Legislature(2013 - 2014)BUTROVICH 205
02/28/2013 07:30 AM Senate SENATE SPECIAL COMM ON IN-STATE ENERGY
| Audio | Topic |
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| Start | |
| Presentation: Long Term Perspective on Energy Issues | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
ALASKA STATE LEGISLATURE
SENATE SPECIAL COMMITTEE ON IN-STATE ENERGY
February 28, 2013
7:30 a.m.
MEMBERS PRESENT
Senator Click Bishop, Co-Chair
Senator John Coghill, Co-Chair
Senator Peter Micciche
Senator Dennis Egan
Senator Bill Wielechowski
MEMBERS ABSENT
All members present
OTHER LEGISLATORS PRESENT
Senator Fred Dyson
Senator Cathy Giessel
COMMITTEE CALENDAR
PRESENTATION: LONG-TERM PERSPECTIVE ON ENERGY ISSUES
- HEARD
PREVIOUS COMMITTEE ACTION
No previous action to record
WITNESS REGISTER
BILL SHEFFIELD, representing himself
Anchorage, Alaska
POSITION STATEMENT: Presentation on long-term energy issues in
Alaska.
JOSEPH GRIFFITH, General Manager
Matanuska Electric Association
Palmer, Alaska
POSITION STATEMENT: Presentation on long-term energy issues in
Alaska.
ACTION NARRATIVE
7:30:42 AM
CO-CHAIR CLICK BISHOP called the Senate Special Committee on In-
State Energy meeting to order at 7:30 a.m. Present at the call
to order were Senators Egan, Wielechowski, and Co-Chair Bishop.
CO-CHAIR BISHOP welcomed Senator Dyson and Senator Giessel to
the meeting.
^PRESENTATION: Long Term Perspective on Energy Issues
PRESENTATION: Long Term Perspective on Energy Issues
7:31:32 AM
CO-CHAIR BISHOP welcomed Bill Sheffield and Joe Griffith. He
explained that former governor Sheffield would provide an
overview of an in-state gasline and Mr. Griffith would address
the state of the Railbelt electrical system.
7:32:31 AM
BILL SHEFFIELD, former governor, explained that his appearance
before the committee was part of a 28-presentation tour around
Alaska. He said his overview would address what could be done
for the present and future citizens of Alaska. He said Alaska
was on the precipice and many communities were already over the
edge of an energy crisis. He explained that too many Alaskan
residents were struggling with high energy costs and declared
that Alaska's energy crisis would only get worse.
7:32:54 AM
SENATOR MICCICHE joined the meeting.
MR. SHEFFIELD stated that Bush communities were paying high
prices for basic comforts and Fairbanks was burning firewood for
heat that was affecting air quality. He said the natural gas
production decline from Cook Inlet had caused the loss of
hundreds of jobs on the Kenai Peninsula and would drive up
domestic and commercial energy costs in just a couple of years.
He explained that the solution was an in-state gas pipeline to
tap into the tremendous reserves already proven. He proclaimed
that the in-state gasline could happen if Alaskans mustered up
the political will to do it. He said the act of building the in-
state gas pipeline would benefit both the present population via
job creation and future generations through lower energy costs.
7:34:57 AM
MR. SHEFFIELD said the Alaska Stand Alone Pipeline (ASAP) could
provide the following benefits:
· Reduce Fairbanks' air quality problem.
· Allow Flint Hill Refinery (FHR) in Fairbanks to return to
full production and eliminate its need to import expensive
product; FHR averaged 130 railcar shipments per day,
current average was 20 railcar shipments per day.
· Provide affordable energy to the proposed gold mine in
Livengood.
· Provide affordable energy to the Donlin Gold Mine.
· Provide affordable energy to Bethel if the Donlin Gold Mine
received gas.
· Cut Alaska Railroad's operating costs with lower energy
prices and increased FHR deliveries.
· Reopen the Nikiski Agrium Plant. He noted that 325 jobs
disappeared when Cook Inlet gas supplies shrank.
7:38:27 AM
He said barring some future large discovery, Cook Inlet gas
supplies would continue to diminish while Southcentral faced the
possibility of importing gas within a couple of years. He stated
that Alaska had 35 trillion cubic feet of proven gas reserves on
the North Slope. He said Alaska had talked about the big
diameter gas line for some time, but the advent of fracking had
flooded the gas market in the Lower 48 and the project had to be
rethought.
He noted that the Alaska Gas Development Corporation (AGDC) had
advanced ASAP. He said Governor Parnell and AGDC President Dan
Fauske were to be commended for the progress made with ASAP. He
stated that ASAP's environmental study showed significant
progress, the right-of-way for the pipeline was all but secured,
and financing could be arranged one way or another. He
recommended that the state pay for ASAP outright in order to
reduce tariffs and reduce end user costs. He noted that
declining oil production might not allow for the state to
entirely pay for ASAP.
7:41:03 AM
He declared that the longer Alaska avoided making a decision to
go forward, the more expensive ASAP would get. He noted that
AGDC predicted that every year of delay would raise ASAP's cost
by $200 million. He explained that immediate project approval
would involve an additional four years to secure permits,
complete engineering, and finalize design before construction
could begin. He remarked that delays to proceed with the large
diameter pipeline project had increased estimates from $25
billion to a high range of $65 billion.
MR. SHEFFIELD stated that AGDC required the legislation to
provide the tools in order to hold a successful open season for
solid market commitments, follow through to build ASAP, and
provide gas to Southcentral by 2019. He noted that Governor
Parnell said in his State of the State Address that AGDC
legislation was a priority and legislation would add horse power
to AGDC's engine.
He announced that he was not an investor or had any operational
interest in ASAP. He said he had been an Alaskan for more than
60 years and cared deeply about the present and future needs of
Alaska. He said he believed it was time to quit studying and get
on with investing in ASPA to provide affordable energy for
Alaskans.
7:44:51 AM
CO-CHAIR BISHOP asked what the single most important thing to do
if the state decided to move forward with ASAP.
MR. SHEFFIELD answered that the most important thing a state
could do was build its infrastructure, maintain its
infrastructure, and provide education. He said the state should
provide the infrastructure to allow the private sector to come
in and provide jobs. He stated that gas was for Alaskans and oil
was for the state budget. He remarked that ASAP was the most
important project that Alaska could do.
7:46:51 AM
CO-CHAIR BISHOP recognized that Co-Chair Coghill and Senator
Micciche joined the meeting.
SENATOR MICCICHE stated that he agreed with Mr. Sheffield and
noted that one of the reasons he was in the legislature was due
to his frustration with gas. He declared that gas was a key
issue for the state and he asked Alaskans to fairly evaluate the
options. He said parochialism was a big problem in Alaska and
folks had a hard time getting past what it would take to get a
gasline going. He remarked that the visionaries that built the
Trans-Alaska Pipeline System (TAPS) created the state's current
economy. He stated that a number-two industry would be created
the second the gasline valve was opened, no matter what pipeline
diameter size. He asserted that Alaska was missing the boat and
had been for a long time. He explained that like a 401K, a
gasline project was not about market timing, it was about time
in the market. He noted that Alaska missed out on some high
price opportunities from natural gas commodity prices and would
face low price challenges, but a gasline project's average value
over thirty or forty years would allow the state to come out on
top. He stated that if a large diameter line was going to
happen, it would have to happen soon. He declared that not
moving forward with the large diameter line would require the
state to get behind another option. He remarked that too many
Alaskans were in need and too many jobs were being missed. He
stated that margins did not work to drive projects with diesel
and its negative impact affected mom-and-pop opportunities as
well as the large industrial sector. He said he hoped that
Alaska could move forward and thanked Mr. Sheffield for his
comments.
MR. SHEFFIELD replied that it was important to fund ASAP and get
to open season. He said Alaska was never going to know anything
beyond what was currently known until open season. He explained
that open season was where all of the decisions were made.
CO-CHAIR BISHOP thanked Mr. Sheffield for his presentation.
7:50:43 AM
CO-CHAIR BISHOP announced that the committee would stand at
ease.
7:52:33 AM
JOSEPH GRIFFITH, General Manager, Matanuska Electric
Association, noted that he was also the CEO for the Alaska
Railbelt Cooperative Transmission & Electric Company (ARCTEC).
He noted that he was Commander at Elmendorf Air Force Base and
met former governor Sheffield during his assignment. He revealed
that he had worked for Senator Dyson as well. He stated that he
spent 25 years in the energy business; 22 years at Chugach
Electric Association (CEA) and three years at Matanuska Electric
Association (MEA).
He detailed that the Railbelt was made up of four private
organizations and two municipal electric utilities. He
identified the Railbelt utilities as follows:
· Anchorage Municipal Light & Power (AMLP).
· Chugach Electric Association (CEA).
· Golden Valley Electric Association (GVEA).
· Homer Electric Association (HEA).
· Matanuska Electric Association (MEA).
· Seward Electric System (SES).
MR. GRIFFITH said all of the utilities were not-for-profits, a
key factor that affected future power costs.
7:56:07 AM
He explained that the parts of an electrical system were:
generation, transmission, and distribution. He addressed
transmission as follows:
· Connected all of the utilities together.
· Facilitated economic dispatch of power by bringing the
cheapest power online first.
· Power transfer to facilitate constant load shifting.
· Reserve sharing to provide power if generation was lost.
He noted that power transfer and reserve sharing was worth
billions of dollars a year to utilities. He said electrical
customers would pay higher rates without power transfer and
reserve sharing.
7:59:05 AM
He explained that all of the utilities had or would soon have
their own generation capabilities. He said the investment by the
utilities was about $1 billion. He explained the power
generation as follows:
· CEA: Beluga Power Plant (BPP), South Anchorage, IGT, Cooper
Lake Hydro, and Eklutna Hydro.
· AMLP: Plant 1, Plant 2, and Eklutna Hydro.
· GVEA: North Pole, Eva Creek Wind, Healy Coal, Aurora Coal
(contract), Battery Energy Storage System (BESS), Zehnder,
and Delta.
· MEA: Eklutna Generation Station and Eklutna Hydro.
· HEA: Nikiski Combined Cycle, Soldotna, and Bernice Lake.
· SES: Seward Plant.
· Note: All utilities participated in the Bradley Lake
Hydroelectric Project (BLHP).
8:02:41 AM
MR. GRIFFITH addressed the Railbelt's energy situation and noted
that gas was a problem. He explained that it was critical to
never let the Railbelt's gas system fail. He stated that
Railbelt utilities where changing their investments and the
ability to dispatch power would affect the transmission system
from Fairbanks to Homer. He noted that BPP would no longer be
running in load-following mode as a buffer in the middle of the
Railbelt and BLHP. He said the BPP change was due to HEA and MEA
power plants coming online. He remarked that any successful,
modern economy demanded reasonably priced power.
8:04:33 AM
CO-CHAIR COGHILL asked when the HEA and MEA plants would come
online.
MR. GRIFFITH answered that HEA's Nikiski plant was online and
their Soldotna facility would be online in six months. He said
the real problem would occur when MEA's Eklutna Plant comes
online and a portion of BPP shuts down, resulting in the
inability to buffer BLHP sales coming north. He said the
Railbelt was a year and a half away from having a real problem
to deal with and that was inadequate time to fix the
transmission system. He stated that the Railbelt would have to
do some heroics in response to the changes.
CO-CHAIR COGHILL noted that Healy Clean Coal Power (HCCP) plant
would be coming online and asked if that would help stabilize
power for the Railbelt.
MR. GRIFFITH replied that HCCP would benefit Fairbanks when 50
megawatts was added.
CO-CHAIR COGHILL asked if HCCP was coming south.
MR. GRIFFITH replied that HCCP's power could come south.
CO-CHAIR COGHILL responded that he wanted to confirm the timing.
MR. GRIFFITH answered that the crisis faced by the Railbelt was
fuel and transmission congestion. He stated that the crisis was
in the near term, three to five years. He asserted that
something had to be done to save the Railbelt.
CO-CHAIR COGHILL asked to verify that the first project was from
BLHP going north into Anchorage.
MR. GRIFFITH answered yes. He said the problem was equally
problematic from Anchorage to Fairbanks. He explained that it
would be a little trickier when HCCP was brought online. He
addressed long term issues when the Susitna-Watana Hydroelectric
Project (SWHP) came online and the need to transmit a tremendous
amount of power in both directions, something that could not be
presently done.
8:07:15 AM
CO-CHAIR COGHILL stated that transmission projects were big
dollar items and noted Anchorage going north would be $200
million. He asked what Homer to Anchorage would cost.
MR. GRIFFITH responded that resolving the entire BLHP constraint
issue in addition to doing a Hydro-Hydro between BLHP and SWHP
would be a $1 billion challenge. He noted that there were
cheaper alternatives if load-shed or blackouts were deemed
acceptable. He said installing a second underwater high voltage
direct-current (DC) line to BPP would provide near 100 percent
reliability on the southern sector and allow for servicing
without power interruption. He explained that a study conducted
last summer advised that a second line be built to BPP.
CO-CHAIR COGHILL asked if the integration cost would be
acceptable for installing a DC line to BPP.
MR. GRIFFITH answered yes and noted that a DC line was
equivalent to the cost of overhead alternating-current (AC)
lines.
CO-CHAIR BISHOP asked if it was Nikola Tesla and George
Westinghouse that were arguing over AC versus DC.
MR. GRIFFITH answered yes and noted Nikola Tesla was an AC
advocate.
CO-CHAIR BISHOP stated that Tesla was on the right track because
you could move more AC based electricity at a lower cost.
MR. GRIFFITH responded that more AC electricity could be moved
more cheaply, but AC systems resist movement because of their
cyclic problem that created line loss and that added to its
cost. He explained that DC did not exhibit line loss and did not
require special equipment, but its costs were high and required
large facilities on both ends.
8:11:54 AM
MR. GRIFFITH stated that the Railbelt utilities had a Fuel
Situation Mitigation Effort underway as follows:
· Utility group studying potential fixes for the near term,
three to five years.
· Costs prohibitive for interim importation fix of natural
gas in the near term.
· Alaska Stand Alone Pipeline (ASAP) deliveries by 2019.
· North Slope liquid natural gas (LNG) trucking was a concept
that could help with Fairbanks' air emissions and home
heating issues, but would not do a thing for Southcentral
due to volume limitations.
· SWHP's delivery by 2024 with transmission system upgrades.
· Least cost approach in the near term was to generate with
diesel fuel until Cook Inlet gas supplies improved.
8:14:03 AM
MR. GRIFFITH addressed other short-term mitigations as follows:
· Decongest the transmission system to facilitate optimum use
of BLHP energy and capacity, especially during the summer
when it could carry the load; ARCTEC and Alaska Energy
Authority (AEA) were working on decongesting the
transmission system.
· More natural gas storage capability, Cook Inlet Natural Gas
Storage Alaska (CINGSA) capacity was 11 to 12 billion cubic
feet (Bcf), but more was needed.
· Cheaper diesel fuel could be derived from the state's
royalty oil, but there would be constitutional issues.
· Continual state efforts to foster exploration in Cook Inlet
and to keep an LNG exportation facility open for expanded
market potential.
· Smaller, cheaper importation of LNG from the Lower 48 to
aid the gas system in the short term.
· Import low cost propane from Canada.
CO-CHAIR COGHILL inquired if the benefit from BLHP's diversion
upgrade would be realized without transmission upgrades.
MR. GRIFFITH answered yes. He explained that the Battle Creek
watershed would be diverted with 45,000 megawatt hours added. He
said the added power would be drawn from BLHP, but the added
powered electricity could not be delivered when needed the most.
He said generation would have to be shut down at other locations
in order to get the BLHP power out.
8:16:45 AM
SENATOR WIELECHOWSKI addressed natural gas storage and noted a
need at Beluga. He asked if Mr. Griffith was aware of the
technical aspects for storage at Beluga.
MR. GRIFFITH replied yes. He said MEA's plant would be on the
Beluga side due to the pipeline's location. He explained that he
was actively talking to people that had storage capabilities to
buy or rent storage to create a buffer.
SENATOR WIELECHOWSKI asked if AMLP and CEA would be helped to
have more storage on the Beluga side
MR. GRIFFITH answered that it could because the pipeline could
flow in either direction. He said the Cook Inlet Gas Gathering
System (CIGGS) pipeline ran between Tyonek and Nikiski. He
explained that if a cataclysmic event closed the pipeline, gas
could be moved on the east side of the Kenai Peninsula without
interruption.
8:20:00 AM
He addressed Independent Power Producers (IPP) and how they fit
in the Railbelt system. He noted that he had spent 25 years
dealing with IPPs in addition to people who thought that they
could produce as cheaply as or better than the Railbelt
utilities. He explained that there was a federal law called the
Public Utility Regulatory Policies Act (PURPA) that required
utilities to accept electrical power output for a combined heat
and power facility. He stated that he welcomed any IPP that
wished to compete on a head-up basis with a utility. He noted
that often IPPs could not compete with the utilities, but they
had a right to state that they were going to be a combined heat
and power facility to sell power as an avoided-cost. He said
there were two kinds of avoided-costs, firm versus non-firm. He
explained that firm-avoided-cost meant an IPP had backup
reserves and non-firm meant a utility could take what it wanted
from an IPP without backup. He detailed that non-firm was less
expensive than firm. He said most IPPs say that they would do
the combined heat and power approach, a strategy that was a good
one if a market for heat was identified. He noted that the
federal law's intent was for IPPs to first be a heat producer
and secondly as an electricity producer. He disclosed that most
IPPs get it the other way around as an electricity producer that
uses waste heat, a strategy that was not what PURPA was all
about. He said the Regulatory Commission of Alaska (RCA)
regulations mimic PURPA and require the same for the state. He
stated that the big issue for IPPs was rates of return and the
economics. He said investor owned IPPs required a 10 percent
return or more to be able to make it. He noted that co-ops
struggle along with three to five percent because of possessing
a captive market and no shareholders.
SENATOR DYSON disclosed that Mr. Griffith made an effort to use
coal as a fuel for MEA's new plant and was stymied by public
opinion in the permitting process. He asked if Mr. Griffith
could explain what occurred.
MR. GRIFFITH answered that Senator Dyson was correct. He said
the intent to use coal occurred 10 to 12 years ago. He noted
that he and Brad Evans, CEA's current CEO, conjured up a coal
plant philosophy for the Beluga-Mine Moth facility, 25 miles
west of Beluga. He declared the coal plant would have worked,
but politics got in the way. He stated that if the coal plant
would have been built, the current electrical situation would be
different. He noted another attempt for a coal plant in the
Matanuska-Susitna Valley that failed and ended up being built in
Eklutna.
8:24:44 AM
SENATOR DYSON asked if Mr. Griffith was convinced that the stack
discharges were within acceptable limits from the technology
currently being looked at.
MR. GRIFFITH answered yes. He explained that coal plants were
probably cleaner today due to stricter rules.
SENATOR DYSON addressed a big power generation plant concept on
the North Slope that would produce high voltage DC electricity
for the Railbelt. He asked if the concept was close enough to
being a potential solution for the Railbelt.
MR. GRIFFITH replied that the North Slope power plant was a
feasible project that had to be fully fleshed out. He noted that
building a transmission line over Atigun Pass would be a
challenge and noted that a costly proposal was to tunnel under
it. He stated that reserves would be required on the south end
and the project would end up being a matter of money. He
commented that no power proposals should be taken off the table
until something was found that worked.
8:26:30 AM
SENATOR DYSON asked who should be chosen to study the options
regarding risks, costs, and cost-benefits.
MR. GRIFFITH responded that AEA should be the entity, but
financial constraints limited their ability to step into the
leadership role. He explained that if he were governor, he would
have his energy czar sitting at the table with him every day.
CO-CHAIR BISHOP said he shared everyone's frustrations on how to
get a single point of command and control structure for Alaska's
energy needs. He explained that politics should be out of it
with good business practices used to address energy needs and
avoid crisis management.
MR. GRIFFITH replied that he would be happy to share his
thoughts with Senator Bishop.
8:29:33 AM
He presented the ARCTEC 2013 request as follows:
· Governor Parnell had $13.7 million in his budget to
eliminate constraints on BLHP.
· Governor Parnell had $95 million in his budget for SWHP.
· BLHP's Battle Creek Diversion in BLHP did not get into the
budget; $23.5 million would be required to keep the project
on schedule.
· Governor Parnell had $25 million in his budget for AEA's
Renewable Energy Grant Fund; an additional $31 million was
required to keep the program going in 2013.
SENATOR WIELECHOWSKI asked about the Battle Creek diversion and
the amount of megawatts that would be added.
MR. GRIFFITH replied that Battle Creek did not add any capacity
to BLHP and limitations were dictated by the size of the
generators. He said 40,000 to 45,000 megawatt hour of power
would be added.
CO-CHAIR BISHOP asked to clarify that the term peak-peak meant
BLHP would have more water to meet the peak power demand.
MR. GRIFFITH answered yes. He explained that Bradley Lake would
have more water, put power capacity was limited by BLHP's
generators.
SENATOR WIELECHOWSKI asked how long the Battle Creek project
would take to complete if full funding was provided.
MR. GRIFFITH replied that the diversion work could start next
summer or fall. He explained that the project was a simple
diversion with no drilling required.
8:32:45 AM
SENATOR MICCICHE asked if Mr. Griffith could quantify his
optimism for improvement in Cook Inlet gas supplies. He noted
that he was struggling with Mr. Griffith's previous comment.
MR. GRIFFITH replied that he had also struggled with Cook Inlet
gas supplies for many years. He stated that many experts had
informed him that a lot of gas existed and it was a matter of
finding it. He explained that it would take 16 to 18 wells per
year at a cost of $10 million to $20 million. He said he would
remain optimistic if the state continued to foster drilling
through a tax arrangement.
SENATOR MICCICHE agreed with Mr. Griffith that not enough wells
were being drilled. He stated that three large Cook Inlet fields
had supplied the entire basin for 40 years and a fourth was not
likely. He remarked that the activity needed to keep up with the
decline curve was hot happening and the region had a natural gas
problem.
MR. GRIFFITH replied that he agreed.
SENATOR MICCICHE stated that he hoped there would be gas
discoveries to extend the critical-intersection. He said he
struggled with Mr. Griffith's comment that diesel was the best
option when its cost was three to four times higher than natural
gas.
MR. GRIFFITH replied that a long term solution to use imported
gas would easily beat diesel, but that concept would be an
anathema for the legislature. He said gas from the North Slope
was years away and it was too late for coal or hydro. He stated
that diesel made sense in the next three to five year period. He
noted that propane would probably beat diesel, but he was
working on its feasibility.
8:36:32 AM
SENATOR MICCICHE asked to confirm that some Cook Inlet utilities
were considering importing LNG as a short term option.
MR. GRIFFITH answered yes. He remarked that he was a member of
the group considering the imported LNG option. He noted that the
turbines for the plant being considered for LNG could seamlessly
switch to diesel. He said MEA was also looking for a less
expensive diesel fuel supply. He reiterated that all energy
options were on the table.
SENATOR MICCICHE responded that he appreciated Mr. Griffith's
comments. He stated that assisting Mr. Griffith's efforts was
important to the committee.
MR. GRIFFITH thanked the committee.
CO-CHAIR BISHOP thanked Mr. Griffith and Mr. Sheffield for their
presentations.
8:38:13 AM
There being no further business to come before the Senate In-
State Energy Committee, Co-Chair Bishop adjourned the meeting at
8:38 a.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| Bill Sheffield_BIOGRAPHY_19Feb13.doc |
SISE 2/28/2013 7:30:00 AM |
energy |
| Bill Sheffield_TEMPLATE_Senate_28Feb13.docx |
SISE 2/28/2013 7:30:00 AM |