Legislature(1999 - 2000)
03/02/2000 10:11 AM House O&G
| Audio | Topic |
|---|
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE SPECIAL COMMITTEE ON OIL AND GAS
March 2, 2000
10:11 a.m
MEMBERS PRESENT
Representative Jim Whitaker, Chairman
Representative Fred Dyson
Representative Gail Phillips
Representative Joe Green
Representative John Harris
Representative Brian Porter
Representative Allen Kemplen
Representative Tom Brice
Representative Hal Smalley
MEMBERS ABSENT
All members present
SENATE MEMBERS PRESENT
Senator Georgianna Lincoln
COMMITTEE CALENDAR
CS FOR SENATE JOINT RESOLUTION NO. 18(RLS)
"Requesting Exxon Mobil Corporation to pay claimants for court-
ordered damages resulting from the Exxon Valdez oil spill."
- MOVED HCS CSSJR 18(O&G) OUT OF COMMITTEE
HOUSE BILL NO. 414
"An Act relating to the qualifications of the members of the
Alaska Oil and Gas Conservation Commission; and providing for an
effective date."
- HEARD AND HELD
PREVIOUS ACTION
BILL: SJR 18
SHORT TITLE: EXXON VALDEZ DAMAGE CLAIMS
Jrn-Date Jrn-Page Action
3/24/99 662 (S) READ THE FIRST TIME - REFERRAL(S)
3/24/99 662 (S) JUD, RES
4/07/99 (S) JUD AT 1:30 PM BELTZ 211
4/07/99 (S) MOVED OUT OF COMMITTEE
4/07/99 (S) MINUTE(JUD)
4/09/99 843 (S) JUD RPT 4DP
4/09/99 843 (S) DP: TAYLOR, ELLIS, TORGERSON, DONLEY
4/09/99 843 (S) ZERO FISCAL NOTE (S.JUD)
4/28/99 (S) RES AT 3:00 PM BUTROVICH 205
4/28/99 (S) FAILED TO MOVE OUT OF COMMITTEE
4/28/99 (S) MINUTE(RES)
5/07/99 (S) MINUTE(RES)
5/10/99 1322 (S) RES RPT 3DP 1NR
5/10/99 1322 (S) NR: HALFORD; DP: MACKIE, LINCOLN,
TAYLOR
5/10/99 1322 (S) PREVIOUS ZERO FN (S.JUD)
5/11/99 (S) RLS AT 12:00 PM FAHRENKAMP 203
5/15/99 (S) RLS AT 1:30 PM FAHRENKAMP 203
5/16/99 (S) RLS AT 4:30 PM FAHRENKAMP 203
5/16/99 (S) MINUTE(RLS)
5/16/99 1514 (S) RULES TO CAL W/CS 1DNP 1OR 5/16/99
5/16/99 1522 (S) READ THE SECOND TIME
5/16/99 1523 (S) RLS CS ADOPTED UNAN CONSENT
5/16/99 1523 (S) HELD IN SECOND READING TO 5/17
CALENDAR
5/17/99 1585 (S) TAKEN UP IN SECOND READING
5/17/99 1586 (S) RETURN TO RULES CMTE MOTION FLD
Y7 N13
5/17/99 1586 (S) ADVANCED TO THIRD READING FLD Y13 N7
5/17/99 1586 (S) THIRD READING 5/18 CALENDAR
5/18/99 1645 (S) READ THE THIRD TIME CSSJR 18(RLS)
5/18/99 1645 (S) PASSED Y14 N6
5/18/99 1646 (S) GREEN NOTICE OF RECONSIDERATION
5/19/99 1689 (S) RECON TAKEN UP - IN THIRD READING
5/19/99 1689 (S) PASSED ON RECONSIDERATION Y16 N4
5/19/99 1715 (S) TRANSMITTED TO (H)
1/10/00 1878 (H) READ THE FIRST TIME - REFERRALS
1/10/00 1879 (H) O&G, RES, JUD
1/10/00 1896 (H) CROSS SPONSOR(S): KERTTULA
2/24/00 (H) O&G AT 10:00 AM CAPITOL 17
2/24/00 (H) Failed To Move Out Of Committee
2/24/00 (H) MINUTE(O&G)
2/25/00 2315 (H) CROSS SPONSOR(S): SMALLEY
3/02/00 (H) O&G AT 10:00 AM CAPITOL 17
BILL: HB 414
SHORT TITLE: OIL & GAS CONSERVATION COMMISSION
Jrn-Date Jrn-Page Action
2/16/00 2222 (H) READ THE FIRST TIME - REFERRALS
2/16/00 2222 (H) O&G
3/02/00 (H) O&G AT 10:00 AM CAPITOL 17
WITNESS REGISTER
JEFF LOGAN, Legislative Assistant
to Representative Joe Green
Alaska State Legislature
Capitol Building, Room 214
Juneau, Alaska 99801
POSITION STATEMENT: On behalf of sponsor, testified on HB 414.
ROBERT L. CHRISTENSON, Chair
Alaska Oil and Gas Conservation Council
3001 Porcupine Road
Anchorage, Alaska 99501
POSITION STATEMENT: Testified on HB 414; provided suggestions.
HAROLD HEINZE
1336 Staubbach Circle
Anchorage, Alaska 99508
POSITION STATEMENT: Testified on HB 414; provided suggestions.
DAVID W. JOHNSTON
320 Mariner Drive
Anchorage, Alaska 99515
POSITION STATEMENT: Testified on HB 414.
TUCKERMAN BABCOCK
P.O. Box 2929
Palmer, Alaska 99645
POSITION STATEMENT: Testified on HB 414.
ACTION NARRATIVE
TAPE 00-16, SIDE A
Number 0001
CHAIRMAN JIM WHITAKER called the House Special Committee on Oil
and Gas meeting to order at 10:11 a.m. Members present at the
call to
order were Representatives Whitaker, Dyson, Phillips, Harris,
Porter, Kemplen and Smalley. Representatives Green and Brice
arrived as the meeting was in progress.
SJR 18-EXXON VALDEZ DAMAGE CLAIMS
Number 0110
CHAIRMAN WHITAKER announced the first item of business would be
CS FOR SENATE JOINT RESOLUTION NO. 18(RLS), requesting Exxon
Corporation to pay claimants for court-ordered damages resulting
from the Exxon Valdez oil spill.
[The resolution had been amended in the present committee on
February 24, 2000, followed by a 3-2 vote in favor of moving the
amended resolution from committee. However, because there are
nine committee members, that vote was insufficient to move the
resolution from committee.]
REPRESENTATIVE KEMPLEN moved to rescind the committee's previous
action on failing to move HCS CSSJR 18(O&G) from committee.
There being no objection, it was so ordered.
Number 0195
CHAIRMAN WHITAKER declared that the main motion to report HCS
CSSJR 18(O&G) out of committee was again before the committee.
He asked if there were any objections.
REPRESENTATIVE PORTER objected.
Upon a roll call vote, Representatives Phillips, Harris, Kemplen,
Smalley and Whitaker voted in favor of moving the resolution out
of committee; Representative Porter voted against it.
(Representative Dyson abstained.) Therefore, HCS CSSJR 18(O&G)
was moved from the House Special Committee on Oil and Gas by a
vote of 5-1.
HB 414-OIL & GAS CONSERVATION COMMISSION
Number 0311
CHAIRMAN WHITAKER announced the next item of business, HOUSE BILL
NO. 414, "An Act relating to the qualifications of the members of
the Alaska Oil and Gas Conservation Commission; and providing for
an effective date."
JEFF LOGAN, Legislative Assistant to Representative Joe Green,
explained that Representative Green, sponsor of HB 414, was
unable to attend because he was chairing the State Affairs
Committee and still taking testimony. Mr. Logan testified on his
behalf.
Number 0381
MR. LOGAN began by explaining that in the state's system of
government, the legislature establishes policy through
establishment and amendment of the statutes, and the executive
[branch] carries out that policy. Some recent appointments have
caused concern that the policy regarding the qualifications for
membership on the Alaska Oil and Gas Conservation Commission
(AOGCC) needs to be clarified. Representative Green had
introduced HB 414 to clarify what the legislature means by
certain terms in the qualifications statute.
MR. LOGAN said HB 414 proposes to amend the qualifications for
the commission member who is a petroleum engineer. The proposal
offers two alternative standards. A qualified candidate may be
either (1) a registered petroleum engineer, who has taken the
test and received the certificate from the state, or (2) one who
has earned an engineering degree (not necessarily in petroleum
engineering) from a university and has at least ten years'
professional subsurface experience in the oil and gas industry in
drilling, well operations, reservoir engineering or a combination
thereof. The latter career path is common industry practice.
Mr. Logan clarified that a degree in engineering means that the
candidate holds a graduate or undergraduate degree from an
engineering program that meets the requirements of the
Accreditation Board for Engineering and Technology (ABET).
Number 0782
MR. LOGAN explained that HB 414 had come before the Twentieth
Legislature as HB 274. In its new incarnation, HB 414 is the
product of a working group that included oil and gas companies,
the Alaska Oil and Gas Association (AOGA), the petroleum
engineering faculty of the University of Alaska Fairbanks, ABET,
and individuals in the industry who do not hold degrees in
petroleum engineering but are working in that capacity. Mr.
Logan recalled that a concern previously expressed was that the
legislature should not "handcuff the governor" but allow him a
large enough pool of qualified people in the state. Mr. Logan
said he is confident that the new language resolves that concern.
MR. LOGAN noted that the second change made by HB 414 concerns
the qualifications to serve on the AOGCC as its petroleum
geologist. Again, one can be certified by the state (be a member
of the American Institute of Professional Geologists, which
requires a degree in geology and eight years of field experience)
or hold a degree in geology from an accredited university and
have ten years of professional experience in petroleum geology.
MR. LOGAN explained that HB 414 makes no changes to the
qualifications for the third position on the AOGCC, the position
often referred to as the public member seat. That person does
not need to be certified, trained or experienced in either of the
two professional fields.
Number 0993
REPRESENTATIVE PHILLIPS asked what had happened to the previous
bill.
MR. LOGAN explained that it had not make it all the way through
both houses of the legislature. He added that this legislation
is only prospective, that is, applicable only to future
appointments.
REPRESENTATIVE SMALLEY commented favorably on the educational
requirements being available in Alaska. He then expressed
concern about the experience criteria, asking if there are many
people who would qualify.
MR. LOGAN said yes, it is common for a person educated in another
field of engineering to go to work for an oil company and be
trained in petroleum engineering.
REPRESENTATIVE GREEN, who had just joined the meeting, confirmed
that there is a large pool of qualified people in the state.
REPRESENTATIVE PHILLIPS said that, as an example, her husband
would qualify. His degrees from the University of Alaska are in
economic geology and mining engineering, but he would qualify on
the basis of having worked in petroleum engineering for so many
years.
Number 1170
REPRESENTATIVE BRICE, who had also just joined the meeting, asked
if the committee was going to hear from the AOGCC.
CHAIRMAN WHITAKER said yes.
REPRESENTATIVE BRICE asked for a ballpark number of how many
people in the state meet the criteria.
MR. LOGAN said at last count [about a year ago] there were about
500, of whom 100 are licensed engineers and 400 would qualify
under the experience requirements.
REPRESENTATIVE PORTER asked if the gentleman just cleared by the
committee [Daniel T. Seamount, appointee to the AOGCC] would
qualify under HB 414.
REPRESENTATIVE GREEN affirmed that Mr. Seamount would qualify as
a geologist.
Number 1266
REPRESENTATIVE BRICE asked if the new criteria would disqualify
any of the current commission members if they were to come up for
reappointment.
MR. LOGAN said at first that he thought not; on second thought,
however, he recalled a conversation with the drafter of the
legislation which indicated that because it is a statute that
requires qualification for service on the commission, if the
nominee did not meet those qualifications, it would, indeed,
affect [that nominee].
REPRESENTATIVE BRICE summarized, "So we're not sure whether or
not the current professional petroleum engineer would meet these
requirements if he were up for reappointment."
Number 1342
ROBERT L. CHRISTENSON, Chair, Alaska Oil and Gas Conservation
Council, testified by teleconference from Anchorage. He had four
suggestions: First, it is important that anyone practicing
engineering in the state be a registered, professional engineer.
Second, in addition to subsurface experience, a candidate needs
experience in production process operation. Third, lines 10-12
are redundant. Fourth, regarding the geologist, he thinks the
candidate should be certificated by the AIPG as a petroleum
geologist and also have the experience listed, because as the
bill is written, there is no requirement for experience in
petroleum geology.
REPRESENTATIVES PHILLIPS, PORTER and BRICE discussed the last
statement with Mr. Christenson, and clarified that what he was
suggesting was that an AIPG geologist could not qualify without
petroleum experience.
Number 1582
HAROLD HEINZE testified by teleconference from Anchorage. He
said he is a graduate petroleum engineer, has worked as such for
more than 10 years, is a former manager for ARCO, and had served
as commissioner of [the Department of] Natural Resources. He
advocated giving greater weight to experience in Alaska. He also
said he would like to see more of the discussion focused on how
to get the best-qualified person appointed as opposed to
[focusing on] whether the pool is 100, 500 or 10,000 people. The
state has only three [AOGCC] commissioners, he noted, and each
carries a lot of weight; it is very important who they are.
CHAIRMAN WHITAKER suggested that the confirmation process by the
legislature affords an answer to some of Mr. Heinze's concerns,
and that the selection process by the governor would address
others.
Number 1751
DAVID W. JOHNSTON testified by teleconference from Anchorage.
Mr. Johnston was an AOGCC commissioner from 1989 until this year,
and he served as chair for eight of those years. He said the
commission's primary mission is the health and well-being of the
[state's oil] reservoir. The commission deals primarily with the
nuts and bolts of drilling and reservoir development. Its
purpose is to prevent waste, to protect development rights, and
to ensure a greater ultimate recovery of the resource. This
requires a focused, technical knowledge of reservoir engineering
principles and practices. For this reason, the ideal candidate
for the engineering seat will possess the specific qualifications
required by HB 414. In his opinion, the bill in the long run
will benefit the commission.
MR. JOHNSTON agreed with the comments of Mr. Heinze concerning
other qualifications. He said the commission needs people who
are not only technically proficient, but also have the wisdom and
judgment to be good commissioners. He hopes the governor's
review process incorporates that. The commissioners with whom he
has dealt all have been wise, good, solid folks with good
judgment and sensitivity to issues. However, relative to the
technical experience, he thinks the qualifications articulated in
this bill would be healthy for the commission.
Number 1889
REPRESENTATIVE PHILLIPS asked Mr. Johnston whether he thinks an
"Alaska experience" qualifier should be added.
MR. JOHNSTON said he thinks Alaskan experience is desirable but
not necessarily essential. If he were choosing between two
equally well-qualified candidates, he would pick the Alaska-based
person. He added that there are people out there with both the
technical and the Alaskan experience.
REPRESENTATIVE PORTER asked if Mr. Johnston wished to comment on
the changes suggested by Mr. Christenson.
MR. JOHNSTON concurred that the geologist should be not just a
professional, but should also have the petroleum qualifications.
CHAIRMAN WHITAKER voiced concern for the AOGCC and its function
as an independent, quasi-judicial commission. It appears to him
that there has been an erosion of that independence, he said. He
asked Mr. Johnston's opinion on that.
MR. JOHNSTON said he thought that over the years, the idea of
independence has eroded. The budget is subject to the review of
the Department of Administration and is subject to the same sort
of prioritization within that department as are its various
divisions. He would prefer to see the budget go directly to the
governor's Office of Management and Budget without going through
the Department of Administration. The statute provides that the
commission should be treated like a major division of state
government for purposes of budget. That suggests that the AOGCC
should be considered like a department, not like a division of a
department.
Number 2088
MR. JOHNSTON said more important is that the independence of the
AOGCC has been hampered by restrictions placed on it by the
Department of Law. The legal advice offered by the department
should establish wide enough parameters so that managers have
some freedom to move within them. Now, AOGCC commissioners are
"really tied to going down one narrow trail," he said, which
really dilutes the authority of the commission.
CHAIRMAN WHITAKER asked for more information about the "narrow
trail."
MR. JOHNSTON cited an instance in which the commission had a
fundamental disagreement with the attorney general regarding the
weighty issue of the unitization of Prudhoe Bay. The attorney
general's decision took the issue out of the hands of the
commission, saying it had exceeded its authority. There remain
issues fundamental to the economic health of Prudhoe Bay, issues
he believes are properly within the aegis of the commission, but
the commission has been precluded from exercising its statutory
authority by the Department of Law.
CHAIRMAN WHITAKER said it was his impression in reading the
decision by the attorney general that the commission was
precluded from dealing with issues that were economic in nature.
He asked if there was anything with which the commission deals
that is not related to economics.
MR. JOHNSTON said the commission's statutory authority does not
specifically mention "economics" but only "good oil field
engineering practices." The commission historically has
interpreted that to mean that there is a level of economics in
its review. There is a reasonableness built into the statute.
All of the decisions that the commission renders will have an
economic impact.
TAPE 00-16, SIDE B
Number 2455
TUCKERMAN BABCOCK testified by teleconference from Palmer. He
said he is a former AOGCC commissioner [June 1993 to September
1996] and currently is manager of government and strategic
affairs for Matanuska Electric Association. Based on his
experience with the AOGCC and as a Director of Boards and
Commissions for Governor Hickel, he supports HB 414.
MR. BABCOCK said one of the most remarkable attributes of the
[oil and gas] commission in Alaska is the complete lack of
corruption among inspectors and the integrity of the people who
work at the AOGCC, as well as the professionalism with which they
review the multi-million dollar projects and plans that are
submitted to them. It is very important, in that process, to
keep political pressure and the potential for political
favoritism to an absolute minimum. One way governors
historically have done that is by allowing commissioners to
continue to serve until retirement or death. That led to a
commission that was as independent as the statute intended, and
it is disturbing to him to see - for the first time in the
history of the State of Alaska - a governor actively replacing
every AOGCC commissioner. Because of the AOGCC's intimate
involvement in the management of the oil and gas fields of
Alaska, it is essential to keep that agency as independent as the
statutes indicate it should be.
MR. BABCOCK also observed that the legal counsel to the
commission is the Department of Law, which has made it clear that
if the commission does not follow its advice, it will not
represent the commission or defend its position. So an
independent commission becomes subject to the interpretation of
statute and regulation of the Department of Law. The AOGCC now
has no authority to make any decision that does not get a green
light from the Department of Law.
Number 2271
REPRESENTATIVE SMALLEY asked Mr. Babcock about the suggestions
for changes in HR 414 made by Mr. Christenson.
MR. BABCOCK said he saw no reason not to support those.
CHAIRMAN WHITAKER said testimony indicates that the line of
responsibility and authority with regard to the AOGCC is
something the committee needs to look into further.
REPRESENTATIVE GREEN gave a brief history of Prudhoe Bay and
pointed to the unique separate ownership of the oil rim and the
gas cap. He said that the AOGCC is an independent entity and has
the authority to force unitization. He concurred with
suggestions made by Mr. Christenson. He said one thing that had
not been mentioned was the Maximum Efficient Rate (MER)
established for every reservoir in the state. Through the
ability and farsightedness of the AOGCC, it has been possible to
achieve maximum recovery from the reservoir, even though that
takes longer. It is critical that commissioners have the
expertise, the stature and the ability to stand toe-to-toe with
the oil companies; that is why he is so adamant about having
someone who is qualified. This should not be a political
appointment. At one time, he noted, 90 percent of the state's
income came from oil.
Number 1845
REPRESENTATIVE PHILLIPS said she liked the bill but recommended
three conceptual amendments based on the testimony. First, she
referred to Section 1, page 2, paragraph (2), line 14, where it
read "holds a certification as a professional geologist under AS
08.02.011." She said that is the American Institute of Petroleum
Engineers qualification; the recommendation was that it also
include Alaska registration.
REPRESENTATIVE PHILLIPS explained the second conceptual
amendment. She referred to page 2, line 1, where it read
[beginning on page 1, line 14]:
and has at least 10 years of professional subsurface
experience in the oil and gas industry in drilling,
well operations, reservoir engineering, or a
combination thereof;
She proposed that the committee could add either the phrase
"production process operation experience" or the phrase
"reservoir engineering qualifications." She added, "He
recommended that we put in 'has production process operation
experience' there."
REPRESENTATIVE GREEN mentioned that it is critical that the
person have subsurface experience.
REPRESENTATIVE PHILLIPS specified that she wanted the people who
knew best, including the drafters, to decide which phrase is
better.
REPRESENTATIVE PHILLIPS proposed a third conceptual amendment, to
add a new section that deals with the preference for Alaskan
experience; the other sections would then be renumbered.
REPRESENTATIVE GREEN said he had no problem with the three
conceptual amendments.
CHAIRMAN WHITAKER reminded members that this is the only
committee of referral before the measure goes to the House floor.
He then agreed that the bill should be held until the amendments
could be drafted. [HB 414 was held over.]
ADJOURNMENT
There being no further business before the committee, the House
Special Committee on Oil and Gas meeting was adjourned at 11:12
a.m.
| Document Name | Date/Time | Subjects |
|---|