Legislature(2023 - 2024)BARNES 124

01/30/2023 01:00 PM House RESOURCES

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01:00:44 PM Start
01:12:12 PM Overview(s): Oil and Gas Assets and Activity
02:24:11 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Overview: Oil and Gas Assets and Activity by TELECONFERENCED
Department of Natural Resources
                    ALASKA STATE LEGISLATURE                                                                                  
               HOUSE RESOURCES STANDING COMMITTEE                                                                             
                        January 30, 2023                                                                                        
                           1:00 p.m.                                                                                            
MEMBERS PRESENT                                                                                                               
Representative Tom McKay, Chair                                                                                                 
Representative Kevin McCabe                                                                                                     
Representative George Rauscher                                                                                                  
Representative Dan Saddler                                                                                                      
Representative Stanley Wright                                                                                                   
Representative Jennie Armstrong                                                                                                 
Representative Donna Mears                                                                                                      
Representative Maxine Dibert                                                                                                    
MEMBERS ABSENT                                                                                                                
Representative Josiah Patkotak                                                                                                  
COMMITTEE CALENDAR                                                                                                            
OVERVIEW(S): OIL AND GAS ASSETS AND ACTIVITY                                                                                    
     - HEARD                                                                                                                    
PREVIOUS COMMITTEE ACTION                                                                                                     
No previous action to record                                                                                                    
WITNESS REGISTER                                                                                                              
JOHN BOYLE, Commissioner Designee                                                                                               
Department of Natural Resources                                                                                                 
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Co-provided an overview of the oil and gas                                                               
assets and activities.                                                                                                          
DEREK NOTTINGHAM, Director                                                                                                      
Division of Oil and Gas                                                                                                         
Department of Natural Resources                                                                                                 
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Co-provided an overview of the oil and gas                                                               
assets and activities.                                                                                                          
JOHN CROWTHER, Deputy Commissioner                                                                                              
Department of Natural Resources                                                                                                 
Anchorage, Alaska                                                                                                               
POSITION  STATEMENT:    Answered  questions  about  the  overview                                                             
ACTION NARRATIVE                                                                                                              
1:00:44 PM                                                                                                                    
CHAIR  TOM MCKAY  called the  House Resources  Standing Committee                                                             
meeting to order at 1:00  p.m.  Representatives McCabe, Rauscher,                                                               
Saddler,  Wright, Armstrong,  Dibert, and  McKay were  present at                                                               
the call to  order.  Representative Mears arrived  as the meeting                                                               
was in progress.                                                                                                                
CHAIR  MCKAY said  the purview  of the  House Resources  standing                                                               
committee  includes the  Department of  Natural Resources  (DNR);                                                               
Department  of  Environmental   Conservation  (DEC);  and  Alaska                                                               
Department of  Fish & Game  (ADF&G).   He said issues  before the                                                               
House  Resources Committee  will  mainly  involve activities  and                                                               
projects related to  these three departments.  He said  it is his                                                               
intent to make  Alaska a place that attracts  more investment and                                                               
development  to  provide  revenue.    He  contended  the  way  to                                                               
generate revenue is to develop natural resources responsibly.                                                                   
CHAIR  MCKAY  asked  each  committee   member  to  give  a  brief                                                               
description of  their individual backgrounds.   He then nominated                                                               
Representative  Rauscher   as  vice-chair.     [There   being  no                                                               
objection, it was so ordered.]                                                                                                  
CHAIR MCKAY  asked for a  motion for the submission  of committee                                                               
bills by the committee chair.                                                                                                   
REPRESENTATIVE RAUSCHER moved to  authorize Chair McKay to submit                                                               
bills on behalf of the House Resources Standing Committee.                                                                      
REPRESENTATIVE SADDLER objected for  the purposes for discussion.                                                               
He asked who Chair McKay will consult.                                                                                          
CHAIR MCKAY  responded that his  intent is all  committee members                                                               
will be involved in those decisions.                                                                                            
REPRESENTATIVE RAUSCHER supported the motion.                                                                                   
REPRESENTATIVE  SADDLER removed  his objection.   There  being no                                                               
further objection, the motion passed.                                                                                           
         OVERVIEW(S):  OIL AND GAS ASSETS AND ACTIVITY                                                                      
1:12:12 PM                                                                                                                    
CHAIR MCKAY  announced that the  only order of business  would be                                                               
the Oil and Gas Assets and Activity Overview.                                                                                   
^OVERVIEW(S):  OIL AND GAS ASSETS AND ACTIVITY                                                                                  
[Contains discussion of HB 49, HB 50, and SB 49.]                                                                               
1:13:21 PM                                                                                                                    
JOHN   BOYLE,  Commissioner   Designee,  Department   of  Natural                                                               
Resources, introduced  the PowerPoint to  the Oil and  Gas Assets                                                               
and Authority [hard  copy included in the committee  packet].  He                                                               
said  the purpose  of the  DNR  financial forecast  is to  assist                                                               
lawmakers with  decision making  during the  legislative process.                                                               
He said  the forecast will show  what Alaska can look  forward to                                                               
in  the  coming  decade.    He assured  the  committee  that  the                                                               
forecast will  model how oil  and gas production can  improve the                                                               
state's fiscal  health.   He confirmed  the North  Slope "legacy"                                                               
oil fields Prudhoe Bay, Kuparuk,  and Alpine are seeing a healthy                                                               
number of  investors.   He emphasized  the legacy  producers have                                                               
been maintaining  the flow  of oil  to the  Trans-Alaska Pipeline                                                               
System  (TAPS) for  40-50 years  and remain  the backbone  of oil                                                               
production in Alaska.                                                                                                           
1:16:27 PM                                                                                                                    
COMMISSIONER DESIGNEE BOYLE highlighted  the recent investment by                                                               
Australia-based Santos  Ltd, to the  Pikka Project.  He  said the                                                               
project is  estimated to produce  roughly 80,000 barrels  per day                                                               
compared to the 500,000 barrels  per day currently.  He contended                                                               
that  volume  of  oil  in  TAPS  hasn't  existed  in  some  time.                                                               
Commissioner Designee  Boyle cited the Willow  Project as another                                                               
new source of revenue for Alaska once  it is online.  He said DNR                                                               
is  expecting  a ruling  on  the  Final Supplemental  Environment                                                               
Impact  Statement   (SEIS)  from  the  federal   Bureau  of  Land                                                               
Management  (BLM) soon.   Mr.  Boyle imparted  the project  could                                                               
produce  upwards  of  180,000  barrels  per  day.    Commissioner                                                               
Designee Boyle  cited the discovery of  the Nanushuk [geological]                                                               
Formation as a reason for optimism.                                                                                             
1:19:41 PM                                                                                                                    
DEREK NOTTINGHAM,  Director, Division of Oil  and Gas, Department                                                               
of Natural  Resources, described  his background  in the  oil and                                                               
gas industry.  Mr. Nottingham said  he has lived in Alaska for 16                                                               
years,  employed  as a  petroleum  engineer.   He  continued  the                                                               
PowerPoint overview, on Slide 2,  which read as follows [original                                                               
punctuation provided]:                                                                                                          
     • Introduction                                                                                                             
     • North Slope Resources and Activity                                                                                       
     • Project Update and Production Forecast                                                                                   
     • Natural Gas Trucking                                                                                                     
     • Willow and ANWR Updates                                                                                                  
     • Net  Zero Goals and Carbon  Capture, Utilization, and                                                                    
1:22:02 PM                                                                                                                    
MR.  NOTTINGHAM  directed  attention  to Slide  3,  "North  Slope                                                               
Potential,"   which  read   as   follows  [original   punctuation                                                               
     United States Geologic Survey (USGS) estimates                                                                             
     that Alaska's North Slope has more oil than any                                                                            
     other Arctic nation:                                                                                                       
     • Produced Oil: >18.7 billion barrels                                                                                      
     • Significant oil production continues from existing                                                                       
     and developing fields                                                                                                      
     • Recent large discoveries                                                                                                 
     • Undiscovered Oil: >48 billion barrels                                                                                    
     • Discovered Gas: ~ 50 trillion cubic feet                                                                                 
     •  Undiscovered Conventional  Gas: ~194  trillion cubic                                                                    
     •  Unconventional  Gas:  ~125 trillion  cubic  feet  of                                                                    
     methane, hydrates and shale gas                                                                                            
     Interest in North  Slope has been in  steady incline in                                                                    
     the last                                                                                                                   
     several years:                                                                                                             
     •  Recent  finds  on   state  lands  demonstrate  great                                                                    
     •  Nanushuk and  Torok formations  are driving  renewed                                                                    
     interest (new data suggests enormous potential)                                                                            
     • Legacy fields including  Prudhoe Bay and Kuparuk have                                                                    
     exceeded internal expectations through infield work                                                                        
1:24:33 PM                                                                                                                    
REPRESENTATIVE  SADDLER asked  how  the amount  of  oil could  be                                                               
estimated if there has not been any exploration yet.                                                                            
MR. NOTTINGHAM answered  that the numbers in the  overview do not                                                               
have a  high degree  of precision  and are  an estimate  based on                                                               
similar projects.  He said based  on the size of the North Slope,                                                               
it is likely to have significant deposits.                                                                                      
1:25:23 PM                                                                                                                    
JOHN  CROWTHER,   Deputy  Commissioner,  Department   of  Natural                                                               
Resources,  answered  questions  about  oil and  gas  assets  and                                                               
activities.   He  clarified the  numbers  presented were  derived                                                               
from  the  United  States  Geological   Survey  (USGS)  based  on                                                               
statistical  extrapolations.    He  claimed there  is  a  lot  of                                                               
national and  international confidence in USGS  estimates, noting                                                               
the USGS is the premiere assessor of natural resources.                                                                         
1:26:21 PM                                                                                                                    
CHAIR MCKAY asked how much of  the 48 billion barrels would be on                                                               
state land.                                                                                                                     
1:26:33 PM                                                                                                                    
MR. NOTTINGHAM said he was unsure  how many barrels were on state                                                               
land and would get back to Chair McKay with that number.                                                                        
1:26:42 PM                                                                                                                    
DEPUTY  COMMISSIONER CROWTHER  reiterated DNR  was unsure  of how                                                               
many barrels  of oil are on  state land.  He  explained that USGS                                                               
divided  the assessment  of the  coastal plain  of the  [National                                                               
Petroleum Reserve-Alaska  (NPR-A)] and  a portion of  the Greater                                                               
Nanushuk Prospect,  which falls  within the  NPR-A boundary.   He                                                               
stated there are  significant oil and gas deposits  on both state                                                               
and federal lands.                                                                                                              
1:27:41 PM                                                                                                                    
MR. NOTTINGHAM  returned to the  PowerPoint and showed  where the                                                               
19 billion barrels  of oil are located on the  North Slope on the                                                               
map in  Slide 4, "North Slope  Oil Production".  He  used the map                                                               
to illustrate  a number of  exciting opportunities ahead  for oil                                                               
1:29:17 PM                                                                                                                    
CHAIR MCKAY  specifically asked if  there are any plans  to drill                                                               
at West Harrison Bay.                                                                                                           
1:29:27 PM                                                                                                                    
DEPUTY COMMISSIONER CROWTHER answered  the West Harrison Bay Unit                                                               
was created  by DNR  with the expectation  that an  operator will                                                               
drill  wells  in an  attempt  to  delineate  that prospect.    He                                                               
anticipates  some drilling  activities  in that  area  soon.   In                                                               
response to  a follow-up question,  he offered  his understanding                                                               
that drilling would commence in 2025.                                                                                           
1:30:34 PM                                                                                                                    
REPRESENTATIVE  SADDLER   asked,  "What  is  the   Alaska  Seward                                                               
Boundary and why is it important on the map?"                                                                                   
1:30:51 PM                                                                                                                    
DEPUTY-COMMISSIONER   CROWTHER   explained  the   Alaska   Seward                                                               
boundary  is  the limit  of  state-owned  and -managed  resources                                                               
including three miles offshore.   He pointed to the West Harrison                                                               
Bay Unit and the Liberty  Prospect which are offshore oil fields.                                                               
He said  the Prudhoe  Bay [oil  field] is  primarily on  land but                                                               
does extend offshore.                                                                                                           
CHAIR  MCKAY asked  if the  48 billion  barrels of  oil cited  on                                                               
Slide 3, "North Slope Potential," included offshore wells.                                                                      
DEPUTY  COMMISSIONER  CROWTHER  responded  that  the  48  billion                                                               
barrels does  include on-land and  offshore wells.   He clarified                                                               
that  offshore  leases  also  extend  into  the  Chukchi  Sea  in                                                               
addition to the Beaufort Sea.                                                                                                   
1:33:17 PM                                                                                                                    
REPRESENTATIVE SADDLER  asked if the 48  billion barrels included                                                               
viscous and heavy oil.                                                                                                          
1:33:30 PM                                                                                                                    
MR. NOTTINGHAM  affirmed viscous and  heavy oils are  included in                                                               
the 48 billion barrels of potentially undiscovered oil.                                                                         
1:33:40 PM                                                                                                                    
MR. NOTTINGHAM returned to the  PowerPoint and read from Slide 5,                                                               
"Working Interest  Ownership of North  Slope Units."   He pointed                                                               
out  ConocoPhillips  Alaska, Inc.  is  the  main leaseholder  and                                                               
operator  in the  NPR-A.   He  identified Kuparuk  River Unit  as                                                               
primarily owned and  operated by ConocoPhillips Alaska,  Inc.  He                                                               
said  Prudhoe  Bay  is  operated   by  Hilcorp,  the  predominant                                                               
operator on the east side of the North Slope.                                                                                   
MR.  NOTTINGHAM  directed  attention  to Slide  6,  "North  Slope                                                               
Exploration Drilling 2022-2023," which  read as follows [original                                                               
punctuation provided]:                                                                                                          
                      Great Bear Pantheon                                                                                     
     Completed  the  Theta  West-1 well  in  April  of  2022                                                                    
     targeting the  Lower Basin Floor  Fan interval  seen in                                                                    
     the  Talitha-A  well.    A  successful  flow  test  was                                                                    
     achieved from  this interval. The well  was plugged and                                                                    
              International Hydrates Test Project                                                                             
     Received  approval  for   a  methane  hydrate  drilling                                                                    
     program  of  up  to  three wells  and  well  production                                                                    
     testing  on lease  ADL 47450  in the  Prudhoe Bay  Unit                                                                    
     taking  place in  the winter  2022-2023 season.  One of                                                                    
     the three  wells, Hydrate 2, was  completed in November                                                                    
     2022. The project is partnered  with US DOE, USGS, ASRC                                                                    
     and Japan OGMEC.                                                                                                           
Mr. Nottingham said liquid hydrocarbon  flow rates were above 500                                                               
barrels per  day.   He stated  North Slope  Energy has  agreed to                                                               
drill two wells  in NPR-A known as the West  Castle Prospect.  He                                                               
said  the Merlin  II  well  was tested,  but  the reserve  wasn't                                                               
economically  viable.   He said  there is  also a  unit near  the                                                               
Toolik River that may be developed.                                                                                             
1:39:32 PM                                                                                                                    
REPRESENTATIVE SADDLER pressed Mr.  Nottingham to expound on what                                                               
DNR might  be looking  for in methane  hydrates drilling  and the                                                               
potential benefits.                                                                                                             
1:39:42 PM                                                                                                                    
MR.  NOTTINGHAM defined  methane hydrates  and where  they occur.                                                               
He  related  the compound  is  gas  in  an  ice-like state.    He                                                               
affirmed  DNR  knows  methane  is  there  [underground]  but  the                                                               
question  is whether  [Alaska] can  produce it.   He  remarked an                                                               
observation well  and two test  wells have been drilled  with the                                                               
goal of seeing if DNR's methodologies work.                                                                                     
1:41:09 PM                                                                                                                    
CHAIR MCKAY considered  the state will need a way  to get the gas                                                               
to market.  He asked if  methane is "stranded gas" like the other                                                               
known deposits on the North Slope that aren't being developed.                                                                  
1:41:35 PM                                                                                                                    
COMMISSIONER-DESIGNEE   BOYLE   acknowledged   the   methane   is                                                               
considered a  stranded gas.  He  said the purpose of  the test is                                                               
"aid  our  allies," particularly  Japan,  as  a means  of  energy                                                               
security.   He explained Japan  is aware of the  methane deposits                                                               
in the  deep waters off the  coast of Japan.   He illuminated the                                                               
North  Slope offers  a  good  proxy for  Japan  to  study how  to                                                               
extract the gas.  He said the  goal would be for Japan to harvest                                                               
its own energy to establish domestic security.                                                                                  
1:43:46 PM                                                                                                                    
MR.  NOTTINGHAM  narrated the  Slide  7,  "Status Update  of  Key                                                               
Future Projects:  North Slope,"  which read as  follows [original                                                               
punctuation provided]:                                                                                                          
     (Santos/Oil Search)                                                                                                      
     Ongoing front-end engineering and design (FEED);                                                                           
     start of production (Phase 1: 2025; Phase 2 final                                                                          
     investment decision (FID) expected ~2024/2025).                                                                            
     Project FID approved in August 2022 for Pikka                                                                              
     Phase 1. Project first oil anticipated in 2026.                                                                            
     Peak design capacity rate,                                                                                                 
     Phase 1: 80,000 barrels of                                                                                                 
     oil per day (bopd)                                                                                                         
     Addressing AK District Court remand; likely to target                                                                      
     a new BLM Record of Decision anticipated by                                                                                
     YE 2022. Construction expected to start Q1 2023. First                                                                     
      oil post 2025/2026. Awaiting BLM Record of Decision                                                                       
     (ROD) on Supplemental Environmental Impact Statement                                                                       
     (SEIS). FID cannot be made before the ROD. First                                                                           
     oil expected 6 years after FID, if approved.                                                                               
     Peak rate: ~180,000 bopd                                                                                                   
     CRU Narwhal                                                                                                              
     Narwhal reservoir first oil December 2021.                                                                                 
     Produced ~1600 BOPD. Drilling expected from                                                                                
     CD4 to total ~12 wells. Full development requires a                                                                        
     new pad (CD8) and drilling an additional                                                                                   
     2040  wells starting in ~2028 from CD8.                                                                                    
     Sustained Unit Production from CD8 could                                                                                   
     commence as early as 2028, pending stakeholder                                                                             
     alignment, permitting, internal studies and alignment.                                                                     
     This conceptual first oil date remains consistent with                                                                     
     the 23rd POD submitted in 2021. Peak DNR estimates                                                                         
     >32,000 bopd                                                                                                               
     MPU Raven Pad                                                                                                            
     Long-Range Activities of Milne Point Unit (MPU)                                                                            
     40th plan of development (POD) discuss future                                                                              
     drilling opportunities in undeveloped acreage in the                                                                       
     northwest of the unit. November 2022 Hilcorp formally                                                                      
      applied for approval to construct a new drilling and                                                                      
     production pad (R Pad) on ADL 25509 within MPU.                                                                            
      Peak DNR estimates~10,000 bopd. Analogous to 2018 M                                                                       
     Pad development at MPU                                                                                                     
     KRU Nuna-Torok                                                                                                           
     2021 Kuparuk River Unit (KRU) POD appraisal                                                                                
     activity for two existing wells and seismic data                                                                           
     processing.  2022 KRU  POD  states  rotary drilling  is                                                                    
     planned in 2022 Q3  with another injector/producer pair                                                                    
     for   Torok  reservoir   appraisal  to   inform  future                                                                    
     developments. Peak rate up to 25,000 bopd                                                                                  
1:47:09 PM                                                                                                                    
CHAIR MCKAY recalled  there was a polar bear  issue regarding the                                                               
Willow Project.   He had  read the  polar bear population  on the                                                               
North Slope is  increasing, and said he would  expect the project                                                               
to move forward if this were true.                                                                                              
1:47:39 PM                                                                                                                    
DEPUTY COMMISSIONER  CROWTHER answered polar bears  are protected                                                               
by Endangered  Species Act  (ESA) requirements  in the  SEIS; the                                                               
issue  was  taken  care  of  in  the  remand.    He  offered  his                                                               
understanding that  issues brought to light  from litigation have                                                               
been resolved in  the SEIS document through  consultation and the                                                               
federal  government  will be  issuing  a  permit for  the  Willow                                                               
Project soon.                                                                                                                   
1:48:44 PM                                                                                                                    
REPRESENTATIVE  SADDLER  asked  if  the  issue  with  the  Willow                                                               
Project SEIS had to do with global warming.                                                                                     
1:49:02 PM                                                                                                                    
DEPUTY COMMISSIONER CROWTHER  said global warming was  one of the                                                               
issues  raised in  the remand.   He  was unsure  of the  specific                                                               
details  however,  and  offered  to  get  the  opinion  from  the                                                               
Department of Law to the committee.                                                                                             
1:49:27 PM                                                                                                                    
MR. NOTTINGHAM described the graph  on Slide 8, "Fall 2022: North                                                               
Slope  Annualized Forecast,"  which  read  as follows,  [original                                                               
punctuation provided]:                                                                                                          
       Comparison of DNR vs Operator                                                                                            
     Forecasts across the same                                                                                                  
     group of fields.                                                                                                           
       Operator's numbers in charts                                                                                             
     exclude not-yet producing fields,                                                                                          
     while Official Forecast includes                                                                                           
     production from future projects.                                                                                           
     Short Term:                                                                                                                
        ? DNR forecasts FY 2023 annualized average daily                                                                        
      statewide production at 501 thousand barrels of oil                                                                       
     per day (mbopd), and North Slope                                                                                           
     production at 492 mbopd, with a range of 448 mbopd and                                                                     
     535 mbopd.                                                                                                                 
     Long term:                                                                                                                 
     ? Long term forecast reliability is gauged by general                                                                      
         ballpark comparison between DNR and operators'                                                                         
     aggregate forecasts. Operators' long-term                                                                                  
     outlook falls within DNR's long term forecast range.                                                                       
     ? Specific  differences are  expected and  do highlight                                                                    
     DNR's  ground-up uncertainty  analysis on  all included                                                                    
     Outlook  on production  assumes  that operators'  plans                                                                    
     and other project drivers stay unchanged.                                                                                  
1:51:30 PM                                                                                                                    
MR.  NOTTINGHAM  continued  to Slide  9,  "Alaska  Statewide  Oil                                                               
Production Forecast    Fall 2022 Expected Case  And Categories Of                                                               
Production,"   which  gives   definitions  of   abbreviations  as                                                               
follows, [original punctuation provided]:                                                                                       
     ?  Current Production  (CP) remains  backbone of  state                                                                    
     production in near and medium term                                                                                         
     ? Under Development  (UD) segment represents production                                                                    
     expected from wells drilled in FY 2023                                                                                     
     ?  Under   Evaluation  (UE)  begins  to   play  a  more                                                                    
     significant role in production in the next 510 years                                                                       
     ?  Production   outlook  depends  on   several  factors                                                                    
     including operators' plans, oil price, fiscal system                                                                       
1:52:27 PM                                                                                                                    
CHAIR MCKAY  understood TAPS is uneconomical  if production drops                                                               
below 350,000 barrels  per day.  He pointed to  the gray areas on                                                               
both graphs, which indicated to  him Alaska needs new discoveries                                                               
and new  developments or the state  could be in trouble  in about                                                               
five years.                                                                                                                     
1:53:29 PM                                                                                                                    
COMMISSIONER-DESIGNEE  BOYLE  confirmed   Chair  McKay's  concern                                                               
regarding the  need for new development  on the North Slope.   He                                                               
said Alyeska  Pipeline Service Company  has been hard at  work to                                                               
ensure  oil keeps  flowing in  the pipeline.   He  explained that                                                               
there have  not been  any recent  studies on  throughput volumes.                                                               
He emphasized, "more  oil through the pipeline  is always better"                                                               
[than less throughput].  He  identified a decrease in gas volumes                                                               
means less revenue from tariffs levied to the oil producers.                                                                    
COMMISSIONER-DESIGNEE BOYLE returned to  the topic of forecasting                                                               
Alaska's future oil  production.  He claimed the  decline rate on                                                               
the North Slope is very minimal.   He expected the rate to remain                                                               
stable with  projects like  Willow that  will keep  oil following                                                               
through the  pipeline.  He  maintained the investment  climate in                                                               
the state needs to attract new producers.                                                                                       
1:56:46 PM                                                                                                                    
REPRESENTATIVE  SADDLER stated  he projected  the gray  lines [on                                                               
the graphs  in Slide 9] are  something to look forward  to in the                                                               
future, but  the committee needs  to focus on the  declining rate                                                               
of  current production  and how  that will  reflect on  potential                                                               
1:57:29 PM                                                                                                                    
MR. NOTTINGHAM  illustrated the shipping  process shown  on Slide                                                               
9,  "Trucking  Natural Gas  to  Market,"  which read  as  follows                                                               
[original punctuation provided]:                                                                                                
     Agreement between Hilcorp North                                                                                          
     Slope LLC and the Interior Gas Utility                                                                                   
     ? Hilcorp subsidiary Harvest Midstream to                                                                                  
     produce LNG from Prudhoe Bay gas                                                                                           
     ? Facilities to produce 150,000 gallons/day                                                                                
     to be built and online in October 2024                                                                                     
     ? 20-year contract with opportunity to                                                                                     
     increase term and capacity                                                                                                 
     ? Plans to truck LNG from Deadhorse to                                                                                     
       Compressed natural gas (CNG) service coming to the                                                                     
     North Slope                                                                                                              
         ? SES Midstream LLC acquired a lease to site a                                                                         
     compression facility for taking Prudhoe Bay                                                                                
         gas and distributing CNG by truck to oilfield                                                                          
     customers across the North Slope.                                                                                          
1:59:25 PM                                                                                                                    
REPRESENTATIVE  MCCABE asked  about lawsuits  in the  North Slope                                                               
related to trucking  access.  He inquired if  those lawsuits have                                                               
been settled and whether the public has access to those roads.                                                                  
1:59:50 PM                                                                                                                    
DEPUTY COMMISSIONER CROWTHER spoke  generally about access on the                                                               
North  Slope  for  the  public;   there  are  challenges  to  the                                                               
administration including  litigation regarding  access.   He said                                                               
DNR provided  an access permit  for the Pikka Project  that would                                                               
cross the Kuparuk River Unit.   He relayed ConocoPhillips Alaska,                                                               
Inc. appealed the decision by DNR, which is now in litigation.                                                                  
2:00:43 PM                                                                                                                    
REPRESENTATIVE  MCCABE synopsized  the lawsuit  came down  to one                                                               
oilfield   developer   blocking   access  to   another   oilfield                                                               
2:01:12 PM                                                                                                                    
DEPUTY COMMISSIONER  CROWTHER opined that it  was appropriate for                                                               
DNR to grant  access despite opposition but chose  not to comment                                                               
further  on  active  litigation.   In  response  to  a  follow-up                                                               
question,  he  offered  his understanding  that  the  lawsuit  is                                                               
currently  in State  Superior  Court; DNR  expects  the court  to                                                               
review the filing and make a decision in due course.                                                                            
CHAIR  MCKAY asked  the committee  to  pay attention  to what  is                                                               
happening  in  Cook  Inlet  with respect  to  providing  heat  to                                                               
Railbelt communities.                                                                                                           
2:02:46 PM                                                                                                                    
MR. BOYLE stated DNR would  be presenting the Cook Inlet forecast                                                               
for oil  production in the  Senate and  offered to return  to the                                                               
House   Resources   Standing   Committee   to   give   the   same                                                               
2:03:35 PM                                                                                                                    
MR.  NOTTINGHAM  returned  to  the  presentation,  on  Slide  11,                                                               
"Willow  Update," which  read  as  follows [original  punctuation                                                               
         ? Comment period for Draft Final Supplemental                                                                          
     Environmental Impact Statement (EIS) closed August 29,                                                                     
     ? Final SEIS review completed by cooperating agencies                                                                      
     in January 2023                                                                                                            
     ? Publication of Final SEIS is expected imminently                                                                         
     ? A Record of Decision (ROD) should follow as soon as                                                                      
     30 days after Final SEIS publication                                                                                       
     ? The State Pipeline Coordinator's Section (SPCS) will                                                                     
       begin reviewing permits based on the SEIS shortly                                                                        
     after the ROD                                                                                                              
     Anticipated performance                                                                                                  
      ? Expected peak production of 180,000 barrels of oil                                                                      
     per day (bopd)                                                                                                             
      ? 600 million barrels of oil estimated (mmboe) total                                                                      
     production over project life                                                                                               
     ? $817 billion in royalty and property tax payment to                                                                      
     State of Alaska, US, and municipal governments                                                                             
2:05:15 PM                                                                                                                    
MR. NOTTINGHAM narrated Slide 12,  "ANWR Update," with text and a                                                               
map of  leaseholders' boundaries on  the North Slope,  which read                                                               
as follows [original punctuation provided]:                                                                                     
       AIDEA's leases remain suspended pending                                                                                
     completion of the SEIS. The other two                                                                                    
     lessees relinquished their leases, so                                                                                    
     AIDEA's are the only remaining (blue in                                                                                  
     lease map).                                                                                                              
       Lease suspension litigation is in briefing                                                                             
     cross-motions for summary judgment.                                                                                      
     • Plaintiffs' and State's opening briefs were filed                                                                        
     December 5, 2022.                                                                                                          
     • BLM's response is due February 3, 2023.                                                                                  
     • Briefing should conclude in mid- to late-March.                                                                          
       The leasing program litigation remains                                                                                 
     stayed pending completion of the SEIS.                                                                                   
     Next status report is due April 28, 2023.                                                                                
2:06:34 PM                                                                                                                    
REPRESENTATIVE  MCCABE   inquired  what  the   Alaska  Industrial                                                               
Development and  Export Authority  (AIDEA) plans  to do  with the                                                               
current leases.                                                                                                                 
2:07:03 PM                                                                                                                    
DEPUTY COMMISSIONER CROWTHER expressed DNR  did not know the path                                                               
AIDEA  may take  regarding  existing leases.    He believed  when                                                               
AIDEA took  those leases it was  with the intent to  maximize the                                                               
benefits to the state.                                                                                                          
2:07:47 PM                                                                                                                    
REPRESENTATIVE  SADDLER  asked when  the  next  lease sale  might                                                               
DEPUTY  COMMISSIONER CROWTHER  explained that  BLM is  obliged to                                                               
hold a  lease sale  by the  end of 2024  to remain  in compliance                                                               
with federal  law.  He said  BLM is currently working  on a draft                                                               
SEIS that DNR expects to see prior to any further lease sales.                                                                  
2:09:04 PM                                                                                                                    
CHAIR MCKAY asked if the filling would be made by 2/3/23.                                                                       
DEPUTY COMMISSIONER  CROWTHER answered  that there could  be many                                                               
filings and the date of a decision is uncertain.                                                                                
2:09:34 PM                                                                                                                    
MR.  NOTTINGHAM described  main  points in  Slide  13, "Net  Zero                                                               
Greenhouse Gas (GHG)  Initiatives of North Slope  Companies."  He                                                               
explained all  major developers are  moving in the  direction for                                                               
zero  carbon  offsets.   He  divulged  Hilcorp has  not  publicly                                                               
stated the  company's goal  to real  net zero  but did  release a                                                               
statement,   which  read   as   follows,  [original   punctuation                                                               
     "We  have to  operate  to the  same  high standards  as                                                                    
     everyone else. We  may be private, but  we have capital                                                                    
     providers,  we have  partners, we  have  lots of  other                                                                    
     people involved  in business  with us.  They're feeling                                                                    
     those pressures  (i.e. ESG, emissions  reductions), and                                                                    
     we  have to  be responsive  to those  as well."    Greg                                                                    
     Lalicker, Hilcorp CEO.                                                                                                     
2:11:36 PM                                                                                                                    
REPRESENTATIVE  MCCABE pointed  out  net zero  goals are  derived                                                               
from the  boards of  directors of  given companies  without input                                                               
from the Department of Natural Resources.                                                                                       
2:12:08 PM                                                                                                                    
MR. BOYLE  affirmed the net zero  goals are set by  the boards of                                                               
2:12:24 PM                                                                                                                    
REPRESENTATIVE SADDLER asked  if there are sanctions  in place to                                                               
deter companies from not developing leased oil fields.                                                                          
MR.  BOYLE hesitated  to say  there were  no consequences  to not                                                               
achieving  a company's  net zero  goals.   He said  investors and                                                               
lending institutions create  pressure on oil companies  to make a                                                               
project  successful.   He also  asserted some  of the  production                                                               
technologies  are  nascent and  still  developing.   He  believed                                                               
companies  are striving  to  get to  net zero  GHG  but there  is                                                               
always an amount of uncertainty in the future.                                                                                  
2:15:03 PM                                                                                                                    
CHAIR MCKAY offered  his understanding that GHG  consists of: "n-                                                               
ox; s-ox;  and CO2" which  means, nitrous oxide,  sulfur dioxide,                                                               
and CO2.                                                                                                                        
2:15:28 PM                                                                                                                    
MR. NOTTINGHAM said he thought  Chair McKay was correct and added                                                               
methane is  also a GHG chemical.   He said the  main concern with                                                               
GHG is primarily methane and CO2 emissions.                                                                                     
2:16:01 PM                                                                                                                    
DEPUTY  COMMISSIONER CROWTHER  said, historically,  nitrous oxide                                                               
and sulfur dioxide associated with  industrial activity have been                                                               
significantly diminished.                                                                                                       
2:16:36 PM                                                                                                                    
MR. NOTTINGHAM  returned to the  PowerPoint, Slide  12, "Geologic                                                               
Carbon  Storage,"  to  four   maps  depicting  potential  storage                                                               
locations  and future  exploration  opportunities throughout  the                                                               
state.  He  said the map on the right  represented saline aquifer                                                               
potential.  He  attested carbon storage capacities  are great and                                                               
don't give  off a lot of  emissions.  He said  Alaska already has                                                               
subsurface  data and  the advantage  of having  a large  block of                                                               
state-owned land.   Mr. Nottingham believed SB  49 addresses many                                                               
of the state leasing issues.                                                                                                    
2:20:10 PM                                                                                                                    
REPRESENTATIVE  MCCABE asked  if  saline could  be injected  into                                                               
Cook  Inlet  based on  the  map  on  Slide 14,  "Geologic  Carbon                                                               
2:20:58 PM                                                                                                                    
MR.  NOTTINGHAM  answered  CO2  can   be  injected  to  create  a                                                               
condition of  enhanced oil recovery  (EOR) but imparted  that CO2                                                               
injection doesn't remedy the Cook Inlet supply issue.                                                                           
2:21:45 PM                                                                                                                    
CHAIR MCKAY explained HB 49 and  HB 50 are the bills that address                                                               
carbon  capture and  credits; he  urged the  committee to  become                                                               
familiar with those bills for future discussions.                                                                               
2:22:42 PM                                                                                                                    
REPRESENTATIVE   SADDLER  asked   that  the   department  provide                                                               
background information and general reading to committee members.                                                                
2:23:01 PM                                                                                                                    
MR.  BOYLE answered  DNR  would be  happy  to provide  background                                                               
information on these topics for the committee.                                                                                  
2:24:11 PM                                                                                                                    
There being no  further business before the  committee, the House                                                               
Resources Standing Committee meeting was adjourned at 2:24 p.m.                                                                 

Document Name Date/Time Subjects
HRES DNR NS Oil and Gas Update 1.30.23.pdf HRES 1/30/2023 1:00:00 PM