Legislature(2009 - 2010)Dutch Harbor

08/26/2009 05:00 PM House ENERGY

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05:12:11 PM Start
05:12:30 PM HB218|| HB219
06:54:38 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Location: Makushin Room, Grand Aleutian
Hotel, 498 Salmon Way
+ Statewide Energy Plan TELECONFERENCED
Heard & Held
Heard & Held
-- Public testimony will be taken --
                    ALASKA STATE LEGISLATURE                                                                                  
               HOUSE SPECIAL COMMITTEE ON ENERGY                                                                              
                        Unalaska, Alaska                                                                                        
                        August 26, 2009                                                                                         
                           5:12 p.m.                                                                                            
MEMBERS PRESENT                                                                                                               
Representative Bryce Edgmon, Co-Chair                                                                                           
Representative Charisse Millett, Co-Chair                                                                                       
Representative Kyle Johansen                                                                                                    
Representative Jay Ramras (via teleconference)                                                                                  
Representative Chris Tuck                                                                                                       
MEMBERS ABSENT                                                                                                                
Representative Nancy Dahlstrom                                                                                                  
Representative Pete Petersen                                                                                                    
COMMITTEE CALENDAR                                                                                                            
HOUSE BILL NO. 218                                                                                                              
"An Act  establishing and  relating to  the Department  of Energy                                                               
and to  the board  of directors of  the Alaska  Energy Authority;                                                               
transferring the  Alaska Energy Authority and  the Alaska Natural                                                               
Gas Authority to  the Department of Energy;  and transferring the                                                               
home  energy  and weatherization  program  to  the Department  of                                                               
     -HEARD & HELD                                                                                                              
HOUSE BILL NO. 219                                                                                                              
"An Act relating to the renewable energy grant fund."                                                                           
     -HEARD & HELD                                                                                                              
PREVIOUS COMMITTEE ACTION                                                                                                     
BILL: HB 218                                                                                                                  
SHORT TITLE: CREATING DEPT OF ENERGY/AEA BD                                                                                     
SPONSOR(s): ENERGY                                                                                                              
04/06/09       (H)       READ THE FIRST TIME - REFERRALS                                                                        
04/06/09       (H)       ENE, FIN                                                                                               
05/29/09       (H)       ENE AT 1:00 PM Bethel                                                                                  
05/29/09       (H)       Heard & Held                                                                                           
05/29/09       (H)       MINUTE(ENE)                                                                                            
06/17/09       (H)       ENE AT 5:00 PM Fairbanks                                                                               
06/17/09       (H)       Heard & Held                                                                                           
06/17/09       (H)       MINUTE(ENE)                                                                                            
08/07/09       (H)       ENE AT 2:00 PM Kenai                                                                                   
08/26/09       (H)       Heard & Held                                                                                           
08/26/09       (H)       MINUTE(ENE)                                                                                            
08/26/09       (H)       ENE AT 5:00 PM Dutch Harbor                                                                            
BILL: HB 219                                                                                                                  
SHORT TITLE: RENEWABLE ENERGY GRANT REQUIREMENTS                                                                                
SPONSOR(s): ENERGY                                                                                                              
04/06/09       (H)       READ THE FIRST TIME - REFERRALS                                                                        
04/06/09       (H)       ENE, RES, FIN                                                                                          
05/29/09       (H)       ENE AT 1:00 PM Bethel                                                                                  
05/29/09       (H)       Heard & Held                                                                                           
05/29/09       (H)       MINUTE(ENE)                                                                                            
06/17/09       (H)       ENE AT 5:00 PM Fairbanks                                                                               
06/17/09       (H)       Heard & Held                                                                                           
06/17/09       (H)       MINUTE(ENE)                                                                                            
08/07/09       (H)       ENE AT 2:00 PM Kenai                                                                                   
08/26/09       (H)       Heard & Held                                                                                           
08/26/09       (H)       MINUTE(ENE)                                                                                            
08/26/09       (H)       ENE AT 5:00 PM Dutch Harbor                                                                            
WITNESS REGISTER                                                                                                              
SHIRLEY MARQUARDT, Mayor                                                                                                        
City of Unalaska                                                                                                                
Unalaska, Alaska                                                                                                                
POSITION STATEMENT:  During hearing of HB 218 and HB 219,                                                                     
expressed the need to continue to include local input and                                                                       
control with any proposed energy plans.                                                                                         
JOHN CONWELL, Superintendant                                                                                                    
City of Unalaska School District                                                                                                
City of Unalaska                                                                                                                
Unalaska, Alaska                                                                                                                
POSITION STATEMENT:  During hearing of HB 218 and HB 219,                                                                     
outlined the progress of the City of Unalaska's school                                                                          
JOE BERESKIN, SR., Mayor                                                                                                        
City of Akutan                                                                                                                  
Akutan, Alaska                                                                                                                  
POSITION STATEMENT:  Provided comments during discussion of HB
218 and HB 219.                                                                                                                 
WENDY HAWTHORNE, Chief Executive Officer                                                                                        
Ounalashka Corporation                                                                                                          
Unalaska, Alaska                                                                                                                
POSITION STATEMENT:   During hearing of HB 218 and  HB 219, noted                                                             
her agreement with Mayor Marquardt's  comments regarding the need                                                               
to continue to fund nonrenewable energy projects.                                                                               
DON GRAVES, Production Manager                                                                                                  
Dutch Harbor, Alaska                                                                                                            
POSITION  STATEMENT:   During  hearing  of  HB  218 and  HB  219,                                                             
suggested  broadening the  legislation  to  allow communities  as                                                               
well as industry to take advantage of energy efficient projects.                                                                
KATHERINE McGLASHAN                                                                                                             
Dutch Harbor, Alaska                                                                                                            
POSITION  STATEMENT:   During  hearing  of  HB  218 and  HB  219,                                                             
expressed  frustration with  the length  of time  it takes  to go                                                               
through  the   process  of  the  home   energy  conservation  and                                                               
weatherization programs.                                                                                                        
RICHARD PECK, Owner                                                                                                             
Utility Innovations Plus                                                                                                        
Unalaska, Alaska                                                                                                                
POSITION  STATEMENT:   During discussion  of HB  218 and  HB 219,                                                             
expressed  his  favor  with  the proposal  for  a  Department  of                                                               
FRANK KELTY                                                                                                                     
Unalaska, Alaska                                                                                                                
POSITION  STATEMENT:   During discussion  of HB  218 and  HB 219,                                                             
specified that  more programs dealing with  various energy issues                                                               
would be helpful.                                                                                                               
CHRIS HLADICK, City Manager                                                                                                     
City of Unalaska                                                                                                                
Unalaska, Alaska                                                                                                                
POSITION STATEMENT:   Provided comments  during discussion  of HB
218  and  HB  219,  and   opined  that  it's  important  for  the                                                               
legislature  to  have  someone  independent  of  AEA  review  the                                                               
various projects that come forward for funding.                                                                                 
SINCLAIR WILT, Vice President                                                                                                   
Alyeska Seafoods, Inc.                                                                                                          
Unalaska, Alaska                                                                                                                
POSITION  STATEMENT:   During discussion  of HB  218 and  HB 219,                                                             
discussed the air quality permit process.                                                                                       
SKIP SOUTHWORTH, Member                                                                                                         
Unalaska City Council                                                                                                           
City of Unalaska                                                                                                                
Unalaska, Alaska                                                                                                                
POSITION  STATEMENT:   Posed  a  question  and provided  comments                                                             
during discussion of HB 218 and HB 219.                                                                                         
ACTION NARRATIVE                                                                                                              
5:12:11 PM                                                                                                                    
CO-CHAIR  BRYCE  EDGMON called  the  House  Special Committee  on                                                             
Energy meeting  to order  at 5:12  p.m.   Representatives Edgmon,                                                               
Millett,  Johansen, Ramras  (via teleconference),  and Tuck  were                                                               
present  at  the   call  to  order.    Also   in  attendance  was                                                               
Representative Mike Chenault.                                                                                                   
HB 218-CREATING DEPT OF ENERGY/AEA BD                                                                                         
HB 219-RENEWABLE ENERGY GRANT REQUIREMENTS                                                                                    
5:12:30 PM                                                                                                                    
CO-CHAIR BRYCE EDGMON  announced that the only  order of business                                                               
would be  HOUSE BILL NO.  218, "An Act establishing  and relating                                                               
to the Department of Energy and  to the board of directors of the                                                               
Alaska   Energy  Authority;   transferring   the  Alaska   Energy                                                               
Authority and the Alaska Natural  Gas Authority to the Department                                                               
of Energy;  and transferring the  home energy  and weatherization                                                               
program to  the Department of  Energy."; and HOUSE BILL  NO. 219,                                                               
"An Act relating to the renewable energy grant fund."                                                                           
CO-CHAIR EDGMON  noted that  there is  draft legislation  that is                                                               
the result of a working group  of legislators who hope to develop                                                               
a statewide energy plan that can be introduced next session.                                                                    
5:18:46 PM                                                                                                                    
SHIRLEY  MARQUARDT,   Mayor,  City   of  Unalaska,   thanked  the                                                               
committee for its interest in the  region.  She remarked that the                                                               
committee is  likely to hear  testimony similar to that  given at                                                               
prior meetings in rural Alaska; that  is that the cost to provide                                                               
energy  in communities  in  rural Alaska  is  expensive and  that                                                               
there aren't  many good  solutions.  With  regard to  the state's                                                               
energy plan, she acknowledged the  desire for 50 percent of power                                                               
production to be from renewable  resources by 2025.  However, she                                                               
opined  that although  the aforementioned  isn't a  bad goal,  it                                                               
probably isn't possible.  She expressed  the need for any plan to                                                               
recognize  that  existing  facilities   in  the  state  could  be                                                               
upgraded with newer technologies that  continue to use diesel but                                                               
burn 30  percent less fuel.   Such savings could be  passed on to                                                               
consumers.  Mayor Marquardt further  expressed the need for there                                                               
to be local input and control on  all of these projects as it has                                                               
been  illustrated   that  monies  given  to   a  municipality  or                                                               
community  for  a specific  project  has  saved money  and  time.                                                               
Therefore, local input  and control with a  statewide energy plan                                                               
is important.                                                                                                                   
MAYOR MARQUARDT,  regarding the provisions  in HB 219  that speak                                                               
to hiring an  economist with experience in the  area of renewable                                                               
energy, expressed concern with  "forensic economists" who utilize                                                               
the information  before them to  come up  with a product  to suit                                                               
the client.   Therefore, she  encouraged the committee  to obtain                                                               
independent  economists   or  financial  engineers  who   have  a                                                               
background in  renewable energy  as well  as in  power production                                                               
and  financial feasibility  of various  types of  projects.   She                                                               
pointed out that  renewable energy is new and  although there are                                                               
a lot  of ideas,  there aren't many  [systems] actually  in place                                                               
and working.   She further encouraged the committee  not to allow                                                               
the proposed Department  of Energy to become the  only grantor of                                                               
funds for projects.  She related  that the City of Unalaska would                                                               
rather  approach its  legislators, who  understand the  community                                                               
and its  goal, for help  on construction costs rather  than going                                                               
through a grant program.  The  aforementioned may be simpler in a                                                               
case  in  which a  community  is  merely  seeking an  upgrade  to                                                               
existing  diesel   technology.    Mayor  Marquardt   opined  that                                                               
Unalaska  has  challenges with  renewable  energy  sources.   For                                                               
instance,  the area  has  a  lot of  wind,  but it's  problematic                                                               
because it comes  from all directions at once.   Furthermore, the                                                               
tides in  the area are  only 2.5 to 3  feet.  She  specified that                                                               
the risks  are large  for the  area because it  isn't on  a grid.                                                               
Therefore,  Mayor Marquardt  expressed  concern that  communities                                                               
such as  Unalaska would have  difficulty obtaining  grant funding                                                               
for projects  that aren't renewable energy  sources, although the                                                               
proposal may  reduce the carbon  footprint, reduce  dependency on                                                               
fuel, and  reduce costs  for the local  consumers.   The concern,                                                               
she further  articulated, is  that a department  may not  see the                                                               
differences  in  communities  throughout  the state  as  well  as                                                               
legislators would.                                                                                                              
CO-CHAIR  EDGMON  noted  his appreciation  of  Mayor  Marquardt's                                                               
comments regarding  the capital  budget process  and the  need to                                                               
avoid  sideboards when  a  local  government/community works  for                                                               
funding  that has  to flow  from the  federal government  through                                                               
state government to the local government.                                                                                       
CO-CHAIR MILLETT  noted that Governor Parnell  recently appointed                                                               
cabinet-level  energy positions,  which had  been proposed  in HB
218.   The aforementioned  recognizes that  energy issues  are of                                                               
high importance.                                                                                                                
5:27:40 PM                                                                                                                    
JOHN CONWELL,  Superintendant, City of Unalaska  School District,                                                               
City  of  Unalaska,  said  that although  he  hadn't  planned  on                                                               
testifying   today,   he   would   relate   the   school's   debt                                                               
reimbursement  program.   The  large  renovation  project of  the                                                               
city's 5th through 12th grade  facility is nearly complete.  Much                                                               
of the renovation included energy  efficiency changes, from which                                                               
the school  expects to  garner huge cost  savings.   For example,                                                               
all  exterior and  interior  lights and  all  exterior doors  and                                                               
windows   were    replaced   with   energy    efficient   models.                                                               
Furthermore, about half  of the roof was repaired as  was a large                                                               
section of  the building's leaking  exterior.   Large renovations                                                               
in the building's  kitchen also occurred.   Mr. Conwell expressed                                                               
the hope that in about six months  he will be able to report much                                                               
lower utility bills.   In conclusion, Mr.  Conwell encouraged the                                                               
legislature  to  continue  the   70  percent  debt  reimbursement                                                               
program  for school  districts  as  it has  enabled  the City  of                                                               
Unalaska  to  provide  a much  better  learning  environment  for                                                               
5:29:45 PM                                                                                                                    
JOE BERESKIN, SR., Mayor, City  of Akutan, expressed concern with                                                               
HB  218  and  its  attempt  to combine  many  [services]  in  one                                                               
department because  often things fall  to the wayside.   He noted                                                               
that the City  of Akutan has been fortunate in  that it has three                                                               
energy  projects  funded through  the  existing  program in  AEA.                                                               
Mayor Bereskin  acknowledged that people  may wonder how  a small                                                               
city such as  Akutan could tap into  the funds it has.   To that,                                                               
he related  the need  to understand  the process  and get  a good                                                               
group  together  to promote  projects.    He mentioned  that  the                                                               
funding from the  state is allowing a geothermal  project and two                                                               
hydro projects.   In response to Co-Chair  Edgmon, Mayor Bereskin                                                               
informed the committee that for  the geothermal project, soil and                                                               
gas  sampling occurred  a couple  of months  ago and  a group  is                                                               
trying to  determine the  best location to  drill.   He expressed                                                               
his hope  that they would be  able to drill next  fall or spring.                                                               
He noted  that the City  of Akutan filled out  grant applications                                                               
for drilling, which is the next step.                                                                                           
5:33:56 PM                                                                                                                    
CO-CHAIR MILLETT  mentioned that  the committee has  noticed that                                                               
groups  that deal  with energy  matters are  scattered throughout                                                               
different state departments.  The  aforementioned is difficult to                                                               
navigate.    Therefore,   HB  218  was  designed   to  propose  a                                                               
Department  of Energy  that consolidated  energy programs  in one                                                               
department  and offered  some  changes to  some  of the  existing                                                               
organizations.    However,  HB  219 is  clean-up  legislation  in                                                               
response  to the  belief  of some  legislators  that there  isn't                                                               
enough oversight and that there  [was approval of funds] for some                                                               
research and  development projects and technologies  that weren't                                                               
proven.   The  aforementioned resulted  in an  audit report  that                                                               
offered  recommendations  that  have  been  incorporated  in  the                                                               
legislation, such  as the  need to hold  project completion  at a                                                               
high level.   Co-Chair Millett  said that the committee  has also                                                               
provided  copies of  the committee's  first draft  of a  proposed                                                               
energy  policy, which  is the  product of  a stakeholders'  group                                                               
that has been meeting.  She  characterized this draft policy as a                                                               
work in progress.                                                                                                               
5:40:00 PM                                                                                                                    
WENDY    HAWTHORNE,   Chief    Executive   Officer,    Ounalashka                                                               
Corporation,   began  by   informing  the   committee  that   the                                                               
Ounalashka Corporation  represents about 420 shareholders.   Most                                                             
of  the  business conducted  by  Ounalashka  Corporation is  land                                                             
leasing and development.  The  high energy costs for tenants have                                                               
become very apparent.   In fact, areas for  which the corporation                                                               
pays  the  energy costs  may  face  an  increase  in rent.    Ms.                                                               
Hawthorne  noted her  agreement with  Mayor Marquardt's  comments                                                               
regarding  Unalaska not  losing [funding/approval]  for upgrading                                                               
nonrenewable energy  projects in  favor of only  renewable energy                                                               
projects.   There  has been  difficulty getting  renewable energy                                                               
projects going in Unalaska.                                                                                                     
5:42:11 PM                                                                                                                    
DON  GRAVES, Production  Manager, UniSea,  explained that  UniSea                                                               
generates  power and  is  the largest  manufacturer  of power  in                                                               
Unalaska.   He  related  that Unalaska  is  different than  other                                                               
communities in  the state in  that the  city has had  to generate                                                               
its own  power and  ensure stable  supplies for  the plants.   He                                                               
encouraged  the committee  to  be in  contact  with programs  and                                                               
facilities  that fall  outside  the City  of Unalaska's  purview.                                                               
Since UniSea sells some power to  the community, it would be nice                                                               
to  receive  some assistance  with  the  facilities in  town  and                                                               
review  available alternative  energy  sources such  as fish  oil                                                               
from the production  facilities.  For example, 25  percent of the                                                               
power UniSea produces  is from fish oil, which is  renewable.  He                                                               
suggested   that  the   legislation   be   broadened  such   that                                                               
communities  as well  as  industry can  take  advantage of  their                                                               
5:45:03 PM                                                                                                                    
KATHERINE McGLASHAN, speaking  as a single mother  of five living                                                               
in a home with little  insulation, expressed frustration with the                                                               
paperwork  requirements  for  the home  energy  conservation  and                                                               
weatherization  program.   She opined  that the  process is  very                                                               
slow, and therefore  she would support assistance  to shorten the                                                               
process.   She related that  she filled  out the form  last year,                                                               
but received no response even after email and phone messages.                                                                   
MS. McGLASHAN, in response  to Representative Chenault, specified                                                               
that she has had her home  energy rated.  However, she noted that                                                               
her home  falls under  the Aleutian  Housing Authority,  and thus                                                               
she isn't sure where her forms are in the process.                                                                              
CO-CHAIR EDGMON  reminded everyone that the  legislature recently                                                               
overrode  former  Governor  Palin's  veto  of  $28.6  million  in                                                               
federal  stimulus  funds  for  energy.    Originally,  there  was                                                               
discussion  that AEA  and AHFC  would  come forward  with a  plan                                                               
regarding how  to spend  the $28.6  million.   Part of  that plan                                                               
would have been  to strengthen the energy rating  program and the                                                               
education aspect  regarding the  benefits of weatherization.   He                                                               
asked if  there is any update  as to what Governor  Parnell might                                                               
do with the $28.6 million.                                                                                                      
REPRESENTATIVE  CHENAULT  replied  no, but  added  that  Governor                                                               
Parnell has  been asked to  utilize the funds in  public building                                                               
renewal  as  well  as  school  districts,  and  opined  that  the                                                               
stimulus  funds should  be used  to help  all Alaskans,  not just                                                               
"the  state."   However,  he  said he  expects  the  funds to  be                                                               
available  shortly.   With  regard  to  Ms. McGlashan's  specific                                                               
situation, he suggested she contact her legislator.                                                                             
5:50:48 PM                                                                                                                    
RICHARD  PECK, Owner,  Utility Innovations  Plus, after  relaying                                                               
that he'd  been working in  the electric utility industry  for 40                                                               
years  and  started his  energy  consulting  firm 14  years  ago,                                                               
commented  on the  need  for  clear direction,  and  the lack  of                                                               
information  forthcoming  from  the   agencies  with  which  he's                                                               
spoken.  He  opined that centralizing all the  agencies that deal                                                               
with energy  would be a  worthy endeavor, and suggested  that the                                                               
Regulatory  Commission  of  Alaska  (RCA)  be  placed  under  the                                                               
purview of  the proposed Department  of Energy to  avoid conflict                                                               
between the  two entities' efforts.   He mentioned that  with the                                                               
help of  AEA, he's just  completed a wind assessment  in "Pyramid                                                               
Valley,"  and expressed  his  hope that  such  AEA programs  will                                                               
continue.   He then  questioned what  the makeup  of any  new AEA                                                               
board  of  directors  would  be   and  what  recommendations  the                                                               
committee would have for the board.                                                                                             
5:54:31 PM                                                                                                                    
CO-CHAIR EDGMON  indicated that  the concept is  for AEA  to have                                                               
autonomy, and that according to HB  218, its [new] board would be                                                               
made up of  the commissioner of the Department  of Revenue (DOR),                                                               
the commissioner of the proposed  Department of Energy, one other                                                               
head of a  principal department of the executive  branch, and two                                                               
public  members, with  the latter  three being  appointed by  the                                                               
governor.    He  noted  that  the RCA  just  held  a  meeting  in                                                               
Anchorage regarding  the "rolling blackouts that  might occur" in                                                               
Southcentral  Alaska due  to shortages  in natural  gas supplies,                                                               
and expressed favor with Mr.  Peck's suggestion regarding placing                                                               
the RCA under the purview of the proposed Department of Energy.                                                                 
MR. PECK mentioned  that AEA was very helpful to  him when he was                                                               
working with a  client on Umnak Island until  AEA determined that                                                               
the client  was neither  an electric  utility nor  an independent                                                               
power  producer and  thus wasn't  eligible  for AEA's  help.   He                                                               
surmised that  there are probably  other similar,  small, private                                                               
enterprises  that  need  assistance developing  their  own  power                                                               
supply in order to meet their  own energy needs but have no place                                                               
to  turn  at this  time  because  they  are neither  an  electric                                                               
utility  nor  an  independent  power  producer.    Therefore,  he                                                               
suggested that  such statutory definitions  need to  be reviewed.                                                               
In  conclusion, he  said, "We  don't want  to disenfranchise  any                                                               
business interest that's trying to  develop the resources of this                                                               
great state."                                                                                                                   
6:00:00 PM                                                                                                                    
FRANK KELTY, noting  that energy issues are now  at the forefront                                                               
of   things  the   state  must   consider   and  surmising   that                                                               
establishing a  Department of Energy to  consolidate services and                                                               
work  with  various  programs  in  a  more  efficient  manner  is                                                               
something  that the  majority of  people could  support, he  then                                                               
listed  current fuel  prices compared  to what  they were  a year                                                               
ago:   number 2 diesel at  the dock is now  $2.75/gallon, but was                                                               
$4.45/gallon  a year  ago;  delivered home  heating  fuel is  now                                                               
$3.18/gallon, but  was $4.98/gallon a  year ago; and  gasoline is                                                               
now $3.34/gallon, but was approximately  $4.99/gallon a year ago.                                                               
He mentioned  that many of the  buildings in town are  not energy                                                               
efficient or weatherized, and surmised  that energy costs for the                                                               
seafood industry are  probably some of the  highest expenses that                                                               
the  industry  has  to  face,   and  that  this  probably  has  a                                                               
tremendous impact on  the harvesters and processers  in the area.                                                               
In  conclusion,  he  ventured that  more  programs  dealing  with                                                               
various energy issues would be helpful.                                                                                         
6:05:20 PM                                                                                                                    
CHRIS HLADICK, City  Manager, City of Unalaska,  opined that it's                                                               
important for the legislature to  have someone independent of AEA                                                               
review the various  projects that come forward  for funding; such                                                               
a person ought to have  power-project experience.  He also opined                                                               
that AEA  needs clear  direction from and  oversight by  both the                                                               
governor and  the legislature -  recalling that in the  past, AEA                                                               
has had problems  and received complaints.   He acknowledged that                                                               
it  is probably  not  a  bad idea  to  have  a single  department                                                               
dealing  with  all energy-related  issues.    He, too,  expressed                                                               
favor  with  the concept  of  having  the  RCA placed  under  the                                                               
purview of  the proposed  Department of Energy.   With  regard to                                                               
developing an energy  policy, he posited that  it's important for                                                               
that policy to have obtainable  goals, and for research regarding                                                               
the  cost of  obtaining  those goals  to be  conducted  so as  to                                                               
determine,  on  a  case-by-case basis,  what  funding  mechanisms                                                               
would be most appropriate.                                                                                                      
MR. HLADICK then mentioned that  [Unalaska] has four power plants                                                               
as well  as a powerhouse  project estimated to cost  $48 million,                                                               
and that the cost of air  quality permitting has gone through the                                                               
roof, and  will only  increase, particularly  if, at  the federal                                                               
level,  "we  end  up  going to  cap-and-trade",  or  if  silicon-                                                               
controlled  rectifiers  (SCRs)  start  being  required  at  every                                                               
"powerhouse" in rural Alaska; capital  costs for "installation at                                                               
capacity"  is also  very high.    Conversion to  ultra-low-sulfur                                                               
diesel  will  also have  a  huge  impact  on  rural Alaska.    In                                                               
response  to  questions,  he  informed  the  committee  that  the                                                               
Makushin Geothermal  project began  around 1982/1983 when  a well                                                               
was  drilled to  about  1,800 feet  where  380 degree  Fahrenheit                                                               
water was  found.   The three-inch  hole was  modeled to  about a                                                               
million pounds  of steam per  hour.   [The City of  Unalaska] had                                                               
been in  the process  of negotiating with  the landowner  for the                                                               
fluid,  but  that fell  apart.    At  this  point, [the  City  of                                                               
Unalaska]  has   $4  million  for   exploratory  drilling.     He                                                               
highlighted  that Makushin  isn't the  only place  on the  island                                                               
where geothermal  exists, and therefore  the city will  work with                                                               
OESI Power Corporation and the  Aleut Corporation for drill sites                                                               
on  their property.   The  city  will also  approach the  federal                                                               
government regarding a  drill site that's located  in the Glacier                                                               
River Valley.  The hope  is that between the aforementioned three                                                               
options, the  city can obtain  an agreement  for the fluid.   The                                                               
landowner [at Makushin] wanted to  charge a sliding scale for the                                                               
fluid such  that the cost  was just  below that of  diesel, which                                                               
isn't "something  you can  spend $150 million  on."   Mr. Hladick                                                               
noted that  this will be a  very expensive and high  risk project                                                               
that  will take  a  minimum  of 10  years.    For instance,  just                                                               
developing  the well  field could  total well  over $50  million.                                                               
Therefore,   the  city   is  taking   a  cautious   approach  and                                                               
acknowledges that the  project will have to rely on  bonding.  He                                                               
relayed  that the  high  cost  of the  air  quality permits  that                                                               
Alyeska Seafoods,  Inc., Western Seafoods, City  of Unalaska, and                                                               
UniSea Inc.  have paid for  has made them reluctant  to disregard                                                               
those and go  with geothermal that may not work.   Therefore, the                                                               
geothermal project has to be taken  to a certain point before the                                                               
aforementioned entities  will give up their  air quality permits.                                                               
Although the  geothermal project  is complicated,  the volatility                                                               
of the  price of fuel illustrates  that work on the  project must                                                               
continue because  no one knows  what the  future holds.   He told                                                               
the committee  that the hope  is to drill exploratory  wells next                                                               
summer.   The  next step  would be  to develop  the well  fields,                                                               
which  is where  the costs  really add  up.   With regard  to the                                                               
length of the transmission lines,  he specified that there's four                                                               
miles  of  water and  about  eight  miles  to the  current  site,                                                               
including crossing four bridges and rough terrain.                                                                              
MR. HLADICK told  the committee that the city  had performed some                                                               
research regarding wind power.   There have been two studies with                                                               
initial findings that  the wind in the Unalaska  area has violent                                                               
changes.   To  develop a  commercial  level of  wind power  could                                                               
total about $20  million and achieve a savings  of about $225,000                                                               
in  fuel;  and therefore,  it  amounts  to  about $1  million  in                                                               
depreciation  not including  maintenance [costs].   The  level of                                                               
useable wind in the Unalaska area  doesn't make wind power a good                                                               
investment.   Furthermore,  it was  doubtful that  a manufacturer                                                               
would provide a  warranty for the level of the  wind in Unalaska.                                                               
The aforementioned  makes it  difficult to  spend that  amount of                                                               
public funds with no manufacturer warranty.                                                                                     
6:15:00 PM                                                                                                                    
CO-CHAIR EDGMON  discussed Nome's  wind turbine project  in which                                                               
18 wind  turbines with 100 foot  towers are used to  capture wind                                                               
from whatever  direction it blows.   The wind turbine  project in                                                               
Nome cost $7 million that  [Sitnasuak Native Corporation] and the                                                               
Bering  Straits Corporation  funded  because  AEA didn't  believe                                                               
there was  viable wind power  in Nome.   However, there  wasn't a                                                               
comprehensive  enough of  a study  regarding the  best technology                                                               
for far north climates.  One  of the towers broke, which required                                                               
the entire  system to be shut  down.  The point,  Co-Chair Edgmon                                                               
said  is  that although  wind  technology  is probably  the  most                                                               
proven   renewable  energy   technology,   it's   still  in   the                                                               
developmental stage.   He predicted  that future dollars  for any                                                               
type of energy  projects will be very  competitive, and therefore                                                               
Unalaska's  cautious  approach will  likely  be  rewarded in  the                                                               
future.  Furthermore,  the legislature is at a point  at which it                                                               
wants  to allocate  the scarce  funds toward  projects that  will                                                               
provide  cheaper  energy  prices  and  technology  that  actually                                                               
6:19:16 PM                                                                                                                    
MR. HLADICK  pointed out that if  the gas pipeline is  built, the                                                               
propane  by-product could  be used  if it  could be  delivered to                                                               
tidewater for $.70  per gallon.  In fact,  Unalaska could convert                                                               
its power plant  to propane as could snow  machines and vehicles;                                                               
the conversion could  be done simply by  following information on                                                               
the Internet.   He recalled a cursory review of  the $150 million                                                               
geothermal  project,  which  found  that  in  order  for  such  a                                                               
project, with  no grants, to  break even  oil would have  to cost                                                               
$130 per barrel.                                                                                                                
6:20:21 PM                                                                                                                    
SINCLAIR WILT,  Vice President, Alyeska Seafoods,  Inc., returned                                                               
to the issue  of air permits.  He related  that Alyeska Seafoods,                                                               
Inc.,  is in  the  process of  trying to  replace  a small  older                                                               
generator with a  new generator in order to conserve  fuel by 10-                                                               
15 percent  in the powerhouse.   If the aforementioned  proves to                                                               
be  successful,  there are  several  more  [generators] that  the                                                               
company would like to switch.   Although the generator has tier 2                                                               
certification,  the  Department   of  Environmental  Conservation                                                               
(DEC) has said that it doesn't  meet tier 2 requirements for this                                                               
application.  This  generator is tier 2  certified by Caterpillar                                                               
and is being used in  other states, including California, for the                                                               
same application.   Mr. Wilt said that the  situation is reaching                                                               
the point  at which the company  will have to refuse  delivery of                                                               
the new [generator] and rebuild the old [generator].                                                                            
6:22:49 PM                                                                                                                    
MR. HLADICK, in response to  Co-Chair Edgmon, noted that the city                                                               
went  through   the  air  permitting  process   with  the  city's                                                               
powerhouse.  The  process took four years and cost  close to $1.1                                                               
million  to  obtain  the  air  permit.    He  explained  that  an                                                               
Environmental Protection Agency (EPA)  accepted air quality model                                                               
has to  be run,  which includes  inputs such as  the size  of the                                                               
engines and the length of run  time.  The process also takes into                                                               
account the  amount of power plants  in the community.   When the                                                               
model is  run, it's done  with all the  power plants in  the area                                                               
running  at full  capacity in  order to  determine where  nitrous                                                               
oxides and sulfur  dioxides hit the land.  The  model is run with                                                               
various inputs per the EPA.   This is an expensive process and is                                                               
dependent upon  how many times  the regulator wants the  model to                                                               
be run,  he said.   He further  explained that the  model doesn't                                                               
really show  what's happening on  the property seeking  a permit,                                                               
but rather  it shows  what happens  on everyone  else's property.                                                               
Mr. Hladick  opined that the  model doesn't really  have anything                                                               
to  do with  the  complex terrain  and  winds of  the  area.   In                                                               
response  to Co-Chair  Edgmon, Mr.  Hladick  confirmed that  it's                                                               
essentially a  federally driven process  that deals with  the air                                                               
shed in the area.  He noted  that Unalaska has a fairly small air                                                               
shed, but there's a lot of industrial use.                                                                                      
6:27:01 PM                                                                                                                    
CO-CHAIR EDGMON, upon determining no  one else wished to testify,                                                               
asked Mayor Marquardt to discuss  energy consumption in Unalaska,                                                               
a substantial port with only 4,000-5,000 residents.                                                                             
6:27:45 PM                                                                                                                    
MAYOR MARQUARDT  opined that there is  no reason for the  City of                                                               
Unalaska  to  construct  a  $48 million  power  plant  for  4,000                                                               
residents.   However,  the city  does need  to construct  a power                                                               
plant to address  the energy needs of the number  one port in the                                                               
U.S.  in terms  of  quantity  of fish  landed.   Mayor  Marquardt                                                               
recalled when she arrived in Unalaska  about 30 years ago when it                                                               
was a nice  quiet small town with two fish  processing plants and                                                               
a newly constructed  bridge.  However, in  1988-89 the Magnusson-                                                               
Stevens Act  was enacted and the  pollock fishery was born.   The                                                               
pollock fishery was the largest  fishery in the state.  Unalaska,                                                               
the only  ice free port  in the Bering Sea  and near some  of the                                                               
richest fishing  in the world, was  a natural fit for  vessels to                                                               
unload.   Therefore, the  processing plants  grew, which  in turn                                                               
caused  support sector  services  to change  and  many people  to                                                               
converge  on the  city.   In  a very  short  time, Unalaska  grew                                                               
quickly as did the city's power needs.                                                                                          
6:31:12 PM                                                                                                                    
MAYOR MARQUARDT explained that the  City of Unalaska is trying to                                                               
supply a  dependable, fuel  efficient, clean  source of  power to                                                               
the community  as well  as existing and  future industries.   The                                                               
city chose to work with Wartsila,  a company in Finland, which is                                                               
the green standard in Europe.  The Wartsila engine is a heavy-                                                                  
built slower  turning machine  that likes to  run at  100 percent                                                               
and  is only  torn  down once  a year  or  year-and-a-half.   She                                                               
characterized  the Wartsila  engine as  extremely dependable  and                                                               
efficient.   The city  was lucky to  obtain assistance  from U.S.                                                               
Senator Stevens through a grant  to purchase two engines that are                                                               
5.2  megawatts  each.   Eventually,  the  city will  replace  the                                                               
existing nine  inefficient older Cat engines  with three Wartsila                                                               
engines.  The third engine had  to be ordered in order to support                                                               
the  increasing  power  needs   of  Unalaska.    Mayor  Marquardt                                                               
acknowledged that  it costs a  lot to  live in rural  Alaska, but                                                               
many people  still choose to  live in rural Alaska  because there                                                               
are  benefits that  outweigh the  negatives.   She said  that the                                                               
city has  put all of its  "eggs in the geothermal  basket," which                                                               
she  acknowledged is  a risky  situation.   Furthermore, even  if                                                               
geothermal will provide  base power in the amount of  close to 10                                                               
megawatts,  diesel generation  will  still be  necessary for  the                                                               
swings when up  to 20 megawatts of power are  needed.  Therefore,                                                               
the  fixed costs  of diesel  generation  will always  have to  be                                                               
applied  to  the  rate,  plus   the  cost  of  geothermal.    The                                                               
aforementioned means that if the  city council chooses to go this                                                               
route, it  will be an  incredibly expensive venture and  the city                                                               
will need help.  She  acknowledged the earlier question regarding                                                               
how much help  a community of 4,000 can receive,  but pointed out                                                               
that  the  community  provides critical  support  for  a  fishing                                                               
industry  that supports  the entire  state.   Unalaska's  fishing                                                               
industry  provides  tax revenue  to  the  state, funding  for  63                                                               
coastal  villages   in  Western  Alaska  through   the  community                                                               
development quota (CDQ)  program.  The City of  Unalaska is going                                                               
to need help  to continue to support the fishing  industry in the                                                               
future,  regardless of  going with  geothermal  or expanding  the                                                               
existing powerhouse.                                                                                                            
6:35:02 PM                                                                                                                    
CO-CHAIR MILLETT said that Dutch Harbor  is not unique in that it                                                               
will always need  diesel and may not be able  to reach the stated                                                               
goal of  50 percent renewable  energy.  Furthermore,  she related                                                               
her  understanding  that Alaska  will  always  be a  fossil  fuel                                                               
state,  and those  communities that  don't have  renewable energy                                                               
resources  shouldn't face  opposition  to  necessary upgrades  to                                                               
fossil fuel power sources.   Therefore, the [state's energy plan]                                                               
needs to recognize the uniqueness of all the regions.                                                                           
6:36:39 PM                                                                                                                    
CO-CHAIR  EDGMON  commented  that  the notion  with  a  statewide                                                               
energy plan is  to create an overarching vision  in state statute                                                               
to address  the supply and demand  side.  He then  asked if Mayor                                                               
Marquardt had  any comments on  the committee's  statewide energy                                                               
plan proposal.                                                                                                                  
MAYOR MARQUARDT responded that she  needs more time to review and                                                               
understand  the  plan.   However,  she  cautioned  the  committee                                                               
against making a plan that tries  to address too much and ends up                                                               
not accomplishing very much.   She opined that simpler plans seem                                                               
to work better.                                                                                                                 
6:39:46 PM                                                                                                                    
REPRESENTATIVE TUCK opined that  conservation efforts can only go                                                               
so far,  although it's  cheaper to save  energy than  produce it.                                                               
However,  when industries  are  expanding as  they  are in  Dutch                                                               
Harbor,  one can  only  conserve  so much.    He  then noted  his                                                               
appreciation of the comments relating  that wind energy isn't the                                                               
solution  for  every  community,  as  well  as  the  other  costs                                                               
associated with wind energy.                                                                                                    
6:41:40 PM                                                                                                                    
REPRESENTATIVE  JOHANSEN encouraged  Mayor Marquardt  to continue                                                               
to  pursue  geothermal  energy   while  working  with  the  major                                                               
industries, such  as the fishing  industry.  He  acknowledged the                                                               
city's efforts using fish oil.                                                                                                  
6:43:33 PM                                                                                                                    
REPRESENTATIVE  CHENAULT  opined  that it's  important  to  visit                                                               
communities  throughout the  state because  the energy  issues in                                                               
each  community are  different.   Furthermore, it's  important to                                                               
see those  differences and completed projects  first-hand as well                                                               
as receive feedback first-hand.                                                                                                 
6:46:47 PM                                                                                                                    
SKIP  SOUTHWORTH,   Member,  Unalaska   City  Council,   City  of                                                               
Unalaska, said that should an  energy rebate become a possibility                                                               
again, he  asked if  there is  any way to  give an  energy credit                                                               
rather than money.   Taxes wouldn't have to be  paid on an energy                                                               
credit.   For  communities such  as  Bethel who  faced very  cold                                                               
temperatures last  year, having  the fuel  rather than  the money                                                               
would've provided more bang for the buck.                                                                                       
6:49:05 PM                                                                                                                    
REPRESENTATIVE  RAMRAS noticed  that the  message throughout  the                                                               
state has  been fairly  similar in  that communities  face energy                                                               
and financial  constraints and  that the  future is  perilous for                                                               
all as the  price of oil continues  to rise.  He  related that he                                                               
is  delighted with  the draft  legislation the  stakeholder group                                                               
has produced.                                                                                                                   
CO-CHAIRS MILLETT and EDGMON thanked everyone for participating.                                                                
[HB 218 and HB 219 were held over.]                                                                                             
6:54:38 PM                                                                                                                    
There being no  further business before the  committee, the House                                                               
Special Committee on Energy meeting was adjourned at 6:5% p.m.                                                                  

Document Name Date/Time Subjects
HB0218A.PDF HENE 6/17/2009 5:00:00 PM
HENE 8/26/2009 5:00:00 PM
HENE 9/16/2009 1:30:00 PM
HB 218
Draft_Energy_Policy_Bill[1].pdf HENE 8/26/2009 5:00:00 PM
HENE 9/16/2009 1:30:00 PM
HB0219A.PDF HENE 6/17/2009 5:00:00 PM
HENE 8/24/2009 1:00:00 PM
HENE 8/26/2009 5:00:00 PM
HENE 9/16/2009 1:30:00 PM
HB 219
Utilities Emergency Response Overview.pdf HENE 8/26/2009 5:00:00 PM
HENE 9/1/2009 2:00:00 PM