|
Update bill for AOGCC moves in Legislature House version passed by Oil and Gas, goes to Resources; Senate version receives Resources Committee, Senate floor approval, passes 19-0 Kristen Nelson Petroleum News
Bills to update the statutory authority of the Alaska Oil and Gas Conservation Act, dating from the territorial Legislature more than 50 years ago, are moving in both houses of the Alaska Legislature.
Senate Bill 109, with only one referral, to Resources, passed that committee April 13 and received unanimous approval on the Senate floor April 18.
The House version, House Bill 183, passed the House Special Committee on Oil and Gas April 12 and moved on to Resources; the bill also has a referral to Judiciary.
John Norman, chairman of the Alaska Oil and Gas Conservation Commission, told House Oil and Gas Committee members April 12 that the statute was originally enacted in 1955 by the territorial Legislature, which “had the foresight to put in place an oil and gas regulatory structure before even there was oil and gas discovered at Swanson River in Alaska.”
The bills — identical versions were moving April 18 — make a number of substantive changes, as well as taking care of some items Norman described as housekeeping.
The bills specifically give the commission the authority to regulate underground injection of gas for storage. Norman said both the commission and operators have presumed the commission has the authority and must issue permits for gas storage injection. “But we do not specifically have … that black-letter authority, and so we are requesting it,” he said. Gas storage for use at periods of peak need is common elsewhere in the United States, he said, and has begun in Cook Inlet because of deliverability issues.
One change in the bill is the result of an audit done by Legislative Budget and Audit, which recommended that the commission seek statutory authority “to regulate not just for conservation purposes but also for safety and public health,” Norman said.
The commission is already active in that area, has petroleum inspectors in the field and is working with other state agencies “to close any gaps in regulation.” The bill specifies that this authority would be “to the extent not in conflict with regulation by the Department of Labor and Workforce Development or the Department of Environmental Conservation.”
“This is consistent with the 2004 version of the model oil and gas conservation act promulgated by the Interstate Oil and Gas Compact Commission,” Norman told Senate Resources April 13.
Tweak to coalbed methane legislation The bill also contains a tweak to 2004 coalbed methane legislation, Norman told House Oil and Gas.
That enactment required that, as a condition of a permit to drill a well for “production or production testing” of coalbed methane, the operator had to “design and implement a water well testing program to provide baseline data on water quality and quantity” the results of which would be made available to the public by the commission.
Norman said the change here was to remove production testing, associated with exploration prospects, from the statute and to specify that the requirement was for “regular production.” He said there was a lot of concern about the affect of coalbed methane production on freshwater supplies and the intent of the 2004 legislation was to “make sure that coalbed methane production does not disrupt freshwater supplies.”
The 2004 language included both production and production testing and Norman said the commission believes that production testing, which “normally occurs in the course of conducting exploration operations” is of “short duration, poses minimal risk and so it is our opinion that this should not trigger the need for a full-blown study.”
If, however, an operator makes a discovery and goes into production, then the water well testing program would be required, he said.
Change in ‘outmoded’ legal provisions The bill also contains a change “intended to do away with an outmoded provision in the law related to appeals” from decisions of the commission. The appellate provisions of the Alaska Oil and Gas Conservation Act “have never been changed since 1955,” Norman said. Since that time Alaska has become a state, “court rules were adopted, a judicial statute was adopted and this artifact has remained and it’s caused some confusion,” he said. The commission has had a consistent interpretation, he said, and that interpretation was recently upheld by the Alaska Supreme Court.
Norman said the change is to appeals from commission decisions and under the new language “our record will be handled under the same rules as any other agency, which is the way we would expect to be treated.”
The bill provides that a person affected by a commission decision may file for reconsideration. “A person who has applied for reconsideration and is dissatisfied with the disposition of the application for reconsideration may appeal to the superior court. The questions reviewed on appeal are limited to the questions presented to the commission by the application for reconsideration.”
Permitting fee, information changes The bills would do away with a $100 fee for a permit to drill. Norman said since the commission is funded by a regulatory cost charge most of the companies pay the cost charge and the permitting fee is deducted and the billings are adjusted.
He also said that the commission is working toward e-commerce and hopes within two years to have operators filing for permits electronically. The commission is “trying to overcome some of their legitimate concerns about confidentiality of information” but Norman said he believes those concerns can be overcome — and the purpose would be defeated, he said, if a paper check had to be sent across town to complete the transaction.
The commission also proposes to move more information into the public domain more quickly, Norman said.
Reports and information filed with the commission are now confidential for 24 months following the 30-day filing period. With the exception of exploration and stratigraphic wells, the commission is proposing to eliminate this confidentiality period.
Norman said the commission believes it is necessary to protect the proprietary interests of companies that invest to drill exploration or stratigraphic wells, “but not so the ordinary development well in a field.” He said the commission has surveyed the other states and found that Alaska is “affording more confidentiality according to our study than other states.”
If this provision is passed the commission would write regulations for this provision.
Fines to be increased The commission is also proposing to increase its fine for violations, which has been set at a maximum of $5,000 per day, to a maximum of $10,000 per day, with a $100,000 maximum for a single violation. “This would allow us to capture violations of a very significant nature that might occur just within a 24-hour period,” Norman said.
The commission is also requesting that the penalty for the wasting of gas be raised from the value of the gas to twice the value of the gas.
The bill also provides that in the event civil penalties imposed by the commission are not paid, they are recoverable by the Attorney General on behalf of the commission in superior court.
The commission is also putting into statute “a number of specific criteria so that in our decisions we would go through these as a checklist,” Norman said. These include the good faith of the operator, the extent to which action was in a willful manner; the extent and seriousness of the violation; benefits derived from the violation; history of compliance or noncompliance; the need to deter similar behavior; effort made by the person committing the violation to correct the violation and prevent future violations; and other factors relevant to assessment that are adopted by the committee in regulation.
Industry consulted Norman said changes between the original bill and the committee substitute were based on comments the commission received. He said the commission listened to concerns it received and attempted to reconcile those and come up with a bill that would work.
Judy Brady, executive director of the Alaska Oil and Gas Association, said AOGA had several concerns with the original legislation but said the commission had answered its questions “and we now have a better understanding of the rationale for the suggested changes” in the agency’s statutory authority. Brady said “AOGA currently has no major objections and supports the current committee substitute.”
Mark Worcester, senior legal counsel for ConocoPhillips Alaska, said as the largest producer and most active explorer in Alaska, ConocoPhillips works “quite closely with the commission.”
He said the commission has been diligently updating its regulations and “updating and clarifying the statutory basis for their authority” is another step forward. He said Norman talked to ConocoPhillips about the reasons for the bill.
“We didn’t always see completely eye-to-eye on every issue but we respect the process and on balance we support this bill,” Worcester said.
| 