02/12/2007 01:00 PM House RESOURCES
| Audio | Topic |
|---|---|
| Start | |
| SB46 | |
| Overview: Cook Inlet Gas: Reality & Exploration Potential | |
| Adjourn |
+ teleconferenced
= bill was previously heard/scheduled
| *+ | SB 46 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| + | TELECONFERENCED |
ALASKA STATE LEGISLATURE
HOUSE RESOURCES STANDING COMMITTEE
February 12, 2007
1:01 p.m.
MEMBERS PRESENT
Representative Carl Gatto, Co-Chair
Representative Craig Johnson, Co-Chair
Representative Vic Kohring
Representative Bob Roses
Representative Paul Seaton
Representative Peggy Wilson
Representative Bryce Edgmon
Representative David Guttenberg
Representative Scott Kawasaki
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
CS FOR SENATE BILL NO. 46(RES)
"An Act relating to the Alaska coastal management program;
providing for an effective date by amending the effective date
of sec. 45, ch. 24, SLA 2003, as amended by sec. 21, ch. 31, SLA
2005; and providing for an effective date."
- MOVED CSSB 46(RES) OUT OF COMMITTEE
OVERVIEW(S): COOK INLET GAS: REALITY & EXPLORATION POTENTIAL
- HEARD
PREVIOUS COMMITTEE ACTION
BILL: SB 46
SHORT TITLE: COASTAL MANAGEMENT PROGRAM
SPONSOR(s): SENATOR(s) OLSON
01/16/07 (S) PREFILE RELEASED 1/12/07
01/16/07 (S) READ THE FIRST TIME - REFERRALS
01/16/07 (S) RES, FIN
01/29/07 (S) RES AT 3:30 PM BUTROVICH 205
01/29/07 (S) Moved CSSB 46(RES) Out of Committee
01/29/07 (S) MINUTE(RES)
01/31/07 (S) RES RPT CS 3DP 1NR SAME TITLE
01/31/07 (S) DP: HUGGINS, GREEN, STEDMAN
01/31/07 (S) NR: MCGUIRE
01/31/07 (S) FIN REFERRAL WAIVED
02/07/07 (S) TRANSMITTED TO (H)
02/07/07 (S) VERSION: CSSB 46(RES)
02/08/07 (H) READ THE FIRST TIME - REFERRALS
02/08/07 (H) RES
02/12/07 (H) RES AT 1:00 PM CAPITOL 124
WITNESS REGISTER
SENATOR DONNY OLSON
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Sponsor of SB 46.
DAVID GRAY, Staff
to Senator Donny Olson
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Answered questions regarding SB 46.
RANDY BATES, Acting Director
Office of Project Management and Permitting (OPMP)
Department of Natural Resources (DNR)
Juneau, Alaska
POSITION STATEMENT: Testified in support of 46 and answered
questions.
TOM LOHMAN, Wildlife Specialist
Department of Wildlife Management
North Slope Borough;
Vice-Chair
Alaska Coastal District Association
Anchorage, Alaska
POSITION STATEMENT: Testified in support of CSSB 46(RES).
MARLENE CAMPBELL, Coastal Management Coordinator
Government Relations Director
City and Borough of Sitka
Sitka, Alaska
POSITION STATEMENT: Testified in support of CSSB 46(RES).
GARY WILLIAMS, Coastal District Coordinator
Kenai Peninsula Borough
Soldotna, Alaska
POSITION STATEMENT: Testified in support of CSSB 46(RES).
CAROL SMITH, Planner/Coastal Coordinator
City of Valdez
Valdez, Alaska
POSITION STATEMENT: Testified in support of CSSB 46(RES).
BOB SWENSON, State Geologist, Acting Director
Central Office
Division of Geological & Geophysical Surveys
Department of Natural Resources
Fairbanks, Alaska
POSITION STATEMENT: Presented an overview on Cook Inlet gas.
ACTION NARRATIVE
CO-CHAIR CRAIG JOHNSON called the House Resources Standing
Committee meeting to order at 1:01:28 PM. Representatives
Johnson, Gatto, Guttenberg, Edgmon, Kawasaki, Kohring, Seaton,
and Roses were present at the call to order. Representative
Wilson arrived as the meeting was in progress.
SB 46 - COASTAL MANAGEMENT PROGRAM
1:01:51 PM
CO-CHAIR JOHNSON announced that the first order of business
would be CS FOR SENATE BILL NO. 46(RES), "An Act relating to the
Alaska coastal management program; providing for an effective
date by amending the effective date of sec. 45, ch. 24, SLA
2003, as amended by sec. 21, ch. 31, SLA 2005; and providing for
an effective date."
1:02:03 PM
SENATOR DONNY OLSON, Alaska State Legislature, sponsor,
paraphrased from the following sponsor statement [original
punctuation provided]:
Alaska's Coastal Management Program has undergone
major modification in the last several years under the
previous administration. These changes required the
coastal zone management districts throughout the state
to completely revise their management plans.
Compliance and approval of the new plans by both the
state and federal authorities must be achieved before
the March 1, 2007 termination date of their existing
plans.
Of the 28 coastal management districts, 16 have new
plans that have been approved or are near approval.
Of the remaining districts, 9 are still being revised
or are under review and 3 have requested mediation.
They are not likely to make the March 1 deadline. The
reasons most often given for the delays are the
complexity and extent of information required by the
Department of [Natural] Resources for justification of
the plan proposals. This is particularly true for
large districts where revisions to resources
inventories and analysis required significant effort.
CSSB 46(RES) accomplishes two things. First, it
extends the March 1 deadline for completion and
approval of district plans six months to September 1.
Secondly, it extends a related deadline for the
designation of categorical and generally consistent
determinations (the ABC list) six months also.
I urge you to give favorable consideration of SB 46
and its importance to 70% of Alaska's coastal area and
the people who call it home.
SENATOR OLSON emphasized that CSSB 46(RES) is entirely focused
on extending the deadline from March 1 to September 1, 2007. He
said that other related issues will be carried forward in
another bill.
1:04:46 PM
CO-CHAIR GATTO asked if the extension is sufficient to meet all
the deadlines mentioned.
SENATOR OLSON stated that he is not convinced it is, but it
provides communities the opportunity to complete revision of
their plans. One or two districts will probably have difficulty
making the September 1 deadline, he said.
1:05:23 PM
CO-CHAIR GATTO asked what happens for coastal zone management in
those districts that do not meet the deadline.
DAVID GRAY, Staff to Senator Donny Olson, Alaska State
Legislature, related that the administration supports the
September deadline. He further related that the coastal
districts are telling Senator Olson that the six-month extension
is adequate and a good compromise. He noted that extending the
deadline beyond September 1 also has problems.
1:07:01 PM
CO-CHAIR GATTO inquired as to why CSSB 46(RES) is significantly
shorter than the original version.
SENATOR OLSON explained that the original bill had a section
dealing with federal lands and federal leases, which made the
bill more complicated than just extending the deadline. Given
the time sensitivity of the deadline, he said, the bill was
amended to deal only with the deadline issue.
1:07:54 PM
REPRESENTATIVE GUTTENBERG related his assumption that the
coastal zone management districts, along with their planning
process, had been eliminated during the Twenty-Third Alaska
State Legislature. He asked what transpired between then and
now.
SENATOR OLSON offered his belief that the previous
administration failed to understand the complexity and
detrimental effects that their actions would have on the coastal
communities that wished to have a say in fish, gas, and oil
issues.
1:09:00 PM
REPRESENTATIVE GUTTENBERG inquired as to whether there had been
a court case or other type of challenge.
SENATOR OLSON said he did not know of any challenges in court,
but due to the imminent deadline three districts sought
resolutions through mediation.
1:09:32 PM
REPRESENTATIVE GUTTENBERG asked what happens to a coastal
district as an entity if it is not in compliance by the
September deadline.
1:11:18 PM
RANDY BATES, Acting Director, Office of Project Management and
Permitting (OPMP), Department of Natural Resources (DNR),
explained that OPMP is the lead agency for implementing the
Alaska Coastal Management Program (ACMP). He related that the
OPMP, DNR, and the Palin Administration support CSSB 46(RES).
He stated that OPMP will continue working with the coastal
districts throughout the time extension to achieve compliance
with their coastal programs. He reported that OPMP has worked
with the districts over the past two years to ensure that the
districts understand the rules of writing enforceable policies
and that they are educated as to what they can and cannot do.
Once the districts have completed their plans, they will submit
them to DNR. The DNR will then evaluate the compliance,
respond, and make a recommendation to the commissioner. If the
policies are still noncompliant with the laws that govern the
coastal program, they will not be approved, he said. The
districts are trying to address issues that the state is already
addressing, which is not allowed and thus DNR disapproved those
plans.
1:13:58 PM
REPRESENTATIVE ROSES inquired as to what action will be taken
for those districts that are not in compliance because they did
not submit a plan.
MR. BATES explained that coastal management in the state and for
the districts is voluntary. If a district voluntarily chooses
to participate, it can write district plans according to rules
established by statute and regulation. If DNR determines that
the policies are noncompliant, the department cannot approve the
policies, and the district does not get those policies. If the
district writes policies that are approvable, they become law as
part of the coastal program that is implemented uniformly
throughout the state by DNR, just as the department does for the
statutes and the regulations. He stated that a district would
not have a plan if DNR disapproved all of the policies included
in that plan. Absent a plan, he said, state laws and standards
still apply to the entire coastal zone. Therefore, he stressed,
protection is not lost for resources or uses in a coastal zone
without a district plan. Instead, what a district loses is the
local perspective on how to guide development in accordance with
ACMP.
1:16:22 PM
MR. BATES further explained that in any planning process
additional time will always be requested for getting better
studies and information with which to prepare a better plan.
Given the implementation of House Bill 191 in 2003 and given the
eight-month extension afforded by Senate Bill 102 in 2005, he
stated that this additional six months should generally satisfy
the majority of the coastal districts seeking additional time.
He emphasized that the districts must realize this six-month
extension is it. The DNR is awaiting submission of district
plans so it can finalize its review and make sure it is done in
a manner that reaches conclusion by the now proposed September 1
deadline.
1:18:02 PM
REPRESENTATIVE GUTTENBERG asked what happens if the department
disapproves or modifies any of the program as referenced on page
1, lines 13-14, in CSSB 46(RES).
MR. BATES reported that this provision was passed by the
legislature in 2003 and again ratified in 2005 through Senate
Bill 102. He noted that it is his task as acting director of
the executive branch to carry out the program and ensure that
the legislature's language is implemented. The department has
used this language to terminate the plans of five coastal
districts that have never complied with House Bill 191 by
drafting and submitting district plan revisions. The department
has not, under any other circumstance, taken any action to
disapprove or modify any other part of a program, he emphasized.
Furthermore, DNR has been implementing a provision in Senate
Bill 102 that requires elimination of certain district policies
if they duplicate or restate existing law, and this
implementation aligns itself with this provision of CSSB 46(RES)
as well, he said.
1:19:50 PM
REPRESENTATIVE GUTTENBERG inquired as to whether a coastal zone
plan becomes null and void if it copies existing state statute.
MR. BATES answered, "Yes." If there is a provision in an
existing coastal district plan that restates or duplicates an
existing state or federal law, it is rendered null and void by
Senate Bill 102, he said. Eliminating that duplicity was one of
the basic tenants of reform of the coastal program back in 2003.
1:21:15 PM
REPRESENTATIVE GUTTENBERG pointed out that sometimes it is
desirable to transfer authority to the lowest level, and
sometimes not. He asked if there is any provision for
arbitration so that a district's entire plan is not
automatically voided without the opportunity for discussing a
duplicative [provision].
MR. BATES related that nationally there are 35 coastal states,
and each state has an opportunity to develop a coastal program
that best fits its needs. Alaska has chosen to implement a
program that includes state laws from the various sister
agencies, such as the Office of Habitat Management and
Permitting, the Department of Environmental Conservation, and
the Division of Mining, Land and Water. He emphasized that
Alaska has also voluntarily chosen to include a local component
the state's coastal districts. This is a state program in
which the local governments play an important role in helping
determine whether projects are compliant with district plans,
the state standards, and the existing state and federal law.
1:23:30 PM
REPRESENTATIVE SEATON asked whether local coastal district plans
could speak to an "issue" that is already addressed in state
law.
MR. BATES responded that there are regulations that state what a
district can and cannot write. He said there is also statutory
language that says a district may not address a matter already
covered by an existing state agency authority unless the
matter is not adequately addressed. If a district demonstrates
that an issue is inadequately addressed, then it can delve into
the topic. He outlined the context: Is the resource covered
and is the management and protection provided? If it is not and
it is within the bounds of what the state has written as far as
a coastal program, then the district could address the issue.
Mr. Bates further stated that DNR has, under all circumstances,
objectively reviewed and evaluated all of the district plans as
to whether they comply with state laws.
1:27:40 PM
CO-CHAIR JOHNSON surmised that the state will write a plan
without local input for any coastal district that fails to meet
the planning deadline or that has its plan denied by DNR.
MR. BATES answered affirmatively. He noted that state law still
applies to a coastal zone regardless of whether there is a
district plan. District plans simply provide a local flavor to
the program, he said.
1:28:06 PM
REPRESENTATIVE SEATON queried as to whether a district would be
terminated if its plan is not submitted and/or approved by the
deadline.
MR. BATES stated that there is no elimination of districts. He
cited the communities of Angoon, Hydaburg, Klawock, St. Paul,
Kake, Wrangell, and Petersburg as examples of coastal districts
without plans. They will remain coastal districts and DNR will
still involve them in discussions regarding coastal management.
However, he stressed, they will not have a seat at the table
during a consistency review of a project, and therefore no due
deference in the interpretation of laws.
1:29:32 PM
MR. BATES emphasized that a district gains due deference and a
seat at the table with an approved district plan that has
enforceable policies. Absent those policies and absent an
effective district plan, the state still implements the program
at a state level, he said. Districts without plans could still
comment and participate through ACMP consistency procedures and
through any solicitation for public comment on federal or state
agency permits.
1:30:21 PM
REPRESENTATIVE WILSON asked whether a community could re-submit
a plan by September 1, 2007, if its previous plan was denied.
She also inquired as to whether a district could deny a permit
request before it reached the state level.
MR. BATES said that if a plan is not compliant, DNR tells the
district what it can do to achieve compliance. If the district
is trying to write about an aspect of resource that is already
covered by existing law, DNR educates the district on how the
coverage is provided. If the coverage is inadequate, DNR
instructs the district on how to craft its enforceable policies
in order to get to the issue. At this point, he stressed, he
did not expect any district to come in with a plan that DNR has
not yet seen because it is only a matter of refining plans and
accepting what the rules are.
MR. BATES then stated that a local district could deny a permit
under the coastal program because regulation allows coastal
districts to identify areas that are important to them, such as
tourism, recreation, subsistence use, or habitat. He said that
if a district can draw a boundary around a specific area that
needs to be maintained for a particular reason, the district
could then disqualify or disallow certain uses in that area.
However, he emphasized, a district cannot preempt uses that the
state considers important for the preservation of health,
safety, or economy, such as oil and gas opportunities.
1:34:01 PM
REPRESENTATIVE EDGMON noted that there are three coastal plans
currently in mediation and that some others will soon be in
mediation. What happens to the funding stream if these plans
are not submitted by the September 1 deadline, he asked.
MR. BATES predicted that 26 of the 28 districts will be finished
by the September 1 extension deadline. He said he expects that
mediation with the three districts will be resolved and their
plans approved and in place before the deadline. The department
will continue working with the two remaining districts, and any
others that may be languishing, to get them to approval. He
stressed that funding is continuous for all of the districts
that are making progress and are participating in the program.
The 28 coastal districts receive an average of $1 million
annually in state and federal funds to ensure that they are
implementing the program for themselves and for the state's
purposes.
1:36:09 PM
REPRESENTATIVE EDGMON asked if this means a district would still
receive funding even if its plan is not approved by September 1.
MR. BATES indicated that funding for districts that fail to meet
the deadline depends on whether the district is making progress
on its plan. The department has not heard from a couple of
districts, he said, and it would make no sense to continue
funding a district if it has no intention of revising its plan.
1:36:45 PM
TOM LOHMAN, Wildlife Specialist, Department of Wildlife
Management, North Slope Borough; Vice Chair, Alaska Coastal
District Association, supported CSSB 46(RES). The North Slope
Borough needs the extension, he said, in order to successfully
complete its district plan revision. He noted that in terms of
coastal area, the North Slope District has the second largest in
the state. He agreed with Mr. Bates that 26 of the 28 active
coastal districts will have approved plans in place by the
extended deadline. However, he stressed, very few districts
will be satisfied with their approved plan. Mr. Lohman took
issue with Mr. Bates' statements about educating the districts.
He said that over the past three years the North Slope Borough
has been continually surprised with regard to where it stands
with DNR. The borough, he stressed, has found it impossible to
craft policies on subsistence and activities in outer
continental shelf waters, two topics of extreme importance to
the borough. He also noted that the lack of continuity in DNR's
staff over the past three years has resulted in interpretations
changing numerous times. While there might be other vehicles to
address some of those differing interpretations, the deadline
extension is essential for the North Slope Borough, he advised.
1:40:01 PM
MARLENE CAMPBELL, Coastal Management Coordinator, Government
Relations Director, City and Borough of Sitka, supported Mr.
Lohman's statements and thanked Senator Olson for the bill. She
said that many districts are facing extinguishment of their
programs until their new plans are in place on March 1. Sitka
has done everything in its power to comply with deadlines, she
explained. The state has done three major reviews, and each
time has changed Sitka's plan by forcing removal of more of the
district's enforceable policies. The district, she opined, now
has less than half of what it once did. Furthermore, what is
left is not nearly as protective as they had hoped it would be.
Sitka submitted its final plan amendment by the August 10,
[2006] deadline. However, Sitka did not hear back from the
state until the commissioner's November 24, [2006,] approval,
which required removal of yet more of the district's enforceable
policies. Sitka deleted the policies and submitted its revised
plan on January 5, 2007, but this document was not submitted to
the National Oceanic and Atmospheric Administration (NOAA) for
federal approval until January 22, she said. Ms. Campbell
emphasized that because of the timeframe there is no way Sitka's
plan can actually be in operation by March 1, and the extension
will afford continuity of the district's plans.
1:42:37 PM
GARY WILLIAMS, Coastal District Coordinator, Kenai Peninsula
Borough, stated that the bill is necessary because 14 coastal
district plans will expire if the legislation is not passed.
Nine of these are the largest of the coastal districts, and this
includes the Kenai Peninsula Borough's district, he said. The
task of updating the coastal district plans to conform to
legislation has been a daunting task, not only for the coastal
districts but also for OPMP. This effort has turned out to be
much more complex and time consuming than anyone could have
foreseen, he emphasized. With at least nine of the districts
certain to miss the deadline, he stated, it only makes sense to
provide an extension of time because an extension will have no
negative effect on any person or process.
1:44:13 PM
CAROL SMITH, Planner/Coastal Coordinator, City of Valdez,
testified that the [Valdez Coastal Management District] fully
supports passage of CSSB 46 (RES). She said that the district
had successfully met all of the program's deadlines so far
because of the district's small size and a consultant's help.
The district received notice of approval of its revised plan on
December 13, 2006. However, she continued, the district is now
behind in finishing its plan because the director was out of the
office for three months due to an automobile accident. Although
the state has been helpful in working through most situations,
she stated, the Valdez district believes the deadline extension
will make it possible for most districts to finish their plans.
1:46:01 PM
CO-CHAIR JOHNSON closed public testimony after ascertaining that
there was no one else wishing to testify.
1:46:21 PM
REPRESENTATIVE GUTTENBERG asked whether the sponsor would be
proposing other legislation to deal with the other issues.
SENATOR OLSON said, "Yes."
1:46:39 PM
CO-CHAIR GATTO moved to report CSSB 46(RES) out of committee
with individual recommendations and the accompanying fiscal
notes. There being no objection, CSSB 46(RES) was reported from
the House Resources Standing Committee.
The committee took an at-ease from 1:47:27 PM to 1:50:43 PM.
^OVERVIEW: COOK INLET GAS: REALITY & EXPLORATION POTENTIAL
1:50:43 PM
CO-CHAIR JOHNSON announced that the last order of business would
be an overview presented by the Division of Geological &
Geophysical Surveys - Cook Inlet Gas: Reality & Exploration
Potential.
1:50:55 PM
BOB SWENSON, State Geologist, Acting Director, Central Office,
Division of Geological & Geophysical Surveys, Department of
Natural Resources, presented an overview entitled, "Alaska Gas
Exploration Potential The Cook Inlet and Other Basins". He
first reviewed five "Take Home Points": 1) Because of market
issues, focused exploration for natural gas in Alaskan basins is
in its infancy; 2) Of the 36+ trillion cubic feet (tcf) of gas
reserves, nearly all was discovered while looking for oil; 3)
Published resource assessments often have very large associated
"error bars," variation assessments; 4) Significant exploration
potential exists in a number of basins across the state, however
economics and access to market will play key roles in level of
activity; 5) In the Cook Inlet, most of the easy and
inexpensive gas has been found and delineated.
1:53:38 PM
MR. SWENSON pointed out that the map of Alaska on slide 4 of his
PowerPoint presentation clearly shows that a significant amount
of land in the state has no existing infrastructure. He noted
that the polygon superimposed on the map delineates the size of
Colorado in comparison to Alaska. Sedimentary basins with oil
and gas potential are shown in yellow, he explained, and the
dominant hydrocarbon potential in most of the basins is gas.
1:54:44 PM
MR. SWENSON advised that there is significant gas potential in
the Colville Basin adjacent to the Brooks Range and in the
offshore basins of the Beaufort and Chukchi seas. He noted that
most of the exploration on the North Slope has been focused on
the Barrow Arch shown on slide 5 and that this is where Prudhoe
Bay is located. He pointed out that the lands colored in red
are state acreage and the rest is federal acreage.
1:55:56 PM
MR. SWENSON reported that the division has conducted a
significant amount of surveying along the front of the Brooks
Range looking at the geology as well as the hydrocarbon
potential. Referring to the satellite image of the Brooks Range
on slide 6, he explained that the lighter colored polygons
indicate the areas that have been mapped by the division. He
then moved to slide 7 showing a close-up image of the area near
Anaktuvuk Pass where numerous leases have been purchased over
the last three years.
1:56:51 PM
MR. SWENSON further advised that the North Aleutian Basin shown
on slide 8 also has significant gas potential. The red lines
delineate the annual areawide sale for onshore and offshore
state acreage, he said. The varying shades of grey on the map
indicate the thickness of the basin light grey signifies where
the basin thins dramatically to the north and black signifies
where the basin thickens significantly as it reaches onshore
areas.
1:57:30 PM
MR. SWENSON noted that slide 9 shows the seismic interpretation
for the Bristol Bay offshore region where Shell and Hewitt
Mineral Corporation purchased leases during the first annual
lease sale [in 2005]. The thick 150-mile-long "sedimentary
package" shown on the slide indicates significant exploration
potential, he said. To illustrate the immensity of the Bristol
Bay region he moved to slide 10 where an outline of the Arctic
National Wildlife Refuge 1002 area is superimposed within the
bay.
1:59:27 PM
MR. SWENSON described the Gulf of Alaska depicted on slide 11 as
a "sleeper area." The green dots indicate onshore oil seeps
along the gulf, he explained, and the red dots indicate onshore
and offshore wells drilled between the 1950s and 1982. The
geological cross section drawn at the bottom of the slide shows
that the area is a classic thrust belt, he said, and all the
tertiary sediments that contain the hydrocarbon potential are
caught up in this thrust belt. The Gulf of Alaska is one of the
oldest oil provinces in the state 300,000 barrels of oil were
produced in the early 1900s before the local refinery burned
down. He said the natural oil seep shown on slide 12 is located
on Brower Ridge and seeps about a barrel of oil per day.
MR. SWENSON emphasized that the resource assessment numbers on
slide 13 are estimates for the "technically recoverable" gas in
Alaska and do not include an "economic filter." For a near-
field area, the economic recoverable reserve estimate would be
very close to the technically recoverable number, he said;
however, the numbers for reserves located far away from
infrastructure would be quite different. He explained that the
estimates are a range of numbers because they are "probabilistic
estimates" compiled from all the different data sources. Using
the Chukchi Sea as an example, he pointed out that the estimated
reserve is an extremely large range of 13.6 - 154.3 tcf. In a
probability distribution the smaller number of the range is the
95th percentile, meaning there is a 95 percent chance that the
amount of the reserve is larger than the smaller number. The
largest number in the probability range is the 5 percent number,
meaning there is a 95 percent chance that the reserve is smaller
than the larger number. What is usually reported and published
is the mean of these numbers which, in this example, would be
60.1 tcf. The more limited the geologic information the larger
the range, he continued, and using the mean is problematic
because it does not represent the entire distribution and the
amount of information that is contained within any given area.
MR. SWENSON subsequently reviewed the known and estimated gas
reserves for Alaska's three regions: Southern Alaska has 2 tcf
of known reserves in Cook Inlet plus a mean estimate of 20 tcf
of undiscovered conventional gas; Central Alaska has a mean
estimate of 9 tcf of undiscovered conventional gas; and Northern
Alaska has 33 tcf of known reserves plus a mean estimate of 150
tcf of undiscovered conventional gas. He stated that the total
of proven, or known, gas reserves in Alaska is 36 tcf as shown
on slide 14.
2:05:34 PM
MR. SWENSON then focused attention on the exploration potential
of the Cook Inlet. He reviewed the stratigraphy for the
Tertiary period on slide 15, noting that the West Foreland and
Hemlock formations house the oil reservoir, and the gas is all
reserved except for a small portion of associated free
(biogenic) gas that is located in the Tyonek, Beluga, and
Sterling formations. Referring to slide 16, he explained that
the red triangles are the volcanoes along the Aleutian Trench
associated with the subduction of the Pacific Plate underneath
the North American Continent, and the blue X's are all
earthquakes associated with the subduction.
MR. SWENSON pointed out that slide 17 is a cross section of the
subduction zone located under the red line previously shown on
slide 16. He said the Pacific Plate is currently moving under
the North American Plate at about the same rate as a fingernail
grows. This is relatively fast in geologic time, he emphasized,
and this is why there are a tremendous number of earthquakes
along the south Alaska margin. As the Pacific Plate subducts,
two things happen: it partially melts and then rises up,
causing volcanoes along the Alaska Peninsula; and sediments are
scraped off the Pacific Plate as it subducts, causing formation
of the Chugach Mountains. Between those two geologic phenomena,
he continued, is what is called a "forearc basin" and that is
the Cook Inlet Basin. He said the Cook Inlet Basin is unique
because there are very few forearc basins in the world that have
hydrocarbon production.
2:08:31 PM
MR. SWENSON further explained that this uniqueness is because of
the source rock in the Cook Inlet Basin and because of the
thickness and deformation history of the basin. Up to 95
percent of the basin's gas is what is called "biogenic" gas
which comes directly from coals. The oil in the Cook Inlet is
from the Mesozoic section that underlies the entire Cook Inlet
Basin.
MR. SWENSON proceeded to slide 18 and the importance of
provenance in the Cook Inlet. The basin is bounded by a series
of faults, he said, and contained within those faults is a
series of depositional environments. Through time, sediments
from the volcanic arch and the forearc basin have filled up the
Cook Inlet Basin. He pointed out that non-marine meandering
stream systems like the one shown on slide 19 are what filled
the Cook Inlet Basin. These types of depositional environments,
he explained, create areas called crevasse splays, point bars,
and flood plain channel abandonment. As they are buried these
depositional environments will create rock that house
hydrocarbons. The green areas shown in the picture, he
continued, will become coals as they are buried.
2:09:57 PM
MR. SWENSON commenced to slide 20 depicting the aforementioned
deposition in three-dimensional terms. As the basin subsides,
he explained, these different depositional environments become
stacked on top of one another and a very complex series of
reservoirs develops. He stressed that seismic imaging of this
type of depositional system can be very difficult, making it
hard to determine where a trapping configuration might be
located.
MR. SWENSON displayed a photograph from the Healy Mine area
north of the Alaska Range that illustrates what this type of
deposition looks like in an outcrop on land. He explained that
the thick coal seams in the photograph would be associated with
the green areas shown on slide 19 and the sandstones inter-
bedded within the coals are from the meandering streams that
swept back and forth across the basin as it subsided.
2:11:03 PM
MR. SWENSON then referred to slide 22 showing well logs for the
Beluga River Gas Field. He explained that this depiction
relates to the previous 3-D diagrams and is what is seen when
the well is drilled. The yellow represents the sand bodies, he
said, each of which is perforated and produces gas up into the
well bore. He noted that this structure of repeated coal,
sandstone, and mudstone layers can be up to five miles thick in
the Cook Inlet Basin and is one reason why the basin is so
prolific.
2:11:54 PM
MR. SWENSON pointed out that exploration in the Cook Inlet began
in the 1950s with the discovery of the Swanson River Field,
slide 24, and that there have been a number of discoveries since
that time, slide 25. There was a large spike of exploration
wells in the mid-1960s, he said, and by the time Prudhoe Bay was
found in 1968 over 2 billion barrels of oil and almost 8 tcf of
gas had been discovered in the Cook Inlet. Much of the
exploration activity then moved to the North Slope. At that
point in time, he explained, there was a significant amount of
"stranded" gas in the basin, meaning there was no market for
that gas. He noted that gas-specific exploration did not begin
until recent times.
2:13:05 PM
MR. SWENSON discussed the graph on slide 26 portraying gas field
size distribution for the Cook Inlet. He explained that there
are a number of relatively small fields of 100-300 billion cubic
feet (bcf) and a number of large fields of 1-2 tcf, but that
there are virtually no fields in between these sizes. The
question, he said, is where are these "in-fill" fields.
2:13:46 PM
MR. SWENSON then directed the committee's attention to the
historical and projected gas production for the Cook Inlet shown
on slide 27. Based on current known reserves in the Cook Inlet
Basin, he said, projected production is now about to drop off a
cliff. He emphasized that this prediction is based only on
proven reserves in the current fields and does not incorporate
probable reserves or exploration reserves.
2:15:35 PM
MR. SWENSON predicted that there is more gas to be found and it
will be found in existing fields and in new "exploration play
types." However, he said, there are hurdles to overcome such as
the incredibly high costs of operating and drilling in an
offshore scenario, a limited market because of the Alaska market
not being open to the Lower 48 market, and complicated land
access.
MR. SWENSON spoke about the gas exploration potential in the
Cook Inlet pointing out the following on slide 29: 1) Only
structural traps have been explored for and developed;
stratigraphic trap potential remains untapped; 2) Eighty-five
percent of the gas discovered early in the exploration cycle was
found while drilling for oil; 3) Only 70 exploration wells have
been drilled for gas, and those were drilled very recently; 4)
Four of the largest fields have 86 percent of the reserves; and
5) Field-size distribution lacks discoveries in the 300-1300 bcf
range with the question being whether this size range will be
discovered.
2:17:00 PM
MR. SWENSON moved to slide 30 showing diagrams of the different
oil and gas trapping mechanisms. He noted that to-date the
"exploration play type" looked at in the Cook Inlet Basin has
been limited to anticlinal traps like the one diagramed at the
top left of the slide. In the lower left corner is a diagram of
the thrust fault, he said.
MR. SWENSON then interpreted four slides showing seismic data.
He explained that the seismic data on slide 31 shows the
incredibly large folds at Granite Point in the north Cook Inlet
Basin. He noted that the next type of exploration play is down
"off-structure" in stratigraphic traps. Slide 32, he continued,
shows what geologists call "low hanging fruit," meaning the
North Cook Inlet Field has classic "direct hydrocarbon
indicators" (DHIs). The gas field is located at the top left of
the slide, he said, and is indicated by the two bumps in the
lower part of the seismic line. The velocity of the seismic
signal slows down when it goes through gas, creating what
geologists call gas "push-down." This "push-down" shows up as a
dip in the seismic data, he explained, indicating there is a
thick gas column above the dip. On slide 33 he pointed out the
"flat spots" that indicate a contact between gas and water, and
that this gas is trapped rather than free.
2:19:59 PM
MR. SWENSON, responding to questions, stated that he thought the
size of the North Cook Inlet Field shown in slide 32 is a
reservoir of about 1.2 tcf of gas, and that both the Sterling
and upper Beluga sections have multiple layers that contain gas.
He reiterated that while there has been a significant amount of
exploration in the Cook Inlet Basin, these early phases of
exploration were only for oil, not gas. Other than the 70
recently drilled wells, he said, there has not been a concerted
effort to specifically look for gas.
2:21:44 PM
MR. SWENSON turned to the seismic data shown on slide 34. He
pointed to the area of the slide where the sand, coal, and
mudstone layers "pinch-out" laterally and "up-dip." He
explained that if there is a viable seal in the pinch-out area,
this would constitute a stratigraphic trap. He noted that this
type of play has not yet been significantly looked for in the
Cook Inlet Basin, but that part of the play in Prudhoe Bay is a
stratigraphic trap. He further explained that the volume of gas
contained in this type of stratigraphic trap depends on the seal
capacity and the height of the hydrocarbon column. If the
stratigraphic traps are a very low angle, he said, the volume
can be relatively large.
2:22:51 PM
MR. SWENSON reported that in 2006 the Division of Geological &
Geophysical Surveys initiated a study of the entire Cook Inlet
Basin. He displayed four photographs, slides 35-38, of the
stratigraphy in exposed landforms near Fritz Creek, Fox River,
Homer, and Diamond Gulch areas located along the edge of Cook
Inlet Basin. He explained that this stratigraphy extends all
the way through the Cook Inlet Basin, so the basin's geology can
be determined by studying these exposed landforms. He further
explained that the exploration potential of the landforms
themselves is lessened because the stratigraphy is uplifted and
exposed. Mr. Swenson displayed seismic data on slide 39 and
explained that the division's main focus is to identify and
publish the geology of the basin's edge. This geology will be
very important for "non-structural play types" in the Cook Inlet
Basin, he said.
MR. SWENSON thanked Veritas Geophysical Corporation for
providing seismic data to the division. He noted that the data
is provided through an agreement between Veritas and the
Department of Natural Resources. He said use of this data is
extremely important to state geologists because it gives them
the ability to "get into the subsurface" and to use the exposed
outcrops for extrapolating the information into the Cook Inlet
Basin.
MR. SWENSON next explained that the purple line around the land
and water of Cook Inlet on slide 42 delineates the Tertiary Gas
Potential Fairway. Areas outside of the line have limited gas
exploration potential. He noted that the different colors for
land on the map indicate their status: light green is federal
acreage, pink is Alaska Native Claims Settlement Act (ANCSA)
acreage, and blue is state acreage. All of the offshore acreage
also belongs to the state, he said.
2:25:28 PM
REPRESENTATIVE SEATON asked why Kachemak Bay, east of Homer, is
of such interest to gas companies given that it is located
outside of the high gas potential boundary.
2:25:41 PM
MR. SWENSON related that the interest is only because Kachemak
Bay is located on the basin's edge. He explained that in a
biogenic gas system it is important to have a relatively thick
stratigraphy to accumulate enough gas to migrate into the traps.
However, the Tertiary sediment is thin in Kachemak Bay, so it
was excluded from the area of high potential, he said.
MR. SWENSON next referred to the 2006 Cook Inlet Areawide Sale
depicted on slide 43. He advised the committee to keep in mind
the boundary shown on the previous slide as members looked at
the lease locations. The tracts shown in dark blue were
purchased during the 2006 sale, he said, and the pink is
previously owned tracts. He specifically pointed out that all
of the state acreage along the Sterling Highway was sold in the
2006 sale and that there is significant potential for lands
adjacent to those state leases.
MR. SWENSON then directed the committee's attention to non-
conventional exploration gas and stressed that this would be an
important part of increasing the amount of reserves in the Cook
Inlet Basin. Slide 44 illustrates a "stacked pay" well where
the shallow gas is at a lower pressure than the deeper gas. He
said this requires the running of two or three "completion
strings" to keep the two pressure zones separate. If a
gas/water contact moves into the well bore, he explained, the
water causes significant production problems. To shut off the
water the producer must go through the very expensive process of
pulling the entire tubing string out of the well. He advised
that going back and fixing "watered-out" wells in the Cook Inlet
will be one way for increasing production from known reserves.
2:28:58 PM
MR. SWENSON reported that tight gas sands, illustrated on slide
46, are another type of non-conventional exploration gas. He
explained that "porosity" is the size or amount of free space
between the sand grains and "permeability" is how well fluid can
flow between those pore spaces. He noted that a number of well
bores in the Cook Inlet Basin have very prolific production
because they are in sands with high porosity and high
permeability. He explained that in tight gas sands the
deliverability is significantly less because the porosity and
permeability are low. However, he emphasized, tight gas sands
are a potential target because they have the potential to
reservoir significant resource. For example, he said, producing
10 million cubic feet per day from wells in fractured shale was
inconceivable 20 years ago. He stressed that diligent
application of new technologies is essential.
2:30:41 PM
CO-CHAIR GATTO inquired as to whether there has ever been a
major gas field that became exposed due to uplifting and then
subsequently vented completely into the atmosphere.
2:31:09 PM
MR. SWENSON explained that the oil seep shown in the Gulf of
Alaska photograph is exactly that scenario. Of course, he said,
exhumed gas fields are tougher to see than exhumed oil fields
because the evidence is not really visible. There are gas seeps
all around, he explained, including one that was recently
discovered by the division in the Port Moller area of Bristol
Bay.
2:31:57 PM
CO-CHAIR GATTO asked if it is possible to establish the date of
a massive venting and correlate whether that venting led to a
warming trend so as to determine whether man's contribution to
global warming is significant or not.
2:32:32 PM
MR. SWENSON advised that while he had not seen any actual
calculations, he assumed that the amount of methane generated by
biodegradation at the earth's surface is far more than the
release from one gas field. For example, he said, the Susitna
Basin produces an astounding amount of methane, and all across
the state bubbles can be seen coming up from the tundra.
2:33:17 PM
CO-CHAIR JOHNSON queried as to whether new technology is
actively being developed by the industry.
2:33:41 PM
MR. SWENSON stressed that the oil companies are being very
diligent in this regard. The use of technology in the Cook
Inlet Basin must be put into the context of the initial reserve
amount of 8.2 tcf of gas, he explained. At that time, the
amount of deliverability from those fields was tremendous, but
the market was only just developing. As the deliverability
starts approaching the "off-take," or the market, those
technologies will start coming into effect. He emphasized that
as time goes on, technology will play an important role in
adding reserves to the Cook Inlet Basin.
2:34:55 PM
CO-CHAIR JOHNSON asked what is the reality of running out of
gas.
2:35:20 PM
MR. SWENSON stated that the market drives the amount of
exploration what the market is willing to handle in volume as
well as the price. Much of the exploration from this point
forward, he said, will require additional investment by the
exploration companies. The ability to have access to the market
at a fair price is going to be incredibly important. He
emphasized that there is definitely significant resource
potential in the Cook Inlet. However, he warned, the hurdles
toward that exploration can be onerous. These hurdles include
land access, the cost of drilling, the cost of seismic
acquisition, and the permitting. Concerning actually running
out of gas, he stated that any hydrocarbon is a finite resource
assuming that all of the resource has been identified and that
is really the key point.
2:36:46 PM
CO-CHAIR JOHNSON noted that the legislature has control over the
hurdle of permitting and ensuring that it happens in a
responsible way.
ADJOURNMENT
There being no further business before the committee, the House
Resources Standing Committee meeting was adjourned at 2:37:21
PM.
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