Legislature(2021 - 2022)SENATE FINANCE 532

01/24/2022 01:00 PM Senate FINANCE



* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+= SB 25 STATE GOV'T FINANCES: WEBSITE TELECONFERENCED
Moved CSSB 25(FIN) Out of Committee
+ SB 33 SEAFOOD PRODUCT DEVELOPMENT TAX CREDIT TELECONFERENCED
Heard & Held
-- Invited & Public Testimony --
<Time Limit May Be Set>
+ SB 104 GEOTHERMAL RESOURCES TELECONFERENCED
Heard & Held
-- Invited & Public Testimony --
<Time Limit May Be Set>
+ Bills Previously Heard/Scheduled TELECONFERENCED
                 SENATE FINANCE COMMITTEE                                                                                       
                     January 24, 2022                                                                                           
                         1:02 p.m.                                                                                              
                                                                                                                                
                                                                                                                                
1:02:26 PM                                                                                                                    
                                                                                                                                
CALL TO ORDER                                                                                                                 
                                                                                                                                
Co-Chair Bishop called the  Senate Finance Committee meeting                                                                    
to order at 1:02 p.m.                                                                                                           
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Senator Click Bishop, Co-Chair                                                                                                  
Senator Bert Stedman, Co-Chair                                                                                                  
Senator Lyman Hoffman                                                                                                           
Senator Donny Olson (via teleconference)                                                                                        
Senator Bill Wielechowski                                                                                                       
Senator David Wilson                                                                                                            
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Senator Natasha von Imhof                                                                                                       
                                                                                                                                
ALSO PRESENT                                                                                                                  
                                                                                                                                
Erin  Shine,  Staff,  Senator  Click  Bishop;  SENATOR  GARY                                                                    
STEVENS, SPONSOR;  Tim Lamkin, Staff, Senator  Gary Stevens;                                                                    
Jeremy Woodrow, Alaska  Seafood Marketing Institute, Juneau;                                                                    
Chris  Barrows,  Pacific   Seafood  Processors  Association,                                                                    
Juneau.                                                                                                                         
                                                                                                                                
PRESENT VIA TELECONFERENCE                                                                                                    
                                                                                                                                
Nicole   Reynolds,  Deputy   Tax  Director,   Department  of                                                                    
Revenue;  Mark  Palmer,  CEO Ocean  Beauty  Seafoods,  Inc.,                                                                    
Anchorage;  Abby   Fredrick,  Director   of  Communications,                                                                    
Silver  Bay  Seafoods,  Juneau; Julianne  Curry,  CEO  Ocean                                                                    
Beauty   Seafoods,  Inc.,   Kodiak;   Haley  Paine,   Deputy                                                                    
Director,  Division of  Oil and  Gas, Department  of Natural                                                                    
Resources;  Steve  Masterman,  Division  of  Geological  and                                                                    
Geophysical Surveys, State Geologist, Fairbanks.                                                                                
                                                                                                                                
SUMMARY                                                                                                                       
                                                                                                                                
SB 25     STATE GOV'T FINANCES: WEBSITE                                                                                         
                                                                                                                                
          CSSB 25(FIN)  was REPORTED  out of  committee with                                                                    
          five  "do pass"  recommendations  and  with a  new                                                                    
          fiscal   impact  note   from  the   Department  of                                                                    
          Administration.                                                                                                       
                                                                                                                                
SB 33     SEAFOOD PRODUCT DEVELOPMENT TAX CREDIT                                                                                
                                                                                                                                
          SB 33 was HEARD and HELD in committee for further                                                                     
          consideration.                                                                                                        
                                                                                                                                
SB 104    GEOTHERMAL RESOURCES                                                                                                  
                                                                                                                                
          SB 104 was HEARD and HELD in committee for                                                                            
          further consideration.                                                                                                
                                                                                                                                
SENATE BILL NO. 25                                                                                                            
                                                                                                                                
     "An Act  relating to the establishment  and maintenance                                                                    
     of an  Internet website providing information  on state                                                                    
     government  financial transactions  and specifying  the                                                                    
     information to be made available on the website."                                                                          
                                                                                                                                
1:03:20 PM                                                                                                                    
                                                                                                                                
SENATOR  BILL WIELECHOWSKI,  SPONSOR  stated  that the  bill                                                                    
would  create   an  online   searchable  website   of  state                                                                    
expenditures. He stated the state  was rated forty-ninth out                                                                    
of  the  fifty states  in  terms  of  public access  to  the                                                                    
states  financial  information. He shared that  the bill had                                                                    
widespread  support and  was hopeful  that it  would quickly                                                                    
move from committee.                                                                                                            
                                                                                                                                
Co-Chair  Stedman MOVED  to ADOPT  the committee  substitute                                                                    
for SB 25, Work Draft 32-LS0217\W (Marx, 2/20/22).                                                                              
                                                                                                                                
Co-Chair Bishop OBJECTED for discussion.                                                                                        
                                                                                                                                
1:04:17 PM                                                                                                                    
                                                                                                                                
ERIN  SHINE,  STAFF,  SENATOR CLICK  BISHOP,  explained  the                                                                    
proposed committee substitute.  discussed the Explanation of                                                                    
Changes (copy on file):                                                                                                         
                                                                                                                                
     Page 4, line 30  Page 5, line 9                                                                                            
     Rearranges  37.05.215(c)(2)  and  (3)  to  clarify  the                                                                    
     Department of  Administration is to be  responsible for                                                                    
     maintaining the portion of  the Alaska Online Checkbook                                                                    
     that  provides   information  related   to  independent                                                                    
     contractors and service procurement contracts.                                                                             
                                                                                                                                
     Page 5, line 24-25                                                                                                         
     Clarifies  the  definition   of  expenditure  does  not                                                                    
     include  salary and  wage payments  to state  employees                                                                    
     and benefit payments to a  member or former member of a                                                                    
     state retirement system.                                                                                                   
                                                                                                                                
     Page 5, line 26-27                                                                                                         
     Adds new  language to clarify  that PFD  payments would                                                                    
     not be included in the Online Checkbook.                                                                                   
                                                                                                                                
     Page 6, line 6                                                                                                             
     Changes delayed availability  effective date to October                                                                    
     1, 2023                                                                                                                    
                                                                                                                                
     Page 6, line 12                                                                                                            
     Changes  transitional   provision  effective   date  to                                                                    
     October 1, 2024                                                                                                            
                                                                                                                                
Co-Chair  Bishop  WITHDREW  his objection.  There  being  NO                                                                    
OBJECTION, it was so ordered.                                                                                                   
                                                                                                                                
Senator Wielechowski  explained the  new fiscal  impact note                                                                    
for $250,000 of capital cost.                                                                                                   
                                                                                                                                
Co-Chair  Stedman   MOVED  to   REPORT  CSSB   25(FIN)  from                                                                    
committee  with individual  recommendation and  attached new                                                                    
fiscal impact  note from  the Department  of Administration.                                                                    
There being NO OBJECTION, it was so ordered.                                                                                    
                                                                                                                                
CSSB 25(FIN)  was REPORTED  out of  committee with  five "do                                                                    
pass"  recommendations and  with  a new  fiscal impact  note                                                                    
from the Department of Administration.                                                                                          
                                                                                                                                
1:08:12 PM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
1:09:19 PM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                
SENATE BILL NO. 33                                                                                                            
                                                                                                                                
     "An Act  relating to a seafood  product development tax                                                                    
     credit; providing  for an  effective date  by repealing                                                                    
     secs. 32  and 35, ch.  61, SLA 2014; and  providing for                                                                    
     an effective date."                                                                                                        
                                                                                                                                
1:10:23 PM                                                                                                                    
                                                                                                                                
SENATOR GARY  STEVENS, SPONSOR, introduced  the legislation.                                                                    
He stated  that the proposal  was a direct  economic benefit                                                                    
policy,  which had  been used  in  the past  for salmon  and                                                                    
herring. The  bill extended the  sunset date,  and broadened                                                                    
the  scope   of  the  tax   credit  to   include  investment                                                                    
incentives for  pollack and prawn  products. He  shared that                                                                    
the  bill was  a partial  reimbursements for  investments in                                                                    
hardware,  machinery, and  infrastructure in  the processing                                                                    
industry.                                                                                                                       
                                                                                                                                
1:11:26 PM                                                                                                                    
                                                                                                                                
TIM LAMKIN, STAFF, SENATOR  GARY STEVENS, offered background                                                                    
to the legislation.                                                                                                             
                                                                                                                                
Co-Chair Bishop requested a Sectional Analysis.                                                                                 
                                                                                                                                
Mr. Lamkin discussed the Sectional Analysis (copy on file):                                                                     
                                                                                                                                
     Sec.  1: AS  43.75.035(b)(1) and  (2), relating  to tax                                                                    
     credits  applied   to  value-added  activity   for  the                                                                    
     processing  of salmon  and herring  products, (1)  adds                                                                    
     the fisheries of pollock and  cod as applicable for the                                                                    
     tax  credit;   and  (2)  extends  the   sunset  of  the                                                                    
     applicable tax credits through year 2025.                                                                                  
                                                                                                                                
     Sec.   2:   AS  43.75.035(c),   conforming   amendment,                                                                    
     relating  to  applying  a  tax  credit  for  investment                                                                    
     equipment  used  to  process   salmon  or  herring,  to                                                                    
     include equipment used for processing pollock and cod.                                                                     
                                                                                                                                
     Sec.   3:   AS  43.75.035(d),   conforming   amendment,                                                                    
     relating  to  a  3-year  carry-forward  of  unused  tax                                                                    
     credits for the processing  of salmon and herring, adds                                                                    
     the same carry-forward of tax  credits to be applicable                                                                    
     for pollock and cod processing.                                                                                            
                                                                                                                                
     Sec. 4: AS 43.75.035(e), relating  to the 50 percent of                                                                    
     liability  cap  on  applicable tax  credits,  is  legal                                                                    
     drafting  statutory  clean-up, deleting  a  duplicative                                                                    
     and redundant clause already contained  in Section 1 of                                                                    
     the bill.                                                                                                                  
                                                                                                                                
     Sec.  5:  AS   43.75.035(g)(5),  conforming  amendment,                                                                    
     relating  to state  claw-back  of  a carry-forward  tax                                                                    
     credit, in the  event an asset used  for the processing                                                                    
     of salmon or herring  to which a carry-forward applies,                                                                    
     if the  asset is removed  from the state,  adds pollock                                                                    
     and   cod  in   determining  qualified   investment  of                                                                    
     processing within the state.                                                                                               
                                                                                                                                
1:16:02 PM                                                                                                                    
                                                                                                                                
Co-Chair Bishop surmised that the section applied to hard                                                                       
assets like processing equipment.                                                                                               
                                                                                                                                
Mr. Lamkin agreed. He continued with the Sectional                                                                              
Analysis:                                                                                                                       
                                                                                                                                
     Sec.  6:  AS   43.75.035(j)(3),  conforming  amendment,                                                                    
     relating  to the  definition of  "qualified investment"                                                                    
     under  this  tax  credit program,  adds  investment  in                                                                    
   assets used for processing pollock and cod products.                                                                         
                                                                                                                                
     Sec.  7:  AS   43.75.035(j)(6),  conforming  amendment,                                                                    
     relating  to the  definition of  "value-added" products                                                                    
     under  this  tax  credit program,  adds  processing  of                                                                    
     pollock and cod byproducts.                                                                                                
                                                                                                                                
     Sec. 8-11:  Are historical  sunset dates  and repealers                                                                    
     of this  tax credit  program, consolidating all  of the                                                                    
     various sunset provisions of the  program into a single                                                                    
     sunset, occurring  now in section  8, and set  for Jan.                                                                    
     1, 2026.                                                                                                                   
                                                                                                                                
     Sec. 12:  Sets an effective  date for the bill  of Jan.                                                                    
     1, 2021.                                                                                                                   
                                                                                                                                
Senator Hoffman wondered why the proposal was only for a                                                                        
three year sunset extension.                                                                                                    
                                                                                                                                
Mr.  Lamkin replied  that the  decision  was historically  a                                                                    
policy  call, but  relayed  that the   norm   was usually  a                                                                    
five-year extension  with variations.  He agreed  to provide                                                                    
for detailed information.                                                                                                       
                                                                                                                                
Senator Hoffman  felt that  there should be  a minimum  of a                                                                    
four  or five-year  extension. He  stressed  that there  was                                                                    
such effort to put a bill through the process.                                                                                  
                                                                                                                                
Mr.  Lamkin  stated  that  most  recent  extension  for  the                                                                    
program  was  in 2014,  so  the  original sunset  was  eight                                                                    
years.                                                                                                                          
                                                                                                                                
Senator  Olson  wondered  whether  the  Coastal  Development                                                                    
Quota (CDQ) groups weighed in on the bill.                                                                                      
                                                                                                                                
Senator  Stevens   replied  that  he  had   not  heard  from                                                                    
processors,  but felt  that it  would be  nice to  hear from                                                                    
them.                                                                                                                           
                                                                                                                                
Mr.  Lamkin  referred to  a  list  of support  letters  from                                                                    
various fishing organizations.                                                                                                  
                                                                                                                                
Co-Chair Bishop  requested a definition of  where fish would                                                                    
fall in the cod family for tax purposes.                                                                                        
                                                                                                                                
Mr. Lamkin agreed to provide that information.                                                                                  
                                                                                                                                
1:21:13 PM                                                                                                                    
                                                                                                                                
JEREMY WOODROW, ALASKA  SEAFOOD MARKETING INSTITUTE, JUNEAU,                                                                    
testified in  support of the  legislation. He  remarked that                                                                    
after processing, there was leftover  product that could add                                                                    
potential value to Alaska seafood  resources. He stated that                                                                    
fish  bone  and fish  oil  currently  generates hundreds  of                                                                    
millions of dollars annually  for Alaskas  seafood industry.                                                                    
He  stressed  that  there  was   financial  benefit  to  the                                                                    
discarded items after standard seafood processing.                                                                              
                                                                                                                                
Senator  Wielechowski  wondered  whether the  bill  required                                                                    
that  the  value  added  occur in  Alaska,  or  whether  the                                                                    
addition of value could occur outside of Alaska.                                                                                
                                                                                                                                
Mr. Woodrow  replied that he  believed the intention  of the                                                                    
bill was for processing within the state.                                                                                       
                                                                                                                                
Senator Wielechowski  wondered whether the bill  allowed for                                                                    
a tax credit for value added outside of the state.                                                                              
                                                                                                                                
Mr.  Lamkin replied  that  the bill  was  intended only  for                                                                    
assets valued within the state.                                                                                                 
                                                                                                                                
Co-Chair  Bishop felt  that  Section 6  would  speak to  the                                                                    
question.                                                                                                                       
                                                                                                                                
Mr.  Lamkin stated  that DOR  was available  to answer  that                                                                    
question.                                                                                                                       
                                                                                                                                
1:26:47 PM                                                                                                                    
                                                                                                                                
Co-Chair  Bishop wondered  whether the  tax credit  was only                                                                    
applicable if the asset was used within the state.                                                                              
                                                                                                                                
NICOLE REYNOLDS, DEPUTY TAX  DIRECTOR, DEPARTMENT OF REVENUE                                                                    
(via teleconference), indicated in the affirmative.                                                                             
                                                                                                                                
1:27:30 PM                                                                                                                    
                                                                                                                                
CHRIS  BARROWS,  PACIFIC   SEAFOOD  PROCESSORS  ASSOCIATION,                                                                    
JUNEAU, discussed  his support  of the  bill. He  pointed to                                                                    
letters of support and research  in the members  packets. He                                                                    
shared  that  the  bill  would  reestablish  a  longstanding                                                                    
program  and  expand  its  list   of  eligible  species.  He                                                                    
stressed  that the  expansion was  an important  addition to                                                                    
the existing program.                                                                                                           
                                                                                                                                
Co-Chair  Bishop wondered  whether it  was possible  to have                                                                    
less product  discharge after processing with  the expansion                                                                    
of eligible items.                                                                                                              
                                                                                                                                
Mr. Barrows  replied that the expansion  of technology could                                                                    
have potential for a decrease in discharge.                                                                                     
                                                                                                                                
1:32:38 PM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
1:32:56 PM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                
1:33:25 PM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
1:35:54 PM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                
1:36:40 PM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
1:38:50 PM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                
1:39:03 PM                                                                                                                    
                                                                                                                                
MARK  PALMER, CEO  OCEAN  BEAUTY  SEAFOODS, INC.,  ANCHORAGE                                                                    
(via   teleconference),   testified   in  support   of   the                                                                    
legislation. He  remarked on the successful  track record of                                                                    
infrastructure  investment,  which  was still  currently  in                                                                    
service. He  stressed that his company  produced value added                                                                    
seafood products in every area of Alaska.                                                                                       
                                                                                                                                
Co-Chair  Stedman asked  for opinion  on black  cod and  its                                                                    
place in the past and future of the seafood economy.                                                                            
                                                                                                                                
Mr. Palmer replied  that his company had a  smoked black cod                                                                    
product with  national distribution through Whole  Foods and                                                                    
Costco.  He noted  that the  availability  and abundance  of                                                                    
black cod created economic opportunities.                                                                                       
                                                                                                                                
Co-Chair  Stedman  wondered  whether  black  cod  should  be                                                                    
included in the bill.                                                                                                           
                                                                                                                                
Mr.  Palmer  replied that  it  was  not yet  qualified,  and                                                                    
explained  that  he  did  not know  whether  black  cod  was                                                                    
included in the bill.                                                                                                           
                                                                                                                                
1:45:18 PM                                                                                                                    
                                                                                                                                
ABBY  FREDRICK,  DIRECTOR   OF  COMMUNICATIONS,  SILVER  BAY                                                                    
SEAFOODS, JUNEAU (via  teleconference), testified in support                                                                    
of  the  legislation.  She explained  that  there  had  been                                                                    
significant investment  in processing  facilities throughout                                                                    
the state, and operated  in several coastal communities. She                                                                    
stated that  Silver Bay Seafoods had  utilized past versions                                                                    
of the program.                                                                                                                 
                                                                                                                                
1:48:59 PM                                                                                                                    
                                                                                                                                
JULIANNE  CURRY, CEO  OCEAN  BEAUTY  SEAFOODS, INC.,  KODIAK                                                                    
(via  teleconference), spoke  in  support of  the bill.  She                                                                    
explained that there  was also a letter  of support included                                                                    
in the  members packets.  She specifically spoke  in support                                                                    
of the inclusion of pollock and cod in the legislation.                                                                         
                                                                                                                                
Co-Chair Bishop OPENED and CLOSED public testimony.                                                                             
                                                                                                                                
Senator Wielechowski  wondered why  there was  a distinction                                                                    
in the bill between the words processed and produced.                                                                           
                                                                                                                                
Ms. Reynolds replied the  department interpreted those words                                                                    
were  that the  equipment or  product  needed to  be in  the                                                                    
state of Alaska. She stressed  that the product or equipment                                                                    
outside of the state would not be eligible for the program.                                                                     
                                                                                                                                
Senator  Wielechowski surmised  that the  fish must  be from                                                                    
and processed within Alaska.                                                                                                    
                                                                                                                                
Ms.  Reynolds responded  that  she could  not  speak to  the                                                                    
location  of  the  harvested fish,  but  believed  that  the                                                                    
intent was for the fish to be harvested within the state.                                                                       
                                                                                                                                
1:55:55 PM                                                                                                                    
                                                                                                                                
Mr. Lamkin  stated that the intent  of the bill was  for the                                                                    
credits to cover Alaska resources.                                                                                              
                                                                                                                                
Senator  Wielechowski  noted  that  there  was  a  published                                                                    
fiscal note  from April 2021,  which showed a  revenue loss,                                                                    
but the new fiscal note had a significant change.                                                                               
                                                                                                                                
Ms. Reynolds  said that  the updated FN  had taken  the Fall                                                                    
2021 forecast,  which had  lower fish  values than  had been                                                                    
originally addressed in the bill.                                                                                               
                                                                                                                                
Senator Wielechowski  asked about  the revenue to  the state                                                                    
general fund from the credits.                                                                                                  
                                                                                                                                
Ms. Reynolds replied  that DOR had not been  involved in the                                                                    
crafting of the note.                                                                                                           
                                                                                                                                
Senator  Wielechowski was  curious about  revenue types  and                                                                    
market changes.                                                                                                                 
                                                                                                                                
Ms.  Reynolds  agree  to  provide  the  information  to  the                                                                    
committee.                                                                                                                      
                                                                                                                                
Senator Wielechowski  cited page 12  of the report.  He then                                                                    
noted   the  report   and  read   from   the  report   about                                                                    
confidentiality rules.                                                                                                          
                                                                                                                                
2:00:55 PM                                                                                                                    
                                                                                                                                
Ms. Reynolds  stressed that there  was an intention  for DOR                                                                    
to  provide  accurate  revenue   forecasts,  and  agreed  to                                                                    
explore confidentiality rules.                                                                                                  
                                                                                                                                
Senator  Wielechowski  stated that  he  was  referring to  a                                                                    
report from the Legislative Finance Division (LFD).                                                                             
                                                                                                                                
Ms. Reynolds  agreed to provide that  information related to                                                                    
the question.                                                                                                                   
                                                                                                                                
Senator  Wielechowski  queried  an  opinion  on  the  bill's                                                                    
possible retroactivity.                                                                                                         
                                                                                                                                
Ms. Reynolds replied  that DOR did not take  a position, and                                                                    
would support the legislature.                                                                                                  
                                                                                                                                
Senator  Wilson wondered  whether  the bill  would apply  to                                                                    
vessels that  were both fishing and  processing vessels, and                                                                    
queried the number of those  types of vessels that reside in                                                                    
the state.                                                                                                                      
                                                                                                                                
Mr. Lamkin replied  in the affirmative, and  differed to the                                                                    
industry  representatives  for  the  information  about  the                                                                    
number of those types of vessels.                                                                                               
                                                                                                                                
Senator  Wilson wondered  whether  the  investment in  those                                                                    
vessels would be prorated for  the amount used on processing                                                                    
versus fishing.                                                                                                                 
                                                                                                                                
Mr. Lamkin looked  at page 4 of the bill,  and stressed that                                                                    
the detailed analysis would be provided by DOR.                                                                                 
                                                                                                                                
Senator Wilson stated that he would follow up with DOR.                                                                         
                                                                                                                                
Ms. Reynolds agreed to provide that information.                                                                                
                                                                                                                                
SB  33  was   HEARD  and  HELD  in   committee  for  further                                                                    
consideration.                                                                                                                  
                                                                                                                                
2:05:27 PM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
2:11:12 PM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                
SENATE BILL NO. 104                                                                                                           
                                                                                                                                
     "An Act  relating to geothermal resources;  relating to                                                                    
     the   definition   of   'geothermal   resources';   and                                                                    
     providing for an effective date."                                                                                          
                                                                                                                                
2:11:12 PM                                                                                                                    
                                                                                                                                
Co-Chair Bishop discussed housekeeping.                                                                                         
                                                                                                                                
HALEY  PAINE,  DEPUTY DIRECTOR,  DIVISION  OF  OIL AND  GAS,                                                                    
DEPARTMENT  OF   NATURAL  RESOURCES   (via  teleconference),                                                                    
discussed a  presentation (copy on file).  She announced she                                                                    
would begin with slide 18.                                                                                                      
                                                                                                                                
Ms. Paine spoke to slide 19, "Purpose of SB 104":                                                                               
                                                                                                                                
    ?Modernize Alaska's geothermal exploration program                                                                          
     ?Greater potential for  providing affordable, renewable                                                                    
     energy   to  rural   communities  and   remote  natural                                                                    
     resource extraction projects                                                                                               
     ?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                                                                             
     ?More  time  for  a  company   to  identify  and  prove                                                                    
     resource to convert to leases                                                                                              
     ?Conversion  to  leases  based on  completion  of  work                                                                    
     commitment and  submission of exploration  plan instead                                                                    
     of proving discovery of commercial resource                                                                                
     ?Doubles maximum acreage allowed for exploration                                                                           
     ?Reforms definitions for  geothermal resources to focus                                                                    
     on Commercial Use                                                                                                          
     ?Explicitly   excludes   domestic,  noncommercial,   or                                                                    
     small-scale  industrial   use  from  the  need   for  a                                                                    
     geothermal license or lease                                                                                                
                                                                                                                                
Ms. Paine moved to slide 20, which provided a brief history                                                                     
of geothermal leasing and permitting in Alaska:                                                                                 
                                                                                                                                
     Present 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.                                                                               
                                                                                                                                
     2013                                                                                                                       
     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.                                                                                                                
                                                                                                                                
     2008                                                                                                                       
     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  the                                                                    
     website.                                                                                                                   
                                                                                                                                
     1986                                                                                                                       
     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.                                                                                                    
                                                                                                                                
     1983                                                                                                                       
     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.                                                                                         
                                                                                                                                
2:16:19 PM                                                                                                                    
                                                                                                                                
Ms. Paine spoke to slide 21, "DNR Leasing/Permitting                                                                            
Process":                                                                                                                       
                                                                                                                                
     ?Competitive Lease Sale                                                                                                    
     ?If  no competing  interest,  issue prospecting  permit                                                                    
     with two-year time limit                                                                                                   
     ?This   bill  would   update  this,   replacing  2-year                                                                    
     prospecting  permits with  5-year exploration  licenses                                                                    
     designed  after  our  modern oil  and  gas  exploration                                                                    
     license program.                                                                                                           
     ?Only after  the stipulations  of a  permit/license are                                                                    
     met can the operator opt to convert to a lease.                                                                            
     ?Both processes require Best  Interest Finding prior to                                                                    
     disposal                                                                                                                   
                                                                                                                                
Ms. Paine discussed slide 22, "Sectional Summary":                                                                              
                                                                                                                                
     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 and gas under AS 38.05.180.                                                                           
     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.                                                                                         
                                                                                                                                
Ms. Paine skipped to slide 24, "Section 2: Private Use                                                                          
Exemption":                                                                                                                     
                                                                                                                                
     ? 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.                                                                         
                                                                                                                                
Co-Chair Bishop wondered whether there was an example of                                                                        
volume of water per minute in the bill.                                                                                         
                                                                                                                                
Ms. Paine replied that there was not a specific numeric                                                                         
requirement, because there was no desire to set limits that                                                                     
might hinder development.                                                                                                       
                                                                                                                                
2:20:06 PM                                                                                                                    
                                                                                                                                
Senator Wielechowski queried the definition of domestic.                                                                        
                                                                                                                                
Ms. Paine replied that it referred to an individual                                                                             
homeowner.                                                                                                                      
                                                                                                                                
Ms. Paine looked at slide 25, "Section 2: Preferential                                                                          
Rights":                                                                                                                        
                                                                                                                                
     ?  Current  statute  grants preferential  rights  to  a                                                                    
     surface  owner to  apply for  a geothermal  prospecting                                                                    
     permit once notice is received of existing application                                                                     
          ?Potentially     discouraging    to     commercial                                                                    
          development                                                                                                           
          ?Private landowners usually don't have financial                                                                      
          resources to develop a commercially viable                                                                            
          geothermal resource.                                                                                                  
     ? Surface  owner rights are already  protected under AS                                                                    
     38.05.130.                                                                                                                 
          ?If   conflict   arises,   DNR   ensures   private                                                                    
          landowners  would  not  be left  without  heat  or                                                                    
          power,   or   otherwise  damaged   by   commercial                                                                    
          development.                                                                                                          
     ?  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. Surface                                                                    
     owner notification  is also  part of  later surface-use                                                                    
     permitting.                                                                                                                
                                                                                                                                
Senator Wielechowski  wondered whether  someone who  was not                                                                    
the surface  owner could  apply to develop  a piece  of land                                                                    
that was owned by someone else.                                                                                                 
                                                                                                                                
Ms. Paine replied in the affirmative.                                                                                           
                                                                                                                                
Senator Wielechowski surmised that  a developer could obtain                                                                    
the rights to someone elses land.                                                                                               
                                                                                                                                
Ms.  Paine   replied  that  the   provision  was   in  place                                                                    
currently,  and  the  bill  would not  seek  to  change  the                                                                    
mineral estate.                                                                                                                 
                                                                                                                                
Senator  Wielechowski  felt  that  there  would  be  unhappy                                                                    
landowners.                                                                                                                     
                                                                                                                                
Co-Chair  Bishop felt  that there  could be  a conversations                                                                    
about subsurface rights.                                                                                                        
                                                                                                                                
Ms. Paine looked at slide 26, "Section 3: Work Commitment":                                                                     
                                                                                                                                
     ? 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 license                                                                         
     ?Commitment expressed in dollar figure                                                                                     
     ?annual reporting and performance objectives                                                                               
                                                                                                                                
2:25:31 PM                                                                                                                    
                                                                                                                                
Senator  Wielechowski stressed  that most  oil in  the state                                                                    
was  found on  either  state or  federal  land. He  wondered                                                                    
whether the  state had  ever forced  a private  landowner to                                                                    
allow and oil an gas company to develop their land.                                                                             
                                                                                                                                
Ms. Paine  replied that it  had not occurred  for geothermal                                                                    
exploration. She  agreed to  provide more  information about                                                                    
oil and gas.                                                                                                                    
                                                                                                                                
2:26:49 PM                                                                                                                    
                                                                                                                                
STEVE  MASTERMAN,  DIVISION  OF GEOLOGICAL  AND  GEOPHYSICAL                                                                    
SURVEYS,  STATE GEOLOGIST,  FAIRBANKS (via  teleconference),                                                                    
looked at  the slide 27. He  stated that the slide  had been                                                                    
revised to  be more specific  and to remove  the temperature                                                                    
restraint.                                                                                                                      
                                                                                                                                
Senator  Wielechowski  asked for  an  example  of brines  or                                                                    
gases that could  be artificially pumped into  the ground in                                                                    
the statute.                                                                                                                    
                                                                                                                                
Mr. Masterman  replied that it  was less likely that  gas or                                                                    
brines would  be injected into geothermal  fields. He stated                                                                    
that the Chena  Hot Springs field received  injections for a                                                                    
closed loop environment.                                                                                                        
                                                                                                                                
2:30:24 PM                                                                                                                    
                                                                                                                                
Senator Wielechowski  wondered whether any of  the brines or                                                                    
gases  could  damage water  resources,  and  how to  protect                                                                    
against the damage.                                                                                                             
                                                                                                                                
Mr. Masterman  replied that production of  geothermal fluids                                                                    
occurred  at considerable  depths, and  water sources  would                                                                    
not be at that level.                                                                                                           
                                                                                                                                
Mr. Masterman  addressed slide 28,  "Sections 7 and  11: New                                                                    
Definition":                                                                                                                    
                                                                                                                                
     "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 systems.                                                                          
     ?Ensures all  the State's mineral estate  resources are                                                                    
     captured in definition.                                                                                                    
       ame definition  being applied  to both DNR  and AOGCC                                                                    
     statutes.                                                                                                                  
                                                                                                                                
Co-Chair Bishop queried the source of the definition.                                                                           
                                                                                                                                
Mr. Masterman agreed to provide that information.                                                                               
                                                                                                                                
Senator Wielechowski  wondered what  happened to  the helium                                                                    
exclusion in the previous definition.                                                                                           
                                                                                                                                
Mr. Masterman replied  that Alaska did not  have much helium                                                                    
present, so it was almost not applicable.                                                                                       
                                                                                                                                
2:35:24 PM                                                                                                                    
                                                                                                                                
Ms. Paine concluded the presentation.                                                                                           
                                                                                                                                
Senator  Wielechowski wondered  why there  was a  removal of                                                                    
the annual rental fee of three dollars an acre.                                                                                 
                                                                                                                                
Ms. Paine  replied that the  reason was to be  more flexible                                                                    
in the future.                                                                                                                  
                                                                                                                                
Senator Wielechowski looked at Section  6, and asked for the                                                                    
rationale behind  the repeal of the  unitization provisions.                                                                    
He also queried the legislations impact on royalties.                                                                           
                                                                                                                                
Ms. Paine  replied that  the reason for  the repeals  was to                                                                    
align  with oil  and gas  exploration. She  stated that  the                                                                    
bill  would not  impact  the current  royalty structure  for                                                                    
geothermal energy development.                                                                                                  
                                                                                                                                
Senator Wilson  wondered whether  DNR tracked the  number of                                                                    
domestic geothermal insulations in the state.                                                                                   
                                                                                                                                
Ms. Paine replied  that the Division of Oil and  Gas did not                                                                    
track the number of domestic heat pumps in the state.                                                                           
                                                                                                                                
Senator  Wielechowski looked  at Section  6, and  whether it                                                                    
gave  the  commissioner  the ability  to  change  the  lease                                                                    
requirements with agreement from the lessee.                                                                                    
                                                                                                                                
Ms. Paine replied  that the intention of  that provision was                                                                    
to align with the current oil and gas provisions.                                                                               
                                                                                                                                
Co-Chair Bishop wondered whether  there was a recent royalty                                                                    
modification.                                                                                                                   
                                                                                                                                
Ms. Paine replied in the affirmative.                                                                                           
                                                                                                                                
2:40:05 PM                                                                                                                    
                                                                                                                                
Senator  Wilson   queried  a  definition  of   "small  scale                                                                    
industrial use."                                                                                                                
                                                                                                                                
Ms.   Paine  replied   that  there   was  not   a  statutory                                                                    
definition,  and  explained that  it  was  based on  whether                                                                    
there would be a customer for the product.                                                                                      
                                                                                                                                
Senator Wilson  wondered whether Chena Hot  Springs would be                                                                    
considered small scale industrial.                                                                                              
                                                                                                                                
Ms. Paine replied that Chena  Hot Springs did not distribute                                                                    
their  power  outside  of the  organization,  so  they  were                                                                    
exempt from that definition.                                                                                                    
                                                                                                                                
Senator Wilson wondered whether  it would include commercial                                                                    
developments for homes or medical facilities.                                                                                   
                                                                                                                                
Ms.  Paine  replied that  they  would  not go  through  this                                                                    
specific regulatory  process, but  felt that there  would be                                                                    
other permits from different agencies.                                                                                          
                                                                                                                                
Senator Wilson  surmised that a  developer could  bypass the                                                                    
requirement by working directly  with the landowner, as long                                                                    
as there was no distribution of power.                                                                                          
                                                                                                                                
Ms. Paine replied  that anyone who was looking  for the size                                                                    
and  scale  of  resource  to  develop  would  fine  it  more                                                                    
economic to distribute the resource,  however there would be                                                                    
other public processes for the development of the resource.                                                                     
                                                                                                                                
Co-Chair Bishop OPENED and CLOSED public testimony.                                                                             
                                                                                                                                
Co-Chair Bishop discussed the following day's agenda.                                                                           
                                                                                                                                
SB 104 was HEARD and HELD in committee for further                                                                              
consideration.                                                                                                                  
                                                                                                                                
ADJOURNMENT                                                                                                                   
2:44:04 PM                                                                                                                    
                                                                                                                                
The meeting was adjourned at 2:44 p.m.                                                                                          

Document Name Date/Time Subjects
SB 25 Explanation of Changes V.a to V.b.pdf SFIN 4/20/2021 9:00:00 AM
SFIN 1/24/2022 1:00:00 PM
SB 25
SB 25 Responses to SFIN Committee Members re SB 25 Online Checkbook 5.03.21.pdf SFIN 4/20/2021 9:00:00 AM
SFIN 1/24/2022 1:00:00 PM
SB 25
SB 25 AFP-AK Support Letter_ (002).pdf SFIN 4/20/2021 9:00:00 AM
SFIN 1/24/2022 1:00:00 PM
SB 25
SB 25 AKPIRG ST AFF testimony.pdf SFIN 4/20/2021 9:00:00 AM
SFIN 1/24/2022 1:00:00 PM
SB 25
SB 25 Sponsor Statement.pdf SFIN 1/24/2022 1:00:00 PM
SB 25
SB 25 Supporting Doc 2 Historical 10-19 Reports Follow The Money.pdf SFIN 1/24/2022 1:00:00 PM
SB 25
SB 25 Supporting Doc 1 Follow the Money 2018 Report.pdf SFIN 1/24/2022 1:00:00 PM
SB 25
SB 25 Supporting Doc 3 Online Checkbook Examples.pdf SFIN 1/24/2022 1:00:00 PM
SB 25
SB033 SEAFA Support Letter 2.22.21.pdf SFIN 1/24/2022 1:00:00 PM
SRES 2/22/2021 3:30:00 PM
SB 33
SB033 ICICLE and Silver Bay Support Letters 2.22.21.pdf SFIN 1/24/2022 1:00:00 PM
SRES 2/22/2021 3:30:00 PM
SB 33
SB 33 RDC Letter of Support 4-5-21.pdf SFIN 1/24/2022 1:00:00 PM
SRES 4/7/2021 3:30:00 PM
SB 33
SB 33 Seafood-Tax-Credit_Summary of Changes _from A to B.pdf SFIN 1/24/2022 1:00:00 PM
SB 33
SB 33 Seafood-Tax-Credit_Sectional_Version B.pdf SFIN 1/24/2022 1:00:00 PM
SB 33
SB 33 SeafoodTaxCredit_SupportLetter_PSPA_02Feb2021.pdf SFIN 1/24/2022 1:00:00 PM
SB 33
SB 33 SeafoodTaxCredit_SupportLetter_OceanBeauty_19Feb2021.pdf SFIN 1/24/2022 1:00:00 PM
SB 33
SB 33 SeafoodTaxCredit_SupportLetter_SilverBay_22Feb2021.pdf SFIN 1/24/2022 1:00:00 PM
SB 33
SB 33 SeafoodTaxCredit_SupportLetter_SEAFA_22Feb2021.pdf SFIN 1/24/2022 1:00:00 PM
SB 33
SB 33 SeafoodTaxCredit_SupportLetter_RDC05April2021.pdf SFIN 1/24/2022 1:00:00 PM
SB 33
SB 33 SeafoodTaxCredit_QuantitiveAnalysis_MRG_March2021.pdf SFIN 1/24/2022 1:00:00 PM
SB 33
SB 104 Sponsor Statement 3.9.21.pdf SFIN 1/24/2022 1:00:00 PM
SRES 4/9/2021 3:30:00 PM
SB 104
SB 104 Sectional Analysis Version I 1.22.22.pdf SFIN 1/24/2022 1:00:00 PM
SB 104
SB 25 Explanation of Changes ver. B to W 1.21.2022.pdf SFIN 1/24/2022 1:00:00 PM
SB 25
SB 25 Work Order ver. W 1.21.2022.pdf SFIN 1/24/2022 1:00:00 PM
SB 25
SB 104 DNR Presentation SFIN 012422.pdf SFIN 1/24/2022 1:00:00 PM
SB 104
SB 104 Summary of Changes v.I 1.22.22.pdf SFIN 1/24/2022 1:00:00 PM
SB 104
SB 104 Sectional Analysis Version I 1.22.22.pdf SFIN 1/24/2022 1:00:00 PM
SB 104
SB 33 Icicle Seafoods Support for SB 33 Seafood Product Development Tax Credit 1 24 2022.pdf SFIN 1/24/2022 1:00:00 PM
SB 33
SB 33 Invited Testimony - SenFin - Abby Fredrick - Silver Bay Seafoods 1.24.2021.docx SFIN 1/24/2022 1:00:00 PM
SB 33
SB 33 PSPA SB33 Testimony - 24 Jan 2022.pdf SFIN 1/24/2022 1:00:00 PM
SB 33
SB 33 Support Letter UFA 2.24.2021.pdf SFIN 1/24/2022 1:00:00 PM
SB 33