Legislature(2005 - 2006)CAPITOL 124
03/15/2005 05:00 PM House OIL & GAS
| Audio | Topic |
|---|---|
| Start | |
| HB197 | |
| HB142 | |
| HB71 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 197 | TELECONFERENCED | |
| *+ | HB 142 | TELECONFERENCED | |
| += | HB 71 | TELECONFERENCED | |
HB 142-OIL & GAS: REG. OF UNDERGROUND INJECTION 5:21:44 PM CHAIR KOHRING announced that the next order of business would be HOUSE BILL NO. 142, "An Act relating to regulation of underground injection under the federal Safe Drinking Water Act; and providing for an effective date." 5:22:57 PM DANIEL SEAMOUNT, Commissioner, Alaska Oil and Gas Conservation Commission (AOGCC), Alaska Department of Administration, introduced HB 142 on behalf of the Alaska Department of Administration. He directed attention to "slides" printed in a handout available in the committee packet. He began by giving a brief outline of his presentation. 5:26:18 PM MR. SEAMOUNT turned to slide 3, containing the AOGCC mandate: AOGCC regulates operations affecting subsurface oil and gas resources, ensures the reliability of oil and gas flow measurements, and ensures that underground sources of drinking water are protected. MR. SEAMOUNT explained that the AOGCC mainly oversees subsurface oil and gas activities, but also makes sure that the meters are accurate. 5:27:03 PM MR. SEAMOUNT turned to slide 4, which defines the AOGCC underground injection program. He explained that the AOGCC regulates Class II wells and has primacy for implementing the federal Underground Injection Control (UIC) Program for purposes of enhanced oil recovery and for the most environmentally sound disposal of oil field waste. He said: The proper underground injection of material to enhance oil recovery has resulted in billions of dollars in revenue to the State of Alaska and industry. That's the enhanced oil recovery Class II wells, or Class II-R. Also, there are some Class II- D, which are disposal wells that dispose of ... oil- filled waste. ... The best place to put oil-filled waste is deep underground where it's not going to have the potential to spill on the surface. 5:28:12 PM MR. SEAMOUNT continued: Slide 5 is just a statement of the ... statute as it is right now that gives us the power to oversee ... Class II disposal wells, and also the protection of underground sources of drinking water. The next slide shows what change [HB 142 would make] to that part of the statute. And that would be in Section 1, AS 31.05.030(h).... It gives us oversight for the control of underground injection related to the recovery and production of oil and gas wells, and ... it is adding, "and the control of underground injection in Class I wells as defined in [40 C.F.R. 144.6, as amended]." 5:29:15 PM MR. SEAMOUNT turned to slide 7 and explained: What we have now are two agencies performing the same job; one is protecting a nonexistent resource on the North Slope, and that is an underground source of fresh water. It's been determined that there are no underground sources of fresh water. And that's one of the things that Class I wells [are] supposed to do. ... [There are] Class I wells up there that are protecting something that doesn't exist. And this results in onerous and costly requirements on industry and the State of Alaska. ... [Through this bill, AOGCC] would obtain control through primacy or ... having [the U.S. Environmental Protection Agency (EPA)] agree that we really don't need Class I wells, so we would just continue the Class II oversight, and say that ... everything on the North Slope was oil and gas waste, so we could do it through putting it down a Class II well. 5:30:29 PM MR. SEAMOUNT opined that the five classes of wells under the Safe Drinking Water Act are very confusing; there are different interpretations about what waste can go down what kind of well, and sometimes a Class I well is situated next to a Class II well. He gave a brief overview of what each of the well types were for. In Alaska, there are 1,155 Class II wells which are overseen by the AOGCC, he said. There are only 7 Class I wells, all on the North Slope, and there are more than 3,000 Class V wells. 5:33:47 PM MR. SEAMOUNT turned to slide 11 and remarked: We believe that it's a waste of taxpayer and industry time and money to have ... two agencies overseeing two very similar well programs. There's confusion by operators over what waste is allowed to be disposed in each class of well.... [But] all wastes on the North Slope are directly associated with hydrocarbon production, and there are some regions in the EPA that say that if it's [a waste] associated with oil and gas production, ... then it ought to go down a Class II well, not a Class I. ... Much time and energy is expended by the two agencies and industry ... in tracking what waste goes where. There's a huge amount of time and energy that could be allocated in other places. ... Often the same fluids are injected into the same disposal zones in different wells that are sitting next to each other. The two wells are constructed virtually the same. And AOGCC works on these Class I wells anyway by performing a lot of work advising EPA on their program, and our five inspectors ... inspect the Class I wells.... 5:36:03 PM MR. SEAMOUNT turned to slide 12 and continued: The Class I program ... protects a nonexisting resource: fresh water. It's an inefficient ... permit process. EPA approvals are generally much slower than AOGCC, though ... in the recent past, they're getting better at that. ... They tend to have onerous and costly stipulations considering well integrity. EPA has no onsite field inspectors. They regulation only seven out of 1,162 UIC wells and ... it would appear that it would be costly and remote for EPA to be running a program out of Seattle for only seven wells. There is a temptation for industry, from all this confusion about what to do with these different types of wastes, ... to transport waste long distance for surface displacement or disposal in a redundant disposal well, and that leads to a ... further risk of surface spills. 5:37:23 PM MR. SEAMOUNT noted that slide 13 was a cross section that shows the similarity between Class I wells and Class II wells. Then he moved to slide 14, which he said highlighted the confusion about fluids eligible for a Class II well. He said that the Region 10 EPA position was that only fluids that have been down hole can go into a Class II well, or the waste has to be generated by contact with an oil and gas production stream during the removal of produced water or other contaminants. He described a few issues that tend to cause confusion regarding which type of well is appropriate for which type of waste. 5:39:31 PM REPRESENTATIVE GARDNER asked what "USDW" and "SDWA" stand for. MR. SEAMOUNT replied that USDW stands for underground source of drinking water, such as an aquifer. He noted, "Where oil is produced on the North Slope, there are [no USDWs]. The ground is frozen and none of that water is moveable." SDWA stands for Safe Drinking Water Act. MR. SEAMOUNT turned to slide 15 and said: One of engineers did an analysis of the differences in cost between a Class I and a Class II well, and historically a Class I well cost $2.50 barrel of fluid disposed as opposed to a Class II well, which is $1.50. 5:41:10 PM MR. SEAMOUNT explained that slide 16 is a list of options and solutions. He said: We've got three options. The first option, business as usual, would be if HB 142 is not passed, and the ... silver lining to that is that I wouldn't have to do very much work ... on this task force; no effort would be expended to change the status quo. But if we don't do anything, we're going to continue to have confusion among industry, cost to the taxpayer and industry. There's going to be redundancies between the two agencies. There'll be inefficient approval processes. And it is not industry's preference because ... of the costs associated with it. MR. SEAMOUNT continued: [Slide 17] shows the two [other] options. The first option would be probably the easiest and that would be ... somehow for AOGCC to obtain primacy over the EPAs Class I program. This would lead ... to less industry confusion; they'd be dealing with one agency, and it would save everybody money. The second option would be to just go to having one class of well for all disposal, and that would be a Class II well, overseen by the AOGCC. ... That would need HB 142 to be passed also, and it also [would] need a ruling by the EPA. It would take a little bit more work, but ... that's the best option possible. That would result in less energy used for waste determination and tracking, less cost, less ... industry confusion ..., and it saves everybody money. 5:43:22 PM REPRESENTATIVE SAMUELS asked for clarification about the mentioned task force. MR. SEAMOUNT replied, "We have been talking to ... EPA about building this task force. We're ready to put it in place, and that would be one of the actions we would take." REPRESENTATIVE SAMUELS asked if AOGCC would take any other actions. MR. SEAMOUNT answered, "We are looking at ... writing some regulations in the event that we do reach an agreement with EPA." 5:44:16 PM REPRESENTATIVE KERTTULA asked if permafrost would be considered an underground fresh water source, and if so, if this was the reason that EPA does not consider all North Slope wells to be Class II. MR. SEAMOUNT responded that the EPA definition of fresh water is water that is flowable and in quantities that is usable, therefore permafrost is not considered fresh water. He said: The people at EPA that we talked to are in agreement; they would like us to take the program. Their problem is they don't see in the Safe Drinking Water Act where it's allowed. ... Class II primacy is allowed, [but] they don't see where Class I primacy is allowed. They have a legally, technical problem with it. ... We have been talking to other states about whether they have partial primacy, and we found three states: California ... has partial primacy over a certain set of Class V disposal wells, which involve geothermal wells. And then New Mexico and Illinois have stated that they have some sort of partial primacy. 5:46:47 PM REPRESENTATIVE GARDNER pointed out that if the bill passed through the legislature exactly as written, "we're only partway to where you want to be, and we still then need to get something worked out with the EPA, and that's not in our hands, is that correct?" MR. SEAMOUNT answered affirmatively. 5:47:13 PM REPRESENTATIVE ROKEBERG asked for further distinction between Class I and Class II wells. MR. SEAMOUNT replied: The whole issue ... is sort of a fight between whether confinement of the fluid is most important, or legally the type of fluids, where it's come from, is most important. And that's a dynamic situation. It's been changing gradually through the years. ... We tend to take the position that if we can confine the fluids underground, the type of fluid doesn't really matter that much. Whereas EPA tends to think that they have to go by the letter of the law, and if they interpret that this fluid came from this location ... then it's got to go down this kind of well, and another one, it goes down another type of well. ... They tend to want to see more of Class I wells. 5:49:09 PM REPRESENTATIVE ROKEBERG noted that in producing some types of petroleum, some deadly toxins are produced. He asked, "Seemingly from this definition, everything that comes out of a producing well would be a Class II well, even if it was poisonous, is that correct?" MR. SEAMOUNT replied that this was probably correct and commented, "We haven't had to deal with that in Alaska yet, because we generally have pretty clean oil; very low SO2 concentrations." REPRESENTATIVE ROKEBERG asked, "But what if you did have an SO2 concentration; would that be a one or a two?" MR. SEAMOUNT replied, "I believe that would be a Class II because it came from down hole." REPRESENTATIVE ROKEBERG asked why it was more expensive for Class I well. MR. SEAMOUNT explained that some of the extra cost is due to reporting, and a lot of it is testing. He added that in the past there has been a requirement to cement Class I wells all the way to the surface through its deep casing, which many times requires extra holes shot in the casing and more attempts to get the cement to the surface. He said that the AOGCC believes that there are operational problems and environmental risks associated with cementing casing all the way to the surface. He noted that if the cement is too high it will become too heavy "and you could lose it to the formation." He explained that a Class I well could be between 2,000-9,000 feet deep on the North Slope, and the casing depths range to over 20,000 feet. He said, "A typical Prudhoe Bay well is about 9,800 feet true vertical depth, but with extended reach well bores, they can go to 13,000 feet or more. ... They generally case all the way." 5:54:36 PM MARILYN CROCKETT, Deputy Director, Alaska Oil and Gas Association (AOGA) explained that AOGA is a private, nonprofit trade association whose members comprise the majority of the oil and gas operations that occur in the state. She testified in support of HB 197. She remarked that the AOGCC is very highly regarded for its management of the Class II well program. She continued, "The [AOGCC] is the one state agency that has the specific technical expertise needed when evaluating issues related to the subsurface and the structural integrity of wells." 5:56:51 PM CHAIR KOHRING asked if the EPA is willing to cede control to allow the state to have primacy. MS. CROCKETT replied that the Region 10 EPA administrator had told the AOGCC that if it is legal for the EPA to transfer this program to the state, he would support doing so. She noted, "The rub seems to be in the attorneys reaching the conclusion that in fact it is possible to carve off this program as they have done in three other states for three other programs." 5:58:22 PM REPRESENTATIVE KERTTULA asked Mr. Seamount, "Once you have primacy, what kind of latitude do you have to go outside the EPA regulations?" MR. SEAMOUNT replied that the AOGCC would have to reach a compromise with the EPA on that issue; the EPA would still be the overseer. 5:59:04 PM BENJAMIN BROWN, Legislative Liaison, Office of the Commissioner, Alaska Department of Environmental Conservation (ADEC) stated that no concerns about the bill were raised by the commissioner and the directors of the Division of Spill Prevention and Response, the Division of Water, and the Division of Environmental Health. He commented, "We feel at [ADEC] that [AOGCC is] in a very good position to obtain primacy from the EPA over this." REPRESENTATIVE KERTTULA asked if this bill would affect ADEC operations. MR. BROWN replied that it would not. 6:00:59 PM REPRESENTATIVE DAHLSTROM moved to report HB 142 out of committee with individual recommendations and the accompanying fiscal notes. There being no objection, HB 142 was reported from the House Special Committee on Oil and Gas.
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