ALASKA STATE LEGISLATURE
HOUSE RESOURCES STANDING COMMITTEE
April 15, 2024
1:05 p.m.
DRAFT
MEMBERS PRESENT
Representative Tom McKay, Chair
Representative Kevin McCabe
Representative Dan Saddler
Representative Stanley Wright
Representative Jennie Armstrong
Representative Donna Mears
Representative George Rauscher, Vice Chair
Representative Thomas Baker
MEMBERS ABSENT
Representative Maxine Dibert
OTHER MEMBERS PRESENT
Representative Justin Ruffridge
COMMITTEE CALENDAR
CS FOR HOUSE BILL NO. 195(FSH)
"An Act relating to the powers of the Alaska Commercial
Fisheries Entry Commission; relating to administrative areas for
regulation of certain commercial set net entry permits;
establishing a buy-back program for certain set net entry
permits; providing for the termination of state set net tract
leases under the buy-back program; closing certain water to
commercial fishing; and providing for an effective date."
- HEARD & HELD
HOUSE BILL NO. 329
"An Act relating to state tideland leases; and relating to
aquatic farming or related hatchery operation site leases."
- HEARD & HELD
CS FOR HOUSE BILL NO. 251(L&C)
"An Act exempting certain foods and drinks prepared in a
person's uninspected home kitchen from state labeling,
licensing, packaging, permitting, and inspection requirements;
and permitting a person to acquire meat from a producer by way
of an ownership share in an animal if certain conditions are
met."
- HEARD & HELD
PRESENTATION: West Harrison Bay Unit Exploration and
Development Update
- HEARD
HOUSE BILL NO. 349
"An Act relating to leases of public land for renewable energy
projects; and providing for an effective date."
- SCHEDULED BUT NOT HEARD
PREVIOUS COMMITTEE ACTION
BILL: HB 195
SHORT TITLE: COOK INLET: NEW ADMIN AREA;PERMIT BUYBACK
SPONSOR(s): RUFFRIDGE
05/08/23 (H) READ THE FIRST TIME - REFERRALS
05/08/23 (H) FSH, RES
02/06/24 (H) FSH AT 10:00 AM GRUENBERG 120
02/06/24 (H) Heard & Held
02/06/24 (H) MINUTE(FSH)
02/13/24 (H) FSH AT 10:00 AM GRUENBERG 120
02/13/24 (H) Heard & Held
02/13/24 (H) MINUTE(FSH)
02/27/24 (H) FSH AT 10:00 AM GRUENBERG 120
02/27/24 (H) <Bill Hearing Canceled>
03/14/24 (H) FSH AT 10:00 AM GRUENBERG 120
03/14/24 (H) -- MEETING CANCELED --
03/19/24 (H) FSH AT 10:00 AM GRUENBERG 120
03/19/24 (H) <Bill Hearing Canceled>
03/21/24 (H) FSH AT 10:00 AM GRUENBERG 120
03/21/24 (H) -- MEETING CANCELED --
03/26/24 (H) FSH AT 10:00 AM GRUENBERG 120
03/26/24 (H) Heard & Held
03/26/24 (H) MINUTE(FSH)
04/02/24 (H) FSH AT 10:00 AM GRUENBERG 120
04/02/24 (H) Moved CSHB 195(FSH) Out of Committee
04/02/24 (H) MINUTE(FSH)
04/03/24 (H) FSH RPT CS(FSH) NEW TITLE 3DP 1NR 2AM
04/03/24 (H) DP: CARPENTER, STUTES, VANCE
04/03/24 (H) NR: HIMSCHOOT
04/03/24 (H) AM: MCCORMICK, MCCABE
04/08/24 (H) RES AT 1:00 PM BARNES 124
04/08/24 (H) Heard & Held
04/08/24 (H) MINUTE(RES)
04/15/24 (H) RES AT 1:00 PM BARNES 124
BILL: HB 329
SHORT TITLE: AQUATIC FARM AND HATCHERY LEASES
SPONSOR(s): VANCE
02/15/24 (H) READ THE FIRST TIME - REFERRALS
02/15/24 (H) FSH, RES
02/27/24 (H) FSH AT 10:00 AM GRUENBERG 120
02/27/24 (H) <Bill Hearing Canceled>
03/05/24 (H) FSH AT 10:00 AM GRUENBERG 120
03/05/24 (H) <Bill Hearing Canceled>
03/07/24 (H) FSH AT 10:00 AM GRUENBERG 120
03/07/24 (H) Heard & Held
03/07/24 (H) MINUTE(FSH)
03/14/24 (H) FSH AT 10:00 AM GRUENBERG 120
03/14/24 (H) -- MEETING CANCELED --
03/19/24 (H) FSH AT 10:00 AM GRUENBERG 120
03/19/24 (H) <Bill Hearing Rescheduled to 03/21/24>
03/21/24 (H) FSH AT 10:00 AM GRUENBERG 120
03/21/24 (H) -- MEETING CANCELED --
03/26/24 (H) FSH AT 10:00 AM GRUENBERG 120
03/26/24 (H) Moved CSHB 329(FSH) Out of Committee
03/26/24 (H) MINUTE(FSH)
03/28/24 (H) FSH RPT CS(FSH) NEW TITLE 6DP
03/28/24 (H) DP: C.JOHNSON, HIMSCHOOT, CARPENTER,
STUTES, MCCABE, VANCE
03/28/24 (H) FIN REFERRAL ADDED AFTER RES
04/08/24 (H) RES AT 1:00 PM BARNES 124
04/08/24 (H) Heard & Held
04/08/24 (H) MINUTE(RES)
04/15/24 (H) RES AT 1:00 PM BARNES 124
BILL: HB 251
SHORT TITLE: EXEMPTIONS FOR HOMEMADE FOODS
SPONSOR(s): REPRESENTATIVE(s) RAUSCHER
01/16/24 (H) PREFILE RELEASED 1/12/24
01/16/24 (H) READ THE FIRST TIME - REFERRALS
01/16/24 (H) L&C, RES
02/02/24 (H) L&C AT 3:15 PM BARNES 124
02/02/24 (H) <Bill Hearing Rescheduled to 02/05/24>
02/05/24 (H) L&C AT 3:15 PM BARNES 124
02/05/24 (H) Heard & Held
02/05/24 (H) MINUTE(L&C)
02/14/24 (H) L&C AT 3:15 PM BARNES 124
02/14/24 (H) Scheduled but Not Heard
02/21/24 (H) L&C AT 3:15 PM BARNES 124
02/21/24 (H) -- MEETING CANCELED --
03/15/24 (H) L&C AT 3:15 PM BARNES 124
03/15/24 (H) -- MEETING CANCELED --
03/27/24 (H) L&C AT 3:15 PM BARNES 124
03/27/24 (H) Moved CSHB 251(L&C) Out of Committee
03/27/24 (H) MINUTE(L&C)
03/28/24 (H) L&C RPT CS(L&C) NEW TITLE 2DP 5NR
03/28/24 (H) DP: RUFFRIDGE, SUMNER
03/28/24 (H) NR: CARRICK, FIELDS, SADDLER, PRAX,
WRIGHT
04/08/24 (H) RES AT 1:00 PM BARNES 124
04/08/24 (H) Heard & Held
04/08/24 (H) MINUTE(RES)
04/15/24 (H) RES AT 1:00 PM BARNES 124
WITNESS REGISTER
JEFF BEAUDOIN, representing self
Kasilof, Alaska
POSITION STATEMENT: Testified in opposition of HB 195.
GARY HOLLIER, representing self
Kenai, Alaska
POSITION STATEMENT: Testified in support of HB 195.
RUSSEL CLARK, representing self
Kenai, Alaska
POSITION STATEMENT: Testified in support of HB 195.
CODY BLOSSOM, representing self
Clam Gulch, Alaska
POSITION STATEMENT: Testified in support of HB 195.
DOUG BLOSSOM, representing self
Clam Gulch, Alaska
POSITION STATEMENT: Testified in support of HB 195.
JOHN MANLEY, representing self
Fairbanks, Alaska
POSITION STATEMENT: Testified in support of HB 195.
KEN COLEMAN
President, Eastside Consolidation Association
Kenai, Alaska
POSITION STATEMENT: Testified in support of HB 195.
LISA GABRIEL, representing self
Kenai, Alaska
POSITION STATEMENT: Testified in support of HB 195.
ALAN CROOKSTON
Tide Chaser Fisheries
Kenai, Alaska
POSITION STATEMENT: Testified in support of HB 195.
TANYA DONER, representing self
Anchorage, Alaska
POSITION STATEMENT: Testified in opposition to HB 195.
PAULINE MILLS, representing self
Kasilof, Alaska
POSITION STATEMENT: Testified in support of HB 195.
SCOTT SUMMERS, representing self
Kenai, Alaska
POSITION STATEMENT: Testified in support of HB 195.
GARY DEIMAN, representing self
Ninilchik, Alaska
POSITION STATEMENT: Testified in support of HB 195.
BRUCE MANLEY, representing self
Kasilof, Alaska
POSITION STATEMENT: Testified in support of HB 195.
RANDY MEIER, representing self
Kasilof, Alaska
POSITION STATEMENT: Testified in support of HB 195.
GEORGE TOWNSEND, representing self
Kenai, Alaska
POSITION STATEMENT: Testified in support of HB 195.
JAMES MCGRATH, representing self
Kasilof, Alaska
POSITION STATEMENT: Testified in support of HB 195.
MONICA ZAPPA, representing self
Ninilchik, Alaska
POSITION STATEMENT: Testified in support of HB 195.
TED CROOKSTON, representing self
Kenai, Alaska
POSITION STATEMENT: Testified in support of HB 195.
HARRY LEMAN, representing self
Ninilchik, Alaska
POSITION STATEMENT: Testified in support of the original
version of HB 195.
TIM DONER, representing self
Ninilchik, Alaska
POSITION STATEMENT: Testified in support of the original
version of HB 195.
NANCY HILLSTRAND, Owner
Pioneer Alaskan Fisheries
Homer, Alaska
POSITION STATEMENT: Testified in opposition to CSHB 329(FSH).
MICHAEL PARKER, Owner, Manager
Narwhal LLC
Anchorage, Alaska
POSITION STATEMENT: Spoke on the update on West Harrison Bay.
STEPHANE LABONTE, Manager
Narwhal LLC
Anchorage, Alaska
POSITION STATEMENT: Presented a PowerPoint presentation on the
West Harrison Bay Unit.
ACTION NARRATIVE
1:05:31 PM
CHAIR MCKAY called the House Resources Standing Committee
meeting to order at 1:05 p.m. Representatives Mears, Armstrong,
McCabe, Saddler, Wright, and McKay were present at the call to
order. Representatives Rauscher and Baker arrived as the
meeting was in progress.
HB 195-COOK INLET: NEW ADMIN AREA;PERMIT BUYBACK
1:07:02 PM
CHAIR MCKAY announced that the first order of business would be
CS FOR HOUSE BILL NO. 195(FSH) "An Act relating to the powers of
the Alaska Commercial Fisheries Entry Commission; relating to
administrative areas for regulation of certain commercial set
net entry permits; establishing a buy-back program for certain
set net entry permits; providing for the termination of state
set net tract leases under the buy-back program; and providing
for an effective date."
1:07:21 PM
CHAIR MCKAY opened public testimony.
1:08:18 PM
JEFF BEAUDOIN, representing self, testified in opposition to HB
195. He stated that he has been involved with the fisheries in
Alaska for two decades, and he has fished in the Eastside Cook
Inlet district for four years. He expressed the opinion that
the proposed legislation would violate [the Limited Entry Act of
1973]. He referenced the Commercial Fisheries Entry Commission
(CFEC) optimization study on the Eastside Cook Inlet setnet
fishery, stating that the analysis in the study was flawed
because it did not consider inflation. He also argued against
the Cook Inlet management plan.
1:11:11 PM
GARY HOLLIER, representing self, testified in support of HB 195.
He shared that he is a 70-year resident of Kenai, and his family
owns a large setnet operation. He expressed the opinion that
the permit buyback should be done through a lottery system,
using 300 permits at $170,000 per permit. He stated that at
this point he has invested around $1 million in his operation.
He noted that he became a setnetter in Cook Inlet in 1971 and
was granted an original CFEC permit. He shared that along with
other expenses, he spent $344,000 in 2009 on setnet sites for
his operation. He argued that a setnet operation has more costs
than just the CFEC permits. He continued that he has not been
able to fish because of the Board of Fisheries management
policies concerning Chinook salmon. He stated that this
legislation needs to pass to help the fishermen. In response to
a question from Chair McKay, he stated that he does support the
legislation.
1:13:58 PM
RUSSEL CLARK, representing self, testified in support of HB 195.
He said that his family has had a Cook Inlet setnet operation
for around 22 years. He stated that this issue also impacts his
crew, who are mostly Alaska Natives living in remote villages.
He argued that the Eastside Cook Inlet fishery must be reduced
to between 79 and 106 permits before the Board of Fisheries
would consider policies to bring it into a viable fishery. He
noted that the board's policies are based on Chinook salmon, not
on the commercially targeted sockeye salmon. He pointed out
that there has been "tremendous" economic impact to the
communities in the area and that these communities have
supported the Kenai area for decades. He argued that now the
communities need support from the legislature.
1:16:27 PM
CODY BLOSSOM, representing self, testified in support of HB 195.
He said the current management practices of fisheries around the
Cook Inlet has been detrimental to those working in the fishery.
He argued that there should be compensation so those that want
[to pursue other economic activities can, while those that want
to stay could have a chance at making a living in the fishery].
1:17:19 PM
DOUG BLOSSOM, representing self, testified in support of HB 195.
He stated that he is a third generation Alaskan setnet fishermen
in Cook Inlet. He discussed how the setnet site has supported
his family, allowing his children to pursue other careers in the
state [indisc.].
1:19:08 PM
JOHN MANLEY, representing self, testified in support of HB 195.
He reminded the committee that the issue was initially a
reduction in the fleet, as removing 300 permits would revitalize
the fishery.
1:20:37 PM
KEN COLEMAN, President, Eastside Consolidation Association,
testified in support of HB 195. He stated that he has been a
setnetter for 54 years. He stated that he has been working with
the bill since inception, which has been around 10 years.
1:21:27 PM
LISA GABRIEL, representing self, testified in support of HB 195.
She said that she has been an Eastside setnetter for over 35
years. She expressed support for the lottery system that was
originally proposed by the bill, as it would ensure the core
fishery would remain for future generations. She expressed
support for allowing 300 permits to leave the fishery, as
remaining permits could still participate in a viable fishery.
1:23:11 PM
ALAN CROOKSTON, Tide Chaser Fisheries, testified in support of
HB 195, on behalf of Tide Chaser Fisheries. He stated that this
operation fishes on the Eastside of Cook Inlet. He echoed
previous testimony, adding that setnet operations should be
viewed as the "family farm." He continued that he could have
chosen many different careers, but he bought into the setnet
operation, investing hundreds of thousands of dollars in
equipment. He pointed out that none of this equipment has any
value if the permits cannot fish. He expressed the opinion that
a buyback would make the fishery viable again.
1:24:52 PM
TANYA DONER, representing self, testified in opposition to HB
195. She shared that she has been part of the fishery since the
1960s. She expressed support for the bill in its original form
before the amendments passed in the House Special Committee on
Fisheries. She discussed the effort put into this issue over
the years, and she expressed disappointment that there had been
this change from the bill's original form.
1:26:00 PM
PAULINE MILLS, representing self, testified in support of HB
195. She shared that she has been a setnetter for 40 years on
the Eastside of Cook Inlet. She expressed the opinion that the
proposed buyout program would help both fishermen who want to
stay and those who want to leave the fishery.
1:27:25 PM
SCOTT SUMMERS, representing self, testified in support of HB
195. He shared that he is a third generation setnetter from
Kenai, where his grandparents began fishing in the late 1940s.
He stated said that something must be done legislatively to keep
the setnet fishery viable, as currently, "we've got nothing."
1:28:23 PM
GARY DEIMAN, representing self, testified in support of HB 195.
He shared that he lives on his setnet site, and his family has
fished there for 50 years. He stated that this has been a
discussion for many years, expressing the opinion that it is
time for a buyback to happen, with permits valued at $260,000
each. He added that this price would make it viable for people
to leave the fishery. He pointed out that this would be the
cost of the business, not just the permit.
1:29:40 PM
BRUCE MANLEY, representing self, testified in support of HB 195.
He stated that he fishes the mouth of the Kasilof River, where
an estimated 1 million fish passed through last year. He stated
that prior to last year the record escapement was 460,000. He
argued that now he is being forced to dip net in Cook Inlet.
1:30:53 PM
RANDY MEIER, representing self, testified in support of HB 195.
He shared that he has had a family operation at the mouth of the
Kasilof River for 28 years. In the operation there are five
permits, and each permit holder is in support of the proposed
legislation. He reiterated that this would help those who want
to leave the fishery and those who want to stay.
1:31:44 PM
GEORGE TOWNSEND, representing self, testified in support of HB
195. He shared that he has been a setnetter in Kasilof since
1984. He said that, like other setnetters, he has made a
substantial investment into the equipment for the fishery. He
stated that the bill would be a way to take care of the
livelihood of the fishermen for the future.
1:33:14 PM
JAMES MCGRATH, representing self, testified in support of HB
195. He expressed the understanding that because of changes
made to the bill, anyone who wants to be in the lottery or
buyback would have to have registered buoy stickers for 2022.
He expressed uncertainty why this one year was chosen, as it
could be unfair to some who have participated in the fishery for
many years.
1:35:03 PM
MONICA ZAPPA, representing self, testified in support of HB 195;
however, she expressed preference for the original version of
the bill. She echoed the economic points made by previous
testifiers. She stated that this fishery has been shut down
based on the numbers of Chinook salmon in the river; however,
derbies for these fish all along the coast line still exist,
with winners making hundreds of thousands of dollars. She made
the argument that these are the same fish that have shut down
the entire fishery. She argued that this is unfair.
1:37:10 PM
TED CROOKSTON, representing self, testified in support of HB
195; however, he argued against the change made in the House
Special Committee on Fisheries. He stated that the way the bill
is now written there could be the possibility of no permits
remaining. He reiterated that the value of a fishing operation
is not just the value of the permit; the permit is just a way to
regulate the fishery, but it is not the cost of fishing. He
shared that he has a 60-year history in the fishery, and those
who have been participating the longest need a voice.
1:39:37 PM
HARRY LEMAN, representing self, testified in support of the
original version of HB 195. He shared that his family setnet
site has been on the Eastside of Cook Inlet for six generations.
He stated that the recent regulations have "gutted" the
lifestyle, tradition, and identity of the local fishermen. He
expressed the opinion that the price of the permits should be
raised because of inflation. He continued that this goes deeper
than the price of the permit and the equipment, as it "goes to
the core of our being." Describing the fish camps that are
along the beach and those who have given their lives to the
fishery, he explained that there is no way to undervalue this.
1:42:57 PM
TIM DONER, representing self, expressed support for the previous
version of the bill, but not the current one. He shared that he
has fished the area for 50 years.
1:43:41 PM
CHAIR MCKAY, after ascertaining that there was no one else who
wished to testify, closed public testimony.
CHAIR MCKAY announced that HB 195 was held over.
#^hb251
HB 251-EXEMPTIONS FOR HOMEMADE FOODS
1:43:58 PM
CHAIR MCKAY announced that the next order of business would be
CS FOR HOUSE BILL NO. 251(L&C), "An Act exempting certain foods
and drinks prepared in a person's uninspected home kitchen from
state labeling, licensing, packaging, permitting, and inspection
requirements; and permitting a person to acquire meat from a
producer by way of an ownership share in an animal if certain
conditions are met."
1:44:28 PM
CHAIR MCKAY opened public testimony on CSHB 251(L&C). After
ascertaining that there was no one who wished to testify, he
closed public testimony.
CHAIR MCKAY announced that CSHB 251(L&C) was held over.
HB 329-AQUATIC FARM AND HATCHERY LEASES
1:45:05 PM
CHAIR MCKAY announced that the next order of business would be
CS FOR HOUSE BILL NO. 329(FSH) "An Act relating to state
tideland leases; relating to geoduck seed transfers; and
relating to aquatic farming or related hatchery operation site
leases."
1:45:37 PM
CHAIR MCKAY opened public testimony on CSHB 329(FSH).
1:45:58 PM
NANCY HILLSTRAND, Owner, Pioneer Alaskan Fisheries, testified in
opposition to CSHB 329(FSH). She shared that she has operated a
seafood processor for 25 years. She argued that the state
should not be closing access to up to 180 acres without adequate
monitoring. She cited AS 38.05.083, arguing that subsections
(c) and (f) should stay the same. On line 27 of the proposed
legislation, she argued that "may provide for the consideration"
should be "must provide". She stated that leases in tidelands
are important to Alaskans, and this would be a giveaway to
certain people. Concerning the fiscal note, she questioned
whether the Department of Revenue would be losing money if the
bill were passed. She expressed the opinion that leases do not
need to be more than 10 years. She suggested that the state
should wait for the progress of the mariculture industry before
passing legislation and work with it as it progresses.
1:47:45 PM
CHAIR MCKAY, after ascertaining that there was no one else who
wished to testify, closed public testimony.
CHAIR MCKAY announced that CSHB 329(FSH) would be held over.
1:48:05 PM
The committee took an at-ease from 1:48 p.m. to 1:52 p.m.
1:52:17 PM
^PRESENTATION(S): West Harrison Bay Unit Exploration and
Development Update
PRESENTATION(S): West Harrison Bay Unit Exploration and
Development Update
1:52:19 PM
CHAIR MCKAY announced that the final order of business would be
a PowerPoint presentation on an update on the West Harrison Bay
Unit exploration and development.
1:52:45 PM
CHAIR MCKAY made opening remarks on the history of West Harrison
Bay, noting that there are a prospective set of [oil and gas
exploration] leases there. He expressed the understanding that
these leases are a top-rated prospect in Shell's portfolio, as
this area could be the size of Kuparuk [which is the second
largest oil field in North America]. He discussed the problem
of Shell's current leases, which are adjacent to Narwhal's
leases. He expressed the opinion that this has resulted in the
lack of exploration activity at this prospect. He noted that
Shell and the Department of Natural Resources (DNR) have never
testified on these delays.
1:55:09 PM
MICHAEL PARKER, Owner, Manager, Narwhal, LLC, provided invited
testimony on the West Harrison Bay Unit (WHBU). He said Narwhal
and EE Partners Corporation together own 83,000 lease acres in
West Harrison Bay. This acreage is immediately adjacent to
81,000 acres in WHBU owned and operated by Shell Offshore. He
said Narwhal was formed in 2016 to investigate the oil and gas
prospects on the North Slope, and it has invested around $8
million to acquire leases, conduct assessment, and begin field
work. He stated that Narwhal plans to invest another $100
million to conduct the program. He expressed the belief that
West Harrison Bay contains one of the largest oil reserves found
in the last five decades in Alaska, and the development of this
resource could generate up to $20 billion for Alaska.
MR. PARKER expressed the opinion that efforts to bring this oil
to market has been impeded by two separate entities. He pointed
out that one of these entities is Shell Offshore, suggesting
that it halted exploration because of environmental activism,
and it is trying to extend the term of its expiring leases. He
expressed the understanding that Shell's intention is to fully
divest of its leases. He expressed the understanding that Shell
has attempted to find another operator so the exploration would
be possible, but it has not; therefore, for the past 16 months
Shell has been in default of its legal obligations.
Additionally, he argued that Shell has failed to drill at least
one exploration well, per the WHBU agreement. Instead, he
stated that Shell moved to extend the deadline in the plan of
exploration until 2026, with all requirements eliminated.
MR. PARKER said, "It's anybody's guess how a well will be
drilled if Shell is no longer required to designate a unit
operator and does not have the internal mandate or intention to
conduct an exploration program in West Harrison Bay."
2:00:36 PM
MR. PARKER continued, stating that DNR's commissioner issued a
response to Shell, confirming that it would grant an extension
and not issue a letter of default. He suggested that the
committee should ask why Shell insists on holding leases that it
has publicly confirmed it would not explore or identify another
operator to explore. He expressed the opinion that this is
because of Shell's business with a large oil discovery in Guyana
and an "embarrassing" decision that it has made concerning this.
He opined that Shell's handling of WHBU could also expose an
embarrassing decision Shell has made. He said, "Shell's delay
tactics ... would not be possible without the full support and
cooperation of DNR and Commissioner John Boyle, who appears to
be promoting Shell's corporate interests over the interest of
the people of Alaska."
MR. PARKER expressed the opinion that DNR is the second entity
standing in the way of an exploration program in West Harrison
Bay. He continued that since 2020, DNR has granted and
accommodated every request by Shell, regardless of the validity.
He expressed frustration over the fact that DNR has not issued
Shell a notice of default. He noted that meanwhile the federal
government has granted leases on federal land more fervently
than DNR in Alaska. He said that Narwhal has met with DNR and
discussed these concerns, resulting in a commitment from DNR to
expedite drilling, but this was to no avail. He reiterated his
opinion concerning the commissioner of DNR.
MR. PARKER argued that the cost to develop West Harrison Bay is
in the range of costs of developing other projects in the state.
He suggested that these costs should be shared by all lease
holders in West Harrison Bay in a coordinated development
program, as this would minimalize the environmental impact,
maximize recovery, and prevent the waste of resources. He
reiterated the opinion that DNR has not required Shell to comply
with its obligations to the WHBU agreement. He stated that
Narwhal would be putting forth an idea for legislation that
would prevent DNR from avoiding its obligations.
2:08:18 PM
CHAIR MCKAY pointed out that in a letter Shell has claimed that
a qualified operator is needed to take over its holdings in
WHBU. He expressed the understanding that Narwhal is qualified
and ready, yet Shell does not give it the job. He argued that
many smaller companies have made many of the oil discoveries on
the North Slope.
2:10:21 PM
The committee took an at-ease from 2:10 p.m. to 2:11 p.m.
2:11:01 PM
REPRESENTATIVE SADDLER noted the contentions made during
testimony, and he requested that the commissioner of DNR be
given the opportunity to respond.
CHAIR MCKAY stated that DNR has known for weeks of the current
hearing, and it was given multiple opportunities to testify. He
stated that DNR was also provided multiple opportunities to give
a confidential response to his office; however, there was no
response. He discussed the importance of going forward with the
hearing.
2:12:13 PM
REPRESENTATIVE RAUSCHER expressed agreement with Representative
Saddler. He suggested that DNR may not have understood the
depth of the language in the discussion. He expressed the need
for clarity for whether DNR would like to have representation
during the hearing.
CHAIR MCKAY assured Representative Rauscher that DNR knew the
details of the conversation.
2:13:06 PM
STEPHANE LABONTE, Manager, Narwhal, LLC, presented a PowerPoint
presentation on WHBU. He began on slide 1, which gave an
overview of the presentation. He moved to slide 2 and discussed
the resource in West Harrison Bay, reiterating the points that
Mr. Parker made. He expressed the opinion that it would be a
revival of the North Slope for oil and gas exploration. He
moved to slide 3 and discussed the National Petroleum Reserve in
Alaska (NPRA). He pointed out that the Pikka oil field covers
more ground that initially thought, and because of this, WHBU is
considered a "world class type of reservoir." He reiterated
this same point with the Willow Project. He noted the current
restrictions on drilling in the NPRA, pointing out that there is
available drilling in the area offshore of the North Slope in
West Harrison Bay. He reiterated that because of these other
large oil discoveries, it is thought that West Harrison Bay
holds the same.
2:16:44 PM
MR. LABONTE moved back to slide 2 and emphasized the "tremendous
financial benefits" that developing West Harrison Bay would
bring to the state. He expressed the opinion that Shell and DNR
are seeking to delay this development by ignoring the legal
obligations.
MR. LABONTE moved to slide 4 and gave an overview of Narwhal's
work and commitments in West Harrison Bay. He stated that it
plans to invest up to $100 million in initial exploration.
Using the economics of Pikka and Willow, he estimated that there
would be $20 billion in royalties to Alaska.
MR. LABONTE moved to slide 5 and gave a timeline summary of
WHBU. He disclosed that he had worked with Shell during its
acquisition of WHBU leases, but his discussion is based on
public knowledge. He continued with Shell's history in West
Harrison Bay, expressing the understanding that Shell has stated
that it would not return to Alaska; however, it is seeking to
extend its leases. He noted Shell's adherence to the Paris
Climate Agreement and discussed Shell's search for another
operator for the leases. He stated that its deadline was
extended to 12/31/22 for this purpose. He argued that Shell is
at fault, as it has not found an operator but sought another
extension. He noted the DNR commissioner's letter that extended
Shell's term to 12/31/27. He stated that Narwhal appealed this
decision. He added that this was a request for reconsideration,
as Narwhal asked DNR to withdraw its letter granting a further
deadline to Shell and instead issue a letter of default.
2:23:05 PM
MR. LABONTE moved to slide 6, titled "Shell's Motivation for
Delay and DNR's Response." He presented Narwhal's context of
Shell's motivation for delaying development in West Harrison
Bay, which includes Shell's corporate mandate and its inability
to find an operator. He partly contributed these delays to
Shell's concern for its reputation, and he attributed its
current strategy to "delays to avoid potential embarrassment
from missed opportunities." He stated that Narwhal has been
present and made multiple offers when Shell was seeking an
operator, but Shell has refused to engage with Narwhal. He
added that Narwhal has made six separate offers to either work
jointly to develop WHBU or buy Shell's leases. He noted that
all offers were rejected.
MR. LABONTE continued, expressing the opinion that DNR has
delayed its response or given a noncommittal response to Shell.
He argued that the impact of the delays "is huge for Alaskans
... resulting in economic waste and ... irresponsible
environmental stewardship of the land."
2:26:49 PM
CHAIR MCKAY disclosed for the record that, as chair of the
committee, his office has been informed of this situation for
over a year, and with respect to all involved the information
has been kept confidential in his office. He expressed the hope
that the situation would resolve itself; however, he said, "I
want the committee to know that we weren't trying to hide
anything from the members of the committee, but we're finally at
the point where I think you all need to know and make up your
own minds."
2:27:47 PM
MR. LABONTE moved to slide 7, titled "DNR's Inaction and
Response." He expressed the understanding that no default
letter has been issued to Shell by DNR, and there have been no
consequences imposed on Shell's lack of activity. He drew
attention to other cases that DNR has made enforcements against,
including Jade Energy and Fury Resources. He stated that
Narwhal has the opinion that Shell is being treated favorably,
as opposed to other entities. He speculated on the impact of
inaction, which he suggested has resulted in the delays in
Alaska's development of resources. He also argued that DNR has
been misaligned with the public interest.
2:30:16 PM
MR. LABONTE briefly noted slide 8, titled "DNR's Actions Violate
Alaska Law and Policies." He moved to slide 9, which listed
suggested legislative changes. He stated that Narwhal's
objective is that default notifications in Alaska's oil and gas
operations be clarified and enforceable. He discussed Narwhal
suggested timelines in further detail, including that the
commissioner of DNR would issue a notice of default within 30
days and a default to be cured within 90 days of the notice
date. He pointed out that this would ensure a maximum duration
of 120 days to resolution.
MR. PARKER added that the DNR regulation already exists, but
this would change the 90-day limit to a default. He stated that
the idea is to codify this into law. He pointed out that this
would ensure that all operators on the North Slope would be
treated the same.
MR. LABONTE concluded on slide 11 and said, "Shell and the DNR
have collaboratively delayed the development of West Harrison
Bay, ignoring their legal and operational obligations." He
noted that Narwhal's suggested call to action would be for DNR
to hold Shell accountable, and he reiterated Narwhal's suggested
legislative changes.
2:33:39 PM
CHAIR MCKAY stated for the record that there is an
administrative appeal in superior court; however, this is not a
legal lawsuit for damages. He stated that it is only
administrative, and it has not been discussed and will not be
discussed by the committee nor the testifiers. He expressed the
understanding that no rules have been violated by the
legislature. He stated that the House Resources Standing
Committee is an oversight committee; therefore, responsible to
the people in the state for the proper leasing of the state's
resources.
2:34:39 PM
REPRESENTATIVE ARMSTRONG reiterated the need for the
commissioner of DNR to be present to address the accusations.
She asked whether it is Narwhal's opinion that the commissioner
of DNR was putting his personal relationship with Shell over the
development of the project. She requested any information that
has led to this opinion. She questioned whether small operators
and large operators are treated differently [on the North
Slope].
2:35:35 PM
MR. PARKER responded with the belief that no more explanations
would be needed [other than the preceding testimony]. From the
many discussions Narwhal has had with DNR, he expressed the
understanding that DNR thought developing West Harrison Bay was
important and Shell needed to either drill or move aside to
allow another operator to drill. He stated that Narwhal has
only expressed the need for a partner to help with the $9
billion development costs. After the monthly conversations with
DNR from 2022 to 2023, he expressed the understanding that there
had been a collective agreement, and a default letter would be
sent, yet default letters were never sent. From a conference
call in 2024, he expressed the opinion that because of the past
expenditures Shell had made in the state, the commissioner was
more concerned about accommodating Shell than expediting the
cost for developing the West Harrison Bay projects.
MR. LABONTE, concerning the second question, cited the two
previously mentioned cases, where DNR "acted swiftly" to put
these [small] companies in default, and then implementing a cure
for the default. He argued that Shell has been in default for
years.
MR. PARKER added that Shell has not been permitted or done any
preliminary fieldwork in WHBU, while Jade Energy was making
concerted efforts. He suggested that Shell was allowed
dispensations when no other companies were allowed this.
2:40:29 PM
CHAIR MCKAY clarified that, on the record, his office and this
committee does not approve nor condone the allegations made
during the hearing. He stated this hearing is to provide an
open forum, so the public can be informed. He reiterated that
the other two parties involved were notified repeatedly, with
these invitations declined.
2:41:05 PM
REPRESENTATIVE MCCABE questioned whether Narwhal lists its West
Harrison Bay leases as assets.
MR. LABONTE responded that it does.
REPRESENTATIVE MCCABE questioned whether Shell would do the
same.
MR. LABONTE responded that Shell does hold these leases as
assets on its company record.
2:41:51 PM
REPRESENTATIVE MEARS referred to slide 4 of the presentation and
pointed out the location of Narwhal's lease sites in relation to
Shell's lease sites. She questioned Narwhal's plan of
exploration and the limitations of not having a partner.
MR. PARKER responded that Narwhal plans to drill its leases
independent of Shell. He stated that its interest is at the
development and exploration stage. As it is a remote region in
the Arctic, the costs to build the infrastructure would be in
the billions of dollars. He expressed the opinion that it would
be unfair for one lease holder to incur the cost, suggesting
that the other half of the bay would benefit [without paying for
infrastructure development]. He noted that sharing the cost
would split the risk and improve the economic return for each
operator.
2:43:49 PM
REPRESENTATIVE RAUSCHER pointed out that Narwhal's lease
holdings surround Shell's leases. He questioned whether the
lease positions would have any bearing on why Shell is not going
forward with development.
MR. LABONTE expressed doubt that this is the case, as it could
be considered a positive aspect that other operators hold
adjacent leases, as the operators could work together.
REPRESENTATIVE RAUSCHER opined that Narwhal is testifying
because it lacks a partner to develop the resource. He
questioned why Narwhal is taking part in the hearing.
MR. LABONTE responded that he and Mr. Parker are not testifying
for the benefit of Narwhal; moreover, they are testifying to
expose DNR's inability to hold Shell accountable. He reiterated
that Narwhal plans to drill its leases independent of Shell;
however, it would be beneficial to work with the WHBU's
operator, whether it is Shell or another operator.
MR. PARKER reiterated that a coordinated approach would minimize
economic impacts, increase recovery, and minimize environmental
impacts, and this would be good for the operators and for the
state. He continued that there could be a joint operating
agreement, with the joint management of a production facility.
He reiterated that otherwise Narwhal would do this alone.
REPRESENTATIVE RAUSCHER questioned again whether the positions
of the leases would affect Shell's development process.
MR. PARKER responded that Narwhal only owns the subsurface, and
it does not control the surface. He stated that Shell could
obtain a right of way on top of Narwhal's leases. He said that
interest is below the surface, so Narwhal could not stop a road
from being built across the leased area.
MR. LABONTE stated that with DNR authorization Shell could
develop its resources within WHBU, produce it to surface, and
build a pipeline across Narwhal's leases.
2:49:27 PM
CHAIR MCKAY commented that even if Narwhal and its leases did
not exist, there is still the problem of WHBU not being explored
and drilled.
REPRESENTATIVE RAUSCHER explained that there has been road
problems and property conflicts in the North Slope, and this is
why he has these questions.
2:50:39 PM
REPRESENTATIVE SADDLER clarified that he supports the oil and
gas industry in the state and environmentally safe development.
However, he stated that for the record, he does not support or
disagree with the allegations made towards DNR and Shell. He
expressed discomfort for the allegations made during the
hearing, especially because Narwhal is advocating for a change
in the state law that could benefit it and others. He expressed
hope that there would be a response from all entities involved.
CHAIR MCKAY reassured Representative Saddler that all entities
had been invited to the discussion multiple times.
2:52:26 PM
REPRESENTATIVE ARMSTRONG requested a written copy of Mr.
Parker's initial testimony.
CHAIR MCKAY confirmed that this was put in the record and
written copies are available.
REPRESENTATIVE ARMSTRONG expressed the hope that the committee
could jointly submit a formal letter requesting testimony from
DNR to address the accusations.
2:53:06 PM
REPRESENTATIVE MCCABE pointed out that all leases in West
Harrison Bay would be offshore, so only ice roads would exist.
He stated that this reminds him of the Point Thompson conflict a
decade ago. The result from this was the leases had to be
proved. He expressed the understanding that because Narwhal is
involved there is "a little bit of a conflict there." He
expressed the understanding that having a partner for
development would be better for both parties.
MR. LABONTE responded in the affirmative, as in any development
partnerships are beneficial. He clarified that Narwhal did not
come forward for the benefit of itself, and its only motivation
was to "force Shell to do the right thing."
MR. PARKER touched on the question of roads, saying these issues
could be avoided with a cooperative approach. He suggested that
if one entity develops ahead of another, the other entity could
"freeload" off the developer. He stated that this supports the
reason that there should be partnerships in West Harrison Bay.
2:56:21 PM
CHAIR MCKAY, concerning the issue of a big company verses a
small company, said there is no reason any qualified company
should not be able to develop oil on the North Slope, as all the
companies use the same contractors. He warned committee members
from falling into the trap thinking that to drill exploratory
wells on the North Slope, a company drilling for oil must be a
large integrated oil company. He noted that many major
discoveries have been made by small companies, so they are
needed.
2:58:27 PM
ADJOURNMENT
There being no further business before the committee, the House
Resources Standing Committee meeting was adjourned at [2:58]
p.m.