Legislature(2011 - 2012)BUTROVICH 205

01/26/2011 03:30 PM Senate RESOURCES


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Audio Topic
03:32:36 PM Start
03:33:53 PM Alaska Energy Report
04:24:16 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Presentation: Alaska Energy Report TELECONFERENCED
Railbelt Large Hydroelectric
Mike Harper, Acting Executive Director, AEA
Bryan Carey, Tech Engineer, Project Manager, AEA
Sara L. Fisher-Goad, Deputy Director, Operations,
AEA
-- Testimony <Invitation Only> --
                    ALASKA STATE LEGISLATURE                                                                                  
              SENATE RESOURCES STANDING COMMITTEE                                                                             
                        January 26, 2011                                                                                        
                           3:32 p.m.                                                                                            
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Senator Joe Paskvan, Co-Chair                                                                                                   
Senator Thomas Wagoner, Co-Chair                                                                                                
Senator Bill Wielechowski, Vice Chair                                                                                           
Senator Bert Stedman                                                                                                            
Senator Lesil McGuire                                                                                                           
Senator Hollis French                                                                                                           
Senator Gary Stevens                                                                                                            
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
All members present                                                                                                             
                                                                                                                                
OTHER LEGISLATORS PRESENT                                                                                                     
                                                                                                                                
Senator Joe Thomas                                                                                                              
Senator Cathy Giessel                                                                                                           
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
ALASKA ENERGY REPORT                                                                                                            
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
No previous action to record                                                                                                    
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
MIKE HARPER, Acting Executive Director                                                                                          
Alaska Energy Authority (AEA)                                                                                                   
Anchorage, AK                                                                                                                   
POSITION STATEMENT: Introduced his team.                                                                                      
                                                                                                                                
BRYAN CAREY, Project Manager                                                                                                    
Alaska Energy Authority (AEA)                                                                                                   
POSITION STATEMENT: Presented the Alaska Energy Report.                                                                       
                                                                                                                                
SARAH FISHER-GOAD, Deputy Director                                                                                              
Operations                                                                                                                      
Alaska Energy Authority (AEA)                                                                                                   
POSITION STATEMENT: Commented on Alaska Energy Report issues.                                                                 
                                                                                                                                
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
3:32:36 PM                                                                                                                    
CO-CHAIR WAGONER  called the Senate Resources  Standing Committee                                                             
meeting to order  at 3:32 p.m. Present at the  call to order were                                                               
Senators  Stevens, French,  Wielechowski,  Co-Chair Paskvan,  and                                                               
Co-Chair Wagoner.                                                                                                               
^Alaska Energy Report                                                                                                           
                      Alaska Energy Report                                                                                  
                                                                                                                              
3:33:53 PM                                                                                                                    
CO-CHAIR WAGONER invited Mr. Harper to give his presentation.                                                                   
                                                                                                                                
MIKE HARPER,  Acting Executive Director, Alaska  Energy Authority                                                               
(AEA), introduced his  team. He said that he thinks  the best way                                                               
to get  to the  goal of  50 percent renewable  energy by  2025 is                                                               
with  a big  hydro  project in  South-central  near the  Railbelt                                                               
region, and he believes the Susitna hydro project does it.                                                                      
                                                                                                                                
3:35:01 PM                                                                                                                    
SENATORS STEDMAN and MCGUIRE joined the committee.                                                                              
                                                                                                                                
3:35:17 PM                                                                                                                    
BRYAN  CAREY, Project  Manager,  Alaska  Energy Authority  (AEA),                                                               
said last year  the AEA completed a  Regional Integrated Resource                                                               
Plan (RIRP)  that documented the need  for a large amount  of new                                                               
generation for  the Railbelt as  the current generation  is aging                                                               
out and the gas supplies in Cook Inlet are decreasing.                                                                          
                                                                                                                                
Last year, he said, the  Alaska Legislature passed a state energy                                                               
policy  in HB  306 that  directs  the state  to set  the goal  of                                                               
getting 50  percent of electrical  generation from  renewable and                                                               
alternative energy by 2025. The only  way you can meet that is to                                                               
have a  large hydro  facility, and most  probably on  the Susitna                                                               
River.                                                                                                                          
                                                                                                                                
MR. CAREY said they have looked  mostly at the Watana location, a                                                               
name he would  use interchangeably with Susitna.  The other large                                                               
hydro project  identified in the RIRP  was a lake tap  coming out                                                               
of Chakachamna  Lake west  of Anchorage. Watana  is 90  miles up-                                                               
river of Talkeetna; the nearest  road is the Denali Highway about                                                               
40 miles  to the  north. He  explained in  the 1980s  the Susitna                                                               
project also included Devil's Canyon  which would have been a dam                                                               
flooding back  to Watana.  Currently they  are looking  at Watana                                                               
only.                                                                                                                           
                                                                                                                                
3:37:56 PM                                                                                                                    
MR. CAREY  switched to a  map of  Chakachamna Lake and  noted the                                                               
Lake  Clark National  Park and  Preserve above  its head  and the                                                               
Trading  Bay State  Game Refuge  below it  on the  river. In  the                                                               
Susitna case all the water would  go through the dam and come out                                                               
on the  river; in  the case  of Chakachamna,  since the  water is                                                               
being  diverted from  one  drainage basin  over  to another,  any                                                               
water that is to go across the  drainage basin is not going to be                                                               
available to go down the  river into the Game Refuge. Conversely,                                                               
neither is  any water required to  go down the river  to the Game                                                               
Refuge available for generation.                                                                                                
                                                                                                                                
He explained  that the Susitna  reservoir would  be approximately                                                               
39  miles long  and  about  2 miles  wide;  it's  30 miles  above                                                               
significant salmon. He explained  during the 1980s, studies found                                                               
that some  Chinooks went through  Devil's Canyon, but  they don't                                                               
know where  they went, and no  salmon were ever found  above that                                                               
point. More recently  in 2003, ADF&G found some  salmon above the                                                               
Watana location, but  how many is still uncertain. It  could be a                                                               
low number just because very few  Chinook can make it through the                                                               
Devil's Canyon area.                                                                                                            
                                                                                                                                
3:39:23 PM                                                                                                                    
SENATOR  WIELECHOWSKI  asked  if  a  dam  would  make  the  water                                                               
temperature change and if that would impact the salmon.                                                                         
                                                                                                                                
MR. CAREY answered that you  can control the water temperature to                                                               
a certain extent by drawing the  water from either the top or the                                                               
bottom of the reservoir. In the  Susitna case, it was thought the                                                               
river may lag a little bit  on its annual temperature change, but                                                               
it  was within  the  natural  variability of  the  river for  the                                                               
salmon. So, some wildlife habitat  would be lost due to flooding.                                                               
In  the  case  of  Chakachamna,  significant  salmon  populations                                                               
travel through the  lake to the national park.  It's thought that                                                               
several species  of fish use and  spawn in the lake  (Lake Trout,                                                               
Dolly Varden, White, Salmon suspected).                                                                                         
                                                                                                                                
Diversion  of water  and  change  of habitat  in  the State  Game                                                               
Refuge downstream is  a big concern of the  resource agencies, he                                                               
said.  There is  also the  concern that  when adults  return they                                                               
would first  go up the wrong  river because they could  go up the                                                               
farthest river to  the power house and would not  be able to make                                                               
it back to  the lake by the  time they figured out  that they had                                                               
to go  down-river another  10 miles.  Also, for  out-migration to                                                               
the  sea  the juveniles  tend  to  go  where  there is  the  most                                                               
current. And the  most current when you're in the  power house is                                                               
to go  down the power  tunnel. So,  the amount of  juveniles that                                                               
would actually make it back down the river is questionable.                                                                     
                                                                                                                                
MR. CAREY  said another  concern is that  FERC would  not license                                                               
the  Chakachamna  project,   because  a  hydrological  connection                                                               
between Lake Chakachamna  and the next lake a  mile upriver would                                                               
affect  the  national  park,  and  that  would  take  an  act  of                                                               
Congress.                                                                                                                       
                                                                                                                                
3:41:01 PM                                                                                                                    
SENATOR  WIELECHOWSKI  asked  if   the  state  should  completely                                                               
abandon Chakachamna at this point. Should there be more studies?                                                                
                                                                                                                                
MR. CAREY  answered that  the department  is uncertain  about the                                                               
exact  kind of  energy they  would  get from  the project.  Their                                                               
figures might  be on the  overly optimistic side from  talking to                                                               
different people  at resource agencies. The  preliminary decision                                                               
document  recommended doing  further engineering  work to  better                                                               
define what  the costs could be  or to see  if there is a  way to                                                               
lower the project cost.                                                                                                         
                                                                                                                                
3:42:40 PM                                                                                                                    
SENATOR   WIELECHOWSKI  asked   if  environmental   people  think                                                               
Chakachamna would  cause severe  environmental impacts  such that                                                               
it couldn't be permitted.                                                                                                       
                                                                                                                                
MR.  CAREY  replied  that  the  environmental  impacts  would  be                                                               
substantial as  designed in regards  to both the  fish population                                                               
upstream  and downstream.  Chakachamna  might seem  to have  some                                                               
value as a  hydroelectric project, but the amount  of energy from                                                               
a project  like that  would mostly come  during the  summer time.                                                               
And  that would  be closer  to  a run-of-river  type of  project,                                                               
because drawn-down on the lake would be limited.                                                                                
                                                                                                                                
CO-CHAIR  PASKVAN asked  if  another  way of  saying  it is  that                                                               
Susitna would be the focus if they want year-round power.                                                                       
                                                                                                                                
MR. CAREY  answered yes.  He said  installed capacity  at Susitna                                                               
would be  approximately 600 MW,  and average annual  energy would                                                               
be around 2600  GWh/yr, which is approximately 50  percent of the                                                               
current annual Railbelt energy  consumption. Chakachamna would be                                                               
more in  the area  of 300  MW; the annual  estimate of  energy of                                                               
860-1100  GWh  might  still  be optimistic.  That  amount  is  20                                                               
percent of the annual Railbelt  energy; so you're still not going                                                               
to get up to 50 percent even with other existing projects.                                                                      
                                                                                                                                
3:45:31 PM                                                                                                                    
He showed a  slide of Railbelt demand that goes  up in winter and                                                               
down in the summer and  Susitna/Watana that together produce more                                                               
energy during  the summer. A lot  of the energy timing  has to do                                                               
with  environmental restraints  dictating  producing more  energy                                                               
during the summer to make sure  the salmon downriver can get into                                                               
other  streams. But  it still  produces a  substantial amount  of                                                               
energy  in  the  winter  time. Chakachamna  would  do  less  than                                                               
Bradley Lake does right now.                                                                                                    
                                                                                                                                
His  next slide  showed 50  energy years  if a  large hydro  like                                                               
Susitna came in.   It would take a big chunk out  of what the gas                                                               
usage would  be in the Anchorage  area, but there would  still be                                                               
substantial need for heating and generation.                                                                                    
                                                                                                                                
3:47:27 PM                                                                                                                    
Slide 9  calculated wholesale generating  cost of power  (not the                                                               
cost  to  the consumer).  The  last  estimate for  Susitna/Watana                                                               
embankment  (not expandable)  was $4.5  billion. If  there was  a                                                               
capital  contribution  of  half   of  that,  with  the  remainder                                                               
financed at 6 percent 30-year  bonds, debt financing would end up                                                               
being a little bit  over 6 cents KWh. O&M would add  a tenth of a                                                               
percent more.  He said building  Susitna/Watana using  the roller                                                               
compacted concrete (RCC) method  might provide a substantial cost                                                               
savings.                                                                                                                        
                                                                                                                                
CO-CHAIR  WAGONER asked  him  to explain  the  concept of  roller                                                               
compacted concrete dams.                                                                                                        
                                                                                                                                
MR.  CAREY described  that RCC  dams just  started getting  built                                                               
about 30  years ago; they  can be  built very quickly  and arches                                                               
are not needed (although they can  be used to save concrete). For                                                               
the most  part, the concrete  is almost  like a slurry  where you                                                               
could just  dump a load of  it in with  a dump truck. It  goes in                                                               
very quick, and saves time which saves a lot of money.                                                                          
                                                                                                                                
Another advantage to  an RCC dam is you could  have a flood half-                                                               
way through  the construction project  going over the top  of the                                                               
dam and  all you have to  do at that point  is to wait a  week or                                                               
two for  the water to stop  and continue working. In  the case of                                                               
an embankment dam,  you have to spend considerably  more money to                                                               
build a  diversion dam  because having water  going over  the top                                                               
during  construction would  set  the project  back a  substantial                                                               
amount of time and, therefore, money.                                                                                           
                                                                                                                                
3:50:31 PM                                                                                                                    
SENATOR WIELECHOWSKI said he had  seen widely varying numbers, as                                                               
low as 2 cents and as high as  20 cents, on the cost per KWh, and                                                               
asked how  he came up  with this number.  Was he counting  on the                                                               
state giving them a capital appropriation of half the amount?                                                                   
                                                                                                                                
MR.  CAREY answered  the  amount the  state  contributes will  be                                                               
determined  at a  future date.  They  could either  figure out  a                                                               
percent of  the project cost  or set a  price target of  what the                                                               
cost of  energy will be  that comes out  of the project  and then                                                               
determine its  investment. Or  the Bradley  model could  be used.                                                               
His estimated costs  show anywhere from 5-6 cents if  there is to                                                               
be  a 50-percent  capital contribution.  If  there was  to be  no                                                               
capital  contribution,  it  would  be 10-12  cents.  But  someone                                                               
wouldn't be able to go to  the financing markets to acquire bonds                                                               
without  a substantial  amount of  equity in  the project  in the                                                               
first place,  and developing  Susitna would  require at  least 25                                                               
percent equity or more.                                                                                                         
                                                                                                                                
3:52:31 PM                                                                                                                    
SENATOR FRENCH asked if his numbers assume no state investment.                                                                 
                                                                                                                                
MR. CAREY replied they assume 50-percent state participation.                                                                   
                                                                                                                                
SENATOR WIELECHOWSKI asked  if the cost per KWh  is the wholesale                                                               
cost to utilities.                                                                                                              
                                                                                                                                
MR. CAREY replied  that it is the cost for  debt financing, which                                                               
tends to be  90 percent of the cost; and  it's a generating cost,                                                               
so it's a wholesale cost to the utility.                                                                                        
                                                                                                                                
SENATOR WIELECHOWSKI  asked what cost the  Fairbanks or Anchorage                                                               
consumer would end up paying.                                                                                                   
                                                                                                                                
MR.  CAREY  replied  that  6   cents  is  the  current  cost  for                                                               
generation with  gas in many cases,  and so it would  be about 12                                                               
cents in Anchorage.                                                                                                             
                                                                                                                                
He showed  two pictures, one  of Bradley Lake, an  embankment dam                                                               
and the largest hydropower project in  the state that is owned by                                                               
the state. He said if Watana  used the embankment method it would                                                               
look  similar but  taller.  Bradley doesn't  have  a fish  ladder                                                               
because  it  doesn't  have  any  fish at  the  lake.  It's  still                                                               
questionable whether Watana would need  a fish ladder or not. The                                                               
other  picture was  of the  Wehdah Jordan  RCC dam.  He explained                                                               
that  not only  can this  type  of dam  be built  faster but  its                                                               
height could be raised while the dam is still in operation.                                                                     
                                                                                                                                
3:55:33 PM                                                                                                                    
CO-CHAIR  PASKVAN   asked  if  the   low  Watana  dam   could  be                                                               
constructed using the RCC method so  that it could be expanded at                                                               
a later time with future power demand.                                                                                          
                                                                                                                                
MR.  CAREY  answered  that  it  could  be  expanded  and  if  the                                                               
geotechnical  investigations  about an  RCC  dam  continue to  be                                                               
favorable, that  would be the  way to go.  But he didn't  want to                                                               
say that  would be  how Watana  would be built  for sure  at this                                                               
time, because  the embankment method  was investigated  much more                                                               
fully.                                                                                                                          
                                                                                                                                
3:58:03 PM                                                                                                                    
He presented an 11-year timeline  of the Susitna project from the                                                               
start  of   licensing  by  filing  the   preliminary  application                                                               
document with  FERC to  start up  on a  low Watana  expandable, a                                                               
fairly aggressive  schedule but doable. The  detailed schedule of                                                               
events was made  up by AEA and some contractors,  but it will get                                                               
refined more in the next couple of weeks.                                                                                       
                                                                                                                                
The  next steps  for  Susitna  are to  have  a  series of  public                                                               
meetings:  Fairbanks on  February 24,  Talkeetna on  February 28,                                                               
Palmer on March  1, and Anchorage on March 2.  During this spring                                                               
they  will  do  aquatics  and wildlife  gap  analyses  where  the                                                               
contractors  go back  and look  at all  the information  from the                                                               
1980s  and  determine  what  information  is  missing,  what  has                                                               
changed along  the river and  where science has gone  since then.                                                               
When that  is done in  the spring, he will  be able to  work with                                                               
the resource agencies to direct  their study plans on the Susitna                                                               
River and then next year a very large study plan would occur.                                                                   
                                                                                                                                
4:00:41 PM                                                                                                                    
From an engineering  standpoint, Mr. Carey said,  they would need                                                               
to identify  all the  current land  owners, form  various working                                                               
groups,  do  additional  geotechnical work  (especially  if  they                                                               
consider using  an RCC), and  do lidar mapping along  the Susitna                                                               
River to see where the sloughs  have changed since then and where                                                               
the bars  have gone  to better  know how much  storage is  in the                                                               
reservoir  area  and  how  to   site  the  different  facilities.                                                               
Access would  need more study, too.  In the 1980s the  access for                                                               
Watana was to  be a 44-mile road  off the Denali Hwy.  An RCC dam                                                               
uses more material than an embankment  dam; and thus, it may make                                                               
more sense to  do a rail spur from Gold  Creek directly to Watana                                                               
and not build a road to it at all.                                                                                              
                                                                                                                                
MR. CAREY said  other things would have to be  evaluated like the                                                               
type of power  house. With the RCC method, the  power house is on                                                               
the exterior  and costs  less as  well as  reduces the  chance of                                                               
cost increases due to unexpected conditions underground.                                                                        
                                                                                                                                
He said  some of  the resource  agencies do not  want to  spend a                                                               
substantial amount  of time studying  wildlife or working  on the                                                               
project until they know there  is an official FERC process moving                                                               
forward,  because they  have done  too much  work on  it already.                                                               
Assuming AEA  has the funds  and the authorization they  would be                                                               
filing  a  notice  of  intent   with  FERC  and  the  preliminary                                                               
application document to start the official FERC process.                                                                        
                                                                                                                                
SENATOR STEVENS  remarked that this  is a fairly simple  dam that                                                               
doesn't require any diversions or tunneling.                                                                                    
                                                                                                                                
MR. CAREY responded  that all the tunnels in an  RCC dam would be                                                               
going through  it, so the  amount of tunneling would  be minimal.                                                               
On  the flip  side power  tunnels are  needed with  an embankment                                                               
dam.                                                                                                                            
                                                                                                                                
4:03:19 PM                                                                                                                    
SENATOR WIELECHOWSKI  asked how many  land owners there  are, and                                                               
if either type dam could be put in an earthquake zone.                                                                          
                                                                                                                                
MR. CAREY  replied the major  land owners  up there are  the BLM,                                                               
CIRI,  Tyonek  Native  Corporation,  and  probably  a  couple  of                                                               
smaller owners.  He didn't  think any houses  or cabins  would be                                                               
flooded out.                                                                                                                    
                                                                                                                                
In regards  to seismic considerations, currently  there are large                                                               
dams of  this size in  California which are  above 80,000-100,000                                                               
people and  in other parts  of the  world as well.  Concrete dams                                                               
don't  fall apart  that easily.  There are  tens of  thousands of                                                               
dams around  the world right now  and he could think  of only one                                                               
failure due  to an earthquake -  in Taiwan, and that  was because                                                               
the  actual  fault  went  under  the dam.  No  faults  have  been                                                               
identified under this site.                                                                                                     
                                                                                                                                
4:05:24 PM                                                                                                                    
SENATOR GIESSEL joined the committee.                                                                                           
                                                                                                                                
4:05:32 PM                                                                                                                    
SENATOR MCGUIRE said she is involved  with a group in the Pacific                                                               
NW Economic  Region that  just did a  study on  national security                                                               
and  long-term viability  with dams.  Some integrity  issues were                                                               
identified   and   suggestions   were  made   on   doing   things                                                               
differently; and she  said she would make the  study available to                                                               
him.                                                                                                                            
                                                                                                                                
4:06:13 PM                                                                                                                    
CO-CHAIR  PASKVAN asked  if  there is  a  difference in  expected                                                               
useful life  in the  Susitna project  if it  was built  under the                                                               
embankment method as compared to the RCC method.                                                                                
                                                                                                                                
MR. CAREY  replied that  the expected  life of  Susitna/Watana is                                                               
greater than  100 years no matter  what type of dam  is used. The                                                               
U.S. has  hydropower projects now  that are beyond 100  years and                                                               
there  is  no  reason  to believe  Watana  couldn't  operate  for                                                               
several hundred years either way.                                                                                               
                                                                                                                                
CO-CHAIR PASKVAN asked for the differences in cost of operation.                                                                
                                                                                                                                
MR.  CAREY replied  there are  some differences  between the  two                                                               
because more than  90 percent of the cost would  be the financing                                                               
cost;  the operation  and maintenance  (O&M) cost  would be  less                                                               
than 2 percent. It's likely that  the cost of operations would be                                                               
one-tenth of a percent.                                                                                                         
                                                                                                                                
CO-CHAIR PASKVAN asked  if the RCC method, because  it is cheaper                                                               
to   build,   would   ultimately   make  more   sense   for   the                                                               
Susitna/Watana project.                                                                                                         
                                                                                                                                
MR. CAREY answered yes.                                                                                                         
                                                                                                                                
4:08:11 PM                                                                                                                    
SENATOR  WIELECHOWSKI asked  if an  analysis or  coordination had                                                               
been done  with the bullet line  or with the big  gas line group.                                                               
Is  it more  economical to  build a  big line  and then  generate                                                               
electricity off  the gas that  would provide power  for Fairbanks                                                               
or South-central?                                                                                                               
                                                                                                                                
MR.  CAREY answered  that they  hadn't coordinated  with the  gas                                                               
line, and it's possible that  both projects could still be built.                                                               
The  only difference  would be  continuing  gas generation  would                                                               
make  them give  up the  goal of  50-percent renewable  energy by                                                               
2025.                                                                                                                           
                                                                                                                                
4:09:11 PM                                                                                                                    
He  added that  another benefit  to  Susitna would  be that  once                                                               
hydropower was on line the cost  of power wouldn't be affected by                                                               
events around the world.                                                                                                        
                                                                                                                                
4:10:37 PM                                                                                                                    
CO-CHAIR WAGONER  asked him to  hold a  meeting on the  Kenai for                                                               
commercial fishermen and other interested parties.                                                                              
                                                                                                                                
SENATOR WIELECHOWSKI  asked if current  electrical infrastructure                                                               
would be able to sustain additional power.                                                                                      
                                                                                                                                
MR.  CAREY  replied  that   existing  infrastructure  would  need                                                               
upgrades in  stations north  and south and  those costs  would be                                                               
substantial.                                                                                                                    
                                                                                                                                
SENATOR WIELECHOWSKI  asked how financing is  proposed. What kind                                                               
of discussion was had with the utilities?                                                                                       
                                                                                                                                
MR. CAREY answered that the utilities support this project.                                                                     
                                                                                                                                
4:12:48 PM                                                                                                                    
SARAH  FISHER-GOAD, Deputy  Director,  Operations, Alaska  Energy                                                               
Authority (AEA), responded  that it was premature to  say how the                                                               
project would  be financed,  but as an  example the  debt service                                                               
that the  AEA has  on the Bradley  Lake hydroelectric  project is                                                               
paid for by  the utilities through a power  sales agreement. When                                                               
that  debt is  paid off,  the  utilities actually  still have  an                                                               
obligation  to   pay  approximately   the  same  amount   for  an                                                               
additional 20 years to the State of Alaska.                                                                                     
                                                                                                                                
She said  that Senator Wagoner  asked the  AEA to give  his staff                                                               
some information on  how the State of Alaska  has participated in                                                               
some other large projects, so he  can get an idea of what options                                                               
are out  there and what they  can do. For instance,  the state is                                                               
participating  in conduit  revenue bonds,  ownership status  (AEA                                                               
owns the  Snettisham Hydroelectric project in  Southeast Alaska),                                                               
and AIDEA has provided conduit  bonds for Lake Dorothy. The State                                                               
of Alaska  used to own the  Four-Dam Pool project which  has been                                                               
split up  and is  now in  local ownership. And  she would  dig up                                                               
some of  the records on  how the  state financed that  project in                                                               
the first place.                                                                                                                
                                                                                                                                
SENATOR WIELECHOWSKI asked  if they think the cost per  KWh (5 or                                                               
6  cents)  will  stay  level  for   the  life  of  the  dam.  One                                                               
presentation said  it would start  out at  20 cents, and  then it                                                               
would go down to 2 cents after 50 years.                                                                                        
                                                                                                                                
MR. CAREY replied  when that estimate was originally  done it was                                                               
under the constraints  of having to put  down 100-percent private                                                               
funding with no state contributions,  similar to Bradley Lake. In                                                               
that  case, once  you got  to the  ends of  the bonds,  the price                                                               
would drop  down to  what the  yearly costs are.  That is  why it                                                               
drops  dramatically to  2  cents or  even less.  In  the case  of                                                               
Bradley, you  don't have  the big  drop until  at least  50 years                                                               
have  gone by  because once  the bonds  are paid  back, then  the                                                               
state  is  getting  paid  back   for  a  certain  amount  of  its                                                               
contribution.  It just  gets into  how  you want  to finance  the                                                               
project.                                                                                                                        
                                                                                                                                
4:15:57 PM                                                                                                                    
CO-CHAIR PASKVAN  asked if the  timeline on page 12  starts after                                                               
deciding on the type of dam.                                                                                                    
                                                                                                                                
MR. CAREY  replied that investigating RCC  construction would not                                                               
push the timeline out. Work that  occurs in the early years, like                                                               
the EIS, has to be done  either way. Some conceptual design using                                                               
both  methods would  be  done simultaneously.  One  or the  other                                                               
would be dropped for the final application.                                                                                     
                                                                                                                                
CO-CHAIR  PASKVAN asked  if starting  the licensing  now poses  a                                                               
material risk to advancing the project.                                                                                         
                                                                                                                                
MR. CAREY replied no.                                                                                                           
                                                                                                                                
SENATOR STEDMAN said  it would be interesting  especially for the                                                               
college  representing this  in Anchorage  to have  "a little  btu                                                               
analysis" generated if they are going  to use 12 cents KW because                                                               
in  the Railbelt  a lot  of people  heat with  natural gas.  They                                                               
should also  "throw in oil  as a  comparison." He also  wanted to                                                               
know how  quickly they anticipate  fully loading the  capacity of                                                               
the dam so it's generating as much revenue as possible.                                                                         
                                                                                                                                
MR.  CAREY responded  that  the schedule  shows  11-12 years  for                                                               
first power. The  nice part about RCC dams is  that the reservoir                                                               
can be filling  up as construction is going  on. Embankment damns                                                               
aren't  ready  to  generate full  power  because  reservoirs  are                                                               
located at lower elevations and  construction has to happen after                                                               
they are filled. RCCs can generate power quicker.                                                                               
                                                                                                                                
SENATOR  STEDMAN said  the issue  is  paying debt  service of  50                                                               
percent immediately and a couple  billion dollars for the utility                                                               
line upgrades,  and asked for an  idea of how quickly  they could                                                               
sell all the power.                                                                                                             
                                                                                                                                
4:20:37 PM                                                                                                                    
MR. CAREY replied  that the Railbelt would be able  to absorb all                                                               
of the power  from Watana on completion, because  it will replace                                                               
its existing gas generation that is old.                                                                                        
                                                                                                                                
SENATOR WIELECHOWSKI said  he would be interested to  see how the                                                               
new power would be integrated into  the old. Chugach and ML&P are                                                               
building a  new gas-fired plant  right now, for instance,  and he                                                               
wanted to know where the new energy would be going.                                                                             
                                                                                                                                
MR. CAREY  replied that  he would  come up  with a  more specific                                                               
plan  of how  it  would  be absorbed  after  consulting with  the                                                               
utilities.                                                                                                                      
                                                                                                                                
SENATOR STEVENS  asked him  to reflect  on wildlife  habitat, and                                                               
said Kodiak went  through years of discussion over  the impact on                                                               
the  bear refuge,  and  in  the end  found  that  1.5 bears  were                                                               
displaced  by  a   smaller  dam.  That  was   acceptable  to  the                                                               
environmental community and to the  wildlife refuge, but he asked                                                               
what kind of wildlife they are talking about.                                                                                   
                                                                                                                                
MR.  CAREY replied  that  environmental issues  are  very much  a                                                               
concern,  because  for  one  thing  the  resource  agencies  have                                                               
mandatory conditioning  and if they  don't like what  the project                                                               
would do,  it won't  move forward.  Moose, caribou,  bear, wolves                                                               
and  other fur  bearers pass  through the  area. In  the case  of                                                               
flooding  an area,  you can't  get around  the impact.  So, there                                                               
some type  of mitigation money  would have  to be paid,  and that                                                               
would go towards increasing  habitat elsewhere, acquiring habitat                                                               
elsewhere or improving habitat.                                                                                                 
                                                                                                                                
4:24:16 PM                                                                                                                    
CO-CHAIR  WAGONER   thanked  everyone  for  their   comments  and                                                               
adjourned the meeting at 4:24 p.m.                                                                                              
                                                                                                                                

Document Name Date/Time Subjects
AEA Large Hydro 012611.ppt SRES 1/26/2011 3:30:00 PM
AEA Watana Schedule.pdf SRES 1/26/2011 3:30:00 PM
AEA Railbelt Large Hydro Preliminary Decision Document.pdf SRES 1/26/2011 3:30:00 PM