Legislature(2023 - 2024)BUTROVICH 205

03/08/2023 03:30 PM Senate RESOURCES

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Audio Topic
03:30:28 PM Start
03:31:03 PM Carbon Capture and Storage (ccs)
04:02:13 PM Alliant Insurance Discussion of Carbon Capture
05:00:49 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Presentation: Carbon Capture, Utilization and
Storage by Tip Meckel, Senior Research Scientist,
Bureau of Economic Geology
Austin Cahill, Managing Director, Alliant
Insurance; David LePain, State Geologist,
Director of Geological & Geophysical Surveys,
Department of Natural Resources; Doug
Vincent-Lang, Commissioner, Department of
Fish and Game
-- Testimony <Invitation Only> --
+ Bills Previously Heard/Scheduled TELECONFERENCED
**Streamed live on AKL.tv**
                       ALASKA STATE LEGISLATURE                                                                               
                 SENATE RESOURCES STANDING COMMITTEE                                                                          
                            March 8, 2023                                                                                       
                              3:30 p.m.                                                                                         
MEMBERS PRESENT                                                                                                               
Senator Click Bishop, Co-Chair                                                                                                  
Senator Cathy Giessel, Co-Chair                                                                                                 
Senator Bill Wielechowski, Vice Chair                                                                                           
Senator Scott Kawasaki                                                                                                          
Senator  James Kaufman                                                                                                          
Senator  Forrest Dunbar                                                                                                         
Senator Matt Claman                                                                                                             
MEMBERS ABSENT                                                                                                                
All members present                                                                                                             
COMMITTEE CALENDAR                                                                                                            
CARBON CAPTURE AND STORAGE (CCS)                                                                                                
     - HEARD                                                                                                                    
ALLIANT INSURANCE DISCUSSION OF CARBON CAPTURE SEQUESTRATION                                                                    
     - HEARD                                                                                                                    
INTRODUCTION TO GEOLOGIC CARBON STORAGE                                                                                         
     - HEARD                                                                                                                    
PREVIOUS COMMITTEE ACTION                                                                                                     
No previous action to record                                                                                                    
WITNESS REGISTER                                                                                                              
TIP MERKEL, PhD., Senior Research Scientist                                                                                     
Gulf Coast Carbon Center                                                                                                        
Bureau of Economic Geology                                                                                                      
Jackson School of Geosciences                                                                                                   
University of Texas at Austin                                                                                                   
Austin, Texas                                                                                                                   
POSITION  STATEMENT:   Delivered  a  presentation   on carbon  capture                                                        
and storage.                                                                                                                    
HARRY BALLAN, Managing Director                                                                                                 
Global M&A Group                                                                                                                
Alliant Insurance Services, Inc.                                                                                                
New York, New York                                                                                                              
POSITION  STATEMENT:  Discussed  carbon capture  and  sequestration.                                                          
AUSTIN CAHILL, Managing Director and Lead                                                                                       
Tax Insurance Team                                                                                                              
Alliant Insurance Services, Inc.                                                                                                
New York, New York                                                                                                              
POSITION STATEMENT: Discussed carbon capture and sequestration.                                                               
DAVID LEPAIN, State Geologist and Director                                                                                      
Division of Geological and Geophysical Surveys                                                                                  
Department of Natural Resources (DNR)                                                                                           
Fairbanks, Alaska                                                                                                               
POSITION  STATEMENT:  Delivered   a presentation   on Geologic  Carbon                                                        
ACTION NARRATIVE                                                                                                              
3:30:28 PM                                                                                                                    
CO-CHAIR   CATHY  GIESSEL   called   the  Senate  Resources   Standing                                                        
Committee  meeting  to  order  at 3:30  p.m.  Present  at the  call  to                                                         
order  were  Senators  Kawasaki,  Kaufman,  Co-Chair  Bishop,  and  Co-                                                         
Chair Giessel. Senator Dunbar arrived during the introductions.                                                                 
^Carbon Capture and Storage (CCS)                                                                                               
                   CARBON CAPTURE AND STORAGE (CCS)                                                                         
                   [Contains discussion of SB 49.]                                                                              
3:31:03 PM                                                                                                                    
CO-CHAIR   GIESSEL  stated  that  the  committee   would  continue   to                                                         
discuss   SB  49  relating   to  carbon   capture,   utilization,   and                                                         
storage. She welcomed Dr. Tip Merkel to begin his presentation.                                                                 
3:31:46 PM                                                                                                                    
TIP  MERKEL,  PhD.,  Senior  Research  Scientist,   Gulf Coast  Carbon                                                          
Center,    Bureau   of   Economic    Geology,    Jackson   School    of                                                         
Geosciences,   University   of   Texas  at   Austin,   Austin,  Texas,                                                          
stated  that  the Gulf  Coast  Carbon Center  (GCCC)  is  an industry-                                                          
sponsored  applied  research   group  that  helps  the private  sector                                                          
develop  an economically   viable  industry  to store  CO2. He pointed                                                          
to the  names and  logos  of the current  GCCC  sponsors  displayed  on                                                         
slide 3.                                                                                                                        
3:34:29 PM                                                                                                                    
DR. MECKEL reviewed the key points in the presentation:                                                                         
        • Carbon Capture, Utilization, and Storage (CCUS)                                                                       
           is not a new topic.                                                                                                  
        • CCUS basics: Capture, Transport, Storage.                                                                             
        • Deployment focus is on emission hubs, including                                                                       
           marine ports and other ports where there are                                                                         
           concentrated industrial emissions.                                                                                   
        • Economics driving the reduction of atmospheric                                                                        
           emission projects are rooted in tax credits in                                                                       
           IRS Section 45Q.                                                                                                     
3:35:37 PM                                                                                                                    
DR.  MECKEL  reviewed   the  components   of  CCUS,  paraphrasing   the                                                         
     The  CCuS  business   is  evolving,  but  at  its  core,  it                                                               
     will  likely  be populated  by  emissions  sources,  service                                                               
     and   technology   providers,  midstream   transport,   well                                                               
     and  storage   operators,  and  tax  equity  driven  project                                                               
     investors / developers.                                                                                                    
The  diagram  shows   the  CO2 sources   on the  left   that  could  be                                                         
anything   that  is  required   to  report  under   the  Environmental                                                          
Protection  Agency  (EPA).  Each source  requires  the  development  of                                                         
some type  of capture  equipment.  Transport  of the  CO2 is by either                                                          
pipeline  or  ship.  He  noted  that  the  US has  about  50  years  of                                                         
experience   with  transport   by  pipeline.   Transport  by   ship  is                                                         
coming.  The  last  component  is  a sink  to  hold  the CO2  for  some                                                         
type of utilization or for permanent sequestration.                                                                             
3:36:59 PM                                                                                                                    
DR.  MECKEL  displayed   slide  6 and  explained   that  CO2 emissions                                                          
from   different   industrial   processes   come   out   at  different                                                          
pressures,  temperatures,   and concentrations.   The pictures  on  the                                                         
top  row  of  a  coal  power   plant,  a  gas  power  plant,   and  air                                                         
capture  typically  have  low concentration   emissions.  The emission                                                          
sources  on the  bottom  row of  a natural  gas  processing  plant,  an                                                         
ammonia  plant,  an  ethanol  plant,  and  a  cement  plant  typically                                                          
have  higher   concentrations   of  pure   CO2,  which  will  be   less                                                         
expensive  to  address.  The point  is that  there  is no  single  cost                                                         
associated  with  CO2 capture; it  is highly  variable  among emission                                                          
3:37:58 PM                                                                                                                    
DR.  MECKEL  stated that  the  purpose  of slide  7  is to  convey  the                                                         
experience  Texas  has  had with  CCS.  Over the  past decade,  nearly                                                          
1  gigatons  of carbon  dioxide  has  been  injected  into  subsurface                                                          
formations  throughout   Texas.  It  is primarily   used for  enhanced                                                          
oil  recovery  in the  Permian  Basin of  west Texas.  He  stated  that                                                         
1 gigaton  of  CO2 over  a  decade is  on  the scale  that  makes  pure                                                         
sequestration feasible.                                                                                                         
DR.  MECKEL said  the  map on  slide 8  shows the  locations  of  major                                                         
US Department   of Energy  funded projects  in  the US  and throughout                                                          
the world  over  the last  20 years.  The projects  identified  in  red                                                         
reflect  the   flagship  carbon  capture   programs   in  the  last  10                                                         
years. These led to opportunities in other states and regions.                                                                  
3:39:20 PM                                                                                                                    
SENATOR CLAMAN joined the committee.                                                                                            
DR.  MECKEL said  slide  9 provides  an  overview  of carbon  storage.                                                          
He  clarified  that  the injection   sites  depicted  have  nothing  to                                                         
do  with shallow   underground  sources  of  drinking  water  that  are                                                         
protected   under   the   Safe   Drinking   Water   Act   (SDWA).   The                                                         
injections  go  1-2 miles  below  the surface,  into  the  depths  from                                                         
which  hydrocarbons  are  recovered.  These  are  either  depleted  oil                                                         
fields  or  saline  formations.   The  CO2 that's  injected   stays  in                                                         
place  much the  same way  as buoyant  hydrocarbons  that  are trapped                                                          
in the subsurface. The physics are the same.                                                                                    
3:40:30 PM                                                                                                                    
DR.  MECKEL  directed  attention   to the  graphic  on  slide  10  that                                                         
includes  an  example  of  offshore   transport,  CO2  injection,   and                                                         
geological storage. He spoke to the following:                                                                                  
     Why Offshore?                                                                                                              
     • Emissions hubs are at coast/ports                                                                                        
     • Single land/mineral owner (GLO)                                                                                          
     • Avoid NUMBY/Unitization                                                                                                  
     • Data availability                                                                                                        
     • Fewer, younger legacy wells                                                                                              
     • Avoid USDW  Class VI focus                                                                                               
     • Monitoring easier?                                                                                                       
     • Long term liability  GLO                                                                                                 
     • Vessel transport flexibility                                                                                             
3:41:26 PM                                                                                                                    
DR.  MECKEL  said slide  11  highlights  the  Porthos  Project  in  the                                                         
Netherlands.    It   illustrates    the   industrial   emitters,    the                                                         
pipeline   network,  and/or  offshore   infrastructure   that's   being                                                         
developed  to inject  CO2 from  the port sector.  This  model has  been                                                         
replicated  throughout   the  world,  including  the  Gulf  Coast,  UK,                                                         
and the Baltics.                                                                                                                
3:42:23 PM                                                                                                                    
DR.  MECKEL   turned  to  slide   12  that  describes   the  Inflation                                                          
Reduction   Act  of   2022  (IRA),   noting   that  it   followed   the                                                         
Bipartisan  Infrastructure   Law  that  passed  in  2021.  The graphic                                                          
on   the   right   illustrates    the  estimated    2022-2031   energy                                                          
transition   spending   in  the  IRA  and  BIL.   He  said  there   was                                                         
actually  more funding  for  CCS in  the BIL  than the  IRA, which  has                                                         
a  lot to  do  with  the Section  45Q  tax  credits.  Their  structure                                                          
and  effect  are  similar  to  the  wind  and  solar  tax credits.   He                                                         
said  he can  imagine  capital  engagement   to develop   CCS projects                                                          
as  the  tax credits   were expanded   and made  transferable   in  the                                                         
IRA.   He  reminded   the  committee   that   the  45Q   credits   were                                                         
introduced  in  2009 and  have  enjoyed  bipartisan  support  over  the                                                         
last decade.                                                                                                                    
3:43:30 PM                                                                                                                    
DR. MECKEL  advised  that  slide 13  lays out  how the  45K tax credit                                                          
works.  It  has a  base fee  that  is increased   if prevailing   wage,                                                         
hour,  and apprenticeship   requirements  are  met.  The credit  for  a                                                         
CO2 storage   project  is  $85/tonne  without  enhanced  oil  recovery                                                          
and   $60/tonne    with   enhanced    oil   recovery.    Congress    is                                                         
considering   a  bill  that   offers  $85/tonne   for  both  types   of                                                         
project.  The   example  on  the  slide  suggests   a project   with  1                                                         
million  tonnes  of  carbon  capture  and  injection  per  year,  which                                                         
would  accrue   an  $85  million   tax  credit/year.   The  credit   is                                                         
available  for  12  years  which  brings  the  tax  credit  value  into                                                         
the  $1 billion  range.  The  credits  are  available  for  direct  pay                                                         
and  now are  transferable.  This  has  stimulated  interest  in  these                                                         
3:44:43 PM                                                                                                                    
DR.  MECKEL  described  slide  14  as  dense  with  information   about                                                         
jobs  and  the  economic  impact   of  carbon  capture  deployment   in                                                         
Texas.  He pointed  to  the  link on  the  upper right  that  may  have                                                         
information  about  Alaska.  He  said  most  of the  studies  indicate                                                          
that  developing   the  CCS  industry   results   in  significant   job                                                         
growth    and   retention    associated     with   long-term    wealth                                                          
3:45:27 PM                                                                                                                    
SENATOR WIELECHOWSKI joined the committee.                                                                                      
DR.  MECKEL  spoke   to  the  following   to  discuss  injection   well                                                         
        • EPA Class II  CO2 used for enhanced oil recovery                                                                      
        • EPA Class VI  CO2 injected for storage/disposal.                                                                      
        • State Primacy                                                                                                         
He  noted   that  only  North   Dakota  and  Wyoming   have  Class   VI                                                         
primacy,  although   several  other  states,  including  Alaska,   were                                                         
applying for or thinking about applying for Class VI primacy.                                                                   
3:46:35 PM                                                                                                                    
DR.  MECKEL  directed  attention  to  the color-coded   map  of the  US                                                         
and spoke to the following in slide 16:                                                                                         
     State   legislative   sessions  are  underway   in  2023  in                                                               
     most  states  across  the country  and more  than  70 carbon                                                               
     management,   hydrogen,  and  procurement-related   measures                                                               
     and bills of interest are under consideration.                                                                             
He  noted  that  the  website   cited  on  the  bottom   of the   slide                                                         
provides  information  about  what  other states  are doing  regarding                                                          
3:47:19 PM                                                                                                                    
DR.  MECKEL   stated  that   slide  17  provides   a  summary   of  his                                                         
comments. It read as follows:                                                                                                   
        • Carbon Capture Utilization and Storage (CCUS) is                                                                      
           not a new topic.                                                                                                     
        • CCUS basics: Capture, Transport, Storage.                                                                             
        • Deployment focus is on emission hubs, including                                                                       
           marine ports.                                                                                                        
        • Economics are rooted in tax credits.                                                                                  
        • CCUS is an economic growth opportunity.                                                                               
The  takeaway  is that  CCUS  is an  opportunity  for  growth  in  many                                                         
3:48:43 PM                                                                                                                    
DR. MECKEL  described  the  following  resources  listed  on the  final                                                         
slide of the presentation. It read as follows:                                                                                  
     • DOE-NETL CCS Newsletter:                                                                                                 
     QUESTRA TION&A=1                                                                                                           
     • GCCSI: https://www.globalccsinstitute.com/                                                                               
     • Gulf Coast Carbon Center:                                                                                                
3:49:15 PM                                                                                                                    
CO-CHAIR  GIESSEL  asked if  he would  talk briefly  about  the slides                                                          
that  discuss  shipping   liquefied  CO2,  because  that  topic  is  of                                                         
significant interest to the committee.                                                                                          
DR.  MECKEL   turned  to   slide  20  and  conveyed   that  he   was  a                                                         
scientific  advisor  on the  Norwegian  Northern  Lights  Project  that                                                         
has  liquid CO2  built  into the  process.  He continued   to speak  to                                                         
the following:                                                                                                                  
                    Liquefied CO2 (LCO2) Shipping                                                                               
           Topics of interest: rapidly evolving full-chain                                                                      
         maritime solutions for low-C energy development and                                                                    
        • Capture of emissions from powering vessels                                                                            
        • Transport of low carbon energy (carbon-neutral                                                                        
           hydrocarbons, Hydrogen, Ammonia)                                                                                     
        • LCO2 transport; synergy with LPG/LNG transport and                                                                    
        • Leapfrogging into offshore storage without                                                                            
           pipelines         FPSO/FSO    for    CCS,    injection                                                               
        • Onshore buffer storage capacity aspects                                                                               
He turned  to  slide 21  and explained   that it  is a rendering  of  a                                                         
site  west of  Bergen,  Norway.  It has  two berths  for  vessels  that                                                         
will  bring  CO2 from  southern  Norway  where  it  will  be offloaded                                                          
into   tanks  and   then  transferred   offshore   through   a  subsea                                                          
pipeline  to a  storage location.   He said both  the  Southeast  Asian                                                         
and  the  greater  North  Sea  communities   are  looking  closely   at                                                         
shipping  LCO?2,  and it  is also becoming  an  important  part of  the                                                         
US deployment of this technology.                                                                                               
CO-CHAIR  GIESSEL   noted  that  the last  few  slides  had  different                                                          
maps of the US.                                                                                                                 
DR. MECKEL  stated  that  the maps  come from  the tracker  website  he                                                         
referenced  earlier.   They  show different   elements  of  CCS.  Slide                                                         
22  shows  in  teal   the  states  that  are   evaluating  pore   space                                                         
ownership  issues  related  to  CCS.  He noted  that  in Texas,  and  a                                                         
number  of  other states,  the  surface  owner  is  deemed to  own  the                                                         
pore  space into  which CO2  would  be injected.  Negotiating  a  lease                                                         
requires   negotiation    with  the   surface   owner,   who   is   not                                                         
necessarily the mineral owner.                                                                                                  
3:53:09 PM                                                                                                                    
He  noted  that,  as  mentioned  earlier,  the  next  slide  addresses                                                          
the  topic was  Class  VI primacy.  Several  states  have  applied  but                                                         
only  North  Dakota  and  Wyoming  have  received  Class  VI  primacy.                                                          
This  means  that there  is  a state  agency  that  is permitting   the                                                         
CO2 injection  wells  under  a  permitting  process  that is  at  least                                                         
as rigorous as the EPA Class VI process.                                                                                        
DR.  MECKEL  said  the states  shaded   green on  the  next  slide  are                                                         
those   that  have   a  combination   of   ownership   interests.   His                                                         
understanding   is  that  this   is  about  the  interaction   between                                                          
hydrocarbon   development   and   CO2  storage.   He   noted  that   in                                                         
Louisiana   there's   been   a  lot   of  discussion    about  whether                                                          
entities   can  drill  through   a  CO2  storage   complex  to  access                                                          
minerals.   The state   has  indicated  that  CCS  projects   will  not                                                         
condemn  mineral  development  in any  way. The  details  on what  this                                                         
means  has  to  be  worked  out,   particularly  if  the  mineral   and                                                         
surface estates are separate.                                                                                                   
He  said  the  states  shaded  red  on  slide  25 reflect   those  that                                                         
have  long-term   state  stewardship.   These   states  have  existing                                                          
legislation  that  addresses  the  long-term  liability  of  a project                                                          
so  the process  for  closure  and  after a  project  ends  is clearly                                                          
laid  out.  He  noted  that  companies  and  investors  typically   are                                                         
hesitant  to proceed  with  a project  if there  isn't  some assurance                                                          
of how the long-term liability will be handled.                                                                                 
DR.  MECKEL  said  the  last  slide  shows  in  dark  blue  the states                                                          
that  have considered   how the  trust  will be  funded,  managed,  and                                                         
3:56:24 PM                                                                                                                    
CO-CHAIR   GIESSEL  asked  about  the  manufacturer   of  the  vessels                                                          
that  will  ship   liquified  CO2  to  Bergen,   Norway,  because   the                                                         
vessels  would  need to be  highly  specialized  to handle  the highly                                                          
corrosive LCO2.                                                                                                                 
DR.  MECKEL  answered  that  Mitsubishi   is  designing  the  vessels.                                                          
They  will  have  more  but  smaller  and  lower  pressure  containers                                                          
that  will  hold  99.9  percent  pure   CO2 with  no  water  component                                                          
because  that's  the  catalyst  for corrosion.   His understanding   is                                                         
that   the   vessels   currently    under   construction    have   some                                                         
specialized  engineering,   but  not as  much  specialized  metallurgy                                                          
as  he  had anticipated.   Other  companies   that are  interested   in                                                         
designing  these  types of  ships have  experience  with  LPG and  LNG.                                                         
He  expects  to  see one  of  these  vessels  in  the  Gulf  of Mexico                                                          
within 2-5 years.                                                                                                               
3:59:07 PM                                                                                                                    
SENATOR  DUNBAR  asked  if it  was  fair to  say  that no  CO2 tankers                                                          
were operating in the Pacific.                                                                                                  
DR. MECKEL said he wasn't aware of any that were on the water.                                                                  
SENATOR  DUNBAR  recalled  that he  anticipated  the tankers  would  be                                                         
built in 2-5 years.                                                                                                             
DR. MECKEL  clarified  that  he anticipates  seeing  one  on the  water                                                         
in  the Gulf  of  Mexico  in 2-5  years  and  in Asia  or  Europe  late                                                         
this year or next year.                                                                                                         
SENATOR  DUNBAR  noted Alaska's  experience   with hydrocarbon  spills                                                          
and asked  what  the impact  would  be if a  tanker spilled  an entire                                                          
load of CO2 into the water.                                                                                                     
DR.  MECKEL  replied   that  it  would  look  very  different   than  a                                                         
release   of  hydrocarbons.   CO2  is   a  natural   compound  in   the                                                         
environment  and  if  it were  released  under  pressure  it  would  go                                                         
to the  gas phase  and  dissipate  quickly.  He noted  that when  a CO2                                                         
well  is  out of  control,  the  CO2 vapor  vents  and  forms  dry  ice                                                         
until  the  well  is  under  control.  He  also  noted  that  when  the                                                         
Nord  Stream  Pipeline  was  damaged,   there  was  a lot  of  dry  ice                                                         
formation that dissipated rapidly.                                                                                              
CO-CHAIR GIESSEL thanked him for the excellent presentation.                                                                    
^Alliant Insurance Discussion of Carbon Capture                                                                                 
 ALLIANT INSURANCE DISCUSSION OF CARBON CAPTURE AND SEQUESTRATION                                                           
4:02:13 PM                                                                                                                    
CO-CHAIR  GIESSEL   announced  the  next  two  speakers  from  Alliant                                                          
Insurance   Inc.  would  discuss  carbon  capture   and  sequestration                                                          
4:03:06 PM                                                                                                                    
AUSTIN  CAHILL,  Managing  Director   and Lead  of  the Tax  Insurance                                                          
Team,  Alliant  Insurance   Inc.,  stated  he was  a  tax  attorney  by                                                         
trade,  which   was  how  he  got  involved   in  the  carbon  capture                                                          
industry.  As  Dr.  Merkel  discussed  previously,   the economics   of                                                         
these   projects   are  related   to   the  use   of   carbon  capture                                                          
sequestration and the tax credits derived therefrom.                                                                            
He   conveyed   that   he   spent    time   with   the   international                                                          
restructuring   group  KPMG   before  moving   to  insurance  broking,                                                          
where  a large  portion  of  what they  do  is to  secure  tax credits                                                          
for   tax  credit   investors.    With   passage   of  the   Inflation                                                          
Reduction   Act,  being   a  tax  credit   investor   includes  carbon                                                          
capture.  Alliant  Insurance  has  been  eager to  become  involved  in                                                         
this  space to  help  de-risk  these  extremely  large carbon  capture                                                          
projects and potential challenge from a taxing authority.                                                                       
MR.   CAHILL    stated   that    Alliant   Insurance    Services    was                                                         
established   in  California  in  1925  and  is  one  of  the  largest                                                          
insurance  brokerages   in the  United  States.  Their  tax  insurance                                                          
brokerage  is  the  largest  tax  insurance   brokerage  worldwide   by                                                         
volume  of  premium  placed.  In  policy  limits,  these  tax  credits                                                          
account  for  tens of  billions  of dollars  per  year in  protection,                                                          
which  shows  this  is already   a very  large  industry.  He  said  he                                                         
and  Mr. Ballan  agree  with Dr.  Merkel  that this  is going  to be  a                                                         
very  economically   fruitful  area  in  terms  of  energy  transition                                                          
and carbon capture specifically.                                                                                                
4:05:10 PM                                                                                                                    
HARRY  BALLAN,   Managing  Director,   Alliant  Insurance,   stated  he                                                         
was  a tax  attorney  who practiced  at Davis  Polk  and  Wardwell  LLP                                                         
from  1993  until  a couple  of  years  ago.  He became  a  partner  in                                                         
1999.  He'd also  been a  professor  of tax law  since  2003, teaching                                                          
mostly at NYU, and he spent a few years as a law school dean.                                                                   
He agreed  with  the  previous  speaker  that Section  45Q  of the  tax                                                         
law  and  in particular   Section  Q,  as amended   and extended,   and                                                         
the Inflation  Reduction   Act was a  game changer  in the  sense  that                                                         
the  economic  benefits  that are  available  to  participants  in  the                                                         
capture  and  sequestration   of carbon  were  unprecedented.   As  Dr.                                                         
Merkel  said,  45Q  has  been  in  the  law  for  some  time,  but  the                                                         
availability   of  $85/metric   ton  allocated   between  capture   and                                                         
sequestration   makes  it   quite  profitable   for  all  the  parties                                                          
MR.  BALLAN stated  that  their  role  at Alliant  Insurance  Services                                                          
was  to  insure  the  credits.  Because  there  are  questions  around                                                          
qualification,   the party  also  has  to qualify  for  the  credit  by                                                         
capturing  and  sequestering  the carbon.  That  means having  a  Class                                                         
VI  well  or a  Class  II  well  that  is properly   certified  by  the                                                         
federal  government   or by  states  that  have  applied  successfully                                                          
for  primacy.  Then  there  is the  possibility  of  the  recapture  of                                                         
the  credits  as  a  consequence  of  leakage,  although  experts   say                                                         
that  is  a  remote   possibility   when  sequestering   in  certified                                                          
wells  that  are one  or two  miles  below  the surface  of  the  earth                                                         
in  saline  formations.  He  suggested   that  others  could  speak  to                                                         
MR.  BALLAN  stated  that  robust  insurance  has  developed  and  will                                                         
continue   to  develop  around   qualification   and  recapture.   This                                                         
will  be important  for those  who  get the credits  directly  and  for                                                         
those   who  benefit   from  the  capture   and  sequestration.    It's                                                         
possible   for   parties    to   enjoy   tax   exemption,    and   even                                                         
governments   are   able   to  enjoy   the  credits   through   direct                                                          
payments.  Even  non-taxpayers  can  enjoy  the  credits.  And because                                                          
it's  also  possible  to transfer   credits,  the  insurance  of  those                                                         
credits is particularly important under that new bill.                                                                          
4:08:38 PM                                                                                                                    
MR. BALLAN  said  one other  aspect  of the new  legislation  that  has                                                         
attracted  a lot  of attention   is that  in exchange  for  or as  part                                                         
of  the  deal   relating  to   the  $85/metric   ton,  the  credit   is                                                         
structured  as a  base credit  amount  of $12/metric  ton  and a  bonus                                                         
credit   rate  of  $85/metric   ton.   Everybody   they've  spoken   to                                                         
expects to get the bonus credit rate.                                                                                           
He  explained  that  in  order  to  get  that  bonus   credit  rate  of                                                         
$85/metric  ton,  it  will  be necessary   to comply  with  prevailing                                                          
wage   requirements    or   prevailing    wage    and   apprenticeship                                                          
requirements.   That is  an  aspect  of qualification   that  needs  to                                                         
be  developed  and monitored.   There is  guidance  from  the Treasury                                                          
Department  about  the  type  of record   keeping  that is  necessary,                                                          
including    that    the   prevailing     wage   and    apprenticeship                                                          
requirements   apply to  the  construction,  repair,  and  maintenance                                                          
of  the capture  and  sequestration  equipment   and technology.   They                                                         
apply  to both  employees  and  independent  contractors  and  all  the                                                         
people engaged in the subcontracts.                                                                                             
MR.  BALLAM   said   there  are   perceived   and  real   social   cost                                                         
benefits  associated  with  complying  with  the  prevailing  wage  and                                                         
apprenticeship   requirements.   Insurance   plays  a  very  important                                                          
role  by helping  with  the  maintenance  of the  appropriate  records                                                          
to ensure  compliance   so the  parties  are able  to qualify  for  the                                                         
4:11:10 PM                                                                                                                    
MR. CAHILL  said  key concerns  their  clients  have are  the specific                                                          
risk  associated  with  qualifying   as a  capture  and  sequestration                                                          
facility    and   then   meeting    the   wage   and    apprenticeship                                                          
requirements.   He  suggested  Mr.  Ballan  provide   his insight   and                                                         
briefly  describe  what  the recapture  risk  is  and how  it operates                                                          
in  Section  45Q. Doing  so  will  set the  stage  for the  discussion                                                          
around how the insurance operates.                                                                                              
4:11:55 PM                                                                                                                    
MR.  BALLAN  explained  that  the  carbon  recapture  risk  relates  to                                                         
leakage.  Once  the sequestration   has occurred  in  a Class  VI  well                                                         
with  permanent  and  secure geological   storage,  the  occurrence  of                                                         
any  leakage   could  result  in  the   loss  of  the  production   tax                                                         
credits in a subsequent year through recapture.                                                                                 
MR. CAHILL  added  that  recapture  provisions  are typically  limited                                                          
to  three years  plus  the  open year  of  whatever  period  of credit                                                          
year  you  are   in.  As  Dr.  Meckel  alluded   to,  a  client   might                                                         
receive  production  credits  for 12  years, but  if in  year six  they                                                         
had a  mass leakage  event  and all  of the carbon  that  had been  put                                                         
into  the ground  leaked  out, they  would only  be able  to recapture                                                          
three  years plus  whatever  was put  into the  ground plus  that  open                                                         
year.  There  is a cap  on  the liability  resulting  from  recapture.                                                          
He said that is important for the insurance piece.                                                                              
4:13:54 PM                                                                                                                    
MR.  CAHILL  restated   that  the  parties  they  work   with  want  to                                                         
ensure  that  that   they  are  entitled  to  the  tax  credits   worth                                                         
$85/metric  ton.  He  noted  that  while  solar  and  wind  involve  an                                                         
additional   sale  of  electricity   and  revenue   stream,  the   full                                                         
value   of  carbon  sequestration    projects  is   derived  from   the                                                         
capture  and  sequestration  of  the  carbon.  He  emphasized  that  it                                                         
is  critical   to  all  parties  that  these   credits  are  protected                                                          
whether   it  is  the  capture  company   that  is  working  with   the                                                         
emitter   to   take  the   carbon,   the   company   that   is  taking                                                          
responsibility    for  the   storage   and  sequestration,    or   both                                                         
companies   that    are  vertically    integrated.    They   all   want                                                         
4:14:45 PM                                                                                                                    
MR.  CAHILL  explained   that  tax  attorneys  offer  the  protection.                                                          
Traditionally,   this was  an  insurance  solution  that  was required                                                          
by  large  banks  for  traditional   tax  equity  investors   on  large                                                         
solar  and wind  projects.  The  large  banks wished  to  transfer  the                                                         
risk  of loss  to an A-rated  counterparty.   There are  many sponsors                                                          
that  will  be  working   in  renewable   energies  and  not   all  the                                                         
companies  will  be A-rated  as a  counterparty.  The  insurance  wraps                                                         
the  risk  of  credit   recapture  or  failure   to  qualify,  thereby                                                          
transferring  that  risk  to an  A-rated  insurer.  He noted  that  the                                                         
insurance   allows   the   original   tax   equity   investor   to   be                                                         
comfortable  enough  in this  emerging  technology  to  invest heavily                                                          
in  these   projects.   He  added  that   while  carbon   capture   and                                                         
sequestration   (CCS)  and  Section  45Q  are  not new,  the  projects                                                          
have  gained  momentum  as  a result  of  the  Tax Cuts  and  Jobs  Act                                                         
and the  Inflation  Reduction  Act and  are now  going at  full steam.                                                          
He  remarked  that  his  group   determines  the  best  insurance   for                                                         
these  projects  by using  the  solar and  wind  model as  a reference                                                          
MR.  CAHILL  continued   to  explain   that  the  client,  either   the                                                         
capture  or  the  store  company,   is indemnified   for  the  risk  of                                                         
loss  associated   with  the qualification   piece  or  the  recapture                                                          
piece.   He  compared  the   process  to  a  seamless   solution   that                                                         
transfers   any  risk   of  challenge   from   the  Internal   Revenue                                                          
Service  (IRS).  The insured  client  would be  whole,  which de-risks                                                          
the  main  value  of  the assets   of these  transactions,   primarily                                                          
the credits.  All  things  considered,  the cost  of the  insurance  is                                                         
relatively   inexpensive.   He  summarized   that  the  policy  covers                                                          
leakage  risk  and  qualification   risk.  The  latter  involves   wage                                                         
and apprenticeship, which is difficult to comply with.                                                                          
4:17:00 PM                                                                                                                    
MR.  CAHILL   continued  to  explain   that  a  client  works   with  a                                                         
broker  to  transfer  the  risk  to  an  insurer.  To  underwrite   the                                                         
risks,   the   broker   needs   the   client's    federally   mandated                                                          
Measurement,  Reporting,  and  Verification  (MRV)  plan,  and tax  due                                                         
diligence  provided  by  a reputable  tax  advisor  that  has reviewed                                                          
the  project's   implementation   and  determined   that  the  project                                                          
should   qualify   for   the   tax   credits.   If   the   underwriter                                                          
determines  that  the  project  properly  qualifies,  the  credits  are                                                         
insured  with  a one-time  payment  for  a policy  that will  last  ten                                                         
years.  Any challenge   to credits  from  the federal  government   for                                                         
the  ten years  that  the project  is  in service  will  be protected.                                                          
This  is  a  true  risk   transfer.  He  explained   that  the  client                                                          
purchases  the  insurance  and submits  a one-time  payment  of two  to                                                         
five percent of the amount of insurance being purchased.                                                                        
4:18:17 PM                                                                                                                    
MR.  CAHILL   advised   that  risk  tolerance   determines   how   much                                                         
insurance   a  client   purchases.   For  an  extremely   conservative                                                          
party,  100   percent  of  the  value   of  the  credits  is  insured.                                                          
Conservative   clients  choose  this  option  because  a  loss  of  100                                                         
percent  of  the credits   is possible  if  a  well blows  up  in  year                                                         
three,  extinguishing  the  use  of the  well.  In that  circumstance,                                                          
the  party  would   lose  the  projected   value  of  the  credits   in                                                         
future  years  three  through  twelve.  The  policies  also  cover  any                                                         
interest,  penalties,   defense  fees,  and the  extent  to  which  the                                                         
proceeds  themselves  will  be  taxable  in gross-up.  These  policies                                                          
place   clients   in  the   same  position    as  never   having   been                                                         
challenged   by  the  IRS.  He  also  spoke   about  transferring   the                                                         
credits   to  unrelated  parties   who  were  previously   uninvolved,                                                          
similar  to  municipal   bonds.  Wrapping   the  risk  with  insurance                                                          
creates  overall  project  economics.  Investors   who previously   may                                                         
have  been reticent  to invest  in  this technology,  now  are willing                                                          
to put significant amounts of capital into these projects.                                                                      
MR.  CAHILL  reported   witnessing   large  amounts  of  capital   pour                                                         
into  this space  from all  different  types  of investor  classes.  He                                                         
witnessed   investments   from  family   offices,   large  alternative                                                          
investment   funds,   big   banks,   and   local   banks.   Additional                                                          
investors  include  emitters  who  are not  able  to avail  themselves                                                          
of   carbon   capture   technology    because   of   jurisdiction    or                                                         
location.   He  opined  that   everybody  wants   these  credits.   The                                                         
credits  are  worth   a lot  of  money   and  the  insurance  solution                                                          
makes  these  credits   safe  from  all  but  things  like   fraud.  He                                                         
described      these     insurance      policies     as     relatively                                                          
MR.  CAHILL  added  that  the  payment  history  on  tax insurance   is                                                         
extremely   high.  He  assured   the  committee  that   he  has  a  100                                                         
percent  claim   payment  history   for  tax  insurance  policies.   He                                                         
reiterated   that  the  policies  can  be  trusted  to  backstop   risk                                                         
related  to  the Section   45Q credit  qualification.   He  added  that                                                         
credits  could   be  used  to  collateralize   projected  future   cash                                                         
flows.  He  stressed  the  benefit  of carbon  capture  insurance   and                                                         
mentioned  trusted  companies  that  are  involved  in this  space.  He                                                         
remarked  that  working  with  a trusted   insurance  broker  can  help                                                         
to  de-risk  the  transaction,   bring   certainty  to  projects,   and                                                         
create a new stable revenue source.                                                                                             
4:21:30 PM                                                                                                                    
MR.   CAHILL   suggested   that   they   spend   the  remaining    time                                                         
discussing   the  model   that  Alaska   might  choose   to  use.   The                                                         
approach  could  be  to rent  the  land  and certify  through  primacy                                                          
the Class VI certifications and charge fees through that.                                                                       
MR.  CAHILL   said  a  more  profitable   opportunity   would  involve                                                          
ownership  of the  wells,  the injection  sites,  and pipelines.   That                                                         
option   establishes   the  ability   to   build  pipe   into  various                                                          
locations.  He  noted  that the  largest  problem  encountered  in  the                                                         
Lower  48 was  the ability  to  construct  pipe  over long  distances.                                                          
The  pipe  construction  problems  are  complicated   by private   land                                                         
ownership.  He  opined  that anybody  that  can build  pipe  over  long                                                         
distances would be at a considerable advantage.                                                                                 
4:22:41 PM                                                                                                                    
SENATOR   CLAMAN  asked  if  the  notion   of  making  money   off  tax                                                         
credits  relies  on  having  a  federal  tax  structure  that  creates                                                          
the credit  so  that there  is a benefit  to  doing all  this. He  then                                                         
asked   if  this  would   all  stop   working  if   Congress  were   to                                                         
suddenly change its mind and stop the tax credits.                                                                              
4:23:38 PM                                                                                                                    
MR.  BALLAN  said   he  would  answer  the  question   more  as  a  tax                                                         
professor  than  as  an  Alliant  employee.   One possibility   was  if                                                         
the  cost   of  emitting   carbon   was   $20/metric   ton  and   as  a                                                         
consequence  of  capturing,  transporting   and  sequestering,  it  was                                                         
worth   $85/metric   ton.  For  example,   if  the   emitter  were   an                                                         
ethanol  plant,  there  might  be  a ratio  of  85 to  20,  the credit                                                          
over  the   invested   amount.  Another   scenario   might  be  cement                                                          
manufacturing  where  natural  gas  is converted  to produce  hydrogen                                                          
with  carbon  as  the  byproduct.   The  cost  of  production  doesn't                                                          
approach  $85/metric   ton.  The  models  have   different  production                                                          
costs  per  metric ton,  but  the  production  costs  tend to  be  less                                                         
than  the   credit  per  metric   ton.  That's   what's  so  powerful;                                                          
invest  $1   and  get  more  than  $1  credit.   To  the  question   of                                                         
whether  the  tax  credit  can be  taken  away,  he  said  the obvious                                                          
answer  is  that  any  tax  credit  can  be  taken  away.  But  if  the                                                         
question  is  what's different   about the  structure  of  this credit                                                          
as  compared  to  prior  iterations  of  energy-related  credits,   the                                                         
answer  is that  there is  something  quite  extraordinary  about  this                                                         
MR.  BALLAN  explained  that  many  of the  credit  schemes  that  have                                                         
existed  in the  tax  law have  involved  phase-downs  and  phase-outs                                                          
over  sometimes  long  periods  of  time.  But something   that caught                                                          
everyone's   notice  and  was   quite  deliberate   in  the  Inflation                                                          
Reduction  Act  was  that in  the  investment  tax  credits,  the  firm                                                         
level  of  30  percent,  assuming   compliance  with  prevailing   wage                                                         
and  apprenticeship   requirements,  was  not  set  with a  phase-down                                                          
or  phase-out.  It  was  set  as  30 percent.   The  message  was  that                                                         
this  was  intended  to  be a  permanent  credit.  Because  this  is  a                                                         
production   credit,  a  carbon  capture  credit   that  goes  over  12                                                         
years,  it  would  be  difficult,   as  a matter   of  tax policy,   to                                                         
change  a 12-year  promise  midstream.  He expressed  his  belief  that                                                         
Congress  intended  this  to be  long term.  There  is some  degree  of                                                         
bipartisanship,   even around  the  Inflation  Reduction  Act  at  this                                                         
point.  He opined  that  the  smart  money is  betting  on  it being  a                                                         
permanent credit.                                                                                                               
4:27:02 PM                                                                                                                    
MR.  CAHILL   added  that  there   are  other  uses   for  sequestered                                                          
carbon.  Even  if the  carbon  credit  were  taken  away,  the pie-in-                                                          
the-sky   concept   is  that   as  carbon   capture   develops  as   an                                                         
industry,  smart  industrial  entrepreneurs   will  figure  out better                                                          
uses   of  carbon   and  manufacturing    processes,   and  that   will                                                         
increase  the  demand  for  carbon   such  that,  if  the credit   were                                                         
taken  away,  there would  be  other industrial   uses of  carbon  once                                                         
sequestered.   He opined  that,  at  this point,  it  is  fairly  clear                                                         
that  the value  of the  projects are  from the  carbon  credits.  That                                                         
is  the  asset.   Carbon  is   being  produced,   and  right  now   the                                                         
federal  government  is  a  buyer of  carbon.  As  Mr. Ballan  pointed                                                          
out,  the  carbon  credit   has  been  around  since  2009   and  isn't                                                         
being  phased down.  It has  bipartisan  support  so it  will probably                                                          
be here for the foreseeable future.                                                                                             
CO-CHAIR GIESSEL thanked the presenters.                                                                                        
Introduction to Geologic Carbon Storage                                                                                         
               Introduction to Geologic Carbon Storage                                                                      
4:28:31 PM                                                                                                                    
CO-CHAIR   GIESSEL  announced   a  presentation   on  geologic  carbon                                                          
storage by the state geologist.                                                                                                 
4:29:03 PM                                                                                                                    
DAVID   LEPAIN,   State    Geologist   and   Director,   Division    of                                                         
Geological   and   Geophysical    Surveys,   Department    of  Natural                                                          
Resources  (DNR),  Anchorage,  Alaska,  reviewed   the outline  of  the                                                         
presentation on slide 2:                                                                                                        
     • Physical and chemical characteristics of CO2                                                                             
     • Requirements for geologic CO2 storage                                                                                    
     • CO2 storage mechanisms                                                                                                   
        • Storage in depleted oil fields and saline formations                                                                  
     • Storage in unmineable coal seams                                                                                         
     • Geologic carbon storage in Alaska                                                                                        
        • Cook Inlet                                                                                                            
        • North Slope                                                                                                           
        • Interior sedimentary basins                                                                                           
4:30:21 PM                                                                                                                    
MR.  LEPAIN  displayed   slide  3  and  described   the  physical   and                                                         
chemical properties of CO2. He made the following points:                                                                       
similar On the surface of the earth,  CO2 is  an  odorless,  colorless                                                          
similar If CO2 is  sufficiently   compressed,    it   takes    on   the                                                         
   characteristics of a liquid and a gas, but it is neither one                                                                 
   nor the other. It is referred to as supercritical CO2.                                                                       
similar Hydrostatic pressure increases with depth due to the weight  of                                                         
   the overlying column of rock and water.                                                                                      
similar If supercritical CO2 is injected below a depth of  about  2,600                                                         
   feet from the subsurface, the pressure is great enough that                                                                  
   the CO2 will remain supercritical.                                                                                           
similar Supercritical CO2 is more  dense,  so  more   will  fit   in  a                                                         
similar Supercritical CO2 is buoyant. It is less dense than  H2O so  it                                                         
   will rise up through a formation, which is important.                                                                        
4:31:52 PM                                                                                                                    
MR.  LEPAIN   referred  to  slide   4 to  discuss   the  criteria   for                                                         
subsurface  formations  to  be attractive  as  reservoirs  for storing                                                          
CO2. He made the following points:                                                                                              
similar Sandstone is one of the  most  prospective   sedimentary   rock                                                         
   types for storing CO2.                                                                                                       
similar Geologists are most interested in sedimentary basins that  have                                                         
   interlayers of sandstone and shale.                                                                                          
similar The sandstones are prospective as storage  containers  for  CO2                                                         
   but there must be impermeable formations overlying the                                                                       
similar CO2 that's injected into sands rise through  the  water column                                                          
   until it reaches an impermeable layer and is trapped.                                                                        
similar The sandstones must have porosity or void space.                                                                        
similar The photo on the upper right  is  a sandstone   in  the Tyonek                                                          
   Formation in Cook Inlet, and the blue spaces around the sand                                                                 
   grains are porosity.                                                                                                         
similar The pores must be interconnected for the supercritical  CO2, or                                                         
   any other liquid, to move through the rock.                                                                                  
similar The sands must be in a trapping configuration, as shown in  the                                                         
   diagram  on the  left. It's  a schematic  cross  section  through  a                                                         
   part of  the Kenai  Gas field.  The sedimentary  layers  originally                                                          
   were deposited   horizontally;  they're  domed  due to  large  scale                                                         
   stresses in the earth's crust.                                                                                               
similar The structure is called a fold, and when rocks are  domed  it's                                                         
   called an anticlinal fold.                                                                                                   
similar The yellow reflects sand, the brown and  green are  mudstones,                                                          
   and red is sand that's saturated with gas.                                                                                   
similar Gas is lighter than water so when a gas molecule   goes into  a                                                         
   sand bed it will migrate up until it reaches the apex of the                                                                 
   fold structure with an overlying mud rock. At that point it's                                                                
4:36:08 PM                                                                                                                    
SENATOR  CLAMAN  asked  what  happens  when  the  increased   pressure                                                          
from injecting the CO2 causes a fracture, similar to what                                                                       
happens in the fracking process to produce oil.                                                                                 
MR. LEPAIN said it depends on how far the induced fracture                                                                      
propagates.   If   the   induced   fracture   is  contained   in   the                                                          
sandstone  formation  into  which  the CO2 is  being  injected,  there                                                          
probably  wouldn't  be any  damage.  But if  the fracture  propagates                                                           
into the overlaying mudstone, CO2 could migrate into that seal.                                                                 
SENATOR CLAMAN commented that the CO2 would be lost.                                                                            
MR.  LEPAIN  said  yes,  but there  may  be  other  opportunities   for                                                         
the  CO2  to   be  trapped   and  sealed   in  subsequent   layers   of                                                         
mudstone.  He  added  that  this  is  well known  technology   and  the                                                         
industry  understands   how  to keep  the  injection  pressures   below                                                         
the frack pressure.                                                                                                             
4:38:30 PM                                                                                                                    
MR.  LEPAIN   directed  attention   to  the   images  on  slide   5  to                                                         
discuss  the  mechanisms  for  storing  CO2  in porous  and  permeable                                                          
similar Buoyant trapping is illustrated in  the  image  in  the center                                                          
   that shows an injection well on the right. The CO2 is buoyant                                                                
   and will migrate up to the crest of a fold structure.                                                                        
similar Residual trapping is shown on the lower left. Some CO2 is  left                                                         
   behind as the CO2 flows.                                                                                                     
similar Solubility trapping occurs when   CO2  is  dissolved   in   the                                                         
   formation water. It forms a weak acid that is trapped.                                                                       
similar Mineral trapping takes place over hundreds of thousands to                                                              
   millions of years, so it's not relevant in this context.                                                                     
4:40:20 PM                                                                                                                    
MR. LEPAIN turned to slide 6 to discuss what attracts geologists                                                                
looking for CO2 storage opportunities.                                                                                          
He described the well understood declining or depleted oil and                                                                  
gas fields as the low hanging fruit. He spoke to the following                                                                  
bullet points:                                                                                                                  
     • Depleted oil and gas fields have:                                                                                        
        • Proven reservoir, trap, and seal                                                                                      
        • Extensive datasets that characterize reservoir                                                                        
           properties, temperature, pressure, and water                                                                         
        • Sandstone body geometries and associated pore                                                                         
           volumes are well-characterized                                                                                       
        • Known     original    oil-in-place    and    production                                                               
        • Existing infrastructure                                                                                               
        • Declining oil fields  CO2 for enhanced oil recovery                                                                   
MR. LEPAIN  stated  that  saline formations   are much  less well                                                               
understood  because  there  hasn't  been the  economic  incentive                                                               
to  study them.  The  subsurface  formations  in  Cook Inlet  and                                                               
the  North   Slope  don't  host   hydrocarbons,   but  they  have                                                               
saline  formation  waters  and  have  great  potential  to  store                                                               
CO2. He spoke to the following bullets:                                                                                         
     • Saline formations:                                                                                                       
          • Total dissolved solids >10,000 parts per million                                                                    
        • Non-potable water                                                                                                     
        • Isolated from potable water sources             saline                                                                
           aquifers deeper and separated from aquifers by                                                                       
        • Depositional environment of sedimentary formation                                                                     
           influences depth to non-potable water                                                                                
           • Marine  shallower                                                                                                  
           • Non-marine  deeper                                                                                                 
        • Data may be lacking - not as well-known as                                                                            
           depleted oil fields                                                                                                  
4:44:23 PM                                                                                                                    
MR.  LEPAIN   turned   to  slide   7  to   discuss  the   storage                                                               
possibility  of  injecting  CO2 into  unmineable  coal  seams. He                                                               
described   coal  seams  in  the   deep  subsurface   as  largely                                                               
unmineable   because  of  the  economics.  He  continued  to  say                                                               
that   most  coals   are   naturally   fractured.   The   primary                                                               
fracture   system    runs   throughout   the   coal   seam,   and                                                               
secondary   fractures  connect  primary   fractures.  CO2  that's                                                               
injected  into  the primary  fractures  helps  in gaining  access                                                               
to the  microform  network  in the  body of the  coal  matrix. He                                                               
continued to speak to the following bullets:                                                                                    
            • CO2 in coal is stored in naturally occurring                                                                      
        fractures (cleats) and micropores in coal                                                                               
          • Cleats provide permeability and access to larger                                                                    
        surface area (micropores)                                                                                               
         • Methane (CH4 ) and CO2 strongly attracted to coal                                                                    
           • CO2 molecules attracted more strongly to coal                                                                      
        particles than methane  displaces methane                                                                               
     • Coal rank influences storage capacity (IPCC, 2005)                                                                       
        - Low rank coal  lignite                                                                                                
          CO2 storage capacity >10x methane -Anthracite                                                                         
          CO2 storage capacity = methane                                                                                        
     • Fate of displaced methane (CH4)?                                                                                         
MR.  LEPAIN pointed  to  the image  on  the lower  right  that shows  a                                                         
50  foot coal  seam  from  the Tyonek  Formation  in  Cook  Inlet.  The                                                         
point  it intends  to  make is  that  there is  a lot  of  coal in  the                                                         
subsurface   of  Cook  Inlet,  and  the  same  applies   to  the  North                                                         
Slope and several other Interior basins.                                                                                        
4:46:43 PM                                                                                                                    
SENATOR  CLAMAN  asked  where the  coal  in Cook  Inlet and  the  North                                                         
Slope was located relative to the oil.                                                                                          
MR.  LEPAIN   replied   that   it  depends   on  the   formation,   but                                                         
strictly  speaking  they  are  separate.  Most  of  the reservoirs   on                                                         
the  North  Slope   are  in  sandstones   that  were  deposited   in  a                                                         
marine   environment,   which  is  different   than   the  environment                                                          
where  the coals  form.  However,  there  is some  interfingering,   so                                                         
some  reservoirs  on  the  North  Slope  may  be in  relatively   close                                                         
proximity to coals.                                                                                                             
4:47:47 PM                                                                                                                    
SENATOR  KAUFMAN  wondered  whether  the  displaced  methane  could  be                                                         
used  as   the  fuel  to   provide  compression   and   drive  topside                                                          
MR. LEPAIN said yes, there are a lot of uses for the methane.                                                                   
SENATOR  KAUFMAN   posited  that  the  gas  would  be  dry  and fairly                                                          
easy to condition.                                                                                                              
MR.  LEPAIN   replied   it  would   be  similar  to   the  gas  that's                                                          
produced from Cook Inlet today.                                                                                                 
SENATOR   KAUFMAN   asked  whether   the   materials   used  for   this                                                         
purpose were high alloy.                                                                                                        
MR. LEPAIN said that was outside his area of expertise.                                                                         
4:49:19 PM                                                                                                                    
MR.  LEPAIN  provided   the  following   summary  of  geologic  carbon                                                          
storage on slide 8:                                                                                                             
           • Geologic storage options include depleted and                                                                      
        declining oil and gas fields, saline formations,                                                                        
        unmineable coal seams                                                                                                   
     • Subsurface      formations    must    be    deeper    than                                                               
        approximately 2,600 ft                                                                                                  
     • Formations must have porosity and permeability                                                                           
           • Formations must include traps (folds, faults,                                                                      
        stratigraphic pinch-out)                                                                                                
     • Sandstones      must   be    overlain    by    impermeable                                                               
        formations  seals                                                                                                       
            • Monitoring during and after CO2 injection is                                                                      
        required     must make sure CO2 is going where                                                                          
        intended; if leakage is detected, must take                                                                             
        corrective action                                                                                                       
4:50:21 PM                                                                                                                    
MR.     LEPAIN     transitioned     to     discuss     Alaska-specific                                                          
possibilities,   starting  with  Cook  Inlet.  He  directed  attention                                                          
to the  colored  column  on the  lower left  of slide  9  and made  the                                                         
following points:                                                                                                               
similar All the producing oil and gas fields in Cook Inlet  are hosted                                                          
   in the younger stratigraphy.                                                                                                 
similar The thick black bars reflect the coal-bearing stratigraphy.                                                             
similar The Hemlock Formation is a major oil reservoir in Cook Inlet.                                                           
similar Gas reservoirs are largely in the Tyonek  Formation,  which  is                                                         
   overlain by the Beluga and Sterling Formations.                                                                              
He  said  the column  on  the  right  reflects  the  older  rocks  that                                                         
are  present   below   the  younger   rocks  described   in  the   left                                                         
column. He continued to make the following points:                                                                              
similar When the younger rocks were deposited, the water  in the  pores                                                         
   was fresh.                                                                                                                   
similar The older rocks were deposited  in an  ancient   ocean  so  the                                                         
   water in the pores was saltwater.                                                                                            
similar Over time the shallow pore waters increased in salinity.  Today                                                         
   they are fairly concentrated brines.                                                                                         
similar The formation waters in the younger stratigraphy has dissolved                                                          
   material in it from long contact with the rocks. It's referred                                                               
   to as saline formation water but it wasn't seawater                                                                          
MR.  LEPAIN   described  Cook   Inlet  as  a  long-lived   sedimentary                                                          
basin. He relayed the following about Cook Inlet:                                                                               
similar It has thousands of feet of interbedded  sand,  mudstone,   and                                                         
similar Cook Inlet hosts 10 oil fields,  5  of  which  are  relatively                                                          
   large. They are all data rich.                                                                                               
similar There are about 28 gas fields that are also data rich. Not  all                                                         
   are in production.                                                                                                           
similar As of November, 2022, 1.389 billion barrels  of oil  have  been                                                         
   produced from Cook Inlet fields; a little more than 7.5                                                                      
   trillion cubic feet of natural gas has been produced.                                                                        
similar These numbers can be used to give a rough qualitative  idea  of                                                         
   the vacant pore space that could be used for CO2 storage.                                                                    
similar There are saline formations in Cook Inlet with a  lot of  coal,                                                         
   so unmineable coal seams are a possibility.                                                                                  
similar The seismic activity in the area is responsible  for  the  fold                                                         
   structures that form the traps for the existing oil and gas                                                                  
   fields in Cook Inlet.                                                                                                        
similar Despite the seismic activity in the  area,  those   seals  have                                                         
   held back the hydrocarbons for millions of years.                                                                            
similar With careful attention to injection pressures, there  is  every                                                         
   reason to believe that those formations can store CO2 for a                                                                  
   long time.                                                                                                                   
4:54:07 PM                                                                                                                    
MR. LEPAIN paraphrased the following summary of the CO2 storage                                                                 
potential in Cook Inlet on slide 10:                                                                                            
     CO storage in depleted and declining oil fields                                                                          
        • Proven reservoir (porosity, permeability), trap,                                                                      
           and seal                                                                                                             
        • Existing infrastructure                                                                                               
        • 1.389 billion barrels of oil and 7.5 trillion                                                                         
           cubic feet of gas production as of end November                                                                      
           2022 (AOGCC)                                                                                                         
        • Field sizes and cumulative production volumes                                                                         
           provide a measure of CO2 storage potential in                                                                        
           existing oil and gas fields                                                                                          
        • Seismic activity        trapped hydrocarbons prove                                                                    
           seal capacity of mudstones not impacted                                                                              
     CO Storage in saline formations                                                                                          
        • Large pore volume  huge potential                                                                                     
        • Uncharacterized                                                                                                       
     Unmineable coal seams                                                                                                    
        • Huge coal resource in basin                                                                                           
        • Estimated storage potential  43 billion tons                                                                          
           (Shellenbaum and Clough, 2010)                                                                                       
        • Fate of displaced methane? Must be captured                                                                           
4:55:29 PM                                                                                                                    
MR. LEPAIN advanced to slide 11 and spoke to the following                                                                      
bullets to describe the CO2 storage potential on the North Slope:                                                               
     • Thousands of feet of interbedded sandstone and mudstone                                                                  
     • Abundant coal west of Umiat (Federal and Native land)                                                                    
     • More than 70 oil accumulations and several gas                                                                           
        accumulations discovered since 1944            several with                                                             
        original oil in-place > 1 billion barrels                                                                               
     • 17.88 billion barrels oil produced through November 2022                                                                 
     • Proven reservoirs and traps  many large fields in                                                                        
     • Saline formations are extensive but uncharacterized                                                                      
     • Large volume of pore space potentially available for CO2                                                                 
     • Marine and nonmarine rocks                                                                                               
     • Coal                                                                                                                     
     • Infrastructure                                                                                                           
     • Low seismic activity                                                                                                     
     • Numerous folds and faults                                                                                                
     • Hydrocarbons trapped for millions years                                                                                  
4:57:32 PM                                                                                                                    
MR. LEPAIN paraphrased the following summary of the CO2 storage                                                                 
potential on the North Slope on slide 12:                                                                                       
     • Cumulative oil production from North Slope fields through                                                                
        November 2022  17.88 billion barrels of oil                                                                             
     • Many fields with original oil-in-place volumes estimated                                                                 
        >1 billion barrels and recoverable oil volumes > 300                                                                    
        million barrels                                                                                                         
     • Large legacy fields have been in decline for decades                                                                     
        EOR potential                                                                                                           
     • Field sizes and cumulative production volumes provide                                                                    
        measure of CO2 storage potential in declining fields                                                                    
        U.S. Geological Survey estimates 0.9 billion metric tons                                                                
        mean recovery replacement storage                                                                                       
     • U.S. Geological survey estimates mean total CO2 storage                                                                  
        potential at 270 billion metric tons (USGS Circular 1386;                                                               
        includes only deep saline formations and existing oil                                                                   
     • Storage in unmineable coal seams estimated at 5.83                                                                       
        billion tons (Shellenbaum and Clough, 2010)  displaced                                                                  
        methane must be captured                                                                                                
4:59:10 PM                                                                                                                    
MR. LEPAIN advanced to slide 13 to describe the Interior                                                                        
sedimentary basins. He noted that the retired land manager from                                                                 
Doyon referred to this area as Middle Earth.                                                                                    
     • All basins are data poor                                                                                                 
     • Best known are Susitna, Nenana, and Yukon Flats                                                                          
           • Sedimentary rocks filling basins are nonmarine                                                                     
        (river, coal swamp, flood plain, and lake deposits)                                                                     
     • Potable water extends to greater depths                                                                                  
     • Nonmarine      settings    tend    to    have    laterally                                                               
        discontinuous reservoirs and seals                                                                                      
     • No infrastructure                                                                                                        
5:00:23 PM                                                                                                                    
CO-CHAIR    GIESSEL    thanked    Dr.   LePain    for    the   helpful                                                          
5:00:49 PM                                                                                                                    
There being no further business to come before the committee,                                                                   
Co-Chair Giessel adjourned the Senate Resources Standing                                                                        
Committee meeting at 5:00 p.m.                                                                                                  

Document Name Date/Time Subjects
2023 03 08 SRES DGGS Geological Carbon Sequestration Presentation.pdf SRES 3/8/2023 3:30:00 PM
2023 03 08 SRES CCS Presentation - Meckel.pdf SRES 3/8/2023 3:30:00 PM