Legislature(1995 - 1996)

02/28/1995 09:15 AM House ECD

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
        HOUSE SPECIAL COMMITTEE ON ECONOMIC DEVELOPMENT                        
                       February 28, 1995                                       
                           9:15 a.m.                                           
                                                                               
                                                                               
 MEMBERS PRESENT                                                               
                                                                               
 Representative Jerry Sanders, Chairman                                        
 Representative Norman Rokeberg                                                
 Representative Vic Kohring                                                    
 Representative Ed Willis                                                      
 Representative Eileen MacLean                                                 
                                                                               
 MEMBERS ABSENT                                                                
                                                                               
 Representative Pete Kelly                                                     
 Representative Carl E. Moses, Vice Chairman                                   
                                                                               
 COMMITTEE CALENDAR                                                            
                                                                               
 Overview of the Coal Industry                                                 
                                                                               
 WITNESS REGISTER                                                              
                                                                               
 JOHN SHIVELY, Commissioner                                                    
 Department of Natural Resources                                               
 400 Willoughby Avenue                                                         
 Juneau, Alaska   99801-1796                                                   
 Telephone:  465-2400                                                          
 POSITION STATEMENT:  Commented on the coal industry in Alaska                 
                                                                               
 GABRIELLE LAROCHE, Section Chief                                              
 Resource Development                                                          
 Department of Commerce & Economic Development                                 
 P.O. Box 110804                                                               
 Juneau, Alaska   99801-0804                                                   
 Telephone:  465-5467                                                          
 POSITION STATEMENT:  Gave an overview of the coal industry and                
                      the department's involvement                             
                                                                               
 ROBERT B. STILES, President                                                   
 Alaska Coal Association                                                       
 DRven Corporation                                                             
 711 H Street, Suite 600                                                       
 Anchorage, Alaska 99501                                                       
 Telephone:  276-6868                                                          
 POSITION STATEMENT:  Gave an overview on coal reserves in                     
                      Alaska                                                   
                                                                               
 CHARLIE GREEN, Assistant to the Vice President for Marketing                  
 Usibelli Coal Mine                                                            
 P.O. Box 71805                                                                
 Fairbanks, Alaska   99707                                                     
 Telephone:  452-2625                                                          
 POSITION STATEMENT:  Gave an overview of the Healy Clean Coal                 
                      Project                                                  
                                                                               
 WARRICK WILSON                                                                
 Alaska Coal Water Fuel, Inc.                                                  
 12212 Old Glenn Highway, Suite 8                                              
 Eagle River, Alaska   99577                                                   
 Telephone:  696-4775                                                          
 POSITION STATEMENT:  Gave an overview on the Alaskan Low-Rank                 
                      Coal-Water Fuel Project                                  
                                                                               
 KATE LAMAL, Environmental Offices                                             
 Golden Valley Electric Association                                            
 Box 71249                                                                     
 Fairbanks, Alaska   99707-1249                                                
 Telephone:  452-1151  Fax:  451-5638                                          
 POSITION STATEMENT:  Commented on the user group issues involved              
                      in the industry                                          
                                                                               
 TERESA IMM, Project Manager                                                   
 Arctic Slope Regional Association                                             
 6700 Arctic Spur Road                                                         
 Anchorage, Alaska   99518-1550                                                
 Telephone:  349-5148  Fax:  349-4213                                          
 POSITION STATEMENT:  Commented on Western Arctic Coal                         
                                                                               
 JOHN SIMMS, Vice President, Marketing                                         
 Usibelli Coal Marketing                                                       
 122 lst Avenue, Suite 302                                                     
 Fairbanks, Alaska   99701                                                     
 Telephone:  452-2625  Fax:  451-6543                                          
 POSITION STATEMENT:  Commented on constraints with regard to                  
                      domestic U.S. use of Alaskan coal                        
                                                                               
 CHARLIE BODDY                                                                 
 Usibelli Coal Marketing                                                       
 122 lst Avenue, Suite 302                                                     
 Fairbanks, Alaska   99701                                                     
 Telephone:  452-2625  Fax:  451-6543                                          
 POSITION STATEMENT:  Commented on the Alaska coal policy                      
                                                                               
                                                                               
 ACTION NARRATIVE                                                              
                                                                               
 TAPE 95-2, SIDE A                                                             
 Number 000                                                                    
                                                                               
 CHAIRMAN JERRY SANDERS called the House Special Committee on                  
 Economic Development to order at 9:15 a.m.  Representatives                   
 Sanders, Kohring, and Rokeberg were present.  Representatives                 
 Moses, Kelly, MacLean and Willis were attending other committee               
 meetings and would be available as soon as possible.                          
                                                                               
 CHAIRMAN SANDERS gave a brief overview of the coal industry in                
 Alaska.  He commented that Alaska contains some 300 years of coal             
 reserves based on present U.S. consumption rates.  This is more               
 than the rest of the U.S. combined.  He said our reserve has                  
 substantial added value due to its low sulfur content and the                 
 growing global trend toward clean air standards.  He also stated              
 that getting this vast resource to market in a safe,                          
 environmentally sound, productive, and profitable manner involves             
 many complicated factors:  Currency exchange rates, cultural                  
 practices of our overseas customers, lack of the necessary                    
 transportation infrastructure, etc.                                           
                                                                               
 CHAIRMAN SANDERS introduced Commissioner John Shively of Natural              
 Resources as the first witness.                                               
                                                                               
 Number 040                                                                    
                                                                               
 JOHN SHIVELY, Commissioner, Department of Natural Resources,                  
 stated that coal has been Alaska's undeveloped resource largely               
 constrained by price, location and government regulations.  He                
 stated the Usibelli coal mine is our main mine and that the state             
 takes in approximately $1.4 million a year in royalties.                      
                                                                               
 COMMISSIONER SHIVELY said the next project would be the Jarvis                
 Creek lease sale which is in the Tok Delta area.  He stated that              
 through the public comment period on the best interest finding,               
 the project is in the process of being finalized and hopes to go              
 to a lease sale sometime this spring.  The main purpose of this               
 coal lease will be to supply a project in Tok which will replace              
 a diesel plant with a plant that will burn a combination of coal              
 and wood, and waste.                                                          
                                                                               
 CHAIRMAN SANDERS asked if the Administration has any plans or                 
 clues as to what changes might be expected within the next four               
 years.                                                                        
                                                                               
 Number 090                                                                    
                                                                               
 COMMISSIONER SHIVELY replied that we need to get some common                  
 sense out of what government does, and to confine the time frames             
 so that they are more reasonable.  It takes so long for the                   
 government to determine what responsible development is that very             
 few businesses can afford to get involved.                                    
                                                                               
 Number 108                                                                    
                                                                               
 REPRESENTATIVE NORMAN ROKEBERG asked Commissioner Shively to                  
 comment on the Administration's action in reopening the Clean                 
 Water Act and any ideas in that regard on why that was reopened.              
                                                                               
 COMMISSIONER SHIVELY responded that he should talk to                         
 Commissioner Burden on that subject.                                          
                                                                               
 REPRESENTATIVE VIC KOHRING asked if Commissioner Shively was                  
 aware of anything that is planned for potential coal methane                  
 activity in the Mat-Su Valley.                                                
                                                                               
 COMMISSIONER SHIVELY responded that activity in the Mat-Su area               
 is being watched with interest.  He explained that there is a                 
 drilling technology being used and that's the coil tubing                     
 technology, which would make drilling coal bed methane much                   
 cheaper.  That provides us a real opportunity to provide                      
 alternative energy in the rural areas.  He stated there is a real             
 problem in the rural areas with fuel tanks; getting them into                 
 compliance with state and federal laws.                                       
                                                                               
 REPRESENTATIVE ROKEBERG said in relating to the rural cost                    
 equalization situation where there is an endowment that has been              
 established, the sinking fund aspect of that endowment appears to             
 be a four to five year life.  At that time there is going to be               
 other difficult decisions made by the state of Alaska on a policy             
 basis to what to do about that.  He stated that we have a very                
 short time frame to look at alternate technologies and other                  
 methods of providing electrical power in the rural areas, and                 
 asked if there were any ideas or if he was interested in pursuing             
 any pilot projects along this line.                                           
                                                                               
 Number 164                                                                    
                                                                               
 COMMISSIONER SHIVELY responded that he has asked his people to                
 look at that.  Right now there is a dispute in who is supposed to             
 oversee some of these projects.  The Alaska Oil and Gas                       
 Commission said they have some jurisdiction.  He explained that               
 their jurisdiction makes drilling for this kind of gas relatively             
 expensive because of their bonding requirements.  Commissioner                
 Shively said he is very interested in looking at both                         
 technologies and what could happen if the Tok plant is built and              
 how that might be used in the rural areas.  He is also interested             
 in where we could use the coal methane method.                                
                                                                               
 Number 177                                                                    
                                                                               
 REPRESENTATIVE KOHRING commented on lowering the bonding                      
 requirements.                                                                 
                                                                               
 COMMISSIONER SHIVELY responded that in his opinion the Alaska oil             
 and gas bonding requirement of a million dollars is wrong.  He                
 explained that this is the kind of bonding you would have for oil             
 drilling.                                                                     
                                                                               
 REPRESENTATIVE KOHRING mentioned that it was recently dropped                 
 from $5 million to $1 million and he was considering introducing              
 legislation to further reduce the bonding requirement.                        
                                                                               
 COMMISSIONER SHIVELY responded it could be a different bonding                
 requirement.                                                                  
                                                                               
 CHAIRMAN SANDERS congratulated Commissioner Shively and said he               
 looked forward to working with him the next four years.                       
                                                                               
 COMMISSIONER SHIVELY thanked Chairman Sanders and said he is also             
 looking forward to working with him.  He said we are faced with               
 some great opportunities, and working together we should make                 
 some of these things into being.                                              
                                                                               
 CHAIRMAN SANDERS noted for the record that Representative Willis              
 arrived at 9:25 a.m.                                                          
                                                                               
 Number 215                                                                    
                                                                               
 REPRESENTATIVE ROKEBERG asked to be excused to attend another                 
 important committee meeting.                                                  
                                                                               
 Number 222                                                                    
                                                                               
 GABRIELLE LAROCHE, Section Chief, Resource Development, Division              
 of Economic Development, testified that Alaska's coal resource is             
 virtually untapped with the remaining reserves estimated to be 5              
 to 5.5 trillion tons.  This is an energy equivalent in BTUs, of               
 more than 1,000 Prudhoe Bays, much of this being high-rank                    
 bituminous coal.  This coal is valuable due to its low sulfur                 
 content.  However, high production and transportation costs,                  
 along with price competition from other countries, is inhibiting              
 further development of Alaska's coal.                                         
                                                                               
 MS. LAROCHE further testified that the Usibelli mine at Healy is              
 the only large scale coal mine operating in Alaska with export                
 going to South Korea.  Another coal investor in Alaska, Idemitsu              
 Alaska, has temporarily canceled plans to mine the Premier Coal               
 Seam in the Wishbone Hill area.  This was due to continued low                
 prices in the Pacific Rim steam coal market.                                  
                                                                               
 MS. LAROCHE stated the largest reasonably markets for Alaska's                
 steam coal are China, India, Japan and Korea which currently                  
 consume l.6 billion tons per year with future forecasts of 2.1                
 billion by the year 2000.  This projected increase offers                     
 opportunities for Alaska to expand its exports.  Other major                  
 producers in competition for this expanding market are Australia,             
 Indonesia, China, and the former Soviet Union.  Although market               
 forecasts are positive, Alaska's current penetration remains                  
 small.  If the market price were to make the projected gains,                 
 projects such as Wishbone Hill and western Arctic coal may see a              
 window of opportunity to develop and gain significant market                  
 share.  The development of Arctic coal reserves could provide a               
 competitive alternative for village and individual power in                   
 comparison to diesel fuel.                                                    
                                                                               
 MS. LAROCHE said the January l995 Report of the Alaska Minerals              
 Commission finds the exclusion of coal mining operations from the            
 state's reclamation bonding pool to be an issue for the coal                  
 industry.  The department mineral specialist provides assistance              
 to many coal developments in the state such as the Healy clean                
 coal project, Northwest Arctic Coal, Wishbone Hill, the Beluga                
 projects and the low rank coal water fuel demonstration.                      
                                                                               
 MS. LAROCHE talked briefly about the Alaska Industrial                        
 Development and Export Authority's (AIDEA) involvement in                     
 development of many coal projects throughout the state.  She also             
 discussed the department's support of the Arctic Slope Regional               
 Corporation in its efforts to demonstrate the viability of the                
 development and export of northwest Arctic coal deposits.                     
                                                                               
 MS. LAROCHE stated the department (OIT & AIDEA) continues to work             
 with Usibelli, the Alaska Railroad, and KEPCO to assure the long              
 term viability of the Usibelli export contract.                               
                                                                               
 Number 308                                                                    
                                                                               
 REPRESENTATIVE KOHRING commented she had mentioned that the                   
 Wishbone Hill project is temporarily on hold.  Is there hope that             
 it might come back on line.                                                   
                                                                               
 MS. LAROCHE replied there is always hope.  There are significant              
 reserves and it's in a good location.                                         
                                                                               
 REPRESENTATIVE KOHRING asked if the Healy clean coal project is               
 under construction.                                                           
                                                                               
 MS. LAROCHE responded that she wasn't sure, but will check on it.             
                                                                               
 REPRESENTATIVE KOHRING said he was also interested in the funding             
 aspect as well.                                                               
                                                                               
 MS. LAROCHE stated she will get back to Representative Kohring's              
 office on funding.                                                            
                                                                               
 Number 335                                                                    
                                                                               
 BOB STILES, President of Alaska Coal Association, and President               
 of Drven Corporation, which is involved with the coal                         
 developments in the Beluga field.  Mr. Stiles noted a few people              
 from the private sector will speak and cover some details.                    
 Charlie Green will cover the Healy clean coal project, Warrick                
 Wilson will speak on the low rank water fuel developments, Kate               
 Lamal will speak on the user group issues involved in the                     
 industry, Teresa Imm on western Arctic coal, John Simms on                    
 constraints with regard to domestic U.S. use of Alaskan coal, and             
 Charlie Boddy will cover cleanup in terms of the Alaska coal                  
 policy that was passed by the legislature a few years ago.                    
                                                                               
 MR. STILES gave an overview on some of the coal reserves in                   
 Alaska:  North of the Arctic Slope, Interior Yukon, Susitna                   
 Basin, NANA Basin, the Cook Inlet area which includes the                     
 Wishbone area, the Beluga reserves and the Jarvis Creek area.                 
                                                                               
 MR. STILES noted the primary market in the Cook Inlet would be to             
 export to Japan, Taiwan, Korea, the coast of China and an outside             
 possibility, the coast of Russia, Mexico, western portion of the              
 Pacific Northwest and possibly Hawaii.  Mr. Stiles said the                   
 Interior reserves are competitive in international markets.  The              
 reserves that are in pockets in the Interior would likely be                  
 development for local use.  The western Arctic coal, that has a               
 high heating value, has potential in both international in the                
 long term and local market for the near term.                                 
                                                                               
 MR. STILES explained what really controls our business in                     
 international markets, we have faced a five year slide in                     
 international prices.  He believes strongly this year the worm                
 has turned.  All indications are, the current negotiations on                 
 what's called a bench mark price we will see an uptick anywhere               
 from $2 to $6 per ton on the bench mark coal which is a                       
 bituminous coal.  A $6.00 uptick on bituminous coal translates to             
 a $4.00 uptick on the subtuminous coal.  He noted while we are                
 always enthusiastic about seeing an uptick in price, we hope it               
 is not too big.  The reason is, if it is too large there will be              
 other production developed in response to that uptick in price                
 which makes the competitive playing field more difficult than it              
 is now.                                                                       
                                                                               
 MR. STILES explained the reason Alaska coal has been under                    
 developed in the last five years is not the price but the Mental              
 Health Land litigation.  He stated that had a very chilling                   
 effect in the market place.  If you cannot market, and have no                
 credibility in the market, you cannot sell; if you cannot sell,               
 you cannot develop new mines.                                                 
                                                                               
 MR. STILES stated the important thing about the contradictory                 
 factor that they have seen in the market place during the time of             
 this price slide is they have seen it continuing to increase in               
 demand, so they do not operate like the classic economic model.               
 Mr. Stiles explained that the most important factor on the price              
 of Alaska coal is the global currency exchange rates.                         
                                                                               
 Number 474                                                                    
                                                                               
 REPRESENTATIVE ED WILLIS asked what the status is with slurry                 
 transportation, where you pulverized the coal and mix with water.             
                                                                               
 MR. STILES responded that slurring coal does not offer a lot of               
 potential for Alaska, and it's to a large extent, market                      
 constrained.  Customers buy their coal and they multi-source                  
 their fuel supply at the plant level.                                         
                                                                               
 Number 490                                                                    
                                                                               
 REPRESENTATIVE KOHRING asked if the reserves were economically                
 feasible.                                                                     
                                                                               
 MR. STILES responded that you have to be close to existing                    
 transportation or you have to be close to the coast to break into             
 the international markets.  If you look at some of the fields in              
 the Yukon area, they will likely not see any export.                          
                                                                               
 REPRESENTATIVE WILLIS asked if Wyoming has a large export market              
 to the Pacific Rim countries.                                                 
                                                                               
 MR. STILES replied no, Wyoming probably exports less coal to the              
 Pacific Rim than Usibelli does to Korea.  The predominant United              
 States steam coals that go to the Pacific Rim come out of Utah.               
                                                                               
 CHAIRMAN SANDERS asked that if and when the Beluga market                     
 develops, where will it be brought to tide water.                             
                                                                               
 Number 496                                                                    
                                                                               
 MR. STILES stated there are three potential sites.  One at                    
 Granite Point, North Forland which is the old BLM dock facility,              
 and one at Ladd.  The preferred choice would probably be North                
 Forland.                                                                      
                                                                               
 Number 560                                                                    
                                                                               
 CHARLIE GREEN, Assistant to the Vice President for Marketing for              
 Usibelli coal mine, gave an overview of the Healy clean coal                  
 project.  He explained that this was started six years ago.                   
 Alaska Industrial Development and Export Authority, Usibelli coal             
 mine and Golden Valley made an application to the United States               
 Department of Energy to propose this project.  Congress has been              
 interested in making grant moneys available to accelerate                     
 commercialization of coal burning technologies.  It's been a long             
 process since the project was awarded by the Department of                    
 Energy, but all of that was resolved this past November.                      
                                                                               
 TAPE 95-2, SIDE B                                                             
 Number 000                                                                    
                                                                               
 MR. GREEN said on February 1, l995, H.C. Price company which was              
 the low bidder received the final notice to proceed with                      
 construction.  He explained that to bridge the $25 million gap,               
 there was a number of contributions by the Golden Valley Electric             
 Association and the Usibelli coal mine, and the most significant              
 contribution in that gap is expected to come from the Department              
 of Energy.                                                                    
                                                                               
 MR. GREEN noted that the scheduled foundation work will start in              
 April or May.  The construction work will take place in l995                  
 through l997.  In l998, because of the matching funds from the                
 Department of Energy, the project will undergo a one year                     
 demonstration period on the new technology.  In l999, it would                
 become full commercial production operated by Golden Valley                   
 Electric Association.                                                         
                                                                               
 MR. GREEN stated the project has many benefits to it.  He said                
 Golden Valley has a needed new power facility.  They are looking              
 at the turn of the century of having a lot of their generating                
 capacity, including their oil fired turbines at North Pole, as                
 being the end of their useful life.  He said they had to make a               
 decision as to what their next generating facility was going to               
 be and this project fit in nicely.                                            
                                                                               
 MR. GREEN said of the new 50 mega watts of power that will come               
 out of that facility there will probably be 35 mega watts that                
 will be utilized by the Fort Knox gold mine which will start                  
 construction this March in Fairbanks.                                         
                                                                               
 MR. GREEN explained that this is a clean coal technology project.             
 He said a number of interesting aspects to the combustion                     
 technology will be used.  There are three things that power plant             
 operators and environmental engineers are interested in and what              
 comes out of a power plant, rocks, knox, and socks.  Mr. Green                
 explained the rocks are the ash that you want to keep from coming             
 out the flue.  Knox is nitrogen oxides and socks is sulfur                    
 dioxide.  This technology has a combuster that you bolt on to the             
 side of a boiler that controls the chemistry in the initial                   
 combustion stage, so you do not create nitrogen oxides.  It will              
 include lime stone cleanup technology in the boiler and capturing             
 sulfur dioxide as calcium sulfate in the fuel gas stream.                     
                                                                               
 MR. GREEN also explained the cleaning of ash, which is a concern              
 of boiler operators everywhere.  Coal ash abrades the inside of               
 the boiler, corrodes tubes; it builds up and interferes with the              
 heat transfer.  Mr. Green said this is a slagging combuster and               
 it will take out the ash before it ever goes into the boiler as               
 molten slack.  He said that about 90 percent of the ash will be               
 removed before the combustion gas gets into the boiler.                       
                                                                               
 CHAIRMAN SANDERS noted for the record that Representative MacLean             
 arrived at l0:05 a.m.                                                         
                                                                               
 REPRESENTATIVE KOHRING asked if there was a shortfall in the                  
 project.                                                                      
                                                                               
 MR. GREEN responded that it is still going through the process                
 where the Department of Energy will forward funds to the project.             
 If that comes through to the full extent, the $25 million gap has             
 been bridged.  If that does not happen, Alaska Industrial                     
 Development and Export Authority, within its organization, has                
 enough contingency to make up that gap.  If there is any question             
 on this matter, he will contact Riley Snell and have him get back             
 to the committee.                                                             
                                                                               
 REPRESENTATIVE EILEEN MACLEAN asked what is the amount of the                 
 gap.                                                                          
                                                                               
 MR. GREEN responded that it was $25 million.  He noted that $12               
 million has been made up by Golden Valley Electric, Usibelli, and             
 equipment manufacturers.                                                      
                                                                               
 CHAIRMAN SANDERS asked if the rise in the global market price                 
 will have any affect on the profitability of this project, or is              
 this a domestic situation.                                                    
                                                                               
 MR. GREEN replied that it is completely domestic.                             
                                                                               
 WARRICK WILSON with the Alaska Coal Water Fuels, Inc., and the                
 Energy and Environmental Research Center, stated they developed a             
 technology at the Energy and Environmental Research Center.  He               
 said they were one of five Department of Energy technology                    
 centers until they were de-federalized under the Reagan                       
 Administration.  Mr. Wilson stated a part of their mission was to             
 look at ways to develop and utilize low rank coal nationwide.                 
 The technology that they think has the most potential is to                   
 beneficiate the coal by causing a permanent moisture reduction by             
 temperature and pressure.                                                     
                                                                               
 MR. WILSON explained the funding sources and potential markets                
 for a low rank coal water fuel.  He discussed the viability of                
 coal water fuel as substitute for diesel and heavy oil fuels.                 
                                                                               
 REPRESENTATIVE WILLIS stated that Mr. Wilson mentioned coal water             
 fuel being a possibility for diesel generation, and asked would               
 gas turbines be a possibility.                                                
                                                                               
 MR. WILSON responded that coal water fuel will work for gas                   
 turbines.  He explained that the most successful test there is to             
 date in an advanced engine, is the Energy and Environmental                   
 Research Center produced 20,000 gallons of low rank coal water                
 fuel that was used in General Motors' Allison turbine simulator.              
                                                                               
 REPRESENTATIVE MACLEAN mentioned that the Alaska Science &                    
 Technology Foundation awarded $l80,000 for the first phase.  She              
 would like to know when the next phase is due.                                
                                                                               
 MR. WILSON replied that phase one is being completed.  Part of                
 the contingency for the award of the remaining funds is the                   
 successful completion of phase one, and to find and develop a                 
 binding agreement with the end user.  The other was to find a                 
 site which will be the University of Alaska, Fairbanks.  The key              
 for the Board of Directors of Alaska Science & Technology                     
 Foundation's final approval will be the business plan.                        
                                                                               
 REPRESENTATIVE MACLEAN asked how many phases will it take to get              
 to the $3.9 million.                                                          
                                                                               
 MR. WILSON said hopefully, the proposal will be completed and                 
 into Alaska Science & Technology Foundation by the April 13                   
 meeting.  He said that during this time they will be asking for               
 the balance of the funding.                                                   
                                                                               
 CHAIRMAN SANDERS asked how practical is this for some of the                  
 smaller villages that are located where the coal is as a fuel                 
 source.                                                                       
                                                                               
 MR. WILSON responded that in competing in the rural market, there             
 would be somewhere between one-half million and one million tons              
 a year.  That is larger than you would use in the whole Interior              
 and everywhere else.                                                          
                                                                               
 KATE LAMAL, Environmental Officer, Golden Valley Electric                     
 Association, also representing the users of coal, noted there is              
 a 25 mega watt existing generation plant near the Healy mine                  
 right at Usibelli.  She stated there are seven power plants that              
 use coal for generation.  She explained that the plants are                   
 having to watch the development of the new air quality                        
 regulations very closely to make sure that they are able to                   
 operate within operating compliance.  She noted there exists                  
 about 100 air quality permits and with the new regulations out,               
 that will probably go up to 300 permits.  There is only seven                 
 coal fired permits in the state, but that represents about 75,000             
 people.                                                                       
                                                                               
 REPRESENTATIVE MACLEAN asked if the state goes over and beyond                
 the Clean Air Act of l990 within the state.                                   
                                                                               
 MS. LAMAL explained that the regulations were signed in December              
 and they are now at the Environmental Protection Agency for                   
 approval.  There was a public comment period open for                         
 simultaneous review.  There are certain aspects of the state                  
 regulations that appear to be more stringent than the federal                 
 regulations at this time.                                                     
                                                                               
 MS. LAMAL stated the other issue that is being watched is the                 
 coal ash.  The power plants produce tons and tons of ash on a                 
 daily basis.  The ash is classified under the federal regulations             
 as being an inert substance.                                                  
                                                                               
 TERESA IMM, Project Manager, Arctic Slope Regional Corporation,               
 stated they are strictly in the feasible phase of developing coal             
 lands owned by the Arctic Slope Regional Corporation.  The  mine              
 site that she identified for development is approximately ten                 
 miles off the Chukchi Sea.  The area is called Deadfall Syncline.             
 She explained that it's a bituminous coal, it's a low moisture,               
 low ash, low sulfur coal with an energy range of an excess of                 
 3,000 BTUs per pound.  She said they are looking at the                       
 feasibility of developing an underground coal mine.                           
                                                                               
 MS. IMM stated they are also looking at the technology of                     
 transporting the coal for export to the Pacific Rim.  She noted               
 they have determined that they can underground mine the coal                  
 economically, and it would be cost competitive with underground               
 mines in the Lower 48.                                                        
                                                                               
 MS. IMM said they are in the process of trying to finalize the                
 transportation.  They have two alternatives.  One is to go south              
 to the Red Dog system and tie into the Red Dog port.  The second              
 alternative that is being evaluated, is developing a port                     
 offshore of the mine site, in which they would try to extend the              
 shipping season using ice breaking vessels.                                   
                                                                               
 CHAIRMAN SANDERS asked if they are cost competitive, does that                
 mean at the surface, not including transportation.                            
                                                                               
 MS. IMM replied that it does not include transportation, the mine             
 costs are competitive with the Lower 48 at the surface.                       
                                                                               
 CHAIRMAN SANDERS asked if ice breaking vessels are currently                  
 operating that are capable of handling coal or does it have to be             
 developed.                                                                    
                                                                               
 MS. IMM explained that it is an evolving technology, but the                  
 technology is there.  She noted that the Russians and Canadians               
 move bulk material through ice regularly.                                     
                                                                               
 CHAIRMAN SANDERS said it was mentioned earlier that the price in              
 the global market may go up $2 to $6 per ton.  He asked that the              
 coal being of better quality, it is possible that it will go up               
 even more.                                                                    
                                                                               
 MS. IMM responded that the coal has been classified by some of                
 the Japanese as premium coal.  They are looking at it as a                    
 blending coal.                                                                
                                                                               
 CHAIRMAN SANDERS introduced Governor Sheffield, with the Arctic               
 Slope consulting group.  He apologized for not introducing him                
 earlier.  Chairman Sanders thanked him for coming.                            
                                                                               
 REPRESENTATIVE MACLEAN noted for the record that the other                    
 members should be present.                                                    
                                                                               
 CHAIRMAN SANDERS explained that members have been present at one              
 time or another.  He noted they have other committee meetings to              
 attend and that some of them have bills up.                                   
                                                                               
 REPRESENTATIVE MACLEAN stated that a memo to the members should               
 be written to that effect.                                                    
                                                                               
 TAPE 95-3, SIDE A                                                             
 Number 000                                                                    
                                                                               
 JOHN SIMMS, Vice President, Marketing for the Usibelli Coal Mine,             
 informed the committee of two federal issues.  The first issue he             
 discuss was the Jones Act, which requires that the transport of               
 coal between states be carried out on American-made ships with                
 American crews.  Mr. Simms discussed the negative impact this had             
 on the price of Alaska coal.                                                  
                                                                               
 MR. SIMMS discussed the second issue which was a proposed treaty              
 by International Maritime Organization that proposes to                       
 reclassify coal as a hazardous and noxious material.  This would              
 require producers of coal to contribute to a fund that would be               
 used to cover compensation claims arising from environmental                  
 catastrophe.  This would raise the cost of coal $3 to $4 each                 
 time it is handled either at the loading or unloading ends of                 
 transportation.  Mr. Simms testified that this would have a                   
 devastating effect on the production of Alaska Coal.                          
                                                                               
 REPRESENTATIVE MACLEAN asked for clarification of the two issues              
 that he believed the state could take action on.  A resolution                
 seeking exemption from the Jones Act, and a resolution opposing               
 the current language of the proposed International Maritime                   
 Organization.                                                                 
                                                                               
 MR. SIMMS responded that it would be very appropriate and he                  
 would like to work with her on drafting a resolution.                         
                                                                               
 CHAIRMAN SANDERS asked in the question of Hawaii, is it possible              
 to get an exemption to the Jones Act from port to port.  On the               
 West Coast, without the Jones Act, would it be possible to                    
 compete with Wyoming and Utah.                                                
                                                                               
 MR. SIMMS believes that with an exemption to the Jones Act, there             
 is no reason why Alaska could not become the chief supplier of                
 West Coast and Hawaii coal.                                                   
                                                                               
 CHARLIE BODDY, Usibelli coal mine, gave a brief overview on the               
 tremendous advances we have made within the industry and only                 
 have scratched the infancy by having only one operational mine.               
 Mr. Boddy stated that mining is important to the state because it             
 provides long term stable jobs for the people of Alaska.                      
                                                                               
 CHAIRMAN SANDERS thanked everyone for coming and assured the body             
 that the Economic Development Committee is interested in the coal             
 industry, both as a committee and individually.  He stated that               
 the committee is looking forward to working with them the next                
 two years.                                                                    
                                                                               
 ADJOURNMENT                                                                   
                                                                               
 There being no further business to come before the committee,                 
 Chairman Sanders adjourned the meeting at 11:06 a.m.                          
                                                                               
                                                                               

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