Legislature(2003 - 2004)

04/16/2004 01:14 PM RES

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
HB 531-CONVENTIONAL & NONCONVENTIONAL GAS LEASES                                                                              
                                                                                                                                
[Contains discussion of HB 395.]                                                                                                
                                                                                                                                
CO-CHAIR MASEK  announced that the  next order of  business would                                                               
be  HOUSE  BILL  NO.  531,   "An  Act  relating  to  natural  gas                                                               
exploration  and  development  and to  nonconventional  gas,  and                                                               
amending the section  under which shallow natural  gas leases may                                                               
be issued; and providing for an effective date."                                                                                
                                                                                                                                
CO-CHAIR  MASEK   reminded  the  committee  that   prior  to  the                                                               
committee's last meeting she appointed  a subcommittee on HB 531,                                                               
which  met  yesterday.   She  requested  that  the chair  of  the                                                               
subcommittee present the information it found to the committee.                                                                 
                                                                                                                                
Number 2600                                                                                                                     
                                                                                                                                
REPRESENTATIVE  GATTO  moved  to  adopt  CSHB  531,  Version  23-                                                               
LS1818\V, Chenoweth,  4/15/04,  as  the working document.   There                                                               
being no objection, Version V was before the committee.                                                                         
                                                                                                                                
CO-CHAIR  DAHLSTROM  explained  that basically  the  subcommittee                                                               
reviewed HB  395 and HB 531  and determined that HB  395 pertains                                                               
to the  present and  HB 531  to the future.   Some  agreement was                                                               
reached with regard  to the terminology, which  she requested the                                                               
drafter address.  The subcommittee  agreed that the two pieces of                                                               
legislation would be compatible.                                                                                                
                                                                                                                                
Number 2518                                                                                                                     
                                                                                                                                
JACK CHENOWETH, Attorney,  Legislative Legal Counsel, Legislative                                                               
Legal   and  Research   Services,  Legislative   Affairs  Agency,                                                               
explained that  the goal of  the subcommittee was to  ensure that                                                               
the  two pieces  of legislation  weren't in  conflict.   Very few                                                               
changes were  made to HB 531  and the changes are  encompassed in                                                               
Version  V.   The  subcommittee  desired  for the  provisions  to                                                               
covering the  waiver of the  local planning authority,  which was                                                               
added  last  year in  HB  69,  to  be  repealed.   Therefore,  AS                                                               
31.05.125, AS  38.05.177(n), and a particular  provision that was                                                               
amended when those  changes were added were repealed.   The other                                                               
change in  Version V  was to AS  46.03.100(f) where  the language                                                               
was changed  to conform to language  used in HB 524  in which the                                                               
legislature   addressed  the   exclusion  from   the  water   and                                                               
wastewater discharge permits.                                                                                                   
                                                                                                                                
REPRESENTATIVE GUTTENBERG  asked if  any consideration  was given                                                               
to melding HB 531 and HB 395 together.                                                                                          
                                                                                                                                
MR. CHENOWETH said that he wasn't given that instruction.                                                                       
                                                                                                                                
CO-CHAIR  DAHLSTROM confirmed  that there  was mention  of having                                                               
one  piece of  legislation  come  out of  the  subcommittee.   In                                                               
discussing the  pros and cons  of the aforementioned,  one member                                                               
felt that one piece of legislation  should be put forth while the                                                               
other two  members of the  subcommittee felt that [two  pieces of                                                               
legislation should be put forth].                                                                                               
                                                                                                                                
REPRESENTATIVE  GATTO said  that  the  subcommittee labored  over                                                               
this matter and  decided that it would be more  practical to keep                                                               
the two  pieces of legislation  separate.  He mentioned  that the                                                               
two pieces of legislation were clearly aligned.                                                                                 
                                                                                                                                
MR. CHENOWETH  explained that  HB 531  reflects an  approach that                                                               
eliminates  shallow natural  gas leasing  as a  separate form  of                                                               
leasing and  brings that leasing  under the conventional  oil and                                                               
gas leasing provisions  of AS 38.05.180.   The aforementioned was                                                               
done  per the  general direction  provided by  the Department  of                                                               
Natural  Resources (DNR).   Substantial  drafting is  required to                                                               
allow  DNR  to  act  on  leasing  on  a  gas  only  basis.    The                                                               
legislation  also  includes  DNR's   suggestion  to  replace  the                                                               
language "shallow natural gas" with  "nonconventional gas."  "All                                                               
of  the changes  made in  [HB] 531,  generally are  made to  move                                                               
leasing in that  direction so that ... we're back  to one general                                                               
form of leasing whether it's for  conventional oil and gas or ...                                                               
whether it's for ... nonconventional gas leasing," he explained.                                                                
                                                                                                                                
Number 2248                                                                                                                     
                                                                                                                                
CO-CHAIR DAHLSTROM moved to report CSHB 531, Version 23-                                                                        
LS1818\V, Chenoweth,  4/15/04, out  of committee  with individual                                                               
recommendations and the accompanying fiscal notes.                                                                              
                                                                                                                                
REPRESENTATIVE  KERTTULA  said  that   she  wanted  to  offer  an                                                               
amendment.                                                                                                                      
                                                                                                                                
CO-CHAIR MASEK said that Representative  Kerttula, as a member of                                                               
the  subcommittee,  had  a  "shot  at  it."    She  reminded  the                                                               
committee  that  there is  a  motion  to  report Version  V  from                                                               
committee pending.                                                                                                              
                                                                                                                                
REPRESENTATIVE KERTTULA objected to the motion.                                                                                 
                                                                                                                                
A roll  call vote was  taken.  Representatives  Gatto, Dahlstrom,                                                               
Masek, and  Lynn voted  in favor of  reporting CSHB  531, Version                                                               
23-LS1818\V,    Chenoweth,    4/15/04,    out    of    committee.                                                               
Representatives  Guttenberg   and  Kerttula  voted   against  it.                                                               
Therefore, CSHB 531(RES) was reported  out of the House Resources                                                               
Standing Committee by a vote of 4-2.                                                                                            
                                                                                                                                
HB 395-SHALLOW NATURAL GAS/ OIL AND GAS                                                                                       
                                                                                                                                
[Contains discussion of HB 531.]                                                                                                
                                                                                                                                
CO-CHAIR MASEK  announced that the  next order of  business would                                                               
be HOUSE  BILL NO. 395, "An  Act relating to shallow  natural gas                                                               
leasing and the regulation of shallow natural gas operations."                                                                  
                                                                                                                                
Number 2162                                                                                                                     
                                                                                                                                
CO-CHAIR DAHLSTROM moved to adopt  CSHB 395, Version 23-LS1314\G,                                                               
Chenoweth,  4/16/04, as  the working  document.   There being  no                                                               
objection, Version G was before the committee.                                                                                  
                                                                                                                                
CO-CHAIR  MASEK  reminded the  committee  that  HB 395  had  been                                                               
assigned to  a subcommittee.   She  requested that  Mr. Chenoweth                                                               
explain Version G.                                                                                                              
                                                                                                                                
JACK CHENOWETH, Attorney,  Legislative Legal Counsel, Legislative                                                               
Legal and  Research Services,  Legislative Affairs  Agency, noted                                                               
that  the committee  should have  a copy  of an  April 16,  2004,                                                               
memorandum he prepared.  Mr.  Chenoweth related that the goal was                                                               
to ensure that  HB 395 operate in some fashion  whether it passed                                                               
by itself or if HB 531 passed as  well.  Section 1 of [Version G]                                                               
amends  the requirements  regarding how  the Alaska  Oil and  Gas                                                               
Conservation  Commission  (AOGCC)   involves  itself  in  shallow                                                               
natural gas.   The language  in Section 1 is  the same as  in the                                                               
prior draft, no  change has been made to this  section.  The only                                                               
change  in Section  2  is to  repeal and  reenact  Section 1  and                                                               
change   all    references   to   "shallow   natural    gas"   to                                                               
"nonconventional gas."   Therefore, Section  1 will be  in effect                                                               
if HB  395 becomes law  while Section 2  will operate if  both HB
395 and HB 531 become law.   Section 3, he explained, is a public                                                               
forum provision  that's imposed upon  the AOGCC  covering shallow                                                               
natural gas  and will operate  if HB 395  alone becomes law.   If                                                               
both HB 395  and HB 531 become law, it's  necessary to change the                                                               
references  to "shallow  natural gas"  to "nonconventional  gas,"                                                               
which is accomplished in Section 4.                                                                                             
                                                                                                                                
MR. CHENOWETH  continued to review Version  G.  Section 5  is the                                                               
same definition of "shallow natural  gas" as in the prior version                                                               
with  the adjustment  in the  reduction  of depth  from 4,000  to                                                               
3,000 feet  in an attempt  to standardize  that.  However,  if HB
531 becomes law,  AS 31.05.170(14) is repealed,  which is located                                                               
on  page  17,  line  14,   and  replaced  by  the  definition  of                                                               
"nonconventional  gas."   Section  7 of  Version  G will  operate                                                               
under passage of either legislation  or passage of both.  Section                                                               
7  addresses  how mineral  interests  are  to  be dealt  with  in                                                               
situations when  the access to  the minerals isn't  covered under                                                               
the  Alaska Land  Act, the  reservation of  the mineral  interest                                                               
under  Section 6(i)  of the  Statehood Act.   The  aforementioned                                                               
would be  pre-Statehood Act lands  and some of the  split estates                                                               
that have occurred under the  Alaska Native Claims Settlement Act                                                               
(ANCSA)  when the  regional Native  corporations and  the village                                                               
corporations  own  separate  estates.     There  is  no  need  to                                                               
establish an alternative to Section 7 because it stands alone.                                                                  
                                                                                                                                
MR. CHENOWETH pointed  out that Section 8-11  are amendments that                                                               
all dealing  with existing shallow  natural gas provisions  in AS                                                               
38.05.177.    The  aforementioned   sections  maintain  the  same                                                               
language  as  in  the  prior   draft  and  utilize  some  of  the                                                               
safeguards  for water-well  tasting,  noise abatement,  setbacks,                                                               
and the  termination or abandonment  obligations at the  time the                                                               
lease  comes to  an  end.   Mr.  Chenoweth  related  that he  was                                                               
instructed  to  make  sure  that  those  provisions  survived  if                                                               
shallow  natural   gas  is   replaced  by   nonconventional  gas.                                                               
Therefore, in  Section 12  paragraphs (3) and  (4) [and  (5)] are                                                               
applicable  when  leases  are   issued  for  nonconventional  gas                                                               
leasing.   He  highlighted that  Section 11  is a  provision that                                                               
provides  additional  safeguards  to cover  shallow  natural  gas                                                               
leasing  and the  requirement  of  what's to  be  included in  an                                                               
agreement between  an owner and a  lessee or things that  have to                                                               
be dealt with in  the event a lessee seeks to  enter land under a                                                               
bond.  The aforementioned provisions  are carried over in Section                                                               
12(ff)(4)(E).                                                                                                                   
                                                                                                                                
MR. CHENOWETH turned to Section 13,  which is an amendment to the                                                               
notice  provision  in  the event  existing  shallow  natural  gas                                                               
leasing  goes forward  under nomination.   The  specifics of  the                                                               
notice provisions  are specified  in AS 38.05.945(b),  Section 14                                                               
of Version G.   Section 15 simply reverses Section  14 if shallow                                                               
natural gas is  eliminated.  The amendment to  reverse Section 13                                                               
is dealt  with in the  repeal of  AS 38.05.945(a)(7) on  page 17,                                                               
line 14.  Section 16  appears because the [subcommittee] insisted                                                               
that the language having to do  with the exclusion from the water                                                               
well and  the wastewater permitting requirements  mirror what was                                                               
done in HB 524.  Section 17 is  a conforming event.  In the event                                                               
that HB 531  becomes law, Sections 18 and 19  operate the same as                                                               
earlier  provisions  for  retaining the  definition  of  "shallow                                                               
natural   gas"   or  replacing   it   with   the  definition   of                                                               
"nonconventional gas."   Sections 20-21 repeal the  waiver of the                                                               
local approval authority that's given to the commissioner.                                                                      
                                                                                                                                
Number 1661                                                                                                                     
                                                                                                                                
MR.  CHENOWETH  highlighted  Section  23,  which  sets  out  some                                                               
repealers that  are contingent.   He reminded the  committee that                                                               
various sections  of Version G take  effect only if HB  531 takes                                                               
effect.   Section  24 is  an  effective date  for the  contingent                                                               
provisions and  ensures that those  provisions [take  effect] one                                                               
day later than HB 531.  Section  25 is the effective date for the                                                               
noncontingent provisions in Version G.                                                                                          
                                                                                                                                
REPRESENTATIVE  GUTTENBERG directed  attention to  page 12,  line                                                               
18,  paragraph (7),  and inquired  as to  the notice  requirement                                                               
that is required.                                                                                                               
                                                                                                                                
Number 1525                                                                                                                     
                                                                                                                                
MARK  MYERS,  Director, Division  of  Oil  & Gas,  Department  of                                                               
Natural   Resources  (DNR),   specified   that  [paragraph   (7)]                                                               
basically puts in place the same  [notice] standard as used for a                                                               
conventional lease  sale.   Therefore, there  is a  best interest                                                               
finding and  a notification of the  sale.  The call  for comments                                                               
would  also  be  incorporated  into  the  best  interest  finding                                                               
process.                                                                                                                        
                                                                                                                                
MR. CHENOWETH  directed attention to  page 5, lines  28-29, which                                                               
specifies that there  must be the opportunity  for public comment                                                               
for a  period of not  less than 60  days.  The  aforementioned is                                                               
"picked up" on  page 12, lines 18-19.  He  reminded the committee                                                               
that shallow natural  gas proceeds on the basis  of an individual                                                               
expressing  an  interest in  developing  a  particular parcel  of                                                               
land.  Based  on the identification of the  parcel, the potential                                                               
lessee makes  application.  Therefore,  the obligation of  DNR to                                                               
provide notice of  receipt of a lease application  is being added                                                               
[in Section 14].   The call for public comment  refers back to AS                                                               
.177(c).  Under  HB 531 there would be no  division of initiating                                                               
a lease  rather it  would all take  place under  the conventional                                                               
oil and  gas leasing methodology.   When the state  initiates the                                                               
decision to lease in a particular  area, it isn't on the basis of                                                               
an individual  making an application  for a lease rather  it's on                                                               
the basis of  the state specifying the area  which it's proposing                                                               
to put  up for lease.   In the latter situation  AS .177 wouldn't                                                               
need  to be  retained  and thus  is eliminated  if  HB 531  takes                                                               
effect.                                                                                                                         
                                                                                                                                
The committee took an at-ease from 2:34 p.m. to 2:37 p.m.                                                                       
                                                                                                                                
Number 1204                                                                                                                     
                                                                                                                                
CO-CHAIR  DAHLSTROM  moved  to   report  CSHB  395,  Version  23-                                                               
LS1314\G, Chenoweth,  4/16/04, out  of committee  with individual                                                               
recommendations and  the accompanying fiscal notes.   There being                                                               
no objection, CSHB 395(RES) was reported out of committee.                                                                      
                                                                                                                                
CO-CHAIR MASEK returned the gavel to Co-Chair Dahlstrom.                                                                        
                                                                                                                                

Document Name Date/Time Subjects