SB 48: "An Act authorizing the Department of Natural Resources to lease land for carbon management purposes; establishing a carbon offset program for state land; authorizing the sale of carbon offset credits; and providing for an effective date."

00 SENATE BILL NO. 48 01 "An Act authorizing the Department of Natural Resources to lease land for carbon 02 management purposes; establishing a carbon offset program for state land; authorizing 03 the sale of carbon offset credits; and providing for an effective date." 04 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 05 * Section 1. AS 36.30.850(b) is amended by adding a new paragraph to read: 06 (51) contracts between third parties and the Department of Natural 07 Resources under AS 38.95.400 - 38.95.499. 08 * Sec. 2. AS 37.05.146(c) is amended by adding a new paragraph to read: 09 (85) revenue from the carbon offset program under AS 38.95.400 - 10 38.95.499. 11 * Sec. 3. AS 38.05.075(a) is amended to read: 12 (a) Except as provided in AS 38.05.035, 38.05.070, 38.05.073, 38.05.081, 13 38.05.082, 38.05.083, 38.05.087, 38.05.102, 38.05.565, 38.05.600, 38.05.810, and this 14 section, when competitive interest has been demonstrated or the commissioner

01 determines that it is in the state's best interests, leasing shall be made at public auction 02 or by sealed bid, at the discretion of the director, to the highest qualified bidder as 03 determined by the commissioner. A bidder may be represented by an attorney or agent 04 at a public auction. In the public notice of a lease to be offered at public auction or by 05 sealed bid, the commissioner shall specify a minimum acceptable bid and the lease 06 compensation method. The lease compensation method shall be designed to maximize 07 the return on the lease to the state and shall be a form of compensation set out in 08 AS 38.05.073(m). An aggrieved bidder may appeal to the commissioner within five 09 days for a review of the determination. The leasing shall be conducted by the 10 commissioner, and the successful bidder shall deposit at the public auction or with the 11 sealed bid the first year's rental or other lease compensation as specified by the 12 commissioner, or that portion of it that the commissioner requires in accordance with 13 the bid. The commissioner shall require, under AS 38.05.860, qualified bidders to 14 deposit a sum equal to any survey or appraisal costs reasonably incurred by another 15 qualified bidder acting in accordance with the regulations of the commissioner or 16 incurred by the department under AS 38.04.045 and AS 38.05.840. If a bidder making 17 a deposit of survey or appraisal costs is determined by the commissioner to be the 18 highest qualified bidder under this subsection, the deposit shall be paid to the 19 unsuccessful bidder who incurred those costs or to the department if the department 20 incurred the costs. All costs for survey and appraisal shall be approved in advance in 21 writing by the commissioner. The commissioner shall immediately issue a receipt 22 containing a description of the land or interest leased, the price bid, and the terms of 23 the lease to the successful qualified bidder. If the receipt is not accepted in writing by 24 the bidder under this subsection, the commissioner may offer the land for lease again 25 under this subsection. A lease, on a form approved by the attorney general, shall be 26 signed by the successful bidder and by the commissioner. 27 * Sec. 4. AS 38.05 is amended by adding a new section to read: 28 Sec. 38.05.081. Leases of state land for carbon management purposes. (a) 29 The commissioner may lease state land for carbon management purposes. A lease 30 agreement under this section must include land use restrictions and authorizations 31 consistent with the carbon management purpose of the lease.

01 (b) A person may apply to lease land for a carbon management purpose by 02 submitting an application to the department. An application to lease land must include 03 (1) the specific location, description, and amount of land the applicant 04 wants to lease; 05 (2) a detailed summary of the proposed purpose the land will be used 06 for; and 07 (3) additional information and requirements established by the 08 department in regulation, including any application fees. 09 (c) If the director receives two or more applications for the same land, the 10 director shall award the lease to the most qualified applicant. In determining the most 11 qualified applicant, the director shall consider whether the applicant has previous 12 experience with carbon management, the anticipated lease term, how the proposed use 13 would accommodate concurrent use of the land, consistency with existing state area or 14 management plans, and any additional requirements established by the department in 15 regulation. If one or more applicants have proposed different carbon management 16 purposes, the director may evaluate each applicant's proposal and determine which 17 proposed use is more appropriate for the selected state land. An aggrieved applicant 18 may appeal to the commissioner for a review of the director's determination within 20 19 days after receiving notice of the determination. 20 (d) A lease under this section may not exceed a period of 55 years. If during 21 the term of the lease the commissioner determines that the land is not being used for 22 the carbon management purpose approved by the commissioner, the commissioner 23 may terminate the lease. 24 (e) A lessee under this section is not entitled to a preference right to purchase 25 the leased land. 26 (f) Compensation for a lease under this section shall be designed to maximize 27 the return to the state and be a form of compensation provided under 28 AS 38.05.073(m). 29 (g) The provisions of AS 38.05.070 and 38.05.095 concerning subleasing, 30 assignment, lease renewals, and lease extensions apply to leasing under this section. 31 (h) Before entering into a lease of land under this section, the director must

01 find under AS 38.05.035(e) that leasing the land for the proposed carbon management 02 purpose is in the best interests of the state. 03 (i) In this section, "carbon management" means a greenhouse gas mitigation 04 measure or non-geologic carbon sequestration project. 05 * Sec. 5. AS 38.05.102 is amended to read: 06 Sec. 38.05.102. Lessee preference. Except for a lease under AS 38.05.081, if 07 [IF] land within a leasehold created under AS 38.05.070 - 38.05.105 is offered for sale 08 or long-term lease at the termination of the existing leasehold, the director may, upon 09 a finding that it is in the best interest of the state, allow the holder in good standing of 10 that leasehold to purchase or lease the land for its appraised fair market value at the 11 time of the sale or long-term lease. 12 * Sec. 6. AS 38.95 is amended by adding new sections to read: 13 Article 8. Carbon Offset Program. 14 Sec. 38.95.400. Carbon offset program. (a) A program is established in the 15 department to undertake carbon offset projects on state land. 16 (b) The commissioner shall adopt regulations to implement AS 38.95.400 - 17 38.95.499. 18 (c) The commissioner may enter into contracts with third parties to carry out 19 the purposes of AS 38.95.400 - 38.95.499. 20 (d) Nothing in AS 38.95.400 - 38.95.499 shall be construed as preventing a 21 private landowner from participating in a registry or exchange, or be construed as the 22 state instituting additional legal requirements on a private landowner undertaking their 23 own carbon offset projects. 24 Sec. 38.95.410. Carbon offset project criteria; evaluation; best interest 25 finding. (a) The commissioner shall adopt criteria for evaluation of a proposed carbon 26 offset project on state land. The evaluation criteria shall include, if applicable, 27 (1) consideration of a project's baseline and predicted additionality; 28 (2) whether registry protocols, including validation and verification 29 requirements, are consistent with applicable state law; 30 (3) whether a project would be consistent with AS 38.95.400 - 31 38.95.499 and applicable regulations; and

01 (4) reasonably foreseeable effects that a project may have on the state 02 or local economy. 03 (b) Except as otherwise provided in statute or regulation adopted by the 04 commissioner, state land shall be available for carbon offset projects. 05 (c) Legislatively withdrawn land may not be used for a carbon offset project 06 without approval by the legislature or as otherwise provided by law. In this subsection, 07 "legislatively withdrawn land" means land set aside by the legislature under 08 AS 16.20.010 - 16.20.170, 16.20.300 - 16.20.360, AS 41.21.110 - 41.21.990, and 09 AS 41.23.010 - 41.23.630. 10 (d) A carbon offset project may be undertaken on state land if the director, 11 with the consent of the commissioner, determines the project is in the best interests of 12 the state under AS 38.05.035(e). 13 (e) A carbon offset project term may not exceed 55 years. 14 (f) State land used for a carbon offset project must remain open to the public 15 for access, hunting, fishing, and other generally allowed uses as determined by the 16 department. 17 Sec. 38.95.420. Registration and sale of carbon offset credits; records. (a) 18 After a written finding under AS 38.95.410(d), the director may enter into an 19 agreement to register the carbon offset project to generate revenue from the sale of 20 carbon offset credits. 21 (b) The department shall maintain records for a carbon offset project 22 undertaken by the department under AS 38.95.400 - 38.95.499 for the project term and 23 any additional amount of time required by the registry. Department records must 24 include, for each carbon offset project, 25 (1) the project term; 26 (2) the anticipated annual carbon offset credits that the carbon offset 27 project will yield; 28 (3) registry agreements; and 29 (4) project administration and technical documentation associated with 30 the valuation of baseline, valuation of additionality, project validation, and project 31 verification.

01 Sec. 38.95.430. Carbon offset revenue fund. (a) Revenue from the carbon 02 offset program shall be deposited in the carbon offset revenue fund. The carbon offset 03 revenue fund is established outside the general fund for the purpose of providing 04 funding for the carbon offset program. The carbon offset revenue fund consists of 05 money appropriated to the fund by the legislature, including program receipts from the 06 sale of verified carbon offset credits. Appropriations to the fund do not lapse. 07 (b) The commissioner may spend money appropriated to the fund for the 08 purposes of the carbon offset program and to pay the costs of administering the 09 program. 10 Sec. 38.95.499. Definitions. In AS 38.95.400 - 38.95.499, unless the context 11 requires otherwise, 12 (1) "additionality" means the reduction in greenhouse gas emissions or 13 increase in carbon storage represented by a carbon offset project that is in addition to 14 the baseline; 15 (2) "baseline" means the amount of carbon sequestration that would 16 occur if the present situation is maintained in the absence of a carbon offset project; 17 (3) "carbon offset credit" means a transferrable instrument issued by a 18 registry for a validated and verified project that represents an emission reduction of 19 one metric ton of carbon dioxide or other greenhouse gases; 20 (4) "carbon offset project" means a greenhouse gas mitigation measure 21 on state land that increases the land's carbon stock, including seaweed farming, 22 afforestation, reforestation, and similar land and resource management measures; 23 (5) "commissioner" means the commissioner of natural resources; 24 (6) "department" means the Department of Natural Resources; 25 (7) "director" means the director of the division of lands; 26 (8) "greenhouse gas" means a gas that traps and emits radiant energy in 27 the earth's atmosphere, including carbon dioxide, methane, nitrous oxide, 28 hydrofluorocarbons, perfluorocarbons, and sulfur hexafluoride; 29 (9) "project term" means the length of time required by a registry for a 30 carbon offset project to yield carbon offset credits; 31 (10) "registry" means an organization or program that brokers carbon

01 offset credits and develops standardized protocols for 02 (A) registering, validating, and verifying carbon offset projects; 03 and 04 (B) issuing carbon offset credits for validated and verified 05 carbon offset projects; 06 (11) "state land" means all land, including shoreland, tideland, and 07 submerged land, or resources belonging to or acquired by the state; in this paragraph, 08 (A) "submerged land" means land that is covered by tidal water 09 between the line of mean low water and seaward to a distance of three 10 geographical miles or further as may be properly claimed by the state; 11 (B) "tideland" means land that is periodically covered by tidal 12 water between the elevation of mean high water and mean low water; 13 (C) "shoreland" means land covered by nontidal water that is 14 navigable under the laws of the United States up to ordinary highwater mark as 15 modified by accretion, erosion, or reliction; 16 (12) "validate" or "validation" means a registry's initial approval of a 17 project plan prior to verification of the project; 18 (13) "verify" or "verification" means a third party's review of a 19 validated project to confirm the project's greenhouse gas net emission reduction or 20 removals for the issuance of carbon offset credits by the registry that has validated the 21 project. 22 * Sec. 7. AS 41.15.300 is amended by adding a new subsection to read: 23 (c) The state land and water designated within the Haines State Forest 24 Resource Management Area under AS 41.15.305(a) may be used for a carbon offset 25 project under AS 38.95.400 - 38.95.499. 26 * Sec. 8. AS 41.15.315(d) is amended to read: 27 (d) The state land and water described in AS 41.15.305(a) are closed to sale 28 under state land disposal laws. The commissioner may lease the land described in 29 AS 41.15.305(a) under AS 38.05.070 - 38.05.105 for a purpose consistent with 30 AS 41.15.300(a) and a municipality may select land in the Haines State Forest 31 Resource Management Area under law. The commissioner may manage the land

01 and water described in AS 41.15.305(a) for purposes consistent with AS 38.95.400 02 - 38.95.499. 03 * Sec. 9. AS 41.15.315 is amended by adding a new subsection to read: 04 (e) A carbon offset project under AS 38.95.400 - 38.95.499 undertaken on 05 land identified in AS 41.15.305 must be consistent with the applicable management 06 plan under AS 41.15.320, and the management plan must identify the land appropriate 07 for the carbon offset project. The department may amend a management plan under 08 AS 41.15.320 to allow for a carbon offset project. 09 * Sec. 10. AS 41.17.200 is amended by adding a new subsection to read: 10 (c) A carbon offset project under AS 38.95.400 - 38.95.499 may be 11 undertaken on land identified in AS 41.17.200 - 41.17.230. 12 * Sec. 11. AS 41.17.220 is amended to read: 13 Sec. 41.17.220. Management of state forests. Land within a state forest or 14 within a unit of a state forest shall be managed under 15 (1) the sustained yield principle; 16 (2) this chapter; [AND] 17 (3) a forest management plan prepared by the department; and 18 (4) a carbon offset project undertaken by the department under 19 AS 38.95.400 - 38.95.499. 20 * Sec. 12. AS 41.17.230(a) is amended to read: 21 (a) The commissioner shall prepare a forest management plan consistent with 22 AS 38.04.005 and this chapter for each state forest and for each unit of a state forest to 23 assist in meeting the requirements of this chapter. An operational level forest 24 inventory shall be completed before a forest management plan for the state forest or 25 the unit of a state forest is adopted. The forest management plan shall be adopted, 26 implemented, and maintained within three years of the establishment of a state forest 27 by the legislature. To the extent they are found to be compatible with the primary 28 purpose of state forests under AS 41.17.200, the forest management plan must 29 consider and permit uses of forest land for nontimber purposes, including a carbon 30 offset project under AS 38.95.400 - 38.95.499, recreation, tourism, mining, mineral 31 exploration, mineral leasing, material extraction, consumptive and nonconsumptive

01 uses of wildlife and fish, grazing and other agricultural activities, and other traditional 02 uses. If the commissioner finds that a permitted use is incompatible with one or more 03 other uses in a portion of a state forest, the commissioner shall affirmatively state in 04 the management plan that finding of incompatibility for the specific area where the 05 incompatibility is anticipated to exist and the time period when the incompatibility is 06 anticipated to exist together with the reasons and benefits for each finding. 07 * Sec. 13. AS 41.17.230 is amended by adding a new subsection to read: 08 (g) A carbon offset project undertaken under AS 38.95.400 - 38.95.499 within 09 a state forest must be consistent with the applicable forest management plan, and the 10 applicable forest management plan must identify the land appropriate for the carbon 11 offset project. The department may amend a forest management plan to allow for a 12 carbon offset project. 13 * Sec. 14. The uncodified law of the State of Alaska is amended by adding a new section to 14 read: 15 TRANSITION: REGULATIONS. The Department of Natural Resources may adopt 16 regulations to implement this Act. The regulations take effect under AS 44.62 (Administrative 17 Procedure Act), but not before the effective date of the law implemented by the regulations. 18 * Sec. 15. Section 14 of this Act takes effect immediately under AS 01.10.070(c).