Legislature(2021 - 2022)BARNES 124
04/23/2021 10:30 AM House RESOURCES
Note: the audio ![]()
and video ![]()
recordings are distinct records and are obtained from different sources. As such there may be key differences between the two. The audio recordings are captured by our records offices as the official record of the meeting and will have more accurate timestamps. Use the icons to switch between them.
| Audio | Topic |
|---|---|
| Start | |
| HB98 | |
| HB135 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 98 | TELECONFERENCED | |
| *+ | HB 135 | TELECONFERENCED | |
| + | TELECONFERENCED |
ALASKA STATE LEGISLATURE
HOUSE RESOURCES STANDING COMMITTEE
April 23, 2021
10:34 a.m.
MEMBERS PRESENT
Representative Josiah Patkotak, Chair
Representative Grier Hopkins, Vice Chair
Representative Zack Fields
Representative Calvin Schrage
Representative Sara Hannan
Representative George Rauscher
Representative Mike Cronk
Representative Ronald Gillham
Representative Tom McKay
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
HOUSE BILL NO. 98
"An Act relating to forest land use plans; relating to forest
land use plan appeals; relating to negotiated timber sales; and
providing for an effective date."
- HEARD & HELD
HOUSE BILL NO. 135
"An Act relating to geothermal resources; relating to the
definition of 'geothermal resources'; and providing for an
effective date."
- HEARD & HELD
PREVIOUS COMMITTEE ACTION
BILL: HB 98
SHORT TITLE: FOREST LAND USE PLANS; TIMBER SALES
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR
02/18/21 (H) READ THE FIRST TIME - REFERRALS
02/18/21 (H) RES, FIN
03/12/21 (H) RES AT 1:00 PM BARNES 124
03/12/21 (H) Heard & Held
03/12/21 (H) MINUTE(RES)
03/19/21 (H) RES AT 1:00 PM BARNES 124
03/19/21 (H) <Bill Hearing Canceled>
04/14/21 (H) RES AT 1:00 PM BARNES 124
04/14/21 (H) Heard & Held
04/14/21 (H) MINUTE(RES)
04/19/21 (H) RES AT 1:00 PM BARNES 124
04/19/21 (H) Heard & Held
04/19/21 (H) MINUTE(RES)
04/22/21 (H) RES WAIVED PUBLIC HEARING NOTICE, RULE
23(A) UC
04/23/21 (H) RES AT 10:30 AM BARNES 124
BILL: HB 135
SHORT TITLE: GEOTHERMAL RESOURCES
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR
03/10/21 (H) READ THE FIRST TIME - REFERRALS
03/10/21 (H) RES, FIN
04/22/21 (H) RES WAIVED PUBLIC HEARING NOTICE, RULE
23(A) UC
04/23/21 (H) RES AT 10:30 AM BARNES 124
WITNESS REGISTER
TIM DABNEY, Acting State Forester, Acting Director
Division of Forestry (DOF)
Department of Natural Resources (DNR)
Anchorage, Alaska
POSITION STATEMENT: Provided information and answered questions
during the hearing on HB 98.
CHRISTOPHER ORMAN, Assistant Attorney General
Natural Resources Section
Civil Division (Juneau)
Department of Law (DOL)
Juneau, Alaska
POSITION STATEMENT: Provided information and answered questions
during the hearing on HB 98.
CLAIR RADFORD, Legislative Counsel
Legislative Legal Services
Legislative Affairs Agency
Juneau, Alaska
POSITION STATEMENT: Provided information and answered questions
during the hearing on HB 98.
STEVE MASTERMAN, Director
Division of Geological and Geophysical Surveys (DGGS)
Department of Natural Resources (DNR)
Fairbanks, Alaska
POSITION STATEMENT: Presented a PowerPoint during the hearing
on HB 135.
CHARLES MCKEE
Anchorage, Alaska
POSITION STATEMENT: Provided comments not on topic with the
published agenda during the hearing on HB 135.
HALEY PAINE, Deputy Director
Division of Oil and Gas (DOG)
Department of Natural Resources
Anchorage, Alaska
POSITION STATEMENT: Co-presented a PowerPoint during the
hearing on HB 135.
ACTION NARRATIVE
10:34:51 AM
CHAIR JOSIAH PATKOTAK called the House Resources Standing
Committee meeting to order at 10:34 a.m. Representatives McKay,
Fields, Cronk, Hopkins, Schrage, Gillham, Hannan, Rauscher, and
Patkotak were present at the call to order.
HB 98-FOREST LAND USE PLANS; TIMBER SALES
10:35:46 AM
CHAIR PATKOTAK announced that the first order of business would
be HOUSE BILL NO. 98, "An Act relating to forest land use plans;
relating to forest land use plan appeals; relating to negotiated
timber sales; and providing for an effective date."
10:36:35 AM
REPRESENTATIVE HOPKINS, who had previously withdrawn Amendment 4
during the House Resources Standing Committee meeting on
4/19/21, said that he wasn't able to find a way to work the
amendment through and restated that he withdrew Amendment 4.
10:37:01 AM
REPRESENTATIVE FIELDS, who had moved to adopt Amendment 6 during
the House Resources Standing Committee meeting on 4/19/21, when
it was subsequently set aside, moved again to adopt Amendment 6,
labeled 32-GH1607\A.17, Radford, 4/27/21, which read as follows:
Page 7, lines 17 - 18:
Delete "[TO A LOCAL MANUFACTURER OF WOOD PRODUCTS
OR A USER OF WOOD FIBER]"
Insert "to a local manufacturer of wood products or a
user of wood fiber"
10:37:03 AM
CHAIR PATKOTAK restated his objection from 4/19/21 for purposes
of discussion.
REPRESENTATIVE FIELDS explained that his amendments emerged from
a desire to maximize local benefit; should natural resources
related to fisheries or tourism, for example, be damaged through
timber harvesting activities, support for local jobs and local
manufacturers should be prioritized. He said Amendment 6 would
limit the sale of timber to a local manufacturer, maximizing
local economic benefits.
10:38:37 AM
TIM DABNEY, Acting State Forester, Acting Director, Division of
Forestry (DOF), Department of Natural Resources (DNR), directed
attention to a letter from the Alaska Forest Association (AFA)
[included in the committee packet], which read as follows
[original punctuation provided]:
In light of recent amendments that are under
consideration to the Bill regarding limitations on
exports and local hire requirements, AFA is concerned
that the Bill will have negative unintended
consequences on the timber industry and our member
operators.
MR. DABNEY said that HB 98 designed to allow local industry to
sell the timber harvested and to find a market for types of wood
that can't be manufactured locally. While AS 38.05.118
currently gives DOF the authority to negotiate a timber sale, it
doesn't clearly state that the local business may export the
timber after the work has been done to build roads and transport
the logs. He explained that local mills aren't equipped to
process young growth, there is a lack of local demand for wood
products from small logs, and the only market for hemlock is in
the Pacific Northwest.
10:41:59 AM
CHRISTOPHER ORMAN, Assistant Attorney General, Natural Resources
Section, Civil Division (Juneau), Department of Law (DOL),
explained that Amendment 6 would be returning to that which is
in current statute in AS 38.05.118. The problem, he explained,
is that the timber sale provisions regarding 500,000 board feet
specified in current AS 38.05.115 would be moved to AS 38.05.118
under HB 98.
10:44:53 AM
CLAIR RADFORD, Legislative Counsel, Legislative Legal Services,
Legislative Affairs Agency, said that Mr. Orman summarized the
possible effects of Amendment 6 very well.
10:45:16 AM
REPRESENTATIVE HANNAN asked Mr. Dabney whether the sales of less
than 500,000 board feet are the same as those of hemlock and
other timber that can't be processed locally.
MR. DABNEY replied that both AS 38.05.115 and AS 38.05.118 can
have an export component.
REPRESENTATIVE HANNAN spoke of the protectionist views
concerning the benefits of local manufacturing and noted that
simply selling timber to local manufacturers may not be in the
best interest of the state. Of there not being a domestic
market for a certain type of timber, she asked, "Is that reason
enough to negotiate a sale?"
REPRESENTATIVE FIELDS responded that the lack of a domestic
market is the reason for including an amendment to push local
industry towards stability and job creation.
10:49:05 AM
REPRESENTATIVE MCKAY expressed that while he sees the benefits
of driving local industries, he would prefer to "let the free
market prevail" because the state needs the revenue. He then
asked Mr. Dabney whether selling timber overseas would generate
more revenue than using it for firewood.
MR. DABNEY said that in a competitive bid sale, the contract
goes to the highest bidder; for material desirable as an export
product, the out-of-state companies can outbid the local
companies. This is one of the reasons, he said, that a
negotiated timber sale with domestic business would be
preferable.
REPRESENTATIVE MCKAY said that trees are a renewable resource,
and more value could be obtained by selling to out-of-state
buyers.
MR. DABNEY replied that balance is important, which is why it's
important to have multiple mechanisms for entering into a sale.
As far as trees growing back, he said, harvested areas
previously populated with old-growth trees now contain young
growth, which is a desirable commodity overseas. He said that
taking advantage of overseas markets and allowing export for
negotiated sales is the point of HB 98.
10:54:26 AM
REPRESENTATIVE HANNAN asked Mr. Dabney to clarify whether, if
Amendment 6 were to be adopted, the statute would then say that
the sale cannot be negotiated. She then asked whether that
means a competitive bid process involving either foreign or
domestic companies would be possible.
MR. DABNEY reiterated that if a negotiated timber sale is
disallowed, a competitive bid process could take place, and
foreign companies have a competitive advantage in being able to
outbid domestic companies. He noted that a foreign or out-of-
state purchaser would use local equipment and labor rather than
sending their own employees and equipment to Alaska.
10:56:55 AM
CHAIR PATKOTAK withdrew his objection to Amendment 6.
10:57:01 AM
REPRESENTATIVE CRONK objected.
10:57:03 AM
A roll call vote was taken. Representatives Hannan, Hopkins,
and Fields voted in favor of Amendment 6. Representatives
Schrage, Gillham, Rauscher, Cronk, McKay, and Patkotak voted
against it. Therefore, Amendment 6 failed to be adopted by a
vote of 3-6.
10:58:03 AM
REPRESENTATIVE FIELDS said that Amendment 7 would not be
offered.
CHAIR PATKOTAK clarified that Representative Fields would not be
[re]offering Amendment 7, which was labeled 32-GH1607\A.16,
Radford, 4/17/21. [Amendment 7 - moved for adoption by
Representative Fields on 4/19/21, with an objection for
discussion purposes stated by Chair Patkotak, and subsequently
tabled - remained tabled.]
10:58:33 AM
The committee took a brief at-ease.
10:59:22 AM
REPRESENTATIVE FIELDS moved to adopt Amendment 8, labeled 32-
GH1607\A.15, Radford, 4/17/21, which read as follows:
Page 7, following line 13:
Insert a new bill section to read:
"* Sec. 6. AS 38.05.115 is amended by adding a new
subsection to read:
(d) The commissioner may negotiate a sale of
timber under AS 38.05.110 - 38.05.123 only to a
prospective purchaser whose main office or
headquarters is located in the state."
Renumber the following bill sections accordingly.
CHAIR PATKOTAK objected for purposes of discussion.
REPRESENTATIVE FIELDS said that, like Amendment 6, the intention
of Amendment 8 is to support local businesses. He asked Ms.
Radford to explain the differences between the two.
11:00:25 AM
MS. RADFORD explained that Amendment 8 would allow the DNR
commissioner to negotiate a timber sale only to a purchaser with
a head office or headquarters within the state.
11:00:58 AM
The committee took a brief at-ease.
11:01:41 AM
REPRESENTATIVE FIELDS said that milling jobs have declined over
the past 30 years due to management of federal lands and
international dynamics in the marketplace, but that there is
expansive authority to create local jobs on state lands. He
said that Alaska has historically had policies regarding in-
state hiring.
11:03:05 AM
CHAIR PATKOTAK asked to have someone address the potential
constitutional concerns with Amendment 8.
11:04:05 AM
MS. RADFORD said that Amendment 8 raises some constitutional
issues under the Privileges and Immunities Clause, Commerce
Clause, and Equal Protection Clause; she said that she has not
done an in-depth analysis, but the Privileges and Immunities
Clause restrains efforts to discriminate against out-of-state
citizens.
REPRESENTATIVE FIELDS said that the issue of restricting hiring
to Alaska residents in terms of state lands and resources,
versus private or federal lands, goes back decades to when the
State originally tried to mandate in-state hiring for
development on the North Slope; the legislature gradually passed
a series of laws, he said, "eventually arriving at an Alaska
hire requirement statute called the Zone of Underemployment
statute." He characterized the policy as permissible when
certain economic decisions related to high unemployment. He
said that the current administration was the first one in 30
years to stop pursuing in-state hiring, "departing from
longstanding bipartisan support for Alaska hire."
11:07:24 AM
MR. ORMAN expressed his agreement with Ms. Radford's assessment
of which constitutional clauses could affect Amendment 8 and
listed several specific statutes that would apply to cases
involving the Equal Protection Clause and the Privileges and
Immunities Clause. He said that they key issue when looking at
Amendment 8 is identifying the rational basis for restricting
timber sales to only include businesses with a main office
located inside the state; when considering Amendment 8 in terms
of the Equal Protection Clause, he explained that there has
historically been legislative intent language explaining the
rational basis. When considering the Privileges and Immunities
Clause, he said, the question is, "Does the law place a burden
on the privileges or immunities protected by the U.S.
Constitution, and if a burden does exist, can the state provide
a substantial reason for the discrimination?" He then explained
that the Dormant Commerce Clause should also be considered,
citing South-Central Timber Development v. Wunnicke, 467 U.S.
82, 104 S. Ct. 2237 (1984). In response to a follow-up question
by Chair Patkotak, Mr. Orman clarified that Amendment 8 would
cause redundancy in AS 38.05.
11:17:22 AM
REPRESENTATIVE FIELDS noted the need for rational basis and
discussed the tendencies of local companies to hire local,
support local charities, pay into the local tax base, and are
attuned to the products that local people need.
11:18:18 AM
REPRESENTATIVE MCKAY said that sometimes business can't find
qualified employees and that others can't pass a drug test. He
characterized Amendment 8 as trying to solve a problem that
doesn't exist and said that DOF is tasked with getting the most
revenue for the timber.
11:20:14 AM
MR. DABNEY noted that negotiated sales under AS 38.05.123 are
already allowed only for local manufacturers. He also said that
the six factors of determination under AS 38.05.110(c) contain
provisions for local benefits. Regarding Representative McKay's
assertions, he explained that timber harvests tend to have
predominately local hires in all aspects, and he said that
maximizing revenue isn't the goal of DOF. While price is
important, he said, he could foresee a situation in which a
proposal with the highest price would fail to a proposal with a
lower price but more local benefits.
11:25:29 AM
REPRESENTATIVE RAUSCHER opined that needed labor can't always be
supplied locally, but that a company with a bottom line won't
want to pay for plane tickets. He expressed that he does want
HB 98 to pass and that he does not support Amendment 8.
11:27:36 AM
REPRESENTATIVE HANNAN noted that Amendment 8 does not specify
hiring Alaska residents, it says that the business needs to be
headquartered in Alaska in order to take part in negotiated
sales; there is nothing in Amendment 8 restricting a company
from bringing staff from elsewhere. She said that most of the
old-growth has been harvested in the last 40 years, and that in
southeast Alaska the few remaining areas of old-growth adjoin
university or tribal land. She said that one of her prime
concerns with HB 98 overall is the difference between negotiated
sales and competitive bid sales. It's clear, she said, that the
goal of bid sales is to give the contract to the highest bidder;
however, negotiated sales are intended to address local need
and, she said, "Asking for the business to be located here seems
like a fairly low bar." She said that it would be ideal for the
business to either be, or intent to remain, a longstanding
member of the community, but that it's not difficult to start a
business in Alaska.
11:30:09 AM
CHAIR PATKOTAK removed his objection to Amendment 8.
11:30:10 AM
REPRESENTATIVE CRONK objected.
11:30:16 AM
A roll call vote was taken. Representatives Fields, Hopkins,
and Hannan voted in favor of Amendment 8. Representatives
McKay, Cronk, Rauscher, Gillham, Schrage, and Patkotak voted
against it. Therefore, Amendment 8 failed by a vote of 3-6.
11:30:55 AM
REPRESENTATIVE FIELDS moved to adopt Amendment 9, labeled 32-
GH1607\A.14, Radford, 4/17/21, which read as follows:
Page 7, following line 13:
Insert a new bill section to read:
"* Sec. 6. AS 38.05.115 is amended by adding a new
subsection to read:
(d) A timber sale contract entered into under
AS 38.05.117, 38.05.118, or 38.05.123 must require the
purchaser to hire only resident workers."
Renumber the following bill sections accordingly.
11:30:58 AM
CHAIR PATKOTAK objected for purposes of discussion.
REPRESENTATIVE FIELDS pointed out that workers have often been
brought in from out of state, and that as timber sales become
increasingly international, there becomes less incentive for
multinational corporations to hire local workers. As the timber
will be harvested on state lands, he said, the legislature has
the authority to mandate local hiring. He recounted a story of
a federal logging job in which the purchaser brought in
undocumented immigrants from Mexico and classified them as
independent contractors in order to defraud them of workers'
compensation, minimum wage, and insurance benefits. He said
that the situation was noticed only because one of the workers
was killed by a bear, largely due to insufficient equipment and
safety measures which would have otherwise been obligatory.
11:33:54 AM
MR. DABNEY said that the industry will not survive much longer
if it is not provided with adequate timber and with the
flexibility to export and that the collapse of the industry
would affect local workers. He opined that the problem is the
lack of available timber, not competition from outside the
state. He said that HB 98 is intended to create more
flexibility for the next few years, since the supply of timber
from the U.S. Forest Service lands is severely limited, young-
growth timber has not yet reached an amount sufficient to feed
the industry, and DOF is already providing the maximum amount of
timber available on state lands. He said that if a company is
required to hire only local workers, the contract may be at
risk. He stated that DOF opposes Amendment 9.
11:36:11 AM
MR. ORMAN said that the same legal issues as described earlier,
concerning the Equal Protection Clause and the Privileges and
Immunities Clause, are also issues with Amendment 9.
11:36:45 AM
REPRESENTATIVE SCHRAGE asked what kind of training is required
for the jobs in question.
MR. DABNEY said there are multiple types of workers involved in
the industry and listed chainsaw, heavy equipment, dump truck,
and logging truck operators. He said that high-skill labor is
required for the mechanized equipment, and noted the
administrative staff required for the clerical work. He said
that they're living-wage jobs that are important to the economy.
REPRESENTATIVE SCHRAGE asked whether Amendment 9 would apply to
all staff, or only those actively involved in the harvesting of
the timber.
11:39:06 AM
REPRESENTATIVE FIELDS responded that the intent is to specify
local hires for the harvest of the lumber, not the entire
company.
REPRESENTATIVE SCHRAGE noted his discomfort with the prior
amendments addressing related issues but said that he could
support Amendment 9 after hearing descriptions of the hands-on
jobs. He referenced Representative Cronk's notes about the many
firefighters who possess the specialized skills that would be
transferable to the timber industry.
11:39:55 AM
REPRESENTATIVE CRONK recalled that Southeast Alaska used to have
a thriving timber industry and opined that development of
resources is being hampered by the federal government. He then
characterized Alaska as having the best-managed resources and
best environmental protections in the world.
11:43:06 AM
REPRESENTATIVE GILLHAM said that he agrees with hiring local,
but there are times when qualified local employees can't be
found.
11:43:56 AM
REPRESENTATIVE HOPKINS expressed that revenue being funneled
into the general fund is not the only way to increase the wealth
of the state. He characterized local hire amendments as having
a "snowball effect" on local and regional well-being.
11:45:20 AM
REPRESENTATIVE RAUSCHER opined that over 90 percent of the
committee members agree with the benefits of hiring local
residents, but that it should not be mandated. He said that he
would not support Amendment 9.
11:46:33 AM
REPRESENTATIVE HANNAN said that the goal should be to create the
biggest economic impact possible when it comes to resource
extraction. She discussed the possibility of having taxation on
income earned in Alaska. Noting that Amendment 9 would likely
not be adopted, she said that she would support it because
hiring local workers keeps money in the local economy.
11:47:49 AM
REPRESENTATIVE FIELDS reminded committee members of the
constitutional mandate to provide Alaska residents the maximum
benefit from resource development on state lands and said that
one of the most basic benefits is job production. He opined
that, without mandates, the state would not achieve the local
hire rates it needs.
11:48:11 AM
CHAIR PATKOTAK removed his objection to Amendment 9.
11:48:14 AM
REPRESENTATIVE CRONK objected.
11:48:19 AM
A roll call vote was taken. Representatives Schrage, Hannan,
Hopkins, and Fields voted in favor of Amendment 9.
Representatives Gillham, Rauscher, Cronk, McKay, and Patkotak
voted against it. Therefore, Amendment 9 failed to be adopted
by a vote of 4-5.
11:49:25 AM
CHAIR PATKOTAK stated that a committee substitute would be
drafted to incorporate the amendments adopted thus far. He
announced that HB 98, as amended, was held over.
HB 135-GEOTHERMAL RESOURCES
11:49:49 AM
CHAIR PATKOTAK announced that the final order of business would
be HOUSE BILL NO. 135, "An Act relating to geothermal resources;
relating to the definition of 'geothermal resources'; and
providing for an effective date."
11:50:31 AM
STEVE MASTERMAN, Director, Division of Geological and
Geophysical Surveys (DGGS), Department of Natural Resources
(DNR), presented a PowerPoint on HB 135, beginning on slide 2,
"Agenda," which read as follows [original punctuation provided]:
? DGGS: Introduction to geothermal energy
? Fundamentals of geothermal systems
? Geothermal systems of Alaska
? DOG: Overview of HB 135
? Purpose of HB 135
DNR geothermal leasing history
? Sectional analysis summary
? Sectional analysis details
? DGGS: Examples of geothermal system
? Supplemental Information
? AGILE Act
? Drilling regulations
MR. MASTERMAN proceeded to slide 5, "Fundamental Ingredients of
Useable Geothermal Energy, which displayed a cross-section of
the well depths of a power plant and read as follows [original
punctuation provided]:
? Elevated geothermal gradient
? Porosity and permeability for the migration of
fluids
? Surface access
Sufficiently large thermal System
? Customers for energy
MR. MASTERMAN explained that geothermal energy comes from heat
generated within the earth, either by volcanic activity or
radioactive decay, and that where there exists an elevated
geothermal gradient there is hotter rock closer to the surface.
Harvesting geothermal power requires hot rocks that are highly
water-permeable, as well as surface access to the geothermal
system, which must be large enough to generate meaningful
amounts of energy. He continued to slide 6, "Heat Flow in
Alaska," which showed the parts of Alaska and the surrounding
oceans where it's easier to find geothermal energy. He noted
that the area around Anchorage and Kenai Peninsula has less heat
flow. Slide 7, "North Slope Geothermal Gradient," showed a
contour map of the North Slope generated from the bottom
temperatures of oil and gas wells. He explained that on the
North Slope, in order to reach a rock temperature of 100 degrees
centigrade, a hole would have to be drilled to 3,000 meters. A
higher geothermal gradient would necessitate a shallower well.
Slide 8, "Geothermal Gradients," provided a graphical
representation with depth in feet on the y-axis and temperature
in degrees centigrade on the x-axis. He noted the plot points
of Chena production wells and the Makushin test well, producing
noticeably higher temperatures at shallower depths, and stressed
that more energy is obtained from a higher-temperature system.
11:58:05 AM
MR. MASTERMAN continued on to slide 9, "Geothermal Resource
Quality, which read as follows [original punctuation provided]:
Generation capacity per unit cost depends on several
geologic and economic factors:
? Temperature (hotter is better)
? Flow rate (higher flow rates are better)
? Reservoir Framework (uniform porosity better than
fractures)
? Recharge (partially natural better than all
artificial)
? Depth (shallower is less expensive, thus better)
? Location, location,? (relative to population,
transmission system, development costs, etc.)
MR. MASTERMAN presented slide 10, "Introduction to Geothermal
Resources," which read as follows [original punctuation
provided]:
? Geothermal heat, where technically and economically
accessible, is an excellent form of sustainable energy
? Hydrothermal systems are the most common form of
energy extraction from geothermal heat
? Complex geologic parameters necessary for a viable
geothermal resource, all present at one location, is
rare
Alaska contains several potential geothermal
resources
? New technologies that will help expand geothermal
development into less favorable geology are on the
horizon
MR. MASTERMAN noted the importance of location and said that
research is being done to develop new technologies to expand the
capacity to produce geothermal energy from lower-temperature,
drier systems, which would expand the use of geothermal energy
as well as allow the development of smaller systems in areas of
lower temperatures, potentially allowing smaller communities
with lower energy needs to develop geothermal resources. He
moved on to slide 11, "Geothermal Systems: Fairbanks Region,"
which showed a map of several geothermal systems that have
reached the surface. A similar map was displayed on slides 13,
14, and 15, titled "Geothermal Systems: Seward Peninsula
Region," "Geothermal Systems: Alaska Peninsula Region," and
"Geothermal Systems: Southeast Region."
12:08:30 PM
CHAIR PATKOTAK opened public testimony on HB 135.
12:09:14 PM
CHARLES MCKEE provided comments not on topic with the published
agenda.
12:12:48 PM
CHAIR PATKOTAK, after ascertaining that no one else wished to
testify, closed public testimony on HB 135.
12:13:27 PM
HALEY PAINE, Deputy Director, Division of Oil and Gas (DOG),
Department of Natural Resources (DNR), began her PowerPoint
presentation [hard copy included in the committee packet] with
slide 17, "Purpose of HB 135," which read as follows [original
punctuation provided]:
? 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 stressed that there are "vast, untapped resources" in
the state. She then paraphrased slide 18, "DNR Geothermal
Leasing/Permitting History," which read as follows [original
punctuation provided but formatting changed]:
Present
Mount Spurr Currently there are two pending
applications for geothermal exploration prospecting
permits in the Mount Spurr area. The final Best
Interest Findings for the first was issued March 12,
2021 and the preliminary Best Interest Finding for the
second was issued March 26, 2021.
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 DO&G's
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
MS. PAINE explained that the sales described in slide 18 were
held because the DNR commissioner had designated those regions
as having significant potential for geothermal resources, so
they were put out for competitive bid. She stressed that HB 135
would not change the competitive bid program, so DNR would
retain the right to offer geothermal leases; however, it would
change the process by which the prospecting permit would be
administered. She explained that the prospecting permit has
only two years in which to discover and prove a commercially
viable resource, whereas the competitive leasing program gives a
permit holder 10 years.
MS. PAINE continued to slide 19, "Sectional Summary, which read
as follows [original punctuation provided but formatting
changed]:
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 & 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 noted HB 135 would address several areas for a change
in the terminology from "permit" to "license" in order to be
consistent with the language used in oil and gas exploration.
She also explained that applicants operating under a geothermal
license would have five years, instead of two, to conduct
reconnaissance, secure permits, and identify the resource. She
said that the permit requirement would change from "the proving
of a commercial resource" to "the completion of a work
commitment" to be consistent with the oil and gas exploration
license program. She noted that there are specific exemptions
for non-commercial, industrial, small-scale home use for which
an operator would not need to pursue a permit.
12:18:50 PM
REPRESENTATIVE HOPKINS asked Ms. Paine for more details on the
private use exemption.
MS. PAINE said that an exclusion could be for domestic use such
as a heat pump for a home, or for small-scale industrial use.
She said that anything that isn't intended for a broader
commercial application or large-scale development intended to
sell power to multiple parties would fall under the exemption.
She said that there is no specific threshold in terms of
megawatt-hour or kilowatt-hour in order to keep the focus on
use.
REPRESENTATIVE HOPKINS asked whether geothermal energy would be
the only subsurface resource that wouldn't require a license or
permit.
MS. PAINE indicated that she would research that question.
12:20:44 PM
REPRESENTATIVE HANNAN asked whether the geothermal development
processes would be changed for administrative purposes only, or
if similar companies would be pursuing those resources.
MS. PAINE replied that it would be the process that would be
modified to align with the state's oil and gas exploration
license program. She explained that the geothermal standard is
currently higher than that of oil and gas exploration licensing,
and that by modifying the terms of geothermal exploration, the
goal is to make production of undiscovered geothermal resources
possible.
12:22:50 PM
MS. PAINE resumed her presentation with slide 21, "Section 2:
Private Use Exemption," which read as follows [original
punctuation provided]:
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.
MS. PAINE paraphrased slide 22, "Section 2: Preferential
Rights," which read as follows [original punctuation provided]:
? The preferential rights provision is being deleted
because it is inappropriate to the situation (it's
more relevant to water rights or other surface use
cases not associated with the mineral estate).
? Surface owner rights are 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.
? Scenario is unlikely because private landowners
usually don't have financial resources to develop a
commercially-viable geothermal resource.
? Rights to access the mineral estate are reserved
under AS 38.05.125.
? Surface owners must provide reasonable access
to resource developers.
The same condition exists for oil & gas or
mining.
? 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.
12:24:40 PM
REPRESENTATIVE HANNAN asked Ms. Paine to further explain the
rights to access under AS 38.05.123.
MS. PAINE said that even if a company has the rights to develop
geothermal resources under a property with different surface
owners, the company would be required to work with the owner on
development and payment. She said that there is a "robust"
public notice process as a part of license issuance and the best
interest finding process, so there would be no infringement on
personal property rights. She deferred to Mr. Masterman for
technical information.
12:27:34 PM
MR. MASTERMAN explained that geothermal systems are developed at
a much shallower depth than oil and gas resources, so there
won't be the need for horizontal wells.
12:28:43 PM
MS. PAINE resumed her presentation by paraphrasing slide 23,
"Section 3: Work Commitment," which read as follows [original
punctuation provided]:
? 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
MS. PAINE paraphrased slide 24, "Section 10: Geothermal Fluids,"
which read as follows [original punctuation provided]:
AS 41.06.060(4) is amended to read:
(4) "geothermal fluid" means liquids, brines, water,
gases, or and steam at temperatures greater than 120
degrees celcius or any commercial use of liquids and
steam naturally or artificially present in a
geothermal system; "geothermal fluid" does not include
oil, hydrocarbon gases, or other hydrocarbon
substances at temperatures less than 120 degrees
celsius
? 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.
MS. PAINE explained that slides 24 and 25, "Sections 7 & 11: New
Definition," change language that specify specific temperatures
which are no longer relevant due to advances in geothermal
technology. Slide 25 read as follows [original punctuation
provided]:
"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.
12:29:48 PM
CHAIR PATKOTAK announced that HB 135 was held over.
12:30:41 PM
ADJOURNMENT
There being no further business before the committee, the House
Resources Standing Committee meeting was adjourned at 12:31 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 98 DNR Response to Remaining Amendments 4.23.2021.pdf |
HRES 4/23/2021 10:30:00 AM HRES 4/23/2021 1:00:00 PM |
HB 98 |
| HB 98 HRES Action on Amendments 4.19.2021.pdf |
HRES 4/19/2021 1:00:00 PM HRES 4/23/2021 10:30:00 AM HRES 4/23/2021 1:00:00 PM |
HB 98 |
| HB 98 Amendment Cronk A.24 4.19.2021.pdf |
HRES 4/19/2021 1:00:00 PM HRES 4/23/2021 10:30:00 AM HRES 4/23/2021 1:00:00 PM |
HB 98 |
| HB 98 Memo Amendment A.15 4.19.2021.pdf |
HRES 4/19/2021 1:00:00 PM HRES 4/23/2021 10:30:00 AM HRES 4/23/2021 1:00:00 PM |
HB 98 |
| HB 98 HRES Amendment Packet 1 4.19.2021.pdf |
HRES 4/19/2021 1:00:00 PM HRES 4/23/2021 10:30:00 AM HRES 4/23/2021 1:00:00 PM |
HB 98 |
| HB 135 Sponsor Statement 4.23.2021.pdf |
HRES 4/23/2021 10:30:00 AM HRES 4/23/2021 1:00:00 PM HRES 4/26/2021 1:00:00 PM HRES 1/21/2022 1:00:00 PM |
HB 135 |
| HB 135 Sectional Analysis Version A 4.23.2021.pdf |
HRES 4/23/2021 10:30:00 AM HRES 4/23/2021 1:00:00 PM HRES 4/26/2021 1:00:00 PM HRES 1/21/2022 1:00:00 PM |
HB 135 |
| HB 135 DNR Presentation 4.23.2021.pdf |
HRES 4/23/2021 10:30:00 AM HRES 4/23/2021 1:00:00 PM HRES 4/26/2021 1:00:00 PM |
HB 135 |
| HB 98 Letter Alaska Forest Association 4.23.2021.pdf |
HRES 4/23/2021 10:30:00 AM |
HB 98 |