Legislature(2023 - 2024)BUTROVICH 205
05/03/2023 03:30 PM Senate RESOURCES
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| Audio | Topic |
|---|---|
| Start | |
| SB48 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | SB 139 | TELECONFERENCED | |
| += | SB 48 | TELECONFERENCED | |
SB 48-CARBON OFFSET PROGRAM ON STATE LAND
3:35:13 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."
She stated that the intention was to continue the consideration
of amendments. Amendment 1 was adopted during the 4/28/23
meeting.
3:36:39 PM
SENATOR CLAMAN moved to adopt Amendment 2, work order 33-
GS1372\B.23, to SB 48.
33-GS1372\B.23
Dunmire
4/27/23
AMENDMENT 2
OFFERED IN THE SENATE BY SENATOR CLAMAN
TO: CSSB 48(RES), Draft Version "B"
Page 4, line 22:
Delete "contracts"
Insert "a contract"
Delete "third parties"
Insert "a third party"
Page 4, line 23, following "38.95.499.":
Insert "Under a contract in which a third party sells,
markets, or otherwise facilitates a carbon offset project,
the cost to the state of the contract may not exceed 30
percent of the revenue generated by the carbon offset
project."
CO-CHAIR GIESSEL objected for purposes of discussion.
3:36:47 PM
SENATOR CLAMAN explained that Amendment 2 was based on
discussions primarily with Sealaska about the structure of their
carbon credit programs and what percentage the vendor charged to
package the entire sale. Amendment 2 proposes a 30 percent
limit. This provides flexibility for the department to negotiate
fair commissions on these kinds of sales but does not give the
department carte blanche to sell the carbon credits at any
price.
3:40:07 PM
CO-CHAIR GIESSEL noted that he spoke about the commission the
broker would receive but the amendment talks about a contract.
She wondered whether the amendment should also include the term
"commission."
SENATOR CLAMAN responded that the goal is to ensure that the
department has a realistic picture of the revenue that might be
generated. If the Department of Natural Resources (DNR) is doing
business on a commission basis, 30 percent is the limit, but if
it's a fee for service the department would still need to show
that the expected revenue was 70 percent compared to the cost of
generating the sale for the carbon credits. The contract is
meant to cover all those circumstances.
CO-CHAIR GIESSEL asked Ms. Miller to comment.
3:42:14 PM
RENA MILLER, Special Assistant to the Commissioner, Department
of Natural Resources (DNR), Anchorage, Alaska, stated that the
administration opposes Amendment 1. On a policy level the
concern is about legislating contractual terms for commercial
agreements. On a practical level, the concern is that the 30
percent limit could reduce the ability to pursue smaller niche
projects that may require a higher commission from a turnkey
developer. The 30 percent cap is also technically unworkable
because it's not possible to know the revenue in advance. She
said the administration expects to negotiate for a fair
commission and for the best interests of the state, but would
like the flexibility to do so without statutorily required
contractual terms.
3:44:42 PM
SENATOR KAUFMAN asked if she could speculate on the smaller
projects the amendment might preclude.
MS. MILLER described a turnkey developer who assumes the upfront
and development costs and is paid through a commission or
revenue-sharing agreement based on a percentage of credit sales.
The standard is from 20-30 percent and the commissions are on
the higher end for the smaller projects. She also pointed out
that the amendment doesn't restrict the value to the commission.
No contract associated with the project can exceed 30 percent of
the revenue generated.
3:46:38 PM
CO-CHAIR BISHOP asked if she said that if the amendment were to
pass, the state could inadvertently lose more revenue on a
larger project.
MS. MILLER said she was talking about smaller projects that
might have higher development costs relative to the revenue
generated. The amendment limits what the state could invest to
get a project to happen and that could preclude some smaller
projects.
CO-CHAIR BISHOP noted that the bill goes to the Finance
Committee next and another amendment that will be offered today
might address this matter.
CO-CHAIR GIESSEL commented that the amendment could be written
more specifically. She offered language.
MS. MILLER asked if she was saying that if there's a commission-
based contract, the commission could not exceed 30 percent.
CO-CHAIR GIESSEL said her concern was that some commissions
could be significantly high.
MS. MILLER said that would reduce the technical concerns, but
the department still doesn't support putting commercial terms in
statute because it limits flexibility.
CO-CHAIR GIESSEL said she understands but shares the concern
that the state could be ripe for snake oil salesmen.
3:49:14 PM
SENATOR KAWASAKI commented on the indeterminate fiscal note and
asked why the 30 percent of revenue cap was so off scale.
MS. MILLER said 30 percent might not be completely off scale.
The industry standard is 20-30 percent of the revenue generated,
but the department hopes to negotiate that down. She added that
it's an evolving market and the standard in two or five years is
unknown.
SENATOR KAWASAKI said he wanted the people listening from home
to know that this legislation potentially will cost because the
program has to cover its own costs.
MS. MILLER responded that the potential returns on potential
projects are depicted in the crediting tables featured in the
Anew report. The fiscal note asks for general fund revenue to
cover the cost of standing up the carbon offset program. A
turnkey project developer would cover those upfront costs and
receive a fee from the revenue that's generated from credit
sales, as would the state. In that scenario the project expenses
are covered. The cost to the state would be in the program costs
that are reflected in the fiscal notes. The fiscal notes reflect
indeterminant revenue to the state because there is no certainty
when a project will be up and running and generating credits.
She noted that the bill includes a fund for the revenue that is
expected to eventually supplant the general fund revenue needed
for the new positions.
3:52:23 PM
SENATOR CLAMAN offered his understanding that the department
expects to select turnkey project developers in the early years,
as opposed to using state resources to stand up a project.
MS. MILLER confirmed that the department expected to rely on the
expertise of a turnkey developer for the initial project. This
would not require capital from the state.
SENATOR CLAMAN asked if the initial project is expected to be
one small project or one that's got the potential to bring $10-
20 million to the state.
MS. MILLER said the size of the initial project remains to be
seen. The revenue the project could return to the state will
vary depending on the project that's selected.
SENATOR CLAMAN asked how many projects the administration is
likely to undertake using the turnkey approach.
MS. MILLER replied that remains to be seen, but one fiscal note
asks for capital for legal and commercial expertise to help with
that decision.
3:55:34 PM
SENATOR CLAMAN noted the reference to boreal forest that will
have both carbon offset projects and timber sales. He asked what
evidence she had anywhere in the world where that had been done.
MS. MILLER deferred to Dr. Eng.
3:56:32 PM
HELGE ENG, State Forester and Director, Division of Forestry and
Fire Protection, Department of Natural Resources (DNR),
Anchorage, Alaska, introduced himself.
SENATOR CLAMAN asked if there were any examples in boreal
forests where both timber harvest and a carbon credit project
were successful in the same forest.
DR. ENG said he believes either Ontario or Quebec or both have
such projects and there are also examples of ongoing projects in
Scandinavian countries. He offered to follow up with specific
information.
SENATOR CLAMAN asked how the forests in those areas compare to
State of Alaska forestlands.
DR. ENG said he thinks they're quite similar in terms of
ecological makeup and productivity.
3:58:13 PM
SENATOR KAUFMAN asked Ms. Miller to summarize the processes that
would be in place to ensure a good return on investment (ROI)
for these projects.
MS. MILLER replied that there's a broad umbrella over the
processes and program that starts with the commissioner's oath
to act in the state's best interests. Once there's a project
concept, there is a feasibility analysis that looks at whether
the project complies with existing laws and regulations of the
state. A commercial analysis will be run to ensure that project
costs are reasonable compared to the anticipated revenue. The
department will also put the contracts through a best interest
finding (BIF) that is an extensive review of factors including
potential impacts to the state and local economy. The
preliminary BIF has to be publicized and given time for public
comments. She said that preliminary finding can be revised in
accordance with those comments and concerns. There will also be
a regular dialog with the legislature throughout the entire
process.
CO-CHAIR GIESSEL asked Senator Claman to clarify his thoughts on
Amendment 1. She reiterated that she would be more receptive if
the amendment directly addressed the commission that the
contractor would levy.
4:02:08 PM
SENATOR CLAMAN said he would be receptive to modifying the
amendment to apply only on commission-based contracts.
CO-CHAIR GIESSEL asked if he had language to suggest. Upon
request, she restated the language she previously suggested.
Under a contract with a third party who facilitates a
carbon offset project, the commission levied by the
contractor may not exceed 30 percent of the revenue
generated by the carbon offset project.
CO-CHAIR BISHOP asked Senator Claman if he would consider
withdrawing the amendment so it could be reworded and offered in
the Finance Committee.
4:04:06 PM
SENATOR CLAMAN said he'd like to roll the amendment to the
bottom of the amendments.
4:04:20 PM
CO-CHAIR GIESSEL set Amendment 2 aside.
4:04:28 PM
CO-CHAIR GIESSEL requested a motion for Amendment 3.
4:04:30 PM
SENATOR WIELECHOWSKI moved to adopt Amendment 3, work order 33-
GS1372\B.11, to SB 48.
33-GS1372\B.11
Dunmire
4/27/23
AMENDMENT 3
OFFERED IN THE SENATE BY SENATOR WIELECHOWSKI
TO: CSSB 48(RES), Draft Version "B"
Page 4, following line 6:
Insert a new subsection to read:
"(i) By February 1 of each year, the
commissioner shall prepare a report on the lease
agreements entered into under this section, transmit
the report to the senate secretary and the chief
clerk of the house of representatives, and notify
the legislature that the report is available. The
report must contain the following information:
(1) the number of total leases entered
into each fiscal year from the fiscal year ending
June 30, 2024, until the present;
(2) a complete list of lease information
for each ongoing lease that includes
(A) a general description of the
location of the lease;
(B) the date the lease was executed;
(C) the identity of each person on
the lease;
(D) a summary of the underlying
carbon management purpose;
(E) the current status of the leased
land with regard to the carbon management
purpose;
(F) the amount of carbon offset
credits generated and sold under the lease
cumulatively and during the current fiscal year;
(G) a summary of the compensation
agreed on for the lease and an explanation of how
the amount was determined; and
(H) the identity of each individual
having an ownership interest in an entity on the
lease;
(3) a complete list of leases that
expired or were terminated during the preceding or
current fiscal year and the reason the lease expired
or was terminated; and
(4) a description of the cumulative
revenue received by the state from leases, the
revenue received by the state from leases during the
preceding fiscal year, and the anticipated revenue
the state will receive from leases in the current
fiscal year."
Reletter the following subsection accordingly.
Page 6, following line 13:
Insert a new section to read:
"Sec. 38.95.440. Annual report. By
February 1 of each year, the commissioner shall
prepare a report on the carbon offset program
established in AS 38.95.400 - 38.95.499, transmit
the report to the senate secretary and the chief
clerk of the house of representatives, and notify
the legislature that the report is available. The
report must contain the following information:
(1) a list of all carbon offset
projects that are generating or eligible to
generate carbon offset credits, or that are in
development, that includes
(A) a general description of each
project location;
(B) the date a contract for a
project was executed and the duration of the
project;
(C) the identity of each person
who contracted with the state for a project;
(D) a summary of each carbon
offset project;
(E) the status of each carbon
offset project;
(F) the amount of carbon offset
credits generated and sold cumulatively and
anticipated during the current fiscal year for
each carbon offset project;
(G) for a project that is in
development but is not yet generating carbon
offset credits, the anticipated timeline for when
the project is expected to generate credits;
(H) a summary of the monetary
compensation agreed on for a contract or project
and an explanation of how the amount was
determined; and
(I) the identity of each
individual having an ownership interest in an
entity that has contracted with the state for a
project;
(2) a complete list of projects that
expired or were terminated during the preceding or
current fiscal year and the reason the project expired or
was terminated;
(3) a description of revenue generated to
the carbon offset revenue fund (AS 38.95.430)
cumulatively over the life of the fund, during the
preceding fiscal year, and the anticipated revenue that
will be generated to the fund in the current fiscal year;
and
(4) a list of all other individuals or
entities with an ongoing contract with the state under
AS 38.95.400 - 38.95.499 that includes, for each
contract, the term length of the contract, the
compensation agreed on under the contract, and a summary
of the service or product provided under the contract."
CO-CHAIR GIESSEL objected for purposes of discussion.
SENATOR WIELECHOWSKI explained that Amendment 3 requires the
department to issue annual reports on 1) the state's leasing of
land for carbon management purposes and 2) contracted carbon
offset projects that are intended to produce carbon credits.
Page 1, lines 11-22 of the amendment list what the reports would
require. He said this is a transparency amendment and his
understanding is that the department supports the language.
4:05:18 PM
MS. MILLER stated that Amendment 3 will take significant staff
time but the department is prepared to comply to have such
ongoing accountability and transparency.
4:05:38 PM
SENATOR KAUFMAN asked, in the interest of efficiency, whether
the department could combine the two annual reports since the
February 1 report dates are the same.
SENATOR WIELECHOWSKI said he didn't know that it would create
less work, but he was willing to work on that idea with the
Finance Committee.
SENATOR KAUFMAN stated support for the amendment.
4:07:11 PM
CO-CHAIR GIESSEL removed her objection; finding no further
objection, Amendment 3, B.11, was adopted.
CO-CHAIR GIESSEL asked for a motion to adopt Amendment 4, B.12.
4:07:40 PM
SENATOR WIELECHOWSKI moved to adopt Amendment 4, work order 33-
GS1372\B.12, to SB 48.
33-GS1372\B.12
Dunmire
4/27/23
AMENDMENT 4
OFFERED IN THE SENATE BY SENATOR WIELECHOWSKI
TO: CSSB 48(RES), Draft Version "B"
Page 1, line 5, following "forest;":
Insert "relating to oil and gas lease
expenditures;"
Page 9, following line 16:
Insert a new bill section to read:
"* Sec. 14. AS 43.55.165(e) is amended to read:
(e) For purposes of this section, lease
expenditures do not include
(1) depreciation, depletion, or
amortization;
(2) oil or gas royalty payments,
production payments, lease profit shares, or
other payments or distributions of a share of oil
or gas production, profit, or revenue, except
that a producer's lease expenditures applicable
to oil and gas produced from a lease issued under
AS 38.05.180(f)(3)(B), (D), or (E) include the
share of net profit paid to the state under that
lease;
(3) taxes based on or measured by net
income;
(4) interest or other financing
charges or costs of raising equity or debt
capital;
(5) acquisition costs for a lease or
property or exploration license;
(6) costs arising from fraud, willful
misconduct, gross negligence, violation of law,
or failure to comply with an obligation under a
lease, permit, or license issued by the state or
federal government;
(7) fines or penalties imposed by law;
(8) costs of arbitration, litigation,
or other dispute resolution activities that
involve the state or concern the rights or
obligations among owners of interests in, or
rights to production from, one or more leases or
properties or a unit;
(9) costs incurred in organizing a
partnership, joint venture, or other business
entity or arrangement;
(10) amounts paid to indemnify the
state; the exclusion provided by this paragraph
does not apply to the costs of obtaining
insurance or a surety bond from a third-party
insurer or surety;
(11) surcharges levied under
AS 43.55.201 or 43.55.300;
(12) an expenditure otherwise
deductible under (b) of this section that is a
result of an internal transfer, a transaction
with an affiliate, or a transaction between
related parties, or is otherwise not an arm's
length transaction, unless the producer
establishes to the satisfaction of the department
that the amount of the expenditure does not
exceed the fair market value of the expenditure;
(13) an expenditure incurred to
purchase an interest in any corporation,
partnership, limited liability company, business
trust, or any other business entity, whether or
not the transaction is treated as an asset sale
for federal income tax purposes;
(14) a tax levied under AS 43.55.011
or 43.55.014;
(15) costs incurred for dismantlement,
removal, surrender, or abandonment of a facility,
pipeline, well pad, platform, or other structure,
or for the restoration of a lease, field, unit,
area, tract of land, body of water, or right-of-
way in conjunction with dismantlement, removal,
surrender, or abandonment; a cost is not excluded
under this paragraph if the dismantlement,
removal, surrender, or abandonment for which the
cost is incurred is undertaken for the purpose of
replacing, renovating, or improving the facility,
pipeline, well pad, platform, or other structure;
(16) costs incurred for containment,
control, cleanup, or removal in connection with
any unpermitted release of oil or a hazardous
substance and any liability for damages imposed
on the producer or explorer for that unpermitted
release; this paragraph does not apply to the
cost of developing and maintaining an oil
discharge prevention and contingency plan under
AS 46.04.030;
(17) costs incurred to satisfy a work
commitment under an exploration license under
AS 38.05.132;
(18) that portion of expenditures,
that would otherwise be qualified capital
expenditures, as defined in AS 43.55.023,
incurred during a calendar year that are less
than the product of $0.30 multiplied by the total
taxable production from each lease or property,
in BTU equivalent barrels, during that calendar
year, except that, when a portion of a calendar
year is subject to this provision, the
expenditures and volumes shall be prorated within
that calendar year;
(19) costs incurred for repair,
replacement, or deferred maintenance of a
facility, a pipeline, a structure, or equipment,
other than a well, that results in or is
undertaken in response to a failure, problem, or
event that results in an unscheduled interruption
of, or reduction in the rate of, oil or gas
production; or costs incurred for repair,
replacement, or deferred maintenance of a
facility, a pipeline, a structure, or equipment,
other than a well, that is undertaken in response
to, or is otherwise associated with, an
unpermitted release of a hazardous substance or
of gas; however, costs under this paragraph that
would otherwise constitute lease expenditures
under (a) and (b) of this section may be treated
as lease expenditures if the department
determines that the repair or replacement is
solely necessitated by an act of war, by an
unanticipated grave natural disaster or other
natural phenomenon of an exceptional, inevitable,
and irresistible character, the effects of which
could not have been prevented or avoided by the
exercise of due care or foresight, or by an
intentional or negligent act or omission of a
third party, other than a party or its agents in
privity of contract with, or employed by, the
producer or an operator acting for the producer,
but only if the producer or operator, as
applicable, exercised due care in operating and
maintaining the facility, pipeline, structure, or
equipment, and took reasonable precautions
against the act or omission of the third party
and against the consequences of the act or
omission; in this paragraph,
(A) "costs incurred for repair,
replacement, or deferred maintenance of a
facility, a pipeline, a structure, or equipment"
includes costs to dismantle and remove the
facility, pipeline, structure, or equipment that
is being replaced;
(B) "hazardous substance" has the
meaning given in AS 46.03.826;
(C) "replacement" includes
renovation or improvement;
(20) costs incurred to construct,
acquire, or operate a refinery or crude oil
topping plant, regardless of whether the products
of the refinery or topping plant are used in oil
or gas exploration, development, or production
operations; however, if a producer owns a
refinery or crude oil topping plant that is
located on or near the premises of the producer's
lease or property in the state and that processes
the producer's oil produced from that lease or
property into a product that the producer uses in
the operation of the lease or property in
drilling for or producing oil or gas, the
producer's lease expenditures include the amount
calculated by subtracting from the fair market
value of the product used the prevailing value,
as determined under AS 43.55.020(f), of the oil
that is processed;
(21) costs of lobbying, public
relations, public relations advertising, or
policy advocacy;
(22) costs incurred as part of a
capital expenditure or other action taken for a
carbon management purpose under AS 38.05.081 or a
carbon offset project under AS 38.95.400 -
38.95.499."
Renumber the following bill section accordingly.
4:07:42 PM
CO-CHAIR GIESSEL objected for purposes of discussion.
SENATOR WIELECHOWSKI explained that Amendment 4 addresses carbon
management and offset projects that occur on land that is also
leased for oil and gas production. If just one company is
involved in both projects, the amendment ensures that the
activities for carbon management or offset purposes are not
counted as lease expenditures and potentially deducted from the
company's production tax value, thereby reducing the taxes owed
to the state. His understanding is that the department does not
oppose Amendment 4.
4:08:40 PM
MS. MILLER stated that Amendment 4 is a policy call and neither
DNR nor the Department of Revenue (DOR) object.
4:08:51 PM
CO-CHAIR GIESSEL removed her objection; finding no further
objection, Amendment 4, B.12, was adopted.
CO-CHAIR GIESSEL solicited a motion for Amendment 5, B.20.
4:09:15 PM
SENATOR WIELECHOWSKI moved to adopt Amendment 5, work order 33-
GS1372\B.20, to SB 48.
33-GS1372\B.20
Dunmire
5/1/23
AMENDMENT 5
OFFERED IN THE SENATE BY SENATOR WIELECHOWSKI
TO: CSSB 48(RES), Draft Version "B"
Page 3, lines 24 - 27:
Delete all material and insert:
"(d) A lease under this section may not
exceed a period of 55 years. The lease must
contain terms and conditions for work
requirements, including benchmarks, and must
require the lessee to make progress toward
development or continual maintenance of the leased
land sufficient to meet the carbon management
purpose of the lease. During the term of the
lease, the commissioner shall terminate the lease
if
(1) the commissioner determines that
the land is not being used for the carbon
management purpose approved by the commissioner;
or
(2) the lessee fails to meet the
requirements of the lease and, after being given
a reasonable opportunity by the commissioner to
comply with the lease, the commissioner
determines that the lessee has still failed to
comply with the lease."
4:09:18 PM
CO-CHAIR GIESSEL objected for purposes of discussion.
SENATOR WIELECHOWSKI explained that Amendment 5 tightens an
existing provision in the bill. It ensures that a lessee for a
proposed carbon management project will not sit on the lease but
rather will utilize the land timely as prescribed in the lease.
The amendment provides benchmarks that must be met or the lease
may be terminated. His understanding is that the department
would like a one-word change in the amendment.
4:10:18 PM
MS. MILLER stated that the department had no objection to
Amendment 5, but would appreciate one small change. On page 1,
line 4 replace the term "work" with the term "performance" to
reflect that the benchmarks would be performance requirements
rather than work requirements. She noted that staff in the
Division of Mining, Land, and Water suggested the change.
CO-CHAIR GIESSEL asked her to distinguish the terms.
MS. MILLER answered that the term "performance requirements" is
used in other leasing contracts, whereas "work requirements" has
the connotation of a hands-on activity that produces an
immediate result. She described planting a tree or building a
road as examples of work requirements. She said performance
encompasses a broader range of activities that don't have a
tangible relationship to work.
4:11:29 PM
SENATOR KAUFMAN mentioned that key performance indicator (KPI)
is an industry standard for measuring the value produced by
work.
4:11:50 PM
SENATOR WIELECHOWSKI support the suggestion to replace the term
"work" with "performance."
4:12:18 PM
SENATOR WIELECHOWSKI stated support for the suggested change.
SENATOR WIELECHOWSKI moved conceptual amendment 1 to Amendment
5, B.20. Replace the term "work" with the term "performance" on
page 1, line 4.
4:12:33 PM
CO-CHAIR GIESSEL found no objection and the amendment to
Amendment 5 was adopted. Amendment 5, as amended, was before the
committee.
CO-CHAIR GIESSEL removed her objection; finding no further
objection, Amendment 5, B.20 as amended, was adopted.
CO-CHAIR GIESSEL solicited a motion to adopt Amendment 6, B.19.
4:13:17 PM
SENATOR WIELECHOWSKI moved to adopt Amendment 6, work order 33-
GS1372\B.19, to SB 48.
33-GS1372\B.19
Dunmire
5/1/23
AMENDMENT 6
OFFERED IN THE SENATE BY SENATOR WIELECHOWSKI
TO: CSSB 48(RES), Draft Version "B"
Page 1, line 10, following "38.95.499":
Insert ", unless the Department of Natural
Resources elects to use this chapter and announces at
the time it solicits a contract that this chapter will
apply to the contract"
CO-CHAIR GIESSEL objected for purposes of discussion.
SENATOR WIELECHOWSKI stated that the bill largely exempts DNR
from the state procurement code and he's always reticent to do
that. This and the next several amendments address the concerns
that the bill provides little notice to the public, little
notice and opportunity for public comment, and little
transparency which allows the potential for sole source
contracts that are worth a lot of money. The amendments will
address the concerns to protect the people while recognizing
that the department needs some flexibility.
Amendment 6 gives DNR the option to announce that it is using
the procurement code when it solicits a contract. His
understanding is that the department does not object to the
amendment.
4:15:30 PM
MS. MILLER stated that the department believes Amendment 6 is
technically unnecessary, but has no objection.
4:15:49 PM
CO-CHAIR GIESSEL removed her objection; finding no further
objection, Amendment 6, B.19, was adopted.
CO-CHAIR GIESSEL solicited a motion for Amendment 7, B.22.
4:16:11 PM
SENATOR WIELECHOWSKI moved to adopt Amendment 7, work order 33-
GS1372\B.22, to SB 48.
33-GS1372\B.22
Dunmire
5/2/23
AMENDMENT 7
OFFERED IN THE SENATE BY SENATOR WIELECHOWSKI
TO: CSSB 48(RES), Draft Version "B"
Page 3, following line 12:
Insert a new subsection to read:
"(c) Before awarding a lease for land under
this section, the director shall issue a
preliminary written finding that a proposed lease
is in the state's best interests. The department
shall then provide at least 30 days' public
notice for public comment and to allow other
interested parties an opportunity to submit an
application to lease the same land. The notice
must contain sufficient information in commonly
understood terms to inform the public of the
nature of the action and the opportunity for the
public to comment on it."
Reletter the following subsections accordingly.
4:16:13 PM
CO-CHAIR GIESSEL objected for purposes of discussion.
SENATOR WIELECHOWSKI stated that Amendment 7 addresses the
concern that the bill exempts DNR from the public notice
requirement and the opportunity to source competitors for a
project even though current law for leases has those
requirements. He said he would be gravely concerned if the bill
were to pass without reining this in. He understands that the
department does not support the amendment, but has committed to
work on alternative language to address this issue. He requested
Ms. Miller articulate the department's position on the record.
4:17:26 PM
MS. MILLER stated that the department opposes Amendment 7 as
drafted but would like to work on the concept of requiring
notice on receipt of an application to lease state land for a
carbon purpose. She clarified that the bill provides a process
for evaluating competing lease applications and it has the
requirement for an interest finding in awarding a lease. While
it's not explicitly stated in the bill, she said it's in the
statutes. She deferred to Jeanne Pigors to discuss that further.
CO-CHAIR GIESSEL called on Jeanne Pigors.
4:18:42 PM
JEANNE PIGORS, Regional Land Section Chief, Northern Region
Office, Division of Mining Land and Water, Department of Natural
Resources (DNR), Fairbanks, Alaska, clarified that the committee
wanted to hear about the best interest finding and the processes
used that provide public notice prior to the issuance of a
lease.
MS. PIGORS stated that the best interest finding process
currently used for leases is what would be used for carbon
projects the bill envisions. The process before a proposed lease
is issued involves an initial review of an application, close
coordination with the applicant, and outreach to fellow agencies
to identify and consider other uses or resources. Consideration
is also given to other multiple uses of the area, other
potential resources that might be developed, and potential
compensation methods while working through a lease. These
considerations are pulled together into the preliminary best
interest finding. The preliminary decision lines out the area
plan information, the land use, the pros and cons of the
project, the potential impacts, and any alternatives that were
considered. This decision is published for the public to
comment. The existing statute provides guidance on how public
notice is conducted to ensure it is comprehensive and reaches
the right audience. A minimum of 30 days public notice is
required for a best interest finding. The department uses those
comments to reevaluate and reconsider aspects of the project.
The final finding and decision incorporates the comments and
responses from the department. Thereafter the department's final
administrative decision is made before the lease is issued. She
clarified that once a final finding is issued, there is a
statutorily required and regulation driven process for appeal
that is available to anybody who disagrees with the final
results of a final finding.
MS. PIGORS deferred to Ms. Miller to discuss the language the
department was working on. She noted that the current lease
statute also provides a process prior to the preliminary
decision to solicit interest from competitors, which could
result in an auction bid.
4:24:38 PM
SENATOR KAWASAKI mentioned trapping cabins and asked her to
discuss the length of typical state leases and how the
department arrived at a 55-year lease for carbon projects.
MS. PIGORS said many of the division's leases are issued for 25-
30 years, although 55-years is consistent with current leases.
Examples of the longer term leases include industrial site
leases, a staging area in Dead Horse, or a shop lease. Leases
that are 25-30 years may be based on the anticipated life of the
infrastructure. Carbon management leases fall within the
parameters of other leases.
4:27:16 PM
SENATOR WIELECHOWSKI said he appreciates the testimony on the
record. He stated that he was withdrawing Amendment 7 because he
believes he can arrive at a compromise with the department.
4:27:42 PM
CO-CHAIR GIESSEL stated that Amendment 7, B.22, has been
withdrawn.
She solicited a motion for Amendment 8, B.21.
4:27:52 PM
SENATOR WIELECHOWSKI moved to adopt Amendment 8, work order 33-
GS1372\B.21, to SB 48.
33-GS1372\B.21
Dunmire
5/1/23
AMENDMENT 8
OFFERED IN THE SENATE BY SENATOR WIELECHOWSKI
TO: CSSB 48(RES), Draft Version "B"
Page 1, line 10, following "38.95.499":
Insert ", except contracts for
(A) goods or supplies; or
(B) services where the value of the
contract exceeds $500,000"
CO-CHAIR GIESSEL objected for purposes of discussion.
SENATOR WIELECHOWSKI stated his intention to withdraw Amendment
8. He continued that he wanted the record to reflect his concern
about exempting the department from the procurement code. The
amendment seeks to clarify that a procurement code exemption is
not needed for goods and supplies or services when the value of
the contract is more than $0.5 million. His understanding was
that the department intended to continue to work with his office
to tighten the language.
4:29:00 PM
MS. MILLER confirmed that the department was happy to continue
to work with Senator Wielechowski on the concept of requiring
procurement code processes for goods and supplies.
4:29:16 PM
SENATOR WIELECHOWSKI withdrew Amendment 8.
4:29:27 PM
CO-CHAIR GIESSEL stated that Amendment 8, B.21, has been
withdrawn.
CO-CHAIR GIESSEL solicited a motion for Amendment 9, B.16.
4:29:31 PM
SENATOR WIELECHOWSKI moved to adopt Amendment 9, work order 33-
GS1372\B.16, to SB 48.
33-GS1372\B.16
Dunmire
5/1/23
AMENDMENT 9
OFFERED IN THE SENATE BY SENATOR WIELECHOWSKI
TO: CSSB 48(RES), Draft Version "B"
Page 6, following line 13:
Insert a new section to read:
"Sec. 38.95.440. Notice, solicitation, and
findings. (a) Before the department enters into
the first contract for a carbon offset project,
the department shall publish a broad solicitation
of interest requesting proposals to undertake
carbon offset projects on state land. The
department shall publish a similar announcement
periodically when the department determines that
market conditions or other factors suggest that a
new solicitation would be in the best interest of
the state.
(b) Before contracting with a third party
for a carbon offset project or in anticipation of
a carbon offset project, the department shall
make a preliminary written finding that the
contract is in the best interest of the state and
provide not less than 30 days' public notice
(1) for public comment; and
(2) to allow other interested parties
an opportunity to submit competing proposals.
(c) Public notice under (b) of this section
must include a description of the land area
proposed to be explored or developed for a carbon
offset project.
(d) The department shall review all
competing proposals received under this section
and provide written findings explaining which
proposal, if any, will be awarded the contract.
(e) The written findings required under (d)
of this section must, for each proposal, address
the factors listed in AS 38.95.410, the costs to
the state, the revenue that the proposal is
expected to generate for the state, and an
analysis of proposed consideration or other
negotiated financial terms made for the contract.
(f) If the department determines that more
than one proposal is in the best interest of the
state, the department may accept more than one
proposal.
(g) Written findings made by the department
under this section are public records.
(h) When the department decides to accept a
proposal, the department shall issue a public
notice of intent to award the contract and make
available for public inspection all submitted
proposals and written findings made by the
department. A person whose proposal was rejected
may appeal to the commissioner within 30 days
after receiving notice that the department
rejected the proposal."
4:29:32 PM
CO-CHAIR GIESSEL objected for purposes of discussion.
SENATOR WIELECHOWSKI explained that Amendment 9 is an attempt to
ensure that the public receives notice of a potential carbon
offset project contract and that there is an opportunity for
competing bids. The amendment proposes a requirement for DNR to
present preliminary written findings that a proposed contract is
in the best interest of the state. There would be public notice
and other interested parties would have the opportunity to make
an offer. Subsection (e) lists things the finding must include.
Multiple contracts could be entered into if that was in the
state's best interest. This amendment, too, recognizes the
problems associated with sole source contracts. He said he knows
the department does not support Amendment 9, but he believes it
should be included in the bill. He acknowledged that
modifications could be made in the Finance Committee.
4:31:27 PM
MS. MILLER stated that the department acknowledges that certain
attributes of the procurement code are important, but they don't
support the amendment because of due process concerns.
4:33:34 PM
SENATOR KAUFMAN read subsection (f) on page 2, lines 2-3 of the
amendment. He asked how accepting more than one proposal would
work and why that provision was included.
SENATOR WIELECHOWSKI said the idea is to rein in sole-source
contracting and generate competition and transparency. He posed
a hypothetical example of several companies having contracts in
the Haines State Forest. His understanding was the department
didn't oppose that part of the amendment.
4:35:37 PM
MS. MILLER agreed that the department didn't object to
subsection (f) regarding more than one proposal in a particular
area.
4:36:02 PM
SENATOR DUNBAR asked whether the bid process could be iterative
such that the company who submits the first bid would be given
the opportunity to adjust their bid based on the competition.
MS. MILLER asked if he was talking about the process under the
amendment or the bill as drafted.
SENATOR DUNBAR said both.
MS. MILLER said she didn't see the opportunity to adjust the
bid, but she'd defer to Chris Orman.
4:38:00 PM
CHRIS ORMAN, Assistant Attorney General, Civil Division, Natural
Resources Section, Department of Law, Juneau, Alaska, agreed
with Ms. Miller that the current language didn't allow a second
bite at the apple. He said something similar regarding the
solicitation process is in AS 38.05.070(d). The concern is that
as currently drafted, a proposal that somebody presented becomes
public and there is competition based on that one proposal.
SENATOR DUNBAR said it wasn't hard to imagine some well-
connected person in the future submitting a bid and not being
subjected to competition. If someone wants to be proactive in
bringing a proposal forward, he said it wouldn't be odd for that
to set off a chain of events where others at least explore the
idea of bidding.
4:41:24 PM
MS. MILLER said the department supports the concept of
soliciting competitive interest. The concern is that Amendment 9
puts the person with the initial offer or expression of interest
at a competitive disadvantage because their offer is the only
one on display. The department feels it's important to protect
all persons.
4:42:11 PM
CO-CHAIR BISHOP summarized the department's concern is that the
first person did their due diligence and subsequent people can
take advantage of that and do little, but potentially submit the
winning bid.
MS. MILLER agreed that was an example of the concern. She also
restated the other things the department does when it considers
a bid.
4:43:22 PM
CO-CHAIR BISHOP said he understood what Senator Wielechowski was
trying to do. He suggested the idea of a firewall where anyone
who looks at a bid would have to sign a confidentiality
agreement.
4:43:52 PM
SENATOR WIELECHOWSKI said he appreciated the discussion and
would like to continue to work with the department to find
language they could agree upon.
4:44:19 PM
MS. MILLER said the department would appreciate that
opportunity.
4:44:27 PM
SENATOR WIELECHOWSKI withdrew Amendment 9.
CO-CHAIR GIESSEL stated that Amendment 9, B.16, has been
withdrawn.
CO-CHAIR GIESSEL solicited a motion for Amendment 10, B.15.
4:44:38 PM
SENATOR WIELECHOWSKI moved to adopt Amendment 10, work order 33-
GS1372\B.15, to SB 48.
33-GS1372\B.15
Dunmire
5/1/23
AMENDMENT 10
OFFERED IN THE SENATE BY SENATOR WIELECHOWSKI
TO: CSSB 48(RES), Draft Version "B"
Page 4, line 22:
Delete "The"
Insert "Subject to the provisions of
AS 38.95.440, the"
Page 6, following line 13:
Insert a new section to read:
"Sec. 38.95.440. Legislative approval for
contracts over $1,000,000. (a) If the commissioner intends
to enter into a contract under AS 38.95.400(c) that has the
potential to exceed $1,000,000 in costs to one of the
parties over the life of the contract, the commissioner
shall submit the contract to the legislature for approval.
The commissioner shall provide a legislative committee any
information that the committee requests during its review
of the contract.
(b) A contract submitted under this section
(1) during a regular session may be
executed only if the legislature approves the contract
by law within 45 days after submission;
(2) when the legislature is not in a
regular session may be executed only if the
legislature approves the contract by law during the
first 45 days of the next regular session or during a
special session convened to address the contract,
whichever occurs first.
(c) The cost to a party over the life of a
contract includes the
(1) value of option provisions;
(2) value of known or reasonably
foreseeable contract addenda or additional durational
terms or time extensions; and
(3) combined value of two or more contracts
that are reasonably related to one another based on
contractor, subject matter, or locale."
4:44:44 PM
CO-CHAIR GIESSEL objected for purposes of discussion.
4:44:53 PM
SENATOR WIELECHOWSKI stated that Amendment 10 addresses the
concern about the lack of oversight and the potential for large
no-bid, sole-source contracts. The amendment requires
legislative approval for contracts with values in excess of $1
million.
CO-CHAIR GIESSEL noted that a legal opinion said this amendment
would conflict with the separation of powers, but her
observation was that it was analogous to the royalty-in-kind
contracts that the legislature approves.
4:46:32 PM
MS. MILLER stated that the department opposes Amendment 10 based
on separation of powers and the legislature having authority
over contracts the administration enters into. There is an
additional concern with the structure of the legislative
approval and the potential for the legislature to renegotiate
the terms of a contract. It inserts a political process in a
commercial arrangement.
4:47:42 PM
SENATOR DUNBAR commented that the $1 million threshold would
capture many of these contracts. He asked, setting aside the
separation of powers concern, if the department might agree to a
number higher than $1 million, which would capture the higher
end contracts.
4:48:51 PM
MS. MILLER said she didn't know that there was a more acceptable
number given the department's concerns. She noted that the
amendment talks about option provisions and the department was
unfamiliar with that term in this context.
4:49:58 PM
SENATOR KAUFMAN referenced subsection (c)(1) on page 1, line 20-
21 and asked if that would be comprehensive to fulfil the
purpose.
MS. MILLER responded that there's a question about the meaning
of "the cost" when the state isn't expending money for turnkey
projects. She also questioned the feasibility of knowing the
monetary values of contract addenda or time extensions in
subsection (c)(2).
4:51:28 PM
SENATOR WIELECHOWSKI stated that he didn't think the amendment
violated the separation of powers doctrine because the
legislature isn't inserting itself into a contract. The
legislature is giving approval of a contract before it's agreed
to which is within its purview.
SENATOR WIELECHOWSKI moved conceptual amendment 1 to Amendment
10. On page 1, lines 7 and 9, increase the amount needed for
legislative approval of contracts from "over $1 million" to
"over $10 million."
CO-CHAIR GIESSEL found no objection and conceptual amendment 1
to Amendment 10 was adopted. She asked if there was further
discussion on Amendment 10, as amended.
4:53:10 PM
CO-CHAIR BISHOP said he agrees with Senator Wielechowski that
this wasn't a separation of powers issue and he supports
Amendment 10, as amended.
SENATOR CLAMAN opined that the increase to $10 million was
reasonable.
4:54:46 PM
CO-CHAIR GIESSEL removed her objection; finding no further
objection, Amendment 10, B.15 as amended, was adopted.
4:55:08 PM
SENATOR WIELECHOWSKI stated that he was not offering Amendment
11, B.14.
CO-CHAIR GIESSEL stated that Amendment 11, B.14, would not be
offered.
CO-CHAIR GIESSEL solicited a motion for Amendment 12, B.1.
4:55:24 PM
SENATOR WIELECHOWSKI moved to adopt Amendment 12, work order 33-
GS1372\B.1, to SB 48.
33-GS1372\B.1
Dunmire
5/1/23
AMENDMENT 12
OFFERED IN THE SENATE BY SENATOR WIELECHOWSKI
TO: CSSB 48(RES), Draft Version "B"
Page 1, following line 7:
Insert a new bill section to read:
"* Section 1. The uncodified law of the State of
Alaska is amended by adding a new section to read:
LEGISLATIVE INTENT: TRANSPARENCY. It is the
intent of the legislature that the division of
elections, in order to increase transparency and
ensure trust in the integrity of the state's vote
counting and tabulation process and to allow members
of the public to verify the accuracy of ranked-choice
tabulations,
(1) in accordance with national best
practices for reporting results of ranked-choice
voting elections, include preliminary ranked-choice
tabulations when releasing preliminary election
results; and
(2) periodically throughout the vote
counting process post updated cast vote record files
that include anonymized records indicating the ranking
order of each ballot cast."
Page 1, line 8:
Delete "Section 1"
Insert "Sec. 2"
Renumber the following bill sections accordingly.
Page 12, following line 8:
Insert new bill sections to read:
"* Sec. 23. AS 15.15.370 is amended to read:
Sec. 15.15.370. Completion of ballot count;
certificate. When the count of ballots is completed,
and in no event later than the day after the election,
the election board shall make a certificate in
duplicate of the results. The certificate includes the
number of votes cast for each candidate, including,
for a candidate in a general election, the number of
votes at each ranking [ROUND OF THE RANKED-CHOICE
TABULATION PROCESS] under AS 15.15.350, the number of
votes for and against each proposition, yes or no on
each question, and any additional information
prescribed by the director. The election board shall,
immediately upon completion of the certificate or as
soon thereafter as the local mail service permits,
send in one sealed package to the director one copy of
the certificate and the register. In addition, all
ballots properly cast shall be mailed to the director
in a separate, sealed package. Both packages, in
addition to an address on the outside, shall clearly
indicate the precinct from which they come. Each board
shall, immediately upon completion of the
certification and as soon thereafter as the local mail
service permits, send the duplicate certificate to the
respective election supervisor. The director may
authorize election boards in precincts in those areas
of the state where distance and weather make mail
communication unreliable to forward their election
results by telephone or radio. The director may
authorize the unofficial totaling of votes on a
regional basis by election supervisors, tallying the
votes as indicated on duplicate certificates. To
ensure adequate protection, the director shall
prescribe the manner in which the ballots, registers,
and all other election records and materials are
thereafter preserved, transferred, and destroyed.
* Sec. 24. AS 15.15.370 is amended by adding a new
subsection to read:
(b) Each day the director releases unofficial
totals of election results for a general election, the
director shall also release an updated ranked-choice
tabulation."
Renumber the following bill sections accordingly.
Page 24, line 1:
Delete "sec. 36"
Insert "sec. 39"
Page 24, line 2:
Delete "sec. 36"
Insert "sec. 39"
Page 24, line 9:
Delete "Section 47"
Insert "Section 50"
Page 24, line 10:
Delete "sec. 48"
Insert "sec. 51"
4:55:27 PM
CO-CHAIR GIESSEL objected for purposes of discussion.
SENATOR WIELECHOWSKI stated his intention to discuss Amendment
12 and then withdraw it. It addresses the concern that Vera, the
largest carbon registry company in the world, has involved
itself in a series of significant legislation related to "green
washing." Buyers of weak carbon credits have been the subject of
consumer lawsuits and administrators of carbon credit programs
potentially could be liable to buyers if their program doesn't
meet their requirement. The amendment seeks to prevent a
situation that is happening with Vera from happening in Alaska.
He requested Co-Chair Giessel call on the administration to
discuss how it intends to deal with the issue of carbon leakage.
4:56:33 PM
MS. MILLER agreed with Senator Wielechowski that Vera is a
carbon registry that has been criticized about its involvement
in large deforestation projects in equatorial countries where a
company shifts their activity to other tract of land it owns.
Buyers have questioned the integrity of those emission
reductions and credits.
She said the registries that the department is primarily focused
on operate largely in North America, and in particular with
forestry where leakage is more of a concern than in other
nature-based projects. They accommodate for this leakage by
requiring 30 percent of the credits generated by the project to
be withheld by the registry as a hedge against leakage. That
action has been sufficient to satisfy buyer concerns that the
credits need to be legitimate and protected against that kind of
leakage.
MS. MILLER continued that the department appreciates the
sensibility and intent of the amendment, but it has confidence
that the registries the department will work with on North
American projects will accommodate leakage very well.
4:58:31 PM
SENATOR WIELECHOWSKI withdrew Amendment 12.
CO-CHAIR GIESSEL stated that Amendment 12, B.1, is withdrawn.
4:58:38 PM
CO-CHAIR GIESSEL returned attention to Amendment 2, B.23, by
Senator Claman.
4:58:43 PM
SENATOR CLAMAN moved conceptual amendment 1 to Amendment 2.
On lines 8 and 9 of Amendment 2, insert "commission" before
"contract" and on line 9 after "project" insert "for a
percentage of the revenue generated" so the provision would
read:
Under a commission contract in which a third party
sells, markets, or otherwise facilitates a carbon
offset project for a percentage of the revenue
generated, the cost to the state of the commission
contract may not exceed 30 percent of the revenue
generated by the carbon offset project.
He opined that this would make it clear that the 30 percent
would only apply to a commission project.
4:59:58 PM
CO-CHAIR GIESSEL objected to amendment 1 to Amendment 2 for
purposes of discussion.
5:00:07 PM
CO-CHAIR GIESSEL found no discussion and removed her objection;
finding no further objection, amendment 1 to Amendment 2 was
adopted.
CO-CHAIR GIESSEL found no further objection and Amendment 2,
B.23 as amended, was adopted. She noted there were no further
amendments.
5:00:33 PM
CO-CHAIR GIESSEL solicited a motion.
5:00:41 PM
CO-CHAIR BISHOP moved to report the CS for SB 48, work order 33-
GS1372\B as amended, from committee with individual
recommendations, forthcoming updated fiscal note(s), and
authorization for Legislative Legal to make technical and
conforming changes.
5:01:8 PM
CO-CHAIR GIESSEL found no objection and CSSB 48(RES) was
reported from the Senate Resources Standing Committee.
| Document Name | Date/Time | Subjects |
|---|---|---|
| SB 48 Amendment #2.pdf |
SRES 5/3/2023 3:30:00 PM |
SB 48 |
| SB 48 Amendment #3.pdf |
SRES 5/3/2023 3:30:00 PM |
SB 48 |
| SB 48 Amendment #4.pdf |
SRES 5/3/2023 3:30:00 PM |
SB 48 |
| SB 48 Amendment #5.pdf |
SRES 5/3/2023 3:30:00 PM |
SB 48 |
| SB 48 Amendment #6.pdf |
SRES 5/3/2023 3:30:00 PM |
SB 48 |
| SB 48 Amendment #7.pdf |
SRES 5/3/2023 3:30:00 PM |
SB 48 |
| SB 48 Amendment #8.pdf |
SRES 5/3/2023 3:30:00 PM |
SB 48 |
| SB 48 Amendment #9.pdf |
SRES 5/3/2023 3:30:00 PM |
SB 48 |
| SB 48 Amendment #10.pdf |
SRES 5/3/2023 3:30:00 PM |
SB 48 |
| SB 48 Amendment #11.pdf |
SRES 5/3/2023 3:30:00 PM |
SB 48 |
| SB 48 Amendment #12.pdf |
SRES 5/3/2023 3:30:00 PM |
SB 48 |