Legislature(1997 - 1998)
03/10/1998 01:10 PM House RES
| Audio | Topic |
|---|
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HB 274 - OIL & GAS CONSERVATION COMMISSION CO-CHAIRMAN OGAN announced the first order of business was House Bill Number 274, "An Act relating to the qualifications of the members of the Alaska Oil and Gas Conservation Commission; and providing for an effective date." Number 0266 JEFF LOGAN, Legislative Assistant to Representative Joe Green, Alaska State Legislature, stated the people of Alaska are blessed with a number of resources available to them one of which is hydrocarbons. There is a great demand worldwide for them for transportation uses. The state has entered into agreements with companies that produce these hydrocarbons, a very sophisticated and technical process, and in order to have a trust relationship with the companies, the state needs to understand what they are telling it about the resources. The responsibility rests with the legislature. "You're in a trust relationship with the people of Alaska to manage their resources. You have collectively delegated that responsibility to a commission that you have statutorily created and have created also a process to select members of the commission." It is important, therefore, that the legislature select someone who is qualified to perform on its behalf and establish those qualifications. Since statehood every governor has seen fit to include on the commission a petroleum engineer. The current Governor has not seen fit to do so, however. House Bill 274 would clarify the requirements to serve on the Alaska Oil and Gas Conservation Commission (AOGCC) by including a petroleum engineer. There is a proposed committee substitute dated 2/20/98. The change is on page 2, line 12, "and completes university or industry training". Number 1119 MR. LOGAN explained Section 1 of the proposed committee substitute would allow the governor to ask professional or industry representatives to solicit recommendations for the appointment of a commissioner. It would not require an obligation to appoint or the legislature to confirm any recommendation. It would simply allow the governor to ask those who do this type of work who might be qualified. Number 1356 MR. LOGAN explained Section 2 of the proposed committee substitute would establish the qualifications of the members. One member "shall" be a petroleum engineer. There are two ways to be considered a petroleum engineer - to hold a certificate of registration as an engineer under AS 08.48 and to have earned a degree in another field of engineering with at least 10 years of professional subsurface experience in the oil and gas industry in drilling, well operations, reservoir engineering, or a combination thereof, and to have taken university or industry classes specific to the problems encountered and methods of drilling, production, reservoir engineering, fluid flow through subsurface formation, and hydrocarbon transportation. There are several ways to get this additional training. There is a group called the Society of Petroleum Engineers, an international organization that sets the standards of petroleum engineering. He has spoken with the director of education and according to him the society has short courses, technical programs and other educational seminars to teach people about petroleum engineering. The society is preparing to apply for certification to the International Association of Continuing Education and Training, a group that sets standards in criteria for this type of training. There is also a group called the Petroleum Technology Transfer Council, a group that holds classes, short courses, seminars, and programs to teach people about technology in the petroleum field. There is also the International Association of Drilling Contractors. There are at least three organizations in addition to the companies themselves that could teach people. The rest of the bill would set the standards for the petroleum geologist and the public member of the commission which have not really been a problem. Number 2211 REPRESENTATIVE RAMONA BARNES stated the first section of the bill does not need to be there - "Before making an appointment, the governor may solicit the recommendations of professional or industry representatives for appointment of a commissioner." Any governor does that now. There is no reason for it to be in law. REPRESENTATIVE BARNES further stated she would like to know under section 2 of the bill how many people in Alaska would meet the qualifications. REPRESENTATIVE BARNES further stated she would like to know why the qualifications for the geologist need to be changed. She is not aware of any controversy surrounding his/her qualifications. TAPE 98-32, SIDE A Number 0059 MR. LOGAN stated, in reference to the language in Section 1, members from the oil and gas industry have suggested similar language. And yes the governor can do that now. Number 0125 REPRESENTATIVE JOE GREEN stated the governor has the prerogative to go wherever in the state and ask whoever. It has not happened currently, however. He has suggested a petroleum engineer, but one can not be found. According to the industry, they are available, it is just a matter of asking. The language just reemphasizes the fact that the governor has a place to go to find qualified personnel. Number 0200 MR. LOGAN stated, in response to how many people would meet the requirements under Section 2, the Department of Labor has found that there were about 579 petroleum engineers employed in the state during 1996. Yet, there were only about 35 registered petroleum engineers. Therefore, under (A) of the proposed committee substitute there should be around 35 who qualify; and under (B) of the proposed committee substitute there should be around 579 who qualify, if they have had the training. Number 0346 REPRESENTATIVE BARNES stated the fiscal note from the Department of Administration says that the pool of engineers would shrink to 25 when the degree requirements contained in the bill are taken into consideration. Number 0379 MR. LOGAN replied he would like some time to investigate that himself. "I don't see how broadening the scope of qualifications lowers the number of people who would qualify." Number 0407 MR. LOGAN stated, in response to the qualifications of the geologist, there has not been a problem in the past, but there has not been a problem with the petroleum seat either. It is thought that it would be good to clarify the legislature's intent in filling the position. Number 0452 REPRESENTATIVE GREEN stated, in response to Representative Barnes' question of the engineer, part may be due to the version of the bill and the fiscal note. The bill is dated 2/20/98, and the fiscal note is dated 2/4/98. The significant change of broadening the qualifications in the bill have not been considered in the fiscal note. The fiscal note would still be zero, but the analysis of the pool shrinking to 25 would drop off entirely. The pool now has been expanded fifteen fold. It was one of the reasons why it was rewritten. Number 0501 CO-CHAIRMAN OGAN noted he is concerned about the pool expanding fifteen fold because the AOGCC is probably the most important commission in the state. It has police and adjudicatory powers over issues of the North Slope. "I'm concerned that expanding the pool that much, we may not have the best qualified help." Number 0545 REPRESENTATIVE GREEN stated one of the reasons that he is willing to make this concession is to allow for others to qualify from other disciplines, chemical and mechanical engineering, for example. It is not uncommon in the oil industry to select a career course that would put a person in the drilling department even though he is not in that particular education discipline. He agrees with the additional qualifications because of the 10 years of professional subsurface experience and additional courses requirement. Number 0635 CO-CHAIRMAN OGAN asked Representative Green whether the person who currently holds the seat would qualify under the criteria. REPRESENTATIVE GREEN replied no he would not qualify under the new criteria. He does not have 10 years of subsurface experience. Number 0647 REPRESENTATIVE GREEN stated, in response to the geology portion, since statehood there has not been a problem with the petroleum engineer or geologist seats. They have always been occupied by people from those disciplines. Currently, there is a geologist, but two of the three have been replaced, and there is concern that the third one might be replaced. If the Governor's propensity continues by not seeking qualified and technical personnel, there is concern there would not be any petroleum engineer or geologist which is what the bill is trying to avoid. This is one of the most critical commissions in the state safety wise. Number 0741 DAVE NORTON testified via teleconference in Valdez. He is not in favor of the bill. It relaxes the requirement that the position should be held by a professional engineer. It is important that the position be a professional engineer because of the public trust implicit in the licensing of engineers in the state. The bill also narrows the requirements to people with experience in subsurface issues when the commission and the oil patch in general is much broader. It is not good public policy to make it an exclusive requirement. It would exclude a lot of people who are professional engineers with a lot of experience in the oil patch with a big picture view of the issues related to resource development. He has submitted a letter to the committee dated March 9, 1998 that goes into more detail. Number 1028 REPRESENTATIVE BILL WILLIAMS asked Mr. Norton, in response to his comments on the bill taking away experience requirements, how does the 10-year experience apply. Number 1066 MR. NORTON replied the bill is detailed in a very narrow area of the commission's purview. It focuses entirely on subsurface issues when the purview of the commission is much more than that. Number 1116 REPRESENTATIVE GREEN asked Mr. Norton whether he is familiar with the two statutory requirements of the AOGCC. MR. NORTON replied, "Yes." REPRESENTATIVE GREEN asked Mr. Norton what are they. MR. NORTON replied they are to maximize resource recovery and prevent waste. REPRESENTATIVE GREEN stated it is actually the prevention of waste and protection of correlative rights. They require somebody who is very knowledgeable of down-hole operations, more so than the fact that it has police power to enforce full unitization. Number 1198 MR. NORTON replied that he is not suggesting that somebody with down-hole experience is not qualified. Actually, there are three main areas of responsibility of the commission: prevention of waste, maximization of recovery, and protection of correlative rights. He agrees down-hole experience is important, but it is not an "end all and be all." When he was on the commission, the most important hearing was on the unitization of oil and gas issues on the North Slope in terms of issues related to the joint use of surface and subsurface facilities. A reservoir specialist and facility engineer would have been more comfortable in that setting. In addition, most reservoir and petroleum engineers that deal with drilling are currently or have been employees of one of the big oil companies - Exxon, Arco or BP. They probably have a conflict of interest or at least a bias toward one company. Number 1323 REPRESENTATIVE GREEN stated until the current Governor took office this was not the case. The petroleum engineer and geologist were not former employees of any of the major companies. From 1972-1978 there was a former Mobile Oil Company engineer on the commission, but other than that the position has not come from any of the local operations. Number 1353 REPRESENTATIVE BARNES stated former Representative Chat Chatterton held the position on the commission for many, many years. When he was in the legislature somebody else served, and then he was reappointed. REPRESENTATIVE GREEN stated he was not on the commission before serving in the legislature. Number 1379 REPRESENTATIVE BARNES asked for clarification from staff. Number 1395 REPRESENTATIVE GREEN stated he went on the commission two years after he left the legislature. He was not on the commission prior to that. It was Chat Chatterton who developed the commission through the legislature during the Hammond Administration. He patterned it after the Texas Railroad Commission. Number 1427 REPRESENTATIVE BARNES asked Representative Green what was Chat Chatterton's function in the oil and gas industry prior to becoming a member of the legislature. Number 1438 REPRESENTATIVE GREEN replied he worked for an oil company. He did work for an oil company and did become a commissioner. The others that worked with oil companies were from ones that do not operate here. Number 1500 CO-CHAIRMAN OGAN entertained a motion to adopt the proposed committee substitute dated 2/20/98. Number 1518 CO-CHAIRMAN BILL HUDSON made a motion to adopt proposed committee substitute for HB 274 dated 2/20/98 for official action. There being no objection, it was before the committee. Number 1552 ROB BEACH testified via teleconference in Fairbanks. He wondered where the governor is for something so important. CO-CHAIRMAN OGAN stated the Governor does not routinely attend the House Resources hearings. MR. BEACH stated he is repulsed by the Judiciary and House Resources committees because they thought the Natives could not handle fish and game very well. We were offered firefighting and now we are not a concern in oil development. The Governor is not there and neither is oil. If this is the type of repercussions a person receives to be acknowledged in the state when having fair and legitimate offerings on positions, he wondered whether the legislature is electing the conservation.... Number 1697 CO-CHAIRMAN OGAN called for a brief at ease at 1:56 p.m. CO-CHAIRMAN OGAN called the meeting back to order at 1:57 p.m. Number 1699 CO-CHAIRMAN OGAN referred to page 2, line 12 of the work draft, "and completes university or industry training", and asked whether there is industry training, or is it on-the-job training. Number 1742 MR. LOGAN replied training is conducted by the Society of Petroleum Engineers, the International Association of Drilling Contractors, and the Petroleum Technology Transfer Council. They conduct, sponsor, and hold short courses, seminars, and educational programs. The International Association of Continuing Education and Training sets the criteria for certification. The Society of Petroleum Engineers is applying for certification within the next few months. Number 1774 REPRESENTATIVE BARNES stated there is no guarantee that the Society of Petroleum Engineers will be certified. Number 1782 MR. LOGAN replied true there is no guarantee. However, the Society of Petroleum Engineers is the highest level of training in regards to petroleum subsurface oil and gas matters. It is recognized worldwide as the best training. The bill requires other training as well, not just from the Society of Petroleum Engineers. The 10 years of professional subsurface experience includes hours and hours of training sponsored by the company itself through PDH (professional development hours) in order to progress in a field. Number 1843 REPRESENTATIVE IRENE NICHOLIA stated that there has been a lot of talk about declining revenues and declining prices of oil, and every time there is talk of declines it means cutbacks in employees. The Department of Law has indicated that there is a limited number of petroleum engineers with Alaskan addresses. She wondered, therefore, how that would impact the future pool of petroleum engineers in Alaska. Number 1885 REPRESENTATIVE GREEN replied the history of the oil industry has been up and down primarily related to world or local events that affect prices. They are profit making organizations. They do not operate like the government. When their expenditures exceed their income, they downsize. They just don't downsize in the technical fields, as a matter of fact, it is one of the last groups to go. In terms of the pool, there will always be hundreds of people that would qualify under this scenario. Far more than in the older days when one had to be a registered petroleum engineer. Number 1946 REPRESENTATIVE NICHOLIA stated the fiscal note says that the pool of engineers shrinks to 25 with the degree requirements. she asked Representative Green whether the proposed committee substitute would change the number. Number 1956 REPRESENTATIVE GREEN replied under (A) of the proposed committee substitute his information says the pool is closer to 35. But, the proposed committee substitute says "or" to also include (B) which requires 10 years of down-hole experience, and to have taken technical courses within the industry or company that applies towards down-hole experience. Number 1988 REPRESENTATIVE NICHOLIA stated there is never a guarantee that the pool of 25 would want to participate on the commission. Number 2008 REPRESENTATIVE GREEN stated Representative Nicholia is referring to (A) - the small pool. He is referring to (A) or (B) - a much larger pool. A downsize would not adversely affect the larger pool. Number 2038 CO-CHAIRMAN OGAN stated he has heard enough different opinions to cause some concern. He put the proposed committee substitute dated 2/20/98 into a subcommittee and assigned Representatives Barnes, Green and Joule to the subcommittee. Number 2070 REPRESENTATIVE GREEN asked Co-Chairman Ogan to be excused from the subcommittee because of his possible bias. Number 2074 CO-CHAIRMAN OGAN replied certainly he could accommodate that. CO-CHAIRMAN OGAN asked Representative Williams whether he would be kind enough to serve on the subcommittee. Number 2114 REPRESENTATIVE WILLIAMS replied he would serve on the subcommittee.
| Document Name | Date/Time | Subjects |
|---|