Alaska’s Big Bet on Carbon Capture
By Sarah Montalbano
Alaska Governor Mike Dunleavy is betting big on the growing market for carbon capture. Dunleavy’s Carbon Management and Monetization Bills were proposed in January 2023 in both the state House and Senate and would create the regulatory framework for the Alaska Department of Natural Resources (DNR) to implement carbon offset and capture projects on Alaska state lands. If environmentalists are serious about reducing net emissions and conserving Alaska’s natural resources, it’s clear that Alaska needs the regulatory authority to facilitate carbon offset and sequestration projects, regardless of one’s opinion on this specific bill.
The carbon offset component of Dunleavy’s plan would allow private parties to lease state lands and keep them undeveloped, thereby reducing net greenhouse gas emissions. These lands are often forest lands kept unlogged by companies, but seaweed cultivation in Alaska’s state waters is another promising avenue. Ultimately, any activity designed to reduce emissions would qualify businesses for a lease.
Carbon offsets would not be new to Alaska. Sealaska — an Alaska Native regional corporation — has been participating in California’s cap-and-trade program by protecting some of its Alaskan lands from logging. Carbon offsets are a particularly good fit for Alaska Native corporations, as they prioritize sustainability but also generate dividends for Alaska Native shareholders. And California’s cap-and-trade program allows carbon credits, which companies purchase to compensate for the emissions produced within California, to be located anywhere so long as they are certified to meet certain conditions.
Reportedly, Sealaska received more than $100 million from British Petroleum — which has to offset the emissions produced by the fuel it sells in California — for keeping some of its forest lands unlogged. As of 2019, the carbon offset credits registered in Alaska totaled about $370 million. Through California’s cap and trade program, Sealaska set aside 165,000 acres of land and offset 11 million metric tons of carbon — the same emissions 2.36 million cars produce in a year. Giving Alaska state lands — not just privately-held corporations — the ability to participate in existing carbon credit markets would simultaneously conserve land and reduce net emissions while generating revenue for the state.
The carbon capture, utilization, and storage (CCUS) component of the legislation would allow Alaska to charge companies rent or fees to store carbon dioxide deep underground on state lands and use it for “enhanced oil recovery or permanent sequestration.” The former uses carbon dioxide gas expansion properties to recover more oil from existing wells, while the latter injects carbon dioxide into geologic formations for permanent storage.
An evaluation commissioned by DNR cites the Cook Inlet basin, which is no longer a major source of oil production in Alaska, as one of “the highest potential storage areas” for permanent sequestration. Estimates vary, but Dunleavy claims the basin has the potential to store 50 gigatons of carbon. For comparison, worldwide emissions in 2022 were 36.8 gigatons.
While the bills do not establish a cap-and-trade program for Alaska — and that’s a good thing given California’s mixed results and well-documented issues with measuring the impact of carbon offsets — it would give Alaska the regulatory authority to participate in existing carbon offset programs and facilitate carbon sequestration projects. California’s cap-and-trade program has faced criticism over worries that companies are “banking” their carbon credits; if that is the case, emissions are not reduced but simply pushed off until later. Carbon offsets in general face difficulties in the measurement of actual emissions reduction over 100 years. Offsets also generally need to prevent emissions that would have happened otherwise — and proving a counterfactual is inherently difficult. The importance of due diligence in monitoring, reporting, and verifying lands used for carbon offsets cannot be overstated.
Alaska would not be the first oil-producing state to experiment with these frameworks for carbon capture. North Dakota was the first state to apply for and receive regulatory authority over carbon injection wells from the Environmental Protection Agency (EPA) in 2018. Wyoming followed suit in 2020, and Louisiana is currently pursuing a similar framework. Allowing states to make these decisions about their natural resources is important because it gives the most input to local communities rather than far-away EPA bureaucrats in D.C. and will also speed up the permitting process for carbon injection wells.
The benefits for Alaska could be substantial. Alaska’s state budget is prone to boom-and-bust cycles based on fluctuations in the price of oil. Stable contracts with private entities for carbon offsets and sequestration could provide a guaranteed revenue stream by private entities paying for the state to sequester carbon in now-defunct oil basins.
Critics argue that carbon offsets and capture shouldn’t be part of the equation at all: Governments ought to be investing in renewable energy, like solar and wind, instead. The European Commission is skeptical of CCUS technology because it “seems to encourage the continued use of fossil fuels rather than switching to renewable sources of energy.” Greenpeace claims “offsets distract us from the climate action we need.”
Yet relying on the government to force the adoption of renewables is not the panacea that the climate movement hopes for. While renewables could contribute to lowering emissions in the future, carbon capture could reduce the emissions already present in the atmosphere. And most climate projections suggest sequestering much of the carbon already in the atmosphere will be necessary to make a dent in rising global temperatures. Environmentalists ought to welcome every strategy to reduce net carbon emissions, especially those that rely on private entities and markets rather than government subsidies and coercion.
Whether Dunleavy’s proposed bills are to become law is up to the Alaska legislature. But the concept — that Alaska can capitalize on existing markets for carbon instead of relying solely on oil and gas development — is a sound one. Creating the right framework for Alaska to harness the potential of markets to pursue CCUS could be the right move for the state and the climate.
Sarah Montalbano is the Education Policy Analyst at Alaska Policy Forum and Northwest Regional Leader with Young Voices. Ms. Montalbano is also a visiting fellow at the Independent Women’s Forum.