03/22/2012 03:00 PM House ENERGY

        HB 323-NONATTAIN AREA HOME HEATING SYSTEM GRANTS                                                                    
                                                                                                                                
4:29:27 PM                                                                                                                    
                                                                                                                                
CO-CHAIR PRUITT announced  that the next order  of business would                                                               
be HOUSE  BILL NO.  323, "An  Act relating  to the  Alaska energy                                                               
efficient  home grant  fund;  and creating  a  grant program  for                                                               
converting  homes in  regions  designated  as particulate  matter                                                               
nonattainment areas to efficient home heating systems."                                                                         
                                                                                                                                
4:29:39 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE TAMMIE WILSON,  Alaska State Legislature, informed                                                               
the committee  Fairbanks North Star  Borough (FNSB)  contains the                                                               
only  U.S.  Environmental  Protection  Agency  (EPA)  particulate                                                               
matter  (PM-2.5) nonattainment  area in  the state,  since Juneau                                                               
avoided this  status by  banning the burning  of wood  on certain                                                               
days.   She provided a  map of  the Fairbanks area  that outlined                                                               
the boundary  of the nonattainment  area - where the  majority of                                                               
people in the  borough live - noting that Eielson  Air Force Base                                                               
is out of  the area, but Fort Wainwright Army  Base is within the                                                               
area.    Representative T.  Wilson  then  responded to  questions                                                               
raised  at a  previous  hearing, saying  that  other states  have                                                               
received EPA grants;  in fact, Libby, Montana  is a nonattainment                                                               
area  that received  an EPA  grant  for a  change-out program  to                                                               
convert  wood stoves.   Spokane,  Washington  has a  state-funded                                                               
program to convert non-EPA certified  wood stoves.  To answer the                                                               
question as  to whether an energy  rater may be liable  if his or                                                               
her estimate  was lower  than the final  cost of  the conversion,                                                               
she said someone can always be  sued.  The purpose of the program                                                               
is to  bring an  energy rater in,  not only to  look at  the oil-                                                               
fired  furnace and  non-EPA  certified wood  stove,  but also  to                                                               
discuss issues  specific to the home  such as the proper  size of                                                               
the wood  stove or  oil furnace.   The  rater will  also identify                                                               
other  problems   such  as  gaps  in   windows,  insulation,  and                                                               
inefficient light  bulbs, in a  similar way to the  Golden Valley                                                               
Electric Association  (GVEA) program.   Representative  T. Wilson                                                               
stressed  that  this program  is  specifically  designed to  help                                                               
those in  the middle class  who cannot  qualify for, or  have not                                                               
participated in,  the Alaska Housing Finance  Corporation (AHFC),                                                               
Department  of Revenue  (DOR),  weatherization  or energy  rebate                                                               
programs.                                                                                                                       
                                                                                                                                
4:33:29 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  TUCK understood  that  for a  rebate program  the                                                               
homeowner pays  for the work  up-front and gets  reimbursed after                                                               
an inspection.   He asked whether HB 323 provides  for the vendor                                                               
to  perform the  work  and  then turn  in  vouchers  to AHFC  for                                                               
payment, up to $10,000.                                                                                                         
                                                                                                                                
4:34:09 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE T.  WILSON said correct.   The intent of  the bill                                                               
is to  help those without the  up-front cash.  She  expressed her                                                               
belief that  the air quality  in FNSB  will improve, but  EPA has                                                               
forced this  issue to be resolved  by 2014.  On  3/15/12, control                                                               
measures  for  the  nonattainment  area were  issued  for  public                                                               
comment, and FNSB must submit  a state implementation plan (SIP).                                                               
The control  package includes the expansion  of existing programs                                                               
which  are: the  use of  dry wood,  wood stove  change-outs, AHFC                                                               
programs,  and  outdoor boiler  retrofits.    These programs  are                                                               
helping  reduce  emissions,  but  FNSB will  not  meet  its  goal                                                               
without the change-out  program or something similar  "to help us                                                               
out  a  little  further."     Most  worrisome  is  that  on  high                                                               
particulate matter  days - that  are also low-temperature  days -                                                               
wood burning would be banned in the borough.                                                                                    
                                                                                                                                
4:37:04 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SADDLER  asked for an explanation  of the emission                                                               
standards.                                                                                                                      
                                                                                                                                
REPRESENTATIVE  T. WILSON  explained the  relevant issue  is that                                                               
the   wood  stove   change-out   control   program  has   reduced                                                               
particulate matter 2.1 percent thus  far.  In further response to                                                               
Representative Saddler,  she acknowledged  there was  an increase                                                               
in  sulfur  dioxide  of  0.96   percent,  which  illustrated  her                                                               
frustration that taking care of  one problem may increase another                                                               
problem.  Again  to Representative Saddler, she  said the control                                                               
measures have  reduced emissions by  a cumulative total  of 22.04                                                               
percent,  which  is  a  reduction  of  between  6.8  and  8.7  in                                                               
micrograms per  cubic meter.  The  goal is for a  reduction of 11                                                               
micrograms per cubic meter.                                                                                                     
                                                                                                                                
REPRESENTATIVE  T.  WILSON  continued, saying  the  2/9/12  draft                                                               
proposed rules  are out for  public hearings,  demonstrating that                                                               
FNSB  is going  down the  right  road by  educating residents  on                                                               
proper  burning  procedures.    In  addition,  EPA  will  tighten                                                               
emission  standards  on  new wood  stoves,  wood  pellet  stoves,                                                               
hydronic  heaters,   new  camp  stoves,  and   new  cook  stoves.                                                               
Representative T.  Wilson concluded  that HB  323 was  drafted to                                                               
address nonattainment areas because  other statewide programs may                                                               
not  help FNSB  residents, and  because these  expensive upgrades                                                               
may  only  be in  effect  for  five or  six  years  until gas  is                                                               
available.                                                                                                                      
                                                                                                                                
4:42:30 PM                                                                                                                    
                                                                                                                                
CO-CHAIR PRUITT acknowledged that it  is unknown as to the future                                                               
of  power generation  in the  Interior  due to  changes in  state                                                               
policy.   He asked, "What  would be  expected [in five  years] by                                                               
the ... people of Fairbanks, where would they be?"                                                                              
                                                                                                                                
REPRESENTATIVE  T.  WILSON related  that  EPA  has set  a  number                                                               
without  providing modeling  or guidelines  for attainment.   The                                                               
Department  of  Environmental  Conservation (DEC)  and  FNSB  are                                                               
trying to  figure out what is  needed to reach that  number.  She                                                               
said there  are no guarantees  that the control measures  will be                                                               
sufficient  to  comply with  EPA  standards.   Representative  T.                                                               
Wilson opined  the best solution is  for the state to  ask EPA to                                                               
wait for gas to come to  the downtown area of Fairbanks, but that                                                               
is not the administration's chosen  option, due to the importance                                                               
of federal  transportation funding to  the northern region.    In                                                               
response  to  Representative  Saddler,   she  explained  that  if                                                               
compliance  is not  met, EPA  can recall  millions of  dollars of                                                               
transportation funding.   Therefore, FNSB must show  a good faith                                                               
effort, averaged over 2012, 2013, and 2014.                                                                                     
                                                                                                                                
4:46:37 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SADDLER  asked why  EPA is resistant  to providing                                                               
funding for compliance, as it has in other states.                                                                              
                                                                                                                                
REPRESENTATIVE  T. WILSON  said  the money  for  that program  is                                                               
gone.                                                                                                                           
                                                                                                                                
CO-CHAIR  PRUITT,  returning attention  to  facets  of the  bill,                                                               
asked why it  was written to allow for grants,  instead of loans,                                                               
for portions of homeowners' costs.                                                                                              
                                                                                                                                
REPRESENTATIVE  T.  WILSON said  the  intent  was to  follow  the                                                               
guidelines of the  rebate program, and to focus  on replacing the                                                               
appliance that would make the most difference.                                                                                  
                                                                                                                                
REPRESENTATIVE  PETERSEN   asked  whether  residents   have  been                                                               
encouraged to buy propane heating  devices, which are more easily                                                               
converted to natural gas.                                                                                                       
                                                                                                                                
REPRESENTATIVE T. WILSON observed propane costs more than oil.                                                                  
                                                                                                                                
CO-CHAIR PRUITT asked  what impact Fort Wainwright  Army Base has                                                               
on the situation.                                                                                                               
                                                                                                                                
4:49:10 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE   T.  WILSON   advised  that   all  projects   and                                                               
expansions in Fairbanks now require  special permitting to verify                                                               
that  construction  and  such would  not  negatively  impact  air                                                               
quality.   In response to  Co-Chair Pruitt, she said  the borough                                                               
changed from number two heating  fuel to number one heating fuel,                                                               
but there was  no substantial change in air quality.   Within the                                                               
city,  there is  district heat,  gas,  wood fuel,  and oil  fuel.                                                               
Because  of  inversion,  pollution  from  the  power  plants  and                                                               
commercial buildings is  higher in the clouds.   Residential wood                                                               
smoke  from  shorter   chimneys  is  lower  and   is  more  often                                                               
registered by the  EPA monitors.  In addition,  as more certified                                                               
wood stoves are  being used, on very cold days  wood smoke levels                                                               
stay high.   She compared  the problem  to that of  air pollution                                                               
which was  improved by  auto emission controls.   Fairbanks  is a                                                               
bowl  with very  little wind,  and the  pollution settles  on the                                                               
town.                                                                                                                           
                                                                                                                                
REPRESENTATIVE PETERSEN  recalled other legislation for  the home                                                               
energy rebate program  that tried to create a  voucher system but                                                               
the contractors  would have  to wait  45 days to  60 days  to get                                                               
reimbursed.    He  asked  whether the  bill  would  have  similar                                                               
problems.                                                                                                                       
                                                                                                                                
REPRESENTATIVE T.  WILSON this is  a simpler program -  one item,                                                               
the appliance - one  check.  If vendors say no,  no money will be                                                               
spent.                                                                                                                          
                                                                                                                                
4:56:34 PM                                                                                                                    
                                                                                                                                
JOHN  ANDERSON, Program  Officer,  Weatherization, AHFC,  advised                                                               
that the  previous voucher idea  created an  unmanageable process                                                               
due to  the volume  of suppliers in  the state,  however, because                                                               
this program  addresses specific mechanical appliances,  it would                                                               
be more manageable.                                                                                                             
                                                                                                                                
REPRESENTATIVE SADDLER asked  for the balance of  the home energy                                                               
efficiency grant fund.                                                                                                          
                                                                                                                                
4:57:35 PM                                                                                                                    
                                                                                                                                
ROSIE  RICKETTS, Program  Manager,  Home  Energy Rebate  Program,                                                               
AHFC, said the balance is approximately $64 million.                                                                            
                                                                                                                                
REPRESENTATIVE SADDLER  asked what the  cost would be  to provide                                                               
$10,000  grants  for  enough  new   stoves  to  reduce  pollution                                                               
sufficiently so that Fairbanks can reach attainment.                                                                            
                                                                                                                                
MR.  ANDERSON estimated  10,000 units  at $10,000  each would  be                                                               
equivalent to $100 million.                                                                                                     
                                                                                                                                
REPRESENTATIVE T. WILSON pointed out  the program would only have                                                               
whatever funding  is allocated by the  legislature.  Furthermore,                                                               
the grants are for an amount  up to $10,000, and most wood stoves                                                               
cost  much  less than  that,  ranging  in  price from  $2,500  to                                                               
$3,500.    In fact,  only  oil  furnaces  older than  1990  would                                                               
qualify for  a replacement  cost of $10,000.   She  stressed that                                                               
the program  would be "first  come, first served," and  urged for                                                               
the initial funding of the program  to be $1 million.  In further                                                               
response to Representative  Saddler, she said it is  hard to know                                                               
what investment would  be necessary to reduce  emissions to reach                                                               
the  standard,  because  the  modeling  is  not  done,  but  more                                                               
information should be available from DEC by this summer.                                                                        
                                                                                                                                
REPRESENTATIVE PETERSEN  questioned whether $1  million allocated                                                               
to replace  100 stoves would result  in enough of a  reduction to                                                               
attain the goal of the bill.                                                                                                    
                                                                                                                                
REPRESENTATIVE T. WILSON  said the number of old  oil furnaces in                                                               
use  is  unknown,  and  replacing them  may  cost  $10,000  each.                                                               
However, replacing  wood stoves will  cost from $3,000  to $3,500                                                               
each because  the grant will  only replace the appliance  and not                                                               
the chimney and other parts.                                                                                                    
                                                                                                                                
5:02:20 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SADDLER was  interested in a way for  the state to                                                               
recover some  of the cost,  perhaps by a  lien that is  paid when                                                               
the home is sold.                                                                                                               
                                                                                                                                
REPRESENTATIVE  T. WILSON  pointed  out  that the  weatherization                                                               
program to  upgrade homes  does not  require repayment,  nor does                                                               
the rebate  program.  The  benefit to the  state is that  it will                                                               
not lose  its federal transportation  funding.   She acknowledged                                                               
there  are  other  programs,  but  oil  furnaces  have  not  been                                                               
addressed.   Fairbanks tests the air  every day and will  know if                                                               
the program is  working in a specific area, and  the test results                                                               
are provided to EPA.  The  program is limited by close parameters                                                               
in order to  target the dirtiest sources of  pollution.  Although                                                               
the  income qualifications  for  other  assistance programs  seem                                                               
high, the  average cost of  heat and electricity in  the Interior                                                               
is from $700  to $1,000, and many residents don't  have the extra                                                               
cash for improvements because of the cost of energy.                                                                            
                                                                                                                                
5:05:40 PM                                                                                                                    
                                                                                                                                
CO-CHAIR FOSTER  agreed with funding  the program for  $1 million                                                               
the first year.  He suggested  there should be a priority for the                                                               
dirtiest appliances.                                                                                                            
                                                                                                                                
REPRESENTATIVE TUCK clarified that the intent of the previous                                                                   
voucher energy rebate program was to pay the homeowner, not                                                                     
individual vendors, which was objected to by AHFC.                                                                              
                                                                                                                                
5:07:03 PM                                                                                                                    
                                                                                                                                
CO-CHAIR PRUITT held over HB 323.