Legislature(2003 - 2004)

05/04/2004 03:55 PM RES

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
   CSHB 531(FIN)am-CONVENTIONAL & NONCONVENTIONAL GAS LEASES                                                                
                                                                                                                                
CHAIR OGAN  announced CSHB  531(FIN) am,  version 23-LS1818/KA.2,                                                               
to be up for consideration.                                                                                                     
                                                                                                                                
CHAIR  OGAN announced  that he  has  no conflict  with this  bill                                                               
because he  is not employed  by anyone that it  affects. However,                                                               
some people  have a  perceived conflict and  he asked  Vice Chair                                                               
Wagoner to conduct the meeting.                                                                                                 
                                                                                                                                
SENATOR SEEKINS  said in case  anyone perceives Chair Ogan  has a                                                               
conflict he objects so that he could vote.                                                                                      
                                                                                                                                
CHAIR OGAN noted  that according to the Ethics  Committee, he has                                                               
no conflict to declare.                                                                                                         
                                                                                                                                
SENATOR  WAGONER said  he was  instructed  that a  person had  to                                                               
declare financial  conflicts when a  bill was voted on,  not when                                                               
it was under discussion.                                                                                                        
                                                                                                                                
5:00 - 5:03 - at ease                                                                                                           
                                                                                                                                
TAPE 04-48, SIDE B                                                                                                            
                                                                                                                                
MR. MARK MYERS, Director, Division  of Oil and Gas, Department of                                                               
Natural Resources (DNR), said the  current version of the bill is                                                               
23-LS1818/KA.2.  He  explained  that  Amendment  1  is  clean  up                                                               
language; the substantive part starts on line 13.                                                                               
                                                                                                                                
                                                     23-LS1818\XA.2                                                             
                      A M E N D M E N T  1                                                                                  
                                                                                                                                
OFFERED IN THE SENATE                                                                                                           
     TO:  CSHB 531(FIN) am                                                                                                      
Page 6, line 25:                                                                                                                
     Delete "finds"                                                                                                         
     Insert "determines"                                                                                                    
                                                                                                                                
Page 7, line 4, following "or the":                                                                                         
     Insert "United States"                                                                                                 
                                                                                                                                
Page 7, line 5:                                                                                                                 
     Delete "and"                                                                                                           
                                                                                                                                
Page 7, line 11, following "required":                                                                                          
     Insert "; and                                                                                                          
                    (D)  as a condition of approval of a permit                                                             
          to drill  a well  for production or  production testing                                                           
          of  coal bed  methane, require  the operator  to design                                                           
          and implement  a water well testing  program to provide                                                           
          baseline  data  on  water  quality  and  quantity;  the                                                           
          commission  shall make  the results  of the  water well                                                           
          testing program available to the public"                                                                          
                                                                                                                                
He  explained  that a  new  standard  requires the  applicant  to                                                               
develop  baseline water  data and  testing prior  to approval  by                                                               
AOGCC of a  permit to drill. This data would  be available to the                                                               
public.                                                                                                                         
                                                                                                                                
SENATOR DYSON moved to adopt Amendment 1. There were no                                                                         
objections and Amendment 1 was adopted.                                                                                         
                                                                                                                                
VICE CHAIR WAGONER announced that Amendment 2 was up for                                                                        
consideration.                                                                                                                  
                                                                                                                                
                                                     23-LS1818\XA.5                                                             
                      A M E N D M E N T  2                                                                                  
                                                                                                                                
OFFERED IN THE SENATE                                                                                                           
     TO:  CSHB 531(FIN) page 19, line 10:                                                                                       
     Delete "(A)"                                                                                                           
                                                                                                                                
Page 19, line 23:                                                                                                               
     Delete "and"                                                                                                           
                                                                                                                                
Page 19, lines 24 - 29:                                                                                                         
     Delete all material.                                                                                                       
                                                                                                                                
Page 23, line 7:                                                                                                                
     Delete "AS 38.05.180(n)(2)"                                                                                            
     Insert "AS 38.05.180(n)(2)(A)"                                                                                         
                                                                                                                                
Page 26, lines 26 through 30:                                                                                                   
     Delete all material.                                                                                                       
                                                                                                                                
Page 38, line 28, following "gas,":                                                                                         
     Insert "(A)"                                                                                                           
                                                                                                                                
Page 38, line 30, following "lease":                                                                                        
     Insert "; and                                                                                                          
                    (B) if the nonconventional gas produced will                                                                
          not  be  in direct  competition  with  gas on  which  a                                                               
          royalty at a rate of  at least 12.5 percent is payable,                                                               
          then  the royalty  share payable  to the  state on  all                                                               
          production of  gas from the  pool attributable  to that                                                               
          lease  shall  be  6.25 percent  based  upon  production                                                               
          delivered  in pipeline  quality and  free of  all lease                                                               
          expenses, including  separation, cleaning, dehydration,                                                               
          gathering,  salt water  disposal,  and preparation  for                                                               
          transportation off the lease"                                                                                       
                                                                                                                                
MR. MYERS explained  that Amendment 2 is  basically another clean                                                               
up amendment. The  Shallow Gas Program has a $1  per acre leasing                                                               
fee.  Currently, if  gas doesn't  compete with  other gas  in the                                                               
market, it  possibly can  get a 6.25  percent royalty.  This bill                                                               
contains that same right under  certain conditions. This language                                                               
is put  in the correct place  where it can deal  with the royalty                                                               
issue.                                                                                                                          
                                                                                                                                
SENATOR  DYSON  moved  to  adopt   Amendment  2.  There  were  no                                                               
objections and it was so ordered.                                                                                               
                                                                                                                                
VICE  CHAIR   WAGONER  announced  Amendment   3  to  be   up  for                                                               
consideration.                                                                                                                  
                                                     23-LS1818\XA.6                                                             
                      A M E N D M E N T  3                                                                                  
                                                                                                                                
OFFERED IN THE SENATE                                                                                                           
     TO:  CSHB 531(FIN) am                                                                                                      
Page 20, line 13, following "AS 38.05.180(ff)(4)":                                                                          
     Insert "or 38.05.180(gg)"                                                                                              
                                                                                                                                
Page 20, line 26, following "AS 38.05.180(ff)":                                                                             
     Insert ", 38.05.180(gg),"                                                                                              
                                                                                                                                
Page 39, line 18:                                                                                                               
     Delete "a new subsection"                                                                                                  
     Insert "new subsections"                                                                                                   
                                                                                                                                
Page 40, following line 17:                                                                                                     
     Insert new subsections to read:                                                                                            
          "(gg)  Before approving operations for the development                                                                
     of coal  bed methane under AS 38.05.134,  38.05.177, or this                                                               
     section,  the director  shall ensure  that  the approval  is                                                               
     conditioned upon                                                                                                           
               (1) reasonable and appropriate setbacks governing                                                                
     the  placement  by  the  operator  of  compressor  stations;                                                               
     setbacks approved  under this  paragraph must  be determined                                                               
     with  reference  to  the   population  density  and  general                                                               
     character   of   the   parcels  surrounding   the   proposed                                                               
     compressor station site; and                                                                                               
               (2) reasonable and appropriate measures to                                                                       
     mitigate the noise of compressors,  engines, and other noise                                                               
     generating equipment operated  by  the operator on the lease                                                               
     or license;  measures approved under this  paragraph must be                                                               
     determined  with reference  to  the  population density  and                                                               
     general character  of the  parcels surrounding  the proposed                                                               
     compressor, engine, or other noise generating equipment."                                                                  
                                                                                                                                
MR. MYERS  explained that Amendment  3 adds new  protections that                                                               
aren't  in the  current bill  that apply  to all  coalbed methane                                                               
operations  on state  lands. It  allows for  the commissioner  to                                                               
require reasonable and appropriate  setbacks for the placement of                                                               
compressor stations with reference  to population density and the                                                               
general character  of the  parcel surrounding  the site.  It also                                                               
requires noise  mitigation. This amendment seeks  to address some                                                               
of the conflicts between surface and subsurface owners.                                                                         
                                                                                                                                
Secondly, it  places shallow gas  leasing under the  same bonding                                                               
requirements that exist  on the conventional program  and adds an                                                               
additional protection for the surface owner.                                                                                    
                                                                                                                                
SENATOR BEN STEVENS arrived at 5:12.                                                                                            
                                                                                                                                
5:14 - 5:15 - at ease                                                                                                           
                                                                                                                                
SENATOR  STEVENS  moved  to  adopt Amendment  3.  There  were  no                                                               
objections and it was so ordered.                                                                                               
                                                                                                                                
VICE  CHAIR   WAGONER  announced  Amendment   4  to  be   up  for                                                               
consideration.                                                                                                                  
                                                                                                                                
                                                     23-LS1818\XA.7                                                             
                                                         Chenoweth                                                              
                                                                                                                                
                      A M E N D M E N T  4                                                                                  
                                                                                                                                
                                                                                                                                
OFFERED IN THE SENATE                                                                                                           
     TO:  CSHB 531(FIN) am                                                                                                      
Page 40, lines 6 - 12:                                                                                                          
     Delete all material and insert:                                                                                            
               "(3)  the provisions of AS 38.05.130 apply to the                                                                
     extraction of coal bed methane, except that the provisions                                                                 
     of that section shall be implemented as follows:                                                                           
                    (A) for an activity or operation for which                                                                  
          the department, by  regulation, requires submission and                                                               
          approval of  a plan of operations  before activities or                                                               
          operations may be undertaken, the  director shall, as a                                                               
          condition  for issuing  the bond,  after notice  and an                                                               
          opportunity to be heard, review  the plan of operations                                                               
          to  determine  if  use of  the  surface  is  reasonably                                                               
          necessary to extract coal bed methane; and                                                                            
                    (B) the director may not require a bond                                                                     
          posted under this  paragraph from a lessee  or agent of                                                               
          a lessee  if the lessee  or agent has already  posted a                                                               
          bond  covering  the  lessee's  statewide  oil  and  gas                                                               
          leasing activities;"                                                                                                  
                                                                                                                                
MR.  MYERS explained  that Amendment  4 is  a duplication  of the                                                               
second part  of Amendment  3 on bonding  and he  recommended that                                                               
the  committee  not consider  it.  The  committee agreed  not  to                                                               
consider it.                                                                                                                    
                                                                                                                                
VICE CHAIR WAGONER renumbered Amendment 5 to be Amendment 4.                                                                    
                                                                                                                                
MR. MYERS explained  that [renamed] Amendment 4  is technical and                                                               
on page 41,  lines 27 and 28, it deletes  "shales containing gas"                                                               
and inserts "gas contained in shales".                                                                                          
                                                                                                                                
SENATOR  STEVENS  moved  to  adopt Amendment  4.  There  were  no                                                               
objections and it was so ordered.                                                                                               
                                                                                                                                
MR. MATT DAVIDSON, Alaska Conservation  Voters, said he hoped the                                                               
public would  have time to review  the amended version of  HB 531                                                               
before it came up in the Finance Committee.                                                                                     
                                                                                                                                
VICE CHAIR WAGONER  explained that the committee  rolled the best                                                               
part of  what it thought  was HB 395 into  HB 531 and  the public                                                               
would get a chance to review it.                                                                                                
                                                                                                                                
SENATOR SEEKINS  moved to pass  SCS CSHB 531(RES)  from committee                                                               
with  individual  recommendations   and  attached  fiscal  notes.                                                               
Senators Stevens, Dyson, Seekins and Vice Chair Wagoner voted                                                                   
yea; and SCS CSHB 531(RES) moved from committee.                                                                                

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