Legislature(1995 - 1996)

01/10/1996 03:35 PM Senate RES

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
                   SENATE RESOURCES COMMITTEE                                  
                        January 10, 1996                                       
                           3:35 P.M.                                           
                                                                               
 MEMBERS PRESENT                                                               
                                                                               
 Senator Loren Leman, Chairman                                                 
 Senator Drue Pearce, Vice Chairman                                            
 Senator Steve Frank                                                           
 Senator Rick Halford                                                          
 Senator Robin Taylor                                                          
 Senator Georgianna Lincoln                                                    
 Senator Lyman Hoffman                                                         
                                                                               
  MEMBERS ABSENT                                                               
                                                                               
 None                                                                          
                                                                               
  COMMITTEE CALENDAR                                                           
                                                                               
 Overview of State Oil and Gas Leasing by Ken Boyd, Director,                  
 Division of Oil and Gas                                                       
                                                                               
    WITNESS REGISTER                                                           
                                                                               
 Ken Boyd, Director                                                            
 Division of Oil and Gas                                                       
 Department of Natural Resources                                               
 400 Willoughby Ave.                                                           
 Juneau, AK 99801-1796                                                         
                                                                               
  ACTION NARRATIVE                                                             
                                                                               
  TAPE 96-1, SIDE A                                                            
                                                                               
 Number 001                                                                    
                                                                               
  CHAIRMAN LEMAN  called the Senate Resources Committee meeting to             
 order at 3:35 p.m. and announced an overview of State oil and gas             
 leasing by Ken Boyd, Director, Division of Oil and Gas.                       
                                                                               
 KEN BOYD, Director, Division of Oil and Gas, explained the bar                
 graphs before the committee on the number of acres leased.  He said           
 there are new discoveries and ideas happening in Alaska.                      
 Technology, for instance, is beginning to catch up with geology.              
 3-D seismic is the emerging activity today.  He thought that                  
 industry is changing its way of looking at Alaska.  The last                  
 lease/sale, #80, showed Chevron coming back into the State.                   
                                                                               
 MR. BOYD explained another graph that showed the acres that have              
 been leased and how many acres are producing.  Over time, he                  
 explained, the three mile square leasing blocks are put into units            
 that give the companies the opportunity to save resources.   Units            
 tend to form over areas of expected production and over time they             
 tend to shrink to what's called a participating area which is the             
 area that actually produces.                                                  
                                                                               
 At this point he explained more graphs to the committee.                      
                                                                               
 By statute, he said, any company can hold 500,000 acres on-shore              
 and 500,000 acres off-shore.  Any acre that's in a unit does not              
 count in the 500,000.  All companies are below their chargeable               
 acres, he noted.                                                              
                                                                               
 Number 255                                                                    
                                                                               
 He said that ARCO and BP do hold a lot of acres.  There is a total            
 of 2,810,000 acres under lease.                                               
                                                                               
 Number 283                                                                    
                                                                               
 SENATOR PEARCE asked for his definition of chargeable acreage.  MR.           
 BOYD answered that it is acreage that is not in the unit.                     
                                                                               
 SENATOR PEARCE asked him to explain the rules for getting to hold             
 a half million acres of land.  MR. BOYD said that leases are                  
 offered for a term; in Cook Inlet that's generally seven years.               
 The company has the right to do nothing or explore.  At the end of            
 the term if the lease has not been committed to a unit, or if the             
 lease does not have a a well that is certified capable of                     
 production, the lease goes back to the State.                                 
                                                                               
 Number 387                                                                    
                                                                               
 SENATOR FRANK commented that most of the areas on the graph do not            
 appear to be in a unit and, therefore, are subject to exploration.            
 MR. BOYD said that the North Slope has mostly 10 year leases,                 
 because of the short drilling season.  But the leases have been               
 shortened to seven years, because, now, more is known about the               
 area.                                                                         
                                                                               
 He explained that 3-D seismic technology is used in many cases                
 before drilling a well.  It is a much more definitive tool for                
 identifying underground formations, because you can look at data as           
 a cube, with a top and sides, that can be rotated in space, rather            
 than as a simple flat two dimensional surface.                                
                                                                               
 Number 442                                                                    
                                                                               
 SENATOR LEMAN asked if his Division had the ability to look at the            
 3-D seismic data.  MR. BOYD said that they do have the technology             
 to do that.                                                                   
                                                                               
 SENATOR LINCOLN asked if 3-D seismic is being used to re-analyze              
 areas and does the State do the actual surveying or do the                    
 companies do it and then give the State the data.  MR. BOYD                   
 answered yes to the first question.                                           
                                                                               
 SENATOR LINCOLN asked why 2-D technology would still be used.  MR.            
 BOYD said it was several magnitudes less expensive and used when              
 learning a new area or if the structure is not complicated.  He               
 explained that the most advanced technology is 4-D seismic which is           
 3-D seismic shot twice, so you can see fluid levels that have                 
 moved.  Using 4-D you can see fluid context, although it can't be             
 identified.                                                                   
                                                                               
 SENATOR LEMAN asked what the accuracy was.  MR. BOYD said that they           
 are very accurate.                                                            
                                                                               
 SENATOR PEARCE asked if we do a joint permitting process with the             
 feds where the wells cross the boundary of the National Petroleum             
 Reserve Alaska (NPRA).  MR. BOYD answered yes, that we only issue             
 land use permits for our lands and it is a very simple process.               
                                                                               
 MR. BOYD explained that ARCO has applied for exploration credit in            
 Nuiqsut, and the State has decided to grant them 15 percent credit.           
 Twenty-five percent is the maximum.  One of the terms that goes               
 with the credit is that the well, if it is drilled, will be held              
 confidential for two years, but cannot be extended.                           
                                                                               
 Number 580                                                                    
                                                                               
 SENATOR LEMAN asked how the public got to view the data.  MR. BOYD            
 replied that the data was viewed in their office.                             
                                                                               
 TAPE 96-1, SIDE B                                                             
 Number 589                                                                    
                                                                               
 No one is allowed to bring in movie cameras.  The viewing process             
 is really a means of attracting new players.                                  
                                                                               
 SENATOR LINCOLN asked if there was an advantage to the 2-D surveys            
 that do not have to be confidential.  MR. BOYD said that would not            
 come into the equation.                                                       
                                                                               
 Number 562                                                                    
                                                                               
 He showed the committee the coming lease sales.  The exploration              
 licensing opportunities begin in April, he said.                              
                                                                               
 Early on, the first idea was area-wide best interest findings                 
 rather than area-wide leasing.  Leasing requires title work and the           
 Department can do about 1 or 1.3 million acres per year.  The title           
 work is done only on the leases that are sold, not all the acres              
 that are offered.  They don't warrant title, in other words.                  
                                                                               
 SENATOR LEMAN commented that it is sad that there are so few wells            
 being drilled in Alaska when 4,000 per year are being drilled in              
 Alberta, Canada.  He noted that it takes a long time to get a                 
 permit here.  In response, MR. BOYD said under the Coastal Policy             
 Program there is the A,B,C list - A being the easiest things to               
 permit and do.  If things have been done enough times, the criteria           
 is known, and therefore, permitting is easier.                                
                                                                               
 Number 379                                                                    
                                                                               
 SENATOR HALFORD asked if the area-wide lease properties are subject           
 to all the same conditions, such as the acreage limitation and the            
 unitization provision.  MR. BOYD said yes, they would be.                     
                                                                               
 SENATOR TAYLOR asked if he would be suggesting any systemic changes           
 within the regulatory process.  MR. BOYD said he thought there had            
 to be changes made to the Alaska Coastal Management Program, but he           
 didn't think there needed to be many.                                         
                                                                               
 SENATOR TAYLOR noted that today, if no one appeals at any stage of            
 the process, it takes a minimum of 39 months for a State timber               
 sale.  He hoped they could suggest legislation that might speed up            
 the permitting process.                                                       
                                                                               
 Number 327                                                                    
                                                                               
 SENATOR PEARCE asked what the Department was doing for reclamation            
 standards on production that was already in place.  MR. BOYD                  
 answered that the Department has broad authority, but they are                
 looking at some complicated tax questions in this area.  He added             
 that they are moving forward.                                                 
                                                                               
 SENATOR PEARCE asked if reclamation expenses are deductible?  MR.             
 BOYD said that is part of the question.  When they are chargeable             
 is another, and there are many others.                                        
                                                                               
 SENATOR LEMAN thanked everyone for their participation and                    
 adjourned the meeting at 4:52 p.m.                                            
                                                                               

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