Legislature(2023 - 2024)BUTROVICH 205

02/24/2023 03:30 PM Senate RESOURCES

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Audio Topic
03:30:36 PM Start
03:30:55 PM SB48
04:54:11 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
*+ SB 48 CARBON OFFSET PROGRAM ON STATE LAND TELECONFERENCED
Heard & Held
-- Testimony <Invitation Only> --
+ Bills Previously Heard/Scheduled TELECONFERENCED
**Streamed live on AKL.tv**
              SB  48-CARBON OFFSET PROGRAM ON STATE LAND                                                                    
                                                                                                                                
3:30:55 PM                                                                                                                    
CO-CHAIR  GIESSEL  announced  the  consideration   of SENATE  BILL  NO.                                                         
48  "An  Act authorizing   the  Department  of  Natural  Resources   to                                                         
lease  land for  carbon  management  purposes;  establishing  a carbon                                                          
offset  program  for  state  land;  authorizing   the  sale  of carbon                                                          
offset credits; and providing for an effective date."                                                                           
                                                                                                                                
3:31:41 PM                                                                                                                    
JOHN   BOYLE,    Commissioner-Designee,     Department    of   Natural                                                          
Resources,   Anchorage,   Alaska,   thanked  the   committee  for   the                                                         
series   of   informational    presentations    leading   up   to   the                                                         
introduction   of  SB  48.  They   highlighted   the  opportunity   and                                                         
promise  associated  with  carbon offset  projects  in Alaska.  It  can                                                         
change  the  paradigm  for managing  state  forests,  particularly   in                                                         
the  Interior.  This  will  result  in  healthier  trees  that  absorb                                                          
more  carbon  and  are  more  resilient   to wild  fire,  and  perhaps                                                          
grow  a  forest  products   industry.   The  message  is  that  carbon                                                          
offset  projects  are  not an  either  or choice.   They give  a  suite                                                         
of  tools  to  process  and  harvest  more  timber  and  realize   more                                                         
revenue  to the  state. This  will  help diversify  the  economy,  grow                                                         
the  budget,  and  provide   economic  opportunities   throughout   the                                                         
state.  He  opined  that  the committee's   questions  about  managing                                                          
risks  and balancing  mineral  interests  in  conjunction  with carbon                                                          
offsets  have  been  good  and the  discussions   productive.  He  said                                                         
it's   becoming    clear    to   everyone    that   there   are    many                                                         
opportunities in this space.                                                                                                    
                                                                                                                                
CO-CHAIR  GIESSEL   listed  the  individuals  who  were  available   to                                                         
respond to questions.                                                                                                           
                                                                                                                                
3:35:08 PM                                                                                                                    
RENA    MILLER,    Special     Assistant    to    the    Commissioner,                                                          
Commissioners     Office,    Department    of    Natural    Resources,                                                          
Anchorage,  Alaska,  stated  that  the bill  broadly  will  enable  the                                                         
state  to  evaluate   new  opportunities   to  generate  revenue   from                                                         
Alaska's  natural  resources  through  carbon  management.   It allows                                                          
the  Department  of  Natural   Resources  (DNR)  to  undertake  carbon                                                          
projects  on  state  land,  and it  allows  private  parties  to  lease                                                         
state  land  for carbon  management   purposes.  She  agreed  with  the                                                         
previous  statement   that carbon   projects  can  be compatible   with                                                         
other uses.                                                                                                                     
                                                                                                                                
3:36:11 PM                                                                                                                    
MS.  MILLER  displayed   the  graphic  on  slide  2  that  illustrates                                                          
carbon   management    to   reduce   greenhouse    gases   by   either                                                          
preventing  the  emission  from  the source  or by  removing  CO2  from                                                         
the  atmosphere.   On  the  left  the  drawing  shows  that  emissions                                                          
from  a  power  plant  tie  into  the  CCUS/Geological   Sequestration                                                          
Bill  that  the committee   may  hear in  the  future.  In  the second                                                          
option,  those   emissions  tie  into  forest   carbon  offsets.   This                                                         
represents  the  nature-based   carbon  removal  process   put forward                                                          
in SB 48.                                                                                                                       
                                                                                                                                
3:37:17 PM                                                                                                                    
MS. MILLER described carbon offset projects outlined on slide 3.                                                                
                                                                                                                                
        1. Project manages living matter to reduce CO2 in the                                                                   
        atmosphere                                                                                                              
         2. Work with a registry: methodology, project data,                                                                    
        validation, audits                                                                                                      
     3. Credits generated to project, then sold on market                                                                       
     4. Credits applied by buyer to offset emissions                                                                            
                                                                                                                                
CO-CHAIR   GIESSEL  mentioned   additionality    and  asked  how   many                                                         
board  feet  were   currently  being   harvested  that  would   not  be                                                         
harvested   if  the  state  were  to  put  those  state  forests   into                                                         
carbon offset projects.                                                                                                         
                                                                                                                                
MS.  MILLER  replied   that  it  was  DNR's   understanding   that  the                                                         
calculation  of  additionality   would be  very  project-specific   and                                                         
site-specific.   She  deferred  the  question  about  current  harvest                                                          
to Alison Arians.                                                                                                               
                                                                                                                                
3:40:01 PM                                                                                                                    
CO-CHAIR   GIESSEL  asked  Ms.  Arians   if  she  could  estimate   the                                                         
number   of   board   feet  the   state   was   currently   harvesting                                                          
statewide.                                                                                                                      
                                                                                                                                
3:40:07 PM                                                                                                                    
ALISON  ARIANS,  Deputy   Director,  Division   of Forestry   and  Fire                                                         
Protection,   Department   of  Natural   Resources   (DNR)  Anchorage,                                                          
Alaska,  stated  that the  number varies  depending  on  the year,  but                                                         
in FY2022  the  harvest was  9,599  thousand board  feet  (MBF) and  in                                                         
FY2021  the harvest  was  42,345 MBF.  She offered  to follow  up  with                                                         
the harvest numbers over the last ten years.                                                                                    
                                                                                                                                
CO-CHAIR GIESSEL said she had the information she needed.                                                                       
                                                                                                                                
CO-CHAIR   BISHOP  requested  the   additional  data  broken   down  by                                                         
region.                                                                                                                         
                                                                                                                                
CO-CHAIR  GIESSEL  asked Ms.  Arians  to send  the information  to  her                                                         
office and she would distribute it to the committee members.                                                                    
                                                                                                                                
MS.  ARIANS  agreed  to supply  the  totals  broken  into  the Coastal                                                          
Southeast, Coastal Southcentral, and Northern regions.                                                                          
                                                                                                                                
3:42:17 PM                                                                                                                    
MS.  MILLER   displayed  slide   4,  Carbon   Markets  -  Growth,   and                                                         
conveyed  that  the  slide  came  from  a  Shell  oil  company  report                                                          
forecasting   growth  in  the  carbon  offset  market.   She  said  DNR                                                         
believes  that  it affirms  that  the  carbon  market  is real,  it  is                                                         
growing,   and   that   it   offers   opportunity.    She   noted   the                                                         
successful projects on Alaska Native corporation lands.                                                                         
                                                                                                                                
She relayed  that  DNR sees  real  potential  in the voluntary  market                                                          
for  the  state  to  sponsor  carbon  offset  projects  that  generate                                                          
credits  that  can  be sold  to  companies  looking  to balance   their                                                         
ledgers.                                                                                                                        
                                                                                                                                
3:43:04 PM                                                                                                                    
CO-CHAIR  GIESSEL  said  she'd  read  that  the voluntary   market  had                                                         
dropped  from $25/credit   to about  $2/credit  and that  it was  being                                                         
contrasted  with  the  cap and  trade market.  She  asked  whether  the                                                         
state had analyzed that kind of value.                                                                                          
                                                                                                                                
MS.  MILLER  said  she  would  follow   up  with  an answer,   but  her                                                         
understanding   was  that  the   voluntary  market   fluctuates   based                                                         
largely  on  the buyers'  perception   of the  value  of  the credits.                                                          
Nevertheless,   DNR expects  significant   increase  in the  voluntary                                                          
market  and  sees  more price  stability,   but less  opportunity   for                                                         
the state in the compliance market.                                                                                             
                                                                                                                                
3:45:05 PM                                                                                                                    
MS.  MILLER  advanced   to  slide  5,  Opportunity   for  Alaska,   and                                                         
discussed   the   following,    specifically   mentioning    the   anew                                                         
report:                                                                                                                         
                                                                                                                                
     • Alaska has the resources                                                                                                 
        o Forest carbon potential:                                                                                              
           • 100 million acres of uplands                                                                                       
           • Millions and millions of acres of forested                                                                         
              state lands                                                                                                       
        o Kelp potential:                                                                                                       
            • 60 million acres of tide and submerged lands                                                                      
     • Potential affirmed by third parties                                                                                      
          • Benefits for revenue, diversification, economic                                                                     
        development                                                                                                             
     • Constitutional responsibility to maximize use                                                                            
                                                                                                                                
3:47:42 PM                                                                                                                    
SENATOR  KAUFMAN  asked if  she said  that constructing   a road  might                                                         
be necessary to prove or manage a project.                                                                                      
                                                                                                                                
MS.  MILLER  replied   that's  a  possibility,   and  in  some  remote                                                          
areas helicopters might be necessary.                                                                                           
                                                                                                                                
SENATOR  KAUFMAN  commented   on  the emotional   conflict  associated                                                          
with building a road to prove an ecological benefit.                                                                            
                                                                                                                                
MS.  MILLER  agreed  that it  could  be an  emotional  issue  for  some                                                         
people.                                                                                                                         
                                                                                                                                
MS. MILLER  turned  to the  State of  Alaska  General Land  Status  map                                                         
depicted  on slide  6 and  noted that  DNR was  working  on a map  that                                                         
shows  where  forest  carbon  offset  projects   on  state  land  could                                                         
occur.  Part  of  this  process  is  to  look  at  each  legislatively                                                          
designated  areas  to  determine  whether  it is  compatible  with  the                                                         
specific  terms  of  these  projects.  DNR  mapping  staff  is working                                                          
on  this   and  the  committee   will   be  apprised   when  the   more                                                         
detailed map is available.                                                                                                      
                                                                                                                                
3:50:12 PM                                                                                                                    
MS. MILLER reviewed the potential questions listed on slide 7.                                                                  
                                                                                                                                
          • Why would anyone pay us for what we are already                                                                     
        doing?                                                                                                                  
     • How does it impact other land uses?                                                                                      
     • How to achieve additionality?                                                                                            
     • Leakage potential                                                                                                        
     • Reversals                                                                                                                
                                                                                                                                
She opined  that  SB 48  empowers DNR  to address  these  questions  in                                                         
a   manner   that   protects   the   state's   best   interests.    She                                                         
reiterated  that  additionality   will  be  determined  on  a case-by-                                                          
case basis. Each project will have unique characteristics.                                                                      
                                                                                                                                
3:51:42 PM                                                                                                                    
SENATOR  KAUFMAN   asked  if  she  would   briefly  define  the   terms                                                         
specifically used in carbon offset.                                                                                             
                                                                                                                                
3:52:22 PM                                                                                                                    
MS. MILLER provided the following definitions:                                                                                  
                                                                                                                                
similar Additionality is the reduction in greenhouse gas/CO2 emissions                                                          
   or the increase in carbon storage above the baseline.                                                                        
similar Leakage is the situation where  emissions  reductions   in  one                                                         
   area transfer to another.                                                                                                    
similar Reversals are for stopping a  project  for  some  reason.   The                                                         
   contractual terms with a registry and buyers and potentially a                                                               
   project developer include buffers against that.                                                                              
                                                                                                                                
CO-CHAIR  GIESSEL  advised  that the  definitions  start  on page  6 of                                                         
the bill.                                                                                                                       
                                                                                                                                
3:54:24 PM                                                                                                                    
MS. MILLER advanced to slide 8 and highlighted the following:                                                                   
                                                                                                                                
     Enable    carbon   offset    projects    on   state's   vast                                                               
     landholdings and extensive shorelines by:                                                                                  
     •  Making   carbon  management   a  possible  use  of  state                                                               
        land                                                                                                                    
     •  Allow  DNR to  lease land  to  third parties  for  carbon                                                               
        management purposes                                                                                                     
     •  Task  DNR  with standing   up a  carbon  offsets  program                                                               
        to do state-sponsored projects                                                                                          
     •    Inventory    and   assess    state's   resources    for                                                               
        suitability and prospectivity                                                                                           
                                                                                                                                
3:55:27 PM                                                                                                                    
MS. MILLER turned to slide 9, SB 48: Overview, and discussed the                                                                
following:                                                                                                                      
                                                                                                                                
     •  Adds a  new, revenue-generating   option  to DNR's  state                                                               
        lands management toolkit                                                                                                
     •  Provides  flexibility   as state  engages   in a  dynamic                                                               
        field with commercial markets                                                                                           
     •  Protects   the  public   interest  in   state  lands  and                                                               
        multiple-use land management                                                                                            
     •  Maintains  existing  land  uses  by individual   Alaskans                                                               
        and by Alaska industries                                                                                                
                                                                                                                                
3:56:31 PM                                                                                                                    
MS. MILLER advanced to slide 10, SB 48: Overview: Land leases,                                                                  
and discussed the following:                                                                                                    
                                                                                                                                
     SB48  enables  private   parties  to lease  state  land  for                                                               
     carbon management projects.                                                                                                
     • Applicant applies for a lease up to 55 years                                                                             
     •   Lease  compensation   must   be  designed   to  maximize                                                               
        return to the state                                                                                                     
     •  DNR ensures  lease  is  in best  interests  of the  state                                                               
        through formal finding                                                                                                  
     • No lessee preference conveyed                                                                                            
                                                                                                                                
3:57:30 PM                                                                                                                    
MS. MILLER advanced to slide 11, SB 48: Overview: State                                                                         
projects, and discussed the following:                                                                                          
                                                                                                                                
     SB 48 establishes Carbon Offset Program.                                                                                   
        •  DNR  undertakes   carbon  offset   projects  on  state                                                               
           land                                                                                                                 
        •   Viability,   state/local   economic   effects   among                                                               
           evaluation criteria                                                                                                  
        •    Proposed    projects     require    best    interest                                                               
           finding/public process                                                                                               
        •  Makes  eligible   state  land  available   for  carbon                                                               
           offset projects (among other uses)                                                                                   
           State-sponsored    projects   not  allowed   on  state                                                               
           parks,    refuges,    rec   areas,    etc.,    without                                                               
           legislative approval                                                                                                 
        •   State   land  remains   open   to   the  public   for                                                               
           traditional uses (hunting, fishing, access, etc.)                                                                    
        •    Program    revenue    pays   for    administration,                                                                
           additional projects                                                                                                  
                                                                                                                                
3:59:08 PM                                                                                                                    
SENATOR  KAUFMAN  expressed   interest  in  seeing  a sample  contract                                                          
for  a  forest   carbon  offset   project  and   the  broker  fees   to                                                         
execute a project and a reversal.                                                                                               
                                                                                                                                
MS.   MILLER   said   she'd    look   into   providing   some   common                                                          
provisions,   but   project  development    companies   generally   use                                                         
different standards of contracts and methodologies.                                                                             
                                                                                                                                
4:01:23 PM                                                                                                                    
MS.  MILLER  turned  to  slide  12, SB  48:  Overview:  Forest  plans,                                                          
and reviewed the following:                                                                                                     
                                                                                                                                
         SB48 grants legislative approval for state-sponsored                                                                   
     carbon offset programs on state forests.                                                                                   
        •   Haines  State   Forest,   Southeast   State   Forest,                                                               
           Tanana Valley State Forest                                                                                           
        • Adds  carbon  offset projects  to  existing  non-timber                                                               
           uses                                                                                                                 
        •  Requires  management  plans  to identify   appropriate                                                               
           forest land for projects, and requires projects                                                                      
           be consistent with management plans                                                                                  
                                                                                                                                
4:02:04 PM                                                                                                                    
CO-CHAIR  BISHOP  referenced  the  second  bullet  and asked  how  much                                                         
carbon  the tundra  on the  North  Slope removes  from  the atmosphere                                                          
annually   and  whether   that   would  be   an  existing   non-timber                                                          
resource that could be sold as a credit.                                                                                        
                                                                                                                                
MS.  MILLER   answered  that   the  bullet  speaks   specifically   and                                                         
solely  to the  three state  forests,  not tundra.  She  was not  aware                                                         
that  DNR  had  talked  to  anybody  interested   in  a tundra  carbon                                                          
offset  project   at this   time.  She  deferred  further  comment   to                                                         
Christy Colles.                                                                                                                 
                                                                                                                                
4:03:47 PM                                                                                                                    
CHRISTY  COLLES,  Director,   Division  of  Mining,  Land,  and Water,                                                          
Department  of  Natural  Resources,  Anchorage,  Alaska,  said  DNR  is                                                         
aware  that  tundra  absorbs   a  lot  of carbon,   but  a market   for                                                         
tundra  has  not  been  identified.  She  noted  that  markets  in  the                                                         
future may include things like tundra and kelp.                                                                                 
                                                                                                                                
4:04:32 PM                                                                                                                    
COMMISSIONER-DESIGNEE   BOYLE  added  that the  intent of  the bill  is                                                         
to   provide   DNR  with   broad   flexibility    to  evaluate    other                                                         
opportunities   such  as  tundra   and  some  mineral   deposits   that                                                         
might make sense not to develop. He said it's all very nascent.                                                                 
                                                                                                                                
CO-CHAIR GIESSEL asked Ms. Miller to continue the presentation.                                                                 
                                                                                                                                
4:06:16 PM                                                                                                                    
MS. MILLER presented the sectional analysis for SB 48:                                                                          
                                                                                                                                
Section  1:  Amends  AS 36.30.850(b)   to  exempt  DNR from  following                                                          
              the state procurement code when contracting with                                                                  
              third parties for purposes related to the carbon                                                                  
              offset program, streamlining the process.                                                                         
                                                                                                                                
She  said  the  basis  for this  provision   is to  put  the  state  on                                                         
more  equal  footing   with  the  commercial  parties   with  which  it                                                         
will  engage.  The  contracts  could  be  for  consultants   that  will                                                         
help  the  state  navigate  this  new  field  or  project  developers.                                                          
After  the  commissioner   has  evaluated  a  specific  proposal,   the                                                         
best  interest  finding  is still  required  before  a project  can  go                                                         
forward.                                                                                                                        
                                                                                                                                
CO-CHAIR  GIESSEL  asked  whether  the best  interest  finding  has  to                                                         
be presented to the legislature.                                                                                                
                                                                                                                                
MS. MILLER deferred the question to Ms. Colles.                                                                                 
                                                                                                                                
4:08:10 PM                                                                                                                    
MS. COLLES  stated  that  a best interest  finding  (BIF)  does not  go                                                         
before  the  legislature.   The  department   drafts  the  preliminary                                                          
decision  that  goes out  for  public notice  and  to agencies.   Based                                                         
on  the   feedback,   the  BIF  may   be  amended   before  the   final                                                         
decision  is  released.  She  added  that  preliminary  decisions   may                                                         
be  sent   to  legislators,    particularly   if  their   district   is                                                         
affected, and those comments are considered as well.                                                                            
                                                                                                                                
4:08:42 PM                                                                                                                    
MS. MILLER continued the sectional analysis.                                                                                    
                                                                                                                                
Section 2: Amends AS 37.05.146(c) to allow revenue from                                                                         
              carbon   offset   credits    to   be   treated   as                                                               
              designated program receipts.                                                                                      
                                                                                                                                
She noted that this new fund is created in Section 6.                                                                           
                                                                                                                                
Section 3: Conforms to Sec. 4 (leases for carbon                                                                                
              management)  by  exempting   the  new  statute,  AS                                                               
              38.05.081  from  the  Alaska   Land  Act's  general                                                               
              leasing   procedures.   This   will   ensure   that                                                               
              leases under  AS 38.05.081  do  not need  to comply                                                               
              with a competitive bid process or auction.                                                                        
                                                                                                                                
CO-CHAIR   GIESSEL  asked   whether  the  bidding   process  would   be                                                         
public or closed.                                                                                                               
                                                                                                                                
MS. MILLER deferred the question to Ms. Colles.                                                                                 
                                                                                                                                
MS.  COLLES  answered   that  Section  3  exempts  carbon  from   going                                                         
through  the process  of  an auction  or bid.  The statute  allows  but                                                         
doesn't  require   auctions  and  this   provision  would  exempt   the                                                         
department   from  having  to  solicit  interest  from  other  parties                                                          
for a similar project in the same location.                                                                                     
                                                                                                                                
CO-CHAIR GIESSEL observed that this was not like an oil lease.                                                                  
                                                                                                                                
MS.  COLLES  said  that's  correct.   She  added  that  it  might  have                                                         
been  envisioned  that way  when the  statute  was written,  but  there                                                         
typically   isn't  competition   or  interest   on  state  lands   from                                                         
individuals   who  want   to  use   the  same  space   for  a  similar                                                          
activity.                                                                                                                       
                                                                                                                                
4:12:21 PM                                                                                                                    
MS.  MILLER  continued  the sectional   analysis  noting  that Section                                                          
4  replaces  the  process   that  is exempted   in  Section  3  with  a                                                         
process that is specific to carbon management.                                                                                  
                                                                                                                                
Section 4: enacts a new subsection AS 38.05.081 relating to                                                                     
              leases  of   state  land   for  carbon   management                                                               
              purposes.   The  proposed   section  AS   38.05.081                                                               
              authorizes   DNR   to   lease   land   for   carbon                                                               
              management.   The  proposed  section   would  allow                                                               
              DNR  to   lease  lands   to   private  parties   to                                                               
              implement their own carbon offset projects.                                                                       
                                                                                                                                
              Proposed  AS 38.05.081(b)   specifies  the  process                                                               
              for  how  a  person  may  apply  to  DNR  to  lease                                                               
              lands for carbon management purposes.                                                                             
                                                                                                                                
              Proposed  AS  38.05.081(c):   specifies  a  process                                                               
              for deciding  between  applications   for  the same                                                               
              land. If  there are  two or more  applications  for                                                               
              the same  land,  the director  of  the division  of                                                               
              lands  within  DNR has  the  discretion  to  select                                                               
              the lessee  by  considering  the  applicant's  past                                                               
              carbon  management  experience,   the  lease  term,                                                               
              and the  proposed carbon  management  use  of state                                                               
              land.  An  aggrieved   applicant   may  appeal  the                                                               
              decision  within  20 days  after  receiving  notice                                                               
              of the decision.                                                                                                  
                                                                                                                                
              Proposed   AS   38.05.081(d):     allows   DNR   to                                                               
              authorize  up  to  a 55-year  lease  for  a  carbon                                                               
              management    purpose.    This   subsection    also                                                               
              authorizes  the commissioner   of DNR to  terminate                                                               
              a lease  if the  land  is not  being  used  for the                                                               
              approved carbon management purpose.                                                                               
                                                                                                                                
              Proposed  AS  38.05.081(e):   specifies   a  lessee                                                               
              does not  receive a  preference  right to  purchase                                                               
              the land.  February   1, 2023  33-GS1372\A   Page 2                                                               
              of 3.                                                                                                             
                                                                                                                                
              Proposed   AS  38.05.081(f):    DNR  can   consider                                                               
              factors  set out  in AS  38.05.073(m)  in  deciding                                                               
              the appropriate   lease  compensation  for  a lease                                                               
              under  the section,   including  "the  fair  market                                                               
              rental  value"  or  the  "annual   gross  receipts"                                                               
              generated by the land.                                                                                            
                                                                                                                                
              Proposed  AS 38.05.081(g):  clarifies  that  carbon                                                               
              management   land   leases    can   be   subleased,                                                               
              assigned,  renewed,  and extended  consistent  with                                                               
              AS 38.05.070 and 38.05.095.                                                                                       
                                                                                                                                
              Proposed  AS 38.05.081(h):  requires  the  director                                                               
              of  DNR  to  complete   a  written  best   interest                                                               
              finding  under  AS   38.05.035(e)  before   leasing                                                               
              lands  for  carbon  management   purposes.  A  best                                                               
              interest  finding   is  required   to  comply  with                                                               
              art. VIII,  sec.  10  of  the Alaska  Constitution                                                                
              and the  statutory  and  case law  that  implements                                                               
              it.                                                                                                               
                                                                                                                                
              Proposed   AS   38.05.081(i):    defines    "carbon                                                               
              management"     to    include    greenhouse     gas                                                               
              mitigation       and      non-geologic       carbon                                                               
              sequestration projects.                                                                                           
                                                                                                                                
CO-CHAIR  GIESSEL  asked  whether  the  commissioner  or  director  was                                                         
awarding   the  lease   because  subsection   (a)   in  the  new   Sec.                                                         
38.05.081  says  the commissioner   may  lease state  land  for carbon                                                          
management  purposes   and subsection   (c)  says  the director   shall                                                         
award  the  lease  to  the  most  qualified  applicant   in  the  event                                                         
there are competing applications.                                                                                               
                                                                                                                                
MS. MILLER deferred the question to Ms. Colles.                                                                                 
                                                                                                                                
4:15:00 PM                                                                                                                    
MS.  COLLES   answered   that   it  depends   on  the   commissioner's                                                          
delegations,  but  often  the commissioner   may be  the one  to  offer                                                         
the  leases  and   the  director  authorizes   the  leases.   She  also                                                         
pointed  out that  much of  Section  4 implements  what  has been  done                                                         
with other long-term leases.                                                                                                    
                                                                                                                                
4:16:01 PM                                                                                                                    
MS. MILLER advanced to Section 5.                                                                                               
                                                                                                                                
Section  5:  of  the  bill  amends  AS  38.05.102   by  noting  that  a                                                         
              lessee  under the  proposed  AS  38.05.081  (see Section                                                          
              4)  does  not  obtain   a  long-term   lease  preference                                                          
              right  in the  land.  This  is  a  conforming  amendment                                                          
              consistent  with language  included  in the  proposed  AS                                                         
              38.05.081(e) (see Section 4).                                                                                     
                                                                                                                                
4:16:20 PM                                                                                                                    
MS. MILLER described Section 6 as the core of the bill.                                                                         
                                                                                                                                
Section  6:  would  establish  the  carbon  offset  program  as  a  new                                                         
              article  within   AS  38.95  through   enactment   of  AS                                                         
              38.95.400  -  38.95.499.   The  new  sections   create  a                                                         
              process  for  DNR  to  implement   a  project   to  yield                                                         
              carbon offset  credits  and create  a fund  for revenues                                                          
              generated from the carbon offset projects.                                                                        
                                                                                                                                
              Proposed  AS 38.95.400:  establishes  the  carbon offset                                                          
              program   and  creates   powers   and  duties   for   the                                                         
              commissioner  of  DNR. It  allows  DNR to  contract  with                                                         
              third  parties   to  carry   out  the   purposes   of  AS                                                         
              38.95.400   -   39.95.499   and   explicitly   disclaims                                                          
              application   of   the    carbon   offset   program    to                                                         
              activities of private landowners.                                                                                 
                                                                                                                                
              Proposed   AS   38.95.410:   requires    DNR   to   adopt                                                         
              criteria  to evaluate  carbon  offset projects  on  state                                                         
              lands.  The  statute  prevents  carbon  offset  projects                                                          
              from  being  undertaken   on  legislatively   designated                                                          
              lands  without   approval  by  the   legislature   or  as                                                         
              provided   by  law.  The   statute  also   requires   the                                                         
              director   of   lands,   with   the   consent    of   the                                                         
              commissioner  of  DNR,  to  find  that  a carbon  offset                                                          
              project is  in the  best interests  of the  state before                                                          
              undertaking    the   project    [page   5,   line    10].                                                         
              Additionally,    carbon   offset   projects    would   be                                                         
              limited  to a  term  of 55  years.  Lastly,  the statute                                                          
              provides  that carbon  offset  projects  cannot restrict                                                          
              public  access,  fishing,  hunting,  or other  generally                                                          
              allowed uses.  February  1, 2023  33-GS1372\A  Page  3 of                                                         
              3.                                                                                                                
                                                                                                                                
MS.  MILLER  referenced  Senator  Bishop's  earlier  comment  and  said                                                         
.410(b) potentially could include tundra.                                                                                       
                                                                                                                                
CO-CHAIR   GIESSEL  said  that  seems  to  conflict   with  subsection                                                          
(c).  It  says   legislatively   withdrawn   lands  may  not   be  used                                                         
without  approval   by  the  legislature,  so  all  land  wouldn't   be                                                         
available.                                                                                                                      
                                                                                                                                
MS. MILLER  answered  that  the legislatively   withdrawn  land refers                                                          
to  subsection  (b)  that  says,  "Except  as  otherwise  provided   in                                                         
statute  or  regulation   adopted  by  the  commissioner,   state  land                                                         
shall  be   available  for   carbon  offset   projects."  One   of  the                                                         
things   that   is  already    otherwise   provided   in   statute   or                                                         
regulation is the legislatively withdrawn land.                                                                                 
                                                                                                                                
She  reiterated  that  the  legislatively   withdrawn  land  cannot  be                                                         
used  without  legislative  approval.  However,   the bill  authorizes                                                          
the  use  of  legislatively   withdrawn  lands  that   are within   the                                                         
three state forests.                                                                                                            
                                                                                                                                
4:19:58 PM                                                                                                                    
MS.  COLLES  clarified  that  some  legislatively   designated  areas,                                                          
such  as the  Bison Range,  may  allow  carbon projects.   She said  it                                                         
will  be  necessary  to  look  at  all the  legislatively   designated                                                          
areas to see which ones would allow a project to be done.                                                                       
                                                                                                                                
CO-CHAIR    GIESSEL    observed   that    these   projects    wouldn't                                                          
necessarily be confined to state forests.                                                                                       
                                                                                                                                
MS. COLLES said that's accurate.                                                                                                
                                                                                                                                
SENATOR  KAUFMAN   asked  how  additionality   would  be  measured   on                                                         
tundra.                                                                                                                         
                                                                                                                                
MS.  MILLER said  the  bill is  written  to accommodate   the broadest                                                          
possible   range  of  carbon  projects   as  long  as  they  meet   the                                                         
requirements of the registry, which includes additionality.                                                                     
                                                                                                                                
4:22:21 PM                                                                                                                    
COMMISSIONER-DESIGNEE   BOYLE  posed  a  potential  scenario  to  prove                                                         
additionality   on tundra.  He  pointed  out  that  the coal  deposits                                                          
on the  North  Slope may  be economic   to develop,  and  if the  state                                                         
were  to  forego  that  type   of  extraction  that  would   disturb  a                                                         
number  of   surface  acres  of  tundra,   that  may  be  a  means   of                                                         
proving additionality.                                                                                                          
                                                                                                                                
MS. MILLER continued to review Section 6.                                                                                       
                                                                                                                                
              Proposed  AS   38.95.420:   specifies   that  after   DNR                                                         
              issues a  best interest  finding,  it may  then enter  an                                                         
              agreement   with  a  registry   to  validate   a  carbon                                                          
              offset project  and  to generate  revenue  from the  sale                                                         
              of carbon   offset  credits.  AS  38.95.420   would  also                                                         
              require  DNR to  maintain  records  for verified  carbon                                                          
              offset projects  for  the  term of  the project  and  any                                                         
              additional time period required by the registry.                                                                  
                                                                                                                                
              Proposed  AS  38.95.430:   Creates   the  carbon  offset                                                          
              revenue  fund. The  fund  would be  outside  the general                                                          
              fund,    would    hold    appropriations      from    the                                                         
              legislature,  including  program  receipts  from sale  of                                                         
              carbon   offset    credits,    and   would   allow    the                                                         
              commissioner  of  DNR  to spend  money  appropriated   to                                                         
              the  fund  for carbon   offset  program  purposes.   Fund                                                         
              appropriations would not lapse.                                                                                   
                                                                                                                                
4:24:57 PM                                                                                                                    
CO-CHAIR  BISHOP  asked  whether  the  terms  and  conditions  in  Sec.                                                         
38.95.420 would be public records.                                                                                              
                                                                                                                                
MS. MILLER deferred the question to Mr. Orman.                                                                                  
                                                                                                                                
4:25:45 PM                                                                                                                    
CHRISTOPHER  ORMAN,  Assistant  Attorney  General,  Natural  Resources                                                          
Section,   Civil  Division,   Department   of  Law,   Juneau,  Alaska,                                                          
confirmed  that  the records  maintained  under  Sec. 38.95.420   would                                                         
be public under the Public Records Act.                                                                                         
                                                                                                                                
4:26:12 PM                                                                                                                    
MS.  MILLER  continued  to  the definitions   in Section  6  and  noted                                                         
that  there   were  13  terms   related  to  the   new  carbon  offset                                                          
program.                                                                                                                        
                                                                                                                                
              Proposed  AS  38.95.499  provides  definitions   for  the                                                         
              program.                                                                                                          
                                                                                                                                
Sections  7  and  8: allow  for  designation   of state  lands  within                                                          
              the Haines  State  Forest  Resource  Management  Area  to                                                         
              be available for carbon offset program purposes.                                                                  
                                                                                                                                
MS. MILLER  noted  that the  Haines  State Forest  was  already broken                                                          
out  in  statute,  and  the  bill  makes  two  changes  to  accomplish                                                          
this for all three state forests.                                                                                               
                                                                                                                                
4:27:07 PM                                                                                                                    
CO-CHAIR  GIESSEL   asked  why the  Haines  State  Forest   was called                                                          
out separately.                                                                                                                 
                                                                                                                                
MS. MILLER deferred the question to Mr. Orman.                                                                                  
                                                                                                                                
MR.   ORMAN    replied   that    they're   separate    statutes.    The                                                         
legislature   first  withdrew  the  Haines   State  Forest  Recreation                                                          
Area  and  identified   it  in  AS  41.17.200-230.   After  that,   the                                                         
legislature   identified  two  more  state  forests,  and  created  the                                                         
state forest system in AS 41.17.400 and AS 41.17.500.                                                                           
                                                                                                                                
Section  9:  amends  AS 41.15.315,   which  requires  that  the Haines                                                          
              State  Forest  Resource   Management   Area  be  managed                                                          
              under  the principles   of multiple   use and  sustained                                                          
              yield, by  adding  a new  subsection  to require  DNR  to                                                         
              amend   the   management    plan   required    under   AS                                                         
              41.15.320  to  identify  lands  appropriate   for carbon                                                          
              offset projects.                                                                                                  
                                                                                                                                
Section  10:  amends   AS 41.17.200   to  provide  that  state  forest                                                          
              system lands are eligible for carbon offset                                                                       
              projects.                                                                                                         
                                                                                                                                
Section  11:  amends  AS 41.17.220   to provide  that  in  addition  to                                                         
              managing  state   forests  under   the  sustained   yield                                                         
              principle,   provisions  of   AS  41.17,  and  a  forest                                                          
              management  plan,   state  forest  lands   must  also  be                                                         
              managed in accordance with a carbon offset project.                                                               
                                                                                                                                
Sections   12  and  13:   require  DNR   to  update   existing  forest                                                          
              management plans to accommodate carbon offset                                                                     
              programs.                                                                                                         
                                                                                                                                
4:32:01 PM                                                                                                                    
CO-CHAIR   GIESSEL  asked   whether  Sections   9,  12,  and   13  also                                                         
provide   the   opportunity   for   public   participation    in   land                                                         
management questions.                                                                                                           
                                                                                                                                
MS.  MILLER deferred   to Ms.  Arians to  discuss  the public  process                                                          
associated   with  forest  management  plans  and  any  amendments   to                                                         
the plans.                                                                                                                      
                                                                                                                                
4:32:29 PM                                                                                                                    
MS.  ARIANS  responded   that  the  management  plans   for  all  state                                                         
forests  require  a public  process  that  is laid  out in  statute.  A                                                         
draft  plan  is  released  for  public  review,  the  comments  on  the                                                         
draft  are  all answered,   a final  plan  is released,   it undergoes                                                          
public  review,  and the  commissioner   signs the  plan.  The statute                                                          
also provides for an appeal process.                                                                                            
                                                                                                                                
4:33:19 PM                                                                                                                    
MS. MILLER continued the sectional analysis.                                                                                    
                                                                                                                                
Sections  14  and 15:  allow  DNR to  immediately  adopt  implementing                                                          
              regulations, but the regulations would not take                                                                   
              effect until the effective date of the bill.                                                                      
                                                                                                                                
MS.  MILLER  conveyed  DNR's preference   for an  immediate  effective                                                          
date.                                                                                                                           
                                                                                                                                
CO-CHAIR GIESSEL asked whether the regulation had begun.                                                                        
                                                                                                                                
MS. COLLES confirmed that DNR had not started a process yet.                                                                    
                                                                                                                                
CO-CHAIR   GIESSEL  observed   that   a  regulation   package  usually                                                          
takes a year to complete.                                                                                                       
                                                                                                                                
MS.  COLLES  estimated  that  it  would  take  2 years,  depending   on                                                         
the public interest and number of comment periods.                                                                              
                                                                                                                                
4:34:44 PM                                                                                                                    
SENATOR  KAUFMAN   pointed  out  that  a  criticism  of  this  plan  is                                                         
that  it's going  the  wrong direction   because it  will  tie up  more                                                         
of Alaska's  limited  state  land. He  asked if  that was  an accurate                                                          
characterization and if there were any mitigations.                                                                             
                                                                                                                                
4:35:34 PM                                                                                                                    
COMMISSIONER-DESIGNEE   BOYLE  said DNR's  position  is  that a carbon                                                          
management  project  does  not  create a  new conservation   unit;  the                                                         
areas  would  be open  to  multiple  uses  such as  hunting,  fishing,                                                          
camping,   recreating,   cutting   firewood,    and  even   a  mineral                                                          
project.  The terms  will  differ with  every  project,  but the  state                                                         
is  obligated  to  take a  well-balanced   viewpoint.  Article  VII  of                                                         
the  constitution  mandates  the  development  of  state  resources  by                                                         
making  them available  for  maximum  use consistent  with  the public                                                          
interest.   He  emphasized  that   he  looks  at  carbon  projects   as                                                         
maximizing opportunities for Alaskans.                                                                                          
                                                                                                                                
4:39:17 PM                                                                                                                    
SENATOR  KAUFMAN  asked if  carbon  projects would  be enabling  a  new                                                         
form of tax.                                                                                                                    
                                                                                                                                
COMMISSIONER-DESIGNEE   BOYLE  said  he'd  heard that  concern  but  he                                                         
didn't  agree.  The  authority  that  is sought  is  for the  state  to                                                         
be able  to engage  and  evaluate  with individuals  in  the voluntary                                                          
market  interested   in  doing  carbon   offset  projects.  The   state                                                         
would  not be  imposing  a carbon  tax or  a cap  and trade  system  on                                                         
existing  entities   within  the  state.  The  state  seeks  to engage                                                          
with  entities   that  are  voluntarily   choosing  to  pursue  carbon                                                          
offset  projects  as a  mechanism  to meet  net  zero benchmarks.   The                                                         
choice  for Alaska  is  whether  it wants  to  participate  and profit                                                          
from these projects.                                                                                                            
                                                                                                                                
4:44:22 PM                                                                                                                    
SENATOR  KAUFMAN  asked  if  there  was anything  that  could  be  done                                                         
to ensure  that  revenue  that  is generated  from  these  projects  is                                                         
spun off and not simply funding their own existence.                                                                            
                                                                                                                                
COMMISSIONER-DESIGNEE   BOYLE  replied   that it  is  DNR's  intent  to                                                         
bring   in  revenue   to  the   state  in   excess  of   the  cost   of                                                         
administering  the  program.  The state  is able  to play  a role  with                                                         
very  low  risk  exposure.   The  project   developer  pays   both  the                                                         
state  lease  fee and  to implement  the  project.  He noted  that  the                                                         
state  could  develop  a project  on  its own,  but  that was  not  the                                                         
intention at this point.                                                                                                        
                                                                                                                                
4:47:26 PM                                                                                                                    
CO-CHAIR  GIESSEL   said  this  project  has  appeal   for people   who                                                         
want  to see  forests  managed  more  productively,   but  she worries                                                          
about  the  estimates  of  revenue.  The  anew report  identified   the                                                         
Haines  forest   as  the  most  productive   area  and  estimated   the                                                         
value  at  $15-25/credit,   but  recent  reports  indicate   the  price                                                         
has  dropped  to $2.00/credit.   The state's  investment   wouldn't  be                                                         
as  large  as the  developer,  but  putting  together  the  regulation                                                          
package  would  not  be  free.  Given  the  state's   track  record  on                                                         
investment  decisions  such  as the  Delta grain  storage  project  and                                                         
the  seafood   processing   plant  in  midtown   Anchorage,  there   is                                                         
cause for concern.                                                                                                              
                                                                                                                                
She  said the  committee  will  hear the  bill again,  but  any update                                                          
on the value of the carbon credits would be very helpful.                                                                       
                                                                                                                                
COMMISSIONER-DESIGNEE    BOYLE  assured  the  committee  that  DNR  was                                                         
looking  at the  program  through the  same lens.  Clearly,  the  state                                                         
has  had  a  poor  track   record  of  picking   winners  and  losers.                                                          
That's  why  the bill  gives  DNR  broad  flexibility  to  monitor  and                                                         
track   the  development   of  this   nascent  market,   and  make   an                                                         
educated  decision  on where  the state  should  get involved  in  this                                                         
space.  He  opined   that  it  should  give  some  confidence   to  the                                                         
public  worried  about  the  disposition  of  public  funds  that  this                                                         
program  would  be a  very modest  increase  in  the budget.  Just  one                                                         
of  the benefits  that  would  accrue  to the  state  is that  the  new                                                         
staff  would  also   help  make  the  department's   permitting   teams                                                         
more robust and efficient in processing other permits.                                                                          
                                                                                                                                
4:53:27 PM                                                                                                                    
CO-CHAIR    GIESSEL   held    SB   48   in   committee    for   future                                                          
consideration.                                                                                                                  

Document Name Date/Time Subjects
SB 48 Transmittal Letter 1.26.2023.pdf SFIN 5/8/2023 9:00:00 AM
SRES 2/24/2023 3:30:00 PM
SB 48
SB 48 Anew - Carbon Offset Opportunity Evaluation Appendix_A.pdf SRES 2/24/2023 3:30:00 PM
SB 48
SB 48 Sectional Analysis 2.1.2023.pdf SRES 2/24/2023 3:30:00 PM
SB 48
SB 48 Anew - Carbon Offset Opportunity Evaluation Appendix_B.pdf SRES 2/24/2023 3:30:00 PM
SB 48
SB 48 SRES Hearing Request 2.1.2023.pdf SRES 2/24/2023 3:30:00 PM
SB 48
SB 48 DNR Overview Presentation for Senate Resources 02.24.2023.pdf SRES 2/24/2023 3:30:00 PM
SB 48
SB 48 Anew Alaska DNR Carbon Offset Opportunity Evaluation.pdf SRES 2/24/2023 3:30:00 PM
SB 48