Legislature(1993 - 1994)
03/11/1994 08:30 AM House FIN
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* first hearing in first committee of referral
+ teleconferenced
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+ teleconferenced
= bill was previously heard/scheduled
HB 199 An Act providing for oil and gas exploration licenses, and oil and gas leases, in certain areas 1 of the state; and providing for an effective date. CS HB 199 (O&G) was reported out of Committee with a "do pass" recommendation and with a fiscal note by the Department of Natural Resources dated 2/09/94. HOUSE BILL 199 "An Act providing for oil and gas exploration licenses, and oil and gas leases, in certain areas of the state; and providing for an effective date." Representative Brown provided the Committee with a packet of amendments to CS HB 199 (O&G). [Copies on file]. Representative Brown explained Amendment #1 to Page 6, Line 29, deleting "must" and inserting "may". She thought the language change would address the State's ability to use exploration licensing within the control of the Department of Natural Resources (DNR) adding that the amendment would provide DNR more flexibility. KEN BOYD, (TESTIFIED VIA TELECONFERENCE), DEPUTY DIRECTOR, DIVISION OF OIL AND GAS, DEPARTMENT OF NATURAL RESOURCES, commented that the word "must" is used in order to indicate that the State is serious about the program and that the oil companies should prepare in advance for that program. Discussion amongst Committee members followed regarding the feasibility of the amendment. Representative Brown MOVED to adopt Amendment #1. [Copy on file]. There was OBJECTION to the motion. A roll call was taken on the MOTION. IN FAVOR: Brown, Grussendorf. OPPOSED: Parnell, Therriault, Foster, Hanley, Martin, Larson. Representatives Navarre, Hoffman and MacLean were not present for the vote. The MOTION FAILED (2-6). Representative Brown MOVED to adopt Amendment #2. [Copy on file]. She stated that the amendment would add "the area described in AS 38.05.140(f)" to Page 3, Line 3. Currently, there is a provision in that section stating that leases can be issued in the offshore area of Bristol Bay and would be accessed by directional drilling. The addition of the amendment would clarify that the same restriction would 2 apply to licenses as well as leases. REPRESENTATIVE JOE GREEN replied that there are many areas in which there is a subsurface lease which would not be accessible. He stated that the amendment would not be in the best interest of the State. Mr. Boyd added that areas that are off limits to leasing are also off limits to licensing. He pointed out that there is currently an existing statute which defines limitations and recommended that the legislation should be held to that same standard as currently applies. Representative Brown MOVED TO WITHDRAW the motion to adopt Amendment #2. There being NO OBJECTION, it was so ordered. Representative Brown MOVED to adopt Amendment #3 [Copy on file] inserting new language to Page 3, Line 9. The language would make it explicate that the Commissioner for DNR could revise a land licensing determination. Mr. Boyd inquired if the amendment would allow the Commissioner to change the project in midstream. Representative Hanley asked if the amendment would give the Commissioner authority to remove land from determination before it was leased. Representative Brown thought that the Commissioner could adopt regulations clarifying the process before operations began. Representative Brown stated that current language is "open ended" and that the amendment would provide a logical process for the Department. Representative Hanley asked if the Commissioner would have the authority to revisit the terms and conditions of that lease. Mr. Boyd replied that there are already provisions in statute allowing the Commissioner to place conditions on leases. Representative Brown MOVED TO AMEND Amendment #3, Page 3, Line 10, deleting "subject to" and inserting "offered under". The language would clarify that once the license is issued, the Commissioner would not have authority to change it. The language change would be required in advance of a proposal or project and would clearly indicate that the State would not intervene after a license is issued. Representative Foster OBJECTED to the MOTION TO AMEND Amendment #3. A roll call was taken on the MOTION. IN FAVOR: Parnell, Therriault, Brown, Grussendorf, Hanley MacLean. OPPOSED: Foster, Martin, Larson. Representatives Hoffman and Navarre were not present for the vote. 3 The MOTION PASSED (6-3). Representative Brown MOVED to adopt Amendment #3. Following discussion, there was OBJECTION to adopting Amendment #3. A roll call was taken on the MOTION. IN FAVOR: Brown, Grussendorf, MacLean. OPPOSED: Therriault, Foster, Hanley, Martin, Parnell, Larson. Representatives Hoffman and Navarre were not present for the vote. The MOTION FAILED (3-6). Representative Brown MOVED to adopt Amendment #4. [Copy on file]. She explained that Amendment #4 would pick up two royalties at the discretion of the Commissioner then making it parallel to competitive provisions. The amendment would add Section (B), a fixed royalty and fixed profit share to the competitive provision of 12.5%. Representative Green stated he opposed the amendment, adding that there would be a royalty change upon unitization and that production would be "shut-in". The amount of that royalty would be twenty (20) percent. The removal of ELF has caused some wells to be prematurely "shut-in". He added that there are large numbers of wells in Alaska which are marginal status and that any indication of a greater burden to the oil industry would be detrimuntal. Representative Hanley asked if the language in Section #3 would allow the Commissioner of DNR the authority to impose the items listed in Amendment #4. Mr. Boyd replied that the Department would not object to the amendment although he currently does have that authority. A roll call was taken on the MOTION. IN FAVOR: Brown, Grussendorf, Larson, MacLean. OPPOSED: Foster, Hanley, Martin, Parnell, Therriault. Representatives Hoffman and Navarre were not present for the meeting. The MOTION FAILED, (4-5). Representative Grussendorf MOVED to adopt Amendment #5 stating that the amendment would provide authority to remove the licensing process from Alaska's marine areas. [Copy on 4 file]. (Tape Change, HFC 94-58, Side 1). Mr. Boyd stated that the Department could not support Amendment #5. He pointed out that many critical areas have already been removed in formulating the legislation. He advised that by removing the marine areas, the legislation would be diluted, which is not warranted. A roll call was taken on the MOTION. IN FAVOR: Grussendorf, Brown. OPPOSED: Foster, Hanley, Martin, Parnell, Therriault, MacLean, Larson. Representatives Hoffman and Navarre were not present for the vote. The MOTION FAILED, (2-7). WALT FURNACE, (TESTIFIED VIA TELECONFERENCE), GENERAL MANAGER, ALASKA SUPPORT INDUSTRY ALLIANCE, REPRESENTATING THE ALASKA JUDICIAL COUNCIL, ANCHORAGE, spoke in support of HB 199. He added that the legislation is timely and given the revenue depletion, the legislation is designed to encourage development. Mr. Furnace urged passage of the bill. Representative Parnell MOVED to report CS HB 199 (O&G) out of Committee with individual recommendations and with a zero fiscal note. There being NO OBJECTION, it was so ordered. CS HB 199 (O&G) was reported out of Committee with a "do pass" recommendation and with a zero fiscal note by the Department of Natural Resources dated 2/09/94.
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