Legislature(2003 - 2004)
04/19/2004 01:57 PM House RES
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* first hearing in first committee of referral
+ teleconferenced
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+ teleconferenced
= bill was previously heard/scheduled
HB 531-CONVENTIONAL & NONCONVENTIONAL GAS LEASES CO-CHAIR MASEK announced that the first order of business would be HOUSE BILL NO. 531, "An Act relating to natural gas exploration and development and to nonconventional gas, and amending the section under which shallow natural gas leases may be issued; and providing for an effective date." Number 0085 CO-CHAIR DAHLSTROM moved that the committee rescind its action in reporting CSHB 531, Version 23-LS1818\V, Chenoweth, 4/15/04, from committee on April 16, 2004. There being no objection, Version V was before the committee. [Although the motion originally referred to Version U, the committee, before taking any action on Amendment 1, corrected the motion to refer to Version V.] CO-CHAIR MASEK noted that Representative Kerttula wanted to offer amendments. REPRESENTATIVE KERTTULA offered [Amendment 1], which read [original punctuation provided]: Page 39, Line 31 - Page 40, Line 11; Delete all material and insert: "(3) for a nonconventional gas lease, rights under the reservation as set out in AS 38.05.125 may not be exercised under the lease unless (A) the owner and the state and its lessees, successors, or assigns reach a prior written agreement under which the state and its lessees, successors, or assigns may enter upon the land in the exercise of the reserved right; only one written agreement authorizing entry onto the land may be required under this subparagraph to authorize activity by the state and its lessees, successors, or assigns, or by their agents, attorneys, and servants as allowed under this subsection; an agreement entered into under this subparagraph is (i) for the duration of the period of production or recovery operations unless the parties agree to a different duration; and (ii) a covenant running with the land; (B) the director, after notice and an opportunity to be heard, determines that, to exercise rights under the reservation and the lease, the lessee has no other reasonable means of entry than access and entry upon the land of the owner; the lessee has the burden of demonstrating compliance with this subparagraph; and (C) the state, its lessees, successors, or assigns make provisions to pay the owner of the land full payment for all damages sustained by the owner by reason of entering upon the land for the purpose of exercising rights under the lease, by posting a surety bond determined by the owner and by the state, its lessees, successors, or assigns to be sufficient as to form, amount and security to secure to the owner payment for all damages, subject to the following: (i) if a provision of this subparagraph conflicts with a requirement of AS 38.05.130, the provision of this subparagraph prevails; and (ii) in addition to the coverage for actual damages required by AS 38.05.130 or this subparagraph, as appropriate, the parties shall make provision for payment of reasonable compensation to the owner for any loss by the owner of the owner's use and enjoyment of the property." REPRESENTATIVE KERTTULA explained that since the legislation has been changed to refer to nonconventional gas rather than shallow natural gas, the owner and the state need to reach a prior written agreement so that people can enter upon the land. She acknowledged that it's undecided with regard to whether such prior written agreement can be required. She further acknowledged concern regarding how stringently to require it in order that it remains constitutional. "But my reading on this is that I would rather that the landowners have this power and that if there is going to be a lawsuit, that they're the ones that start out holding the right," she opined. Therefore, this amendment is to place the authority in the hands of the landowners. REPRESENTATIVE STEPOVICH asked if the agreement would be in lieu of payment as well. REPRESENTATIVE KERTTULA answered that such would have to be a separate agreement. [Amendment 1] merely requires written agreement before anyone can enter the land. REPRESENTATIVE STEPOVICH inquired as to whether Amendment 1 is constitutional. Number 0365 MARIE CROSLEY, Natural Resource Specialist, Division of Oil & Gas, Department of Natural Resources (DNR), deferred to the Department of Law. CO-CHAIR MASEK noted that there was not a representative from the Department of Law. REPRESENTATIVE KERTTULA acknowledged that there will be a constitutional issue because of the reserved rights, but she felt that it's more appropriate to place the property owners in the top position. REPRESENTATIVE KERTTULA related that Amendment 1 was offered in the subcommittee, but it was the desire of the chair [of the subcommittee] to hold it and place it before the full committee. REPRESENTATIVE HEINZE asked if there is any way to determine whether Amendment 1 would be constitutional or not. CO-CHAIR MASEK recalled the testimony of Jack Chenoweth, Attorney, Legislative Legal and Research Services, and Mark Myers, Director, Division of Oil & Gas, at a prior hearing when they said it would be unconstitutional. REPRESENTATIVE KERTTULA interjected that Mr. Chenoweth was concerned, but didn't know how the courts will rule on [Amendment 1] because there is no case law on the matter. REPRESENTATIVE KERTTULA opined that adoption of Amendment 1 would be a strong statement that the committee believes the property owners should be in the driver's seat. She noted that she has a possible conflict of interest on any coal bed methane matter because her family owns property that may be in the leasing area. Number 0916 REPRESENTATIVE STEPOVICH commented that he liked the idea encompassed in Amendment 1, but was concerned with regard to wasting time and money if it's unconstitutional. He said he would like to here from other committee members on the matter of passing legislation that may be frivolous. REPRESENTATIVE GATTO inquired as to what would happen if the amendment was determined to be unconstitutional. REPRESENTATIVE KERTTULA said that the state could choose not to enforce it or it could be severed from the rest of the legislation. Representative Kerttula said she understands the concern, but without any case law directly on the matter it would be more appropriate to adopt Amendment 1. REPRESENTATIVE WOLF opined that there are probably people in the Legislative Legal and Research Division and the Attorney General's Office who could answer whether Amendment 1 is constitutional. Therefore, he requested that Amendment 1 be withdrawn until the answer can be obtained. REPRESENTATIVE KERTTULA declined to withdraw the amendment. Number 1133 REPRESENTATIVE HEINZE remarked that the entire coal bed methane issue seems to boil down to the people [property owners], their land, and their rights. "I know we're in murky waters right now, but if there's a clarity out there somewhere and it ... puts the people in the driver's seat, ... that's what this is all about ...," she opined. CO-CHAIR DAHLSTROM commented that those committee members not present last Friday are at a disadvantage because they didn't here Mr. Chenoweth's statements. Although Mr. Chenoweth didn't specifically say that Amendment 1 would be unconstitutional, he gave the strong impression that there would be many problems. Co-Chair Dahlstrom related her understanding that Mr. Chenoweth was suggesting that the committee "not act in that manner." REPRESENTATIVE GUTTENBERG reminded the committee that voters, citizens, and landowners of the state have voiced strong objection to [their] lack of involvement in the process. Barring any clear legal opinion, property owners deserve to have a say in who enters their property and barring that, to also have their day in court. Therefore, he felt that this might be a good place to make the bright line decision. REPRESENTATIVE STEPOVICH related that the surface owners, the property owners, and the subsurface owners, the state, will be competing to sell the resources. CO-CHAIR MASEK interjected that Amendment 1 would also be problematic with the Statehood Act. CO-CHAIR DAHLSTROM turned to a memorandum Mr. Chenoweth sent to the Senate Resources Standing Committee, from which she read the following: Taken together, the state must abide by provisions of federal law, the Alaska Statehood Act, and State Constitutional provisions under which the state has consented to the terms and conditions applicable to Statehood Act land grants and has a constitutional obligation to provide what I believe would be determined by the court to amount to a guaranteed access to the resources that underlay those land grants. To the extent that the property owner's bill of rights would propose to make access to those resources fully dependent on the surface owner's prior written consent, it would raise questions of compliance with terms and conditions of the Statehood Act. CO-CHAIR DAHLSTROM remarked that there has been no discussion of the subsurface rights on the North Slope, although subsurface rights across the state will be impacted by this. REPRESENTATIVE KERTTULA reiterated that there isn't a clear answer regarding whether Amendment 1 is unconstitutional. Mr. Chenoweth would've said it was if that was the case, she noted. Therefore, she said she didn't believe Amendment 1 is frivolous. She reiterated her belief that the property owners should "have the leg up" in this situation. CO-CHAIR DAHLSTROM objected to Amendment 1. A roll call vote was taken. Representatives Guttenberg, Kerttula, and Gatto voted in favor of the adoption Amendment 1. Representatives Wolf, Lynn, Dahlstrom, Masek, Heinze, and Stepovich voted against it. Therefore, Amendment 1 failed by a vote of 3-6. REPRESENTATIVE STEPOVICH reiterated that he likes the idea of Amendment 1, and added that perhaps in the future surface and subsurface rights could be addressed. Number 1812 REPRESENTATIVE KERTTULA moved that the committee adopt Amendment 2, which read [original punctuation provided]: Page 47, Line 31; after "AS 46.04.900(25)", insert, "AS 46.40.205" Page 48, Line 11 - Line 12; delete all language CO-CHAIR MASEK objected. REPRESENTATIVE KERTTULA reminded the committee that part of what the legislature did last year with SB 69 was to remove local control from these decisions through the coastal management program. However, the entire leasing program no longer falls under the ambit of coastal zone review and the coastal zone management program has been changed significantly. Therefore, the first part of Amendment 2 would bring coastal leasing back under some sort of coastal zone management review. She then turned to the second part of Amendment 2 and page 48, lines 11- 12, of Version V. The language on page 48, lines 11-12, basically says that lease applications under the old shallow natural gas program that were received by DNR before January 1, 2004, would proceed as under the old program. Therefore, about 80,000 acres would be left under the old program. She clarified that these applications haven't been processed or approved, and therefore she opined that any applications should have to come under any new program that the legislature institutes. Amendment 2 would provide the state more control, she noted. Number 1952 MS. CROSLEY acknowledged that DNR has received certain applications prior to the December 31st deadline. From the department's perspective, it's an issue of fairness, she opined. She informed the committee that there are five applicants, including Usibelli Coal Mine, Inc., and Holitna Energy who have filed shallow gas applications prior to the deadline. The leases would've normally already have been issued under the existing program, but DNR put in place a moratorium and began a public process to address concerns held by the public. Therefore, DNR felt it was fair to grandfather in lease applications filed by a certain date. The specified date is necessary in order to avoid any party from taking advantage of whatever the legislature decides. CO-CHAIR DAHLSTROM asked if the cutoff dates coincide with the dates specified in the legislation, which Amendment 2 would delete. MS. CROSLEY said that Version V mirrors the cutoff dates DNR thought would be fair. In further response to Co-Chair Dahlstrom, Ms. Crosley confirmed that the language on page 48, lines 11-12, should remain in the legislation. In response to Representative Guttenberg, Ms. Crosley specified that approximately 157,000 acres would be impacted by this moratorium. The acreage is in the Matanuska-Susitna Valley, Healy, and Holitna. Number 2154 CO-CHAIR DAHLSTROM objected to Amendment 2. REPRESENTATIVE KERTTULA said she respected what Ms. Crosley is saying. However, she reminded the committee that the moratorium is arbitrary to begin with. She reiterated that 80,000 acres are in the Matanuska-Susitna Valley. If there's a concern with regard to a certain geographic area, perhaps a geographic area needs to be exempt. "I think that, again, it's a really important statement that we expect this program to change because it certainly hasn't worked for our citizens," she remarked. REPRESENTATIVE GUTTENBERG asked if Ms. Crosley has been in any discussion with the lease applicants regarding the status of their lease. He asked if the lease applicants are looking to withdraw their lease or change the conditions of it if the situation were to change. MS. CROSLEY said she didn't believe so, and therefore she didn't know what would happen if the situation changed. Number 2276 REPRESENTATIVE GATTO declared a conflict of interest because he is a resident of the Matanuska-Susitna Valley and has leases under his property. CO-CHAIR MASEK reminded the committee that there was an objection to Amendment 2, and therefore requested a roll call. A roll call vote was taken. Representatives Kerttula, Gatto, Heinze, and Guttenberg voted in favor of the adoption of Amendment 2. Representatives Lynn, Stepovich, Masek, Dahlstrom, and Wolf voted against it. Therefore, Amendment 2 failed by a vote of 4-5. Number 2349 CO-CHAIR DAHLSTROM moved to report CSHB 531, Version 23- LS1818\V, Chenoweth, 4/15/04, out of committee again with individual recommendations and the accompanying fiscal notes. REPRESENTATIVE LYNN objected. A roll call vote was taken. Representatives Gatto, Heinze, Stepovich, Wolf, Guttenberg, Kerttula, Masek, and Dahlstrom voted in favor of reporting Version V from committee again. Representative Lynn voted against it. Therefore, CSHB 531(RES), Version V, was again reported out of the House Resources Standing Committee by a vote of 8-1. The committee took an at-ease from 2:32 p.m. to 2:37 p.m.
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