Legislature(2009 - 2010)BARNES 124
04/13/2009 01:00 PM House RESOURCES
| Audio | Topic |
|---|---|
| Start | |
| HB163 | |
| HB217 | |
| SJR16 | |
| HJR33 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 217 | TELECONFERENCED | |
| + | SJR 16 | TELECONFERENCED | |
| *+ | HJR 33 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | HB 163 | TELECONFERENCED | |
HJR 33-RESTART COOK INLET PRODUCTION 1:58:52 PM CO-CHAIR NEUMAN announced that the next order of business is HOUSE JOINT RESOLUTION NO. 33, Urging immediate action by the governor, the Alaska Congressional delegation, and state and federal agencies to assist in the restart of oil production in Cook Inlet that was affected by the eruption of Mt. Redoubt. 1:59:04 PM JENNIFER SENETTE, Staff, Representative Kurt Olson, Alaska State Legislature, introduced HJR 33 on behalf of Representative Olson, sponsor. She explained that HJR 33 urges the governor and state and federal agencies to assist in the restart of oil production in the Cook Inlet that was affected by the eruption of Mt. Redoubt. The March 22, 2009, eruption of Mt. Redoubt shut down the Drift River Oil Terminal, halting oil transfers to the terminal from intermediate facilities at "Trading Bay" and "Granite Point", as well as halting oil transfers from the terminal to [Tesoro Alaska's Kenai refinery (Tesoro)] in Nikiski. This is an economic issue that is important not only to the Kenai area, but the entire state, she pointed out. MS. SENETTE said closure of the Drift River facility is impacting production throughout the Cook Inlet Basin because crude that used to go to the Drift River Oil Terminal must now be stored on platforms which have a finite storage capacity. As the shutdown has gone on, platform storage has become in short supply, requiring the platforms to shut their wells. If the shutdown continues, the Tesoro refinery will be forced to find an oil supply from somewhere else. In addition, the old age of the Cook Inlet wells makes them very difficult to restart once shut down. Because it is expensive and time consuming to get these old wells re-started, their closure today affects production tomorrow. 2:02:40 PM MS. SENETTE noted that a further complication is the drawdown of the Drift River storage tanks since the eruption. Transferring millions of gallons of oil from storage requires re-ballasting of the tanks, which has been done with sea water, she continued. Mixing sea water with the remainder oil in the tanks creates a corrosive material that can potentially damage the tanks. This material must be removed before oil can be returned to the tanks and will take months, at great expense, to do. This effect on current and future oil production is especially a problem for a region and state that depend so heavily on oil production, as well as for all of the workers in this industry. REPRESENTATIVE OLSON added that the oil being talked about could be as much as 20-25 percent of what is going into "Tesoro" and "Tesoro" will replace it with either Trans-Alaska Pipeline System (TAPS) oil or Indonesian spot market oil, neither of which is of the same quality as Cook Inlet oil and which will impact the price. 2:06:06 PM REPRESENTATIVE OLSON, in response to Co-Chair Neuman, explained that the Tesoro refinery originally operated on about 100 percent Cook Inlet oil and this oil is not coming back nearly as fast as it is needed for the plant or the state. The TAPS oil ends up with a waste product that Tesoro ships out of state at additional expense for asphalt and other uses. CO-CHAIR NEUMAN understood that Cook Inlet production is now down to 15,000-20,000 barrels a day. 2:07:08 PM REPRESENTATIVE GUTTENBERG inquired whether something happens structurally to the field when it is shut down. KEVIN BANKS, Director, Division of Oil & Gas, Department of Natural Resources, explained that sea water was pumped into two of the Drift River Oil Terminal's active storage tanks which contaminated the oil remaining in the tanks. Before the tanks can be returned to service they must be drained of the sea water and oil mixture and cleaned. The contaminated oil will require treatment before it can be used in a refinery, but he said he is unsure whether such treatment facilities are available in Alaska. MR. BANKS, in regard to the first whereas and volcanic activity, pointed out that the first Mt. Redoubt volcanic eruption occurred on March 22, 2009, but the Alaska Volcano Observatory reported increasing volcanic unrest as early as September 2008. He said the committee may therefore want to consider a revision to this part of the resolution. REPRESENTATIVE OLSON agreed. 2:09:40 PM MS. SENETTE, in response to Representative Kawasaki, stated that the Drift River facility is operated by the Cook Inlet Pipeline Company and owned by Chevron and Pacific Energy Resources, Ltd. REPRESENTATIVE KAWASAKI asked whether the storage tanks were drawn down in response to the March 22, 2009, eruption or during the period of increased activity before that. MS. SENETTE said she believes the drawdown of the storage tanks happened only after the first eruption on March 22. 2:10:59 PM REPRESENTATIVE KAWASAKI, in relation to HJR 33's request for immediate action by the governor and others, inquired what this action would be. REPRESENTATIVE OLSON said the resolution is asking for any kind of expedited help that is within reason and legal, such as any permits that will be needed. In further response, he explained that permission will be needed to start making repairs, do the work, draw off the salt water and oil that are mixed, inspect the tanks and Drift River facility to certify that they can be utilized again without any contaminations to the Cook Inlet, and ascertain that the dikes are still able to provide containment. CO-CHAIR NEUMAN added that, coupled with the close of [Agrium Inc.'s Kenai Nitrogen Operations plant (Agrium)], this is a huge issue for the Kenai Peninsula. 2:13:28 PM REPRESENTATIVE TUCK understood the urgency and asked whether there is any indication that the governor, congressional delegation, U.S. Congress, and state and federal agencies are not looking at the same urgency and will instead be hindering this in some way. REPRESENTATIVE OLSON said he believes the Kenai Peninsula Borough is putting in a request. In further response, he explained that the request is a declaration of emergency. 2:14:34 PM REPRESENTATIVE SEATON proposed conceptual language for discussion later: [page 2], line 19, at the end of the sentence, add "after the current eruption cycle concludes." This would indicate that the legislature is not trying to urge people to go into an unsafe area, he explained. He then inquired whether immediate action to assist in the restart of oil production in Cook Inlet would include a pipeline from the platforms to the Kenai Peninsula, should that be the most advantageous way to restart those facilities. REPRESENTATIVE OLSON responded that he does not know. MR. BANKS said he supposes it would be possible and feasible to build a pipeline across the inlet as there used to be one in the past. A pipeline would mean that the oil production from the west side would be directed toward the Tesoro refinery, he added, which could possibly be a problem for Chevron. 2:16:26 PM REPRESENTATIVE SEATON asked what the difference is between the produced water that comes up with the oil in the well and the ballast water and oil mixture in the Drift River storage tanks. MR. BANKS replied that two storage tanks have oil and seawater in them now for ballast, and the other tanks are empty and open so that water could get into them if flooding occurred and they would not float. The mixture of oil and produced water is treated upstream of the terminal, either in production facilities near the platforms onshore or on the platforms themselves. Thus, the oil that is moved down the Cook Inlet pipeline to the terminal is pipeline ready, saleable crude. REPRESENTATIVE OLSON said he believes the old "Amoco line" was shut down with the intention of never bringing it back online again. MR. BANKS interjected correct. REPRESENTATIVE OLSON continued, saying that bringing this pipeline back online would not be wanted. 2:18:11 PM REPRESENTATIVE GUTTENBERG asked whether there are protocols in place for actions that the Drift River facility must take in the face of volcanic activity. MR. BANKS said he is unsure what kind of plans or protocols are in place, but he knows there are contingency plans filed with the Department of Environmental Conservation (DEC). Following the 1989-1990 volcanic activities, Chevron made improvements to the facility to raise the tertiary dikes around the terminal. REPRESENTATIVE OLSON added that there are plans in place, and the plan that attracted the most attention was keeping the tanks over half full in order to keep them from floating away should there be a major leak in the dikes. REPRESENTATIVE EDGMON recognized the seriousness of the issue and inquired whether the sponsor plans to get HJR 33 through the whole process now or settle for a letter that members could sign. REPRESENTATIVE OLSON responded that his intent is to get it through with Representative Seaton's verbiage. 2:20:16 PM REPRESENTATIVE KAWASAKI inquired as to which agencies were involved in forcing the shutdown. MR. BANKS explained that the decisions about the Drift River Oil Terminal over the last couple weeks, including the decision to shut it down, were made by the members of the Unified Command, which are the U.S. Coast Guard, DEC, and the leadership from Cook Inlet Pipeline Company. He clarified that the aforementioned contingency plans on file with DEC are normal course-of-business oil spill contingency plans. The U.S. Department of Transportation has jurisdiction on the pipelines that go into the terminal and the U.S. Coast Guard has jurisdiction on the Christy Lee Platform and the flow lines from the terminal out to that loading platform. 2:22:00 PM REPRESENTATIVE KAWASAKI asked whether the Unified Command forced the closure or suggested the closure. MR. BANKS replied that the closure was through agreement by the Unified Command's three bodies. As the owner of the "Cook Inlet Pipeline terminal", Chevron agreed to those provisions. REPRESENTATIVE OLSON noted that he, Representatives Seaton and Chenault, and Senators Waggoner and Stevens are on the distribution list and receive emails several times a week, and sometimes several times a day, about what is being done. CO-CHAIR NEUMAN requested that this information go to all committee members. He opened public testimony on HJR 33. 2:23:47 PM JACK WILES, Kachemak Bay Conservation Society, cautioned members to take a more thorough analysis of the situation because it is not as simple as it seems in HJR 33. For example, the last eruption happened during what was considered to be a low level of volcanic activity. Workers onsite when the volcano erupted for 35 minutes had to be placed in a safe building and then evacuated. He related that at a recent public hearing the Unified Command said the top priority is health and safety and the second priority is the environment. While he appreciated the economic impact of oil production, he said what is not mentioned in HJR 33 is the significant economic impact of an environmental disaster that could occur from a spill. A tremendous amount of sediment load has come down Drift River, which can be seen in a recent aerial photo. The river channel is very unpredictable, with the latest channel right next to and threatening the facility. He agreed that shutting down the terminal was a wise move and pointed out that it is still precarious with 2.5 million gallons of oil in the tanks. MR. WILES urged that HJR 33 be tabled until testimony can be received from the Unified Command or, as an alternative, amended on page 2, line 19, to include wording that says to examine alternative technology to decommission the tanks and look at the feasibility of increased storage in other locations or platforms or to look at the existing pipeline. If the directive is to put the tank farm back into production, the question that must be asked is, Where is the risk assessment and who assumes that risk? 2:27:17 PM ROBERT ARCHIBALD, Kachemak Bay Conservation Society, said he has worked in that Cook Inlet area since 1965 and the Drift River Oil Terminal has been dodging the bullet since its inception 42 years ago. He commended both the Unified Command for its improved communication with the public and the people who went to the facility to pull down the tanks. He said there is no capability for removing the 2.5 million gallons of oil sludge still remaining in the tanks in the event of a catastrophic flood and that this is unacceptable. Given that it can take up to six months to clean out a tank, he asked whether the off-line tanks would have to be used should the facility go back into use. He urged that all stakeholders in the inlet be involved in the design of a new production facility that is not located in a floodplain of a volcanic river. 2:30:12 PM CO-CHAIR NEUMAN inquired whether the Drift River Oil Terminal goes through regular inspections to ensure its integrity. MR. BANKS answered that he thinks the U.S. Department of Transportation has a routine schedule of inspections. In further response, he noted that routine pressure tests and equipment inspections occurred prior to the terminal beginning the pumping of oil to the tanker last week. 2:31:21 PM MR. BANKS, in response to Representative Edgmon, explained that the Petroleum Systems Integrity Office (PSIO) has been represented in the process of the past several weeks. Different agencies have jurisdictions over the terminal and the pipeline feeding the terminal, he continued. Now and in the future, the PSIO can provide a coordinated effort to ensure there are no gaps or overlaps in how the jurisdictions work. An incident command management process has been in place and the Unified Command has been the decision-making authority over the terminal during this particular incident, but it is not a permanent kind of management structure. Should the volcano settle, decisions about whether to mothball, remove, repair, or replace the terminal will be made by the Cook Inlet Pipeline Company and the permitting will be done by various agencies. Having a volcano nearby will factor in to how those permits are awarded. 2:33:58 PM ELISE WOLF urged the Drift River Oil Terminal not be restarted and encouraged that a pipeline instead be constructed from Granite Point to the east side. She argued that HJR 33 would work to usurp the authority of the Unified Command. She said she thinks HJR 33 is inappropriate legislation because if the committee was qualified to be an oversight agency it would have answers to what the contingency plans are. She proposed that instead there be legislation requiring Chevron to pay for all of the workers who have been laid off and any economic impacts that might result from the items listed in the whereas clauses of the resolution. Chevron has had 42 years to realize that a terminal and tanks at the base of a volcano are a bad idea and a risk to other industries in the Cook Inlet. There is no mention in HJR 33 of the economic impact of fishing and tourism and what would happen if these industries were impacted by an oil spill, she continued. This reeks of trying to find ways to skirt oversight and mitigation plans, she charged. 2:38:46 PM WHITNEY LOWE offered his belief that when deciding whether to shut the Drift River Oil Terminal, the Unified Command considered the significant economic impacts that would result and determined that the workers' safety and the safety of the environment were potential enough problems to warrant closing of the facility. It cannot be guaranteed right now that those potential dangers have dissipated, he argued, and it therefore seems shortsighted and inappropriate to now determine it is time to re-open the terminal; the potential long-term costs of such an action must be looked at. He supported the idea of a pipeline across the east side so the terminal could be closed and agreed with Representative Seaton's proposed conceptual amendment. CO-CHAIR NEUMAN closed public testimony. He said he thinks there are some members of the public and the legislature that would not mind seeing the words "that was affected by the eruption of Mt. Redoubt" taken out [from page 2, line 19] in order to get some production of Cook Inlet going. 2:41:35 PM REPRESENTATIVE OLSON said he would like to take HJR 33 back so he can incorporate the amendments suggested by Representative Seaton and Mr. Banks into a committee substitute. He pointed out that the Drift River Oil Terminal has been in that location for 42 years and he does not believe it has ever had a major leak or spill. CO-CHAIR NEUMAN asked whether there have been any safety issues at the Drift River facility. MR. BANKS said he does not know; he deferred to DEC. CO-CHAIR NEUMAN requested the sponsor to ask DEC to come to the next hearing on HJR 33 to answer this question. 2:42:51 PM REPRESENTATIVE KAWASAKI requested that someone from Unified Command also attend the hearing. REPRESENTATIVE OLSON offered to get copies to members of the most recent communications from the Unified Command. CO-CHAIR NEUMAN held over HJR 33.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 163 04.13.09 Leg Legal Memo.pdf |
HRES 4/13/2009 1:00:00 PM |
HB 163 |
| CSHB163(RES) work draft.pdf |
HRES 4/13/2009 1:00:00 PM |
HB 163 |
| HB 163 Amendment 4.13.09.pdf |
HRES 4/13/2009 1:00:00 PM |
HB 163 |
| HJR 33.pdf |
HRES 4/13/2009 1:00:00 PM |
HJR 33 |
| HB 217.pdf |
HRES 4/13/2009 1:00:00 PM |
HB 217 |
| HJR 33 packet.pdf |
HRES 4/13/2009 1:00:00 PM |
HJR 33 |
| SJR 16 packet.pdf |
HRES 4/13/2009 1:00:00 PM |
SJR 16 |