Legislature(2021 - 2022)BARNES 124
04/14/2022 08:00 AM House COMMUNITY & REGIONAL AFFAIRS
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| Audio | Topic |
|---|---|
| Start | |
| HB349 | |
| HB411 | |
| HB402 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 349 | TELECONFERENCED | |
| += | HB 402 | TELECONFERENCED | |
| += | HB 411 | TELECONFERENCED | |
| + | TELECONFERENCED |
HB 349-HEARING ESTABLISH DRILLING UNITS/SPACING
8:07:23 AM
CO-CHAIR HANNAN announced that the first order of business would
be HOUSE BILL NO. 349, "An Act relating to the establishment of
oil and gas drilling units and patterns."
8:07:43 AM
RYAN MCKEE, Staff, Representative George Rauscher, Alaska State
Legislature, on behalf of Representative Rauscher, prime
sponsor, noted those who would be giving invited testimony on HB
349.
8:08:54 AM
JEREMY PRICE, Public Commissioner, Alaska Oil and Gas
Conservation Commission, Department of Commerce, Community &
Economic Development, described the intent and purpose of HB
349. He said HB 349 would reduce administrative barriers by
removing the requirement under AS 31.05.100(a) and (b) that the
Alaska Oil and Gas Conservation Commission (AOGCC) must hold
hearings for any changes to oil and gas pool unit designations,
rules, or spacing patterns, even where all relevant properties
within a given pool belong to a single owner. He advised that
the requirement causes unnecessary delay to pool owners and
generates unnecessary cost to the state. He explained that this
change is necessary because the concept of only one vertical
well in a box on the map has been made obsolete by horizontal
drilling.
MR. PRICE said Section 2 would amend AS 31.05.100(e) to make it
discretionary rather than mandatory for AOGCC to issue notice
and hold a hearing in each instance where an exception is
granted to the rule or spacing pattern proscribed to a
particular pool. With the proposed change, he explained, AOGCC
could allow the operator to drill additional wells within the
same pool without going through 30 days of notice and comments
followed by the issuance of a conservation order. He reported
that from 2016-2020, AOGCC publicly noticed 47 hearings on
noncontroversial well spacing exceptions; these hearings were
not requested by the public, and no testimony was submitted.
Mr. Price pointed to a resolution [20 AAC 25.055, regarding
drilling units and well spacing, shown on slide 1 of a
PowerPoint in the committee packet], and he highlighted that
there would be protection from draining resources from adjacent
owners.
8:12:57 AM
JESSIE CHMIELOWSKI, Engineering Commissioner, Alaska Oil and Gas
Conservation Commission, Department of Commerce, Community &
Economic Development, stated that HB 349 would change a statute
that has not been changed since its adoption in 1955, and it
would not affect AOGCC's ability to fulfill its mission. She
said the legislation addresses how far one well must be from
another in the subsurface, in the targeted, productive
reservoirs. She explained the history of vertical wells and how
pressure would drop when people drilled too close to other
wells. She mentioned a Conservation Act of the 1930s and
prevention of waste through default drilling units. With
today's geology, it is common for wells to drill closer for
greater recovery. When Prudhoe Bay started 44 years ago, the
estimated recoverable reserve was about 9 billion barrels of
oil; today, with advancements in drilling and reservoir
management, recoverable reserves are an estimated 14 billion
barrels.
MS. CHMIELOWSKI referred to the PowerPoint utilized by Mr.
Price. She explained that the reference to "sections" have to
do with governmental grids. She showed how drilling is down
from land and going offshore. She showed "a colorful drawing"
[slide 2 of the PowerPoint] depicting the side view of one of
the wells in the Cosmopolitan Unit, and she pointed to "the
mother board." She talked about lateral drilling and echoed the
remarks of Mr. Price about the administrative burden of so many
notifications.
8:19:03 AM
MS. CHMIELOWSKI, in response to a question from Co-Chair Hannan,
clarified that in a case where there are seven spacing
exceptions on one well, each would require a [notice of]
hearing, because each is considered a separate well bore. In
response to follow-up questions, she said the hearings could be
scheduled on one day. The area that would benefit from HB 349
would be Cook Inlet because the fields on the North Slope are
much larger. She offered her understanding that AOGCC has never
turned down a request for an exception. She added that careful
review is always done, and she noted that the cost to well
owners is significant, thus, they are careful about [the
drilling exception they seek].
8:24:03 AM
MS. CHMIELOWSKI returned to her presentation, directing the
committee's attention to slide 4, which showed a bird's eye view
of the Rendezvous oil pool development plan, and she noted the
grid pattern and indicator of oil pool in the subsurface. Also
shown are planned wells to be drilled; every well has multiple
sections. She talked about using reservoir characteristics to
plan a well. She referred to a drill pad. She drew attention
to slide 5, which shows a zoomed in view [of the Rendezvous oil
pool development plan] and the alternating of "injectors" and
"producers," which is a method of recovering more oil. She said
this is another example of the administrative burden. She said
with passage of HB 349, AOGCC would continue its mission to
prevent waste of hydrocarbon resources. She then offered
feedback from a presentation given at a prior meeting.
8:30:57 AM
MS. CHMIELOWSKI, in response to Co-Chair Schrage, confirmed that
HB 349 would pertain to all other areas beside Cook Inlet; Cook
Inlet happens to be the primary location where [the requirement
for hearings] is causing an issue. She mentioned that AOGCC
sometimes issues guidelines for how best to use a reservoir. In
response to another question from Co-Chair Schrage, she
confirmed that there is a separate section pertaining to public
notice that is being addressed. In response to a third
question, she said it is unlikely that someone would use an old
method of drilling many vertical wells, and she pointed out that
AOGCC has the option to notice a hearing at any time. She
assured Co-Chair Schrage that even with Sections 3 and 4 struck
from HB 349, AOGCC would still have the right to notice a
hearing at its discretion. She echoed Mr. Price's comment that
the bill changes the notice from being mandatory to being
discretionary.
8:36:29 AM
MR. PRICE added that AS 31.05.060 states that any member of the
public can request a hearing. He noted the technical aspect of
having a hearing on spacing issues. He stated that the
Department of Natural Resources (DNR) has "a very robust process
and multiple opportunities for public comment long before the
issue comes before the AOGCC."
8:38:02 AM
CO-CHAIR HANNAN, to clarify discussion on statute and
regulation, asked for confirmation that the handout given by Mr.
Price [shown on slide 1] relates to regulation.
MR. PRICE answered that's correct. In response to a follow-up
question, he indicated that [the language of the resolution]
offers what the language might look like [in statute, under HB
349].
CO-CHAIR HANNAN pointed out that "this is not an absolute." She
requested a citation from Mr. Price, and she explained that she
wants to ensure the committee understands the regulation in
relation to the statute that would be changed under HB 349.
8:40:50 AM
CO-CHAIR HANNAN asked Graham Smith, from DNR, to describe the
public notice requirements as they stand currently and under HB
349, and to address any concerns DNR has regarding well spacing.
8:41:38 AM
GRAHAM SMITH, Petroleum Land Manager, Division of Oil and Gas,
Department of Natural Resources, replied that the constitutional
obligation under Article 8, Section 10, states that no disposal
to state interest shall be made without public notice. He said
DNR has a robust public notice process before beginning the
leasing process. He said the public notice requirements in AS
38.05 are "fairly prescriptive" on the issue of public notice.
Further, each phase of development has a public notice, and he
described actions within those phases that would also get
publicly noticed. He mentioned Sullivan v. Red, a 2013 court
decision that determined that each phase must have its own
assessment. He offered further details regarding public notice,
explaining that DNR, in addition to statutorily mandated public
notice, also gives discretionary public notice when warranted.
8:46:05 AM
MR. SMITH, in response to a question from Representative McCarty
about possible overlap in public notice topics between AOGCC and
DNR, explained that AOGCC is primarily interested in subsurface
issues, while DNR focuses on surface issues. To a follow-up
question, he indicated that the proposed legislation would not
adversely affect DNR's process. He opined that the bill makes
sense, because "a lot of things can be more onerous in nature
than [is] proportional to the value that they provide to the
public."
8:48:16 AM
CO-CHAIR HANNAN inquired whether DNR held an official position
on HB 349.
MR. SMITH answered that he was not aware of a formulated
position; however, he offered to check and get back to the
committee with an answer.
CO-CHAIR HANNAN indicated she would be asking the same question
of AOGCC. She then noted that Emily Nauman, from Legislative
Legal Services, was available for questions.
8:49:22 AM
EMILY NAUMAN, Deputy Director, Legislative Legal Services,
Legislative Affairs Agency, in response to a question from
Representative McCarty, explained that the changes proposed
under HB 349 from "that" to "which" are to modernize the
language according to the drafting manual.
8:51:07 AM
CO-CHAIR HANNAN opened public testimony on HB 349. After
ascertaining there was no one who wished to testify, she closed
public testimony.
8:51:44 AM
CO-CHAIR HANNAN announced HB 349 was held over.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 411 Back up Service Area Statute.pdf |
HCRA 4/14/2022 8:00:00 AM |
HB 411 |
| HB 349 Sectional analysis.pdf |
HCRA 4/14/2022 8:00:00 AM |
HB 349 |
| HB 349 Supporting Document - Image.pdf |
HCRA 4/14/2022 8:00:00 AM HRES 4/27/2022 1:00:00 PM |
HB 349 |
| HB 349 Examples of well spacing issues 4.14.22.pdf |
HCRA 4/14/2022 8:00:00 AM |
HB 349 |