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Alaska abolishes CBM leasing program
Larry Persily Petroleum News government affairs editor
On May 11, the last day of session, the Alaska Legislature passed a bill ending the state’s first come, first serve, over-the counter shallow gas leasing program.
Under the new legislation future applicants for non-conventional shallow gas exploration, including coalbed methane, will have to go through the state’s competitive exploration license or conventional leasing programs which require, among other things, the state to issue a best-interest finding before approving leases.
The measure, House Bill 531, also imposes several new requirements on existing shallow gas leases to protect water quality at nearby wells, lessen noise and impose setback requirements from adjoining property lines, regulate hydraulic fracturing and reinjection of produced water.
And while the legislation allows existing leaseholders to continue working toward developing their property, explorers and producers will need to meet the new standards before obtaining permits for any future drilling, said Pat Galvin, the state’s coalbed methane coordinator. Provision will help mines Another provision of the bill allows applicants that meet a summer deadline to convert shallow gas leases to exploration licenses without having to go through a competitive bid process, said Galvin of the Department of Natural Resources, Alaska Division of Oil and Gas.
The conversion right for applicants is intended to help explorers, particularly potential mine developers, that are looking to coalbed methane as a source of gas for electrical generation at remote sites but whose applications were held up under a temporary state moratorium on new leases.
The legislation also allows the division to extend existing shallow gas leases up to 10 years if the gas is to be used for mining operations. Bill protects coal leaseholders The bill also includes a provision protecting coal leaseholders from any incursion by shallow gas explorers.
Exploration is under way and some production testing has occurred on existing leases, but there has been no commercial coalbed methane production in Alaska. According to Jim Hansen, lease sale manager for the division, the state has issued a total of 68 shallow gas leases encompassing 252,246 acres, 60 of which are in the Matanuska-Susitna area of south-central Alaska, involving 229,609 acres. The other eight leases, encompassing 22,637 acres, are on the southern Kenai Peninsula, in and close to Homer.
The bill also repeals a law adopted last year that allows the state to overrule municipal land-use rules in the interest of promoting coalbed methane development.
The bill did not include a provision to buy back coalbed methane leases. Senate committee rolls two bills into one The Senate Resources Committee took a second coalbed methane reform bill that passed the House, House Bill 395, and added most of its provisions to HB531, which is now headed to the governor for signature into law.
One of the provisions of HB395 that the Senate committee dropped would have required Natural Resources to adopt regulations to ensure that shallow gas exploration and production did not “interfere with the public’s right to access and enjoy recreational waters … and areas important to sport or subsistence hunting.”
The only House vote against HB531 came from Rep. Vic Kohring, R-Wasilla, a strong advocate of coalbed methane drilling.
There were no votes against final passage of the bill in the Senate.
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