The administration’s proposal to streamline permitting for oil and gas exploration and development projects is moving in the Alaska Legislature. The companion bills, House Bill 129 and Senate Bill 59, have been moved by both Resource committees and are now in Finance. HB 129 was heard and held in the House Finance Committee March 26; SB 59 moved out of Senate Resources March 22, headed for Finance, although it had not yet been scheduled for a hearing when Petroleum News went to press.
The legislation would create a process for oil and gas exploration and development based on geographic areas where public input is taken at the beginning of the process rather than at each step along the way.
Department of Natural Resources Commissioner Dan Sullivan told the House Finance Committee March 26 that the bills are part of a permitting reform plan the administration began last year with the enactment of HB 361 which made changes to the state’s leasing and disposal programs identified by DNR’s Division of Mining, Land and Water as the highest priority statutory changes to help reduce the permitting burden on the applicant and free staff time for work on processing applications.
The legislation is part of this year’s proposals from the administration to further reform permitting, Sullivan said, and would allow DNR’s Division of Oil and Gas to provide public notice for oil and gas exploration or development phase work across a geographic area, without regard to lease boundaries.
Application to sale areas
Wendy Woolf of the Division of Oil and Gas has been providing an overview of the proposed changes to legislative committees.
In testimony to House Finance on March 26 she the state’s five areawide oil and gas leasing areas, determined through a best interest finding process which provides for extensive public input, would be the areas in which the new procedures would apply, with the proposed legislation clarifying that the division can review exploration and development across a broader area and provide input before activities occur, allowing criteria to be set in advance on how activities should occur.
The best interest findings for oil and gas leasing have already determined oil and gas exploration and development will occur in these areas — what is at issue is how that exploration and development will occur, Woolf said.
Industry would benefit because they would know what to expect, Woolf said, whereas now input received after plans are submitted — typically from other agencies — may require a plan changes.
The bills clarify that exploration and development activities can be reviewed across geographic areas and provide an opportunity for public comment at the outset of both, Sullivan said, noting that some in the department believe it is already authorized to do reviews across geographic areas.
But that authority isn’t 100 percent clear, Sullivan said, and the decision was made that to come to the Legislature and get the statutory authority clarified before moving forward. He said the department didn’t want to invite litigation and would rather have clarity from the Legislature on the approach.
Comments upfront
In addition to clarifying that DNR can review activities across broad geographic areas, the bills would provide statutory authority for public notice at the beginning of phases of a multiphase project, Woolf said.
She said the public would benefit because the change would allow them to look at oil and gas exploration and development across a broader area and provide input on how development should occur before it occurs.
On the exploration side the department would propose an area and the public could provide input on how exploration activities could occur; the same would be true of the next phase, development, although Woolf said development phase areas would be smaller.
The department would then set criteria for those activities.
A preliminary decision in both the exploration and development phases would have a public comment period and once a final decision was made that would provide standards for the work that could be done and how it could be done.
If there are public concerns that specific areas are not appropriate for some activities, that could be included in the decision, Woolf said.
Leases require plans of operation before work can be done and the findings for the phases would provide industry with basics on how that work could be done, guiding preparation of plans of operation.
Once there was a decision on the phase, individual plans which met requirements in the decision would not have to go out for public comment, although they would go out for agency comment to ensure that the plan met provisions required by other agencies, she said.
No change in transportation
Following exploration and production comes the transportation phase and Woolf said that would not change.
The change in how exploration and development plans are handled would provide certainty to the public that concerns identified were addressed and certainty to industry that plans which met the specified criteria would be approved.
Plans which did not meet requirements would be exceptions and as such would have a public notice, she said.
House Finance had concerns about the nature of geographic areas and Woolf said an example for an exploration area might be activities in the core of the North Slope where there is already development or the areas where shale exploration is occurring.
For development she said the area within the Oooguruk area which isn’t yet developed might be such an area, or the core legacy fields.
House Finance co-Chair Alan Austerman, R-Kodiak, noted the geographic area issue in the March 26 hearing, and asked for a better definition of how geographic areas would be determined.
Support for changes
Mayor Charlotte Brower of the North Slope Borough said in a March 15 letter to Gov. Parnell that the “initial comprehensive review of a geographical area provides an opportunity for participation by the public, government agencies, and industry,” and supported moving the bill forward.
Brooks Range Petroleum Corp. and Linc Energy have supported passage, citing streamlining the permitting process.
Brooks Range Chief Operating Officer Bart Armfield said in a March 1 letter that the change would be a “substantial improvement” to the current process, which he described as “inefficient and cumbersome,” and said the change would “reduce the permitting process by months.”
Corri Feige, Linc Energy’s Alaska general manager, said that by making the permitting process more efficient, the proposal would “play a critical role in lowering costs, attracting investment and, ultimately, increase oil and gas production in the Cook Inlet and on the North Slope.” Linc’s assessment is that the “changes will likely reduce the permitting process timeline by months,” she said.
NGOs oppose
There was opposition from The Wilderness Society, the Northern Alaska Environmental Center and the Southeast Alaska Conservation Council.
Issues raised included the potential size of the areas considered for exploration. Nicole Whittington-Evans, Alaska regional director for The Wilderness Society, cited concerns both with the “one-size-fits-all method of review,” saying it wouldn’t account for “unique project conditions or parcels of land,” and with concerns that the method of review wouldn’t account for changes over time. She also objected to the lack of standards governing DNR decisions “to approve exploration or development on an areawide scale.”
David Arnold, executive director of the Northern Alaska Environmental Center, said balance was needed between “public involvement and the time it takes to issue permits.”
In a March 18 letter Arnold said the current approval process “allows for affected communities to evaluate and comment on the proposed plan of operation.”
James Sullivan of the Southeast Alaska Conservation Council told Senate Resources March 15 said one concern was the uncertainty over how the change would affect large sections of the state, particularly with only one opportunity to comment on the development stage, and said it was “very problematic” that the geographic areas weren’t set out in the bill.
Resource plays an issue
While the bills do not specify any specific use, shale oil is clearly an important application for decisions made on a geographic basis.
In testimony to the House and Senate Resources committees, DNR Deputy Commissioner Joe Balash noted that if shale resources are developed it would be a level of intensity of development not seen before and would be done on a lease-by-lease basis. The tool provided in SB 59 would be very helpful if the shale oil opportunity turns out to be economic, he told Senate Resources, citing work by Great Bear and Royale and others.
Because resource plays are unlikely to be unitized, it would be difficult to make decisions under current law on geographic basis larger than a single lease, Balash said.
—Kristen Nelson
