HOUSE SPECIAL COMMITTEE ON OIL & GAS February 7, 1994 5:00 p.m. MEMBERS PRESENT Representative Joe Green, Chairman Representative Pete Kott, Vice Chairman Representative Harley Olberg Representative Gary Davis Representative Joe Sitton MEMBERS ABSENT Representative Jerry Sanders Representative Jerry Mackie OTHER LEGISLATORS PRESENT Senator Johnny Ellis Senator Jalmar M. Kerttula COMMITTEE CALENDAR HB 199: "An Act relating to the exploration and production of oil and gas and related hydrocarbons, to oil and gas exploration licenses, and to oil and gas leases in certain areas of the state; and providing for an effective date." ADOPTED HB 199 AND MOVED OUT OF COMMITTEE WITH INDIVIDUAL RECOMMENDATIONS. SJR 13: Opposing the ban on the export of Alaska North Slope crude oil; endorsing HR 543, legislation removing restraints on the export of Alaska North Slope oil; requesting the Congress of the United States to pass legislation to permit the export of Alaska North Slope crude oil; and requesting the President of the United States to present to the United States Congress a recommendation to lift the ban on the export of Alaska North Slope crude oil. ADOPTED SJR 13. *HB 401: "An act establishing a procedure for review of proposed projects under the Alaska coastal management program, and relating to petitions for compliance with and enforcement of district coastal management programs under that program and to the disposition of those petitions." ADOPTED HB 199 AND MOVED OUT OF COMMITTEE WITH INDIVIDUAL RECOMMENDATIONS. WITNESS REGISTER DR. PAUL RUSANOWSKI, Director Division of Governmental Coordination Office of the Governor PO Box 110030 Juneau, Alaska 99811 Phone: (907) 465-3562 POSITION STATEMENT: Testified in support of HB 401. STEVEN PORTER ARCO, Alaska P.O. Box 100360 Anchorage, Alaska 99510 Phone: (907) 265-6269 POSITION STATEMENT: Testified in support of HB 401. MIKE O'MEARA P.O.Box 1125 Homer, Alaska 99603 Phone: (907) 235-7767 POSITION STATEMENT: He questioned HB 401 BETH KERTTULA, Assistant Attorney General Department of Law Courthouse Building, 6th Floor P.O. Box 110300 Juneau, AK 99811-0300 Phone: (907) 465-6713 POSITION STATEMENT: Testified in support of HB 401 PREVIOUS ACTION BILL: HB 199 SHORT TITLE: OIL & GAS EXPLORATION LICENSES/LEASES SPONSOR(S): RULES BY REQUEST OF THE GOVERNOR JRN-DATE JRN-PG ACTION 03/05/93 549 (H) READ THE FIRST TIME/REFERRAL(S) 03/05/93 549 (H) OIL & GAS, RESOURCES, FINANCE 03/05/93 549 (H) -ZERO FISCAL NOTE (REV) 3/5/93 03/05/93 549 (H) GOVERNOR'S TRANSMITTAL LETTER 03/15/93 (H) O&G AT 05:00 PM CAPITOL 124 03/16/93 (H) O&G AT 08:00 AM CAPITOL 124 03/22/93 (H) O&G AT 05:00 PM CAPITOL 124 03/22/93 (H) MINUTE(O&G) 03/25/93 (H) O&G AT 05:00 PM CAPITOL 124 03/31/93 (H) O&G AT 05:00 PM CAPITOL 124 04/06/93 (H) MINUTE(O&G) 04/07/93 (H) O&G AT 05:00 PM CAPITOL 124 04/07/93 (H) MINUTE(O&G) 01/13/94 (H) O&G AT 05:00 PM CAPITOL 124 01/26/94 (H) O&G AT 05:00 PM CAPITOL 124 01/31/94 (H) O&G AT 05:00 PM CAPITOL 124 01/31/94 (H) MINUTE(O&G) 02/07/94 (H) O&G AT 05:00 PM CAPITOL 124 BILL: SJR 13 SHORT TITLE: EXPORT OF ALASKA OIL SPONSOR(S): SENATOR(S)ELLIS,Kelly,Rieger,Frank, Leman,Donley,Kerttula,Sharp,Pearce,Little,Duncan, Phillips,Miller; REPRESENTATIVE(S) Green,Grussendorf,Nordlund JRN-DATE JRN-PG ACTION 01/11/93 14 (S) READ THE FIRST TIME/REFERRAL(S) 01/11/93 15 (S) RESOURCES, JUDICIARY 03/24/93 933 (S) COSPONSOR(S): DONLEY 03/31/93 (S) RES AT 3:30 PM BUTROVICH RM 205 03/31/93 (S) MINUTE(RES) 03/31/93 (S) MINUTE(RES) 04/05/93 1100 (S) RES RPT CS 4DP NEW TITLE 04/05/93 1100 (S) ZERO FISCAL NOTE TO SB & CS (REV) 01/21/94 (S) JUD AT 01:30 PM BELTZ ROOM 211 01/21/94 (S) MINUTE(JUD) 01/26/94 2595 (S) JUD RPT CS 3DP NEW TITLE 01/26/94 2596 (S) ZERO FISCAL NOTE TO CS PUBLISHED (REV) 01/26/94 (S) RLS AT 11:30 AM FAHRENKAMP ROOM 203 01/26/94 (S) MINUTE(RLS) 01/28/94 2614 (S) RULES RPT CS 5CAL AND DP NEW TITLE 01/28/94 2614 (S) PREVIOUS ZERO FN APPLIES TO CS (REV) 01/28/94 2624 (S) READ THE SECOND TIME 01/28/94 2625 (S) RLS CS ADOPTED UNAN CONSENT 01/28/94 2625 (S) COSPONSOR(S): KERTTULA, SHARP, PEARCE 01/28/94 2625 (S) LITTLE,DUNCAN,PHILLIPS,MILLER 01/28/94 2625 (S) ADVANCED TO THIRD READING UNAN CONSENT 01/28/94 2625 (S) READ THE THIRD TIME CSSJR 13(RLS) 01/28/94 2626 (S) PASSED Y16 N- E4 01/28/94 2626 (S) Kelly NOTICE OF RECONSIDERATION 02/01/94 2642 (S) RECONSIDERATION NOT TAKEN UP 02/01/94 2643 (S) TRANSMITTED TO (H) 02/02/94 2212 (H) READ THE FIRST TIME/REFERRAL(S) 02/02/94 2213 (H) O&G, RESOURCES 02/02/94 2230 (H) CROSS SPONSOR(S): GREEN, GRUSSENDORF 02/02/94 2230 (H) CROSS SPONSOR(S): NORDLUND 02/07/94 (H) O&G AT 05:00 PM CAPITOL 124 BILL: HB 401 SHORT TITLE: COASTAL ZONE MANAGEMENT PROCEDURES SPONSOR(S): SPECIAL COMMITTEE ON OIL AND GAS JRN-DATE JRN-PG ACTION 01/26/94 2154 (H) READ THE FIRST TIME/REFERRAL(S) 01/26/94 2154 (H) O&G, RESOURCES 02/07/94 (H) O&G AT 05:00 PM CAPITOL 124 ACTION NARRATIVE TAPE 94-5, SIDE A Number 001 CHAIRMAN JOE GREEN called the meeting to order at 5:04 p.m. He noted members in attendance. He noted that Anchorage and Ketchikan were on-line via teleconference, later to be joined by Fairbanks and Homer. HB 199 - OIL & GAS EXPLORATION LICENSES/LEASES Number 015 REPRESENTATIVE HARLEY OLBERG moved to adopt the committee substitute for HB 199. Hearing no objections, it was so ordered. REPRESENTATIVE GARY DAVIS moved to adopt HB 199 with individual recommendations and with attached fiscal notes. Hearing no objection, it was so ordered. Number 062 SJR 13 - EXPORT OF ALASKAN OIL SENATOR JOHNNY ELLIS supported the resolution. He mentioned that Alaska has lost about $2.5 billion since the early 1970s, when the two federal acts were imposed on the state. He further stated the Department of Energy is reviewing the national pros and cons of lifting the bans and although an extension is expected regarding re-authorization of the Export Act, Congressional hearings will soon be reviewing the terms and details, which include Alaska's situation. Therefore any expeditious assistance provided to Senator Pearce in attending the Energy Council meeting next month will assist our Congressional Delegation in making Alaska's case in Congress. Number 083 REPRESENTATIVE JOE SITTON stated that he supports the resolution, but questioned TAPS's historical position on the export ban. SENATOR ELLIS responded to the question with some historical information and indicated there probably was a deal made between the Trans Atlantic Pipeline Service and the legislation of the 1970s. Energy Department projections have claimed that imported oil will be up to 60 percent in the relatively near future, which is why the California independent oil producers are our biggest allies in this fight; domestic oil production is at the bottom of the barrel. Although the timing seems to be right, this will be an uphill battle. Members of Congress will be debating this issue in the spring. SENATOR JALMAR KERTTULA indicated Alaska's need for inclusion and fair treatment in the nation's equity policies. Number 141 SENATOR ELLIS emphasized the importance of providing Congress with current information such as the Prudhoe Bay production curve. In order to make an informed decision, Congress needs to know of brand new discoveries in the oil field. Economists previously projected a two to seven year glut of crude remaining on the West Coast; additional information might indicate a greater benefit than is currently being recognized. REPRESENTATIVE PETE KOTT moved and asked unanimous consent to adopt SJR 13. Hearing no objection, the motion carried. Number 177 HB 401 - COASTAL ZONE MANAGEMENT PROCEDURES DR. PAUL RUSANOWSKI, DIRECTOR, DIVISION OF GOVERNMENTAL COORDINATION, OFFICE OF THE GOVERNOR, also ADMINISTRATOR, ALASKA COASTAL MANAGEMENT PROGRAM, spoke for the need for passage of this legislation. He said coastal zone management (CZM) has been in existence since 1977 and it has a fail-flaw that needs to be addressed. He stated the Coastal Policy Council (CPC) has a due process conflict with the legislation which supports the elevation process within the CZM program. He further stated that roughly 70 percent of Alaska's population resides within the coastal zone. Alaska's CZM program encompasses most of the coastline and, in some cases, extends hundreds of miles inland. The zone inward varies because each district within the coastal zone can set its boundaries based on various influences and conditions. Within each district, any project that is subject to permitting by more than one agency or is federally permitted, is then coordinated in its review by the Division of Governmental Coordination. The reviews are then subject to elevation if a dissenting party objects, and these can elevate to the director level within the resource agencies and ultimately to the commissioner level. In the present situation, an aggrieved party can also petition the CPC to address the same issues that were subject to elevation. A due process conflict is potentially created if the commissioners of the resource agencies also sit on the Coastal Policy Council. This happened recently with the Timber Creek Cabin elevation. He stated that we need a statutory and/or regulatory fix to resolve this issue. The present bill separates individual projects from a petition of process/policy concerns. A project would elevate through the review process but would not be petitioned to the CPC. In lieu of severing this petition process, another review step has been created within the consistency determination at the regional consistency level or the director level elevation. The CPC would review their petition and make a determination. If the comments were not fairly considered they would remand the determination for review. This resolves the existing due process problem. He pointed out this as an equitable solution and it enhances the consistency process. By moving from the APA process to an informal hearing process, there is an estimated $8,000 net savings to the program. This also provides an opportunity to ensure that public comment is considered in the process. At the present time, the public must rely on districts to champion their comments. DR. RUSANOWSKI called attention to the proposed amendment #2 which originated within governmental coordination, and recommended that on page five, line 10, the following language be added under item (B): " A party that is authorized under AS 46.40.096(e-1) or (g) of this section may file a petition showing..." This references both conditions and preserves all petition rights. Number 330 STEVEN PORTER, ARCO, ALASKA and MEMBER, COASTAL POLICY COUNCIL, stated the CPC process was not designed to accommodate the individual consistency determination although they understand the need and desire to set a balance between conservation and development issues. He said they came up with a consensus document that provides for a petition to the CPC regarding a reasonable time frame. The recommendation is that the reasonable time frame be no more than thirty days. The amendment as stated is on page four, line six of the document. Number 345 REPRESENTATIVE SITTON questioned whether thirty days was an adequate time frame for the council to address a possibly complex subject. Number 350 MR. PORTER responded that because of the purpose of the hearing, basically a single meeting of the CPC for a review indicated that thirty days would be ample time. He stated there has not been opposition to the thirty days. Number 356 DR. RUSANOWSKI expressed there was no opposition to the thirty-day period. He said there is an issue of adequate notification which argues for a reasonable period of time. From experience in working with elevations, which have a fifteen day review, thirty days seems more than adequate. Number 366 REPRESENTATIVE DAVIS questioned the logistics of the council's management of this thirty day process of review. Number 382 DR. RUSANOWSKI stated that a small number of projects, approximately one dozen move forward with some dispute; they are handled within a fifteen day meeting time line. He explained that in this case, we are broadening out to include the public and there is concern as to whether the same fifteen days would be adequate in all cases. Therefore, a longer period of time might be necessary to accommodate the public. He concluded there seems to be no problem with thirty days. Number 405 REPRESENTATIVE KOTT asked if the period for receipt of public comment was fifteen days. DR. RUSANOWSKI responded the public comment period is typically thirty days for a public notice project, however it can be as short as seventeen days for response. He said most of the projects have a thirty day public comment period associated with them. Number 418 MIKE O'MEARA (via Homer) commented that from his experience it is difficult for the public to adequately cope with a thirty day comment period as opposed to a sixty day period. He asked that consideration be given to the comments provided by the ombudsmen and other legislators in order to provide adequate comment time for the average citizen. He stated that he would like more information. Number 459 DR. RUSANOWSKI addressed the concern by recounting that a year and a half ago, the attorney general specified there was a due process problem in addressing the elevations and petitions. The CPC authorized governmental coordination to proceed in building consensus for a solution. The process included five participants from the CPC, Bob Walsh of Community & Regional Affairs, five different coastal districts, eight people from various resource agencies within the state, and five private industry representatives. In approximately a year's time, this working group met in attempts to craft a concept. The concept went back to the CPC in October of last year and was endorsed by the council to move forward with support for legislative action. Since October, members of this working group have met informally with the Division of Governmental Coordination to work on various drafts of the present legislation. In January, the efforts were completed. Number 501 MR. O'MEARA asked for an elaboration of the five coastal districts involved in this process. Number 506 DR. RUSANOWSKI stated that district participation was solicited throughout the process, but the five districts that chose to be consistent in their participation were Bristol Bay Coastal Resource Service Area, Kodiak Island Borough, Northwest Arctic Borough, North Slope Borough and the Aleutians West Coastal Resource Service Area. Number 529 BETH KERTTULA, ASSISTANT ATTORNEY GENERAL, DEPARTMENT OF LAW, stated this legislation is the result of a very long public process with a great deal of involvement from various sectors; this resolution is able to involve both the CPC while still allowing for an elevation process, thereby working quite well in coordinating permits in Alaska. She said that a copy of the opinion is available if anyone is interested. Number 568 CHAIRMAN GREEN questioned if the proposed changes would satisfy potentially future litigation. Number 588 MS. KERTTULA indicated that perhaps there may be future regulations that require more input from the coastal districts, but more to the point, she expressed her confidence in this as an open and broad-based process. She said this is a good step forward in allowing third parties to petition the CPC, and because there is a time limit involved, a notice will be required to go out. She further stated this is one more step for public notice and notice requirements that agencies will have to meet. Coastal Management has been moving in this direction all along and this takes it a step further. Number 649 CHAIRMAN GREEN questioned if DR. RUSANOWSKI's testimony in favor of the bill indicated the Administration's support of the bill. Number 656 DR. RUSANOWSKI said the Office of the Governor concurs with this legislation. TAPE 94-5, SIDE B Number 660 A motion was made to adopt amendment #1. Hearing no objection, the motion carried. Number 668 REPRESENTATIVE KOTT moved to adopt amendment #2, either (e) or (g). This amendment was submitted by Governmental Coordination on February 2, 1994. Hearing no objection, the motion carried. Number 678 CHAIRMAN GREEN entertained a motion to move HB 401 out of committee with individual recommendations as amended. Hearing no objections, it was so ordered. ADJOURNMENT CHAIRMAN GREEN adjourned the meeting at 5:52 p.m.