Legislature(2023 - 2024)ADAMS 519
04/19/2024 01:30 PM House FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| HB74 | |
| HB388 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | HB 74 | TELECONFERENCED | |
| + | HB 388 | TELECONFERENCED | |
| + | TELECONFERENCED |
HOUSE BILL NO. 74
"An Act relating to geothermal resources; relating to
the definition of 'geothermal resources'; and
providing for an effective date."
1:35:07 PM
Co-Chair Foster reviewed the meeting agenda.
1:37:32 PM
SEAN CLIFTON, POLICY AND PROGRAM SPECIALIST, DIVISION OF
OIL AND GAS, introduced the PowerPoint presentation "HB 74
Geothermal Resources" dated April 19, 2024 (copy on file).
He advanced to slide 2 titled "Fundamentals of Geothermal
Systems." He relayed that the following slides discussed
geothermal fundamentals and move into an overview of the
bill.
1:38:13 PM
MELANIE WERDON, DIRECTOR, DIVISION OF GEOLOGICAL AND
GEOPHYSICAL SURVEY, DEPARTMENT OF NATURAL RESOURCES,
FAIRBANKS (via teleconference), presented slide 3 titled
Fundamental Ingredients of Useable Geothermal Energy:"
• Elevated geothermal gradient
• Porosity and permeability for the migration of
fluids
• Surface access
• Sufficiently large thermal system
• Customers for energy
Ms. Werdon continued to slide 4 titled "Heat Flow in
Alaska
Most of Alaska is thought to have slightly elevated
heat flow (red). However, only very localized areas
will have all the ingredients for cost-effective
geothermal energy use.
Ms. Werdon turned to slide 5 titled "Introduction to
Geothermal Resources:
• 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
Ms. Werdon moved to slide 6 titled Fiscal Note: DGGS
Geothermal:"
• "Powering Alaska's Future with Geothermal Energy"
$1,000.0 UGF; included in FY2025 Governor's Amended
Budget
• Enables DGGS to restart its geothermal program:
• Supply information to support DNR's geothermal
leasing program and attract explorers and
developers of Alaska's geothermal resources
• Analyze satellite-based remote sensing data for
known geothermal springs and the areas around
them
• Contract airborne thermal imagery to
identify/prioritize promising geothermal sites
• Contract limited, site-scale airborne
geophysical surveys
• Conduct ground-based geologic mapping and
geothermal-site investigations
• Collect water samples from geothermal springs
and obtain state-of-the art analyses at
commercial laboratories
• Attract federal funds to characterize Alaska's
geothermal systems
• Complement initiatives by university, federal,
native, and private-sector partners
1:41:13 PM
Representative Hannan referred to Ms. Werdon's statement
concerning restarting the geothermal program. She asked
what restarting the program would entail. She wondered if
the $1 million was for the first fiscal year for new
employees and what were the needs for the following years.
Ms. Werdon responded that a geothermal program existed in
the 1980s. However, since then the technology had
progressed with new techniques which incited the proposal
to restart the program. She indicated that the Department
of Natural Resources (DNR) currently lacked staff with
geothermal expertise. The fiscal note proposed to hire
three new employees to run the program. Representative
Hannan restated her question regarding if the $1 million
would fund one year of operating expenses. She asked for
more information about the program's budget and ongoing
expenses. Ms. Werdon replied that the fiscal note called
for three permanent staff for $400 thousand, $10 thousand
for travel, $550 thousand for contracted data services, and
$40 thousand for commodities. The budget was included in
the governor's FY 25 Operating Budget and was an annual
ongoing request. Representative Hannan asked what the
anticipated length of time before geothermal energy
production in Alaska would be realized. She wondered how
long the commitment was to "see it through" to production.
Ms. Werdon responded that DNR's geothermal program would
identify geothermal potential in order to attract producers
to the state and invest. She was not familiar with the
timelines of the permitting process for a project.
JOHN CROWTHER, DEPUTY COMMISSIONER, DEPARTMENT OF NATURAL
RESOURCES, responded that the initial results in a
geothermal program should be seen within the next year or
two. A multi-year process was anticipated for a company to
undergo exploration and if successful it would take several
years before there was a project concept. He elaborated
that one of the core purposes of the legislation beside the
data collection program, was making the leasing and
development terms more attractive and workable to
geothermal producers. He noted that DNR had two active
exploration licenses, and one of the two was evolving into
a lease posture. He believed that HB 74 would help with all
phases of the current projects. The goal of the anticipated
lease was to develop a project, which entailed several
years of onsite visits and several additional years of
onsite development as a general timeframe.
1:46:21 PM
Co-Chair Foster wanted to proceed with the presentation
before getting into the "nuts and bolts of the bill."
Mr. Clifton continued on slide 7 titled "Overview of HB 74"
that began the next section of the presentation. He
advanced to slide 8 titled "Purpose of HB 74:"
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
• Repeals rental/royalty modification after 20 years
of production, providing stability and predictability
for investors in geothermal energy projects
• Reform definitions for geothermal resources and fluids to
account for technological advancements in the geothermal
industry
Mr. Clifton indicated that the bill had been heard in prior
sessions and was similar to prior bills. He emphasized that
the bill did not change anything for federal, private, or
native lands and only applied to state lands. He believed
that geothermal could be a component of energy production
solutions in Alaska. He reported that there was renewed
interest in geothermal and one of the main obstacles was
the short timeline for the current permit system and the
high bar for converting the leases into long term
development. The goal was to modernize the program.
Representative Edgmon wanted clarification on two renewable
energy grant program projects that possibly related to the
information on slide 8. Mr. Clifton replied that the grants
through the renewable grant program were doing feasibility
studies for running power lines to the two current
potential projects he had mentioned. He elucidated that the
projects with active permits and leases were at Mt. Spur
and the other was on Augustine Island. Co-Chair Edgmon
recalled that the fiscal note would help staff the
geothermal program. He related that the renewable energy
grant program was funded at $15 million in the prior year.
The two geothermal projects were high on the list at number
2 and 3. He deduced that there had been some work in DNR on
geothermal analysis.
Representative Josephson asked for a description of the
bullet on slide 8 regarding the rental/royalty
modifications. Mr. Clifton answered that currently the
language in the statute was broad enough that it could
allow for increased rental/royalty modifications after 20
years. He relayed that the economics of the project
changing during the financing term was pointed out by a
lessee as being a significant obstacle to obtaining long
term financing.
1:52:30 PM
Representative Galvin ascertained that geothermal was a
newer market" and that transmission was the biggest
obstacle to getting the power to market. She pondered
whether the bill was putting the "cart before the horse."
She asked if working on transmission should be prioritized.
Mr. Crowther agreed that the transmission and access to
markets was critical for the projects to go forward. He
indicated that for a successful project the "frontend"
information gathered by the division was necessary for the
project and licensing terms to perform the exploration and
develop the project, which included transmission. He voiced
that it had to happen all at once. Representative Galvin
surmised that the idea was to get good data, expand the
potential geographical areas, and get more time to develop
a project that would be more attractive to "outside"
producers. She wondered whether the overall goal was to
potentially export energy or create the opportunity for
Alaskans to have more reliable low cost energy. Mr.
Crowther responded that the exciting potential of
geothermal were the renewable, low-cost, and sustainable
long-term elements. However, there were new evolutions in
the energy and demand markets that were enabling more
accessible geothermal development. He communicated that
"core to the department's interest was the production of
the resource but also the energy security benefits for
instate use. Long term renewable power at low rates was a
huge boon to the economy and consumer. The global interest
in geothermal was due to new applications and technologies
that can bring demand for its development. He delineated
that HB 74 set the stage for the underlying resource to be
identified, explored, and set-up for development versus
solving the larger issues like transmission. Representative
Galvin commented that the oil and gas industry was well-
established in the state that provided some certainty
regarding the marketability of oil and gas, by the
producers and in terms of revenue generation for the state.
She hoped that the bill would address marketability so
Alaskans could enjoy clean energy at low costs and
potentially attract other businesses in need of low cost
power to Alaska. She hoped DNR was considering a global
perspective with geothermal development.
1:59:05 PM
Co-Chair Foster wanted to finish the presentation before
more discussion following Representative Hannan's question.
Representative Hannan referred to Representative
Josephson's question regarding rental/royalty modification
and wanted to know if it was in alignment with what was
currently in oil and gas exploration licenses. Mr. Clifton
responded that there was nothing like it in the oil and gas
statutes; they could not be revised upwards only downwards.
He reiterated that the language in the current geothermal
statute was confusing and suggestive, and the provision was
included to "clean up" the statute.
Mr. Crowther added that the language was not functional.
The statute stated that renegotiation was inherently a
mutual activity and "implied some sort of an authority to
compel" but there was not a further statutory mechanism to
act. The department was unsure that the statute was viable.
He added that the statute was identified by financiers as a
disincentive. Representative Hannan emphasized that the
bill was presented as trying to match with oil and gas. She
was aware of royalty modification language regarding gas.
She was wondering why it was being repealed but not
replaced with corollary oil and gas statutes. She thought
the statutes should be consistent. Mr. Crowther understood
Representative Hannan's point. The department viewed it as
a different type of provision than the current authority in
the statutory section regarding oil and gas royalty
modification. There were some differences in how the
projects proceeded and the legislation made the general
framework very consistent. He indicated that, if necessary,
the discussion might come at some point post development in
the future.
2:02:24 PM
Mr. Clifton continued to Slide 9 titled "DNR Geothermal
Leasing and Permitting History:"
Present
Mount Spurr Two leases in the Mount Spurr area, issued
as permits in 2021 and converted to leases in 2023.
Augustine Island Prospecting permit in the southern
part of the volcanic island issued in 2022, expiring
August 2024. A second permit for extended areas around
that permit was awarded in January 2024.
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 were 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 the Division of Oil & Gas 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.
Mr. Clifton summarized that the permits, similar to
exploration licenses were only valid for two years and had
a high bar to meet to become leases. He noted that the
Augustine Island lease was set to expire in August 2024. He
pointed to the Mount Spurr activity and reported that the
leases expired before the developer could find the resource
and invest in development. He hoped that the current
permittees find the resource.
Mr. Clifton continued to slide 10 titled "Leasing Under
Current Law
Application and call for competing proposals:
• If competing proposals ? competitive lease sale
• If no competing interest ? issue prospecting permit
with two-year time limit
• This bill replaces two-year permits with five-year
licenses modelled after our modern oil and gas
exploration licensing program (AS 38.05.131134)
• Conversion to lease:
• Permit (current): "showing of a discovery of
geothermal resources in commercial quantities"
• License (bill): after work commitment is met
Both processes require Best Interest Finding and
public input opportunity prior to award of permit,
license, or lease
o Royalties are set by AS 38.05.181(g): 1.75% of
gross revenue for the first 10 years of
production, then 3.5% of gross revenue after 10
years
Mr. Clifton clarified that the similarities between
geothermal and the oil and gas program referred to the
aspect of land management and resource disposal. The energy
produced from a geothermal well could not be put into
barrels and transported to distant markets. Geothermal
needed to be connected to transmission lines and its
limitations were the reason the royalty provisions were
significantly different. He pointed to the last point on
the slide regarding royalties and remarked that they were a
percentage of gross revenue because there were no barrels
to measure. He stressed that the permit and license process
required a Best Interest Finding that included a robust
public process.
Mr. Clifton continued on slide 11 titled "Sectional
Summary
Section (Agency) Summary
1 (AOGCC) Grants Alaska Oil & Gas Conservation
Commission (AOGCC) authority to pursue primacy of
Class V injections wells for geothermal energy
2 (AOGCC) Removes unnecessary reference to AS 41.06
from AS 31.05.030(m) (see Section 10)
3 (DNR) Changes permits to licenses; adds exemption
for geothermal resources intended for domestic,
noncommercial, or small-scale industrial use (same as
Section 11); removes preferential rights clause
(inappropriate for commercial development of State
resources)
4 (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
5 (DNR) Changes permit to license
6 (DNR) Changes permits to licenses; increases maximum
acreage from 51,200 to 100,000; moves rental fees to
be set by regulation
7 (DNR) Amends AS 38.05.181(f) to grant leases for 10
years, with opportunity for a five-year extension,
with standard indefinite extension by production
Repeals opportunity for DNR commissioner to modify
rent and royalty rates after 20 years of production
8 (DNR) Adds three new subsections AS 38.05.181(ik)
to modernize unitization statute for geothermal leases
to match the model used for oil & gas
9 (DNR) Replaces AS 38.05.965(6) definition of
geothermal resources (same as Section 14)
10 (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
11 (AOGCC) New subsection AS 41.06.020(f) adds
exemption for geothermal resources intended for
domestic, noncommercial, or small-scale industrial use
(see Section 3)
12 (AOGCC) Adds new subsection AS 41.06.057 to provide
for penalties for violations of geothermal statutes
(like oil & gas AS 31.05.150)
13 (AOGCC) Amends AS 41.06.060(4) definition of
geothermal fluid to remove temperature references and
better conform with other changes in this bill
14 (AOGCC) Replaces AS 41.06.060(5) definition of
geothermal resources (same as Section 9)
15 (AOGCC) Repeals AS 41.06.005(b) and AS 41.06.030,
since geothermal units are managed by DNR
1620 (AOGCC/DNR) General provisions for applicability
and effective dates, including applicability for
prospecting permits issued or currently being
processed.
Mr. Clifton informed the committee that slide 11 was his
attempt to succinctly summarize the entire bill on one
slide that could be used as a reference. He continued to
Slide 12 titled "Sections 36: Permits to Licenses
• Provisions in these sections replace "permit" with
"license."
• Within DOG, "permits" are for surface use
authorizations. For subsurface, "licenses" and
"leases" are issued.
• Adopting the exploration licensing program for
geothermal resource management conforms with existing
processes for
oil and gas.
• Section 17 allows for conversion of existing permits
to licenses.
Mr. Clifton illuminated that permits were issued for
surface activities such as roads, pipelines, power lines,
and facilities versus licenses were a pathway to lease the
subsurface resource.
Mr. Clifton continued on Slide 13 titled "Section 3:
Private Use Exemption
• New language:
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.
• Intent:
• Clarify that domestic users of ground source
heat pumps don't need an authorization from DNR
• Encourage the use of geothermal energy to
provide affordable energy in non-utility scale
applications
2:08:30 PM
Mr. Clifton turned to Slide 14 titled "Commercial
Geothermal Power Plants VS Non-Commercial Systems." He
explained the graphic depicting an example of commercial as
compared to non-commercial geothermal power plants. He
emphasized that non-commercial systems do not produce
enough to market the energy.
Mr. Clifton advanced to slide 15: "Section 3: "Preferential
Rights Provision:"
• Current statute grants preferential rights to a
surface owner to apply for a geothermal prospecting
permit once notice is received of an existing
application
• Inappropriate for a surface owner to have a
preferential right to the State's mineral estate
• Surface owners may still pursue domestic geothermal
developments for their own uses
• Need well permits from AOGCC if hazards may
exist
• Need environmental review or permits from
agencies such as Department of Environmental
Conservation, Fish & Game, DNR Division of Mining
Land & Water, or federal agencies
• Examples of permitting requirements are
detailed in a supplemental slide
• Geothermal licenses and leases are not surface use
authorizations
• They only provide the exclusive right to
explore for and develop the subsurface resources
• Public notice is a part of the license issuance
process and surface owners can participate
• Surface use authorizations require public
notice and direct notice to any affected surface
owners
Mr. Clifton summarized that preferential rights were seen
as a hurdle by potential developers and investors.
Mr. Clifton moved to slide 16 titled "Sections 4 & 7: Terms
& Work Commitment
• 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 assessments are
required
• Amends AS 38.05.181(f) for geothermal leases
• Geothermal leases last for 10 years, with
opportunity for a five-year extension, and standard
indefinite extension by production
• Repeals opportunity for DNR commissioner to
renegotiate rental and royalty rates for geothermal
leases after 20 years of production
Mr. Clifton continued to slide 17 titled "Section 6:
Acreage Limit and Rent
• Maximum acreage a lessee may hold increases from
51,200 to 100,000 acres
• Geothermal systems can underlie very large
areas
• Enables explorers to more effectively delineate
resource
• Rental fees to be set by regulation instead of
statute
• Enables DOG to be nimbler in response to market
changes
2:12:39 PM
Mr. Clifton advanced to slide 18 titled "Sections 9, 13, &
14: Geothermal Resources Definition
"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.
"geothermal fluid" means liquids, brines, water,
gases, or steam naturally or artificially present in a
geothermal system; "geothermal fluid" does not include
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
• Distinguishes geothermal fluids from hydrocarbon
resources
• Same definition being applied to both DNR & AOGCC
statutes
Mr. Clifton emphasized that the definitions were new and
the department had consulted several different states to
see how other states updated their definitions. He
elaborated that one of the main points was DNR was
eliminating the temperature limitation, which was currently
120 degrees Celsius and was no longer an appropriate limit.
He exemplified Chena Hot Springs that was producing power
at roughly 80 degrees Celsius. He noted that it was
potentially viable to take even cooler resources and
produce commercial power. Retaining an arbitrary
temperature in statute did not make much sense.
Mr. Clifton presented Slide 19 titled "Minerals or Gases
• Why this is an issue:
• In some places, minerals such as lithium are
being extracted from geothermal fluids as part of
the production system
• Helium and hydrogen are sometimes present in
geothermal fluids and could also be produced
• These are all valuable resources and production
should be encouraged
• What happens if these resources are produced:
• The geothermal lease grants access to the
State's subsurface, so no additional lease or
permit is needed for associated extraction from
fluid as part of the geothermal operation
• Minerals and gases, except hydrocarbons, are
part of the geothermal fluid, so royalties for
produced minerals or gases would be paid under
the terms of the geothermal lease
• Production of dissolved minerals would,
however, need a mining license from Department of
Revenue and pay taxes under AS 43.65
o Royalties for geothermal leases are set by AS
38.05.181(g): 1.75% of gross revenue for the
first 10 years of production, then 3.5% of gross
revenue after 10 years
Mr. Clifton shared that the potential for extracting
minerals or non-hydrocarbon gases from the produced
geothermal fluid was possible, and the issue was not
anticipated or considered in prior legislation. The
department worked through how it could function and deal
with the situation was delineated on the slide.
2:15:37 PM
Representative Galvin referred to slide 6 regarding the
fiscal note and questioned what was intended to be produced
based on the fiscal note. She deduced that much of the work
listed on the slide were things that the industry would
invest in. Mr. Crowther answered that it was not unlike
many other resource industries like mining. The department
devoted a significant amount of funding to general geologic
information about where a resource was located and "passed
the baton to industry" for further exploration. He believed
that geothermal was similar; the division characterized
where possible geothermal resources existed and letting
industry further explore the resource. He expounded that
industry wanted to focus on a specific area and not engage
in general area wide exploration. Representative Galvin
deemed that maybe because geothermal was a new type of
energy industry, it would need to be examined differently
and invested in differently. She expected to see work like
processing leases, oversight, public input processes, and
ensure that there was promised investment, etc. on the
fiscal note. However, she saw that much of DNR's work would
be front-end in exploration. She wondered why the fiscal
note was so different from her expectation. Mr. Crowther
responded that the department had significant capacity to
manage subsurface resources, which was the reason those
type of costs was not included in the fiscal note. The same
staff that was engaged in hydrocarbon and other subsurface
management had the expertise to manage the geothermal
resource.
Co-Chair Foster requested a review of the DNR fiscal note.
2:20:45 PM
Ms. Werdon reviewed the DNR fiscal impact note allocated to
Geological & Geophysical Surveys. She reiterated that the
details were on slide 6. She delineated that the data that
would encompass broad areas of the state and identify
favorable areas for geothermal exploration to attract
explorers and developers to Alaska. She reiterated several
of the bullet points on slide 6 that listed the technical
work DNR would perform in gathering data. She exemplified
that at Pilgrim Hot Springs both airborne and ground based
surveys helped identify where the controlling fault for
geothermal was located. Field crews mapped out the findings
and used water samples to determine the subsurface
temperatures and identify the potential to produce energy.
The data would be made available to the public through a
variety of sources. She spoke about the potential for
federal grant funds to further explore geothermal
resources.
2:25:04 PM
Co-Chair Foster clarified that the new DNR fiscal impact
fiscal note allocated to Geological and Geophysical Surveys
totaled $1 million in the following operating expenditures:
Personal Services $400 thousand; Travel $10 thousand;
Services $550 thousand; and Commodities $40 thousand. He
asked about the 2 full-time positions noted on page 1 of
the fiscal note but observed that 3 positions were included
in the analysis. He wondered what the position count was.
Mr. Crowther explained that two of the positions were new
and one was currently within the department and would be
funded through the fiscal note. He summarized that there
were two new positions but three total in the program.
Co-Chair Foster asked for a summation of the Department of
Commerce, Community and Economic Development (DCCED) fiscal
note.
2:26:58 PM
STEVE DAVIES, SENIOR PETROLEUM GEOLOGIST, ALASKA OIL AND
GAS CONSERVATION COMMISSION, ANCHORAGE (via
teleconference), cited the new zero Department of Commerce,
Community and Economic Development (DCCED) fiscal note
allocated to the Alaska Oil and Gas Conservation Commission
(AOGA). He was unable to discuss the fiscal note and
reported that the chairman of the commission would speak to
it at a forthcoming hearing.
Representative Hannan inquired about section 3 on slide 15
regarding preferential rights. She asked what would happen
if a commercial enterprise was involved; would they gain
access to someone's surface rights if there was a
commercially viable resource via a lease obligation. Mr.
Crowther replied that the subsurface estate was the
dominant access via statute. He elucidated that if an
entity had a geothermal lease, it had the right to enter
the surface as necessary to develop the resources. He added
that the entity did not have an unfettered right and in
almost all cases, worked cooperatively with the surface
owner to create mutual agreements on how and where that
surface was accessed. The department had existing
regulation to set bonds to prevent unreasonable
interference in the event a reconciliation between the
parties could not be reached. A process was in place, but
it was rarely used. Representative Hannan offered that in
oil and gas the infrastructure could be besides the access
point and fairly far removed from it. She ascertained that
in geothermal, it was all in concentrated footprints and a
developer could place their equipment, etc. on private land
because the commercial lease allowed access to the
"superior" subsurface mineral estate. Mr. Crowther answered
that in the event that the private surface ownership was
separate from the state subsurface ownership, the
demarcation line would need to be negotiated between the
parties including state entities. He added that the
subsurface owner did not have the right to unreasonably
interfere without compensation. Ultimately, the subsurface
owner would have the right to site a facility if it was
necessary to develop the resource. Representative Hannan
cited the Chena Hot Springs and asked whether they were
exempted from the bill. Mr. Crowther replied that the hot
springs owned both subsurface and surface rights and were a
private resource privately owned and did not need state
rights of access.
2:32:47 PM
Representative Josephson referenced Section 3 and cited the
deletion of statute 38.05.381, written in 1971 and
rewritten most recently in 2010. He wondered how in regard
to the overriding interest of the subsurface leaseholder
that the statute ever became law. He speculated that the
bill was proposing the change prior to dispute over
ownership interests. He doubted that there was much private
property on Mt. Spur. Mr. Clifton responded that many
Alaska statutes were copy and pasted from old federal laws.
He expounded that the statutes under 38.05.180 for oil and
gas had been revised many times and often through lessons
learned from past development. The state's geothermal
resources had never been produced and there had not been
enough activity in the industry. There was no reason to
focus on the statute and revise it. He noted that other
states like Utah and Nevada had been updating statutes and
regulations and DNR looked to those statutes in
consideration of the legislation. Representative Josephson
shared that he had recently traveled to the community of
Dutch Harbor where a geothermal resource exploration, the
Makushin Geothermal Project was underway. The project was
designed to produce inexpensive power to seafood plants and
the community. He reported that the community discontinued
investment due to much disruption to the land. He asked
what could be learned about the Dutch Harbor obstacles that
might help with the bill.
2:37:11 PM
Mr. Clifton responded that he did not know the details
since it was a private resource owned by a native
corporation. He understood that there were some challenges
with some federal permitting. He was aware of a
presentation in the Senate Resources Committee in the prior
year that contained more details, but he advised
Representative Josephson to engage in a discussion with
those directly involved.
Co-Chair Edgmon was considering the opportunities that
might be viable in the state in light of prior failed
projects in Naknek and Makusin and the amount of money that
it cost to take a helicopter to Mt. Spur from Anchorage,
etc. He believed that it was the most speculative of all
the renewable energy when compared to wind, hydro, and
solar. He surmised that the ability to access the resource
was "extremely difficult". He offered that there was a case
to be made that the program did not have to be so costly
each year. He noted the difficulties of hiring highly
skilled employees in any agency. He concluded that the
opportunities in the state for geothermal existed but were
likely not enough to be commercialized; it was very
speculative. He referenced HB 152 (Renewable Energy
Fund/Task Force/Assist- Chapter 31 SLA 08 - 05/22/2008) in
2008 that created the Renewable Energy Grant Fund. He was
not dismissive of the efforts and supported the effort but
wondered whether if the data aligned itself more to oil and
gas exploration. Mr. Crowther shared that the department
saw the need for the legislation. He believed that the
fiscal note was about $1 million less than drilling one
well and much more about the ability to collect general
information that DNR had increasing capacities to do. He
pointed to the burgeoning interest in geothermal power due
to technological advancements in geothermal power in remote
locations and its lower temperatures applications. He
believed that the legislation and the divisions desire to
open up information and help apply the advancements in
Alaska was beneficial. He thought there was a lot of
prospectivity and geothermal could be a huge energy
resource in the state in long-term. There were many
benefits in attracting and attaining new commercial
interests in Alaska. Co-Chair Edgmon thought that the same
reasoning could be said about a gas line in Alaska. He
appreciated the bill.
2:43:12 PM
Representative Coulombe referenced slide 4 that stated
"However, only very localized areas will have all the
ingredients for cost-effective geothermal energy use. She
asked what were the ingredients that made it cost effective
and how was it known that it would only be in localized
areas. Mr. Crowther responded that there were 5 criteria.
He communicated that historically, there was not much
geothermal activity in Alaska. He believed that currently,
the context was shifting, and the department wanted to
disprove the statement. Representative Coulombe cited the
fiscal note and asked if the $1 million was included in the
governor's request. Mr. Crowther replied that the fiscal
note matched the governor's request.
Co-Chair Foster clarified that if the bill were to pass,
the conferees could square up any discrepancies in the
fiscal note.
2:46:40 PM
Mr. Clifton and Mr. Crowther made general closing comments.
HB 74 was HEARD and HELD in committee for further
consideration.
2:47:51 PM
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB388 Presentation ver. D 4.12.24.pdf |
HFIN 4/19/2024 1:30:00 PM |
HB 388 |
| HB388 Sponsor Statement ver. D 4.12.24.pdf |
HFIN 4/19/2024 1:30:00 PM |
HB 388 |
| HB388 Sectional Analysis ver. D 4.12.24.pdf |
HFIN 4/19/2024 1:30:00 PM |
HB 388 |
| HB388 Summary of Changes (S to D) 4.12.24.pdf |
HFIN 4/19/2024 1:30:00 PM |
HB 388 |
| HB 74 Public Testimony Rec'd by 042524.pdf |
HFIN 4/19/2024 1:30:00 PM |
HB 74 |