Legislature(2023 - 2024)BUTROVICH 205

01/26/2024 03:30 PM Senate RESOURCES

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Audio Topic
03:30:18 PM Start
03:30:59 PM SB49
04:47:43 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+= SB 49 CARBON STORAGE TELECONFERENCED
Heard & Held
-- Testimony <Invitation Only> --
+ Bills Previously Heard/Scheduled TELECONFERENCED
**Streamed live on AKL.tv**
                      SB 49-CARBON STORAGE                                                                                  
                                                                                                                                
3:31:00 PM                                                                                                                    
SENATOR CLAMAN joined the meeting.                                                                                              
                                                                                                                                
SENATOR KAUFMAN joined the meeting.                                                                                             
                                                                                                                                
                                                                                                                                
3:30:59 PM                                                                                                                    
CO-CHAIR GIESSEL  announced the consideration of  SENATE BILL NO.                                                               
49 "An  Act relating to  the geologic storage of  carbon dioxide;                                                               
and providing  for an effective  date." She  said that SB  49 was                                                               
heard several  times last year  and subsequently  several members                                                               
traveled to Bizmark,  North Dakota in December  to participate in                                                               
a meeting with the Planes  CO2 Reduction (PCOR) Partnership. PCOR                                                               
comprises  120 industry,  government, and  research organizations                                                               
that  encourage  the  commercial deployment  of  Carbon  Capture,                                                               
Utilization  and  Storage  (CCUS),  an  essential  technology  to                                                               
manage carbon dioxide emissions.                                                                                                
                                                                                                                                
Several   PCOR  members   already  operate   or  participate   in                                                               
commercial CCUS  projects across  the region,  including Alberta,                                                               
Saskatchewan,  North Dakota,  and  Montana. Alaska  is among  ten                                                               
states that belong to the PCOR partnership.                                                                                     
                                                                                                                                
3:33:23 PM                                                                                                                    
JOHN  BOYLE,  COMMISSIONER,   Department  of  Natural  Resources,                                                               
Anchorage, Alaska, presented  an overview of SB 49.  He said that                                                               
CCUS is  an important, emerging  technology. Several  states have                                                               
progressed and taken advantage of  the opportunities presented by                                                               
a proactive  approach to creating  the regulatory  structure. The                                                               
state of  Alaska is  looking to  join these  efforts to  create a                                                               
regulatory  structure for  CCUS.  North  Dakota has  demonstrated                                                               
that carbon capture  has the potential to  supplement the state's                                                               
natural resource  economy. SB 49  would enable Alaska  to develop                                                               
natural  resources  for  energy,  exports,  and  other  purposes.                                                               
Having a  CCUS regime  in place would  provide state  security to                                                               
enable licensure for development.                                                                                               
                                                                                                                                
3:35:06 PM                                                                                                                    
COMMISSIONER BOYLE  said CCUS provides  substantial opportunities                                                               
for state  monetization. He has  had numerous  conversations with                                                               
potential  developers seeking  to produce  green hydrogen  energy                                                               
and  utilize renewable  resources such  as wind  and solar  power                                                               
generation or biomass. Developers  expressed that having a steady                                                               
stream  of  carbon  dioxide  is an  essential  component  to  the                                                               
production of other products. Future  opportunities center on the                                                               
ability to  export hydrogen, ammonia,  and liquefied  natural gas                                                               
(LNG) to Asian  countries and Alaska is  strategically located on                                                               
the globe  to provide  these services.  There is  high confidence                                                               
geologically in  Cook Inlet's ability to  sequester carbon, which                                                               
could  potentially capture  all of  Japan's carbon  emissions for                                                               
the next 50 years.                                                                                                              
                                                                                                                                
3:37:20 PM                                                                                                                    
COMMISSIONER  BOYLE noted  that Japan  and South  Korea have  set                                                               
ambitious renewable  energy and carbon reduction  goals, but rely                                                               
heavily  on  manufacturing for  economic  growth.  Being able  to                                                               
offer  them  opportunities  to sequester  their  carbon  is  key.                                                               
Operators on  the North Slope  and in  the state seek  to utilize                                                               
carbon   sequestration  technology,   so   having  a   regulatory                                                               
structure in  place is  critical. He  expressed his  gratitude to                                                               
the legislature for considering this issue.                                                                                     
                                                                                                                                
3:39:26 PM                                                                                                                    
JOHN  CROWTHER,   Deputy  Commissioner,  Department   of  Natural                                                               
Resources  (DNR),  provided  an  overview of  a  presentation  on                                                               
carbon  storage  and   SB  49.  He  spoke  to  slide   2  of  the                                                               
presentation:                                                                                                                   
                                                                                                                                
[Original punctuation provided.]                                                                                                
                                                                                                                                
     OUTLINE                                                                                                                    
                                                                                                                                
     1. Introduction                                                                                                            
      2. Alaska Oil & Gas Conservation Commission (AOGCC)                                                                       
      Underground Injection Control Class VI well primacy                                                                       
     updates                                                                                                                    
         3. Carbon Capture Utilization & Storage (CCUS)                                                                         
     licensing updates from other state jurisdictions                                                                           
     4. CCUS project phases and the legislation                                                                                 
     5. Sectional summary                                                                                                       
                                                                                                                                
MR.  CROWTHER   said  last  year's  legislative   action  granted                                                               
authority  for AOGCC  to pursue  primacy  with the  Environmental                                                               
Protection Agency  (EPA). The enactment  of this  legislation has                                                               
allowed AOGCC to  begin conversations with EPA.  DNR has received                                                               
updates  from  state  jurisdictions that  are  actively  pursuing                                                               
licensing,  so DNR  is continuing  to  learn from  and work  with                                                               
regulators in other states.                                                                                                     
                                                                                                                                
3:41:05 PM                                                                                                                    
MR. CROWTHER moved to slide 3 and spoke to the purpose of SB 49:                                                                
                                                                                                                                
[Original punctuation provided.]                                                                                                
                                                                                                                                
     RECAP: PURPOSE OF SB 49                                                                                                    
                                                                                                                                
        Make Alaska's subsurface resources available for                                                                        
     maximum use                                                                                                                
                                                                                                                                
     1.  Enables  the  Department of  Natural  Resources  to                                                                    
     lease  state  lands  for  geologic  storage  of  carbon                                                                    
     dioxide  and  issue   right-of-way  leases  for  carbon                                                                    
     dioxide transportation pipelines                                                                                           
                                                                                                                                
     2.  Empowers  the  Alaska   Oil  and  Gas  Conservation                                                                    
     Commission to  regulate the geologic storage  of carbon                                                                    
     dioxide   on  all   lands  in   the  state,   including                                                                    
     protection of correlative rights                                                                                           
                                                                                                                                
MR. CROWTHER  added that SB  49 would enable a  leasing framework                                                               
and provide a regulatory framework.                                                                                             
                                                                                                                                
3:42:28 PM                                                                                                                    
MR. CROWTHER moved  to slide 4 and outlined  other states' carbon                                                               
storage initiatives.                                                                                                            
                                                                                                                                
[Original punctuation provided.]                                                                                                
                                                                                                                                
     Nationally                                                                                                                 
        • North Dakota:                                                                                                         
             o Two facilities actively injecting CO2 Red                                                                        
               Trail Energy online June 2022 & Blue Flint                                                                       
               Ethanol online October 2023                                                                                      
           o Six Class VI well applications approved                                                                            
        • Wyoming: Issued first Class VI well approval                                                                          
          December 2023                                                                                                         
        • Louisiana: Received Class VI well primacy from                                                                        
          EPA December 2023                                                                                                     
     Alaska                                                                                                                     
        • Department of Energy grants:                                                                                          
             o Department of Natural Resources $1 million                                                                       
               to develop CCUS database                                                                                         
             o University of Alaska Fairbanks CarbonSAFE                                                                        
               Phase II                                                                                                         
             o Alaska CCUS Consortium of Santos, Repsol,                                                                        
               and ASRC Energy Services for Direct Air                                                                          
               Capture feasibility study                                                                                        
                                                                                                                                
MR.   CROWTHER  indicated   growth  in   corporate  developments,                                                               
including  major international  oil  and gas  companies that  are                                                               
actively pursuing and investing  in CCUS projects. Other resource                                                               
states  have  begun  to receive  approval  for  primacy  permits.                                                               
The  U.S.   Department  of  Energy   has  coordinated   with  the                                                               
University of Alaska to characterize  resources in Cook Inlet and                                                               
companies  are considering  direct air  capture opportunities  in                                                               
the state.  He opined that  these steps forward  focused interest                                                               
in Alaska.                                                                                                                      
                                                                                                                                
3:44:56 PM                                                                                                                    
SENATOR CLAMAN  recently encountered  an article  expressing that                                                               
carbon emissions  prices would drop  dramatically after  2022. He                                                               
asked  if  the  drop  in  prices  should  be  considered  as  the                                                               
committee reviews SB 49.                                                                                                        
                                                                                                                                
3:45:23 PM                                                                                                                    
MR.  CROWTHER  replied that  carbon  emissions  prices should  be                                                               
considered  in the  broader context  of  carbon management.  Both                                                               
voluntary  and  compulsory   carbon  markets  exist.  Legislation                                                               
passed last year focuses on  the voluntary market, so the program                                                               
and  corresponding projects  are price  sensitive to  what carbon                                                               
credits are trading at. One of  the drivers is the 45Q tax credit                                                               
which  is  fixed in  federal  statute  for  the next  decade,  so                                                               
projects could continue despite variability in carbon markets.                                                                  
                                                                                                                                
3:46:38 PM                                                                                                                    
BRETT  HUBER, Chair,  Alaska Oil  &  Gas Conservation  Commission                                                               
(AOGCC),   Department  of   Commerce,   Community  and   Economic                                                               
Development,  Anchorage, Alaska,  Co-presented a  presentation on                                                               
carbon storage and SB 49. He spoke to slide 6:                                                                                  
                                                                                                                                
[Original punctuation provided.]                                                                                                
                                                                                                                                
     AOGCC UPDATE                                                                                                               
                                                                                                                                
     Authority to  Pursue Class VI primacy  from EPA granted                                                                  
     through  passage  of SB  48  Carbon  Offset Program  on                                                                  
     State Land (Ch.2 SLA 2023):                                                                                              
                                                                                                                                
     "The  commission  may  take all  actions  necessary  to                                                                    
     allow   the  state   to  acquire   primary  enforcement                                                                    
     responsibility  under 42  U.S.C. 300h-1  and 42  U.S.C.                                                                    
     300h-4 (Safe  Drinking Water Act  of 1974,  as amended,                                                                    
     42  U.S.C.   300f  -  300j-26),  for   the  control  of                                                                    
     underground  injection  related  to  the  recovery  and                                                                    
     production of  oil and natural  gas and the  control of                                                                    
     underground injection  in Class I wells,  as defined in                                                                    
     40  2 C.F.R.  144.6,  as amended,  and  the control  of                                                                    
     underground injection in Class  VI wells, as defined in                                                                  
     40 C.F.R. 144.6, as amended."                                                                                            
                                                                                                                                
     Appropriation for  2 positions  as well  as contractual                                                                    
     and legal support                                                                                                          
                                                                                                                                
3:47:35 PM                                                                                                                    
MR. HUBER moved to slide 7 and spoke to the primacy process:                                                                    
                                                                                                                                
[Original punctuation provided.]                                                                                                
                                                                                                                                
     CLASS VI PRIMACY PROCESS                                                                                                   
                                                                                                                                
     Multiyear process based on other states' experience:                                                                       
          AOGCC's aim is 2 years                                                                                              
      During the process, AOGCC works with EPA to develop                                                                       
     and finalize:                                                                                                            
        • Governor's and Attorney General's statement                                                                           
        • Memorandum of Agreement with EPA                                                                                      
        • Regulatory   Crosswalk   (a   comparison   between                                                                    
          federal and proposed state regulations)                                                                               
        • Program Description  including the process for                                                                        
          application processing                                                                                                
             o How will we implement Class VI?                                                                                  
             o Includes         general        descriptions,                                                                    
               organizational                     structure,                                                                    
               modelling/simulations,   consultancies   that                                                                    
               may   support    the   State,   environmental                                                                    
               justice, and notice  and public participation                                                                    
               processes                                                                                                        
                                                                                                                                
MR. HUBER added that the implementation of primacy is in EPA's                                                                  
court.                                                                                                                          
                                                                                                                                
3:49:01 PM                                                                                                                    
MR. HUBER moved to slide 8 and shared a brief history of AOGCC                                                                  
and EPA interactions pertaining to CCUS:                                                                                        
                                                                                                                                
[Original punctuation provided.]                                                                                                
                                                                                                                                
     EPA INTERACTIONS TO DATE                                                                                                   
                                                                                                                                
      AOGCC and EPA have had a series of interactions over                                                                      
     the last year:                                                                                                             
                                                                                                                                
      • EPA grant invitation and AOGCC's responsive letter                                                                      
     of interest submitted                                                                                                      
     • Introduction meetings and discussions with technical                                                                     
     staff                                                                                                                      
     • Kick-off meeting with EPA Region 10 and Washington,                                                                      
     D.C. HQ                                                                                                                    
     • EPA's initial review of Alaska CCUS legislation                                                                          
     • These discussions  have highlighted technical changes                                                                    
     that  the  Administration   will  be  bringing  forward                                                                    
     amendments to address                                                                                                      
      • EPA Grant  AOGCC formally applied in December 2023                                                                    
                                                                                                                                
MR.  HUBER stated  that  it  took a  while,  from  January 31  to                                                               
November  2, for  the EPA  to  get the  grant in  place. A  grant                                                               
webinar was attended, and the  grant application was completed by                                                               
December  of last  year. Each  applicant state  is allocated  1.9                                                               
million dollars,  and grants should  come late spring  or summer.                                                               
The  grant term  is five  years indicating  a protracted  primacy                                                               
process that  is still likely  anticipated by the EPA.  The first                                                               
meeting for  primacy efforts involved  the Region 10  URC Manager                                                               
and the  DC Headquarters Program Manager.  The review highlighted                                                               
several  concerning  areas,  so  AOGCC is  working  with  DNR  to                                                               
develop amendments.                                                                                                             
                                                                                                                                
3:50:37 PM                                                                                                                    
MR. HUBER  moved to slide  9 and expanded  on EPA's review  of SB
49.                                                                                                                             
                                                                                                                                
[Original punctuation provided.]                                                                                                
                                                                                                                                
     EPA'S REVIEW/POTENTIAL AMENDMENTS                                                                                          
                                                                                                                                
     As  part of  the primacy  process, EPA  and AOGCC  will                                                                    
     engage  in a  "crosswalk"  process  that compare  state                                                                    
     statute and regulation with  federal code. EPA's intent                                                                    
     is  to confirm  that  proposed state  processes are  as                                                                    
     stringent  as   federal  requirements.   EPA's  initial                                                                    
     review   of   the   CCUS  legislation   (August   2023)                                                                    
     identified:                                                                                                                
                                                                                                                                
     1. Exceptions or  waivers "for good cause"  may lead to                                                                    
     stringency questions vs. federal code                                                                                      
     2.  Liability transfer  process and  post-closure trust                                                                    
     fund period  could be inconsistent  vs. federal  code                                                                      
     as  the  EPA  requires  liability to  remain  with  the                                                                    
     operator for the full, 50-year post-closure period                                                                         
     3.  Penalty provisions     AOGCC  has since  determined                                                                    
     proposed penalties should meet or exceed federal code                                                                      
                                                                                                                                
MR. HUBER  added that EPA  authority for the regulation  of Class                                                               
VI of CCUS is the Clean Water  Act and Safe Drinking Water Act to                                                               
ensure  standards  are   met  or  exceeded  in   the  state.  The                                                               
preliminary review is expected to  comprise several hundred pages                                                               
and is a  fairly large regulatory lift. EPA has  not granted cost                                                               
waivers and is  unlikely to do so. AOGCC is  working closely with                                                               
DNR  to   review  successful  applicant  states'   approaches  to                                                               
recommend a  path forward, including taking  a modified Louisiana                                                               
approach. EPA review  was noted to be  precursory and preliminary                                                               
and other issues  could arise, but AOGCC aims  to request further                                                               
review from the EPA as the process moves forward.                                                                               
                                                                                                                                
3:52:28 PM                                                                                                                    
MR.  HUBER  moved  to  slide  10  and  provided  an  overview  of                                                               
staffing:                                                                                                                       
                                                                                                                                
[Original punctuation provided.]                                                                                                
                                                                                                                                
     AOGCC STAFFING AND RESOURCES                                                                                               
                                                                                                                                
     AOGCC is well resourced to pursue the primacy effort:                                                                      
        • Legal Team     Department of Law support, and                                                                         
          contracted services with Susan Pollard, former                                                                        
          Department of Law regulatory attorney. This team                                                                      
          is working on:                                                                                                        
             o Crosswalk + regulation package                                                                                   
             o Memorandum of Agreement                                                                                          
                                                                                                                                
        • Commissioners and staff:                                                                                              
             o Leading   regulation   package   development,                                                                    
               outreach, and public participation efforts                                                                       
             o New Hire  Carbon Reservoir Engineer                                                                            
             o New Hire  Carbon Assistant                                                                                     
             o                                                                                                                  
MR.  HUBER said  AOPCGG  is currently  scheduling interviews  for                                                               
applicants and expects to have both positions filled soon.                                                                      
                                                                                                                                
3:53:33 PM                                                                                                                    
MR. HUBER moved to slide 11 and spoke to the following:                                                                         
                                                                                                                                
[Original punctuation provided.]                                                                                                
                                                                                                                                
     REQUESTS FOR SERVICES                                                                                                      
                                                                                                                                
        • Request For Information for consultant services:                                                                      
          6 responses                                                                                                         
               Potential    services   include:    reservoir                                                                    
               analysis,     reservoir     modelling     and                                                                    
               simulations,        project       management,                                                                    
               environmental justice activities assessments                                                                     
        • Request For Proposals will be issued nearer to                                                                        
          the end of the primacy process in anticipation of                                                                     
          AOGCC receiving a Class VI storage facility                                                                           
          application to process. (estimated September                                                                        
          2025)                                                                                                               
                                                                                                                                
3:54:21 PM                                                                                                                    
HALEY  PAINE,  Deputy Director,  Division  of  Oil &  Gas  (DOG),                                                               
Department  of   Natural  Resources  (DNR),   Anchorage,  Alaska,                                                               
provided updates on licensing from other state jurisdictions.                                                                   
                                                                                                                                
3:54:44 PM                                                                                                                    
MS. PAINE  moved to slide  13 and  spoke to state  carbon storage                                                               
leasing frameworks which vary by state.                                                                                         
                                                                                                                                
She said DOG has had the  opportunity over the past year to learn                                                               
from other  states that successfully passed  extraction licensing                                                               
legislation.  Some  of  the  factors  DOG  considered  are  being                                                               
utilized  by other  states, but  there are  additional commercial                                                               
terms and  a variety  of mechanisms that  have been  put forward.                                                               
Wyoming issued  two new carbon  storage leases, but did  not move                                                               
forward with  a carbon  storage program.  Unlike DNR,  Wyoming is                                                               
focused on  a bonus bid payment  or asking for lump  sum payments                                                               
at different phases of the project.                                                                                             
                                                                                                                                
3:56:49 PM                                                                                                                    
MS. PAINE stated that Texas  passed carbon storage legislation in                                                               
2009. The Texas  General Land Office was tasked  with a five-year                                                               
site characterization  study in the  Gulf of Mexico  to determine                                                               
carbon injection  capability. The  state also allows  the ability                                                               
to capture additional revenue beyond the 45Q tax credit.                                                                        
                                                                                                                                
3:58:03 PM                                                                                                                    
MS. PAINE  said Louisiana utilizes a  general operating agreement                                                               
that is negotiated,  similar to Wyoming. The  state's lease terms                                                               
vary  throughout  the state,  so  negotiated  agreements must  be                                                               
approved by the  Louisiana State Mineral and  Energy Board before                                                               
taking  effect.  Louisiana tracks  the  45Q  tax credit,  so  the                                                               
state's leases would  capture the ability to  absorb 5-10 percent                                                               
of   increased  value.   In  summary,   carbon  storage   leasing                                                               
approaches vary among the lower 48 states.                                                                                      
                                                                                                                                
3:59:10 PM                                                                                                                    
SENATOR  WIELECHOWSKI asked  if commercial  terms were  developed                                                               
prior to the 45Q tax credit.                                                                                                    
                                                                                                                                
3:59:24 PM                                                                                                                    
MS. PAINE replied  that the 45Q tax credit has  been around for a                                                               
long time  and was escalated  under certain legislative  bills in                                                               
Louisiana.  As  a result,  the  maximum  tax credit  for  storage                                                               
increased from $55 to $85 per ton.                                                                                              
                                                                                                                                
4:00:07 PM                                                                                                                    
MR.  CROWTHER   noted  that  several  states   enacted  framework                                                               
legislation, but it did not  set specific terms or minimum terms.                                                               
Consequently,  agencies  have  adopted  different  terms  in  new                                                               
agreements.                                                                                                                     
                                                                                                                                
4:00:38 PM                                                                                                                    
SENATOR  WIELECHOWSKI  asked  if  Alaska  would  acquire  royalty                                                               
provisions given the difference  in constitutionality among other                                                               
states.                                                                                                                         
                                                                                                                                
4:01:24 PM                                                                                                                    
MS.  PAINE  replied  that  the  injection charge  is  akin  to  a                                                               
"reverse  royalty"  provision  in   the  CCUS  context.  Sections                                                               
highlighted in  the sectional summary  in SB  49 treat it  as any                                                               
other mineral interest, but the term injection charge is used.                                                                  
                                                                                                                                
4:02:04 PM                                                                                                                    
SENATOR WIELECHOWSKI asked for  confirmation of his understanding                                                               
that  since Alaska  incorporates the  IRS code,  the state  would                                                               
have to pay tax credits.                                                                                                        
                                                                                                                                
4:02:21 PM                                                                                                                    
MS.  PAINE  responded that  Section  41  in the  House  Resources                                                               
Committee's substitute version  of SB 49 posed  an amendment that                                                               
addresses concerns related to 45Q and tax credits.                                                                              
                                                                                                                                
4:02:45 PM                                                                                                                    
MR. CROWTHER  added that the  administration supported  the House                                                               
Resource  Committee's  change  in the  committee  substitute  and                                                               
would support amendments to address concerns in SB 49.                                                                          
                                                                                                                                
4:03:05 PM                                                                                                                    
SENATOR KAWASAKI asked  why the commercial term  framework of the                                                               
45Q program has only recently been pushed forward.                                                                              
                                                                                                                                
4:03:37 PM                                                                                                                    
MR.  CROWTHER   replied  that  the   45Q  program  is   meant  to                                                               
incentivize  carbon capture  and sequestration.  He believes  the                                                               
U.S.  Senator John  Hoeven of  North  Dakota saw  promise in  the                                                               
ability  to  manage  carbon  resources.  Initially,  the  program                                                               
started small  and technology  was novel,  so careful  steps were                                                               
taken  in  the  early  stages. As  the  carbon  capture  industry                                                               
evolved  and  stakeholders  urged legislative  movement,  federal                                                               
policymakers  enacted   legislation,  including   the  Bipartisan                                                               
Infrastructure  Law,  which  recognized  the  advancement  of  ne                                                               
technologies and spurred  them to increase the 45Q  tax credit to                                                               
$85.                                                                                                                            
                                                                                                                                
4:06:01 PM                                                                                                                    
SENATOR KAWASAKI asked  if the current $85 credit  is expected to                                                               
remain steady for a long period.                                                                                                
                                                                                                                                
4:06:19 PM                                                                                                                    
MR.  CROWTHER  replied  that  he believes  if  a  project  begins                                                               
operation by  2033, it  could claim the  current tax  credit rate                                                               
for a 12-year  period under current law. He  suggested that there                                                               
may be federal efforts to adjust it in the future.                                                                              
                                                                                                                                
4:07:11 PM                                                                                                                    
SENATOR KAWASAKI said  Fairbanks is considering a  wind and solar                                                               
project because a  40 percent credit makes  it financially sound.                                                               
He  asked  if  sequestration  would be  viable  without  the  45Q                                                               
credit.                                                                                                                         
                                                                                                                                
4:07:43 PM                                                                                                                    
MR.  CROWTHER  replied  that  the  45Q  credit  is  an  effective                                                               
incentive in the U.S. However,  there are other successful models                                                               
that do not use the 45Q tax credit.                                                                                             
                                                                                                                                
4:09:10 PM                                                                                                                    
CO-CHAIR  BISHOP  mentioned the  public  process  in Texas  which                                                               
comprises  final lease  approval that  occurs through  the school                                                               
land board and funds the education system.                                                                                      
                                                                                                                                
4:09:36 PM                                                                                                                    
MS.  PAINE  moved to  slide  15  and  spoke  to CCUS  phases  and                                                               
legislation. She  said the  purpose of the  slide is  to showcase                                                               
different project phases.  Section 14 for DNR and  Section 31 for                                                               
AOGCC  highlight  a large  portion  of  project operations.  Some                                                               
sections are based on feedback from EPA.                                                                                        
                                                                                                                                
4:11:18 PM                                                                                                                    
SENATOR  CLAMAN  asked  whether  EPA wants  the  state  to  amend                                                               
legislation  to address  its  concerns or  if  it's a  regulatory                                                               
framework.                                                                                                                      
                                                                                                                                
4:11:27 PM                                                                                                                    
MS.  PAINE  said  other  states  experienced  challenges  due  to                                                               
unspecified bill language around  meeting regulatory standards in                                                               
the  primacy  process. AOG  believes  there's  an opportunity  to                                                               
clarify  language in  statute  ahead of  time  to streamline  the                                                               
process.                                                                                                                        
                                                                                                                                
4:12:14 PM                                                                                                                    
SENATOR CLAMAN  asked for confirmation on  his understanding that                                                               
the  legislature could  expect specific  amendment requests  from                                                               
the EPA for the committee to consider.                                                                                          
                                                                                                                                
4:12:21 PM                                                                                                                    
MS.  PAINE said  EPA  has communicated  initial  feedback to  the                                                               
AOGCC. The  committee could  work with AOGCC  and DNR  to develop                                                               
bill language to address EPA's concerns.                                                                                        
                                                                                                                                
4:12:46 PM                                                                                                                    
MS.  PAINE  moved to  slide  16  and  highlighted the  four  main                                                               
authorizations:                                                                                                                 
                                                                                                                                
        • Carbon Storage Exploration License                                                                                    
        • Carbon Storage Facility Permit                                                                                        
        • Carbon Storage Lease                                                                                                  
        • Closure Certificate                                                                                                   
                                                                                                                                
4:15:24 PM                                                                                                                    
SENATOR KAWASAKI  asked if  a company would  receive the  45Q tax                                                               
credits if it transferred from a Class II to a Class VI well.                                                                   
                                                                                                                                
4:15:42 PM                                                                                                                    
MS. PAINE  said there  are different credit  amounts for  the 45Q                                                               
credit  based on  the activity  involved. The  federal government                                                               
allocates a  set amount  for enhanced oil  recovery and  a higher                                                               
credit amount is provided for sequestration on its own.                                                                         
                                                                                                                                
4:16:29 PM                                                                                                                    
SENATOR KAWASAKI  asked if  the state  could anticipate  Class II                                                               
wells quickly  transitioning to  Class VI wells  in light  of the                                                               
45Q tax credit incentive.                                                                                                       
                                                                                                                                
4:17:02 PM                                                                                                                    
MS. PAINE said no other  states have demonstrated a complete well                                                               
conversion.  EPA provides  Class VI  transition requirements  but                                                               
given  that the  different  well  classifications have  different                                                               
goals the full transition is not greatly anticipated.                                                                           
                                                                                                                                
4:17:55 PM                                                                                                                    
MR.  HUBER  agreed  with  Ms.  Paine  about  the  differing  risk                                                               
profiles. He  stated that they  view these as  entirely different                                                               
regimes with entirely different risk  profiles. He added that the                                                               
idea of  simple well conversion  is not feasible, and  most areas                                                               
are finding that  it is more difficult  repurposing a hydrocarbon                                                               
well.                                                                                                                           
                                                                                                                                
4:18:48 PM                                                                                                                    
SENATOR KAWASAKI asked if there  are concerns with oil production                                                               
and carbon  sequestration being at  odds with each other,  as one                                                               
approach is notably more profitable for the state.                                                                              
                                                                                                                                
4:19:20 PM                                                                                                                    
MR. HUBER  suggested that oil  production is more  profitable for                                                               
the company. Most  costs associated with carbon  storage are from                                                               
carbon capture and transportation.                                                                                              
                                                                                                                                
4:19:57 PM                                                                                                                    
MS. PAINE continued on slide  16 and spoke to closure certificate                                                               
                               2                                                                                                
requirements. She  said once CO  injection is stopped,  there's a                                                               
                                                   2                                                                            
period in  which monitoring plume of  subsurface CO  is required.                                                               
Also  included is  that  a  trust fund  for  the  State would  be                                                               
established,  so even  after the  closure, the  State has  a fund                                                               
somewhat like an insurance policy fund to have on file.                                                                         
                                                                                                                                
4:21:22 PM                                                                                                                    
                                                                2                                                               
CO-CHAIR BISHOP asked for  an explanation on the mechanics of CO                                                                
tonnage and plume leakage.                                                                                                      
                                                                                                                                
4:22:03 PM                                                                                                                    
MR. HUBER stated  his belief that similar to  North Dakota, plume                                                               
leakage measurements are based on  the metering and monitoring of                                                               
the rate of flow and pressure.                                                                                                  
                                                                                                                                
4:22:54 PM                                                                                                                    
CO-CHAIR GIESSEL asked  if the process is similar  to LNG storage                                                               
and CINGSA (Cook Inlet Natural Gas Storage Alaska).                                                                             
                                                                                                                                
4:23:09 PM                                                                                                                    
MR. HUBER  said it is the  same principle, but the  amount of gas                                                               
that rises upward is also monitored.                                                                                            
                                                                                                                                
4:23:26 PM                                                                                                                    
MS. PAINE moved  to slide 17 showcasing a  CCUS project timeline,                                                               
and the relationship  between the DNR carbon  storage license and                                                               
lease  processes.  The  timeline  was developed  based  on  North                                                               
Dakota's  model, but  due  to  the nature  of  doing business  in                                                               
Alaska, the process could take longer.                                                                                          
                                                                                                                                
4:24:47 PM                                                                                                                    
MR.  CROWTHER referenced  Texas operations,  which invested  more                                                               
into  the  earlier  stages  to support  the  long-term  value  of                                                               
subsurface  resources. AOGCC  is working  with the  Department of                                                               
Energy  (DOE) to  develop a  more  specific characterization  for                                                               
Alaska  and  affirmed  the necessity  of  significant  investment                                                               
before any returns are realized.                                                                                                
                                                                                                                                
4:26:12 PM                                                                                                                    
MS. PAINE  moved to slide  19 and provided the  sectional summary                                                               
of SB 49.  She noted that AOGCC is working  to remove Sections 2-                                                               
3.  Section 4  establishes the  post-closure trust  fund for  the                                                               
State. Sections  5-12 aim to  align carbon storage with  the rest                                                               
of   the  mineral   estate  procedures.   Section  13   aims  for                                                               
consistency with standard oil and gas operations.                                                                               
                                                                                                                                
4:27:29 PM                                                                                                                    
SENATOR BISHOP asked if carbon  storage leasing would be possible                                                               
on a non-mineable  coal seam, including in the  Healy area, under                                                               
section 12.                                                                                                                     
                                                                                                                                
4:28:25 PM                                                                                                                    
MS. PAINE responded  that she would return to  the committee with                                                               
further information.                                                                                                            
                                                                                                                                
4:28:56 PM                                                                                                                    
MS.  PAINE  moved  to  slide  20, the  primary  section  for  DNR                                                               
detailing  leasing provisions  and  the work  process for  carbon                                                               
storage licensing.                                                                                                              
                                                                                                                                
4:30:25 PM                                                                                                                    
MS. PAINE moved to slide 21  which is specific to authority under                                                               
DNR   and   pipeline   categories.    She   noted   that   carbon                                                               
transportation  was  added  to  Sections  18-20.  Sections  22-30                                                               
include conforming amendments.                                                                                                  
                                                                                                                                
4:31:42 PM                                                                                                                    
MS. PAINE  moved to slide 22  and briefly spoke to  Section 31 on                                                               
general authorizing provisions.                                                                                                 
                                                                                                                                
4:32:23 PM                                                                                                                    
MS. PAINE moved  to slide 23 and provided a  brief outline of the                                                               
14 carbon storage facility requirements.                                                                                        
                                                                                                                                
4:33:24 PM                                                                                                                    
CO-CHAIR GIESSEL  asked how the  subsections under Section  31 on                                                               
slide  23 differ  from  statutes pertaining  to  gas storage  and                                                               
natural gas import.                                                                                                             
                                                                                                                                
4:33:52 PM                                                                                                                    
MS.  PAINE stated  her  belief that  the  subsections listed  are                                                               
similar  to current  statute  and invited  Mr.  Huber to  provide                                                               
input.                                                                                                                          
                                                                                                                                
4:34:07 PM                                                                                                                    
MR.  HUBER  added  that  the   storage  and  materials  used  are                                                               
different.  However,  the  operations   of  using  a  preexisting                                                               
structure to pump the material is very similar.                                                                                 
                                                                                                                                
                                                                                                                                
SENATOR WIELECHOWSKI asked if the  geographical formation of Cook                                                               
Inlet    is   susceptible    to   earthquakes    with   increased                                                               
                      2                                                                                                         
pressurization from CO.                                                                                                         
                                                                                                                                
4:35:19 PM                                                                                                                    
MR. HUBER  responded that specific  guidelines exist. He  said he                                                               
has  not heard  of other  areas experiencing  induced seismicity,                                                               
but  Cook  Inlet  has not  demonstrated  problems  despite  major                                                               
earthquakes. He  opined that  seismicity is  not something  to be                                                               
overly concerned about and a robust monitoring plan exists.                                                                     
                                                                                                                                
4:36:19 PM                                                                                                                    
MS. PAINE moved  to slide 24 which expands on  the carbon storage                                                               
facility  injection  surcharge under  Section  31.  She said  EPA                                                               
would  like  certain pieces  clarified  under  this section.  The                                                               
subsections  were modeled  after existing  oil &  gas provisions,                                                               
but EPA is seeking consistency with the Class VI rule.                                                                          
                                                                                                                                
4:37:35 PM                                                                                                                    
SENATOR WIELECHOWSKI  asked if  the administration  has discussed                                                               
restructuring bill language so the fund is non-sweepable.                                                                       
                                                                                                                                
4:37:48 PM                                                                                                                    
MS. PAINE  said there  have been  some amendments  recommended by                                                               
the House  Resources Committee to  change bill language so  it is                                                               
non-sweepable and separate from the general fund.                                                                               
                                                                                                                                
4:38:16 PM                                                                                                                    
SENATOR WIELECHOWSKI  inquired on  the amount of  profit expected                                                               
from the 45Q tax credit.                                                                                                        
                                                                                                                                
4:38:52 PM                                                                                                                    
MS.  PAINE replied  that profit  margin  is closely  tied to  the                                                               
             2                                                                                                                  
source  of CO  in  the beginning  stages and  the carbon  capture                                                               
process itself.  An ethanol facility with  a higher concentration                                                               
of  CO  could  be  perceived  as  more  profitable than  a  post-                                                               
combustion  setting  with  a  lower  concentration  of  CO2.  The                                                               
distance of  transportation and  geologic storage  formation also                                                               
impact profitability,  but she  said she  believes it  depends on                                                               
several factors.                                                                                                                
                                                                                                                                
4:40:02 PM                                                                                                                    
SENATOR  WIELECHOWSKI  asked if  the  Department  of Revenue  has                                                               
analyzed the impacts of SB 49 to the corporate tax structure.                                                                   
                                                                                                                                
4:40:16 PM                                                                                                                    
MS. PAINE conveyed that she is  unaware of that type of modeling,                                                               
but could confirm with the Department of Revenue.                                                                               
                                                                                                                                
4:40:35 PM                                                                                                                    
MS. PAINE moved  to slide 25 and  highlighted conforming language                                                               
and general provisions.                                                                                                         
                                                                                                                                
4:41:09 PM                                                                                                                    
CO-CHAIR  GIESSEL  asked how  the  removal  of citizens  advisory                                                               
committees  under   current  executive  orders  relates   to  the                                                               
conforming  amendments  to   parks  and  recreational  facilities                                                               
listed under Sections 32-39.                                                                                                    
                                                                                                                                
4:41:47 PM                                                                                                                    
MR. CROWTHER  replied that the  state park facilities  and assets                                                               
noted in  SB 49  were dedicated  through legislative  action. The                                                               
bill  language explores  the underlying  statutory management  of                                                               
the  four areas,  so the  executive orders  would not  impact the                                                               
underlying  statutory direction.  He offered  to provide  further                                                               
details.                                                                                                                        
                                                                                                                                
4:43:08 PM                                                                                                                    
CO-CHAIR GIESSEL said that would be great.                                                                                      
                                                                                                                                
4:43:12 PM                                                                                                                    
SENATOR DUNBAR  asked for  the reasoning  for selecting  the four                                                               
state lands under Sections 32-39.                                                                                               
                                                                                                                                
4:43:38 PM                                                                                                                    
MR.  CROWTHER   replied  that  these   units  have   a  statutory                                                               
designation  for  permitted  subsurface activities  which  differ                                                               
from other  general use lands. Carbon  sequestration is generally                                                               
available  on state  lands,  but the  four  locations listed  are                                                               
unique.  The  aim  was  to   mirror  provisions  the  legislature                                                               
enacted.                                                                                                                        
                                                                                                                                
4:44:32 PM                                                                                                                    
SENATOR  CLAMAN expressed  concerns that  two of  the four  parks                                                               
listed would  remove committee  advisory authority  under current                                                               
executive order  proposals. He  opined that  citizens commissions                                                               
may recognize components that administration  does not, and it is                                                               
difficult to believe this is coincidental.                                                                                      
                                                                                                                                
4:45:58 PM                                                                                                                    
SENATOR  WIELECHOWSKI asked  what the  boundaries are  for carbon                                                               
storage in the Kenai River Special Management Area.                                                                             
                                                                                                                                
4:46:18 PM                                                                                                                    
MR. CROWTHER replied  that he is uncertain on the  bounds of that                                                               
unit but  offered to  get back to  the committee  with additional                                                               
information.                                                                                                                    
                                                                                                                                
4:46:34 PM                                                                                                                    
CO-CHAIR GIESSEL  shared that the  presentation was helpful  as a                                                               
refresher.  She requested  that  the  administration bring  forth                                                               
recommended EPA amendments at a future date.                                                                                    
                                                                                                                                
4:47:43 PM                                                                                                                    
There  being  no  further  business to  come  before  the  Senate                                                               
Resources Committee,  Co-Chair Giessel  adjourned the  meeting at                                                               
4:47 p.m.                                                                                                                       
                                                                                                                                

Document Name Date/Time Subjects
SB 49 Carbon Storage Refresher Presentation DNR 01.26.24.pdf SRES 1/26/2024 3:30:00 PM
SB 49
SB 49 Fiscal Note DNR 1.19.24.pdf SRES 1/26/2024 3:30:00 PM
SB 49
SB 49 Fiscal Note DEC 1.15.24.pdf SRES 1/26/2024 3:30:00 PM
SB 49
SB 49 Fiscal Note AOGCC 1.19.24.pdf SRES 1/26/2024 3:30:00 PM
SB 49
SB 49 Fiscal Note DOR 1.15.24.pdf SRES 1/26/2024 3:30:00 PM
SB 49
SB 49 Bill Packet 1.25.24.pdf SRES 1/26/2024 3:30:00 PM
SB 49
SB 49 DNR Response to SRES 01.26.24.pdf SRES 1/26/2024 3:30:00 PM
SB 49