Legislature(1999 - 2000)
04/18/2000 03:00 PM Senate RES
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HB 414-OIL & GAS CONSERVATION COMMISSION
JEFF LOGAN, legislative aide to Representative Joe Green, sponsor
of HB 414, made the following comments. HB 414 clarifies the
requirements to serve on the Alaska Oil and Gas Conservation
Commission (AOGCC). It is the sponsor's opinion that there has
been some question about the qualifications and requirements for
service on the board over the past five or six years. HB 414 will
help the Governor and legislature make appointments that will be
better for the oil fields and better for the people of Alaska by
requiring certain technical expertise of the people who serve.
SENATOR TAYLOR asked if HB 414 will ensure that a "down-hole"
engineer will serve on the AOGCC.
MR. LOGAN said yes, it will require that one of the members,
appointed and confirmed by the legislature, will have subsurface
experience.
CHAIRMAN HALFORD read the required qualifications in HB 414 and
asked how many people in Alaska will qualify for that position.
MR. LOGAN said the number is a moving target but, according to the
industry people he has spoken with and the Society of Petroleum
Engineers, about 500 people would qualify.
MR. MIKE ABBOTT, Special Assistant to the Governor, pointed out the
Administration has two serious concerns with HB 414. The first
concern is programmatic; the Administration is concerned that the
proposed bill will make it difficult, if not impossible, to resolve
some of the clarification issues that the sponsor is trying to get
at in terms of who will be considered qualified. As an example,
the bill talks primarily about the engineering position but it also
deals with the geologist position. By the Administration's count,
based on registration information from the American Institute of
Petroleum Geologists, about 12 Alaskans will qualify for the
geologist position if HB 414 passes. Although he does not
necessarily dispute that 500 people in Alaska are eligible for the
engineering position, a lot depends on how one interprets the
standard.
MR. ABBOTT continued. Section 2 of the bill lays out two different
ways that a person can become qualified. First, a licensed
engineer who is qualified as a petroleum engineer would be
qualified. That is an interesting standard because a person can
become a petroleum engineer with less than four years of
professional experience. A person with a degree from a five year
program would only need three years of actual experience and no
supervisory experience, no Alaskan experience, and no down-hole
experience. A person with a degree from a four year petroleum
engineering program would need four years of experience to become a
registered engineer. That will allow a person, albeit licensed but
without a lot of experience, to sit on the AOGCC.
MR. ABBOTT explained that the second way a person can become
qualified is through Section (B) which requires a person to meet
three standards. The first standard requires 10 years of
professional subsurface experience in drilling well operations,
production process operations, etc. It is a little confusing since
the production process operation consists of surface oriented
production work and not subsurface work. Second, one has to have
a degree from a qualified program. The third standard requires one
to have completed university or industry training that covers
certain issue areas specific to petroleum engineering. The third
standard is fairly unquantified because industry training sometimes
consists of day or week long sessions. University programs might
include seminars. It is unclear whether this standard requires
course work, degrees, certificates or attendance so it will be
difficult to know whether a candidate meets the qualifications.
The standard appears to be a university degree.
MR. ABBOTT explained the particularly troubling part of the Section
(B) standard is that the engineer would not be required to be
registered. Currently, the AOGCC commissioner who fills the
engineer's seat has a lot of direct supervisory responsibilities
over the rest of the engineering staff, which is the bulk of the
professional staff on the AOGCC. There are some professional
concerns in the engineering community about whether registered
engineers can be supervised by non-registered engineers. Right now
the AOGCC has been hiring staff engineers and the AOGCC has
required registration for those positions.
MR. ABBOTT said HB 414 implies that the sitting Chairman of the
AOGCC, who was confirmed by the legislature three years ago, will
not be eligible for reappointment when his term is up later this
year. The Administration finds it troubling that someone who has
served as the Chair without complaint from the industry or public
at large would automatically be removed as a result of this
legislation. This gentleman has more than 20 years of engineering
experience in the Alaskan oil fields and is a former president of
VECO Engineering.
CHAIRMAN HALFORD asked if the AOGCC Chairman owned his own
engineering firm.
MR. ABBOTT said he owned a company named Christenson Engineering
which was subsequently purchased by VECO. In the course of that
action, Mr. Christenson became the President of VECO Engineering.
Mr. Abbott noted that he, a representative from the Department of
Law, and other AOGCC Commissioners were available to answer
questions.
SENATOR GREEN recalled that lengthy discussions occurred during the
last approval process and said, with all due respect to Mr.
Christianson who she believes is doing a fine job, some people
questioned whether he was a duly qualified candidate under the
previous criteria. She said she hates to think that is what HB 414
is about. She questioned whether there is a place under Section
(B) where the word "registered" should be used. Regarding fluid
flow through subsurface formations, Senator Green thought it might
be difficult to have ten years of experience in that particular
field. She suggested that instead, the criteria require that a
person have that experience coupled with other underground
experience.
MR. ABBOTT replied that the Administration continues to have
concerns about any standards that will not allow a person with Mr.
Christenson's background to serve.
SENATOR GREEN agreed but thought the member should have the right
to say we have some new standards that we think should be in place
for this particular commission.
MR. ABBOTT said he does not disagree and it is up to the
legislature to make that decision but, using the example of Mr.
Christenson, he would tell him the standard is not appropriate.
SENATOR TAYLOR pointed out the Alaska Society of Professional
Engineers (ASPE) opposes HB 414 based on the fact that this bill
does not require that the engineer be certified by the State of
Alaska.
MR. ABBOTT said that is correct.
SENATOR TAYLOR asked whether the reference to AS 08.48 on page 2
(Subsection A) applies to a certificate of registration as an
engineer under Alaska law.
MR. ABBOTT explained one can qualify under (A) or (B). Subsection
(A) is fine in terms of registered engineers. Subsection (B) does
not require an engineer to be registered.
SENATOR TAYLOR thought Section (B) looks like it talks about an
engineer because it no longer says "petroleum engineer."
MR. ABBOTT replied "... one of the concerns we have with (B) is
that it would allow a non-registered engineer - of which there are
a lot, especially within the oil and gas industry - I don't mean to
misstate this - there are a lot of fine engineers within the oil
and gas industry, and because they don't generally work on public
facilities, they don't necessarily have to be registered to do
work. And so, I'm not calling into question what are a lot of very
experienced and very successful engineers. Whether or not they
could be supervising other professional certified engineers is a
concern and it's one that we think is - well, it's certainly one of
our serious concerns with the bill as proposed right now."
SENATOR TAYLOR asked if the Administration's concern would be
alleviated if Subsection (B) was deleted.
MR. ABBOTT said the Administration would not have that concern but
Subsection (A) is problematic for two reasons. First, it applies
to a very narrow community of individuals. Subsection (B) was
included primarily because such a limited number of people would
qualify under Subsection (A). Subsection (A) as a stand alone does
not require a lot of experience. A person can become a registered
petroleum engineer in Alaska with three or four years of
experience, post graduation.
SENATOR TAYLOR suggested removing Section (B) and adding to Section
(A) some of the experience requirements. He asked if that would
narrow the field of 12 even further.
MR. ABBOTT clarified that the field of 12 has to do with
geologists. To his knowledge, there are about 47 Alaskan
registered petroleum engineers. About 40 others are non-residents
who are registered to work in Alaska.
SENATOR LINCOLN asked if only 12 people qualify for the geologist
position because of the requirement of ten years of professional
experience.
MR. ABBOTT replied that right now if a person is registered as a
professional geologist with the American Institute of Professional
Geologists, the person has the opportunity to indicate what his/her
professional expertise includes. There is not a discrete
registration for petroleum geology.
CHAIRMAN TAYLOR asked what these jobs pay.
MR. ABBOTT replied, "About 85."
CHAIRMAN TAYLOR questioned why a petroleum geologist with ten years
of field experience would want to work for $85,000 as an AOGCC
Commissioner.
MR. ABBOTT said it is difficult to recruit people for the two
directed Commission seats.
SENATOR LINCOLN suggested moving lines 3 and 4 on page 2 up to line
2 so it would read, "who holds a certificate of registration as an
engineer under AS 08.48. and under regulations adopted to implement
that chapter."
MR. ABBOTT said the statute could be left as is under (1) because
it has the licensed professional engineer standard in it right now.
The current standard is very short which doesn't mean it is simple.
There have been concerns raised in the past about what qualifies a
professional engineer regarding education and professional
background in the field of petroleum geology. That is clearly a
term that is subject to interpretation.
SENATOR GREEN said Alaska needs more discovery and drilling which
would increase the number and level of engineers and geologists.
This discussion would be unnecessary because there would be many
people who qualify.
There being no further questions of Mr. Abbott, CHAIRMAN HALFORD
took teleconference testimony.
Number 1535
MR. DAVE NORTON, AOGCC Commissioner, recapped a letter he sent to
committee members summarizing his concerns about HB 414. His first
point is that being a professional engineer implies that a person
must follow a code of professional conduct. That would provide a
safeguard to the public and ensure that their best interests are
being looked after. Subsection B of HB 414 goes the other way and
excludes professional engineers with critical experience in the oil
and gas industry from the qualifications, which is what will happen
in Mr. Christenson's case. Third, the bill, with its very
prescriptive requirements for down-hole, subsurface engineering
experience only, limits qualified candidates and also limits the
purview of the AOGCC. It has not only subsurface responsibilities,
it has responsibilities for surface activities. His letter
describes that problem in detail. He feels the requirements for
engineers should be plain and clear and leave room for discretion
in appointments. An engineer should be required, at a minimum, to
have experience in the Alaska oil and gas industry. The bill is
overly prescriptive and complicated. It tries to fix something
that is not broken. He is opposed to HB 414.
MR. LOGAN asked to speak to HB 274, which was virtually the same
bill introduced during the previous legislature. He said regarding
the qualifications, Representative Green started out with a bill
that said, "holds a certificate of registration as an engineer
under AS 08.48" and then listed the qualifications under Subsection
(B). The Administration came to the table and said that was
unacceptable. Representative Green then changed that language for
the Administration. During hearings in House committees, the
Administration never came forward to express any displeasure with
the language as it is stated here today. Representative Green
assumed the bill was okay with the Administration. Mr. Robert
Christenson of the AOGCC did testify, however. He made a few
suggestions that were incorporated into the bill. The first was
Section 1 which gives the Governor direction to give preference to
Alaska experience. The second suggestion by Mr. Christenson was
the phrase, "production process operations" which the Governor's
representative said he had some questions about. That phrase was
incorporated into the bill.
MR. LOGAN clarified for the record that the engineers who qualify
under Subsection (B) are very qualified, technically trained
individuals. A number of engineers in this state are not
registered Alaska petroleum engineers but they are registered in
another state. They have extensive training and have been in
Alaska a number of years and are very qualified to serve. Much of
the description of what would make a good candidate came from
suggestions by people in the industry. Representative Green asked
them the question, "With millions of dollars of assets at stake,
what are the kinds of people that you have responsible for those
assets?" He then put the bill together and sent it to the
University of Alaska Fairbanks Petroleum Engineering Department for
review. The department thought the language described a good
candidate for that position. Mr. Logan said he is sorry the
Administration did not come forward earlier for clarification. He
also acknowledged that Representative Green was unaware of the
opposition from a professional engineering group. That group did
not contact him.
SENATOR LINCOLN referred to Section 1 and questioned where the
"wiggle room" is.
MR. LOGAN replied that in order to be a certified Alaska engineer,
one must pass what is known as the Arctic test - a specific test
dealing with Arctic engineering measures. Therefore, to qualify
for (A), one has already met the requirements in Section 1 so no
"wiggle room" is needed. He then asked Senator Lincoln to clarify
her question.
SENATOR LINCOLN stated that if under Subsection (B) there are 500
people to choose from, but under Section 2 there are only 12, the
Governor's only option is within the criteria that is laid out in
HB 414.
MR. LOGAN said that is true, but on the geologist point, in order
to be certified under AS 08.02.011, one must be a member of AIPG,
the Association of Professional Geologists. To be a member of
AIPG, one needs eight years of experience. Therefore, just to get
the license one needs eight years of experience so HB 414 only asks
for two more years. During testimony given to the House Oil and
Gas Committee, former Commissioner Harold Heinze made the point
that these are minimum qualifications. The bill does not require
the Governor to appoint the least qualified people, it simply sets
the floor.
SENATOR LINCOLN pointed out the bill was introduced on March 15.
She asked Mr. Logan if today is the first time he has heard a
response from the Administration.
MR. LOGAN said that is correct and the Administration's concerns
were a shock to him because at the end of the process during the
previous legislature, the bill was in a House Resources
subcommittee for six weeks where good participation from all
parties took place and everyone was okay with the bill.
SENATOR LINCOLN asked Mr. Abbott why the Administration has not
expressed its opposition to HB 414 prior to today.
MR. ABBOTT said the Administration's opposition to HB 414 has been
consistent from the day the bill was introduced and throughout the
confirmation process for the previous engineering commissioner and
the current commissioner. The Administration has made it clear
that it prefers the existing standard. He did not think the
sponsor has ever doubted that the Administration is satisfied with
the standard as written and that it has opposed efforts to mandate
a more specific requirement, specifically the subsurface experience
requirement.
SENATOR LINCOLN asked if the Administration testified in opposition
to this bill in the House.
MR. ABBOTT replied, "We have never testified in support of this.
No Administration official has ever testified in a manner that
...."
SENATOR LINCOLN clarified that her question was whether the
Administration testified in opposition to HB 414.
MR. ABBOTT said, "Yes, Mr. Christenson testified in the House Oil
and Gas Committee that the Administration opposed the legislation."
CHAIRMAN TAYLOR announced that because a quorum was not present, he
would hold the legislation and recess the Senate Resources
Committee to the call of the chair.
CHAIRMAN HALFORD noted that Representative Green was present so the
committee would revisit HB 414.
REPRESENTATIVE JOE GREEN, sponsor of HB 414, apologized for not
knowing what transpired earlier in the day, but said the problem
remains that with the present Administration's appointments to the
AOGCC, Alaska has lost one of the most critical parts of that
Commission, and that is technical expertise. When he came to
Alaska in 1977, the Oil and Gas Division did essentially the same
things that the AOGCC does now: monitoring and supervising down-
hole and surface operations in the oil fields, something that all
states that have oil field operations do.
In 1977, the Oil and Gas Division was in the Department of Natural
Resources (DNR). It had, and the AOGCC now has, the power of
compulsory imposition. That has not been an issue in this state
because Alaska has not had differential royalty owners. However,
as development moves across the Colville River, different
subsurface owners are likely in the future. There may be a time
when a subsurface owner does not want to become involved. If 65
percent of the other subsurface owners agree to a unit, the AOGCC
has the authority to create that unit under the compulsory
unitization statute. In the late 1970s, the AOGCC was created,
much like the Texas railroad commission. It has always had a
petroleum engineer as a commissioner, the reason being that while
things are out of sight, they are out of mind, and if no one is
guarding the hen house, a lot of chicks could get away. An
underground blow-out into another reservoir or other disastrous
things could happen. That would also apply if unitization occurs.
He believes it is critical that a person with technical knowledge
and experience in that field serve on the AOGCC yet this
Administration has seen fit to not honor that. HB 414 tries to
ensure that the Governor appoints a geologist and an engineer of
knowledge. The third Commissioner could be of any other
profession.
REPRESENTATIVE GREEN said the reason HB 414 does not require a
registered petroleum engineer is because when this issue was
brought up last year, he got flack from the Administration who said
the pool is too small - there are only 70 or 80 registered
petroleum engineers in the entire state. To accommodate that
concern, the bill was changed to allow all petroleum engineers to
qualify because a lot of companies employ people who are not
registered in Alaska. The companies see no need for registration
in Alaska as these people are registered in other states and they
can perform the work.
SENATOR MACKIE asked how many commissioners are on the AOGCC.
REPRESENTATIVE GREEN replied three.
SENATOR MACKIE asked if there are specific qualifications for the
other two.
REPRESENTATIVE GREEN said there are specific qualifications for the
geologist and engineer but not for the third member - the statute
says the third member need not be expert in either field.
CHAIRMAN HALFORD informed Representative Green that all testimony
was in opposition to the bill, with the exception of Mr. Logan's.
REPRESENTATIVE GREEN asked if those testifying gave specific
reasons for their opposition. He also asked if one group testified
that the engineer should be a registered petroleum engineer rather
than just a petroleum engineer.
CHAIRMAN HALFORD said that was one group but that the Alaska
Society of Professional Engineers also opposes the bill because of
the non-registered engineer requirement. He noted that he
disagrees with Representative Green on the appointment question as
it applied under existing law. He thought the appointment was a
good one and that the person had a lot of experience in petroleum
engineering in a broader sense.
REPRESENTATIVE GREEN said the problem is that the AOGCC has no one
with down-hole experience. That is why he thinks they set it up as
a petroleum engineer because a petroleum engineer's focus is down-
hole rather than surface. He explained that down-hole experience
has to do with the containment, spacing, and reservoir mechanics of
actually producing the oil from that reservoir in an optimum
manner.
CHAIRMAN HALFORD noted that Mr. Abbott stated that the geologist
vacancy would be harder to fill than the petroleum engineer
vacancy.
REPRESENTATIVE GREEN replied that may be so, but the requirements
for a geologist in HB 414 are essentially the same as they are
right now.
SENATOR MACKIE asked how many people are eligible for the geologist
position under HB 414.
REPRESENTATIVE GREEN said the number is around 400 - it was 500 but
he assumes the number has decreased by about 20 percent with the
last downsizing. He added that right now there is a requirement
that the geologist be geologist certified.
SENATOR MACKIE questioned what will happen if that pool shrinks
even further.
REPRESENTATIVE GREEN replied that pool is far larger than that of
the medical board or others. The possibility of shrinking exists
but as long as Alaska is an oil producing state, it will have a
plethora of engineers. The AOGCC has always had applicants even in
the days when engineers were paid significantly higher wages.
Number 2175
SENATOR LINCOLN asked if the number of professional geologists has
also decreased due to the downsizing so that there would be fewer
than 12.
REPRESENTATIVE GREEN said he didn't know because his field has been
in engineering. He thought that in the last 18 months, while
downsizing was occurring, a significant number of exploration
geologists were brought to Alaska with the now-defunct ARCO. ARCO
had shipped most of their exploration geologists to Texas and then
brought them back because their budget was going to expand.
Phillips has indicated that it will spend in excess of $400
million.
SENATOR LINCOLN asked Representative Green to respond to the April
14 letter from the Alaska Society of Professional Engineers.
REPRESENTATIVE GREEN replied, "Well originally, before this bill -
its predecessor had that they had to be a registered engineer and
we heard from the Administration saying that they couldn't support
that because there were too few - there were something less than 70
registered petroleum engineers, as I say, of a field of in excess
of 500, because the companies didn't see a need for that. That
merely entitled those engineers to hire themselves out to someone
else as a professional. It didn't inhibit the use of those
engineers for engineering work that the company felt was adequate
to do the jobs that they wanted them to do. Being registered
doesn't make you a better engineer. It just means that you passed
the test and you are willing to pay the annual dues. That's why I
didn't become registered here. I was carrying these registrations
from other states and began to realize I'm spending an awful lot of
money here for no reason."
SENATOR LINCOLN asked if the engineers are required to be
registered whether the pool would be reduced dramatically to 70.
REPRESENTATIVE GREEN said very much so and to comply with the
desire to have a broader base to choose from and to offset the
concerns brought up by Senator Mackie, the pool is enlarged - not
the discounting of the quality, just the discounting of not having
to be registered.
CHAIRMAN HALFORD noted that it is up to committee members to decide
what to do with CSHB 414 (O&G).
SENATOR PETE KELLY moved CSHB 414(O&G) from committee with
individual recommendations and its accompanying zero fiscal notes.
There being no objection, the motion carried.
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