04/07/2004 01:10 PM House RES
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= 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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