Legislature(2007 - 2008)Anch LIO Conf Rm
12/01/2008 02:00 PM House RESOURCES
| Audio | Topic |
|---|---|
| Start | |
| Overview(s): Matters Pertaining to the Dnr Permitting Process | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
JOINT MEETING
HOUSE RESOURCES STANDING COMMITTEE
HOUSE JUDICIARY STANDING COMMITTEE
Anchorage, Alaska
December 1, 2008
2:31 p.m.
MEMBERS PRESENT
HOUSE RESOURCES
Representative Carl Gatto, Co-Chair
Representative Craig Johnson, Co-Chair
Representative Paul Seaton
Representative Peggy Wilson
Representative Scott Kawasaki
HOUSE JUDICIARY
Representative Jay Ramras, Chair
Representative Nancy Dahlstrom, Vice Chair
Representative John Coghill
Representative Bob Lynn
Representative Ralph Samuels
Representative Max Gruenberg
MEMBERS ABSENT
HOUSE RESOURCES
Representative Anna Fairclough
Representative Bob Roses
Representative Bryce Edgmon
Representative David Guttenberg
HOUSE JUDICIARY
Representative Lindsey Holmes
OTHER LEGISLATORS PRESENT
Representative Mike Chenault
Representative Kyle Johansen
Representative-Elect Charisse Millet
Representative-Elect Kathy Muñoz
COMMITTEE CALENDAR
DNR Permitting Process Testimony from Department of Natural
Resources, DNR, Division of Oil & Gas, Aurora Power, Escopeta,
Exxon Mobil Corp.
PREVIOUS COMMITTEE ACTION
No previous action to record
WITNESS REGISTER
DANNY DAVIS, President
Escopeta Oil Company ("Escopeta")
Houston, Texas
POSITION STATEMENT: Provided comments and answered questions
during the presentation on matters pertaining to the DNR
permitting process.
BRUCE WEBB, Operator
Web Petroleum Services;
Manager
Land and Regulatory Affairs
Aurora Gas
POSITION STATEMENT: Provided comments and answered questions
during the presentation on matters pertaining to the DNR
permitting process.
CRAIG HAYMES, Production Manager
ExxonMobil Corporation
Anchorage, Alaska
POSITION STATEMENT: Provided the committees with an update of
the Point Thomson project.
JOE CAMPBELL, Senior Drilling Superintendant
ExxonMobil Corporation
(No address provided)
POSITION STATEMENT: During hearing regarding Point Thomson,
offered comments.
TOM IRWIN, Commissioner
Department of Natural Resources
Anchorage, Alaska
POSITION STATEMENT: During hearing regarding Point Thomson,
provided a prepared statement.
KEVIN BANKS, Director
Division of Oil & Gas
Department of Natural Resources (DNR)
Anchorage, Alaska
POSITION STATEMENT: During discussion of Point Thomson,
answered questions.
MARTY RUTHERFORD, Deputy Commissioner
Office of the Commissioner
Department of Natural Resources (DNR)
Anchorage, Alaska
POSITION STATEMENT: During discussion of Point Thomson project,
answered questions.
ACTION NARRATIVE
CHAIR JAY RAMRAS called the joint meeting of the House Resources
Standing Committee and the House Judiciary Standing Committee to
order at 2:31:43 PM. Representatives Seaton, Wilson, Gatto,
Johnson, Coghill, Dahlstrom, Samuels, and Ramras were present at
the call to order. Representatives Kawasaki, Gruenberg (via
teleconference), and Lynn arrived as the meeting was in
progress. Also present were Representatives Chenault and
Johansen and Representatives-Elect Millet and Muñoz.
^Overview(s): Matters pertaining to the DNR permitting process
CHAIR RAMRAS announced the only order of business would be the
consideration of matters pertaining to the Department of Natural
Resources (DNR) permitting process, with testimony from DNR's
Division of Oil & Gas, Aurora Power, Escopeta Oil Company, and
ExxonMobil Corporation.
CHAIR RAMRAS expressed his desire that this
meeting would result in a better understanding of the
relationship between the oil and gas industry, DNR, and the
executive branch of Alaska.
2:35:50 PM
DANNY DAVIS, President, Escopeta Oil Company ("Escopeta"), noted
that Escopeta has been doing business in Alaska since 1994. He
spoke of a large lease block (ph) in the water with a large
reservoir that Escopeta could develop, partly with Pacific
Energy Resources, LTD (Pacific Energy), and partly on its own.
2:36:17 PM
BRUCE WEBB, Operator, Web Petroleum Services; Manager, Land and
Regulatory Affairs, noted that Web Petroleum Services is a
contracting company that assists Pacific Energy, Escopeta, and
Fox Petroleum, while Aurora Gas is a small, independent gas
producer in Cook Inlet. He mentioned his involvement with
exploration and production and said he has three off-shore
leases. Prior to that, he noted, he worked for the Division of
Oil & Gas for 11 years in the Permitting and Compliance Section.
CHAIR RAMRAS asked Mr. Webb to confirm that he did the
regulatory work for Escopeta and that Aurora Gas is at the root
of a situation involving gas in Fairbanks, "cutting off 400
customers here in Anchorage, and turning them over to ENSTAR
[Natural Gas Company]," and "the whole RCA problem that has
ensued."
MR. WEBB answered that is correct.
2:37:56 PM
MR. DAVIS mentioned leases, part of which Escopeta shares 50:50
with Pacific Energy, and the other Escopeta owns itself as its
Kitchen prospect, which he said Escopeta believes could hold 800
million barrels of oil and approximately 4 trillion cubic feet
(tcf) of gas. The only way to know for certain is to drill, he
remarked. Corsair and East Kitchen combined have an estimated
300 million barrels of oil and 2-2.5 tcf of gas to be developed.
He explained that the structures were found in the mid '60s by
Shell, but were never fully developed. In 2006, Mr. Davis said,
Escopeta attempted to transport a jack-up rig to the Cook Inlet
Basin; however, due to certain circumstances, that plan did not
transpire. He related that last year he showed Kevin Banks of
the Department of Natural Resources (DNR) how much money
Escopeta had expended, and DNR worked with the company to
perpetuate what leases it had for another year so that Escopeta
could get the aforementioned rig to Cook Inlet.
MR. DAVIS said all the lease blocks "that are now in the water"
and owned by Escopeta expire December 31, 2008, as do the lease
blocks owned by Pacific Energy. The years of work that has been
done thus far have resulted in Escopeta having a rig contract
and heavy lift vessel contract and the ability to begin drilling
wells in April or May of 2009, depending on when the
aforementioned rig can be put in place.
MR. DAVIS said he has been working closely with Pacific Energy
in the development of a shared reservoir. A drilling contract
was made in Pacific Energy's name with the knowledge that
Escopeta would have to "participate in half of it." He said
there are some lease blocks in the middle of the acreage shared
by Escopeta and Pacific Energy, which Forest Oil Company forgot
to include in its unit before Pacific Energy took over. Pacific
Energy subsequently requested to have those two leases in "that
unit," and that was going to be "our original drill site." The
state denied both leases. The case went to appeal, and the
appeal has been "sitting there for six months." Mr. Davis
indicated that the state required Escopeta and Pacific Energy to
sign a contract for a heavy-lift vessel to move the rig in order
to participate, and the contract was due November 1. Currently,
there is no ruling on the appeal "to put the drill site in, in
the middle of our leases," nor has there been a ruling "on the
fact the fact that they were going to extend our leases." Mr.
Davis said Escopeta has a $150 million commitment to Blake
Drilling Company for a three-year drilling contract. He stated,
"They wanted us to execute a $10 million contract with heavy
lift vessel, but we didn't have any leases to drill on because
we knew they were going to expire." He said he has asked the
state for a two-year extension "on these blocks" so Escopeta can
set up the rig.
MR. DAVIS predicted that upon discovery, in less than 18 months
there could be gas flowing into the system, which would enable
gas to be supplied in the Cook Inlet Basin. Development of oil
would require building larger platforms, which would take extra
time. He expressed confidence that the job can be done, and
reiterated that Escopeta is staged to do it but remains in limbo
because it cannot deliver to its partners who will drill the
projects unless it knows where it stands. Mr. Davis stated that
that is why he petitioned the state and Mr. Banks for an
extension on the leases. He said it is confusing to be asked to
sign a $10 million contract to bring a rig to Alaska without
first having leases and a drill site. He said if the company
could drill, an estimated 100,000 barrels a day of oil could be
added to the Cook Inlet Basin, along with enough cubic feet of
gas to take care of the homes in need.
2:43:30 PM
MR. DAVIS emphasized that Escopeta is not asking for money or a
handout, just an opportunity.
CHAIR RAMRAS reminded members of the joint committee that
currently the market in Alaska is only able to bring 25 percent
of its oil out of the Cook Inlet at tide water, is bringing
about 50 percent of its oil from Valdez, and is importing the
other 25 percent of its oil from around the world; therefore,
the ability to make significant discoveries flowing through the
Cook Inlet would not only be a boon for the state treasury, but
also for consumers statewide.
MR. DAVIS recollected that in the '60s, about 250,000 barrels a
day were being moved in Cook Inlet.
CHAIR RAMRAS offered his understanding the amount was
approximately 200,000 barrels a day, and now it is below 10,000
barrels a day.
MR. DAVIS said, "I truly believe we can make a difference to
that. We just need the opportunity, and we're going to pay for
the opportunity."
2:46:28 PM
MR. DAVIS, in response to Co-Chair Gatto, explained the steps
that were taken during a seven-year period, including
contracting with a jack-up rig, hiring a heavy-lift vessel to
move it, a trip to Washington related to the Jones Act waiver,
and losing the rig to a much more lucrative contract. With
Pacific Energy's help, a new contract was executed with Blake
Drilling Company and with a heavy-lift vessel. The contract
only becomes valid if the leases are extended, a provision that
Escopeta wrote into the contract to protect itself from a $10
million liability if the leases are not extended. Mr. Davis
said there are partners willing to work with Escopeta on these
projects; the company does not have the $50 million it will take
to move the rig to Alaska and drill the wells. He offered to
provide the necessary information to prove the funds are there
and from where they are coming. The seven-year period, he said,
is "the term of the oil and gas lease you sign with the State of
Alaska."
MR. DAVIS, in response to a follow-up question from Co-Chair
Gatto, assured him that there would not be a repeat situation
wherein the rig ended up being transported somewhere else again.
He said the reason is that the money has been paid and the Blake
151 hails from Louisiana and Texas and "they're not going
anywhere else."
2:50:05 PM
MR. DAVIS, in response to a question from Representative
Coghill, said Escopeta has asked for an extension only on its
own leases. If Forest Oil Corporation is not granted an
extension, he relayed, Escopeta will still be able to drill its
prospects, even though the two companies share the same
reservoir. In further response, Mr. Davis explained that when
Escopeta knew the rig was not going to move, the company wrote
to Secretary Churdal (ph), letting him know Escopeta had been
put on hold, and that the company would notify him when it was
ready to move. Mr. Davis said he notified the secretary two
weeks ago that Escopeta would probably be "moving" next April
and asked him to make known any problems with the plan. He said
so far, Escopeta has not heard back. He concluded, "As far as I
know, we're still in business."
2:52:01 PM
REPRESENTATIVE SAMUELS stated his assumption that DNR is going
to want a commitment from Escopeta that if the lease is
extended, the company would actually perform or pay a penalty.
MR. DAVIS answered, "That's the way it was written last year."
He explained that Escopeta has not yet discussed the issue of a
penalty. In response to Representative Samuels, he clarified
that he meant a penalty related to an extension.
2:53:01 PM
REPRESENTATIVE GRUENBERG recollected that Mr. Davis had stated
that the lease blocks had been forgotten to be included. He
asked how that happened.
MR. DAVIS reiterated the information regarding the failed leases
and pending appeal. To a follow-up question, he suggested
Representative Gruenberg had probably misunderstood regarding
lease blocks being forgotten. He said the chair of Pacific
Energy discovered that the lease was going to expire and got Mr.
Webb to petition the State of Alaska to see if it would
reinstate those leases into the Corsair unit. He specified that
they would be the southern-most leases in that unit.
REPRESENTATIVE GRUENBERG asked Mr. Davis if the state provided
him with a written opinion or decision denying those leases, and
if so, what did it say?
MR. DAVIS said the state did not provide anything to him,
because the request was made by Pacific Energy. He deferred to
Mr. Webb.
2:55:12 PM
MR. WEBB noted that he had provided to the committees the
Corsair Unit extension appeal document.
CHAIR RAMRAS noted that it is in the committee packet.
2:57:05 PM
REPRESENTATIVE SEATON recalled that Mr. Davis had said that gas
could be available fairly quickly, but that oil production takes
longer. He asked if there are separate reservoirs or if the
Alaska Oil & Gas Conservation Commission (AOGCC) has to
determine whether gas can be "blown off" before the oil is
recovered.
2:57:46 PM
MR. DAVIS responded that there are two separate reservoirs. He
said it is believed that oil reservoirs, which start at about
13,000 feet, continue down to 18,000 feet. He mentioned a
presentation made to AOGCC, which addressed the issue of
satellite platforms used to develop gas reserves at a quicker
rate, and he suggested Mr. Webb could provide the information
from that presentation.
REPRESENTATIVE SEATON said he wants to know that there is
agreement that the gas could be taken off rather than be held
for enhanced oil recovery or anything like that.
MR. WEBB shared his understanding that there was not any such
agreement. He said the presentation basically focused on single
casson (ph) drilling platforms, and he stated his belief that it
is generally acknowledged that the different reservoirs are
separate and distinct and can be managed separately. He said he
has not heard plans for enhanced oil recovery, although he said
he assumes that would be water injection and gas.
MR. DAVIS, in response to a request, reiterated Escopeta's
projected timeline.
3:00:33 PM
CHAIR RAMRAS asked Mr. Webb if he thinks DNR is more interested
in getting lease bonuses and payments or in developing oil and
gas prospects in the Cook Inlet.
MR. WEBB opined that DNR is more interested in lease bonuses and
payments. He said the denial of the Corsair expansion made no
sense and was not in the best interest of the state, Cook Inlet
consumers, the company, or anyone. He said it seemed like DNR
wished to warehouse the leases rather than let a willing and
ready company explore the area.
3:01:33 PM
CHAIR RAMRAS referred to a letter to Governor Palin from
Escopeta Oil, in which Mr. Davis wrote that if the governor
decides to continue her work in Alaska, Escopeta and Pacific
Energy, as well as others, could use her help in rebuilding the
oil and gas industry in the Cook Inlet Basin to meet the need of
all Americans. He asked Mr. Davis to expound on that idea.
3:02:22 PM
MR. DAVIS stated that the decisions that Commissioner Tom Irwin
and Kevin Banks make will affect the future of the oil and gas
industry. He expressed frustration with America's dependence on
the Middle East and said Alaska has the ability to help the rest
of the United States get back on its feet. In response to a
follow-up question, he emphasized the necessity of getting help
from DNR to make the drilling possible.
3:05:17 PM
MR. WEBB, in response to Representative Wilson, said the
timeframe for a reconsideration is 30 days, while an appeal to
the commissioner has no timeline.
3:06:26 PM
REPRESENTATIVE COGHILL said he wants to know if DNR is acting in
Alaska's best interest or if "the combination of those two
leases somehow creates a conundrum for us."
MR. DAVIS responded that Forest Oil Corporation no longer exists
here; Pacific Energy owns the leases "to the north of us." He
reviewed what has been done thus far in conjunction with those
leases. He said other companies would also use the rig once it
is moved up to Alaska, and the rig would be in Alaska for three
or four years. In response to a follow-up question, he said
Pacific Energy inherited their leases from Forest Oil
Corporation about a year and a half ago.
MR. WEBB noted it was August 2007.
MR. DAVIS, in response to a question regarding expansion,
indicated that the leases in question hold the most oil and gas
of any, and for some unknown reason, Forest Oil Corporation
failed to include those leases in its Corsair Unit.
REPRESENTATIVE COGHILL recollected having heard some discussion
about "them losing that and then having to go out to an open
market bidding on that particular set."
MR. DAVIS replied that in about 30 days, the companies involved
stand to lose everything. In response to Representative
Coghill, he recalled that the prime lease area expired in May,
but an extension was requested in order to "put it back into the
unit" and "move that rig up there and drill that location." The
lease area totals 11,364 acres. Mr. Davis said when he was
asked to sign a contract for $10 million without a drilling
lease, it made him feel like "the Wizard of Oz told me to go get
the broomstick of the Wicked Witch of the West." Escopeta got
the contract to the state in time, he added.
REPRESENTATIVE COGHILL said he appreciates Mr. Davis' tenacity,
but he explained he is trying to figure out the legal conundrum
in which the state might have put itself because of laws it has
put in place or the policies that DNR must follow.
MR. DAVIS stated, "If these leases don't get extended and we're
not going to have any legal action, I'll just go back to Texas
and drill wells there." He explained that he is not here to
fight the state, but rather to work with it to rebuild the
industry.
REPRESENTATIVE COGHILL said he would like to overlay Mr. Davis'
ideas onto regulatory code.
MR. DAVIS suggested that the rule to follow is a common sense
one of asking whether something is right or not.
3:12:58 PM
MR. WEBB, regarding the timeline, said Forest Oil Corporation
formed the Corsair Unit and included four leases, and it did so
under the geologic information it had. When Pacific Energy
bought Forest Oil Corporation in 2007, it began cooperating with
Escopeta, sharing seismic information and redefining the
reservoir. That, he said, is when Pacific Energy saw that there
were two leases "that were actually in common with the entire
reservoir." He said Pacific Energy did not become the operator
of the Corsair Unit until mid-November of 2007. What Pacific
Energy inherited from Forest Oil Corporation, he said, was a
drilling commitment to drill a well 34 days after becoming the
operator, which is why the company applied for an expansion and
an extension simultaneously. He said there is no legal conflict
between the two; "the two companies, if they wanted to, could
form one unit over the entire reservoir and then do an
equalization of interest."
REPRESENTATIVE COGHILL surmised that the inheritance of the
commitment to drill by the new partners could not be performed
within the given timeline.
MR. WEBB answered that is correct. He said it was Pacific
Energy's assumption that the state, in the past, had granted
extensions to unit operating agreements, and that [getting an
extension] would not be difficult if Pacific Energy could prove
it could responsibly develop and meet future commitments, which
it has done. He said Pacific Energy has "cured" a couple of
default notices and has complied so far with every stipulation
that DNR has given. He said, "As far as Pacific is concerned,
they're ready to go except for losing those expansion acreages."
3:15:30 PM
MR. DAVIS shared an anecdote to illustrate how history repeats
itself, concluding with an invitation to ExxonMobil Corporation
to come help drill the Cook Inlet Basin. In response to Co-
Chair Gatto, Mr. Davis said he thinks neither Mr. Banks nor
Commissioner Irwin have been restrictive, but it is time to do
something before the gas runs out, and Escopeta is ready for
action.
3:19:20 PM
MR. WEBB noted that in December 1993, the Rowan Drilling Gilbert
Road drilling rig left Cook Inlet, and for 15 years there has
been no jack-up rig in the Cook Inlet. During those 15 years,
he said, not one single major oil and gas company has bid on an
offshore lease, yet every lease sale for 50 years has had bonus
bids and lease payments made by individuals and independents.
He defined "offshore" as [a rig] that is not adjacent to land
that can be reached "directionally" or adjacent to an existing
platform that can be reached "directionally." He said, "And
what that basically has been is nothing more than a charitable
contribution to the state, because there's absolutely no way
that you can develop an offshore lease without a jack-up
drilling rig." Today, he emphasized, there are rising taxes,
declining revenues, higher utility costs, and fiscal
uncertainty, and there are two companies in Alaska, poised to
drill, who keep meeting with resistance and onerous
requirements. He said those companies are not asking for
special consideration, "they just want some of the road blocks
lowered a little bit so that they can drill."
The committee took an at-ease from 3:21:11 PM to 3:25:44 PM.
3:26:38 PM
CRAIG HAYMES, Production Manager, ExxonMobil Corporation, began
by reminding the committee that ExxonMobil Corporation
(ExxonMobil) has been working on the Point Thomson project for
over a year. Mr. Haymes then introduced the project team
members and some of the key contractors that were present. He
highlighted that ExxonMobil has assembled a leadership team that
has experience of 160 years between six individuals.
3:29:10 PM
MR. HAYMES turned the committee's attention to the PowerPoint
entitled "Point Thomson Project - Progress Update," which shows
a photograph of some of the first barges to arrive on the site
in 2007. He informed the committee that over 150 people have
been working on this project for quite some time and with the
receipt of some permits will ramp up to over 200 people within
the next three months. In fact, ExxonMobil will be ready to
drill by February 2009. Mr. Haymes informed the committee that
ExxonMobil has already spent and committed $125 million and no
drilling has occurred. The initial phase of $1.3 billion will
result in $250 million per year in expenditures. He mentioned
that this project is a world class project that requires world
class people and expertise, much of which can be provided by
Alaska's contracting community. Point Thomson, he reminded the
committees, contains 25 percent of the known gas resources on
the North Slope. The gas of Point Thomson will be essential to
the success of the gas pipeline. "It's in everybody's interest
to drill, it's in everybody's interest to move forward with the
development; it can only help all of us," he stated. He then
turned attention to slide 2 of the presentation, which
illustrates that Point Thomson is about 60 miles east of Prudhoe
Bay, which is a remote and environmentally sensitive area
adjacent to the Arctic National Wildlife Refuge (ANWR) and 22
miles east of the nearest development, Badami. Point Thomson's
reservoir is 12,000 feet beneath the surface and straddles the
coast line. The pressure for Point Thomson is 10,200 pounds per
square inch, which is over twice that elsewhere on the North
Slope.
MR. HAYMES moved on to slide 3 entitled "Point Thomson - Initial
Development Phase," which relates that production is targeted
for the end of 2014 and the project is on schedule to meet that
schedule. The base plan is to produce 10,000 barrels per day of
condensate through two wells, drill three wells in oil, and tie
in successful oil wells. He related that the facilities will be
designed to the full development scenario of an export pipeline,
which will be capable of 70,000 barrels per day of liquids and
the gas pipeline will be built at a later date. He highlighted
that this facility will have process facilities, liquids
pipeline, an airstrip, and a camp. The facility is being
designed such that it can be expanded rapidly.
3:32:59 PM
MR. HAYMES turned the committee's attention to the slide
entitled "Point Thomson Project - Clear & Committed Timeline,"
which illustrates that ExxonMobil has moved forward on this
project despite being in dispute with the state. For example,
ExxonMobil has worked on its drilling permits, has secured a rig
to which it has done significant upgrades, ordered long-lead
time equipment, started engineering design, and procured
materials. He pointed out that the activities go all the way to
production by 2014, and therefore ExxonMobil and the 26 other
owners have been doing everything on the critical path.
3:34:00 PM
REPRESENTATIVE WILSON asked if when Mr. Haymes refers to
"production" whether he is speaking of oil or gas production.
MR. HAYMES answered both. The initial phase, he explained, will
delineate and develop the oil, gas, and condensate. He said
that ExxonMobil knows it can obtain a minimum of 10,000 barrels
per day through the facility. The facility design, he
reiterated, is being developed for more than the aforementioned
minimum. The hope, he related, is that the oil wells will be
successful and can be tied in to produce the oil as well. How
much will be produced is always a question.
REPRESENTATIVE WILSON inquired as to what ExxonMobil will do if
it arrives at 2014 and there's no gas pipeline.
MR. HAYMES explained that at this phase, the gas will be cycled
through the facilities and reinjected back into the ground. The
resource is being conserved, which is important because every
molecule of gas that leaves the reservoir results in the loss of
condensate. Mr. Haymes clarified, "So, we're putting all of the
gas back into the ground, saving that for eventually when there
is a gas sales development.
REPRESENTATIVE WILSON related her understanding that the
aforementioned is no different than what anyone else is
currently doing.
MR. HAYMES noted his agreement, adding that the gas will be used
to enhance liquids recovery.
3:35:54 PM
CHAIR GATTO recalled past discussion about development of Point
Thomson and the oil rim. At that time, not much was known nor
is much known about the oil rim, which means there is discussion
about developing oil without knowing what there is. Therefore,
he asked if ExxonMobil assumes that oil is available in
quantities that are appropriate, or is there still a question as
to how much oil is there and how long it will take to start
exporting molecules of gas. He related his understanding from
the AOGCC that a lot of oil won't be left behind just to draw
down the gas well.
MR. HAYMES said ExxonMobil knows there is oil and gas present
[at Point Thomson]. Furthermore, ExxonMobil has knowledge that
there is more gas than oil. He explained that oil is heavy so
that it sits at the bottom of the reservoir and the reservoir
quality degrades the deeper one goes. Since the oil is heavy,
it doesn't flow as easily and it's thin relative to the amount
of gas. The oil sits between water and gas. Therefore, when
the oil flows, water and gas will also flow because the gas in
the water flows more easily than the oil. In doing the
aforementioned, water and gas are being produced. The facility
ExxonMobil is constructing can handle the aforementioned, the
water and the gas as well as the reinjection of the gas into the
reservoir. Three of the five wells that ExxonMobil will drill
target oil. Mr. Haymes related that the targets are at the
extreme of the reservoir to prove-up and determine the
productivity of the oil. Eventually, he explained, when the oil
wells are depleted, they become gas wells. Therefore, these
wells have dual utility. Mr. Haymes informed the committee that
each well costs in excess of $100 million. In comparison, the
Prudhoe Bay well costs $6-$8 million, which means that over 15
Prudhoe Bay wells amount to one of these wells. The
aforementioned illustrates that when a well is drilled, the
desire is to do so that they can be used.
3:38:52 PM
MR. HAYMES then moved on to slide 5 entitled "Point Thomson
Project - Nabors 27E Drill Rig Upgrade," which relates that
ExxonMobil has done $20 million in rig upgrades and Nabors is
spending money on top of that for additional upgrades. The [rig
upgrades] have been going on since March of 2008. He informed
the committee that when the rig is complete it will have 1
million pounds of pulling strength, which means that it will be
in the top 25 percent of the most powerful land rigs in the US.
He further informed the committee that the mud system has to be
overhauled and three mud pumps built to pump 1,600 gallons per
unit of mud. This will be the heaviest drilling mud in the
world, and therefore it poses some fairly significant
challenges. Because such large pumps are necessary, a new mud
pump module must be built. The module was built by Aurora [Gas
LLC] in Anchorage. Also, the engines have had to be overhauled
because of the need for more power. The derrick is being
rebuilt and the draw works are being replaced. The
aforementioned work is on schedule, and therefore the rig will
be recommissioned by December 2008/January 2009 and will be
ready to be mobilized to Point Thomson in February. He then
turned the committee's attention to slide 6 entitled "Wells
Required for High-Pressure Operations," which shows a photo of a
typical wellhead that will be used at Point Thomson. He
reviewed the details of the size and shape of the wellhead.
MR. HAYMES highlighted that this field is located in an
environmentally sensitive area, a significant traffic area for
whaling. He informed the committee that all of ExxonMobil's
wells will be drilled from onshore, which means the wells will
be long-reach wells under high pressure. Therefore, a lot of
planning and due diligence is necessary to successfully drill
such wells. ExxonMobil, he related, has significant expertise
in high pressure drilling. In fact, every well ExxonMobil has
drilled in Point Thomson has been successful. Moving on to
slide 7 entitled "Point Thomson Project - Site Activity," which
shows a photo of the site and highlights specific areas.
ExxonMobil has laid out a plan specifying where the barge would
land and where there would be an ice road. He noted that the
ice road will be built from both the Endicott Causeway and Point
Thomson. New tanks, camp facilities, etcetera are being
installed. The intent was to do as much as could be done in the
summer so that when the ice road is built and the rig is
mobilized, drilling can begin. The aforementioned, he said, has
been successfully accomplished by ExxonMobil.
3:44:49 PM
REPRESENTATIVE SAMUELS inquired as to how much of the
aforementioned work was done since November 2006.
MR. HAYMES [referring to slide 7], said "All of this work, here,
has been done this year and summer." He mentioned that last
year a lot of survey work and site visits were performed. This
year, the bulk of the work was on-site activity.
3:45:30 PM
REPRESENTATIVE WILSON inquired as to how many successful wells
ExxonMobil has drilled in Point Thomson.
MR. HAYMES recalled that of the 19 exploration wells drilled at
Point Thomson, ExxonMobil, as an operator, has drilled 13 of
those all of which were successful. However, two wells weren't
successful due to unique pressure issues.
MR. HAYMES, regarding permits, turned the committee's attention
to slide 8 entitled "Point Thomson Project - Permits." He
informed the committee that after the planning for the summer
work, ExxonMobil applied for and received five permits, all of
which were approved. Of the five permits, one permit was from
DNR to provide access to operate on land to perform gravel work
to set conductors at subsurface levels. ExxonMobil also
received a permit from the Alaska Department of Fish & Game
(ADF&G) to withdraw water from fish bearing lakes. ExxonMobil
also received a permit from the North Slope Borough to conduct
operations under their land management regulations.
Furthermore, ExxonMobil received a conflict avoidance agreement
from the Alaska Whaling Commission such that ExxonMobil agreed
to shut down its barging operations so as not to interfere with
subsistence activities. ExxonMobil also received a US Fish &
Wildlife permit for the incidental taking of wildlife, if
necessary for the protection of human safety. Mr. Haymes
relayed that ExxonMobil has been working collaboratively with
all the permitting agencies. Slide 9 entitled "Point Thomson
Project - Barge Route," shows the barge route utilized to move
all the equipment to Point Thomson this summer. The barging
route, he noted, was modified in consultation with the Alaska
Eskimo Whaling Commission in order to avoid interference with
whaling operations. The route is about 60 miles, which amounts
to about 12 hours. During the summer, there were about 15-20
barge runs. At the request of the Alaska Eskimo Whaling
th
Commission, ExxonMobil shut down on August 20 for three weeks.
Mr. Haymes opined that ExxonMobil has worked positively with
[Native] Alaska villagers and will continue to do so. He then
highlighted slide 10, which is a photo of some of the first
barges to arrive at the site while slide 11 shows photos of
various equipment that has been offloaded from the barges.
Furthermore, in accordance with the approved permits 700 tons of
material and equipment has been delivered to the site. He then
turned to slide 12, which highlights the gravel work performed
at the site. In fact, ExxonMobil has constructed a helicopter
landing site, including a camp facility that would allow people
to stay overnight, a fuel tank farm utilized for winter
drilling, as well as two well pad areas. He specified that the
gravel pad is a 10 acre site. As slide 11 relates, ExxonMobil
has drilled two well conductors down to 120 feet where they are
cemented into the location. Mr. Haymes explained that a
conductor is a large piece of pipe that is about three feet in
diameter and offers a safe wall allowing a drill rig to drill.
Drilling can't begin until the conductor is in place, otherwise
the drilling mud would be invasive. Mr. Haymes relayed, "We
have started drilling."
3:51:00 PM
REPRESENTATIVE SAMUELS asked if a specific permit is necessary
to drill the well conductors.
MR. HAYMES answered yes, explaining that ExxonMobil needed
approval of the land use permit, which specifically stated that
it would install conductors and sellers on site. Therefore, all
the work has been done in accordance with state laws,
regulations, and approved permits. Installation of the first
two wells was as much as could be accomplished this summer. He
then informed the committee that the ice road requires knowledge
of the water depth, and crews completed water depth surveys,
bathymetry surveys, this September. Slide 15, he pointed out,
is a recent overhead photo of the site. He then showed the
committees a short video clip of the Point Thomson project site
in which he pointed out various aspects of significance. He
emphasized the remoteness of the area.
3:53:41 PM
MR. HAYMES then directed the committees' attention to slide 17,
which provides a list of contributing companies. There were
over 40 Alaskan contractors that helped with this project. As
mentioned earlier, over 150 people have worked at the site. He
mentioned some of the contractors that aren't on the list, and
said that every day the list of contributing
companies/contractors grows. Slide 18 illustrates the 50-mile
ice road along the coast line to Point Thomson. The ice road,
he related, will employ 30-40 people for months to build it and
maintain it. Slide 19 offers details regarding the construction
of an ice road, which includes the construction of a mile-long
runway that must be able to withstand the landing of large
aircraft such as Hercules C-133 with a 155,000 pound payload.
The ice road, he related will require 50 tons of equipment to
build it. Furthermore, 51 million gallons of water will be used
in the construction of the ice road. He explained that an ice
road is built by drilling into the ocean, flooding, and letting
it freeze. The aforementioned is done until the desired
thickness is achieved. Since some of the modules that will
travel on the ice road are 1 million pounds, the ice road will
have to be a minimum of five feet thick or touching bottom. Mr.
Haymes informed the committees that the ice road can't be built
today because of the weather. As soon as the ice depth in the
ocean is two feet deep, road construction can begin. Therefore,
within two weeks, ExxonMobil will be waiting on permits [for the
ice road].
3:56:08 PM
MR. HAYMES, moving on to slide 20 entitled "Point Thomson
Project - Permits," pointed out 22 permits are necessary to
build the ice road and drill. Of those 22 permits, 16 are in
hand or on their way and 6 are of concern. He said that two
permits are being denied, one of which is a land use permit and
the other is the plan of operations. There are four other
permits for which ExxonMobil doesn't know the status, including
a temporary water use permit from DNR, a consistency review from
DNR, a geophysical permit from DNR, and drilling permits from
the AOGCC. The land use permit and temporary water use permit
are necessary, otherwise the ice road can't be built. After
construction of the ice road, permits for the plan of
operations, consistency review, geophysical, and drilling are
necessary to actually drill. With regard to correspondence that
ExxonMobil didn't want to build the ice road to do site
remediation, Mr. Haymes said that's incorrect. The plan is to
build the ice road to drill and perform site remediation. In
fact, ExxonMobil has been working on site remediation with AOGCC
since June of 2007 on 10 wells. Furthermore, funding is in
place to do so. The intent is to build the ice road to drill,
but also use that infrastructure to perform other work. A
number of companies have called Exxon to ask to use the ice road
and ExxonMobil has been working in confidence on commercial
arrangements to do so. Mr. Haymes opined that it's in
everybody's interest to drill.
3:58:31 PM
MR. HAYMES, referring to slide 21, highlighted that once this
project is complete Point Thomson will be the world's highest
pressure gas cycling project. The project is in its initial
phase of development. Mr. Haymes pointed out that there are 27
owners at Point Thomson who have already spent $800 million plus
$125 million. This phase will cost another $1.2 billion on top
of that.
3:59:12 PM
REPRESENTATIVE SAMUELS inquired as to the cost per mile of the
ice road.
MR. HAYMES responded that although the information is
proprietary, it amounts to $10s and $10s of millions.
REPRESENTATIVE SAMUELS inquired as to what happens to all the
information, body of work, the $800 million has purchased.
MR. HAYMES answered that the information is proprietary, and
therefore would stay with the owners. However, he related that
all of the data is being shared with the AOGCC through a
confidentiality agreement, which has been the case since August
of last year. The aforementioned has been done because "we"
believe it's important to move forward with development of this
field. Furthermore, [ExxonMobil] recognizes that the AOGCC will
need to help ExxonMobil make decisions with regard to future
development and offtakes for the field.
REPRESENTATIVE SAMUELS questioned, "Why would [ExxonMobil] spend
the money and why would [the AOGCC] issue even one permit, if
they ... want to take the leases back and ... go to court and
decide." He questioned why the parties are at the table today
arguing over this project.
MR. HAYMES related that in the past there have been questions in
terms of whether ExxonMobil can be trusted to execute this plan
of development. In fact, from 1977-2005, there were 21 plans of
development at Point Thomson, each of which was approved by DNR
in consultation with the owners. At different times ExxonMobil
has reviewed large scale cycles, large scale gas sales, but each
time it has come together and agreed upon the next steps, and
modified the plan of development accordingly. There have been
surprises, or rather new information that has caused a change in
course. He pointed out that change in course has been in
consultation with DNR. The owners are all committed to develop
Point Thomson, and furthermore it's in the best interest of
everyone to move forward. ExxonMobil has kept the project
schedule alive so that construction can begin by 2014. Mr.
Haymes said, "We believe we can resolve the dispute. We are
currently in good faith settlement discussions with the DNR;
we're hopeful we can resolve this issue. I can't talk about
those settlement discussions, they're confidential." He then
related that ExxonMobil looks forward to working with the state
to move forward with the development of Point Thomson, the gas
pipeline, and any other resource that partners may wish to join
ExxonMobil.
4:04:16 PM
JOE CAMPBELL, Senior Drilling Superintendant, ExxonMobil
Corporation, began by informing the committee that on December 6
he will have been with ExxonMobil for 28 years and has worked in
Alaska in 1981 and 1982. In response to Chair Ramras, Mr.
Campbell recommended that the state proceed with the drilling.
He explained that there is a 120-man camp at Point Thomson, of
which part of it is for the construction and maintenance of the
ice road. Mr. Campbell pointed out that he is the site
supervisor and thus he would have some authority over those
staff working in construction. He estimated that there would be
a staff of 100-120 at a time and other staff would come out at
various times. In response to Chair Ramras, Mr. Campbell
confirmed that many of the staff would be Alaskans, trained in
the state.
4:06:40 PM
CO-CHAIR JOHNSON asked if ExxonMobil, in its 21 plans to date,
has ever been as far along as it is in this particular plan of
development.
MR. HAYMES answered that it has never been as far along in a
plan of development for Point Thomson as it is today. Not only
is engineering work being done, ExxonMobil is two-and-a-half
months away from starting development wells. ExxonMobil has
never drilled a development well at Point Thomson, which means
that although they will be capable of producing in the future,
they're typically not set up for development.
CO-CHAIR JOHNSON surmised then that 21 times ExxonMobil has had
a plan of development that was less developed than this plan of
development and those were approved.
MR. HAYMES replied yes.
4:07:59 PM
REPRESENTATIVE SEATON, regarding leases and termination of
leases, recalled that if a well is capable of production, the
leases are extended, which cancels the termination of the unit.
He asked if that's correct. He restated, "Is Exxon wanting to
have a well so then they extend the leases and ... cancel the
termination and DNR has made the determination to cancel these
leases and cancel the unit. And if they permit you to drill a
well, then you have legal rights to maintain the ownership for
an extended period of time, whether you produce or not."
MR. HAYMES pointed out that there are different categories of
leases. For example, under current regulations a lease can be
retained for a certified well or a well capable of producing in
payable quantities. ExxonMobil is interested in developing the
resource, not leases, he clarified. The Point Thomson resource
spans a number of leases, and therefore it wouldn't be prudent
for ExxonMobil to focus on developing a lease. ExxonMobil, he
relayed, is focused on the leases that link together to develop
the resource. The resource under the ground doesn't follow
lease boundaries. This plan is focused on the development of
the resource, the heart of the reservoir for gas cycling, gas,
and condensate while developing the flank of the oil to learn as
much as possible. The aforementioned sets the stage for full
field development for oil, cycling, gas or a combination of
those. This plan of development, he said, is based on objective
technical work from many owners. ExxonMobil, he reiterated, is
focused on bringing the resource to production.
REPRESENTATIVE SEATON inquired as to unit termination. He posed
a scenario in which there's a well capable of production at
payable quantities, and asked if that would cancel the
termination of the unit such that the entire unit is maintained.
MR. HAYMES specified that a unit holds a group of leases
together. At this point, ExxonMobil is in court over whether
there is a unit or not. The leases can be held through
different means. He informed the committee that leases don't
expire for 90 days after the unit was terminated. If there's a
drilling operation underway on those leases, then those leases
can be retained in accordance with regulations and lease
conditions.
REPRESENTATIVE SEATON posed a scenario in which some leases in
the center of the unit were held under those terms and the state
succeeded in having the unit terminated and took other leases
back. In such a scenario, how would the state be able to
proceed with resale/reissuance of the unit or bid, he asked.
MR. HAYMES deferred to DNR. He then offered that if various
owners own various leases that straddle the same resource, then
that group of owners will have to come together to form a new
unit and gather new information. After the litigation, which he
estimated would take a decade plus, it would take another five
years for the owners to create another unit. Therefore, it
would be about 15 years before the point of starting is reached.
Therefore, the result is a "real mixture," such that the current
owners, even if there was litigation that was successful in
terminating the unit, would still exist in the future unit.
4:13:37 PM
MR. CAMPBELL, in response to questions from Chair Ramras,
confirmed that he has been to Point Thomson and the well
conductors are in place and he is in place. Mr. Campbell
offered that he has been working on modifying the rig to handle
these wells and be prepared to drill.
REPRESENTATIVE SAMUELS asked if ExxonMobil owns any leases in
the Beaufort [Sea].
MR. HAYMES answered not to his knowledge.
The committee took an at-ease from 4:15:30 PM to 4:15:53 PM.
4:17:02 PM
TOM IRWIN, Commissioner, Department of Natural Resources, began
by noting that he wouldn't say much about the Kitchen, Corsair,
or Pearl units because of court activity. With regard to Point
Thomson, Commissioner Irwin read the following statement:
The subject of today's hearing is how the Department
of Natural Resources manages state oil and gas leases.
Because of my role in resolving appeals filed by
companies who have challenged the department's
decisions, my comments today must be limited. I'm
here to be respectful .... I want to explain the
background for that decision. As you are all aware,
the companies that once held leases to the land in the
Point Thomson area have sued the state, challenging
Commissioner Minge's 2006 decision to terminate the
Point Thomson unit. The existence of that unit
allowed the companies to hold on to leases beyond
their primary term. Many of the leases in this area
were acquired in the 1960s and had 10-year primary
terms. Once the unit terminated, the leases, because
they were beyond the primary term and not in
production, expired. Thus, Director Banks ruled that
31 leases expired after the unit was terminated. And
as required by our regulations, the Division of Oil &
Gas sent lease termination notices. The former
leaseholders appealed the director's decision to me
this fall and that appeal is now pending. On January
12, 2009, the hearing will begin. The companies will
have the opportunity to present factual evidence and
make legal arguments challenging the lease
determination decisions. Because I have the
responsibility to hear the evidence and make a fair
decision based on that record, I cannot testify today
about the validity of the leases. That is an issue
that I will resolve after hearing from the companies
and looking carefully through the evidence they file.
The director of the Division of Oil and Gas, Kevin
Banks, is available to talk about the notices of
termination he signed on August 4, 2008. Thirteen of
the leases in this area terminated earlier. Under a
2001 agreement, DNR allowed ExxonMobil to expand the
Point Thomson unit in exchange for their commitment to
begin development. ExxonMobil gave DNR an unambiguous
commitment to drill a well in 2003 and to begin
development drilling by 2006 and have seven wells
producing by 2008. The expansion agreement also
provided that ... if the drilling activities did not
occur, the leases would be returned to the state
without dispute, and ExxonMobil would pay a penalty of
$20 million. None of the promised wells were drilled;
the $20 million payment was made in the summer of
2007, but the leases were not returned. ExxonMobil
has appealed my decision terminating those leases to
superior court, where an appeal is pending.
There are several other legal actions pending.
ExxonMobil has sued the state claiming damages based
on funds they claim they spent trying to develop the
Point Thomson unit. They sued after the unit was
first terminated, the judge dismissed the case, and
they appealed to the Supreme Court. Because of the
pending litigation, the Supreme Court has stayed its
consideration of this appeal. ExxonMobil sued again
for damages after the April 2008 terminating the unit;
the case has been consolidated with the appeal of the
unit decision before Judge Gleason. Their brief is
due at the end of January. They also filed a claim
for damages before the Department of Administration
that is pending before an administrative law judge.
ExxonMobil has also filed legal actions at the AOGCC.
In an attempt to circumvent DNR's decision to
terminate the Point Thomson unit, they have asked the
AOGCC to compulsory unitize leases that Director Banks
has terminated. DNR has filed a motion to dismiss
this unitization application. ExxonMobil has also
applied for a drilling permit from the AOGCC and
Chairman Seamount recently asked DNR and ExxonMobil
whether a permit should be issued over the land
owner's objections. I also have pending before me a
request to reconsider three permit denials by the
Department of Natural Resources. In addition to the
ice road permit, DNR denied applications for plans of
operations and for seismic activity on these lands
earlier this year. I've been asked to reconsider
those decisions and will issue my decisions after
reviewing the agency record and allowing the
appellants the opportunity to tell me why the
decisions to deny the permits were wrong and provide
any additional evidence they believe I should
consider. As with the lease appeals, because I have
the responsibility to make decisions in those cases, I
cannot comment further on those today. Respectfully,
if there are questions ask Director Kevin Banks.
4:24:29 PM
REPRESENTATIVE SAMUELS, regarding [Escopeta Oil Company, LLC]
("Escopeta"), posed a scenario in which there was no litigation
and the leases under discussion end on December 31, 2008. In
such a situation, he inquired as to how long it would take to
organize and release those leases.
KEVIN BANKS, Director, Division of Oil & Gas, Department of
Natural Resources (DNR), said that under the scenario posed by
Representative Samuels, those leases could be released in the
next lease sale for the Cook Inlet, which would be in May
[2009].
4:25:22 PM
REPRESENTATIVE SAMUELS asked if the price of oil would come into
play when talking about whether or not to extend a lease. He
then asked whether the lawyers make the decisions or the
engineers and lawyers.
MR. BANKS answered that those decisions are made by DNR's
resource evaluation staff and commercial staff, which includes
geologists, geophysicists, and engineers. In the particular
case with Escopeta, Mr. Banks explained that Escopeta was
awarded the leases nine years ago. As a condition of forming
the Kitchen unit around these 19 leases, Escopeta promised to
drill a well in the Kitchen unit by the end of 2007. When
Escopeta failed to meet the aforementioned drilling commitment,
DNR placed the unit in default in order to provide the
department more control in the next step in the process. A
condition of the default specified that if Escopeta could drill
a well by the end of 2008, it could proceed to the next step and
keep the unit. He highlighted that Danny Davis is requesting
that if [Escopeta] doesn't drill a well in two years from now
that it will return the leases. Mr. Banks submitted that that's
where the process is today and Mr. Davis has been unsuccessful
in acquiring a rig. The aforementioned becomes mixed with the
Corsair unit because of the relationship Mr. Davis is trying to
foster between his investors and his firm and the investors of
the Pacific Energy Firm. Mr. Banks opined that [the division]
is faced with trying to make a decision based on the performance
of the applicant and its capability to perform. Mr. Davis
admitted that he was unsuccessful in getting a jack-up rig in
the later end of the seven-year term of the leases. At the 11
hour, Mr. Davis requested that a unit be formed in the Kitchen
unit. The [division's] finding for that unit specified that the
geological information submitted to the division was
insufficient to define a unit. Mr. Banks reminded the committee
that the process the division usually follows in awarding a unit
is that a firm acquires a land position through a lease sale,
the leases are drilled and delineated and form a unit in order
to have the necessary land position to take care of the
correlative rights of others that may own land in the same area.
At that point, the firm can proceed to development.
4:29:57 PM
MR. BANKS related that in this case, geological information
didn't indicate that there was a strong resource capability
although the division was told that a jack-up rig would be
brought in. On that promise, the division decided it would be
in the state's interest to award the unit in the first place.
Two years later, no drilling rig has been brought to the unit
and the division is faced with the decision to default and as of
December the unit will be terminated as will the leases.
4:30:44 PM
MR. BANKS then turned discussion to the Corsair unit. The
Corsair unit formed at basically the same time as the Kitchen
unit by Forest Oil Corporation. The Corsair unit included four
leases. The justification of drilling on those four leases was
based on geology that centered on those leases. After a year,
Pearl took over the unit and the impending commitment for
drilling. Mr. Banks opined that the division worked hard with
Pacific Energy to establish deadlines for when a jack-up rig
contract and a heavy-lift vessel would be required. After
several of those interim milestones slipped, Pacific Energy
requested an expansion of the unity. The division was faced
with the decision as to whether to grant an expansion in a
situation in which the applicant had performed no work and had
missed several milestones. The division decided that the
aforementioned wasn't in the best interest of the state because
the acreage identified in the initial unitization process was
found to be sufficient to support bringing in a drilling rig.
The division believes that Pearl acknowledged that point through
the process, and therefore the division decided not to expand
the Crosair unit. If entities don't perform, he explained, the
division has very limited options as to what it can make those
entities do. The leasing process is clear that leases must be
offered competitively.
4:34:03 PM
CHAIR RAMRAS pointed out that if the division succeeds in the
objectives before it; there won't be a jack-up rig and no
drilling in the Cook Inlet, no construction of an ice road, or
development of the Point Thomson unit.
MR. BANKS clarified that for Point Thomson the division isn't at
the point Chair Ramras has described. For the Cook Inlet, Mr.
Banks submitted that there isn't a jack-up rig on its way. The
company doesn't have the funds to do so; Pacific Energy is on
the verge of bankruptcy.
4:35:37 PM
MARTY RUTHERFORD, Deputy Commissioner, Office of the
Commissioner, Department of Natural Resources (DNR), clarified
that the department doesn't have a standing decision, as the
Corsair unit is under appeal to the commissioner.
CHAIR RAMRAS surmised then that Mr. Davis lied to the committee
about having a jack-up rig.
MR. BANKS explained that the only jack-up rig that's being
offered is one by Pacific Energy. The contract for the heavy-
lift vessel and the rig itself is Pacific Energy's contract.
CHAIR RAMRAS inquired as to the milestones that DNR is trying to
accomplish at Point Thomson and Cook Inlet.
COMMISSIONER IRWIN said that he can't answer that question.
CO-CHAIR JOHNSON asked whether it can still be said that Alaska
is open for business. He pointed out that Mr. Davis has offered
to show [the committees] his financials that indicate there is
the financing for the jack-up rig. Co-Chair Johnson opined that
a year from now when his constituents have absorbed a 17 percent
increase in gas prices, those constituents are going to be
concerned with why they don't have gas and why they're paying
more. He then highlighted that there has been testimony that in
12 months, the natural gas problems can be alleviated and
shortly after that can prevent the importation of 25 percent of
the state's gas. Co-Chair Johnson inquired as to who is in the
queue that can get the job done quicker.
4:39:51 PM
MS. RUTHERFORD confirmed that the state is very much open for
business. She then reminded the committees of the liquefied
natural gas (LNG) export license, which this administration has
supported as it moved through approval of a two-year extension.
In the process, ConocoPhillips Alaska, Inc. and Marathon Oil
provided commitments to drill additional wells in order to
provide greater availability of gas for utilities as well as LNG
export. Those two companies exceeded their commitments and made
their LNG export facility available for third parties so that
there is a market and an incentive for new investment in this
state. Additionally, DNR is not sure that if a two-year
extension was given to these units that there would be a
drilling rig. In fact, there may be a two-year delay, she
pointed out. Therefore, there's no certainty that there will be
a delay but rather there's the hope that the timeline will be
moved forward so that another entity can take the opportunities
provided by the acreage.
4:41:59 PM
CO-CHAIR JOHNSON related his understanding that other oil
companies, as part of the export license, agreed to drill
additional wells.
MS. RUTHERFORD responded that ConocoPhillips Alaska, Inc. and
Marathon Oil Company are drilling additional wells in response
to the state's requirement for support in the LNG export
license. That gas is to be made available primarily to the
utilities as well as for their own LNG export facilities.
MR. BANKS, in further response to Co-Chair Johnson, informed the
committees that ConocoPhillips Alaska, Inc. drilled wells in the
Beluga River unit and is in the process of drilling a well off
the tionic platform in the North Cook Inlet unit. Marathon Oil
is drilling in the Kenai on Nikiski. Mr. Banks explained that
the tionic wells are being drilled from existing tionic
platforms. With regard to who is in the queue, Mr. Banks
informed the committees that Armstrong [Cook Inlet, LLC]
(Armstrong) is drilling at North Fork. Armstrong came forward
with a rig contract that the division requested in an interim
milestone for their unit applications and plans of development.
When Armstrong realized it couldn't get the rig across the road
at Anchor Point because of weight restrictions, the division
could deal with such issues as long as there is some commitment
of funds. Mr. Banks said that a contract that says there is no
contract unless DNR does certain things, including extending the
term of lands that are onshore in order to get a jack-up rig
suggests there's not a contract.
MS. RUTHERFORD added that the way the legislature structured the
entire leasing and plan of development program is to ensure that
the companies holding the land position are making commitments
for exploration and development. As companies are held
responsible for the commitments they've made and negotiated with
the state, it's about getting drilling. When commitments aren't
honored, the department has to be a good land manager and
recognize that sometimes the competition provides for a greater
opportunity for that exploration and development.
4:45:55 PM
COMMISSIONER IRWIN characterized Co-Chair Johnson's question as
really important, noting that DNR has been asked if it is a
proponent of development. Commissioner Irwin reviewed the work
and commitment of various companies and the significant work
being done in this state. Therefore, Commissioner Irwin
emphasized that the department is a proponent of development.
4:47:21 PM
CO-CHAIR GATTO suggested that the department feels like an
apartment landlord who faces a renter who wants a lease but when
asked for the money says that he/she is expecting some money
some time in the future. In such a case, would the landlord
deny the renter the opportunity to rent an apartment, he asked.
MR. BANKS answered that the aforementioned is a fair
characterization, adding that the state should think of itself
as landlords. He then reminded the committees that the
department awards "apartments" in a competitive bidding process.
The lease has an obligation to develop and produce from that
lease. If the department decides to extend leases rather than
offer them in competitive lease sales, it would seem that the
department is offering a lottery ticket to come to the state and
negotiate a better deal. The aforementioned can't be right, he
opined, as it's not fair to those who compete in the lease sale
process.
4:49:42 PM
CO-CHAIR GATTO, regarding the jack-up rig, pointed out that
Alaska is a fairly remote location and he would be nervous about
sending it to Alaska in the hope it would work. He inquired as
to the condition of the rig, the likelihood that rig would be
destined to come to Alaska, and questioned whether it is more of
a wish.
MR. BANKS related that although Blake 151 is currently under an
obligation to ExxonMobil, with a certain amount of notice Blake
151 can give the rig to someone else. Therefore, ExxonMobil has
a rig on hand that's potentially an interruptible service. On
the other hand, Blake 151 has an option for others. He related
that the Blake can drill in water depths up to 150 feet, is
suitable for functioning in the Cook Inlet in the summer months
when there is no ice. The commitment to bring it up to mobilize
it and demobilize it is on the customer's nickel.
4:52:43 PM
REPRESENTATIVE WILSON posed a scenario in which "all this" is
denied and the process stops until the lease sales, and then
asked can the process be expedited.
MR. BANKS replied no, specifying that the dates set for the
lease sales are set in the five-year plan and are updated
yearly.
REPRESENTATIVE WILSON asked if the lease sales schedule is set
in regulation or statute. She also asked whether there would be
a reason to change that schedule.
MR. BANKS answered that the five-year plan is set ahead of time
per statute. The actual lease sale date is schedule because
there are notice requirements. Mr. Banks added that the
aforementioned was a response to a fairly hypothetical question
and that whether the department receives full and complete title
to those leases on December 31 is another question.
REPRESENTATIVE WILSON inquired as to whether it would be
possible to move the schedule up one month, for example.
MR. BANKS offered to review that possibility, and added that
there is some possibility to move the schedule.
4:55:26 PM
REPRESENTATIVE SAMUELS pointed out that DNR keeps issuing
permits to ExxonMobil. He asked, "Is there a legal reason for
this particular permit that you're protecting the lease with
this particular permit?"
MR. BANKS pointed out that the ice road permit is one of others
that DNR has denied. He agreed that having heard ExxonMobil
speak, it would seem the situation is one of "Alice in
Wonderland." He then opined that DNR didn't permit anyone to
place conductors in the pad. There are land use permits that
have been granted in situations in which a lease hold right
isn't required to have the ability to move about on the North
Slope. He highlighted that DNR has denied the ice road and
ExxonMobil's plan of operation. The later brings into question
the Alaska Coastal Zone Management Plan permits that go along
[with the plan of operation]. Mr. Banks said, "If a permit
requires a leasehold right, in other words want to drill on our
land, that would not be allowed."
4:57:18 PM
MS. RUTHERFORD clarified that the distinction is general use
permits and permits that require a leasehold interest. The
previously issued permits are general use permits. Those
permits being denied are ones requiring [ExxonMobil] have a
leasehold position.
REPRESENTATIVE SAMUELS recalled that hearing during the Alaska
Gasline Inducement Act (AGIA) that Point Thomson isn't necessary
to have the gas pipeline. He opined that the argument that
someone is going to risk $40 billion to build a gas pipeline
without having Point Thomson available is a silly argument. He
further opined that everyone should recognize the need for Point
Thomson gas. He then inquired as to how far the terms of the
lease can [be changed]. He asked if it's possible to propose
that all the litigation be dropped if all the leaseholders
placed their gas in TransCanada's pipeline. Representative
Samuels said, "You want Exxon, and Chevron, and BP, and all of
the rest of them to put that gas into that AGIA pipeline; and
that's the new leverage point that's going on right there." He
further asked whether that's the "end-game" in this situation.
5:00:39 PM
MS. RUTHERFORD noted that the attorney general has been provided
a tremendous amount of authority with regard to settling
disputes. Currently, DNR is involved in court ordered
settlement discussions with the previous leaseholders. She
recalled that in a public filing at least one of the
leaseholders indicated that talking about a particular gas
pipeline wasn't something with which they were comfortable.
5:01:51 PM
MR. BANKS pointed out that when people are knowledgeable of
one's plans, the leverage can evaporate.
CO-CHAIR JOHNSON asked if there is any linkage in granting an
extension in Cook Inlet as it might set a precedence that isn't
desirable at Point Thomson.
MR. BANKS confirmed that there is no linkage. The department
wants to treat every lessee fairly and consistently. He
remarked that concerns regarding the state's behavior in the
Cook Inlet haven't entered his mind in regard to the impact it
may have with regard to the state's dispute with ExxonMobil.
CO-CHAIR JOHNSON posed a scenario in which the department
granted a lease extension in Cook Inlet, and asked if it could
jeopardize the potential settlement or retraction of leases with
ExxonMobil. He further asked if such a scenario would set a
precedent that the state may have to live with for an extended
period of time.
MR. BANKS highlighted that the department has already extended,
through unitization, the lease terms for both Pacific Energy and
Escopeta. The department has done similar things for ExxonMobil
through 21 plans of development (PODs) over the last 30 years at
Point Thomson. There comes a time, he said, when the state has
to say no. Mr. Banks opined, "It's easy to approve a plan of
development; it's hard not to." Furthermore, it's difficult to
exercise the leverage or the rights incorporated in awarding a
plan of development because this sort of discussion will always
occur in the public arena. Therefore, pressure is put on the
department to make decisions that may not, in the long run, be
good for the state because the state would lose control of how
its lands are developed.
5:05:36 PM
REPRESENTATIVE SEATON, returning to the North Fork unit,
recalled that the requirement for Gas-Pro Alaska was to drill a
second well or the unit would run out. The aforementioned
forced the sale [of the unit] to Armstrong, with a short
extension with the promise to drill once a rig could be brought
onsite. If Gas-Pro Alaska requested [and was granted] an
extension for a couple of years for the North Fork unit, would
the drilling and production have taken place or would the unit
have remained in a holding pattern.
MR. BANKS pointed out that Gas-Pro Alaska was in fairly
difficult straights to pull together the drilling program to
which Armstrong eventually committed. Although Armstrong had a
bit more time, it wasn't a lot more time. He related his belief
that Armstrong was still within the window to move forward on
the promises of Gas-Pro Alaska. Mr. Banks opined that had the
leases been extended to Gas-Pro Alaska, it's likely that the
state could have had no activity in the North Fork unit. He
then reminded the committees that the state had experience with
Armstrong, an aggressive and well-funded company, in the Cook
Inlet as well as on the North Slope. Armstrong organized the
land position, the exploration wells, and activities that
ultimately led to Oooguruk and Nakaitchuq oil fields now under
development by others.
5:10:17 PM
REPRESENTATIVE DAHLSTROM asked Mr. Davis if in his earlier
testimony he was lying.
MR. DAVIS answered, "No, I wasn't lying." Mr. Davis noted that
he has never shared with Mr. Banks, who has never asked, who his
partners will be. He offered to share that information when the
"time comes." However, he said at this point Escopeta has no
leases to drill. Mr. Davis said:
To rebuild an industry, sometimes you need a helping
hand. I'm not asking for a helping hand, I'm asking
for an opportunity. He's right, my leases expired. I
think I'd like to be treated like Exxon. I've got one
plan of development, they've had 21; so, I guess I got
10-20 years to go before I need to give my leases
back.
MR. DAVIS opined that it's hard to get the funds together to
come to Alaska. He acknowledged that Armstrong is more well
financed that Escopeta. Mr. Davis then opined that ExxonMobil
should be allowed to drill Point Thomson.
REPRESENTATIVE DAHLSTROM asked if Mr. Davis is able and willing
to have a face-to-face discussion with Mr. Banks regarding
confidential information.
MR. DAVIS replied yes. In response to Co-Chair Johnson, Mr.
Davis said that he would be able to share letters and such.
5:13:15 PM
REPRESENTATIVE GRUENBERG related his understanding of
Commissioner Irwin's previous testimony that there's no
statutory, regulatory, or policy setting forth a time for the
decision once the appeal has been submitted.
COMMISSIONER IRWIN said that's correct.
REPRESENTATIVE GRUENBERG then pointed out that under statutes at
the trial and appellate court level, the judiciary has six
months after a matter is submitted within which it must render a
decision or the judiciary isn't paid. Furthermore, each time
the judiciary is paid he/she must sign an affidavit specifying
that there are no pending motions or other matters for longer
than six months. Representative Gruenberg inquired as to
Commissioner Irwin's thoughts regarding such a statutory
requirement for [DNR].
COMMISSIONER IRWIN opined that such a change could have
unintended consequences. The department, he related, works very
hard with the companies to try to make something work out.
However, if the legislature determines a specific date is
necessary, the department will make the decision.
REPRESENTATIVE GRUENBERG inquired as to whether the appeal
regarding the failure to extend leases is de novo, a new
hearing, or is the appeal on the record.
COMMISSIONER IRWIN asked if Representative Gruenberg is
referring to Point Thomson specifically or all leases in
general.
REPRESENTATIVE GRUENBERG clarified that he was referring to "the
other matter."
COMMISSIONER IRWIN explained that he reviews all the data and
takes testimony upon appeal. Ultimately, the decision is his,
he said.
REPRESENTATIVE GRUENBERG surmised then that it's discretionary
and can be done on the record or via a de novo appeal. He asked
if people can request the presentation of additional evidence.
COMMISSIONER IRWIN said that is correct.
REPRESENTATIVE GRUENBERG related his understanding that the
times Mr. Banks provided regarding when leases would be
available were the appeal to be denied are subject to the
possibility that a stay may be granted. He asked if that's
correct.
MR. BANKS said he wouldn't place a tract of land with a clouded
title into a lease sale. It wouldn't be good to offer up a
lease if there was a stay on the department's actions to
terminate the leases in some form or another. "The value of
that tract of land would be blemished by the proceedings before
it," he pointed out.
REPRESENTATIVE GRUENBERG posed a scenario in which an appeal was
filed, but no stay was sought or a stay was sought but denied.
He asked if the tract would be offered for a lease nonetheless
or would that be considered a cloud on the title.
MR. BANKS, drawing from his own experience, recalled that with
leases that had not been formally terminated, but were well past
the termination date, the [department] has [had difficulties]
with other lessees in which the previous lessee and the current
award winner both sue the state. In regard to earlier
testimony, Mr. Banks clarified that he had not called Mr. Davis
a liar, but merely specified that Mr. Davis is not on the
contracts for the vessel or the jack-up rig. Therefore, Mr.
Davis's financial picture isn't of issue in the particular
scenario. At the moment, Pacific Energy has the commitment to
bring up the jack-up rig.
5:19:49 PM
CHAIR RAMRAS inquired as to the milestones for DNR in the next
12 months, regarding Escopeta and Point Thomson and the ability
to move forward to build an ice road.
5:20:29 PM
MR. BANKS answered that he is fairly reluctant to specify the
path the state should take with regard to Point Thomson as these
are very intense negotiations with all of the owners. Regarding
Escopeta, Mr. Banks said that Escopeta was given a December 31st
date. In the two years Escopeta [has held the lease] no well
has been drilled, and therefore it's time to do something. He
opined that the [decision] with regard to Escopeta will be
forthcoming soon.
CHAIR RAMRAS asked whether Mr. Banks appreciated how difficult
it is for Alaskans to reconcile DNR's point of view with the
philosophy exposed by the governor.
MR. BANKS pointed out that Chair Ramras' comments are based on
the premise that if a decision was made to extend the leases for
Escopeta to accommodate Pacific Energy that a well would be
drilled. Mr. Banks said that he isn't convinced the
aforementioned will happen.
5:22:30 PM
MS. RUTHERFORD added that the same could be said for the Point
Thomson leases. As mentioned earlier, there were absolute
commitments on drilling and development from the previous
leaseholders at Point Thomson. However, many of those
commitments were reneged upon. Therefore, she opined that the
department is trying to ensure that development will occur
throughout state land. At some point, one must look to the past
to determine the future. If entities haven't honored their
commitments, then other operators have to be considered as
possible drillers to ensure the development of all the state's
resources.
CHAIR RAMRAS remarked, "From my point of view, you're wrecking
my state ... and it hurts .... From Flint Hills to Healy clean
coal to Point Thomson to the Cook Inlet, government just doesn't
seem to have any answers. And it just drives me nuts."
5:24:02 PM
MR. DAVIS began by mentioning that the package he has wasn't
entirely submitted to the committees because there is a
confidentiality agreement with Mr. Banks. The [idea] that the
contract with the heavy lift vessel is made to Escopeta Oil
Company and Pacific Energy Alaska and was executed by both
entities and submitted to the state is wrong. The drilling
contract is between Pacific Energy Alaska, as the operator, and
Blake Offshore. The rig will work in about 300 feet of water,
not 150 feet of water. Furthermore, Escopeta is not a party to
this contract, but Escopeta does have a rig sharing agreement
with Pacific Energy Alaska that makes [Escopeta] half
responsible for the use of this rig when it arrives. The
aforementioned has also been submitted to Mr. Banks. Mr. Davis
opined that Mr. Banks hasn't went through the paperwork he has
been sent. He said he would provide this information to the
committees.
CHAIR RAMRAS again expressed exasperation with the government's
inability to [move forward with resource development] and said
that the public is also exasperated. Chair Ramras highlighted
that the throughput in the Trans-Alaska Pipeline System (TAPS)
is declining by 6 percent per year while the state budget is
growing by 15 percent a year, which doesn't make for a happy
picture going forward.
5:28:18 PM
MR. HAYMES acknowledged Chair Ramras' frustration, and related
the desire to move to production with Point Thomson. Mr. Haymes
then read from the July 7 DNR permit that was issued to
ExxonMobil pertaining to conductors, as follows: "The permit
was approved based on this attached document titled 'Point
Thomson Drilling Program, Equipment Staging and Pad Preparation
Project Description June 11, 2008." He read from the second
paragraph on page 1, as follows:
The proposed work includes facilitating removal of
equipment currently stored on the pad by another
operator, placement of ice road construction
equipment, a 30-man construction camp, fuel storage
tanks, and fuel associated with ice road construction
and for use in other operations, and maintenance and
site preparation of the existing pad. The maintenance
and site preparation work will include grading,
placing gravel from the Prudhoe Bay area and
installation of cellars (ph) and conductors.
Following site preparation work a small staff may be
maintained on site for maintenance and security until
ice road construction personnel mobilize to the Point
Thomson 3 gravel pit area ... in November or December.
5:30:23 PM
REPRESENTATIVE SAMUELS asked if that language comes from the
state permit.
MR. HAYMES clarified that ExxonMobil submitted a Point Thomson
drilling program, site staging description, which was approved
with the permit approval.
REPRESENTATIVE SAMUELS surmised then that the conductors are
included in the plan for which ExxonMobil obtained a permit.
MR. HAYMES replied yes.
CHAIR RAMRAS related the following from an article by Dermott
Cole (ph) titled "State will struggle with new financial
realities created by falling oil prices." The aforementioned
article says: "Just as the nation will struggle to adapt to new
economic realities, so will the state. Facing lower oil prices
and declining North Slope oil production, now about one-third of
what it was two decades ago; it takes more than chanting 'Drill
baby drill.' to address this problem."
REPRESENTATIVE SAMUELS related his understanding from the
earlier testimony of Mr. Banks and Ms. Rutherford that
ExxonMobil didn't have permits for the subsurface conductors.
MR. BANKS explained that was the permit from which Mr. Haymes
read. It was a general use permit issued by the Division of
Mining, Land, and Water. The permit would have been issued to
any entity that had to perform remediation work or work on the
pad that would've been required upon the termination of a lease.
Regarding the language about conductors, it wasn't part of the
permit he saw as it was issued by another division.
REPRESENTATIVE SAMUELS related his understanding then that the
state gave ExxonMobil a permit to build a staging area for
equipment and fuel to build an ice road. ExxonMobil spent money
to do so. The state also gave ExxonMobil a permit for
subsurface conductors, although testimony today related that
ExxonMobil wasn't given such a permit. He questioned why the
one permit was denied.
MS. RUTHERFORD clarified that the permit was a general use
permit for surface activity. Although the permit may have made
a reference to conductors, it doesn't mean that the Division of
Mining, Land, and Water understood [the conductors] would be
used as a subsurface device. General use permits, she
explained, are issued to entities that don't have to have land
use control of the oil and gas properties prior to issuance.
The division has been very aggressive about not denying general
use permits as well as denying permits for the Point Thomson
area, since the state is in litigation over that unit.
REPRESENTATIVE SAMUELS said that he understands giving leverage,
but this is an "Alice in Wonderland" situation. "If this state
does not get a gas pipeline, we are all so screwed. This
economy is so screwed," he stressed.
5:36:08 PM
CO-CHAIR JOHNSON opined that the state has permitted drilling in
so much as there is 125 feet of pipe in the ground to prevent
mud from coming up at Point Thomson.
MS. RUTHERFORD relayed that she was recently in a conversation
with Mr. Haymes, who clearly stated ExxonMobil wouldn't do any
drilling not permitted by DNR. She then opined that ExxonMobil
doesn't perceive that as drilling and they truly understand that
it is a general use permit and that ExxonMobil's leases in the
unit have defaulted. ExxonMobil, she pointed out, is trying to
settle the matter as it is in good faith negotiations with the
state. Ms. Rutherford emphasized that [DNR] issues many types
of permits to entities without any land use rights; the permit
under discussion is one such permit. "A word buried at the end
of a document as an attachment will not change the dynamic of
the litigation," she stated. Ms. Rutherford opined that it's
extremely unfortunate that 25 years after the last activity at
Point Thomson, the [state] doesn't know whether Point Thomson is
an oil field that should be developed for 20 years prior to gas
development or a gas field in which the gas can go into the
pipeline at the initial open season.
5:37:53 PM
CO-CHAIR GATTO related that a conductor is a piece of wire that
takes electricity from point A to be bled off at point B. If
the division gives a permit that allows for someone to operate a
conductor, is [the term conductor] defined or is the rationale
that it means something different to the division than to Point
Thomson, he asked.
MS. RUTHERFORD said that she hasn't seen the attachment, and
therefore doesn't know if [conductor] is a defined term. She
said she guessed that [conductor] isn't a defined term.
REPRESENTATIVE SEATON said he wanted to be sure that Alaskans
don't have the impression that there is no activity taking
place. He then highlighted that on the Lower Kenai Peninsula,
Cosmopolitan has scheduled 20 wells and a rail system to extend
three miles underneath Cook Inlet to develop an oil field. The
exploratory wells have been drilled and now [Cosmopolitan] is
moving into the production drilling phase. He also reminded
members that Armstrong has drilled a second well at the North
Fork field. He then expressed the hope for more drilling in the
future.
CHAIR RAMRAS remarked, "Representative Seaton, just like the
constituents I serve, you have communities that have no gas. We
should be awash in gas. It's just inexcusable."
5:41:11 PM
REPRESENTATIVE GRUENBERG recalled earlier testimony from Mr.
Banks in which he said that "Pacific Energy was close to
bankruptcy." He further recalled Mr. Banks' testimony relating
that the department is unsure whether the project would ever be
built or the drilling take place if the permit was given to
Pacific Energy, Escopeta Oil, et cetera. If the condition of
Pacific Energy is crucial to the decision, Representative
Gruenberg requested discussion with regard to the financial
status of Pacific Energy and how that is impacting DNR's
decision in the Escopeta Oil and Pacific Energy matter.
MR. BANKS informed the committees that Pacific Energy is a
publicly traded company in the Canadian Stock Exchange. Pacific
Energy is reporting that a $430 million loan has been converted
from a long-term to a current debt. Pacific Energy has admitted
that its debt to revenue ratio is fairly steep. Pacific
th
Energy's September 30 quarterly report indicates these are
issues that need to be sorted out before moving forward. In
fact, one of Pacific Energy's employees describes the company as
externally financed, a company with a small revenue stream from
a few of its leases in Cook Inlet and properties in Southern
California. Mr. Banks opined that Pacific Energy is out of
balance in terms of carrying the kind of debt they have.
5:44:23 PM
MR. DAVIS responded that he finds it amazing that Pacific Energy
is the only company in the US that's in trouble. He highlighted
some of the large companies in the US that are going broke. Mr.
Davis then related that he is going to call Vladimir Kadik (ph)
in the morning to determine if he will farm out the Corsair
project, if the appeal and leases are approved. Therefore,
everything would be put under Escopeta and be unitized and
drill. If [Pacific Energy] then goes into bankruptcy, it
wouldn't impact any of the operations on the leases as [Pacific
Energy] would retain overriding royalties. The aforementioned
can be done, he stressed.
5:45:48 PM
MR. HAYMES clarified that the comment he read before was located
on page 1 of the plan in the second main paragraph. He then
pointed out that he wasn't aware that the ice road ExxonMobil is
proposing to construct is on any of the leases currently under
dispute. The ice road goes from the Endicott Causeway along the
ocean and then arrives at the Point Thomson site.
MR. DAVIS shared that in Texas when one owns the land, sometimes
people own the surface and the minerals underneath. He then
inquired as to the ownership in Alaska and questioned where the
surface stops and the minerals start. If ExxonMobil has drilled
160 feet deep and set conductors, it's considered drilling in
Texas, he related.
5:47:55 PM
CHAIR RAMRAS commented that the upcoming legislature has
interesting tasks before it.
5:49:00 PM
ADJOURNMENT
There being no further business before the committees, the joint
meeting of the House Resources Standing Committee and House
Judiciary Standing Committee was adjourned at 5:49:12 PM.
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