Legislature(2005 - 2006)BUTROVICH 205

02/07/2005 03:30 PM RESOURCES

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03:38:26 PM Start
03:38:57 PM SJR5
03:53:10 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Moved SJR 5 Out of Committee
                    ALASKA STATE LEGISLATURE                                                                                  
              SENATE RESOURCES STANDING COMMITTEE                                                                             
                        February 7, 2005                                                                                        
                           3:38 p.m.                                                                                            
MEMBERS PRESENT                                                                                                               
Senator Ralph Seekins, Vice Chair                                                                                               
Senator Ben Stevens                                                                                                             
Senator Fred Dyson                                                                                                              
Senator Bert Stedman                                                                                                            
Senator Kim Elton                                                                                                               
MEMBERS ABSENT                                                                                                                
Senator Thomas Wagoner, Chair                                                                                                   
Senator Gretchen Guess                                                                                                          
COMMITTEE CALENDAR                                                                                                            
SENATE JOINT RESOLUTION NO. 5                                                                                                   
Urging the United States Congress to reauthorize the Methane                                                                    
Hydrate Research and Development Act.                                                                                           
     MOVED SJR 5 OUT OF COMMITTEE                                                                                               
PREVIOUS COMMITTEE ACTION                                                                                                     
BILL: SJR  5                                                                                                                  
SHORT TITLE: REAUTHORIZE METHANE HYDRATE RESEARCH ACT                                                                           
SPONSOR(s): SENATOR(s) THERRIAULT                                                                                               
02/02/05       (S)       READ THE FIRST TIME - REFERRALS                                                                        
02/02/05       (S)       RES                                                                                                    
02/07/05       (S)       RES AT 3:30 PM BUTROVICH 205                                                                           
WITNESS REGISTER                                                                                                              
Senator Gene Therriault                                                                                                         
Alaska State Capitol                                                                                                            
Juneau, AK  99801-1182                                                                                                          
POSITION STATEMENT: Sponsor of SJR 5.                                                                                         
Mr. Mark Myers, Director                                                                                                        
Division of Oil and Gas                                                                                                         
Department of Natural Resources                                                                                                 
400 Willoughby Ave.                                                                                                             
Juneau, AK  99801-1724                                                                                                          
POSITION STATEMENT: Commented on SJR 5.                                                                                       
ACTION NARRATIVE                                                                                                              
CHAIR  RALPH   SEEKINS  called  the  Senate   Resources  Standing                                                             
Committee meeting to  order at 3:38:26 PM.  Present were Senators                                                             
Dyson, Ben Stevens, Stedman, Elton and Chair Seekins.                                                                           
3:38:57 PM                                                                                                                    
        SJR  5-REAUTHORIZE METHANE HYDRATE RESEARCH ACT                                                                     
CHAIR RALPH SEEKINS announced SJR 5 to be up for consideration.                                                                 
SENATOR GENE THERRIAULT, sponsor, said  he introduced SJR 5 after                                                               
traveling  to  Congress  with  Representative  Samuels  and  Mark                                                               
Myers,  director of  the  Division  of Oil  and  Gas,  to make  a                                                               
presentation to  the Senate Energy  Committee on how  natural gas                                                               
could  solve future  energy needs  of the  nation and  how Alaska                                                               
fits into that equation.                                                                                                        
3:39:54 PM                                                                                                                    
SENATOR  THERRIAULT said  gas  hydrates  need either  temperature                                                               
control  or tremendous  pressure to  keep  the gas  in a  hydrate                                                               
structure. Alaska  is one  of the areas  in which  those hydrates                                                               
are known to exist in abundant  supply; another place is the Gulf                                                               
of Mexico.  Methane or natural  gas molecules are trapped  in ice                                                               
cages on the North Slope.                                                                                                       
SENATOR  THERRIAULT referred  the  committee to  a United  States                                                               
Geological Survey (USGS) map of  the North Slope indicating where                                                               
gas  hydrate   conditions  are  believed  to   exist.  Alaska  is                                                               
perfectly  situated now  to take  the information  gathered under                                                               
the Methane  Hydrate Research Development  of 2000 and  move that                                                               
into the  field. Five hundred  and ninety trillion cubic  feet of                                                               
natural gas is estimated to  be in a hydrate structure underneath                                                               
the existing Prudhoe Bay reserve.                                                                                               
3:41:45 PM                                                                                                                    
Development of  a small percentage of  that, 40 - 100  TCF, could                                                               
be used  as reserve  that would  back up  development of  the gas                                                               
pipeline. It  would potentially impact  tariffs paid on  the line                                                               
and how it is structured and sized for capacity.                                                                                
3:42:17 PM                                                                                                                    
There are  already a number  of proposals to  bring on 35  TCF of                                                               
known gas reserves on North Slope.  If only a small percentage of                                                               
the 590  TCF that is  known to  be onshore was  developed, that's                                                               
multiples of the  current 35 TCF that is  being considered enough                                                               
to build a line to market.                                                                                                      
3:42:52 PM                                                                                                                    
Alaska has  infrastructure in  Prudhoe Bay  and the  oil industry                                                               
has  become adept  at mapping  hydrates because  they drill  down                                                               
through and  map them. Casings  are installed quickly  to prevent                                                               
pressurization of the wells from the gas hydrate structures.                                                                    
3:43:41 PM                                                                                                                    
SJR 5 asks  that the Methane Hydrate Research  Development Act be                                                               
reauthorized. Its conclusion  is due this year in  October and it                                                               
is  time   to  take  laboratory  applications   into  the  field,                                                               
especially in the Prudhoe Bay  area. Total gas hydrates available                                                               
on  the North  Slope, including  onshore and  offshore, get  into                                                               
truly staggering  numbers - instead  of hundreds of  trillions of                                                               
cubic feet,  you're talking  about 1,000s  of trillions  of cubic                                                               
Offshore  gas hydrates  are  more difficult  to  develop, but  as                                                               
technology develops over time, Alaska  has the resource to fill a                                                               
pipeline with it both - short-term and long-term.                                                                               
3:46:12 PM                                                                                                                    
MR.  MYERS, Director,  Division of  Oil  and Gas,  said he  would                                                               
answer questions.                                                                                                               
3:46:42 PM                                                                                                                    
SENATOR ELTON  asked the department  to put  together information                                                               
outlining  how  the  Law  of  the Sea  Treaty  could  affect  all                                                               
offshore methane  hydrate resources.  Mr. Myers  acknowledged his                                                               
3:47:32 PM                                                                                                                    
CHAIR SEEKINS indicated a map  of potential gas hydrates based on                                                               
seismic data and well information.                                                                                              
3:48:33 PM                                                                                                                    
MR. MYERS  said estimates on  the map are accurate  using seismic                                                               
data and  well information. Characteristics  of the  hydrates can                                                               
be   identified  from   seismic  data.   The  estimates   in  the                                                               
Kuparek/Milne  Point area  are accurate.  The National  Petroleum                                                               
Reserve Alaska (NPRA) also has identified hydrates.                                                                             
He explained  that industry considered  hydrates a  geohazard. To                                                               
get a drilling  permit on the North Slope a  company must present                                                               
the Alaska  Oil and  Gas Conservation  Commission (AOGCC)  with a                                                               
map  of the  potential  for hydrates  of free  gas  that must  be                                                               
drilled  through before  going  to a  deeper  oil objective.  The                                                               
shallow intervals  have to  be cased off.  They have  been mapped                                                               
over  the  North  Slope extensively,  but  the  in-place  numbers                                                               
around  the  infrastructure  are  very good.  The  question  then                                                               
becomes how much of if it is economically recoverable.                                                                          
3:49:44 PM                                                                                                                    
MR. MYERS  said Prudhoe Bay hydrates  are unique in that  a free-                                                               
gas leg lies beneath the  hydrate pressure cell. A simulation was                                                               
done  of lowering  the pressure  on the  free gas  leg where  the                                                               
hydrates come out of solution. It  was found that at least 60% of                                                               
the hydrates would be recoverable at  the rate of 50 MMCF per day                                                               
-   suggesting  highly   commercial   wells   from  the   hydrate                                                               
3:50:30 PM                                                                                                                    
He  explained  that most  hydrates  are  biogenically created  by                                                               
microorganisms  near the  surface. High  pressures at  deep ocean                                                               
depths, for instance,  create a stability field  for the hydrates                                                               
to form. The temperature there is also relatively high.                                                                         
Conventional  fault blocks  are  the structure  in  which gas  is                                                               
trapped on the North Slope.  Conventional gas migrates up through                                                               
the faults into  near permafrost where the  right temperature and                                                               
pressure  conditions exist  to form  the hydrates.   Conventional                                                               
gas and  hydrates are  trapped together  and a  relatively simple                                                               
pressure  mechanism  will  lead   to  relatively  high  rates  of                                                               
production  of  free  gas  followed by  a  tremendous  amount  of                                                               
hydrates as they come out of solution.                                                                                          
3:51:08 PM                                                                                                                    
MR. MYERS said that hydrates are  about 180 times denser in terms                                                               
of  the volume  of  gas  per cubic  foot  than conventional  gas.                                                               
Engineering tests  are needed to  demonstrate that  the reservoir                                                               
simulations work.                                                                                                               
     We're more  speculative as  we move  out away  from the                                                                    
     infrastructure. But  again, good  seismic data  in some                                                                    
     of these  areas -  well penetration -  so, we  know the                                                                    
     hydrates  are  there  and  we   know  the  volumes  are                                                                    
     significant  enough to  potentially dwarf  some of  the                                                                    
     known proven reserves of conventional gas.                                                                                 
3:51:48 PM                                                                                                                    
CHAIR SEEKINS asked if he prepared the zero fiscal note.                                                                        
MR. MYERS replied yes.                                                                                                          
3:52:11 PM                                                                                                                    
SENATOR BEN STEVENS noted a  technical correction on page 2, line                                                               
1, where "form" should be changed to "from".                                                                                    
SENATOR  DYSON moved  to  pass  SJR 5  from  committee with  zero                                                               
fiscal  note  and  individual   recommendations.  There  were  no                                                               
objections  and  SJR  5  moved from  committee.  There  being  no                                                               
further  business to  come before  the  committee, Chair  Seekins                                                               
adjourned the meeting at 3:53:10 PM.                                                                                          

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