03/01/2023 01:00 PM House RESOURCES
| Audio | Topic |
|---|---|
| Start | |
| HB50 | |
| HB49 | |
| Adjourn |
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 49 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | HB 50 | TELECONFERENCED | |
ALASKA STATE LEGISLATURE
HOUSE RESOURCES STANDING COMMITTEE
March 1, 2023
1:36 p.m.
MEMBERS PRESENT
Representative Tom McKay, Chair
Representative George Rauscher, Vice Chair
Representative Kevin McCabe
Representative Dan Saddler
Representative Stanley Wright
Representative Jennie Armstrong
Representative Donna Mears
Representative Maxine Dibert
MEMBERS ABSENT
Representative Josiah Patkotak
COMMITTEE CALENDAR
HOUSE BILL NO. 50
"An Act relating to the geologic storage of carbon dioxide; and
providing for an effective date."
- HEARD & HELD
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."
- HEARD & HELD
PREVIOUS COMMITTEE ACTION
BILL: HB 50
SHORT TITLE: CARBON STORAGE
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR
01/27/23 (H) READ THE FIRST TIME - REFERRALS
01/27/23 (H) RES, FIN
02/10/23 (H) RES AT 1:00 PM BARNES 124
02/10/23 (H) Heard & Held
02/10/23 (H) MINUTE(RES)
02/15/23 (H) RES AT 1:00 PM BARNES 124
02/15/23 (H) Heard & Held
02/15/23 (H) MINUTE(RES)
02/17/23 (H) RES AT 1:00 PM BARNES 124
02/17/23 (H) Heard & Held
02/17/23 (H) MINUTE(RES)
02/20/23 (H) RES AT 1:00 PM BARNES 124
02/20/23 (H) Heard & Held
02/20/23 (H) MINUTE(RES)
02/22/23 (H) RES AT 1:00 PM BARNES 124
02/22/23 (H) Heard & Held
02/22/23 (H) MINUTE(RES)
02/24/23 (H) RES AT 1:00 PM BARNES 124
02/24/23 (H) Bills Previously Heard/Scheduled
02/27/23 (H) RES AT 1:00 PM BARNES 124
02/27/23 (H) Heard & Held
02/27/23 (H) MINUTE(RES)
03/01/23 (H) RES AT 1:00 PM BARNES 124
BILL: HB 49
SHORT TITLE: CARBON OFFSET PROGRAM ON STATE LAND
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR
01/27/23 (H) READ THE FIRST TIME - REFERRALS
01/27/23 (H) RES, FIN
02/20/23 (H) RES AT 1:00 PM BARNES 124
02/20/23 (H) <Bill Hearing Canceled>
02/22/23 (H) RES AT 1:00 PM BARNES 124
02/22/23 (H) <Bill Hearing Canceled>
02/24/23 (H) RES AT 1:00 PM BARNES 124
02/24/23 (H) <Bill Hearing Canceled>
02/27/23 (H) RES AT 1:00 PM BARNES 124
02/27/23 (H) Scheduled but Not Heard
03/01/23 (H) RES AT 1:00 PM BARNES 124
WITNESS REGISTER
ED KING, Staff
Representative Tom McKay
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Gave an explanation of changes in the
proposed CS for HB 50, Version S, on behalf of Representative
McKay.
JOHN CROWTHER, Deputy Commissioner
Office of the Commissioner
Department of Natural Resources
Anchorage, Alaska
POSITION STATEMENT: Offered information and answered questions
during the hearing on the proposed CS for HB 50, Version S, on
behalf of the House Rules Standing Committee, sponsor by request
of the governor.
JOHN BOYLE, Commissioner Designee
Department of Natural Resources
Anchorage, Alaska
POSITION STATEMENT: Provided introductory remarks on HB 49, on
behalf of the House Rules Standing Committee, sponsor by request
of the governor.
JOSHUA STRAUSS, Senior Vice President
Anew Climate
Houston, Texas
POSITION STATEMENT: Gave an informational overview on forest
carbon during the hearing on HB 49.
JOHN CROWTHER, Deputy Commissioner
Office of the Commissioner
Department of Natural Resources
Anchorage, Alaska
POSITION STATEMENT: Answered questions during the hearing on HB
49.
ACTION NARRATIVE
1:36:30 PM
CHAIR TOM MCKAY called the House Resources Standing Committee
meeting to order at 1:36 p.m. Representatives Saddler, Wright,
Rauscher, McCabe, Dibert, Armstrong, Mears, and McKay were
present at the call to order.
HB 50-CARBON STORAGE
1:37:46 PM
CHAIR MCKAY announced that the first order of business would be
HOUSE BILL NO. 50 "An Act relating to the geologic storage of
carbon dioxide; and providing for an effective date."
1:38:15 PM
The committee took an at-ease from 1:38 p.m. to 1:42 p.m.
1:42:43 PM
REPRESENTATIVE RAUSCHER moved to adopt the proposed committee
substitute (CS) for HB 50, Version 33-GH1567\S, Dunmire,
2/28/23, as the working document.
CHAIR MCKAY objected for the purpose of discussion.
1:43:52 PM
ED KING, Staff, Representative Tom McKay, Alaska State
Legislature, presented an explanation of changes in Version S
from the written explanation of changes [hard copy in the
committee packet], which read as follow [original punctuation
provided]:
Change 1: Title was expanded by legal services
Change 2: Sections 4 and 5 were added as conforming
changes (page 2, lines 16-20)
Change 3: Clarifying language was added to the closure
trust fund statute (beginning page 2, line 24)
i. Ensure the fund was not susceptible to the
CBR sweep.
ii. Condense the fund to a single account
iii. Make technical drafting changes
Change 4: References to rental payments were removed
from sections 11
13 to conform with oil and gas procedures. (page
4, lines 15, 20, 22, and 29)
Change 5: Legal services redrafted the change to
38.05.184 as a new subsection rather than amending
(b) and made some technical drafting changes.
(page 5, line 29)
Change 6: The proposed carbon storage policy statements
in DNR and AOGCC statutes were deleted.
(page 6, lines 12-14)
Change 7: The minimum lease payments were replaced with
a requirement for DNR to establish market rates in
regulation.
(page 6, lines 12-14)
1:46:59 PM
REPRESENTATIVE MEARS, referencing change 7, asked why [the
references to minimum requirements for acreage, rental fees, and
injection charges] were removed.
MR. KING explained that Version S directed the department to
establish market rates in regulation. However, he said the
language was still imperfect and could be "tightened up" in the
amendment process.
1:47:48 PM
JOHN CROWTHER, Deputy Commissioner, Office of the Commissioner,
Department of Natural Resources (DNR), on behalf of the House
Rules Standing Committee, sponsor by request of the governor,
spoke to the overall policy intent of the change. He explained
that as the market for carbon capture, utilization and storage
(CCUS) projects rapidly developed, it was hard to identify set
floors that allowed projects to proceed while capturing the best
value for the state over the life of the project. Consequently,
the department wanted flexibility in statute to allow subsequent
regulation of public process to further define those terms as
the market matures.
1:49:06 PM
REPRESENTATIVE SADDLER asked Mr. Crowther to define "commercial
terms" and "economic terms."
MR. CROWTHER gave examples of annual lease rentals and lease
injection charges. He said he did not know which terms would be
used yet; however, a variety were used across existing
agreements and would evolve with the market. He reiterated his
belief that a fixed single option would be limiting.
REPRESENTATIVE SADDLER sought to confirm that "commercial terms"
were between the injector and some other entity.
MR. CROWTHER said at a conceptual level, the projects would
benefit from federal incentives and if there were changes to
increase federal incentives, the state may want to participate
in those.
1:51:16 PM
REPRESENTATIVE ARMSTRONG noticed that the $20 per acre minimum
was still included on page 6, line 30. She asked whether the
intent was to delete that language.
MR. KING confirmed that the language in question had been
identified as an area to be amended. He resumed the explanation
of changes, which read as follows [original punctuation
provided]:
Change 8: The license to lease terms were consolidated
in AS 38.05.715 and removed from AS 38.05.705.
(version A page 6, lines 14-17 to version S page
10, lines 14-16)
Change 9: The license renewal process was limited to
the time required for the lease conversion
determination to be completed.
(page 7, lines 10-11)
Change 10: The concurrent carbon storage leasing
section was changed to a transition from EOR to
storage process, which
i. Clarifies that oil and gas operators need to
obtain a storage permit before engaging in
activities outside the scope of their
production lease
ii. Requires lessees to assign DR&R between the
production and storage leases
iii. Aligns the EOR to storage processes among the
agencies (page 10, line 23 through page 11,
line 15)
Change 11: Amends the definitions by
i. Adding a definition for "unit agreement"
(11:24)
ii. Deleting the definition of "carbon dioxide"
(A11:29)
iii. Combining the definitions of "geologic
storage" and "carbon storage" (A12:5)
iv. Removing the phrase "perpetual or short-term"
from "carbon storage" (A12:6 and A28:21)
v. Deleting the unused terms "pore space,"
"reservoir," and "supercritical fluid" from
the DNR statutes (A12:6-11)
vi. Adding a definition of "carbon storage
capacity of a storage reservoir" (28:10-13)
vii. Adding a definition of "enhanced oil or gas
recovery" (28:25-27)
1:55:53 PM
REPRESENTATIVE SADDLER sought to verify that "enhanced oil or
gas recovery" was not included in Alaska Oil and Gas
Conservation Commission (AOGCC) statutes, but "pore space" and
"reservoir" were.
MR. KING confirmed that Representative Saddler was correct. He
resumed the explanation of changes, which read as follows
[original punctuation provided]:
Change 12: Clarified that means "metric ton"
(23:27 and 25:26)
Change 13: Aligned the accounting and expenditure
process of the new storage facility administrative
fund with existing procedures (beginning page 23,
line 26)
Change 14: Added DNR as an agency in charge of
requiring DR&R (page 25, line 13)
Change 15: Added a new bill section to exempt the use
of 45Q credits against state corporate income tax
liability
Change 16: Several technical drafting changes were made
throughout the bill
1:57:17 PM
REPRESENTATIVE MCCABE asked whether change 15 satisfied a
previously proposed amendment pertaining to 45Q credits.
REPRESENTATIVE ARMSTRONG answered in the affirmative.
MR. KING noted that there may be a need for further clarity on
the reference to tax credits. In addition, he highlighted
numerous small technical conforming changes in Version S, which
he characterized as non-substantive.
CHAIR MCKAY asked whether DNR had confirmed the changes in
Version S.
1:58:59 PM
MR. CROWTHER confirmed that the administration supported Version
S.
CHAIR MCKAY sought further questions from committee members on
Version S.
1:59:50 PM
REPRESENTATIVE SADDLER asked whether there was persuasive
evidence for condensing the fund into a single account.
MR. KING said the change was made by Legislative Legal Services.
He shared his understanding that the dedicated funds clause
within the Alaska State Constitution put a damper on the intent
of having two accounts.
REPRESENTATIVE SADDLER asked for verification that there was no
problem with intermingling the money and having the same fund
draw for operations and long-term liability.
MR. KING acknowledged that there was a separate administrative
fund that AOGCC put fees into. The closure trust, however, was
specifically for expenses that occur post closure when the state
takes title. He foresaw no interference or accounting
difficulties.
2:01:54 PM
CHAIR MCKAY removed his objection to the motion to adopt the
proposed committee substitute (CS) for HB 50, Version 33-
GH1567\S, Dunmire, 2/28/23, as a working document. There being
no further objection, Version S was before the committee.
2:02:20 PM
CHAIR MCKAY announced that HB 50 would be held over.
2:02:23 PM
The committee took an at-ease from 2:02 p.m. to 2:05 p.m.
HB 49-CARBON OFFSET PROGRAM ON STATE LAND
2:05:15 PM
CHAIR MCKAY announced that the final order of business would be
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."
2:06:32 PM
The committee took a brief at-ease at 2:06 p.m.
2:07:08 PM
JOHN BOYLE, Commissioner Designee, Department of Natural
Resources (DNR), provided introductory remarks on HB 49, on
behalf of the House Rules Standing Committee, sponsor by request
of the governor. The legislation focused on the utilization of
state land and submerged land for the purpose of carbon offsets,
which would offer the state a new avenue to diversify its
economy and revenues. He described the "tremendous" inventory
of state lands as a competitive advantage for Alaska that may be
very well suited for carbon offset projects. The administration
was asking for a broad regulatory framework, he said, to enable
DNR to engage with the market, understand where carbon offset
opportunities exist, and generate additional state revenues. He
shared his belief that carbon offset projects could incentivize
forest management and timber harvesting and revitalize the
forest industry as a whole in Alaska, while creating exciting
career opportunities. He emphasized that the bill would not
implement carbon taxes or cap-and-trade regimes on businesses
operating within the state, adding that the land used for carbon
projects would still be open for public access and public use.
The projects could be managed in a way that was reflective of
the state's ethos. He noted the thousands of miles of coastline
and submerged lands in Alaska that were high quality areas for
carbon offset projects, such as commercial kelp farms, that
could provide further opportunities in the mariculture industry.
He urged the state to stay nimble and flexible to respond to the
ever-growing and evolving market.
2:15:25 PM
JOSHUA STRAUSS, Senior Vice President, Anew Climate, gave a
PowerPoint presentation, titled "Forest Carbon Informational
Overview," [hard copy included in the committee packet]. He
outlined the agenda for the presentation on slide 2.
2:17:09 PM
MR. STRAUSS continued to slide 3, "About Anew," which read as
follows [original punctuation provided]:
•Oldest and largest carbon offset developer in North
America (20+ years)
•Voted Environmental Finance's Best Project Developer
(North America) and Best Offset Developer (California)
for seven years running
• Dedicated forestry team: in in-house finance,
marketing, and legal experts, plus 30 professional
foresters with unparalleled forest carbon experience
2:18:14 PM
MR. STRAUSS narrated the map on slide 4, "Anew Forestry Project
Map," which pictured some of the 110 forest carbon projects
under Anew's management in the U.S. and Canada. Slide 5 listed
Anew's notable public partnerships, including Alaska DNR,
Michigan DNR, Ohio DNR, 8 Wisconsin counties, 3 Massachusetts
townships, 2 Pennsylvania water authorities, and 1 public
university.
2:19:44 PM
MR. STRAUSS discussed forest carbon basics beginning on slide 7,
"What are forest carbon offsets," which read as follows
[original punctuation provided]:
• Forests across the US sequester substantial amounts
of CO2.
• By maintaining or increasing forest stocking, forest
landowners can generate units of CO2 emissions
reductions ("Carbon Offsets").
• Companies wishing to combat climate change are
willing to pay forest owners for these Carbon Offsets,
thereby claiming credit for reducing CO2 emissions and
mitigating some of the effects of climate change.
2:21:10 PM
MR. STRAUSS proceeded to slide 8, "Forest Carbon Markets," which
read as follows [original punctuation provided]:
Voluntary Market
Companies voluntarily choose to purchase offsets to
reduce their emissions
• Greater variation in pricing
o $4 to $35
• Premium vale attributed to "charismatic" projects
• Less certain demand
Compliance Market
Companies purchase offsets to help meet their legally
mandated emissions targets (CS & Quebec)
• More consistent pricing
o $15 to $20
• Built-in demand through 2030
Additional Compliance Programs
• Washington
• CORSIA (international aviation)
• Canada (Federal and Provincial)
• Oregon
2:24:37 PM
REPRESENTATIVE RAUSCHER asked whether anything federal was on
the horizon.
MR. STRAUSS said nothing was currently on the horizon for a
federal program.
REPRESENTATIVE RAUSCHER sought to confirm that any compliance
program would need to come through the state legislature.
MR. STRAUSS answered yes, a compliance program would be at the
state level. He reiterated that there was no federal oversight
on the horizon.
2:27:09 PM
REPRESENTATIVE MEARS asked whether, in terms of voluntary
compliance, a company looking to purchase carbon credits might
consider the preservation of habitat for wolverine and lynx in
Alaska a charismatic project worth investing in.
MR. STRAUSS answered yes, habitat preservation might increase
the credit value. He indicated that environmental conservation
in addition to emission reduction may be appealing.
2:28:12 PM
REPRESENTATIVE SADDLER suggested that saving the planet may not
have the same market value in twenty years. He asked how much
of the carbon market was voluntary versus compliance.
MR. STRAUSS acknowledged that there was no regulatory mandate
for the voluntary market. Nonetheless, many companies have
publicly committed to becoming carbon neutral by 2030 through
offset programs, for example. He added that although pricing
was variable, measures were being taken to add quantification to
various components of a carbon project. By enrolling in one
now, he said, it wouldn't preclude the ability to better
quantify positive impacts of the project as other methodologies
get "fleshed out."
2:31:22 PM
REPRESENTATIVE SADDLER clarified that if Alaska could derive
benefit from charismatic projects, he was supportive of
"pocketing that money."
CHAIR MCKAY asked whether there were federal tax credits for
voluntarily purchasing offsets.
MR. STRAUSS said no, there was not a direct path to federal tax
credits for these activities.
CHAIR MCKAY pointed out that HB 49 only addressed the voluntary
market.
2:32:36 PM
REPRESENTATIVE DIBERT asked how forest fires would be addressed
in forested areas in the Interior.
MR. STRAUSS said the department was keenly aware of the forest
fire risk. He discussed the American Carbon Registry's (ACR)
voluntary improved forest management protocol, which included a
"buffer" otherwise defined as a pooled insurance mechanism
for all credit-generating projects to cover catastrophic loss.
2:35:39 PM
MR. STRAUSS resumed the presentation on slide 8 and discussed
the compliance market. He continued to slide 9, which listed
examples of credit buyers in the voluntary space, including
Microsoft, Capital One, Nestle, Disney, Chevrolet, and etcetera.
He added that almost every organization in the Fortune 500 were
buying credits. He noted that state lands were not readily
eligible for participation in the compliance programs based on
their design. Mr. Strauss turned to slide 10, "Landowner
Obligations," which outlined the monitoring obligations per year
in both a voluntary and compliance setting. The ACR a
voluntary program was a 40-year commitment, for example,
whereas the compliance program would be well over 100 years. He
outlined the four stages of a carbon offset project:
verification, inventory, reporting, and the monitoring period.
He reiterated that the commitment to a carbon forest program
would not prevent the utilization of that land for recreation or
for sub-surface minerals.
2:44:01 PM
CHAIR MCKAY inquired about the 40-year monitoring period for
voluntary programs and asked whether that would be a 40-year
lease. In addition, he shared his understanding that Native
corporations had participated in the California compliance cap-
and-trade program. He asked whether those properties in Alaska
were under lease for 100 years.
MR. STRAUSS explained that the monitoring period is the length
of time that the landowner is obligated to follow the rules of
the program. For the voluntary space, the monitoring period is
a 40-year flat commitment, during which time the volume of
carbon stock must be maintained or increased with verification
every 5 years; inventory updates every 10 years; and annual
reports on harvesting. He contrasted that timeframe to the
compliance space, which has a monitoring period of 100 years, a
6-year verification period, 12-year inventory, and annual
reporting.
CHAIR MCKAY asked for verification that the Native corporations
that had sold credits in Alaska were under a compliance program.
MR. STRAUSS indicated that some of them were under a compliance
program.
2:48:33 PM
MR. STRAUSS continued the presentation on slide 11, "Key
Components of Offset Quality," which listed the following
principles: Additionality, permanence, verification/monitoring,
registration/serialization, leakage, reversal buffer.
2:53:20 PM
MR. STRAUSS proceeded to slide 12, "Alaska DNR Pilot Projects,"
which read as follows [original punctuation provided]:
• Three areas were selected as pilot projects due
to their carbon stocking, accessibility, and
timber marketability
• Three projects could collectively generate ~10
million offsets over 40-year life
st
• >$80 million in revenue over 1 decade alone
2:55:28 PM
REPRESENTATIVE SADDLER asked for the definition of
"additionality."
MR. STRAUSS defined additionality as the comparison of a project
to an alternate, hypothetical scenario, otherwise referred to as
a "baseline. In response to a request for clarification from
Representative Saddler, he described the baseline scenario as,
"what is likely or very plausible in the absence of a carbon
project."
2:57:31 PM
REPRESENTATIVE MEARS asked why state projects weren't eligible
for the compliance market. In addition, she questioned the
difference in market rates between the voluntary and compliance
markets.
CHAIR MCKAY clarified that HB 49 only covered the voluntary
market. He asked Mr. Crowther whether that was accurate.
2:58:17 PM
JOHN CROWTHER, Deputy Commissioner, Office of the Commissioner,
Department of Natural Resources (DNR), shared his understanding
that under current protocols for compliance markets, public
lands in Alaska would not be eligible. For that reason, HB 49
targeted the voluntary market.
REPRESENTATIVE MEARS asked whether there was a variance in
credit value on the voluntary versus compliance market.
MR. STRAUSS explained that compliance credits generally traded
for around $18. However, he predicted that a forest credit from
Alaska would trade at around $16 to $27.
2:59:25 PM
MR. STRAUSS walked the committee through the project development
process on slide 14, "Anew Services," which listed the following
stages: project feasibility analysis, contracting and listing,
inventory, modeling and documentation, verification, credit
registration and issuance, and credit sale.
CHAIR MCKAY gleaned that this process would be expensive. He
asked how much it would cost and who would pay for it.
3:03:52 PM
MR. STRAUSS conveyed that Anew, for example, covered all costs
associated with project development, which was sometimes in the
millions, and was only reimbursed upon successful sale of the
credits. Consequently, he shared his belief that Anew's
approach was appealing to landowners because they don't have to
allocate public funds to start a project. He concluded the
presentation on slide 15, "Development Timeline," which depicted
the approximately 18-month timeline of events from starting a
project to getting credits issued.
3:06:42 PM
REPRESENTATIVE SADDLER asked for the definition of "offset."
MR. STRAUSS likened "offset" to "credit" or one metric ton of
emissions reduction.
3:08:17 PM
CHAIR MCKAY announced that HB 49 would be held over.
3:08:33 PM
ADJOURNMENT
There being no further business before the committee, the House
Resources Standing Committee was adjourned at 3:08 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB50 CS - S.pdf |
HRES 3/1/2023 1:00:00 PM HRES 3/8/2023 1:00:00 PM |
HB 50 |
| HB 50 Summary of Changes (A to S).pdf |
HRES 3/1/2023 1:00:00 PM HRES 3/8/2023 1:00:00 PM |
HB 50 |
| HB 49 - Forest Carbon 101 - ANEW - 3.01.2023.pdf |
HRES 3/1/2023 1:00:00 PM |
HB 49 |
| HB 49 Overview Presentation DNR 03.01.23.pdf |
HRES 3/1/2023 1:00:00 PM HRES 3/8/2023 1:00:00 PM |
HB 49 |