Legislature(2003 - 2004)
05/12/2003 02:53 PM House RES
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HB 196-CARBON SEQUESTRATION Number 1255 CHAIR FATE announced that the next order of business would be HOUSE BILL NO. 196, "An Act relating to carbon sequestration; and providing for an effective date." Number 1322 LISA WEISSLER, Staff to Representative Ethan Berkowitz, Alaska State Legislature, presented HB 196 on behalf Representative Berkowitz, sponsor. She explained that carbon sequestration is the capture and long-term storage of carbon in forests, soils, and oceans. In order to understand why carbon sequestration is important, one must step into the international arena with regard to climate changes and international interest in limiting the amount of carbon entering the atmosphere. She informed the committee that the Kyoto Protocol, an international agreement establishing an emissions limit for carbon and other greenhouse gases, is being drafted. Although the U.S. isn't going to sign the Kyoto Protocol, it could impact U.S. companies and the U.S. in general. Under the Kyoto Protocol, countries and companies that produce carbon will have an emissions limit; if they exceed the emissions limit, there are ways to offset that overproduction of carbon and greenhouse gases. MS. WEISSLER explained that one way to offset that overproduction is to trade with companies below the limit. The other is carbon sequestration, an active method used to sequester more carbon in the land, soil, forests, and ocean. In the case of carbon sequestration, capitalism is taking over and a carbon credit-trading market is being created. [This legislation] looks to Alaska benefiting from this emerging market because Alaska holds great potential for sequestration activities. For example, on the Kenai there are a lot of dead trees due to the spruce bark beetle infestation. Thus there is the possibility of eliminating the dead trees and reforesting the area. Such active management could potentially produce credits that Alaska would be able to place in the carbon credit- trading market for money. She acknowledged that some of the money could go towards reforestation, while some of it could be placed in the state's general fund. MS. WEISSLER explained that the legislation isn't designed to put Alaska in the market right away because there are many questions to answer. It follows what Idaho and Nebraska have already implemented, requesting that their state departments of natural resources review the matter in order to determine how the state might participate and what is going on with this market, and establishing an advisory committee to help the department with the process. Therefore, this legislation merely places the state in a position to benefit from the [carbon credit-trading market]. However, this market can be limited because the number of credits could be limited due to the emissions limit. Therefore, those states and countries not ready to enter the market could be left behind. Ms. Weissler noted that the Alaska Reforestation Council has looked into this. She passed around a pamphlet entitled "Reforestation Needs and Opportunities for Carbon Sequestration in Alaska." REPRESENTATIVE CISSNA provided the committee with an article entitled "Carbon Sequestration - Terrestrial Approaches." Number 1628 REPRESENTATIVE HEINZE asked how these carbon credits are traded. MS. WEISSLER answered that she believes its just like any other commodity. She recalled that when limits were established for sulfur dioxide, a market was created for it. Ms. Weissler specified that when quantifying how much is being sequestered, the unit of tons is used. REPRESENTATIVE HEINZE asked if Ms. Weissler meant a ton of carbon molecules MS. WEISSLER replied yes; it's actually the gas emitted into the atmosphere. Number 1748 REPRESENTATIVE GUTTENBERG asked how the value of a forest is measured. MS. WEISSLER said that's one of the questions yet to be answered. REPRESENTATIVE GUTTENBERG pointed out that the last page of the document, entitled "Opportunities for Carbon Offset Programs in Alaska," specifies: "A carbon credit is one metric ton of carbon or CO2 equivalent that is captured from the atmosphere and stored in plants and organic matter." Number 1851 JOHN "CHRIS" MAISCH, Regional Forester, Northern Region Office, Division of Forestry, Department of Natural Resources (DNR), confirmed that carbon would be traded per ton. Although a number of formulas could be used for wood, essentially it's the wood volume and the amount of carbon that is created through the photosynthetic process of the tree or plant. The carbon is locked up as the wood or the biomass of the plant. He noted that the actual certification process needs work. CHAIR FATE asked if the fact that the U.S. isn't a signatory to the Kyoto Protocol would influence what happens in the U.S. relative to this. MR. MAISCH replied yes. He explained that many of the companies that are part of the Kyoto Protocol do business worldwide; those counties that have signed and ratified the Kyoto Protocol have programs in which carbon needs to be reduced in the country. Therefore, a worldwide company such as BP could trade and sell carbon credits anywhere in the world and obtain credits for that in a country that has ratified the Kyoto Protocol. Number 1938 CHAIR FATE pointed out that there are a lot of forest fires in Alaska, fires that cause large areas of the Interior to be covered with smoke to the extent that someone can't fly an airplane. Of course, the smoke is carbon. Chair Fate asked how this natural phenomenon would come into play with gaining credits in this sequestration program. MR. MAISCH explained that since a forest fire would be a natural event, it wouldn't impact the actual program of sequestering of carbon. However, it might impact the state if the state quickly reforests and revegetates burned acreage. Currently, it's rare that the state does the aforementioned. He said that [if the state quickly reforests and revegetates burned acreage], the state would be speeding up the rate at which reforestation would naturally occur in a burned area; thus the state could potentially produce a saleable carbon credit for the time the state sped up the reforestation of the burned area. In further response, Mr. Maisch specified that the landowner would bear the cost of reforestation. However, the idea is that the price of the carbon credit would offset the reforestation cost. CHAIR FATE interjected that would be the case if the quota wasn't already filled. MR. MAISCH acknowledged that there is a quota, but pointed out that as more companies become interested in those credits, those credits will trade at a higher price. With the proposed quota, there is some merit in being the first in, rather than the last. CHAIR FATE asked if Mr. Maisch feels [carbon sequestration] is worth review, as requested in HB 196. MR. MAISCH replied yes, in order to evaluate whether it is a tool for land managers to leverage more reforestation activities or other activities to produce these saleable credits. CHAIR FATE asked if this would be leverage to entice the U.S. to sign the Kyoto Protocol. MR. MAISCH replied no. He said that the U.S. wouldn't have to ratify the Kyoto Protocol in order to participate in the carbon [credit-trading] market. Number 2118 REPRESENTATIVE HEINZE asked if the carbon molecules would be traded, bartered, or sold. MR. MAISCH answered that the carbon [credits] would be sold like any other commodity on the commodities market, such as lumber, corn, or oil. Currently, credits for sulfur dioxide, a pollutant emitted by electric utilities, are traded; an exchange sells credits to offset excess emissions of sulfur dioxides. The aforementioned program has been in the U.S. for a number years; the [sulfur dioxide credit] prices are set per ton, and the market bids it up or down based on the availability of the credits. Carbon credits would work in the same way. REPRESENTATIVE HEINZE asked if [carbon credits] are being traded elsewhere in the world, and if so, at what price. MR. MAISCH responded that the price varies based on a number of factors. The largest variable is whether the carbon credit is actually certified. There is a third-party certifier who certifies how much carbon a project is going to produce so that can be taken to the marketplace and a potential purchaser of that credit is assured the specified amount of carbon is being produced. Although there are projects worldwide, most of them aren't traded through an exchange because the exchange isn't running. Mr. Maisch informed the committee that several Native organizations in the Lower 48, such as the Nez Perce, have done carbon projects with utilities. He characterized most of the projects that have occurred thus far to be from a public relations standpoint, rather than an actual trade through the exchange. REPRESENTATIVE HEINZE said she was trying to determine how the sponsor could forecast [that this market could provide] $400 million in revenue if the exchange isn't running. MR. MAISCH suggested that projection could be based on private projects elsewhere. He said he'd have to perform some research in order to verify that projection. Number 2284 REPRESENTATIVE CISSNA asked if there are other ways in which carbon sequestration could benefit Alaska. MR. MAISCH pointed out that Alaska's being involved in carbon sequestration could provide some public relations benefits. He returned to the paper by the Alaska Reforestation Council, written in 2000, and suggested that it might be worth reviewing in detail. Mr. Maisch pointed out that in terms of the global warming concept, many have embraced this carbon sequestration program to help reduce global warming. CHAIR FATE, upon determining no one else wished to testify, closed public testimony. He announced that he had no objection to forwarding HB 196 to the next committee of referral. Number 2368 REPRESENTATIVE MASEK directed attention to page 3, lines 2-4, which specifies that members of the advisory committee created by this legislation are entitled to per diem and travel. The committee took an at-ease from 7:00 p.m. to 7:02 p.m. CHAIR FATE informed the committee that each member should now have a copy of the fiscal note. He directed the committee's attention to the analysis included in the fiscal note. Number 2419 REPRESENTATIVE LYNN asked how the size of the advisory committee was determined. MS. WEISSLER explained that the size came about because the sponsor was looking for a list of folks able to assist in the development of the report. Furthermore, the advisory committee follows the models in Idaho and Nebraska. REPRESENTATIVE LYNN remarked that if any voting is required of this advisory committee, then its membership should be an odd number. MS. WEISSLER related that she didn't believe there would be any voting because the advisory committee is really to develop recommendations and assist the department. Number 2482 REPRESENTATIVE MASEK asked why an advisory committee has to be created, when DNR can handle this with its existing staff. She offered her belief that most of the legislation passed this session has had no fiscal impact. CHAIR FATE related his understanding from the sponsor that this legislation was merely a request to look into this; however, it seems to go further and seems to be partially responsible for some sort of implementation. MS. WEISSLER clarified that the intent is for the advisory committee to advise the department. There is no intention to put anything into motion. With regard to the fiscal note, she said she suspects that the costs could be substantially reduced through use of the teleconference network and existing staff, which was the intention of the sponsor. She mentioned the possibility of grant opportunities that could be more likely if this legislation is in place. Number 2606 CHAIR FATE announced that HB 196 would be held for further consideration. He related his view that this is a good idea, although more study seems to be required on the fiscal note as well as the specific duties of the board. [HB 196 was held over.]
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