Legislature(2005 - 2006)BUTROVICH 205

02/28/2005 03:30 PM Senate RESOURCES

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03:32:10 PM Confirmation Hearing: Alaska Oil and Gas Conservation Commission (aogcc)
03:32:10 PM Start
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Confirmation Hearing:
Alaska Oil & Gas Conservation Commission-
Dan Seamount
Heard & Held
        SB 103-OIL & GAS: REG. OF UNDERGROUND INJECTION                                                                     
CHAIR WAGONER announced SB 103 to be up for consideration.                                                                      
MR.  SEAMOUNT,   Alaska  Oil  and  Gas  Conservation   Commission,                                                              
explained that SB  103 would give the state of  Alaska the ability                                                              
to obtain  primacy in  enforcement for  the underground  injection                                                              
of  waste streams  of a  certain  class of  well. "If  we were  to                                                              
obtain this  primacy, then  we would have  oversight over  all oil                                                              
and gas related waste injection wells in the state."                                                                            
He  provided  a  slide  presentation   that  explained  the  AOGCC                                                              
regulates operations  affecting subsurface oil and  gas resources.                                                              
It insures  reliability of  oil and gas  flow measurements  so the                                                              
state  gets  its  proper  revenue   and  taxes  and  insures  that                                                              
underground sources of drinking water are protected.                                                                            
MR. SEAMOUNT explained  that currently the state  has primacy over                                                              
Class  II  wells that  accept  wastes  generated  by oil  and  gas                                                              
operations.  They are injected  into a  formation where  they will                                                              
never  be  seen  again.  Another  type  of  Class  2  well  is  an                                                              
injection well  whose purpose is  for enhanced oil  recovery. Both                                                              
kinds  are very  valuable.  The  proper underground  injection  of                                                              
material  to enhance  oil  recovery has  resulted  in billions  of                                                              
dollars in  revenue and taxes to  the state. Also, the  best place                                                              
to put oil  field waste is  deep underground. That is  much better                                                              
than transporting it and the possibility of having a spill.                                                                     
Title 31 gives the  commission its authority. SB 103  adds Class I                                                              
wells,  which   currently  are   overseen  by  the   Environmental                                                              
Protection  Agency  (EPA)  to  the  AOGCC's  oversight  authority.                                                              
Right now  two agencies  are performing  the same  job and  one is                                                              
protecting a non-existent resource - fresh water.                                                                               
He  proposed   that  the  AOGCC  control   underground  injections                                                              
through primacy  or single disposal  class, which could come  at a                                                              
later  date. While  it supports  this endeavor,  the EPA does  not                                                              
think  this is  legally possible.  Nevertheless, it  has formed  a                                                              
task force  with the AOGCC  to figure out  a way for the  state to                                                              
achieve  primacy  and  SB  103  would  allow  the  task  force  to                                                              
MR. SEAMOUNT  explained there are  five classes of  disposal wells                                                              
under  the   Safe  Drinking   Water  Act.   Class  I   wells  take                                                              
industrial,  hazardous,  non-hazardous  and municipal  waste.  The                                                              
North Slope  has seven Class  I wells.  Class II wells  handle oil                                                              
and gas waste. An  upcoming argument is that none  of the industry                                                              
would be on the  North Slope if it wasn't for oil  and gas, so any                                                              
waste  that's created  there is  directly associated  with it  and                                                              
there shouldn't  be any Class  I wells  there. They should  all be                                                              
Class  II  wells.   "Plus  the  fact  that  you   don't  have  any                                                              
underground sources of drinking water."                                                                                         
Class III  is solution mining;  there is  none of that  in Alaska.                                                              
Class IV, illegal  now, is radioactive waste injection.  There are                                                              
no Class IV wells  in Alaska. There are a lot of  Class V wells in                                                              
Alaska comprised of whatever doesn't fit into Classes I-IV.                                                                     
The EPA  said it  would be  okay for  the AOGCC  to take over  all                                                              
classes of  wells, but  Mr. Seamount  is only  asking for  Class I                                                              
and II wells and he said, "There may be a little rub there."                                                                    
MR. SEAMOUNT  related that there are  only seven Class  I wells in                                                              
the state, 1,155  Class II wells, and more than 3,000  Class V. He                                                              
said  it is  a waste  of  money to  have  redundant programs.  One                                                              
agency  could  oversee   the  wells,  reducing  time,   money  and                                                              
confusion -  even some litigation  about what kinds of  fluids can                                                              
go down Class I  and II wells - while still  providing protections                                                              
that  are   needed  when  injecting   waste.  Also,   getting  EPA                                                              
approvals takes longer than getting AOGCC approvals.                                                                            
He explained  that the agencies  duplicate multiple tests  and EPA                                                              
has  no permanent  on-sight  field inspector.  The  state has  two                                                              
inspectors at all  times. The EPA is only overseeing  seven out of                                                              
1,162 Underground  Injection Control (UIC) wells.  It seems costly                                                              
for EPA  to continue  doing this  and it  is supportive  of giving                                                              
primacy to the AOGCC.                                                                                                           
One   slide  he   presented   illustrated   the  similarities   in                                                              
construction  of Class I  and II  wells that have  about a  $1 per                                                              
barrel difference  in operating expense.  He said it would  take a                                                              
lot of effort to change the status quo, but it is worth doing.                                                                  
MR. SEAMOUNT said  if AOGCC gets primacy of the  two well classes,                                                              
there would  be less  industry confusion and  more savings  to the                                                              
taxpayer and  industry. In the future,  if AOGCC decides  to go to                                                              
one class  of disposal well on  the North Slope [which  would need                                                              
a new  statute as  well as an  EPA ruling],  the same  good things                                                              
would happen.  He emphasized  again that a  lot of time  and money                                                              
is put  into resolving  confusion between the  AOGCC, EPA  and the                                                              
SENATOR ELTON  asked if he would  be negotiating with the  EPA for                                                              
primacy of wells on state, private and federal lands.                                                                           
MR. SEAMOUNT answered yes.                                                                                                      
SENATOR ELTON asked  if the North Slope's role would  change if he                                                              
negotiated primacy with the EPA.                                                                                                
MR. SEAMOUNT replied no.                                                                                                        
SENATOR SEEKINS  asked if SB  103 gives  him the authority  to ask                                                              
EPA  for primacy.  Mr.  Seamount  indicated yes.  Senator  Seekins                                                              
asked if he would  have to create regulations  necessary to comply                                                              
with the federal requirements.                                                                                                  
MR. SEAMOUNT replied yes.                                                                                                       
SENATOR GUESS  asked if Alaska could  have Class I wells  that are                                                              
not related to oil and gas.                                                                                                     
MR. SEAMOUNT  replied yes.  He added  that most  Class I  wells in                                                              
this country  are not related to  oil and gas. However,  the North                                                              
Slope  has oil  and gas  infrastructure that  generates waste  and                                                              
it's been mandated  that it go down a Class II  well, but argument                                                              
is that the North Slope waste should be Class II waste.                                                                         
SENATOR GUESS  asked if this bill  puts all current Class  I wells                                                              
and into  the future  under the AOGCC  regardless of  whether they                                                              
had anything to do with oil and gas.                                                                                            
MR. SEAMOUNT  replied yes.  If Class I  wells were found  that are                                                              
not related  to oil and  gas, he would  talk to the  Department of                                                              
Environmental Conservation  (DEC) about  how to regulate  them. He                                                              
     The fact is  that all Class I wells are  constructed the                                                                   
     same  and they  are constructed  to  the same  standards                                                                   
     that  the AOGCC  requires.  It could  turn  out that  we                                                                   
     could  oversee non-oil  and gas related  Class I  wells,                                                                   
     but we haven't come to that point yet.                                                                                     
SENATOR GUESS asked  if that's why SB 103 doesn't  specify Class I                                                              
wells  as   non-oil  and   gas  and   does  the  commission   feel                                                              
comfortable regulating those.                                                                                                   
MR.  SEAMOUNT replied  he feels  comfortable  that the  commission                                                              
could find  a reasonable  solution. "I  don't think  it will  be a                                                              
big problem."                                                                                                                   
MARILYN CROCKET,  Deputy Director, Alaska Oil and  Gas Association                                                              
(AOGA), supported  Class I  primacy being given  to the  AOGCC. It                                                              
has  the technical  assets  and  infrastructure required  to  have                                                              
primacy. In 2003,  the Independent Groundwater  Protection Council                                                              
conducted a  peer review  and the commission  was given  very high                                                              
marks and comments.                                                                                                             
CHAIR WAGONER seeing  there were no questions, said  he would hold                                                              
the bill and adjourned the meeting at 3:58 p.m.                                                                                 

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