Legislature(2003 - 2004)
03/15/2004 01:07 PM House RES
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* first hearing in first committee of referral
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= bill was previously heard/scheduled
SB 265-OIL&GAS LEASE SALE SCHEDULE/NOTIFICATION [Contains discussion of SB 266] CO-CHAIR MASEK announced that the first order of business would be CS FOR SENATE BILL NO. 265(RES), "An Act relating to the schedule of proposed oil and gas lease sales and to a related report to the legislature; and providing for an effective date." [SB 265 was sponsored by the Senate Rules Standing Committee by request of the governor.] Number 0094 MARK MYERS, Director, Division of Oil & Gas, Department of Natural Resources (DNR), explained that CSSB 265(RES) and SB 266 are bills to help enable DNR to hold a Bristol Bay oil and gas lease sale in the fall of 2005. Under current statute, the state, before making any changes in the areawide sale, must notify the legislature in the first [session] of that legislature and two years in advance of the sale; under current law, the state would have to notify the legislature of this lease sale at the beginning of the first session of the next legislature. In addition, fulfilling the two-year notice requirement will mean that the earliest the sale could occur is 2007. Therefore, DNR and the governor are requesting a change to that notification procedure. MR. MYERS specified that the proposed change in CSSB 265(RES) would allow the state to notify the legislature anytime with regard to the changes to the sale and process. It would also require that annually, in February, DNR would provide the legislature with a report laying out the five-year schedule for areawide lease sales. The aforementioned proposal seems to provide good balance in that additional notification is provided while allowing flexibility to add sales to the schedule without a potential three- to four-year delay in a sale. MR. MYERS highlighted that the notification doesn't mean the sale will occur; it merely allows the process to occur. The process includes a best interest finding document, which weighs whether a sale is in the state's best interests. Mr. Myers referred to a map that specified the schedule based on passage of CSSB 265(RES). With its passage, prior to the sale there'd be a long period of review, public input, a preliminary best interest finding, public comment on the aforementioned document, and a final best interest finding. Even with this bill, the earliest this process could happen is in the fall 2005. He clarified that this bill will allow the state to accelerate the process for the Bristol Bay lease sale by allowing the sale in the fall of 2005, rather than January 2007. Number 0418 MR. MYERS, in response to Representative Stepovich, clarified that the bill amends the entire process. If the state were to contemplate future areawide sales, it would be under the same timeframe proposed in the bill. However, the immediate need for the bill is for the proposed Bristol Bay lease sale. Number 0480 CO-CHAIR DAHLSTROM moved to report CSSB 265(RES) out of committee with individual recommendations and the accompanying fiscal note. There being no objection, CSSB 265(RES) was reported from the House Resources Standing Committee. SB 266-BRISTOL BAY OIL & GAS LEASE SALE CLOSURE Number 0534 CO-CHAIR MASEK announced that the next order of business would be SENATE BILL NO. 266, "An Act approving an interim classification by the commissioner of natural resources closing certain land within the area of the proposed Bristol Bay (Alaska Peninsula) competitive oil and gas areawide lease sale to oil and gas exploration licensing and shallow natural gas leasing; and providing for an effective date." [SB 266 was sponsored by the Senate Rules Standing Committee by request of the governor.] CO-CHAIR MASEK explained that the committee packet should contain a memorandum to Representative Kerttula dated March 4, 2004, from Thomas E. Irwin, Commissioner, Department of Natural Resources (DNR), as well as a letter of intent that follows what Commissioner Irwin's memorandum states. The letter of intent read: It is the intent of the Legislature that, if the State deems that an Alaska Peninsula Oil and Gas Lease Sale is in the State's best interest and a sale occurs, companies only be allowed to access offshore Prospects from onshore drill sites, utilizing directional drilling technology. Number 0637 MARK MYERS, Director, Division of Oil & Gas, Department of Natural Resources (DNR), explained that SB 266 is a mineral closing order for the area of the proposed Bristol Bay sale. To preserve the prospective area for an areawide lease sale, [DNR] wants to close it to shallow gas leasing and exploration licensing. The thought, he said, is that the intent of the areawide sale will be better met if the leases are left intact and the entire area is available for the competitive program. MR. MYERS referred to a map that illustrates the prospective section. Under shallow gas leasing, entities are allowed, in a noncompetitive program, to file for land with a depth down to 3,000 feet and deeper, if part of the field is below that. He said DNR believes the competitive process is better served if the leases are left intact, and thus all the mineral rights for oil and gas are left and bid at the same time in the competitive sale. There are examples in which the shallow gas lessee would probably be different from those bidding on the conventional lease sale. Thus there would be a correlative-rights issue between the shallower section and the deeper section. At this point, he said, it's better to preserve the area for the more traditional conventional lease sale area. MR. MYERS further explained that [DNR] believes there will be an additional economic value brought in by higher bonus bids than if the leases were segregated vertically. He said the intent of the bill is merely to prevent those activities from occurring until there is an areawide sale. Once an area is in an areawide sale, he noted, it's no longer eligible for either program. He added that the legislation closes this only for the shallow gas leasing and exploration licensing; it doesn't close it to other mineral entry programs or prohibit conventional oil and gas leasing. Number 0816 REPRESENTATIVE STEPOVICH inquired as to the difference between this [proposal] and Prudhoe Bay or Cook Inlet. MR. MYERS answered that this legislation would align it with the same leasing programs used on the North Slope and at Cook Inlet. Outside those areawide areas in which competitive sales occur, over-the-counter leases are allowed for shallow gas leases, just for the shallow section. Such activity has occurred north of the areawide leasing area in the Matanuska-Susitna region, Homer, and other places. This legislation would provide for a competitive process versus an over-the-counter process, and all the mineral rights would be leased at the same time. CO-CHAIR MASEK, upon determining no one else wished to testify, announced that public testimony was closed. Number 0900 CO-CHAIR DAHLSTROM moved to report SB 266 out of committee with individual recommendations, [the accompanying fiscal notes], and the accompanying letter of intent. There being no objection, SB 266 was reported from the House Resources Standing Committee.
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