As Legislature nears end, governor scores a gain with his carbon plan

The state Senate has unanimously approved one of Gov. Mike Dunleavy’s key legislative priorities, Senate Bill 48, establishing a framework for sales of carbon offset credits from Alaska forests.

Carbon offsets involve a forest owner selling the ability of trees to absorb and store carbon dioxide, a greenhouse gas largely responsible for global warming. Companies working to control emissions buy the credits.

The 20-0 vote in the Senate on Monday sent the bill to the state House where a similar measure, House Bill 49, was pending in the House Finance Committee. Even with adjournment set for Wednesday it’s quite possible, absent some procedural hiccup, that the proposal will pass the Legislature before adjournment.

All three Mat-Su Republican state senators, Sens. Mike Shower, Shelly Hughes and David Wilson, voted yes on the governor’s bill in the face of a small but vocal group of hometown conservatives. The group voiced strong opposition in the belief that the legislation would bring Alaska’s resources under the control of international financier George Soros, the United Nations and possibly even China.

Meanwhile, a second part of the governor’s initiative, a bill establishing a framework for underground injection and storage of carbon dioxide in below-surface geologic formations, is at an advanced stage in the finance committees of both the House and Senate. However, finalizing this bill, HB 50 in the House and SB 49 in the Senate, will now wait until next year.

Still, one of the most important parts of the C02 injection bill, an authorization for the state’s Alaska Oil and Gas Conservation Commission to apply for “primacy,” or management authority, for specialized wells designed for the safe injection of C02, which is corrosive. These are Class VI wells now managed by the U.S. Environmental Protection Agency. A key objective for the governor is having the state control the injection process.

That authority is in a section of SB 49 and HB 50 but it was also inserted into the carbon credits bill, which may pass this year. That will allow the AOGCC to get a head start in its application to assume the Class VI well authority.

State Natural Resources Commissioner John Boyle pointed out that it can take several years for the EPA to hand over this authority, so that it’s important to get a start on it this year because the clock is running on generous federal tax credits to help fund underground carbon injection.

In other developments as of late Monday the Legislature appeared headed toward its usual end-session deadlock over the budget. Alaskans have seen these kinds of end-of-session “chicken” games over the budget before.

If agreement can’t be forged between the House and Senate the governor will likely issue a special session proclamation late Wednesday. There have been previous special sessions held to complete the budget, so this is nerve-wracking for many but is nothing new.

Time was short as of Monday. The Senate had rolled the state operating and capital, or construction, budgets together into one bill, House Bill 39. The House previously passed an earlier version of HB 39 without the capital budget.

Senators were debating further changes to the budget bill late Monday with the hope of passing HB 39 back to the House on Tuesday. There must be an “up or down” vote to accept the Senate version. That’s because there’s no time left for a budget conference committee, the usual procedure for resolving difference between House and Senate-passed budget bills, said Sen. Bert Stedman, R-Sitka, cochair of the Senate Finance Committee.

The biggest objection the House has with the Senate plan is the senators’ proposal for a $1,300 Permanent Fund Dividend, or PFD, compared with the House proposal for a $2,700 PFD.

Stedman and other senate leaders say the larger PFD would create an approximate $600 million deficit. The Senate’s smaller PFD, in contrast, would leave a small surplus. The governor must have a balanced budget with funds in hand to cover all expenses to be able to legally sign a budget by July 1.

If the House plan for a larger dividend were to be approved new revenues will have to be found to fund the deficit. So far there are no revenue bills moving in the Legislature. Rep. Ben Carpenter, R-Nikiski, has proposed a state sales tax but it has not moved from committee.

If a special session is called by the governor he will set the agenda with the bills he wants considered listed on the proclamation. The budget bills will be among those but there could be other bills.

Dunleavy could order the special session to begin immediately, just past midnight Wednesday, triggering a 30-day clock for the work to be done. The 30 days would end on June 18, and that is uncomfortably close to the Constitutional requirement for the budget to be signed by July 1.