Legislature(2011 - 2012)BARNES 124
02/14/2012 08:00 AM COMMUNITY & REGIONAL AFFAIRS
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HB 312-NATURAL GAS CONVERSION PROGRAM/FUND 8:57:12 AM CHAIR MUNOZ announced that the final order of business would be HOUSE BILL NO. 312, "An Act creating a low-interest loan program for homeowners who convert their homes to natural gas-fired heating; and creating the natural gas home heating conversion loan fund." 8:57:18 AM REPRESENTATIVE TAMMIE WILSON, speaking as the sponsor, explained that HB 312 proposed to create a low-interest loan program for Alaskans to convert their homes to natural gas-fired heating and creates a natural gas home heating conversion loan fund. The legislation would also allow the option for Alaskans to take out a low interest loan to replace their oil, coal, or wood home heating devices. Furthermore, the natural home heating conversion loan program isn't subject to income limitations and will be set at 1 percent interest for 10 years. She highlighted that natural gas is a cleaner burning fuel than is currently offered in many communities. REPRESENTATIVE T. WILSON then informed the committee that per the Environmental Protection Agency (EPA) the Fairbanks North Star Borough is a nonattainment area for PM 2.5, which is a particulate level. Thus far, models have shown that [the designation] is due to Fairbanks' home heating, whether it's by wood, coal, or heating oil. The aforementioned are the only choices for residents of Fairbanks, save a small amount of gas and some district heat within the City of Fairbanks. Therefore, one would question why this proposed loan is necessary. She explained that the EPA is going to require Fairbanks to prove that it's taking steps to lower its particulate level, which is called a state implementation plan. Fairbanks residents have already been asked to upgrade their wood or coal burners, and are also being asked to upgrade their oil furnaces when affordable through the rebate program or other programs while the area waits for natural gas to get to Fairbanks, which hopefully will be less than 30 years because this proposal isn't implemented until gas is available. She then related that according to the EPA's emission factor data, switching from a conventional wood stove to natural gas will reduce the PM emissions in Fairbanks by 99.7 percent, which is very substantial, and switching from oil to gas will reduce it by 38.6 percent. REPRESENTATIVE T. WILSON then informed the committee that if Fairbanks can't decrease its PM 2.5 to 35 parts per billion, assuming the EPA doesn't change that, the EPA can eliminate that Northern region's transportation funding. More locally, the matter is about air quality and Fairbanks can't do much about the inversion rate. Ultimately, Fairbanks can't reach [the EPA's goal] without natural gas. Therefore, HB 312 provides another tool that illustrates to the EPA a better way than fining residents for heating their homes. She noted that the Alaska Housing Finance Corporation (AHFC) would monitor this loan program, for which there would only be funds once natural gas is available to Fairbanks. 9:01:07 AM REPRESENTATIVE T. WILSON, in response to Representative Gardner, specified that this natural gas home heating conversion loan program is modeled after the [energy] rebate program and stays within its existing definitions and program. REPRESENTATIVE GARDNER asked if the sponsor anticipates having adequate funds to meet the needs of those homeowners who want to participate or have income level guidelines been considered. REPRESENTATIVE T. WILSON clarified that interior weatherization is the program based on income and it's expected that many Fairbanks residents will be able to use that program to upgrade heating. This proposal targets the middle class which currently can't afford to do the rebate program, but don't qualify for the interior weatherization. 9:02:49 AM REPRESENTATIVE CISSNA related her understanding that it's possible for furnaces to be able to run on various sources of energy such that a furnace could be converted to use natural gas and then back to another source. REPRESENTATIVE T. WILSON responded that at this point, she hadn't considered that because in the Fairbanks area oil furnaces or wood stoves couldn't be converted. She did acknowledge that conversions to propane or natural gas might allow converting [to another energy source] and she opined that such conversions aren't quite as expensive as it would be to convert an entire unit. 9:04:44 AM REPRESENTATIVE FOSTER mentioned that propane cooking stoves come with a part that can switch to natural gas, but he wasn't sure how that would apply to heating equipment. He then inquired as to the percentage of residents that use wood and oil. REPRESENTATIVE T. WILSON specified that 60-65 percent of Fairbanks residents use wood or coal burning devices, which has been identified by the EPA as the main issue. Therefore, Fairbanks has a program [to encourage] changing out wood [furnaces]. Within the City of Fairbanks, it's about 55 percent and growing as energy costs have increased. 9:06:11 AM REPRESENTATIVE FOSTER then asked if HB 264 applies to just the change out of appliance or does it also include the connections. REPRESENTATIVE T. WILSON answered that it applies just to the appliance. She expressed her belief that if the program covered the cost of the appliance, then the homeowner could fund the remainder of the process. 9:06:58 AM REPRESENTATIVE AUSTERMAN related his assumption that in the Railbelt there are many commercial buildings that currently burn oil. If the goal is to reduce emissions, he questioned why the legislation doesn't address commercial buildings as part of the program. REPRESENTATIVE T. WILSON explained that commercial buildings weren't included because modeling has found that residential buildings are causing the majority of the problem, mostly because of the burning of wood and/or coal. She said she hadn't wanted to broaden the legislation too much initially. Furthermore, there are programs available for commercial buildings. Representative T. Wilson offered to consider broadening the legislation to include commercial buildings. CHAIR MUNOZ opined that it would be more inclusive for the program to include commercial buildings. REPRESENTATIVE T. WILSON said she wasn't opposed to doing so. 9:08:20 AM REPRESENTATIVE AUSTERMAN pointed out that HB 264 is basically written for the Railbelt since it speaks to an issue specific to Fairbanks and that is where the natural gas will be. Therefore, he inquired as to what happens if Wantana is built or emissions could be lowered by burning wood pellets rather than oil. Representative Austerman also inquired as to whether the sponsor had considered statewide issues. REPRESENTATIVE T. WILSON stated that any community can use the program if it had access to natural gas. The legislation does focus on Fairbanks because of the need for Fairbanks to have its state implementation plan submitted to the Alaska Department of Environmental Conservation (DEC) by 2014 to ultimately be submitted to the EPA. Representative T. Wilson reiterated that HB 264 illustrates to the EPA that Fairbanks is serious about wanting natural gas and what it would do for the area. She reiterated that this proposed program would be available to other areas currently burning oil that have access to natural gas. 9:10:08 AM REPRESENTATIVE AUSTERMAN informed the committee that by the end of next year Kodiak will be using about 98 percent alternative energy and will have electric rates of about $.14-$.15 per kilowatt hour. Therefore, if there was a movement to convert homes from diesel to electricity, perhaps the legislation should include other energy sources beyond natural gas. Representative Austerman said that he is considering a more holistic view of the state. REPRESENTATIVE T. WILSON related that with the Railbelt's high cost of electricity, $.23-$.24 per kilowatt hour, she didn't think of electricity as cheap enough to include in the program. She said that she would be interested in an amendment to include electricity because she wanted the program to apply statewide. CHAIR MUNOZ related that much of the discussion of the Southeast Alaska Integrated Resource Plan includes discussion of conversion to wood pellets for home heating in some of the smaller communities in Southeast Alaska. 9:12:30 AM REPRESENTATIVE CISSNA recalled conversations that have led her to believe that one can easily convert a gas-fired furnace to propane. If that's the case, she indicated that it would be [helpful for] HB 264 to include such options. 9:14:09 AM REPRESENTATIVE GARDNER asked if the 1 percent interest on the loan covers the overhead of establishing and administering such a program or would the corpus of the fund be used for that. REPRESENTATIVE T. WILSON deferred to AHFC, which will administer the program. 9:15:30 AM STACY SHUBERT, Director, Governmental Affairs & Public Relations, Alaska Housing Finance Corporation, Department of Revenue (DOR), highlighted that AHFC submitted an indeterminate fiscal note. Although AHFC estimates that the cost to administer the program would be 1 percent, it really depends upon the demand of the overall program. 9:16:14 AM CHAIR MUNOZ inquired of the committee the direction it wants to provide to the sponsor. 9:16:42 AM REPRESENTATIVE AUSTERMAN opined that the sponsor should add sections addressing conversion to electricity and those areas outside of the electrical grid or natural gas grid. REPRESENTATIVE T. WILSON surmised then that instead of specifying all types of energy, perhaps there could be a broader reference to [alternative energy] to allow expansion as other types of energy arise. She said she could do that. 9:18:10 AM REPRESENTATIVE GARDNER recalled that Fairbanks faces the possible loss of federal highway funds, and therefore she wanted to evaluate the cost of the program versus the potential loss in federal funds. REPRESENTATIVE T. WILSON agreed to provide the committee with the loss in transportation funds, but emphasized that this legislation is addressing the restrictions that will be implemented because Fairbanks is designated a nonattainment area. REPRESENTATIVE GARDNER said she is thinking of making a stronger case for doing it now. 9:19:47 AM CHAIR MUNOZ asked if the committee wants to expand the legislation's 25 percent allowance for commercial structures. REPRESENTATIVE GARDNER remarked that she is comfortable with it, in the absence of any other testimony about it. REPRESENTATIVE AUSTERMAN suggested that this issue may need to be posed to AHFC. 9:20:28 AM CHAIR MUNOZ asked if it would be overly burdensome or costly to expand the program to include small businesses. 9:21:00 AM PAUL KAPANSKY, Director, Mortgage Operations, Alaska Housing Finance Corporation, Department of Revenue, specified that at this point statute is severely limiting in terms of making loans to commercial enterprises. Therefore, a change in statute would be necessary to expand it to commercial enterprises. If there was a change in statute and commercial enterprises were included, he said the administrative cost and burden would depend upon the need and demand. Currently, the residential small loan program is administered via a contract through Alaska USA. However, he wasn't sure how commercial loans would be handled because AHFC doesn't do direct lending, per se. CHAIR MUNOZ surmised then that perhaps that section should be left as it is in the legislation. REPRESENTATIVE T. WILSON noted that the 25 percent definition was taken from the existing rebate program. 9:22:21 AM REPRESENTATIVE FOSTER commented that the health impacts are certainly immediate in terms of the particulates. However, he asked if the fiscal impact in terms of the federal funds is eminent or not. REPRESENTATIVE T. WILSON said, "The EPA wants us to believe that it's immediate." However, she related her understanding that the odds are that in 2014 Fairbanks can't meet the deadline and can ask for a five-year extension. She emphasized that it's not just the highway funds that are at stake. For instance, if the natural gas pipeline wanted to go through the Fairbanks North Star Borough, because Fairbanks is a nonattainment area more permitting would be required than would be necessary in other communities. The economic impacts would be immediate, she opined. She also noted that military bases and the movement of troops would receive more scrutiny. Representative T. Wilson related that she has been working directly with Region 10 EPA through Seattle and has ascertained that as long as the area is working toward the goal [of reducing emissions]5, the EPA is usually "pretty good about it, but sometimes it depends on who is the President of the United States at the time." 9:23:49 AM CHAIR MUNOZ announced that HB 312 would be held over.