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Home My WebLink AboutO 0620 9 XHVZE Image Project Order File Cover Page This page identifies those items that were not scanned during the initial production scanning phase. They are available in the original file, may be scanned during a special rescan activity or are viewable by direct inspection of the file. 0 0(09- Order File Identifier Organizing (done) RESCAN F-1 Color Items: ,7 Greyscale Items- 7 Poor Quality Originals: 7 Other: NOTES: BY: Project Proofing BY: Scanning Preparation BY Production Scanning [I Two-sided DIGITAL DATA 0 Diskettes, No. El Other, No/Type: Date: Date: 0 Rescan Needed OVERSIZED (Scannable) F-1 Maps: E] Other Items Scannable by a Large Scanner OVERSIZED (Non -Scannable) F] Logs of various kinds: F� Other: /s/ /s/ — x 30 + = TOTAL PAGES )76 D C?l (Count does not include cover sheet) ate: /s/ V Stage 1 Page Count from Scanned File: (Count does include cover s et) Page Count Matches Number in Scanning Preparation: YES NO __1 BY: =Mana — I-,-- Date: q1t 7//o /s/ MP Stage 1 If NO in stage 1, page(s) discrepancies were found: YES NO BY: Maria Date: /s/ Scanning is complete at this point unless rescanning is required. 1111111111111111111 ReScanned BY: Maria Date: /s/ Comments about this file: QualityChecked 10/6/2005 Orders File Cover Page.doc 0 4 1) 2) 3) 4) 5) 6) Geothermal Drilling Program Other 62 June 10, 2010 Implementation of SB 243 Transferring authority for Geothermal permits from DNR to AOGCC. June 17, 2010 File opening request May 29, 20 10 Backup Info June 28, 2010 Comments from City of Akutan, Comments from State of Alaska June 29, 2010 Hearing Transcript July 12, 2010 Final Regulations Package Geothermal Drilling Program Other 62 Attorney -Client information located in Confidential Room Regulations dealing with Geothermal Resources were adopted by the Alaska Oil and Gas Conservation Commission on July 14, 2010, with an effective date of September 30, 2010. The regulations have been made permanent and have been filed by the Lt. Governor. The regulations will appear in Register 195, October 2010, of the Alaska Administrative Code. You may obtain a copy of the filed regulations at http://doa.alaska.gov/ogc/. The following sections were adopted: 20 AAC 25.705 20 AAC 25.730 20 AAC 25.710 20 AAC 25.735 20 AAC 25.715 20 AAC 25.740 20 AAC 25.720 20 AAC 25.990 Register 195, October 20100 MISCELLANEOUS BOAR-9 20 AAC 25 is amended by adding new sections to Article 7 to read: Article 7. Geothermal Resources. Section 705. Authority of commission 710. Applicability of regulations 715. Variances 720. Calculation of regulatory cost charges for geothermal wells 725. Estimated regulatory cost charges for geothermal wells 730. Commission's determination of regulatory cost charges for geothermal wells 735. Payment dates for regulatory cost charges for geothermal wells 740. Supplemental appropriations 20 AAC 25.705. Authority of commission. All wells drilled in search of or in support of the recovery or production of geothermal resources must comply with the regulations contained in 20 AAC 25.705 — 20 AAC 25.740. (Eff. 09/30/2010, Register195) Authority: AS 41.06.005 AS 41.06.035 AS 41.06.040 20 AAC 25.710. Applicability of regulations. Unless otherwise specified in 20 AAC 25.705 — 20 AAC 25.740, the regulations in this chapter apply to wells drilled in search of or in support of the recovery or production of geothermal resources. (Eff. 09/30/2010, Register195) Authority: AS 41.06.005 AS 41.06.035 AS 41.06.040 20 AAC 25.715. Variances. Upon request of the operator for an action under 20 AAC 25.705 — 25.740 that has application to a single well or geothermal system, the commission may approve a variance from the commission's regulations, if (1) the approval provides at least an equally effective means of accomplishing the requirement set out in the commission's regulation; or (2) the commission determines that the request is more appropriate to the proposed operation than compliance with requirements of the regulation. (Eff. 09/30/2010, Register195) Authority: AS 41.06.005 AS 41.06.035 AS 41.06.040 20 AAC 25.720. Calculation of regulatory cost charges for geothermal wells. (a) The formula for determining a person's regulatory cost charge under AS 41.06.055 is RCCg = VgopNgtot *(Ag - Lg) where RCCg = the regulatory cost charge for geothermal wells; Register 195, October 20 10 0 MISCELLANEOUS BOARV Vgop = the total volume of geothermal resources produced from, and all fluids and substances injected into, during the most recently concluded calendar year, wells for which a Permit to Drill has been issued under AS 41.06.050, of which the person is the operator on the first day of the fiscal year, and that have not before that day been plugged and abandoned and reported as abandoned in accordance with this chapter; Vgtot = the total volume of geothermal resources produced from, and all fluids and substances injected into, during the most recently concluded calendar year, all wells for which a Permit to Drill has been issued under AS 41.06.050 and that have not before the first day of the fiscal year been plugged and abandoned and reported as abandoned in accordance with this chapter; Ag = the appropriation, other than from federal receipts, made for the operating costs related to activities under AS 41.06 of the commission for the fiscal year; Lg = the lapsed amount of a previous appropriation that is appropriated for the fiscal year under AS 41.06.055(d). (b) For purposes of calculating regulatory cost charges, volumes of geothermal resources produced from or injected into wells consist of the applicable volumes reported to the commission under 20 AAC 25.230(b) and 20 AAC 25.432, except that (1) if an operator has failed to report a volume as required, if two or more reported volumes are inconsistent, or if the commission determines that a reported volume is otherwise unreliable, the commission may calculate or estimate volumes as it considers appropriate; (2) the commission may add the volume of a substantial spill or other release of geothermal resources that is not included in a report under 20 AAC 25.230(b) or 20 AAC 25.432. (c) For purposes of determining volumes under AS 41.06.055(b) and 20 AAC 25.705 — 20 AAC 25.740 9,000 cubic feet of gaseous geothermal resources has a volume that is the equivalent of one barrel of liquid geothermal resources. (d) For purposes of AS 41.06.055(a) and 20 AAC 25.705 — 20 AAC 25.740, a well is considered plugged and abandoned and reported as abandoned in accordance with this chapter if the well has been abandoned in accordance with 20 AAC 25.105 and 20 AAC 25.112 and a complete well record for the well, including a description of plugging operations, on a Well Completion or Recompletion Report and Log (Form 10-407) as required by 20 AAC 25.070(3) has been filed with the commission after abandonment. (Eff. 09/3 0/2010, Register 195) Authority: AS 41.06.005 AS 41.06.040 AS 41.06.055 AS 41.06.035 AS 41.06.050 20 AAC 25.725. Estimated regulatory cost charges for geothermal wells. (a) Before determining regulatory cost charges for a fiscal year under 20 AAC 25.730 the commission may establish estimated regulatory cost charges for geothermal wells to be paid during the first quarter of the fiscal year. The amount of an estimated regulatory cost charge for geothermal wells is one-fourth of the commission's reasonable estimate, based on information then available, of what the person's total regulatory cost charge for geothermal wells will be for that fiscal year. (b) The commission will provide a person subject to an estimated regulatory cost charge for geothermal wells with written notice of the amount of the charge and the payment date. The commission will set a payment date to be at least 20 days after the date of the notice. The person 2 0 V Register 195, October 2010 MISCELLANEOUS BOAR] shall pay the estimated regulatory cost charge for geothermal wells by the payment date. (Eff. 09/30/2010, Register195) Authority: AS 41.06.005 AS 41.06.040 AS 41.06.055 AS 41.06.035 AS 41.06.050 20 AAC 25.730. Commission's determination of regulatory cost charges for geothermal wells. (a) After the later of the beginning of a fiscal year or the date of enactment of an appropriation for the operating costs of the commission for that fiscal year, the commission will provide to persons subject to a regulatory cost charge under AS 41.06.055 written notice of the proposed regulatory cost charges for geothermal wells to be imposed on persons subject to regulatory cost charges for that fiscal year and the basis for the charges, in accordance with 20 AAC 25.720. (b) No later than 30 days after notice is issued under (a) of this section, a person subject to a regulatory cost charge for geothermal wells may submit comments on, or request a revision to, the regulatory cost charges imposed for geothermal wells by the commission. A request for a revision must be accompanied by an explanation of the basis for the requested revision, and evidence in support of the request. Before a hearing is held under (c) of this section, the commission will provide all persons subject to a regulatory cost charge for geothermal wells with copies of comments and requests for revision received by the commission or with notice of the persons' right to inspect those comments and requests for revision. (c) No later than 60 days after notice is issued under (a) of this section, the commission will hold a public hearing in accordance with 20 AAC 25.540 on the proposed regulatory cost charges for geothermal wells. (d) No later than 90 days after notice is issued under (a) of this section, the commission will issue an order determining the regulatory cost charges for geothermal wells to be paid and the dates by which the charges must be paid. The commission will provide written notice to each person subject to a regulatory cost charge of the person's regulatory cost charge for geothermal wells and payment dates. (e) The commission will not determine or adjust previously determined regulatory cost charges based on fluid volume reports that are filed or amended, or on other fluid volume corrections that are made, after the deadline under (b) of this section for responding to the commission's notice of proposed regulatory cost charges, except if the commission finds that (1) a person has grossly under -reported the person's Vgop, as defined in 20 AAC 25.720(a); (2) under -reporting as described in (1) of this subsection caused or will cause others' regulatory cost charges for geothermal wells to be materially excessive; and (3) correcting the excessive regulatory cost charges for geothermal wells is in the public interest. (Eff. 09/30/2010, Register195) Authority: AS 41.06.005 AS 41.06.040 AS 41.06.055 AS 41.06.035 AS 41.06.050 20 AAC 25.735. Payment dates for regulatory cost charges for geothermal wells. (a) If the commission orders payment of estimated regulatory cost charges under 20 AAC 25.725, the commission will establish payment dates for regulatory cost charges during the second, third, Register 195, October 20100 MISCELLANEOUS BOARP and fourth quarters of the fiscal year. No later than each payment date, a person subject to a regulatory cost charge under 20 AAC 25.725 shall pay one-third of the difference between the person's regulatory cost charge for geothermal wells and any estimated regulatory cost charge previously paid for the fiscal year, except that a regulatory cost charge for geothermal wells may be prepaid, in part or in whole, at any time. (b) If the commission does not order payment of estimated regulatory cost charges under 20 AAC 25.725, the commission will establish payment dates for regulatory cost charges during each quarter or each third of the fiscal year. No later than each payment date, a person subject to a regulatory cost charge under 20 AAC 25.750 shall pay one-fourth, if four payment dates are established, or one-third, if three payment dates are established, of the person's regulatory cost charge, except that a regulatory cost charge for geothermal wells may be prepaid, in part or in whole, at any time. (c) The commission will set the first payment date in a fiscal year to be at least 20 days after the date the commission provides notice under 20 AAC 25.730(d). (Eff. 09/30/2010, Register195) Authority: AS 41.06.005 AS 41.06.040 AS 41.06.055 AS 41.06.035 AS 41.06.050 20 AAC 25.740. Supplemental appropriations. For regulatory cost charges for geothermal wells based on a supplemental appropriation for a fiscal year, (1)the commission will determine regulatory cost charges using the commission's determinations of geothermal resources and well operatorship previously made in connection with the regular appropriation for the fiscal year; (2) in applying the formula set out in 20 AAC 25.720(a), the commission will set the variable "Lg" equal to zero; (3) the commission will use the procedures set out in 20 AAC 25.730, except that the period (A) for submitting comments or requesting a revision under 20 AAC 25.730(b) is 10 days instead of 3 0 days; (B) within which a public hearing will be held under 20 AAC 25.730(c) is 20 days instead of 60 days; the commission will provide notice of that hearing at least 10 days before the date of that hearing; the 30-day notice requirement under 20 AAC 25.540 does not apply to a hearing held under this paragraph; and (C) within which the commission will issue an order determining regulatory cost charges under 20 AAC 25.730(d) is 30 days instead of 90 days; (4) 20 AAC 25.735 does not apply; and (5) the commission will set the payment date for regulatory cost charges to be at least 10 days after the date the commission provides notice under 20 AAC 25.730(d). (Eff. 09/30/2010, Register195) Authority: AS 41.06.005 AS 41.06.040 AS 41.06.055 AS 41.06.035 AS 41.06.050 9 Register 195, October 201016 MISCELLANEOUS BOARV 20 AAC 25.990(73) is amended to read: (73) "well" (A) means a hole penetrating the earth, usually cased with steel pipe, and (i) from which oil or gas, or both, or geothermal resources, is obtained or obtainable; or (ii) that is made for the purpose of finding or obtaining oil, gas or geothermal resources, or of supporting oil, gas, or geothermal resources production; and (B) includes a well with multiple well branches drilled to different bottom -hole locations. (Eff. 11/7/99, Register 152; am 1/5/2006), (Eff. 09/30/2010, Register195) Authority: AS 31.05-030 AS 41.06.035 AS 41.06.005 AS 41.06.040 0 0 Mary Jones David McCaleb XTO Energy, Inc. IHS Energy Group George Vaught, Jr. Cartography GEPS P.O. Box 13557 810 Houston Street, Ste 200 5333 Westheimer, Suite 100 Denver, CO 80201-3557 Ft. Worth, TX 76102-6298 Houston, TX 77056 Jerry Hodgden Richard Neahring Mark Wedman Hodgden Oil Company NRG Associates Halliburton 40818 th Street President 6900 Arctic Blvd. Golden, CO 80401-2433 P.O. Box 1655 Anchorage, AK 99502 Colorado Springs, CO 80901 Schlumberger CIRI Baker Oil Tools Drilling and Measurements Land Department 795 E. 94 th Ct. 2525 Gambell St, #400 P.O. Box 93330 Anchorage, AK 99515-4295 Anchorage, AK 99503 Anchorage, AK 99503 Ivan Gillian Jill Schneider Gordon Severson 9649 Musket Bell Cr. #5 US Geological Survey 3201 Westmar Circle Anchorage, AK 99507 4200 University Drive Anchorage, AK 99508-4336 Anchorage, AK 99508 Jack Hakkila Darwin Waldsmith James Gibbs P.O. Box 190083 P.O. Box 39309 P.O. Box 1597 Anchorage, AK 99519 Ninilchick, AK 99639 Soldotna, AK 99669 Kenai National Wildlife Refuge Penny Vadla Cliff Burglin Refuge Manager 399 West Riverview Avenue 319 Charles Street P.O. Box 2139 Soldotna, AK 99669-7714 Fairbanks, AK 99701 Soldotna, AK 99669-2139 Richard Wagner Bernie Karl North Slope Borough P.O. Box 60868 K&K Recycling Inc. P.O. Box 69 Fairbanks, AK 99706 P.O. Box 58055 Barrow, AK 99723 Fairbanks, AK 99711 0 0 Colombie, Jody J (DOA) From: Colombie, Jody J (DOA) Sent: Tuesday, August 31, 2010 3:42 PM To: harbour@gci.net; Aubert, Winton G (DOA); Ballantine, Tab A (LAW); Brooks, Phoebe; Davies, Stephen F (DOA); Fisher, Samantha J (DOA); Foerster, Catherine P (DOA); Johnson, Elaine M (DOA); Laasch, Linda K (DOA); Maunder, Thomas E (DOA); McIver, Bren (DOA); McMains, Stephen E (DOA); Norman, John K (DOA); Okland, Howard D (DOA); Paladijczuk, Tracie L (DOA); Pasqual, Maria (DOA); Regg, James B (DOA); Roby, David S (DOA); Saltmarsh, Arthur C (DOA); Scheve, Charles M (DOA); Schwartz, Guy L (DOA); Seamount, Dan T (DOA); Shartzer, Christine R (DOA); (foms2@mtaonline. net); (michael.j.nelson@conocophillips.com); (Von. L.Hutchins@conocophillips.com); Alan Dennis; alaska@petrocalc.com; Anna Raff; Barbara F Fullmer; bbritch; Becky Bohrer; Bill Penrose; Bill Walker; Bowen Roberts; Brad McKim; Brady, Jerry L; Brandon Gagnon; Brandow, Candle (ASRC Energy Services); Brian Gillespie; Brian Havelock; Bruce Webb; carol smyth; caunderwood; Charles O'Donnell; Chris Gay; Cliff Posey; Crandall, Krissell; dapa; Daryl J. Kleppin; Dave Matthews; David Boelens; David House; David Spann; David Steingreaber; ddonkel@cfl.rr.com; Deborah J. Jones; Delbridge, Rena E (LAA); Dennis Steffy; doug_schultze; Elowe, Kristin; Evan Harness; eyancy; Francis S. Sommer; Fred Steece; Garland Robinson; Gary Laughlin; Gary Rogers; Gary Schultz; ghammons; Gordon Pospisil; Gorney, David L.; Gregg Nady; gspfoff; Harry Engel; Jdarlington oarlington@gmail.com); Jeff Jones; Jeffery B. Jones Oeff.jones@alaska.gov); Jerry McCutcheon; Jim White; Jim Winegarner; Joe Nicks; John Garing; John Katz Oohn.katz@alaska.gov); John S. Haworth; John Spain; John Tower; Jon Goltz; Judy Stanek; Julie Houle; Kari Moriarty; Kaynell Zeman; Keith Wiles; Kim Cunningham; Larry Ostrovsky; Laura Silliphant; Marilyn Crockett; Mark Dalton; Mark Hanley (mark. hanley@anadarko.com); Mark Kovac; Mark P. Worcester; Marquerite kremer; Michael Dammeyer; Michael Jacobs; Mike Bill; Mike Mason; Mikel Schultz; Mindy Lewis; MJ Loveland; mjnelson; mkm7200; nelson; Nick W. Glover; NSK Problem Well Supv; Patty Alfaro; Paul Decker (paul.decker@alaska.gov); PORHOLA, STAN T; Rader, Matthew W (DNR); Randall Kanady; Randy L. Skillem; rob.g.dragnich@exxonmobil.com; Robert A. Province (raprovince@marathonoil.com); Robert Brelsford; Robert Campbell; Roberts, Susan M.; Rudy Brueggeman; Scott Cranswick; Scoff, David (LAA); Shannon Donnelly; Sharmaine Copeland; Shellenbaum, Diane P (DNR); Slemons, Jonne D (DNR); Sondra Stewman; Steve Lambert; Steve Moothart; Steven R. Rossberg; Suzanne Gibson; tablerk; Tamera Sheffield; Taylor, Cammy 0 (DNR); Temple Davidson; Teresa Imm; Terrie Hubble; Thor Cutler; Tina Grovier; Todd Durkee; Tony Hopfinger; trmjrl; Vicki Irwin; Walter Featherly; Will Chinn; Williamson, Mary J (DNR); Winslow, Paul M; Yereth Rosen; Aaron Gluzman; Bettis, Patricia K (DNR); Dale Hoffman; David Spann; Fr6d6ric Grenier; Gary Orr; Jason Bergerson; Jerome Eggemeyer; Joe Longo; Marc Kuck; Mary Aschoff; Maurizio Grandi; Ostrovsky, Larry Z (DNR); Richard Garrard; Sandra Lemke; Talib Syed; Tiffany Stebbins; Wayne Wooster; Willem Vollenbrock; William Van Dyke; Woolf, Wendy C (DNR); David Johnson; Joseph Flack Subject: Post Hearing Notice and Final Geothermal Resources Regulation AOGCC Attachments: Final Geothermal Resources Regulations AOGCC.pdf; Post Hearing Notice.pdf Jody J Colombie Special Assistant A laska Oil and Gas Conservation Commission 333 West 7th Avenue, Suite 100 Anchorage, AK 99501 (907)793-1221 (phone) (907)276-7542 (/ax) 0 0 Colombie, Jody J (DOA) From: Clark, Scott M (GOV) Sent: Tuesday, August 31, 2010 1:43 PM To: Pearson, Robert L (DOA) Subject: Regulations Filed: Title 20 - JU2010201538 - Oil and Gas Conservation Commission - Geothermal Resource Drilling Attachments: 20-2010201538.pdf On 8/31/2010, Lieutenant Governor Craig E. Campbell filed regulations (JU2010201538) from the Alaska Oil and Gas Conservation Commission re: Geothermal Resource Drilling (20 AAC 25.700 - 990). The effective date of the regulations is 9/30/2010, and the regulations will be published in Register 195, October 2010. The filing certification and regulation text are attached. Thank you, Scott Clark Special Assistant Office of Lieutenant Governor Craig E. Campbell 240 Main Street, Room 301 Juneau, Alaska 99801 PHONE: 907.465.4081 FAX: 907.465.5400 ��coltxlarUiialaska.�4ov Itgov.alaska.gov 0 0 Craig E. Campbell Lieutenant Governor State Capitol Juneau, Alaska 99811 907.465.3520 465.5400 Fax WWW.LTGOV.ALASKA.GOV OFFICE OF THE LIEUTENANT GOVERNOR ALASKA MEMORANDUM TO: Robert Pearson, AAC Contact Department of Administration FROM: Scott Clark Special Assistant 907.465.4081 530 West 7t" Ave, Suite 1700 Anchorage, Alaska 99501 907,269.7460 269,0263 LT.GOVERNOR@AT-ASKA.GOV DATE: August 31, 2010 RE: Filed Permanent Regulations: Alaska Oil and Gas Conservation Commission Geothermal Resource Drilling: 20 AAC 25.700 - 990 Attorney General File Regulation Filed: Effective Date: Print: JLJ2010201538 8/31/2010 9/30/2010 195, October 2010 cc with enclosures: Linda Nfiller, Department of Law firn Pound, Adrr�iruistrative Regulation Review Committee Judy Herndon, LexisNexis Jody Colombie, Department of Administration 0 0 ORDER CERTIFYING THE CHANGES TO REGULATIONS OF ALASKA OIL AND GAS CONSERVATION COMMISSION The attached 8 pages of regulations, dealing with geothermal resource drilling under 20 AAC 25, is certified to be a correct copy of the regulation changes that the Alaska Oil and Gas Conservation Commission adopted at its July 14, 20 10 meeting, under the authority of AS 31.05.30, AS 41.06.005, AS 41.06.035 and AS 31.06,040 and in compliance with the Administrative Procedure Act (AS 44.62), including the notice provisions (AS 44.62.190 and AS 44.62.200) and opportunity for public comment provision (AS 44.62.2 10). This action is not expected to require an increased appropriation. On the record, in considering public comments, the Alaska Oil and Gas Conservation Commission paid special attention to the cost to private persons of the regulatory action being taken. As provided in AS 44.62.180, the subject regulation changes take effect on the 30th day after thev are filed bv the lieutenant vovernor. DATE: July 27, 20 10 Anchorage V S,!",H- cu'v 4 r- FILING CERTIFICATION 1, Craig E. Campbell, Lieutenant Governor for the State of Alaska, certify that on A 2010 at /-'Q/ jO in., I filed the attached regulations according to the provisions of AS 44.62.040 — 44.62.120. 41- -CieutenantGovemor Crat�, 7 Effective: Sed-e VVI r- 30', 2- 0 0 Register: I � [� , 0 cf--p �Xr- '�'D ( 0 FOR DELEGATION OF THE LIEUTENANT GOVERNOR'S AUTHORITY 1, CRAIG E. CAMPBELL, LIEUTENANT GOVERNOR OF THE STATE OF ALASKA, designate the following state employee to perform the Administrative Procedures Act filing functions of the Office of the Lieutenant Governor: SCOTT CLARK, Special Assistant IN TESTIMONY WHEREOF, I have signed and affixed the Seal of the State of Alaska, at Juneau, on February 23, 2010. LIEUTENANT GOVERNOR Register Ler- '2010 2— 0 Arpr<— C- I -e- Pub 11 5h e_r ,?Je,a,s e- re bev Section Ar Adz- 0 MISCELLANEOUS BOARDS ;15., -;s b-1 a-dL '7 Article 7. Geothermal Resources. -7- 705. Authority of commission -P-e4;q1A46 a's 710. Applicability of regulations A,4-61e-,f- _P025 715. Variances -)n e-vj -S , - -6 O'ki's i-b 720. Calculation of regulatory cost charges for geothermal wells 725. Estimated regulatory cost charges for geothermal wells 730. Commission's determination of regulatory cost charges for geothermal wells 735. Payment dates for regulatory cost charges for geothermal wells 740. Supplemental appropriations ==ill 20 AAC 25.705. Authority of commission. All wells drilled in search of or in support of the recovery or production of aeothermal resources jb.�k�omply with the regulations contained in -Z0,4AC a5, -7o c-- ZoA-A c. -Z5.-7,q0-. 4�/&V(0 A--r;p-le,e try., oti-s" .,4s V /. a 4. o 3 A-S 3-el. a 6. 0-f 0 (40A4 C-LS-705 -- 20 AAC 25.710. Applicability of regulations. Unless otherwise specified in 1�ak 4�k Qr— regulations in this chapter sk-erapply to wells drilled in seareb of or in � 2(yo support of the recovery or production of geothermal resource,. E p"1q.er 1� A U T-t4 OR I -rtj ; 4 S 4/ /- 0 4 - 00' !!C 1413� -Al. 4. 0 3 5 A- S V A 06 - 0-4 0 0 Register 2010 0 MISCELLANEOUS BOARDS 2oAPr--k5-76tS — A an 20 AAC 25.715. Variances. Upon request of the operator foraa+y action under t4"#icle that has application to a single well or geothermal system, the commission may approve a variance I 1?c ,from the commission's regulations, if ke the approval provides at least an equally effective means o,f accomplishing the requirement set out in the commission's regulation; or Xthe commission determines that the request is more appropriate to the proposed operation than compliance with requirements of the regulation. 0—f 4-' 9 /0 12 o 10 ) 0 5) Av T.,*,e /' 7 : 4-S V1. o6. oo.,T- *s -/ /. 0&. a 35 ,4.5- -// o 6. o 1/0 20 AAC 25.720. Calculation of regulatory cost charges for geothermal -wells. (a) The formula for determining a person's regulatory cost charge under AS 41.06.055 is RCCg = Vgop/Vgtot *(Ag - Lg) where RCCg the regulatory cost charge for geothermal wells; Vgop the total volume of geothermal resources produced from, and all fluids and substances injected into, during the most recently concluded calendar year, wells for which a Permit to Drill has been issued under AS 41.06.050, of which the person is the operator on the first day of the fiscal year, and. that have not before that day been plugged and abandoned and reported as abandoned in accordance with this chapter; Vgtot = the total volume of geothermal resources produced from, and all t-luids and substances injected into, during the most recently concluded calendar year, all wells for which a Permit to Drill has been issued under AS 41.06.050 and that have not before the first day of the fiscal year been plugged and abandoned and reported as abandoned in accordance with this chapter; 2 Register 2010 MISCELLANEOUS BOARDS Ag = the appropriation, other than from federal receipts, made -for the operating costs related A-541. 0(o to activities under Q6- t;944,A- 41;;Pk.a-9ka1+rkk of the commission for the fiscal year; Lg = the lapsed amount of a previous appropriation that is appropriated for the fiscal year under AS 41.06.055(d). (b) For purposes of calculating regulatory cost charges, volumes of geothermal resources produced from or injected into wells consist of the applicable volumes reported to the commission under 20 AAC 25.230(b) and 20 AAC 25.432, except ttiat (1) if an operator has failed to report a volume as required, if two or more reported volumes are inconsistent, or if the commission determines that a reported Y11 A - volume is otherwise unreliable, the commission 4-14,��calculate or estimate volumes as it considers appropriate; rN-N CL (2) the commission -411, ITT its ett add the volume of a substantial spill or other release of geothermal resources that is not included in a report under 20 AAC 25.230(b) or 20 AAC 25.432. (c) For purposes of determining volumes under AS 41.06.055(b) and firii-cfrjptc�,9,000 cubic feet of gaseous geothermal resources has a volume that is the equivalent of one barrel of liquid geothermal resources. a. -70 .5 0 A-t+ C -5, 7SP 0 (d) For purposes of AS 41.06.055(a) �and and abandoned and reported as abandoned in accordance with this chapter if the well has been abandoned in accordance with 20 AAC 25.105 and 20 AAC 25.112 and a complete well. record for the well, including a description of plugging operations, on a Well Completion or 3 Register J15 is MISCELLANEOUS BOARDS Recompletion Report and Log (Forni 10-407) as required by 20 AAC 25.070(3) lias been filed 6.1 OQ"-- 0 /S I-e r Ns with the commission after abandonment. 2010 1) VTT+0 IL f,rli I A S 4 1. 0 Co. 0 as I PT541. 0&. oa�s AS 41. 0 4,, 0 60 20 AAC 25.725. Estimated regulatory cost charges for geothermal wells. (a) Before r)nnAi determining regulatory cost charges for a fiscal year under 20 AAC 25.730 the commission W�� ,ea r-a-V^dLy. rvto-1 W - "-n �,establish estimated regulatory cost charge!�to be paid during -t-h--6Tirst quarter of v.) the fiscal year. The amount of an estimated regulatory cost cha�rge �isone-fourfto� the commission's reasonable estimate, based on information then available, of what the person's total " P1 r ghne�-+W--v VV%0=1 �Vjc ( t �s regulatory cost charge will be for that fiscal year. (b) The commission will provide a person subject to an estimated regulatory cost charge 40% V- e, with written notice of the amount of the charge and the payment date. The commission will set a payment date tha-t/least 20 days after the date of the notice. The person shall pay the estimated regulatory cost chargA b the payment date. 14--s v- /. o t., ss L+ A-.s 6 0 (40 30 15 A--s Vol. 20 AAC 25.730. Commission's determination of regulatory cost charges for geothermal wells. (a) After the later of the beginning of a fiscal year or the date of enactment of an appropriation for the operating costs of the commission for that fiscal year, the commission will provide to persons subject to a regulatory cost charge under AS 41.06.055 written notice of the f -T n p�errs!o�nsubject to regulatory cost charges for proposed regulatory cost chaxgese'rt-o�e :impose A that fiscal year and the basis for the charges, in accordance with 20 AAC 25.720. fter notice is issued. under (a) of this section, a person subject to a N't�� regulatory cost charg$,rn submit comments on, or request a revision to, the regulatory cost charges imposed for geothermal wells by the commission. A request for a revision must be 4 0 Register Jq5, bc_,�6 2010 0 MISCELLANEOUS BOARDS accompanied by an explanation of the basis for the requested revision, and evidence in support of the request, Before a hearing is held under (c) of this section, the commission will provide all persons subject to a regulatory cost charge,,,wi copies of comments and requests for revision received by the commission or with notice of the persons' right to inspect those comments and requests for revision. ho 10-4e-e (c) W�� 60 days after notice is issued under (a) of this section, the commission will hold a public hearing in accordance with 20 AAC 25.540 on the proposed regulatory cost I LLS chargeg. No tLk/ (d) W.4thtri 90 days after notice is issued under (a) of this section, the commission will ej .04vt,,e�-V" VVIoA W e4ts �) issue an order determining the regulatory cost chargelYo—be paid and the dates by which the charges must be paid. The commission will provide written notice to each person subject to a wet& regulatory cost charge of the person's regulatory cost charge.�,�nd —payment dates. (e) The commission will not determine or adjust previously determined regulatory cost charges based on fluid volume reports that are filed or amended, or on other fluid volume corrections that are made, after the deadline under (b) of this section for responding to the commission's notice of proposed regulatory cost charges, except if the commission finds that (1) a person has grossly under -reported the person's Vgop, as defined in 20 AAC 25.720(a); (2) under -reporting as described in (1) of this subsection caused or will cause I i& others' regulatory cost charge'so 1�e materially excessive; and (3) correcting the excessive regulatory cost chargcJ,1_s in- �the puib�ic in�teres q / 301 Zo I o �eej_ /, _S -1eK I q -r--; A .5 V /. 06, 00Q6 A-5 44 /. 0,6. 0 3 s ,-+ 5 541, od'. 04 0 ,A— S -�41. 0 46-. 0 _S o As 4e /. 0 6 - 5 0 2010 Register 6e 0 MISCELLANEOUS BOARDS 20 AAC 25.735. Payment dates for regulatory cost charges for geothermal wells. (a) If the commission orders payment of estimated regulatory cost charges under 20 AAC 25.725, the commission will establish payment dates for regulatory cost charges during the second, third, and fourth quarters of the fiscal year. No later than each payment date, a person subject to a (`_J1, Jue, _ne PrA C ;I- S. -7 a*, regulatory cost chargeys—hallpay one-third of the difference between the person's regulatory cost chargeand any estimated regulatory cost charge previously paid for the fiscal year, except that a 11 .1 We'us-i regulatory cost charg(�,may be prepaid, in part or in whole, at any time. (b) If the commission does not order payment of estimated regulatory cost charges under 20 AAC 25.725, the commission will establish payment dates for regulatory cost charges during each quarter or each third of the fiscal year. No later than each payment date, a person subject to & a regulatory cost chargeyEa-11 pay one-fourth, if four payment dates are established, or one-third, A if three payment dates are established, of the person's regulatory cost charge, except that a C regulatory cost charge,� e �prep�aid7m �part �� le, at any time. ,,,may b (c) The commission will set the first payment date in a fiscal year to be at least 20 days after the date the commission provides notice under 20 AAC 25.730(d). 11113 Or.) J _J "+or- rj., A 5 o,6. oo s— or.. 0 06 S �5s 0 0.6.,0-50 Y-X e Votal F�0& 20 AAC 25.740. Supplemental appropriations. regulatory cost charge*a�se_d w �-,- =/4s ,PC— I ) on a supplemental appropriation for a fiscal year, (.-+�-the commission will determine regulatory cost charges using the commission's determinations of geothermal resources and well operatorship previously made in connection with the regular appropriation for the fiscal year; X) in applying the formula set out in 20 AAC 25.720(a), the commission will set the variable "Lg" equal to zero),.,, on Register 115, j,-AL—r1P()l0 MISCELLANEOUS BOARDS .-OIN lk� (he commission will use the procedures set out in 20 AAC 25.730, except that the period CA) "efor submitting comments or requesting a revision under 20 AAC 25.730(b) is 10 days instead of 3 0 days; (,A) Vtjlwithin which a public hearing will be held under 20 AAC 25.730(c) is 20 days instead of 60 days; the commission will provide notice of that hearing at least 10 days before the date of that hearing; the 30-day notice requirement under 20 AAC 25.540 does not apply to a hearing held under this paragraph; and %?within which the commission will issue an order determining regulatory cost charges under 20 AAC 25.730(d) is 30 days instead of 90 days; (44) jk�20 AAC 25.735 does not apply; and 6 !U �(e the commission will set the payment date for regulatory cost charges to be at least 10 days after the date the commission provides notice under 20 AAC 25.730(d). (Eff. � /L0 � 101� Register j-1br) q0 Authority: AS 41.06.005 AS 41.06.03:0- A -5 '//, 04. 6 '65 Asvf, 0(0.0 50 20 AAC 25.990 is amended to read: 0-11 STI 7 65 AS 41.06.04S Register 0 0 2010 MISCELLANEOUS BOARDS (73) "well" �Imeans a hole penetrating the earth, usually cased with steel pipe, and (i) from which oil or gas, or both, or geothermal resources, is obtained or obtainable; or (ii) that is made for the purpose of finding or obtaining oil, gas or geothermal resources, or of supporting oil, ga%or geothermal resources production; and 7�(Wincludes a well with multiple well branches drilled to different bottom -hole locations,r(Efff. 11/7/99, Register 152; am 1/5/2006, Register 177, 13'01ZP10 Register PS j Authority: AS 31.0550 A D 1, .0*5 E.', MEMORANDUM To: Daniel T. Seamount, Chairman Oil and Gas Conservation Commission Dept. of Administration From: Deborah E. Behr Chief Assistant Attorney General and Regulations Attorney , Legislation and Regulations Section 0 State of Alaska Department of Law Date: August 26, 2010 FileNo.: JU2010201538 Tel. No.: 465-3600 Re: 20 AAC 25.700 -.990: Alaska Oil and Gas Conservation Commission Regulations re: Geothermal Resource Drilling Under AS 44.62.060, we have reviewed the Alaska Oil and Gas Conservation Commission adoption, amendment, and repeal of the regulations and approve the changes for filing by the lieutenant governor. A duplicate original of this memorandum is being furnished the lieutenant governor, along with the 8 pages of regulations and the related documents. You might wish to contact the lieutenant governor's office to confirm the filing date and effective date of the attached regulation changes. The May 28, 2010 public notice and the July 27, 2010 certification order both state that this action is not expected to require an increased appropriation. Therefore, a fiscal note under AS 44.62.195 is not required. In accordance with AS 44.62.125(b)(6), some corrections have been made in the regulations, as shown on the attached copy. DEB:pav cc w/enc.: Robert Pearson, Regulations Contact Dept, of Administration Jody Colombie, Special Assistant Alaska Oil and Gas Conservation Commission Dept. of Administration Tina Kobayashi, Supervising Attorney Oil, Gas.and Mining Section 0 MEMORANDUM To: Hon. Craig E. Campbell Lt. Governor From: Deborah E. Behr Chief Assistant Attorney General and Regulations Attorney Legislation and Regulations Section State of Alaska Department of Law Date: August26,2010 FileNo.: JU2010201538 Tel. No.: 465-3600 Re: 20 AAC 25.700 -.990: Alaska Oil and Gas Conservation Commission Regulations re: Geothermal Resource Drilling We have reviewed the attached Alaska Oil and Gas Conservation Commission regulations. A duplicate of this memorandum is being furnished to Daniel T. Seamount, Chair, along with a copy of the regulations. The Department of Law has reviewed the attached regulations against the statutory standards of the Administrative Procedure Act. Based upon our review, we find no legal problems. This memorandum and the attached duplicate memorandum dated August 26, 2010 constitute the written statement of approval under AS 44.62.060(b) and (c) that authorizes your office to file the attached regulations. The regulation changes were adopted by the Alaska Oil and Gas Conservation Commission after the close of the public comment period. The regulations concern geothermal resource drilling. The certification order for the regulations states that this action is not expected to require an increased appropriation. Therefore, a fiscal note under AS 44.62.195 is not required. We have made technical corrections to conform the regulations with the drafting manual under AS 44.62.060 and 44.62.125. The corrections are shown on the attached copy of the regulations. DEB:pav cc: Daniel T. Seamount, Chairman Oil and Gas Conservation Commission Dept. of Administration Register _, 0 MISCELLANEOUS B4kDS 2- 0 ArPr�- ;� 5 1 -�5 4-VV1 f" ,L,CL 10, a -CLOG A-,-+-, c- 1,e- -7 -%-a Y,;et ek-' Article 7. F)0j0j,-4e*,, as e- rie, ew e,9.797747 Section Ar 1;,de- 7. 705. Authority of commission 710. Applicability of regulations 715. Variances Geothermal Resources. 720. Calculation of regulatory cost charges for geothermal wells 725. Estimated regulatory cost charges for geothermal wells 730. Commission's determination of regulatory cost charges for geothermal wells 735. Payment dates for regulatory cost charges for geothermal wells 740. Supplemental appropriations ==:?-L 20 AAC 25.705. Authority of commission. All wells drilled in search of or in support of the recovery or production of geothermal resources 5b.4�omply with the regulations contained in -2-0.A A C a s. -7o c- - Z oA-A c- .4 5. -7,qC) -rHo oe , ry., .44-T d1l. 414. oes- 0 3 -5 A-S VZ eo. of 0 AS - 70 S,� 20 AAC 25.710. Applicability of regulations. Unless otherwise specified in 4 regulations contft� �Zin this chapter shdrapply to wells drilled in search of or in support of the recovery or production of geothermal resources. ( E.;_.r,_. / / � A VT-T-+00Z ITC1 . 4 S Y/- 04, - OU Ir .4,7 -Al. o 4. d 3 5 4-S V /. v6. 0-4 0 I Register 00 MISCELLANEOUS BWDS &AACAS. 705 — aJ. 74 0 20 AAC 25.715. Variances. Upon request of the operator fora" action under thi&44kle that has application to a single well or geothermal system, the commission may approve a variance from the commission's regulations, if ka� the approval provides at least an equally effective means of accomplishing the requirement set out in the commission's regulation; or commission determines that the request is more appropriate to the proposed operation than compliance with requirements of the regulation. A v rhve / 7! 4-S ell' 06- 00'r *s Ve. o&. 0.3ar 4SVI. o6.oV0 20 AAC 25.720. Calculation of regulatory cost charges for geothermal wells. (a) The formula for determining a person's regulatory cost charge under AS 41.06.055 is RCCg = VgopNgtot *(Ag - Lg) where RCCg = the regulatory cost charge for geothermal wells; Vgop = the total volume of geothermal resources produced from, and all fluids and substances injected into, during the most recently concluded calendar year, wells for which a Permit to Drill has been issued under AS 41.06.050, of which the person is the operator on the first day of the fiscal year, and that have not before that day been plugged and abandoned and reported as abandoned in accordance with this chapter; Vgtot = the total volume of geothermal resources produced from, and all fluids and substances injected into, during the most recently concluded calendar year, all wells for which a Permit to Drill has been issued under AS 41.06.050 and that have not before the first day of the fiscal year been plugged and abandoned and reported as abandoned in accordance with this chapter; 2 Register _, a MISCELLANEOUS B&DS Ag = the appropriation, other than from federal receipts, made for the operating costs related A-54,- OG to activities under T441e 4 1 Gh"tor- Q6 4 she 4 1 wska 94attA; of the commission for the fiscal year; Lg = the lapsed amount of a previous appropriation that is appropriated for the fiscal year under AS 41.06.055(d). (b) For purposes of calculating regulatory cost charges, volumes of geothermal resources produced from or injected into wells consist of the applicable volumes reported to the commission under 20 AAC 25.230(b) and 20 AAC 25.432, except that (1) if an operator has failed to report a volume as required, if two or more reported volumes are inconsistent, or if the commission determines that a reported YNI A-, volume is otherwise unreliable, the commission .—J]'--ifi i4s. 4ktrrcalculate or estimate volumes as it considers appropriate; V-v-N ex dlereftoy�add the volume of a substantial spill or (2) the commission Vvill, '1191 lita, %At other release of geothermal resources that is not included in a report under 20 AAC 25.230(b) or 20 AAC 25.432. (c) For purposes of determining volumes under AS 41.06.055(b) and thi��i�9,000 cubic feet of gaseous geothermal resources has a volume that is the equivalent of one barrel of liquid geothermal resources. 6. -70 7%41-0 (d) For purposes of AS 41.06.055(a) �and and abandoned and reported as abandoned in accordance with this chapter if the well has been abandoned in accordance with 20 AAC 25.105 and 20 AAC 25.112 and a complete well record for the well, including a description of plugging operations, on a Well Completion or 3 Register _, a MISCELLANEOUS BWDS Recompletion Report and Log (Form 10-407) as required by 20 AAC 25.070(3) has been filed with the commission after abandonment. C E 'J #Q t s ie r Avrt+oxf-ri- As4i.o&�,00,5 As o 4. . 0 -4 0 /10�_ 'S Al PCs q1. 0.a.6 A .5 04P,050 20 AAC 25.725. Estimated regulatory cost charges for geothermal wells. (a) Before determining regulatory cost charges for a fiscal year under 20 AAC 25.730 the commission v�� I !C!a CcArk-e-Y. n%#_1 W %I- ql� establish estimated regulatory cost charge!�to be paid during the first quarter of C4.e wr-LLS ) the fiscal year. The amount of an estimated regulatory cost charge is one-fourth of the commission's reasonable estimate, based on information then available, of what the person's total regulatory cost charge will be for that fiscal year. (b) The commission will provide a person subject to an estimated regulatory cost charge -with written notice of the amount of the charge and the payment date. The commission will set a t),;e/least 20 days after the date of the notice. The person shall pay the estimated payment date 0 -at -4-t t W ekts3 regulatory cost cha�rg b�r �yyt h e pD-a y am e n f d —at e. A-s o ss Atj-q*�Aj r, . ^5 + 1. 06.00S A-S 9- _J A;5 0 (P. 0 30 5 4-s V ol 20 AAC 25.730. Commission's determination of regulatory cost charges for geothermal wells. (a) After the later of the beginning of a fiscal year or the date of enactment of an appropriation for the operating costs of the commission for that fiscal year, the commission will provide to persons subject to a regulatory cost charge under AS 41.06.055 written notice of the proposed regulatory cost char�a-e4sRrto-AbAe&:i-±m---t-p:)!-o-s-e-JT--t-n-p�-e�r—s!�—n�s--S-U-Ibject to regulatory cost charges for A that fiscal year and the basis for the charges, in accordance with 20 AAC 25.720. QN6 ( ooetr -"VL.*j � (b)'�DO days -after notice is issued under (a) of this section, a person subject to a regulatory cost charg$,ma'y_ submit comments on, or request a revision to, the regulatory cost charges imposed for geothermal wells by the commission. A request for a revision must be 4 Register _, it MISCELLANEOUS BAILS accompanied by an explanation of the basis for the requested revision, and evidence in support of the request. Before a hearing is held under (c) of this section, the commission will provide all persons subject to a regulatory cost charge�' �ic ��pies of �com� d requests for revision received by the commission or with notice of the persons' right to inspect those comments and requests for revision. K0 I d.�ey (c) W54� 60 days after notice is issued under (a) of this section, the commission will hold a public hearing in accordance with 20 AAC 25.540 on the proposed regulatory cost charge Ne. i Lkr (d) W-4thM 90 days after notice is issued under (a) of this section, the commission will 11_� eA �fs issue an order determining the regulatory cost charge�f6_be paid and the dates by which the charges must be paid. The commission will provide written notice to each person subject to a We,& regulatory cost charge of the person's regulatory cost chargea�ndpay�ment iateVl (e) The commission will not determine or adjust previously determined regulatory cost charges based on fluid volume reports that are filed or amended, or on other fluid volume corrections that are made, after the deadline under (b) of this section for responding to the commission's notice of proposed regulatory cost charges, except if the commission finds that (1) a person has grossly under -reported the person's Vgop, as defined in 20 AAC 25.720(a); (2) under -reporting as described in (1) of this subsection caused or will cause W P-itc ) 'to 6e materially excessive; and others' regulatory cost charges A L-4,( (3) correcting the excessive regulatory cost chatge:his rn' the public interes ,J ,4-V 14 S 1//. 66. CO-5 As V- /. oz. 0 -3 5 ,,+ 5 sz/. od'. 0-f () ,A-.S V-1 . 0 4. 0 _S o 5 Register _, a MISCELLANEOUS BWDS 20 AAC 25.735. Payment dates for regulatory cost charges for geothermal wells. (a) If the commission orders payment of estimated regulatory cost charges under 20 AAC 25.725, the commission will establish payment dates for regulatory cost charges during the second, third, and fourth quarters of the fiscal year. No later than each payment date, a person subject to a C r -it^ 4�er 'Aj- A -A C -A- S. -7 ZUS I regulatory cost charje_�shall pay —one-third of the difference between the person's regulatory cost Z% we_�� charge and any estimated re-g-ura—tory cost charge previously paid for the fiscal year, except that a A a wrm-4t-e-v- regulatory cost chargimay be prepaid, -in-p-a-ft—or-Tin-' whole, at any time. (b) If the commission does not order payment of estimated regulatory cost charges under 20 AAC 25.725, the commission will establish payment dates for regulatory cost charges during each quarter or each third of the fiscal year. No later than each payment date, a person subject to C4 ,, a- �2'5 -�'76 0 � a regulatory cost chargNetlia-11 pay one-fourth, if four payment dates are established, or one-third, A if three payment dates are established, of the person's regulatory cost charge, except that a regulatory cost chargg�e;ayy �IffeprepaZY, �in �pawrt �®rin w�ole, at any time. (c) The commission will set the first payment date in a fiscal year to be at least 20 days after the date the commission provides notice under 20 AAC 25.730(d). e-". / / J 0--&-2 1 s4cr A- 541. o,6. 00 S- v-1. 0 6. 0 fA D S 9- 0 6. 20 AAC 25.740. Supplemental appropriations. IMP tho- yGasso of regulatory cost charge*alseCd�.. ?/ I ) C on a supplemental appropriation for a fiscal year, �ethe commission will determine regulatory cost charges using the commission's determinations of geothermal resources and well operatorship previously made in connection with the regular appropriation for the fiscal year; 01 in applying the formula set out in 20 AAC 25.720(a), the commission will set the 011" variable "Lg" equal to zer0j. 'I., I, Register _, MISCELLANEOUS B*RDS .-,!A '4� J.he commission will use the procedures set out in 20 AAC 25.730, except that the period CA) ,.�Wfor submitting comments or requesting a revision under 20 AAC 25.730(b) is 10 days instead of 30 days; ee4lwithin which a public hearing will be held under 20 AAC 25.730(c) is 20 days instead of 60 days; the commission will provide notice of that hearing at least 10 days before the date of that hearing; the 3 0-day notice requirement under 20 AAC 2 5. 5 40 does not apply to a hearing held under this paragraph; and (�qwithin which the commission will issue an order determining regulatory cost charges under 20 AAC 25.730(d) is 30 days instead of 90 days; .�120 AAC 25.735 does not apply; and the commission will set the payment date for regulatory cost charges to be at least 10 days after the date the commission provides notice under 20 AAC 25.730(d). (Eff. —/—/—I Register __j q0 Authority: AS 41.06.005 AS 41.06.0-*# A js tl /. or. 6 B-S As V(. 0(0.0 50 20 AAC 25.990 is amended to read: P,(j7 .:%WAW167-4FITITI� I'M V kwj .55 AS 41.06.04M 7 Register _, -00 Q.� "An (73) "well" 0) MISCELLANEOUS BORDS A means a hole penetrating the earth, usually cased with steel pipe, and (i) from which oil or gas, or both, or geothermal resources, is obtained or obtainable; or (ii) that is made for the purpose of finding or obtaining oil, gas or geothermal resources, or of supporting oil, ga%or geothermal resources production; and 0� ��includes a well with multiple well branches drilled to different bottom -hole locationsr(Eff. 11/7/99, Register 152; am 1/5/2006, Register 177; Register 0 Authority: AS 31.05% A A-5 4//. D I, - 005 -------------- .4 S / /. 0 ( 0.0 .3-S 1* ( -L / / - .0-4) 10,111 8 0 0 Reg, ister 2010 MISCELLANEOUS BOARDS VA Article 7, �6 6L c4_.' Geothennal Resources. '74 �'Scction 705. Authority of commission 710, Applicabilityofre-ulations 715. Variances 71-0. Calculation ofregulatory cost charges tbr geothen-nal Nvells 72i. Fstimated regulatory cost char _Qes for geothermal wells 710, Commission's determination of regulatory cost charges for geothernial wells 735. Pavinent dates for regulatory cost charges for geothermal wells 740. SLIPPIctnental appropriations 20 AAC 25.705.Authoirih, of commission. All -%N-,clls drilled in search ofor in suprK:111 ot'llic recovem- or production ot'geothermal resource-, �,;�comphy %vith the reg I gulations contained 'ill -P tit �--kak4t--7, A L, / ry " 7*; 20 AAC25.710. Applicability of regulations. Unless other%vise specified r"�ulattons cofthi4ie4-eI3en+cr& in this chapter sh-6rapply to wells drilled in search of or in support of the recovery or production of'geothernial resources. ( E / / � C i -rt-4 0 Reoister—.. 0 MISCELLANEOU'S BOARDS I I WA .2c A W- -),5. -AL�5 - .45, 74 C, -'-iO AAC 25.71 -5. Variances. Upon request of the operator f(-)r,,uw action under thi�g�cle that has application to a single well orgeothernial system. the commizsion may approve a variance I?C I ) from the commission's re-ulations, if-�O the approval provides at least an equally effective means of accomplishing the requirement set out in the commission's regulation, or M the commission determines that the request is more appropnate to the proposed operation than compliance with requirements ofthe regulation. 6 3-5 YA C4.0*c 20 AAC 25.720. Calculation of regulatory cost charges for geothermal wells. (a) The fiormula tbr determining a person's regulatory cost charge under AS 41'WO55 is RCCg - VgopNg ,lot *(A() - L-) Where RCCI the reLulatory cost charge for geothermal wells. Voop the total volume of geothermal resources produced Crom. and all fluldsand substances iqjcctcd into, during the most recently concluded calendar year, wells for which a Permit to Drill has been issued Linder AS 41.06.050, ol'which the person is the operator on the first day ofthe fiscal vear. and that have not betbre that day been plugged and abandoned and repor(cd as abandoned in accordance with this chapter, k'gtot --- the total volume of geollien-nal resources produced firom. and all fluids and substances ii�jected into. during the most recently concluded calendar year, all wells for which a Permit Io Drill has been issued under AS 41.06.050 and that have not before the first day ofthe fiscal vear been pluqzed and abandoned and reported as abandoned in accordance with this chapter: g_ 2 Register 2010 MISCELLANFOUS BOARDS Av the appropriation. other than from federal receipts, made fior the operating costs related A I A 1-11- &Iakek-'s to activities underT I of (lie commission for the fiscal year'. Lg : the lapsed amount of a previous appropriation that is appropriated for the fiscal year under AS 41.06.055(d). (b) For purposes of calculating regulatory cost charges. volumes of -geothermal resources produced trom or ir�jccted into wells consist of the applicable volumes reported to the commission under 20 AAC 25.1-310(b) and 20 AAC 25.432, except that (1) if an operator has failed to report a volume as required, if two or rriore reported volumes are inconsistent. or 14' the commission determines that a reported Volume is other-,,6sc unreliable, the commission calculate or estimate volumes as it considers appropriate: I its A'a substantial split or (2) the commission YtiW- n dk-c�add the volume ( other release of ocothcrmal resources that is not included in a report under -20 AAC 25.230(b) or 20 AAC 1-5.431 (c) For purposes of determininc, volumes under AS 41.06.055(b) and thi,.-rrfraptri�9.000 cubic feet ofgascous gwothernial resources has a volume that is the equivalent oforte barrel of liquid geothermal resources. -7C 5 C #,4 ;;,'S, 744. N (d) For purposes of AS 41 .06.055(a) and thi*-e4aj*,-r. a well is considered plugged and abandoned and reported as abandoned in accordance with this chapter 11- the well has been abandoned in accordance with 1-0 AAC 25,105 and 20 AAC 25.112 and a complete well record fOr the Well- including a description of plugging operations, on a Well Completion or 0 0 Rcgisler MlS('E.LLANi:0US BOARDS Rccornpletion Report and I -oil, (Form 10-407) as required by 20 AM 25.070(,3) has been filed 5, with the commission after abandonment- T C, C -6 20 AAC 25.725. Estimated regulatory cost charges for geothermal wells. (a) Belbre detennining regulatory cost chartges t6r a fiscal year under 20 AAC 25.730 the commission iw4tft-diosc�.'estabfish estimated re-ulatory cost charge.< paid during the first quarter of po be I the fiscal year. The amount of an estimated regulatory cost charge, is one-fourth tit- the commission's reasonable estimate. based on inforniation then available. of what the person's total cost reg,ulatorN- a oe will he for that fiscal year. A (b)The commission will provide a person su�ject to an estimated regulatory cost charec withmitten notice of the amount of the charge and the payment date-'rhe cornmission will set a V_ payment date tchat least 20 days after the date of the notice. The person shall pay the estimated regulatory cost charj'�'� Gy the payment date. A ' - 14 —S 4i- 20 AAC 25.730. Commission's determination of regulatoij, cost charges- for geothermal wells. (a) After the later of the beginning of a fiscal year or the date of enactment of an appropriation for the operating costs ofthe commission for that fiscal year, the commission will provide to persons subject to a regulatory cost charge under AS 41-06.0555 written notice of the proposed regulatory cost charr�gps ft—) be impOsezr_O_n__ persons subject to rcaulatory cost charges ficir A zn that fiscal vcar and the basis for the charges. in accordance with 20 AA(7 25.7-20, N'W� 3 Aer notice is issued tinder (a) of this section. a person subject to a L is 1VOUlatory cost charge may submit comments on. or request a revision to. the regulatory cost charges imposed for geothermal wells by the commission. A request tbr a revision must be 4 0 0 Register --.-2010 MISCELLANEOU'S BOARDS accompanied by an explanation ofthe basis forthe requested revision.and evidence iIISU[)pOrt 01' the request,. Before a hearing is held under (c) ofthis section. the commission will provide all pcn�ons su�jcct to a regulatory cost charg eyvi th copies of comments and rcqUC`SIS I'm- revision received by the commission or with notice of the persons' right to inspect those comments and requests kir revision. (c) V"7-44iM 60 days after notice is issued under (a) of this section. the commission will hold a public hearing in accordance with 20 AAC 25.�-+Iu on the proposed regulatory cost charges. (d) W-4fWM 90 days after notice is issued under (a) ofthis section, the commission will wu,-J, t LS issue an order determining the regulatory cost charge�,'I`obe paid and the dates by which the charges must be paid. The commission will provide mcritten notice to each person sul�ject to a � i + regulalory cost charge of the pers c ost . ion's regulaton., charge ,\and paym�n �dates� (c) The commission will not determine or adjust previously determined regulatory cost charges based on fluid volume reptnis that arc filed or amended, or on other fluid volunic corrections that are made, after the deadline Linder (b) of this section flor responding to tile commission's notice ol'proposed reg ,ulatory cost charges. except il'the commission finds that (1) a person has grossly under -reported the person's Vgop. as defined in 20 AM 25.7'20(a)- (21) under -reporting as described in (1) of this subsection caused or will cause Q&,14tts �e 44--1 others' regulatory cost charge!No be material ly excessive: and (3) correcting the excessive regulatory cost chargc!\��,-ts -S 4- 5 C Reo ister 2010 MISCELLANI.`�OUS BOARDS 20 AAC 25.735. Payment dates for regulatory cost charges for geothermal wells. (a) I t'the commission orders payment ofestimated regulatory cost charges under 20 AAC 25.725. the commission will establish payment dates for regulatory cost charges during the second, third, and fourth quarters ofthe fiscal year. No later than each payment date- a person subject to a C _-L reOUlatOrV cost cha __��_hafl nav one-third of the difference between the person's regulatory cost r.,w Chargel.and any estimated regulatory cost charge previously, paid I -or the fiscal year- except that a �_S regulatory cost charge may be prepaid. in part —or in whole. at any time. (b) If the commission does not order payment of estimated regulaton, cost charges under 20 AAC 25.725, the commission will establish payment dates tbr regulatory cost charges during each quarter or each third ofthe fiscal year. No later than each payment date, a person subject to rj C, a regulatory cost charc�6shaili pay one-fourth, iffour payment dates are established. or one-third, A if three payment dates are established. of the person's regulatory cost charge. except that a IA- I VI: ;1 reg)ulatory cost charge,17ay be prepaid. in PTr—toi iri ��,-bole. at any time. (c) The commission will set the first payment date in a fiscal year to he at least 20 days after the date the commission provides notice under 20 AAC 25.7310(d)� CC ? 4-4_. sicf /_4 5�4 -4- . _s 6. c --/: 14 1111-/ . C (0. C __:!� I-- �+ _> '7' / . 4�, 0 , (� -:� C, �1� r- 01-11114d 25.740. Supplemental appropriations. 10 the C-M5 caw,-_+4- ret, laton, cost charg on a supplemental appropriation for a fiscal year- A4-Wthe commission will determine regulatory cost charges, using the commission's determinations of ocothermal resources and well operatorship previously made in connection with the regular appropriatiOn for the fiscal year. 4`� -in applying the t-Orniula set out in 20 AAC 25.7220(a). the commission will set the variable "Lg" equal to ZCTQ�. 6 Register -00 MISCE'LLANEOUS BOODS the commission will use the procedures set out In 20 AAC 25.730. except that the period _,,_W�for submitting comments or requesting a revision under 20 AAC 25.73 )O(b) is 10 days instead (if 30 days; 'r—TINIVithin which a public hearing will be held under 20 AAC _25.730(c) is 20 days instead of 60 days, the commission will provide notice ofthat hearing at least 10 days before the date ofthat hearing, the 30-day notice requirement under'-10 AAC does not apply to a heaning held under this paragraph; and within which the commission will issue an order deterniinin- regulatory cost charges under 20 AAC 25�730(d) is '30 days instead of 90 days; ;�20 AAC 25.735 does not apply.- and _N ;Y j the commission will set the payment date for regulatory cost charges to be at least 10 days after the date the commission provides notice under 20 AAC 25.730(d). (13111 - _,/_/ Register IV C, Authority: AS 41.06.005 AS 41-06-030-k q/. cc- 6 C 5 T '20 AAC 1_5�990 is amended to read.- 7 -5 5* AS 41.0&04G ister *_I 0 MISCELLANEOUS ARDS (73) means a hole penetrating the earth. usually cased with steel pipe, and (i) From which oil or gas, or both, or geothermal resources, is obtaincd or obtainable; or (ii) that is made for the purpose of finding or obtaining oil, gas or 41- geothen-nal resources, or of supporting oil. gxior geothermal resources production; and ��-includcs a well with multiple well branches drilled to ditTerent bottom -hole locations� (Eff. 11/7/99, Register 152; am 1/5/2006, Register 177; Register S - 54 Authority: AS 31.05�_ 0 A Ar-54 '/' 5 9 P-74 M:i E 0 MEMORANDUM STATE OF ALASKA ALASKA OIL AND GAS CONSERVATION COMMISSION TO: Regulations Attorney DATE: Legislation/Regulations Section Department of Law SUBJECT: FROM: John K. Norman, Commissi Department of Administrati$on' Alaska Oil and Gas Conservation Commission July 12, 2010 AG File No. JU2010201538 Request for Legal Review of Regulations Project on Geothermal Resource Drilling 20 AAC 25.700-990 We are requesting approval of the attached fin -regulations on the Geothermal Resource Drilling. J The Commission adopted these changes on J e 14, 2010. Enclosed are the following documents: 1. original and one copy of the final regulations; 2. original signed and dated certification order; 3. original public notices; 4. original additional regulations notice information form distributed with the notice; 5. original publisher's affidavit's of publication; 6. original affidavit of notice; 7. original affidavit of oral hearing; 8. original affidavit of commission action; 9. excerpt from unapproved minutes from the May 5, 2010 meeting; We worked with Assistant Attorney General Thomas Ballantine on this project. Upon completing your review, please forward the regulations to the lieutenant governor for filing. In accordance with AS 44.62.180, the regulation changes will take effect on the 3 oth day after filing. 0 ORDER CERTIFYING THE CHANGES TO REGULATIONS OF ALASKA OIL AND GAS CONSERVATION COMMISSION The attached 8 pages of regulations, dealing with geothermal resource drilling under 20 AAC 25, is certified to be a correct copy of the regulation changes that the Alaska Oil and Gas Conservation Commission adopted at its July 14, 2010 meeting, under the authority of AS 31.05.30, AS 41.06.005, AS 41.06.035 and AS 31.06.040 and in compliance with the Administrative Procedure Act (AS 44.62), including the notice provisions (AS 44.62.190 and AS 44.62.200) and opportunity for public comment provision (AS 44.62.2 10). This action is not expected to require an increased appropriation. On the record, in considering public comments, the Alaska Oil and Gas Conservation Commission paid special attention to the cost to private persons of the regulatory action being taken. As provided in AS 44.62.180, the subject regulation changes take effect on the 30th day after flip nri- -Filprl'k flie lieutenant governor DATE: July 27, 2010 Anchorage FILING CERTIFICATION 1, Craig E. Campbell, Lieutenant Governor for the State of Alaska, certify that on 2010 at in., I filed the attached regulations according to the provisions of AS 44.62.040 — 44.62.120. Lieutenant Governor Effective: Register: 0 0 ORDER CERTIFYING THE CHANGES TO REGULATIONS OF ALASKA OIL AND GAS CONSERVATION COMMISSION The attached 4 pages of regulations, dealing with geothermal resource drilling u er 20 AAC 25, 'e drl' ng u is certified to be a correct copy of the regulation changes that the Alaska Oil a Gas 1 Conservation Commission adopted at its July 14, 2010 meeting, under the a ority of AS 31.05.30, AS 41.06.005, AS 41.06.035 and AS 31.06.040 and in complia e with the .t t Administrative Procedure Act (AS 44.62), including the notice provisi s (AS 44.62.190 and AS 44.62.200) and opportunity for public comment provision (AS 44.62 10). This action is not expected to require an increased On the record, in considering public comments, the Alaska �Xli and Gas Conservation Commission paid special attention to the cost to private,76ons of the regulatory action being taken. As provided in AS 44.62.180, the subject re they are filed by the lieutenant governor. DATE: July 14, 2010 Anchorage Commissioner FILING CERTIFICATION 1, Craig E. Campbell, Veutenant Governor for the State of Alaska, certify that on 2010 at m., I filed the attached regulations according to the provisions of AS 14.62.040 — 44.62.120. Lieutenant Governor 0 0 Register 2010 MISCELLANEOUS BOARDS Article 7 Geothermal Resources Section 705. Authority of commission 710. Applicability of regulations 715. Variances 720. Calculation of regulatory cost charges for geothermal wells 725. Estimated regulatory cost charges for geothermal wells 730. Commission's determination of regulatory cost charges for geothermal wells 735. Payment dates for regulatory cost charges for geothermal wells 740. Supplemental appropriations 990. Definitions 20 AAC 25.705. Authority of commission. All wells drilled in search of or in support of the recovery or production of geothermal resources shall comply with the regulations contained in this Article 7. 20 AAC 25.710. Applicability of regulations. Unless otherwise specified in this article, all regulations contained elsewhere in this chapter shall apply to wells drilled in search of or in support of the recovery or production of geothermal resources. 20 AAC 25.715. Variances. Upon request of the operator for any action under this article that has application to a single well or geothermal system, the commission may approve a variance from the commission's regulations, if (a) the approval provides at least an equally effective means of accomplishing the requirement set out in the commission's regulation; or (b) the commission determines that the request is more appropriate to the proposed operation than compliance with requirements of the regulation. 20 AAC 25.720. Calculation of regulatory cost charges for geothermal wells. (a) The formula for determining a person's regulatory cost charge under AS 41.06.055 is RCCg = VgopNgtot *(Ag - Lg) where RCCg the regulatory cost charge for geothermal wells; Vggp the total volume of geothermal resources produced from, and all fluids and substances injected into, during the most recently concluded calendar year, wells for which a Permit to Drill has been issued under AS 41.06.050, of which the person is the operator on the first day of the fiscal year, and that have not before that day been plugged and abandoned and reported as abandoned in accordance with this chapter; Vgtot = the total volume of geothermal resources produced from, and all fluids and substances injected into, during the most recently concluded calendar year, all wells for which a Permit to Drill has been issued under AS 41.06.050 and that have not before the first day of the fiscal year been plugged and abandoned and reported as abandoned in accordance with this chapter; 0 Register 2010 MISCELLANEOUS BARDS Ag = the appropriation, other than from federal receipts, made for the operating costs related to activities under Title 41 Chapter 06 of the Alaska Statutes of the commission for the fiscal year; Lg = the lapsed amount of a previous appropriation that is appropriated for the fiscal year under AS 41.06.055(d). (b) For purposes of calculating regulatory cost charges, volumes of geothermal resources produced from or injected into wells consist of the applicable volumes reported to the commission under 20 AAC 25.230(b) and 20 AAC 25.432, except that (1) if an operator has failed to report a volume as required, if two or more reported volumes are inconsistent, or if the commission determines that a reported volume is otherwise unreliable, the commission will, in its discretion, calculate or estimate volumes as it considers appropriate; (2) the commission will, in its discretion, add the volume of a substantial spill or other release of geothermal resources that is not included in a report under 20 AAC 25.230(b) or 20 AAC 25.432. (c) For purposes of determining volumes under AS 41.06.055(b) and this chapter 9,000 cubic feet of gaseous geothermal resources has a volume that is the equivalent of one barrel of liquid geothermal resources. (d) For purposes of AS 41.06.055(a) and this chapter, a well is considered plugged and abandoned and reported as abandoned in accordance with this chapter if the well has been abandoned in accordance with 20 AAC 25.105 and 20 AAC 25.112 and a complete well record for the well, including a description of plugging operations, on a Well Completion or Recompletion Report and Log (Form 10-407) as required by 20 AAC 25.070(3) has been filed with the commission after abandonment. 20 AAC 25.725. Estimated regulatory cost charges for geothermal wells. (a) Before determining regulatory cost charges for a fiscal year under 20 AAC 25.730 the commission will, in its discretion, establish estimated regulatory cost charges to be paid during the first quarter of the fiscal year. The amount of an estimated regulatory cost charge is one-fourth of the commission's reasonable estimate, based on information then available, of what the person's total regulatory cost charge will be for that fiscal year. (b) The commission will provide a person subject to an estimated regulatory cost charge with written notice of the amount of the charge and the payment date. The commission will set a payment date to at least 20 days after the date of the notice. The person shall pay the estimated regulatory cost charge by the payment date. 20 AAC 25.730. Commission's determination of regulatory cost charges for geothermal wells. (a) After the later of the beginning of a fiscal year or the date of enactment of an appropriation for the operating costs of the commission for that fiscal year, the commission will provide to persons subject to a regulatory cost charge under AS 41.06.055 written notice of the proposed regulatory cost charges to be imposed on persons subject to regulatory cost charges for that fiscal year and the basis for the charges, in accordance with 20 AAC 25.720. (b) Within 30 days after notice is issued under (a) of this section, a person subject to a regulatory cost charge may submit comments on, or request a revision to, the regulatory cost charges imposed for geothermal wells by the commission. A request for a revision must be accompanied by an explanation of the basis for the requested revision, and evidence in support of 2 0 Register 2010 MISCELLANEOUS BARDS the request. Before a hearing is held under (c) of this section, the commission will provide all persons subject to a regulatory cost charge with copies of comments and requests for revision received by the commission or with notice of the persons' right to inspect those comments and requests for revision. (c) Within 60 days after notice is issued under (a) of this section, the commission will hold a public hearing in accordance with 20 AAC 25.540 on the proposed regulatory cost charges. (d) Within 90 days after notice is issued under (a) of this section, the commission will issue an order determining the regulatory cost charges to be paid and the dates by which the charges must be paid. The commission will provide written notice to each person subject to a regulatory cost charge of the person's regulatory cost charge and payment dates. (e) The commission will not determine or adjust previously determined regulatory cost charges based on fluid volume reports that are filed or amended, or on other fluid volume corrections that are made, after the deadline under (b) of this section for responding to the commission's notice of proposed regulatory cost charges, except if the commission finds that (1) a person has grossly under -reported the person's Vgop, as defined in 20 AAC 25.720(a); (2) under -reporting as described in (1) of this subsection caused or will cause others' regulatory cost charges to be materially excessive; and (3) correcting the excessive regulatory cost charges is in the public interest. 20 AAC 25.735. Payment dates for regulatory cost charges for geothermal wells. (a) If the commission orders payment of estimated regulatory cost charges under 20 AAC 25.725, the commission will establish payment dates for regulatory cost charges during the second, third, and fourth quarters of the fiscal year. No later than each payment date, a person subject to a regulatory cost charge shall pay one-third of the difference between the person's regulatory cost charge and any estimated regulatory cost charge previously paid for the fiscal year, except that a regulatory cost charge may be prepaid, in part or in whole, at any time. (b) If the commission does not order payment of estimated regulatory cost charges under 20 AAC 25.725, the commission will establish payment dates for regulatory cost charges during each quarter or each third of the fiscal year. No later than each payment date, a person subject to a regulatory cost charge shall pay one-fourth, if four payment dates are established, or one-third, if three payment dates are established, of the person's regulatory cost charge, except that a regulatory cost charge may be prepaid, in part or in whole, at any time. (c) The commission will set the first payment date in a fiscal year to be at least 20 days after the date the commission provides notice under 20 AAC 25.730(d). 20 AAC 25.740. Supplemental appropriations. In the case of regulatory cost charges based on a supplemental appropriation for a fiscal year, (a) the commission will determine regulatory cost charges using the commission's determinations of geothermal resources and well operatorship previously made in connection with the regular appropriation for the fiscal year; (b) in applying the formula set out in 20 AAC 25.720(a), the commission will set the variable "Lg" equal to zero; (c) the commission will use the procedures set out in 20 AAC 25.730, except that the period 91 MISCELLANEOUS BARDS 0 Register 2010 (1) for submitting comments or requesting a revision under 20 AAC 25.730(b) is 10 days instead of 30 days; (2) within which a public hearing will be held under 20 AAC 25.730(c) is 20 days instead of 60 days; the commission will provide notice of that hearing at least 10 days before the date of that hearing; the 30-day notice requirement under 20 AAC 25.540 does not apply to a hearing held under this paragraph; and (3) within which the commission will issue an order determining regulatory cost charges under 20 AAC 25.730(d) is 30 days instead of 90 days; (d) 20 AAC 25.735 does not apply; and (e) the commission will set the payment date for regulatory cost charges to be at least 10 days after the date the commission provides notice under 20 AAC 25.730(d). (Eff. Register _) Authority: AS 41.06-005 AS 41.06.035 AS 41.06.040 20 AAC 25.990 is amended to read: 20 AAC 25.990. Definitions. (73) "well" (a) means a hole penetrating the earth, usually cased with steel pipe, and (i) from which oil or gas, or both, or geothermal resources, is obtained or obtainable; or (ii) that is made for the purpose of finding or obtaining oil, gas or geothermal resources, or of supporting oil, gas or geothermal resources production; and (b) includes a well with multiple well branches drilled to different bottom -hole locations; (Eff. 11/7/99, Register 152; am 1/5/2006, Register 177; Register Authority: AS 31.05.30 4 0 Register 2010 MISCELLANEOUS BARDS Article 7 Geothermal Resources Section 705. Authority of commission 710. Applicability of regulations 715. Variances 720. Calculation of regulatory cost charges for geothermal wells 725. Estimated regulatory cost charges for geothermal wells 730. Commission's determination of regulatory cost charges for geothermal wells 735. Payment dates for regulatory cost charges for geothermal wells 740. Supplemental appropriations 990. Definitions 20 AAC 25.705. Authority of commission. All wells drilled in search of or in support of the recovery or production of geothermal resources shall comply with the regulations contained in this Article 7. 20 AAC 25.710. Applicability of regulations. Unless otherwise specified in this article, all regulations contained elsewhere in this chapter shall apply to wells drilled in search of or in support of the recovery or production of geothermal resources. 20 AAC 25.715. Variances. Upon request of the operator for any action under this article that has application to a single well or geothermal system, the commission may approve a variance from the commission's regulations, if (a) the approval provides at least an equally effective means of accomplishing the requirement set out in the commission's regulation; or (b) the commission determines that the request is more appropriate to the proposed operation than compliance with requirements of the regulation. 20 AAC 25.720. Calculation of regulatory cost charges for geothermal wells. (a) The formula for determining a person's regulatory cost charge under AS 41.06.055 is RCCg = VgopNgtot *(Ag - Lg) where RCCg the regulatory cost charge for geothermal wells; Vggp the total volume of geothermal resources produced from, and all fluids and substances injected into, during the most recently concluded calendar year, wells for which a Permit to Drill has been issued under AS 41.06.050, of which the person is the operator on the first day of the fiscal year, and that have not before that day been plugged and abandoned and reported as abandoned in accordance with this chapter; Vgtot = the total volume of geothermal resources produced from, and all fluids and substances injected into, during the most recently concluded calendar year, all wells for which a Permit to Drill has been issued under AS 41.06.050 and that have not before the first day of the fiscal year been plugged and abandoned and reported as abandoned in accordance with this chapter; 0 k S Register 2010 MISCELLANEOUS BO Ag = the appropriation, other than from federal receipts, made for the operating costs related to activities under Title 41 Chapter 06 of the Alaska Statutes of the commission for the fiscal year; Lg = the lapsed amount of a previous appropriation that is appropriated for the fiscal year under AS 41.06.055(d). (b) For purposes of calculating regulatory cost charges, volumes of geothermal resources produced from or injected into wells consist of the applicable volumes reported to the commission under 20 AAC 25.230(b) and 20 AAC 25.432, except that (1) if an operator has failed to report a volume as required, if two or more reported volumes are inconsistent, or if the commission determines that a reported volume is otherwise unreliable, the commission will, in its discretion, calculate or estimate volumes as it considers appropriate; (2) the commission will, in its discretion, add the volume of a substantial spill or other release of geothermal resources that is not included in a report under 20 AAC 25.230(b) or 20 AAC 25.432. (c) For purposes of determining volumes under AS 41.06.055(b) and this chapter 9,000 cubic feet of gaseous geothermal resources has a volume that is the equivalent of one barrel of liquid geothermal resources. (d) For purposes of AS 41.06.055(a) and this chapter, a well is considered plugged and abandoned and reported as abandoned in accordance with this chapter if the well has been abandoned in accordance with 20 AAC 25.105 and 20 AAC 25.112 and a complete well record for the well, including a description of plugging operations, on a Well Completion or Recompletion Report and Log (Form 10-407) as required by 20 AAC 25.070(3) has been filed with the commission after abandonment. 20 AAC 25.725. Estimated regulatory cost charges for geothermal wells. (a) Before determining regulatory cost charges for a fiscal year under 20 AAC 25.730 the commission will, in its discretion, establish estimated regulatory cost charges to be paid during the first quarter of the fiscal year. The amount of an estimated regulatory cost charge is one-fourth of the commission's reasonable estimate, based on information then available, of what the person's total regulatory cost charge will be for that fiscal year. (b) The commission will provide a person subject to an estimated regulatory cost charge with written notice of the amount of the charge and the payment date. The commission will set a payment date to at least 20 days after the date of the notice. The person shall pay the estimated regulatory cost charge by the payment date. 20 AAC 25.730. Commission's determination of regulatory cost charges for geothermal wells. (a) After the later of the beginning of a fiscal year or the date of enactment of an appropriation for the operating costs of the commission for that fiscal year, the commission will provide to persons subject to a regulatory cost charge under AS 41.06.055 written notice of the proposed regulatory cost charges to be imposed on persons subject to regulatory cost charges for that fiscal year and the basis for the charges, in accordance with 20 AAC 25.720. (b) Within 30 days after notice is issued under (a) of this section, a person subject to a regulatory cost charge may submit comments on, or request a revision to, the regulatory cost charges imposed for geothermal wells by the commission. A request for a revision must be accompanied by an explanation of the basis for the requested revision, and evidence in support of 4 0 Register 2010 MISCELLANEOUS BADS the request. Before a hearing is held under (c) of this section, the commission will provide all persons subject to a regulatory cost charge with copies of comments and requests for revision received by the commission or with notice of the persons' right to inspect those comments and requests for revision. (c) Within 60 days after notice is issued under (a) of this section, the commission will hold a public hearing in accordance with 20 AAC 25.540 on the proposed regulatory cost charges. (d) Within 90 days after notice is issued under (a) of this section, the commission will issue an order determining the regulatory cost charges to be paid and the dates by which the charges must be paid. The commission will provide written notice to each person subject to a regulatory cost charge of the person's regulatory cost charge and payment dates. (e) The commission will not determine or adjust previously determined regulatory cost charges based on fluid volume reports that are filed or amended, or on other fluid volume corrections that are made, after the deadline under (b) of this section for responding to the commission's notice of proposed regulatory cost charges, except if the commission finds that (1) a person has grossly under -reported the person's Vgop, as defined in 20 AAC 25.720(a); (2) under -reporting as described in (1) of this subsection caused or will cause others' regulatory cost charges to be materially excessive; and (3) correcting the excessive regulatory cost charges is in the public interest. 20 AAC 25.735. Payment dates for regulatory cost charges for geothermal wells. (a) If the commission orders payment of estimated regulatory cost charges under 20 AAC 25.725, the commission will establish payment dates for regulatory cost charges during the second, third, and fourth quarters of the fiscal year. No later than each payment date, a person subject to a regulatory cost charge shall pay one-third of the difference between the person's regulatory cost charge and any estimated regulatory cost charge previously paid for the fiscal year, except that a regulatory cost charge may be prepaid, in part or in whole, at any time. (b) If the commission does not order payment of estimated regulatory cost charges under 20 AAC 25.725, the commission will establish payment dates for regulatory cost charges during each quarter or each third of the fiscal year. No later than each payment date, a person subject to a regulatory cost charge shall pay one-fourth, if four payment dates are established, or one-third, if three payment dates are established, of the person's regulatory cost charge, except that a regulatory cost charge may be prepaid, in part or in whole, at any time. (c) The commission will set the first payment date in a fiscal year to be at least 20 days after the date the commission provides notice under 20 AAC 25.730(d). 20 AAC 25.740. Supplemental appropriations. In the case of regulatory cost charges based on a supplemental appropriation for a fiscal year, (a) the commission will determine regulatory cost charges using the commission's determinations of geothermal resources and well operatorship previously made in connection with the regular appropriation for the fiscal year; (b) in applying the formula set out in 20 AAC 25.720(a), the commission will set the variable "Lg" equal to zero; (c) the commission will use the procedures set out in 20 AAC 25.730, except that the period 3 1 0 Register 2010 MISCELLANEOUS BORDS (1) for submitting comments or requesting a revision under 20 AAC 25.730(b) is 10 days instead of 3 0 days; (2) within which a public hearing will be held under 20 AAC 25.730(c) is 20 days instead of 60 days; the commission will provide notice of that hearing at least 10 days before the date of that hearing; the 30-day notice requirement under 20 AAC 25.540 does not apply to a hearing held under this paragraph; and (3) within which the commission will issue an order determining regulatory cost charges under 20 AAC 25.730(d) is 30 days instead of 90 days; (d) 20 AAC 25.735 does not apply; and (e) the commission will set the payment date for regulatory cost charges to be at least 10 days after the date the commission provides notice under 20 AAC 25.730(d). (Eff. Register __) Authority: AS 41.06.005 AS 41.06.035 AS 41.06.040 20 AAC 25.990 is amended to read: 20 AAC 25.990. Definitions. (73) "well" (a) means a hole penetrating the earth, usually cased with steel pipe, and (i) from which oil or gas, or both, or geothermal resources, is obtained or obtainable; or (ii) that is made for the purpose of finding or obtaining oil, gas or geothermal resources, or of supporting oil, gas or geothermal resources production; and (b) includes a well with multiple well branches drilled to different bottom -hole locations; (Eff. 11/7/99, Register 152; am 1/5/2006, Register 177; Register Authority: AS 31.05.30 4 0 0 STATE OF ALASKA NOTICE OF PROPOSED CHANGES IN THE REGULATIONS OF THE ALASKA OIL AND GAS CONSERVATION COMMISSION The Alaska Oil and Gas Conservation Commission proposes to adopt regulation changes to Title 20, Chapter 25 of the Alaska Administrative Code by renumbering current Article 7 as new Article 8, and adding a new Article 7 to deal with geothermal resource drilling and production. The new regulations proposed to be adopted by the Alaska Oil and Gas Conservation Commission include the following: (1) 20 AAC 25.705 — includes geothermal wells in the commission's regulatory jurisdiction; (2) 20 AAC 25.710 — extends the existing oil and gas well regulations, where applicable, to geothermal wells; (3) 20 AAC 25.715 — allows Commission to grant regulatory variances and waivers, where appropriate; (4) 20 AAC 25.720, 725, 730, 735, 740 and 745 - establishes calculation method for geothermal resource regulatory cost charge, and; (5) 20 AAC 25.990(73) — adds geothermal wells to the commission's definition of well. You may comment on the proposed regulation changes, including the potential costs to private persons of complying with the proposed regulations, by submitting written comments to the Alaska Oil and Gas Conservation Commission at 333 West 7 1h Avenue, Suite 100, Anchorage, Alaska 99501. The comments must be received no later than 4:30 p.m. on June 28, 2010. Oral or written comments also may be submitted at a hearing to be held at 9:00 a.m. on June 29, 2010, at 333 West 7th Avenue, Suite 100, Anchorage, Alaska 99501. The hearing may continue beyond 12:00 p.m, to allow comment by those present before 9:30 a.m. The public comment period wil I close at the end of the June 29, 2010 hearing. If you are a person with a disability who needs a special accommodation in order to participate in this process, please contact the Commission's Special Assistant Jody Colombie at (907) 793-1221 no later than June 23, 20 10 to ensure that any necessary accommodations can be provided. For a copy of the proposed regulation changes, contact Jody Colombie at 333 West 7 1h Avenue, Suite 100, Anchorage, Alaska 99501, (907) 793-1221, or go to www.aogcc.alaska.gov. After the public comment period ends, the Alaska Oil and Gas Conservation Commission will either adopt these or other provisions addressing the same subject, without further notice, or decide to take no action on them. The language of the final regulations may be different from that of the proposed regulations. YOU SHOULD COMMENT DURING THE TIME ALLOWED IF YOUR INTERESTS COULD BE AFFECTED. Statutory Authority: AS 41.06.005, AS 41.06.035, AS 41.06.040. Statutes Being Implemented, Interpreted, or Made Specific: AS 41.06.005, AS 41.06.035, AS 41.06.040. Fiscal Information: The proposed regulation changes are not expected to require an increased appropriation. DATE: .5/ niel T. Seamount. Jr.. Chair ADDITIONAL REGULATIONS NOTICE INFORMATION (AS 44.62.190(d)) 1. Adopting agency: Alaska Oil and Gas Conservation Commission. 2. General subject of regulations: Geothermal resources drilling and production. 3. Citation of regulations: 20 AAC 25.705, 20 AAC 25.710, 20 AAC 25.715, 20 AAC 25.720, AAC 25.725, 20 AAC 25.730, 20 AAC 25.73 5, 20 AAC 25.740, 20 AAC 25.745 and 20 AAC 25.990(73) 4. Reason for the proposed action: legislative action transferring geothermal regulatory authority to the Alaska Oil and Gas Conservation Commission. 5. Program category and BRU affected: Alaska Oil and Gas Conservation Commission. 6. Cost of implementation to the state agency: Annual cost is $30,000 (2% of current inspection program cost). 7. The name of the contact person for the regulations: Name: Winton Aubert Title: Senior Reservoir Engineer Address: 333 W. 7th Avenue, Suite 100, Anchorage, AK 99501 Telephone: (907) 793-1221 E-mail: winton.aubert@alaska.gov 8. The origin of the proposed action: agencystaff. 9. Date: May 28, 2010 10. Prepared by: J4 J. Cca6mbiV Alaska Oil and Gas Conservation Commission (907) 793-1221 STOF0330 JUN 2 #776326 Alaska C Waggle $415.00 AFFIDAVIT OF PUBLICATION STATE OF ALASKA I THIRD JUDICIAL DISTRICT Shane Drew being first duly sworn on oath deposes and says that he/she is a representative of the Anchorage Daily News, a daily newspaper. That said newspaper has been approved by the Third Judicial Court, Anchorage, Alaska, and it now and has been published in the English language continually as a daily newspaper in Anchorage, Alaska, and it is now and during all said time was printed in an office maintained at the aforesaid place of publication of said newspaper. That the annexed is a copy of an advertisement as it was published in regular issues (and not in supplemental form) of said newspaper on May 29,2010 and that such newspaper was regularly distributed to its subscribers during all of said period. That the full amount of the fee charged for the foregoing publication is not in excess of the rate charged private individuals Signed Subscribed and sworn to before 13r) me thik-,24� day oa-,t.� Notary Public in and for 'Me State of Alaska. Third Division Anchorage, Alaska "N My COMMISSION EXPIRES PUO Of 9 0 STATE OF ALASKA ) ss. THIRD JUDICIAL DISTRICT AFFIDAVIT OF NOTICE OF PROPOSED ADOPTION OF REGULATIONS AND FURNISHING OF ADDITIONAL I`NFORMATION 1, Jody J. Colombie, Special Assistant to the Alaska Oil and Gas Conservation Commission, being sworn, state the following: As required by AS 44.62.190, notice of the proposed adoption of changes to 20 AAC 25.700- 990, dealing with Geothernial Resource Drilling, was given by being (1) published in a newspaper or trade publication; (2) furnished to interested persons as shown on the attached list; (3) furnished to appropriate state officials; (4) furnished to the Department of Law, along with a copy of the proposed regulations; (5) electronically transmitted to incumbent State of Alaska legislators; (6) furnished to the Legislative Affairs Agency, Legislative Library; (7) posted on the Alaska Online Public Notice System, as required by AS 44.62.175(a)(1) and (b) and AS 44.62.190(a)(1); (8) furnished electronically, along with a copy of the proposed regulations, to the Legislative Affairs Agency, the chairs of the Senate Resources Committee and House Special Committee of Oil and Gas, the Administrative Regulation Review Committee, and the Legislative Council. As required by AS 44.62.190(d), additional regulations notice information regarding the proposed adoption of the regulation changes described above was furnished to interested persons as shown on the attached list and those in (5) and (6) of the list above. The additional regulations notice information was posted on the Alaska Online Public Notice System. DATE: July 14, 20 10 Anchorage ()A�COJ4 Jo(O J. C((�mUe Special Assistant to the Commission SUBSCRIBED AND SWORN TO before me is 14th day of July 0 10. Kota�y Public in' a & State of Alaska My commission expires: 11/11/2010 0 Colombie, Jody J (DOA) From: Colombie, Jody J (DOA) Sent: Friday, May 28, 2010 12:00 PM To: resregs@leg is. state. ak. us; (foms2@mtaonline. net); (m ichael.j. nelson @conocoph i I lips. com); (Von. L.Hutchins@conocophillips.com); Alan Dennis; alaska@petrocaic.com; Anna Raff; Barbara F Fullmer; bbritch; Becky Bohrer; Bill Walker; Bowen Roberts; Brad McKim; Brady, Jerry L; Brandon Gagnon; Branclow, Cancle (ASRC Energy Services); Brian Gillespie; Brian Havelock; Bruce Webb; carol smyth; caunderwood; Charles O'Donnell; Chris Gay; Cliff Posey; Crandall, Krissell; Dan Bross; dapa; Daryl J. Kleppin; David Boelens; David House; David Steingreaber; ddonkel@cfl.rr.com; Deborah J. Jones; Delbridge, Rena E (LAA); doug__,schultze; Elowe, Kristin; Evan Harness; eyancy-, Francis S. Sommer; Fred Steece; Garland Robinson; Gary Laughlin; Gary Rogers; Gary Schultz; ghammons; Gordon Pospisil; Gorney, David L.; Gregg Nady; gspfoff; Harry Engel; Jdarlington oarlington@gmail.com); Jeff Jones; Jeffery B. Jones oeff.jones@alaska.gov); Jerry McCutcheon; Jim White; Jim Winegarner; Joe Nicks; John Garing; John Katz (john.katz@alaska.gov); John S. Haworth; John Spain; John Tower; Jon Goltz; Joseph Darrigo; Judy Stanek; Julie Houle; Kari Moriarty; Kaynell Zeman; Keith Wiles; Larry Ostrovsky; Laura Silliphant; Marilyn Crockett; Mark Dalton; Mark Hanley (mark. hanley@anadarko.com); Mark Kovac; Mark P. Worcester; Marquerite kremer; Michael Dammeyer; Michael Jacobs; Mike Bill; Mike Mason; Mikel Schultz; Mindy Lewis; MJ Loveland; mjnelson; mkm7200; nelson; Nick W. Glover; NSK Problem Well Supv; Patty Alfaro; Paul Decker (paul.decker@alaska.gov); PORHOLA, STAN T; Rader, Matthew W (DNR); Raj Nanvaan-, Randall Kanady; Randy L. Skillern; rob.g.dragnich@exxonmobil.com; Robert A. Province (raprovince@marathonoil.com); Robert Campbell; Roberts, Susan M.; Rudy Brueggeman; Scott Cranswick; Scott, David (LAA); Shannon Donnelly; Sharmaine Copeland-, Shellenbaum, Diane P (DNR); Slemons, Jonne D (DNR); Sondra Stewman; Steve Lambert; Steve Moothart; Steven R. Rossberg; Suzanne Gibson; tablerk; Tamera Sheffield; Taylor, Cammy 0 (DNR); Temple Davidson; Teresa Imm; Terrie Hubble; Thor Cutler; Tina Grovier; Todd Durkee; Tony Hopfinger; trmjrl; Walter Featherly; Williamson, Mary J (DNR); Winslow, Paul M; Aaron Gluzman; Bettis, Patricia K (DNR); Dale Hoffman; Fr6d6ric Grenier; Gary Orr; Jason Bergerson; Jerome Eggemeyer; Joe Longo; Lamont Frazer; Marc Kuck; Mary Aschoff; Maurizio Grandi; Ostrovsky, Larry Z (DNR); Richard Garrard; Sandra Lemke; Scott Nash; Talib Syed; Tiffany Stebbins; Wayne Wooster; Willem Vollenbrock; William Van Dyke; Woolf, Wendy C (DNR); Aubert, Winton G (DOA); Ballantine, Tab A (LAW); Brooks, Phoebe; Davies, Stephen F (DOA); Fisher, Samantha J (DOA); Foerster, Catherine P (DOA)-, Johnson, Elaine M (DOA); Laasch, Linda K (DOA); Mahnken, Christine R (DOA); Maunder, Thomas E (DOA); McIver, Bren (DOA); McMains, Stephen E (DOA); Norman, John K (DOA); Okland, Howard D (DOA); Paladijczuk, Tracie L (DOA); Pasqual, Maria (DOA); Regg, James B (DOA); Roby, David S (DOA); Saltmarsh, Arthur C (DOA); Scheve, Charles M (DOA); Schwartz, Guy L (DOA); Seamount, Dan T (DOA); Austerman, Alan; Buch, Bob (LAA); Bunde, Con (LAA); Cathy Munoz (Representative Cathy_Eng strom_M u noz@leg is. state. ak. us); Chenault, Mike (LAA); Cissna, Sharon (LAA); Coghill, i-ohn (LAA); Crawford, Harry (LAA); Dahlstrom, Nancy (LAA); Davis, Bettye J (LAA); Doogan, Mike (LAA); Dyson, Fred (LAA); Edgmon, Bryce E (LAA); Egan, Dennis W (LAA)- Ellis, Johnny (LAA); Fairclough, Anna (LAA); Foster, Richard; French, Hollis (LAA); Gara, Les (�AA); Gardner, Berta (LAA); Gatto, Carl (LAA); Gruenberg, Max F (LAA); Guttenberg, David (LAA); Harris, John (LAA); Hawker, Mike (LAA); Herron, Bob; Hoffman, Lyman F (LAA); Holmes, Lindsey (LAA); Huggins, Charlie (LAA); Johansen, Kyle B (LAA); Johnson, Craig W (LAA); Joule, Reggie (LAA); Kawasaki, Scott Jw (LAA); Keller, Wes (LAA); Kelly, Mike (LAA); Kerttula, Beth (LAA); Kevin Meyer; Kookesh, Albert (LAA); Lynn, Bob (LAA); McGuire, Lesil L (LAA); Menard, Linda K; Millett, Charisse; Neuman, Mark A (LAA); Olson, Donny (LAA); Olson, Kurt E (LAA); Paskvan, Joe; Petersen, Pete; Ramras, Jay B (LAA); Salmon, Woodie W (LAA); Seaton, Paul (LAA); Stedman, Bert K (LAA); Stevens, Gary L (LAA); Stoltze, Bill (LAA); Tammie Wilson; Thomas, Bill (LAA); Thomas, Joe (LAA); Tuck, Chris; Wagoner, Tom (LAA); Wielechowski, Bill (LAA); Wilson, Peggy A (LAA) Subject: AOGCC Proposed Geothermal Regulations Attachments: Public Notice, Additional Info, Proposed Geothermal Regulations.pdf The Alaska Oil and Gas Conservation Commission proposes to adopt regulation changes to Title 20, Chapter 25 of the Alaska Administrative Code by renumbering current Article 7 as new Article 8, and adding a new Article 7 to deal with geothermal resource drilling and production. The new regulations proposed to be adopted by the Alaska Oil and Gas Conservation Commission include the following: (1) 20 AAC 25.705 — includes geothermal wells in the commission's regulatory jurisdiction; 0 4 (2) 20 AAC 25.710 — extends the existing oil and gas well regulations, where app Picable, to geothermal wells; (3) 20 AAC 25.715 — allows Commission to grant regulatory variances and waivers, where appropriate; (4) 20 AAC 25.720, 725, 730, 735, 740 and 745 - establishes calculation method for geothermal resource regulatory cost charge, and; (5) 20 AAC 25.990(73) — adds geothermal wells to the commission's definition of well. dodvd. Colotnbie Special Assistant Alaska Oil and Gas Conservation Commission 333 IT'est 7th Avenue. Suite 100 Anchorage, AK 99501 (907)793-1221 (phone) (907)276-7542 (fax) 0 Colombie, Jody J (DOA) From: Colombie, Jody J (DOA) Sent: Friday, May 28, 2010 3:07 PM To: Foster, Neal W (LAA) Subject: AOGCC Proposed Geothermal Regulations Attachments: Public Notice, Additional Info, Proposed Geothermal Regulations.pdf The Alaska Oil and Gas Conservation Commission proposes to adopt regulation changes to Title 20, Chapter 25 of the Alaska Administrative Code by renumbering current Article 7 as new Article 8, and adding a new Article 7 to deal with geothermal resource drilling and production. The new regulations proposed to be adopted by the Alaska Oil and Gas Conservation Commission include the following: (1) 20 AAC 25.705 — includes geothermal wells in the commission's regulatory jurisdiction; (2) 20 AAC 25.710 — extends the existing oil and gas well regulations, where applicable, to geothermal wells; (3) 20 AAC 25.715 — allows Commission to grant regulatory variances and waivers, where appropriate; (4) 20 AAC 25.720, 725, 730, 735, 740 and 745 - establishes calculation method for geothermal resource regulatory cost charge, and; (5) 20 AAC 25.990(73) — adds geothermal wells to the commission's definition of well. Jo(�))J ('olombie Special Assislan/ Alaska Oil and Gas Conservation Commission 333 West 71h Avenue, Suile 100 Anchorage, AK 99501 (907)793-1221 (phone ' (90 7)2'116- 7542 (/ax) Mary Jones David McCaleb George Vaught, Jr. XTO Energy, Inc. IHS Energy Group PO Box 13557 Cartography GEPS Denver, CO 80201-3557 810 Houston Street, Ste 2000 5333 Westheimer, Ste 100 Ft. Worth, TX 76102-6298 Houston, TX 77056 Jerry Hodgden Richard Neahring Mark Wedman Hodgden Oil Company NRG Associates Halliburton 408 18th Street President 6900 Arctic Blvd. Golden, CO 80401-2433 PO Box 1655 Anchorage, AK 99502 Colorado Springs, CO 80901 Schlumberger Ciri Baker Oil Tools Drilling and Measurements Land Department 4730 Business Park Blvd., #44 2525 Gambell Street #400 PO Box 93330 Anchorage, AK 99503 Anchorage, AK 99503 Anchorage, AK 99503 Ivan Gillian Jill Schneider Gordon Severson 9649 Musket Bell Cr.#5 US Geological Survey 3201 Westmar Cr. Anchorage, AK 99507 4200 University Dr. Anchorage, AK 99508-4336 Anchorage, AK 99508 Jack Hakkila Darwin Waldsmith James Gibbs PO Box 190083 PO Box 39309 PO Box 1597 Anchorage, AK 99519 Ninilchick, AK 99639 Soldotna, AK 99669 Kenai National Wildlife Refuge Penny Vadla Cliff Burglin Refuge Manager 399 West Riverview Avenue 319 Charles Street PO Box 2139 Soldotna, AK 99669-7714 Fairbanks, AK 99701 Soldotna, AK 99669-2139 Richard Wagner Bernie Karl North Slope Borough PO Box 60868 K&K Recycling Inc. PO Box 69 Fairbanks, AK 99706 PO Box 58055 Barrow, AK 99723 Fairbanks, AK 99711 0 0 SERVICE LIST FOR PROPOSED REGULATIONS FOR GEOTHERMAL RESOURCES DRILLING AND PRODUCTION On May 28, 2010, 1 mailed to the following individuals the public notice of proposed amendments to 20 AAC 25.705, 20 AAC 25.710, 20 AAC 25.715, 20 AAC 25.720, AAC 25.725, 20 AAC 25.730, 20 AAC 25.735, 20 AAC 25.740, 20 AAC 25.745 and 20 AAC 25.990(73), additional regulations notice information, and proposed regulations: Annette Kreitzer Commissioner Department of Administration PO Box 110200 Juneau, AK 99811 Debra Behr Chief Assistant Attorney General Legislation and Regulations Section Department of Law PO Box 110300 Juneau, AK 99811 0 0 Colombie, Jody J (DOA) From: Colombie, Jody J (DOA) Sent: Wednesday, June 02, 2010 8:45 AM To: David Johnson; Joseph Flack; Tfffany Stebbins Subject: Proposed Geothermal Regulations Attachments: Public Notice, Additional Info, Proposed Geothermal Regulations.pdf ,Jody,l. Colombie Special Assistant Alaska Oil and (.;as Conservalion Commission 333 West 71h Avenue, Suite 100 Anchorage, AK 9,9501 (907)'93-1221 (phone - (907,)276-7542 (fax) 0 0 STATE OF ALASKA ) ss. THIRD JUDICIAL DISTRICT AFFIDAVIT OF ORAL HEARING 1, Jody J. Colombie, Special Assistant to the Alaska Oil and Gas Conservation Commission, being sworn, state the following: On June 29, 2010, at 9: 00 a.m., at 3 3 3 West 7t" Avenue, Suite 100, Anchorage, Alaska, a public hearing presided over by Daniel T. Seamount, Jr., Commissioner, Chair of the Alaska Oil and Gas Conservation Commission, was held in accordance with AS 44.62.2 10 for the purpose of taking testimony in connection with the adoption of changes to 20 AAC 25.700-990, dealing with Geothermal Resource Drilling. DATE: July 14,2010 Anchorage, Alaska 41'n Jodi A. Co&moe SpeYial Assistant to the Commission SUBSCRIBED AND SWORN TO before me this 14th day of July, 2010. N'b"tary'Public in and-%Kth� State of Alaska My commission expires: I I / 11/2010 0 0 STATE OF ALASKA ) ss. THIRD JUDICIAL DISTRICT AFFIDAVIT OF COMMISSION ACTION 1, Jody J. Colombie, Special Assistant to the Alaska Oil and Gas Conservation Commission, being sworn, state the following: The attached motion, dealing with geothermal resource drilling regulation changes, was passed by the Alaska Oil and Gas Conservation Commission during its July 14, 2010 meeting. Date: Julv 14. 2010 Anchorage Jod ��J. Col myie Spe al Assistant to the Commission SUBSCRIBED AND SWORN TO before me this 14th day of July, 2010. N-6-tary Public in and Tof-the State of Alaska My commission expires: I 1/ 11/2010 0 0 ALASKA OIL AND GAS CONSERVATION COMMISSION MEETING July 14, 2010 Unapproved Minutes Commissioner John K. Norman moved and Commissioner Cathy P. Foerster seconded the following motion: "I move to adopt the attached amendment to 20 AAC 25.700-990." The motion carried unanimously. -45 0 0 1 ALASKA OIL AND GAS CONSERVATION COMMISSION 2 Before Commissioners: Daniel T. Seamount, Chairman John K. Norman 3 Cathy Foerster 4 In the Matter of Proposed Changes 5 to Title 20, Chapter 25 of the Alaska Administrative Code: 6 Geothermal Resources Drilling and Production 7 ALASKA OIL and GAS CONSERVATION COMMISSION Anchorage, Alaska 9 June 29th, 2010 10 9:00 o'clock a.m. 11 VOLUME I PUBLIC HEARING 12 BEFORE: Daniel T. Seamount, Chairman 13 John K. Norman, Commissioner Cathy Foerster, Commissioner 14 15 16 17 18 19 20 21 22 23 24 25 R & R C 0 U R T R E P 0 R T E R S 811 G STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 E 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 TABLE OF CONTENTS Opening Remarks by Chair Seamount Comments by Winton Aubert Testimony by Amanda Kolker Testimony of Ray Mann R & R C 0 U R T R E P 0 R T E R S 811 G STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 05 06 14/26 15 & 0 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 P R 0 C E E D I N G S (On record - 9:03 a.m.) CHAIR SEAMOUNT: I'd like to call this hearing to order. This is a hearing to consider proposed regulations pertaining to geothermal resource drilling and production of the Alaska Oil and Gas Conservation Commission. Today is June 29th, 2010. It is 9:03 a.m. To my left is Commissioner Cathy Foerster. To my right is Commissioner John Norman and I'm Dan Seamount, the Chair. Any persons that have any kind of special -- need for special accommodations will see -- can see the special assistant Jody Coiombie sitting in the back. R & R Court Reporting (sic) will be recording the proceeding. You can obtain a copy of transcript from R & R Court Reporting or you can contact Ms. Colombie and she can lead you in the right direction. I'd like to remind anybody that's going to testify to speak into both of the microphones so people at the back of the room can hear and so that the Court Reporter can get a clear recording. The Alaska Oil and Gas Conservation Commission proposed to adopt requlation changes to Title 20, Chapter 25 of the Alaska Administrative Code by renumbering current Article 7 as new Article 8 and adding a new Article 7 to deal with geothermal resource drilling and production. R & R C 0 U R T R E P 0 R T E R S 811 G STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 3 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 The new regulations proposed to be adopted by the AOGCC include the following: number (1), 20 AAC 25.705 it includes geothermal wells in the Commission's regulatory jurisdiction; number (2), 20 AAC 25.710 extends the existing oil and gas well regulations, where applicable, to geothermal wells; number (3), 20 AAC 25.715 allows the Commission to grant regulatory variances and waivers, where appropriate; 20 AAC 25.720, 725, 730, 735, 740 and 745 establishes a calculation method for geothermal resource regulatory cost charge, and finally number (5) 20 AAC 25.990 adds geothermal wells to the Commission's definition of a well. We received one comment and that was from the Department of Natural Resources Division of -- I believe it was the Division of Oil and Gas. COMMISSIONER FOERSTER: No, it was ....... CHAIR SEAMOUNT: No, no, it was from ....... COMMISSIONER FOERSTER: ..... it was (simultaneous speech) ..... CHAIR SEAMOUNT: ..... it was from the -- the Commissioner of the Department Natural Resources. We received that late yesterday, that's June 28, 2010. This hearing is being held in accordance with AS 44.62 and 20 AAC 25.540 of the Alaska Administrative Code. Those are regulations governing public hearings. The hearing will be recorded. R & R C 0 U R T R E P 0 R T E R S 811 G STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 0 0 1 2 3 4 6 7 8 9 10 11 12 13 14 5 16 17 18 19 20 21 22 23 24 25 Okay. I see by the sign -in sheet we have four that are requesting to testify. If anybody has a question of the witness what you do is you provide the question in writing with your name and the name of the witness and give it to Ms. Colombie in the back, our special administrative assistant, and she'll forward those questions up here and we'll consider whether the question is relevant or not and if it is we'll ask the question for you. The notice of this hearing was published in the Anchorage Daily News on May 29th, 2010. It's also been posted on the State of Alaska on-line notices website, as well as the AOGCC's own website. The law, AS 44.62.210(a) required us to consider all factual, substantive and all other relevant matter presented to JLt IDefore adopting, amending or repealing regulations. And when we are considering the factual, substantive and other relevant matter the agency will pay special attention to the cost to private persons of the proposed regulatory action. Okay, before we start I'd like to ask, Commissioner Foerster, do you have any comments at this time? COMMISSIONER FOERSTER: Not at this time. CHAIR SEAMOUNT: And, Commissioner Norman, do you have any comments? COMMISSIONER NORMAN: I have none. CHAIR SEAMOUNT: Thank you. Our practice is to swear R & R C 0 U R T R E P 0 R T E R S 811 G STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 5 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 witnesses in and are we to have that practice today? COMMISSIONER NORMAN: I think that would be advisable. if a witness is uncomfortable swearing in, then that's fine. The regulationS say that will be taken into consideration in weighing the weight to be given to the witness' testimony. CHAIR SEAMOUNT: Okay. Also if you're going to be speaking on Lechn-ical matters if you'd like to be considered an expert witness we'll ask you to indicate your qualifications and background and your experience so the Commission can gauge whether you'd fall into the category of an expert witness. Okay. I think the first person to testify will be Dr. Winton Aubert. He's our senior reservoir engineer and he's going to provide comments for the AOGCC. Dr. Aubert. DR. AUBERT: Thank you. For the record I'm Winton Aubert senior engineer on the Commission;s Staff. CHAIR SEAMOUNT: Dr. Aubert, I don't think everyone is familiar with your experience and qualifications, could you please tell us something about lem? DR. AUBERT: Yes, I hold terminal degree in Petroleum Engineering from LSU. I have more than 30 years experience in all phases of the petroleum industry. I've authored numerous publications and U. S. Paten registrations and I'm a registered professional Petroleum Engineer in Alaska. CHAIR SEAMOUNT: Thank you, Dr. Aubert, you may proceed with your ..... R & R C 0 U R T R E P 0 R T E R S 811 G STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 6 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 COMMISSIONER FOERSTER: I have a question, is -- us terminal degree a way of avoiding saying that you have a Ph.D.? DR. AUBERT: Yes, it is. COMMISSIONER FOERSTER: Okay. CHAIR SEAMOUNT: Dr. Aubert is humble. COMMISSIONER FOERSTER: But I'm not on his behalf. CHAIR SEAMOUNT: Okay, thank you. Please proceed. DR. AUBERT: During its most recent session the Alaska Legislature transfer regulatory authority for geothermal resource development from the Alaska Department of Natural Resources to the Alaska Oil and Gas Conservation Commission. One of the transferring bills caveats is a target date of July 1st, 2010 after which new AOGCC geothermal regulations may take effect. Pursuant to the Legislature's action today we proposed amending our current Title 20, Chapter 25 of the Alaska Administrative Code in order to bring the Commission's regulations into applicability to geothermal energy development. As the Chair has summarized we now propose renumbering current Article 7 of the Commission regulations, the definition section, as new Article 8. In today's proposed Article 7 we establish the Commission's authority over geothermal resource development, then apply by reference existing oil and gas regulations to geothermal wells. We propose explicit flexibility to allow R & R C 0 U R T R E P 0 R T E R S 811 G STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 7 1 regulatory variances and waivers appropriate for geothermal 2 application. 3 We propose a calculation method for geothermal wells 4 regulatory cost charge, an estimation method for said 5 regulatory cost charge and provide a description of the 6 Commission's cost charge determination method. 7 We further propose methodology by which the Commission 8 establishes regulatory cost charge payment dates, supplemental 9 appropriations and a regulator-y cost charge effective date. 10 Finally, in new Article 8 we propose to add geothermal 11 wells to the Commission's well definition. These proposed 12 regulatory amendments must be finalized then presented and 13� formally adopted in a public forum. 14 And one correction, in addition to the comments received 15 iDy -- from the Alaska Department of Natural Resources, we also 16 received comments from the Legislative Affairs attorney 17 regarding these -- this proposal. 18 Are there any questions from the panel at this time? 19 CHAIR SEAMOUNT: Before we go to questions, we have 20 someone on the line, Ms. Amanda Kolker. Are you on the line, 21 Ms. Kolker? I wonder if she got ..... 22 DR. KOLKER: Can -- can you hear me? 23 CHAIR SEAMOUNT: Yes. Yes, and you're able to hear okay? 24 DR. KOLKER: T -- yeah, it's not the best sound quality. 25 1 guess if the speakers could move slightly closer to the R & R C 0 U R T R E P 0 R T E R S 811 G STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 F-11 0 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 microphone it might help, but I can catch most of it. Thank you for asking. CHAIR SEAMOUNT: Okay. Do those speakers work there? Okay. We'll have testimony from that. Why don't you move over there, Dr. Auberc. MS. COLOMBIE: No, Winton, you can stay there. I'll move over. (Off record comments) CHAIR SEAMOUNT: Okay. Now we'll have questions and comments. Commissioner Norman. COMMISSIONER NORMAN: I have a continuing question that I'm just going to raise for the record. I don't know -- Dr. Aubert, I don't really know that you would have an answer, but I'll just raise it for the record. The statute talks in terms of calculating the regulatory cost charge based upon total volume of geothermal resources. The proposed regulation does. And the statute defines geothermal resources as natural heat of the earth which would be measured according to some metric measuring heat, but I believe that our proposal -- and I'm not arguing with this, I'm just -- I want to flag this on the record so that if we have to revisit it and correct it we can if it does require that. The metric that we will use for calculating the RCC is fluid volume, but the statute and the regulations talk in terms of geothermal resource which as I said is natural heat of the R & R C 0 U R T R E P 0 R T E R S 811 G STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 I 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 earth, so there's a slight disconnect there. And if we have to revisit that there's several ways to do that because these regulations will not kick into effect, at least this portion of it for some time, but we may need to make those two things consistent either by a slight change to the statute or a regulatory change that would express the Commission's intention to interpret that as meaning fluid. That's all I have. CHAIR SEAMOUNT: Thank you, Commissioner Norman. Commissioner Foerster. COMMISSIONER FOERSTER: Dr. Aubert, when you reference explicit flexibility I think that's something that geothermal industry would be really interested in understanding how that expands, where -- you know, I mean, where it's limited. So could you give a little description of where we're looking at allowing explicit flexibility and where we're not? DR. AUBERT: Some of the areas include -- in our requirements for blow-out prevention equipment for gas detection equipment and for near surface seismic surveys, those things are generally are not as robust in a geothermal application as they are for oil and gas exploration, so we're prepared to waive, if you will, or vary where appropriate our current oil and gas regulations as we apply them in a geothermal permitting scheme. COMMISSIONER FOERSTER: But I'm asking assuming that those will be looked at on a case by case basis to determine what R & R C 0 U R T R E P 0 R T E R S 811 G STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 UK 1� 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 robustness is required? DR. AUBERT: Defini�-eiy. COMMISSIONER FOERSTER: Okay. And how would you treat exploration areas, areas where we don't have any data? DR. AUBERT: We will —— WE�'ll have to rely on the nearest geologic control that exists for any given area and absent any geologic control then naturally our tendency will be to err on the side of caution and be morE� conservative with our blow-out prevention and so forth requirE�ments. COMMISSIONER FOERSTER: Okay. Are there any areas of the proposed regulations where we're specifically disallowing flexibility? DR. AUBERT: Not for geothermal application. COMMISSIONER FOERSTER: Okay. That's all I have. DR. AUBERT: Yeah. And this also allows us, just as an aside, to offer variances in waivers without the requirement for 30 day notice and a Public Hearing. COMMISSIONER FOERSTER: Okay. So where my head is going with this if an operator has a problem with any of our regulations because it's not applicable to geothermal then this explicit flexibility should address that concern? DR. AUBERT: That's our aim in establishing that particular clause. I have. COMMISSIONER FOERSTER: Okay, thank you. That's all I R & R C 0 U R T R E P 0 R T E R S 811 G STREET (907)277-0572/F:ax 274-8982 ANCHORAGE, ALASKA 99501 11 0 0 1 2 3 4 5 6 7 8 9 10 11 12 13 1 4 15 7 6 17 18 19 20 21 22 23 24 25 CHAIR SEAMOUNT: Okay, thank you, Commissioner Foerster. Okay. I have no questions or comments. Dr. Aubert, thank you very much. on, one more, Comm__ssioner Norman. COMMISSIONER NORMAN: Again, a comment because the commentary from the Department of Natural Resources was ]ust received yesterday, it is a three page letter. It will be part of the record. If there are any persons present or on the line that have not seen that and want the opportunity to view it, please let us know. The Commission won't go through that. It's fairly straight forward in the commentary, but if you would desire a copy to comment on, please let us know and we'll see that you get it. CHAIR SEAMOUNT: Yeah, having gone through the comment in a quick manner it looks like there's some pretty significant additions that are recommended, And I don't know if we would want to just go ahead and make a decision on the regulations as proposed today and re -notice the recommendations by the DNR some time later? COMMISSIONER FOERSTER: That's -- I had discussed that with out Assistant Attorney General before the meeting as to whether that would be an acceptable way to proceed and I had gotten an indication from him that, that would be okay. So I'm wondering if a motion at this time would be appropriate to do that or should we wait and hea-_ what the rest of the folks have to say before (simultaneous speech) ..... R & R C 0 U R T R E P 0 R T E R S 811 G STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 12 0 0 1 CHAIR SEAMOUNT: I think we should wait and, you know, we 2 could make that decision when vie go into the adjudicatory 3 process, is that correct, Mr. AG? 4 MR. BALLANTINE: Yes. 5 CHAIR SEAMOUNT: okay, good. Okay, thank you, Dr. Aubert. 6 Okay. At this -- I misspoke. Before I said there were 71 four people willinq to testify, there are only three and we 8 have two left and it looks like they're both with the City of 9 Akutan, so Mr. Mann and Ms. Ko--ker, can you still hear me? 10 DR. KOLKER: Yes. Can you hear me? 11 CHAIR SEAMOUNT: Yes. I heard some -- there were some 12 really good things said about -,,,ou and your geologist by Chris 13 Nye of the Alaska Volcano observatory when I asked him about 14 the possibility of encountering toxic gases in any of these 15 wells and he put me at ease. 16 Okay. So I guess I can swear you both in at the same time 17 unless you have any objections. 18 DR. KOLKER: No objection. 19 MR. MANN: Fine with me. 20 CHAIR SEAMOUNT: Okay. Please raise your right hand. 21 MR. MANN: Are you doing that, Amanda? 22 CHAIR SEAMOUNT: And, Ms. Kolker, -- yeah, and Ms. Kolker, 23 1 know you're doing that. 24 (oath Administered) 25 MR. MANN: I do. R & R C 0 U R T R E P 0 R T E R S 811 G STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 13 0 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 is 16 17 18 19 2 0 21 22 23 24 25 DR. KOLKER: I do. CHAIR SEAMOUNT: Thank you. Okay. Now, as far as expert witnesses do either or both of you want to be considered as expert witnesses? MR. MANN: I do not. CHAIR SEAMOUNT: Okay. MR. MANN: Amanda is a geologist, doctorate in Geology. Amanda, do you want to be an expert witness? DR. KOLKER: Oh, I don't know, does it, you know, add credence to my testimony? COMMISSIONER FOERSTER: It does. CHAIR SEAMOUNT: Okay. It would probably be good for you to be considered as an expert witness, so if you could state name, who you represent, what's the subject or discipline and your qualifications. AMANDA KOLKER called as a witness on behalf of the City of Akutan, testified telephonically as follows: DIRECT EXAMINATION DR. KOLKER: Sure. My name is Amanda Kolker. I represent the City of Akutan. I'm the project manager and geologist for the Akutan geothermal project. My qualifications are I have a Ph.D. in Geology from the University of Alaska - Fairbanks. I worked for many years in Alaska geothermal, most notably at Chena Hot Springs as well as other projects. My dissertation R & R C 0 U R T R E P 0 R T E R S 811 G STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 1101 0 0 1 C 11 2 2 2, 2 2 2 work was on geothermal energy in Alaska and I researched, you know, from a geological perspective as well as, sort of, social sustainability. CHAIR SEAMOUNT: Okay. Commissioner Norman, do you have any objection to us designating Ms. Kolker as an expert witness? COMMISSIONER NORMAN: No objection. CHAIR SEAMOUNT: Commissioner Foerster? COMMISSIONER FOERSTER: None. CHAIR SEAMOUNT: Okay. Hearing so, Ms. Kolker, you are now officially a designated expert witness in the field of geothermal. Okay. City of Akutan, you can proceed and when you do, please, state name and then proceed with your testimony. RAY MANN called as a witness on behalf of the City of Akutan, testified telephonically as follows on: DIRECT EXAMINATION MR. MANN: Thank you, Mr. Chairman and Members of the Commission. My name is Ray Mann. I'm president of RMA Consulting Group and we are the program managers for the City of Akutan. And as program managers we're responsible for a number of key projects that are being undertaken there at this time. The construction of an airport, a harbor, a geothermal project, road building and two hydro projects so we've been R & R C 0 U R T R E P 0 R T E R S 811 G STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 116i 0 0 1 engaged with the village and with the Trident Seafoods 2 Corporation that has the largest seafood plant in the world 3 located at Akutan with about 1,000 employees. 4 And by the way, as an aside they use seven megawatts of 5 power, so if you're wondering why we might be drilling out 6 there that's one of the incentives, but I would also say and I 7 think Dr. Kolker will emphasize this, that this is a multi- 8 component geothermal project in which we hope to not only 9 capture power for that large power usage and these new projects 10 that are coming on line, but also applications such as 11 agriculture, greenhouse agriculture, tourists -- tourism 12 applications through PICKA (ph) and other organizations in the 13 Aleutians, so that's, sort of, the backdrop of why this program 14 -is oeing cleveloped and going forward. 15 Again, as an introduction I would say the community has 16 been working towards this proj I ect for decades. It's always, of 17 course, been a resource that's there. There's hot water 18 flowing to the beach in Hot Springs Bay and, of course, folks 19 there live right next to a volcano so this is not a new 20 project, but we've been happy to work with the City since 2008 21 to help bring it to fruition along with a lot of other people 22 including the State of Alaska. 23 For my remarks I would like to emphasized several areas or 24 issues that we think are important to the Commission and 25 im,,Do-tant in the sense, I think, as we join in a partnership to R & R C 0 U R T R E P 0 R T E R S 811 G STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 16 0 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 bring geothermal energy to Alaska. These are suggestions on things that we've seen. We're at a little bit different segment than, perhaps, other folks who will testify or that you will come in contact with. We're not in the geothermal industry. You, know, we are a community and we are hoping to be part of developing geothermal as a sustainable resource for Alaska. So I would ask the following considerations at this time or in the future from the Commission. One, it's important to recognize the public benefits of geothermal exploration and development versus what might be a more traditional corporate economic model. Again, we're not in it for profit. We're not drilling and exploring two make money. Number two, the stated policies of the Alaska Legislature and successive administrations have supported the immediate development of renewal energy including the vast geothermal resources of Alaska to reduce dependence on fossil fuels and most significantly for villages such as Akutan to promote the sustainability of rural Alaskan communities, lifestyles and cultures. So, again, I would suggest that there's a broader array of issues here that the Commission will, I think, from time to time have to consider and deal with. Number three, there is a direct investment by the State in this technology and in these projects. This project is being totally funded with public money through a grant from the R & R C 0 U R T R E P 0 R T E R S 811 G STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 17 0 0 1 2 3 4 5 6 9 10 11 12 13 14 15 16 il 18 19 20 21 22 23 24 25 Alaska Energy Authority, rural -- I mean, Renewable Energy Fund that the Legislature has established and by the City of Akutan direct contributions. Therefore, again, I think it's important to recognize that there is a public purpose behind many of these projects. Now, obviously there will be large commercial projects or what could IDe construed as commercial projects like Mt. Spur or others, but I would say right now from our work with the Alaska Energy Authority over the last couple years there's probably 20 projects right now that are identified on the books as fundable in terms of exploration and potential development and almost all of these are rurally situated. And right now I think at this surface in Alaska (ph) you have Akutan and you have Manley, you have Pilgrim up in Nome and, of course, Naknek which is, kind of, a little bit different story as a utility. Here again, unlike corporate development of the oil and gas type, geothermal development will concinue to include a large direct investment by the State. And, again, emphasizing for two goals as we understand it when we look at the state wide energy plan and we look at the Governor's program to provide for renewal energy sustainability. And those are to relieve diesel dependence and particularly in rural Alaska which does two things. It creates a viability of those communities and relieves the State of having to pay the money that it pays now as subsidies to the use of diesel. And, R & R C 0 U R T R E P 0 R T E R S 811 G STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 Ila 0 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 again, the threat that -- always that those prices will go up and make some of these communities unsustainable. The second public strategic goal is, again, to support that sustainability so that we don't lose villages so we don't have people having to leave their traditional lifestyle or their rural economic lifestyle and abandoned what they're known for decades or in sometimes -- in some comes as in Akutan for several thousand years. So, again, I think those are the -- my interpretation of the very strategic goals of the State and I think this project comports with that. The other issue in conjunction with that I would add that much of this resource development for geothermal is intertwine with Native Corporations and Native Corporation land ownership, tribal entities and village entities, so that, again, to me adds another factor to what you'll have to consider possibly in terms of how these land relationships develop, who's actually the owner, who is the driller, who's the operator and, again, it would be a little bit different, perhaps, in the standard oil and gas drilling program. I will say again as an aside we've had a number of discussions particularly with the communities in the Aleutians that it's not quite clear what their ownership of geothermal resource is because they're the subsurface owners as the Regional Corporation and the State has sovereignty over certain elements of geothermal resources, so one of the questions we're R & R C 0 U R T R E P 0 R T E R S 811 G STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 19 0 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 2 � facing is whether we could in any way get hit with a double royalty or a double charge when someone says I'll let you drill through my land for, you know, so much a foot and then the State says well, when you take those fluids out, of course, they belong to us so I think, again, that's probably one of the more significant issues that -- and there are some legal ramifications to that I know that people have investigated so I won't go into that any more. In view of the State's funding of the Akutan geothermal project the City considers itself to be a partner with the Alaska Energy Authority and other agencies in pursuing the mutual goal of renewable energy development. We hope to develop the same relationship with the Commission, with the Staff here and with the whole team as we go through this process. I've talked to several of the Commissioners and with Winton and other folks in terms of this transition. I think it's worked well and it's been hectic I know for you folks and for us. We've been working on this for a long time and I think there's been good cooperation in getting closure and in getting things moving with a potential spud date of July 15th which is breathing down our necks here very, very closely. So, again, I would emphasize that we see this as a partnership. We've worked extremely well with AEA. We believe that, that partnership should be extended throughout the state R & R C 0 U R T R E P 0 R T E S 811 G STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 20 0 0 1 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 administration. Finally with regard to the proposed adoption of the new Article 7 of 20 AAC 25, I'd offer the following comments and, again, not as an expert, just as my -view of someone being involved with one of the first projects of its kind that's going to forward in Alaska. One, I think that this Commission should quickly promulgate additional changes to the regulations where as it's already been, sort of, discussed here with Dr. Aubert, there are certain things in the regulations that don't apply, that are oil and gas related and so on. And I guess my view would be it's important to do what's happening now and that is let's get the infrastructure -- the structure that moved over to the Commission and let the Commission begin to operate. I think, however, again my suggestion would be that we work together and over time really eliminate those needs for waivers and variances. I mean, they should be just basically inherent in the geothermal chapter of the code and not have to contend with on either side the idea oh, that's a waiver, that's a variance and so again, I know that's going to take time and, again, that's a suggestion that we have. The proposed calculation of Regulatory Cost Charge is basically for me and members of our team that I've talked to is a little bit difficult-- t--o understand how it's going to apply to this kind of project. Number one, we throughout the planning R & R C 0 U R T R E P 0 R T E R S 811 G STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 21 0 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 and implementation of the project have segmented exploration, you know, specifically from production. And in talking to our geologists and, again, Dr. Kolker may want to comment, the idea of measuring fluids and what constitutes, you know, geothermal resource going back to Commissioner Norman's comment, what is that real definition of what we're doing I think is another thing that we'll have to work together on as we come together on how to calculate these charges. Our senior engineer Alan Bailey (ph) with Geothermal Resources Group who couldn't testify today recommended that the Commission consider just a straight annual fee. In his experience in working with California, Nevada and most of the western states they simply have adopted a fee schedule. It's an annual payment that's made and there's basically no need to guess what next year's payment would be if you have that kind of schedule, so that -- again, that may be a suggested approach. The -- that really concludes my remarks. Again, I want to thank the Commission for helping us get our project underway and for allowing us to testify here today. And I'd be glad to answer any questions that you might have. CHAIR SEAMOUNT: Thank you, Mr. Mann. Commissioner Norman, do you have questions, comments? COMMISSIONER NORMAN: No, I just thank Mr. Mann for his testimony. R & R C 0 U R T R E P 0 R T E R S 811 G STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 22 0 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 MR. MANN: Thank you. CHAIR SEAMOUNT: Commissioner Foerster. COMMISSIONER FOERSTER: I have a couple. Mr. Mann, I appreciate the statements that you gave us on issues that are important (indiscernible - coughing) cause they gives us a better flavor for who you are and most of us have a lot of experience with the oil and gas industry and so we know who they are so it's ..... MR. MANN: Right. COMMISSIONER FOERSTER: ..... really nice to start to (get to know who you (guys are and I look forward to getting to know a lot more about that. But my question is other than helping us to understand you for the sake of communicating and having a good relationship is there any way that that knowledge should impart what we do with our regulations? MR. MANN: I guess my experience would harken to our work with the Department of Natural Resources 'cause we've been working with them for the better part of a year and the number one issue that presented itself at that time in how to implement these regulations or how to handle geothermal since it's new, you know, has been just the coordination of those two agencies. I have encouraged the folks at AEA to develop those lines of communication in which, again, as sponsors of these kinds of projects they should -- they have a vested interest. R & R C 0 U R T R E P 0 R T E R S 811 G STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 23 1 2 3 4 5 6 7 8I 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 They have a financial interest and I think that's really, you know, probably the main focal point for what you can take away from our experience I think. COMMISSIONER FOERSTER: Okay, thank you. COMMISSIONER NORMAN: Commissioner Seamount? CHAIR SEAMOUNT: Commissioner Norman. COMMISSIONER NORMAN: Yes, one other question, Mr. Mann, if you know, there will likely be some aspect of any project that will involve a return of fluids back into the earth and we're looking at that trying to figure out how that might fit into the Federal Underground Injection Control Program. And in that context we've run into in other states the idea of an open loop system versus a closed loop system. Do those terms mean anything to you and if so could you comment on them as related to how you envision your project? MR. MANN: Thank you, Commissioner Norman. Dr. Kolker would be the best person to comment on that. COMMISSIONER NORMAN: Very well. MR. MANN: We are definitely aware of that and it definitely would be a part of this project and so I think she should comment on that if that's okay. COMMISSIONER NORMAN: That's satisfactory. DR. KOLKER: Yeah, I'm sorry. I'm going to have to have you repeat the question, I couldn't hear you at all. COMMISSIONER NORMAN: Yes, I'll repeat it Dr. Koke (sic), R& R C 0 U R T R E P O R T E R S 811 G STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 24 & 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 is 19 20 21 22 23 24 25 whenever you're -- or Kolker, whenever you're ready to testify. MR. MANN: I guess I would make one other comment, an aside which I didn't emphasize. The City is approaching this as a public and private development and so beyond the exploratory phase it's the City's intention to develop a private partnership in that the majority of the development funding and bringing the resource on line would be done through either a consortium approach or a development approach that uses private funding and may get involved with such things as carbon credits and tax incentives and so on to help bring it about, but our budget right now we see this as about a one- third exploration/government funding project and two-thirds of a primary development through private funds. CHAIR SEAMOUNT: Okay. You know, I think some of your suggestions -- I don't know, I'm not sure, but may require some changes to the statute. And I know that the -- a lot of the Legislators are very excited about geothermal and I think they'd he really receptive to hearing what you have to say, but -- I mean, if -- you know, keep in communication with us and if it does require something like that then we can go down that route. MR. MANN: Right, great. Our Representative Bryce Edgmon, of course, is the co-chair of the House Energy Committee so we stay very close. He's going to come out and visit the project along with Senator Lyman Hoffman this summer and they're very, & R C 0 U R T R E P 0 R T E R S 811 G STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 181611 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 very interested and very supportive when we were in Juneau testifying, et cetera, this summer -- this spring. CHAIR SEAMOUNT: I know Senator McGuire is very interested, too. And I've got to mentioned that we appreciate the dilemma you've been in, in the hand over -- the bureaucratic clash and hand over through all this, you know, we're -- we're in, sort of, a dilemma, too over this so I thank you for your patience. MR. MANN: Well, we're here to cooperate and graduate. CHAIR SEAMOUNT: Okay. Okay. I assume Dr. Kolker has something to say, testimony. AMANDA KOLKER previously sworn, testified telephonically as follows on: DIRECT EXAMINATION CONTINUED DR. KOLKER: I do, um -hum. Well, first of all before I get started I would like to thank the agencies involved, especially the Oil and Gas Conservation Commission for reviewing closely the regulations and I'm glad that, you know, the time has been taken to revisit these. They are old. And geothermal is going to become more and more, I believe, an important -- important prospect in Alaska. So I think it's worth taking the time to revisit the regulations and make sure they're appropriate and they're up to date and all that. So I appreciate what the agency has done so far, but I do think, you know, it's -- we're on the right track of making R& R C 0 U R T R E P O R T E R S 811 G STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 26 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 it more of a collaborative process between the agency and industry and individual projects and Municipalities that are stakeholders in geothermal development in Alaska. So I appreciate this hearing and I appreciate the time that you've taken. I do want to make a few just background, general comments, just share some of my knowledge about geothermal energy in Alaska 'cause I -- I've studied it for a long time and I've work in it for a while, so just in general I'd like to comment that if you ever look at a geothermal resources map of Alaska you'll see that there's many, many resources in Alaska and people talk about this all the time, any proven resources from drilling in the 170s and almost all of them except for one remain unexplored (ph). And there are several barriers to geothermal energy. Some are general and some are Alaska specific. A general one is that geothermal has very high capital costs that -- you know, (indiscernible) costs and those especially within geothermal they happen when the project risk is very high, like, the resource is still unknown and so that's why states and the Federal Government have all, you know, very often committed to helping out projects in the high risk, initial high capital cost stage. And as, sort of, our -- as Ray alluded to Akutan paradigm is while it's still really risky, we're going to get the R& R C 0 U R T R E P O R T E R S 811 G STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 27 1 2 3 41 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 State's help and prove up our resource basically and it's where the public funds are coming from. And then when the resource if proven up then that's when we can look for private funds. And these days private funds aren't even available to unproven resources the way the economy is working so that's pretty much how every project is going to have to go. And, you know, everybody (ph) knows this, they understand this and this is why they've developed help, you know, in the form of loans and grants to start up geothermal projects. So another barrier to geothermal energy that's Alaska specific is the remoteness and that means a lot because geothermal projects need a lot of equipment, drill rigs you have to fly in which pretty much triple or quadruple the cost of normal geothermal exploration projects. You know, a lot of these places -- a lot of the resources are in places where there's no roads which not only means again flying in equipment and (indiscernible), but it also means once you go to produce and transmit the power then you have transmission issues and you've got to build roads for that, so it's an Alaska specific barrier. You know, another Alaska specific barrier is human resources. Most villages just don't have the human resources to pull together a geothermal project. You know, another Alaska -- I could go on and on, but I'll just mention one more which is land ownership. We have R& R C 0 U R T R E P O R T E R S 811 G STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 0 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 subsurface rights issues, we have surface rights issues so, you know, these things are making it difficult to develop geothermal in Alaska. And I think one of the -- you know, proves that this is so difficult is that the only geothermal project in the state is at Chena Hot Springs. And regulations -wise what that means is actually significant because Chena it's interesting to note didn't have to -- under Title 11 the regulations didn't apply because at Chena the fluid is under 85 degrees celsius and so, you know, this is kind of a very (ph) little secret. I believe that's one of the reason that project went forward. You know, Bernie Karl never needed to ask anyone for anything because, you know, he's a single landowner and he was essentially drilling for backwater. So, you know, you guys might want to check into it. Who regulated the Chena Hot Springs project. I don't know of anyone. And that's the only geothermal project in the state that's gone forward. And I'd just like to mentioned that, you know, most viable geothermal projects are believed -- you know, most projects that are believe to be viable are over 85 degrees celsius and that is the case in Akutan. So despite all these barriers the state has decided to promote geothermal, you know, (indiscernible) grant funds, with loan options, other incentives to develop geothermal. And it's because geothermal is a base load renewable resource so unlike R& R C 0 U R T R E P O R T E R S 811 G STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 29 9 +� 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 i9 19 20 21 22 23 24 25 wind or solar it can completely displace fossil powered options. Also geothermal can provide heat so it's got the potential to take villages completely off diesel. Other benefits related to heat greenhouses, et cetera, all of these are reasons why AEA in particular, but, you know, the State of Alaska has decided to promote geothermal. Simply it's the least (ph) risky in the future than diesel. So these are just the general comment -- you know, comments that I wanted to give the picture of the general context in that geothermal has a significant amount of barriers to development. And with the Akutan project I wanted to, you know, (indiscernible) some barriers I think one of the reasons I'm working back in project -- I think -- one of the most likely to move forward because some of these barriers are minimal. I mean, transmission in our case (ph) is minimal. We have a really good resource we're pretty sure. We just have to prove it up. Of course, you know, like I said that makes us follow the regulations, but as I said Akutan has been playing by the rules the whole time and we're going to follow them. And, you know, as Ray mentioned this is not a profit making project. It's -- you know, the idea with the Akutan project is reduce the diesel dependance in the village period. And you know, what that means is reduce State subsidy through PCE (ph), so that's just some general comments I wanted to R& R C 0 U R T R E P O R T E R S 811 G STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 30 9 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 I make. Now, specifically our drilling program this summer is core hole drilling which is split (ph) hole drilling. It's an exploration drilling where the normal -- you know, this is pretty standard in geothermal that you drill exploration wells (indiscernible) and you often drill core holes. The success rate for exploration drilling, your core hole drilling is about 20 percent so this is why it's high risk and this is why, you know, we're asking for help from the state and it was awarded. Core hole drilling is different from rotary drilling. Core hole drilling is -- our diameter at the bottom of the well is going to be about two inches so it's a very small diameter well. It won't produce volumes. In fact, it's unlikely to produce very -- you know, very much water at all, enough to test the resource and that's the point of the well and so that's, sort of, the background. And in terms of the regulations, again, I really would like to thank you for looking closely at them and, you know, proposing some changes, but I would like to testify that I think some of the proposed changes really don't make sense to me. I don't believe that applying existing oil and gas regulations is particularly appropriate modifications (ph). I'm particularly concerned with this idea of having regulations that then must be waived in the case of geothermal. I mean, waivers are ambiguous. They're subject to the whims of & R C 0 U R T R E P O R T E R S 811 G STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 31 1 2 3 4 5 6 7 8 91 10 11 12 13 14 15 16 17 18 iy 20 21 22 23 24 25 the individual agents, you know, it keeps a project guessing. You know, it keeps a project guessing also about the time lines and -- you know, so that's one thing. The geothermal geologic setting is entirely different from sedimentary basin (ph) which is the geologic setting for oil and gas. You know, it means the type of strata (ph) encountered are entirely different. Volcanic rocks, which are typically what you're going to find in geothermal, they behave very differently than sedimentary rocks. They retain fluid different, they fracture differently. There's -- you know, there's different dangers involved. So that's, you know, some comments in terms of the well drilling. You know, exploration, we touched on this a little bit at the beginning of the call -- or of the meeting today. The exploration methodologies are entirely different. You know, somebody mentioned seismic not being particularly robust. I mean, seismic is not normally used with geothermal. There's a few instances in which it is particularly where you have a completely blind resource, but, you know, as I said with Alaska we have many proven resources and seismic probably wouldn't be used. And it's just an example of exploration being, you know, quite different on the other hand. So I think that, you know, to some -- I think that Title 11 is -- entire regulation really was a good start. I think it was consistent with what was going on in the 170s and 180s, R& R C 0 U R T R E P O R T E R S 811 G STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 32 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 with geothermal. It could use a bit of updating. And I'd like to recommend that -- and I'll say this again at the end, but what other states have done is form a geothermal working group which is composed of government representatives from different agencies, industry people, geothermal project managers like myself and, you know, Municipalities, basically geothermal stakeholders that help mold the regulations to really be appropriate for the climate that we're in, for the geology that we're going to encounter, etc cetera, etc cetera. So the other thing that I would like you to speak to is -- you know, is this notion that adding geothermal wells to the Commission's well definitions that I don't have a problem with that, I'd just would like you to comment that, again, you're going to need to distinguish between core holes and rotary drilled holes. They're very different. They do entirely different things. They're for entirely different purposes. They require entirely different rigs and equipment, so, you know, if the agency is going to add it to the well definition you've got to distinguish between the two. And you've got to get to know core hole drilling which is, you know, more of a mining industry standard than an oil and gas industry standard. So the other thing I'd like to mention is, you know, to speak to my own (indiscernible) this might not be great to mentioned, but, you know, one thing that isn't -- and this is R& R C 0 U R T R E P O R T E R S 811 G STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 33 0 • 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 I 22 23 24 25 an example of one of the things that isn't at all addressed in the regulations, but needs to be is this idea of injection and re -injection is very important in geothermal. It keeps your system (ph) renewable. And over the past 20 years that's really been the focus of changes in regulatory procedures. And I would suggest that, you know, any changes need to be made that's one the agency should revisit. So, finally, I'll speak to the fees. I would agree with Ray I don't -- I don't think that the structure makes any sense to me. You know, based on volume thing well, that would basically mean that core holes which is great because we're not going to get volumes, but you know, the whole idea that the volumes effect the fee schedule I think is just a huge headache and it's based on the fact that, you know, the fluid coming out of these wells are going to be profit making. They're just not. It's not -- it's a different paradigm. And, you know, keep it (ph) -- I would rec- -- I would (indiscernible) that the recommendation to consider to the straight annual fee schedule that way you don't have to guess. You don't have to try to measure volumes on a periodic basis. You know, there's, no (indiscernible) there so..... And so my recommendations would be to form a geothermal working group which actually has already been -- State of Alaska just I don't think any ever anymore (indiscernible) couple years. And have real action items for those meetings R& R C 0 U R T R E P O R T E R S 811 G STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 IM 9 • 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 and have real individual technical issues addressed from the regulatory perspective and so that would be my first recommendation. And then the second recommendation is, you know, to really consider which oil and gas regulations you're going to apply, if any, on, you know, a regulation by regulation basis and to consider a straight annual fee schedule. So that concludes my comments. I'd be happy to answer any questions and if I think it was Commissioner Norman, if you could repeat your question again, I couldn't hear you at all? CHAIR SEAMOUNT: Okay. Thank you, Dr. Kolker. I think you have some really interesting recommendations and your points are well taken. I would request that you could -- if there's any way you could make up a list of bullet points on one page and send it to us that would be really helpful. DR. KOLKER: Sure. CHAIR SEAMOUNT: Okay. Commissioner Norman. COMMISSIONER NORMAN: Are you able to hear me all right? DR. KOLKER: Yeah, I hear you okay, thanks. COMMISSIONER NORMAN: Okay. You touched on my question and I believe for the time being responded to it. My question was simply on how produced fluids would be handled upon re- injection and what requirements that might trigger under the Federal underground injection control program. And I don't know if you're ready to comment on that or not. R& R C 0 U R T R E P O R T E R S 811 G STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 35 0 0 1 2 3 4 5 6 7 8 9 10 �l 12 13 14 15 16 17 18 19 20 21 22 23 24 25 We obviously have some further thinking to do about how all of this is going to work. And I think it's obvious based on what we've said here that we'll be revisiting these to fine tune these regulations and make some additions in the future, but if you have a comment on produced water or other fluids that you'd care to make that would be helpful. DR. KOLKER: The only thing that, you know, without going into a lot of technical detail, the only thing that I would say is that other states re -injection regulations often deal with water rights. California and Nevada are the biggest producers of geothermal fluids that are also known to worst -- groundwater and most water rights disputes. So you know, that's not -- I mean,..... MR. MANN: Hello? COMMISSIONER NORMAN: Are you still there, please? DR. KOLKER: I'm here, can you hear me? COMMISSIONER NORMAN: Yes, um -hum. And you concluded your comment, is that correct? DR. KOLKER: No. Yeah, at least I would concur with you that we need to sit down and look carefully at the issues that are involved in terms of, you know, we're not going to be too worried about water rights which are the concern in other states, but we are going to be worried about underground water excused (ph). You know, Alaska has permafrost which nowhere else in the Lower 48 dealt with things like that. So I think R& R C 0 U R T R E P O R T E R S 811 G STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 36 1 2 3 4 5 6 7, 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 it's technically -- profound technical dilemma and I think it needs to be looked at by experts. COMMISSIONER NORMAN: Very good, thank you. DR. KOLKER: Thank you. CHAIR SEAMOUNT: Commissioner Foerster. COMMISSIONER FOERSTER: Some very interesting recommendation. I just need a little clarification. Are you recommending that we not adopt any regulations until a work group has completed it's work? DR. KOLKER: Well, there -- I mean, the existing Title 11 recommend- -- regulations under DNR, you know, were what we were working with for most of the length of our project and there were -- you know, we felt appropriate. I mean, the echo the regulations in other states. You know, there are definitely technical issues that -- I would say use Title 11 as a base and do some updating from there. I would say, you know, obviously not be regulated, but I think that, you know, Title 11 was a fine start. COMMISSIONER FOERSTER: Okay. But are you aware of the basis for the Title 11 regulations? DR. KOLKER: I'm not sure what you mean? COMMISSIONER FOERSTER: Were you aware that those were just -- they just took the AOGCC's regulations that were in place at that time and dropped them in? DR. KOLKER: Um -hum (affirmative) R& R C 0 U R T R E P O R T E R S 811 G STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 37 1 2 3 4 5 6 71 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 COMMISSIONER FOERSTER: Did you realize that? DR. KOLKER: I wouldn't know -- no. COMMISSIONER FOERSTER: Okay. So you're recommending that we stick with those regulations that are in Title 11 and not adopt any until the work group has -- any new ones until the work group has completed its efforts? DR. KOLKER: That's what I recommend, yes. COMMISSIONER FOERSTER: Okay. That's all. CHAIR SEAMOUNT: Okay. Dr. Kolker, you've mentioned other states, would you be able to tell us which state has the best regulations? DR. KOLKER: That's a good question. People often look to California. I would say that I think in terms of walking this fine line between producing (indiscernible) and effective geothermal -- you know, developing good geothermal resources and, you know, actually having a project I think they're done a good job walking that line. Having said that obviously there's tons of things they regulate for that wouldn't apply to us seeing that they're in a hot climate with little water and huge populations, but then California is generally used as the model. Other states I would look at our Oregon and Nevada, but often Oregon and Nevada just pull things from California. California has really been the spearhead. CHAIR SEAMOUNT: Okay, thank you. Specifically to your R& R C 0 U R T R E P O R T E R S 811 G STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 1 2 3 4 5'I 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 project, how far away is your project from the city? DR. KOLKER: Well, like I said we're still in the exploration stage so we don't know exactly where the production well will be located. Our exploratory holes are located approximately, I think, it's four -- I'm thinking it's longer. In miles I think it's about four miles and five miles from the city. Ray, am I right? MR. MANN: Yeah, that's correct. CHAIR SEAMOUNT: And it's on the same island I assume? MR. MANN: Right. And it's about a mile closer to the Trident plant as well. So where the transmission lines would come out of the valley it's only one mile to Trident from there. CHAIR SEAMOUNT: So you don't have to tanker the electricity over any water. That was a joke on the record, that was a joke. MR. MANN: No, but we -- surprisingly we were asked by some folks in Unalaska whether we'd consider undersea cabling back to Unalaska. Engineers have a little problem with that. CHAIR SEAMOUNT: Okay. COMMISSIONER FOERSTER: I have one more question. CHAIR SEAMOUNT: One more question. COMMISSIONER FOERSTER: Mr. Mann, are you a resident of Akutan? MR. MANN: No, I'm a resident of Anchorage. I live about R& R C 0 U R T R E P O R T E R S 811 G STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 39 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 two blocks from here. COMMISSIONER FOERSTER: Okay, thank you. CHAIR SEAMOUNT: Is it appropriate that we have final comments and adjourn? COMMISSIONER FOERSTER: It's appropr- -- I don't see any reason to recess. CHAIR SEAMOUNT: Okay. Commissioner Norman, comments or final questions? COMMISSIONER NORMAN: No. I would like to thank both of the witnesses for some very good testimony. And I think we're all proceeding forward knowing that for this Commission and for all involved that we're somewhat plowing new ground, so we'll continue to cooperate and communicate principally and move forward. CHAIR SEAMOUNT: Commissioner Foerster. COMMISSIONER FOERSTER: Nothing other than thank you for good testimony. CHAIR SEAMOUNT: I think it's an extremely exciting project. And personally my graduate education was in geothermal a long, long, long, long time ago and it's nice to see some of that coming back. We hope that you keep some good communications going with this agency, technical and other and we want to see it proceed. So with that do I hear a motion..... COMMISSIONER FOERSTER: I move we adjourn. R& R C 0 U R T R E P O R T E R S 811 G STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 0 1 L 9 E C c 1C 11 1 L 1= 1� i� lE 1" if l� 2C 21 2,- 2_ 2L 2r COMMISSIONER NORMAN: Second. CHAIR SEAMOUNT: Okay. with that we are adjourned at 10:01 a.m.. (Recessed - 10:01 a.m.) R& R C 0 U R T R E P O R T E R S 811 G STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 41 i • 1 C E R T I F I C A T E 2 UNITED STATES OF AMERICA ) ) ss . 3 STATE OF ALASKA ) 4 I, Rebecca Nelms, Notary Public in and for the State of Alaska, residing at Anchorage, Alaska, and Reporter for R & R 5 Court Reporters, Inc., do hereby certify: 6' THAT the annexed and foregoing Public Hearing In the Matter of the Proposed Changes to Title 20, Chapter 25 of the 7 Alaska Administrative Code: Geothermal Resources Drilling and Production, was taken by Suzan Olson on the 29th day of June, 8 2010, commencing at the hour of 9:00 a.m., at the Alaska Oil and Gas Conservation Commission, 333 West Seventh Avenue, 9 Anchorage, Alaska; 10 THAT this Hearing Transcript, as heretofore annexed, is a true and correct transcription of the proceedings taken and it transcribed by Suzan Olson to the best of her ability; 12 IN WITNESS WHEREOF, I have hereunto set my hand and affixed my seal this 6th day of July, 2010. 13 14 Notary Public in a for Alaska 15 My Commission Expires: 10/10/10 16 17 18 19 20 21 22 23 24 25 R& R C 0 U R T R E P O R T E R S 811 G STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 STATE OF ALASKA OIL AND GAS CONSERVATION COMMISSION Geothermal Resources Drilling and Production Regulations June 29, 2010 at 9:00 am NAME AFFILIATION PHONE # TESTIFY (Yes or No) -Ri4Y /Ar t,3 9MA4 C of 12.9.2 o 3 S vq c C y ME CAN PAM M El JU DEPARTMENT OF NATURAL RESOURCES 550 wE ANCHO OFFICE OF THE COMMISSIONER June 28, 2010 Commissioners Seamount, Foerster and Norman Alaska Oil and Gas Conservation Commission 333 W. 7� Avenue, Suite 100 PARNELL, GOVERNOR P.O. BOX 111000 NEAU, ALASKA 99811-1000 PHONE: (907) 465-2400 FAX: (907) 465-3886 ST 7T" AVENUE, SUITE 1400 RAGE, ALASKA 99501-3650 PHONE: (907) 269-8431 FAX.- (907) 269-8918 RECEIVED JUN 3 0 2010 Alaska Oil & Gas Cem. Gorrunission Anchorage, AK 99501 ,AncharoUs Dear Commissioners: The Department of Natural Resources (DNR) has reviewed the following regulations proposed by the Alaska Oil and Gas Conservation Commission (AOGCC or Commission) in regard to geothermal resources: 1. 20 AAC 25.705 - which includes geothermal wells in the Commission's regulatory jurisdiction; 2. 20 AAC 25.710 - which extends the existing oil and gas well regulations, where applicable, to geothermal wells; 3. 20 AAC 25.715 - which allows the Commission to grant regulatory variances and waivers, where appropriate; 4. 20 AAC 25.720, 725, 730, 735, 740 and 745 - which establishes the calculation method for geothermal resource regulatory cost charge, and; 5. 20 AAC 25.990(73) - which adds geothermal wells to the Commission's definition of well. The following comments are offered for your consideration. A. We have considered whether, even at temperatures below 120 degrees Celsius, safety concerns may exist that would argue for assertion of AOGCC drilling control even where the definition would not necessarily support it, such as kicks or blowouts caused by high pressure water at any temperature. We note that AS 41.06.060 Definitions includes the following: (4) "geothermal fluid" means liquids and steam at temperatures greater than 120 degrees Celsius or any commercial use of liquids and steam naturally present in a geothermal system at temperatures less than 120 degrees Celsius; (5) "geothermal resources" (A) means the natural heat of the earth at temperatures greater than 120 degrees Celsius, or any use of that heat for commercial purposes, measured at the point where the highest - temperature resources encountered enter or contact a well or other resource extraction device or any commercial use of the natural heat of the earth;..." "Develop, Conserve, and Enhance Natural Resources for Present and Future Alaskans. " • • 6/28/10 Page 2 of 3 With that in mind, we suggest [additions] to 20 AAC 25.710 and 20 AAC 25.990 as follows: 20 AAC 25.710. Applicability of regulations. Unless otherwise specified in this article, all regulations contained elsewhere in this chapter shall apply to wells drilled in search of or in suppot of the recovery or production of geothermal resources [geothermal fluids or geothermal energy]. 20 AAC 25.990. Definitions. ...(73) "well" (a) means a hole penetrating the earth, usually cased with steel pipe, and (1) from which oil or gas, or both, [geothermal fluid, geothermal resource,] or geothermal energy, is obtained or obtainable; or (ii) that is made for the purpose of finding or obtaining oil, gas [, geothermal fluids, geothermal resources,] or geothermal energy production; and ... B. Because temperature data is of the utmost importance in regard to geothermal wells, and because geothermal projects are likely to be on non -State lands, making lease requirements inapplicable, the following [addition] is requested: 20 AAC 25.071 (b) [(9) the following items: (A) geothermal well logs showing lithologic characteristics and depth of formations encountered; depths and temperatures of water -bearing and steam -bearing strata; any data obtained about the temperatures, chemical compositions and physical characteristics of fluids encountered; the amount, size, and weight of casing used; and the size, type and density of perforated intervals. (B) temperature log(s) obtained by either continuous temperature logging or by comprehensive multiple point temperature survey(s).] C. To ensure access to subsurface data for use by the Leasing and Resource Evaluation sections of the Division of Oil and Gas, we request the following [addition]. 20 AAC 25.537 [(f) Notwithstanding (b) and (d) of this section, permits, reports, and information required by this chapter to be filed by the operator or, in the case of lands owned by the State of Alaska, voluntarily submitted, are available to the Department of Natural Resources for inspection, copying, or duplication at the Department of Natural Resources' expense, and for its sole and exclusive use. D. While the Commission is required to consider water rights when deciding whether to approve a drilling permit, and can adopt regulations to prevent, among other things, unreasonable disturbance or injury to prior water rights, we do not find regulations dealing with the possible impairment of prior water rights as a factor in the Commission's decision -making. Under DNR unit regulations, 11 AAC 84.895 addresses how water rights are considered for drilling approval in a unit. i6/28/10 Page 3 of 3 We request adoption of regulatory language that follows one of two possible paths: a) consultation with the DNR Division of Mining, Land and Water regarding possible impairment of prior water rights in relation to non -unitized geothermal drilling permit applications; or b) adoption of language similar to 11 AAC 84.895 to address how AOGCC will consider prior water rights in exercising their geothermal drilling authority. Thank you for the opportunity to comment on the proposed regulations of the AOGCC relative to geothermal drilling. Sincerely, Thomas E. Irwin ecc: Dick Mylius Kevin Banks Gary Prokosch Sara Longan Jack Hartz Susan Browne Paul Decker Lisa Weissler Shaun Peterson Matt Rader Bruce Buzby Comments on Proposetanges in the Regulations of the Alaska and Gas Conservation Commission, Title 20 Chapter 25 of the Alaska Administrative Code Dr. Amanda Kolker, Geothermal Project Manager, City of Akutan Background: Geothermal in AK • The state of AK contains vast geothermal resources. Many are considered "proven," and many are potentially high -quality. However, almost all remain unexploited. • The barriers to geothermal energy development are significant. These include: o CAPITAL COST. Geothermal development requires a large expenditure up front, when project risk is high. o ACCESS. The remoteness of rural AK inflates these costs even higher. Roadless terrain requires fly -in operations (e.g., drill rigs must be helicoptered in at substantial cost), longer and more expensive transmission lines, etc. o BENEFITS NOT ABSORBED BY INVESTORS. Many of the benefits of geothermal use are difficult to quantify, such as reducing dependence on fuel imports, creating jobs, etc. o VILLAGE RESOURCES. Geothermal development is typically comprehensive, dealing with power and heating systems as a unified whole. This requires long-term planning and devoted human resources — a challenge for most rural communities. o LAND OWNERSHIP ISSUES. Geothermal development requires that surface and subsurface rights owners collaborate. This is often politically impossible. • Nonetheless, the State of AK has decided to promote geothermal energy in AK, and backed up this commitment in the form of grant funds, loan programs, and other incentives. The reasons why the state has made this effort, I believe, is because: o Geothermal can provide "baseload" power, unlike other renewables (wind, solar, etc.). o Geothermal provides heat as well as power so it has potential to completely eliminate diesel dependence in certain villages. o Geothermal has the potential to provide economic development opportunities related to heat production (greenhouses, industrial uses, tourism, etc.) Background: The Akutan Geothermal Proiect (AGP) • The AGP is not a profit -making project. The City of Akutan is the project leader and benefactor. The point of the AGP is to reduce diesel dependence and stimulate economic development. • Akutan very likely has a high -quality resource — almost certainly over 85 'C. This, and the minimal transmission costs, make the project one of the most economically feasible in AK. Background: Geothermal Core hole drilling • Occurs early in exploration phase — high risk because unproven resource. • Average success rate is 20% (industry literature). • Small diameter hole (bottom hole diameter around 2"). Does not produce substantial volumes of fluid —cannot be produced. Comments re: AOCGG Proposed Changes 1) Applying OG regs is, in many cases, not appropriate. • There are significant differences between geothermal and O&G drilling, for example: • Geothermal core hole drilling not analogous to rotary drilling. May want to check with mining industry regulations — core holes are common in mining ops. • Depths for geothermal holes are typically shallower, changing the engineering requirements. Comments on Proposedtanges in the Regulations of the Alaska And Gas Conservation Commission, Title 20 Chapter 25 of the Alaska Administrative Code Dr. Amanda Kolker, Geothermal Project Manager, City of Akutan • Types of strata encountered— volcanic rocks vs. sedimentary rocks. These rocks have different mechanical properties (e.g., retain fluid differently, fracture differently, etc.) therefore present very different dangers. • Strata do not typically contain organic material, so many O&G concerns do not apply (e.g., significant methane is not typically found in geothermal fields). • Cementing, casing, completion protocols somewhat different. • Exploration for geothermal resources is entirely different from petroleum exploration. • 0&G wells do not concern themselves with re -injection issues, which is a major concern in geothermal wells. 2) Adding geothermal wells to commission's well definition should be done with care. • Again, a distinction must be made between core holes and rotary -drilled holes. • Injection is very important in geothermal — over the past 20 years, this has been a large focus of regulatory changes. 3) Proposed fee schedule is cumbersome and inappropriate. • Since the fee schedule is based on "volumes of geothermal fluid," that means: • Core holes would not be subject to fees since fluid returns are minimal, and not producible. • For larger-diamter geothermal holes, personnel will be required to measure volumes periodically, which in itself is challenging, and raises many additional questions (e.g., what's the measurement methodology? What if volumes change over time? ) . At least in the case of Akutan, geothermal energy extraction is not a profit -making venture, and the wells will be drilled with public money. That the State of AK intends to finance the drilling of wells and then extract a fee when those wells are drilled, does not make logical sense. The two agencies 4) The approach of applying O&G regulations and then "waiving" them is very problematic. Waivers are ambiguous, and subject to the whims of individual agents, etc. Recommendations: • AOGCC should work with the Alaska Geothermal Working Group (AGWG) to revisit existing regulations, address technical issues, and propose appropriate changes and updates. The GWG should have an appointed leader, meet frequently, and be given specific action items and deadlines. On the GWG should be, at a minimum: o AOGCC representative(s) o ADNR representative(s) o AEA representative(s) o All other AK Geothermal project stakeholders o Geothermal industry representative(s) • AOGCC should consider a straight annual fee schedule. This eliminates the "guessing -game" that geothermal projects would have to undertake with the proposed change. It would also eliminate the problematic requirement of measuring volume on a periodic basis. Colombie, Jody J (DOA) From: Amanda Kolker [info@ak-geothermal.com] Sent: Thursday, July 01, 2010 11:42 AM To,: ' Colombie, Jody J (DOA) Subject: Kolker Comments to the Alaska Oil and Gas Conservation Commission Attachments: Kolker Comments AOGCC Regulation Changes.docx Hello Jody, Attached are the comments and recommendations I presented to the AOCGG at the public hearing regarding changes to geothermal regulations on Tuesday. The commissioner requested I email these comments to your agency. Thanks, Amanda Kolker Akutan Geothermal Project Manager 971-322-5002 0 0 Comments on Proposed Changes in the Regulations of the Alaska Oil and Gas Conservation Commission, Title 20 Chapter 25 of the Alaska Administrative Code Presented by Raymond Mann, President, RMA Consulting Group and On Behalf of the City of Akutan 29 June 2010 Good morning Commissioners and members of the Commission staff. My name is Ray Mann and I am the President of RMA Consulting Group and Program Manager for the City of Akutan. Our company has been assisting the City of Akutan with its geothermal development project since 2008, including the preparation of Alaska Renewable Energy Grant Fund and other grant applications, Alaska Power Project Fund loans, Exploration and Development agreements with Akutan and Aleut Native Corporations, and the preparation and processing of required permits. We are currently completing the pre - drilling procurement and logistical phase of the project in preparation for the commencement of exploratory drilling operations on July 15t" of this year. The purpose of my comments this morning is to address several key issues related to geothermal exploration and development for consideration by the Commission in adopting the currently proposed and future regulations. These include: 1. The public benefits of geothermal exploration and development versus the traditional corporate economic model applied to oil and gas production. 2. The stated policies of the Alaska Legislature and successive Administrations to support the immediate development of renewable energy, including the vast geothermal resources of Alaska, to reduce the dependence on fossil fuels , and most significantly for villages such as Akutan, to promote the sustainability of rural Alaska communities, lifestyles and cultures. 3. Direct investment by the State of Alaska, through the Renewable Energy Grant Fund of hundreds of millions of dollars for renewable energy development, including the identification of nearly twenty viable geothermal development projects requiring near -term exploration and resource identification through state investment. Here again, unlike the profit motivated development of oil and gas, geothermal development will involve substantial, direct investment of public funds and a set of strategic public goals for the elimination of diesel dependence and economic and cultural sustainability for the future. It should be noted that all of the nearly four million dollars required to plan for and complete Akutan's exploratory drilling program this summer is public money. 4. The majority of geothermal development projects being supported and funded by the State of Alaska are community -based projects, Akutan, Unalaska, Manley to name a few. These are not the corporation —based RMA Comments AOGCC Public Meeting 29 June 2010 Page 1 • 0 oil and gas programs the Commission customarily deals with. In addition, much of this local resource development is intertwined with Native Corporation land ownership, tribal values and rural sustainability. All of these factors should be accounted for in any regulatory scheme adopted by the Commission, now and in the future. Geothermal development should be openly promoted by the Commission, as consistent with State policy, and not viewed simply as an "industry" to be regulated, nor as a source of revenue to offset declining oil and gas tax income. In view of the State's funding of the Akutan geothermal project, the City considers itself to be a partner with the Alaska Energy Authority and other agencies in pursuing the mutual goal of renewable energy development. We are hopeful that the Alaska Oil and Gas Conservation Commission will join us in that partnership. Finally, with regard to the proposed adoption of the new Article 7 of 20 AAC 25, 1 would offer the following: 1. The Commission should quickly promulgate revised sections 710 and 715 to more definitively reflect the requirements of geothermal exploration and production, including definition of terms, technical requirements and procedures consistent with geothermal operations. RMA and the City of Akutan will be happy to work with the Commission and staff as these new regulations are developed. 2. Consistent with the above -recommendation, the number of waivers and variances can most likely be reduced with the elimination of oil- and gas - centered requirements from the geothermal resource sections of the regulations. 3. The proposed calculation of regulatory cost changes and the attendant formula in proposed 20AAC25.720 appears complex and could create uncertainty about fees and charges to be levied at various phases of geothermal development. I will let others discuss the technical details of this view; however, our initial reaction is that a more simplified, annual fee schedule be developed, similar to the approach adopted by most of the western states. Thank you for this opportunity to comment on these important issues, and we look forward to working with the Commission and staff as this new chapter in resource development unfolds. I will be happy to answer any questions you might have. RMA Comments AOGCC Public Meeting 29 June 2010 Page 2 43 STATE OF ALASKA ADVERTISING ORDER NOTICE TO PUBLISHER lqw INVOICE MUST BE IN TRIPLICATE SHOWING ADVERTISING ORDER NO., CERTIFIED AFFIDAVIT OF PUBLICATION (PART 2 OF THIS FORM) WITH ATTACHED COPY OF ADVERTISEMENT MUST BE SUBMITTED WITH INVOICE ADVERTISING ORDER NO. A O-03014036 A SEE BC'Tf% [Fib l I E a0RES5 F R D M AOGCC 333 W 7th Ave, Ste 100 Anchorage, AK 99501 AGENCY CONTACT Jody Colombie DATE OF A.O. May 28, 2010 PHONE PCN DATES ADVERTISEMENT REQUIRED: May J 29, 2010 THE MATERIAL BETWEEN THE DOUBLE LINES MUST BE PRINTED IN ITS ENTIRETY ON THE DATES SHOWN. o Anchorage Daily News PO Box 149001 Anchorage, AK 99514 g SPECIAL INSTRUCTIONS: Advertisement to be published was e-mailed Type of Advertisement Legal® ❑ Display Classified ❑Other (Specify) SEE ATTACHED SEND 1NVOIE IIVRC1l:�ifl AOGCC, 333 W. 7th Ave., Suite 100 Anchorage, AK 99501 PAGE 1 OF 2 PAGES TOTAL OF ALL PAGES$ REF TYPE NUMBER AMOUNT DATE COMMENTS 1 VEN 2 ARD 02910 FIN AMOUNT SY CC PGM LC ACCT FY NMR DIST LIQ 1 10 02140100 73451 2 REQUISITIONE BY: DIVISION APPROVAL: 02-902 (Rev. 3/94) Publisher/Original Copies: Department Fiscal, Department, Receiving Elea" ]y • • STATE OF ALASKA NOTICE OF PROPOSED CHANGES IN THE REGULATIONS OF THE ALASKA OIL AND GAS CONSERVATION COMMISSION The Alaska Oil and Gas Conservation Commission proposes to adopt regulation changes to Title 20, Chapter 25 of the Alaska Administrative Code by renumbering current Article 7 as new Article 8, and adding a new Article 7 to deal with geothermal resource drilling and production. The new regulations proposed to be adopted by the Alaska Oil and Gas Conservation Commission include the following: (1) 20 AAC 25.705 — includes geothermal wells in the commission's regulatory jurisdiction; (2) 20 AAC 25.710 — extends the existing oil and gas well regulations, where applicable, to geothermal wells; (3) 20 AAC 25.715 — allows Commission to grant regulatory variances and waivers, where appropriate; (4) 20 AAC 25.720, 725, 730, 735, 740 and 745 - establishes calculation method for geothermal resource regulatory cost charge, and; (5) 20 AAC 25.990(73) — adds geothermal wells to the commission's definition of well. You may comment on the proposed regulation changes, including the potential costs to private persons of complying with the proposed regulations, by submitting written comments to the Alaska Oil and Gas Conservation Commission at 333 West 71h Avenue, Suite 100, Anchorage, Alaska 99501. The comments must be received no later than 4:30 p.m. on June 28, 2010. Oral or written comments also may be submitted at a hearing to be held at 9:00 a.m. on June 29, 2010, at 333 West 7`h Avenue, Suite 100, Anchorage, Alaska 99501. The hearing may continue beyond 12:00 p.m. to allow comment by those present before 9:30 a.m. The public comment period will close at the end of the June 29, 2010 hearing. If you are a person with a disability who needs a special accommodation in order to participate in this process, please contact the Commission's Special Assistant Jody Colombie at (907) 793-1221 no later than June 23, 2010 to ensure that any necessary accommodations can be provided. For a copy of the proposed regulation changes, contact Jody Colombie at 333 West 71h Avenue, Suite 100, Anchorage, Alaska 99501, (907) 793-1221, or go to www.aogcc.alaska.gov. After the public comment period ends, the Alaska Oil and Gas Conservation Commission will either adopt these or other provisions addressing the same subject, without further notice, or decide to take no action on them. The language of the final regulations may be different from that of the proposed regulations. YOU SHOULD COMMENT DURING THE TIME ALLOWED IF YOUR INTERESTS COULD BE AFFECTED. Statutory Authority: AS 41.06.005, AS 41.06.035, AS 41.06.040. Statutes Being Implemented, Interpreted, or Made Specific: AS 41.06.005, AS 41.06.035, AS 41.06.040. Fiscal Information: The proposed regulation changes are not expected to require an increased appropriation. DATE: niel T. Seamount, Jr., Chair • ADDITIONAL REGULATIONS NOTICE INFORMATION (AS 44.62.190(d)) 1. Adopting agency: Alaska Oil and Gas Conservation Commission. 2. General subject of regulations: Geothermal resources drilling and production. 3. Citation of regulations: 20 AAC 25.705, 20 AAC 25.710, 20 AAC 25.715, 20 AAC 25.720, AAC 25.725, 20 AAC 25.730, 20 AAC 25.735, 20 AAC 25.740, 20 AAC 25.745 and 20 AAC 25.990(73) 4. Reason for the proposed action: legislative action transferring geothermal regulatory authority to the Alaska Oil and Gas Conservation Commission. 5. Program category and BRU affected: Alaska Oil and Gas Conservation Commission. 6. Cost of implementation to the state agency: Annual cost is $30,000 (2% of current inspection program cost). 7. The name of the contact person for the regulations: Name: Winton Aubert Title: Senior Reservoir Engineer Address: 333 W. 7th Avenue, Suite 100, Anchorage, AK 99501 Telephone: (907) 793-1221 E-mail: winton.aubert@alaska.gov 8. The origin of the proposed action: agency staff. 9. Date: May 28, 2010 10. Prepared by: (�� (:� 0 Jody J. C mbi Alaska Oil and Gas Conservation Commission (907) 793-1221 • • STATE OF ALASKA NOTICE TO PUBLISHER ADVERTISING ORDER NO. ADVERTISING INVOICE MUST BE IN TRIPLICATE SHOWING ADVERTISING ORDER NO., CERTIFIED /fO_03014036 A ORDER AFFIDAVIT OF PUBLICATION (PART 2 OF THIS FORM) WITH ATTACHED COPY OF ADVERTISEMENT MUST BE SUBMITTED WITH INVOICE SEE BOTTOM FQR IN"0 DD'RESS I �ii�,Pa ii°Ii F AOGCC AGENCY CONTACT DATE OF A.O. R 333 West 7 h Avenue. Suite 100 Jody Colornbie May 28, 2010 PHONE PCN ° Anchorage_ AK 99501 M DATES ADVERTISEMENT REQUIRED: May 29, 2010 o Anchorage Daily News PO Box 149001 Anchora e AK 99514 THE MATERIAL BETWEEN THE DOUBLE LINES MUST BE PRINTED IN g ITS ENTIRETY ON THE DATES SHOWN. SPECIAL INSTRUCTIONS: United states of America State of Account # STOF0330 AFFIDAVIT OF PUBLICATION REMINDER ss INVOICE MUST BE IN TRIPLICATE AND MUST REFERENCE THE ADVERTISING ORDER NUMBER. division. A CERTIFIED COPY OF THIS AFFIDAVIT OF PUBLICATION MUST BE SUBMITTED WITH THE INVOICE. Before me, the undersigned, a notary public this day personally appeared ATTACH PROOF OF PUBLICATION HERE. who, being first duly sworn, according to law, says that he/she is the of Published at in said division and state of and that the advertisement, of which the annexed is a true copy, was published in said publication on the day of 2010, and thereafter for consecutive days, the last publication appearing on the day of , 2010, and that the rate charged thereon is not in excess of the rate charged private individuals. Subscribed and sworn to before me This day of 2010, Notary public for state of My commission expires _ Register 2010 MISCELLANEOUS BOWDS Draft 05/28/2010 Article 7 Geothermal Resources Section 705. Authority of commission 710. Applicability of regulations 715. Variances 720. Calculation of regulatory cost charges for geothermal wells 725. Estimated regulatory cost charges for geothermal wells 730. Commission's determination of regulatory cost charges for geothermal wells 735. Payment dates for regulatory cost charges for geothermal wells 740. Supplemental appropriations 745. Effective date of regulatory cost charge regulations 20 AAC 25.705. Authority of commission. All wells drilled in search of or in support of the recovery or production of geothermal resources shall comply with the regulations contained in this Article 7. 20 AAC 25.710. Applicability of regulations. Unless otherwise specified in this article, all regulations contained elsewhere in this chapter shall apply to wells drilled in search of or in support of the recovery or production of geothermal resources. 20 AAC 25.715. Variances. Upon request of the operator for any action under this article that has application to a single well or geothermal system, the commission may approve a variance from the commission's regulations, if (a) the approval provides at least an equally effective means of accomplishing the requirement set out in the commission's regulation; or (b) the commission determines that the request is more appropriate to the proposed operation than compliance with requirements of the regulation. 20 AAC 25.720. Calculation of regulatory cost charges for geothermal wells. (a) The formula for determining a person's regulatory cost charge under AS 41.06.055 is RCCg = Vgop Vgtot * (Ag-Lg) where RCCg = the regulatory cost charge for geothermal wells; Vgop = the total volume of geothermal resources produced from, and all fluids and substances injected into, during the most recently concluded calendar year, wells for which a Permit to Drill has been issued under AS 41.06.050, of which the person is the operator on the first day of the fiscal year, and that have not before that day been plugged and abandoned and reported as abandoned in accordance with this chapter; Vgtot = the total volume of geothermal resources produced from, and all fluids and substances injected into, during the most recently concluded calendar year, all wells for which a Permit to Register 2 MISCELLANEOUS B6*DS Draft 05/28/2010 Drill has been issued under AS 41.06.050 and that have not before the first day of the fiscal year been plugged and abandoned and reported as abandoned in accordance with this chapter; Ag = the appropriation, other than from federal receipts, made for the operating costs related to activities under Title 41 Chapter 06 of the Alaska Statutes of the commission for the fiscal year; Lg = the lapsed amount of a previous appropriation that is appropriated for the fiscal year under AS 41.06.055(d). (b) For purposes of calculating regulatory cost charges, volumes of geothermal resources produced from or injected into wells consist of the applicable volumes reported to the commission under 20 AAC 25.230(b) and 20 AAC 25.432, except that (1) if an operator has failed to report a volume as required, if two or more reported volumes are inconsistent, or if the commission determines that a reported volume is otherwise unreliable, the commission will, in its discretion, calculate or estimate volumes as it considers appropriate; (2) the commission will, in its discretion, add the volume of a substantial spill or other release of geothermal resources that is not included in a report under 20 AAC 25.230(b) or 20 AAC 25.432. (c) For purposes of determining volumes under AS 41.06.055(b) and this chapter 9,000 cubic feet of gaseous geothermal resources has a volume that is the equivalent of one barrel of liquid geothermal resources. (d) For purposes of AS 41.06.055(a) and this chapter, a well is considered plugged and abandoned and reported as abandoned in accordance with this chapter if the well has been abandoned in accordance with 20 AAC 25.105 and 20 AAC 25.112 and a complete well record for the well, including a description of plugging operations, on a Well Completion or Recompletion Report and Log (Form 10-407) as required by 20 AAC 25.070(3) has been filed with the commission after abandonment. 20 AAC 25.725. Estimated regulatory cost charges for geothermal wells. (a) Before determining regulatory cost charges for a fiscal year under 20 AAC 25.730 the commission will, in its discretion, establish estimated regulatory cost charges to be paid during the first quarter of the fiscal year. The amount of an estimated regulatory cost charge is one-fourth of the commission's reasonable estimate, based on information then available, of what the person's total regulatory cost charge will be for that fiscal year. (b) The commission will provide a person subject to an estimated regulatory cost charge with written notice of the amount of the charge and the payment date. The commission will set a payment date to at least 20 days after the date of the notice. The person shall pay the estimated regulatory cost charge by the payment date. 20 AAC 25.730. Commission's determination of regulatory cost charges for geothermal wells. (a) After the later of the beginning of a fiscal year or the date of enactment of an appropriation for the operating costs of the commission for that fiscal year, the commission will provide to persons subject to a regulatory cost charge under AS 41.06.055 written notice of the proposed regulatory cost charges to be imposed on persons subject to regulatory cost charges for that fiscal year and the basis for the charges, in accordance with 20 AAC 25.720. 2 Register 200 MISCELLANEOUS BOWDS Draft 05/28/2010 (b) Within 30 days after notice is issued under (a) of this section, a person subject to a regulatory cost charge may submit comments on, or request a revision to, the regulatory cost charges imposed for geothermal wells by the commission. A request for a revision must be accompanied by an explanation of the basis for the requested revision, and evidence in support of the request. Before a hearing is held under (c) of this section, the commission will provide all persons subject to a regulatory cost charge with copies of comments and requests for revision received by the commission or with notice of the persons' right to inspect those comments and requests for revision. (c) Within 60 days after notice is issued under (a) of this section, the commission will hold a public hearing in accordance with 20 AAC 25.540 on the proposed regulatory cost charges. (d) Within 90 days after notice is issued under (a) of this section, the commission will issue an order determining the regulatory cost charges to be paid and the dates by which the charges must be paid. The commission will provide written notice to each person subject to a regulatory cost charge of the person's regulatory cost charge and payment dates. (e) The commission will not determine or adjust previously determined regulatory cost charges based on fluid volume reports that are filed or amended, or on other fluid volume corrections that are made, after the deadline under (b) of this section for responding to the commission's notice of proposed regulatory cost charges, except if the commission finds that (1) a person has grossly under -reported the person's Vgop, as defined in 20 AAC 25.720(a); (2) under -reporting as described in (1) of this subsection caused or will cause others' regulatory cost charges to be materially excessive; and (3) correcting the excessive regulatory cost charges is in the public interest. 20 AAC 25.735. Payment dates for regulatory cost charges for geothermal wells. (a) If the commission orders payment of estimated regulatory cost charges under 20 AAC 25.725, the commission will establish payment dates for regulatory cost charges during the second, third, and fourth quarters of the fiscal year. No later than each payment date, a person subject to a regulatory cost charge shall pay one-third of the difference between the person's regulatory cost charge and any estimated regulatory cost charge previously paid for the fiscal year, except that a regulatory cost charge may be prepaid, in part or in whole, at any time. (b) If the commission does not order payment of estimated regulatory cost charges under 20 AAC 25.725, the commission will establish payment dates for regulatory cost charges during each quarter or each third of the fiscal year. No later than each payment date, a person subject to a regulatory cost charge shall pay one-fourth, if four payment dates are established, or one-third, if three payment dates are established, of the person's regulatory cost charge, except that a regulatory cost charge may be prepaid, in part or in whole, at any time. (c) The commission will set the first payment date in a fiscal year to be at least 20 days after the date the commission provides notice under 20 AAC 25.730(d). 20 AAC 25.740. Supplemental appropriations. In the case of regulatory cost charges based on a supplemental appropriation for a fiscal year, (a) the commission will determine regulatory cost charges using the commission's determinations of geothermal resources and well operatorship previously made in connection with the regular appropriation for the fiscal year; Register 00 MISCELLANEOUS BORDS Draft 05/28/2010 (b) in applying the formula set out in 20 AAC 25.720(a), the commission will set the variable "Lg" equal to zero; (c) the commission will use the procedures set out in 20 AAC 25.730, except that the period (1) for submitting comments or requesting a revision under 20 AAC 25.730(b) is 10 days instead of 30 days; (2) within which a public hearing will be held under 20 AAC 25.730(c) is 20 days instead of 60 days; the commission will provide notice of that hearing at least 10 days before the date of that hearing; the 30-day notice requirement under 20 AAC 25.540 does not apply to a hearing held under this paragraph; and (3) within which the commission will issue an order determining regulatory cost charges under 20 AAC 25.730(d) is 30 days instead of 90 days; (d) 20 AAC 25.735 does not apply; and (e) the commission will set the payment date for regulatory cost charges to be at least 10 days after the date the commission provides notice under 20 AAC 25.730(d). 20 AAC 25.745. Effective date of regulatory cost charge regulations. The regulations governing the assessment of regulatory cost charges in 20 AAC 25.720 through 25.740 shall not take effect until after one full calendar year of sustained production of geothermal resources. (Eff. _/_/ , Register ___) Authority: AS 41.06.005 AS 41.06.040 AS 41.06.035 In addition, existing Article 7 is renumbered to Article 8 and 20 AAC 25.990 is amended as follows: 20 AAC 25.990. Definitions. (73) "well" (a) means a hole penetrating the earth, usually cased with steel pipe, and (i) from which oil or gas, or both, or geothermal energy, is obtained or obtainable; or (ii) that is made for the purpose of finding or obtaining oil, gas or geothermal energy, or of supporting oil, gas or geothermal energy production; and (b) includes a well with multiple well branches drilled to different bottom -hole locations; (Eff. 11/7/99, Register 152; am 1/5/2006, Register 177; _/_/ , Register Authority: AS 31.05.30 El #2 • MEMORANDUM To: Daniel T. Seamount, Jr., Chair Alaska Oil and Gas Conservation Commission Dept. of Administration From: Deborah E. Behr Chief Assistant Attorney General and Regulations Attorney Legislation and Regulations Section State of Alaska Department of Law Date: June 17, 2010 File No.: JU2010201538 Tel. No.: 465-3600 Re: Regulations File Opening Re: 20 AAC 25.700 - 990: Alaska Oil and Gas Conservation Commission: Geothermal Resource Drilling We have received your memorandum of June 16, 2010 regarding the above -referenced matter. The project has been assigned to Tab Ballantine, Assistant Attorney General, phone number 269-5100. Our department's file number for this project is JU2010201538. This file number should be used on any further correspondence pertaining to this project. DEB:pvp cc: Robert Pearson, Regulations Contact Dept. of Adminstration Jody Colombie, Special Assistant Alaska Oil and Gas Conservation Commission Dept. of Administration Scott Clark, AAC Coordinator Office of the Lieutenant Governor Randy Ruaro, Deputy Chief of Staff Office of the Governor Tina Kobayashi, Supervising Attorney Oil, Gas and Mining Section Tab Ballantine, Assistant Attorney General Anchorage RECEIVED JUN 21 2, 1010 masks~ 01 & Ui W'ramv Commissio 0 MEMORANDUM STATE OF ALASKA ALASKA OIL AND GAS CONSERVATION COMMISSION TO: Deborah E. Behr DATE: June 16, 2010 Assistant Attorney General And Regulations Attorney Legislation and Regulations Section SUBJECT: File -opening request for Regulations Project on Geothermal Resource Drilling and Production 20 AAC 25.700 and 20 AAC 25.990 FROM: Daniel T. Seamount, Jr., Chair AOGCC Regulations Contact Department of Administration The Alaska Oil and Gas Conservation Commission (AOGCC) is requesting that you open a new file for a regulations project adding Section 700 of Title 20, Chapter 25, of the Alaska Administrative Code, pertaining to Geothermal Resource Drilling and production for the AOGCC. The AOGCC previously mailed to the Department of Law the public notice, additional regulations notice information, and a draft of the regulations. Please assign Assistant Attorney General Tab Ballantine to this project. Our contact person for the project is Jody Colombie at 793-1221. -* 1 *SEAM PARNELL, GOVERNOR DEPARTMENT OF NATURAL RESOURCES 550 WEST 7T" AVENUE, SUITE 800 ANCHORAGE, ALASKA 99501-3560 DIVISION OF OIL & GAS PHONE: (907) 269-8800 FAX(907) 269-8938 June 10, 2010 Alaska Oil and Gas Conservation Commission (AOGCC) Commissioners John Norman, Catherine Foerster, and Dan Seamount Dr. Winton Aubert Hand Delivered RE: Implementation of SB 243 Transferring Authority for Geothermal Permits from the Department of Natural Resources (DNR) Division of Oil and Gas (DO&G) to AOGCC and Related File Transmittal Dear Commissioners and Dr. Aubert, Governor Parnell signed SB 243 on June 2, 2010. Sec 22 is effective immediately (12:01 am AST the day after the Governor signs, therefore June 3, 2010). Transmittal To implement this law, DNR is transmitting and transferring responsibility for the following to AOGCC: 1. Naknek Electric Association a. Original Naknek Electric Assn., Well G-1 Permit to Drill Issued DNR A2215, P804, P829, P1273 file: These permits have been issued and drilled. Contact Susan Browne, DNR, with questions 269-8803. b. The data DNR has collected from the Naknek G-1 is available to AOGCC. Contact Shaun Peterson, Geologist, DNR Resource Evaluation, 269-6482, for data questions. c. Original Naknek G-2 Permit to Drill was not issued. DNR A2275, P 1249, P 1250 file: This permit has not been issued but has completed agency review and should be issued by AOGCC as soon as possible. Contact Matthew Rader, DNR, with questions, 269-8776 d. Original Naknek statewide geothermal bond accepted by DNR file: This $200,000 statewide bond has been accepted by DNR and is in use for the Naknek G-1 Well. Contact Brian Havelock, DNR, with questions 269-8807. 2. City of Akutan a. Original four City of Akutan Geothermal Permits to Drill were not issued; DNR A2273 file: These approvals have not been issued but have been through agency review and should be issued by AOGCC as soon as possible. Contact Matthew Rader, DNR, with questions 269-8776. b. Original unaccepted City of Akutan bond CD ITF: This bond is based on a CD held in trust for the state and has not yet been accepted. Contact DNR Brian Havelock 269-8807 with questions. "Develop, Conserve, and Enhance Natural Resources for Present and Future Alaskans. " Division of Oil & Gas 6/10/10 Page 2 of 2 3. Electronic File Material a. DNR has provided selected electronic copies of materials for these permits to AOGCC. A CD has been prepared containing the basic application and permit information held electronically by DNR for the Naknek Electric Assoc. and City of Akutan projects. Some of this material is not in the hard copy files transferred to AOGCC. In particular, the CD contains supporting information for the City of Akutan permit applications that is not in the file. Contact DNR Matthew Rader 269- 8776 with questions. SB 243 reads in relevant part: Sec. 20. The uncodified law of the State of Alaska is amended by adding a new section to 11 read: 12 TRANSITION: REGULATIONS. (a) To the extent the regulations are not 13 inconsistent with the language and purposes of this Act, regulations relating to geothermal 14 wells adopted by the Department of Natural Resources under AS 41.06 before July 1, 2010, 15 remain in effect as valid regulations implementing this Act. The Alaska Oil and Gas 16 Conservation Commission may administer and enforce regulations previously adopted under 17 AS 41.06 relating to geothermal wells until the Alaska Oil and Gas Conservation Commission 18 adopts regulations in accordance with this Act. 19 (b) The Alaska Oil and Gas Conservation Commission may immediately proceed to 20 adopt regulations necessary to implement the changes made by this Act. The regulations take 21 effect under AS 44.62 (Administrative Procedure Act), but not before July 1, 2010. 22 * Sec. 21. The uncodified law of the State of Alaska is amended by adding a new section to 23 read: 24 REVISOR'S INSTRUCTIONS. The revisor of statutes is instructed to change the 25 catch line of AS 41.06.030 from "Reservoir management" to "Unitization." 26 * Sec. 22. Section 20 of this Act takes effect immediately under AS 01.10.070(c). 27 * Sec. 23. Except as provided in sec. 22 of this Act, this Act takes effect July 1, 2010. If you have any questions please feel free to contact me at 269-8775, or one of the staff as indicated above. Sincerely, Jonne Slemons Permitting and Leasing Section Chief ecc: ADNR Office of the Commissioner of the Department of Natural Resources ADNR DMLW Land, Rick Thompson, Clark Cox, Anchorage ADNR DMLW Water, Gary Prokosch, Mike Walton, Anchorage ADNR Division of Geological and Geophysical Surveys, Rod Combellick, Fairbanks Naknek Electric Association, Donna Vukich Naknek Electric Association, Corri Feige, The Castle Mountain Group, Inc., Sutton, AK City of Akutan, Susan Lutz City of Akutan, RMA Consulting Group Robert Kirkman 0 • MEMORANDUM To: Daniel T. Seamount, Chair Oil and Gas Conservation Commission Dept. of Administration f From: Deborah E. Behr Chief Assistant Attorney General Legislation and Regulations Section State of Alaska Department of Law Date: February 2, 2010 File No.: JU2010201091 Tel. No.: 465-3600 Re: File Opening re: Geothermal Regulatory Transfer At the request of the governor's legislative office, we have opened a bill -drafting file for your office on the above -referenced matter. The project has been assigned to Assistant Attorney General Tab Ballantine, phone number 269-5100. Please work closely with Tab Ballantine so that the final drafts can be submitted expeditiously. Please contact me, Linda Miller, or Tab Ballantine if you have any questions about our bill -drafting work for you. DEB:pav cc: Kevin Brooks, Legislative Liaison Dept. of Administration Tyson Fick, Legislative Liaison Dept. of Commerce, Community, and Economic Development Heather Brakes, Legislative Liaison Dept. of Natural Resources Catherine Foerster, Commissioner Oil and Gas Conservation Commission Dept. of Administration Randy Ruaro, Deputy Chief of Staff Office of the Governor Tina Kobayashi, Supervising Attorney Oil, Gas and Mining Section Tab Ballantine, Assistant Attorney General Anchorage • FISCAL NOTE 0 STATE OF ALASKA 2010 LEGISLATIVE SESSION Fiscal Note Number: Bill Version: () Publish Date: CS SIB 243 Identifier (file name): SB243CS -DOA-AOGCC-03-31-10 Dept. Affected: Admin Title RDU AOGCC "An Act relating to the royalty obligation for geothermal resources." Component AOGCC Sponsor Senator Lesil McGuire Requester (S) FIN Component Number 2010 Expenditures/Revenues (Thousands of Dollars) Note: Amounts do not include inflation unless otherwise noted below. Appropriation Required Information OPERATING EXPENDITURES FY 2011 FY 2011 FY 2012 FY 2013 FY 2014 1 FY 2015 FY 2016 Personal Services Travel Contractual Supplies Equipment Land & Structures Grants & Claims Miscellaneous 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 TOTAL OPERATING 0.0 0.0 0.0 0.0 0.0 0.0 1 0.0 CAPITAL EXPENDITURES CHANGE IN REVENUES ( ) FUND SOURCE (Thousands of Dollars) 1002 Federal Receipts 1003 GF Match 1004 GF 1005 GF/Program Receipts 1037 GF/Mental Health Other Interagency Receipts 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1 0.0 11 0.0 0.0 0.0 1 0.0 TOTAL 0.0 0.0 1 0.0 1 0.0 0.0 0.0 1 0.0 Estimate of any current year (FY2010) cost: POSITIONS ------- ------- ANALYSIS: (Attach a separate page if necessary) Additional work for the Alaska Oil and Gas Conservation Commission (AOGCC) resulting from this bill could be managed by existing staff. The agency would need to provide training for Commissioners and staff on geothermal drilling and production practices, but the costs would be absorbed by the agency. Therefore, AOGCC submits a zero fiscal note. Prepared by: Jody J. Colombie, Special Assistant I Phone (907 793-1221 Division Alaska Oil and Gas Conservation Commission Date/Time 3/31/10 10:00 AM Approved by: Rachael Petro, Deputy Commissioner Date 3/31/2010 Department of Administration (Revised iv6i2oo9OMB) Page 1 of 1 WORK DRAFT 0 WORK DRAFT • WORK DRAFT 1 2 3 4 5 6 7 8 9 10 11 12 13 BY Offered: Referred: CS FOR SENATE BILL NO.243( ) IN THE LEGISLATURE OF THE STATE OF ALASKA TWENTY-SIXTH LEGISLATURE - SECOND SESSION Sponsor(s): SENATOR MCGUIRE A BILL FOR AN ACT ENTITLED 26-LS 1346\S Bullock 3/26/10 "An Act relating to geothermal resources; relating to the royalty obligation for geothermal resources; transferring from the Department of Natural Resources to the Alaska Oil and Gas Conservation Commission authority over permitting and inspection of geothermal wells; providing for a regulatory cost charge for geothermal wells; and providing for an effective date." BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: * Section 1. AS 31.05.030 is amended by adding a new subsection to read: (m) The commission has jurisdiction and authority over all persons and property, public and private, necessary to carry out the purposes and intent of AS 41.06, except for provisions in AS 41.06 for which the Department of Natural Resources has jurisdiction. * Sec. 2. AS 38.05.181(g) is amended to read: (g) Each geothermal lease shall be conditioned upon payment by the lessee of 11 -1- CSSB 243( ) L New Text Underlined [DELETED TEXT BRACKETED] WORK DRAFT 0 WORK DRAFT 0 26-LS1346\S ' 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 a royalty of 1.75 percent [NOT LESS THAN 10 PERCENT BUT NOT MORE THAN 15 PERCENT] of the gross revenues derived from the production, sale, or use of geothermal resources under the lease during the first 10 years immediately following the date the geothermal resource first generates gross income and 3.5 percent of the gross revenues derived from the production, sale, or use of geothermal resources under the lease after that first 10-year period. Royalties may be taken in kind rather than in value if the commissioner determines that taking in kind would be in the best interest of the state. * Sec. 3. AS 41.06 is amended by adding a new section to read: Sec. 41.06.005. Jurisdiction over geothermal resources. (a) The commission has jurisdiction under this chapter over geothermal wells to prevent waste, to protect correlative rights, and to ensure public safety. (b) The Department of Natural Resources has jurisdiction under this chapter over management of geothermal leases and units in the public interest and to effect development. * Sec. 4. AS 41.06.010 is amended to read: Sec. 41.06.010. Waste prohibited; investigation. The waste of geothermal resources in the state is prohibited. The commission may investigate to determine whether waste exists or is imminent, or whether other facts exist that justify or require action by the commission to prohibit waste. * Sec. 5. AS 41.06.020 is repealed and reenacted to read: Sec. 41.06.020. Authority of commission; application. (a) The commission has jurisdiction over all persons and property, public and private, necessary to carry out the purposes and intent of this chapter. (b) The authority of the commission applies to all land in the state lawfully subject to the police power of the state, including private land, municipal land, state land, land of the United States, and land subject to the jurisdiction of the United States, and to all land included in a voluntary cooperative or unit plan of development or operation entered into in accordance with AS 38.05.181. When land that is subject to the commission's authority is committed to a unit agreement involving land subject to federal jurisdiction, the operation of this chapter or a part of this chapter may be L CSSB 243( ) -2- New Text Underlined [DELETED TEXT BRACKETED] WORK DRAFT 0 -WORK DRAFT 0 26-LS1346\S 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 suspended if (1) the unit operations are regulated by the United States; and (2) the conservation of geothermal resources is accomplished under the unit agreement. (c) This chapter applies (1) to wells drilled in search of, in support of, or for the recovery or production of geothermal resources; (2) when a person engaged in drilling activity not otherwise subject to the provisions of this chapter encounters geothermal resources, fluid, or water of sufficient heat or pressure to constitute a threat to human life or health unless the drilling operation is subject to oil and gas drilling regulation under AS 31.05; (3) in areas and under conditions in which the commission determines that drilling may encounter geothermal resources, fluid, or water of sufficient heat or pressure to constitute a threat to human life or health. (d) To the extent the provisions of AS 31.05 do not conflict with the provisions of this chapter, the provisions of AS 31.05 are applicable to wells drilled in search of, in support of, or for the recovery or production of geothermal resources. (e) Nothing in this chapter limits the authority of the department (1) over geothermal resources under AS 3 8.05.181; or (2) to approve and manage geothermal units or operations that include state land. * Sec. 6. AS 41.06.030(a) is amended to read: (a) The commissioner shall require the filing and approval of a plan of development and operation on a [EACH PRODUCING] geothermal system that includes state land [AND MAY ISSUE WELL -SPACING AND POOLING ORDERS, LIMITS ON PRODUCTION, AND REINJECTION REQUIREMENTS, IN ORDER TO PREVENT WASTE, PROMOTE MAXIMUM ECONOMIC RECOVERY, AND PROTECT CORRELATIVE RIGHTS]. * Sec. 7. AS 41.06.030(b) is amended to read: (b) Lessees of all or part of a geothermal system that includes state land may enter into a unit agreement for cooperative development, with the approval of the 11 -3- CSSB 243( ) L New Text Underlined [DELETED TEXT BRACKETED] WORK DRAFT 0 WORK DRAFT 0 26-LS1346\S 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 commissioner. The commissioner may suspend or modify the approved development plan in accordance with the unit agreement. * Sec. 8. AS 41.06.030(c) is amended to read: (c) If the owners of at least two-thirds of the leasehold interests in a geothermal system ratify a unit agreement approved under N of this section by the commissioner, the commissioner may enforce the agreement as to lessees not a party to the agreement by allocating production under the principle of correlative rights and by apportioning costs and revenues. * Sec. 9. AS 41.06.030 is amended by adding a new subsection to read: (e) The commissioner may adopt regulations under AS 44.62 to carry out the purposes and intent of this chapter for duties assigned to the department, including the promotion of maximum economic recovery. * Sec. 10. AS 41.06 is amended by adding a new section to read: Sec. 41.06.035. Reservoir management; commission's regulations. (a) The commission may issue well -spacing and pooling orders, place limits on production, and impose reinjection requirements for the purpose of preventing waste and to protect correlative rights in a geothermal system. (b) The commission may adopt regulations under AS 44.62 and issue orders appropriate to carry out the purposes and intent of this chapter for duties assigned to the commission, including orders regarding the establishment of drilling units for pools as set out in AS 31.05.100 and orders regarding unitized operation and integration of interests as set out in AS 31.05.110. * Sec. 11. AS 41.06.040(a) is repealed and reenacted to read: (a) The commission shall adopt regulations under AS 44.62 (Administrative Procedure Act), issue orders, and take other appropriate action to carry out the purposes and intent of this chapter, including adopting regulations to prevent (1) geothermal resources, water or other fluids, and gases from escaping into strata other than that in which they are found, unless in accordance with an approved reinjection program; (2) contamination of surface and groundwater; (3) premature degradation of a geothermal system by water L CSSB 243( ) 4- New Text Underlined [DELETED TEXT BRACKETED] WORK DRAFT 0 WORK DRAFT 26-LS1346\S 1 encroachment or otherwise; 2 (4) blowouts, cavings, and seepage; and 3 (5) unreasonable disturbance or injury to neighboring properties, prior 4 water rights, prior oil or gas rights, human life, health, and the natural environment. 5 * Sec. 12. AS 41.06.040(b) is amended to read: 6 (b) The commission [COMMISSIONER] shall require [CAUSE] the 7 operator of a geothermal well [OR WELLS] to file adequate an individual or blanket 8 surety bond [BONDS] to ensure compliance with regulations adopted under this 9 section. 10 * Sec. 13. AS 41.06.040(c) is amended to read: 11 (c) The commission [COMMISSIONER] shall require a geothermal operator 12 to notify the commission [DEPARTMENT] if the operator discovers significant 13 quantities of hydrocarbon substances, helium, or fissionable materials. 14 * Sec. 14. AS 41.06.040(d) is amended to read: 15 (d) The commission and its staff [COMMISSIONER] may enter upon any 16 property, public or private, to inspect a geothermal operation for compliance with 17 regulations adopted under this section. 18 * Sec. 15. AS 41.06.050 is repealed and reenacted to read: 19 Sec. 41.06.050. Permits to drill. (a) A person shall apply for and receive a 20 permit from the commission before drilling a well in 21 (1) search of geothermal resources; or 22 (2) support of the recovery or production of geothermal resources. 23 (b) The application required in (a) of this section must contain sufficient 24 information to enable the commission to determine if the operation of the well will 25 interfere with or impair a prior water, oil, or gas right. 26 (c) A person must submit a separate permit application for each well. The 27 permit application must be in the form or format required by the commission and 28 include all information required by the commission. 29 (d) As soon as practicable after receiving an application under (a) of this 30 section, the commission shall approve or deny the application for a permit to drill. 31 (e) In making the determination under (d) of this section, the commission shall -5- CSSB 243( ) L New Text Underlined [DELETED TEXT BRACKETED] WORK DRAFT WORK DRAFT is 26-LS1346\S ' 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 consider whether the (1) proposed well will significantly interfere with or substantially impair a prior water, oil, or gas right; (2) proposed well is contrary to a provision of this chapter, a regulation adopted by the commission, another law, or an order, stipulation, or term of a permit issued by the commission; and (3) applicant is in violation of a provision of this chapter, a regulation adopted by the commission, another law, or an order, stipulation, or term of a permit issued by the commission; the commission shall consider the magnitude of the violation. * Sec. 16. AS 41.06 is amended by adding a new section to read: Sec. 41.06.055. Regulatory cost charge for geothermal wells. (a) Each person that, on the first day of a state fiscal year, operates a well within the jurisdiction of the commission for which a permit to drill has been issued under AS 41.06.050 shall pay to the commission an annual regulatory charge for each well that has not, before the first day of that state fiscal year, been (1) plugged and abandoned; and (2) reported as abandoned in accordance with regulations of the commission. (b) The commission shall annually determine the regulatory cost charge to be paid under this section. The regulatory cost charge to be paid by a person for a state fiscal year must be based on the total volume during the most recent calendar year for the wells described in (a) of this section of which the person was the operator on the first day of the fiscal year as a percentage of the total volume during the same calendar year for all wells described in (a) of this section. In this subsection, "total volume" means the sum of the volume of all geothermal resources produced from a well and all fluids and substances injected or otherwise artificially introduced into the well. (c) The commission shall determine the regulatory cost charges levied under this section so that the total amount to be collected approximately equals the appropriations made for the operating costs of the commission that have been incurred under this chapter for the fiscal year. L CSSB 243( ) -6- New Text Underlined [DELETED TEXT BRACKETED] WORK DRAFT WORK DRAFT 26-LS1346\S 1 (d) The commission shall collect the regulatory cost charges imposed under 2 this section. The Department of Administration shall identify the amount of 3 appropriations made for the operating costs of the commission under this chapter that 4 lapse into the general fund each year. The legislature may appropriate an amount that 5 is at least equal to the lapsed amount to the commission for its operating costs under 6 this chapter for the next fiscal year. If the legislature makes an appropriation to the 7 commission under this subsection that is equal to or greater than the lapsed amount, 8 the commission shall reduce the total regulatory cost charge collected for that fiscal 9 year by a comparable amount. 10 (e) The commission may adopt regulations relating to the investigation of the 11 accuracy of reported information and for collecting required payments under this 12 section. 13 * Sec. 17. AS 41.06.060 is repealed and reenacted to read: 14 Sec. 41.06.060. Definitions. In this chapter, unless the context otherwise 15 requires, 16 (1) "commission" means the Alaska Oil and Gas Conservation 17 Commission created under AS 31.05.005; 18 (2) "correlative rights" means the right of an owner of each property in 19 a geothermal system to produce without waste the owner's just and equitable share of 20 the geothermal resources in the geothermal system; a just and reasonable share is an 21 amount, so far as can be practically determined and so far as can be practically 22 produced without waste, that is substantially in proportion to the quantity of 23 recoverable geothermal resources under the owner's property relative to the total 24 recoverable geothermal resources in the geothermal system; 25 (3) "geothermal fluid" means liquids and steam at temperatures greater 26 than 120 degrees Celsius or any commercial use of liquids and steam naturally present 27 in a geothermal system at temperatures less than 120 degrees Celsius; 28 (4) "geothermal resources" 29 (A) means the natural heat of the earth at temperatures greater 30 than 120 degrees Celsius, or any use of that heat for commercial purposes, 31 measured at the point where the highest -temperature resources encountered -7- CSSB 243( ) L New Text Underlined [DELETED TEXT BRACKETED] WORK DRAFT 9 WORK DRAFT 0 26-LS1346\S ' 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 enter or contact a well or other resource extraction device or any commercial use of the natural heat of the earth; (B) includes (i) the energy, including pressure, in whatever form present in, resulting from, created by, or that may be extracted from that natural heat; (ii) the material medium, including steam and other gases, hot water, and hot brines constituting the geothermal fluid naturally present, as well as substances artificially introduced to serve as a heat transfer medium; and (iii) all dissolved or entrained minerals and gases that may be obtained from the material medium, but excluding hydrocarbon substances and helium; (5) "geothermal system" means a stratum, pool, reservoir, or other geologic formation containing geothermal resources; (6) "operator" means a person drilling, maintaining, operating, producing, or in control of a well; (7) "owner" means the person who has the right to drill into or produce from a geothermal system and to appropriate the geothermal resources produced from a geothermal system for that person and others; (8) "waste" means, in addition to its ordinary meaning, physical waste, and includes an inefficient, excessive, or improper production, use, or dissipation of geothermal resources, including (A) drilling, transporting, or storage methods that cause or tend to cause unnecessary surface loss of geothermal resources; (B) locating, spacing, drilling, equipping, operating, producing, or venting of a well in a manner that results or tends to result in reducing the ultimate economic recovery of geothermal resources; (9) "well" means a well drilled, converted, or reactivated for the discovery, testing, production, or subsurface injection of geothermal resources. * Sec. 18. AS 41.06.030(d) and 41.06.040(e) are repealed. L CSSB 243( ) -8- New Text Underlined [DELETED TEXT BRACKETED] ' 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 WORK DRAFT 9 WORK DRAFT 0 26-LS1346\S * Sec. 19. The uncodified law of the State of Alaska is amended by adding a new section to read: APPLICABILITY; AMENDMENT OF EXISTING LEASES. (a) Section 2 of this Act applies to a lease for a geothermal resource or the renewal of a lease for a geothermal resource entered into on or after the effective date of sec. 2 of this Act. (b) The commissioner of natural resources shall offer the royalty rates in AS 38.05.181(g), as amended by sec. 2 of this Act, as an amendment to a lease or a renewal of a lease entered into before the effective date of sec. 2 of this Act. * Sec. 20. The uncodified law of the State of Alaska is amended by adding a new section to read: TRANSITION: REGULATIONS. (a) To the extent the regulations are not inconsistent with the language and purposes of this Act, regulations relating to geothermal wells adopted by the Department of Natural Resources under AS 41.06 before July 1, 2010, remain in effect as valid regulations implementing this Act. The Alaska Oil and Gas Conservation Commission may administer and enforce regulations previously adopted under AS 41.06 relating to geothermal wells until the Alaska Oil and Gas Conservation Commission adopts regulations in accordance with this Act. (b) The Alaska Oil and Gas Conservation Commission may immediately proceed to adopt regulations necessary to implement the changes made by this Act. The regulations take effect under AS 44.62 (Administrative Procedure Act), but not before July 1, 2010. * Sec. 21. The uncodified law of the State of Alaska is amended by adding a new section to read: REVISOR'S INSTRUCTIONS. The revisor of statutes is instructed to change the catchline of AS 41.06.030 from "Reservoir management" to "Unitization." * Sec. 22. Section 20 of this Act takes effect immediately under AS 01.10.070(c). * Sec. 23. Except as provided in sec. 22 of this Act, this Act takes effect July 1, 2010. L -9- CSSB 243( ) New Text Underlined [DELETED TEXT BRACKETED] Colombie, Jody J (DOA) From: Foerster, Catherine P (DOA) Sent: Wednesday, March 31, 2010 8:55 AM To: Colombie, Jody J (DOA) Subject: FW: IMPORTANT!!!!!!! FISCAL NOTES FOR SB 243 S Attachments: Sb 243 S Version.pdf From: Michael Pawlowski [ ma ilto: M ichael—Pawlowski @leg is. state.ak. us] Sent: Tuesday, March 30, 2010 4:09 PM To: Brakes, Heather K (GOV) Cc: Foerster, Catherine P (DOA); Banks, Kevin R (DNR) Subject: IMPORTANT! ! ! ! ! ! ! FISCAL NOTES FOR SB 243 S Heather — Just got a note from Darwin in Sen. Stedman's office We have to get fiscal notes to the S version of SB 243 Geothermal (S- version with AOGCC and DNR language) by tomorrow. Is that possible???? Thanks Mike Pawlowski FISCAL NOTE 0 STATE OF ALASKA 2010 LEGISLATIVE SESSION Fiscal Note Number: Bill Version: () Publish Date: LL 1091 Identifier (file name): 1091 -DOA-AOGCC-02-18-1 0 Dept. Affected: Admin Title An Act relating to geothermal resources..." RDU AOGCC Component AOGCC Sponsor Senator Lesil McGuire Requester Senator Lesil McGuire Component Number 2010 Expenditures/Revenues (Thousands of Dollars) Note: Amounts do not include inflation unless otherwise noted below. Appropriation Required Information OPERATING EXPENDITURES FY 2011 FY 2011 FY 2012 FY 2013 FY 2014 FY 2016 FY 2016 Personal Services Travel Contractual Supplies Equipment Land & Structures Grants & Claims Miscellaneous 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 TOTAL OPERATING 0.0 0.0 0.0 0.0 0.0 0.0 0.0 CAPITAL EXPENDITURES CHANGE IN REVENUES ( FUND SOURCE (Thousands of Dollars) 1002 Federal Receipts 1003 GF Match 1004 GF 1005 GF/Program Receipts 1037 GF/Mental Health Other Interagency Receipts 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1 0.0 0.0 0.01 0.0 0.0 TOTAL 0.0 0.0 1 0.01 0.0 1 0.01 0.0 0.0 Estimate of any current year (FY2010) cost: POSITIONS Temporary ANALYSIS: (Attach a separate page if necessary) Any additional work or necessary training resulting from this bill could be managed by existing staff and the costs would be absorbed by the agency. The agency, therefore, submits a zero fiscal note. Prepared by: Jody J. Colombie, Special Assistant I Phone (907 793-1221 Division Alaska Oil and Gas Conservation Commission Date/Time 2/18/10 4:00 PM Approved by: Rachael Petro, Deputy Commissioner Date 2/18/2010 Department of Administration (Revised 11/6/2009 OMB) Page 1 of 1 Colombie, Jody J (DOA From: Foerster, Catherine P (DOA) Sent: Thursday, February 18, 2010 10:05 AM To: Brooks, Kevin A (DOA) Cc: Pearson, Robert L (DOA); Seamount, Dan T (DOA); Norman, John K (DOA); Colombie, Jody J (DOA); Paladijczuk, Tracie L (DOA) Subject: RE: Greensheet JU2010201091 geothermal resources Kevin, As we discussed on the phone, the AOGCC and the DNR are supportive of this bill and have collaborated through our AG's on crafting language for it. The bill would transfer authority for the regulation of geothermal operations from DNR to AOGCC (while leaving with DNR all the other geothermal authorities they are interested in maintaining). If the DNR keeps this authority, they will either have to hire staff (a drilling engineer and a field inspector and possibly a geologist all with geothermal experience) or have to contract with the AOGCC (or some other entity) for our staff to do the work (which is what's happening right now). There are other complications with the status quo that I won't bore you with, but the short message is that both DNR and AOGCC feel that the transfer of this authority is in the best interests of the State of Alaska. Jody will be sending you a fiscal note. The AOGCC will need to expend some money on geothermal training for our staff. (We would need to expend this money even if the DNR kept the authority but asked us to do the work; so I'm not sure how you want to treat it as far as a fiscal note goes.) Also, as we discussed on the phone, a bit of technical training will cost minor dollars compared with the cost of the DNR having to hire or contract two or three high -paid folks. Hope this helps. Let us know if you need more or different info. Cathy From: Brooks, Kevin A (DOA) Sent: Thursday, February 18, 2010 9:21 AM To: Seamount, Dan T (DOA); Foerster, Catherine P (DOA); Norman, John K (DOA) Cc: Pearson, Robert L (DOA) Subject: FW: Greensheet JU2010201091 geothermal resources Dan, please take a look at the attached bill and provide feedback/comments. I'll need to submit our position to the Gov's legislative office on the attached greensheet by tomorrow (Friday). Let me know if you have any questions or need to discuss. Thanks. From: Machulsky, Mara M (GOV) Sent: Wednesday, February 17, 2010 5:22 PM To: Brooks, Kevin A (DOA) Subject: Greensheet JU2010201091 geothermal resources Attached please find the greensheet for JU 1091 Relating to geothermal resources; relating to the transfer of authority from the Department of Natural Resources to the Alaska Oil and Gas Conservation Commission over permitting and inspection of geothermal wells; and relating to a regulated well regulatory cost charge for geothermal resources. , Due February, 19 2010 Mara Machulsky Legislative Executive Assistant Office of Governor Sean Parnell P.O. Box 110001 Juneau, AK 99811-0001 PHONE: 907.465.4021 CELL: 907.723.5753 mara.machulskygalaska. gov www.gov. state. ak.us Colombie, Jody J (DOA) From: Foerster, Catherine P (DOA) Sent: Thursday, February 18, 2010 9:34 AM To: Colombie, Jody J (DOA) Subject: FW: Greensheet JU2010201091 geothermal resources Attachments: ILL 1091 geothermal resources.pdf; JU2010201091.pdf From: Brooks, Kevin A (DOA) Sent: Thursday, February 18, 2010 9:21 AM To: Seamount, Dan T (DOA); Foerster, Catherine P (DOA); Norman, John K (DOA) Cc: Pearson, Robert L (DOA) Subject: FW: Greensheet JU2010201091 geothermal resources Dan, please take a look at the attached bill and provide feedback/comments. I'll need to submit our position to the Gov's legislative office on the attached greensheet by tomorrow (Friday). Let me know if you have any questions or need to discuss. Thanks. m From: Machulsky, Mara M (GOV) Sent: Wednesday, February 17, 2010 5:22 PM To: Brooks, Kevin A (DOA) Subject: Greensheet JU2010201091 geothermal resources Attached please find the greensheet for JU 1091 Relating to geothermal resources; relating to the transfer of authority from the Department of Natural Resources to the Alaska Oil and Gas Conservation Commission over permitting and inspection of geothermal wells; and relating to a regulated well regulatory cost charge for geothermal resources. Due February, 19 2010 Mara Machulsky Legislative Executive Assistant Office of Governor Sean Parnell P.O. Box 110001 Juneau, AK 99811-0001 PHONE: 907.465.4021 CELL: 907.723.5753 mara.machulskygalaska.gov 0 • www.gov.state.ak.us SEAN PARNELL GOVERNOR STATE OF ALASKA P.O. Box 110001 JUNEAU, ALASKA 99811-0001 (907) 465-3500 FAX (907) 465-5532 WWW.GOV.STATE.AK.US STATE OF ALASKA GOVERNOR'S LEGISLATIVE OFFICE JUNEAU CONFIDENTIAL FOR INTERNAL REVIEW ONLY DATE: February 17, 2010 TO: Kevin Brooks DEPARTMENT: Administration FROM: Heather Brakes, Deputy Legislative Director TELEPHONE: (907) 465-4021 LAW LOG: JU2010201091 DEADLINE: February 19, 2010 DESCRIPTION: Relating to geothermal resources; relating to the transfer of authority from the Department of Natural Resources to the Alaska Oil and Gas Conservation Commission over permitting and inspection of geothermal wells; and relating to a regulated well regulatory cost charge for geothermal resources. Attached is draft legislation that may affect your agency. If you have any corrections or changes that you would like to make to it or the attached draft transmittal letter, or if you have any concerns or notice possible problems or issues about them, list your recommendations below or in a bill analysis, and mark up the bill or letter accordingly. E-mail an attached briefing paper and fiscal note in PDF to Heather Brakes at Heather.Brakes@alaska.eov and Mara Machulsky at Mara.Machulsk_y@alaska.gov. Indicate your preferred house for introduction, sign this cover sheet, and return all relevant material to the governor's Legislative Office by the deadline above. Use the following identification format on the legislation's fiscal note, the name of the PDF document, and the subject of the email: Last 4 Digits of the Law Log Number -Department -Component -Date (Example: 0009-EED-ESS-1-03-07) RECOMMENDATION (circle applicable): Approve Hold Do Not Approve INTRODUCE IN (circle applicable): House Senate Both COMMENTS: Signature (Commissioner, or Designee) No Recommendation DATE: Amend WORK DRAFT WORK DRAFT to WORK DRAFT 1 2 3 4 R 6 7 9 10 11 12 13 14 Introduced: Referred: BILL NO. JU2010201091 bill.doc IN THE LEGISLATURE OF THE STATE OF ALASKA TWENTY-SIXTH LEGISLATURE - SECOND SESSION A BILL FOR AN ACT ENTITLED 2/17/2010 "An Act relating to geothermal resources; relating to the transfer of authority from the Department of Natural Resources to the Alaska Oil and Gas Conservation Commission over permitting and inspection of geothermal wells; relating to a regulated well regulatory cost charge for geothermal resources; and providing for an effective date." BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: * Section 1. AS 41.06 is amended by adding a new section to read: Sec. 41,06.005. Jurisdiction over geothermal wells. The Alaska Oil and Gas Conservation Commission has jurisdiction under this chapter over geothermal wells. * Sec. 2. AS 41.06.010 is amended to read: Sec. 41.06.010. Waste prohibited; investigation. The waste of geothermal resources in the state is prohibited. The commission may investigate to determine whether waste exists or is imminent. or whether other facts exist that iustifv or require action by the commission. * Sec. 3. AS 41.06.020 is repealed and reenacted to read: -1- New Text Underlined [DELETED TEXT BRACKETED] WORK DRAFT 0 WORK DRAFT 0 WORK DRAFT 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 Sec. 41.06.020. Application. (a) The commission has jurisdiction over all persons and property, public and private, necessary to carry out the purposes and intent of this chapter. (b) The authority of the commission applies to all land in the state lawfully subject to the police power of the state, including private land, municipal land, state land, land of the United States, and land subject to the jurisdiction of the United States. The authority of the commission further applies to all land included in a voluntary cooperative or unit plan of development or operation entered into in accordance with AS 38.05.181. When any of that land is committed to a unit agreement involving land subject to federal jurisdiction, the operation of this chapter or a part of this chapter may be suspended, if the unit operations are regulated by the United States and if the conservation of geothermal resources is accomplished under the unit agreement. (c) The provisions of this chapter apply (1) to wells drilled in search of, in support of, or in recovery or production of geothermal resources; (2) when a person engaged in drilling activity not subject to the provisions of this chapter encounters geothermal resources, fluid, or water of sufficient heat or pressure to constitute a threat to human life or health, unless the drilling operation is subject to oil and gas drilling regulation under AS 31.05; (3) in areas and under conditions in which the commission determines that drilling may encounter geothermal resources, fluid, or water of sufficient heat or pressure to constitute a threat to human life or health. (d) To the extent the provisions of AS 31.05 do not conflict with the provisions of this chapter, the provisions of AS 31.05 are applicable to wells drilled in search of, in support of, or in recovery or production of geothermal resources. (e) Nothing in this chapter limits the authority over geothermal resources granted to the Department of Natural Resources under AS 38.05,181. * Sec. 4. AS 41.06.030(a) is amended to read: (a) The commission may, [COMMISSIONER SHALL] require the filing and approval of a plan of development and operation on each producing geothermal -2- New Text Underlined [DELETED TEXT BRACKETED] WORK DRAFT 0 WORK DRAFT 0 WORK DRAFT 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 system and may issue orders appropriate to carry out the purposes and intent of this chapter, including orders regarding establishment of drilling units for pools as set out in AS 31.05.100 and orders regarding unitization and unitized operation of pools and integration of interests by agreement as set out in AS 31.05.110 [WELL -SPACING AND POOLING ORDERS, LIMITS ON PRODUCTION, AND REINJECTION REQUIREMENTS, IN ORDER TO PREVENT WASTE, PROMOTE MAXIMUM ECONOMIC RECOVERY, AND PROTECT CORRELATIVE RIGHTS]. * Sec. 5. AS 41.06.030(b) is amended to read: (b) Lessees of all or part of a geothermal system including at least one state lease may enter into a unit agreement for cooperative development, with the approval of the commissioner of the Department of Natural Resources. The commissioner of the Department of Natural Resources may suspend or modify the approved development plan in accordance with the unit agreement. * Sec. 6. AS 41.06.030(c) is amended to read: (c) If the owners of at least two-thirds of the leasehold interests in a geothermal system ratify a unit agreement approved under (b) of this section by the commissioner of the Department of Natural Resources, the commission [COMMISSIONER] may enforce the agreement as to lessees not a party to the agreement by allocating production under the principle of correlative rights and by apportioning costs and revenues. Sec. 7. AS 41.06.040(a) is repealed and reenacted to read: (a) The commission shall adopt regulations under AS 44.62, issue orders, and take other appropriate action to carry out the purposes and intent of this chapter, including regulations to prevent (1) geothermal resources, water or other fluids, and gases from escaping into strata other than that in which they are found, unless in accordance with an approved reinjection program; (2) contamination of surface and groundwater; (3) premature degradation of a geothermal system by water encroachment or otherwise; -3- New Text Underlined [DELETED TEXT BRACKETED] WORK DRAFT 0 WORK DRAFT 0 WORK DRAFT 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 (4) blowouts, cavings, and seepage; and (5) unreasonable disturbance or injury to neighboring properties, prior water rights, prior oil or gas rights, human life, health, and the natural environment. Sec. 8. AS 41.06.040(b) is amended to read: (b) The commission [COMMISSIONER] shall cause the operator of a geothermal well or wells to file adequate individual or blanket surety bonds to ensure compliance with regulations adopted under this section [SUBSECTION]. * Sec. 9. AS 41.06.040(c) is amended to read: (c) The commission [COMMISSIONER] shall require a geothermal operator to notify the commission [DEPARTMENT] if the operator discovers significant quantities of hydrocarbon substances, helium, or fissionable materials. * Sec. 10. AS 41.06.040(d) is amended to read: (d) The commission and its staff [COMMISSIONER] may enter upon any property, public or private, to inspect a geothermal operation for compliance with regulations adopted under this section. * Sec. 11. AS 41.06.050 is repealed and reenacted to read: Sec. 41.06.050. Permits to drill. (a) A person shall apply for and receive a permit from the commission before drilling (1) a well in search of geothermal resources; or (2) a well in support of the recovery or production of geothermal resources. (b) The application must contain sufficient information to enable the commission to determine whether the operation of the well will interfere with or impair a prior water, oil, or gas right. (c) A person must submit a separate permit application for each well. The permit application must be in the form or format required by the commission and include all information required by the commission. (d) After receiving an application under (a) of this section, the commission shall promptly approve or deny the application for a permit to drill. (e) In making the determination under (d) of this section, the commission shall consider whether -4- New Text Underlined [DELETED TEXT BRACKETED] WORK DRAFT • WORK DRAFT • WORK DRAFT 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 (1) a proposed geothermal operation will significantly interfere with or substantially impair prior water, oil, or gas rights; (2) the proposed well is contrary to a provision of this chapter, a regulation adopted by the commission, or other law, or to an order, stipulation, or term of a permit issued by the commission; and (3) an applicant is in violation of a provision of this chapter, a regulation adopted by the commission, or other law, or of an order, stipulation, or term of a permit issued by the commission and the magnitude of the violation. * Sec. 12. AS 41.06 is amended by adding a new section to read: Sec. 41.06.055. Regulated geothermal well regulatory cost charge. (a) Every person that on the first day of a state fiscal year is the operator of a well for which a permit to drill has been issued under AS 41.06.050 and that has not, before that day, been plugged and abandoned and reported as abandoned in accordance with regulations of the commission shall pay to the commission an annual regulatory charge for that fiscal year. A regulatory cost charge may not be collected from a person unless the operation for which the person is responsible is within the jurisdiction of the commission. (b) The commission shall annually determine regulatory cost charges under this section. The regulatory cost charge to be paid by a person for a state fiscal year must be based on the total vohune during the most recently concluded calendar year for the wells described in (a) of this section of which the person was the operator on the first day of the fiscal year as a percentage of the total volume during the same calendar year for all wells described in (a) of this section. For purposes of this subsection, "total volume" means the sum of the volume of all geothermal resources produced from a well and all fluids and substances injected or otherwise artificially introduced into the well. (c) The commission shall determine the regulatory cost charges levied under this section so that the total amount to be collected approximately equals the appropriations made for the operating costs of the commission that have been incurred under this chapter for the fiscal year. (d) The commission shall administer the collection of the regulatory cost -5- New Text Underlined (DELETED TEXT BRACKETED) WORK DRAFT 0 WORK DRAFT • WORK DRAFT 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 charges imposed under this section. The Department of Administration shall identify the amount of the appropriations made for the operating costs of the commission under this chapter that lapses into the general fund each year. The legislature may appropriate to the commission for its operating costs under this chapter for the next fiscal year an amount that is at least equal to the lapsed amount. If the legislature makes an appropriation to the commission under this subsection that is at least equal to the lapsed amount, the commission shall reduce the total regulatory cost charge collected for that fiscal year by a comparable amount. (e) The commission may adopt regulations relating to the investigation of the accuracy of reported information and for collecting required payments under this section. * Sec. 13. AS 41.06.060 is repealed and reenacted to read: Sec. 41,06.060. Definitions. In this chapter, unless the context otherwise requires, (1) "commission" means the Alaska Oil and Gas Conservation Commission created under AS 31.05.005; (2) "correlative rights" means the opportunity afforded, so far as it is practicable to do so, to the owner of each property in a geothermal system to produce without waste the owner's just and equitable share of the geothermal resources in the geothermal system; being an amount, so far as can be practically determined, and so far as can be practically obtained without waste, substantially in the proportion that the quantity of recoverable geothermal resources under the owner's property bears to the total recoverable geothermal resources in the geothermal system, and for such purposes to use the owner's just and equitable share of the geothermal system; (3) "geothermal fluid" means liquids and steam related to the presence of geothermal resources and present in a geothermal system; (4) "geothermal resources" (A) means the natural heat of the earth; (13) includes (i) the energy, including pressure, in whatever form present in, resulting from, created by, or that may be extracted from -6- New Text Underlined (DELETED TEXT BRACKETED] WORK DRAFT 0 WORK DRAFT • WORK DRAFT 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 that natural heat; (ii) the material medium, including steam and other gases, hot water, and hot brines constituting the geothermal fluid naturally present, as well as substances artificially introduced to serve as a heat transfer medium; and (iii) all dissolved or entrained minerals and gases that may be obtained from the material medium, but excluding hydrocarbon substances and helium; (5) "geothermal system" means a stratum, pool, reservoir, or other geologic formation containing geothermal resources; (6) "operator" means a person drilling, maintaining, operating, producing, or in control of a well; (7) "owner" means the person who has the right to drill into or produce from a geothermal system and to appropriate the geothermal resources produced from a geothermal system for that person and others; (8) "waste" means (A) in addition to its ordinary meaning, "physical waste"; (13) includes an inefficient, excessive, or improper production, use, or dissipation of geothermal resources, including (i) drilling, transporting, or storage methods that cause or tend to cause unnecessary surface loss of geothermal resources; (ii) locating, spacing, drilling, equipping, operating, producing, or venting of a well in a manner that results or tends to result in reducing the ultimate economic recovery of geothermal resources; (9) "well" means a well drilled, converted, or reactivated for the discovery, testing, production, or subsurface injection of geothermal resources. * Sec. 14. AS 41.06.030(d) and 41.06.040(e) are repealed. * Sec. 15. The uncodifted law of the State of Alaska is amended by adding a new section to read: TRANSITION: REGULATIONS. (a) To the extent the regulations are not -7- New Text Underlined [DELETED TEXT BRACKETED] WORK DRAFT 0 WORK DRAFT • WORK DRAFT 1 2 3 4 5 6 7 8 9 10 11 inconsistent with the language and purposes of this Act, regulations relating to geothermal wells adopted by the Department of Natural Resources under AS 41.06 before the effective date of this section remain in effect as valid regulations implementing this Act. The Alaska Oil and Gas Conservation Commission may administer and enforce those previously adopted regulations under AS 41.06 relating to geothermal wells until the Alaska Oil and Gas Conservation Commission adopts regulations in accordance with this Act. (b) The Alaska Oil and Gas Conservation Commission may immediately proceed to adopt regulations necessary to implement the changes made by this Act. The regulations take effect under AS 44.62 (Administrative Procedure Act), but not before July 1, 2010. * Sec. 16. Section 15(b) of this Act takes effect immediately under AS 01.10.070(c). * Sec. 17. Notwithstanding sec. 16 of this Act, this Act takes effect July 1, 2010. _g_ New Text Underlined [DELETED TEXT BRACKETED] 11 1 E, k �� t I. w b C r M Y 5 r ! L ALASKA OIL AND GAS CONSERVATION COM IISSION November 11, 2009 Hand Delivered Jerry Gallagher Legislative and Communications Director Office of Governor Sean Parnell 550 West 70' Ave., Suite 1700 Anchorage, Alaska 99501 Re: Alaska Oil and Gas Conservation Commission 2010 Agency Legislative Proposal Form Geothermal Resource Dear Mr. Gallagher: SEAN PARNELL, GOVERNOR 333 W. 7thAVE NUE, SUITE 100 ANCHORAGE, ALASKA 99501-3539 PHONE (907) 279-1433 FAX (907) 276-7542 Enclosed is a "2010 Legislative Proposal Form" you requested describing a proposed amendment to AS 41.06.010 to assign the responsibility for regulation of geothermal resource wells to the Alaska Oil and Gas Conservation Commission (AOGCQ. Senator Lesil McGuire intends to sponsor this as part of other geothermal legislation planned to be brought forward by the Senate Resources Committee this legislative session. The AOGCC supports this amendment because it would result in streamlining the drilling permit process which would help the state's economics. The streamlining would occur because the AOGCC is the only agency in the state that has engineering expertise in drilling, there will be fewer state employees involved, and there will be one less agency involved in the permitting process. It is notable that geothermal operations in all but two other oil and gas producing states are regulated by agencies similar to the AOGCC. Commissioners Irwin and Kreitzer are aware this is being submitted; and, we are coordinating with DNR. If you have any questions, please do not hesitate to contact me at 793-1227. incerely, Daniel T. Seamount, Jr. Chair cc: Senator Lesil McGuire Annette Kreitzer, Commissioner DOA Thomas Irwin, Commissioner DNR Kevin Banks, Director DNR/DOG Jonne Slemons, DNR, DOG Petroleum Land Manager • 0 Confidential and Deliberative Process 2010 Agency Legislative Proposal Form Agency: Alaska Oil and Gas Conservation Commission (AOGCC) Contact Name: Chair, Dan Seamount Contact Number: (907) 279-1433 Focus Area (Check all that apply) X Economic Development X Government Within Our Means Personal Responsibility/ Empowering Alaska's Families Administrative Legislation (Sunsets, etc) Subject and summary of proposed legislation (include intent and statutory references): Amend AS 41.06.010, et. sea., to assign to the Alaska Oil and Gas Conservation Commission (AOGCC), an independent quasi-judicial agency of the State of Alaska created pursuant to AS 31.05.005, responsibility for regulation and oversight of geothermal resource wells. (Authority for leasing geothermal resources on state lands would remain with DNR. AS 38.05.181.) Legislation best introduced by: Governor's Office X Legislator Suggested legislator(s), if any, and reason: Senator Lesil McGuire has a companion bill to geothermal resource legislation she plans to introduce; or, may be introduced as a Senate Resources Committee bill. Estimated fiscal impact: operating, capital, generating revenue $ Will improve project timing and result in fewer state employees needed to regulate Alaska's growing geothermal program. List proposed funding sources. Initial cost of regulation can be absorbed byAOGCC. Once production begins, costs of regulation will be assessed to industry as part of the Regulatory Cost Charge paid by industry pursuant to AS 31.05.093. Priority level of the legislation: X HIGH MEDIUM LOW Priority ranking in comparison to other proposals submitted by department Several projects already underway. Others planned for the coming season. Explain the benefits the proposed legislation would provide. Safer and more efficient permitting and oversight of geothermal wells leading to shortened project timing through use of AOGCC drilling experts. Fewer state employees will be needed to regulate Alaska's growing geothermal program. Explain the consequences, if any, of not implementing the proposed statutory change. Continued inefficient permitting process and operator confusion about authority. Need for DNR to hire drilling engineer, field inspector, and operations engineer. Potential interference with oil and gas exploration and production in the same areas where geothermal drilling is planned. Describe any potential negative impacts of this legislation and how they would be minimized. None. Geothermal drilling is currently regulated by DNR pursuant to AS 41.06. Proposed legislation would simply transfer regulatory authority from DNR to AOGCC. Who do you anticipate will support the bill and why? Include municipalities, groups, etc... Operators, and local governments. AOGCC regulation will result in more efficient permitting and less confusion over authority. DNR agrees that regulation of geothermal drilling and well operations should be overseen by AOGCC. Who do you anticipate will oppose the bill and why? No opposition expected. What other state departments will be affected by this legislation? Have you discussed the impact with the commissioners of these affected departments, and if so, do they support the bill? DNR. Yes. They do. Identify and describe any previous state or federal legislation or similar efforts in other states which affect or relate to this proposal. In all other oil and gas producing states, geothermal regulatory authority resides with the same agency that regulates oil & gas drilling and production (only exceptions are Utah and Idaho, which are not major oil & gas producing states.) Has this bill topic been previously introduced in the legislature? No. What was the final outcome and why? n/a Date: November 12, 2009 Submitted by and approved by Commissioner: Commissioner and Chair, AOGCC cc: Commissioner, Department of Natural Resources Commissioner, Department of Administration Ej F V 6!L j ALASSA OIL AND GAS CONSERVATION COMl►IISSION November 11, 2009 Hand Delivered Jerry Gallagher Legislative and Communications Director Office of Governor Sean Parnell 550 West 7th Ave., Suite 1700 Anchorage, Alaska 99501 Re: Alaska Oil and Gas Conservation Commission 2010 Agency Legislative Proposal Form Geothermal Resource Dear Mr. Gallagher: SEAN PARNELL, GOVERNOR 333 W. 7th AVENUE, SUITE 100 ANCHORAGE, ALASKA 99501-3539 PHONE (907) 279-1433 FAX (907) 276-7542 Enclosed is a "2010 Legislative Proposal Form" you requested describing a proposed amendment to AS 41.06.010 to assign the responsibility for regulation of geothermal resource wells to the Alaska Oil and Gas Conservation Commission (AOGCC). Senator Lesil McGuire intends to sponsor this as part of other geothermal legislation planned to be brought forward by the Senate Resources Committee this legislative session. The AOGCC supports this amendment because it would result in streamlining the drilling permit process which would help the state's economics. The streamlining would occur because the AOGCC is the only agency in the state that has engineering expertise in drilling, there will be fewer state employees involved, and there will be one less agency involved in the permitting process. It is notable that geothermal operations in all but two other oil and gas producing states are regulated by agencies similar to the AOGCC. Commissioners Irwin and Kreitzer are aware this is being submitted; and, we are coordinating with DNR. If you have any questions, please do not hesitate to contact me at 793-1227. Zincerely, Daniel T. Seamount, Jr. Chair cc: Senator Lesil McGuire Annette Kreitzer, Commissioner DOA Thomas Irwin, Commissioner DNR Kevin Banks, Director DNR/DOG Jonne Slemons, DNR, DOG Petroleum Land Manager 0 0 Confidential and Deliberative Process 2010 Agency Legislative Proposal Form Agency: Alaska Oil and Gas Conservation Commission (AOGCC) Contact Name: Chair, Dan Seamount Contact Number: (907) 279-1433 Focus Area (Check all that apply) X Economic Development X Government Within Our Means Personal Responsibility/ Empowering Alaska's Families Administrative Legislation (Sunsets, etc) Subject and summary of proposed legislation (include intent and statutory references): Amend AS 41.06.010, et. sea." to assign to the Alaska Oil and Gas Conservation Commission (AOGCC), an independent quasi-judicial agency of the State of Alaska created pursuant to AS 31.05.005, responsibility for regulation and oversight of geothermal resource wells. (Authority for leasing geothermal resources on state lands would remain with DNR. AS 38.05.181.) Legislation best introduced by: Governor's Office X Legislator Suggested legislator(s), if any, and reason: Senator Lesil McGuire has a companion bill to geothermal resource legislation she plans to introduce; or, may be introduced as a Senate Resources Committee bill. Estimated fiscal impact: operating, capital, generating revenue $ Will improve project timing and result in fewer state employees needed to regulate Alaska's growing geothermal program. List proposed funding sources. Initial cost of regulation can be absorbed byAOGCC. Once production begins, costs of regulation will be assessed to industry as part of the Regulatory Cost Charge paid by industry pursuant to AS 31.05.093. Priority level of the legislation: X HIGH MEDIUM LOW Priority ranking in comparison to other proposals submitted by department Several projects already underway. Others planned for the coming season. Explain the benefits the proposed legislation would provide. Safer and more efficient permitting and oversight of geothermal wells leading to shortened project timing through use of AOGCC drilling experts. Fewer state employees will be needed to regulate Alaska's growing geothermal program. Explain the consequences, if any, of not implementing the proposed statutory change. Continued inefficient permitting process and operator confusion about authority. Need for DNR to hire drilling engineer, field inspector, and operations engineer. Potential interference with oil and gas exploration and production in the same areas where geothermal drilling is planned. Describe any potential negative impacts of this legislation and how they would be minimized. None. Geothermal drilling is currently regulated by DNR pursuant to AS 41.06. Proposed legislation would simply transfer regulatory authority from DNR to AOGCC. Who do you anticipate will support the bill and why? Include municipalities, groups, etc... Operators, and local governments. AOGCC regulation will result in more efficient permitting and less confusion over authority. DNR agrees that regulation of geothermal drilling and well operations should be overseen by AOGCC. Who do you anticipate will oppose the bill and why? No opposition expected. What other state departments will be affected by this legislation? Have you discussed the impact with the commissioners of these affected departments, and if so, do they support the bill? DNR. Yes. They do. Identify and describe any previous state or federal legislation or similar efforts in other states which affect or relate to this proposal. In all other oil and gas producing states, geothermal regulatory authority resides with the same agency that regulates oil & gas drilling and production (only exceptions are Utah and Idaho, which are not major oil & gas producing states.) Has this bill topic been previously introduced in the legislature? No. What was the final outcome and why? n/a Date: November 12, 2009 Submitted by and approved by Commissioner: Commissioner and Chair, AOGCC cc: Commissioner, Department of Natural Resources Commissioner, Department of Administration Colombie, Jody J (DOA) From: Norman, John K (DOA) Sent: Tuesday, November 10, 2009 4:42 PM To: Colombie, Jody J (DOA) Cc: Foerster, Catherine P (DOA); Seamount, Dan T (DOA) Subject: FW: Legislative Proposal Form Attachments: 2010 Department Legislative Proposal Form (3).doc Jody this is now ready (with the two edits) to be sent to Governor's office. Dan should sign and he may want to add a cover and cc Annette and Tom Irwin. You should open a file on this geothermal Legislative Proposal. We will have a lot more to go in it as bill is being drafted and works its way through the legislature. From: Slemons, Jonne D (DNR) Sent: Tuesday, November 10, 2009 4:06 PM To: Norman, John K (DOA) Cc: Banks, Kevin R (DNR) Subject: Legislative Proposal Form Comm. Norman, We've reviewed the proposed Legislative Proposal Form, and have only two minor edits. If you have any questions please let me know. We are also working on several other issues that could be addressed through a statutory "package" if there is the will to do so. Those issues are currently in rough form, but we are working to refine them now. We will contact you if and when it appears that discussion on those issues is appropriate, and as soon as necessary background information, etc. has been collected. Thank you, Jonne Jonne Slemons Petroleum Land Manager Division of Oil and Gas Alaska Department of Natural Resources 550 W. 7th Ave., Ste. 800 Anchorage, AK 99501 Ph: 907-269-8775 Fax: 907-269-3484 • Page 2 of 3 • exciting. Please let me know if you have any questions. Thanks Mindy Mindy Rowland Deputy Legislative Director Office of Governor Sean Parnell Cell: 723-4636 From: Foerster, Catherine P (DOA) To: Rowland, Mindy B (GOV) Cc: Gallagher, Gerald L (GOV) Sent: Wed Oct 14 07:38:01 2009 Subject: RE: geothermal legislation Mindy, Thanks in advance for sending me the correct form. can find it. Cathy From: Gallagher, Gerald L (GOV) Sent: Tuesday, October 13, 2009 5:14 PM To: Foerster, Catherine P (DOA) Cc: Rowland, Mindy B (GOV) Subject: RE: geothermal legislation Or perhaps it would be easier for you just to tell me where I Cathy — Mindy will send you the official Governor's Office form for proposed legislation. The form went to all Departments in late summer, but I guess the Dept. of Administration didn't think to give it to all their agencies. We'll run it through the process when you get it back to us. It's easy to fill out, even for an engineer. Jerry Gallagher Legislative and Communications Director Office of Governor Sean Parnell 550 West 7th Ave, Suite 1700 Anchorage, Alaska 99501 PHONE: 907.269.7450 geraid.gallagher@alaska.gov www.govstate.a_k. us From: Foerster, Catherine P (DOA) Sent: Tuesday, October 13, 2009 1:09 PM To: Gallagher, Gerald L (GOV) Subject: RE: geothermal legislation Thanks. What do we need to do to get approval from the Governor's office? From: Gallagher, Gerald L (GOV) Sent: Monday, October 12, 2009 4:51 PM To: Foerster, Catherine P (DOA) Subject: RE: geothermal legislation If you want to ask a friendly to introduce legislation, we would have to approve, have Dept. of Law do the drafting, then give it back to you to work directly with a legislator. So if you want to go through the hoops, let me know. 11/12/2009 Page • • Jerry Gallagher Legislative and Communications Director Office of Governor Sean Parnell 550 West 7th Ave, Suite 1700 Anchorage, Alaska 99501 PHONE: 907.269.7450 gerald_gallagher@alaska.gov www.gov.state.ak.us From: Foerster, Catherine P (DOA) Sent: Monday, October 12, 2009 1:51 PM To: Gallagher, Gerald L (GOV) Subject: geothermal legislation Jerry, When we spoke today, I got the impression that it would be okay if we pursue geothermal legislation through a legislator rather than through the Governor's office. Please confirm that I got that right, or else please let me know that I was mistaken. Cathy PS. It was nice visiting with you. And if I ever put a Jerry Gallagher quote on my wall, I'm sure it'll be a good one. 11/12/2009 Pagel of 3 Norman, John K (DOA) From: Foerster, Catherine P (DOA) Sent: Thursday, October 15, 2009 8:27 AM To: Norman, John K (DOA); Seamount, Dan T (DOA); Ballantine, Tab A (LAW) Subject: FW: geothermal legislation Attachments: 2010 Department Legislative Proposal Form.doc Attached is the "approval" form. John, how about you and I work on it tomorrow? Tab, you're welcome to join us if you so choose. Dan, you're gone so you can insert yourself next week when you return. From: Rowland, Mindy B (GOV) Sent: Thursday, October 15, 2009 8:20 AM To: Foerster, Catherine P (DOA) Cc: Gallagher, Gerald L (GOV) Subject: RE: geothermal legislation Good Morning Cathy, Thank you for your patience. I am finally at a computer where I can access the legislative proposal form. I've attached it here for you. Please let me know if you have any questions and if there is anything else I can do to assist. Mindy Mind-y Rowland Legislative Deputy Director Office of Governor Sean Parnell PO Box 110001 Juneau, Alaska 99811 PHONE: 907.465.4021 mindy.rowland@alaska.gov www.gov.state.ak.us From: Rowland, Mindy B (GOV) Sent: Wednesday, October 14, 2009 2:48 PM To: Foerster, Catherine P (DOA) Subject: Re: geothermal legislation Hi Cathy The form isn't posted and unfortunately, I have not been near a computer for the last couple of days to access my files to send it to you. I may have some luck this evening. If not, I'll get it to you tomorrow morning. I apologize for taking so long. If you're anxious to get started, some of the information needed will be pros and cons, who is likely to support/oppose, consequences of not making the change, whether the proposal had been considered in the past (such as a similar bill that failed to make it through in an earlier session), and an outline of the proposal. I think there may be one or two other items but I can't recall them off the top of my head. I'm looking forward to seeing what you have to suggest on geothermal leasing. The potential of this resource is 11/12/2009