Legislature(1999 - 2000)
03/02/2000 10:11 AM House O&G
| Audio | Topic |
|---|
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HB 414-OIL & GAS CONSERVATION COMMISSION Number 0311 CHAIRMAN WHITAKER announced the next item of business, HOUSE BILL NO. 414, "An Act relating to the qualifications of the members of the Alaska Oil and Gas Conservation Commission; and providing for an effective date." JEFF LOGAN, Legislative Assistant to Representative Joe Green, explained that Representative Green, sponsor of HB 414, was unable to attend because he was chairing the State Affairs Committee and still taking testimony. Mr. Logan testified on his behalf. Number 0381 MR. LOGAN began by explaining that in the state's system of government, the legislature establishes policy through establishment and amendment of the statutes, and the executive [branch] carries out that policy. Some recent appointments have caused concern that the policy regarding the qualifications for membership on the Alaska Oil and Gas Conservation Commission (AOGCC) needs to be clarified. Representative Green had introduced HB 414 to clarify what the legislature means by certain terms in the qualifications statute. MR. LOGAN said HB 414 proposes to amend the qualifications for the commission member who is a petroleum engineer. The proposal offers two alternative standards. A qualified candidate may be either (1) a registered petroleum engineer, who has taken the test and received the certificate from the state, or (2) one who has earned an engineering degree (not necessarily in petroleum engineering) from a university and has at least ten years' professional subsurface experience in the oil and gas industry in drilling, well operations, reservoir engineering or a combination thereof. The latter career path is common industry practice. Mr. Logan clarified that a degree in engineering means that the candidate holds a graduate or undergraduate degree from an engineering program that meets the requirements of the Accreditation Board for Engineering and Technology (ABET). Number 0782 MR. LOGAN explained that HB 414 had come before the Twentieth Legislature as HB 274. In its new incarnation, HB 414 is the product of a working group that included oil and gas companies, the Alaska Oil and Gas Association (AOGA), the petroleum engineering faculty of the University of Alaska Fairbanks, ABET, and individuals in the industry who do not hold degrees in petroleum engineering but are working in that capacity. Mr. Logan recalled that a concern previously expressed was that the legislature should not "handcuff the governor" but allow him a large enough pool of qualified people in the state. Mr. Logan said he is confident that the new language resolves that concern. MR. LOGAN noted that the second change made by HB 414 concerns the qualifications to serve on the AOGCC as its petroleum geologist. Again, one can be certified by the state (be a member of the American Institute of Professional Geologists, which requires a degree in geology and eight years of field experience) or hold a degree in geology from an accredited university and have ten years of professional experience in petroleum geology. MR. LOGAN explained that HB 414 makes no changes to the qualifications for the third position on the AOGCC, the position often referred to as the public member seat. That person does not need to be certified, trained or experienced in either of the two professional fields. Number 0993 REPRESENTATIVE PHILLIPS asked what had happened to the previous bill. MR. LOGAN explained that it had not make it all the way through both houses of the legislature. He added that this legislation is only prospective, that is, applicable only to future appointments. REPRESENTATIVE SMALLEY commented favorably on the educational requirements being available in Alaska. He then expressed concern about the experience criteria, asking if there are many people who would qualify. MR. LOGAN said yes, it is common for a person educated in another field of engineering to go to work for an oil company and be trained in petroleum engineering. REPRESENTATIVE GREEN, who had just joined the meeting, confirmed that there is a large pool of qualified people in the state. REPRESENTATIVE PHILLIPS said that, as an example, her husband would qualify. His degrees from the University of Alaska are in economic geology and mining engineering, but he would qualify on the basis of having worked in petroleum engineering for so many years. Number 1170 REPRESENTATIVE BRICE, who had also just joined the meeting, asked if the committee was going to hear from the AOGCC. CHAIRMAN WHITAKER said yes. REPRESENTATIVE BRICE asked for a ballpark number of how many people in the state meet the criteria. MR. LOGAN said at last count [about a year ago] there were about 500, of whom 100 are licensed engineers and 400 would qualify under the experience requirements. REPRESENTATIVE PORTER asked if the gentleman just cleared by the committee [Daniel T. Seamount, appointee to the AOGCC] would qualify under HB 414. REPRESENTATIVE GREEN affirmed that Mr. Seamount would qualify as a geologist. Number 1266 REPRESENTATIVE BRICE asked if the new criteria would disqualify any of the current commission members if they were to come up for reappointment. MR. LOGAN said at first that he thought not; on second thought, however, he recalled a conversation with the drafter of the legislation which indicated that because it is a statute that requires qualification for service on the commission, if the nominee did not meet those qualifications, it would, indeed, affect [that nominee]. REPRESENTATIVE BRICE summarized, "So we're not sure whether or not the current professional petroleum engineer would meet these requirements if he were up for reappointment." Number 1342 ROBERT L. CHRISTENSON, Chair, Alaska Oil and Gas Conservation Council, testified by teleconference from Anchorage. He had four suggestions: First, it is important that anyone practicing engineering in the state be a registered, professional engineer. Second, in addition to subsurface experience, a candidate needs experience in production process operation. Third, lines 10-12 are redundant. Fourth, regarding the geologist, he thinks the candidate should be certificated by the AIPG as a petroleum geologist and also have the experience listed, because as the bill is written, there is no requirement for experience in petroleum geology. REPRESENTATIVES PHILLIPS, PORTER and BRICE discussed the last statement with Mr. Christenson, and clarified that what he was suggesting was that an AIPG geologist could not qualify without petroleum experience. Number 1582 HAROLD HEINZE testified by teleconference from Anchorage. He said he is a graduate petroleum engineer, has worked as such for more than 10 years, is a former manager for ARCO, and had served as commissioner of [the Department of] Natural Resources. He advocated giving greater weight to experience in Alaska. He also said he would like to see more of the discussion focused on how to get the best-qualified person appointed as opposed to [focusing on] whether the pool is 100, 500 or 10,000 people. The state has only three [AOGCC] commissioners, he noted, and each carries a lot of weight; it is very important who they are. CHAIRMAN WHITAKER suggested that the confirmation process by the legislature affords an answer to some of Mr. Heinze's concerns, and that the selection process by the governor would address others. Number 1751 DAVID W. JOHNSTON testified by teleconference from Anchorage. Mr. Johnston was an AOGCC commissioner from 1989 until this year, and he served as chair for eight of those years. He said the commission's primary mission is the health and well-being of the [state's oil] reservoir. The commission deals primarily with the nuts and bolts of drilling and reservoir development. Its purpose is to prevent waste, to protect development rights, and to ensure a greater ultimate recovery of the resource. This requires a focused, technical knowledge of reservoir engineering principles and practices. For this reason, the ideal candidate for the engineering seat will possess the specific qualifications required by HB 414. In his opinion, the bill in the long run will benefit the commission. MR. JOHNSTON agreed with the comments of Mr. Heinze concerning other qualifications. He said the commission needs people who are not only technically proficient, but also have the wisdom and judgment to be good commissioners. He hopes the governor's review process incorporates that. The commissioners with whom he has dealt all have been wise, good, solid folks with good judgment and sensitivity to issues. However, relative to the technical experience, he thinks the qualifications articulated in this bill would be healthy for the commission. Number 1889 REPRESENTATIVE PHILLIPS asked Mr. Johnston whether he thinks an "Alaska experience" qualifier should be added. MR. JOHNSTON said he thinks Alaskan experience is desirable but not necessarily essential. If he were choosing between two equally well-qualified candidates, he would pick the Alaska-based person. He added that there are people out there with both the technical and the Alaskan experience. REPRESENTATIVE PORTER asked if Mr. Johnston wished to comment on the changes suggested by Mr. Christenson. MR. JOHNSTON concurred that the geologist should be not just a professional, but should also have the petroleum qualifications. CHAIRMAN WHITAKER voiced concern for the AOGCC and its function as an independent, quasi-judicial commission. It appears to him that there has been an erosion of that independence, he said. He asked Mr. Johnston's opinion on that. MR. JOHNSTON said he thought that over the years, the idea of independence has eroded. The budget is subject to the review of the Department of Administration and is subject to the same sort of prioritization within that department as are its various divisions. He would prefer to see the budget go directly to the governor's Office of Management and Budget without going through the Department of Administration. The statute provides that the commission should be treated like a major division of state government for purposes of budget. That suggests that the AOGCC should be considered like a department, not like a division of a department. Number 2088 MR. JOHNSTON said more important is that the independence of the AOGCC has been hampered by restrictions placed on it by the Department of Law. The legal advice offered by the department should establish wide enough parameters so that managers have some freedom to move within them. Now, AOGCC commissioners are "really tied to going down one narrow trail," he said, which really dilutes the authority of the commission. CHAIRMAN WHITAKER asked for more information about the "narrow trail." MR. JOHNSTON cited an instance in which the commission had a fundamental disagreement with the attorney general regarding the weighty issue of the unitization of Prudhoe Bay. The attorney general's decision took the issue out of the hands of the commission, saying it had exceeded its authority. There remain issues fundamental to the economic health of Prudhoe Bay, issues he believes are properly within the aegis of the commission, but the commission has been precluded from exercising its statutory authority by the Department of Law. CHAIRMAN WHITAKER said it was his impression in reading the decision by the attorney general that the commission was precluded from dealing with issues that were economic in nature. He asked if there was anything with which the commission deals that is not related to economics. MR. JOHNSTON said the commission's statutory authority does not specifically mention "economics" but only "good oil field engineering practices." The commission historically has interpreted that to mean that there is a level of economics in its review. There is a reasonableness built into the statute. All of the decisions that the commission renders will have an economic impact. TAPE 00-16, SIDE B Number 2455 TUCKERMAN BABCOCK testified by teleconference from Palmer. He said he is a former AOGCC commissioner [June 1993 to September 1996] and currently is manager of government and strategic affairs for Matanuska Electric Association. Based on his experience with the AOGCC and as a Director of Boards and Commissions for Governor Hickel, he supports HB 414. MR. BABCOCK said one of the most remarkable attributes of the [oil and gas] commission in Alaska is the complete lack of corruption among inspectors and the integrity of the people who work at the AOGCC, as well as the professionalism with which they review the multi-million dollar projects and plans that are submitted to them. It is very important, in that process, to keep political pressure and the potential for political favoritism to an absolute minimum. One way governors historically have done that is by allowing commissioners to continue to serve until retirement or death. That led to a commission that was as independent as the statute intended, and it is disturbing to him to see - for the first time in the history of the State of Alaska - a governor actively replacing every AOGCC commissioner. Because of the AOGCC's intimate involvement in the management of the oil and gas fields of Alaska, it is essential to keep that agency as independent as the statutes indicate it should be. MR. BABCOCK also observed that the legal counsel to the commission is the Department of Law, which has made it clear that if the commission does not follow its advice, it will not represent the commission or defend its position. So an independent commission becomes subject to the interpretation of statute and regulation of the Department of Law. The AOGCC now has no authority to make any decision that does not get a green light from the Department of Law. Number 2271 REPRESENTATIVE SMALLEY asked Mr. Babcock about the suggestions for changes in HR 414 made by Mr. Christenson. MR. BABCOCK said he saw no reason not to support those. CHAIRMAN WHITAKER said testimony indicates that the line of responsibility and authority with regard to the AOGCC is something the committee needs to look into further. REPRESENTATIVE GREEN gave a brief history of Prudhoe Bay and pointed to the unique separate ownership of the oil rim and the gas cap. He said that the AOGCC is an independent entity and has the authority to force unitization. He concurred with suggestions made by Mr. Christenson. He said one thing that had not been mentioned was the Maximum Efficient Rate (MER) established for every reservoir in the state. Through the ability and farsightedness of the AOGCC, it has been possible to achieve maximum recovery from the reservoir, even though that takes longer. It is critical that commissioners have the expertise, the stature and the ability to stand toe-to-toe with the oil companies; that is why he is so adamant about having someone who is qualified. This should not be a political appointment. At one time, he noted, 90 percent of the state's income came from oil. Number 1845 REPRESENTATIVE PHILLIPS said she liked the bill but recommended three conceptual amendments based on the testimony. First, she referred to Section 1, page 2, paragraph (2), line 14, where it read "holds a certification as a professional geologist under AS 08.02.011." She said that is the American Institute of Petroleum Engineers qualification; the recommendation was that it also include Alaska registration. REPRESENTATIVE PHILLIPS explained the second conceptual amendment. She referred to page 2, line 1, where it read [beginning on page 1, line 14]: and has at least 10 years of professional subsurface experience in the oil and gas industry in drilling, well operations, reservoir engineering, or a combination thereof; She proposed that the committee could add either the phrase "production process operation experience" or the phrase "reservoir engineering qualifications." She added, "He recommended that we put in 'has production process operation experience' there." REPRESENTATIVE GREEN mentioned that it is critical that the person have subsurface experience. REPRESENTATIVE PHILLIPS specified that she wanted the people who knew best, including the drafters, to decide which phrase is better. REPRESENTATIVE PHILLIPS proposed a third conceptual amendment, to add a new section that deals with the preference for Alaskan experience; the other sections would then be renumbered. REPRESENTATIVE GREEN said he had no problem with the three conceptual amendments. CHAIRMAN WHITAKER reminded members that this is the only committee of referral before the measure goes to the House floor. He then agreed that the bill should be held until the amendments could be drafted. [HB 414 was held over.]
| Document Name | Date/Time | Subjects |
|---|