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Chairman Kohring leery of rollback Legislator looks to amend, but preserve, state’s shallow gas program Larry Persily Petroleum News Government Affairs Editor
The chairman of Alaska’s House Oil and Gas Committee says the Legislature accomplished a lot last year in making it easier for shallow gas explorers to work in Alaska, and he is leery of rolling back that effort to please opponents.
Rep. Vic Kohring said he is wary of “overzealous” attempts that could weaken the push to attract exploration and development of the state’s coalbed methane reserves.
The 10th-year Wasilla Republican told his committee Feb. 5 he plans to combine his bill and a second measure dealing with coalbed methane leasing and drilling into a single piece of legislation that he hopes to have ready for discussion possibly the week of Feb. 16.
The committee’s effort is separate from work in the Senate Resources Committee on its own legislation dealing with the controversies of shallow gas leasing in Alaska. The Senate version wouldn’t change existing leases but would impose significant changes on future activity.
Kohring’s bill would charge a new tax of 1 cent per 20,000 cubic feet of shallow gas production — though he avoids calling it a tax and instead the bill calls it an exaction — with the money to go into a state-managed water well restoration fund to pay for repair or replacement of any wells damaged by drilling. Residents would have to apply to the Department of Natural Resources and show that drilling damaged their water quality. State would return unused tax collections The measure, House Bill 420, would cap the fund at $250,000, and would return the taxes to drillers if no claims are filed in their lease area.
The other bill heard by Kohring’s committee Feb. 5, House Bill 395, would repeal a portion of the law adopted by legislators last year that gave the Department of Natural Resources the authority to override municipal land-use laws affecting coalbed methane development.
The bill, sponsored by four Republicans from Palmer, Chugiak, Valdez and Homer, also would allow the state to regulate drilling to protect underground water sources, increase public notice requirements of leases, set up a public forum process for resolving residents’ complaints, and set minimum rental payments to property owners for use of their land by shallow gas developers.
Kohring did not say which pieces of the two bills would survive in the final, merged version, though he said he wants to keep his tax provision for filling the water well restoration fund. Critics often cite their fears of damaged wells as they debate shallow gas drilling close to residential areas, though the industry says there is little chance of such problems.
In testimony before the House Oil and Gas Committee on Feb. 5, Kohring’s staff reported it could take as long as eight or nine years to fill the restoration fund at the tax rate proposed in the bill. At 1 cent per 20,000 mcf, it would take average daily production of more than 150 million cubic feet of shallow gas to fill the $250,000 fund in eight years. No need to penalize industry “We don’t want to make it sound like we’re penalizing industry,” Kohring said at the committee meeting. But considering the low risk of damaged wells, the fund should be sufficient, he said after the meeting.
The representative said he paid $3,000 for a 161-foot well in Wasilla in 2000. At that cost, the fund could pay for about eight wells a year with the tax revenue from 150 million cubic feet of daily production.
The state has more than 250,000 acres under lease for shallow gas drilling, the majority of it in the Matanuska-Susitna Borough in Kohring’s district.
The chairman said the merged legislation also will include some of the provisions from the other measure before his committee, including requirements for more public notice of shallow gas leasing. “There are people who feel we ramrodded this” last year, he said. But it will not include a repeal of the state’s ability to override municipal land-use laws, Kohring said.
In addition to minimal public notice of the leases and water quality, residents also are upset about their property rights, said Tom Wright, an aide to Rep. John Harris, R-Valdez, whose district extends into the Matanuska-Susitna Borough. “The concerns in my mind are very valid,” Wright told the Oil and Gas Committee. Rep. Harris wants balance with property owners “It is the responsibility of the state to find a balance, where possible, between the rights of property owners and responsible resource development,” Harris, a co-sponsor of House Bill 395, said in a prepared statement.
Rep. Paul Seaton, R-Homer, also a co-sponsor of the competing bill, told Kohring’s committee, “There are corrective actions we are trying to take,” such as allowing the Natural Resources commissioner to decide if leaseholders have other options to reach their subsurface resources without setting up drilling rigs or crossing private surface property.
But that worries Rep. Cheryll Heinze, R-Anchorage. She said it could be a “precarious balance,” depending on whether the commissioner is friendly or not to development.
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