Legislature(2011 - 2012)BELTZ 105 (TSBldg)
01/24/2012 03:30 PM Senate COMMUNITY & REGIONAL AFFAIRS
| Audio | Topic |
|---|---|
| Start | |
| SB154 | |
| SB122 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | SB 154 | TELECONFERENCED | |
| *+ | SB 122 | TELECONFERENCED | |
SB 154-NATURAL GAS CONVERSION PROGRAM/FUND
3:36:04 PM
CHAIR OLSON announced the consideration of SB 154.
3:36:29 PM
SENATOR JOE THOMAS, sponsor of SB 154, said the bill would
create a low interest loan program for Alaskan families to
replace their oil, coal or wood home-heating appliances with
natural gas. He said the Fairbanks Borough was anxiously
awaiting the arrival of more natural gas and that current
supplies were limited. He said in addition to Prudhoe Bay,
Interior Alaska was hopeful the Cook Inlet subsidized rigs
strike gas and expand supply via truck or pipeline. He said SB
154 would give families the ability to plan ahead for low cost
energy when access to gas was made available.
He said the home heating change-out mechanism would create a
more robust gas distribution system in the Kenai Peninsula,
Anchorage and Matanuska-Susitna Valley areas where gas is
currently distributed. He said the recent propane conversions to
natural gas in the Kenai Peninsula had a dramatic cost savings
impact.
He said Fairbanks' Golden Valley Electric Association and Flint
Hills Resources' North Pole Refinery were considering natural
gas supplied from Prudhoe Bay for their own uses and potentially
for distribution to homes; a decision would be made by
September, 2012. He said Flint Hills Resources' North Pole
Refinery would be able to lower production costs and provide the
state with lower priced fuels.
3:39:17 PM
SENATOR THOMAS said the Fairbanks Borough would be able to get a
handle on its air quality problem by changing over an estimated
12,000 homes to natural gas. He said it would also spark the
economy, create local jobs all across the state and keep more
money circulating in Alaska rather than being spent on energy
costs. He noted that developers in the Fairbanks area have dealt
with outside companies where projects were cancelled due to high
fuel costs.
3:40:42 PM
GRIER HOPKINS, staff to Senator Thomas, said the impetus for SB
154 was to create a stronger, more economic instate market for a
natural gas pipeline or delivery program for the Fairbanks
Borough and Southcentral communities. He said having access to
natural gas would not be helpful if homeowners were unable to
use it. He said any natural gas delivery system would help build
a more robust gas market, vitalize local economies and keep more
local jobs in the communities. He said rural homeowners unable
to access natural gas would indirectly benefit from nearby
natural gas supplied regions where businesses pass along savings
from lower energy costs. He noted that the Fairbanks Borough was
studying its current natural gas distribution system to plan for
future infrastructure build out.
He said SB 154 would make available a $7,500 furnace replacement
loan, at 1 percent interest, to be paid back over 10 years
through the Alaska Housing Finance Corporation (AHFC). Eligible
candidates must own a noncommercial, single occupancy or duplex
home, demolition was not eminent, substantially complete
construction and has access to natural gas within their
community. He noted that connection costs would be the
homeowners' responsibility.
3:44:33 PM
MR. HOPKINS said the new furnace must become the home's primary
source of heat and participation is not subject to any income
limitations. He said the state's Energy Efficient Rebate Program
was used as a model for the loan program. He said an individual
homeowner applicant would contact AHFC, request an Energy Rater
to for a change out estimate and submit the report to Alaska
USA, AHFC's participating program lender.
He said SB 154 would also address Fairbanks' air quality problem
linked to smoke from wood burning, a less expensive alternative
to heating with oil. He noted that homeowners can save up to 50
percent by burning wood versus heating oil. The Fairbanks
Borough hired Sierra Research to do an air quality study and
found that 12,000 homes would have to be converted to natural
gas to meet the Environmental Protection Agency's (EPA) air
quality mandate.
3:47:06 PM
MR. HOPKINS said the Fairbanks' current natural gas market is at
capacity with 1108 customers. He noted that Senator Wagoner
inquired about possible federal programs available for natural
gas conversion and that a recent $1500 federal tax credit
expired in 2010.
3:48:37 PM
CHAIR OLSON asked how many homes would participate the first
year and during the life of the loan program.
3:48:56 PM
SENATOR THOMAS answered that 1000 homes would participate for
initial hook-up starting with Fairbanks' high density
neighborhoods. He noted that Fairbanks Natural Gas had a
distribution system setup in the borough but could not add
customers due to a lack of supply.
3:49:46 PM
CHAIR OLSON said 1000 homes borrowing $7500 each was a fair
amount of money going out as capital.
SENATOR THOMAS agreed.
CHAIR OLSON said a 1 percent interest rate was a low return on
investment.
SENATOR THOMAS agreed.
3:50:24 PM
CHAIR OLSON asked if there were similar state programs to SB
154.
SENATOR THOMAS answered that there may be several current and
suggested programs.
3:51:00 PM
MR. HOPKINS answered that the Alaska Energy Rebate Program was
available, it had distributed $90 million to over 14,600
homeowners who saved up to 33 percent in energy costs.
He said SB 154 was not a grant program and allowed the state to
get some return on investment. Other programs include the AHFC's
rebate on buying a five star plus energy rated home,
weatherization assistance for low-income renters and homeowners,
and the Alaska Second Mortgage Program for Energy Conservation.
3:52:33 PM
CHAIR OLSON commented that the Weatherization Assistance Program
was statewide and that SB 154 would only concentrate on
Southcentral and Fairbanks.
SENATOR MENARD asked if AHFC had addressed adding staff to run
the program in SB 154.
CHAIR OLSON said further testimony would answer Senator Menard's
question and asked if homeowners who have already converted to
natural gas would benefit.
3:53:35 PM
MR. HOPKINS answered no. He said a homeowner could receive funds
to upgrade their home heating appliance or access the current
Energy Efficient Rebate Program.
SENATOR WAGONER asked if SB 154 strictly covers the cost of
replacing the heating appliance.
MR. HOPKINS answered yes. He said running a gas line to a home
is not covered.
SENATOR MENARD asked what the homeowner's costs would be to run
gas line to their home.
MR. HOPKINS answered that NorthStar Gas in the Fairbanks
currently charges $17.64 per foot for the main line to get close
to the home and $930 for the first 100 feet of feeder line from
the main line to the home plus an additional charge per foot if
required.
3:56:06 PM
CHAIR OLSON asked if the loan program accommodated home
businesses.
MR. HOPKINS answered that the program was strictly for single
occupancy homes and duplexes, but up to 25 percent could be used
for commercial purposes.
CHAIR OLSON asked if a summer home residence would qualify.
MR. HOPKINS answered only for an owner-occupied home, but he
would ask AFHC to verify.
3:57:22 PM
DAN FAUSKE, CEO, Alaska Housing Finance Corp., said the
following details need to be worked out: loan terms, program
management, distribution development and the home conversion
process. He said there are approximately 30,000 potential home
conversions in the Fairbanks area which equates to $200 million
in required capital.
CHAIR OLSON asked where funding would come from at 1 percent
interest. He noted management costs were not included.
3:59:50 PM
MR. FAUSKE answered that SB 154 would have to be a state-funded
program.
4:01:06 PM
JEFF JACOBSON, Chief of Staff, Fairbanks North Star Borough,
said SB 154 would assist households that are burdened by high
fuel prices. He said the borough has used state grant funds to
conduct a natural gas distribution study to determine the
economics of expanding its limited natural gas distribution
system. He said in the event natural gas was delivered by truck,
bullet-line or pipeline, the borough residents need the means to
convert their homes.
He said the EPA designated Fairbanks as a Nonattainment Area for
Particulate Matter (PM-2.5) and mandated an air quality
improvement plan to be in place by 2014. He said SB 154 helps
the borough meet EPA's air quality goals by allowing residents
to switch away from heating oil and wood.
MR. JACOBSON said natural gas supplied to the Interior's two
refineries would lower their operating costs and ultimately
provide Alaskans with lower priced fuel.
4:04:54 PM
CHAIR OLSON asked about the distribution plan for the 12,000
home conversions needed to meet EPA air quality standards and
the hookup accessibility for the 30,000 homes.
MR. JACOBSON answered that if nothing else was done but convert
12,000 homes to natural gas, the borough would meet the EPA
mandated air quality attainment standards. He said Fairbank's
distribution plan combines direct pipelines to high density
neighborhoods and independent distribution to remote areas. He
said along with natural gas conversion, the borough would
continue to educate the population, assist homeowners to burn
drier wood and offer the Wood Stove Exchange Program to replace
wood stoves and boilers with qualified heating devices.
4:07:06 PM
CHAIR OLSON asked what the anticipated infrastructure costs
were.
MR. JACOBSON answered that data from the Fairbanks Distribution
Study would provide preliminary information.
4:07:36 PM
SENATOR WAGONER said NorthStar Gas did a study on a pipeline
installation project in Homer; the cost was $3.5 million. He
said Fairbanks was 10 times the size of Homer and asked if the
borough had a good start on distribution line installation.
SENATOR THOMAS answered yes.
MR. JACOBSON answered yes.
4:08:14 PM
JOMO STEWART, Energy Project Manager, Fairbanks Economic
Development Corp., said he was in charge of the Fairbanks Gas
Distribution System Report and concurred with prior testimony.
He said SB 154 would be a useful and welcomed component to allow
the borough to tap into the benefits of natural gas when it
becomes available.
4:09:51 PM
SENATOR THOMAS commented on cost concerns and said the intent
was to keep the project cost as low as possible. He said the
proposed loan interest rate might not be high enough to cover
administrative costs and conceded that 1 percent was a starting
point. He said the appliance cost of converting fuel oil to
natural gas is relatively close to projections, but wood burning
system conversion and gas-line installation was a different
situation.
4:10:54 PM
CHAIR OLSON said he would hold SB 154 in committee.
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