Legislature(2021 - 2022)BARNES 124
04/23/2021 10:30 AM House RESOURCES
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| Audio | Topic |
|---|---|
| Start | |
| HB98 | |
| HB135 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 98 | TELECONFERENCED | |
| *+ | HB 135 | TELECONFERENCED | |
| + | TELECONFERENCED |
HB 135-GEOTHERMAL RESOURCES
11:49:49 AM
CHAIR PATKOTAK announced that the final order of business would
be HOUSE BILL NO. 135, "An Act relating to geothermal resources;
relating to the definition of 'geothermal resources'; and
providing for an effective date."
11:50:31 AM
STEVE MASTERMAN, Director, Division of Geological and
Geophysical Surveys (DGGS), Department of Natural Resources
(DNR), presented a PowerPoint on HB 135, beginning on slide 2,
"Agenda," which read as follows [original punctuation provided]:
? DGGS: Introduction to geothermal energy
? Fundamentals of geothermal systems
? Geothermal systems of Alaska
? DOG: Overview of HB 135
? Purpose of HB 135
DNR geothermal leasing history
? Sectional analysis summary
? Sectional analysis details
? DGGS: Examples of geothermal system
? Supplemental Information
? AGILE Act
? Drilling regulations
MR. MASTERMAN proceeded to slide 5, "Fundamental Ingredients of
Useable Geothermal Energy, which displayed a cross-section of
the well depths of a power plant and read as follows [original
punctuation provided]:
? Elevated geothermal gradient
? Porosity and permeability for the migration of
fluids
? Surface access
Sufficiently large thermal System
? Customers for energy
MR. MASTERMAN explained that geothermal energy comes from heat
generated within the earth, either by volcanic activity or
radioactive decay, and that where there exists an elevated
geothermal gradient there is hotter rock closer to the surface.
Harvesting geothermal power requires hot rocks that are highly
water-permeable, as well as surface access to the geothermal
system, which must be large enough to generate meaningful
amounts of energy. He continued to slide 6, "Heat Flow in
Alaska," which showed the parts of Alaska and the surrounding
oceans where it's easier to find geothermal energy. He noted
that the area around Anchorage and Kenai Peninsula has less heat
flow. Slide 7, "North Slope Geothermal Gradient," showed a
contour map of the North Slope generated from the bottom
temperatures of oil and gas wells. He explained that on the
North Slope, in order to reach a rock temperature of 100 degrees
centigrade, a hole would have to be drilled to 3,000 meters. A
higher geothermal gradient would necessitate a shallower well.
Slide 8, "Geothermal Gradients," provided a graphical
representation with depth in feet on the y-axis and temperature
in degrees centigrade on the x-axis. He noted the plot points
of Chena production wells and the Makushin test well, producing
noticeably higher temperatures at shallower depths, and stressed
that more energy is obtained from a higher-temperature system.
11:58:05 AM
MR. MASTERMAN continued on to slide 9, "Geothermal Resource
Quality, which read as follows [original punctuation provided]:
Generation capacity per unit cost depends on several
geologic and economic factors:
? Temperature (hotter is better)
? Flow rate (higher flow rates are better)
? Reservoir Framework (uniform porosity better than
fractures)
? Recharge (partially natural better than all
artificial)
? Depth (shallower is less expensive, thus better)
? Location, location,? (relative to population,
transmission system, development costs, etc.)
MR. MASTERMAN presented slide 10, "Introduction to Geothermal
Resources," which read as follows [original punctuation
provided]:
? Geothermal heat, where technically and economically
accessible, is an excellent form of sustainable energy
? Hydrothermal systems are the most common form of
energy extraction from geothermal heat
? Complex geologic parameters necessary for a viable
geothermal resource, all present at one location, is
rare
Alaska contains several potential geothermal
resources
? New technologies that will help expand geothermal
development into less favorable geology are on the
horizon
MR. MASTERMAN noted the importance of location and said that
research is being done to develop new technologies to expand the
capacity to produce geothermal energy from lower-temperature,
drier systems, which would expand the use of geothermal energy
as well as allow the development of smaller systems in areas of
lower temperatures, potentially allowing smaller communities
with lower energy needs to develop geothermal resources. He
moved on to slide 11, "Geothermal Systems: Fairbanks Region,"
which showed a map of several geothermal systems that have
reached the surface. A similar map was displayed on slides 13,
14, and 15, titled "Geothermal Systems: Seward Peninsula
Region," "Geothermal Systems: Alaska Peninsula Region," and
"Geothermal Systems: Southeast Region."
12:08:30 PM
CHAIR PATKOTAK opened public testimony on HB 135.
12:09:14 PM
CHARLES MCKEE provided comments not on topic with the published
agenda.
12:12:48 PM
CHAIR PATKOTAK, after ascertaining that no one else wished to
testify, closed public testimony on HB 135.
12:13:27 PM
HALEY PAINE, Deputy Director, Division of Oil and Gas (DOG),
Department of Natural Resources (DNR), began her PowerPoint
presentation [hard copy included in the committee packet] with
slide 17, "Purpose of HB 135," which read as follows [original
punctuation provided]:
? Modernize Alaska's geothermal exploration program
? Greater potential for providing affordable,
renewable energy to rural communities and remote
natural resource extraction projects
? Promote clean energy industry job creation
? Align geothermal licensing with the oil and gas
exploration license program, thereby increasing
feasibility for companies to develop resources
? More time for a company to identify and prove
resource to convert to leases
? Conversion to leases based on completion of
work commitment and submission of exploration plan
instead of proving discovery of commercial resource
? Doubles maximum acreage allowed for exploration
? Reforms definitions for geothermal resources to
focus on Commercial Use
? Explicitly excludes domestic, noncommercial, or
small-scale industrial use from the need for a
geothermal license or lease
MS. PAINE stressed that there are "vast, untapped resources" in
the state. She then paraphrased slide 18, "DNR Geothermal
Leasing/Permitting History," which read as follows [original
punctuation provided but formatting changed]:
Present
Mount Spurr Currently there are two pending
applications for geothermal exploration prospecting
permits in the Mount Spurr area. The final Best
Interest Findings for the first was issued March 12,
2021 and the preliminary Best Interest Finding for the
second was issued March 26, 2021.
2013
Augustine Island 26 tracts were offered. Only one
tract was leased to a private individual and no
exploration work was conducted as a result of that
lease sale.
2008
Mount Spurr 16 tracts leased to Ormat and one private
individual. Ormat purchased 15 leases in the 2008 sale
and drilled on southern flank of volcano. They didn't
find adequate temperatures in wells to pursue the
project. The state has the data available on DO&G's
website.
1986
Mount Spurr On June 24, 1986, DNR offered 2,640 acres
in two tracts. Both tracts received bids. The lease
for Tract 1 expired in 1996, and the lease for Tract 2
was terminated in 1990.
1983
Mount Spurr DNR held its first geothermal lease sale
in the Mount Spurr area on May 17, 1983. 10,240 acres
in 16 tracts were offered in Competitive Geothermal
Lease Sale 1. One tract received a bid. The lease for
that tract was terminated in 1992
MS. PAINE explained that the sales described in slide 18 were
held because the DNR commissioner had designated those regions
as having significant potential for geothermal resources, so
they were put out for competitive bid. She stressed that HB 135
would not change the competitive bid program, so DNR would
retain the right to offer geothermal leases; however, it would
change the process by which the prospecting permit would be
administered. She explained that the prospecting permit has
only two years in which to discover and prove a commercially
viable resource, whereas the competitive leasing program gives a
permit holder 10 years.
MS. PAINE continued to slide 19, "Sectional Summary, which read
as follows [original punctuation provided but formatting
changed]:
1 (AOGCC) Removes unnecessary reference to AS 41.06
from AS 31.05.030(m) because of changes made by
Section 9.
2 (DNR) Changes permits to licenses. Explicit
exemption for geothermal resources intended for
domestic, noncommercial, or small-scale industrial use
(See also Section 9). Removes preferential rights
clause. This provision is not appropriate for
commercial development of State resources.
3 (DNR) Changes permit to license. Extends term of
licenses (formerly permits) from two to five years.
Replaces lease conversion requirement of commercial
discovery and development plan with work commitment
and exploration plan.
4 (DNR) Changes permit to license.
5 (DNR) Changes permits to licenses. Increases maximum
acreage from 51,200 to 100,000. Adds provision for
rental fees to be defined in regulation, rather than
statute (easier to update).
6 (DNR) Adds new subsections to AS 38.05.181 to
modernize unitization statute for geothermal leases to
match the model we use for oil & gas under AS
38.05.180.
7 (DNR) Replaces AS 38.05.965(6) definition of
geothermal resources (Same as Section 11).
8 (AOGCC) Amends AS 41.06.020(e), clarifies that AS
41.06 does not limit DNR's authority over geothermal
resource management on state land.
9 (AOGCC) Amends AS 41.06.020(f) to add explicit
exemption for geothermal resources intended for
domestic, noncommercial, or small-scale industrial use
(See also Section 2).
10 (AOGCC) Amends AS 41.06.060(4) definition of
geothermal fluid to remove temperature references and
better conform with other changes in this bill.
11 (AOGCC) Replaces AS 41.06.060(5) definition of
geothermal resources (Same as Section 7).
12 (AOGCC) Repeals AS 41.06.005(b) and AS 41.06.030,
since geothermal units are managed by DNR.
1316 General provisions for applicability and
effective dates. Includes applicability provision for
prospecting permits currently being processed.
MS. PAINE noted HB 135 would address several areas for a change
in the terminology from "permit" to "license" in order to be
consistent with the language used in oil and gas exploration.
She also explained that applicants operating under a geothermal
license would have five years, instead of two, to conduct
reconnaissance, secure permits, and identify the resource. She
said that the permit requirement would change from "the proving
of a commercial resource" to "the completion of a work
commitment" to be consistent with the oil and gas exploration
license program. She noted that there are specific exemptions
for non-commercial, industrial, small-scale home use for which
an operator would not need to pursue a permit.
12:18:50 PM
REPRESENTATIVE HOPKINS asked Ms. Paine for more details on the
private use exemption.
MS. PAINE said that an exclusion could be for domestic use such
as a heat pump for a home, or for small-scale industrial use.
She said that anything that isn't intended for a broader
commercial application or large-scale development intended to
sell power to multiple parties would fall under the exemption.
She said that there is no specific threshold in terms of
megawatt-hour or kilowatt-hour in order to keep the focus on
use.
REPRESENTATIVE HOPKINS asked whether geothermal energy would be
the only subsurface resource that wouldn't require a license or
permit.
MS. PAINE indicated that she would research that question.
12:20:44 PM
REPRESENTATIVE HANNAN asked whether the geothermal development
processes would be changed for administrative purposes only, or
if similar companies would be pursuing those resources.
MS. PAINE replied that it would be the process that would be
modified to align with the state's oil and gas exploration
license program. She explained that the geothermal standard is
currently higher than that of oil and gas exploration licensing,
and that by modifying the terms of geothermal exploration, the
goal is to make production of undiscovered geothermal resources
possible.
12:22:50 PM
MS. PAINE resumed her presentation with slide 21, "Section 2:
Private Use Exemption," which read as follows [original
punctuation provided]:
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.
MS. PAINE paraphrased slide 22, "Section 2: Preferential
Rights," which read as follows [original punctuation provided]:
? The preferential rights provision is being deleted
because it is inappropriate to the situation (it's
more relevant to water rights or other surface use
cases not associated with the mineral estate).
? Surface owner rights are protected under AS
38.05.130.
? If conflict arises, DNR ensures private
landowners would not be left without heat or power, or
otherwise damaged by commercial development.
? Scenario is unlikely because private landowners
usually don't have financial resources to develop a
commercially-viable geothermal resource.
? Rights to access the mineral estate are reserved
under AS 38.05.125.
? Surface owners must provide reasonable access
to resource developers.
The same condition exists for oil & gas or
mining.
? If a surface use agreement can't be reached,
resolution process is in 11 AAC 86.145.
DNR holds a hearing wherein the developer must
prove there is no other alternative location for the
well or data acquisition.
? If the Commissioner concurs, developer posts a
bond to compensate landowner for any impacts and work
progresses.
? Public notice is a part of the license issuance
process, and surface owners would be included.
12:24:40 PM
REPRESENTATIVE HANNAN asked Ms. Paine to further explain the
rights to access under AS 38.05.123.
MS. PAINE said that even if a company has the rights to develop
geothermal resources under a property with different surface
owners, the company would be required to work with the owner on
development and payment. She said that there is a "robust"
public notice process as a part of license issuance and the best
interest finding process, so there would be no infringement on
personal property rights. She deferred to Mr. Masterman for
technical information.
12:27:34 PM
MR. MASTERMAN explained that geothermal systems are developed at
a much shallower depth than oil and gas resources, so there
won't be the need for horizontal wells.
12:28:43 PM
MS. PAINE resumed her presentation by paraphrasing slide 23,
"Section 3: Work Commitment," which read as follows [original
punctuation provided]:
? Changes prospecting permit to license and increases
term from 2 to 5 years
? Creates greater opportunity for success of
noncompetitive geothermal program
? Conversion to noncompetitive lease through
completion of agreed upon work commitment
? Current process for oil and gas exploration
license
? Commitment expressed in dollar figure ? Annual
reporting and performance objectives
MS. PAINE paraphrased slide 24, "Section 10: Geothermal Fluids,"
which read as follows [original punctuation provided]:
AS 41.06.060(4) is amended to read:
(4) "geothermal fluid" means liquids, brines, water,
gases, or and steam at temperatures greater than 120
degrees celcius or any commercial use of liquids and
steam naturally or artificially present in a
geothermal system; "geothermal fluid" does not include
oil, hydrocarbon gases, or other hydrocarbon
substances at temperatures less than 120 degrees
celsius
? 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.
MS. PAINE explained that slides 24 and 25, "Sections 7 & 11: New
Definition," change language that specify specific temperatures
which are no longer relevant due to advances in geothermal
technology. Slide 25 read as follows [original punctuation
provided]:
"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.
12:29:48 PM
CHAIR PATKOTAK announced that HB 135 was held over.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 98 DNR Response to Remaining Amendments 4.23.2021.pdf |
HRES 4/23/2021 10:30:00 AM HRES 4/23/2021 1:00:00 PM |
HB 98 |
| HB 98 HRES Action on Amendments 4.19.2021.pdf |
HRES 4/19/2021 1:00:00 PM HRES 4/23/2021 10:30:00 AM HRES 4/23/2021 1:00:00 PM |
HB 98 |
| HB 98 Amendment Cronk A.24 4.19.2021.pdf |
HRES 4/19/2021 1:00:00 PM HRES 4/23/2021 10:30:00 AM HRES 4/23/2021 1:00:00 PM |
HB 98 |
| HB 98 Memo Amendment A.15 4.19.2021.pdf |
HRES 4/19/2021 1:00:00 PM HRES 4/23/2021 10:30:00 AM HRES 4/23/2021 1:00:00 PM |
HB 98 |
| HB 98 HRES Amendment Packet 1 4.19.2021.pdf |
HRES 4/19/2021 1:00:00 PM HRES 4/23/2021 10:30:00 AM HRES 4/23/2021 1:00:00 PM |
HB 98 |
| HB 135 Sponsor Statement 4.23.2021.pdf |
HRES 4/23/2021 10:30:00 AM HRES 4/23/2021 1:00:00 PM HRES 4/26/2021 1:00:00 PM HRES 1/21/2022 1:00:00 PM |
HB 135 |
| HB 135 Sectional Analysis Version A 4.23.2021.pdf |
HRES 4/23/2021 10:30:00 AM HRES 4/23/2021 1:00:00 PM HRES 4/26/2021 1:00:00 PM HRES 1/21/2022 1:00:00 PM |
HB 135 |
| HB 135 DNR Presentation 4.23.2021.pdf |
HRES 4/23/2021 10:30:00 AM HRES 4/23/2021 1:00:00 PM HRES 4/26/2021 1:00:00 PM |
HB 135 |
| HB 98 Letter Alaska Forest Association 4.23.2021.pdf |
HRES 4/23/2021 10:30:00 AM |
HB 98 |