Legislature(2011 - 2012)BARNES 124
01/21/2011 01:00 PM House RESOURCES
| Audio | Topic |
|---|---|
| Start | |
| Overview(s): Division of Oil & Gas, Division of Geological and Geophysical Surveys, and Alaska Oil & Gas Conservation Commission | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
HOUSE RESOURCES STANDING COMMITTEE
January 21, 2011
1:06 p.m.
MEMBERS PRESENT
Representative Paul Seaton, Co-Chair
Representative Peggy Wilson, Vice Chair
Representative Alan Dick
Representative Neal Foster
Representative Cathy Engstrom Munoz
Representative Berta Gardner
MEMBERS ABSENT
Representative Eric Feige, Co-Chair
Representative Bob Herron
Representative Scott Kawasaki
OTHER LEGISLATORS PRESENT
Representative Dan Saddler
COMMITTEE CALENDAR
OVERVIEW(S): DIVISION OF OIL & GAS~ DIVISION OF GEOLOGICAL AND
GEOPHYSICAL SURVEYS~ AND ALASKA OIL & GAS CONSERVATION
COMMISSION
- HEARD
OVERVIEW(S): DIVISION OF GEOLOGICAL AND GEOPHYSICAL SURVEYS
- SCHEDULED BUT NOT HEARD
PREVIOUS COMMITTEE ACTION
No previous action to record
WITNESS REGISTER
KEVIN BANKS, Director
Division of Oil & Gas
Department of Natural Resources (DNR)
Anchorage, Alaska
POSITION STATEMENT: Provided an overview on the
responsibilities of the Division of Oil & Gas.
CATHY FOERSTER, Engineering Commissioner
Alaska Oil & Gas Conservation Commission (AOGCC)
Department of Administration (DOA)
Anchorage, Alaska
POSITION STATEMENT: Gave a presentation on the Alaska Oil & Gas
Conservation Commission (AOGCC).
ACTION NARRATIVE
1:06:06 PM
CO-CHAIR PAUL SEATON called the House Resources Standing
Committee meeting to order at 1:06 p.m. Representatives Seaton,
Wilson, Munoz, Foster, Gardner, and Dick were present at the
call to order. Representative Saddler was also present.
^OVERVIEW(S): Division of Oil & Gas, Division of Geological and
Geophysical Surveys, and Alaska Oil & Gas Conservation
Commission
OVERVIEW(S): Division of Oil & Gas, Division of Geological and
Geophysical Surveys, and Alaska Oil & Gas Conservation
Commission
1:06:06 PM
CO-CHAIR SEATON announced that the only order of business would
be overviews from the Division of Oil & Gas, Department of
Natural Resources (DNR), and from the Alaska Oil & Gas
Conservation Commission (AOGCC).
1:07:36 PM
KEVIN BANKS, Director, Division of Oil & Gas, Department of
Natural Resources (DNR), before beginning his presentation,
explained some distinctions between the division and the AOGCC.
He pointed out that the division is part the DNR and serves as
the landlord of state lands, particularly with respect to the
oil industry and its leases held on state lands. The AOGCC
manages conservation and the rights of leaseholders and owners
of oil and gas throughout the state; however, the division's
focus is only on state lands. In addition, the AOGCC functions
in a judicial fashion to adjudicate differences related to
ownership, and issues related to the conservation of the
resource. Although the division is also involved with
conservation issues, its responsibilities extend to the economic
recovery of oil and gas resources, to ensuring that facilities
minimally impact the environment during development, and to the
cost of the recovery of resources.
1:10:06 PM
MR. BANKS noted that the division sometimes appears before the
AOGCC as any other landowner, or oil and gas producer, to work
out differences with respect to ownership. He advised that
later testimony by the AOGCC would further explain the
differences between the two agencies.
1:10:32 PM
MR. BANKS then began his presentation, noting that during this
past year the division spent time on a new strategic plan and on
framing a new mission statement. The process involved many
members of his staff and he said, "Our lessees and the public
can be assured that we are functioning in a way that is
accountable, and that our lessees are developing our lands to
the maximum benefit of all of us here in Alaska." He indicated
that the division receives its authority from AS 38.05.180 and
AS 38.05.035, which authorize the division to manage oil and gas
lands and geothermal lands, and, with other divisions within the
DNR, to inspect oil and gas facilities on state lands and issue
permits on land use. Mr. Banks then displayed slide 4 titled,
"Gross Oil Volume from State Leases" which illustrated if the
state were a producer, it would be the fourth largest in the
state. In fact, the state owns in the form of royalty,
approximately one-eighth of the oil produced, and plays an
important and unique role in the United States because nearly
all of the oil produced in the state is on state land.
1:15:19 PM
MR. BANKS displayed slide 5, which was an organization chart of
the division and which indicated functions of the division,
including staff who evaluate resources, prepare and administer
leases, issue permits, and manage commercial agreements and the
royalty-in-kind program. Many members of the division's staff
have years of experience in the oil and gas industry.
Additionally, there is now a Petroleum Systems Integrity Office
(PSIO) to determine the industry's capability to safely and
prudently develop resources without accident or loss of revenue.
Mr. Banks turned to slide 6 titled, "Achievements in 2010" and
informed the committee that a division-wide strategic plan was
developed in order to create an environment in which the
division acts consciously, not unconsciously, when making
decisions. The second objection of the strategic plan was to
inspire confidence and develop work processes "so that people
can be assured that the decisions that we make are properly
grounded, fully documented, and will be successful if
challenged."
1:20:28 PM
MR. BANKS, in response to questions, clarified that PSIO stands
for Petroleum Systems Integrity Office and that the division
deputy director is Kurt Gibson. He offered to provide the
committee with the names and phone numbers of his staff.
Returning to achievements in 2010, he related that before the
leasing, discovery, and production of oil, the division must
determine the potential of the resource, and that task is done
by resource evaluation. The resource evaluation team helps
determine the value of leases, the size of units, and serves as
a consulting group for the division and for its clients. In
fact, the team will soon complete a study, in conjunction with
the Alaska Gasline Development Corp. (AGDC), on the Cook Inlet
gas supply reserves, and to analyze what new resource reserve
production will cost. Slide 9 indicated that the lease staff of
contract administrators includes biologists whose
responsibilities are to document the best interests of the state
when land is offered for lease. In addition, environmental
impacts are evaluated, as are federal and state regulations, and
competitive lease sales are held once each year for every one of
the oil and gas lease sale areas. For example, lease sales are
held in October for land on the North Slope, and in May for Cook
Inlet land.
1:25:18 PM
MR. BANKS explained that after oil and gas is found and the
leases are sold, the unit administration staff delineates the
oil fields. To do this the leases that overlie a potential pool
of oil are combined in a unit, so each of the lessees within the
unit will share in the costs of development, and so correlative
rights are protected. Forming units also minimizes
environmental impacts by ensuring development occurs in an
orderly way. He described unit administration as where "some of
our most sophisticated relationship with the industry occurs at
this point, because it involves so much of our division in the
engagement. We have the resource and geoscientists working on
this, our land people, with their law background, and the
commercial folks are usually engaged in creating these decisions
...." Referring to the royalty accounting function of the
division, Mr. Banks noted that the division collected $2.2
million in 2010, and approximately one-half of that was credited
to the Alaska Permanent Fund Corporation (APFC). He pointed out
that the sale of oil to the Flint Hills Resources refinery is
the largest source of income.
1:28:16 PM
REPRESENTATIVE P. WILSON asked for clarification on the legal
requirement that directs 25 percent of oil revenue to the APFC.
1:28:34 PM
MR. BANKS expressed his understanding that the original
constitutional amendment that created the APFC has changed;
however, 50 percent of all royalty, bonus bids, and rents
associated with resource development goes to the APFC by law.
Addressing the audit function of the division, Mr. Banks
acknowledged there is often disagreement on the value of oil; as
a matter of fact, in 1977, the state initiated litigation on the
value of its oil that was not settled for about 16 years.
Through this litigation, the question of the value of the
production of North Slope oil was resolved in royalty settlement
agreements that defined a way to calculate the royalty value of
the oil. The audit staff ensures that royalty revenue to the
state is correct.
1:31:01 PM
MR. BANKS informed the committee that economists and petroleum
commercial analysts on the commercial staff in his division
determine the "market value" of leases at the time the state
exercises its periodic opportunities to renegotiate royalty
settlement agreements. It is important to research future
production cost figures, and he noted that the commercial staff
is also called upon to work on gas line issues in cooperation
with the Department of Revenue (DOR). Returning to the function
of the PSIO, he explained that about three years ago the
legislature funded a project called the "gap analysis," which
the PSIO has presented to the governor's resource subcabinet.
The PSIO was an outgrowth of the failure of the oil transit
lines in Prudhoe Bay in March and August of 2006. At that time,
the state was informed by the industry that corrosion problems
in the Prudhoe Bay area existed to an unknown extent and were
more widespread than expected. The first task of the PSIO was
to conduct an analysis to determine gaps in the departmental
jurisdictions and oversight of the industry's infrastructure, in
addition to possible overlaps of jurisdiction and oversight.
1:34:11 PM
REPRESENTATIVE P. WILSON asked for the PSIO's findings.
1:34:31 PM
MR. BANKS responded that the gap analysis is incomplete;
however, the industry has provided some information regarding
the root causes of burst gas lines, the industry's response to
these events, and their inspection programs. The division was
able to respond to inquiries from the U.S. Congress regarding
the 2006 spill. He expressed his hope that within the next year
final answers will be available from the industry as to what
types of integrity management, safety oversight, and quality
assurance programs are being put in place, and are being
followed, by the oil companies.
1:36:16 PM
REPRESENTATIVE P. WILSON opined that the integrity of the
infrastructure of the pipeline is hard to determine, given the
age of the system.
1:36:55 PM
MR. BANKS agreed and said, "I think we have a Mercedes Benz on
the North Slope, but it's an old one."
1:37:15 PM
MR. BANKS advised members that further information from the
division was provided in the committee packet.
1:38:42 PM
REPRESENTATIVE MUNOZ asked whether the division's analysis
agrees with the oil industry's projection of a sharp decline in
oil production after 2018.
1:39:06 PM
MR. BANKS related that DOR's forecast for the next few years is
a slight uptick next year and then a 5-6 percent decline through
2020. This forecast assumes certain activities will occur, such
as pending development projects.
1:40:43 PM
CO-CHAIR SEATON asked for the projects noted in the division's
report that have plans of development.
1:41:09 PM
MR. BANKS explained that a plan of development is usually a list
of activities proposed for the next year for a particular unit.
For the Colville River Unit, of which the ConocoPhillips Alaska
CD-5 Satellite Construction & Development Program (CD5) is a
part, the plan of development may include information about how
many wells will be drilled, data evaluation, or whether surface
facilities are under consideration; however, since a plan of
development is a plan, some of the suggested activities may not
get done. Usually the state uses the plan as a guide to the
direction of development within a unit. He stressed that the
lessees do not often provide the division with any forecast of
production that might occur as a consequence of implementing a
plan. The division receives data, not interpretative data, and
a company's interpretation of potential is not often shared with
the division, subsequently the division does not often assign
potential to a plan of development.
1:43:07 PM
CO-CHAIR SEATON asked for the source of production forecasts.
1:43:46 PM
MR. BANKS expressed his belief that a company is obligated by
law to reveal potential new reserves and new production, and
these are often reported by the press, but the division does not
typically rely on press communications for its work. Discussion
about the resource and reserves in a plan of development remains
confidential between the producers and the division.
Furthermore, this information is more likely to be raw data or
whether the company is meeting the criteria for a prudent
activity, rather than a forecast of production. The application
also holds information from an applicant on a proposed plan of
development, but considerable information remains confidential.
1:45:30 PM
REPRESENTATIVE GARDNER referred to slide 18 titled "Fiscal Year
Oil and Gas Revenue on State Lands." She asked whether the
indicators for settlement income include income as a result of a
tariff dispute.
1:46:03 PM
MR. BANKS said yes, and clarified that the graph only applies to
royalty revenue, not tax revenue. The oil and gas settlements
in the early 90's were cash payments made to the state as a
result of resolving the Alaska North Slope (ANS) royalty
litigation initiated in 1977. Occasionally there is an
adjustment related to a change in the calculation of royalty
value, or in the Trans-Alaska Pipeline System (TAPS) tariffs.
1:46:52 PM
REPRESENTATIVE GARDNER has heard from independent producers that
the difficulty of gaining access to an existing facility is an
impediment to developing and shipping oil and gas. She asked
how the legislature can assist so that new explorers and
independents can be confident of being able to produce their
finds.
1:47:22 PM
MR. BANKS responded that in unitization the division is usually
dealing with one set of owners that participate as a unit and
agree to build a single facility; in fact, the division wants to
limit the number of facilities associated with a single field.
The question of access to a unit when someone outside the unit
has made a discovery leaves the new explorer with two choices:
building new facilities or sharing existing facilities that
belong to someone else. For example, for the Oooguruk field, a
sharing agreement was reached with Pioneer Oil Company Inc., so
that oil, gas, and water are moved from the Oooguruk field to
the Kuparuk River Unit for a fee. On the other hand, at the
Nikaitchug Unit, new facilities were built. These decisions are
made by the companies based on cost. Although this is a huge
challenge, Mr. Banks advised that the division is working on
issuing permits that are conditioned on the use of existing
facilities, such as an ice road.
1:50:46 PM
REPRESENTATIVE SADDLER asked whether there are any areas of
operation within the division that the legislature could change
to improve Alaska's competitiveness in the oil and gas industry.
1:51:24 PM
MR. BANKS noted that part of the strategic planning underway at
the division is "looking at ways of doing things smarter,
faster, better." In fact, his staff is working at making what
it has better. At the completion of the executive process, he
anticipates coming to the legislature with several ideas for
solving problems.
1:52:30 PM
CO-CHAIR SEATON urged Mr. Banks to come to the committee with
proposed statutory or policy changes. He then asked which
proposed wells have not progressed for reasons other than
financial or economic considerations; but because of problems
with state or federal permitting, environmental lawsuits, or
regulatory hurdles. For example, CD5 is on hold because of a
bridge.
1:54:45 PM
MR. BANKS opined there is not an inventory of such wells.
Moreover, this is a difficult question to answer because some
wells are not drilled due to access and technical challenges.
1:55:22 PM
CO-CHAIR SEATON clarified that he was not asking for
confidential information, but more information on the obstacles
to drilling that have been reported in the press. He asked
again about a list, compiled by the state, of wells that are not
being drilled "for reasons other than economic."
1:56:43 PM
MR. BANKS said there is no such list in the Division of Oil &
Gas. The division drafts activity maps every four to five
months as things change, and notes press articles and permit
applications, but does not keep an inventory of projects that
have failed. He offered to assemble such a list.
1:58:39 PM
CO-CHAIR SEATON said this information would be helpful when
conflicting testimony is heard by the committee. He then
referred to the DOR's "Oil and Gas Production Tax Status Report
to the Legislature," dated January 18, 2011, and asked whether
the division has conflicts with the data presented in the
report.
1:59:18 PM
MR. BANKS responded he has not reviewed that report. He added
that because of the information-sharing now permitted with
respect to taxes, the DOR is party to discussions of plans of
development. The DNR does not normally receive information with
respect to costs, and the DOR's interest in plans of development
is driven by the need to predict tax credits.
2:02:01 PM
CATHY FOERSTER, Engineering Commissioner, Alaska Oil & Gas
Conservation Commission (AOGCC), Department of Administration
(DOA), informed the committee she is presenting today on behalf
of Alaska Oil & Gas Conservation Commission (AOGCC) chair Daniel
Seamount Jr., who is ill. Ms. Foerster said the commission
staff is comprised of the following: three commissioners - a
petroleum engineer, a petroleum geologist, and a public member
with relevant oil and gas experience; five petroleum engineers;
two petroleum geologists; six field inspectors; support staff.
The AOGCC mission is to prevent hydrocarbon waste, protect
correlative rights, promote greater ultimate hydrocarbon
recovery, protect underground fresh water from damage caused by
oil and gas operations, and protect human safety in the areas
for which it has jurisdiction. She noted that the roles of the
commission and of the division are very different, as the
division acts as the landlord of state lands, and the commission
is concerned with oil and gas practices throughout the state.
2:05:51 PM
MS. FOERSTER continued to explain that AOGCC jurisdiction is
over oil and gas resource development, geothermal resource
development, underground storage of natural gas, and metering
accuracy for custody transfer. She added that the commission is
involved in metering accuracy only when oil or gas is changing
ownership. Typical AOGCC operations approvals apply to: the
drilling of oil, gas, and geothermal and service wells; sundry
wellwork on existing wells; underground injection for enhanced
oil recovery, disposal of oilfield waste, or gas storage;
conservation orders that are specific to a field; miscellaneous
other approvals. Ms. Foerster called attention to the report in
members' committee packets titled, "The Alaska Oil and Gas
Conservation Commission, January 21, 2011 Testimony." Page 9
titled, "Exploratory Well Permits (1996-2010)" was a chart
indicating the number of operators drilling, and she pointed out
that in the earlier years exploratory drilling was dominated by
ConocoPhillips Alaska and BP. Looking at later years, many more
companies are listed, which is good news.
2:09:20 PM
MS. FOERSTER turned attention to page 10 titled, "Development
and Service Wells/Laterals (1996-2009)" and noted this chart
contains similar information related to development and service
wells. As Kuparuk and Prudhoe Bay are the biggest fields,
ConocoPhillips Alaska and BP continue to dominate. Page 11 was
a chart titled, "Alaska Oil & Gas Activity" and indicated the
number of permits to drill approved by the commission, the
number of reservoirs in the state, the number of active wells,
and "what has triggered some of the bumps that have come along
the way."
2:10:39 PM
MS. FOERSTER, in response to a question, explained that on the
chart the yellow arrows at Cook Inlet, at Prudhoe Bay/Kuparuk,
and at Exploration and Satellite Developments, point out "the
bumps." In further response, she explained the purple bar
represents the number of permits to drill issued that year, the
hot pink bar represents the number of reservoirs, and the green
bar represents the number of active wells. Ms. Foerster then
addressed hot topics before the commission and noted that the
commission's role in North Slope gas sales relates to its
mission to prevent hydrocarbon waste and ensure greater ultimate
recovery of hydrocarbons during the production of oil and gas.
Whenever gas is taken from an oil reservoir that has not
finished producing its oil, there is the risk of losing the oil
that was not yet produced. The commission has finished a study
of the impacts of natural gas sales on Prudhoe Bay oil recovery,
and is engaged in a similar study of Point Thomson. Both
studies will be used to determine what kind of "off-take
allowables," - the amount of gas that can be produced per day
without the need to re-inject - that will be allotted to those
fields. The commission anticipated the need for these studies
prior to receiving a request.
2:14:25 PM
CO-CHAIR SEATON asked whether the studies are available to the
public.
2:14:38 PM
MS. FOERSTER advised that only the Prudhoe Bay study is
completed and a summary is available to the public; however,
AOGCC signed a confidentiality agreement with the operators for
both studies. In response to Co-Chair Seaton, she said she
would ensure that the summary is available on the AOGCC website,
and would provide committee members with a copy.
2:15:38 PM
REPRESENTATIVE P. WILSON requested an explanation of the risk to
an oil reservoir created by removing the gas.
2:16:03 PM
MS. FOERSTER explained that the gas in an oil reservoir
maintains the reservoir pressure that pushes the oil through the
pipes and to the surface. Thus, as gas is produced, the
pressure is depleted and eventually the oil will no longer come
up out of the ground. In addition, the gas is used as enhanced
oil recovery fluid and is re-injected into the oil portion of
the reservoir to maintain pressure. Also, some of the gas from
Prudhoe Bay is exported to other fields to enhance recovery,
maintain pressure, and increase production, so gas from Prudhoe
Bay is being used elsewhere on the North Slope. In the case of
Point Thomson, the bulk of the reservoir is a gas condensate,
and in the reservoir everything acts as a dense-phase fluid;
therefore, the fluid is not really gas or oil because of the
temperature and pressure. At production, however, the pressure
drops and condensate "falls out" which will produce both gas and
liquid in the first wells. Furthermore, as the pressure drops
in the reservoir and the liquids fall out, the liquids stick to
the walls of rock and to sand grains, and become unrecoverable.
This will happen near the wellbore, and will diminish the amount
of gas produced. Ms. Foerster concluded that producing Point
Thomson as a gas reservoir initially is problematic, not only
due to the loss of reserves, but also due to the loss of
productivity. A further explanation of these phenomena is found
on AOGCC's website.
2:20:35 PM
CO-CHAIR SEATON asked whether the measurement of hydrocarbons is
by British thermal units (BTUs) or by dollars.
2:21:06 PM
MS. FOERSTER answered that the commission does not base anything
on finances, but on volume and physics, and therefore uses BTUs.
Ms. Foerster restated AOGCC's role in gas storage: ensure that
no hydrocarbon is wasted, by making sure that the injected gas
can be recovered, and ensure safe operations. There are seven
storage injection orders in Cook Inlet; three at Swanson River,
Pretty Creek, Kenai Gas Field, Nicolai Creek, and Cannery Loop.
In addition, seven to eight billion cubic feet (BCF) of gas per
day is re-injected into the Prudhoe Bay reservoir for storage.
Getting the most attention right now is the request to store gas
by Cook Inlet Natural Gas Storage, Alaska (CINGSA) and a storage
injection order has been issued, although there is a request for
reconsideration of the order and therefore details cannot be
discussed.
2:23:23 PM
REPRESENTATIVE GARDNER asked whether the gas that has been re-
injected in Prudhoe Bay is ultimately recoverable.
MS. FOERSTER said yes, it will be. Returning to her
presentation, she informed the committee that there has been
recent non-traditional drilling that falls under AOGCC
jurisdiction. Although there is no current coal bed methane
activity there has been activity in geothermal drilling and as
of July 2010, jurisdiction over geothermal transferred from the
DNR to the commission. Recent geothermal activity has been
conducted by Naknek Electric Association (NEA), by Ormat Nevada
at Mount Spurr, and in the Akutan area, although there is no
activity at the present. Ms. Foerster noted that geothermal
activity not for commercial use is outside AOGCC authority.
2:25:23 PM
CO-CHAIR SEATON surmised ground source heat pumps or ocean heat
pumps do not fall under AOGCC jurisdiction.
MS. FOERSTER said she believed that is correct.
2:25:55 PM
REPRESENTATIVE FOSTER asked which department does have
jurisdiction over this type of geothermal. Committee staff was
directed to ascertain the answer to that question.
2:26:30 PM
MS. FOERSTER then explained that in the case of the drilling of
a well that is not under AOGCC jurisdiction, AS 31.05.027(g)
provides that if the commission finds sufficient likelihood of
an unexpected encounter of oil, gas, or other hazardous
substance, the commission may designate the area subject to its
regulations. For example, the Naknek well was drilled on the
edge of an oil and gas basin and there was no scientific data to
assure the commission that oil and gas would not be encountered.
Thus the commission asserted jurisdiction over this project,
prior to the transfer of geothermal authority in 2010, to make
sure that appropriate safeguards were used. The authority was
used again over CIRI's Cook Inlet underground coal gasification
(UCG) project. CIRI successfully drilled four wells without the
use of blowout prevention equipment; however, the fifth well
required the use of blowout prevention equipment and was
abandoned. She said, "People don't like it when we assert
jurisdiction, but we do it for a reason, and the underground
coal gasification is an example of where it's a darn good thing
that we did." Turning to the subject of the Deepwater Horizon
drilling rig explosion in the Gulf of Mexico, Ms. Foerster
recalled that the AOGCC received many inquiries about its
policies from state, national, and international agencies during
that time. The AOGCC is reviewing the findings from various
studies of that incident to see whether anything applies to its
operations in Alaska. Based on information from the Gulf of
Mexico blowout and spill, the AOGCC began an effort to recruit
additional field inspectors and a petroleum engineer. The
commission is also reviewing its regulations and statutes to
ensure that there are no gaps. A docket has been set to hold a
public hearing on this review, which may result in amendments to
regulations and statutes.
2:32:10 PM
MS. FOERSTER advised that BP's Liberty project has some of the
same characteristics as the operations in the Gulf of Mexico in
that it is an ultra-deep well and is also a very highly
extended-reach operation. Therefore, AOGCC will apply more
stringent oversight of this well. Regarding suspended wells,
the AOGCC clarified its language to require a physical
inspection at the time of status reports. The vast majority of
suspended wells is on active wells and platforms, and is
therefore not a problem. However, 100 legacy wells in the
National Petroleum Reserve, Alaska (NPR-A) are on Bureau of Land
Management (BLM) managed land and are not in compliance with BLM
or AOGCC regulations. She observed with dismay that it is very
difficult for the state to exert authority over federal lands.
2:34:58 PM
CO-CHAIR SEATON asked whether the abandoned wells in Cook Inlet
are in compliance.
MS. FOERSTER explained that if a well has been properly plugged
and abandoned according to regulations it does not require
monitoring and is 100 percent safe. In further response, she
assured the committee that she has looked at every single well
in the state that has not been properly plugged and abandoned,
and there are none in Cook Inlet that come to her mind.
2:36:45 PM
REPRESENTATIVE FOSTER asked for the depth of the Liberty well,
in comparison to wells in the Gulf of Mexico, and for the
general depth of a shallow well.
2:37:03 PM
MS. FOERSTER said the problem with the Liberty well is not so
much its depth as that it requires eight or more miles of
horizontal reach. In fact, one of the problems with the
Deepwater Horizon in the Gulf of Mexico was not the depth of the
well itself, but the depth of the water - it was located in
5,000 feet of water - and the blowout preventer was on the
seafloor. In the case of the Liberty well, the blowout
preventer will be on Endicott Island; however, the projects are
similar in the horizontal distance they have to drill.
2:38:10 PM
CO-CHAIR SEATON observed that some of the fracking technologies
that have allowed shale gas production have been developed and
used in Alaska. He asked whether that technology is being used
in lateral drilling operations on the North Slope, and if AOGCC
has regulations or monitoring pertaining to fracking.
2:39:15 PM
MS. FOERSTER said the short answer is yes, but there is a longer
answer. Hydraulic fracturing is a technology that has been used
extensively for 75 years safely; the key is to drill the well
properly, case and cement it properly, and establish good
mechanical integrity so when the hydraulic frack is done the
fluids stay within the zone in which they were injected.
Furthermore, if the fluids are transported safely going in and
coming out of the well, hydraulic fracturing is a very safe
operation. When it is not done properly, "that's when you get
into trouble." She cautioned that some of the reporting on
shale development is more political than factual. Shale
deposits are very wet, and when water and gas are together and
the water is not saline, a farmer may use the water for
drinking. If there is gas in the water and it catches fire,
that is because of nature, not improper fracturing. She
stressed that investigators must look at the details of a
fractured well incident to determine the cause; it is a
complicated issue, but there has never been a scientifically
proven problem with groundwater associated with hydraulic
fracturing.
2:42:27 PM
CO-CHAIR SEATON asked, "We don't have any of that problem up
here, is that correct?"
2:42:59 PM
MS. FOERSTER said, "No, we do not."
2:43:13 PM
CO-CHAIR SEATON questioned whether AOGCC has data on the Shell
Offshore Inc. (Shell), platform drilling operation regarding
depth, pressure, and blowout preventers, that would reveal what
kind of field Shell is exploring.
2:44:29 PM
MS. FOERSTER acknowledged that there can always be surprises, so
the equipment must be adequate to address surprises. She
assured the committee that the Bureau of Ocean Energy
Management, Regulation and Enforcement (BOEM), which will be
regulating Shell's development, will require a large safety
factor for blowout prevention equipment and for "tubulars"; in
fact, AOGCC geologic data indicates that the Shell development
is expected to be in a normally pressured reservoir. Adequate
safety factors will ensure that Shell will be able to cope with
abnormal pressures.
2:45:37 PM
CO-CHAIR SEATON asked whether AOGCC has influence on BOEM
regarding well operations and design.
2:46:06 PM
MS. FOERSTER stated that AOGCC has no jurisdiction in federal
waters, but will keep abreast of the operation because of the
commission's strong interest thereof.
2:46:44 PM
CO-CHAIR SEATON recalled a gas blowout in Cook Inlet that burned
for 13 months and asked whether there are concerns about the
ability to drill a relief well like what was needed in the Gulf
of Mexico.
2:47:35 PM
MS. FOERSTER confirmed that AOGCC is concerned with this issue
and relief wells will be addressed at the scheduled public
hearing this spring along with all of the offshore regulations
and requirements. The commission must determine whether two
jack-up rigs are needed in the inlet in order to allow one to
drill.
2:48:15 PM
MS. FOERSTER, in response to Representative Peggy Wilson,
indicated that CINGSA stands for Cook Inlet Natural Gas Storage,
Alaska.
2:48:47 PM
CO-CHAIR SEATON expressed his understanding that CINGSA is a
wholly-owned subsidiary, perhaps of ENSTAR Natural Gas Company,
and functions as a third party storage facility.
MS. FOERSTER concurred.
2:49:32 PM
REPRESENTATIVE P. WILSON asked Mr. Banks whether there has been
no oil and gas revenue on state land since 2002 because there
have been no legal settlements.
2:50:12 PM
MR. BANKS said correct, and restated that the revenue shown on
slide 18 of his presentation are royalty revenues, not tax
revenues.
2:50:31 PM
CO-CHAIR SEATON thanked the presenters.
2:50:38 PM
ADJOURNMENT
There being no further business before the committee, the House
Resources Standing Committee meeting was adjourned at 2:50 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| testimony for House Resources.ppt |
HRES 1/21/2011 1:00:00 PM |
|
| HRES DOG presentation 1-21-11 KRB.pdf |
HRES 1/21/2011 1:00:00 PM |