04/07/2021 03:30 PM Senate RESOURCES

         SB 62-GAS LEASES; RENEWABLE ENERGY GRANT FUND                                                                      
                                                                                                                                
4:05:43 PM                                                                                                                    
CHAIR   REVAK   reconvened   the  meeting   and   announced   the                                                               
consideration of SENATE  BILL NO. 62 "An Act  relating to surface                                                               
use restrictions for  oil and gas leases; relating  to gas leases                                                               
in Kachemak  Bay; relating  to the  renewable energy  grant fund;                                                               
and providing for an effective date."                                                                                           
                                                                                                                                
CHAIR REVAK  stated that the  first hearing  was on March  10 and                                                               
public testimony  was heard. He  reminded the committee  that the                                                               
Department of Natural Resources  (DNR) responded to the questions                                                               
from the first hearing and it  was distributed to the members. It                                                               
is also included in the bill packets.                                                                                           
                                                                                                                                
He asked Ms. Paine to provide a recap of the bill.                                                                              
                                                                                                                                
4:06:45 PM                                                                                                                    
HALEY  PAINE,   Deputy  Director,   Division  of  Oil   and  Gas,                                                               
Department  of  Natural  Resources   (DNR),  Anchorage,  Alaska,                                                                
stated  that  the purpose  of  SB 62  is to  allow  the Division                                                                
of  Oil  and  Gas to  lease  and  capture  revenue   from  state-                                                               
owned  resources  underlying  lands restricted  to  surface  use.                                                               
She  clarified  that  the bill  does  not open  Kachemak  Bay  or                                                               
any other  closed  area to  surface development.   The intent  is                                                               
to  capture  royalty   revenue  from   geology  drained  through                                                                
development  on nearby  unrestricted  lands.                                                                                    
                                                                                                                                
MS.  PAINE explained  that if  the  unleased land  is drained  by                                                               
wells on adjacent leases, royalties may  not be paid to the state                                                               
or the  revenue could  be diminished. She  said this  may prevent                                                               
the state  from realizing the  revenue unless a remedy  is sought                                                               
through   the  Alaska   Oil  and   Gas  Commission   (AOGCC)  for                                                               
correlative   rights.  Furthermore,   leasing  is   the  standard                                                               
mechanism  for establishing  a  contractual relationship  between                                                               
the state and  developer. Through the lease,  the state exercises                                                               
its authority to require compliance  with mitigation measures and                                                               
require sharing of drilling and reservoir data.                                                                                 
                                                                                                                                
MS. PAINE  highlighted that  Section 2 of  the bill  identifies a                                                               
specific  Township that  is  the area  the  division proposes  to                                                               
allow for gas only leasing  while maintaining the current surface                                                               
use restrictions. She noted that  a subsequent section amends the                                                               
statutes  to  authorize the  allocation  of  funds to  allow  the                                                               
legislature  to  appropriate revenue  from  these  leases to  the                                                               
Renewable Energy Grant Fund.                                                                                                    
                                                                                                                                
4:09:21 PM                                                                                                                    
CHAIR  REVAK found  no questions  or comments  and solicited  the                                                               
will of the committee.                                                                                                          
                                                                                                                                
4:09:25 PM                                                                                                                    
SENATOR MICCICHE moved  to report SB 62,  work order 32-GS1714\A,                                                               
from  committee  with  individual  recommendations  and  attached                                                               
fiscal note(s).                                                                                                                 
                                                                                                                                
4:09:39 PM                                                                                                                    
CHAIR REVAK  found no objection and  SB 62 was reported  from the                                                               
Senate Resources Standing Committee.