SB 220-ENERGY EFFICIENCY/ ALTERNATIVE ENERGY  3:39:29 PM CO-CHAIR WIELECHOWSKI announced SB 220 to be up for discussion purposes only since the committee didn't have a quorum [CSSB 220(RES), labeled 26-LS1197\K, was before the committee]. He said they had a couple of amendments before them; the first [labeled 26-LS1197\K.11, Kane] was to create a new loan program within the Department of Commerce, Community and Economic Development (DCCED) for businesses interested in alternative energy and energy efficiency. 26-LS1197\K.11 Kane AMENDMENT K.11 OFFERED IN THE SENATE BY SENATOR MCGUIRE TO: CSSB 220(RES), Draft Version "K" Page 12, line 3, through page 13, line 18: Delete all material and insert:  "* Sec. 17. AS 45.88.010(a) is amended to read: (a) There is established in the Department of Commerce, Community, and Economic Development the alternative energy conservation revolving loan fund to carry out the purposes of AS 45.88.010 - 45.88.090. Loans made under AS 45.88.010 - 45.88.090 are to be used (1) to develop means of energy production utilizing one or more alternative energy systems; and (2) to purchase, construct, and install  energy conservation improvements in commercial  buildings [ENERGY SOURCES OTHER THAN FOSSIL OR NUCLEAR FUEL, INCLUDING, BUT NOT LIMITED TO, WINDMILLS, WATER AND SOLAR ENERGY DEVICES].  * Sec. 18. AS 45.88.010 is amended by adding a new subsection to read: (e) The Alaska energy conservation revolving loan fund consists of (1) money appropriated to the fund by the legislature; (2) gifts, bequests, or contributions from other sources; (3) principal and interest payments or other income earned on loans or investments in the fund and appropriated to the fund; and (4) money chargeable to principal or interest that is collected through liquidation by foreclosure or other processes on loans made under AS 45.88.010 - 45.88.090 and appropriated to the fund.  * Sec. 19. AS 45.88.020(a) is amended to read: (a) The department may (1) make loans for the purchase, construction, and installation, in commercial  buildings that are located in the state, of (A) alternative energy systems; and (B) energy conservation improvements; (2) adopt regulations necessary to carry out the provisions of AS 45.88.010 - 45.88.090, including regulations to establish reasonable fees for services provided and charges for collecting the fees; (3) collect the fees and collection charges established under this subsection.  * Sec. 20. AS 45.88.025 is amended by adding a new section to read: Sec. 45.88.025. Eligibility. To be eligible for a loan under AS 45.88.010 - 45.88.090, an applicant must (1) physically reside in the state and maintain a domicile in the state during 12 consecutive months prior to the date of application for a loan and may not have (A) declared or established residency in another state; or (B) received residency or a benefit based on residency from another state; (2) be at least 51 percent owned by individuals described in (1) of this section if the applicant is a corporation, joint venture, or partnership; or (3) be a nonprofit organization under AS 10.20.  * Sec. 21. AS 45.88.030(a) is repealed and reenacted to read: (a) A loan made under AS 45.88.010 - 45.88.090 may not exceed $50,000. If the requested loan amount exceeds $30,000, the applicant must deliver to the department a document from a financial institution stating that (1) the applicant has been denied a loan for the same purpose; or (2) the loan from the financial institution is contingent on the applicant also receiving a loan from the fund.  * Sec. 22. AS 45.88.030(e) is amended to read: (e) The rate of interest for a loan under  AS 45.88.010 - 45.88.090 shall be the prime rate, as  defined by AS 44.88.599, plus one percentage point,  but may not be less than five percent a year [FOR AN ALTERNATIVE ENERGY SYSTEM IS FIVE PERCENT FOR THE FIRST $15,000 OF THE LOAN AND 15 PERCENT FOR THE AMOUNT OF THE LOAN THAT EXCEEDS $15,000].  * Sec. 23. AS 45.88.030 is amended by adding a new subsection to read: (f) A loan under AS 45.88.010 - 45.88.090 must be secured by a mortgage or other security instrument in the real property to be improved and a lien on the improvements financed with the loan.  * Sec. 24. AS 45.88.090(a) is amended to read: (a) In AS 45.88.010 - 45.88.090, (1) "alternative energy system"  (A) [(1)] means a source of thermal, mechanical or electrical energy that [WHICH] is not dependent on oil or gas or a nuclear fuel for the supply of energy for space heating and cooling, refrigeration and cold storage, electrical power, mechanical power, or the heating of water; (B) [(2)] includes (i) [(A)] an alternative energy property as defined by 26 U.S.C. 48(a)(3)(A) (Sec. 301, P.L. 95- 618, Internal Revenue Code); (ii) [(B)] a method of architectural design and construction which provides for the collection, storage, and use of direct radiation from the sun; (iii) [(C)] a woodstove with a catalytic converter or a catalytic converter for a wood stove; [AND] (iv) [(D)] a steam, hot water, or ducted hot air central heating system that uses wood or coal for fuel; and  (v) a high efficiency wood pellet stove; (C) [(3)] does not include (i) [(A)] a stove that uses only wood, coal, or oil for fuel; or (ii) [(B)] a fireplace or fireplace insert; (2) "commercial building"  (A) means a building that is intended to be  used for commercial purposes;  (B) does not include  (i) a residential structure or mobile home  that contains one to four family housing units; or  (ii) individual units of condominiums or  cooperatives;  (3) "energy conservation improvement" means  (A) structural insulation;  (B) thermal windows and doors;  (C) a furnace replacement burner designed  to achieve a reduction in the amount of fuel consumed  as a result of increased combustion efficiency;  (D) a device for modifying flue openings  designed to increase the efficiency of operation of  the heating system;  (E) an electrical or mechanical furnace  ignition system that replaces a gas pilot light;  (F) an automatic energy-saving setback  thermostat;  (G) a meter that displays the cost of  energy usage;  (H) caulking and weather stripping of doors  and windows;  (I) insulating shades and shutters;  (J) air and water recuperators." Renumber the following bill sections accordingly. Page 13, line 19, following "45.88.010(c),": Delete "45.88.030(e)" Insert "45.88.030(c), 45.88.030(d)," Page 14, following line 10: Insert a new bill section to read: "* Sec. 31. The uncodified law of the State of Alaska is amended by adding a new section to read: REVISOR'S INSTRUCTION. The revisor of statutes shall change the heading of art. 1 of AS 45.88 from "Alternative Energy Revolving Loan Fund" to "Alternative Energy Conservation Revolving Loan Fund."" GREG WINEGAR, Director, Division of Investments, Department of Commerce, Community and Economic Development (DCCED), explained that Amendment K.11 makes two fundamental changes to the bill. It adds conservation improvements as an eligible purpose along with alternative energy systems, which was in the original bill. The other major change is that the bill now targets commercial buildings as residential structures are eligible for a similar type of loan through AHFC. The thinking on commercial buildings was to avoid duplication as AHFC already has a program for residential type loans. So this bill will now target commercial buildings that are owned by Alaskan residents. SENATOR STEDMAN joined the committee. MR. WINEGAR said the loan limit was changed from $30,000 to $50,000 and this would allow borrowers to not only put in an energy system but also to take advantage of loans for conservation-type things. 3:41:38 PM MIKE PAWLOWSKI, aide to Senator McGuire, said Mr. Winegar did a great job of explaining the purpose of the amendment. He pointed out that language in Section 21, on page 2, lines 22-28, asks applicants to work with their financial institution as a commercial entity if the loan is over $30,000; they have to present a "turn down letter" to the department, something that is done in other programs to maintain where the state is supplementing rather than competing with the regular commercial loan sector. 3:43:12 PM SENATOR STEVENS joined the committee. CO-CHAIR WIELECHOWSKI remarked that he was very happy to see the definition of "energy conservation improvement." Finding no further questions, he set Amendment K.11 aside. CO-CHAIR WIELECHOWSKI said that Sharon Long would explain the next amendment for its sponsor, Senator Huggins. 3:43:46 PM SHARON LONG, aide to Senator Huggins, explained that this conceptual amendment strives to delete prohibitions in current Alaska statutes which prevent consideration of nuclear projects as part of the energy alternative projects by inserting "nuclear" after "including" on page 2, line 24 of CSSB 220(RES) version K. She explained another amendment by Senator Huggins labeled 26- LS1197\K.10 26-LS1197\K.10 Kane AMENDMENT K.10 OFFERED IN THE SENATE TO: CSSB 220(RES), Draft Version "K" Page 1, line 5, following "loan fund,": Insert "to nuclear waste material, to nuclear  energy production and facilities, to the definition of  'power project' or 'project' as it relates to rural  and statewide energy programs and the Alaska Energy  Authority, to the definition of 'alternative energy  system,'" Page 3, line 18: Delete "sec. 15" Insert "sec. 20" Page 3, following line 20: Insert new bill sections to read:  "* Sec. 4. AS 18.45.020 is amended to read: Sec. 18.45.020. United States licenses or permits  required. A person may not manufacture, construct, produce, transfer, acquire, or possess a special nuclear material, by-product material, special nuclear  material facility, by-product material facility, production facility, or utilization facility, or act as an operator of a production facility or utilization facility, wholly within the state without first obtaining a license or permit for the activity in which the person proposes to engage from the Nuclear Regulatory Commission if the commission requires a license or permit to be obtained by persons proposing to engage in the activities.   * Sec. 5. AS 18.45.025(a) is amended to read: (a) A person may not construct a nuclear fuel production facility, nuclear utilization facility, utilization facility, reprocessing facility, or nuclear waste disposal facility in the state without first obtaining a permit from the Department of Environmental Conservation to construct the facility on land designated by the legislature under (b) of this section.  * Sec. 6. AS 18.45.025(b) is amended to read: (b) The legislature shall designate by law the land in the state on which a nuclear fuel production facility, nuclear utilization facility, utilization  facility, nuclear reprocessing facility, or nuclear waste disposal facility may be located. In designating the land in the state on which (1) a nuclear utilization facility or  utilization facility may be located, the legislature  shall act in the interest of regulating the economics  of nuclear energy;  (2) a nuclear fuel production facility, [NUCLEAR UTILIZATION,] nuclear reprocessing facility, or nuclear waste disposal facility may be located, the legislature shall act to protect the public health and safety.  * Sec. 7. AS 18.45.025(c) is repealed and reenacted to read: (c) The Department of Environmental Conservation shall adopt regulations governing the issuance of permits required by (a) of this section. However, a permit may not be issued until the municipality with jurisdiction over the proposed facility site has approved the permit." Renumber the following bill sections accordingly. Page 7, following line 28: Insert a new bill section to read:  "* Sec. 15. AS 42.45.990(4) is amended to read: (4) "power project" or "project" means a plant, works, system, or facility, together with related or necessary facilities and appurtenances, including a divided or undivided interest in or a right to the capacity of a power project or project, that is used or is useful for the purpose of (A) electrical or thermal energy production [OTHER THAN NUCLEAR ENERGY PRODUCTION]; (B) waste energy utilization and energy conservation; or (C) transmission, purchase, sale, exchange, and interchange of electrical or thermal energy, including district heating or interties;" Renumber the following bill sections accordingly. Page 12, following line 2: Insert a new bill section to read:  "* Sec. 22. AS 44.83.990(6) is amended to read: (6) "power project" or "project" means a plant, works, system, or facility, together with related or necessary facilities and appurtenances, including a divided or undivided interest in or a right to the capacity of a power project or project, that is used or is useful for the purpose of (A) electrical or thermal energy production [OTHER THAN NUCLEAR ENERGY PRODUCTION]; (B) waste energy utilization and energy conservation; or (C) transmission, purchase, sale, exchange, and interchange of electrical or thermal energy, including district heating or interties;" Renumber the following bill sections accordingly. Page 13, following line 18: Insert a new bill section to read:  "* Sec. 27. AS 46.11.900(1) is amended to read: (1) "alternative energy system" (A) means a source of thermal, mechanical, or electrical energy that is not dependent on oil or gas [OR A NUCLEAR FUEL] for the supply of energy for space heating and cooling, refrigeration and cold storage, electrical power, mechanical power, or the heating of water; (B) includes (i) an alternative energy property as defined by 26 U.S.C. 48(a)(3)(A); and (ii) a method of architectural design and construction that provides for the collection, storage, and use of direct radiation from the sun;" Renumber the following bill sections accordingly. Page 13, line 19: Delete "AS 45.88.010(c)" Insert "AS 18.45.027; AS 45.88.010(c)" Page 13, line 20: Delete "sec. 15" Insert "sec. 20" Page 13, line 21: Delete "sec. 11" Insert "sec. 16" Page 13, lines 21 - 22: Delete "sec. 12" Insert "sec. 17" Page 13, line 27: Delete "sec. 13" Insert "sec. 18" MS. LONG explained that new language on page 1, line 5, aligns the title of the bill with the changes that are made later in it. The amendment inserts a new Section 4 that speaks to federal licensing and permits; AS 18.45 only speaks to federal aspects of atomic energy. It includes "special nuclear material facility, by-product material facility" in order to cover more projects or activities in this section for which a license or permit may be needed from the Nuclear Regulatory Commission (NRC). She continued explaining that it adds new sections 4, 5, 6 and 7 on page 3 of the bill. CO-CHAIR WIELECHOWSKI interrupted to ask if lines 14-18 in Section 4 on page 1 of the amendment that say, "A person may not manufacture, construct, produce, transfer, acquire, or possess a special nuclear material, by-product material, special nuclear material facility..." meant that they are expanding what a person cannot produce. MS. LONG answered yes; it repeals the prohibitions "if the commission requires a license or permit to be obtained by persons proposing to engage in these activities." [page 1, lines 20-21 of Amendment K.10]. CO-CHAIR WIELECHOWSKI asked Brian Kane, Legislative Drafting Attorney, to explain what that language was attempting to do. 3:47:27 PM BRIAN KANE, Legislative Affairs Attorney, explained that these sections in AS 18.45 have a lot of terms that were previously used and mismatched throughout - sometimes it would have a full phrase with "facilities" and sometimes "facility" wasn't there. The goal here was to cover every possibility that the Nuclear Regulatory Commission could cover, because as it stood it was just special nuclear material and by-product material. Adding "facility" adds the possibility of a special nuclear facility or by-product material facility in connection with the actual material. Then a person has to obtain that permit from the federal government before they can take any further steps. CO-CHAIR WIELECHOWSKI asked him to talk about the interplay between federal and state regulation regarding nuclear facilities and energy. MR. KANE answered that he had done some reading on the Atomic Energy Act and said that basically the federal government has a pretty long and complex list of permits and applications to even start the process of putting together a nuclear facility or producing any kind of nuclear energy. Basically the Atomic Energy Act preempts everything a state could do with the exception of economic regulation, which comes a little later in this amendment. The idea is to fulfill all of the federal obligations first, then you would proceed to the different state permitting processes. CO-CHAIR WIELECHOWSKI said it seems that section 4 is changing that you couldn't own a special nuclear material facility without getting permission from the Nuclear Regulatory Agency. MR. KANE answered yes; it's just making that clear by adding it to the list of things the federal permit is required for. 3:50:57 PM MS. LONG explained that she found out that the state has no regulations and no permit requirements right now for nuclear energy. The Nuclear Regulatory Commission has a step process where a person first has to have a licensed nuclear power unit. You have to get an early site permit and do a lot of scientific field work. So far, there are no small licensed nuclear power units. CO-CHAIR WIELECHOWSKI asked if she found that most states have a fairly complex set of regulations on top of the federal regulations or do they mostly rely on the federal regulations. MS. LONG and Mr. Kane said they didn't know what the other states are doing. Back to the amendment, she said Section 5 speaks to the state licensing permits and requirements and adds "nuclear utilization facility" to conform with other definitions. Section 6 of the amendment amends AS 18.45.025 to say that when the Legislature designates the land in the state on which a nuclear utilization facility may be located, it must act only in the interests of regulating the economics of nuclear energy. This is based on a series of court cases that Mr. Kane could explain. MS. LONG said Section 7 of the amendment deletes a line that states that a permit may not be issued unless approved by the Governor, leaving only a requirement for approval by the Department of Environmental Conservation in the municipality. So, this section retains local approval for a project that might be in any particular area, but removes the Governor's part in it. Any project would still be dealing with the NRC, DEC, AEA and a local political subdivision. 3:53:39 PM SENATOR HUGGINS clarified that Section 7 allows some degree of local control. MS. LONG added that the people she talked to surmised that it would probably be a local political subdivision that would bring this kind of project forward to the state. CO-CHAIR WIELECHOWSKI clarified that a permit has to go through the DEC and the municipality with jurisdiction over the proposed facility. If it was in Anchorage, it would have to go through the Anchorage Assembly. MS. LONG said yes. CO-CHAIR WIELECHOWSKI asked what happens if it's in an area without a local government. MS. LONG answered that after discussions with Mr. Kane, her sense was that they would be dealing with the NRC and DEC. A community in the unorganized borough would go directly to the state. She said Section 15 adds a new section to page 7 of the bill that amends the definition of "power project" that deletes the exclusion of nuclear energy in relation to statewide energy programs. Section 22 of the amendment amends the definition of "power project" to delete the exclusion of nuclear energy in relation to the Alaska Energy Authority (AEA) on page 12, line 2 of the bill. This will allow the AEA to consider power projects that depend on a thermal, mechanical or electrical system that depends on nuclear power. Now those projects can't be considered. Language on page 4, line 11, of the amendment eliminates the prohibition of transporting nuclear waste material. Section 27 on page 3, lines 25-30 of the amendment deletes "or a nuclear fuel" - another exclusion. CO-CHAIR WIELECHOWSKI asked her to explain it a little bit more. MS. LONG explained that the state currently prohibits transportation of nuclear waste material. This would eliminate that. A nuclear power project generates nuclear waste and that would have to be transported somewhere. She said that the state allows use of nuclear power for medical purposes and she needed to check on how that was dealt with. 3:57:59 PM MR. KANE added that AS 18.45.027 has part (A) and part (B); part (B) actually has an exclusion for radioactive materials used in medicine, education or scientific research as an exception to the high level nuclear waste material that can be transported. CO-CHAIR WIELECHOWSKI asked who would be able to transfer nuclear material under the proposal on page 4, and if they would have to be regulated by the RCA or the NRC. MR. KANE answered that state law would then be silent to that situation. CO-CHAIR WIELECHOWSKI said it would be important to figure out what the federal regulations are for transportation in case they need to enact some other state law or regulation to control who transfers nuclear material. 3:59:44 PM MS. LONG said the remaining sections of the amendment are renumbering. SENATOR HUGGINS commented that Galena was attempting to look at a small nuclear module, but every time it was brought up there, it was suddenly found to be prohibited. This removes that prohibition and puts the skeletal structure in place for further regulation. He said the French use nuclear for about 7 percent of their power and Japan is number 2 internationally and that further, "We ought to at least have a system that allows us to have that conversation in some reality if it comes to fruition." CO-CHAIR WIELECHOWSKI agreed that it is a conversation that is worth having - if it can be done safely and cost effectively. He asked Ms. Long if she had idea of cost for building a nuclear plant. MS. LONG said she had no idea, but she knows that Westinghouse and Toshiba would like to license a small unit that would be appropriate for the Galena project. She explained that because of court cases, the state has regulatory authority over economics only for these things while the NRC has control over health and safety issues. 4:02:13 PM CO-CHAIR WIELECHOWSKI asked if the RCA or NRC would set rates on a nuclear power plant. MR. KANE replied that would be something the RCA could potentially control. CO-CHAIR WIELECHOWSKI asked Sarah Fisher-Goad if the AEA had any comments on this amendment. 4:03:26 PM SARAH FISHER-GOAD, Alaska Energy Authority, responded that AEA had no comments on the amendment, but said she would answer questions on how it pertains to either the Power Project Fund or the AEA statutes. CO-CHAIR WIELECHOWSKI asked for a quick overview of its relationship to those two things. MS. GOAD answered if this amendment were to be incorporated into SB 220, the Power Project Fund would be an eligible financing vehicle for a nuclear project. With respect to the AS 44.83 change that would allow "nuclear" to be included as a definition of "power project," she mentioned that AEA has other statutes that do not allow them to own new projects. If the desire was to allow them to own a future new project, be it any project, the statutes would have to be changed. SENATOR HUGGINS said it appears that under AEA's authority and responsibility she would want a reasonable portfolio of energy projects and capabilities to choose from, not that nuclear should be number 1 or number 29, but it would just become one option among others. He asked if she any difficulty with having it as part of a portfolio. MS. GOAD answered that this amendment allows them to consider nuclear; right now they don't have a position with respect to whether that should be included or not. But if this amendment were adopted they would consider nuclear projects through either the Power Project Fund or through administering a grant through a program on a future project. It is a policy call that she said she was not prepared to answer. She wanted her testimony to describe how nuclear would be considered if it was included. Right now they don't have nuclear projects to consider. If AEA would have to be involved in a project like this, they would have additional costs, but not now. MS. LONG said Mr. Pawlowski just passed her a note that says Title 42.05.990 (Public utilities and carriers) does say that RCA would regulate nuclear rates. CO-CHAIR WIELECHOWSKI asked Mr. Pickett from the RCA if he had any comments. 4:08:09 PM BOB PICKETT, Chairman, Regulatory Commission of Alaska (RCA), said that other RCA members would answer those questions. RICHARD GAZAWAY, Administrative Law Judge, Legislation/Regulation, Regulatory Commission of Alaska (RCA), Department of Commerce, Community and Economic Development (DCCED), said he was trying to figure out what section of AS 42.05.990 Mr. Pawlowski was referencing when he said they would regulate the nuclear facility. MR. PAWLOWSKI said he was referencing AS 42.05.990 that says a utility that serves one or more customers and makes more than $50,000 a year is regulated by the RCA. So, presuming that a nuclear facility sold more than $50,000 in electricity a year it wouldn't be rate regulated by the RCA. 4:09:16 PM STEWART GARY, Assistant Attorney General Representing the RCA, Department of Law (DOL), agreed with that assessment. To the extent that a nuclear facility is generating and providing electric power for compensation it would be within the definition of a public utility - specifically in AS 42.05.990(4)(a) which provides that every entity that owns, operates, manages or controls any plant, pipeline, or system for furnishing by generation, transmission or distribution, electrical service to the public for compensation. It doesn't specifically mention nuclear. Electrons are electrons; if electrical power generation is being provided to the public for compensation it's going to meet that definition. CO-CHAIR WIELECHOWSKI asked if they see any concerns that would require the Legislature to enact any other legislation. Should they adopt this amendment or another one that allows for nuclear energy production in Alaska? MR. PICKETT answered that this amendment, specifically, hadn't been analyzed, but probably not. He said he would look it over by Wednesday. 4:11:22 PM SENATOR WAGONER withdrew Amendment K.6 [introduced on 2/18/10]. He said he was going to develop it into a committee bill or wait until next year. There were no objections and it was so ordered.