Legislature(2009 - 2010)BUTROVICH 205

02/10/2010 03:30 PM RESOURCES


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03:37:24 PM Start
03:38:13 PM SB242
04:21:25 PM SB243
04:34:34 PM Presentation: Point Mackenzie Rail Extension
05:13:27 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
*+ SB 243 NO ROYALTY ON GEOTHERMAL RESOURCE TELECONFERENCED
Heard & Held
*+ SB 242 GEOTHERMAL RESOURCE TAX CREDITS TELECONFERENCED
Heard & Held
+ Presentation:Pt.MacKenzie Rail Extension TELECONFERENCED
+ Bills Previously Heard/Scheduled TELECONFERENCED
             SB 242-GEOTHERMAL RESOURCE TAX CREDITS                                                                         
                                                                                                                                
CO-CHAIR MCGUIRE announced SB 242 to be up for consideration.                                                                   
                                                                                                                                
3:38:13 PM                                                                                                                    
MIKE  PAWLOWSKI, aide  for Senator  McGuire, sponsor  of SB  242,                                                               
explained  that  this  measure  is   an  income  tax  credit  for                                                               
geothermal exploration  and development. He said  that geothermal                                                               
is  a  clean  renewable  source  of  power  and  can  provide  an                                                               
important base  load supply of power.  It has been used  in other                                                               
countries and states successfully.                                                                                              
                                                                                                                                
Section 1, he  said, has the geothermal resource  tax credit that                                                               
is  located within  the corporate  income tax  statutes under  AS                                                               
43.20. This  section has two tax  credits: the first, on  page 1,                                                               
lines  9-14,  subsection  (b), provides  a  resource  exploration                                                               
credit  in the  amount  of  up to  50  percent  of the  qualified                                                               
exploration expenditures for exploration  conducted on state land                                                               
and 25 percent  for those not conducted on  state land. According                                                               
to the  Department of  Revenue (DOR), the  resource owned  by the                                                               
state and not  owned by the state should actually  be adjusted to                                                               
reflect  the land  ownership  when the  bill  moves forward.  The                                                               
important limit  on that credit starts  on page 2, line  1 - that                                                               
it cannot exceed $20 million.                                                                                                   
                                                                                                                                
3:39:51 PM                                                                                                                    
MR. PAWLOWSKI  said the second credit  is on page 2,  lines 8-12,                                                               
and is  the resource development  credit, which is 10  percent of                                                               
the qualified  development expenditures. Both of  the tax credits                                                               
are limited  further by subsection  (d) that says the  tax credit                                                               
taken  in either  (b) or  (c) can  never amount  to more  than 50                                                               
percent of  a person's tax  liability. As a company  develops and                                                               
brings the  resource on line  and is accruing revenue,  these tax                                                               
credits  can offset  their tax  liability -  the key  point being                                                               
that  revenue would  be coming  into the  state at  that time.  A                                                               
carry-forward of  seven years is on  page 2, lines 10-11,  but it                                                               
should be more like 20 years.                                                                                                   
                                                                                                                                
3:41:24 PM                                                                                                                    
CO-CHAIR WIELECHOWSKI  said he thought  encouraging this  sort of                                                               
development was  a step in the  right direction. He asked  how "a                                                               
person" is  defined in  sections (a) and  (b) and  all throughout                                                               
the statute.                                                                                                                    
                                                                                                                                
MR. PAWLOWSKI  deferred that answer to  Johanna Bales, Department                                                               
of Revenue (DOR).                                                                                                               
                                                                                                                                
3:41:40 PM                                                                                                                    
SENATOR STEVENS joined the committee.                                                                                           
                                                                                                                                
3:42:03 PM                                                                                                                    
CO-CHAIR WIELECHOWSKI asked  if this tax credit  is available per                                                               
site or per company, per well or per unit.                                                                                      
                                                                                                                                
MR. PAWLOWSKI  again deferred to  the DOR, but  his understanding                                                               
was that  the tax credit  is based on actual  expenditures rather                                                               
than the project multiple times.                                                                                                
                                                                                                                                
CO-CHAIR WIELECHOWSKI asked  if the credit is  available when the                                                               
resource goes  on line or as  incurred even though it  may not be                                                               
on line for several years.                                                                                                      
                                                                                                                                
MR.  PAWLOWSKI  replied  that  the  tax  credit  accrues  as  the                                                               
expenditures are made, but without  production there is no income                                                               
to claim  the credit against. The  credits are in the  income tax                                                               
statutes,  and  that  is why  the  carry-forward  provisions  are                                                               
necessary.                                                                                                                      
                                                                                                                                
CO-CHAIR WIELECHOWSKI asked if the credit is transferable.                                                                      
                                                                                                                                
MR. PAWLOWSKI answered that the  credit in the current version of                                                               
the bill is  not transferable beyond a  successive interest only.                                                               
So, you  could sell  the credit  if you  sell the  facility along                                                               
with it. That language is on page 2, lines 16-19.                                                                               
                                                                                                                                
3:44:27 PM                                                                                                                    
CO-CHAIR  WIELECHOWSKI asked  why  the credit  is retroactive  to                                                               
June 30, 2008 if the goal is to encourage future development.                                                                   
                                                                                                                                
MR.  PAWLOWSKI  explained  that some  companies  are  working  on                                                               
geothermal  projects   in  Alaska  to  the   degree  that  actual                                                               
conducted  expenditures would  be  creditable. The  credit is  to                                                               
apply to projects that are currently under development.                                                                         
                                                                                                                                
CO-CHAIR  WIELECHOWSKI asked  if  these credits  would be  passed                                                               
through to consumers when the rates are set.                                                                                    
                                                                                                                                
MR. PAWLOWSKI  deferred that  answer to  the project  sponsors in                                                               
terms  of their  understanding of  whether or  not they  would be                                                               
rate regulated and to the  Regulatory Commission of Alaska (RCA).                                                               
He  added that  the project  sponsors would  also talk  about the                                                               
transferability issue  and whether  credits should be  rebated or                                                               
transferred similar  to oil and  gas credits. It was  not drafted                                                               
that way.                                                                                                                       
                                                                                                                                
3:46:19 PM                                                                                                                    
CO-CHAIR  MCGUIRE asked  Ms.  Bales how  "person"  is defined  in                                                               
Title 43.                                                                                                                       
                                                                                                                                
JOHANNA  BALES,  Deputy  Director, Tax  Division,  Department  of                                                               
Revenue (DOR), answered that under  the Alaska income tax title a                                                               
"person"  is defined  as an  individual,  a trust,  an estate,  a                                                               
partnership, or a corporation.                                                                                                  
                                                                                                                                
CO-CHAIR  WIELECHOWSKI  said  he  is  trying  to  understand  the                                                               
parameters  with  the  $20  million cap.  Could  this  credit  be                                                               
applied  to multiple  persons  or multiple  sites,  so an  entity                                                               
could get  multiple $20-million tax credits?  Maybe that language                                                               
needs to be tightened up.                                                                                                       
                                                                                                                                
MS.  BALES answered  that the  way the  language is  written, the                                                               
$20-million cap  is per  project. If  an individual  taxpayer had                                                               
several  different  projects,  he  could get  a  $20-million  tax                                                               
credit for each project.                                                                                                        
                                                                                                                                
CO-CHAIR WIELECHOWSKI  asked if  someone is doing  a well  at Mt.                                                               
Spurr and they do multiple wells  or wells that are several miles                                                               
apart, is "project" defined anywhere.                                                                                           
                                                                                                                                
MS.  BALES   answered  no;  existing  language   doesn't  have  a                                                               
definition  and   neither  do   existing  corporate   income  tax                                                               
statutes.                                                                                                                       
                                                                                                                                
3:48:14 PM                                                                                                                    
SENATOR  FRENCH  asked  how  expenditures   on  state  lands  and                                                               
expenditures   on    other   lands   are    treated   differently                                                               
philosophically.                                                                                                                
                                                                                                                                
MR.  PAWLOWSKI  said  he  was unclear  on  the  different  taxing                                                               
relationship between  state-owned land and non-state  owned land,                                                               
and that these provisions are part of an entire fiscal picture.                                                                 
                                                                                                                                
CO-CHAIR MCGUIRE said  the bill is to  incentivize development on                                                               
state lands.                                                                                                                    
                                                                                                                                
SENATOR FRENCH  said he didn't  know what revenue the  state gets                                                               
from  geothermal energy  when it  comes out  of the  ground other                                                               
than cheap electricity,  which he hoped the state  would get lots                                                               
of. The  state wouldn't  grab a royalty  on that  electricity. He                                                               
was  trying to  understand  how  the consumer  would  be able  to                                                               
differential between  geothermal from  the state versus  from the                                                               
federal government. Maybe it should all be 50 percent.                                                                          
                                                                                                                                
MR.  PAWLOWSKI responded  that  Ms. Chin  who  is developing  the                                                               
Naknek  geothermal project  that is  not on  state land  might be                                                               
able to  answer that question later  in the hearing. He  said the                                                               
definition   is  on   pages   2-3,   the  qualified   development                                                               
expenditures, but the project language still needs work.                                                                        
                                                                                                                                
SENATOR  STEDMAN  said  he  had  a  similar  concern  to  Senator                                                               
Wielechowski's  about retroactive  application  and thought  they                                                               
should  tighten up  "qualified exploration  expenditure" language                                                               
on page 3,  line 9, and that they should  do some background work                                                               
to find out how many geothermal businesses Alaska has.                                                                          
                                                                                                                                
CO-CHAIR MCGUIRE  replied that currently no  geothermal companies                                                               
are  operating in  Alaska although  Ormat  has the  lease on  Mt.                                                               
Spurr. When  they came to  town they started looking  at statutes                                                               
on the books  that deal with geothermal and what  kinds of things                                                               
would  make a  difference in  incentivizing geothermal  energy in                                                               
Alaska. These two  bills came out of those  discussions. She said                                                               
the next one deals with royalty.                                                                                                
                                                                                                                                
3:52:57 PM                                                                                                                    
SENATOR  WAGONER  asked  how  this would  affect  the  Chena  Hot                                                               
Springs business.                                                                                                               
                                                                                                                                
CO-CHAIR MCGUIRE  responded that the Hot  Springs doesn't operate                                                               
in a commercial environment.                                                                                                    
                                                                                                                                
SENATOR WAGONER said  the owner is developing it  to supply power                                                               
and lay  a line  over the  mountain to  the base,  and that  is a                                                               
commercial application.                                                                                                         
                                                                                                                                
CO-CHAIR MCGUIRE said if he  was creating a commercial entity, he                                                               
would  qualify for  this  credit. The  retroactivity  would be  a                                                               
policy decision.                                                                                                                
                                                                                                                                
CO-CHAIR WIELECHOWSKI  asked if a  geothermal company joins  in a                                                               
joint venture  with another  company that  has money,  could they                                                               
take the credit if no energy is produced.                                                                                       
                                                                                                                                
MS. BALES answered yes.                                                                                                         
                                                                                                                                
3:56:13 PM                                                                                                                    
CO-CHAIR MCGUIRE  said these bills  were not  put in for  any one                                                               
entity, but rather the inspiration  came from her trip to Iceland                                                               
to see  how geothermal  energy had  transformed that  nation that                                                               
now has a rate of 6 cents/kWh.                                                                                                  
                                                                                                                                
3:56:42 PM                                                                                                                    
PAUL THOMSEN,  Director, Policy  and Business  Development, Ormat                                                               
Technologies, supported SB 242.  He introduced Raum Orenstein who                                                               
is the project  developer for the Mt. Spurr  project and director                                                               
of  business  development  with Ormat  Technologies.  He  thanked                                                               
Senator McGuire  and legislative  staff for drafting  these bills                                                               
that remove  significant barriers  to geothermal  development. He                                                               
said  he would  focus on  SB 242  at this  time and  give them  a                                                               
little  bit of  background on  Ormat Technologies.  He elaborated                                                               
that Ormat is publicly traded on  the New York Stock Exchange. It                                                               
started  as  a  company  in   1965  designing  and  manufacturing                                                               
equipment.                                                                                                                      
                                                                                                                                
What  sets them  apart from  other  developers is  that they  are                                                               
vertically integrated. They design  and manufacture equipment and                                                               
delineate the  resource and operate the  geothermal power plants.                                                               
Ormat did  its first  contract installing  remote power  units in                                                               
1975 with the TransAlaska Pipeline.  In that time, he said, Ormat                                                               
has been responsible for over  1000 mgW of geothermal development                                                               
in over  71 countries  around the world.  They are  interested in                                                               
coming  back to  Alaska and  developing this  resource to  supply                                                               
energy to the  Railbelt; they are particularly  interested in Mt.                                                               
Spurr and Mt. Makushin.                                                                                                         
                                                                                                                                
He said  that Ormat was honored  in the recent AGA  grant process                                                               
when  the Division  of Geological  and Geophysical  Survey (DGGS)                                                               
sited it as  one of the most highly experienced  companies in the                                                               
world and that the proposed approach  is the best to move forward                                                               
toward potential development at Mt. Spurr.                                                                                      
                                                                                                                                
MR.  THOMSEN  said  that  they strongly  support  SB  242,  which                                                               
recognizes that geothermal exploration is  similar to oil and gas                                                               
exploration in  that they both  involve high  cost/risk drilling.                                                               
He  added  that many  Alaskan  resources  are green  fields  that                                                               
require blind drilling which increases the cost and the risk.                                                                   
                                                                                                                                
3:59:28 PM                                                                                                                    
Alaska has  introduced tax  credits for  oil and  gas exploration                                                               
and this  bill similarly  incentivizes geothermal  exploration in                                                               
the same way,  he explained. If passed,  their financial analysis                                                               
indicates that this credit, if  the carry forward is increased to                                                               
20  years  or made  refundable,  will  lower  the total  cost  of                                                               
geothermal development  by more  than 10 percent  and, therefore,                                                               
lower  the total  cost  of power  to  the ratepayer  by  5 to  10                                                               
percent.                                                                                                                        
                                                                                                                                
CO-CHAIR WIELECHOWSKI said  this is a really  exciting project. A                                                               
particularly good  thing about geothermal  is that it is  a solid                                                               
base line of energy 24/7; it doesn't  matter if the sun is out or                                                               
if the wind is blowing. He  asked if they have timelines for this                                                               
project  coming online,  how they  envision  this credit  passing                                                               
through  to the  consumer, and  if he  could talk  publicly about                                                               
what he expects those rates to be.                                                                                              
                                                                                                                                
MR.  THOMSEN answered  that typically  developing  a green  field                                                               
geothermal  project from  defining the  resource to  bringing the                                                               
power on line takes  4 - 5 years, but in  Alaska they are looking                                                               
to extend that a little bit by having it online by 2016.                                                                        
                                                                                                                                
On  the question  of impact  to the  ratepayers, their  financial                                                               
model  indicates that  this credit  reduces  Ormat's CAPEX.  With                                                               
geothermal projects  there are two  issues - the cost  to develop                                                               
the  project  and  the  price   they  can  get  for  selling  the                                                               
electricity. So  within this local  market they are looking  at a                                                               
fixed price and  as an independent power producer,  they look for                                                               
a  contract with  an investor-owned  utility that  is competitive                                                               
enough  that they  can get  the price  approved through  the RCA.                                                               
Prices  in 2009  dollars  are about  12-14  cents/kWh. That  gets                                                               
negotiated with an  off-taker of that electricity-  like GRETC or                                                               
a  utility.   Allowing them  to lower  the price  translates into                                                               
ratepayers getting  the benefit  from that through  lower utility                                                               
bills.                                                                                                                          
                                                                                                                                
CO-CHAIR WIELECHOWSKI  asked if that  price includes the  cost of                                                               
transmission lines into the main grid.                                                                                          
                                                                                                                                
MR. THOMSEN replied no.                                                                                                         
                                                                                                                                
CO-CHAIR  WIELECHOWSKI asked  how  the energy  from this  project                                                               
would get tied into the main grid.                                                                                              
                                                                                                                                
MR.  THOMSEN said  they were  looking for  solutions to  that. If                                                               
they had  to bear building  the additional transmission  to reach                                                               
this project  and the  road, that would  increase the  price they                                                               
would  need to  get for  their electricity  to make  this project                                                               
viable.                                                                                                                         
                                                                                                                                
CO-CHAIR WIELECHOWSKI asked how many mgW they would produce.                                                                    
                                                                                                                                
MR.  THOMSEN  answered  that  they  believe  the  resource  could                                                               
achieve 100 mgW, but they  have learned to develop these projects                                                               
pragmatically. So,  the initial phase  would be 50 mgW,  and then                                                               
making  sure the  heat  and  water can  sustain  a  full 100  mgW                                                               
development before making that capital expenditure.                                                                             
                                                                                                                                
CO-CHAIR WIELECHOWSKI  asked if  they plan to  add more  water to                                                               
create more steam.                                                                                                              
                                                                                                                                
MR. THOMSEN  answered no.  He explained that  Ormat has  a unique                                                               
closed   loop  system.   There  are   two  types   of  geothermal                                                               
development  today:  one is  called  "flash"  and one  is  called                                                               
"binary." The first power plant  using flash technology was built                                                               
in 1905 in Italy. This is  basically where a well is drilled, the                                                               
water comes up  out of pressure, and turns to  steam that turns a                                                               
steam turbine. That  process needs Mother Nature to  work in your                                                               
favor because that steam needs to  be recondensed into rain so it                                                               
can recharge the ground water table.                                                                                            
                                                                                                                                
The  Ormat system  is closed  loop: it  brings up  the hot  water                                                               
under  pressure in  a closed  environment and  heats a  secondary                                                               
working fluid. That  working fluid vaporizes and  when it expands                                                               
it builds pressure  and turns a turbo expander. The  hot brine is                                                               
then  100  percent  reinjected  back into  the  reservoir  to  be                                                               
reheated and reused. He said  this is what makes their geothermal                                                               
development  so unique  - that  it has  a symbiotic  relationship                                                               
with the reservoir. That reservoir  needs to be maintained and if                                                               
they start  to see a  cooling effect,  they know the  power plant                                                               
will produce less electricity and  become less economic; and they                                                               
will start losing money.                                                                                                        
                                                                                                                                
CO-CHAIR  MCGUIRE asked  him to  describe their  two projects  in                                                               
Hawaii and Reno.                                                                                                                
                                                                                                                                
MR.  THOMSEN  responded  that their  facility  in  Reno,  Nevada,                                                               
produces approximately 100  mgW of electricity; it  is inside the                                                               
city limits  and produces enough  geothermal power to  supply the                                                               
entire  residential load  of the  city of  Reno. The  project was                                                               
built over a  20-year period with incremental  projects coming on                                                               
line  utilizing one  reservoir. He  said the  prices have  varied                                                               
greatly  over that  20-year period.  The  initial power  purchase                                                               
contracts were  in the 6-8 cent  range and today they  are closer                                                               
to 10 cents.                                                                                                                    
                                                                                                                                
He emphasized that as they look  to bring the amounts per project                                                               
on  rapidly,  and  added  that  the value  in  doing  so  becomes                                                               
exponentially more important in  looking at a fixed-price 20-year                                                               
contract.  They typically  enter into  fixed price  contracts; so                                                               
the earlier  the project  gets on  the line,  the lower  the rate                                                               
they have to  negotiate, but that is what they  have to live with                                                               
for the  life of  the project.  So, these  projects that  came on                                                               
line at 6 cents in Reno in  1985 really show their value 20 years                                                               
later. They hope  the same effect happens at Mt.  Spurr. The Reno                                                               
resource is a  unique geological resource that  they have drilled                                                               
very  deep and  found  very moderate-temperature  water; so  more                                                               
water and volume has to be used to sustain the reservoir.                                                                       
                                                                                                                                
4:07:22 PM                                                                                                                    
Contrary  to that,  their 30  mgW project  on the  Big Island  of                                                               
Hawaii   is   from  a   volcanic   resource,   and  it   supplies                                                               
approximately 35 percent  of the Big Island's  energy needs. They                                                               
have implemented safety protocols  and standards for dealing with                                                               
live molten lava and are able  to produce a product there that is                                                               
very reasonably  priced. Mt.  Spurr would  be a  similar project,                                                               
however  the price  would be  more in  Alaska because  geothermal                                                               
energy  would be  offsetting  imported bunker  fuel.  On the  Big                                                               
Island of Hawaii it would be closer to $.10 to $.12.                                                                            
                                                                                                                                
SENATOR HUGGINS asked  for a "quick thumbnail sketch"  of the two                                                               
states that have federal incentives.                                                                                            
                                                                                                                                
MR. THOMSEN  replied that today  the federal government  offers a                                                               
production tax credit,  a $.02-tax rebate on the  project once it                                                               
starts  producing  energy. But  since  that  credit needs  to  be                                                               
reauthorized every  few years, it  is also unreliable. So,  it is                                                               
very hard  to count on  that credit  for their project  that will                                                               
take  five years  before it  will produce  electricity. That  tax                                                               
credit currently  exists and  today under  the Stimulus  Act they                                                               
can actually forego that production  tax credit and receive a 30-                                                               
percent investment tax credit for  projects coming on-line before                                                               
2013. So,  their concern is  not knowing what  federal incentives                                                               
will be when this project is ready to be brought online in 2016.                                                                
                                                                                                                                
He  said  Ormat  operates  projects  in  the  states  of  Nevada,                                                               
California,  Hawaii,  and  have   built  projects  in  Idaho  and                                                               
Wyoming.  Many of  those states  have also  tried to  incentivize                                                               
geothermal  development  either  through property  or  sales  tax                                                               
abatements or  other such incentives.  While they don't  like the                                                               
impact  to  local  governments  that  some  of  those  incentives                                                               
create, they  still think  that looking  at the  corporate income                                                               
tax as  a way to jump  start these projects is  "a great solution                                                               
to that."                                                                                                                       
                                                                                                                                
SENATOR HUGGINS said  this is exciting because it  is the future.                                                               
He wanted to hear about some of their international experiences.                                                                
                                                                                                                                
4:10:34 PM                                                                                                                    
MR. THOMSEN answered  that they are equally as  excited to trail-                                                               
blaze a project in Alaska and  hope what they learn in developing                                                               
this project will  lower the cost for  future geothermal projects                                                               
in  Alaska. Ormat  recently developed  a  geothermal facility  at                                                               
Lake  Naivasha  in Kenya,  Africa,  where  they weren't  able  to                                                               
receive financing because people  were concerned about developing                                                               
a project  in a third world  country. Ormat financed this  48 mgW                                                               
project  on  its  own  balance sheet;  they  then  refinanced  it                                                               
afterwards.  They  also  improved  upon the  local  community  by                                                               
teaching local people  how to operate and  conduct maintenance to                                                               
the facility and by creating a  school center for the children of                                                               
those employees.  Today it is  a model for  developing geothermal                                                               
projects in third-world countries and  has been cited in multiple                                                               
projects moving forward.                                                                                                        
                                                                                                                                
4:12:32 PM                                                                                                                    
MR.  THOMSEN,  referring   to  Co-chair  Wielechowski's  previous                                                               
question,  said  that Ormat's  original  concern  was that  their                                                               
leases for Mt. Spurr date back  to 2008 and they would lose their                                                               
original  $3.5 million  investment  by taking  placed in  service                                                               
today.  They  won't  start  getting the  tax  credit  until  this                                                               
project generates  revenue and the  majority of  that exploration                                                               
cost is yet to come; so, they  are open to modifying that date to                                                               
current.                                                                                                                        
                                                                                                                                
4:13:28 PM                                                                                                                    
CO-CHAIR MCGUIRE asked  him the value of the  incentives to their                                                               
decision to continue moving forward.                                                                                            
                                                                                                                                
MR.  THOMSEN  replied  that   these  incentives  are  "absolutely                                                               
imperative" to  moving this  project forward.  If they  can't get                                                               
the price  in line with what  the local utilities are  willing to                                                               
pay,  it's a  non-starter.  Reducing these  barriers would  allow                                                               
them to release the funds  quicker, thus allowing this project to                                                               
be actualized by 2016.                                                                                                          
                                                                                                                                
CO-CHAIR WIELECHOWSKI  said, "I love clean  energy, green energy;                                                               
I  also   like  affordable,  low-cost   energy."  He   asked  for                                                               
assurances that these tax credits  will pass through to consumers                                                               
in the  form of lower  rates. He asked  if he envisioned  the RCA                                                               
regulating his  end of the project  or if he planned  on going to                                                               
Chugach first and having  them go to the RCA -  and having no RCA                                                               
oversight over their project.                                                                                                   
                                                                                                                                
MR.  THOMSEN replied  that  they envision  the  second getting  a                                                               
contract with  a utility  and that contract  is then  approved or                                                               
not by the RCA. They want  that contract to be transparent and to                                                               
be a  good thing for Alaskans.  He said the exciting  thing about                                                               
working for  a geothermal company is  that it offers a  base load                                                               
supply  of electricity  24/7  and they  think  that their  price,                                                               
while it  might seem  a little  high compared  to natural  gas or                                                               
coal in the  Lower 48, offers something that none  of those can -                                                               
a fixed price over  20 years. That kind of a  price hedge over 20                                                               
years  will pay  dividends in  the future  for the  ratepayers of                                                               
Alaska  - especially  talking about  current debates  on cap  and                                                               
trade, renewable portfolio standards, and so forth.                                                                             
                                                                                                                                
CO-CHAIR WIELECHOWSKI said  the concern he has seen  is that they                                                               
have a  similar process in  place for  natural gas in  Cook Inlet                                                               
and they have no idea how  much it costs for producers to extract                                                               
it   and  sell   it  to   Chugach  Electric,   ML&P  or   another                                                               
organization. It's  something the RCA  complains about a  lot and                                                               
he wonders what direction they are headed in.                                                                                   
                                                                                                                                
CO-CHAIR  MCGUIRE thanked  them  for their  presentation and  for                                                               
believing in Alaska.                                                                                                            
                                                                                                                                
4:17:14 PM                                                                                                                    
SUZANNE  LAMSON, Projects  Manager, Naknek  Electric Association,                                                               
said she was speaking for  Donna Vukich, its general manager. She                                                               
thanked  the committee  for  all of  its  work on  energy-related                                                               
issues,  especially  regarding  geothermal.  She  said  they  are                                                               
working  on a  green field  development in  Southwest Alaska  and                                                               
they  supported SB  242  and  SB 243.  Removing  the barriers  to                                                               
geothermal  development   through  this  kind  of   incentive  is                                                               
"imperative" to develop geothermal energy in Alaska.                                                                            
                                                                                                                                
4:18:55 PM                                                                                                                    
MARILYN  LELAND, Executive  Director,  Alaska Power  Association,                                                               
strongly supported  SB 242 and  SB 243.  She said Alaska  has the                                                               
misfortune of having some of  the most expensive energy costs and                                                               
the biggest  problem supplying  energy to  its citizens.  But, at                                                               
the  same  time it  also  has  the  fortune  of having  the  best                                                               
resources  in   the  country  for  generating   electricity  with                                                               
hydropower, wind  and geothermal.  Currently, one  member, Naknek                                                               
Electric Association,  is drilling for geothermal;  several other                                                               
members  including  Inside  Passage  Electric  Coop,  Nome  Joint                                                               
Utilities,  and  TDX  Power are  considering  the  possibilities.                                                               
However,  the front-end  costs are  enormous and  the systems  of                                                               
pursuing  of them  are generally  small;  and without  incentives                                                               
some  geothermal  projects  just   won't  get  done  because  the                                                               
companies  won't be  able to  take  the risk  involved with  that                                                               
cost, which would be a huge loss for Alaska.                                                                                    
                                                                                                                                
MS. LELAND emphasized that geothermal  is not a theoretical idea;                                                               
it  is a  real  possibility and  the  time is  here  to carry  it                                                               
forward.                                                                                                                        
                                                                                                                                
CO-CHAIR MCGUIRE  thanked everyone for their  testimony and work;                                                               
and closed public testimony setting SB 242 aside.                                                                               
                                                                                                                                

Document Name Date/Time Subjects
Briefing on Southcentral Rail Extension.ppt SRES 2/10/2010 3:30:00 PM
Briefing on Rail Extension Econ. Benefits to Central AK.pptx SRES 2/10/2010 3:30:00 PM