2007 Alaska Coastal Conference

1. 2007 Alaska Coastal Conference Bruce Anders Chief, Leasing and Permitting Section www.dog.dnr.state.ak.us/oil/ Bruce_anders@dnr.state.ak.us 269-8775

2. Mission: • “Maximize the physical recovery of the state's oil and gas resources … • in an environmentally sound and safe manner, and the economic revenue from these resources.” • Hold lease sales • Collect Royalties • Manage Units • Collect, store and process seismic data • Administer leases

3. The State Revenue Pie Total Royalties, Bonuses, Rents, Fees & Settlements: $2.3 Billion General Fund Royalties, Bonuses, Fees & Rents: $1.7 Billion Royalties to Permanent Fund & School Fund: $610.7 Million FY 2006 Unrestricted Revenue 11% Non-Petroleum Taxes: $1.9 Billion 89% Petroleum (Oil & Gas Property Tax + Income Tax + Severance Tax)

4. Millions of Barrels per Year

5. Authorities • ADNR • AS 38.05.027 Management of legislatively designated state game refuges and critical habitat areas is the co-responsibility of ADF&G (AS 16.20.050-060) and ADNR. Lessees are required to obtain permits from both ADNR and ADF&G. • AS 38.35.010-260 Right-of-way leasing for pipeline transportation of crude oil and natural gas is under the control of the commissioner of ADNR. The commissioner shall not delegate the authority to execute the leases. • AS 38.05.127 Provides for reservation of easements to ensure free access to navigable or public water.11 AAC 53.330Implementing regulations for the reserving of easements to ensure free access to navigable or public water. • 11 AAC 83.158(a) A plan of operations must be approved by the commissioner, ADNR, if (1) state owns all or a part of the surface estate, (2) lease reserves a net profit share to the state, (3) state owns all or part of the mineral estate, but the surface estate is owned by a party other than the state, and the surface owner requests such a plan. • 11 AAC 96.010 Operations requiring permits, including the use of explosives and explosive devices, except firearms. • 11 AAC 96.140 Land use activities are subject to general stipulations that will minimize surface damage or disturbance of drainage systems, vegetation, or fish and wildlife resources • ADNR/DO&G • AS 38.05.035(a)(9)(C)Requires geological and geophysical data to be kept confidential upon request of supplier. • AS 38.05.130 Allows the director, DO&G, to approve oil and gas exploration and development activities in the case where the surface estate is not held by the state or is otherwise subject to third party interests, provided the director determines that adequate compensation has been made to the surface estate holder for any damages which may be caused by lease activities. • AS 38.05.180Establishes an oil and gas leasing program to provide for orderly exploration and development of petroleum resources belonging to the state of Alaska. • 11 AAC 96.010-150Geophysical Exploration Permit provides controls over activities on state lands in order to minimize adverse activities • ADNR/DL • AS 38.05.075 Establishes leasing procedures under public auction, including tide and submerged lands, bidding qualifications, and competitive or non-competitive bidding methods • AS 38.05.850 Authorizes the director to issue permits, rights-of-way or easements on state land for recovery of minerals from adjacent land under valid lease. • 11 AAC 80.005-055 Pipeline Right-of-way Leasing Regulations. • 11 AAC 93.040-130 • Requires a Water Rights Permit for the appropriation of state waters for beneficial uses. • 11 AAC 96.010-140 Land use permit activities not permitted by a multiple land use permit or lease operations approval.

6. Authorities (short list) • Title 38 • 38.05.132 Oil And Gas Exploration License • 38.05.134 Conversion To Lease • 38.05.135 Leasing Generally; Payments And Interest • 38.05.177 Shallow Natural Gas Leases • 38.05.180 Oil and Gas Leasing • 11 AAC 83.158, .346 & 96.10 • 11 AAC 83.158 & .346 Plans of Operations • 11 AAC 96.10 Geophysical Exploration Permits • Best Interest Finding Mitigation Measures • The lease

7. Achievements in 2006Leasing/Permitting • Conducted five areawide lease sales in FY 2006 • 1.6 million acres leased, with 402 bids on 360 tracts, and 41 bidding groups participating • Resulted $38.2 million in bonus bids

9. ACMP Review Processin Oil and Gas world

10. Typical A List Activities: On-pad civil works

11. Electrical Skid on Pad

12. VSM (Vertical Support Member)

13. Typical B List Activities • Typically routine off-pad activities • Foreseeable disturbance to tundra

14. Off-pad Snowfence PBU S Pad

15. Onshore off-pad Pipeline Construction(construction of new pipeline on new VSMs)

16. This is HIS ground! Palm Bridge Crossing

17. Alpine Airstrip

18. C List Activities • New field development -- off-pad construction projects • Plans of Operation (not on B-List) • Exploratory Drilling on NS (AKA Individual Project Review)

19. Gas Processing FacilityNinilchik Unit…

20. Gas Processing Facility-- Prudhoe Bay Unit

21. Tarn Drill Site (KRU)

22. Alpine CD 3 Construction Winter of ‘05

23. Onshore Ice Pad Exploration NS

24. Offshore Shallow Water Exploration

25. Geophysical Exploration Permit

26. Oil & Gas Permitting Process Most work: Exploration licenses, Lease sales, Plans of Operation Linking of BIF and ACMP review

28. Oil & Gas Permitting Process North Slope Areawide Best Interest Finding (BIF) Need BIF every 10 years 4/19 published the 10 year Preliminary BIF and “Consistency Analysis” 90-day public comment Public hearings FBIF  Proposed CD 10 days, Final CD

29. Mitigation Measures AS 38.05.035(e): Director has authority “to impose conditions or limitations, in addition to those imposed by statute, to ensure that a resource disposal is in the state's best interests.” DOG conditions plans of operation, exploration, or development and other permits based on these mitigation measures. These measures were developed after considering terms imposed in earlier competitive lease sales and comments and information submitted by the public, local governments, environmental organizations, and other federal, state, and local agencies. Additional measures will likely be imposed when lessees submit a proposed plan of operations. The most recent mitigation measures will be applied to all operations, regardless of when the lease was issued.

30. Single Agency vs. OPMP Coordinated Review • DOG performs single agency review where • DOG approval is only state agency authorization necessary other than DEC permits

31. Plan of Operations (11 AAC 83.158/.346) • Must contain sufficient information for the commissioner to determine the surface use requirements and impacts directly associated with the proposed operations. • Must contain statements/maps depicting: • the sequence and schedule of the operations • projected use requirements directly associated with proposed ops • location and design of well sites, material sites, water supplies, solid waste sites, buildings, roads, utilities, airstrips, and all other facilities and equipment necessary to conduct the proposed operations; • a description of operating procedures designed to prevent or minimize adverse effects on natural resources/uses, historic/archeological sites, and public use areas

32. ACMP Review of POOs • North Slope: 90% are A and B List reviews. • Cook Inlet: Mostly Single Agency Reviews. No A/B List. • Individual Project Reviews (OPMP Coordinated) • Exploration Wells • Development (New Fields) • Expansion of Facilities (Satellites)

33. Single Agency Review Example – Plan of Operations • Pre-application meeting and identification of issues and authorizations necessary • Applicant submits plan, CPQ, and Consistency Analysis addressing Statewide and Resource District Enforceable Policies, and other material • DOG, OPMP and other resource agencies review application material and determine completeness and if OPMP or DOG coordinates review

34. DOG Requests/Recommendations • Finalizing ABC list would streamline Cook Inlet permitting, and to a lesser extent, NS • Exploration wells on B list • Predictability on single vs. coordinated agency review