MEMORANDUM

TO: Pete Sprague, President

Members of the Kenai Peninsula Borough Assembly

FROM: Millie Martin, Assembly Member

Chris Moss, Assembly Member

DATE: December 4, 2003

SUBJECT: Resolution 2003-129, Requesting amendment of Alaska Statutes 31.05.125 and 38.05.177(o), which authorize the Commissioner of the Department of Natural Resources to waive compliance with local laws for shallow natural gas leases in limited cases, requesting additional public notice requirements, and requesting that the state buy back the South Peninsula Shallow Gas Leases.

The State of Alaska recently issued shallow gas leases in the southern Kenai Peninsula to provide for shallow coal bed methane development. While the development of natural resources in Alaska is important, it should be conducted with due regard for other affected property rights. The State Legislature recently enacted Senate Committee Substitute for House Bill 69, which relates to the regulation of shallow natural gas leasing and closely related energy projects. Sections 4 and 6 of this bill authorize the commissioner of the Department of Natural Resources ("DNR") to approve a waiver of local planning authority approval and requirements if the DNR clearly demonstrates an overriding state interest. The provisions require the commissioner to issue specific findings giving reasons for granting such a waiver.

However, it is well recognized that local communities are best qualified to regulate surface uses of property within their jurisdiction. Such authority is specifically delegated to local governments in Title 29. Local planning ordinances and regulations are only adopted after public hearings, typically by both the planning commission and the municipal legislative body.

Additionally, HB 394, effective October 9, 1996, requires notice of an application for shallow gas leasing in a newspaper of general circulation, but does not require publication in additional local media. A matter of this importance should be well publicized locally.

Finally, Governor Murkowski preliminarily indicated that he may consider supporting buying back these leases after further analysis. In 1976 the legislature bought back offshore oil and gas leases in Kachemak Bay. Given the lack of sufficient public notice of this sale and the need to improve legislation governing shallow gas leases, this resolution would notify the state legislature that the borough assembly o encourages the state to buy back the South Peninsula Shallow Gas Leases and to either repeal or amend the statutes governing shallow gas leases to provide better notice and a better opportunity to resolve land use conflicts.