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Carbon offset a go
Legislature approves one of two bills introduced by governor in January
Kristen Nelson Petroleum News
In January Gov. Mike Dunleavy introduced bills to establish two programs in the state: a carbon offset program and a carbon capture, utilization and storage program. The carbon capture, utilization and storage, CCUS, bill had extensive hearings in the House while the Senate focused on the carbon offset bill.
On May 16 a Senate Finance Committee substitute for the carbon offset bill, Senate Bill 48, including one element of the CCUS bill, SB 49, passed the House, after passing the Senate May 15.
In a May 16 press release the governor's office said SB 48 establishes a statewide carbon offset program within the Alaska Department of Natural Resources. "That means a business or entity that produces carbon dioxide can offset those emissions by buying certain credits generated by nature-based projects on State land," while not preventing access to the lands by Alaskans for camping, hunting, fishing and other recreational activities.
The bill also does not prevent natural resource development on the lands.
Revenues would come to the state from private parties leasing state lands for carbon offset and from the state developing its own carbon offset projects.
Diversifying the economy "Alaska can now diversify its economy and stabilize the budget process by entering the rapidly emerging global market for carbon offsets," the governor said. "I want to thank the members of the legislature that made improvements to the bill and especially Commissioner John Boyle and his staff at the Department of Natural Resources for their perseverance, patience and hard work to get the bill across the finish line in just four months."
Regulations for the program will be developed by DNR.
"Today marks an exciting new chapter for natural resources in Alaska with the passage of Governor Mike Dunleavy's carbon offset bill," DNR Commissioner John Boyle said. I'm grateful our DNR experts and AOGCC partners were able to work with the legislature to deliver a bill giving Alaska a new revenue stream that complements our current resource development industries and Alaskans' use of State land. I'm particularly excited about the opportunities to more actively manage and invest in our forests."
AOGCC The portion of SB 49 included in SB 48 grants the Alaska Oil and Gas Conservation Commission authority to pursue primacy from the U.S. Environmental Protection Agency over Class VI wells, carbon dioxide injection wells. In hearings in the House, legislators were told that it was important to potential carbon sequestration developers that there was state primacy for Class VI injection wells as the process of obtaining a drilling permit for such wells from EPA was lengthy, whereas states with Class VI primacy could permit wells more quickly.
The AOGCC fiscal note accompanying the bill says that in fiscal years 2024 and 2025, the agency will be focused on obtaining Class VI primacy from EPA. General fund expenditures for those years "may be offset by potential grant receipts through the EPA Class VI Grant Program," the fiscal note said. AOGCC would need language allowing it to accept those federal funds, should they become available.
The agency also said regulations would be required to support the program.
DNR's OPMP The carbon offset program would be at DNR, authorizing the department to lease state lands for carbon management purposes. In its fiscal note, DNR's Office of Project Management and Permitting said the department would "lay a foundation for leases and offset projects and then fill out staffing based on program demand."
A large project coordinator and administrative officer would be housed in DNR's Office of Project Management and Permitting, and would coordinate DNR subject matter experts, planners, foresters and adjudicators in the Division of Mining, Land and Water and the Division of Forestry and Fire Protection.
The large project coordinator, starting in fiscal year 2024, would stand up and administer the carbon program, including a regulations framework, and an administrative officer, starting in FY 2025, would perform budget, reporting, accounting, procurement and human resources functions.
DNR's DML&W Staff in DNR's Division of Mining, Land and Water would support the leasing program.
The division said it anticipates an increase in applications starting in calendar year 2024 and said it would address the immediate need to develop regulations by adding one staff position and anticipates the process could take a year to a year and a half to complete.
"This first step is necessary to ensure a consistent adjudicatory framework for agency staff and businesses applying to the state under provisions of this bill," the division said in its fiscal note.
The staff position added to develop regulations will transition to a division adjudicator role after regulations are adopted and will begin working on carbon leasing project applications.
DNR's DF&FP In its fiscal note DNR's Division of Forestry and Fire Protection it would add a permanent position to coordinate and complete updates of state forest management plans, "analyze forest carbon offset projects and provide input on best interest findings, identify new potential forest carbon offset project areas on State Forests or other state lands, oversight and quality control of contractors, provide data and information to project developers, design and implement timber management practices that meet the requirements of the forest carbon offset projects, ensure consistency of forest management with carbon offset project commitments."
That position would be added in FY 2024.
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