Legislature(2023 - 2024)BUTROVICH 205
01/22/2024 03:30 PM Senate RESOURCES
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| SB69PRESENTATION:GEOTHERMALRESOURCES | |
| Adjourn |
* first hearing in first committee of referral
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+ teleconferenced
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| += | SB 69 | TELECONFERENCED | |
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ALASKA STATE LEGISLATURE
SENATE RESOURCES STANDING COMMITTEE
January 22, 2024
3:31 p.m.
MEMBERS PRESENT
Senator Click Bishop, Co-Chair
Senator Cathy Giessel, Co-Chair
Senator Bill Wielechowski, Vice Chair
Senator James Kaufman
Senator Kawasaki
Senator Forrest Dunbar
Senator Matt Claman
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
SENATE BILL NO. 69
"An Act relating to geothermal resources; relating to the
definition of 'geothermal resources'; and providing for an
effective date."
- HEARD & HELD
PRESENTATION: GEOTHERMAL RESOURCES
- HEARD
PREVIOUS COMMITTEE ACTION
BILL: SB 69
SHORT TITLE: GEOTHERMAL RESOURCES
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR
02/15/23 (S) READ THE FIRST TIME - REFERRALS
02/15/23 (S) RES, FIN
04/12/23 (S) RES AT 3:30 PM BUTROVICH 205
04/12/23 (S) Heard & Held
04/12/23 (S) MINUTE(RES)
04/17/23 (S) RES AT 3:30 PM BUTROVICH 205
04/17/23 (S) Heard & Held
04/17/23 (S) MINUTE(RES)
05/12/23 (S) RES AT 3:30 PM BUTROVICH 205
05/12/23 (S) Heard & Held
05/12/23 (S) MINUTE(RES)
01/22/24 (S) RES AT 3:30 PM BUTROVICH 205
WITNESS REGISTER
JOHN BOYLE, Commissioner
Department of Natural Resources (DNR)
Anchorage, Alaska
POSITION STATEMENT: presented SB 69 on behalf of Governor
Dunleavy.
SEAN CLIFTON, Policy & Program Specialist
Division of Oil & Gas (DOG)
Department of Natural Resources (DNR)
Anchorage, Alaska
POSITION STATEMENT: provided an overview of the presentation.
MELANIE WERDON, Director
Alaska Division of Geologic & Geophysical Surveys (DGGS)
Department of Natural Resources (DNR)
Fairbanks, Alaska
POSITION STATEMENT: provided an overview of the presentation.
JOHN CROWTHER, Deputy Commissioner
Department of Natural Resources (DNR)
Anchorage, Alaska
POSITION STATEMENT: provided an overview of the presentation.
ACTION NARRATIVE
3:31:44 PM
CO-CHAIR CLICK BISHOP called the Senate Resources Standing
Committee meeting to order at 3:31 p.m. Present at the call to
order were Senators Dunbar, Claman, Senator Wielechowski, Co-
Chair Bishop, and Co-Chair Giessel. Senator Kawasaki joined
thereafter.
SB 69-GEOTHERMAL RESOURCES
3:32:24 PM
CO-CHAIR BISHOP 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."
3:33:33 PM
JOHN BOYLE, Commissioner, Department of Natural Resources (DNR),
Anchorage, Alaska, presented SB 69 on behalf of Governor
Dunleavy. He said that SB 69 would make necessary changes to
current statute and introduce new energy opportunities.
He urged that there is a grave need to explore and delineate
energy resources that will provide residents with energy
security, affordability, and reliability. The bill would make
necessary changes to current statute, introduce new energy
opportunities, and improve the geothermal structure. It would
convert the antiquated permitting structure to expand the
geothermal exploration license to a five-year lease. This would
provide flexibility and better account for the time needed to
complete an exploration program. It would change the current
permit system to align with an exploration license system,
similar to the oil and gas system. The bill would double the
maximum size of a geothermal lease, accounting for larger areas
of land.
3:36:09 PM
MR. BOYLE said that once a potential developer performs a
certain amount of work, SB 69 would allow a work commitment
rather than requiring a commercial discovery to move forward in
the exploration process.
3:36:16 PM
SENATOR KAWASAKI joined the meeting.
3:36:44 PM
MR. BOYLE stated that SB 69 would incentivize outside firms to
invest and take risks in geothermal exploration with the most
flexibility possible. Of over one hundred geothermal systems
identified in Alaska, only five have been explored. The Division
of Geological and Geophysical Surveys (DGGS) is working with the
Governor's Office to undertake much of the early
characterization through mineral exploration around the state.
The DNR is seeking to obtain data from various geothermal
systems to better understand, more actively market, and solicit
firm interest. There is enthusiasm for SB 69 to move forward to
advance geothermal opportunities in Alaska.
3:40:27 PM
JOHN CROWTHER, Deputy Commissioner, Department of Natural
Resources (DNR), Anchorage, Alaska, briefly introduced himself.
3:40:45 PM
SEAN CLIFTON, Policy & Program Specialist, Division of Oil & Gas
(DOG), Department of Natural Resources (DNR), briefly introduced
himself.
3:41:09 PM
MELANIE WERDON, Director, Alaska Division of Geological &
Geophysical Surveys (DGGS), Department of Natural Resources,
Fairbanks, Alaska, provided an overview of the presentation. She
moved to slide 4 and referenced the following points:
[Original punctuation provided.]
FUNDAMENTAL INGREDIENTS OF USEABLE GEOTHERMAL ENERGY
• Elevated geothermal gradient
• Porosity and permeability for the migration of fluids
• Surface access
• Sufficiently large thermal system
• Customers for energy
3:42:33 PM
MS. WERDON moved to slide 5, comprising a visual of elevated
geothermal heat flow in Alaska based on 1980s-era geothermal
data. DGGS' proposed new work will narrow potential red target
areas to help the Division of Oil and Gas focus on the most
promising areas in Alaska for geothermal leases. New data on
Alaska's geothermal systems would reduce industry risk and
encourage industry investment.
3:43:25 PM
MS. WERDON moved to slide 6 and read the following:
[Original punctuation provided.]
INTRODUCTION TO GEOTHERMAL RESOURCES
• 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 many potential geothermal
resources
• New technologies that will expand geothermal
development into less favorable geology are on
the horizon
Ms. Werdon added that there are supplemental materials available
at the end of the presentation with specific regional details.
3:44:28 PM
MS. WERDON moved to slide 7 and referenced the bullet points
listing new DGGS responsibilities.
[Original punctuation provided.]
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
• $190.0 UGF initial cost FY2025
Ms. Werdon stated that the state of Alaska has left federal
money on the table at geothermal sites. The main focus is on the
presentation comprising updates to SB 69.
3:46:18 PM
CO-CHAIR BISHOP asked if the DNR is actively recruiting for the
new geologist position and if Inflation Reduction Act (IRA)
funds are in focus.
3:46:46 PM
MR. CROWTHER responded that the DNR is not actively recruiting
for the position, given pending legislative allocation of budget
funds. However, the department is seeking to expand resources
for a more comprehensive geothermal assessment program across
the state, including federal funds and programs. The DNR holds
several relationships with federal agencies for resource
characterization in Alaska, including the United States
Geological Survey (USGS), DGGS, the Department of Energy, and
others under the IRA and general budget programs to characterize
geothermal resources that can be utilized. There is a need to
supplement this effort through resources and legislative action
on the leasing side.
3:47:47 PM
CO-CHAIR BISHOP offered a future discussion in budget
subcommittees.
3:47:55 PM
SENATOR KAWASAKI asked Ms. Werdon if typical well-based
geothermal systems lose their heat resource over time.
3:48:22 PM
MS. WARDEN said that geothermal systems were designed with wells
that raise heated water with enough distance from the
reinjection of the cold water to prevent interference and system
cooling.
3:48:57 PM
SENATOR KAWASAKI asked if that process is related to the
doubling of lease acreage size referenced in SB 69.
3:49:18 PM
MS. WARDEN deferred the question to Mr. Clifton.
3:49:31 PM
SEAN CLIFTON, Policy & Program Specialist, Division of Oil & Gas
(DOG), Department of Natural Resource (DNR), Anchorage, Alaska,
provided an overview of the presentation. He said that maximum
acreage size allows for more room to effectively explore and
define the resource through drilling and testing before reducing
it to the appropriate lease size.
3:50:24 PM
SENATOR CLAMAN asked about the type of federal funds available
and how the state could obtain access.
3:50:37 PM
MR. CROWTHER offered to follow up regarding federal funds that
are still being adapted. He stated his belief that USGS has
regular programs that could focus on geothermal
characterization.
3:51:04 PM
CO-CHAIR BISHOP noted that legislative aids could obtain the
information for the committee.
3:51:23 PM
MR. CLIFTON moved to slide 9 and proceeded with an overview of
SB 69.
[Original punctuation provided.]
PURPOSE OF SB 69
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 and fluids
to account for technological advancements in the
geothermal industry
Mr. Clifton noted that modernization of the geothermal
exploration program mandates additional time, more acreage, and
updated definitions.
3:52:09 PM
MR. CLIFTON moved to slide 10 and provided an overview of
geothermal leasing and permitting history in the Mount Spurr and
Augustine Island areas. The two Mount Spurr permits were
converted into leases in anticipation of a lease sale in October
of 2023. There was less industry attention and interest than
anticipated, therefore no bids were placed. Augustine Island's
permit issued in 2022 would be extended if SB 69 passed, while a
second permit was requested to expand available acreage to
explore the Southern part of the island.
3:53:41 PM
MR. CLIFTON moved to slide 11, highlighting leasing under
current law.
[Original punctuation provided.]
LEASING UNDER CURRENT LAW
Application and call for competing proposals
• If competing proposals barb2right competitive lease sale
• If no competing interest barb2right issue prospecting
permit with two-year time limit
• This bill replaces two-year permits with five-
year licenses modelled after our modern oil and
gas exploration licensing program.
• 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 and
public input opportunity prior to award of permit,
license, or lease
Royalties are set by AS 38.05.181(g): 1.75 percent of
gross revenue for the first 10 years of production,
then 3.5 percent of gross revenue after 10 years
Mr. Clifton added that this does not constitute much time to
organize capital for on-the-ground work, urging the push for a
five-year gas exploration lease. With the two-year time limit,
lease holders must drill "right on the money" or land is
returned to the state.
3:55:45 PM
SENATOR KAWASAKI asked about work conditions in place to measure
oil and gas exploration progress and ways to obtain a plan of
development. He stated that there are currently several
undeveloped oil and gas leases.
3:56:33 PM
MR. CROWTHER responded that in general, many oil and gas units
have long been in active production. However, there are some
leases that are at earlier stages. Oil and gas leases that do
not see exploration at their primary term may be returned to the
state. The DNR envisions a similar system under the geothermal
program, given that a work commitment is met. The development
process has an annual review.
3:57:49 PM
SENATOR KAWASAKI asked if a company exploring resources would
have a duty to produce findings.
3:58:06 PM
MR. CROWTHER responded that a company would have a duty to
pursue development on their lease or it would relinquish at its
term. A failed attempt to reach development may provide for an
opportunity for extensions depending on how the lease is issued.
3:58:58 PM
SENATOR WIELECHOWSKI asked how gross revenue is determined.
3:59:21 PM
MR. CLIFTON said that gross revenue is based on reporting. The
DNR has not set up a model for processing royalty filings for
geothermal revenue. It may be more appropriate to use a
different model, either quarterly or annually.
4:00:06 PM
CO-CHAIR BISHOP cautioned against comparing oil and gas with hot
water. The state is treading new territory with geothermal
production and developing appropriate definitions for royalties
is under way. He asked if royalties will be based on the amount
of British thermal units (BTUs) produced by the well.
4:01:16 PM
MR. CROWTHER noted that the language in statute as proposed is
focused on commercial revenue of geothermal production.
4:01:53 PM
SENATOR CLAMAN asked how the consensus was reached for
identifying AOGCC as the regulatory body for managing geothermal
production.
4:02:44 PM
MR. CROWTHER invited Mr. Huber to contribute his perspective.
The AOGCC currently regulates and focuses on hazard-related or
subsurface activities.
4:03:23 PM
BRETT HUBER, Chairman, Alaska Oil & Gas Conservation Commission,
Anchorage, Alaska, provided an overview of geothermal drilling.
He conveyed that the AOGCC is involved with drilling regulation.
The state's path forward relies on proper geothermal drilling to
protect underground and freshwater aquifers, as well as ensuring
public safety.
4:04:35 PM
SENATOR CLAMAN hypothesized a scenario of poor management
following extraction and if this would be under the jurisdiction
of AOGCC.
4:04:59 PM
MR. HUBER replied that it would not be under the AOGCC's
jurisdiction. The wells are positioned in a way to maximize
recovery and minimize waste. AOGCC would oversee underground
activities.
4:05:33 PM
MR. CLIFTON moved to slide 12 and said he created a sectional
summary to assist members in locating information by agency.
[Original punctuation provided.]
SECTIONAL SUMMARY
1. (AOGCC) Grants Alaska Oil & Gas Conservation
Commission (AOGCC) authority to pursue primacy of
Class V injections wells for geothermal energy
2. (AOGCC) Removes unnecessary reference to AS 41.06
from AS 31.05.030(m) (see Section 10)
3. (DNR) Changes permits to licenses; adds exemption
for geothermal resources intended for domestic,
noncommercial, or small-scale industrial use
(same as Section 11); removes preferential rights
clause (inappropriate for commercial development
of State resources)
4. (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
5. (DNR) Changes permit to license
6. (DNR) Changes permits to licenses; increases
maximum acreage from 51,200 to 100,000; moves
rental fees to be set by regulation
7. (DNR) Amends AS 38.05.181(f) to grant leases for
10 years, with opportunity for a five-year
extension, with standard indefinite extension by
production Repeals opportunity for DNR
commissioner to modify rent and royalty rates
after 20 years of production
8. (DNR) Adds three new subsections AS 38.05.181(i
k) to modernize unitization statute for
geothermal leases to match the model used for oil
& gas
9. (DNR) Replaces AS 38.05.965(6) definition of
geothermal resources (same as Section 14)
10. (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
11. (AOGCC) New subsection AS 41.06.020(f) adds
exemption for geothermal resources intended for
domestic, noncommercial, or small-scale
industrial use (see Section 3)
12. (AOGCC) Adds new subsection AS 41.06.057 to
provide for penalties for violations of
geothermal statutes (like oil & gas AS 31.05.150)
13. (AOGCC) Amends AS 41.06.060(4) definition of
geothermal fluid to remove temperature references
and better conform with other changes in this
bill
14. (AOGCC) Replaces AS 41.06.060(5) definition of
geothermal resources (same as Section 9)
15. (AOGCC) Repeals AS 41.06.005(b) and AS 41.06.030,
since geothermal units are managed by DNR
16-20.(AOGCC/DNR) General provisions for
applicability and effective dates, including
applicability for prospecting permits issued or
currently being processed
4:06:05 PM
MR. CLIFTON moved to slide 13 and stated that the provisions in
Sections 3-6 replace "permit" to "license" to reflect the common
understanding of the terms within the Division of Oil & Gas
(DOG).
[Original punctuation provided.]
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.
4:07:17 PM
MR. CLIFTON moved to slide 14 and spoke to private use
exemption.
[Original punctuation provided.]
SECTION 3: PRIVATE USE EXEMPTION
• New language:
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.
• Intent:
o Clarify that domestic users of ground source
heat pumps don't need an authorization from
DNR
o Encourage the use of geothermal energy to
provide affordable energy in non-utility
scale applications
4:08:23 PM
SENATOR WIELECHOWSKI inquired about private use exemption and
referenced the 2021 version of Senate Bill 104 "An Act relating
to geothermal resources; relating to the definition of
'geothermal resources'; and providing for an effective date."
Committee members raised concerns among several sections of the
bill. He asked for clarification on commercial, domestic, and
small-scale industrial definitions.
4:09:02 PM
MR. CLIFTON responded that no changes were made, nor definitions
defined within the legislation. The DOG assumed the royalty
component of the statute and its plain language would be clear.
4:09:45 PM
SENATOR WIELECHOWSKI asked for clarification on the definition
of small-scale industrial use in the new legislative language.
4:10:03 PM
MR. CROWTHER acknowledged that there are significant questions
about the scales and offered to work with the committee to
develop language to further clarify legislative intent. The
focus is on heat pumps for private use at the individual
facility level.
4:10:47 PM
SENATOR WIELECHOWSKI asked if there's a need to update "intended
for" to "actually used for" in the new language.
4:11:07 PM
MR. CROWTHER replied that the actual use in development should
be the legislative focus. He offered to coordinate with members
to improve the proposed language.
4:11:24 PM
SENATOR WIELECHOWSKI referenced Section 3 of SB 69 and asked why
eight lines were omitted.
4:11:49 PM
MR. CLIFTON replied that the language in statute was confusing
and posed potential problems for developers that might have an
exploration license. Private surface owners maintain legal
rights, but surface owners may be able to invoke the statute to
take over the developer's operation. If the surface owner &
developer cannot reach an agreement, the commission of DNR could
interfere under AS 38.05.130. He added that in the arbitration
process, regulations exist to ensure the surface owner is
compensated.
He spoke to slide 16.
[Original punctuation provided.
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
o Inappropriate for a surface owner to have a
preferential right to the State's mineral estate
• Surface owners may still pursue domestic geothermal
developments for their own uses
o Need well permits from AOGCC if hazards may exist
o Need environmental review or permits from
agencies such as Department of Environmental
Conservation, Fish & Game, DNR Division of Mining
Land & Water, or federal agencies
o Examples of permitting requirements are detailed
in a supplemental slide
• Geothermal licenses and leases are not surface use
authorizations
o They only provide the exclusive right to explore
for and develop the subsurface resources
o Public notice is a part of the license issuance
process and surface owners can participate
o Surface use authorizations require public notice
and direct notice to any affected surface owners
4:13:30 PM
SENATOR WIELECHOWSKI asked for clarification on preferential
rights and suggested a third party's subsequent subsurface
rights to land under private ownership. He wondered if a third
party could force a landowner to develop a pipeline, generator,
or heat pump.
4:14:20 PM
MR. CROWTHER responded that there are areas in Alaska where
private landowners own subsurface rights and are entitled to
manage the resource. In state-owned areas, statute ceded the
management right to surface owners. In the case of personal use
using ground source heat pumps, a surface owner would maintain
the right to primary resource use.
The intent of SB 69 is to allow the state to benefit from the
licensing and leasing of large-scale, commercial-scale
geothermal resources.
4:16:04 PM
MR. CLIFTON moved to slide 15 and said there are separate
permitting processes for commercial and non-commercial systems.
The graphic on the right showcases non-commercial systems
involving heat pumps/loops above water table or wells less than
a few hundred feet deep. Commercial development would not take
away heat from a private user.
4:17:39 PM
SENATOR WIELECHOWSKI asked Mr. Clifton to define the state's
subsurface rights.
4:18:00 PM
MR. CROWTHER replied that Alaska law comprises fluid minerals
leasing provisions, the constitutional right for locatable
minerals to be staked, and other subsurface rights managed by
the state. Certain rocks, gravels, and minerals are accrued to
the state under some circumstances and are at times associated
with the surface. He offered to follow up on the delineation of
subsurface versus surface rights.
4:18:55 PM
CO-CHAIR BISHOP reminded members about questions available from
last year with written responses.
4:19:10 PM
SENATOR WIELECHOWSKI asked about domestic user authorization
requirements through the DNR and the depth of heat pumps.
4:19:33 PM
MR. CLIFTON responded that heat pumps do not run deep, only a
few hundred feet as demonstrated on slide 15.
4:19:45 PM
CO-CHAIR BISHOP added that geothermal systems get expensive
quickly compared to natural gas or diesel fuel.
4:20:06 PM
SENATOR KAUFMAN asked if the heat pump design is defined as a
closed-loop interface as opposed to the lifting of water steam
using an open system.
4:20:43 PM
MR. CLIFTON replied yes, these systems are most often designed
as closed-loop, so pumping is done at the surface and therefore
ensure environmental protection.
4:21:32 PM
MR. CLIFTON moved to slide 17 and spoke to the following:
[Original punctuation provided.]
SECTIONS 4 & 7: TERMS & 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 assessments are
required
• 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
4:22:08 PM
SENATOR WIELECHOWSKI noted that AOGC is changing license
prerequisites from a development to an exploration plan. He
wondered if a different-tiered process is necessary to expedite
the development timeline.
4:22:56 PM
MR. CROWTHER replied that AOGC views potential competition at
the front end and the requirement for significant expenditure to
obtain the lease as safeguarding the warehousing concern. A
good-faith developer may need 4-5 years of an exploration
program to complete the initial characterization step. He said
there are permit/new lease holders pursuing these activities on
a multi-year program because field expenditure and mobilization
take years.
4:24:25 PM
CO-CHAIR BISHOP asked when and where the data from a five-year
exploration license would become publicly available.
4:24:43 PM
MR. CLIFTON responded that he is unsure of the timeline but
would find the terms and report back to the committee.
4:25:05 PM
CO-CHAIR BISHOP added that technology and resources change over
time.
4:25:24 PM
MR. CLIFTON said he does not recall any lifelines from the DOG
on the previous question.
4:25:37 PM
MR. CLIFTON added that annual reporting and assessments are
monitored, so there is an incentive to meet requirements.
4:26:08 PM
CO-CHAIR BISHOP reiterated the committee's desire to know the
timeline of publicly available data.
4:26:16 PM
MR. CLIFTON moved to slide 18 and spoke to the following:
[Original punctuation provided.]
SECTION 6: ACREAGE LIMIT & RENT
• Maximum acreage a lessee may hold increases from
51,200 to 100,000 acres
o Geothermal systems can underlie very large
areas
o Enables explorers to more effectively
delineate resource
• Rental fees to be set by regulation instead of
statute
o Enables DOG to be nimbler in response to
market changes
4:27:46 PM
SENATOR CLAMAN inquired about the large acreage limit. As most
of the initial work is done before leases are obtained, he
wondered if quality research in conjunction with a smaller lease
could accomplish the same goal.
4:28:33 PM
MR. CLIFTON clarified that the acreage limit is a lessee total
holding limit. Currently, AOGC has a cap, so adjusting it would
allow the sequential build-out of a position. The scope of the
program requires large footprints.
4:29:37 PM
MR. CLIFTON added that this is regarding a limit for a license
area, so the total area would not necessarily be converted into
a lease. While the numbers seem large, such as a half-a-million
acre lease, wells are not drilled every ten feet.
4:30:26 PM
SENATOR WIELECHOWSKI referred to the 40-acre minimum requirement
under Section 6 of SB 69. Under current law, an exception exists
in the case of a preference right. He suggested that omitting
the preferential right would be contrary to encouraging small-
scale development.
4:31:01 PM
MR. CLIFTON referred to the preference right under Section 6(b).
4:31:14 PM
SENATOR WIELECHOWSKI asked if an exception should be made for
people with 20-acre lots. He foresees a large number of people
wanting to explore but may be prohibited under the current
acreage requirement.
4:32:03 PM
MR. CLIFTON clarified that this is specific to the state's
subsurface. The intent is to defer non-commercial developers
from needing to obtain a lease through the DNR. He opined that
there is room for adjustments, however.
4:33:03 PM
MR. CROWTHEY added that the scenario proposed by Senator
Wielechowski would require a 40-acre license under current
statute language.
4:33:38 PM
CO-CHAIR BISHOP sought clarification on whether the 100-thousand
acreage limit could be split up.
4:33:51 PM
MR. CLIFTON replied yes.
4:34:05 PM
MR. CLIFTON moved to slide 19.
[Original punctuation provided.]
SECTIONS 9, 13, & 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.
"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;"
• 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
• Distinguishes geothermal fluids from hydrocarbon
resources
• Same definition being applied to both DNR & AOGCC
statutes
Mr. Clifton added that the AOGC is seeking to accomplish the
goals listed.
4:35:08 PM
SENATOR WIELECHOWSKI suggested the statute proposal is a repeal
and replace scenario and asked for clarification on actual
changes made such as with helium.
4:35:26 PM
MR. CLIFTON replied that he does not currently have eyes on old
statute, but it is likely that the mention of helium was
modified. Helium has been long considered a critical and
protected resource, but could conceivably be produced under the
right of a subsurface granted by a geothermal lease.
4:36:38 PM
SENATOR WIELECHOWSKI asked about the scope of extraction of
minerals in solution, such as gold or zinc.
4:37:20 PM
MR. CROWTHEY opined that gold is unavailable.
4:37:35 PM
CO-CHAIR BISHOP added that gold is 18 times heavier than water
so unlikely to surface.
4:37:53 PM
MS. WERDON said that the most common element found in geothermal
systems in California is possibly lithium from brines due to a
naturally elevated lithium content. It is possible to obtain
gold in solution in acidic fluid, but the concentration would be
relatively low. She offered to verify concentration volumes for
different elements.
4:38:55 PM
CO-CHAIR GIESSEL noted that Arkansas is monetizing lithium
dissolved in subsurface brine as it has value.
4:39:11 PM
SENATOR WIELECHOWSKI asked if the state tweaked the definition
of minerals in solution whether it would conflict with mining or
royalty laws.
4:39:32 PM
MR. CROWTHEY replied that the DNR would be willing to work with
the committee to clarity intent. Laws governing mineral fluids
should be in accordance with mineral and royalty provisions.
4:40:11 PM
SENATOR WIELECHOWSKI asked if beginning mining with geothermal
resources is currently possible.
4:40:37 PM
MR. CROWTHEY suggested that mining with geothermal resources is
a hypothetical scenario at this point. A potential royalty
provision would apply to both energy generation and mineral
recovery. Lithium development may provide other beneficial
developments. There is uncertainty in potential cooccurrence of
geothermal resources in Alaska.
4:41:21 PM
CO-CHAIR BISHOP said that the prospect of geothermal mining is a
good discussion to have in the meantime.
4:41:36 PM
MR. CLIFTON said that the department would follow up with the
committee.
4:41:53 PM
CO-CHAIR BISHOP asked if the state would receive royalty
benefits aside from geothermal development.
4:42:13 PM
MR. CLIFTON noted that the state would receive some royalty. The
geothermal lease terms of 1.75 percent and 3.5 percent gross
revenue after ten years would apply. It is different than
traditional hard rock mining leases based on net revenue. In
most lithium extraction cases in the lower 48 states, large
evaporation ponds are being utilized. Alternative energy-
intensive and expensive technologies would need to be invented
and installed to justify this type of operation.
4:43:27 PM
SENATOR WIELECHOWSKI opined that the state does not make a lot
of money from royalties. He asked whether Mr. Clifton has had
conversations with people interested in using geothermal
development for mining.
4:44:08 PM
MR. CLIFTON replied no. If an operation comprised explicit
mining, it would be a very different situation involving mining
leases. He is unaware of anyone seeking to use geothermal
development as a means of mining. He opined that it would be a
different leasing situation if developer were seeking explicit
mining without the use of geothermal development as a power
source.
4:44:38 PM
MR. CROWTHEY said that management of geothermal energy systems
sometimes entails operational challenges. With the perceived
potential of lithium or another valuable commodity, it would
offset operational costs.
4:45:18 PM
MS. CLIFTON concluded the presentation and referred to
supplemental slides toward the end.
4:45:41 PM
SENATOR WIELECHOWSKI asked what provisions does SB 69, Section
15, remove from AS 41.06.005(b) and AS 41.06.030.
4:46:00 PM
MR. CLIFTON moved to slide 12 and replied that since geothermal
units are managed by the DNR, the subsections are not
appropriate. He explained that the DNR could be brought before
the AOGC, a quasi-judicial agency, if there was a dispute.
4:47:08 PM
CO-CHAIR BISHOP held SB 69 in committee.
4:48:30 PM
There being no further business to come before the Senate
Resources Committee, Co-Chair Bishop adjourned the meeting at
4:48 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| SB 69 Fiscal Note DNR 01.22.24.pdf |
SRES 1/22/2024 3:30:00 PM |
SB 69 |
| SB 69 Fiscal Note DCCED 01.22.24.pdf |
SRES 1/22/2024 3:30:00 PM |
SB 69 |
| SB 69 Geothermal Resources Refresher Presentation DNR 01.22.24.pdf |
SRES 1/22/2024 3:30:00 PM |
SB 69 |
| SB 69 Department Responses to 01.22.24 Hearing.pdf |
SRES 1/22/2024 3:30:00 PM |
SB 69 |