03/15/2004 01:07 PM House RES
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ALASKA STATE LEGISLATURE
HOUSE RESOURCES STANDING COMMITTEE
March 15, 2004
1:07 p.m.
MEMBERS PRESENT
Representative Nancy Dahlstrom, Co-Chair
Representative Beverly Masek, Co-Chair
Representative Nick Stepovich
Representative Kelly Wolf
Representative Beth Kerttula
Representative David Guttenberg
MEMBERS ABSENT
Representative Cheryll Heinze, Vice Chair
Representative Carl Gatto
Representative Bob Lynn
COMMITTEE CALENDAR
CS FOR SENATE BILL NO. 265(RES)
"An Act relating to the schedule of proposed oil and gas lease
sales and to a related report to the legislature; and providing
for an effective date."
- MOVED CSSB 265(RES) OUT OF COMMITTEE
SENATE BILL NO. 266
"An Act approving an interim classification by the commissioner
of natural resources closing certain land within the area of the
proposed Bristol Bay (Alaska Peninsula) competitive oil and gas
areawide lease sale to oil and gas exploration licensing and
shallow natural gas leasing; and providing for an effective
date."
- MOVED SB 266 OUT OF COMMITTEE
HOUSE BILL NO. 417
"An Act amending the definition of 'project' in the Act
establishing the Alaska Natural Gas Development Authority; and
providing for an effective date."
- MOVED HB 417 OUT OF COMMITTEE
SENATE JOINT RESOLUTION NO. 27
Relating to the resolution of submerged land title disputes.
- MOVED SJR 27 OUT OF COMMITTEE
PREVIOUS COMMITTEE ACTION
BILL: SB 265
SHORT TITLE: OIL&GAS LEASE SALE SCHEDULE/NOTIFICATION
SPONSOR(S): RULES BY REQUEST OF THE GOVERNOR
01/14/04 (S) READ THE FIRST TIME - REFERRALS
01/14/04 (S) RES
02/04/04 (S) RES AT 3:30 PM BUTROVICH 205
02/04/04 (S) Moved CSSB 265(RES) Out of Committee
02/04/04 (S) MINUTE(RES)
02/06/04 (S) RES RPT CS 5DP 1AM SAME TITLE
02/06/04 (S) DP: OGAN, SEEKINS, WAGONER, DYSON,
02/06/04 (S) ELTON; AM: STEVENS B
02/25/04 (S) TRANSMITTED TO (H)
02/25/04 (S) VERSION: CSSB 265(RES)
02/26/04 (H) READ THE FIRST TIME - REFERRALS
02/26/04 (H) O&G, RES
02/26/04 (H) O&G AT 3:15 PM CAPITOL 124
02/26/04 (H) Scheduled But Not Heard
02/27/04 (H) RES AT 1:00 PM CAPITOL 124
02/27/04 (H) -- Meeting Canceled --
03/02/04 (H) O&G AT 3:15 PM CAPITOL 124
03/02/04 (H) Heard & Held
03/02/04 (H) MINUTE(O&G)
03/09/04 (H) O&G AT 3:15 PM CAPITOL 124
03/09/04 (H) Moved Out of Committee
03/09/04 (H) MINUTE(O&G)
03/12/04 (H) O&G RPT 5DP
03/12/04 (H) DP: ROKEBERG, KERTTULA, CRAWFORD,
03/12/04 (H) HOLM, KOHRING
03/15/04 (H) RES AT 1:00 PM CAPITOL 124
BILL: SB 266
SHORT TITLE: BRISTOL BAY OIL & GAS LEASE SALE CLOSURE
SPONSOR(S): RULES BY REQUEST OF THE GOVERNOR
01/14/04 (S) READ THE FIRST TIME - REFERRALS
01/14/04 (S) CRA, RES
02/02/04 (S) CRA AT 1:30 PM FAHRENKAMP 203
02/02/04 (S) Moved SB 266 Out of Committee
02/02/04 (S) MINUTE(CRA)
02/04/04 (S) CRA RPT 3DP 2NR
02/04/04 (S) DP: STEDMAN, WAGONER, STEVENS G
02/04/04 (S) NR: LINCOLN, ELTON
02/04/04 (S) RES AT 3:30 PM BUTROVICH 205
02/04/04 (S) Moved Out of Committee
02/04/04 (S) MINUTE(RES)
02/06/04 (S) RES RPT 6DP
02/06/04 (S) DP: OGAN, SEEKINS, STEVENS B, WAGONER,
02/06/04 (S) DYSON, ELTON
02/25/04 (S) TRANSMITTED TO (H)
02/25/04 (S) VERSION: SB 266
02/26/04 (H) READ THE FIRST TIME - REFERRALS
02/26/04 (H) O&G, RES
02/26/04 (H) O&G AT 3:15 PM CAPITOL 124
02/26/04 (H) Scheduled But Not Heard
02/27/04 (H) RES AT 1:00 PM CAPITOL 124
02/27/04 (H) -- Meeting Canceled --
03/02/04 (H) O&G AT 3:15 PM CAPITOL 124
03/02/04 (H) Heard & Held
03/02/04 (H) MINUTE(O&G)
03/09/04 (H) O&G AT 3:15 PM CAPITOL 124
03/09/04 (H) Moved Out of Committee
03/09/04 (H) MINUTE(O&G)
03/12/04 (H) O&G RPT 1DP 3NR 1AM
03/12/04 (H) DP: ROKEBERG; NR: KERTTULA, CRAWFORD,
03/12/04 (H) HOLM; AM: KOHRING
03/15/04 (H) RES AT 1:00 PM CAPITOL 124
BILL: HB 417
SHORT TITLE: AK NATURAL GAS DEV. AUTHORITY INITIATIVE
SPONSOR(S): REPRESENTATIVE(S) CHENAULT
02/02/04 (H) READ THE FIRST TIME - REFERRALS
02/02/04 (H) O&G, RES
02/17/04 (H) O&G AT 3:15 PM CAPITOL 124
02/17/04 (H) -- Meeting Canceled --
02/19/04 (H) O&G AT 3:15 PM CAPITOL 124
02/19/04 (H) Moved Out of Committee
02/19/04 (H) MINUTE(O&G)
02/23/04 (H) O&G RPT 2DP 3AM
02/23/04 (H) DP: ROKEBERG, MCGUIRE; AM: HEINZE,
02/23/04 (H) CRAWFORD, HOLM
02/23/04 (H) FIN REFERRAL ADDED AFTER RES
03/15/04 (H) RES AT 1:00 PM CAPITOL 124
BILL: SJR 27
SHORT TITLE: SUBMERGED LAND TITLE DISPUTES
SPONSOR(S): SENATOR(S) SEEKINS
02/06/04 (S) READ THE FIRST TIME - REFERRALS
02/06/04 (S) RES
02/18/04 (S) RES AT 3:30 PM BUTROVICH 205
02/18/04 (S) Moved Out of Committee
02/18/04 (S) MINUTE(RES)
02/19/04 (S) RES RPT 4DP 1NR
02/19/04 (S) DP: OGAN, SEEKINS, STEVENS B, WAGONER
02/19/04 (S) NR: ELTON
02/23/04 (S) RETURNED TO RLS COMMITTEE
03/02/04 (S) RESOLUTION IN SECOND READING
03/04/04 (S) TRANSMITTED TO (H)
03/04/04 (S) VERSION: SJR 27
03/08/04 (H) READ THE FIRST TIME - REFERRALS
03/08/04 (H) RES
03/15/04 (H) RES AT 1:00 PM CAPITOL 124
WITNESS REGISTER
MARK MYERS, Director
Division of Oil & Gas
Department of Natural Resources (DNR)
Anchorage, Alaska
POSITION STATEMENT: Presented CSSB 265(RES) and SB 266.
REPRESENTATIVE MIKE CHENAULT
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Testified as sponsor of HB 417.
HAROLD HEINZE, Chief Executive Officer
Alaska Natural Gas Development Authority (ANGDA)
Anchorage, Alaska
POSITION STATEMENT: Testified on HB 417; explained that the
bill would expand ANGDA's options for a terminus for the natural
gas pipeline to include Cook Inlet.
STEVEN PORTER, Deputy Commissioner
Department of Revenue (DOR)
Anchorage, Alaska
POSITION STATEMENT: During hearing on HB 417, presented
information and answered questions.
SENATOR RALPH SEEKINS
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Presented SJR 27 as sponsor.
ACTION NARRATIVE
TAPE 04-14, SIDE A
Number 0001
CO-CHAIR BEVERLY MASEK called the House Resources Standing
Committee meeting to order at 1:07 p.m. Representatives Masek,
Dahlstrom, Stepovich, Wolf, Guttenberg, and Kerttula were
present at the call to order.
SB 265-OIL&GAS LEASE SALE SCHEDULE/NOTIFICATION
[Contains discussion of SB 266]
CO-CHAIR MASEK announced that the first order of business would
be CS FOR SENATE BILL NO. 265(RES), "An Act relating to the
schedule of proposed oil and gas lease sales and to a related
report to the legislature; and providing for an effective date."
[SB 265 was sponsored by the Senate Rules Standing Committee by
request of the governor.]
Number 0094
MARK MYERS, Director, Division of Oil & Gas, Department of
Natural Resources (DNR), explained that CSSB 265(RES) and SB 266
are bills to help enable DNR to hold a Bristol Bay oil and gas
lease sale in the fall of 2005. Under current statute, the
state, before making any changes in the areawide sale, must
notify the legislature in the first [session] of that
legislature and two years in advance of the sale; under current
law, the state would have to notify the legislature of this
lease sale at the beginning of the first session of the next
legislature. In addition, fulfilling the two-year notice
requirement will mean that the earliest the sale could occur is
2007. Therefore, DNR and the governor are requesting a change
to that notification procedure.
MR. MYERS specified that the proposed change in CSSB 265(RES)
would allow the state to notify the legislature anytime with
regard to the changes to the sale and process. It would also
require that annually, in February, DNR would provide the
legislature with a report laying out the five-year schedule for
areawide lease sales. The aforementioned proposal seems to
provide good balance in that additional notification is provided
while allowing flexibility to add sales to the schedule without
a potential three- to four-year delay in a sale.
MR. MYERS highlighted that the notification doesn't mean the
sale will occur; it merely allows the process to occur. The
process includes a best interest finding document, which weighs
whether a sale is in the state's best interests. Mr. Myers
referred to a map that specified the schedule based on passage
of CSSB 265(RES). With its passage, prior to the sale there'd
be a long period of review, public input, a preliminary best
interest finding, public comment on the aforementioned document,
and a final best interest finding. Even with this bill, the
earliest this process could happen is in the fall 2005. He
clarified that this bill will allow the state to accelerate the
process for the Bristol Bay lease sale by allowing the sale in
the fall of 2005, rather than January 2007.
Number 0418
MR. MYERS, in response to Representative Stepovich, clarified
that the bill amends the entire process. If the state were to
contemplate future areawide sales, it would be under the same
timeframe proposed in the bill. However, the immediate need for
the bill is for the proposed Bristol Bay lease sale.
Number 0480
CO-CHAIR DAHLSTROM moved to report CSSB 265(RES) out of
committee with individual recommendations and the accompanying
fiscal note. There being no objection, CSSB 265(RES) was
reported from the House Resources Standing Committee.
SB 266-BRISTOL BAY OIL & GAS LEASE SALE CLOSURE
Number 0534
CO-CHAIR MASEK announced that the next order of business would
be SENATE BILL NO. 266, "An Act approving an interim
classification by the commissioner of natural resources closing
certain land within the area of the proposed Bristol Bay (Alaska
Peninsula) competitive oil and gas areawide lease sale to oil
and gas exploration licensing and shallow natural gas leasing;
and providing for an effective date." [SB 266 was sponsored by
the Senate Rules Standing Committee by request of the governor.]
CO-CHAIR MASEK explained that the committee packet should
contain a memorandum to Representative Kerttula dated March 4,
2004, from Thomas E. Irwin, Commissioner, Department of Natural
Resources (DNR), as well as a letter of intent that follows what
Commissioner Irwin's memorandum states. The letter of intent
read:
It is the intent of the Legislature that, if the State
deems that an Alaska Peninsula Oil and Gas Lease Sale
is in the State's best interest and a sale occurs,
companies only be allowed to access offshore Prospects
from onshore drill sites, utilizing directional
drilling technology.
Number 0637
MARK MYERS, Director, Division of Oil & Gas, Department of
Natural Resources (DNR), explained that SB 266 is a mineral
closing order for the area of the proposed Bristol Bay sale. To
preserve the prospective area for an areawide lease sale, [DNR]
wants to close it to shallow gas leasing and exploration
licensing. The thought, he said, is that the intent of the
areawide sale will be better met if the leases are left intact
and the entire area is available for the competitive program.
MR. MYERS referred to a map that illustrates the prospective
section. Under shallow gas leasing, entities are allowed, in a
noncompetitive program, to file for land with a depth down to
3,000 feet and deeper, if part of the field is below that. He
said DNR believes the competitive process is better served if
the leases are left intact, and thus all the mineral rights for
oil and gas are left and bid at the same time in the competitive
sale. There are examples in which the shallow gas lessee would
probably be different from those bidding on the conventional
lease sale. Thus there would be a correlative-rights issue
between the shallower section and the deeper section. At this
point, he said, it's better to preserve the area for the more
traditional conventional lease sale area.
MR. MYERS further explained that [DNR] believes there will be an
additional economic value brought in by higher bonus bids than
if the leases were segregated vertically. He said the intent of
the bill is merely to prevent those activities from occurring
until there is an areawide sale. Once an area is in an areawide
sale, he noted, it's no longer eligible for either program. He
added that the legislation closes this only for the shallow gas
leasing and exploration licensing; it doesn't close it to other
mineral entry programs or prohibit conventional oil and gas
leasing.
Number 0816
REPRESENTATIVE STEPOVICH inquired as to the difference between
this [proposal] and Prudhoe Bay or Cook Inlet.
MR. MYERS answered that this legislation would align it with the
same leasing programs used on the North Slope and at Cook Inlet.
Outside those areawide areas in which competitive sales occur,
over-the-counter leases are allowed for shallow gas leases, just
for the shallow section. Such activity has occurred north of
the areawide leasing area in the Matanuska-Susitna region,
Homer, and other places. This legislation would provide for a
competitive process versus an over-the-counter process, and all
the mineral rights would be leased at the same time.
CO-CHAIR MASEK, upon determining no one else wished to testify,
announced that public testimony was closed.
Number 0900
CO-CHAIR DAHLSTROM moved to report SB 266 out of committee with
individual recommendations, [the accompanying fiscal notes], and
the accompanying letter of intent. There being no objection,
SB 266 was reported from the House Resources Standing Committee.
HB 417-AK NATURAL GAS DEV. AUTHORITY INITIATIVE
CO-CHAIR MASEK announced that the next order of business would
be HOUSE BILL NO. 417, "An Act amending the definition of
'project' in the Act establishing the Alaska Natural Gas
Development Authority; and providing for an effective date."
Number 0960
REPRESENTATIVE MIKE CHENAULT, Alaska State Legislature, sponsor,
explained that HB 417 amends the definition of "project" to
include all options for a terminus of the Alaska natural gas
pipeline. This specifically identifies Cook Inlet as a
possibility for a terminus.
Number 0993
REPRESENTATIVE CHENAULT, in response to Representative
Guttenberg, said this would give the Alaska Natural Gas
Development Authority (ANGDA) the ability to look at the Cook
Inlet basin as a possible terminus, rather than only looking at
Prince William Sound as a possible terminus.
Number 1049
HAROLD HEINZE, Chief Executive Officer, Alaska Natural Gas
Development Authority, explained that Ballot Measure 3, passed
in 2002, defines what a "project" is. It specifically includes
not only a [main natural gas pipeline] to Valdez, but also a
spur line from Glennallen to the Cook Inlet area. Mr. Heinze
noted that he'd provided information to demonstrate that ANGDA
has been looking at Cook Inlet and has considered delivering gas
into the Cook Inlet area, which is one of ANGDA's most important
responsibilities and benefits offered to Alaska. He said his
understanding of the bill is that it would instruct ANGDA in
looking at its development-plan work targeted for June 15, to
expand its [options] for a terminus to specifically include a
pipeline directly to a Cook Inlet port.
MR. HEINZE said the level of detail it takes to address that
kind of a routing between now and June 15 is going to be a
little tricky. He said ANGDA has mainly been using the work
that relates to the Yukon Pacific [Corporation]] effort that
went down the Trans-Alaska Pipeline. In looking at the
feasibility of the project, he said, he isn't uncomfortable with
looking at Cook Inlet in a feasibility sense. He said the
engineering technical data, in particular, the environmental
permitting issues related to that, would be difficult for ANGDA
to assess in the short amount of time available.
Number 1197
STEVEN PORTER, Deputy Commissioner, Department of Revenue (DOR),
explained that DOR and the state have looked at ANGDA as the
entity to look at all of the in-state gas use, and is looking at
bringing gas to Cook Inlet and other areas throughout the state.
He said DOR doesn't consider this legislation to be inconsistent
with that. Mr. Porter mentioned the broader economics of
bringing gas to Cook Inlet versus Valdez, barring the permitting
and the environmental issues. He said the basic economics of
those two areas are so similar that research on one area fairly
well much applies to the other area in terms of the overall
economics of an LNG [liquefied natural gas] project. The
permitting and environmental work on each element, including the
spur line from Glennallen to Anchorage, would require some
additional work on behalf of the authority to solve and answer
those problems.
Number 1277
REPRESENTATIVE KERTTULA asked how much of an extra workload this
could result in, and if that was being taken into account with
respect to ANGDA's budget.
MR. HEINZE explained that based on what had been looked at thus
far, regardless of a route, there hasn't been a lot of
difference in the numbers relating to where and how gas is
brought to tidewater in Alaska. He said in terms of the early
feasibility phase [ANGDA] is currently in, it isn't seen as
necessary to differentiate, fairly exactly, those different
options at this point; to do that would require little to no
additional work, but a more definitive choice between the two
areas would require considerable work and time. He indicated no
additional effort or funding is required in looking at the two
locations indeterminately, but said to make the choice between
the two locations would require considerably more effort than is
included in ANGDA's funding.
Number 1388
REPRESENTATIVE STEPOVICH asked why Cook Inlet wasn't included
originally.
MR. HEINZE said he had nothing to do with Ballot Measure 3. He
explained that the project's sponsors had chosen what was felt
to be the most executable project at the time. He said the
value of the permitting already done on the route to Valdez is
extremely significant with regard to the [June 15 deadline] and
all of the other issues. However, [ANGDA] is aware that
ConocoPhillips Alaska, Inc., and BP, in conjunction with several
others, have looked at a more direct route to Cook Inlet.
Saying [ANGDA] has never seen the work and has no knowledge of
it, he indicated he'd feel much better about moving quickly and
about what the problems are if he could see the work.
Number 1502
REPRESENTATIVE GUTTENBERG asked if there was any reason to
exclude other possibilities for other routes.
MR. PORTER said the governor has stated interest in looking at
all the different options for economic marketability for the
gas, so there isn't a reason to exclude any option that may
become an economically viable project.
Number 1551
CO-CHAIR DAHLSTROM moved to report HB 417 out of committee with
individual recommendations and the accompanying fiscal notes.
There being no objection, HB 417 was reported from the House
Resources Standing Committee.
SJR 27-SUBMERGED LAND TITLE DISPUTES
CO-CHAIR MASEK announced that the final order of business would
be SENATE JOINT RESOLUTION NO. 27, Relating to the resolution of
submerged land title disputes.
Number 1589
SENATOR RALPH SEEKINS, Alaska State Legislature, sponsor,
explained that SJR 27 relates to resolving land-title disputes
between the state and the federal government. He paraphrased
from the sponsor statement, which read [original punctuation
provided but some formatting changed]:
Alaska holds over 20,000 rivers and more than
1,000,000 lakes considered to be potentially navigable
waterways. This amounts to nearly 60,000,000 acres of
submerged lands. Title to all submerged land was to
be transferred to Alaska from the federal government
at statehood. It's important to note that up until
statehood this land was held in trust for the future
state by the federal government. Now, more than 45
years after Alaska became a sovereign state, the
federal government has yet to transfer title to these
promised lands.
SJR 27 does three things:
1. It encourages the Secretary of the Interior and
the Alaska congressional delegation to support and
endorse the continuation of the process for recording
federal disclaimers of interest for quieting title to
submerged lands;
2. It requests the Alaska congressional delegation to
introduce legislation in the Congress to provide for
federal participation in the proposed state and
federal Navigable Waters Commission for Alaska; and
3. It requests the introduction of legislation in the
Congress to amend the Quiet Title Act to ensure
federal cooperation in resolving submerged land title
disputes.
The dilemma is clearly illustrated in the U.S. 9th
Circuit Court of Appeals case Alaska v. USA (decision
filed on January 28, 2000). Circuit Judge Andrew
Kleinfeld authored the opinion of the court excerpted
as follows:
It is undisputed that when the Union was created, each
of the thirteen original states retained title to the
lands covered by navigable waters, and that under the
"equal footing doctrine" each new state succeeds upon
statehood to the federal interest in these lands. The
Submerged Lands Act gave Alaska title to the beds of
navigable rivers on January 3, 1959.
Under [the Quiet Title Act] ... the federal government
takes the position that its sovereign immunity shields
it from the state government's claim [to clear title
to submerged lands] until the federal government
itself makes a claim. Because Alaska is very large,
much of it is wilderness, and there are innumerable
waters, the federal government has not had time yet
(45 years) to determine what claims it wishes to make.
Therefore, the state government must wait until the
federal government makes a claim, if it ever does,
before settling whether it has title.
In a nutshell, the federal government's preferred
method for reconciling these disputes appears to be to
wait the state out. When (if ever) the government
decides to make a claim against state ownership, only
then does Alaska have an opportunity to protect its
ownership interest. This is accomplished by filing a
quiet title suit against the federal government - just
as it did in the case cited above relating to the
Nation, Kandik and Black Rivers.
The bottom line? That which should be indisputable -
that Alaska holds title to its submerged lands - has,
in fact, been effectively disputed as a function of
the federal government's foot dragging. Without
doubt, the existing processes of resolving submerged
lands title disputes are inadequate and exceptionally
slow. SJR 27 seeks resolution to this extraordinarily
unfair dilemma.
Number 1848
REPRESENTATIVE GUTTENBERG asked whether there was any indication
from the federal government that it would [act to resolve these
issues].
SENATOR SEEKINS said no.
REPRESENTATIVE GUTTENBERG asked if that could be done with the
commission or would have to be done with legislation.
SENATOR SEEKINS said he believes the commission is needed to
help analyze the situation between the federal and state
governments and the cooperation that could be extended.
However, the [state] is asking for some changes to the Quiet
Title Act because, based on the opinion written by Justice
Kleinfeld, the [federal] government can hold its claim until it
wants to assert it. He said this is basically unfair and the
thought is that, as a sovereign state, [Alaska] should be able
to go around that; thus [the state] is asking for some changes
in the legislation as well as the commission.
REPRESENTATIVE STEPOVICH said he applauds this legislation and
hopes to see more like it.
CO-CHAIR MASEK noted that there was a hearing with DNR in which
Senator Gene Therriault was present; discussed were land issues
and land swaps that dealt with Native corporations, the state,
and the federal government. She said she thought this was
timely and important to go forward with.
Number 1987
CO-CHAIR DAHLSTROM moved to report SJR 27 out of committee with
individual recommendations and the accompanying fiscal notes.
There being no objection, SJR 27 was reported from the House
Resources Standing Committee.
ADJOURNMENT
There being no further business before the committee, the House
Resources Standing Committee meeting was adjourned at 1:34 p.m.
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