Legislature(2021 - 2022)BARNES 124

01/21/2022 01:00 PM House RESOURCES

Note: the audio and video recordings are distinct records and are obtained from different sources. As such there may be key differences between the two. The audio recordings are captured by our records offices as the official record of the meeting and will have more accurate timestamps. Use the icons to switch between them.

Download Mp3. <- Right click and save file as

Audio Topic
01:04:16 PM Start
01:06:05 PM HB135
02:02:40 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Heard & Held
-- Invited & Public Testimony --
-- Testimony <Time Limit May Be Set> --
                    ALASKA STATE LEGISLATURE                                                                                  
               HOUSE RESOURCES STANDING COMMITTEE                                                                             
                        January 21, 2022                                                                                        
                           1:04 p.m.                                                                                            
MEMBERS PRESENT                                                                                                               
Representative Josiah Patkotak, Chair                                                                                           
Representative Grier Hopkins, Vice Chair                                                                                        
Representative Zack Fields                                                                                                      
Representative Calvin Schrage                                                                                                   
Representative Sara Hannan                                                                                                      
Representative George Rauscher                                                                                                  
Representative Mike Cronk                                                                                                       
Representative Ronald Gillham                                                                                                   
Representative Tom McKay                                                                                                        
MEMBERS ABSENT                                                                                                                
All members present                                                                                                             
COMMITTEE CALENDAR                                                                                                            
HOUSE BILL NO. 135                                                                                                              
"An Act relating to geothermal resources; relating to the                                                                       
definition of 'geothermal resources'; and providing for an                                                                      
effective date."                                                                                                                
     - HEARD & HELD                                                                                                             
PREVIOUS COMMITTEE ACTION                                                                                                     
BILL: HB 135                                                                                                                  
SHORT TITLE: GEOTHERMAL RESOURCES                                                                                               
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR                                                                                    
03/10/21       (H)       READ THE FIRST TIME - REFERRALS                                                                        
03/10/21       (H)       RES, FIN                                                                                               
04/22/21       (H)       RES WAIVED PUBLIC HEARING NOTICE, RULE                                                                 
                         23(A) UC                                                                                               
04/23/21       (H)       RES AT 10:30 AM BARNES 124                                                                             
04/23/21       (H)       Heard & Held                                                                                           
04/23/21       (H)       MINUTE(RES)                                                                                            
04/23/21       (H)       RES AT 1:00 PM BARNES 124                                                                              
04/23/21       (H)       -- MEETING CANCELED --                                                                                 
04/26/21       (H)       RES AT 1:00 PM BARNES 124                                                                              
04/26/21       (H)       Heard & Held                                                                                           
04/26/21       (H)       MINUTE(RES)                                                                                            
04/30/21       (H)       RES AT 1:00 PM BARNES 124                                                                              
04/30/21       (H)       Heard & Held                                                                                           
04/30/21       (H)       MINUTE(RES)                                                                                            
01/21/22       (H)       RES AT 1:00 PM BARNES 124                                                                              
WITNESS REGISTER                                                                                                              
HALEY PAINE, Deputy Director                                                                                                    
Central Office                                                                                                                  
Division of Oil and Gas (DO&G)                                                                                                  
Department of Natural Resources (DNR)                                                                                           
Anchorage, Alaska                                                                                                               
POSITION  STATEMENT:    On  behalf  of  the  administration,  co-                                                             
provided  a PowerPoint  presentation titled,  "HB 135  GEOTHERMAL                                                               
RESOURCES," dated 1/21/22.                                                                                                      
STEVE MASTERMAN, Director                                                                                                       
Division of Geological & Geophysical Surveys (DGGS)                                                                             
Department of Natural Resources (DNR)                                                                                           
Fairbanks, Alaska                                                                                                               
POSITION  STATEMENT:    On  behalf  of  the  administration,  co-                                                             
provided  a PowerPoint  presentation titled,  "HB 135  GEOTHERMAL                                                               
RESOURCES," dated 1/21/22.                                                                                                      
SEAN CLIFTON, Policy and Program Specialist                                                                                     
Central Office                                                                                                                  
Division of Oil and Gas (DO&G)                                                                                                  
Department of Natural Resources (DNR)                                                                                           
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:   During  the hearing on  HB 135,  answered a                                                             
ACTION NARRATIVE                                                                                                              
1:04:16 PM                                                                                                                    
CHAIR  JOSIAH  PATKOTAK  called   the  House  Resources  Standing                                                             
Committee  meeting  to  order  at   1:04  p.m.    Representatives                                                               
Schrage, Gillham,  Hannan, Rauscher,  Hopkins, Cronk,  McKay, and                                                               
Patkotak  were present  at  the call  to  order.   Representative                                                               
Fields arrived as the meeting was in progress.                                                                                  
1:06:05 PM                                                                                                                    
                  HB 135-GEOTHERMAL RESOURCES                                                                               
CHAIR PATKOTAK announced  that the first order  of business would                                                               
be HOUSE BILL NO. 135,  "An Act relating to geothermal resources;                                                               
relating  to  the  definition   of  'geothermal  resources';  and                                                               
providing for an effective date."                                                                                               
CHAIR PATKOTAK reminded  committee members that HB 135  is by the                                                               
[House Rules Committee by request of the governor].                                                                             
1:07:21 PM                                                                                                                    
HALEY  PAINE, Deputy  Director, Central  Office, Division  of Oil                                                               
and Gas (DO&G), Department of  Natural Resources (DNR), on behalf                                                               
of  the  administration,  co-provided a  PowerPoint  presentation                                                               
titled, "HB 135 GEOTHERMAL RESOURCES,"  dated 1/21/22.  She began                                                               
with slide 2, "AGENDA," and said  she would review the purpose of                                                               
HB 135,  review DNR's geothermal  leasing history, and  provide a                                                               
sectional analysis and summary of the bill.                                                                                     
MS. PAINE proceeded  to slide 4, "PURPOSE OF HB  135," which read                                                               
as follows  [original punctuation  provided with  some formatting                                                               
   • Modernize Alaska's geothermal exploration program                                                                        
        o Greater potential for providing affordable,                                                                           
          renewable energy to rural communities and remote                                                                      
          natural resource extraction projects                                                                                  
        o Promote clean energy industry job creation                                                                            
   • Align geothermal licensing with the oil and gas                                                                          
    exploration   license   program,   thereby   increasing                                                                   
     feasibility for companies to develop resources                                                                           
        o More time for a company to identify and prove                                                                         
          resource to convert to leases                                                                                         
        o Conversion to leases based on completion of work                                                                      
          commitment and submission of exploration plan                                                                         
          instead of proving discovery of commercial                                                                            
        o Doubles maximum acreage allowed for exploration                                                                       
   • Reforms definitions for geothermal resources to focus                                                                    
     on Commercial Use                                                                                                        
        o Explicitly excludes domestic, noncommercial, or                                                                       
          small-scale industrial use from the need for a                                                                        
          geothermal license or lease                                                                                           
MS.  PAINE stated  that the  purpose of  HB 135  is to  modernize                                                               
Alaska's geothermal  exploration license program given  there are                                                               
opportunities to develop  the state's resources.   The bill would                                                               
increase  the   feasibility  for   companies  to   develop  those                                                               
resources  and  benefits   would  include  providing  affordable,                                                               
renewable energy and  creating jobs.  The bill  would also ensure                                                               
the   consideration  of   geothermal  resources   in  line   with                                                               
commercial use.                                                                                                                 
1:11:24 PM                                                                                                                    
REPRESENTATIVE  HANNAN asked  whether  it  is currently  required                                                               
that domestic  non-commercial, small-scale industrial use  have a                                                               
lease or permit  from the state.  She further  asked whether that                                                               
would be continued.   She said she understands that  HB 135 would                                                               
move and modernize the commercial aspect.                                                                                       
MS. PAINE replied  that current state statute does  not require a                                                               
permit  or lease  for a  small-scale or  home industrial  system.                                                               
However,  she pointed  out, that  is implicit,  not explicit,  so                                                               
[DNR] wants  to explicitly state  that homeowners  or individuals                                                               
would not be  impacted.  This explicit statement  allows for some                                                               
of these other changes to be made in the bill.                                                                                  
REPRESENTATIVE  HANNAN noted  that the  underlying premise  under                                                               
the state's oil and gas leasing  is about subsurface rights.  She                                                               
inquired about  the amount of  subsurface use of  geothermal that                                                               
is  not commercial.   She  further inquired  whether currently  a                                                               
property owner would  need a permit to enjoy  hot springs located                                                               
on their property.                                                                                                              
MS. PAINE  responded that a homeowner  is not going to  require a                                                               
permit from  DNR to access  the geothermal under  their property,                                                               
the use  of a heat  pump being an example.   She deferred  to her                                                               
DNR colleagues  to answer in terms  of the quantity or  number or                                                               
known  locations  of  the  duration  of use  of  those  sorts  of                                                               
products within the state.                                                                                                      
REPRESENTATIVE HANNAN said  she is okay with  having the question                                                               
answered later  since it  doesn't directly  pertain to  the bill.                                                               
However,  she  related,  she is  now  thinking  about  subsurface                                                               
rights that  are [currently] closely  monitored and  permitted in                                                               
the backyards of homeowners.                                                                                                    
1:14:37 PM                                                                                                                    
REPRESENTATIVE  HOPKINS drew  attention  to the  bullet point  on                                                               
slide  4  that  states,  "Doubles  maximum  acreage  allowed  for                                                               
exploration."   He  surmised  it  is a  doubling  from 50,000  to                                                               
100,000 acres for what an individual can get for a lease.                                                                       
MS. PAINE confirmed that that is correct.                                                                                       
REPRESENTATIVE  HOPKINS  asked whether  that  was  a concern  for                                                               
current lessees  or others  trying to  get leases  for geothermal                                                               
MS. PAINE answered that it hasn't  been found to be a problem per                                                               
se,  but that  any  time the  acreage can  be  increased it  will                                                               
maximize  the potential.   For  example,  it can  sometimes be  a                                                               
challenge to find  the location of the actual resource  for a hot                                                               
spring found at  the surface because it  isn't typically directly                                                               
underneath;  this  would  expand  the field  for  being  able  to                                                               
search.   She noted  that in  the agency's  exploration licensing                                                               
program,  an individual  may seek  500,000  acres, and  therefore                                                               
this [proposed] change  from 50,000 acres to  100,000 acres would                                                               
not be anything out of par with the mineral leasing program.                                                                    
REPRESENTATIVE HOPKINS remarked  that that is a lot of  land.  He                                                               
asked the  100,000 acres would be  roped off from any  other type                                                               
of development,  exploration, or sale during  the five-year lease                                                               
for proving the source and completing the work commitment.                                                                      
MS. PAINE replied that  it is not.  She said  the state would not                                                               
be granting exclusive rights to  access the property or any other                                                               
mineral, but it would be exclusive  to the geothermal.  These are                                                               
not mineral closing orders; this  just allows someone to enter an                                                               
area  and begin  to  explore  for those  resources.   All  access                                                               
provisions are  guided through  a plan  of exploration  and lease                                                               
plan of operations and are vetted accordingly through there.                                                                    
1:17:23 PM                                                                                                                    
REPRESENTATIVE   SCHRAGE  asked   whether   the  development   of                                                               
geothermal  energy  could make  the  acreage  unviable for  other                                                               
MS.  PAINE  responded that  when  evaluating  specific plans  for                                                               
operations, the  agency takes  into mind  the beneficial  uses of                                                               
the region more generally speaking.   Without a specific plan and                                                               
an understanding of the resource  size it would be speculative to                                                               
say whether  something may  hurt or  progress into  a plan.   For                                                               
example, if there  is an oil and gas  facility, certain competing                                                               
uses would  have to be  considered, but allowing  the opportunity                                                               
to  explore for  geothermal  would not  necessarily preclude  the                                                               
agency from advancing the other resources in the area.                                                                          
REPRESENTATIVE  SCHRAGE  asked  whether   a  process  exists  for                                                               
evaluating the different opportunities within an area.                                                                          
MS. PAINE replied  that multiple processes exist,  with the first                                                               
and foremost being  the best interest finding (BIF)  process.  An                                                               
applicant would  apply for a  permit on a  set area and  then the                                                               
state would conduct  a BIF under which all potential  uses of the                                                               
area  are evaluated,  including potential  cumulative impacts  to                                                               
resources and  uses as a  result of said permit  activities being                                                               
permitted in that  area.  After balancing  the potential positive                                                               
and   net   negative  effects   the   director   makes  a   final                                                               
determination.   AS  a  public  process it  is  noticed, and  the                                                               
comments  incorporated.    Following  that,  the  applicant  goes                                                               
through a permitting process to  indicate actual activities.  The                                                               
first phase  in BIF  disposal allows the  applicant to  enter the                                                               
land.  The second phase of  public process and notice is when the                                                               
applicant  has a  specific plan  for specific  metrics and  sizes                                                               
that [DO&G] can  take into account and let the  public know about                                                               
and then provide comment on.                                                                                                    
1:20:32 PM                                                                                                                    
REPRESENTATIVE GILLHAM  said his concern  is not so  much another                                                               
company coming  in but whether  someone with a permit  could lock                                                               
up  the 500,000  acres  so there  would be  no  access to  Alaska                                                               
residents who have used that land for centuries to hunt.                                                                        
MS. PAINE responded  that the 500,000 acres was in  result to the                                                               
agency's oil and gas exploration  licensing program, whereas this                                                               
bill  is seeking  to change  from 50,000  acres to  approximately                                                               
100,000 acres.  She said HB  135 would not do anything to change,                                                               
impact, or  impede the ability  of folks  to access the  area for                                                               
uses  such as  subsistence, all  of which  is taken  into accord.                                                               
Licensing is  simply to the  mineral estate.   The aforementioned                                                               
issues  have  not been  encountered  under  the agency's  current                                                               
geothermal program.                                                                                                             
1:22:12 PM                                                                                                                    
STEVE MASTERMAN,  Director, Division of Geological  & Geophysical                                                               
Surveys  (DGGS), Department  of Natural  Resources (DNR),  stated                                                               
that  he  doesn't  have  anything  more to  add  to  Ms.  Paine's                                                               
response to Representative Gillham.                                                                                             
1:22:33 PM                                                                                                                    
REPRESENTATIVE FIELDS  inquired about  the expanded area  and the                                                               
size of a facility.                                                                                                             
MS. PAINE  answered that  that would  not necessarily  indicate a                                                               
change in  size of the facility.   The sizing for  the facilities                                                               
would be  based on the what  the resource requires.   This merely                                                               
allows [the  applicant] to look  in a  greater space to  see what                                                               
resource  may be  there.   The  type of  facility  that would  be                                                               
placed  on an  area would  be at  the size  and scale  that makes                                                               
sense for the resource itself.                                                                                                  
1:23:39 PM                                                                                                                    
MS. PAINE resumed her presentation.   She turned to slide 5, "DNR                                                               
GEOTHERMAL  LEASING/PERMITTING HISTORY,"  which  read as  follows                                                               
[original punctuation provided with some formatting changes]:                                                                   
     Mount   Spurr  Currently   there  are   two  geothermal                                                                  
     exploration  prospecting  permits  in the  Mount  Spurr                                                                    
     area, both issued during 2021.                                                                                             
     Augustine  Island  An  application  for  a  prospecting                                                                  
     permit is under review for Augustine Island.                                                                               
     Augustine  Island  26  tracts were  offered.  Only  one                                                                  
     tract  was  leased  to  a  private  individual  and  no                                                                    
     exploration  work was  conducted  as a  result of  that                                                                    
     lease sale.                                                                                                                
     Mount Spurr 16  tracts leased to Ormat  and one private                                                                  
     individual. Ormat purchased 15  leases in the 2008 sale                                                                    
     and drilled  on southern flank of  volcano. They didn't                                                                    
     find  adequate  temperatures  in wells  to  pursue  the                                                                    
     project.  The state  has the  data available  on DO&G's                                                                    
     Mount Spurr On  June 24, 1986, DNR  offered 2,640 acres                                                                  
     in  two tracts.  Both tracts  received bids.  The lease                                                                    
     for Tract 1 expired in 1996,  and the lease for Tract 2                                                                    
     was terminated in 1990.                                                                                                    
     Mount Spurr  DNR held its  first geothermal  lease sale                                                                  
     in the Mount  Spurr area on May 17,  1983. 10,240 acres                                                                    
     in  16 tracts  were offered  in Competitive  Geothermal                                                                    
     Lease Sale 1.  One tract received a bid.  The lease for                                                                    
     that tract was terminated in 1992.                                                                                         
MS.  PAINE noted  that since  its  start in  1983 the  geothermal                                                               
program  has not  been  a significantly  large  program, and  the                                                               
tracts in which interest was shown  were in the Mount Spurr area.                                                               
All   the  activities   from  1983-2013   were  done   through  a                                                               
competitive  leasing  program,  which  would not  be  changed  or                                                               
affected by HB 135.   The competitive leasing program is designed                                                               
for  when multiple  parties show  an interest,  and competitively                                                               
making the  resources available ensures  the maximizing  of value                                                               
to the state.   She explained that HB 135  seeks to address those                                                               
times when there  is only a single interested party  and there is                                                               
not competitive  process.  It  is currently called  a prospecting                                                               
permit,  but it  can be  better characterized  as an  exploration                                                               
license.  Two parties presently  have prospecting permits located                                                               
in the  Mount Spurr  area and are  in their  two-year prospecting                                                               
permit stage.  Should HB  135 pass, these two existing permittees                                                               
would benefit  from the ability  to extend  from a two-year  to a                                                               
five-year.   An  application is  in place  for Augustine  Island,                                                               
with the preliminary BIF forthcoming in the next few months.                                                                    
1:26:23 PM                                                                                                                    
MS.  PAINE   spoke  to  slide   6,  "SECTIONAL   SUMMARY,"  which                                                               
highlights  everything that  is being  sought and  that would  be                                                               
changed  through HB  135.   The slide  read as  follows [original                                                               
punctuation provided with some formatting changes]:                                                                             
     1  (AOGCC) Removes  unnecessary reference  to AS  41.06                                                                  
     from  AS  31.05.030(m)  because   of  changes  made  by                                                                    
     Section 9.                                                                                                                 
     2   (DNR)  Changes   permits   to  licenses.   Explicit                                                                  
     exemption   for  geothermal   resources  intended   for                                                                    
     domestic, noncommercial, or  small-scale industrial use                                                                    
     (See  also  Section  9).  Removes  preferential  rights                                                                    
     clause.   This  provision   is   not  appropriate   for                                                                    
     commercial development of State resources.                                                                                 
     3  (DNR) Changes  permit to  license.  Extends term  of                                                                  
     licenses  (formerly permits)  from two  to five  years.                                                                    
     Replaces  lease  conversion requirement  of  commercial                                                                    
     discovery  and development  plan  with work  commitment                                                                    
     and exploration plan.                                                                                                      
     4 (DNR) Changes permit to license.                                                                                       
     5 (DNR) Changes permits  to licenses. Increases maximum                                                                  
     acreage  from 51,200  to  100,000.  Adds provision  for                                                                    
     rental fees  to be  defined in regulation,  rather than                                                                    
     statute (easier to update).                                                                                                
     6  (DNR)  Adds  new  subsections  to  AS  38.05.181  to                                                                  
     modernize unitization statute  for geothermal leases to                                                                    
     match  the  model  we  use  for  oil  &  gas  under  AS                                                                    
     7   (DNR)  Replaces   AS  38.05.965(6)   definition  of                                                                  
     geothermal resources (Same as Section 11).                                                                                 
     8  (AOGCC) Amends  AS 41.06.020(e),  clarifies that  AS                                                                  
     41.06 does  not limit  DNR's authority  over geothermal                                                                    
     resource management on state land.                                                                                         
     9  (AOGCC)  Amends  AS  41.06.020(f)  to  add  explicit                                                                  
     exemption   for  geothermal   resources  intended   for                                                                    
     domestic, noncommercial, or  small-scale industrial use                                                                    
     (See also Section 2).                                                                                                      
     10  (AOGCC)   Amends  AS  41.06.060(4)   definition  of                                                                  
     geothermal fluid  to remove temperature  references and                                                                    
     better conform with other changes in this bill.                                                                            
     11  (AOGCC)  Replaces  AS  41.06.060(5)  definition  of                                                                  
     geothermal resources (Same as Section 7).                                                                                  
     12 (AOGCC)  Repeals AS  41.06.005(b) and  AS 41.06.030,                                                                  
     since geothermal units are managed by DNR.                                                                                 
     1316    General   provisions  for   applicability   and                                                                  
     effective dates.  Includes applicability  provision for                                                                    
     prospecting permits currently being processed.                                                                             
1:27:26 PM                                                                                                                    
MS. PAINE discussed slide 8, "SECTION 2: PRIVATE USE EXEMPTION,"                                                                
which read as follows [original punctuation provided with some                                                                  
formatting changes]:                                                                                                            
     ? New language added:                                                                                                    
     A prospecting  license or lease  is not  required under                                                                    
     this   section  to   explore  for,   develop,  or   use                                                                    
     geothermal  resources  if  the geothermal  resource  is                                                                    
     intended  for domestic,  noncommercial, or  small-scale                                                                    
     industrial use.                                                                                                            
     ?  This explicitly  excludes  private geothermal  users                                                                  
     from a requirement to apply for a license or lease.                                                                      
MS. PAINE stated that Section  2 would provide private landowners                                                               
the  certainty  that  their  ability  to  access  geothermal  for                                                               
something like a ground source heat pump is protected in law.                                                                   
1:28:20 PM                                                                                                                    
REPRESENTATIVE SCHRAGE  asked what  the largest project  would be                                                               
that  someone  could  put  in  place  under  this  provision  for                                                               
domestic, noncommercial, or small-scale industrial use.                                                                         
MS.  PAINE replied  that it  is  intentionally not  limited to  a                                                               
specific size  so that  it can  be considered  based on  the use.                                                               
She  said [the  department]  did not  want  to set  a  cap for  a                                                               
certain number of kilowatts given it  was found that the caps put                                                               
on  the  definition  of  geothermal   and  temperature  may  have                                                               
restricted folks  unnecessarily.   "So," she continued,  "when we                                                               
are thinking  about this, we're  really focused on  some resource                                                               
that's  going  to  be  produced and  then  sold,  distributed  to                                                               
multiple clients, so that is why  we didn't really set a specific                                                               
kilowatt or megawatt exemption on there."                                                                                       
REPRESENTATIVE  SCHRAGE  asked whether  there  is  any risk  that                                                               
someone who  is using  this for a  non-commercial use  or someone                                                               
who  developed geothermal  infrastructure for  non-commercial use                                                               
could impact other uses unintentionally.                                                                                        
MS. PAINE responded  that despite the type of  project that would                                                               
go in, if someone is immaterially  using state land or creating a                                                               
large  project,   that  project   may  not  require   a  specific                                                               
geothermal  prospecting  permit.    However, it  would  no  doubt                                                               
require other  sorts of permits  and authorization that  may come                                                               
out  of  DNR, or  the  Department  of Environmental  Conservation                                                               
(DEC), or another agency.  Therefore,  that sort of risk would be                                                               
vetted through  the public  processes that  are in  place through                                                               
those other permits that might be required.                                                                                     
1:30:41 PM                                                                                                                    
MS. PAINE  addressed slide 9,  "SECTION 2:  PREFERENTIAL RIGHTS,"                                                               
which read  as follows [original  punctuation provided  with some                                                               
formatting changes]:                                                                                                            
     ? The  preferential rights  provision is  being deleted                                                                  
     because  it is  inappropriate  to  the situation  (it's                                                                  
     more  relevant to  water rights  or  other surface  use                                                                  
     cases not associated with the mineral estate).                                                                           
     ?  Surface   owner  rights   are  protected   under  AS                                                                  
          ?   If  conflict   arises,  DNR   ensures  private                                                                    
          landowners  would  not  be left  without  heat  or                                                                    
          power,   or   otherwise  damaged   by   commercial                                                                    
          ? Scenario is  unlikely because private landowners                                                                    
          usually don't have  financial resources to develop                                                                    
          a commercially-viable geothermal resource.                                                                            
     ?  Rights to  access  the mineral  estate are  reserved                                                                  
     under AS 38.05.125.                                                                                                      
          ?  Surface owners  must provide  reasonable access                                                                    
          to resource developers.                                                                                               
          ?  The same  condition  exists for  oil  & gas  or                                                                    
     ?  If  a  surface   use  agreement  can't  be  reached,                                                                  
     resolution process is in 11 AAC 86.145.                                                                                  
          ? DNR  holds a hearing wherein  the developer must                                                                    
          prove there  is no other alternative  location for                                                                    
          the well or data acquisition.                                                                                         
          ? If  the Commissioner concurs, developer  posts a                                                                    
          bond to  compensate landowner for any  impacts and                                                                    
          work progresses.                                                                                                      
     ?  Public notice  is  a part  of  the license  issuance                                                                  
     process, and surface owners would be included.                                                                           
MS. PAINE  said the preferential  rights clause  currently allows                                                               
that a surface  owner may exercise the  preferential right within                                                               
30 days after  receiving notice of the application  for a permit,                                                               
or by agreeing  to meet the terms  of a bid within  60 days after                                                               
receiving  notice of  the  acceptance  of the  bid  for a  lease.                                                               
Under current statute, the department  makes it known through the                                                               
public  notice process  when someone  applies  for a  prospecting                                                               
permit.  The  surface owner could then put a  permit over the top                                                               
of that and say, "I would like to use that."                                                                                    
1:31:50 PM                                                                                                                    
MS. PAINE  specified that this  is where  it gets to  DNR's point                                                               
about the explicit  exemption.  She said the  department wants to                                                               
ensure that  anything in the  realm of non-commercial  and small-                                                               
scale would not be impacted.   These types of projects would only                                                               
be of  the size and magnitude  that an individual would  not most                                                               
likely be  able to fund  and continue  with the exploration  of a                                                               
large-scale program.   This provides  the certainty  that someone                                                               
who has  spent money  on surveys  and exploration  for geothermal                                                               
doesn't  have  to  run  the  risk of  someone  placing  a  permit                                                               
application on top  of them and then thereby  selling that permit                                                               
back to  them at a fee;  that is essentially what  the removal of                                                               
the preferential rights clause is seeking to prevent.                                                                           
MS. PAINE said another reason  DNR wants to explicitly state that                                                               
this does  not apply is  so surface landowners are  not concerned                                                               
that  their domestic  use would  in  any way  be infringed  upon.                                                               
Several different provisions and processes  are in place in which                                                               
the surface  owner's rights are  protected.  If a  concern arises                                                               
between a  surface owner and  someone entering their  property to                                                               
explore  for a  mineral resource  that has  been granted  through                                                               
geothermal,  oil and  gas, or  another  sort of  lease, DNR  will                                                               
intervene under  AS 38.05.130  and a  robust public  process will                                                               
take  place   to  ensure  that   the  landowner  is   not  harmed                                                               
financially  and that  everything  is bonded  sufficiently.   She                                                               
reminded the committee  that this is where  members had questions                                                               
during a previous hearing.                                                                                                      
1:34:23 PM                                                                                                                    
REPRESENTATIVE  HOPKINS observed  the statement  on slide  9 that                                                               
under  AS 38.05.130  private landowners  would be  protected from                                                               
being  left without  heat  or  power.   He  further observed  the                                                               
statement  that   this  scenario  is  unlikely   because  private                                                               
landowners usually  don't have financial  resources to  develop a                                                               
commercially viable geothermal resource.   He posed a scenario in                                                               
which an  individual has a  heat pump  for private home  use, but                                                               
somebody develops  the resource on 100,000  acres surrounding the                                                               
home  and it  drains the  geothermal potential  for that  private                                                               
home.   He asked whether  HB 135  would protect a  homeowner that                                                               
loses  access to  a  geothermal resource  due  to the  commercial                                                               
development of a larger one.                                                                                                    
MS. PAINE replied that that  scenario may be highly unlikely, but                                                               
DNR  believes  these  provisions would  absolutely  protect  that                                                               
landowner.  The  sort of resource used to power  a home heat pump                                                               
may  not actually  be connected  to something  on the  scale that                                                               
would  be  large  enough  to  warrant  some  sort  of  commercial                                                               
development.  She deferred to Mr. Masterman to answer further.                                                                  
MR. MASTERMAN  responded that in  such a  scenario it would  be a                                                               
scale issue as well  as a depth issue.  A  home heat pump system,                                                               
he explained, is at very  shallow depths, generally tens of feet,                                                               
whereas a commercial scale  and commercial temperature geothermal                                                               
system  is at  depths of  a  thousand feet  or more.   The  depth                                                               
separation between these  two systems is going  to be substantial                                                               
and very likely  tapping into different sources  of either fluids                                                               
or heat.   They are  going to  be very distinct  geologically and                                                               
thermally,    and   therefore    the   scenario    described   by                                                               
Representative Hopkins would be very unlikely.                                                                                  
1:37:13 PM                                                                                                                    
REPRESENTATIVE  HOPKINS recalled  Ms. Paine's  statement about  a                                                               
robust  public notice  process.    He inquired  as  to whether  a                                                               
private landowner  who would  be impacted  by a  lease submission                                                               
would be mailed a notice or whether  it would just be posted on a                                                               
state website or public domain.                                                                                                 
MS. PAINE  answered that the  first step in the  general disposal                                                               
process is done by posting,  and under statute posting is through                                                               
the  newspaper, the  agency's website,  and  so forth.   When  it                                                               
moves  into  specific  sorts  of   operations  there  is  a  more                                                               
specified notification process.  To  receive a plan of operations                                                               
the  agency  requires  the  applicant  to  identify  the  surface                                                               
landowners that  may be impacted.   At the scale addressed  in HB
135,  which is  the  disposal  phase, it  is  more  of a  general                                                               
posting; then, as  there is a known project and  a known plan, it                                                               
becomes more specific.                                                                                                          
1:38:41 PM                                                                                                                    
REPRESENTATIVE  HANNAN observed  the  statement on  slide 9  that                                                               
preferential rights would be deleted  under HB 135.  However, she                                                               
observed,  the   presentation  later  states   that  hydrothermal                                                               
systems are  the most common  form of energy extraction  from the                                                               
geothermal  heat.   She inquired  about where  in the  permitting                                                               
water rights come in once there  is a finding that the geothermal                                                               
is substantial enough for commercial development.                                                                               
MS. PAINE replied that the water  rights would take place under a                                                               
separate  permitting process  through DEC.   She  said she  could                                                               
follow up with more details if the committee so wanted.                                                                         
MR. MASTERMAN  responded that most people  obtaining water rights                                                               
are  doing so  for either  agriculture or  domestic use,  so they                                                               
typically want high  quality water that is not  full of minerals,                                                               
chemicals,  or dissolved  constituents.   Geothermal systems  are                                                               
often very brine rich and  may have chemical attributes that make                                                               
them  unsuitable  for  drinking  or agricultural  use.    So,  he                                                               
advised, while there is potential  for overlap of water rights or                                                               
competitive  needs  for water,  the  chemical  attributes of  the                                                               
water for  geothermal use and  for agricultural and  domestic use                                                               
are quite distinct.                                                                                                             
1:42:19 PM                                                                                                                    
REPRESENTATIVE HANNAN requested that  the committee hear formally                                                               
from DEC on water rights.  She noted  that while it may not be in                                                               
DNR's purview, in  many parts of Alaska the water  use rights and                                                               
preferential water  use rights about salmon  spawning streams are                                                               
frequently  close to  where there  is  geothermal evidence,  with                                                               
Bristol Bay  being one such area.   She said she  wants to ensure                                                               
that a water  conflict is not created by  geothermal being siloed                                                               
from water rights when it is known that they are integrated.                                                                    
CHAIR PATKOTAK agreed to invite  DEC to come before the committee                                                               
regarding  where  in  the permitting  process  water  rights  are                                                               
1:43:46 PM                                                                                                                    
REPRESENTATIVE  SCHRAGE stated  he understands  that most  of the                                                               
water  rights issues  are currently  over non-brine  rich waters.                                                               
However, he  said, as more  exploration for geothermal  occurs he                                                               
is  concerned  about an  industrial  project  impacting the  heat                                                               
potential  of  other  non-commercial  private users.    He  asked                                                               
whether, at  the point of  putting in a  development, assessments                                                               
and  tracking  would  be done  to  see  if  there  is a  loss  of                                                               
efficiency or loss of heat potential due to the development.                                                                    
MS.  PAINE reiterated  that a  process  is in  place to  identify                                                               
whether anyone's  heat, power, or  other beneficial use  of their                                                               
property would  be impacted;  so DNR would  be able  to evaluate,                                                               
intervene, and make sure compensation  is in place.  She deferred                                                               
to Mr.  Masterman to  address any  competitions that  could arise                                                               
but  recalled  his  earlier description  of  the  differences  in                                                               
locations and depths.                                                                                                           
1:45:27 PM                                                                                                                    
SEAN  CLIFTON, Policy  and  Program  Specialist, Central  Office,                                                               
Division of Oil  and Gas (DO&G), Department  of Natural Resources                                                               
(DNR), clarified slide 9 is not  saying that this has anything to                                                               
do with water  rights, but rather that the concept  is similar or                                                               
more relevant to  water rights.  He said none  of the cases being                                                               
discussed here have  anything to do with water  rights, which are                                                               
managed by the Water Section  in [DNR's] Division of Mining, Land                                                               
and Water.   Those seeking  to secure water  rights or to  have a                                                               
water rights dispute  handled would do that  through the Division                                                               
of Mining, Land  and Water.  As pointed out  by Mr. Masterson, he                                                               
continued, the typical  water rights issues are  with clean water                                                               
to drink or  water a crop, not  the type of fluids  that might be                                                               
used for  geothermal resources.   He  confirmed that  DEC handles                                                               
matters where  contamination of surface  water might be  an issue                                                               
and said permits  would have to be  applied for in the  case of a                                                               
development scenario.                                                                                                           
CHAIR PATKOTAK stated  the committee would still look  for a more                                                               
in-depth  understanding of  the different  types of  water rights                                                               
and how they could be affected by HB 135.                                                                                       
1:47:38 PM                                                                                                                    
MS. PAINE spoke to slide  10, "SECTION 3: WORK COMMITMENT," which                                                               
read  as   follows  [original  punctuation  provided   with  some                                                               
formatting changes]:                                                                                                            
     ? Changes prospecting permit to license and increases                                                                    
     term from 2 to 5 years                                                                                                   
          ? Creates greater opportunity for success of                                                                          
          noncompetitive geothermal program                                                                                     
    ?   Conversion   to    noncompetitive   lease   through                                                                   
     completion of agreed upon work commitment                                                                                
         ? Current process for oil and gas exploration                                                                          
               ? Commitment expressed in dollar figure                                                                          
               ? Annual reporting and performance                                                                               
MS. PAINE explained  that the term prospecting  "permit" would be                                                               
changed to  "license," and the  time would be increased  from two                                                               
years to five years.  To  provide context, she noted that a lease                                                               
is granted for 10 years.  She  said the bar to prove a commercial                                                               
resource is  a high  bar that  can take  a significant  amount of                                                               
time, whether for oil and gas or  for geothermal.  This is a more                                                               
robust  and more  consistent way  of moving  forward for  a party                                                               
that has completed  a specified work commitment.   The bill seeks                                                               
to align the  geothermal program with the oil and  gas program in                                                               
terms of the requirements.                                                                                                      
1:49:28 PM                                                                                                                    
REPRESENTATIVE  HOPKINS offered  his understanding  that "permit"                                                               
would be changed to "license,"  and that expanding from two years                                                               
to  five  years  would  be  a five-year  extension  of  the  work                                                               
commitment.  He  asked whether the lease for up  to 100,000 acres                                                               
is for ten years.                                                                                                               
MS.  PAINE replied  that as  a  part of  the competitive  leasing                                                               
program, [leases] are  issued for a primary term of  10 years and                                                               
can be  for parcel sizes smaller  than 100,000 acres.   Under the                                                               
competitive geothermal program, which HB  135 does not impact, 10                                                               
years are  being granted in which  to explore the area.   Because                                                               
this is noncompetitive it is  a slightly shorter duration of time                                                               
because  [the department]  wants to  encourage as  many folks  as                                                               
possible  to  get  out  there and  compete  to  explore  Alaska's                                                               
REPRESENTATIVE HOPKINS  offered his understanding that  the lease                                                               
is  for 10  years  on sizes  up  to 100,000  acres  and the  work                                                               
commitment is for  five years.  He posed a  scenario in which the                                                               
work commitment is not completed  in five years and asked whether                                                               
the individual would still have  that same lease for another five                                                               
MS.  PAINE responded  that  [DNR's]  competitive leasing  program                                                               
does not include  a work commitment for decision.   To maintain a                                                               
lease beyond  the 10  years the individual  would have  to either                                                               
move  to unitization  or achieve  production.   This work  permit                                                               
commitment component  is separate,  unique, and specific  to what                                                               
[DNR] is  calling an exploration license  program, she explained.                                                               
The five-year work  commitment aligns with the  five-year term of                                                               
the exploration  license itself.   In the case of  an exploration                                                               
license,  if an  individual  has not  been  able to  successfully                                                               
complete  their work  commitment, there  are provisions  where an                                                               
extension  of  time can  be  applied  for  to complete  the  work                                                               
commitment,  but  that would  go  through  the commissioner's  or                                                               
director's office  and there could  be some  further requirements                                                               
in terms of performance guarantees along with that.                                                                             
1:52:23 PM                                                                                                                    
MR. MASTERMAN resumed the PowerPoint  presentation with slide 11,                                                               
"SECTION 10: GEOTHERMAL FLUIDS,"  which read as follows [original                                                               
punctuation provided with some formatting changes]:                                                                             
     AS 41.06.060(4) is amended to read:                                                                                      
     (4)  "geothermal fluid"  means liquids,  brines, water,                                                                
     gases, or  and steam  at temperatures greater  than 120                                                            
     degrees celcius  or any commercial  use of  liquids and                                                                  
     steam   naturally   or   artificially  present   in   a                                                              
     geothermal system; "geothermal  fluid" does not include                                                                
     oil,   hydrocarbon   gases,    or   other   hydrocarbon                                                                
     substances  at  temperatures   less  than  120  degrees                                                              
     ?  Aligns  with  modernized definition  for  geothermal                                                                    
     ?   Not   limited   by  temperature   because   current                                                                    
     technology  enables  development of  cooler  geothermal                                                                    
     ?  Distinguishes  geothermal  fluids  from  hydrocarbon                                                                    
MR. MASTERMAN explained that HB  135 would update the definitions                                                               
for a geothermal fluid and a  geothermal resource.  He noted that                                                               
in addition  to modernizing the definition  of geothermal fluids,                                                               
it  is   distinguished  that  hydrocarbon  resources   cannot  be                                                               
considered a  geothermal fluid.  Further,  the updated definition                                                               
would allow for situations where  an explorer might encounter hot                                                               
and dry rocks, inject a fluid  into those rocks, and then extract                                                               
the  heat by  recovering that  "artificially present  fluid" from                                                               
the geothermal system.  He said  the biggest change is removal of                                                               
the temperature  criteria for geothermal  fluid.   Technology for                                                               
geothermal systems  is advancing  to allow exploitation  of lower                                                               
temperature  systems, so  having a  temperature limit  constrains                                                               
the definition of geothermal fluid.                                                                                             
1:54:30 PM                                                                                                                    
MR.  MASTERMAN  moved  to  slide   12,  "SECTIONS  7  &  11:  NEW                                                               
DEFINITION,"   which  read   as  follows   [original  punctuation                                                               
provided with some formatting changes]:                                                                                         
     "Geothermal resources"  means the  natural heat  of the                                                                  
     earth; the energy, in whatever  form, below the surface                                                                  
     of  the earth  present in,  resulting from,  or created                                                                  
     by, or which may be  extracted from, such natural heat;                                                                  
     and  all   minerals  in  solution  or   other  products                                                                  
     obtained   from   naturally  heated   fluids,   brines,                                                                  
     associated gases,  and steam,  in whatever  form, found                                                                  
     below  the surface  of the  earth;  but excluding  oil,                                                                  
     hydrocarbon gases, or other hydrocarbon substances.                                                                      
     ? Modern definition for geothermal resources.                                                                              
          ? Not limited by temperature because current                                                                          
      technology enables development of cooler geothermal                                                                       
     ? Ensures all the State's mineral estate resources are                                                                     
     captured in definition.                                                                                                    
      ? Same definition being applied to both DNR & AOGCC                                                                       
MR. MASTERMAN  specified that this  [proposed] new  definition of                                                               
geothermal resource comports with  the [proposed] definition of a                                                               
geothermal fluid:  it does  not have a temperature limitation, it                                                               
allows for artificial fluids to be  used to extract the heat, and                                                               
it separates clearly that oil,  natural gas, or other hydrocarbon                                                               
fluids are not considered a geothermal resource.                                                                                
1:55:54 PM                                                                                                                    
REPRESENTATIVE  HOPKINS  asked  whether geothermal  potential  is                                                               
included in  the "Alaska Mapper"  system which allows  the public                                                               
to look at mineral mapping and exploration opportunities.                                                                       
MR. MASTERMAN  answered that  he does not  know if  geothermal is                                                               
included in the Alaska Map app.   However, he said, a page on the                                                               
DGGS web  site has  the locations of  all known  thermal springs,                                                               
and each  one has a live  link to access the  information that is                                                               
1:57:11 PM                                                                                                                    
REPRESENTATIVE  HANNAN inquired  about the  department's insights                                                               
on large volcanic eruptions.                                                                                                    
MR. MASTERMAN replied that when the  bell is rung anywhere on the                                                               
planet, there will  be repercussions elsewhere.   He related that                                                               
in  a recent  conversation  with someone  at  the Alaska  Volcano                                                               
Observatory about putting out a  notice on what the possibilities                                                               
are  in  Alaska for  a  large  eruption,  he  was told  that  the                                                               
possibilities are not that high for now.                                                                                        
2:00:49 PM                                                                                                                    
The committee took an at-ease from 2:00 p.m. to 2:01 p.m.                                                                       
2:01:22 PM                                                                                                                    
CHAIR PATKOTAK opened public testimony on HB 135.  After                                                                        
ascertaining that no one wished to testify, he closed public                                                                    
2:02:40 PM                                                                                                                    
There being no further business before the committee, the House                                                                 
Resources Standing Committee meeting was adjourned at 2:03 p.m.                                                                 

Document Name Date/Time Subjects
HB 135 Sponsor Statement 4.23.2021.pdf HRES 4/23/2021 10:30:00 AM
HRES 4/23/2021 1:00:00 PM
HRES 4/26/2021 1:00:00 PM
HRES 1/21/2022 1:00:00 PM
HB 135
HB 135 Sectional Analysis Version A 4.23.2021.pdf HRES 4/23/2021 10:30:00 AM
HRES 4/23/2021 1:00:00 PM
HRES 4/26/2021 1:00:00 PM
HRES 1/21/2022 1:00:00 PM
HB 135
HB 135 Example Geothermal Facilities 4.27.2021.pdf HRES 4/26/2021 1:00:00 PM
HRES 1/21/2022 1:00:00 PM
HB 135
HB 135 Support University of Michigan Center for Sustainable Systems 4.27.2021.pdf HRES 4/26/2021 1:00:00 PM
HRES 1/21/2022 1:00:00 PM
HB 135
HB 135 DNR Presentation 1.21.2022.pdf HRES 1/21/2022 1:00:00 PM
HB 135