Legislature(2023 - 2024)ADAMS 519

05/03/2023 01:30 PM House FINANCE

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Audio Topic
01:34:08 PM Start
01:35:10 PM HB50
02:34:14 PM HB49
03:30:39 PM Presentation: Alaska Liquefied Natural Gas Project Update
04:03:03 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Presentation: Alaska Liquefied Natural Gas TELECONFERENCED
Project Update by Alaska Gasline Development
Corporation
+= HB 49 CARBON OFFSET PROGRAM ON STATE LAND TELECONFERENCED
Heard & Held
+= HB 50 CARBON STORAGE TELECONFERENCED
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
                  HOUSE FINANCE COMMITTEE                                                                                       
                        May 3, 2023                                                                                             
                         1:34 p.m.                                                                                              
                                                                                                                                
                                                                                                                                
1:34:08 PM                                                                                                                    
                                                                                                                                
CALL TO ORDER                                                                                                                 
                                                                                                                                
Co-Chair Foster  called the House Finance  Committee meeting                                                                    
to order at 1:34 p.m.                                                                                                           
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Bryce Edgmon, Co-Chair                                                                                           
Representative Neal Foster, Co-Chair                                                                                            
Representative DeLena Johnson, Co-Chair                                                                                         
Representative Julie Coulombe                                                                                                   
Representative Mike Cronk                                                                                                       
Representative Alyse Galvin                                                                                                     
Representative Sara Hannan                                                                                                      
Representative Andy Josephson                                                                                                   
Representative Dan Ortiz                                                                                                        
Representative Will Stapp                                                                                                       
Representative Frank Tomaszewski                                                                                                
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
None                                                                                                                            
                                                                                                                                
ALSO PRESENT                                                                                                                  
                                                                                                                                
Nicholas   Fulford,   Senior   Director,  Gas   and   Energy                                                                    
Transition,    GaffneyCline;     John    Crowther,    Deputy                                                                    
Commissioner, Department of  Natural Resources; Rena Miller,                                                                    
Special  Assistant, Office  of the  Commissioner, Department                                                                    
of   Natural   Resources;   Eric   Demoulin,   Director   of                                                                    
Administrative  Services,   Department  of   Revenue;  Frank                                                                    
Richards,    President,     Alaska    Gasline    Development                                                                    
Corporation;   Nick   Szymoniak,   Manager,   New   Business                                                                    
Ventures,    Alaska    Gasline   Development    Corporation;                                                                    
Representative Justin Ruffridge.                                                                                                
                                                                                                                                
PRESENT VIA TELECONFERENCE                                                                                                    
                                                                                                                                
Ashlee Adoko,  Director of Office of  Project Management and                                                                    
Permitting,  Department  of  Natural Resources;  Helge  Eng,                                                                    
Director,   Division  of   Forestry  and   Fire  Protection,                                                                    
Department   of  Natural   Resources;   Kris  Hess,   Deputy                                                                    
Director, Division of Mining,  Land and Water, Department of                                                                    
Natural Resources.                                                                                                              
                                                                                                                                
SUMMARY                                                                                                                       
                                                                                                                                
HB 50     CARBON STORAGE                                                                                                        
                                                                                                                                
          HB 50 was HEARD and HELD in committee for further                                                                     
          consideration.                                                                                                        
                                                                                                                                
HB 49     CARBON OFFSET PROGRAM ON STATE LAND                                                                                   
                                                                                                                                
          HB 49 was HEARD and HELD in committee for further                                                                     
          consideration.                                                                                                        
                                                                                                                                
PRESENTATION: ALASKA LIQUEFIED NATURAL GAS PROJECT UPDATE                                                                       
                                                                                                                                
Co-Chair Foster reviewed the meeting agenda.                                                                                    
                                                                                                                                
HOUSE BILL NO. 50                                                                                                             
                                                                                                                                
     "An Act relating to the geologic storage of carbon                                                                         
     dioxide; and providing for an effective date."                                                                             
                                                                                                                                
1:35:10 PM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
1:35:57 PM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                
Co-Chair Foster continued to review the agenda.                                                                                 
                                                                                                                                
1:36:41 PM                                                                                                                    
                                                                                                                                
NICHOLAS   FULFORD,   SENIOR   DIRECTOR,  GAS   AND   ENERGY                                                                    
TRANSITION,   GAFFNEYCLINE,  introduced   himself  and   the                                                                    
PowerPoint  presentation  "CCUS  Value  Chain  and  Business                                                                    
Case" dated  May 3, 2023 (copy  on file). He shared  that he                                                                    
had worked  on around a  dozen CCS [carbon  capture storage]                                                                    
projects   worldwide,  but   predominately   in  Texas   and                                                                    
Louisiana. He began  on slide 2 and provided  the agenda for                                                                    
the presentation. He stated that  the industry was unfolding                                                                    
at a  rapid rate. He relayed  there were quite a  few useful                                                                    
lessons  that  could be  drawn  from  activities around  the                                                                    
world.  One of  the features  of  the journey  was that  the                                                                    
different sequestration  agreements had reached  an advanced                                                                    
stage  in their  discussions  so that  cost  stack and  pore                                                                    
space leasing  costs were starting  to come to  the surface.                                                                    
As  the contracts  became more  sophisticated  there were  a                                                                    
number  of commercial  considerations emerging.  He reported                                                                    
that the  environment for CCS  in Alaska was  very different                                                                    
from Texas, Louisiana, and many other parts of the world.                                                                       
                                                                                                                                
Mr. Fulford moved  to slide 3 titled  "Significance of State                                                                    
Related  Charges  in Development."  He  shared  that in  the                                                                    
context of  the CCS industry,  Alaska was in a  fairly early                                                                    
stage. He elaborated that many  of the projects in Texas and                                                                    
Louisiana had reached  fully termed sequestration agreements                                                                    
typically between  an emitter  (e.g., a  petrochemical plant                                                                    
or  power  station)  and  transportation  storage  companies                                                                    
(T&S). He  detailed that T&S  entities had to  address where                                                                    
the carbon dioxide (CO2) was  sequestered, and part of their                                                                    
contractual  framework  pertained   to  pore  space  leasing                                                                    
agreements.  He  expected  the journey  in  Alaska  to  move                                                                    
through the  same kind of  phase. He relayed that  the focus                                                                    
had been on the geology and  rock properties in the past few                                                                    
months and the  outcome of the work was  to demonstrate that                                                                    
the state had considerable potential.                                                                                           
                                                                                                                                
Mr.  Fulford  continued reviewing  stages  on  slide 3.  The                                                                    
second stage was  techno-economic project feasibility, which                                                                    
included a  high level dialogue with  potential emitters and                                                                    
people  interested  in  storing  CO2  and  a  more  advanced                                                                    
perspective  on  pore  space  leasing.  He  noted  it  would                                                                    
include the kind of regulatory  and legislative framework HB
50 was designed to address.                                                                                                     
                                                                                                                                
Mr. Fulford moved to the  third phase, which would be termed                                                                    
a   pre-financial  investment   decision  (FID)   phase.  He                                                                    
detailed  that   the  emitters  and  the   sequestering  T&S                                                                    
companies  were  finding  it  useful to  adopt  a  heads  of                                                                    
agreement  framework, which  entailed an  eight to  ten-page                                                                    
agreement  (that  was  not  typically  legally  binding)  to                                                                    
provide  some  assurance  for  lenders  and  the  industries                                                                    
looking to  sequester their carbon.  He expounded  that part                                                                    
of the agreement would likely  include a reasonably detailed                                                                    
explanation of the pore space  arrangements and location. At                                                                    
that  point, much  more  detailed  financial modeling  would                                                                    
occur,  including  levelized  cost storage  and  taxes.  The                                                                    
fourth phase    FID    would include an array  of contracts,                                                                    
which   would   be   carefully   scrutinized   by   lenders,                                                                    
particularly  if any  project  finance  was involved.  There                                                                    
would  also be  an EPC  or development  contract to  look at                                                                    
construction.                                                                                                                   
                                                                                                                                
1:42:01 PM                                                                                                                    
                                                                                                                                
Representative Hannan  asked what  the last term  [EPC] used                                                                    
by Mr. Fulford stood for.                                                                                                       
                                                                                                                                
Mr.  Fulford   replied  that  EPC  stood   for  engineering,                                                                    
procurement, and construction (EPC) contract.                                                                                   
                                                                                                                                
1:42:26 PM                                                                                                                    
                                                                                                                                
Representative Galvin  referenced the  technical feasibility                                                                    
stage  shown   on  slide  3.  She   recalled  discussion  in                                                                    
committee  the  previous  week  about  transportation  of  a                                                                    
product thousands  of miles to  another location.  She found                                                                    
it to be  a significant barrier to the  project concept. She                                                                    
remarked that  the committee  had not yet  seen the  size or                                                                    
type of  container needed. She  thought it was  an important                                                                    
part  of  the  plan.   Alternatively,  she  considered  that                                                                    
perhaps  there was  only thought  about oil  and gas  on the                                                                    
North  Slope, which  was an  entirely different  vision. She                                                                    
asked for Mr. Fulford's comments.                                                                                               
                                                                                                                                
Mr.  Fulford   responded  that  the  distance   between  the                                                                    
emitting source  and the sequestration  site was  a critical                                                                    
part  of  the  picture.  He stated  that  the  distance  was                                                                    
relatively  short  for  most of  the  existing  projects  or                                                                    
projects  in development.  He highlighted  an ammonia  plant                                                                    
where an injection  well was being drilled  within the plant                                                                    
boundary,  which created  substantial savings.  He estimated                                                                    
that for  the Gulf  Coast, the  distance the  economics were                                                                    
sustainable was about  50 miles. He elaborated  that at that                                                                    
point  the compression  in the  pipeline tariffs  started to                                                                    
encroach. He  noted it  was within  the current  envelope of                                                                    
the 45Q  tax credits of about  $85 per ton and  the capture,                                                                    
transport, and  sequestration came  out of that.  The marine                                                                    
transport of CO2  was being done between  Denmark and Norway                                                                    
and   was  a   relatively   groundbreaking  and   developing                                                                    
technology. Although  there had not been  any largescale CO2                                                                    
marine transportation  vessels built  yet, they were  on the                                                                    
drawing board.  He relayed that  to move CO2  from Southeast                                                                    
Asia to Alaska  in a large oceangoing CO2  vessel would cost                                                                    
about $50  per ton. He  stated it  would be comparable  to a                                                                    
complex CO2 capture facility.                                                                                                   
                                                                                                                                
                                                                                                                                
Representative Galvin surmised  that if the ship  were to be                                                                    
built  and the  [transportation] cost  was $50  per ton,  it                                                                    
sounded  like  the market  was  much  higher than  in  other                                                                    
places. She  remarked that  she could  be wrong  and perhaps                                                                    
Japan  and  Asia had  other  market  choices. She  asked  if                                                                    
Alaska was really a good choice for them.                                                                                       
                                                                                                                                
Mr. Fulford  responded that  there were  a number  of energy                                                                    
intensive Asian economies without  any readily available CO2                                                                    
sequestration facilities;  therefore, a number of  them were                                                                    
looking  actively at  cross border  CO2 export  projects, in                                                                    
which case  the distance  and complexity  was a  factor. The                                                                    
regulatory ability  to monitor and measure  and be confident                                                                    
in  secure  storage  was  also  particularly  important.  He                                                                    
stated that  one interesting synergy with  respect to Alaska                                                                    
was the  potential export  of LNG  [liquid natural  gas] and                                                                    
the  import  of  CO2.  There   were  a  number  of  Japanese                                                                    
companies  looking at  the concept.  Although the  economics                                                                    
and technology were yet to be  determined, it was one of the                                                                    
factors  that  made CO2  imports  more  relevant than  other                                                                    
ones.                                                                                                                           
                                                                                                                                
Representative  Galvin asked  Mr.  Fulford to  speak to  the                                                                    
economics  of  a  future   situation  where  the  technology                                                                    
existed for  Asia or another  country to ship its  carbon to                                                                    
Alaska for sequestration  and Alaska shipped out  its LNG or                                                                    
another gas product.  She asked what the  revenue would look                                                                    
like for Alaska.                                                                                                                
                                                                                                                                
Mr.  Fulford  responded that  the  strategic  scale of  CCUS                                                                    
[carbon  capture, utilization,  and storage]  in Alaska  was                                                                    
significant on  a global level.  He stated it was  useful to                                                                    
keep  in mind  that the  numbers and  volumes were  material                                                                    
when  turning them  into revenue  numbers.  He relayed  that                                                                    
moving LNG from Alaska to  Asia cost about $1.00 per million                                                                    
Btu [British thermal unit], which  corresponded to about $50                                                                    
per  ton.  He  elaborated   that  when  exporting  LNG,  the                                                                    
exporter bore the  return cost of the empty  ship. He stated                                                                    
that equally with CO2 "you'd  be doing the same." He relayed                                                                    
that in  theory, if  the activities  could be  combined into                                                                    
one business model, it would  mean the potential for halving                                                                    
the   costs,  which   would   create   much  more   economic                                                                    
opportunity. He believed  the concept was a  number of years                                                                    
away, but it was worthy  of exploration for Alaska's oil and                                                                    
gas future.  He noted there were  other strategies available                                                                    
including  processing gas  into ammonia  or another  organic                                                                    
compound,  which was  more transportable  than hydrogen  and                                                                    
could be used to export instead  of gas. He stated that CCUS                                                                    
was  a  facilitating  technology   that  would  aid  in  the                                                                    
process.                                                                                                                        
                                                                                                                                
1:51:09 PM                                                                                                                    
                                                                                                                                
Representative   Josephson   referenced  the   terms   price                                                                    
discovery and  levelized cost storage  used by  Mr. Fulford.                                                                    
He asked for an explanation of the terms.                                                                                       
                                                                                                                                
Mr. Fulford responded that there  were dozens of emitters in                                                                    
the U.S.  Gulf Coast  energy corridor  who were  all looking                                                                    
for cost effective storage of  their CO2. There were perhaps                                                                    
half a  dozen viable storage candidates.  He elaborated that                                                                    
currently  the dialogue  was going  back  and forth  between                                                                    
emitters and  storage entities and  price discovery  was the                                                                    
negotiation process  of what was  almost a  commodity price.                                                                    
Levelized cost  was a term  associated with  carbon projects                                                                    
and was  a way  of turning the  capital and  operating costs                                                                    
into a tariff. He elaborated  that the levelized cost of CO2                                                                    
storage may be  $20 per ton, which meant  that financing the                                                                    
capital and  operating expenditures would require  a $20 per                                                                    
ton tariff over a 20-year period in order to pay it off.                                                                        
                                                                                                                                
1:53:32 PM                                                                                                                    
                                                                                                                                
Co-Chair  Johnson referred  to the  CO2 backhaul.  She asked                                                                    
whether  natural  gas  was  a   liquid  that  compressed  at                                                                    
relatively the same rate [as  CO2] making it possible to use                                                                    
the same ships [for transportation].                                                                                            
                                                                                                                                
Mr. Fulford  explained that the  concept of LNG out  and CO2                                                                    
back had economic advantage, but  the technology did not yet                                                                    
exist. The  factors mentioned by  Co-Chair Johnson  were key                                                                    
and  would have  to be  addressed. He  believed it  would be                                                                    
many years before the option was available.                                                                                     
                                                                                                                                
Co-Chair   Johnson  referenced   the  number   of  different                                                                    
entities from which the CO2  might be received. She asked if                                                                    
CO2 gas was  pure or included other  chemical compounds. She                                                                    
asked if it varied by company.                                                                                                  
                                                                                                                                
Mr. Fulford  replied that for  a point to point  CCS scheme,                                                                    
the quality  of the CO2 was  much less important as  long as                                                                    
it was  in a form  that could  be easily injected  and would                                                                    
remain in  the reservoir.  He relayed  that CO2  quality was                                                                    
key for  emerging industrial hubs  in the same way  that gas                                                                    
transmission  system had  a certain  spec, which  had to  be                                                                    
adhered to. He stated in  that case, some emitters may place                                                                    
additional costs in  pretreating CO2 to get it  to the right                                                                    
quality.                                                                                                                        
                                                                                                                                
1:56:28 PM                                                                                                                    
                                                                                                                                
Mr. Fulford advanced to slide  4 and the unit technical cost                                                                    
of  some examples  of real  life sequestration  projects. He                                                                    
detailed  that the  technical cost  amounted to  the upfront                                                                    
capital   expenditures    and   20   years    of   operating                                                                    
expenditures.  He  noted the  information  was  useful as  a                                                                    
comparison  between  different  concepts,  but  it  did  not                                                                    
translate into a  tariff. For the most part,  the capture of                                                                    
CO2 was  a significantly  higher proportion of  capital than                                                                    
lease storage.  He relayed  that the  transport and  to some                                                                    
extent  the compression  were variable.  The example  on the                                                                    
left of the  slide was an industrial hub  concept and showed                                                                    
relatively  small  transport  and storage  cost,  reflecting                                                                    
economies of  scale in  the unit  technical cost.  The other                                                                    
two examples  on the slide  showed a gas  processing project                                                                    
and  an LNG  acid  gas pre-treatment  project. He  explained                                                                    
that  the  predominance  of capital  and  operating  expense                                                                    
required for the two projects  was for the capture. He noted                                                                    
he would  go into  additional detail on  the numbers  in the                                                                    
next couple of slides.                                                                                                          
                                                                                                                                
Mr. Fulford  moved to  slide 5 titled  "Example Costs  for a                                                                    
200  to 250MMscfd  Project  (3.9 to  4.8  MTPA)." The  slide                                                                    
corresponded to  the gas  processing and  LNG acid  gas pre-                                                                    
treatment  projects [shown  on slide  4]. He  noted the  two                                                                    
projects were  very similar. He  pointed out that  a certain                                                                    
amount of  compression was required  to bring the CO2  up to                                                                    
the  required critical  pressures.  The  slide showed  $77.3                                                                    
million in  compression capital expenditure and  $40 million                                                                    
for  injection   wells.  The  other   costs  were   less  in                                                                    
descending order of magnitude. The  example project was 4 to                                                                    
5 million  tons per annum  (MTPA) of CO2  with approximately                                                                    
$125  million in  upfront  capital  expenditures. The  right                                                                    
side  of the  chart listed  operating expenditures  with the                                                                    
two  key  components  being fuel  for  the  compression  and                                                                    
monitoring   cost   of   injection  wells   and   monitoring                                                                    
equipment,  which was  very expensive.  The total  operating                                                                    
expenditure was about $8 million.                                                                                               
                                                                                                                                
Mr.  Fulford  continued  to  slide  6  and  went  through  a                                                                    
potential hypothetical  scenario in  terms of what  the cost                                                                    
may be  for leasing the  pore space. The scenario  applied a                                                                    
$1 per ton  additional cost for the pore  space lease, which                                                                    
changed  the numbers  accordingly.  The  change added  about                                                                    
$4.5  million  per annum  of  operating  expenditures (a  35                                                                    
percent increase compared to the  example without pore space                                                                    
leasing).                                                                                                                       
                                                                                                                                
Mr.  Fulford moved  to slide  7 and  highlighted a  scenario                                                                    
where  the  pore  space  lease  was  capitalized  and  moved                                                                    
upfront  as  a  capacity  charge or  something  similar.  He                                                                    
detailed that at  a 10 percent discount rate  the pore space                                                                    
lease  (capital)  came to  about  $38  million, which  added                                                                    
about  30 percent  (the capital  expenditure  would go  from                                                                    
$125 million up to $163  million). The purpose of the slides                                                                    
was to  provide real life  examples to  give a sense  of how                                                                    
much projects cost and the impact of pore space.                                                                                
                                                                                                                                
2:00:12 PM                                                                                                                    
                                                                                                                                
Representative  Hannan  looked at  the  row  in the  capital                                                                    
expenditures  column of  the  examples  showing the  owner's                                                                    
cost.  She  asked  if  that   reflected  the  contractor  or                                                                    
developer cost  for Alaska. She  noted that Alaska  would be                                                                    
the owner  of the pore  space. She  asked if the  pore space                                                                    
lease  cost was  borne solely  by the  developer. She  noted                                                                    
that  in some  of  the examples  discussed,  Alaska was  the                                                                    
owner of the space and perhaps a developer in some regard.                                                                      
                                                                                                                                
Mr.  Fulford replied  that the  owner's costs  predominately                                                                    
related to  the surface  facilities and were  typically paid                                                                    
by the  developer. He  noted that  the legal  and regulatory                                                                    
arrangement  surrounding  the  ownership of  pore  space  in                                                                    
Alaska was well defined in  its constitution. He stated that                                                                    
generally  the costs  would be  sustained by  the developing                                                                    
company and not the state.                                                                                                      
                                                                                                                                
Representative  Hannan stated  her  understanding there  was                                                                    
not currently an  example of an LNG/CO2  exchange because it                                                                    
was not  happening anywhere  yet. She  noted that  under the                                                                    
concept of  the LNG project  in Alaska, the state  would own                                                                    
the project and  would invest in its  development. She asked                                                                    
for verification  that Alaska  expected to  be the  owner of                                                                    
the  sequestration   pore  space   and  the  owner   of  the                                                                    
accompanying facilities.                                                                                                        
                                                                                                                                
Mr. Fulford  replied that the  concept of the export  of LNG                                                                    
and import of  CO2 was in the distant future  and may not be                                                                    
feasible given it  was so far away; however,  in the context                                                                    
of the  LNG project,  he envisioned that  a project  of that                                                                    
scale and  complexity would require a  series of legislative                                                                    
steps to  go forward (which  was the case in  most countries                                                                    
GaffneyCline worked  with in terms of  LNG development). The                                                                    
default assumption would  be that the LNG  project would pay                                                                    
a tariff to a T&S company  to deal with its CO2. He remarked                                                                    
that it  could be done  in a  different way, which  had more                                                                    
synergies  for  the state  and  the  way its  revenues  were                                                                    
determined.                                                                                                                     
                                                                                                                                
2:03:34 PM                                                                                                                    
                                                                                                                                
Representative Stapp  observed that the examples  used a 12-                                                                    
year operating capacity  time in the formula  used. He asked                                                                    
if it  was standard in  the industry to amortize  costs over                                                                    
12  years. He  highlighted  that the  pieces of  legislation                                                                    
under discussion had a much longer timeframe.                                                                                   
                                                                                                                                
Mr. Fulford responded  that the 12 years was  a throwback to                                                                    
the previous 45Q  [tax] structure. He relayed  that 20 years                                                                    
would  be  more  typical injection  framework  and  possibly                                                                    
longer.                                                                                                                         
                                                                                                                                
Representative Stapp  asked if  a 20-year  calculation would                                                                    
reduce the cost  because there would be 20  years of capital                                                                    
expenditures versus 12.                                                                                                         
                                                                                                                                
Mr.  Fulford responded  in the  affirmative. He  stated that                                                                    
with discount  rates, the later  years started to  have less                                                                    
effect.  He  relayed  that for  most  companies  looking  at                                                                    
developments,  being able  to  secure  the longest  possible                                                                    
secured cashflow  was advantages  for everyone  and resulted                                                                    
in lower tariffs.                                                                                                               
                                                                                                                                
Representative  Stapp  asked  if  the increase  of  the  per                                                                    
tonnage fees  to the allowable  federal 45Q tax  credits was                                                                    
incorporated into  the cost assessments. He  believed it was                                                                    
$85 per  ton for standard  capture and he understood  it was                                                                    
considerably  higher for  direct-year capture  at $180  [per                                                                    
ton].                                                                                                                           
                                                                                                                                
Mr.  Fulford replied  that he  was frequently  asked how  to                                                                    
factor in 45Q and was it  considered a credit or revenue. He                                                                    
explained that GaffneyCline considered  the 45Q tax cashflow                                                                    
and the  associated direct pay  to be revenue.  For example,                                                                    
if the levelized cost was $50  per ton (which may be typical                                                                    
for  a gas  processing  plant)  and a  tax  credit could  be                                                                    
secured at $85 (for a  limited time), it would be considered                                                                    
as  a  profitable project  with  an  IRR [internal  rate  of                                                                    
return] of potentially greater than 10 percent.                                                                                 
                                                                                                                                
Representative  Stapp remarked  that  the cost  per ton  for                                                                    
carbon storage was  less than the available  45Q tax credit.                                                                    
He  remarked  on the  seven-year  period.  He asked  if  the                                                                    
difference in  the capital expenditure  cost of  the project                                                                    
was factored  in. He  stated a project  would not  be paying                                                                    
any  taxes at  a federal  level even  if it  was a  subsidy.                                                                    
Alternatively, he asked whether  the effective credit made a                                                                    
project economical or not was used as a baseline.                                                                               
                                                                                                                                
Mr.  Fulford  responded  that  the  capital  investment  and                                                                    
operating  expenditures  involved  in  a  CCUS  project  was                                                                    
purely a  cost and unless  there was a revenue  mechanism to                                                                    
compensate, no investment would happen.  He noted it was the                                                                    
reason nothing  was happening despite  the interest  in CCUS                                                                    
from  a lot  of countries.  There was  an emissions  trading                                                                    
system in  Europe, which was  about $100 per ton.  There was                                                                    
the  LCFS [low  carbon fuel  standard] in  California, which                                                                    
was  similar  depending  on  how  much  could  be  captured.                                                                    
Additionally,  there was  the federal  45Q. He  explained it                                                                    
was  providing a  very significant  financial incentive.  He                                                                    
highlighted  an LNG  pre-treatment  plant already  producing                                                                    
CO2 as  an example.  He stated it  was roughly  adequate for                                                                    
something like an ammonia or  hydrogen plant, and inadequate                                                                    
for  a gas-fired  power station.  He explained  there was  a                                                                    
merit order of projects, some  were economic and others were                                                                    
not and  the cutoff was  somewhere between a  large hydrogen                                                                    
plant and a gas-fired power station.                                                                                            
                                                                                                                                
2:08:38 PM                                                                                                                    
                                                                                                                                
Co-Chair Johnson  thought Mr. Fulford  had stated  that some                                                                    
of the carbon capture technology  was not yet available. She                                                                    
asked what  kind of carbon  emissions load existed  that may                                                                    
be transported to Alaska.                                                                                                       
                                                                                                                                
Mr.  Fulford   replied  that  the  largest   projects  being                                                                    
discussed in  Texas were  100 MPTA  (the Exxon  Houston ship                                                                    
channel project).  There was also an  existing pipeline that                                                                    
would  take  16  MTPA.  He  noted that  in  the  context  of                                                                    
industrial emissions across the  country it was minimal. The                                                                    
limitation was the economics of capture.                                                                                        
                                                                                                                                
Co-Chair  Johnson  referred   to  the  monitoring  equipment                                                                    
(capital  and   operating)  costs.  She  assumed   that  the                                                                    
standards from the registry would  drive what the monitoring                                                                    
equipment would be.                                                                                                             
                                                                                                                                
Mr. Fulford responded affirmatively.  He relayed that all of                                                                    
the  projects  had   to  obtain  a  license   from  the  EPA                                                                    
[Environmental   Protection  Agency]   or  from   the  state                                                                    
authority depending on the jurisdiction.  He stated it would                                                                    
determine  the  extensive  array   of  surface  and  surface                                                                    
monitoring to  examine what was  happening to the  plume and                                                                    
check for any leakage.                                                                                                          
                                                                                                                                
Co-Chair  Johnson  surmised it  applied  to  carbon and  the                                                                    
Alaska Gasline  Development Corporation (AGDC)  depending on                                                                    
whether  there  was  a  line or  other  types  of  equipment                                                                    
installed.  She  asked  how 404  primacy  would  impact  the                                                                    
capital  costs. She  asked if  Mr.  Fulford anticipated  any                                                                    
difference in the capital cost if the state assumed it.                                                                         
                                                                                                                                
Mr.  Fulford  replied  that  the  capital  investment  would                                                                    
probably not  change, but the  operating expenditure  may be                                                                    
reduced. He  elaborated that based  on some of  the projects                                                                    
GaffneyCline was  working on,  the cost of  an EPA  class VI                                                                    
permit  application  was  relatively high  but  expected  to                                                                    
drop. He  remarked that for  states with primacy,  the class                                                                    
VI process was perceived to be much less complex.                                                                               
                                                                                                                                
Co-Chair Johnson wondered how  familiar Mr. Fulford was with                                                                    
companies'  financing based  on zero  carbon emissions.  For                                                                    
example, project  financing where zero carbon  emissions was                                                                    
a requirement or  provided a given number  of points towards                                                                    
obtaining a loan.                                                                                                               
                                                                                                                                
Mr. Fulford  summarized that he  was very familiar  with the                                                                    
topic,  which likely  warranted  a  separate discussion.  He                                                                    
explained there  were clear examples of  low carbon projects                                                                    
attracting low  cost finance  from different  sources. There                                                                    
were an  increasing number  of financial  organizations that                                                                    
would deprioritize  or not lend  to projects  they perceived                                                                    
to be  incompatible with  their carbon  goals. Additionally,                                                                    
some of  the tech  companies with a  particularly aggressive                                                                    
net zero  target would pay  several hundred dollars  per ton                                                                    
for a CO2 removal credit.                                                                                                       
                                                                                                                                
2:14:41 PM                                                                                                                    
                                                                                                                                
Co-Chair Edgmon  stated his understanding that  three states                                                                    
had  404   primacy  including   Florida,  New   Jersey,  and                                                                    
Michigan. He  asked if  all three  states were  doing carbon                                                                    
capture.                                                                                                                        
                                                                                                                                
JOHN  CROWTHER, DEPUTY  COMMISSIONER, DEPARTMENT  OF NATURAL                                                                    
RESOURCES, responded that the  404 primacy was distinct from                                                                    
the class VI  primacy. He did not know the  status of carbon                                                                    
projects in  the three states mentioned  by Co-Chair Edgmon,                                                                    
but it was not dependent  or associated with 404 primacy. He                                                                    
clarified that the class VI  primacy through the EPA was for                                                                    
sequestration wells.                                                                                                            
                                                                                                                                
Co-Chair  Edgmon  stated  that  was  his  understanding.  He                                                                    
thought  the  exchange  between  Co-Chair  Johnson  and  Mr.                                                                    
Fulford could have been inferred differently.                                                                                   
                                                                                                                                
2:15:33 PM                                                                                                                    
                                                                                                                                
Mr. Fulford advanced  to slide 8 titled  "Supply, Demand and                                                                    
Levelized Cost." He highlighted  a scenario turning the cost                                                                    
breakdown on slide 7 into  a tariff excluding the pore lease                                                                    
cost spaces and the  other significant commercial risks, the                                                                    
levelized cost  or tariff would  likely be about $10  to $12                                                                    
per ton. He  stated there seemed to be a  price of about $20                                                                    
per ton that  would support some of the  larger T&S projects                                                                    
serving the  Gulf Coast. The  slide highlighted there  was a                                                                    
substantial amount  of sequestration potential  available in                                                                    
the U.S.  and to be  competitive it  was necessary to  be at                                                                    
the lefthand  side of the  curve shown  on slide 8.  He used                                                                    
the  ExxonMobil Houston  ship channel  project (the  largest                                                                    
envisaged  project)  as an  example  with  100 MTPA  for  20                                                                    
years, which was about 2 gigatonnes  and on the left side of                                                                    
the  chart. He  relayed that  Alaska was  perceived to  have                                                                    
about 50 gigatonnes  available in the Cook  Inlet, which was                                                                    
also still very much on the lefthand side of the chart.                                                                         
                                                                                                                                
Mr. Fulford briefly  turned to slide 9 showing  a summary of                                                                    
some of the leasing fees  other states had been securing. He                                                                    
turned  to  slide  10  titled  "Alaska  Considerations."  He                                                                    
relayed that  on a technical  level, most of the  Gulf Coast                                                                    
projects were  aimed exclusively  at saline  aquifers (water                                                                    
carrying geological formations), which  had an extensive but                                                                    
less well defined CO2 storage  capacity. The focus in Alaska                                                                    
was currently  on depleted gas  reservoirs, which  were well                                                                    
documented   and  with   very  clear   traps.  The   largest                                                                    
difference conceptually  between Alaska  and other  parts of                                                                    
the U.S.  was that Alaska  had very low state  emissions. He                                                                    
discussed  the  three benefits  of  Alaska  pursuing a  CCUS                                                                    
strategy. The  first was that  the foundation of  the Alaska                                                                    
economy continued to be the  oil and gas industry. He stated                                                                    
that  as  all  of  the recent  developments  had  served  to                                                                    
underline, to  enable the industry  to continue to  make the                                                                    
future  tax  revenues  more   resilient,  an  assertive  and                                                                    
clearly  established  carbon  management strategy  would  be                                                                    
needed  to help  go  forward. He  elaborated  that not  only                                                                    
would it  protect existing revenues  and cashflow,  it would                                                                    
potentially secure  new investments  and future  tax royalty                                                                    
that  may otherwise  be at  risk in  a world  without carbon                                                                    
management.                                                                                                                     
                                                                                                                                
2:19:37 PM                                                                                                                    
                                                                                                                                
Mr.  Fulford relayed  that the  second benefit  was the  LNG                                                                    
project (the  monetization of North  Slope natural  gas). He                                                                    
stated that  having a robust  carbon management  strategy to                                                                    
accompany  the project  would be  an essential  part of  the                                                                    
project going  forward from a "social  license" perspective.                                                                    
He  shared  that  based  on  his  experience  speaking  with                                                                    
Japanese  banks   and  others   who  could   conceivably  be                                                                    
interested,  it was  clear that  lending to  such a  project                                                                    
would be  dependent on  it being presented  in a  low carbon                                                                    
fashion. He  explained that natural  gas and  carbon capture                                                                    
were  two  foundation stones  of  the  ammonia and  hydrogen                                                                    
industry,  which   would  be  an  important   feature  going                                                                    
forward.  The  third benefit  the  potential  for Alaska  to                                                                    
participate in the large scale imports of CO2.                                                                                  
                                                                                                                                
Representative Josephson  noted that he was  a big supporter                                                                    
of the large diameter  gasline proposed in past legislation,                                                                    
SB  138  [legislation  proposed   by  former  Governor  Sean                                                                    
Parnell in 2014]  and could see how "this"  could be helpful                                                                    
to  that  endeavor.  He considered  the  subject  of  social                                                                    
license [in  regard to  CCUS projects  being a  catalyst for                                                                    
LNG/gas monetization  (shown on slide  10)]. He asked  if it                                                                    
could  potentially less  helpful  if the  goal  post on  the                                                                    
international scene  moved, which was likely  to happen. For                                                                    
example,  if the  Paris Accord  became the  Barcelona Accord                                                                    
and had  more aggressive goals  to achieve. He asked  if the                                                                    
consideration could  become outdated  because the  world was                                                                    
in crisis.                                                                                                                      
                                                                                                                                
Mr. Fulford responded  that it was a  very topical question.                                                                    
He stated that part of his  role at GaffneyCline was to take                                                                    
a  view on  gas and  LNG demand  and how  it was  unfolding.                                                                    
Currently there  was likely a  bigger gap in  LNG forecasts,                                                                    
particularly  in  the  post  2030  era.  He  considered  the                                                                    
investment required to move the  world's energy systems to a                                                                    
renewable  or net  zero  system and  the  ability of  global                                                                    
economies to  sustain the expenditure.  He explained  it was                                                                    
difficult   to   create   the   circumstance   where   rapid                                                                    
decarbonization  would  occur.  He believed  taking  a  more                                                                    
balanced view  of the role  that unmitigated natural  gas or                                                                    
low carbon  fuels like  ammonia or  hydrogen would  take and                                                                    
looking  at the  timeframe for  the Alaska  LNG project,  it                                                                    
should  be a  viable proposition  with the  right buyer  and                                                                    
contract structure. He  noted that much would  depend on the                                                                    
willingness of buyers to invest.                                                                                                
                                                                                                                                
2:23:31 PM                                                                                                                    
                                                                                                                                
Mr.  Fulford provided  conclusions on  slide 11.  He relayed                                                                    
that  the   commercial  framework   for  CCUS   was  rapidly                                                                    
evolving; however, the tariffs and  price point based on the                                                                    
hardware and required capital  expenditure were beginning to                                                                    
come  together. The  capture economics  continued to  be the                                                                    
biggest  part of  the equation  and getting  those addressed                                                                    
was  perhaps the  key to  large scale  CCUS. The  commercial                                                                    
terms   varied   significantly   depending   on   the   risk                                                                    
allocation. In  particular, currently the  biggest stumbling                                                                    
block was the ability of  an emitter to guarantee off taker.                                                                    
He explained  that an emitter  would always want its  CO2 to                                                                    
be taken,  but a storage project  may not always be  able to                                                                    
take  it.  There was  currently  a  very active  negotiating                                                                    
dialogue in the U.S., from  which there were many lessons to                                                                    
be learned  in Alaska. Much  of the same dialogue  was being                                                                    
held outside  the U.S. at  the government level, with  a bit                                                                    
slower pace and a different set of cost drivers.                                                                                
                                                                                                                                
Representative Ortiz  looked at  slide 11  and asked  for an                                                                    
explanation of  the bullet  point: "commercial  terms depend                                                                    
heavily on project structure and risk allocation."                                                                              
                                                                                                                                
Mr.  Fulford responded  with an  example. He  explained that                                                                    
once a  large industrial  emitter secured  sequestration, it                                                                    
was  able to  collect the  45Q  [tax credit]  and perhaps  a                                                                    
premium for  low carbon  fuel. However,  if the  emitter was                                                                    
unable to secure  the emissions, it may  face liabilities of                                                                    
$100 to $300 per ton for having  to vent the CO2, or not. On                                                                    
the other hand,  the storage entity may be paid  $20 per ton                                                                    
to take the  CO2. He clarified that the  emitter was ideally                                                                    
not about  to take  a $300  liability for  not doing  so. He                                                                    
explained that  the back  and forth  on short  and long-term                                                                    
liabilities could  create some large, stranded  costs, which                                                                    
had to be somehow allocated in the contract framework.                                                                          
                                                                                                                                
2:26:30 PM                                                                                                                    
                                                                                                                                
Co-Chair Edgmon asked  how Mr. Fulford would  respond to the                                                                    
viewpoint  that   the  idea  of  carbon   capture  could  be                                                                    
considered  a Ponzi  scheme. He  reasoned that  by the  time                                                                    
much of  the factors  were worked  out, particularly  on the                                                                    
sequestration  side, the  planet  may have  pivoted to  more                                                                    
carbon friendly  in terms of  emissions. He  considered that                                                                    
idea  seemed promising  in the  current environment  but may                                                                    
not bear out in the  future. He referenced the continued use                                                                    
of  the word  "emerging"  [used to  describe carbon  capture                                                                    
technology].  He  asked what  Mr.  Fulford  would say  to  a                                                                    
person who thought the idea  sounded like crypto currency or                                                                    
something similar.  He stated that  the end goal was  to not                                                                    
just provide environmental  social government (ESG) licenses                                                                    
to an emitter, but to  actually reduce carbon. He asked what                                                                    
would  happen if  it did  not pan  out and  the multibillion                                                                    
dollar emerging industry began to sputter and disappear.                                                                        
                                                                                                                                
Mr.  Fulford replied  that real  money  was currently  being                                                                    
deployed   into   CCS    from   credible   and   respectable                                                                    
institutions  including pension  funds  and  New York  based                                                                    
infrastructure funds.  Secondly, the International  Panel on                                                                    
Climate  Change   (IPCC)  was  pushing  hard   for  a  rapid                                                                    
decarbonization of  the world's economy. He  elaborated that                                                                    
the IPCC had  stated that CCUS was an essential  part of the                                                                    
transition from present  to net zero. He  considered some of                                                                    
the   transformational  energy   systems  like   fusion  and                                                                    
imagined that in  50 or so years carbon capture  would be an                                                                    
older technology; however,  there was a very  clear role for                                                                    
the  next   50  years   and  investment  was   taking  place                                                                    
currently.                                                                                                                      
                                                                                                                                
Co-Chair Edgmon thanked Mr. Fulford for the presentation.                                                                       
                                                                                                                                
Co-Chair  Foster thanked  Mr. Fulford  and set  an amendment                                                                    
deadline for May 10, 2023, at 5:00 p.m.                                                                                         
                                                                                                                                
HB  50  was   HEARD  and  HELD  in   committee  for  further                                                                    
consideration.                                                                                                                  
                                                                                                                                
2:30:49 PM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
2:32:34 PM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                
HOUSE BILL NO. 49                                                                                                             
                                                                                                                                
     "An   Act  authorizing   the   Department  of   Natural                                                                    
     Resources   to  lease   land   for  carbon   management                                                                    
     purposes;  establishing  a  carbon offset  program  for                                                                    
     state  land;  authorizing  the sale  of  carbon  offset                                                                    
     credits; and providing for an effective date."                                                                             
                                                                                                                                
Co-Chair Foster began with a review of the fiscal notes.                                                                        
                                                                                                                                
2:34:14 PM                                                                                                                    
                                                                                                                                
ASHLEE ADOKO,  DIRECTOR OF OFFICE OF  PROJECT MANAGEMENT AND                                                                    
PERMITTING,   DEPARTMENT    OF   NATURAL    RESOURCES   (via                                                                    
teleconference),  reviewed   the  fiscal  impact   note  OMB                                                                    
Component  Number 2733,  control code  RFFnp, dated  5/2/23.                                                                    
For  FY  24,  the  total   operating  cost  was  $194.4  and                                                                    
consisted of  $156.1 in personal services,  $10.0 in travel,                                                                    
$16.3 in  services, and $12.0  in commodities for  one full-                                                                    
time permanent large  project coordinator position beginning                                                                    
in  FY 24  to stand  up  and administer  the state  projects                                                                    
program  (path 2  in the  upcoming  presentation). The  fund                                                                    
source was  undesignated general funds (UGF)  to be replaced                                                                    
with revenue.                                                                                                                   
                                                                                                                                
Representative Josephson  asked about Ms.  Odoko's statement                                                                    
that general funds would be  replaced by revenue. He did not                                                                    
see that going out to FY 29.                                                                                                    
                                                                                                                                
Ms.  Adoko   responded  that   the  Department   of  Natural                                                                    
Resources (DNR) did not know  exactly when revenues would be                                                                    
online and  the department  would provide  additional detail                                                                    
on  the topic  during its  presentation. She  had additional                                                                    
notes  regarding  FY 25  and  beyond  if the  committee  was                                                                    
interested.                                                                                                                     
                                                                                                                                
Co-Chair  Foster   asked  Ms.  Adoko  to   repeat  her  last                                                                    
statement.                                                                                                                      
                                                                                                                                
Ms.  Adoko explained  that  she  had covered  FY  24 in  her                                                                    
fiscal note  explanation but  offered to  provide additional                                                                    
information on FY 25 and beyond.                                                                                                
                                                                                                                                
Co-Chair Foster asked for clarification.  He asked Ms. Adoko                                                                    
to proceed.                                                                                                                     
                                                                                                                                
Ms. Adoko relayed that for  FY 25, the total operating costs                                                                    
were $369.8, made  up of $264.5 in  personal services, $10.0                                                                    
in travel, $81.3 in services,  and $14.3 in commodities. The                                                                    
cost covered a full-time  administrative officer I permanent                                                                    
position  to  perform  budget,  reporting,  accounting,  and                                                                    
other functions to support the  state projects program (path                                                                    
2 in the upcoming presentation.  There was a cost associated                                                                    
with  one  survey  needed  to  support  the  state  projects                                                                    
program. The  numbers carried forward  for FY 26  and beyond                                                                    
to support the large  project coordinator and administrative                                                                    
officer.                                                                                                                        
                                                                                                                                
2:38:49 PM                                                                                                                    
                                                                                                                                
RENA MILLER, SPECIAL ASSISTANT,  OFFICE OF THE COMMISSIONER,                                                                    
DEPARTMENT  OF NATURAL  RESOURCES, remarked  that there  was                                                                    
also a capital request on the fiscal note.                                                                                      
                                                                                                                                
Ms.  Adoko added  that there  was  a capital  appropriations                                                                    
request of $425.0 for contracting  the subject matter expert                                                                    
and   consult  for   developing   program  regulations   and                                                                    
contracts and implementing the state projects program.                                                                          
                                                                                                                                
Co-Chair  Foster thanked  Ms. Adoko.  He moved  to the  next                                                                    
fiscal note.                                                                                                                    
                                                                                                                                
2:39:56 PM                                                                                                                    
                                                                                                                                
HELGE  ENG,   DIRECTOR,  DIVISION   OF  FORESTRY   AND  FIRE                                                                    
PROTECTION,   DEPARTMENT   OF    NATURAL   RESOURCES,   (via                                                                    
teleconference), went  through the fiscal note  control code                                                                    
ZmXiS,  OMB component  number  435. The  note  showed FY  24                                                                    
costs of $147.3  including $107.9 for a  forester, $10.0 for                                                                    
travel, $17.4  for services, and $12.0  for commodities. The                                                                    
note  showed a  startup cost  of $10.0  and supply  costs of                                                                    
$2.0  annually.  The out  years  beginning  in FY  25  would                                                                    
revert to  $2.0 annually,  for a  total of  $137.3. Revenues                                                                    
were not specifically estimated  due to timeline uncertainty                                                                    
and  potential project  variation.  He  relayed that  credit                                                                    
sales may occur in FY  28 at the earliest. Revenue generated                                                                    
from  carbon offset  projects would  be  deposited into  the                                                                    
carbon offset fund established by the bill.                                                                                     
                                                                                                                                
Mr. Eng  continued to review  the fiscal  note. Expenditures                                                                    
for  Division  of Forestry  and  Fire  Protection (DOF)  and                                                                    
Office  of Project  Management and  Permitting (OPMP)  staff                                                                    
would  be funded  by unrestricted  general funds  (UGF), but                                                                    
the intent was  to utilize the carbon offset  funds in place                                                                    
of general  fund dollars once revenues  began materializing.                                                                    
The  one  permanent  forester position  would  primarily  be                                                                    
involved  in  updating  state  forest  management  plans  as                                                                    
required  by  the  legislation  as  well  as  inventory  and                                                                    
ensuring management practices adhered  to the commitments in                                                                    
the carbon offset  project and meet the  requirements of the                                                                    
projects. Regulations would be  developed and adopted by the                                                                    
commissioner.                                                                                                                   
                                                                                                                                
2:43:24 PM                                                                                                                    
                                                                                                                                
Representative  Josephson had  not heard  that the  earliest                                                                    
credit sale would  occur in FY 28. He  observed that project                                                                    
development  would  occur in  the  coming  two fiscal  years                                                                    
followed   by   the   intervening  carbon   offset   project                                                                    
development  timeline,  which  sounded familiar  to  project                                                                    
development. He  asked why so  much time was needed.  He did                                                                    
not sense that the tribes needed as much time to get going.                                                                     
                                                                                                                                
Mr. Eng responded  that the fiscal note was  an estimate and                                                                    
was  developed with  experts in  the field.  He stated  that                                                                    
carbon  offset projects  were an  undertaking. Based  on his                                                                    
experience,  the  timeline  shown  in the  fiscal  note  was                                                                    
fairly typical for a carbon offset project.                                                                                     
                                                                                                                                
Ms. Miller added that Anew  had presented on general project                                                                    
timelines and had indicated that  18 months was a reasonable                                                                    
time from  start to  finish for  a project,  but due  to the                                                                    
variability  of  conditions  in   Alaska  depending  on  the                                                                    
specific project,  a second field  season may  be necessary.                                                                    
She  explained that  project timing  worked  well and  could                                                                    
encompass two field seasons within  18 months, the timeframe                                                                    
would be  more condensed; however, depending  on start dates                                                                    
and field  season timing it  may take 24 months.  She stated                                                                    
the department  hoped to get  things off the ground  as soon                                                                    
as possible.  There would likely  be private  landowners and                                                                    
the  department   would  have  to  write   regulations.  She                                                                    
elaborated   there  would   be  a   period  of   time  after                                                                    
regulations were  written where  the department  would field                                                                    
interest and consider which projects to advance.                                                                                
                                                                                                                                
Representative Josephson  asked if  the bill would  apply to                                                                    
private landowners.                                                                                                             
                                                                                                                                
Ms. Miller responded in the  negative. She relayed there was                                                                    
language in the state projects  area that made it abundantly                                                                    
clear.  She  referenced Representative  Josephson's  mention                                                                    
that Alaska Native Corporations may  have the ability to get                                                                    
projects  going  faster. She  clarified  that  had been  her                                                                    
previous reference to the private landowner difference.                                                                         
                                                                                                                                
2:46:37 PM                                                                                                                    
                                                                                                                                
Representative Hannan  stated that the bill  had been talked                                                                    
about as a forestry bill;  however, she observed that out of                                                                    
the four positions  in the three fiscal  notes, the forester                                                                    
position was  the cheapest. She  remarked that  according to                                                                    
the fiscal notes, the bulk  of the money required to operate                                                                    
the bill  would be in OPMP,  operated by a consultant  to do                                                                    
website  development and  monitoring. She  stated there  had                                                                    
been  discussion  about the  need  to  increase the  state's                                                                    
forest  management  practices   and  regularly  measure  and                                                                    
monitor. She asked if her understanding was accurate.                                                                           
                                                                                                                                
Ms.   Miller  responded   that   there   was  an   important                                                                    
differentiation  between project  costs  for any  particular                                                                    
project and the  cost of the state having  the carbon offset                                                                    
program that  would undertake multiple projects  that may or                                                                    
may not all  be related to forestry. The  things required by                                                                    
the project  including inventory  required by  the registry,                                                                    
the computer  modeling, the papering of  the project design,                                                                    
and  ongoing  verification  and auditing  were  all  project                                                                    
costs and were not reflected  in the fiscal notes. She added                                                                    
that looking  to the  likelihood that  some of  the greatest                                                                    
carbon  attributes were  in the  forests,  it made  forestry                                                                    
projects a  very likely endeavor  for the new  carbon offset                                                                    
program. The  situation would entail  a lot of  ongoing work                                                                    
with DOF  as the project  continued. She clarified  that DOF                                                                    
would not  be doing  the project,  but it  would need  to be                                                                    
doing  a  number  of  things to  support  the  project.  The                                                                    
division would  also need to  manage timber  harvests, which                                                                    
was not technically part of the project.                                                                                        
                                                                                                                                
Representative Hannan referenced the  capital budget item in                                                                    
the  OPMP fiscal  note. She  referenced the  contractor that                                                                    
would  develop the  website and  conduct registry  work. She                                                                    
surmised  the contractor  was not  likely to  be an  Alaskan                                                                    
entity. She thought it would  be someone dealing with carbon                                                                    
offset across  the country versus someone  in Alaska helping                                                                    
the state manage its forest.                                                                                                    
                                                                                                                                
Ms.  Miller responded  that  working  specifically with  the                                                                    
registry would  be a project  cost. She referenced  the OPMP                                                                    
contract   cost  of   $75,000   for   website  and   systems                                                                    
development  and explained  that the  bill required  project                                                                    
details to  be reported by  the state regularly.  There were                                                                    
additional  funds for  expertise on  setting up  the project                                                                    
framework and regulations. She noted  it was a new field and                                                                    
the   department   wanted   to   ensure   regulations   were                                                                    
established  with expertise  in  the field.  There was  also                                                                    
$250,000 in  capital related  to contractual  subject matter                                                                    
expertise  (largely legal  and commercial)  that would  help                                                                    
the  state in  evaluating contractual  and commercial  terms                                                                    
with entities it would be working with on projects.                                                                             
                                                                                                                                
2:50:53 PM                                                                                                                    
                                                                                                                                
Representative Josephson  referenced Ms.  Miller's statement                                                                    
that  the project  costs would  not be  shown in  the fiscal                                                                    
notes. He asked  if it was because they were  taken from the                                                                    
state's  share of  the profit.  He asked  where the  project                                                                    
costs resided if they were not in the fiscal notes.                                                                             
                                                                                                                                
Ms. Miller  responded that  the upcoming  presentation would                                                                    
go into more detail on  the topic. She explained that absent                                                                    
upfront capitalization,  the state  would be working  with a                                                                    
turnkey type  of developer/contractor  that would  cover the                                                                    
upfront  project costs  including  inventory, papering,  and                                                                    
computer modeling  of carbon  storage. The  contractor would                                                                    
receive  a portion  of the  credit revenue  in exchange  for                                                                    
frontloading the costs and taking  the initial project risk.                                                                    
In  the future  there  would be  incoming  revenue from  the                                                                    
project into  the fund created  under the bill,  which would                                                                    
provide  a  source  of capitalization  for  future  projects                                                                    
where the  state could look at  other contractual agreements                                                                    
and  service contracts  that  would  potentially enable  the                                                                    
state to undertake more of the work directly.                                                                                   
                                                                                                                                
Representative   Josephson   referenced   the   department's                                                                    
statements about the  need to monitor timber  harvest by the                                                                    
program. He  asked if it was  fair to say that  the bill had                                                                    
the effect theoretically of slowing timber harvest.                                                                             
                                                                                                                                
Ms.  Miller responded  that the  department  did not  expect                                                                    
carbon offset  projects to slow  timber sales.  Timber sales                                                                    
would continue to be managed  by the division. She explained                                                                    
that if  there was  a carbon offset  project on  lands where                                                                    
timber sales occurred, the forests  would need to be managed                                                                    
in part under the carbon offset project.                                                                                        
                                                                                                                                
Representative Josephson surmised  that it could necessitate                                                                    
a reduction in harvest.                                                                                                         
                                                                                                                                
Ms.  Miller   responded  that  DNR  did   not  anticipate  a                                                                    
reduction in  harvest under  the improved  forest management                                                                    
protocols the  state would  be doing  on those  forests. The                                                                    
department  expected  to be  making  a  commitment with  the                                                                    
registry to not  increase harvest levels to  the full annual                                                                    
allowable cut on land enrolled in a project.                                                                                    
                                                                                                                                
2:54:01 PM                                                                                                                    
                                                                                                                                
Representative Galvin recalled from  a prior presentation to                                                                    
the committee  the idea  about a  turnkey project  where the                                                                    
state would  be able to  work with an organization  that was                                                                    
responsible for  the detailed work.  She remarked  that when                                                                    
she had asked about the  costs the organization would charge                                                                    
it was her impression the  answer depended on many different                                                                    
variables. She considered  that it may have  something to do                                                                    
with what was  negotiated. She had heard the cost  was up to                                                                    
20 percent  of the project.  She asked if other  states that                                                                    
may be working on similar  legislation ever included "not to                                                                    
exceed" clauses [on the costs].  She asked if the department                                                                    
had a process  on other projects where it  had guardrails in                                                                    
place.                                                                                                                          
                                                                                                                                
Ms. Miller responded that Michigan  was the only other state                                                                    
with  carbon  offset  projects on  public  land.  She  would                                                                    
follow up with information on  details on the arrangement in                                                                    
that context.  She elaborated that  there were  some unusual                                                                    
terms  in  the  RFP  [request for  proposal],  such  as  the                                                                    
exclusive  right  to  all future  projects  on  those  state                                                                    
forests.  She  stated  it  was  always  a  balance  and  she                                                                    
confirmed that details were negotiated.  She noted there may                                                                    
be  other  things  a  party  may  want  to  negotiate  in  a                                                                    
contract. For  example, perhaps a developer  would train in-                                                                    
house employees  so they would  be more able to  do projects                                                                    
in the  future without relying  on a project  developer. She                                                                    
relayed there  was no limit  on the  topic in the  bill. She                                                                    
believed  the  protection  was   somewhat  inherent  in  the                                                                    
responsibilities of  the department  in looking out  for the                                                                    
state's best  interests and being able  to regularly justify                                                                    
what  it  was doing  as  they  came before  the  legislature                                                                    
annually  and  other times  as  requested.  She thought  the                                                                    
department had  a strong track  record of  being responsible                                                                    
in that context.                                                                                                                
                                                                                                                                
Representative Galvin remarked that  the concept in the bill                                                                    
was potentially  a big ticket  item of around  $300 million.                                                                    
She  referenced  an  "amazing   project"  that  someone  had                                                                    
presented in recent months. She  reasoned that 20 percent of                                                                    
that  total was  a substantial  chunk  of change  to be  the                                                                    
moderator of the work. She understood  it was a lot of work,                                                                    
but also appreciated  it was an opportunity  for business as                                                                    
well as for legislators. She thanked the department.                                                                            
                                                                                                                                
Co-Chair Foster requested  a review of the  fiscal note from                                                                    
the DNR Division of Mining, Land and Water.                                                                                     
                                                                                                                                
2:58:06 PM                                                                                                                    
                                                                                                                                
KRIS  HESS, DEPUTY  DIRECTOR, DIVISION  OF MINING,  LAND AND                                                                    
WATER,    DEPARTMENT     OF    NATURAL     RESOURCES    (via                                                                    
teleconference),  went through  OMB  Component Number  3002,                                                                    
control  code  OEyBr. She  clarified  that  the fiscal  note                                                                    
pertained to the leasing program  only and not for the state                                                                    
project program  previously discussed  by OPMP and  DOF. For                                                                    
FY  24 the  note  included $117.5  for  a full-time  natural                                                                    
resource  specialist III  position, $5.0  for travel,  $17.4                                                                    
for  services, and  $12.0  for commodities  for  a total  of                                                                    
$151.9. For FY  25 through FY 29, the  total operating costs                                                                    
dropped  by  $10,000  because  it was  a  one-time  cost  in                                                                    
commodities and supplies  to set up the  office. The funding                                                                    
source  was UGF  and there  would  be a  transition over  to                                                                    
program  receipts  once  revenue   started  coming  in.  She                                                                    
relayed that the  division would come back  to the committee                                                                    
if the program required  additional positions in the future.                                                                    
She detailed that the new position  was a range 18 and would                                                                    
initially be used to set  up regulations. The position would                                                                    
travel   to  help   develop   the   regulations  and   would                                                                    
subsequently  transition  to adjudicating  applications  for                                                                    
leases on state land.                                                                                                           
                                                                                                                                
Co-Chair Foster requested  a review of the  fiscal note from                                                                    
the Department of Revenue (DOR).                                                                                                
                                                                                                                                
3:02:30 PM                                                                                                                    
                                                                                                                                
ERIC   DEMOULIN,   DIRECTOR  OF   ADMINISTRATIVE   SERVICES,                                                                    
DEPARTMENT  OF REVENUE,  relayed that  the DOR  fiscal note,                                                                    
OMB Component  Number 123,  had been  reduced down  to zero.                                                                    
The fiscal  note discussed the  need for  collaboration with                                                                    
DNR when  it came  to fiscal management  of the  program and                                                                    
generating new  revenues for  the state.  He relayed  it was                                                                    
anticipated   there  would   be  substantial   collaboration                                                                    
between the  executive leadership of both  departments to be                                                                    
able to  bring the  credits to  market, which  would include                                                                    
conversations  with   stakeholders  as  things   started  to                                                                    
evolve.  The department  had  decided to  come  back to  the                                                                    
committee  for  personal  services needs  in  future  budget                                                                    
cycles as  the programs were  developed and started  to gain                                                                    
traction.  He asked  if there  were any  questions from  the                                                                    
committee.                                                                                                                      
                                                                                                                                
Co-Chair Foster noted there were  currently no questions. He                                                                    
thanked Mr. DeMoulin.                                                                                                           
                                                                                                                                
3:03:39 PM                                                                                                                    
                                                                                                                                
Co-Chair Foster  relayed that the  committee would  hear two                                                                    
additional presentations  during the meeting. He  began with                                                                    
a presentation from DNR.                                                                                                        
                                                                                                                                
Ms.  Miller introduced  the  PowerPoint presentation  titled                                                                    
"House Bill 49: Fiscal Picture,"  dated May 3, 2023 (copy on                                                                    
file). She  relayed that the  bill would allow the  state to                                                                    
stand  up two  programs for  leasing and  state projects  to                                                                    
enable  the  state  to monetize  natural  resources  through                                                                    
carbon. The  department was not  asking for approval  of any                                                                    
specific project  in the  legislation. She  highlighted that                                                                    
there was  a strong and  growing interest in  carbon offsets                                                                    
and capital to be deployed.  The department wanted to ensure                                                                    
Alaska  was positioned  well to  participate  in the  carbon                                                                    
business,  to make  good use  of its  resources and  provide                                                                    
revenue to the  state. The bill included  two distinct paths                                                                    
to monetizing  carbon. The  first path  was state  leases to                                                                    
third  parties,   referred  to  as  "carbon   leases"  (bill                                                                    
Sections 3  through 5).  The second path  was for  the state                                                                    
itself to  undertake carbon offset projects,  referred to as                                                                    
"state projects"  (bill Sections 1  through 2 and  6 through                                                                    
13).  The  two  paths  had  different  costs  and  different                                                                    
revenues, which would be reviewed in the presentation.                                                                          
                                                                                                                                
Ms. Miller moved to slide  4 titled "Path 1: Carbon leases."                                                                    
As reviewed in the fiscal  note from the Division of Mining,                                                                    
Land  and  Water,  the  department   would  need  people  to                                                                    
promulgate  regulations   and  receive  and   process  lease                                                                    
applications.  Once leases  were  awarded,  they would  need                                                                    
ongoing monitoring  to ensure conditions  were met  and that                                                                    
everything  was  in line.  The  department  was seeking  one                                                                    
permanent  full-time  position.  There was  program  receipt                                                                    
authority for the Division of  Mining, Land and Water in the                                                                    
legislation  and ideally,  once there  was incoming  revenue                                                                    
from carbon leases, the revenue  would supplant general fund                                                                    
and  the  additional  would  go to  the  general  fund.  The                                                                    
revenue for  the carbon leases  was indeterminate  in amount                                                                    
and timing and  was driven entirely by demand  of people who                                                                    
have  interest in  carbon use  on state  land. She  noted it                                                                    
would  vary  depending  on  the  area  of  land  lease,  the                                                                    
particular  concept, the  value of  what they  were able  to                                                                    
store, and who they were able to generate returns with.                                                                         
                                                                                                                                
Ms. Miller continued  to review path 1  pertaining to carbon                                                                    
leases  on  slide 5.  She  highlighted  that timber  harvest                                                                    
rights were not  included with a land lease.  She provided a                                                                    
hypothetical  example  of a  carbon  lease  where a  company                                                                    
wanted to  lease 10,000  acres and  invested capital  of its                                                                    
own to  regenerate a forest.  She elaborated that it  may be                                                                    
20  or more  years before  the  trees were  large enough  to                                                                    
sequester  the amount  of carbon  needed to  meet protocols,                                                                    
but  at  that  point  the  company  could  generate  offsets                                                                    
through the new trees and  make revenue. Under the scenario,                                                                    
while the bill  gave options, it was likely  the state would                                                                    
want  some  kind  of  annual  fee for  the  land  lease  and                                                                    
potentially a  percentage of the carbon  revenues once there                                                                    
was  revenue  coming  to  the  lessee  for  their  work  and                                                                    
invested  capital. Under  the example,  the land  and forest                                                                    
would revert to the state at the end of 55 years.                                                                               
                                                                                                                                
Ms.  Miller  reviewed  a second  hypothetical  carbon  lease                                                                    
example  on  slide 5.  The  scenario  involved a  kelp  farm                                                                    
(potentially  grown for  food  production)  that overlaid  a                                                                    
carbon  offset   project  to   help  with   kelp  production                                                                    
economics or  because they were interested  generally. Under                                                                    
the scenario, the  state may get an annual fee  for the land                                                                    
lease and some percentage of the carbon revenue.                                                                                
                                                                                                                                
3:08:25 PM                                                                                                                    
                                                                                                                                
Representative Galvin  asked why  the state would  choose to                                                                    
lease  acres to  another  company that  could  find its  own                                                                    
turnkey  organization  to assume  risks  of  a project.  She                                                                    
thought  it  seemed  the state  was  hiring  another  middle                                                                    
manager. She was trying to understand the reasons.                                                                              
                                                                                                                                
Ms.  Miller responded  that although  the bill  required the                                                                    
division  to structure  compensation to  maximize return  to                                                                    
the state, a  lessee's primary motivation may or  may not be                                                                    
profit off the  carbon. She used the kelp  farm scenario [on                                                                    
slide 5]  as an example.  Potentially there would  be enough                                                                    
of  a  carbon  purpose  associated to  offset  some  of  the                                                                    
marginal  economics. In  that instance  the  state would  be                                                                    
realizing some  percentage of revenue related  to the carbon                                                                    
purpose  and  the ability  to  advance  another program  the                                                                    
legislature  had  authorized  that went  to  local  economic                                                                    
development.  The  other  example   [on  slide  5]  involved                                                                    
substantial risk  and upfront capital.  She noted it  may or                                                                    
may not  be something the  state was prepared to  engage in.                                                                    
She  stated that  if a  third party  wanted to  take it  on,                                                                    
there was the  potential to let them take the  risk that the                                                                    
trees grow  the way  they were supposed  to on  schedule and                                                                    
that they  were able  to generate  the credits,  put upfront                                                                    
capital in,  and still generate  some revenue  from allowing                                                                    
someone else to take on the activities.                                                                                         
                                                                                                                                
Ms.  Miller believed  that in  other  instances, a  lessee's                                                                    
primary  interest  may  be  trying  out  some  newer  carbon                                                                    
purpose  things that  were not  quite as  established. Under                                                                    
the  scenario, the  lessee would  be looking  to achieve  an                                                                    
environmental benefit  and the revenue was  important too in                                                                    
order to justify  and fund the work and the  state would get                                                                    
its share of  the revenue. She believed there  were a number                                                                    
of  permutations. She  reminded committee  members that  the                                                                    
state  forests were  not  eligible for  lease  and would  be                                                                    
reserved for state projects.                                                                                                    
                                                                                                                                
Representative  Galvin  asked  if Native  organizations  had                                                                    
done  anything  similar involving  leasing  of  acres and  a                                                                    
middle  person. Alternatively,  she wondered  whether Native                                                                    
organizations  had directly  contacted companies  looking to                                                                    
take on a project.                                                                                                              
                                                                                                                                
Ms.  Miller responded  that to  her knowledge  the landowner                                                                    
did  not lease  the  land  to a  developer.  She stated  her                                                                    
understanding that  the landowner was able  to work directly                                                                    
with  a   developer  as  a  partner/contractor   to  develop                                                                    
projects.                                                                                                                       
                                                                                                                                
3:12:39 PM                                                                                                                    
                                                                                                                                
Ms.  Miller  advanced  to  slide 7  titled  "Path  2:  State                                                                    
Projects - Review." She detailed  that the bill stood up the                                                                    
carbon offset  program for  the state  to undertake  its own                                                                    
projects that would  be housed under OPMP.  She explained it                                                                    
was an  existing model within  DNR that was proven  at being                                                                    
able  to  manage  things spanning  different  divisions  and                                                                    
needs. The  state would be  the project proponent  and owner                                                                    
and may  work with  a partner such  as a  project developer.                                                                    
There would be costs to start  and manage a project over its                                                                    
term. The  project would generate credits  for carbon stored                                                                    
and  the state  would sell  credits to  buyers and  generate                                                                    
revenue.                                                                                                                        
                                                                                                                                
Ms. Miller continued  to discuss path 2  pertaining to state                                                                    
projects on slide  8. She noted that the  committee had seen                                                                    
similar  information  from  Kurt Krapfl  with  the  American                                                                    
Carbon  Registry  and  potentially from  Josh  Strauss  with                                                                    
Anew. The  idea was to  show how  the steps worked  within a                                                                    
project.                                                                                                                        
                                                                                                                                
Ms.  Miller   advanced  to  slide  9   and  discussed  costs                                                                    
associated  with state  projects. There  were fixed  program                                                                    
costs  regardless  of  the  number  of  projects  the  state                                                                    
undertook.  She  highlighted that  the  costs  shown on  the                                                                    
slide were  reflected in  the fiscal  notes. The  slide also                                                                    
noted  the   initial  capital  to  OPMP   to  establish  the                                                                    
framework  and  retain  expertise. Project  dependent  costs                                                                    
included  feasibility  analysis,  implementation  (including                                                                    
the  initial  forest  inventory, computer  modeling  of  the                                                                    
growth  to set  a baseline  and accountability),  papering a                                                                    
project in order  to submit it to the  registry, and ongoing                                                                    
project maintenance (inventories  were required periodically                                                                    
as well as onsite and desktop verifications).                                                                                   
                                                                                                                                
Ms. Miller  continued to review  project dependent  costs on                                                                    
slide 10.  There were  a variety  of ways  for the  state to                                                                    
approach projects including use of  state staff and funds or                                                                    
contracting with  a project  developer. She  elaborated that                                                                    
the  state could  hire  a  project developer  on  a fee  for                                                                    
service  basis or  work with  the Department  of Revenue  to                                                                    
hire separate marketing companies  to assist with marketing.                                                                    
The  state could  also  look  to an  ala  carte concept  and                                                                    
contract   directly  on   a   fee-for-services  basis   with                                                                    
companies engaged  in one particular  aspect of  the project                                                                    
development  such as  counting  and measuring  trees in  the                                                                    
forest inventory or computer modeling for the growth.                                                                           
                                                                                                                                
Ms. Miller advanced to state  project scenarios on slide 11.                                                                    
The scenarios  featured potential pilot  projects identified                                                                    
by Anew. She  clarified that the slide did  not indicate the                                                                    
projects would be undertaken or  in the exact form described                                                                    
by Anew; however, they provided a  way to show how the costs                                                                    
and  returns played  out over  the  life of  a project.  The                                                                    
scenarios included modest returns,  and much would depend on                                                                    
timing  and  number  of projects,  the  project  sizes,  the                                                                    
verified  carbon  stored  by  the  projects,  the  price  of                                                                    
credits, and  the marketing  success. Ultimately,  the money                                                                    
from  the credit  sales  would flow  into  the fund  created                                                                    
under the bill.  The department saw carbon  as an additional                                                                    
layer  of  land  and  resource  use  that  complimented  the                                                                    
existing  uses,  which did  not  consume  or sever  a  state                                                                    
resource,  and was  additive (e.g.,  in  state forests  with                                                                    
ongoing harvests).                                                                                                              
                                                                                                                                
3:17:11 PM                                                                                                                    
                                                                                                                                
Ms.  Miller continued  to  slide 12  titled  "Path 2:  State                                                                    
Projects   1-project scenario."  The slide used and expanded                                                                    
on Anew's  crediting tables. The  column on the  left showed                                                                    
the  project  year,  the  second  column  showed  the  total                                                                    
credits  generated in  a project,  the third  column reduced                                                                    
the credits  by 30 percent  to account for any  leakage, and                                                                    
the fourth  column showed  buffer credits  at 18  percent on                                                                    
average  (the  insurance  pool   in  the  event  of  natural                                                                    
disasters  required by  the registry).  The fifth  and sixth                                                                    
columns   showed    conservation   and    removal   credits,                                                                    
respectively.  She  believed  Mr.   Strauss  with  Anew  had                                                                    
thoroughly described  the difference between the  two items.                                                                    
The  seventh column  showed gross  project  revenue and  the                                                                    
eighth  column  reflected  the project  expense,  which  was                                                                    
specific to  the project.  The next  columns showed  the net                                                                    
project  revenue  and  developer  share,  respectively.  She                                                                    
noted the  developer share was  20 percent, if  any, because                                                                    
projects that  were not  turnkey operations  would not  be a                                                                    
flat  20 percent.  She  elaborated  that a  fee-for-services                                                                    
model would be  covered in the project  expenses. The second                                                                    
to  last  column  on the  right  reflected  fiscal  note/DNR                                                                    
program costs, which  were not part of the  project but were                                                                    
important to show  when looking at potential  revenue from a                                                                    
project.  The  final  column  was  net  state  revenue  that                                                                    
reflected everything pulled together.                                                                                           
                                                                                                                                
Ms.  Miller moved  to a  scenario  on slide  13 where  three                                                                    
projects were  done concurrently.  She relayed that  the big                                                                    
difference was  in the  fixed DNR  program costs,  which had                                                                    
not changed  from the  one project slide  [12] to  the three                                                                    
project  slide  [13].  She highlighted  a  larger  scope  of                                                                    
potential revenue [shown in the  net state revenue column on                                                                    
the right].                                                                                                                     
                                                                                                                                
Ms.  Miller continued  to slide  14 titled  "Path 2:  Carbon                                                                    
Offset  Revenue  Fund."  She  explained  that  revenue  from                                                                    
credit sales would flow to  the fund. She referenced Section                                                                    
6, page 6, lines 13 through  20 of the legislation where the                                                                    
fund details were laid out. She reviewed the slide:                                                                             
                                                                                                                                
   HB 49 version \U:                                                                                                            
                                                                                                                                
      Fund is outside general fund (GF)                                                                                      
                                                                                                                                
      Revenue automatically flows into fund  "shall" be                                                                      
        deposited                                                                                                               
                                                                                                                                
      Legislative appropriation required for DNR fund use                                                                    
                                                                                                                                
      Used for purposes of Carbon Offset Program                                                                             
                                                                                                                                
      Unobligated amount over $10M returns to GF annually                                                                    
                                                                                                                                
Ms. Miller addressed potential uses  [of the fund]. The fund                                                                    
would go  towards paying project bills  and required project                                                                    
maintenance  (ongoing  costs  of recurring  inventories  and                                                                    
audits in  order to keep generating  additional credits from                                                                    
the project). She  elaborated that there may  be projects at                                                                    
some point  with other activities involved  (e.g., thinning)                                                                    
that would generate additional credits.  The fund would also                                                                    
be   used  towards   initiating  additional   carbon  offset                                                                    
projects  and feasibility,  start-up, and  implementation to                                                                    
continue  generating  additional  revenue to  the  fund  and                                                                    
general fund.                                                                                                                   
                                                                                                                                
                                                                                                                                
3:21:16 PM                                                                                                                    
                                                                                                                                
Representative Josephson  asked for verification  that state                                                                    
forests were eligible and a prime target for the program.                                                                       
                                                                                                                                
Ms. Miller  responded that  "we've been  able to  affirm the                                                                    
potential of  that" and  trees had  a tremendous  ability to                                                                    
store  carbon. She  stated  that trees  would  be the  first                                                                    
place to start looking at the different projects.                                                                               
                                                                                                                                
Representative  Tomaszewski  stated his  understanding  that                                                                    
once  the  fund reached  $10  million,  anything above  that                                                                    
would start rolling into the  general fund. He looked at the                                                                    
one project  scenario for  state projects  on slide  12 that                                                                    
showed $11 million  in 2032. He asked  for verification that                                                                    
there  would be  no  revenue  to the  general  fund for  ten                                                                    
years.                                                                                                                          
                                                                                                                                
Ms. Miller  responded it  was true  assuming there  was only                                                                    
one  project.  She  clarified  that   DNR  found  it  highly                                                                    
unlikely  there would  only be  one project.  The department                                                                    
thought  there  was  tremendous  potential  and  anticipated                                                                    
multiple projects.                                                                                                              
                                                                                                                                
Representative  Tomaszewski  observed  the costs  were  $4.5                                                                    
million  during the  same  time period  and  $11 million  in                                                                    
revenue.                                                                                                                        
                                                                                                                                
3:23:09 PM                                                                                                                    
                                                                                                                                
Co-Chair  Edgmon thought  that  the numbers  built into  the                                                                    
ten-year forecast for  the state were wildly  above what the                                                                    
committee was  hearing presently.  He cited $300  million in                                                                    
the current year,  $500 million for the next  year, and $900                                                                    
million coming up. He stated  it was perhaps attainable down                                                                    
the  road  if  every   cylinder  collected  at  full  speed.                                                                    
However, the assessment he was  hearing was much smaller and                                                                    
more  modest. He  stated it  was still  promising and  worth                                                                    
exploring  but  did  not reflect  hundreds  of  millions  of                                                                    
dollars. He asked for comment.                                                                                                  
                                                                                                                                
Ms. Miller responded that the  department was discussing and                                                                    
presenting modest revenues with  the affirmed potential. The                                                                    
department wanted to  build on and explore  what it believed                                                                    
to be greater potential. She  stated it would depend on what                                                                    
kind of protocols  the state was able to tap  into under the                                                                    
parameters of the bill on what kind of land.                                                                                    
                                                                                                                                
Co-Chair Edgmon  asked if  it was  possible to  have several                                                                    
hundred million in revenue in a handful of years.                                                                               
                                                                                                                                
Ms. Miller  responded it  was not possible  in a  handful of                                                                    
years  due to  the initial  time constraints.  She estimated                                                                    
there were around four years  to do regulations, receive and                                                                    
evaluate  projects, decide  what  projects  to move  forward                                                                    
with, and 18 to 24 months of project development.                                                                               
                                                                                                                                
3:24:46 PM                                                                                                                    
                                                                                                                                
Representative Coulombe  observed that  the expenses  in the                                                                    
fiscal  notes and  the $447,100  [shown in  the DNR  program                                                                    
cost columns  on slides 12  and 13]  were all coming  out of                                                                    
UGF, but the revenues went into a different fund.                                                                               
                                                                                                                                
Ms. Miller responded  that the positions would  be funded by                                                                    
UGF  until  there  was sufficient  revenue  coming  in  from                                                                    
carbon offset  projects to supplant  the UGF. She  stated it                                                                    
would be  immediately. She relayed  that the  column showing                                                                    
DNR  program  costs did  not  indicate  a fund  source.  She                                                                    
explained that  if there  was revenue  in the  carbon offset                                                                    
fund, it  would cover the  cost and  UGF would no  longer be                                                                    
necessary.                                                                                                                      
                                                                                                                                
Representative  Coulombe remarked  it did  not appear  there                                                                    
would be any  revenue in the years indicated  by Ms. Miller.                                                                    
She thought it  looked like the state was  paying and paying                                                                    
and then it would magically be flipped.                                                                                         
                                                                                                                                
Ms. Miller  confirmed that  the state would  rely on  UGF in                                                                    
the initial years before credit revenue was flowing.                                                                            
                                                                                                                                
Co-Chair Foster thanked Ms. Miller for her presentation.                                                                        
                                                                                                                                
HB  49  was   HEARD  and  HELD  in   committee  for  further                                                                    
consideration.                                                                                                                  
                                                                                                                                
3:26:42 PM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
3:30:30 PM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                
^PRESENTATION: ALASKA LIQUEFIED NATURAL GAS PROJECT UPDATE                                                                    
                                                                                                                                
3:30:39 PM                                                                                                                    
                                                                                                                                
FRANK  RICHARDS,   PRESIDENT,  ALASKA   GASLINE  DEVELOPMENT                                                                    
CORPORATION,  introduced  himself   and  his  colleague.  He                                                                    
relayed  he  would  provide  an  update  on  Alaska  Gasline                                                                    
Development  Corporation's (AGDC)  commercial structure  and                                                                    
on  activities the  corporation had  undertaken to  move the                                                                    
[Alaska  Liquified Natural  Gas (LNG)]  project forward.  He                                                                    
provided  a  PowerPoint   presentation  titled  "Alaska  LNG                                                                    
Project  Update,"  dated May  3,  2023  (copy on  file).  He                                                                    
reviewed that  AGDC was a  state corporation created  by the                                                                    
legislature in 2013  with a mission to  maximizing the North                                                                    
Slope natural  gas assets  to be able  to ring  them through                                                                    
and develop infrastructure for Alaska's  needs to help lower                                                                    
the  cost  for  Alaskans  and  commercialize  resources  and                                                                    
provide them  to international markets  to bring  in revenue                                                                    
to the state.                                                                                                                   
                                                                                                                                
Mr. Richards  moved to  slide 3 and  stated that  the Alaska                                                                    
LNG project  was not  the project  legislators had  heard or                                                                    
read about  over the last  20 years. He explained  that some                                                                    
modifications  had been  made over  the past  several years,                                                                    
primarily around  the commercial  aspects of the  project in                                                                    
terms  of lowering  the cost  of  supply. Additionally,  the                                                                    
concept  was to  increase revenues  to the  state and  would                                                                    
transition  development  back  to  the  private  sector  for                                                                    
funding and construction.                                                                                                       
                                                                                                                                
Mr. Richards turned  to slide 4 titled "Alaska  LNG: Gas for                                                                    
Alaskans  and  Export."  He  relayed   that  LNG  stood  for                                                                    
liquified natural  gas. The project would  utilize resources                                                                    
in the  Prudhoe Bay and Point  Thomson Units for a  total of                                                                    
40  trillion  cubic  feet   (Tcf)  of  proven,  conventional                                                                    
produced gas  available for export.  The gas in  Prudhoe Bay                                                                    
alone  amounted to  8.5 billion  feet, which  was compressed                                                                    
and put back  down. The project included  the development of                                                                    
an  Arctic carbon  capture plant  on the  North Slope  where                                                                    
carbon  dioxide  (CO2)  would   be  removed,  captured,  and                                                                    
sequestered  in a  reservoir. He  explained it  would enable                                                                    
the  project to  take  advantage of  the  [federal] 45Q  tax                                                                    
credits  that would  equate to  $600  million in  additional                                                                    
annual  revenue. The  pipeline  would run  from Prudhoe  Bay                                                                    
paralleling the Trans-Alaska  Pipeline System (TAPS) towards                                                                    
Fairbanks and continuing along the  Parks Highway and Alaska                                                                    
Railroad  to  Nikiski where  an  LNG  plant would  be  built                                                                    
adjacent to  the existing Agrium  and Kenai  LNG facilities.                                                                    
The  LNG would  be  produced  at the  plant  in Nikiski  and                                                                    
shipped overseas on tankers.                                                                                                    
                                                                                                                                
3:33:38 PM                                                                                                                    
                                                                                                                                
Mr. Richards moved  to slide 4 and  highlighted that Senator                                                                    
Dan Sullivan  had recently shared with  the legislature that                                                                    
the  Congressional delegation  had been  very supportive  of                                                                    
the project.  He shared that  Senator Sullivan  had traveled                                                                    
to  Asia   with  AGDC  to   interface  with   countries  and                                                                    
offtakers.  He noted  the senator's  enthusiasm and  support                                                                    
was very helpful.                                                                                                               
                                                                                                                                
Representative Josephson referenced  Mr. Richards' statement                                                                    
about  the $600  million more  to the  project with  45Q tax                                                                    
credits. He asked if the amount was net to the state.                                                                           
                                                                                                                                
Mr.  Richards  responded  that  the  45Q  tax  credits  were                                                                    
extended in  a bipartisan  effort by Congress.  He clarified                                                                    
that the  owners of  a carbon plant  like the  Arctic carbon                                                                    
capture plant would receive the  tax credits. The first five                                                                    
years  would equate  to approximately  $600 million  in cash                                                                    
available to the  operator and the remaining  seven years of                                                                    
the project's  life would  be in  tax credits  available for                                                                    
the producer to  sell. He elaborated that  the credits would                                                                    
be $85 per  ton and the plant would capture  about 7 million                                                                    
tons per year.                                                                                                                  
                                                                                                                                
3:35:44 PM                                                                                                                    
                                                                                                                                
Representative Stapp  asked if  the plant would  qualify for                                                                    
the  direct capture  credit  of  up to  $180.  He asked  for                                                                    
verification  that the  amount was  on top  of the  existing                                                                    
credits available for enhanced oil recovery.                                                                                    
                                                                                                                                
Mr.  Richards responded  that there  were two  provisions in                                                                    
the  45Q  tax  credits.  One was  for  carbon  sequestration                                                                    
priced  at $85  per  ton.  The other  was  for enhanced  oil                                                                    
recovery at $55 per ton.  He clarified that the credits were                                                                    
not cumulative.                                                                                                                 
                                                                                                                                
Representative Tomaszewski  asked if  the 807 miles  of pipe                                                                    
[shown on slide 4] was large diameter.                                                                                          
                                                                                                                                
Mr.  Richards  responded that  the  pipe  was 42  inches  in                                                                    
diameter and  would be buried  for the vast majority  of the                                                                    
line except for fault crossings.                                                                                                
                                                                                                                                
Representative Tomaszewski observed  that the proposed route                                                                    
was well outside the Fairbanks  boundary. He asked what kind                                                                    
of tap was included for the Fairbanks area.                                                                                     
                                                                                                                                
Mr. Richards responded  that there was an  offtake point for                                                                    
Fairbanks  located off  the Chatanika  River. The  alignment                                                                    
would  run south  to  Livengood and  cross  the area  around                                                                    
Minto Flats. He  noted it was the first  major offtake point                                                                    
on the line.                                                                                                                    
                                                                                                                                
3:37:31 PM                                                                                                                    
                                                                                                                                
Representative   Hannan    presumed   that    the   monetary                                                                    
descriptions  and  benefits   Mr.  Richards  described  were                                                                    
critical   through  the   numbers   in  the   rest  of   the                                                                    
presentation.  She  recalled  from one  of  the  committee's                                                                    
meetings on carbon sequestration that  there was 10 years in                                                                    
the tax code before Congress  would have to renew the credit                                                                    
or it  would go  away. She  wondered if  AGDC used  the same                                                                    
timeframe for the development of  the project given that the                                                                    
Arctic carbon  capture plant was critical  to the economics.                                                                    
Alternatively, she  wondered if the project  would extend to                                                                    
15  to  20 years.  She  noted  she  may  have the  tax  code                                                                    
expiration date wrong.                                                                                                          
                                                                                                                                
Mr.  Richards   responded  that   AGDC  and   Goldman  Sachs                                                                    
calculated the  tax credit timeframe  to be 12  years, which                                                                    
equated  to  approximately  $7.2 billion  available  to  the                                                                    
project. He pointed  to a chart on slide 6  showing the cost                                                                    
of  supply.  He deferred  to  his  colleague for  additional                                                                    
detail in the 45Q tax credit provision.                                                                                         
                                                                                                                                
3:39:06 PM                                                                                                                    
                                                                                                                                
NICK  SZYMONIAK,  MANAGER,  NEW  BUSINESS  VENTURES,  ALASKA                                                                    
GASLINE DEVELOPMENT  CORPORATION, responded that  Alaska LNG                                                                    
was very  competitive with  strong economics.  The challenge                                                                    
of  moving the  project  forward  was due  to  its size  and                                                                    
complexity, not  the economics. The  state's cost  of supply                                                                    
was $6.55 to  deliver to Asia including the  purchase of the                                                                    
gas on the North Slope,  paying for profits to the investors                                                                    
of  the AK  LNG system,  and transportation.  He highlighted                                                                    
that the cost  was well below LNG market prices  in Asia and                                                                    
was  cheaper than  Cook Inlet  gas.  He stated  that as  any                                                                    
business  owner,  the  state  and  investors  would  not  be                                                                    
selling the LNG  at the cost of supply, it  would be sold at                                                                    
market prices. He  noted that prices may be  linked to crude                                                                    
oil, Henry  Hubb (Lower 48  gas price), or a  combination of                                                                    
the two and  fixed costs. The cost of  supply included $1.45                                                                    
for raw gas  and fuel, of that $1.25 was  the purchase price                                                                    
of  the  raw  gas  from   producers.  He  relayed  that  the                                                                    
discussions  were currently  under  negotiations. There  was                                                                    
the possibility  that if the  gas could be sold  above $6.55                                                                    
that  the   extra  revenue  could  be   shared  between  the                                                                    
producers, the state, and investors.                                                                                            
                                                                                                                                
Representative  Hannan restated  her previous  question. She                                                                    
provided a scenario  where the tax code expired  in 12 years                                                                    
and  the line  was not  yet  operating. She  asked AGDC  was                                                                    
saying  that  it was  immaterial  to  the economics  of  the                                                                    
project. She  asked for verification that  the project could                                                                    
move  forward without  the carbon  capture  element and  the                                                                    
element  was  merely  an ancillary  benefit  that  made  the                                                                    
project more profitable.                                                                                                        
                                                                                                                                
Mr. Richards  responded in the  affirmative. He  shared that                                                                    
in  talks with  individuals  in Washington  D.C. around  the                                                                    
bipartisan reestablishment  of the provision, they  had seen                                                                    
the benefit and had recreated  it and increased the cost. He                                                                    
noted that  hopefully the bipartisan support  would continue                                                                    
when it  needed to be  renewed in the future.  However, AGDC                                                                    
was not  relying on it,  but it was  a solid benefit  to the                                                                    
project.                                                                                                                        
                                                                                                                                
Mr.  Szymoniak added  that  there was  a  deadline for  when                                                                    
construction needed  to start,  which he believed  was eight                                                                    
to ten  years out. The corporation  expected construction to                                                                    
start within that period followed  by the 12-year period. He                                                                    
stated they  did not run a  material risk of running  out of                                                                    
time to benefit from the 45Q tax credits.                                                                                       
                                                                                                                                
3:41:53 PM                                                                                                                    
                                                                                                                                
Representative Cronk  remarked that he had  the same concern                                                                    
as  Representative  Tomaszewski.  He  highlighted  that  the                                                                    
coldest area  in Alaska was  the Interior and he  hoped that                                                                    
it was not excluded from  benefitting from a cheap source of                                                                    
heat. He asked  if all of the land needed  to build the line                                                                    
was secured.                                                                                                                    
                                                                                                                                
Mr. Richards responded that 93  percent of the land had been                                                                    
leased  to  the   project  by  the  state   or  the  federal                                                                    
government. There was 7 percent  remaining and AGDC would be                                                                    
in   discussions  with   the   municipalities  and   private                                                                    
landowners.  He stated  that the  remaining  lands would  be                                                                    
leased prior to the final investment decision.                                                                                  
                                                                                                                                
3:42:54 PM                                                                                                                    
                                                                                                                                
Mr. Richards moved to slide  7 titled "Lower Cost Energy for                                                                    
Alaskans." The  mission provided by the  legislature was the                                                                    
ability to provide  and realize North Slope  assets to bring                                                                    
low cost  energy to Alaskans.  He detailed that the  cost of                                                                    
supply on  the international  market was $6.55,  which meant                                                                    
Alaskans  would  be able  to  receive  the  gas at  a  range                                                                    
between  $4 and  $5 per  million  btu because  it would  not                                                                    
require liquification  or shipping.  The price  charts shown                                                                    
on slide 7 provided an indicator  of what the price would be                                                                    
compared to historic  Cook Inlet gas prices.  The slide also                                                                    
showed a price comparison  between natural gas, heating oil,                                                                    
and electricity.  The outcome was  a significant  savings to                                                                    
households using natural gas or  had electricity produced by                                                                    
natural gas.                                                                                                                    
                                                                                                                                
Mr. Szymoniak continued  to slide 8 titled  "Alaska LNG: New                                                                    
State Revenue."  He relayed that  the analysis on  net state                                                                    
revenue that  would be generated  by the AK LNG  project had                                                                    
been produced by  the Department of Revenue  (DOR). He noted                                                                    
that  AGDC had  worked closely  with DOR  on the  inputs. He                                                                    
detailed that the chart included  property taxes at the full                                                                    
statutory 20  mills, but  it only  showed the  state's share                                                                    
and excluded  the municipal share.  The chart  also included                                                                    
the corporate income tax for  the upstream and midstream. He                                                                    
highlighted  a  significant  jump in  corporate  income  tax                                                                    
revenue   around  year   10,  which   was  associated   with                                                                    
depreciation  of  the  investment  in AK  LNG  pipeline  and                                                                    
plant.  The   chart  also   reflected  production   tax  and                                                                    
royalties, which  accrued from the  sale of natural  gas and                                                                    
increased  production  from  Point  Thomson  that  would  be                                                                    
unlocked by a major gas sale to the AK LNG project.                                                                             
                                                                                                                                
Mr. Richards  advanced to slide  9 titled  "Positive Climate                                                                    
Impact." He relayed that the  positive impact of the project                                                                    
would be the  replacement of coal in Asia  with natural gas.                                                                    
He  pointed  to a  bar  chart  reflecting the  lifecycle  of                                                                    
greenhouse  gas  emissions  from  natural  gas  versus  coal                                                                    
power. He emphasized that 77  million tons of carbon dioxide                                                                    
would  not   be  emitted  from  coal   power  production  by                                                                    
replacing it with natural gas from Alaska.                                                                                      
                                                                                                                                
Mr. Richards  moved to  slide 10  titled "Major  Permits and                                                                    
Authorizations."  He relayed  that  the AK  LNG project  had                                                                    
gone  through  the regulatory  process  led  by the  Federal                                                                    
Energy  Regulatory  Commission  (FERC). He  elaborated  that                                                                    
AGDC  had obtained  the federal  permits and  the two  major                                                                    
state  permits pertaining  to air  quality. The  corporation                                                                    
had  the rights-of-way  and it  would continue  to keep  the                                                                    
projects current and ready to go to construction.                                                                               
                                                                                                                                
3:46:02 PM                                                                                                                    
                                                                                                                                
Representative  Cronk asked  for  details  about the  Alaska                                                                    
Rural Energy Fund.                                                                                                              
                                                                                                                                
Mr.  Richards responded  that that  the Alaska  Rural Energy                                                                    
Fund was created in either HB  9 or SB 138 where legislators                                                                    
saw  there were  communities  that would  not be  benefiting                                                                    
from  energy off  the project.  The  legislation created  an                                                                    
affordable  energy fund  that would  allow revenues  to come                                                                    
into  the state  that the  legislature could  appropriate to                                                                    
communities  without  direct  access   to  the  project.  He                                                                    
relayed that  20 percent  of the  royalty payments  would be                                                                    
paid  into  the  fund  that could  be  appropriated  by  the                                                                    
legislature.                                                                                                                    
                                                                                                                                
Representative Josephson wanted to  ensure that another bill                                                                    
sponsored by  Senator James Kaufman would  not eliminate the                                                                    
fund.                                                                                                                           
                                                                                                                                
Co-Chair  Foster suggested  that  Mr. Richards  may want  to                                                                    
check  with Senator  Kaufman to  make  sure his  legislation                                                                    
would not eliminate something AGDC may need in the future.                                                                      
                                                                                                                                
Mr.  Richards noted  that Senator  Hoffman had  been "pretty                                                                    
gleeful" about the  recognition that the fund  was there. He                                                                    
would follow up with the senator's staff.                                                                                       
                                                                                                                                
Co-Chair   Edgmon  did   not  know   whether  Representative                                                                    
Josephson was  referring to  a bill  that the  committee had                                                                    
heard on  rural electrification. He noted  it was completely                                                                    
different [than the topic at hand].                                                                                             
                                                                                                                                
3:47:48 PM                                                                                                                    
                                                                                                                                
Mr.  Szymoniak relayed  that the  next several  slides would                                                                    
describe how AGDC  was going about getting AK  LNG built and                                                                    
developed with  private investors.  He stated that  over the                                                                    
years there  had been substantial  effort and  capital spent                                                                    
on AK  LNG by  the state and  producers. He  elaborated that                                                                    
the  effort  had gone  to  a  fully permitted  project  with                                                                    
significant engineering,  design, and field work  behind it.                                                                    
He explained that  the permitting and work to  date was very                                                                    
valuable.  There were  many investors  looking to  invest in                                                                    
LNG  projects. The  asset was  fully owned  by AGDC  and the                                                                    
corporation  had hired  Goldman  Sachs  to raise  investment                                                                    
capital for AK LNG. He  reported it would take an additional                                                                    
~$150  million to  get  the project  to  a final  investment                                                                    
decision (FID)  when construction  would start and  the full                                                                    
$44 billion  was committed. Much  of the  additional funding                                                                    
would be  for front  end engineering  and design  (FEED) and                                                                    
the overhead  and legal  and commercial work  to get  all of                                                                    
the  LNG sales  contracts, financing  agreements, and  other                                                                    
agreements to advance the project.                                                                                              
                                                                                                                                
3:48:56 PM                                                                                                                    
                                                                                                                                
Co-Chair  Johnson  noted  there were  currently  differences                                                                    
between  the  funding  included  in  the  House  and  Senate                                                                    
operating  budgets. She  explained that  one of  the reasons                                                                    
for  the   difference  was  the   inclusion  of   a  federal                                                                    
appropriation of  $4 million secured by  [U.S.] Senator Lisa                                                                    
Murkowski. She  stated that some  of the difference  was the                                                                    
House's  inclusion of  some operating  funds  for AGDC.  She                                                                    
believed that the Senate had  possibly included some capital                                                                    
funding outside of the $4  million. She asked for details on                                                                    
the funding AGDC needed.                                                                                                        
                                                                                                                                
Mr. Richards responded  that the FY 24  operating request in                                                                    
the  governor's budget  was approximately  $3.1 million  for                                                                    
personal  services,  travel,  services, and  commodities  to                                                                    
keep  the AGDC  operating team  moving forward.  The funding                                                                    
provided  for   a  small   number  of   employees,  computer                                                                    
services,  rent, heat,  electricity, and  small commodities.                                                                    
The $4 million  that came in from Senator  Murkowski had not                                                                    
been included in  the capital budget request  because it had                                                                    
been working its way through  Congress at the time. Congress                                                                    
had passed  the bill  and the president  had signed  it; the                                                                    
bill included  $4 million in federal  funds specifically for                                                                    
AGDC to use in FEED. He  elaborated that the FEED effort was                                                                    
approximately $150  million. The corporation was  looking to                                                                    
the private  sector to  fund the amount  in addition  to the                                                                    
amount provided  by Congress. He  noted that  unbeknownst to                                                                    
AGDC the federal funding had  a match requirement, which was                                                                    
the reason for  a $2.5 million request for  state funds. The                                                                    
funds   would  go   towards  moving   the  project   through                                                                    
commercial and legal  aspects and FEED to  bring the project                                                                    
ultimately  to  FID.  He summarized  that  AGDC's  operating                                                                    
budget  request  was included  in  the  House's budget.  The                                                                    
second  funding request  was  around  receipt authority  and                                                                    
match requirements.                                                                                                             
                                                                                                                                
3:52:25 PM                                                                                                                    
                                                                                                                                
Representative  Hannan  asked  whether AGDC  was  requesting                                                                    
that the  two additional requests be  in the FY 24  or FY 25                                                                    
budget. She asked  if the general fund match was  to match a                                                                    
federal capital receipt.                                                                                                        
                                                                                                                                
Mr. Richards clarified  that it was a FY 24  request and the                                                                    
federal  fund  receipt  authority  of  $4  million  was  the                                                                    
Senator  Murkowski  appropriation  for  FEED.  In  order  to                                                                    
utilize  the  federal  funding,  there  was  a  state  match                                                                    
requirement of $2.5 million UGF.                                                                                                
                                                                                                                                
Representative Hannan  asked if  it was  the first  time the                                                                    
committee had been notified of  the request for inclusion in                                                                    
the FY 24 operating budget.                                                                                                     
                                                                                                                                
Co-Chair Johnson  responded that  the request was  not brand                                                                    
new. She explained  it was the reason AGDC  had been invited                                                                    
to present to the committee.  She had learned of the request                                                                    
recently; it  had not  been part  of the  original operating                                                                    
budget because the federal funding  came in mid-session. The                                                                    
idea  was to  hear from  AGDC  to get  an update  and to  be                                                                    
appreciative of  the funding and learn  what the legislature                                                                    
needed to do in terms of matching funds.                                                                                        
                                                                                                                                
Mr. Richards  added that Senator Murkowski's  request was in                                                                    
the U.S. operating  budget ahead of time;  however, AGDC had                                                                    
not  known  what the  [U.S.]  Department  of Energy's  (DOE)                                                                    
match requirement would  be, if any. He stated  it had taken                                                                    
AGDC almost three  months to work through  the DOE hierarchy                                                                    
to  get to  a program  manager  and understand  there was  a                                                                    
match requirement.  He explained it  was the reason  for the                                                                    
late news provided to the  governor and Office of Management                                                                    
and Budget. He apologized for  the timing of the request and                                                                    
explained it had been extremely  difficult to get a response                                                                    
from DOE.                                                                                                                       
                                                                                                                                
                                                                                                                                
3:55:28 PM                                                                                                                    
                                                                                                                                
Representative Josephson  stated his understanding  that the                                                                    
$3.1 million  in the House  version of the  operating budget                                                                    
was not included in the  Senate's version. He asked how AGDC                                                                    
would  move   forward  without  the  money   if  the  Senate                                                                    
prevailed on the issue.                                                                                                         
                                                                                                                                
Mr. Richards responded that AGDC  would not move forward. He                                                                    
explained that  it would not have  the legislative authority                                                                    
or the funding to be  able to continue operations. He stated                                                                    
that if the budget did  not include the funding, he supposed                                                                    
AGDC would move  out of its offices, layoff  its people, and                                                                    
put its project in boxes.                                                                                                       
                                                                                                                                
Co-Chair Edgmon stated his  understanding that Goldman Sachs                                                                    
was under agreement  to raise investment capital  to get the                                                                    
project  to FID,  which  eventually would  lead  to the  $44                                                                    
billion  construction portion  of the  project. He  asked if                                                                    
the funding to pay Goldman  Sachs was under the service line                                                                    
item totaling $1,197,000 [shown on slide 20].                                                                                   
                                                                                                                                
Mr. Richards  responded that Goldman Sachs  was working with                                                                    
AGDC on  a contingency  basis and would  not get  paid until                                                                    
funds  were   raised  from   private  sector   entities.  He                                                                    
clarified that  Goldman Sachs would  be paid by  the private                                                                    
sector entities, not AGDC.                                                                                                      
                                                                                                                                
3:57:04 PM                                                                                                                    
                                                                                                                                
Representative  Galvin  looked  at   the  $1.8  million  for                                                                    
personal  services   [on  slide   20]  and   considered  the                                                                    
additional  $4 million  in federal  receipts. She  asked how                                                                    
many employees currently worked at AGDC.                                                                                        
                                                                                                                                
Mr.  Richards responded  there  were  currently four  filled                                                                    
positions, but there were eight or nine PCNs available.                                                                         
                                                                                                                                
Representative  Galvin  asked   for  verification  that  the                                                                    
services  request was  for other  contracting work,  not for                                                                    
Goldman Sachs.  She asked what the  request represented. She                                                                    
noted it was not a typical  budget for the committee to look                                                                    
at and she was striving for more clarity on the request.                                                                        
                                                                                                                                
Mr. Richards  responded that  the services  line represented                                                                    
paying  rent,   utilities,  IT  services,  and   some  small                                                                    
contracts for  personal services.  The majority of  the work                                                                    
AGDC had done  over the years to advance the  project on the                                                                    
commercial side  had been part of  the corporation's capital                                                                    
expenditures.  He   explained  that  when   the  legislature                                                                    
capitalized the AK  LNG fund, AGDC had  been utilizing those                                                                    
funds with  the authorization of  its board of  directors to                                                                    
advance the project.  He stated it was where  most of AGDC's                                                                    
contractual expenses resided.                                                                                                   
                                                                                                                                
Co-Chair Foster asked  if Mr. Richards was only  in town for                                                                    
the rest of the day.                                                                                                            
                                                                                                                                
Mr. Richards agreed.                                                                                                            
                                                                                                                                
Co-Chair  Foster stated  there was  time for  one additional                                                                    
question.  He   offered  to  bring  AGDC   back  before  the                                                                    
committee  at   a  later  date  to   answer  any  additional                                                                    
questions.                                                                                                                      
                                                                                                                                
3:59:28 PM                                                                                                                    
                                                                                                                                
Representative  Stapp referenced  AGDC's testimony  that the                                                                    
project  had the  best  economics of  any  project in  North                                                                    
America. He asked  if ADGC had high  confidence that Goldman                                                                    
Sachs would  be able to  raise the required $150  million in                                                                    
private equity needed for FID.                                                                                                  
                                                                                                                                
Mr. Richards  responded in the affirmative.  He relayed that                                                                    
Goldman  Sachs  was  not  doing   the  work  for  free;  the                                                                    
financial entity saw the value  in the project. He explained                                                                    
that   Goldman  Sachs   was  bringing   high  value   equity                                                                    
developers  and  international  companies to  the  table  to                                                                    
advance the project.                                                                                                            
                                                                                                                                
Co-Chair  Foster  asked  if Mr.  Richards  had  any  closing                                                                    
comments.                                                                                                                       
                                                                                                                                
Mr. Richards thanked  the committee for its  time. He stated                                                                    
that  AGDC was  advancing  the project  and  there was  keen                                                                    
interest.  Part  of  the  keen  interest  was  working  with                                                                    
investors who were doing their  due diligence on the project                                                                    
and  on   the  state.  The  corporation   was  engaged  with                                                                    
investors  on a  daily basis  and  its goal  was to  present                                                                    
hopefully positive results in the near-term.                                                                                    
                                                                                                                                
Co-Chair Foster  thanked the presenters. He  noted there may                                                                    
be an additional meeting scheduled  to answer any additional                                                                    
questions the committee may have.                                                                                               
                                                                                                                                
Co-Chair    Foster   acknowledged    Representative   Justin                                                                    
Ruffridge in the room.                                                                                                          
                                                                                                                                
Co-Chair Foster reviewed the agenda for the following day's                                                                     
meeting.                                                                                                                        
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
4:03:03 PM                                                                                                                    
                                                                                                                                
The meeting was adjourned at 4:02 p.m.                                                                                          
                                                                                                                                

Document Name Date/Time Subjects
HB 49 NEW FN DNR Forest Mngmt 042523.pdf HFIN 5/3/2023 1:30:00 PM
HB 49
HB 49 NEW FN DOR Comm Office 041923.pdf HFIN 5/3/2023 1:30:00 PM
HB 49
HB 49 NEW FN DNR Mining Land Water 4-26-23.pdf HFIN 5/3/2023 1:30:00 PM
HB 49
HB3.VerB.SupportingDocs.5.1.23.pdf HFIN 5/3/2023 1:30:00 PM
HB 3
HB49 Fiscal Picture DNR-HFIN 5-3-23 .pdf HFIN 5/3/2023 1:30:00 PM
HB 49
HB 50 2023 04 17 DNR Response to HFIN Q April 11, 2023.pdf HFIN 5/3/2023 1:30:00 PM
HB 50
HB 49 NEW FN DNR Project Mngmt 4-26-23.pdf HFIN 5/3/2023 1:30:00 PM
HB 49
AGDC HFIN 5.3.23 Presentation.pdf HFIN 5/3/2023 1:30:00 PM
AGDC - HFIN 050323
HB 49 NEW FN DNR Admin&Support $ 5-2-23.pdf HFIN 5/3/2023 1:30:00 PM
HB 49
Alaska LNG Revenue Analysis 2023.04.21 - SOA Spring Update AGDC .pdf HFIN 5/3/2023 1:30:00 PM
AGDC - HFIN 050323