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House committee takes different angle Bill would amend but not abolish Alaska’s shallow gas leasing Larry Persily Petroleum News Government Affairs Editor
While the Senate Resources Committee works on legislation to end Alaska’s controversial shallow gas leasing program, the House Oil and Gas Committee is more interested in changing but not abolishing the program.
The House committee on Feb. 24 released its latest version of legislation — House Bill 395 — to deal with residents’ fears of damaged water wells and noise, and concerns with property-line setbacks and public notice of coalbed methane drilling in their communities.
But the committee substitute does not include a key provision of the original bill, which would have repealed last year’s legislation allowing the Department of Natural Resources to override municipal land-use rules if they hinder shallow gas development and the department finds an “overriding interest” for the state-imposed waiver.
The repeal provision was not expected to survive in the Oil and Gas version of the bill, as Committee Chair Rep. Vic Kohring said three weeks ago he did not want to roll back Alaska’s progress in attracting coalbed methane exploration.
The committee substitute for HB 395 does include much more stringent public notice requirements for new leases, including letters to every resident in affected areas. Bill would impose new tax And the bill would impose a new tax on shallow gas production at 1 cent per thousand cubic feet to fill up a $250,000 water well restoration fund. Residents could apply to draw on the fund to repair or replace wells damaged by gas drilling. The original version of the bill set the tax at 1 cent per 20,000 cubic feet.
At the new tax rate, for example, the account could reach its cap in about 18 months if coalbed methane production totaled 50 million cubic feet per day, about 10 percent of the production from Alaska’s Cook Inlet fields. The tax would switch on and off as needed to keep the account at $250,000.
No shallow gas production is under way in Alaska, though companies hold leases to 273,000 acres for exploration.
The committee’s version combined Kohring’s own measure, HB 420, with another coalbed methane measure, HB 395, which was introduced last month by four lawmakers whose districts include the leasing areas. The public notice requirements came from HB395, with the water well restoration fund from HB 420.
The requirement for heavy public notice of shallow gas leasing — much more than is required under existing law — addresses one of the major complaints of Matanuska Valley and Homer residents who say they were caught unaware by last year’s leases. The existing over-the-counter program for shallow gas leases allows developers to choose the areas they want and does not require any sort of best-interest finding by the state as is used in other leasing programs. Committee holds bill for more work The committee took public comment on the new version of the 12-page bill, which was not distributed until the start of the meeting. Kohring said he plans to hold the bill for further work.
Even if the bill moves out of Oil and Gas, it still has three more committee assignments before reaching the full House for a vote and would then face Senate committee hearings — a lot of work in the 10 weeks before the Legislature’s adjournment deadline.
Kohring’s committee members clearly were not ready to move the bill Feb. 24, and toward the end of the meeting the chairman announced he was calling a brief at ease so that lawmakers could meet in the hall, in private, to discuss timing of the legislation. Republican Reps. Jim Holm of Fairbanks and Cheryll Heinze and Norm Rokeberg of Anchorage got up from the table and joined Kohring in the hallway outside the committee room, with Democrat Reps. Harry Crawford of Anchorage and Beth Kerttula of Juneau declining to participate in what they said was a violation of Alaska’s open meeting law.
The four Republican members quickly returned to the room and the committee resumed taking public testimony on the bill. Water well tests would be required Among the changes in the bill from its original proposals is the requirement that the leaseholders, not the property owners, would be responsible for testing a property owner’s water well before drilling begins to establish a water-quality baseline. Property owners would refer to that test if they needed to file a claim against the well restoration fund.
“This bill is a step in the right direction,” said Robert Archibald of Homer, though he would like to see the measure amended to require that leaseholders hire independent contractors to test the wells instead of doing the work themselves.
The bill also would require developers to take steps to lessen noise from their operations and allow the state to impose “appropriate setbacks” for compressors near property lines. The measure also addresses operator bonding and land restoration requirements.
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