Legislature one-fourth way through 2023 session; Governor rolls out his carbon storage, offset proposal

State legislators in Juneau are one fourth of the way through their 2023 session.

Monday, Feb. 13, was the 28th day of the 120-day session. No bills have passed yet, but that’s not unusual in the first year of a two-year Legislature, particularly one with a large number of first-time lawmakers.

Activity will pick up as weeks pass. By late April and early May as the required adjournment looms on the 120 th day the pace will be hectic.

It’s busy already in the state capitol. Passing a budget is the Legislature’s main responsibility – Gov. Mike Dunleavy proposes a budget plan, and legislators approve it – and the Finance Committee in the state House has now formed subcommittees to review agency budgets, which are now meeting.

By custom, the House develops a version of the operating budget and sends it to the Senate, which then tweaks it and sends its version back to the House. Differences are ironed out in a conference committee, which usually happens late in the session in May.

The same process works in reverse with the state capital budget, which is mostly for construction. The Senate typically originates this and sends it the House. Sometimes the House makes it changes and sends it back to the Senate but because this usually happens late in the session the House members’ tweaks to the Senate’s capital budget are often made through amendments in the House Finance committee after discussions with senators. Legislators have meanwhile been busy with the critical policy issues of the 2023 session.

Education groups are pushing hard for an increase in school funding this year to counter the effects of several years of inflation on school district budgets. Hearings are under way in the education committees of the House and Senate, and an increase has become a priority in the Senate and many House members are supportive. But it will cost money, and the big question is whether Gov. Mike Dunleavy will support it.

The governor has the final say on spending with his line-item veto power. In other actions, the House Resources committee took up the governor’s carbon storage bill last Friday, Feb. 10, in the first legislative review of the proposal.

The House bill is House Bill 50 with the Senate version in Senate Bill 49.) The governor feels Alaska is well positioned to do carbon storage because of the unique characteristics of Cook Inlet geology. He also feels that having the capacity for this in Alaska will allow developers to show they can pursue industrial projects with “net-zero” emissions of CO2, which enhances their ability to do financing.

The legislation mostly deals with establishing the statutory framework for carbon injection and storage in underground rock formations (typically oil and gas reservoirs) that are under state control.

The bill sets up the regulatory framework within the Department of Natural Resources, or DNR, which has authority for state land as well as the Alaska Oil and Gas Conservation Commission, or AOGCC, which regulates subsurface oil and gas activity.

The legislation would establish provisions for companies to lease space in reservoirs to store carbon dioxide, or CO2. This is not new. The DNR and AOGCC now regulate an underground natural gas storage in a storage project near Kenai, a process that would be similar to storage of CO2.

DNR officials would like the bill to become law this year so that companies with industrial activities that produce CO2 emissions can begin the planning needed to lease reservoir space from the state and build facilities to inject and permanently store the gas underground.

Alaska is in an advantageous position to do this because the state controls the subsurface and can issue leases to inject and store gas without the complexities of having to get the agreement of private owners of subsurface mineral rights, in contrast with other states pursuing carbon injection projects where companies typically have to deal with a multitude of private owners.

There are also generous new federal tax credits available to support projects like these but they have time limits, and projects like these can often take several years to plan, secure permits and construct, the House committee was told Separately, two other bills, House Bill 49 and Senate Bill 48, would authorize the DNR to set up a program to sell carbon offset credits on state forest lands.

This is program that can be implemented much more quickly than the underground storage projects but its potential for new revenue to the state might be more limited. Companies buy these credits from owners of forest lands based on contracts that the forests will be kept intact for a period of time, which can vary, to allow trees to absorb CO2 from the atmosphere.

Only the carbon storage bill, HB 50, was before the House committee on Friday, so the carbon credit bills will be taken up separately. Like the underground storage of gas sales of carbon credits is not new. Agreements have been done in many parts of the world like the Amazon rain forests as well as in many U.S. states including Alaska.

Consultant studies for the DNR show three prospective project areas as having near-term potential for a state carbon credit sales program: According to the study, by Anew Consulting, there are 76,900 acres in the Haines State Forest in Southeast Alaska that might generate $33 million over 10 years; 109,000 acres in the Tanana Valley State Forest (Interior) that could generate $23.7 million over 10 years, and 110,000 acres in the Mat-Su region of Southcentral Alaska that might generate $24.9 million over 10 years.