Legislature(2007 - 2008)BARNES 124
01/28/2008 01:00 PM House RESOURCES
| Audio | Topic |
|---|---|
| Start | |
| HB267 | |
| HB336 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 267 | TELECONFERENCED | |
| *+ | HB 336 | TELECONFERENCED | |
| + | TELECONFERENCED |
HB 336-SUSITNA HYDROELECTRIC PROJECT 2:04:35 PM CO-CHAIR JOHNSON announced that the final order of business would be 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." 2:04:54 PM JEANNE OSTNES, Staff to Representative Johnson, Alaska State Legislature, drew attention to the April 13, 2005, Legislative Research Report on this project and noted that the project has been studied for many years. The bill would allow the Alaska Industrial Development and Export Authority (AIDEA) to work cooperatively with utilities along the Railbelt to look at those older studies and determine what it would take to construct a hydroelectric dam. She said the bill's fiscal note is $1 million. CO-CHAIR JOHNSON informed the committee that there is a separate appropriations bill for $1 million in the House Finance Committee. 2:07:26 PM CO-CHAIR GATTO inquired whether hydroelectric means building a dam or can electricity be generated without a dam. MS. OSTNES said she did not know. CO-CHAIR JOHNSON said there is a project, the Chakachamna Hydropower Project, that is a tunnel and not a dam. However, he noted, it is not the intention of HB 336 to specify whether a dam or other method would be best. The intention is to "brush off" the $300 million study done in the 1980s and have AIDEA determine what would still be pertinent to today for generating electricity to the Railbelt or statewide. 2:09:35 PM CO-CHAIR GATTO noted that HB 336 refers to the Susitna River Hydroelectric Power Project and surmised that the Chakachamna Hydropower Project is not for the Susitna River. CO-CHAIR JOHNSON said he is just pointing out that it does not necessarily have to be a dam. CO-CHAIR GATTO noted that there is a proposal to build a bridge that includes in its structure underwater propellers to generate energy from tidal power. CO-CHAIR JOHNSON said that is an accurate assessment, but that it is not part of HB 336 which deals only with previous studies. 2:10:59 PM REPRESENTATIVE SEATON inquired whether "brushing off" the study means starting another Environmental Impact Statement (EIS) and laying out what must be done from the 1980 EIS. What is the goal of this proposal, he asked. CO-CHAIR JOHNSON said the EIS would not be updated and that AIDEA can speak to the question. He understood that originally there was not enough demand for power from the Susitna River, but that power consumption in the Railbelt has changed considerably since 1984 and this would be looked at by the new study. 2:12:33 PM REPRESENTATIVE EDGMON surmised that HB 336 would not go back and add in the costs of the intertie to get the power to the appropriate size for the Railbelt. CO-CHAIR JOHNSON replied that the intertie, the four-dam pool, and the Railbelt Energy Fund all came out of the original Susitna study. This legislation is to bring the existing study up-to-date as much as is possible with $1 million so the legislature can review what is needed. 2:13:57 PM SARA FISHER-GOAD, Acting Executive Director, Alaska Energy Authority (AEA), noted that AEA is a functioning corporation of the state of Alaska, but has no staff. Therefore, AEA contracts with AIDEA to carry out the duties of AEA's programs. She said she is an AIDEA staff person with AEA duties. This is not an AIDEA project, she explained, it is an AEA project. She understood the purpose of HB 336 is to have AEA conduct a study and prepare a proposal for a hydroelectric power project on the Susitna River that is appropriately sized for the Railbelt. She related that the project proposed in the 1980s was for 1600 megawatts and AEA's understanding is that it is being asked to evaluate whether that is an appropriate size or whether it should be sized down to meet the needs of the Railbelt. While the fiscal note is for $1 million, there is an indeterminate placeholder for 2010 and AEA expects that it can refine the estimate once it is known how far the legislature would like AEA to go in evaluating this project. 2:16:20 PM REPRESENTATIVE GUTTENBERG asked whether the report could be completed earlier than 2010, given today's cost of energy. JIM STRANDBERG, Project Manager, Alaska Energy Authority, noted that the $1 million budget will allow an initial review of the existing project reports and consider potential concepts for a re-sized power project that would reflect the needs of the Railbelt. The aforementioned could be performed in a year. 2:18:04 PM REPRESENTATIVE GUTTENBERG inquired whether it would be better to be more proactive and get more research done at the same time that the study is going on, not a full EIS but a jump start. MR. STRANDBERG said he believes the review should proceed with deliberate speed. He recommended a hard look at the project as fast as possible, prior to spending any significant money on renewed EIS's or permits because the project must be defined before it can be permitted. REPRESENTATIVE GUTTENBERG expressed his concern that other state departments are being left out while AEA moves forward. He related that getting off of an oil economy would result in an energy cost savings of $186 million per year in Fairbanks alone, and it would be considerably more in the Anchorage and Matanuska-Susitna areas. 2:20:51 PM CO-CHAIR JOHNSON asked whether he is correct in hearing that AEA could complete the review by June 2009. MR. STRANDBERG answered that the $1 million would allow the hire of a contractor to generally review the project and take a preliminary look at the needs of the Railbelt, as well as do a very preliminary concept discussion of what a project ought to be. A more detailed review would require more time and more budget. In further response to Co-Chair Johnson, Mr. Strandberg confirmed that the review could be completed by June 2009, but said it would be a very preliminary review of the project. He said AEA would not recommend that the legislature base its decision to fund or move ahead on the project in lieu of other potential energy futures with this sort of product. CO-CHAIR JOHNSON said that was not the intention. He agreed that getting the information sooner is better than later. 2:23:55 PM REPRESENTATIVE SEATON inquired whether there is any estimate of what constitutes an appropriately sized Susitna project. MR. STRANDBERG replied that it is likely the project could be smaller than 1200 megawatts, bearing in mind that the megawatt rating is only one part of the energy rating for the project. There is the capacity to generate power, he said, but storage capabilities and the amount of energy that can be produced must also be considered. The other aspect is whether to enter into a project where construction would be phased such that basic support and storage infrastructure is built and then incrementally add generation units that are correctly sized for the reliability needs of the network. Under those scenarios, it is possible to initially enter the water with 100-300 megawatts in initial construction and have a more phased approach that reflects the Railbelt needs. It is likely that viable projects can be created that are economically feasible where the initial capacities are significantly less than 1200 megawatts. Sizing and phasing of the project is highly complex, he advised. 2:26:24 PM REPRESENTATIVE SEATON recalled that a fault line was identified through the Susitna area. MR. STRANDBERG suggested that AEA should review that immediately, as well as any other potential deal killer. He assured the committee that there are significant seismic considerations associated with the project. It might be best to do an interim report within a year and then conclude the report at a later date depending on the actual size of the study and when AEA confirms with the legislature exactly what it is being asked to do. He said he is unclear as to what product is needed from this process. 2:28:52 PM REPRESENTATIVE GUTTENBERG commented that there is only one small area of the state that is not seismically active. MR. STRANDBERG said correct. REPRESENTATIVE GUTTENBERG understood the original plan was for two dams totaling 1200 megawatts. MR. STRANDBERG replied that according to a white paper provided to AEA by Ms. Ostnes, a number of options were considered. The last option was a "run of the river hydro plant" that had generators taking water and energy from the river using very little containment, along with a single larger Devils Canyon dam. They needed to work together in order to provide power output, he said, and there were significantly different capacities between the upper and lower power plants. 2:30:31 PM CO-CHAIR GATTO related that Mount Spurr erupts every few decades and one eruption backed up Lake Chakachamna water for five miles until the water overpowered the mud and went through it. Additionally, there are a couple of glaciers in the area, as well as the 300-mile-long Castle Mountain fault. The Susitna project would deliver power to a substation 40 miles away that is already delivering power and might not be able to handle increased power without additional construction. Perhaps a different alternative than this should be considered, he said. REPRESENTATIVE WILSON agreed. CO-CHAIR JOHNSON said the Railbelt is faced with a real crisis for energy. A natural gas pipeline is 10-12 years away and there is no spur planned for that pipeline. Alternatives need to be reviewed and the issue needs to be addressed, he opined. This project may not be the solution, but it is a way to look to the future for solving some of the problems. 2:33:23 PM REPRESENTATIVE ROSES asked what is being received for the $1 million given the statements and questions made so far: this is dusting off the old study to take another look, should the project be downsized or something different, can the review be done faster, the review is just preliminary, the review should not be used to make a decision on whether to move forward on the project. He supported looking for alternative sources of energy and providing electricity to the Railbelt so that the natural gas could be used for things other than power plants, such as getting the Agrium plant running again, but questioned what the $1 million would accomplish. CO-CHAIR JOHNSON requested Mr. Strandberg to further qualify what will be received for the $1 million. MR. STRANDBERG understood that AEA is being asked to review this project and make progress on its re-evaluation in light of the new realities of the Railbelt and the fuel futures environment. He said AEA would commit to making an interim report at the end of a year and conclude the work within two years. As to the question of whether this review is correctly sized for advancing this project to a point where decisions can be made, he said the answer is no. Useful information could be provided and early concepts could be developed on what the configuration of the project might be to satisfy the needs of the Railbelt. But, for $1 million and a one-year timeline, AEA could not provide a project analysis, a detailed construction cost estimate, a project schedule, and a project feasibility in enough detail that the legislature would be able to make a decision to commit funds to construct this project. This is a very large project, he said, possibly one of the largest tried in the state and the budget will be in the billions. 2:37:54 PM REPRESENTATIVE ROSES surmised that this is a huge and important project, but said the review is being sized to the cost of $1 million rather than determining what needs to be done and how much that would cost. MR. STRANDBERG said that is accurate. Some budgeting work with regard to the necessary size of the project for moving forward has been done by AEA, but it was believed that this could not be brought up until the project was first addressed as configured with the $1 million. CO-CHAIR JOHNSON related that the $1 million figure came from some utilities that said the study could be done for that amount. He suggested that if this is not the case, then perhaps AEA can be charged with coming up with an appropriate amount for accomplishing what needs to be done. 2:40:27 PM REPRESENTATIVE ROSES reiterated his support of the concept, but said he wants a useful end product. CO-CHAIR JOHNSON said that is the goal. MS. FISHER-GOAD proposed that AEA develop a more detailed budget with some deliverables on what AEA would provide at certain points and possibly give the legislature some decision points on funding to go forward. In further response to Co-Chair Johnson, Ms. FISHER-GOAD said she could possibly have something by Monday, February 4th, and come to Juneau to present a detailed budget in person. REPRESENTATIVE SEATON requested that AEA also provide a review of competing projects in the state. 2:44:31 PM REPRESENTATIVE FAIRCLOUGH said that before any money is invested she would like to know what the "drop dead issues" were for why the project did not go forward before. She agreed with Representative Roses' concern about spending $1 million for a product that is not tangible or usable. She also requested AEA's annual report regarding what investments it has made to reach its missions and measures. Additionally, she said she would like to discuss the criteria that are used for selecting contractors and the outputs from those contractors in the form of deliverable goods when looking at projects and associations. MR. STRANDBERG asked for further clarification. CO-CHAIR JOHNSON stated his belief that Representative Fairclough's questions are outside the scope of HB 336. He requested Ms. FISHER-GOAD to meet one-on-one with Representative Fairclough next week to answer her questions. 2:46:16 PM REPRESENTATIVE FAIRCLOUGH stated she will be a no vote if she does not know the criteria that AEA will use to contract. She said she wants to know AEA's success rate in using money for research. In further response to Co-Chair Johnson, Representative Fairclough confirmed that what she wants to know is how AEA will let the contract for this study. CO-CHAIR JOHNSON agreed that that is appropriate. 2:46:49 PM REPRESENTATIVE WILSON requested a review of the area in which the project would be located. CO-CHAIR JOHNSON directed attention to a map at the back of the committee packet. 2:48:23 PM NICHOLAS GOODMAN, Chief Executive Officer, TDX Power, informed the committee that TDX Power is an independently owned power generation holding company, a wholly owned subsidiary of Tanadgusix Corporation, the Alaska Native Village Corporation from St. Paul Island. He said TDX owns and operates electric utilities around the state and that it builds power plants. He said the Chakachamna Hydropower Project should not be confused with the Susitna project. From a corporate perspective, TDX Power's support of HB 336 is hinged on getting away from such dramatic reliance on natural gas for power generation. History shows that a diversified portfolio is necessary for doing well in generating power, he said, and right now Alaska is almost completely reliant on generating electricity from natural gas. It is important to review alternatives to generation of natural gas. He said TDX Power began looking at hydropower options several years ago and that it is currently looking at the Chakachamna Hydropower Project. He said TDX Power deemed the Susitna project too large for a privately owned company to pursue, but that is not to say the project does not have merits. At 330 megawatts Chakachamna is appropriately sized for the Railbelt right now, would appropriately diversify the portfolio, and would not overwhelm the state. It is not without its challenges, he cautioned, as is the case with all hydropower projects. He agreed with Co-Chair Gatto as to what the challenges are and that those are the challenges TDX Power is currently looking at. One of the benefits of the Chakachamna project, he said, is that the environmental impact is relatively small. A very minor dam would be built and essentially the bottom of the lake would be tapped and the water would be run through an underground tunnel into a neighboring basin. The eruption of Mount Spurr would have had little impact to the Chakachamna project and would actually have added more head to the drain from the raised lake level. He said TDX Power will be continuing its analysis of the Chakachamna project for the next two years and hopes to proceed forward with a plan if it looks economic and if utilities are interested in purchasing the power. There are other hydropower alternatives to the Susitna project, he said. The tidal power concepts for Cook Inlet have good merit, as does tapping Mount Spurr's geothermal resource, because they are renewable and help diversify TDX Power's portfolio. He said there are other privately owned companies that are also interested in looking at these projects and developing them without reliance on public funding to make them go forward. 2:53:51 PM REPRESENTATIVE SEATON inquired whether 300 megawatts is considered the appropriate size. MR. GOODMAN pointed out that every utility in the Railbelt has its own opinion in this regard. As an independent company, TDX Power has tried to stay neutral to all of the utilities and add something that benefits all of them. He said TDX Power thinks a 300 megawatt project is appropriately sized and would provide a good benefit to the Railbelt grid from Fairbanks on down to Homer and Seward by replacing the dependence on dwindling natural gas supplies. 2:55:38 PM REPRESENTATIVE SEATON noted that Bradley Lake on the Kenai Peninsula is about 135 megawatts but the output is about 50 megawatts. He asked if this same principle would apply to the Chakachamna project. MR. GOODMAN confirmed that for the Chakachamna project the capacity factor - the amount of energy put out compared to how much is installed - is predicted to be in the 50 percent range, thus it would be 300 megawatts with an output of 150 megawatts. 2:56:33 PM CO-CHAIR GATTO highlighted the proposal to build a bullet line through Fairbanks and into Anchorage which depends upon the following four things happening: Agrium is a buyer, gas is liquefied in Kenai, utility demand is there for the gas, and consumer demand is there. He said he is concerned the whole proposal might fall if the utility demand is taken away. MR. GOODMAN responded that this in no way replaces the utilities' need for additional generation. He said the Chakachamna project would provide one-third or less of what any utility would need to provide power to its customers. He said he did not know whether this could result in the axing of the aforementioned project. Speaking from the perspective of a ratepayer, he said that if the project described by Co-Chair Gatto makes sense, then the state should do it and Chakachamna should not be done. Power project development comes down to two things: is it economic and is it wanted. He said he did not disagree with Co-Chair Gatto, but advised that a diversified portfolio should be looked at for power generation over the long-run of 20-30 years. 2:59:26 PM CO-CHAIR GATTO commented that proposals for coal-fired base loads were destructive to the gas project. MR. GOODMAN agreed. He said TDX Power is technology neutral and has looked at coal but found that coal is not permittable and is not wanted in the state of Alaska even if it is economic. 3:00:15 PM REPRESENTATIVE SEATON commented that he would hate to see renewable hydropower not be developed because the state wants to burn more carbon dioxide. MR. GOODMAN pointed out that unlike 2-3 years ago, there is now the economics of carbon taxes and other taxes becoming very real for fossil fuels. CO-CHAIR JOHNSON encouraged making decisions based on determining what is the best product, and that decisions not be based on whether there is a gas line because then nothing will ever get done. [HB 336 was held over.]
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