Legislature(2005 - 2006)HOUSE FINANCE 519
04/04/2006 01:30 PM House FINANCE
| Audio | Topic |
|---|---|
| Start | |
| HB57 | |
| HB493 | |
| HB445 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | HB 57 | TELECONFERENCED | |
| + | HB 445 | TELECONFERENCED | |
| + | HB 470 | TELECONFERENCED | |
| *+ | HB 493 | TELECONFERENCED | |
| + | TELECONFERENCED |
HOUSE FINANCE COMMITTEE
April 4, 2006
1:41 p.m.
CALL TO ORDER
Co-Chair Meyer called the House Finance Committee meeting to
order at 1:41:03 PM.
MEMBERS PRESENT
Representative Mike Chenault, Co-Chair
Representative Kevin Meyer, Co-Chair
Representative Bill Stoltze, Vice-Chair
Representative Richard Foster
Representative Mike Hawker
Representative Jim Holm
Representative Reggie Joule
Representative Mike Kelly
Representative Beth Kerttula
Representative Carl Moses
Representative Bruce Weyhrauch
MEMBERS ABSENT
None
ALSO PRESENT
Pete Ecklund, Staff, Representative Kevin Meyer; Eddy Jeans,
Director, Education Support Services, Department of
Education and Early Development; Representative Bill Thomas;
Kaci Schroeder, Staff to Representative Bill Thomas; Ron
Miller, Executive Director, Alaska Industrial Development
and Export Authority (AIDEA); Peter Crimp, Project Manger
for Alternative Energy and Energy Efficiency, Department of
Commerce, Community and Economic Development; Sara
Gilbertson, Legislative Liaison, Department of Fish and
Game; Kathie Wasserman, Alaska Municipal League; Paul Fuhs,
City and Borough of Yakutat.
PRESENT VIA TELECONFERENCE
John Schnabel, Haines; Mike Harper, Deputy Director, Rural
Energy, Alaska Energy Authority; Rueben Loewen, Development
Specialist; Becky Gay, Project Manager, AEA; Dick Mylius,
Deputy Director, Division of Mining Land and Water,
Department of Natural Resources; Eddy Jeans, Director,
Education Support Services, Department of Education and
Early Development; Larry Wiget, Director of Government
Relations, Anchorage School District; Mary Francis,
Executive Director, Alaska Council of School Administrators;
Chris Rose, Executive Director, Renewable Energy Alaska
Project; Meera Kohler,President and CEO, Alaska Village
Electric Co-op; Josh Larose, Southwest Municipal Conference.
SUMMARY
SSHB 57 "An Act relating to the sale of certain state land
to adjacent landowners."
CSSSHB 57(FIN) was REPORTED OUT of Committee with
an indeterminate fiscal note (DNR) and individual
recommendations.
HB 493 "An Act relating to reimbursement of municipal
bonds for school construction."
HB 493 was HEARD and HELD in Committee for further
consideration.
HB 445 "An Act relating to the alternative energy grant
fund and to alternative energy grants."
HB 445 was HEARD and HELD in Committee for further
consideration.
SPONSOR SUBSTITUTE FOR HOUSE BILL NO. 57
"An Act relating to the sale of certain state land to
adjacent landowners."
REPRESENTATIVE WEYHRAUCH, SPONSOR, spoke to the bill. He
explained that the bill was introduced to induce the state
to purchase federal lands for sale in January, 2006, as well
as to clear the way for right away disputes over development
of private interests. He noted that his own family often
visited wilderness experiences in Alaska and commended John
Schnable from Haines who operates a small tourist gold mine
in Haines, Alaska. Mr. Schnable is experiencing difficulty
with state lands adjacent to his property. Representative
Weyreuch explained that the bill would allow the Department
of Natural Resources to negotiate sales of isolated parcels
of government owned land at fair market value to adjacent
land-owners. The land must be smaller than twenty acres and
completely enclosed. He expressed that he did not normally
participate in "special interest bills", but speculated that
this bill did not harm, but rather made a fair market
transaction possible. He also mentioned a proposed
amendment by the Department of Natural Resources that would
further protect the State's interests by adding a "best
interest finding" in the event of public easement. He
proposed that this added a level of government oversight,
while allowing an "arms' length" transaction.
1:45:28 PM
JOHN SCHNABEL, HAINES, TESTIFIED VIA TELECONFERENCE
regarding the bill. He stated that the reason he wished to
negotiate a sale as opposed to an outcry auction was due to
the prohibitive upfront costs involved in such auctions. He
explained that he was developing 80 acres into a tourist
destination, and did not wish this work to be disturbed
should another party wish to purchase the small parcel
contained in his property. He noted he had invested over a
million dollars to keep his land in pristine condition, and
wished to keep it so. He mentioned he had no problem with
any right of way through the land, or any trail designation
if that should become applicable.
1:47:47 PM
DICK MYLIUS, DEPUTY DIRECTOR, DIVISION OF MINING LAND AND
WATER, DEPARTMENT OF NATURAL RESOURCES testified via
teleconference. He explained that in most cases, when state
lands were sold it was through a competitive process,
although in certain circumstance state law allows dealing
with one individual through "preference rights". This bill
adds to a current preference right bill. He noted that this
usually took place when an individual had significant rights
or investment in the property. He noted that in this case,
the state had acquired a parcel of land through foreclosure,
making it a self-contained parcel, completely surrounded by
Mr. Schnable's other land. He explained it could not be
sold under existing preference right statutes, and the
public would not be interested since it was included in an
individual's property. He noted it had already been
surveyed, and a best interest finding would be completed
before the sale.
1:50:20 PM
Representative Chenault asked whether this was the only
parcel in this circumstance statewide. Mr. Mylius stated
that his Department was unaware of any other similar
parcels, although he speculated that there might be other
parcels in this situation. He noted that most State land
was acquired in large tracts, and this had been an
exception, acquired under foreclosure during the mining
registration law of the early 1960's.
Responding to a follow-up, Mr. Mylius confirmed that this
bill could be used for such a circumstance in the future.
Representative Kelly observed that the bill permitted rather
than instructed the Director. He asked what the price for a
twenty-acre parcel might be. Mr. Mylius responded that the
largest expense in this case was the public notice
requirement, which cost roughly $1 thousand, in addition to
a $2 thousand in staff time. He noted that last year two
new positions were established to deal with a backlog of
preference rights. He explained that this accounted for the
zero fiscal note.
1:52:57 PM
Responding to a follow-up by Representative Kelly, Mr.
Mylius noted that the applicant would not pay staff time,
but rather the newspaper publication costs.
1:53:30 PM
Representative Kerttula observed that with best interest
findings, the Department could protect against an individual
attempting to purchase a parcel with unique value. Mr.
Mylius confirmed that the Department could decide not to
grant the right to purchase.
1:54:18 PM
Representative Holm asked whether a sunset provision was
appropriate since this was a unique parcel. Mr. Mylius
responded that it might be a helpful tool to have in the
future for a similar circumstance.
1:54:50 PM
Representative Hawker referred to the "sale of an isolated
parcel" as referred to in the bill and asked how they would
interpret "isolated". Mr. Mylius stated that they
interpreted this as being unattached to any other block of
state land, since in this case it was totally surrounded by
private lands.
Responding to another question, Mr. Mylius confirmed that
the current preference right that deals with isolated
parcels most often have pertained to urban parcels that had
no public value and were unattached to other state lands.
1:56:40 PM
Representative Hawker asked whether this would apply to a
municipality that owned land that surrounded state property,
allowing them to petition for a preference right. Mr.
Mylius noted that municipalities already had other statutes
that allow the State to transfer land to them, such as
municipal entitlement. He noted that to his knowledge no
municipality had ever applied under the current preference
rights statutes.
1:57:54 PM
Representative Hawker asked whether there was any
exposure to the state that should be considered before
passing the bill. Mr. Mylius stated that there was no
additional exposure, and referred to the proposed
amendment, which ensured the best interest finding.
1:58:26 PM
Representative Foster commented that he had a 10-acre
Native allotment surrounded by State Land and wondered if
this provision would apply. Mr. Mylius noted that in this
circumstance, if an allotment were surrounded by state land,
it would not apply. He noted that a sale in this case would
be done through a competitive process.
1:59:39 PM
Representative Kelly asked whether, if several individuals
were interested in the same parcel, the "best interest
finding" would apply. Mr. Mylius confirmed that in this
case the public process would help determine the best
interest.
2:00:27 PM
REPRESENTATIVE BILL THOMAS, HAINES, testified in support of
the bill. He expressed his knowledge of John Schnabel and
applauded his efforts over the years to develop the parcel.
Co-Chair Meyer closed public testimony.
2:02:16 PM
Representative Weyhrauch MOVED Amendment #1, 24-LS0319\Y.1,
Bullock, 3/31/06. Representative Joule OBJECTED.
Representative Weyhrauch noted that the Department of
Natural Resources had suggested the amendment after the bill
had moved out of the House Resources Commitee. He explained
that it was intended to provide further protection to the
State's interests, especially in providing access to State
waters.
SARA GILBERTSON, LEGISLATIVE LIAISON, DEPARTMENT OF FISH AND
GAME, testified about the amendment.
2:03:45 PM
Ms. Gilbertson noted that the Department of Fish of Game
worked with the Department of Natural Resources and the
Department of Law to create the amendment. She explained
that there were instances of small parcels of land
completely surrounded by State land, when the State land
contained a water source. She stressed that the State
wished to ensure access to water, and suggested that they
add the proposed language, demanding a best interest finding
to be made by the Director before conveying a parcel. She
concluded that the finding would not affect the transaction
in question in Haines.
2:04:13 PM
The OBJECTION was REMOVED. There being no objection, the
Amendment PASSED by unanimous consent.
Representative Stoltze asked about the suggestion of a
sunset provision. Representative Weyhrauch reminded the
Committee that the testimony referred to the future need for
such a tool.
Representative Hawker pointed out that that the fiscal
note was indeterminate, rather than a zero fiscal note as
previously referenced.
Representative Weyhrauch expressed his hope that the state
of Alaska would create revenue through this bill.
Representative Kelly questioned whether the title of the
Bill should refer to State land rather than Federal Land.
Representative Weyrauch noted that the original title of the
bill referred to purchase of Federal Land.
Representative Foster MOVED to REPORT HB 57 out of
Committee as Amended with an Indeterminate Fiscal Note (DNR)
and individual recommendations. There being NO OBJECTION,
the motion PASSED by unanimous consent.
HOUSE BILL 493
"An Act relating to reimbursement of municipal bonds for
school construction."
2:08:07 PM
PETER ECKLUND, STAFF TO REPRESENTATIVE KEVIN MEYER testified
regarding the bill. He explained that the bill proposes to
allow municipalities to bond for school construction and
renovation projections beginning November 1, 2006 and ending
November 1, 2008. He noted that under current legislation,
any municipality could ask their electorate to approve
funding for school capital projects. The principal and
interest payments would then be eligible for partial payment
by the State. Municipalities would be reimbursed for 60
percent of the cost of all projects that met all the space
allocation guidelines set forth by the Department of
Education and Early Development. Mr. Ecklund noted that a
40 percent reimbursement rate would apply to projects that
exceeded the space allocation guidelines. He stated that
currently there were over $146 million in projects submitted
to the Department that could qualify for this reimbursement.
Co-Chair Meyer asked for an explanation of how the 60/40
percent was arrived upon, rather than the previous 70/60
formula. Mr. Ecklund explained that in 2002, the passage of
HB 2003 opened a two-year period of school debt
reimbursement. He stated that $699 million of debt was
authorized to be reimbursed by the Department -- 55 percent
at the 70 percent rate, and 45 percent at the 60 percent
rate. It followed that nearly half of the schools took
advantage of the 60 percent rate. The Department concluded
therefore that the 60 percent rate must have proven fair and
attractive to municipalities.
Co-Chair Meyer referred to the current program, in which the
State paid for 70 percent of costs of a Department of
Education approved project, and asked if the program was
still in effect until October 1, 2006.
Mr. Ecklund stated that there was a non-capped program open
between December of 2002 and December of 2004. He noted
that currently there were $192 million of projects
authorized to be bonded until October of this year, with
different caps for schools with different enrollment rates.
He explained that the current program finances 70 percent of
the cost of approved projects, and 60 percent of unapproved
projects, expiring in October of 2006.
2:11:52 PM
Co-Chair Meyer clarified that under the proposed program, if
a project was on the approved list, it would qualify at the
60 percent rate, with no caps. He asked if the proposed
lower rates of reimbursement were related to the current
level of indebtedness. Mr. Ecklund stated that the debt
service payments for previously authorized debts was $94
million, which did not include the nearly $300 million in
projects that have been authorized but not requested. He
also noted that for every $100 million in debt authorized,
the State's debt service payments increased $6 million per
year for twenty years. He concluded that if all authorized
projects requested payments, it could increase the State's
debt payments by $18 million annually.
Responding to a follow-up by Co-Chair Meyer, Mr. Ecklund
confirmed that currently the debt level was uncertain.
2:13:40 PM
Co-Chair Meyer speculated that since this bill proposed the
lower rate, it would result in a lower overall debt.
Representative Stoltze observed that a project would need
to meet requirements after it was submitted. He expressed
certain frustrations with the capital project process of the
Department of Education and Early Development in terms of
waiting time and expense.
2:14:38 PM
Representative Joule asked if a tax relief or community
dividend bill might be a companion to this bill, and
observed that this seemed to pass a debt burden to
communities, which often resulted in higher property taxes.
He acknowledged that while his comment was somewhat
facetious, it also pointed out a real issue. He asked if an
earlier debt reimbursement bill connected to a General
Obligation (GO) bond. Mr. Ecklund confirmed that a GO
Bond package on the ballot in 2002 addressed previous debt
reimbursement.
2:16:31 PM
Representative Joule observed that there was current
construction in rural Alaskan schools that pertained to this
issue.
Co-Chair Meyer pointed out the $25 million in the budget to
complete maintenance items from the previous year, and his
awareness of other rural construction or repair projects
that would need to be addressed by the capital budget.
2:17:21 PM
Representative Joule asked for clarification about the
section of the bill that was funded at 40 percent. Mr.
Ecklund responded that during the last two-year period,
there were 70 and 60 percent debt reimbursement provisions.
He reiterated that during that time, 45 percent were paid at
the 60 percent level for unapproved projects.
2:18:19 PM
Representative Stoltze noted an earlier proposal with a
50/50 proposition in the interior, but noted that these
could not be determined without certain agreements. He
expressed concern over whether this represented a "bidding
war".
2:19:06 PM
Co-Chair Meyer noted that this was the highest amount the
State felt they could reimburse based upon current debt
loads. He suggested that in the past years, with a lower
debt load, the State was able to reimburse up to 70 percent,
but that currently, a 60 percent ratio seemed more
reasonable.
Representative Stoltze commented that the Matsu Borough and
School Board had experienced frustration in trying to
receive the State funding needed to adequately house
students. He expressed the need for discussion about the
proper ratio of reimbursement funding.
2:20:32 PM
EDDY JEANS, DIRECTOR, EDUCATION SUPPORT SERVICES, DEPARTMENT
OF EDUCATION AND EARLY DEVELOPMENT testified regarding the
bill. He complimented Mr. Ecklund for his explanation of
the bill's history. He then pointed out the indeterminate
fiscal note prepared by his Department, since it was
currently unclear which schools or projects would apply for
this reimbursement. In response to an earlier question
about how many projects were currently outstanding, he
stated that currently $100 million had been authorized by
voters and the Department of Education. He noted that
municipalities had not yet issued these bonds. He also
stated that an additional $200 million had been authorized
last year, partially approved by the Department and by
voters. He confirmed Mr. Ecklund's earlier observation that
for every $100 million in the 70 or 60 percent reimbursement
ratio, the estimated annual debt payment to the State was $6
million for approximately 20 years. He emphasized that
currently the State's debt burden was $94 million, with an
additional $18 million estimated for the next two years,
putting the State's debt reimbursement program at
approximately $112 million.
2:21:51 PM
Mr. Jeans then pointed out that at the ratios in the
proposed legislation, the State's debt program would drop to
approximately $5 to $5.5 million per $100 million
authorized.
Co-Chair Meyer referred to a handout pertaining to State
Capital Funding, provided by the Department of Education,
and asked if the Department recommended the 60 percent
ratio.
Mr. Jeans responded that the recommendation made in the
report was for a greater variance between reimbursement
levels for those projects that met, as opposed to exceeded,
the Department approved space guidelines. He pointed out
that nearly half of the projects authorized under HB 2003
exceeded space guidelines, leading the Department to
conclude that a ten percent differential did not seem to
matter to districts. They therefore recommended a larger
span between percentages.
Co-Chair Meyer concluded that the Department was concerned
more with the span than the actual percentages. Mr. Jeans
stated that the Department would leave it to the legislators
to decide the reimbursement levels, but pointed out that the
impression that a ten percent differential would deter
districts from department from space guidelines had proven
untrue.
2:24:10 PM
Representative Kelly asked whether the amount of projects
exceeding space guidelines created a financial burden. Mr.
Jeans responded that when HB 2003 was passed in 2003, the
Department knew there were projects that exceeded space
guidelines, but did not anticipate that nearly half the debt
reimbursement would fall under that category. He reiterated
that the ten percent difference did not seem to deter
districts from building outside space guidelines.
2:25:06 PM
Representative Stoltze referred to past contention over the
development of criteria, and asked if enough weight had been
placed on areas with documented rates of growth. He asked
if in effect there existed a penalty for pre-planning.
Mr. Jeans acknowledged that in the current system there was
not a provision to encourage future planning in
municipalities. He noted that they currently focused on
reacting to problems of overcrowding. He noted however that
they did allow for six or seven year enrollment projections
when applying for new space. He conceded that in areas like
Matsu, the system was not currently able to keep up with the
level of growth.
2:26:29 PM
Representative Stoltze suggested that it might be helpful to
provide reimbursement for land acquisitions in advance. He
noted the increasing difficulty to find adequate parcels, as
well as contentious legislative efforts in the past
attempting to lower costs.
2:27:18 PM
Representative Joule asked if grant funding to schools
unable to bond had ever exceeded space guidelines. Mr.
Jeans responded that there had not. Representative Joule
followed up by observing that negotiating space differences
occurred prior to the Department issuing its priority list
for the year.
2:28:20 PM
Mr. Jeans noted that grant projects must fall within space
guidelines, and only under HB 2003 and SB 73 last year did
the State allow debt reimbursement for projects that
exceeded space guidelines.
2:28:43 PM
Responding to a question by Representative Kelly, Mr. Jeans
confirmed his Department's belief that a 20 percent
differential would affect the number of projects that
exceeded space guidelines.
2:29:03 PM
LARRY WIGET, DIRECTOR OF GOVERNMENT RELATIONS, ANCHORAGE
SCHOOL DISTRICT testified online. He commented on the
success of the school debt reimbursement program, and
pointed out that higher reimbursement numbers made it easier
to pass bonds with voters. He confirmed that the School
District supported the bill, but stated that they would like
to extend the time for the new program, from November 1,
2008, to November 30, 2008 to allow for the election to
occur that year for approving bonds without holding a
special election.
Co-Chair Meyer proposed that they create CONCEPTUAL
AMENDMENT changing the end date of the legislation.
2:31:17 PM
Representative Hawker asked whether, if they approved the
shift in percentage reimbursements, it would reflect poorly
on the legislative support of schools.
2:31:46 PM
Mr. Wiget expressed appreciation of the program being
currently put forth by the legislation. He reiterated that
the greater the level of participation by the State the
easier it was for districts to pass bonds, but expressed
appreciation for the reimbursement program.
2:32:31 PM
Representative Stoltze noted that the April election in
Anchorage, as opposed to an October election in other parts
of the State, seemed to cause problems of non-conformity, in
this case necessitating an amendment.
Co-Chair Meyer expressed the desire to HOLD the bill in
order to address further amendments.
2:33:27 PM
Representative Holm referred to very large school projects,
and asked if a more standard school system in Alaska was
more cost effective for the state, rather than individual
designs.
2:34:15 PM
Mr. Jeans explained that the Bond Reimbursement Review
Committee had examined the issue of prototype schools. They
found that in larger communities like Anchorage, protypes
worked well at the elementary school level, since there were
so many schools. However, the State has not adopted a
standard prototype for high schools.
2:35:24 PM
Responding to another question by Representative Holm, Mr.
Jeans noted that examination of this issue led to prototypes
being used in Anchorage and Fairbanks. He noted that there
was not enough construction in the state of large schools to
make prototype models economically favorable.
Representative Holm observed that all schools have a similar
function, and suggested that the cost for construction
should not change by changing the appearance of a unique
school. He expressed that a $54 million high school made
him uncomfortable.
2:36:43 PM
Mr. Jeans reiterated that the Bond Reimbursement Review
Committee had examined prototype schools and found them
ineffective at the high school level. He stressed that they
used such models effectively for elementary schools in
Anchorage and Fairbanks.
2:37:48 PM
MARY FRANCIS, EXECUTIVE DIRECTOR, ALASKA COUNCIL OF SCHOOL
ADMINISTRATORS, (ACSA), testified regarding the bill. She
noted a resolution in support of extending the bond debt
reimbursement program and expressed appreciation to the
committee. She also stated that ACSA members would like to
see a higher reimbursement rate.
Co-Chair Meyer closed public testimony.
Co-Chair Meyer MOVED Amendment #1, 24-LS1752\G.1, Mischel,
3/20/06, changing the end date of the legislation from
November 1, 2008, to November 30, 2008. There being NO
OBJECTIONS the Amendment was ADOPTED.
HB 493, as Amended, was HEARD and HELD.
2:40:07 PM
Representative Stoltze, following up on the discussion on
school design uniformity, asked for a list of schools and
populations to be provided by Mr. Jeans. He noted that in
his district, school populations ranged from 700 to 2,200.
HOUSE BILL NO. 445
"An Act relating to the alternative energy grant fund
and to alternative energy grants."
2:40:54 PM
Representative Stoltze MOVED to ADOPT Work DRAFT 24-
LS1311\X, Cook, 3/31/06. There being NO OBJECTIONS the
Committee Substitute (FIN) was ADOPTED.
2:42:00 PM
REPRESENTATIVE BILL THOMAS, Sponsor, introduced his staff,
Kaci Schroeder and testified regarding the bill. He
explained that the bill proposed to take ten cents per
barrel from oil price revenue sharing and place it into an
alternative energy fund, to be administered by the
Alternative Energy Authority (AEA). He noted that AEA
already had the infrastructure necessary to administer
grants. He estimated that the fund would generate
approximately $30 million per year. The program funding
mechanism could be in place only if the price of oil was $35
per barrel or higher. The program funding could sustain
itself if left alone. He explained that the AEA would
direct the funding to support alternative and efficient
energy projects. Grants may not exceed $20 million, but
grantees may be eligible for more than one grant over time.
Projects are to be submitted to the AEA, who would use their
existing criterion to determine project viability. Grantees
must match funding at 25 percent. He defined an alternative
energy project as "a project that produces energy for the
production of electricity, heat or medical power, derived
from renewable or local resources other than liquid
petroleum, primarily diesel." He went on to define energy
efficiency project as one that "improves the efficiency of
energy generation, transmission or use at facilities across
the state". This includes facility installation, energy
efficient lighting, and improved use of diesel fuel. He
defined an electric utility as "an entity that provides
power for public consumption and has been certified by the
Regulatory Commission of Alaska (RCA)".
2:46:42 PM
Representative Thomas noted that the legislation was crafted
following a trip to Yakutat, where the cost of fuel was an
issue, and residents expressed a desire to utilize nearby
natural gas, but lacked the financial resources to create a
system. He pointed out that when Haines converted to hydro-
electric power, although some were skeptical, it has
provided steady rates in the current climate of rising
costs. He expressed the desire for the State to plan for
the future.
Representative Thomas proposed that the bill would benefit
urban as well as rural communities. He noted that in South
Central Alaska, natural gas was running low. He stressed
that using current resources to solve these problems would
save money in the future. He stated that some communities
in his district use over a million gallons of diesel per
year. He suggested that with a grant program, a community
could bond their share and recoup the funds over a six or
eight year period, using technologies such as wind and tidal
surge. He also proposed that it could free up some PCE
funds.
Additionally, Representative Thomas noted that decreasing
energy costs to consumers puts money back into the Alaskan
economy. He referenced the Fire Island project, and Chugiac
Electric that sought to harness geothermal power at a nearby
hotsprings, as well as some southeast communities looking
into using wood fire to heat swimming pools and cut down on
wood waste. He concluded his presentation by pointing out
that projects would be screened by the AEA rather than
approaching the legislature directly, thereby streamlining
the funding process.
2:50:23 PM
Representative Thomas expressed his usual stance as a pro-
industry legislator, and conceded that a new environmental
focus was novel for his office. Co-Chair Meyer observed
that using hydro energy seemed wise for Representative
Thomas' district and asked if there was reference to nuclear
energy in the bill. Representative Thomas stated that,
although there was allowance for nuclear projects in the
bill, the AEA did not currently allow such projects.
2:51:46 PM
Representative Holm asked about the criterion that would be
adopted to determine economic viability of a project. He
maintained caution in giving authority to regulatory
agencies, and asked for assurances of fair and unbiased
decision making.
2:52:35 PM
Representative Thomas reiterated that AEA already had
established criteria in place, as well as a process for
reviewing projects. He cited several communities that would
benefit from the proposed program.
Representative Hawker referred to earlier comments, and
asked for clarification of the idea of the State having
"extra" wealth. Representative Thomas referred to the vote
to reserve $600 million and proposed that if the State used
$20 to $30 million to support alternative energy projects,
communities could be weaned from dependence on diesel fuel.
He referred to several communities that were being helped
with small grants to retire debt and go forward with energy
projects. He observed that oil prices were not expected to
decline, and suggested it would be wise to use reserves for
pro-active programs. Responding to another comment by
Representative Hawker, Representative Thomas mentioned the
PPT bill and the perception that $1 billion to $2.3 billion
in revenue would be raised by the State. He suggested that
some of the monies should be used to make the State more
energy independent. He maintained that the funding for his
bill would be generated by the State's royalties, if they
were at a level over $35 per barrel. He proposed that, if
adopted, the program would use ten cents per barrel for
energy projects. He stressed that he did not believe that
the entire $20 to $30 million per year would be spent on
projects.
2:56:38 PM
Representative Hawker insisted upon clarifying the notion of
"extra" wealth. He referenced the "prevailing price", or
West Coast price, of $35 per barrel. He proposed that more
than $45 per barrel was needed to balance the State's
budget, and maintained that by taking ten cents from the
amount it increased the State's deficit. He stated that
there was not currently adequate funding for social
services, and proposed that taking $100 million out of the
budget would result in deficit spending for the State.
Representative Thomas replied that projects would ultimately
be channeled through the legislative budget process, giving
legislators the opportunity not to fund them if funds were
not available. He emphasized that since his district was
dependant upon diesel, it was a priority for him to see them
replace this with alternative energy.
Representative Hawker expressed concern that even with a
large increase in taxes on the oil industry, the funding was
already spent. He debated the idea that the State was in
the position of having "extra" wealth.
2:59:01 PM
Representative Thomas emphasized that this was an
appropriation bill, and would come before the Committee
yearly for approval. He urged approval.
Vice-Chairman Meyer agreed that the bill was timely and had
merit, and suggested that the funding source would be worked
out in the legislative process.
Representative Joule commented on the hope for the gas line.
He noted that a benefit of the gas pipeline would be access
to that energy for Alaskans in various areas of the State.
He stressed that the proposed legislation is to explore
alternative energy to areas that will not have access to the
gas line reserves. He emphasized the appropriateness of
these areas seeking alternative energy methods. He observed
that the bill attempted to liberate these communities from
dependence on diesel fuel. He encouraged the legislation.
3:01:44 PM
Co-Chair Meyer agreed that especially in remote areas like
Kotzebue, such alternative sources would be very helpful.
3:02:24 PM
RON MILLER, EXECUTIVE DIRECTOR, ALASKA INDUSTRIAL
DEVELOPMENT AND EXPORT AUTHORITY (AIDEA) testified regarding
the bill. He agreed that the bill did not create a new
program, but rather created another source of funding for
existing alternative energy programs. He noted that the
program was currently funded primarily by federal funds, but
was completing an outside solicitation. He stated that they
used an established set of guidelines in evaluating
potential projects. Their primary focus is on the life
cycle savings of a project. He referred to the Alternative
Energy Newletter, and described projects such as the Prince
of Wales Island hydro electric project, funded by a
combination of grant fund and funds from the power project
loan fund. He noted that this project would displace over
half a million gallons of diesel annually for that area. He
expressed support of the bill.
3:04:37 PM
Representative Holm asked what criteria were employed to
decide which areas and projects would be funded.
PETER CRIMP, PROJECT MANGER FOR ALTERNATIVE ENERGY AND
ENERGY EFFICIENCY, DEPARTMENT OF COMMERCE, COMMUNITY AND
ECONOMIC DEVELOPMENT responded that they conducted life
cycle economic analayses for each project, looking at the
overall savings for its life. He noted that for a
hydroelectric project with a span of 40 years, the costs
were compared over a horizon to an existing project, for
example a diesel power project, and then to the present
value of savings. He noted that they ranked projects by
benefit to costs ratios and allocated resources according to
these ratios.
3:06:09 PM
Representative Holm asked how various communities would be
chosen. Mr. Crimp noted that they would choose the
community project with the most savings compared to the
least costs.
Representative Holm asked if any biases existed, and only
strict calculations were used. Mr. Crimp noted that they
made every effort to conduct "arms' length" assessments of
projects, using a financial analysis as well as an analysis
of technical merit.
3:07:27 PM
Representative Holm noted a concern expressed about the
project at Fire Island, regarding loss of wildlife and other
deterrents. He speculated that projects might contain
possible problems not addressed from a financial standpoint.
He asked how these concerns were taken into account.
3:08:27 PM
Mr. Crimp explained that before Alaska Energy Authority
provided any funding for projects, they required all
necessary permits. He noted that before Fire Island could
be approved, it would need permits from Fish and Wildlife
service, as well as possibly the FAA, Core of Engineers,
etc. Balanced financing for the project is also required.
3:09:21 PM
Representative Kerttula observed that the ultimate goal of
the bill was not only to provide good sources of energy to
various areas Statewide, but also long-term cost savings.
Mr. Crimp confirmed that this was the thrust of the
Authority's program - to reduce the overall cost of
providing energy to the State.
3:10:19 PM
Representative Joule asked about the progress of the Ing
River project. Mr. Crimp explained that a feasibility
analysis was being conducted for the project in Knik Arm,
that would use tidal flow turbon technology. He noted that
the same technology could be employed in the Yukon River.
Although the economics were currently unclear, he stated
that the overall effort has been useful in producing common
assumptions, and projected 3 to 5 years for completion.
3:11:38 PM
Representative Hawker referred to Page 2, Lines 8 to 13,
which discusses criterion for grant projects. He asked for
clarification of "economically viable" as well as "services
of the grantee". He also asked how economically liability
was determined if a project proved unviable, as had been the
case in some past projects.
Mr. Crimp referred to earlier testimony by Mr. Miller about
the ranking of proposals. He noted that the services that
reduce costs for consumers would receive the focus. He also
stressed that the current program required a match,
sometimes as much as 60 percent, involving out of pocket
match as well as financing.
3:14:17 PM
Representative Hawker noted the current bill contained
only a 25 percent match, and asked if a performance bond
would be required equal to State funding. Mr. Crimp
responded that there was no requirement for a performance
bond, but emphasized that the recipient's investment in a
project was an incentive for project success.
Representative Hawker maintained that while providing an
incentive for programs, the State remained liable for lost
revenue.
3:15:14 PM
Representative Holm asked if these projects were under the
supervision of the Regulatory Commission of Alaska (RCA).
Mr. Miller stated that some utilities were not regulated by
RCA.
3:16:08 PM
Representative Kelly referred to a presentation given about
the small, interconnected hydro power plants for exchange
into the Northwest. He observed that in major Alaskan
communities in Southeast this might be a viable option. He
cited personal experience with various experimental energy
projects, and noted that hydro-electric power tended to be
the most proven resource, as opposed to other projects which
were more speculative. He asked if this project focused on
hydro power as a solution for Alaska.
3:17:54 PM
Mr. Miller responded that they had not been approached with
such a proposal, and speculated that, especially as an
export project, it would have to prove cost effectiveness
for Alaska. Representative Kelly noted that diesel
efficiency and hydro projects seemed to have the greatest
amount of improvement, but observed that sometimes these
projects might be adversely affected by climate and other
environmental factors.
3:19:19 PM
Mr. Miller noted that they were very active in hydro
electric projects, supporting them through grant and
financing programs. He noted two successful hydro projects
in Juneau, as well as on Prince of Wales Island. He also
noted that diesel efficiency has proven successful,
particularly with in-use efficiencies such as lighting
retrofits. He noted that Juneau had some of the lowest
energy rates in the States due to hydro projects.
3:20:33 PM
Vice Chairman Stoltze opened the floor to public
testimony.
CHRIS ROSE, EXECUTIVE DIRECTOR, RENEWABLE ENERGY ALASKA
PROJECT, testified via teleconference in support of the
bill. He observed that 40 states have incentive policies
built in at the state level for energy renewal. He observed
that the price of oil was projected to remain high, and that
communities that relied solely on this source would face
increasing costs. He also noted that there were
opportunities for improvements in the rail belt. He
explained that his organization was educating the public on
the changes in technologies. For example, in some areas of
the country, wind was the cheapest form of energy available.
He also noted that having a policy like this bill would
create a future energy framework for the state. He stated
that the renewable energy market was the fastest growing in
the country. The "clean energy market" was predicted to
quadruple in nine years' time. He concluded that if
policies like this were put in place, consumers would
benefit from fixed rate power, such as instituting a wind
generator in rural areas. He emphasized that efficiency was
also part of the overall program needed. He concluded that
they believed in the merit of the policy, and encouraged
legislators to use the amount of oil as a guidepost in how
much was invested into alternative energy.
3:26:14 PM
MEERA KOHLER,PRESIDENT AND CEO, ALASKA VILLAGE ELECTRIC CO-
OP testified via teleconference in support of the bill. She
explained that they were a utility providing energy to
21,000 Alaskans in 52 villages. She observed that the bill
provided an opportunity for communities dependent on oil to
develop some alternatives to rising oil costs. She
applauded the bill's link to the cost of oil, and the high
level cap on the grants, as well as the 25 percent cash
match. She concluded that the bill brought Alaska closer to
energy independence and encouraged its support.
3:28:09 PM
Representative Kelly asked if her organization would be
amenable to assuming the completion risk of a venture, or
converting the 25 percent match to a loan. Ms. Kohler noted
that 25 percent of the cost of a project was absorbed by the
utility, and the other costs were covered by the granting
agency. She noted that the utility would retain the risk of
the 25 percent, unless they convinced the granting agency to
share any additional costs.
3:30:28 PM
Representative Kelly observed that if a project was
unsuccessful, a utility would need to take on completion
costs for a project that was not generating revenue. Ms.
Kohler concurred, and added that if a project was funded at
$5 million, and actually cost $6 million, the utility would
need to bridge that gap. She stated that they might
approach the federal government, but confirmed that the
utility would somehow need to come forward.
3:31:38 PM
JOSH LAROSE, SOUTHWEST MUNICIPAL CONFERENCE, testified via
teleconference in support of the bill. He referred to
current newspaper articles about the prices of diesel fuel,
as well as the rural energy funding bills, concluding that
the funding for rural diesel energy would prove
unsustainable. He pointed out that the debate was regarding
how to best provide options to these rural areas. He stated
that small communities were facing a bleak financial
situation, and that the bill presented immediate as well as
future relief.
3:33:46 PM
KATHIE WASSERMAN, ALASKA MUNICIPAL LEAGUE, testified in
support of the legislation. She stated that the bill was
forward thinking, encouraging investigation into utilities'
future, and cost savings in areas such as educational
facilities. She cited her experience as mayor of a small
community, and recalled the high rate of energy cost to
these areas. She proposed that if more communities had the
option to study other means it would provide savings.
3:36:02 PM
Co-Chair Meyer asked about the nature of the hydro plant in
her area. Ms. Wasserman noted that the was put in place a
long time ago by the cold storage company that founded the
community of Pelican, and not paid for by the city or State.
3:36:38 PM
Representative Hawker pointed out the $7 billion dollar
liability to the pension plan by the State. He asked how he
could invest in this program without addressing this other
legal liability.
3:37:17 PM
Ms. Wasserman suggested that there might be other areas
where monies could be cut in the budget. She offered to
discuss these ideas with legislators.
3:37:59 PM
PAUL FUHS, CITY AND BOROUGH OF YAKUTAT, testified about the
costs of energy to smaller communities. He recalled the
importance of savings measures to these areas.
3:39:48 PM
Co-Chair Meyer agreed that the legislation was a good idea.
He offered to work with the Sponsor to come up with
alternative funding.
3:40:57 PM
HB 445 was HELD in Committee for further consideration.
ADJOURNMENT
The meeting was adjourned at 3:41 P.M.
| Document Name | Date/Time | Subjects |
|---|