Legislature(2003 - 2004)

05/12/2003 02:53 PM RES

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
HB 196-CARBON SEQUESTRATION                                                                                                   
                                                                                                                                
Number 1255                                                                                                                     
                                                                                                                                
CHAIR FATE  announced that  the next order  of business  would be                                                               
HOUSE BILL  NO. 196,  "An Act  relating to  carbon sequestration;                                                               
and providing for an effective date."                                                                                           
                                                                                                                                
Number 1322                                                                                                                     
                                                                                                                                
LISA WEISSLER,  Staff to  Representative Ethan  Berkowitz, Alaska                                                               
State  Legislature, presented  HB  196  on behalf  Representative                                                               
Berkowitz, sponsor.   She explained that  carbon sequestration is                                                               
the capture  and long-term storage  of carbon in  forests, soils,                                                               
and oceans.   In order to understand why  carbon sequestration is                                                               
important,  one  must  step into  the  international  arena  with                                                               
regard to climate changes and  international interest in limiting                                                               
the amount of  carbon entering the atmosphere.   She informed the                                                               
committee  that the  Kyoto Protocol,  an international  agreement                                                               
establishing an  emissions limit for carbon  and other greenhouse                                                               
gases, is being  drafted.  Although the U.S. isn't  going to sign                                                               
the Kyoto Protocol,  it could impact U.S. companies  and the U.S.                                                               
in general.   Under the  Kyoto Protocol, countries  and companies                                                               
that produce carbon will have  an emissions limit; if they exceed                                                               
the   emissions   limit,   there   are  ways   to   offset   that                                                               
overproduction of carbon and greenhouse gases.                                                                                  
                                                                                                                                
MS.   WEISSLER   explained   that   one  way   to   offset   that                                                               
overproduction is to  trade with companies below the  limit.  The                                                               
other  is   carbon  sequestration,  an  active   method  used  to                                                               
sequester more carbon in the land,  soil, forests, and ocean.  In                                                               
the case of  carbon sequestration, capitalism is  taking over and                                                               
a  carbon   credit-trading  market  is  being   created.    [This                                                               
legislation]  looks  to  Alaska  benefiting  from  this  emerging                                                               
market  because Alaska  holds great  potential for  sequestration                                                               
activities.   For example, on the  Kenai there are a  lot of dead                                                               
trees due to  the spruce bark beetle infestation.   Thus there is                                                               
the  possibility of  eliminating the  dead trees  and reforesting                                                               
the  area.   Such  active  management  could potentially  produce                                                               
credits that Alaska would be able  to place in the carbon credit-                                                               
trading  market for  money.   She acknowledged  that some  of the                                                               
money could go  towards reforestation, while some of  it could be                                                               
placed in the state's general fund.                                                                                             
                                                                                                                                
MS.  WEISSLER explained  that the  legislation isn't  designed to                                                               
put  Alaska in  the  market  right away  because  there are  many                                                               
questions to  answer.   It follows what  Idaho and  Nebraska have                                                               
already implemented,  requesting that their state  departments of                                                               
natural resources  review the  matter in  order to  determine how                                                               
the  state might  participate  and  what is  going  on with  this                                                               
market,  and  establishing  an advisory  committee  to  help  the                                                               
department with the process.   Therefore, this legislation merely                                                               
places  the state  in  a  position to  benefit  from the  [carbon                                                               
credit-trading  market].   However,  this market  can be  limited                                                               
because  the  number of  credits  could  be  limited due  to  the                                                               
emissions  limit.   Therefore,  those  states  and countries  not                                                               
ready to  enter the market  could be  left behind.   Ms. Weissler                                                               
noted  that  the Alaska  Reforestation  Council  has looked  into                                                               
this.    She passed  around  a  pamphlet entitled  "Reforestation                                                               
Needs and Opportunities for Carbon Sequestration in Alaska."                                                                    
                                                                                                                                
REPRESENTATIVE  CISSNA provided  the  committee  with an  article                                                               
entitled "Carbon Sequestration - Terrestrial Approaches."                                                                       
                                                                                                                                
Number 1628                                                                                                                     
                                                                                                                                
REPRESENTATIVE HEINZE asked how these carbon credits are traded.                                                                
                                                                                                                                
MS. WEISSLER answered  that she believes its just  like any other                                                               
commodity.   She recalled that  when limits were  established for                                                               
sulfur  dioxide, a  market  was  created for  it.   Ms.  Weissler                                                               
specified that  when quantifying  how much is  being sequestered,                                                               
the unit of tons is used.                                                                                                       
                                                                                                                                
REPRESENTATIVE  HEINZE  asked if  Ms.  Weissler  meant a  ton  of                                                               
carbon molecules                                                                                                                
                                                                                                                                
MS. WEISSLER replied yes; it's  actually the gas emitted into the                                                               
atmosphere.                                                                                                                     
                                                                                                                                
Number 1748                                                                                                                     
                                                                                                                                
REPRESENTATIVE  GUTTENBERG asked  how the  value of  a forest  is                                                               
measured.                                                                                                                       
                                                                                                                                
MS.  WEISSLER  said  that's  one  of  the  questions  yet  to  be                                                               
answered.                                                                                                                       
                                                                                                                                
REPRESENTATIVE GUTTENBERG pointed  out that the last  page of the                                                               
document, entitled  "Opportunities for Carbon Offset  Programs in                                                               
Alaska,"  specifies:   "A  carbon  credit is  one  metric ton  of                                                               
carbon or  CO2 equivalent  that is  captured from  the atmosphere                                                               
and stored in plants and organic matter."                                                                                       
                                                                                                                                
Number 1851                                                                                                                     
                                                                                                                                
JOHN "CHRIS"  MAISCH, Regional Forester, Northern  Region Office,                                                               
Division  of Forestry,  Department  of  Natural Resources  (DNR),                                                               
confirmed  that carbon  would  be  traded per  ton.   Although  a                                                               
number of formulas  could be used for wood,  essentially it's the                                                               
wood volume and the amount of  carbon that is created through the                                                               
photosynthetic  process of  the tree  or  plant.   The carbon  is                                                               
locked up  as the  wood or the  biomass of the  plant.   He noted                                                               
that the actual certification process needs work.                                                                               
                                                                                                                                
CHAIR FATE asked  if the fact that the U.S.  isn't a signatory to                                                               
the  Kyoto Protocol  would  influence what  happens  in the  U.S.                                                               
relative to this.                                                                                                               
                                                                                                                                
MR. MAISCH replied yes.  He  explained that many of the companies                                                               
that are part of the  Kyoto Protocol do business worldwide; those                                                               
counties that  have signed and  ratified the Kyoto  Protocol have                                                               
programs  in which  carbon needs  to be  reduced in  the country.                                                               
Therefore, a  worldwide company such  as BP could trade  and sell                                                               
carbon credits anywhere in the  world and obtain credits for that                                                               
in a country that has ratified the Kyoto Protocol.                                                                              
                                                                                                                                
Number 1938                                                                                                                     
                                                                                                                                
CHAIR FATE  pointed out that there  are a lot of  forest fires in                                                               
Alaska,  fires that  cause  large  areas of  the  Interior to  be                                                               
covered  with smoke  to  the  extent that  someone  can't fly  an                                                               
airplane.  Of course, the smoke  is carbon.  Chair Fate asked how                                                               
this  natural  phenomenon  would  come  into  play  with  gaining                                                               
credits in this sequestration program.                                                                                          
                                                                                                                                
MR. MAISCH explained that since a  forest fire would be a natural                                                               
event, it wouldn't  impact the actual program  of sequestering of                                                               
carbon.  However, it might impact  the state if the state quickly                                                               
reforests and  revegetates burned acreage.   Currently, it's rare                                                               
that the  state does the  aforementioned.   He said that  [if the                                                               
state  quickly reforests  and  revegetates  burned acreage],  the                                                               
state would be speeding up  the rate at which reforestation would                                                               
naturally  occur  in   a  burned  area;  thus   the  state  could                                                               
potentially produce  a saleable  carbon credit  for the  time the                                                               
state sped up  the reforestation of the burned area.   In further                                                               
response, Mr. Maisch specified that  the landowner would bear the                                                               
cost of  reforestation.  However, the  idea is that the  price of                                                               
the carbon credit would offset the reforestation cost.                                                                          
                                                                                                                                
CHAIR  FATE interjected  that  would  be the  case  if the  quota                                                               
wasn't already filled.                                                                                                          
                                                                                                                                
MR. MAISCH  acknowledged that there  is a quota, but  pointed out                                                               
that as more companies become  interested in those credits, those                                                               
credits will trade  at a higher price.  With  the proposed quota,                                                               
there is some merit in being the first in, rather than the last.                                                                
                                                                                                                                
CHAIR FATE  asked if Mr.  Maisch feels [carbon  sequestration] is                                                               
worth review, as requested in HB 196.                                                                                           
                                                                                                                                
MR. MAISCH  replied yes,  in order  to evaluate  whether it  is a                                                               
tool for land managers to  leverage more reforestation activities                                                               
or other activities to produce these saleable credits.                                                                          
                                                                                                                                
CHAIR FATE asked if this would  be leverage to entice the U.S. to                                                               
sign the Kyoto Protocol.                                                                                                        
                                                                                                                                
MR. MAISCH  replied no.  He  said that the U.S.  wouldn't have to                                                               
ratify the Kyoto  Protocol in order to participate  in the carbon                                                               
[credit-trading] market.                                                                                                        
                                                                                                                                
Number 2118                                                                                                                     
                                                                                                                                
REPRESENTATIVE  HEINZE asked  if  the carbon  molecules would  be                                                               
traded, bartered, or sold.                                                                                                      
                                                                                                                                
MR. MAISCH answered that the  carbon [credits] would be sold like                                                               
any other  commodity on the  commodities market, such  as lumber,                                                               
corn,  or  oil.    Currently,   credits  for  sulfur  dioxide,  a                                                               
pollutant emitted by electric utilities,  are traded; an exchange                                                               
sells  credits to  offset excess  emissions  of sulfur  dioxides.                                                               
The  aforementioned program  has been  in the  U.S. for  a number                                                               
years; the  [sulfur dioxide credit]  prices are set per  ton, and                                                               
the market  bids it up or  down based on the  availability of the                                                               
credits.  Carbon credits would work in the same way.                                                                            
                                                                                                                                
REPRESENTATIVE HEINZE asked if [carbon  credits] are being traded                                                               
elsewhere in the world, and if so, at what price.                                                                               
                                                                                                                                
MR. MAISCH responded  that the price varies based on  a number of                                                               
factors.   The largest variable  is whether the carbon  credit is                                                               
actually  certified.    There  is  a  third-party  certifier  who                                                               
certifies how much  carbon a project is going to  produce so that                                                               
can  be taken  to the  marketplace and  a potential  purchaser of                                                               
that credit  is assured the  specified amount of carbon  is being                                                               
produced.   Although there are  projects worldwide, most  of them                                                               
aren't  traded through  an exchange  because  the exchange  isn't                                                               
running.  Mr.  Maisch informed the committee  that several Native                                                               
organizations in the  Lower 48, such as the Nez  Perce, have done                                                               
carbon projects  with utilities.   He  characterized most  of the                                                               
projects  that  have  occurred  thus  far to  be  from  a  public                                                               
relations  standpoint, rather  than an  actual trade  through the                                                               
exchange.                                                                                                                       
                                                                                                                                
REPRESENTATIVE HEINZE  said she was  trying to determine  how the                                                               
sponsor  could forecast  [that this  market  could provide]  $400                                                               
million in revenue if the exchange isn't running.                                                                               
                                                                                                                                
MR. MAISCH  suggested that projection  could be based  on private                                                               
projects elsewhere.   He said he'd have to  perform some research                                                               
in order to verify that projection.                                                                                             
                                                                                                                                
Number 2284                                                                                                                     
                                                                                                                                
REPRESENTATIVE  CISSNA asked  if there  are other  ways in  which                                                               
carbon sequestration could benefit Alaska.                                                                                      
                                                                                                                                
MR. MAISCH  pointed out  that Alaska's  being involved  in carbon                                                               
sequestration could  provide some public relations  benefits.  He                                                               
returned  to  the  paper by  the  Alaska  Reforestation  Council,                                                               
written in 2000,  and suggested that it might  be worth reviewing                                                               
in detail.   Mr. Maisch pointed  out that in terms  of the global                                                               
warming  concept, many  have embraced  this carbon  sequestration                                                               
program to help reduce global warming.                                                                                          
                                                                                                                                
CHAIR  FATE, upon  determining  no one  else  wished to  testify,                                                               
closed public testimony.   He announced that he  had no objection                                                               
to forwarding HB 196 to the next committee of referral.                                                                         
                                                                                                                                
Number 2368                                                                                                                     
                                                                                                                                
REPRESENTATIVE  MASEK directed  attention to  page 3,  lines 2-4,                                                               
which specifies  that members of  the advisory  committee created                                                               
by this legislation are entitled to per diem and travel.                                                                        
                                                                                                                                
The committee took an at-ease from 7:00 p.m. to 7:02 p.m.                                                                       
                                                                                                                                
CHAIR FATE  informed the  committee that  each member  should now                                                               
have a  copy of  the fiscal  note.   He directed  the committee's                                                               
attention to the analysis included in the fiscal note.                                                                          
                                                                                                                                
Number 2419                                                                                                                     
                                                                                                                                
REPRESENTATIVE LYNN asked how the  size of the advisory committee                                                               
was determined.                                                                                                                 
                                                                                                                                
MS.  WEISSLER explained  that  the size  came  about because  the                                                               
sponsor was  looking for a  list of folks  able to assist  in the                                                               
development of  the report.  Furthermore,  the advisory committee                                                               
follows the models in Idaho and Nebraska.                                                                                       
                                                                                                                                
REPRESENTATIVE LYNN  remarked that if  any voting is  required of                                                               
this advisory  committee, then  its membership  should be  an odd                                                               
number.                                                                                                                         
                                                                                                                                
MS. WEISSLER related  that she didn't believe there  would be any                                                               
voting  because  the  advisory committee  is  really  to  develop                                                               
recommendations and assist the department.                                                                                      
                                                                                                                                
Number 2482                                                                                                                     
                                                                                                                                
REPRESENTATIVE MASEK  asked why an  advisory committee has  to be                                                               
created, when DNR  can handle this with its existing  staff.  She                                                               
offered  her belief  that  most of  the  legislation passed  this                                                               
session has had no fiscal impact.                                                                                               
                                                                                                                                
CHAIR FATE related  his understanding from the  sponsor that this                                                               
legislation was merely  a request to look into  this; however, it                                                               
seems to  go further  and seems to  be partially  responsible for                                                               
some sort of implementation.                                                                                                    
                                                                                                                                
MS.  WEISSLER  clarified that  the  intent  is for  the  advisory                                                               
committee to  advise the  department.  There  is no  intention to                                                               
put anything  into motion.  With  regard to the fiscal  note, she                                                               
said she suspects  that the costs could  be substantially reduced                                                               
through  use of  the teleconference  network and  existing staff,                                                               
which  was the  intention  of  the sponsor.    She mentioned  the                                                               
possibility of grant  opportunities that could be  more likely if                                                               
this legislation is in place.                                                                                                   
                                                                                                                                
Number 2606                                                                                                                     
                                                                                                                                
CHAIR  FATE announced  that  HB  196 would  be  held for  further                                                               
consideration.   He related his  view that  this is a  good idea,                                                               
although more  study seems to be  required on the fiscal  note as                                                               
well  as the  specific duties  of the  board.   [HB 196  was held                                                               
over.]                                                                                                                          
                                                                                                                                

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