Legislature(2021 - 2022)SENATE FINANCE 532
01/24/2022 01:00 PM Senate FINANCE
| Audio | Topic |
|---|---|
| Start | |
| SB25 | |
| SB33 | |
| SB104 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 25 | TELECONFERENCED | |
| + | SB 33 | TELECONFERENCED | |
| + | SB 104 | TELECONFERENCED | |
| + | TELECONFERENCED |
SENATE BILL NO. 104
"An Act relating to geothermal resources; relating to
the definition of 'geothermal resources'; and
providing for an effective date."
2:11:12 PM
Co-Chair Bishop discussed housekeeping.
HALEY PAINE, DEPUTY DIRECTOR, DIVISION OF OIL AND GAS,
DEPARTMENT OF NATURAL RESOURCES (via teleconference),
discussed a presentation (copy on file). She announced she
would begin with slide 18.
Ms. Paine spoke to slide 19, "Purpose of SB 104":
?Modernize Alaska's geothermal exploration program
?Greater potential for providing affordable, renewable
energy to rural communities and remote natural
resource extraction projects
?Promote clean energy industry job creation
?Align geothermal licensing with the oil and gas
exploration license program, thereby increasing
feasibility for companies to develop resources
?More time for a company to identify and prove
resource to convert to leases
?Conversion to leases based on completion of work
commitment and submission of exploration plan instead
of proving discovery of commercial resource
?Doubles maximum acreage allowed for exploration
?Reforms definitions for geothermal resources to focus
on Commercial Use
?Explicitly excludes domestic, noncommercial, or
small-scale industrial use from the need for a
geothermal license or lease
Ms. Paine moved to slide 20, which provided a brief history
of geothermal leasing and permitting in Alaska:
Present Mount Spurr Currently there are two geothermal
exploration prospecting permits in the Mount Spurr
area, both issued during 2021.
Augustine Island An application for a prospecting
permit is under review for Augustine Island.
2013
Augustine Island 26 tracts were offered. Only one
tract was leased to a private individual and no
exploration work was conducted as a result of that
lease sale.
2008
Mount Spurr 16 tracts leased to Ormat and one private
individual. Ormat purchased 15 leases in the 2008 sale
and drilled on southern flank of volcano. They didn't
find adequate temperatures in wells to pursue the
project. The state has the data available on the
website.
1986
Mount Spurr On June 24, 1986, DNR offered 2,640 acres
in two tracts. Both tracts received bids. The lease
for Tract 1 expired in 1996, and the lease for Tract 2
was terminated in 1990.
1983
Mount Spurr DNR held its first geothermal lease sale
in the Mount Spurr area on May 17, 1983. 10,240 acres
in 16 tracts were offered in Competitive Geothermal
Lease Sale 1. One tract received a bid. The lease for
that tract was terminated in 1992.
2:16:19 PM
Ms. Paine spoke to slide 21, "DNR Leasing/Permitting
Process":
?Competitive Lease Sale
?If no competing interest, issue prospecting permit
with two-year time limit
?This bill would update this, replacing 2-year
prospecting permits with 5-year exploration licenses
designed after our modern oil and gas exploration
license program.
?Only after the stipulations of a permit/license are
met can the operator opt to convert to a lease.
?Both processes require Best Interest Finding prior to
disposal
Ms. Paine discussed slide 22, "Sectional Summary":
1 (AOGCC)
Removes unnecessary reference to AS 41.06 from AS
31.05.030(m) because of changes made by Section 9.
2 (DNR)
Changes permits to licenses.
Explicit exemption for geothermal resources intended
for domestic, noncommercial, or small-scale industrial
use (See also Section 9).
Removes preferential rights clause. This provision is
not appropriate for commercial development of State
resources.
3 (DNR)
Changes permit to license.
Extends term of licenses (formerly permits) from two
to five years.
Replaces lease conversion requirement of commercial
discovery and development plan with work commitment
and exploration plan.
4 (DNR)
Changes permit to license.
5 (DNR)
Changes permits to licenses.
Increases maximum acreage from 51,200 to 100,000.
Adds provision for rental fees to be defined in
regulation, rather than statute (easier to update).
6 (DNR)
Adds new subsections to AS 38.05.181 to modernize
unitization statute for geothermal leases to match the
model we use for oil and gas under AS 38.05.180.
7 (DNR)
Replaces AS 38.05.965(6) definition of geothermal
resources(Same as Section 11).
8 (AOGCC)
Amends AS 41.06.020(e), clarifies that AS 41.06 does
not limit DNR's authority over geothermal resource
management on state land.
9 (AOGCC)
Amends AS 41.06.020(f) to add explicit exemption for
geothermal resources intended for domestic,
noncommercial, or small-scale industrial use (See also
Section 2).
10 (AOGCC)
Amends AS 41.06.060(4) definition of geothermal fluid
to remove temperature references and better conform
with other changes in this bill.
11 (AOGCC)
Replaces AS 41.06.060(5) definition of geothermal
resources(Same as Section 7).
12 (AOGCC)
Repeals AS 41.06.005(b) and AS 41.06.030 since
geothermal units are managed by DNR.
1316
General provisions for applicability and effective
dates.
Includes applicability provision for prospecting
permits currently being processed.
Ms. Paine skipped to slide 24, "Section 2: Private Use
Exemption":
? New language added:
A prospecting license or lease is not required under
this section to explore for, develop, or use
geothermal resources if the geothermal resource is
intended for domestic, noncommercial, or small-scale
industrial use.
? This explicitly excludes private geothermal users
from a requirement to apply for a license or lease.
Co-Chair Bishop wondered whether there was an example of
volume of water per minute in the bill.
Ms. Paine replied that there was not a specific numeric
requirement, because there was no desire to set limits that
might hinder development.
2:20:06 PM
Senator Wielechowski queried the definition of domestic.
Ms. Paine replied that it referred to an individual
homeowner.
Ms. Paine looked at slide 25, "Section 2: Preferential
Rights":
? Current statute grants preferential rights to a
surface owner to apply for a geothermal prospecting
permit once notice is received of existing application
?Potentially discouraging to commercial
development
?Private landowners usually don't have financial
resources to develop a commercially viable
geothermal resource.
? Surface owner rights are already protected under AS
38.05.130.
?If conflict arises, DNR ensures private
landowners would not be left without heat or
power, or otherwise damaged by commercial
development.
? If a surface use agreement can't be reached,
resolution process is in 11 AAC 86.145.
?DNR holds a hearing wherein the developer must
prove there is no other alternative location for
the well or data acquisition.
?If the Commissioner concurs, developer posts a
bond to compensate landowner for any impacts and
work progresses.
? Public notice is a part of the license issuance
process, and surface owners would be included. Surface
owner notification is also part of later surface-use
permitting.
Senator Wielechowski wondered whether someone who was not
the surface owner could apply to develop a piece of land
that was owned by someone else.
Ms. Paine replied in the affirmative.
Senator Wielechowski surmised that a developer could obtain
the rights to someone elses land.
Ms. Paine replied that the provision was in place
currently, and the bill would not seek to change the
mineral estate.
Senator Wielechowski felt that there would be unhappy
landowners.
Co-Chair Bishop felt that there could be a conversations
about subsurface rights.
Ms. Paine looked at slide 26, "Section 3: Work Commitment":
? Changes prospecting permit to license and increases
term from 2 to 5 years
?Creates greater opportunity for success of
noncompetitive geothermal program
?Conversion to noncompetitive lease through completion
of agreed upon work commitment
?Current process for oil and gas exploration license
?Commitment expressed in dollar figure
?annual reporting and performance objectives
2:25:31 PM
Senator Wielechowski stressed that most oil in the state
was found on either state or federal land. He wondered
whether the state had ever forced a private landowner to
allow and oil an gas company to develop their land.
Ms. Paine replied that it had not occurred for geothermal
exploration. She agreed to provide more information about
oil and gas.
2:26:49 PM
STEVE MASTERMAN, DIVISION OF GEOLOGICAL AND GEOPHYSICAL
SURVEYS, STATE GEOLOGIST, FAIRBANKS (via teleconference),
looked at the slide 27. He stated that the slide had been
revised to be more specific and to remove the temperature
restraint.
Senator Wielechowski asked for an example of brines or
gases that could be artificially pumped into the ground in
the statute.
Mr. Masterman replied that it was less likely that gas or
brines would be injected into geothermal fields. He stated
that the Chena Hot Springs field received injections for a
closed loop environment.
2:30:24 PM
Senator Wielechowski wondered whether any of the brines or
gases could damage water resources, and how to protect
against the damage.
Mr. Masterman replied that production of geothermal fluids
occurred at considerable depths, and water sources would
not be at that level.
Mr. Masterman addressed slide 28, "Sections 7 and 11: New
Definition":
"Geothermal resources" means the natural heat of the
earth; the energy, in whatever form, below the surface
of the earth present in, resulting from, or created
by, or which may be extracted from, such natural heat;
and all minerals in solution or other products
obtained from naturally heated fluids, brines,
associated gases, and steam, in whatever form, found
below the surface of the earth; but excluding oil,
hydrocarbon gases, or other hydrocarbon substances.
?Modern definition for geothermal resources.
?Not limited by temperature because current technology
enables development of cooler geothermal systems.
?Ensures all the State's mineral estate resources are
captured in definition.
ame definition being applied to both DNR and AOGCC
statutes.
Co-Chair Bishop queried the source of the definition.
Mr. Masterman agreed to provide that information.
Senator Wielechowski wondered what happened to the helium
exclusion in the previous definition.
Mr. Masterman replied that Alaska did not have much helium
present, so it was almost not applicable.
2:35:24 PM
Ms. Paine concluded the presentation.
Senator Wielechowski wondered why there was a removal of
the annual rental fee of three dollars an acre.
Ms. Paine replied that the reason was to be more flexible
in the future.
Senator Wielechowski looked at Section 6, and asked for the
rationale behind the repeal of the unitization provisions.
He also queried the legislations impact on royalties.
Ms. Paine replied that the reason for the repeals was to
align with oil and gas exploration. She stated that the
bill would not impact the current royalty structure for
geothermal energy development.
Senator Wilson wondered whether DNR tracked the number of
domestic geothermal insulations in the state.
Ms. Paine replied that the Division of Oil and Gas did not
track the number of domestic heat pumps in the state.
Senator Wielechowski looked at Section 6, and whether it
gave the commissioner the ability to change the lease
requirements with agreement from the lessee.
Ms. Paine replied that the intention of that provision was
to align with the current oil and gas provisions.
Co-Chair Bishop wondered whether there was a recent royalty
modification.
Ms. Paine replied in the affirmative.
2:40:05 PM
Senator Wilson queried a definition of "small scale
industrial use."
Ms. Paine replied that there was not a statutory
definition, and explained that it was based on whether
there would be a customer for the product.
Senator Wilson wondered whether Chena Hot Springs would be
considered small scale industrial.
Ms. Paine replied that Chena Hot Springs did not distribute
their power outside of the organization, so they were
exempt from that definition.
Senator Wilson wondered whether it would include commercial
developments for homes or medical facilities.
Ms. Paine replied that they would not go through this
specific regulatory process, but felt that there would be
other permits from different agencies.
Senator Wilson surmised that a developer could bypass the
requirement by working directly with the landowner, as long
as there was no distribution of power.
Ms. Paine replied that anyone who was looking for the size
and scale of resource to develop would fine it more
economic to distribute the resource, however there would be
other public processes for the development of the resource.
Co-Chair Bishop OPENED and CLOSED public testimony.
Co-Chair Bishop discussed the following day's agenda.
SB 104 was HEARD and HELD in committee for further
consideration.