HB 50 — An Act relating to carbon storage on state land; relating to the powers and duties of the Alaska Oil and Gas Conservation Commission; relating to deposits into the permanent fund; establishing the carbon storage closure trust fund and carbon dioxide storage facility administrative fund; relating to geothermal resources; relating to carbon storage exploration licenses; relating to carbon storage leases; relating to carbon storage operator permits; relating to enhanced oil or gas recovery; relating to long-term monitoring and maintenance of storage facilities; relating to carbon oxide sequestration tax credits; relating to the Regulatory Commission of Alaska and regulation of the service of natural gas storage; relating to the regulation of liquefied natural gas import facilities; relating to the oil and gas production tax; relating to the duties of the Department of Natural Resources; relating to carbon dioxide pipelines; relating to reserve-based state loans for oil and gas development projects in the Cook Inlet sedimentary basin; relating to the Alaska Industrial Development and Export Authority; requiring the Alaska Industrial Development and Export Authority to report to the legislature on oil and gas projects with potential to increase oil and gas production from the Cook Inlet sedimentary basin; relating to an audit of carbon storage leases conducted by the legislative audit division; and providing for an effective date.

relating to the Alaska Industrial Development and Export Authority;

requiring the Alaska -1- Enrolled HB 50 Industrial Development and Export Authority to report to the legislature on oil and gas projects with potential to increase oil and gas production from the Cook Inlet sedimentary basin;

relating to an audit of carbon storage leases conducted by the legislative audit division;

and providing for an effective date.

_______________ * Section 1.

The uncodified law of the State of Alaska is amended by adding a new section to read:

The authority of the commission further applies to all land included in a voluntary cooperative or unit plan of development or operation entered into in accordance with AS 38.05.180(p) or 38.05.730.38.05.725.

AS 31.05.030(h)31.05.030(m) is amended to read:

(h)(m) The commission mayhas takejurisdiction and authority over all actionspersons and property, public and private, necessary to allowcarry out the statepurposes toand HB0050aintent -1-of HBAS 5041.06, Newexcept Textfor Underlinedprovisions [DELETEDin TEXTAS BRACKETED]41.06.005 33-GH1567\A- acquire41.06.060 primaryand enforcement41.06.305 responsibility[AS under41.06] 42for U.S.C.which the Department of Natural Resources has jurisdiction.

300h-1 and 42 U.S.C.

300h-4 (Safe Drinking Water Act of 1974, as amended, 42 U.S.C.

300f - 300j-26), for the control of underground injection related to the recovery and production of oil and natural gas and the control of underground injection in Class I wells, as defined in 40 C.F.R.

144.6, as amended, and the control of underground injection in Class VI wells, as defined in 40 C.F.R.

144.6, as amended.

AS 37.05.146(c) is amended by adding new paragraphs to read:

(86) carbon dioxide storage facility administrative fund (AS 41.06.160);

(87) carbon storage closure trust fund (AS 37.14.850).

* Sec.

5.

AS 37.13.010(a) is amended to read:

(a) Under art.

IX, sec.

15, of the state constitution, there is established as a separate fund the Alaska permanent fund.

The Alaska permanent fund consists of (1) 25 percent of all mineral lease rentals, royalties, royalty sale Enrolled HB 50 -2- proceeds, net profit shares under AS 38.05.180(f) and (g), and federal mineral revenue sharing payments received by the state from mineral leases issued on or before December 1, 1979, and 25 percent of all bonuses received by the state from mineral leases issued on or before February 15, 1980;

(2) 50 percent of all mineral lease rentals, royalties, royalty sale proceeds, net profit shares under AS 38.05.180(f) and (g), carbon storage injection royalties required under AS 38.05.705(c)(3)(B), and federal mineral revenue sharing payments received by the state from mineral leases issued after December 1, 1979, and 50 percent of all bonuses received by the state from mineral leases issued after February 15, 1980;

and (3) any other money appropriated to or otherwise allocated by law or former law to the Alaska permanent fund.

* Sec.

6.

(a) The carbon storage closure trust fund is established as a separate trust fund of the state.state outside and separate from the general fund.

The legislature may appropriate the principal and earnings of the fund shall be held by the state for the purpose of protecting the public interest in maintenancemaintaining and closureclosing of carbon storage facilities in the state.

TheMoney fundin is composed of the carbon storage closure trust fund incomedoes accountnot andlapse. the carbon storage closure trust fund operating account.

(b) The carbon storage closure trust fund income account consists of payments received under (c) of this section, AS 41.06.180,41.06.175 and earnings on the incomefund. account.

The carbonpayments storagereceived closurefor trusteach fund operating account consists of appropriations by the legislature of the annual balance of the carbon storage closurefacility trustshall fundbe incomeseparately accountaccounted andfor anyunder earningsAS on37.05.142. those appropriations while in the operating account.

(c)The Beforecommissioner payments are accepted into the carbon storage closure trust fund income account for a particular carbon storage facility, the Alaska Oil and Gas Conservation Commission and the operator may execute a memorandum of understandingrevenue thatis outlines a schedulefiduciary of expected payments into the fundfund. and the relationship of the payments and accumulated earnings in the fund to the operator's obligations under AS 41.06.155 or 41.06.175.

IfThe thecommissioner memorandum of understandingrevenue addressesshall investmentmanage ofand invest the fund withassets respectas toprovided paymentsin madeAS by37.10.071. the operator, the commissioner of revenue must also sign the memorandum.

(d)(c) NothingThe incommissioner thisof sectionnatural createsresources may make expenditures from the carbon storage closure trust fund for the purpose of conducting long-term monitoring and maintenance of a dedicatedstorage fund.facility under AS 41.06.305.

(e)If Ina thisstorage section,operator unlessis theunable contextto requiresfulfill otherwise,the (1)storage "fund"operator's meansduties and the carbonfinancial assurance provided by the storage closureoperator trustunder fund;AS 41.06.110(c)(2) is exhausted or insufficient, the Alaska Oil and Gas Conservation Commission may make expenditures from the fund for the purposes allowed under AS 41.06.105 - 41.06.210.

(2)-3- "storageEnrolled facility"HB has50 the(d) meaningNothing given in ASthis 41.06.210.section creates a dedicated fund.

HB(e) 50In -2-this HB0050asection, New(1) Text"fund" Underlinedmeans [DELETEDthe TEXTcarbon BRACKETED]storage 33-GH1567\Aclosure *trust Sec.fund;

5.(2) "storage facility" and "storage operator" have the meanings given in AS 41.06.210.

* Sec.

7.

6.8.

(a) Land, including tide, submerged, or shoreland, to which the state holds title or to which itthe state [IT] may become entitled, may be leased, except for the extraction of natural resources and for carbon storage under AS 38.05.700 - 38.05.795, in the manner provided in AS 38.05.070 - 38.05.105.

7.9.

Rights may not be exercised by the state, its lessees, successors, or assigns under the reservation as set out in AS 38.05.125 until the state, its lessees, successors, or assigns make provision to pay the owner of the land full payment for all damages sustained by the owner, by reason of entering upononto [UPON] the land.

If the owner for any cause refuses or neglects to settle the damages, the state, its lessees, successors, assigns, or an applicant for a lease or contract from the state for the purpose of prospecting for valuable minerals, or option, contract, or lease for carbon storage or mining coal,coal or a lease for extracting geothermal resources, petroleum, or natural gas, may enter upononto [UPON] the land in the exercise of the reserved rights after posting a surety bond determined by the director, after notice and an opportunity to be heard, to be sufficient as to form, amount, and security to secure to the owner payment for damages, and may institute legal proceedings in a court where the land is located, as may be necessary to determine the damages whichthat [WHICH] the owner may suffer.

8.10.

Enrolled HB 50 -4- All land, together with tide, submerged, or shoreland, to which the state holds title to or to which the state may become entitled, may be obtained by permit or lease for the purpose of exploration, development, and the extraction of minerals.

Except as specifically limited by AS 38.05.131 - 38.05.181 and 38.05.700 - 38.05.795, land may be withheld from lease application on a first-come, first-served basis, and offered only HB0050a -3- HB 50 New Text Underlined [DELETED TEXT BRACKETED] 33-GH1567\A on a competitive bid basis when determined by the commissioner to be in the best interests of the state.

9.11.

(c) Payment of a royalty or a net profit share payment to the state under a lease issued under AS 38.05.135 - 38.05.181 or aan paymentinjection of a rent or charge under AS 38.05.700 - 38.05.795 becomes due on the date and in the manner specified in the lease or in a regulation adopted by the commissioner.

10.12.

(d) If a royalty or net profit share payment to which the state is entitled under AS 38.05.135 - 38.05.181 or aan paymentinjection of a rent or charge under AS 38.05.700 - 38.05.795 is not paid or is underpaid when it becomes due under (c) of this section, the unpaid amount of the rent, charge, royalty, or[OR] net profit share paymentpayment, or injection charge bears interest in a calendar quarter at the rate of five percentage points above the annual rate charged member banks for advances by the 12th Federal Reserve District as of the first day of that calendar quarter, or at the annual rate of 11 percent, whichever is greater, compounded quarterly as of the last day of that quarter.

11.13.

(e) If a royalty or net profit share payment to which the state is entitled under AS 38.05.135 - 38.05.181 or aan paymentinjection of a rent or charge under AS 38.05.700 - 38.05.795 is overpaid, interest at the rate and compounded in the manner provided in (d) of this section shall be allowed and paid on the overpayment.

(1) if the state grants a credit against future payments for the overpayment, the state shall pay interest on the overpayment (A) from the date that is the later of the date the overpayment was -5- Enrolled HB 50 (i) due;

HB 50 -4- HB0050a New Text Underlined [DELETED TEXT BRACKETED] 33-GH1567\A (2) if the state refunds the overpayment, the state shall pay interest on the overpayment (A) from the date that is the later of the date the overpayment was (i) due;

12.14.

The additional area applied for shall be in multiples of 40 acres, and the application shall contain a statement that the granting of a lease for additional land is necessary for the person to c arry on business economically and is in the public interest.

13.15.

AS 38.05.184(b)38.05.181(a) is amended to read:

(b)(a) NoThe carboncommissioner storagemay, licensesunder orregulations leasesadopted or additional oil or gas leases may be issued by the departmentcommissioner, orgrant anyprospecting otherlicenses state[PERMITS] agency for the exploration for or the development or production of oil and gasleases onto state-owneda landqualified andperson watersto seawardexplore offor, thedevelop, meanor higheruse highgeothermal waterresources. line, beginning at Anchor Point;

When title to the surface parcel is held by a person other than the state, that person shall have a preferential right to a geothermal prospecting license [PERMIT] or lease for the area underlying the surface parcel.

The surface owner must exercise the preference right within 30 days after receiving notice of the application for a license [PERMIT], or by agreeing to meet the terms of a bid Enrolled HB 50 -6- within 60 days after receiving notice of the acceptance of the bid for a lease.

* Sec.

16.

AS 38.05.181(c) is amended to read:

(c) On state land that has not been declared a competitive geothermal area or withdrawn from geothermal prospecting, the commissioner may issue a prospecting license [PERMIT] to the first qualified applicant.

The license [PERMIT] conveys an exclusive right, for a period of five [TWO] years, to prospect for geothermal resources on state land included under the license [PERMIT].

The commissioner has discretion to renew the license [PERMIT] for an additional one-year term.

A holder of a prospecting license [PERMIT] has the right, after completion of an agreed-on work commitment [UPON THE SHOWING OF A DISCOVERY OF GEOTHERMAL RESOURCES IN COMMERCIAL QUANTITIES] and the submission of an exploration [A DEVELOPMENT] plan acceptable to the commissioner, to convert the license [PERMIT] to a noncompetitive lease at a royalty rate under (g) of this section.

The conversion privilege must be exercised not later than 30 days after the expiration of the license [PERMIT].

If the land included within the license [PERMIT] is designated a competitive geothermal area during the license [PERMIT] term, the licensee [PERMITTEE] must apply for a noncompetitive lease within 30 days after notification of the designation or forfeit the conversion privileges and the exclusive right to prospect.

* Sec.

17.

AS 38.05.181(d) is amended to read:

(d) On state land that is designated a competitive geothermal area and is not subject to an existing prospecting license [PERMIT], the commissioner may issue geothermal leases to the highest bidder by competitive bidding procedures established by regulations adopted by the commissioner.

At the discretion of the commissioner, competitive lease sales may be by oral or sealed bid, on the basis of a cash bonus, profit share, or royalty share.

* Sec.

18.

AS 38.05.181(e) is amended to read:

(e) Prospecting licenses [PERMITS] and geothermal leases granted under this section must [, EXCEPT IN THE CASE OF PARCELS SUBJECT TO A PREFERENCE RIGHT UNDER (b) OF THIS SECTION,] be issued for at least 40 acres but not more than 2,560 acres.

A person may not own, or hold an interest in, -7- Enrolled HB 50 geothermal leases covering more than 100,000 [51,200] acres.

However, geothermal leases in commercial production, individually or under a unit operation or well spacing or pooling arrangement, do not count against the acreage limitation.

All prospecting licenses [PERMITS] and geothermal leases are subject to an annual rental fee established by the department in regulation and [,] payable in advance [, OF $3 PER ACRE].

The rental for a year shall be credited against royalties accruing for that year.

* Sec.

19.

AS 38.05.181(f) is amended to read:

(f) A geothermal lease shall be issued for a primary term of 10 years and may be renewed for an additional term of five years if the lessee is actively engaged in drilling operations.

A geothermal lease is valid for the duration of commercial production.

[BEGINNING 20 YEARS AFTER THE INITIATION OF COMMERCIAL PRODUCTION AND AT 10-YEAR INTERVALS THEREAFTER, THE COMMISSIONER MAY RENEGOTIATE THE RENTALS AND ROYALTIES DUE ON A GEOTHERMAL LEASE.] * Sec.

20.

AS 38.05.184 is amended by adding a new subsection to read:

(h) A department or other state agency may not issue a carbon storage license or lease on state-owned land and water seaward of the mean higher high water line, beginning at Anchor Point;

then west to the three mile limit of state land and waters;water;

14.21.

PolicyApplicability;regulations. on carbon dioxide storage.

It(a) isThe inprovisions theof publicAS interest38.05.700 to- promote38.05.795 apply to the geologiclicensing of state land for carbon storage exploration and the leasing of state land for carbon dioxide.storage.

The geologic storage of carbon dioxide benefits the citizens of the state and the environment by reducing greenhouse HB0050a -5- HB 50 New Text Underlined [DELETED TEXT BRACKETED] 33-GH1567\A gas emissions.

Sec.

38.05.705.

Applicability;

regulations.

(a) The provisions of AS 38.05.700 - 38.05.795 apply to exploration licensing and the leasing of state land for carbon storage.

38.05.710.38.05.705.

Enrolled HB 50 -8- (b) A carbon storage exploration license gives the licensee (1) the exclusive right to explore, for carbon storage purposes, the state land described in the license for a five-year term;

and (2) the option to convert the license for all or part of the state land described in the license into a carbon storage lease after the licensee (A)complies fulfillswith the worklease commitmentsconversion setprocess outdescribed in theAS license;38.05.715.

(B)(c) demonstratesA thecarbon abilitystorage toexploration meetlicense themust commercial(1) termsbe forconditioned on the leaseposting asof seta outbond inor other security acceptable to the licensedepartment orand in regulation;favor of the state;

(C)(2) obtainsbe conditioned on an obligation by the licensee to fulfill a permitspecified underwork AScommitment 41.06.125;as set out in the license;

andthe (D)work compliescommitment withmust include mandatory provisions for (A) an annual fee paid by the leaselicensee conversionto processthe ofdepartment ASin 38.05.720(b).an amount that is at least $20 an acre, subject to the license;

(c)and A(B) carbonan storageannual explorationreport licensedescribing mustthe (1)licensee's beexploration conditionedactivities onin an obligation by the licenseeprevious tocalendar fulfillyear, awhich specifiedthe worklicensee commitmentshall asprovide setto out in the license;department;

theand work(3) commitmentinclude mustproposed includecommercial mandatoryterms provisionsthat forapply (A)if anthe annuallicense feeis paidconverted byinto thea licenseecarbon tostorage thelease, departmentwhich inmust, at a minimum, provide for (A) an amountannual rent of at least $20 peran acreacre; subject to the license;

and (B) ana annualcharge reporton describinginjected thevolumes licensee'sof explorationcarbon activitiesdioxide inof theat previousleast calendar$2.50 year,a whichton. must be provided by the licensee to the department;

(2)(d) includeThe proposedcommissioner commercialmay termsrevoke ifa thecarbon storage exploration license isbefore convertedthe intotermination aof carbonthe storagefive-year lease,term whichof mustthe atlicense aif minimumthe providelicensee forfails (A)to ancomply annualwith rentthe requirements of at(c) leastof $20this persection acre;or applicable regulations.

and(e) HBThe 50department -6-may HB0050arenew Newa Textcarbon Underlinedstorage [DELETEDexploration TEXTlicense BRACKETED]for 33-GH1567\Aa (B)term asufficient per-tonto injectiondetermine chargewhether onthe alllicensee's injectedpermit volumesapplication ofwill carbonbe dioxideaccepted under AS 41.06.105 - 41.06.210 if the licensee (1) before the expiration of atthe leastlicense, $2.50;applies for a permit under AS 41.06.120;

(C) the posting of a bond or other security acceptable to the department and in favor of the state;

(3) be conditioned on the posting of a bond or other security acceptable to the department and in favor of the state;

and (4) be subject to revocation at the commissioner's discretion under (d) of this section.

(d) The commissioner may revoke a carbon storage exploration license before the termination of the license's five-year term if the licensee fails to comply with the requirements of (c) of this section or applicable regulations.

(e) The department shall renew a carbon storage exploration license if the licensee (1) before the expiration of the license term, applies for a permit under AS 41.06.125;

-9- Enrolled HB 50 (3) provides documentation acceptable to the department of the pending permit application;

and (4) submits to the department an executed renewal form to the department affirming the original terms of the license for the renewedterm licenseof term.the renewed license.

(f) InA the commissioner's discretion, a carbon storage exploration license maythat behas been renewed forunder a(e) termof sufficientthis tosection determineterminates whetherimmediately if the licensee'sAlaska permitOil applicationand willGas beConservation acceptedCommission denies the licensee's permit application under AS 41.06.105 - 41.06.210.

(g) AThe carbondollar storageamounts explorationin license(c) thatof hasthis beensection renewedshall underincrease (e)every offive thisyears sectionin terminatesproportion uponto denialthe ofConsumer thePrice licensee'sIndex permitfor applicationurban byconsumers thefor Alaskaurban OilAlaska, andas Gasdetermined Conservationby Commissionthe underUnited ASStates 41.06.105Department -of 41.06.210.Labor, Bureau of Labor Statistics.

(h) The dollarindex amounts in (c) of this section shall change every five years according to changes in the Consumer Price Index for allJanuary urban2024 consumersis for the Anchoragereference Metropolitanbase Areaindex. compiled by the Bureau of Labor Statistics, United States Department of Labor.

The(h) indexA forcharge Januaryon 2023injected volumes of carbon dioxide required under (c)(3)(B) of this section or as altered by the commissioner under AS 38.05.715(c) is a royalty for the referencepurposes baseof index.the Alaska permanent fund under AS 37.13.010.

38.05.715.38.05.710.

(a) TheTo proceduresapply infor thisa sectioncarbon applystorage HB0050aexploration -7-license HBunder 50AS New38.05.705, Textan Underlinedapplicant [DELETEDshall TEXTsubmit BRACKETED] 33-GH1567\A to the issuancecommissioner of a carbonproposal storagethat exploration(1) licenseidentifies underthe ASspecific 38.05.710.area to be subject to the license;

(b) To initiate the licensing procedure, an applicant shall submit to the commissioner a proposal that (1) identifies a specific area to be subject to the license;

(3) proposes commercial terms applicable to a carbon storage lease underthat satisfy the requirements of AS 38.05.710(c)(2);38.05.705(c)(3);

(c)(b) The commissioner shall publish notice of a proposal received under (b)(a) of this section.

The notice shallmust include a solicitation for competing proposals.

AThe commissioner shall send a copy of the published notice shall be sent to anyeach lessee under AS 38.05.135 - 38.05.181 inwithin one-one-half half mile of the area proposed for anthe Enrolled HB 50 -10- exploration license.

Any person in the area may submit a competing proposal, including a proposal for the authorization of subsurface storage of oil or gas under AS 38.05.180(u), under the process established by the commissioner in regulation.

The regulations must require that a competing proposal be submitted not later than 90 days after the commissioner's written notice is published.

(d)(c) After the deadlineperiod for submission of a competing proposalproposals has passed, the commissioner shall issue a written finding determining whether theissuance state'sof besta interestscarbon arestorage servedexploration throughlicense issuingis ain carbonthe storagebest explorationinterests license.of tte.

If the commissioner determines that issuance of a carbon storage exploration license is in the best interests of the state, the finding must (1) describe the limitations, stipulations, conditions,and orconditions changesof from the initiatinglicense proposaland orany competingchanges proposalsto thatthe areconditions requireddetailed toin make the issuanceproposal submitted under (a) of thethis explorationsection, licenseor conforma tocompeting theproposal, bestthat interestsare required before issuance of the state;exploration license;

(3) if there are competing proposals from multiple applicants, identify HB 50 -8- HB0050a New Text Underlined [DELETED TEXT BRACKETED] 33-GH1567\A which applicants are qualified for the issuance of the exploration license and include information forabout the competitive bid process as set out in (f)(e) of this section;

and (4) include a copy of the exploration license to be issued and the form of lease that will be used for any portion of the exploration license area subsequentlythat is later converted to a lease under AS 38.05.720.38.05.715.

(e)(d) If the commissioner concludesdetermines that issuance of a carbon storage exploration license is in the best interests of the state,state and that only one applicant is qualified tofor bea issued the license, the applicant may accept or reject the exploration license, as limited or conditioned by the terms of the finding made under (c) of this section and in the form of lease attached to the finding, not later than 30 days after the finding's date ofthe publication.finding was issued.

TheIf an applicant fails to respond within 30 days after the finding was issued, the commissioner shall consider anthe applicant's failure to respond in the 30- day period as a rejection of the license.

(f)-11- Enrolled HB 50 (e) If the commissioner concludesdetermines that issuance of thea carbon storage exploration license is in the best interests of the state,state and that more than one applicant is qualified tofor bea issued the license, the commissioner shall issue a request for competitive sealed bids, under procedures adopted by regulation, to determine which qualified applicants will bereceive issueda the license.

If the commissioner determines that a competitive bid process is necessary, the best interest finding made under (c) of this section must include notice that the commissioner intends to request competitive bids.

(g)(f) The commissioner shall establish in regulation the criteria for the assessment of competitive bids under (f)(e) of this section and for the determination of a successful bidder.

(h)(g) If a lessee under AS 38.05.135 - 38.05.181 in the area covered by a proposed carbon storage exploration license participates in a competitive bid process under (f)(e) of this section and is not the successful bidder, before issuing the license, the commissioner shall provide the lessee an opportunity to match the successful bid.

(i)(h) A carbon storage exploration license issued under this section and a carbon storage lease under AS 38.05.72038.05.715 or 38.05.72538.05.720 must include HB0050a -9- HB 50 New Text Underlined [DELETED TEXT BRACKETED] 33-GH1567\A (1) a covenant from the licensee or lessee not to unreasonably interfere with the rights of a lessee under AS 38.05.135 - 38.05.181;

and (2) a clause by which the licensee or lessee indemnifies the state for any unreasonable interference the licensee or lessee might cause to the rights of a lessee under AS 38.05.135 - 38.05.181.

(j)(i) When notice is required under this section, the department shall follow the requirements for notice under AS 38.05.945(b) and (c).

38.05.720.38.05.715.

(a) The commissioner may convert a carbon storage exploration license to a carbon storage lease if the licensee satisfies the requirements of AS 38.05.710(b) and complies with (b) of this section.

(b) To convert a carbon storage exploration license to a carbon storage lease, a licensee shall provide to the commissioner a copy of the permit obtained under AS 41.06.10541.06.120. - 41.06.210 to the commissioner.

After receiving a copy of the permit, if the licenseecommissioner ismay inissue compliancea withEnrolled ASHB 38.05.710(b),50 the-12- commissioner shall issue a carbon storage lease for those areas of the exploration license approved for carbon storage by the permit.permit if the licensee has (1) fulfilled the work commitments set out in the license;

A(2) leasedemonstrated issuedthe underability thisto sectionmeet mustthe include (1) commercial terms for the lease as set out in the commissioner'slicense. finding under AS 38.05.715(d);

(2)(c) Notwithstanding (b) of this section, if the agreementscommissioner requireddetermines that a carbon storage project is in the best interests of the state and would not be economically feasible under ASthe 38.05.715(i);commercial terms set by the license, the commissioner may issue the carbon storage lease under alternative commercial terms.

andA (3)lease anyissued otherunder conditionthis orsubsection obligationmust deemedbe necessarysupported by a written finding that contains specific factual details justifying the commissionerdecision, oran requiredexplanation byof regulation.the commissioner's reasons for issuing the lease, and a description of the original terms and the alternative terms of the lease.

The finding must be published on the commissioner's publicly available Internet website.

(d) A lease issued under this section must include (1) commercial terms for the lease;

(2) the agreements required under AS 38.05.710(h);

and (3) any other condition or obligation the commissioner considers necessary or that is required by regulation.

38.05.725.38.05.720.

ConcurrentTransition from enhanced oil recovery operations to carbon storage leasing.operations.

(a) A lessee under AS 38.05.180 injecting under a Class II well permit shall applyacquire for a carbon storage lease from the department before engaging in injectioncarbon operationsstorage activity that mayis requirenot aassociated Classwith VIenhanced injectionoil permit from the United States Environmental Protection Agency or agas storagerecovery. facility permit under AS 41.06.125.

(b) TheAt issuancethe ofcommissioner's discretion, the commissioner may issue a carbon storage lease to a lessee under (a)AS of38.05.180 thisif sectionthe lessee is vestedin solelycompliance inwith theregulations commissioner'sadopted discretion.under AS 41.06.185(b).

HB 50 -10- HB0050a New Text Underlined [DELETED TEXT BRACKETED] 33-GH1567\A (c) A carbon storage lease issued under this section must include (1) commercial terms acceptable to the minimumdepartment commercialthat termssatisfy describedthe in-13- Enrolled HB 50 requirements of AS 38.05.710(c)(2);38.05.705(c)(3);

(2) the agreements required under AS 38.05.715(i);38.05.710(h);

(3) ifany theother carboncondition storageor lesseeobligation is not the samecommissioner entityconsiders asnecessary theor responsiblethat partyis underrequired the existing lease, an assumption by theregulation. carbon storage lessee of any dismantlement, removal, and restoration obligations set out in the oil and gas lease;

and(d) (4)Before anya othercarbon conditionsstorage lease issued under this section may be transferred or assigned to an entity that is not the responsible party under the existing oil and obligationsgas deemedlease necessaryunder byAS 38.05.180, the commissionerassuming orparty requiredmust byprovide regulation.financial assurance acceptable to the department that the obligations of the lease can be met.

(e) The department may adopt regulations that allow all or part of a lease issued under AS 38.05.180 to be transitioned to a lease under this section upon the receipt of a permit issued under AS 41.06.185.

38.05.730.38.05.725.

(b) To prevent or assist in preventing waste, and to protect the correlative rights of persons owning interestsinterest in the tracts of landsland affected, with the approval of the commissioner, a group of lessees may validly integrate theirthe lessees' interests to provide for the unitized management, development, and operation of the tracts of land as a unit.

(c)In Athis leasesubsection, operated"unit underagreement" ameans planan approvedagreement orby prescribedlessees bywith an interest in the commissionerunit, isthe exceptedstate, fromand determiningany holdingsother orcarbon controlstorage underlessor ASwith 38.05.140.an interest in the unit.

(c) A lease operated under a plan approved or prescribed by the commissioner under this section is excepted from determining holdings or control under AS 38.05.140.

38.05.735.38.05.730.

Except as otherwise provided in AS 38.05.705(h) or under art.

38.05.735.

Annual report to the legislature.

The commissioner shall Enrolled HB 50 -14- prepare an annual report that includes an accounting of the carbon storage closure trust fund established under AS 37.14.850 and information on carbon storage licensing applications and decisions and the issuance of carbon storage leases.

The commissioner shall submit the report to the senate secretary and the chief clerk of the house of representatives on or before February 1 of each year and notify the legislature that the report is available.

Sec.

38.05.740.

Removal and restoration after termination.

Upon termination of a license under AS 38.05.705 or a lease under AS 38.05.715 or 38.05.720, a licensee or lessee shall promptly remove all improvements and equipment, except as otherwise approved in writing by the commissioner, and shall restore the land to a condition that is approved by the commissioner.

Sec.

In AS 38.05.700 - 38.05.795, unless the context requires otherwise, (1) "carbon dioxide"storage" means carbonthe dioxideunderground storage of acarbon qualitydioxide thatin (A)a willcarbon notstorage compromisereservoir; the safety of geologic storage;

and(2) (B)"enhanced willoil notor compromisegas therecovry" propertieshas of a storage reservoir HB0050a -11- HB 50 New Text Underlined [DELETED TEXT BRACKETED] 33-GH1567\A that allow the reservoirmeaning togiven effectivelyin encloseAS and41.06.210; contain a stored gas or stored supercritical fluid;

(2)(3) "carbon"reservoir" storage"has means the permanentmeaning orgiven short-term underground storage of carbon dioxide in aAS geologic41.06.210. storage reservoir;

(3) "geologic storage" has the meaning given in AS 41.06.210;

(4) "pore space" means a geologic storage reservoir, cavity, or void in a subsurface sedimentary stratum;

(5) "reservoir" has the meaning given in AS 41.06.210;

(6) "supercritical fluid" means a substance at or above its critical temperature and critical pressure that is neither a liquid nor a gas but that has properties of both.

15.22.

AS 38.05.965(6) is amended to read:

(6) "geothermal resources" means the natural heat of the earth at temperatures greater than 80 [120] degrees Celsius, measured at the point where the highest-temperature resources encountered enter or contact a well or other resource extraction device, and includes (A) the energy, including pressure, in whatever form present in, resulting from, created by, or that may be extracted from that natural heat;

(B) the material medium, including the geothermal fluid naturally present, as well as substances artificially introduced to serve as a heat transfer medium;

and (C) all dissolved or entrained minerals and gases that may be obtained from the material medium, but excluding hydrocarbon substances and helium;

-15- Enrolled HB 50 * Sec.

23.

(a) Rights-of-way on state landland, including rights-of-way over, under, along, across, or uponon [UPON] the right-of-way of a public road or highway or the right-of-way of a railroad or other public utility, or across, upon,on [UPON], over, or under a river or other body of water or land belonging to or administered by the state may be granted by noncompetitive lease by the commissioner for pipeline purposes for the transportation of oil, products, carbon dioxide, or natural gas under those conditions prescribed by law or by administrative regulation.

Except to the extent authorized by an oil and gas lease, a gas only lease, or a carbon storage lease, or an oil and gasgas, or[OR] gas onlyonly, or carbon storage unit agreement approved by the state, no person may engage in any construction or operation of any part of an oil, products, carbon dioxide, or natural gas pipeline,pipeline whichthat is or is proposed to be, [WHICH] in whole or in partpart, is[IS orOR isIS proposedPROPOSED toTO beBE] on state land unless that person has obtained from the commissioner a right-of-way lease of the land under this chapter.

16.24.

(b) The commissioner may by regulation exempt from the requirement of a right-of-way lease under this chapter the construction or operation (1) of (1) field gathering lines or any reasonable classification of themfield fromgathering thelines; requirement of a right-of-way lease under this chapter;

and (2) of a pipeline transporting carbon dioxide within a field for the purpose of an enhanced oil or gas recovery project under AS 41.06.185 or field pressurization measures HB 50 -12- HB0050a New Text Underlined [DELETED TEXT BRACKETED] 33-GH1567\A within that same field from[THEM theFROM requirementTHE ofREQUIREMENT aOF right-of-wayA leaseRIGHT-OF-WAY underLEASE thisUNDER chapter.THIS CHAPTER].

17.25.

18.26.

(3) "lease" means the instrument or extension of an instrument issued under this chapter granting a leasehold interest in state land for pipeline right-of-way Enrolled HB 50 -16- purposes to a person and authorizing the construction or operation of, or the transportation, serviceservice, or sale byby, a pipeline for crude oil, natural gas, carbon dioxide, or products;

19.27.

(7) "pipeline" or "pipeline facility" means all the facilities of a total system of pipe, whether owned or operated under a contract, agreement, or lease, used by a carrier for transportation of crude oil, natural gas, carbon dioxide, or products for delivery, for storage, or for further transportation, and including all pipe, pump or compressor stations, station equipment, tanks, valves, access roads, bridges, airfields, terminals and terminal facilities, including docks and tanker loading facilities, operations control center for both the upstream part of the pipeline and the terminal, tanker ballast treatment facilities, and fire protection system, communication system, and all other facilities used or necessary for an integral line of pipe, taken as a whole, to effectuatecarry out [EFFECTUATE] transportation, including an extension or enlargement of the line;

20.28.

(10) "transportation" means the shipment or carriage by a pipeline of crude oil, natural gas, carbon dioxide, or products from an upstream terminus in one or more fields or points of production or supply of the minerals to a downstream terminus in one or more points for delivery of the minerals to a purchaser or consignee, for storage, or for further carriage or shipment, including shipment or carriage within the state that may be classified as interstate or foreign transportation to HB0050a -13- HB 50 New Text Underlined [DELETED TEXT BRACKETED] 33-GH1567\A the extent that the transportation may constitutionally be subjected to the provisions of this chapter, as well as all services necessary to effectuatecarry out [EFFECTUATE] shipment or carriage, including,including among[, otherAMONG things,OTHER THINGS,] the receipt, storage, processing, handling, transfer in transit, forwarding, and delivery of the minerals.

21.29.

(11) "carbon dioxide" has the meaning given in AS 38.05.795.41.06.210.

22.30.

(a) The commission has jurisdiction under AS 41.06.005 - 41.06.060 [THIS CHAPTER] over geothermal -17- Enrolled HB 50 wells to prevent waste, to protect correlative rights, and to ensure public safety.

23.31.

(c) The provisions of AS 41.06.005 - 41.06.060 apply [THIS CHAPTER APPLIES] (1) to wells drilled in search of, in support of, or for the recovery or HB 50 -14- HB0050a New Text Underlined [DELETED TEXT BRACKETED] 33-GH1567\A production of geothermal resources;

Enrolled HB 50 -18- (d) To the extent the provisions of AS 31.05 do not conflict with the provisions of AS 41.06.005 - 41.06.060 [THIS CHAPTER], the provisions of AS 31.05 are applicable to wells drilled in search of, in support of, or for the recovery or production of geothermal resources.

24.32.

(e) The commissioner may adopt regulations under AS 44.62 (Administrative Procedure Act) to carry out the purposes and intent of AS 41.06.005 - 41.06.060 [THIS CHAPTER] for duties assigned to the department, including the promotion of maximum economic recovery.

25.33.

(b) The commission may adopt regulations under AS 44.62 (Administrative Procedure Act) and issue orders appropriate to carry out the purposes and intent of AS 41.06.005 - 41.06.060 [THIS CHAPTER] for duties assigned to the commission, including orders regarding the establishment of drilling units for pools as set out in AS 31.05.100 and orders regarding unitized operation and integration of interests as set out in AS 31.05.110.

26.34.

(a) The commission shall adopt regulations under AS 44.62 (Administrative Procedure Act), issue orders, and take other appropriate action to carry out the HB0050a -15- HB 50 New Text Underlined [DELETED TEXT BRACKETED] 33-GH1567\A purposes and intent of AS 41.06.005 - 41.06.060 [THIS CHAPTER], including adopting regulations to prevent (1) geothermal resources, water or other fluids, and gases from escaping into strata other than that in which they are found, unless in accordance with an approved reinjection program;

(3) premature degradation of a geothermal system by water -19- Enrolled HB 50 encroachment or otherwise;

27.35.

28.36.

29.37.

The Department of Administration shall identify the amount of HB 50 -16- HB0050a New Text Underlined [DELETED TEXT BRACKETED] 33-GH1567\A appropriations made for the operating costs of the commission under AS 41.06.005 - 41.06.060 [THIS CHAPTER] that lapse into the general fund each year.

If the legislature makes an appropriation to the commission under this subsection that is equal to or greater than the lapsed amount, the commission shall reduce the total regulatory cost charge collected for that fiscal Enrolled HB 50 -20- year by a comparable amount.

30.38.

(5) "geothermal resources" (A) means the natural heat of the earth at temperatures greater than 120 degrees Celsius, or any use of that heat for commercial purposes, measured at the point whereat which [WHERE] the highest-temperature resources encountered enter or contact a well or otherresourceother resource extraction device or any commercial use of the natural heat of the earth;

(B) includes HB0050a -17- HB 50 New Text Underlined [DELETED TEXT BRACKETED] 33-GH1567\A (i) the energy, including pressure, in whatever form present in, resulting from, created by, or that may be extracted from that natural heat;

and -21- Enrolled HB 50 (iii) all dissolved or entrained minerals and gases that may be obtained from the material medium, but excluding hydrocarbon substances and helium;

(6) "geothermal system" means a stratum, pool, reservoir, or toherto her geologic formation containing geothermal resources;

31.39.

Carbon DioxideStorage; Injection and Storage.

Injection.

Policy on carbon dioxide storage.

For the purposes of protecting health, safety, and property in the state, it is in the public interest that to the HB 50 -18- HB0050a New Text Underlined [DELETED TEXT BRACKETED] 33-GH1567\A extent economically and technologically feasible, carbon dioxide be injected into and stored in oil and gas reservoirs and other geologic formations in a manner protective of waters and reservoir integrity.

The state recognizes that geologic storage of carbon dioxide may require the cooperation of mineral interest holders and that, when cooperation is not achieved, regulatory procedures that promote cooperative management for protection and maximization of resources are necessary.

Sec.

41.06.110.

41.06.115.41.06.110.

(a) The authority of the commission applies to all land (1) in the state lawfully subject to the police power of the state, including private land, municipal land, state land, federal land, and land subject to the jurisdiction of the United States,States; and to all land included in a voluntary cooperative or unit plan of development or operation entered into in accordance with AS 38.05.730.

and (2) included in a voluntary cooperative or unit plan of development or Enrolled HB 50 -22- operation entered into in accordance with AS 38.05.725.

(c) The commission has the authority to (1) regulate activities related to a storage facility, including the construction, operation, and closure;closure of the facility;

(3) enter, at a reasonable time and in a reasonable manner, a storage facility to (A) inspect equipment and facilities;

(4) exercise continuing jurisdiction over storage operators and storage HB0050a -19- HB 50 New Text Underlined [DELETED TEXT BRACKETED] 33-GH1567\A facilities, including the authority, after notice and hearing, to amend provisions in a permit and to revoke a permit;

and (5) dissolve or change the boundaries of anyan commission-established oil or gas field or unit established by the commission that is within or near the boundaries of a storage reservoir'sreservoir. boundaries;

and(d) (6)To grant,the forextent goodAS cause,31.05 exceptionsdoes tonot theconflict requirementswith andAS implementing41.06.105 rules- 41.06.210, the provisions of AS 41.06.10531.05 -are 41.06.210.applicable to wells drilled in search of, in support of, and for carbon storage.

(d)(e) ToNothing thein extent AS 31.05 does not conflict with AS 41.06.105 - 41.06.210,41.06.210 limits the provisionsauthority of ASthe 31.05Department areof applicableNatural toResources wellsunder drilledAS in38.05.700 search- of,38.05.795 inor supportAS of,41.06.305. and for carbon dioxide storage.

(e) Nothing in AS 41.06.105 - 41.06.210 limits the authority of the Department of Natural Resources under AS 38.05.700 - 38.05.795.

41.06.120.41.06.115.

Waste in a storage facility or storage reservoir in the state is prohibited.

The commission may investigate to determine whether waste exists or is imminent, or whether other facts exist that justify -23- Enrolled HB 50 or require action by the commission to prohibit waste.

41.06.125.41.06.120.

(a) A prospective storage operator is required to obtain a permit from the commission.commission to operate a storage facility.

(c) A person applying for a permit shall (1) request a pre-applicationpreapplication meeting with the commission staff;

and (4) pay the commission the cost the commission incurs in reviewing anthe person's application, publishing notices for hearings, and holding hearings on the person's permit applications.application.

(e) The commission shall set the amount of the fee in (c)(3) of this section must be based on the HBanticipated 50cost -20-to HB0050athe Newcommission Textassociated Underlinedwith [DELETED TEXT BRACKETED] 33-GH1567\A commission's anticipated cost of processing applications, including any preliminary work in advance of receiptreceiving of an application.

The commission may enter into an agreement with a prospective applicant that requires the applicant to reimburse the commission for reasonable costs of work incurred in preparing for activities before receiptthe ofcommission receives an application.

(f) AThe feecommission theshall commissiondeposit receivesfees collected under this section mustin be deposited into the carbon dioxide storage facility administrative fund established in AS 41.06.165.41.06.160.

41.06.130.41.06.125.

The noticecommission mustshall beprovide providednotice in the same manner as a notice under AS 31.05.050(b) and beshall providedprovide notice to (1) each mineral lessee, mineral owner, and mineral right owner of record within the storage reservoir and within one-half mile of the storageboundaries reservoir'sof boundaries;the Enrolled HB 50 -24- storage reservoir;

(2) each surface owner of land overlying the storage reservoir and within one-half mile of the reservoir'sboundaries boundaries;of the storage reservoir;

and (3) any additional persons that the commission requires.considers necessary.

41.06.135.41.06.130.

(a) The commission shall consult with the Department of Environmental Conservation and the Department of Natural Resources before issuing a permit under AS 41.06.125.41.06.120.

(b) Before the commission may approve a permit appliedapplication forsubmitted under AS 41.06.125,41.06.120, the commission shallmust find (1) that the storage operator has complied with all requirements set by the commission;

(2) that the proposed storage facility is suitable and feasible for carbon dioxide injection and storage;

HB0050a -21- HB 50 New Text Underlined [DELETED TEXT BRACKETED] 33-GH1567\A (4) that the storage operator has made a good-faithgood faith effort to get the consent of all persons with an ownership interest in the proposed storage reservoir and surface owners of land overlying the proposed storage reservoir;

(6) that the proposed storage facility will not adversely affect surface waterswater or formations containing fresh water;

(9) that the proposed storage facility will not endanger human health or -25- Enrolled HB 50 unduly endanger the environment;

(12) that the storage operator will establish monitoring facilities and protocols to assess the location and migration of carbon dioxide injected for carbon storage and to ensure compliance with all permit, statutory, and administrative requirements;

(13) that all nonconsenting landlandowners owners or holders of mineral rights areare, or will bebe, equitably compensated;

41.06.140.41.06.135.

The commission may include in a permit or order any parameters necessary to carry out the objectives of AS 41.06.105 - 41.06.21041.06.210, andprevent towaste, protect correlative rights, and adjustensure the respectivehealth rights and obligationssafety of persons affected by geologicthe storage.permit.

41.06.145.41.06.140.

If a storage operator does HB 50 -22- HB0050a New Text Underlined [DELETED TEXT BRACKETED] 33-GH1567\A not obtain the consent of all persons with an ownership interest in the storage reservoir, the commission may order that the mineralpore space rights of nonconsenting owners be included in a storage facility and subject to geologiccarbon storage.

Before the commission may issue an order effectuatingforming an amalgamation under this section, the commission mustshall provide public notice and hold a hearing.

41.06.150.41.06.145.

When the commission issues a permit under AS 41.06.125,41.06.120, the commission shall also issue a certificate that states that the permit has been issued, describes the area covered, and contains other information the commission deemsconsiders appropriate.

The storage operator may file a copy of the certificate with the office of the recorder in the district in which the storage facility is located.

41.06.155.41.06.150.

storage reservoir integrity.

(a) The commission shall take action to ensure that Enrolled HB 50 -26- (1) substances that compromise the integrity of a storage reservoir do not enter a storage reservoir;

(b) For the purposes of this sectionsection, and in the application of other laws, carbon dioxide that is stored and remains in carbon storage under a permit is not considered a pollutant and does not constitute a nuisance.

41.06.160.41.06.155.

Nothing in AS 41.06.105 - 41.06.210 (1) prejudices the rights of thosea person with a property interestsinterestin within a storage facility to exercise rights that have not been committed to athe storage facility;

or (2) prevents a mineral owner or mineral lessee from drilling through or near a storage reservoir to explore for and develop mineralsrovidedminerals if the drilling, production, and related activities comply with commission requirements thatset preserveby the storagecommission facility'sto preserve the integrity of the storage facility and protect the objectives of AS 41.06.105 - 41.06.210.

41.06.165.41.06.160.

(a) A storage operator shall pay to the commission a fee on each metric ton of carbon dioxide injected for geologiccarbon storage.

The commission shall set the amount of the fee mustbased beon inthe anticipated expenses the amountcommission setwill byincur in regulating storage facilities during each phase, including the commission.construction, operational, and pre- completion phases.

The amount must be based on the anticipated expenses that the commission willshall incurdeposit HB0050aa -23-fee HBcollected 50under Newthis Textsubsection Underlinedin [DELETEDthe TEXTcarbon BRACKETED]dioxide 33-GH1567\A in regulating storage facilitiesfacility duringadministrative theirfund construction,established operational,in and(b) pre-closureof phases.this section.

The fee shall be deposited in the carbon dioxide storage facility administrative fund established in (b) of this section.

(2) fees received under AS 41.06.12541.06.120 and 41.06.200;41.06.195;

and (3) interest earned on money in the fund.

(c) ExpenditureMoney fromin the carbon dioxide storage facility administrative fund isshall subjectbe toseparately appropriation.accounted for under AS 37.05.142.

The appropriationlegislature may beappropriate madethe by-27- generalEnrolled appropriationHB of50 programmoney receiptsin conditionedthe onfund complianceto with the programcommission reviewto provisionscarry out the purposes of AS 37.07.080(h).41.06.105 - 41.06.210.

The commission, however, through a cooperative agreement with another state agency, may use the fund to compensate the cooperating agency for expenses the cooperating agency incurs in carrying out regulatory responsibilities that the agency may have over a storage facility.

41.06.170.41.06.165.

The storage operator has title to the carbon dioxide injected into and stored in a storage reservoir and holds title until the commission issues a certificate of completion under AS 41.06.175.41.06.170.

When a certificate of completion is issued under AS 41.06.170, title to carbon dioxide injected into and stored in a storage reservoir is transferred to the owner of the pore space, unless the storage operator and the owner of the pore space have a contrary agreement.

41.06.175.41.06.170.

Certificate of completion,completion. release, and transfer of title and custody.

(a) AfterOnce a storage operator discontinues carbon dioxide injections into a reservoirstorage endreservoir, and upon application by the storage operator, the commission shallmay considerissue issuing a certificate of completion.completion (1) only after public notice and hearing;

Thethe certificatecommission mayshall onlyestablish benotice issuedrequirements afterfor publica noticehearing andunder hearing.this paragraph;

The(2) only after the commission shallconsults establishwith noticethe requirementsDepartment forof Environmental Conservation, the hearing.Department of Natural Resources, and all persons with an ownership interest in the storage reservoir;

Theand certificate(3) mayafter onlya beperiod issuedof afterat theleast commission50 hasyears, consultedor withanother theperiod Departmentapproved ofby Environmentalthe Conservation,commission for the Departmentstorage ofreservoir Naturalbased Resources,on andrequirements allestablished personsin withregulation, anhas ownershipelapsed interestsince inthe last carbon dioxide injection into the storage reservoir.

(b) The certificatecommission may notissue bea issuedcertificate untilof atcompletion leastonly 10if yearsthe afterstorage carbonoperator dioxide(1) injectionshas end.fully complied with all laws governing the storage facility;

(b)(2) Ashows certificatethat of completion may only be issued if the storage operator HBhas 50addressed -24-all HB0050apending Newclaims Textregarding Underlinedthe [DELETEDoperation TEXTof BRACKETED] 33-GH1567\A (1) is in full compliance with all laws governing the storage facility;

(2)(3) shows that the operatorunderground hasplace addressedor allpore pendingspace claimsin regardingwhich the storageinjected facility'scarbon operation;dioxide is stored is not expected to pose a threat to human health, human safety, the environment, or underground sources of drinking water;

(3)Enrolled HB 50 -28- (4) shows that the undergroundstored place or poreinjected space where the carbon dioxide was injected or stored is expectedunlikely to nocross longeran expandunderground vertically or horizontallypore space boundary and is not expected to poseendanger noan threatunderground tosource humanof health,drinking humanwater safety,or theotherwise environment,endanger orhuman undergroundhealth, sourceshuman ofsafety, drinkingor water;the environment;

(4)(5) shows that theall storedwells, orequipment, injectedand carbonfacilities dioxideallowed is unlikely to crossremain anyin undergroundplace orfollowing porepost-injection spacesite boundarycare and issite notclosure expectedare toin endangergood anycondition undergroundand sourceretain ofmechanical drinkingintegrity; water or otherwise endanger human health, human safety, or the environment;

(5)(6) shows that allthe operator has plugged wells, equipment,removed equipment and facilitiesfacilities, toand becompleted usedreclamation inwork theas post-closurerequired periodby arethe incommission goodand conditionthe andDepartment retainof mechanicalNatural integrity;Resources;

(6)(7) shows that the operator has pluggedpaid wells,all removedfees equipment and facilities,surcharges andowed completedfor reclamation work as required by the commission;storage facility;

(7) has paid all fees and surcharges for the facility;

(c) Once a certificate of completion is issued, title to the storagedepartment facilityassumes andprimary toresponsibility thefor storedlong-term carbonmonitoring dioxideand transfers,maintenance without payment of any compensation, to the statestorage underfacility, managementas ofprovided thein DepartmentAS of41.06.305. Natural Resources.

TitleThe acquiredstorage byoperator and all persons who generated injected carbon dioxide are released from liability to the state includesassociated allwith rightsthe andstorage interestsfacility in,in andan allamount responsibilitiesequal associatedto with,the amount attributed to the storedstorage facility in the carbon dioxide.storage closure trust fund established in AS 37.14.850.

The storagestate, operatorthe anddepartment, allor personsthe whocommission generatedis anynot injectedliable carbonfor dioxidedamages arearising releasedout fromof, liabilityor toin theany statemanner associatedconnected withwith, thelong-term storagemonitoring facility,and providedmaintenance thatof thea liabilitystorage tofacility if the stateamount shallfor not result in the paymentstorage offacility anyseparately damagesaccounted for in excess of the balance of the carbon storage closure trust fund established in AS 37.14.850.37.14.850 is unavailable or insufficient.

AnyA bondsbond posted by the storage operator under AS 41.06.110(c)(2) must be released.

In this subsection, "long-term monitoring and maintenance" has the meaning given in AS 41.06.305(e).

41.06.180.41.06.175.

(a) A storage operatorsoperator injecting carbon dioxide at a storage facility shall pay to the commission a surcharge on each tonyear offor the first 12 years that carbon dioxide is injected forat storage.the storage facility.

The surchargecommission mustshall bedeposit in the amountsurcharge setinto by the commission.general fund.

The amountlegislature mustmay beappropriate baseda onsurcharge anticipatedcollected expensesunder thatthis thesubsection stateinto willthe incurcarbon instorage regulatingclosure storagetrust facilitiesfund duringestablished post-closurein phases.AS 37.14.850.

The-29- surchargeEnrolled shall be deposited in the carbon HB0050a -25- HB 50 New(b) TextThe Underlinedannual [DELETEDsurcharge TEXTin BRACKETED]this 33-GH1567\Asection storageis closuredetermined trustby fundthe establishedfollowing informula: AS 37.14.850.

S = (7,500,000 x (I/261.78)) / 12, where (1) S is the dollar amount of the annual surcharge for a storage facility;

(2) I is equal to the Consumer Price Index for urban consumers for urban Alaska, as determined by the United States Department of Labor, Bureau of Labor Statistics, without seasonal adjustment, for December of the calendar year immediately preceding the year of issuance of the storage facility permit.

41.06.185.41.06.180.

(a) In addition to the penalties in (b) - (d) of this section, a person who violates a provision of AS 41.06.105 - 41.06.21041.06.210, or a commissionregulation regulation,adopted order,under AS 41.06.105 - 41.06.210, or an order or term of a permit issued by the commission under AS 41.06.105 - 41.06.210,41.06.210 is liable for a civil penalty of not more than $100,000 for the initial violation and not more than $10,000 for each day afterthereafter that on which the violation continues.

(b) A person who knowingly commits an act specified in AS 11.46.630(a) for the purpose of evading a provision of thisAS chapter,41.06.105 - 41.06.210, a regulation adopted under thisAS chapter,41.06.105 - 41.06.210, or an order, stipulation, or term of a permit issued by the commission is guilty of a class A misdemeanor.

(c) A person who knowingly aidsviolates or abets another person in the violation of a provision of thisAS chapter,41.06.105 - 41.06.210, a regulation adopted under thisAS chapter,41.06.105 - 41.06.210, or an order, stipulation, or term of a permit issued by the commission is subjectguilty toof thea sameclass penaltyA asmisdemeanor thatpunishable prescribedby ina thisfine chapterof fornot themore violationthan by$10,000 thea otherday person.for each day of violation.

(d) A person who knowingly violatesaids or abets another person in the violation of a provision of thisAS chapter,41.06.105 - 41.06.210, a regulation adopted under thisAS chapter,41.06.105 - 41.06.210, or an order, stipulation, or term of a permit issued by the commission is guiltysubject ofto athe misdemeanorsame punishablepenalty byas athat fineprescribed ofin notthis moresection thanfor $10,000the aviolation dayby forthe eachother dayperson. of violation.

Enrolled HB 50 -30- (f) In determining the amount of a penalty assessed under (a) of this section, the commission shall consider (1) the extent to which the person committing the violation was acting in good faith in attempting to comply;

(3) the extent and seriousness of the violation and the actual or HB 50 -26- HB0050a New Text Underlined [DELETED TEXT BRACKETED] 33-GH1567\A potential threat to public health or the environment;

(4) the economic or environmental harm,harm or injury to the public,public caused by the violation;

(5) the economic value or other benefits derived by the person committing the violation from the commission of the violation;

41.06.190.41.06.185.

Enhanced oil or gas recovery.

IfThe adopted, the regulations must require thatthat, in considering whether to approve a conversion, and upon conversion, the provisions of AS 41.06.105 - 41.06.210 and its implementing rules apply.

The regulations may impose additional requirements to,to AS 41.06.105 - 41.06.210, or waivedescribe specific situations in which the requirements of,of AS 41.06.105 - 41.06.210 forare goodwaived, cause and to ensure that the objectives of AS 41.06.105 - 41.06.210 are met.

41.06.195.41.06.190.

(a) The commission -31- Enrolled HB 50 may enter into agreements with other governments, government entities, and state agencies for the purpose of carrying out the objectives of AS 41.06.105 - 41.06.210.

41.06.200.41.06.195.

Determining capacity of storage amounts;reservoir;

(a) The HB0050acommission -27-may HBadopt 50a Newwritten Textpolicy Underlinedestablishing [DELETED TEXT BRACKETED] 33-GH1567\A commission, under procedures and criteria that the commission maywill adopt,use mayto determine the amount of carbon dioxidestorage thatcapacity mayof be injected and stored in a storage reservoir, including for the purpose of enhanced oil or gas recovery.

(b) The purpose of determining the carbon storage amountscapacity of a storage reservoir is to facilitate usingcalculating the amount of stored carbon dioxide for matters including carbon credits, allowances, trading, emissions allocations, and offsets.

The commission may charge a reasonable fee to a person requesting a storagecapacity determination.

AThe fee the commission receivesshall fordeposit afees storagereceived determinationunder mustthis besubsection depositedin into the carbon dioxide storage facility administrative fund established in AS 41.06.165.41.06.160.

(c) In this section, "carbon storage capacity of a storage reservoir" means the maximum injected volume in a storage reservoir at which the pressure in the reservoir does not pose a risk to the integrity of the reservoir or its ability to maintain carbon storage.

In AS 41.06.105 - 41.06.210, unless the context requires otherwise, (1) "carbon dioxide" means carbon dioxide of a quality that (A) will not compromise (A) the safety of geologiccarbon storage;

and (B) will not compromise the properties of a storage reservoir that allow the reservoir to effectively enclose and contain a stored gas or stored supercritical fluid;

(2) "commission""carbon storage" means the Alaskaunderground Oilstorage andof Gascarbon Conservationdioxide Commissionin createda understorage ASreservoir; 31.05.005;

(3) "geologic"commission" storage" means the permanentAlaska orOil short-termand undergroundGas storageConservation ofEnrolled carbonHB dioxide50 in-32- aCommission storagecreated reservoir;under AS 31.05.005;

(4) "permit""enhanced oil or gas recovery" means the increased recovery of hydrocarbons, including oil and gas, from a permitcommon issuedsource of supply achieved by artificial means or by the commissionapplication allowingof aenergy personextrinsic to operatethe common source of supply, including pressuring, cycling, pressure maintenance or injection of a storagesubstance facility;or form of energy, including injection of water, gas, carbon dioxide, or both gas and carbon dioxide, including immiscible and miscible floods, as long as the enhanced oil or gas recovery does not include injection of a substance or form of energy for the sole purpose of (A) aiding in the lifting of fluids in the well;

(5)or "pore(B) space"stimulation meansof athe cavityreservoir at or voidnear inthe awell subsurfaceby sedimetarymechanical, stratum;chemical, thermal, or explosive means;

(6)(5) "reservoir""permit" means a subsurfacestorage sedimentaryfacility stratum,permit formation,issued aquifer,under cavity,AS or41.06.120; void, including pore space, oil and gas reservoirs, saline formations, and coal seams suitable for or capable of being made suitable for injecting and storing carbon dioxide;

(7)(6) "storage"pore facility"space" means thea storagecavity reservoir, underground equipment, well, and surface facilities and equipment used or proposedvoid to be used in HBa 50subsurface -28-sedimnetary HB0050astratum; New Text Underlined [DELETED TEXT BRACKETED] 33-GH1567\A accordance with a permit;

(7) "reservoir" means a subsurface sedimentary stratum, formation, aquifer, cavity, or void, including pore space, oil and gas reservoirs, saline formations, and coal seams that are suitable, or capable of being made suitable, for injection and carbon storage;

(8) "storage facility" means the storage reservoir, underground equipment, well, and surface facilities and equipment used in accordance with a permit;

(8)(9) "storage operator" means a person holding or applying for a permit;

(9)(10) "storage reservoir" means a reservoir proposed, authorized, or used for storing carbon dioxide;storage;

(10)(11) "supercritical fluid" means a substance at or above its critical temperature and critical pressure that is neither a liquid nor a gas but that has properties of both;

(11)-33- Enrolled HB 50 (12) "waste" means, in addition to its ordinary meaning, physical waste, and includes inefficient, excessive, or improper operation of a storage facility or well;

(12)(13) "well" means a well that is drilled, converted, or reactivated for discovery, testing, or subsurface injection into a reservoir.

Article 3.

Long-Term Monitoring and Maintenance of Carbon Storage Facilities.

Sec.

41.06.305.

Long-term monitoring and maintenance.

(a) The department shall conduct long-term monitoring and maintenance of a storage facility that has been issued a certificate of completion under AS 41.06.170.

(b) Under this section, the authority of the department applies to all land in the state lawfully subject to the police power of the state, including private land, municipal land, state land, land of the United States, and land subject to the jurisdiction of the United States.

The department may enter, at a reasonable time and in a reasonable manner, the site of a storage facility that has been issued a certificate of completion under AS 41.06.170.

(c) The state, the department, and the commission have no obligation to pay costs associated with long-term monitoring and maintenance of a storage facility in an amount greater than the amount attributable to that storage facility and separately accounted for under AS 37.14.850.

(d) The department may adopt regulations under AS 44.62 (Administrative Procedure Act) to carry out the purposes of this section.

(e) In this section, (1) "commission" means the Alaska Oil and Gas Conservation Commission created under AS 31.05.005;

(2) "long-term monitoring and maintenance" means an activity associated with monitoring and maintenance of a storage facility that has been issued a certificate of completion under AS 41.06.170 and may include (A) operational and long-term inspecting, testing, and monitoring of the storage facility site, wells, and remaining facilities;

(B) remediation measures arising from the storage facility site, including remediation of property and mechanical problems associated with Enrolled HB 50 -34- wells and remaining facilities;

(C) repairing mechanical leaks at the storage facility site;

(D) plugging and abandoning wells;

(E) converting wells for use as observation wells;

(F) purchasing or paying insurance costs for a storage facility, whether commercially or through government funding;

(3) "storage facility" has the meaning given in AS 41.06.210.

32.40.

(a) The land and water areas described in AS 41.21.161 are not open to mineral entry under AS 38.05.135 - 38.05.275 andor 38.05.700 - 38.05.795.

33.41.

34.42.

35.43.

The state land and water described in AS 41.21.611(b) is closed to mineral entry under AS 38.05.135 - 38.05.275 and HB0050a -29- HB 50 New Text Underlined [DELETED TEXT BRACKETED] 33-GH1567\A 38.05.700 - 38.05.795, to commercial harvest of timber, and to sale under state land disposal laws.

36.44.

AS 42.05.141 is amended by adding new subsections to read:

(g) The commission shall, as required under AS 44.88.850(b), determine -35- Enrolled HB 50 whether the sale price in a gas sales agreement for gas produced through a project partially or fully funded by a loan under AS 44.88.850 constitutes a just and reasonable immediate delivery price for gas.

(h) Except as provided in AS 42.05.711(q) and (s), the commission shall regulate under this chapter the service of natural gas storage and the service of liquefied natural gas storage, including storage furnished by operating a natural gas storage facility that is part of a (1) pipeline facility operated by a pipeline carrier;

or (2) natural gas pipeline facility operated by a natural gas pipeline carrier.

(i) In (h) of this section, "natural gas pipeline carrier," "natural gas pipeline facility," "pipeline carrier," and "pipeline facility" have the meanings given in AS 42.06.630.

* Sec.

45.

AS 42.05.381(k) is amended to read:

(k) The cost to the utility of storing gas in a gas storage facility or storing liquefied natural gas in a liquefied natural gas storage facility that is allowed in determining a just and reasonable rate shall reflect the (1) reduction in cost attributable to any exemption from a payment due under AS 38.05.096 or 38.05.180(u), as applicable, and the value of a tax credit that the owner of the gas storage facility received under AS 43.20.046 or 43.20.047, as applicable;

the [.

THE] commission may request the (A) [(1)] commissioner of natural resources to report the value of the exemption from a payment due under AS 38.05.096 or 38.05.180(u), as applicable, that the gas storage facility received;

and (B) [(2)] commissioner of revenue to report information on the amount of tax credits claimed under AS 43.20.046 and 43.20.047, as applicable, for the gas storage facility or liquefied natural gas storage facility;

(2) fair market value of oil and gas fields, drilling rigs, production platforms, wells, and similar assets used for gas storage or liquefied natural gas storage and a fair return on the fair market value of those assets;

(3) costs related to the dismantlement, removal, and restoration of Enrolled HB 50 -36- a gas storage facility or liquefied natural gas storage facility IN THIS SUBSECTION, "GAS STORAGE FACILITY" HAS THE MEANING GIVEN IN AS 31.05.032].

* Sec.

46.

AS 42.05.381 is amended by adding a new subsection to read:

(p) In (k) of this section, "gas storage facility" has the meaning given in AS 31.05.032(e).

* Sec.

47.

AS 42.05 is amended by adding a new section to article 5 to read:

Sec.

42.05.505.

Records of gas storage facilities.

Records held by the commission related to the finances of a gas storage facility, a liquefied natural gas storage facility, or a public utility providing the service of natural gas storage, including financial statements and financial assurance agreements, are confidential and are not public records under AS 40.25.100 - 40.25.295 (Alaska Public Records Act).

The commission may disclose information from a record subject to this section only to a state or federal agency if the commission determines that disclosure of the information is necessary for the commission to complete its duties.

* Sec.

48.

AS 42.05.711(q) is amended to read:

(q) The service of natural gas storage furnished by operating a natural gas storage facility that is [(1) PART OF A PIPELINE FACILITY OPERATED BY A PIPELINE CARRIER, (2) PART OF A NATURAL GAS PIPELINE FACILITY OPERATED BY A NATURAL GAS PIPELINE CARRIER, OR (3)] part of a North Slope natural gas pipeline facility operated by a North Slope natural gas pipeline carrier is exempt from this chapter.

In this subsection, ["NATURAL GAS PIPELINE CARRIER," "NATURAL GAS PIPELINE FACILITY,"] "North Slope natural gas pipeline carrier [,]" and "North Slope natural gas pipeline facility [,]" ["PIPELINE CARRIER," AND "PIPELINE FACILITY"] have the meanings given in AS 42.06.630.

* Sec.

49.

AS 42.05.711 is amended by adding a new subsection read:

(w) A liquefied natural gas import facility under the jurisdiction of the Federal Energy Regulatory Commission is exempt from this chapter.

* Sec.

50.

AS 42.06.140 is amended by adding new subsections to read:

(c) The commission shall regulate under AS 42.05 the service of natural gas -37- Enrolled HB 50 and liquefied natural gas storage, including storage furnished by operating a natural gas storage facility that is part of a (1) pipeline facility operated by a pipeline carrier;

or (2) natural gas pipeline facility operated by a natural gas pipeline carrier.

(d) In this section, (1) "service of liquefied natural gas storage" means the operation of a liquefied natural gas storage facility;

"service of liquefied natural gas storage" does not include the storage of liquefied natural gas (A) owned by or contractually obligated to the owner, operator, or manager of the liquefied natural gas storage facility;

or (B) for which the price of storage is not separately itemized;

(2) "service of natural gas storage" means the operation of a natural gas storage facility primarily or exclusively for the benefit of third-party customers, and not for the benefit of the owner, operator, or manager of the natural gas storage facility;

"service of natural gas storage" does not include the storage of natural gas (A) owned by or contractually obligated to the owner, operator, or manager of the natural gas storage facility;

or (B) for which the price of storage is not separately itemized.

* Sec.

51.

AS 43.20.036 is amended by adding a new subsection to read:

(k) For purposes of calculating the income tax payable under this chapter, the taxpayer may not apply as a credit against tax liability the carbon oxide sequestration credit allowed as to federal taxes under 26 U.S.C.

45Q (Internal Revenue Code).

* Sec.

52.

AS 43.55.165(e) is amended to read:

(e) For purposes of this section, lease expenditures do not include (1) depreciation, depletion, or amortization;

(2) oil or gas royalty payments, production payments, lease profit shares, or other payments or distributions of a share of oil or gas production, profit, or revenue, except that a producer's lease expenditures applicable to oil and gas produced from a lease issued under AS 38.05.180(f)(3)(B), (D), or (E) include the share of net profit paid to the state under that lease;

Enrolled HB 50 -38- (3) taxes based on or measured by net income;

(4) interest or other financing charges or costs of raising equity or debt capital;

(5) acquisition costs for a lease or property or exploration license;

(6) costs arising from fraud, wilful misconduct, gross negligence, violation of law, or failure to comply with an obligation under a lease, permit, or license issued by the state or federal government;

(7) fines or penalties imposed by law;

(8) costs of arbitration, litigation, or other dispute resolution activities that involve the state or concern the rights or obligations among owners of interests in, or rights to production from, one or more leases or properties or a unit;

(9) costs incurred in organizing a partnership, joint venture, or other business entity or arrangement;

(10) amounts paid to indemnify the state;

the exclusion provided by this paragraph does not apply to the costs of obtaining insurance or a surety bond from a third-party insurer or surety;

(11) surcharges levied under AS 43.55.201 or 43.55.300;

(12) an expenditure otherwise deductible under (b) of this section that is a result of an internal transfer, a transaction with an affiliate, or a transaction between related parties, or is otherwise not an arm's length transaction, unless the producer establishes to the satisfaction of the department that the amount of the expenditure does not exceed the fair market value of the expenditure;

(13) an expenditure incurred to purchase an interest in any corporation, partnership, limited liability company, business trust, or any other business entity, whether or not the transaction is treated as an asset sale forfederal income tax purposes;