CSSSHB 364(O&G): "An Act prohibiting the issuance of state shallow natural gas leases in the vicinity of Kachemak Bay, modifying the authority to extend certain shallow natural gas leases, and precluding the director of the division of lands from reissuing or otherwise extending shallow natural gas leases within the Kachemak Bay area if there is a breach of a term or condition of the lease; and providing for an effective date."
00 CS FOR SPONSOR SUBSTITUTE FOR HOUSE BILL NO. 364(O&G) 01 "An Act prohibiting the issuance of state shallow natural gas leases in the vicinity of 02 Kachemak Bay, modifying the authority to extend certain shallow natural gas leases, 03 and precluding the director of the division of lands from reissuing or otherwise 04 extending shallow natural gas leases within the Kachemak Bay area if there is a breach 05 of a term or condition of the lease; and providing for an effective date." 06 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 07 * Section 1. AS 38.05.177(a) is amended to read: 08 (a) The provisions of this section 09 (1) apply to gas, whether methane associated with and derived from 10 coal deposits or otherwise, from a field if a part of the field is within 3,000 feet of the 11 surface; and 12 (2) do not apply to authorize lease of 13 (A) land
01 (i) that is subject to an oil and gas exploration license or 02 lease issued under AS 38.05.131 - 38.05.134; or 03 (ii) that is leased under AS 38.05.180; 04 (B) the land (i) that is proposed to be subject to an oil and gas 05 exploration license or lease issued under AS 38.05.131 - 38.05.134; or (ii) that 06 is described in and part of a proposed oil and gas leasing program prepared 07 under AS 38.05.180(b); however, the commissioner may waive the limitations 08 of this subparagraph; 09 (C) the land that is held under a coal lease entered into under 10 AS 38.05.150, unless the applicant for a shallow natural gas lease is also the 11 lessee under AS 38.05.150 of that land; [OR] 12 (D) the valid existing selections of the Alaska Mental Health 13 Trust Authority made for the purpose of reconstituting the mental health trust 14 established under the Alaska Mental Health Enabling Act, P.L. 84-830, 70 15 Stat. 709 (1956), that become subject to management under AS 38.05.801, or 16 of land that has been designated by law for or is subject to designation for 17 conveyance to the Alaska Mental Health Trust Authority; however, after 18 consultation with the Alaska Mental Health Trust Authority, the commissioner 19 may waive the limitations of this subparagraph; or 20 (E) land and water within the Kenai Peninsula Borough 21 east of Cook Inlet and south of the north boundary of Township 5 South, 22 Seward Meridian. 23 * Sec. 2. AS 38.05.177(d) is amended to read: 24 (d) A lease 25 (1) shall be automatically extended if and for so long thereafter as gas 26 is produced in paying quantities from the lease and the lessee continues to meet all 27 requirements of the lease; a [. A] lease issued under this section covering land on 28 which there is a well capable of producing gas in paying quantities does not expire 29 because the lessee fails to produce gas unless the lessee is allowed reasonable time to 30 place the well on a producing status; if [. IF] drilling has commenced on the 31 expiration date of the primary term of the lease and is continued with reasonable
01 diligence, including such operations as redrilling, sidetracking, or other means 02 necessary to reach the originally proposed bottom hole location, the lease is extended 03 for one year and for so long thereafter as gas is produced in paying quantities; a [. A] 04 gas lease issued under this section that is subject to termination by reason of cessation 05 of production does not terminate if, within 90 days after production ceases or a longer 06 period determined at the discretion of the director, reworking or drilling operations are 07 commenced on the land under lease and are thereafter conducted with reasonable 08 diligence during the period of nonproduction; 09 (2) issued under (c) of this section before January 1, 2004, may be 10 extended at the discretion of the director; a lease may be extended under this 11 paragraph [. IN ADDITION,] upon application by the lessee; [,] the director may 12 once extend the [A] lease [ISSUED UNDER (c) OF THIS SECTION] for a period of 13 not more than three years; in exercising discretion to extend a lease under this 14 paragraph, the director may not extend the lease unless the director considers 15 (A) the extent of the shallow natural gas exploration 16 activity already conducted on the lease and on adjacent areas; 17 (B) the probability that further shallow natural gas 18 exploration activity will occur on the lease and will lead to shallow natural 19 gas development and production; and 20 (C) whether extension of the lease's primary term will 21 accelerate the eventual production of shallow natural gas from the lease. 22 * Sec. 3. The uncodified law of the State of Alaska is amended by adding a new section to 23 read: 24 APPLICATION OF SECTION 1 TO LAND CURRENTLY LEASED IN THE 25 VICINITY OF KACHEMAK BAY FOR SHALLOW NATURAL GAS EXPLORATION 26 AND DEVELOPMENT. The provisions of AS 38.05.177(a)(2)(E), added by sec. 1 of this 27 Act, apply to prohibit the issuance or reissuance of a lease under AS 38.05.177 entered into 28 before the effective date of this Act if the lease terminates because of the failure to extend the 29 lease under AS 38.05.177(d), as modified by sec. 2 of this Act, or if the lease terminates by 30 the operation of AS 38.05.177(h). 31 * Sec. 4. This Act takes effect immediately under AS 01.10.070(c).