Legislature(2015 - 2016)BARNES 124

03/18/2015 01:00 PM House RESOURCES

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Audio Topic
01:02:08 PM Start
01:02:54 PM SJR13
01:31:38 PM Presentation(s): Middle Earth by Calista Corporation and Donlin Gold
02:33:33 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Moved CSSJR 13(RES) Out of Committee
-- Invited/Public Testimony --
+ Middle Earth Presentation by Calista Corporation TELECONFERENCED
& Donlin Gold
-- Testimony <Invitation Only> --
<Bill Hearing Canceled>
-- Invited/Public Testimony --
+ Bills Previously Heard/Scheduled TELECONFERENCED
          SJR 13-OCS OIL & GAS EXPLORATION/DEVELOPMENT                                                                      
1:02:54 PM                                                                                                                    
CO-CHAIR NAGEAK announced that the  first order of business is CS                                                               
FOR SENATE JOINT  RESOLUTION NO. 13(RES), Supporting  oil and gas                                                               
exploration  and  development  on  the  outer  continental  shelf                                                               
offshore of the  state; opposing attempts to  prohibit future oil                                                               
and  gas  development  in  the Beaufort  and  the  Chukchi  Seas,                                                               
including the Hanna  Shoal area; and requesting  that the federal                                                               
Administration cease and desist  from restrictions that adversely                                                               
affect active or future leases  in high petroleum potential areas                                                               
in  the Beaufort  and  Chukchi Seas,  including  the Hanna  Shoal                                                               
1:03:25 PM                                                                                                                    
CHAD  HUTCHISON,  Staff,  Senator   John  Coghill,  Alaska  State                                                               
Legislature, introduced  CSSJR 13(RES) on behalf  of the sponsor,                                                               
Senator Coghill.   He explained  the resolution is  in opposition                                                               
to  recent efforts  by the  federal executive  branch to  further                                                               
restrict areas in the Chukchi and  Beaufort seas as it relates to                                                               
oil  and gas  development.   The  specific concern  is the  Hanna                                                               
Shoal  area in  the  Chukchi  Sea.   There  are  some active  and                                                               
adjacent  leases  where it  is  felt  there  will be  a  negative                                                               
effect.   There  is  concern  about the  ability  to renew  those                                                               
active  leases that  are currently  in the  area and  there is  a                                                               
concern  that  some  of  the  mitigation  costs  associated  with                                                               
designating the Hanna Shoal as  an environmentally sensitive area                                                               
will further prohibit oil and gas development in that area.                                                                     
MR. HUTCHISON began a PowerPoint  presentation consisting of maps                                                               
of the area being talked about.   Drawing attention to slide 2, a                                                               
map of  the Beaufort Sea provided  by the Bureau of  Ocean Energy                                                               
Management  (BOEM), he  said the  different colored  boxes denote                                                               
the activity.   Green indicates the historic leases  that the oil                                                               
companies have had  in the past and blue indicates  areas of high                                                               
petroleum potential.   Red indicates federally  restricted areas,                                                               
of  which one  is  a subsistence  area by  Barrow  and another  a                                                               
subsistence area  by Kaktovik.  These  were previously restricted                                                               
by the Bush  Administration and every five  years the restriction                                                               
goes  forward; the  Obama Administration  has continued  the same                                                               
restriction from 2012  to 2017.  Yellow  indicates active leases,                                                               
none of  which are in the  restricted areas.  Moving  to slide 3,                                                               
he  noted  that the  leases  shown  in  green around  Barrow  and                                                               
Kaktovik  are the  historic  leases and  said  the oil  companies                                                               
generally don't  have an ongoing  interest in those.   The active                                                               
leases shown  in yellow are the  ones about which the  sponsor is                                                               
most concerned.  He said slides  4 and 5 provide a less cluttered                                                               
view  of  what  the  proposed  area looks  like  that  the  Obama                                                               
Administration is moving forward with.                                                                                          
1:06:16 PM                                                                                                                    
MR.  HUTCHISON brought  attention to  slide 6,  stating the  real                                                               
concern is  in the Chukchi  Sea, which  has a lot  more activity.                                                               
He said  the blue color  indicates the areas with  high petroleum                                                               
potential.  There are more active  leases as can be seen by there                                                               
being a  lot more areas  depicted in yellow.   The red  line near                                                               
the coast on slide 6 is the  25-mile buffer zone.  The only thing                                                               
existing in  that 25-mile  area are historic  leases that  are no                                                               
longer of  interest to  the producers.   The  pink and  red areas                                                               
near Barrow  indicate the  subsistence area  for Barrow  in which                                                               
there  are  no  active  leases,   so  there  is  not  really  any                                                               
resistance to  that portion of it.   The key area  in the middle,                                                               
the Hanna Shoal area, is indicated  by the yellow circle.  It has                                                               
been studied the previous five  years.  Within that yellow circle                                                               
are historic and active leases as  well as a large area with high                                                               
petroleum potential.   Turning to slide 8 he  explained that this                                                               
area is important because Shell  has three active leases that are                                                               
adjacent  to the  Hanna  Shoal  area.   Repsol  has seven  leases                                                               
actually in the  Hanna Shoal area itself and  another five leases                                                               
in the adjacent area that  deal with similar petroleum prospects.                                                               
The  concern  is that  designating  an  area as  [environmentally                                                               
sensitive]  will  decrease  the  ability to  renew  those  leases                                                               
beyond 2022  and will  increase the mitigation  costs to  the oil                                                               
producers.     Mr.   Hutchison   said  slide   9  shows   further                                                               
clarification as  to what some  of the proposed area  looks like.                                                               
Slide 10 indicates the withdrawn  areas [located within the draft                                                               
proposed   program  area]:     the   25-mile  buffer   area,  the                                                               
subsistence area around  Barrow, and the Hanna  Shoal area, which                                                               
is the new component to all this.                                                                                               
1:09:30 PM                                                                                                                    
CO-CHAIR NAGEAK  said his statement is,  "Here we go again."   He                                                               
     It really  upsets me that  people who live  there, most                                                                    
     of them ...  have been working on this  issue for years                                                                    
     and years and years.   All along the coast working with                                                                    
     the whalers,  working with  the industry,  working with                                                                    
     everybody and  going through the  issue of  reliance on                                                                    
     our resources  offshore and  onshore.   And here  we go                                                                    
     again.   We  have  all this  potential,  but it  really                                                                    
     comes to  us as Native  people and all people  who live                                                                    
     along the  coast where we rely  on renewable resources.                                                                    
     We  also rely  on  nonrenewable resources  for our  tax                                                                    
     base and for our livelihoods.   A lot of people work in                                                                    
     that area....  Without the  oil industry we wouldn't be                                                                    
     who we are today.                                                                                                          
CO-CHAIR NAGEAK  noted that  just a few  weeks ago  the President                                                               
began considering placing  the 1002 Area [in  the Arctic National                                                               
Wildlife Refuge] near where he was  born into a Wilderness.  When                                                               
oil was  discovered it was  found out  that the United  States of                                                               
America had to  do land claims.  While doing  the land claims the                                                               
federal  government  also  created  [Native]  corporations.    He                                                               
     What are corporations?  Well,  they're an instrument to                                                                    
     make  money.    And  why did  the  government  give  us                                                                    
     corporations when  we wanted  tribes?  Well,  they gave                                                                    
     us corporations and they ...  locked up the areas where                                                                    
     our resources  are or our  resources have been.   Since                                                                    
     time  immemorial our  people  used those  resources....                                                                    
     So,  here we  go again.   What  are we  to do  when the                                                                    
     government  of the  United  States  in infinite  wisdom                                                                    
     gave us  an instrument to  say ... "go  enrich yourself                                                                    
     but in the meantime we'll  lock up every piece of land,                                                                    
     every piece of  water ... and you're not  going to have                                                                    
     anything."  That  is exactly what it is right  now.  We                                                                    
     didn't ask  for corporations.   But  then for  the past                                                                    
     several  years this  has been  happening after  working                                                                    
     diligently for  years and years and  years working with                                                                    
     the  industry,  with  the government,  with  everybody.                                                                    
     And so what are we to  do?  There is one federal agency                                                                    
     who's locking  up everything  ... for  those of  us who                                                                    
     depend  on the  resource and  ... another  agency who's                                                                    
     willing to work  with us and finding ways  to make sure                                                                    
     that everything  is protected in  that area  where they                                                                    
     are going to  open up or they have opened  up areas for                                                                    
     oil and gas  exploration.  So we have  two agencies ...                                                                    
     that  have given  us  heartache and  hope  at the  same                                                                    
     time.  So  what are we to  do?  What [are]  a whole lot                                                                    
     of my families  going to do in Kaktovik  when they have                                                                    
     a resource  right underneath their feet  but they can't                                                                    
     use it?                                                                                                                    
1:14:39 PM                                                                                                                    
REPRESENTATIVE  JOSEPHSON  understood  that in  the  announcement                                                               
referred  to by  the  resolution, the  President also  authorized                                                               
some  exploratory development  in a  very preliminary  stage from                                                               
Virginia down to the South Carolina coast.   He said as far as he                                                               
knows  President Obama  is the  first to  allow that.   He  asked                                                               
whether the sponsor thinks that  these restrictions in the Arctic                                                               
are due to Shell's performance in 2012.                                                                                         
MR.  HUTCHISON replied  that his  personal opinion  is that  from                                                               
[the President's]  perspective it  might be  related to  that, as                                                               
well as related  to an overreaching philosophical  decision as it                                                               
relates to climate change and environmentally sensitive areas.                                                                  
1:16:04 PM                                                                                                                    
CO-CHAIR NAGEAK opened public testimony.                                                                                        
1:16:23 PM                                                                                                                    
KARA   MORIARITY,  President   and  CEO,   Alaska  Oil   and  Gas                                                               
Association (AOGA),  Anchorage, Alaska,  spoke in support  of SJR
13.   She said the Alaska  Oil and Gas Association  (AOGA) is the                                                               
professional trade  association for the  oil and gas  industry in                                                               
Alaska and its  members represent the majority  of the producers,                                                               
explorers, refiners, marketing,  and transportation activities in                                                               
the state.  The association's  members have been operating in the                                                               
Arctic for  more than 40 years.   Oil and gas  development is the                                                               
backbone  of Alaska's  economy,  and as  the largest  undeveloped                                                               
energy  basin in  the  U.S. the  Arctic  Outer Continental  Shelf                                                               
(OCS)  is the  next generation  of energy  security for  the U.S.                                                               
The Arctic  OCS holds enormous  oil and gas  resources, estimated                                                               
by  the  Department  of  Interior  at  approximately  27  billion                                                               
barrels of  oil and 132 trillion  cubic feet of natural  gas.  In                                                               
comparison, the  Trans-Alaska Pipeline System (TAPS)  has carried                                                               
more than  17 billion barrels  in just over  30 years.   So, TAPS                                                               
has  played a  critical  link in  the  nation's energy  security,                                                               
transporting crude  oil from Alaska's  North Slope to  West Coast                                                               
markets.   The OCS development  in the Beaufort and  Chukchi seas                                                               
could feed  into TAPS  and maintain its  viability for  many more                                                               
years to come.   Oil and gas development in  the Arctic OCS means                                                               
more jobs for Alaskans.   Development of the Chukchi and Beaufort                                                               
seas is predicted  to produce an annual average  of 35,000 direct                                                               
and  indirect  jobs representing  a  total  payroll of  over  $70                                                               
MS. MORIARITY noted  that since 1971, 84 wells  have been drilled                                                               
in the  Arctic OCS,  all without incident.   Industry  has worked                                                               
with   communities  to   incorporate  traditional   knowledge  in                                                               
decision  making, establish  Conflict  Avoidance Agreements,  and                                                               
impose  seasonal  drilling  limitations.    New  regulations  and                                                               
further  research  has  further   ensured  that  development  and                                                               
environmental  protection  can  co-exist.     Three  AOGA  member                                                               
companies  hold leases  within the  withdrawn  areas or  directly                                                               
adjacent to  it.   While the  federal withdrawal  language states                                                               
that  "nothing  in  this  withdrawal  affects  the  rights  under                                                               
existing leases  in the  withdrawn areas,"  there are  still many                                                               
unknowns for the  operators, such as the ability  to renew active                                                               
leases or how the transport  or building of infrastructure into a                                                               
pipeline  would  be  affected.     The  prior  four  lease  sales                                                               
scheduled in the  Beaufort and Chukchi seas were  included in the                                                               
Bureau of  Ocean Energy  Management's previous  five-year leasing                                                               
plan,  but were  withdrawn  and  subsequently not  held.   It  is                                                               
AOGA's  fear that  additional restrictions  or delays  will limit                                                               
the opportunities for development in the Arctic OCS.                                                                            
MS. MORIARITY  said that  as the  sea ice  stays open  longer and                                                               
other countries move forward with  exploration and development in                                                               
their waters  and transportation  through the  ice-free Northwest                                                               
Passage, Alaska's  arctic seas could be  left largely unattended.                                                               
With little  infrastructure in  place communities  along Alaska's                                                               
north  coast will  be at  the greatest  risk with  no ability  to                                                               
respond.   Development  of  the Arctic  OCS  for exploration  and                                                               
development  would  bring that  infrastructure  to  a very  rural                                                               
onshore area and the industry's  continued presence would provide                                                               
security and  response capabilities should  they be needed.   She                                                               
said  AOGA  supports SJR  13  to  maintain  all of  the  proposed                                                               
leasing  areas in  the Beaufort  and Chukchi  seas and  to resist                                                               
additional restrictions on leasing in the final program.                                                                        
1:20:46 PM                                                                                                                    
CO-CHAIR  NAGEAK closed  public testimony  after ascertaining  no                                                               
one else wished to testify.                                                                                                     
1:21:18 PM                                                                                                                    
REPRESENTATIVE   TARR  stated   she   has   concerns  about   the                                                               
resolution.   Four of  the five  areas withdrawn  were previously                                                               
withdrawn so there  has been a history under  both Democratic and                                                               
Republican administrations  to exclude those areas  from leasing.                                                               
She  understood from  what she  has read  that the  new area  was                                                               
picked for  its biological importance,  the subsistence  needs of                                                               
the people living  nearby, and to ensure that  the marine animals                                                               
and endangered whales swimming through  those areas are protected                                                               
and  will be  there  for future  generations.   She  said she  is                                                               
cautious because the  revenue issue has not yet  been resolved so                                                               
the state  doesn't stand to  gain much from this  OCS development                                                               
and  she would  like to  see this  matter resolved  before moving                                                               
1:22:44 PM                                                                                                                    
CO-CHAIR NAGEAK  reiterated that  this issue  has been  worked on                                                               
for  a very  long time  and studies  have been  done.   The North                                                               
Slope  Borough has  a diploma  wildlife management  and he  was a                                                               
drafter for many years of that  diploma.  He has been in offshore                                                               
and onshore issues  for more than half his life.   He has watched                                                               
all of this happening.  His  first job right after high school in                                                               
1969 was  in Prudhoe Bay, so  he has been involved  in oil issues                                                               
for  a very  long  time  and in  working  with  the industry  and                                                               
others.   So it is  upsetting when things  like this happen.   In                                                               
the  late 1980s  and early  1990s  a look  was taken  at how  the                                                               
offshore rigs  would work and  there was  a rig right  outside of                                                               
Barrow.   This  rig was  put in  the area  where the  Chukchi and                                                               
Beaufort  seas meet,  which  is a  very volatile  area.   In  the                                                               
summer he has  been near it many times while  hunting.  He shared                                                               
his experience  of being right  in front of Barrow  while hunting                                                               
and  seeing all  kinds of  animals  when suddenly  the ice  began                                                               
coming in  very fast.  The  community knows how that  area is and                                                               
how  dangerous it  is and  this has  been told  to everybody  who                                                               
comes up  to do work  in that area.   Discussions about  what the                                                               
administration wants to do will  be continued in his community as                                                               
well as in this committee                                                                                                       
1:26:34 PM                                                                                                                    
REPRESENTATIVE JOSEPHSON stated  he will not be  objecting to the                                                               
CO-CHAIR TALERICO  offered his appreciation of  Co-Chair Nageak's                                                               
input on this  issue because it is rare for  the committee to get                                                               
actual  firsthand  knowledge  and  experience  from  someone  who                                                               
thoroughly knows the area.                                                                                                      
1:27:17 PM                                                                                                                    
CO-CHAIR TALERICO moved to report  CSSJR 13(RES) out of committee                                                               
with  individual  recommendations  and  the  accompanying  [zero]                                                               
fiscal  note.    There  being no  objection,  CSSJR  13(RES)  was                                                               
reported from the House Resources Standing Committee.