Legislature(2023 - 2024)ADAMS 519
04/28/2023 01:30 PM House FINANCE
Note: the audio ![]()
and video ![]()
recordings are distinct records and are obtained from different sources. As such there may be key differences between the two. The audio recordings are captured by our records offices as the official record of the meeting and will have more accurate timestamps. Use the icons to switch between them.
| Audio | Topic |
|---|---|
| Start | |
| HB65 | |
| HB50 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 50 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | HB 65 | TELECONFERENCED | |
HOUSE BILL NO. 50
"An Act relating to the geologic storage of carbon
dioxide; and providing for an effective date."
3:34:32 PM
Co-Chair Foster OPENED public testimony.
GEORGE PIERCE, SELF & NEIGHBORS, KASILOF (via
teleconference), spoke in opposition to the bill. He stated
the bill was bad for the ground water, land, and trees. He
opposed carbon capture storage. He emphasized that the
issue was about money. He stated it was a handout to the
oil industry and lobbyists pouring money into politicians'
pockets. He remarked that the state would not be levying a
high enough tax to reduce emissions to the desired extent.
He stated that the legislature did what the oil industry
told it to do. He stated the governor's carbon capture tax
did not address the largest carbon dioxide emitted from
fossil fuel methane. He stated it was bad for permafrost,
highly expensive, and energy intense. He highlighted that
the state's oil industry produced 3 billion tons of CO2 per
year. There was no place to put all of the CO2 and no
chemical process to extract it in any reasonable time. He
stated that carbon capture and sequestration was almost
entirely a PR fig leaf promoted by the fossil fuel
industry. He relayed the proposal was only feasible if the
gas exceeded the additional cost of removal. He stated that
Alaska gave the industry $1 billion in free gas to inject
into wells. He stated it was all about oil recovery. He
stressed that the proposal would add no new revenue to the
budget. He encouraged the legislature to look closely at
the issue and stated the bill should be thrown in the
trash.
3:39:24 PM
TRISH BAKER, CHUGACH ELECTRIC ASSOCIATION, ANCHORAGE (via
teleconference), shared that the company was the largest
electric utility in the state. She spoke about the company
and its service area. The company was committed to
responsibly developing clean and sustainable energy for the
state. The company's energy portfolio included a mix of
natural gas, hydro, and wind. It was working towards its
goal of reducing the carbon intensity of electricity
generation. The company was evaluating several types of
projects to achieve its decarbonization goals. Carbon
capture and sequestration was one of the options the
company was looking at. She stated the bill would make the
option more achievable. She elaborated that when fully
developed, carbon capture technology may provide an
additional tool for decarbonizing new or existing energy
generation. She relayed that the bill would help Alaska
complete installation of carbon sequestration
infrastructure vital for an electric utility carbon capture
program. The company supported the development of a carbon
management framework.
3:41:35 PM
CHRISTINE RUSLER, PRESIDENT AND CEO, ASRC ENERGY SERVICES,
ANCHORAGE (via teleconference), testified in support the
bill. She hoped the state stayed at the forefront of making
carbon capture safe and economical in order for Alaska to
prosper for future generations. She relayed that the
Department of Natural Resources had been actively engaging
with carbon capture utilization working groups and she had
been an active part of. The group brought together state
agencies, private corporations, and the university to
discuss a clear path forward. She hoped the Alaska Oil and
Gas Conservation Commission (AOGCC) would be given the
authority to pursue primacy to enable faster permitting and
to increase the likelihood of receiving government funding.
She believed the bill would attract more investment in
carbon capture in Alaska. She supported the bill and
thanked the committee.
3:43:31 PM
LYDIA SHUMAKER, SELF, WASILLA (via teleconference), opposed
the legislation. She addressed the tax credit that was the
only driver for companies to partake in CCUS [carbon
capture utilization and storage], a way of signaling
environmental savings. She stated that CCUS projects never
met their expected goals and it had not been discussed in
any of the bill hearings. She stressed that the bill's
fiscal notes specified that the amount and timing of
revenue from the bill proposal was not yet known. She
stated that unknown revenue was a terrible way to move
forward on any project. She stated that the bill was not
needed to apply for Class VI primacy. She strongly opposed
the bill.
Representative Galvin asked about Ms. Shumaker's reference
to taxpayer expenses of $281 million. She asked if Ms.
Shumaker was referring to a state or federal project.
Ms. Shumaker answered it was a federal project in Illinois
called Archer Daniels Midland. She detailed it was an
attempt at a CCUS project, the same as the type proposed
under the legislation. The project had failed and cost over
$400 million with $281 million covered by the federal
Department of Energy. She stated the federal government did
not make money, it only collected taxes. She stated
essentially the taxpayer had to pay for it.
Representative Hannan asked about Ms. Shumaker's
affiliation and requested her testimony in writing.
Ms. Shumaker responded that she was not affiliated with a
group and she would submit her comments in writing.
3:47:45 PM
KASSIE ANDREWS, SELF, ANCHORAGE (via teleconference),
opposed the legislation. She stated it had been stated
numerous times that the biggest incentive to the proposal
was the 45Q tax credit. She relayed that according to
Taxpayers for Common Sense the Treasury Department's
inspector general for tax administration found that only 10
entities claimed over $1 billion in 45Q tax credits from
2010 to 2019, which was roughly 99 percent of the total
credits claimed. She relayed that out of the 12 commercial
capture projects as of 2020, only one project sequestered
captured carbon. No reporting had been made public on the
amount of carbon that would be pumped into the ground. She
stated that the 45Q program was in noncompliance with
reporting standards. She reported that of the $1 billion
claimed, nearly 90 percent did not comply with
Environmental Protection Agency reporting requirements. She
stated that the tax credit was an unproven climate
solution, commercially unviable, and mired in a history of
tax fraud. She highlighted that $30.6 billion was the
latest estimate on the credit, which did not include the
Inflation Reduction Act expansion. She asked how Alaskans
would benefit from the proposal. She reasoned the proposal
would stand on its own two feet if it was such a great idea
rather than being supported by consumers.
3:49:33 PM
KEN GRIFFIN, SELF, WASILLA (via teleconference), stressed
that the technology had not been proven to be profitable.
He underscored that all of the major projects throughout
the world had failed. He referenced a failed project in
Australia where an uptick in CO2 emissions had occurred
because of the inability to capture the gas. He underscored
his belief the proposal was a scam. He reported there were
25 other states fighting the idea. He was not saying don't
pass the bill, but he supported putting the brakes on the
issue to study it. He stated it was necessary to ask why 25
states were fighting the idea. He remarked that the
governor had signed something against ESG [environmental
and social governance] investments. He underscored it was a
big contradiction and problem. He stated the 45Q in the
state's own testimony in the Resources Committee was
referred to as "spaghetti law" and full of fraud. He
stressed that budgets were bloated, borrowing was to the
max, and the GDP was terrible. He stressed it would grow
government and the government would have to find a way to
keep funding it. He stated it was a bad idea. He referenced
the 45Q tax credit and stated there was a huge difference
between collectively taking money from taxpayers from the
IRS to give to a company that wanted to shift liability to
citizens compared to the state lowering the tax burden to
increase competition. He stressed that the companies would
be doing this on their own if it was a proven and viable
concept. He asked the legislature to put the brakes on the
issue.
3:53:12 PM
FRANK PASKVAN, AFFILIATE PROFESSOR, UNIVERSITY OF ALASKA
FAIRBANKS (via teleconference), supported the bill. He had
been working in carbon capture and storage on behalf of the
university for the past several years. He also led a
statewide carbon capture workgroup with over 150 people
representing industry, the university, the public,
nongovernmental organizations, and state agencies. The
university and the Department of Natural Resources had held
workshops in 2022 to gather input for the research and
development of the bill. The mission of the workgroup was
to accelerate commercial carbon capture projects in Alaska
to enable investments and provide options to lower the
carbon footprint of activities of vital importance to the
state economy including power generation at refineries. He
detailed that the Infrastructure Investment and Jobs Act
(IIJA) of 2021 provided $62 billion over five years for
emission reduction programs, including more than $10
billion for carbon capture and other methods to limit
emissions from industry. A separate law in 2022 included $2
billion for carbon dioxide removal and extending the 45Q
tax credits. He relayed that for the state to compete for
the funding, it was fundamentally important to establish a
legal framework enabling carbon storage. He encouraged the
committee's support.
Representative Galvin referenced Mr. Paskvan's work with
other stakeholders. She referenced Mr. Paskvan's testimony
that the bill was critical to enable investments. She asked
if he was referring to federal investments or projects
happening that may be looking at ESGs.
Mr. Paskvan replied it was necessary for both. He stated
that the bill enabled the Department of Natural Resources
to lease subsurface storage area for carbon dioxide. He
relayed that without the provision in law, there was no
possibility of any project. He explained that the bill
would establish all of the necessary items for the business
of carbon storage. He relayed there were at least 12 states
establishing similar laws. He stated that Alaska could play
a big part in the new and growing industry, which was seen
as an important element in reducing the carbon footprint.
Representative Galvin understood the industry had been
using similar technology that would make the concept
viable. She recognized the state had the space between the
rocks for the technology. She asked about the more global
aspects. She referenced a brief conversation she had with
GaffneyCline and stated her understanding that the concept
of other states sending carbon to Alaska for storage had
not been fully flushed out. She thought it seemed there was
a lot of pretty major technology that had yet to be put in
place, whereas the storage by industry may be viable
currently. She asked if the bill was covering more than it
needed to. She wondered if they could think about the
global portion at a later date while still satisfying what
was needed for industry to become competitive in its work
to satisfy ESGs and other.
3:59:35 PM
Mr. Paskvan replied that the aspects of leasing the carbon
storage space would be fundamental to an instate storage
project or imported storage project. He believed Japan had
put together a CO2 research storage vessel, but it was very
early days. He did not know of anyone transporting CO2, but
Alaska had the rocks and the opportunity to compete. He did
not know how the bill would treat or discriminate between
the two.
Representative Galvin thought it could be something for
later investigation. She thanked Mr. Paskvan for his
testimony.
4:00:48 PM
HERMAN MORGAN, SELF, ANIAK (via teleconference), did not
support the bill. He stated they needed to get out of ESG
investment and Blackrock because it was destroying the
economy. He wanted the Permanent Fund to be given back to
the people. He spoke to the need to invest in cheap energy
in rural Alaska such as propane to heat water and homes. He
supported investment in a gas pipeline to bring cheap
energy to residents. He stated the carbon capture nonsense
was not right. He thanked the committee.
Co-Chair Foster reviewed the email address for public
testimony.
Co-Chair Foster CLOSED public testimony.
Co-Chair Foster asked for a review of the fiscal notes
beginning with the Department of Revenue (DOR).
4:04:27 PM
ERIC DEMOULIN, ADMINISTRATIVE SERVICES DIRECTOR, DEPARTMENT
OF REVENUE, reviewed FN 8, control code wpuhz. He stated it
was important to note that carbon sequestration was a
rapidly emerging market in the very early stages. The
department recognized there would be infrastructure needs
and an incentive for investment to get things moving
forward. The department's fiscal note was indeterminate due
to variables that could not currently be quantified. He
referenced the federal 45Q changes that occurred in 2022
and 2023. The department looked at it as being a potential
economic benefit to have some sort of influence for
companies to be able to invest.
Representative Galvin referenced earlier public testimony
by Mr. Paskvan that there were 12 other states currently
establishing similar laws. She asked if the fiscal notes
considered what the state's competition was looking at. She
noted Mr. DeMoulin's statement that the market was dynamic
and moving fast. She asked if it meant the state would miss
out on potential revenue if it did not pass legislation
quickly. She asked if the 12 states had similar market
conditions. She considered companies outside of Alaska
would all have to determine how to transfer CO2, whereas
that may not be such an issue in other states.
Mr. DeMoulin deferred the question to a colleague.
FADIL LIMANI, DEPUTY COMMISSIONER, DEPARTMENT OF REVENUE
(via teleconference), responded that the revenue was
indeterminate at present as the state was seeking to secure
the enabling authority to determine the market in Alaska.
He reported it was a rapid emerging market nationwide and
many states were starting to jump onboard. He stated it was
a global market. He relayed the industry was constantly
changing and was a trillion dollar business. The state was
currently working with some groups to be able to provide
conceptual framework on the financial aspects of the
market. He remarked that he was not privy to the
information related to other states, but he could follow
up.
4:11:14 PM
Representative Galvin referenced earlier testimony that the
federal government was dispersing $10 billion. She thought
she may have heard the number $62 billion listed as well.
She asked if there was a time limit on receiving the
funding. She asked if Alaska would miss out on being a
strong applicant for federal funding if it did not pass
legislation.
Mr. DeMoulin deferred the question to Mr. Limani.
Mr. Limani responded that he did not know what federal
programs were available in relation to the figures provided
by Representative Galvin.
Mr. DeMoulin asked Representative Galvin to provide any
additional information she may have to aid in a follow up
response.
Representative Galvin replied that she was referring to
notes she had taken during Mr. Paskvan's testimony in
support of the legislation. She noted Mr. Paskvan also
testified he led the workgroup related to carbon capture
and sequestration. He had cited the figures $62 billion and
$10 billion related to carbon capture.
Mr. DeMoulin replied that the Department of Natural
Resources may have more information during its portion of
the fiscal note review.
Representative Josephson looked at page 2 of the DOR fiscal
note that discussed potential impacts on revenue including
the severance tax. He remarked that the unknown should be a
red flag for any legislator; however, he was assuaged by
the fact that the bill was designed to be structure or
scaffolding. He understood they were trying to create an
enabling act. He surmised the state could put the brakes on
if it learned the impact on its production tax was bad. He
concluded the legislation did not involve making final
decisions.
Mr. DeMoulin believed it was a fair statement. He explained
that the legislation gave the state a framework to work
with but there was no obligation in terms of next steps.
Mr. Limani stated it was a fair assessment. He relayed the
department did not currently have a clear assessment of
what the market entailed without having the ability to
determine which particular areas the state was looking at
in order to be able to quantify the revenue impacts. There
was no initial investment by the state; therefore, once the
state received enabling authority it could determine
gathering of the data related to fiscal impacts.
4:15:33 PM
BRETT HUBER, CHAIRMAN, ALASKA OIL AND GAS CONSERVATION
COMMISSION (AOGCC), reviewed the Department of Natural
Resources (DNR) fiscal note control code MPzCQ. Following
the passage of the legislation, the AOGCC would concentrate
on seeking primacy for Class VI wells from the EPA and
doing the regulatory package underpinning the statutory
direction contained in the legislation. He relayed it was a
substantial regulatory lift for the agency. He relayed it
was a new program, but not new to the business the agency
conducted. The agency would be in charge of the vast
majority of the program, particularly as it pertained to
the underground. He noted that DNR would handle some of the
surface components such as licensing and leasing
unitization. The fiscal note added two positions in the
first two years including a senior carbon engineer at a
range 26 and a fully exempt carbon assistant at a range 18.
The cost for the positions was $388,000 annually through
2029. There was a services component of $650,000 for the
first two years, $50,000 of which was for the statewide
corps services allocation and $300,000 was for the
Department of Law for AOGCC's regulatory lift and the
opportunity to contract with expertise that had gone
through the process in other states.
Mr. Huber stated it was possible the work would be done
entirely in-house or partially in-house, but the numbers in
the fiscal note covered the maximum the agency would need
to cover the process. Page 2 of the fiscal note specified
the funds of about $1 million per year in the first two
years were general funds. The department had been invited
to put in a letter of interest to the EPA grant program.
There was $50 million currently in the program and about
half the states applied for the program. He relayed that
the request for interest period was closed, but
applications had not yet been sent out. The agency assumed
the state's share may be $2 million with $1 million
received in the first year. The agency believed it would
recoup all or the majority of the $2 million in the first
two years from federal funding. The fiscal note showed a
needed increase in the agency's federal receipt authority,
but it would not necessarily need to be handled in the
current budget work. He relayed it could be handled via RPL
[revised program legislative] or in a supplemental budget
the following year.
Mr. Huber highlighted that the agency believed there was
revenue potential from the program. However, until there
was a regulatory or statutory framework in place, it was
what DNR had testified as the thrust of the bill "to hang
some regulatory bones out there to have the conversation
with the industry" to determine the level of interest and
potential levels of dollars changing hands may be. The
agency intended the program to be fully funded by the
regulated industry as was the case with the oil and gas
industry. There were a number of mechanisms by which the
bill allowed the agency to garner the funds into the Carbon
Storage Facility Administrative Fund. He reiterated that
the fiscal note was indeterminate. He highlighted staff and
services lines of $388,000 and $350,000 for a total of
$738,000 in FY 26 through FY 29 with corresponding
designated general fund (DGF) revenues for a net zero. He
stated the number could change on the top or the bottom.
The agency could potentially manage it in-house or via
contract due to substantial modeling. The bill gave the
flexibility for either or both options.
Representative Hannan noted Mr. Huber's reference to the
EPA grant program. She asked if the state had applied but
did not know if it would receive the grant funds. She asked
if passage of the legislation was required in order for the
agency to apply for EPA grant funds to backfill general
fund costs.
Mr. Huber clarified that prior to the beginning of the year
the governor's office received notice of a grant
opportunity to seek primacy of the Class VI program through
the EPA. The administration and Congress determined they
would prefer to have the program managed through the states
instead of the federal government and had put forward $50
million to assist. The state had submitted its letter of
interest and that part of the process had closed at the end
of March. He relayed that the EPA should be issuing grant
applications shortly, at which point, the agency would
complete and submit the application. The agency believed it
would operate similarly to its Underground Injection
Control Class II program that was currently with the
federal government. He elaborated that the state believed
it would get the funding, but the grant application and
approval were not yet in place.
4:22:46 PM
Representative Hannan asked if the agency believed the
legislation was necessary in order to apply for the Class
VI primacy. Alternatively, she asked if the state could
apply for the Class VI primacy and grant without the
passage of the legislation.
Mr. Huber answered that it was AOGCC's estimation that the
state was able to begin the process of seeking primacy, but
could not accept primacy without the legislation. He added
that the agency would not have submitted the letter of
interest if it could not do so without the legislation.
Representative Stapp asked if the agency could apply for
and receive the grant funding without passage of the bill.
Mr. Huber replied he believed so. He relayed that the
agency had not seen the grant rules, but there was every
indication it was a grant to seek primacy, not to receive
primacy. He believed they could start down the grant
process of receiving and expending the funds to start
looking at the regulatory process. He added that in order
to receive primacy and perhaps some of the regulations it
would require the state to have the authority to accept
primacy and to promulgate some of the regulations only
allowed under the legislation.
Representative Stapp referenced the request to hire a
senior carbon engineer. He presumed the expertise was
likely not in high supply due to the new nature of the
industry. He thought action should potentially be taken in
order to hire the position.
Mr. Huber answered there was more demand than supply
currently. The agency found it to be the same situation
when hiring senior petroleum engineers or senior petroleum
geologists. The jobs were not easy to fill, especially when
looking at who was competing for the small pool of
individuals. He highlighted that the industry side was able
to pay much more than the state. He confirmed that the
sooner the state was able to begin the process of seeking
an individual to fill the position the better.
4:26:31 PM
RYAN FITZPATRICK, DIRECTOR, DIVISION OF OIL AND GAS,
DEPARTMENT OF NATURAL RESOURCES, spoke to DNR's fiscal note
7 control code CFleq, OMB component 439. He reported that
the fiscal note reflected zero dollars in additional
expenditures. The department anticipated that standing up
the program could be accomplished using in-house resources,
primarily within the Division of Oil and Gas. He detailed
that DNR's role in the CCUS bill was primarily with regard
to leasing of state lands, which was very similar to the
leasing program the division operated for oil and gas
leases. The staff involved in oil and gas lease offerings,
lease management, and unitizations would be the same staff
undertaking the new operations. The revenue reflected in
the fiscal note was indeterminate. He explained that DNR
would look at revenues from the leasing activity and as the
projects progressed there would hopefully be injection fees
or gross revenue receipts from project operators. The
outyears reflected expenses for the legislation. He noted
it was possible that if there was a large increase in lease
applications that took substantial staff time the
department may need to request management funds in the
future. He explained that under the scenario, there would
hopefully be a better picture in terms of potential revenue
and revenue could help cover any additional staff costs.
Representative Galvin recalled seeing a cost per tonnage as
a placeholder. She assumed it came from looking at other
projects. She understood there was not a full business plan
currently. She considered the scope within Alaska and the
industry that was already present. She wondered if the
department would share anything it had currently with
regard to the cost per tonnage of injection. She thought it
would only apply after injection was used for production.
She asked for verification it would only count as carbon
storage.
Mr. Fitzpatrick responded that the original version of the
bill had looked at one other equivalent state lease with
commercial terms the department could review. Based on the
initial bill, the department had used an injection fee of
$2.50 per ton as a placeholder along with a $20 per acre
minimum rental fee for the license of the lease terms. As
the department continued to investigate and looked at other
leases that included the commercial terms rather than a
recorded notice of the lease, it found increasing
variability around the commercial terms for different CCUS
projects. He stated that CCUS was an evolving industry and
part of the reason for the variation in commercial terms
was due to the different economics present in different
projects. He elaborated that the different economics
depended on whether a project was capturing from an
industrial process with a pure CO2 stream versus a post
combustion process with a more diluted stream. The
economics of the different projects drove very different
economics in regard to the commercial terms for the
injection and storage piece of the project.
Mr. Fitzpatrick explained that as DNR looked at additional
leases, it had concluded that setting a minimum commercial
term, especially at the rate it initially used, ran the
risk that the state could price itself out of the market
for several potential types of projects. The bill had been
amended to provide for commercial terms being set by the
commissioner through a regulation and rule making process
that would be subject to public notice and input. He
relayed that the different leases DNR had seen included a
variety of commercial terms including injection fees that
ranged from $1.00 and over $3.00 per ton. Some lease terms
also referenced other types of commercial terms such as a
percentage of gross revenue or revenue sharing on a net
basis. He explained the variation was the reason the bill
had been amended to be more flexible with regard to
commercial terms. The state would like to target being as
high up in the commercial competitive scale as possible.
4:34:18 PM
Representative Galvin thought it sounded like a complicated
formula when deciding how to determine the best rates for
Alaska. She understood it was currently a moving target in
light of the rapidly changing market. She added that Alaska
was unique. She thought about companies already working in
Alaska and considered that if they wanted to use the
technology it may be an advantage for the state. She hoped
Alaska could obtain the higher end of the $1.00 to $3.00
range. She understood why the change had been made to the
bill to be flexible. She had spoken with GaffneyCline and
understood the market was dynamic. She stated her
understanding the department was looking at two markets:
the market in Alaska and the market globally. She would be
following the issue with a positive and hopeful attitude.
Co-Chair Foster turned to the next fiscal note from the
Department of Environmental Conservation, control code
Zlvkm.
JASON OLDS, DIRECTOR, AIR QUALITY, DEPARTMENT OF
ENVIRONMENTAL CONSERVATION, spoke to the department's zero
fiscal note. The department was not anticipating expenses
and generally supported the bill. He stated that the
emerging technology would provide an opportunity for the
injection of potential emissions or pollutants that would
otherwise be produced from industrial sources. He stated it
was a win-win for air quality. The department did not
believe any emissions generated would significantly impact
its revenue or work.
HB 50 was HEARD and HELD in committee for further
consideration.
Co-Chair Foster reviewed the schedule for the following
meeting.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 50 NEW FN DCCED AOGCC 042423.pdf |
HFIN 4/28/2023 1:30:00 PM |
HB 50 |
| HB 65 FNSB FY24 House Finance 04.27.23.pdf |
HFIN 4/28/2023 1:30:00 PM |
HB 65 |
| HB 65 FNSB School Fund Balance 042723.pdf |
HFIN 4/28/2023 1:30:00 PM |
HB 65 |
| HB 65 Anchorage SD - HFIN 4.28.23.pdf |
HFIN 4/28/2023 1:30:00 PM |
HB 65 |
| HB 65 MSBSD Slides House Finance 042823.pdf |
HFIN 4/28/2023 1:30:00 PM |
HB 65 |
| HB65 LPSD House Finance 4.28.23 (1).pdf |
HFIN 4/28/2023 1:30:00 PM |
HB 65 |
| HB 50 NEW FN DCCED AOGCC 042823.pdf |
HFIN 4/28/2023 1:30:00 PM |
HB 50 |
| HB 65 Public Testimony Rec'd by 050923.pdf |
HFIN 4/28/2023 1:30:00 PM |
HB 65 |