Legislature(2011 - 2012)BELTZ 105 (TSBldg)


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Heard & Held
Heard & Held
           SB 154-NATURAL GAS CONVERSION PROGRAM/FUND                                                                       
3:36:04 PM                                                                                                                  
CHAIR OLSON announced the consideration of SB 154.                                                                              
3:36:29 PM                                                                                                                    
SENATOR  JOE THOMAS,  sponsor  of  SB 154,  said  the bill  would                                                               
create  a  low interest  loan  program  for Alaskan  families  to                                                               
replace  their oil,  coal or  wood  home-heating appliances  with                                                               
natural  gas.  He  said  the   Fairbanks  Borough  was  anxiously                                                               
awaiting  the  arrival  of  more natural  gas  and  that  current                                                               
supplies  were  limited. He  said  in  addition to  Prudhoe  Bay,                                                               
Interior  Alaska  was  hopeful  the Cook  Inlet  subsidized  rigs                                                               
strike gas  and expand supply via  truck or pipeline. He  said SB                                                               
154 would  give families the ability  to plan ahead for  low cost                                                               
energy when access to gas was made available.                                                                                   
He  said the  home heating  change-out mechanism  would create  a                                                               
more  robust  gas distribution  system  in  the Kenai  Peninsula,                                                               
Anchorage  and  Matanuska-Susitna  Valley   areas  where  gas  is                                                               
currently distributed. He said the  recent propane conversions to                                                               
natural gas  in the Kenai  Peninsula had a dramatic  cost savings                                                               
He said  Fairbanks' Golden Valley Electric  Association and Flint                                                               
Hills  Resources' North  Pole Refinery  were considering  natural                                                               
gas supplied from Prudhoe Bay  for their own uses and potentially                                                               
for  distribution  to   homes;  a  decision  would   be  made  by                                                               
September,  2012.  He  said Flint  Hills  Resources'  North  Pole                                                               
Refinery would be able to  lower production costs and provide the                                                               
state with lower priced fuels.                                                                                                  
3:39:17 PM                                                                                                                    
SENATOR THOMAS said the Fairbanks Borough  would be able to get a                                                               
handle on its  air quality problem by changing  over an estimated                                                               
12,000 homes  to natural  gas. He  said it  would also  spark the                                                               
economy, create  local jobs  all across the  state and  keep more                                                               
money circulating  in Alaska  rather than  being spent  on energy                                                               
costs. He noted that developers  in the Fairbanks area have dealt                                                               
with outside companies where projects  were cancelled due to high                                                               
fuel costs.                                                                                                                     
3:40:42 PM                                                                                                                    
GRIER HOPKINS, staff  to Senator Thomas, said the  impetus for SB                                                               
154 was to create a stronger,  more economic instate market for a                                                               
natural  gas  pipeline  or delivery  program  for  the  Fairbanks                                                               
Borough and  Southcentral communities.  He said having  access to                                                               
natural gas  would not  be helpful if  homeowners were  unable to                                                               
use it. He said any natural  gas delivery system would help build                                                               
a more robust gas market,  vitalize local economies and keep more                                                               
local jobs  in the communities.  He said rural  homeowners unable                                                               
to  access  natural  gas would  indirectly  benefit  from  nearby                                                               
natural gas supplied regions where  businesses pass along savings                                                               
from lower energy costs. He  noted that the Fairbanks Borough was                                                               
studying its current natural gas  distribution system to plan for                                                               
future infrastructure build out.                                                                                                
He said SB 154 would  make available a $7,500 furnace replacement                                                               
loan,  at 1  percent  interest, to  be paid  back  over 10  years                                                               
through the  Alaska Housing Finance Corporation  (AHFC). Eligible                                                               
candidates must  own a noncommercial, single  occupancy or duplex                                                               
home,   demolition  was   not  eminent,   substantially  complete                                                               
construction  and   has  access  to  natural   gas  within  their                                                               
community.  He   noted  that  connection   costs  would   be  the                                                               
homeowners' responsibility.                                                                                                     
3:44:33 PM                                                                                                                    
MR. HOPKINS said  the new furnace must become  the home's primary                                                               
source of  heat and  participation is not  subject to  any income                                                               
limitations. He said the state's  Energy Efficient Rebate Program                                                               
was used as  a model for the loan program.  He said an individual                                                               
homeowner applicant  would contact AHFC, request  an Energy Rater                                                               
to for  a change  out estimate  and submit  the report  to Alaska                                                               
USA, AHFC's participating program lender.                                                                                       
He said SB 154 would  also address Fairbanks' air quality problem                                                               
linked to smoke  from wood burning, a  less expensive alternative                                                               
to heating with  oil. He noted that homeowners can  save up to 50                                                               
percent  by  burning  wood  versus  heating  oil.  The  Fairbanks                                                               
Borough  hired Sierra  Research to  do an  air quality  study and                                                               
found that  12,000 homes  would have to  be converted  to natural                                                               
gas  to  meet the  Environmental  Protection  Agency's (EPA)  air                                                               
quality mandate.                                                                                                                
3:47:06 PM                                                                                                                    
MR. HOPKINS said the Fairbanks'  current natural gas market is at                                                               
capacity  with  1108 customers.  He  noted  that Senator  Wagoner                                                               
inquired about  possible federal  programs available  for natural                                                               
gas  conversion  and  that  a recent  $1500  federal  tax  credit                                                               
expired in 2010.                                                                                                                
3:48:37 PM                                                                                                                    
CHAIR  OLSON asked  how many  homes would  participate the  first                                                               
year and during the life of the loan program.                                                                                   
3:48:56 PM                                                                                                                    
SENATOR  THOMAS answered  that 1000  homes would  participate for                                                               
initial   hook-up   starting   with   Fairbanks'   high   density                                                               
neighborhoods.  He  noted  that   Fairbanks  Natural  Gas  had  a                                                               
distribution  system  setup in  the  borough  but could  not  add                                                               
customers due to a lack of supply.                                                                                              
3:49:46 PM                                                                                                                    
CHAIR  OLSON said  1000 homes  borrowing  $7500 each  was a  fair                                                               
amount of money going out as capital.                                                                                           
SENATOR THOMAS agreed.                                                                                                          
CHAIR OLSON  said a 1 percent  interest rate was a  low return on                                                               
SENATOR THOMAS agreed.                                                                                                          
3:50:24 PM                                                                                                                    
CHAIR  OLSON asked  if there  were similar  state programs  to SB                                                               
SENATOR THOMAS  answered that  there may  be several  current and                                                               
suggested programs.                                                                                                             
3:51:00 PM                                                                                                                    
MR. HOPKINS  answered that the  Alaska Energy Rebate  Program was                                                               
available,  it  had  distributed   $90  million  to  over  14,600                                                               
homeowners who saved up to 33 percent in energy costs.                                                                          
He said SB 154  was not a grant program and  allowed the state to                                                               
get some return on investment.  Other programs include the AHFC's                                                               
rebate  on   buying  a   five  star   plus  energy   rated  home,                                                               
weatherization assistance for  low-income renters and homeowners,                                                               
and the Alaska Second Mortgage Program for Energy Conservation.                                                                 
3:52:33 PM                                                                                                                    
CHAIR OLSON commented that  the Weatherization Assistance Program                                                               
was  statewide  and  that  SB   154  would  only  concentrate  on                                                               
Southcentral and Fairbanks.                                                                                                     
SENATOR MENARD  asked if AHFC  had addressed adding staff  to run                                                               
the program in SB 154.                                                                                                          
CHAIR OLSON said further testimony  would answer Senator Menard's                                                               
question and  asked if homeowners  who have already  converted to                                                               
natural gas would benefit.                                                                                                      
3:53:35 PM                                                                                                                    
MR. HOPKINS answered no. He  said a homeowner could receive funds                                                               
to upgrade  their home  heating appliance  or access  the current                                                               
Energy Efficient Rebate Program.                                                                                                
SENATOR  WAGONER asked  if SB  154  strictly covers  the cost  of                                                               
replacing the heating appliance.                                                                                                
MR. HOPKINS  answered yes. He said  running a gas line  to a home                                                               
is not covered.                                                                                                                 
SENATOR MENARD asked  what the homeowner's costs would  be to run                                                               
gas line to their home.                                                                                                         
MR.  HOPKINS  answered  that  NorthStar   Gas  in  the  Fairbanks                                                               
currently charges $17.64 per foot for  the main line to get close                                                               
to the home and  $930 for the first 100 feet  of feeder line from                                                               
the main line  to the home plus an additional  charge per foot if                                                               
3:56:06 PM                                                                                                                    
CHAIR  OLSON   asked  if  the  loan   program  accommodated  home                                                               
MR. HOPKINS  answered that  the program  was strictly  for single                                                               
occupancy homes and duplexes, but up  to 25 percent could be used                                                               
for commercial purposes.                                                                                                        
CHAIR OLSON asked if a summer home residence would qualify.                                                                     
MR.  HOPKINS answered  only for  an owner-occupied  home, but  he                                                               
would ask AFHC to verify.                                                                                                       
3:57:22 PM                                                                                                                    
DAN  FAUSKE,   CEO,  Alaska  Housing  Finance   Corp.,  said  the                                                               
following  details need  to be  worked out:  loan terms,  program                                                               
management,  distribution  development  and the  home  conversion                                                               
process. He  said there are  approximately 30,000  potential home                                                               
conversions in the  Fairbanks area which equates  to $200 million                                                               
in required capital.                                                                                                            
CHAIR  OLSON asked  where funding  would come  from at  1 percent                                                               
interest. He noted management costs were not included.                                                                          
3:59:50 PM                                                                                                                    
MR. FAUSKE answered  that SB 154 would have to  be a state-funded                                                               
4:01:06 PM                                                                                                                    
JEFF  JACOBSON, Chief  of Staff,  Fairbanks  North Star  Borough,                                                               
said SB  154 would  assist households that  are burdened  by high                                                               
fuel prices.  He said the borough  has used state grant  funds to                                                               
conduct  a  natural  gas  distribution  study  to  determine  the                                                               
economics  of  expanding  its limited  natural  gas  distribution                                                               
system. He said in the event  natural gas was delivered by truck,                                                               
bullet-line or pipeline, the borough  residents need the means to                                                               
convert their homes.                                                                                                            
He said the EPA designated  Fairbanks as a Nonattainment Area for                                                               
Particulate  Matter   (PM-2.5)  and   mandated  an   air  quality                                                               
improvement plan  to be in  place by 2014.  He said SB  154 helps                                                               
the borough  meet EPA's air  quality goals by  allowing residents                                                               
to switch away from heating oil and wood.                                                                                       
MR.  JACOBSON said  natural gas  supplied to  the Interior's  two                                                               
refineries  would  lower  their operating  costs  and  ultimately                                                               
provide Alaskans with lower priced fuel.                                                                                        
4:04:54 PM                                                                                                                    
CHAIR  OLSON asked  about the  distribution plan  for the  12,000                                                               
home conversions  needed to  meet EPA  air quality  standards and                                                               
the hookup accessibility for the 30,000 homes.                                                                                  
MR. JACOBSON answered  that if nothing else was  done but convert                                                               
12,000  homes to  natural gas,  the  borough would  meet the  EPA                                                               
mandated  air quality  attainment standards.  He said  Fairbank's                                                               
distribution  plan  combines  direct pipelines  to  high  density                                                               
neighborhoods and  independent distribution  to remote  areas. He                                                               
said  along  with  natural  gas  conversion,  the  borough  would                                                               
continue  to educate  the population,  assist homeowners  to burn                                                               
drier wood and  offer the Wood Stove Exchange  Program to replace                                                               
wood stoves and boilers with qualified heating devices.                                                                         
4:07:06 PM                                                                                                                    
CHAIR  OLSON  asked  what the  anticipated  infrastructure  costs                                                               
MR. JACOBSON  answered that data from  the Fairbanks Distribution                                                               
Study would provide preliminary information.                                                                                    
4:07:36 PM                                                                                                                    
SENATOR  WAGONER said  NorthStar Gas  did a  study on  a pipeline                                                               
installation  project in  Homer; the  cost was  $3.5 million.  He                                                               
said Fairbanks  was 10 times the  size of Homer and  asked if the                                                               
borough had a good start on distribution line installation.                                                                     
SENATOR THOMAS answered yes.                                                                                                    
MR. JACOBSON answered yes.                                                                                                      
4:08:14 PM                                                                                                                    
JOMO   STEWART,  Energy   Project  Manager,   Fairbanks  Economic                                                               
Development Corp.,  said he  was in charge  of the  Fairbanks Gas                                                               
Distribution System  Report and  concurred with  prior testimony.                                                               
He said SB 154 would be  a useful and welcomed component to allow                                                               
the  borough to  tap into  the benefits  of natural  gas when  it                                                               
becomes available.                                                                                                              
4:09:51 PM                                                                                                                    
SENATOR THOMAS  commented on  cost concerns  and said  the intent                                                               
was to  keep the  project cost  as low as  possible. He  said the                                                               
proposed loan  interest rate  might not be  high enough  to cover                                                               
administrative costs and  conceded that 1 percent  was a starting                                                               
point.  He said  the appliance  cost  of converting  fuel oil  to                                                               
natural gas is relatively close  to projections, but wood burning                                                               
system  conversion  and  gas-line installation  was  a  different                                                               
4:10:54 PM                                                                                                                    
CHAIR OLSON said he would hold SB 154 in committee.                                                                             

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