OPINION: Carbon discredit: Alaska should demand a fair return for our resources

When Gov. Mike Dunleavy released his proposed budget in December, I was glad to see a budget balanced in both the short- and long-term. His 10-year plan showed $300 million of “new revenue” starting this coming fiscal year, growing to $900 million per year by 2027. On Jan. 12, the governor announced Alaska’s newest revenue source: carbon, or rather the ability to store it, either by injecting it deep underground or by absorbing it in our forests and selling carbon credits on the global market.

This was a surprise to me, given that the governor’s official position is that carbon dioxide does not cause global climate change, but I support the proposition that carbon has value underground. Although skeptical, I was looking forward to his proposal. Upon closer inspection, however, this plan doesn’t hold up. Potential revenue is not coming any time soon, will cost us to get there, and looks to be far short of the governor’s fairytale numbers. This is just the latest chapter in Alaska’s history of giving away resources and coming up short for Alaskans.

Central to the governor’s underground carbon sequestration bill is a provision in the Inflation Reduction Act, signed by President Joe Biden last year, that dramatically increased federal tax credits for underground carbon sequestration — now $60-$180 per ton of CO2 injected. As introduced, the governor’s bill, HB 50, would have had the state collect $2.50 per ton of carbon injected on state lands. This works out to at most 4.2% as state revenue, assuming the minimum federal tax credit and a market price of zero. For a project pulling the maximum tax credits from the feds and selling into the current European market for these credits, the state’s take would be less than 1%. For context, the state takes about 16.5% from various sources on oil and gas produced on state land. That’s a bad deal for Alaska.

In a new version, the Resources Committee stripped out even those $2.50 per ton minimums, citing a need for “flexibility,” leaving any state revenue up to future regulation to be decided by this governor’s Department of Natural Resources, or DNR. Given that most carbon capture, utilization and storage — CCUS — projects will be collocated with oil and gas production for reasons pertaining to the availability of CO2 and drilling equipment, the decision to remove revenue minimums leaves the door wide open for a giveaway to the oil industry and punts the Legislature’s constitutional responsibility to ensure maximum benefit for Alaskans to DNR. That’s a worse deal.

There’s more. This bill would also allow oil companies to write off the cost of developing their carbon sequestration infrastructure against their oil production taxes. In the bill, oil production and carbon sequestration are two separate leases, but not excluding the cost of CCUS development from oil production tax credits allows for further subsidization of oil production. I offered commonsense amendments in committee to resolve both of these issues, but Republicans, advised by DNR, voted them down in lockstep.

If Alaska can become a center of this new carbon sequestration industry, that’s a win-win, but only so long as Alaskans get a fair return for our resources.

Rep. Donna Mears, elected in 2022, represents East Anchorage’s House District 21 in the Alaska Legislature.

The views expressed here are the writer’s and are not necessarily endorsed by the Anchorage Daily News, which welcomes a broad range of viewpoints. To submit a piece for consideration, email commentary(at)adn.com. Send submissions shorter than 200 words to letters@adn.com or click here to submit via any web browser. Read our full guidelines for letters and commentaries here.