Analysis: Part one of governor’s carbon package is done, but some legislators skeptical

Gov. Mike Dunleavy achieved the passage of the first part of his carbon legislation, this offering forest carbon offsets for sale. The second part, establishing the framework for a state-managed carbon dioxide underground injection program with permanent storage, did not pass but will be on the governor’s front burner for the 2024 legislative session.

Some Mat-Su legislators are skeptical, although they supported the governor’s major bill for the 2023 session. “This is pay-to-pollute,” State Sen. Shelley Hughes said on the floor the senate. “I don’t see how this will reduce one ton of CO2 from the atmosphere,” in Alaska, she said. That’s partly because much Alaska forest land where offset credits will be sold will never be logged anyway, and the point of the legislation is to protect forest to grow and absorb more carbon dioxide.

Hughes gritted her teeth and voted for the bill anyway, but mainly because it might help Alaska oil and gas developers appear to reduce greenhouse gas emissions and reduce pressure by environmental groups on banks that finance Alaska development.

Rep. DeLena Johnson, R-Palmer, also had questions during House Finance Committee meetings. She didn’t who the buyers of the credits will be, or whether there is really a viable long-term market.

In any event, the forest carbon offset sales will bring only modest state revenues, according to Anew, a company working with the state to develop the credit program.

State natural resources Commissioner John Boyle says sales revenues will help pay for active management in state forests for fire and insect prevention and mitigation.

The other bill, thwe carbon dioxide injection and storage program, if approved, has more state revenue potential because companies would lease unused reservoir capacity from the state, which owns it. In the long run there is likely a bigger market for this, However, the legal framework for this must be established in state law, which is the point of the legislation.

Conceptually, both programs seem simple. Trees absorb carbon dioxide and if forest owners manage their lands to maximize this the avoided carbon offsets can be sold to companies needing to offset their own emissions. This is now done in the Lower 48 and in Alaska on lands owned by Alaska Native corporations. The advantage here is that this can be done soon – there are now buyers and reputable companies in this business.

Senate Bill 48, which the governor recently signed, also includes a provision allowing private individuals to lease state lands – with trees, of course – and market the carbon offsets through the state, which will itself sell offsets from state forests.

Part two of the carbon package, in Senate Bill 49 and House Bill 50, involves the leasing to companies of the underground geologic reservoir space for injection and permanent storage of carbon dioxide. This bill will see more action next year and it has the potential of earning much more revenue. That’s because the potential volume of CO2 safely stored will be much larger and more easily measured for certification by buyers.

This will take time to develop because it’s not yet clear where the carbon dioxide will come from. If the big Alaska LNG Project, if built, will produce a huge amount of C02 to be available for storage on the North Slope because the natural gas there is high in carbon dioxide, at least in Prudhoe Bay where most of the gas is located.

This could be injected and stored in underused reservoirs there. The carbon dioxide cannot be shipped through the Ak LNG pipeline for the making of liquefied natural gas for export, so it has to be injected on the North Slope.

Cook Inlet also has ample potential for CO2 injectionba and storage, too, but it’s unknown where this carbon dioxide come from. A potential rebuild and restart of the closed Agrium Corp. fertilizer and ammonia plant, with reasonably-priced natural gas delivered through Ak LNG, could be one source.

Japanese companies are also interested in shipping liquid CO2 to Cook Inlet for injection and storage, and one company there has already contracted for construction of a specialized CO2 tanker, although is unlikely that this first vessel will be to serve Alaska, at least at first.

A lot of work is also being done on direct capture of carbon dioxide in flue gas, both from coal-fired boilers in Interior Alaska and gas-fired turbines on the North Slope and Southcentral Alaska. The capture in coal boilers is more easily done than in gas turbines. A lot of research is underway in this area aided by federal tax credits for greenhouse gas reduction.

With direct capture, industrial and power plant emissions could be sources of CO2, but the technology is still evolving. In Interior Alaska Usibelli Mines and the university are also looking at the potential for injecting and storing CO2 in underground coal seams. In Cook Inlet and the North Slope there are also prospects of using pore space in deep saline water acquifers, former state Natural Resources Commissioner Corrie Feige says. In Southcentral Alaska those are too deep to have contact with drinking water acquifers, and there are no drinking water acquifers on the North Slope because of permafrost.