Legislature(1995 - 1996)

05/05/1995 08:44 AM O&G

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
 HB 334 - EXEMPT NAT. GAS FACILITY FROM BOND AND PLANS                       
                                                                               
 REPRESENTATIVE BILL WILLIAMS made a MOTION to ADOPT CSHB 334(O&G).            
                                                                               
 CHAIRMAN ROKEBERG asked if there were any objections.  Hearing                
 none, the MOTION PASSED.                                                      
                                                                               
 CHAIRMAN ROKEBERG noted for the record that Representative DAVIES             
 had joined the committee.                                                     
                                                                               
 PAUL CRAIG, PRESIDENT, Z-ENERGY INCORPORATED, testified via                   
 teleconference and expressed support for HB 334.  He said oil spill           
 contingency planning and financial responsibility for oil spills is           
 good public policy and should be upheld, specifically for oil                 
 production facilities, but not natural gas facilities.  He stated             
 the importance of exempting gas facilities from oil spill                     
 contingencies, bonding, and planning has already been recognized.             
 Unfortunately, the exemption goes downstream from the wellhead but            
 does not go upstream to the natural gas reservoir.  The result is             
 having a $1 million oil spill contingency bonding and planning                
 requirement in place for natural gas wells and exploratory wells in           
 the state.                                                                    
                                                                               
 MR. CRAIG stated the Alaska Oil and Gas Conservation Commission               
 (AOGCC) has both the technical expertise and data to give                     
 knowledgeable opinions about the probability of encountering oil in           
 a well being drilled.  The state's stratigraphic wells, which can             
 be drilled very easily, are already exempted from oil spill                   
 planning and oil spill contingency if they are not thought to be              
 drilled into a hydrocarbon bearing structure.                                 
                                                                               
 Number 155                                                                    
                                                                               
 MR. CRAIG said the current bonding requirement precludes                      
 development of important resources, such as coalbed methane, for              
 rural communities and villages.  He stated the requirement to put             
 up $1 million in assets to back up a bond basically makes drilling            
 these type of projects uneconomic.  That requirement also puts up             
 a barrier which stops independents from doing business in Alaska.             
 He pointed out there is an estimated 8,000 independents doing                 
 business in the Lower 48 and only a couple doing business in                  
 Alaska.  He explained providing an environment that is attractive             
 to Alaska owned, small independent oil and gas companies is good              
 for Alaska and good for the oil and gas industry.  He strongly                
 encouraged the legislature to pass HB 334 and recommended any                 
 provisions included in HB 334 would exclude the continuation of oil           
 spill contingency bonding.                                                    
                                                                               
 CHAIRMAN ROKEBERG asked Mr. Craig if he had a copy of the committee           
 substitute, version F and a copy of the memo from Mr. Johnston of             
 the AOGCC.                                                                    
                                                                               
 MR. CRAIG said he had a copy of the committee substitute but not              
 the memo from Mr. Johnston.                                                   
                                                                               
 CHAIRMAN ROKEBERG recalled that Mr. Craig had said bond costs make            
 drilling uneconomic.  He asked Mr. Craig to give the committees a             
 brief idea of how he justifies that statement.                                
                                                                               
 Number 220                                                                    
                                                                               
 MR. CRAIG responded bonding, unlike insurance, has different                  
 requirements.  If he has to get a $1 million bond, he must prove              
 that he can repay that $1 million.  Therefore, he would have to tie           
 up $1 million in liquid assets.  He stated if he goes to the                  
 Sacramento Valley, where environmental concerns are paramount, he             
 can drill a well and the bonding requirements would be                        
 approximately $25,000 to $50,000 total for the entire well.  He               
 said to tie up $1 million in assets or find investors willing to              
 tie up $1 million in assets to drill a coalbed methane well to                
 serve a rural village of 200 residents does not make economic                 
 sense.                                                                        
                                                                               
 MR. CRAIG noted it is a time when very little money is going to               
 exploratory drilling of hydrocarbon wells, and natural gas wells in           
 particular.  In talking with numerous independents from the Lower             
 48 regarding (indiscernible) gas project in Alaska and when they              
 hear the bonding requirements, they either hang up or laugh.  He              
 stated there is already a $100,000 bonding requirement, through the           
 AOGCC, for the purpose of making sure the site is plugged,                    
 abandoned, and cleaned up appropriately.  He said if a $1 million             
 oil spill contingency bond is added on top of the AOGCC bond, it is           
 simply not attractive and creates an environment where it                     
 economically does not make sense to develop reserves in Alaska when           
 it is much more inexpensive to develop reserves in the Lower 48 or            
 internationally.                                                              
                                                                               
 (Representative NICHOLIA joined the committee.)                               
                                                                               
 CHAIRMAN ROKEBERG wondered if Mr. Craig has a project or plan on              
 the near-term horizon that HB 334 would assist.                               
                                                                               
 MR. CRAIG stated Z-Energy would like to drill a natural gas well on           
 the north end of the Beluga Gas Field.  He said investors are                 
 interested in the project and are willing to participate in                   
 drilling costs.  He stressed one of the major barriers he is                  
 facing, in terms of getting firm commitments for participation, is            
 there are no investors who will consider tying up $1 million in               
 assets to participate in an exploratory natural gas well of this              
 nature.  He pointed out passage of HB 334 would allow Z-Energy to             
 proceed with that particular project during the current drilling              
 season.                                                                       
                                                                               
 Number 286                                                                    
                                                                               
 ERIK OPSTAD, PRESIDENT, E.A. OPSTAD & ASSOCIATES, testified via               
 teleconference and expressed support for passage of HB 334 to                 
 eliminate the bonding requirements for natural gas wells.  He                 
 stated from personal experience, the bonding requirements in the              
 state of Alaska impose an enormous hurdle for small operators such            
 as himself.  He stated small operators simply do not have the                 
 capital to put up, or will investors put up the dollars required to           
 allow drilling gas properties in the state.  As a consequence, the            
 small operators do all their work outside.                                    
                                                                               
 MR. OPSTAD said in 1994, his company and his partners spent                   
 approximately $3.5 million drilling wells in the state of                     
 California and they were successful.  He stated his company did not           
 spend that money in Alaska because they cannot justify it.  As a              
 consequence, the royalties being generated as a result of that                
 activity are benefiting the state of California and the jobs which            
 are part and parcel to that activity are also going to Californians           
 rather than Alaskans, even though much of the funding for that                
 activity came from Alaska.                                                    
                                                                               
 MR. OPSTAD stated he sees no benefit to the environment by having             
 the bonding requirement.  He said it has been his experience that             
 natural gas wells are benign in terms of their environmental                  
 impact.  He felt the AOGCC is fully capable of determining whether            
 or not a proposed drilling location and depth is likely to have any           
 significant probability of encountering oil.  He expressed support            
 for the continuation of the bonding requirements for oil wells but            
 sees no necessity for having bonding requirements for natural gas             
 wells.                                                                        
                                                                               
 Number 338                                                                    
                                                                               
 DAVID JOHNSTON, CHAIRMAN, AOGCC, testified via teleconference and             
 stated HB 334 would authorize the commission to classify certain              
 exploration activities as being likely to encounter oil and gas for           
 the purposes of oil discharge prevention and contingency plans                
 required by AS 46.  He said HB 334, as written, would also require            
 AOGCC to establish a bond amount for natural gas exploration                  
 facilities to ensure surface clean up in the event oil is                     
 encountered and spilled.  He pointed out the commission does not              
 object to classifying these types of exploration activities in this           
 manner and added the commission has worked with the Department of             
 Environmental Conservation (DEC) informally in the past on similar            
 activities.                                                                   
                                                                               
 MR. JOHNSTON said the AOGCC does recommend a few changes to HB 334            
 and had faxed a copy of the proposed changes the day before.                  
 However, in a meeting the previous night, additional changes were             
 recommended.  He stated he would review those changes, even though            
 the committee did not have them before them.                                  
                                                                               
 MR. JOHNSTON stated the first proposed change is in Section 1.  AS            
 31.05.030 is proposed to be amended by adding a new subsection to             
 read:  "(i) When requested by a person proposing to explore for gas           
 by means of drilling a well, the commission may evaluate the                  
 likelihood that the well will penetrate a formation containing oil.           
 If the commission concludes with reasonable certainty that the well           
 will not penetrate a formation containing oil, the commission shall           
 so certify."                                                                  
                                                                               
 CHAIRMAN ROKEBERG asked if the changes could be faxed to the                  
 committee.                                                                    
                                                                               
 MR. JOHNSTON said as soon as he gets back to the office he could              
 fax them.  He stated the changes are not in writing at this time.             
                                                                               
 REPRESENTATIVE ALAN AUSTERMAN asked if the changes were being                 
 proposed to CSHB 334(O&G) or the original bill.                               
                                                                               
 MR. JOHNSTON said the changes are proposed for the committee                  
 substitute, version C.                                                        
                                                                               
 CHAIRMAN ROKEBERG requested that before Mr. Johnston faxes the                
 changes to the committee to make sure they conform with version F.            
                                                                               
 MR. JOHNSTON stated in Section 3, AOGCC proposes AS 46.04.030 be              
 amended by adding a new subsection to read:  "(s) If a well                   
 certified by the Alaska Oil and Gas Conservation Commission under             
 AS 31.05.030(i) penetrates a formation containing oil, the operator           
 of the exploration facility (1) shall notify the department, the              
 Alaska Oil and Gas Conservation Commission, and all other                     
 appropriate state agencies; and".  He said the reason for the                 
 proposed change is the original bill said something about notifying           
 the oil spill response cooperative designated in the permit.  He              
 pointed out AOGCC does not issue permits which have the oil spill             
 response cooperative designated.                                              
                                                                               
 (Representative G. DAVIS joined the committee.)                               
                                                                               
 REPRESENTATIVE SCOTT OGAN stated he is having a hard time following           
 the changes Mr. Johnston is proposing verbally.  He requested Mr.             
 Johnston to fax something to the committee.                                   
                                                                               
 Number 456                                                                    
                                                                               
 MR. JOHNSTON stated AOGCC proposes changing Section 5 by adding a             
 new subsection to read:  "(n) If a well certified by the Alaska Oil           
 and Gas Conservation Commission under AS 31.05.030(i) penetrates a            
 formation containing oil, the operator of the exploration facility            
 shall cease all activity until the bonding requirements of (b) of             
 this section are met."                                                        
                                                                               
 MR. JOHNSTON said the problem AOGCC was having with the current               
 version is that Section 5 would have the commission establishing a            
 bond amount.  Currently, the commission does not have the expertise           
 in-house to evaluate the type of surface damage which might result            
 from oil being spilled.  Traditionally, that has been a function of           
 DEC.  He stated if the commission began judging what that damage              
 was, another program would need to be built and staff would need to           
 be added.  He thought it would be simpler if when oil is                      
 encountered during exploration activities for natural gas, the                
 operator cease operations and then comply with bonding requirements           
 previously established by AS 46.                                              
                                                                               
 REPRESENTATIVE AUSTERMAN asked how often operators encounter oil              
 when exploring for natural gas.                                               
                                                                               
 MR. JOHNSTON stated one in ten wells in the state find oil.                   
 Therefore, with only a 10 percent chance, the question can be asked           
 why is bonding required for any well.  He said what is desired is             
 some reasonable certainty that the well will not encounter oil.  In           
 those cases where there is sufficient well control in a nearby                
 facility, the commissioner can make that call.  If a very shallow             
 program is being considered, such as coalbed methane, again that              
 call could be made by the commissioner as it would not be likely to           
 encounter oil.  In another situation, in the Interior of the state            
 where a deep program is being proposed, that comfort level is not             
 there to say oil will not be encountered.                                     
                                                                               
 Number 504                                                                    
                                                                               
 REPRESENTATIVE DAVIES stated it sounds like AOGCC is comfortable in           
 having the expertise to make the fundamental geophysical and                  
 geological determination called for.  He wondered in those cases              
 where AOGCC is not comfortable, would AOGCC feel comfortable in not           
 certifying.                                                                   
                                                                               
 MR. JOHNSTON replied that is correct.  He said if AOGCC did not               
 have the data, they would not certify.                                        
                                                                               
 REPRESENTATIVE DAVIES asked Mr. Johnston if he was referring to all           
 drilling exploration when he mentioned one in ten wells encounter             
 oil or was he referring to those exploring for natural gas.                   
                                                                               
 MR. JOHNSTON stated he was talking about all exploration activities           
 in the state.                                                                 
                                                                               
 REPRESENTATIVE DAVIES asked if AOGCC certifies the operator is                
 drilling for gas and only expects to find gas, what is the history            
 of circumstances where they encounter oil.                                    
                                                                               
 MR. JOHNSTON said there is no history as those situations have                
 never been looked at.  He stated that data is not available.                  
                                                                               
 CHAIRMAN ROKEBERG recalled Mr. Craig had said his company is                  
 contemplating drilling near the Beluga Gas Field.  He asked how               
 much geophysical or other information does AOGCC need to have to              
 determine that a company will be going after gas as opposed to                
 other hydrocarbon formations.                                                 
                                                                               
 MR. JOHNSTON stated first the company would have to submit their              
 actual drilling proposal to AOGCC, so the commission would                    
 understand exactly where they were proposing the well and at what             
 depths they were planning to go to.  Then the commission would look           
 at surrounding wells in the vicinity.  He said for example in the             
 Beluga River area, there are a number of wells which have                     
 established very good well control.  In that particular case, the             
 commission could say with reasonable certainty that if a company is           
 going to dig at that particular depth, they would not likely                  
 encounter oil.  Whereas, if a company proposed a deeper well which            
 exceeded the depth of the surrounding wells in that region, the               
 commission may not have that comfort level and probably would                 
 withhold the certification.                                                   
                                                                               
 MR. JOHNSTON stated there is one additional proposed change to                
 amend Section 6 by adding a new subsection to read:  (c)  Except as           
 provided in AS 46.04.030(s) and 46.04.030(n), the provisions of AS            
 46.04.030(b) and AS 46.04.040(b) do not apply to the operation of             
 an exploration facility to the extent that it is used to explore              
 for gas by means of drilling a well certified by the Alaska Oil and           
 Gas Conservation Commission under AS 31.05.030(i).                            
                                                                               
 Number 572                                                                    
                                                                               
 DAVID LAPPI, PRESIDENT, LAPP RESOURCES INC., testified via                    
 teleconference and expressed support for HB 334.  He urged the                
 legislature, when they are looking at the business climate in the             
 state of Alaska, to continuously evaluate the cost of doing                   
 business for private industries.  He said the bonding and                     
 insurance, as it relates to oil and gas exploration and                       
 development, is a key factor in the cost of doing business.  He               
 noted he had submitted testimony in writing and hoped it had been             
 distributed.                                                                  
                                                                               
 MR. LAPPI stated he would like to see the three agencies requiring            
 bonding and/or insurance get together and roll the financial                  
 responsibility, bonding, and insurance requirement into one                   
 package.  Therefore, an operator coming to the state or an operator           
 in the state would not have to deal with three separate agencies to           
 get the bond.  He said that would be of great assistance in                   
 reducing administrative work and helping the operators along in the           
 business climate.                                                             
                                                                               
 MR. LAPPI commented on AOGCC's proposed change to require an                  
 operator to stop operations if he encounters oil and purchase the             
 appropriate bond.  He pointed out if the primary purpose is still             
 to produce gas and oil is not going to be produced, the well is               
 continuously cased with field casings cemented in place, the                  
 operator proceeds to produce gas and that oil is safely contained             
 by a casing program, he felt the state should go back after the               
 production of gas begins and review the requirement for any oil               
 spill contingency bond if the operator is not actually going to               
 produce the oil.  He urged the legislature to pass HB 334.                    
                                                                               
 Number 620                                                                    
                                                                               
 BRECK TOSTEVIN, ASSISTANT ATTORNEY GENERAL, ENVIRONMENTAL SECTION,            
 DEPARTMENT OF LAW, testified via teleconference and said he had               
 some legal drafting concerns regarding the coordination of AOGCC              
 and DEC's programs.  He stated Sections 2 and 4 create exemptions             
 in the oil spill contingency plan responsibility requirements.  He            
 felt those two sections were unnecessary because the way the                  
 legislation has been drafted in the past, there has been a unified            
 exemption contained in AS 46.04.050 which is contained in Section             
 6 of the bill.  He said as long as the exemptions in Section 6 are            
 dealt with, Sections 2 and 4 are not needed, and would avoid making           
 it complicated.                                                               
                                                                               
 MR. TOSTEVIN said in regard to Section 5, it is a policy call as to           
 whether or not financial responsibility is going to be required,              
 but language should be used that refers to financial responsibility           
 and not tie it to surety bonds, because that is only one method of            
 financial responsibility allowed under AS 46.04.040.  AS 46.04.040            
 allows self-insurance, insurance, surety, guarantee, letters of               
 credit or other forms approved by the department.                             
                                                                               
 Number 649                                                                    
                                                                               
 ROBERT MINTZ, ASSISTANT ATTORNEY GENERAL, OIL, GAS, AND MINING                
 SECTION, DEPARTMENT OF LAW, testified via teleconference and said             
 the changes suggested are legal.  He stated there are some                    
 differences in language between AOGCC's statute AS 31 and DEC's               
 statute AS 46.  For example, the conservation act uses the term gas           
 but not natural gas and AS 46.04 uses the term natural gas.  He               
 added that AS 46 provides that financial responsibility and                   
 contingency fund requirements are triggered by operation of a                 
 facility but facility is not a concept used by the commission.                
                                                                               
 MR. MINTZ noted that many of the changes Mr. Johnston suggested are           
 an attempt to avoid confusion because of the different languages              
 and different concepts used in the two acts.  He stated the work              
 draft uses the term natural gas exploration facility and the term             
 natural gas is not necessary.  He said the term exploration                   
 facility is sufficient.                                                       
                                                                               
 TAPE 95-65, SIDE B                                                            
 Number 000                                                                    
                                                                               
 REPRESENTATIVE OGAN clarified the gas versus natural gas language             
 is inclusive to include coalbed methane.                                      
                                                                               
 MR. MINTZ responded there is no problem with that.                            
                                                                               
 BETTY COX, BRADY AND COMPANY, testified via teleconference and                
 stated she will offer her experiences in working in the oil                   
 industry from a bonding and insurance standpoint.  She noted                  
 everyone keeps referring to a $1 million bond (indiscernible).  She           
 said she has worked with the AOGCC in regard to bonding and meeting           
 the financial responsibility requirements of AS 46.04.040.  She               
 agreed with Mr. Tostevin that a bond is not the only method of                
 meeting those requirements.                                                   
                                                                               
 MS. COX said for a smaller operator, a bond is not the ideal way to           
 approach the financial requirements because bonding companies look            
 at that type of obligation as a financial guarantee.  She explained           
 just because someone has $1 million in cash does not necessarily              
 mean the bonding company will approve and support that person with            
 a $1 million bond.  The bonding company looks at the long term and            
 whether a company will be around ten years in the future to pay if            
 there is a loss.                                                              
                                                                               
 Number 073                                                                    
                                                                               
 MS. COX stated insurance is readily available both with financial             
 responsibility and without financial responsibility.  She said she            
 is not sure whether or not a natural gas exploration facility comes           
 under financial responsibility requirements.  The costs on the                
 insurance varies from operation to operation and can be quite                 
 expensive.  However, she felt insurance would be cheaper than a               
 bond because on an independent operation, unless the company is               
 worth $50 million, not only will there be a bond premium, the                 
 company will have to post $1 million cash.                                    
                                                                               
 MS. COX said from an insurance basis, for a $1 million exploration            
 well, her company would go to its carriers and establish a                    
 commercial general liability policy that would provide third party            
 coverage for property damage and bodily injury and would also                 
 include pollution.  At the same time, they would purchase a side-             
 by-side pollution liability policy that could provide                         
 (indiscernible) both pollution coverage for the company's own                 
 spills and own property and that of the public.  She stated the               
 minimum premium would be approximately $50,000.  The premium would            
 be based on the entire operation.                                             
                                                                               
 Number 112                                                                    
                                                                               
 MS. COX stated she had been successful in writing a bond for an               
 independent.  She said in trying to write the bond, she contacted             
 AOGCC for information to determine how many people had posted bonds           
 and contacted every one of them in trying to sell her clients to              
 them.  She told committee members every single one turned her down.           
 She thought the only companies having bonds with the state                    
 currently are probably very large companies, such as the major oil            
 companies.  She noted when she placed the calls, she was told two             
 people had posted cash.                                                       
                                                                               
 MS. COX said writing the bond was a very long process.  She finally           
 found a bonding company willing to work with her on the bond.  She            
 stated the first year the bond was collateralized 50 percent.  It             
 was a $200,000 bond, so the bonding company kept $100,000.  She               
 noted they were successful at the anniversary premium date in                 
 getting the collateral released.                                              
                                                                               
 MS. COX told committee members the difference between bonding and             
 insurance is that with bonding, if there is a loss, it has to be              
 paid back and with insurance, the company does not have to pay it             
 back.                                                                         
                                                                               
 CHAIRMAN ROKEBERG recessed the House Special Committee on Oil and             
 Gas and passed the gavel to Co-Chairman Green to conduct business             
 with the House Resources Committee.                                           
                                                                               
 Number 440                                                                    
                                                                               
 CHAIRMAN ROKEBERG called the joint meeting of the House Special               
 Committee on Oil and Gas and the House Resources Committee back to            
 order.                                                                        
                                                                               
 GRANT DOYLE, CHIEF EXECUTIVE OFFICER, A.G. MIDLAND CO, INC.,                  
 testified via teleconference and expressed support for HB 334.  He            
 asked committee members to imagine a home-grown energy industry               
 that is (indiscernible) to protecting (indiscernible), not because            
 there are laws and regulations requiring the protection but rather            
 because of the workers, the owners, the investors, the mangers,               
 their children and their grandchildren.  He said they are all                 
 concerned that Alaska remain a beautiful, clean, and healthy place            
 to live.                                                                      
                                                                               
 MR. DOYLE asked committee members to imagine a home-grown energy              
 industry which not only pays royalties to the state and pays                  
 salaries to Alaskans but also spends and invests the profits in               
 Alaska, investing for the future.  He said imagine the state's                
 rural villages being heated and generating electrical power with              
 clean, economical, and abundant natural gas.  He stated imagine no            
 more leaking tanks and lines to contaminate water supplies and                
 endanger fish and game stocks; no more paying two to three dollars            
 for 180,000 BTUs of energy.                                                   
                                                                               
 MR. DOYLE stressed it is past time to allow Alaskans to directly              
 participate in Alaska's energy interest.  He stated gas does not              
 spill.  He asked why the state requires writing contingency plans             
 and purchasing spill bonds for natural gas.  He said it is time to            
 bring energy decisions home but first the state must prepare                  
 itself.  The Alaska energy industry, owned, operated, and managed             
 by Alaskans is long past due.  He urged the legislature to pass HB            
 334 and eliminate the requirement to write a spill contingency plan           
 in order to drill for natural gas which cannot spill.  He urged the           
 legislature to eliminate the requirement to post a $1 million oil             
 spill bond for natural gas.                                                   
                                                                               
 Number 490                                                                    
                                                                               
 ED COLLAZZI, ENVIRONMENTAL SPECIALIST, INDUSTRY OIL SPILL                     
 CONTINGENCY PLANNING, DEPARTMENT OF ENVIRONMENTAL CONSERVATION                
 (DEC), stated the department has no objection to modifying its                
 requirements for natural gas exploration facilities based on an               
 informed judgement and a certification from the AOGCC.  He said the           
 department has several concerns with HB 334 as written.  He noted             
 Section 1 refers to a reasonable probability and the department               
 believes the certification should reflect a reasonable certainty              
 since there is an argument there is reasonable probability that any           
 exploratory well will not hit a producing formation.  He added the            
 department would support Mr. Johnston's suggested language.                   
                                                                               
 MR. COLLAZZI agrees with Mr. Tostevin in regard to Sections 2 and             
 4.  Both of those sections are inconsistent with the department's             
 existing law because the department puts all of the specific                  
 exemptions to its requirements in AS 46.04.050 and there is no need           
 to add the change in either Section 2 or 4.  The definition of                
 exploration facility and the exemptions would specifically exempt             
 those facilities certified by AOGCC.                                          
                                                                               
 MR. COLLAZZI said Section 3 seems to describe limitations on the              
 exemption which is granted in Section 6.  He thought that might be            
 more appropriately placed in AS 46.04.050 because it describes                
 limitations and modifications to the exemption itself.  He stated             
 Section 5, as written, proposes to amend the DEC law and the                  
 department believes it needs some clarification.  He noted Section            
 5 refers to a surety bond and in looking at the law, the department           
 was wondering if that bond was intended to be an additional oil               
 spill clean up bond that would be attached to or in addition to the           
 bond AOGCC presently requires for plugging and abandonment.  If so,           
 he suggested it be put into AS 31, AOGCC's laws rather than                   
 attempting to modify AS 46, DEC's laws.                                       
                                                                               
 MR. COLLAZZI stated if the intent is to make this part of DEC's law           
 and amend Title 46, what is essentially being done is exempting               
 natural gas exploration facilities from DEC's present financial               
 responsibility requirements and then requiring financial                      
 responsibility again in an amount not specified.  He thought it was           
 a round-about way of doing that if that is the intent.  He said the           
 DEC does not have bonding specialists on staff but administers the            
 program (a one-person program) based on specific financial                    
 responsibility amounts the legislature sets.  Therefore, if the               
 intent of Section 5 is to require the DEC to require a lesser                 
 amount based on a determination from AOGCC, the department would              
 ask either that lesser amount be specified in the law or that AOGCC           
 be tasked with determining what that amount is.  He stressed if               
 this section is intended to amend Title 46 and not Title 31, he               
 suggests the language be replaced with surety bond by financial               
 responsibility because there are several different ways to                    
 demonstrate financial responsibility under the DEC's laws.                    
                                                                               
 MR. COLLAZZI commented in Section 6, there is a typo.  He stated              
 the reference should be to AS 46.04.030(b) not AS 46.04.030(a) as             
 (a) refers to oil terminal facilities and (b) refers to exploratory           
 facilities.  He added the comments he heard from Mr. Johnston                 
 sounded reasonable regarding Section 6 also.                                  
                                                                               
 Number 558                                                                    
                                                                               
 REPRESENTATIVE AUSTERMAN told Mr. Collazzi the committee would                
 appreciate receiving his comments in writing.                                 
                                                                               
 CHAIRMAN ROKEBERG stated because of the technical nature of HB 334            
 and the fact there is a significant amount of work needing to be              
 done on the bill, HB 334 will be held at this time.  He noted other           
 reasons for holding HB 334 include there is no fiscal note attached           
 to the bill, there needs to be several amendments made to                     
 incorporate the language Mr. Johnston suggested, and additional               
 input from the state and industry is needed.  He agreed there is a            
 need for immediate legislation in this area.  He assured everyone             
 who is interested in seeing HB 334 passed, that the House Special             
 Committee on Oil and Gas will give the bill serious consideration.            
                                                                               
 CHAIRMAN ROKEBERG said in talking with Speaker Phillips, it is the            
 opinion of the Speaker, Representative Green and himself that there           
 is not adequate time to consider HB 334 during this session.  He              
 stated if timing warrants and a window of opportunity does arise,             
 the committee may revisit the bill because the committee does                 
 recognize the importance of HB 334.                                           

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