Legislature(2021 - 2022)BUTROVICH 205
04/09/2021 03:30 PM Senate RESOURCES
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| Audio | Topic |
|---|---|
| Start | |
| SB104 | |
| SB61 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| += | SB 97 | TELECONFERENCED | |
| += | SB 61 | TELECONFERENCED | |
| *+ | SB 104 | TELECONFERENCED | |
SB 104-GEOTHERMAL RESOURCES
3:46:04 PM
CHAIR REVAK announced the consideration of SENATE BILL NO. 104
"An Act relating to geothermal resources; relating to the
definition of 'geothermal resources'; and providing for an
effective date."
3:46:35 PM
STEVE MASTERMAN, Director, Division of Geological & Geophysical
Surveys, Department of Natural Resources, Fairbanks, Alaska,
began the presentation to introduce SB 104 with a review of the
agenda followed by a discussion of the purpose and key aspects
of SB 104 outlined on slide 4 that read as follows:
• 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
MR. MASTERMAN deferred further introduction of SB 104 to Ms.
Paine.
3:53:11 PM
HALEY PAINE, Deputy Director, Division of Oil and Gas,
Department of Natural Resources (DNR), Anchorage, Alaska, stated
she would discuss the history and current status of geothermal
leasing and permitting in Alaska followed by a sectional summary
of the changes that were described in the purpose of the bill.
MS. PAINE explained that since 1983, DNR has held three
geothermal lease sales in the Mount Spurr area and one on
Augustine Island. The commissioner designated the area in each
lease based on substantial indication of substantial resources,
which called for a competitive sale of tracts, and SB 104 would
change nothing in that process. She highlighted that the only
sale that resulted in on-the-ground activity was in 2008 when 16
tracts on Mount Spurr were leased, but those tracts were
subsequently relinquished. At present, she said there are two
pending applications for geothermal exploration prospecting
permits and both would benefit from the changes proposed in SB
104. DNR issued the final Best Interest Finding for the first
application March 12, 2021 and the preliminary Best Interest
Finding for the second application March 26, 2021.
3:54:46 PM
MS. PAINE directed attention to the sectional summary for SB 104
on slide 7 and provided a review of Sections 2, 3, and 5.
Section 2 has the first of several changes in terminology.
"License" is used instead of "permit" to align with oil and gas
exploration licensing. It also provides an explicit exemption
for geothermal resources intended for domestic, noncommercial,
or small-scale industrial use. Finally, the preferential rights
provision is removed as it is more relevant to water rights or
other surface uses that are not associated with the mineral
estate. Not applying this to domestic use further protects
private rights.
Section 3 extends the term of the license from two years to five
years. Additionally, the lease conversion requirement of
commercial discovery and development plan is replaced with a
work commitment and exploration plan. The work commitment is the
current standard for oil and gas leasing. A work commitment is
expressed in dollars of direct exploration expenditures. This
provides more flexibility than a finite definition of a
commercial quantity discovery.
MS. PAINE skipped to Section 5 and explained the maximum acreage
in a geothermal lease is increased from 51,200 to 100,000 acres.
The definitions for geothermal fluids and geothermal resources
are modernized to account for changing technology and it removes
temperature requirements currently in statute.
MS. PAINE advised that the foregoing was a summary of the
sectional analysis.
3:57:37 PM
SENATOR STEVENS noted that the federal government does not
recognize hydropower as renewable energy, and asked whether
geothermal is considered renewable.
MR. MASTERMAN answered that the Agile Act [that passed in 2019]
recognized geothermal energy as a renewable energy source.
SENATOR STEVENS expressed appreciation for the information.
3:58:23 PM
SENATOR KIEHL asked how the helium that comes up with the hot
water would be treated in the redefinition of geothermal
resources. He noted that the current definition explicitly
excludes helium, but the new definition does not.
MR. MASTERMAN deferred the question to Ms. Paine.
3:59:10 PM
MS. PAINE said she would send follow up information to help
explain how helium would be treated when it is removed from the
new definition.
CHAIR REVAK asked her to send the information to his office and
it would be distributed to the committee.
3:59:41 PM
SENATOR KIEHL ask what notice and opportunity a surface land
owner would receive if geothermal prospecting or drilling was
planned for underneath their land, since the bill removes that
preference right.
MS. PAINE answered that the current, robust public process would
not change with passage of SB 104. In that process, the director
must issue a written Best Interest Finding (BIF) that finds
disposal of the land is in the best interest of the state. When
an application is received, notice and the opportunity to
comment goes out to affected communities, municipalities, Native
organizations, and landowners. Once the preliminary BIF is
published, interested parties have another opportunity to
comment.
SENATOR KIEHL asked if the notice is sent specifically to the
owner of record of the surface parcel.
MS. PAINE answered that letters are not sent to individual
landowners but notice is sent through multiple public venues in
the area including local organizations, the post office, and
media outlets.
4:02:26 PM
SENATOR MICCICHE joined the committee.
MR. MASTERMAN directed attention to the maps on slide 9 of the
geothermal system associated with Mount Spurr. The map on the
left provides a regional view of Mount Spurr with a volcanic
vent and hot springs on either side, Cook Inlet in the center,
and Anchorage on the right. He pointed to the power lines and
roads and explained that Mount Spurr is about 35 miles from the
power grid and road system so a spur line and access road would
be required if these systems are found commercially viable.
MR. MASTERMAN said the map on the right of slide 9 provides a
close-up of the hot springs and volcanic vent as well as the two
permit areas that GeoAlaska and Razor Geothermal applied for,
both of which are in the immediate area of the hot springs. The
close-up also shows the holes Ormat drilled on the southern
flank of the volcano in 2008. [This is referenced in the
leasing/permitting history on slide 6.]
4:05:05 PM
MR. MASTERMAN explained that the shaded areas on the map reflect
the geology of the area. The green areas reflect Tertiary
sediments in the west foreland formation, which is a series of
conglomerates. The areas in different shades of pink are the
volcanic rocks and intrusive rocks associated with Mount Spurr.
He described the geology in the area as somewhat complicated.
Both the Capps Glacier fault and the Lake Clark fault are major
geological features that have considerable offset. He said Ormat
drilled on the southeast side of the Capps Glacier fault and it
was a dry hole. They drilled through the shallow volcanic rocks
into the underlying sedimentary rocks but never intersected any
water or rocks that were even warm. They drilled in the area for
a reason but it was a 100 percent miss.
He said the new explorers have that information but they still
have the tough task of finding the right fault and tracing it
back to the geothermal reservoir that is sourcing the Mount
Spurr Hot Springs. It may take the geologists a number of summer
seasons to do the geologic mapping and geophysical surveys
before they start drilling. These companies also need a fairly
large tract of land. The holes Ormat drilled were approximately
4-5 miles away from the surface expression of the hot springs,
so 5-6 miles on either side of the surface expression is not
unheard of to locate the reservoir.
MR. MASTERMAN asked if there were any questions about Mount
Spurr.
4:09:03 PM
SENATOR KAWASAKI asked for an explanation of the mechanics of a
reservoir for a geothermal field.
MR. MASTERMAN answered that a geothermal resource is a fluid
like oil and gas, but the companies are looking for a reservoir
of high flow high temperature water, which comes from ground
water that is heated by a volcano. Similar to oil and gas, a
geothermal reservoir is often hosted in porous rock but it is
volcanic rock that is sufficiently porous to provide a conduit
for the hot water migration. Faults also host geothermic
resources. They provide a mechanism for fluid to migrate through
the rocks, picking up heat as it makes its way to the surface or
into a bore hole. He noted that unlike an oil and gas reservoir,
the rocks surrounding a geothermal reservoir are hot so any
water that flows back into that system will recharge the
available resource that can then be extracted.
4:11:44 PM
SENATOR KAWASAKI asked what happens if more than one company is
drawing on the same geothermal reservoir.
MR. MASTERMAN offered his understanding that the same rules
would apply as for oil and gas leases. The boundaries are
vertical and the details of who owns what part of the reservoir
have to be worked out, but one company cannot suck their
neighbor's reservoir dry. This would apply to GeoAlaska and
Razor Geothermal whose applications are for adjacent areas. If
the reservoir straddles the boundary, resolution of the
competing interests would be necessary.
4:13:09 PM
SENATOR STEVENS asked how the power generated at Mount Spurr
would get to market.
MR. MASTERMAN explained that a power plant would be constructed
close to the drill holes and the electricity that is generated
would be carried on a short intertie, presumably to the Beluga
power plant and then into the Railbelt electrical network.
SENATOR STEVENS asked the location of the Beluga power plant.
MR. MASTERMAN replied it is a little north of Tyonek.
4:14:44 PM
MR. MASTERMAN directed attention to the maps of Pilgrim Hot
Springs on slide 10, the left of which shows the geologic units
in the region. Pilgrim Hot Springs is in the center with the
Graphite Creek project to the west. It is the largest
undeveloped graphite resource in the nation and will require
about 6 megawatts of power if it goes into production. Nome,
which is to the south along the Bering Sea, currently has an
equivalent power demand. He noted that the heavy black lines in
the vicinity of Pilgrim Hot Springs and west to Graphite Creek
reflect fault lines. Over geologic time the faults have caused
the area to the north to drop and develop into a basin several
thousand feet deep, much like the basin in Nevada. He said these
faults may play a critical role in the geothermic picture at
Pilgrim Hot Springs.
4:16:47 PM
MR. MASTERMAN directed attention to the close-up of Pilgrim Hot
Springs on the right and said the black box reflects the extent
of the geothermal exploration in the area. Thus far, 90 degree
centigrade water has been identified at about 300 feet and
cooler water beneath that. That is an indication that the source
of the hot water is not directly below the hot springs. Locating
the reservoir will require further exploration and for a company
to be interested in doing that it would want a large land
position and time to do the exploration work. He said that is
the reason for the proposed changes to the existing statutes.
4:21:50 PM
SENATOR STEVENS asked if DOR was involved in the permitting and
leasing of the very costly, failed geothermal plant in Naknek.
He said he would like to know what went wrong.
MR. MASTERMAN replied that was before his tenure, but he would
follow up with information about the project.
SENATOR STEVENS asked if he was correct in assuming that DNR was
involved in the permitting and leasing.
4:23:24 PM
MS. PAINE answered that DNR did not lease or license those
lands, but she and Mr. Masterman would look into it more.
4:23:56 PM
SENATOR STEVENS said he was pleased the department was not
involved but he would appreciate follow up information to
understand what went wrong.
CHAIR REVAK asked Jeremy Price to provide brief testimony.
4:24:54 PM
JEREMY PRICE, Commissioner, Alaska Oil and Gas Conservation
Commission (AOGCC), Anchorage, Alaska, stated that the
department worked with the commission to ensure the definitions
in Titles 41 and 38 were aligned. He expressed appreciation for
DNR's efforts and stated support for SB 110.
SENATOR MICCICHE asked Mr. Masterman why, once a geothermal
resource is used, it is reinjected into the reservoir instead of
another location.
4:26:13 PM
MR. MASTERMAN answered that from a permitting perspective, it
would be easier to reinject the water into the reservoir.
Because the water would still be warm, it would take less energy
to bring it back up to temperature to be reused. He described it
as a loop.
SENATOR MICCICHE said he assumes the magma is recharging faster
than the heat from the reservoir is depleted.
MR. MASTERMAN answered that is generally correct.
CHAIR REVAK thanked the presenters
4:27:37 PM
CHAIR REVAK opened public testimony on SB 104; finding none, he
closed public testimony
4:28:00 PM
CHAIR REVAK held SB 104 in committee for further consideration.
| Document Name | Date/Time | Subjects |
|---|---|---|
| SB 97 Generally Allowed Uses Fact Sheet.pdf |
SRES 4/9/2021 3:30:00 PM |
SB 97 |
| SB 97 Legislatively Designated Areas Factsheet.pdf |
SRES 4/9/2021 3:30:00 PM |
SB 97 |
| SB 97 Letter of Opp Becky Long 4.2.21.pdf |
SRES 4/9/2021 3:30:00 PM |
SB 97 |
| SB 97 Rec Rivers Comparison - 3.30.2021.pdf |
SRES 4/9/2021 3:30:00 PM |
SB 97 |
| SB 61 Amendment Kiehl b.4(004).pdf |
SRES 4/9/2021 3:30:00 PM |
SB 61 |
| SB 104 Fiscal Note 1 & 2 dated 3.5.21.pdf |
SRES 4/9/2021 3:30:00 PM |
SB 104 |
| SB 104 Sponsor Statement 3.9.21.pdf |
SFIN 1/24/2022 1:00:00 PM SRES 4/9/2021 3:30:00 PM |
SB 104 |
| SB 104 Sectional Analysis Version A 3.11.21.pdf |
SRES 4/9/2021 3:30:00 PM |
SB 104 |
| SB 104 Geothermal Resources Presentation 4.9.21.pdf |
SRES 4/9/2021 3:30:00 PM |
SB 104 |
| SB 61 Summary of Changes for CS SRES Work Draft 32-GS1706.B 3.8.21.pdf |
SRES 4/9/2021 3:30:00 PM |
SB 61 |