Legislature(2003 - 2004)
04/16/2004 01:14 PM RES
* first hearing in first committee of referral
= bill was previously heard/scheduled
= 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for the provisions to covering the waiver of the local planning authority, which was added last year in HB 69, to be repealed.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AS 31.05.125, AS 38.05.177(n), and a particular provision that was amended when those changes were added were repealed.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.