Legislature(2013 - 2014)BARNES 124

01/27/2014 08:00 AM House ENERGY


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08:02:40 AM Start
08:03:41 AM Presentation(s): Institute of the North
09:20:46 AM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Presentations by Nils Andreassen, Executive TELECONFERENCED
Director, Institute of the North:
- 2013 Arctic Energy Summit, Akureyri, Iceland
- 2013 Arctic Summit, Seward, Alaska
                    ALASKA STATE LEGISLATURE                                                                                  
               HOUSE SPECIAL COMMITTEE ON ENERGY                                                                              
                        January 27, 2014                                                                                        
                           8:02 a.m.                                                                                            
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Doug Isaacson, Co-Chair                                                                                          
Representative Neal Foster                                                                                                      
Representative Pete Higgins                                                                                                     
Representative Shelley Hughes                                                                                                   
Representative Benjamin Nageak                                                                                                  
Representative Andy Josephson                                                                                                   
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Representative Charisse Millett, Co-Chair                                                                                       
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
PRESENTATION(S):  INSTITUTE OF THE NORTH                                                                                        
                                                                                                                                
     - HEARD                                                                                                                    
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
No previous action to record                                                                                                    
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
NILS ANDREASSEN, Executive Director                                                                                             
Institute of the North                                                                                                          
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Presented a review of "2013 Energy                                                                       
Projects" sponsored by Institute of the North.                                                                                  
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
8:02:40 AM                                                                                                                    
                                                                                                                                
CO-CHAIR  DOUG ISAACSON  called  the House  Special Committee  on                                                             
Energy meeting  to order  at 8:02  a.m.   Representatives Hughes,                                                               
Nageak,  Josephson, Higgins,  and  Isaacson were  present at  the                                                               
call to order.  Representative  Foster arrived as the meeting was                                                               
in progress.                                                                                                                    
                                                                                                                                
^PRESENTATION(S):  INSTITUTE OF THE NORTH                                                                                       
            PRESENTATION(S):  INSTITUTE OF THE NORTH                                                                        
                                                                                                                              
8:03:41 AM                                                                                                                    
                                                                                                                                
CO-CHAIR  ISAACSON  announced that  the  only  order of  business                                                               
would be  a presentation by Nils  Andreassen, Executive Director,                                                               
Institute  of  the  North,  entitled,   "Review  of  2013  Energy                                                               
Projects."     Prior  to  the  presentation,   Co-Chair  Isaacson                                                               
provided the committee with a  memorandum dated 1/27/14, in which                                                               
he  discussed  the  focus  of the  energy  committee.    Co-Chair                                                               
Isaacson explained that there  are many interesting opportunities                                                               
related  to the  subject  of energy,  and his  hope  is that  the                                                               
energy committee would focus its  attention on the impediments to                                                               
bringing the lowest delivered [energy]  cost to Alaskans in every                                                               
region, and stressed that energy  must be cheap enough to attract                                                               
private investment,  bring new  jobs, and  stabilize communities.                                                               
He  directed attention  to  two tables  in  the memorandum  which                                                               
listed  six separate  and overlapping  functions within  consumer                                                               
energy  and  thirteen  state  agencies  involved  in  the  energy                                                               
sector.     In  addition,  hundreds  of   service  providers  and                                                               
organizations  are  involved  in  the  energy  field.    Co-Chair                                                               
Isaacson  cautioned that  focus requires  saying no  to a  lot of                                                               
interesting opportunities.   He said,  "I'm hoping that -  as you                                                               
have expressed it  to us - that we concentrate  on moving forward                                                               
the issues  that will  bring the lowest  delivered cost  to every                                                               
region of Alaska, and get our  economy going."  Finally, he noted                                                               
that he participated  in both the 2013 Arctic  Energy Summit held                                                               
in Iceland and the Alaska Dialogue held in Seward.                                                                              
                                                                                                                                
8:07:25 AM                                                                                                                    
                                                                                                                                
NILS ANDREASSEN, Executive Director,  Institute of the North (the                                                               
Institute),  informed the  committee the  Institute is  "Alaska's                                                               
Arctic Think-And-Do  Tank" and  that he  would review  two recent                                                               
events sponsored  by the Institute,  the Alaska Dialogue  and the                                                               
Arctic  Energy Summit.   The  mission of  the Institute  is:   To                                                               
inform  public   policy  and  cultivate  an   engaged  citizenry,                                                               
consistent with our focus on  the North and belief that commonly-                                                               
owned  resources should  be managed  and developed  for community                                                               
and  individual  prosperity.    He  stressed  the  importance  of                                                               
Alaska's  domestic energy  production, generation,  transmission,                                                               
and use.   Further, the  Institute values the Arctic as a commons                                                               
with the management of its resources  for the benefit of people -                                                               
which is consistent  with the state's constitution  - and focuses                                                               
on responsible energy and infrastructure  development in order to                                                               
facilitate sustainable communities.  In  fact, the goal of energy                                                               
and   infrastructure   development   is  [to   foster]   healthy,                                                               
prosperous, and  resilient people, and  to elevate the  voices of                                                               
northern peoples  between local communities, state  agencies, and                                                               
national and international entities.   The Institute convenes and                                                               
facilitates  civic discourse  by  bringing  people together,  and                                                               
through this  engagement and active participation  informs public                                                               
policy through outreach  and education.  He opined  that the work                                                               
of the  Institute results  in a  meaningful product  and tangible                                                               
recommendations  of findings,  and  sustains a  broad network  of                                                               
stakeholders  within  the  state  and around  the  Arctic.    The                                                               
process  also   gathers  research   for  broader   awareness  and                                                               
accessibility.   Mr.  Andreassen  said the  theme  of the  Arctic                                                               
Energy Summit was richness, responsibility,  and resilience.  The                                                               
theme  of  the  Alaska  Dialogue  was  how  the  state  can  make                                                               
effective investment decisions regarding  energy development.  At                                                               
the  energy  summit, participants  were  encouraged  to think  of                                                               
three  levels  of government  -  national,  indigenous, and  sub-                                                               
national -  because in  each of the  eight Arctic  nations, these                                                               
three levels  of government have  an integral role  in developing                                                               
energy projects and fostering sustainable communities.                                                                          
                                                                                                                                
8:12:06 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  HUGHES asked  for the  source of  the Institute's                                                               
funding.                                                                                                                        
                                                                                                                                
MR. ANDREASSEN answered that the  Institute was founded by former                                                               
Governor Wally  Hickel almost twenty  years ago, and  is governed                                                               
by  an active  board of  directors and  Chair Drew  Pearce.   The                                                               
statewide board  of fifteen  members meets  regularly to  set the                                                               
agenda and  goals.   Funding sources are  diverse, from  fees and                                                               
corporate  sponsorships collected  for  events,  to grants,  past                                                               
state support, and federal contracts  for projects.  Returning to                                                               
his presentation  on the  topic of  governance, attendees  at the                                                               
energy summit  were encouraged to  think "beyond  stakeholders to                                                               
rights  holders"  as  local   communities,  tribes,  states,  and                                                               
nations  have  rights as  well  as  responsibilities when  energy                                                               
resources are  developed.  Stakeholders  may have an  interest in                                                               
an issue  affecting energy, but  others have specific  rights and                                                               
responsibilities.   Also  covered at  the summit  were the  three                                                               
themes of responsibility, richness,  and resilience, which act to                                                               
provide  cohesion around  the topics  addressed that  ranged from                                                               
the project  development of  tidal, wind,  and diesel,  to policy                                                               
discussions     about     government    subsidies     influencing                                                               
infrastructure development.   He  assured the committee  that all                                                               
eight  Arctic nations  recognize that  energy development  is not                                                               
risk  free;  however,  there  is  a  common  commitment  to  risk                                                               
mitigation in  that northern peoples are  concerned, but capable.                                                               
Much  of the  risk mitigation  is based  on having  the necessary                                                               
response abilities that are provided  by having infrastructure in                                                               
place  for  response  operations.     Finally,  northern  peoples                                                               
recognize  their responsibility  to community,  culture, and  the                                                               
environment.                                                                                                                    
                                                                                                                                
8:16:35 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  NAGEAK   suggested  that   traditional  knowledge                                                               
should  be one  of  the  aspects of  risk  mitigation.   He  then                                                               
inquired as to the indicators under discussion.                                                                                 
                                                                                                                                
MR. ANDREASSEN agreed that risk  mitigation should employ Western                                                               
science and local  and traditional knowledge.   In fact, everyone                                                               
is  needed to  ensure a  safe  environment.   The development  of                                                               
indicators may be  a subject for the next  summit; indicators are                                                               
ways healthy communities, strong culture,  and a safe and healthy                                                               
environment  can be  measured.   Nations are  working to  measure                                                               
their progress in meeting their  responsibilities in those areas.                                                               
He  continued  to explain  that  almost  all Arctic  nations  are                                                               
endowed with similar rich resources,  and attendees at the energy                                                               
summit   looked  at   richness  supplied   from  three   sources,                                                               
renewables, non-renewables, and efficiency  and conservation.  At                                                               
the  same time,  nations have  rich environments  and social  and                                                               
cultural structures.                                                                                                            
                                                                                                                                
REPRESENTATIVE NAGEAK  asked whether conservation  and efficiency                                                               
includes  retrofitting  existing  structures and  existing  power                                                               
plants.                                                                                                                         
                                                                                                                                
8:19:13 AM                                                                                                                    
                                                                                                                                
MR. ANDREASSEN  said yes,  along with  more efficient  public and                                                               
private buildings,  demand management, and reductions  in the use                                                               
of energy through engineering solutions.                                                                                        
                                                                                                                                
8:19:56 AM                                                                                                                    
                                                                                                                                
CO-CHAIR ISAACSON pointed out the  issues were defined at both of                                                               
the events  with a consensus  approach by many participants.   He                                                               
noted that  the information presented  is more of a  summary from                                                               
the events than something [determined by] the Institute.                                                                        
                                                                                                                                
MR. ANDREASSEN agreed.  He  described the process in Iceland that                                                               
involved two hundred people from  eight countries and resulted in                                                               
key issues brought forward by the  participants at the end of the                                                               
session.   In  fact,  one of  the topics  that  emerged from  the                                                               
energy summit  was that there  is wealth, and that  richness plus                                                               
responsibility equals  resilience.  Resilience is  the ability to                                                               
respond and  adapt to  change, and  the capacity  of a  system to                                                               
"bounce  back."   Thus, if  a system  is responsible  in resource                                                               
development to  peoples and communities,  all those  affected are                                                               
more  able  to  adapt  to  change.   Resilience  is  also  asset-                                                               
dependent, but is  impacted by the scale and the  rate of change,                                                               
and is time-sensitive, in that  waiting to be responsible weakens                                                               
resilience.   Mr. Andreassen stressed that  resilient communities                                                               
depend on  resilient energy  systems.   He described  a resilient                                                               
energy system  as one  that takes  advantage of  renewables, non-                                                               
renewables, and efficiency and conservation  methods.  In Alaska,                                                               
there  are  fundamental  challenges  facing  the  state  such  as                                                               
declining oil  production, decreased  state revenue,  high energy                                                               
costs,  and  significant fiscal  hurdles  into  the next  decade.                                                               
Therefore,  looking  at systems  in  Iceland  and other  northern                                                               
partners is to search for best  practices, and to look at new and                                                               
innovative  policies  that  have  derived  maximum  benefit  from                                                               
resources for residents.   For example, in Norway  the nation has                                                               
taken an  equity interest in  project development to  support its                                                               
export  of  non-renewable  oil   and  gas;  renewable  energy  is                                                               
retained  for   domestic  use.    Similarly,   Iceland  owns  the                                                               
infrastructure needed  for the transmission of  energy around the                                                               
country, providing  affordable energy  to its residents  and low-                                                               
cost power to attract large  industry and speed its recovery from                                                               
an economic "meltdown."                                                                                                         
                                                                                                                                
8:26:15 AM                                                                                                                    
                                                                                                                                
CO-CHAIR ISAACSON  noted that Iceland priced  energy for industry                                                               
at approximately  2-4 cents and  at approximately 8-10  cents for                                                               
residents.  He asked Mr. Andreassen to elaborate.                                                                               
                                                                                                                                
MR.  ANDREASSEN  opined  that   Iceland's  focus  is  to  attract                                                               
industry,  and  its  competitive  advantage  is  having  low-cost                                                               
energy.   Energy-intensive  industries  from  China, Brazil,  and                                                               
other countries have built manufacturing  plants in Iceland based                                                               
on  affordable energy;  in fact,  it is  cost effective  to smelt                                                               
aluminum  in  Iceland  with raw  materials  barged  from  Brazil.                                                               
Because  Iceland  has  attracted   these  anchor  tenants,  local                                                               
regions have reversed unemployment  trends and nearby communities                                                               
have benefited.   Utilizing a  10-year plan, local  economies are                                                               
improving region by region.                                                                                                     
                                                                                                                                
8:28:41 AM                                                                                                                    
                                                                                                                                
CO-CHAIR ISAACSON reiterated two points:   1. this was a decades-                                                               
long process that garnered broad  support; 2. instead of shipping                                                               
resources   overseas  for   manufacturing,  raw   materials  were                                                               
imported for refining and value-added  manufacturing.  He pointed                                                               
out that  raw materials  for processing  were shipped  to Iceland                                                               
from the opposite end of the  globe; this scenario can be seen as                                                               
a model for Alaska.                                                                                                             
                                                                                                                                
MR.  ANDREASSEN acknowledged  that Iceland  is well-located  near                                                               
the  European  market, but  most  important  was its  ability  to                                                               
deliver low-cost energy.  He  displayed slide 9 entitled, "Energy                                                               
Costs Vary"  from a PowerPoint  presentation entitled  "Review of                                                               
2013  Energy Projects."   The  slide  showed various  electricity                                                               
prices and  heating costs  in Alaska.   Slide 10  entitled, "High                                                               
Energy  Costs,"  compared average  energy  costs  in Alaska  with                                                               
those  of the  Lower  48,  and he  concluded  that Alaska  cannot                                                               
compete.   However, Mr. Andreassen suggested  that this situation                                                               
can be turned around by thinking  of low-cost energy as a part of                                                               
Alaska's  competitiveness equation,  and  setting  new goals  for                                                               
actually changing  things.   The challenge is  to plan  right now                                                               
because in the next 10 years,  Alaska will possibly face a fiscal                                                               
crisis  and will  operate  in  a new  era  of fiscal  constraint;                                                               
therefore,  there will  be a  decreasing ability  to address  the                                                               
huge need for  energy infrastructure and development.   He turned                                                               
to outcomes from  the Alaska Dialogue event,  where the Institute                                                               
brought seventy-five leaders from around  the state to Seward for                                                               
three days.  At the  event, attendees looked at challenges facing                                                               
the state  and at successful  case studies of  policy development                                                               
in the  state and around the  world.  Challenges were  divided by                                                               
production,    generation,    distribution,   and    utilization.                                                               
Production entailed  getting a resource  from the ground  or air;                                                               
generation  was the  power; distribution  was bringing  the power                                                               
from generation to  the consumer; utilization was the  use of the                                                               
power  by the  consumer.   Production challenges  were identified                                                               
such  as access,  permitting,  market conditions,  infrastructure                                                               
deficits,  and  regional  differences were  identified,  as  were                                                               
common  themes  such as  balkanized  systems,  lack of  capacity,                                                               
regulatory uncertainty, and  the need for affordable  power.  Mr.                                                               
Andreassen  acknowledged  that  insufficient time  was  spent  on                                                               
solutions,  but  some  solutions  offered  were  more  integrated                                                               
operations  and  management,  micro-grids,  and  partnering  with                                                               
extractive  industries for  rural energy  solutions.   Generation                                                               
challenges  included security  of  supply, cost  of systems  that                                                               
need innovation and regional planning, and economies of scale.                                                                  
                                                                                                                                
8:35:42 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE NAGEAK referred back  to production challenges and                                                               
asked about  the cost of the  solutions offered.  The  problem of                                                               
high  costs always  arises in  discussions about  [solutions for]                                                               
some areas  of the  state.   He recalled  that oil  from existing                                                               
fields in  Prudhoe Bay  is refined  on a  small scale  to produce                                                               
fuel for  local vehicles, and it  is also sold to  local villages                                                               
and delivered in the winter by  Rolligons.  Other fields in rural                                                               
areas have oil  and gas, but it is not  produced because there is                                                               
no  transportation to  other  markets.   He  asked whether  other                                                               
rural fields on Native land can  be subsidized to produce oil and                                                               
[refine] gas as is done in Prudhoe Bay.                                                                                         
                                                                                                                                
8:38:11 AM                                                                                                                    
                                                                                                                                
CO-CHAIR  ISAACSON  said   Representative  Nageak's  question  is                                                               
relevant to  the Interior Energy  Plan [Senate Bill 23  passed in                                                               
the First  Session of the Twenty-Eighth  Legislature] because the                                                               
Alaska Industrial  Development and  Export Authority  (AIDEA) has                                                               
approved  MWH Americas,  Inc. to  build a  liquefaction plant  so                                                               
that liquefied  natural gas (LNG) can  be moved off of  the North                                                               
Slope.  He  opined if LNG can be transported  to Fairbanks it can                                                               
also be made available to Native communities.                                                                                   
                                                                                                                                
8:38:30 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE NAGEAK  stressed he was  referring to the  need in                                                               
rural Alaska for  diesel fuel and automotive gas.   He said it is                                                               
150  miles to  where he  lives but  by the  time oil  travels the                                                               
Trans-Alaska Pipeline  System [TAPS],  is shipped out,  and comes                                                               
back refined,  the cost is  very high.   He asked, "Why  can't we                                                               
work with  those landowners and the  people ... to produce  [on a                                                               
small scale]."   Representative Nageak suggested  commissioning a                                                               
study to determine  the possibility of locally  refining fuel for                                                               
heating and transportation as is done in Prudhoe Bay.                                                                           
                                                                                                                                
MR. ANDREASSEN  said Representative  Nageak has presented  a good                                                               
example of  anchor tenants who are  able to create an  economy of                                                               
scale and  leverage a resource  on behalf of  nearby communities.                                                               
He  encouraged the  state -  when planning  for the  future -  to                                                               
evaluate the  opportunities for  extractive industries  where the                                                               
state's  return  on investment  could  mean  that industry  could                                                               
support greater economies of scale.                                                                                             
                                                                                                                                
8:41:17 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE HUGHES asked Mr.  Andreassen to recommend specific                                                               
actions the  state can take  to address the  challenges discussed                                                               
during his presentation.                                                                                                        
                                                                                                                                
8:42:16 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE HIGGINS  commented that  most residents  know that                                                               
the state  needs to  invest and build  infrastructure.   In fact,                                                               
many  are tired  of  rhetoric and  studies,  but desire  specific                                                               
recommendations from  the Institute to  the governor on  where to                                                               
invest.                                                                                                                         
                                                                                                                                
8:43:22 AM                                                                                                                    
                                                                                                                                
CO-CHAIR ISAACSON opined  that the intent of  the presentation is                                                               
to reveal the synergy within  the state, including the Arctic, on                                                               
how to prioritize the needed investments.                                                                                       
                                                                                                                                
8:43:29 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE NAGEAK  added that working with  federal and state                                                               
agencies  for permitting  is a  problem  because of  duplication.                                                               
When   projects   are   discussed,   permitting   always   causes                                                               
frustrating delays, more so in Alaska  than in other parts of the                                                               
nation.                                                                                                                         
                                                                                                                                
8:44:30 AM                                                                                                                    
                                                                                                                                
CO-CHAIR ISAACSON  agreed and urged  the committee to  create the                                                               
prioritization  needed  this  session to  guide  the  legislative                                                               
process, perhaps with bill action or through a resolution.                                                                      
                                                                                                                                
MR.  ANDREASSEN  advised  the committee  to  recognize  that  the                                                               
challenges and  solutions presented  were garnered  from "general                                                               
brainstorming  among the  group in  the  room."   He agreed  with                                                               
Representative  Higgins that  many challenges  are already  known                                                               
and in some cases, solutions have  been offered too.  He returned                                                               
the  committee's focus  "on how  do we  do that  prioritization."                                                               
Attendees at  the Alaska Dialogue expressed  support for regional                                                               
planning, which  is already in  motion through the  Alaska Energy                                                               
Authority (AEA),  and he  urged that  continued support  for that                                                               
planning process  should be  one of the  priorities.   Turning to                                                               
the  discussion  on  distribution/transmission, he  related  this                                                               
topic  has  some  of  the   same  challenges  as  generation  and                                                               
production, and the  key solution is to  establish anchor tenants                                                               
from  the  private  sector   through  a  public-private  business                                                               
partnership  to  create economies  of  scale  within regions  and                                                               
communities.  On  the topic of utilization,  he acknowledged that                                                               
there  is  work underway  in  the  state for  energy  efficiency,                                                               
weatherization, and conservation efforts  through AEA and others.                                                               
However,  much  work  is  left   to  do  which  is  depending  on                                                               
leadership from the state to provide infrastructure.                                                                            
                                                                                                                                
8:47:27 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  JOSEPHSON asked  Mr.  Andreassen  to explain  the                                                               
purpose behind  the "no renewable  land use designation"  and the                                                               
meaning of the "STWD" acronym [both on slide 15].                                                                               
                                                                                                                                
MR. ANDREASSEN was unsure and  will provide that information at a                                                               
later date.                                                                                                                     
                                                                                                                                
CO-CHAIR ISAACSON said STWD stands for statewide.                                                                               
                                                                                                                                
8:48:25 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  NAGEAK   expressed  his  interest  in   the  same                                                               
question, particularly  in regard  to land  owned by  the federal                                                               
government.  He  related that some federal  land existed "without                                                               
our  knowledge"  and  residents  need to  know  their  rights  on                                                               
federal land.   He  expressed his  frustration that  agencies are                                                               
"usurping the  power of the  federal government ...  and Congress                                                               
on  both  sides,   on  both  houses,  when   ...  [agencies]  can                                                               
unilaterally  set parameters  on what  you  can and  can't do  on                                                               
state  or  federal   lands,  when  it  is  the   purview  of  the                                                               
legislative body to do those things ...."                                                                                       
                                                                                                                                
8:50:22 AM                                                                                                                    
                                                                                                                                
CO-CHAIR  ISAACSON   encouraged  the  committee  to   define  the                                                               
particular  issues  that  the legislature  can  address  in  this                                                               
session.  He agreed with "the  grand idea of it" but stressed the                                                               
importance   of  giving   legislators   and  the   administration                                                               
direction  on  how to  move  the  process of  getting  affordable                                                               
energy to residents.                                                                                                            
                                                                                                                                
8:50:58 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  NAGEAK  acknowledged   that  presenters  who  are                                                               
experienced in these issues for  many years have good ideas under                                                               
the  present  system;  unfortunately,  most of  the  land  [under                                                               
discussion]  is  owned  by  the  federal  government  and  it  is                                                               
frustrating  for the  local  residents when  agencies  - not  the                                                               
legislative bodies - place great  restrictions on what can happen                                                               
within  the  state.     He  advised  it  is   [the  Alaska  State                                                               
Legislature's] responsibility  and within its power  to put these                                                               
agencies on  notice through resolutions that  problems within the                                                               
system of  the federal government  prevent the state  from acting                                                               
on these lands.                                                                                                                 
                                                                                                                                
CO-CHAIR   ISAACSON  reminded   the  committee   the  Institute's                                                               
presentation is  a report that  will help the committee  focus on                                                               
its task this session.                                                                                                          
                                                                                                                                
8:52:32 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  HUGHES restated  her  interest  in the  solutions                                                               
proposed by  the presentation, so  that the energy  committee can                                                               
increase  its understanding  and  prioritize  solutions that  are                                                               
appropriate for the state to advance.                                                                                           
                                                                                                                                
8:53:40 AM                                                                                                                    
                                                                                                                                
CO-CHAIR  ISAACSON noted  that utilization  and transmission  are                                                               
topics that  will be  discussed by  the Regulatory  Commission of                                                               
Alaska (RCA) on  1/31/14.  He also requested  that Mr. Andreassen                                                               
present at  a later date  a more  thorough view of  the solutions                                                               
suggested by the Institute.                                                                                                     
                                                                                                                                
MR. ANDREASSEN,  in response to Representative  Hughes, explained                                                               
that the  proposed solutions  were not  developed further  at the                                                               
Alaska  Dialogue, but  he can  come  back to  the committee  with                                                               
appropriate  speakers  to  advise  on  "the  short  list  of  the                                                               
solutions that were suggested."   Returning attention to the 2010                                                               
plan, state policy, and state  strategy, he said four points came                                                               
from the  effort to  establish a  state energy  policy.   At that                                                               
time, the state  wished to:  establish an  energy policy; develop                                                               
strategic goals;  adopt a  plan to  achieve the  goals; implement                                                               
programs and projects consistent with  the goals.  Mr. Andreassen                                                               
observed  that the  Institute  and its  attendees  at the  Alaska                                                               
Dialogue  believe only  the first  point  has been  accomplished.                                                               
The  current problem  statement is:    To what  extent is  Alaska                                                               
achieving  affordability, ensuring  projects efficacy  and stable                                                               
funding for  projects in the  long-term, while  practicing fiscal                                                               
constraint?  The state energy  policy is AS 44.99.115 Declaration                                                               
of  state  energy  policy.    The policy  set  very  broad  goals                                                             
recognizing  the importance  of the  issue, that  outside factors                                                               
affect  the  affordability  of  energy, and  that  the  state  is                                                               
challenged by  distance and geography.   Another worthy  goal set                                                               
by  the policy  is obtaining  an energy  portfolio of  50 percent                                                               
renewable energy.                                                                                                               
                                                                                                                                
8:57:09 AM                                                                                                                    
                                                                                                                                
MR. ANDREASSEN opined the challenge  ahead is to determine how to                                                               
reach the  goals of the policy.   At the Alaska  Dialogue, it was                                                               
suggested that the policy be  neither too complex nor too simple.                                                               
In addition,  eight case  studies were  analyzed for  elements of                                                               
policy, implementation,  and programs/projects.  On  policy, case                                                               
studies  revealed  that  successful policies  ensured  certainty,                                                               
empowered the market,  allowed open access, and  had clear vision                                                               
and  missions.   On  implementation,  the  studies revealed  that                                                               
infrastructure  is crucial,  building for  industry first  works,                                                               
and a  micro-grid infrastructure is equally  important to deliver                                                               
benefits  to residents.   In  addition,  there was  most often  a                                                               
strong consensus about the process  among the people affected, as                                                               
there was  in Iceland and  in Canada.    With this type  of broad                                                               
support,  projects were  found to  move  forward in  a matter  of                                                               
months.  Finally, analyses  of successful programs/projects found                                                               
them to  be inclusive, had  public and private  involvement, were                                                               
statewide,  depended   upon  the  right  information,   and  held                                                               
technical  credibility.    As  a matter  of  fact,  the  projects                                                               
reviewed were  found to be  catalysts and foundations  for bigger                                                               
efforts.   Thus  the  Alaska Dialogue  articulated seven  desired                                                               
qualities  of  policy  and  ten  goals  that  the  policy  should                                                               
achieve.   Mr. Andreassen concluded  that the  foregoing strategy                                                               
is a  good direction  for the  state to pursue.   In  review, the                                                               
energy policy should:   be driven by vision  and strategy; create                                                               
and support  regulatory clarity;  have broad  stakeholder buy-in;                                                               
be able to be evaluated  against measurable indicators; adapt and                                                               
evolve based on results of  evaluation; establish a loading order                                                               
or  prioritization method;  include clear  strategy or  work plan                                                               
for implementation.   He  urged the committee  to reflect  on the                                                               
state's current energy policy and its achievements.                                                                             
                                                                                                                                
9:02:40 AM                                                                                                                    
                                                                                                                                
MR. ANDREASSEN  then provided  a list of  what the  energy policy                                                               
should  achieve:     economic  development/growth/sustainability;                                                               
stability       and        predictability;       equity/fairness;                                                               
innovation/entrepreneurism;      affordability;      stewardship;                                                               
transparency and  accountability.  He advised  the committee that                                                               
a strategy and implementation plan is  the next step to be taken.                                                               
Further, the Alaska Dialogue attendees  developed a short list of                                                               
indicators for how to measure the  impact of the policy, the most                                                               
important being price, because affordability  was a key indicator                                                               
in Iceland  and other  places.  Slide  27 displayed  the equation                                                               
for energy  price:   fuel plus capital  and operation  costs over                                                               
demand.   Demand is one  aspect that  is not talked  about enough                                                               
because  demand is  an important  factor for  anchor tenants  and                                                               
economies of  scale, along  with how  to structure  projects that                                                               
are consistent with the demand of a region or community.                                                                        
                                                                                                                                
9:04:43 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE HUGHES asked whether  the present energy policy is                                                               
missing some of the desired elements.                                                                                           
                                                                                                                                
MR. ANDREASSEN  responded that  great work  and effort  went into                                                               
establishing  the  current  policy; however,  the  Institute  has                                                               
heard that it is not effective  and is not achieving its purpose.                                                               
Slide 28  entitled "Key Takeaways,"  listed criteria met  and not                                                               
met by the  current policy.  He agreed that  the policy is driven                                                               
by vision and  strategy, but further development  on strategy and                                                               
regulatory clarity  is needed as  evidenced by comments  from the                                                               
Alaska  Dialogue.   The existing  policy has  stakeholder buy-in,                                                               
but  is lacking  in  the ability  to  measure progress,  evaluate                                                               
success,  and prioritize  project  development.   Mr.  Andreassen                                                               
acknowledged  that good  economic development  has come  from the                                                               
existing  policy   and  it  strives  to   achieve  stability  and                                                               
predictability.   Regarding equity, he  said the AEA  process has                                                               
been  used to  fairly assess  communities.   There was  good work                                                               
done on the energy policy  and instead of reevaluating the policy                                                               
it is  more important  to develop  a strategy  and implementation                                                               
plan to  address the  criteria still in  question.   He concluded                                                               
that  the current  policy is  aspirational and  does not  provide                                                               
sufficient direction, with the exception  of AEA, which does have                                                               
a clear direction  on how it should approach projects.   In fact,                                                               
AEA is  communicating the work  that it and other  state agencies                                                               
are doing.  The remaining challenge  is that the policy should be                                                               
affecting  every  level  of  decision-making  and  not  just  one                                                               
agency.   For  example, he  questioned whether  the state  energy                                                               
policy influences either decisions  made by the executive branch,                                                               
or  legislative capital  projects and  spending.   Mr. Andreassen                                                               
said  the  existing policy  lacks  the  following:   criteria  to                                                               
decide and judge efficacy; a  strategy to prioritize how to spend                                                               
limited money in a way that  produces results; a system to manage                                                               
projects  and  expenditures  to  ensure  the  completion  of  the                                                               
state's stated  goals.   Although there are  many great  ideas to                                                               
solve the  state's energy problems,  there is no way  to evaluate                                                               
and choose  from the  solutions offered.   He  recommended adding                                                               
legislative  oversight  [on  energy  issues]  and  completing  an                                                               
evaluation of assets and liabilities,  and then closed by saying,                                                               
"and I don't know that we need  more studies, but we do need some                                                               
work  to  determine the  strategy  and  implementation aspect  of                                                               
this."                                                                                                                          
                                                                                                                                
9:11:18 AM                                                                                                                    
                                                                                                                                
CO-CHAIR ISAACSON  noted that  Mr. Andreassen  will be  in Juneau                                                               
all next week.                                                                                                                  
                                                                                                                                
9:11:54 AM                                                                                                                    
                                                                                                                                
MR.  ANDREASSEN  offered  to contact  individual  legislators  to                                                               
answer questions.                                                                                                               
                                                                                                                                
9:12:21 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE FOSTER observed that  the Institute is involved in                                                               
Arctic issues such as the oil  and gas reserves located there and                                                               
future shipping through the Northwest  Passage.  He expressed his                                                               
interest in more information on the  role the Arctic will have in                                                               
terms of bringing lower cost energy  to Alaska, or how to utilize                                                               
shipping through the Arctic to  bring raw materials to Alaska for                                                               
refining and for use by value-added industry.                                                                                   
                                                                                                                                
9:13:25 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  HIGGINS said,  "...  we've touched  on  a lot  of                                                               
subjects  here ...  and  what can  this committee  do?   And  I'd                                                               
rather like  to see us do  something, than just do  rhetoric this                                                               
whole  session."   He  further  urged  for  a resolution  to  get                                                               
federal lands  designated back to  state land, in support  of the                                                               
[Roads to  Resources Initiative proposed  by Governor  Parnell in                                                               
2011].                                                                                                                          
                                                                                                                                
9:14:25 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  NAGEAK returned  discussion  to  the creation  of                                                               
industry  on  corporate  land.    Most  Native  corporations  and                                                               
corporate  land  are near  residential  areas;  for instance,  25                                                               
miles from  Barrow there is a  known finding of oil  and gas, but                                                               
development is not  feasible at this time because of  the lack of                                                               
transportation.    He urged  for  the  legislature to  create  an                                                               
incentive  so production  can begin  on corporate  land, such  as                                                               
refining  oil on  a small  scale to  supply the  villages on  the                                                               
coast  of Alaska  and along  the river  systems.   Representative                                                               
Nageak assured  the committee  this is  possible, and  within the                                                               
twelve Native regional  corporations there is interest  to find a                                                               
way  to develop  their resources  to take  care of  the needs  of                                                               
local communities now.                                                                                                          
                                                                                                                                
9:16:49 AM                                                                                                                    
                                                                                                                                
CO-CHAIR  ISAACSON called  attention to  the [Alaska  Royalty Oil                                                               
and Gas Development Advisory Board,  established in AS 38.06.020]                                                               
and advised that the committee needs  to be directive in terms of                                                               
what this  advisory board is supposed  to do.  He  said the board                                                               
does not meet  frequently thus is pressed for time.   Further, in                                                               
order to determine and evaluate  priorities, he recommended using                                                               
the Fairbanks Metropolitan Area Transportation System (FMATS) -                                                                 
which has a  technical and an executive  side - as a  model for a                                                               
consumer  energy commission  to help  the committee  "get through                                                               
the gridlock."   This is  a successful  model built on  a federal                                                               
Metropolitan   Planning   Organization   (MPO)   model   and   is                                                               
responsible for moving the gridlock of projects in the Interior.                                                                
                                                                                                                                
9:18:22 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  NAGEAK  recommended  that  the  energy  committee                                                               
become  a standing  committee  so its  actions  would carry  more                                                               
weight.                                                                                                                         
                                                                                                                                
9:18:57 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE HUGHES  said "... I'd  rather try to  do something                                                               
and fail, than do nothing and succeed."                                                                                         
                                                                                                                                
9:20:46 AM                                                                                                                    
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
There being no  further business before the  committee, the House                                                               
Special Committee on Energy meeting was adjourned at 9:20 a.m.                                                                  

Document Name Date/Time Subjects
PRESENTATION - Outcomes from the Alaska Dialogue and AES combined.pptx HENE 1/27/2014 8:00:00 AM
House Energy Committee - Institute of the North PowerPoint Presentation (01-27-14)
Meeting Agenda- House Energy Committee 28th AK Legislature (01-27-14).pdf HENE 1/27/2014 8:00:00 AM