CS FOR SENATE BILL NO. 48(FIN) "An Act relating to the powers and duties of the Alaska Oil and Gas Conservation Commission; authorizing the Department of Natural Resources to lease land for carbon management purposes; establishing a carbon offset program for state land; authorizing the sale of carbon offset credits; authorizing the use of land and water within the Haines State Forest Resource Management Area for a carbon offset project; authorizing the undertaking of carbon offset projects on land in legislatively designated state forests; relating to oil and gas lease expenditures; and providing for an effective date." 12:53:01 PM Co-Chair Foster noted that one amendment had been received. Representative Coulombe requested to ask a question to the department. Co-Chair Foster asked a representative from the Department of Natural Resources (DNR) to come to the committee table. Representative Coulombe was concerned that the carbon credits had an opportunity to raise the cost of energy in Alaska. She stated that anytime resource companies were required to buy something to do business, generally the cost went downhill. She had heard a lot about energy cost during the current session. She relayed that her amendment addressed the concern. She asked how the department and state would raise revenue without increasing energy costs for Alaskans. 12:54:45 PM AT EASE 12:56:04 PM RECONVENED Representative Coulombe MOVED to ADOPT Amendment 1, 33- GS1372\R.2 (Dunmire, 5/15/23) (copy on file): Page 1, following line 8: Insert a new bill section to read: "* Section 1. The uncodified law of the State of Alaska is amended by adding a new section to read: LEGISLATIVE INTENT. It is the intent of the legislature that the carbon offset program be used as a resource development tool and not cause consumers in the state to pay higher prices for goods or energy as a result of the program." Page 1, line 9: Delete "Section 1" Insert "Sec. 2" Renumber the following bill sections accordingly. Co-Chair Foster OBJECTED for discussion. RENA MILLER, SPECIAL ASSISTANT, DEPARTMENT OF NATURAL RESOURCES, understood the intent behind the amendment and appreciated the concern. She clarified that the bill did not require any corporation to buy the credits or implement an emissions limit that would obligate the business to look for a means to offset them. She stated it was an increasing reality of doing business for many corporations where their customers, shareholders, investors, and/or inherent internal values were pushing them to make voluntary emission reduction, net zero type goals. She stated that purchasing offsets from the market was one avenue the corporations could take in order to meet the goals. She relayed it was not the department's intent for the state's engagement in the carbon market to drive up costs for Alaskans or anyone else. The department believed the corporations would seek the offset credits at general market prices and some valued certain kinds from certain areas and co-benefits more highly than others. The department wanted to put out a fair credit that accomplished the concurrent goals of following through on its constitutional obligation to maximize the resources of the state. She detailed that carbon was a replenishable resource in this context that generated revenue for the state that concurrently did something positive for the environment and put something on the market for corporations to purchase in order to accomplish their goals. She stated the department appreciated the intent statement and viewed it as an additional use of resources. 12:59:11 PM Representative Coulombe spoke to the intent of her amendment. She shared that she had received numerous emails about the topic from constituents. She saw the carbon bills as a tool to help resource development continue in Alaska more than as a revenue generator. She believed if the revenue came it would be later. She could not tell companies what to charge people, but her concern was about a situation where the state was overburdened with regulatory cost or was driving revenue and did not pay attention to the cost to the consumer. She remarked it was only possible to control what the state did, not what oil and gas did. She reiterated her view that the carbon bills were a tool to help industry in Alaska conduct its business. She stated that it was the "world we live in" whether a person agreed with ESG [environmental social governance] and carbon credits. She did not want the oil and gas companies to begin passing the cost down to the consumer. She would hate for energy prices to increase and for no one to understand why. 1:00:55 PM JOHN BOYLE, COMMISSIONER, DEPARTMENT OF NATURAL RESOURCES, appreciated the sentiments of the amendment. He stated that the carbon credit demand was being driven by factors outside of Alaska. He explained that by implementing a carbon program in Alaska, the state would be offering supply for the companies demanding it. He explained that offering the ability for companies to purchase carbon credits would be the best way for the state to protect Alaskans from different price shocks. He elaborated that the revenues collected from the sale of credits would have myriad purposes for the legislature to appropriate for the public good. He mentioned separate legislation related to carbon sequestration, which could help grow the Permanent Fund and funds could be redistributed in the form of the dividend. He continued that it was a mechanism available to the state to protect and provide incentives for the people of Alaska based on the policies and regulations of other jurisdictions and the choices companies were making to implement carbon neutral policies. He believed "we're" getting to the heart of the intent behind the amendment, which was protecting Alaskans "from some of these policies." 1:02:47 PM Representative Josephson referenced the commissioner's statement about wanting to protect Alaskans from some of these policies. He asked for an explanation of the statement. Commissioner Boyle replied that it was perhaps an unartful statement. He clarified that companies were interested in achieving net zero targets. Some of it was being driven by regulation in certain jurisdictions or by corporate policies to obtain certain environmental standards and benchmarks influencing companies' behaviors. He believed it was fair to say that those policies may involve a cost on their product. For example, if a national airline wanted to achieve a net zero policy and it did not have the mechanisms at hand to obtain the goal, it would potentially look to forest or other carbon based offsets to meet the goals. As a result, it may have some impact on pricing charged to consumers through increased ticket cost or other items. The state did not have the ability to control a company's pricing mechanism. He explained that if the state had the [carbon credit] program in place, some of the consumers who may be paying a higher price based on the companies' choices would see more public benefit through increased government spending, the Permanent Fund Dividend, and other mechanisms. 1:05:12 PM Representative Josephson addressed the amendment. He believed it was the mindset of the legislature that the credit purchasers would be in the Lower 48. He noted that Commissioner Boyle had sort of suggested the same. He remarked that the state's own industry may be interested in purchasing credits. He stated his understanding that the bill would be used as a resource development tool for resources helping "our brothers and sisters" in the Lower 48. He added that it was compelled to have no net loss on biomass. He asked if it was fair to say it was a conservation bill from Alaskan lands. Commissioner Boyle agreed. Representative Stapp opposed the amendment. He thought the first part of the amendment was relatively unnecessary where it specified "it is the intent of the legislature that the carbon offset program be used as a resource development tool." He believed it was already implicit in the underlying bill. His primary issue with the amendment was its second aspect that read "... not cause consumers in the state to pay higher prices for goods or energy as a result of the program." He stated the intent language was arbitrary based on a person's philosophical disposition. On the one hand, it was possible to argue that there was no value created in a carbon selling system; therefore, it drove up consumer costs. On the other hand, environmental advocates would argue that inaction effectively drove up consumer costs as well because at some point it would be necessary to deal with mitigation. He did not believe the legislature or the department could ever fulfill the intent language. He reiterated his opposition to Amendment 1. 1:08:38 PM Representative Coulombe thought it was a valid point to recognize that the program could increase energy costs, which was a big deal to Alaskans. She understood the issue was on the department's radar. She appreciated all of the hours the department had spent on the topic before the House Finance Committee. She WITHDREW Amendment 1. Co-Chair Foster noted there were no additional amendments. 1:09:55 PM Co-Chair Johnson MOVED to REPORT CSSB 48(FIN) out of committee with individual recommendations and the accompanying fiscal notes. There being NO OBJECTION, it was so ordered. CSSB 48(FIN) was REPORTED out of committee with eight "do pass" recommendations and three "no recommendation" recommendations and with three new fiscal impact notes from the Department of Natural Resources, one new zero note from the Department of Commerce, Community and Economic Development, and one previously published fiscal impact note: FN7 (CED). 1:10:41 PM AT EASE 1:14:00 PM RECONVENED