Legislature(2019 - 2020)SENATE FINANCE 532
01/24/2019 09:00 AM Senate FINANCE
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| Start | |
| Presenation: Alaska Oil and Gas Conservation Commission | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
SENATE FINANCE COMMITTEE
January 24, 2019
9:01 a.m.
9:01:35 AM
CALL TO ORDER
Co-Chair Stedman called the Senate Finance Committee
meeting to order at 9:01 a.m.
MEMBERS PRESENT
Senator Natasha von Imhof, Co-Chair
Senator Bert Stedman, Co-Chair
Senator Click Bishop
Senator Lyman Hoffman
Senator Peter Micciche
Senator Donny Olson
Senator Mike Shower
Senator Bill Wielechowski
Senator David Wilson
MEMBERS ABSENT
None
ALSO PRESENT
Senator Cathy Giessel; Daniel T. Seamount, Jr.,
Commissioner, Alaska Oil and Gas Conservation Commission,
Department of Administration; Cathy Foerster, Engineering
Commissioner, Alaska Oil and Gas Conservation Commission,
Department of Administration.
SUMMARY
PRESENTATION: ALASKA OIL and GAS CONSERVATION COMMISSION
Co-Chair Stedman noted that Senate President Cathy Giessel
was in attendance.
^PRESENATION: ALASKA OIL and GAS CONSERVATION COMMISSION
9:02:12 AM
Co-Chair Stedman expressed that the subject of the
presentation would be a broad reaching information hearing.
He intended to focus on the subject matter in front of the
committee. He thought the presentation would provide
background for work being done by oil and gas consultants
in the state. He emphasized to those presenting the
importance of defining concepts and avoiding acronyms for
greater understanding for the listening public.
Co-Chair Stedman commented on the common topic of inquiry
regarding a state gas line. He stressed that the public
understanding of oil and gas issues was important.
9:05:18 AM
DANIEL T. SEAMOUNT, JR., COMMISSIONER, ALASKA OIL AND GAS
CONSERVATION COMMISSION, DEPARTMENT OF ADMINISTRATION,
showed the presentation "Alaska Oil and Gas Conservation
Commission (AOGCC)," (copy on file). He discussed the role
of AOGCC as well as its duties pertaining to North Slope
gas sales. He furthered that he wanted to provide
statistics regarding production, development, exploration
and potential new discoveries.
Commissioner Seamount directed attention to hydraulic
fracturing in Alaska, the role of AOGCC in North Slope gas
sales, and allowable gas offtake for Prudhoe Bay and Point
Thomson field. He highlighted two orders the agency made on
gas offtake on Prudhoe Bay and Point Thomson. He invited
members to read through the information and contact AOGCC
with any questions.
Commissioner Seamount showed the first page of the
presentation, which showed a photo of the AOGCC office
location. He talked about the Southeast Alaska communities
he visited in the recent past.
9:09:33 AM
Commissioner Seamount explained that AOGCC was an
independent quasi-judicial body that held hearings and made
rules related to spacing and other exceptions. Granting
permits for drilling wells and performing sundry well
workovers were additional responsibilities of AOGCC.
Associated statutes were found in Title 31, chapter 5 of
Alaska Statutes; and regulations were located in Title 20,
chapter 25 of the Alaska Administrative Code. He continued
that AOGCC had three commissioners: Commissioner Seamount
was the geology commissioner, Cathy Foerster was the
engineering commissioner, and there was a public member.
Commissioner Seamount made note of a recent statute change
demanding that the public member have training and
experience relative to the oil and gas industry. He noted
that AOGCC had 34 people on its staff, including two
geologists, six engineers, nine field inspectors and
several administrative support staff.
9:11:06 AM
Commissioner Seamount displayed slide 2. He made note of
two offices including one in North Slope staffed with
inspectors. He added that there were inspectors working
from home on the Kenai Peninsula.
Commissioner Seamount turned to slide 3, "Quasi-judicial
State regulatory agency - Mainly Sub-surface":
To protect the public interest in exploration and
development of Alaska's valuable oil, gas, and
geothermal resources through the application of
conservation practices designed to ensure greater
ultimate recovery and the protection of health,
safety, fresh ground waters and the rights of all
owners to recover their share of the resource.
Exception to sub-surface oversight is the proving of
metering so allocation of production is fairly
distributed
Funded by Industry receipts $7,468,600 (FY19).
Small amount from EPA for managing UIC program
$119,000 (FY19)
Extremely Technical Arbitrary interpretation of law
regarding AOGCC decisions difficult.
Statute (title 31), regulations, and science very
tight
Jurisdiction over private and public lands
Adjudicate disputes between resource owners
32 Total Staff includes positions for 3 commissioners,
2 geologists, 6 engineers, 9 field inspectors, 2
statisticians, 2 IT, 8 administrative
Commissioner Seamount commented that Alaska was the best
area in the world for gas flaring. He specified that none
of AOGCC's funding came from the General Fund (GF). Rather,
AOGCC was funded by industry receipts charged based on
production and injection of fluids and gas. He estimated
that the commission's budget for FY 19 was almost $7.5
million.
CATHY FOERSTER, ENGINEERING COMMISSIONER, ALASKA OIL AND
GAS CONSERVATION COMMISSION, DEPARTMENT OF ADMINISTRATION,
introduced herself and explained her role at AOGCC. She
relayed that the Underground Injection Control (UIC)
Program protected fresh groundwater from contamination from
oilfield activities.
Commissioner Seamount estimated that one-third of the
commission's budget was spent on the UIC program.
Commissioner Seamount continued discussing slide 3,
emphasizing that AOGCC was an extremely technical
organization. He thought arbitrary interpretation of the
law regarding the commission's decisions was difficult. The
commission tried to stay by the letter of the law. He
explained that that commission was an independent agency
and its dispute adjudication had included the state.
9:15:58 AM
Commissioner Seamount discussed slide 4, "Quasi-judicial
State regulatory agency - Mainly Sub-surface":
? Protect human safety
? Protect fresh water (down to ? mile)
o Manage Class II UIC program
? Prevent physical waste of energy
Resources (1/2 to 5.5 miles drilled depth, 3 miles
vertical depth deep)
? Promote greater ultimate recovery - (1/2 to 5.5
miles drilled depth, 3 miles vertical depth deep)
? Protect correlative rights
? Intense Inspection and Enforcement
Commissioner Seamount recalled that AOGCC had only
witnessed approximately 20 violations in the previous 19
years and thought that industry was careful. He reiterated
that only .2 percent of gas was flared in the state. He
reported that here had never been a reported case of
contamination of fresh water due to oilfield operations in
the 60-year history of production in the state.
9:18:31 AM
Commissioner Seamount showed slide 5, "AOGCC PRIMARY
SERVICES":
Regulate, monitor and inspect all subsurface
activities directly related to oil and gas exploration
and production including the design and integrity of
wells, well control procedures and equipment,
reservoir management plans and proposed underground
injection programs.
Hold Hearings
Issue pool rules and other conservation orders.
Approve and monitor plans for reservoir development
and enhanced oil recovery.
Approve permits for initial drilling, re-drill,
sidetrack, and remedial well operations. This includes
the evaluation and approval of proposed designs for
drilling fluids, well control, casing, cementing and
well completion operations.
Inspect drill rigs and wells to ensure compliance
with AOGCC regulations.
Witness safety valve, mechanical integrity, and
blowout preventer tests.
Witness meter-proving, calibration, and oil quality
tests.
Enforce well spacing rules
Monitor production rates, injection well pattern,
gas/oil/water ratios, and pressure maintenance
efforts.
Monitor and evaluate gas flaring.
Collect and maintain all oil and gas production
records.
Collect and maintain all well history files and well
log records.
Administer Alaska's Underground Injection Control
(UIC) program and the annular waste disposal program
(protection of drinking water).
Commissioner Seamount encouraged members to contact him
with any questions pertaining to the AOGCC primary services
as listed slide 5.
Commissioner Seamount showed slide 6, "AOGCC Permits and
Decisions / Orders 2009 2018":
? Permits to Drill 1,605
? Drilling Completed 1,658 wells / branches
? Well Work Activity Reports 8,401
? Orders and Decisions 717
Aquifer Exemption, Area Injection, Disposal, Enhanced
Recovery, Metering, Pool Rules, Production, and Other
Topics
Major Orders 59
Amendments 539
Well Spacing Exceptions 119
? Special Development Considerations many
Commissioner Seamount detailed that most special
development considerations were approved after a great deal
of communication with operators.
9:21:08 AM
Senator Shower asked if there were any requirements
relating to the use of federal funds for the UIC.
Commissioner Foerster noted that the requirements from the
Environmental Protection Agency (EPA) were primarily
related to reporting. State standards for almost all of the
commission's activities were generally more stringent than
federal standards. There was no EPA requirement that AOGCC
add regulation to the industry. She commented on the
commission's good relationship with the EPA.
Senator Olson asked about the approximately 20 violations
that had occurred over the previous years.
Commissioner Seamount relayed that the most important
function of AOGCC's response to violations was to prevent
reoccurrence. The commission required the submission of a
plan, and violations had historically been small.
Commissioner Foerster referenced BP's pipeline fail due to
corrosion. The commission had considered the incident to be
"waste" and was the biggest violation she could recall.
There had been other instances in which operators had
flared or vented gas that should not have been flared.
Senator Olson expressed concern about groundwater and noted
that it was a significant concern of his district on the
North Slope. He asked what kind of assurances he could give
his constituents that the groundwater would not become
contaminated by the oil and gas activity.
Commissioner Foerster stated that there were very stringent
requirements on well construction to ensure that injected
oil and gas never contacted groundwater. There was a
required minimum of two competent barriers to flow;
preventing oil, gas, and saltwater resources from
contacting fresh water. She discussed well construction and
stated that in order for contaminates to reach groundwater,
it would have to find its way through three layers of pipe.
There were further requirements for operators to test for
and demonstrate mechanical integrity. If a well could not
demonstrate that it could not maintain integrity, it would
be immediately shut down.
9:25:43 AM
Senator Olson asked about the number of times had an
integrity of a well been breached from production
activities.
Commissioner Foerster did not have an available number and
offered to provide the information at a later time.
Senator Olson wondered how many occasions there had been a
lack of mechanical integrity.
Commissioner Foerster noted that sometimes there was a
reduction down to one barrier, and the commission did not
consider the situation to be a mechanical loss of
integrity. She agreed to provide the information requested
by Senator Olson at a later time.
9:26:57 AM
Ms. Foerster reviewed slide 7, "Major Issues of 2018":
? Growing inventory of old and idle wells
Ensuring mechanical integrity
Plugging wells with no future utility
? Operator bankruptcies --> orphan wells
? Well bonding adequacy
? BLM Legacy (aka Travesty) wells
? New operators
Commissioner Foerster recounted that the growing inventory
of old and idle wells was one of the biggest issues facing
the commission. She detailed that annually AOGCC required
every operator to demonstrate mechanical integrity of old
and idle wells and provide a plan for the future. She
commented on the bankruptcy of companies, after which the
well plugging liability was left to landowners. After a
company went bankrupt, it no longer had the funds or the
legal requirement to follow AOGCC regulations and plug the
wells. The orphan wells presented problems for the future
and regulations were designed to mitigate future problems.
When an operator was not capable of plugging a well, most
often the state was the landowner and retained the
responsibility.
Commissioner Foerster continued discussing slide 7. She
discussed the transition to smaller operators with less
financial capabilities and the potential for major cost
liabilities. The previous year the AOGCC passed regulation
changes increasing bonding requirements. She noted that
Prudhoe Bay was bonded for $200,000; which would not even
pay for an engineering study, much less get started on
plugging a well. She noted that as smaller companies took
on more land ownership (from BP, ExxonMobil, and Conoco)
the liability of the state increased.
9:31:48 AM
Commissioner Foerster continued addressing bonding and
noted that the change in regulation was awaiting signature
by the lieutenant governor. She explained there were a few
states in the country that had adopted legislation to
protect the landowner from the liability. She had urged the
administration and legislature to pass similar legislation
that would transfer liability to the original landowner if
subsequent landowners could not cover the costs of
abandoned well mitigation.
Commissioner Foerster thought it was important for the
state to protect itself from future liability for plugging
wells at Prudhoe Bay. She commented on the collaborative
work with the Bureau of Land Management (BLM) on legacy
wells. The worst of the wells had been secured, and AOGGCC
and BLM continued working to clean up the entire slate of
bad wells. She discussed new operators, which created more
work for the agency. She discussed the education and
collaboration with new operators, which was in aid of
understanding regulation.
9:35:01 AM
Co-Chair von Imhof asked if Commissioner Foerster could
provide the committee with a map of abandoned wells and an
estimate of the state's potential financial recourse.
Commissioner Foerster agreed to provide the information.
She commented on the high number of abandoned wells. She
considered if Prudhoe Bay ceased to produce without an
operator capable of plugging the wells and estimated a cost
in the hundreds of millions to plug over 1,000 wells. She
estimated that an average cost for plugging a well was
$250,000; and there could potentially be 1,500 wells. She
reminded that there were idle wells in virtually every
field across the North Slope.
Co-Chair Stedman anticipated that there would be further
discussion on the subject of reclamation on the North
Slope.
Commissioner Foerster discussed slide 8, "Likely Issues of
2019":
? All the 2018 issues
? Aggressive exploration season
12 Conoco wells
1 ENI extended reach well
1 Great Bear well
4 Oil Search wells
? Conoco development work at Willow and Greater
Moose's Tooth
? Unanticipated crises and challenges
Senator Bishop asked if the Great Bear well was a
conventional well.
Commissioner Foerster stated that exploration wells were
confidential and that only the location could be divulged.
Commissioner Seamount recalled that Great Bear had
announced some information through the press and had both
conventional and shale wells. He believed Great Bear was
selling out.
9:39:32 AM
Commissioner Foerster showed slide 9, "Offtake Allowables
for North Slope - Major Gas Sales":
[SECRETARY'S NOTE: the title of the projected slide -
"AOGCC Concerns with North Slope Major Gas Sales" - was
different than on the print copy but the slide had the same
content.]
? PBU offtake: 3.6 BCF/D (including fuel usage)
CO2 utilization study
Oil acceleration study
? Pt Thomson offtake: 1.1 BCF/D (including fuel usage)
5 years of pilot performance demonstrating full
scale cycling not viable
? Both offtakes were granted assuming a defined window
of opportunity for MGS
? Oil losses will occur. Later is better. Less is
better.
Commissioner Foerster explained that if gas was found
associated with oil, it was AOGCC's job to give permission
for the gas to be removed. The two big sources of gas on
the North Slope were at Prudhoe Bay and Point Thomson, both
of which had gas associated with oil. There had been a
series of hearings a year and a half previously that
resulted in offtake allowables for both fields. She
discussed the potential sale of offtake gas. She discussed
methods of utilizing CO2.
Commissioner Foerster noted that EOR signified 'enhanced
oil recovery,' which was meant to increase the production
of oil through injection of fluid or other means.
9:43:57 AM
Commissioner Foerster continued discussing slide 9, noting
that Point Thomson was known as a gas condensate reservoir.
She defined the cycling process, which stripped condensates
from gas, which was later reinjected. She noted that
Exxon's modelling indicated that gas cycling was not
economically viable. She commented that models could not be
perfectly accurate, and every model was enhanced with
additional data. She continued that AOGCC had required
Exxon to demonstrate five years of cycling performance to
show that a full-scale cycling project was not viable.
Commissioner Foerster noted that both of the offtake
allowables had been granted. She reiterated that once gas
production started, oil began to be lost. If oil could
continue to produce while gas was deferred, more oil would
come out of the ground. The less gas was produced, the
slower the losses would occur.
9:47:03 AM
Co-Chair Stedman asked for an explanation of field rules as
they might pertain to Point Thomson.
Commissioner Foerster explained that there were statewide
rules and standard regulations that every operator was
required to comply with to protect fresh groundwater, human
safety, and protect rights. She noted that fields always
had special circumstances. She used the example of Prudhoe
Bay, where it was heavily faulted and complicated. The
rules pertaining to how far wells must be would result in
oil left in the ground. Operators requested exemptions from
statewide field rules and provided technical reasons for
the exception.
Commission Foerster continued to address Co-Chair Stedman's
question. For every new field, the operator (and sometimes
the commission) would identify areas where special field
rules were needed. Usually the operator did a good job
demonstrating rationale for an exception.
9:50:16 AM
Co-Chair Stedman asked about the timing of the 5-year
program that Point Thomson was participating in, and how it
related to gas offtake.
Commissioner Foerster noted that the wells at Point Thomson
were oil wells based on the gas to oil ratio. There had
been enough condensate in the gas at Point Thomson that the
wells qualified as oil wells, which meant the gas needed to
be reinjected. Thereby AOGCC had required five years of
cycling to demonstrate that greater ultimate recovery would
not be achieved by a cycling project. Exxon had experienced
great technical difficulty establishing the cycling volumes
that were required. She was concerned whether Exxon would
have five years of performance to show by 2025.
Co-Chair Stedman asked if the timing was in calendar years.
Commissioner Foerster stated that the demonstration
required five years of performance.
Co-Chair Stedman asked how to take gas off the field and
get around the ruling.
Commissioner Foerster stated that if Exxon could not
provide five years of performance data to AOGCC by 2025, to
get the gas it would have to reapply for a new set of rules
that excluded the requirement.
9:53:29 AM
Co-Chair Stedman understood that there was a fairly precise
target date of 2025 for natural gas production. He
mentioned attending presentations on the Liquid Natural Gas
(LNG) marketplace, and thought it was clear that the
marketplace would be expanding. He pondered that the
projects that would not be built would sit on the sidelines
until there was another space within the marketplace to
renegotiate. He asked if the state was facing a window
considering a potential gas line. He wondered about the
feasibility of AKLNG and the offtake decision by AOGCC. He
wondered if the state should reconsider its analysis to
make sure it was maximizing the monetary value of the
basin.
Commissioner Foerster did not feel qualified to address the
question, and LNG sales was not her area of expertise. She
referenced an earlier slide that indicated that oil loss
was inevitable. She thought it was important to continue to
produce oil and use gas to get oil out of the ground. She
affirmed that there would be those at the AOGCC that would
take a second look at the issue.
Co-Chair Stedman asked if AOGCC would take a second look at
the AKLNG project.
Commissioner Foerster pondered that orders might have to be
modified.
Co-Chair Stedman explained that the economics of the gas
line appeared to be marginal, which did not leave a great
deal of room for error.
9:57:28 AM
Senator Wielechowski asked about a Point Thomson offtake
well. He asked if the gas was being stripped of condensate,
reinjected, or shipped to Prudhoe Bay. He wondered if the
state was getting royalties or production taxes from the
1.1 BCF/D mentioned on the slide.
Commissioner Foerster stated that the 1.1 BCF/D shown on
slide 9 signified the total gas offtake from Point Thomson
that would be allowed starting in 2025. At that point,
assuming that Exxon had demonstrated that cycling was not
viable, whatever condensate came out with the gas would
likely be stripped off and sold down an oil line and the
rest of the gas would go to a gas sales line. The 1.1 BCF/D
would be whatever went down the sales line, plus whatever
was needed to fuel the field.
Senator Wielechowski asked about the current offtake of Pt.
Thomson.
Commissioner Foerster stated that the offtake did not go
into effect until 2025, assuming that Exxon had completed
the five years of pilot performance. If after five years of
cycling the economics and technical aspects were proven,
all the gas from Point Thomson would be used either for
reinjection or fuel to keep the field running. If prior to
2025 the data proved cycling would not work, the gas would
be sold.
Senator Bishop referenced the conclusions on page 8 of the
document "AOGCC Conservation Order no. 719 Corrected" (copy
on file), and asked about what pool was being discussed
when talking about stripping liquids off the gas.
Commissioner Foerster emphasized that the Point Thomson
field was very complicated. The gas cap was rich in
condensate, with a base of a thin oil rim that was highly
viscous and reluctant to flow. The cost, technology, and
risks to extract the oil were prohibitive.
Senator Bishop asked about the CO2 level at Point Thomson.
Commissioner Foerster agreed to provide the information at
a later time.
10:01:30 AM
Senator Shower asked for an explanation of the commission's
administrative appeals process. He asked about general
solvency stipulations for smaller companies and mentioned
environmental issues and liability for wells left in West
Texas. He wondered if there were any stipulations other
than bonding that were required for companies.
Commissioner Foerster explained the appeal request process
for a hearing to consider a proposed change in field rules.
She noted that a hearing required a 30-day notice period.
Operators would present technical data for consideration,
after which the AOGCC would generally meet a self-imposed
requirement of submitting a ruling within an additional 30
days. Usually within 3 to 4 months after a request, a final
ruling was issued. She estimated that the requests came
approximately every 1.5 months.
10:03:54 AM
Senator Shower asked if there were other stipulations
besides bonding for the bill Commissioner Foerster
mentioned earlier in the meeting.
Commissioner Foerster reiterated that AOGCC met with every
operator annually to do a well by well review of idle
wells. The agency encouraged operators to plug and abandon
certain wells each year. She could not think of other
regulations that were in place. If an operator wanted to
suspend a well, AOGCC questioned the future utility of the
well and could grant the suspension for future use. She
gave an example of a well that could be suspended for
future use.
Commissioner Foerster continued to address Senator Shower's
question. She explained that if idle Prudhoe Bay wells had
been plugged 15 to 20 years previously, operators that
developed additional drilling capability would not have
been able to implement the new technologies to get greater
oil recovery from the fields. She stressed the importance
of making judgement calls.
10:06:30 AM
Commissioner Seamount showed slide 10, "Alaska Oil Activity
and Production." He noted that subsequent slides would show
the decline in Alaska oil production, permitting, as well
as development and potential discoveries. He noted that
development and discoveries added to the workload of AOGCC.
He thought it would be better to talk with the Division of
Oil and Gas or the operators with regard to development and
discoveries.
Commissioner Seamount reviewed slide 11, "Alaska's Average
Daily Oil and NGL Production Rate: 1960 - 2018," which
showed a line graph depicting historic oil production in
Alaska. He noted a peak in the graph in 1970 that indicated
Cook Inlet oil discoveries that increased production. He
mentioned the five discoveries in 1965 in Cook Inlet.
Swanson River had been discovered in 1957. He pointed out
the drop off in exploration in Cook Inlet that coincided
with a dramatic increase in Prudhoe Bay. He noted
exploration had went up to 2.2 million barrels per day
around 1990 and had declined by approximately 6 percent
since that time. He highlighted discoveries in Colville
River and Alpine. He thought the production decline had
flattened out. The previous year the decline 3 percent, and
the two previous years there had been an incline in
production.
Commissioner Seamount continued discussing slide 10, and
thought if press releases were to be believed, it was
possible to go up to one million barrels per day by 2024,
which he thought was an aggressive prediction. He stated
that a later slide would show that the average time between
discovery and development was nine years.
10:09:53 AM
Commissioner Seamount turned to slide 12, "Alaska's
Statistics":
Permits to Drill since 1901: 9,302
Wells with Completion Dates: 8,614
Hydraulically Fractured Wells: 2,026
Hydraulically Fractured Wells: 23.5%
Oil Production for Nov 2018 (bbls): 14,918,869
NGL Production for Nov 2018 (bbls): 1,691,188
Oil Production for Nov 2018 (bbls/d): 497,296
NGL Production for Nov 2018 (bbls/d): 56,374
Total (bbls/d): 553,670
Commissioner Seamount commented on the contentious subject
of fracking, which had been going on since the 1960s.
Commissioner Seamount reviewed slide 13, "Alaska's
Statistics - Alaska Oil and NGL Production - November 2016
to November 2018," which showed a bar graph. The dashed
line showed a rolling average that began in November 2016
and ended in November 2018. He was optimistic that the flat
average line would start to incline in the future.
Commissioner Foerster noted that the dips of production
were in the summer and explained that production facilities
operated best when cold. She added that planned maintenance
was often done in the summer.
Senator Micciche referenced slide 12 and asked about the
nearly 15 million barrels listed as "Oil production for Nov
2018."
Commissioner Foerster affirmed that the slide was
misleading and should actually show that the cumulative oil
production as of November 2018 was 14,918,869.
10:13:25 AM
AT EASE
10:13:59 AM
RECONVENED
Co-Chair Stedman noted that slide 12 had numerics that were
appearing in millions, while actual production was in
billions.
Commissioner Seamount affirmed he would edit the
information on slide 12, and that the cumulative oil
production as of November 2018 was near 15 billion rather
than 15 million.
Commissioner Seamount showed slide 14, "Alaska 2018:
Permits to Drill Approved by AOGCC," which showed a pie
chart depicting Alaska statewide - all well types. The
chart broke down the types of wells drilled. It was
observable that by far the most wells drilled were
producers of oil on the Arctic Slope. He looked at figures
showing exploratory wells in Cook Inlet and on the North
Slope. He pointed out service wells on the Arctic Slope.
There were 15 exploration permits outstanding for the
remainder of the winter. The winter of 2019 had a lot of
exploration activity.
Commissioner Seamount turned to slide 15, "EXPLORATORY
(WILDCAT / DELINEATION) WELLS AND WELL BRANCHES -
Statewide, Oil and Gas: Completed, Suspended or Abandoned
(2004 2018*)," which showed a bar graph depicting
statewide conventional oil and gas only. He commented that
oil price was shown in light green, which showed a great
deal of fluctuation. Various colors depicted various
operators that had drilled exploration wells. The winter of
2018-2019 would show an extra 15 exploratory wells drilled.
10:16:42 AM
Commissioner Seamount displayed slide 16, "DEVELOPMENT AND
SERVICE WELLS AND WELL BRANCHES - Statewide, Oil and Gas:
Completed, Suspended or Abandoned (2003 2017)," which
showed a bar graph depicting statewide conventional oil and
gas only. By far BP and ConocoPhillips had the most
activity.
Commissioner Foerster referenced an earlier question by
Senator Shower pertaining to abandoned wells and noted that
the same rigs that did well work and drilling would also do
the abandonment work. She asserted that there was a balance
of how much of rig resource was wanted to devote to work
that did not generate production.
Commissioner Seamount moved to slide 17, "Workover
Activities (2003 2017) Statewide: Conventional Oil and
Gas Only," which showed a bar graph. He noted that the
purpose of workovers was to make repairs or enhance
production. In 2017 there were close to 1,000 workover
activities. Industry was spending a lot of money keeping
the wells in good shape.
Commissioner Seamount turned to slide 18, "Alaska Oil and
Gas Activity - AOGCC Oversight (1958-2018*)," which showed
a line graph. The blue line showed the number of permits
that AOGCC had processed. He discussed peak periods, which
had levelled out to between 150 to 200 permits per year.
The number of wells over which AOGCC had oversight had
steadily risen to between 5,000 and 6,000 wells that
inspectors and staff were watching closely. The number of
pools was shown by the fuchsia line and had risen to almost
150.
10:20:37 AM
Commissioner Seamount showed slide 19, "Announced Alaska
North Slope "Discoveries, which showed a map of Northern
Alaska. He reiterated that AOGCC did not have expertise in
the recent discoveries, although the activity would
increase the agency's workload. He mentioned development at
Moose's Tooth, Willow, and the Pica and Smith Bay
Discoveries. He thought the Division of Oil and Gas as well
as the operators could provide more expertise on the
subject. He thought if the announcement in the news were
true, the new wells could add another 500,000 barrels of
oil to the pipeline. There had been mention of plans for
development in 2024, which he thought was very aggressive.
Commissioner Seamount displayed slide 20, "Major Recent
Brookian Discoveries," which showed a table. He thought the
slide was put together by Paul Decker from the Division of
Oil and Gas. The slide showed what the expected production
would be from the discoveries and developments. He pointed
out estimated production levels in Willow and Smith Bay.
Co-Chair Stedman asked about the timeline and if AOGCC was
to expect development in 2025.
Commissioner Seamount answered in the affirmative. He was
skeptical but hoped that the operators were correct.
Senator Shower asked about the average time for development
of wells.
Commissioner Seamount turned to slide 21, "Development
Timeline for North Slope Oil Fields," which showed a bar
chart. He directed attention to the discoveries and
developments, which took an average of nine years from
discovery to regular production.
Commissioner Foerster noted that the advantage of many of
the major recent discoveries was the proximity to existing
infrastructure, which would have a positive impact on the
time to production.
10:24:47 AM
Commissioner Seamount showed slide 22, "Cook Inlet
Exploration":
Exploration Immaturity
? Cook Inlet is similar in size to lower 48
basins
? 14,000 square mile area is same as San Juan
Basin
? <400 exploratory wells & <1400 total wells
vs 28,000+ wells in San Juan Basin
Cook Inlet Basin: No 1980s Drilling Boom
Commissioner Seamount emphasized that the Cook Inlet was
under-explored. The United States Geological Survey had
estimated that only 2 percent to 4 percent of the oil
generated in Cook Inlet had been identified. There had only
been 52 penetrations of the Jurassic, which most of the oil
came from. He considered that the state and the industry
had been remiss in not going deeper to look for additional
oil.
Commissioner Foerster wanted to ensure she had a list of
information requested by the committee.
Co-Chair Stedman affirmed that the committee would provide
a list of questions in letter format.
Commissioner Foerster thanked the legislature for its
respect and interest in AOGCC's work.
Co-Chair Stedman asked for a reminder of the role of AOGCC
in allowing offtake and controlling the balance between oil
and gas.
Commissioner Foerster explained that it was the statutory
obligation of AOGCC was to prevent hydrocarbon waste, and
also to encourage greater ultimate recovery of hydrocarbon.
In granting offtake allowables of gas from oil fields,
AOGCC considered its statutory obligations. She pointed out
that it was a law of physics that if gas was taken from an
oilfield before all the oil was produced, there would be
oil losses. When an operator requested to take gas from an
oil field, AOGCC had to ensure that by taking the gas,
greater ultimate recovery of oil and gas would be achieved.
The decision was not economic, convenience, or politically
based; but rather in order to ensure greater recovery of
hydrocarbons.
Commissioner Seamount referenced the distance between wells
in the state. He discussed the close proximity of wells in
the San Juan Basin, where in some fields well spacing was
down to one acre. There were 53 pads in Prudhoe Bay, and
with the latest technology it could be possible to develop
the bay with only five pads, which had implications on the
opening of Alaska National Wildlife Refuge (ANWR). He could
not believe how wide open and clean Prudhoe Bay was.
10:30:40 AM
Senator Wilson asked for a discussion of spills and
recovery efforts in Prudhoe Bay.
Commissioner Foerster noted that spills and spill
prevention were not within the purview of AOGCC but were
within the jurisdiction of the Department of Environmental
Conservation (DEC).
Senator Wilson asked about the number of capped wells in
the state.
Commissioner Foerster agreed to provide the information at
a later time.
Senator Shower asked where most of the remaining oil
Commissioner Seamount had mentioned in Cook Inlet was
located.
Commissioner Seamount thought there was potential
throughout Cook Inlet. He mentioned Swanson River, North
Cook Inlet, and other areas. There had been interesting
tests showing permeability. He stated that south of Homer
there had been oil saturated cores pulled from the ground.
He thought the area was under-explored and that there was a
lack of information.
10:32:59 AM
Senator Bishop asked if Commissioner Foerster had
jurisdiction over some aspects of the drilling rigs.
Commissioner Foerster stated AOGCC had a lot of
jurisdiction over drilling operations.
Senator Bishop asked if rig safety jurisdiction helped
prevent spills.
Commissioner Foerster clarified that spills were not
reported to the commission, nor did it regulate clean ups.
She stated that preventing spills was part of the purview
of AOGCC but monitoring and regulating was not.
Commissioner Seamount thought that Senator Bishop was
referencing blowouts, which were releases during drilling.
There had been less than 15 blowouts in the history of the
state, 14 of which were shallow gas blowouts. One had
contained a bit of oil. One of the primary duties of AOGCC
was to prevent well blowouts. He added that corrosion and
leakage were under the purview of DEC.
Co-Chair Stedman thanked the testifiers. He thanked
Commissioner Foerster for her work in providing information
to the legislature. He thanked her on behalf of the state
and lauded the safety record in the oil basin. He
congratulated her on her retirement.
ADJOURNMENT
10:36:44 AM
The meeting was adjourned at 10:36 a.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| 012419 AOGCC Order - Prudhoe Bay.pdf |
SFIN 1/24/2019 9:00:00 AM |
AOGCC |
| 012419 AOGCC SFC Presentation .pdf |
SFIN 1/24/2019 9:00:00 AM |
AOGCC |
| 012419 AOGCC Order - Pt. Thompson.pdf |
SFIN 1/24/2019 9:00:00 AM |
AOGCC |
| 012419 AOGCC - Pt Thompson.pdf |
SFIN 1/24/2019 9:00:00 AM |
AOGCC |
| 012419 AOGCC - PB Gas Offtake.pdf |
SFIN 1/24/2019 9:00:00 AM |
AOGCC |
| 012419 AOGCC - North Slope Gas Sales.pdf |
SFIN 1/24/2019 9:00:00 AM |
AOGCC |