Legislature(1993 - 1994)

04/13/1993 05:05 PM Senate O&G

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
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              SENATE SPECIAL COMMITTEE ON OIL & GAS                            
                         April 13, 1993                                        
                            5:05 p.m.                                          
                                                                               
  MEMBERS PRESENT                                                              
                                                                               
  Senator Loren Leman, Chairman                                                
  Senator Rick Halford                                                         
  Senator Bert Sharp                                                           
  Senator Judith Salo                                                          
  Senator Al Adams                                                             
                                                                               
  MEMBERS ABSENT                                                               
                                                                               
  All Present                                                                  
                                                                               
  COMMITTEE CALENDAR                                                           
                                                                               
  SENATE BILL NO. 150                                                          
  "An Act providing for oil  and gas exploration licenses, and                 
  oil  and  gas leases,  in certain  areas  of the  state; and                 
  providing for an effective date."                                            
                                                                               
  PREVIOUS ACTION                                                              
                                                                               
  SB  150  - See  Oil &  Gas  minutes dated  3/16/93, 3/23/93,                 
  4/1/93, and 4/8/93.                                                          
                                                                               
  WITNESS REGISTER                                                             
                                                                               
  Annette Kreitzer, Legislative Aide                                           
  %Senator Leman                                                               
  State Capitol                                                                
  POSITION STATEMENT:  Commented on SB 150.                                    
                                                                               
  George Findling, Manager                                                     
  Government and Public Relations                                              
  ARCO                                                                         
  Anchorage, Alaska 99510                                                      
  POSITION STATEMENT:  Commented on SB 150.                                    
                                                                               
  Mike Conway, Director                                                        
  Division of Spill Prevention and Response                                    
  Department of Environmental Conservation                                     
  410 Willoughby Ave., Suite 105                                               
  Juneau, Alaska 99801-1795                                                    
  POSITION STATEMENT:  Commented on SB 150.                                    
                                                                               
  Jim Eason, Director                                                          
  Division of Oil and Gas                                                      
  Department of Natural Resources                                              
  P.O. Box 107034                                                              
  Anchorage, Alaska 99510-7005                                                 
  POSITION STATEMENT:  Commented on SB 150.                                    
                                                                               
                                                                               
  Bradley Penn, Land Manager                                                   
  Marathon Oil Company                                                         
  P.O. Box 190168                                                              
  Anchorage, Alaska 99519                                                      
  POSITION STATEMENT:  Commented on SB 150.                                    
                                                                               
  Kevin Tabler, Land Manager                                                   
  Union Oil Company                                                            
  P.O. Box 196247                                                              
  Anchorage, Alaska 99519                                                      
  POSITION STATEMENT:  Commented on SB 150.                                    
                                                                               
  Harold Heinze, Resource Development Advisor                                  
  Office of the Governor                                                       
  P.O. Box 110001                                                              
  Juneau, Alaska 99811-0001                                                    
  POSITION STATEMENT:  Commented on SB 150.                                    
                                                                               
  Dave Lappi                                                                   
  Lapp Research, Inc.                                                          
  4900 Sportsman Dr.                                                           
  Anchorage, Alaska 99502                                                      
  POSITION STATEMENT:  Commented on SB 150.                                    
                                                                               
  ACTION NARRATIVE                                                             
                                                                               
  TAPE 93-15, SIDE A                                                           
  Number 001                                                                   
  SENATOR LEMAN called  the Special Committee  on Oil and  Gas                 
  meeting to order at 5:05 p.m. and announced SB 150 OIL & GAS                 
  EXPLORATION LICENSES/LEASES to be up for consideration.                      
                                                                               
  SENATOR SHARP moved to adopt the  CS to SB 150.  There  were                 
  no objections and it was so ordered.                                         
                                                                               
  ANNETTE  KREITZER,  Legislative  Aide  for  Senator   Leman,                 
  explained  the changes  in the  CS.   She said  there was  a                 
  geographic  restriction  and  relinquishment   language  was                 
  added.                                                                       
                                                                               
  MS.  KREITZER  said  bonding language  with  an  annual work                 
  commitment was proposed.                                                     
                                                                               
  Additionally, the  CS addresses the  competitive bid process                 
  and calls for a  sealed bid process rather than  oral outcry                 
  auction.                                                                     
                                                                               
  Number 87                                                                    
                                                                               
  GEORGE FINDLING, Manager of  Government Public Relations for                 
  ARCO, said they  still oppose the CS as adopted.  He said it                 
  is unfortunate that the bonding has been weakened even more,                 
                                                                               
                                                                               
  because it protects  the state's interest.  He supported the                 
  annual bonding concept.                                                      
                                                                               
  Number 180                                                                   
                                                                               
  MIKE  CONWAY, Director,  Spill Prevention and  Response, was                 
  concerned with the financial requirements for the production                 
  facilities  and  proposed  amounts  that  are  substantially                 
  different from what the legislature set.                                     
                                                                               
  He  said  they needed  more  time  to develop  a  connection                 
  between  financial  responsibility   requirements  for   the                 
  likelihood of spills  from the different operations  and the                 
  cost of clean-up.   His guess  is that the existing  amounts                 
  are too low.                                                                 
                                                                               
  SENATOR SHARP said Louisiana, Florida, Montana,  Washington,                 
  Texas,   and   Wyoming   don't   even   have   a   financial                 
  responsibility bonding requirement.   California has only $1                 
  million within 30 miles  of the coastline.  MR.  CONWAY said                 
  they are looking at the cleanup costs.                                       
                                                                               
  SENATOR SHARP said his concern was that on-shore exploration                 
  can be done by smaller independent operators.                                
                                                                               
  Number 253                                                                   
                                                                               
  JIM EASON, Director,  Division of Oil  and Gas, said he  had                 
  extreme reservations about the amendment regarding  bonding.                 
  He said  the intent of the bill  is to get companies working                 
  in  areas  of the  state  that  have received  little  or no                 
  attention under the current leasing program.                                 
                                                                               
  Number 307                                                                   
                                                                               
  BRADLEY  PENN,   Land  Manager  for  Marathon  Oil  Company,                 
  supported  CSSB 150.  He  said they do exploration licensing                 
  as a supplement to the existing competitive leasing program.                 
                                                                               
                                                                               
  Number 320                                                                   
                                                                               
  KEVIN TABLER, Land Manager for  Union Oil Company, supported                 
  CSSB 150.                                                                    
                                                                               
  Number 329                                                                   
                                                                               
  PETE NELSON, Land  Manager for Texaco, Inc.,  supported CSSB
  150.                                                                         
                                                                               
  Number 340                                                                   
                                                                               
  HAROLD HEINZE, Resource Development Advisor to the Governor,                 
  supported Mr.  Eason's  testimony.    He  said  it  is  very                 
                                                                               
                                                                               
  important to provide a  basis for larger areas or  new areas                 
  of  the  state  to  be  made   available  for  oil  and  gas                 
  exploration.  It is also important that  this exploration be                 
  timely.   We need to find a  way to involve more oil and gas                 
  companies in Alaska, he said.                                                
                                                                               
  MR. HEINZE  approved of  all the  changes made  to the  bill                 
  except for  the reduction of  the bonding  requirement.   To                 
  offset the lessening of the bonding requirement, he proposed                 
  that  the  license  be immediately  revoked  if  annual work                 
  commitments were not met.                                                    
                                                                               
  SENATOR  ADAMS  asked  how  the   annual  reviews  would  be                 
  accomplished.  MR. HEINZE  said the Division of Oil  and Gas                 
  would have to look at the associated costs.                                  
                                                                               
  Number 406                                                                   
                                                                               
  MR. EASON  said they  could eliminate  the need for  funding                 
  additional programs by reviewing the independent audits.                     
                                                                               
  SENATOR HALFORD moved  to adopt  the amendment that  changes                 
  "annual review or" to "annual review and..." on page 3, line                 
  11, page 4, lines 5 and 7.  SENATOR  ADAMS objected, because                 
  of testimony from  various companies  supporting the CS,  he                 
  thought  they should  be  allowed time  to  comment on  this                 
  amendment.                                                                   
                                                                               
  KEVIN TABLER said it sounded like a reasonable approach.                     
                                                                               
  SENATOR ADAMS removed  his objection  and the amendment  was                 
  adopted.                                                                     
                                                                               
  DAVE LAPPI said the amendment would be a workable solution.                  
  He thought  it would  help solve  the problems  independents                 
  might have operating in  the state of  Alaska.  He said  the                 
  application fee  of $1  per acre  was higher  than in  other                 
  countries and urged them to consider lowering it by a factor                 
  of 10.  He thought the  high up-front costs would discourage                 
  exploration.                                                                 
                                                                               
  SENATOR SALO asked  if the size  of the parcels would  vary.                 
  MR. LAPPI said he thought a lot of applications would be for                 
  around  500,000   acres,  because   of  the   relinquishment                 
  procedures.   He said relinquishment of 25% of the remaining                 
  acreage at the end of a period would be more reasonable.                     
                                                                               
  MR. EASON commented that the term is up to ten years  and he                 
  thought it would be a mistake to tailor something that works                 
  in between.                                                                  
                                                                               
  SENATOR SALO  asked Mr. Eason if he  thought $1 per acre fee                 
  was  reasonable.   MR.  EASON said  he  thought it  was very                 
  reasonable.   He said  it costs  a great  deal  of money  to                 
                                                                               
                                                                               
  evaluate 500,000 acre  licenses.  Anyone who is serious will                 
  view the  application fee  as a  truly diminimous  amount of                 
  money.                                                                       
                                                                               
  Number 557                                                                   
                                                                               
  MR. HEINZE suggested  language to say  the fee is "not  more                 
  than  $1  for each  acre  of land  that  is  subject to  the                 
  exploration license."                                                        
                                                                               
  SENATOR  SALO   asked  which  department   would  have   the                 
  flexibility to set that fee.  MR. HEINZE said the Department                 
  of Natural Resources  would have that authority  under Title                 
  38.                                                                          
                                                                               
  CHARLES MCKEE said  he advocated the industries  interest in                 
  making discoveries, but not at the expense of  his copyright                 
  status.                                                                      
                                                                               
  TAPE 93-15, SIDE B                                                           
  Number 580                                                                   
                                                                               
  SENATOR HALFORD  offered an amendment  saying "up to  $1 per                 
  acre  and  that the  discretion  be with  the Commissioner."                 
  This  would  give them  leeway to  adjust  the fee  if there                 
  wasn't as much interest as expected.                                         
                                                                               
  MR.  EASON  said   they  would  have  a  problem  with  that                 
  amendment.                                                                   
                                                                               
  SENATOR LEMAN removed  his objection  and the amendment  was                 
  adopted.                                                                     
                                                                               
  Number 565                                                                   
                                                                               
  SENATOR  SHARP moved to  reduce the $5  million for on-shore                 
  exploration financial responsibility to $1 million  based on                 
  information  that  Washington,  Texas,  Louisiana,  Florida,                 
  Wyoming, and  Montana have no  financial responsibility  and                 
  California has only $1 million within  30 miles of the coast                 
  line.                                                                        
                                                                               
  MR.  CONWAY  said he  would  let the  Department  of Natural                 
  Resources comment  on this  issue.   MR. EASON  said it  was                 
  difficult to make generalizations  and consultation with the                 
  Department   of   Environmental    Conservation   and    the                 
  Administration  was  needed  to see  if  it  satisfied their                 
  goals.                                                                       
                                                                               
  SENATOR LEMAN  asked if there were any objections to Senator                 
  Sharp's amendment.  SENATOR HALFORD supported the amendment,                 
  but wanted to know the Administration's position in the next                 
  committee.   SENATOR  SALO  objected and  wanted to  see the                 
  Administration's position before passing it from committee.                  
                                                                               
                                                                               
  SENATOR  LEMAN asked  for a  vote.   Senator Sharp,  Senator                 
  Leman, and Senator Halford voted yes; Senator  Salo voted no                 
  and the amendment was adopted.                                               
                                                                               
  SENATOR  HALFORD  moved  to  pass  the  CS to  SB  150  with                 
  amendments and two fiscal notes from  committee.  There were                 
  no objections and it was so ordered.                                         
  SENATOR LEMAN adjourned the meeting at 6:00 p.m.                             
                                                                               

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