Legislature(1995 - 1996)

09/12/1995 10:00 AM Senate RES

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
                   SENATE RESOURCES COMMITTEE                                  
                       September 12, 1995                                      
                           10:00 a.m.                                          
                         Anchorage, AK                                         
                                                                               
                                                                               
 MEMBERS PRESENT                                                               
                                                                               
 Senator Loren Leman, Chairman                                                 
 Senator Drue Pearce, Vice Chairman                                            
 Senator Steve Frank                                                           
 Senator Rick Halford                                                          
 Senator Georgianna Lincoln (Participated via teleconference                   
                             from Rampart)                                     
                                                                               
  MEMBERS ABSENT                                                               
                                                                               
 Senator Robin Taylor                                                          
 Senator Lyman Hoffman                                                         
                                                                               
 ALSO IN ATTENDANCE                                                            
                                                                               
 Representative Norman Rokeberg, Chairman, House Special                       
   Committee on Oil & Gas                                                      
                                                                               
  COMMITTEE CALENDAR                                                           
                                                                               
 -- ALASKA OIL AND GAS CONSERVATION COMMISSION BRIEFING ON                     
     CONSERVATION ORDER NO. 360 AND SUBSEQUENT ACTION BY AOGCC                 
                                                                               
 -- DEPARTMENT OF NATURAL RESOURCES BRIEFING ON HEARINGS FOR                   
    OPTIMIZATION OF NATURAL GAS LIQUIDS BLENDING AND UTILIZATION OF            
    MISCIBLE INJECTANT WITHIN THE PRUDHOE BAY UNIT AND SUBSEQUENT              
    ACTION BY DNR                                                              
                                                                               
 -- OVERVIEW OF FINAL WORK SESSION REPORT TO RESOURCES COMMITTEE               
                                                                               
 -- AREAWIDE BEST INTEREST FINDING                                             
                                                                               
 -- RESOURCE PERMITTING                                                        
                                                                               
  WITNESS REGISTER                                                             
                                                                               
 David Johnston, Chairman                                                      
 Alaska Oil & Gas Conservation Commission                                      
 3001 Porcupine Drive                                                          
 Anchorage, AK 99501-3120                                                      
                                                                               
 Ken Boyd, Director                                                            
 Division of Oil & Gas                                                         
 Department of Natural Resources                                               
 3601 C St., Suite 1380                                                        
 Anchorage, AK 99503-5948                                                      
                                                                               
 Annette Kreitzer, Staff to Senate Resources                                   
  Committee                                                                    
 State Capitol                                                                 
 Juneau, AK 99801-1182                                                         
                                                                               
 David Sutter, Land Manager                                                    
 ARCO Alaska                                                                   
 700 G St.                                                                     
 Anchorage, AK 99501                                                           
                                                                               
 Steve Porter, Director                                                        
 Exploration Permits Compliance                                                
 ARCO Alaska                                                                   
 700 G St.                                                                     
 Anchorage, AK 99501                                                           
                                                                               
 Brad Penn                                                                     
 Marathon Oil Co.                                                              
 3201 C St.                                                                    
 Anchorage, AK 99501                                                           
                                                                               
 Diane Mayer, Director                                                         
 Division of Governmental Coordination                                         
 Office of Management & Budget                                                 
 Box 110030                                                                    
 Juneau, AK 99811-0030                                                         
                                                                               
 Al Bohn, Manager, Air Quality Permitting                                      
 Air Quality Management Section                                                
 Department of Environmental Conservation                                      
 410 Willoughby Ave., Suite 105                                                
 Juneau, AK 99801                                                              
                                                                               
 Commissioner Frank Rue                                                        
 Department of Fish & Game                                                     
 P.O. Box 25526                                                                
 Juneau, AK 99802-5526                                                         
                                                                               
  ACTION NARRATIVE                                                             
  TAPE 95-61, SIDE A                                                           
                                                                               
 Number 001                                                                    
                                                                               
  CHAIRMAN LEMAN  called the Senate Resources Committee meeting to             
 order in the Anchorage Legislative Information Office conference              
 room at 10:00 a.m.                                                            
                                                                               
 In his opening remarks, SENATOR LEMAN said the current Resources              
 Committee, as well as the previous Resources Committee under the              
 chairmanship of Senator Mike Miller, has been working to identify             
 those impediments to the continued development of oil and gas.  He            
 noted the committee has introduced legislation that it will                   
 continue working on and hold hearings on, however, the purpose of             
 the meeting is not specifically addressed to that legislation,                
 although he believes there are peripheral issues that relate to               
 them.  He then invited David Johnston to make his presentation to             
 the committee.                                                                
                                                                               
 Number 050                                                                    
                                                                               
 DAVID JOHNSTON, Chairman, Alaska Oil and Gas Conservation                     
 Commission, expressed his appreciation for the opportunity to                 
 testify before the committee on Conservation Order No. 360 and the            
 commission's hearings earlier in the year concerning NGL blending             
 and MI utilization in the Prudhoe Bay reservoir.                              
                                                                               
 Mr. Johnston explained that natural gas liquids (NGLs) and miscible           
 injectant (MI) are both produced from natural gas.  NGLs are                  
 saleable and at Prudhoe Bay are blended with the crude oil for                
 transportation to market.  On the other hand,  MI is injected back            
 into the reservoir to recover additional oil as part of an enhanced           
 oil recovery project.  NGLs blended with the oil stream are                   
 principally butane and heavier components often referred to as                
 pentane plus.  NGL components converted to MI are primarily ethane,           
 propane and butane.  The common component, therefore, is largely              
 butane.                                                                       
                                                                               
 He said the dispute between Atlantic Richfield Company (ARCO) and             
 British Petroleum Exploration Alaska (BPXA), in large part, centers           
 on the best use of butane.  In other words, should it be used to              
 make more MI for enhanced oil recovery operations, or to make more            
 NGLs for sale in the marketplace.                                             
                                                                               
 Another point that is important to understand to appreciate the               
 dispute is the Prudhoe Bay equity that exists.   When the Prudhoe             
 Bay unit was formed in 1977, two participating areas were approved:           
 one for the oil rim and one for the gas cap.  Each PA has a                   
 different equity distribution.  For example, BPXA owns                        
 approximately 51 percent of the oil rim, but only approximately 14            
 percent of the gas cap.  ARCO, on the other hand, owns                        
 approximately 22 percent of the oil rim, but approximately 42-1/2             
 percent of the gas cap.  Exxon has about the same situation as                
 ARCO.  The other minor working interest owners own significantly              
 less of both, but, generally, they tend to own more oil than they             
 do gas.  For example, Texaco, who was a participant in these                  
 hearings, owns approximately .5 percent of the oil, but absolutely            
 no gas from the gas cap.                                                      
                                                                               
 The dispute arose when Alyeska, earlier this year, approved an                
 increase in the volume of NGLs allowed for blending.  It                      
 implemented new vapor pressure control criteria that would allow an           
 estimated additional 10 to 20,000 barrels per day of NGLs to be               
 blended with the Prudhoe Bay crude oil.                                       
                                                                               
 The commission first became aware of Alyeska's pending decision in            
 late December 1994.  They immediately wrote the operators, both               
 ARCO and BPXA, to inquire what affect increased NGL blending would            
 have on ultimate recovery from Prudhoe Bay.  The two operators                
 offered quite divergent views.  ARCO stated that increased blending           
 would add approximately 90 million barrels of additional recovery,            
 principally in the form of NGLs.  BPXA stated that increased                  
 blending would reduce the amount of MI available for enhanced oil             
 recovery, which could be used to recover an additional 100 to 200             
 million barrels of oil.  Because of these differences, the                    
 commission decided to hold a hearing to further investigate NGL               
 thru-put, MI utilization and ultimate recovery from Prudhoe Bay.              
 The hearing was scheduled for May.                                            
                                                                               
 In February 1995, Alyeska approved the new blending limits.  On               
 February 9, ARCO increased NGL output to meet the new criteria.               
 BPXA responded by restricting the volume of NGLs blended with                 
 Prudhoe Bay crude at Skid 50.  The result was an impasse with NGL             
 blending remaining unchanged and both companies petitioning the               
 commission for intervention.                                                  
                                                                               
 The commission's public hearing began on May 16 and ran through               
 June 1, 1995.  They reconvened the hearing on June 20 & 21 to allow           
 rebuttal testimony.  Post hearing briefs were required by June 30.            
 The commission rendered its decision, Conservation Order No. 360,             
 on August 9, 1995.  Hearing participants included ARCO, BPXA,                 
 Exxon, Phillips, Shell, Mobile, Texaco, Chevron, Amarada Hess,                
 Marathon, Yukon Pacific, DNR and the Department of Revenue.                   
                                                                               
 Mr. Johnston directed attention to some of the conclusions reached            
 in Conservation Order No. 360 which are:                                      
                                                                               
  No. 6.  Competition exists between the production of blended                 
 NGLs and MIs, but facility upgrade options are available to reduce            
 or eliminate this competition.                                                
                                                                               
  No. 8.  The working interest owners disagree about how their                 
 property and contractual arrangements protect the correlative                 
 rights of both the oil rim owner and the gas cap owners to produce            
 their just and equitable share of oil and gas without waste.  This            
 is possible because of the separate and disparate equity interest             
 between the oil rim PA and the gas cap PA within the Prudhoe Bay              
 reservoir.                                                                    
                                                                               
  No. 9.  It appears that all persons' correlative rights will                 
 best be protected by complete integration of interests in the                 
 reservoir under AS 31.05.110.                                                 
                                                                               
  No. 12.  ARCO and BPXA agree that current production practices               
 are producing physical waste from the Prudhoe Bay reservoir but               
 disagree why.  Current property and contractual arrangements                  
 governing operation and development of the Prudhoe Bay reservoir              
 are inadequate to prevent and may promote physical waste.                     
                                                                               
  No. 16.  At least in the short term, the quantity and rate of                
 production of oil and gas most likely to prevent waste and ensure             
 greater ultimate recovery is to blend for sale the maximum                    
 allowable volume of NGLs.                                                     
                                                                               
  No. 18.  Sufficient evidence has been heard regarding the                    
 effects of property and contractual arrangements on Prudhoe Bay               
 development and operation to convince the commission that the next            
 phase of these proceedings should be more focused on the general              
 investigation previously anticipated.  It appears that more                   
 complete unitization and integration of interest in the Prudhoe Bay           
 oil pool will be necessary to prevent waste, ensure greater                   
 ultimate recovery of oil and gas, and protect the correlative                 
 rights.  Consequently, in the absence of voluntary efforts, further           
 hearings in this matter will be directed toward developing a plan             
 of compulsory unitization.                                                    
                                                                               
  No. 19.  Competition between the gas cap and oil rim has                     
 compromised conservation principles and the development and                   
 operation of the Prudhoe Bay oil pool.  If the competitive effects            
 of disparate equity interests are eliminated, the working interest            
 owners should be able to recommend a cooperative and uniform plan             
 of operation and development to prevent waste and ensure a greater            
 ultimate recovery of oil and gas within the Prudhoe oil pool.                 
                                                                               
 Mr. Johnston reviewed two of the rules of Conservation Order No.              
 360 which are:                                                                
                                                                               
  Rule 1:  Requires the operators to immediately begin producing               
 the maximum volume of NGLs that can be tendered to Taps from the              
 Prudhoe Bay reservoir.  This rule expires in one year.                        
                                                                               
  Rule 2:  Establishes another hearing date which is currently                 
 scheduled for October 24 to begin developing a plan for compulsory            
 unitization of the Prudhoe Bay reservoir.   The hearing may be                
 postponed if the owners are voluntarily working to integrate the              
 separate and competing equities of the gas cap and oil rim.                   
                                                                               
 Mr. Johnston informed the committee that there are two applications           
 for rehearing of Conservation Order No. 360 pending before the                
 commission.  One has been filed by BPXA and the other by Exxon.               
                                                                               
 Concluding his direct testimony, Mr. Johnston introduced                      
 Commissioner Russ Douglas, and then stated he would take questions            
 from the committee.                                                           
                                                                               
 Number 170                                                                    
                                                                               
 SENATOR HALFORD inquired as to the present status of requiring                
 operators to produce the maximum volume of NGLs into the line.  MR.           
 JOHNSTON responded that they have received word that the operators            
 are abiding by the order and NGLs being sent down the pipeline have           
 increased.  He thought it was in the 70,000 plus range.                       
                                                                               
 Number 184                                                                    
                                                                               
 SENATOR FRANK asked how they monitor this so that they know the               
 operators are complying with the order.  MR. JOHNSTON replied that            
 they have inspectors out in the field to verify, but at this                  
 particular point, they are relying on the operators to monitor                
 themselves.  He noted that ARCO is the operator of the central gas            
 facility where the NGLs are produced and they are in control of               
 that process.  BPXA is in control where the NGLs are blended with             
 the Prudhoe Bay crude oil.                                                    
                                                                               
 Number 192                                                                    
                                                                               
 SENATOR LINCOLN said she noted from the testimony that there could            
 be a possible increase of 20,000 additional barrels of NGLs a day,            
 and she asked if there was any kind of time frame for determining             
 when that will peak out.  MR. JOHNSTON replied that the question              
 was not an easy one to answer because the amount of NGLs that can             
 be produced and blended is also a factor of the amount of oil that            
 is being produced on a daily basis.  The order directs the                    
 operators to increase the blending rate, so, presumably, if there             
 was a cutback in oil rate, the percentage of NGLs would still be              
 increased over what would have taken place prior to this order.  He           
 also pointed out that increasing NGLs is a process that takes a               
 little bit of time to unfold.                                                 
                                                                               
 Number 220                                                                    
                                                                               
 SENATOR FRANK asked if the effort is to get the companies to                  
 voluntarily agree to a unitization of the entire Prudhoe Bay field.           
 MR. JOHNSTON answered that they would like to see the separate and            
 disparate equity interests that exist between the gas cap and the             
 oil rim no longer exist.  Instead, they would like to see that                
 there be a common driver within the reservoir so that there is not            
 a built-in incentive to produce gas or to produce oil.  This is               
 based upon the assumption that the current practices they are                 
 seeing right now, which is causing competition between the                    
 production of NGLs versus the production of oil via the enhanced              
 oil recovery process of injecting MI back into the reservoir, is              
 causing not the most optimum development plan being put forth by              
 the operators.  Testimony at the hearings was that waste was                  
 occurring, that ultimate recovery was being affected.                         
                                                                               
 Number 275                                                                    
                                                                               
 SENATOR FRANK asked if the commission's role was to protect the               
 state's royalty interest or the state's general interest, and if              
 there is any conflict there.   MR. JOHNSTON replied that the                  
 commission is there to protect the reservoir, to ensure that that             
 reservoir is properly developed.  In that process, they do try to             
 protect the correlative rights of BP, ARCO and the state of Alaska.           
 He noted that nothing in the AOGCC's statutes really points to                
 considering economics, but it does talk about good oil field                  
 engineering practices.  So, even though the statute does not talk             
 directly to economics, he thinks it is strongly implied.                      
                                                                               
 Number 295                                                                    
                                                                               
 SENATOR FRANK inquired as to the current number of units in Prudhoe           
 Bay.  MR. JOHNSTON responded that DNR and the Alaska Oil & Gas                
 Conservation Commission have different concepts of  "units."  The             
 property at Prudhoe Bay has been unitized where multiple leases               
 have been combined together and are managing as if they were two              
 properties: the gas cap and oil revenue.   The commission would               
 like to see these individual leases brought together and managed as           
 if one property, where there is a common equity that exists between           
 the gas cap and the oil rim.                                                  
                                                                               
 SENATOR FRANK asked if the best way to accomplish the unitization             
 was to allow the companies to voluntarily negotiate that rather               
 than imposing something that may not be as good as a negotiated               
 agreement.  MR. JOHNSTON replied that in his opinion, voluntary               
 efforts are the best way to go.  He said the plan at Prudhoe Bay              
 worked very well for many years, but today they are beginning to              
 see the conflict that is developing between the gas cap and oil               
 rim.                                                                          
                                                                               
 Number 340                                                                    
                                                                               
 SENATOR LEMAN asked if the two were combined, wouldn't the series             
 of percentages be an ever changing thing, and if there wasn't some            
 way to come up with a methodology that would provide equity.  MR.             
 JOHNSTON answered that he believes there is, and he observed that             
 this has been seen in other fields in Alaska such as Point                    
 McIntyre, which has a gas cap and is unitized under one equity.               
 There are not separate equities for the gas cap and for the oil               
 rim.                                                                          
                                                                               
 Number 365                                                                    
                                                                               
 SENATOR HALFORD asked if there are other jurisdictions that have a            
 similar leasing system to what exists at Prudhoe Bay: unitization             
 that is not complete.  MR. JOHNSTON said the participants in the              
 hearing were asked if they could refer to any other field in the              
 U.S. where a dual equity like this existed, and they could not                
 refer to another example of a reservoir that had this split.                  
                                                                               
 SENATOR HALFORD asked if the statutory framework actually allows              
 for what exists at Prudhoe Bay.  MR. JOHNSTON answered that in                
 looking at the statute, a reservoir can be developed without                  
 unitization; the properties do not have to be integrated.  The only           
 time that you have to integrate is if you start violating                     
 conservation principles.  He further explained that the commission            
 does not feel that Prudhoe Bay has been fully unitized, although              
 there has been an attempt.  The property rights have been                     
 integrated as it pertains to the gas, and they have unitized as it            
 pertains to the oil, but, essentially, two properties have been               
 created.                                                                      
                                                                               
 Number 435                                                                    
                                                                               
 SENATOR PEARCE commented that in 1992 she sponsored a bill in which           
 the only change made was that the chairman of the commission cannot           
 succeed himself or herself, but as a part of that, there were long            
 and involved discussions over whether or not the commission should            
 be allowed to regulate, not only for conservation purposes, but               
 also for economic purposes.  The problem with the statute is that             
 the commission is given jurisdiction and authority to carry out the           
 purposes of the chapter, but there is never a purposes section in             
 a chapter.  A policy decision was made in 1992 by the legislature             
 and the administration not to add economics to the powers and                 
 duties of the commission.  She said that since they chose not to              
 put it in the statute that it is silent and there is not a common             
 thread of economic recovery throughout the statute.  MR. JOHNSTON             
 agreed that there are not specific references to economics in the             
 statute, although they are sensitive to those cites and they look             
 at it as to what constitutes good oil field engineering practices.            
 SENATOR PEARCE responded that that was good common sense, not                 
 economic sense, but what she is talking about is that they are not            
 there to maximize the state's take from an oil field by deciding              
 that they are going to lower the take now to raise it later, or               
 vice versa.                                                                   
                                                                               
 Number 510                                                                    
                                                                               
 SENATOR HALFORD observed that from the whole history of this                  
 commission, economics has always been a thread that has been there;           
 it doesn't have to be stated directly.   He questioned what is                
 being conserved if there is no economics.                                     
                                                                               
 Number 545                                                                    
                                                                               
 SENATOR LEMAN asked Mr. Johnston if he had any comments on the                
 jurisdiction argument, other than just to acknowledge that it                 
 exists.  MR. JOHNSTON said there have been some questions of                  
 jurisdiction, and on those questions the commission has already               
 ruled that clearly they do have jurisdiction in this regard.  They            
 have jurisdiction over voluntary units on state lands, federal                
 lands, etc.                                                                   
                                                                               
 SENATOR LEMAN inquired if it was possible that there is overlapping           
 jurisdiction with DNR.   MR. JOHNSTON responded that if DNR renders           
 a decision that is in direct conflict with the commission's, it may           
 be a decision that only the courts can render, or it may be that              
 the legislature may want to clarify its intent.  He pointed out               
 there is some overlapping language in the two statutes.                       
                                                                               
 Number 645                                                                    
                                                                               
 SENATOR HALFORD asked if the commission has the independent                   
 authority to hire counsel and MR. JOHNSTON clarified that the                 
 statute says the Department of Law will provide full-time legal               
 counsel to them, but that they have the right to contract.  SENATOR           
 HALFORD pointed out that it could be the ultimate question if there           
 is conflict between DNR and the commission and the attorney general           
 represents both of them.                                                      
                                                                               
 Number 610                                                                    
                                                                               
 SENATOR LEMAN thanked Mr. Johnston for his participation in the               
 hearing and then invited Ken Boyd to make his presentation.                   
                                                                               
 KEN BOYD, Director, Division of Oil & Gas, Department of Natural              
 Resources, stated that DNR's hearing is ongoing so there is a fair            
 constraint on what he can say.                                                
                                                                               
 Mr. Boyd said DNR held hearings in August, and on October 3 there             
 will be closing oral statements by the participants, as well as an            
 opportunity for the public to comment, with the written public                
 comment period closing on October 13.  After that, the commission             
 will render its decision.                                                     
                                                                               
  TAPE 95-61, SIDE B                                                           
 Number 001                                                                    
                                                                               
 Mr. Boyd commented that with all of the testimony in these                    
 hearings, he has to believe that somebody believes that there is an           
 authority question here, having spent this much time, money and               
 effort on it.  He said the authority question is one that                     
 Commissioner Shively would like to see addressed in a separate                
 hearing and would like to address personally.  SENATOR LEMAN said             
 when the timing is appropriate, the committee would be interested             
 in airing the authority question and having Commissioner Shively's            
 input.                                                                        
                                                                               
 Number 020                                                                    
                                                                               
 SENATOR FRANK asked if DNR's  hearings were addressing the same               
 issues as AOGCC.  MR. BOYD responded that some of their issues are            
 undoubtedly the same, and they have built on the commission's                 
 hearing and went off in a different direction, incorporating some             
 of the same things.  He also clarified that unitization is not part           
 of their current hearing, instead it focuses more on the side of              
 the NGLs and MI.  However, when the commission does have a hearing            
 on unitization, DNR may become involved or have a separate hearing.           
                                                                               
 Number 050                                                                    
                                                                               
 SENATOR LEMAN voiced his concern that there appears to be a                   
 duplication of effort which means a duplication of a lot of money             
 and time for those who are participating.  He asked if it really              
 makes sense to have a duplication of effort and if there is a need            
 to streamline.  MR. BOYD agreed that there was some duplication and           
 when dealing with this kind of issue there is some repetition.  DNR           
 did incorporate the AOGCC testimony into their hearing.                       
                                                                               
 Number 065                                                                    
                                                                               
 SENATOR PEARCE asked if Mr. Boyd would do a walk through from a               
 lease sale, exploration, and announcement of a discovery, and then            
 what happens in what order.  MR. BOYD explained there is a lease              
 sale and they occur in 3 mile by 3 mile blocks, with a number of              
 companies bidding on all these tracts.  When the bidding is done,             
 there is a number of leases and the companies get together with the           
 state and make a decision that it would be in the best interest of            
 everybody to unitize it.  In other words, to take the interest and            
 decide what's under all these leases.  Then as to positions of                
 lease ownership, to divide this up into a unit that has a position            
 of ownership.  Instead of spending individual resources and                   
 developing each individual well, it makes sense to pool the                   
 resources, drill common wells and share the difference based on               
 ownership.  Those decisions are made through unit agreements and              
 negotiation.  The department has discussions with the unit owners             
 as to what the production from each of the individual pieces of the           
 unit will be.                                                                 
                                                                               
 Number 125                                                                    
                                                                               
 SENATOR PEARCE asked if when the companies bring to DNR a                     
 unitization agreement to produce a particular pool, does DNR have             
 the ability to say that a company, such as BP, should own 35                  
 percent instead of 40 percent.  MR. BOYD responded it is more to              
 the ownership of how much oil is under the particular tract, not so           
 much who owns what.  He also acknowledged that there can't be                 
 production until there is a signed unitization agreement.  There              
 also must be an operating agreement signed by the operator and DNR.           
                                                                               
                                                                               
 Number 155                                                                    
                                                                               
 SENATOR LEMAN thanked Mr. Boyd for appearing before the committee             
 and stated the next item on the agenda would be an overview of work           
 sessions that have been held during the interim on various issues             
 of interest to the committee.                                                 
 ANNETTE KREITZER, staff to the Senate Resources Committee, gave               
 brief background information on the gathering of information                  
 contained in the Best Interest Finding and Permitting Report.  She            
 stressed that the report is her interpretation of the anecdotal               
 comments of those who were interviewed and those who attended the             
 work sessions.  The purpose of the report is to bring the                     
 permitting issue and the areawide best interest finding issue to              
 the committee's attention. She noted that there are two slightly              
 different viewpoints at this time, and there may be more as the               
 issue of a best interest finding is discussed further.                        
                                                                               
 Ms. Kreitzer pointed out that several bills passed recently by the            
 legislature, such as SB 238 and SB 308, began to deal with the oil            
 and gas lease sale process, the hearings that go on, the coastal              
 zone process.  However, there is some concern that the hearing                
 process adopted in SB 238 has been lengthening the permitting                 
 process with no real gain or real value added to the process.                 
 There may not be the value in the addition of that hearing process            
 because the companies are having to address the same facts over and           
 over, and that is a factor of having the same land up for lease               
 over and over again, and she believes that is why this best                   
 interest finding idea has come to the forefront.                              
 In checking with Jack Chenoweth, legislative counsel, he stated               
 there were no prohibitions, but he said it depends on what the                
 final idea would like if it were to come before the committee for             
 consideration.                                                                
                                                                               
 Ms. Kreitzer also noted that Jim Eason, a consultant to the                   
 Resources Committee last session, mentioned a bifurcated best                 
 interest finding process as another option to consider.                       
                                                                               
 Number 260                                                                    
                                                                               
 SENATOR PEARCE requested that Frank Rue comment on a reference made           
 in the report to a question posed by Fish and Game to DNR relating            
 to isostatic rebound as a source of geologic instability, which was           
 a concern contained in the preliminary findings for the Yakataga              
 sale.                                                                         
                                                                               
 FRANK RUE, Commissioner, Department of Fish & Game, testifying via            
 the teleconference network from Juneau, responded that it was not             
 the most significant concern they had.  In the situation of the               
 Bering Glacier retreating at approximately 100 feet a day and where           
 there is very active glaciation, isostatic rebound is a factor in             
 earthquakes in other parts of the world.  The question was easily             
 dispensed with by DNR who said the rate of rebound is very slow.              
 DNR has got information on how rapidly the land is rebounding, and            
 they were able to deal with the question very simply, he said.                
 Whether it is a good example of the kind of question they should              
 raise or not, he thinks it is worth looking at.  He added that DNR            
 dealt with the question and it did not become a major point of                
 contention.                                                                   
 Number 300                                                                    
                                                                               
 ANNETTE KREITZER, in clarifying the reference made to the isostatic           
 rebound question in the report, said that is not one big thing that           
 is a problem in the permitting process or best interest finding               
 process, it is a lot of small things.  She said it may not be a               
 typical question that Department of Fish and Game employees ask,              
 but it adds to the costs of all these processes that the companies            
 have to go through.                                                           
                                                                               
 Continuing with the report and the best interest finding process,             
 Ms. Kreitzer said she noted there was some discussion about whether           
 a five-year oil and gas lease sale at this point in the state's               
 history is too long a period of time.  She corrected a                        
 mischaracterization in the report - at least one small company who            
 faxed her said that they still feel that five years is too long.              
                                                                               
 Addressing the permitting issue, Ms. Kreitzer said there was                  
 discussion during the work sessions on how important permitting is            
 in factors of decisions about investing in Alaska.  There are                 
 questions about the ability of government departments to be                   
 efficient in permitting matters.  Instead of phoning or faxing for            
 additional information, letters are sent to permittees resulting in           
 additional time delays.                                                       
                                                                               
 There is also concern that there needs to be good interaction                 
 between state and federal governments in the issuance of permits.             
 Memorandums of Understanding to facilitate interaction between                
 state and federal agencies did exist at one time and they may need            
 to be updated.                                                                
                                                                               
 There is concern that a lot more days are being added on to the               
 permitting process because of the stopping the clock to answer                
 questions asked in letters.                                                   
                                                                               
 There is concern that there isn't comment from agencies until the             
 last day for review.                                                          
                                                                               
 There was consensus that the Alaska Coastal Management program                
 works pretty well because of its consensus nature.  It was felt               
 that it was helpful that it forces the other agencies to follow a             
 deadline.                                                                     
                                                                               
 There was consensus that inexperienced staff, plus reorganization             
 at DEC may be hampering the Air Quality Permitting program.                   
                                                                               
 There was some concern that the Coastal Zone standards could either           
 be tightened or that some of those activities could be added to the           
 "B" List to expedite the permitting.                                          
                                                                               
 The final issue of concern was shared costs.  Departments, because            
 of budgetary concerns, will enter into agreements with companies to           
 expedite permits.  Ms. Kreitzer said she tagged it onto the report            
 as something that is happening and may be something the committee             
 would want to look at further.                                                
                                                                               
 Number 470                                                                    
                                                                               
 SENATOR LEMAN stated the committee would move on to the next item             
 on the agenda which was areawide best interest findings.                      
                                                                               
 DAVID SUTTER, Land Manager, ARCO Alaska, informed the committee               
 that the presentation he was making before the committee was almost           
 identical to the presentation he made to Oil & Gas Policy Council             
 approximately four weeks ago.                                                 
                                                                               
 Mr. Sutter said one of the problems with exploration and with the             
 leasing program is that there hasn't been a lease sale in almost              
 two years.  Secondly, the lease sales that are scheduled are broken           
 up with one scheduled for this year and the next one not for                  
 another two years.  This means waiting until two sales occur before           
 being able to lease a prospect.                                               
                                                                               
 Also, there is the economic factor, and they would not want to go             
 out and spend the kind of money it takes to drill on the North                
 Slope if they knew they were going to eventually own only half of             
 the prospect.  He said it would be better for the company to just             
 wait and get the entire prospect leased up before they invest money           
 to drill.   As a result, the company goes and leases in other parts           
 of the world.                                                                 
                                                                               
 Mr. Sutter outlined the following recommendations made to the Oil             
 & Gas Policy Council which include: identifying core areas in the             
 state of Alaska that are already established as far as oil and gas            
 producing areas; DNR conduct an areawide best interest finding for            
 these areas initially; update the best interest finding at least              
 every five years; the core areas would be offered for lease on an             
 annual basis; and delete the acreage in the core areas that had               
 objections.                                                                   
                                                                               
  TAPE 95-62, SIDE A                                                           
 Number 015                                                                    
                                                                               
 SENATOR FRANK commented that he would be interested, at some future           
 time, for the committee to have a briefing on what the state has              
 under lease, how many leases are under production or part of a unit           
 under production, and the status of all the leases.  He said he's             
 under the impression that there are many, many leases that aren't             
 being produced, etc., and he wonders why.  MR. SUTTER responded               
 that one of the concessions ARCO has talked about is that the lease           
 terms could be shortened by going to an areawide lease sale.  That            
 would force the oil companies to get out there and drill or do                
 something before the primary term expires.                                    
                                                                               
 SENATOR FRANK asked if the bonus bid issue was a good idea versus             
 some other system that doesn't require that kind of up-front                  
 expenditure.  MR. SUTTER answered that he would not change the                
 current system, which is the sealed bonus bid, because he thinks it           
 is the best one going in trying to maximize revenues for the state            
 of Alaska.  He suggested shortening the lease term before worrying            
 about changing the bonus system.                                              
                                                                               
 Number 050                                                                    
                                                                               
 SENATOR LEMAN said it was the committee's express interest two                
 years ago to get more exploration going sooner rather than later,             
 and to identify things that could be done and begin a discussion on           
 that.                                                                         
                                                                               
 Mr. SUTTER reiterated that the recommendation to shorten the lease            
 term is conditioned upon having an areawide lease sale.  He                   
 cautioned that just shortening the term, but staying with the                 
 current program is going to scare even more people out of the                 
 state.                                                                        
                                                                               
 Number 070                                                                    
                                                                               
 SENATOR FRANK asked what the sense was in DNR having leases within            
 a prospect held at two different times.  MR. SUTTER responded that            
 a lot of it is the way the industry has nominated it, a lot of it             
 is based on what becomes available at the time it's offered.  Also,           
 a lot of it has do with just the manpower DNR needs to be able to             
 do the best interest finding for that lease, as well as being able            
 to clear the title on it.  He also pointed out that it is the                 
 industry's responsibility in dealing with DNR to convey what they             
 are interested in and let them know what level of interest they               
 have.  He acknowledged that in the past they probably haven't been            
 very good at doing that.                                                      
                                                                               
 Number 175                                                                    
                                                                               
 MR. SUTTER also spoke to two leases that were issued in Kuparuk:              
 one issued prior to the field discovery and one that was issued               
 about four years.  He noted there were 10 pages of stipulations               
 added to one lease four years ago, and he believes the place for              
 the stipulations is in regulations so that they apply to all                  
 leases, not just individual tracts.  SENATOR PEARCE questioned how            
 that kind of system could work, as well as making it conform with             
 coastal zone management.  She said it would require constantly                
 changing the regs to come up with whatever the latest request is.             
 SENATOR HALFORD agreed that there are probably too many                       
 stipulations, but he said in an ideal world they are probably a lot           
 fairer than added regulations after the fact which change the                 
 rules.                                                                        
                                                                               
 SENATOR LEMAN questioned how long it would take to go through the             
 regulation process in a nonemergency situation.  KEN BOYD responded           
 that it would take anywhere from six to eight months or longer.               
                                                                               
 SENATOR PEARCE asked how DNR gets comments from the oil companies             
 on stipulations that are part of a lease sale plan.  KEN BOYD                 
 responded that it is a continuing operation of talk and                       
 conversation, but, formally, it is through the finding process                
 where they are developing what mitigating measures are going to be            
 included in the lease sale and there is the opportunity to comment.           
                                                                               
                                                                               
 Number 245                                                                    
                                                                               
 In his final comments MR. SUTTER said the recommendation from ARCO            
 is that not only is an areawide best interest finding needed, but             
 it should go one step further with areawide leasing.  He said his             
 recommendation is to not only give DNR the flexibility to do their            
 job, but to give them the appropriations to do so.                            
                                                                               
 Number 275                                                                    
                                                                               
 SENATOR HALFORD agreed that DNR should have flexibility to do their           
 job, but he pointed out there are two kinds of flexibility.  One              
 flexibility that some people are concerned with is the flexibility            
 for different interpretations after the fact.  He thinks the kind             
 of things that do the most good in terms of change are things that            
 are applied universally to all of the competitors, that encourage             
 the competitors to fight it out to see who wins, not the things               
 that are done after the fact for one or the other competitor.                 
                                                                               
 Concluding, MR. SUTTER stressed that DNR is short on staffing and             
 an areawide leasing program is going to tax their staff                       
 considerably.                                                                 
                                                                               
 Number 340                                                                    
                                                                               
 KEN BOYD noted that Commissioner Shively is interested in getting             
 the lands leased as fast as possible, but still with the                      
 responsibility that we have for that ownership and to mitigate                
 properly.  The thing that slows leasing down is the finding, and              
 the passage of SB 308 lengthened the process by requiring a                   
 preliminary finding.  He added that DNR believes that at least                
 areawide findings are something that can probably work.                       
                                                                               
 In response to Senator Frank's request earlier in the meeting that            
 the committee be briefed on the status of current leases, upcoming            
 lease sales, etc., KEN BOYD outlined the following:                           
                                                                               
  Sale 80:  This is the Shaviovik sale.  The finding came out                  
 one week ago, and the sale will be held on December 5.                        
                                                                               
  Sale 79:  It was scheduled to held in October, however,                      
 Commissioner Shively has not yet decided when he wants to issue               
 that finding and when to hold that sale.                                      
                                                                               
  Sale 85 A:  It is a reoffering sale in the Cook Inlet                        
 scheduled for November 29.  It will go to a preliminary finding               
 early next year.  The public will have 60 days to comment on the              
 finding once it is created.  A number of acres have been added back           
 in the Caribou Hills area at the request of SIRI and Union Texas              
 Petroleum.  However, there is still opposition because the local              
 people are concerned about damage to their aquifer from oil and gas           
 development, and there are discussions going on in the area to                
 resolve that issue.                                                           
                                                                               
 Mr. Boyd also noted a large North Slope sale is scheduled for 1997.           
                                                                               
 Number 565                                                                    
                                                                               
 SENATOR PEARCE asked for a clarification on a complaint from                  
 persons in Cordova to the Coastal Policy Council relating to Sale             
 79.  DIANE MAYER, Director, Division of Governmental Coordination,            
 acknowledged that several citizens petitioned the council regarding           
 DNR's consistency determination for Lease Sale 79 and the council             
 determined that those appeals didn't have standing under the law.             
 One individual took that decision to court to see if the council              
 erred in making that decision, and that is in court right now.                
                                                                               
  TAPE 95-62, SIDE B                                                           
 Number 045                                                                    
                                                                               
 SENATOR PEARCE asked Mr. Boyd if the status of that suit has had              
 any bearing on Commissioner Shiveley's indecision so far on Lease             
 Sale 79.  KEN BOYD responded that he didn't think so, but they have           
 been tracking it as to whether it stops any part of the process,              
 and so far, it has not.                                                       
                                                                               
 Number 055                                                                    
                                                                               
 SENATOR LEMAN stated the final item on the agenda was a                       
 presentation by Steve Porter of ARCO and Brad Penn of Marathon Oil            
 on resource permitting.                                                       
                                                                               
 STEVE PORTER, Director, Exploration Permits Compliance, ARCO                  
 Alaska, said the goal of oil and gas development in Alaska is to              
 identify those areas that the company wants to lease, that the                
 public wants to lease, that the representative government wants to            
 lease to create a lease sale process that is efficient, protects              
 the public, protects the environment, and encourages the oil and              
 gas industry through incentives.  The oil and gas industry is not             
 concerned with the standards that are placed before it in terms of            
 compliance with those standards.  It is not the standards that seem           
 to be the problem, but, rather, the methodology on how the                    
 standards are applied to a specific application.                              
 He noted that the energy facility standards in statute give the               
 state and the industry very specific support for how to go about              
 developing a field.  However, he pointed out that sometimes the               
 process gets slowed down through the state's process, and sometimes           
 there are situations where the owners can't agree on facility                 
 relationships.  Sometimes the industry will be in conflict and when           
 they can't resolve the conflict, they may move forward with a                 
 situation that is not in their best interest or in the state's best           
 interest just because they can't resolve the conflict.                        
                                                                               
 Addressing exploration and process issues, Mr. Porter said from a             
 coastal zone consistency standpoint and from an operations                    
 standpoint, the very first thing a company must do is to inform the           
 public and the agencies what their plan is and to receive feedback            
 from that.  The public hearing process is a method of feedback and            
 the identification of concerns, but the one thing that the process            
 fails to do is that it is not a consensus building process; it is             
 an advocacy type of a process.  He suggested there has to be a                
 different methodology for moving forward; there has to be some type           
 of consensus building process.  Once all of the feedback and all              
 the analysis is received, at that point, a company makes a sound              
 decision and they either move forward or don't.                               
                                                                               
 Speaking to the Coastal Policy Council and the Alaska Coastal                 
 Management program, Mr. Porter said it is a good program, but it is           
 a complex process that creates enough uncertainty in the oil                  
 industry that it makes companies reticent to come to Alaska to                
 spend their money.  He suggested the industry would like to see a             
 less complex process with certainty in that process.                          
                                                                               
 Number 210                                                                    
                                                                               
 SENATOR PEARCE said the federal act is the underlying act in the              
 coastal zone process, and she asked if some state within the United           
 States has done a better job in building this process.  MR. PORTER            
 responded that coastal zone management is having difficulty dealing           
 with problems, so the question is if there is a better way to deal            
 with conflict.  Florida has created a mediator type of process                
 where the two sides identify a mediator and the mediator sits down            
 with the parties and helps them try to come to a consensus.  If the           
 parties can't come to a consensus, the mediator becomes the                   
 arbitrator of the decision.  However, the Florida law does not                
 become effective until October, so there is no experience with the            
 process.                                                                      
                                                                               
 Number 265                                                                    
                                                                               
 MR. PORTER said he has had concerns with the Coastal Policy Council           
 because there has been a time where there has been a                          
 misunderstanding and mistrust of exactly what the Coastal Policy              
 Council is supposed to do.  He said if they waste thousands of                
 dollars reviewing, analyzing and making a decision on every single            
 petition that comes to them, and then, if every single petition               
 still goes to court, they didn't help anything.  The Coastal Policy           
 Council became a waste of time; it became one more loop in the                
 process without adding any value.                                             
                                                                               
 He pointed out that the Coastal Zone Management Act is up for                 
 reauthorization this year, and he suggested there is the                      
 opportunity to try all kinds of things to see what works and, in              
 essence, lead the nation in coastal management issues.                        
                                                                               
 SENATOR LEMAN commented that if the Coastal Zone Management Act is            
 up for reauthorization, this is the time for the state and the                
 industry to be involved and make some changes.  MR. PORTER said he            
 spends a lot of his time basically filing permits, and, if the                
 complexity of the process could be minimized, they might have more            
 time for the other.  He said the federal law provides enough                  
 latitude to do a lot at the state level, and they haven't                     
 identified anything specific in the federal law that needs to be              
 changed, so he thinks the focus should be on the state program.               
                                                                               
 Number 350                                                                    
                                                                               
 MR. PORTER then outlined the various permits required for their               
 Bufflehead Project:  there is an AOGCC permit to drill, a BLM                 
 permit to drill; an oil spill plan that cost $20,000 to prepare; an           
 environmental assessment for a permit for the right-of-way which              
 cost $20,000 to prepare; the permit issued by the U.S. Fish and               
 Wildlife Service which cost $5,000; the coastal resource clearance            
 cost a couple of thousand dollars; and the air quality control                
 permit which cost $3,500.                                                     
                                                                               
 Mr. Porter pointed out that the air quality control permit is about           
 16 hours worth of work for the agency that is taking about 40 hours           
 to complete, and the oil and gas industry is being billed on an               
 hourly basis.  He said he thinks there are better ways to create an           
 efficient operation that encourages efficiency and addresses some             
 of the struggles the industry has with the overhead.  He noted                
 there has been talk of going to a fee basis, and he suggested going           
 to a contractor basis also where the agency would choose a list of            
 contractors that are reviewers for permits, and to let the oil                
 industry choose the contractor.  That brings the quality of the               
 contracts up, it brings the quality of the work up and it brings              
 the costs down.                                                               
                                                                               
 Number 500                                                                    
                                                                               
 SENATOR LEMAN, in speaking to the air quality program, said the               
 Legislative Budget & Audit Committee has said it is premature to be           
 auditing a program that is just getting started, but he will be               
 discussing the issue with Commissioner Burton to make sure that DEC           
 is not inappropriately charging or is being inconsistent in those             
 charges.                                                                      
 MR. PORTER pointed out that costs for the permitting process itself           
 are probably in excess of $100,000 per well.                                  
                                                                               
 As a recommendation on a way the process can change, MR. PORTER               
 suggested developing a single plan of operations that actually has            
 all the information for all the permits and is in chronological               
 order and makes sense.  Instead of producing 15 permits that all              
 duplicate themselves on a lot of the information, he suggested                
 having a plan of operations, but also keep all the regulations in             
 place, keep all the environmental concerns in place and keep all              
 the reviewers in place in terms of the agencies.                              
                                                                               
 SENATOR LEMAN agreed that those are the types of things that need             
 to be looked at in finding a way to make the process easier for the           
 reviewers and easier for the people applying for the permits.                 
                                                                               
 Returning to the Bufflehead project, MR. PORTER said it started in            
 May 1994, and it is anticipated that they will start drilling the             
 well this week.  He attributed a lot of the problem in taking that            
 length of time in getting to this point on the federal agencies,              
 not the state agencies.  He suggested getting the federal agencies            
 to interact with the state's process and to get them to buy off on            
 our time lines up front in order to give the industry some                    
 certainty about how to get the permits completed.  He added that on           
 the whole, the state agencies are more responsive and understanding           
 to the industry's needs.                                                      
                                                                               
  TAPE 95-63, SIDE A                                                           
 Number 005                                                                    
                                                                               
 Concluding his presentation, MR. PORTER also suggested that one of            
 the things that should be examined and should be encouraged is                
 putting the permitting process on the Internet because a lot of the           
 concern that comes from their remote districts is the 10 to 15-day            
 turnaround time and this would help speed up the process.                     
                                                                               
 Number 065                                                                    
                                                                               
 BRAD PENN, representing Marathon Oil Co. in Anchorage, noted he is            
 also chairman of AOGA's Land, Exploration & Operations Committee,             
 and he stated AOGA is supportive of the areawide best interest                
 finding.  The specifics of lease terms and whether it's an entire             
 areawide offering or specific areas have not yet been addressed by            
 the committee.                                                                
                                                                               
 In addressing the permitting process, Mr. Penn said he thinks the             
 process is good in intent to have DGC be the coordinating agency to           
 go out and collect comments.  However, he believes the problem is             
 that their authority is just in regulation and not in statute.                
 There is a 50- to 55-day time frame for projects for coastal zone             
 consistency review, but the abuses of the system come when an                 
 agency will ask a valid question and the clock is stopped.  He                
 suggested that if DGC is going to be the coordinating agency,                 
 besides giving them tough people to enforce the regulation, give              
 them some teeth in what they are enforcing as far as coordinating             
 a response under the coastal zone consistency determination.                  
                                                                               
 Mr. Penn also spoke to performance standards.  He said no matter              
 whether you drill a well in the Kenai gas field or Clam Gulch or              
 Beaver Creek, there is a certain set of standards that are similar            
 for that well.  He suggested one thing that might work is to move             
 the approval of an exploratory well on to what is called the "B               
 list," the general concurrence that that activity would be approved           
 if they met these performance standards, and the only time it would           
 be necessary to ask for another permit would be if they were going            
 to exceed those standards for one reason or another.                          
                                                                               
 Number 145                                                                    
                                                                               
 SENATOR LEMAN said he thought there was a general permit to which             
 you attach certain specifics.  MR. PENN said what he was suggesting           
 was that list be expanded to include something like exploratory               
 wells, because right now just getting the minor things on the list            
 has been a battle.                                                            
                                                                               
 Number 180                                                                    
                                                                               
 DIANE MAYER, Director, Division of Governmental Coordination, said            
 she thought the presentations by the previous speakers of what's              
 happening had been fairly accurate, and some of the suggestions               
 they brought forward have merit.                                              
                                                                               
 Ms. Mayer said the coastal program has a progression to it in that            
 it does have a lot of complexity.  The consistency process which              
 was put into the program had the real single objective of trying to           
 bring the agencies together with their permit authorities to look             
 at a proposal at the same time.  They established for Alaska, at              
 least in coastal areas, a project-based review, which was a real              
 leap forward to solve a lot of the problems of redundancy.                    
                                                                               
 In assessing the program, along with that design and now its                  
 implementation, there has been a lot of expectation with different            
 parties about what they thought it was or how it should work.                 
 Also, some of the practices and processes put in place, while they            
 were really innovative and made a big leap forward in their time,             
 have become more formalized and actually part of the bureaucracy.             
 There have been shifts largely because of the petition process and            
 the appeal mechanism.  She said they are looking at the program               
 overall and doing an assessment of what is working, what isn't                
 working, what needs to be updated, etc.                                       
                                                                               
 Speaking to suggestions that have been made during the meeting, Ms.           
 Mayer said she is completely open to suggestions and is willing to            
 take a hard look the program and how it might be streamlined and              
 made more effective.                                                          
                                                                               
 Ms. Mayer also pointed out that the whole program was initially               
 authorized under the Federal Coastal Zone Management Act, and a lot           
 of the problems they are struggling with are just legal or                    
 regulatory things in the state law, and they can do a lot by really           
 fixing their program.  She added that the feds essentially give the           
 state an enormous amount of power and a considerable amount of                
 money.  For instance, right now, with a federal grant, DGC has a              
 person onboard to basically work out and bring up to date their MOU           
 package and make sure that their relationship and understanding               
 with federal agencies is clear.                                               
                                                                               
 Number 290                                                                    
                                                                               
 AL BOHN, Manager, Air Quality Permitting, Department of                       
 Environmental Conservation, said that division has undergone a                
 reorganization and there are now two layers of management that are            
 gone in the permitting process, so the whole process has become               
 more streamlined.                                                             
                                                                               
 Addressing Mr. Porter's concern that an air quality permit for the            
 Bufflehead project, which he said should have taken the agency 16             
 hours instead of the 40 hours they were billed for, Mr. Bohn said             
 he is now reviewing all timesheets, and, if this had crossed his              
 desk, he would have investigated it much further, but he also                 
 pointed out that Mr. Porter had the opportunity to dispute some or            
 all of the charges, so there was some recourse for him if he felt             
 these charges were out of line.                                               
                                                                               
 Mr. Bohn said he is aware of Mr. Penn's concern with the Kenai gas            
 wells, and he offered to work with Mr. Penn on some other                     
 strategies to avoid another occurrence of any kind of a problem               
 that he has.                                                                  
                                                                               
 Since reorganization of the air quality division, Mr. Bohn said               
 they have tightened up their procedures and streamlined them to a             
 great effect.  He has experienced staff averaging 7.2 years of                
 industry experience.  Their core group of nine people is currently            
 servicing 238 permittees, and looking toward the implementation of            
 the new permit program sometime in November after EPA approval,               
 these same nine people will be servicing somewhere between 450 and            
 600 permittees.  He said they have to establish streamlined                   
 procedures, and they will become more of an assembly line rather              
 than a piece work shop that they were in the past, which will allow           
 some economies in processing these applications in a timely                   
 fashion.                                                                      
                                                                               
 Number 375                                                                    
                                                                               
 SENATOR LEMAN asked if there is a system in place now so that they            
 can say with confidence that the charges for an air quality permit            
 are going to be reasonable.   MR. BOHN responded that it is not a             
 documented system; each review is done on a case-by-case basis.               
 With the numbers that were used when developing the original permit           
 fees for the current operating permit program, the number of hours            
 that they estimated for retainer purposes generally work out pretty           
 close to the time it should actually take, give or take certain               
 spins on things.  He also acknowledged that he sets tough deadlines           
 on issuing permits.                                                           
                                                                               
 Number 440                                                                    
                                                                               
 Responding to an inquiry from Senator Frank, MR. BOHN explained               
 that there are nine people in the permitting group since the                  
 reorganization.  In addition to the air quality permit group, there           
 is also a compliance and develop group under the air quality                  
 maintenance section.                                                          
                                                                               
 SENATOR FRANK noted that at the time the air quality standards went           
 into effect, the department requested approximately 43 new people,            
 which the legislature resisted, and he asked how many were                    
 approved.  MR. BOHN said there are currently 32 employees in the              
 division.                                                                     
                                                                               
 Number 500                                                                    
                                                                               
 FRANK RUE, Commissioner, Department of Fish & Game, stated he                 
 appreciates the efforts of both Mr. Porter and Mr. Penn to point              
 out some of the positive things that can be done and things that              
 can be avoided.  Some of the ideas that have been floated during              
 the meeting are things that they have been working on and will                
 continue working on.  He agreed that issues with the Coastal Policy           
 Council need to be worked out, but he added that it is really an              
 issue of the public and district having a voice in the process that           
 agencies are already in.  He also expressed his interest in                   
 discussing specific issues with either Mr. Penn or Mr. Porter                 
 because he does not want to be treating industries differently than           
 he would the public.                                                          
                                                                               
 Number 565                                                                    
                                                                               
 In his closing comments before adjourning the meeting, SENATOR                
 LEMAN thanked the participants and encouraged them to share                   
 highlights of the meeting with their colleagues, and he stressed              
 that the committee is serious about wanting to make some of these             
 changes that will make government friendlier, more efficient and              
 will get things done at less cost.  He then adjourned the meeting             
 at approximately 2:00 p.m.                                                    
                                                                               

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