Legislature(2017 - 2018)BARNES 124
03/05/2018 01:00 PM House RESOURCES
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| Audio | Topic |
|---|---|
| Start | |
| HB355 | |
| Presentation(s): Food Security in Alaska | |
| Presentation(s): Alaska Oil and Gas Conservation Commission | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| + | TELECONFERENCED | ||
| += | HB 355 | TELECONFERENCED | |
| + | TELECONFERENCED |
ALASKA STATE LEGISLATURE
HOUSE RESOURCES STANDING COMMITTEE
March 5, 2018
1:04 p.m.
MEMBERS PRESENT
Representative Andy Josephson, Co-Chair
Representative Geran Tarr, Co-Chair
Representative Harriet Drummond
Representative Justin Parish
Representative Chris Birch
Representative DeLena Johnson
Representative George Rauscher
Representative David Talerico
Representative Chris Tuck (alternate)
MEMBERS ABSENT
Representative John Lincoln, Vice Chair
Representative Mike Chenault (alternate)
COMMITTEE CALENDAR
HOUSE BILL NO. 355
"An Act relating to the crime of criminally negligent burning;
relating to protection of and fire management on forested land;
relating to prohibited acts and penalties for prohibited acts on
forested land; and providing for an effective date."
- HEARD & HELD
PRESENTATION(S): FOOD SECURITY IN ALASKA
- HEARD
PRESENTATION(S): ALASKA OIL AND GAS CONSERVATION COMMISSION
- HEARD
PREVIOUS COMMITTEE ACTION
BILL: HB 355
SHORT TITLE: FIRE;FOREST LAND; CRIMES;FIRE PREVENTION
SPONSOR(s): REPRESENTATIVE(s) GUTTENBERG
02/16/18 (H) READ THE FIRST TIME - REFERRALS
02/16/18 (H) RES, JUD
02/28/18 (H) RES AT 1:00 PM BARNES 124
02/28/18 (H) Heard & Held
02/28/18 (H) MINUTE(RES)
02/28/18 (H) RES AT 6:00 PM BARNES 124
02/28/18 (H) Heard & Held
02/28/18 (H) MINUTE(RES)
03/05/18 (H) RES AT 1:00 PM BARNES 124
WITNESS REGISTER
REPRESENTATIVE DAVID GUTTENBERG
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: As prime sponsor, presented HB 355.
ANNE NELSON, Senior Assistant Attorney General
Natural Resources Section
Civil Division (Anchorage)
Department of Law (DOL)
Anchorage, Alaska
POSITION STATEMENT: Answered a question regarding HB 355.
DARRELL BREESE, Staff
Representative George Rauscher
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Speaking on behalf of Representative
Rauscher, explained Amendment 1 to HB 355.
CHRIS MAISCH, State Forester, Director
Division of Forestry
Department of Natural Resources (DNR)
Fairbanks, Alaska
POSITION STATEMENT: Answered questions regarding HB 355.
DANNY CONSENSTEIN, Board Member
Alaska Food Policy Council (AFPC)
Anchorage, Alaska
POSITION STATEMENT: Presented the Alaska Food Policy Council
Strategic Plan dated 1/12/12.
KEN METER, Consultant
Crossroads Resource Center (CRC)
Minneapolis, Minnesota
POSITION STATEMENT: Provided a PowerPoint presentation
entitled, "Building Food Security in Alaska," dated 3/5/18, and
answered questions.
GARY FERGUSON, BS, ND
Healthy Communities Consultant
Anchorage, Alaska
POSITION STATEMENT: Provided a PowerPoint presentation
entitled, "Addressing Nutrition Insecurity with Traditional
Foods," undated.
HOLLIS FRENCH, Commissioner, Chair
Alaska Oil and Gas Conservation Commission (AOGCC)
Anchorage, Alaska
POSITION STATEMENT: Provided a PowerPoint presentation and
expressed AOGCC's opinion that legislation is needed regarding
plugging liability for oil and gas wells in Alaska.
CATHY FOERSTER, Commissioner
Alaska Oil and Gas Conservation Commission (AOGCC)
Anchorage, Alaska
POSITION STATEMENT: Answered questions related to AOGCC's
opinion that legislation is needed regarding plugging liability
for oil and gas wells in Alaska.
ACTION NARRATIVE
1:04:45 PM
CO-CHAIR GERAN TARR called the House Resources Standing
Committee meeting to order at 1:04 p.m. Representatives Tarr,
Josephson, Birch, Parish, Talerico, Rauscher, Drummond, and Tuck
(alternate) were present at the call to order. Representative
Johnson arrived as the meeting was in progress.
HB 355-FIRE;FOREST LAND; CRIMES;FIRE PREVENTION
1:05:22 PM
CO-CHAIR TARR announced that the first order of business would
be HOUSE BILL NO. 355, "An Act relating to the crime of
criminally negligent burning; relating to protection of and fire
management on forested land; relating to prohibited acts and
penalties for prohibited acts on forested land; and providing
for an effective date."
1:06:22 PM
REPRESENTATIVE DAVID GUTTENBERG, Alaska State Legislature, as
prime sponsor, presented HB 355. He explained that HB 355
addresses fire safety, suppression, and education. The bill
seeks to restructure the way fines are levied, called a bail,
which is whether a person receives a ticket, or goes to court,
or is pursued because of deliberately setting a fire that caused
considerable damage. The bill also includes a component
addressing fire safety, as well as clarifies the authority of
fire prevention officers to enter private property to
investigate fires. Currently, if it is post-fire and fire
prevention officers need to investigate, they must receive the
property owner's permission and without said permission, they
need to obtain a warrant for access.
1:07:36 PM
REPRESENTATIVE TUCK asked if a subpoena is required for access.
REPRESENTATIVE GUTTENBERG replied that if a [wildland] fire goes
through private property, fire prevention officers can access
the property to suppress, control, and put out the fire.
However, to further investigate after the fire, officers must
have the property owner's permission or obtain a warrant if
permission is denied.
1:09:10 PM
REPRESENTATIVE RAUSCHER moved to adopt Amendment 1, labeled 30-
LS1382\D.2, Radford, 3/1/18, which read:
Page 2, lines 10 - 11:
Delete "or a destructive agent"
Insert "[OR A DESTRUCTIVE AGENT]"
Page 2, line 12:
Delete "at any time"
Insert ", when responding to a wildland fire or
suspected fire, [AT ANY TIME]"
Page 2, lines 14 - 15:
Delete "or a destructive agent"
Insert "[OR A DESTRUCTIVE AGENT]"
CO-CHAIR JOSEPHSON objected for discussion purposes.
1:09:35 PM
REPRESENTATIVE RAUSCHER explained Amendment 1 limits the times
when forestry officials can enter private property by deleting
the words "at any time" and inserting "when responding to a
wildland fire or suspected fire," and deletes "or a destructive
agent." He said the amendment preserves the property rights and
the privacy of property owners. He acknowledged officials need
to investigate nearby properties during a fire and immediately
after, but [without the amendment] officials could enter private
properties at a much later time.
1:11:35 PM
REPRESENTATIVE JOSEPHSON questioned why Amendment 1 deletes and
inserts "or a destructive agent."
REPRESENTATIVE RAUSCHER said the definition of destructive agent
includes bugs, which is not a valid reason to access one's
private property at any time.
1:12:38 PM
ANNE NELSON, Senior Assistant Attorney General, Natural
Resources Section, Civil Division (Anchorage), Department of Law
(DOL), stated she was also confused by whether the intent of the
amendment was to remove "destructive agent".
The committee took a brief at-ease.
1:14:18 PM
DARRELL BREESE, Staff, Representative George Rauscher, Alaska
State Legislature, said the definition of destructive agent is
found in AS 41.15.170 as follows:
destructive agent means an insect, pathogen or other
environmental agent that causes damage to a forest
resource
MR. BREESE further explained that Division of Forestry
regulation 41 AAC 9595 places the onus for addressing insect
infestation wholly on the property owner with the division's
approval or disapproval of the method the property owner is
using. As written, the amendment would delete language from
both HB 355 and from existing statute by the bracketed language.
1:15:40 PM
CO-CHAIR TARR requested Mr. Chris Maisch to speak to why
"destructive agent" is in current statute and whether removing
that term would be a problem.
1:15:40 PM
CHRIS MAISCH, State Forester, Director, Division of Forestry,
Department of Natural Resources (DNR), stated that AS 41.15.020
gives the DNR commissioner the power to make regulations related
to fires and destructive agents and that this definition [of a
destructive agent] is used in numerous places in statute. For
example, in an emergency the commissioner can declare a zone of
infestation and then emergency regulations to address something
such as a bark beetle outbreak. He advised that in its history
the Division of Forestry has not needed to make use of this
statutory authority, but it exists for that reason.
1:17:13 PM
CO-CHAIR JOSEPHSON posited that the amendment would prevent a
fire officer right of entry to forested land to address a
destructive agent, and an officer would only have right of entry
when responding to a wildland fire or a suspected fire. He
surmised the amendment's goal of protecting the privacy of
private property owners reaches across public lands.
MR. MAISCH replied that his comments were narrowed to the
"destructive agent" piece, but that the aforementioned would be
a concern. He said the division has other authority to declare
a zone of infestation to address an issue of insects or disease,
although he would read the amendment narrowly as Co-Chair
Josephson described when it refers to wildland fire or suspected
fire and that there could be some potential conflicts between
the two.
CO-CHAIR JOSEPHSON stated he has some concerns about the
expansiveness of this section under the bill and under current
law. He said his understanding of criminal procedure is that a
person could still file motion practice and say notwithstanding
this statute or this bill, something should be suppressed
because someone's rights weren't read to them or a warrant
should have issued, although one would think that this might
support the state's argument that a warrant wasn't always
necessary. He said he is making the point that there could
still be an assortment of motion practice in criminal court
theoretically.
1:19:46 PM
REPRESENTATIVE BIRCH observed the term destructive agent appears
in multiple locations in the bill and the bill title relates
generally to burning, negligent burning, and everything related
to fire. He asked whether the division can quarantine property
due to issues such as dead standing trees on public or private
land, without consent of the property owner.
MR. MAISCH responded he could not envision a unilateral case in
which the division would enter property without first going
through forest practices statutory authority involving the
commissioner and a best interest finding to establish a zone of
infestation, which could be insects, diseases, or other
pathogens, and then enacting emergency regulations on how the
division would intend to deal with that, which could mean
treatments on private lands. There would be a more exhaustive
process for the division to go through besides just making a
unilateral decision that it would take action under this
statute. This statute is really focused on the fire piece.
REPRESENTATIVE BIRCH surmised this accommodation currently
exists.
MR. MAISCH answered correct.
MR. BREESE pointed out that the section that would be amended by
Amendment 1, AS 41.15.040, deals specifically with the right of
entry to control and to suppress fires. So, if this section is
amended, the Division of Forestry would still have a right to
enter for any other reasons, such as insect infestation. The
changes suggested by the amendment are to limit the entry when
[the division] is controlling and suppressing fires.
1:22:49 PM
REPRESENTATIVE PARISH expressed his concern about denying [state
fire officers] access to land to prevent a fire, to investigate
a negligent fire, or to investigate after a fire. He said
Amendment 1 is overly restrictive and he cannot support it.
REPRESENTATIVE DRUMMOND noted the state forester did not
indicate a destructive agent has been an issue for the division.
Furthermore, she said, if insects, diseases, or pathogens
contribute to fire danger by killing trees, the destructive
agent language must be part of the assessment in fire prevention
by the division, and there is no reason to remove it. She said
she therefore cannot support Amendment 1.
REPRESENTATIVE JOSEPHSON stated he opposes Amendment 1. The law
as written allows a fire officer to enter public and private
land to prevent prospective fires because of destructive agents
such as bug infestations, he said, and he doesn't have enough
knowledge to say that that should be prohibited. He further
cautioned against encumbering a fire official's ability to
access and inspect public land.
1:26:19 PM
REPRESENTATIVE TUCK asked whether a destructive agent could be
something that may be administered to prevent insect
infestation. He requested clarification on the intent of
existing statute regarding destructive agent.
MR. MAISCH responded that destructive agent is defined in
statute and means insect pathogen or environmental agent that
can cause damage to the forest resource. Whatever the cause,
standing dead timber is a more receptive and dangerous fuel
source to wildland fire than is a standing green forest.
Destructive agent is rather broad, but in the context of
forestry operations, it would primarily be for spruce bark
beetle infestations. He reminded members that the spruce bark
beetle infestation on the Kenai Peninsula was substantial and
crossed public and private ownership. He advised that prevent,
control, and suppress all have specific meanings in forestry.
1:28:43 PM
REPRESENTATIVE TUCK surmised the purpose of having this language
in this section is to allow the division to check whether a
property owner is applying flammable agents and/or whether
something needs to be applied to prevent the trees from drying
out and becoming a fire hazard.
MR. MAISCH answered the division would not be checking on what a
property owner is applying. He explained that if a property
owner has cut a lot of timber on his/her land and hasn't
properly treated the slash or disposed of the material it
becomes a breeding source for the insects and then the insects
can spread onto adjoining private or public lands. Therefore,
that would be the reason why forestry division staff would need
access to a piece of property.
1:29:41 PM
REPRESENTATIVE TUCK offered his understanding that there are
regulations which require downed trees be treated with a proper
destructive agent and the purpose of this is to be able to
inspect whether the downed trees have been treated with the
proper destructive agent.
MR. MAISCH replied correct, it would be a control method. He
explained there are numerous control methods for keeping an
insect infestation or potential infestation under control. It
is how the slash is treated - which could be chemical treatment
or physical treatment such as bucking, burning, or burial.
There are many ways to do that and those are addressed under the
separate Alaska Forest Resources and Practices Act statute.
1:30:47 PM
REPRESENTATIVE DRUMMOND said any organization authorized to
prevent, control, or suppress a fire includes any one of the
volunteer or paid fire departments in the state's communities.
She noted the Anchorage fire department has been working for
years to remove excess dry timber on "the hillside" in Anchorage
because it is extremely difficult or impossible to get water to
that area given the size of the roads. Therefore, she said,
close attention must be paid to who would be prevented from
getting to the source of a fire or potential source of a fire.
1:31:48 PM
CO-CHAIR TARR held over HB 355 with Amendment 1 pending for
further discussion.
^PRESENTATION(S): FOOD SECURITY IN ALASKA
PRESENTATION(S): FOOD SECURITY IN ALASKA
1:32:38 PM
CO-CHAIR TARR announced that the next order of business would be
presentations on food security in Alaska.
1:34:15 PM
DANNY CONSENSTEIN, Board Member, Alaska Food Policy Council
(AFPC), informed the committee that the Alaska Food Policy
Council (AFPC) is a coalition of Alaskans working to create a
healthier and more secure, self-reliant Alaska by improving its
food system. He said a food system is a term that describes how
food is acquired and used in a region, from the source of the
food to how it is stored, distributed, and consumed, which is
also known as a foodshed.
MR. CONSENSTEIN provided a brief background of farming in Alaska
and the role agriculture has played in the growth of the state.
He stressed farming's impact on the state's economy, the health
of its residents, and in supporting diverse cultures, but
questioned whether the Alaska food system is working well.
Therefore, he said, the AFPC decided to explore what a strong
food system would look like. Drawing attention to pages 8-11 of
the AFPC Strategic Plan dated 1/12/12, he reported that AFPC set
five goals to strengthen the food system. Goal 1, he explained,
is that all Alaskans should have access to affordable, healthy
(preferably local) foods. Goal 2 is that Alaska's food-related
industries should have a strong workforce and operate in a
supportive business environment. Goal 3 is to ensure that food
is safe and protected as it is distributed. Goal 4 is that
Alaska should have a sustainable food system, meaning the state
can keep growing food and growing enough food to feed Alaskans
in the future. Goal 5 is that Alaskans should be engaged in the
state's food system. While those are the goals, he continued,
the hard part about building a stronger food system is how to do
it; for example, whether policies need to be changed.
1:39:37 PM
MR. CONSENSTEIN related that the Alaska Food Policy Council took
some early steps, one being related to procurement, which is a
big driver. While consumers are already purchasing a lot of
Alaska grown products and want to buy Alaska grown, the question
is whether Alaska's institutions are buying Alaska grown. He
stated that if the engine of procurement was working and the
state and school districts were purchasing Alaska grown, then
the private sector food producers would fill that gap from the
supply side. For example, AFPC encouraged more programs in
schools - the Nutritional Alaska Food in Schools Program helped
schools purchase from the farm - and AFPC supported the product
preference, or 7 percent, statute. The AFPC worked with local
communities on emergency planning because thinking about being
prepared for the next emergency is a step towards food security.
MR. CONSENSTEIN, regarding the goal of engaging Alaskans, said
AFPC has sponsored three statewide conferences to bring people
together to learn more. He related that AFPC also facilitated
dialog in the communities of Nome, Fairbanks, Palmer, Bethel,
Juneau, Homer, and Anchorage. Further, AFPC encouraged the
state administration to form a work group so that state agencies
with different responsibilities around food could communicate
and coordinate better and become more efficient, which was done
under Governor Parnell.
MR. CONSENSTEIN stated AFPC is now looking at members of the
legislature to think about changes in policy that could build a
stronger food system. To move forward, he explained, there
needs to be an understanding of where the state is now. The
AFPC hired Ken Meter, an economist from Minnesota who has done
this for other regions and states, to do a food assessment of
Alaska and the executive summary of his report [is in the
committee packet].
1:42:53 PM
REPRESENTATIVE BIRCH inquired whether Mr. Consenstein's
presentation is related to any legislation before the body.
MR. CONSENSTEIN replied his presentation is not in reference to
any particular legislation, but that several bills are before
the body that AFPC supports and that would go towards building a
stronger food system. The point of his presentation and that of
others today, he explained, is to provide an understanding of
how the state's food system impacts Alaskans, the state's
economic development, the health of Alaskans, and food security.
He offered his hope that the committee or other members of the
legislature might work with AFPC, a nonprofit think tank around
food and food policy, to come up with some legislation for
introduction in the next session that would strengthen the food
system.
1:44:32 PM
KEN METER, Consultant, Crossroads Resource Center (CRC),
provided a PowerPoint presentation entitled, "Building Food
Security in Alaska," dated 3/5/18. He explained his study was
conducted by talking to several dozen people around Alaska and
doing economic research. He turned to a picture of the Juneau
airport on slide 1 and reminded members that the food for many
Alaskans comes by airplane. He said the map on slide 2 lists
the studies he has done - 136 regional studies in a total of 40
states and 2 Canadian provinces, as well as studies for 3
tribes. The list, he noted, indicates how widespread the
discussion is about food and his role in that.
MR. METER stated the next three slides show some different
approaches in Alaska to food security. Slide 3, he said, is a
picture of the Chena Hot Springs greenhouse, which taps surplus
heat from the hot springs to raise vegetables that are sold to
the people visiting the hot springs. Slide 4 is a picture of
traditional salmon drying in Kotzebue. Slide 5 shows the
greenhouse at Tim Meyer's farm in Bethel above the Arctic Circle
where he grows vegetables to sell to Bethel residents.
1:46:37 PM
MR. METER displayed slide 6 and noted Alaska's population has
grown from about 300,000 in 1969 to over 700,000 in 2016, an
increase of 151 percent over 48 years (slide 7). Addressing the
graph on slide 8 he related that the personal income in Alaska
has gone from $10 billion in 1969 to over $40 billion [in 2016],
an increase of 304 percent (slide 9). He said these two
datapoints pose an interesting question because one would think
that the economics of farming would be improving since there are
more people with more money to spend to buy food. However, he
stated, that is not really the case.
MR. METER turned to slide 10 and reported his study showed that
Alaska residents buy about $2.1 billion of food every year, but
about $2 billion of that is sourced outside of Alaska and so
leaves the state. He qualified, however, that the $2.1 billion
is not very accurate [see Mr. Meter's explanation under the
1:54:30 p.m. timestamp]. He noted the rising income and rising
population present a challenge to look for ways that the state
could retrieve some of those dollars and keep them in the state
to work for other purposes and to pay taxes within the state
government. Moving to slide 11, Mr. Meter noted that Alaska
farmers only sell about $12 million of food products each year.
He advised that this large gap between production by the state's
700-plus farmers and the demand for food could be filled.
1:48:27 PM
MR. METER displayed slide 12 and noted it lists the top farm
products in Alaska according to the 2012 census of agriculture.
He pointed out that although land is at a premium in Alaska,
most of the farm product sales do not go toward feeding people.
[The number one product] is nursery crops (ornamentals) for
landscaping and number two is hay. Vegetables sold to humans is
number three. So, he continued, while the production in Alaska
is important, it doesn't do much to feed the state's population.
MR. METER turned to slide 13 and discussed the history of farm
income in Alaska from 1969-2016. He explained the orange line
on the graph shows the money that all the farms in Alaska have
earned by selling products since 1969. The maroon line shows
how much it cost those farmers to produce those products. He
pointed out that in 2007 the cost of producing food and other
commodities rose substantially and has continued to rise
steadily since then. Alaska has a strange situation where the
returns being earned by farmers are staying steady, but the
expenses have gone up. Why this is happening is a conundrum he
cannot answer, he said, and it is a big challenge to the future
of eating food from Alaska farms. Subtracting the production
expenses from the cash receipts is depicted by the red line, he
noted, which shows that the net cash income for farmers has been
declining steadily since 2002 and has been negative every year
since 2005. Alaska farmers have had significant losses trying
to produce both food products and ornaments for state residents.
MR. METER displayed the graph on slide 14 and spoke further
about the net cash income for Alaska farmers from 1969-2016. He
explained the numbers are the same data as used on the previous
slide but are adjusted for inflation - the value of the dollar
is now one-sixth of the value it was when the previous chart was
started. The graph shows that, when adjusted for inflation,
quite a bit more money was earned in the 1970's when the value
of the dollar was higher, and the earnings in 1997 and 2001 also
look a bit higher, but the losses are still the same since 2005.
1:51:04 PM
REPRESENTATIVE PARISH asked what attributed to the enormous
spike in expenses for farmers in 2007.
MR. METER replied he doesn't really know, but the data shows
what farmers are spending their money on and much of this is
increased labor costs. He said he doesn't have the time or
resources to answer the question adequately or reliably, but his
assumption is that many farmers have an off-farm job to pay for
the cost of their farm operations. As the farmer's expenses
keep rising, the farmer keeps selling what he/she can on the
farm and makes up for that income with an off-farm job.
MR. METER drew attention to the peak in the orange line
representing cash receipts for the years 1991-2003. He said
some of the peak is due to the State of Alaska starting to count
what he considers to be non-farm items as part of agriculture
income. When that stopped in 2003 the income for farmers
leveled off and so it could be said that the positive income in
that era is more of a statistical question than a reality for
farmers. If that bump is taken out, he continued, a steady
decline would be seen since 1989 to the present.
MR. METER moved to slide 15 and pointed out that farmers are
making $33 million less farming today than in 1969. Since 1989
farmers have spent $119 million more raising crops and livestock
than they received from the market. These are severe questions
for the future of agriculture, he said, especially when there
are hundreds of thousands of people to feed and there is so much
of a past tradition of agriculture in the state.
1:53:28 PM
REPRESENTATIVE RAUSCHER requested examples of what Mr. Meter
considered non-farm items during the years 1991-2003.
MR. METER replied his understanding from staff at the Division
of Agriculture is that there was a time when some of the farmed
seafood products were considered agriculture. However, he
explained, that statistical move to claim those as part of
agriculture was, over time, disallowed because it really didn't
conform to federal practices, so those higher number of sales
were essentially because of an accounting shift. It went back
to the more standard accounting system in 2003, and since then
the cash receipts have remained steady in adjusted dollars.
1:54:30 PM
REPRESENTATIVE TUCK inquired whether the $2.1 billion spent on
food by Alaskans is strictly for farmed agriculture products or
also includes seafood.
MR. METER explained that to get this number he used an average
for the western U.S. states where the cost of food is less than
in Alaska. Also, Alaska has more people who depend upon
subsistence or other personal use gathering of wild foods.
Therefore, he said, it isn't a very accurate number in the sense
that he cannot prove it is exactly $2.1 billion and $2 billion.
Additionally, he continued, he cannot prove there is $100
million of trade from Alaska farms to Alaska consumers. The
data he has would show that the direct sales from farmers to
household customers is about $2.2 million in 2012, which is all
the hard data he would have to show how much food is moving
directly from farms to household customers. That would not
include food that goes to a grocery store or food that is
processed on the way to Alaska consumers, he added, so it is an
inadequate total measure. The flow of food from Alaska farms to
Alaska consumers is quite small, and there is not a lot of food
processing in the state either.
1:56:17 PM
MR. METER resumed his presentation. He said slide 16 addresses
the benefits coming into Alaska from the [federal government's]
Supplemental Nutrition Assistance Program (SNAP). He explained
the red line on the graph is the same red line seen before, but
it looks much shallower because the scale has changed. The
orange line is the amount of federal payments coming in to
support farmers, which have been rising in the last few years
commensurate with the decline in farm income. However, he said,
the startling story here is that the SNAP benefits to low income
people went up to $200 million in 2011. While it fell to $160
million [in 2016], it is still 13 times the amount of food that
[Alaska] farmers sell. He pointed out that SNAP benefits are
often the number one source of money for food in Alaska and it
could be argued that all those subsidies from the federal
government are more important in feeding Alaskans than farmers
are themselves. That is a challenge for the longevity and
health of people who live in the state, he opined.
MR. METER moved to slide 17 and noted the state spends about
$450 million every year to cover the medical costs of diabetes
and related conditions, which is another flow of money leaving
Alaska every year. This is tied to eating improper foods as
well as improper exercise, he said, and is another reason to
think about having more Alaskans more closely connected to a
source for healthy food.
1:57:55 PM
MR. METER displayed slide 18 and said CRC has calculated that if
every person in Alaska were to buy $5 of food directly from some
farm in the state (a hypothetical calculation since those farms
don't currently exist in the state), farms would earn $193
million of income, which is 16 times the current cash receipts.
Specific changes like that, he continued, could make a large
difference in terms of farm income. Turning to slide 19 he
related that the State of Alaska took CRC's suggestion and [in
2017] started a buy $5 Alaska Grown challenge in which [six]
retailers], the Alaska Farm Bureau, and farmers collaborated.
Carrs Safeway won an award for its displays around the state and
Walmart came in second. Several producers said they increased
their sales and reach in selling food because of that challenge.
He suggested that continuing the Alaska Grown challenge could
make a big impact by publicizing to Alaskans why it is in their
interest to buy more food from local farmers.
MR. METER drew attention to slide 20 and noted that one of every
three farms in Alaska sells direct to customers. This ranks
Alaska up with states like Vermont and New Hampshire, he said,
as one of the top states in the nation for how many farms reach
out directly to their customers.
MR. METER turned to slide 21 and said CRC calculated how much
land would be required to provide all of Alaska's demand [at
current rates of consumption] for a few select vegetables that
are easy to grow in Alaska. The acreages are as follows: 4,700
acres for potatoes, 200 for carrots, 200 for cabbage, and 600
for lettuce. Even though the state has given up much of its
best land for urban development, he continued, it does have land
suitable for farming if new farmers can be brought on and if the
fertility can be improved.
2:00:02 PM
MR. METER moved to slide 22 and discussed a CRC project done in
South Carolina in 2013. Ironically, he noted, South Carolina is
importing almost as much food as does Alaska even though it has
four growing seasons. He said CRC's approach was to say that a
whole web of facilities is needed. This "food web" includes
aggregation points like the one existing in Charleston, he
explained, as well as places on farms that have the
infrastructure to safely wash and package food and to get it on
pallets for loading into storage or selling to individual
household customers. This model would work very well in Alaska,
he advised. He drew attention to the picture of a packing barn
on slide 23 and said it is on a farm in Wisconsin and is a good
example of infrastructure built on a farm to make local foods
much more efficient, from the boxes shown in the picture back to
a micro-van that conveys the product to buyers.
MR. METER displayed slide 24 and said public investment is a key
role in addition to publicizing the need to buy food from Alaska
farms and building infrastructure that creates community
efficiencies. He pointed out that the heavy investment in good
auto and air transport enables food to travel rapidly from long
distances, but food has trouble going the short distances within
the state. Warehouses need to be built along with an entire
system of relationships that will convey food from local farms
to local consumers, he said, and that would be a good role for
the state to take on. He concluded by drawing attention to his
contact information shown on slide 25.
2:01:57 PM
REPRESENTATIVE BIRCH [observed from slide 15] that in 2016
farmers lost $30 million on $40 million worth of cash receipts.
He asked what Mr. Meter would advise the State of Alaska to do
to mitigate this.
MR. METER replied his answer is what he said at the end of his
presentation - creating infrastructure, such as food caches in
rural areas, warehouses with freezer and cooler space so that it
becomes more efficient to get food from farms to customers in
the state, advertising the need for consumers to buy food and
keep the money in the state, and supporting new farms so the
state has people with the skills of agriculture. Since 1950 the
number of people with those skills has declined, he noted. The
state needs to build the support system around agriculture to
make it feasible for people to make a better livelihood than
they currently are making.
REPRESENTATIVE BIRCH commented that in looking at the raw
numbers it appears that a doubling of the receipts is needed to
at least break even. He said most of the people he knows shop
at Costco or Walmart because in an urban area people shop where
the groceries show up. While he appreciates fresh carrots, he
said there is a huge hole to be dug out of. He asked what is
being looked for, short of a straight-up subsidy.
2:04:37 PM
CO-CHAIR TARR stated she is unsure whether CRC looked at the
number of new farms during that time. Addressing the [net cash
income] line, she noted that starting a new farm is cost
intensive and Alaska has had lots of growth in that industry in
the more recent years. She asked whether CRC evaluated anything
like that, given a new farm would be "upside down" with costs
like purchasing equipment.
MR. METER responded, "Not in any great detail," and concurred
with Co-Chair Tarr. A dilemma had by Alaska farmers is the move
towards importing more inputs, he said. Oil pumped in Alaska
goes to Seattle for refining and then comes back to the state.
Fertilizers are purchased from Outside. Alaska has a real
challenge because all the inputs essentially must be brought in
from outside Alaska, adding cost to the farming. The rising
cost of living means it is more expensive for labor and so on.
Some of the refinements, he suggested, could be to use the waste
food generated by manufacturers and the tourist industry to
create more fertility rather than purchasing chemicals from
Outside. An infrastructure can be had that is based on
materials that can be harvested and grown inside the state
instead of importing. In some ways, he added, it has become
less economical precisely because of investing in the
infrastructure that made it so easy to get food to a store but
didn't make it easy to get food from a farm to a consumer.
CO-CHAIR TARR noted the committee has jurisdiction over the
Department of Natural Resources (DNR) and has spent much time on
the Division of Oil & Gas but much less time on the Division of
Lands, Mining and Water and the Division of Agriculture. Over
the past few years, she said, the committee has been trying to
look at the other opportunities relative to that type of
resource development. The $2 billion economic opportunity for
Alaska stood out to her and prompted having these hearings.
2:08:25 PM
GARY FERGUSON, BS, ND, Healthy Communities Consultant, provided
a PowerPoint presentation entitled, "Addressing Nutrition
Insecurity with Traditional Foods," undated. He said he has 16
years of experience in the health system, has served on the
Alaska Food Policy Council, and has been working on food and
nutrition security issues across the state for many years,
primarily in the Alaska tribal health system.
DR. FERGUSON displayed slide 2, a picture of a river system. He
said a lot of his work has been around addressing the social,
economic, cultural, and environmental factors that contribute to
health and wellbeing. He explained slide 3 shows the social
determinants of health and having to move upstream to stem the
tide of some of these long-term issues to prevent chronic
disease. Nutrition is an important part of that as food and
food systems are addressed and ensuring that there are vibrant
local food economies, as well as traditional foods.
DR. FERGUSON moved to slide 4 and discussed the domains of
health influence. Noting he is also a clinician, he said an
important part of health care is to keep communities whole
through great public health and clinics. Clinical care is only
about 20 percent of the domain of health influence, he stated.
Health behaviors are about 30 percent and healthy eating is part
of that. Social and economic conditions, such as education and
employment, are key indicators, he continued, and the
environment is another domain. Having healthy food available is
important to health and wellbeing in communities.
2:10:42 PM
DR. FERGUSON turned to slide 5 depicting a diagram of Maslow's
hierarchy of needs. He explained it is a theoretical model
looking at addressing the basic needs of foods, safety, and
security from the western perspective and from the First Nations
perspective as informed by the Blackfoot Nation. As these needs
are addressed, communities and individuals can be actualized.
The First Nations model, he pointed out, is interesting because
it is not just about individual actualization, but also about
cultural perpetuity of which food is a basis - healthy foods and
foods locally available.
DR. FERGUSON drew attention to slide 6 depicting the cover of
Alaska Magazine from the early 2000's with an article entitled,
"The Store Outside Their Door," which looked at subsistence
lifestyles and the importance of these foods to Alaska's
communities. He said it isn't just about addressing food
security by shipping food into villages, it's also about looking
at how these local and traditional foods are valued. These
foods are important nutritionally and culturally.
DR. FERGUSON explained slide 7 focuses on the decline of
traditional foods, with this slide being about at study on the
decline in traditional marine food intake and vitamin D levels.
Historically, Alaska Native people had very high levels of
vitamin from their marine food intake and this study showed
there has been a consistent decline because of the change to a
more western diet and the giving up of some of these important
traditional foods.
2:12:24 PM
DR. FERGUSON turned to slide 8 relating to a study of Alaska
Native traditional foods in the Norton Sound region. He said
the study found that traditional foods of seal oil and salmon
improved pre-diabetes and prevented diabetes, and that people
who ate traditional diets had less cardiovascular disease. He
moved to slide 9 and said another study found that Alaska Native
people are hardwired for these traditional foods and may not do
so well with western foods such as grains, sugar, and
carbohydrates. Congenital sucrase-isomaltase deficiency (CSID)
affects upwards of 10 percent of the Inuit population. For
Native people, he continued, the traditional foods that are high
fat, high protein, and low carbohydrate are good medicine.
DR. FERGUSON displayed slide 10 and related that chronic disease
is a very expensive hit on the health care system. Obesity and
some chronic diseases are preventable by eating a healthy diet,
including traditional foods, he noted, and therefore a healthy
diet provides cost savings to health care systems. Addressing
slide 11, he said Hippocrates, the father of medicine, stated it
well when he said that food is truly medicine and the first
medicine should be food.
DR. FERGUSON drew attention to slide 12 depicting the Store
Outside Your Door Program, which he has helped co-produce over
the years. While at Alaska Native Tribal Health Consortium, he
said, he worked with many tribes and tribal health organizations
to capture how to hunt, fish, gather, and grow food in a
person's community. Many resources show how resilient a
community can be when it focuses on the store outside its door
versus the store that is locally available and often doesn't
have healthy, nutrient dense foods on the store shelves.
2:14:50 PM
DR. FERGUSON turned to slide 13 and discussed picking foods from
the beach. He said badarki [chiton] salad is a traditional food
that he ate while growing up in Sand Point on Shumagin Island.
He related that the picture on slide 14 is taken at The Siglauq
in Kotzebue where amazing work is being done around having
traditional foods such as caribou and seal served to elders at
the Siglauq facility. These nutrient dense foods help the
elders feel good, he stated, and serve as cultural connections
and comfort foods for the elders.
DR. FERGUSON displayed slide 15 and pointed out that a person's
taste preferences start in the womb in that what the mother eats
is craved by her baby later in life. Moving slide 16 he noted
the mother is feeding her son traditional whale food, which is
very iron rich and nutrient dense. This will set her son right
as he starts his life, he said, and will ideally give him a
preference for such local foods. Dr. Ferguson said the photos
on slides 17 and 18 depict a traditional salmon food in
Metlakatla. This traditional food can be used to help with
teething and to help children develop a taste for salmon, which
is rich in vitamin D and calcium.
2:17:06 PM
DR. FERGUSON displayed slides 19-23 and noted fireweed is a
nutrient dense, traditional green that is gathered in the
spring. One cup of fireweed leaves or shoots provides more
vitamin A than the daily need and is a good source of vitamin C
and fiber. He said studies show that the harsher the
environment the more nutrient dense Alaska plants become because
they form antioxidants, which also benefit people. Another
nutrient dense green is sour dock. Many people don't realize
there are so many foods in the landscape that people can live
off and the ancestors of Native Alaskans thrived nutritionally
because of living off the land. Ensuring that these foods are
available for the next generation is important, he stressed.
DR. FERGUSON turned to slides 24-25 and pointed out that iron
deficiency anemia is a challenge faced by young and elderly
Native Alaskans and is a big issue in the statewide Head Start
Program. He said the iron content of a three-ounce portion of
seal meat is equal to two portions of caribou/reindeer, or to
six hamburgers, or to 56 hotdogs. Whale contains about two
times the amount of iron in seal, he added. These incredibly
nutrient dense foods are important to Native Alaskans from a
health promotion and obese prevention standpoint.
2:19:20 PM
DR. FERGUSON discussed slides 26-27, noting that the traditional
berries harvested in Alaska are three to six times higher in
antioxidants than commercially harvested berries. Displaying
slide 28 he said the Centers for Disease Control and Prevention
(CDC) and the National Institutes of Health (NIH) have shown
interest in how the traditional foods of [Native Americans] are
important for the future of indigenous peoples when looking at
chronic disease prevention and health promotion.
DR. FERGUSON noted slide 29 depicts some of the work done in his
home region by the Aleutian Pribilof Islands Association, Inc.,
to address traditional foods in Head Start facilities. He
explained that "qaqamiigux" is the traditional foods eaten in
the Aleutian and Pribilof island region.
DR. FERGUSON said slide 30 depicts what some of the communities
are doing to help people understand the value of traditional
foods and the importance of passing that on to the next
generation. For example, the village of Igiugig did a six-week
traditional food challenge as a health experiment that measured
biometrics like weight, blood pressure, blood sugar, and heart
rate to see how traditional foods impacted people's health.
DR. FERGUSON displayed slide 31, a picture of a culture camp in
Atka. He said culture camps are held all over Alaska every year
to help the next generations to be connected to their food
system and how to live off the land. Additionally, the camps
provide physical activity and connect the next generations to
their culture and elders.
2:21:03 PM
DR. FERGUSON stated that the quote on slide 32 is from Dr. Rita
Pitka Blumenstein, a great supporter of the work with
traditional foods and traditional medicines:
We are free to be who we are - to create our own life
out of our past, and out of the present. We are our
ancestors. When we heal ourselves, we also heal our
ancestors - our grandmothers, our grandfathers, and
our children. When we heal ourselves, we heal Mother
Earth.
DR. FERGUSON added that tackling food and [food] security and
helping the next generations to grow up healthy will save the
State of Alaska money and effort at trying to address chronic
disease once fully manifested versus preventing these diseases
with healthy foods in the first place.
2:21:58 PM
CO-CHAIR TARR remarked that Dr. Ferguson's presentation
highlights the challenge the legislature has in public policy
when making decisions about natural resources, such as land
management and access. She said legislators should be thinking
about the foods people will be able to access as a result.
DR. FERGUSON stated Co-Chair Tarr's remark is about protecting
food systems through looking at baseline environmental impact
statements (EIS's) and looking at communities and resource
development. He said good baseline surveys of traditional foods
and where people get their foods from are an important part of
protecting and ensuring there are healthy vital food systems.
Much of his work has been about, "How do we live off the land
and be vibrant people?" and "How do we connect to the
understanding that our ancestors had of these important foods?"
Environmental stewardship is a cultural value, he continued, and
these important foods that are truly medicine will go away if
they aren't protected as economies and resources are developed.
As stated by Mr. Meter, the fertile lands where food can be
grown must be incorporated into the thinking.
2:25:06 PM
MR. CONSENSTEIN added that he looks forward to working with the
committee over the interim on some options for policy changes
that would strengthen the state's food system.
CO-CHAIR TARR noted there has been talk about [the committee]
convening a task force or caucus.
^PRESENTATION(S): ALASKA OIL AND GAS CONSERVATION COMMISSION
PRESENTATION(S): ALASKA OIL AND GAS CONSERVATION COMMISSION
2:26:24 PM
CO-CHAIR TARR announced that the final order of business would
be a presentation by the Alaska Oil and Gas Conservation
Commission.
2:27:23 PM
HOLLIS FRENCH, Commissioner, Chair, Alaska Oil and Gas
Conservation Commission (AOGCC), began his presentation by
discussing workover activities depicted in charts on a series of
seven PowerPoint slides. Displaying the slide entitled,
"Workover Activities (2003-2017*)," he noted the 2017 numbers
[are preliminary] and said the trend is the same as it has been
for the last few years with no aberration historically.
2:27:55 PM
CO-CHAIR JOSEPHSON surmised the chart reflects an effort to
double-down and get more resource out of the ground and so, in a
sense, reflects resources available and economic strength.
MR. FRENCH replied he would be cautious about commenting on what
it means. He said he is giving the numbers so the committee can
look at them and draw its own conclusions. A certain number of
workovers took place last year, he explained, and workovers are
something short of drilling a new well and are usually downhole
well repairs.
2:29:00 PM
REPRESENTATIVE PARISH observed from the chart that 2009 was the
most active year. He said he doesn't see any connection between
these and a dollar value for the workover activities. He
inquired whether the chart shows only the number of instances,
which appear to be between a low of 650 and a high of just under
1,800. He further inquired whether it would be useful to know
the expense of each workover.
MR. FRENCH responded he doesn't have access to the cost per
workover, or the cost per job, because billing receipts are not
submitted to AOGCC. The commission just permits the actual work
and out it goes to the field.
2:29:57 PM
REPRESENTATIVE BIRCH asked whether workovers are a contributor
to the uptick in production seen over the last three years.
MR. FRENCH answered the way to look at it is that if this work
is not done, the decline is going to be a lot worse.
REPRESENTATIVE BIRCH said there is no decline.
MR. FRENCH agreed, but explained that without this work things
get worse. The uptick in production is due to several factors
and certainly the work done in 2014 and 2015 has something to do
with that. These are wells that have been stimulated, repaired,
and operated on to work better, and the results are being seen.
REPRESENTATIVE BIRCH concluded that workover investment has had
a positive impact on production.
MR. FRENCH replied the short answer is yes.
2:31:53 PM
MR. FRENCH returned to his presentation and reviewed exploration
wells using another series of seven PowerPoint slides. He noted
explorations wells aren't always a popular activity, the number
of exploration wells always being relatively low compared to
other wells. But, he added, as a harbinger of the future AOGCC
knew the committee would be interested.
MR. FRENCH moved to a series of three PowerPoint slides about
the number of development wells that have been drilled. He said
he calls these "regular" or "normal" wells and explained they
are non-exploration wells drilled in a known field in a known
location. He pointed out that the number of development wells
drilled has remained remarkably steady over the years.
2:32:50 PM
REPRESENTATIVE BIRCH noted much has been said about oil tax
credits, for which the state still has a billion dollars of
liability to pay down. He asked whether the wells depicted in
the slide [entitled, "EXPLORATORY (WILDCAT/DELINEATION) WELLS
AND WELL BRANCHES, Statewide, Oil and Gas: Completed, Suspended
or Abandoned (2003-2017*)], would be represented in the
investment that the industry has made, such as the wells drilled
in the Colville River and Smith Bay areas by Caelus Energy, LLC.
MR. FRENCH answered that a well would be represented if it has
been actually drilled. He said the Smith Bay and Nanushuk
wells, and the wells being drilled in the National Petroleum
Reserve-Alaska (NPR-A), are represented.
2:34:21 PM
REPRESENTATIVE PARISH, regarding the same slide, observed the
statement, "Total Wells and Well Branches Drilled and Completed,
Suspended, or Abandoned since 2003." He asked what proportion
of these would be abandoned wells.
MR. FRENCH replied he doesn't know the number but abandoning a
well happens with regularity. Frequently an exploration well is
drilled and analyzed, he explained, and then plugged and
abandoned shortly thereafter because there is no immediate plan
to re-enter that wellbore and do something with it.
2:35:17 PM
CO-CHAIR TARR, regarding the same slide, observed the number of
operators and inquired whether these are the operators in active
exploration work and not just the lessee.
MR. FRENCH responded that these are wells actually drilled. A
company may be leasing property, or may be expanding, or may be
making plans or announcing plans, he added, but AOGCC doesn't
count it until a drill bit goes in the earth and a well drilled.
CO-CHAIR TARR noted the committee packet includes a similar
slide that is specifically for the Arctic Slope.
2:36:11 PM
MR. FRENCH returned to his presentation and said he would
discuss AOGCC's effort to update its bonding practices and would
present an idea AOGCC would like the committee to consider.
Speaking from a paper entitled, "Presentation to House
Resources, Monday, March 5, 2018, he read a quote from the
publication, "RISKS OF ACQUIRING AGING OILFIELDS," published by
the Rocky Mountain Mineral Law Foundation:
As sure as death is the great certainty of life, so
too is plugging the great certainty of petroleum
development: every well will - at some future point
unknown - cease to produce in paying quantities and
require plugging. In transactions involving aging
oilfield properties, both the seller and the purchaser
must understand and appreciate their respective risk
of plugging liability.
MR. FRENCH, to make members aware of the size of the liability,
reported there are about 5,200 wells in Alaska. Most are oil
producers, some are injectors of either gas, water, or miscible
injectant to help sweep the reservoir, and a few are disposal
wells. While 5,200 is a large number, he said, Louisiana has
over 200,000 wells and Texas has over 500,000. While Alaska has
a long way to go to get to those numbers, he continued, AOGCC
wants to stay on top of this issue from the get-go.
MR. FRENCH related that AOGCC holds bonds to ensure that the
operator of a lease plugs and abandons its wells when finished.
He said AOGCC has begun the process of updating its bonding
practices, which was brought to the committee's attention last
year. At that time AOGCC pointed out its regulations that say a
bond "must not be less than $100,000" for a single well and "not
less than $200,000 for a blanket bond covering" all an
operator's wells in the state. He noted that AOGCC has
historically required no more than $100,000 for the first well
and $200,000 for all subsequent wells. All of BP's 1,900 wells
on the North Slope are covered by a $200,000 bond; the same is
true of ConocoPhillips. He recalled that year's headline about
those hearings stated, "'Paltry' bonding for oil operators puts
Alaska at risk," and said AOGCC thinks that sums it up well.
2:39:04 PM
MR. FRENCH noted AOGCC held a workshop last summer to discuss
the issue with industry and to solicit industry's input directly
and through written submissions. He reminded members that last
year AOGCC stated its belief that it doesn't need any statutory
authority to act. He related that comments received by AOGCC
after the workshop from the Alaska Oil and Gas Association
(AOGA) and ConocoPhillips also said a new law isn't needed;
AOGCC has the authority it needs to take action.
MR. FRENCH pointed out that AOGCC is not the only holder of
bonds in the state. He said the Department of Natural Resources
(DNR) holds bonds for Dismantlement, Removal and Rehabilitation
(DR&R), which are monies held to remove surface improvements
such as pipelines, facilities, and tanks.
MR. FRENCH said AOGCC has not arrived at a cookbook answer for
this bonding effort. Earlier this year AOGCC sent a letter to
every operator in the state requiring them to give AOGCC their
estimates [by 3/7/18] of what it would cost to properly plug and
abandon (P&A) their wells.
MR. FRENCH related that informing AOGCC's effort was the
bankruptcy of Aurora Gas LLC, a small company/operator of 19 gas
wells all located on the west side of Cook Inlet. Alaska has
seen oil companies bankrupt in the past, he said, but this one
was different in that no one stepped forward to buy all of
Aurora Gas's assets. Of the 19 wells Aurora Gas had when it
went into bankruptcy, only the 6 best producing wells were
acquired by a new company, Aurora Exploration. He noted that
while those names seem very similar, they are distinct legal
entities. From its time spent in bankruptcy court last fall,
AOGCC learned a lot about that process. Of the 13 remaining
wells, 10 are on land owned by Cook Inlet Region, Incorporated
(CIRI). This turns out to be a big break for the State of
Alaska, he explained, because under AOGCC regulations if the
operator disappears AOGCC looks to the landowner for following
through on plugging and abandoning those wells. Thus, CIRI will
have to pay to plug and abandon those 10 dead wells. The other
three wells will fall on DNR. He offered his belief that DNR
will come to the legislature for money to make the wells safe
and to plug and abandon them.
2:41:33 PM
MR. FRENCH reported that last fall AOGCC held a hearing to get a
better handle on what it costs to plug and abandon a well.
There is no simple answer, he reported. The first question that
must be asked is about the well's location. Is it on the North
Slope, in Cook Inlet, on or off the road system? Last summer
AOGCC dealt with [NordAq Energy Inc.], a company that had two
wells - one on the west side of Cook Inlet near the mouth of the
Kustutan River and the other off-road on the north Kenai
Peninsula where a snow road had to be built to access the well.
MR. FRENCH pointed out that for bonding purposes the question is
not what it's going to cost the operator to do the P&A work.
The bond is in case the operator fails to do its obligation and
the state must step in and do the work. Therefore, the state
must figure out the amount of money it needs to hold as security
should it get handed the P&A job. He said AOGCC's best estimate
for plugging and abandoning the wells on the west side of Cook
Inlet, off the road system, is around $600,000 each.
MR. FRENCH said all this information brings him to the impetus
for this hearing. While working on this issue, it has come to
AOGCC's attention that in at least two jurisdictions, California
and Kansas, the regulating authorities are armed with statutes
that allow them to pursue former operators for plugging and
abandonment costs in the event a current operator is financially
unable to do so. He noted the statutes do not get much use,
they are there as a form of backstop. One high-profile case
involved an oil platform in Santa Barbara where the current
operator [Venoco LLC] went bankrupt, potentially leaving the
State of California on the hook for millions of dollars of
costs. California's prior operator law allowed it to enter
negotiations with Exxon, the operator of the platform at the
time the law went into effect, and the state and Exxon reached a
settlement.
2:43:41 PM
MR. FRENCH said the language of the laws in California and
Kansas are simple. He read aloud from the laws, which state:
California:
(c)(1) The current operator, as determined by the
records of the supervisor, of a deserted well that
produced oil, gas, or other hydrocarbons or was used
for injection is responsible for the proper plugging
and abandonment of the well or the decommissioning of
deserted production facilities. If the supervisor
determines that the current operator does not have the
financial resources to fully cover the cost of
plugging and abandoning the well or the
decommissioning of deserted production facilities, the
immediately preceding operator shall be responsible
for the cost of plugging and abandoning the well or
the decommissioning of deserted production facilities.
(2) The supervisor may continue to look seriatim to
previous operators until an operator is found that the
supervisor determines has the financial resources to
cover the cost of plugging and abandoning the well or
decommissioning deserted production facilities.
However, the supervisor may not hold an operator
responsible that made a valid transfer of ownership of
the well prior to January 1, 1996.
Kansas (Kan. Stat. Ann Section 55-179 (2014):
For the purposes of this section, a person who is
legally responsible for the proper care and control of
an abandoned well shall include, but is not limited
to, one or more of the following: [1] Any operator of
a waterflood or other pressure maintenance program
deemed to be causing pollution or loss of usable
water; [2] the current or last operator of the lease
upon which such well is located, irrespective of
whether such operator plugged or abandoned such well;
[3] the original operator who plugged or abandoned
such well; and [4] any person who without
authorization tampers with or removes surface
equipment or downhole equipment from an abandoned
well.
MR. FRENCH pointed out that these laws are two approaches - one
keeps going back in time until finding someone who can afford to
plug and abandon the wells and one goes back just to the last
operator. He said both approaches capture the concept that this
is an enormous liability and that it will not go away soon.
Referring to his previous quote, "In transactions involving
aging oilfield properties," Mr. French stated he thinks [the
buyer and the seller] both know there is something at risk for
all that liability.
2:46:00 PM
REPRESENTATIVE RAUSCHER offered his understanding that [DNR]
would be asking for bonding for the three abandoned wells on
state land, not the ten abandoned wells on CIRI land.
MR. FRENCH replied CIRI will to have to pay to plug and abandon
the ten wells that are on CIRI land, and the state will have to
pay to plug and abandon the three wells that are on state land.
2:47:04 PM
CO-CHAIR JOSEPHSON inquired as to how much cash would be
required from the bond holder for a $600,000 bond.
CATHY FOERSTER, Commissioner, Alaska Oil and Gas Conservation
Commission (AOGCC), responded that the cost of a bond is
dependent upon the financial stability of the company. For
example, she continued, it costs BP and Exxon much less than it
does a little company.
CO-CHAIR JOSEPHSON, regarding Aurora Gas and Aurora Exploration,
asked whether accidentally both were called Aurora or was a
situation where one was a sub-corporation and therefore could
only be touched in some limited way.
MR. FRENCH answered they are two distinct corporations. He
allowed that even AOGCC was confused by that and thought it saw
the same actors on both sides, but that was wrong. He explained
it is a very powerful concept in bankruptcy law that once a
company goes bankrupt, it is done and over. He said AOGCC
thought about trying to get Aurora Exploration to plug and
abandon those old wells because that's all AOGCC cared about,
but that is contrary to bankruptcy law and couldn't be done.
CO-CHAIR JOSEPHSON offered his understanding the state can
capture $300,000 and is therefore short about $1.5 million on
these three wells.
MR. FRENCH replied the state has $200,000 because AOGCC's
practice has been to take $100,000 for the first well and
$100,000 for the second well and that constitutes the operator's
statewide bond. Therefore, most companies have $200,000 on
account with AOGCC.
CO-CHAIR JOSEPHSON, regarding the approximate $1.5 million the
state will be out in general fund dollars, surmised the state
would try to seek a judgment through the attorney general and
notwithstanding the bankruptcy filing the state would try to
become a creditor and try to get in the queue in some way.
MR. FRENCH responded that that is a dead end, based on the
bankruptcy hearings he sat through and getting a feel for what
is coming in versus what is going out. He related that when
California dealt with the [Santa Barbara] platform, one of the
more humorous lines in the letter of intent signed between
[California] and Exxon is that the parties anticipate the former
operator, Venoco LLC, is not going to comply with the order from
the state to plug and abandon those wells. The reality is that
nothing can be squeezed from a [bankrupt] operator.
2:50:53 PM
REPRESENTATIVE PARISH calculated that an overall liability of
almost $8 million was ducked by this oil company folding, of
which the State of Alaska is on the hook for $1.6 million unless
the bonding is also used to offset the costs of CIRI. He asked
whether there would be any division there.
MR. FRENCH answered CIRI is on its own, but that CIRI had the
foresight to have purchased an insurance policy against this
eventuality.
MS. FORESTER advised that while worrying about three wells is
important because it is real money, the question is how much to
worry about 5,300 wells. The big picture, she advised, is that
AOGCC needs to improve its bonding, however that will not get
AOGCC there. A bill is needed that says AOGCC can go back on
old operators. Plus, other things need to be done that AOGCC is
working on and that DNR is working on. She said she is not
worried about three wells, she is worried about 5,300 wells.
2:52:43 PM
REPRESENTATIVE PARISH posed a scenario in which an operator owns
1,000 wells of which 800 will not be useful in the future. He
inquired whether the operator could sell off the [800] wells
without any adjustment to its bonding as well as no adjustment
to the bonding of someone who owns two wells.
MR. FRENCH replied AOGCC focuses on operators. If an operator
were to sell those wells and someone stepped forward to operate
them, AOGCC would analyze that [new] operator's strength and
make that operator post a bond before it became the operator.
That change of operatorship is controlled by AOGCC, he
continued, and AOGCC's moment to act is when a change of
operator form is submitted and that is when AOGCC would say it
needs some bonding. Ms. Foerster's point is well taken, he
added, it is the big picture and that huge number, particularly
aging Prudhoe Bay wells. He related he has taken two or three
trips to Prudhoe Bay since starting his AOGCC job and he was
deeply impressed with how much that infrastructure has aged
since when he worked there from 1984-1992.
2:54:07 PM
REPRESENTATIVE PARISH offered his understanding that an operator
going bankrupt after acquiring a great number of aging wells
would leave [the State of Alaska] without further recourse.
MR. FRENCH responded that he and Ms. Foerster are before the
committee because AOGCC sees a danger where a strong presence
could exit, and a financially less strong company could take
over some assets and leave much more exposure to the state
treasury in the form of taking care of a known obligation.
MS. FOERSTER posed a scenario in which a big company leaves, it
sells to a little company, and the little company is unable to
plug those thousands of wells. She said [the state] would have
three choices: 1) the legislature could pass a backstop bill
that allows AOGCC to go back on the former operator, an option
she likes; 2) the state's coffer could be dug into for billions
of dollars that it doesn't have, an option she doesn't like; or
3) [the abandoned equipment and pollutants] could be left in
place and the state turned into [a mess like what was done with]
the federal government's legacy wells on the NPR-A.
2:56:11 PM
REPRESENTATIVE BIRCH, relating to cost, asked what mechanics are
involved in plugging and abandoning a well; for example, whether
a big rig would be set up over the hole and grout pumped into
it. He further asked how many wells have been abandoned.
MS. FOERSTER answered that every well will have its own cost.
Some wells will need only a little grout pumped into them, but
these will be the exception. Many wells will require a rig on
them - some of those are in the middle of infrastructure where
there are already rigs that can just be driven over and set up
to do the work, and then there are wells in the middle of
nowhere that will require a rig to be helicoptered in, one piece
at a time, and this can only be done after an ice road has been
built. So, she continued, the cost can be as simple as
attaching a hose and pumping in grout or it can be huge.
2:57:35 PM
REPRESENTATIVE DRUMMOND remarked this is scary. She offered her
understanding that not all the 32 operators listed on the slides
are operating right now. She presumed that each operator has
drilled two or more wells and therefore the state collected a
$200,000 bond from each one, which is only $6.4 million. She
further presumed that not all the [5,200] wells were created by
those 32 operators, which is a big problem [for the state].
Regarding Aurora Gas, she inquired as to what happens with the
$200,000 bond in bankruptcy.
MR. FRENCH replied the bond is made payable to AOGCC and only
AOGCC can collect it. For Aurora Gas, he said, it is basically
a certificate of deposit at a local bank. When the time comes,
AOGCC will seize the bond and hand it over to the Department of
Administration for deposit in the general fund. He added that
AOGCC has only seized a bond once to help pay for P&A liability.
Mr. French explained the statute says AOGCC can require a bond
and AOGCC's regulations say not less than $100,000 and not less
than $200,000, so there is no upper limit. But, he advised, the
committee will hear from industry that every dollar out of its
pocket for bonding is one less capital dollar it will spend next
year. That is the industry's negotiating posture, so AOGCC is
faced with a delicate balancing act of hitting the right number.
MS. FORESTER pointed out that bonding is not going to solve the
problem because AOGCC is not going to collect $1 billion worth
of bonds.
MR. FRENCH agreed.
2:59:57 PM
REPRESENTATIVE DRUMMOND asked whether the state could take the
$200,000 bond and buy an insurance policy with it.
MR. FRENCH responded it might be possible the state could engage
in the same business CIRI engaged in, which is buying an
insurance policy for that liability. But, he continued, that is
risky.
MS. FOERSTER added that to say CIRI bought an insurance policy
is a very simplistic approach. She explained that before CIRI
approved the sale to Aurora Gas from the old operator, CIRI made
the old operator sign a promissory agreement saying the old
operator would be responsible for plugging and abandoning the
wells should the buyer be unable. That old operator still
exists and still has money and CIRI has gone back on the old
operator and that old operator is going to plug the wells. So,
it is kind of like an insurance, but is more like what AOGCC is
asking the committee to consider, which is to have the ability
to go back on the old operator.
3:01:00 PM
CO-CHAIR JOSEPHSON surmised that if BP has 1,900 wells the cost
is not going to be a few thousand per bond because BP is sort of
self-insured. Given the cost of P&A has gone up, he said he is
trying to determine what the retort could be other than it is a
dollar that cannot go somewhere else.
MR. FRENCH posited that the industry will say to look at its
history and that it has taken care of its responsibility. In
the history of the state, he said, there have been few instances
where it has fallen back on the state. The nature of insurance
and the nature of long-range issues is that they don't pop up
every day. It is a matter of [the state] trying to be careful
and trying to stay ahead of something. Industry is aware of
this and is not neglecting it, but AOGCC believes it is a much
bigger liability than gets discussed at regular intervals.
Therefore, AOGCC appreciates the opportunity to discuss it today
and thinks it prudent for the state to have that backstop of a
law that lets the last guy be looked at.
3:02:57 PM
CO-CHAIR JOSEPHSON surmised the bond would apply to private
land, such as CIRI, and that CIRI would have to have the same
$600,000 requirement prospectively.
MR. FRENCH replied that AOGCC doesn't have a "cookbook" response
and is going to take each operator one at a time. He said he is
unsure whether AOGCC will multiply wells times $600,000 to come
up with a number.
CO-CHAIR TARR noted 5,000 wells times $600,000 is a $3 billion
problem.
3:03:36 PM
REPRESENTATIVE JOHNSON, regarding multiplying $600,000 by every
well in the state, inquired whether the goal is to have a bond
that will be sizeable enough for people to act if they want to
get back their bond, or whether it is to cover the state for
every dime it might possibly cost in the future. She offered
her interpretation that at first this was portrayed as a very
dark and huge problem, but then it was heard that [AOGCC] has
only gone after a bond once.
MS. FOERSTER responded that AOGCC has only had cause to go after
the bond one time and did, and now AOGCC has another opportunity
to do that with Aurora Gas and will. But, she explained, the
problem isn't going to be solved by a bond and the problem isn't
going to be solved by a bill. The problem of having thousands
of wells in the state, all of which will become an idle well
eventually if not plugged, is going to require several steps.
She said one step that AOGCC has already instituted is that
every operator comes in once a year and reviews with AOGCC every
idle well the operator has and what the future utility and
mechanical condition is for each idle well. After those reviews
an agreement is made on which wells will be plugged and
abandoned over the next year. The commission is going through
each operator's idle well inventory and trying to lower it year
by year. Ms. Foerster said another step will be reviewing
AOGCC's bonding process and trying to make it more realistic.
But bonding is not going to be the solution by itself, she said.
Another part of the solution is working with legislators to pass
a bill that lets AOGCC go back on other operators.
MS. FOERSTER added that another part of the solution which
hasn't been mentioned and which she would like to see is an idle
well fund. She outlined how this fund would work: If an
operator has, say, 100 idle wells, then the next year it will
cost the operator, say, $100 per well for each of the 100 wells
that is still idle. If any of those wells are still idle the
following year it will cost the operator $500 per well and the
next year it will cost $1,000 and so on. That money would be
put into an idle well fund to be used for plugging and
abandoning wells. This fund would do two things, she continued.
It would start to build a fund that AOGCC can use for plugging
and abandoning wells and will disincentivize operators from
leaving their wells idle. She described this issue as being
like a patient that requires several doctors doing several
different things - legislators are one of the doctors, AOGCC is
another, and DNR is another. When DNR allows operators to sell
properties to new operators, they must work DR&R agreements that
are more creative and inclusive.
3:07:47 PM
REPRESENTATIVE JOHNSON inquired whether AOGCC is having trouble
with companies doing their due diligence when AOGCC asks for
their compliance.
MR. FRENCH answered NordAq Energy Inc. has plugged and abandoned
its well on the far side of Cook Inlet but hasn't yet gotten to
its well on the Kenai Peninsula. NordAq is not a multi-million
dollar or multi-national company and is trying to scrape
together the money to do this job, he said. But part of it is
AOGCC and DNR putting the heat on NordAq to push it in the right
direction. He noted AOGCC probably spends 80 percent of its
effort working with 20 percent of these companies. He added
that while AOGCC does worry about the large number of wells had
by ConocoPhillips, BP, and Hilcorp, they are huge companies that
have an amazing amount of people putting energy into these. It
is the little outfits that give AOGCC a lot of fits.
REPRESENTATIVE JOHNSON asked how much the settlement was with
Exxon.
MR. FRENCH replied he will get back to Representative Johnson
after the hearing.
REPRESENTATIVE JOHNSON commented that while maybe there should
be concern on this, she feels there won't be 5,200 wells coming
in at one point. She said there must be good operators in the
state and surmised the "big three" are working with [AOGCC].
She stated there needs to be a spectrum of concern and how the
amount of the bonds is chosen, there must be awareness of what
that could do as far as development.
MR. FRENCH agreed it is a valid point and said it is something
AOGCC is struggling with. The number cannot be too high, or it
is a penalty; and the number cannot be too low, or it isn't
meaningful. It is part of policy setting, he continued, and it
isn't easy.
3:10:40 PM
REPRESENTATIVE TALERICO said this should be looked at as a risk
assessment. Although he can appreciate the number of wells in
the state, he continued, he also realizes that some have been
plugged and taken care of. Some of these companies are probably
very responsible and work at taking care of that. It is
difficult when it is said [the state] has X number of wells and
[the state] is going to cover the expense for all of those,
although there are those smaller companies that do that. There
are different costs associated with different wells. He asked
whether AOGCC, via the Administrative Code, will have a tiered
system for the bonding so that AOGCC recognizes that something
way in the outback that requires an ice road is a completely
different cost than something that is on the road system.
MR. FRENCH agreed each company is different. He said the well
Caelus drilled at Smith Bay is wildly different than a Swanson
River well that a truck can be driven to, and that the old
Swanson River field is in a very different landscape than the
North Slope landscape.
3:12:18 PM
CO-CHAIR TARR summarized that there are two different issues
here. One is the bonding authority issue that AOGCC can address
independent of the legislature. The other is a committee bill
providing statutory language to allow AOGCC to go after the
previous operator. She ascertained that no one on the committee
was opposed to considering a committee bill in this regard.
3:12:51 PM
ADJOURNMENT
There being no further business before the committee, the House
Resources Standing Committee meeting was adjourned at 3:12 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 355 Opposition-Squyres Graphic.pdf |
HRES 3/5/2018 1:00:00 PM HRES 3/9/2018 1:00:00 PM |
HB 355 |
| HB 355 Opposition-Squyres Testimony.pdf |
HRES 3/5/2018 1:00:00 PM HRES 3/9/2018 1:00:00 PM |
HB 355 |
| HB 355 Sectional Analysis 2.21.18.pdf |
HRES 2/28/2018 1:00:00 PM HRES 2/28/2018 6:00:00 PM HRES 3/5/2018 1:00:00 PM HRES 3/9/2018 1:00:00 PM |
HB 355 |
| HB 355 Sponsor Statement 2.21.18.pdf |
HRES 2/28/2018 1:00:00 PM HRES 2/28/2018 6:00:00 PM HRES 3/5/2018 1:00:00 PM HRES 3/9/2018 1:00:00 PM |
HB 355 |
| HB 355 Supporting Document- Expanded One Pager 2.21.18.pdf |
HRES 2/28/2018 1:00:00 PM HRES 2/28/2018 6:00:00 PM HRES 3/5/2018 1:00:00 PM HRES 3/9/2018 1:00:00 PM |
HB 355 |
| HB 355 Ver A 2.21.18.pdf |
HRES 2/28/2018 1:00:00 PM HRES 2/28/2018 6:00:00 PM HRES 3/5/2018 1:00:00 PM HRES 3/9/2018 1:00:00 PM |
HB 355 |
| DNR Fiscal Note, HB 355.pdf |
HRES 2/28/2018 1:00:00 PM HRES 2/28/2018 6:00:00 PM HRES 3/5/2018 1:00:00 PM |
HB 355 |
| Law Fiscal Note, HB 355.pdf |
HRES 2/28/2018 1:00:00 PM HRES 2/28/2018 6:00:00 PM HRES 3/5/2018 1:00:00 PM HRES 3/9/2018 1:00:00 PM |
HB 355 |
| HB 355 Supporting Document- Alaska Fire Chiefs Letter of Support 2.28.18.pdf |
HRES 2/28/2018 1:00:00 PM HRES 2/28/2018 6:00:00 PM HRES 3/5/2018 1:00:00 PM HRES 3/9/2018 1:00:00 PM |
HB 355 |
| HB 355 Amendment One - D.2 - Rep. Rauscher 3.1.18.pdf |
HRES 3/5/2018 1:00:00 PM HRES 3/9/2018 1:00:00 PM |
HB 355 |
| HB 355 Amendment Two - D.3 - Rep Rauscher 3.1.18.pdf |
HRES 3/5/2018 1:00:00 PM HRES 3/9/2018 1:00:00 PM |
HB 355 |
| HB 355 Amendment Three - D.4 - Rep. Rauscher 3.1.18.pdf |
HRES 3/5/2018 1:00:00 PM HRES 3/9/2018 1:00:00 PM |
HB 355 |
| HB 355 Amendment Four - D.6 - Rep. Rauscher 3.2.18.pdf |
HRES 3/5/2018 1:00:00 PM |
HB 355 |
| HB 355 Amendment Five - D.7 - 3.2.18.pdf |
HRES 3/5/2018 1:00:00 PM |
HB 355 |
| HRES AOGCC Presentation Notes - Protecting the state from P and A liability 3.5.18.pdf |
HRES 3/5/2018 1:00:00 PM |
AOGCC |
| HRES AOGCC Presentation - CHART_Workover_Activities_Statewide_(2003-2017)_20180228 3.5.18.pdf |
HRES 3/5/2018 1:00:00 PM |
AOGCC |
| HRES AOGCC Presentation - CHARTS_Avg_Daily_Oil_NGL_Production_Rates_Statewide_(1960-2017)_20180228 3.5.18.pdf |
HRES 3/5/2018 1:00:00 PM |
AOGCC |
| HRES AOGCC Presentation - CHARTS_Wells_Drilled_DEV-SER_Oil-Gas_State_(2003-2017)_Bar_Chart_20180301 3.5.18.pdf |
HRES 3/5/2018 1:00:00 PM |
AOGCC |
| HRES AOGCC Presentation - CHARTS_Wells_Drilled_EXP_Oil-Gas_Statewide_(2003-2017)_Bar_Chart 3.5.18.pdf |
HRES 3/5/2018 1:00:00 PM |
AOGCC |
| HRES Food Security Presentation_Meter 3.5.18.pdf |
HRES 3/5/2018 1:00:00 PM |
Food Security |
| HRES Food Is Medicine 2018 Alaska Legislature - Ferguson 3.5.18.pdf |
HRES 3/5/2018 1:00:00 PM |
food Food Security |
| HRES Food Is Medicine 2018 Alaska Legislature - Ferguson 3.5.18.pdf |
HRES 3/5/2018 1:00:00 PM |
Food |