HB 395

"Shallow Natural Gas Leasing and the Regulation of Shallow Natural Gas Operations"
Introduced by Representatives HARRIS, Gatto, Stoltze, Seaton

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The Legislature is scrambling to deal with the thorny issues raised by the passage of last year’s HB 69 and the outrage of landowners in the Kenai Peninsula and Mat-Su Valley. One of this year’s bills, HB 395, could provide a starting place to make important improvements to the CBM (shallow gas) program. However, HB 395 needs major amendments in order to make it a true improvement to the CBM leasing and development program.

1. Property Rights (Section 5, 7,8) HB 395 contains several provisions to improve how landowners would experience CBM development on their land but fails to provide DNR with the capacity to regulate CBM and relies on the lease itself as the main vehicle to protect a landowner’s quality of life. Since surface landowners have very limited leverage to influence lease terms this is an empty promise of protection. A. Provides for payment of fees for well head and compressor stations located on private property. B. Requires that the CBM lease contain provisions for appropriate setbacks for compressor stations based upon population and location. C. Requires measures in lease to mitigate noise from compressors and other equipment. D. Requires the lease to include restoration and reclamation of impacts from exploration and development. E. Amendments to existing law dealing with "surety bonds" to pay for damages to from exploration and development. HB 395 needs to grant DNR the capacity to regulate CBM development and ensure that surface use agreements and surety bonds are negotiated before a lease is granted to protect owner’s negotiation position. HB 395 should also contain provisions giving surface owners adequate opportunity to seek/receive court damages without risking litigation costs.
2. Protection Of Drinking Water (Section 1) HB 395 takes a step toward protecting our water by allowing the state to regulate the reinjection of wastewater produced by CBM. The bill should require, not merely allow, the state to regulate reinjection of water below known subsurface drinking and agricultural water supplies and ban the use of non-toxic hydraulic fracturing fluids.
3. Public Notice (Sections 2, 4) HB 395 adds limited public process requirements on CBM leasing and development by requiring expanded newspaper and local government notice of proposed leases and an informal process for the public to voice concerns on proposed and existing development. HB 395 should require notice to individual landowners prior to leasing land for development, and define a more formal process with safeguards to address public concerns.
4. Local Government Oversight (Sections 10, 11) HB 395 repeals the controversial provisions of HB 69 which in essence took away local governments’ authority to regulate local CBM development. The bill could be improved by giving local governments the full authority to provide neighborhood setbacks, health and safety safeguards, noise abatement procedures, and industrial traffic limits.
5. Narrow Definition of CBM (Section 3, 6) HB 395 closes loopholes allowing developers to access traditional natural gas prospects through the most permissive CBM leasing structure.

• A buyback of all existing leases is necessary to ensure equal application for all areas leased under the currently substandard leasing and development structure.
• Apply Alaska’s traditional oil and gas development standards to CBM development including a Best Interest Finding, Improved Royalty Structure and Adequate Bonding requirements.
• State developed quality of life standards, setbacks, limits on air and water pollution.
• Requirement for state baseline studies of water quality/quantity and methane seepage.