Lawmakers Studying Carbon Capture Act

Alaska Beacon
    Alaska legislators are considering a bill proposed by Gov. Mike Dunleavy last year to store carbon emissions, which could have implications from Cook Inlet to the North Slope. According to industry experts, it could allow a wide range of new opportunities and enable the continuation of existing ones.
    House Bill 50, the Carbon Capture, Utilization, and Storage Act, would allow the state to lease subsurface rights for the purpose of storing carbon dioxide, the largest contributor to human-caused climate warming.
    Combined with generous federal subsidies, the bill could enable everything from enhanced oil recovery using carbon dioxide to the sequestration of emissions from new coal-fired power generation to removing carbon dioxide directly from the air. According to a consultant hired by the state, a carbon capture framework could even make it economic for the state to export North Slope natural gas not as gas but as hydrogen or ammonia, with the carbon dioxide from processing sequestered underground.
    The legislation could also help maintain existing fossil fuel production and justify new development amid pressure to reduce carbon emissions.
    “Innovation, rather than elimination, is the future of coal,” Usibelli Coal Mine executive Lorali Simon wrote in a letter of support for the bill.
    Haley Paine, deputy director of the state’s Division of Oil and Gas, said the bill was aimed both at creating a new revenue stream for the state by commercializing the geologic “pore space” of low-grade coal seams, saline aquifers and depleted oil reservoirs, and at supporting existing development. “It’s a little bit of all-of-the-above,” she said in an interview.
    HB 50 was introduced last year and was discussed by the House Resources Committee in nine hearings and the House Finance Committee in five. The finance committee took the bill up again in late January. The Senate Resources Committee also held several hearings on its version, Senate Bill 49. Last year, the Legislature passed related legislation aimed at taking advantage of the market for carbon offsets through forest and other land-based projects.
    In testimony, officials from the Department of Natural Resources and hired consultants described the carbon storage market as poised to skyrocket from almost nothing a few years ago. States are hurrying to develop regulatory frameworks and take over regulation of carbon dioxide injection wells from the federal Environmental Protection Agency.
    Alaska, officials argue, is strategically suited to take advantage of carbon capture and storage because of its geology and Alaska’s ownership of subsurface rights.
    The idea of capturing carbon dioxide and storing it underground has been around for decades, but commercial projects have been hampered by high costs, technical challenges and the lack of a financial motivation to sequester carbon dioxide. Now caps on carbon pollution, carbon taxes, the carbon offset market, corporate goals to produce “net-zero” carbon emissions, and government incentives have caused interest in carbon sequestration to soar.
    A federal tax credit offers $85 per ton of carbon dioxide captured from an industrial facility and sequestered underground. A lesser tax credit is available for carbon dioxide used for enhanced oil recovery and a larger credit is available for projects that remove the gas directly from the air and sequester it.
    DNR presented hypothetical scenarios involving a regional power facility generating about $600,000 in revenue annually during injection; a North Slope project generating $2.5 million from injection and $8 million from enhanced oil recovery annually; and a carbon-dioxide import project generating $25 million annually during injection. A minimum fee of $2.50 per ton was removed from the bill last year, a move DNR says gives necessary flexibility in the new market.
    Some of the revenue would be set aside for long-term maintenance and monitoring of storage sites; under the program, the state would assume responsibility for injection sites after 10 years and it has proof that nothing is leaking.
    In addition to providing new opportunities, the bill could help enable fossil fuel development to continue. DNR noted that many oil companies operating in Alaska have adopted goals related to reducing greenhouse gas emissions from oil-field operations. Legal challenges related to new oil development are often related to carbon emissions, they added.
    In a letter of support, the Resource Development Council for Alaska wrote that HB 50 could help “decarbonize energy production” in the state and allow companies to meet their net-zero goals within Alaska. The Alaska Oil and Gas Association, Chugach Electric Association and ASRC Energy Services also expressed support for the bill.
    A task force hosted by the University of Alaska Fairbanks’ Institute of Northern Engineering described its mission as attracting new investment and ensuring continued operation of power generation, industrial processes, and oil and gas production, “all of which are carbon intensive activities vital to the state economy.”
    Nicholas Fulford, with the consulting firm GaffneyCline, testified regarding carbon capture, utilization and storage. He said that the ability to sequester carbon dioxide could be a “very significant unlocking mechanism” for natural gas and could result in growing global demand for gas in the coming years rather than falling demand.
    “The [Alaska] LNG project is probably right at the crosshairs of this kind of CCUS development,” he said, adding that the project could export a zero-carbon fuel like hydrogen or ammonia rather than liquefied natural gas.
    The Alaska Gasline Development Corp.’s Tim Fitzpatrick wrote in an email that carbon capture is a key part of its gas pipeline project. Seven million tons of carbon dioxide would be removed from North Slope gas annually before entering the pipeline and used either for enhanced oil recovery or sequestered. AGDC, together with Mitsubishi Corp., TOYO Engineering Corp., and Hilcorp Alaska, is also evaluating the commercial feasibility of producing ammonia from North Slope gas.
    Payne said the most likely projects to result from the state’s effort could be those that have already received funding for studies to determine whether they are feasible from the Department of Energy, specifically a proposal to store carbon dioxide from two existing power plants and a new coal-fired plant in Southcentral Alaska in a nearly depleted Cook Inlet gas field and direct air capture projects being studied by ASRC Energy Services.
    Opponents of the bill described subsidies for carbon capture as misguided and prone to abuse. A letter submitted by a group of environmental, justice and religious organizations described carbon capture as “a dangerous distraction.”
    “We don’t need to fix fossil fuels; we need to ditch them,” it read.
    In an interview, Rep. Alyse Galvin, I-Anchorage and House Finance Committee member, expressed concern over long-term liabilities to the state, earthquake risks, and the idea of carbon dioxide imports. She questioned whether the program would be the big new revenue generator Dunleavy presented it as.
    “There’s a lot of important questions to ask,” she said.

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July 2004 

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