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HOUSE BILL NO. 74
IN THE LEGISLATURE OF THE STATE OF ALASKA
THIRTY-THIRD LEGISLATURE - FIRST SESSION
BY THE HOUSE RULES COMMITTEE BY REQUEST OF THE GOVERNOR
Introduced: 2/15/23
Referred: House Special Committee on Energy, Resources
A BILL
FOR AN ACT ENTITLED
"An Act relating to geothermal resources; relating to the definition of 'geothermal 1
resources'; and providing for an effective date." 2
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 3
* Section 1. AS 31.05.030(h) is amended to read: 4
(h) The commission may take all actions necessary to allow the state to 5
acquire primary enforcement responsibility under 42 U.S.C. 300h-1 and 42 U.S.C. 6
300h-4 (Safe Drinking Water Act of 1974, as amended, 42 U.S.C. 300f - 300j-26), for 7
the control of underground injection related to the recovery and production of oil and 8
natural gas, [AND] the control of underground injection in Class I wells, and the
9
control of underground injection in Class V wells associated with the recovery of 10
geothermal energy for heating, aquaculture, and production of electric power for 11
commercial or industrial uses, as defined in 40 C.F.R. 144.6, as amended. 12
* Sec. 2. AS 31.05.030(m) is amended to read: 13
(m) The commission has jurisdiction and authority over all persons and 14 33-GH1618\A
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property, public and private, necessary to carry out the purposes and intent of 1
AS 41.06 [, EXCEPT FOR PROVISIONS IN AS 41.06 FOR WHICH THE 2
DEPARTMENT OF NATURAL RESOURCES HAS JURISDICTION]. 3
* Sec. 3. AS 38.05.181(a) is amended to read: 4
(a) The commissioner may, under regulations adopted by the commissioner, 5
grant prospecting licenses [PERMITS] and leases to a qualified person to explore for, 6
develop, or use geothermal resources. A prospecting license or lease is not required 7
under this section to explore for, develop, or use geothermal resources if the 8
geothermal resource is intended for domestic, noncommercial, or small-scale 9
industrial use [WHEN TITLE TO THE SURFACE PARCEL IS HELD BY A 10
PERSON OTHER THAN THE STATE, THAT PERSON SHALL HAVE A 11
PREFERENTIAL RIGHT TO A GEOTHERMAL PROSPECTING PERMIT OR 12
LEASE FOR THE AREA UNDERLYING THE SURFACE PARCEL. THE 13
SURFACE OWNER MUST EXERCISE THE PREFERENCE RIGHT WITHIN 30 14
DAYS AFTER RECEIVING NOTICE OF THE APPLICATION FOR A PERMIT, 15
OR BY AGREEING TO MEET THE TERMS O F A BID WITHIN 60 DAYS AFTER 16
RECEIVING NOTICE OF THE ACCEPTANCE OF THE BID FOR A LEASE]. 17
* Sec. 4. AS 38.05.181(c) is amended to read: 18
(c) On state land that has not been declared a competitive geothermal area or 19
withdrawn from geothermal prospecting, the commissioner may issue a prospecting 20
license [PERMIT] to the first qualified applicant. The license [PERMIT] conveys an 21
exclusive right, for a period of five [TWO] years, to prospect for geothermal resources 22
on state land included under the license [PERMIT]. The commissioner has discretion 23
to renew the license [PERMIT] for an additional one-year term. A holder of a 24
prospecting license [PERMIT] has the right, after completion of an agreed-upon 25
work commitment [UPON THE SHOWING OF A DISCOVERY OF 26
GEOTHERMAL RESOURCES IN COMMERCIAL QUANTITIES] and the 27
submission of an exploration [A DEVELOPMENT] plan acceptable to the 28
commissioner, to convert the license [PERMIT] to a noncompetitive lease at a royalty 29
rate under (g) of this section. The conversion privilege must be exercised not later than 30
30 days after the expiration of the license [PERMIT]. If the land included within the 31 33-GH1618\A
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license [PERMIT] is designated a competitive geothermal area during the license 1
[PERMIT] term, the licensee [PERMITTEE] must apply for a noncompetitive lease 2
within 30 days after notification of the designation or forfeit the conversion privileges 3
and the exclusive right to prospect. 4
* Sec. 5. AS 38.05.181(d) is amended to read: 5
(d) On state land that is designated a competitive geothermal area and is not 6
subject to an existing prospecting license [PERMIT], the commissioner may issue 7
geothermal leases to the highest bidder by competitive bidding procedures established 8
by regulations adopted by the commissioner. At the discretion of the commissioner, 9
competitive lease sales may be by oral or sealed bid, on the basis of a cash bonus, 10
profit share, or royalty share. 11
* Sec. 6. AS 38.05.181(e) is amended to read: 12
(e) Prospecting licenses [PERMITS] and geothermal leases granted under this 13
section must [, EXCEPT IN THE CASE OF PARCELS SUBJECT TO A 14
PREFERENCE RIGHT UNDER (b) OF THIS SECTION,] be issued for at least 40 15
acres but not more than 2,560 acres. A person may not own, or hold an interest in, 16
geothermal leases covering more than 100,000 [51,200] acres. However, geothermal 17
leases in commercial production, individually or under a unit operation or well spacing 18
or pooling arrangement, do not count against the acreage limitation. All prospecting 19
licenses [PERMITS] and geothermal leases are subject to an annual rental fee 20
established by the department in regulation and [,] payable in advance [, OF $3 21
PER ACRE]. The rental for a year shall be credited against royalties accruing for that 22
year. 23
* Sec. 7. AS 38.05.181(f) is amended to read: 24
(f) A geothermal lease shall be issued for a primary term of 10 years and may 25
be renewed for an additional term of five years if the lessee is actively engaged in 26
drilling operations. A geothermal lease is valid for the duration of commercial 27
production. [BEGINNING 20 YEARS AFTER THE INITIATION OF 28
COMMERCIAL PRODUCTION AND AT 10-YEAR INTERVALS THEREAFTER, 29
THE COMMISSIONER MAY RENEGOTIATE THE RENTALS AND 30
ROYALTIES DUE ON A GEOTHERMAL LEASE.] 31 33-GH1618\A
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* Sec. 8. AS 38.05.181 is amended by adding new subsections to read: 1
(i) The commissioner may require a lessee of a geothermal resource to operate 2
under a unit agreement that prescribes the conditions under which the lessee must 3
operate. A unit agreement must adequately protect all parties in interest, including the 4
state. Except as provided in (j) of this section, the commissioner may not reduce the 5
royalty on a geothermal lease issued under this section in, or in connection with, a unit 6
agreement. 7
(j) When determined by the commissioner to be in the public interest, the 8
commissioner may authorize a lessee and the lessee's representative, together with 9
each other or jointly or severally with another lessee, to collectively adopt or operate 10
under a unit agreement. The commissioner may, with the consent of the involved 11
lessees, establish, change, or revoke the drilling, producing, and royalty requirements 12
of the leases. 13
(k) A geothermal lease and a unit agreement approved under this section must 14
specify that the lease and unit agreement are subject to applicable statutes and 15
regulations in force at the time the lease or unit agreement is entered into and to future 16
amendments to those statutes and regulations. 17
* Sec. 9. AS 38.05.965(6) is repealed and reenacted to read: 18
(6) "geothermal resources" means the natural heat of the earth and 19
energy, in whatever form, below the surface of the earth present in, resulting from, 20
created by, or that may be extracted from the natural heat, and all minerals in solution 21
or other products obtained from naturally heated fluids, brines, associated gases, and 22
steam, in whatever form, found below the surface of the earth that may be produced 23
for a commercial use; "geothermal resources" does not include oil, hydrocarbon gases, 24
or other hydrocarbon substances; 25
* Sec. 10. AS 41.06.020(e) is amended to read: 26
(e) Nothing in this chapter limits the authority of the department 27
[(1)] over geothermal resources under AS 38.05.181, including the 28
authority [; OR 29
(2)] to approve and manage geothermal units or operations that include 30
state land. 31 33-GH1618\A
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* Sec. 11. AS 41.06.020 is amended by adding a new subsection to read: 1
(f) The commission may, when consistent with the purpose and intent of this 2
chapter, exempt from this chapter a domestic, noncommercial, or small-scale 3
industrial use of geothermal resources. 4
* Sec. 12. AS 41.06 is amended by adding a new section to read: 5
Sec. 41.06.057. Penalties. (a) In addition to the penalties in (b) - (d) of this 6
section, a person who violates a provision of this chapter, a regulation adopted under 7
this chapter, or an order, stipulation, or term of a permit issued by the commission is 8
liable for a civil penalty of not more than $100,000 for the initial violation and not 9
more than $10,000 for each day thereafter on which the violation continues. 10
(b) A person who knowingly commits an act specified in AS 11.46.630(a) for 11
the purpose of evading a provision of this chapter, a regulation adopted under this 12
chapter, or an order, stipulation, or term of a permit issued by the commission is guilty 13
of a class A misdemeanor. 14
(c) A person who knowingly aids or abets another person in the violation of a 15
provision of this chapter, a regulation adopted under this chapter, or an order, 16
stipulation, or term of a permit issued by the commission is subject to the same 17
penalty as that prescribed in this chapter for the violation by the other person. 18
(d) A person who knowingly violates a provision of this chapter, a regulation 19
adopted under this chapter, or an order, stipulation, or term of a permit issued by the 20
commission is guilty of a misdemeanor punishable by a fine of not more than $10,000 21
a day for each day of violation. 22
(e) The commission may assess the civil penalties provided in this section, 23
and, if not paid, the penalties are recoverable by suit filed by the attorney general in 24
the name and on behalf of the commission in the superior court. The payment of a 25
penalty does not relieve a person on whom the penalty is imposed from liability to any 26
other person for damages arising out of the violation. 27
(f) In determining the amount of a penalty assessed under (a) of this section, 28
the commission shall consider 29
(1) the extent to which the person committing the violation was acting 30
in good faith in attempting to comply; 31 33-GH1618\A
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(2) the extent to which the person committing the violation acted in a 1
wilful or knowing manner; 2
(3) the extent and seriousness of the violation and the actual or 3
potential threat to public health or the environment; 4
(4) the injury to the public resulting from the violation; 5
(5) the benefits derived by the person committing the violation from 6
the violation; 7
(6) the history of compliance or noncompliance by the person 8
committing the violation with the provisions of this chapter, the regulations adopted 9
under this chapter, and the orders, stipulations, or terms of permits issued by the 10
commission; 11
(7) the need to deter similar behavior by the person committing the 12
violation and others similarly situated at the time of the violation or in the future; 13
(8) the effort made by the person committing the violation to correct 14
the violation and prevent future violations; and 15
(9) other factors considered relevant to the assessment that are adopted 16
by the commission in regulation. 17
* Sec. 13. AS 41.06.060(4) is amended to read: 18
(4) "geothermal fluid" means liquids, brines, water, gases, or [AND] 19
steam [AT TEMPERATURES GREA TER THAN 120 DEGREES CELSIUS OR 20
ANY COMMERCIAL USE OF LIQUIDS AND STEAM] naturally or artificially 21
present in a geothermal system that may be produced for a commercial use; 22
"geothermal fluid" does not include oil, hydrocarbon gases, or other 23
hydrocarbon substances [AT TEMPERATURES LESS THAN 120 DEGREES 24
CELSIUS]; 25
* Sec. 14. AS 41.06.060(5)is repealed and reenacted to read: 26
(5) "geothermal resources" means the natural heat of the earth and 27
energy, in whatever form, below the surface of the earth present in, resulting from, 28
created by, or that may be extracted from the natural heat, and all minerals in solution 29
or other products obtained from naturally heated fluids, brines, associated gases, and 30
steam, in whatever form, found below the surface of the earth that may be produced 31 33-GH1618\A
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for a commercial use; "geothermal resources" does not include oil, hydrocarbon gases, 1
or other hydrocarbon substances; 2
* Sec. 15. AS 41.06.005(b) and 41.06.030 are repealed. 3
* Sec. 16. The uncodified law of the State of Alaska is amended by adding a new section to 4
read: 5
APPLICABILITY. (a) Except as provided in (b) of this section, this Act applies to a 6
license or lease for a geothermal resource granted or entered into on or after the effective date 7
of secs. 1 - 11 and 13 - 15 of this Act. 8
(b) An application made under AS 38.05.181(c), as that subsection read before the 9
effective date of sec. 4 of this Act, that is pending with the Department of Natural Resources 10
on the effective date of sec. 4 of this Act is considered to be an application under 11
AS 38.05.181(c), as amended by sec. 4 of this Act. 12
* Sec. 17. The uncodified law of the State of Alaska is amended by adding a new section to 13
read: 14
TRANSITION: CONVERSION OF AN EXISTING PROSPECTING PERMIT TO A 15
PROSPECTING LICENSE. A permittee with a valid permit issued under AS 38.05.181(c), as 16
that subsection read before the effective date of sec. 4 of this Act, may request in writing that 17
the commissioner of natural resources convert the prospecting permit into a prospecting 18
license under AS 38.05.181, as amended by this Act. The Department of Natural Resources 19
shall give public notice of a request for conversion under this section. In this section, the 20
legislature finds that conversion of a prospecting permit under this section into a prospecting 21
license under AS 38.05.181, as amended by this Act, will best serve the interests of the state. 22
The commissioner of natural resources is not required to make a written finding under 23
AS 38.05.035 to approve a request to convert a prospecting permit into a prospecting license. 24
The expiration date of a prospecting license converted under this section may not be later than 25
five years from the date the prospecting permit was issued under AS 38.05.181(c), as that 26
subsection read before the effective date of sec. 4 of this Act. 27
* Sec. 18. The uncodified law of the State of Alaska is amended by adding a new section to 28
read: 29
TRANSITION: REGULATIONS. The Department of Natural Resources and the 30
Alaska Oil and Gas Conservation Commission may adopt regulations to implement the 31 33-GH1618\A
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changes made by this Act. The regulations take effect under AS 44.62 (Administrative 1
Procedure Act) but not before the effective date of the law implemented by the regulation. 2
* Sec. 19. Section 18 of this Act takes effect immediately under AS 01.10.070(c). 3
* Sec. 20. Except as provided in sec. 19 of this Act, this Act takes effect July 1, 2023. 4