Legislature(1995 - 1996)

04/11/1996 01:45 PM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
  HOUSE BILL NO. 394                                                           
                                                                               
       "An Act authorizing  a program of natural  gas and coal                 
       bed methane development licensing and leasing; relating                 
       to  regulation  of  certain  natural  gas   exploration                 
       facilities and coal  bed methane exploration facilities                 
       for purposes of preparation of discharge prevention and                 
       contingency   plans   and  compliance   with  financial                 
       responsibility requirements; amending the duties of the                 
       Alaska  Oil  and Gas  Conservation  Commission as  they                 
       relate to natural  gas exploration activities and  coal                 
       bed  methane exploration  activities; and  amending the                 
       exemption  from obtaining a  waste disposal  permit for                 
       disposal  of  waste  produced  from  coal  bed  methane                 
       drilling."                                                              
                                                                               
  ALFREDA WARD,  (TESTIFIED VIA TELECONFERENCE),  CITY MANAGER                 
  OF  FORT  YUKON,  FAIRBANKS,  spoke in  support  of  HB 394,                 
  indicating  the  importance  of  the  legislation  to  rural                 
  Alaska's ability to  deal with  the high cost  of fuels  and                 
  utilities.                                                                   
                                                                               
  HANS  NEIDIG, STAFF,  REPRESENTATIVE  SCOTT OGAN,  explained                 
  Amendment #1, 9-LS1463\R.12,  Chenoweth, 4/9/96.   He stated                 
  as the legislation currently reads, it would reduce the bond                 
  level $25  thousand dollars on  state lands.   The amendment                 
  would also include Native Corporation  Lands being placed at                 
  that rate.                                                                   
                                                                               
  Representative Mulder MOVED  to adopt  Amendment #1.   There                 
  being NO OBJECTION, it was adopted.                                          
                                                                               
  Representative  Brown spoke  to Amendment  #2, 9-LS146\R.13,                 
  Chenoweth, 4/11/96 which  would change  language on Page  6,                 
  Line 15, from "may" to "shall".                                              
                                                                               
  REPRESENTATIVE  SCOTT  OGAN  noted that  he  did  not oppose                 
  Amendment #2.  Representative Brown MOVED to adopt Amendment                 
                                                                               
  Representative  Brown  MOVED  to  adopt  Amendment   #3,  9-                 
  LS1463\R.16,  Chenoweth, 4/11/96,  which would  add standard                 
  language  addressing  the  royalty  which  the  State  would                 
  receive.  Representative  Ogan noted that he  did not object                 
  to  the  amendment.    There  being  NO OBJECTION  from  the                 
  Committee, it was adopted.                                                   
                                                                               
  Representative  Brown  MOVED  to  adopt  Amendment   #4,  9-                 
  LS1463\R.17,  Chenoweth,  4/11/96,  which  would  provide  a                 
                                                                               
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  clarification of Title  38.  Representative Ogan  noted that                 
  he  did  not  object  to  the  amendment.   There  being  NO                 
  OBJECTION from the Committee, it was adopted.                                
                                                                               
  Representative  Brown  MOVED  to   adopt  Amendment  #5,  9-                 
  LS1463\R.5,  Chenoweth,  4/8/96,  which  would  require  the                 
  applicant to pay a reasonable application  fee not to exceed                 
  $500 dollars.   Representative Ogan  noted that  he did  not                 
  object to the amendment.  There  being NO OBJECTION from the                 
  Committee, it was adopted.                                                   
                                                                               
  Representative Brown  spoke to Amendment  #6, 9-LS1463\R.19,                 
  Chenoweth,  4/11/96, which questions the distribution of the                 
  public owned resources.   She thought that it would  only be                 
  fair that when resources  were to be disposed of,  all parts                 
  of the  State be  included.   Representative Brown  remarked                 
  that this  was a policy  issue and that  Southcentral Alaska                 
  should be included.                                                          
                                                                               
  Representative Ogan  stated that  he  opposed Amendment  #6,                 
  commenting that  the  program had  been designed  to be  for                 
  rural Alaskans  only, the area in which  the energy problems                 
  exist.   He thought the proposed legislation would also help                 
  to mitigate  the environmental problem,  currently estimated                 
  to be $500 million dollars for  clean-up of the fuel storage                 
  facilities.                                                                  
                                                                               
  Representative Brown noted that there exists a "lot of room"                 
  for expansion of the gas  pipeline transmission system.  She                 
  referenced Page 6, Line 11, which she thought would create a                 
  restriction.   Representative Ogan  replied that  the intent                 
  was   to  cover   whatever   the  "in-place"   gas  pipeline                 
  transmission  systems  are, and  would  not apply  to future                 
  systems.  The  intent of the  legislation is to subsidize  a                 
  resource left  in the  ground to  help with  the Power  Cost                 
  Equalization problem.   He thought it  would not be fair  to                 
  those producing gas  without the  exclusion in the  pipeline                 
  system.  Representative  Brown WITHDREW  Amendment #6.   She                 
  thought  that gas producers  should be  consulted as  to how                 
  this action would affect them.                                               
                                                                               
  Representative  Brown spoke  to Amendment  #7, 9-LS146\R.18,                 
  Chenoweth, 4/11/96, which  would insert language  addressing                 
  gas found in association  with oil.  She stressed  that this                 
  section was the governing  portion which determines contents                 
  of the leases.                                                               
                                                                               
  Representative Ogan noted that he opposed the amendment.  He                 
  pointed out  that specific  language already  exists in  the                 
  bill which  states gas can  not be  produced if it  is below                 
  three thousand feet.  He acknowledged that he did not intend                 
  to limit gas production in the rural communities.  Gas could                 
                                                                               
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  be  associated with methane resulting  from coal when and if                 
  the source was not identifiable.   He suggested that type of                 
  gas should not be excluded and pointed out that Amendment #4                 
  already addressed the statutes in Title 38.                                  
                                                                               
  Representative  Mulder  questioned   the  possibility  of  a                 
  natural  gas   development  occurring   in  a   commercially                 
  developed oil deposit.                                                       
                                                                               
  JIM  HANSEN,  (TESTIFIED  VIA  TELECONFERENCE),  LEASE  SALE                 
  MANAGER,  DIVISION  OF  OIL  &  GAS, DEPARTMENT  OF  NATURAL                 
  RESOURCES  (DNR),  ANCHORAGE,   advised  that,  above  three                 
  thousand  feet, the  chances  of  an  oil deposit  would  be                 
  remote.  Gas  not associated  with coal could  exist in  the                 
  region.  He noted that the chance of finding gas with oil in                 
  that shallow of a surface was  remote.  He also acknowledged                 
  that little is  known about that  area of Alaska and  agreed                 
  that anything could happen.                                                  
                                                                               
  Co-Chair Hanley asked if oil had been discovered, what would                 
  be  the  status  of  the  gas  associated   with  that  oil.                 
  Representative Ogan  replied, if the gas is  not below three                 
  thousand  feet,  it  can  continue   to  produce  that  gas.                 
  Language exists in the bill which  stipulates that if oil is                 
  encountered,   operations   would  immediately   be  ceased.                 
  Representative Brown noted  that the issue of  "discovery of                 
  gas with heavy oil"  had not been addressed in  the proposed                 
  legislation.                                                                 
                                                                               
  KENNETH    ROGOWSKI,    (TESTIFIED    VIA   TELECONFERENCE),                 
  ENVIRONMENTAL  SPECIALIST,  SPILL  PREVENTION  AND  RESPONSE                 
  (SPAR), DEPARTMENT OF ENVIRONMENTAL CONSERVATION, ANCHORAGE,                 
  noted  that  Page  9  addressed   the  law  and  regulations                 
  associated with gas and oil.  He  reiterated that if oil was                 
  found  in  the  gas,  operations   would  halt  immediately.                 
  Representative Brown questioned if it had been the intent to                 
  sell the gas rights within a reservoir which also had oil in                 
  it.   Representative  Ogan commented  that the  Oil and  Gas                 
  Conservation  Commission  will   protect  and  conserve  oil                 
  resources in association  with the gas above  three thousand                 
  feet.  That agency controls production practices.                            
                                                                               
  Representative   Brown   MOVED   to   adopt  Amendment   #7.                 
  Representative Martin OBJECTED.                                              
                                                                               
  A roll call was taken on the MOTION to adopt Amendment #7.                   
                                                                               
       IN FAVOR:      Brown, Hanley.                                           
       OPPOSED:       Parnell, Kelly, Kohring, Martin, Mulder,                 
                      Foster.                                                  
                                                                               
  Representatives Navarre, Therriault and Grussendorf were not                 
                                                                               
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  present for the vote.                                                        
                                                                               
  The MOTION FAILED (2-6).                                                     
                                                                               
  Representative  Brown  MOVED  to   adopt  Amendment  #8,  9-                 
  LS1463\R.18,  Chenoweth,  4/11/96,  which would  delete  the                 
  language on Page 5, Lines 20-22:   "If rent is not paid when                 
  due, the  director shall mail  the lessee written  notice of                 
  nonpayment at the end of each  month, while the rent remains                 
  unpaid, for a period of two months".                                         
                                                                               
  Representative Ogan voiced objection to  the amendment.  Mr.                 
  Hansen agreed with Representative Brown noting that language                 
  would create a burden on DNR  keeping track of lease payment                 
  schedule.   He noted that  lease payments are  currently due                 
  annually.   If  a lease  is to  be terminated  due  to none-                 
  payment  of  rent,  notification  is  provided.    Following                 
  further  discussion,  between   Committee  members  and  Mr.                 
  Hansen, Representative Brown recommended  that the amendment                 
  be HELD until Mr. Hansen could provide specific information.                 
                                                                               
                                                                               
  (Tape Change, HFC 96-114, Side 1).                                           
                                                                               
  Representative Brown  spoke to  Amendment #9,  9-LS1463\R.6,                 
  Chenoweth, 4/8/96, which  would address language on  Page 4,                 
  Line 22, and would  insert "that it is in the best interests                 
  of the  state".  She noted  that in some villages,  there is                 
  adamant  opposition  to  the oil  and  gas  operations being                 
  conducted near their area.  Some  of those concerns could be                 
  mitigated  in a  best interest finding  by attaching  to the                 
  lease   stipulations,   language  addressing   the  pipeline                 
  placement.   She  emphasized  that a  standard  needs to  be                 
  included.                                                                    
                                                                               
  Representative Ogan voiced opposition to  the amendment.  He                 
  noted that the Findings Section  of the proposed legislation                 
  suggests  that it be in the best  interest of the State that                 
  the  resource be developed.   He  added that  surface rights                 
  were addressed in Amendment #1 and that existing language on                 
  surface rights is in  Title 38.  That language  would apply.                 
  Insertion of the proposed language  could "open the door" to                 
  a requirement for  a best interest  finding now excluded  in                 
  statute.   He thought that the  director of the Oil  and Gas                 
  Division would act in the "best interest of the State".                      
                                                                               
  Mr. Hansen agreed  with the  language proposed in  Amendment                 
  interest  finding.   Representative  Ogan  stated  that best                 
  interest findings are  an extensive  inventory of the  area,                 
  and calculated that it would be an expensive process.                        
                                                                               
                                                                               
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  Representative  Parnell  asked  if   there  was  alternative                 
  language which could be used.  Co-Chair Hanley questioned if                 
  the  proposed  language  would  be  more  "helpful"  to  the                 
  Department.   Mr. Hansen recommended  receiving that opinion                 
  from the  Attorney General's  office.   Representative Brown                 
  noted  that  virtually all  leases  representing the  States                 
  resources go through a "best interest" finding process.  She                 
  thought that discovery and eventual  production would have a                 
  large impact, warranting issues which  need to be addressed.                 
  She recommended that addition of the language would create a                 
  standard.  Representative  Brown suggested  that it was  not                 
  clear that public  comment could  reveal what was  occurring                 
  and recommended that the standard be included.                               
                                                                               
  Representative  Parnell advised  using  the language  "after                 
  review of all available information, the director determines                 
  it  is  in  the  State's  interest".   Representative  Brown                 
  agreed.  Representative Parnell suggested that would include                 
  public comments, as well as other information.                               
                                                                               
  Representative Ogan voiced  concern that the added  language                 
  would allow the  Commissioner of DNR  to be responsible  for                 
  more  findings  and  hearings  which  would   ultimately  be                 
  expensive for the State and the user.                                        
                                                                               
  Representative Parnell thought that  current language in the                 
  bill would prove  to have a  negative reaction and that  the                 
  director would then not have a basis from which to deliver a                 
  lease.   The intent  of the  proposed language  would remove                 
  this concern from the best  interest findings category.   He                 
  added that he would hope to  reach a "middle ground" between                 
  the various points of view.                                                  
                                                                               
  Representative  Parnell  MOVED   the  amended  language   to                 
  Amendment  #9 which  would  delete "on  the basis  of public                 
  comments received" and insert "after review of all available                 
  information, the director  determines it  is in the  State's                 
  interest....."   Representative  Kelly  voiced concern  that                 
  special interest  groups would sway  the director's decision                 
  rather than  that decision  being based  on substantive  and                 
  factual information.                                                         
                                                                               
  Representative Brown recommended deleting  "all".  Following                 
  discussion,  most Committee members  agreed to delete "all".                 
  Representative Parnell MOVED to  amend the amended language,                 
  deleting  "all".  There being  NO OBJECTION, it was deleted.                 
  Representative Parnell MOVED to  adopt the amended Amendment                 
  environmentalist  would  use that  change  to  benefit their                 
  interests.                                                                   
  A roll call was taken on the MOTION.                                         
                                                                               
                                                                               
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       IN FAVOR:      Parnell, Therriault, Brown, Grussendorf,                 
                      Kohring, Martin, Mulder, Hanley.                         
       OPPOSED:       Kelly.                                                   
                                                                               
  Representatives Navarre and Foster were  not present for the                 
  vote.                                                                        
                                                                               
  The MOTION PASSED (8-1).                                                     
                                                                               
  Representative  Brown  MOVED  to   adopt  Amendment  #8,  9-                 
  LS1463\R.15,  Chenoweth,  4/11/96.    Representative  Mulder                 
  OBJECTED.                                                                    
                                                                               
  A roll call was taken on the MOTION.                                         
                                                                               
       IN FAVOR:      Brown, Grussendorf, Parnell.                             
       OPPOSED:       Therriault,   Kelly,  Kohring,   Martin,                 
                      Mulder, Hanley.                                          
                                                                               
  Representatives Navarre and Foster were  not present for the                 
  vote.                                                                        
                                                                               
  The MOTION FAILED (3-6).                                                     
                                                                               
  Representative Mulder MOVED to report CS HB 394 (FIN) out of                 
  Committee  with  individual  recommendations  and  with  the                 
  accompanying fiscal notes.   There  being NO OBJECTIONS,  it                 
  was so ordered.                                                              
                                                                               
  CS HB 394  (FIN) was reported  out of Committee  with a  "do                 
  pass"  recommendation  and   with  a  fiscal  note   by  the                 
  Department of  Natural Resources  dated 2/28/96  and a  zero                 
  fiscal note by the  Department of Environmental Conservation                 
  dated 2/28/96.                                                               

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