Legislature(2023 - 2024)BUTROVICH 205

04/17/2023 03:30 PM Senate RESOURCES

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+= SB 69 GEOTHERMAL RESOURCES TELECONFERENCED
Heard & Held
-- Invited & Public Testimony --
+= HJR 11 ADDRESS AIR POLLUTION IN FAIRBANKS TELECONFERENCED
Heard & Held
-- Testimony <Invitation Only> --
Jason Olds, Acting Director Division of Air
Quality, Department of Environmental Conservation
*+ SB 82 COOK INLET: NEW ADMIN AREA;PERMIT BUYBACK TELECONFERENCED
Heard & Held
-- Testimony <Invitation Only> --
Bills Previously Heard/Scheduled:
+= SB 92 STATE OWNERSHIP OF SUBMERGED LAND TELECONFERENCED
Moved CSSB 92(RES) Out of Committee
**Streamed live on AKL.tv**
                   SB  69-GEOTHERMAL RESOURCES                                                                              
                                                                                                                                
3:37:05 PM                                                                                                                    
CO-CHAIR  BISHOP   reconvened  the  meeting  and   announced  the                                                               
consideration  of  SENATE  BILL  NO.   69  "An  Act  relating  to                                                               
geothermal resources;  relating to the definition  of 'geothermal                                                               
resources'; and providing for an effective date."                                                                               
                                                                                                                                
He noted that  this was the second hearing and  the intent was to                                                               
go through the sectional analysis and hear public testimony.                                                                    
                                                                                                                                
3:37:53 PM                                                                                                                    
JOHN CROWTHER, Deputy Commissioner, Department of Natural                                                                       
Resources (DNR), Anchorage, Alaska, introduced himself.                                                                         
                                                                                                                                
3:38:05 PM                                                                                                                    
SEAN CLIFTON, Policy and Program  Specialist, Division of Oil and                                                               
Gas,  Department of  Natural Resources  (DNR), Anchorage,  Alaska                                                               
provided  an  overview  of  SB 69  and  presented  the  sectional                                                               
analysis. He began by reviewing the purpose of the legislation.                                                                 
                                                                                                                                
     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                                                                        
        • Repeals rental/royalty modification after 20                                                                          
          years of production, providing stability and                                                                          
          predictability for investors in geothermal energy                                                                     
          projects                                                                                                              
     Reform  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                                                                                           
                                                                                                                                
3:40:48 PM                                                                                                                    
MR.   CLIFTON    advanced   to   slide   11,    "DNR   Geothermal                                                               
Leasing/Permitting History," and spoke to the following:                                                                        
                                                                                                                                
     Present   Mount  Spurr Two  prospecting permits  in the                                                                  
               Mount Spurr  area, issued in 2021  (expire in                                                                    
               2023).                                                                                                           
               Augustine  Island One  prospecting permit  in                                                                  
               the  southern part  of  the volcanic  island,                                                                    
               issued in 2022 (expires in 2024).                                                                              
                                                                                                                                
     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  were leased  to Ormat                                                                
               and one  private individual.  Ormat purchased                                                                    
               15  leases in  the 2008  sale and  drilled on                                                                    
               the  southern flank  of volcano.  They didn't                                                                    
               find  adequate   temperatures  in   wells  to                                                                    
               pursue the  project. The  State has  the data                                                                    
               available  on  the  Division  of  Oil  &  Gas                                                                    
               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.                                                                             
                                                                                                                                
MR. CLIFTON noted that without this legislation, the permitting                                                                 
would have to be completely restarted for the two Mount Spurr                                                                   
permits that are due to expire in 2023.                                                                                         
                                                                                                                                
3:42:47 PM                                                                                                                    
CO-CHAIR BISHOP asked how much it would extend a prospect lease,                                                                
if the bill were to pass.                                                                                                       
                                                                                                                                
MR. CLIFTON replied that it would give a company about three                                                                    
additional years.                                                                                                               
                                                                                                                                
3:43:24 PM                                                                                                                    
SENATOR CLAMAN asked where Augustine Island is located.                                                                         
                                                                                                                                
MR. CLIFTON replied that it's due west of Anchor Point in the                                                                   
southern Cook Inlet.                                                                                                            
                                                                                                                                
SENATOR CLAMAN asked where the Unalaska project that Bernie Karl                                                                
talked about would fall in DNR's regulatory permitting process.                                                                 
                                                                                                                                
MR.  CLIFTON replied  that  Bernie Karl  is  associated with  the                                                               
development  of   the  Makushin  project,  which   is  a  private                                                               
resource.  DNR  is not  involved,  but  the  Alaska Oil  and  Gas                                                               
Commission  and  the  Department  of  Environmental  Conservation                                                               
(DEC)  are  involved in  that  project.  He reiterated  that  the                                                               
purpose  of SB  69 is  to  update DNR's  program for  permitting,                                                               
licensing,  and  leasing  projects   involving  State  of  Alaska                                                               
resources.                                                                                                                      
                                                                                                                                
CO-CHAIR  BISHOP recalled  that  Mr.  Karl said  he  had all  his                                                               
permits.                                                                                                                        
                                                                                                                                
SENATOR  KAWASAKI asked  about the  permitting  process when  the                                                               
geothermal resource transitions through  multiple layers of state                                                               
and private land.                                                                                                               
                                                                                                                                
MR. CLIFTON  responded that unitization provides  a framework for                                                               
different resource  owners to  come to  agreement on  how they're                                                               
going to  develop the  resource. This  will be  addressed further                                                               
along in the  presentation, but Pilgrim Hot Springs  near Nome is                                                               
a good example of multiple resource owners.                                                                                     
                                                                                                                                
MR.  CLIFTON  advanced  to  slide  12,  "Leasing  and  Permitting                                                               
Process," and discussed the following:                                                                                          
                                                                                                                                
     Application and call for competing proposals If competing proposals ? competitive lease sale If no competing interest ? issue prospecting                                                                      
          permit with two-year time limit                                                                                     
          o This bill replaces two-year permits with five-                                                                      
             year licenses modelled after our modern oil and                                                                    
             gas exploration licensing program.                                                                                 
          o Conversion to lease                                                                                                 
               • Permit (current): "showing of a discovery                                                                      
                  of geothermal resources in commercial                                                                         
                  quantities"                                                                                                   
               •  License (bill): after work commitment is                                                                      
                  met Both processes require Best Interest                                                                      
                  Finding prior to award of permit, license,                                                                    
                  or lease                                                                                                      
                                                                                                                                
3:48:40 PM                                                                                                                    
CO-CHAIR  BISHOP asked  whether DNR  was  hard and  fast on  five                                                               
years.                                                                                                                          
                                                                                                                                
MR.  CROWTHER  replied  that  DNR's belief  is  that  five  years                                                               
maintains  the competitive  balance  and allows  the  time for  a                                                               
company  to  do  several  field-seasons   of  work  and  prove  a                                                               
potential resource. He  added that the department  would be happy                                                               
to provide its  perspective on other timeframes  if the committee                                                               
suggested alternatives.                                                                                                         
                                                                                                                                
CO-CHAIR  BISHOP  said  he  was   thinking  about  the  logistics                                                               
required to get to some remote locations.                                                                                       
                                                                                                                                
MR. CLIFTON conveyed  that the sectional summary on  slide 13 was                                                               
for reference as members review the legislation.                                                                                
                                                                                                                                
3:49:55 PM                                                                                                                    
MR. CLIFTON  advanced to the detailed  sectional summary starting                                                               
on slide 15. He spoke to the following:                                                                                         
                                                                                                                                
     SECTION 1: CLASS V WELLS PRIMACY                                                                                         
                                                                                                                                
         • Grants AOGCC authority to pursue primacy for                                                                         
        permitting Class V injection wells for geothermal                                                                       
        developments                                                                                                            
      • State agencies are quicker and have more expertise                                                                      
        with permitting within their jurisdiction than US                                                                       
        EPA                                                                                                                     
     • Reduces project costs and permitting timelines                                                                           
       • AOGCC already has primacy for Class II injection                                                                       
        wells used for enhanced oil recovery injection                                                                          
        programs                                                                                                                
                                                                                                                                
MR. CLIFTON  deferred further explanation  of Class V  primacy to                                                               
the representative from AOGCC.                                                                                                  
                                                                                                                                
CO-CHAIR BISHOP asked  Commissioner Wilson if he  had anything to                                                               
add.                                                                                                                            
                                                                                                                                
GREG  WILSON,  Commissioner,  Alaska  Oil  and  Gas  Conservation                                                               
Commission  (AOGCC),   Department  of  Commerce,   Community  and                                                               
Economic Development  (DCCED), Anchorage, Alaska, stated  that he                                                               
had nothing to add at this time.                                                                                                
                                                                                                                                
3:51:34 PM                                                                                                                    
SENATOR CLAMAN  asked for the  timeline when DNR might  apply for                                                               
Class V primacy.                                                                                                                
                                                                                                                                
MR. CROWTHER  deferred the question to  the AOGCC representative.                                                               
He added that  DNR's thinking was that it was  prudent to put all                                                               
the  geothermal  updates  in  one   bill,  even  though  Class  V                                                               
authority may not be needed immediately.                                                                                        
                                                                                                                                
COMMISSIONER WILSON deferred the question to Dave Roby.                                                                         
                                                                                                                                
3:52:20 PM                                                                                                                    
DAVE  ROBY,  Senior  Reservoir   Engineer,  Alaska  Oil  and  Gas                                                               
Conservation   Commission   (AOGCC),  Department   of   Commerce,                                                               
Community  and Economic  Development (DCCED),  Anchorage, Alaska,                                                               
stated  that the  purpose  of  including Class  V  is to  provide                                                               
authority to  regulate the injection  activities instead  of just                                                               
the permitting  of the well. It  would be similar to  what's done                                                               
currently for water and gas  injection for enhanced oil recovery.                                                               
He  noted   that  the   Environmental  Protection   Agency  (EPA)                                                               
currently was  the permitting  authority and  he wasn't  sure the                                                               
agency would authorize the state to assume Class V primacy.                                                                     
                                                                                                                                
SENATOR  CLAMAN asked  for DNR's  timeline for  pursuing Class  V                                                               
primacy and what it might cost.                                                                                                 
                                                                                                                                
MR. ROBY said he believes  DNR would start pursuing primacy right                                                               
away if the  bill were to pass,  although preliminary discussions                                                               
with the EPA  indicate that it would be unlikely  that the agency                                                               
would grant primacy on just geothermal.  He said it may be a dead                                                               
end but it  costs nothing to pursue. Beyond that,  he didn't know                                                               
how long the process might take.                                                                                                
                                                                                                                                
CO-CHAIR  BISHOP advised  that the  DCCED fiscal  note says  that                                                               
AOGCC   does  not   anticipate   any  fiscal   impact  from   the                                                               
legislation.                                                                                                                    
                                                                                                                                
3:54:20 PM                                                                                                                    
MR. CROWTHER suggested  that the committee may  be thinking about                                                               
and  referencing the  Class VI  program that  does have  a fiscal                                                               
note impact. That  primacy is more complex to pursue  and the EPA                                                               
has  signaled  it  wants  applicants to  go  through  the  entire                                                               
process,  which will  take  time.  The cost  of  that primacy  is                                                               
distinct from this pursuit.                                                                                                     
                                                                                                                                
CO-CHAIR BISHOP asked Mr. Clifton to continue.                                                                                  
                                                                                                                                
3:55:01 PM                                                                                                                    
MR. CLIFTON advanced to slide 16 and discussed the following:                                                                   
                                                                                                                                
     SECTIONS 2, 10, & 15: DNR MANAGES GEOTHERMAL UNITS ON                                                                    
     STATE LAND                                                                                                               
                                                                                                                                
        DNR manages Alaska's geothermal resources under                                                                       
     unitization and operations provisions in AS 38.05.181                                                                    
                                                                                                                                
        Section 2: Removes  redundant reference to  AS 41.06                                                                    
                   from AS 31.05.030(m)                                                                                         
        Section 10: Related amendment to AS 41.06.020(e)                                                                        
        Section 15: Repeals AS 41.06.005(b) and AS 41.06.030                                                                    
                   since geothermal units are managed by DNR                                                                    
                                                                                                                                
3:55:52 PM                                                                                                                    
MR. CLIFTON advanced to slide 17 and discussed the following:                                                                   
                                                                                                                                
     SECTIONS 36: PERMITS TO LICENSES                                                                                         
                                                                                                                                
      • Provisions in these sections replace "permit" with                                                                      
        "license."                                                                                                              
          • Within DOG, "permits" are for surface use                                                                           
        authorizations.  For   subsurface,  "licenses"   and                                                                    
        "leases" are issued.                                                                                                    
       •  Adopting the exploration licensing program for                                                                        
        geothermal   resource   management   conforms   with                                                                    
        existing processes for oil and gas.                                                                                     
        •  Section 17 allows for conversion of existing                                                                         
        permits to licenses.                                                                                                    
                                                                                                                                
3:57:00 PM                                                                                                                    
SENATOR WIELECHOWSKI joined the committee.                                                                                      
                                                                                                                                
MR. CLIFTON advanced to slide 18 and discussed the following:                                                                   
                                                                                                                                
     SECTION 3: 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.                                                                     
                                                                                                                                
He noted that later in the presentation he'd talk about changing                                                                
the definition of "geothermal resources" by removing the very                                                                   
high-temperature requirement.                                                                                                   
                                                                                                                                
CO-CHAIR BISHOP asked if it would exclude somebody who                                                                          
circulates naturally occurring hot water throughout their home.                                                                 
                                                                                                                                
MR. CLIFTON said slide 19  addresses the question. The graphic on                                                               
the bottom  right provides  examples of a  typical home  or small                                                               
business  use of  different types  of ground  source heat  pumps.                                                               
They  use heat  exchange  to pull  heat from  the  earth to  heat                                                               
water. This  is not a model  for producing power. The  graphic on                                                               
the  left  illustrates  a commercial  development  of  geothermal                                                               
resources  to  produce  power.  He  noted  that  Bernie  Karl  is                                                               
producing power with geothermal resources,  but he is not selling                                                               
that  power so  DNR does  not view  it as  commercial use  of the                                                               
resource. He acknowledged that the  language was open so a future                                                               
commissioner could take a different approach.                                                                                   
                                                                                                                                
CO-CHAIR  BISHOP  asked Dr.  LePain  if  the boreholes  for  non-                                                               
commercial systems  illustrated on  slide 19  would use  the same                                                               
drill and case as a conventional well.                                                                                          
                                                                                                                                
DR.  DAVID  LEPAIN, State  Geologist  and  Director, Division  of                                                               
Geological  and   Geophysical  Surveys,  Department   of  Natural                                                               
Resources (DNR),  Fairbanks, Alaska, said that's  correct; ground                                                               
source heat pump technology would  be used in such non-commercial                                                               
systems.                                                                                                                        
                                                                                                                                
CO-CHAIR BISHOP observed that it  might be beneficial to identify                                                               
the depth or length of the boreholes as a range in feet.                                                                        
                                                                                                                                
4:01:44 PM                                                                                                                    
SENATOR  WIELECHOWSKI  agreed  and  asked  whether  there  was  a                                                               
definition for domestic or small-scale industrial use.                                                                          
                                                                                                                                
MR.  CLIFTON  replied  that  the bill  does  not  propose  adding                                                               
specific  definitions under  Title 38  for domestic,  small-scale                                                               
industrial  use.  He  opined  that  those  would  be  interpreted                                                               
according to the common meanings.                                                                                               
                                                                                                                                
SENATOR  WIELECHOWSKI  asked how  he  would  define domestic  and                                                               
small-scale industrial use.                                                                                                     
                                                                                                                                
4:02:42 PM                                                                                                                    
MR.  CROWTHER responded  that the  core intent  is commerciality.                                                               
Power  somebody generates  from a  geothermal resource  for their                                                               
home  or a  business operation  on  their property  would not  be                                                               
subject  to  this lease  requirement  if  the power  isn't  sold.                                                               
Somebody  who  develops  a   large-scale  project  that  requires                                                               
central power generation and has  commodity sales of manufactured                                                               
products would start to be a non-small-scale industrial use.                                                                    
                                                                                                                                
SENATOR WIELECHOWSKI  asked if geothermal  is considered  part of                                                               
the subsurface resource the state continues to own.                                                                             
                                                                                                                                
MR. CROWTHER said yes; DNR views  it as a mineral resource of the                                                               
state.                                                                                                                          
                                                                                                                                
SENATOR WIELECHOWSKI asked  if it runs afoul  of the constitution                                                               
if no royalty is collected.                                                                                                     
                                                                                                                                
MR. CROWTHER replied that DNR  understands commercial projects to                                                               
be those  seeking resources from  significant depths  of hundreds                                                               
or  thousands  of feet,  which  is  clearly  a character  of  the                                                               
mineral estate.  He acknowledged that  the court had  not settled                                                               
whether the  migration of the  heat to  the surface at  the level                                                               
that's  functionally  useful  for   purposes  of  home  or  small                                                               
business  use is  a sufficiently  mineral and  whether the  state                                                               
could assert authority  at the surface level if the  state is not                                                               
the surface owner. The legislature  carves out the private right,                                                               
but it does not attempt to draw a distinct line.                                                                                
                                                                                                                                
4:05:45 PM                                                                                                                    
SENATOR  WIELECHOWSKI  asked  whether  Section 3  should  have  a                                                               
provision that limits depth to no more than 300 feet.                                                                           
                                                                                                                                
MR. CLIFTON  said it's  different than selling  a barrel  of oil;                                                               
it's  based   on  a   percentage  of   gross  revenue   under  AS                                                               
38.05.181(g).  Subsection  (g)  sets  the royalty  rate  at  1.75                                                               
percent of  gross revenue  for the first  10 years  of production                                                               
and 3.5  percent of  production in subsequent  years. SB  69 does                                                               
not propose to change that statute.                                                                                             
                                                                                                                                
4:06:56 PM                                                                                                                    
SENATOR WIELECHOWSKI  asked if somebody  could drill  a 100-foot-                                                               
deep oil well and pump 25 gallons per day for personal use.                                                                     
                                                                                                                                
MR. CROWTHER  said he didn't  know how Alaska law  treats surface                                                               
expressions  of  hydrocarbons  or   other  mineral  resource.  He                                                               
offered to do some research and follow up with the information.                                                                 
                                                                                                                                
4:07:50 PM                                                                                                                    
SENATOR CLAMAN asked if Bernie Karl  had to apply for any permits                                                               
initially and whether  there was any regulatory  oversight of his                                                               
geothermal operation at Chena Hot Springs outside of Fairbanks.                                                                 
                                                                                                                                
MR.  CROWTHER  offered his  understanding  that,  similar to  the                                                               
Makushin project,  the resource  is private,  so Mr.  Karl didn't                                                               
have to  get a permit from  DNR to access and  use that resource.                                                               
He didn't  know what  permits or  authorizations from  other uses                                                               
that Mr. Karl may hold.                                                                                                         
                                                                                                                                
SENATOR CLAMAN  summarized that DNR's  understanding is  that Mr.                                                               
Karl's  operation  uses  surface  geothermal  because  using  the                                                               
subsurface estate requires authorization from DNR.                                                                              
                                                                                                                                
MR. CROWTHER said  he'd follow up with a  definitive response but                                                               
his  understanding  in   that  case  is  that   the  mineral  and                                                               
subsurface estate is private.                                                                                                   
                                                                                                                                
SENATOR  CLAMAN  continued that  the  state  sold the  subsurface                                                               
estate to some depth.                                                                                                           
                                                                                                                                
MR.  CROWTHER  said  the  state  typically  cannot  alienate  its                                                               
mineral estate  in transactions,  but Alaska has  instances where                                                               
there is a  private mineral estate that passed  to private owners                                                               
pre-statehood or in other situations.                                                                                           
                                                                                                                                
4:10:03 PM                                                                                                                    
SENATOR  CLAMAN said  he  wasn't questioning  what  Mr. Karl  was                                                               
doing but it seemed relevant to the questions that were arising.                                                                
                                                                                                                                
CO-CHAIR BISHOP commented that from  a safety standpoint it makes                                                               
sense to set a range for private use.                                                                                           
                                                                                                                                
4:10:44 PM                                                                                                                    
SENATOR KAUFMAN  noted the reference to  "small-scale industrial"                                                               
and  asked  whether there  was  intent  to differentiate  between                                                               
commercial and industrial.                                                                                                      
                                                                                                                                
MR. CLIFTON said small-scale  industrial envisions something like                                                               
a seafood  processing plant that  is adjacent to a  resource that                                                               
can  be  used  to  power   the  plant  instead  of  using  diesel                                                               
generation. DNR  doesn't need to  get involved in  the permitting                                                               
or licensing  or leasing  processes for  the mineral  estate. The                                                               
bill does  provide flexibility for situations  where the facility                                                               
changes and is exporting power.                                                                                                 
                                                                                                                                
SENATOR KAUFMAN said he'd follow up offline.                                                                                    
                                                                                                                                
MR. CLIFTON  responded to Senator Claman's  question. He conveyed                                                               
that  the area  around Chena  Hot  Springs is  a private  mineral                                                               
estate that  was granted prior to  statehood. It is not  a unique                                                               
situation.  He  agreed with  Mr.  Crowther  that if  the  mineral                                                               
estate  had been  given  to the  state, it  would  not have  been                                                               
ceded.                                                                                                                          
                                                                                                                                
4:14:07 PM                                                                                                                    
MR. CLIFTON advanced to slide 20 and discussed the following:                                                                   
                                                                                                                                
     SECTION 3: PREFERENTIAL RIGHTS Current statute grants preferential rights to a                                                                      
        surface owner to apply for a geothermal prospecting                                                                   
        permit once notice is received of an existing                                                                         
        application                                                                                                           
          •  Inappropriate for  a surface  owner  to have  a                                                                    
             preferential  right  to  the   State's  mineral                                                                    
             estate                                                                                                             
          •  Potentially    discouraging    to    commercial                                                                    
             development                                                                                                        
          •  Private landowners usually don't have financial                                                                    
             resources  to  develop   a  commercially-viable                                                                    
             geothermal resource                                                                                                
     • Surface owners may still pursue domestic geothermal                                                                    
        developments for their own uses                                                                                       
          • Need well permits from AOGCC                                                                                        
          •  Need environmental review or permits from other                                                                    
             agencies such  as  Department of  Environmental                                                                    
             Conservation, Department  of Fish  & Game,  DNR                                                                    
             Division  of  Mining  Land  &  Water,  possibly                                                                    
             federal agencies                                                                                                   
          •  Examples   of   permitting   requirements   are                                                                    
             detailed in a supplemental slide                                                                                   
       • Rights to access the mineral estate are reserved                                                                     
        under AS 38.05.125, while surface owner rights are                                                                    
        protected under AS 38.05.130                                                                                          
          •  Surface owners  must provide  reasonable access                                                                    
             to resource developers                                                                                             
          •  The same  condition  exists for  oil  & gas  or                                                                    
             mining                                                                                                             
          •  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,  a developer posts                                                                    
             a bond to compensate landowner for any impacts                                                                     
             and work progresses                                                                                                
      • Geothermal licenses and leases are not surface use                                                                    
        authorizations                                                                                                        
          •  They  only  provide  the   exclusive  right  to                                                                    
             explore for and develop the subsurface                                                                             
             resources                                                                                                          
          •  Public notice is a part of the license issuance                                                                    
             process and surface owners can participate                                                                         
          •  Surface  use   authorizations  require   public                                                                    
             notice and direct notice to any affected                                                                           
             surface owners                                                                                                     
                                                                                                                                
4:15:53 PM                                                                                                                    
MR. CLIFTON advanced to slide 21 and discussed the following:                                                                   
                                                                                                                                
     SECTIONS 4 & 7: TERMS AND 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                                                                                                    
     • Amends AS 38.05.181(f) for geothermal leases                                                                           
          •  Geothermal  leases  last  for  10  years,  with                                                                    
             opportunity for a five-year extension, and                                                                         
             standard indefinite extension by production                                                                        
          •  Repeals opportunity  for  DNR  commissioner  to                                                                    
             renegotiate rental and royalty rates for                                                                           
             geothermal leases after 20 years of production                                                                     
                                                                                                                                
MR. CLIFTON continued to slide 22 and discussed the following:                                                                  
                                                                                                                                
     SECTION 6: ACREAGE LIMIT & RENT Maximum acreage a lessee may hold increases from                                                                     
        51,200 to 100,000 acres                                                                                               
          • Geothermal systems can underlie very large                                                                          
             areas                                                                                                              
          • Enables explorers to more effectively delineate                                                                     
             resource                                                                                                           
     •  Rental fees  to  be  set  by regulation  instead  of                                                                  
        statute                                                                                                               
          • Enables DOG to be nimbler in response to market                                                                     
             changes                                                                                                            
                                                                                                                                
4:18:38 PM                                                                                                                    
MR. CLIFTON advanced to slide 23 and discussed the following:                                                                   
                                                                                                                                
     SECTION 8: UNITIZATION Adds three  new  subsections  AS  38.05.181(ik)   to                                                                  
        modernize unitization statute for geothermal leases                                                                   
        to match the model used for oil & gas                                                                                 
        (i)DNR commissioner may compel unitization                                                                              
        (j)Commissioner may establish, change, or revoke                                                                        
          drilling, producing, and royalty requirements of                                                                      
          leases as part of the unit agreement                                                                                  
        (k)Leases and unit agreement are subject to current                                                                     
          and future statutes and regulations                                                                                   
                                                                                                                                
4:20:36 PM                                                                                                                    
MR. CLIFTON advanced to slide 24 and discussed the following:                                                                   
                                                                                                                                
     SECTIONS 9 & 14: GEOTHERMAL RESOURCES 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                                                                                              
      •  Same definition being applied to both DNR & AOGCC                                                                      
        statutes                                                                                                                
                                                                                                                                
CO-CHAIR BISHOP commented that it might fall under a different                                                                  
safety jurisdiction.                                                                                                            
                                                                                                                                
4:22:22 PM                                                                                                                    
MR. CLIFTON advanced to slide 25 and discussed the following:                                                                   
                                                                                                                                
     SECTION 13: GEOTHERMAL FLUIDS                                                                                            
                                                                                                                                
     AS 41.06.060(4) is amended to read:                                                                                      
                                                                                                                                
        (4) "geothermal fluid" means liquids, brines, water,                                                                    
          gases, or steam  naturally or artificially present                                                                    
          in  a geothermal  system; "geothermal  fluid" does                                                                    
          not  include  oil,  hydrocarbon  gases,  or  other                                                                    
          hydrocarbon substances;"                                                                                              
                                                                                                                                
        • Aligns with modernized definition for geothermal                                                                      
          resources                                                                                                             
        • Not limited by temperature because current                                                                            
          technology    enables   development    of   cooler                                                                    
          geothermal systems                                                                                                    
        • Distinguishes geothermal fluids from hydrocarbon                                                                      
          resources                                                                                                             
                                                                                                                                
MR. CLIFTON advanced to slide 26 and discussed the following:                                                                   
                                                                                                                                
     SECTION 12: PENALTIES Conforming language to AOGCC authority over gas and                                                                    
        oil operations (AS 31.05.150)  Without this provision, AOGCC may not have                                                                        
        authority to assess penalties for violations related                                                                  
        to operation of geothermal wells                                                                                      
                                                                                                                                
4:23:26 PM                                                                                                                    
SENATOR WIELECHOWSKI noted that the temperature requirement was                                                                 
removed from Section 13. He asked if that would allow a company                                                                 
to pump large quantities of drinking water from the ground.                                                                     
                                                                                                                                
MR. CLIFTON responded that geothermal fluids typically are not                                                                  
potable.                                                                                                                        
                                                                                                                                
SENATOR  WIELECHOWSKI pointed  out that  the definition  includes                                                               
water  and the  temperature requirement  is removed.  He restated                                                               
his question and asked for a yes or no answer.                                                                                  
                                                                                                                                
4:24:17 PM                                                                                                                    
MR. CROWTHER  said they'd follow  up with a  definitive response,                                                               
but he believes  that the beneficial use of water  may have to be                                                               
approved by DNR through the water authorization.                                                                                
                                                                                                                                
CO-CHAIR  BISHOP commented  that geothermal  typically runs  in a                                                               
loop.                                                                                                                           
                                                                                                                                
MR.  CROWTHER said  that's  correct, but  if  somebody wanted  to                                                               
extract  and  make  beneficial  use   of  the  water  instead  of                                                               
reinjecting, they may need an additional authorization.                                                                         
                                                                                                                                
MR.  CLIFTON deferred  to Dr.  LePain to  review the  DGGS fiscal                                                               
note.                                                                                                                           
                                                                                                                                
4:25:27 PM                                                                                                                    
DR.   DAVID  LEPAIN,   Director,  Division   of  Geological   and                                                               
Geophysical Surveys, advanced  to slide 27 and spoke  to the DGGS                                                               
fiscal note:                                                                                                                    
                                                                                                                                
     FISCAL NOTE: NEW DGGS GEOLOGIST 4 Enables DGGS to restart its geothermal program. The                                                                    
        new geologist would:                                                                                                  
          •  Coordinate  with   agencies  and   industry  to                                                                    
             publish   new   geologic   data    to   further                                                                    
             development of Alaska's geothermal energy                                                                          
             resources                                                                                                          
          •  Maintain and update  geologic data  on Alaska's                                                                    
             geothermal systems in a geothermal database                                                                        
          •  Attract federal funds to  characterize Alaska's                                                                    
             geothermal systems and resources                                                                                   
          •  Monitor  developments  in   geothermal  systems                                                                    
             technology                                                                                                         
          •  Conduct  geologic  investigations  of  Alaska's                                                                    
             geothermal systems                                                                                                 
          •  Publish geologic  maps,  reports  and  data  on                                                                    
             Alaska geothermal systems                                                                                          
          •  Advise DNR  and  other  state agencies  on  the                                                                    
             state's geothermal resources                                                                                       
          • Support DNR's geothermal leasing program                                                                            
          • Support and supply information to explorers and                                                                     
             developers of Alaska's geothermal resources                                                                        
          • Support and advise DNR Commissioner's Office                                                                        
             and Governor's Office on geothermal policy                                                                         
                                                                                                                                
4:26:32 PM                                                                                                                    
CO-CHAIR BISHOP opened public testimony on SB 69.                                                                               
                                                                                                                                
4:26:50 PM                                                                                                                    
PAUL CRAIG,  Founder and CEO, GeoAlaska  LLC., Anchorage, Alaska,                                                               
stated that  his company has  geothermal exploration  permits for                                                               
Mount Spur and  Augustine Island and they fully support  SB 69 as                                                               
currently written. This  bill is critical for  the corporation to                                                               
survive. He stressed that two years  is not enough time to make a                                                               
discovery  and obtain  a lease;  five years  is a  more realistic                                                               
timeframe.  He said  companies  are ready  and  willing to  spend                                                               
millions  of  dollars in  Alaska  that  will help  secure  energy                                                               
security  for the  Railbelt  and diversify  the  economy but  the                                                               
legislation is needed for that to happen.                                                                                       
                                                                                                                                
4:29:18 PM                                                                                                                    
GEOFFREY  SIMPSON,   Land  Manager,  Cyrq  Energy   LLC,  Boulder                                                               
Colorado, testified in support of SB  69. He stated that Cyrq has                                                               
six operating plants  in the western US; they  produce energy for                                                               
up to 100,000  homes. Cyrq is also working on  a project on Mount                                                               
Spurr.  He echoed  Mr. Craig  in support  of DNR's  new licensing                                                               
proposal; they  look forward to  it going into effect  this year.                                                               
They  have plans  to move  their exploration  activity for  Mount                                                               
Spurr onto the ground next year.                                                                                                
                                                                                                                                
4:30:26 PM                                                                                                                    
CO-CHAIR BISHOP  held SB  69 in  committee with  public testimony                                                               
open.                                                                                                                           

Document Name Date/Time Subjects
SB 82 Sponsor Statement.pdf SFIN 2/19/2024 1:30:00 PM
SRES 4/17/2023 3:30:00 PM
SB 82
SB 82 ver A.pdf SRES 4/17/2023 3:30:00 PM
SB 82
SB 82 Sectional Analysis ver A.pdf SFIN 2/19/2024 1:30:00 PM
SRES 4/17/2023 3:30:00 PM
SB 82
SB 82 Fiscal Note ADFG - Central Region Fisheries Management.pdf SRES 4/17/2023 3:30:00 PM
SB 82
SB 82 Supporting Documents-DNR Shore Fishery Leasing Fact Sheet 10.1.2010.pdf SFIN 2/19/2024 1:30:00 PM
SRES 4/17/2023 3:30:00 PM
SB 82
SB 82 Supporting Documents-DNR Shore Lease Fishery Sites Map 01.18.18.pdf SFIN 2/19/2024 1:30:00 PM
SRES 4/17/2023 3:30:00 PM
SB 82
SB 82 Supporting Documents-Eastside Setnet Area Map.pdf SFIN 2/19/2024 1:30:00 PM
SRES 4/17/2023 3:30:00 PM
SB 82
SB 82 Supporting Documents-News Article ADN 8.12.21.pdf SFIN 2/19/2024 1:30:00 PM
SRES 4/17/2023 3:30:00 PM
SB 82
SB 82 Supporting Documents-News Article KDLL Radio 03.02.23.pdf SFIN 2/19/2024 1:30:00 PM
SRES 4/17/2023 3:30:00 PM
SB 82
SB 82 Supporting Documents-News Article Peninsula Clarion 03.24.23.pdf SFIN 2/19/2024 1:30:00 PM
SRES 4/17/2023 3:30:00 PM
SB 82
SB 82 Supporting Documents-Upper Cook Inlet Management Area Statistical Areas.pdf SFIN 2/19/2024 1:30:00 PM
SRES 4/17/2023 3:30:00 PM
SB 82
HJR 11 Sponsor Statement.pdf SRES 4/17/2023 3:30:00 PM
HJR 11
HJR011 Ver. A.PDF SRES 4/17/2023 3:30:00 PM
HJR 11
HJR 11 Fiscal Note HRES.pdf SRES 4/17/2023 3:30:00 PM
HJR 11
HJR 11 Letters of Support through 04.15.23.pdf SRES 4/17/2023 3:30:00 PM
HJR 11
SB 82 Fiscal Note DNR.pdf SRES 4/17/2023 3:30:00 PM
SB 82
SB 92 Amendment #1.pdf SRES 4/17/2023 3:30:00 PM
SB 92
SB 69 SRES DNR Answers to Committee Questions 04.17.23.pdf SRES 4/17/2023 3:30:00 PM
SB 69