Legislature(2001 - 2002)
03/23/2001 08:07 AM House O&G
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* first hearing in first committee of referral
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+ teleconferenced
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ALASKA STATE LEGISLATURE
HOUSE SPECIAL COMMITTEE ON OIL AND GAS
March 23, 2001
8:07 a.m.
MEMBERS PRESENT
Representative Scott Ogan, Chair
Representative Hugh Fate, Vice Chair
Representative Fred Dyson
Representative Mike Chenault
Representative Vic Kohring
Representative Gretchen Guess
Representative Reggie Joule
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
CONFIRMATION HEARING
Alaska Oil and Gas Conservation Commission
Julie Heusser - Anchorage
- CONFIRMATION ADVANCED
PREVIOUS ACTION
No previous action to record
WITNESS REGISTER
JULIE HEUSSER, Appointee
to the Alaska Oil and Gas Conservation Commission (AOGCC)
333 West Seventh Avenue, Suite 100
Anchorage, Alaska 99501-3539
POSITION STATEMENT: Testified as appointee to the AOGCC and
answered questions relating to her appointment and to the AOGCC
in general.
ACTION NARRATIVE
TAPE 01-19, SIDE A
Number 0001
CHAIR SCOTT OGAN called the House Special Committee on Oil and
Gas meeting to order at 8:07 a.m. Members present at the call
to order were Representatives Ogan, Fate, Dyson, Kohring, and
Guess. Representatives Chenault and Joule arrived as the
meeting was in progress.
CONFIRMATION HEARING
Alaska Oil and Gas Conservation Commission
Number 0042
CHAIR OGAN announced that the committee would consider the
confirmation of Julie Heusser to the Alaska Oil and Gas
Conservation Commission (AOGCC). He asked Ms. Heusser to tell
members why she wished to serve on the AOGCC.
Number 0088
JULIE HEUSSER, Appointee to the Alaska Oil and Gas Conservation
Commission, answered that she is an Alaskan and just happens to
be a petroleum engineer. She offered some personal history,
noting that her grandparents came to Alaska in 1941 and that she
was born and raised in Anchorage. When deciding what to study,
she said one consideration was that it allow her to return to
Alaska to live. She emphasized that Alaska is her home, and
that she is committed to the state and to protecting the oil and
gas resources for the citizens of Alaska.
MS. HEUSSER, in response to another question relating to the
higher pay in private industry, said the oil and gas industry is
booming, and there is an active search for experienced
engineers, geologists, and geophysicists; industry pays
accordingly. She said working for the industry was an option
for her, but Alaska is her home and opportunities for employment
[in private industry] would have taken her elsewhere.
Therefore, she has chosen to work at the AOGCC as a regulator.
CHAIR OGAN expressed appreciation for Ms. Heusser's willingness
to serve. He said he would like to thank the governor, who had
a hard time a few years ago finding a petroleum engineer.
Number 0406
REPRESENTATIVE FATE observed from Ms. Heusser's resume that she
had worked in the corporate world previously, but had switched
to work for the AOGCC; he expressed appreciation for that.
MS. HEUSSER noted that she had been involved just marginally in
the regulatory end of things when working for the industry. In
response to a further question from Chair Ogan, she explained
that the AOGCC, when fully staffed, would have two petroleum
engineers, two reservoir engineers, and two geologists; she sees
her role as applying her "real-life, real-world experience" to
decisions made by the AOGCC, which adds a "practical factor."
Number 0555
CHAIR OGAN asked Ms. Heusser to describe her responsibilities.
He characterized the AOGCC as the "police force ... of the oil
patch." Noting that the AOGCC has quasi-judicial powers, he
asked how those are exercised. He also asked what kinds of
scenarios arise regarding competing producers who require that
regulatory oversight.
MS. HEUSSER replied that she also has heard the AOGCC referred
to as "the police of the oil industry." The AOGCC provides
oversight of both activities and proposed activities, first
getting involved, for example, when an operator wishes to drill
a well; the operator provides the AOGCC with a permit to drill,
which the AOGCC reviews carefully, not only from the perspective
of whether the operator is drilling on the operator's lease and
not someone else's, but also from the standpoint of whether the
design protects sources of drinking water, is mechanically
competent, and will do the job that it is intended to do. Ms.
Heusser said the AOGCC regularly interacts with operators,
particularly new operators in the state, and is able to
effectively influence how their wells are drilled. She noted
that the AOGCC provides all sorts of input, from planning to
remedial operations.
Number 0710
CHAIR OGAN suggested there may be different royalty scenarios
for leases within fairly close proximity or even within the same
pool. He asked whether the AOGCC ensures that the expensive oil
doesn't somehow migrate into the less-expensive oil well.
MS. HEUSSER answered that if adjoining leases have different
property owners on either side of the lease line, most probably
a unit will have been formed. The purpose of the unit is to
efficiently, effectively, and economically recover all of the
hydrocarbons that are part of that oil pool or gas pool that is
covered by the leases. Basically, it is done on a percentage
basis. Drilling of one well potentially could drain oil from
surrounding leases, and that is factored in. All producers get
their money, and it is recognized upfront how much oil a
particular lease holds; the owner of a lease that holds less
would receive a smaller percentage of the revenue from the oil
that is produced out of that unit.
MS. HEUSSER, in response to a question by Chair Ogan, affirmed
that as a quasi-judicial agency, the AOGCC has the ability to
adjudicate that. She clarified that in most situations,
however, operators that own leases will voluntarily form a unit
and agree to the costs and the percentage of revenues for each
operator; only when the operators cannot resolve that do they
come to the AOGCC, which then will listen to both sides, apply
good engineering principles, and make a decision.
Number 0837
CHAIR OGAN noted that the full committee was now present. He
then announced that having met with Ms. Heusser, he was
impressed with both her credentials and her Alaskan spirit. He
concurred with her appointment.
Number 0949
REPRESENTATIVE KOHRING referred to the AOGCC's role of policing
the oil industry in terms of making sure that the royalties from
the North Slope are accurate. He asked Ms. Heusser whether
there are any problems in that regard now.
MS. HEUSSER explained that one responsibility of the AOGCC is
routine "witnessing of meter-proving" to ensure that the oil
being metered is being metered accurately, and that the volumes
reported by the operators are accurate, which equates
immediately into state revenue. In response to a further
question regarding whether Ms. Heusser believes the volumes from
the North Slope are accurate, Ms. Heusser said yes, to the best
of her knowledge at this time.
Number 1069
REPRESENTATIVE DYSON asked whether, with a single operator in
the field now, Ms. Heusser sees any increased opportunity for
that operator to fix the books and cheat the state, either in
regard to the royalty share or in regard to the costs of
transportation, production, and so forth.
MS. HEUSSER returned to the function of meter-proving; she said
the AOGCC ensures that what goes into Pump Station 1 of the
Trans-Alaska Pipeline System is accurately metered. The AOGCC
also meters volumes at the Milne Point field, the Endicott
field, and others. If those volumes are accurately measured,
Ms. Heusser said, she isn't the person who can address whether a
producer can cheat the state out of revenue, which is based upon
the volume of oil. If there is another means [of cheating], Ms.
Heusser added, she isn't aware of it. As for transportation
costs, those are outside of her area of expertise and get back
to the price at the wellhead; by contrast, her own area is the
"down-hole" and the surface metering.
Number 1229
REPRESENTATIVE KOHRING recalled that years ago, when first in
office, he was on the budget subcommittee for the Department of
Administration; under its jurisdiction was the AOGCC. He
mentioned that there were concerns then about funding for the
AOGCC, including salaries, staffing, and so forth, which was
inadequate at the time; he'd attempted to put an additional
$50,000 in, he said, which the administration at the time
disagreed with. He asked Ms. Heusser whether she believes the
AOGCC's staffing is adequate and whether its staff can do
adequate oversight, given its current budget.
MS. HEUSSER asked Representative Kohring what he feels is an
adequate level of oversight. She then noted that the AOGCC has
six engineers and geologists who look over all of the state's
oil and gas fields, whereas operators have twice that amount of
staff to look after one field. She added that the AOGCC does
oversight and acts "in an audit function."
MS. HEUSSER said for the time being the funding is adequate and
a bit more secure, being based upon program receipts and funded
through an accounting mechanism by the operators that produce
and inject oil and gas. A separate issue is that salaries
offered by the AOGCC for technical staff are not competitive
with salaries offered in the industry. "We feel like we're
doing a good job of looking over all of the oil and gas
activities in the state of Alaska," she concluded.
Number 1396
MS. HEUSSER, in response to a question by Representative Joule,
specified that the AOGCC has two petroleum engineer positions,
one filled; two reservoir engineer positions, one filled; and
two geologist positions, both filled.
REPRESENTATIVE JOULE noted that in a previous hearing the
committee heard that the Department of Natural Resources (DNR)
receives from the producers information including three-
dimensional (3-D) seismic information; he also noted that the
state would have to pay to have that interpreted, but doesn't do
so. He asked: If the state isn't willing to pay to get the
information from the industry that would reveal what the 3-D
information says, would it be helpful to have someone [at the
AOGCC] who can read that information as it is received from the
oil companies? He specified that he wasn't talking about
interpreting it directly and paying for that interpretation, but
was talking about somebody who could look at the information
that the oil companies have, at their facilities, and interpret
it there.
MS. HEUSSER answered that she is of the philosophy that
information is power. Being able to understand and interpret
seismic data would be of great value to the state; it would help
when it comes to lease sales and would help regarding whether
the AOGCC believes bids being received are reasonable. As to
whether that position would fall under the DNR or the AOGCC, Ms.
Heusser said she had no opinion.
Number 1539
MS. HEUSSER, in response to a question by Chair Ogan, said
reading 3-D seismic information isn't part of her own
background. It is an art; a geophysicist who specializes in
interpreting seismic data, whether two-dimensional or three-
dimensional, would do that. She further responded that the
AOGCC has people who are competent in assessing interpreted
geophysical information, who can "spot gas with the best of them
and ... identify structures off of seismic information";
therefore, the AOGCC has that expertise to a limited extent.
Number 1601
CHAIR OGAN asked whether the AOGCC exercises that ability much,
and whether the AOGCC has the resources to get the information
from the oil companies. He recalled that a representative from
the [DNR's] Division of Oil and Gas had talked about the lack of
[monetary] resources to get all of the 3-D seismic data, which
the division could get for the price of reproducing it. He also
asked whether there is an active program now.
MS. HEUSSER answered that within the AOGCC, collecting and
interpreting seismic data is not a routine function. However,
the AOGCC had used it recently in order to help the Department
of Environmental Conservation assess a spill-contingency plan.
It requires fairly technical expertise and a "monstrous"
computer system, and the AOGCC isn't set up to do it; Ms.
Heusser said she cannot speak for the DNR, but suspects that the
DNR isn't set up to do that, either. It would be an investment
in not only personnel, but perhaps also in some computer
hardware and software, in order to do the job adequately.
Number 1701
REPRESENTATIVE FATE noted that Ms. Heusser, in a discussion
prior to the meeting, had said how busy the AOGCC is. He asked,
with these unfilled positions, whether the AOGCC is keeping up.
He pointed out that there would be an added workload because of
gas exploration.
MS. HEUSSER answered that the AOGCC has a great staff; people
work long hours, including late at night and on weekends, and
are scrambling to keep up with the permits to drill and the
sundry applications that need the AOGCC's review in order for
operators to continue to do business. If things get even
busier, then the AOGCC definitely will be scrambling. She noted
that the AOGCC has had some difficulty in filling its open
engineering positions. The AOGCC wants experienced people;
although the staff is well compensated by the state salary pay
scale, the commission cannot compete with salaries offered by
the industry.
Number 1823
CHAIR OGAN informed members that the procedure regarding a
confirmation is that the committee doesn't make a recommendation
per se, but just notifies the Speaker of the House that the
confirmation has been heard. He thanked Ms. Heusser and asked
her to contact him or the committee if there is anything they
can do for the AOGCC. He expressed an interest in spending a
day or two in the field during the interim, in order to see
firsthand what the AOGCC does.
MS. HEUSSER responded that the AOGCC would welcome having Chair
Ogan or any other Representative stop by and would gladly answer
questions.
[There being no objection, the confirmation of Ms. Heusser to
the AOGCC was advanced.]
CHAIR OGAN called an at-ease at 8:37 a.m. in order to hear the
Overview Presentation by the Alaska Oil and Gas Conservation
Commission, as well as the Oil and Gas Subcommittee Report.
[For minutes on the overview and the subcommittee report, see
the cover sheet for 8:37 a.m. this same date.]
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