Vol. 28, No.6 Week of February 05, 2023
Providing coverage of Alaska and northern Canada's oil and gas industry

Governor drops carbon M&M bills; could raise billions, help save PFDs

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Kay Cashman

Petroleum News

On Jan. 27 Alaska Gov. Mike Dunleavy introduced Senate Bill (SB) 48, SB 49, House Bill (HB) 49 and HB 50, his Carbon Management and Monetization Bill Package, creating statutory and regulatory structures needed to capitalize on carbon markets. The package consists of two pieces of legislation focusing on a carbon offset program; and a carbon capture, utilization and storage (CCUS) program.

“In Alaska, we are blessed with the resources of today, but we’re also blessed with the resources of tomorrow,” Dunleavy said in a Jan. 27 press release.

“With support from the Legislature for our carbon management bill package, we’ll change the conversation about new revenue. We’ve been told by some that we can generate revenue in the billions over 20 years just from our forest lands. This represents the means to fund services, lower the cost of living and improve our quality of life, to create wealth and billions of dollars in economic activity without taxing Alaskans or eliminating the PFD (Permanent Fund Dividend),” Dunleavy said.

Carbon capture, utilization and storage

SB 49 and HB 50 are key components of the state’s efforts to monetize its immense carbon storage potential and maximize the utilization of resources.

CCUS projects capture carbon dioxide that’s emitted and inject it deep underground into geologic formations for enhanced oil recovery or permanent sequestration.

Alaska’s older oil and gas basins, particularly in the Cook Inlet basin (but also on the North Slope) have the right geology to sequester carbon underground. Cook Inlet has been identified as one of the top spots on earth with the ability to sequester carbon underground - with at least 50 gigatons of capacity, the Dunleavy press release said.

This legislation specifically creates new authorities for state agencies to license, lease and administer the state’s pore space for geological storage; administer pipeline infrastructure for transportation of captured carbon to geological storage facilities and administer injection wells and carbon storage facilities; and protect correlative rights of all subsurface owners.

DNR and AOGCC administer

Bill HB 50 and SB 49 allow DNR to lease state lands for carbon storage projects, establishes a CCUS regulatory regime within the Alaska Oil and Gas Conservation Commission, allows AOGCC to pursue primacy for UIC Class VI carbon dioxide injection wells, and expands existing regulatory authority over oil and gas pipelines to carbon dioxide pipelines.

The majority of the work necessary to administer the CCUS program within the Division of Oil and Gas would be managed with existing staff resources but two new positions would be added within the division in sections that would be most heavily involved in CCUS program implementation and oversight.

One new Storage Geologist I/II position would be added within the Resource Evaluation section to evaluate and characterize carbon storage resources within the state and to undertake technical evaluation of carbon storage applications and project oversight reviews.

One new Economist II/III/IV position would be added within the division’s Commercial Section to conduct research on commercial and fiscal storage terms and long‐term liability issues and to support the Commercial Section in the analysis and negotiation of commercial, fiscal and liability terms of storage license and lease applications.

New fund

The legislation creates a new “Carbon Storage Closure Trust Fund.” It will be funded through payments from carbon storage facility operators based on the volume of injected carbon. The payment amounts will be set by the AOGCC at the time that a permit is issued for the facility.

The fund is intended to be used for long‐term monitoring and maintenance related to injected underground carbon after a carbon storage facility has ceased operation and the operator has dismantled infrastructure and remediated the facility site except for the underground carbon.

Carbon offset program

SB 48 and HB 49 establish a statewide carbon offset program through forest sequestration within the Alaska Department of Natural Resources. The proposed carbon offset program has the potential to generate additional revenue for the state through biologic carbon storage projects that can mitigate a portion of the carbon dioxide emitted into the atmosphere.

The bill seeks to grant DNR the ability to establish a carbon offset program and enable carbon offset projects on state lands. Current statutes do not allow for carbon offset projects.

The carbon offset program will allow private parties to lease state land to undertake carbon offset programs and allow the state, through DNR, to implement its own carbon offset projects.

Benefits to existing industries

“Carbon management will complement - and in some cases enhance - Alaska’s existing industries like forestry, oil and gas, mining, tourism and outdoor recreation,” said DNR Commissioner-designee John Boyle. “These bills do not lock up state land, rather, they unleash new opportunities. Carbon offset projects will not prevent mineral development, timber harvests, new oil and gas exploration or infrastructure development. Land within the carbon offset program area will still be available for hunting, fishing, camping and recreational activities for Alaskans and visitors.”

Conventional resource development companies operating in Alaska stand to benefit in multiple ways from a strong state carbon management regulatory framework. These companies can use carbon credits to offset their carbon emissions, creating new opportunities for financing. CCUS allows companies to use the carbon dioxide produced by their operations by capturing it and reinjecting it into oil wells to actually increase production.

Alaska’s advantages

According to information supplied by the governor, Alaska has important competitive advantages for the development of a CCUS industry. The state owns the pore space used for storage under its lands, which allows leasing of large contiguous storage sites.

Large storage resources have been identified in both the Cook Inlet basin and the North Slope, co-located with existing infrastructure, making development easier.

The Cook Inlet basin represents the largest carbon sequestration resource on the U.S. West Coast with an estimated 43 gigatons of storage potential in deep un-mineable coal seams, with even more in saline aquifers and depleted reservoirs that would likely give Cook Inlet alone the ability to store 50 gigatons.

For perspective, that represents 50 years of carbon emissions from the entire nation of Japan.


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