Legislature(1997 - 1998)

02/18/1997 01:13 PM RES

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
          HOUSE RESOURCES STANDING COMMITTEE                                   
                  February 18, 1997                                            
                      1:13 p.m.                                                
MEMBERS PRESENT                                                                
Representative Bill Hudson, Co-Chairman                                        
Representative Scott Ogan, Co-Chairman                                         
Representative Beverly Masek, Vice Chair                                       
Representative Ramona Barnes                                                   
Representative Fred Dyson                                                      
Representative Joe Green                                                       
Representative William K. ("Bill") Williams                                    
Representative Reggie Joule                                                    
MEMBERS ABSENT                                                                 
Representative Irene Nicholia                                                  
COMMITTEE CALENDAR                                                             
SENATE JOINT RESOLUTION NO. 9 am                                               
Urging the United States Congress to pass legislation to open the              
coastal plain of the Arctic National Wildlife Refuge, Alaska, to               
oil and gas exploration, development, and production.                          
     -  MOVED SJR 9 am OUT OF COMMITTEE                                        
* HOUSE BILL NO. 128                                                           
"An Act relating to water quality; directing the Department of                 
Environmental Conservation to conduct water quality research;                  
establishing the Water Science Oversight Board; and providing for              
an effective date."                                                            
     - BILL POSTPONED TO 2/20/97                                               
(* First public hearing)                                                       
PREVIOUS ACTION                                                                
BILL:  SJR 9                                                                   
SHORT TITLE: ENDORSING ANWR LEASING                                            
SPONSOR(S): SENATOR(S) PEARCE, Adams, Green, Parnell, Taylor,                  
Miller, Mackie, Donley, Sharp, Leman, Phillips, Halford, Wilken,               
Torgerson, Kelly, Ward; REPRESENTATIVE(S) Rokeberg                             
JRN-DATE      JRN-PG                 ACTION                                    
01/29/97       160    (S)   READ THE FIRST TIME - REFERRAL(S)                  

01/29/97 160 (S) RESOURCES 02/10/97 (S) RES AT 3:30 PM BUTROVICH ROOM 205 02/10/97 (S) MINUTE(RES) 02/11/97 282 (S) RES RPT 5DP 1AM 02/11/97 282 (S) DP:GREEN, TAYLOR, TORGERSON, LEMAN, 02/11/97 282 (S) DP: SHARP; AM: LINCOLN 02/11/97 282 (S) ZERO FISCAL NOTE (S.RES) 02/13/97 (S) RLS AT 10:45 AM FAHRENKAMP RM 203 02/13/97 (S) MINUTE(RLS) 02/13/97 334 (S) RULES TO CALENDAR 2/13/97 02/13/97 334 (S) READ THE SECOND TIME 02/13/97 335 (S) AM NO 1 WITHDRAWN 02/13/97 335 (S) AM NO 2 OFFERED BY LINCOLN 02/13/97 335 (S) AM NO 2 ADOPTED UNAN CONSENT 02/13/97 336 (S) AM NO 3 OFFERED BY LINCOLN 02/13/97 336 (S) AM NO 3 FAILED Y4 N14 E2 02/13/97 336 (S) ADVANCED TO THIRD READING UNAN CONSENT 02/13/97 336 (S) READ THE THIRD TIME SJR 9 AM 02/13/97 336 (S) COSPONSOR(S): WILKEN, TORGERSON, 02/13/97 336 (S) KELLY, WARD 02/13/97 336 (S) PASSED Y17 N- E2 A1 02/13/97 341 (S) TRANSMITTED TO (H) 02/14/97 354 (H) READ THE FIRST TIME - REFERRAL(S) 02/14/97 354 (H) RESOURCES 02/14/97 362 (H) CROSS SPONSOR(S): ROKEBERG 02/18/97 (H) RES AT 1:00 PM CAPITOL 124 WITNESS REGISTER SENATOR DRUE PEARCE Alaska State Legislature Capitol Building, Room 518 Juneau, Alaska 99801 Telephone: (907) 465-4993 POSITION STATEMENT: Testified as sponsor of SJR 9 am. DALE BONDURANT P.O. Box 1197 Soldotna, Alaska 99669 Telephone: (907) 262-0818 POSITION STATEMENT: Testified against SJR 9 am. VERNITA HERDMAN 2075 Campbell Place Anchorage, Alaska 99507 Telephone: (907) 562-1740 POSITION STATEMENT: Testified on SJR 9 am. ACTION NARRATIVE TAPE 97-13, SIDE A Number 0001 CO-CHAIRMAN SCOTT OGAN called the House Resources Standing Committee meeting to order at 1:13 p.m. Members present at the call to order were Representatives Ogan, Hudson, Masek, Dyson and Green. Representatives Williams, Joule and Barnes joined the meeting at 1:15 p.m., 1:16 p.m. and 1:18 p.m., respectively. Representative Nicholia was absent. SJR 9 am - ENDORSING ANWR LEASING Number 0059 CO-CHAIRMAN OGAN said the calendar included SJR 9 am, urging the United States Congress to pass legislation to open the coastal plain of the Arctic National Wildlife Refuge, Alaska, to oil and gas exploration, development, and production. He said the sponsor of SJR 9 am was not in the committee room and asked Representative Green to present the bill. Number 0089 REPRESENTATIVE JOE GREEN said SJR 9 am sends another message to the President, his cabinet and Congress that Alaska is interested in opening up the Arctic National Wildlife Refuge (ANWR), at least the 1002 coastal plain area which represents about 1 percent of the total refuge; he added that there would not be massive development. He said concern had been expressed that SJR 9 am could interrupt the caribou migration and reminded the committee that Alaska has the second largest oil field in the north American continent, the Kuparuk field. This field is right in the way of the coastal zone herd caribou migration, and that herd has increased nearly seven-fold since oil environmental and industry issues can be handled in a cooperative manner. Number 0199 REPRESENTATIVE GREEN said according to United States Geological Survey (USGS) figures, there could be as much as ten billion barrels of commercial oil from the coastal zone area. He said oil wells have been drilled north, east and west of the 1002 area, and in every case they have discovered hydrocarbon, albeit not always in commercial quantities; but there has been oil. He said in all likelihood there are traps, perhaps not huge anticlinal traps like there are in Prudhoe Bay. There is the strong possibility of traps similar to those in the Kuparuk River field. Number 0253 REPRESENTATIVE GREEN said there has been a concerted effort over the last several years in lobbying back in Washington, D.C., to open ANWR, at least the 1002 area, for exploration. It would be good to have exploration and development, but it needs to be opened up to see if there is anything there at all. He said the benefits to the state of Alaska could be anywhere from a high of 90 percent to the low of 50 percent of royalties. He said on a ten billion barrel reserve, the math bodes very well. REPRESENTATIVE GREEN said an environmental consideration would have to be given. He added that Alaska would not only benefit in royalties, but that the pipeline coming from the coastal zone would pass Point Thompson, Badami, and other known accumulations of oil. This would allow the transportation of that oil to the existing infrastructure at Pump One. Number 0345 REPRESENTATIVE GREEN said this oil would prolong the life of the existing Trans-Alaska Pipeline System (TAPS). He mentioned the Prudhoe Bay fields which are reaching their economic limit. He said that with additional oil coming through the pipeline, the economic limit would be extended several years, perhaps as many as ten years because the pipeline costs would be allocated to other barrels of oil. It costs to have that 48-inch line going, but if you can reduce those costs because of increasing amounts of oil coming from ANWR then the per-barrel cost that comes from Prudhoe Bay decreases and the economic life of the field is extended. Number 0420 REPRESENTATIVE GREEN said the operations of oil fields in the North Slope, including Prudhoe Bay, have been able to operate in an environmental satisfactory manner. He said each step of major development, since the first day, has reduced the footprint dramatically. It is estimated that if there are ten billion barrels of commercial oil discovered in ANWR, the footprint would be no larger than Dulles Airport near Washington, D.C. He said larger mammals co-exist beautifully, as has been proven, in at least two of the oil fields. He said opening up ANWR would provide an economic benefit to the state, including jobs for Alaskans, and it is environmentally sound. He said opening up ANWR would provide jobs for every state in the union, but mostly in Alaska. He said development creates long-term jobs and provides opportunities which encourages our children to stay in the state. Number 0552 CO-CHAIRMAN BILL HUDSON said over the years, we have heard about the through-put capacity which makes operating the pipeline profitable. He asked what was the least amount of through-put necessary in order to remain profitable. Number 0580 REPRESENTATIVE GREEN said there is a fairly wide latitude with the through-put. He said some estimates are as low as 200,000 barrels a day, but many people feel it is closer to 300,000. He said various factors drive the through-put, such as price of oil, labor costs, operating costs, and so forth. He said those fluctuations or an edict coming from Washington D.C., things that can't be foreseen, would put the through-put at 250,000 barrels a day, plus or minus 10 percent. Number 0638 CO-CHAIRMAN HUDSON said getting into ANWR or the "Naval Petroleum Reserve" is necessary to add to that through-put so as to obtain the barrels we know currently exist in the North Slope. He said if you don't add to the current reserve, many barrels would probably remain in the ground. Once they are shut in, they remain. Number 0682 REPRESENTATIVE GREEN said this is a fair assessment. He said even if you were to put that pipeline in mothballs, maintenance would be excessively high because it must be maintained in absolutely tip-top shape. He fields to be brought on line. CO-CHAIRMAN OGAN announced that Senator Pearce, sponsor of SJR 9 am, joined the committee meeting. Number 0771 REPRESENTATIVE RAMONA BARNES said the pipeline enabling act says that when it is no longer economically feasible, which Representative Green says he thinks is around 250,000 barrels of oil, whereas she always thought it was around 6,000 barrels of oil, the pipeline then must be dismantled and the area returned to the state it was prior to the building of the pipeline. She asked if that was Senator Pearce's understanding as well. Number 0808 SENATOR DRUE PEARCE, sponsor of SJR 9, said the pipeline act, the same as the North Slope leases, says that there has to be a dismantling at the decision of the state and the federal government. If the state and the federal government decided that on the state and federal lands we wanted the haul road, pads, roads or the right-of-way left, then Alyeska would leave them in whatever condition was asked for by the state and federal government. She said this decision-making process has not really begun on the pipeline, but it has already begun on some of the leases regarding abandoned areas. She said Congress will need to re-authorize the entire pipeline act within the next few years, possibly four or five. SENATOR PEARCE said the number she was given by the Alaska Department of Natural Resources, in terms of the number of barrels of oil needed to make the pipeline economic, is somewhere between 250,000 and 300,000 barrels. Number 0904 CO-CHAIRMAN OGAN referred to the oil embargo which occurred in the 1970s and the national security concern over importing oil. He asked what the United States was importing now. Number 0953 SENATOR PEARCE said for calendar year 1996, the United States imported almost 53 percent of its oil, a number which is growing each year. For any country, particularly the United States, to be more than half dependent on foreign sources of oil should be frightening. She said Venezuela has acted as a friend to the United States, but the Middle East continues to be a powder keg. A tremendous amount of federal defense dollars and federal state department dollars go into those area in order to allow the United States to keep getting that oil. Number 1013 REPRESENTATIVE REGGIE JOULE said he supports SJR 9 am. Number 1082 DALE BONDURANT testified next via teleconference from Kenai. He said the committee discussed the argument that if we open up ANWR the United States will be less dependent on foreign oil. He added that this argument was a no-brainer as we have worked so hard to export that oil. Companies who want to export our oil all have foreign oil. The sooner they can get rid of Alaskan oil, the more dependant the United States is going to be on that foreign oil. He said there are some real problems regarding the environment and mentioned an article about a well being poisoned. People are being fired because they are trying to do it right and industry has had a pretty bad black eye in some cases. They are dumping toxins in Cook Inlet. MR. BONDURANT said the main reasoning for all of this is bottom-line profits an never given up what they have actually contracted for and these deals are played for the public's benefit. He said the public owns the oil, but are never allowed to know exactly how much is being paid for it. He would argue for a reduction of 90 percent down as we are going to give it to industry anyway. Maybe some of the public would be less willing to give away the oil as compared to the legislature and the Administration. Number 1243 REPRESENTATIVE GREEN asked him if he had been to the North Slope. MR. BONDURANT said he has not been there, but he has been reading about it. He is leery of a company that has the power to get rid of whistle blowers who have enough guts to come forward and point out the problems and the state goes along with this. He referred to a case in Valdez. Number 1283 REPRESENTATIVE GREEN said when you have a private industry that hires and discharges, based on the quality of a person's work rather than on longevity or union affiliation, there will be casualties. He said to condemn the whole industry because somebody got fired is about the same as condemning environmental actions on the North Slope when you've never been there. Number 1310 REPRESENTATIVE GREEN referred to Mr. Bondurant's testimony about why the United States would import oil and then appear to want to export oil. He asked if he was familiar with supply and demand and the transportation costs associated with oil. Since the 1920s, when there was a large expansion within the oil industry in the United States, an exchange of crude oils from one company to another began occurring. If a company operates in Louisiana and has a refinery in Texas, they might make an exchange of oil in Louisiana for more oil in Texas nearer their refinery. He said this is not unlike what we would be doing in this country. Oil going from the Middle East to the Far East would be traveling a much longer route than if oil came to this country on the Gulf of Mexico and then we discharged or sold our oil from Alaska to the Far East. He said it may appear that we are doing rather a foolish thing in importing oil and exporting oil, but it has to do with the net use of it at the lowest possible cost. Number 1404 MR. BONDURANT said we are continuing to be fed this type of propaganda, but the bottom line clause is a profit for the oil companies not a profit for Alaska. We are shipping oil in and out and no one seems to be concerned that, in the case of a real problem, these options are not going to be available to us. Industry takes the position of bottom line profit in every thing they do. He said regarding the employee question, maybe if we had a good union there might be some results. The oil companies were happy to have unions when they first came into Alaska. Now there is a company union called VECO and the people don't have any representation. Number 1471 REPRESENTATIVE BARNES said she has been to Prudhoe Bay on four separate occasions at different times of the year and observed that it is operated in an environmentally safe manner. Things are done open and above board, it is clean, well-kept, with animals and birds all over that enjoy being there. Regarding the use of American flag vessels versus foreign bottom boats, her understanding is that we ship our oil to Taiwan in American flag vessels. She encouraged him to support SJR 9 am and resolutions like this so that his grandkids and hers can have a job in Alaska. Number 1541 MR. BONDURANT said he had problems with some of her actions and referred to the $5 million that was left on the table. As to the future, when the oil is finished in the state there will not be an on going allegiance. He said the quicker we get rid of them, the (indisc.). CO-CHAIRMAN OGAN mentioned that Representative Green told him he would be able to discuss these issues with him after the meeting. Number 1592 VERNITA HERDMAN said she traveled in the 1980s to the North Slope and has been to Kaktovik a couple of times, to Prudhoe Bay many times and to Barrow. She also has been to the Gwich'in villages of Fort Yukon, Arctic Village and Beaver on the American side and to Fort McPherson, Arctic Red River and Old Crow on the Canadian side. She has been to Inuvik and Aklavik which are Eskimo villages, albeit Canadian. MS. HERDMAN said she wanted to take issue with some of the comments based on her observations and a great deal of reading. She just spoke a couple of days ago with a resident from the North Slope Borough who had previously been on record in support of oil development. This resident said he is having second thoughts. He noticed after a period of oil exploration activities that the birds, land mammals and the marine mammals disappeared for two and a half months. MS. HERDMAN said the porcupine caribou herd is very different from the herd around the Prudhoe Bay area. This herd migrates extreme distances across the United States and Canadian borders. The area of concern to the Gwich'in people, who use that caribou herd extensively for food, is the land that is of most interest to the oil industry is on the calving grounds of the porcupine caribou herd. Caribou who are calving have a different behavior from non-calving carib disturbed and the footprint area would be in the calving grounds. MS. HERDMAN said her observations differed, respectively, from Representative Barnes's observations. She had been to Prudhoe Bay at all different seasons of the year and remembered flying from Prudhoe Bay to Kaktovik where there was plume of smoke that came from the burning of gases from the industry area. She said it was no small plume, it paralleled the plane for miles and miles and added that the impact on air quality is of great concern. Number 1764 MS. HERDMAN said, for many years when it was the Soviet Union, there were activities in Siberia that were non-environmentally regulated and that we are just beginning to see the fall out as a result of those activities. She concluded that this might be the single issue that both she and Mr. Bondurant agree on. Number 1824 REPRESENTATIVE BEVERLY MASEK asked when Ms. Herdman had traveled to the North Slope. Number 1836 MS. HERDMAN said the oil development was well under way when she traveled up to the North Slope, she thought oil had been going through the pipeline for about nine years at the time she traveled up there. She said she had not been up there recently, but the comments made by the resident from the North Slope Borough were made over the past weekend. REPRESENTATIVE MASEK asked her where she was from. MS. HERDMAN said she was originally from Unalakeet, but lives in Anchorage currently. REPRESENTATIVE MASEK asked her when her last trip was up to the North Slope. MS. HERDMAN said her last trip was in 1989 and added that she hoped that progress had been made since then. Number 1871 REPRESENTATIVE GREEN said he shared Representative Masek's concern about the time frame in which she visited that area. He said the large footprints which were done to separate the wells far enough apart so, that if something would happen, the drilling rig wouldn't fall over and hit another well head. He said this has long since been done away with. Every possibility was taken into consideration when they begin working in a new environment. Prior to the development of Prudhoe Bay, the oil industry was really not that familiar with permafrost. Now the industry has had 20 years of experience and so have been able to reduce the size of the footprint to the point that it doesn't contain large drill pads. REPRESENTATIVE GREEN said, in the spring, the best place to view birds is along the roads in Prudhoe Bay and Kuparuk River fields. He said the reason for this is that there is a little amount of dust and when you discolor snow it melts faster, so the first place that the birds can see tundra is near the roads. He said you can also see geese, swans. He said perhaps the person who said you could not see birds and animals was ill advised or he was talking about a specific two month period that was anomalous to the norm. REPRESENTATIVE GREEN said the caribou migration for the central caribou herd migration is greater than the migration for the porcupine herd. He said those caribou occasionally calve in the oil fields themselves. Number 1987 MS. HERDMAN said the information she received wasn't in the form of gossip or rumor, it was from a member of the Alaska Eskimo Whaling Commission. She believed that the commission had done its own independent research in environmental investigations. She did not believe that the distance migrated was the factor she mentioned, she referred to the nature of the calving grounds and added that the behavior during calving times is very different from migrating caribou. Number 2015 MS. HERDMAN admitted that eight years is a long time to have passed since she visited the North Slope. She hoped things had changed. She is glad that the industry is getting environmentally sensitive. She said Representative Green's remarks give her hope because he seemed to be very knowledgeable and at least appeared to have been up there. Number 2033 REPRESENTATIVE FRED DYSON said most of the vapor from the burning of natural gas is water. Number 2045 MS. HERDMAN said the smoke she referred to was quite dark, slate grey. She had seen the Anchorage power plant and said there is a lot of steam with that, but this smoke was different. Number 2052 REPRESENTATIVE DYSON said as part of the safety procedure, an oil field has flares, and with that the air-fuel ratio is not controlled because of a safety measure from the vent piping. He referred to a person who worked up in Prudhoe Bay and said she could call him if she had any questions about the oil field operations. Number 2109 SENATOR PEARCE said certainly the industry and the state are sympathetic to the people of Kaktovik, Arctic Village and the Canadian villages who depend on the caribou herd. The porcupine herd is not the largest herd, but it is healthy herd with just under 200,000 animals. She said exploration takes place in the winter on the North Slope and no members of the porcupine herd remain on the coastal plain in the winter. The herd is there for a very short period of time in the summer. They calve, gather and then leave. They are there for six weeks or less, each and every summer with the calving grounds moving from year to year. The choice of calving grounds is probably snow-dependent, depending on bad the winter is and how far they get before they calve. SENATOR PEARCE said exploration can be done to determine what sort of hydrocarbons there are, if any. The next part would be the permitting system for development which occurs long before you get to production. She said at that time, when we know more about where the areas are where oil is located versus the areas where there has been calving, when we will be able to mitigate for the impacts of that calving. The only way this can be done is to do the exploration and see what is really there. She said the state fully intends to work to make sure that we mitigate those impacts. She reiterated that the caribou and most of the other animals mentioned are not in or active in the coastal plains area in the winter. Number 2192 CO-CHAIRMAN OGAN said the wolves are probably harassing the caribou more than the oil development is. Number 2225 REPRESENTATIVE BARNES made a motion to move SJR 9 am with a zero fiscal note and individual recommendations. She asked for unanimous consent. There being no objection, SJR 9 am moved from the House Resources Standing Committee. Number 2231 CO-CHAIRMAN OGAN called for a recess at 1:53 p.m. The committee would reconvene with the Senate Resources Committee to hear timber overviews at 2:00 p.m.

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