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Mixed energy bill fates
Carbon capture, transmission system bills pass; royalty reduction fails to move
Kristen Nelson Petroleum News
As the 33rd Alaska Legislature ended its second session May 15, two major energy bills -- both from the governor -- passed, while other bills aimed at the Cook Inlet natural gas shortage, including a bill to reduce Cook Inlet royalties to encourage more natural gas production and a bill aimed at bringing another jack-up rig to the inlet, failed.
House Bill 50, introduced in the 2023 session as a companion to HB 49, establishes the framework for carbon storage in the state. Bills rolled into HB 50 included one allowing the Regulatory Commission of Alaska to regulate natural gas storage in Cook Inlet, another allowing the Alaska Industrial Development and Export Authority to pursue reserve-based lending for gas producers in Cook Inlet and a third modernizing the state's geothermal leasing program.
HB 307 is the Railbelt transmission bill, aimed at eliminating wheeling, where a fee is charged for energy transmission each time energy crosses lines owned by a different utility. The bill includes provisions creating a board for the Alaska Energy Authority separate from the AIDEA board, increasing qualifications for Regulatory Commission of Alaska commissioners and increasing the pay for those positions.
HB 50 In reviewing legislation which passed this session, the governor's office said in a May 16 release that HB 50 "creates a new opportunity for the state to earn revenue by storing carbon dioxide in depleted underground oil and gas basins."
Under HB 50, the Department of Natural Resources' Division of Oil and Gas will lease state lands for carbon capture, utilization and storage projects, and the division said in a fiscal note that new regulations on evaluation of applications and establishing a competitive bidding system should be promulgated within 12 months. Exploration licensing will be used for carbon storage, with 5-year terms and work commitments, similar to the division's exploration licensing program for oil and gas, with the licensee having the ability to convert the license to leases.
The Alaska Oil and Gas Conservation Commission will pursue primacy over Class VI wells for CCUS injection from the U.S. Environmental Protection Agency and will create a regulatory structure for CCUS in Alaska, AOGCC said in its fiscal note, with fiscal year 2025 work expected to focus on obtaining primacy.
In its fiscal note AIDEA said that under the Cook Inlet reserve-based lending program created in the bill, it will annually prepare a report for the Legislature analyzing potential oil and gas development projects in Cook Inlet that the agency believes have reasonable potential to increase production. The bill creates a lending account, consisting of money or assets deposited by the authority or contributed from other sources. As a term of a loan, AIDEA may accept an ownership share, as long as that share does not require AIDEA to contribute to development costs.
Geothermal provisions rolled into the bill change the state's existing geothermal permit program to a licensing program based on the division's exploration licensing program. A license would be for 5 years, and based, as is the exploration licensing program, on a work commitment, with an individual able to hold up to 100,000 acres and licenses convertible to leases with a 10-year term.
The Regulatory Commission of Alaska gains authority to regulate natural gas and liquefied natural gas storage facilities. In its fiscal note RCA said the "bill changes current exemptions to require RCA regulatory oversight of natural gas storge service and liquefied natural gas storage services even if the storage facility is part of a pipeline facility operated by a pipeline carrier or a natural gas pipeline facility operated by a natural gas pipeline carrier."
HB 207 The governor's office called HB 307 "a game changer for the Railbelt power grid, power utilities, and its business and residential customers," by streamlining taxation and tariff policies "to make new and existing electrical generation projects more affordable," and incentivizing "independent power producers to move forward on renewable power projects like solar and wind farms along the Railbelt."
HB 207 creates a Railbelt Transmission Organization within the Alaska Energy Authority and creates an AEA board separate from AIDEA, with which it has previously shared a board, and specifies requirements for the public members.
The bill also addresses RCA commissioners, tightening requirements to serve, and raises the salaries of the commissioners.
The Railbelt Transmission Organization is created "for the purpose of establishing an open access transmission tariff" which RCA describes in its fiscal note as "a transmission cost recovery mechanism for, and to ensure nondiscriminatory open access to the Railbelt backbone transmission system."
RCA said in its fiscal note that the RTO would "establish a transmission cost recovery mechanism for, and to ensure nondiscriminatory open access to, the Railbelt backbone transmission system," which it would be required to submit to RCA for approval. If the RTO fails to file a transmission cost recovery mechanism with RCA by July 1, 2025, "the RCA must establish the transmission cost recovery mechanism."
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