Legislature(2023 - 2024)SENATE FINANCE 532
05/07/2024 09:00 AM Senate FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| HB219 | |
| HB125 | |
| HB50 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| += | HB 219 | TELECONFERENCED | |
| += | HB 125 | TELECONFERENCED | |
| += | HB 50 | TELECONFERENCED | |
CS FOR HOUSE BILL NO. 50(FIN)
"An Act relating to carbon storage on state land;
relating to the powers and duties of the Alaska Oil
and Gas Conservation Commission; relating to carbon
storage exploration licenses; relating to carbon
storage leases; relating to carbon storage operator
permits; relating to enhanced oil or gas recovery;
relating to long-term monitoring and maintenance of
storage facilities; relating to carbon oxide
sequestration tax credits; relating to the duties of
the Department of Natural Resources; relating to
carbon dioxide pipelines; and providing for an
effective date."
9:15:54 AM
AT EASE
9:16:43 AM
RECONVENED
JOHN CROWTHER, DEPUTY COMMISSIONER, DEPARTMENT OF NATURAL
RESOURCES, recapped Slide 10, CCUS 45Q Value Chain, which
was where the presentation had left off the previous day.
9:18:09 AM
Senator Kiehl asked whether the person capturing the carbon
had to be the lessor of the state pore space.
9:18:34 AM
Mr. Crowther responded that there were many different
project development scenarios and project costs could be
paid by many different entities.
9:19:01 AM
Senator Kiehl asked may the entity that captured the carbon
be the lessor of the pore space.
9:19:04 AM
Mr. Crowther replied in the affirmative.
9:19:10 AM
Senator Kiehl pondered high transport costs. He queried the
competitive environment in which the state would lease the
space. He asked whether negotiations would be meaningful if
there was only one potential lessor.
9:19:57 AM
Mr. Crowther replied that different scenarios involving
multiple parties would be discussed further in the
presentation.
9:20:45 AM
Senator Kiehl encouraged further discussion on a
competitive leasing environment.
9:21:31 AM
Mr. Crowther pointed to slide 11, "Hypothetical State
Revenue Assumptions" of the presentation that began the day
prior:
• Not all CO2 emissions are feasibly captured
technology continues to rapidly develop
• Capital expenditures to retrofit existing facilities
cannot be met by existing incentives in some cases
• Import of CO2 is dependent on further development of
shipping technology and infrastructure
• 45Q tax credits to the capturing entity are only
available for projects capturing CO2 in the US
• $60 per ton for Enhanced Oil Recovery
• $85 per ton for geologic carbon storage
• $180 per ton for geologic storage of carbon
from Direct Air Capture
9:22:46 AM
Co-Chair Stedman asked about the frequency of
transportation of carbon by sea.
9:23:03 AM
Mr. Crowther understood that there were some European
jurisdictions that were transporting carbon by barge over
very short distances. He added that hed read a Wall Street
Journal article that discussed ships under design that
would be long-haul oceangoing vessels.
9:23:28 AM
Co-Chair Stedman commented that ocean transport for carbon
was slow to evolve and that the future of ocean transport
was unknown.
9:23:42 AM
Senator Bishop commented that the 45Q credits would expire
in 2033. He wondered how long a project built in 2031 would
be able to take advantage of the credits.
9:24:38 AM
Mr. Crowther responded that under current federal
provisions if the project met the construction threshold it
would be eligible for 12 years of injection but there could
be no new entrance after 2033. He noted that the federal
government could change provisions at any time.
9:25:14 AM
Co-Chair Stedman asked whether there was a 5-year reduction
in the event of a transfer.
9:25:23 AM
Mr. Crowther deferred to Ryan Fitzpatrick. He believed that
currently the credit was cashable for five years and
transferable for an additional period depending on whether
the taxpayer was a corporate or non-profit entity.
9:25:45 AM
RYAN FITZPATRICK, COMMERCIAL ANALYST, DEPARTMENT OF NATURAL
RESOURCES, furthered that the credit was cashable for the
first five years of a projects injection cycle and
transferrable for the remaining seven years of the
injection cycle.
9:26:22 AM
Co-Chair Stedman relayed that cashable credits were not a
committee favorite.
9:26:44 AM
Mr. Crowther appreciated the comments. He noted that the
credits were federal credits and that Alaska law
incorporated state credit match to the 45Q, with an
allocation percentage adjustment down. He said that the
bill would eliminate the state incentive and that federal
tax credits would be the only remaining incentive.
9:27:20 AM
Co-Chair Stedman surmised that the current bill eliminated
the offset of the state corporate income tax, which had not
been in the initial legislation.
9:27:35 AM
Mr. Crowther replied in the affirmative. He said that the
issue had been quicky identified in House Resources
Committee and the bill had been amended.
9:27:47 AM
Co-Chair Stedman said that if the federal tax code were
adopted it could result in cashable credits.
9:28:09 AM
Mr. Crowther agreed. He said that the bill would repeal
those credits.
9:28:29 AM
Co-Chair Stedman understood that the bill had been modified
to include several other pieces of legislation. He asked
when the bill had been amended to include the federal
credit language.
9:29:15 AM
Mr. Crowther explained that the bill had been amended in
the House Resources Committee.
9:29:24 AM
Mr. Crowther discussed slide 12, "Hypothetical Alaska CCUS
Projects Regional Power Facility":
Regional Power Facility
• State revenue: hundreds of thousands of dollars per
year
• Size: 250,000 metric tons/year
• Benefits: Investable, regulatorily compliant, and
reliable power
Major North Slope Facility
• State revenue: millions of dollars per year
• Size: 2,000,000 metric tons/year
• Benefits: Decarbonizing North Slope energy
production makes it highly competitive and potentially
priced at a premium, attracts new investors, and
mitigates federal regulatory risk to Alaska
CO2 Import and Sequestration Facility
• State revenue: tens of millions of dollars per year
• Size: 10,000,000 metric tons/year
• Benefits: National priority project with major new
investment, industrial capacity, and economic activity
in Alaska
9:34:31 AM
Senator Bishop spoke of an earlier example of annual
revenue to state treasury for the first hypothetical and
wondered whether the same could be done for examples two
and three.
9:34:52 AM
Mr. Crowther replied that extrapolation could be done based
on the assumption of project size. He said that the North
Slope would bring in $5 to $6 million, hypothetically, the
carbon was injected and stored.
9:35:33 AM
Mr. Fitzpatrick interjected that the final example could
bring in $25 million per year, hypothetically, assuming the
10 million tons of injection volume was met.
9:36:04 AM
Senator Bishop understood that the major North Slope
facility would charge $180 per ton for Direct Air Capture.
He queried other activities could include new oil
production.
9:36:33 AM
Mr. Crowther explained that in the hypothetical focus on
capturing combusted natural gas emissions and would not
necessarily be a Direct Air Capture facility. He furthered
that a Direct air Capture facility could be developed on
the North Slope that could bring in revenue. He said that
enhanced oil recovery was a possible use for carbon
dioxide.
9:37:02 AM
Senator Bishop thought that greener barrels of oil could
lead to more exploration and projects.
9:37:35 AM
Mr. Crowther agreed. He said that investors measure carbon
intensity when investing and, in some markets, there was a
price premium emerging for carbon mitigated or reduced
barrels.
9:38:04 AM
Co-Chair Stedman asked about the sources of the changes to
the bill from the original version. He requested testimony
from the major players on the North Slope. He asked what
the department expected from the 45Q credits.
9:38:54 AM
Mr. Crowther replied that one of the changes in the bill
had been made in the Senate Resources Committee and
pertained to commercial minimums. The change had set the
minimum at $2.50 per ton of carbon, which had been in the
original draft then removed in the House Resources
Committee and reinstated in the Senate Resources Committee.
The numbers set in Senate Resources had been used in the
hypotheticals.
9:39:43 AM
Co-Chair Stedman hoped that at some point the major
industry players would testify on the bill.
9:40:02 AM
Mr. Crowther pointed to slide 13, "Lease Expenditure
Amendment.":
Sec. 50 For the purposes of AS 43.55.165, Lease
Expenditures do not include:
(23) costs incurred to become eligible for, or that
result in eligibility to claim, the carbon oxide
sequestration credit allowed as to federal taxes under 26
U.S.C 45Q (Internal Revenue Code), when costs are expended
to construct, acquire, modify, operate, dismantle, or
remove a facility for carbon capture, carbon utilization,
or carbon storage, including construction and modification
of new or existing infrastructure, as well as fees incurred
under AS 41.06.160, surcharges incurred under AS 41.06.175,
or costs associated with obtaining, operating, or
maintaining a license or lease under AS 38.05.7000
38.05.795.
Mr. Crowther noted that the last three hypothetical
examples discussed were projects focused on the storage of
carbon dioxide where the carbon was captured and injected
for permanent storage in a new lease allowed for under the
legislation. He stated that it was also possible for carbon
dioxide to be used for enhanced oil recovery. He said that
enhanced oil activities associated with carbon dioxide
could result in capital lease expenditures under the
states production tax, which was a concern. He noted that
costs of projects had been discussed in previous committees
and whether those costs would affect state revenue. He
stressed that the bill should focus on protecting the
states revenue from the development of carbon capture
projects without impacting opportunities and existing
operations. He noted that the text on the slide was the
current amendment, which the administration had concerns
with.
9:43:18 AM
Co-Chair Stedman asked how carbon sequestration as a non-
normal cost was differentiated when the end-user was
demanding a lower carbon footprint by oil and energy
producers.
9:44:36 AM
Mr. Crowther responded that the discussion about what oil
suppliers need to do to enable supplies to get to different
markets was needed. He said that there was currently no
requirement that they do so. He understood the discussion
in Senate Resources Committee, and elsewhere, had centered
around expensive carbon cost being limited in all
situations. He relayed that the administration was
interested in striking a balance that would not inhibit
existing activity or operations or new potential
expansions.
9:46:17 AM
Co-Chair Stedman clarified an earlier statement that he had
made about Milwaukee. He said that he had meant
Minneapolis.
9:46:21 AM
Mr. Crowther considered the time and suggested he move on
to the next slide.
Senator Olson replied that the committee would take a
recess and continue the presentation during the scheduled
1:30PM meeting.
9:46:46 AM
RECESS
9:48:01 AM
RECONVENED
CSHB 50 was HEARD and HELD in committee for further
consideration.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 50 DOR TAX 050624.pdf |
SFIN 5/7/2024 9:00:00 AM |
HB 50 |
| HB 219 Responses to SFIN Questions 5.6.24.pdf |
SFIN 5/7/2024 9:00:00 AM |
HB 219 |
| HB 50 AOGCC Letter to Senate Finance on waste amendment.pdf |
SFIN 5/7/2024 9:00:00 AM |
HB 50 |