Legislature(2019 - 2020)BARNES 124
02/25/2019 01:00 PM House RESOURCES
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| 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
ALASKA STATE LEGISLATURE
HOUSE RESOURCES STANDING COMMITTEE
February 25, 2019
1:01 p.m.
MEMBERS PRESENT
Representative John Lincoln, Co-Chair
Representative Geran Tarr, Co-Chair
Representative Chris Tuck, Vice Chair
Representative Sara Hannan
Representative Grier Hopkins
Representative Ivy Spohnholz
Representative David Talerico
Representative George Rauscher
MEMBERS ABSENT
Representative Sara Rasmussen
COMMITTEE CALENDAR
PRESENTATION(S): ALASKA OIL AND GAS CONSERVATION COMMISSION
- HEARD
PREVIOUS COMMITTEE ACTION
No previous action to record
WITNESS REGISTER
DAN SEAMOUNT, Geologic Commissioner
Alaska Oil and Gas Conservation Commission
Department of Administration
Anchorage, Alaska
POSITION STATEMENT: Co-provided a PowerPoint presentation by
the Alaska Oil and Gas Conservation Commission and answered
questions.
CATHY FOERSTER, Petroleum Engineering Commissioner
Alaska Oil and Gas Conservation Commission
Department of Administration
Anchorage, Alaska
POSITION STATEMENT: Co-provided a PowerPoint presentation by
the Alaska Oil and Gas Conservation Commission and answered
questions.
ACTION NARRATIVE
1:01:16 PM
CO-CHAIR JOHN LINCOLN called the House Resources Standing
Committee meeting to order at 1:01 p.m. Representatives Hannan,
Rauscher, Spohnholz, Talerico, Tuck, Hopkins, Tarr, and Lincoln
were present at the call to order.
REPRESENTATIVE SPOHNHOLZ described District 16 and expressed her
interest in the House Resources Standing Committee because of
the role resources serve as an economic engine for the state.
REPRESENTATIVE RAUSCHER reviewed his previous experience serving
on the House Resources Standing Committee and discussed at
length various aspects of District 9.
REPRESENTATIVE TUCK described the facets of District 23 and his
interest in the House Resources Standing Committee.
REPRESENTATIVE HANNAN noted mining and other important resource
development activities that take place in District 33.
REPRESENTATIVE TALERICO described District 6 and noted the
mining and timber interests and other resource activities, such
as farming and energy production, within his district. He
stated his concern related to reduced king salmon runs in
District 6.
REPRESENTATIVE HOPKINS related various mining operations within
District 4 and pointed out the University of Alaska Fairbanks
studies all types of resource extraction and development.
CO-CHAIR TARR recalled her previous work on the House Resources
Standing Committee and reminded members the committee would
explore topics related to the Department of Natural Resources
(DNR), the Department of Environmental Conservation, the
Division of Agriculture, DNR, public lands, and non-extractive
resource activities such as recreation and adventure tourism.
CO-CHAIR LINCOLN said District 40 is known for its oil, gas, and
mining activities in addition to its subsistence harvest, which
he characterized as a healthy mix of development and the
environment. He reviewed his responsibilities as co-chair of
the House Resources Standing Committee.
CO-CHAIR LINCOLN discussed the following memorandums provided in
the committee packet: Amendments to Legislation before the
House Resources Committee, dated 2/25/19; House Resources Bill
Hearing Request Requirements, dated 2/25/19.
^PRESENTATION(S): Alaska Oil and Gas Conservation Commission
PRESENTATION(S): Alaska Oil and Gas Conservation Commission
1:19:31 PM
CO-CHAIR LINCOLN announced that the only order of business would
be a presentation by the Alaska Oil and Gas Conservation
Commission. Prior to the presentation, Co-Chair Lincoln invited
the committee to make introductory statements.
1:20:03 PM
DAN SEAMOUNT, Geologic Commissioner, Alaska Oil and Gas
Conservation Commission (AOGCC), Department of Administration
(DOA), said slides 1 and 2 which illustrate the locations of the
AOGCC home office in Anchorage, the North Slope (NS) field
office in Deadhorse, AOGCC offices in Anchorage and NS, and in-
home offices on the Kenai Peninsula. He said AOGCC's three main
areas of focus are: NS; Prudhoe Bay and Kuparuk River Unit and
satellite oil fields; Cook Inlet. Mr. Seamount directed
attention to slide 3 and informed the committee AOGCC is a
quasi-judicial state regulatory agency working mainly on
subsurface issues such as drilling, development, and exploration
for oil and gas and geothermal resources. He paraphrased from
AOGCC's mission statement as follows:
To protect the public interest in exploration and
development of Alaska's valuable oil, gas, and
geothermal resources through the application of
conservation practices designed to ensure greater
ultimate recovery and the protection of health,
safety, fresh ground waters and the rights of all
owners to recover their share of the resource.
Exception to subsurface oversight is the proving of
metering so allocation of production is fairly
distributed.
MR. SEAMOUNT added once production is distributed, ownership of
hydrocarbons becomes a private property issue no longer within
the purview of AOGCC. In fiscal year 2019 (FY 19), AOGCC will
submit a budget request for "funded industry" receipts of
$7,468,600, and an additional amount for $119,000 from the U.S.
Environmental Protection Agency for managing the Underground
Injection Control (UIC) program; although UIC costs are greater
than those budgeted, AOGCC is mandated to manage the program.
He further explained AOGCC is an extremely technical
organization limited by [AS 31.05] and Alaska Administrative
Code Title 20, Chapter 25 regulations, which make arbitrary or
capricious interpretations of the law difficult.
1:25:37 PM
MR. SEAMOUNT continued, noting AOGCC has jurisdiction over
private and public lands, and adjudicates disputes between
resource owners. Staffing includes positions for three
commissioners, two geologists, six engineers, nine field
inspectors, two statisticians, two information technology
managers, and eight administrators. Slide 4 illustrated AOGCC
subsurface jurisdictions: protect human safety on drilling
rigs; protect freshwater through UIC; prevent physical waste of
energy; promote greater ultimate recovery of resources; protect
correlative rights; intense inspection and enforcement program.
REPRESENTATIVE TUCK asked how AOGCC's protection of human safety
differs from that of the Occupational Safety and Health
Administration (OSHA), U.S. Department of Labor, and
Occupational Safety and Health, Division of Labor Standards and
Safety, Department of Labor & Workforce Development.
1:28:54 PM
CATHY FOERSTER, Petroleum Engineering Commissioner, AOGCC,
clarified AOGCC's role in protecting public safety is by
preventing injuries and deaths related to accidents occurring on
oil wells and drilling rigs.
REPRESENTATIVE TUCK surmised AOGCC is concerned about the
"design end of things."
MS. FOERSTER said AOGCC reviews the design of wells, how
drilling operations are conducted, and the equipment used in
drilling operations.
REPRESENTATIVE TUCK questioned whether AOGCC investigates
incidents.
MS. FOERSTER said AOGCC would investigate an incident related to
a violation of a matter within its jurisdiction, and would
assist other agencies to do so.
REPRESENTATIVE SPOHNHOLZ asked how frequently AOGCC inspects
wells.
1:31:17 PM
MS. FOERSTER explained of its eight inspectors, AOGCC always has
three working on NS, two or three working in Cook Inlet, and two
off-duty. Thus, inspections and the witnessing of tests are
ongoing twenty hours per day by four to seven staff members;
although AOGCC does not observe every test, blowout preventers
on drilling rigs in a known field must be tested every two
weeks, and every week on rigs drilling an exploratory well and
on workovers. In fact, AOGCC reviews previous tests to ensure
each is covered every month or two, especially if there have
been safety valve test failures.
1:33:02 PM
REPRESENTATIVE HANNAN asked for AOGCC's jurisdiction and
inspection authority on new developments on federal lands such
as the National Petroleum Reserve-Alaska (NPR-A), the Arctic
National Wildlife Refuge (ANWR), and offshore.
MS. FOERSTER said AOGCC has jurisdiction on all land and state
waters throughout the state except Denali National Park and
Preserve. Although jurisdiction does not begin until the onset
of work, operators present plans to AOGCC far in advance to get
drilling permits, to ensure the use of acceptable engineering
practices, and that AOGCC regulations are followed.
REPRESENTATIVE RAUSCHER asked whether there is a duplicity of
AOGCC regulatory inspections and oversight.
MS. FOERSTER related on federal land the federal government also
has oversight; however, AOGCC is always present for inspections.
MR. SEAMOUNT recalled AOGCC has had a difficult relationship
with the federal government; however, the agencies are now
working well together.
REPRESENTATIVE HOPKINS inquired as to whether AOGCC has
oversight of the feeder lines and the "pipeline system."
MS. FOERSTER said no, AOGCC jurisdiction stops at the wellhead;
however, AOGCC inspectors will report any violations observed.
Further, if failure to maintain infield pipelines results in a
spill or a release before transfer metering has occurred, AOGCC
would assess penalties for waste of the resource.
1:37:33 PM
MR. SEAMOUNT added other oversight is provided by the Department
of Environmental Conservation (DEC), the U.S. Environmental
Protection Agency (EPA), the U.S. Coast Guard, and the Alaska
Department of Fish & Game (ADFG) to address environmental
problems associated with a spill. He directed attention to
slide 5, which listed AOGCC primary services. Slide 6 provided
the following historical table of permits, decisions, and orders
from 2009-2018: over 1,600 permits to drill were issued, over
1,600 wells were completed; over 8,000 well work activities were
reported; 717 orders and decisions were issued; there were many
hearings of special development considerations.
CO-CHAIR LINCOLN asked for a description of a permit
application.
MR. SEAMOUNT said applications for Prudhoe Bay and Kuparuk River
Unit are often a few pages, but exploration permits can consist
of over 100 pages.
MS. FOERSTER added every application for a permit to drill is
highly detailed and technical, contains a complete description
of procedures, equipment, and materials, and is scrutinized by a
geologist, engineers, and the commissioners.
REPRESENTATIVE RAUSCHER observed an operator may need to make
changes to a permit and asked at what point a new permit is
required.
1:42:00 PM
MS. FOERSTER acknowledged changes arise and - depending on the
nature of the change - a verbal approval could be issued;
however, an entirely new permit may be required thus AOGCC works
closely with operators so they may continue to work if possible.
Ms. Foerster directed attention to slide 7, which listed major
issues of 2018, and stated there are several concerns facing
AOGCC related to a growing inventory of old and idle wells in
the state. Firstly, the mechanical integrity of old wells must
be maintained and AOGCC inspectors observe mechanical integrity
tests; secondly, to prevent idle wells from becoming future
orphan wells, three years ago AOGCC began to inventory idle
wells that have no future utility so operators can place said
wells on a plug and abandonment schedule. She cautioned
selecting wells to be plugged must exclude any that may have
future use, and she provided an example. A third issue with
idle wells is that operator bankruptcies create orphan wells
because a bankrupt operator does not have the financial
resources to fulfil its responsibility to plug and properly
abandon idle wells. She stressed AOGCC seeks to ensure that all
operators plug idle wells. An additional issue is that for all
operators the state's bonding practices are inadequate to cover
the expenses of abandonment, and she gave an example. To
address this issue, over the last two years AOGCC has written
improved bonding regulations which are waiting for approval by
the lieutenant governor. She pointed out the burden of
responsibility for wells not plugged by an insolvent operator
falls to the landowner, which is most likely to be the state.
Other states, such as California, have passed and utilized
legislation which allows state government to turn to prior
operators in the case of bankruptcy; examples of the
aforementioned legislation have been provided to the Senate
Resources Standing Committee for evaluation, and she urged for
similar action by the Alaska State Legislature.
1:50:51 PM
CO-CHAIR LINCOLN requested copies of the suggested legislation.
REPRESENTATIVE HOPKINS asked for details of the proposed
[increased] bonding level and questioned whether industry has
been receptive.
MS. FOERSTER advised AOGCC determined the average cost of
plugging and abandonment for each operator ranges from $400,000
to $500,000 per well; therefore, AOGCC created a graduated
bonding scale which is closer to the true costs and serves to
encourage operators to plug idle wells; however, costs vary
widely and "bonding still leaves some liability to the
landowner, which legislation could address." In response to
Representative Hopkins' question about cooperation, she said
larger companies are receptive but smaller companies are not
because their bond costs are higher.
REPRESENTATIVE TUCK restated legislation is needed before the
state can ascribe responsibility to a prior operator.
MS. FOERSTER said yes, furthermore, the legislation would not be
retroactive beyond its effective date.
CO-CHAIR TARR recalled previous AOGCC testimony that the
proposed amended regulations "were on the lieutenant governor's
desk awaiting approval ...."
1:55:44 PM
MS. FOERSTER corrected her earlier statement and said, "We have
approved those as an agency, but they haven't been signed into
effect by the lieutenant governor ... there's one last Juneau
legal review ... and I think they're still in that legal
process." In further response to Co-Chair Tarr, she confirmed
additional legislation, not just new regulation, is needed for
the state to place responsibility on a prior operator.
REPRESENTATIVE HANNAN expressed her understanding new
regulations, if signed, would require each well to obtain
additional bonding to the new limits.
MS. FOERSTER said, "As soon as those regulations go into effect,
we will be requiring larger bonds from every operator in the
state."
REPRESENTATIVE HANNAN asked how many orphan wells are in the
state.
MS. FOERSTER reported there are fewer than 20 orphan wells that
have "nobody" to plug them due to bankruptcy or unknown
ownership; there are 136 wells on NS with responsibility
assessed to the federal government, and after 10 years of
negotiations with the federal government, about 45 of those
still have some work incomplete.
REPRESENTATIVE TUCK questioned whether any of the orphan wells
are dangerous.
MS. FOERSTER responded none of the orphan wells are an
environmental or safety hazard.
2:00:12 PM
REPRESENTATIVE RAUSCHER asked for clarification on the
retroactivity of the aforementioned proposed legislation.
MS. FOERSTER explained the suggested legislation would allow the
state to assign responsibility to previous operators on all
wells transferred after the effective date of the legislation;
for example, legislation passed in 2019 would affect property
sold during 2019 and afterward.
MS. FOERSTER, in response to Representative Spohnholz, provided
a brief history of the Legacy Wells Program, Bureau of Land
Management (BLM), U.S. Department of the Interior. In 2005,
following years of refusal by BLM to clean up and plug 136 [test
wells sponsored by the U.S. Government and drilled prior to 1982
in and near NPR-A], AOGCC enlisted the assistance of U.S.
Senator Lisa Murkowski and the U.S. Senate Committee on Energy
and Natural Resources; subsequently, Congress appropriated $50
million to BLM to plug the wells. Although progress has been
made, two wells of high priority have not been plugged to comply
with AOGCC standards. Apart from the aforementioned two wells,
AOGCC is satisfied with the progress made by BLM, but more money
will be required to complete the program.
2:06:13 PM
REPRESENTATIVE SPOHNHOLZ inquired as to the state's recourse to
ensure the two problem wells are closed properly.
MS. FOERSTER assured the committee AOGCC is demanding BLM
complete its plan to properly clean up the wells. In response
to Co-Chair Lincoln, she said she was unsure about BLM's request
to Congress for additional funds in this regard. Returning
attention to slide 7, she explained AOGCC works extensively with
operators new to the state to familiarize them with regulations,
and to review their plans in order to avoid problems later; new
operators brought opportunities to the state and created a large
amount of work for AOGCC in 2018. Slide 8 listed additional
issues that are expected to arise in 2019 due to an aggressive
exploration season including 18 new wells, development work at
Willow and Greater Moose's Tooth, and unknown challenges. Slide
9 reviewed the offtake allowables issued by AOGCC for NS major
gas sales. She reminded the committee AOGCC granted offtake
allowables for Prudhoe Bay and Point Thomson as follows:
• Prudhoe Bay offtake allowable: 3.6 billion cubic feet
per day (BCF/D) including fuel usage; required are a
CO2 utilization study to determine potential use for
the CO2 resource produced with the gas, and an oil
acceleration study to determine the potential loss of
oil after taking the gas out of the ground
• Point Thomson offtake allowable: 1.1 BCF/D including
fuel usage; required are five years of a pilot
performance study demonstrating full scale cycling is
not viable, however, Point Thomson is a gas
condensate reservoir and removal of the gas must be
cycled to prevent loss.
MS. FOERSTER further explained ExxonMobil Corporation
(ExxonMobil) stated cycling is not feasible at Point Thomson,
but the state will still require the cycling pilot
demonstration, although ExxonMobil is having substantial
problems with its cycling pilot equipment that have delayed the
study. She pointed out both offtakes were granted after AOGCC
was told there was a defined window of opportunity to sell NS
gas, and thus the hydrocarbon losses associated with stranded
gas would be higher than the losses of oil; however, AOGCC may
reevaluate the appropriateness of a gas offtake allowable for
the year 2025.
2:15:53 PM
CO-CHAIR TARR recalled the aforementioned situation is the first
time a gas offtake decision was made for a gas pipeline export
project such as the Alaska LNG project (AKLNG). She expressed
her understanding most of the work in advance of the AKLNG gas
pipeline project was premature and noted the project would be
further discussed in the House Resources Standing Committee.
MS. FOERSTER advised if the gas cap at Prudhoe Pay had been sold
off in the '70s or '80s, much of the oil now available would
have been "stuck in the ground and Prudhoe Bay would currently
be a marginal field at best, if it were still operating ... and
Kuparuk would be in the same shape ...."
CO-CHAIR TARR asked for the timeline for reconsideration of the
decision.
MS. FOERSTER said any time AOGCC receives information
questioning the current offtake allowables, it can call a
hearing within one month; in fact, it would be appropriate for
AOGCC to hold a hearing on the topic.
REPRESENTATIVE SPOHNHOLZ has heard AOGCC held hearings related
to [BP Exploration (Alaska) Inc. (BP)] wells and permafrost.
2:20:05 PM
MS. FOERSTER said AOGCC held hearings and the matter is under
adjudication, thus she could only speak to the facts on record.
There was a well failure related to permafrost thawing in the
nearby wellbore area. BP modeled the problem, identified other
similar wells, and shut-in the similar wells; however, last year
a well that had been shut-in for over 12 years failed, which
indicated there is a problem with the modeling. She said AOGCC
is in the process of evaluating information garnered in the
hearings.
REPRESENTATIVE SPOHNHOLZ inquired as to the amount of gas vented
[by the second well].
MS. FOERSTER said there was a small gas release from the shut-in
well and she was unsure of the volume. In further response to
Representative Spohnholz, she said the gas release was an abrupt
release of short duration.
2:23:24 PM
MR. SEAMOUNT informed the committee one of AOGCC's duties is to
provide information to the public, investors, and operators.
Slide 11 was a chart of production from 1960-2018 beginning with
250,000 barrels per day from Cook Inlet. Increases of
production were shown at the discovery of Prudhoe Bay in 1968
and at the opening of the Trans-Alaska Pipeline System (TAPS).
Highest production was approximately 2,200,000 barrels per day,
declining to approximately 500,000 barrels per day. He said
AOGCC anticipates an increase in oil production within the next
10 years. Slide 12 listed the following statistics:
• 9,302 permits to drill since 1901
• 8,600 wells completed
• 2,200 hydraulically fractured wells - 23.5 percent
of producing wells since the '60s
• Over 500,000 barrels of oil and natural gas liquids
(NGLs) per day produced in November 2018, which is
an increase
• 18.6 billion barrels of oil and 776 million barrels
of NGLs in cumulative production totals since 1901
2:29:33 PM
MR. SEAMOUNT opined new discoveries and developments may result
in doubling the previous cumulative total. The cumulative total
for gas is 111 trillion cubic feet produced, although this
figure includes gas that has been reinjected. Slide 13 provided
statistics on Alaska oil and NGL production from 11/16 to 11/18
and illustrated an average 12-month production of just under
550,000 barrels per day - without further decline - which he
attributed to horizontal drilling and other new technology.
Slide 14 illustrated most of oil and gas activity is on the
Arctic Slope; in 2018, 148 of 175 wells were drilled on the
Arctic Slope. Slide 15 illustrated exploratory wells and well
branches. Mr. Seamount observed 27 exploratory wells were
drilled in [the winter of 2018-2019], which he described as a
really active season; in addition, the potential for the wells
is high because they are being drilled on proven geologic
trends. Slide 16 showed a plot between development and service
wells within oil fields [2003-2017]. Mr. Seamount pointed out
the dominate activities are by ConocoPhillips Alaska, Inc.
(ConocoPhillips) and BP. Oil price was shown on the background
of the slide, and he opined there is little relationship between
oil price and the number of wells drilled for exploration or
development. Slide 17 illustrated workover activities between
2003 and 2017; the most important activities are repairs and
enhancements to existing wells; however, these activities could
be affected by NS gas offtake.
2:33:20 PM
REPRESENTATIVE HANNAN surmised a workover activity applies to a
well that is not new or abandoned but "just needs tweaking."
MR. SEAMOUNT said exactly right. Slide 18 was a graph of Alaska
oil and gas activity during the period of AOGCC oversight from
1985 to 2018. Increases in the number of permits issued
occurred at the discoveries of oil at Swanson River, Cook Inlet,
Prudhoe Bay and Kuparuk; since construction of TAPS the level of
permitting has been about 200 wells per year statewide.
Approximately 3,000 oil and gas pools have been approved by
AOGCC, and the number of active wells is approximately 5,500.
REPRESENTATIVE SPOHNHOLZ asked for a definition of "pool."
MR. SEAMOUNT explained pools are rocks that hold the
hydrocarbons.
MS. FOERSTER added a pool is a separate and isolated reservoir
containing hydrocarbons that behave in a certain way.
2:39:10 PM
REPRESENTATIVE RAUSCHER asked for a prediction as to whether the
number of pools and the number of active wells would increase.
MR. SEAMOUNT opined activity would increase.
CO-CHAIR TARR returned attention to slide 17. She pointed out
[workover] activities during 2014 to 2016 were leading to
increased production in a time of low oil prices; furthermore,
disruptions in production were related to a lack of work or
upkeep on wells.
MR. SEAMOUNT expressed his confusion [about the data on slide
17] because the price of oil does not have a correlation with
the amount of work operators completed; however, AOGCC seeks to
ensure that operators maintain higher levels of production.
CO-CHAIR TARR suggested in 2014-2016 - because there were no new
projects - increased production can be attributed to well
workovers.
MR. SEAMOUNT agreed. He added independent operators and largely
new technology led to the recovery of more oil.
MS. FOERSTER, in response to Co-Chair Tarr, said new technology
is reflected in the enhancements sections of slide 17; both
enhancements and repairs to shut-in wells by BP, ConocoPhillips,
and Hilcorp Energy Company resulted in renewed production.
REPRESENTATIVE SPOHNHOLZ returned attention to slide 11 and
observed increased production also correlated with new fields in
Oooguruk, Nikaitchuq, and Point Thomson.
2:42:50 PM
MS. FOERSTER advised "flat" production from Prudhoe Bay and
Kuparuk is effectively an increase because for years those
fields were averaging a 67 percent decline.
REPRESENTATIVE HOPKINS returned attention to slide 18 and
surmised the large yellow arrows represent the location and
timeline of discoveries.
MR. SEAMOUNT agreed. Slide 19 was a map of NS illustrating new
areas of discovery including Smith Bay, Pikka, Moose's Tooth,
and Willow. Slide 20 provided additional data on Smith Bay,
Willow, and Pikka/Horseshoe, which indicated the Division of Oil
and Gas, DNR, expects increased production of 500,000 barrels of
oil per day; further, the operators of Willow and Smith Bay
estimate production would begin in 2025. Slide 21 was a chart
showing the average timeline for recent fields is 11 years from
discovery to development. He concluded [production] by 2025 is
a reasonable timeline for the development of the new
discoveries, with the exception of Smith Bay due to its remote
location. Mr. Seamount turned attention to the potential of
Cook Inlet and characterized the exploration of Cook Inlet as
immature because almost all of its oil has come from the pre-
[Tertiary period of time]; in fact, the U.S. Geological Survey,
U.S. Department of the Interior, estimates only 2 percent to 4
percent of the oil in Cook Inlet has been identified and thus
there could be 140 billion barrels of oil below the Tertiary.
He opined the state and industry have not sufficiently explored
for oil and gas in Cook Inlet; for example, only 400 exploration
wells have been drilled - 1,400 total wells - and only 52 wells
have been drilled below the Tertiary, as compared to over 28,000
wells drilled in the San Juan Basin, which is a basin of similar
size located in Colorado and New Mexico (slide 22).
2:49:00 PM
REPRESENTATIVE TUCK asked whether slide 22 indicates a potential
for oil and gas in Cook Inlet.
MR. SEAMOUNT said there is potential for both oil and gas.
CO-CHAIR TARR returned attention to slide 4 and asked for
clarification of AOGCC's jurisdiction over deeper exploration in
Cook Inlet; also, have habitat protections for the beluga whale
and difficult conditions limited exploration in the inlet.
MR. SEAMOUNT said he was unsure about the effect of beluga
whales; however, AOGCC's jurisdiction over deeper pools is the
same as over any exploration well. In further response to Co-
Chair Tarr, he said "depth doesn't count when it comes to
exploration, it's just that the companies haven't drilled out
that far .... they've drilled up to seven miles ...." He
further explained Prudhoe Bay was developed on fifty-three pads
with 1973 technology; present technology allows for drilling
five to seven miles - which means Prudhoe Bay could have been
developed on five pads - thus modern technology has big
implications for exploration in environmentally sensitive areas
such as ANWR and NPR-A.
2:53:02 PM
REPRESENTATIVE HANNAN questioned whether AOGCC staff are subject
to the state classification system or "if the variety of your
employees report to you through commissioners for hiring and
firing and classification."
MR. SEAMOUNT said AOGCC is an independent agency, however,
hiring an engineer or geologist requires approval from the
governor. Technically, AOGCC staff are state employees who are
funded through industry receipts, not through the general fund
(GF); in fact, the AOGCC budget has no impact on GF.
REPRESENTATIVE HANNAN further asked whether all AOGCC employees
are exempt employees.
MS. FOERSTER said AOGCC has some union and some exempt
employees; engineers and geologists and two administrative
positions are exempt.
REPRESENTATIVE HOPKINS pointed out Cook Inlet has been explored
since the mid-'50s and questioned why tax exploration credits
and opportunities have not successfully encouraged development
in Cook Inlet.
MR. SEAMOUNT opined [Cook Inlet] needs a good discovery in the
pre-Tertiary; he acknowledged operators have not acted upon $20
million in drilling credits offered by the state. The rocks
with the most potential are in the Jurassic [period], which has
generated two producers at McArthur River and three encouraging
tests indicating the presence of oil, permeability, or
"tremendous oil shows." He said big fields are there, but
operators don't accept the risk to drill.
MS. FOERSTER agreed and stated an increase in oil price would
also encourage activity as drilling in Cook Inlet carries a high
risk.
MR. SEAMOUNT, speaking from his personal experience, said he
identified 92 drillable known prospects in Cook Inlet.
REPRESENTATIVE TALERICO inquired as to the basis of disputes
between resource owners.
2:58:01 PM
MR. SEAMOUNT related disputes are typically related to
correlative rights; for example, accusations of stealing
resources by crossing lease lines. According to AOGCC
regulations, lease lines have a 500-foot setback for oil and a
1,500-foot setback for gas and therefore, many of the disputes
are without merit.
CO-CHAIR TARR observed the state is "more involved" on NS
through the credit program and by publishing geologic data. She
asked whether further geologic assessments of Cook Inlet by
former operators, or by the state, would lead to more
exploration.
3:01:05 PM
MR. SEAMOUNT was unsure; he recalled his previous experience 10
years ago with the state's Cook Inlet credit program that has
not been utilized by industry. He suggested the state could
provide 3D seismic data on Cook Inlet, albeit at an unknown
cost.
REPRESENTATIVE TALERICO stated his appreciation for Ms.
Foerster's service as an AOGCC commissioner.
CO-CHAIR LINCOLN agreed.
3:03:35 PM
ADJOURNMENT
There being no further business before the committee, the House
Resources Standing Committee meeting was adjourned at 3:03 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| AOGCC House Resources Presentation 2.25.19.pdf |
HRES 2/25/2019 1:00:00 PM |
Alaska Oil and Gas Conservation Commission |