Legislature(2005 - 2006)BUTROVICH 205
04/19/2006 03:30 PM Senate RESOURCES
| Audio | Topic |
|---|---|
| Start | |
| SB278 | |
| Agrium Phase 2 Summary – Kenai Blue Sky Project | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 278 | TELECONFERENCED | |
| *+ | SJR 17 | TELECONFERENCED | |
ALASKA STATE LEGISLATURE
SENATE RESOURCES STANDING COMMITTEE
April 19, 2006
3:38 p.m.
MEMBERS PRESENT
Senator Thomas Wagoner, Chair
Senator Ralph Seekins, Vice Chair
Senator Ben Stevens
Senator Fred Dyson
Senator Bert Stedman
Senator Kim Elton
Senator Albert Kookesh
MEMBERS ABSENT
All members present
OTHER MEMBERS PRESENT
Senator Hollis French
COMMITTEE CALENDAR
SENATE BILL NO. 278
"An Act creating the Alaska Climate Change Task Force; and
providing for an effective date."
MOVED CSSB 278(RES) OUT OF COMMITTEE
Agrium Blue Sky Phase 2 Presentation
SENATE JOINT RESOLUTION NO. 17
Urging the United States Department of Justice and the Alaska
Department of Law to identify all natural resource damages from
the Exxon Valdez oil spill that were unanticipated at the time
of the 1991 settlement, to develop plans to remedy the damages,
and to present the ExxonMobil Corporation with a request for the
full $100,000,000 that is available through the "Reopener for
Unknown Injury" clause of the 1991 civil settlement to carry out
these plans.
SCHEDULED BUT NOT HEARD
PREVIOUS COMMITTEE ACTION
BILL: SB 278
SHORT TITLE: ALASKA CLIMATE CHANGE TASK FORCE
SPONSOR(s): SENATOR(s) OLSON
02/13/06 (S) READ THE FIRST TIME - REFERRALS
02/13/06 (S) RES, FIN
04/12/06 (S) RES AT 3:30 PM BUTROVICH 205
04/12/06 (S) Heard & Held
04/12/06 (S) MINUTE(RES)
04/19/06 (S) RES AT 3:30 PM BUTROVICH 205
WITNESS REGISTER
Senator Donny Olson
Alaska State Capitol
Juneau, AK 99801-1182
POSITION STATEMENT: Sponsor of SB 278
Dr. Glenn P. Juday
Professor of Forest Ecology
University of Alaska Fairbanks
Fairbanks, AK
POSITION STATEMENT: Supported SB 278
DR. ROLAND MAW, Executive Director
United Cook Inlet Driftnet Association (UCIDA)
Kenai, AK
POSITION STATEMENT: Supported SB 278
BRIAN DAVIES, former chief of BP operations
Prudhoe Bay, AK
POSITION STATEMENT: Supported SB 278
BILL BOYCOTT, General Manager
Agrium Kenai Nitrogen Operations
Kenai, AK
POSITION STATEMENT: Presented Agrium Blue Sky Phase 2 Summary
ACTION NARRATIVE
CHAIR THOMAS WAGONER called the Senate Resources Standing
Committee meeting to order at 3:38:24 PM. Present at the call to
order were Senators Ben Stevens, Bert Stedman, Ralph Seekins,
Kim Elton, Albert Kookesh, Fred Dyson, and Thomas Wagoner.
SB 278-ALASKA CLIMATE CHANGE TASK FORCE
CHAIR THOMAS WAGONER announced SB 278 to be up for
consideration.
SENATOR OLSON, sponsor, recapped that SB 278 establishes a task
force to review climate changes, determine the implications and
make recommendations. He introduced experts in the field who
would give their perspective.
DR. GLEN JUDAY, Professor of Forest Ecology, University of
Alaska, Fairbanks (UAF), said he would pose five questions and
provide five answers.
1. Is it warmer in Alaska? Yes it is and how much warmer depends
on: 1) location, 2 season- warming is a bit faster in the winter
than in the summer, and 3) time frame - the National Weather
Service tracks trends in 30 year blocks that cover complete
decades. For example 1971-2000 gives a 30 trend showing that the
temperature is up about 2.5 degrees F for most stations in
Alaska. Barrow has the strongest warming with an increase of
over 4 degrees F.
2. What is making Alaska warmer? Solar variability, volcanoes,
green house gases and global dimming drive temperature changes
on the planet. The heat delivered by ocean currents and El Niños
have a particular affect in Alaska and they have become more
frequent, stronger and longer lasting. Therefore, Alaska is
warmer.
3. Is the warming affecting anything we might care about? Yes.
The average glacial loss in Alaska amounts to about 50 feet of
water and the Arctic sea ice is at a minimum. Currently there
are ice-free passages in the Arctic in the summer and the trend
is for the ice to be completely gone by summer's end within 3 or
4 decades. Lakes are drying, river low-flow episodes are more
common and river temperatures are rising. The permafrost is
warming and some is thawing. Trees are growing less because they
are short of water and warm weather phenomena such as forest
fires and insect infestations are becoming more common and are
affecting more forests.
4. Will it continue to get warmer? The best evidence indicates
that if we stop all greenhouse gas now, we would still face 50-
70 years of additional strong warming. If greenhouse gas
emissions continue to accelerate, there is a straight-line
relationship between how much more warming there will be.
5. How do we know we can trust the people who are telling us
this? Dr. Juday cited an article he wrote for Agroborealis, a
research magazine published by the UAF Agriculture and Forestry
Experiment Station (AFES). In 1982 there was a national level
conference in Alaska that examined the possibility of climate
warming. He took those predictions and compared them with what
has actually happened in 2006 and they are right on target.
DR. JUDAY said a next reasonable step is to get the people with
the information together with the people that need to know.
That's what SB 278 does and it sounds like a good plan, he
concluded.
3:45:26 PM
SENATOR BERT STEDMAN commented ice ages come and go and he finds
the information interesting in light of the fact that Ketchikan
had record rainfall last year. At least in Southeast we're not
faced with drought conditions, he said.
DR. JUDAY responded it's difficult to get all the nuances in a
short presentation, but there's a general principle that when
you affect the earth climate system in a measurable way, other
places can experience change that may be the opposite.
He related that the steering currents that bring storms ashore
have not been going to most of the Alaska landmass, but they
have been going to other places in Alaska with more frequency
and intensity.
SENATOR SEEKINS asked where global warming was this last January
in Fairbanks.
3:47:07 PM
DR. JUDAY explained that the Arctic Ocean basin has been much
warmer for the last two or three years and that process
accelerated last January when lots of warm air moved in. Air had
to move out and go somewhere and that just happened to be right
over Fairbanks. He noted that the Arctic Ocean sea-ice has set a
minimum record every month for about the last year and is on
track for another record melt-back.
3:48:02 PM
SENATOR BEN STEVENS asked if we are at the end of a glaciation
period and if so, when it started.
DR. JUDAY replied there were four major episodes starting about
1 million years ago. The most recent was the Wisconsin
glaciation. It began about 70,000 years ago, reached a peak
about 35,000 years ago, and ended rather definitively about
12,500 years ago.
SENATOR BEN STEVENS asked if the glaciers in Alaska are the
remnant of the last episode.
MR. JUDAY explained that the ice in the glaciers isn't that old
since it's continually renewed and there have been warming and
cooling episodes, but in general the answer is yes. The portion
of the land surface that is covered with ice was much greater
during the ice age than it is now and if it gets a whole lot
warmer it will get smaller yet.
SENATOR BEN STEVENS said out of curiosity he'd like to know the
dates of the other three glaciations.
3:50:30 PM
MR. JUDAY replied he didn't recall all the dates off hand.
SENATOR DYSON asked if any icepacks are increasing at this time.
MR. JUDAY replied there are a few in Alaska and a couple in
other places, but they represent a distinct minority. Generally
they are characterized by having the gathering areas high
elevations so the main effect of the warming that we're
experiencing is to increase snowfall in those high elevations.
In Greenland the last four years of observation shows a higher
rate of collapse than was ever anticipated. At current
temperatures it now looks inevitable that it will substantially
increase the sea level. In Antarctica the record is quite short
and up until 2003 it wasn't possible to confirm a shrinking
trend. Since then it is possible to confirm that substantial ice
loss is occurring.
3:52:59 PM
DR. ROLAND MAW, Executive Director, United Cook Inlet Driftnet
Association (UCIDA), outlined his academic background in
ecology, wildlife management, forestry and his current
employment relating to fisheries. He expressed support for the
previous comments and gave some insight as to why the task force
is a good idea. With the current warming trend various models
predict a potential 10-foot rise in sea levels in the next three
decades. If the models are correct, the impact on the fishing
industry will be monumental. Estuaries will flood so that
nursery areas for salmon and other species will be lost; erosion
will occur from Nikiski to Homer; and infrastructure for loading
and unloading fishery products will be affected. The proposed
task force is a good vehicle for looking at these issues.
He noted the current problems with salmon returns in the MatSu
Valley. Stream flows are smaller and the summertime water
temperature is high enough to be lethal for migrating smolt and
adults. Last summer for the first time some lakes in the MatSu
experienced anoxic conditions below 3 meters. The lack of oxygen
in the water column is a result of warming temperature,
increased vegetation, and the subsequent dying and rotting of
vegetation. Salmon mortality shows up quickly in the anoxic
areas.
3:58:08 PM
DR. MAW suggested the committee consider adding representation
to the task force to include the industries that make a living
on, around, and from the water. He reiterated his agreement with
the previous speaker and said global warming is happening and we
have to deal with it.
3:59:02 PM
SENATOR STEDMAN asked if tectonic rebound is occurring in the
Kenai Peninsula.
DR. MAW replied he did not know.
3:59:44 PM
BRIAN DAVIES, engineer and former chief of BP operations at
Prudhoe Bay, said that over the last 35 years he has noticed a
distinct warming phase in the climate, which should not be
confused with weather. Alaska is at the leading edge of this
global warming and is experiencing change at between two and
four times the global average.
The trend is clear and it would be imprudent not to plan for it
to continue. Furthermore, it is likely that forestry, marine
shoreline, fishing, natural resource development, and the
infrastructure of towns and villages will be significantly
impacted. Mr. Davies extended his full support to the idea of
establishing a broad based and temporary task force to gather
information and develop a business plan to deal with the
challenges of this trend and hopefully identify some
opportunities. SB 278 establishes a vehicle to begin planning
for eventualities.
4:03:17 PM
SENATOR SEEKINS referenced page 2, line 2, and asked if the ex-
officio members would be voting members.
SENATOR OLSON replied to the best of his knowledge, yes.
SENATOR SEEKINS asked why the Alaska Conservation Alliance (ACA)
has a dedicated seat and what scientific expertise it brings to
the table.
SENATOR OLSON replied the ACA would have personnel that have a
perspective if not expertise that might be helpful to the task
force. He clarified that the Senate president and House speaker
would appoint all the members.
SENATOR SEEKINS asked who ACA is.
SENATOR OLSON replied it is a group of people that is interested
in conservation ideas and issues such as climate change.
SENATOR SEEKINS questioned whether the group didn't have a pre-
established position.
SENATOR OLSON replied not necessarily.
4:05:49 PM
SENATOR SEEKINS asked if the primary concern is to look at the
effect of warming trends in just the northern regions of the
state.
SENATOR OLSON replied the idea is to look at all areas, but
there are differences across the state. As the previous witness
pointed out, the trends are clear and it would be imprudent not
to plan and make recommendations to meet the changes that are
coming.
4:07:23 PM
SENATOR SEEKINS asked how the selection of the chair would take
place and whether any one of the appointees would qualify.
SENATOR OLSON replied any one of the 13 appointees would be
eligible. Oftentimes taskforce members decide who will be
chairperson.
SENATOR SEEKINS said his task force experience is that the chair
is typically a legislator. He was curious if that was the intent
or whether it would be open to everyone including a member of
the Alaska Conservation Alliance.
SENATOR OLSON responded it would depend on the good judgment of
the Senate president and the House speaker to make sure the
chair is well qualified for the task.
4:08:28 PM
SENATOR STEDMAN recommended Senator Olson be the chair.
4:08:51 PM
SENATOR SEEKINS said his preference for chair would be a
legislative member who has a particular interest in the subject.
CHAIR WAGONER remarked it would be up to the president and the
speaker to make sure that happens.
SENATOR ELTON said his understanding is that the task force
would select the chair. He noted that four of the members are
legislators, which is a significant voting block if they wanted
a legislator to be the chair.
SENATOR SEEKINS moved to amend page 2, line 23, to select a
chairperson from among the members of the legislature.
SENATOR ELTON objected primarily for procedural reasons. He
suggested it might be best to leave the decision to the next
committee where SB 278 will meet the House bill, which he
suspected would be the vehicle.
SENATOR SEEKINS maintained the view that a member of the
legislature ought to be the chair and he wanted that clarified
in this committee.
SENATOR KOOKESH asked if it would affect funding.
CHAIR WAGONER responded it would be up to the Senate president
and the House speaker to fund the task force.
SENATOR KOOKESH said he'd support the amendment if it meant that
funding would be more likely.
SENATOR SEEKINS noted that the fiscal notes were fairly
substantial.
CHAIR WAGONER said that's why the bill is going to the Finance
Committee.
SENATOR OLSON said he was initially taken back by the size of
the fiscal notes, but believes that the $68,000 for personal
services could be cut significantly. That would bring the total
down to a more appropriate number, he said.
CHAIR WAGONER brought the discussion back to the proposed
amendment.
SENATOR KOOKESH asked the sponsor to comment on the amendment.
SENATOR OLSON replied he recognized that this could be a
contentious point and he would defer to the committee.
SENATOR SEEKINS reviewed the fiscal notes and said the chair's
responsibility is to administer the budget and, in his view,
that responsibility ought to fall to a member of the
legislature. The chair's further responsibility is to bring
order to the process, not to necessarily dominate the result.
So, he said, this would in no way threaten the result or
findings of the task force.
4:18:35 PM
SENATOR ELTON pointed out that the task force is charged with
the duty of highlighting the issues and offering recommendations
to the legislature and selection of the chairperson is a most
important initial decision. Because of negative public
perception he cautioned against restricting the selection to one
among four people rather than one among 13 people.
SENATOR ELTON maintained his objection.
CHAIR WAGONER commented that with the exception of department
chairs, very few university officials have budget experience.
SENATOR KOOKESH expressed the view that the task force ought to
be able to pick the chair.
CHAIR WAGONER said legislators are elected to control funds and
he believes that in most cases a legislator would be more
conservative and control funds better than another member.
A roll call vote was taken and Amendment 1 passed with 5 yeas
and 1 nay. Senator Dyson, Senator Stedman, Senator Kookesh,
Senator Seekins, and Senator Wagoner voted in favor and Senator
Elton voted against.
SENATOR STEDMAN moved to report CSSB 278(RES) from committee
with individual recommendations and attached fiscal notes. There
was no objection and it was so ordered.
4:23:20 PM recess 4:26:59 PM
CHAIR WAGONER announced that SJR 17 wouldn't be heard today.
^Agrium Phase 2 Summary - Kenai Blue Sky Project
AGRIUM PRESENTATION - KENAI BLUE SKY
CHAIR THOMAS WAGONER announced that the committee would hear the
Agrium Presentation on Cook Inlet Oil and Gas in Transition.
BILL BOYCOTT, General Manager, Agrium Kenai Nitrogen Operations,
presented the Phase 2 summary for the Kenai Blue Sky Project. He
explained that the Kenai complex was built to convert natural
gas to anhydrous ammonia and urea products for use in
agricultural and petrochemical applications. About 2 percent of
the product is used in Alaska, but most is destined for export
with the primary markets in South Korea and Mexico.
Gas availability in Cook Inlet has been a challenge. The demand
on the system is about 200 Bcf annually and at full rates the
facility consumes 53 Bcf of gas. He noted that the neighboring
LNG facility has the capacity for about 80 Bcf of gas. Power
generation and the utility market account for another 70 Bcf.
The complex has not run at capacity since 2001 and the severe
decline in availability of gas in Cook Inlet continued. In
November 2005 half the facility was shut down and it's unlikely
that it will be restarted on natural gas. In the last three
years the employment at the facility has gone from 295 to about
160.
Gas contracts run through October 2006 but they are working to
secure gas beyond that time. That's a difficult proposition
thought because the decline in Cook Inlet is continuing. To keep
the facility alive they have been looking at other alternatives
because it would have a significant economic impact on the Kenai
Peninsula and Alaska as a whole if the business were lost.
4:33:48 PM
MR. BOYCOTT said there is commercially proven technology to
convert coal to feedstock for a complex like this and one of the
byproducts is a significant amount of CO. Preliminary evaluation
2
indicates that CO flood technology could allow recovery of an
2
incremental 300 million barrels of oil in Cook Inlet. The
Department of Energy has been working to better understand this.
SENATOR DYSON said he has heard that coal gasification plants
are expensive and in the near term just a limited number will be
permitted in the U.S.
MR. BOYCOTT responded these plants are clean in terms of
environmental permitting.
SENATOR DYSON said his understanding is that the federal
government doesn't want to move too fast because the technology
is quite new.
MR. BOYCOTT replied there is significant incentive in the
national energy policy to use this technology. The federal
government is encouraging the use of alternate feed stocks and
coal is specifically targeted. Industrial gasification and also
the use of gasification for power generation is something that
is encouraged now. The federal government has made grants
available for these facilities, but the funding is limited.
Agrium is not competing for those dollars, but it would take
advantage of allowances for tax supports should this commercial
opportunity move forward.
4:37:15 PM
SENATOR DYSON asked if Agrium would come to the legislature for
funding.
MR. BOYCOTT replied no. Usibelli Coal Mine and Agrium worked
together an on an initial screening and determined the project
should move forward. At that time the two companies agreed to
fund an economic feasibility study, which will be complete
within the 30 to 45 days. At that point the outlay will be about
$4 million. Assuming they should move forward, the next step is
to produce a bankable commercial document for the next phase.
That means establishing firm contracts for the coal supply, for
the fertilizer offtake, for the power offtake, and a lump sum
turnkey engineering contract with a process performance
guarantee. They could then take the deal to Wall Street for
financing. To create that package it will cost about $28
million, $13 million of which will be the engineering work.
SENATOR DYSON asked who would build and pay for the additional
electric power intertie that will be needed so Agrium can sell
power back to the grid.
MR. BOYCOTT replied that would be part of the Phase 2
evaluation, but they anticipate an additional charge of about
1/2 cent per kilowatt-hour. Agrium is currently evaluating how
much power it can export because the facility itself consumes 90
megawatts and it's unlikely that they can get that with the
existing grid. They have begun looking at what it would cost to
fund the intertie in order to take that power up to the grid and
they believe they will be able to export about 60 megawatts. In
the timeframe under consideration they would probably be
restricted to the existing southern intertie design because
developing a new design and getting permits by 2011 would be
very difficult. If the intertie were to go in, it would allow
the export of between 130 and 180 megawatts depending on what
happens with other production on the peninsula.
4:41:25 PM
To date it looks as though most of the coal supply will come
from Beluga with incremental capacity from Fairbanks [Healy].
Transportation from Healy to Anchorage will be by rail and then
barges will run from Anchorage and Beluga.
The technology is coal gasification with a pulverized coal power
plant to support energy needs. He noted that at present they are
looking at new environmental control technologies on the power
plant that allow both CO sequestration and environmental
2
performance.
A point that is sometimes misunderstood is that the plant does
not produce natural gas. It produces hydrogen and CO and
2
nitrogen is a byproduct of the air separation unit. In this
facility some portion of the hydrogen and nitrogen combine into
ammonia then some CO combines with ammonia to urea. The facility
2
would be run such that capacity would be increased by 20 percent
with all the ammonia and urea being produced from coal. Also,
significant CO would be available to support an enhanced oil
2
recovery operation in Cook Inlet. The current estimate is 7,000
tons per day without CO recovery off the power plant.
2
4:44:37 PM
With 300 employees at the facility, the indirect employment
benefit is estimated to be 900 positions. In conjunction with
the mine the direct and indirect employment estimate is 2,000
jobs, which is significant. Current plans are to double the
current facility, which sits on 80 acres and has a replacement
value of $1.5 billion. Obviously that is a significant
employment opportunity for Alaska.
Although power generation equipment is aging and future
dependence on natural gas is potentially problematic for the
state, it's still challenging to support the expenditure of $600
million to $700 million for a coal power plant in Alaska with a
900-megawatt grid. Nevertheless they believe this project has
benefit to the state. The Beluga reserve is opened; employment
on the Kenai Peninsula is increased; the most competitive power
generation in Alaska is supported; and the energy base is
diversified.
MR. BOYCOTT said he and Mr. Johnson meet with the engineering
firms next week to review Phase 1 work. Once that evaluation is
complete they will look for funding to initiate Phase 2 by July.
If the opportunity is not strong enough, they will continue to
search for natural gas and watch the peninsula business prepare
to wind down.
MR. BOYCOTT said they are asking for state and federal support
for Phase 2, which is estimated to be $28 million. He has told
the senior leadership team that Agrium would be required to
provide a significant amount of the Phase 2 funding; a
willingness to contribute the Kenai asset into the new entity;
and a willingness to sign a long term agreement to ensure a
market for the product. Obviously, he said, Agrium and Usibelli
Coal Mine have already made a significant commitment.
4:50:17 PM
SENATOR ELTON asked if coal gasification might lock Agrium into
a higher cost environment than if it took gas from a spur or
bullet line coming from the North Slope.
MR. BOYCOTT said no; to move forward they must ensure that the
coal basis is competitive over the long term. The plants are
very efficient and on a cash basis they could compete with
anything in the world. The hurdle is getting the money to build
the facility.
There being no further business to come before the committee,
Chair Wagoner adjourned the meeting at 4:51:40 PM.
| Document Name | Date/Time | Subjects |
|---|