Legislature(2011 - 2012)BARNES 124
02/17/2011 03:00 PM House ENERGY
| Audio | Topic |
|---|---|
| Start | |
| HB103 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 103 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| + | TELECONFERENCED |
HB 103-POWER PROJECT; ALASKA ENERGY AUTHORITY
3:05:27 PM
CO-CHAIR PRUITT announced that the only order of business would
be HOUSE BILL NO. 103, "An Act relating to the procurement of
supplies, services, professional services, and construction for
the Alaska Energy Authority; establishing the Alaska Railbelt
energy fund and relating to the fund; relating to and repealing
the Railbelt energy fund; relating to the quorum of the board of
the Alaska Energy Authority; relating to the powers of the
Alaska Energy Authority regarding employees and the transfer of
certain employees of the Alaska Industrial Development Export
Authority to the Alaska Energy Authority; relating to acquiring
or constructing certain projects by the Alaska Energy Authority;
relating to the definition of 'feasibility study' in the Alaska
Energy Authority Act; and providing for an effective date."
3:06:11 PM
CO-CHAIR PRUITT established that the meeting would focus on the
histories of the proposed Susitna hydroelectric project, the
Bradley Lake hydroelectric dam, and the Icelandic hydroelectric
project, as well as the role of the Federal Energy Regulatory
Commission (FERC) with regard to licensure of the Susitna Dam.
3:08:00 PM
SARA FISHER-GOAD, Executive Director, Alaska Energy Authority
(AEA), Department of Commerce, Community & Economic Development
(DCCED), furnished the Alaska Energy Authority Summary of Funds
and the Railbelt Energy Fund Net Available Assets to the
committee [Included in members' packets].
3:10:07 PM
BRYAN CAREY, Technical engineer, Alaska Energy Authority (AEA),
Department of Commerce, Community & Economic Development
(DCCED), offered a brief history of the Susitna hydroelectric
project. He stated that the Susitna Basin between the Talkeetna
Mountains and the Alaska Range had been studied by the Bureau of
Reclamation in the 1950's as a possible hydro-electric site,
with 12 possible dam sites identified above Gold Creek. In the
1960's, the US Army Corps of Engineers continued with the study
of a four dam system. In the 1970's, the Army Corps of
Engineers studied an idea for raising the height of the Watana
Dam, to supply the energy equivalent of two dams, which would
reduce the cost and the area to be flooded. In 1976, the Alaska
Power Authority was created and it took over the Susitna
project. In 1981, the Railbelt Energy Fund was created,
primarily for the Susitna project. In the early 1980s, the
price of oil dropped substantially, low cost natural gas was
found in Cook Inlet, and the demand for electricity did not
increase as originally projected. In 1985, the plan was
restructured into three stages: build the 700 foot Watana Dam;
build the Devil Canyon Dam to its full height; and add an
additional 185 feet on the top of the Watana Dam. This would
allow for energy production to begin earlier, and to spread the
stages over whatever time frame was necessary. In 1986, this
plan and its license were dropped, but the Bradley Lake hydro
project license was received. In 1989, the Alaska Power
Authority became the Alaska Energy Authority (AEA). In 1991,
the Bradley Lake Hydro project was commissioned and it began
production. He pointed out that AEA completed the Bradley Lake
project on time and under budget. In 2008, there was a $2.5
million appropriation to re-evaluate the Susitna Hydro-electric
Project and its place in the Railbelt Integrated Resource Plan.
In 2010, the state declared its goal for 50 percent renewable
energy by 2025.
3:16:29 PM
REPRESENTATIVE SADDLER asked which license was dropped in 1986.
3:16:44 PM
MR. CAREY, in response, stated that it was actually the FERC
permit to Alaska Power Authority. He explained that the first
step for a FERC license was to file a preliminary permit
application, which allowed for three years to study the project,
and gave a priority for the FERC license. He sketched a
comparison of the former and present Susitna projects, noting
that the current Watana Dam would be 700 feet tall, with a
smaller reservoir of 20,000 acres, and an annual energy capacity
of 2,600 giga watt hours. This would be about 50 percent of the
current Railbelt electrical usage.
3:20:03 PM
MR. CAREY directed attention to the rising cost of natural gas
and the decrease in availability. He expressed concern to the
capacity for winter production of natural gas. He explained
that this hydro-electric project would replace many of the aging
natural gas facilities, although it would only replace 50
percent of natural gas usage.
3:21:29 PM
CO-CHAIR PRUITT asked about the results from the $2.5 million
evaluation.
3:21:33 PM
MR. CAREY replied that his presentation reflected the result of
that study. He explained that the Railbelt Integrated Resource
plan looked at the sources for energy generation during the
upcoming 50 years.
3:23:03 PM
REPRESENTATIVE FOSTER asked for clarification on the demand for
fuel oil in 20 years.
3:23:22 PM
MR. CAREY replied that the use of fuel oil for energy generation
would diminish within the next ten years. He explained that the
original was for an 885 foot high dam, and noted that the
current plan was for a 700 foot dam. He discussed the Bradley
Lake hydro project, and directed attention to the similarities
with a Watana embankment dam. He reported that Bradley Lake dam
was a 125 foot embankment dam with a concrete face on the water
side. He pointed out that, as the Bradley Lake dam was steeper,
it used far less material than the proposed Susitna dam.
3:25:59 PM
MR. CAREY pointed out that Bradley Lake was glacial, with no
fish, and did not require a fish ladder. He opined that the
Bradley Lake project had a positive impact on the fish spawning
areas at tide water. He reported that, in 1985, the financing
had been obtained and the license was issued. He stated that
construction began in 1987 and that the dam was put on line in
1991, with a capacity to generate 120 megawatts. He said that
the average annual power generation was about 35-40 percent of
capacity, with peak usage during the day. He pointed out that
even in the winter, Bradley Lake project could dispatch power.
He noted that the power tunnel was 3.5 miles long, and crossed
three fault lines, with an additional 20 miles of transmission
lines. He stated that the six power purchasers were the
utilities along the Railbelt.
3:29:55 PM
REPRESENTATIVE FOSTER asked about the fault lines crossed by the
power tunnel.
3:30:10 PM
MR. CAREY, in response to Representative Foster, explained that
the power tunnel from the lake crossed three small fault lines,
which required special engineering to manage the geological
risk. He noted that the design of an embankment dam was
extremely stable and built to withstand an earthquake equivalent
to the Anchorage earthquake. He stated that the capital cost
had been about $350 million, even though interest rates were
much higher during the 1980s. He pointed out that about 50
percent of the cost was paid through state appropriations. He
reported that hydropower was more expensive than natural gas
when Bradley Lake came on line; however, now the cost of hydro
power was less than natural gas generation. He pointed to the
power sales agreement, which allowed for the state to continue
receiving funds back from the Bradley Lake project, even after
the bonds have been repaid.
3:34:22 PM
REPRESENTATIVE PETERSEN asked if the financial return from the
Bradley Lake project would be placed in a fund for other power
projects.
3:35:01 PM
MR. CAREY agreed, but he stated that he was unsure to which fund
the returns would be paid.
3:35:12 PM
MS. FISHER-GOAD offered her belief that the power sales
agreement determined that funds be paid back into the existing
Railbelt energy fund. She pointed out that discussion for
proposed HB 103 could determine whether the returns would
instead be paid into the Alaska Railbelt energy fund. She
affirmed that the returns could be paid into the general fund,
if there was not a specific fund for payment.
3:36:02 PM
CO-CHAIR PRUITT suggested a need for legislation to create the
Alaska Railbelt fund.
3:36:27 PM
BRIAN BJORKQUIST, Senior Assistant Attorney General, Labor and
State Affairs Section, Civil Division (Anchorage), Department of
Law (DOL), in response to Co-Chair Pruitt, said that, under the
Bradley Lake power sales agreement, the payments due after the
bond payoff were to be directed into a Railbelt energy fund,
although not designated into the existing Railbelt energy fund.
He clarified that the fund receiving the payments must be used
for power and transmission projects in the Railbelt. He stated
that both the Railbelt energy fund and the Alaska Railbelt
energy fund would fit this definition. He suggested for
negotiations with the utilities for consensus to payment of the
Bradley Lake revenue.
3:37:40 PM
MR. CAREY pointed to another advantage, as the state could
receive much lower financing rates than the utilities. He noted
that the financing was backed by the power sales agreement,
which was exempt from the RCA, and allowed investors a greater
certainty for return of investment.
3:38:31 PM
REPRESENTATIVE TUCK noted that hydroelectric projects were a
huge investment with a long-term return toward economic growth.
He expressed agreement for the State of Alaska to finance the
project, or at least bond 50 percent of the project.
3:39:35 PM
MR. CAREY agreed that the State of Alaska could choose the bond
return percentage.
3:39:37 PM
REPRESENTATIVE TUCK, referring to the Bradley Lake financing
model, asked if the Susitna project would also receive a loan
with a variable interest rate. He asked for a projection of the
investment from the private sector.
3:39:54 PM
MS. FISHER-GOAD explained that the Susitna project was much
larger than the Bradley Lake project. He reported that a
financing team would be established to work with the utilities
for potential power sales agreements, and with the State of
Alaska to determine its involvement.
3:41:16 PM
CO-CHAIR PRUITT asked if AEA would hold the bonds for the
financing of the project. He suggested that AEA establish the
length of time for financing, in order to replenish the fund for
other electric projects, and that the utilities should not be
involved with the financing.
3:42:19 PM
MS. FISHER-GOAD explained that the power sales agreements with
the utilities were the means to pay back the debt on the bonds.
3:42:51 PM
REPRESENTATIVE TUCK, referring to an earlier presentation,
observed that the models reflected interest rates of 6 percent.
3:43:23 PM
MR. CAREY, in response, said that 6 percent was used as an
example for the models; although the current market was
substantially less, it was still unknown what the market would
be in five to ten years.
REPRESENTATIVE TUCK, reflecting on the earlier design and
permitting of the Lower Watana dam project, asked which
projected change in design would be presented to FERC for
permitting and which design reflected the $4.5 billion cost.
MR. CAREY explained that the original design was for an
embankment dam without a concrete face. He suggested that a
roller compacted concrete (RCC) face could lower the cost of the
project, if it would work for that site. The idea for the
concrete face had been discarded in the 1980s because it was a
new technique and, for northern climates, its endurance to a
freeze-thaw cycle was unknown. He declared that the technology
had now been proven in Alaska. He stated that the two options
would be pursued in parallel to determine the lowest cost for
construction. He explained that the option to expand the dam
height would be included in the license application.
REPRESENTATIVE TUCK asked if the FERC application would include
the option to expand the project, and if it allowed for design
change.
3:47:32 PM
MR. CAREY declared that the description should be for the
project to be initially built, but that amendments for expansion
to the license could be filed at a later date. He detailed that
the original project design should allow for project expansion
to add more generation capacity.
3:49:27 PM
REPRESENTATIVE TUCK asked if it was better to initially file for
an expandable dam with FERC, in order to ensure its possibility
in the future.
3:50:21 PM
MR. CAREY offered his belief that, due to greater environmental
effects, it was not a good strategy to initially file for the
larger project limits. He deferred to Howard Lee.
3:51:02 PM
HOWARD LEE, Vice-President, MWH Americas, agreed that it was
better to apply for a license just for the initial stage of
development. He declared that it would simplify and expedite
the process and it would not preclude the future possibility for
expansion by applying for an amendment to the license. He
stated that this was a typical approach for development of large
hydro basin projects.
3:52:28 PM
REPRESENTATIVE TUCK asked to clarify that this application for
the smaller project would not limit an expanded project in the
future.
3:52:51 PM
MR. LEE agreed.
3:52:57 PM
CO-CHAIR PRUITT inquired about the costs of the project. He
referred to the Susitna Hydroelectric Project handout and
directed attention to Table 3.1 on page 12. He asked about the
cost discrepancy between this estimate to Low Watana and an
estimate from an earlier presentation. [As other committee
members had not yet received this handout, it was agreed to
postpone this discussion.]
BRIAN SADDEN, Project Manager, MWH Americas, stated that he was
the Project Manager for the Karahnjukar Hydro project in
Iceland. He presented a PowerPoint titled "Railbelt Large
Hydroelectric" which compared the similarities of the
Karahnjukar Hydro project with the Susitna/ Low Watana hydro
project. He reported that the Karahnjukar project was a 650
feet concrete faced, rock filled dam, in a near Arctic
environment, and that its reservoir was adjacent to a glacier
with three active volcanoes beneath it. He shared that a long
series of tunnels connected the power house to the dam.
3:58:47 PM
MR. SADDEN relayed that the underground structure was similar to
one of the Low Watana designs. He confirmed that the dam height
was similar to Low Watana, and was concrete faced and rock
filled. He explained the region around the dam site and some of
the structures nearby. He detailed the challenges: the remote
location necessitating that a 35 mile road be built; the dam
fill; the major concrete work; and the need of accommodations
and camp for 1,200 workers and families. He described the
solutions for most of these problems. He indicated that the
concrete work was kept sheltered throughout the winter, with hot
air generators to keep it warm. He stated the importance for
keeping up with the concrete work, as the rock fill work moved
much more quickly. He pointed to the dangers and the need for
constant vigilance for safety.
4:10:36 PM
MR. SADDEN, in response to Representative Tuck, described the
method for securing the rebar reinforcements. He pointed out
that a roller compacted concrete (RCC) dam did not need any
reinforcement within the dam, which allowed it to be built more
quickly than an embankment dam.
4:11:43 PM
REPRESENTATIVE LYNN asked for the height of Hoover Dam.
4:12:09 PM
MR. SADDEN replied that the proposed Watana Dam was 700 feet
high, and the Hoover Dam was 726 feet high, and from an
engineering point of view, this was within precedent.
4:13:41 PM
REPRESENTATIVE LYNN asked for the width of the canyons.
4:13:50 PM
MR. SADDEN replied that Hoover Dam was in a very narrow canyon,
and that Watana was wider.
4:14:29 PM
CO-CHAIR PRUITT asked if an RCC dam of this height had been
built.
4:14:57 PM
MR. SADDEN replied that a 710 foot RCC dam had been built in
China, with a similar height concrete faced rock filled dam also
built in China. He pointed out that the 770 foot Oroville Dam
in California was the highest embankment dam. He noted that a
smaller RCC dam had been built in a similarly seismic area of
California. He indicated that few concrete faced rock filled
dams had been built in the U.S., but they were a dam of choice
in many places as they fit into the topography. He continued
with his PowerPoint showing construction of the Karahnjukar
Project. He pointed out the difficulty for pouring an RCC dam
in mid winter.
4:21:03 PM
REPRESENTATIVE LYNN asked about the problems for diverting the
river.
4:21:26 PM
MR. SADDEN replied that the type of dam, which was predicated by
the return period of flood, determined the capacity of the
diversion. He explained that a concrete dam could allow flood
waters to flow over it, even if half built; an embankment dam
with a clay core allowed for a 50 - 100 year flood return
period; an RCC dam had a 10 - 20 year return period; a concrete
faced rock filled dam could allow flood waters to pass over or
through during construction, so its return period of flood was
between 20 - 50 years. He pointed out that the natural flows
through the Watana were very low during some periods of the
year, so it was important to schedule the early work in the
river during these low flow periods. He explained that an RCC
dam could be built with a sluice through the base of it. He
said that on the day of the actual diversion, every piece of
equipment was throwing rocks in the river to direct the
downstream flow into the diversion tunnel.
4:25:01 PM
REPRESENTATIVE TUCK asked if there was a concern with glacial
siltation.
4:25:17 PM
MR. SADDEN replied that the calculations indicated that the deep
canyon would silt, but that full siltation would take more than
100 years. He indicated that the final studies would include
calculations for siltation.
4:27:08 PM
MR. CAREY confirmed that the studies done during the 1980s
calculated that full siltation for a 700 foot dam would take at
least 500 years.
4:27:39 PM
REPRESENTATIVE SADDLER asked what was the oldest hydro electric
dam, and what would happen at the end of its useful life.
4:28:01 PM
MR. SADDEN observed that hydroelectric projects began in the
early 1900's. He noted that the life of a dam was unknown, but
that maintenance could be expensive. He explained that the
generators, the turbines, and the electrical equipment often
wore out after 25 - 35 years. He stated that continual stopping
and starting was harder on the equipment.
4:30:42 PM
REPRESENTATIVE SADDLER asked about the hazards from seismic
activity.
4:31:04 PM
MR. SADDEN agreed that although this was a seismic area, dams
were built in seismic zones. He reported that the available
analyses, international standards, and FERC guidelines would
determine design codes and statutes. He shared that a proposed
design criteria for dams was a 2,500 year earthquake return
period. He pointed out that a lower earthquake return period
meant a smaller earthquake. In response, he conveyed that the
appropriate aggregate building materials had been identified as
available on-site. He opined that some of the special materials
for an RCC dam were also in the vicinity.
4:35:51 PM
REPRESENTATIVE SADDLER asked about the cost overruns for dam
projects.
4:36:09 PM
MR. SADDEN replied that cost overruns were a problem, but that
the key was to identify, manage, overcome, and mitigate the
risks. He explained that the budget analysis had to account for
each of these. He offered examples of bad weather and
unforeseen geology. He stated that there were many techniques
to manage risk.
4:38:26 PM
MR. SADDEN stated that all hydro projects, which were not
federally owned, were required to have FERC licensing. He
announced that the first step was to submit for a preliminary
permit, which would announce the project and give the authority
to talk with the necessary agencies. He clarified that the
preliminary permit did not require specific details for the
project, and was usually available within six months. During
this time, there was work on the full license application. The
license was granted for 50 years, and included a component which
required the licensee to mitigate environmental effects. He
detailed that there was a choice for three separate licensing
processes: traditional (TLP), alternative (ALP), and integrated
(ILP). He pointed out that, although these processes appeared
similar, the ILP required the earliest involvement with FERC, as
the process planning and scoping were done in conjunction with
all interested parties, so that when the application was filed
with FERC it was relatively straight forward. He opined that
the FERC process was currently more focused on re-licensing, as
there had not been many large new projects in the prior 30 - 40
years. He explained the typical licensing process, which
included a filing of the initial proposal, FERC meetings and
solicitation for public comments, studies, and preparation of
the application. He detailed the post application filing
process, which included FERC reviews with public comments and
the issuance of the FERC environmental document with more public
comments, all of which could take at least five years to
finalize.
4:44:46 PM
REPRESENTATIVE TUCK asked if the five year time period included
permitting and licensing.
4:44:59 PM
MR. SADDEN replied that this time frame included the pre-file
period to the issuance of the license; however, he cautioned
that the process was unpredictable and could be longer as there
were many issues to be addressed. He noted that a lot of money
had already been spent on environmental studies in the 1980s for
the Susitna hydro project, and he commended AEA for its initial
gap analysis to focus on the current study needs. He offered a
licensing strategy for AEA, which included an early engagement
of the resource agencies to identify critical study needs, an
analysis to maximize use of the earlier environmental study
work, and a strong commitment to environmental protection and
enhancement. He pointed to the importance of a conceptual
engineering analysis to coordinate with the environmental
studies. He explained that the FERC role was to determine: the
need for the project by comparing its cost with alternatives,
the project development costs related to environmental
mitigation costs, and the wholesale power cost regardless of the
project power cost. He stated that FERC had no role in the
power cost to the consumers.
4:50:25 PM
REPRESENTATIVE PETERSEN asked to define gap analysis.
4:50:51 PM
MR. CAREY, in response, said that AEA environmental contractors
were doing updated wildlife studies for possible changes to
endangered species listing, migration patterns for caribou,
changes in hydrological information, and the possibility of
salmon upstream of the dam site.
4:52:21 PM
REPRESENTATIVE TUCK asked if there were any means to expedite
the process.
4:52:58 PM
MR. SADDEN replied that although there was no way to guarantee a
speedy process, the key was to quickly engage with the public
interests, agencies, and stakeholders to clarify the commitment
and make the process predictable.
4:53:51 PM
CO-CHAIR PRUITT referred to the Susitna Hydroelectric Project
handout [referenced earlier and now distributed to committee
members] and directed attention to Table 3.1 on page 12. He
asked for clarification about the role and authority of AEA, and
requested that AEA submit a construction cost estimate.
4:56:03 PM
REPRESENTATIVE PETERSEN reflected on the difficulty for a cost
estimate, as it was unknown when construction would begin, and
what would be the interest rates.
CO-CHAIR PRUITT agreed, but opined that a refined estimate was
important for a several billion dollar project. He pointed out
that the Bradley Lake hydro project was under budget.
4:57:20 PM
MS. FISHER-GOAD pointed out that proposed HB 103 applied to a
restoration of AEA powers, and was necessary for AEA to proceed
and submit the preliminary permit application with FERC. She
noted that the $65 million appropriation was necessary to fund
the process. She observed that proposed HB 103 defined the role
and responsibilities of AEA. She offered her belief that the
State of Alaska had "required and asked for a focused agency to
provide focus on energy issues." She stated that AEA was
fulfilling that role. She remarked that, although the FERC
process could not be hastened, the preliminary permit
application could be submitted to initiate the project.
[HB 103 was held over.]
| Document Name | Date/Time | Subjects |
|---|---|---|
| 1 - HB 103 AEA Presentation on the History of Susitna River and Bradley Lake Hydroelectric Projects.pdf |
HENE 2/17/2011 3:00:00 PM |
HB 103 |
| 2 - HB 103 AEA Presentation on Karahnjukar and FERC.pdf |
HENE 2/17/2011 3:00:00 PM |
HB 103 |