Legislature(2003 - 2004)

04/07/2004 01:10 PM RES

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                 ALASKA STATE LEGISLATURE                                                                                     
            HOUSE RESOURCES STANDING COMMITTEE                                                                                
                       April 7, 2004                                                                                            
                         1:10 p.m.                                                                                              
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Nancy Dahlstrom, Co-Chair                                                                                        
Representative Beverly Masek, Co-Chair                                                                                          
Representative Cheryll Heinze, Vice Chair                                                                                       
Representative Carl Gatto                                                                                                       
Representative Bob Lynn                                                                                                         
Representative Kelly Wolf                                                                                                       
Representative David Guttenberg                                                                                                 
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Representative Nick Stepovich                                                                                                   
Representative Beth Kerttula                                                                                                    
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
HOUSE BILL NO. 309                                                                                                              
"An Act prohibiting the release of nonindigenous predatory                                                                      
fish into public water."                                                                                                        
                                                                                                                                
     - MOVED CSHB 309(RES) OUT OF COMMITTEE                                                                                     
                                                                                                                                
HOUSE BILL NO. 395                                                                                                              
"An Act relating to shallow natural gas leasing and the                                                                         
regulation of shallow natural gas operations."                                                                                  
                                                                                                                                
     - HEARD AND HELD                                                                                                           
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
BILL: HB 309                                                                                                                  
SHORT TITLE: PROHIBIT RELEASE OF PREDATORY FISH                                                                                 
SPONSOR(S): REPRESENTATIVE(S) WOLF                                                                                              
                                                                                                                                
05/08/03 (H) READ THE FIRST TIME - REFERRALS                                                                                    
05/08/03 (H) FSH, RES                                                                                                           
05/16/03 (H) FSH AT 7:30 AM CAPITOL 124                                                                                         
05/16/03 (H) Heard & Held                                                                                                       
05/16/03 (H) MINUTE(FSH)                                                                                                        
03/22/04 (H) FSH AT 9:00 AM CAPITOL 124                                                                                         
03/22/04 (H) Moved CSHB 309(FSH) Out of Committee                                                                               
03/22/04  (H)  MINUTE(FSH)                                                                                                      
03/24/04  (H)  FSH RPT CS(FSH) NT 3DP 2NR                                                                                       
03/24/04 (H) DP: GARA, WILSON, SEATON; NR: OGG,                                                                                 
03/24/04 (H) GUTTENBERG                                                                                                         
03/31/04  (H)  RES AT 1:00 PM CAPITOL 124                                                                                       
03/31/04 (H) Heard & Held                                                                                                       
03/31/04  (H)  MINUTE(RES)                                                                                                      
04/01/04 (H) JUD REFERRAL ADDED AFTER RES                                                                                       
04/05/04  (H)  RES AT 1:00 PM CAPITOL 124                                                                                       
04/05/04 (H) Heard & Held                                                                                                       
04/05/04  (H)  MINUTE(RES)                                                                                                      
04/07/04  (H)  RES AT 1:00 PM CAPITOL 124                                                                                       
                                                                                                                                
BILL: HB 395                                                                                                                  
SHORT TITLE: SHALLOW NATURAL GAS                                                                                                
SPONSOR(S): REPRESENTATIVE(S) HARRIS                                                                                            
                                                                                                                                
01/23/04 (H) READ THE FIRST TIME - REFERRALS                                                                                    
01/23/04 (H) O&G, RES, JUD, FIN                                                                                                 
02/05/04  (H)  O&G AT 1:00 PM CAPITOL 124                                                                                       
02/05/04 (H) Heard & Held                                                                                                       
02/05/04  (H)  MINUTE(O&G)                                                                                                      
02/24/04  (H)  O&G AT 3:15 PM CAPITOL 124                                                                                       
02/24/04 (H) Heard & Held                                                                                                       
02/24/04  (H)  MINUTE(O&G)                                                                                                      
02/26/04  (H)  O&G AT 3:15 PM CAPITOL 124                                                                                       
02/26/04 (H) Heard & Held                                                                                                       
02/26/04  (H)  MINUTE(O&G)                                                                                                      
03/09/04  (H)  O&G AT 3:15 PM CAPITOL 124                                                                                       
03/09/04 (H) Moved CSHB 395(O&G) Out of Committee                                                                               
03/09/04  (H)  MINUTE(O&G)                                                                                                      
03/12/04 (H) O&G RPT CS(O&G) NT 1DP 3NR 1AM                                                                                     
03/12/04 (H) DP: KOHRING; NR: ROKEBERG, CRAWFORD,                                                                               
03/12/04 (H) HOLM; AM: KERTTULA                                                                                                 
03/19/04  (H)  RES AT 1:00 PM CAPITOL 124                                                                                       
03/19/04 (H) -- Meeting Canceled --                                                                                             
04/07/04  (H)  RES AT 1:00 PM CAPITOL 124                                                                                       
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
RICK VANDERKOLK, Staff                                                                                                          
to Representative John Harris                                                                                                   
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Presented HB 395 on behalf of                                                                              
Representative Harris, sponsor.                                                                                                 
                                                                                                                                
ROBIN McLEAN                                                                                                                    
Sutton, Alaska                                                                                                                  
POSITION STATEMENT:  Provided testimony on HB 395.                                                                              
                                                                                                                                
MYRL THOMPSON                                                                                                                   
Sutton, Alaska                                                                                                                  
POSITION STATEMENT:  Provided testimony on HB 395.                                                                              
                                                                                                                                
KATELYN BALDWIN                                                                                                                 
Wasilla, Alaska                                                                                                                 
POSITION STATEMENT:  Testified on HB 395.                                                                                       
                                                                                                                                
MARK MYERS, Director                                                                                                            
Division of Oil & Gas                                                                                                           
Department of Natural Resources (DNR)                                                                                           
Anchorage, Alaska                                                                                                               
POSITION  STATEMENT:    During   bill  hearing  on  HB  395,                                                                    
provided information and answered questions.                                                                                    
                                                                                                                                
MICHAEL O'MEARA                                                                                                                 
Homer, Alaska                                                                                                                   
POSITION  STATEMENT:    Testified  on HB  395  and  answered                                                                    
questions from the members.                                                                                                     
                                                                                                                                
JOHN NORMAN, Chairman                                                                                                           
Alaska Oil and Gas Conservation Commission                                                                                      
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Testified on HB 395.                                                                                       
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
TAPE 04-19, SIDE A                                                                                                            
Number 0001                                                                                                                     
                                                                                                                                
CO-CHAIR   NANCY  DAHLSTROM   called  the   House  Resources                                                                  
Standing   Committee  meeting   to   order   at  1:10   p.m.                                                                    
Representatives   Dahlstrom,   Masek,   Gatto,   Wolf,   and                                                                    
Guttenberg   were   present   at    the   call   to   order.                                                                    
Representatives Heinze  and Lynn arrived as  the meeting was                                                                    
in progress.                                                                                                                    
                                                                                                                                
HB 309-PROHIBIT RELEASE OF PREDATORY FISH                                                                                     
                                                                                                                                
CO-CHAIR  DAHLSTROM  announced  that   the  first  order  of                                                                    
business would  be HOUSE BILL  NO. 309, "An  Act prohibiting                                                                    
the  release of  nonindigenous  predatory  fish into  public                                                                    
water."                                                                                                                         
                                                                                                                                
CO-CHAIR DAHLSTROM  clarified that during the  April 5, 2004                                                                    
bill  hearing  an  objection  was  made  and  had  not  been                                                                    
removed,  so  for  procedural reasons  the  committee  would                                                                    
again address the issue.                                                                                                        
                                                                                                                                
Number 0110                                                                                                                     
                                                                                                                                
CO-CHAIR  MASEK  moved  to report  CSHB  309,  [Version  23-                                                                    
LS1097\W,   Utermohle,  3/24/04]   out  of   committee  with                                                                    
individual  recommendations  and   the  accompanying  fiscal                                                                    
notes,  and asked  for unanimous  consent.   There being  no                                                                    
objection,  CSHB  309(RES) was  reported  out  of the  House                                                                    
Resources Standing Committee.                                                                                                   
                                                                                                                                
[CO-CHAIR  DAHLSTROM  passed  the  gavel  over  to  Co-Chair                                                                    
Masek.]                                                                                                                         
                                                                                                                                
HB 395-SHALLOW NATURAL GAS                                                                                                    
                                                                                                                                
Number 0245                                                                                                                     
                                                                                                                                
CO-CHAIR  MASEK announced  that the  next order  of business                                                                    
would be  HOUSE BILL  NO. 395, "An  Act relating  to shallow                                                                    
natural gas  leasing and the  regulation of  shallow natural                                                                    
gas operations."                                                                                                                
                                                                                                                                
CO-CHAIR MASEK  clarified that the House  Resources Standing                                                                    
Committee had  not been  holding up [HB  395], but  had been                                                                    
waiting  for almost  two  weeks for  the  bill's sponsor  to                                                                    
provide  the   CS  [committee  substitute]   containing  the                                                                    
changes  requested by  the Department  of Natural  Resources                                                                    
(DNR).  She  said the Division of Oil and  Gas has indicated                                                                    
that it  is satisfied with the  bill with a couple  of small                                                                    
changes,  and  noted  that  the  changes  are  reflected  in                                                                    
Version J.                                                                                                                      
                                                                                                                                
Number 0305                                                                                                                     
                                                                                                                                
CO-CHAIR  DAHLSTROM moved  to adopt  the proposed  committee                                                                    
substitute (CS), labeled  23-LS1314\J, Chenoweth, 4/6/04, as                                                                    
the work  draft.   There being no  objection, Version  J was                                                                    
before the committee.                                                                                                           
                                                                                                                                
CO-CHAIR MASEK noted  that testimony would be  taken and the                                                                    
bill would be held over.                                                                                                        
                                                                                                                                
Number 0418                                                                                                                     
                                                                                                                                
RICK  VANDERKOLK,  Staff   to  Representative  John  Harris,                                                                    
presented  HB  395  on   behalf  of  Representative  Harris,                                                                    
sponsor.  Mr.  VanderKolk indicated he would  go through the                                                                    
changes to CSHB 395(O&G), and he remarked:                                                                                      
                                                                                                                                
     HB 395  is undergoing  a fascinating  journey, and                                                                         
     conceptually  the sponsors  have been  after three                                                                         
     main  points.    ...  They've  wanted  to  protect                                                                         
     property rights  if some semblance of  that to the                                                                         
     best of the legislature's  ability, even under the                                                                         
     provisions  set   out  in  Article  VIII   of  the                                                                         
     [Alaska] State Constitution.                                                                                               
                                                                                                                                
     Give  the  protection   available  for  ...  water                                                                         
     quality   for   both    agricultural   and   human                                                                         
     consumption  purposes,  and  allows  some  way  to                                                                         
     ensure that  public notice  is absolutely  done to                                                                         
     ...  the maximum;  that  all residents  understand                                                                         
     what  is happening  to  their  property, what  the                                                                         
     leasing  process is  about, and  what exactly  can                                                                         
     take place for reasonable  access and entry ... to                                                                         
     the property.                                                                                                              
                                                                                                                                
     So that's  the spirit  in which  ... [HB]  395 has                                                                         
     evolved  .                                                                                                                 
                                                                                                                                
MR.  VANDERKOLK  said  a great  deal  of  collaboration  and                                                                    
research  was  the   done  with  the  Alaska   Oil  and  Gas                                                                    
Conservation Commission  (AOGCC), the Department  of Natural                                                                    
Resources   (DNR),    the   Department    of   Environmental                                                                    
Conservation  (DEC), constituents,  and  with the  sponsors.                                                                    
There  was  a concentrated  effort  to  address all  of  the                                                                    
concerns  that people  have.   He explained  that Section  1                                                                    
deals  with the  shallow natural  gas activity  oversight by                                                                    
AOGCC, and a  change was made to alter the  authority of the                                                                    
AOGCC such that paragraph  (1) prohibits the commission from                                                                    
issuing a  permit if operations would  involve producing gas                                                                    
from an  aquifer that serves  as a source of  drinking water                                                                    
or for agricultural purposes,  and a conditional prohibition                                                                    
against the  reinjection of produced  water.   Paragraph (2)                                                                    
expands  the   authority  of  the  commission   to  regulate                                                                    
hydraulic  fracturing associated  with  exploration for  and                                                                    
the disposal  of wastes  produced by  those operations.   He                                                                    
said a new provision was  added to Section 2 directing AOGCC                                                                    
to initiate  a public forum process  to resolve, informally,                                                                    
matters   of    public   health,   safety,    welfare,   and                                                                    
environmental complaints.                                                                                                       
                                                                                                                                
MR.  VANDERKOLK  told  the committee  that  Section  4  adds                                                                    
provisions  for  interaction  between   a  developer  and  a                                                                    
surface  owner, as  defined in  the new  chapter in  mineral                                                                    
interests, only  for activities not  governed by  the Alaska                                                                    
Land  Act of  AS 38.05.   Sections  5, 6,  and 7,  deal with                                                                    
changes to authorizing shallow natural  gas leasing under AS                                                                    
38.05.177.    Section 5  amends  requirements  of notice  by                                                                    
acknowledging  that the  director  should actually  consider                                                                    
public  comment  that may  be  received  before executing  a                                                                    
lease.   He said  substitution of  "may" for  "shall" alters                                                                    
the scope  of the director's authority  where discretion can                                                                    
be exercised,  and noted  that the intention  is to  make it                                                                    
less of an automated process.                                                                                                   
                                                                                                                                
Number 0733                                                                                                                     
                                                                                                                                
MR. VANDERKOLK  explained that  Section 6  adds a  series of                                                                    
additional requirements to be  inserted in a shallow natural                                                                    
gas  lease  to  include   water  well  testing,  appropriate                                                                    
setbacks   for   compressor   stations,   noise   mitigation                                                                    
measures,  and  surface   restoration  requirements  if  the                                                                    
surface is  disturbed by  exploration or  development, which                                                                    
would take  place after  the termination of  the lease.   He                                                                    
said  in instances  in which  an owner  and a  lessee cannot                                                                    
reach  agreement for  the lessee's  entry  onto property  to                                                                    
explore  and  develop shallow  natural  gas  and the  lessee                                                                    
seeks to  post a bond  to permit entry, the  first amendment                                                                    
adds a  further requirement that the  lessee demonstrate the                                                                    
necessity to access  the property.  Sections 9  and 10 amend                                                                    
the  notice requirements  for  activities  under the  Alaska                                                                    
Land  Act  under  AS  38.05.    Section  11  imposes  permit                                                                    
requirements   that  relate   to  operations   resulting  in                                                                    
disposal of  waste materials on  state land and water.   Mr.                                                                    
VanderKolk  explained that  the amendment  allows discharges                                                                    
from  coal  bed methane  drilling  to  be covered  under  AS                                                                    
46.03.100.  He remarked,  "Previously, ... the discharge was                                                                    
exempted under the DEC; we've  wanted to make sure that that                                                                    
was covered as regulated."                                                                                                      
                                                                                                                                
MR.  VANDERKOLK  said  in  terms of  the  maximum  depth  of                                                                    
shallow  natural gas  recovery, Sections  3 and  13 set  the                                                                    
standard of recovery  at 3,000 feet.   Suggesting that there                                                                    
has been  some inconsistency in  statute, he said this  is a                                                                    
way  to  clarify  it  and set  a  benchmark  maximum  depth.                                                                    
Sections  14  and  15  eliminate  provisions  by  which  the                                                                    
commissioner  of  DNR may  approve  a  waiver of  the  local                                                                    
planning  authority approval  and  requirements relating  to                                                                    
compliance  of local  ordinances and  regulations, which  is                                                                    
covered in [Section 14], he  explained.  Mr. VanderKolk said                                                                    
those are the fundamental changes of [CSHB 395(O&G)].                                                                           
                                                                                                                                
Number 0845                                                                                                                     
                                                                                                                                
REPRESENTATIVE  GUTTENBERG turned  attention  to Section  6,                                                                    
and asked how [paragraphs (2)-(5)] would be implemented.                                                                        
                                                                                                                                
MR. VANDERKOLK explained that the  intention is to give more                                                                    
regulatory direction,  as opposed  to enshrining  it because                                                                    
it  is recognized  that  local situations  are  going to  be                                                                    
relative to the  matter.  He pointed out that  there is more                                                                    
direction  in  Section  6, subsection  (f),  paragraph  (3),                                                                    
which  talks  about  the  parameters  used  for  determining                                                                    
setbacks,  general  character of  the  land  subject to  the                                                                    
lease, the size of parcels,  the size of the owner's parcel,                                                                    
and population density.  Mr.  VanderKolk commented that some                                                                    
direction is  provided for regulators to  determine where to                                                                    
place  [compressor] stations.    He remarked,  "I think  the                                                                    
same impression is given with the other points."                                                                                
                                                                                                                                
Number 0990                                                                                                                     
                                                                                                                                
ROBIN McLEAN testified.  She  mentioned that she is a member                                                                    
of the  Sutton Community  Council, which has  been following                                                                    
this issue very closely.   Ms. McLean said [residents of the                                                                    
Matanuska-Susitna Valley]  and Homer  are very eager  to see                                                                    
some legislation go  forward.  She turned  attention to page                                                                    
1,  subparagraph (A),  and suggested  removing the  language                                                                    
"unless  the  commission  finds" because  [residents]  would                                                                    
feel  more  comfortable  if that  prohibition  was  "written                                                                    
across the board."  Ms.  McLean commented that she was happy                                                                    
to  see the  3,000-foot  depth limitation  put  back in  [HB                                                                    
395], but would  like to see water well testing  for all the                                                                    
wells in leased areas.  She remarked:                                                                                           
                                                                                                                                
     I know Mr. [John] Norman ... testified to this in                                                                          
      the ... [Senate Resources Standing Committee].                                                                            
     We'd like  very much  to see a  specific statement                                                                         
     that toxic  fracturing fluids would  be prohibited                                                                         
     in Alaska,  and I  know he testified  something to                                                                         
     the  effect ...  that  AOGCC [Alaska  Oil and  Gas                                                                         
     Conservation  Commission]  would  be  amenable  to                                                                         
     that.                                                                                                                      
                                                                                                                                
     ... I  think it  would be an  easy fix  that would                                                                         
     make a lot of people  happy since, apparently, the                                                                         
     industry  doesn't  want  to use  toxic  fracturing                                                                         
     material  anymore.   I don't  see  any reason  why                                                                         
     that  can't  be  added  in.    I  really  strongly                                                                         
     encourage that.                                                                                                            
                                                                                                                                
MS.  McLEAN  encouraged  the  committee  to  keep  the  bill                                                                    
moving, because [residents] would  like to see something get                                                                    
signed  by  the  governor  this  year  which  would  protect                                                                    
property owners.  She remarked:                                                                                                 
                                                                                                                                
     One thing I  hope you guys do while  you have Mark                                                                         
     Myers on the  phone is ask him some  of the things                                                                         
     that  ...  DNR  learned   from  the  hundreds  and                                                                         
     hundreds of  people who came from  DNR meetings in                                                                         
     the  Mat-Su and  what the  strong feelings  of the                                                                         
     property owners are because  it seems like there's                                                                         
     a bit  of a disconnect  between the  measures that                                                                         
     are  being  implemented  in Juneau  and  what  the                                                                         
     property  owners  actually  want.     So,  he's  a                                                                         
     resource; I  know he  came to  several of  the DNR                                                                         
     workshops ....                                                                                                             
                                                                                                                                
Number 1260                                                                                                                     
                                                                                                                                
MYRL THOMPSON testified.  He noted that he had just                                                                             
received a copy of the bill and had not had much time to                                                                        
review it.  Mr. Thompson remarked:                                                                                              
                                                                                                                                
     For Section 1, I don't  like the ... word "unless"                                                                         
     the  commission  finds  that  will  not  adversely                                                                         
     affect.  That  doesn't do us a whole  lot of good.                                                                         
     ...  The 3,000-foot  has been  in ...  that's good                                                                         
     that  that's  in  place of  the  4,000  foot  just                                                                         
     looking at  it in  the short  amount of  time that                                                                         
     I've had.                                                                                                                  
                                                                                                                                
     In  Section (6),  under  the  water testing  part,                                                                         
     some of  that looks  pretty agreeable but  I might                                                                         
     suggest that  when you're testing each  well under                                                                         
     [paragraph  (2), subparagraph  (A)] for  dissolved                                                                         
     content,  I'm  assuming   that's  total  dissolved                                                                         
     solids ...  including methane and  water flow.   I                                                                         
     might want to add  (indisc.) test for conductivity                                                                         
     also.   ... Under  Section 7,  the words  "may", I                                                                         
     don't have a lot of faith in "may" anymore.                                                                                
                                                                                                                                
REPRESENTATIVE GATTO interrupted.                                                                                               
                                                                                                                                
CO-CHAIR MASEK told Representative Gatto  that he was out of                                                                    
order.   She said Mr.  Thompson is testifying and  she would                                                                    
recognize [Representative  Gatto's question], but  first let                                                                    
Mr. Thompson finish giving his testimony.                                                                                       
                                                                                                                                
REPRESENTATIVE  GATTO stated  that  he  couldn't follow  Mr.                                                                    
Thompson's testimony if he didn't  provide the page and line                                                                    
numbers for [the sections he was referring to].                                                                                 
                                                                                                                                
CO-CHAIR MASEK asked Representative  Gatto to go through the                                                                    
chair.                                                                                                                          
                                                                                                                                
MR. THOMPSON said he hoped  the committee would not move the                                                                    
bill  and  would take  more  public  testimony [at  a  later                                                                    
time].  He acknowledged that  there seemed to be some pretty                                                                    
clear changes from the last version of the bill.                                                                                
                                                                                                                                
CO-CHAIR  MASEK  said  the   committee  would  have  another                                                                    
hearing on  the bill and  [Mr. Thompson] would  have another                                                                    
chance  to testify.   She  noted  that there  had been  many                                                                    
committee substitutes for the bill.                                                                                             
                                                                                                                                
REPRESENTATIVE GATTO  told Mr. Thompson he  thought it would                                                                    
be easier  for the committee  to follow his testimony  if he                                                                    
provided a page  and line number when  referring to specific                                                                    
sections of the bill.                                                                                                           
                                                                                                                                
MR. THOMPSON said he understood.                                                                                                
                                                                                                                                
Number 1539                                                                                                                     
                                                                                                                                
KATELYN BALDWIN  testified.   She said  she was  [in Juneau]                                                                    
with  the Alaska  Youth for  Environmental  Action, but  the                                                                    
testimony she was  giving are her personal views.   She said                                                                    
she  believes that  there should  be best  interest findings                                                                    
before development  begins because DNR favors  best interest                                                                    
findings.     Ms.  Baldwin  commented  that   best  interest                                                                    
findings  are  already  done for  traditional  oil  and  gas                                                                    
leases.  If  the bill does pass, she told  the committee she                                                                    
hopes  that   is  one  factor  that   should  definitely  be                                                                    
included.  Ms. Baldwin said she  believes the bill is a good                                                                    
avenue to pursue  and is a really good attempt  to deal with                                                                    
community   problems  of   water  quality,   public  notice,                                                                    
fragmenting   fluid  regulations,   and  noise   mitigation.                                                                    
However,  she said  she doesn't  think it  does enough.   Ms                                                                    
Baldwin  told the  members that  she would  like to  see the                                                                    
repeal  of  HB  69  included   in  the  bill,  so  that  the                                                                    
commissioner  does  not have  the  right  to override  local                                                                    
zoning regulations.                                                                                                             
                                                                                                                                
MS. BALDWIN said  she is concerned about  the reclamation of                                                                    
an area after  it has been developed, and would  like to see                                                                    
clear language defining  what will happen to  the land after                                                                    
it's been  drilled upon.  She  said she thought DEC  and DNR                                                                    
should  definitely have  jurisdiction over  their areas  for                                                                    
making the regulations  - DEC for water quality  and DNR for                                                                    
resources   issues  -   because   those  [departments]   are                                                                    
obviously the best suited to  make those crucial regulations                                                                    
on the shallow natural gas  drilling.  Ms. Baldwin said this                                                                    
bill needs  to be  a foundation  for private  property owner                                                                    
rights and  developmental regulations.   She added  that she                                                                    
was real excited  about traveling to Juneau  from Wasilla to                                                                    
testify in person.                                                                                                              
                                                                                                                                
Number 1647                                                                                                                     
                                                                                                                                
REPRESENTATIVE WOLF  suggested that  both federal  and state                                                                    
policies  which   are  in   place  require   guidelines  and                                                                    
parameters with respect to remediation concerns.                                                                                
                                                                                                                                
MS. BALDWIN replied that she does not see it in the bill.                                                                       
                                                                                                                                
REPRESENTATIVE  WOLF commented  that he  believes there  are                                                                    
agencies that  have procedures in place  which address these                                                                    
issues.                                                                                                                         
                                                                                                                                
REPRESENTATIVE  GATTO  asked  Ms.  Baldwin  if  she  attends                                                                    
Wasilla High School.                                                                                                            
                                                                                                                                
MS. BALDWIN replied that she attends Colony High School.                                                                        
                                                                                                                                
REPRESENTATIVE GATTO  asked if Ms.  Baldwin is in  Juneau as                                                                    
part of a group.                                                                                                                
                                                                                                                                
MS. BALDWIN replied yes.                                                                                                        
                                                                                                                                
REPRESENTATIVE GATTO asked the name of the group.                                                                               
                                                                                                                                
MS.  BALDWIN  said   she  is  with  the   Alaska  Youth  for                                                                    
Environmental Action  which is  participating in  the civics                                                                    
conservation summit.                                                                                                            
                                                                                                                                
REPRESENTATIVE  GATTO questioned  whether  her testimony  is                                                                    
based on  her background with  the group  or if she  had put                                                                    
forth testimony on her own.                                                                                                     
                                                                                                                                
MS.  BALDWIN  responded that  she  had  done  a lot  of  the                                                                    
research on her own and these  are her personal views on the                                                                    
bill.                                                                                                                           
                                                                                                                                
REPRESENTATIVE GATTO  said he  is happy  to see  that people                                                                    
Ms. Baldwin's age are getting involved in the community.                                                                        
                                                                                                                                
MS.  BALDWIN  said  she really  appreciated  [Representative                                                                    
Gatto's comment].                                                                                                               
                                                                                                                                
REPRESENTATIVE WOLF pointed out  that the [state and federal                                                                    
procedures] he  had been referring  to are on page  6, lines                                                                    
9-14.                                                                                                                           
                                                                                                                                
Number 1806                                                                                                                     
                                                                                                                                
MARK MYERS, Director,  Division of Oil &  Gas, Department of                                                                    
Natural  Resources (DNR),  testified in  support of  HB 395.                                                                    
He remarked,  "Our other  concern was  making sure  that you                                                                    
had legislation  that we both  believe to be  implemented in                                                                    
DNR's  perspective, and  I think  DEC, DNR,  and AOGCC  also                                                                    
believe  that those  will be  implemented, so  ... that's  a                                                                    
very important  step, I  think, for  this legislation."   He                                                                    
noted that he believes  the sponsor very accurately outlined                                                                    
what  the  bill  accomplishes.    He  said  there  are  some                                                                    
significant new protections  in the bill.  There  were a lot                                                                    
of  areas  which are  already  practiced  by state  agencies                                                                    
either  within the  lease or  "within  our stipulations  and                                                                    
mitigation measures or within  our practices," he commented.                                                                    
Mr. Myers said  that this bill would codify  them, make them                                                                    
clear, and  it's a good  positive step.  It  eliminates some                                                                    
of the uncertainty people have,  and addresses a broad level                                                                    
of  issues  from  surface  owner  rights  to  water  quality                                                                    
issues, he  added.   A significant  new protection  which is                                                                    
currently not available in statute  is the implementation of                                                                    
protections  for  surface  owners  in  bonding  on  nonstate                                                                    
lands, he pointed out.                                                                                                          
                                                                                                                                
MR.  MYERS said  concerns were  noted during  [DNR's public]                                                                    
process in  the valley  and all of  the public  comments are                                                                    
within DNR's  web site on oil  and gas.  He  added that [DNR                                                                    
also had]  a separate coal  bed methane workshop  and people                                                                    
are free to view the public comments.                                                                                           
                                                                                                                                
MR. MYERS  said there were  two major concerns  expressed in                                                                    
the  workshops.   One  is  the issue  of  the best  interest                                                                    
finding,  which  is  addressed  in   HB  531  and  which  is                                                                    
supported by  DNR.  He  commented that there is  a mechanism                                                                    
to  implement it  if the  legislature would  want to  pursue                                                                    
that avenue of approach, he added.                                                                                              
                                                                                                                                
MR. MEYERS told the committee  the second issue and the more                                                                    
contentious issue is  that of buy backs.   He explained that                                                                    
there are a lot of people  in the valley that would like the                                                                    
shallow gas leases  to be bought back.  He  pointed out that                                                                    
he'd  testified  previously  on  mechanisms  that  might  be                                                                    
employed in doing that, and  what the fiscal costs would be.                                                                    
He summarized that  the process of issuing  leases without a                                                                    
best interest  finding and the  desire of people to  see the                                                                    
process start  over with  a buy back  provision are  the two                                                                    
issues not addressed by HB 395.                                                                                                 
                                                                                                                                
Number 1977                                                                                                                     
                                                                                                                                
REPRESENTATIVE  GUTTENBERG referred  to pages  5 and  6, and                                                                    
commented  the he  believes  the  remediation processes  for                                                                    
testing  water, setbacks,  and noise  mitigation seem  to be                                                                    
pretty subjective.   He asked what standard  is currently in                                                                    
place, and how HB 395 changes them.                                                                                             
                                                                                                                                
MR. MYERS  responded that  there are  no set  standards with                                                                    
respect to  water well testing.   No standards are  in place                                                                    
which require a water well to  be tested.  He explained that                                                                    
there  are, however,  objective  standards  which say  water                                                                    
wells within approximately a quarter  mile radius around the                                                                    
drill site  have to be  tested.  He added  that it is  a new                                                                    
standard  that goes  beyond existing  practices.   Mr. Myers                                                                    
told  the  members  that  those  same  standards  are  being                                                                    
addressed in  the process  in the valley  in terms  of noise                                                                    
abatement  and  setbacks.   He  commented  that the  factors                                                                    
listed   here   are    reasonable   factors   to   consider.                                                                    
Furthermore, he explained that DNR  also put the requirement                                                                    
to  allow setbacks  and  noise abatement  in  its leases  in                                                                    
stipulations  and mitigations  measures.   Mr. Myers  shared                                                                    
that [DNR] is aware of the issues.  He remarked:                                                                                
                                                                                                                                
     More  typically,  then   actually  you  put  those                                                                         
     standards up front that  there that something that                                                                         
     is  considered  on  a site-by-site  basis  when  a                                                                         
     final  operation's request  were submitted.   It's                                                                         
     quite  clear from  the process  in the  valley the                                                                         
     folks wanted  more certainty than that,  so we are                                                                         
     moving through.                                                                                                            
                                                                                                                                
MR.  MYERS said  [DNR] should  have  a draft  report on  the                                                                    
process by  next week.   He commented that there  are likely                                                                    
to be recommendations  on more direct standards  in terms of                                                                    
depth limits and minimum setbacks.   The department believes                                                                    
that  one size  does not  fit all  and each  individual case                                                                    
needs  to  be   looked  at  for  the   values  involved,  he                                                                    
acknowledged.   Mr. Myers  remarked, "This  legislation does                                                                    
cut out those values, value  of the parcel, character of the                                                                    
land,  et cetera."    He summarized  that  he believes  that                                                                    
standards give  clear direction to DNR  from the legislature                                                                    
on what should be considered in future leases.                                                                                  
                                                                                                                                
Number 2110                                                                                                                     
                                                                                                                                
REPRESENTATIVE  GUTTENBERG  asked Mr.  Myers  if  he sees  a                                                                    
difference  between what  has been  said  during the  public                                                                    
comment   process   and  what   is   being   said  in   [the                                                                    
legislature].                                                                                                                   
                                                                                                                                
MR. MYERS remarked:                                                                                                             
                                                                                                                                
     I think there's several  different arenas in which                                                                         
     the issue is being played  out.  The first thought                                                                         
     is  obviously  in the  press  -  there's lot's  of                                                                         
     stuff going  around in the  press.  The  second is                                                                         
     in our public  process in the valley;  we had five                                                                         
     workshops  where   we  really  in  took   all  the                                                                         
     concerns  of   the  residents  in  valley.     The                                                                         
     workshops were  specific to these  various issues;                                                                         
     a lot  of them  are issues  that are  addressed in                                                                         
     this legislation.                                                                                                          
                                                                                                                                
     The goal  was ... at  the end  of the day  for the                                                                         
     commissioner to  have fully  heard all  the public                                                                         
     concerns,  to  address  it,   and  then  look  for                                                                         
     developing  more  specific   standards  than  were                                                                         
     currently in  place.  ...  and we put  the general                                                                         
     standards  in place  ... prior  to the  leasing in                                                                         
     stipulations  and  mitigation measures,  but  it's                                                                         
     quite clear  it has  more specific  management and                                                                         
     enforceable  guidelines and  regulations, so  this                                                                         
     is a process to develop that ....                                                                                          
                                                                                                                                
     The third is  the legislative process.   We at DNR                                                                         
     recognize  the value  of  having  a best  interest                                                                         
     finding and  actually having a more  organized way                                                                         
     of  leasing  than  over-the-counter.   It  is  our                                                                         
     opinion that  the over counter leasing  has led to                                                                         
     approximately  60  percent  of  the  leases  being                                                                         
     picked up  on speculation by folks  that typically                                                                         
     are   involved  or   engaged   in   oil  and   gas                                                                         
     activities.   It's  led to  leasing in  areas that                                                                         
     ...   are   more   densely  populated   than   has                                                                         
     historically been  leased, although in  some cases                                                                         
     that's not true.                                                                                                           
                                                                                                                                
     We  have  in  other  areas, but  we've  done  that                                                                         
     leasing  after the  best interest  finding process                                                                         
     and the public process has  been fully evolved.  I                                                                         
     think  again, that  developed because  the shallow                                                                         
     gas leasing  program was used  in areas  that were                                                                         
     historically  in larger  area-wide sales  but they                                                                         
     had  been shrunk  back to  the  more limited  best                                                                         
     interest finding and that led  to (indisc.) in ...                                                                         
     the  Wasilla-Sutton area,  and down  in the  Homer                                                                         
     area, which has led to lots of conferences.                                                                                
                                                                                                                                
     ... The  third part  ... I'm trying  to get  at is                                                                         
     the concerns that were brought  out because of the                                                                         
     legislation.   There  are  certain  areas that  we                                                                         
     believe strongly  need legislative  fixes.   We at                                                                         
     DNR would like to see  a bill like [HB] 531, which                                                                         
     goes back  to a best interest  finding competitive                                                                         
     natured program and the appropriate remedies.                                                                              
                                                                                                                                
     It gives us  a lot more public input;  it gives us                                                                         
     ability  to more  customize  the leasing  program;                                                                         
     and it  gives the commissioner a  better, stronger                                                                         
     balancing  test  and  whether   or  not  to  issue                                                                         
     leases.   I think also  in the long run  the state                                                                         
     will receive more income off  leases than it would                                                                         
     through this over-the-counter program.                                                                                     
                                                                                                                                
MR. MYERS indicated there were  some concerns and confusions                                                                    
over the various bills.                                                                                                         
                                                                                                                                
Number 2290                                                                                                                     
                                                                                                                                
REPRESENTATIVE WOLF turned attention  to page 6, lines 9-14,                                                                    
and asked  if there are standard  procedures for remediation                                                                    
during the operation.                                                                                                           
                                                                                                                                
MR.  MYERS  replied  that  there  are  many  avenues  toward                                                                    
[remediation].  He  explained that the first  way is through                                                                    
stipulations and  mitigations set forth  in the lease.   For                                                                    
example,  typically there  are  setbacks  from fish  bearing                                                                    
streams and other  types of habitat.  The  requirement is to                                                                    
use existing roads and  infrastructure wherever possible, so                                                                    
there's no allowance  in the final operations  for new roads                                                                    
unless  they're really  proven  to be  needed,  he told  the                                                                    
members.    Mr.  Myers  said that  the  process  includes  a                                                                    
comment period when  the landowner can come  in and weigh-in                                                                    
on his  or her  concerns.   He stated  that DNR  takes these                                                                    
concerns  very  seriously  in terms  of  moving  facilities,                                                                    
setbacks,   et  cetera,   in   light   of  the   landowner's                                                                    
perspective and in minimizing the surface impact.                                                                               
                                                                                                                                
Number 2358                                                                                                                     
                                                                                                                                
MR.  MYERS  said other  federal  [and]  state agencies  have                                                                    
standards.  For  instance, the U.S. Army  Corps of Engineers                                                                    
requires a permit if wetlands  are to be filled and requires                                                                    
mitigation to the wetlands.   He commented that DEC also has                                                                    
certain requirements  in terms  of water discharges  and the                                                                    
issuance  of  permits.    Mr. Myers  noted  that  the  whole                                                                    
process  is  highly  regulated.   He  said  he  thought  one                                                                    
[misconception] is  that the issuance  of the lease  is only                                                                    
the first  step and does  not really [provide] the  right to                                                                    
do any activities on the lease.                                                                                                 
                                                                                                                                
MR. MYERS  said it  is all  permitted and  regulated through                                                                    
numerous agencies  involved with  the process, so  it really                                                                    
affect  the size  and shape  of  the development.   He  said                                                                    
another issue  is that  if a  development situation  were to                                                                    
occur, more  than likely it would  involve unitization where                                                                    
multiple  producing  leases would  be  put  together into  a                                                                    
common  facility   to  minimize   the  number   of  separate                                                                    
facilities.  He remarked:                                                                                                       
                                                                                                                                
     One of  the things  that was  learned early  on in                                                                         
     the oil industry  is that if you allow  me just to                                                                         
     go on  regulating in terms  of its  production you                                                                         
     could see  multiple duplicative facilities  in the                                                                         
     same  area, so  the surface  impact is  increased.                                                                         
     So  the unitization  - we  limit those  numbers of                                                                         
     facilities to  those where they  need it  and that                                                                         
     ...   minimizes  the   environmental  impact   and                                                                         
     maximizes the  economic return on the  project, so                                                                         
     that's another  way of access  to use  to minimize                                                                         
     the surface impact.                                                                                                        
                                                                                                                                
REPRESENTATIVE WOLF  suggested that the activity  of shallow                                                                    
gas wells would not  compromise any current regulations that                                                                    
are in place.                                                                                                                   
                                                                                                                                
MR. MYERS, noted that he was  not 100 percent sure, said the                                                                    
protections are  there, but this  bill adds  some additional                                                                    
protections in terms  of water testing and  quantifying in a                                                                    
more  precise  way  the  standards  used  for  setbacks,  et                                                                    
cetera.    He  said   the  legislation  better  defines  the                                                                    
interaction between  the surface owner  and the lessee.   He                                                                    
commented   that  there   are   some  clarifications,   some                                                                    
additional  standards,  and   some  additional  testing  and                                                                    
mitigation   requirements   in   the  bill,   as   well   as                                                                    
clarification of  existing requirements.  Mr.  Meyer said he                                                                    
believes [the  bill] "tightens up" the  regulatory framework                                                                    
that  already   exists,  and   added  that   the  regulatory                                                                    
framework  still  has a  lot  of  protections  in it.    For                                                                    
instance, the well  design has to be approved  by AOGCC, but                                                                    
that's not the way to  limit or manage issues involving risk                                                                    
of contamination.   The "well  casing program"  ensures that                                                                    
the  well has  multiple  layers of  casings  of cement  that                                                                    
protect the producing zone, which  separates and isolates it                                                                    
from any  possible aquifers required for  any reinjection of                                                                    
water, for example.                                                                                                             
                                                                                                                                
MR. MYERS said some of those  [elements] are in the bill and                                                                    
some  are  in   standard  practices.    He   said  the  only                                                                    
substantive  difference  in  the  bill  is  similar  to  the                                                                    
coastal zone management program in  that it is exempted from                                                                    
a coastal  zone review.   In coastal zone reviews  there are                                                                    
public  processes involved,  so development  on shallow  gas                                                                    
leases have one less process.   In some areas the bill gives                                                                    
additional protection not available  in existing oil and gas                                                                    
programs, he summarized.                                                                                                        
                                                                                                                                
Number 2598                                                                                                                     
                                                                                                                                
REPRESENTATIVE  GATTO suggested  that all  people who  drill                                                                    
their own  water well  should have  it tested.   He  said he                                                                    
knows  of an  entire subdivision  that has  arsenic in  it's                                                                    
water  and suggested  it is  possible for  an individual  to                                                                    
have arsenic  in his/her water.   Representative Gatto asked                                                                    
if after drilling  and production occurred, if  a person had                                                                    
an initial  water well  test and found  heavy metals  in the                                                                    
water, would there  be a way to connect that  to any kind of                                                                    
production occurring in the vicinity.                                                                                           
                                                                                                                                
MR. MYERS suggested  it would be more  appropriate for AOGCC                                                                    
to address that issue.  He remarked:                                                                                            
                                                                                                                                
     The geochemistry of the water  - ... you'd have to                                                                         
     look  to  see  if  the contaminants  -  the  heavy                                                                         
     metals  or  other  contaminants  are  contaminants                                                                         
     likely  to have  been  in that  water within  that                                                                         
     (indisc.).  ... There's  lots of other sources for                                                                         
     ...   arsenic  and   other   heavy  minerals   and                                                                         
     (indisc.)   actually;  the   natural  seeping   of                                                                         
     methane   through   the    water   system   occurs                                                                         
     throughout   Cook   Inlet    just   due   to   the                                                                         
     hydrological conditions for the aquifers.                                                                                  
                                                                                                                                
     So,  when you  look  at it,  you  really need  the                                                                         
     baseline data to  tell and to link  it; ... unless                                                                         
     you  have   a  unique  geochemical   signature,  I                                                                         
     significantly  doubt that  you could  argue that's                                                                         
     100 percent  sure that's coming from  the coal bed                                                                         
     methane, so  base level data does  make sense, and                                                                         
     that's exactly  why you  use something  like that;                                                                         
     you pretest  to get  that baseline data.   Whether                                                                         
     or not  you need  to test all  the wells  again in                                                                         
     the  area  or  whether just  representative  wells                                                                         
     that penetrate specific aquifers.                                                                                          
                                                                                                                                
MR. MYERS  said from  the standpoint  of a  testing program,                                                                    
hydrologists   would   test    representative   wells   with                                                                    
representative  distances  in   various  aquifers  prior  to                                                                    
[exploration  and  production].    He  explained  that  this                                                                    
standard is stronger  than that in which it  requires all of                                                                    
the wells  to be  tested.  He  noted that  specific aquifers                                                                    
would have to  be tested in order to get  the baseline data.                                                                    
Mr. Myers said trying to  retrospectively tie it to a unique                                                                    
characteristic in the  whole may or may not  be the problem.                                                                    
A lot  of the large  contamination occurs from  more shallow                                                                    
sources such as agricultural  runoffs or from septic systems                                                                    
that are  improperly designed  or over  used.   He remarked,                                                                    
"You'd  have  to  be  able   separate  out  those  sorts  of                                                                    
agreements --  arsenic is  not a problem  in those  types of                                                                    
systems though."   He said other cases could be  a result of                                                                    
a  lot of  contaminants but  the  hope is  that the  pretest                                                                    
baseline  data would  provide that  information.   Mr. Myers                                                                    
said  the requirement  is  general  enough that  regulations                                                                    
would have to be written  to [specify] what is being tested,                                                                    
and he anticipated that would be a part of the process.                                                                         
                                                                                                                                
Number 2748                                                                                                                     
                                                                                                                                
REPRESENTATIVE  GATTO asked  if [DNR]  had considered  going                                                                    
into  homes  within a  selected  distance  to test  existing                                                                    
wells for contamination beforehand.                                                                                             
                                                                                                                                
MR. MYERS  commented he believes  that is what  the standard                                                                    
does.   He said  it doesn't  differentiate between  wells at                                                                    
the well  site, but it's all  water wells within a  box that                                                                    
approximately  represents a  quarter-mile radius  around the                                                                    
well site.   Each home with  a well would have  to be tested                                                                    
within that  radius prior  to the  withdrawal of  water from                                                                    
the  potential  coal bed  zone,  Mr.  Myers explained.    He                                                                    
reiterated  that  he  believes   this  standards  does  what                                                                    
Representative Gatto is asking, and  it does it not just for                                                                    
representative water  wells of homeowners, but  also for all                                                                    
water wells.                                                                                                                    
                                                                                                                                
Number 2812                                                                                                                     
                                                                                                                                
MICHAEL O'MEARA  testified on HB  395.  He told  the members                                                                    
that he is concerned about the  bill even though he does not                                                                    
live within the lease area.   He commented that his property                                                                    
could be at some future time.   Mr. O'Meara said he believes                                                                    
there  should  be  a buy-back  of  existing  leases  because                                                                    
anything that is attempted without  that provision is just a                                                                    
cosmetic change.  He told  the members that he had questions                                                                    
based on  the earlier version  of the  bill and asked  if it                                                                    
has been changed substantially since Monday.                                                                                    
                                                                                                                                
CO-CHAIR MASEK replied that have  been several CS brought to                                                                    
the committee.  The sponsor  reviewed all the changes at the                                                                    
beginning of  the meeting, she  said.  Co-Chair  Masek asked                                                                    
if Mr. O'Meara needed to  have the sponsor repeat the review                                                                    
of the changes.                                                                                                                 
                                                                                                                                
MR. O'MEARA asked if there had been changes since Monday.                                                                       
                                                                                                                                
CO-CHAIR MASEK replied this is correct.                                                                                         
                                                                                                                                
MR.  VANDERKOLK  asked  if  Mr.  O'Meara  was  referring  to                                                                    
version N.                                                                                                                      
                                                                                                                                
MR.  O'MEARA responded  that he  does not  have the  bill in                                                                    
hand, but said that may well be the version.                                                                                    
                                                                                                                                
MR.  VANDERKOLK told  Mr. O'Meara  that  since Monday  there                                                                    
have only been  three changes.  The first is  a title change                                                                    
which makes it more specific.   The second includes a change                                                                    
in language  on page  5, line 19,  which makes  the language                                                                    
very   specific  with   respect   to   water  well   testing                                                                    
requirements.    It  clarifies that  the  bill  pertains  to                                                                    
production testing  and production activities on  the lease,                                                                    
as opposed  to testing for  any particular reason  an agency                                                                    
might like to work  on the surface.  On page  7, line 17 and                                                                    
21, it  clarifies that  the provision to  pay the  owner for                                                                    
all damages is by the lessee, not the state.                                                                                    
                                                                                                                                
TAPE 04-19, SIDE B                                                                                                            
                                                                                                                                
Number 2975                                                                                                                     
                                                                                                                                
MR. O'MEARA commented  that he does not have a  lot of faith                                                                    
in the  Alaska Oil  and Gas Conservation  Commission (AOGCC)                                                                    
because some  of the  past members'  staff have  been people                                                                    
who have  obvious political motivations  and conflicts.   He                                                                    
said he doubts that forum  will provide the public with very                                                                    
much.   Mr. O'Meara  complimented the committee  on elements                                                                    
of their work.  He was  happy that the 3,000-foot well depth                                                                    
limitation was maintained.  Mr.  O'Meara said he believes it                                                                    
is good that  the committee is trying to  refine language in                                                                    
Section  7,  although  some  of  it  is  very  difficult  to                                                                    
understand.   For example, he  read the following  from page                                                                    
7, lines 6 and 7:                                                                                                               
                                                                                                                                
      ...reasonably necessary or convenient to render                                                                           
      beneficial and efficient the complete enjoyment                                                                           
     of the property and the reserved rights;                                                                                   
                                                                                                                                
MR. O'MEARA  said he hopes that  it can be written  in plain                                                                    
language  because  not  only  does  this  confuse  him,  but                                                                    
suggested  that  later  if  there  ever  is  a  dispute  the                                                                    
attorneys  will have  a field  day with  that language.   He                                                                    
emphasized that he thinks the concept is a good one.                                                                            
                                                                                                                                
MR. O'MEARA told  the members that he  believes another good                                                                    
thing the  committee is doing  is overriding  the provisions                                                                    
of HB 69 which he believes was terrible legislation.                                                                            
                                                                                                                                
MR.  O'MEARA commented  that  there are  still  a couple  of                                                                    
important  elements missing  from  the  legislation.   There                                                                    
still is no  provision for direct notice  to property owners                                                                    
in the  lease area, he said.   Mr. O'Meara told  the members                                                                    
that  he is  disturbed by  a requirement  for review  by the                                                                    
Alaska Coastal Zone Management Program.                                                                                         
                                                                                                                                
MR. VANDERKOLK responded to the  point on public notice.  He                                                                    
suggested   that   Mr.   O'Meara   read   Section   10,   AS                                                                    
38.05.945(b),  which highlights  how  all pertinent  parties                                                                    
are  to  be  notified.     With  several  decades  of  using                                                                    
conventional oil  and gas leasing public  notice, there will                                                                    
be a  broad and useful  way of notifying  pertinent parties,                                                                    
he commented.                                                                                                                   
                                                                                                                                
MR. O'MEARA asked where to look.                                                                                                
                                                                                                                                
MR. VANDERKOLK  directed him to  page 9, starting on  line 6                                                                    
through to the  end of the section [on line  25].  There are                                                                    
various  methods  of  communicating that  leases  are  being                                                                    
proposed and awarded.  He  referred to AS 38.05.177(c) which                                                                    
allows for  a public forum  to take place which  is outlined                                                                    
in Section 2.                                                                                                                   
                                                                                                                                
MR. O'MEARA pointed to page 9, line 11, which reads:                                                                            
                                                                                                                                
      (ii) notification of parties known or likely to                                                                           
     be affected by the action; or ...                                                                                          
                                                                                                                                
MR.  O'MEARA asked  if that  language refers  to individuals                                                                    
who hold property within the lease area.                                                                                        
                                                                                                                                
MR. VANDERKOLK replied presumably so.                                                                                           
                                                                                                                                
MR.   O'MEARA  commented   that  he   is  troubled   by  the                                                                    
"presumably" part  of Mr. VanderKolk's  answer.  He  said he                                                                    
would like  to see clearer  language that would put  forth a                                                                    
requirement that  individuals who  own property in  the area                                                                    
to be leased would be notified directly.                                                                                        
                                                                                                                                
MR. VANDERKOLK commented that since  this is common practice                                                                    
out of current statute he  said he believes Mr. Meyers would                                                                    
be useful in responding to the question.                                                                                        
                                                                                                                                
Number 2712                                                                                                                     
                                                                                                                                
MR.  O'MEARA commented  that he  lives in  an area  that has                                                                    
been  available for  leasing  a number  of  times under  the                                                                    
areawide plan, and that it  is clear to him that individuals                                                                    
do not get the information  that is needed under the current                                                                    
plan.    He  told  the   members  he  believes  this  is  an                                                                    
opportunity for  the committee to  take a hard look  at this                                                                    
and  improve  it by  providing  for  direct notification  of                                                                    
landowners.                                                                                                                     
                                                                                                                                
CO-CHAIR MASEK  advised Mr. O'Meara that  another hearing on                                                                    
the bill will  be scheduled so he will  have additional time                                                                    
to provide testimony.                                                                                                           
                                                                                                                                
Number 2664                                                                                                                     
                                                                                                                                
MR. O'MEARA urged  the members to take a closer  look at the                                                                    
basic language in  the property owners' bill of  rights.  He                                                                    
said he  believes this is  very important and does  not want                                                                    
to  see  the legislature  fail  to  pass substantive  reform                                                                    
legislation.                                                                                                                    
                                                                                                                                
Number 2553                                                                                                                     
                                                                                                                                
JOHN  NORMAN,  Chairman,  Alaska Oil  and  Gas  Conservation                                                                    
Commission (AOGCC), testified on HB  395.  He commented that                                                                    
there is a qualification in the  first page that some of the                                                                    
speakers  have  expressed  concern  about.   It  relates  to                                                                    
production from  an aquifer.   There is a option  that would                                                                    
allow someone to  petition the AOGCC to make  a finding that                                                                    
production  from  a  well would  not  adversely  affect  the                                                                    
aquifer.   Mr. Norman told  the members that it  is believed                                                                    
that this is an important provision  to have in the bill for                                                                    
the state  of Alaska.   This should be  an option if  it can                                                                    
"clearly" be  shown that this  is in  an area where  it will                                                                    
not in  any way  adversely affect  an aquifer.   He  said he                                                                    
knows that there  are villages that are  desperate for power                                                                    
because they have diesel fuel at  a high cost.  If a village                                                                    
had the option to produce fuel  but it would have to be from                                                                    
an  aquifer and  this bill  would provide  an option  with a                                                                    
public  hearing and  notice  for decisions  to  be made,  he                                                                    
explained.                                                                                                                      
                                                                                                                                
MR.  NORMAN said  that he  understands that  the public  has                                                                    
concerns.   As  chairman  of  the AOGCC  he  stated that  he                                                                    
wanted it  on the  record that it  is the  responsibility of                                                                    
the agency to  protect fresh water in the course  of oil and                                                                    
gas production.  The  commission accepts that responsibility                                                                    
and will absolutely discharge it, he stated.                                                                                    
                                                                                                                                
Number 2433                                                                                                                     
                                                                                                                                
MR. NORMAN emphasized a positive  aspect of the public forum                                                                    
process which is  on page 2, [lines 26 and  27,] which reads                                                                    
as follows:                                                                                                                     
                                                                                                                                
     For any  other matter, the commission  shall refer                                                                         
     the complaint  to other  federal, state,  or local                                                                         
     agencies, as appropriate.                                                                                                  
                                                                                                                                
MR.  NORMAN  commented that  this  language  when read  with                                                                    
Section 15 of  the bill, which is a  repealer section, would                                                                    
put more  global control into  effect.  The  commission sees                                                                    
that as  a positive aspect  of the bill because  it empowers                                                                    
local property owners  in having more say-so  in what occurs                                                                    
in their areas.                                                                                                                 
                                                                                                                                
MR. NORMAN referred to page  3, [lines 12 through 15,] which                                                                    
read as follows:                                                                                                                
                                                                                                                                
     (a) Except  for activities  governed by  AS 38.05,                                                                         
     the  developer   shall  give  the   surface  owner                                                                         
     written  notice  of  the oil  and  gas  operations                                                                         
     contemplated at least  20 days before commencement                                                                         
     of operations.  The  requirement of written notice                                                                         
     may be waived by the parties.                                                                                              
                                                                                                                                
MR.  NORMAN  said in  conjunction  with  that subsection  he                                                                    
pointed  to page  4 [lines  10 through  12,] which  reads as                                                                    
follows:                                                                                                                        
                                                                                                                                
     (4) "oil  and gas  operations" means  the drilling                                                                         
     of  an  oil  and  gas  well,  the  production  and                                                                         
     completion operations  ensuing from  the drilling,                                                                         
     and   oil   and    gas   geophysical   exploration                                                                         
     activities  that require  entry  upon the  surface                                                                         
     estate;                                                                                                                    
                                                                                                                                
MR. NORMAN said that there should  be a clear trigger of the                                                                    
requirement   to  give   notice.     He  said   he  believes                                                                    
"commencement of operations" is  clear, but when reading the                                                                    
definition [of oil and gas  operations] he asked if it means                                                                    
when  drilling is  commenced or  again  when production  and                                                                    
completion operations are commenced.   He questioned if this                                                                    
is one  notice [or many].   Mr. Norman offered to  assist in                                                                    
creating language that would make the intent clear.                                                                             
                                                                                                                                
Number 2325                                                                                                                     
                                                                                                                                
MR. NORMAN  said where the  bill references the  drilling of                                                                    
oil and gas  wells and ties it to an  existing statute which                                                                    
allows for cross enforcement and  very careful monitoring of                                                                    
every  single well,  the commission  suggests that  the bill                                                                    
use the following language:                                                                                                     
                                                                                                                                
       ...the drilling of a well requiring a permit                                                                             
     under AS 31.05.090                                                                                                         
                                                                                                                                
MR. NORMAN  told the members  that this language  would pick                                                                    
up all of these wells  because the commission is statutorily                                                                    
required to track all wells.                                                                                                    
                                                                                                                                
MR. NORMAN  pointed to page  3, subsection (c),  which reads                                                                    
as follows:                                                                                                                     
                                                                                                                                
     (c)  If  a  developer  fails  to  give  notice  as                                                                         
     provided in  this section,  the surface  owner may                                                                         
     seek  any  appropriate  relief  in  the  court  of                                                                         
     proper jurisdiction  and may receive  punitive and                                                                         
     actual damages.                                                                                                            
                                                                                                                                
MR.  NORMAN commented  that  punitive  damages are  normally                                                                    
awarded  for some  sort of  reckless conduct.   He  told the                                                                    
members that  he points this  out because he believes  it is                                                                    
important  that  the statutes  are  very  clear as  to  when                                                                    
required notice is to be  given since this could trigger not                                                                    
only  actual damages,  but punitive  damages as  well.   Mr.                                                                    
Norman emphasized that there should not be any gray area.                                                                       
                                                                                                                                
Number 2200                                                                                                                     
                                                                                                                                
CO-CHAIR  MASEK  said  for the  record  that  Representative                                                                    
Heinze joined the meeting at 3 p.m.                                                                                             
                                                                                                                                
CO-CHAIR MASEK suggested that Mr. VanderKolk work with Mr.                                                                      
Norman and Mr. Meyer to address issues that were discussed.                                                                     
                                                                                                                                
MR. VANDERKOLK replied that he looks forward to doing so.                                                                       
                                                                                                                                
[HB 395 was held in committee.]                                                                                                 
ADJOURNMENT                                                                                                                   
                                                                                                                                
There being no further business before the committee, the                                                                       
House Resources Standing Committee meeting was adjourned at                                                                     
2:15 p.m.                                                                                                                       
                                                                                                                                

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