04/03/2012 03:00 PM House ENERGY

            HB 357-AIDEA SUSTAINABLE ENERGY PROGRAM                                                                         
                                                                                                                                
3:05:09 PM                                                                                                                    
                                                                                                                                
CO-CHAIR PRUITT announced that the  first order of business would                                                               
be  HOUSE BILL  NO.  357, "An  Act  establishing the  sustainable                                                               
energy transmission and supply development  program in the Alaska                                                               
Industrial Development and Export Authority."                                                                                   
                                                                                                                                
3:05:18 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  OLSON  moved  the proposed  committee  substitute                                                               
(CS)  for HB  357, Version  27-LS1402\B, Kirsch,  4/2/12, as  the                                                               
working  document.   There  being  no  objection, Version  B  was                                                               
before the committee.                                                                                                           
                                                                                                                                
3:06:19 PM                                                                                                                    
                                                                                                                                
DIRK CRAFT,  Staff to Representative  Lance Pruitt,  Alaska State                                                               
Legislature, presented the changes to  HB 357 Version M that were                                                               
encompassed in  Version B. In  Version M  of the bill,  section 5                                                               
was deleted  and subsequent sections were  renumbered because the                                                               
Department  of Law  (DOL) confirmed  that this  section could  be                                                               
construed to  create a  liability for the  legislature.   The new                                                               
section 5 retains the same language  from section 6 in Version M,                                                               
except  for  the  following  change:   "an  energy  project"  was                                                               
replaced with "qualified  energy development" on page  4, line 6,                                                               
and page  5, line 1,  in order  to satisfy the  Alaska Industrial                                                               
Development &  Export Authority (AIDEA), Department  of Commerce,                                                               
Community & Economic Development.   The new section 6 retains the                                                               
same  language  from section  7  in  Version  M, except  for  the                                                               
following  change:    "an  energy   project"  was  replaced  with                                                               
"qualified  energy development"  on page  5,  line 29.   The  new                                                               
section 7 retains the same language  from section 8 in Version M.                                                               
The new  section 8 retains  the same  language from section  9 in                                                               
Version M.   The  new section  9 retains  the same  language from                                                               
section  10  in  Version  M, except  for  the  following  change:                                                               
deletion of the  word "energy" proceeding "loan" on  page 6, line                                                               
26.   The new section 10  retains the same language  from section                                                               
11 in Version  M, except for the following changes:   deletion of                                                               
the word  "energy" proceeding "loan" on  page 6, line 28,  and on                                                               
page 7,  lines 6 and 11.    The  new section 11 retains  the same                                                               
language from section  12 in Version M, except  for the following                                                               
change:  deletion of the  word "energy" proceeding "loan" on page                                                               
7, line  20.  The new  section 13 retains the  same language from                                                               
section  14  in Version  M,  except  for the  following  changes:                                                               
"energy   projects"   was   replaced   with   "qualified   energy                                                               
development" on page 8, lines 18-19, on page 9, lines 11-14, 22-                                                                
23 and  26, and  on page  10, lines 5,  12-13, 15-16,  and 18-19.                                                               
The new section  14 retains the same language from  section 15 in                                                               
Version  M,  except  for  the  following  changes:    "an  energy                                                               
project"  was replaced  with  "qualified  energy development"  on                                                               
page 10,  line 23;  inserted "conservation"  proceeding "storage"                                                               
on page 10,  line 25; replaced "conversion of  natural gas, coal,                                                               
or  biomass  to  liquids"  with   "the  chemical,  catalytic,  or                                                               
biological upgrade or conversion of  natural gas, coal or biomass                                                               
to  hydrocarbon  liquids"  on  page  10,  lines  29-30;  inserted                                                               
"gasification of coal or biomass  into synthesis gas" on page 11,                                                               
line 3; inserted "the chemical,  catalytic, or biological upgrade                                                               
of synthesis  gas into methane"  on page 11, lines  4-5; inserted                                                               
"the manufacture  of hydrogen from  any feedstock,  excluding the                                                               
mechanical separation from  air" on page 11, lines 6-7.   The new                                                               
section 15 retains  the same language from section  16 in Version                                                               
M, except  for the  following change:   the reference  is changed                                                               
from section 14 to section 13 to reflect the number of sections.                                                                
                                                                                                                                
3:13:08 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SADDLER asked  for  clarification  on the  change                                                               
from "an energy project" to "qualified energy development."                                                                     
                                                                                                                                
MR.  CRAFT   explained  AIDEA  has   a  specific   definition  of                                                               
"projects" in its statutes.  He read from AS 44.88.900:                                                                         
                                                                                                                                
     "project" means  a plant or  facility used  or intended                                                                    
     for   use  in   connection  with   making,  processing,                                                                    
     preparing,  transporting, or  producing, in  any manner                                                                    
     goods, products,  or substances  of any kind  or nature                                                                    
     in connection  with developing  or utilizing  a natural                                                                    
     resource   for   extracting,  smelting,   transporting,                                                                    
     converting,  assembling,  or  producing in  any  manner                                                                    
     minerals, raw  minerals, chemicals,  compounds, alloys,                                                                    
     fibers,  commodities,   and  materials,   products,  or                                                                    
     substances of any kind or nature.                                                                                          
                                                                                                                                
REPRESENTATIVE  SADDLER said,  "So this  is a  separate fund  for                                                               
purposes other than what's defined in 'project.'"                                                                               
                                                                                                                                
MR. CRAFT said correct.                                                                                                         
                                                                                                                                
3:15:06 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  TUCK  directed  attention   to  the  addition  of                                                               
"conservation" on  page 10,  line 25  of the  bill and  asked for                                                               
what type of conservation projects these loans would be used.                                                                   
                                                                                                                                
MR. CRAFT  said the sponsor's  intent was to  be all-encompassing                                                               
and   include  any   type  of   energy   project  that   involves                                                               
conservation.  He deferred to  a representative of AIDEA for more                                                               
details.   In further  response to  Representative Tuck,  he said                                                               
the  sponsor  worked  closely  with AIDEA  on  crafting  the  new                                                               
language in the bill.                                                                                                           
                                                                                                                                
REPRESENTATIVE  TUCK expressed  his understanding  that the  bill                                                               
originally addressed  power generation and transmission,  but has                                                               
expanded to include any type  of manufacturing from liquid gasses                                                               
and value-added industries.                                                                                                     
                                                                                                                                
MR. CRAFT said, "Again, I think  it was, the intent was to create                                                               
a fund  that could be used  for energy projects, ...  any type of                                                               
energy project  that is currently  in use by  utilities statewide                                                               
.... That  can include any kind  of project we discussed  in this                                                               
committee."                                                                                                                     
                                                                                                                                
3:16:46 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE PRUITT opined the intent  is not necessarily for a                                                               
value-added product  for export, but there  are opportunities for                                                               
manufacturing  within  the  state.     He  referred  to  the  new                                                               
language,  "the chemical,  catalytic,  or  biological upgrade  or                                                               
conversion of natural gas, coal  or biomass" and stressed that an                                                               
electrical utility  or a small  company could get funding  to use                                                               
these processes  within the state.   Representative  Pruitt said,                                                               
"It's not intended for export."                                                                                                 
                                                                                                                                
REPRESENTATIVE TUCK  asked where to find  the applicable language                                                               
in the bill.                                                                                                                    
                                                                                                                                
MR. CRAFT returned attention to sections  13 and 14 of Version B.                                                               
Section  13 begins  on page  8, line  14, and  establishes a  new                                                               
separate fund within AIDEA.  He  restated the intent of the bill,                                                               
which is to stop utilities  from obtaining financing for projects                                                               
from out-of-state sources,  and to keep the  financing process in                                                               
the state.  Page 9, lines  12-35, outlines the powers and duties.                                                               
Mr. Craft  explained that a  new fund  is created to  protect the                                                               
existing credit  rating of  AIDEA, and  to offer  expanded powers                                                               
and limitations when  it comes to energy financing.   He deferred                                                               
to AIDEA for more details.                                                                                                      
                                                                                                                                
3:20:14 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE TUCK  stated he liked  the intent of the  bill, as                                                               
it  is a  good example  of how  to offer  low interest  loans for                                                               
value-added  industry, manufacturing,  and a  local petrochemical                                                               
industry in  the future.  He  understood that the state  needs to                                                               
help  industry by  reducing the  cost of  energy; however,  there                                                               
needs to be a return  on investment after providing "seed money."                                                               
Furthermore,  the   bill  provides   planning  for   the  future.                                                               
Representative Tuck said he appreciated the idea of the bill.                                                                   
                                                                                                                                
3:22:09 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE OLSON moved to report  the proposed CS for HB 357,                                                               
Version  27-LS1402\B,   Kirsch,  4/2/12,   as  amended,   out  of                                                               
committee  with individual  recommendations and  the accompanying                                                               
fiscal  notes.   There  being  no  objection, CSHB  357(ENE)  was                                                               
reported from the House Special Committee on Energy.                                                                            
                                                                                                                                
3:22:55 PM                                                                                                                    
                                                                                                                                
The committee took an at-ease from 3:22 p.m. to 3:23 p.m.                                                                       
                                                                                                                                
3:23:05 PM                                                                                                                    
                                                                                                                                
CO-CHAIR PRUITT clarified that CSHB 357(ENE) was not amended.