Alaska shallow gas leasing would change

Opponents say bill to end over-the-counter program doesn’t go far enough; AOGA supports concept of bill

Larry Persily

Petroleum News Government Affairs Editor

The Senate Resources Committee listened as several Matanuska Valley and Homer area residents testified that legislation to end Alaska’s over-the-counter shallow gas leasing program doesn’t go far enough to solve the problem. They want the Alaska Legislature to do something about the 273,000 acres already leased out.

“You’ve got to make it retroactive,” said Jeff Arndt, coalbed methane coordinator for Friends of Mat-Su, a citizens group formed in opposition to state shallow gas leases in their area.

“This one still does not cover the problems we have right now,” said Roberta Highland of Homer, another area with residents mobilized against last year’s state leases.

The committee heard public testimony Feb. 23 on a new version of Senate Bill 312, sponsored by Committee Chair Scott Ogan, which would end the controversial leasing program that is by Ogan’s own admission short on public notice and long on conflicts. In its place, explorers would need to go through the competitive-bid process of the state’s exploration licensing or areawide leasing programs.

Best-interest finding would be required

The change would not affect any shallow gas existing leases or lease applications filed before Jan. 1, 2004.

The state’s shallow gas leasing program “is applicant driven,” with explorers picking the lands they want to lease, Ogan said in explaining why he proposed the committee substitute for Senate Bill 312 to end the program. It was intended for rural areas that need small, local sources of natural gas, not for the urban areas of last year’s leases around Homer and the Matanuska Valley. “The program had some unintended consequences,” he said.

This year’s bill recognizes the need to make a change, particularly by going to a stronger public notice requirement, Ogan said. “No one should be caught off-guard.”

More action on bill in March

Dropping the over-the-counter leases, Ogan said, “will bring a better, upfront public process.” Critics of Alaska’s 8-year-old shallow gas expedited leasing program said its lack of competitive bidding and public notice requirements led to last year’s uproar in Homer and the Matanuska Valley as residents learned the state had leased the subsurface rights beneath their property.

Alaska law retains the subsurface rights for the state, although many homeowners were not aware of the law.

Jeanne Walker of Homer testified at Senate Resources that neither the real estate agent nor the title company were aware at closing in July 2003 that the state had leased out the rights beneath the home she and her husband had just purchased. She asked that the committee consider amending the bill to require that the state notify all property owners affected by existing leases.

“Unfortunately, this realization in Senate Bill 312 comes too late,” said Michelle Church, a former director of Friends of Mat-Su.

Not all of the testimony was negative.

Some testimony supports bill

And Carroll Martin of Soldotna spoke in general support of shallow gas drilling. “Twenty years from now, everybody will be thanking Scott Ogan.”

The committee chair also explained the bill has some pluses for the industry, including the option for longer lease terms than are allowed under existing shallow gas leases and greater flexibility in looking for unconventional gas reserves at all depths.

None of the committee members addressed the public comments that favored retroactive changes in existing shallow gas leases.