Alaska’s Bad Energy Bill of the Week – Carbon Storage (HB 50/SB 49)

By Kassie Andrews -- April 16, 2024

Ed. Note: Yesterday, ten amendments limiting HB 50 – Carbon Storage were defeated in the Alaska legislature, indicating a path to passage. See the comment section for more information.

“To summarize, Alaska’s Carbon Storage bill ranks among the worst of the worst. When was the last time you as an Alaskan were asked if you wanted to participate in a carbon reduction strategy at all, especially considering our limited footprint on the global scale?”

Governor Mike Dunleavy’s “Carbon Management and Monetization Bill Package” is double trouble for Alaska. HB 50/SB 49 – Carbon Storage, introduced by Dunleavy at the beginning of the 33^rd session (2023–2024), is coupled with a carbon offset bill, HB 49/SB 48. “The package consists of two pieces of legislation focusing on a carbon offset program; and carbon capture, utilization, and storage (CCUS) program”

The carbon offset legislation (“tree bill”) passed last session despite unanimous public testimony in opposition. The public process leaves much to be desired as the Senate Finance Committee (see this video) decided there were better things to do than listen to what citizens had to say last year.

Globalist Scheme

Capture, storing, and sequestering carbon dioxide (CO₂), the gas of life, is a nefarious scheme by a global elite to control processes to manage raw materials, transportation, manufacturing, and agriculture. The claim is that these sectors need to be decarbonized if we are to achieve net-zero emissions goals created for us by 2050.

According to Roberto Bocca – Head, Centre for Energy and Materials with the World Economic Forum (WEF) on the Net-Zero Industry Tracker Report in 2023:

“It is imperative that action is taken soon to both decarbonize and improve energy efficiency; otherwise, unabated fossil-fuel demand in the key industry sectors, which have grown 8% on average the past three years, will increase very significantly by 2050,” said Bocca. “But industrial leaders can respond through new collaborative ways of working and innovating, for example within industrial clusters and by fostering best practices, sharing infrastructure in important areas like clean hydrogen and CCUS and building demand for lower-emissions products.”  “Decarbonizing these industrial and transport sectors, which emit 40% of global greenhouse gas emissions today, is essential to achieving net zero, especially as demand for industrial products and transport services will continue to be strong,”

Referring to the Net Zero Industry Tracker, the WEF goes on:

According to the report, the $13.5 trillion in investments is derived from average clean power generation costs: solar, off-shore and on-shore wind, nuclear and geothermal, electrolyzer costs for clean hydrogen and carbon transport, as well as storage costs”. Also: “carbon pricing, tax subsidies, public procurement and development of strong business cases can support in mobilizing necessary investments. However, raising capital for high-risk projects with unproven technologies could be challenging in the current macroeconomic environment. Institutional investors and multilateral banks, therefore, can play an important role by providing access to low-cost capital linked to emissions targets; equally vital is adapting financial models to the needs of various industries and regions.”

Far-left environmentalists see CCUS as a scam by Big Oil to “delay the phase out of fossil fuels” – they call this greenwashing. Big Oil at the behest of their owners (not the real stakeholders) have subscribed to the net-zero nonsense to help normalize the notion that we are in a climate crisis, and that something must be done with CO₂.  After all, they are going to get paid either way.

Unfortunately, citizens are left out of conversations related to carbon control policy as shown during the public process.  These decisions and laws are made at the very top in boardrooms by outside corporate interests who in some cases are not even American-owned companies. 

45Q Woes

Enacted in 2008, the Energy Improvement and Extension Act of 2008
(Division B of P.L. 110-343) introduced the 45Q tax credit for every metric ton of CO₂ that is captured for utilization, permanently sequestered, or used in enhanced oil recovery (EOR). The original intent of the credit was to incentivize technology for emissions from coal-fired power plants. The tax credit was expanded again in 2018 and, more recently, expanded in the federal Inflation Reduction Act in 2022. The latest expansion extended the credit and added an enhanced credit for direct air capture (DAC).

It is all fun and games until someone gets hurt, and taxpayers and consumers are hurting over this no-good inflationary tax credit. Through 2019, taxpayers have been defrauded by nearly one billion dollars due to the 45Q tax credit. The Treasury Inspector General for Tax Administration (TIGTA) reported that out of the $1 billion in credits claimed between 2010 to 2019, nearly 90% did not comply with EPA reporting requirements. 

Taxpayers for Common Sense reports: “Cost estimates for 45Q have risen over the life of the tax credit. The issue brief documents that the Joint Committee on Taxation (JCT) adjusted its 10-year cost projection from roughly $1.8 billion in 2018 to $3.2 billion in 2022. A different cost estimate from the U.S. Treasure Department in 2021 put the price tag for 45Q at $20.1 billion from FY2021-FY2031, but that changed last year when the Treasury Department’s 45Q 10-year cost estimate jumped from $20.1 billion to $30.6 billion.”

Others report ten-year subsidy estimates to be in the range of $50-$100 billion and will likely be significantly higher as estimates from two provided include only the electrical power sector.  With no transparency to date, and a 90% demonstrated fraud rate, The Great State of Alaska has jumped into this mess with both feet and no sign of looking back. 

Long-term Geologic Storage of CO₂?

Long-term geologic storage of CO₂ is unproven. The claim from the state is that Alaska’s older oil and gas basins, particularly in Cook Inlet “have the right geology to sequester carbon underground.”  Per Governor Dunleavy’s press release on the carbon management bills – “Cook Inlet has been identified as one of the top spots on earth with the ability to sequester carbon underground — with at least 50 gigatons of capacity.” This area just so happens to be where we are having purported gas supply issues; oddly, the DNR hasn’t forecast drilling past 2030.

An Institute for Energy Economics & Financial Analysis (IEEFA) study looked at two large scale carbon capture and storage projects out of Norway: Sleipner in the North Sea, and Snøhvit in the Barents Sea. 

The report notes:

In Norway, a substantial carbon tax was the economic impetus for CCS. The primary driver of CCS for both projects was avoidance of the Norwegian Carbon Tax (1991). The price point of the tax is such that oil and gas producers, even with extensive development costs and ongoing operating costs for the CCS system, saved money by undertaking the investment. That savings margin has only grown since. Unless that fundamental cost element exists in a given market – and persists – that economic drive will be missing. It is unclear whether subsidies alone will create an equivalent result.

One could be left wondering – Are we setting up the bank for a substantial carbon tax?

These projects separate CO₂ from produced gas and compress and transport the CO₂ for permanent reinjection within the seafloor. Despite both locations being among the most studied geological fields in oil and gas as well as CO₂ storage globally, the fields are in an unpredictable state. From the report:

In 1999, three years into Sleipner’s storage operations, CO₂ had already risen from its lower-level injection point to the top extent of the storage formation and into a previously unidentified shallow layer. Injected CO₂ began to accumulate in this top layer in unexpectedly large quantities. Had this unknown layer not been fortunate enough to be geologically bounded, stored CO₂ might have escaped.

At Snøhvit, problems surfaced merely 18 months into injection operations despite detailed pre-operational field assessment and engineering. The targeted storage site demonstrated acute signs of rejecting the CO₂. An geological structure thought to have 18 years’ worth of CO₂ storage capacity was indicating less than six months of further usage potential. This unexpected turn of events baffled scientists and engineers while at the same time jeopardizing the viability of more than US$7 billion of investment in field development and natural gas liquefaction infrastructure. Emergency remedial actions and permanent long-term alternatives needed to be, and were, identified on short notice and at great cost.

The report continues

“In one situation, the CO₂ deposited moved rapidly and unexpectedly to a previously unidentified area. In another, CO₂ storage space meant for years of sequestering turned out to be insufficient. Such developments raise questions about whether two data sources the size of Sleipner or Snøhvit are sufficient to form a reliable basis for secure storage of greenhouse gases on a scale hundreds of times their size, and do so permanently.” 

They highlight that CO₂ storage has not behaved as geologists initially expected for either project. 

In summary, the IEEFA report states for Norway:

What is unknown is the long-term viability of any subsurface storage formation. Will the gas migrate over time? Will the formations fault or deform in ways that allow the gas to escape? Are the formation’s boundaries sealed, or faulted such that the CO2 has a path to move?

The truth is that no engineer or scientist, let alone corporate executive or politician, can answer the question definitively. That is because, even using the best technology and techniques available today, the hard science is limited to statistically based expectations derived from costly and resource-intensive samples of subsurface data that are, by their nature, conjectures of what is going on underground. Subsurface assessment technologies are improving, but they likely will never provide a complete and foolproof picture of what nuances, exceptions, deviations, inclusions, or limits are above and within subsurface structures.

Here in the United States, Louisiana faces the risk of CO₂ storage projects leaking through abandoned wells, noting “the depth of nearly half (46.5 percent) of abandoned wells in Louisiana is a mystery, according to the reports. Of those remaining 53.5 percent of wells with depth records, about 1,200 penetrate potential CO₂ storage formations, and 896 of those wells have perforations that would allow CO₂ from the formation to get inside the well. Also, 297 of those wells are unplugged, with another 15 plugged before modern standards.”

Their concerns go on:

I know there’s a lot of pressure to approve these permits as rapidly as possible, but along with that pressure comes a concern that there won’t be a robust review on the part of regulators,” said Dominic DiGiulio, a former EPA official who helped write the agency’s rules on CO₂ sequestration underground. And “Aside from the effects on the climate, residents and safety advocates are concerned about what happens when a CO₂ well or pipeline leaks without being detected. The gas can displace air and cause people to suffocate, as happened in 2020 in Satartia, Mississippi, after a CO₂ pipeline rupture sent dozens of people to the hospital. The gas is colorless and odorless, and vehicles cannot start in a CO₂-saturated environment, making it difficult for people to escape if there is a rupture.

Another stunning failure in the race to sequester carbon, the world’s largest carbon reduction project is working at just one-third capacity and decreasing.  Australia’s Chevron Gorgon gas plant has already cost Chevron $3.2B and more investment is needed to allow for water to be moved to effectively store the carbon, the reason for this is to “manage the pressure in the formation and keep “induced microseismicity” – or feint earth tremors – within allowed limits.”  Sounds like a wonderful concept for Alaska!

Who pays for these mishaps?  As a wise friend says, “corporations don’t pay for taxes, consumers do.” 

Back to Alaska: Bill Grade

To summarize, HB 50/SB 49 – Carbon Storage is one of the worst of the worst. There is no upside to this aside from the promised future revenues we might see from carbon schemes. This is a promise dangled in front of Alaskans as to imply we will not have investment in our state unless we capitulate to the extortion of carbon control. When was the last time you were asked as an Alaskan if you wanted to participate in a carbon reduction strategy at all, especially considering our limited footprint on the global scale?

The score for this bill in its present state is a -7.  With -9 being the worst, 0 neutral and +9 being the best in the way of freedom and liberty.  This as demonstrated in the detailed legislative scoring:

1.     Expand/Contract Government?

Does it create, expand or enlarge an agency, board or function/activity of government? Conversely, does it reduce the size/scope of government?

Score -1.  This bill increases the size of government, adding positions for a “carbon engineer” and a “carbon assistant”. According to the fiscal note:  This bill expands existing authority and responsibilities of the Alaska Oil and Gas Conservation Commission (AOGCC) to create a regulatory structure for carbon capture, utilization, and storage (CCUS) in Alaska. This bill grants AOGCC authority to pursue primacy from the U.S. Environmental Protection Agency (EPA) over Class VI wells needed for CCUS injection and amends the general property laws of Alaska to clarify pore space ownership for private parties.

AOGCC anticipates that program management and administration may be accomplished through a combination of existing staff and contractual support. In FY2025, this program will be supported by two existing staff and existing funding added as part of SB48 which passed during the 2023 legislative session. In this fiscal note, costs for program support are included in the personal services and service line beginning in FY2026 to continue those positions and support the work associated with this legislation.

2.     Govt Free Market Interference?

Does it give the government any new/expanded power to prohibit, restrict or regulate the free market? Conversely, does it eliminate/reduce govt intervention in the free market?

Score -1.  This is free market interference.  This bill establishes the bank and the need for carbon revenue and gives no services in return.  Legislation is not required for private companies to apply for class IV well primacy – they can do this today. 

3.     Create / Remove Barriers to Enter Market?

Does it increase barriers to entry into the market?  Conversely, does it remove barriers to market entry?

Score -1.  As seen in Norway, the economic impetus for CCS was a substantial carbon tax.

At Snøhvit, the problems they encountered only 18 months into the targeted storage site demonstrated signs of rejecting the CO2.  This was a geological structure thought to have 18 years’ worth of capacity.  This jeopardized an over $7B investment in field development and natural gas liquefaction infrastructure.  Carbon storage serves one purpose, sequestering.  It produces no power and no oil.

4.     Increase Taxes, Fees, Etc.

Direct/Indirect increase of taxes, fees/assessments?  Conversely, does it reduce them?

Score -1.  That is all this is – a tax and a fee.  An entire industry made out of whole cloth.  According to the presentation by the Alaska Division of Oil and Gas:

–       Division of Oil & Gas will charge fees for applications and licenses, and annual rentals for leases.

–       Once operations begin, injection fees similar to royalties at a rate of at least $2.50 per ton will be charged.

–       Fees will be collected to fund program oversight and monitoring after closure of injection facilities.

–       AOGCC will assess fees to fund oversight of wells and facilities during drilling, operations, and closure.

5.     Increase Govt Spending?

Does it increase govt spending or debt?  Conversely, does it reduce govt spending/debt?

Score -1.  The 45Q is said to be the only incentive to carbon sequestration.  It is pure government spending with no services rendered.  The 45Q tax credit is a fraudulent tax credit that should have ended the minute the fraud was discovered and reported by the Treasury Inspector General.  Instead, in the response to the findings, the Department of Energy touted yet a new government entity they would stand up to “develop a corrective action plan” – the Office of Clean Energy Demonstrations, (OCED) who “Accelerates the market adoption of clean energy technologies and fills a critical innovation gap on the path to 100% clean electricity by 2035 and net-zero emissions by 2050.”  Their mission is to “deliver clean energy demonstration projects at scale in partnership with the private sector to accelerate market adoption, deployment, and the equitable transition to a decarbonized energy system.”

6.     Govt Growth/Displace Private Sector

Does it grow government by displacing the private sector in the market? Conversely, does it eliminate or return a function of government to the private sector?

Score 0.  At face value the bill sponsors want you to believe that this opens up a new market for private industry to achieve net zero goals, however, this new market only exists because of government subsidies that are paid for by the United States taxpayers.  Sequestration could have long term catastrophic displacement in private industry such as Cook Inlet natural gas producers due to uncertainties associated with permanent sequestration.

7.     Govt Redist. of Wealth Tax Policy Reward Special Interests

Does it increase govt. redistribution of wealth?  Tax policy to reward special interests/businesses/govt. employees.  Conversely does it decrease govt. redistribution?

Score -1.  This is taking advantage of fraudulent tax policy (45Q) and working with private industry to take money from people in return for nothing.  This is going to cost everyone the inflation on their energy which especially hurts the lower class. 

8.     Restrict Public Access to Information?

Does it restrict public access to information related to govt. activity or reduce accountability? Conversely, does it increase government transparency/accountability?

Score 0.  There is no metric for success or accountability in this legislation.  With the entire concept of carbon control being made up out of the aforementioned whole cloth, to what effect are we doing this other than to greenwash, tax and control people?  This legislation is not for the public, not from the public, not developed in public light and our legislators are trying to sell this as some benefit to the public that we all must pay for.  Our own university that we the people fund is used as a propaganda generating tool against citizens to sell it.  Governor Dunleavy made not one mention of this during his reelection campaign.  This may very well be scored -1.

9.     Violate U.S. Constitution or Alaska Constitution

Does it violate the spirit or the letter of either the U.S. Constitution or the Alaska Constitution? Conversely, does it uphold either of those constitutions?

Score -1.  Carbon control is an ideological state project of Marxist construct.  This legislation establishes the funding and viability of that Marxism.  A limited government is in direct conflict with setting up the bank for carbon.  This is the establishment of a never-ending power grab in the bottomless pit of need from the carbon industrial complex, all to no avail and to no effect to the climate.  Our forefathers never foresaw the problem we are having with the federal reserve and inflation – inflation is the mother of all taxes.  This legislation would not exist if not for inflationary fed dollars.  The IRA was written to corrupt state policies with massive subsidies and restriction on generation where we could be utilizing our own abundant resources.  This legislation is also in conflict with the Alaska Constitution Article 8 – “It is the policy of the State to encourage the settlement of its land and the development of its resources by making them available for maximum use consistent with the public interest.”  As indicated in the Norway fields, our natural gas production in Cook Inlet has a valuable and indeterminate geological infrastructure that we are purposely putting at risk.  Monitoring and bonding language in the bill indicate exactly that.  The notion of this bill fragrantly dismisses the future production of Cook Inlet in violation of Article 8. 

The idea of carbon control signifies the imperative for government action in managing or controlling carbon flows within politically defined limits.  While, A., Jonas, A. E. G., & Gibbs, D. (2010).

When the climate cult is not successful in changing the weather, what is next?  This is the perfect Ponzi scheme – a never ending, never winnable game with ever increasing control on economy, industry and individual freedoms.

Total Score -7

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Prior posts of Kassie Andrews, a principal at MasterResource, can be found here.