Legislature(2007 - 2008)HOUSE FINANCE 519

03/05/2008 01:30 PM House FINANCE


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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ HB 344 ADMINISTRATIVE CODE/REGISTER DISTRIBUTION TELECONFERENCED
Moved Out of Committee
+ HB 348 BOARD OF GAME REGULATIONS TELECONFERENCED
Scheduled But Not Heard
*+ HB 373 SCHOOL BOND DEBT REIMBURSEMENT TELECONFERENCED
Moved Out of Committee
+ Bills Previously Heard/Scheduled TELECONFERENCED
+= HB 336 SUSITNA HYDROELECTRIC PROJECT TELECONFERENCED
Heard & Held
+= HB 359 PROBATION AND MINOR CONSUMING TELECONFERENCED
Heard & Held
HOUSE BILL NO. 336                                                                                                            
                                                                                                                                
     "An  Act  directing  the   Alaska  Energy  Authority  to                                                                   
     conduct  a study  of and  to prepare a  proposal for  an                                                                   
     appropriately  sized Susitna  River hydroelectric  power                                                                   
     project; and providing for an effective date."                                                                             
                                                                                                                                
Representative  Kelly introduced  Steve Haagenson,  the newly                                                                   
appointed  Energy  Coordinator  for Alaska  Energy  Authority                                                                   
(AEA).                                                                                                                          
                                                                                                                                
JEAN OSTNES,  STAFF, REPRESENTATIVE CRAIG  JOHNSON (SPONSOR),                                                                   
explained HB 336, which authorizes  AEA to conduct a study of                                                                   
the Susitna  River hydroelectric power project.  She referred                                                                   
to  previous  studies done  in  1982  and 1983.  The  current                                                                   
fiscal note  for $1 million is  intended for the  first phase                                                                   
of the current study, Task Force 1.                                                                                             
                                                                                                                                
1:46:39 PM                                                                                                                    
                                                                                                                                
Co-Chair Meyer  wanted to  know if AEA  was already  using an                                                                   
$880,000 allocation  to study  energy issues in  the Railbelt                                                                   
region. Ms.  Ostnes thought that  report would meld  with the                                                                   
study proposed  by HB  336. There  are engineers on  contract                                                                   
who can immediately  go to work. Co-Chair Meyer  asked if AEA                                                                   
would  still need  $1 million  in addition  to the nearly  $1                                                                   
million  already set  aside. He  asked if the  intent was  to                                                                   
also use  Railbelt energy fund  money for the  Susitna study.                                                                   
Ms. Ostnes replied that the Sponsor  wanted capital money but                                                                   
the source was not yet identified.                                                                                              
                                                                                                                                
Representative  Joule supported  energy projects for  Alaska.                                                                   
His  concern about  the Railbelt  project is  that there  are                                                                   
other parts  of the  state that  need alternative energy.  He                                                                   
does not want the State to postpone  looking at other regions                                                                   
and  would prefer  to have  AEA look  at energy  alternatives                                                                   
that might impact places with higher energy costs.                                                                              
                                                                                                                                
1:49:27 PM                                                                                                                    
                                                                                                                                
Ms.  Ostnes  believed  that  the  Sponsor  is  interested  in                                                                   
looking at  the issue state-wide  and hoped that  the project                                                                   
would affect the rest of the state.                                                                                             
                                                                                                                                
Representative   Gara  voiced   concerns  about  building   a                                                                   
hydroelectric  project only  to  find out  later that  online                                                                   
energy  was cheaper.  He  referred  to the  five-phase  study                                                                   
("Estimate  for Susitna  Hydro-electric  Feasibility  Study,"                                                                   
Copy on  File), anticipated  to cost  a total of  $2,750.000.                                                                   
Ms. Ostnes  replied the  Sponsor felt  $1 million would  help                                                                   
the project move forward.                                                                                                       
                                                                                                                                
Vice-Chair  Stoltze  wondered  how  much  of  the  work  done                                                                   
through past studies  is still relevant. Ms.  Ostnes referred                                                                   
to  a 1986  report by  Gordon  Harrison (Copy  on File)  that                                                                   
addresses  the financial  plan and  why it  didn't work.  She                                                                   
referred  to extensive  work that  had been  done that  needs                                                                   
updating. Vice-Chair Stoltze had  concerns about costs of the                                                                   
study.                                                                                                                          
                                                                                                                                
1:54:50 PM                                                                                                                    
                                                                                                                                
STEVE   HAAGENSON,   ENERGY    COORDINATOR,   ALASKA   ENERGY                                                                   
AUTHORITY,   spoke  in   support  of   HB  336.  He   defined                                                                   
hydroelectric  projects  as  stable-priced   power.  He  said                                                                   
sizing is critical and also having  the right water resources                                                                   
to  run  the  project.  He  thought  hydroelectric  would  be                                                                   
cleaner  and  cheaper.  The  bill will  allow  the  State  to                                                                   
evaluate the project to the next  level in order to determine                                                                   
whether to go  further. He felt the people  of Alaska deserve                                                                   
to  evaluate   hydroelectric  and   compare  it   with  other                                                                   
available technologies.                                                                                                         
                                                                                                                                
Vice-Chair Stoltze  asked what  percentage of the  population                                                                   
would  be  affected  by  the project.  Mr.  Hagensom  said  a                                                                   
significant portion of the population.                                                                                          
                                                                                                                                
Representative  Joule  asserted  the  need  to  look  at  all                                                                   
alternatives  for energy  in order  to strategically  develop                                                                   
Alaska's resources.  He wondered  if there were  alternatives                                                                   
outside the Railbelt.                                                                                                           
                                                                                                                                
Mr. Haagenson anticipated that  his general approach would be                                                                   
to meet  with all Alaskans and  ask them what they  think the                                                                   
solutions are  for technology and  fuel source. He  would try                                                                   
to  quantify the  demand for  power  that would  be used  for                                                                   
electricity, transportation  and heating, and  then determine                                                                   
the best options for each area of the state.                                                                                    
                                                                                                                                
REPRESENTATIVE CRAIG JOHNSON,  SPONSOR, added that Susitna is                                                                   
not the  final answer, but one  of the pieces of  the puzzle.                                                                   
He has  been in  contact with  developers of mining  projects                                                                   
whose most glaring need is electricity.  He cited examples of                                                                   
plans the Susitna project would affect.                                                                                         
                                                                                                                                
There  was  a  discussion  about  energy  rates  and  funding                                                                   
options.                                                                                                                        
                                                                                                                                
2:08:08 PM                                                                                                                    
                                                                                                                                
Representative  Gara  suggested  that  the  study  include  a                                                                   
comparison of  the price of  power under the  Susitna project                                                                   
with the  price of power under  a gas line project.  He asked                                                                   
about the  difference between  the $1  million on the  fiscal                                                                   
note  and   the  $2,750,000   cost  for   the  total   study.                                                                   
Representative Johnson clarified  that the study was meant to                                                                   
be  done  in  phases.  The  first  phase,  which  would  cost                                                                   
approximately $1 million, would  determine the feasibility of                                                                   
continuing the project.                                                                                                         
                                                                                                                                
2:12:03 PM                                                                                                                    
                                                                                                                                
SARA  FISHER-GOAD,  DEPUTY  DIRECTOR  OF  OPERATIONS,  ALASKA                                                                   
ENERGY  AUTHORITY,  viewed HB  336  as  a specific  study  of                                                                   
Susitna and explained  the costs of the phases  of the study.                                                                   
She referred  to Co-Chair  Meyer question  about the  earlier                                                                   
$800,000 study. She mentioned  alternative energy projects in                                                                   
rural Alaska.                                                                                                                   
                                                                                                                                
2:15:05 PM                                                                                                                    
                                                                                                                                
Representative  Gara restated  his  question about  comparing                                                                   
the  prices of  different  types  of power.  Ms.  Fisher-Goad                                                                   
agreed those  comparisons need  to be done.  She said  the $1                                                                   
million fiscal  note responds to  the structure of HB  336. A                                                                   
Senate bill has a different approach.  If the Committee chose                                                                   
to amend  to include a broader  study, the fiscal  note would                                                                   
follow.                                                                                                                         
                                                                                                                                
JIM  HEMSATH,  DEPUTY DIRECTOR,  DEVELOPMENT,  ALASKA  ENERGY                                                                   
AUTHORITY (Testified via teleconference),  explained that the                                                                   
$1 million  for Task  Force 1  would accomplish  a review  of                                                                   
existing information,  including  an engineering analysis  of                                                                   
what has  already been  done. This stage  of the  study would                                                                   
also look  for flaws,  update the  estimates, and update  the                                                                   
costs in  order to  understand what the  cost of  power would                                                                   
be. Task  Force 1 will  be able to  determine if  the Susitna                                                                   
project  is feasible.  If  the project  is  feasible, then  a                                                                   
comparative  study  of different  forms  of  energy would  be                                                                   
done. The  goal is to be  as focused as possible  to minimize                                                                   
capital expenditure.                                                                                                            
                                                                                                                                
2:18:50 PM                                                                                                                    
                                                                                                                                
Representative Gara  asked if part  of the goal of  the study                                                                   
is to update  past estimates to today's dollars.  Mr. Hemsath                                                                   
answered in the  affirmative, but added that  the study would                                                                   
also explore  changes in  technology and  code over  the last                                                                   
twenty years,  and take  a critical  look at the  engineering                                                                   
assumptions of the first studies.                                                                                               
                                                                                                                                
Representative Hawker  referred to the fiscal  note and asked                                                                   
for a budget  analysis of who  will be used in the  study and                                                                   
how much they would be paid.                                                                                                    
                                                                                                                                
2:22:18 PM                                                                                                                    
                                                                                                                                
Mr. Hemsath  responded that  the million  dollar figure  is a                                                                   
cap.  His  experience leads  him  to  believe  a lot  can  be                                                                   
accomplished  for that amount  of money. At  AEA there  are a                                                                   
number  of  term  contracts put  in  place  specifically  for                                                                   
analysis  of  energy needs,  so  they  have the  capacity  to                                                                   
efficiently  develop the engineering  estimate in-house.  The                                                                   
million dollars would evaluate  what has been done and review                                                                   
it for changes in technology and  code that were not known in                                                                   
1983, including seismic activity.                                                                                               
                                                                                                                                
Ms. Fisher-Goad assured  the Committee that in  the past, AEA                                                                   
has  used   appropriations  appropriately  and   with  fiscal                                                                   
responsibility.                                                                                                                 
                                                                                                                                
2:26:29 PM                                                                                                                    
                                                                                                                                
Co-Chair  Meyer  also  wanted   a  better  breakdown  of  the                                                                   
expenses and costs of the proposed project.                                                                                     
                                                                                                                                
ERIC YOULD,  ENERGY CONSULTANT, WOOD CANYON  GROUP (Testified                                                                   
via  teleconference), spoke  in  support of  HB  336. He  had                                                                   
worked on the Susitna project  in the 1980s. He thought a new                                                                   
cost estimate is  important. In addition, the  State needs to                                                                   
look at  other energy projects  that could provide  energy to                                                                   
the   Railbelt,  specifically   coal,   natural  gas,   other                                                                   
hydropower projects,  geothermal, wind and tidal  options. In                                                                   
his opinion,  the alternative  assessment is critical  to the                                                                   
success  of the  Susitna  project. He  pointed  out that  the                                                                   
Federal Energy Regulatory Commission  will require a study of                                                                   
alternatives  in  order  to  get   a  license.  The  National                                                                   
Environmental  Protection  Act   also  requires  a  study  of                                                                   
alternatives. Susitna  was withdrawn by the  governor in 1985                                                                   
because of the  costs of oil, which undermined  the economics                                                                   
of Susitna and  dried up excess revenue that  could have come                                                                   
to the State.                                                                                                                   
                                                                                                                                
2:32:38 PM                                                                                                                    
                                                                                                                                
Representative  Gara  wanted  information  on  the  fisheries                                                                   
impact  of the  project.  Mr.  Yould replied  that  extensive                                                                   
fisheries studies had been done.                                                                                                
                                                                                                                                
2:34:00 PM                                                                                                                    
                                                                                                                                
MIKE WRIGHT,  GOLDEN VALLEY  ELECTRIC ASSOCIATION  (Testified                                                                   
via teleconference),  spoke  in support  of HB 336.  Railbelt                                                                   
utilities  rely   heavily  on   fossil  fuels  for   electric                                                                   
generation.  The  volatile price  of  oil has  a  significant                                                                   
                                      2                                                                                         
impact on the cost of electricity.  COemissions  from burning                                                                   
fossil fuels are also a consideration.                                                                                          
                                                                                                                                
TOM    STAUDENMAIER,     EAGLE    RIVER     (Testified    via                                                                   
teleconference),  advised  consolidating all  the  management                                                                   
systems, tying the grid together, and eliminating debt.                                                                         
                                                                                                                                
2:39:24 PM                                                                                                                    
                                                                                                                                
JERRY MCCUTCHEON,  ANCHORAGE (Testified via  teleconference),                                                                   
spoke  in  opposition  of  HB  336. He  listed  some  of  the                                                                   
problems with  past projects. He thought the  re-study should                                                                   
be done by the Army Corps of Engineers.                                                                                         
                                                                                                                                
2:45:10 PM                                                                                                                    
                                                                                                                                
BRADLEY  EVANS,  ACTING  CHIEF   EXECUTIVE  OFFICER,  CHUGACH                                                                   
ELECTRIC  ASSOCIATION, INC.  (Testified via  teleconference),                                                                   
testified  in  support of  HB  336.  He was  concerned  about                                                                   
dependence  on natural  gas and  thought  the current  system                                                                   
could not  continue to handle  energy needs in  the Railbelt.                                                                   
He supported  doing  a study to  find the  right answers  for                                                                   
diverse energy  sources. Chugach  has conducted many  studies                                                                   
regarding  alternative  energy that  they  would  be glad  to                                                                   
share with AEA.                                                                                                                 
                                                                                                                                
2:49:13 PM                                                                                                                    
                                                                                                                                
UWE KALENKA,  CHUGACH ELECTRIC  ASSOCIATION, INC.  (Testified                                                                   
via teleconference),  testified  in support  of the  bill. He                                                                   
was  concerned  about heavy  dependence  on natural  gas  for                                                                   
energy. He wanted  the range of energy  alternatives studied,                                                                   
including  the Susitna hydroelectric  project. He  maintained                                                                   
that the project is overdue.                                                                                                    
                                                                                                                                
2:52:50 PM                                                                                                                    
                                                                                                                                
PAUL D.  KENDALL, ANCHORAGE  (Testified via  teleconference),                                                                   
spoke  in favor  of the  Susitna hydroelectric  project.   He                                                                   
suggested holding  a hearing to educate the  public on energy                                                                   
issues. Energy is a vitally important  issue. Leadership sets                                                                   
the tone. He recommended an incremental  expansion design for                                                                   
Susitna.                                                                                                                        
                                                                                                                                
3:01:16 PM                                                                                                                    
                                                                                                                                
PUBLIC TESTIMONY CLOSED.                                                                                                        
                                                                                                                                
HB 336 was HEARD and HELD for further consideration.                                                                            
                                                                                                                                

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