The Alaska Legislature has passed a bill that combines underground storage of carbon dioxide, new regulation of underground storage of natural gas, state financing for new Cook Inlet natural gas development and an expansion of the state’s geothermal energy program.
The measure, House Bill 50, sets up a regulatory and commercial framework for Alaska to stash carbon gases that would otherwise stream into the atmosphere, where they reinforce the greenhouse layer that is heating the planet.
The bill started as one in a pair introduced last year by Gov. Mike Dunleavy that focused on the state’s opportunity to possibly earn money through carbon sequestration or storage. The first bill, which passed last year and became dubbed the “tree bill,” authorized a system for the state to sell carbon credits for preserved land within state-owned forests.
The carbon-sequestration bill, which became known as the “hole bill” because it concerns injection of carbon gas deep underground, turned out to be more complex.
Carbon sequestration is seen as a growth opportunity as companies look for ways to reduce their emissions and fight global warming. The state hopes to cash in on some of that business.
The bill that the Legislature passed sets up a process for carbon-storage leases and regulation of what is known as “pore space,” the underground cavities in which the gas could be reinjected.
It sets fiscal terms, including a requirement for 50% of the revenue from carbon-storage leasing to go to the Alaska Permanent Fund.
The bill’s section on regulating natural gas storage in Cook Inlet incorporates the contents of a separate bill, Senate Bill 220. It’s a common practice for lawmakers to combine loosely related bills at the end of a session in order to get them passed before the deadline expires.
“This is a huge piece for Cook Inlet,” Senate Majority Leader Cathy Giessel, the sponsor of that separate bill, said in floor comments. “As we are seeking to increase natural gas production in Cook Inlet, we have to have a place to store the gas. During the summer we don’t use as much. We need a place to store it.”
Utilities from the Kenai Peninsula to Fairbanks are worried that a looming natural gas shortage will hurt their ability to provide services.
The state commission already regulates one natural gas storage facility on the Kenai Peninsula, a commercial site that started operating in 2012. The provisions in the bill authorize the commission to regulate any other Cook Inlet gas storage operations.
The bill’s section on reserves-based lending incorporates the substance of yet another measure, House Bill 388, that authorizes the state to lend money for development of Cook Inlet oil or gas projects, with the fossil fuel reserves to be used as collateral.
The geothermal section in the bill incorporates legislation originally introduced by Dunleavy that redefines geothermal energy and expands the size of the tracts that may be leased for development.
The combined bill won final passage when the House concurred on Wednesday, May 15, the last day of the session, with the Senate changes.
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