|
Lease buyback bill gets Senate hearing Alaska senators told cost of shallow gas buyback could be in the millions Larry Persily Petroleum News Government Affairs Editor
State senators took no action at the first committee hearing on legislation to buy back up to 23,000 acres of shallow gas state leases north of Homer on Alaska’s Kenai Peninsula.
Buying back the leases could cost the state much more than the $500 each the company paid for the right to lease the acreage, said Mark Myers, director of the Oil and Gas Division at the state Department of Natural Resources.
Myers told the Senate Community and Regional Affairs Committee the price tag could include any costs incurred by the developer and, possibly, compensation for the value of any gas that might exist underground.
The committee, which took no public testimony on the bill at its Feb. 4 hearing, could bring up and move the bill in the 13 weeks before the Legislature’s scheduled May 12 adjournment or kill the measure by not sending it to its next committee.
The sponsor, Sen. Gary Stevens, told committee members the coalbed methane leases were an “unintended consequence” of a 1999 decision to exclude the area from a larger lease sale program. By excluding the uplands near Kachemak Bay from the state’s areawide lease program, he explained, the subsurface rights to the land became available for the less regulated over-the-counter leasing program. Fish and wildlife, tourism the issues Stevens, a Kodiak Republican whose district includes the lower Kenai Peninsula, wants his colleagues to support his bill to buy back the leases and impose a moratorium on any new leases in the area. Many residents fear the drilling could hurt water quality, fishing and tourism, the senator said. The state in 1976 banned oil and gas leasing in Kachemak Bay to protect the rich marine life of the area, and Stevens believes the ban should be extended to the uplands to safeguard fish and wildlife habitat and the area’s profitable and growing tourism industry.
If the state and leaseholder cannot reach a negotiated buyback price, Myers told committee members, the state could use its eminent domain authority to take the leases but would have to pay “just compensation,” which could cover undiscovered gas reserves.
For example, he speculated, if one-fifth of the acreage holds gas in a 50-foot-thick sands play, it could total 20 billion cubic feet of natural gas, or perhaps $20 million in value at $1 per thousand cubic feet.
“The applicants could claim significant resource value,” he told the committee.
The estimate applies to conventional gas in sandstone formations, which Myers said is probably the leaseholders’ target rather than methane trapped in coalbed seams. There is likely more coalbed gas in the area, he said, but it is more costly and difficult to extract, and would present its own problems for calculating its value in an eminent domain case. No exploration under way No exploration work is under way on any of the leases, Myers said, adding, “no one has proposed a well.” He also told the senators, “In all likelihood, many of these leases will not be explored.”
The eight shallow gas leases are south and east of Anchor Point, just north of Homer and toward the head of Kachemak Bay.
| 