Legislature(2007 - 2008)HOUSE FINANCE 519
01/25/2007 01:30 PM House FINANCE
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| Overview: Department of Natural Resources | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
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HOUSE FINANCE COMMITTEE
January 25, 2007
1:35 p.m.
CALL TO ORDER
Co-Chair Meyer called the House Finance Committee meeting to
order at 1:35:07 PM.
MEMBERS PRESENT
Representative Mike Chenault, Co-Chair
Representative Kevin Meyer, Co-Chair
Representative Bill Stoltze, Vice-Chair
Representative Harry Crawford
Representative Richard Foster
Representative Les Gara
Representative Mike Hawker
Representative Reggie Joule
Representative Mike Kelly
Representative Bill Thomas, Jr.
MEMBERS ABSENT
Representative Mary Nelson
ALSO PRESENT
Representative Bob Buch; Representative Anna Fairclough
PRESENT VIA TELECONFERENCE
Marty Rutherford, Acting Commissioner, Department of Natural
Resources; Dick Mylius, Acting Director, Division of Mining
Land and Water, Department of Natural Resources; Chris
Maisch, Director, Division of Forestry, Department of
Natural Resources; Kevin Banks, Acting Director, Division of
Oil & Gas, Department of Natural Resources; Larry
DeVilbiss, Director, Division of Agriculture, Department of
Natural Resources
GENERAL SUBJECT(S):
^OVERVIEW: DEPARTMENT OF NATURAL RESOURCES
The following overview was taken in log note format.
Handouts will be on file with the House Finance Committee
through the 25th Legislative Session, contact 465-6814.
After the 25th Legislative Session they will be available
through the Legislative Library at 465-3808.
TIME SPEAKER DISCUSSION
1:36:33 PM Co-Chair Meyer Introduced members and presenters.
1:37:04 PM MARTY Introduced members of her staff.
RUTHERFORD,
ACTING
COMMISSIONER,
DEPARTMENT OF
NATURAL
RESOURCES
1:40:35 PM Commissioner Related that she will highlight
Rutherford challenges to the Department of Natural
Resources (DNR) and described key
programs as shown in the handout
"Department of Natural Resources As of
January 2007" (copy on file.) She
shared DNR's mission: "To develop,
conserve, and maximize the use of
Alaska's natural resources consistent
with the public's interest."
She described the responsibilities of
the Commissioner's office and
emphasized the three top issues: the
natural gas pipeline, Bristol Bay
omnibus issues, and employee
recruitment and retention.
1:42:20 PM Commissioner Spoke to recruitment and retention
Rutherford issues and noted that DNR is crucial to
Alaska's economy.
1:44:38 PM Commissioner Discussed the mission of the Division
Rutherford of Oil and Gas. The three primary
purposes of the Division are to
encourage exploration and development,
to maximize benefits of development and
production to the state, and to
maximize non-tax revenue from oil and
gas production. The transition team's
focus was on declining oil and gas
production on the North Slope, the
Point Thomson litigation, and the gas
pipeline project. It also addressed
system integrity.
DNR will be moving into a larger role
on the North Slope; coordinating oil
and gas permitting and oversight
activities of state and federal
agencies, reviewing quality assurance
programs of companies, and insuring
there are no gaps or duplications of
efforts among the various regulatory
agencies.
1:46:45 PM Commissioner Addressed the mission of the Office of
Rutherford Project Management & Permitting -
Coastal Management, which is to oversee
responsibility of coastal uses and
resources. The Coastal District Plan
revisions are on-going. She related
the purposes of the Transitional
Report.
1:49:04 PM Commissioner Summarized the purpose of the Office of
Rutherford Project Management & Permitting - Large
Project Permitting, which coordinates
state review and permitting, and state
participation in federal land use
planning efforts. It is almost
entirely funded by program receipts.
1:50:11 PM Commissioner Explained the purpose of the Office of
Rutherford Habitat Management and Permitting,
which is to protect Alaska's fish and
wildlife resources and their habitats.
1:52:20 PM Commissioner Related the purpose of the Division of
Rutherford Mining, Land and Water and its various
offices. This division is the
foundation for all of the other
agencies in DNR.
1:54:09 PM Commissioner Spoke about the Forestry Division and
Rutherford highlighted its purposes. This
division also provides Fire Suppression
services.
1:57:32 PM Commissioner Talked about the Geological and
Rutherford Geophysical Surveys Division, its
purpose and important issues.
1:59:30 PM Commissioner Discussed the Board of Agriculture and
Rutherford Conservation and the role of the
Division of Agriculture.
2:00:29 PM Commissioner Spoke about the Conservation and
Rutherford Development Board, which provides
support and advice for conservation
planning. She related information
about the Alaska Mental Health Trust
Land Office, a distinct entity.
2:02:21 PM Commissioner Explained the Division of Parks and
Rutherford Outdoor Recreation's tasks. A key
difference between Alaska's state parks
and Alaska's national park system is
that the state parks are located near
communities and along road systems and
are accessible to Alaskans.
2:03:33 PM Commissioner Highlighted the Support Services
Rutherford Division, which provides the
information technology services and
graphic land records to DNR. She
emphasized the services provided.
2:06:24 PM Commissioner Noted the involvement of DNR with work
Rutherford on the gas pipeline.
2:06:57 PM Vice-Chair Highlighted the difference between
Stoltz Alaska state and national parks,
calling the state parks and land
managers stewards rather than distant
landlords.
2:08:25 PM Representative Asked if oil production could be
Gara increased on the North Slope by
improving facilities access.
2:09:07 PM Commissioner Replied that DNR has not had time to
Rutherford discuss this yet, but would be glad to
follow up on it at a later date.
2:09:50 PM Vice-Chair Asked about a long-range plan for the
Stoltz funding of the Division of Agriculture.
Commissioner Rutherford replied that
DNR has not had time to address that
issue.
2:11:31 PM LARRY Noted that the revolving loan fund was
DEVILBISS, never intended to run the entire
DIRECTOR, Division.
DIVISION OF
AGRICULTURE,
DEPARTMENT OF
NATURAL
RESOURCES
2:12:39 PM Co-Chair Meyer Requested an update on production
activity on the North Slope and whether
PPT will serve to increase production
in the future. Commissioner Rutherford
said she is waiting to see how PPT
works. She voiced concern about the
production decline. She pointed out
that she is pleased by the level of
production activity by some of the new
players such as Shell and British Gas.
The intention of PPT is to incentivize
exploration and development.
2:15:46 PM Co-Chair Meyer Expressed pleasure that there are new
companies now on the North Slope. He
thought that Shell's off-shore
production might not result in
royalties for the state.
2:16:23 PM Commissioner Spoke about Shell's on-shore and off-
Rutherford shore activity.
2:17:10 PM KEVIN BANKS, Spoke of the current status of oil and
ACTING gas activities on the North Slope. He
DIRECTOR, wondered when the results of PPT would
DIVISION OF be apparent. The players on the North
OIL & GAS, Slope are enjoying the transition
DEPARTMENT OF credits offered under PPT that
NATURAL newcomers don't get. Mr. Banks
RESOURCES described how the royalties are
acquired for Shell's explorations. He
commented that more volume in the oil
pipeline means lower tariffs, which
will increase the state's royalties and
tax benefits.
2:20:11 PM Co-Chair Meyer Mentioned the relationship between the
gas pipeline and new oil.
2:20:46 PM Co-Chair Meyer Asked for an update on the gas
pipeline. Commissioner Rutherford
shared where the process is at. She
pointed out that there has been a lot
of good feedback on Governor Palin's
proposed Alaska Gasline Inducement Act
(AGIA).
2:22:16 PM Co-Chair Asked if the North Slope is production-
Chenault limited. Mr. Banks replied that the
facilities are working at capacity now.
He described how new companies are
fitting in.
2:24:11 PM Co-Chair Put forth a hypothetical situation of a
Chenault new producer bringing in a new well and
having to back out a couple other wells
in order to put the new well into the
system if it were running at capacity,
the restricting factor being gas and
water, not oil. If it is "volume
limited" there needs to be give and
take for new players. He talked about
expanding facilities. Mr. Banks
pointed out that the facilities also
include flow lines and pipelines, which
are not at capacity.
2:26:16 PM Co-Chair Concluded that if the production
Chenault facility were not limited by the gas
and water content in the reservoir
today, there would be more production.
Mr. Banks agreed.
2:26:57 PM Co-Chair Asked if legislation was passed last
Chenault year with the intent to start fire
suppression a month earlier this year.
2:28:05 PM CHRIS MAISCH, Replied that is correct. Co-Chair
DIRECTOR, Chenault asked about the Nenana fire.
DIVISION OF Mr. Maisch replied that the Parks
FORESTRY, Highway fire was one of the few in the
DEPARTMENT OF state this past year. Co-Chair
NATURAL Chenault wondered why that fire got out
RESOURCES of control. Mr. Maisch replied that
each fire is unique and may not be
caught, even with an earlier start of
the fire season
2:28:50 PM Representative Thanked Commissioner Rutherford for the
Hawker work she has done on the Mental Health
Trust Lands Office. Commissioner
Rutherford noted how important it is to
stay on top of that specific resource
development.
2:30:07 PM Representative Encouraged the Department to continue
Hawker in the direction of long-range planning
such as was done for the State Parks
System. Commissioner Rutherford said
it was an outstanding job, and it
focused on the right philosophy and a
yearly implementation strategy.
Representative Hawker wondered how this
trend could continue. Commissioner
Rutherford recognized that budget
tightening is difficult. She shared
her philosophy and approach for DNR.
Representative Hawker voiced
appreciation.
2:33:14 PM Representative Asked what is next for Point Thomson.
Crawford Commissioner Rutherford said it is in
the early stages of litigation and then
the releasing of Point Thomson land
will be determined. If litigation is
successful, then discussion is needed
for alternative methods of releasing
that land.
2:34:51 PM Representative Wondered when access to that land will
Hawker be available. Commissioner Rutherford
thought it would be a three-year
process.
2:35:49 PM Co-Chair Meyer Asked for information about mining
projects, the Tongass Management Plan,
and the Beaufort Lease Sale.
2:36:32 PM Mr. Maisch Explained that the Tongass Management
Plan just had a draft Environmental
Impact Statement (EIS) released on
February 12. The Division is
participating in the Tongass Round
Table discussion with communities and
industries affected by the draft EIS.
A team of ADF&G and DNR members will
address specific issues in the plan.
The overall effort will be coordinated
by both departments' commissioners.
2:38:02 PM DICK MYLIUS, Provided an update on mining projects
ACTING in the state. He stated that mineral
DIRECTOR, prices continue to be very high;
DIVISION OF therefore there is also a high interest
MINING LAND in state lands. There will be record-
AND WATER, breaking revenues from taxes and
DEPARTMENT OF royalties to the state in the next few
NATURAL years. He highlighted big projects such
RESOURCES as Pogo, which was recently permitted,
and had its first gold produced in
February. He listed projects in the
permitting stage; Kensington and Rock
Creek. He mentioned future projects;
Chuitna Coal across from Cook Inlet,
Donlin Creek, and Pebble Mine.
2:44:20 PM Commissioner Added that Rock Creek litigation has
Rutherford been suspended for now and the Beaufort
Lease Sale is coming up.
2:45:25 PM Co-Chair Meyer Asked about other future sales.
2:46:08 PM Vice-Chair Asked about projects in the Mat-Su
Stoltz Valley area. Mr. Maisch responded that
Lucky Shot is of interest in Hatcher
Pass, as is coal development in the
Sutton area. There are many projects
in the Fairbanks area, also.
Commissioner Rutherford talked about
the Chickaloon project. Full Metal
Minerals is responsible for the lease.
2:48:58 PM Representative Recalled the 2004 Bristol Bay mining
Hawker plan document regarding Pebble and
Talarik Units, where a management plan
was required prior to permitting. He
inquired if this administration would
have such a plan. Commissioner
Rutherford replied that she is not
familiar with this issue. Mr. Mylius
recalled that the 2004 plan called for
a comprehensive permitting process for
Pebble Mine, not a specific management
plan. Representative Hawker disagreed
and suggested Mr. Mylius review the
plan. Commissioner Rutherford agreed
to look at the plan and Mr. Mylius
agreed to meet with Representative
Hawker at a later date.
2:52:00 PM Mr. Banks Discussed the Beaufort sale of March
2006, which brought in about $14.5
million in bonus bids - a successful
sale. BP was the highest bidder at
over $7 million. Sixty-two tracks were
leased and 13 tracks were sold.
Upcoming sales are on schedule in
February for Bristol Bay, in May for
Cook Inlet, and in October for Beaufort
and North Slope.
2:54:26 PM Co-Chair Meyer Asked if there were a gas pipeline in
place, would the lease sales be
greater. Mr. Banks described how North
Slope sales might turn out under that
scenario.
2:55:40 PM Representative Asked about the Pebble Mine and Talarik
Gara Creek water permit. He wondered what
rules limit DNR's discretion on
granting a water withdrawal permit.
2:56:49 PM Mr. Mylius Explained the water withdrawal permit
process.
2:58:07 PM Representative Inquired if current statutes regarding
Gara water withdrawal are adequate. Mr.
Mylius replied that he thought they
were. He added that DNR works with the
Department of Fish and Game gathering
surface and ground water information
and on permitting.
2:59:53 PM Co-Chair Meyer Thanked DNR for the presentation.
Commissioner Rutherford expressed
appreciation for the committee's time.
3:01:12 PM Representative Spoke about the high cost of energy in
Joule rural areas. Commissioner Rutherford
suggested a conversation with Bob
Swenson from the Geological and
Geophysical Surveys Division.
3:02:21 PM ADJOURNMENT
The meeting was adjourned at 3:02 PM.
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