Legislature(2023 - 2024)BARNES 124
02/28/2023 10:15 AM House ENERGY
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| Audio | Topic |
|---|---|
| Start | |
| HB74 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 74 | TELECONFERENCED | |
| + | TELECONFERENCED |
HB 74-GEOTHERMAL RESOURCES
10:17:22 AM
CHAIR RAUSCHER announced that the only order of business would
be HOUSE BILL NO. 74, "An Act relating to geothermal resources;
relating to the definition of 'geothermal resources'; and
providing for an effective date."
10:18:30 AM
JOHN BOYLE, Commissioner, Department of Natural Resources,
stated that Governor Mike Dunleavy seeks to implement an "all of
the above" strategy for energy in Alaska that would make use of
the state's natural resources and using both fossil fuels and
renewable energy sources, with the goal of lowering energy costs
for Alaskans. He stated that the goal of the proposed
legislation would be to incentivize investment into the
development of geothermal energy in the state.
10:22:04 AM
AARON O'QUINN, Leasing Manager, Division of Oil and Gas,
Department of Natural Resources, co-presented a PowerPoint
titled, "HB 74, Geothermal Resources." He began on slide 2 and
gave an outline of what information would be covered during the
presentation.
10:23:07 AM
DAVID LEPAIN, PhD, Director, Division of Geological and
Geophysical Surveys, Department of Natural Resources, began on
slides 3 and 4 and gave an overview of the necessary elements of
geothermal energy. He stated that the well brings steam up into
the facility which spins the turbines and produces electricity,
and the water is injected into the ground in another area to
cool and eventually be reheated.
DR. LEPAIN continued to slide 5 and gave an overview of
geothermal heat flow in the state of Alaska. Alaska is thought
to have an elevated heat flow, and it mostly comes from granite
and volcanic systems. He said that the volcanic systems often
show up in the form of hot springs.
10:28:21 AM
DR. LEPAIN continued to slide 6 and showed geothermal gradients
in the state, showing temperatures in both Celsius and
Fahrenheit and depth in both in both and kilometers and feet.
He said that the cone on the map shows the geothermal of the
Alaska Peninsula.
DR. LEPAIN continued to slides 7 and 8 and gave an overview of
geothermal resource quality. He said that hotter temperatures,
higher flow rates, more shallow depths, and natural recharge are
all better for producing more energy at a lower cost, although
having all of those factors in a single geothermal source is
rare. He stated that a properly managed geothermal resource
will be able to produce energy indefinitely, and the technology
to use geothermal resources are quickly improving.
10:34:26 AM
REPRESENTATIVE CARRICK asked whether the reinjection of water
into the ground is a process with long-term sustainability.
DR. LEPAIN answered that it depends on the management of the
source. If managed correctly with multiple far-off reinjection
wells, the source can be used indefinitely. In response to a
follow-up question, he stated that the turbines have a lifespan
of between 30 and 40 wells, but he is unsure of the lifespans of
the wells.
10:37:38 AM
REPRESENTATIVE PRAX asked whether the state is involved in Chena
Power's project in Dutch Harbor, Alaska.
MR. O'QUINN answered that that project is on land owned by the
Native corporations, so the state is not involved.
10:39:20 AM
BRETT HUBER, SR, Chair, Alaska Oil and Gas Conservation
Commission; Commissioner, Department of Commerce, Community, and
Economic Development, returned to a previous question and
reiterated that a geothermal project could continue to produce
for "many decades," and that it would be possible to drill a new
well in proximity to an old well that was no longer useable.
10:40:30 AM
REPRESENTATIVE PRAX asked whether HB 74 would cause the state to
become more involved with companies to develop geothermal
energy.
10:41:25 AM
JOHN CROWTHER, Deputy Commissioner, Department of Natural
Resources, answered that private landowners would continue to
manage their own land, and the bill is meant to get the state to
develop geothermal energy on state lands and private landowners
on their own land.
10:43:11 AM
REPRESENTATIVE PRAX asked what the name of the Dutch Harbor
project is.
DR. LEPAIN answered that it is Makushin Volcano. He added that
the bill would allow the state to do more research on the
potential of certain areas for geothermal energy sites.
10:45:39 AM
MR. O'QUINN continued to slides 9 and 10 and gave an overview of
the purpose HB 74. He stated that the bill would allow Alaska's
geothermal exploration program to be modernized, align
geothermal licensing with oil and natural gas to make it more
economically viable for private interests, and reform
definitions for geothermal resources to focus on commercial use.
The bill would increase the amount of land that can be used for
exploration and repeal the provision allowing the state to
renegotiate the royalties after a period of 20 years.
10:49:10 AM
MR. O'QUINN continued to slides 11 and 12 and gave an overview
of the leasing and permitting process and project history. He
stated that the two most recent permits for exploration were
offered in 2021 for Mount Spurr and 2022 for Augustine Island.
He said that under the current rules, if there are competing
proposals to use land for a geothermal project, there is a
competitive process, but in the case of only a single bid the
permit is usually issued. Currently, the permits last only two
years, and the bill would change that to five and be modeled
after oil and natural gas licensure.
10:52:10 AM
REPRESENTATIVE PRAX asked whether five year is enough time for
geothermal exploration.
MR. O'QUINN answered that the five-year time period is meant to
provide a balance between getting some amount of work done and
"warehousing" tracts of land for later use. He added that if
some work is done during the five year exploration period, the
owner of the permit will be eligible for a ten-year lease.
10:53:36 AM
MR. O'QUINN continued to slides 13 and 14 and showed a brief
summary of the sectional analysis for HB 74. He continued to
slide 15 and stated that Section 1 would allow the Alaska Oil
and Gas Conservation Commission (AOGCC) to pursue primacy for
Class V injection wells for geothermal developments.
10:56:00 AM
REPRESENTATIVE SCHRAGE asked what the definition of a Class V
well is.
MR. HUBER answered that there are 32 categories that would fall
under the definition of Class V, including geothermal wells. He
added that it does not change the rules of the permitting
process but allows a state agency to issue the permits rather
than the federal government. In response to a follow-up
question, he said that the bill would allow AOGCC to exempt
certain smaller-scale projects from permitting.
REPRESENTATIVE SCHRAGE asked whether any permits for geothermal
projects had been rejected in the past.
MR. O'QUINN answered that he was unsure. In response to a
follow-up question, he said that AOGCC views geothermal wells in
much the same way as unregulated water wells around the state,
and they would therefore be low risk.
11:01:53 AM
REPRESENTATIVE CARRICK asked for a comparison between the
average depths of a water well and a geothermal well.
MR. HUBER answered that in his personal experience, water wells
are often around 500 feet, although there is no official data
kept on them.
MR. CROWTHER added that the smaller scale projects that would be
exempt would be more shallow and less complex wells because they
would be for personal or smaller scale use, and the electricity
generated from them would not be sold.
11:06:18 AM
CHAIR RAUSCHER asked if the bill would have any potential impact
on land held by Native Alaskans.
MR. O'QUINN answered that the state leases only state land, and
lands held by the Native Corporations are private lands for all
intents and purposes. Those lands would still be subject to the
permitting process, just as they are for oil and natural gas.
11:07:48 AM
REPRESENTATIVE PRAX asked whether AOGCC overlaps with the
Department of Environmental Conservation (DEC).
MR. HUBER answered that DEC has a role with certain
environmental issues while AOGCC handles the actual permitting,
and that both agencies work together on these types of projects.
In response to a follow-up question, he stated that there is a
"very extensive" process in which AOGCC reviews the plans of a
project before any permits are issued, and that any change of
plans must be approved. In any case of a catastrophic loss of
control of a well, an investigation would take place.
11:13:33 AM
MR. O'QUINN continued to slide 16 and gave a brief overview of
Sections 2, 10, and 15. Those sections would eliminate some
duplicate language found in existing state statutes.
MR. O'QUINN moved to slides 17 and 18 and stated that Section 3
would bring the geothermal exploration program in line with the
oil and natural gas program, which considers permits to be
"surface level". Section 3 would also exclude private
geothermal users from the requirement to apply for a license or
lease. He stated that Section 17 would allow for current
permits to be converted licenses.
11:15:53 AM
MR. O'QUINN continued to slide 19 and showed a graphic depicting
the harvesting of geothermal power. He explained the difference
in depth between private and commercial usages and stated that
the difference in depth is part of the reason for not requiring
private use permits.
MR. O'QUINN moved to slide 20 and gave an overview of the
"preferential rights" found in Section 3 of HB 74. He
reiterated that it would change the rules for geothermal energy
to match those of oil and natural gas in regard to the surface
and subsurface owner of a parcel of land. Permitting laws for
any work being done on the surface would remain the same.
11:20:21 AM
MR. O'QUINN continued to slide 21 and stated that Sections 4 and
7 and stated that the sections would change geothermal leases to
last 10 years, with the possibility of a five year extension.
The rule allowing the commissioner of the Department of Natural
Resources (DNR) to renegotiate the rental and royalty agreement
after 20 years of production would be repealed.
MR. O'QUINN continued to slide 22 and stated that Section 6
would increase the amount of acreage a lessee can hold to
100,000 acres. Rental fees would be changed to be a part of the
regulatory process rather than statutory.
MR. O'QUINN continued to slide 23 and said that Section 8 would
modernize the unitization statute for geothermal resources to
match those used for oil and natural gas.
MR. O'QUINN moved to slide 24 and stated that Sections 9 and 14
would change the definition of geothermal resources to:
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.
11:23:17 AM
REPRESENTATIVE MCKAY asked whether revenues to the state from
geothermal production would be subject to the permeant fund.
MR. CROWTHER answered that he believes that would be the case.
11:24:06 AM
CHAIR RAUSCHER asked where the money being added to the
permanent fund from this activity would be generated.
MR. CROWTHER answered that payments from permitting and
royalties from geothermal production would be added to the
permanent fund. In response to a follow-up question, he said
that the resource from which the royalty would be collected is
the electricity created by the steam generated from pulling the
geothermal heat from the ground.
11:26:06 AM
REPRESENTATIVE PRAX asked whether any royalties would be set in
statute or be up for negotiation.
MR. O'QUINN answered that there is a minimum royalty rate set in
statute and the royalty rate for the lease could be set via
regulation.
11:28:00 AM
HALEY PAINE, Deputy Director, Division of Oil and Gas,
Department of Natural Resources, added that there is currently a
1.75 percent royalty rate set in statute for the first 10 years,
which is increased to 3.75 percent after 10 years.
11:28:32 AM
REPRESENTATIVE PRAX asked whether more latitude should be given
for negotiation of royalty rates to make geothermal production
more economical.
MS. PAINE answered that the minimum royalty rates had been
lowered in the past. She added that the prime purpose of HB 74
in regard to royalty rates is to remove the ambiguity that
exists once a project has been producing for 20 years.
11:31:09 AM
MR. O'QUINN continued to slide 25 and stated that Section 13
would change the definition of geothermal fluids. The new
definition would add certain types of liquids and exclude
hydrocarbons from the definition.
MR. O'QUINN continued to slide 26 and stated that Section 12
would modify the penalties section of the current statutes to
allow AOGCC to assess penalties for violations related to
geothermal wells.
11:33:06 AM
CHAIR RAUSCHER asked whether there is a specific dollar amount
prescribed for violations.
MR. HUBER answered that the bill would match the penalties for
violations relating to geothermal production to those of oil and
natural gas.
11:34:22 AM
DR. LEPAIN moved to slide 27 and stated that HB 74 has a fiscal
note to allow for the Alaska Division of Geological and
Geophysical Surveys to hire an additional geologist. The new
geologist would be a senior level Geologist 4 and would be
responsible for publishing geological data for the advancement
of geothermal development in the state. He stated that this
program would attract federal funds to help spur geothermal
resource development.
11:37:06 AM
MR. CROWTHER stated that there are several additional slides
with supplemental information regarding geothermal systems in
Alaska.
11:37:40 AM
CHAIR RAUSCHER asked how granite systems work in terms of
geothermal systems and volcanic systems.
DR. LEPAIN answered that volcanic systems manifest themselves in
more obvious ways, but granite systems do produce their own
heat.
11:39:07 AM
REPRESENTATIVE PRAX asked whether it was possible for geothermal
production TO result in other valuable by-products, and whether
that is accounted for in the bill.
MR. CROWTHER answered that AOGCC requires license holders to
understand what they are drilling through to ensure safe
operations, making such a scenario unlikely. If data were
gained showing the presence of other valuable resources such as
hydrocarbons, the license holder would need to apply for another
license to pursue those resources. In response to a follow-up
question, he said that royalties on any other resources would
still be collected if the license holder applied for another
license to harvest those resources.
[HB 74 was held over.]
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 74 Transmittal Letter 02.14.2023.pdf |
HENE 2/28/2023 10:15:00 AM |
HB 74 |
| HB 74 DNR Geothermal Bill One-Pager 02.22.2023.pdf |
HENE 2/28/2023 10:15:00 AM |
HB 74 |
| HB 74 Geothermal Intro and Sectional Analysis Presentation 02.28.2023.pdf |
HENE 2/28/2023 10:15:00 AM |
HB 74 |
| HB 74 Sectional Analysis 02.26.2023.pdf |
HENE 2/28/2023 10:15:00 AM |
HB 74 |