Legislature(1993 - 1994)
04/13/1993 05:05 PM Senate O&G
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* first hearing in first committee of referral
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= bill was previously heard/scheduled
SENATE SPECIAL COMMITTEE ON OIL & GAS
April 13, 1993
5:05 p.m.
MEMBERS PRESENT
Senator Loren Leman, Chairman
Senator Rick Halford
Senator Bert Sharp
Senator Judith Salo
Senator Al Adams
MEMBERS ABSENT
All Present
COMMITTEE CALENDAR
SENATE BILL NO. 150
"An Act providing for oil and gas exploration licenses, and
oil and gas leases, in certain areas of the state; and
providing for an effective date."
PREVIOUS ACTION
SB 150 - See Oil & Gas minutes dated 3/16/93, 3/23/93,
4/1/93, and 4/8/93.
WITNESS REGISTER
Annette Kreitzer, Legislative Aide
%Senator Leman
State Capitol
POSITION STATEMENT: Commented on SB 150.
George Findling, Manager
Government and Public Relations
ARCO
Anchorage, Alaska 99510
POSITION STATEMENT: Commented on SB 150.
Mike Conway, Director
Division of Spill Prevention and Response
Department of Environmental Conservation
410 Willoughby Ave., Suite 105
Juneau, Alaska 99801-1795
POSITION STATEMENT: Commented on SB 150.
Jim Eason, Director
Division of Oil and Gas
Department of Natural Resources
P.O. Box 107034
Anchorage, Alaska 99510-7005
POSITION STATEMENT: Commented on SB 150.
Bradley Penn, Land Manager
Marathon Oil Company
P.O. Box 190168
Anchorage, Alaska 99519
POSITION STATEMENT: Commented on SB 150.
Kevin Tabler, Land Manager
Union Oil Company
P.O. Box 196247
Anchorage, Alaska 99519
POSITION STATEMENT: Commented on SB 150.
Harold Heinze, Resource Development Advisor
Office of the Governor
P.O. Box 110001
Juneau, Alaska 99811-0001
POSITION STATEMENT: Commented on SB 150.
Dave Lappi
Lapp Research, Inc.
4900 Sportsman Dr.
Anchorage, Alaska 99502
POSITION STATEMENT: Commented on SB 150.
ACTION NARRATIVE
TAPE 93-15, SIDE A
Number 001
SENATOR LEMAN called the Special Committee on Oil and Gas
meeting to order at 5:05 p.m. and announced SB 150 OIL & GAS
EXPLORATION LICENSES/LEASES to be up for consideration.
SENATOR SHARP moved to adopt the CS to SB 150. There were
no objections and it was so ordered.
ANNETTE KREITZER, Legislative Aide for Senator Leman,
explained the changes in the CS. She said there was a
geographic restriction and relinquishment language was
added.
MS. KREITZER said bonding language with an annual work
commitment was proposed.
Additionally, the CS addresses the competitive bid process
and calls for a sealed bid process rather than oral outcry
auction.
Number 87
GEORGE FINDLING, Manager of Government Public Relations for
ARCO, said they still oppose the CS as adopted. He said it
is unfortunate that the bonding has been weakened even more,
because it protects the state's interest. He supported the
annual bonding concept.
Number 180
MIKE CONWAY, Director, Spill Prevention and Response, was
concerned with the financial requirements for the production
facilities and proposed amounts that are substantially
different from what the legislature set.
He said they needed more time to develop a connection
between financial responsibility requirements for the
likelihood of spills from the different operations and the
cost of clean-up. His guess is that the existing amounts
are too low.
SENATOR SHARP said Louisiana, Florida, Montana, Washington,
Texas, and Wyoming don't even have a financial
responsibility bonding requirement. California has only $1
million within 30 miles of the coastline. MR. CONWAY said
they are looking at the cleanup costs.
SENATOR SHARP said his concern was that on-shore exploration
can be done by smaller independent operators.
Number 253
JIM EASON, Director, Division of Oil and Gas, said he had
extreme reservations about the amendment regarding bonding.
He said the intent of the bill is to get companies working
in areas of the state that have received little or no
attention under the current leasing program.
Number 307
BRADLEY PENN, Land Manager for Marathon Oil Company,
supported CSSB 150. He said they do exploration licensing
as a supplement to the existing competitive leasing program.
Number 320
KEVIN TABLER, Land Manager for Union Oil Company, supported
CSSB 150.
Number 329
PETE NELSON, Land Manager for Texaco, Inc., supported CSSB
150.
Number 340
HAROLD HEINZE, Resource Development Advisor to the Governor,
supported Mr. Eason's testimony. He said it is very
important to provide a basis for larger areas or new areas
of the state to be made available for oil and gas
exploration. It is also important that this exploration be
timely. We need to find a way to involve more oil and gas
companies in Alaska, he said.
MR. HEINZE approved of all the changes made to the bill
except for the reduction of the bonding requirement. To
offset the lessening of the bonding requirement, he proposed
that the license be immediately revoked if annual work
commitments were not met.
SENATOR ADAMS asked how the annual reviews would be
accomplished. MR. HEINZE said the Division of Oil and Gas
would have to look at the associated costs.
Number 406
MR. EASON said they could eliminate the need for funding
additional programs by reviewing the independent audits.
SENATOR HALFORD moved to adopt the amendment that changes
"annual review or" to "annual review and..." on page 3, line
11, page 4, lines 5 and 7. SENATOR ADAMS objected, because
of testimony from various companies supporting the CS, he
thought they should be allowed time to comment on this
amendment.
KEVIN TABLER said it sounded like a reasonable approach.
SENATOR ADAMS removed his objection and the amendment was
adopted.
DAVE LAPPI said the amendment would be a workable solution.
He thought it would help solve the problems independents
might have operating in the state of Alaska. He said the
application fee of $1 per acre was higher than in other
countries and urged them to consider lowering it by a factor
of 10. He thought the high up-front costs would discourage
exploration.
SENATOR SALO asked if the size of the parcels would vary.
MR. LAPPI said he thought a lot of applications would be for
around 500,000 acres, because of the relinquishment
procedures. He said relinquishment of 25% of the remaining
acreage at the end of a period would be more reasonable.
MR. EASON commented that the term is up to ten years and he
thought it would be a mistake to tailor something that works
in between.
SENATOR SALO asked Mr. Eason if he thought $1 per acre fee
was reasonable. MR. EASON said he thought it was very
reasonable. He said it costs a great deal of money to
evaluate 500,000 acre licenses. Anyone who is serious will
view the application fee as a truly diminimous amount of
money.
Number 557
MR. HEINZE suggested language to say the fee is "not more
than $1 for each acre of land that is subject to the
exploration license."
SENATOR SALO asked which department would have the
flexibility to set that fee. MR. HEINZE said the Department
of Natural Resources would have that authority under Title
38.
CHARLES MCKEE said he advocated the industries interest in
making discoveries, but not at the expense of his copyright
status.
TAPE 93-15, SIDE B
Number 580
SENATOR HALFORD offered an amendment saying "up to $1 per
acre and that the discretion be with the Commissioner."
This would give them leeway to adjust the fee if there
wasn't as much interest as expected.
MR. EASON said they would have a problem with that
amendment.
SENATOR LEMAN removed his objection and the amendment was
adopted.
Number 565
SENATOR SHARP moved to reduce the $5 million for on-shore
exploration financial responsibility to $1 million based on
information that Washington, Texas, Louisiana, Florida,
Wyoming, and Montana have no financial responsibility and
California has only $1 million within 30 miles of the coast
line.
MR. CONWAY said he would let the Department of Natural
Resources comment on this issue. MR. EASON said it was
difficult to make generalizations and consultation with the
Department of Environmental Conservation and the
Administration was needed to see if it satisfied their
goals.
SENATOR LEMAN asked if there were any objections to Senator
Sharp's amendment. SENATOR HALFORD supported the amendment,
but wanted to know the Administration's position in the next
committee. SENATOR SALO objected and wanted to see the
Administration's position before passing it from committee.
SENATOR LEMAN asked for a vote. Senator Sharp, Senator
Leman, and Senator Halford voted yes; Senator Salo voted no
and the amendment was adopted.
SENATOR HALFORD moved to pass the CS to SB 150 with
amendments and two fiscal notes from committee. There were
no objections and it was so ordered.
SENATOR LEMAN adjourned the meeting at 6:00 p.m.
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