00 SENATE CS FOR CS FOR HOUSE BILL NO. 50(FIN) am S 01 "An Act relating to carbon storage on state land; relating to the powers and duties of the 02 Alaska Oil and Gas Conservation Commission; relating to deposits into the permanent 03 fund; establishing the carbon storage closure trust fund and carbon dioxide storage 04 facility administrative fund; relating to geothermal resources; relating to carbon storage 05 exploration licenses; relating to carbon storage leases; relating to carbon storage 06 operator permits; relating to enhanced oil or gas recovery; relating to long-term 07 monitoring and maintenance of storage facilities; relating to carbon oxide sequestration 08 tax credits; relating to the Regulatory Commission of Alaska and regulation of the 09 service of natural gas storage; relating to the regulation of liquefied natural gas import 10 facilities; relating to the oil and gas production tax; relating to the duties of the 11 Department of Natural Resources; relating to carbon dioxide pipelines; relating to 12 reserve-based state loans for oil and gas development projects in the Cook Inlet 01 sedimentary basin; relating to the Alaska Industrial Development and Export 02 Authority; requiring the Alaska Industrial Development and Export Authority to report 03 to the legislature on oil and gas projects with potential to increase oil and gas production 04 from the Cook Inlet sedimentary basin; relating to an audit of carbon storage leases 05 conducted by the legislative audit division; and providing for an effective date." 06 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 07 * Section 1. The uncodified law of the State of Alaska is amended by adding a new section 08 to read: 09 SHORT TITLE. This Act may be known as the Carbon Capture, Utilization, and 10 Storage Act. 11 * Sec. 2. AS 31.05.027 is amended to read: 12 Sec. 31.05.027. Land subject to commission's authority. The authority of the 13 commission applies to all land in the state lawfully subject to its police powers, 14 including land of the United States and land subject to the jurisdiction of the United 15 States. The authority of the commission further applies to all land included in a 16 voluntary cooperative or unit plan of development or operation entered into in 17 accordance with AS 38.05.180(p) or 38.05.725. 18 * Sec. 3. AS 31.05.030(m) is amended to read: 19 (m) The commission has jurisdiction and authority over all persons and 20 property, public and private, necessary to carry out the purposes and intent of 21 AS 41.06, except for provisions in AS 41.06.005 - 41.06.060 and 41.06.305 22 [AS 41.06] for which the Department of Natural Resources has jurisdiction. 23 * Sec. 4. AS 37.05.146(c) is amended by adding new paragraphs to read: 24 (86) carbon dioxide storage facility administrative fund 25 (AS 41.06.160); 26 (87) carbon storage closure trust fund (AS 37.14.850). 27 * Sec. 5. AS 37.13.010(a) is amended to read: 28 (a) Under art. IX, sec. 15, of the state constitution, there is established as a 29 separate fund the Alaska permanent fund. The Alaska permanent fund consists of 01 (1) 25 percent of all mineral lease rentals, royalties, royalty sale 02 proceeds, net profit shares under AS 38.05.180(f) and (g), and federal mineral revenue 03 sharing payments received by the state from mineral leases issued on or before 04 December 1, 1979, and 25 percent of all bonuses received by the state from mineral 05 leases issued on or before February 15, 1980; 06 (2) 50 percent of all mineral lease rentals, royalties, royalty sale 07 proceeds, net profit shares under AS 38.05.180(f) and (g), carbon storage injection 08 royalties required under AS 38.05.705(c)(3)(B), and federal mineral revenue sharing 09 payments received by the state from mineral leases issued after December 1, 1979, and 10 50 percent of all bonuses received by the state from mineral leases issued after 11 February 15, 1980; and 12 (3) any other money appropriated to or otherwise allocated by law or 13 former law to the Alaska permanent fund. 14 * Sec. 6. AS 37.14 is amended by adding a new section to read: 15 Article 11. Carbon Storage Closure Trust Fund. 16 Sec. 37.14.850. Carbon storage closure trust fund. (a) The carbon storage 17 closure trust fund is established as a separate trust fund of the state outside and 18 separate from the general fund. The legislature may appropriate the principal and 19 earnings of the fund for the purpose of protecting the public interest in maintaining 20 and closing carbon storage facilities in the state. Money in the fund does not lapse. 21 (b) The carbon storage closure trust fund consists of payments received under 22 AS 41.06.175 and earnings on the fund. The payments received for each storage 23 facility shall be separately accounted for under AS 37.05.142. The commissioner of 24 revenue is a fiduciary of the fund. The commissioner of revenue shall manage and 25 invest the fund assets as provided in AS 37.10.071. 26 (c) The commissioner of natural resources may make expenditures from the 27 carbon storage closure trust fund for the purpose of conducting long-term monitoring 28 and maintenance of a storage facility under AS 41.06.305. If a storage operator is 29 unable to fulfill the storage operator's duties and the financial assurance provided by 30 the storage operator under AS 41.06.110(c)(2) is exhausted or insufficient, the Alaska 31 Oil and Gas Conservation Commission may make expenditures from the fund for the 01 purposes allowed under AS 41.06.105 - 41.06.210. 02 (d) Nothing in this section creates a dedicated fund. 03 (e) In this section, 04 (1) "fund" means the carbon storage closure trust fund; 05 (2) "storage facility" and "storage operator" have the meanings given 06 in AS 41.06.210. 07 * Sec. 7. AS 38.05.069(e) is amended to read: 08 (e) Nothing in (c) of this section affects the disposal of minerals under 09 AS 38.05.135 - 38.05.183 or carbon storage under AS 38.05.700 - 38.05.795. 10 * Sec. 8. AS 38.05.070(a) is amended to read: 11 (a) Land, including tide, submerged, or shoreland, to which the state holds title 12 or to which the state [IT] may become entitled, may be leased, except for the 13 extraction of natural resources and for carbon storage under AS 38.05.700 - 14 38.05.795, in the manner provided in AS 38.05.070 - 38.05.105. 15 * Sec. 9. AS 38.05.130 is amended to read: 16 Sec. 38.05.130. Damages and posting of bond. Rights may not be exercised 17 by the state, its lessees, successors, or assigns under the reservation as set out in 18 AS 38.05.125 until the state, its lessees, successors, or assigns make provision to pay 19 the owner of the land full payment for all damages sustained by the owner, by reason 20 of entering onto [UPON] the land. If the owner for any cause refuses or neglects to 21 settle the damages, the state, its lessees, successors, assigns, or an applicant for a lease 22 or contract from the state for the purpose of prospecting for valuable minerals, or 23 option, contract, or lease for carbon storage or mining coal or a lease for extracting 24 geothermal resources, petroleum, or natural gas, may enter onto [UPON] the land in 25 the exercise of the reserved rights after posting a surety bond determined by the 26 director, after notice and an opportunity to be heard, to be sufficient as to form, 27 amount, and security to secure to the owner payment for damages, and may institute 28 legal proceedings in a court where the land is located, as may be necessary to 29 determine the damages that [WHICH] the owner may suffer. 30 * Sec. 10. AS 38.05.135(a) is amended to read: 31 (a) Except as otherwise provided, valuable mineral deposits in land belonging 01 to the state shall be open to exploration, development, and the extraction of minerals. 02 All land, together with tide, submerged, or shoreland, to which the state holds title to 03 or to which the state may become entitled, may be obtained by permit or lease for the 04 purpose of exploration, development, and the extraction of minerals. Except as 05 specifically limited by AS 38.05.131 - 38.05.181 and 38.05.700 - 38.05.795, land may 06 be withheld from lease application on a first-come, first-served basis, and offered only 07 on a competitive bid basis when determined by the commissioner to be in the best 08 interests of the state. 09 * Sec. 11. AS 38.05.135(c) is amended to read: 10 (c) Payment of a royalty or a net profit share payment to the state under a lease 11 issued under AS 38.05.135 - 38.05.181 or an injection charge under AS 38.05.700 - 12 38.05.795 becomes due on the date and in the manner specified in the lease or in a 13 regulation adopted by the commissioner. 14 * Sec. 12. AS 38.05.135(d) is amended to read: 15 (d) If a royalty or net profit share payment to which the state is entitled under 16 AS 38.05.135 - 38.05.181 or an injection charge under AS 38.05.700 - 38.05.795 is 17 not paid or is underpaid when it becomes due under (c) of this section, the unpaid 18 amount of the royalty, [OR] net profit share payment, or injection charge bears 19 interest in a calendar quarter at the rate of five percentage points above the annual rate 20 charged member banks for advances by the 12th Federal Reserve District as of the 21 first day of that calendar quarter, or at the annual rate of 11 percent, whichever is 22 greater, compounded quarterly as of the last day of that quarter. 23 * Sec. 13. AS 38.05.135(e) is amended to read: 24 (e) If a royalty or net profit share payment to which the state is entitled under 25 AS 38.05.135 - 38.05.181 or an injection charge under AS 38.05.700 - 38.05.795 is 26 overpaid, interest at the rate and compounded in the manner provided in (d) of this 27 section shall be allowed and paid on the overpayment. The interest allowance is 28 subject to the following: 29 (1) if the state grants a credit against future payments for the 30 overpayment, the state shall pay interest on the overpayment 31 (A) from the date that is the later of the date the overpayment 01 was 02 (i) due; or 03 (ii) received; 04 (B) to the date that is the earlier of the date 05 (i) of notice to the lessee of the credit; or 06 (ii) on which the lessee actually takes the credit; 07 (2) if the state refunds the overpayment, the state shall pay interest on 08 the overpayment 09 (A) from the date that is the later of the date the overpayment 10 was 11 (i) due; or 12 (ii) received; 13 (B) to the date the state issues the refund. 14 * Sec. 14. AS 38.05.140(a) is amended to read: 15 (a) A person may not take or hold coal leases or permits during the life of coal 16 leases on state land exceeding an aggregate of 92,160 acres, except that a person may 17 apply for coal leases or permits for acreage in addition to 92,160 acres, not exceeding 18 a total of 5,120 additional acres of state land. The additional area applied for shall be 19 in multiples of 40 acres, and the application shall contain a statement that the granting 20 of a lease for additional land is necessary for the person to carry on business 21 economically and is in the public interest. On the filing of the application, except as 22 provided by AS 38.05.180(ff)(3) or 38.05.180(gg) and 38.05.700 - 38.05.795, the coal 23 deposits in the land covered by the application shall be temporarily set aside and 24 withdrawn from all other forms of disposal provided under AS 38.05.135 - 38.05.181. 25 * Sec. 15. AS 38.05.181(a) is amended to read: 26 (a) The commissioner may, under regulations adopted by the commissioner, 27 grant prospecting licenses [PERMITS] and leases to a qualified person to explore for, 28 develop, or use geothermal resources. When title to the surface parcel is held by a 29 person other than the state, that person shall have a preferential right to a geothermal 30 prospecting license [PERMIT] or lease for the area underlying the surface parcel. The 31 surface owner must exercise the preference right within 30 days after receiving notice 01 of the application for a license [PERMIT], or by agreeing to meet the terms of a bid 02 within 60 days after receiving notice of the acceptance of the bid for a lease. 03 * Sec. 16. AS 38.05.181(c) is amended to read: 04 (c) On state land that has not been declared a competitive geothermal area or 05 withdrawn from geothermal prospecting, the commissioner may issue a prospecting 06 license [PERMIT] to the first qualified applicant. The license [PERMIT] conveys an 07 exclusive right, for a period of five [TWO] years, to prospect for geothermal resources 08 on state land included under the license [PERMIT]. The commissioner has discretion 09 to renew the license [PERMIT] for an additional one-year term. A holder of a 10 prospecting license [PERMIT] has the right, after completion of an agreed-on work 11 commitment [UPON THE SHOWING OF A DISCOVERY OF GEOTHERMAL 12 RESOURCES IN COMMERCIAL QUANTITIES] and the submission of an 13 exploration [A DEVELOPMENT] plan acceptable to the commissioner, to convert 14 the license [PERMIT] to a noncompetitive lease at a royalty rate under (g) of this 15 section. The conversion privilege must be exercised not later than 30 days after the 16 expiration of the license [PERMIT]. If the land included within the license [PERMIT] 17 is designated a competitive geothermal area during the license [PERMIT] term, the 18 licensee [PERMITTEE] must apply for a noncompetitive lease within 30 days after 19 notification of the designation or forfeit the conversion privileges and the exclusive 20 right to prospect. 21 * Sec. 17. AS 38.05.181(d) is amended to read: 22 (d) On state land that is designated a competitive geothermal area and is not 23 subject to an existing prospecting license [PERMIT], the commissioner may issue 24 geothermal leases to the highest bidder by competitive bidding procedures established 25 by regulations adopted by the commissioner. At the discretion of the commissioner, 26 competitive lease sales may be by oral or sealed bid, on the basis of a cash bonus, 27 profit share, or royalty share. 28 * Sec. 18. AS 38.05.181(e) is amended to read: 29 (e) Prospecting licenses [PERMITS] and geothermal leases granted under this 30 section must [, EXCEPT IN THE CASE OF PARCELS SUBJECT TO A 31 PREFERENCE RIGHT UNDER (b) OF THIS SECTION,] be issued for at least 40 01 acres but not more than 2,560 acres. A person may not own, or hold an interest in, 02 geothermal leases covering more than 100,000 [51,200] acres. However, geothermal 03 leases in commercial production, individually or under a unit operation or well spacing 04 or pooling arrangement, do not count against the acreage limitation. All prospecting 05 licenses [PERMITS] and geothermal leases are subject to an annual rental fee 06 established by the department in regulation and [,] payable in advance [, OF $3 07 PER ACRE]. The rental for a year shall be credited against royalties accruing for that 08 year. 09 * Sec. 19. AS 38.05.181(f) is amended to read: 10 (f) A geothermal lease shall be issued for a primary term of 10 years and may 11 be renewed for an additional term of five years if the lessee is actively engaged in 12 drilling operations. A geothermal lease is valid for the duration of commercial 13 production. [BEGINNING 20 YEARS AFTER THE INITIATION OF 14 COMMERCIAL PRODUCTION AND AT 10-YEAR INTERVALS THEREAFTER, 15 THE COMMISSIONER MAY RENEGOTIATE THE RENTALS AND 16 ROYALTIES DUE ON A GEOTHERMAL LEASE.] 17 * Sec. 20. AS 38.05.184 is amended by adding a new subsection to read: 18 (h) A department or other state agency may not issue a carbon storage license 19 or lease on state-owned land and water seaward of the mean higher high water line, 20 beginning at Anchor Point; then around the perimeter of Kachemak Bay, to Point 21 Pogibshi; then west to the three mile limit of state land and water; then north to a point 22 three miles west of Anchor Point; then east to the mean higher high water line of 23 Anchor Point, the point of beginning. 24 * Sec. 21. AS 38.05 is amended by adding new sections to read: 25 Article 15A. Carbon Storage Exploration Licenses; Leases. 26 Sec. 38.05.700. Applicability; regulations. (a) The provisions of 27 AS 38.05.700 - 38.05.795 apply to the licensing of state land for carbon storage 28 exploration and the leasing of state land for carbon storage. 29 (b) The commissioner may adopt regulations necessary to implement 30 AS 38.05.700 - 38.05.795. 31 Sec. 38.05.705. Carbon storage exploration licensing. (a) The commissioner 01 may issue carbon storage exploration licenses on state land. 02 (b) A carbon storage exploration license gives the licensee 03 (1) the exclusive right to explore, for carbon storage purposes, the state 04 land described in the license for a five-year term; and 05 (2) the option to convert the license for all or part of the state land 06 described in the license into a carbon storage lease after the licensee complies with the 07 lease conversion process described in AS 38.05.715. 08 (c) A carbon storage exploration license must 09 (1) be conditioned on the posting of a bond or other security acceptable 10 to the department and in favor of the state; 11 (2) be conditioned on an obligation by the licensee to fulfill a specified 12 work commitment as set out in the license; the work commitment must include 13 mandatory provisions for 14 (A) an annual fee paid by the licensee to the department in an 15 amount that is at least $20 an acre, subject to the license; and 16 (B) an annual report describing the licensee's exploration 17 activities in the previous calendar year, which the licensee shall provide to the 18 department; and 19 (3) include proposed commercial terms that apply if the license is 20 converted into a carbon storage lease, which must, at a minimum, provide for 21 (A) an annual rent of at least $20 an acre; and 22 (B) a charge on injected volumes of carbon dioxide of at least 23 $2.50 a ton. 24 (d) The commissioner may revoke a carbon storage exploration license before 25 the termination of the five-year term of the license if the licensee fails to comply with 26 the requirements of (c) of this section or applicable regulations. 27 (e) The department may renew a carbon storage exploration license for a term 28 sufficient to determine whether the licensee's permit application will be accepted 29 under AS 41.06.105 - 41.06.210 if the licensee 30 (1) before the expiration of the license, applies for a permit under 31 AS 41.06.120; 01 (2) is in compliance with the conditions of the license; 02 (3) provides documentation acceptable to the department of the 03 pending permit application; and 04 (4) submits to the department an executed renewal form affirming the 05 original terms of the license for the term of the renewed license. 06 (f) A carbon storage exploration license that has been renewed under (e) of 07 this section terminates immediately if the Alaska Oil and Gas Conservation 08 Commission denies the licensee's permit application under AS 41.06.105 - 41.06.210. 09 (g) The dollar amounts in (c) of this section shall increase every five years in 10 proportion to the Consumer Price Index for urban consumers for urban Alaska, as 11 determined by the United States Department of Labor, Bureau of Labor Statistics. The 12 index for January 2024 is the reference base index. 13 (h) A charge on injected volumes of carbon dioxide required under (c)(3)(B) 14 of this section or as altered by the commissioner under AS 38.05.715(c) is a royalty 15 for the purposes of the Alaska permanent fund under AS 37.13.010. 16 Sec. 38.05.710. License procedures. (a) To apply for a carbon storage 17 exploration license under AS 38.05.705, an applicant shall submit to the commissioner 18 a proposal that 19 (1) identifies the specific area to be subject to the license; 20 (2) proposes minimum work commitments; 21 (3) proposes commercial terms applicable to a carbon storage lease 22 that satisfy the requirements of AS 38.05.705(c)(3); 23 (4) demonstrates the applicant's ability to assume responsibility of a 24 carbon storage lease; 25 (5) describes how the applicant meets the minimum qualifications for a 26 licensee under applicable regulations; and 27 (6) includes an attestation of the applicant's ability to perform the 28 requirements of (2) - (4) of this subsection. 29 (b) The commissioner shall publish notice of a proposal received under (a) of 30 this section. The notice must include a solicitation for competing proposals. The 31 commissioner shall send a copy of the published notice to each lessee under 01 AS 38.05.135 - 38.05.181 within one-half mile of the area proposed for the 02 exploration license. Any person may submit a competing proposal, including a 03 proposal for the authorization of subsurface storage of oil or gas under 04 AS 38.05.180(u), under the process established by the commissioner in regulation. 05 The regulations must require that a competing proposal be submitted not later than 90 06 days after the commissioner's notice is published. 07 (c) After the period for submission of competing proposals has passed, the 08 commissioner shall issue a written finding determining whether issuance of a carbon 09 storage exploration license is in the best interests of the state. If the commissioner 10 determines that issuance of a carbon storage exploration license is in the best interests 11 of the state, the finding must 12 (1) describe the limitations, stipulations, and conditions of the license 13 and any changes to the conditions detailed in the proposal submitted under (a) of this 14 section, or a competing proposal, that are required before issuance of the exploration 15 license; 16 (2) set out the commercial terms required for the eventual conversion 17 of the exploration license into a carbon storage lease; 18 (3) if there are competing proposals from multiple applicants, identify 19 which applicants are qualified for the issuance of the exploration license and include 20 information about the competitive bid process as set out in (e) of this section; and 21 (4) include a copy of the exploration license to be issued and the form 22 of lease that will be used for any portion of the exploration license area that is later 23 converted to a lease under AS 38.05.715. 24 (d) If the commissioner determines that issuance of a carbon storage 25 exploration license is in the best interests of the state and that only one applicant is 26 qualified for a license, the applicant may accept or reject the exploration license, as 27 limited or conditioned by the terms of the finding made under (c) of this section and in 28 the form of lease attached to the finding, not later than 30 days after the date the 29 finding was issued. The applicant shall accept or reject the issuance of the carbon 30 storage exploration license in writing. If an applicant fails to respond within 30 days 31 after the finding was issued, the commissioner shall consider the applicant's failure to 01 respond as a rejection of the license. 02 (e) If the commissioner determines that issuance of a carbon storage 03 exploration license is in the best interests of the state and that more than one applicant 04 is qualified for a license, the commissioner shall issue a request for competitive sealed 05 bids, under procedures adopted by regulation, to determine which qualified applicants 06 will receive a license. If the commissioner determines that a competitive bid process is 07 necessary, the best interest finding made under (c) of this section must include notice 08 that the commissioner intends to request competitive bids. 09 (f) The commissioner shall establish in regulation the criteria for the 10 assessment of competitive bids under (e) of this section and for the determination of a 11 successful bidder. 12 (g) If a lessee under AS 38.05.135 - 38.05.181 in the area covered by a 13 proposed carbon storage exploration license participates in a competitive bid process 14 under (e) of this section and is not the successful bidder, before issuing the license, the 15 commissioner shall provide the lessee an opportunity to match the successful bid. If 16 the lessee matches the successful bid, the commissioner shall issue a carbon storage 17 exploration license to the lessee. 18 (h) A carbon storage exploration license issued under this section and a carbon 19 storage lease under AS 38.05.715 or 38.05.720 must include 20 (1) a covenant from the licensee or lessee not to unreasonably interfere 21 with the rights of a lessee under AS 38.05.135 - 38.05.181; and 22 (2) a clause by which the licensee or lessee indemnifies the state for 23 any unreasonable interference the licensee or lessee might cause to the rights of a 24 lessee under AS 38.05.135 - 38.05.181. 25 (i) When notice is required under this section, the 26 department shall follow the requirements for notice under 27 AS 38.05.945(b) and (c). 28 Sec. 38.05.715. Conversion to lease by licensee. (a) The commissioner may 29 convert a carbon storage exploration license to a carbon storage lease if the licensee 30 complies with (b) of this section. 31 (b) To convert a carbon storage exploration license to a carbon storage lease, a 01 licensee shall provide to the commissioner a copy of the permit obtained under 02 AS 41.06.120. After receiving a copy of the permit, the commissioner may issue a 03 carbon storage lease for those areas of the exploration license approved for carbon 04 storage by the permit if the licensee has 05 (1) fulfilled the work commitments set out in the license; 06 (2) demonstrated the ability to meet the commercial terms for the lease 07 as set out in the license. 08 (c) Notwithstanding (b) of this section, if the commissioner determines that a 09 carbon storage project is in the best interests of the state and would not be 10 economically feasible under the commercial terms set by the license, the 11 commissioner may issue the carbon storage lease under alternative commercial terms. 12 A lease issued under this subsection must be supported by a written finding that 13 contains specific factual details justifying the decision, an explanation of the 14 commissioner's reasons for issuing the lease, and a description of the original terms 15 and the alternative terms of the lease. The finding must be published on the 16 commissioner's publicly available Internet website. 17 (d) A lease issued under this section must include 18 (1) commercial terms for the lease; 19 (2) the agreements required under AS 38.05.710(h); and 20 (3) any other condition or obligation the commissioner considers 21 necessary or that is required by regulation. 22 Sec. 38.05.720. Transition from enhanced oil recovery operations to 23 carbon storage operations. (a) A lessee under AS 38.05.180 shall acquire a carbon 24 storage lease before engaging in carbon storage activity that is not associated with 25 enhanced oil or gas recovery. 26 (b) At the commissioner's discretion, the commissioner may issue a carbon 27 storage lease to a lessee under AS 38.05.180 if the lessee is in compliance with 28 regulations adopted under AS 41.06.185(b). The commissioner may consider the 29 qualifications and abilities of the lessee to meet the commercial requirements of a 30 carbon storage lease and whether issuance of the lease is in the best interests of the 31 state. 01 (c) A carbon storage lease issued under this section must include 02 (1) commercial terms acceptable to the department that satisfy the 03 requirements of AS 38.05.705(c)(3); 04 (2) the agreements required under AS 38.05.710(h); 05 (3) any other condition or obligation the commissioner considers 06 necessary or that is required by regulation. 07 (d) Before a carbon storage lease issued under this section may be transferred 08 or assigned to an entity that is not the responsible party under the existing oil and gas 09 lease under AS 38.05.180, the assuming party must provide financial assurance 10 acceptable to the department that the obligations of the lease can be met. 11 (e) The department may adopt regulations that allow all or part of a lease 12 issued under AS 38.05.180 to be transitioned to a lease under this section upon the 13 receipt of a permit issued under AS 41.06.185. 14 Sec. 38.05.725. Plan of development and operations; unitization. (a) The 15 commissioner shall require the filing and approval of a plan of development and 16 operation for a carbon storage lease. 17 (b) To prevent or assist in preventing waste, and to protect the correlative 18 rights of persons owning interest in the tracts of land affected, with the approval of the 19 commissioner, a group of lessees may validly integrate the lessees' interests to provide 20 for the unitized management, development, and operation of the tracts of land as a 21 unit. The commissioner may suspend or modify a development plan approved under 22 (a) of this section in accordance with the unit agreement. In this subsection, "unit 23 agreement" means an agreement by lessees with an interest in the unit, the state, and 24 any other carbon storage lessor with an interest in the unit. 25 (c) A lease operated under a plan approved or prescribed by the commissioner 26 under this section is excepted from determining holdings or control under 27 AS 38.05.140. The provisions of this section concerning cooperative or unit plans are 28 in addition to and do not affect AS 31.05 and AS 41.06. 29 Sec. 38.05.730. Payments from carbon storage exploration licenses and 30 carbon storage leases. Except as otherwise provided in AS 38.05.705(h) or under art. 31 IX, sec. 15, Constitution of the State of Alaska, the department shall deposit in the 01 general fund the money it collects under AS 38.05.700 - 38.05.795. 02 Sec. 38.05.735. Annual report to the legislature. The commissioner shall 03 prepare an annual report that includes an accounting of the carbon storage closure trust 04 fund established under AS 37.14.850 and information on carbon storage licensing 05 applications and decisions and the issuance of carbon storage leases. The 06 commissioner shall submit the report to the senate secretary and the chief clerk of the 07 house of representatives on or before February 1 of each year and notify the legislature 08 that the report is available. 09 Sec. 38.05.740. Removal and restoration after termination. Upon 10 termination of a license under AS 38.05.705 or a lease under AS 38.05.715 or 11 38.05.720, a licensee or lessee shall promptly remove all improvements and 12 equipment, except as otherwise approved in writing by the commissioner, and shall 13 restore the land to a condition that is approved by the commissioner. 14 Sec. 38.05.795. Definitions. In AS 38.05.700 - 38.05.795, unless the context 15 requires otherwise, 16 (1) "carbon storage" means the underground storage of carbon dioxide 17 in a carbon storage reservoir; 18 (2) "enhanced oil or gas recovery" has the meaning in AS 41.06.210; 19 (3) "reservoir" has the meaning given in AS 41.06.210. 20 * Sec. 22. AS 38.05.965(6) is amended to read: 21 (6) "geothermal resources" means the natural heat of the earth at 22 temperatures greater than 80 [120] degrees Celsius, measured at the point where the 23 highest-temperature resources encountered enter or contact a well or other resource 24 extraction device, and includes 25 (A) the energy, including pressure, in whatever form present in, 26 resulting from, created by, or that may be extracted from that natural heat; 27 (B) the material medium, including the geothermal fluid 28 naturally present, as well as substances artificially introduced to serve as a heat 29 transfer medium; and 30 (C) all dissolved or entrained minerals and gases that may be 31 obtained from the material medium, but excluding hydrocarbon substances and 01 helium; 02 * Sec. 23. AS 38.35.020(a) is amended to read: 03 (a) Rights-of-way on state land, including rights-of-way over, under, along, 04 across, or on [UPON] the right-of-way of a public road or highway or the right-of-way 05 of a railroad or other public utility, or across, on [UPON], over, or under a river or 06 other body of water or land belonging to or administered by the state may be granted 07 by noncompetitive lease by the commissioner for pipeline purposes for the 08 transportation of oil, products, carbon dioxide, or natural gas under those conditions 09 prescribed by law or by administrative regulation. Except to the extent authorized by 10 an oil and gas lease, a gas only lease, or a carbon storage lease, or an oil and gas, 11 [OR] gas only, or carbon storage unit agreement approved by the state, no person 12 may engage in any construction or operation of any part of an oil, products, carbon 13 dioxide, or natural gas pipeline that is or is proposed to be, [WHICH] in whole or in 14 part, [IS OR IS PROPOSED TO BE] on state land unless that person has obtained 15 from the commissioner a right-of-way lease of the land under this chapter. 16 * Sec. 24. AS 38.35.020(b) is amended to read: 17 (b) The commissioner may by regulation exempt from the requirement of a 18 right-of-way lease under this chapter the construction or operation of 19 (1) field gathering lines or any reasonable classification of field 20 gathering lines; and 21 (2) a pipeline transporting carbon dioxide within a field for the 22 purpose of an enhanced oil or gas recovery project under AS 41.06.185 or field 23 pressurization measures within that same field [THEM FROM THE 24 REQUIREMENT OF A RIGHT-OF-WAY LEASE UNDER THIS CHAPTER]. 25 * Sec. 25. AS 38.35.122 is amended to read: 26 Sec. 38.35.122. Products pipeline and carbon dioxide transportation 27 pipeline leases. The commissioner has discretion to include any or all of the terms set 28 out in AS 38.35.120 in leases of state land for products pipeline right-of-way purposes 29 or carbon dioxide transportation pipeline right-of-way purposes. 30 * Sec. 26. AS 38.35.230(3) is amended to read: 31 (3) "lease" means the instrument or extension of an instrument issued 01 under this chapter granting a leasehold interest in state land for pipeline right-of-way 02 purposes to a person and authorizing the construction or operation of, or the 03 transportation, service, or sale by, a pipeline for crude oil, natural gas, carbon 04 dioxide, or products; 05 * Sec. 27. AS 38.35.230(7) is amended to read: 06 (7) "pipeline" or "pipeline facility" means all the facilities of a total 07 system of pipe, whether owned or operated under a contract, agreement, or lease, used 08 by a carrier for transportation of crude oil, natural gas, carbon dioxide, or products for 09 delivery, for storage, or for further transportation, and including all pipe, pump or 10 compressor stations, station equipment, tanks, valves, access roads, bridges, airfields, 11 terminals and terminal facilities, including docks and tanker loading facilities, 12 operations control center for both the upstream part of the pipeline and the terminal, 13 tanker ballast treatment facilities, and fire protection system, communication system, 14 and all other facilities used or necessary for an integral line of pipe, taken as a whole, 15 to carry out [EFFECTUATE] transportation, including an extension or enlargement 16 of the line; 17 * Sec. 28. AS 38.35.230(10) is amended to read: 18 (10) "transportation" means the shipment or carriage by a pipeline of 19 crude oil, natural gas, carbon dioxide, or products from an upstream terminus in one 20 or more fields or points of production or supply of the minerals to a downstream 21 terminus in one or more points for delivery of the minerals to a purchaser or 22 consignee, for storage, or for further carriage or shipment, including shipment or 23 carriage within the state that may be classified as interstate or foreign transportation to 24 the extent that the transportation may constitutionally be subjected to the provisions of 25 this chapter, as well as all services necessary to carry out [EFFECTUATE] shipment 26 or carriage, including [, AMONG OTHER THINGS,] the receipt, storage, processing, 27 handling, transfer in transit, forwarding, and delivery of the minerals. 28 * Sec. 29. AS 38.35.230 is amended by adding a new paragraph to read: 29 (11) "carbon dioxide" has the meaning given in AS 41.06.210. 30 * Sec. 30. AS 41.06.005 is amended to read: 31 Sec. 41.06.005. Jurisdiction over geothermal resources. (a) The commission 01 has jurisdiction under AS 41.06.005 - 41.06.060 [THIS CHAPTER] over geothermal 02 wells to prevent waste, to protect correlative rights, and to ensure public safety. 03 (b) The Department of Natural Resources has jurisdiction under AS 41.06.005 04 - 41.06.060 [THIS CHAPTER] over management of geothermal leases and units in the 05 public interest and to effect development. 06 * Sec. 31. AS 41.06.020 is amended to read: 07 Sec. 41.06.020. Authority of commission; application. (a) The commission 08 has jurisdiction over all persons and property, public and private, necessary to carry 09 out the purposes and intent of AS 41.06.005 - 41.06.060 [THIS CHAPTER]. 10 (b) The authority of the commission applies to all land in the state lawfully 11 subject to the police power of the state, including private land, municipal land, state 12 land, land of the United States, and land subject to the jurisdiction of the United 13 States, and to all land included in a voluntary cooperative or unit plan of development 14 or operation entered into in accordance with AS 38.05.181. When land that is subject 15 to the commission's authority is committed to a unit agreement involving land subject 16 to federal jurisdiction, the operation of AS 41.06.005 - 41.06.060 [THIS CHAPTER] 17 or a part of AS 41.06.005 - 41.06.060 [THIS CHAPTER] may be suspended if 18 (1) the unit operations are regulated by the United States; and 19 (2) the conservation of geothermal resources is accomplished under the 20 unit agreement. 21 (c) The provisions of AS 41.06.005 - 41.06.060 apply [THIS CHAPTER 22 APPLIES] 23 (1) to wells drilled in search of, in support of, or for the recovery or 24 production of geothermal resources; 25 (2) when a person engaged in drilling activity not otherwise subject to 26 the provisions of AS 41.06.005 - 41.06.060 [THIS CHAPTER] encounters geothermal 27 resources, fluid, or water of sufficient heat or pressure to constitute a threat to human 28 life or health unless the drilling operation is subject to oil and gas drilling regulation 29 under AS 31.05; 30 (3) in areas and under conditions in which the commission determines 31 that drilling may encounter geothermal resources, fluid, or water of sufficient heat or 01 pressure to constitute a threat to human life or health. 02 (d) To the extent the provisions of AS 31.05 do not conflict with the 03 provisions of AS 41.06.005 - 41.06.060 [THIS CHAPTER], the provisions of 04 AS 31.05 are applicable to wells drilled in search of, in support of, or for the recovery 05 or production of geothermal resources. 06 (e) Nothing in AS 41.06.005 - 41.06.060 [THIS CHAPTER] limits the 07 authority of the department 08 (1) over geothermal resources under AS 38.05.181; or 09 (2) to approve and manage geothermal units or operations that include 10 state land. 11 * Sec. 32. AS 41.06.030(e) is amended to read: 12 (e) The commissioner may adopt regulations under AS 44.62 (Administrative 13 Procedure Act) to carry out the purposes and intent of AS 41.06.005 - 41.06.060 14 [THIS CHAPTER] for duties assigned to the department, including the promotion of 15 maximum economic recovery. 16 * Sec. 33. AS 41.06.035(b) is amended to read: 17 (b) The commission may adopt regulations under AS 44.62 (Administrative 18 Procedure Act) and issue orders appropriate to carry out the purposes and intent of 19 AS 41.06.005 - 41.06.060 [THIS CHAPTER] for duties assigned to the commission, 20 including orders regarding the establishment of drilling units for pools as set out in 21 AS 31.05.100 and orders regarding unitized operation and integration of interests as 22 set out in AS 31.05.110. 23 * Sec. 34. AS 41.06.040(a) is amended to read: 24 (a) The commission shall adopt regulations under AS 44.62 (Administrative 25 Procedure Act), issue orders, and take other appropriate action to carry out the 26 purposes and intent of AS 41.06.005 - 41.06.060 [THIS CHAPTER], including 27 adopting regulations to prevent 28 (1) geothermal resources, water or other fluids, and gases from 29 escaping into strata other than that in which they are found, unless in accordance with 30 an approved reinjection program; 31 (2) contamination of surface and groundwater; 01 (3) premature degradation of a geothermal system by water 02 encroachment or otherwise; 03 (4) blowouts, cavings, and seepage; and 04 (5) unreasonable disturbance or injury to neighboring properties, prior 05 water rights, prior oil or gas rights, human life, health, and the natural environment. 06 * Sec. 35. AS 41.06.050(e) is amended to read: 07 (e) In making the determination under (d) of this section, the commission shall 08 consider whether the 09 (1) proposed well will significantly interfere with or substantially 10 impair a prior water, oil, or gas right; 11 (2) proposed well is contrary to a provision of AS 41.06.005 - 12 41.06.060 [THIS CHAPTER], a regulation adopted by the commission, another law, 13 or an order, stipulation, or term of a permit issued by the commission; and 14 (3) applicant is in violation of a provision of AS 41.06.005 - 41.06.060 15 [THIS CHAPTER], a regulation adopted by the commission, another law, or an order, 16 stipulation, or term of a permit issued by the commission; the commission shall 17 consider the magnitude of the violation. 18 * Sec. 36. AS 41.06.055(c) is amended to read: 19 (c) The commission shall determine the regulatory cost charges levied under 20 this section so that the total amount to be collected approximately equals the 21 appropriations made for the operating costs of the commission that have been incurred 22 under AS 41.06.005 - 41.06.060 [THIS CHAPTER] for the fiscal year. 23 * Sec. 37. AS 41.06.055(d) is amended to read: 24 (d) The commission shall collect the regulatory cost charges imposed under 25 this section. The Department of Administration shall identify the amount of 26 appropriations made for the operating costs of the commission under AS 41.06.005 - 27 41.06.060 [THIS CHAPTER] that lapse into the general fund each year. The 28 legislature may appropriate an amount that is at least equal to the lapsed amount to the 29 commission for its operating costs under AS 41.06.005 - 41.06.060 [THIS 30 CHAPTER] for the next fiscal year. If the legislature makes an appropriation to the 31 commission under this subsection that is equal to or greater than the lapsed amount, 01 the commission shall reduce the total regulatory cost charge collected for that fiscal 02 year by a comparable amount. 03 * Sec. 38. AS 41.06.060 is amended to read: 04 Sec. 41.06.060. Definitions. In AS 41.06.005 - 41.06.060 [THIS CHAPTER], 05 unless the context otherwise requires, 06 (1) "commercial use" means the sale of heat or power to a third party; 07 (2) "commission" means the Alaska Oil and Gas Conservation 08 Commission created under AS 31.05.005; 09 (3) "correlative rights" means the right of an owner of each property in 10 a geothermal system to produce without waste the owner's just and equitable share of 11 the geothermal resources in the geothermal system; a just and reasonable share is an 12 amount, so far as can be practically determined and so far as can be practically 13 produced without waste, that is substantially in proportion to the quantity of 14 recoverable geothermal resources under the owner's property relative to the total 15 recoverable geothermal resources in the geothermal system; 16 (4) "geothermal fluid" means liquids and steam at temperatures greater 17 than 120 degrees Celsius or any commercial use of liquids and steam naturally present 18 in a geothermal system at temperatures less than 120 degrees Celsius; 19 (5) "geothermal resources" 20 (A) means the natural heat of the earth at temperatures greater 21 than 120 degrees Celsius, or any use of that heat for commercial purposes, 22 measured at the point at which [WHERE] the highest-temperature resources 23 encountered enter or contact a well or other resource extraction device or any 24 commercial use of the natural heat of the earth; 25 (B) includes 26 (i) the energy, including pressure, in whatever form 27 present in, resulting from, created by, or that may be extracted from 28 that natural heat; 29 (ii) the material medium, including steam and other 30 gases, hot water, and hot brines constituting the geothermal fluid 31 naturally present, as well as substances artificially introduced to serve 01 as a heat transfer medium; and 02 (iii) all dissolved or entrained minerals and gases that 03 may be obtained from the material medium, but excluding hydrocarbon 04 substances and helium; 05 (6) "geothermal system" means a stratum, pool, reservoir, or other 06 geologic formation containing geothermal resources; 07 (7) "operator" means a person drilling, maintaining, operating, 08 producing, or in control of a well; 09 (8) "owner" means the person who has the right to drill into or produce 10 from a geothermal system and to appropriate the geothermal resources produced from 11 a geothermal system for that person and others; 12 (9) "waste" means, in addition to its ordinary meaning, physical waste, 13 and includes an inefficient, excessive, or improper production, use, or dissipation of 14 geothermal resources, including 15 (A) drilling, transporting, or storage methods that cause or tend 16 to cause unnecessary surface loss of geothermal resources; 17 (B) locating, spacing, drilling, equipping, operating, producing, 18 or venting of a well in a manner that results or tends to result in reducing the 19 ultimate economic recovery of geothermal resources; 20 (10) "well" means a well drilled, converted, or reactivated for the 21 discovery, testing, production, or subsurface injection of geothermal resources. 22 * Sec. 39. AS 41.06 is amended by adding new sections to read: 23 Article 2. Carbon Storage; Injection. 24 Sec. 41.06.105. Jurisdiction over storage facilities. The commission has 25 jurisdiction under AS 41.06.105 - 41.06.210 over storage facilities to prevent waste, 26 protect correlative rights, and ensure public health and safety. 27 Sec. 41.06.110. Authority of the commission. (a) The authority of the 28 commission applies to all land 29 (1) in the state lawfully subject to the police power of the state, 30 including private land, municipal land, state land, federal land, and land subject to the 31 jurisdiction of the United States; and 01 (2) included in a voluntary cooperative or unit plan of development or 02 operation entered into in accordance with AS 38.05.725. 03 (b) When land that is subject to the commission's authority is committed to a 04 unit agreement involving land subject to federal jurisdiction, the operation of 05 AS 41.06.105 - 41.06.210 may be suspended if 06 (1) the unit operations are regulated by the United States; and 07 (2) conservation of resources in the reservoir or pool is accomplished 08 in the agreement. 09 (c) The commission has the authority to 10 (1) regulate activities related to a storage facility, including the 11 construction, operation, and closure of the facility; 12 (2) require that storage operators provide assurance, including bonds, 13 that money is available to fulfill the storage operator's duties; 14 (3) enter, at a reasonable time and in a reasonable manner, a storage 15 facility to 16 (A) inspect equipment and facilities; 17 (B) observe, monitor, and investigate operation; and 18 (C) inspect records required to be maintained at the facility; 19 (4) exercise continuing jurisdiction over storage operators and storage 20 facilities, including the authority, after notice and hearing, to amend provisions in a 21 permit and to revoke a permit; and 22 (5) dissolve or change the boundaries of an oil or gas field or unit 23 established by the commission that is within or near the boundaries of a storage 24 reservoir. 25 (d) To the extent AS 31.05 does not conflict with AS 41.06.105 - 41.06.210, 26 the provisions of AS 31.05 are applicable to wells drilled in search of, in support of, 27 and for carbon storage. 28 (e) Nothing in AS 41.06.105 - 41.06.210 limits the authority of the 29 Department of Natural Resources under AS 38.05.700 - 38.05.795 or AS 41.06.305. 30 Sec. 41.06.115. Waste prohibited; investigation. Waste in a storage facility 31 or storage reservoir in the state is prohibited. The commission may investigate to 01 determine whether waste exists or is imminent, or whether other facts exist that justify 02 or require action by the commission to prohibit waste. The injection of carbon dioxide 03 and substances commonly associated with carbon dioxide injection is not considered 04 waste. 05 Sec. 41.06.120. Storage facility permit. (a) A storage operator is required to 06 obtain a permit from the commission to operate a storage facility. 07 (b) A permit may not be transferred unless the commission consents. 08 (c) A person applying for a permit shall 09 (1) request a preapplication meeting with the commission staff; 10 (2) comply with application requirements; 11 (3) pay a fee in an amount determined by the commission; and 12 (4) pay the commission the cost the commission incurs in reviewing 13 the person's application, publishing notices for hearings, and holding hearings on the 14 person's permit application. 15 (d) A permit application must include sufficient information to enable the 16 commission to determine whether the storage facility will interfere with or impair an 17 existing water, oil, gas, or other mineral interest. 18 (e) The commission shall set the amount of the fee in (c)(3) of this section 19 based on the anticipated cost to the commission associated with processing 20 applications, including preliminary work in advance of receiving an application. The 21 commission may enter into an agreement with a prospective applicant that requires the 22 applicant to reimburse the commission for reasonable costs of work incurred in 23 preparing for activities before the commission receives an application. 24 (f) The commission shall deposit fees collected under this section in the 25 carbon dioxide storage facility administrative fund established in AS 41.06.160. 26 Sec. 41.06.125. Hearing on permit application. (a) Before issuing a permit 27 for a storage facility, the commission shall hold a public hearing. 28 (b) The commission shall provide notice of a public hearing under this section. 29 The commission shall provide notice in the same manner as a notice under 30 AS 31.05.050(b) and shall provide notice to 31 (1) each mineral lessee, mineral owner, and mineral right owner of 01 record within the storage reservoir and within one-half mile of the boundaries of the 02 storage reservoir; 03 (2) each surface owner of land overlying the storage reservoir and 04 within one-half mile of the boundaries of the storage reservoir; and 05 (3) any additional persons that the commission considers necessary. 06 (c) A hearing notice required by this section must comply with deadlines set 07 by the commission. 08 Sec. 41.06.130. Permit requirements. (a) The commission shall consult with 09 the Department of Environmental Conservation and the Department of Natural 10 Resources before issuing a permit under AS 41.06.120. 11 (b) Before the commission may approve a permit application submitted under 12 AS 41.06.120, the commission must find 13 (1) that the storage operator has complied with all requirements set by 14 the commission; 15 (2) that the proposed storage facility is suitable and feasible for carbon 16 storage; 17 (3) that the carbon dioxide to be stored is of a quality that allows it to 18 be safely and efficiently stored in the storage reservoir; 19 (4) that the storage operator has made a good faith effort to get the 20 consent of all persons with an ownership interest in the proposed storage reservoir and 21 surface owners of land overlying the proposed storage reservoir; 22 (5) if the proposed storage facility contains commercially valuable 23 minerals, that the interests of the mineral owners or mineral lessees will not be 24 adversely affected or have been addressed in an arrangement entered into by the 25 mineral owners or mineral lessees and the storage operator; 26 (6) that the proposed storage facility will not adversely affect surface 27 water or formations containing fresh water; 28 (7) that carbon dioxide is not reasonably anticipated to escape from the 29 storage reservoir; 30 (8) that substances that compromise the objectives of AS 41.06.105 - 31 41.06.210 or the integrity of a storage reservoir will not enter a storage reservoir; 01 (9) that the proposed storage facility will not endanger human health or 02 unduly endanger the environment; 03 (10) that the proposed storage facility is in the public interest; 04 (11) that the horizontal and vertical boundaries of the proposed storage 05 reservoir are defined and the boundaries include buffer areas to ensure that the storage 06 facility is operated safely and as contemplated; 07 (12) that the storage operator will establish monitoring facilities and 08 protocols to assess the location and migration of carbon dioxide injected for carbon 09 storage and to ensure compliance with all permit, statutory, and administrative 10 requirements; 11 (13) that all nonconsenting landowners or holders of mineral rights are, 12 or will be, equitably compensated; and 13 (14) that the storage operator is not in violation of a provision of 14 AS 41.06.105 - 41.06.210 or regulations adopted by the commission. 15 Sec. 41.06.135. Permit provisions. The commission may include in a permit 16 or order any parameters necessary to carry out the objectives of AS 41.06.105 - 17 41.06.210, prevent waste, protect correlative rights, and ensure the health and safety of 18 persons affected by the permit. 19 Sec. 41.06.140. Amalgamating property interests. If a storage operator does 20 not obtain the consent of all persons with an ownership interest in the storage 21 reservoir, the commission may order that the pore space rights of nonconsenting 22 owners be included in a storage facility and subject to carbon storage. Before the 23 commission may issue an order forming an amalgamation under this section, the 24 commission shall provide public notice and hold a hearing. 25 Sec. 41.06.145. Certificate. When the commission issues a permit under 26 AS 41.06.120, the commission shall also issue a certificate that states that the permit 27 has been issued, describes the area covered, and contains other information the 28 commission considers appropriate. The storage operator may file a copy of the 29 certificate with the office of the recorder in the district in which the storage facility is 30 located. 31 Sec. 41.06.150. Environmental protection; storage reservoir integrity. (a) 01 The commission shall take action to ensure that 02 (1) substances that compromise the integrity of a storage reservoir do 03 not enter a storage reservoir; and 04 (2) carbon dioxide does not escape from a storage facility. 05 (b) For the purposes of this section, and in the application of other laws, 06 carbon dioxide that is stored and remains in carbon storage under a permit is not 07 considered a pollutant and does not constitute a nuisance. 08 (c) The commission's authority under (a) of this section does not limit the 09 jurisdiction of the Department of Environmental Conservation. 10 Sec. 41.06.155. Preservation of rights. Nothing in AS 41.06.105 - 41.06.210 11 (1) prejudices the rights of a person with a property interest in a 12 storage facility to exercise rights that have not been committed to the storage facility; 13 or 14 (2) prevents a mineral owner or mineral lessee from drilling through or 15 near a storage reservoir to explore for and develop minerals if the drilling, production, 16 and related activities comply with requirements set by the commission to preserve the 17 integrity of the storage facility and protect the objectives of AS 41.06.105 - 41.06.210. 18 Sec. 41.06.160. Fees; carbon dioxide storage facility administrative fund. 19 (a) A storage operator shall pay to the commission a fee on each metric ton of carbon 20 dioxide injected for carbon storage. The commission shall set the amount of the fee 21 based on the anticipated expenses the commission will incur in regulating storage 22 facilities during each phase, including the construction, operational, and pre- 23 completion phases. The commission shall deposit a fee collected under this subsection 24 in the carbon dioxide storage facility administrative fund established in (b) of this 25 section. 26 (b) The carbon dioxide storage facility administrative fund is established in 27 the general fund. The fund consists of 28 (1) fees received under (a) of this section; 29 (2) fees received under AS 41.06.120 and 41.06.195; and 30 (3) interest earned on money in the fund. 31 (c) Money in the carbon dioxide storage facility administrative fund shall be 01 separately accounted for under AS 37.05.142. The legislature may appropriate the 02 money in the fund to the commission to carry out the purposes of AS 41.06.105 - 03 41.06.210. 04 Sec. 41.06.165. Title to carbon dioxide. The storage operator has title to the 05 carbon dioxide injected into and stored in a storage reservoir and holds title until the 06 commission issues a certificate of completion under AS 41.06.170. While the storage 07 operator holds title, the operator is liable for any damage the carbon dioxide may 08 cause, including damage caused by carbon dioxide that escapes from the storage 09 facility. When a certificate of completion is issued under AS 41.06.170, title to carbon 10 dioxide injected into and stored in a storage reservoir is transferred to the owner of the 11 pore space, unless the storage operator and the owner of the pore space have a 12 contrary agreement. 13 Sec. 41.06.170. Certificate of completion. (a) Once a storage operator 14 discontinues carbon dioxide injections into a storage reservoir, and upon application 15 by the storage operator, the commission may issue a certificate of completion 16 (1) only after public notice and hearing; the commission shall establish 17 notice requirements for a hearing under this paragraph; 18 (2) only after the commission consults with the Department of 19 Environmental Conservation, the Department of Natural Resources, and all persons 20 with an ownership interest in the storage reservoir; and 21 (3) after a period of at least 50 years, or another period approved by 22 the commission for the storage reservoir based on requirements established in 23 regulation, has elapsed since the last carbon dioxide injection into the storage 24 reservoir. 25 (b) The commission may issue a certificate of completion only if the storage 26 operator 27 (1) has fully complied with all laws governing the storage facility; 28 (2) shows that the operator has addressed all pending claims regarding 29 the operation of the storage facility; 30 (3) shows that the underground place or pore space in which the 31 injected carbon dioxide is stored is not expected to pose a threat to human health, 01 human safety, the environment, or underground sources of drinking water; 02 (4) shows that the stored or injected carbon dioxide is unlikely to cross 03 an underground or pore space boundary and is not expected to endanger an 04 underground source of drinking water or otherwise endanger human health, human 05 safety, or the environment; 06 (5) shows that all wells, equipment, and facilities allowed to remain in 07 place following post-injection site care and site closure are in good condition and 08 retain mechanical integrity; 09 (6) shows that the operator has plugged wells, removed equipment and 10 facilities, and completed reclamation work as required by the commission and the 11 Department of Natural Resources; 12 (7) has paid all fees and surcharges owed for the storage facility; and 13 (8) meets any other regulatory requirements established by the state. 14 (c) Once a certificate of completion is issued, the department assumes primary 15 responsibility for long-term monitoring and maintenance of the storage facility, as 16 provided in AS 41.06.305. The storage operator and all persons who generated 17 injected carbon dioxide are released from liability to the state associated with the 18 storage facility in an amount equal to the amount attributed to the storage facility in 19 the carbon storage closure trust fund established in AS 37.14.850. The state, the 20 department, or the commission is not liable for damages arising out of, or in any 21 manner connected with, long-term monitoring and maintenance of a storage facility if 22 the amount for the storage facility separately accounted for in the carbon storage 23 closure trust fund established in AS 37.14.850 is unavailable or insufficient. A bond 24 posted by the storage operator under AS 41.06.110(c)(2) must be released. In this 25 subsection, "long-term monitoring and maintenance" has the meaning given in 26 AS 41.06.305(e). 27 Sec. 41.06.175. Carbon storage facility injection surcharge. (a) A storage 28 operator injecting carbon dioxide at a storage facility shall pay to the commission a 29 surcharge each year for the first 12 years that carbon dioxide is injected at the storage 30 facility. The commission shall deposit the surcharge into the general fund. The 31 legislature may appropriate a surcharge collected under this subsection into the carbon 01 storage closure trust fund established in AS 37.14.850. 02 (b) The annual surcharge in this section is determined by the following 03 formula: S = (7,500,000 x (I/261.78)) / 12, where 04 (1) S is the dollar amount of the annual surcharge for a storage facility; 05 (2) I is equal to the Consumer Price Index for urban consumers for 06 urban Alaska, as determined by the United States Department of Labor, Bureau of 07 Labor Statistics, without seasonal adjustment, for December of the calendar year 08 immediately preceding the year of issuance of the storage facility permit. 09 Sec. 41.06.180. Penalties. (a) In addition to the penalties in (b) - (d) of this 10 section, a person who violates a provision of AS 41.06.105 - 41.06.210, a regulation 11 adopted under AS 41.06.105 - 41.06.210, or an order or term of a permit issued by the 12 commission under AS 41.06.105 - 41.06.210 is liable for a civil penalty of not more 13 than $100,000 for the initial violation and not more than $10,000 for each day 14 thereafter on which the violation continues. 15 (b) A person who knowingly commits an act specified in AS 11.46.630(a) for 16 the purpose of evading a provision of AS 41.06.105 - 41.06.210, a regulation adopted 17 under AS 41.06.105 - 41.06.210, or an order, stipulation, or term of a permit issued by 18 the commission is guilty of a class A misdemeanor. 19 (c) A person who knowingly violates a provision of AS 41.06.105 - 41.06.210, 20 a regulation adopted under AS 41.06.105 - 41.06.210, or an order, stipulation, or term 21 of a permit issued by the commission is guilty of a class A misdemeanor punishable 22 by a fine of not more than $10,000 a day for each day of violation. 23 (d) A person who knowingly aids or abets another person in the violation of a 24 provision of AS 41.06.105 - 41.06.210, a regulation adopted under AS 41.06.105 - 25 41.06.210, or an order, stipulation, or term of a permit issued by the commission is 26 subject to the same penalty as that prescribed in this section for the violation by the 27 other person. 28 (e) The commission may assess the civil penalties provided in this section, 29 and, if not paid, the penalties are recoverable by suit filed by the attorney general in 30 the name and on behalf of the commission in the superior court. The payment of a 31 penalty does not relieve a person on whom the penalty is imposed from liability to any 01 other person for damages arising out of the violation. 02 (f) In determining the amount of a penalty assessed under (a) of this section, 03 the commission shall consider 04 (1) the extent to which the person committing the violation was acting 05 in good faith in attempting to comply; 06 (2) the extent to which the person committing the violation acted in a 07 wilful or knowing manner; 08 (3) the extent and seriousness of the violation and the actual or 09 potential threat to public health or the environment; 10 (4) the economic or environmental harm or injury to the public caused 11 by the violation; 12 (5) the economic value or other benefits derived by the person 13 committing the violation from the commission of the violation; 14 (6) any history of previous violations by the person committing the 15 violation; 16 (7) the need to deter similar behavior by the person committing the 17 violation and others similarly situated at the time of the violation or in the future; 18 (8) the effort made by the person committing the violation to correct 19 the violation and prevent future violations; and 20 (9) other matters justice requires. 21 Sec. 41.06.185. Enhanced oil or gas recovery. (a) Except as provided in (b) 22 of this section, the provisions of AS 41.06.105 - 41.06.210 do not apply to 23 applications filed with the commission proposing to use carbon dioxide for enhanced 24 oil or gas recovery. 25 (b) The commission may adopt regulations that allow enhanced oil or gas 26 recovery and related well activities to be converted to a storage facility. The 27 regulations must require that, in considering whether to approve a conversion, and 28 upon conversion, the provisions of AS 41.06.105 - 41.06.210 apply. The regulations 29 may impose additional requirements to AS 41.06.105 - 41.06.210, or describe specific 30 situations in which the requirements of AS 41.06.105 - 41.06.210 are waived, to 31 ensure that the objectives of AS 41.06.105 - 41.06.210 are met. 01 Sec. 41.06.190. Cooperative agreements and contracts. (a) The commission 02 may enter into agreements with other governments, government entities, and state 03 agencies for the purpose of carrying out the objectives of AS 41.06.105 - 41.06.210. 04 (b) The commission may enter into contracts with private persons to assist in 05 carrying out the objectives of AS 41.06.105 - 41.06.210. If an emergency exists, the 06 commission may enter into contracts without public notice and without competitive 07 bidding. 08 Sec. 41.06.195. Determining capacity of storage reservoir; carbon credits; 09 fees. (a) The commission may adopt a written policy establishing procedures and 10 criteria that the commission will use to determine the carbon storage capacity of a 11 storage reservoir, including for the purpose of enhanced oil or gas recovery. 12 (b) The purpose of determining the carbon storage capacity of a storage 13 reservoir is to facilitate calculating the amount of stored carbon dioxide for matters 14 including carbon credits, allowances, trading, emissions allocations, and offsets. The 15 commission may charge a reasonable fee to a person requesting a capacity 16 determination. The commission shall set the fee by regulation. The commission shall 17 deposit fees received under this subsection in the carbon dioxide storage facility 18 administrative fund established in AS 41.06.160. 19 (c) In this section, "carbon storage capacity of a storage reservoir" means the 20 maximum injected volume in a storage reservoir at which the pressure in the reservoir 21 does not pose a risk to the integrity of the reservoir or its ability to maintain carbon 22 storage. 23 Sec. 41.06.210. Definitions. In AS 41.06.105 - 41.06.210, unless the context 24 requires otherwise, 25 (1) "carbon dioxide" means carbon dioxide of a quality that will not 26 compromise 27 (A) the safety of carbon storage; and 28 (B) the properties of a storage reservoir that allow the reservoir 29 to effectively enclose and contain a stored gas or stored supercritical fluid; 30 (2) "carbon storage" means the underground storage of carbon dioxide 31 in a storage reservoir; 01 (3) "commission" means the Alaska Oil and Gas Conservation 02 Commission created under AS 31.05.005; 03 (4) "enhanced oil or gas recovery" means the increased recovery of 04 hydrocarbons, including oil and gas, from a common source of supply achieved by 05 artificial means or by the application of energy extrinsic to the common source of 06 supply, including pressuring, cycling, pressure maintenance or injection of a substance 07 or form of energy, including injection of water, gas, carbon dioxide, or both gas and 08 carbon dioxide, including immiscible and miscible floods, as long as the enhanced oil 09 or gas recovery does not include injection of a substance or form of energy for the sole 10 purpose of 11 (A) aiding in the lifting of fluids in the well; or 12 (B) stimulation of the reservoir at or near the well by 13 mechanical, chemical, thermal, or explosive means; 14 (5) "permit" means a storage facility permit issued under 15 AS 41.06.120; 16 (6) "pore space" means a cavity or void in a subsurface sedimentary 17 stratum; 18 (7) "reservoir" means a subsurface sedimentary stratum, formation, 19 aquifer, cavity, or void, including pore space, oil and gas reservoirs, saline formations, 20 and coal seams that are suitable, or capable of being made suitable, for injection and 21 carbon storage; 22 (8) "storage facility" means the storage reservoir, underground 23 equipment, well, and surface facilities and equipment used in accordance with a 24 permit; "storage facility" does not include pipelines, compressors, surface facilities, 25 and equipment used to transport carbon dioxide to the storage facility that are 26 unrelated to well safety and metering; 27 (9) "storage operator" means a person holding or applying for a permit; 28 (10) "storage reservoir" means a reservoir proposed, authorized, or 29 used for carbon storage; 30 (11) "supercritical fluid" means a substance at or above its critical 31 temperature and critical pressure that is neither a liquid nor a gas but that has 01 properties of both; 02 (12) "waste" means, in addition to its ordinary meaning, physical 03 waste, and includes inefficient, excessive, or improper operation of a storage facility 04 or well; 05 (13) "well" means a well that is drilled, converted, or reactivated for 06 discovery, testing, or subsurface injection into a reservoir. 07 Article 3. Long-Term Monitoring and Maintenance of Carbon Storage Facilities. 08 Sec. 41.06.305. Long-term monitoring and maintenance. (a) The 09 department shall conduct long-term monitoring and maintenance of a storage facility 10 that has been issued a certificate of completion under AS 41.06.170. 11 (b) Under this section, the authority of the department applies to all land in the 12 state lawfully subject to the police power of the state, including private land, 13 municipal land, state land, land of the United States, and land subject to the 14 jurisdiction of the United States. The department may enter, at a reasonable time and 15 in a reasonable manner, the site of a storage facility that has been issued a certificate 16 of completion under AS 41.06.170. 17 (c) The state, the department, and the commission have no obligation to pay 18 costs associated with long-term monitoring and maintenance of a storage facility in an 19 amount greater than the amount attributable to that storage facility and separately 20 accounted for under AS 37.14.850. 21 (d) The department may adopt regulations under AS 44.62 (Administrative 22 Procedure Act) to carry out the purposes of this section. 23 (e) In this section, 24 (1) "commission" means the Alaska Oil and Gas Conservation 25 Commission created under AS 31.05.005; 26 (2) "long-term monitoring and maintenance" means an activity 27 associated with monitoring and maintenance of a storage facility that has been issued a 28 certificate of completion under AS 41.06.170 and may include 29 (A) operational and long-term inspecting, testing, and 30 monitoring of the storage facility site, wells, and remaining facilities; 31 (B) remediation measures arising from the storage facility site, 01 including remediation of property and mechanical problems associated with 02 wells and remaining facilities; 03 (C) repairing mechanical leaks at the storage facility site; 04 (D) plugging and abandoning wells; 05 (E) converting wells for use as observation wells; 06 (F) purchasing or paying insurance costs for a storage facility, 07 whether commercially or through government funding; 08 (3) "storage facility" has the meaning given in AS 41.06.210. 09 * Sec. 40. AS 41.21.167(a) is amended to read: 10 (a) The land and water areas described in AS 41.21.161 are not open to 11 mineral entry under AS 38.05.135 - 38.05.275 or 38.05.700 - 38.05.795. 12 * Sec. 41. AS 41.21.491(d) is amended to read: 13 (d) Except for oil and gas leasing under AS 38.05.180 and carbon storage 14 licensing and leasing under AS 38.05.700 - 38.05.795, the mineral estate in the state- 15 owned land and water described in (a) of this section is closed to mineral entry under 16 AS 38.05.181 - 38.05.275. 17 * Sec. 42. AS 41.21.502(c) is amended to read: 18 (c) The mineral estate in the state-owned land and water described in (a) of 19 this section is open to oil and gas leasing under AS 38.05.180 and carbon storage 20 licensing and leasing under AS 38.05.700 - 38.05.795. The mineral estate in the 21 state-owned land and water described in (a) of this section is closed to mineral entry 22 under AS 38.05.181 - 38.05.275. 23 * Sec. 43. AS 41.21.617 is amended to read: 24 Sec. 41.21.617. Other uses generally. The state land and water described in 25 AS 41.21.611(b) is closed to mineral entry under AS 38.05.135 - 38.05.275 and 26 38.05.700 - 38.05.795, to commercial harvest of timber, and to sale under state land 27 disposal laws. The commissioner may lease the land described in AS 41.21.611(b) 28 under AS 38.05.070 - 38.05.105 for a purpose consistent with AS 41.21.610(a) and 29 (b). A municipality may select land within the Alaska Chilkat Bald Eagle Preserve 30 under law. 31 * Sec. 44. AS 42.05.141 is amended by adding new subsections to read: 01 (g) The commission shall, as required under AS 44.88.850(b), determine 02 whether the sale price in a gas sales agreement for gas produced through a project 03 partially or fully funded by a loan under AS 44.88.850 constitutes a just and 04 reasonable immediate delivery price for gas. 05 (h) Except as provided in AS 42.05.711(q) and (s), the commission shall 06 regulate under this chapter the service of natural gas storage and the service of 07 liquefied natural gas storage, including storage furnished by operating a natural gas 08 storage facility that is part of a 09 (1) pipeline facility operated by a pipeline carrier; or 10 (2) natural gas pipeline facility operated by a natural gas pipeline 11 carrier. 12 (i) In (h) of this section, "natural gas pipeline carrier," "natural gas pipeline 13 facility," "pipeline carrier," and "pipeline facility" have the meanings given in 14 AS 42.06.630. 15 * Sec. 45. AS 42.05.381(k) is amended to read: 16 (k) The cost to the utility of storing gas in a gas storage facility or storing 17 liquefied natural gas in a liquefied natural gas storage facility that is allowed in 18 determining a just and reasonable rate shall reflect the 19 (1) reduction in cost attributable to any exemption from a payment due 20 under AS 38.05.096 or 38.05.180(u), as applicable, and the value of a tax credit that 21 the owner of the gas storage facility received under AS 43.20.046 or 43.20.047, as 22 applicable; the [. THE] commission may request the 23 (A) [(1)] commissioner of natural resources to report the value 24 of the exemption from a payment due under AS 38.05.096 or 38.05.180(u), as 25 applicable, that the gas storage facility received; and 26 (B) [(2)] commissioner of revenue to report information on the 27 amount of tax credits claimed under AS 43.20.046 and 43.20.047, as 28 applicable, for the gas storage facility or liquefied natural gas storage facility; 29 (2) fair market value of oil and gas fields, drilling rigs, production 30 platforms, wells, and similar assets used for gas storage or liquefied natural gas 31 storage and a fair return on the fair market value of those assets; 01 (3) costs related to the dismantlement, removal, and restoration of 02 a gas storage facility or liquefied natural gas storage facility [. IN THIS 03 SUBSECTION, "GAS STORAGE FACILITY" HAS THE MEANING GIVEN IN 04 AS 31.05.032]. 05 * Sec. 46. AS 42.05.381 is amended by adding a new subsection to read: 06 (p) In (k) of this section, "gas storage facility" has the meaning given in 07 AS 31.05.032(c). 08 * Sec. 47. AS 42.05 is amended by adding a new section to article 5 to read: 09 Sec. 42.05.505. Records of gas storage facilities. Records held by the 10 commission related to the finances of a gas storage facility, a liquefied natural gas 11 storage facility, or a public utility providing the service of natural gas storage, 12 including financial statements and financial assurance agreements, are confidential 13 and are not public records under AS 40.25.100 - 40.25.295 (Alaska Public Records 14 Act). The commission may disclose information from a record subject to this section 15 only to a state or federal agency if the commission determines that disclosure of the 16 information is necessary for the commission to complete its duties. 17 * Sec. 48. AS 42.05.711(q) is amended to read: 18 (q) The service of natural gas storage furnished by operating a natural gas 19 storage facility that is [(1) PART OF A PIPELINE FACILITY OPERATED BY A 20 PIPELINE CARRIER, (2) PART OF A NATURAL GAS PIPELINE FACILITY 21 OPERATED BY A NATURAL GAS PIPELINE CARRIER, OR (3)] part of a North 22 Slope natural gas pipeline facility operated by a North Slope natural gas pipeline 23 carrier is exempt from this chapter. In this subsection, ["NATURAL GAS PIPELINE 24 CARRIER," "NATURAL GAS PIPELINE FACILITY,"] "North Slope natural gas 25 pipeline carrier [,]" and "North Slope natural gas pipeline facility [,]" ["PIPELINE 26 CARRIER," AND "PIPELINE FACILITY"] have the meanings given in 27 AS 42.06.630. 28 * Sec. 49. AS 42.05.711 is amended by adding a new subsection read: 29 (w) A liquefied natural gas import facility under the jurisdiction of the Federal 30 Energy Regulatory Commission is exempt from this chapter. 31 * Sec. 50. AS 42.06.140 is amended by adding new subsections to read: 01 (c) The commission shall regulate under AS 42.05 the service of natural gas 02 and liquefied natural gas storage, including storage furnished by operating a natural 03 gas storage facility that is part of a 04 (1) pipeline facility operated by a pipeline carrier; or 05 (2) natural gas pipeline facility operated by a natural gas pipeline 06 carrier. 07 (d) In this section, 08 (1) "service of liquefied natural gas storage" means the operation of a 09 liquefied natural gas storage facility; "service of liquefied natural gas storage" does 10 not include the storage of liquefied natural gas 11 (A) owned by or contractually obligated to the owner, operator, 12 or manager of the liquefied natural gas storage facility; or 13 (B) for which the price of storage is not separately itemized; 14 (2) "service of natural gas storage" means the operation of a natural 15 gas storage facility primarily or exclusively for the benefit of third-party customers, 16 and not for the benefit of the owner, operator, or manager of the natural gas storage 17 facility; "service of natural gas storage" does not include the storage of natural gas 18 (A) owned by or contractually obligated to the owner, operator, 19 or manager of the natural gas storage facility; or 20 (B) for which the price of storage is not separately itemized. 21 * Sec. 51. AS 43.20.036 is amended by adding a new subsection to read: 22 (k) For purposes of calculating the income tax payable under this chapter, the 23 taxpayer may not apply as a credit against tax liability the carbon oxide sequestration 24 credit allowed as to federal taxes under 26 U.S.C. 45Q (Internal Revenue Code). 25 * Sec. 52. AS 43.55.165(e) is amended to read: 26 (e) For purposes of this section, lease expenditures do not include 27 (1) depreciation, depletion, or amortization; 28 (2) oil or gas royalty payments, production payments, lease profit 29 shares, or other payments or distributions of a share of oil or gas production, profit, or 30 revenue, except that a producer's lease expenditures applicable to oil and gas produced 31 from a lease issued under AS 38.05.180(f)(3)(B), (D), or (E) include the share of net 01 profit paid to the state under that lease; 02 (3) taxes based on or measured by net income; 03 (4) interest or other financing charges or costs of raising equity or debt 04 capital; 05 (5) acquisition costs for a lease or property or exploration license; 06 (6) costs arising from fraud, wilful misconduct, gross negligence, 07 violation of law, or failure to comply with an obligation under a lease, permit, or 08 license issued by the state or federal government; 09 (7) fines or penalties imposed by law; 10 (8) costs of arbitration, litigation, or other dispute resolution activities 11 that involve the state or concern the rights or obligations among owners of interests in, 12 or rights to production from, one or more leases or properties or a unit; 13 (9) costs incurred in organizing a partnership, joint venture, or other 14 business entity or arrangement; 15 (10) amounts paid to indemnify the state; the exclusion provided by 16 this paragraph does not apply to the costs of obtaining insurance or a surety bond from 17 a third-party insurer or surety; 18 (11) surcharges levied under AS 43.55.201 or 43.55.300; 19 (12) an expenditure otherwise deductible under (b) of this section that 20 is a result of an internal transfer, a transaction with an affiliate, or a transaction 21 between related parties, or is otherwise not an arm's length transaction, unless the 22 producer establishes to the satisfaction of the department that the amount of the 23 expenditure does not exceed the fair market value of the expenditure; 24 (13) an expenditure incurred to purchase an interest in any corporation, 25 partnership, limited liability company, business trust, or any other business entity, 26 whether or not the transaction is treated as an asset sale for federal income tax 27 purposes; 28 (14) a tax levied under AS 43.55.011 or 43.55.014; 29 (15) costs incurred for dismantlement, removal, surrender, or 30 abandonment of a facility, pipeline, well pad, platform, or other structure, or for the 31 restoration of a lease, field, unit, area, tract of land, body of water, or right-of-way in 01 conjunction with dismantlement, removal, surrender, or abandonment; a cost is not 02 excluded under this paragraph if the dismantlement, removal, surrender, or 03 abandonment for which the cost is incurred is undertaken for the purpose of replacing, 04 renovating, or improving the facility, pipeline, well pad, platform, or other structure; 05 (16) costs incurred for containment, control, cleanup, or removal in 06 connection with any unpermitted release of oil or a hazardous substance and any 07 liability for damages imposed on the producer or explorer for that unpermitted release; 08 this paragraph does not apply to the cost of developing and maintaining an oil 09 discharge prevention and contingency plan under AS 46.04.030; 10 (17) costs incurred to satisfy a work commitment under an exploration 11 license under AS 38.05.132; 12 (18) that portion of expenditures, that would otherwise be qualified 13 capital expenditures, as defined in AS 43.55.023, incurred during a calendar year that 14 are less than the product of $0.30 multiplied by the total taxable production from each 15 lease or property, in BTU equivalent barrels, during that calendar year, except that, 16 when a portion of a calendar year is subject to this provision, the expenditures and 17 volumes shall be prorated within that calendar year; 18 (19) costs incurred for repair, replacement, or deferred maintenance of 19 a facility, a pipeline, a structure, or equipment, other than a well, that results in or is 20 undertaken in response to a failure, problem, or event that results in an unscheduled 21 interruption of, or reduction in the rate of, oil or gas production; or costs incurred for 22 repair, replacement, or deferred maintenance of a facility, a pipeline, a structure, or 23 equipment, other than a well, that is undertaken in response to, or is otherwise 24 associated with, an unpermitted release of a hazardous substance or of gas; however, 25 costs under this paragraph that would otherwise constitute lease expenditures under (a) 26 and (b) of this section may be treated as lease expenditures if the department 27 determines that the repair or replacement is solely necessitated by an act of war, by an 28 unanticipated grave natural disaster or other natural phenomenon of an exceptional, 29 inevitable, and irresistible character, the effects of which could not have been 30 prevented or avoided by the exercise of due care or foresight, or by an intentional or 31 negligent act or omission of a third party, other than a party or its agents in privity of 01 contract with, or employed by, the producer or an operator acting for the producer, but 02 only if the producer or operator, as applicable, exercised due care in operating and 03 maintaining the facility, pipeline, structure, or equipment, and took reasonable 04 precautions against the act or omission of the third party and against the consequences 05 of the act or omission; in this paragraph, 06 (A) "costs incurred for repair, replacement, or deferred 07 maintenance of a facility, a pipeline, a structure, or equipment" includes costs 08 to dismantle and remove the facility, pipeline, structure, or equipment that is 09 being replaced; 10 (B) "hazardous substance" has the meaning given in 11 AS 46.03.826; 12 (C) "replacement" includes renovation or improvement; 13 (20) costs incurred to construct, acquire, or operate a refinery or crude 14 oil topping plant, regardless of whether the products of the refinery or topping plant 15 are used in oil or gas exploration, development, or production operations; however, if 16 a producer owns a refinery or crude oil topping plant that is located on or near the 17 premises of the producer's lease or property in the state and that processes the 18 producer's oil produced from that lease or property into a product that the producer 19 uses in the operation of the lease or property in drilling for or producing oil or gas, the 20 producer's lease expenditures include the amount calculated by subtracting from the 21 fair market value of the product used the prevailing value, as determined under 22 AS 43.55.020(f), of the oil that is processed; 23 (21) costs of lobbying, public relations, public relations advertising, or 24 policy advocacy; 25 (22) costs incurred as part of a capital expenditure or other action taken 26 for a carbon management purpose under AS 38.05.081 or a carbon offset project under 27 AS 38.95.400 - 38.95.499; 28 (23) costs incurred for carbon capture or carbon storage, 29 including fees incurred under AS 41.06.160, surcharges incurred under 30 AS 41.06.175, or costs associated with obtaining, operating, or maintaining a 31 license or lease under AS 38.05.700 - 38.05.795; in this paragraph, 01 (A) "carbon capture" means the process of capturing 02 carbon dioxide from a chemical, mechanical, or industrial process, or 03 directly from the ambient atmosphere, and reducing the carbon dioxide to 04 a concentrated form, including a supercritical fluid; "carbon capture" 05 does not include gas processing or gas treatment; 06 (B) "carbon storage" means the long-term geologic storage 07 of carbon dioxide in a carbon storage facility permitted under 08 AS 41.06.120 or a Class VI injection well, as defined in 40 C.F.R. 146.5(f). 09 * Sec. 53. AS 44.25.020 is amended to read: 10 Sec. 44.25.020. Duties of department. The Department of Revenue shall 11 (1) enforce the tax laws of the state; 12 (2) collect, account for, have custody of, invest, and manage all state 13 funds and all revenues of the state except revenues incidental to a program of licensing 14 and regulation carried on by another state department, funds managed and invested by 15 the Alaska Retirement Management Board, and as otherwise provided by law; 16 (3) invest and manage the balance of the power development fund in 17 accordance with AS 44.83.386; 18 (4) administer the surety bond program for licensure as a fish 19 processor or primary fish buyer; 20 (5) provide reasonable assistance to the Alaska Industrial 21 Development and Export Authority under AS 44.88.850(c). 22 * Sec. 54. AS 44.37.020 is amended by adding a new subsection to read: 23 (d) The Department of Natural Resources shall provide reasonable assistance 24 to the Alaska Industrial Development and Export Authority under AS 44.88.850(c). 25 * Sec. 55. AS 44.88 is amended by adding new sections to read: 26 Article 10A. Cook Inlet Reserve-Based Lending. 27 Sec. 44.88.850. Cook Inlet reserve-based lending account. (a) The Cook 28 Inlet reserve-based lending account is established in the revolving fund. The account 29 consists of money or assets deposited into the account by the authority and 30 contributions from other sources. 31 (b) The authority may use money in the account to make one or more reserve- 01 based loans to fund oil and gas development projects the authority considers necessary 02 to increase oil and gas production from the Cook Inlet sedimentary basin. The 03 authority may, as a term of the loan, accept an ownership share in the project funded 04 by the loan. If the authority accepts an ownership share as a term of the loan, the 05 ownership share must be in the form of a carried interest that does not obligate the 06 authority to contribute to the development costs of the project. The authority may 07 make a loan under this section only 08 (1) to a legal entity in compliance with state and federal laws; 09 (2) if the loan applicant provides a written waiver permitting the 10 authority to access or obtain copies of the loan applicant's confidential records that are 11 in possession of the Department of Natural Resources or the Department of Revenue; 12 information provided to the authority under this section shall be kept confidential by 13 the authority unless disclosure is authorized by the loan applicant or borrower; 14 (3) if the authority obtains an independent study performed by an 15 experienced, qualified expert that confirms the valuation of the loan security and the 16 capacity of the loan to support the oil and gas development project and to cause or 17 increase the commercial production of oil or gas from the Cook Inlet sedimentary 18 basin; 19 (4) if the Regulatory Commission of Alaska determines, under 20 AS 42.05.141(g), that the sale price in a gas sales agreement for gas produced through 21 a project partially or fully funded by a loan under this section does not exceed a just 22 and reasonable immediate delivery price for gas; 23 (5) if the authority determines that the sales price for oil and gas 24 produced through a project partially or fully funded by a loan under this section is 25 reasonable and in the best interests of residents of the state. 26 (c) The authority may request assistance from the Department of Revenue 27 under AS 44.25.020(a)(5) or the Department of Natural Resources under 28 AS 44.37.020(d) to execute this section. 29 (d) The authority may accept an overriding royalty interest in a lease for 30 which a loan has been extended under (b) of this section if, as a term of the loan, the 31 overriding royalty interest is subject to prior approval by the Department of Natural 01 Resources. The authority may only have the overriding royalty interest transferred to 02 the authority if the borrower defaults. 03 Sec. 44.88.855. Report to the legislature on Cook Inlet oil and gas 04 development projects. (a) The authority shall evaluate oil and gas development 05 projects the authority believes have reasonable potential to increase oil and gas 06 production from the Cook Inlet sedimentary basin. Each year, the authority shall 07 prepare a report related to those oil and gas development projects and shall, by the first 08 day of each regular session of the legislature, deliver the report to the senate secretary 09 and the chief clerk of the house of representatives and notify the legislature that the 10 report is available. At the request of a legislative committee, a representative of the 11 authority shall appear in that committee to review the report. For each oil and gas 12 development project, the report must include 13 (1) a cost estimate for the project; 14 (2) the potential recoverable gas from the project; 15 (3) the projected rate of return for the project; 16 (4) if the authority recommends a reserve-based loan for the project, 17 the amount of funds necessary for deposit into the Cook Inlet reserve-based lending 18 account to provide a loan for the project and the recommended source of funds for the 19 deposit. 20 (b) Notwithstanding AS 44.88.215, 44.88.850(b)(2), or any other law, a 21 borrower's information shall be subject to the public reporting requirements under this 22 section. Each year, the authority shall prepare a report related to Cook Inlet reserve- 23 based loans made under AS 44.88.850 and shall, by the first day of each regular 24 session of the legislature, deliver the report to the senate secretary and the chief clerk 25 of the house of representatives and notify the legislature that the report is available. At 26 the request of a legislative committee, a representative of the authority shall appear in 27 that committee to review the report. The report must 28 (1) identify each entity borrowing funds under AS 44.88.850; 29 (2) list the amount borrowed by each borrower and the date each loan 30 was approved; 31 (3) include a summary of the terms of the lending agreement with each 01 borrower; 02 (4) summarize each project for which a loan was made, including the 03 status of the project and the volume of oil and gas produced and expected to be 04 produced from the project; 05 (5) list the status of payments made on the loan, including whether the 06 loan is or ever was in default. 07 * Sec. 56. AS 44.88.900 is amended by adding new paragraphs to read: 08 (20) "oil and gas development project" means a development project to 09 produce proven oil or gas reserves; 10 (21) "reserve-based loan" means a loan made against and fully secured 11 by an oil and gas field, proven undeveloped or developed oil and gas reserves, or other 12 assets of the entity receiving the loan. 13 * Sec. 57. AS 46.03.020 is amended to read: 14 Sec. 46.03.020. Powers of the department. The department may 15 (1) enter into contracts and compliance agreements necessary or 16 convenient to carry out the functions, powers, and duties of the department; 17 (2) review and appraise programs and activities of state departments 18 and agencies in light of the policy set out in AS 46.03.010 for the purpose of 19 determining the extent to which the programs and activities are contributing to the 20 achievement of that policy and to make recommendations to the departments and 21 agencies, including environmental guidelines; 22 (3) consult with and cooperate with 23 (A) officials and representatives of any nonprofit corporation or 24 organization in the state; 25 (B) persons, organizations, and groups, public and private, 26 using, served by, interested in, or concerned with the environment of the state; 27 (4) appear and participate in proceedings before any state or federal 28 regulatory agency involving or affecting the purposes of the department; 29 (5) undertake studies, inquiries, surveys, or analyses it may consider 30 essential to the accomplishment of the purposes of the department; these activities 31 may be carried out by the personnel of the department or in cooperation with public or 01 private agencies, including educational, civic, and research organizations, colleges, 02 universities, institutes, and foundations; 03 (6) at reasonable times, enter and inspect with the consent of the owner 04 or occupier any property or premises to investigate either actual or suspected sources 05 of pollution or contamination or to ascertain compliance or noncompliance with a 06 regulation that may be adopted under AS 46.03.020 - 46.03.040; information relating 07 to secret processes or methods of manufacture discovered during investigation is 08 confidential; 09 (7) conduct investigations and hold hearings and compel the 10 attendance of witnesses and the production of accounts, books, and documents by the 11 issuance of a subpoena; 12 (8) advise and cooperate with municipal, regional, and other local 13 agencies and officials in the state, to carry out the purposes of this chapter; 14 (9) act as the official agency of the state in all matters affecting the 15 purposes of the department under federal laws now or hereafter enacted; 16 (10) adopt regulations necessary to carry out the purposes of this 17 chapter, including regulations providing for 18 (A) control, prevention, and abatement of air, water, or land or 19 subsurface land pollution; 20 (B) safeguard standards for carbon dioxide, petroleum, and 21 natural gas pipeline construction, operation, modification, or alteration; 22 (C) protection of public water supplies by establishing 23 minimum drinking water standards, and standards for the construction, 24 improvement, and maintenance of public water supply systems; 25 (D) collection and disposal of sewage and industrial waste; 26 (E) collection and disposal of garbage, refuse, and other 27 discarded solid materials from industrial, commercial, agricultural, and 28 community activities or operations; 29 (F) control of pesticides; 30 (G) other purposes as may be required for the implementation 31 of the policy declared in AS 46.03.010; 01 (H) handling, transportation, treatment, storage, and disposal of 02 hazardous wastes; 03 (11) inspect the premises of sellers and suppliers of paint, vessels, and 04 marine and boating supplies, and take other actions necessary to enforce 05 AS 46.03.715; 06 (12) notwithstanding any other provision of law, take all actions 07 necessary to receive authorization from the administrator of the United States 08 Environmental Protection Agency to administer and enforce a National Pollutant 09 Discharge Elimination System program in accordance with 33 U.S.C. 1342 (sec. 402, 10 Clean Water Act), 33 U.S.C. 1345 (sec. 405, Clean Water Act), 40 C.F.R. Part 123, 11 and 40 C.F.R. Part 403, as amended; 12 (13) require the owner or operator of a facility to undertake 13 monitoring, sampling, and reporting activities described in 33 U.S.C. 1318 (sec. 308, 14 Clean Water Act); 15 (14) notwithstanding any other provision of law, take all actions 16 necessary to receive federal authorization of a state program for the department and 17 the Department of Natural Resources to administer and enforce a dredge and fill 18 permitting program allowed under 33 U.S.C. 1344 (sec. 404, Clean Water Act) and to 19 implement the program, if authorized. 20 * Sec. 58. AS 42.05.990(10)(B) and 42.05.990(11)(B) are repealed. 21 * Sec. 59. The uncodified law of the State of Alaska is amended by adding a new section to 22 read: 23 LEGISLATIVE AUDIT DIVISION REPORT TO THE LEGISLATURE. The 24 legislative audit division shall conduct an audit of carbon storage leases in the state under 25 AS 38.05.700 - 38.05.795 and submit the audit to the senate secretary and the chief clerk of 26 the house of representatives on or before January 1, 2033, and notify the legislature that the 27 audit is available. The audit must include detailed fiscal information from each fiscal year, 28 beginning with the fiscal year ending June 30, 2025, total revenues and costs to the state 29 associated with carbon storage leases in each fiscal year, and recommendations to improve the 30 carbon storage program. 31 * Sec. 60. The uncodified law of the State of Alaska is amended by adding a new section to 01 read: 02 TRANSITION: CONVERSION OF EXISTING PROSPECTING PERMIT 03 APPLICATIONS AND PROSPECTING PERMITS. (a) The commissioner of natural 04 resources shall convert an application for a prospecting permit made under AS 38.05.181(c), 05 as that subsection read on the day before the effective date of sec. 16 of this Act, that is 06 pending with the Department of Natural Resources on the effective date of sec. 16 of this Act, 07 to an application for a prospecting license under AS 38.05.181(c), as amended by sec. 16 of 08 this Act. 09 (b) A person with a valid permit issued under AS 38.05.181(c), as that subsection 10 read on the day before the effective date of sec. 16 of this Act, may request in writing that the 11 commissioner of natural resources convert the prospecting permit into a prospecting license 12 under AS 38.05.181, as amended by secs. 15 - 19 of this Act. The Department of Natural 13 Resources shall provide public notice of a request for the conversion of a prospecting permit 14 into a prospecting license under this section. 15 (c) Upon request of a person qualified under (b) of this section, the commissioner of 16 natural resources shall convert a prospecting permit issued under AS 38.05.181(c), as that 17 section read on the day before the effective date of sec. 16 of this Act, into a prospecting 18 license under AS 38.05.181, as amended by secs. 15 - 19 of this Act. Notwithstanding 19 AS 38.05.035(e), the director of the division of lands is not required to make a written finding 20 and the commissioner of natural resources is not required to expressly approve the conversion 21 of a prospecting permit into a prospecting license under this section. Notwithstanding 22 AS 38.05.181(c), as amended by sec. 16 of this Act, a prospecting permit converted into a 23 prospecting license under this section may not expire later than five years from the date the 24 permit was issued under AS 38.05.181(c), as that subsection read on the day before the 25 effective date of sec. 16 of this Act. 26 * Sec. 61. The uncodified law of the State of Alaska is amended by adding a new section to 27 read: 28 TRANSITION: REGULATIONS. The Department of Natural Resources, the 29 Department of Revenue, and the Alaska Oil and Gas Conservation Commission may adopt 30 regulations necessary to implement the changes made by this Act. The regulations take effect 31 under AS 44.62 (Administrative Procedure Act), but not before the effective date of the law 01 implemented by the regulation. 02 * Sec. 62. The uncodified law of the State of Alaska is amended by adding a new section to 03 read: 04 REVISOR'S INSTRUCTION. The revisor of statutes is requested to change the 05 chapter heading for AS 41.06 from "Geothermal Resources" to "Geothermal Resources and 06 Carbon Storage." 07 * Sec. 63. Section 61 of this Act takes effect immediately under AS 01.10.070(c).