03/10/2023 01:00 PM House RESOURCES
| Audio | Topic |
|---|---|
| Start | |
| HB49 | |
| Adjourn |
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 49 | TELECONFERENCED | |
| + | TELECONFERENCED |
ALASKA STATE LEGISLATURE
HOUSE RESOURCES STANDING COMMITTEE
March 10, 2023
1:01 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
MEMBERS ABSENT
Representative Josiah Patkotak
Representative Maxine Dibert
COMMITTEE CALENDAR
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 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
03/01/23 (H) Heard & Held
03/01/23 (H) MINUTE(RES)
03/08/23 (H) RES AT 1:00 PM BARNES 124
03/08/23 (H) Heard & Held
03/08/23 (H) MINUTE(RES)
03/10/23 (H) RES AT 1:00 PM BARNES 124
03/10/23 (H) Heard & Held
03/10/23 (H) MINUTE(RES)
WITNESS REGISTER
SPENCER PLUMB, Manager
Forest Carbon Innovation
Verra
Missoula, Montana
POSITION STATEMENT: Presented the PowerPoint titled,
"Introduction to Verra and VCS Forest Carbon Methodologies" and
answered questions.
ANGELO SARTORI, Director
Regional Outreach
Verra
Santiago, Chile
POSITION STATEMENT: Answered questions on carbon credits and
methodologies.
BEN CARRIER, Legal Director
Verra
Portland, Oregon
POSITION STATEMENT: Answered questions on carbon credits and
methodologies.
RENA MILLER, Special Assistant to the Commissioner
Office of the Commissioner
Department of Natural Resources
Juneau, Alaska
POSITION STATEMENT: On behalf of the sponsor, House Rules by
Request of the governor, answered questions on CSHB 49, Version
S.
ACTION NARRATIVE
1:01:30 PM
CHAIR TOM MCKAY called the House Resources Standing Committee
meeting to order at 1:01 p.m. Representatives Saddler, Wright,
Mears, McCabe, Armstrong, and McKay were present at the call to
order. Representative Rauscher arrived as the meeting was in
progress.
1:02:10 PM
HB 49-CARBON OFFSET PROGRAM ON STATE LAND
CHAIR MCKAY announced that the only order of business would be
HB 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."
[Before the committee, adopted as a working document on 3/8/23,
was the proposed committee substitute (CS) for HB 49, Version
33-GH1372\S, Dunmire, 3/3/23, ("Version S").]
1:04:03 PM
SPENCER PLUMB, Manager, Forest Carbon Innovation, VERRA,
presented the power point presentation titled, "Introduction to
Verra and VCS Forest Carbon Methodologies" [hard copy included
in the committee packet]. In providing an overview to Verra, he
stated that he would address the project registration process,
Verified Carbon Standard (VCS), forest carbon methodologies, and
prospective changes. He stated that these topics are important
in the consideration of the proposed legislation. He introduced
Angelo Sartori and Ben Carrier as his colleagues.
1:05:28 PM
MR. PLUMB began on slide 2, which bulleted the topics in the
presentation. He explained that Verra plays a complimentary
role in voluntary carbon markets by interacting with
stakeholders; other registries and standards exist, but Verra's
standard is one of the largest, contributing to the high quality
of carbon credits. He stated that the presentation would
address the updates on Verra's forest carbon methodologies.
Moving to slide 3, he pointed out that Verra's mission is to
accelerate action on climate change and sustainable development
through standards which drive investment to achieve measurable,
high-integrity outcomes for global stakeholders. In an
overview, he said Verra was founded in 2007 as a nonprofit
organization based in Washington D.C. He stated that Verra has
staff worldwide, as its standards cover the global footprint.
1:08:00 PM
REPRESENTATIVE SADDLER requested examples of some of the global
stakeholders.
MR. PLUMB responded that in the voluntary carbon markets, often
buyers of carbon credits are global companies. He said Verra
does not sell to specific countries or businesses, as anyone is
eligible to buy carbon credits and develop projects globally.
In response to a follow-up question, he provided Shell as an
example of a global company buying carbon credit. He stated
that Meta and Microsoft have inquired about buying carbon
credits. He deferred the question to his colleagues.
1:09:40 PM
ANGELO SARTORI, Director, Regional Outreach, Verra, responded
that global companies buying carbon credits have been connected
to airlines worldwide and some European energy companies. He
listed (indisc.) as some other examples of global companies.
BEN CARRIER, Legal Director, Verra, responded that Verra has a
public registry that lists the buyers of carbon credits.
MR. PLUMB pointed out Verra's standards listed on slide 5, with
VCS being the best known and the most germane. He discussed the
Climate, Community, and Biodiversity Standards, which could
elevate some VCS projects to protect biodiversity and local
communities. He stated a Scope 3 Program is being developed to
engage directly with businesses concerning Scope 3 emissions.
He said this is the extent of Verra's operations. Providing
around 70 percent of carbon credits, he reiterated that VCS is
one of the largest programs in the voluntary carbon market.
1:12:31 PM
MR. PLUMB pointed out that slide 6 illustrates how Verra fits
into the various carbon markets. He stated that the voluntary
carbon market consists of companies not operating under a
jurisdiction or national program; rather companies are
independently deciding to take the measures to reduce their
carbon footprint. He indicated that some companies are in areas
where it is difficult to reduce emissions, and often these
companies buy carbon credits to demonstrate an effort to
stakeholders and the public. He noted Alaska sells credits to
projects in California, which is the best-known compliance
market. He stated that the European Union also has a compliance
mechanism, but credits cannot be bought outside of its market.
He stated that Corsia, South Africa, and Columbia each have
compliance markets that allow for VCS credits to be issued and
used, whereas California does not. He added that Verra has a
pathway to generate credits for the market in California, but
California does not follow VCS. He pointed out there are
emerging markets with their own compliance mechanisms, and Verra
plans to integrate these carbon credits with VCS.
1:15:49 PM
REPRESENTATIVE MCCABE expressed the opinion that Verra is like a
broker, as it verifies the credits before the credits are sold.
He questioned whether Verra follows standards for the United
Nations and the World Economic Forum. He related the concern
that the World Economic Forum has connections with Verra.
MR. PLUMB clarified that Verra is a nonprofit company with a
board of directors serving the public. He added that Verra is a
standards body working in the middle between buyers and sellers,
setting the rules and checking project documents to make sure
the credits are real. Verra's methodologies can be used under
the United Nations' program, but these are not methodologies
Verra has written. He stated that Verra has its own
methodologies based on scientific work that meets certain
standards of quality.
1:18:33 PM
REPRESENTATIVE MCCABE expressed appreciation for Verra's role as
the "standards body." He expressed the understanding that Verra
sets the standards, and the buyers would know that the sellers
have to meet these standards. He compared Verra to a quality
assurance group.
MR. PLUMB responded in agreement. He gave an example of a
seafood label that verifies sustainability. He also provided an
example of the Forest Stewardship Council that verifies
sustainable management of forests.
REPRESENTATIVE SADDLER commented that Verra is a "big" operation
and questioned its funding.
MR. PLUMB responded that Verra receives its funding from program
and project fees. The project fees are associated with each
carbon credit generated. He stated that Verra receives around
15 cents from every credit issued, and it issues between 50
million and 100 million credits a year; therefore, this is where
a large majority of the funding comes from. He added that
because there is a great deal of interest in the voluntary
carbon market, Verra's staff is rapidly increasing.
1:21:50 PM
MR. SARTORI, in response to Representative Saddler, stated that
"VCS" is the acronym for "Verified Carbon Standard."
1:22:57 PM
REPRESENTATIVE SADDLER questioned whether one Verified Carbon
Unit is equal to one carbon credit. He expressed the
understanding that one carbon credit is equal to one million
metric tons of carbon dioxide.
MR. PLUMB, in response, directed the committee to slide 7 which
defined a carbon credit. He explained that the language used to
represent a carbon credit is "Verified Carbon Unit," with one
unit representing one credit. He continued that one credit
represents the removal or reduction of one ton of carbon
dioxide, either by keeping it from going into the atmosphere or
pulling it out of the atmosphere.
1:24:09 PM
REPRESENTATIVE WRIGHT questioned whether Verra acquires the
credits or acknowledge the eligibility of credits.
MR. PLUMB stated that Verra does not own the credits. The
credits belong to the project developer, and then they belong to
the buyer or seller. He said Verra simply sets the standards
for what qualifies as carbon credits.
1:24:52 PM
MR. PLUMB, in response to Representative Armstrong, moved to
slide 8 and explained the attributes of high-quality carbon
credits. He stated that Verra makes public the qualities and
characteristics of potential projects. Reviewing this process,
he stated that Verra evaluates potential projects to make sure
they are real and measurable. He pointed out carbon removal
would need to be permanent, or at least viable for 100 years.
He continued that projects have to be additional. This means
projects would not have occurred but for the carbon finance
related to the sale of voluntary carbon credits. He stressed
the importance of the projects being independently verified. He
listed the three bodies involved in this as Verra, the
developers, and the third-party auditors. The bodies must agree
with the way projects are being measured and the way guidelines
for quantifying carbon removal are being followed. He stated
the registry lists the entities that can hold credits, and it
lists the entities that have retired credits. He added that
credits are uniquely numbered so they cannot be duplicated. He
made the final point that all projects are required to be
conservatively estimated.
1:28:40 PM
MR. PLUMB moved to slide 11, which shows how to develop a VCS
project in 8 steps. He stated that steps 1, 2, and 3 would
involve the project developer picking a methodology, submitting
a project description, and listing the project on the registry.
Once a project is received and reviewed, step 4 would be a 30-
day public comment period, which creates additional
transparency. He stated that in step 5 a third-party verifier
would look at the project and ensure it is following the rules
and meeting the requirements. After this review, in step 6,
activities could be implemented. In step 7 a third-party
auditor would take measurements and verify emission reductions
are real. In other words, there are two steps where bodies
other than Verra and the project developer would take
measurements and quantify the project. He said this is to make
sure the project is not just creating "hot air" credits. In the
final step, he said the credits would be issued.
1:30:34 PM
MR. PLUMB, in response to Representative Saddler, stated that
"Verified Carbon Units" is Verra's brand. He stated that there
are other names under other registries; however, the most common
denominator for all is one carbon credit equals one ton of
carbon dioxide. He explained that one ton of carbon dioxide is
used because other greenhouse gases are also tracked, such as
methane. Because methane traps more heat per molecule, it has a
higher global-warming potential than carbon dioxide. Reducing
methane creates more carbon credits because it creates more tons
of carbon dioxide.
1:32:50 PM
CHAIR MCKAY expressed the opinion that there needs to be a unit
of time, such as one ton of carbon per year.
MR. PLUMB responded in agreement. He said Verra requires the
removal or reduction be for 100 years. He stated that the
duration of carbon is an additional aspect for buyers of carbon
credits to consider.
1:33:52 PM
REPRESENTATIVE ARMSTRONG pointed out the 2015 paper from the
journal, Forest Science, which criticizes Verra for over
crediting carbon credits in a past project. She questioned
whether anything has changed since this 2015 criticism, such as
the methodologies used.
MR. PLUMB, in response, pointed out on slide 10 that Verra has
different types of methodologies, including agriculture, energy,
and improved forest management. He stated that the criticism
concerned the Improved Forest Management methodology. He added
that Verra receives criticisms frequently and takes them
seriously; nevertheless, Verra stands by its methodologies that
have been developed under a public, transparent process with
scientific review. He explained that in order for projects to
pass through the verification bodies and through Verra's review
process, there needs to be a high level of confidence. He said
the case Representative Armstrong referred to concerned
additionality, as there was likely to be some sort of
harvesting, and the paper argued that there should not have
been. In Verra's view, some sort of counterfactual needed to be
set, and, at that time, this was a forward-looking
counterfactual based on common practices in the area. In other
words, looking at other forest management plans from other
landowners in the area, there was a reasonable likelihood of
logging, which would cause a loss of carbon credits. He
expressed the opinion that this type of criticism is a healthy
dynamic, as it creates new methodologies. He stated that now a
new method is being developed which compares projects to other
areas in real time, not just a forecast of what could happen.
In this new method, a match would have to be found for the
project, and these other comparable areas would have to be
tracked in real time to understand what is happening. He argued
that this would be an improvement; however, Verra would not
throw out the other methodologies because it stands behind what
additionality has demonstrated. He reiterated that Verra always
looks for feedback and ways to improve.
1:39:32 PM
MR. PLUMB, in response to Chair McKay, defined the acronym "VVB"
as "validation verification body." In response to a follow-up
question, he described the verification bodies as independent
organizations that review projects and Verra's methodologies.
He said these auditors are experts in Verra's standards and
methodologies and know them "front and back."
1:41:20 PM
REPRESENTATIVE ARMSTRONG expressed concern about business
investments in Alaska and [carbon credits] being over estimated.
She surmised this could hurt Alaska's reputation. She referred
to the different methodologies as choosing "your own adventure"
in generating money. She suggested the investors could put
Alaska in their annual reports, and if projects fail, this could
affect future investments in Alaska. She questioned the
certainty in carbon credit markets and requested the average
number of public comments on Verra's projects. She expressed
interest in researching the auditing process and questioned
whether the auditors are freelance or part of a third-party
company.
MR. PLUMB, in response, directed the committee to slide 13,
which showed some of the forestry methodologies which could be
used in Alaska projects. He pointed out a new methodology for
forest management that uses baselines from national forest
inventories. He argued that this methodology could generate a
market with the highest-quality forest credits in the country.
In this methodology, Verra would review the carbon measurements
by pulling data points on plots measured within the project. He
stated that a comparison would be made with 10 other data
points; therefore, [carbon credits] are not just forecasted, but
compared with actual measured quantities of other plots. He
argued that this is the most advanced way to make sure the
credits are additional to what would have happened without
intervention. He explained that this methodology is moving
forward to ensure quality; however, the legislature would need
to determine whether the standards are strict enough for Alaska.
1:47:28 PM
REPRESENTATIVE SADDLER expressed appreciation for the detailed
explanation of the process. To understand the development of
the carbon credit market, he drew an analogy of the developing
firearms market. He stated that Remmington had its own calibers
and specialties, as did other developing brands of firearms and
in time the market determined which specifics to adhere to, and
these standards were adopted. He questioned whether the early
stages of the carbon credit market resemble this example. He
questioned whether in time the carbon credit market will
consolidate.
MR. PLUMB expressed the opinion that the analogy was accurate;
however, the carbon credit market has more growth than
consolidation at this point. For example, the market is set at
one ton of carbon dioxide equaling one Verified Carbon Unit, and
this is the same as for other registries; however, the
methodologies are not exactly the same. He stated that Verra
works at moving forward and improving, and so do the other
registries. He suggested that going forward, a coalescing will
happen around projects in order to issue credits. He stated
that now the distinctions are minor, and others' standards and
methodologies are often used.
1:50:32 PM
MR. PLUMB returned to slide 9, which shows Verra's position in
the market. He noted that project developers are made up of a
variety of stakeholders and companies that are built to develop
credits. He added that there is no discrimination on what
entity can develop a project. He stated that Verra would often
put together project descriptions for developers for review;
however, as templets are online, entities can do these
themselves. He noted that the key piece is Verra's VCS, as all
methodologies "tier up" to this standard. He stated that even
though carbon credits from diverse industries seem different,
they could be housed under a single standard because the
methodologies provide specific details. He stated that some
projects could be combined, such as agroforestry projects.
MR. PLUMB stated that once credits are developed, project
developers own them. The credits can be sold to brokers,
trading platforms, or directly to businesses or individuals.
Because carbon credits in the market are not all the same, there
is an increase in the demand for brokers to do quality
assessments, so there is a differentiation happening at the
intermediary level. He stated that brokers are scaling this up
in order to sell the credits to corporations or companies, and
entities are buying credits, not only for climate purposes, but
to align their images in the public perspective. For example, a
cruise ship line may want to buy carbon credits in Alaska so it
can align with local projects, making this connection for their
customers. He explained that this is the reason for
differentiation - different companies have different needs when
buying carbon credits.
1:55:38 PM
MR. PLUMB reviewed slide 10 and the wide range of project types.
He talked about the revision of afforestation and reforestation
methodologies. He stated that Verra is expanding its
methodology on wetland projects, which are also called blue-
carbon projects. He explained that projects are relative to the
interests of each state, and if a methodology does not exist,
Verra is open to receiving input. As new information is
presented or requested by stakeholders or project developers,
Verra is actively updating methodologies. He cautioned that,
because of the lengthy reviews, developing new projects could be
a long process.
1:58:45 PM
CHAIR MCKAY interjected that Alaska would primarily use forestry
projects to digest carbon, and the carbon credits would go
towards oil and gas projects. He requested that the
presentation be turned to this focus.
MR. PLUMB provided an example of a reforestation project. He
stated that Alaska has had many wildfires, and these areas often
need to be replanted. He questioned whether this example would
be of interest.
1:59:51 PM
CHAIR MCKAY pointed out the spruce beetle infestation that
leaves trees standing dead. To address this, he postulated that
a swath of infested forest would be inventoried for the carbon
digested. The credits would be calculated and sold to an oil
company for carbon offsets, for example. He continued that the
oil company would then proceed with developing projects that
would provide revenue and jobs. He referred to this as "a
circle of life." He expressed the understanding that forest
management would mean cutting down dead standing trees to make a
more lush and productive forest.
MR. PLUMB responded that, in this case, a specific methodology
would need to be determined in order to implement an improved
forest management project. The project would remove the dead
trees and open the forest canopy to allow new growth. He added
this would also reduce fire risk. He continued that under the
new methodology, a company would add to the way the forest had
been managed in the past, and the implemented changes would
increase the amount of carbon stored in the forest. The project
description would outline how the activities align with the
requirements and rules in the methodology, and this would then
be submitted to Verra for review. Verra would work with the
project developer. Upon acceptance of the project, there would
be a 30-day public comment period, and Verra would collect the
feedback. In this process, there would also be the list of
forest management activities, such as removing the beetle kill
and opening up the forest canopy so other trees can thrive. He
stated that the independent verification bodies determine if the
activities would align with the methodology.
2:05:59 PM
MR. PLUMB stated that once the project is verified, activities
could begin, such as thinning the forest. In order to be
conservative, the carbon stored in the removed trees would have
to be quantified. For example, the trees may be used in
construction, or chipped and burned. If the trees were burned,
the emissions would be counted as a loss for the project. He
suggested that the regeneration of the forest would balance this
out over time. He stated that setting a forecasted baseline, or
a statistically matched baseline, would quantify the amount of
carbon the project is addressing. If additional carbon credits
were found upon the third-party verification, Verra would scale
this across the entire project. After initial carbon credits
are issued, and the forest grows, he said, there could be
another verification with more credits issued.
2:09:07 PM
CHAIR MCKAY directed the focus of the presentation to state-
owned forests in Alaska. He expressed the understanding that
Verra would be dealing with the Department of Natural Resources
(DNR). In reference to the timeline, he suggested, DNR would
pick a methodology for a swath of land affected by beetle kill.
However, during part of the year there would be no fieldwork
because of the harsh winters. He expressed the understanding
that DNR, with a consultant, would propose a project
description, and this would take around a year. The project
would then be listed on the registry, which might take a month.
There would be a public comment period, which might take 18
months. An independent auditor would be contracted, which would
add another 3 months. Once the project activities are
implemented, he surmised it would be 2 years into the project,
or the second summer, when another auditor would need to verify
the activities are real. Finally, he said, carbon credits could
be sold 2 or 3 years into the process. He said, "That's a lot
of work" and questioned, "Who pays for it ... because we have
not made a dime yet."
2:12:34 PM
MR. PLUMB cautioned, if the project developer is the state,
there may be a requirement that this be done by the state, which
could affect additionality. Assuming this is not an issue, he
addressed the question, explaining that a major project
developer would need to start with a project description and the
pre-implementation estimate of carbon benefits, and this would
require forest modeling. The total estimated carbon credit
could then be taken to companies for up-front financing to start
the project. After implementation, credits would be given to
the company. He expressed the opinion that often companies are
open to signing contracts because they are considering the
purchase of carbon credits for future emissions. He said Verra
is not involved in the contracts; however, Verra's VCS can be
used to develop the project and referred to in the contract. He
suggested this would substantiate the project. He deferred to
his colleagues.
2:16:41 PM
MR. CARRIER stated these offtake agreements are for the future
stream of carbon credits generated by projects. Because the
development of a project could take years, with no revenue until
credits are issued, these offtake agreements, or contracts,
would solve the financing.
2:17:53 PM
CHAIR MCKAY suggested an option would be to sell the forest with
beetle kill "as is." He expressed the opinion this would not be
the optimum use, but "that would get us cash in hand faster."
MR. PLUMB responded that this is a consideration; however, he
suggested carbon credits as a new and complex way to generate
revenue for Alaska. He explained there are ways to make
estimations of carbon storage in wood products. Once a wood
product is demonstrated to be long lived, the benefits can be
measured. He added that the land could also be retained for
multi-use purposes, such as recreation or hunting. He explained
that with improved forest management projects, harvesting can
often be beneficial; however, Verra's methodologies require the
loss from harvesting be accounted for by putting the trees in
different wood uses. He added there is also a requirement that
projects not harvest trees during peak carbon storage.
CHAIR MCKAY questioned whether the money would have to be
returned if a swath of forest is sold for carbon credits, and an
act of God, such as a forest fire, destroyed the forest.
MR. PLUMB responded that there is a non-permanence risk tool.
He explained that an upfront assessment of the likelihood of the
loss of carbon would be made, and the project developer would
calculate a risk percentage. Verra would retain this percentage
of carbon credits in a pool to cover the losses. Once these are
made up, the project could be reinstated. If buffer credits
cannot be reinstated, the project would be closed, and no more
credits would be issued until the balance is made up. He stated
that this would ensure the holder would not lose carbon credits
and the project developer could keep the project going.
2:23:17 PM
CHAIR MCKAY pointed out there is a huge volume of treeless
tundra in the state. He questioned whether tundra could be
included in the program.
MR. PLUMB responded that tundra lands can be used for carbon
storage, but it would need a new methodology. Verra would have
to develop this along with researchers from the state. In
response to a follow-up question, he stated that programs would
not prohibit recreational activities. Verra is looking for
carbon storage, and, as long as there is no impact to the
forest, the state would determine land usage. In response to a
second follow-up question, he remarked that when a mine deposit
is found on the land, this becomes tricky. He said the project
would be stopped, as there is no way to make up for the credits
elsewhere. The buffer pool could be used, but most likely this
project would become ineligible.
2:27:48 PM
REPRESENTATIVE RAUSCHER questioned why a mine would not produce
the same result as a forest fire.
MR. PLUMB responded that he would need to follow up after the
meeting with this answer. He stated that any time credits are
issued, the percentage for the insurance pool is taken. Verra
would withhold a proportional amount of carbon credits, and
different risk factors would be determined from different types
of activities, such as mining, floods, fires, or drought. He
expressed uncertainty of the mechanism that would regain credits
issued from the buffer pool. He surmised that if the state
changed its course, Verra could possibly use the buffer pool;
nevertheless, new projects would most likely not be developed.
2:30:26 PM
MR. CARRIER responded in agreement. He added Verra has a review
process for projects that were registered but are no longer
creating emission reductions.
2:31:50 PM
MR. PLUMB moved to Slide 12, which addressed project fees.
Depending on the project, he stated that project developers
would pay a fee for setting up registry accounts. He added that
there are fees associated with issuing credits and costs
associated with the independent verification bodies. He offered
to follow up with the names of some of these independent
companies. He continued that onsite validations require a fee.
He stated that the exact total project costs for project
developers is not available to Verra.
2:34:11 PM
MR. PLUMB displayed slide 13 and addressed existing forestry
methodologies. He pointed out on the slide the methodologies
relevant to Alaska. He stated that there is a methodology being
developed for tree-planting activities in case of a severe fire.
He referenced his work on a fire-adapted forest methodology,
which concentrates on forest thinning in order to reduce the
severity of wildfires. To understand the effectiveness, he
stated that treated areas are compared with untreated areas.
Moving to slide 14, he said the final point for review is that
Verra is working toward using remote-sensing applications for
both setting the baseline and estimating carbon within the
project. He suggested that this would streamline projects and
reduce costs. He stressed the importance of this for Alaska, as
the state is vast, with many areas difficult to reach. In
conclusion, he offered to address any further questions.
2:38:17 PM
REPRESENTATIVE SADDLER remarked that Verra is a "vigorous, large
operation." He expressed the understanding that most of the
funding comes from issuing around 100 million credits per year
at 15 cents per unit fee. He questioned whether Verra brings in
$150 million a year. He requested an explanation of the funding
stream.
MR. PLUMB responded that the primary sources of funding are from
issuing credits, registering new users, and collecting project
fees.
REPRESENTATIVE SADDLER questioned whether his calculation was
correct, and he requested an explanation of the amount Verra
receives from issuing credits versus other fees.
2:39:37 PM
MR. CARRIER responded that around 90 percent of revenue comes
from issuance fees for carbon credits, and there is a fee
schedule on the website. He stated that in 2021 Verra had
issued an excess of 100 million carbon credits, and the revenue
for the year was between $20 million and $40 million. He added
this would be from fees charged to registered entities, as Verra
does not rely on grant funding.
2:41:25 PM
MR. PLUMB, per Representative Saddler's calculations, stated
that 100 million credits at 15 cents a credit would equal $15
million.
2:41:45 PM
CHAIR MCKAY listed the primary tree varieties found in Alaska.
He remarked that most of Alaska is frozen and dark for half of
the year. He questioned the carbon storage in trees during the
winter.
MR. PLUMB responded that during the winter the carbon would
continue to be stored in the trunk and root system of the trees.
In the summer, with 18 to 20 hours of daylight, trees would be
very active, going through photosynthesis at a higher rate than
forests at lower latitudes. He stated that photosynthesis
requires light, water, and carbon dioxide, and the trees pull
this in and make sugar, and store this while releasing oxygen.
2:45:55 PM
CHAIR MCKAY requested that a representative from the Department
of Resources respond to a question from Representative Mears.
2:46:18 PM
REPRESENTATIVE MEARS referred to page 2, line 12 of HB 49,
Version S, concerning the bidding process. Concerning the
commissioner making the decision, she questioned whether this
would be typical of Alaska's purchasing processes, or whether
there would be a higher level for an appeal.
RENA MILLER, Special Assistant, Office of the Commissioner,
Department of Resources, responded that this section relates to
the land leasing procedures already in statute. She stated that
Version S in [Section 38.05.081] under Section 4, page 3,
beginning on line 1, would add language to the statute exempting
the state land carbon-management leases. She explained that
this language addresses competition between applicants for the
same land. She pointed out that in the same section on page 3,
beginning on line 13, the director would exercise discretion in
determining the most qualified applicant. She added that the
qualification would include previous carbon management
experience.
REPRESENTATIVE MEARS, in a follow up referencing page 3, line 17
of Version S, stated that this language would require qualified
bidders to make a deposit equal to cost incurred by other
bidders. She questioned whether these bidding processes are
unique to land management and forestry.
MS. MILLER deferred the question to the Division of Mining, Land
and Water for a future response.
REPRESENTATIVE MEARS, with a follow-up question, pointed out
language in Section 38.05.081, page 3, on line 31 of Version S,
which concerns maximizing the return to the state. She
indicated that other language refers back to the Constitution of
the State of Alaska as a "maximum benefit". She stated that
[Section 11, page 8, line 26 in Version S] refers to a
"sustained yield". She expressed the opinion that the language
"maximize the return" indicates immediate money, while the word
"benefit" has less monetary and timeline implications.
MS. MILLER expressed agreement with the interpretation, as
"compensation" relates to money, while "best interest" could be
a range of things. She explained that the language "best
interest finding" is used in statute to make sure the state
could accommodate other values that are not necessarily tangible
dollars. She continued that a "best interest finding" would be
required when issuing a lease, but the compensation in exchange
for the lease should be designed to "maximize" the dollar return
to the state. She clarified this would be attempting to balance
these two features.
2:50:43 PM
REPRESENTATIVE SADDLER expressed the opinion that in Version S
the language in [Section 38.05.081] on page 3, line 21 is
subjective. He questioned the criteria the director would use
in deciding between two conflicting bidders.
MS. MILLER responded that the short answer is this could be
decided in regulation. In response to a follow up requesting
clarification, she said the director would evaluate a proposal
and determine which usage would be more appropriate. She
explained that characteristics and current usage of the land
might be more conducive to one type of project; therefore, the
state may broadly consider the "best interest" by maintaining
certain types of usage.
REPRESENTATIVE SADDLER, with a follow up, expressed the
understanding that [Section 38.05.081] is about leases of land
for carbon management, and the same mechanism for carbon
management would be applied, regardless of the bidder.
Concerning two different applicants for the same piece of state
land, he questioned how the distinction would be made for the
different uses.
MS. MILLER responded that there should be flexibility, as styles
of carbon management can require very different site-control
protocols and registry requirements. Should there be
competition, she said flexibility should be protected for the
selected land and its usage.
2:54:09 PM
REPRESENTATIVE MEARS questioned the reasoning for singling out
the Haines State Forest Management Area in Section 7, page 8,
line 2 of Version S.
MS. MILLER responded that the Haines State Forest Management
Area was established in a different part of the statute from the
other state forest systems. Because of this, the Haines State
Forest Management Area statute would need to be addressed
separately in Version S to allow carbon offset projects. She
deferred the question to the next committee meeting and the
Department of Law for the unique history on this.
2:56:06 PM
CHAIR MCKAY announced that HB 49 was held over.
2:56:20 PM
ADJOURNMENT
There being no further business before the committee, the House
Resources Standing Committee meeting was adjourned at 2:56 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 49 Presentation - Verra.pdf |
HRES 3/10/2023 1:00:00 PM |
HB 49 |