Legislature(2017 - 2018)BUTROVICH 205
03/10/2017 03:30 PM Senate RESOURCES
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| Audio | Topic |
|---|---|
| Start | |
| Confirmation Hearings: Alaska Oil and Gas Conservation Commission (aogcc) | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
SENATE RESOURCES STANDING COMMITTEE
March 10, 2017
3:30 p.m.
MEMBERS PRESENT
Senator Cathy Giessel, Chair
Senator John Coghill, Vice Chair
Senator Natasha von Imhof
Senator Shelley Hughes
Senator Kevin Meyer
MEMBERS ABSENT
Senator Bert Stedman
Senator Bill Wielechowski
COMMITTEE CALENDAR
CONFIRMATION HEARINGS
ALASKA OIL AND GAS CONSERVATION COMMISSION (AOGCC)
Hollis French
Dan Seamount
- CONFIRMATIONS ADVANCED
PREVIOUS COMMITTEE ACTION
No previous action to record
WITNESS REGISTER
HOLLIS FRENCH, appointee
Anchorage, Alaska
POSITION STATEMENT: Appointee to the Alaska Oil and Gas
Conservation Commission (AOGCC).
DAN SEAMOUNT, re-appointee
Alaska Oil and Gas Conservation Commission (AOGCC)
Anchorage, Alaska
POSITION STATEMENT: Re-appointee to the Alaska Oil and Gas
Conservation Commission (AOGCC).
DAVE HANSON, representing himself
Anchorage, Alaska
POSITION STATEMENT: Supported both appointments of Dan Seamount
and Hollis French to the Alaska Oil and Gas Conservation
Commission (AOGCC).
ACTION NARRATIVE
3:30:33 PM
CHAIR CATHY GIESSEL called the Senate Resources Standing
Committee meeting to order at 3:30 p.m. Present at the call to
order were Senators Coghill, Hughes, von Imhof, and Chair
Giessel.
^Confirmation Hearings: Alaska Oil and Gas Conservation
Commission (AOGCC)
Confirmation Hearings:
Alaska Oil and Gas Conservation Commission (AOGCC)
3:31:05 PM
CHAIR GIESSEL announced the confirmation hearings for the
appointment to the Alaska Oil and Gas Conservation Commission
(AOGCC) of former State Senator Hollis French and the
reappointment of Dan Seamount. She said the (AOGCC) is Alaska's
gatekeeper and chief regulator of Alaska's hydrocarbon
resources. They have a constitutional mandate to maximize the
state's resources for the maximum benefit of its people. It is
part of the hammers the state has in its tool box to insure
compliance with that mandate.
SENATOR MEYER joined the committee.
CHAIR GIESSEL continued that AOGCC has three members: one seat
for a petroleum engineer, one seat for a petroleum geologist,
and one seat for a public member that preferably has some
background knowledge of the regulated industry. She invited
former Senator French to come forward saying he was well known
to this committee. He would be filling the public member seat,
which until he was appointed on July 20, 2016, was vacant for
over a year. That vacant seat lead to some serious quorum
issues, which this committee heard about during the last year.
3:32:29 PM
HOLLIS FRENCH, Appointee, Alaska Oil and Gas Conservation
Commission, Anchorage, Alaska, said he would take a couple of
minutes to tell them about his oil field background before the
committee discusses his appointment. He moved to Alaska in 1978
and was hired in 1979 as a bull cook on an oil rig, Shell
Platform A, in Cook Inlet. He worked there for the next five
years. After eight months of washing pots and pans he was
promoted to a roustabout. That is pretty unusual, as most people
start as roustabout, but he had to actually work his way up from
below that. As a roustabout you chip paint, mop floors, work on
the business end of the crane; you strap loads, load the boat,
and unload the boat; you swing a sledge hammer; you crawl in the
vessels and do whatever you are told to do. He did that for
eight months.
In 1980, Shell Oil Company decided to hire and train him to be a
utility man, which is essentially an operator in training, and
eventually he became a production operator. Operators are
responsible for the flow of oil and gas out of the well, for
separating that oil and gas, and the water, as well, ship the
clean oil to shore, reinject the gas for gas lift, and reinject
the water for water flood.
He worked there until 1984 when he was hired by ARCO at Kuparuk
when it was still a new field. SPF-2 had not started up yet and
SPF-1 was in motion. He was hired for SPF-2, but put to work on
SPF-1 and after that SPF-3. It was the second largest oil field
in North American at the time. ARCO was a great company to work
for; they had a very aggressive training program in place and he
was moved through all the positions of the plant from gas
handling to oil separation. They had a water flood system and
power generation. They had a topping plant where they made
diesel, a waste injection plant, and drill sites where the wells
were located. That is probably the first time he encountered an
Alaska Oil and Gas Conservation Commission (AOGCC) employee, the
inspectors who came out to make sure that their surface and
subsurface safety valves would actuate when they were required
to do so.
Eventually he landed in the board room, which is the control
room, when CPF-1 was the oil movements coordinator for the
Kuparuk field. So, he was constantly in contact with CPF-2 and
CPF-3, as well as the TransAlaska Pipeline System (TAPS). When
TAPS had a slowdown he would slow down their production. Then
they built two enormous so-called divert tanks, so they could
keep their flow going 100 percent to those divert tanks when
TAPS had a slowdown and then once TAPS was back up to speed they
could slip that oil back into the line and keep their numbers up
as high as possible.
MR. FRENCH said the sole function of a production operator is to
maximize production. When the bosses would walk in they would
look at the board and the lights and want to see everything at
105 percent. That was their goal and they did a pretty good job
in producing over 300,000 barrels of oil a day in the Kuparuk
field.
3:35:42 PM
Eventually, he decided to take oil field earnings and go to law
school, then went into public service by becoming a prosecuting
attorney. Then he was elected to the legislature. He closed by
saying that both of those jobs made him realize that he enjoys
public service. This position on the AOGCC is another aspect of
that and it feels like a good fit in combination with his
earlier oil field experience. He likes the job; it's a small
agency, but for three members they do a lot of important work.
3:36:23 PM
CHAIR GIESSEL drew members' attention to the fact sheet about
the Alaska Oil and Gas Conservation Commission (AOGCC). The last
sentence after the last semicolon says, "and one member who
shall have training or experience that gives the person a
fundamental understanding of the oil and gas industry in the
state." The final caveat was added to statute in 2004 or so when
the public member had no experience in the industry. That proved
to be a concern to legislators. She appreciated Senator French
elaborating on his experience in the oil industry. She noted he
had already been serving on the commission for six or seven
months.
SENATOR COGHILL thanked Mr. French for serving and added that is
a good fit for him. He asked how he sees the advocacy he had in
the legislature fit into his role as a commissioner.
3:38:41 PM
MR. FRENCH answered that one of the benefits of the job is that
it is strictly bound by statute: the black and white laws passed
by this legislature. The regulations that have been promulgated
by the agency define his job, and he spends a lot of time
reading them. Some of them are specific and some are more
broadly philosophical, but those are his "commandments." His job
through the agency is to protect the public interest in the
exploration and development of Alaska's valuable oil, gas, and
geothermal resources through the application of conservation
practices that are designed to ensure the greater ultimate
recovery of the resource and to protect health, safety, fresh
ground waters, and the rights of every owner to extract their
share of the resource.
One of the things commissioners have to keep in mind, Mr. French
said, is that they can from time-to-time adjudicate disputes
between two oil companies who have leases butting up against one
another. One of the more interesting words he has come across in
the oil and gas industry is that oil and gas are "fugacious,"
which means they move around underground unpredictably. It was
first used in the 20s and 30s to describe oil and gas helping
regulators get a handle on this unusual property of this
material. If you think of a lease being a square, it has
happened in the past that owners of this lease would drill right
along the edge, so they would be able to extract not only their
oil and gas, but the oil and gas of the guy next to them. For
that reason most oil leases come with spacing requirements of
500 feet. The real point is that they are bound by statute that
confine them to their mission. There is no room outside of that.
SENATOR COGHILL said because of the work he has done with
Senator French he has the greatest confidence that is exactly
where he will go. Water management is of growing concern in
Alaska, especially with more lateral drilling and fracking and
he asked how the AOGCC looks at that element as a management
issue.
MR. FRENCH replied that the AOGCC has a small but incredibly
talented engineering staff that makes sure every well bore is
well engineered, constructed, and tested for mechanical
integrity. He said part of Senator Coghill's concern probably
arises from the fracking controversy. They take place miles
underground and in a safe formation, but all that fluid comes
back to the surface and must be disposed of in a separate well.
Disposal has been a problem in other states, because of their
high-volume wells with enormous amounts of water being injected
in single places. It can cause some small slippages. Alaska
doesn't have that problem; we don't have the same geology here
and we don't have the same number of wells to handle the water
from. He said Alaska probably issues fracking permits "in the
dozens" every year, whereas in North Dakota and Texas it can be
in the hundreds or thousands of wells. Alaska just hasn't had
that enormous volume of water disposal to cause a problem. Our
disposal wells are well engineered, tested for mechanical
integrity, and are putting the water so deep in the earth that
it's never going to flow back up to a fresh water source.
SENATOR COGHILL said he appreciated that and that he wants to
stay ahead of any disinformation that might come through Alaska.
He asked how many staff the AOGCC has.
MR. FRENCH answered that the agency has about 30 employees
total: three commissioners, about six engineers and geologists,
eight field inspectors who work North Slope-type shifts to look
at the wells and valves, a couple of IT people, and support
staff.
3:44:14 PM
SENATOR COGHILL asked how information flows between staff and
the commissioners.
MR. FRENCH answered that Commissioner Seamount has worked many
years with the agency and has seen many ups and downs in its
functioning, but he credits Commissioner Foerster with
establishing a "highly efficient and low drama" work environment
that is extremely collaborative. And then there are sort of
senior engineers and inspectors who can provide historical
perspective for guidance. Sometimes the conversations are
extremely technical and way over his head and he listens, and
gets the picture. But he relies on his co-commissioners and
staff to help guide him. Sometimes it's more of a policy
question.
For example, they have out for notice and comment a regulation
that would help publicize and make available to the public
fracking permits when they come to the agency 10 days before
they issue the permit. This week they were inundated with people
who think it should be a 30-day notice and comment period. And
that is a policy call they will reach at some point. He wasn't
sure what the right answer is between 10 and 30, but they are
conscious of not holding up industry. The reason for picking 10
days is that is about how long it takes to process a permit, and
they don't want to be in the position of saying oh, you've got
to wait another 10 days while a few more comments come in on
your permit.
MR. FRENCH explained that he reviewed a fracking permit earlier
in the week that took about an hour. It might take someone else
two hours to review it, but after that, you're going to know
where it is and have an idea of what is happening. If you are
for it, you say so. Probably most of the comments would be
against it, and that kind of policy call has no exact right
answer, but you can see how they are thinking.
3:46:50 PM
CHAIR GIESSEL commented that his colleagues, the other two
commissioners, speak very highly of Mr. French's work with them
over the past few months that he has been a very quick study and
they really enjoy working with him. That gives her a lot of
comfort and gives him a lot of credibility in her eyes.
MR. FRENCH said he appreciated that. He wanted to close by
making a couple of points. A question came up earlier in a House
Resources Committee that it shed light on how commission works.
Before he came down he got a list of all the permits the Alaska
Oil and Gas Conservation Commission (AOGCC) had granted since he
came to work. It was about 100 well permits and about 300
workover permits. One of the committee members said, "Aha, but
how many have you denied?" The answer is none, and that is
because the companies that work in Alaska know what their
business is about. When they fill all the boxes in the Alaska
Oil and Gas Conservation Commission (AOGCC) checklist, they are
issued a permit. It's not up to his discretion. The statute says
they "shall" issue a permit if all those steps are done. They
would be in Superior Court getting their hands slapped by a
judge very soon after acting arbitrarily or capriciously.
Lastly, Mr. French said that he met with an executive from
Hilcorp on Wednesday who said he could tell the committee they
are supporting his confirmation.
3:48:46 PM
CHAIR GIESSEL asked him to stay and said that she would take
public testimony after they hear from Commissioner Seamount.
Commissioner Seamount had been serving since 2000 when he was
first appointed by Governor Tony Knowles. He holds the geologist
seat on the commission. He is a professional geologist under AS
08.02.011 and has a minimum of 10 years of professional
experience in the field of petroleum geology. She invited him
forward.
3:49:35 PM
DAN SEAMOUNT, re-appointee, Alaska Oil and Gas Conservation
Commission (AOGCC), Anchorage, Alaska, said he would respond to
any questions or concerns they had about his confirmation for
the third time to the Alaska Oil and Gas Conservation Commission
(AOGCC). He noted his resume in their packets. First, he had
been commissioner for the Alaska Oil and Gas Conservation
Commission (AOGCC) for the past 17 years, which is more than 30
percent of the time the agency has been in existence; it beats
Tom Marshall's record. He explained that Tom Marshall is why
Alaskans all get PFD checks and why it has Prudhoe Bay and
Kuparuk. He is the one who picked the land for state selection;
it was called Marshall's Folly at the time. That is why Alaska
has been rich and will be rich in the future.
MR. SEAMOUNT said the normal time that a commissioner is
commissioner at Alaska Oil and Gas Conservation Commission
(AOGCC) is 2-4 years and he has been there 17 years. He has
worked with 10 other AOGCC commissioners and represented five
governors with the Interstate Oil and Gas Compact Commission.
He said he found this job is very exciting, challenging and
fulfilling. And he would like to continue that for another six
years with the best staff he has ever worked with. Every single
one of the 30-plus staff is doing his job.
When Commissioner French started, it was his job to bring him
along, and after a few days he found out that he gets it. He
doesn't have to train him anymore. The commission is running
smoothly right now with a full commission. He has been involved
in more than 124 public hearings, issues over 3,500 drilling
permits, 17,000 well work over operations, and hundreds of major
decisions. Before he showed up, the commission had done maybe
five penalties, but since he has been there they have done 27
civil penalties and 137 enforcement actions. The reason there
are more penalties and enforcement actions now are because
Alaska has a lot of new operators. They come from other areas
and Alaska has stringent regulations and they need to be
educated. The most important part of educating them is when they
do violate a regulation or statute, they tell them what they did
wrong and you write out a plan on how it's not going to happen
again. That is more important that the dollar amount of the
fines.
MR. SEAMOUNT said he is surprised that he is still with the
commission, but new challenges come along all the time and he
can never predict what they are going to be. It keeps his brain
from atrophying. While he has been in the industry he has
interacted with government agencies in five states on similar
issues the AOGCC addresses. He has 25 years of Alaska experience
directly related to the oil and gas industry. He worked
underground operations with production, drilling, reservoir
engineers, for most of his career, and these will all contribute
to helping do a good job of promoting conservation and efficient
production of Alaska's oil and natural gas. He also has 20 years
of outside experience in the Rocky Mountains, Texas, Mid-
continent, California, Kazakhstan, and Alaska.
3:57:03 PM
He said Alaska has 20-plus basins, which have oil and gas
potential, and only two basins are producing now. Twenty more
are left that haven't even been touched. A tremendous amount of
oil is left and announcements of three major discoveries; two
are discoveries and a third needs to be tested, but it looks
pretty good, too. It makes him think that Alaska has a great
future. He said it takes 11.5 years to get a new field going.
3:59:10 PM
SENATOR COGHILL asked what surprises he saw coming in
exploration other than explaining the challenges of Alaska to
the new players.
MR. SEAMOUNT answered that the explorers coming into the state
are spending a lot of money and hiring good staff. AOGCC is not
a consulting agency - they don't tell them how to drill or set
pipe - and very rarely denies a permit, because when a permit is
submitted and Alaska Oil and Gas Conservation Commission (AOGCC)
staff sees it's not compliant they tell the company to go back
home and make it compliant. They go back and forth so that by
the time it gets to the commissioners it's almost always
compliant.
One new discovery in the Pikka Unit has been sitting between the
two biggest oil fields in the country for 60 years; no one found
it. Alaska Oil and Gas Conservation Commission (AOGCC)'s own
geologists have mapped it and think it's bigger than announced.
SENATOR COGHILL asked what some of the new wrinkles are coming
in terms of new technologies' compatibility with existing
regulations.
MR. SEAMOUNT said technology is moving so fast these days that
it's hard to predict and their regulations are being modified
just to keep up with it. A lot of new people are coming into the
state and stirring up the locals especially with the fracking
issue, which incidentally has been around since 1947. He has had
hundreds of wells fracked and never had a problem except one
time when a high-pressure hose got away from them and started
whipping around the location. His assistant just happened to be
a semi-professional tennis player and was playing jump rope with
it.
Some people come into the state saying that fracking is going to
kill local kids and all kinds of bad outcomes, but he responds
that it's his job to make sure that what they do is safe. He has
asked for any information they may have, but he hasn't seen any
yet.
4:03:31 PM
SENATOR COGHILL commented that the depth and coldness of the
ground up there probably is helpful for fracking.
MR. SEAMONT said that was correct and added that the North Slope
has no real fresh water either, because it's all frozen.
Fracking up there is not the issue it is down south and not the
issue that the outsiders have stirred it up to be.
CHAIR GIESSEL remarked that last year or so the commission
rewrote the fracking regulations.
MR. SEAMOUNT said that happened in 2014 and now some new
regulations are coming up to make the process more transparent.
4:05:20 PM
CHAIR GIESSEL asked him if the leaking gas pipeline in Cook
Inlet falls under AOGCC jurisdiction.
MR. SEAMOUNT said the quorum says it does not, because mainly
the gas has already been bought and paid for, and it is now in
the hands of the Department of Environmental Conservation (DEC)
and the Coast Guard. That said, the discussion was one of the
questions with differences among the staff in his memory, and
there was discussion of bringing in the attorney from the
Department of Law (DOL).
CHAIR GIESSEL thanked him for his service and finding no further
questions, opened public comment.
4:06:38 PM
DAVE HANSON, representing himself, Anchorage, Alaska, said he
worked under Governor Hammond in charge of land selections and
completed selections of 40 million acres of state land. Later he
was the state's lobbyist in Washington, D.C., on the Alaska
National Interest Lands Conservation Act (ANILCA). Some of the
many public positions he has held are serving for four years as
vice chair of the Alaska Local Boundary Commission, another
quasi-judicial body, such as the Oil and Gas Commission, and for
the past 20 years he has had his own business providing neutral
public hearing officer facilitation services to controversial
projects such as the Juneau road, the bridge to nowhere, the
Anchorage Coastal Trail, and the Cooper Landing Road. He shared
the following three points:
1. In reference to comments from Senator Coghill and
Commissioner Seamount, he has several friends who have
been in the industry as drillers and welders and
worked both in the Dakotas and Alaska, and they have
uniformly said they cannot believe how much better
quality control Alaska has and how much more serious
the industry is about doing things right here. And he
thinks that is partially a compliment to this
commission.
2. The AOGCC has a great reputation and integrity.
This is a tribute to Commissioners Foerster and
Seamount. Commissioner Seamount should, of course, be
reconfirmed.
3. He supports the confirmation of Mr. French. Though
he doesn't know him personally, his background of 12
years of working in the oil industry, being a trained
attorney, working through the attorney general's
office, and 12 years in the legislature definitely
qualify him to meet a fundamental understanding of the
oil and gas industry in the state. He also has a
public reputation for a high level of integrity. It is
fortunate that a person with his skills background and
interest and concern for Alaska is willing to serve in
this position.
CHAIR GIESSEL, finding no further comments, closed public
testimony. Finding no further questions, she read the committee
report as follows:
In accordance with AS 39.05.080, the Resources
Committee reviewed the following and recommends the
appointments be forwarded to a joint session for
consideration: Oil and Gas Conservation Commission:
Hollis French and Dan Seamount.
This does not reflect an intent by any of the members
to vote for or against the confirmation of the
individuals during any further sessions. The committee
signed the committee report document.
4:11:07 PM
CHAIR GIESSEL, finding no further business, adjourned the Senate
Resources Committee meeting at 4:11 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| Agenda 3-10-17.pdf |
SRES 3/10/2017 3:30:00 PM |
|
| 1. Oil & Gas Conservation Commission Fact Sheet.pdf |
SRES 3/10/2017 3:30:00 PM |
AOGCC |
| 2. AOGCC - Resume - Hollis French.pdf |
SRES 3/10/2017 3:30:00 PM |
AOGCC |
| 3. AOGCC - Resume - Dan Seamount.pdf |
SRES 3/10/2017 3:30:00 PM |
AOGCC |