Legislature(2023 - 2024)ADAMS 519
04/18/2023 01:30 PM House FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| HB49 | |
| HB50 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 49 | TELECONFERENCED | |
| += | HB 50 | TELECONFERENCED | |
| + | TELECONFERENCED |
HOUSE BILL NO. 49
"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."
1:36:52 PM
KURT KRAPFL, DIRECTOR OF FORESTRY, AMERICAN CARBON REGISTRY
(via teleconference), relayed that the American Carbon
Registry (ACR). He explained that ACR was a carbon offset
registry and issued credits that could be used in voluntary
and compliance carbon offset markets. He provided
information about his education and professional experience
in the carbon market. He shared that he had reviewed
projects throughout the U.S. and Canada and had helped in
developing ACR's carbon offset methodologies. He was also
responsible for ACR's portfolio management and strategic
direction.
1:38:37 PM
Mr. Krapfl provided a PowerPoint presentation titled "The
Role of Forest Carbon Credits in Alaska's Forest Management
and Carbon Reduction Strategies"(copy on file). He began on
slide 2 and detailed that ACR was a carbon offset registry
founded in 1996 as the first private and voluntary
greenhouse gas registry in the world. He elaborated that
ACR was a subsidiary of a larger nonprofit organization
called Winrock International. Winrock International was
based in Little Rock, Arkansas and did community
development and sustainability projects nationally and
worldwide. He explained that ACR operated in the compliance
and voluntary carbon markets. In 2012, ACR was approved as
a California Offset Project Registry under California's
Cap-and-Trade program and was one of only three registries
approved. In 2020, ACR was approved by the International
Civil Aviation Organization (ICAO) to supply offsets to the
airline industry. In 2023, ACR was approved by the
Washington State Offset Project Registry for its emerging
Cap-and-Trade program.
Mr. Krapfl continued to review slide 2 and reported that
the ACR team had over 250 years of collective market
experience:
o Forestry team consisting of six (3 PhD and 3 MS)
technical and policy experts
o 70+ Compliance forestry and >130 Voluntary
forestry projects registered
Mr. Krapfl detailed that ACR had over 200 projects that
spanned compliance and voluntary carbon markets in its
forestry portfolio alone.
1:40:55 PM
Mr. Krapfl turned to slide 3 and discussed the carbon
market. He explained that the point was that rapid
decarbonization provided monetary incentive for meeting
goals of the Paris Agreement targets. He detailed that
carbon offsets themselves were not a silver bullet to
addressing climate change. He explained that ACR believed
the first step was decarbonizing the economy and carbon
credits were to be used to offset residual emissions that
could not be directly out of the supply chain initially or
over time. In the past years, there had been a rapid
expansion in the voluntary carbon market (the carbon market
driven by corporate actions and environmental
consciousness).
Mr. Krapfl explained the voluntary carbon market included a
lot of net zero and climate neutral targets. Over 2,000
companies engaged in the voluntary carbon market to date,
and it had grown to a $2 billion industry. There were
projections that the market would grow exponentially in the
coming years. The compliance market included cap and trade
programs where emission sources were capped, and allowances
or offsets were issued to certain participating entities.
Mr. Krapfl detailed that the entities were then
incentivized to decarbonize. He explained that entities
that could decarbonize quickly were rewarded with the
ability to trade the offsets to other entities in areas
that were harder or took longer to decarbonize. He stated
that the voluntary carbon market had emerged as a very
important means of the efforts, especially in the U.S., to
meet the commitments under the Paris Agreement. He
highlighted the aviation industry under industry regulation
related to sustainable aviation and fuels.
Co-Chair Foster noted that Co-Chair Johnson had joined the
meeting.
1:44:11 PM
Mr. Krapfl addressed slide 4 titled "Nature-Based
Solutions." He highlighted examples of project types under
ACR's portfolio that he thought Alaska may be interested in
such as improved forest management, which involved
extending rotation lengths and committing to increase
carbon stocks compared to an alternate legal and plausible
baseline scenario. Other project types such as
afforestation/reforestation would be incredibly important
nature-based solutions to climate change. The projects
would involve planting trees on marginal or degraded lands
that would not be expected to regenerate to forest. The
projects were credited for forest carbon accrual and
included tree growth and biomass accrual. Avoided
conversion was a third project type that included avoided
conversion of forest to non-forest (e.g., agriculture,
mining, residential). The project type involved appraisal
to the highest and best use for the property compared to
its use in forestry and would involve putting a
conservation easement on a property to make sure
[development] did not happen. He noted that carbon credits
were unique and important in incentivizing climate action
and attaching monetary value to forest conservation,
ecosystem benefits, and amenity values. He explained that
in many other scenarios the only monetary value was the
timber.
1:46:42 PM
Mr. Krapfl turned to slide 5 titled "ACR land sector
portfolio." He relayed that there were 16 methodologies
across the ACR portfolio including [but not limited to]
three improved forest management (IFM) methodologies, the
U.S. forest methodology, the Canadian IFM methodology, an
IFM methodology for small non-industrial private forest
(NIPF) land, afforestation/reforestation, avoided
conversion of forestland, and two wetlands methodologies.
He stated that ACR incorporated numerous land ownership
classes including industrial, land trusts, municipal and
state lands, small landowners, and tribes. He noted there
was opportunity for a variety of different land ownership
classes in Alaska.
Mr. Krapfl continued reviewing slide 5. He relayed that ACR
had a multitude of projects and most of those enrolled in
its program in the land sector were improved forest
management, but there were other opportunities as well. He
highlighted that ACR's forest credits issued had taken off,
especially around 2015/2016 when the California Resources
Board started ramping up its enrollment. He reported that
ACR's credits issued continued to grow and growth was
expected to be exponential in the coming years.
Mr. Krapfl moved to slide 6 titled "Project Development
Process." The process was made up of four phases including
project feasibility, monitoring/reporting,
validation/verification, and credit issuance. He discussed
project feasibility considerations including eligibility
and costs, the commitment period (40 years under ACR), and
potential buyers. He relayed that the first step of the
monitoring/reporting phase was establishing and maintaining
a forest carbon inventory, which included detailed timber
cruising that led to quantifying forest carbon stocks and
reporting on a periodic basis to the American Carbon
Registry.
Mr. Krapfl moved to the third phase, which was independent
third-party validation and verification of carbon credit
claims. He explained that validation was confirmation of
eligibility for the program and verification was on a five-
year basis at minimum and could be done more frequently if
desired. He elaborated that every five years a site visit
field-based verification was required where trees were
measured. Desk-based verification could be done during the
interim if a party was looking for more frequent carbon
offset issuances. He highlighted the fourth phase, the
issuance of serialized carbon offset credits. The credits
were tracked and retired in ACR's secure registry platform.
1:51:22 PM
Mr. Krapfl relayed that the next section of the
presentation would address tenets of the carbon market
needed for demonstrating quality. He advanced to slide 7
titled "Additionality." The first consideration was what
would happen in the absence of the project and whether the
project was causing real climate benefits. He detailed that
ACR used a three-pronged additionality test that considered
regulatory surplus, common practice (e.g., typical
harvesting rates on nearby properties, and what had been
done historically), and implementation barriers (the
forestry analysis typically financial, but could be
technological or institutional). He elaborated on
implementation barriers and explained there was a high
value of timber and in order to sequester carbon it was
necessary incentivize a change in forest management.
1:53:43 PM
Mr. Krapfl turned to slide 8 titled "IFM project example."
He believed the State of Alaska would primarily be most
interested in the IFM project type and he would review the
crediting for the particular project type. The slide showed
a graph of an IFM project example. He pointed to the
initial carbon stocks where the yellow line [reflecting the
project] and the red line [reflecting the baseline] merged
at time zero, which represented the carbon stocks at the
initial forest inventory. He explained that the red line
was a counterfactual scenario of what could happen in the
absence of a project driven by regulatory requirements,
accessibility, operability, distance to mills, and mill
capacity. He noted there were many considerations in the
development of the baseline scenario. He relayed that the
baseline was also driven by net present value using an
appropriate discount rate by ownership type. For state
lands the net present value discount rate would be 5
percent. The project line shown in yellow reflected how the
forests were being managed. He explained that ACR's program
required a participating entity to continually grow its
forest carbon stocks above their previously issued levels.
Participants also had to re-measure their forests and
verify the carbon stocks at least once every five years.
Representative Josephson looked at slide 8 and noted his
question pertained to additionality. He remarked there was
a bill on the House floor the following day, which would
move from 5-year timber sales to 10-year to 20-year sales
and would liberalize some forest practices for certain
trees deemed salvage trees at the discretion of the
commissioner. He reasoned that if contracts were made
pursuant to the bill, presumably the contract could not be
undone. He asked if Mr. Krapfl had experienced a situation
where two different concepts in a state were working in
opposing directions. He asked how to meld two concepts that
were currently dynamic and in flux.
Mr. Krapfl answered that he did not know about the
particular bill Representative Josephson was referring to.
He stated that if the bill salvaged timber, ACR always
considered legal restraints in its baseline and if other
legal constraints came into effect during the recording
period, the baseline would need to be updated. It was
possible the baseline may need to be updated if
contradicting legal requirements came into place during the
recording period or before.
1:58:19 PM
Mr. Krapfl advanced to slide 9 titled "Permanence." He
explained that permanence was the concept that the carbon
stored, because of the project's activity, needed a
contractual and legally binding term guaranteeing the
carbon would not be released back into the atmosphere. The
ACR required a 40-year commitment to retain and increase
carbon stocks, which coincided with climate targets for
decarbonizing by midcentury and for nature-based solutions
to climate change aligned with Paris Agreement targets. He
explained that during that time it was necessary to
continually monitor, report, and verify to ensure
permanence.
Mr. Krapfl detailed that any nature-based solution such as
forest would have the possibility for the release of carbon
due to natural or landowner disturbances. There were
separate, specific ways to treat risk mitigation. He
expounded that ACR required a percentage to be contributed
into a shared buffer pool for every issuance of carbon
offsets due to nature-based solutions. He explained that
the buffer pool acted as an insurance mechanism. He
furthered that unintentional reversals could include
wildfire, flood, wind events, and insect/disease, which
were all out of control of the project component and ACR
would not expect the participant to be liable for the
losses. He detailed that because all projects contributed
and not all projects were expected to use the buffer, ACR
felt it had a robust risk mitigation mechanism to handle
unintentional reversals. If a substantial number of stocks
were lost, ACR would cover the loss with funds from the
buffer pool. He explained a scenario involving an
intentional reversal. For example, if a project harvested
more than annual growth such that the carbon stocks
decreased below previously issued levels, they would be
covered by the project proponent out of pocket.
Representative Stapp stated his understanding that the
biggest benefit for Alaska would be forestry maintenance,
something that was not currently done in many of Alaska's
forests. He referenced risk mitigation, buffer
contributions, and mitigation of the long-term catastrophic
effects on carbon offsets posed by wildfires. He asked if
it was true that practicing good forest management reduced
the potential risk and liability to losses. He asked if ACR
would consider it good or bad practice.
Mr. Krapfl replied that ACR did consider it good forest
practice. He explained that ACR had a tool that was based
on project location that considered fuels management, flood
risk, flammability of the forest, etcetera. He explained
that a participant's contribution was based on their
project attributes. For example, certain things like fuels
management could reduce a participant's contribution. The
program incentivized good practices.
2:03:38 PM
Mr. Krapfl turned to slide 10 titled "Quantification." He
explained that each of ACR's methodologies had specific
ways of quantifying the carbon in forests. The quantified
carbon benefit is the carbon stock difference between the
project and baseline scenarios. He noted there were some
reductions required for sound carbon accounting. He
detailed that the gross number of credits or ERTs [emission
reduction tons] required a deduction for physical
uncertainty where warranted. He explained that ACR required
that forest inventory had a statistical accuracy and
precision level of plus or minus 10 percent of the 90
percent confidence interval. He elaborated it was driven by
the number of forest carbon plots put out on the land and
the size of the land. A project with more plots and a
uniform forest would have a low sample error and could
avoid the deduction; however, ACR required a deduction for
projects with higher statistical uncertainty.
Mr. Krapfl addressed the concept of carbon leakage and
explained that if a forest carbon project was reducing the
amount of harvest in a project area, there was the
possibility that neighbors or market forces may be driven
to increase more harvesting in their areas to compensate
for the reduction in wood products. He explained that a
decrease in the amount of wood products in the market was
likely to increase prices; therefore, it may incentivize
harvesting elsewhere. The ACR used a 30 percent crediting
deduction for leakage, based upon academic literature.
There was another option to directly quantify leakage
although it was an abstract concept that was difficult, but
possible, to do in the field.
Mr. Krapfl continued to discuss slide 10. He explained that
the buffer contribution was driven by a project's
attributes and typically ranged from 15 to 22 percent for
forestry projects (with an average of about 18 percent).
The credits went into the buffer and ACR did not make any
profits off of the buffer. The net ERTs or credits issued
to a project were calculated by subtracting the buffer
contribution from the gross ERTs.
2:07:38 PM
Representative Hannan asked what ERT stood for.
Mr. Krapfl replied that ERT stood for emission reduction
tons, which was one metric ton of carbon. He turned to
slide 11 titled "3rd Party Verification." He relayed that
third-party verification was a key step for any reputable
crediting program. He explained that third-party verifiers
had to be approved by the international standards
organization. Site visit verifications were conducted at
least every five years where trees were measured and
compared to the project developer's measurements to ensure
measurements were done correctly. Full quantification
checks were conducted, which entailed checking tree level
calculations that went into quantifying the amount of
carbon in the forest. He elaborated that the third party
did its own independent full quantification and compared it
to the project developer. The third party conducted a
materiality check. He explained that the difference between
the project developer's calculation and the verifier's
calculation could not have a difference of more than 5
percent. The third party also fixed all of the correctable
errors. He noted that typically the differences were only
related to rounding.
Mr. Krapfl continued to address slide 11. He relayed that
successful verification was followed by an ACR review,
which led to serialized offset credit issuance (the
registry tracked credits from issuance through retirement).
2:10:09 PM
Mr. Krapfl discussed the role of registries on slide 12. To
safeguard the environmental and financial integrity of the
carbon market. He detailed that registries set the rules
for what constituted high quality carbon offsets.
Additionally, registries reviewed projects to ensure they
complied with requirements and developed scientific
methodologies to quantify the amount of forest carbon
sequestered based on the project actions. Each of the
methodologies had a public comment period where anyone
could participate in the scientific process. He relayed
that ACR received many comments and responded to each of
the comments and revised methodology as needed. The work
was followed by a blind scientific peer review process that
was at the same level of publishing as a high quality
academic journal. He elaborated there were typically three
or four experts in the academic and industry space that
weighed in and ACR did not know who the individuals were
during or after the process. The process was administered
independently of the authors and all of the issues needed
to be closed out before any of ACR's methodologies could be
published.
Mr. Krapfl reiterated that registries had a safeguarding
and quality assurance role. He detailed that ACR had secure
registry software that issued credits that could be tracked
throughout their life. He relayed that ACR was a legally
registered nonprofit under the Internal Revenue Service
(IRS). The registry had a nominal annual fee for each
project listed under its program and there was a 17 cent
per ton activation and retirement fee. He shared that
critics had suggested in the past that if a registry was
charging on a per ton basis, it may have incentive to over
credit. He underscored that was not the case. He explained
that ACR did not charge fees when credits were issued; it
charged fees when credits were activated and used for
transfer retirement to meet compliance or a climate
obligation. The registry was not incentivized and did not
earn any revenue on credits if they were not considered the
highest integrity and they were not used. He explained that
it mitigated many of the concerns and it aligned with ACR's
effort of ensuring quality of every credit and delivering
real climate impact.
2:14:06 PM
Co-Chair Johnson stated she was trying to wrap her head
around ACR's clients and where the money came from. She
detailed her understanding that ACR was trying to make a
match between people offsetting carbon and people producing
carbon through a third-party verified system. She asked who
would be setting up the system where there was an actual
monetary value. She wondered if clients were governments,
countries, banks, and venture capitalists.
Mr. Krapfl asked for verification that Co-Chair Johnson was
wondering who would use the credits.
Co-Chair Johnson stated there had to be an entity with
money that would provide money to a project that was carbon
neutral and that wanted to ensure the project was verified
through a registry. She wondered who the entities were that
wanted people to use a registry versus something less
reliable. She wondered if the entities were venture
capitalists, states, other countries.
Mr. Krapfl replied that ACR's reputation had been built by
over 30 years in the carbon market. He detailed that ACR
was one of the three carbon offset registries chosen to
work in the California Cap-and-Trade program and similarly
in the Washington State program and the International Civil
Aviation Organization program. He explained it was a very
comprehensive assessment of program requirements in order
to get approved. There were few emerging evaluation
networks currently being established including the
Integrity Council for the Voluntary Carbon Markets that
addressed what constituted a high quality carbon offset and
what program requirements were necessary across the board
to ensure high integrity. He explained there were only a
handful of carbon registries, including ACR, that met the
requirements. He believed Co-Chair Johnson's question was
in regard to standardization and what represented a high
quality carbon offset. He referenced ACR's track record and
principals of permanence and additionality, free of
leakage, and requiring field verification, which were all
necessary in order to meet the level of integrity.
2:19:32 PM
Co-Chair Johnson clarified that she was trying to get a
sense of who or what entity was registered as carbon
neutral and put the information on a bank loan application
or request for venture capital funding. She assumed the
entities were applying for money somehow and the registry
was there to verify the integrity of the carbon and
offsets. She asked who the entities were. She reiterated
her previous question.
Mr. Krapfl replied that the end users were all of the above
mentioned by Co-Chair Johnson including banks, regulated
entities under a compliance system, technology companies,
etcetera. He elaborated that many of the largest companies
in the U.S. had climate obligations they used the credits
for. There were a variety of people involved including
landowners, project developers, independent third-party
verifiers, and registry. He relayed that ACR did not get
involved in any project development; it merely set the
requirements and ensured projects met them. He explained
that in the voluntary carbon market people could trust that
credits had gone through the process because of ACR's
accolades and due to its rigorous processes.
2:22:16 PM
Co-Chair Johnson remarked that ACR had been involved with
carbon credits for quite some time. She asked if ACR had
originated from a United Nations climate accord or climate
goals established by a state. She wondered how the market
originated and about the registries providing quality
assurance. She wondered what it was measured against.
Mr. Krapfl replied that up until the Paris Agreement there
had not been any regulated caps for industry and their
carbon obligations in the U.S. other than California and
the State of Washington that were establishing cap-and-
trade programs, much of the commitments were voluntary and
driven by consumer demand and industry wanting to do what
it could to help with climate mitigation. He elaborated
that a regulated state like California had very specific
criteria that carbon offset registries needed to meet. He
noted that meeting the criteria was not easy and required a
lot of certification and insurance. He stated it was the
bar that needed to be met in regulated spaces.
2:24:38 PM
Representative Galvin noted the meeting agenda had listed
the Alaskan Carbon Registry, which she assumed was a typo
and was meant to be the American Carbon Registry. She
considered ARC compared to Anew. She appreciated the
committee had learned about the history of what the model
looked like and was meant to do. She was trying to
articulate the difference between the two presentations the
committee had heard [by ARC and Anew]. She wondered if the
two organizations were offering the same services or if the
registry was an entirely different piece with a shared
model, which explained the reason for similar messages. She
looked at slide 12 and asked for a sense of the business
plan. She wondered about the cost of each of the components
and the revenue.
JOHN CROWTHER, DEPUTY COMMISSIONER, DEPARTMENT OF NATURAL
RESOURCES, replied that the Department of Natural Resources
(DNR) was working to present some information about the
costs of project development and associated revenues in
addition to how it interrelated to the fiscal notes
attached to the bill. He would follow up with the
information. The department viewed ACR as a third-party
verifier of projects, while Anew was a project developer.
The state and Anew would work together to propose a project
and register it through a protocol maintained by an entity
like ACR. He expounded that buyers would see that the
credits were registered on a respected and known registry,
which would have a degree of certainty about their terms
and quality.
2:28:35 PM
Representative Galvin looked at slide 12 and stated her
understanding the committee was currently hearing from a
registry and in a previous meeting on the bill there had
been a presentation from a potential project developer.
Mr. Crowther nodded in agreement.
Representative Galvin asked for clarification on the name
of the organization currently presenting. She wondered if
the reference to the Alaskan Carbon Registry had been
accidental or intentional.
Mr. Crowther replied that they were currently hearing from
the American Carbon Registry; there was not an Alaskan
Carbon Registry. He thought it may be a typo.
Representative Coulombe had a question about the value of
carbon credits. She looked at slide 4 showing solutions
including improved forest management,
afforestation/reforestation, and avoided conversion. She
asked if the three items listed on the slide were all equal
in value. For example, she wondered if focusing on credits
related to improved forest management would be just as
valuable as the other two.
Mr. Krapfl replied that the credits varied in price as set
by the market. He detailed there were two different types
of improved forest management credits including a
conservation credit aimed at avoiding deforestation, which
was related to the baseline, and a removals credit related
to growing the trees larger. He relayed that ACR viewed the
climate benefit as the same, but the two types were
distinguished in its registry for transparency. He
explained that generally the removal of credits received a
bit higher price than the avoided emissions. He elaborated
that some of the pricing was based on who was buying the
credit and what their interests were (e.g., if a credit fit
a purchaser's geography and whether the purchaser liked the
story behind a project). He detailed that avoided emissions
may be going for $10 to $20 per ton in the states
currently, whereas removal may be going for $20 to $30 per
ton.
Mr. Krapfl stated that reforestation projects were
generally a bit more difficult to bring to market because
of the time lag between planting a tree and its growth;
however, it was very important and something that buyers
recognized, which meant the credits were on the high end of
the removals crediting spectrum. He stated that avoided
conversion was an impactful project type (avoided
conversion of forest to non-forest) and resulted in many
avoided emissions and removals credits as well. He
communicated that the market determined the pricing and it
could vary widely.
2:33:10 PM
Representative Coulombe looked at slide 11 related to third
party verification. She listed the process including a site
visit every five years, a third-party qualification check,
and an ACR review. She asked how many times the site had to
be visited to receive and maintain the credit.
Mr. Krapfl replied that the site visit requirement was a
minimum of once every five years, which came out to eight
visits over the life of a project with a 40-year term. He
explained that desk-based verifications could be done more
frequently if desired. He detailed that the desk-based
verification was more of a modeling exercise, whereas
measuring the trees out in the field was a larger endeavor.
Representative Coulombe clarified her question. She asked
if ACR had to verify and do its own review independent of
the site visit occurring every five years.
Mr. Krapfl clarified that ACR was a standard setting body
and did not verify carbon claims. There were independent
third-party verifiers that conducted the verifications
according to ACR's program. He elaborated that ACR reviewed
project detail requirements and conducted high-level
quantification checks prior to issuing any credits. He
relayed that ACR tried to stay separate from individuals in
the field for impartiality.
2:36:09 PM
Co-Chair Foster discussed the meeting timeframe.
Representative Hannan directed a question to the
department. She noted that in a prior discussion on HB 50,
the department shared that it started to look at the
concept after industry had highlighted its interest in the
area. She asked where the impetus for HB 49 came from. She
asked if there were industry partners or people seeking
forestry carbon registry goals in Alaska.
Mr. Crowther answered that generally speaking there was an
increasing awareness and interest in the types of projects.
He relayed that Alaska Native Corporations (ANCs) had been
pursuing the projects. Additionally, there were projects in
forest management in the country and worldwide. The primary
impetus for the legislation was the increased awareness as
opposed to discreet projects being proposed. He added that
a variety of people had come to the state with a variety of
carbon management related interest in Alaska because of the
scope of its resources above and below ground. He noted
that the occurrence of the projects through ANCs was the
most discreet precipitating event for the state's
investigation of the topic.
Representative Ortiz looked at nature-based solutions on
slide 4. He pointed to the last statement on the slide:
"Provide important contributions to climate change." He
asked if there was a climate change measurement process
that took place and considered things like temperature
change. He clarified that he did not doubt it was
happening. He asked if it was actually possible to measure
providing important contributions to climate change.
Mr. Crowther explained the context of the phrase cited by
Representative Ortiz on slide 4. He clarified that the
projects were identified as carbon reduction in the
atmosphere. He stated that carbon dioxide in the atmosphere
was attributed to being a driver of climate change and
reducing or managing it was associated with contributing to
limiting climate change.
Representative Ortiz asked for verification there was a way
to measure how much carbon was being removed from the
atmosphere by using a baseline year and measuring five
years later.
2:39:36 PM
Mr. Crowther replied that the measurement done through the
projects was more associated with the amount of carbon in
the biomass as opposed to measurements of the atmosphere.
He noted it was very difficult to assess an incremental
change on a global scale. It was much more manageable to
measure whether a specific plot of land had more trees than
it did 5, 10, and 20 years ago; therefore, there was more
carbon dioxide sequestered in the area. The intent of the
program was incentivizing carbon in the landscape as
opposed to the atmosphere.
Representative Galvin asked if Mr. Krapfl played a role in
drafting the bill. She wondered about the financial returns
for the state.
Mr. Krapfl replied that he had no part in drafting the
bill. He explained that ACR issued credits, but the actual
returns for Alaska would be better directed to Anew or
someone similar.
Co-Chair Foster believed the intent of the next hearing on
the bill was to address feasibility questions and the
numbers.
Mr. Crowther replied the intent was to present more revenue
information at the next hearing on the bill.
Representative Galvin asked if she should wait to ask
questions pertaining to the wording of the bill.
Co-Chair Foster asked for the question on the bill.
Representative Galvin referenced language on page 2, line 4
of the bill: "When competitive interest has been
demonstrated or the commissioner determines that it is in
the state's best interest." She thought the two things
seemed to be the same thing and wondered about the word
"or."
2:42:57 PM
Mr. Crowther deferred to a colleague.
RENA MILLER, SPECIAL ASSISTANT, COMMISSIONER'S OFFICE,
DEPARTMENT OF NATURAL RESOURCES (via teleconference),
replied that the language referenced by Representative
Galvin was currently in statute. She explained that the
bill would amend the existing provision according to the
bold at the far right of line 2 on the same page.
Representative Galvin referenced statutes included in the
bill and observed there were a lot related to leases. She
assumed the language was relatively similar to oil and gas
leases. She asked if the language was representing the same
business model shown on slide 12 of the presentation. She
stated her understanding that there would be a land lease
where the project manager such as Anew would bid on land
and would then go through a carbon registry. Alternatively,
she wondered if the state would do "this." She was trying
to understand if the third party was needed and if it was
the reason there was leasing language in the bill.
Mr. Crowther believed the intent of the bill was to allow
flexibility for state-managed projects on state-managed
lands potentially with the support of third party
organizations like Anew or to let third party developers
pursue projects with a lease. He stated his understanding
that both of the kinds of projects would potentially
utilize third party registries like ACR to verify and
register credits created by the project.
Representative Galvin stated her understanding that it
would be left wide open depending upon the players coming
to the table (i.e., state entities or another group looking
for carbon offset projects). She observed that under the
legislation the [DNR] commissioner would determine whether
a project was in Alaska's best interest. She believed
carbon offset projects could be independently operated by
an entity other than the state and perhaps in parallel with
state projects.
Mr. Crowther believed Representative Galvin's understanding
was correct; however, there were certain areas of land that
were limited to state projects (e.g., state forest lands).
He noted that the discretion of the commissioner was
expressed through a best interest finding and a public
input process.
2:47:28 PM
Mr. Krapfl continued on slide 13 titled "California Cap &
Trade." He shared that the remaining slides included
portfolio metrics, some in relation to Alaska and some in
terms of state lands. Slide 13 showed metrics on the
California Cap-and-Trade program. He highlighted that
forestry played a large part in California's program with
the remainder in industrial solutions. Forest management
accounted for over 90 percent of the program. He
highlighted that ACR had the leading share in terms of
forestry issuance by registry in the California program.
Mr. Krapfl advanced to slide 14 titled "ACR Voluntary
Portfolio." The ACR voluntary portfolio was split between
forest carbon and a variety of other agricultural and land-
based projects such as wetlands and agriculture, and
industrial projects (e.g., destroying ozone and depleting
gases). Additionally, IFM was also a large part of ACR's
portfolio and was somewhat more evenly distributed between
Canadian IFM reforestation, wetlands, etcetera. He
highlighted that ACR's projects were distributed nationwide
including in Alaska. He detailed that about 4 percent of
its registered projects were in Alaska. Many of its
projects were located in the upper Midwest and along the
Gulf Coast.
2:49:56 PM
Mr. Krapfl turned to slide 15 titled "Other Relevant
Stats." He relayed that ACR currently had 12 state, county,
and municipal projects listed under its registry.
Additionally, ACR had 16 Alaskan projects and 27 tribal or
ANC projects. He detailed that 4 percent of ACR's projects
were registered in Alaska; however, over one-quarter of its
total issuance volumes currently come from Alaska. He
stated there was a big opportunity in Alaska based on its
resources.
Representative Josephson looked at nature-based solutions
on slide 4. He noted that Mr. Krapfl had talked about
conservation credits and secondarily about removal. He
asked if Mr. Krapfl meant the removal of carbon by growing
trees larger.
Mr. Krapfl replied that conservation credits were given for
avoiding emissions to the atmosphere associated with more
intensive harvesting that could be done in the baseline
scenario. He explained that removal of carbon from the
atmosphere entailed growing trees larger, accumulating more
biomass over time. He stated it was similar to reforesting
or planting trees, only it pertained to existing trees that
were accumulating more biomass.
Representative Josephson asked how timber harvesting fit
into slide 4. He observed that the emphasis on slide 4
included extending rotation lengths (leaving trees in the
ground longer), planting new trees, avoided conversion, and
conservation easements. He asked whether the state could do
the other things [listed on the slide] if it wanted to do
some harvesting.
Mr. Krapfl affirmatively. He explained that ACR's projects
did not restrict harvesting from occurring. He elaborated
that for IFM it would reduce the harvest levels and set the
threshold for the amount of timber that could be cut. He
expounded that it may incentivize and provide funds to do
different types of harvesting. For example, converting from
clearcuts to single tree selection. He explained that
forests could be managed and harvested differently than the
state would have done traditionally and the funds from the
carbon could help to do so.
2:53:40 PM
Representative Hannan looked at slide 14 showing that
Alaska was 4 percent of [ACR's] project distribution (the
number of projects nationwide). She turned to slide 15 that
showed Alaska accounted for 34 percent of the volume. She
surmised that the small number of projects reflected a
total carbon value of 34 percent. She assumed the volume
was measured on carbon value and not acreage or anything
else.
Mr. Krapfl replied that slide 14 was based on the number of
projects registered with ACR and slide 15 was issuance
volumes. The slides showed that 4 percent of ACR's projects
were producing a large number of credits.
Representative Hannan looked at other relevant statistics
on slide 15 including 16 Alaskan projects in addition to
[27] tribal/ANC projects and 12 state/county/municipal
projects. She assumed the only projects that were Alaska
specific were the 16 Alaskan projects. She asked if all 16
were either tribal or ANC projects.
Mr. Krapfl answered that there were a total of 16 Alaskan
projects, many of the 16 were tribal or ANC, but some were
privately owned. The remainder of the [27] tribal/ANC
projects were distributed through the continental U.S.
2:56:05 PM
Representative Tomaszewski looked at slide 6 related to
serialized carbon offsets that were tracked and retired in
ACR's secure registry platform. He asked for additional
detail on how the secure registry platform worked and how
carbon offsets were retired.
Mr. Krapfl answered that the registry platform was on a
publicly accessible website showing existing projects. The
website kept records of carbon claims. He explained that
ACR's standards and documents showed what information
needed to be publicly available and what needed to be
private. He characterized the platform as a clearinghouse
of information available for people to view. The website
included issuance volumes, project locations, and a variety
of other project attributes. He explained that ACR issued
credits on a per ton basis and each ton had its own serial
number. The serial number acted as a unique identifier to
enable the credit to be traded and tracked. He explained
that when someone used credit against their climate
commitments it was designated as retired to ensure it could
not be sold or used twice. He relayed that one unit of
carbon dioxide was used once for one climate mitigation
action.
Mr. Crowther thanked Co-Chair Foster and relayed that the
department looked forward to continuing work on the bill.
Mr. Krapfl thanked the committee for the invitation to
present.
Co-Chair Foster noted that the next bill hearing would
include a deeper dive into the fiscal notes and bill.
HB 49 was HEARD and HELD in committee for further
consideration.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 50 2023 04 17 DNR Response to HFIN Q April 11, 2023.pdf |
HFIN 4/18/2023 1:30:00 PM |
HB 50 |
| HB 49 ACR_AK HFIN Presentation 041822.pdf |
HFIN 4/18/2023 1:30:00 PM |
HB 49 |
| HFIN DNR HB 50 CCUS Presentation 041123.pdf |
HFIN 4/18/2023 1:30:00 PM |
HB 50 |