Legislature(1993 - 1994)
01/25/1994 03:45 PM Senate O&G
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SENATE SPECIAL COMMITTEE ON OIL & GAS
January 25, 1994
3:45 P.M.
MEMBERS PRESENT
Senator Loren Leman, Chairman
Senator Bert Sharp
Senator Judith Salo
MEMBERS ABSENT
Senator Rick Halford
Senator Al Adams
COMMITTEE CALENDAR
CSSB 150(FIN) AM(FLD S)
"An Act relating to the exploration and production of oil and
gas and related hydrocarbons, to oil and gas exploration
licenses and to oil and gas leases in certain areas of the
state, and to the proof of financial responsibility required
for the operation of facilities for the production of crude
oil and associated hydrocarbons and facilities for exploration
for oil and gas and related hydrocarbons; and extending the
period in which a sale on the five-year oil and gas lease sale
schedule may be delayed; and providing for an effective date."
SENATE BILL NO. 239
"An Act relating to evidence of financial responsibility
provided by persons who conduct noncrude oil operations; and
providing for an effective date."
PREVIOUS ACTION
SB 150 - See Oil & Gas minutes dated 3/16/93, 3/23/93, 4/1/93,
4/8/93, and 4/13/93.
SB 239 - See Oil & Gas minutes dated 1/24/94.
WITNESS REGISTER
Cliff Berglin
P.O.Box 131
Fairbanks, Ak. 99707
POSITION STATEMENT: Opposed SB 239.
Ken Boyd, Deputy Director
Division of Oil and Gas
Department of Natural Resources
P.O. Box 107034
Anchorage, Ak. 99510-0734
POSITION STATEMENT: Commented on SB 239.
Mead Treadwell, Deputy Commissioner
Department of Environmental Conservation
410 Willoughby Ave., Suite 105
Juneau, Ak. 99801-1795
POSITION STATEMENT: Supported SB 239.
Ray Gillespie
Petro Marine, Crowley Marine, Delta Western
9478 Riverbend Court
Juneau, Ak. 99801
POSITION STATEMENT: Supported SB 239.
Bill Schoephoester
Refined Oil distributors
311 C Street, #500
Anchorage, Ak. 99503
POSITION STATEMENT: Supported SB 239.
ACTION NARRATIVE
TAPE 94-2, SIDE A
Number 001
SENATOR LEMAN called the Special Committee on Oil and Gas work
session to order at 3:45 p.m. and announced SB 150 (OIL & GAS
EXPLORATION LICENSES/LEASES) to be up for consideration. He
said the bill was not formally in the committee, but they
wanted to work on the amendments to where they would feel
comfortable with taking action on the floor of the Senate.
SENATOR SALO asked on page 3, lines 12 - 14, if deleting this
language doesn't release the exploration company from starting
exploration. SENATOR LEMAN said it was his intent for the
explorers to have a plan and to follow it. Each year the
bonding for the work commitment will change. The proposed
language accomplishes the proposed change in the bonding
requirements.
CLIFF BERGLIN, Fairbanks, opposed SB 150. He said he would
send written comments to the Committee.
He said the people who have been meeting on this bill for the
last 2 years are the who's who of the world's oil companies.
Therefore, it can't be in the best interest of the people of
the State of Alaska. He also asked what would happen to the
mental health issue and to surface rights.
Number 308
SENATOR SHARP asked what was the size of the standard lease
under competitive bid?
KEN BOYD, Anchorage, answered the maximum size of the lease
is 5,760 acres (3 miles square). Leases vary in size, because
of the shape of land ownership.
SENATOR SHARP said he couldn't understand why they raised the
minimum to 20,000 acres. He asked when a license is converted
to a lease at the end of the explorat ion process, would it
be convertible to 5,760 acre leases. MR. BOYD said that is
correct. He explained that the leased acres have to be
contiguous according to law.
Number 344
SENATOR SALO asked who decided what land is to be
relinquished. MR. BOYD explained that the Commissioner would
decide if the company didn't.
SENATOR LEMAN announced the Committee would end the "work
session" and begin the hearing portion of the meeting and
brought SB 239 (NONCRUDE OIL OPERATIONS:FINANC'L RESPB'TY) up
for consideration.
Number 394
MEAD TREADWELL, Deputy Director, Department of Environmental
Conservation, explained that the law requires people providing
insurance as a form of financial responsibility have a policy
which allows the insurer to be sued in a state court. Prior
to Exxon Valdez no one had a problem getting this direct
action insurance. After the Exxon Valdez, OPA '90 was passed
requiring direct action insurance nationally. At that time,
the London insurance market had stopped writing this kind of
insurance as widely as it had. DEC was faced with a situation
where they had to be able to grant waivers to small companies
who could not get this kind of insurance or shut them down
under the law.
The legislature allowed them to grant waivers quarterly if
people could not get direct action.
In summary, MR. TREADWELL said, they support the intent of
this bill and suggest a simple amendment in Section 1 making
the waiver provision permanent.
He explained that the waiver provision is very strictly
enforced.
SENATOR SALO remarked that the direct action insurance is
available to some, but not to others and asked what is the
difference.
MR. TREADWELL answered part of it has to do with the position
taken by the P&I clubs. He said approximately 12 people have
been able to get it and about 20 haven't. He added that DEC
enforces the general law on financial responsibility
rigorously and there is 100% compliance.
Number 506
RAY GILLESPIE, Petro Marine Services, Crowley Maritime, and
Delta Western, said his companies do a good percentage of
distribution of refined oil products in the state.
Unavailability of direct action insurance has been a
consistent problem since right after the Exxon Valdez.
Prior to the Exxon Valdez direct action insurance has been
available, but not through the London market which provides
an indemnification type of contract reimbursing operators'
claims. They have never agreed to be sued in every state.
Companies satisfied the requirement prior to Exxon Valdez with
an insurance product that was sold in the U.S. domestic
insurance market. It was a binder of sorts that satisfied the
direct action requirement. After the Exxon Valdez, that
market dried up. No company that operates vessels or shore-
side tank farms has gotten a direct action policy. Those that
have been written are for the upland facilities and some of
the larger exploration companies that fall under another risk
category for insurance than his operators do.
He supported the testimony from DEC and urged them to adopt
the CS as distributed by staff.
Number 544
BILL SCHOEPHOESTER, Petro Marine Service and Association of
Refined Oil Distributors, said he has been working directly
with his insurance company and has not been able to come up
with any direct action insurance he can buy. He urged the
committee to eliminate the temporary nature of the waiver.
SENATOR LEMAN said they would take up SB 239 at their next
meeting and hoped to move it from Committee and adjourned the
meeting at 4:07 p.m.
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