02/06/2008 01:00 PM House RESOURCES
| Audio | Topic |
|---|---|
| Start | |
| HB267 | |
| HB336 | |
| Adjourn |
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 267 | TELECONFERENCED | |
| += | HB 336 | TELECONFERENCED | |
| + | TELECONFERENCED |
ALASKA STATE LEGISLATURE
HOUSE RESOURCES STANDING COMMITTEE
February 6, 2008
1:05 p.m.
MEMBERS PRESENT
Representative Carl Gatto, Co-Chair
Representative Craig Johnson, Co-Chair
Representative Anna Fairclough
Representative Paul Seaton
Representative Bryce Edgmon
Representative David Guttenberg
Representative Scott Kawasaki
MEMBERS ABSENT
Representative Bob Roses
Representative Peggy Wilson
COMMITTEE CALENDAR
HOUSE BILL NO. 267
"An Act relating to authorizing the state to join with other
states entering into the Wildlife Violator Compact and
authorizing the compact to supersede existing statutes by
approving standards, rules, or other action under the terms of
the compact; and directing the initiation of civil actions to
revoke appropriate licenses in this state based on a resident
licensee's violation of or failure to comply with the terms of a
wildlife resource citation issued in another state that is a
party to the compact."
- MOVED CSHB 267(RES) OUT OF COMMITTEE
HOUSE BILL NO. 336
"An Act directing the Alaska Energy Authority to conduct a study
of and to prepare a proposal for an appropriately sized Susitna
River hydroelectric power project; and providing for an
effective date."
- HEARD AND HELD
PREVIOUS COMMITTEE ACTION
BILL: HB 267
SHORT TITLE: WILDLIFE VIOLATOR COMPACT
SPONSOR(s): REPRESENTATIVE(s) JOHNSON
01/04/08 (H) PREFILE RELEASED 1/4/08
01/15/08 (H) READ THE FIRST TIME - REFERRALS
01/15/08 (H) RES, FIN
01/18/08 (H) RES AT 1:00 PM BARNES 124
01/18/08 (H) Heard & Held
01/18/08 (H) MINUTE(RES)
01/28/08 (H) RES AT 1:00 PM BARNES 124
01/28/08 (H) Heard & Held
01/28/08 (H) MINUTE(RES)
02/06/08 (H) RES AT 1:00 PM BARNES 124
BILL: HB 336
SHORT TITLE: SUSITNA HYDROELECTRIC PROJECT
SPONSOR(s): REPRESENTATIVE(s) JOHNSON
01/22/08 (H) READ THE FIRST TIME - REFERRALS
01/22/08 (H) RES, FIN
01/28/08 (H) RES AT 1:00 PM BARNES 124
01/28/08 (H) Heard & Held
01/28/08 (H) MINUTE(RES)
02/06/08 (H) RES AT 1:00 PM BARNES 124
WITNESS REGISTER
AL CAIN, Criminal Justice Planner
Statewide Law Enforcement Specialist
Division of Sport Fish
Alaska Department of Fish & Game (ADF&G)
Anchorage, Alaska
POSITION STATEMENT: Answered questions regarding HB 267.
BURKE WALDRON, Captain
Central Office
Division of Alaska Wildlife Troopers
Department of Public Safety (DPS)
Anchorage, Alaska
POSITION STATEMENT: Answered questions regarding HB 267.
ELIZABETH VAZQUEZ, Chair
Board of Directors
Chugach Electric Association, Inc.
Anchorage, Alaska
POSITION STATEMENT: Supported HB 336.
BRAD EVANS, Acting Chief Executive Officer
Chugach Electric Association, Inc.
Anchorage, Alaska
POSITION STATEMENT: Provided information and answered questions
during hearing on HB 336.
UWE KALENKA, Vice Chair
Chugach Electric Association, Inc.
Anchorage, Alaska
POSITION STATEMENT: Supported HB 336.
RAY KREIG, Chairman
Chugach Consumers
Anchorage, Alaska
POSITION STATEMENT: Supported HB 336.
JAMES HEMSATH, Deputy Director for Development
Alaska Energy Authority (AEA)
Alaska Industrial Development and Export Authority (AIDEA)
Anchorage, Alaska
POSITION STATEMENT: Provided information and answered questions
during hearing on HB 336.
CHRIS RUTZ, Procurement Manager
Alaska Energy Authority (AEA)
Alaska Industrial Development & Export Authority (AIDEA)
Anchorage, Alaska
POSITION STATEMENT: Answered questions during hearing on HB
336.
ACTION NARRATIVE
CO-CHAIR CRAIG JOHNSON called the House Resources Standing
Committee meeting to order at 1:05:12 PM. Representatives
Kawasaki, Fairclough, Seaton, Guttenberg, Gatto, and Johnson
were present at the call to order. Representative Edgmon
arrived as the meeting was in progress.
HB 267-WILDLIFE VIOLATOR COMPACT
1:05:29 PM
CO-CHAIR JOHNSON announced that the first order of business
would be HOUSE BILL NO. 267, "An Act relating to authorizing the
state to join with other states entering into the Wildlife
Violator Compact and authorizing the compact to supersede
existing statutes by approving standards, rules, or other action
under the terms of the compact; and directing the initiation of
civil actions to revoke appropriate licenses in this state based
on a resident licensee's violation of or failure to comply with
the terms of a wildlife resource citation issued in another
state that is a party to the compact."
REPRESENTATIVE FAIRCLOUGH supported the concept of the Wildlife
Violator Compact and supported moving HB 267 out of committee.
She appreciated the opportunity to work with other states to
hold people who abuse resources accountable.
1:07:22 PM
CO-CHAIR JOHNSON, in response to Co-Chair Gatto, reviewed the
changes included in Version O of HB 267[the committee substitute
adopted as the working draft on 1/28/08, labeled 25-LS0864\0,
Kane, 1/24/08]. He said Version O excludes commercial fishing
because commercial fishing is not part of the compact; however,
there is discussion underway among compact members to include
commercial fishing in the future. Another change, he said, is
the definition of wildlife that was added on page 5 [subsection
(o), lines 21-27].
1:08:07 PM
REPRESENTATIVE SEATON observed that big game commercial hunting
services are also excluded along with commercial fishing (page
1, lines 2-3).
CO-CHAIR JOHNSON understood that a big game commercial hunting
service must have a hunting license and would be unable to
provide the service if it lost its hunting license. This would
also apply to big game guides, he added.
1:08:40 PM
REPRESENTATIVE SEATON pointed out that additional wording was
removed from the title: "authorizing the compact to supersede
existing statutes [by approving standards, rules, or other
action under the terms of the compact]".
CO-CHAIR JOHNSON said this deletion is in response to the
committee's concern that Alaska state law clearly takes
precedence over the compact so the state retains its autonomy
over its wildlife and resources.
1:09:17 PM
CO-CHAIR GATTO inquired whether there is anything that should be
specifically excluded from the definition of wildlife [page 5,
subsection (o), lines 21-27].
CO-CHAIR JOHNSON responded he would be uncomfortable excluding
anything because the broader it is, the better. However, he
said, he is willing to discuss a specific recommendation.
1:09:55 PM
CO-CHAIR GATTO asked whether the last sentence [of subsection
(o)] is a redundant statement.
CO-CHAIR JOHNSON said he is uncertain, but it was drafted by
Legislative Legal and Research Services so it must have been
thought necessary.
REPRESENTATIVE FAIRCLOUGH pointed out that this language was
included in Version O at the committee's request to ensure that
no species were left out. In further response to Co-Chair
Gatto, Representative Fairclough clarified that the language
added in Version O is on page 5, lines 26-27, as follows: "In
this state, 'wildlife' means all species of fish and game as
these terms are defined in AS 16.05.940."
REPRESENTATIVE SEATON added that the reference to statute is to
make it clear that wildlife means hunted wildlife covered by a
hunting license, not dogs or cows or shrews or other animals.
1:12:10 PM
AL CAIN, Criminal Justice Planner, Statewide Law Enforcement
Specialist, Division of Sport Fish, Alaska Department of Fish &
Game (ADF&G), stated that the term wildlife is compact language.
The last sentence [relating to the state of Alaska] was added by
Legislative Legal and Research Services because Alaska's
statutes do not define wildlife, they define fish and game. He
said Alaska statute defines fish as any species of aquatic
finfish, invertebrate, or amphibian in any stage of its life
found or introduced in the state; and game is defined as any
species of bird, reptile, or mammal, including feral animals
introduced and found. These definitions include species covered
under sport hunting and sport fishing licenses and do not
include domesticated animals like cats and dogs.
CO-CHAIR GATTO inquired whether a domestic reindeer would be
defined as [huntable] wildlife.
MR. CAIN said there is a list of animals that are exempt from
hunting.
1:14:42 PM
CO-CHAIR GATTO asked whether a clause is needed in HB 267 that
specifically excludes domesticated animals whether they were
originally wild or otherwise.
MR. CAIN responded he did not believe that is necessary because
there is extensive definition language in this regard. A
domestic reindeer would be defined as private property, the same
as would be a domesticated pet. The only exception is that the
Alaska Department of Fish & Game would require the owner to have
a permit to possess a reindeer, bison, or similar species. He
said he will look up the exact citation.
CO-CHAIR GATTO asked whether a pet wolf could be hunted by a
neighbor who fears the wolf might attack his or her pet dog.
REPRESENTATIVE FAIRCLOUGH noted that if Alaska is a member of
the wildlife compact, the state would determine whether a
violation has occurred under existing Alaska statute and an
appeal process would also be available prior to the violation
going into the compact database for access by the other compact
member states. So, the state is covered, she said.
REPRESENTATIVE SEATON pointed out that by adopting Version O the
compact will not supersede existing state statutes because this
provision was removed. He agreed that the state is covered.
CO-CHAIR GATTO responded, "If indeed the state statute did cover
those."
CO-CHAIR JOHNSON said he thinks that in the case of a neighbor
shooting someone else's pet a number of civil and criminal
statutes would apply that are unrelated to protecting the
state's natural resources.
1:18:56 PM
BURKE WALDRON, Captain, Central Office, Division of Alaska
Wildlife Troopers, Department of Public Safety (DPS), cited a
portion of the compact's definition of wildlife which specifies:
"Species included in the definition of wildlife vary from state
to state and a determination of whether a species is wildlife
for the purposes of this compact must be based on local law."
He noted that game, not wildlife, is hunted under Alaska law and
that the definition of game excludes domestic birds and mammals.
Thus, domestic animals are excluded in terms of how the state's
game or wildlife laws apply.
CO-CHAIR GATTO inquired whether farm raised musk ox are
considered domestic animals under Alaska statute.
MR. BURKE related that court rulings for both musk ox and bison
have determined that farm reared animals are considered
domestic.
1:20:35 PM
REPRESENTATIVE FAIRCLOUGH moved to report HB 267, Version 25-
LS0864\O, Kane, 1/24/08, out of committee with individual
recommendations and the accompanying zero fiscal note. There
being no objection, CSHB 267(RES) was reported from the House
Resources Standing Committee.
HB 336-SUSITNA HYDROELECTRIC PROJECT
1:21:30 PM
CO-CHAIR JOHNSON announced that the next order of business would
be HOUSE BILL NO. 336, "An Act directing the Alaska Energy
Authority to conduct a study of and to prepare a proposal for an
appropriately sized Susitna River hydroelectric power project;
and providing for an effective date." He noted that public
testimony is still open for HB 336.
1:22:20 PM
ELIZABETH VAZQUEZ, Chair, Board of Directors, Chugach Electric
Association, Inc., stated that Chugach Electric Association
supports HB 336. She specified:
Chugach is a member-owned electric cooperative
headquartered in Anchorage. It is the largest
electric utility in Alaska. We provide retail
electric services to approximately 80,000 metered
locations. Chugach also provides power for Alaskans
from Homer to Fairbanks through wholesale and economy
energy sales to other utilities.... We directly or
indirectly provide energy to three-quarters of the
state's population.
Today about 90 percent of the kilowatt-hours Chugach
sells annually are produced by natural gas-fired
units. The other 10 percent comes from hydroelectric
projects. Currently, all of our natural gas from the
Cook Inlet Basin.
Chugach believes fuel diversity is important for
customers. As you can see, we are heavily dependent
upon Cook Inlet gas as a generation fuel. Natural gas
prices have risen dramatically in recent years -
doubling between 2003 and 2006. As gas prices have
risen, so too have the bills paid by electric utility
customers.
We very much value the three hydroelectric projects we
currently have in the Railbelt. They provide clean,
renewable, relatively flat-priced power. These three
projects - Eklutna, Cooper Lake, and Bradley Lake -
generally provide the lowest cost generation for the
Chugach systems. The only real problem we have with
them is their limited capacity. We are extracting all
the power we can from these projects today.
We believe the time is right for the state to study
generation alternatives, including the idea of a major
regional hydroelectric project on the Susitna River.
Much work was done studying the concept of a very
large Susitna project back in the 1980s. We are not
suggesting a rebirth of that project per se, but
rather a fresh look at the resource, and a realistic
appraisal of a project that is the right size for the
Railbelt region.
It would take years to bring a major new hydroelectric
project online. Therefore, the right time to begin a
process like this is now. Chugach is planning for a
new, efficient gas-fired power plant that will provide
a bridge to the future. However, around 2020 we
foresee the need for the next major generation
project. This is a good time to study the potential
of a Susitna project and the benefits it could provide
for Alaskans throughout the interconnected Railbelt
region.
Chugach believes HB 336 makes several good points. We
believe this study should be led by the Alaska Energy
Authority. We very much agree ... that the effort
should be collaborative among the Energy Authority and
the Railbelt electric utilities. We believe the
emphasis should be on considering a project
[appropriately] sized for the Railbelt. At this point
it is prudent to review and build on the work that has
already been done in prior studies.
In conclusion, we would like to thank Representative
Johnson for sponsoring this bill and co-sponsors
Speaker Harris and Representatives Ramras and Kelly
for their support of this important issue.
1:26:56 PM
REPRESENTATIVE SEATON inquired whether Ms. Vazquez agreed with
previous testimony that the appropriate size for the project
would be 100-300 megawatts instead of 1200 megawatts. He
further inquired whether there is room for two projects in the
100-300 megawatt size or only room enough for one.
MS. VAZQUEZ understood that generally there is a need for at
least two or three hydroelectric projects and that the
previously proposed Susitna Hydroelectric Project was considered
too big for the Railbelt at 1200-1600 megawatts. She deferred
to Mr. Evans for further detail.
BRAD EVANS, Acting Chief Executive Officer, Chugach Electric
Association, Inc., said that while a 300 megawatt project would
be welcome in the Railbelt, it would not be large enough to dent
the fossil fuel problem the region currently faces. The Susitna
Hydroelectric Project could be built in either of two ways, he
explained. It could be scaled down or it could be built to its
full capability of 1200 megawatts with only enough turbines
installed to meet current demand. Then, in the future, the
project could be scaled up without doing any more dam and civil
work - similar to what Chugach did at Bradley Lake.
1:30:20 PM
REPRESENTATIVE SEATON asked whether it is Chugach's view that
the Susitna project should go forward and the proposed
Chakachamna project should be kicked out.
MR. EVANS responded no. It was not aimed at Chakachamna or some
other similar project, it was to get the best fit for where the
load is today and the other resources that are in play today.
Everything would be studied and the economics of each one would
be looked at to see what the optimal answer would be for the
state at this time along with a future capability to grow.
CO-CHAIR JOHNSON added that the appropriate sized project is one
of the things the study will look at. It will not be the call
of any utility to determine what is or is not appropriate.
1:32:06 PM
MR. EVANS, in response to Co-Chair Gatto, stated that Chugach's
peak load is just shy of 500 megawatts, including wholesale
power sales and sales to Matanuska Electric Association (MEA).
In further response to Co-Chair Gatto, Mr. Evans confirmed that
the Susitna project is considerable given that it would replace
300 megawatts of Chugach's current load.
CO-CHAIR GATTO asked whether the [low generation costs for the
Eklutna, Cooper Lake, and Bradley Lake hydro projects] include
the amortized cost of constructing them.
MR. EVANS replied that there is not one answer because each of
those projects is under a different financial model. The newer
Bradley Lake does not financially perform like the much older
Cooper and Eklutna. Bradley Lake was 50 percent grant and 50
percent debt service. But, even with that 50 percent debt
service, Bradley Lake is still one of Chugach's cheapest power
sources today.
1:33:35 PM
CO-CHAIR GATTO asked what portion of the current total
consumption of Cook Inlet natural gas is consumed by Chugach
Electric Association.
MR. EVANS estimated about 40 percent.
CO-CHAIR GATTO observed that displacing 40 percent of current
Cook Inlet gas consumption would be the same as finding new gas
and would thus extend the break point for when there will not be
enough gas to supply existing needs.
MR. EVANS agreed. He said Chugach is 90 percent gas-fired
generation, so hydropower would conserve the gas for other uses
for a period of time.
CO-CHAIR JOHNSON interjected that hydropower would not
necessarily supplant the use of Cook Inlet gas due to the long
time frame for dam construction. As a long-term goal it would
extend the life of the gas fields, but it will not solve the
Cook Inlet gas problem.
1:36:30 PM
REPRESENTATIVE GUTTENBERG inquired what Chugach Electric
Association needs to build between now and when Susitna would
come online, given the association's aging infrastructure.
MS. VAZQUEZ said Chugach would have hydropower now if she had a
magic wand. However, Chugach's only option right now for
bridging the gap is gas-fired new generation. The newer
generation assets are 30 percent more efficient than the aging
assets they will replace, she pointed out. The current
equipment is so old that the parts have to be special ordered.
Chugach is at a crisis point and there is no luxury of time to
pursue one alternative and then another; rather, several
alternatives must now be pursued at the same time.
MR. EVANS noted that most of Chugach's generation was built in
the 1960s and 1970s and has reached the end of its useful
mechanical life. Additionally, it is dated in terms of its
efficiency and a 30 percent efficiency gain would put a huge
dent in the association's fuel bill. The current business model
is old, he said, and Chugach has an intermediate plan to bridge
between the Railbelt's current energy problem and the
possibility of a larger-scale project that would solve the
problem. Chugach is currently working with two other utilities
on plans to jointly construct a new gas-fired generation project
in Anchorage that is hoped to be online by 2012. If a hydro
project came online afterward it would be for those times of
maintenance, outages, and intermediate and peaking purposes
rather than base load.
1:40:22 PM
CO-CHAIR GATTO asked why Chugach is in a crisis and did not use
a business model that plans way ahead.
MR. EVANS said the crisis is that the current business model is
under stress. The Cook Inlet gas model is old and will not
necessarily meet the growing demands of the Cook Inlet Region,
and the fossil fuel model is coming under stress for
environmental and global warming reasons. The time is right to
find alternative sustainable resources that will flatten out
prices and provide diversity to reduce dependence on market-
based gas prices. Those market-based gas prices will go right
to customer's front doors, he warned. If something is not done
it will be a crisis, and that is why Chugach is reaching out and
supporting efforts that will be useful to the people and the
economy of the state.
1:42:16 PM
REPRESENTATIVE KAWASAKI inquired whether coal is still part of
Chugach Electric Association's equation.
MR. EVANS replied that Chugach studied a coal-fired plant at the
Beluga coal field, but coal now has a lot of environmental
challenges and its future is uncertain. It seems the
legislature would want to pick the best alternative, he said.
Chugach is asking for enough information to help pick that best
alternative and thinks hydropower has a role to play.
1:43:15 PM
REPRESENTATIVE KAWASAKI asked whether Mr. Evans thinks there is
a lot riding on a Susitna dam.
MR. EVANS responded yes, a lot would be riding on Susitna if it
got built. In further response to Representative Kawasaki, Mr.
Evans said Susitna would be a big impact to Chugach's generation
business model.
1:43:55 PM
REPRESENTATIVE KAWASAKI noted that $160 million in federal funds
was spent on the Susitna plan and no dirt was turned and no road
was built; all that remains is a box of paperwork. He said he
supports a carbon neutral source of electricity like the Susitna
dam, but it is a big project. He inquired about the short term
projects that Chugach has in place right now.
CO-CHAIR JOHNSON said he views Susitna as placing another option
on the table, not taking options off. Conversations with other
people indicate that having one mega-project to provide all of
the state's power is ill advised, he related. Thus, it will
take a lot of these interim smaller projects. If it is the
right project, perhaps it would become the cornerstone of a
package, but the Susitna dam would not be the only project.
1:46:12 PM
REPRESENTATIVE KAWASAKI asked why HB 336 would spend $1 million
on one narrowly defined project, the Susitna dam, and not on any
other options that have been proposed.
CO-CHAIR JOHNSON answered that the bill spends $1 million to
brush that box off, update it, and answer some questions.
1:47:07 PM
REPRESENTATIVE EDGMON stated that this issue merits discussion
whether or not the idea goes forward. If it is "code orange"
for natural gas in Anchorage, then the pleas from his
constituents indicate it is "code red" in Bush Alaska. People
are leaving the Bush because it has become too expensive to live
out there.
CO-CHAIR JOHNSON said he is not looking at this as just a
Railbelt solution, rather he hopes it is the cornerstone of a
statewide solution and long-range energy policy to start
electrifying Alaska.
1:49:03 PM
MS. VAZQUEZ informed the committee that Chugach Electric
Association is not just waiting for a hydro project to solve its
problems. It is dealing with these issues in the near term by
taking interim conservation measures to conserve energy, such as
stressing conservation and providing tips in the association's
monthly newsletter. The association has a renewable energy
committee that meets once monthly and the board receives a
monthly report regarding conservation efforts and efforts with
the association's biggest customers. She said Chugach is on
overdrive in working with other utilities on immediate future
joint-generation that is needed to be more efficient.
1:50:36 PM
UWE KALENKA, Vice Chair, Chugach Electric Association, Inc.,
stated it is not wise for an electric utility to have all its
eggs in one basket and Chugach has almost all of its eggs in one
basket with 90 percent of its generation from gas and 10 percent
from hydropower. There are only two companies in Cook Inlet
producing gas, he said. In the 1960s and early 1970s gas was
23 cents per million cubic feet (MCF), now it is over $4. The
Henry Hub natural gas price is between $6 and $12. As a
resource becomes scarce the price automatically goes up, said
Mr. Kalenka, so it can be seen where things are heading with the
gas running out in Cook Inlet. Chugach is looking long-range in
exploring all alternatives, and the Susitna Hydropower Project
is possibly one of them. Susitna needs to be dusted off and
looked at to determine whether it is viable, economical, and
practical - that is all that Chugach is saying at this point.
Wind and geothermal are unable to generate the amount of energy
currently required, he related. Time is urgent and the gas is
needed for home heating rather than generating electricity.
1:52:56 PM
RAY KREIG, Chairman,, Chugach Consumers, said Chugach Consumers
is an advocacy group for electric utility customers. He noted
that he is a professional civil engineer and that he served for
six and one-half years on the Chugach Electric Association Board
of Directors. He specified:
Chugach Consumers strongly supports HB 336 and we
commend Representative Johnson and Chugach Electric's
new board for their leadership in stepping up and
initiating this overdue review of one of the major
alternatives to the present hydrocarbon-based cost
rollercoaster that ratepayers are on with gas-fired
generation.
The steadily rising cost of energy in the past few
years has everyone, especially utility boards, talking
about alternatives wind, coal, small and large
hydro, and even nuclear. The utilities have to make
decisions on new generation. It will be extremely
useful to narrow the alternatives down, if possible,
so the most promising can be focused on sooner rather
than later.
The blast from the Anchorage Daily News editorial page
last week against reviewing Susitna is, in our
opinion, misplaced. The state has over $150 million
invested in studies of Susitna hydro and more and more
people are thinking about large hydro as a solution.
It is irresponsible not to look at this project again
and update the numbers, at least in a general way. If
the numbers point to a likely cost of 30 cents per
kilowatt hour that was mentioned by the Anchorage
Daily News, then it can be put back on the shelf and
attention will move to other alternatives.
We would like to suggest that the $1 million in this
appropriation not be put out in one large consultant
RFP [Request for Proposals]. This is not likely to
get best value for this appropriation. A staged
approach, in our opinion, will get better information
for the state's money.
We suggest that an engineering conference be first
held by the Alaska Energy Authority (AEA). There are
many engineers, environmental scientists, and former
regulators that worked on Susitna still around that
should be hired to participate along with new leaders
in the hydroelectric engineering profession. One-
hundred-thousand dollars should be sufficient for this
first task and at the end of that process all will be
better informed of the issues and players. Better
decisions can then be made by AEA and the utilities as
they go forward with this review and update of the
original Susitna project or a reconfigured and
appropriately adjusted project for current needs.
1:57:59 PM
JAMES HEMSATH, Deputy Director for Development, Alaska Energy
Authority (AEA), Alaska Industrial Development and Export
Authority (AIDEA), discussed the points outlined in his white
paper entitled, "Estimate for Susitna Hydro-electric Feasibility
Study". The study would use the significant engineering work
done in the 1980s to provide a feasibility, or screening-grade,
estimate on the project's cost in today's dollars under today's
engineering and other concerns, he said. A key objective of the
study would be to determine what size facility can be put in
because it is not infinitely scalable. The two dams in the
original design cannot necessarily be broken up and only one or
the other built. For example, in order to have full seasonal
load, the 600 megawatt lower Devil's Canyon dam is dependent on
flow control from the 1000 megawatt upper river dam. He noted
that the $1 million study will require significant engineering
to address the assumptions used in the 1984 estimates versus
2008 in terms of constructability, construction techniques, and
the generation capacity for this particular site. The
engineering study will provide a rough estimate of power cost so
it can be determined whether this facility or this site is
appropriate for Alaska, he related. For instance, if the cost
is determined to be in the 30 cent range instead of the current
8-9 cent range, then that would mean this project is
inappropriate and other alternatives need to be looked at. The
Susitna project is only one of a number of alternatives that
need to be addressed by a statewide energy portfolio that looks
at industrial demand as well as local demand, he advised.
2:01:21 PM
CO-CHAIR JOHNSON pointed out that the $1 million will not
provide consumption or demand projections for the future. Those
will come later.
MR. HEMSATH responded correct, the study will look at what can
be generated. He said Susitna is a very involved project and
the $135 million was not wasted in 1984 because there was
significant engineering that occurred. The point of this study
is to make sure that the numbers are relevant and determine the
power cost. Only broad assumptions will be made about demand.
2:02:56 PM
REPRESENTATIVE GUTTENBERG observed that each of the four work
tasks outlined in the white paper has a cost. He asked whether
the tasks could be done in parallel rather than sequentially.
MR. HEMSATH answered yes and no. A number of these things could
be done in parallel if the funds were available. On a large
capital project like this, there are typically certain phases on
which engineering capital is expended, he explained. Since it
is a re-evaluation, not a re-creation, of the 1984 design, the
first phase is to determine the power costs. If the power cost
is in the 10 cent per kilowatt range, then moving on with
further study is warranted. Until it is known that the project
makes sense, care must be taken to not expend additional funds
unnecessarily because those funds could then be applied to a
statewide study.
2:05:04 PM
REPRESENTATIVE GUTTENBERG estimated that the Susitna and other
projects could provide an energy savings of up to $1 billion
annually for the Railbelt area. Therefore, he theorized,
expending another $1-2 million to do all of the studies in
parallel instead of sequentially would shave off several years
of study time and pay for itself through the energy savings that
would start sooner. If the money was available, should it be
done this way, he asked.
MR. HEMSATH said $1 billion is likely an over-estimate. He
agreed with the necessity for haste in looking at the state's
energy options, but cautioned that the time savings of a few
months would not be of great import for a 10-12 year project.
"The most important thing is to truly address the engineering
and the cost aspects on the current design to understand them as
best we can because those are going to drive the decision," he
said. "The other parts are refinement."
2:09:02 PM
REPRESENTATIVE KAWASAKI inquired how AEA would select a
qualified contractor given the white paper's recommendation that
an RFP process not be used.
MR. HEMSATH said 14 qualified contractors are currently on AEA's
term contract list as the result of an RFP from last summer. It
was a competitive process with the goal of identifying qualified
contractors to undertake AEA and AIDEA tasks. Selecting from
this list will gain 4-6 months over using an RFP.
CHRIS RUTZ, Procurement Manager, Alaska Energy Authority (AEA),
Alaska Industrial Development & Export Authority (AIDEA), added
that all of these contracts are currently in the process of
being set up. Term contracts for engineering services have been
used for many years because they give management flexibility and
allow AEA and AIDEA to react quickly when circumstances and
situations arise, he explained. They are solicited using the
state procurement code and are established following those rules
and guidelines. However, AEA and AIDEA also go through formal
competitive processes if the need dictates.
2:12:15 PM
CO-CHAIR JOHNSON asked what it will take to get the study
underway and whether Work Task 1 [identified in AEA's white
paper] can be finished by December 2009.
MR. HEMSATH responded that Task 1 is truly a nominal 12 month
activity. It takes about a year to do a detailed study like
this, even dealing with other information, he said. The scope
of work would be developed and term contractors identified by
June 2008. Thus, the study could be completed by June 2009 and
most definitely by December 2009.
2:13:54 PM
REPRESENTATIVE SEATON inquired whether other projects in the
area will be looked at in addition to the Susitna project.
MR. HEMSATH replied that AEA will not be going too far afield
due to the tightness of dollars and scope - attention will be
focused on the Susitna project because of its size. However,
there are existing feasibility studies for other projects like
the Chakachamna Hydropower Project, so very loose comparisons
can be done. Comparison would be based on looking at the cost
of power and a project would not be viable if the cost is 20-30
cents per kilowatt hour, he said. The bulk of the work will be
understanding the river and the dam situation to determine what
size facilities can be reasonably developed at what cost based
on the information from the 1984 study.
2:16:04 PM
REPRESENTATIVE SEATON suggested that AEA be directed to key in
on the Susitna project and not directed to diversify the study
to look at other projects such as Eklutna. He cited a sentence
under the objectives in AEA's white paper which states: "To aid
in decision making cost of power for generic alternative
generation sources (coal, gas, wind, geothermal) will be
developed, and finance options will [be] considered." Does that
mean AEA will develop those financing options and other
alternative generation options as well as dusting off the
Susitna project, he asked.
MR. HEMSATH answered no. That statement was written in light of
a $2.74 million full-blown study, and would be the second phase,
he said. The Susitna project will be in the $5 billion range
and how it is financed will be critical. In this phased
approach, what must first be determined is whether the Susitna
project would be cost competitive. He cautioned against viewing
Susitna as a way to displace enough gas to make Agrium or the
Kenai LNG facility operate again. That can only come from
increased exploration in the Cook Inlet, he advised. At best
the Susitna project displaces enough gas to keep houses warm.
2:19:58 PM
REPRESENTATIVE SEATON inquired whether AEA will first look at
potential "drop dead" features of the Susitna project, such as
seismic or economic issues, and stop the study if one is found.
MR. HEMSATH said yes, but with a lot of nuance in the yes. The
problem is that even in the $1 million study, there will be
tasks that are running parallel. Whether the study is stopped
depends on what the perceived risk is. In addition to cost and
size, the study will try to identify any technical risks that
are known now that were not known in 1984, such as the recently
identified geologic fault. But, he said, it is unlikely this
fault can be found in the first month.
REPRESENTATIVE SEATON asked whether HB 336 should include a
means for AEA to provide an interim report should something be
identified that would preclude the project from moving forward.
This way AEA would not be required to go through the full study
if something is discovered early on.
MR. HEMSATH responded yes. This would allow AEA to come back
for direction on how to proceed.
2:23:43 PM
CO-CHAIR JOHNSON inquired whether any other useful information
will be acquired even if the Susitna Hydropower Project is
determined not feasible after spending the $1 million.
MR. HEMSATH allowed that a large portion of those funds would
"go down the river". Most likely there will be some peripheral
information about the costs of other projects, but nothing that
could be applied to projects like Chakachamna. In further
response to Co-Chair Johnson, Mr. Hemsath said the study would
provide an updated understanding of why the project does not
work as well as an understanding of the construction costs of
this kind of facility. The study might also provide some cost
information for rough estimates on scaling. The $1 million
addresses current issues, he said, and if Susitna is not a
viable alternative to the state's energy needs, the focus can
then be directed elsewhere.
2:26:13 PM
CO-CHAIR JOHNSON requested further explanation of Work Task 2 as
outlined in AEA's white paper.
MR. HEMSATH explained that he organizes a project so it goes
through a series of gates in order to maximize the value of the
capital being expended. This way, the capital can be used
elsewhere in case a decision needs to be cut off. If Task 1
determines that the power cost is viable, then Task 2 would be
an environmental and socio-economic study to determine those
impacts and costs. Additionally, it would determine whether
anything has changed in the environment since 1984, such as
changes in weather patterns that might affect the ability to
collect enough water. The environmental/socio-economic study
would also look at some light industrial uses and an intertie
beyond the Railbelt. Mr. Hemsath said there are other possible
alternatives for power generation and Task 3 would identify
those alternatives that are true options. Task 3 concentrates
only on a small area, he said, and a larger state plan would
help to ensure that the questions and portfolio of energy
projects is appropriate. Task 4 is self explanatory regarding
finance options for the project, he said.
2:30:42 PM
REPRESENTATIVE EDGMON inquired whether anyone is tracking all of
the projected power needs throughout the state, given there are
numerous proposed developments that would create even greater
power demands.
MR. HEMSATH said there are a number of people at AEA and AIDEA
who are aware of what is happening. However, there is no
comprehensive focus with benchmarks and that is something that
truly is necessary and it is not an insignificant activity.
There is a true need for a comprehensive look at energy assets
and energy demand from an industrial perspective, he emphasized.
The questions need to be addressed in a format that will allow
people to understand how the pieces of the puzzle could fit
together and whether each piece of the puzzle is the best thing
for the overall state versus a specific project. A
comprehensive look would also give some focus as to where
additional research can be done to facilitate the development of
an energy source for the state's benefit.
2:32:54 PM
REPRESENTATIVE EDGMON submitted that the state's energy needs
are so great it is going to take big picture thinking. He
related that the governor is talking about an energy coordinator
position and that this person may oversee or be the executive
director of AEA. He said he thinks HB 336 fits into the overall
picture of the state's power needs. He asked whether anyone
could speak as to how HB 336, the energy coordinator, and the
state's big picture would all fit together.
CO-CHAIR JOHNSON agreed that a bigger picture is needed. He
asked much closer to the big picture would the full funding of
$2.7 million get the state.
MR. HEMSATH deferred to the governor's office in regard to
Representative Edgmon's question about the overall picture. In
terms of a full-blown $2.7 million study, he said it would
identify some of the Railbelt-driven options and, to a smaller
extent, it would identify where some of the key industrial base
loads might be that would help backstop the larger-scale energy
projects that are needed for economy of scale. However, he
advised, it would not address what the state would look like as
a system.
2:36:12 PM
REPRESENTATIVE EDGMON asked whether the intent is to move the
bill today.
CO-CHAIR JOHNSON said he thought more work needed to be done and
that while he could support a $1 million fiscal note at this
point, he was unsure about $2.7 million. Additionally, he said
he would like to hear from other utilities.
REPRESENTATIVE EDGMON inquired whether there are any federal
funding sources.
CO-CHAIR JOHNSON confirmed that there is federal funding and
that he is looking into whether the funds are available for
studies as opposed to projects. He said he sees HB 336 as the
first step of a statewide plan that would electrify rural Alaska
as well as future developments. Even if the Susitna project is
a no-go, it will still be money well spent. He said his
intention is to go for the full $2.7 million in a staged plan.
He agreed AEA should be allowed to stop the study if needed.
REPRESENTATIVE SEATON said he did not want to see the committee
confusing a directed study with spending the money elsewhere if
Susitna is a no-go. If a statewide energy plan is wanted then
that should be done, it cannot be a subsidiary for if the
Susitna dust-off does not work.
CO-CHAIR JOHNSON appreciated the comment, but noted that he is
looking for other benefits should the $1 million not accomplish
what was intended.
2:43:25 PM
REPRESENTATIVE SEATON stated that this is a significant project
with significant potential for Alaska. Even a no-go is good
information and the information does not need to do something
else someplace else. He said he did not want the bill held up
because of his conceptual amendment.
2:44:21 PM
CO-CHAIR JOHNSON requested a sense of the body on whether to
report HB 336 from committee today.
REPRESENTATIVE GUTTENBERG said he would like to hear from other
utilities.
REPRESENTATIVE FAIRCLOUGH asked whether other utilities had been
reached since this is the second time HB 336 has been before the
committee.
CO-CHAIR JOHNSON responded that he did and does not think there
are any utilities that do not know about the bill.
REPRESENTATIVE FAIRCLOUGH stated she does not favor additional
spending beyond the $1 million.
CO-CHAIR JOHNSON said the $1 million accomplishes what he set
out to do, but he would also like to get as much out of it as he
can.
2:47:16 PM
REPRESENTATIVE GUTTENBERG maintained his objection to reporting
the bill. He noted that he would like to talk with Golden
Valley Electric Association of Fairbanks. He said further work
on the bill would mean less work for the House Finance
Committee.
CO-CHAIR JOHNSON, in response to Representative Fairclough, said
there is no companion bill in the Senate, but there is a bill
that creates a commission and has a fiscal note of $3 million.
REPRESENTATIVE FAIRCLOUGH said she does not object to holding
the bill in committee in order to reach out to utilities. She
said she would check with her utility about its position on the
bill.
2:50:04 PM
REPRESENTATIVE SEATON moved that the committee adopt Conceptual
Amendment 1 as follows:
Page 1, line 11, after "area.":
Insert "This study will initially look at
potential drop dead issues and if any are identified
an interim report identifying those issues may be used
to terminate the study."
There being no objection, Conceptual Amendment 1 was adopted.
2:51:19 PM
REPRESENTATIVE GUTTENBERG stated that he would like to hear from
someone who was intimately involved in the 1984 study and could
review the whole thing.
MR. HEMSATH suggested Eric Yould.
[HB 336 was held over.]
ADJOURNMENT
There being no further business before the committee, the House
Resources Standing Committee meeting was adjourned at 2:54:20
PM.
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