Legislature(2009 - 2010)BUTROVICH 205
02/12/2009 11:00 AM Senate ENERGY
| Audio | Topic |
|---|---|
| Start | |
| SB31 | |
| SB54 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | SB 31 | TELECONFERENCED | |
| *+ | SB 54 | TELECONFERENCED | |
| + | TELECONFERENCED |
SB 31-GEOTHERMAL ELEC. PROD. TAX CREDIT
CHAIR MCGUIRE announced the consideration of SB 31. She said it
is her bill, and she has a committee substitute (CS) with
significant changes. It provides for a production tax credit to
incentivize renewable energy in Alaska. The original bill
incentivized geothermal energy investment by allowing for a tax
credit of $0.35 per kilowatt hour. The bill now provides the
credit for other forms of alternative energy. Many projects have
been discussed. Funding by the Alaska Energy Authority is a
direct pay-out of money. She has talked with companies,
municipal utilities, and co-ops that may be looking at wind,
tidal, and geothermal projects. The idea is to attract new
investment into these sustainable energy projects that may also
create new jobs. She hopes it will push existing projects that
might not be economic yet.
CHAIR MCGUIRE said that the bill gives a tax credit to profit-
making companies, and municipal utilities would get an earned-
tax credit that can be traded on the market. "You might end up
with a very unique circumstance where you have alternative
energy tax credits being traded on the market, and, for example,
a fossil fuel company buying them." That is good for Alaskans
and the environment. The bill needs some work. There are some
creative financing mechanisms in it, but it is patterned after
the film credit incentive bill that passed last year.
11:16:24 AM
SENATOR WIELECHOWSKI moved to adopt the CS to SB 31, labeled 26-
LS0217\C, as a working document. Hearing no objection, Version C
was before the committee.
TREVOR FULTON, Staff to Senator McGuire, Alaska State
Legislature, said the CS has four main changes from the original
bill. The scope of SB 31 is expanded to include other types of
alternative energies besides geothermal: solar, biomass, wind,
tidal, river, and wave. The tax credit is now transferable so
that public utilities can benefit. The original bill was
misdrafted, so the third change corrects the amount of credit to
$0.35 cents. It also adds a January 1 effective date to comport
with the start date of the tax year.
SENATOR WIELECHOWSKI asked about the fiscal note.
MR. FULTON said the Department of Revenue will address that. He
has seen two fiscals notes so far, but neither one really
reflects the CS.
11:19:42 AM
DAN STICKEL, Economist, Department of Revenue (DOR), Juneau,
said the CS fiscal note will be indeterminate because no one can
know what projects will apply for this credit. The 14-megawatt
Lake Dorothy hydro project, for example, would qualify for about
$260,000 per year. It has a $64 million capital cost. The
Department of Energy reports that Alaska has 1.3 billion
kilowatt hours of alternative energy generated annually. If it
is increased by 10 percent, revenue to the state would be
reduced by about $455,000 per year for four years. But he
doesn't know what projects will come on line and if the credit
will be used.
11:22:30 AM
MR. STICKEL said the DOR will have the expense of reviewing,
approving, and tracking these credits. "I believe we are
requesting either an additional corporate income tax auditor or
a partial position for that work in the fiscal note."
11:23:12 AM
SENATOR STEDMAN asked what expectations the department has.
JOHANNA BALES, Deputy Director, Tax Division, DOR, Anchorage,
said there is a federal corporate income tax credit that deals
with this type of energy. Alaska adopts that federal credit, so
Alaska corporate income taxpayers would get some benefit from
the federal credit, but only corporations. The intent is to help
public utilities with a transferable credit. It may entice
businesses who wouldn't normally get that income tax credit.
MR. STICKEL added that they hadn't looked at the economics of
projects "and what this might incent." The press has reported on
the Lake Dorothy hydro project, a wind farm in Nome, a wind farm
on Fire Island, and a geothermal project at Mr. Spurr. "But we
haven't looked at the economics of any of those."
11:25:34 AM
NICK GOODMAN, CEO, TDX Power, Anchorage, said TDX Power owns and
operates regulated utilities and develops power projects around
Alaska. It does a number of renewable energy projects, including
wind and geothermal. It is looking at hydro projects - from 400
kilowatts to 330 megawatts. "We are extremely supportive of this
legislation." It is a wonderful way to attract investments. His
company has experience with the federal PTC [production tax
credit] on some geothermal projects in the Lower 48. It's safe
to say that the federal PTC is the single most significant
component to the development of the majority of wind farms in
the Lower 48. It has demonstrated itself as a vehicle for
attracting investment and getting projects in the ground. This
bill would have great benefit to the state of Alaska.
11:27:11 AM
SENATOR STEDMAN said the credit will be available for the first
of four years after the power plant is placed in service. He
asked if there is enough of a tax shield on the depreciating out
of a hydro dam with its high capital costs. Would it dilute the
tax credit?
MR. GOODMAN said hydro would benefit probably the least from
this, but it would still be of some benefit. The depreciation
depends a lot on the size of the project. Smaller projects
depreciate much more quickly.
SENATOR STEDMAN asked if the depreciation life is 50 or 7 years.
MS. BALES said someone could generate a credit for the first of
four years and use that credit during the four years. If it
wasn't all used it could be sold to someone else who could use
the credit until it was exhausted. She did recommend to the
sponsor to allow the credit to be generated for four years and
then allow its use by the producer until it was exhausted. But
expenses are more upfront than on the back end.
CHAIR MCGUIRE said they would continue to work on that.
11:30:09 AM
PAUL THOMPSON, Director, Policy and Business Development, Ormat
Technologies, Reno, NV, expressed support for SB 31. Ormat is
very encouraged to see the legislative commitment to develop
alternative energy resources in Alaska. Ormat first did business
in Alaska in 1976 when it sold remote power units to the Alyeska
pipeline company. His chairperson has always pursued the dream
of developing a geothermal project in Alaska. Ormat is publicly
traded on the NYSE and has over 1,000 employees worldwide. It
currently owns and operates 350 megawatts of geothermal power in
the United States and is responsible for one gigawatt of power
generation around the world. Ormat is evaluating energy
opportunities in Alaska and looks forward to trying to develop
its recently acquired 36,000 acres at Mt. Spurr. This type of
bill will help get meaningful renewable projects in Alaska.
Ormat hasn't run all of its financial models, but 0.35 cents
won't greatly incentivize large-scale geothermal projects in a
state where development costs are high. The federal PTC is 2
cents, and with double the development costs, "we would push for
a PTC in the 3.5 to 4.5-cent-per kilowatt hour range."
11:32:46 AM
CLAY KOPLIN, Cordova Electric Co-op and the Alaska Power
Association, said SB 31 is an exciting bill. Cordova Electric
depreciates its hydro projects over 50 years. A challenged
economy is a good time to invest in energy infrastructure,
because there is a good workforce and lower material prices. It
is a good time for a bill like this to encourage private
industry investment in alternate energy production that provides
benefits particularly in rural Alaska. Most of Alaska's energy
needs are met by nonprofits and municipals, so the transferable
tax credit is very attractive. Cordova Electric is partnering
with a Native corporation in an alternative energy project. They
were trying to find ways to tie the federal tax incentives to
their tax liability because the projects are on their lands.
This bill will encourage those partnerships between electric
utilities and the Native corporations. He is pleased that the CS
broadens the scope. Different areas of the state will use
different technologies. He said that hydro isn't generally
considered, at the federal level, renewable or alternative, so
he was glad to see it included in SB 31.
11:35:37 AM
MR. KOPLIN said that Cordova Electric took the $40,000 of
revenue from last year and retrofitted some street lights with
LED fixtures, which use one half to one fourth of the energy,
greatly reducing winter diesel use. He asked that the credit be
claimed for the first 48 months of operation rather than four
years. So if a project went into service on the tenth month of a
fiscal year, it could get the full four years of tax credits
instead of just three years and two months. He encouraged that
it apply to other taxes rather than just state income taxes. It
could also apply to existing alternative energy projects.
CHAIR MCGUIRE noted his suggestions.
11:37:23 AM
HAP SYMMONDS, Ocean Beauty Seafoods, Cordova, said he supports
SB 31. Alternative energy is important for seafood processing
plants that are located in rural communities and have the
prospects of hydro, wind, and tidal energy. It is a great bill
for outlying communities with seafood plants. He supports a
credit of 3.5 to 4.0 cents rather than 0.35 cents. It would
provide even more incentive to get off of diesel.
11:39:30 AM
TOM LAKOSH, Anchorage, said the bill is a great idea, but it
needs work. He concurs with the suggested amendments, including
raising the subsidy to match at least the 1.9-cent federal
subsidy. He suggested changing line 14 by adding "or btu
equivalent of alternative energy ... consumed or sold" after
"kilowatt hour". This would encourage production of biofuels for
use other than electricity generation. Gas and diesel are
consumed for heat. On page 2, line 17, "hydrokinetic" is
redundant to "tidal and wave" energy. The bill should provide a
definition of hydrokinetic that includes things like ocean
currents because the modifying language may be overly
restrictive. There are problems with biomass. Alaska doesn't
want pollution from biomass energy. "We need a definition for
biomass that has some sort of pollution standard."
MR. LAKOSH said he has suggested using a particular biomass
generator that produces wood pellets and uses sewage and liquid
biomass to produce ethanol as back up to wind in rural
communities. Pellets can be used in stoves when not producing
electricity, and the alcohol can be used for heat or gasoline.
Alaska could subsidize the production of E10 in local
communities for alcohol stoves or clean wood pellet stoves.
There should be a number of alternatives that should be
subsidized if they are clean.
CHAIR MCGUIRE said those are excellent points.
11:44:31 AM
SUE ELY, Alaska Conservation Alliance, Juneau, said her group
represents over 38,000 Alaskans. Alaska is at an energy
crossroads, and volatile fuels prices are negatively impacting
its citizens. Many electrical generation facilities are at or
near the end of their life spans and will need to be replaced.
Alaska should take full advantage of its vast clean energy
resources. The governor wants to produce 50 percent of Alaska's
electricity from renewable resources. An alternative tax credit
could help get there. Geothermal, reasonably-sized hydro, wind,
solar, biomass, hydrokinetic, and tidal can all provide stable-
priced power. It can fill batteries in electric vehicles and
warm and illuminate greenhouses to secure Alaska's food source.
Germany has already used a clean energy incentive to build an
$8.7 billion renewable energy industry. It created 170,000 jobs.
The bill is a strong first step in an energy plan for Alaska.
11:47:04 AM
CHAIR MCGUIRE set SB 31 aside for continued work.
| Document Name | Date/Time | Subjects |
|---|---|---|
| SB 54 Bill Packet.pdf |
SENE 2/12/2009 11:00:00 AM |
SB 54 |
| SB 31 Bill Packet.pdf |
SENE 2/12/2009 11:00:00 AM |
SB 31 |