and almost
certain litigation just to get back to the point [exploration]
was at. Allowing only one well, after seven-years and $7
billion invested by Shell Oil, she stressed, is unacceptable.
She recalled that dozens of wells were drilled in the Prudhoe
Bay area and all were deemed "disappointing," even though the
geology suggested it was a great spot for oil, the wells were
not hitting. Even so, she said, the state continued leasing and
with nearly every company leaving, ARCO went "all in" and
drilled one more well that hit. She pointed out that it changed
everything for everyone, and the Arctic OCS is one of the last
"elephants out there." Representative Gattis expressed that
Alaska is at risk of losing all Arctic lease investments and;
therefore, needs lease extensions and improved regulatory rules
and process. She said, [HJR 301] recommends the federal
government reconsider its recent decisions and not stand in the
way of Alaskan's vital economic activity in the state. She
pointed out that Alaskans have safely developed all types of
oil, gas, minerals, timber, and fisheries since statehood by
developing regulatory practices that work for all stakeholders.
She remarked that HJR 301 asks the federal government to
basically stand down, re-extend those leases, and let the state
do what it does best - resource development.
8:11:53 AM
REPRESENTATIVE HERRON commented that he supports HJR 301, and
pointed to the National Strategy for the Arctic Region, released
in May, 2013 by President Barack Obama's administration. In
January, 2014, the administration released the Implementation
[for the National Strategy for the Arctic Region]. Remarkably,
he noted, the number one effort stated is to advance the United
States' security interests within the National Strategy of the
Arctic Region, entitled "To Provide for Future United States'
Energy Security." He described the content as reading that
President Obama's administration and the United States is
committed to working with stakeholders, industry, and other
Arctic [countries] to explore the energy resource base, develop
and implement best practices, and share experiences to enable
the environmentally responsible production of oil and natural
gas, as well as renewable energy. He pointed to the
implementation plan and read: "We wish to ensure the safe and
responsible [indisc.] of non-renewable energy resources ... to
ensure safe and responsible exploration development onshore and
offshore Arctic non-renewable energies in an environmentally
sound manner." So, he surmised, this strategy was recently
released and they are "talking out both sides of their mouths,"
in saying this is what they want to do, especially for the
Arctic Region, and then it take steps to counter the
implementation plan within the National Strategy for the Arctic
Region.
8:14:21 AM
CO-CHAIR NAGEAK offered that over the years he has spoken with
Alaskans, legislators, and Congressional aides, to educate them
regarding [Alaska's oil and gas]. He offered an antidote that
when he returned from the United States Army, his home had
changed in that it had become a borough sanctioned by the State
of Alaska, and there were Native Corporations. He pointed out
that "we had our own destiny in our own hands and oil was
discovered." He reminded the committee that corporations make
money from their assets, and that land was the biggest asset the
federal government gave to the corporations. As it turned out,
under the land was oil and gas and other riches, yet the federal
government locked up the land even though the tribes were to
work hand-in-hand with the federal government. The people
living in that area, he stated, are disheartened because they
are continually blocked, and those are the people who depended
on Alaska's resources from the very beginning. He said that in
his earlier days there were "oil seeps" all over the north, and
yet the people can't do anything due to the restrictions placed
on what they do on their own lands. One day, he recalled
driving across a river because he believed it was hard snow and
fell in, only to discover it was a "gas pot." The people living
off the land see "these all the time," as there is so much oil
and gas there but, he reiterated, there is nothing they can do
with it due to the restrictions.
8:19:42 AM
REPRESENTATIVE TARR offered that an issue of concern is the lack
of revenue sharing with OCS development not being mentioned in
HJR 301, and questioned whether that was intentional as it
appeared to be a missed opportunity for jobs. According to the
U.S. Department of Interior, she pointed out, the lease sales
are not happening due to the requirement that they be
competitive lease sales. She explained that when the [U.S.
Department of Interior] issued a nomination opportunity in 2013
and 2014, no companies were interested in one of the leases and
only one company in the other, which did not meet the
requirement of a competitive lease sale. To the extent that
regulatory reform would change that, she hoped the committee
would take its time to consider concrete actions to be taken,
and speak to the companies themselves as she was unsure of the
value of [HJR 301] other than to say the legislature is
disappointed. Certainly low oil prices are influencing a lot of
this behavior and, she opined, it would benefit the committee to
understand those dynamics. In terms of the lease extension, a
couple of pieces of [HJR 301] have merit, but other pieces do
not get "at the real things that need to be changed" when
considering regulatory reform. She pointed out that the current
administration allowed OCS development to go forward during this
past year and expressed that the administration could not be
blamed for the failures of the Kulluk, the unpreparedness of the
company for the Arctic waters, the damage that occurred, and
delaying them by a year.
8:22:17 AM
REPRESENTATIVE JOSEPHSON offered that he shares his colleagues
concerns and feels very differently about the Liberty
Development, which may be facing other contests, mainly because
the Liberty Development is closer to shore, and safer to
develop. When reviewing the current administration and its
willingness to look at oil development on the East Coast from
Virginia down to South Carolina. He suggested considering that
President George W. Bush's administration hadn't made that
allowance, "what's going on here is much more nuanced and
complicated." He referred to an article from "Fuel Fix," a
Ramco sponsored website, and noted when the United States
Department of Interior asked oil companies to highlight areas of
interest for future Arctic sales, only one unidentified company
spoke up. He advised that federal law does not give the United
States Department of Interior the authority to issue blanketed
extensions, rather it requires companies to lay out specific
development plans for drilling and developing. He said his
statement is corroborated by Eric Melito, Director of the
American Petroleum Institute, who said "it is not surprising
that Interior cancelled the remaining lease sales because there
was an absence of nominations," and Mr. Melito surely wants
development. While there is no doubt there is a strict
regulatory environment, he opined, it is not believable that
Shell Oil would invest $7 billion, not have a productive find,
and determine it doesn't want to participate for the indefinite
future. He deduced it cannot be a response to sudden regulatory
change in that it is more causally a response to a failure to
have a productive find. He echoed Representative Tarr in that
[HJR 301] would be more enticing if the state had more revenue
sharing. He stressed he is a believer and booster of onshore
oil and gas development as it would go a long way to curing the
state's current financial ills. Representative Josephson said
he is a "big" backer of AKLNG, but objects to HJR 301 for the
above reasons.
8:25:45 AM
CO-CHAIR TALERICO advised that he supports HJR 301, and
paraphrased from his press release of October 16, 2015, as
follows [original punctuation provided]:
These are heavy-handed and ill-reasoned policies fit
for the Big Environmental lobby, and that's sad. I'm
greatly concerned with their pattern of careless
disregard for the people of Alaska. One short-sighted,
anti-Alaska decision after another. We have decades of
experience carefully and respectfully developing our
resources in Alaska. We're seeing a scary and
concerning shift, policy and process-wise, from our
federal overlords: instead of merely making our
regulatory and permitting system a labyrinth, they're
now also making decisions for the market. That should
give us all cause for alarm. I feel for the people in
my co-chair's region and all the contractors who did
and stood to benefit from exploration, research and
development.
CO-CHAIR TALERICO pointed out that with regard to a competitive
bid, one bidder qualifies as a legitimate competitive bidder.
He opined that the State of Alaska has the area of 3-nautical
miles straight out from low tide, and has the opportunity to
develop. The state has held off in some development due to
concern with local villages "up there" and have listened to
their responses when whaling, et cetra. Even though the
committee may have questions about its take off of this, he
said, the state is in the throes of attempting to build an 814-
mile piece of infrastructure that will produce a transportation
system for gas about as close to the Beaufort Sea as "we're
probably going to get in a long time." Geologically, in the
Beaufort Sea which is close to where the line is going in, there
have been different estimations as to how much gas there may be
there - anywhere from 1.9 trillion cubic feet up to 15.8
trillion cubic feet. He opined that HJR 301 is appropriate and
he appreciates the sponsor brining it forward as the time is now
to get clearly get the message to the people in Washington, D.C.
8:28:39 AM
CO-CHAIR NAGEAK advised there are three agencies involved when
dealing with land use and oceans: the United States Fish and
Wildlife Service, the Bureau of Land Management, and the United
States Army Corps of Engineers. He pointed out that each agency
deals differently with the people living in those areas, and the
people who make it known they are interested in an area for
exploration and/or development. He offered that earlier on he
worked for BLM, went to land school, knows how these agencies
work, knows their laws about land use - especially with BLM
land. He offered that, to Alaska's benefit, the director at the
Bureau of Land Management works closely with the villages and
communities, and the Army Corps of Engineers works diligently
with the people of the area; as opposed to getting anything
through the United States Fish and Wildlife Service.
8:30:36 AM
REPRESENTATIVE SEATON said it is appropriate that the
legislature is sending a message to the administration that it
wants to see offshore development. Although, many of the
"WHEREAS" are not talking about the offshore, he related, but
instead the state's development or its procedures on Alaska
lands. He noted that rather than getting into the nuances of
the interaction of the agencies, the statement that the
legislature wants to make sure it has development in a very
proactive and safe manner is appropriate. The overall message
and intent of urging the federal government to approve economic
development for the State of Alaska is a good message although,
he reiterated, he does not particularly agree with every
statement contained within the "WHEREAS" sections.
8:32:35 AM
CO-CHAIR NAGEAK opened public testimony.
8:33:11 AM
BARBARA HUFF-TUCKNESS, Director, Governmental and Legislative
Affairs, Alaska Teamsters Local 959, said on behalf of the
Alaska Teamster Local 959 members, especially those working in
the oil and gas industry, who strongly support HJR 301. She
pointed out that at least one economic study estimates that the
development of the Arctic Outer Continental Shelf (OCS) oil and
gas resources could produce at least 54 thousand jobs from a
national perspective, and an estimated annual payroll for those
jobs of approximately $72 billion. She provided that any of
these projects put more oil or gas in the state's pipeline, and
will provide a huge economic opportunity for many Alaskans
living and working in the northern village regions. The Alaska
Teamsters, she explained has been training in some of the
villages and, hopefully, offering an opportunity for more Rural
Alaskans to work in the oil and gas industry. She said the
union strongly supports the environmental safe oil and gas
development as the hydrocarbon potential in the Chukchi Sea and
Beaufort Sea represents one-third of the world's, and United
States in particular, oil and gas resources. It also represents
Alaska's future children and grandchildren job opportunities
within Alaska for all Alaskans. She pointed out that as the
Arctic evolves and the economic opportunities are developed in
Alaska and abroad, the Teamsters welcome those new Alaskan jobs
and opportunities within those particular regions and also
opening up some of the local port areas in Alaska's northern
communities. For these reasons, she offered, the Alaska
Teamsters Union supports HJR 301. She referred to a November 2,
2015 article within the Alaska Dispatch News, entitled "Shell
leaves door open for future exploration in Alaska's Arctic,"
regarding the number of leases, and said:
Currently Shell has 275 leases in the Chukchi Sea -
even though the Interior Department has rejected
Shell's bid to extend the duration of its Beaufort and
Chukchi Sea leases, which otherwise expire between
2017 and 2020.
MS. HUFF-TUCKNESS opined that the state has many economic
opportunities with a bright future.
8:37:46 AM
KARA MORIARTY, President and CEO, Alaska Oil and Gas
Association, said that as a professional trade association for
the industry in Alaska, it supports the resolution for many of
the reasons previously mentioned. She pointed out that the
Arctic has major resources and just because Shell Oil decided
not to proceed in 2016 with their investment, it is not giving
up those leases as there is still interest in the Arctic. She
opined that "this" highlights the strength of the state's
areawide leasing program in that it is predictable, reliable,
and consistent; sometimes the state will only have one bidder,
and recently there was a "whopping" lease sale on the North
Slope. She reiterated that the lease sale process in the state
is consistent, reliable, and predictable which is something the
industry needs because "when you start and stop lease sales it
sends a message that maybe the government is not that interested
in truly developing the Arctic." She advised that the Alaska
Oil and Gas Association was very discouraged when the U.S.
Department of Interior decided to cancel the scheduled lease
sales for 2016 and 2017. She added that with regard to oil
price, Shell Oil has been very clear that oil price did not play
into their decision, if it had proceeded Alaska wouldn't have
seen production for 12-15 years, and "we" cannot even accurately
predict oil prices for 12-15 months. This is a long term and
necessary prospect for Alaska when looking at Alaska and the
country's energy security. The Alaska Oil and Gas Association
is hopeful the federal government will reconsider that decision,
she offered.
8:40:21 AM
REPRESENTATIVE TARR commented that because federal law prohibits
the lease sales because its definition of "competitive sales"
requires that there be more than one interested party,
questioned whether Ms. Moriarty is working with Alaska's
Congressional Delegation to change that requirement, and
opportunities to address that issue.
MS. MORIARTY replied the Alaska's Congressional Delegation is
working on a host of changes to make this process stronger,
including revenue sharing. She advised that since Shell Oil's
announcement it is not returning in 2016, Senator Lisa Murkowski
has continued to advocate for revenue sharing as the [senior
Republican on the Senate Energy and Natural Resources
Committee]. She offered that "it just sends a message that when
you cancel lease sales like this it sends a message that you
really are not interested because some of those things, I think,
could have proceeded without that." She appreciates that the
legislature, and many others, go on record that Alaskans do
support gas development.
8:41:43 AM
REPRESENTATIVE TARR opined that this is something the Republican
leadership in Congress would be interested in, and asked whether
she has any idea why this issue wouldn't move forward.
MS. MORIARTY responded she cannot speak to that directly as it
is a question she would need to ask [Alaska's Senators].
8:42:42 AM
CO-CHAIR NAGEAK closed public testimony on HJR 301.
8:43:01 AM
CO-CHAIR TALERICO moved to report HJR 301, labeled 29-LS1169\W,
out of committee with individual recommendations and the
accompanying fiscal note. There being no objection, HJR 301
passed out of the House Resources Standing Committee.
8:44:33 AM
The committee took an at-ease from 8:44 to 8:47 a.m.
8:47:23 AM
ADJOURNMENT
There being no further business before the committee, the House
Resources Standing Committee meeting was adjourned at 8:47 a.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HJR 301 Sponsor Statement.pdf |
HRES 11/3/2015 8:00:00 AM |
|
| HJR 301- ver W.pdf |
HRES 11/3/2015 8:00:00 AM |
|
| HJR 301 Fiscal Note-LEG-LAA-11-2-15.pdf |
HRES 11/3/2015 8:00:00 AM |
|
| HJR 301 Supporting Documents - North Slope Borough Letter of Support 10-29-2015.pdf |
HRES 11/3/2015 8:00:00 AM |
|
| 11.3.15 HSE RES HJR - AK Dispatch News Article on Shell OCS 11.2.15.pdf |
HRES 11/3/2015 8:00:00 AM |