02/08/2012 01:00 PM House RESOURCES
| Audio | Topic |
|---|---|
| Start | |
| HJR29 | |
| HB9 | |
| Adjourn |
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 9 | TELECONFERENCED | |
| *+ | HJR 29 | TELECONFERENCED | |
| + | TELECONFERENCED |
ALASKA STATE LEGISLATURE
HOUSE RESOURCES STANDING COMMITTEE
February 8, 2012
1:03 p.m.
MEMBERS PRESENT
Representative Eric Feige, Co-Chair
Representative Paul Seaton, Co-Chair
Representative Peggy Wilson, Vice Chair
Representative Alan Dick
Representative Neal Foster
Representative Bob Herron
Representative Cathy Engstrom Munoz
Representative Berta Gardner
Representative Scott Kawasaki
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
HOUSE JOINT RESOLUTION NO. 29
Urging the United States Department of the Interior, Bureau of
Land Management, to plug legacy wells properly and to reclaim
the legacy well sites as soon as possible in order to protect
the environment in the Arctic region.
- HEARD & HELD
HOUSE BILL NO. 9
"An Act requiring the Joint In-State Gasline Development Team to
report to the legislature recommended changes to state law that
are required to enable or facilitate the design, financing, and
construction of an in-state natural gas pipeline so that the in-
state natural gas pipeline is operational before 2016; and
providing for an effective date."
- HEARD & HELD
PREVIOUS COMMITTEE ACTION
BILL: HJR 29
SHORT TITLE: BLM LEGACY OIL WELL CLEAN UP
SPONSOR(s): REPRESENTATIVE(s) MILLETT
01/17/12 (H) READ THE FIRST TIME - REFERRALS
01/17/12 (H) RES
02/08/12 (H) RES AT 1:00 PM BARNES 124
BILL: HB 9
SHORT TITLE: IN-STATE GASLINE DEVELOPMENT CORP
SPONSOR(s): REPRESENTATIVE(s) CHENAULT
01/18/11 (H) PREFILE RELEASED 1/7/11
01/18/11 (H) READ THE FIRST TIME - REFERRALS
01/18/11 (H) RES, FIN
02/06/12 (H) RES AT 1:00 PM BARNES 124
02/06/12 (H) Heard & Held
02/06/12 (H) MINUTE(RES)
02/08/12 (H) RES AT 1:00 PM BARNES 124
WITNESS REGISTER
REPRESENTATIVE CHARISSE MILLETT
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Testified as prime sponsor of HJR 29.
CATHERINE FOERSTER, Engineering Commissioner
Alaska Oil and Gas Conservation Commission (AOGCC)
Anchorage, Alaska
POSITION STATEMENT: Provided a PowerPoint presentation and
testimony in support of HJR 29.
TED MURPHY, Deputy State Director of Resources
Division of Resources
Alaska State Office
U.S. Bureau of Land Management
Anchorage, Alaska
POSITION STATEMENT: Testified during the hearing on HJR 29.
RENA DELBRIDGE, Staff
Representative Mike Hawker
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: During the hearing on HB 9, provided
answers on behalf of Representative Hawker, sponsor, to the
questions that were posed by the House Resources Standing
Committee on 2/6/12.
JOE DUBLER, Vice President
Alaska Gasline Development Corporation (AGDC)
Director of Finance, Alaska Housing Finance Corporation (AHFC)
Department of Revenue (DOR)
Anchorage, Alaska
POSITION STATEMENT: During the hearing on HB 9, assisted in
providing answers to questions posed by committee members during
the committee's 2/6/12 hearing on the bill.
KIRSTEN SIKORA, Acting CEO
Alaska Natural Gas Development Authority (ANGDA)
Office of the Commissioner
Department of Revenue (DOR)
Anchorage, Alaska
POSITION STATEMENT: During the hearing on HB 9, discussed the
accomplishments of ANGDA.
SCOTT HEYWORTH, Chairman
Board of Directors
Alaska Natural Gas Development Authority (ANGDA)
Office of the Commissioner
Department of Revenue (DOR)
Anchorage, Alaska
POSITION STATEMENT: Expressed concerns with HB 9.
KAYE LAUGHLIN, Permitting Coordinator
Alaska Natural Gas Development Authority (ANGDA)
Office of the Commissioner
Department of Revenue (DOR)
Anchorage, Alaska
POSITION STATEMENT: During the hearing on HB 9, outlined the
specific work that ANGDA has completed.
CORRIE YOUNG
Anchorage, Alaska
POSITION STATEMENT: Expressed concern with HB 9.
JAMES FIELDS
Glennallen, Alaska
POSITION STATEMENT: Testified in opposition to HB 9.
MERRICK PEIRCE
Fairbanks, Alaska
POSITION STATEMENT: Testified in opposition to HB 9.
ACTION NARRATIVE
1:03:59 PM
CO-CHAIR PAUL SEATON called the House Resources Standing
Committee meeting to order at 1:03 p.m. Representatives Herron,
P. Wilson, Kawasaki, Gardner, Feige, and Seaton were present at
the call to order. Representatives Munoz, Foster, and Dick
arrived as the meeting was in progress.
HJR 29-BLM LEGACY OIL WELL CLEAN UP
1:04:17 PM
CO-CHAIR SEATON announced that the first order of business would
be HOUSE JOINT RESOLUTION NO. 29, Urging the United States
Department of the Interior, Bureau of Land Management, to plug
legacy wells properly and to reclaim the legacy well sites as
soon as possible in order to protect the environment in the
Arctic region.
1:05:15 PM
REPRESENTATIVE CHARISSE MILLETT, Alaska State Legislature, prime
sponsor, predicted that by bringing up the subject of legacy
wells HJR 29 will result in big impacts on the state of Alaska
because it will lead to discussions and agreements with the
federal government about the wells. She explained that between
1944 and 1981 approximately 136 wells were drilled in the
National Petroleum Reserve-Alaska (NPR-A). Some were drilled by
the U.S. Navy and some by the U.S. Geological Survey. Some of
the wells are being used as climate change mechanisms, but an
extraordinary number of these wells have not been capped or
mitigated at all. This has caused a lot of issues to arise with
the Alaska Oil and Gas Conservation Commission (AOGCC) because
the wells pose a risk to both wildlife and human life. The well
sites are unattractive with many barrels around them. Some
wells can no longer be found because they were just bore holes,
or have eroded, or have [sunken] into lakes. This is a black
eye on Alaska even though those wells were drilled by the
federal government. Therefore, HJR 29 urges the U.S. Bureau of
Land Management (BLM) to take responsibility and continue with
mitigation of the wells.
1:07:20 PM
REPRESENTATIVE MILLETT said she introduced HJR 29 because the
squeaky wheel gets the grease. There is disagreement between
BLM and AOGCC regarding how many wells have been capped, but she
said she thinks there are about 110 wells that are worrisome, 42
that are very worrisome, and she would like to see some
movement. She conveyed that according to the BLM, getting money
for this type of thing is difficult to do, especially without
the earmark process. However, Alaskans and the legislature can
take a lead in encouraging Congress to clean up these wells.
Creative solutions have been proposed to the BLM, such as giving
the land to the State of Alaska and then the state would clean
up the wells. She related that some producers have said they
would take over the mitigation costs if they could lease the
land for exploration.
REPRESENTATIVE MILLETT reiterated that the resolution would
start a dialogue amongst Alaskans, Congress, and BLM. She would
like to see the wells capped, mitigated, and [the land put] back
in the pristine condition that the state relies on its producers
to do. If any private producer left wells like these anywhere
in Alaska, the environmental groups would be screaming. She
said she has reached out to 24 environmental groups urging them
to get behind this cause, but has had little feedback. When a
"thimble of oil" is dropped on the North Slope it becomes a
front page story, but the NPR-A wells have yet to be a front
page story and only two articles have been written about the
issue. Raising awareness of these wells that have not been
remediated over the past 60 years is a long time in coming, and
it is sickening the way the lands have been left.
CO-CHAIR SEATON concurred that this is an important topic for
everyone.
1:10:01 PM
REPRESENTATIVE P. WILSON remarked how dare [the federal
government] request Alaska to do things when it does not do
those things itself.
REPRESENTATIVE MILLETT responded that this is in Alaska's
backyard. The federal government controls and restricts Alaska
on every aspect of development in the state, yet this is the
legacy that the federal government has left Alaska.
1:10:35 PM
REPRESENTATIVE KAWASAKI thanked the sponsor for bringing forward
the resolution. In regard to the third [whereas] on page 2, he
inquired whether any of the unplugged legacy wells have damaged
the surface vegetation, groundwater, fish, land mammals, and sea
mammals.
REPRESENTATIVE MILLETT replied that it is hard to equate because
not a lot of travel is done on the NPR-A. The North Slope
Borough has taken over some of the wells, she said, so the
borough could be contacted about the wells, the land transfer,
and the responsibility that now lies with the borough. However,
right now it is out in the wilderness. There is open diesel,
but no one is studying water contamination, so the effects on
wildlife will not be known until there is someone monitoring it.
1:11:47 PM
REPRESENTATIVE GARDNER thanked the sponsor for raising this
issue and writing the resolution. She shared that this issue
has been raised by many legislators when meeting with federal
officials in Washington, DC, but the officials have always
pleaded poverty and no money for amelioration. Noting the
various people to whom the resolution would be sent, she asked
whether there are others who should receive the resolution given
that funding is what is needed.
REPRESENTATIVE MILLETT agreed HJR 29 should go to everyone that
can be thought of, including every member of Congress and every
environmental organization. She said she would be accepting of
any suggestions from Representative Gardner regarding who the
resolution should be sent to.
1:13:04 PM
REPRESENTATIVE KAWASAKI asked whether well reclamation efforts
between the years 1944 and 1981 were not properly understood and
the requirements under law at that time were done, but now the
wells are out of compliance because the laws have changed since
then.
REPRESENTATIVE MILLETT concurred, but said that just as there
are legacy wells in other areas of the state that have been
drilled since 1959, the owner/operator of that well is still
required to make the well right to standards of today. It is a
case of what is good for one group of people should be good for
all groups of people. Anyone drilling in Alaska should be
responsible for the legacy that it leaves.
1:14:05 PM
CO-CHAIR FEIGE, observing that reporters were in the committee
room, said that maybe the press would pick up the story. He
requested the sponsor to review who she talked to regarding the
aforementioned land swap, and presumed that such a land swap
would include the subsurface as well as the surface.
REPRESENTATIVE MILLETT deferred to AOGCC commissioner Cathy
Foerster to provide the specific details because it was AOGCC
that was involved in these talks.
1:14:48 PM
REPRESENTATIVE HERRON suggested that the resolution be sent to
the boards of the Sierra Club, World Wildlife Fund, and all
other non-governmental organizations (NGOs) so that the boards
of the organizations could decide, not the executive director.
REPRESENTATIVE MILLETT replied that the resolution has been
sent, but sending the actual resolution, if it passes, is a
great idea. The more that awareness can be raised about this
issue, the more likely it will become a front page story.
REPRESENTATIVE HERRON suggested the committee work with the
sponsor to add all of those NGOs to the mailing list.
CO-CHAIR SEATON said that could come forward as an amendment
when the committee is considering amendments.
1:16:36 PM
REPRESENTATIVE P. WILSON commented that a way to get front page
news is for the State of Alaska to tell the federal government
that it will not pay any more money until something is done.
She inquired whether the sponsor has spoken to the governor
about how far he is willing to go regarding this issue.
REPRESENTATIVE MILLETT responded that the Department of
Environmental Conservation (DEC) is aware of this issue. She
allowed she probably has not given enough credit to the Alaska
contingent of the BLM, which has made this issue its number one
priority. She acknowledged that the Alaska BLM's hands are tied
through the federal appropriations process and said the wells in
Alaska are competing with many other sites around the U.S. from
the 1940s. Unfortunately, the State of Alaska cannot force the
federal government to abide by state law or pay fines. She
pointed out that offshore NPR-A lease sales have brought the
federal government $9 billion, but not a cent of that has been
re-appropriated back to this area.
1:18:19 PM
REPRESENTATIVE DICK commented that if environmental groups
really are concerned about cleaning up the environment this
should be a number one priority. But, if environmental groups
are only concerned about locking up land, then he can see where
the land is already locked up and there really is not a motive
to do anything further here. He said it seems to him that if
environmental groups really do get on board with the sponsor
that is proof that they really do care about cleaning up the
environment; if they do not, then maybe their motives should be
questioned.
CO-CHAIR SEATON reminded members that the resolution is a
communication from the legislature and the governor, if it
passes and the governor signs it. He said he agrees it should
be sent to parties that should be interested, but questions
their named involvement in a resolution from the legislature.
REPRESENTATIVE MILLETT offered her appreciation for the
committee's consideration of HJR 29 and said that as awareness
is raised it ensures that folks doing business in Alaska will be
expected to do it right and within the letter of the law. The
legacy wells on the NPR-A send a mixed message to people about
how pristine Alaska's environment is. Maybe the squeaky well
will get the cap.
1:21:10 PM
REPRESENTATIVE FOSTER inquired about the estimated cost for
plugging an open well.
REPRESENTATIVE MILLETT answered that the BLM has provided two
numbers - one for complete remediation and one for plugging.
These two different things can be done separately or at the same
time, she explained, but she does not have a total number. The
most concern is just plugging the open wells. The last well
cost around $16 million for that one well one time. Ideas have
been floated that a group of wells could be plugged at the same
time which would lower the cost [per well]. However, there is
no real handle on the total package of what it would cost to do
remediation.
CO-CHAIR SEATON moved to testimony from representatives of AOGCC
and BLM.
1:22:59 PM
CATHERINE FOERSTER, Engineering Commissioner, Alaska Oil and Gas
Conservation Commission (AOGCC), thanked the committee for
allowing her to testify in support of HJR 29. She said this
subject has been dear to her since becoming a commissioner in
2005. Responding to Representative Kawasaki's earlier question,
she said some of these wells were drilled after 1959, which was
when the AOGCC came into being and established proper
requirements for plugging and abandonment (P&A); therefore, the
wells drilled after that were out of compliance with AOGCC
regulations. In response to Representative Foster's earlier
question, she said that so far the cost per well for the BLM's
"attempts" to P&A and remediate has averaged $4.6 million per
site. She noted that she is saying "attempts" because BLM
claims to have plugged and abandoned and remediated more wells
than AOGCC acknowledges as having been done properly, so there
is a dispute in this regard. Responding to Representative
Gardner's earlier question, Ms. Foerster said that her sister-
in-law has suggested that today's PowerPoint presentation be put
on YouTube as a way to reach more people. Addressing Co-Chair
Feige's earlier question, she offered her understanding that the
land swap was grassroots to granite, so the mineral and surface
rights were swapped as was the remediation obligation. Thus,
the North Slope Borough now has responsibility for 33 of the 136
wells.
1:25:29 PM
REPRESENTATIVE GARDNER, in regard to the [state] leasing this
land for development, inquired what confidence could be had that
the state would not face a similar situation for any new wells
that are drilled, given the previous defiance of AOGCC's
regulations.
MS. FOERSTER replied that AOGCC has not had any problems with
any operators in the state of Alaska other than the federal
government. She added that the federal government is not taking
out any leases from AOGCC and has not come to AOGCC in the last
year and a half for a permit to drill.
1:26:36 PM
MS. FOERSTER began reviewing the photographs in her PowerPoint
presentation, explaining that between the mid-1940s and the
early 1980s the federal government drilled numerous wells in
northern Alaska to test the viability of oil and gas development
in the arctic environment. She said these legacy wells are all
in the western North Slope, an area with geography and biology
like that of the Arctic National Wildlife Refuge (ANWR). While
the area the wells are in is called a national petroleum reserve
rather than a national wildlife refuge, that does not make what
has happened there okay.
MS. FOERSTER related that the U.S. Bureau of Land Management
(BLM), within the U.S. Department of Interior, is the agency
that operates these wells. While the BLM is not the operator
that drilled the wells, it has been assigned responsibility by
the federal government to manage these wells. Essentially every
one of the 136 wells has been out of compliance with Alaska
regulations at one time or another and most of them still are.
Given the condition of these wells, review of the applicable
federal regulations would likely reveal that they are not even
in compliance with the regulations of the entity that owns and
manages them.
1:28:09 PM
MS. FOERSTER prefaced that she will be covering only the most
troubling issues, not every issue, that AOGCC has with these
wells. Displaying the photo labeled "Solid waste primarily in
the form of empty drums litter the area around Skull Cliff Core
Test," she pointed out that the objects in the picture are not
caribou or musk ox, but rusting barrels and drums. While the
BLM says there is insufficient budget to clean up these hundreds
of rusting drums, it has a big enough budget to rent a
helicopter to fly out and take pictures of the drums. She
suggested that the next time the BLM is out taking pictures it
should bring along a big net, gather up the drums, and carry
them out. Additionally, she continued, while the BLM does not
have enough money to clean up its mess, it has enough money to
write a report about it; this picture and the others she will be
showing are taken from a BLM report that used to be on the
agency's web site.
MS. FOERSTER urged that as members view these pictures, they
consider the hypocrisy of the federal government in wanting to
protect the Arctic National Wildlife Refuge from the very sort
of mess that the federal government has caused, and is allowing
to continue, elsewhere in Alaska.
1:29:46 PM
MS. FOERSTER allowed that to be fair to the federal government
and current administration, the legacy wells have been a problem
since the middle of the last century and are not solely the
fault of the current administration. However, because this
administration is the only one in place now, it is the only one
that the state can hold accountable. Also, to be fair to the
Alaska BLM folks who are Alaskans too, she said she thinks that
they would like to clean up the mess as well, but their hands
are tied by their meager annual budget of about $1 million,
which enables them to write a report and take pictures and not
much else. However, she stressed, she is not going to cut the
federal government any slack because it takes in billions of
dollars from Alaska lease sales and some of that money should
come back to Alaska to fix this mess. She shared that when
making this presentation to the Ground Water Protection Council,
a group of state and federal regulators from across the U.S.,
she asked that people in the audience stand up if the picture
depicted a proper P&A and remediate; no one, including
representatives of the BLM, stood up for any of the pictures.
1:31:11 PM
MS. FOERSTER, moving to the photo labeled "North Simpson #1 is
partially submerged in the summer," stated that in Alaska the
proper plugging and abandonment of wells is governed by Article
2 of AOGCC regulations. The purpose of properly plugging and
abandoning wells includes public safety, protection of the
environment, and protection of sources of drinking water. She
asked, rhetorically, whether anyone would want to take a drink
from the lake in the photo.
MS. FOERSTER stated that proper plugging and abandonment of a
well includes sufficient downhole cement and plugs to ensure
that underground fluids cannot migrate. With few exceptions,
none of the [136] legacy wells complies with this requirement.
Turning to the photo labeled "Simpson Core #29," she noted that
the well is open to the surface with no downhole plugs at all
and with no wellhead. The mud or diesel that was probably in
the well at one time has likely gone into the environment. The
earlier question about whether there has been damage to the
environment can be answered by looking at the pictures of these
wells. Several of the wells were left filled with diesel, she
said, and she thinks this is one of them, although she is not
sure.
1:32:25 PM
MS. FOERSTER, displaying the photo labeled "Light trash is
present in the seep between Cores #30 and #30A," explained that
the well was drilled in a seep, so the oil on the surface is a
naturally occurring seep. Proper plugging and abandonment of a
well requires that all underground pipe be cut off five feet
below ground level so that it cannot create an excavation hazard
or become a problem during subsidence or other normal earth
movement. With few exceptions, she said, none of the legacy
wells complies with this requirement.
MS. FOERSTER, moving to the photo labeled "Awuna wellhead with
exposed wooden pilings and Styrofoam," stated that this picture
has been used in mailers and fundraisers opposing development of
the Arctic National Wildlife Refuge. She said the oil industry
was probably blamed for this well and this is another part of
the legacy that these wells are leaving for Alaska. Properly
plugging and abandonment of a well requires sufficient surface
remediation that the site blends in with the natural vegetation,
and within a few seasons there should be no surface indication
of a well's location. Many of the legacy well sites are
permanent eyesores littered with rotting wood, rusting metal,
and other debris. However, because the legacy wells have not
been properly plugged, those wells that are re-vegetated are
potentially more serious downhole mechanical integrity issues
because they are out of site and out of mind but not secured.
She said the helicopter shown in this picture re-emphasizes that
the BLM has enough money to rent helicopters.
1:33:52 PM
MS. FOERSTER pointed out that the delay in plugging and
abandonment has caused at least three of the wells to be lost
due to subsidence and other normal earth movement. The BLM has
taken these wells off its concern list because it can no longer
find them, she said. Two of the wells are at the bottom of what
subsidence and snowmelt have turned into lakes and the third has
been buried by a landslide. Additionally, wells can simply be
no longer found and there is no explanation for why. Postponing
the abandonment of these wells simply puts the remainder of them
at risk of also becoming lost. Losing a well does not mean that
it is no longer a mechanical integrity or environmental concern;
it is just one that cannot be seen. She explained that the
[Awuna well] is on its way to being lost as the subsidence lake
develops. How long before it is lost, she asked, and how much
will it cost to find and fix it after that happens.
MS. FOERSTER, turning to the photo labeled "East Simpson #2 is
partially submerged during the spring thaw," noted that the
question with this legacy well is how long will it take for
natural subsidence to submerge this site completely and what
will be the cost to find it and fix it in the middle of a lake.
1:35:15 PM
MS. FOERSTER, displaying the photo labeled "Kaolak #1 with cabin
on the drill pad," asserted that allowing these unsafe and
unsightly wells to litter Alaska's wilderness while threatening
both human safety and the environment is unacceptable.
Nonetheless, BLM has properly plugged and abandoned fewer than
10 of the 136 wells. If these wells were operated by an oil
company the AOGCC would force compliance with its regulations
and impose fines for non-compliance, she said. Unfortunately,
while BLM can be found in violation of AOGCC regulations, AOGCC
has no legal authority to force the U.S. Department of Interior
into compliance. Additionally, she continued, AOGCC should not
have to. Showing the photo labeled "Umiat #1 is located about 5
miles from the Umiat airstrip," she said the federal government
should provide adequate funding specifically designated for the
purpose of bringing its own wells into regulatory compliance
with its and AOGCC's regulations. This funding could come from
the billions of dollars collected in lease sales or from
stimulus efforts. For example, jobs could have been given to
displaced Gulf of Mexico workers after the Macondo disaster to
come to Alaska and plug and abandon these wells.
MS. FOERSTER reiterated Representative Millett's earlier
statement that oil companies are interested in leasing these
lands and to have the remediation be part of their leasing.
There are opportunities to make these problems go away, she
said, and making this happen is a part of her job. She vowed
that as long as she is with AOGCC she will be haranguing to make
it happen. She cannot force the BLM into compliance, but she
can embarrass them in the court of public opinion and find and
work with the reasonable people to try to move this forward.
1:37:17 PM
REPRESENTATIVE GARDNER inquired whether the information gained
when these wells were drilled is in the public domain or
available to potential lessors.
MS. FOERSTER responded that AOGCC has scant records on these
wells and she does not know how much information the BLM has;
however, anything that AOGCC has is available to the public.
REPRESENTATIVE P. WILSON suggested that the resolution could be
amended with a whereas clause asking the BLM to provide the
state with the information that the agency has on these wells.
She inquired about the cabin depicted in the photo labeled
"Kaolak#1 with cabin on the drill pad."
MS. FOERSTER answered that as far as she knows the cabin was
part of the activity around that well. She expressed her
optimism that the Alaska BLM representatives and the AOGCC will
collaborate moving forward with the legacy wells and that BLM
will provide AOGCC with whatever information it has. She said
she is therefore unsure that such a whereas clause is necessary.
1:39:22 PM
REPRESENTATIVE KAWASAKI asked how many of the approximately
2,200 legacy wells on the North Slope are not currently in
compliance with AOGCC's regulations for capping.
MS. FOERSTER replied that the BLM is by far the biggest violator
of AOGCC's regulations. Many, many wells on the North Slope are
long-term shut-in wells on active pads, she continued, and these
are looked at every day by operators. A handful of wells
needing cleanup are located in exploratory sites and AOGCC has
given notice to those operators and the operators are
proceeding. Two or three wells between Anchorage and Fairbanks,
the Rosetta wells, are true orphan wells for which AOGCC cannot
find the owners. Other than the Rosetta wells, the only ones
that have not been remediated are a few Point Thomsen
exploratory wells that ExxonMobil and BP admit they own and
admit they owe remediation. However, due to high pressure in
the Thomsen reservoir and the way that those wells were left
because it was thought at the time that they would be re-entered
soon, re-entering the wells for plugging and abandonment poses
severe dangers that the companies do not know how to get around.
The wells are partially plugged and abandoned, so they are not
an immediate environmental risk. It would be a far greater risk
to go in without a thoroughly prepared plan, which the companies
and AOGCC are working on.
1:42:12 PM
REPRESENTATIVE KAWASAKI, in regard to AOGCC rules about whether
a gravel pad is still active, inquired whether AOGCC actually
looks to see if a pad qualifies as active. He said it seems to
him that a company not wanting to do remediation could just keep
leasing the ground and say that it is actively monitoring that
site.
MS. FOERSTER clarified that an active pad is producing, so oil
and gas production is coming from that pad.
MS. FOERSTER, responding to Co-Chair Feige, said she joined
AOGCC nearly seven years ago at the end of March 2005.
CO-CHAIR FEIGE asked how many wells the BLM has drilled in
Alaska over the past seven years.
MS. FOERSTER responded she does not have an exact count for the
last seven years, but a handful of coalbed methane test wells
have been drilled in or near the city of Wainwright since her
arrival at AOGCC. One well was drilled before she arrived and a
few more were drilled after she arrived.
CO-CHAIR FEIGE inquired whether BLM followed all of the AOGCC
regulations that it was supposed to follow.
MS. FOERSTER answered no, it did not.
1:44:11 PM
REPRESENTATIVE MUNOZ offered her appreciation for Ms. Foerster's
work to raise awareness of this issue. She asked what the
[federal] government's original purpose was for drilling these
wells.
MS. FOERSTER replied that the original purpose was to find out
whether oil and gas drilling was viable in an arctic
environment. Geologists had long recognized the North Slope as
an oil-rich area and after World War II the U.S. wanted to
ensure its own energy security. So, it was exploration, but as
seen by the surface oil seeps in her presentation it was not
hard to imagine that the area was oil rich. She added that the
exploration was very shallow.
REPRESENTATIVE MUNOZ inquired whether the [federal] government
has ever used any of the resources there for military activity
or other purposes.
MS. FOERSTER responded she does not know and deferred to the BLM
to answer the question.
REPRESENTATIVE MUNOZ asked whether the U.S. Environmental
Protection Agency (EPA) has been involved or notified.
MS. FOERSTER answered that the Alaska EPA has been informed of
this and has offered its moral support to AOGCC. When she made
her presentation at the Ground Water Protection Council, several
federal EPA people in attendance were aghast and offered
suggestions to her that AOGCC has already tried. Thus, EPA is
aware of the issue, but has not made the issue its mission.
REPRESENTATIVE GARDNER inquired about the current condition of
the BLM's coalbed methane wells.
MS. FOERSTER replied that those wells have been abandoned. In
further response, she said the wells are plugged and abandoned,
and that it was not AOGCC's abandonment regulations that the BLM
did not follow.
1:47:31 PM
TED MURPHY, Deputy State Director of Resources, Division of
Resources, Alaska State Office, U.S. Bureau of Land Management,
stated that he is before the committee to answer questions on
the legacy well program within Alaska. He said he thinks the
BLM is on track to continue working closely with the state to
reach resolution, a common understanding of where the wells are
at, the condition the wells are in, and how to remediate and
plug those wells into the future. Collaboration is the
component that everyone needs to do to get this done.
CO-CHAIR SEATON asked whether Mr. Murphy disagrees with the
facts as they have been presented or that the pictures do not
truly represent the situation around the wells.
MR. MURPHY responded that the pictures are an accurate
reflection of the condition of the wells. He said the federal
government does not control 136 wells in the NPR-A. Some of
those were conveyed in the Barrow Gas Field Transfer Act [of
1984] and some of those wells, while called wells, are actually
cores or shallow wells that were never cased. They were used to
determine the thickness of the permafrost and maybe some
geologic structures. They may have ranged anywhere from a
couple hundred feet to nearly a thousand feet.
CO-CHAIR SEATON requested Mr. Murphy to provide the committee
with a written commentary about the number of wells and the type
of wells.
1:50:13 PM
REPRESENTATIVE HERRON requested Mr. Murphy to say "mia culpa" on
behalf of the BLM and the federal government.
MR. MURPHY stated "mia culpa."
REPRESENTATIVE GARDNER, in regard to Mr. Murphy's statement that
BLM is working closely with the state to reach common
understanding, inquired what the active parts are of working
closely.
MR. MURPHY answered that it begins with the 2004 report on the
legacy wells that he put back on the BLM's web site yesterday.
He said BLM is making an amendment to that report. He explained
that some of the pictures shown earlier are a re-visitation of
those wells and it is important to understand that the BLM has
chosen to address those wells being impacted by coastal erosion
and that would have been overrun by the ocean in the near
future. Those wells were plugged and the mud pits remediated.
REPRESENTATIVE GARDNER understood Mr. Murphy to be saying that
the wells likely to be impacted by coastal erosion or that have
been impacted by coastal erosion have been plugged and
remediated.
MR. MURPHY said yes, within the next five years. The BLM does
not have an accurate representation of what the coastal erosion
impacts will be into the future, but the BLM has addressed the
ones that will be overrun or have been overrun by the ocean.
1:52:19 PM
REPRESENTATIVE KAWASAKI offered his understanding that 12 wells
have been plugged since the 2004 inventory, one in 2010 at the
cost of $17 million and Umiat #9 that was plugged in 2011 at a
cost of $2.5 million. In regard to reassessment of the 2004
inventory, he asked what the process will be for determining
which wells should be first. He further asked when the BLM will
get done.
MR. MURPHY replied he does not know when BLM will be done as it
is contingent on a number of factors, but he is committed to BLM
continuing to address the problem. He outlined the screening
process that will occur: condition of the existing pad and
pits; visible solid waste, such as equipment, piping, and
barrels; whether the bore hole penetrated known oil and gas
stratigraphy; whether the well had an oil or gas show and, if
so, is the well capable of flowing; whether the well is near
human activity and, if so, whether it is a risk to the people
near the well; the condition of the wellhead and whether there
has been previous problems or repair work on that wellhead; and
whether the presence of the unplugged well has the potential to
negatively impact anticipated development.
1:54:11 PM
CO-CHAIR FEIGE allowed that much of this happened before Mr.
Murphy came onboard the BLM and that Mr. Murphy is working
towards a solution. As far as the solutions of removing pits
and reclaiming the wells being impacted by coastal erosion, he
said the BLM is keeping pilots like him employed. He said he is
disturbed by the BLM's failure to follow existing AOGCC
regulations for the wells drilled near Wainwright. While he did
not know whether that was a willful disregard of the regulations
or simply a lack of knowledge or expertise on the part of the
people that were doing those wells, he asked that Mr. Murphy
pass on to the federal government that the state does not take
kindly to the violation of its laws.
REPRESENTATIVE MUNOZ inquired what the top federal agency
funding priorities are for Alaska and where this remediation
effort fits into those priorities.
MR. MURPHY explained that the Alaska BLM budget is based upon
the conveyance program, which is the largest funded program
within BLM Alaska, followed by the oil and gas "1310 program"
and then the recreational components. As far as priorities, the
annual budget for the legacy well program is a base of $1
million and supplementals are addressed thereafter.
CO-CHAIR SEATON requested the committee members to submit any
other questions they may have and that BLM provide in writing
any disputes it has with HJR 29 so the committee may address
them.
CO-CHAIR SEATON held over HJR 29.
HB 9-IN-STATE GASLINE DEVELOPMENT CORP
1:56:49 PM
CO-CHAIR SEATON announced that the next order of business would
be HOUSE BILL NO. 9, "An Act requiring the Joint In-State
Gasline Development Team to report to the legislature
recommended changes to state law that are required to enable or
facilitate the design, financing, and construction of an in-
state natural gas pipeline so that the in- state natural gas
pipeline is operational before 2016; and providing for an
effective date." [Before the committee was Version U, labeled
27-LS0075\U, Bullock, 1/19/12, adopted as the working document
on 2/6/12.]
The committee took an at-ease from 1:57 p.m. to 1:58 p.m.
1:58:44 PM
RENA DELBRIDGE, Staff, Representative Mike Hawker, Alaska State
Legislature, on behalf of Representative Hawker, sponsor, noted
that committee members posed a number of questions about HB 9 at
the committee hearing on 2/6/12. She directed attention to
these questions and the answers provided in a [2/8/12]
memorandum [from Representative Chenault, prime sponsor,]
included in the committee packet. She addressed the first
question, paraphrasing from the memorandum, written as follows
[original punctuation provided]:
1. Provide a comparison of the authorities granted to the
Alaska Gasline Development Corporation (AGDC) in HB 9
with those granted under the Alaska Gasline Inducement
Act (AGIA), and note which, if any, are authorities
unique to the AGDC and AGIA projects.
MS. DELBRIDGE prefaced that the memorandum's answer is a very
cursory comparison and should not be construed as a
comprehensive legal analysis of AGIA and HB 9. She related that
should the committee want such an analysis, the sponsor suggests
a review from parties that are expert in AGIA and applicable
laws. She paraphrased the memorandum's answer, written as
follows [original punctuation provided]:
In a broad sense, AGIA and AGDC are similar in that
both projects may exercise eminent domain; AGDC acts
as a coordinator of an instate project much as the
State Pipeline Coordinator's Office serves as such for
an AGIA project; both projects enjoy expedited
permitting processes; both provide confidentiality
protecting commercial negotiations or proprietary work
products; and both limit judicial review claims in an
attempt to prevent unwarranted delays in state-
sanctioned projects.
2:00:18 PM
REPRESENTATIVE KAWASAKI inquired whether Representative Hawker,
as co-sponsor of the bill, has ever requested a specific legal
analysis of whether HB 9 and AGIA are compatible and, if not, is
that something the co-sponsor or the committee would do.
MS. DELBRIDGE offered her belief that the question posed on
2/6/12 was not compatibility but what HB 9 offers in comparison
to what AGIA offers. Compatibility, such as concerns about
violating the half a billion cubic feet a day limit under AGIA
with an in-state line, is already addressed in House Bill 369
that prohibits AGDC from pursuing any project that is in
violation of AGIA.
2:01:11 PM
MS. DELBRIDGE moved to the second question and answer,
paraphrasing from the memorandum, written as follows [original
punctuation provided]:
2. Does HB 9 contain a date or similar benchmark
requiring AGDC to return to the Legislature with its
findings on planning and developing an instate
gasline?
HB 9 does not specifically include a date certain by
which AGDC must return to the Legislature. However,
AGDC is subject to the Executive Budget Act; as a
public corporation, AGDC is unable to spend funds
without an appropriation. Without a significant
appropriation, AGDC would lack the means to sanction a
project and proceed with construction.
MS. DELBRIDGE said there is every expectation that at the point
of sanctioning AGDC would return to the legislature with that
funding request because it would be hundreds of millions, if not
over a billion, dollars.
2:02:08 PM
CO-CHAIR SEATON understood that AGDC could not sign contracts
that obligate the state without the appropriation from, and the
approval of, the legislature.
MS. DELBRIDGE deferred to Mr. Dubler.
JOE DUBLER, Vice President, Alaska Gasline Development
Corporation (AGDC), Director of Finance, Alaska Housing Finance
Corporation, Department of Revenue (DOR), explained that all the
contracts that AGDC enters into, similar to other state
agencies, are subject to appropriation. To the extent there is
no appropriation, the contract expires.
MS. DELBRIDGE pointed out that House Bill 369, passed in 2010,
had a date certain at which AGDC was to deliver a project plan
to the legislature and that was done on schedule on July 1,
2011. Additionally, AGDC has been providing monthly status
reports to the legislature so there is a continuing process of
keeping tabs on that work and the status of that work.
2:03:07 PM
MS. DELBRIDGE continued paraphrasing from the memorandum,
turning to question and answer 3, written as follows [original
punctuation provided]:
3. HB 9 grants AGDC the ability to use eminent domain.
What does this authority do in practical terms?
Eminent domain is a power granted under 09.55.240 (see
attached), allowing eminent domain to be exercised for
most public uses, including uses authorized by
governments and, per 09.55.240(a)(13), "for the
location of pipelines for gathering, transmitting,
transporting, storing, or delivering natural or
artificial gas or oil or any liquid or gaseous
hydrocarbons, including, but not limited to, pumping
stations, terminals, storage tanks, or reservoirs, and
related installations."
HB 9, in Section 1, Lines 15-16, explicitly ensures
AGDC will be able to exercise this power as provided
in 09.55.240-460. This legislation does not expand
eminent domain.
REPRESENTATIVE GARDNER asked why it is necessary to explicitly
ensure.
MS. DELBRIDGE understood there are occasional legal questions
brought as to what entity specifically in a given circumstance
can exercise eminent domain.
2:04:50 PM
MS. DELBRIDGE commenced paraphrasing from the memorandum, citing
questions and answers 4 and 5, written as follows [original
punctuation provided]:
4. Section 4, lines 24-25 of HB 9 address duplication of
state efforts. Has duplication of efforts, such as
ownership of studies, been an issue, or is it
anticipated to be an issue?
AGDC is working diligently to avoid duplicating work
funded by other state money. The sponsors believe
efficiency with state resources is important, and will
offer an amendment to this paragraph retracting the
deletion, but keeping the change replacing the "Joint
In-State Gasline Development Team" with "Alaska
Gasline development Corporation."
5. Would waiving costs or rental fees for a lease or
right-of-way provided by the Department of Natural
Resources require a fiscal note? If not, how would the
costs incurred by the agency be covered?
Generally, the sponsors suggest that a fiscal note
should come from the department affected. However,
AGDC is now paying the state Department of Natural
Resources $189,000 per year for a right-of-way lease;
Section 6 would eliminate or reduce that charge.
Additionally, as discussed in committee on Feb. 6, the
sponsors are developing an amendment to Section 6(g).
2:06:40 PM
CO-CHAIR SEATON said the question on 2/6/12 was whether AGDC
could obligate DNR and other departments to prioritize their
budgets without going through a budgetary process and have to
absorb the costs out of their existing programs. He requested
further clarification.
MR. DUBLER responded that the forthcoming amendment will modify
this so it is not gratis and will be at usual and customary
charges. Regarding expediency, he related that the sponsors are
standing by the expediency issue whereby the individual
departments will prioritize this project ahead of other projects
to the extent it is necessary to complete it on a timely basis
[see 2:27:09 timestamp for a correction by Mr. Dubler]. In
further response to the co-chair, Mr. Dubler said the
forthcoming amendment will modify the part about it being at the
department's cost to being that AGDC will pay usual and
customary charges for the services and/or products that it
receives.
2:08:26 PM
MS. DELBRIDGE returned to the memorandum, paraphrasing question
and answer 6, written as follows [original punctuation
provided]:
6. Section 6 (e) of HB 9 allows AGDC to enter into
confidentiality agreements as needed to acquire or
provide information. Information that falls under such
an agreement is not subject to disclosure under AS
40.25.110. Is this confidentiality provision also
contained in AGIA?
While AGIA has some confidentiality provisions, the
primary function is to protect proprietary information
of private interests, provided to the state for
informational and not decision-making purposes. Under
AGDC, the protection primarily becomes one of
protecting AGDC and private parties it engages with in
commercial negotiations and other matters. The role
of the state is different under AGIA than under AGDC.
2:09:57 PM
CO-CHAIR SEATON recalled that this became a huge issue during
the Alaska Stranded Gas Development Act when the legislature was
unable to find out any of the operating provisions with the
operating company. He asked whether this same problem would
occur under HB 9, whereby the legislature would be asked to
sanction something that it is unable to find out about.
MR. DUBLER replied that the confidentiality discussion talked
about here is imperative. For example, AGDC is currently
attempting to work with some producer companies on alignment on
issues of gas composition. However, the companies will not
share any information with AGDC because they are concerned that
that information will become public; so right now AGDC is
shooting in the dark. Referencing question 4 about sharing of
information and duplicating efforts, he said that for this
summer's field work AGDC is focusing its efforts from Fairbanks
down so that if there is an alignment with the AGIA and AGDC
projects, AGDC will not be duplicating any efforts above
Fairbanks where the AGIA efforts are focused. The proposed
confidentiality would prevent people from being able to request
information provided by companies to AGDC for the project that
the companies would not otherwise be obligated to provide to the
public.
2:12:01 PM
CO-CHAIR SEATON said he appreciates and does not have a problem
with that. However, he is asking whether this provision is
structured so broadly that it would allow the confidentiality
agreements of an operating entity to be withheld from the
legislature, although AGDC would know. For example, the
legislature would be unable to find out the operating conditions
and veto rights of the operating entity. He cautioned that if
HB 9 sets up the same controversial structure as was in the
Alaska Stranded Gas Development Act it will be problematic for
moving the bill through the system.
MR. DUBLER answered that he is unfamiliar with the Alaska
Stranded Gas Development Act and its confidentiality provisions,
so he cannot compare what AGDC is asking for here with what was
in that bill. What AGDC is asking for here is similar to what
exists under AGIA. In AGIA the state is the licensor and
TransCanada the licensee, and he offered his belief that the
agreements between the two parties are subject to
confidentiality agreements.
CO-CHAIR SEATON stated that this question will need resolution
from Legislative Legal and Research Services or the sponsor.
MR. DUBLER agreed to get an answer to the committee.
2:14:17 PM
MS. DELBRIDGE continued her review of the memorandum,
paraphrasing question and answer 7, written as follows [original
punctuation provided]:
7. Is there a provision, similar to one in AGIA, that
requires a body of work developed under AGDC be
remanded to the state in the event a project is not
sanctioned or is unable to attract sufficient
customers?
As a state corporation, all work product and assets
developed by AGDC belong to the state. Depending on
the circumstances, AGIA provides for the transfer of
work by the private-sector licensee to the state
either at no cost to the state, or at some level of
cost, per AS 43.90.200: ...
CO-CHAIR SEATON surmised that the state would have the product
and if the project did not go forward the confidentiality
agreements would not prevent the state or the legislature from
having that information.
MS. DELBRIDGE agreed to check on that in conjunction with the
co-chair's previous question.
2:15:26 PM
MS. DELBRIDGE paraphrased question and answer 8, written in the
memorandum as follows [original punctuation provided]:
8. The Alaska Natural Gas Development Authority has
engaged in work related to a right-of-way between
Glennallen and Palmer. Is there an asset, such as a
right-of-way lease, and if so, will that lease be
transferred to AGDC upon passage of HB 9?
Alaska Natural Gas Development Authority assets remain
with the Authority. However, under HB 9, the AHFC
Board, as directors of ANGDA and AGDC, would have the
ability to transfer assets from one subsidiary to
another.
MS. DELBRIDGE offered her belief that the conditional lease held
by Alaska Natural Gas Development Authority (ANGDA) requires
commissioner approval in order to transfer. She continued
paraphrasing the rest of the memorandum's answer, written as
follows [original punctuation provided]:
The right-of-way lease ANGDA secured is conditional,
and as such, may require significant additional time
and investment to upgrade to an unconditional lease.
Consultation with the State Pipeline Coordinator's
Office (SPCO) clarified that a conditional lease does
not grant an interest in state land, but is a
'reservation' allowing 10 years to convert to a non-
conditional lease. A conditional lease cannot be
renewed. In further clarification, ANGDA's conditional
lease does not technically follow the Richardson
Highway, but begins in Palmer and terminates in
Glennallen. ANGDA began work on a further segment
between Glennallen and Delta Junction, but to the
SPCO's knowledge, never acquired the right to state
land for that segment.
2:17:30 PM
CO-CHAIR SEATON noted that ANGDA is online and will respond to
the question of whether there is or is not a right-of-way.
REPRESENTATIVE HERRON inquired how many of the conditions of the
conditional lease have been met and satisfied. In response to
Co-Chair Seaton, he agreed to pose this question to ANGDA.
2:18:18 PM
CO-CHAIR FEIGE, in regard to ANGDA's work on the conditional
right-of-way lease between Palmer and Glennallen, asked what
would be the value of letting that work be abandoned. He said
that if a bullet line to Anchorage went in, it seems that a
right-of-way to connect the electrical grid to a source of
cheaper electrical generating energy would be a reasonable
benefit to the people of that region. Glennallen, Copper
Center, Kenny Lake, Chitina, and Valdez are all on the same
electrical grid, he continued, and they pay a significant
premium to what is paid by the folks in the Anchorage Bowl.
MS. DELBRIDGE replied that she does not believe there is any
intent to abandon the right-of-way that ANGDA has acquired. She
said she believes that it is seen as an asset that AGDC and
ANGDA together under the AHFC board can further build on and
make use of.
MR. DUBLER added that there are at least 25 conditions that have
to be met and those are project plans that have to be submitted
for review and approval to the Department of Natural Resources
(DNR). A significant amount of work needs to be done to get this
to a lease that would actually be useful in terms of putting in
a pipeline, but some work has been done and that would not be
abandoned. He offered his belief that this conditional lease is
in effect until July 2016, so four years are left to complete
all of the requirements that DNR has put on ANGDA to complete
this lease.
2:20:08 PM
CO-CHAIR FEIGE noted that AGDC could be fully engaged in
developing and building a pipeline to the Anchorage Bowl in 2016
when this conditional right-of-way expires. Assuming HB 9
becomes law, he asked whether it would be prudent and whether
AGDC would pursue extension of that conditional right-of-way to
preserve it for future use, given a significant amount of work
has been done.
MR. DUBLER said he is not sure he would describe the work as a
significant amount. While he does not know how much work has
been done, he can see how much has not been done by what is in
the conditions in the lease. He said his recollection of
reading the lease is that it is not subject to extension, but to
the extent that there is a lease in place now he would hope that
the commissioner of DNR would be able to issue a new one that
replicates what is existing. In further response to Co-Chair
Feige, Mr. Dubler agreed that AGDC would consult the legislature
if it is found that the conditional lease needs to be extended.
2:21:23 PM
MS. DELBRIDGE moved to question and answer 9, written in the
memorandum as follows [original punctuation provided]:
9. What are the potential impacts to the state and local
governments if state resources, such as land, water
and gravel as specified in Section 6, of HB 9, are
provided to an AGDC project at no cost and the gasline
includes commercial gas exports?
The sponsors expect an amendment under development to
Section 6, (g), of HB 9 to address this concern.
MS. DELBRIDGE recalled the committee's concern that the state
could end up subsidizing commercial gas exports, and assured
members that it is not the intent of the sponsors to create that
sort of subsidy.
2:22:07 PM
MS. DELBRIDGE addressed question and answer 10, written in the
memorandum as follows [original punctuation provided]:
10. Regarding HB9 Section 12, what are the existing
timelines for judicial review?
Judicial review of decisions by commissioners on
right-of-way leases is already limited in statute: ...
MS. DELBRIDGE noted that this limited judicial review is in AS
38.35.200, included in the memorandum. She paraphrased the rest
of the answer in the memorandum, written as follows [original
punctuation provided]:
Sections 12 and 13 in HB 9 work together to add a new
subsection (c) incorporating the judicial review process
created for the Trans-Alaska Pipeline System. Judicial
review is already statutorily limited to 60 days per the
Right-of-Way Leasing Act (AS 38.35.200); the new Section 13
(c) defines the jurisdiction for a claim and prohibits a
court from issuing injunctive relief that would delay
project progress while a claim is heard. Section 13 (c)
also specifies a 60-day window for claims to be filed
alleging denial of rights under the state Constitution.
MR. DUBLER added that this provision is not intended to take
away the rights of citizens to object to this project. It is
meant to push the objection to the beginning of the project
rather than when a billion dollars' worth of pipe is ready to go
into the ground and a claim is suddenly filed that stops all
work for a year and a half while the issue is resolved. The
intent is to resolve those issues up front and not wait until it
is time to dig the ditch.
CO-CHAIR SEATON said the committee appreciates that.
2:23:56 PM
MS. DELBRIDGE paraphrased questions and answers 11-12, written
in the memorandum as follows [original punctuation provided]:
11. What is the anticipated impact to municipalities
associated with Section 6, HB 9, exempting an AGDC
project from state and municipal property taxes during
construction? What are the anticipated impacts to
municipalities during a pipeline construction phase?
At this point, without final project engineering and
costs, it is difficult to determine the potential
impacts. Additionally, municipal taxes could change
between now and a taxable period. The sponsors have
requested a legal opinion on what pipeline project
assets and activities are taxable, and will provide
additional information to the committee as it becomes
available.
12. Provide an AGDC analysis of international fiscal
systems consultant Pedro [van Meurs'] assessment of an
Alaska gas export project, as presented in a seminar
to legislators in December 2011.
This request will take additional time, as AGDC was
not present at [van Meurs'] presentation and has no
access to the assumptions that went into the original
analysis.
2:25:28 PM
MS. DELBRIDGE paraphrased question and answer 13, written in the
memorandum as follows [original punctuation provided]:
13. Be prepared to discuss Section 25 of HB 9, exempting
from Regulatory Commission of Alaska review any
agreement or amendment to an agreement entered into by
AGDC with a public utility, for as long as debt is
outstanding on an AGDC pipeline.
AGDC has indicated it is prepared to discuss this at
the committee's pleasure.
CO-CHAIR SEATON said the committee will leave that at this time
because there are no commissioners available and no one from the
Regulatory Commission of Alaska (RCA) available. He offered his
appreciation for the answers provided.
2:27:09 PM
MR. DUBLER corrected his earlier statement that under HB 9 AGDC
would have the highest priority in obtaining permits from the
state's agencies; rather, AGDC would be second to AGIA.
CO-CHAIR SEATON inquired whether Mr. Dubler is representing the
administration's or AGDC's position on HB 9.
MR. DUBLER replied he is just answering questions on the bill
and said the governor is not sponsoring HB 9. He offered his
belief that the governor's position is to let the legislative
process work and if HB 9 passes the governor will consider the
bill at that time.
CO-CHAIR SEATON opened public testimony on HB 9.
2:29:27 PM
KIRSTEN SIKORA, Acting CEO, Alaska Natural Gas Development
Authority (ANGDA), Office of the Commissioner, Department of
Revenue (DOR), testified as follows:
For the past eight and a half years ANGDA has focused
on its mission to bring the most affordable energy to
Alaskan consumers. ANGDA has been flexible and
transparent in all of our undertakings. Over the
years ANGDA has participated in several projects that
are noteworthy.
ANGDA has secured a conditional right-of-way between
Palmer and Glennallen. ANGDA completed the required
wetlands study, conceptual design, and the route
delineation to the draft EIS [environmental impact
statement] stage on a bi-directional pipeline between
the Beluga Field and Fairbanks. ANGDA secured status
as a shipper in TransCanada's Alaska Pipeline Project
[APP], which will provide the lowest gas pipeline
tariff rates possible to the Alaskan consumers.
ANGDA's participation in the APP open season has
effectively secured a 30 percent discount over other
entrants that may come into the project at a future
date. ANGDA worked with private sector companies,
Native corporations, and rural communities on the
Alaska propane project. This project is an excellent
example of how government and the private sector can
work together to provide energy solutions and local
economic impacts. As part of our statewide view,
ANGDA has provided delivery options and other
logistical considerations to deliver the clean-burning
alternative fuels to those residents in Alaska that
will not benefit from an in-state gasline.
In closing, ANGDA's body of work is good and valuable
and can benefit the State of Alaska and its consumers.
Governor Parnell has stated that projects will align.
ANGDA's spur line right-of-way and our status in the
open season will greatly complement AGIA. Again, I
thank you for the opportunity to share just a snippet
of what ANGDA has accomplished over the years. And,
as a mother of three, I truly appreciate the
opportunity to be a part of this monumental decision
for our future generations.
2:32:05 PM
CO-CHAIR FEIGE inquired about the approximate value on the work
for the conditional right-of-way between Palmer and Glennallen.
MS. SIKORA replied that she does not have an exact value on the
segment from Glennallen to Palmer, but said she will provide
that information by tomorrow. In further response, she said it
would be roughly $6 million.
2:32:41 PM
REPRESENTATIVE KAWASAKI said he is not yet sure what he thinks
of HB 9. He related that a 1/30/12 letter from Representatives
Chenault and Hawker to the ANGDA Board of Directors states the
sponsors' belief that ANGDA's statutory language is overly
prescriptive and limits the scope of mission that is critical to
adapt to changing markets. He requested Ms. Sikora to address
this.
MS. SIKORA deferred to ANGDA's chairman [Mr. Scott Heyworth],
saying that it is a policy issue the board can speak to.
CO-CHAIR SEATON requested Mr. Heyworth to present his testimony
first and then answer Representative Kawasaki's question.
2:33:50 PM
SCOTT HEYWORTH, Chairman, Board of Directors, Alaska Natural Gas
Development Authority (ANGDA), Office of the Commissioner,
Department of Revenue (DOR), cautioned that the committee is
being asked to take a very risky political action that could
close the door on more economically viable gas projects in the
state. He said HB 9 would abolish a citizens' initiative that
passed with over 63 percent approval 10 years ago. He assured
the committee that ANGDA has always kept the interest of Alaskan
consumers at the forefront.
MR. HEYWORTH said several aspects of the bill cause him specific
concern. Regarding the provision that would eliminate RCA
oversight, he asked who would protect the consumers' interest in
a tariff that may prove highly inefficient to consumers.
Regarding Section 18 that would repeal and re-enact AS 41.41.020
dealing with the authority's governing body, he said the Alaska
Housing Finance Corporation (AHFC) is not the appropriate agency
to oversee ANGDA because it is an inherent conflict of interest
between shipper and pipeline builder. Both the Alaska Pipeline
Project and Denali-The Alaska Gas Pipeline project went to great
extents to keep a distance between the commercial team, the
pipeline builders, and the potential shippers. While the AHFC
board has experience in financial transactions and housing
expertise, it has none in energy or gaslines. He stressed that
ANGDA has participated in the Alaska Pipeline Project as a
shipper, and therefore cannot turn over its confidential
agreements to AGDC unless the parties it is working with agree.
2:36:14 PM
MR. HEYWORTH, continuing with his specific concerns, stated that
Section 27, which proposes to add a new subsection to the
exemptions in AS 42.05.711, would leave no check and balance in
the mega-project development to protect the public interest. It
would give carte blanche to the AGDC, with AGDC becoming the
self-regulator, developer, and shipper of a pipeline in Alaska
and an unregulated State of Alaska monopoly. He said ANGDA
would never have looked for these types of changes in its
mission, statutes, or exemptions from regulatory oversight.
Regarding Section 31, [which would repeal Section 1 of Ballot
Measure No. 3], he strongly suggested that HB 9 receive a great
deal of scrutiny during the legislative session, given that
ANGDA was created by the will of the people. The people of
Alaska are counting on legislators to question whether HB 9 is
in the best interests of all Alaskans.
MR. HEYWORTH urged committee members to consider whether the
needs of the consumers are being placed first, whether it is a
viable project without complete state subsidies, and whether the
project is the right size and going to the right location, all
of which has yet to be determined. He asked where the
industrial anchor tenants have weighed in; where do the
producers and industrial users want to go - Valdez or Cook
Inlet; and whether this project is the right size.
2:38:06 PM
REPRESENTATIVE KAWASAKI reiterated his question regarding the
1/30/12 letter from Representatives Chenault and Hawker.
MR. HEYWORTH deferred to Ms. Sikora.
MS. SIKORA replied that in the past ANGDA has demonstrated it is
always flexible and open to changes. She said she does not
believe that at the time this authority was given to ANGDA under
AS 41.41 it was overly prescriptive. She added that ANGDA looks
forward to working with the legislature and the administration
on the best way forward to provide Alaska's consumers with the
lowest cost energy.
REPRESENTATIVE HERRON reiterated his earlier question about
whether all of the conditions in the conditional lease have been
met and satisfied.
MS. SIKORA referenced Co-Chair Feige's statement that the
conditional right-of-way could be of value and would be of value
to the people of Southcentral. Saying she did not have a line-
item description of the work that has been completed, she
deferred to ANGDA's permitting coordinator, Ms. Kaye Laughlin,
to provide further information.
2:40:15 PM
KAYE LAUGHLIN, Permitting Coordinator, Alaska Natural Gas
Development Authority (ANGDA), Office of the Commissioner,
Department of Revenue (DOR), explained that she has been
involved in the spur line, which is the conditional right-of-way
pipeline lease referenced earlier. She clarified that the
conditional spur line lease is actually part of the overall
Beluga to Fairbanks pipeline right-of-way lease application.
She noted that the state pipeline coordinator was not involved
in the federal EIS review that got to the draft EIS stage for
the Beluga to Fairbanks pipeline project. She said there are no
conditions yet because ANGDA does not have any permits that
would carry conditions.
MS. LAUGHLIN stated that a great deal of work has been done by
ANGDA and outlined the work that has already been done by ANGDA:
completion of conceptual pipeline system design; completion of
land ownership surveys; completion of wetlands delineation;
cultural resources clearances; 360 degree immersive video;
earthquake studies; the project plans required for the EIS and
future permits; access roads; materials sites; cultural review
by the State Historic Preservation Officer (SHPO); government-
to-government involvement meetings; the numbers of culverts and
power lines along the route; assessments of wildlife, flora,
fauna, threatened and endangered species, invasive weeds,
migratory waterfowl, and air quality; and seismic activity
analysis.
MS. LAUGHLIN specified that this work was done for ANGDA's
preferred pipeline route, as well as for the five alternative
routes, and this work is in ANGDA's custody. Over 90 percent of
the existing route is within existing rights-of-way, she said.
Additionally, ANGDA has done traffic counts, anadromous streams,
and distance and compatibility with the Trans-Alaska Pipeline
System (TAPS).
2:42:53 PM
REPRESENTATIVE HERRON requested that an explanation of the value
of the conditional right-of way be compiled and given to the
committee co-chairs. He further requested that someone from the
administration explain conditional and non-conditional leases.
CO-CHAIR SEATON directed attention to the 2/7/12, 4:19 p.m., e-
mail from Ms. Sikora in the committee packet, which states that
the right-of-way valuation for the full pipeline length from
Palmer to Delta Junction is valued at $12,522,943 in 2011
dollars. He said that Co-Chair Feige's question was about the
value of a segment of that right-of-way and when that breakdown
is received from ANGDA the co-chairs will forward it to
committee members.
CO-CHAIR SEATON posed the question as to whether there is a
conflict if ANGDA is a shipper and requested that a detailed
answer be provided to the committee.
2:46:04 PM
CORRIE YOUNG, reminded committee members that ANGDA was
established by an overwhelming vote of confidence by the people
of Alaska. [The initiative] passed in every district in the
state, she said. Therefore, HB 9 would be abolishing something
that was created by the will of the people who spoke
overwhelmingly that an entity is needed solely for Alaskans to
produce North Slope natural gas and propane for the citizens of
today and of the future.
CO-CHAIR SEATON clarified that HB 9 would not abolish ANGDA, but
would roll together the structures to create a pipeline and to
move that forward. He said he is not commenting on the bill one
way or another, just explaining that the bill changes the format
somewhat while keeping the goal of an in-state gas project and
trying to move that project forward.
2:48:38 PM
JAMES FIELDS stated that he is the school board president for
the Copper River School District as well as a business owner and
parent. He stressed that gas is needed in his area now; the
area's residents cannot wait for something to get from Palmer to
Glennallen and then on over to the Copper River Basin. Despite
the government, highway, and other infrastructure in his area,
he continued, school enrollment has declined 36 percent over the
last nine years, which is huge and shows what the population is
doing in the region. People moved to the region when fuel oil
was 50 cents a gallon, not when it was $4 per gallon. He
postulated that Anchorage has not seen as big a price increase
due to its larger population, but said the residents of his
community are citizens like the people in Anchorage are.
MR. FIELDS related that ANGDA knocked on his door five years ago
and he and others were excited when that happened; however,
since then it has been a complete roller coaster of whether a
pipeline is happening. He said he is opposed to HB 9 and has
not met anyone in the Copper River Basin who is for the bill.
He urged the committee to do what is the best long-term solution
for the whole state, not a short-term solution for the biggest
population area. A long-term solution will count in matters of
tourism, he said; if the Interior goes away, then only the coast
will have tourism. He said people of the Copper River Basin are
listening and aware of this issue, but they are busy trying to
make ends meet when it is 50 below and there is no fuel subsidy.
2:51:17 PM
CO-CHAIR SEATON presumed that Mr. Fields is in favor of an in-
state gasline and in-state gas supplies to communities, but that
Mr. Fields is fearful of the proposed route that would go down
the Parks Highway.
MR. FIELDS responded that that was the case originally.
However, after listening to the other testimony he is now
fearful of the whole idea because it takes away the mandate of
the people and takes away certain rights. He said he is
therefore fearful of both and he thinks that ANGDA should stay
in place and go forward as the people wanted it to.
2:52:16 PM
MERRICK PEIRCE testified that he has spent the last half decade
working to see the voter-mandated All-Alaska Gasline built. He
noted that he is a board member and CFO of Alaska Gasline Port
Authority (AGPA), but that his comments today are his own. He
said something very important is missing from the presentations
he has heard today as well as on 2/6/12. To explain, he
presented a scenario in which he brings forth a piece of
legislation that would do everything HB 9 proposes, but instead
of building a gas pipeline his legislation would build a multi-
billion dollar water pipeline to transport ocean water from the
Arctic Ocean to Cook Inlet. He predicted that committee members
would respond to his proposed legislation by saying that there
is plenty of water in Cook Inlet and a water pipeline is a
pointless costly boondoggle. He said this absurd scenario helps
illustrate the most fundamental of the many problems with HB 9,
which is: Why would Alaska spend billions to take gas from
Prudhoe Bay to Cook Inlet when there are trillions of cubic feet
of Cook Inlet gas that can be delivered to customers at a
fraction of the cost of the bullet line?
MR. PEIRCE maintained that to take HB 9 seriously, committee
members would have to believe that the U.S. Geological Survey
(USGS), other agencies, and various gas companies are all wrong
in their belief that there are trillions of cubic feet of gas in
Cook Inlet. He respectfully suggested that the committee invite
these experts to explain why they believe there are trillions of
cubic feet of gas under Cook Inlet and to explain their concerns
about marketing that gas.
2:54:30 PM
MR. PEIRCE said the real question is what to do with all the gas
in Cook Inlet. He related that the USGS believes 19 trillion
cubic feet of gas are under Cook Inlet, in 2004 the U.S.
Department of Energy estimated 21-25 trillion cubic feet,
Buccaneer Energy has told him it thinks 16 trillion cubic feet
are likely, and Escopeta recently found 3.5 trillion cubic feet
in its first well in the Kitchen Lights Unit. Therefore, he
asserted, this question is so fundamental that it must be
addressed for the evaluation of HB 9 to have any credibility.
He pointed out that one trillion cubic feet of gas would be an
11-year supply for the Railbelt at its current usage of 240
million cubic feet per day. Ten trillion cubic feet, about half
of what USGS believes exists, would be a supply of 111 years.
The 3.5 trillion cubic feet in the Kitchen Lights Unit could be
as much as a 40-year supply for the Railbelt.
2:55:22 PM
MR. PEIRCE argued that the bullet line, also known as the
pipeline to poverty, is not what Alaska voters asked for because
it follows the wrong route and bypasses Fairbanks, North Pole,
the state's critical military bases, and the vast mineral
resource potential along the Richardson Highway corridor. It
only offers two gas take-off points for the entire state and has
no economy of scale, so it will not deliver affordable energy to
Alaskans. He said it is known that the cost of gas - based upon
current usage and no Cook Inlet supply - would be over $20
freight on board (FOB) Anchorage, and offers no new substantial
revenue to Alaska. This AGDC project is a disaster, he charged,
which is why so many entities that have carefully looked at this
project are opposed to it, among them the City of Valdez, City
of North Pole, Fairbanks North Star Borough Assembly, and the
Alaska Municipal League. He added that the league voted nearly
unanimously in favor of building the All-Alaska Gasline and that
vote was after hearing from AGDC, AGPA, and ANGDA. He said he
is really disappointed that the legislators sponsoring HB 9 took
office by the will of the people, but once elected worked to
subvert the will of the people that was expressed in the 2002
voter mandate. He urged defeat of HB 9.
2:57:21 PM
CO-CHAIR SEATON closed public testimony after ascertaining no
one else wished to testify. He noted there would be invited
testimony from the RCA and possibly others at a later date.
[HB 9 was held over.]
2:58:09 PM
ADJOURNMENT
There being no further business before the committee, the House
Resources Standing Committee meeting was adjourned at 2:58 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 9 Version U.pdf |
HRES 2/6/2012 1:00:00 PM HRES 2/8/2012 1:00:00 PM HRES 2/10/2012 1:00:00 PM HRES 2/24/2012 1:00:00 PM HRES 2/27/2012 1:00:00 PM |
HB 9 |
| HB 9 Sectional, version U.pdf |
HRES 2/6/2012 1:00:00 PM HRES 2/8/2012 1:00:00 PM HRES 2/10/2012 1:00:00 PM HRES 2/24/2012 1:00:00 PM HRES 2/27/2012 1:00:00 PM |
HB 9 |
| HB 9 Sponsor Statement- version U.pdf |
HRES 2/6/2012 1:00:00 PM HRES 2/8/2012 1:00:00 PM HRES 2/10/2012 1:00:00 PM HRES 2/24/2012 1:00:00 PM |
HB 9 |
| Amendment1-RES.pdf |
HRES 2/6/2012 1:00:00 PM HRES 2/8/2012 1:00:00 PM HRES 2/10/2012 1:00:00 PM |
HB 9 |
| Amendment 2-RES.pdf |
HRES 2/6/2012 1:00:00 PM HRES 2/8/2012 1:00:00 PM HRES 2/10/2012 1:00:00 PM |
HB 9 |
| HB 9.pdf |
HRES 2/6/2012 1:00:00 PM HRES 2/8/2012 1:00:00 PM HRES 2/10/2012 1:00:00 PM HRES 2/24/2012 1:00:00 PM |
HB 9 |
| HB 9 Fact Sheet.docx |
HRES 2/6/2012 1:00:00 PM HRES 2/8/2012 1:00:00 PM HRES 2/10/2012 1:00:00 PM HRES 2/24/2012 1:00:00 PM |
HB 9 |
| AGDC Legislative Recommendations.pdf |
HRES 2/6/2012 1:00:00 PM HRES 2/8/2012 1:00:00 PM HRES 2/10/2012 1:00:00 PM |
HB 9 |
| 2002 Ballot Measure 3, Section 1.docx |
HRES 2/6/2012 1:00:00 PM HRES 2/8/2012 1:00:00 PM |
HB 9 |
| HB 369.pdf |
HRES 2/6/2012 1:00:00 PM HRES 2/8/2012 1:00:00 PM HRES 2/10/2012 1:00:00 PM |
HB 9 |
| HJR 29.pdf |
HRES 2/8/2012 1:00:00 PM |
|
| HJR 29 Sponsor Statement.pdf |
HRES 2/8/2012 1:00:00 PM |
|
| HJR 29 BLM Legacy Wells.pdf |
HRES 2/8/2012 1:00:00 PM |
|
| HJR 29 BLM Legacy Well Pictures.pdf |
HRES 2/8/2012 1:00:00 PM |
|
| HJR 29 AOGCC - legacy well non-compliance.pdf |
HRES 2/8/2012 1:00:00 PM |
|
| HJR 29 AOGCC - legacy well white paper.pdf |
HRES 2/8/2012 1:00:00 PM |
|
| HJR 29 Support Letter RDC.pdf |
HRES 2/8/2012 1:00:00 PM |
|
| ANGDA - H Res Comm 02812.pdf |
HRES 2/8/2012 1:00:00 PM HRES 2/10/2012 1:00:00 PM |
HB 9 |
| HB 9 ANGDA e-mail.pdf |
HRES 2/8/2012 1:00:00 PM HRES 2/10/2012 1:00:00 PM |
HB 9 |
| Executed ROW Lease 072006.pdf |
HRES 2/8/2012 1:00:00 PM HRES 2/10/2012 1:00:00 PM |
HB 9 |
| HJR 29 email support Mayor Hugo 02072012.pdf |
HRES 2/8/2012 1:00:00 PM |
HJR 29 |
| Subsection G-New.pdf |
HRES 2/8/2012 1:00:00 PM |
HB 9 |
| Avoid Duplications.pdf |
HRES 2/8/2012 1:00:00 PM |
HB 9 |
| HRES Response.pdf |
HRES 2/8/2012 1:00:00 PM HRES 2/10/2012 1:00:00 PM |
HB 9 |