Legislature(2023 - 2024)BUTROVICH 205
03/13/2023 03:30 PM Senate RESOURCES
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| Audio | Topic |
|---|---|
| Start | |
| HJR5 | |
| SB67 | |
| SB49 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HJR 5 | TELECONFERENCED | |
| += | SB 67 | TELECONFERENCED | |
| += | SB 49 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
SB 49-CARBON STORAGE
4:21:00 PM
CO-CHAIR GIESSEL reconvened the meeting and announced the
consideration of SENATE BILL NO. 49 "An Act relating to the
geologic storage of carbon dioxide; and providing for an
effective date."
She stated the intention to continue the 3/10/23 review of the
sectional analysis for SB 49.
4:21:43 PM
HALEY PAINE, Deputy Director, Division of Oil and Gas,
Department of Natural Resources (DNR), Anchorage, Alaska,
continued the sectional analysis for SB 49, starting with
Section 14 on slide 22.
Section 14 (DNR/DOG)
Adds new sections to AS 38.05 Alaska Land Act as
Article 15A Carbon Storage Exploration Licenses;
Leases (proposed AS 38.05.700795); detailed summary
on next slide
MS. PAINE directed attention to the theoretical timeline for a
CCUS project on slide 23 that overlays the different components
of the bill. It notes the points that a carbon storage
exploration license and a carbon storage lease come into play.
The yellow arrow highlights that Section 14 applies after the
initial screening and at the start of the feasibility phase.
Section 14 Detail:
AS 38.05.700
Policy statement that it is in the public interest to
promote geologic storage of carbon dioxide
AS 38.05.705
Provision for applicability carbon storage statutes
and authority for DNR to adopt regulations to
implement these statute
AS 38.05.710
Allows the commissioner to issue carbon storage
exploration licenses on state land and establishes
work commitment obligations, minimum economic terms,
bonding requirements, default provisions, renewal
provisions, and the escalation of minimum economic
terms.
• 5-year exploration license term
• Conversion of the license to a lease upon
fulfillment of work commitment, acquiring storage
facility permit from AOGCC, ability to meet
commercial terms
AS 38.05.715
Procedures for issuance of a carbon storage
exploration license. These are modeled after existing
procedures for oil and gas exploration licensing under
AS 38.05.133.
• Identify land, minimum work commitment, economic
terms, 90 days for competing proposals
• Written finding including competitive process if
competing proposals are submitted
• Subsection 715(h) provides a right-of-first-
refusal opportunity for existing lessees under AS
38.05.135181 (i.e., mineral lessees for coal,
oil and gas, geothermal, or other exploitable
minerals).
4:26:30 PM
CO-CHAIR BISHOP referenced section .710 and asked what the
duration of the lease would be after the license is converted to
a lease.
MS. PAINE answered that the lease is good for as long as the
carbon storage facility is in operation, from construction
through post-closure activities. She added that it's similar to
the oil and gas lease model; there's a primary term that allows
exploration work, but to hold the lease after that the company
has to be engaged in actual production.
CO-CHAIR GIESSEL asked her to speak to subsection .710(h) which
says dollar amounts shall change every five years.
MS. PAINE explained that subsection (h) provides an opportunity
to reevaluate the statutory minimums for per acre and per ton
injection charges and increases them in line with the consumer
price index.
SENATOR CLAMAN questioned whether this wasn't an overly simple
solution to price indexing.
MS. PAINE offered her belief and hope that it would be as
functionally simple as outlined.
4:27:37 PM
JOHN CROWTHER, Deputy Commissioner, Department of Natural
Resources, Anchorage, Alaska, added that, similar to other floor
provisions in oil and gas leasing, it was conceivable that the
department would pass regulation or negotiate leases that were
higher than the statutory floor.
4:28:19 PM
MS. PAINE continued to describe the provisions in Section 14.
Section 14 - (DNR/DOG)
AS 38.05.720
Provision allowing conversion of an AS 38.05.715
carbon storage exploration license to a carbon storage
lease.
AS 38.05.725
An oil and gas lessee converting from enhanced oil
recovery to carbon storage must apply for a carbon
storage lease.
AS 38.05.730
Requirements for plans of development and operations,
and provision for unitization, as with oil and gas
leasing.
AS 38.05.735
Payments from carbon storage licenses and leases are
to be deposited in the general fund except for the
amount allocated to the Permanent Fund under art. IX,
sec. 15, of the Alaska Constitution.
AS 38.05.795
Definitions for specific terms used in the proposed
Article 15A Carbon Storage Exploration Licenses;
Leases
4:29:50 PM
CO-CHAIR BISHOP referenced the payment provision in section .735
and asked what percentage will go to the Permanent Fund.
MS. PAINE answered that for older leases 25 percent of mineral
interests are allocated to the Permanent Fund and a newer
generation of leases allocate 50 percent to the Permanent Fund.
She deferred to the Department of Law to say where these leases
would fall.
CO-CHAIR BISHOP said he'd like that information and Co-Chair
Giessel agreed.
4:30:40 PM
MS. PAINE continued to slide 25, Sectional Summary: Secs. 15-31.
Section 15 (DNR/DOG)
Amends AS 38.35.020(a) to include carbon dioxide for
pipeline transportation right-of-way (ROW) leasing
purposes
Section 16 (DNR/DOG)
Amends AS 38.35.020(b) to allow the DNR commissioner
to exempt pipelines from ROW leasing when transporting
carbon dioxide for enhanced oil recovery or pressure
support
Section 17 (DNR/DOG)
Conforming amendment to AS 38.35.122 to bring some
carbon dioxide pipelines under the same title as
"product" pipelines
Section 1820 (DNR/DOG)
Amends AS 38.35.230 definition of "lease," "pipeline"
or "pipeline facility," and "transportation" to
include provisions for carbon dioxide
Section 21 (DNR/DOG)
Amends AS 38.35.230 to add a definition for "carbon
dioxide" cross referencing the definition used in AS
38.05.795
CO-CHAIR GIESSEL asked if these sections were provisional and
whether it was more likely that the storage would be located
where the carbon was produced.
MR. CROWTHER responded that these sections conform carbon
dioxide pipelines to the existing long and short-distance oil
and gas pipeline regulatory system. DNR anticipates these carbon
dioxide pipelines initially would be very short, but the
provisions in these sections provide the authority to manage all
the different pipeline scenarios.
4:32:51 PM
CO-CHAIR BISHOP asked if AS 38.35.020(a) in Section 15 was for a
new standalone pipeline.
MS. PAINE said yes; the provision authorizes new rights-of-way
leases for constructing a pipeline.
CO-CHAIR BISHOP asked how it would work if the new pipeline was
within an existing right-of-way for an in-use petroleum
pipeline.
MS. PAINE answered that DNR's rights-of-way are for non-
exclusive access.
4:34:15 PM
MS. PAINE continued to Sections 22-30 on slide 25
Sections 2230 (AOGCC)
Conforming amendments separate AS 41.06 into two
articles one for geothermal and one for carbon
storage (AS 41.06.005060).
4:34:45 PM
SENATOR WIELECHOWSKI questioned the reason for the new paragraph
(b)(2) in Section 16 that exempts the construction or operation
of a pipeline transporting carbon dioxide within a field for the
purpose of an enhanced oil recovery project or field
pressurization measures.
MR. CROWTHER explained that AS 38.35.020(b) exempts those
pipelines from the requirement to acquire a specific right-of-
way lease, but it does not exempt the pipeline from the
regulation associated with operations within a development site.
MS. PAINE added that infield gathering lines within a unit
currently are exempted from the requirement to obtain a right-
of-way lease.
SENATOR WIELECHOWSKI asked if this was limited to operations
within a unit or field.
MR. CROWTHER said he would follow up with specifics about the
jurisdiction, but in practice most those operations have been in
the context of an existing development or authorization.
SENATOR WIELECHOWSKI said he was curious about whether this
could affect private property rights.
MR. CROWTHER clarified that the authorities under discussion are
for the purpose of leasing out state lands for the purpose of
siting infrastructure associated with a project. This does not
authorize placing infrastructure on private lands, although
there are processes for an operator to seek such an
authorization and for adjudication.
4:37:44 PM
MS. PAINE continued to Section 31 on slide 25.
Section 31 (AOGCC)
Adds new sections to AS 41.06 as Article 2. Carbon
Dioxide Injection and Storage beginning at AS
41.06.105. Detailed summary on slide after next.
MS. PAINE directed attention to slide 26 that shows the same
theoretical timeline for a CCUS project but with a yellow arrow
that points to where the AOGCC carbon storage permit fits. That
authority is detailed in section 31.
4:38:33 PM
MS. PAINE advanced to slides 27-28, Section Detail: Section 31
(AOGCC).
Section 31 Detail:
AS 41.06.105
Contains a policy statement that it is in the public
interest to inject carbon dioxide into oil and gas
reservoirs in a manner protective of waters and
reservoir integrity; recognizes that in the event
cooperation of mineral interest holders in an area
cannot be obtained, regulatory procedures that enable
cooperative management are required
AS 41.06.110
Provides AOGCC jurisdiction over carbon dioxide
storage facilities to prevent waste, protect
correlative rights, and ensure public health and
safety; "waste" is defined in AS 41.06.210
AS 41.06.115
Concerns AOGCC's authority to carry out the purposes
and intent of AS 41.06.105210 (a) contains an
expansive statement of AOGCC's jurisdiction over
persons and property necessary to carry out the
purposes and intent of AS 41.06.105210 the state's
police power (b) allows AOGCC to suspend its statutes
as to lands committed to federal units, provided the
conservation of resources is provided for (c) contains
a list of specific AOGCC regulatory authorities (d)
wells drilled for carbon dioxide are subject to
AOGCC's jurisdiction under AS 31.05 unless
specifically covered by AS 41.06.105210 (e) AS
41.06.105210 do not limit DNR's authority over (1)
carbon storage exploration licensing or leasing; or
(2) approval and management of carbon storage units or
operations that include state land
AS 41.06.120
Provides that waste is prohibited in a carbon storage
facility or reservoir
4:40:04 PM
AS 41.06.125
Provides permit requirements for storage facilities
AS 41.06.130
Creates a public hearing requirement for storage
facility permits issued by AOGCC notice is given to
property owners within ½ mile
AS 41.06.135
Specifies the criteria for the AOGCC to approve a
carbon storage facility permit
AS 41.06.140
Allows AOGCC to include parameters, limitations, or
restrictions in a permit and to protect and adjust
rights and obligations of persons affected by geologic
storage
AS 41.06.145
Concerns amalgamation of property interests for
storage facilities
CO-CHAIR BISHOP requested additional explanation of the
provision in section .145.
MS. PAINE explained that if a property owner does not consent to
a storage facility, AOGCC has the authority to amalgamate the
subsurface property interests and allow the use of the storage
facility as long as the nonconsenting owner is properly
compensated. The oil and gas statutes have a similar provision.
MS. PAINE continued to review the details of Section 31.
AS 41.06.150
Creates specifications for recording a carbon storage
facility certificate to put future property purchasers
on notice
AS 41.06.155
Creates statutory requirements for AOGCC to ensure
environmental protection and reservoir integrity in
storage facilities and reservoirs
AS 41.06.160
Clarifies preservation of rights, including
deconfliction of development of other minerals by
drilling through or near a storage reservoir
AS 41.06.165
Provides authority for AOGCC to collect fees and
establishes the "carbon dioxide storage facility
administrative fund" under the general fund
AS 41.06.170
Specifies that storage operators hold title to
injected carbon dioxide until a certificate is issued
under AS 41.06.175, including liability for damage
associated with injected carbon dioxide
AS 41.06.175
Specifies the eight factor criteria for certificate of
completion a transfer of title of CO2
4:43:45 PM
SENATOR DUNBAR asked her to speak to 1) the state's liability if
a storage facility is wrongly certified as complete and 2) what
happens if the company has gone bankrupt.
MS. PAINE answered that the state would have the ability to hold
the company liable, just as it can today. If the company is no
longer in business, the funds that are paid into the carbon
storage trust fund over the life of the project would provide
protection.
SENATOR DUNBAR observed that the difference in the carbon
storage context, is that the state has title to the CO2 that is
both an asset and a liability. The liability is that the state
has to make sure it doesn't leak.
4:46:32 PM
MS. PAINE advanced to slide 29 and continued to review the
details of Section 31
AS 41.06.180
Provides authority for AOGCC to collect a "carbon
storage facility injection surcharge" for post-closure
administration to be deposited in the "carbon storage
closure trust fund" established in AS 37.14.850 (bill
Sec. 4)
AS 41.06.185
Provision for AOGCC to impose civil penalties for
violations of its carbon storage statutes
AS 41.06.190
Excludes AOGCC's carbon storage statues from enhanced
oil recovery (EOR), except for when an EOR-related
reservoir is converted to a storage reservoir
AS 41.06.195
Authority for AOGCC to enter into agreements with
other government entities and agencies for carbon
storage purposes
AS 41.06.200
Authority for AOGCC to determine amounts for injection
and storage, including EOR; provides for fees and
applicability for credits and other carbon management
goals
AS 41.06.210
Definitions for terms used in AOGCC's carbon storage
statutes
4:48:01 PM
SENATOR WIELECHOWSKI questioned the reasoning for using the term
"carbon dioxide" in the definition of "carbon dioxide."
MR. CROWTHER said a certain quality and composition of carbon
dioxide is necessary for the safe administration of an injection
and storage project, so the definition tries to indicate that it
is a technical term that is used throughout the statute.
SENATOR WIELECHOWSKI asked if the definition was standard within
the industry.
MR. CROWTHER answered that the program is modeled on the
standard recognition that carbon dioxide must be of a suitable
quality and purity to be safely managed in these storage
facilities. He offered to follow up with how other states have
defined the compound.
SENATOR WIELECHOWSKI said he'd be curious to hear about other
states, because the definition in the bill seemed very unusual.
MR. CROWTHER restated that he would follow up with information
from other states and DNR's thoughts on conforming the
definition to the intent.
4:50:42 PM
SENATOR DUNBAR asked whether the bill, as currently drafted,
could be used to inject and store any other kind of gas.
MR. CROWTHER said there are efforts to manage other byproducts
from industrial activities, but the only focus for geologic
sequestration is carbon dioxide.
SENATOR CLAMAN commented that these leases are the reverse of a
typical oil and gas lease because those leases only last as long
as it's economic to get the product out of the ground. For
carbon storage, the company is obligated to manage the storage
facility indefinitely. He asked what in the legislation
addresses the lessee that decides to go home after 10 years.
MS. PAINE responded that while there isn't an end date for the
project, the model is able to predict how much CO2 a reservoir is
able to take over a certain number of years. If the operator is
able to demonstrate that the plume is no longer migrating and
there's no danger of a leak 10 years after injection has ceased,
AOGCC may grant a site closure certificate. There is no
requirement to do so; 10 years is just the earliest in the post
injection period that the operator could apply for a title
transfer.
SENATOR CLAMAN summarized that before a company goes home after
it has injected CO2 to the capacity of the storage reservoir, it
must apply and show AOGCC convincing evidence that the gas is
fully contained and won't migrate.
MS. PAINE agreed.
SENATOR CLAMAN continued that if there were a problem after
that, any corrective action would be the state's responsibility.
MS. PAINE answered the state is ultimately responsible as the
landowner, but the idea is that the regulatory and statutory
requirements for inspections, monitoring, and the post closure
trust fund would avoid that sort of problem.
4:55:17 PM
SENATOR WIELECHOWSKI noted that the bill talks about carbon,
carbon storage, and carbon dioxide; he asked if those terms are
intended to be used interchangeably.
MR. CROWTHER agreed that the terms were used interchangeably,
and conveyed that the House version of the bill was amended to
make the terminology consistent.
4:55:57 PM
SENATOR DUNBAR asked if he had an explanation for the zero
fiscal note from the Department of Revenue (DOR).
MR. CROWTHER asked whether he was talking about revenues or
expenses.
SENATOR DUNBAR said he thought it was expenses.
MR. CROWTHER said DNR and DOR believe the program can be managed
with the existing staff. However, that could change in years to
come, and if that happened a request would be forthcoming at
that time.
4:57:21 PM
SENATOR KAWASAKI asked about enhanced oil recovery wells, the
difference between Class II and Class VI wells, and how that
determination is made.
MS. PAINE answered that, at present, an enhanced oil recovery
well is dedicated to that purpose. But when that well is used
for geologic storage, it has to be a Class VI well because the
concentration of CO2 will be very different. The EPA currently is
working on the rules that govern the transition from one well
class to the other, but right now there is just the statement
that when the safety and protections designed for the well are
no longer applicable for Class II, it's necessary to transition
to Class VI.
SENATOR KAWASAKI noted that the language says the commission
will adopt the regulations even though the federal government
hasn't said what it will do on Class VI wells, so the AOGCC will
have to take that up at some point.
MS. PAINE agreed.
4:58:59 PM
MS. PAINE continued to slide 30 to describe Sections 32-39.
Sections 3235 (DNR/Parks)
Conforming amendments to parks and recreational
facilities laws (AS 41.21)
• Wood-Tichik excluded
• Willow Creek permitted
• Kenai River Management Area permitted
• Alaska Chilkat Bald Eagle Preserve excluded
Section 36 (DNR/DOG)
Adds new subsection AS 44.37.020(d) for DNR to
administer storage facilities and stored carbon after
certificate of completion is issued under proposed AS
41.06.175 (bill Sec. 31)
Section 3739 (DNR/AOGCC)
General provisions for authority to adopt regulations,
title change for chapter AS 41.06, and effective date
of the legislation
5:00:12 PM
CO-CHAIR GIESSEL noted that the committee would work with DNR to
reschedule the individuals who had been invited to testify.
| Document Name | Date/Time | Subjects |
|---|---|---|
| SB 67 Sponsor Responses to Committee Questions 03.01.23.pdf |
SRES 3/13/2023 3:30:00 PM |
SB 67 |
| SB 67 - Testimony received as of 3.11.23.pdf |
SRES 3/13/2023 3:30:00 PM |
SB 67 |
| HJR 05 CS(FSH) Version U 2.15.23.PDF |
SRES 3/13/2023 3:30:00 PM |
HJR 5 |
| HJR 05 Explanation of Changes Version S to U 2.15.23.pdf |
SRES 3/13/2023 3:30:00 PM |
HJR 5 |
| HJR 05 Sponsor Statement Version U 2.24.23.pdf |
SRES 3/13/2023 3:30:00 PM |
HJR 5 |
| HJR 05 Fiscal Note One - House Special Committee on Fisheries 2.15.23.PDF |
SRES 3/13/2023 3:30:00 PM |
HJR 5 |
| HJR 05 Research - KCAW Article 2.1.23.pdf |
SRES 3/13/2023 3:30:00 PM |
HJR 5 |
| HJR 05 Research - ATA and ALFA Orca White Paper Handout 12.7.22.pdf |
SRES 3/13/2023 3:30:00 PM |
HJR 5 |
| HJR 05 Research - ADFG Press Release 8.8.22.pdf |
SRES 3/13/2023 3:30:00 PM |
HJR 5 |
| HJR 05 Testimony - Received as of 3.13.23.pdf |
SRES 3/13/2023 3:30:00 PM |
HJR 5 |