Legislature(2003 - 2004)

04/30/2004 03:30 PM RES

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                    ALASKA STATE LEGISLATURE                                                                                  
              SENATE RESOURCES STANDING COMMITTEE                                                                             
                         April 30, 2004                                                                                         
                           3:30 p.m.                                                                                            
                                                                                                                                
TAPE(S) 04-46                                                                                                                 
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Senator Scott Ogan, Chair                                                                                                       
Senator Thomas Wagoner, Vice Chair                                                                                              
Senator Fred Dyson                                                                                                              
Senator Ben Stevens                                                                                                             
Senator Kim Elton                                                                                                               
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Senator Ralph Seekins                                                                                                           
Senator Georgianna Lincoln                                                                                                      
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
HOUSE BILL NO. 522 am                                                                                                           
"An Act relating to discharges from small commercial passenger                                                                  
vessels; and providing for an effective date."                                                                                  
                                                                                                                                
MOVED HB 522 am OUT OF COMMITTEE                                                                                                
                                                                                                                                
SENATE BILL NO. 312                                                                                                             
"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."                                                                                                                
                                                                                                                                
HEARD AND HELD                                                                                                                  
                                                                                                                              
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
BILL: HB 522                                                                                                                  
SHORT TITLE: SMALL CRUISE SHIP DISCHARGES                                                                                       
SPONSOR(s): STATE AFFAIRS                                                                                                       
                                                                                                                                
02/26/04       (H)       READ THE FIRST TIME - REFERRALS                                                                        
02/26/04       (H)       RES                                                                                                    
03/03/04       (H)       RES AT 1:00 PM CAPITOL 124                                                                             
03/03/04       (H)       Heard & Held                                                                                           
03/03/04       (H)       MINUTE(RES)                                                                                            
03/17/04       (H)       RES AT 1:00 PM CAPITOL 124                                                                             
03/17/04       (H)       Moved Out of Committee                                                                                 
03/17/04       (H)       MINUTE(RES)                                                                                            
03/18/04       (H)       RES RPT 6DP 2NR                                                                                        
03/18/04       (H)       DP: LYNN, STEPOVICH, HEINZE, KERTTULA,                                                                 
03/18/04       (H)       DAHLSTROM, MASEK; NR: GATTO, WOLF                                                                      
04/06/04       (H)       TRANSMITTED TO (S)                                                                                     
04/06/04       (H)       VERSION: HB 522 AM                                                                                     
04/07/04       (S)       READ THE FIRST TIME - REFERRALS                                                                        
04/07/04       (S)       RES                                                                                                    
04/30/04       (S)       RES AT 3:30 PM BUTROVICH 205                                                                           
                                                                                                                                
BILL: SB 312                                                                                                                  
SHORT TITLE: CONVENTIONAL & NONCONVENTIONAL GAS LEASES                                                                          
SPONSOR(s): RESOURCES BY REQUEST                                                                                                
                                                                                                                                
02/09/04       (S)       READ THE FIRST TIME - REFERRALS                                                                        
02/09/04       (S)       RES, FIN                                                                                               
02/23/04       (S)       RES AT 3:30 PM BUTROVICH 205                                                                           
02/23/04       (S)       Heard & Held                                                                                           
02/23/04       (S)       MINUTE(RES)                                                                                            
03/05/04       (S)       RES AT 3:30 PM BUTROVICH 205                                                                           
03/05/04       (S)       <Above Bill Hearing Postponed>                                                                         
03/22/04       (S)       RES AT 3:30 PM BUTROVICH 205                                                                           
03/22/04       (S)       Heard & Held                                                                                           
03/22/04       (S)       MINUTE(RES)                                                                                            
03/26/04       (S)       RES AT 3:30 PM BUTROVICH 205                                                                           
03/26/04       (S)       Heard & Held                                                                                           
03/26/04       (S)       MINUTE(RES)                                                                                            
04/21/04       (S)       RES AT 3:30 PM BUTROVICH 205                                                                           
04/21/04       (S)       Heard & Held                                                                                           
04/21/04       (S)       MINUTE(RES)                                                                                            
04/30/04       (S)       RES AT 3:30 PM BUTROVICH 205                                                                           
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
Ms. Linda Sylvester                                                                                                             
Staff to Representative Bruce Weyhrauch                                                                                         
Alaska State Capitol                                                                                                            
Juneau, AK  99801-1182                                                                                                          
POSITION STATEMENT: Commented on HB 522 for the sponsor.                                                                      
                                                                                                                                
Mr. Dan Easton, Director                                                                                                        
Division of Water                                                                                                               
Department of Environmental Conservation                                                                                        
410 Willoughby                                                                                                                  
Juneau, AK 99801-1795                                                                                                           
POSITION STATEMENT: Commented on HB 522.                                                                                      
                                                                                                                                
Mr. Bryce Brockway, Vice President                                                                                              
Marine Hotel and Technical Operations                                                                                           
Cruise West                                                                                                                     
No address provided                                                                                                             
POSITION STATEMENT: Supports HB 522.                                                                                          
                                                                                                                                
Mr. David Berg, President                                                                                                       
Viking Travel Agency                                                                                                            
Petersburg AK                                                                                                                   
POSITION STATEMENT: Supports HB 522.                                                                                          
                                                                                                                                
Captain Michael Jones, Director                                                                                                 
Marine Operations                                                                                                               
Linblad Expeditions                                                                                                             
1415 Western Ave., Ste. 700                                                                                                     
Seattle WA 98101                                                                                                                
POSITION STATEMENT: Supports HB 522                                                                                           
                                                                                                                                
Mr. John Waterhouse                                                                                                             
Elliot Bay Design Group                                                                                                         
Seattle, WA                                                                                                                     
POSITION STATEMENT: Available to answer questions on HB 522.                                                                  
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
TAPE 04-46, SIDE A                                                                                                            
                                                                                                                                
              HB 522-SMALL CRUISE SHIP DISCHARGES                                                                           
                                                                                                                                
CHAIR SCOTT  OGAN called the Senate  Resources Standing Committee                                                             
meeting  to  order at  3:30  p.m.  Present were  Senators  Thomas                                                               
Wagoner,  Ben Stevens,  Fred  Dyson, Kim  Elton  and Chair  Scott                                                               
Ogan. The  first order of  business to come before  the committee                                                               
was HB 522 am.                                                                                                                  
                                                                                                                                
MS.  LINDA SYLVESTER,  staff to  Representative Bruce  Weyhrauch,                                                               
sponsor, related that in 2001  the Alaska Legislature enacted the                                                               
Commercial  Vessel  Environmental  Complaints  Program  to  solve                                                               
concerns  over  cruise  ship  and  state  ferry  discharges  into                                                               
Alaskan waters.  Since then, most  cruise ships  discharging into                                                               
Alaskan  waters  have  installed  advanced  wastewater  treatment                                                               
systems,   which   has   dramatically  improved   water   quality                                                               
samplings. Small cruise  vessels are required to  comply with the                                                               
same  standards   for  the  larger  vessels,   even  though  they                                                               
contribute  approximately  only  3   percent  of  the  wastewater                                                               
discharge.                                                                                                                      
                                                                                                                                
The  assumption  was  made that  the  environmental  technologies                                                               
invented  by the  large cruise  ships  would filter  down to  the                                                               
small vessels, which  were given a period of time  to comply; and                                                               
that has now expired. Technology  that was invented for the large                                                               
vessels doesn't work with the  smaller vessels. The Department of                                                               
Environmental   Conservation   (DEC)   and   the   small   vessel                                                               
organization worked  together to come  up with an  alternative so                                                               
that small  vessels would  not be forced  to retrofit  with large                                                               
holding wastewater  tanks. The  plan is  flexible enough  for the                                                               
department and vessels to check  back with each other every three                                                               
years to come  up with a new plan to  utilize new technology that                                                               
doesn't require massive retrofitting.                                                                                           
                                                                                                                                
MR.  DAN  EASTON,  Director, Division  of  Water,  Department  of                                                               
Environmental Conservation  (DEC), related  that it's  clear that                                                               
this legislation  refers to just  small vessels  carrying between                                                               
50  to 250  passengers. It  was hoped  in 2001  that some  of the                                                               
larger treatment  technologies could be  scaled down and  made to                                                               
work  on  the  smaller  vessels,  which  hasn't  happened.  Small                                                               
vessels are now required to  add technology that doesn't exist or                                                               
add tankage. The  problem arises only at  anchor, because vessels                                                               
can either hold  their discharge until they are under  way or add                                                               
tankage. This  bill would add another  option limiting discharges                                                               
either to volume, time, or to certain locations.                                                                                
                                                                                                                                
CHAIR OGAN asked  if any ships were built after  the last law was                                                               
passed in reference to January 1, 2004 in section 6.                                                                            
                                                                                                                                
MR. EASTON replied that he didn't know the answer.                                                                              
                                                                                                                                
SENATOR BEN  STEVENS asked if  the owner providing evidence  of a                                                               
change in its  treatment system would trigger a  stability test -                                                               
in reference to lines 21 - 24.                                                                                                  
                                                                                                                                
MR.  EASTON  replied that  the  department  didn't envision  this                                                               
situation happening very much.                                                                                                  
                                                                                                                                
     We were  really going to focus  on management practices                                                                    
     and non-structural  changes.... There  was a  belief on                                                                    
     the part of the drafters  that there would be some sort                                                                    
     of firm guideline.                                                                                                         
                                                                                                                                
SENATOR STEVENS asked when the guidelines would be adopted.                                                                     
                                                                                                                                
MR.  EASTON replied  that  the bill  has no  time  frame, but  he                                                               
intends to start immediately.                                                                                                   
                                                                                                                                
SENATOR STEVENS asked  him to explain the year  2016 timeframe in                                                               
sections 3, 5, 8, 10, 12 and 13.                                                                                                
                                                                                                                                
MR.  EASTON replied  that those  sections  eliminate the  wording                                                               
that hasn't worked and adds  the new provision on best management                                                               
practices for small vessels until 2016.                                                                                         
                                                                                                                                
MS.  SYLVESTER  explained  that  the  plan  for  best  management                                                               
practices is reviewed  every three years, but goes  away in 2015.                                                               
The date  mirrors what the  industry felt  is the useful  life of                                                               
the  vessels.  It  is  also   an  estimate  of  when  the  better                                                               
technology will be  readily available and when new  boats will be                                                               
replacing the older ones.                                                                                                       
                                                                                                                                
MR. BRYCE  BROCKWAY, Vice President,  Marine Hotel  and Technical                                                               
Operations, Cruise  West, said  they operate  six of  the smaller                                                               
vessels ranging in size from 74 passengers up to 114.                                                                           
                                                                                                                                
CHAIR OGAN asked if any keels  had been laid between the time the                                                               
last bill  had been  passed and  now. He wanted  to know  who was                                                               
exempt from the language.                                                                                                       
                                                                                                                                
MR. BROCKWAY  replied that Cruise  West hadn't laid any  more new                                                               
keels; but  America West  had laid  one and  plans to  operate in                                                               
Alaska. He  also informed the committee  that some municipalities                                                               
don't want to introduce seawater  into their systems and seawater                                                               
is used as a flushing mechanism in their systems.                                                                               
                                                                                                                                
MR. DAVID  BERG, President, Viking  Travel Agency, said  that the                                                               
small ships are important to  the economy of Petersburg and urged                                                               
passage of HB 522.                                                                                                              
                                                                                                                                
CAPTAIN  MICHAEL  JONES,  Director,  Marine  Operations,  Linblad                                                               
Expeditions,  said   it  belongs  to  the   Small  Cruise  Vessel                                                               
Association  that  is  representing  Cruise  West  and  has  been                                                               
operating in Alaska since 1982.  In 1989 it purchased two vessels                                                               
that are  152 ft. long  and carry 70  passengers and 24  crew. He                                                               
supported the best management practices in HB 522.                                                                              
                                                                                                                                
MR. JOHN  WATERHOUSE, Elliot Bay  Design Group, Seattle,  said he                                                               
would  answer questions  on wastewater  design issues,  but there                                                               
were none.                                                                                                                      
                                                                                                                                
SENATOR THOMAS  WAGONER moved  to pass HB  522 am  from committee                                                               
with individual  recommendations and attached fiscal  note. There                                                               
were no objections and it was so ordered.                                                                                       
                                                                                                                                
        SB 312-CONVENTIONAL & NONCONVENTIONAL GAS LEASES                                                                    
                                                                                                                                
CHAIR SCOTT OGAN announced SB 312  to be up for consideration. He                                                               
referred to a publication  called "Western Governor's Association                                                               
Coalbed Methane Best  Practices," which doesn't go into  a lot of                                                               
specifics, but covers  all the issues that need to  be dealt with                                                               
in   states  that   have  been   dealing  with   coalbed  methane                                                               
development. He also  noted that other bills on  the same subject                                                               
would be discussed at this meeting.                                                                                             
                                                                                                                                
PATRICK GALVIN,  Division of Oil  and Gas, Department  of Natural                                                               
Resources (DNR), gave a general  overview of the different pieces                                                               
of legislation  on this  subject saying  that they  are primarily                                                               
geared toward operational issues that  DNR will have to review as                                                               
projects are proposed on state  leases and there is some overlap.                                                               
He related that right now  no best interest findings are required                                                               
for shallow gas  leases. HB 531 and SB 312  require those. Public                                                               
notice  requirements  are a  big  issue  and all  three  vehicles                                                               
address this  issue by bringing  the shallow gas  leasing process                                                               
more in line with the public  notice provisions that are used for                                                               
DNR's standard  oil and gas leasing  programs. HB 531 and  SB 312                                                               
say  with  the  elimination  of   shallow  oil  and  gas  leasing                                                               
programs,  all decisions  related to  oil  and gas  will be  made                                                               
under the notice  provisions that are currently used  for the oil                                                               
and  gas  leases and  exploration  licenses.  The proposed  draft                                                               
standards   go   beyond   statutory  requirements   and   include                                                               
additional   requirements  for   display   ads,  public   service                                                               
announcements  and   direct  notice   to  individuals   who  have                                                               
requested to be on a notice list.                                                                                               
                                                                                                                                
Concern  was  noted  about  notice  that  would  be  provided  on                                                               
activities taking place outside of  DNR leases and the Alaska Oil                                                               
and  Gas Conservation  Commission (AOGCC)  would review  drilling                                                               
permits  on private  subsurface estate  lands. But  those reviews                                                               
aren't noticed publicly.                                                                                                        
                                                                                                                                
Another area of  interest has been what types  of disclosures are                                                               
made  public  with  regard to  operations  and  potential  public                                                               
hazards that may be associated  with it. Some information is held                                                               
confidential  by  developers  for  proprietary  reasons  and  not                                                               
disclosed to  the public  for two  years. The  proposed standards                                                               
would  provide that  components  of the  fracturing materials  be                                                               
provided to  DNR as part of  the plan of operations,  which would                                                               
be made  available to the  public. However, the exact  formula of                                                               
how those are put together would remain confidential.                                                                           
                                                                                                                                
SENATOR ELTON asked what an enforceable standard is.                                                                            
                                                                                                                                
MR. GALVIN  replied that it  is a  type of regulation  that would                                                               
apply to DNR leases within the Mat-Su area.                                                                                     
                                                                                                                                
SENATOR  ELTON  asked  if  it would  consist  of  contract  terms                                                               
between the person that gets the  lease and the state. Mr. Galvin                                                               
said yes.                                                                                                                       
                                                                                                                                
CHAIR OGAN asked if more  statutory authority would be needed for                                                               
the department to implement this requirement.                                                                                   
                                                                                                                                
MR. GALVIN replied  he didn't believe that  DNR needed additional                                                               
authority to  enforce and  apply these  standards to  existing or                                                               
future leases. It would be  accomplished through union agreements                                                               
and other contractual  relationships that would be set  up in the                                                               
future.  The Mat-Su  area is  the only  area right  now that  has                                                               
coalbed  methane activities  taking place.  Enforceable standards                                                               
will be developed for other areas that are location-specific.                                                                   
                                                                                                                                
TAPE 04-46, SIDE B                                                                                                            
                                                                                                                                
SENATOR ELTON  asked how standards  would be applied  to existing                                                               
contracts.                                                                                                                      
                                                                                                                                
MR. GALVIN explained that all  the leases require the approval of                                                               
DNR before work takes place. The  decision of whether or not that                                                               
activity is  in the best interest  of the state would  take place                                                               
at that time.                                                                                                                   
                                                                                                                                
He  said  that   coalbed  methane  operators  in   the  Lower  48                                                               
voluntarily agreed to not  use diesel-based fracturing materials.                                                               
The  standards prohibit  its use,  but it  is the  wrong type  of                                                               
material  to  be used  to  fracture  coal anyhow.  Operators  are                                                               
required  to  obtain  an  agreement with  the  surface  owner  to                                                               
establish what damages  may be for access activities  and to make                                                               
arrangements for payment  of those damages. If they  do not reach                                                               
agreement, the  operator can  come to DNR  and establish  a bond.                                                               
Both bills have provisions that  affect the bonding relationship.                                                               
The  primary issue  has to  do with  the type  of notice  that is                                                               
being provided  and what  should be included  in the  damages for                                                               
the bond. Whether this is  the only reasonable location for these                                                               
activities to take place is also considered.                                                                                    
                                                                                                                                
Current authority  in enforceable standards provides  a framework                                                               
for a  company to request  a bond  hearing from DNR  and includes                                                               
provisions to  ensure good faith negotiations.  State law doesn't                                                               
address  these  issues  outside  of  the  DNR  reserved  minerals                                                               
mandate. Instances  of different  private subsurface  and surface                                                               
owners  is  common in  the  Lower  48,  but  less so  in  Alaska.                                                               
Currently,  no provisions  address how  access would  be acquired                                                               
and whether or  not a surface use agreement would  be needed. One                                                               
of  the house  bills  would set  up a  process  similar to  DNR's                                                               
process for mineral leasing.                                                                                                    
                                                                                                                                
MR.  GALVIN  continued  saying  that  the  enforceable  standards                                                               
provide  a  number  of  factors   that  DNR  should  look  at  in                                                               
determining the value of the bond.                                                                                              
                                                                                                                                
CHAIR OGAN  said he thought  the split estate issue  was probably                                                               
the  thorniest in  the entire  coalbed methane  situation. People                                                               
get mad when someone  can show up with a big  drill rig and start                                                               
drilling on their  property. He asked him to  explain what really                                                               
happens.                                                                                                                        
                                                                                                                                
MR. GALVIN  replied that two  different requirements  involve the                                                               
surface owner and his relationship  with the operator. One is the                                                               
requirement for  establishing a value  for the damages  and going                                                               
to DNR  for bonding if  an agreement can't be  reached. Secondly,                                                               
when a  developer wants to actually  do something on a  lease, he                                                               
will have to submit a plan  to DNR. Currently, he provides a copy                                                               
of that  plan to  any surface owner  where operations  are taking                                                               
place  along with  a  notice  telling the  surface  owner how  to                                                               
participate  in  DNR's review  of  the  plan.  He would  also  be                                                               
required  to provide  notice of  his application  to any  surface                                                               
owner within a half-mile of  operations. If an agreement can't be                                                               
reached,  the  operator would  ask  DNR  for  a bond  hearing  to                                                               
determine what  the possible damages  would be and the  amount of                                                               
the bond that would cover it.                                                                                                   
                                                                                                                                
CHAIR OGAN  asked, assuming a  worst-case scenario,  if currently                                                               
an aggressive operator could simply  send out the required notice                                                               
to the  last owner  of record, who  may be absent,  and put  in a                                                               
road and drill pad without hearing from the owner.                                                                              
                                                                                                                                
MR.  GALVIN replied  if attempts  have been  made to  contact the                                                               
surface owner  and there is no  response, DNR would have  to move                                                               
forward with the decision on  approving a plan of operations that                                                               
would look out for the interests  of the owners by establishing a                                                               
bond.                                                                                                                           
                                                                                                                                
CHAIR OGAN put himself in the  landowner's shoes and said that he                                                               
would  be mad  about someone  drilling  on his  land without  him                                                               
knowing about  it even  though he  knew when  he bought  the land                                                               
that he didn't buy the subsurface rights.                                                                                       
                                                                                                                                
MR.  GALVIN  said one  of  the  areas  needing  a great  deal  of                                                               
discussion is what is considered  a good faith effort to identify                                                               
and contact the owner of a property.                                                                                            
                                                                                                                                
CHAIR OGAN  asked if signing the  title at the land  office gives                                                               
permission  to  the  state  to   access  subsurface  minerals  in                                                               
advance.                                                                                                                        
                                                                                                                                
MR.   GALVIN  clarified   that   it's   not  exactly   considered                                                               
permission. When  property is conveyed  by the state,  it retains                                                               
the right to the minerals and  the right to access those minerals                                                               
by entry onto the land.                                                                                                         
                                                                                                                                
CHAIR  OGAN asked  if any  laws had  been established  that would                                                               
change the status of the  relationship between the subsurface and                                                               
surface owners.                                                                                                                 
                                                                                                                                
MR.  GALVIN answered  no;  this  issue has  been  in place  since                                                               
Statehood and will  remain in place for any  conventional oil and                                                               
gas  lease or  any  other potential  conflict  between a  private                                                               
surface  owner who  acquired his  title  from the  state and  the                                                               
state's interest  in developing  those minerals some  time later.                                                               
This  is  the  first  wide-scale   situation  where  a  potential                                                               
conflict of interest has arisen here.                                                                                           
                                                                                                                                
MR.  GALVIN  said the  different  pieces  of legislation  address                                                               
surface impact issues related to  coalbed methane through setback                                                               
requirements.   Currently,  developers   are  required   to  only                                                               
minimize their  impact to  residential or  commercial activities,                                                               
but the public wants specifics;  so the draft standards have very                                                               
specific setbacks. Noise and visual  mitigation measures are also                                                               
part of the standards.                                                                                                          
                                                                                                                                
Wastewater  disposal  is  a public  concern  related  to  coalbed                                                               
methane specifically  and currently  DEC statutes exempt  it from                                                               
its wastewater  permitting requirements. Well spacing  is another                                                               
issue  that  is  addressed  in  the  standards.  Presently,  well                                                               
spacing is  addressed only  by the AOGCC,  which evaluates  it on                                                               
the  most efficient  means  of developing  the  resource -  their                                                               
statutory responsibility. It  will not look at the  issue the way                                                               
the public  is expecting it  to be looked  at or how  to minimize                                                               
the surface impact associated with well spacing.                                                                                
                                                                                                                                
The  enforceable  standards  recognize that  almost  any  coalbed                                                               
methane development is going to  be done after a development unit                                                               
has  been formed.  A  unit is  a method  to  tie leases  together                                                               
including lands  of different ownership  in order to  develop the                                                               
collective resource in  a more efficient manner.  DNR will engage                                                               
the public  in a  review of the  proposal. Specific  well spacing                                                               
density  is not  suggested -  just  a recognition  that any  well                                                               
spacing  decision  would be  based  upon  balancing the  need  to                                                               
develop the resource with surface impacts.                                                                                      
                                                                                                                                
SENATOR ELTON  asked if DNR  could go further  with non-statutory                                                               
authority for well spacing.                                                                                                     
                                                                                                                                
MR. GALVIN  answered that it is  an issue of having  to recognize                                                               
the  different function  of the  AOGCC versus  DNR. The  AOGCC is                                                               
looking at  well spacing as  an issue associated  with developing                                                               
the  well  in the  most  efficient  manner possible.  From  DNR's                                                               
perspective, it  is the  land manager.  While it  cooperates with                                                               
the AOGCC,  DNR has  the additional  responsibility to  make sure                                                               
that the activities take place in a responsible manner.                                                                         
                                                                                                                                
SENATOR ELTON asked if his answer was yes.                                                                                      
                                                                                                                                
MR. GALVIN said yes and elaborated,  "We're going to look at well                                                               
spacing primarily  from a surface impact  standpoint.... AOGCC is                                                               
going to  look at well  spacing at  the bottom of  the holes...."                                                               
Two different  authorities would  be used,  but no  additional or                                                               
contradicting  authorities.  "It's  looking at  different  issues                                                               
associated with the same activity."                                                                                             
                                                                                                                                
CHAIR  OGAN  related   that  the  Mat-Su  Borough   has  a  draft                                                               
regulation that mandates well spacing.                                                                                          
                                                                                                                                
MR. GALVIN warned that there is  a potential for conflict in that                                                               
regard. However,  the issue is  also a  function of the  state of                                                               
technology for coalbed methane in  this country, which is to have                                                               
vertical  wells.   Therefore,  there   is  almost   a  one-to-one                                                               
relationship in  the well spacing  at the  bottom of the  hole as                                                               
well  as  the surface.  New  technologies  are continually  being                                                               
developed in  this regard, but DNR  is not in a  position at this                                                               
point to  say what is  or is not  an appropriate well  spacing at                                                               
the surface.                                                                                                                    
                                                                                                                                
He said  that AOGCC has  the authority to protect  drinking water                                                               
sources  from  any  drilling  operation  that  is  proposed.  The                                                               
concern  is what  if something  goes wrong  and how  that can  be                                                               
known  as  soon  as  possible  and how  redress  efforts  can  be                                                               
conducted.  DNR is  responsible  for baseline  water testing  for                                                               
wells;  AOGCC  is  responsible   for  water  quality  testing  in                                                               
general.  Monitoring will be  needed for quality and quantity and                                                               
it may  occur at the drinking  water well or maybe  at additional                                                               
wells in  between the drilling  site and the drinking  water well                                                               
to  identify an  impact  before  it actually  gets  to the  well.                                                               
Surface  discharge standards  allow discharge  on the  surface if                                                               
water quality does not have a negative environmental impact.                                                                    
                                                                                                                                
CHAIR OGAN concluded the hearing on SB 312.                                                                                     
                                                                                                                                
CHAIR OGAN asked Mark Myers, Director, Division of Oil and Gas:                                                                 
                                                                                                                                
     Have I  at any  time when I  was employed  by Evergreen                                                                    
     Resources  ever advocated  for  the  company with  your                                                                    
     department in carrying their water  when I was employed                                                                    
     by  them   or  done  anything  that   you  thought  was                                                                    
     [inappropriate]?                                                                                                           
                                                                                                                                
MR. MARK MYERS, Director, Division  of Oil and Gas, Department of                                                               
Natural Resources (DNR), responded:                                                                                             
                                                                                                                                
     I've known  you for  multiple years now  - back  in the                                                                    
     past when  you were chairman  of the House Oil  and Gas                                                                    
     Committee and now - I've  dealt with you as chairman of                                                                    
     the Resources Committee. We have  discussed oil and gas                                                                    
     issues  as appropriate  on a  lot of  different issues,                                                                    
     both   before   the   committee   and   in   terms   of                                                                    
     consultation. In all cases, it's  been very clear to me                                                                    
     that  you are  representing the  state and  not in  the                                                                    
     representation of  anybody in industry. In  fact, I can                                                                    
     go back  to at one point  you had notified me  that you                                                                    
     were considering  even taking  a job. You  were letting                                                                    
     me  know  prior to,  even  in  that process,  accepting                                                                    
     employment with  Evergreen that you  were and  that you                                                                    
     expected that  to change the  relationship in  terms of                                                                    
     how issues  were handled. But,  in no cases did  I ever                                                                    
     see you  advocate for the  industry, but  only advocate                                                                    
     on  issues  directly  involving   oil  and  gas  policy                                                                    
     ranging all the way from  North Slope production to gas                                                                    
     pipeline to providing - making  sure Cook Inlet had oil                                                                    
     and gas  supplies. So, I  can honestly say that  in all                                                                    
      my dealings with you, no, in my mind there has never                                                                      
      been a conflict that has been brought up before the                                                                       
     division.                                                                                                                  
                                                                                                                                
CHAIR OGAN asked if he would be willing to say that under oath                                                                  
if necessary.                                                                                                                   
                                                                                                                                
MR. MYERS replied yes.                                                                                                          
                                                                                                                                
There being no further business to come before the committee,                                                                   
Chair Ogan adjourned the meeting at 5:10 p.m.                                                                                   
                                                                                                                                

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