CSSB 161(RES): "An Act relating to geothermal resources; relating to the definition of 'geothermal resources'; and providing for an effective date."
00 CS FOR SENATE BILL NO. 161(RES) 01 "An Act relating to geothermal resources; relating to the definition of 'geothermal 02 resources'; and providing for an effective date." 03 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 04 * Section 1. AS 31.05.030(m) is amended to read: 05 (m) The commission has jurisdiction and authority over all persons and 06 property, public and private, necessary to carry out the purposes and intent of 07 AS 41.06 [, EXCEPT FOR PROVISIONS IN AS 41.06 FOR WHICH THE 08 DEPARTMENT OF NATURAL RESOURCES HAS JURISDICTION]. 09 * Sec. 2. AS 38.05.181(a) is amended to read: 10 (a) The commissioner may, under regulations adopted by the commissioner, 11 grant prospecting licenses [PERMITS] and leases to a qualified person to explore for, 12 develop, or use geothermal resources. A prospecting license or lease is not required 13 under this section to explore for, develop, or use geothermal resources if the 14 geothermal resource is intended for domestic, noncommercial, or small-scale
01 industrial use [WHEN TITLE TO THE SURFACE PARCEL IS HELD BY A 02 PERSON OTHER THAN THE STATE, THAT PERSON SHALL HAVE A 03 PREFERENTIAL RIGHT TO A GEOTHERMAL PROSPECTING PERMIT OR 04 LEASE FOR THE AREA UNDERLYING THE SURFACE PARCEL. THE 05 SURFACE OWNER MUST EXERCISE THE PREFERENCE RIGHT WITHIN 30 06 DAYS AFTER RECEIVING NOTICE OF THE APPLICATION FOR A PERMIT, 07 OR BY AGREEING TO MEET THE TERMS OF A BID WITHIN 60 DAYS AFTER 08 RECEIVING NOTICE OF THE ACCEPTANCE OF THE BID FOR A LEASE]. 09 * Sec. 3. AS 38.05.181(c) is amended to read: 10 (c) On state land that has not been declared a competitive geothermal area or 11 withdrawn from geothermal prospecting, the commissioner may issue a prospecting 12 license [PERMIT] to the first qualified applicant. The license [PERMIT] conveys an 13 exclusive right, for a period of five [TWO] years, to prospect for geothermal resources 14 on state land included under the license [PERMIT]. The commissioner has discretion 15 to renew the license [PERMIT] for an additional one-year term. A holder of a 16 prospecting license [PERMIT] has the right, after completion of an agreed-upon 17 work commitment [UPON THE SHOWING OF A DISCOVERY OF 18 GEOTHERMAL RESOURCES IN COMMERCIAL QUANTITIES] and the 19 submission of an exploration [A DEVELOPMENT] plan acceptable to the 20 commissioner, to convert the license [PERMIT] to a noncompetitive lease at a royalty 21 rate under (g) of this section. The conversion privilege must be exercised not later than 22 30 days after the expiration of the license [PERMIT]. If the land included within the 23 license [PERMIT] is designated a competitive geothermal area during the license 24 [PERMIT] term, the licensee [PERMITTEE] must apply for a noncompetitive lease 25 within 30 days after notification of the designation or forfeit the conversion privileges 26 and the exclusive right to prospect. 27 * Sec. 4. AS 38.05.181(d) is amended to read: 28 (d) On state land that is designated a competitive geothermal area and is not 29 subject to an existing prospecting license [PERMIT], the commissioner may issue 30 geothermal leases to the highest bidder by competitive bidding procedures established 31 by regulations adopted by the commissioner. At the discretion of the commissioner,
01 competitive lease sales may be by oral or sealed bid, on the basis of a cash bonus, 02 profit share, or royalty share. 03 * Sec. 5. AS 38.05.181(e) is amended to read: 04 (e) Prospecting licenses [PERMITS] and geothermal leases granted under this 05 section must [, EXCEPT IN THE CASE OF PARCELS SUBJECT TO A 06 PREFERENCE RIGHT UNDER (b) OF THIS SECTION,] be issued for at least 40 07 acres but not more than 2,560 acres. A person may not own, or hold an interest in, 08 geothermal leases covering more than 100,000 [51,200] acres. However, geothermal 09 leases in commercial production, individually or under a unit operation or well spacing 10 or pooling arrangement, do not count against the acreage limitation. All prospecting 11 licenses [PERMITS] and geothermal leases are subject to an annual rental fee 12 established by the department in regulation and [,] payable in advance [, OF $3 13 PER ACRE]. The rental for a year shall be credited against royalties accruing for that 14 year. 15 * Sec. 6. AS 38.05.181(f) is amended to read: 16 (f) A geothermal license [LEASE] shall be issued for a [PRIMARY] term of 17 five  years and may be converted to a lease under (c) of this section 18 [RENEWED FOR AN ADDITIONAL TERM OF FIVE YEARS IF THE LESSEE IS 19 ACTIVELY ENGAGED IN DRILLING OPERATIONS]. A geothermal lease is valid 20 for the duration of commercial production. Beginning 20 years after the initiation of 21 commercial production and at 10-year intervals thereafter, the commissioner may 22 renegotiate the rentals and royalties due on a geothermal lease. 23 * Sec. 7. AS 38.05.181 is amended by adding new subsections to read: 24 (i) The commissioner may require a lessee of a geothermal resource to operate 25 under a unit agreement that prescribes the conditions under which the lessee must 26 operate. A unit agreement must adequately protect all parties in interest, including the 27 state. Except as provided in (f) and (j) of this section, the commissioner may not 28 reduce the royalty on a geothermal lease issued under this section in, or in connection 29 with, a unit agreement. 30 (j) When determined by the commissioner to be in the public interest, the 31 commissioner may authorize a lessee and the lessee's representative, together with
01 each other or jointly or severally with another lessee, to collectively adopt or operate 02 under a unit agreement. The commissioner may, with the consent of the involved 03 lessees, establish, change, or revoke the drilling, producing, and royalty requirements 04 of the leases. 05 (k) A geothermal lease and a unit agreement approved under this section must 06 specify that lease and unit agreement are subject to applicable statutes and regulations 07 in force at the time the lease or unit agreement is entered into and to future 08 amendments to those statutes and regulations. 09 * Sec. 8. AS 38.05.965(6) is repealed and reenacted to read: 10 (6) "geothermal resources" means the natural heat of the earth and 11 energy, in whatever form, below the surface of the earth present in, resulting from, 12 created by, or that may be extracted from the natural heat, and all minerals in solution 13 or other products obtained from naturally heated fluids, brines, associated gases, and 14 steam, in whatever form, found below the surface of the earth; "geothermal resources" 15 does not include oil, hydrocarbon gases, or other hydrocarbon substances; 16 * Sec. 9. AS 41.06.020(e) is amended to read: 17 (e) Nothing in this chapter limits the authority of the department 18 (1) over geothermal resources under AS 38.05.181, including the 19 authority [; OR 20 (2)] to approve and manage geothermal units or operations that include 21 state land. 22 * Sec. 10. AS 41.06.020 is amended by adding a new subsection to read: 23 (f) The commission may, when consistent with the purpose and intent of this 24 chapter, exempt from this chapter a domestic, noncommercial, or small-scale 25 industrial use of geothermal resources. 26 * Sec. 11. AS 41.06.060(4) is amended to read: 27 (4) "geothermal fluid" means liquids, brines, water, gases, or [AND] 28 steam [AT TEMPERATURES GREATER THAN 120 DEGREES CELSIUS OR 29 ANY COMMERCIAL USE OF LIQUIDS AND STEAM] naturally or artificially 30 present in a geothermal system; "geothermal fluid" does not include oil, 31 hydrocarbon gases, or other hydrocarbon substances [AT TEMPERATURES
01 LESS THAN 120 DEGREES CELSIUS]; 02 * Sec. 12. AS 41.06.060(5) is repealed and reenacted to read: 03 (5) "geothermal resources" means the natural heat of the earth and 04 energy, in whatever form, below the surface of the earth present in, resulting from, 05 created by, or that may be extracted from the natural heat, and all minerals in solution 06 or other products obtained from naturally heated fluids, brines, associated gases, and 07 steam, in whatever form, found below the surface of the earth; "geothermal resources" 08 does not include oil, hydrocarbon gases, or other hydrocarbon substances; 09 * Sec. 13. AS 41.06.005(b) and 41.06.030 are repealed. 10 * Sec. 14. The uncodified law of the State of Alaska is amended by adding a new section to 11 read: 12 APPLICABILITY. This Act applies to a license or lease for a geothermal resource 13 entered into on or after the effective date of secs. 1 - 12 of this Act. 14 * Sec. 15. The uncodified law of the State of Alaska is amended by adding a new section to 15 read: 16 TRANSITIONAL PROVISIONS: REGULATIONS. The Department of Natural 17 Resources and the Alaska Oil and Gas Conservation Commission may adopt regulations to 18 implement the changes made by this Act. The regulations take effect under AS 44.62 19 (Administrative Procedure Act) but not before the effective date of the law implemented by 20 the regulation. 21 * Sec. 16. Section 15 of this Act takes effect immediately under AS 01.10.070(c). 22 * Sec. 17. Except as provided in sec. 16 of this Act, this Act takes effect July 1, 2020.