Legislature(2023 - 2024)BARNES 124
02/28/2023 10:15 AM House ENERGY
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| Audio | Topic |
|---|---|
| Start | |
| HB74 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 74 | TELECONFERENCED | |
| + | TELECONFERENCED |
HB 74-GEOTHERMAL RESOURCES
10:17:22 AM
CHAIR RAUSCHER announced that the only order of business would
be HOUSE BILL NO. 74, "An Act relating to geothermal resources;
relating to the definition of 'geothermal resources'; and
providing for an effective date."
10:18:30 AM
JOHN BOYLE, Commissioner, Department of Natural Resources,
stated that Governor Mike Dunleavy seeks to implement an "all of
the above" strategy for energy in Alaska, as this would make use
of both fossil fuels and renewable energy sources, with the goal
of lowering energy costs for Alaskans. He stated that the goal
of the proposed legislation would be to incentivize investments
into the development of geothermal energy in the state.
10:22:04 AM
AARON O'QUINN, Leasing Manager, Division of Oil and Gas,
Department of Natural Resources, co-presented a PowerPoint,
titled "HB 74, Geothermal Resources" [hard copy included in the
committee packet]. He began on slide 2 and gave an outline of
the presentation.
10:23:07 AM
DAVID LEPAIN, PhD, Director, Division of Geological and
Geophysical Surveys, Department of Natural Resources, co-
presented a PowerPoint, titled "HB 74, Geothermal Resources."
He moved to slide 3 and slide 4, giving an overview of the
necessary elements of geothermal energy. He explained that a
well would bring steam up into the facility, spinning the
turbines, and this would produce electricity. He continued that
water would be injected into the ground in another area to cool
and eventually be reheated. He continued to slide 5, giving an
overview of the geothermal heat flow in Alaska. He stated that
Alaska is thought to have an elevated heat flow, which mostly
comes from granite and volcanic systems. He said that the
volcanic systems often show up in the form of hot springs.
10:28:21 AM
DR. LEPAIN continued to slide 6 and pointed out the geothermal
gradients in the state. He said that the cone on the map shows
the geothermal source in the Alaska Peninsula. He continued to
slide 7 and slide 8 and gave an overview of the quality of the
geothermal resource in the state. He said that hotter
temperatures, higher flow rates, more shallow depths, and
natural recharge are all better for producing more energy at a
lower cost; however, he added that having all these factors in a
single geothermal source is rare. He stated that a properly
managed geothermal resource would be able to produce energy
indefinitely, adding that the technology to use these resources
is quickly improving.
10:34:26 AM
REPRESENTATIVE CARRICK asked whether reinjection of water into
the ground has long-term sustainability.
DR. LEPAIN answered that this depends on the management of the
source; if managed correctly with multiple far-off reinjection
wells, the source can be used indefinitely. In response to a
follow-up question, he stated that the turbines have a lifespan
of between 30 and 40 wells, however, he expressed uncertainty
concerning the lifespan of the wells.
10:37:38 AM
REPRESENTATIVE PRAX asked whether the state is involved in Chena
Power's project in Dutch Harbor.
MR. O'QUINN answered that this project is on land owned by the
Native corporations, so the state is not involved.
10:39:20 AM
BRETT HUBER, Chair, Alaska Oil and Gas Conservation Commission
(AOGCC), Department of Commerce, Community, and Economic
Development, returned to a previous question and reiterated that
a geothermal project could continue to produce for "many
decades," and it would be possible to drill a new well in
proximity to an old, useable well.
10:40:30 AM
REPRESENTATIVE PRAX asked whether HB 74 would cause the state to
become more involved with companies to develop geothermal
energy.
10:41:25 AM
JOHN CROWTHER, Deputy Commissioner, Department of Natural
Resources, answered that private landowners would continue to
manage their own land, and the bill is meant to get the state to
develop geothermal energy on state lands and private landowners
on their own land.
10:43:11 AM
DR. LEPAIN, in response to a follow-up question, answered that
the name of the Dutch Harbor project is Makushin Volcano. He
added that the bill would allow the state to do more research on
the potential of certain areas for geothermal energy sites.
10:45:39 AM
MR. O'QUINN continued to slide 9 and slide 10 and gave an
overview of HB 74. He explained that the bill would allow
Alaska's geothermal exploration program to be modernized. It
would align geothermal licensing with the requirements for oil
and natural gas, making it more economically viable for private
interests. The proposed legislation would also reform
definitions for geothermal resources so there is a focus on
commercial use. He continued that the bill would increase the
amount of land that can be used for exploration, and it would
repeal the provision allowing the state to renegotiate the
royalties after a period of 20 years.
10:49:10 AM
MR. O'QUINN continued to slide 11 and slide 12 and gave an
overview of the leasing and permitting process and project
history. He stated that the two most recent permits for
exploration were offered in 2021 for Mount Spurr and 2022 for
Augustine Island. He said that under the current rules, if
there are competing proposals to use land for a geothermal
project, there is a competitive process, but in the case of only
a single bid, the permit is usually issued. Currently, the
permits last only two years; however, the bill would change this
to five years, modeled after oil and natural gas licensure.
10:52:10 AM
REPRESENTATIVE PRAX asked whether five years would be enough
time for geothermal exploration.
MR. O'QUINN answered that the five-year period is meant to
provide a balance between getting some amount of work done and
"warehousing" tracts of land for later use. He added that if
some work is done during the five-year exploration period, the
owner of the permit will be eligible for a ten-year lease.
10:53:36 AM
MR. O'QUINN continued to slide 13 and slide 14 and showed a
brief summary of the sectional analysis for HB 74. He continued
to slide 15 and stated that Section 1 would allow AOGCC to
pursue primacy for Class V injection wells for geothermal
developments.
10:56:00 AM
REPRESENTATIVE SCHRAGE questioned the definition of a Class V
well.
MR. HUBER answered that there are 32 categories that would fall
under the definition of Class V, including geothermal wells. He
added that it does not change the rules of the permitting
process; it would allow a state agency to issue the permits
rather than the federal government. In response to a follow-up
question, he said that the bill would allow AOGCC to exempt
certain smaller-scale projects from permitting.
REPRESENTATIVE SCHRAGE asked whether any permits for geothermal
projects had been rejected in the past.
MR. O'QUINN expressed uncertainty. In response to a follow-up
question, he said that AOGCC views geothermal wells in much the
same way as unregulated water wells around the state, and they
would therefore be low risk.
11:01:53 AM
REPRESENTATIVE CARRICK asked for a comparison between the
average depths of a water well and a geothermal well.
MR. HUBER answered that in his personal experience, water wells
are often around 500 feet, although there is no official data
kept on them.
MR. CROWTHER added that the smaller scale projects that would be
exempt would be more shallow and less complex wells because they
would be for personal or smaller scale use, and the electricity
generated from them would not be sold.
11:06:18 AM
CHAIR RAUSCHER asked if the bill would have any potential impact
on land held by Native Alaskans.
MR. O'QUINN answered that the state would only lease state land,
and lands held by the Native Corporations are considered
private. Those lands would still be subject to the permitting
process, just as they are for oil and natural gas.
11:07:48 AM
REPRESENTATIVE PRAX asked whether AOGCC overlaps with the
Department of Environmental Conservation (DEC).
MR. HUBER answered that DEC has a role with certain
environmental issues while AOGCC handles the actual permitting,
and that both agencies work together on these types of projects.
In response to a follow-up question, he stated that there is a
"very extensive" process in which AOGCC reviews the plans of a
project before any permits are issued, and any change of plans
must be approved. In the case of a catastrophic loss of control
of a well, an investigation would take place.
11:13:33 AM
MR. O'QUINN continued to slide 16 and gave a brief overview of
Sections 2, 10, and 15. He stated that these sections would
eliminate some duplicate language found in existing state
statutes. He moved to slide 17 and slide 18, stating that
Section 3 would bring the geothermal exploration program in line
with the oil and natural gas program, which considers permits to
be "surface level". Section 3 would also exclude private
geothermal users from the requirement to apply for a license or
lease. He stated that Section 17 would allow for current
permits to be converted to licenses.
11:15:53 AM
MR. O'QUINN continued to slide 19 and showed a graphic depicting
the harvesting of geothermal power. He explained the difference
in depth between private and commercial usages, as the
difference in depth is part of the reason for not requiring
private use permits.
MR. O'QUINN moved to slide 20 and gave an overview of the
"preferential rights" found in Section 3 of HB 74. He
reiterated that it would change the rules for geothermal energy
to match those of oil and natural gas in regard to the surface
and subsurface owner of a parcel of land. He added that
permitting laws for any work being done on the surface would
remain the same.
11:20:21 AM
MR. O'QUINN continued to slide 21, pointing out that Section 4
and Section 7 would change geothermal leases to last 10 years,
with the possibility of a 5-year extension. He stated that the
rule allowing the commissioner of the Department of Natural
Resources to renegotiate the rental and royalty agreement after
20 years of production would be repealed.
MR. O'QUINN continued to slide 22 and stated that Section 6 of
the proposed legislation would increase the amount of acreage a
lessee can hold to 100,000 acres. Rental fees would be changed
to be a part of the regulatory process rather than statutory.
He continued to slide 23 and said that Section 8 would modernize
the unitization statute for geothermal resources to match those
used for oil and natural gas. He moved to slide 24 and stated
that Sections 9 and 14 would change the definition of geothermal
resources to:
the natural heat of the earth; the energy, in whatever
form, below the surface of the earth present in,
resulting from, or created by, or which may be
extracted from, such natural heat; and all minerals in
solution or other products obtained from naturally
heated fluids, brines, associated gases, and steam, in
whatever form, found below the surface of the earth;
but excluding oil, hydrocarbon gases, or other
hydrocarbon substances.
11:23:17 AM
REPRESENTATIVE MCKAY asked whether revenues to the state from
geothermal production would be subject to the permanent fund.
MR. CROWTHER expressed the belief that this would be the case.
11:24:06 AM
CHAIR RAUSCHER questioned the generation of the money being
added to the permanent fund.
MR. CROWTHER answered that payments from permitting and
royalties from geothermal production would be added to the
permanent fund. In response to a follow-up question, he said
that the resource from which the royalty would be collected is
the electricity created by the steam generated from pulling the
geothermal heat from the ground.
11:26:06 AM
REPRESENTATIVE PRAX asked whether any royalties would be set in
statute.
MR. O'QUINN answered that there is a minimum royalty rate set in
statute while the royalty rate for the lease could be set via
regulation.
11:28:00 AM
HALEY PAINE, Deputy Director, Division of Oil and Gas,
Department of Natural Resources, added that there is currently a
1.75 percent royalty rate set in statute for the first 10 years,
which is increased to 3.75 percent after 10 years.
11:28:32 AM
REPRESENTATIVE PRAX, to make geothermal production more
economical, asked whether more latitude should be given for the
negotiation of royalty rates.
MS. PAINE answered that the minimum royalty rates have been
lowered in the past. She added that the prime purpose of HB 74
in regard to royalty rates is to remove the ambiguity that
exists once a project has been producing for 20 years.
11:31:09 AM
MR. O'QUINN continued to slide 25 and stated that Section 13 of
the proposed legislation would change the definition of
geothermal fluids. The new definition would add certain types
of liquids and exclude hydrocarbons.
MR. O'QUINN continued to slide 26 and stated that Section 12
would modify the penalties section of the current statutes to
allow AOGCC to assess penalties for violations related to
geothermal wells.
11:33:06 AM
CHAIR RAUSCHER asked whether there is a specific dollar amount
prescribed for violations.
MR. HUBER answered that the proposed bill would match the
penalties for geothermal production violations to the violations
for oil and natural gas.
11:34:22 AM
DR. LEPAIN moved to slide 27 and stated that the fiscal note for
HB 74 would allow for the Alaska Division of Geological and
Geophysical Surveys to hire an additional geologist. The
position would be a senior level geologist responsible for
publishing geological data for the advancement of geothermal
development in the state. He expressed the understanding that
this program would attract federal funds to help spur geothermal
resource development.
11:37:06 AM
MR. CROWTHER stated that there are several additional slides
with supplemental information regarding geothermal systems in
Alaska.
11:37:40 AM
CHAIR RAUSCHER asked how granite systems work in terms of
geothermal systems and volcanic systems.
DR. LEPAIN answered that volcanic systems manifest themselves in
more obvious ways, but granite systems do produce their own
heat.
11:39:07 AM
REPRESENTATIVE PRAX asked whether geothermal production could
result in other valuable byproducts and whether this would be
accounted for in the bill.
MR. CROWTHER answered that to ensure safe operations, AOGCC
would require license holders to understand what they are
drilling through, and this would make such a scenario unlikely.
If data were gained showing the presence of other valuable
resources, such as hydrocarbons, the license holder would need
to apply for another license to pursue these resources. In
response to a follow-up question, he said that royalties on any
other resources would still be collected if the license holder
applied for another license to harvest those resources.
[HB 74 was held over.]
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 74 Transmittal Letter 02.14.2023.pdf |
HENE 2/28/2023 10:15:00 AM |
HB 74 |
| HB 74 DNR Geothermal Bill One-Pager 02.22.2023.pdf |
HENE 2/28/2023 10:15:00 AM |
HB 74 |
| HB 74 Geothermal Intro and Sectional Analysis Presentation 02.28.2023.pdf |
HENE 2/28/2023 10:15:00 AM |
HB 74 |
| HB 74 Sectional Analysis 02.26.2023.pdf |
HENE 2/28/2023 10:15:00 AM |
HB 74 |