Legislature(2003 - 2004)
03/28/2003 03:40 PM Senate RES
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HB 69-REGULATION OF SHALLOW NATURAL GAS
CHAIR OGAN told members that he had assigned HB 69 to a
subcommittee chaired by Senator Dyson. He declared a conflict of
interest with HB 69 and asked to be excused from taking action
on it.
SENATOR BEN STEVENS objected.
CHAIR OGAN then stated that Vice Chair Tom Wagoner would chair
the meeting.
SENATOR ELTON asked Chair Ogan to describe his conflict.
CHAIR OGAN said he works during the interim for a company that
will be directly affected by this legislation.
VICE-CHAIR WAGONER told members that a proposed committee
substitute, Version C, was before the committee.
SENATOR SEEKINS moved to adopt Version C as the working document
of the committee.
VICE-CHAIR WAGONER noted without objection, the motion carried.
SENATOR DYSON moved the adoption of Amendment 1, which reads as
follows.
A M E N D M E N T 1
Page 3, line 26, after "laws" delete all language through lines
31 and replace with:
If DNR clearly demonstrates an overriding state
interest, waiver of local planning authority approval
and the compliance requirement may be granted by the
commissioner. The commissioner shall issue specific
findings giving reasons for granting any waiver under
this section.
Page 4, line 2, after (o) delete all language through line 6 and
replace with:
If DNR clearly demonstrates an overriding state
interest, waiver of local planning authority approval
and the compliance requirement may be granted by the
commissioner. The commissioner shall issue specific
findings giving reasons for granting any waiver under
this section.
SENATOR OGAN explained that Amendment 1 articulates that the
state has a vested interest in that subsurface right and if the
local regulations are so onerous, the commissioner can override
them. He said he personally believes it is good state policy to
protect state subsurface rights. Currently, in other states,
cases have arisen in which local governments have passed
regulations that prevented developers from accessing state
subsurface property.
SENATOR SEEKINS said he supports this language because it is
just a restatement of a truism. The state has certain rights
under the Constitution; Amendment 1 reserves those rights.
SENATOR ELTON asked if a precedent for this language exists
anywhere else in statute.
SENATOR OGAN said there is a precedent in the section on public
projects.
SENATOR ELTON stated the original language in Version C was
problematic for the Alaska Municipal League (AML) and questioned
whether AML supports Amendment 1.
SENATOR OGAN said it does and that a representative from the AML
was available to testify.
VICE-CHAIR WAGONER asked if any of the public participants
wanted to testify on Amendment 1. There was no response.
SENATOR BEN STEVENS asked if the sponsor endorses Amendment 1.
VICE-CHAIR WAGONER asked that the record reflect that the
sponsor nodded affirmatively in support of Amendment 1.
SENATOR OGAN informed members the citation for the waiver for
public projects is AS 35.30.030.
With no further objection to the adoption of Amendment 1, VICE-
CHAIR WAGONER announced the motion carried.
SENATOR DYSON moved to adopt Amendment 2, proposed by the
Department of Law. He told members Department of Law staff has
advised that the language in Amendment 2 is more consistent with
existing statutory language and will help to avoid litigation.
Amendment 2 reads as follows.
A M E N D M E N T 2
OFFERED IN THE SENATE RESOURCES BY SENATOR DYSON
COMMITTEE
TO: SCS HB 69 (23-LS0428\C)
Page 1, line 7
Delete "unconventional"
Insert "shallow"
Page 1, lines 7-8
Delete ", including coal bed methane,"
Page 1, line 9
Delete "unconventional"
Insert "shallow"
Page 1, line 12
Delete "unconventional"
Insert "shallow"
Page 2, line 3:
Delete "unconventional"
Insert "shallow"
Page 2, line 7, following "as"
Delete "unconventional"
Insert "shallow"
Page 2, line 15
Delete "unconventional"
Insert "shallow"
Page 2, line 17
Delete "unconventional"
Insert "shallow"
Page 2, line 21
Delete "unconventional"
Insert "shallow"
Page 2, line 22
Delete ", including coal bed methane"
Page 2, line 25
Delete "unconventional"
Insert "shallow"
Delete ",including coal bed methane,"
Page 2, line 26, following "and, if so,"
Delete "establish the response"
Insert "whether the volume of oil encountered will be of
such quantities that an oil discharge prevention and
contingency plan will be required."
Page 2, lines 27-28
Delete all material.
Page 3, line 2
Delete "unconventional"
Insert "shallow"
Page 3, line 25
Delete "unconventional"
Insert "shallow"
Page 3, line 30
Delete "unconventional"
Insert "shallow"
Page 3 lines 30-31
Delete ", including coal bed methane,"
Page 4, line 1
Delete "title"
Insert "chapter"
Page 4, line 1
Insert a new bill section to read:
"*Sec.5 AS 31.05.170 is amended by adding a new paragraph to
read:
(15) "shallow natural gas" means coal bed methane,
natural gas drilled for under a lease authorized by AS
38.05.177, or natural gas drilled for in a well whose true
vertical depth is 4,000 feet or less."
Renumber the following bill sections accordingly.
Page 4, line 1:
Delete "AS 38.05.177"
Insert "AS 38.05"
Delete "subsection"
Insert "section"
Page 4, line 2
Delete "(o)"
Insert "Sec. 38.05.178. Regulation of shallow natural gas;
relationship of chapter to other laws."
Page 4, line 13
Delete "unconventional"
Insert "shallow"
Page 4, lines 13-14
Delete ", including coal bed methane,"
Page 4, line 6
Insert "For purposes of this section, 'shallow natural gas'
has the meaning given in AS 31.05.170"
Page 4, line 13
Delete "unconventional [SHALLOW]
Insert "shallow"
Page 4, lines 13-14
Delete "including coal bed methane gas,"
Page 4, line 15, following "determines"
Insert "under AS 31.05.030(j) that"
Page 4, line 16, following "(1)"
Delete "under AS 31.05.030(j) that"
Page 4, line 16, following "for"
Delete "unconventional"
Insert "shallow"
Page 4, line 19, following "plan"
Delete "with an appropriate response planning standard
described in"
Page 4, line 20
Delete "AS 46.04.030(k)"
Page 4, following line 22
Insert a new bill section to read
"*Sec.8. AS 46.04.900 is amended by adding a new paragraph to
read:
(30) "shallow natural gas" has the meaning given in AS
31.05.170"
Renumber the following bill sections accordingly.
Page 4, line 26
Delete "unconventional"
Insert "shallow"
Page 4, line 26
Delete "unconventional"
Insert "shallow"
Page 4, following line 30
Insert a new bill section to read:
"*Sec.10 AS 46.40.210 is amended by adding a new paragraph to
read:
(10) "shallow natural gas" has the meaning given in AS
31.05.170."
Renumber the remaining bill section accordingly.
SENATOR OGAN objected for the purpose of discussion.
VICE-CHAIR WAGONER asked Mr. Mintz to explain the intent of
Amendment 2 to the committee.
MR. ROBERT MINTZ, Assistant Attorney General, Department of Law
(DOL), explained to members that Amendment 2 was drafted by the
DOL after consultation with representatives of the Alaska Oil
and Gas Conservation Commission (AOGCC), Department of Natural
Resources (DNR), and the Department of Environmental
Conservation (DEC). It is intended to do three things.
· The term "unconventional natural gas" was changed to
"shallow natural gas" throughout the legislation. The title
of the bill uses the term "shallow natural gas" so the term
was made consistent to avoid a potential problem with the
title not describing the subject of the bill. The common
understanding of "unconventional natural gas" includes gas
at deep depths.
· It provides a statutory definition of "shallow natural
gas." DOL felt that inclusion was important because as the
bill has been developed, it actually affects not only the
AOGCC statute, but also DEC and DNR. The definition makes
clear what projects would and would not be covered by the
bill.
MR. MINTZ told members that an AOGCC member would explain the
definition to members.
MR. DAN SEAMOUNT, Alaska Oil and Gas Conservation Commission,
said both the AOGCC and DNR discussed ways to define shallow
natural gas and agreed on this definition. Any one or more of
three criteria is sufficient to meet the definition. One
criterion is coal bed methane. Because there is a practical
depth limitation involved, coal can be squeezed to a point where
gas cannot flow out of it at that depth, probably at about 4,000
feet. The second criterion could be covered by a DNR shallow gas
lease, under AS 38.05.177. The third criterion is natural gas
drilled for in a well with a true vertical depth (TVD) of not
more than 4,000 feet. Both the AOGCC and DNR felt these criteria
would cover the types of projects the committee intends to cover
under this legislation.
MR. MINTZ then told members the third change in Amendment 2 will
correct an inconsistency in the language between what the AOGCC
is expected to do under Section 6 of the bill (related to oil
spill contingency plans) and what the AOGCC is authorized to do
under Section 2 of the bill (the AOGCC's powers and
responsibilities). Using the language from Section 6 in Section
2 will avoid any uncertainty about the AOGCC's authority. In
addition, a superfluous phrase was deleted.
MR. MINTZ noted a fourth change in Amendment 2 is technical and
relates to Section 5. As written, the committee substitute adds
a new subsection to Section 177 of AS 38.05, the shallow gas
leasing statute. Because the coverage of Section 5 is broader
than shallow gas leasing and the concept of shallow natural gas
is broader than what is provided for under the leasing statute,
DOL thought placing Section 5 in the shallow gas leasing section
could cause confusion. DOL instead suggested it be placed in a
new section by itself. Amendment 2 adds that new section.
SENATOR OGAN referred to page 2, lines 22-25 of Amendment 2, and
asked if the intent of that language is to prevent AOGCC from
playing the role traditionally played by DEC.
MR. MINTZ said that is a policy call for the committee to make.
He said Section 2 is only supposed to provide express authority
for the AOGCC to do what Section 6 asks it to do. The language
on lines 22-25 would make the language consistent with Section
6.
SENATOR OGAN asked if AS 31 is the AOGCC statute.
MR. MINTZ said that is correct.
SENATOR OGAN asked, "So you don't want AOGCC to be in the
business of establishing a response? That's more what DEC - I
mean is that why we're doing this basically - the DEC job
description?"
MR. RANDY RUEDRICH, AOGCC, told members that two sections of the
bill were inconsistent. Section 6 contained the requirements to
provide information, which are left unchanged. Section 2
required the AOGCC to do the task described in Section 6. The
amendment attempts to make consistent what the AOGCC is being
asked to do with what it is doing. He said the AOGCC will be
defining the likely flow rates to give to the DEC for the
establishment of a spill contingency plan.
SENATOR OGAN asked if the line number changes on page 4 reflect
the adoption of the committee substitute.
MR. MINTZ said that is correct. He explained that Amendment 2
was originally drafted to apply to Version B. However, when
Version C was introduced, handwritten revisions were made to
apply to Version C. He acknowledged that because of limited
time, he cannot assure that all of the necessary revisions were
included. [Amendment 2 as typed above contains the handwritten
revisions provided by Mr. Mintz that apply to Version C.]
VICE-CHAIR WAGONER announced that with no further questions or
objections, CSHB 69(RES) [Version C] as amended was before the
committee.
SENATOR OGAN moved that the bill drafter be able to make any
technical conforming changes necessary to incorporate Amendment
1 as he believed some clean-up changes may be required.
VICE-CHAIR WAGONER suggested that the motion allow the chair to
make sure the changes are technical in nature before the draft
is considered finalized.
SENATOR BEN STEVENS asked Senator Ogan to clarify why he
believes Amendment 1 will require a technical correction.
SENATOR OGAN said he is concerned the heading will not conform.
He added that he is only asking the committee to give the legal
drafter the ability to make technical corrections, not
substantive changes. He said the legal drafter made that
suggestion because he did not draft Amendment 1.
SENATOR ELTON commented that if any technical amendments need to
be made, he would also like a copy.
SENATOR OGAN indicated the legislation could also be changed on
the Senate floor, if necessary.
There being no further discussion or objections, VICE-CHAIR
WAGONER announced the motion carried and that the committee
would take public testimony.
MR. MATT DAVIDSON, representing the Alaska Conservation Voters,
expressed concern that the public has had very little chance to
review the changes to HB 69 made in the Senate. He said he
agrees that the development of coal bed methane and shallow gas
drilling has huge potential for the development of energy across
the state, especially in rural areas where energy costs are very
high. Unfortunately, the bill does not recognize the potential
risks of this type of development to groundwater, surface water,
community development and public and private lands. The bill is
lacking in that it does not instruct the agencies to take a
proper look at these impacts. He asked that the bill recognize,
in its findings section, the potential impacts to the waters,
neighborhoods and communities of the state from coal bed
methane.
MR. DAVIDSON said the bill erroneously implies that the impacts
of coal bed methane developments are less of a threat to the
resources of the state. He agrees they differ from deep well
drilling, but the impacts to private landowners and surface
waters in the Rocky Mountains have been very big. He described
the process of coal bed methane development, particularly
reinjection, and problems associated with salinity, seepage, and
groundwater levels and contamination. He repeated the findings
section should reflect those risks and that AOGCC should develop
regulations to address them.
MR. DAVIDSON said he believes it is inappropriate to leave the
variance provision in Sections 1 and 3 of the bill. A variance
will not be necessary once regulations are developed to properly
manage coal bed methane production. He urged the committee to
add the sunset provision to the variance language.
MR. DAVIDSON said he also believes it is inappropriate that the
public notice of the variances continues to be included in the
legislation. There has been no compelling testimony as to why
the variances are necessary. The AOGCC is currently processing
some of the variances requested by Evergreen Drilling. He said
he continues to object to the language limiting local government
planning in Sections 4 and 5. Coal bed methane has tremendous
impacts on private land. A local government should have the
right to tell the producer and the state that it does not want a
compressor station built next to a school. His final point was
that the exemption to coastal zone consistency review is
inappropriate because coal bed methane produces wastewater and
has the potential to affect marine and other ecosystems and
should not be exempted.
SENATOR OGAN told Mr. Davidson that the subcommittee held a
number of meetings and publicly noticed each one. He then told
Mr. Davidson, regarding ground and surface water contamination,
the plans that Evergreen Resources submitted to the AOGCC
contain double protection to ensure no aquifer infiltration. He
said water is not actually injected to produce the well. The
water is drawn down to lower the pressure in the reservoir,
which makes the methane to rise. He said some of that water does
have low salinity levels. That is reinjected below the level of
production into bedrock. It is virtually impossible for that
water to infiltrate the aquifer. He also told Mr. Davidson that
the boroughs will be able to say they do not want a compressor
station next to a school through land use and planning. This
bill does not remove that ability; it does allow the
commissioner to waive local requests if there is a compelling
issue but he believes those mitigating concerns can be addressed
in the permit.
SENATOR OGAN said he believes Mr. Davidson must have been
referring to a New York Times article about methane seepage in
the Powder River Basin. He said the methane seepage was a
natural seepage that had been there forever. He pointed out that
methane is non-toxic. He has seen friends in the Mat-Su Valley
turn on their faucets, hold a match and light a fire. He noted
the coal is very shallow in some places in the Mat-Su Valley.
Those people are actually drawing water out of coal. Their water
wells produce gas.
SENATOR ELTON commented that it is easy to talk about a lot of
these issues as if the public has the same understanding of
them. Often what gets in the way is a lack of knowledge. He said
the issue is that at one end the bill constricts the possibility
of public notice, at the other end, communities are being told
they have no say. That sets up a situation where no rational
discussion will take place because there will be no forum in
which to do so. He asked whether situations in the past have
occurred that warrant the new sections in the bill.
SENATOR OGAN asked to respond to a previous comment and said the
only thing this bill does is to change public notices for
technical changes made by the AOGCC, basically for down-hole
operations. He said a technical change might be requested when a
company wants to make minor changes to its plan of operation
because it encountered a slightly different geology than
expected. He said the public still has plenty of opportunity to
comment on the leasing issue itself and mitigating measures on
the overall plan. He pointed out to date, no one has requested a
public hearing on any of those technical changes.
SENATOR ELTON asked if any situation has arisen that requires
the kind of relief this bill seeks.
SENATOR OGAN said, to the best of his knowledge, there have been
no requests on these technical down-hole issues, and that they
have all been public noticed with the AOGCC. He told members
that someone who wants to delay a project could request a
hearing, which requires a 30-day notice. That could force an
operation to shut down over a technical change to a plan that
the AOGCC commissioners are capable of deciding upon without
harming the public. He said he believes this change is
consistent with the Governor's attempt to streamline the
regulatory process.
SENATOR ELTON maintained that one can always envision a
situation in which public notice and public hearings could
create problems, even if they haven't in the past.
MR. DAVIDSON told members that he testified at the first
subcommittee hearing, at which time the first committee
substitute was introduced. That was the first time he saw the
municipal language and called the Mat-Su Borough to inform
staff. Since then, the chair of the subcommittee asked him to
hold his comments and bring them before the full committee. He
said he appreciates Senator Ogan's knowledge of coal bed
methane. He noted that the State of Montana just considered a
bill to regulate the discharge of water drawn from coal bed
methane. The farmers and ranchers want it regulated because they
cannot use that water on their operations. He pointed out that
neither the state nor the AOGCC has a lot of experience with
coal bed methane production or drilling so he feels it is
appropriate to discuss potential issues in communities.
SENATOR OGAN said he agrees that other states have had problems
with water discharges. However, in some areas of Colorado, the
water is so pure it is drinking water quality. Ranchers love it
because they can get a water supply they did not have before.
However, there are problems with salinity in other areas. That
is not the case in Alaska because that water cannot be
discharged on the ground; it must be reinjected below 4,000
feet.
MR. DAVIDSON told members his goal is that the legislation
recognize that impacts from coal bed methane production can
occur. He asked the committee to consider the comments from the
Mat-Su Borough because placing limits on Title 29 authorities'
ability to zone these production wells is important.
VICE-CHAIR WAGONER said he thought the committee had the
concurrence of the Mat-Su borough on the bill as amended.
TAPE 03-18, SIDE B
SENATOR OGAN invited Mr. Davidson to contact staff at Evergreen
Resources who would be glad to give him a tour and explain their
operations. He said he believes Mr. Davidson would be impressed
with how conscientious Evergreen is about its operations.
MR. DAVIDSON said he is not arguing Evergreen's intentions or
that this legislation is a back door way to do business, he just
believes the public deserves to recognize the potential impacts.
VICE-CHAIR WAGONER announced a 10-minute at-ease. When the
committee reconvened, he said he would entertain a motion to
move the legislation from committee.
SENATOR SEEKINS said he would like to express support for the
rally going on in front of the Capitol Building to support our
troops and President Bush. He then moved SCSHB 69(RES) with
individual recommendations.
SENATOR ELTON objected and asked what the original motion was.
VICE-CHAIR WAGONER said the original motion was to adopt Version
C and then the committee adopted two amendments.
SENATOR ELTON asked for an explanation of the differences
between Versions B and C.
SENATOR DYSON explained that when the subcommittee sent its
proposal to the legal drafters, it had a line drawn through a
few words but the drafter did not exclude those words. Senator
Dyson did not notice that the words remained when he reviewed
the draft committee substitute. He said those words kept the
municipalities from having any say, which the subcommittee did
not intend. Those words were removed in Version C and, as far as
he knows, that is the only difference between the two versions.
He said he takes total responsibility for the error and
apologized for the mistake.
SENATOR ELTON removed his objection and VICE-CHAIR WAGONER
announced that without objection, the motion carried.
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