Legislature(1995 - 1996)
01/10/1996 03:35 PM Senate RES
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* first hearing in first committee of referral
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= bill was previously heard/scheduled
SENATE RESOURCES COMMITTEE
January 10, 1996
3:35 P.M.
MEMBERS PRESENT
Senator Loren Leman, Chairman
Senator Drue Pearce, Vice Chairman
Senator Steve Frank
Senator Rick Halford
Senator Robin Taylor
Senator Georgianna Lincoln
Senator Lyman Hoffman
MEMBERS ABSENT
None
COMMITTEE CALENDAR
Overview of State Oil and Gas Leasing by Ken Boyd, Director,
Division of Oil and Gas
WITNESS REGISTER
Ken Boyd, Director
Division of Oil and Gas
Department of Natural Resources
400 Willoughby Ave.
Juneau, AK 99801-1796
ACTION NARRATIVE
TAPE 96-1, SIDE A
Number 001
CHAIRMAN LEMAN called the Senate Resources Committee meeting to
order at 3:35 p.m. and announced an overview of State oil and gas
leasing by Ken Boyd, Director, Division of Oil and Gas.
KEN BOYD, Director, Division of Oil and Gas, explained the bar
graphs before the committee on the number of acres leased. He said
there are new discoveries and ideas happening in Alaska.
Technology, for instance, is beginning to catch up with geology.
3-D seismic is the emerging activity today. He thought that
industry is changing its way of looking at Alaska. The last
lease/sale, #80, showed Chevron coming back into the State.
MR. BOYD explained another graph that showed the acres that have
been leased and how many acres are producing. Over time, he
explained, the three mile square leasing blocks are put into units
that give the companies the opportunity to save resources. Units
tend to form over areas of expected production and over time they
tend to shrink to what's called a participating area which is the
area that actually produces.
At this point he explained more graphs to the committee.
By statute, he said, any company can hold 500,000 acres on-shore
and 500,000 acres off-shore. Any acre that's in a unit does not
count in the 500,000. All companies are below their chargeable
acres, he noted.
Number 255
He said that ARCO and BP do hold a lot of acres. There is a total
of 2,810,000 acres under lease.
Number 283
SENATOR PEARCE asked for his definition of chargeable acreage. MR.
BOYD answered that it is acreage that is not in the unit.
SENATOR PEARCE asked him to explain the rules for getting to hold
a half million acres of land. MR. BOYD said that leases are
offered for a term; in Cook Inlet that's generally seven years.
The company has the right to do nothing or explore. At the end of
the term if the lease has not been committed to a unit, or if the
lease does not have a a well that is certified capable of
production, the lease goes back to the State.
Number 387
SENATOR FRANK commented that most of the areas on the graph do not
appear to be in a unit and, therefore, are subject to exploration.
MR. BOYD said that the North Slope has mostly 10 year leases,
because of the short drilling season. But the leases have been
shortened to seven years, because, now, more is known about the
area.
He explained that 3-D seismic technology is used in many cases
before drilling a well. It is a much more definitive tool for
identifying underground formations, because you can look at data as
a cube, with a top and sides, that can be rotated in space, rather
than as a simple flat two dimensional surface.
Number 442
SENATOR LEMAN asked if his Division had the ability to look at the
3-D seismic data. MR. BOYD said that they do have the technology
to do that.
SENATOR LINCOLN asked if 3-D seismic is being used to re-analyze
areas and does the State do the actual surveying or do the
companies do it and then give the State the data. MR. BOYD
answered yes to the first question.
SENATOR LINCOLN asked why 2-D technology would still be used. MR.
BOYD said it was several magnitudes less expensive and used when
learning a new area or if the structure is not complicated. He
explained that the most advanced technology is 4-D seismic which is
3-D seismic shot twice, so you can see fluid levels that have
moved. Using 4-D you can see fluid context, although it can't be
identified.
SENATOR LEMAN asked what the accuracy was. MR. BOYD said that they
are very accurate.
SENATOR PEARCE asked if we do a joint permitting process with the
feds where the wells cross the boundary of the National Petroleum
Reserve Alaska (NPRA). MR. BOYD answered yes, that we only issue
land use permits for our lands and it is a very simple process.
MR. BOYD explained that ARCO has applied for exploration credit in
Nuiqsut, and the State has decided to grant them 15 percent credit.
Twenty-five percent is the maximum. One of the terms that goes
with the credit is that the well, if it is drilled, will be held
confidential for two years, but cannot be extended.
Number 580
SENATOR LEMAN asked how the public got to view the data. MR. BOYD
replied that the data was viewed in their office.
TAPE 96-1, SIDE B
Number 589
No one is allowed to bring in movie cameras. The viewing process
is really a means of attracting new players.
SENATOR LINCOLN asked if there was an advantage to the 2-D surveys
that do not have to be confidential. MR. BOYD said that would not
come into the equation.
Number 562
He showed the committee the coming lease sales. The exploration
licensing opportunities begin in April, he said.
Early on, the first idea was area-wide best interest findings
rather than area-wide leasing. Leasing requires title work and the
Department can do about 1 or 1.3 million acres per year. The title
work is done only on the leases that are sold, not all the acres
that are offered. They don't warrant title, in other words.
SENATOR LEMAN commented that it is sad that there are so few wells
being drilled in Alaska when 4,000 per year are being drilled in
Alberta, Canada. He noted that it takes a long time to get a
permit here. In response, MR. BOYD said under the Coastal Policy
Program there is the A,B,C list - A being the easiest things to
permit and do. If things have been done enough times, the criteria
is known, and therefore, permitting is easier.
Number 379
SENATOR HALFORD asked if the area-wide lease properties are subject
to all the same conditions, such as the acreage limitation and the
unitization provision. MR. BOYD said yes, they would be.
SENATOR TAYLOR asked if he would be suggesting any systemic changes
within the regulatory process. MR. BOYD said he thought there had
to be changes made to the Alaska Coastal Management Program, but he
didn't think there needed to be many.
SENATOR TAYLOR noted that today, if no one appeals at any stage of
the process, it takes a minimum of 39 months for a State timber
sale. He hoped they could suggest legislation that might speed up
the permitting process.
Number 327
SENATOR PEARCE asked what the Department was doing for reclamation
standards on production that was already in place. MR. BOYD
answered that the Department has broad authority, but they are
looking at some complicated tax questions in this area. He added
that they are moving forward.
SENATOR PEARCE asked if reclamation expenses are deductible? MR.
BOYD said that is part of the question. When they are chargeable
is another, and there are many others.
SENATOR LEMAN thanked everyone for their participation and
adjourned the meeting at 4:52 p.m.
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