Legislature(2023 - 2024)

2023-01-27 Senate Journal

Full Journal pdf

2023-01-27                     Senate Journal                      Page 0107
SB 49                                                                                                                         
SENATE BILL NO. 49 BY THE SENATE RULES COMMITTEE                                                                                
BY REQUEST OF THE GOVERNOR, entitled:                                                                                           
                                                                                                                                
              "An Act relating to the geologic storage of carbon                                                               
          dioxide; and providing for an effective date."                                                                        
                                                                                                                                
was read the first time and referred to the Resources and Finance                                                               
Committees.                                                                                                                     
                                                                                                                                
The following fiscal information was published today:                                                                           
 Fiscal Note No. 1, Department of Natural Resources                                                                             
 Fiscal Note No. 2, Department of Commerce, Community, and                                                                      
          Economic Development                                                                                                  
 Fiscal Note No. 3, indeterminate, Department of Revenue                                                                        
 Fiscal Note No. 4, indeterminate, Department of Environmental                                                                  
          Conservation                                                                                                          
                                                                                                                                
Governor's transmittal letter dated January 26:                                                                                 
                                                                                                                                
Dear President Stevens:                                                                                                         
                                                                                                                                
Under the authority of Article III, Section 18, of the Alaska                                                                   
Constitution, I am transmitting a bill relating to carbon capture,                                                              
utilization, and storage (CCUS) and providing for an effective date.                                                            
                                                                                                                                
This bill is a key component of the state’s efforts to monetize its                                                             
immense carbon storage potential and maximize utilization of                                                                    
resources. CCUS projects capture carbon dioxide emitted from point                                                              

2023-01-27                     Senate Journal                      Page 0108
sources or the atmosphere and inject it deep underground into geologic                                                          
formations for utilization in industrial processes, such as enhanced oil                                                        
recovery, or for permanent sequestration.                                                                                       
                                                                                                                                
Industry interest in CCUS is growing around the country and the                                                                 
world, driven by regulatory requirements, corporate objectives, and                                                             
government financing and tax incentives. Alaska’s participation in the                                                          
industry could bring new industrial activity into the state, provide new                                                        
revenue through CCUS exploration licensing, leasing, and permitting                                                             
programs, and burnish the state’s credentials for environmentally                                                               
responsible resource development. Alaska is uniquely positioned for                                                             
success in the CCUS industry, having large, state-owned subsurface                                                              
acreage positions with highly prospective geologic formations ideal                                                             
for the underground storage of carbon dioxide.                                                                                  
                                                                                                                                
This omnibus CCUS bill establishes a CCUS leasing and regulatory                                                                
program for the state. The bill creates a framework for the Department                                                          
of Natural Resources (DNR) and the Alaska Oil and Gas Conservation                                                              
Commission (AOGCC) to permit and regulate carbon storage facilities                                                             
on lands within the state. The bill establishes an exploration licensing                                                        
and leasing program, along with a pathway for the conversion of                                                                 
enhanced oil recovery operations to sequestration operations. The bill                                                          
also establishes a mechanism by which the state will assume title to                                                            
sequestered carbon dioxide following storage facility closure, and an                                                           
industry-funded trust fund to cover possible long-term liabilities.                                                             
                                                                                                                                
The bill provides DNR with the authority to grant carbon storage                                                                
exploration licenses, and then leases, for the underground storage of                                                           
carbon dioxide on state land. Generally, a license would have a five-                                                           
year term with mandatory work commitments including an annual fee                                                               
of at least $20 per acre and annual reporting requirements. The bill                                                            
contains minimum annual rent requirements, a per-ton injection charge                                                           
for stored carbon dioxide, and requirements for bonding or other                                                                
financial security. Due to the mineral nature of pore space leased for                                                          
carbon storage, twenty-five percent of lease payments would be                                                                  
deposited into the Alaska Permanent Fund. Carbon storage lessees                                                                
would be required to file for approval of a plan of development with                                                            
the commissioner of DNR in a process similar to current oil and gas                                                             

2023-01-27                     Senate Journal                      Page 0109
lessees. The bill requires carbon storage licenses and leases to include                                                        
covenants to prevent unreasonable interference with the rights of                                                               
existing mineral lessees and to indemnify the state for any                                                                     
unreasonable interference.                                                                                                      
                                                                                                                                
The bill amends statutes for pipeline rights-of-way leasing on state                                                            
land to include pipelines for the transportation of carbon dioxide. This                                                        
allows the state to administer pipeline infrastructure for transportation                                                       
of captured carbon dioxide to geological storage facilities.                                                                    
                                                                                                                                
The bill provides the AOGCC with the authority to seek primacy from                                                             
the United States Environmental Protection Agency for permitting                                                                
over Class VI underground injection wells. States with primacy over                                                             
these wells are anticipated to enjoy a competitive advantage in this                                                            
burgeoning industry due to quicker well permitting. The bill also                                                               
grants AOGCC statewide regulatory authority over carbon storage                                                                 
facilities to maintain reservoir integrity, protect property rights, and                                                        
ensure public health and safety. AOGCC would charge application                                                                 
fees to cover the anticipated costs of processing applications. Once                                                            
carbon dioxide is being injected into a permitted carbon storage                                                                
facility, the facility operator would pay AOGCC a fee for each ton of                                                           
carbon dioxide injected to cover anticipated expenses during the                                                                
operation of the carbon storage facility. Also, AOGCC would set a                                                               
surcharge based on carbon dioxide injected to address the expenses the                                                          
state will incur post-closure. The surcharge payments would be                                                                  
deposited into the carbon storage closure trust fund created in the bill.                                                       
DNR would assume title and management of the facilities and stored                                                              
carbon post-closure.                                                                                                            
                                                                                                                                
This bill has an immediate effective date to allow the state to capitalize                                                      
on these new opportunities as soon as possible.                                                                                 
                                                                                                                                
This bill is part of my long-term fiscal solution and plan to attract                                                           
investment to Alaska. The public will benefit from new potential                                                                
sources of revenue for the state and boroughs, which can be directed to                                                         
funding programs to benefit Alaskans. The private sector will benefit                                                           
from new opportunities for industries associated with the capture,                                                              
transportation, use, and geological storage of carbon dioxide. The state                                                        

2023-01-27                     Senate Journal                      Page 0110
will benefit from an inclusive carbon management strategy that can                                                              
alleviate investor concerns over Arctic energy and infrastructure                                                               
projects and strengthen Alaska’s resource development opportunities.                                                            
                                                                                                                                
I urge your prompt and favorable action on this measure.                                                                        
                                                                                                                                
Sincerely,                                                                                                                      
/s/                                                                                                                             
Mike Dunleavy                                                                                                                   
Governor