HOUSE SPECIAL COMMITTEE ON OIL AND GAS March 12, 1996 5:15 p.m. MEMBERS PRESENT Representative Norman Rokeberg, Chair Representative Scott Ogan, Vice Chair Representative Gary Davis Representative Bill Williams Representative Tom Brice Representative David Finkelstein MEMBERS ABSENT Representative Bettye Davis COMMITTEE CALENDAR HOUSE BILL NO. 388 "An Act revising laws relating to oil and gas leasing to authorize a program of areawide leasing." - MOVED CSHB 388 (O&G) OUT OF COMMITTEE PREVIOUS ACTION BILL: HB 388 SHORT TITLE: AREAWIDE OIL & GAS LEASING SPONSOR(S): REPRESENTATIVE(S) ROKEBERG,B.Davis JRN-DATE JRN-PG ACTION 01/05/96 2368 (H) PREFILE RELEASED 01/08/96 2368 (H) READ THE FIRST TIME - REFERRAL(S) 01/08/96 2368 (H) O&G, RESOURCES, FINANCE 02/06/96 (H) O&G AT 10:00 AM CAPITOL 124 02/06/96 (H) MINUTE(O&G) 03/07/96 (H) O&G AT 10:00 AM CAPITOL 124 03/07/96 (H) MINUTE(O&G) 03/09/96 (H) O&G AT 1:00 PM CAPITOL 124 03/12/96 (H) O&G AT 5:00 PM CAPITOL 124 WITNESS REGISTER NORMA CALVERT, Lobbyist Marathon Oil Company P.O. Box 3128 Houston, Texas 77253 Telephone: (713) 296-3915 POSITION STATEMENT: Supported CSHB 388 KENNETH A. BOYD, Director Division of Oil and Gas Department of Natural Resources 3601 C Street, Suite 1380 Anchorage, Alaska 99503-5948 Telephone: (907) 762-2547 PAT FOLEY, Chairman Lands Exploration Operations Committee Alaska Oil and Gas Association (AOGA) P.O. Box 100360 Anchorage, Alaska 99576 Telephone: (907) 265-6283 POSITION STATEMENT: Testified on CSHB 388 AL HASTINGS, Director of Oil and Gas Cook Inlet Region, Incorporated 2525 C Street, Suite 500 Anchorage, Alaska 99503 Telephone: (907) 263-5163 POSITION STATEMENT: Testified on CSHB 388 KEVIN TABLER, Land Manager Union Oil Company P.O. Box 196247 Anchorage, Alaska 99516 Telephone: (907) 263-7600 POSITION STATEMENT: Testified on CSHB 388 GEORGE FINDLING, Manager Government and Public Relations ARCO Alaska, Incorporated P.O. Box 100360 Anchorage, Alaska 99501 Telephone: (907) 263-4174 POSITION STATEMENT: Testified on CSHB 388 ACTION NARRATIVE TAPE 96-13, SIDE A Number 000 The House Oil & Gas Special Committee was called to order by Chairman Norman Rokeberg at 5:15 p.m. Members present at the call to order were Representatives Rokeberg, Ogan, G. Davis, and Brice. This meeting was teleconferenced to Anchorage. A quorum was present. HB 388 - AREAWIDE OIL & GAS LEASING CHAIRMAN NORMAN ROKEBERG announced that the agenda was HB 388, an Act revising laws relating to oil and gas leasing to authorize a program of areawide leasing, and said there was a proposed committee substitute. Number 0057 REPRESENTATIVE SCOTT OGAN made a motion to adopt CSHB 388, version 9-LS1341\G. Hearing no objection, CSHB 388 was before the House Special Committee on Oil and Gas. Number 0198 NORMA CALVERT, Lobbyist, Marathon Oil Company, said that Brad Penn (ph.) worked with the sponsor of HB 388 and submitted a letter from him supporting HB 388. She said Marathon supports HB 388. Number 0345 CHAIRMAN ROKEBERG said he was the sponsor of HB 388 and that he has been working with the Alaska Oil and Gas Association (AOGA) and with the Administration to reach a consensus version of HB 388. He said CSHB 388 is that consensus bill with a few modifications. Representative Williams joined the committee meeting at 5:20 p.m. Number 0462 KENNETH A. BOYD, Director, Division of Oil and Gas, Department of Natural Resources, testified via teleconference from Anchorage. He said he was pleased that the committee removed the parallel lease sale process. He said there are some things in CSHB 388 that will need to be worked out. He wanted to thoroughly evaluate CSHB 388 because many sections refer back and forth to each other. Number 0571 CHAIRMAN ROKEBERG said it is the committee's intention to move CSHB 388 today and to make additional changes before it arrived at the House Standing Committee on Resources. Number 0738 PAT FOLEY, Chairman, Lands Exploration Operations Committee Alaska Oil and Gas Association (AOGA), testified via teleconference from Anchorage. He said a letter was sent to the committee suggesting modifications to CSHB 388. He said even though those modifications refer to CSHB 388 version F they still apply to the version marked G. Number 0790 MR. FOLEY said the title should be changed to reflect in some way, that it is an areawide leasing bill. He proposed on page one, line eight, insert "to provide for annual areawide lease sale." Another change was on page three, Section 1, line 24, after AS 38.05.180(b) insert, "except for a sale under 6(g) of this subsection". His final comment, on page six, Section 2, line 21, delete the word, "sales", as the language is awkward. He said you are offering the land for lease, not offering it for lease sale. Number 0906 MR. FOLEY asked for the opportunity to provide additional written comments upon a review of version G of CSHB 388. He said AOGA's position is to establish a regular and predictable oil and gas leasing program allowing timely access to the most prospective areas of the state. He said areawide leasing would provide efficiencies and reduce costs associated with preparations for best interest findings. He said AOGA advocates a program of annual areawide leasing in all areas of the state where competitive leases are regularly offered. He said, it is believed, this lease program could be implemented under existing authority. Number 0993 MR. FOLEY said AOGA members have offered many ideas regarding areawide leasing. He added that legislative language was also offered for consideration as AOGA members considered the various areawide leasing proposals and became concerned that earlier concepts created a new and arguably different lease sale program, ultimately requiring regulation. He said these regulations pose a threat to both the industry and the state. He said the earlier areawide leasing proposals also created a cumbersome review process that has been streamlined in the CSHB 388 version before the committee today. Number 1124 AL HASTINGS, Director of Oil and Gas, Cook Inlet Region, testified via teleconference from Anchorage. He said he wanted to echo the testimony given by Mr. Boyd and Mr. Foley. He supported an accelerated and smooth leasing process. He mentioned Mr. Foley's concerns and said he hoped they would be resolved in the committee process. He chose not to go into details, but said he would submit a letter to the sponsor. Number 1124 KEVIN TABLER, Land Manager, Union Oil Company, testified via teleconference from Anchorage. He said he just received the new CSHB 388, and generally speaking the bill looks good and supported the testimony of all previous witnesses. He said CSHB 388 is a consensus of industry, Administration and the work of the committee. He said CSHB 388 will streamline the areawide leasing process as well as the best interest finding process and that he would provide written information regarding his comments. Number 1188 GEORGE FINDLING, Manager, Government and Public Relations, ARCO Alaska, Incorporated, testified via teleconference from Anchorage. He said he also supports the previous testimony and will provide written comments for the committee. He said there are three areas that ARCO is concerned about in addition to the specific comments that were made by AOGA. He said on page five, lines 7 to 9, and also on page six, lines 23 and 24, there is some inconsistency in that wording. He questioned to what extent the wording was required. Number 1247 MR. FINDLING said on page six, lines 27 to 30, there doesn't appear to be a resolution provided and infers that if new information arises an annual offering cannot be made, independent of the outcome of a best interest finding. He believed that this was an unintended consequence. He said if new information arises, a supplemental best interest finding could be prepared, allowing the annual sale to go forward. Number 1290 CHAIRMAN ROKEBERG said there is an intention on page six, line 28, to insert the word, "substantial", before the word, "new". He asked if that would help for clarification purposes. Number 1304 MR. FINDLING said an insertion would commiserate with the rest of CSHB 388. He said CSHB 388 does not state what a resolution is or how new information is resolved, allowing the sale to continue. CHAIRMAN ROKEBERG made a motion to adopt proposed Amendment 1, on page six, line 21, to delete the word, "sales". Number 1345 REPRESENTATIVE TOM BRICE questioned the word, "sale" on page four, line 29. A discussion ensued regarding the difference between a sale and a lease. Number 1451 MR. BOYD said the state offers acreage for lease if you are having an oil and gas lease sale. He said he would leave the word "sale" in on page four, line 29, but would omit the word "sales" on page six, line 21. Number 1470 CHAIRMAN ROKEBERG repeated Amendment 1 and included page six, line 28, insert the word, "substantial", so that it reads, "that substantial new information". He said the word, "substantial" makes the language consistent. He said the intent of CSHB 388 is that any new information brought up and supplemental to the best interest finding would have to be substantial, non-meritorious information. Hearing no objection, Amendment 1 was so adopted to CSHB 388 by the House Special Committee on Oil and Gas. CHAIRMAN ROKEBERG noted for the record that Representative Finkelstein joined the committee meeting at 5:30 p.m. Number 1610 REPRESENTATIVE DAVID FINKELSTEIN asked Mr. Boyd what the Administration's position was regarding CSHB 388 and if they have any amendments to the bill. Number 1627 MR. BOYD said his testimony was general and stated that he was pleased that the parallel lease sale process was removed and that CSHB 388 now works under existing law. He said everyone received the new version of CSHB 388 an hour ago and said the details must be analyzed. He said it is the Administration's position to look at CSHB 388 and submit specific comments that would alleviate any conflict. He said Title 38 has a lot of pieces and it would be unfortunate to try to resolve all of those conflicts here. He said the Administration will probably request further changes to CSHB 388, but that they will not propose any amendments today. Number 1685 REPRESENTATIVE FINKELSTEIN asked about the Administration's position of limiting the areawide leasing to north of the Umiat baseline. MR. BOYD said it was never the Administration's position to limit areawide leasing to one specific area of the state. He said, now that "we don't have a parallel universe here, we are amending existing law essentially." He said it is a process that can work anywhere and said as the schedule works, sales are starting on the North Slope and north of the Umiat baseline. He said the process created in CSHB 388 will be able to be used anywhere and the easiest place to start is on the North Slope. Number 1740 REPRESENTATIVE OGAN made a motion to move CSHB 388 (O&G), version G, as amended with attached fiscal notes and individual recommendations. Hearing no objections CSHB 388 (O&G) was so moved from the House Special Committee on Oil and Gas. ADJOURNMENT There being no further business to come before the House Oil & Gas Special Committee, Chairman Rokeberg adjourned the meeting at 5:46 p.m.