Legislature(1995 - 1996)

02/14/1996 03:45 PM RES

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                   SENATE RESOURCES COMMITTEE                                  
                       February 14, 1996                                       
                           3:45 P.M.                                           
 MEMBERS PRESENT                                                               
 Senator Loren Leman, Chairman                                                 
 Senator Drue Pearce, Vice-Chairman                                            
 Senator Steve Frank                                                           
 Senator Rick Halford                                                          
 Senator Lyman Hoffman                                                         
  MEMBERS ABSENT                                                               
 Senator Robin Taylor                                                          
 Senator Georgianna Lincoln                                                    
  COMMITTEE CALENDAR                                                           
 SENATE CONCURRENT RESOLUTION NO. 24                                           
 Relating to a division of game in the Alaska Department of Fish and           
 Game and to management of game.                                               
 SENATE BILL NO. 243                                                           
 "An Act establishing a requirement of an annual offer of land for             
 oil and gas leases if the land was the subject of a best interest             
 finding and if revision of that best interest finding for that land           
 is not justified; deleting from the Alaska Land Act a limitation on           
 the re-offer of land for oil and gas leases when the land was                 
 previously offered; and amending laws relating to oil and gas                 
 leasing to authorize a program of areawide leasing for land not               
 subject to exploration licensing and to modify provisions relating            
 to disposals based on best interest findings."                                
 SENATE BILL NO. 245                                                           
 "An Act relating to best interest findings for oil and gas lease              
 sales for the area onshore and north of the Umiat baseline."                  
  PREVIOUS SENATE COMMITTEE ACTION                                             
 SCR 24 - No previous action to consider.                                      
 SB 243 - No previous action to consider.                                      
 SB 245 - No previous action to consider.                                      
  WITNESS REGISTER                                                             
 Marilyn Wilson, Legislative Aide                                              
 % Senator Bert Sharp                                                          
 State Capitol                                                                 
 Juneau, AK 99801-1182                                                         
  POSITION STATEMENT:   Read sponsor statement for SCR 24.                     
 Ken Taylor, Deputy Director                                                   
 Division of Wildlife Conservation                                             
 Department of Fish and Game                                                   
 P.O. Box 25526                                                                
 Juneau, AK 99802-5526                                                         
  POSITION STATEMENT:   Opposed SCR 24.                                        
 Ed Grasser                                                                    
 Alaska Outdoor Council                                                        
 P.O. Box 2790                                                                 
 Palmer, AK 99645                                                              
  POSITION STATEMENT:   Supported SCR 24.                                      
 Peter Sheperd                                                                 
 1012 Galena St.                                                               
 Fairbanks, AK 99709                                                           
  POSITION STATEMENT:   Supported SCR 24.                                      
 Bud Burris                                                                    
 2801 Talkeetna Ave.                                                           
 Fairbanks, AK 99709                                                           
  POSITION STATEMENT:   Supported SCR 24.                                      
 Ken Boyd, Director                                                            
 Division of Oil and Gas                                                       
 Department of Natural Resources                                               
 3601 C Street, Ste. 1380                                                      
 Anchorage, AK 99503-5948                                                      
  POSITION STATEMENT:   Commented on SB 243 and SB 245.                        
 Carol Shobe, Realty Services Section                                          
 Division of Land                                                              
 Department of Natural Resources                                               
 3601 C St., Ste. 960                                                          
 Anchorage, AK 99503-5947                                                      
  POSITION STATEMENT:   Commented on SB 243 and SB 245.                        
 Jim Hansen, Leasing                                                           
 Division of Oil and Gas                                                       
 Department of Natural Resources                                               
 3601 C St., Ste. 1380                                                         
 Anchorage, AK 99503-5948                                                      
  POSITION STATEMENT:   Commented on SB 243 and SB 245.                        
 David Sutter                                                                  
 P.O. Box 100360                                                               
 Anchorage, AK 99510                                                           
  POSITION STATEMENT:   Commented on SB 243 and SB 245.                        
 Al Hastings, Director                                                         
 Division of Oil and Gas                                                       
 Cook Inlet Regional, Inc. (CIRI)                                              
 2525 C St., #500                                                              
 Anchorage, AK 99503                                                           
  POSITION STATEMENT:   Supported SB 245.                                      
 Pat Foley, Chairman                                                           
 Lands Exploration and Operation Committee                                     
 Alaska Oil and Gas Association (AOGA)                                         
 P.O. Box 100360                                                               
 Anchorage, AK 99510                                                           
  POSITION STATEMENT:   Commented on SB 243 and SB 245.                        
 John Donohue, General Manager                                                 
 969 W 9th Ave.                                                                
 Anchorage, AK 99510                                                           
  POSITION STATEMENT:   Commented on SB 243 and SB 245.                        
  ACTION NARRATIVE                                                             
  TAPE 96-15, SIDE A                                                           
 Number 001                                                                    
          SCR 24 REESTABLISH ADFG DIVISION OF GAME                         
  CHAIRMAN LEMAN  called the Senate Resources Committee meeting to             
 order at 3:45 p.m. and announced  SCR 24  to be up for consideration.         
 MARILYN WILSON, Legislative Aide to Senator Sharp, said that SCR 24           
 is a request by the legislature to the Governor to change the name            
 Division of Wildlife Conservation back to the division's former               
 name, Division of Game.  This change in name has fragmented the               
 Division's mission into many sections, many with opposing goals.              
 The Division's resources have been redirected toward benefiting               
 non-hunters, gathering and manipulation of public opinion for non-            
 users benefits, and virtually abandoning Alaska's game resource for           
 MR. KEN TAYLOR, Deputy Director, Division of Wildlife, said his               
 Division has a constitutional and statutory responsibility for                
 managing 521 wildlife species in Alaska.  Of these, about 70 are              
 classified as game and their name was changed in 1989 to better               
 reflect their responsibility.  During the past seven years the                
 Division developed its first mission statement which is to conserve           
 and enhance Alaska's wildlife and to provide for a wide range of              
 uses for the greatest benefit of current and future generations of            
 people.  They believe this statement accurately reflects their                
 responsibility to the Alaskan public.                                         
 Contrary to this resolution, he said, there is nothing fragmented             
 about their objectives and goals or their development process.                
 Their Division budget is spent primarily on management of hunted              
 species.  They also track federal actions related to access,                  
 easements, unwarranted closures, and numerous other issues that               
 have not been in the best interests of Alaska's hunters and                   
 trappers and filing countless protests and appeals when federal               
 actions violate their own laws.                                               
 Only about 4.5 percent of their budget is spent on programs that              
 might be perceived as not directly benefiting hunters such as                 
 viewing programs or a non-game program which focuses chiefly on               
 conservation of endangered species for which they have statutory              
 Out of their 180 employees in the Division, there are five that               
 work on non-consumptive use programs.  Until very recently these              
 programs were funded through the general fund and they are                    
 currently working on a national initiative sponsored by the                   
 international association of fish and wildlife agencies to draft              
 and introduce legislation to Congress which would establish                   
 alternative federal funding sources for these programs for which              
 there is a great deal of support in Alaska.                                   
 Many hunters and trappers do not feel it is fair that they should             
 foot the entire bill for the Division of Wildlife Conservation or             
 for wildlife conservation programs in Alaska and support taxing               
 other user groups in an equitable manner.                                     
 The Department's opposition to this resolution is directed                    
 primarily to the numerous inaccuracies found the preamble                     
 statements that, if it were to pass the legislature, would be                 
 devastating to the self esteem and moral of Division personnel and            
 would not further the interests of consumptive users in Alaska.  In           
 the greater scheme of things, their name doesn't make much                    
 difference.  Their constitutional mandates aren't going to change.            
 Number 127                                                                    
 SENATOR LEMAN asked him if he could identify the inaccuracies.  MR.           
 TAYLOR said the second, third, and fifth WHEREAS' were inaccurate             
 and untrue. He believed all of their programs in one way or another           
 do benefit hunters, trappers, and sport fishermen with the                    
 exception, possibly being the Marine Mammals Program which was                
 funded under general funds for many years, but was recently                   
 changed.  Alaska has a very strong interest in how marine mammals             
 are managed.  He did not think Alaskans would want the federal                
 government to represent Alaska's interest in the management of                
 marine mammals, particularly with sea lions being so close to being           
 listed on the endangered species list.                                        
 SENATOR HALFORD admitted that probably a much smaller number of               
 dollars than millions was used for purposes other than what was               
 mandated.  He also thought the mission of the ADF&G had been not              
 blurred, but redefined, because that's really what happened.                  
 MR. TAYLOR replied that their constitutional mandate is to manage             
 Alaska's wildlife, not just game.  While there has been more                  
 development of viewing areas and other non-consumptive uses over              
 the past several years, that's been in response to public demand.             
 It has changed, but he didn't think it had blurred their mission as           
 a division.                                                                   
 SENATOR HALFORD said he thought there was a conflict in the                   
 statutes, because on one hand their obligation is to all species              
 and on the other hand their funding mechanism is limited to the               
 funds generated by the consumptive uses.  There is still something            
 wrong and if the resolution can more accurately reflect that, it              
 should do that.  The message is that the people who are paying the            
 bill are not satisfied with the allocation of their resource                  
 Number 222                                                                    
 MR. TAYLOR agreed that there was a conflict, but they have been               
 struggling to deal with that ever since they lost their general               
 funds which was after FY95.                                                   
 SENATOR LEMAN said he hoped they could work together to have the              
 resolution more accurate reflect the issues by next Monday and set            
 it aside.                                                                     
 ED GRASSER, Alaska Outdoor Council, supported the resolution,                 
 although he agreed with the Department on the accuracy in some of             
 the WHEREAS clauses.  He believed that management goals within the            
 Division had been redefined.  He thought there was a lack of                  
 professionalism in certain areas, like the McNeil River Refuge.               
 Hunting took place for years along side the viewing opportunity and           
 then all of a sudden it became a problem; not a biological problem            
 or a conflict between two user groups.                                        
 One of the statements in support of closing the refuge that the               
 Department made was that it could do nothing to correct the public            
 perception of tame bears being shot.  Their perception is that                
 while wildlife conservation may be what the Division does, and                
 their is a constitutional mandate for them to manage wildlife, but            
 the intent of the meaning of sustained yield is explicit in the               
 constitution.  It says that the sustained yield concept meant high            
 human harvest.                                                                
 SENATOR HALFORD commented that they might have two Divisions, the             
 Division of Game and the Division of Wildlife Conservation, one of            
 which is funded by the support of consumptive users, the other of             
 which has no money.                                                           
 MR. GRASSER said his group voted to oppose the diversity funding              
 initiative, because they are concerned about the increased amount             
 of money that will come out of their pockets, because most of the             
 items they are targeting for taxation are items that hunters and              
 fishermen purchase and its going to be used for the other category            
 of users.                                                                     
 Number 307                                                                    
 PETER SHEPERD supported SCR 24.  He said he worked as an ADF&G                
 biologist in 1960 and retired in 1981 and he had years of                     
 experience in Alaska with the Fish and Wildlife Service.  He tried            
 to do his best for the resource and for the hunting public.  At the           
 same time, he realized that with a proactive management program               
 including environmental factors, their efforts would benefit the              
 non-consumptive public.  He agrees that the Division of Wildlife's            
 mission has distinctly changed from one of active management to a             
 biocentric oriented passive mode.  Most people associated                     
 conservation with preservation with the concept that the best way             
 to preserve nature is to leave it alone.  Most scientists believe             
 that to leave nature alone, is to invite a torrent of change.                 
 Nature cannot manage animal populations, but we can by the most               
 scientific means possible.                                                    
 Number 352                                                                    
 BUD BURRIS, Fairbanks, said he graduated from college with a degree           
 in game management and in 1961 he worked as a biologist for ADF&G.            
 He worked with enlarging bag limits and lengthening hunting season            
 and did things like transplant game populations and managed                   
 wildlife populations in many areas.  He disagreed with Mr. Taylor             
 in that the Department is currently effectively managing any of the           
 more than 500 species of wildlife.                                            
 To correct that the federal government has regained management                
 authority over waterfowl, dinky birds, marine mammals, seabirds,              
 eagles, hawks, owls, ravens, crows, and many others.  The federal             
 government has usurped State management authority on all species in           
 parks and monuments.                                                          
 SENATOR LEMAN thanked everyone for their testimony and said SCR 24            
 would be held in Committee for further work.                                  
           SB 243 OIL & GAS LEASES: AREAWIDE & OTHERS                         
         SB 245 N SLOPE OIL & GAS BEST INTEREST FINDING                        
 SENATOR LEMAN announced  SB 243 and SB 245  to be up for                      
 KEN BOYD, Director, Division of Oil and Gas, noted that he had                
 provided the Committee members with a book from DNR called the                
 Five-Year Oil and Gas Leasing Program, January 1995 which he would          
 refer to during his testimony.  He directed them to a map that was            
 just before page 43 in the book and explained the schedule as                 
 represented there.                                                            
 He said generally these areas are selected by a nomination process            
 which involves the Division asking their customers (the oil and gas           
 industry) which areas they would like to see leased.  With the                
 information they receive they devise the schedule.  The nomination            
 process gives industry the acreage they want on a schedule they               
 One of the changes in the process is that they are offering a                 
 larger amount of land for sale on a yearly basis.  This raises the            
 concern of how to clear the title to all the land.  They have in              
 the recent past done the title work prior to the sale; even though            
 in the lease the State does not claim to have clear title.  They              
 have now decided to do the title work after the sale.                         
 Number 461                                                                    
 CAROL SHOBE, Realty Services Section, said that with the five-year            
 plan they do three title checks that occur over a two-year period             
 as they progress through a sale.  The North Slope area is not a               
 very complex title; Alaska owns the majority of the oil and gas               
 JIM HANSEN, Division of Oil and Gas, explained that a best interest           
 finding is simply a document they have to produce by statute that             
 says the sale is in the State's best interest.  It's a document               
 that contains a lot of environmental and habitat information.                 
 Their process takes about 21 months from the time they start until            
 the time they can hold the sale.  He explained the process with the           
 use of the chart before page 43 in the above mentioned book.                  
 He said typically they get most of their comments at the end of the           
 comment period.  It takes about six months to write a preliminary             
 finding based on information and comments.  Until that time                   
 everything is based on how fast they can do there work.  From that            
 point on, the timing is controlled by statute and regulation.  Once           
 they have done a first areawide finding, they can hold annual                 
 sales, because the process is much shorter, typically eight months.           
 SENATOR LEMAN said he hoped to shorten the process.                           
 MR. HANSEN explained that part of the problem they deal with is               
 that during the first portion of the process, they are at the tail            
 end of other best interest finding processes.  They normally are              
 dealing with three sales at once.  When they start contracting                
 things the work gets a little tougher.                                        
 SENATOR LEMAN asked if that was why there is a big fiscal note with           
 SB 243.  MR. BOYD explained that the reason for the big fiscal note           
 is that it creates a separate process of sales when, in fact,                 
 areawide leasing could be integrated into their current plan.                 
 The Committee's attention was directed towards a large map                    
 indicating lease sale areas prior to January 16, 1996.                        
 TAPE 96-15, SIDE B                                                            
 Number 581                                                                    
 The new area-wide finding was defined in blue and he indicated it             
 would be offered for lease.  After the lease sale, on a yearly                
 basis, the whole area would be available for lease again without              
 having to do a new finding.  The Commissioner needs to issue a                
 letter asking if there is any new information that would cause him            
 to modify the finding.  If there is, mitigating measures could be             
 added.  They now have enough information that they don't need to              
 have a new finding and this can go on for a period of five years              
 before another finding is needed.                                             
 MR. BOYD concluded that that was area-wide leasing as it is now,              
 without any changes to statute.  He explained that SB 243 creates             
 a whole new process which he did not think was necessary since they           
 had accomplished area-wide leasing both on the North Slope, on and            
 off shore, and Cook Inlet under existing law .                                
 SENATOR LEMAN asked what process they go through to determine if              
 there is new information.  MR. HANSEN answered that they just send            
 out another call for comments and on that call they simply state if           
 there is any new information that has been available since the best           
 interest finding was released, to let them know what the                      
 information is and what the impact is.  They look at the                      
 information and decide if it takes a revision of the finding.  If             
 there is new information, they simply revise that portion of the              
 finding and issue that as if it were a final finding.  Based on the           
 revision they would issue a decision of the Director as to whether            
 the sale should proceed or not.                                               
 SENATOR LEMAN asked him to explain why they left Cook Inlet off               
 their version of this legislation.  MR. BOYD said SB 245 does not             
 create a new process.  If they had not gotten title to a certain              
 tract of land, they would not be able to offer it in the next lease           
 sale if they hadn't offered it for sale previously.  What SB 245              
 says is that if the best interest finding covers the tract it                 
 doesn't matter if you offer it for sale, it can be offered for sale           
 The reason Cook Inlet wasn't offered is they had to start                     
 somewhere.  In particular they have a title situation of titling              
 after the sale and it's fairly simple on the slope, but in Cook               
 Inlet the land ownership is quite a bid more complicated.  In fact            
 they have two Cook Inlet conventional sales scheduled, 85A and 85             
 over the next couple of years.  Most of the Cook Inlet area will be           
 covered by conventional lease sales and they can add acreage to               
 those sales.  The Cook Inlet area has more complex title and land             
 issues.  There are more complex issues with people, fishermen, and            
 landowners.  Some people don't want to have lease sales in Cook               
 Inlet.  The lease program has stalled for almost two years because            
 of litigation.  The administration's plan is to see if area-wide              
 leasing can be successful on the North Slope first and then move it           
 to the off shore area and Cook Inlet.  Once they get good findings            
 for sale 85 in the Cook Inlet, they have a good foundation from               
 which they can build an area-wide leasing program there and in many           
 areas of the State.                                                           
 SENATOR LEMAN asked why they use the five-year period for the best            
 interest findings instead of using an indefinite time period.  MR.            
 BOYD replied that it is worthwhile to revise a finding and he had             
 no objection to extending that time period.  As long as you are               
 doing the yearly updates and have some way of putting out a                   
 comprehensive document that incorporates the changes over time so             
 you don't have one document and 14 supplements.                               
 SENATOR LEMAN stated he was just trying to find ways to save time             
 and money and he thought that this issue could be worked on.                  
 Number 487                                                                    
 GEORGE FINDLING, ARCO, said that today they would have Dave Sutter            
 testify on ARCO's behalf.                                                     
 DAVID SUTTER, Land Manager, ARCO Alaska, said that for a year they            
 have been suggesting that the State adopt an area-wide concept with           
 its lease sales in areas that have had significant past discoveries           
 where industry activities are on-going. Examples are onshore at               
 North Slope and Cook Inlet which are areas that have been excluded            
 from exploration and licensing.                                               
 MR. SUTTER said the first thing they would like to see the                    
 legislature mandate annually is area-wide leasing on the North                
 Slope and Cook Inlet provided an necessary best interest finding              
 supports this sale.  They would like to see the Cook Inlet and                
 North Slope lease sale cover just those open areas excluded from              
 licensing; no off shore areas.  They would like to see a North                
 Slope area-wide lease sale occur no later than 1998 which matches             
 up with what Mr. Boyd has planned in sale 87.  They would also like           
 to see a Cook Inlet area-wide lease sale on shore occur no later              
 than 1999 which Mr. Boyd has scheduled for August 1998.  They would           
 like to see area-wide best interest findings on the North Slope and           
 Cook Inlet commence immediately.  They would like to see the best             
 interest findings cover at least 10 years rather than five years.             
 They believe that the best interest findings should cover all lands           
 within a geographic sale area regardless of current lease status or           
 ownership.  They believe comments for new information should be               
 solicited annually for the area-wide best interest findings and the           
 Commissioner of DNR should have discretionary authority to turn new           
 information required to change the best interest finding prior to             
 the expiration of the 10 year period.  They also believe                      
 legislation should not require additional regulations.                        
 In conclusion, MR. SUTTER said, that they believe this legislation            
 will encourage more activity in those areas covered by area-wide              
 leasing and that real benefits will ultimately go to the State.               
 Number 440                                                                    
 AL HASTINGS, CIRI, commended the Committee for pursuing additional            
 measures the State could take to make State lands available for oil           
 and gas leasing on an annual basis.  CIRI supports the concept of             
 areawide best interest findings and subsequent areawide leasing for           
 all on shore areas not subject to exploration licensing.  Although            
 CIRI is may not be an active bidding participant in the State lease           
 sales, they are an active working interest owner on about 80,000              
 acres of State leases where they have partnered with other                    
 companies.  It is important that most of the lands on a particular            
 structure be available for lease so that an operator can proceed              
 with exploration and hopefully development.  Having an annual                 
 leasing program in Cook Inlet enhances both CIRI and the State                
 MR. HASTINGS stated if there are any ambiguities concerning the               
 Division's authority to have areawide leasing that clarifying                 
 legislation would be appropriate.  He urged that any legislation              
 considered by the Committee limit any additional regulatory                   
 requirements since the regulatory writing and review process is               
 very time consuming.                                                          
 In conclusion, MR. HASTINGS said he supported Mr. Sutter's                    
 testimony from ARCO.                                                          
 Number 414                                                                    
 PAT FOLEY, Chairman, Lands Exploration and Operation Committee,               
 AOGA, said they believe in regular predictable oil and gas leasing            
 programs would benefit the State and the industry.  It would also             
 allow State agencies, the public, local government, and industry,             
 to efficiently plan and budget for oil and gas leasing.                       
 Areawide leasing is the most viable method to make highly                     
 perspective State lands available for exploration in a timely                 
 manner.  Implementation of areawide leasing could enhance Alaska's            
 competitiveness in attracting oil and gas exploration and                     
 production which is essential to ensure sustainable future State              
 revenues.  It could also reduce costs to the State for preparation            
 of best interest findings by combining individual best interest               
 findings into one single areawide finding.  Areawide leasing would            
 allow industry to know with certainty which areas would be offered            
 annually.  This could provide cost saving and efficiencies in a               
 lengthy and expensive lease sale preparation process.  They                   
 encourage areawide leasing in the areas of the State where                    
 competitive leasing is regularly offered and they believe this can            
 be handled under existing authority.  AOGA requests the                       
 legislator's endorsement of these concepts.                                   
 SENATOR LEMAN noted that the Governor's bill doesn't say anything             
 about requiring annual leases which theirs does.  He asked him if             
 he preferred the stronger approach in SB 243.  MR. FOLEY said AOGA            
 supports a mandate requiring the Department to offer a lease sale             
 annually where leases are offered on a competitive basis.                     
 Number 362                                                                    
 JOHN DONAHUE, General Manager, UNOCAL, said that they are the major           
 oil and gas producer in Cook Inlet.  He said if they do not arrest            
 the decline in the near future the entire infrastructure of the               
 Cook Inlet oil production will eventually collapse.  If that                  
 occurs, additional exploration will be very difficult.  He                    
 recommended that the State should offer consistent and extensive              
 lease sales in the Cook Inlet area that will require a best                   
 interest findings type of procedure.                                          
 SENATOR LEMAN thanked everyone for their testimony and adjourned              
 the meeting at 5:00 p.m.                                                      

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