SB 49-CARBON STORAGE  3:40:30 PM CO-CHAIR GIESSEL announced the consideration of SENATE BILL NO. 49 "An Act relating to the geologic storage of carbon dioxide; and providing for an effective date." She invited Kevin Connors to testify on SB 49. 3:41:17 PM KEVIN CONNORS, Assistant Director of Regulatory Compliance and Energy Policy, Energy and Environmental Resource Center, University of North Dakota, Grand Forks, North Dakota, provided invited testimony on SB 49. He explained that he worked in regulatory and program development for both class II and class VI oil wells. He described the Energy and Environmental Resource Center (EERC) as a non-teaching business unit within the University of North Dakota. He stated that the EERC is industry focused with a great reputation regionally and worldwide. He added that EERC serves as the North Dakota energy research center. He stated that the CO partnership is a research-focused 2 consortium with 20 years of applied experience. The consortium includes the energy, agriculture, ethanol, coal, electricity, oil, gas, service, and technology industries with 240 members. He added that the centers unprecedented growth confirms the interest in advancing technologies. MR. CONNORS explained that the P-Corp partnership includes a large regional consortium with ten states and four Canadian provinces, including Alaska. He stated that the P-Corp partnership began in 2019 and is currently in its fourth phase. He noted that EERC partnered with the University of Alaska Fairbanks Institute of Northern Engineering and the University of Wyoming School of Energy Resources. He stated that the mission of the P-Corp partnership focuses on the commercial deployment of the technologies. He mentioned the contribution of the Interstate Oil and Gas Compact Commission (IOGCC) to SB 49. He remarked that IOGCC formed a task force in 2002 comprised of experts, state regulators, the P-Corp partnership, the Department of Energy and other key industry stakeholders. The task force sought to ascertain whether the federal government is the most appropriate regulator for dedicated geologic storage of carbon dioxide. The task force recommended that the states regulate the activity under a resource management framework, similar to the regulation of oil and gas. He added that the IOGCC developed a model statute and regulations. Portions of the language included in SB 49 is rooted in the model statute developed by the IOGCC task force. 3:46:54 PM MR. CONNORS revealed that he works directly with commercial project developers of Carbon Capture Storage (CCS) in North Dakota and the surrounding region. He stated that he works on greenfield, characterization, feasibility, project design, and permitting. He added that operational projects receive monitoring and reporting that follows with those activities. He remarked on witnessing new industries emerging despite the challenges. He expressed familiarity with the regulatory frameworks similar to SB 49. He highlighted the priority of the Alaska Oil and Gas Conservation Commission (AOGCC) to apply for and obtain class VI primacy. He explained that when states regulate predictability and permitting, they provide regulatory certainty to the industry. MR. CONNORS highlighted three key pieces of geologic storage: industry, geology and policy. He stated his full support for SB 49, which initiates the application for class VI primacy. He informed the committee that similar legislation was adopted in other states. He stated that SB 49 provides a resource- management framework that allows for an effective, all- encompassing regulatory program. Only two states in the nation have primacy: North Dakota and Wyoming. He noted that Louisiana applied and is awaiting approval. He declared that the Environmental Protection Agency (EPA) authority can take several years. He added that EPA is the permitting and regulatory authority and approximately 40 permits were submitted to EPA. MR. CONNORS mentioned that EPA approved multiple permits in Illinois over a four to five year period. In contrast, North Dakota, with primacy, issued four permits within the last year. The permitting process was shortened to eight months. He stated that primacy allowed the industry emerging in North Dakota a predictable and known permitting process. He alleged that states have an advantage by regulating the activity. The regulation process enables the deployment of technology and allows for economic opportunities and solutions for Alaska's energy industry. 3:51:28 PM CO-CHAIR GIESSEL asked if there were questions. 3:51:41 PM SENATOR KAWASAKI asked about class II wells, which are common in Alaska. He queried how frequently class II wells transition to class VI wells. MR. CONNORS answered that EPA established class VI rules in 2010. He revealed that a federal code identifies the transition of oil well classes. He stated that the transition is tied to pressure and project intent. He spoke about potential challenges associated with the transition to a mineral-bearing zone, which requires permission from the mineral owner to use their minerals as a storage horizon. He remarked that he had not witnessed a transition in the oil well class. The future may include the use of depleted oil and gas reservoirs, but most states mandate optimal recovery of oil and gas resources. Transitioning to a class VI reservoir means that production ceases. He opined that a path toward continued production and storage is associated with enhanced oil recovery. He recognized the storage aspects of CO-enhanced oil recovery. He anticipated great benefits to 2 enhanced oil recovery compared to CO storage. He explained that 2 CO injection recovery involves managing a reservoir and 2 pressures within the reservoir; the activity is considered storage. 3:54:25 PM CO-CHAIR BISHOP asked how long North Dakota waited to receive the class VI certification. MR. CONNORS answered that he led the effort, and it took about five years. CO-CHAIR GIESSEL asked if the carbon storage is collected from currently functioning power plants. She wondered if North Dakota employed technology to capture carbon from the air. MR. CONNORS responded that a combination of supplies are utilized including lignite coal. He furthered that electricity generation from ethanol plants and corn belt capture are also utilized. He explained that the states in the corn belt lack the appropriate geology for large-scale geologic storage, so captured CO requires transport. He mentioned that CO capture in 22 Wyoming's natural gas processing facilities utilizes a pipeline to transport CO to Montana and North Dakota. He added that North 2 Dakota has been capturing CO since 2000 in a lignite coal 2 gasification plant utilizing a pipeline to transport CO to oil 2 fields in southern Saskatchewan. CO-CHAIR GIESSEL asked about the federal credits North Dakota obtains. MR. CONNORS replied that the Section 45Q tax credit is available to the project developer, which incentivizes advancing projects. He revealed that the Section 45Q tax credit is $85/ton for saline storage, and $60/ton for CO as it is stored in 2 association with enhanced oil recovery. He added that higher incentives exist for direct air capture. The Section 45Q tax credits incentivize commercial development and deployment and are made available to the capturer or the storage provider depending on the business arrangement. CO-CHAIR GIESSEL assumed that North Dakota gleaned revenue from the core space. MR. CONNORS replied that the North Dakota core space is privately owned. He expounded that surface owners own the core space, which is leased, and private landowners are compensated. He furthered that North Dakota saw economic benefits as the state exports more than it consumes. North Dakota provides energy to multiple states via the coal fleet and oil and gas industries. He cited North Dakota's goal to reach carbon neutrality. He shared that North Dakota's agriculture and energy industries provide the pillars of the state's economy and carbon-intensive industries. He revealed that North Dakota considered carbon capture utilization and storage as a solution to reducing the carbon intensity of the industries. North Dakota reaps the benefits of economic interest and advancement because of the practices. He stated that North Dakota receives investment interest because of the early work with CCS projects. 4:01:23 PM SENATOR WIELECHOWSKI asked what the average landowner receives per acre and ton. He wondered if North Dakota captures revenue via taxes. MR. CONNORS replied that there is a fee associated with CO 2 storage used to pay for the administration of the regulatory program and the long-term transition of a closed site. He explained that CCS did not yield a direct economic benefit to North Dakota, however, the agriculture and energy industries benefit economically and pay into state revenues. He revealed that state revenue is gained from taxing the oil, gas, coal, and agriculture industries. The revenue is allocated to school systems and other programs. SENATOR WIELECHOWSKI requested the per acre and ton value. He asked if the state taxed the industry directly for carbon storage. MR. CONNORS denied a specific tax other than the fee associated with CO storage. The benefit is that carbon storage attracts new 2 industries. The state does not receive direct revenue but creates great opportunities for industries to thrive. SENATOR WIELECHOWSKI asked how a state might receive revenue from CCS. He asked if the industry is taxed when they inject carbon into the wells. MR. CONNORS restated that CO storage is not taxed other than the 2 fees associated. He shared that the North Dakota Legislature considered a higher fee for out-of-state CO. The state benefits 2 from attracting new industries because of interest in carbon capture and the hydrogen economy. He stated that sales tax incentives exist for industries seeking to capture CO. He added 2 that pipelines for CO enhanced recovery operations allow for 2 further tax incentives. North Dakota allows industries to thrive with a business-friendly environment and safeguards ensuring that CO storage and transport are done safely. 2 4:06:14 PM CO-CHAIR BISHOP queried Mr. Connors experience with coal power plants and feasibility studies related to carbon direct-air capture. MR. CONNORS replied that he had experience with both. He added that project developers were encouraged to characterize geological prospects. The projects were supported from characterization through feasibility and permitting. He mentioned a coal-fired power plant that is permitted to store four million metric tons of CO underneath the facility. He added 2 that the project received federal funding. He mentioned helping an electric company characterize its geology for a geologic storage project that was approved in January of 2023. CO-CHAIR BISHOP requested a further conversation with Mr. Connors. MR. CONNORS agreed to have another conversation. 4:07:59 PM CO-CHAIR GIESSEL held SB 49 in committee.