Legislature(2015 - 2016)BUTROVICH 205
01/26/2015 03:30 PM Senate RESOURCES
| Audio | Topic |
|---|---|
| Start | |
| Overview on Confidentiality Procedures in State Agencies | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
ALASKA STATE LEGISLATURE
SENATE RESOURCES STANDING COMMITTEE
January 26, 2015
3:32 p.m.
MEMBERS PRESENT
Senator Cathy Giessel, Chair
Senator Mia Costello, Vice Chair
Senator John Coghill
Senator Peter Micciche
Senator Bert Stedman
Senator Bill Stoltze
Senator Bill Wielechowski
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
Overview of Confidentiality Procedures in State Agencies
-HEARD
PREVIOUS COMMITTEE ACTION
No previous action to record
WITNESS REGISTER
CHAD HUTCHISON, Staff to Senator Coghill
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Gave an overview of confidentiality
procedures in both the executive and legislative branches of
government.
RANDALL HOFFBECK, Acting Commissioner
Department of Revenue (DOR)
Anchorage, Alaska
POSITION STATEMENT: Briefed committee on how confidentiality is
applied in the DOR.
CATHY FOERSTER, Engineering Commissioner and Chair
Alaska Oil and Gas Conservation Commission (AOGCC)
Anchorage, Alaska
POSITION STATEMENT: Briefed committee on how the AOGCC handles
confidentiality issues.
PAUL DECKER, Interim Acting Director
Division of Oil and Gas
Department of Natural Resources (DNR)
Juneau, Alaska
POSITION STATEMENT: Explained how confidentiality issues are
addressed in the DNR.
NIKOS TSAFOS, Partner
enalytica
Legislative Consultant
Juneau, Alaska
POSITION STATEMENT: Explained how confidentiality is used from a
consultant's point of view.
JANAK MAYER, Partner
enalytica
Legislative Consultant
Juneau, Alaska
POSITION STATEMENT: Explained how confidentiality is used from a
consultant's point of view.
ACTION NARRATIVE
3:32:19 PM
CHAIR CATHY GIESSEL called the Senate Resources Standing
Committee meeting to order at 3:32 p.m. Present at the call to
order were Senators Micciche, Costello, Stedman, Wielechowski,
Coghill, Stoltze, and Chair Giessel.
^Overview on Confidentiality Procedures in State Agencies
OVERVIEW ON CONFIDENTIALITY PROCEDURES IN STATE AGENCIES
CHAIR GIESSEL said the purpose of the hearing was about
confidentiality procedures in state agencies and welcomed Chad
Hutchison.
3:33:13 PM
CHAD HUTCHISON, Staff to Senator Coghill, Alaska State
Legislature, Juneau, Alaska, said he would give an overview on
confidentiality procedures in both the executive and legislative
branches of government. He would talk about who is involved with
these agreements, what's in the agreements, when they occur and
why, and why they are important from the perspective of Alaska
State government. He would also provide a brief history of
confidentiality agreements (CA) in Alaska.
MR. HUCHISON said a confidentiality agreement is an agreement
between parties where information of a proprietary nature is
disclosed between the parties and is not to be disclosed to the
public or a third party. Examples of proprietary information
include confidential data, research, books, trade secrets,
business operations, strategic materials, and things like that.
Sometimes a confidential agreement goes forward between parties
just to see if the transaction itself can go forward.
3:35:29 PM
What else may also be included in confidentiality agreements?
The parties investigation of assets including locations, "return
clauses (if the deal does not go through the proprietary
information is returned to the parties as soon as practical),"
and discussions relating to future transactions like press
releases and public announcements.
3:36:04 PM
MR. HUTCHISON noted that he prepared this presentation. He
continued that other elements included in a confidentiality
agreement are damage provisions related to injuries and the
recoverable steps, whether injunctive relief may or not be
available, and if there is a dispute, what sort of alternative
resolution may occur and which court has relevant jurisdiction.
They also sometimes include assignment clauses between the
parties.
Confidentiality agreements are important, because the intent is
to have an honest assessment between the parties as it relates
to some of these transactions going forward. For example, in the
oil industry there may be disclosures of transportation costs
and valuation practices that may be valuable for other
competitors to know.
3:38:07 PM
Confidentiality in the State of Alaska is addressed by AS
40.25.110(a) that says "unless specifically provided otherwise,
public records of all public agencies are open to inspection."
The second level of analysis is found more in AS 40.25.120 that
is used after balancing the right to public access with the
privacy rights guaranteed in the State Constitution and the need
for government officials to engage in policy deliberation
without undue influence. So, this statute outlines a number of
exceptions to public records requirements that include trade
secrets, proprietary information, and so forth.
All in all, Mr. Hutchison said, of the 47 statute titles, at
least 34 of them include some provision that relates to
confidential agreements. Seven statutes allow or require the
executive or legislative branches and their employees to enter
into confidentiality agreements, which he would describe more
about later. They are:
AS 31.25.090(f-g) - the Alaska Gasline Development
Corporation (AGDC),
AS 37.10.220(b)(4) - the Alaska Retirement Management
Board whenever they look at financial investment
decisions going forward,
AS 38.05.020 (b)(12) - the Department of Natural
Resources (DNR) (the AK LNG Project),
AS 40.25.100 - the Department of Revenue (DOR) as it
relates to the tax information of individual
taxpayers, the exception being you can't have
aggregate tax information,
AS 40.25.120 (a)(13-14) - AGDC,
AS 43.05.095(c) - Department of Revenue (DOR) relating
to indirect expenditure reports that are submitted to
the Senate Finance Committee on July 1 of the first
regular session, and
AS 43.98.060 - DNR/DOR, the Oil and Gas
Competitiveness Review Board that takes into how
confidentiality agreements are related account
activity and investment information.
MR. HUTCHISON said two additional statutes are related to
information on the North Slope Gasline construction: AS
43.82.310 - DNR/DOR Stranded Gas Development Act and AS
43.90.160 - DOR Alaska Gasline Inducement Act; both apply to
applications whether it be for development of a contract or for
the Alaska Gasline Inducement Act (AGIA) license, itself.
CHAIR GIESSEL said he didn't call out AOGCC.
MR. HUTCHISON said this list is not intended to be exhaustive.
CHAIR GIESSEL said the Alaska Railroad Corporation (ARRC) also
has a lot of proprietary information.
MR. HUTCHISON said confidentiality agreements had been used when
the AGIA applications occurred.
3:42:52 PM
SENATOR WIELECHOWSKI said that was "completely inaccurate." AS
43.90.160 says: "information that the commissioners have
determined is proprietary or a trade secret under AS 43.90.150
may not be made public even after notice is published." AS
43.90.150 in AGIA said:
At the request of the applicant, information submitted
under this chapter, that the applicant...identifies
and demonstrates its proprietary or as a trade secret
it's confidential and not subject to public disclosure
under AS 43.25....After the license is awarded all
information submitted all information submitted and
not determined by commissioners to be proprietary
shall be made public.
So under AGIA, if a company believes that information is
proprietary, the burden is on them to prove it and if the
commissioners determine that it is indeed proprietary or a trade
secret, then it's confidential. That is very different than what
was done under SB 138, the gasline bill. SB 138, section 24, AS
38.05.020(b)(12) says the commissioner:
May enter into confidentiality agreements to maintain
the confidentiality of information related to contract
negotiations and contract implementation associated
with the North Slope natural gas project.
SENATOR WIELECHOWSKI explained the commissioner is allowed to
say that anything related to contract negotiations or
implementation can be confidential. That' virtually everything,
which is a problem that many have with the confidentiality
provision of SB 138: it's way too broad. It gives the
commissioner the sole right to say if it's confidential or not
as opposed to the applicant demonstrating the information is
proprietary or a trade secret.
MR. HUTCHISON agreed there was a different structure but he was
using it as an example to help people understand the different
confidentiality agreements that have occurred throughout the
state's history.
3:46:15 PM
SENATOR MICCICHE said he wasn't disagreeing with Senator
Wielechowski, but he believed the final line in AGIA
confidentiality allowed the commissioners to deem something as
confidential, which results in essentially the same outcome as
in SB 138.
SENATOR WIELECHOWSKI responded that SB 138 basically says the
commissioner has the right to declare all information "related
to contract negotiations and contract implementation," which is
virtually everything: email, phone calls, and documents.
SENATOR MICCICHE said the end result is the same if the
commissioner can determine that something is proprietary or a
trade secret. The AGIA license doesn't have sideboards.
MR. HUTCHISON added that almost all of the confidentiality
agreements have different provisions and he wanted to make sure
they understood the historical context. He continued that in
1999, legislators were required to sign confidentiality
agreements prior to receiving briefings from the Knowles
Administration on the BP-ARCO merger. Why? Because it contained
proprietary corporate information and state and federal tax
issues. In 2005, state officials/employees were required to sign
confidentiality agreements for access to oil and gas market
reports by Wood MacKenzie, Ltd.
3:49:15 PM
SENATOR STEDMAN commented that he signed that document, but he
didn't know why they were required to sign it, because he didn't
recall anything that had any real value they didn't have access
to under ACES or anything they worked with on this subject
matter. His perspective was that they need to be careful about
signing confidentiality agreements.
3:50:11 PM
MR. HUTCHISON said they researched different non-statutory
confidentiality agreements in the executive branch's interaction
with some of the private sector entities. The first sampling
deals with DNR and includes in the appendices its "request for
proposal" procedures, a "nondisclosure and confidentiality"
section that forbids contractors from disseminating confidential
information. It delineates the types of information covered.
The Department of Health and Social Services (DHSS) similarly
requires business associates in the private sector that receive
protected health information to sign an agreement that
delineates how information is handled. Included in the agreement
are numerous provisions outlining confidentiality requirements.
The Department of Public Safety (DPS) and Council on Domestic
Violence and Sexual Assault require "assurances" from grant
recipients among which is a requirement that the grantee will
protect "program participant confidentiality and maintain
policies and procedures to guarantee program participant
confidentiality."
3:52:22 PM
RANDALL HOFFBECK, Acting Commissioner, Department of Revenue
(DOR), Anchorage, Alaska, said much of the department is secure
workspace. Many employees handle confidential taxpayer
information. Most of this relates to the Tax Division, but Child
Support Enforcement and Permanent Fund Division also have
confidentiality, and they all receive annual training in it.
3:54:28 PM
One of the department's primary missions is to collect,
administer, and audit Alaska's tax revenues. Another mission is
to forecast and report revenues. This largely involves data
collected via the first mission. Some data is offered
voluntarily, because industry knows the department will keep it
confidential as required by law.
3:55:10 PM
He said that confidentiality is largely statute driven. AS.
43.05.230 states, "It is unlawful for a current or former
officer, employee, or agent of the state to divulge the amount
of income or the particulars set out or disclosed in a report or
return made under this title . . ."
AS 40.25.1900(a) states in part "Information in the possession
of the Department of Revenue that discloses the particulars of
the business or affairs of a taxpayer or other person is not a
matter of public record . . ."
AS 43.20.021(a) adopts the Internal Revenue Code by reference,
including sections regarding confidentiality of taxpayer data
3:56:23 PM
Consequences for releasing confidential data and not releasing
it are in AS 43.05.230(f) that provides "a willful violation
of…this section...is punishable by a fine of not more than
$5,000, or by imprisonment of not more than two years, or by
both."
However, AS 11.56.820(a)(2) provides that a "person commits the
crime of tampering with public records in the second degree if
the person . . . knowingly . . . suppresses, conceals, removes,
or otherwise impairs the . . . availability of a public record,
knowing that the person lacks the authority to do so." (a Class
A Misdemeanor).
3:57:36 PM
Information can be disclosed includes exceptions in AS
43.05.230:
•Investigations, Appeals, Child Support proceedings
•DNR (tax return data for audit functions); DEC and
ADF&G (fisheries business tax filer info)
•Sharing with Federal or other state governments if
they can prove they have appropriate safeguards
•Information in a tobacco, alcohol, mining, business,
or fisheries license is public
Other specific exceptions that relate to oil and gas, but are in
the general Depart of Revenue statutes, AS 43.05.230:
•The name of each person claiming a credit, and the
amount of the credit for each gas storage facility, is
public information (from HB 280, in 2010)
•The name of each person electing to pay production
taxes under the tax as gas ("TAG") method, and the
amount of gas produced for each lease or property is
public information (from SB 138, in 2014)
Less specifically, there are exceptions to taxpayer
confidentiality in the Oil and Gas Production Tax Statutes (AS
43.55.890):
•Data aggregated among three or more producers or
explorers to prevent individual identification
•We routinely aggregate and release large amounts of
data in this manner: tax collections, credits,
production volumes, tax rates, values, transportation
costs, lease expenditures, etc.
ACTING COMMISSIONER HOFFBECK stated that the department requests
and receives a lot of taxpayer data including their plans and
projections that are necessary to do their job. In many cases
companies are not required to provide this but they do so
because of how department personnel treat the data. One of the
first things he did when he started working with the DOR is
request all the confidentiality agreements and their policies
and procedures for vetting confidential data, and it is being
reviewed right now to make sure of having the right balance
between releasing information to the public and keeping
confidential what taxpayers feel is important.
4:00:17 PM
CHAIR GIESSEL asked if a legislator wanted to review the tax
information and agreed to sign the confidentiality agreement,
could he do that.
ACTING COMMISSIONER HOFFBECK replied that he wasn't sure, but
would find out.
SENATOR STOLTZE said he didn't know what would constitute a
release of information. For instance, what if a legislator had
served on the ARCO/BP merger and made pronouncements during a
tax debate one way or another, because of information he read in
a confidential manner.
ACTING COMMISSIONER HOFFBECK responded that he remembered that
the department was able to make determinations based on
confidential data during the construction of TransAlaska
Pipeline System (TAPS), but they couldn't release specifics of
that data. But he couldn't see how his example could in any way
reveal commercial data underlying his decision.
SENATOR STOLTZE wanted that clarified by the counsels of the DOR
and the Attorney General's office.
SENATOR COGHILL commented said many legislators worked hard to
keep people's personal information was kept safe by the
government.
4:04:36 PM
CATHY FOERSTER, Engineering Commissioner and Chair, Alaska Oil
and Gas Conservation Commission (AOGCC), said the commission is
responsible for regulating oil, gas, and geothermal exploration,
development and production operations throughout the State of
Alaska. They oversee all drilling and well work on all state
lands and state waters. It also ensures that custody transfer
metering is done accurately.
The AOGCC receives a large volume of information from operators
every day. Most of this information is stored in the AOGCC's
non-confidential well file system and also posted on the AOGCC
website, both of which are open and available to the public.
However, the AOGCC frequently receives information that it is
required by statute to keep confidential.
The most common example of data that the AOGCC is required to
keep confidential relates to exploratory wells. The statutes
clearly say that required reports and information that relate to
an exploratory or stratigraphic test well and those portions of
an application for a permit to drill a well that contains
proprietary information shall be kept confidential for 24 months
unless the owner of the well gives written permission to release
the data and information earlier. The exact wording can be found
at AS 31.05.35(c).
4:07:19 PM
Another example is data that an operator is not required by
statute to provide but that they voluntarily provide. Again the
statutes are very clear. They say that information not required
by statute but voluntarily filed with the commission shall be
kept confidential if the person filing the information so
requests. The exact wording can be found at AS 31.05.035(d).
So what sorts of information would an operator volunteer and
want to hold confidential? The answer to this question is not
spelled out in the statutes but it is still pretty clear. An
operator often wants to share interpretive or company-
proprietary information so that the commission can understand
the operator's reasoning behind a request or action. Examples
are a structure or net pay map or a structural cross-section.
Another example is a reservoir simulation model - its
construction, its input data and assumptions, and its output.
All of these examples involve technical interpretation and the
use of a company's proprietary tools and technology.
Specifically, MS. FOERSTER said AS 31.05.035(d) has been used to
treat as confidential voluntarily provided information - i.e.,
data and information neither required nor requested by the
AOGCC. Since both Prudhoe Bay and Point Thomson are oil fields,
no gas may be removed from either without an offtake allowable
determination by the AOGCC. This requirement is in place to
ensure that waste does not occur because, in general, removing
gas from an oil field before all the oil has been produced
generally results in loss of some of the oil. For AOGCC to make
the offtake allowable determination the operator of the field
must demonstrate that hydrocarbon losses will not occur. This
demonstration typically involves complicated geologic and
engineering analysis, and for both Prudhoe Bay and Point
Thomson, that is definitely the case.
In 2005, the AOGCC began preparing for that inevitable "ask" by
gathering that technical and analytical information, all of
which the operators hold as proprietary and confidential. Thus
as part of the process, AOGCC technical staff signed
confidentiality agreements with both the Prudhoe Bay and the
Point Thomson operators.
Obviously, confidentiality does not apply to information
submitted as part of a public process. That said, AOGCC
regulations regarding hearings clarify that, if disclosure of
otherwise confidential information is required for the
commission to make a decision, the commission will protect that
data's confidentiality by viewing it in-camera and redacting it
from the public record.
4:10:13 PM
CHAIR GIESSEL asked if the commission holds executive sessions.
MS. FOERSTER replied they don't have executive meetings; they go
into a deliberative process after a hearing. They try to avoid
gathering except in the public record so they don't violate the
Public Records Act. Their decisions are based on what has come
in through the public process and then individual deliberations.
Staff synthesizes information from the hearings, makes it easy
to understand, and makes recommendations. Each commissioner can
call in the staff and ask for further clarification. Sometimes
the staff will revise its recommendation and sometimes the
commissioner will "get it." They try really hard to not violate
the Public Records Act.
CHAIR GIESSEL said she was trying to visualize receiving
confidential information about gas and oil and asked when they
receive this information if the companies come to the commission
and convene a meeting in executive session.
4:13:19 PM
MS. FOERSTER answered that two things happen: one, the technical
staff signed those confidentiality agreements, so they meet and
use all the data that they have complied through those studies
to formulate their recommendations to the commission.
For instance, for the gas off-take issue an engineer and a
geologist will sign CAs and go through the details of BP's or
ExxonMobil reservoir stimulation model, the technical staff will
understand the input and agree that the construction of the
model uses good engineering practices, that the geologic
description is valid, and that all of the input assumptions that
went into the model make sense based on the data; then they will
run different cases. This information won't be shared with the
commissioners, because they didn't sign the CA, but then the
recommendations will be based on the data in their heads. But
before getting to a decision, there would be a public hearing in
which the commissioner would require the operator to present as
much information for the public record as is possible. If there
is information that is proprietary or a trade secret the
commission will hold an "in camera session." During that session
they may say something is not proprietary and if they want it to
be used to consider their decision it will have to be on the
public record. Otherwise, it's not being considered. This
happens in hearings all the time. For regular questions the
commissioners will each sit in their office and ask questions
separately, but for legal questions, all three commissioners
listen to their assistant attorney general at one time.
4:17:28 PM
SENATOR WIELECHOWSKI asked if it was fair to say that at the
heart the commission is trying to protect trade secrets and
proprietary information.
MS. FOERSTER replied yes; and data the company has acquired that
gives it a competitive edge - an exploratory well, for example -
is because that company spent millions of dollars drilling the
well and acquiring that data. There may be unleased acreage
around it and the investment they have made gives them a
competitive edge that the statutes recognize shouldn't be handed
out for free.
4:18:20 PM
SENATOR STOLTZE asked about a new appointment to the commission.
MS. FOERSTER said they got a new commissioner on Thursday, Mike
Gallagher. She hadn't read his bio, but recalled that he grew up
and went to college in Michigan and heard money could be made in
Alaska, so he and his buddy got jobs on the TAPS. When it was
done, he did maintenance on it. When he retired he got bored and
came back to work and then was asked by the governor to serve on
the AOGCC.
4:20:50 PM
PAUL DECKER, Interim Acting Director, Division of Oil and Gas
(DOG), Department of Natural Resources (DNR), Juneau, Alaska,
said he is a petroleum geologist and that most of the division's
records are public. Only limited kinds of information are
maintained as confidential and only when confidentiality is
explicitly provided for by law. Confidentiality is not presumed
just because someone stamped it that way; the legislature has
provided some direction on the idea that keeping things
confidential allows them to gather more data than they would
ordinarily be able to obtain. On the other hand, more disclosure
promotes greater transparency and better insight into the
operation of the state and why decisions were made.
The Alaska Public Records Act, AS 40.25, agency records are
public documents unless otherwise stated. DNR's primary
confidentiality statute is AS 38.05.035(a)(8) that specifically
lists six categories of information that are to be kept
confidential upon request: the names of nominators or applicants
for land disposals (if someone wants to obtain an exploration
license or nominate a certain area for lease sale), the names of
bidders and bid values that ultimately submit sealed bids (lease
sales and exploration licenses that can become competitive bid),
any and all geological, geophysical and engineering (GG&E) data,
financial data, right-of-way applications (not often in the
DOG), and information about public agency land planning.
4:24:37 PM
MR. DECKER explained that the DOR has provisions for sharing
bits of information with DNR, specifically oil and gas when it
comes to adjudicating tax credits: for example, the exploration
tax credits under AS 43.55.025 and .023 where the program is
offered through the DOR statutes, but part of the responsibility
for adjudicating those credits is to make sure that DNR actually
gets the data that is to be submitted and eventually made
public. AS 43.05.230 makes sure DNR gets the data.
Other confidentiality statutes apply to the Division of Oil and
Gas (DOG): royalty audits and Royalty Board issues.
4:25:24 PM
As a practical matter, almost all of the confidential data the
division is GG&E data or financial information. GG&G data would
be submitted under the terms of the lease and exploration
license obligations, as well as any seismic data (maintains
confidentiality in perpetuity) or other data acquired through a
miscellaneous land use permits (MLUP), and unit and
participating area applications. In addition to the DOR tax
credit AS 43.55 provisions, there is also an older incentive
credit program under AS 38.05.180(i) that did have some action
but no wells drilled or seismic acquired for more than 15 years.
Financial information would be things like financials submitted
to assure that a company is good for its DRR obligations on
their leases, or if a company would like to ask for royalty
modification, DOR tax filings and supplemental reports submitted
to commercial analysts to understand the companies better, major
projects that are forward-looking that are not actually up for a
decision to rule on yet (for example, the gas pipeline projects
over the years), auditing issues like net profit share lease
audits (making sure they understand the field cost deductions
before asserting that their leases have gone into payout), and
royalty sales contracts and invoices.
4:28:52 PM
MR. DECKER explained the value of confidentiality is that it
allows the division to amass and interpret vast amount of data
that is absolutely critical to understanding resources
throughout the State (the subsurface geology as well as
commercial information about the commercial landscape) and that
would have been impossible for the State to generate and
understand the resources. The commercial environment has to do
with the royalty modification and viability of projects, the
DR&R liability, and simply making sure that the State through
the auditing process is getting the full value of its share of
royalty and net profit share.
He said sometimes this information comes to them voluntarily,
because the operators are aware that the division can maintain
confidentiality. So, protecting that confidentiality is critical
to them.
4:30:43 PM
He explained that various types of confidential data arrive in
the DOG from different sources for various reasons and are
stored and used by different sections within the division. As an
example, seismic data submitted under the DOG permit
requirements (multiple land use permit requirements) is granted
permanent confidentiality by default. It is used exclusively by
the geophysicists and geologists of the Resource Evaluation
Section to understand the subsurface.
The life cycle is such that the data comes in from the operator,
it's inventoried through a data base, indexed, carefully stored
and archived including all the many different kinds of
components and file types within that data. The copy is made off
to the secure network where it can get used, while the original
digital media is stored in their highly confidential secure
vault.
4:32:04 PM
SENATOR WIELECHOWSKI asked if the confidential seismic studies
that the state still pays 80-90 percent in credits for being
kept confidential.
MR. DECKER replied that was an important distinction. In this
particular example, he was using MLUP seismic that has
contributed to most of the data acquired over years. But the tax
credits under .023 and .025 very clearly call for release of the
seismic data eventually; most have a 10-year confidentiality
period. The newer Frontier Basin tax credits (Middle Earth
credits approved in 2012) carry a much higher percent of the
State's investment in credits. Because that was such a generous
support the legislature made the confidentiality period on those
credits two years.
4:33:49 PM
In this example, he explained that the data are loaded, quality-
checked, prepared for the interpretation software where the
geophysicists can actually work with the information. The data
is then interpreted and subsurface maps are made with it; it is
also integrated and reconciled with previously acquired data
that might for various reasons have a slightly different story
that might cause some angst. These confidential interpretations
inform their technical recommendations on things like lease
sales, unitization applications, and any decision about
reservoir lands. Whether it impacts the actual operator that
submitted that data set or not, that data can be used
confidentially for the greater good. This kind of data would be
permanently retained within the division and it is truly useful
forever in some way or another.
4:34:46 PM
CHAIR GIESSEL said that recently the DNR commissioner determined
a Caelus [Energy LLC] royalty modification and asked when their
data will have to be given out.
MR. DECKER said his memory of that is not clear; he knew they
carefully redacted their application which was stamped entirely
confidential in order for it to go out to public comment.
SENATOR WIELECHOWSKI asked if the vast majority of seismic
studies is done with credits and if this information shared with
the AOGCC.
MR. DECKER replied that most of the seismic data acquired within
the last 10-11 years since these credits have been available
would have been acquired under these DOR credit programs and it
is not supplied to AOGCC.
SENATOR WIELECHOWSKI said this would be valuable information for
the AOGCC to have.
MR. DECKER said he couldn't recall the commission approaching
them for access to the seismic data in the 10 years he had been
there, but he knew that sometimes the commission approached the
companies directly.
MS. FOERSTER added that when an operator needs to show the
commission information to help them understand a request, they
generally give it to them voluntarily with the understanding
that it is protected. During that same 10 years, she couldn't
remember a time when the commission needed data from the DNR. If
they needed it they would get it from the operator. She stated
that the commission didn't need a middle man.
4:38:56 PM
MR. DECKER presented example 2 of how confidential data is used:
a North Slope exploration well submitted pursuant to the DOR tax
credits (wildcat drilling credits in AS 43.55.025) that would
have temporary confidentiality, assuming that it's not on
private land (in which case the private land owner would need to
give authorization for the data to become public). This data
gets inventoried into an index into an archive and is used
primarily by the Resource Evaluation Section. This includes all
of the well data collected, not only the information that would
be required to be submitted to the AOGCC, because the credits
are so generous that operators are required to show all of the
data. The copy is made to a secure media and retained in the
vault; it's loaded, quality checked and prepared for
interpretation, a secure backup is made. The data is reviewed
and interpreted internally by the experts to help inform
technical recommendations for things like lease sales,
exploration potential, unit actions, and such. The difference is
that this data has to be prepared for release, which has turned
out to be quite onerous, and the data would go public after
about two years (a 30-day period, plus a 24-month period, plus a
30-day public comment period). It's essentially timed to
coincide with the AOGCC's exploration well confidentiality
period of two years.
4:41:19 PM
A third example was of financial data obtained for royalty
audits under AS 38.05.036 is one where the data would be
permanently confidential. This is used primarily by the Royalty
Audit Section. The data is obtained from the lessees during the
audit or just before it commences; it's copied and backed up;
then it's used to analyze the lessee's confidential sales
contracts, invoices, and other information to verify field
prices that lessee has experienced and make sure that is
reviewed then in context with other producers' similar
information. No one sees it all except for the audit staff and
it's used for determining the "higher of values" for audit
claims (the idea that all operators within a certain region
provide the state with a basket of prices and the state obtains
the higher value royalty out of that basket of sales). This data
is retained indefinitely within the division and is very useful
in the future when another audit or appeal comes up.
4:42:48 PM
MR. DECKER'S fourth example was specific to the Caelus Nuna
royalty modification in the Oooguruk Unit, the goal being for
the Commercial Section to construct an economic model to
determine if the project would go forward without royalty
modification.
He concluded that only limited kinds of information are
maintained as confidential and must be explicitly identified and
approved in the statutes. Confidentiality allows the state to
benefit from utilizing data without putting its owners at a
competitive disadvantage. Most of the confidential data within
DOG is either the technical GG&E or financial and comes in a
diverse spread of data types. The data is treated with a common
theme to ensure that is maintained confidential, but they all
have their different needs and different details to their life
cycle. The ability to maintain data confidentiality has enable
the division to understand the subsurface resources statewide
and have led to much better management decisions than they would
have been able obtain without those statutory provisions.
4:45:33 PM
SENATOR STOLTZE wanted clarification from the highest pay grade
in the administration on confidentiality and what stance they
have taken legally or politically.
CHAIR GIESSEL said the purpose of these presentations is to
allow the public to understand how confidentiality is used
currently. The next pair of speakers would talk about its use in
relation to the LNG projects around the world. But it's really
up to the governor as to what he's planning to do with his
executive staff.
SENATOR STOLTZE said he has heard there has been a lack of
clarity on confidentiality.
4:48:17 PM
NIKOS TSAFOS, Partner, enalytica, introduced himself and said he
spent the last 10 years working in the oil and gas industry,
mostly as a consultant with special expertise in natural gas. He
had probably signed more confidentiality agreements than most
people in the room as it is a natural course of business for a
consultant.
4:49:13 PM
JANAK MAYER, Partner, enalytica, said this was his fourth
legislative session in Juneau working with a range of
committees; his expertise is principally in project economics
and valuation. He stressed the importance of the division
between eventual transparency of agreements once they are
finalized and the need for confidentiality during the
negotiating process inherent in the conflicting requirements of
keeping something secret while wanting to maintain an open
democratic state and government. He explained that once an
agreement is reached a lot of information is capable of being
made available openly to the public and should be.
The need for confidentiality during the negotiating process is
not about protecting company proprietary secrets or processes,
it's much more about protecting the state's negotiating
position. Negotiations are a lot like a game of poker and
playing with all your cards showing doesn't work very well. At
the moment under SB 138 the administration, principally the
commissioners of DNR and DOR, is authorized to negotiate a
series of complex contentious difficult agreements on everything
from potential fiscal stabilization to off-taking and balancing,
geology and marketing. The State needs to think through very
carefully what its fundamental interests are: what it is trying
to achieve, what it can realistically achieve, what it is
absolutely not willing to give up, what things are less
important, secondary considerations that might be given away as
bargaining chips in order to get other things in return. The
State is not negotiating with just one monolith entity, but
against a series of different companies, which also have
different interests. In some cases the interests align with each
other between companies and in some companies have natural
interests that align with the State and not with each other.
The State needs to think through that alignment and see how it
can be used to put pressure on the other companies. So, it
should be clear that the State's best interest is not always
served by information being broadly available to the public and,
in fact, can be irreparably harmed in terms of what the state
can achieve during the negotiating process.
4:53:57 PM
There are two ways to maintain confidentiality during the
negotiating process: one is for the administration to go off and
do it and come back with a series of agreements that are
available to the public, like what was tried under the Stranded
Gas Act and the Legislature was blind-sided. The other process
would be if the administration could negotiate some things while
maintaining a dialogue with legislators about what their
assessment of the state's interests are, what can be achieve,
what can't, and what might be traded; it's crucial to the
democratic process to be able to explain what was given away and
why.
4:55:34 PM
MR. TSAFOS commented on confidentiality in LNG projects. Lots of
information is known about LNG projects at FID and include:
-Technical: number of wells, routes of pipelines, technical
specifications, a footprint;
-Impacts: how projects impact the local communities; what kind
of mitigations are being taken to protect the environment;
-Costs: usually a total cost figure and a breakdown of the
aggregates;
-Financial: whether companies are taking on any debt or not, the
names of the lenders, the tenor, how much they are borrowing
from each financiers
-Commercial: the number of contracts and counter parties the LNG
project will be selling gas to and for how long, some of the
detailed terms about who does the shipping, if the LNG delivery
is flexible, if the price is indexed to oil or not, and other
terms called S-curves, a measure that limits volatility;
sometimes there is an overall contract value (no assumptions).
You almost never get the price formula, the most sensitive
aspect.
Once projects come online, consultants can look at other data
and try to figure it out, but companies will never tell you that
you've got it right. If the fiscal system is part of law that
applies to all projects you know about that, and if it is part
of a negotiation, like a production sharing contract, then it's
a mix. Sometimes the public has access to that information, but
often not. Sometimes there is public access to a generic
contract in general but not the specific contract that has been
signed between the company and the sovereign.
5:01:09 PM
CHAIR GIESSEL asked Mr. Tsafos to come back with last slide on
Wednesday because she wanted to respect committee members' time
and not get into the habit of running over.
5:02:00 PM
There being no further business to come before the committee,
Chair Giessel adjourned the Senate Resources Committee meeting
at 5:02 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| SRES-AKDOR Presentation- Confidentiality Jan 26 2015 v3.pdf |
SRES 1/26/2015 3:30:00 PM |
|
| SRES Decker DOG Confidentiality-20150126.pdf |
SRES 1/26/2015 3:30:00 PM |
|
| SRES- enalytica Confidentiality January 2015.pdf |
SRES 1/26/2015 3:30:00 PM |
|
| SRES-Confidentiality Presentation-Chad Hutchinson-01-26-2015.pdf |
SRES 1/26/2015 3:30:00 PM |
|
| SRES-Written Testimony of Commissioner Cathy Foerster-01-28-2015.pdf |
SRES 1/26/2015 3:30:00 PM |