Legislature(2003 - 2004)

02/26/2003 03:35 PM Senate RES

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                    ALASKA STATE LEGISLATURE                                                                                  
              SENATE RESOURCES STANDING COMMITTEE                                                                             
                       February 26, 2003                                                                                        
                           3:35 p.m.                                                                                            
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Senator Scott Ogan, Chair                                                                                                       
Senator Thomas Wagoner, Vice Chair                                                                                              
Senator Fred Dyson                                                                                                              
Senator Ralph Seekins                                                                                                           
Senator Ben Stevens                                                                                                             
Senator Kim Elton                                                                                                               
Senator Georgianna Lincoln                                                                                                      
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
All members present                                                                                                             
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
Confirmation Appointments to the Alaska Oil and Gas Conservation                                                                
Council: Randy Ruedrich and Sarah H. Palin                                                                                      
                                                                                                                                
PREVIOUS ACTION                                                                                                               
                                                                                                                                
No previous action to record.                                                                                                   
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
Ms. Sarah Palin                                                                                                                 
1140 W Parks Hwy                                                                                                                
Wasilla, AK  99654                                                                                                              
                                                                                                                                
Mr. Randy Ruedrich                                                                                                              
1515 West Thirteenth Avenue                                                                                                     
Anchorage, AK 99501-4214                                                                                                        
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
TAPE 03-8, SIDE A                                                                                                             
Number 0001                                                                                                                     
                                                                                                                                
CHAIR SCOTT  OGAN called the Senate  Resources Standing Committee                                                             
meeting  to order  at 3:35  p.m. Senators  Wagoner, Ben  Stevens,                                                               
Dyson, Seekins, Elton and Chair  Ogan were present. The committee                                                               
took  up  the confirmation  hearings  of  Sarah Palin  and  Randy                                                               
Ruedrich  to  the  Alaska Oil  and  Gas  Conservation  Commission                                                               
(AOGCC).                                                                                                                        
                                                                                                                                
[While  the  committee  took a  brief  at-ease,  SENATOR  LINCOLN                                                               
arrived.]                                                                                                                       
                                                                                                                                
CHAIR OGAN  asked Ms. Palin her  reasons for wanting to  serve on                                                               
the AOGCC and what she will "bring to the mix."                                                                                 
                                                                                                                                
MS. SARAH PALIN, Governor's appointee  to the AOGCC, told members                                                               
she is motivated  to serve because she believes that  oil and gas                                                               
development is the  state's bread and butter. She  feels that the                                                               
issues facing  this industry are  significant and  its regulatory                                                               
agency  needs to  have  fair  and objective  views.  She will  be                                                               
grateful for  the opportunity to  serve. She believes  the bottom                                                               
line is that  if Alaskans want good schools,  state troopers, and                                                               
the infrastructure  to fund  those, Alaskans  need a  healthy oil                                                               
and  gas  industry.  She  repeated  that  she  is  motivated  and                                                               
challenged to serve in this capacity.                                                                                           
                                                                                                                                
CHAIR OGAN took questions from members.                                                                                         
                                                                                                                                
SENATOR ELTON asked Ms. Palin  her reaction to the Permanent Fund                                                               
Board of Directors'  request of the AOGCC to  do an investigation                                                               
of tariff and lease issues.                                                                                                     
                                                                                                                                
MS. PALIN  said that  resolution raised  concern about  the North                                                               
Slope operators,  especially in  respect to the  costs associated                                                               
with the  pipeline. Her first  reaction was that it  will provide                                                               
the  AOGCC  with   an  opportunity  to  work  with   all  of  the                                                               
appropriate  agencies involved  with  tariffs, facility  pricing,                                                               
and maintenance and operation practices,  especially on the North                                                               
Slope, and  to take any  necessary steps appropriate  to increase                                                               
production for  state leases and  to maximize recovery.  She said                                                               
she sees  it as a  good opportunity to  look at the  practices of                                                               
the  AOGCC and  other  agencies  to see  if  things  can be  done                                                               
better.                                                                                                                         
                                                                                                                                
SENATOR ELTON  then asked Ms.  Palin how  she will deal  with the                                                               
fact  that her  husband  works for  BP when  she  must deal  with                                                               
agendas that come before the AOGCC that involve BP.                                                                             
                                                                                                                                
MS. PALIN  said she spoke  to Governor Murkowski, Chief  of Staff                                                               
Clark, and the AOGCC attorney  about this matter before accepting                                                               
this nomination. She answered:                                                                                                  
                                                                                                                                
     "...  and have  been assured  also that  because of  my                                                                    
     husband's position, he - and  I say this respectfully -                                                                    
     he is blue collar, an  hourly paid employee up there on                                                                    
     the North Slope  in production. He's not  a manager, he                                                                    
     works, so  he's not making policy  and affecting policy                                                                    
     so  there  is  that  differentiation there.  But  I  am                                                                    
     filling out a form that  I've been told by the attorney                                                                    
     to go  and do in order  to disclose that my  husband is                                                                    
     an employee of  BP. And then I've been told  on a case-                                                                    
     by-case basis our ethics chair,  whoever that would be,                                                                    
     and our Governor appoints that,  will rule on whether I                                                                    
     should vote on anything that has  to do with BP - again                                                                    
     on a case-by-case basis.                                                                                                   
                                                                                                                                
SENATOR ELTON thanked Ms. Palin.                                                                                                
                                                                                                                                
MS.  PALIN   added  that  Dan   Seamount,  a   former  Governor's                                                               
appointee, is  a sitting AOGCC  commissioner and is  also married                                                               
to an  employee of an industry  company in Alaska. He  has had no                                                               
conflicts of interest.                                                                                                          
                                                                                                                                
CHAIR OGAN asked Ms. Palin what  she sees the most important role                                                               
of the AOGCC to be.                                                                                                             
                                                                                                                                
MS. PALIN  said the bottom  line is  to maximize the  recovery of                                                               
oil  and gas  for the  benefit  of Alaskan  citizens, to  prevent                                                               
waste of the resources, and to  make sure that first and foremost                                                               
Alaska  citizens  are  able  to  derive  the  benefits  from  our                                                               
resources.  She said  that according  to the  AOGCC statute,  her                                                               
role  is  to  work  with  the other  two  commissioners  to  help                                                               
maximize recovery.                                                                                                              
                                                                                                                                
CHAIR OGAN  said often, to  maximize recovery, producers  have to                                                               
jump through a  lot of hoops with AOGCC,  because AOGCC regulates                                                               
their technical operations. He said  the AOGCC can help or hinder                                                               
maximum production by  changing the number of hoops  they have to                                                               
jump through.  The other side of  the argument is that  the AOGCC                                                               
doesn't want  to be so  lenient as to  crowd the rights  of other                                                               
producers, worker  safety or  the safety  of the  environment. He                                                               
asked Ms. Palin how she will balance that out.                                                                                  
                                                                                                                                
MS. PALIN said that is where  the fairness and objectivity that a                                                               
commissioner needs  to bring  to this  job and  role fit  in. She                                                               
stated:                                                                                                                         
                                                                                                                                
     Again, Senator, I think if  we keep in mind always that                                                                    
     for the  benefit of Alaskan citizens  is the foundation                                                                    
     on what the commission needs  to build upon, the job of                                                                    
     being objective  should not be that  difficult. And, to                                                                    
     be  perfectly honest  with you  also, I  never hid  the                                                                    
     fact that I am pro-development  and pro-oil and gas, if                                                                    
     you will, in  terms of recognizing that oil  and gas is                                                                    
     our state's  bread and butter  and we need to  get that                                                                    
     maximum value  and maximum recovery from  the resources                                                                    
     if we want to have a  healthy economy in our state. So,                                                                    
     in that term too Senator,  any unnecessary hoops any of                                                                    
     the industry  has had  to jump  through that  have just                                                                    
     created  a  hindrance  to progress  and  to  growing  a                                                                    
     stronger  economy,  I  would  want  our  commission  to                                                                    
     consider the  proposals and the changes  that, perhaps,                                                                    
     industry would have  for us to be  considered, and I'll                                                                    
     have an open mind about that.                                                                                              
                                                                                                                                
CHAIR OGAN noted that Ms. Palin  will be asked to make rulings on                                                               
very  technical  issues and  that  her  resume  does not  show  a                                                               
background in  oil and gas  development. He said  that experience                                                               
is not  necessary for the public  member but asked, "How  are you                                                               
going  to keep  people  from blowing  a bunch  of  smoke up  your                                                               
skirts?"                                                                                                                        
                                                                                                                                
MS. PALIN  said thankfully,  the AOGCC  has technical  staff. She                                                               
has done some research and  believes they give objective and fair                                                               
advice to the commissioners. She agreed  she does not have an oil                                                               
and  gas   technical  background  but  she   believes  the  three                                                               
commissioners,  one  a  geologist   and  the  other  a  petroleum                                                               
engineer, will be able to make fair and objective decisions.                                                                    
                                                                                                                                
CHAIR  OGAN said  his  previous  statement was  not  meant to  be                                                               
sexist; he uses it with anyone.  He then added that Ms. Palin has                                                               
been a quick study  and did a great job for  the City of Wasilla.                                                               
He believes she will be a  good spokeswoman for the AOGCC and has                                                               
good  administrative skills.  He cautioned  however, that  at the                                                               
end of the day,  the Legislature would need to do  what is in the                                                               
state's best interest.                                                                                                          
                                                                                                                                
SENATOR LINCOLN said she read Ms.  Palin's resume and had some of                                                               
the  same  questions about  her  resume  and  what the  AOGCC  is                                                               
responsible for. She  noted she also read in  a newspaper article                                                               
that Ms. Palin  said she was offered some  other positions within                                                               
the Administration  but turned it  down. She asked Ms.  Palin why                                                               
she wants  to serve  on this particular  commission and  what she                                                               
wants to achieve while serving.                                                                                                 
                                                                                                                                
MS. PALIN  said she turned down  two prior offers to  work in the                                                               
Administration  because she  wants  to raise  her  family in  the                                                               
Matanuska Valley. She  said she is grateful  for this opportunity                                                               
because  she  recognizes the  significance  of  the oil  and  gas                                                               
industry and the public role  on the commission. She believes the                                                               
founders of the  board were wise to place a  public member on the                                                               
AOGCC. She said  as the mayor of Wasilla, she  was tasked with so                                                               
many duties  in the fastest growing  area in the state.  She said                                                               
she would be able to bring  the skills she has from that position                                                               
to the AOGCC.                                                                                                                   
                                                                                                                                
SENATOR LINCOLN asked how long she has been in office.                                                                          
                                                                                                                                
MS. PALIN said  her AOGCC position is full-time and  today is day                                                               
six.                                                                                                                            
                                                                                                                                
SENATOR  LINCOLN  said the  AOGCC  is  responsible for  accepting                                                               
written plans submitted  by lessees and to  hold public hearings.                                                               
The AOGCC  would then  "grant approval  of the  plan if  the plan                                                               
contains  a voluntary  agreement by  the lessee  to use  its best                                                               
efforts to  employ residents in  this state and to  contract with                                                               
firms in this  state for work in connection  with the development                                                               
of  the field...."  She  asked Ms.  Palin what  she  would do  to                                                               
improve Alaska hire  and utilization of Alaska  businesses in the                                                               
oil industry.                                                                                                                   
                                                                                                                                
MS. PALIN assured  her she will do all that  the AOGCC is legally                                                               
able  to do  to  encourage and  ensure that  Alaska  hire is  the                                                               
common practice. She  told members that her husband  is an Alaska                                                               
Native who works on the North  Slope. The opportunity he has been                                                               
given  for all  of these  years as  an Alaskan  has affected  her                                                               
perspective  on the  Alaska hire  issue positively.  She repeated                                                               
that she  will do  all that she  can to see  that Alaska  hire is                                                               
strengthened.                                                                                                                   
                                                                                                                                
SENATOR LINCOLN  noted that one  of the  AOGCC's responsibilities                                                               
is to protect the public  interest in exploration and development                                                               
of oil and gas resources  while protecting health and safety, the                                                               
environment and  property rights.  She pointed  out that  part of                                                               
her  district  encompasses  the   ANWR  footprint  and  that  the                                                               
residents of Arctic Village and  Venetie are very concerned about                                                               
the Porcupine Caribou herd. She asked  Ms. Palin how she plans to                                                               
protect that herd so that  those villagers can continue to derive                                                               
the benefits that former generations have.                                                                                      
                                                                                                                                
MS. PALIN  said the AOGCC  members have not discussed  that issue                                                               
yet but her  perception is that the AOGCC  has been underutilized                                                               
in terms of  outreach and in terms of an  education process going                                                               
both ways  with facts  coming from  the people  who live  in that                                                               
area and  from the scientific  community. She believes  the AOGCC                                                               
needs to do  more outreach and to interact with  the residents of                                                               
that region more.                                                                                                               
                                                                                                                                
CHAIR OGAN thanked Ms. Palin and  asked Mr. Ruedrich why he wants                                                               
to serve on the AOGCC and what he views as its greatest mission.                                                                
                                                                                                                                
MR. RANDY  RUEDRICH told members he  came to Alaska in  the early                                                               
1970s and worked  in the [oil] industry. At that  time, the AOGCC                                                               
was  the  center   of  attention  and  he  thought   it  was  the                                                               
government. Over the years he has  continued to view the AOGCC as                                                               
a very significant portion of  what makes the Alaska oil industry                                                               
function. He believes with his  background, he can help the AOGCC                                                               
work  toward  maximum  recovery  of  the  resources  for  revenue                                                               
generation  and to  create  jobs for  Alaskans  and business  for                                                               
companies and contractors.                                                                                                      
                                                                                                                                
SENATOR WAGONER said  that the oil fields in Cook  Inlet are past                                                               
the maturing stage and are  in decline. There has been discussion                                                               
about removing  two or  three platforms in  the near  future. His                                                               
concern is  that with quickly  changing technology, the  oil will                                                               
remain in  place if the platforms  are removed and the  wells are                                                               
cemented. He asked Mr. Ruedrich his thoughts on that matter.                                                                    
                                                                                                                                
MR. RUEDRICH  said the  AOGCC's job is  to maximize  the recovery                                                               
from  state  property and  to  regulate  on private  and  federal                                                               
lands. Regarding the  platforms in Cook Inlet, he  said the AOGCC                                                               
needs to work carefully with  operators to encourage them to keep                                                               
their assets viable  for as long as practicable  because they may                                                               
be able to  do more recovery in the future  from assets deemed to                                                               
be at the end  of their life. He pointed out  that Cook Inlet has                                                               
the positive aspects of the  [indisc.] platform coming on line as                                                               
a new  producer. All of the  gas fields around the  Inlet are now                                                               
on line and  gas is a commercial activity, which  is important to                                                               
all of Southcentral Alaska.                                                                                                     
                                                                                                                                
SENATOR WAGONER asked  if it would be beneficial  to provide some                                                               
type of incentive for these companies  for a short period of time                                                               
to see if technology improves.                                                                                                  
                                                                                                                                
MR. RUEDRICH said  he thinks an incentive  is worth consideration                                                               
but he  didn't have any thoughts  on what that might  be. He said                                                               
he had a brief chat with  a manager who invited the commissioners                                                               
to come  see what is  going on  and that perhaps  some incentives                                                               
could be a derived benefit of that.                                                                                             
                                                                                                                                
SENATOR ELTON noted that Mr.  Ruedrich described the core role of                                                               
the  AOGCC as,  "an  implementing agency  that  creates jobs  for                                                               
Alaskans."                                                                                                                      
                                                                                                                                
MR. RUEDRICH explained that he  believes it is critical that when                                                               
the AOGCC  approves a  permit to  drill a well,  30 to  50 people                                                               
have a  job. It is  the quickest way  to create real  activity. A                                                               
huge  percentage  of  the  people who  work  for  contractors  on                                                               
drilling rigs are Alaskans. In that  sense, the AOGCC is a direct                                                               
link  and  the  more  drilling  permits  it  approves,  the  more                                                               
activity it will create for the contractors of Alaska.                                                                          
                                                                                                                                
SENATOR  ELTON  said that  while  he  doesn't disagree  with  the                                                               
characterization Mr. Ruedrich  made of one of  the AOGCC's roles,                                                               
clearly there  is a  regulatory control role.  He then  said that                                                               
Mr.  Ruedrich  was investigated  by  the  federal government  and                                                               
possibly by  the AOGCC when he  was the general manager  of Doyon                                                               
for reinjecting waste into wells. He  asked what he will bring to                                                               
the AOGCC from that experience.                                                                                                 
                                                                                                                                
MR. RUEDRICH  said it makes  one very aware that  the underground                                                               
injection control  system regulations  the AOGCC  administers for                                                               
the  EPA are  extremely important.  He  was very  aware of  those                                                               
regulations before  leaving Alaska in  the late 1980s and,  as he                                                               
was working  to implement  them, he  became aware  that he  had a                                                               
situation   of  non-compliance.   The  problem   was  immediately                                                               
resolved  after it  was  discovered.  An extensive  investigation                                                               
ensued,  which   raised  the  sensitivity  of   doing  that  work                                                               
correctly. The  current injection projects on  the Slope minimize                                                               
waste on the  surface immediately so that there  is essentially a                                                               
zero discharge.                                                                                                                 
                                                                                                                                
SENATOR  ELTON  corrected himself  and  noted  that Mr.  Ruedrich                                                               
worked for Doyon  Drilling rather than Doyon. He  then asked what                                                               
the mix of instate and  out-of-state employees was during his 10-                                                               
year tenure at Doyon Drilling.                                                                                                  
                                                                                                                                
MR.  RUEDRICH  said  his  recollection  is  that  Doyon  Drilling                                                               
probably always  employed at least  80 percent  Alaska residents,                                                               
and occasionally  90 percent. He  believes the numbers  are still                                                               
very similar today.                                                                                                             
                                                                                                                                
SENATOR ELTON asked if that includes the contractors.                                                                           
                                                                                                                                
MR. RUEDRICH said that is correct.                                                                                              
                                                                                                                                
SENATOR  ELTON asked  Mr. Ruedrich  to comment  on the  Permanent                                                               
Fund  Corporation  Board of  Directors'  request  that the  AOGCC                                                               
investigate  tariff  and  lease  issues  that  may  impact  state                                                               
revenues.                                                                                                                       
                                                                                                                                
MR. RUEDRICH said  his initial reaction was  curiosity, but after                                                               
reflecting on  it, the  document will  give different  aspects of                                                               
the Murkowski  Administration an opportunity to  work together to                                                               
understand what the  other does and what can be  done to increase                                                               
revenue for operators and the state.                                                                                            
                                                                                                                                
SENATOR ELTON  said that he  was not  sure how Mr.  Ruedrich felt                                                               
about the request from his  answer. He noted Mr. Brady instigated                                                               
the resolution.                                                                                                                 
                                                                                                                                
MR. RUEDRICH said  it is not a matter of  agreeing or disagreeing                                                               
with the  request, instead he  believes an investigation  will be                                                               
very helpful.                                                                                                                   
                                                                                                                                
SENATOR SEEKINS said his association  with Mr. Ruedrich goes back                                                               
to when  he was working for  Doyon Drilling. He asked  if Senator                                                               
Lincoln  was a  director  of Doyon  at the  time  and had  direct                                                               
oversight of Doyon Drilling.                                                                                                    
                                                                                                                                
SENATOR  LINCOLN said  she  is  a member  of  the Doyon  Drilling                                                               
Board.                                                                                                                          
                                                                                                                                
SENATOR  SEEKINS  noted he  was  also  on  the state  chamber  of                                                               
commerce  executive  board  when  they first  met  and  that  Mr.                                                               
Ruedrich  was doing  some  tremendous things  in  terms of  local                                                               
hire, especially for some of the young shareholders.                                                                            
                                                                                                                                
MR.  RUEDRICH  said  that  Doyon  Drilling  was  not  working  to                                                               
maximize profit;  it was aiming  to maximize shareholder  W-2 and                                                               
corporate profit.  Doyon Drilling  frequently had  as high  as 40                                                               
percent shareholder  hire. The only  difficulty he can  recall is                                                               
that other operators  would hire some of  Doyon Drilling's highly                                                               
qualified employees during slower periods.                                                                                      
                                                                                                                                
SENATOR SEEKINS said he thought  Doyon Drilling's effort was very                                                               
impressive.  He  asked  if  there   will  be  an  opportunity  to                                                               
encourage those same efforts in his current position.                                                                           
                                                                                                                                
MR.  RUEDRICH said  the AOGCC  cannot guide  anyone about  who to                                                               
employ. However, the  commission can leave a  message with anyone                                                               
who asks.                                                                                                                       
                                                                                                                                
SENATOR SEEKINS  said he served  with Mr. Brady on  the Permanent                                                               
Fund Board of Trustees under  the Hickel Administration. He asked                                                               
if it would  be helpful if the Senate, rather  than the Permanent                                                               
Fund Board, asks  the AOGCC to look at ways  to get fallow leases                                                               
into production.                                                                                                                
                                                                                                                                
MR. RUEDRICH said to maximize  recovery on undiscovered oil, such                                                               
as federal  leases, the AOGCC  might have to change  its charter.                                                               
He felt that is more specifically under DNR's venue.                                                                            
                                                                                                                                
SENATOR  SEEKINS commented  that  it might  have more  horsepower                                                               
coming from the Legislature rather than the investment arm.                                                                     
                                                                                                                                
SENATOR  LINCOLN  clarified that  Mr.  Ruedrich  was employed  by                                                               
Doyon Drilling while she was on  the Doyon Drilling board and she                                                               
is still  a member of  that board. She  asked Mr. Ruedrich  if he                                                               
plans to  continue to be the  Republican Party chair and,  if so,                                                               
that may affect his decisions.                                                                                                  
                                                                                                                                
MR. RUEDRICH  said his position is  not paid, so he  did not list                                                               
it  on his  resume  because  it is  not  an employment  activity.                                                               
Second, he does not think his  involvement in the party, based on                                                               
changes  in   federal  law,  will   have  any  impact   on  state                                                               
activities.  He noted  the bipartisan  campaign  reform act  that                                                               
passed Congress  last year requires  a segregation  of authority.                                                               
He has transferred the state  operations duties of the Republican                                                               
Party of Alaska to Paulette Simpson.  He will be dealing with the                                                               
federal  issues. That  segregation  should  remove any  perceived                                                               
issues  of  conflict.  It  also   reduces  his  Republican  Party                                                               
involvement to  what he would  be doing  outside of the  hours of                                                               
his AOGCC involvement.                                                                                                          
                                                                                                                                
SENATOR LINCOLN asked  if he has stepped down as  the state party                                                               
chair.                                                                                                                          
                                                                                                                                
MR. RUEDRICH  said he  remains the chairman  but only  deals with                                                               
federal matters of the party.                                                                                                   
                                                                                                                                
SENATOR LINCOLN  said her  question still  stands and  whether he                                                               
believes as  the state party  chair, the decisions he  makes will                                                               
be affected by that position.                                                                                                   
                                                                                                                                
MR. RUEDRICH said  no because he believes issues  in the interest                                                               
of Alaskans are  non-partisan in this context.  The activities of                                                               
the  AOGCC are  to  improve  the recovery  of  resources and  the                                                               
maximization of revenue for the state.                                                                                          
                                                                                                                                
SENATOR LINCOLN asked if he applied for the AOGCC position.                                                                     
                                                                                                                                
MR. RUEDRICH said he did.                                                                                                       
                                                                                                                                
SENATOR  LINCOLN   said  she  was  confused   by  Mr.  Ruedrich's                                                               
statement that  he could  talk about Alaska  hire. She  noted the                                                               
AOGCC's  statute says  the  AOGCC  can use  its  best efforts  to                                                               
employ  residents  and contract  with  Alaskan  companies if  the                                                               
company volunteers  to do so.  She asked  him to comment  on that                                                               
section.                                                                                                                        
                                                                                                                                
MR.  RUEDRICH  said  he  thinks it  is  extremely  important  for                                                               
lessees to  employ Alaskans,  no matter  where the  capital comes                                                               
from.  He   firmly  believes  that  Native   Alaskans  should  be                                                               
employed.                                                                                                                       
                                                                                                                                
SENATOR LINCOLN  said she was speaking  about qualified Alaskans,                                                               
not Alaska Natives.                                                                                                             
                                                                                                                                
MR. RUEDRICH replied:                                                                                                           
                                                                                                                                
     If  we give  people who  have  been trained  to do  the                                                                    
     work,  and we  have so  many people  in this  state, we                                                                    
     have  the opportunity  - Alaskan  contractors employing                                                                    
     local employees, not people who  fly in because we have                                                                    
     a lot  of people here  who are very  qualified, engaged                                                                    
     in oil field  work. I can specifically say  the lack of                                                                    
     work is  such that  people that  I know  extremely well                                                                    
     have worked  outside of  Alaska most  of this  year, on                                                                    
     loan by  their companies to other  locations around the                                                                    
     world, Lower  48, Middle East, etcetera,  because we do                                                                    
     not have work here and I  think we need to reverse that                                                                    
     situation. It's nice to have  Alaskans exported to work                                                                    
     but it's better to have them working at home.                                                                              
                                                                                                                                
TAPE 03-8, SIDE B                                                                                                               
                                                                                                                                
SENATOR  LINCOLN said  the Governor  has stated  publicly several                                                               
times that Alaska needs more  exploration of oil resources, which                                                               
can be  accomplished by improving access,  expanding the drilling                                                               
window and reducing  the permitting time. She  asked Mr. Ruedrich                                                               
to comment about his role in that regard.                                                                                       
                                                                                                                                
MR.  RUEDRICH said  the permits  issued by  the AOGCC  are issued                                                               
within  30  days.  Frequently,  if an  operator  needs  a  permit                                                               
expedited, the  AOGCC has issued  permits the next day  or within                                                               
in  a three-day  period. He  expects the  AOGCC to  help simplify                                                               
some   of  the   other  aspects   by  providing   more  technical                                                               
information  to  its  sister agencies  throughout  the  state  to                                                               
increase their understanding of the problems.                                                                                   
                                                                                                                                
CHAIR  OGAN referred  to  AS 31.05.009,  the  AOGCC statute  that                                                               
pertains  to  the qualifications  of  members.  He asked  if  Mr.                                                               
Ruedrich is a qualified petroleum engineer.                                                                                     
                                                                                                                                
MR.  RUEDRICH  said  he  finds   the  term  "qualified  petroleum                                                               
engineer" to  be interesting. He said  he does not have  a degree                                                               
in  petroleum  engineering;  all  three of  his  degrees  are  in                                                               
chemical engineering.  Of the people  in this industry  doing the                                                               
work deemed to be "petroleum  engineering" inside of the drilling                                                               
community,   the   production   community,  and   the   [indisc.]                                                               
reservoir,  about one-third  are  chemical engineers  and a  like                                                               
percentage  are  mechanical  engineers.  Less than  a  third  are                                                               
actually petroleum engineers.  His experience in the  oil and gas                                                               
business over  the last 33  years has been almost  exclusively in                                                               
reduction aspects.  His background in working  with pipelines and                                                               
the shifting of crude oil is  minimal. Most of his experience has                                                               
been involved with petroleum engineering work.                                                                                  
                                                                                                                                
CHAIR OGAN said  the statute says that one AOGCC  member shall be                                                               
a certificated petroleum engineer or  have earned a degree from a                                                               
university  in the  field of  engineering  and has  at least  ten                                                               
years of  professional subsurface experience  in the oil  and gas                                                               
industry  in   drilling,  well  operations,   production  process                                                               
operations  and reservoir  engineering. He  noted Mr.  Ruedrich's                                                               
resume shows  a lot of  upper level management experience  but he                                                               
wondered how much field experience he has.                                                                                      
                                                                                                                                
MR. RUEDRICH said he worked as  a drilling engineer or a drilling                                                               
foreman from 1970  through 1981 in Texas,  Alaska and California,                                                               
and proceeded  into his first  management job in 1982  in Dallas,                                                               
Texas and returned to Alaska in  1983 to manage the ARCO drilling                                                               
activities. His  capital budget was up  to $1 million per  day at                                                               
times.  He summarized  that he  has  about 11  years of  hands-on                                                               
experience and  about 20 years  of management  experience. During                                                               
the last three years, he worked as a consultant.                                                                                
                                                                                                                                
CHAIR OGAN asked Mr. Ruedrich to  recite the simplest form of the                                                               
equation for linear flow in Darcy's Law.                                                                                        
                                                                                                                                
MR. RUEDRICH replied:                                                                                                           
                                                                                                                                
     Essentially, for the group at hand, if you just state                                                                      
     it in a simple sense, if you're flowing through porous                                                                     
     rock, the flow rate that you  have is a function of the                                                                    
     pressure  applied, and  the restrictions  through which                                                                    
     your flow  rate reaches the permeability.  So, it's the                                                                    
     permeability multiplied  by the pressure gives  you the                                                                    
     flow that you've achieved.                                                                                                 
                                                                                                                                
CHAIR  OGAN asked  Mr.  Ruedrich if  he was  able  to recite  the                                                               
formula.                                                                                                                        
                                                                                                                                
MR. RUEDRICH recited the formula.                                                                                               
                                                                                                                                
CHAIR OGAN asked  Mr. Ruedrich the difference between  a pipe ram                                                               
and a blind ram and a BOP.                                                                                                      
                                                                                                                                
MR. RUEDRICH  explained that a blind  ram has no room  to be open                                                               
and would have no  flow with nothing in the hole.  A pipe ram has                                                               
a specific half  moon opening in each  of two sides. If  it has a                                                               
five-inch half circle opening on  both sides, it will allow five-                                                               
inch pipe to be inside and seal against it.                                                                                     
                                                                                                                                
CHAIR OGAN asked  Mr. Ruedrich to talk about logging  as a method                                                               
to determine  reservoir properties, such as  porosity, rock type,                                                               
and  water salinity.  He asked  what kinds  of logs  are used  to                                                               
determine porosity.                                                                                                             
                                                                                                                                
MR. RUEDRICH said  porosity laws involve sonic  laws that measure                                                               
the characteristics of the rock,  or density, where a radioactive                                                               
source is used  and the re-radiation is  collected. Neutron tools                                                               
can also be used and are  a different form of radioactive logging                                                               
that measure  the density of  the material  and characterizations                                                               
of the  fluids in the  rock. He then  asked to address  a comment                                                               
that Senator Lincoln made earlier  and said the [indisc.] caribou                                                               
herd  had about  2,000 to  2,500 animals.  That same  herd ranges                                                               
during the calving and summer grazing  seasons on the oil area of                                                               
the North Slope and is now  in excess of 20,000 animals. He feels                                                               
that an  oil field can  be developed properly  in the midst  of a                                                               
vibrant caribou herd.                                                                                                           
                                                                                                                                
CHAIR OGAN  said the  ANWR ball  is in  Congress's court  at this                                                               
point. He asked that the committee  not belabor the point at this                                                               
time as  he doesn't  see how the  AOGCC's operations  will affect                                                               
the  wildlife. He  then thanked  Ms. Palin  and Mr.  Ruedrich for                                                               
their willingness to  serve. He believes the AOGCC is  one of the                                                               
most important  commissions in the  state. It helps  generate the                                                               
revenues  needed to  operate state  functions  in government.  He                                                               
asked the appointees to be diligent  and look out for the state's                                                               
best interests.                                                                                                                 
                                                                                                                                
SENATOR WAGONER moved to advance Sarah Palin's nomination to the                                                                
full body for consideration. There being no objection, the                                                                      
motion carried.                                                                                                                 
                                                                                                                                
SENATOR DYSON moved to advance Randy Ruedrich's nomination to                                                                   
the full body for consideration. There being no objection, the                                                                  
motion carried.                                                                                                                 
                                                                                                                                
There being no further business to come before the committee,                                                                   
CHAIR OGAN adjourned the meeting at 4:40 p.m.                                                                                   
                                                                                                                                

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