Legislature(2003 - 2004)
05/04/2004 03:55 PM Senate RES
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ALASKA STATE LEGISLATURE
SENATE RESOURCES STANDING COMMITTEE
May 4, 2004
3:55 p.m.
TAPE(S) 04-48
MEMBERS PRESENT
Senator Scott Ogan, Chair
Senator Thomas Wagoner, Vice Chair
Senator Fred Dyson
Senator Ralph Seekins
Senator Ben Stevens
Senator Kim Elton
MEMBERS ABSENT
Senator Georgianna Lincoln
COMMITTEE CALENDAR
SENATE RESOLUTION NO. 4
Requesting the United States Congress to amend the federal
Wilderness Act to authorize fishery enhancement programs and
similar activities in wilderness areas.
MOVED SR 4 OUT OF COMMITTEE
CS FOR HOUSE BILL NO. 319(FIN) am
"An Act relating to the disposal of state land by lottery;
relating to the reservation of rights by the state in land
contracts and deeds; relating to the disposal, including sale or
lease, of remote recreational cabin sites; and providing for an
effective date."
HEARD AND HELD
CS FOR HOUSE BILL NO. 531(FIN) am
"An Act relating to natural gas exploration and development and
to nonconventional gas, and amending the section under which
shallow natural gas leases may be issued; and providing for an
effective date."
MOVED SCS CSHB 531(RES) OUT OF COMMITTEE
PREVIOUS COMMITTEE ACTION
BILL: SR 4
SHORT TITLE: AMEND WILDERNESS ACT
SPONSOR(s): RESOURCES
05/03/04 (S) READ THE FIRST TIME - REFERRALS
05/03/04 (S) RES
05/04/04 (S) RES AT 3:30 PM BUTROVICH 205
BILL: HB 531
SHORT TITLE: CONVENTIONAL & NONCONVENTIONAL GAS LEASES
SPONSOR(s): RESOURCES
03/04/04 (H) READ THE FIRST TIME - REFERRALS
03/04/04 (H) O&G, RES, FIN
03/16/04 (H) O&G AT 3:15 PM CAPITOL 124
03/16/04 (H) Heard & Held
03/16/04 (H) MINUTE(O&G)
03/18/04 (H) O&G AT 3:15 PM CAPITOL 124
03/18/04 (H) Heard & Held
03/18/04 (H) MINUTE(O&G)
03/22/04 (H) RES AT 1:00 PM CAPITOL 124
03/22/04 (H) <Pending Referral>
04/01/04 (H) O&G AT 3:15 PM CAPITOL 124
04/01/04 (H) Moved CSHB 531(O&G) Out of Committee
04/01/04 (H) MINUTE(O&G)
04/05/04 (H) O&G RPT CS(O&G) 7AM
04/05/04 (H) AM: HOLM, KERTTULA, MCGUIRE, ROKEBERG,
04/05/04 (H) CRAWFORD, HEINZE, KOHRING
04/14/04 (H) RES AT 1:00 PM CAPITOL 124
04/14/04 (H) Heard & Held <Assigned to Subcmte>
04/14/04 (H) MINUTE(RES)
04/16/04 (H) RES AT 1:00 PM CAPITOL 124
04/16/04 (H) Moved CSHB 531(RES) Out of Committee
04/16/04 (H) MINUTE(RES)
04/19/04 (H) RES AT 1:00 PM CAPITOL 124
04/19/04 (H) Moved CSHB 531(RES) Out of Cmte. Again
04/19/04 (H) MINUTE(RES)
04/21/04 (H) RES RPT CS(RES) 3DP 1DNP 3NR 2AM
04/21/04 (H) DP: GATTO, STEPOVICH, MASEK; DNP: LYNN;
04/21/04 (H) NR: HEINZE, WOLF, DAHLSTROM;
04/21/04 (H) AM: KERTTULA, GUTTENBERG
04/26/04 (H) FIN AT 1:30 PM HOUSE FINANCE 519
04/26/04 (H) Continuation of Meeting Canceled 6:39
PM
04/27/04 (H) FIN AT 1:30 PM HOUSE FINANCE 519
04/27/04 (H) Moved CSHB 531(FIN) Out of Committee
04/27/04 (H) MINUTE(FIN)
04/28/04 (H) FIN RPT CS(FIN) 4DP 5NR
04/28/04 (H) DP: STOLTZE, CHENAULT, FATE, FOSTER;
04/28/04 (H) NR: MEYER, JOULE, CROFT, HARRIS,
04/28/04 (H) WILLIAMS
05/01/04 (H) TRANSMITTED TO (S)
05/01/04 (H) VERSION: CSHB 531(FIN) AM
05/01/04 (S) READ THE FIRST TIME - REFERRALS
05/01/04 (S) RES, FIN
05/04/04 (S) RES AT 3:30 PM BUTROVICH 205
WITNESS REGISTER
Mr. Paul Shadura, President
Kenai Peninsula Fishing Association
Soldotna AK
POSITION STATEMENT: Supports SR 4.
Mr. Jerry Fandrei, Executive Director
Cook Inlet Aquaculture Association
Kenai AK
POSITION STATEMENT: Supports SR 4.
Mr. Jerry McCutcheon
Anchorage AK
POSITION STATEMENT: Commented on SR 4.
Representative Hugh Fate
Alaska State Capitol
Juneau, AK 99801-1182
POSITION STATEMENT: Sponsor of HB 319.
Mr. Bob Loeffler, Director
Division of Mining, Land and Water
Department of Natural Resources
400 Willoughby Ave.
Juneau, AK 99801-1724
POSITION STATEMENT: Commented on HB 319.
Mr. Mark Myers, Director
Division of Oil and Gas
Department of Natural Resources
400 Willoughby Ave.
Juneau, AK 99801-1724
POSITION STATEMENT: Commented on HB 353.
Mr. Matt Davidson
Alaska Conservation Voters
Juneau AK
POSITION STATEMENT: Commented on HB 531.
ACTION NARRATIVE
TAPE 04-48, SIDE A
SR 4-AMEND WILDERNESS ACT
CHAIR SCOTT OGAN called the Senate Resources Standing Committee
meeting to order at 3:55 p.m. Present were Senators Wagoner,
Seekins, Elton and Chair Scott Ogan. Senator Stevens arrived at
5:12 and Senator Dyson arrived at 4:53. The first order of
business to come before the committee was SR 4, a follow up
resolution to the one passed by the committee earlier, asking
the Department of Interior to allow the release of sockeye fry
into Tustumena Lake in Wilderness Society and Alaska Center for
the Environment versus the U.S. Fish and Wildlife Service. The
Department of Interior has determined that qualifications to
assert in the Supreme Court aren't there and the Ninth Circuit
has met and balked. The result of the lawsuit is that 100,000
adult fish will not be returning to lower Cook Inlet.
SR 4 asks Congress to amend the Wilderness Act to deal with non-
commercial activities such as the sockeye salmon enhancement
programs, which have been going on in Tustumena Lake for 30
years.
MR. PAUL SHADURA, President, Kenai Peninsula Fishing
Association, supported the resolution saying, "The urgency of
this action cannot be overstated.... It is imperative that
Alaska encourages our federal delegation and our president of
the need to take action...."
MR. JERRY FANDREI, Executive Director, Cook Inlet Aquaculture
Association (CIAA), recognized the importance of this issue.
The Ninth Circuit Court of Appeal's decision to enjoin
the Tustumena Lake project restricts our ability to
complete our goal of providing protection for the Cook
Inlet salmon resource. The decision also limits the
ability of the state to manage its fishery resources,
particularly those resources providing the basis for
the state's rural economy. On behalf of CIAA, I
support SR 4 and look forward to its submittal....
MR. JERRY MCCUTCHEON, Anchorage resident, said:
Put the fish into Tustumena Lake. Let the state take
the legal responsibility for having it happen and
let's solve it somewhere else. I think by not putting
the fish in the lake we set a bad precedent.... The
waters of the state of Alaska belong to the state of
Alaska. I don't know whatever happened to that, but I
think it's a good time to solve the problem.
CHAIR OGAN said he agreed with him.
SENATOR WAGONER moved to pass SR 4 from committee with
individual recommendations and attached fiscal note. There were
no objections and it was so ordered.
CHAIR OGAN added that Mr. McCutcheon's comments relate to the
submerged lands issue and he thought the State of Alaska should
have the ability to regulate what happens on them, whether they
are an in-holding in a national wildlife refuge or not. "I'm
outraged that somehow somebody thinks their wilderness
experience is being compromised because there's some little
fishies swimming in a lake somewhere and maybe a float plane
that landed."
4:08 - 4:09 - at ease
CSHB 319(FIN) am-REC.CABIN SITES/LOTTERY SALE/RTS. RESERV
CHAIR SCOTT OGAN announced CSHB 319(FIN)am to be up for
consideration.
REPRESENTATIVE HUGH FATE, sponsor of HB 319, said he'd reviewed
only some of the amendments.
4:10 - 4:12 - at ease
MR. BOB LOEFFLER, Director, Division Mining, Land and Water,
Department of Natural Resources (DNR), said he is very proud of
the division's remote recreation program, which is continually
being improved. The technical amendments are just workability
sections so his goal can be accomplished.
He informed the committee that surveys are currently taking his
department roughly two years from the time a lease is initiated.
Individual parcels usually take longer than the batches. The
Mat-Su Borough has a 10-month backlog and the proposed
legislation would probably put individuals to the end of that
line; Fairbanks North Star Borough's situation is similar. This
brings about his concern that this program might eliminate a
portion of the department's current program to do surveys in the
proposed 24 months. Secondly, he was concerned that an
individual would go through the process and not be finished in
the 24-month timeframe and the department would lose its
authorization to convey the surveyed land to them. To protect
individual Alaskans, he proposed Amendment 1 that says survey
and appraisal shall be completed within 24 months of lease
issuance unless an extension is deemed necessary by the
commissioner. This directs him very clearly to accomplish the
sponsor's intent, but doesn't penalize an individual if it can't
be done.
MR. LOEFFLER said that Amendment 2 prohibits the department from
selling land with high mineral potential by standards adopted by
the department in regulations (page 4, section (g). Requiring
standards to be put into regulations would eliminate his FY05
sale. However, he can accomplish the sponsor's intent by
adopting standards, but not putting them into regulations.
MR. POUND refined the amendment saying he would delete only "in
regulations".
MR. LOEFFLER said that would be fine. The third technical
amendment deletes subsection (g). He explained that at least two
boroughs require either absolutely or approximately 10 acres as
the minimum parcel size, but the bill sets 10 acres as the
maximum parcel size. Given his experience with people going out
on the ground and trying to figure out the area along curved
streams and lakes, he didn't think most of them would get
particularly close. It would be odd to send people out knowing
they would be unsuccessful in the Mat-Su and Kodiak boroughs. He
thought the sponsor's intent could be accomplished by the
technical change.
MR. POUND replied that it was acceptable.
SENATOR WAGONER said he liked line 31 in section (g) that deals
with lake and river frontage so one person couldn't go in and
develop one-acre lots clear around a lake.
MR. LOEFFLER agreed with him in general and said those
requirements are typically in all his division's remote sales.
He said the third part of (g) says parcels sold under this
section are subject to 16 USC 31, the famous no more clause in
ANILCA. While he is supportive of the clause, it binds Congress
to not do certain things and it's an odd thing to have to put in
everybody's patent.
CHAIR OGAN summarized that there was agreement by the sponsor on
all the technical changes except for Amendment 1. He went on to
the policy amendment that would revise (f).
MR. LOEFFLER explained that the policy problem he wanted to
solve in (f) is that Alaska land needs to be open to all
Alaskans. Just because one person nominates a particularly good
parcel doesn't mean he is the only one who should be entitled to
it as he is currently. However, it has been the department's
experience that people don't bid when someone has nominated a
parcel and has the right of first refusal. His solution has been
to offer enough land so that there are enough choices.
SENATOR WAGONER said he has been involved in a couple right of
first refusal purchases and that people do bid competitively for
them.
MR. LOEFFLER responded that the department offers auctions for
surveyed parcels without the right of first refusal, but
auctions are spirited nevertheless. The publications for those
parcels are much more elaborate than mere classifieds. HB 319 is
an opportunity to stake land, but the department doesn't know
exactly what is included in the offers because the land hasn't
been surveyed yet. The problems are operational.
SENATOR WAGONER said that a lot of people in Alaska will know
better than other people immediately where the prime pieces of
property are.
I believe what the chairman of this committee said
that we're going to create a mini land rush and the
best parcels in those areas are going to be taken up
by the people that know those areas best.... But I
think it's our responsibility to make sure the state
gets the largest amount of profit out of this land
that we can....
CHAIR OGAN suggested adding "after a best interest finding" on
line 3 of the policy amendment.
MR. LOEFFLER said that a best interest finding is required for
the department to sell all land, but it's not required on land
that isn't being sold.
4:40 - 4:48 - at ease
SENATOR DYSON arrived at 4:53.
CHAIR OGAN said he would hold HB 319 for further work.
CSHB 531(FIN)am-CONVENTIONAL & NONCONVENTIONAL GAS LEASES
CHAIR OGAN announced CSHB 531(FIN) am, version 23-LS1818/KA.2,
to be up for consideration.
CHAIR OGAN announced that he has no conflict with this bill
because he is not employed by anyone that it affects. However,
some people have a perceived conflict and he asked Vice Chair
Wagoner to conduct the meeting.
SENATOR SEEKINS said in case anyone perceives Chair Ogan has a
conflict he objects so that he could vote.
CHAIR OGAN noted that according to the Ethics Committee, he has
no conflict to declare.
SENATOR WAGONER said he was instructed that a person had to
declare financial conflicts when a bill was voted on, not when
it was under discussion.
5:00 - 5:03 - at ease
TAPE 04-48, SIDE B
MR. MARK MYERS, Director, Division of Oil and Gas, Department of
Natural Resources (DNR), said the current version of the bill is
23-LS1818/KA.2. He explained that Amendment 1 is clean up
language; the substantive part starts on line 13.
23-LS1818\XA.2
A M E N D M E N T 1
OFFERED IN THE SENATE
TO: CSHB 531(FIN) am
Page 6, line 25:
Delete "finds"
Insert "determines"
Page 7, line 4, following "or the":
Insert "United States"
Page 7, line 5:
Delete "and"
Page 7, line 11, following "required":
Insert "; and
(D) as a condition of approval of a permit
to drill a well for production or production testing
of coal bed methane, require the operator to design
and implement a water well testing program to provide
baseline data on water quality and quantity; the
commission shall make the results of the water well
testing program available to the public"
He explained that a new standard requires the applicant to
develop baseline water data and testing prior to approval by
AOGCC of a permit to drill. This data would be available to the
public.
SENATOR DYSON moved to adopt Amendment 1. There were no
objections and Amendment 1 was adopted.
VICE CHAIR WAGONER announced that Amendment 2 was up for
consideration.
23-LS1818\XA.5
A M E N D M E N T 2
OFFERED IN THE SENATE
TO: CSHB 531(FIN) page 19, line 10:
Delete "(A)"
Page 19, line 23:
Delete "and"
Page 19, lines 24 - 29:
Delete all material.
Page 23, line 7:
Delete "AS 38.05.180(n)(2)"
Insert "AS 38.05.180(n)(2)(A)"
Page 26, lines 26 through 30:
Delete all material.
Page 38, line 28, following "gas,":
Insert "(A)"
Page 38, line 30, following "lease":
Insert "; and
(B) if the nonconventional gas produced will
not be in direct competition with gas on which a
royalty at a rate of at least 12.5 percent is payable,
then the royalty share payable to the state on all
production of gas from the pool attributable to that
lease shall be 6.25 percent based upon production
delivered in pipeline quality and free of all lease
expenses, including separation, cleaning, dehydration,
gathering, salt water disposal, and preparation for
transportation off the lease"
MR. MYERS explained that Amendment 2 is basically another clean
up amendment. The Shallow Gas Program has a $1 per acre leasing
fee. Currently, if gas doesn't compete with other gas in the
market, it possibly can get a 6.25 percent royalty. This bill
contains that same right under certain conditions. This language
is put in the correct place where it can deal with the royalty
issue.
SENATOR DYSON moved to adopt Amendment 2. There were no
objections and it was so ordered.
VICE CHAIR WAGONER announced Amendment 3 to be up for
consideration.
23-LS1818\XA.6
A M E N D M E N T 3
OFFERED IN THE SENATE
TO: CSHB 531(FIN) am
Page 20, line 13, following "AS 38.05.180(ff)(4)":
Insert "or 38.05.180(gg)"
Page 20, line 26, following "AS 38.05.180(ff)":
Insert ", 38.05.180(gg),"
Page 39, line 18:
Delete "a new subsection"
Insert "new subsections"
Page 40, following line 17:
Insert new subsections to read:
"(gg) Before approving operations for the development
of coal bed methane under AS 38.05.134, 38.05.177, or this
section, the director shall ensure that the approval is
conditioned upon
(1) reasonable and appropriate setbacks governing
the placement by the operator of compressor stations;
setbacks approved under this paragraph must be determined
with reference to the population density and general
character of the parcels surrounding the proposed
compressor station site; and
(2) reasonable and appropriate measures to
mitigate the noise of compressors, engines, and other noise
generating equipment operated by the operator on the lease
or license; measures approved under this paragraph must be
determined with reference to the population density and
general character of the parcels surrounding the proposed
compressor, engine, or other noise generating equipment."
MR. MYERS explained that Amendment 3 adds new protections that
aren't in the current bill that apply to all coalbed methane
operations on state lands. It allows for the commissioner to
require reasonable and appropriate setbacks for the placement of
compressor stations with reference to population density and the
general character of the parcel surrounding the site. It also
requires noise mitigation. This amendment seeks to address some
of the conflicts between surface and subsurface owners.
Secondly, it places shallow gas leasing under the same bonding
requirements that exist on the conventional program and adds an
additional protection for the surface owner.
SENATOR BEN STEVENS arrived at 5:12.
5:14 - 5:15 - at ease
SENATOR STEVENS moved to adopt Amendment 3. There were no
objections and it was so ordered.
VICE CHAIR WAGONER announced Amendment 4 to be up for
consideration.
23-LS1818\XA.7
Chenoweth
A M E N D M E N T 4
OFFERED IN THE SENATE
TO: CSHB 531(FIN) am
Page 40, lines 6 - 12:
Delete all material and insert:
"(3) the provisions of AS 38.05.130 apply to the
extraction of coal bed methane, except that the provisions
of that section shall be implemented as follows:
(A) for an activity or operation for which
the department, by regulation, requires submission and
approval of a plan of operations before activities or
operations may be undertaken, the director shall, as a
condition for issuing the bond, after notice and an
opportunity to be heard, review the plan of operations
to determine if use of the surface is reasonably
necessary to extract coal bed methane; and
(B) the director may not require a bond
posted under this paragraph from a lessee or agent of
a lessee if the lessee or agent has already posted a
bond covering the lessee's statewide oil and gas
leasing activities;"
MR. MYERS explained that Amendment 4 is a duplication of the
second part of Amendment 3 on bonding and he recommended that
the committee not consider it. The committee agreed not to
consider it.
VICE CHAIR WAGONER renumbered Amendment 5 to be Amendment 4.
MR. MYERS explained that [renamed] Amendment 4 is technical and
on page 41, lines 27 and 28, it deletes "shales containing gas"
and inserts "gas contained in shales".
SENATOR STEVENS moved to adopt Amendment 4. There were no
objections and it was so ordered.
MR. MATT DAVIDSON, Alaska Conservation Voters, said he hoped the
public would have time to review the amended version of HB 531
before it came up in the Finance Committee.
VICE CHAIR WAGONER explained that the committee rolled the best
part of what it thought was HB 395 into HB 531 and the public
would get a chance to review it.
SENATOR SEEKINS moved to pass SCS CSHB 531(RES) from committee
with individual recommendations and attached fiscal notes.
Senators Stevens, Dyson, Seekins and Vice Chair Wagoner voted
yea; and SCS CSHB 531(RES) moved from committee.
There being no further business to come before the committee,
Vice Chair Wagoner adjourned the meeting at 5:23 p.m.
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