Legislature(2021 - 2022)ADAMS 519
03/17/2022 09:00 AM House FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| HB135 | |
| HB273 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 135 | TELECONFERENCED | |
| += | HB 273 | TELECONFERENCED | |
| + | TELECONFERENCED |
HOUSE BILL NO. 135
"An Act relating to geothermal resources; relating to
the definition of 'geothermal resources'; and
providing for an effective date."
9:07:26 AM
Co-Chair Foster indicated the committee had heard a portion
of the presentation on HB 135 in the prior week. The
presenter would continue with his presentation.
9:07:59 AM
SEAN CLIFTON, POLICY AND PROGRAM SPECIALIST, DIVISION OF
OIL AND GAS, DEPARTMENT OF NATURAL RESOURCES, continued
with his PowerPoint presentation, "HB 135 Geothermal
Resources: House Finance Committee," dated March 9, 2022
(copy on file). He wanted to clarify some items on slide 9
of the presentation. The slide read as follows:
New language added: A prospecting license or lease is
not required under this section to explore for,
develop, or use geothermal resources if the geothermal
resource is intended for domestic, noncommercial, or
small-scale industrial use.
? This explicitly excludes private geothermal users
from a requirement to apply for a license or lease.
Mr. Clifton clarified that it was not that the department
did not want to regulate small-scale users, but that the
department aimed to address the commercial users so that it
could properly manage natural resources as the [state]
constitution mandated. The department also hoped to reap
some royalties to gain revenue for the state.
9:09:29 AM
Mr. Clifton moved to slide 10. The slide showed some
examples of different styles of ground source heat projects
for residential use. All of the styles on the slide could
effectively heat small buildings with fairly low heat.
Representative Wool asked if the department was just
considering basic heat pumps that use heat from the earth.
He wondered if heat pumps were considered geothermal power.
Mr. Clifton explained that even though there were small-
scale users that might be receiving heat from the earth
through mechanisms like heat pumps, they would not be
generating power through a turbine. There was no mechanism
for the state to exact royalties in these situations, which
is why the department was not trying to regular small-scale
users. He clarified that there may be other regulations
enacted from entities such as the Department of
Environmental Conservation or the Department of Fish and
Game, but the Division of Oil and Gas was not involved.
9:12:55 AM
Representative Wool brought up Chena Hot Springs in
Fairbanks as an example of geothermal heat. Through the use
of the hot water, there was a small and low temperature
power generation. He wondered if it was considered an
example of a commercial system.
Mr. Clifton replied that Chena Hot Springs was a good
example of a power generating system that was using a more
modern understanding of how geothermal systems could be
utilized for power. However, Chena was not a state
resource, and the Department of Natural Resources (DNR)
could not regulate it. Also, Chena was not selling power
which would not trigger the department to get involved.
9:14:39 AM
Mr. Clifton turned to slide 11 and indicated that the bill
would eliminate the preferential rights division. The
current statute granted preferential rights to a surface
owner to apply for a geothermal prospecting permit once
notice was received of an existing application. He stated
that this was potentially problematic. If a commercial
developer wanted to build a multi-million-dollar power
generating system and part of the application covered a
surface owner's area, the statute as it was currently
written could be interpreted to allow for the surface owner
to invoke their preferential right, take the permit, and
resell it back to the original applicant.
Mr. Clifton continued on slide 11. He thought preferential
rights was a discouraging provision for applicants and
wanted to avoid ambiguity in statute. He also reminded
members there were existing provisions in statute that
would protect surface owners. He indicated that if the
preferred site for a project was on a surface owner's land,
the developer would typically attempt to reach a private
agreement with the owner. If an agreement could not be
reached, another site would likely be selected. For
example, private agreements were commonly sought after to
negotiate cell phone tower sites. Most of the time private
surface owners were open to reaching amicable agreements.
9:18:37 AM
Representative Josephson asked who owned the subsurface
rights in Alaska. He mentioned ongoing disputes about
natural gas operations in the states of Pennsylvania and
New York.
Mr. Clifton replied that it depended on the title or the
patent held by the owner of the land. In most cases in
Alaska, private surface owners did not own the subsurface
or the minerals. There were some exceptions that occurred
before 1959, prior to Alaska's statehood, of homesteaders
who possessed land titles that stated they owned the land
wholly. A landowner should know who owned the title to the
subsurface based on the title documentation.
9:21:06 AM
Representative Josephson recalled the Cold Bay methane case
that he thought caused typically conservative individuals
to become conservationists. It was a concerted and
aggressive effort by the state to develop Cold Bay methane.
He asked how his fears could be assuaged that this kind of
circumstance could not arise from the bill.
Mr. Clifton was not intimately familiar with the issue
Representative Josephson was referring to. However, there
had been discussion that arose in public meetings the
department held with respect to Susitna Valley licensing
for gas development. The regulatory apparatus of the state
sought to protect the state's resources and environment.
There were multiple entities that worked to protect the
state's interests in subsurface resources. He explained
that when wells were drilled, the Alaska Oil and Gas
Conservation Commission would analyze the safety of the
well and would take note of any resources that may be
impacted by the well. There were overlapping authorities
and state agencies that were monitoring the environmental
impacts.
9:23:56 AM
Representative LeBon recalled Mr. Clifton's earlier example
of cell towers. He added that there may be zoning
limitations for cell towers. There would be a more
complicated legal arrangement involving the banks if the
desired area for the cell tower was on a commercial
property.
Mr. Clifton responded that he had a good point. The state
had to honor municipal zoning laws that might involve more
stringent requirements.
Representative LeBon added that if there was a bank loan on
the property, the bank would have to be consulted as well.
9:25:43 AM
Mr. Clifton continued to address slide 11. In the case of
the state not being able to reach an amenable agreement
with a private owner, there was regulatory guidance in
statute that dictated how a dispute would be addressed. He
added that homestead landowners were not required to report
the transfer of land. Public notice was part of the entire
process and surface owners that might be affected were
directly notified. The only exception was when a surface
owner was unreachable, which has happened, but developers
were required to prove that they had repeatedly tried to
contact the surface owner.
Representative LeBon noted that title searches would likely
have to be conducted as well.
9:28:23 AM
Representative Wool returned to the topic of Chena Hot
Springs. He asked why the state did not own the subsurface
rights to the springs.
Mr. Clifton responded that he was unsure of the ownership
of the subsurface rights at Chena Hot Springs. However, he
indicated that the state would need to own the subsurface
in order for DNR to be triggered to become involved in an
operation. If it was discovered that there was a large
geothermal system that was shared by multiple subsurface
owners, there would be a unitization process. He would
cover this topic in more detail later in the presentation
particularly regarding correlated rights.
9:30:51 AM
Mr. Clifton moved to slide 12 to address work commitments
in Section 3 of the bill. The department wanted to change
the prospecting permit in order to license and increase
terms from 2 to 5 years. The change would provide a greater
opportunity for success and ensured they were making
progress. There would be a trigger that would transform the
permit into a lease for long-term use.
9:33:26 AM
Mr. Clifton moved to Sections 7 and 8 on slide 13. He
explained that these sections were added due to
recommendations from the House Resources Committee. The
sections would add two additional steps for public notice.
When a proposal was received, a public notice would be
issued as well as a call to ensure that there were no
competing proposals. If there were competing proposals, the
lease sale model would be utilized, which has been
successful in the past. Next, a final best interest funding
would be issued, which included another opportunity for
public comment. Throughout the process, the department
would seek input from cooperating agencies.
9:34:54 AM
Representative Josephson referred to the third section on
slide 13 which stated that geothermal licenses and leases
were not surface use authorizations. The slide also stated
that licenses and leases only provided the exclusive right
to explore for and develop the subsurface resources. He
wondered how it was possible to "explore for and develop"
if there was no surface use authorization.
Mr. Clifton responded that just because the department
might issue a disposal for access to the subsurface, it did
not mean that there was an explicit authorization for the
use of the surface. There might be a variety of surface
owners and competing interests at play. A subsurface
authorization, particularly under an expiration license,
could be half a million acres. Realistically, an expiration
program would not touch every acre of the land. The plan
would be to target specific areas. The department would
review the plan and any competing interests and might issue
an authorization that did not authorize the entire plan. A
subsurface disposal did not guarantee access to the entire
surface area. The state had very important competing
surface interests.
Representative Josephson asked if the bill provided an
opportunity that might not come to fruition.
Mr. Clifton responded that it could be interpreted in that
way and he would not argue the point. He noted that part of
the purpose of the subsurface disposals was to grant an
exclusive right to prevent other entities from encroaching
on an existing operation. It was in some ways still a
property right. The department did not want inefficient or
damaging development of the state's resources.
9:38:40 AM
Representative LeBon indicated that the final bullet on
slide 13 also caught his attention. The bullet stated that
surface use authorizations required public notice and
direct notice to any affected surface owners. He referred
to slide 11 and read from it as follows:
? If the Commissioner concurs, developer posts a bond
to compensate landowner for any impacts and work
progresses.
Representative LeBon shared his understanding that the
slide suggested that property could be seized if the owner
was not reachable. He had experience with not being able to
find property owners to obtain permission. He asked if
there was a scenario in which the commissioner could permit
projects to take place on a private property owner's land.
Mr. Clifton indicated that the scenario could happen
hypothetically, but it was unlikely. Typically, private
property was a small amount of acreage, though he
understood that some people owned large swaths of land. He
explained that there would usually be opportunity to access
subsurface resources without needing to interfere with an
unreachable surface owner's land. The issue had come up in
public testimony for the Susitna Valley exploration
license. In this situation, agriculture would be affected
and community members were concerned with the notion of a
road being placed across their fields. The state would work
to avoid damaging the surface of a land and would exhaust
every alternative. He presumed there were other solutions
and damaging private owners' properties would not be
required.
Representative LeBon noted that there were large parcels of
land that belong to the state for agricultural purposes.
The state patent for agricultural land would not include
this purpose. He wondered whether the agricultural patent
would prevent commercial development on state land.
Mr. Clifton had not heard of a competing interest and
assured him that the state had the resources to evaluate
such a situation. The department would not move swiftly or
recklessly.
9:43:10 AM
Mr. Clifton continued to address slide 13. The two new
steps in the public notice process proposed by the House
Resource Committee read as follows:
? NEW The exploration license is issued
? NEW The license is extended or converted to a lease
Mr. Clifton emphasized that there was ample opportunity for
surface owners to become aware of a situation that might
affect their land before surface authorizations were
issued.
Mr. Clifton turned the presentation over to his co-
presenter.
9:44:29 AM
DAVID LEPAIN, DIRECTOR, DIVISION OF GEOLOGICAL &
GEOPHYSICAL SURVEYS, DEPARTMENT OF NATURAL RESOURCES (via
teleconference), advanced to slide 14 addressing Section 12
of the bill. He read the slide:
AS 41.06.060(4) is amended to read: (4) "geothermal
fluid" means liquids, brines, water, gases, or and
steam naturally or artificially present in a
geothermal system; "geothermal fluid" does not include
oil, hydrocarbon gases, or other hydrocarbon
substances
? Aligns with modernized definition for geothermal
resources.
? Not limited by temperature because current
technology enables development of cooler geothermal
systems.
? Distinguishes geothermal fluids from hydrocarbon
resources.
9:45:53 AM
Representative Carpenter asked if the definition included
bodies of water that lay on the surface such as rivers,
lakes, or the ocean.
Mr. Lepain deferred to Mr. Clifton.
Mr. Clifton responded that he did not think it included
surface water bodies. If there were a case where a surface
pool or hot spring was present, it likely would not be used
to drive a power generating turbine. The pool would be
noted, but the hottest source would be found through
drilling and testing. This would produce hotter geothermal
fluids from the heart of the resource to obtain the best
resource rather than trying to capitalize on the surface
pooling.
Representative Carpenter suggested that heat was not the
only source of energy that may be valuable. He mentioned
tidal energy as a potential geothermal fluid source that
could also be tapped and monetized. The state tapped wind,
which he considered to be a fluid, and monetized the
energy. He thought there was a difference between
extracting oil from the ground and monetizing the oil and
extracting heat from the ground and monetizing the heat. He
wondered who would own the heat. He was struggling to see
reasoning behind the differing approaches between fossil
fuel extraction and royalties and naturally occurring
resource extraction such as geothermal fluids.
Mr. Clifton confirmed Representative Carpenter was correct
that air was a fluid. If it could be interpreted broadly,
wind turbines could be brought into the conversation.
However, he did not think the broad interpretation would
hold weight in court nor would the interpretation be
acceptable by DNR. He was unsure of how tidal generation
turbines were permitted and could not speak to the example
specifically.
9:51:11 AM
Mr. Lepain advanced to slide 15 which showed a new
definition of geothermal resources in Sections 9 and 13 of
the bill. He read from the slide:
"Geothermal resources" means 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.
Modern definition for geothermal resources.
? Not limited by temperature because current
technology enables development of cooler geothermal
systems.
? Ensures all the State's mineral estate resources are
captured in definition.
? Same definition being applied to both DNR & AOGCC
statutes.
Mr. Lepain elaborated that this specifically pertained to
heated fluid in the subsurface.
9:52:53 AM
Representative Carpenter thought the state was missing a
portion of geothermal resources if the state was only
looking underground. He was struggling to find a
connection.
Mr. Lepain replied that he believed it was a matter of
definition, and that he was defining geothermal resources
to be a subsurface resource. He noted that Mr. Clifton
mentioned that heat pumps in private homes that pull heat
from the air were technically considered geothermal energy
but were not regulated under the bill. He reiterated that
he thought the issue came down to the definition of
geothermal resources.
Representative Carpenter agreed that a line had to be drawn
somewhere.
Mr. Clifton drew attention to the fact that the natural
heat of the earth and the surface of the earth were
contained within the definition of geothermal resources. He
clarified that the subsurface estate was the only element
that applied to the statutes.
9:55:27 AM
Representative Wool asked if there was a temperature
trigger.
Mr. Clifton deferred to Mr. Lepain.
Mr. Lepain replied that the modernized definition
explicitly removed a temperature cutoff due to the
technology advancements in the last 15 to 20 years. Due to
these advancements, it was possible to pull heat from
relatively low temperature subsurface fluids or soil on a
small scale. The question of whether commercial power could
be generated using this method was unclear to him. The
temperature-based provision had been removed specifically
because of technology advancements, and therefore
restricting it to a particular temperature would be a
mistake.
Representative Wool was aware of a project in Juneau that
was going to run a loop through the ocean and use the
ambient heat of the ocean to produce power. He was thinking
of situations involving the private individual.
Mr. Lepain advanced to slide 16 and referenced the fiscal
impact note [control code svNTz] by the Department of
Natural Resources. He commented that Alaska had significant
geothermal energy potential around the state. At most
geothermal sites, the state had relatively little
information and the sites had not been studied thoroughly.
Some sites had been studied significantly, but the
department did not have enough information to decide which
sites had potential to be a significant geothermal energy
source. As presently constituted, the Division of
Geological & Geophysical Surveys (DGGS) did not have enough
staff to appropriately grow its knowledge of potential
resources.
10:00:18 AM
Mr. Lepain explained that the fiscal note would add a new
Geologist 3 position within DGGS's Energy Resources Section
in Fairbanks. The addition of the position would help re-
start the division's geothermal program. The position would
coordinate with agencies and industry to publish new
geologic data to further the development of Alaska's
geothermal energy resources. He read the list of
responsibilities of the new geologist from slide 16:
This will enable DGGS to restart its geothermal
program. The new geologist would:
• Coordinate with agencies and industry to publish
new geologic data to further development of
Alaska's geothermal energy resources
• Maintain and update geologic data on Alaska's
geothermal systems in a geothermal database
• Attract federal funds to characterize Alaska's
geothermal systems and resources
• Monitor developments in geothermal systems
technology
• Conduct geologic investigations of Alaska's
geothermal systems
• Publish geologic maps, reports and data on Alaska
geothermal systems
• Advise DNR and other state agencies on the
state's geothermal resources
• Support the Department's geothermal leasing
program
• Support and supply information to explorers and
developers of Alaska's geothermal resources
• Support and advise DNR Commissioner's Office and
Governor's Office on geothermal policy
Mr. Clifton emphasized that the purpose of the position was
to grow knowledge of Alaska's geothermal resource potential
through hard data. This would inform the decision on
whether to develop a specific site.
Co-Chair Foster indicated that there were two fiscal notes
total. He asked Mr. Clifton to review the other fiscal note
by DNR.
Mr. Clifton reviewed the zero fiscal note [control code
pRsYR] by the Division of Oil and Gas within DNR. He
emphasized that it had zero fiscal impact and would not
cause any additional burdens to the division.
10:04:17 AM
Representative Wool noted that the fiscal note mentioned
that the bill would double the acreage limit for geothermal
projects from 51,200 to 100,000 acres. He asked if 50,000
acres was considered small.
Mr. Clifton was not certain and did not know the conversion
of acreage to square miles. However, he commented that
geothermal systems tend to cover much larger areas than
were perhaps conceived when the laws were first written.
Granting the security of a larger area made much more sense
for developers. It also adhered to the way in which other
states had been updating their laws.
10:05:49 AM
Representative Josephson noted that he had spent time at a
family ranch which was 300 acres. He thought the lease
would cover scores of properties and many miles.
Mr. Clifton indicated the maximum was being increased to
100,000 acres. He stated that 640 acres was one square
mile, which he thought might be a good frame of reference.
He explained that this was specific to the expiration
licenses, which were not permanent. Even if the state
issued a license for 100,000 acres, that would not
necessarily mean that a lease would also be granted at the
end of the license's term. The details of the lease that
might be issued long-term would be dictated by the
resources that had been demonstrated to be located at the
site. In a situation where all 100,000 acres were issued a
lease, all of the acreage would not necessarily be
utilized. The subsurface area might be impacted more than
the surface area, and it was unlikely that more than a few
acres on the surface would be impacted.
10:09:02 AM
Co-Chair Foster referenced the other fiscal note by DNR
that added the position that was previously discussed. The
fiscal note had a control code of svNTz.
Mr. Lepain deferred to Mr. Clifton, as he did not have a
clear copy of the fiscal note.
Mr. Clifton addressed the fiscal note which added a
position of a geologist. The impact of the note was
$150,000.
Mr. Clifton appreciated the opportunity to present the
bill. He was happy to answer any follow-up questions.
HB 135 was HEARD and HELD in committee for further
consideration.
Co-Chair Foster would take a brief at ease.
10:11:52 AM
AT EASE
10:15:02 AM
RECONVENED
Co-Chair Foster indicated the committee would be hearing
HB 273.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 272 & HB 273 Public Testimony Rec'd by 031422.pdf |
HFIN 3/17/2022 9:00:00 AM |
HB 272 HB 273 |
| HB 273 Theoretical Fiscal Note.pdf |
HFIN 3/17/2022 9:00:00 AM |
HB 273 |
| HB 272 HB 273 Public Testimony Rec'd by 031622.pdf |
HFIN 3/17/2022 9:00:00 AM |
HB 272 HB 273 |
| HB 273 Public Testimony incl Ktkn Resolution Rec'd by 031722.pdf |
HFIN 3/17/2022 9:00:00 AM |
HB 273 |