Legislature(2023 - 2024)ADAMS 519
04/04/2024 10:00 AM House FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| Presentation: Cook Inlet Oil and Gas by the Department of Natural Resources | |
| HB257 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| + | HB 257 | TELECONFERENCED | |
| + | TELECONFERENCED |
HOUSE BILL NO. 257
"An Act requiring the Department of Natural Resources
to make Cook Inlet seismic survey data available to
certain persons; and providing for an effective date."
11:18:56 AM
REPRESENTATIVE TOM MCKAY, SPONSOR, thanked the committee
for hearing the bill. He read the sponsor statement (copy
on file):
As Alaska State Legislators, we are all committed to
unlocking the vast potential of Cook Inlet for gas
exploration and drilling. One way we can do this is by
attempting to broaden access to state-owned seismic
survey data. This legislation aims to enhance data
access, allowing a wider range of experts and industry
players to explore the geological intricacies of Cook
Inlet. By making seismic data more accessible, we hope
to stimulate interest and investment from new players
in the energy sector. Our goal is to enhance energy
security, support economic development, and ensure the
sustainable management of Alaska's natural resources.
This bill represents a pivotal step toward realizing
the untapped potential of Cook Inlet, encouraging
innovation, and fostering a competitive energy market.
11:20:25 AM
Representative McKay relayed that he had been approached by
small independent oil and gas operators seeking access to
state seismic data in Cook Inlet. The data would be
reviewed by seismic consultants and could potentially
result in projects in the Cook Inlet. He believed that it
was one step the state could take to encourage exploration
activity. He asked his staff to provide a PowerPoint
presentation.
TREVOR JEPSEN, STAFF, REPRESENTATIVE TOM MCKAY, provided a
PowerPoint presentation titled "HB 257 Cook Inlet Seismic
Data Access." He began on slide 2 titled "Seismic Data:
Overview:"
Extremely important tool in the oil and gas
Industry.
Using sound waves, geological structures can
be mapped.
Seismic programs can cost anywhere from a
few million to hundreds of millions of dollars;
depends on magnitude of the area of inquiry.
Mr. Jepsen read from a prepared statement. He expounded
that seismic data was used on both land and sea.
11:22:52 AM
Mr. Jepsen turned to slide 3 titled "Seismic Data
Acquisition
• Seismic Surveying: This process involves sending
shock waves into the ground, which then bounce back to
the surface where they are recorded by sensors known
as geophones.
• Data Recording and Analysis: The reflected waves are
captured by the geophones and converted into seismic
data.
Mr. Jepsen explained that the shock waves were generated by
small, controlled explosions.
11:23:26 AM
Mr. Jepsen discussed slide 4 titled "Seismic Imaging: 2D,
3D, & 4D." He elaborated that the photos on the slide
portrayed what the data looked like. He added that 4D
[dimensional space] seismic data tracked the change and
migration of fluid volumes and reservoirs over time but was
used for already producing reservoirs. He noted that 3D
provided a better picture but was more expensive than 2D.
11:24:01 AM
Mr. Jepsen reviewed slide 5 titled "Why HB 257?":
Requires the Department of Natural Resources to
distribute state-owned seismic data to "qualified
persons" at no charge
Predicted gas shortages in the near-future due to
decreased Cook Inlet gas production poses a potential
existential threat to South Central
Despite state-owned seismic data being offered at a
fraction of cost for acquisition, still serves as a
barrier for exploration companies
Mr. Jepsen indicated that the state received very little
revenue from selling Cook Inlet seismic data to the
industry. He reiterated that the goal of the legislation
was to get more industry professionals to view the data to
attract more smaller and medium sized operators. The state
currently sold the data at a fraction of the cost to
produce it. However, he felt that it still served as a
barrier to some companies accessing the area. He pointed to
the graph on the right side of the chart by the Department
of Natural Resources that portrayed the Cook inlet Gas
Production Curve. The graph showed a decline in meeting the
production goal of 70(BCF) by 2027. He reported that
eventually exporting LNG was likely resulting in higher
costs for rate payers.
11:25:57 AM
Mr. Jepsen turned to slide 6 titled "Seismic Tax Credits:"
• Oil and Gas companies eligible for Geological and
Geophysical Exploration tax credits under AS
43.55.023(a)(2)
• Must comply with AS 43.55.025(f)(2)
• Ownership of seismic data is relinquished to state
after 10 years following the survey completion date
Mr. Jepsen related that the third bullet point was relevant
to HB 257. The bill eliminated the 10 year requirement to
qualified persons but not for other data that had not met
the 10 year requirement.
11:27:02 AM
Mr. Jepsen moved to slide 7 titled "How Valuable is the
State-Owned Seismic Data?
• Perceived value of state-owned seismic data varies
• Important distinction: Cook Inlet vs. Alaska North
Slope
• Less than 3% of total revenue for state-owned
seismic data is brought in from Cook Inlet Seismic
Data
Mr. Jepsen pointed to the pie chart and chart on the right
side of the slide that showed 94 percent of total seismic
data sales was from the North Slope region.
11:27:48 AM
Mr. Jepsen turned to slide 8 titled "Cook Inlet Seismic
Sales Summary
• HB 257 brings forward a "value-add" question for the
legislature
• HB 257 doesn't pretend to be a silver bullet to spur
Cook Inlet interest, but instead is one of many
changes we can make to incentivize new activities and
investment
Mr. Jepsen pointed to the pie chart and chart on the side
and communicated that the academic and government sectors
purchased most of the seismic data with industry purchasing
roughly $27 thousand worth of data from 2018 to 2023. He
deemed that the legislation presented a trade-off decision
for the legislature: The small amount in sales revenue
versus potential interest in Cook Inlet. He concluded that
the legislation was one piece of a larger plan to
incentivize Cook Inlet gas production.
Co-Chair Foster relayed that the fiscal note had estimated
the loss of revenue of $35,000. He wondered how much the
cost of producing the data was versus about how much the
state received on the dollar to sell it. Mr. Jepsen
responded that it was roughly 1 percent of the total cost
of producing it. He deferred to DNR for a detailed answer.
11:30:53 AM
Representative Galvin reported that she did not find any
supporting documents from industry in the bill packet. She
asked for "examples of who would be supportive" of the
legislation. Mr. Jepsen answered that the sponsor did not
have a list or letters from industry. He mentioned that
Representative McKay engaged in discussions with industry.
11:31:47 AM
Representative McKay interjected that he only had anecdotal
information from industry people that he interacted with
frequently who had recommended the action. He had heard
that it could open up some oil and gas industry prospects.
He offered to provide some personal testimony if needed.
Representative Galvin deduced that the gist of the DNR
presentation the committee just received was to get
"current" Cook Inlet industry "players" incentivized. She
wondered whether the bill would help that "group of folks."
Representative McKay believed the bill could help
incentivize interest with a bank of data free of charge.
Mr. Jepsen interjected that there was very little interest
in Cook Inlet lease sales even with adjusted lease terms.
He also hoped to attract newcomers with the data.
11:34:15 AM
Representative Josephson recalled a meeting with the prior
administration and commissioner of DNR regarding an issue
over data. He was unable to remember the issue or details.
He pondered whether the sponsor should get DNR's opinion.
Representative McKay was unable to envision what the topic
might have been. Representative Josephson recalled that it
was about seismic data.
Mr. Jepsen believed it was most likely the North Slope and
would follow up.
Co-Chair Foster welcomed Juneau students to the committee
room.
Co-Chair Edgmon thought that seismic data in Cook Inlet was
3-D and not 2-D.
Representative McKay answered that it could be both or
either. He added that 3-D data was newer, was currently
used more prevalently, and was a substantial improvement in
what scientists could evaluate. Co-Chair Edgmon wondered if
the seismic data in Arctic National Wildlife Refuge (ANWR)
was in 2D. Representative McKay replied in the affirmative.
11:37:55 AM
Co-Chair Edgmon asked how much of the 3.2 million acres in
the Cook Inlet boundary was conducive to seismic data
gathering. Representative McKay answered that seismic data
gathering required a substantial amount of permitting and
was highly regulated. He did not know off hand how much
land was open for seismic data.
11:39:15 AM
Representative Coulombe asked who qualified persons were
and who made the determination. Mr. Jepsen responded that
Section 2 of the bill included the definition of qualified
person. He read the following:
"qualified person" means an accredited domestic
research institution, a person actively exploring for,
developing, or producing oil, gas, or minerals in the
state, or another person to whom the provision of
seismic survey and other geophysical data would serve
the best interests of the state as determined by the
department.
Representative Cronk thanked the bill sponsor and staff for
the bill. He appreciated the idea and believed that if it
brought in one more company it was worth it.
Representative McKay relayed that the bill kept with the
state's constitutional requirement to responsibly
developing its natural resources.
Co-Chair Foster asked the department if it had any
comments.
MELANIE WERDON, DIRECTOR, DIVISION OF GEOLOGICAL AND
GEOPHYSICAL SURVEYS, DEPARTMENT OF NATURAL RESOURCES (via
teleconference), replied that she was available for
questions.
Co-Chair Foster thanked the students for joining the
committee. He was happy to visit with them after the
meeting.
Co-Chair Foster thanked the presenters.
HB 257 was HEARD and HELD in committee for further
consideration.
Co-Chair Foster reviewed the schedule for the following
meeting.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 257 - Presentation ver B 3.31.24.pdf |
HFIN 4/4/2024 10:00:00 AM |
HB 257 |
| HB 257 - Sponsor Statement ver B 3.31.24.pdf |
HFIN 4/4/2024 10:00:00 AM |
HB 257 |
| HB 257 - Sectional Analysis ver B 3.31.24.pdf |
HFIN 4/4/2024 10:00:00 AM |
HB 257 |
| HB 257 - DNR-DGGS Cook Inlet Seismic Sales Summary and Sesimic Data Costs - 2018 to 2023.pdf |
HFIN 4/4/2024 10:00:00 AM |
HB 257 |
| HB 257 - DNR-DGGS Seismic Sales by Sector and Region - 2018 to 2023.pdf |
HFIN 4/4/2024 10:00:00 AM |
HB 257 |
| HFIN DNR Cook Inlet Oil & Gas Presentation 040424 (2).pdf |
HFIN 4/4/2024 10:00:00 AM |