Legislature(2001 - 2002)
02/21/2002 09:36 AM Senate FIN
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
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. th 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 th 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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