Legislature(2019 - 2020)BUTROVICH 205

02/01/2019 03:30 PM Senate RESOURCES

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Audio Topic
03:30:27 PM Start
03:31:15 PM Overview: Alaska Oil & Gas Conservation Commission
04:52:15 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Alaska Oil & Gas Conservation Commission: TELECONFERENCED
- Overview, Mission, Update & Gas Offtake
- Commissioners Cathy Foerster & Dan Seamount
+ Bills Previously Heard/Scheduled TELECONFERENCED
                    ALASKA STATE LEGISLATURE                                                                                  
              SENATE RESOURCES STANDING COMMITTEE                                                                             
                        February 1, 2019                                                                                        
                           3:30 p.m.                                                                                            
                                                                                                                                
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Senator Chris Birch, Chair                                                                                                      
Senator John Coghill, Vice Chair                                                                                                
Senator Cathy Giessel                                                                                                           
Senator Lora Reinbold (online)                                                                                                  
Senator Scott Kawasaki                                                                                                          
Senator Jesse Kiehl                                                                                                             
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Senator Click Bishop                                                                                                            
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
OVERVIEW: ALASKA OIL & GAS CONSERVATION COMMISSION                                                                              
                                                                                                                                
     - HEARD                                                                                                                    
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
No previous action to record                                                                                                    
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
DAN SEAMOUNT, Commissioner                                                                                                      
Alaska Oil and Gas Conservation Commission                                                                                      
Anchorage, Alaska                                                                                                               
POSITION STATEMENT: Provided an overview of the commission.                                                                   
                                                                                                                                
CATHY FOERSTER, Commissioner                                                                                                    
Alaska Oil and Gas Conservation Commission                                                                                      
Anchorage, Alaska                                                                                                               
POSITION STATEMENT: Provided an overview of the commission.                                                                   
                                                                                                                                
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
                                                                                                                                
3:30:27 PM                                                                                                                    
CHAIR CHRIS BIRCH called the  Senate Resources Standing Committee                                                             
meeting to order  at 3:30 p.m. Present at the  call to order were                                                               
Senators  Kiehl, Coghill,  Giessel, Kawasaki,  Reinbold (online),                                                               
and Chair Birch.                                                                                                                
                                                                                                                                
^OVERVIEW: Alaska Oil & Gas Conservation Commission                                                                             
       OVERVIEW: Alaska Oil & Gas Conservation Commission                                                                   
                                                                                                                              
3:31:15 PM                                                                                                                    
CHAIR BIRCH  announced that the  committee will hear  an overview                                                               
from the Alaska  Oil and Gas Conservation  Commission (AOGCC). He                                                               
detailed that  AOGCC oversees oil  and gas  drilling, development                                                               
and production, reservoir depletion,  and metering operations. He                                                               
said AOGCC  is the  agency that  acts on behalf  of the  state to                                                               
prevent waste,  to protect  correlative rights,  improve ultimate                                                               
recovery, and protect underground freshwater.                                                                                   
                                                                                                                                
3:32:31 PM                                                                                                                    
DAN  SEAMOUNT,   Geologic  Commissioner,   Alaska  Oil   and  Gas                                                               
Conservation  Commission  (AOGCC), Anchorage,  Alaska,  addressed                                                               
slide 2  in AOGCC's overview,  "AOGCC has oversight over  oil and                                                               
gas  projects everywhere  except Denali  National Park."  He said                                                               
AOGCC's  main office  is in  Anchorage,  a field  office for  the                                                               
inspectors  on  the North  Slope  at  Deadhorse, and  inspectors'                                                               
residential  offices  in  the  Kenai  Peninsula  for  Cook  Inlet                                                               
inspections.                                                                                                                    
                                                                                                                                
He  explained  that there  are  two  basins  in Alaska  that  are                                                               
currently producing,  the Cook  Inlet and  the Colville  Basin on                                                               
the North  Slope. He  emphasized that Alaska  has over  20 basins                                                               
that have oil  and gas potential with little activity  due to the                                                               
state's remoteness. He  said there are a lot  of future potential                                                               
in hydrocarbons for Alaska.                                                                                                     
                                                                                                                                
3:34:59 PM                                                                                                                    
He referenced  slide 3 in AOGCC's  overview presentation, "Quasi-                                                               
judicial   state  regulatory   agency,  mainly   sub-surface"  as                                                               
follows:                                                                                                                        
                                                                                                                                
   • AOGCC Mission: To protect the public interest in                                                                           
     exploration and  development of Alaska's valuable  oil, gas,                                                               
     and   geothermal  resources   through  the   application  of                                                               
     conservation practices  designed to ensure  greater ultimate                                                               
     recovery and the protection of  health, safety, fresh ground                                                               
     waters, and the rights of  all owners to recover their share                                                               
     of the  resource. Exception to sub-surface  oversight is the                                                               
     proving of  metering so allocation  of production  is fairly                                                               
     distributed.                                                                                                               
   • Funded by industry receipts of $7,468,600 for FY2019. AOGCC                                                                
     takes  no money  out of  the general  fund. The  Legislature                                                               
     approves the AOGCC  budget and represents the  people of the                                                               
     State of Alaska who AOGCC works for.                                                                                       
   • Small amount from the United States Environmental                                                                          
     Protection Agency  (EPA) for managing  Underground Injection                                                               
     Control  (UIC) program:  $119,000 for  FY2019. UIC  takes up                                                               
     one  third   of  AOGCC's  budget   and  the   commission  is                                                               
     underfunded.                                                                                                               
   • Extremely technical, arbitrary interpretation of law                                                                       
     regarding AOGCC decisions difficult.                                                                                       
   • Statute (title 31), regulations, and science is very tight.                                                                
   • Jurisdiction over private and public lands, adjudicate                                                                     
     disputes between resource owners.                                                                                          
   • Thirty-two total staff members: 3 commissioners, 2                                                                         
     geologists,   6    engineers,   9   field    inspectors,   2                                                               
     statisticians, 2 IT, 8 administrative.                                                                                     
                                                                                                                                
3:37:24 PM                                                                                                                    
CATHY  FOERSTER, Commissioner,  Alaska Oil  and Gas  Conservation                                                               
Commission   (AOGCC),  Anchorage,   Alaska,  addressed   the  UIC                                                               
program's budget  and noted  that AOGCC would  be doing  the work                                                               
anyway as  part of the  commission's oversite, so  the commission                                                               
is  saving   the  federal  taxpayers   money  by   eliminating  a                                                               
redundancy.  The  only  added  work  is  the  paperwork  that  is                                                               
required.                                                                                                                       
                                                                                                                                
She referenced slide 4,  "Quasi-judicial state regulatory agency,                                                               
mainly sub-surface," as follows:                                                                                                
                                                                                                                                
   • Protect human safety on rigs.                                                                                              
   • Protect fresh water:                                                                                                       
        o Down to one-quarter mile:                                                                                             
        o Manage Class II UIC program.                                                                                          
   • Prevent physical waste of energy resources:                                                                                
        o 0.5 to 5.5 miles drilled depth,                                                                                       
        o 3 miles vertical depth deep.                                                                                          
   • Promote greater ultimate recovery:                                                                                         
        o 0.5 to 5.5 miles drilled depth,                                                                                       
        o 3 miles vertical depth deep.                                                                                          
   • Protect correlative rights.                                                                                                
   • Intense inspection and enforcement.                                                                                        
                                                                                                                                
3:42:20 PM                                                                                                                    
CHAIR BIRCH asked how a well is plugged.                                                                                        
                                                                                                                                
COMMISSIONER FOERSTER answered that wells  are plugged on a case-                                                               
by-case  basis. Plugging  methods  are determined  by the  well's                                                               
geometry.  The objective  of plugging  a  well is  to secure  any                                                               
hydrocarbon-bearing  zone or  any other  zone that  could produce                                                               
hazardous fluid  from coming to  the surface or  from commingling                                                               
with  another  underground  resource.  Plugging can  be  done  by                                                               
cement, bridge-plugs,  or a  combination from  total depth  up to                                                               
the surface. When a well is  plugged, the wellhead is cutoff, the                                                               
top five feet  of the casing is cutoff, a  marker-plate is placed                                                               
on top and welded into place in case of future excavation.                                                                      
                                                                                                                                
CHAIR BISHOP  asked if the plugging  method Commissioner Foerster                                                               
described would allow for access in the future.                                                                                 
                                                                                                                                
COMMISSIONER  FOERSTER  answered  no.   She  explained  that  the                                                               
plugging method makes going back into the well cost prohibitive.                                                                
                                                                                                                                
3:44:30 PM                                                                                                                    
COMMISSIONER   SEAMOUNT  addressed   slide   5,  "AOGCC   primary                                                               
services," as follows:                                                                                                          
                                                                                                                                
   • Regulate, monitor, and inspect all subsurface activities                                                                   
     directly related  to oil and gas  exploration and production                                                               
     including the  design and integrity  of wells,  well control                                                               
     procedures  and equipment,  reservoir management  plans, and                                                               
     proposed underground injection programs:                                                                                   
                                                                                                                                
        o Hold hearings.                                                                                                        
       o Issue pool rules and other conservation orders.                                                                        
        o Approve and monitor plans for reservoir development                                                                   
          and enhanced oil recovery.                                                                                            
        o Approve permits for initial drilling, re-drill,                                                                       
          sidetrack, and remedial  well operations; this includes                                                               
          the  evaluation and  approval of  proposed designs  for                                                               
          drilling fluids,  well control, casing,  cementing, and                                                               
          well completion operations.                                                                                           
        o Inspect drill rigs and wells to insure compliance with                                                                
          AOGCC regulations.                                                                                                    
        o Witness safety valve, mechanical integrity, and                                                                       
          blowout preventer tests.                                                                                              
        o Witness meter-proving, calibration, and oil quality                                                                   
          tests.                                                                                                                
        o Enforce well spacing rules.                                                                                           
        o Monitor production rates, injection well pattern,                                                                     
          gas/oil/water   ratios,    and   pressure   maintenance                                                               
          efforts.                                                                                                              
        o Monitor and evaluate gas flaring.                                                                                     
        o Collect and maintain all oil and gas production                                                                       
          records.                                                                                                              
        o Collect and maintain all well history files and well                                                                  
          log records.                                                                                                          
        o Administer Alaska's Underground Injection Control                                                                     
          (UIC) program and the annular waste disposal program                                                                  
          (protection of drinking water).                                                                                       
                                                                                                                                
SENATOR KAWASAKI  noted that Commissioner Seamount  had said that                                                               
AOGCC does not have enough inspectors.                                                                                          
                                                                                                                                
COMMISSIONER  FOERSTER   opined  that  AOGCC  does   have  enough                                                               
inspectors.                                                                                                                     
                                                                                                                                
COMMISSIONER SEAMOUNT  explained that  AOGCC has  very aggressive                                                               
performance measures.                                                                                                           
                                                                                                                                
COMMISSIONER  FOERSTER  specified  that she  routinely  asks  her                                                               
inspectors  if AOGCC  has an  adequate number  of inspectors  and                                                               
their answer  is always  "yes." She said  inspectors go  to every                                                               
rig every  month or two, and  frequency is increased if  a rig is                                                               
having a problem passing a  blowout preventer (BOP) test or other                                                               
concerns.  She added  that inspectors  try to  witness mechanical                                                               
integrity test on injection wells with a set frequency.                                                                         
                                                                                                                                
COMMISSIONER SEAMOUNT  added that Alaska  is in a  very fortunate                                                               
position that the state has some  very good operators. He said he                                                               
did not know of any incidences  where the operators have not self                                                               
reported a problem.                                                                                                             
                                                                                                                                
3:47:49 PM                                                                                                                    
SENATOR  KAWASAKI asked  if  AOGCC anticipated  a  need for  more                                                               
inspectors with the North Slope's anticipated growth.                                                                           
                                                                                                                                
COMMISSIONER  SEAMOUNT answered  that  AOGCC will  deal with  the                                                               
anticipated increase in activities when needed.                                                                                 
                                                                                                                                
COMMISSIONER FOERSTER added that  AOGCC has asked the Legislature                                                               
for additional positions in the past when activity increased.                                                                   
                                                                                                                                
SENATOR KIEHL  asked who  sets the  performance measures  and how                                                               
were they derived.                                                                                                              
                                                                                                                                
COMMISSIONER SEAMOUNT answered that the performance measures                                                                    
were set a long time ago and have been adjusted. He added that                                                                  
the original measures have not been changed.                                                                                    
                                                                                                                                
3:49:56 PM                                                                                                                    
COMMISSIONER SEAMOUNT addressed slide 6, "AOGCC permits and                                                                     
decision /orders, 2009-2018" as follows:                                                                                        
                                                                                                                                
   • Permits to drill: 1,605.                                                                                                   
   • Drilling completed: 1,658 wells and branches.                                                                              
   • Well work activity reports: 8,401.                                                                                         
   • Orders and decisions: 717:                                                                                                 
        o Aquifer exemption,                                                                                                    
        o Area injection,                                                                                                       
        o Disposal,                                                                                                             
        o Enhanced recovery,                                                                                                    
        o Metering,                                                                                                             
        o Pool rules,                                                                                                           
        o Production and other topics:                                                                                          
             square4 Major orders: 59,                                                                                          
             square4 Amendments: 539,                                                                                           
             square4 Well spacing exceptions: 119.                                                                              
   • Special development considerations are "many."                                                                             
                                                                                                                                
3:52:29 PM                                                                                                                    
COMMISSIONER FOERSTER addressed slide 7, "Major issues of 2018"                                                                 
as follows:                                                                                                                     
                                                                                                                                
   • Growing inventory of old and idle wells:                                                                                   
        o Ensuring mechanical integrity;                                                                                        
        o Plugging wells with no future utility;                                                                                
        o Annual review of idle wells and operators' intentions.                                                                
   • Operator bankruptcies, orphan wells:                                                                                       
        o Liability falls back on the landowner if bankrupt                                                                     
          operator cannot plug its wells;                                                                                       
        o State of Alaska is the landowner for the majority of                                                                  
          wells;                                                                                                                
        o CIRI exercised its contractual right to have the                                                                      
          previous operator pay for well plugging.                                                                              
   • Well bonding adequacy.                                                                                                     
   • Bureau of Land Management (BLM) legacy, also known as the                                                                  
     "Travesty Wells:"                                                                                                          
        o Started with 126 wells to be plugged, down to                                                                         
          approximately 40 wells that need to be addressed.                                                                     
        o Wells are prioritized and nearby wells are also                                                                       
          plugged.                                                                                                              
        o BLM will have to go back to Congress to get more money                                                                
          to plug the remaining wells.                                                                                          
   • New operators:                                                                                                             
        o Challenges in adapting to Alaska's cold environment                                                                   
          and AOGCC's regulations.                                                                                              
                                                                                                                                
COMMISSIONER  FOERSTER  pointed  out that  there  are  trade-offs                                                               
regarding  idle-well  plugging.  She  noted that  if  AOGCC  made                                                               
Arco/BP  plug all  their Prudhoe  Bay wells  that were  not being                                                               
used  30  years  ago,  present day  horizontal  and  coil-tubing-                                                               
sidetrack  technologies, and  multi-laterals would  not have  had                                                               
mother-well bores to take advantage of.                                                                                         
                                                                                                                                
SENATOR  COGHILL  asked  Commissioner Foerster  to  quantify  the                                                               
number of idle wells.                                                                                                           
                                                                                                                                
COMMISSIONER FOERSTER replied that there  are 1,300 idle wells in                                                               
Alaska.                                                                                                                         
                                                                                                                                
3:56:41 PM                                                                                                                    
She addressed bankruptcy impact on  plugging idle wells. She said                                                               
fixes for plugging bankrupt wells include:                                                                                      
                                                                                                                                
   • Decrease idle wells via annual review with producers.                                                                      
   • Bonding regulations were passed last year to increase the                                                                  
     bonding to help cover the cost of plug-and-abandon (P&A)                                                                   
     wells:                                                                                                                     
        o Regulation change is sitting on the lieutenant                                                                        
          governor's desk,  but the lieutenant governor  has been                                                               
          advised  not  to sign  any  regulation  change for  its                                                               
          possible  impact on  the administration's,  "We're open                                                               
          for business" approach.                                                                                               
        o The regulation will certainly hurt the, "We're open                                                                   
          for business" approach.                                                                                               
   • Landowner needs to put assurances in place to protect                                                                      
     themselves:                                                                                                                
        o The best assurance the state can put into place is the                                                                
          ability to go back on the prior operator.                                                                             
                                                                                                                                
4:08:48 PM                                                                                                                    
She addressed "Likely issues of 2019" and referenced as follows:                                                                
                                                                                                                                
   • All the 2018 issues.                                                                                                       
   • Aggressive exploration season:                                                                                             
        o 12 Conoco wells,                                                                                                      
        o 1 Eni extended reach well,                                                                                            
        o 1 Great Bear well,                                                                                                    
        o 4 Oil Search wells.                                                                                                   
   • Conoco development work at Willow and Greater Moose's                                                                      
     Tooth.                                                                                                                     
   • Unanticipated crises and challenges.                                                                                       
                                                                                                                                
4:10:30 PM                                                                                                                    
COMMISSIONER  FOERSTER addressed  "Offtake  allowables for  North                                                               
Slope major gas sales" as follows:                                                                                              
                                                                                                                                
   • [Prudhoe Bay] (PBU) offtake: 3.6 [billion cubic feet per                                                                   
     day] (BCF/D), including fuel usage:                                                                                        
        o CO2 utilization study;                                                                                                
        o Oil acceleration study.                                                                                               
   • Point Thomson offtake:                                                                                                     
        o 1.1 BCF/D, including fuel usage;                                                                                      
        o 5 years of pilot performance demonstrating full scale                                                                 
          cycling not viable.                                                                                                   
   • Both offtakes were granted assuming a defined window of                                                                    
     opportunity for [master gas system] (MGS).                                                                                 
   • Oil losses will occur. "Later is better" and "Less is                                                                      
     better."                                                                                                                   
                                                                                                                                
4:16:56 PM                                                                                                                    
SENATOR  COGHILL asked  what the  distance is  between the  pilot                                                               
injection well and the recovery well.                                                                                           
                                                                                                                                
COMMISSIONER SEAMOUNT  estimated that the distance  between wells                                                               
is approximately four miles.                                                                                                    
                                                                                                                                
COMMISSIONER FOERSTER explained that  the further apart the wells                                                               
are  the  better  the condensate-rich  gas  "sweep"  is  attained                                                               
because injecting  into well "radiates"  rather than moving  in a                                                               
"straight line."                                                                                                                
                                                                                                                                
COMMISSIONER SEAMOUNT explained that geology  plays a big part in                                                               
injections.                                                                                                                     
                                                                                                                                
COMMISSIONER FOERSTER  summarized that  oil loses will  occur and                                                               
"later is better."                                                                                                              
                                                                                                                                
4:18:55 PM                                                                                                                    
SENATOR GIESSEL  asked what  the pressures  are at  Point Thomson                                                               
and the kind of equipment required for reinjecting.                                                                             
                                                                                                                                
COMMISSIONER FOERSTER  replied that  Point Thomson's  pressure is                                                               
around  10,000  pounds.  To  reinject  the  injection  must  push                                                               
against  the 10,000  pounds of  pressure. She  said the  required                                                               
equipment  is not  common and  there are  only one  or two  other                                                               
places  in  the world  where  compressors  work to  the  capacity                                                               
required  at  Point  Thomson. She  conceded  that  ExxonMobil  is                                                               
struggling to get the complicated  injection equipment to perform                                                               
at Point Thomson.                                                                                                               
                                                                                                                                
SENATOR  GIESSEL  asked about  the  off-take  allowance that  was                                                               
under   consideration  for   Point   Thomson.   She  asked   that                                                               
Commissioner Foerster refresh the  committee on the Point Thomson                                                               
settlement.  She noted  that  the lease  went  to litigation  and                                                               
there was a settlement that  required Point Thomson to be brought                                                               
into  gas  production  at  some  point.  She  asked  Commissioner                                                               
Foerster to talk about the  elements of the settlement that might                                                               
have come into play pertaining to the off-take allowance.                                                                       
                                                                                                                                
COMMISSIONER  FOERSTER answered  that  she did  not consider  the                                                               
off-take allowance  and referenced  the regulations  and statutes                                                               
that the commission enforces.                                                                                                   
                                                                                                                                
COMMISSIONER SEAMOUNT  suggested that Senator  Giessel's question                                                               
be directed to the Department of Natural Resources (DNR).                                                                       
                                                                                                                                
SENATOR COGHILL noted  that ExxonMobil has been  working at Point                                                               
Thomson for  a couple  of years  and noted  that they  "have some                                                               
equipment." He asked to confirm  that ExxonMobil's bore integrity                                                               
has been pretty good.                                                                                                           
                                                                                                                                
COMMISSIONER FOERSTER  replied that  ExxonMobil has done  a great                                                               
job of being an operator. She  noted that the wells are not cheap                                                               
and not easy to drill.                                                                                                          
                                                                                                                                
4:22:43 PM                                                                                                                    
COMMISSIONER SEAMOUNT  stated that Senator Coghill's  question on                                                               
the  distance  between  the  injector  and  producer  is  a  good                                                               
question and he will get back to the committee with an answer.                                                                  
                                                                                                                                
SENATOR  COGHILL noted  that the  settlement must  be taken  into                                                               
consideration as to  whether the producers have been  asked to do                                                               
something that was practical or beyond practical.                                                                               
                                                                                                                                
COMMISSIONER  SEAMOUNT replied  that AOGCC  is trying  to do  the                                                               
same and added, "That's what the pilot project is all about."                                                                   
                                                                                                                                
COMMISSIONER FOERSTER  noted that ExxonMobil's work  in the pilot                                                               
project included  wells that were  drilled that could be  used no                                                               
matter  what  ends up  being  the  outcome.  She added  that  the                                                               
compressors ExxonMobil's is using are not cheap.                                                                                
                                                                                                                                
COMMISSIONER  SEAMOUNT noted  that the  only place  in the  world                                                               
that he  has seen the  pressures mentioned with injectors  was at                                                               
the  Tengiz  oil  and  gas  field  in  Kazakhstan.  He  said  the                                                               
injection process is very complicated.                                                                                          
                                                                                                                                
4:24:22 PM                                                                                                                    
He  addressed  "Alaska  oil activity  and  production"  regarding                                                               
statistics  on  production,  permitting,  and  numbers  of  wells                                                               
drilled. He  said he would  conclude AOGCC's presentation  on new                                                               
development  and   discoveries,  and   possible  impact   on  the                                                               
commission's workload.                                                                                                          
                                                                                                                                
He addressed  slide 11, "Alaska's  average daily oil  and natural                                                               
gas liquids (NGL)  production rate 1957-2018." He  noted that the                                                               
chart shows  a decline from  2.2 million  barrels of oil  per day                                                               
(BOPD)  to  553,000  BOPD;  however,  recent  activity  may  have                                                               
stabilized  production and  the latest  discoveries may  increase                                                               
production substantially.                                                                                                       
                                                                                                                                
4:28:23 PM                                                                                                                    
He addressed slide 12, "Alaska's statistics" as follows:                                                                        
                                                                                                                                
   • Permits to drill since 1901: 9,302.                                                                                        
   • Wells with completion dates: 8,614.                                                                                        
   • Hydraulically fractured wells:                                                                                             
        o Number: 2,026;                                                                                                        
        o Percent: 23.50.                                                                                                       
   • Oil and NGL production for November 2018, barrels per day:                                                                 
     553,670.                                                                                                                   
   • Cumulative production totals since 1901:                                                                                   
        o Oil (barrels): 18,630,391,970;                                                                                        
        o NGL (barrels): 766,342,357;                                                                                           
        o Total (barrels): 19,396,734,327;                                                                                      
        o Gas (cubic ft): 111,273,536,534,000;                                                                                  
             square4 Includes re-injected and miscible injection gas.                                                           
                                                                                                                                
He  addressed  slide  13,  "Alaska's   statistics,  oil  and  NGL                                                               
production,  November 2016-2018.  He  summarized  that there  has                                                               
been virtually no decline over the  last two years. He said AOGCC                                                               
predicts that  production will increase, especially  if producers                                                               
explore the state's other basins.                                                                                               
                                                                                                                                
4:31:23 PM                                                                                                                    
He addressed  slide 14, "Alaska  2018: permits to  drill approved                                                               
by AOGCC" pie chart as follows:                                                                                                 
                                                                                                                                
   • Producer-Oil, Arctic Slope: 105:                                                                                           
        o Note: Arctic Slope totals include wells and wellbores                                                                 
          on state and private lands and in state waters within                                                                 
          the Beaufort Sea;                                                                                                     
   • Service-Arctic Slope: 25;                                                                                                  
   • Producer-Oil, Cook Inlet: 22;                                                                                              
   • Exploratory-Oil, Arctic Slope: 17;                                                                                         
   • Producer-Gas, Cook Inlet: 2;                                                                                               
   • Service-Cook Inlet: 2;                                                                                                     
   • Exploratory-Gas: Arctic Slope: 1;                                                                                          
   • Exploratory-Oil: Cook Inlet: 1;                                                                                            
   • Total: 175 wells drilled.                                                                                                  
                                                                                                                                
COMMISSIONER  SEAMOUNT said  2019 will  be an  active exploration                                                               
season.                                                                                                                         
                                                                                                                                
CHAIR  BIRCH  asked  if  Doyon,  Limited  has  been  drilling  in                                                               
Interior Alaska.                                                                                                                
                                                                                                                                
COMMISSIONER FOERSTER answered no.                                                                                              
                                                                                                                                
COMMISSIONER SEAMOUNT replied that  Doyon is interested and noted                                                               
that he  would not be surprised  if they do some  drilling in the                                                               
future. He said there is oil  and gas potential in the basin that                                                               
Doyon is exploring.                                                                                                             
                                                                                                                                
CHAIR  BIRCH remarked  that Doyon  would be  talking to  AOGCC if                                                               
they were interested in drilling.                                                                                               
                                                                                                                                
COMMISSIONER  FOERSTER  replied that  AOGCC  has  not heard  from                                                               
Doyon.                                                                                                                          
                                                                                                                                
COMMISSIONER SEAMOUNT  reiterated that he would  not be surprised                                                               
if AOGCC heard from Doyon.                                                                                                      
                                                                                                                                
He addressed  slide 15, "Exploratory  (wildcat/delineation) wells                                                               
and well  branches statewide, oil  and gas:  completed, suspended                                                               
or abandoned, 2004-2018." He pointed  out that ConocoPhillips has                                                               
drilled  most  exploration  wells.  He said  there  is  not  much                                                               
correlation between oil prices and exploratory drilling.                                                                        
                                                                                                                                
4:34:20 PM                                                                                                                    
He addressed  slide 16, "Development  and service wells  and well                                                               
branches  statewide,   oil  and  gas:  completed,   suspended  or                                                               
abandoned, 2003-2017." He said the  graph shows that activity has                                                               
remained stable. He noted that oil  production has gone up due to                                                               
longer, horizontal  wells and bigger fracturing  jobs. He pointed                                                               
out that ConocoPhillips is the "big  driller" and BP runs a close                                                               
second.                                                                                                                         
                                                                                                                                
CHAIR BIRCH asked if AOGCC keeps track of rig counts.                                                                           
                                                                                                                                
COMMISSIONER SEAMOUNT  answered that  AOGCC keeps track  of drill                                                               
counts. He  noted that  oil and gas  journals are  inaccurate and                                                               
misleading  because they  only  count the  wells  that are  being                                                               
drilled  at the  time, not  the wells  that are  moving from  one                                                               
location to another.                                                                                                            
                                                                                                                                
COMMISSIONER FOERSTER replied  that AOGCC does not  keep count of                                                               
rigs that are "stacked," strictly what rigs are active.                                                                         
                                                                                                                                
COMMISSIONER SEAMOUNT  said AOGCC  can get  the number.  He noted                                                               
that  the  number of  rigs  were  down,  but the  production  was                                                               
holding.                                                                                                                        
                                                                                                                                
4:36:30 PM                                                                                                                    
He   addressed  slide   17,   "Workover  activities,   2003-2017,                                                               
statewide:  conventional oil  and gas  only." He  summarized that                                                               
the graph  shows that nothing  stands out. Activity was  shown to                                                               
increase  when  the  price  of   oil  increased.  He  noted  that                                                               
"repairs" and  "enhancements" were  indicators of  production. He                                                               
explained  that "repairs"  indicated  wells being  put back  into                                                               
production  and "enhancements"  include  perforating, acid  jobs,                                                               
and fracturing jobs.  He said there were over  1,000 workovers in                                                               
2017. AOGCC spends a lot of time with workover applications.                                                                    
                                                                                                                                
He  addressed  slide 18,  "Alaska  oil  and gas  activity,  AOGCC                                                               
oversight, 1958-2018," and detailed as follows:                                                                                 
                                                                                                                                
   • Number of approved permits:                                                                                                
        o 1960: Swanson River, went up to 50 wells.                                                                             
        o 1960-1970: Swanson River plus offshore platforms, over                                                                
          100 well permits.                                                                                                     
       o Trans-Alaska Pipeline: Up to over 300 oil wells.                                                                       
        o Early 1980s: Oil boom crashed.                                                                                        
        o Permits rose when oil prices increased.                                                                               
        o 1999 was the only correlation with oil prices,                                                                        
          resulting in a drop in well activity.                                                                                 
        o Current activity: 175 wells permitted in 2018.                                                                        
   • Active wells:                                                                                                              
        o Active well definition: One that AOGCC must spend                                                                     
          money on to send an inspector on site.                                                                                
   • Number of "pools" that AOGCC has regulated over time:                                                                      
        o 150 oil and gas pools.                                                                                                
                                                                                                                                
COMMISSIONER FOERSTER  said she defines  "active well" as  a well                                                               
that is active, a well that  is producing or injecting. She noted                                                               
that   Commissioner  Seamount   includes   idle   wells  in   his                                                               
definition. She said  she does see how a well  can be both active                                                               
and idle. She disclosed that 1,300 wells are currently idle.                                                                    
                                                                                                                                
4:41:59 PM                                                                                                                    
COMMISSIONER  SEAMOUNT  addressed  slide  19,  "Announced  Alaska                                                               
North  Slope discoveries."  He  said there  have  been some  huge                                                               
announcements made for the following:                                                                                           
                                                                                                                                
   • Pikka;                                                                                                                     
   • Smith Bay: could be well over 10 billion barrels;                                                                          
   • Moose's Tooth: currently has two pads and will be making                                                                   
     about 100,000 barrels per day.                                                                                             
   • Willow: has 300 million barrels reported.                                                                                  
   • Great Bear: currently in risky exploration phase.                                                                          
                                                                                                                                
He addressed  slide 20, "Major recent  Brookian discoveries" that                                                               
addressed   the   Smith    Bay,   Willow,   and   Pikka/Horseshoe                                                               
discoveries. He  said the  total expected  production per  day is                                                               
420,000  barrels.  He said  if  the  Moose's Tooth  discovery  is                                                               
added, the  total is  approximately 500,000  barrels per  day. He                                                               
said producers have said they will  get Smith Bay and Pikka going                                                               
by  2024  or 2025,  a  timeline  target  that  he finds  hard  to                                                               
believe.                                                                                                                        
                                                                                                                                
He addressed slide 21, "Development  timeline for North Slope oil                                                               
fields" that shows  discovery to regular production.   He pointed                                                               
out that  the average time  from discovery to  regular production                                                               
is nine and a  half years. He noted that Smith  Bay and Pikka are                                                               
saying  discovery to  regular production  will take  five to  six                                                               
years.                                                                                                                          
                                                                                                                                
4:44:42 PM                                                                                                                    
He  addressed  slide  22, "Cook  Inlet  exploration,  exploration                                                               
immaturity" as follows:                                                                                                         
                                                                                                                                
   • Cook Inlet is similar in size to Lower 48 basins.                                                                          
   • Cook Inlet's 14,000 square mile area is the same as the San                                                                
     Juan Basin, located in New Mexico and Colorado.                                                                            
   • Cook Inlet has less than 400 exploratory wells and less                                                                    
     than 1,400 total wells versus more than 28,000 wells in the                                                                
     San Juan Basin with more discoveries occurring.                                                                            
   • United States Geological Survey (USGS) has said that only                                                                  
     two to four percent of the oil generated in Cook Inlet has                                                                 
     ever been identified.                                                                                                      
   • Additional oil in Cook Inlet is in zones below the present                                                                 
     producing  zones and  has migrated  up. Only  53 wells  have                                                               
     been drilled into the "pre-Tertiary"  formation. He said the                                                               
     best  potential is  in the  "Jurassic" formation.  He opined                                                               
     that there  could be another  140 billion barrels of  oil in                                                               
     Cook Inlet.                                                                                                                
                                                                                                                                
4:46:20 PM                                                                                                                    
COMMISSIONER SEAMOUNT  summarized that  he got  his start  in the                                                               
San  Joaquin Basin  of  California  in the  1970s  which are  oil                                                               
fields discovered in 1900 where  wells were down to one-half acre                                                               
spacing.  He  said he  came  to  Alaska  and  noted that  due  to                                                               
technology,  Prudhoe Bay's  spacing  was two  miles. He  revealed                                                               
that  with current  technology,  drilling is  out  five to  seven                                                               
miles and remarked that Prudhoe  Bay could be developed with only                                                               
five pads,  a technological advancement that  could have positive                                                               
implications on  developing the  Arctic National  Wildlife Refuge                                                               
(ANWR).                                                                                                                         
                                                                                                                                
SENATOR GIESSEL  asked if AOGCC has  jurisdiction over pipelines.                                                               
She referenced  a situation where ultra-cold  temperatures caused                                                               
gas in a pipeline to become hydrates.                                                                                           
                                                                                                                                
COMMISSIONER SEAMOUNT  answered no.  He explained that  AOGCC has                                                               
jurisdiction over "waste" if something  happens before the gas is                                                               
metered and "everyone gets their  fair share." He said afterwards                                                               
the gas belongs to somebody  and another department or entity has                                                               
jurisdiction.                                                                                                                   
                                                                                                                                
4:49:12 PM                                                                                                                    
SENATOR GIESSEL asked how often gas pipelines freezes up.                                                                       
                                                                                                                                
COMMISSIONER FOERSTER  answered that she  has never heard  of gas                                                               
pipelines freezing.                                                                                                             
                                                                                                                                
COMMISSIONER  SEAMOUNT  noted that  he  was  aware of  "gathering                                                               
lines" and not  "transmission lines" freezing up  in Wyoming when                                                               
temperatures reached 40 below.                                                                                                  
                                                                                                                                
COMMISSIONER FOERSTER  queried why  a freeze-up would  occur when                                                               
temperatures are a lot colder in Prudhoe Bay.                                                                                   
                                                                                                                                
CHAIR BIRCH said  many were looking forward to the  lease sale in                                                               
ANWR and  the coastal plain.  He said if  all goes well  with the                                                               
lease sale in ANWR, what will AOGCC's role be.                                                                                  
                                                                                                                                
COMMISSIONER   FOERSTER  answered   that  AOGCC   has  regulatory                                                               
authority for all  wells drilled within Alaska,  whether on state                                                               
land, private land, or federal land.                                                                                            
                                                                                                                                
CHAIR BIRCH  noted that  Senator Reinbold  was online  during the                                                               
presentation.                                                                                                                   
                                                                                                                                
SENATOR  REINBOLD  thanked  the commissioners  for  an  excellent                                                               
presentation.                                                                                                                   
                                                                                                                                
CHAIR  BIRCH  thanked   Commissioner  Foerster  and  Commissioner                                                               
Seamount for their presentation.                                                                                                
                                                                                                                                
4:52:15 PM                                                                                                                    
There being  no further  business to  come before  the committee,                                                               
Chair  Birch adjourned  the Senate  Resources Standing  Committee                                                               
meeting at 4:52 p.m.                                                                                                            

Document Name Date/Time Subjects
AOGCC Overview 2-1-19.pdf SRES 2/1/2019 3:30:00 PM
Hydraulic Fracturing In Alaska White Paper 2015.pdf SRES 2/1/2019 3:30:00 PM
North Slope Gas Sales white paper (7-31-06).pdf SRES 2/1/2019 3:30:00 PM
Point Thomson white paper (7-31-06).pdf SRES 2/1/2019 3:30:00 PM
Prudhoe Bay Gas Offtake white paper (7-31-06).pdf SRES 2/1/2019 3:30:00 PM