04/26/2021 01:00 PM House RESOURCES

                  HB 135-GEOTHERMAL RESOURCES                                                                               
                                                                                                                                
1:04:16 PM                                                                                                                    
                                                                                                                                
CHAIR PATKOTAK announced  that the first 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."                                                                                               
                                                                                                                                
1:05:44 PM                                                                                                                    
                                                                                                                                
The committee took a brief at-ease.                                                                                             
                                                                                                                                
1:06:23 PM                                                                                                                    
                                                                                                                                
HAILEY PAINE,  Deputy Director,  Division of  Oil and  Gas (DOG),                                                               
Department  of Natural  Resources (DNR),  resumed the  PowerPoint                                                               
presentation [hard copy included  in the committee packet], began                                                               
during  the  April  23,  2021, meeting  of  the  House  Resources                                                               
Standing  Committee,  with  slide  26,  "Examples  of  Geothermal                                                               
Systems."   She explained that  this section of  the presentation                                                               
would highlight the  locations in Alaska which  could be affected                                                               
under HB  135.  She  then deferred  to Mr. Masterman  to continue                                                               
the presentation.                                                                                                               
                                                                                                                                
1:07:53 PM                                                                                                                    
                                                                                                                                
STEVE   MASTERMAN,   Director,   Division   of   Geological   and                                                               
Geophysical  Surveys  (DGGS),  Department of  Natural  Resources,                                                               
began his presentation  with slide 27, "Mt Spurr,"  showing a map                                                               
of  the  Mt.  Spurr  volcanic   system  across  Cook  Inlet  from                                                               
Anchorage,  approximately  35 miles  from  the  power lines  that                                                               
service Anchorage.   He said  that with a surface  temperature of                                                               
about  40 degrees  Celsius, Mt.  Spurr  is classified  as a  warm                                                               
spring, so there will be  further exploration in hopes of finding                                                               
warmer water  containing more  energy.   He noted  that GeoAlaska                                                               
LLC and  Raser Power  Systems, LLC are  exploring the  area since                                                               
Ormat Technologies,  Inc. found  only dry wells  and subsequently                                                               
moved out  .  He  continued to  slide 28, "Pilgrim  Hot Springs,"                                                               
showing  a map  of a  geothermal system  on the  Seward Peninsula                                                               
with  a  surface water  temperature  of  50 degrees  Celsius,  92                                                               
degrees Celsius at drilling depth  of 120 meters, and a suspected                                                               
temperature of  150 degrees Celsius  in the reservoir.   He noted                                                               
the  hot spring's  proximity  to Nome  and  Graphite Creek,  each                                                               
requiring  about  six  megawatts  of power  but  currently  using                                                               
diesel generated power.  He said  that if the hot water reservoir                                                               
at Pilgrim  Hot Springs is  found, the energy generation  will be                                                               
in the  tens of  megawatts, powering both  Nome and  the Graphite                                                               
Creek Mine.  He pointed out  the areas where drilling has already                                                               
happened and the  nearby fault line which could  contain more hot                                                               
water.                                                                                                                          
                                                                                                                                
1:18:57 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE HANNAN  referred to slide  24 and asked  about the                                                               
phrase "naturally or artificially in the geothermal system."                                                                    
                                                                                                                                
MR.  MASTERMAN explained  that some  of the  new developments  of                                                               
geothermal energy  allow for dry  systems; for  instance, liquids                                                               
injected into  an area of  hot rock  could be recovered  from the                                                               
same bore hole, creating a closed-loop system.                                                                                  
                                                                                                                                
1:21:28 PM                                                                                                                    
                                                                                                                                
SEAN CLIFTON, Policy and Program  Specialist, Division of Oil and                                                               
Gas,  Department   of  Natural  Resources,   addressed  questions                                                               
remaining from the House Resources  Standing Committee meeting on                                                               
April  23, 2021.   He  said that  geothermal resource  production                                                               
would  be  the  only  instance  in  which  a  subsurface  mineral                                                               
resource  owned  by the  state  would  contain an  exemption  for                                                               
private use.  He clarified that  if a landowner were to find gold                                                               
or oil  on the  property to  which they  own the  surface rights,                                                               
they would  be required to go  through the state for  permits and                                                               
pay royalties on the resource production.                                                                                       
                                                                                                                                
1:22:49 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE FIELDS  inquired about recent  geothermal projects                                                               
and the associated prices per kilowatt hour.                                                                                    
                                                                                                                                
MR. CLIFTON responded that he doesn't have an answer.                                                                           
                                                                                                                                
1:23:46 PM                                                                                                                    
                                                                                                                                
JEREMY   PRICE,   Commissioner/Chair,    Alaska   Oil   and   Gas                                                               
Conservation   Commission   (AOGCC),  Department   of   Commerce,                                                               
Community,  and  Economic  Development  (DCCED),  said  that  DNR                                                               
worked  with AOGCC  to identify  any  areas of  concern prior  to                                                               
introducing HB 135.                                                                                                             
                                                                                                                                
1:24:22 PM                                                                                                                    
                                                                                                                                
MR. CLIFTON said that, with  regards to preferential rights, it's                                                               
established in  AS 38.05.125  that a  subsurface owner  or lessee                                                               
must  be given  reasonable use  of  the surface  for purposes  of                                                               
exploration and  production.   He explained  that if  a developer                                                               
wanted  access to  private surface  property,  the developer  and                                                               
surface owner  would need to  have a private agreement  with some                                                               
form of  compensation, such as  money or  building a road.   With                                                               
geothermal development,  he said,  free energy  could be  part of                                                               
the  compensation.   He  said  that private,  mutually-beneficial                                                               
agreements  are very  common, but  if the  parties are  unable to                                                               
come to an  agreement and the developer can't  find other access,                                                               
DNR  may be  asked  to  intervene under  AS  38.05.130, with  the                                                               
procedure defined in 11 AAC 86.145.                                                                                             
                                                                                                                                
1:27:17 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  HANNAN  asked  what  the  surface  infrastructure                                                               
would be once a geothermal site is identified for development.                                                                  
                                                                                                                                
MR. CLIFTON replied  that the geothermal plant would  be built as                                                               
close  to  the  water  source   as  possible,  with  power  lines                                                               
stretching to the end of the grid.                                                                                              
                                                                                                                                
MR. MASTERMAN explained  that there would be a  small facility at                                                               
the well field  with a building housing the power  turbines and a                                                               
road or airstrip  for access.  He said that  the facilities would                                                               
be  self-contained, as  the only  end product  is the  power that                                                               
travels along the powerline.                                                                                                    
                                                                                                                                
REPRESENTATIVE  HANNAN asked  Mr. Masterman  how he  would define                                                               
"small."                                                                                                                        
                                                                                                                                
MR. MASTERMAN replied that  geothermal systems producing hundreds                                                               
of megawatts would require a  large powerplant, but a system like                                                               
Chena  Hot  Springs that  produces  hundreds  of kilowatts  would                                                               
require only "a small warehouse kind of size."                                                                                  
                                                                                                                                
CHAIR PATKOTAK  asked about the  size of the Pilgrim  Hot Springs                                                               
plant.                                                                                                                          
                                                                                                                                
MR.  MASTERMAN noted  that it  would be  helpful to  provide some                                                               
visual examples of powerplants around the world.                                                                                
                                                                                                                                
1:33:04 PM                                                                                                                    
                                                                                                                                
CHAIR PATKOTAK  asked Mr. Clifton  whether imminent  domain would                                                               
play a role in geothermal development.                                                                                          
                                                                                                                                
MR.  CLIFTON replied  that imminent  domain applies  to scenarios                                                               
within  the  purview  of the  Department  of  Transportation  and                                                               
Public Facilities (DOT&PF) rather than DNR.                                                                                     
                                                                                                                                
CHAIR PATKOTAK noted  that Mr. Clifton had  earlier asserted that                                                               
the  state  would intervene  if  a  developer and  surface  owner                                                               
couldn't come to an agreement.                                                                                                  
                                                                                                                                
MR.  CLIFTON explained  that  it would  be  the DNR  commissioner                                                               
mediating a reasonable agreement  between the parties rather than                                                               
the state seizing the land or forcing a sale.                                                                                   
                                                                                                                                
1:35:24 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  GILLHAM asked  about  a possible  timeline for  a                                                               
power plant to begin production.                                                                                                
                                                                                                                                
MR.  MASTERMAN  explained that  once  a  geothermal reservoir  is                                                               
found   there  would   be  a   period  of   engineering  studies,                                                               
permitting, and  economics to be  established and confirmed.   He                                                               
said that five to ten years  would be a reasonable timeline for a                                                               
facility in a remote part of the state.                                                                                         
                                                                                                                                
CHAIR PATKOTAK  noted that it would  be a privately owned  or co-                                                               
operated facility.                                                                                                              
                                                                                                                                
1:37:18 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE HANNAN asked what  the subsurface rights are under                                                               
current law.                                                                                                                    
                                                                                                                                
MS. PAINE  responded that currently,  if a developer  requested a                                                               
geothermal prospecting  permit, the  surface owner would  have 30                                                               
days to apply for their  own permit, which would have preference.                                                               
Under HB 135 the surface owner would not be allowed to apply.                                                                   
                                                                                                                                
CHAIR PATKOTAK asked why a surface owner would apply.                                                                           
                                                                                                                                
MS. PAINE  replied that  the surface  owners would  most commonly                                                               
apply  for a  permit in  the  hope of  reselling the  exploration                                                               
rights to  the developer.   He clarified  that a  landowner could                                                               
still use the subsurface resource for  a personal use like a home                                                               
heat pump.                                                                                                                      
                                                                                                                                
1:40:18 PM                                                                                                                    
                                                                                                                                
CHAIR PATKOTAK announced that HB 135 was held over.