Legislature(2001 - 2002)
02/21/2002 09:36 AM Senate FIN
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* first hearing in first committee of referral
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SENATE BILL NO. 140
"An Act relating to regulation and licensing of certain water-
power development projects."
DARWIN PETERSON, staff to Senator Torgerson read a statement into
the record as follows.
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In the 106 Congress, Senator Murkowski sponsored Senate Bill
422 amendment the Federal Power Act to provide for Alaska
state jurisdiction over small hydroelectric projects. This
legislation transferred to Alaska, and only the state of
Alaska, licensing and regulatory authority over hydroelectric
projects that are 5,000 kilowatts or less.
Bringing this regulatory authority closer to home will reduce
the great time and expense associated with federal licensing
and regulation of small hydro projects in Alaska. The time and
money required for federal licensing is virtually prohibited
for some small utility and personal projects.
Before Alaska can acquire jurisdiction from FERC (Federal
Energy Regulatory Commission), the Legislature must approve
this bill and the Governor must submit a program satisfying
FERC's regulatory requirements. As SB 140 is currently
drafted, the Regulatory Commission of Alaska would be the
regulatory agency responsible. All the current environmental
protections required under federal law will still apply and
cannot be preempted by this legislation.
Senator Wilken referred to Section 1(b)(2)(E) on page 2, line 9 of
the bill and questioned the necessity of the language, which
includes "the interest of Alaska Natives" as one of six criteria
that must be given "equal consideration" in the establishment of a
regulatory program.
Mr. Peterson referred to the set of criteria included in the
federal enabling legislation [copy on file] that Congress has
established the state must meet before the Federal Energy
Regulatory Commission (FERC) would authorize transfer of regulatory
authority to the state. Included in this criterion, he pointed out,
the interest of Alaska Natives is specifically listed. He was
unsure why Congress chose this language, but asserted that by not
"mirroring the federal enabling legislation," transfer could be
denied.
SFC 02 # 13, Side B 10:24 AM
Senator Wilken understood the need for this legislation to be
identical to the federal law; however, he argued that no
consideration is given to the private landowner unless that
landowner is Alaska Native. He noted the other considerations
include protection of the environment, recreation activities, and
energy conservation and asserted the omission of landowners
represents "a gap". He proposed that additional language be added
to this subsection to require equal consideration for nearby
residents and landowners.
Co-Chair Kelly asked if "the interest of Alaska Natives is defined
somewhere" that the Committee could reference.
Mr. Peterson was unsure but surmised there could be a process
contained elsewhere in FERC regulations for addressing the interest
of landowners. He deferred to the next witness.
WILL ABBOTT, Commissioner, Regulatory Commission of Alaska,
testified via teleconference from Anchorage that he could offer no
explanation either. He stated that the process to establish
regulations for this program would have to define the matter.
Co-Chair Kelly clarified the process of adopting regulations would
have to consider the interest of Alaska Natives, and only once
regulations are adopted, would those interests be determined. He
again asked if there is no definition already in place.
Mr. Abbott stated that is his understanding, but qualified he does
not have definitive knowledge because the program is new to the
Regulatory Commission of Alaska (RCA). He stated that FERC must
define the language, pointing out the federal law "leaves an awful
lot of authority with FERC" in that this agency could approve or
not approve, the state regulations.
Co-Chair Kelly was more concerned that a Native organization or an
Alaska Native individual could argue that a proposed project is not
in its best interest and the project would be denied on that basis.
Mr. Abbott predicted such an argument would be considered equally
along with the other criterion relating to mitigation of wildlife,
the environment, and etc., during the process of licensing a
hydroelectric project. He stated the decision would then be made by
the RCA.
Co-Chair Kelly remarked that an African-American, a Filipino, or
white person would not have the same input. He commented, "Sounds
like Alabama 1952 in reverse."
Senator Olson informed there is a federal definition of "interest
of Alaska Natives". He understood Senator Wilken's concerns
regarding landowners, but ascertained other issues beside land
ownership are involved.
Senator Ward shared that initially, he approved of the equal
consideration granted to Alaska Natives. He asked if shareholders
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of the 13 Region of the Alaska Native Lands Claim Act (ANLCA),
those Alaska Natives who do not reside in Alaska, are included in
this provision.
Mr. Abbott guessed the criteria would apply to those Alaska
Natives, but stressed that all parties would have an opportunity to
comment during the licensing process. He stated that how much
weight is given to each argument would be the decision of the
Commission.
Senator Ward asked if a project were challenged by any of these
shareholders, as not in their best interest, whether Alaska would
be in violation of federal law if the arguments were ignored.
Mr. Abbott predicted this could be the case.
Senator Ward asked if SB 140 could be "corrected" to eliminate the
potential for "non-residents controlling resources in Alaska."
Mr. Abbott replied that how much weight is given to each criterion
could be considered.
Senator Ward interjected he did not want the specific interest of
this group of people given any weight because they do not reside in
Alaska.
Co-Chair Donley wanted a sense of the amount of power 5,000
kilowatts generates. He requested an example of the diesel turbines
that supply the City of Bethel.
Mr. Abbott responded the Bethel facility is larger. He
characterized a 5,000 kilowatt project as "relatively small, run of
the river-type" containment dam "with a pipe coming down into the
turbines" but no large dam behind. He gave a project by Lake Clark
as an example, noting it provides the villages of Illiamna, New
Haven and Nondalton with approximately two-thirds of their power.
Another example, he noted, is near Haines and would augment the
Goat Lake Hydroelectric Power source for Skagway and Haines.
Co-Chair Kelly referenced data included in the member's bill files
lists several such projects [copy on file].
Co-Chair Donley asked if the term "five megawatt" originates from
the federal legislation.
Mr. Abbott affirmed and noted five megawatts is the same
measurement as 5,000 kilowatts.
Co-Chair Donley next asked if five megawatts is the maximum size of
a project that would qualify for this program, whether there is a
minimum size requirement that would provide that smaller projects
are exempt from these regulations.
Mr. Abbott answered no, that all projects less than 5,000 kilowatts
are included in the federal law.
Co-Chair Donley asked if there are provisions for exempting any
projects from regulation.
Mr. Abbott said there are not.
Co-Chair Donley next asked the status of federal regulatory reform
legislation under congressional consideration.
Mr. Abbott did not know the status.
Co-Chair Donley asked if SB 140 or the federal enabling act allows
the RCA to modify its regulations in the event the reform
legislation is adopted in order to "lessen the regulatory burden"
on the public.
Mr. Abbott responded the federal enabling legislation contains a
provision to allow the RCA to modify regulations with approval from
FERC.
Senator Olson clarified that currently FERC approval is required
for a one-kilowatt hydroelectric project, such as those found in
mining sites that provide power for only one or two residents.
Mr. Abbott was only familiar with the recent federal enabling
legislation. He reiterated the RCA must consult with FERC to
determine the perimeters of the state authority.
Senator Olson asked if miners operating small systems are currently
in violation.
Mr. Abbott again noted the projects are still under FERC
jurisdiction and that he was unfamiliar with specifics.
Co-Chair Donley noted Congress occasionally exempts hydroelectric
projects from FERC regulations primarily because a local government
owns them. He asked if there are any exemptions in the proposed RCA
program.
Mr. Abbott affirmed there currently are such exemptions, but
informed this legislation does not address the matter and that this
is another issue to be determined with the FERC.
Co-Chair Kelly commented that locally owned projects regulated by
the RCA are exempt.
Co-Chair Donley corrected that some are exempt but others are not.
Co-Chair Donley understood the policy is straightforward regarding
privately owned systems, but that policy differs when government-
owned systems are involved. He wanted consideration for possibly
reducing the amount of regulations for government-owned systems.
Senator Green asked if this legislation should reference the
federal enabling statute, so that in the event regulatory reforms
are enacted, the RCA regulations would be amended automatically.
She said this would eliminate the need for the regulatory amendment
process each time the federal laws are changed.
Mr. Peterson responded this would be acceptable. He noted the only
action necessary to enact this program is a state statute providing
for the transfer of this authority from FERC to the RCA.
Senator Wilken informed that a five-megawatt plant is one-forth the
size of the power plant located on the Chena River in Fairbanks. He
calculated a five-megawatt system would provide enough energy to
power 50,000 100-watt light bulbs. Therefore, he predicted future
projects could be larger then the Committee understood.
Mr. Peterson stated there are currently 53 proposed projects in the
permit application process. Of those projects, he said, 42 are for
projects five megawatts or less.
Senator Ward asked if current regulations apply to small electrical
generating operations on mining claims that do not sell power to
others.
GARY PROKOSCH, Water Resources Section, Division of Mining, Land
and Water, Department of Natural Resources, testified via
teleconference from Anchorage that FERC allows exemptions for many
small projects in Alaska, including the example Senator Ward
provided.
Senator Ward asked if the new program would remove the exemptions.
Mr. Prokosch replied that if this law passed, the small projects
would be regulated by the state RCA rather then under direct
supervision of FERC. He surmised the implementation regulations
could include exemptions.
Senator Ward expressed that Senator Green's comments are valid.
SALLY SADDLER, Business Development Specialist/Legislative Liaison,
Division of International Trade and Market Development, Department
of Community and Economic Development testified in Juneau and read
talking points as follows.
· Bill calls for RCA to adopt regulations, licenses and
regulate water power plants of 5 mw or less, essentially
creating a state version of the Federal Energy Regulatory
Commission program. We believe RCA is an appropriate
agency to assume these duties. It does represent an
expansion of their current mission, and accordingly costs
are outlined in our fiscal note and in fiscal notes of
other agencies.
· Administration has an interagency team (Department of
Natural Resources, Department of Fish and Game, CZM, RCA
and Department of Community and Economic Development)
analyzing the bill. Want to share today the common points
emerging from our review.
· We believe development of small hydro projects can
support economic development and improve the
availability/cost of power in rural Alaska. We understand
a state program may have advantages in allowing us to
focus the process on issues pertinent to Alaska.
· When federal legislation was pending, the Governor
supported giving Alaska jurisdiction. At the same time
the Governor recognized that this is a complex
undertaking and we must be sure a state program results
in proper design and construction, and at the same time
protects fish, wildlife and the environment at least as
well, or as rigorously, as does FERC. The Governor also
acknowledged the importance of establishing an
appropriate funding mechanism that could be either a
direct appropriation or be based on a user fee system.
· Each agency fiscal note (RCA, Department of Natural
Resources, and Department of Fish and Game) assumes it
will take two years to develop regulations that will
define program operations. Once state regulations are
recommended, FERC must approve our state program before
ceding authority to the state.
· Costs of operating the program in FY 05 and beyond are a
bit more difficult to estimate. Agencies currently
understand their existing role with FERC process but
expect during the regulations process to outline the
additional duties, statutes and regulatory authority they
may need to operate a program as well as FERC (for
example, FERC has jurisdiction over entire watersheds
while FG currently has oversight only of streambeds.)
· The State of Oregon currently has a hydro project program
that operates in addition to FERC for all hydro projects
in that state, and we will examine their extensive
statutes and regulations, as well as work with FERC, for
ideas.
Senator Ward asked the witness to comment on Senator Green's
suggestion.
Ms. Saddler stated she was not in a position to respond. She noted
however, that some regulations in the existing FERC program "may
not be totally appropriate for Alaska." She understood the intent
of this program change is to "allow us to focus on those that are
Alaska specific." In adopting state regulations, she explained
projects in Alaska would not be subject to all the FERC provisions.
Senator Leman expressed that the state should have the ability to
grant exemptions given that FERC currently does so.
Senator Leman also questioned the "equal consideration" language
discussed earlier. He was unsure if this would be possible,
realistic or appropriate. He noted the provision also does not
allow consideration of other interests that could be involved. He
presumed the state statute could allow for this and remain within
the requirements of the federal law.
Senator Leman then referenced the general funds included in the
Department of Fish and Game and the Department of Natural Resources
fiscal notes and asked if federal funding would be provided to
operate the program or whether the only benefit is the transfer of
oversight to the state.
Ms. Saddler responded she understood the RCA would have the
opportunity to develop regulations that could include consideration
for other interests, provided these regulations "meet the intent of
the FERC regulations." She was unsure about the amount of federal
funds available for this program.
Mr. Abbott explained the current process in which FERC does not
collect funds from the applicant until the project is permitted and
begins to operate. At this time, he detailed, a charge is assessed
based on the amount of kilowatts produced. He assumed these
revenues would be allocated to the RCA. He noted the program would
operate using revenue generated from completed projects, although
it is unknown how the program would be funded before any projects
are completed and supplying revenue.
Senator Leman asked if no revenues were generated from projects
proposed but never completed, the state would subsequently not
recover expenses incurred in the permitting process.
Mr. Abbott affirmed.
JACK HESSION, Alaska Public Water Coalition, testified via
teleconference from Anchorage and read a statement into the record
as follows.
The Coalition includes sport fishing groups, conservation
organizations, former members of the Alaska Water Board and
other individuals, all of whom share an interest in the sound
management and proper disposition of Alaska's publicly owned
water resources.
In summary, the Coalition strongly opposes enactment of SB
140, which would establish a state hydroelectric regulatory
program with authority to accept license applications for
hydroelectric projects on state, private, and federal lands in
Alaska, including state and federal conservation system units.
The Coalition supports the continuation of Federal Energy
Regulatory Commission jurisdiction on all lands in Alaska.
Impact on state and national conservation system units
Under SB 140 a state license or exemption from licensing in a
national conservation system unit would be subject to the
approval of the Secretary of the Interior or Agriculture, and
licensing conditions could be imposed. The provision provides
insufficient protection for the national conservation system
units, as a Secretary favoring hydropower could be expected to
endorse projects in the units. The bill does not have a
similar provision for state conservation system units.
Alaska jurisdiction over projects located in federal
conservation system units would be unprecedented; no state
currently has such jurisdiction. Under the Federal Power Act
and other applicable federal law, the Federal Energy
Regulatory Commission does not accept applications for
hydropower projects located within national parks, wild and
scenic rivers, or wilderness areas, all of which are closed to
new hydropower development.
If a state regulatory authority accepted license applications
for hydropower projects within these national conservations
system, it would be met with intense controversy and
litigation from citizens determined to protect the purposes
and natural values for which these lands were set aside by
Congress. With equal determination, citizens would also defend
state conservation system units from destructive hydroelectric
dams.
The State should not assume the cost of hydropower regulation
SB 140 would establish a state hydroelectric regulatory
program within the Regulatory Commission of Alaska for the
purpose of licensing, re-licensing, exempting from licensing,
and regulating hydroelectric projects of 5 megawatts or less
on all lands in Alaska, with the exception of national study
rivers. The new regulatory program would be modeled after the
licensing requirements of the Federal Energy Regulatory
Commission (FERC). To ensure that the state program met these
federal requirements, the program would have to be approved by
FERC.
Putting this state regulatory program in place would require a
professional staff capable of matching FERC's expertise, and a
substantial annual expenditure of state funds. Because the
federal law requires the state's regulatory program to
"…protect the public interest, purposes…and the environment to
the same extent provided by the requirements for licensing and
regulation by [FERC]," the State would be obliged to spend
approximately as much on a regulatory program as FERC now does
for its Alaska regulatory responsibilities. (Emphasis added).
The State's cost could even exceed FERC's if state regulators
accepted applications for dams in national conservation system
units.
To get a realistic estimate of the cost of a state regulatory
program, the Committee should consult FERC on the cost of the
Commission's Alaska regulatory program.
In any event, we question whether it is in the State's
interest to take on a new and costly responsibility when the
State is facing a fiscal crisis and the Legislature is seeking
to reduce, not increase, the cost of state government.
Federal Energy Regulatory Commission
Expanding an existing state bureaucracy such as the Alaska
Regulatory Commission, or creating an entirely new agency or
division in an existing department makes no sense at all when
licensing of hydroelectric projects is being completely
administered by FERC. The "small" hydropower industry, which
was the moving force behind the federal law and now supports
SB 140, has failed to show that FERC's licensing process for
small hydro is flawed or somehow fails to protect the State's
interest in hydropower license procedures. The industry
complains of its costs and the length of the FERC process, but
to our knowledge, the industry has been unable to cite a
single instance of an Alaska license application being denied
by the federal commission.
Ironically, the Alaska Rural Electric Co-Operative
Association, which supports SB 140, had some kind words about
the existing FERC process. In testimony before the Senate
Resources Committee's February 8 hearing on SB 140, Eric
Yould, the Associations's Executive Director, said that "Our
members have taken a certain amount of solace in having a
third independent body, FERC, with the ability to stand up to
the federal and state agencies. We have found ourselves at the
mercy of the state agencies that sometime are not friendly at
all to the very notion of hydro projects and make the lives of
people trying to do this quite miserable." He said that FERC
is a "known" and "trusted" entity that acts as an independent
arbiter.
His observations bear on the fundamental question before the
Alaska Legislature as it considers SB 140: Given that the FERC
process is working satisfactorily, should the State rush to
replace it and assume the financial burden now carried by the
federal government? We think the answer is clearly "no."
Thus as it considers SB 140, we recommend that the Committee
and the Legislature as a whole apply the adage "if it ain't
broke, don't fix it." FERC's program is not broken; the
Commission is adequately carrying out the responsibilities
assigned to it by Congress.
Furthermore, a state takeover of FERC's responsibilities would
amount to a voluntarily accepting an unfunded mandated from
the federal government. By contrast, other federal mandates to
the State are accompanied by substantial federal funds, an
example of which is the generous federal funding of the Alaska
Surface Mining Control and Reclamation Act. Thus in order to
adequately fund a state hydropower regulatory program, the
Legislature would be obliged to increase overall state
spending, or take the necessary funds from other vital state
services and programs. Neither course is in the public
interest. Congress's offer of "small" hydropower jurisdiction
is an offer the State should politely but firmly refuse.
In conclusion, a state regulatory program would likely result
in intense controversy if hydropower projects were proposed
for units of the state and national conservation systems.
Because the existing FERC licensing and regulatory process is
performing satisfactorily and at minimum cost to the state
government, it is not fiscally prudent for the State to assume
FERC's responsibilities and costs, particularly at a time of
major shortfalls in state revenues.
We recommend that the Committee take no further action on SB
140.
Thank you for considering our views.
CHIP DENNERLEIN, Director, Division of Habitat and Restoration,
Department of Fish and Game, testified he is a member of the
interagency team referenced by Ms. Saddler. He informed the
Department of Fish and Game is participating in this effort because
the management and resolution of fish and wildlife issues, both in
resource protection and in public use, are "central to the current
FERC process" as well as central to this legislation. He stated the
intent is to establish a state program that "effectively and
efficiently hits the targets."
Mr. Dennerlein pointed out Governor Tony Knowles wrote Congress in
support of the federal enabling legislation and "expressed a few
conditions on funding" including "adequate state authority in
legislation," a source of funding sufficient to ensure "a real
program", and protection of fish and wildlife resources for
Alaskans at least as well as the current process.
Mr. Dennerlein clarified his remarks "support the concept" of
transferring regulatory authority to the RCA.
Mr. Dennerlein noted no hydropower projects proposed in Alaska that
have "passed the basic economic analysis" have been opposed by the
Department. He listed a hydroelectric dam on Kodiak Island as one
major project that had potential impact on fish and wildlife.
Mr. Dennerlein described the duties of FERC including licensing,
economic analysis, due diligence, independent review and serves as
the "coordinating point for all concerns." He continued, the agency
performs monitoring and compliance over the life of projects, as
well as re-licensing existing projects, such as those involving
restoring salmon runs in previously dry creek beds, and ensure dam
safety.
Mr. Dennerlein instructed on the application process and partial
exemptions whereby the applicant agrees to abide by the "resource
agency stipulations" and full exemptions "for relatively benign
projects that do not involve significant federal land interest."
Mr. Dennerlein then detailed the relationship between the
Department and FERC to obtain necessary data for the Department to
make decisions relating to salmon spawning and hydrology. He noted
the Department "helps frame questions" for environmental impact
statements, according to the provision in the Fish and Wildlife
Service Coordination Act. He elaborated on this process giving
examples of determining whether a proposed project impacts marsh
"where the Coho are rearing" and watershed where "the deer hunters
are concerned."
Mr. Dennerlein then spoke to the impacts of this legislation on the
Department listing front-end costs, the permitting process,
operating expenses of the program, participation of the Native
corporations and other Native organizations. He opined that more
work is necessary to avoid an "unintended result." He qualified the
Department supports small hydropower projects, but stressed there
are many affected parties in such a project, many of which are
competing.
Senator Leman asked if this legislation provides specific authority
to allow for partial and full exemptions that are comparable to
those granted by FERC that the witness mentioned.
Mr. Dennerlein answered it does. He indicated the decision would be
deferred to the Department. He was unsure whether federal law would
allow the state to exempt a privately owned project.
Senator Olson asked if this bill would make securing a permit less
cumbersome for small operators and or seasonal users.
Mr. Dennerlein answered, "That's the million dollar question." He
stated the "state is uncertain at this moment." He surmised a
program could be "crafted", which could accomplish this.
Mr. Dennerlein next addressed the fiscal note, stressing it is not
possible to accurately predict the cost of operating this program.
He listed many variables and suggested a consultant with experience
in this matter could be retained. He noted the State of Oregon
operates a similar program, which could be a source for locating an
expert.
SFC 02 # 14, Side A 11:12 AM
Mr. Dennerlein continued speaking to the number of staff required
to establish this program, including a full-time "team leader" and
staff from the Department of Law, Department of Fish and Game and
Department of Natural Resources.
Co-Chair Kelly ordered the bill HELD in Committee.
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