Legislature(2007 - 2008)BUTROVICH 205

02/20/2008 03:30 PM Senate RESOURCES


Download Mp3. <- Right click and save file as

* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+= SB 246 SUSITNA HYDRO WORKING GROUP; REPORT TELECONFERENCED
Heard & Held
+ HB 315 EXTEND BIG GAME COMMERCIAL SERVICES BOARD TELECONFERENCED
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
          SSSB 246-SUSITNA HYDRO WORKING GROUP; REPORT                                                                      
                                                                                                                              
3:37:28 PM                                                                                                                    
CHAIR HUGGINS announced SB 246 to be up for consideration.                                                                      
                                                                                                                                
SENATOR JOE THOMAS, sponsor of SB 246, started with reading the                                                                 
sponsor statement as follows:                                                                                                   
                                                                                                                                
     Senate Bill  246 will direct  the governor to  have the                                                                    
     Alaska    Energy    Authority   (AEA)    analyze    the                                                                    
     hydroelectric potential  of the Susitna River.  The AEA                                                                    
     will review  and update the  studies done in  the past,                                                                    
     evaluate cost analysis,  financing options, current and                                                                    
     future demand  and other  critical issues  to determine                                                                    
     the  feasibility  of  the project.  The  governor  will                                                                    
     submit a final report to  the legislature no later than                                                                    
     July 1, 2010.                                                                                                              
                                                                                                                                
     In recent years, Alaskans have  seen their energy costs                                                                    
     skyrocket.  These   ever-rising  costs   and  uncertain                                                                    
     supplies  not  only  make  it  difficult  for  Alaskans                                                                    
     across the  state to make  ends meet, but also  have an                                                                    
     adverse impact on economic growth.                                                                                         
                                                                                                                                
     The  energy produced  by  a  hydroelectric facility  is                                                                    
     predictable,  stable, clean  and  low cost.  Currently,                                                                    
     the Bradley Lake hydroelectric  dam produces energy for                                                                    
     the Railbelt at just $.05  per kWh, far below the $.176                                                                    
     per kWh that the Interior is currently paying.                                                                             
                                                                                                                                
     In  addition  to these  factors,  the  majority of  our                                                                    
     combustion turbine power plants  along the Railbelt are                                                                    
     over 30  years old and  all will need  retrofitting and                                                                    
     replacement that will cost between  $1 billion and $2.5                                                                    
     billion   over  the   next   ten   years.  Once   these                                                                    
     replacements  begin, we  will  continue  with the  same                                                                    
     rising  energy  costs, fluctuating  operating  expenses                                                                    
     and high polluting facilities that  the citizens of the                                                                    
     state have experienced in the past.                                                                                        
                                                                                                                                
     Twenty five  years ago,  when a  dam along  the Susitna                                                                    
     River was last looked at,  Cook Inlet gas cost $.21 per                                                                    
     million cubic  feet (mmcf),  the population  and energy                                                                    
     demand along  the Railbelt was substantially  less then                                                                    
     today, and  energy costs were  no where near  what they                                                                    
     are today. I believe all  these factors, along with the                                                                    
     environmental  and  long   term  energy  considerations                                                                    
     merit a reopening of the Susitna discussion.                                                                               
                                                                                                                                
     Nothing is as comprehensive  of an approach to reducing                                                                    
     costs,  emissions   and  dependence  on   finite,  non-                                                                    
        renewable energy production for the Railbelt and                                                                        
     adjacent areas as a Susitna Dam project.                                                                                   
                                                                                                                                
     I urge you to support the passage of SSSB 246.                                                                             
                                                                                                                                
                                                                                                                                
3:38:23 PM                                                                                                                    
SENATOR MCGUIRE joined the committee.                                                                                           
                                                                                                                                
3:40:33 PM                                                                                                                    
CHAIR  HUGGINS asked  Senator Thomas  to walk  through who  he is                                                               
proposing to be the members of the Alaska Energy Authority.                                                                     
                                                                                                                                
SENATOR  THOMAS  replied  that   the  bill  just  designates  the                                                               
authority  itself and  he  had anticipated  that  the new  energy                                                               
coordinator would be  the person who would  direct that activity.                                                               
The governor's office sees that as the way forward as well.                                                                     
                                                                                                                                
3:41:53 PM                                                                                                                    
CHAIR HUGGINS asked who he is recommending the AEA consult with.                                                                
                                                                                                                                
SENATOR  THOMAS answered  that it's  important that  it at  least                                                               
consults with  several major departments  within the state  - the                                                               
Department   of   Natural    Resources   (DNR),   Department   of                                                               
Environmental Conservation  (DEC), Alaska Department of  Fish and                                                               
Game  (ADF&G),  Department  of Labor  and  Workforce  Development                                                               
(DOLWD)  and the  Department of  Commerce,  Community &  Economic                                                               
Development.                                                                                                                    
                                                                                                                                
3:42:25 PM                                                                                                                    
SENATOR  STEDMAN   asked  if  the   study  would   encompass  the                                                               
electrical grid  and do a  cost back  analysis of what  should be                                                               
the power generation.                                                                                                           
                                                                                                                                
SENATOR THOMAS answered yes.                                                                                                    
                                                                                                                                
SENATOR STEDMAN asked  if it would concentrate on  hydro, coal or                                                               
natural gas as the source.                                                                                                      
                                                                                                                                
SENATOR THOMAS answered  he anticipated that it will  look at all                                                               
energy  sources within  the  Railbelt area  with  an emphasis  on                                                               
Susitna. But to do a  feasibility comparison, those other sources                                                               
would have to be taken into consideration.                                                                                      
                                                                                                                                
SENATOR GREEN asked if legislation  would be required for a group                                                               
of state  commissioners to get  together as a committee  with the                                                               
AEA coordinator.  She didn't  think they  were really  needed and                                                               
she would rather see experts doing the study.                                                                                   
                                                                                                                                
SENATOR THOMAS answered  he didn't intend for  the departments to                                                               
be put  together in a  committee, but  rather that the  AEA would                                                               
consult with them on an individual basis.                                                                                       
                                                                                                                                
3:46:07 PM                                                                                                                    
CHAIR  HUGGINS  asked  him  to explain  what  the  Alaska  Energy                                                               
Authority is.                                                                                                                   
                                                                                                                                
SENATOR THOMAS  replied that the  AEA is a department  within the                                                               
DCCED and it is charged  with all the energy responsibilities for                                                               
the state. Other state departments  have taken on varying degrees                                                               
of  responsibility  and  that  is   the  impetus  for  an  energy                                                               
coordinator.                                                                                                                    
                                                                                                                                
3:47:18 PM                                                                                                                    
CHAIR  HUGGINS  asked  if  the  energy  coordinator  position  is                                                               
currently vacant and if its subordinates are the existing body.                                                                 
                                                                                                                                
SENATOR THOMAS answered yes.                                                                                                    
                                                                                                                                
CHAIR HUGGINS  asked for the  Energy Authority  representative to                                                               
come forward.                                                                                                                   
                                                                                                                                
3:48:10 PM                                                                                                                    
SARAH  FISHER-GOAD,  Acting  Executive Director,  AEA,  explained                                                               
that  the AEA  is  a state  corporation and  has  gone through  a                                                               
number of  changes. In 1993,  it was statutorily changed  and not                                                               
allowed to  have staff or to  own any future projects;  the rural                                                               
programs were put  into the Division of Energy  in the Department                                                               
of Community and  Regional Affairs. At that  time, AEA's programs                                                               
were administered and still are  administered by AIDEA staff. So,                                                               
AEA contracts  with AIDEA  to provide the  staff support  for its                                                               
programs.  That  was increased  in  1999  to include  the  former                                                               
Division of Energy  Programs, which was in  the former Department                                                               
of Community and Regional Affairs.                                                                                              
                                                                                                                                
Even though AEA  exists as a corporation and  doesn't have staff,                                                               
it could only  own a project with  legislative authorization. She                                                               
said the  AIDEA has 66 staff  members, many of whom  work both on                                                               
AIDEA and AEA projects.                                                                                                         
                                                                                                                                
MS. GOAD  said with the  governor's emphasis on having  an energy                                                               
coordinator, the AIDEA board of  directors adopted by-law changes                                                               
that allow  an AIDEA executive  director to be different  than an                                                               
AEA executive  director. This position  has always been  the same                                                               
person since 1993. With the  energy coordinator and AEA executive                                                               
director appointments, there will be two people.                                                                                
                                                                                                                                
SENATOR WIELECHOWSKI asked the mission of the AEA.                                                                              
                                                                                                                                
MS. GOAD  answered the mission  is to  reduce the cost  of energy                                                               
for Alaskans.                                                                                                                   
                                                                                                                                
SENATOR WIELECHOWSKI  asked if  AEA had looked  at a  bullet line                                                               
bringing  gas down  from  the  North Slope  (at  a  cost of  $2.5                                                               
billion)  and if  she  anticipated  at least  comparing  it to  a                                                               
Susitna hydro  project that would  probably provide a lot  of the                                                               
same needs.                                                                                                                     
                                                                                                                                
3:52:10 PM                                                                                                                    
MS. GOAD answered that what  Senator Thomas envisions goes beyond                                                               
Susitna.  The   fiscal  note  tries  to   address  the  different                                                               
components of  the bill  and some of  the regional  planning that                                                               
needs to be done.                                                                                                               
                                                                                                                                
SENATOR  WIELECHOWSKI asked  if a  spur line  into South  Central                                                               
would provide  the same sort  of energy  they would get  from the                                                               
Susitna dam.                                                                                                                    
                                                                                                                                
3:53:21 PM                                                                                                                    
JAMES HENSATH,  Deputy Director of  Development for both  AEA AND                                                               
AIDEA, answered  that the bullet line  is a way to  move gas from                                                               
the North Slope  to South Central and it has  its cost which will                                                               
come out in  the cost of the fuel. The  long term plan comparison                                                               
would  look  at how  the  Susitna  project  would fit  in.  Using                                                               
natural gas turbine generation would be one of those.                                                                           
                                                                                                                                
He explained  when South Central  was in  full bore with  LNG and                                                               
Agrium at capacity,  gas consumption as it  related to electrical                                                               
generation  was 15  percent  of  the total  gas  consumption -  a                                                               
potentially small  component of what  could be delivered  by that                                                               
gas line.                                                                                                                       
                                                                                                                                
CHAIR HUGGINS  asked what he had  been working on in  the last 24                                                               
months.                                                                                                                         
                                                                                                                                
MS. GOAD  answered that the  AEA side has concentrated  mostly on                                                               
rural  energy  projects.  A  deputy   director  of  Rural  Energy                                                               
oversees that.  Their primary funding source  for building energy                                                               
infrastructure  for communities  in  rural Alaska  is the  Denali                                                               
Commission  and they  have done  bulk fuel  tank farms  and rural                                                               
power  system upgrades.  They also  provide technical  assistance                                                               
for those  communities to  help them  be sustainable  and address                                                               
some  maintenance  needs  through  a circuit  rider  program  and                                                               
technical assistance.                                                                                                           
                                                                                                                                
AEA  also runs  the $27-million  Power Cost  Equalization Program                                                               
that  provides  subsidy  payments  to rural  utilities  for  rate                                                               
payers, for residential and community  facilities. In addition to                                                               
that   rural  energy   work,  since   1993   AEA  actually   owns                                                               
infrastructure   including  the   Bradley  Lake   Hydro  Electric                                                               
Project, the Alaska  Intertie that runs from Willow  to Healy and                                                               
the  small Larson  Bay Hydro  Project  - and  from 1993-1999  AEA                                                               
owned  the Four-Dam  Pool Power  Projects. In  addition, AEA  has                                                               
been attached for  studies for some capital projects;  one is the                                                               
AK/BC  Intertie  and an  energy  export  study. It  is  currently                                                               
working on  a Railbelt Electrical  Grid Authority project  and an                                                               
advisory  committee  just  met in  their  building  yesterday  to                                                               
listen to  that progress.  They expect  some results  this summer                                                               
with  respect   to  organizational   aspects  for   the  Railbelt                                                               
utilities.                                                                                                                      
                                                                                                                                
CHAIR HUGGINS asked who makes up the advisory committee.                                                                        
                                                                                                                                
MS. GOAD answered  the committee was comprised  of various stake-                                                               
holders  in  the  Railbelt,   some  utilities  stake-holders  and                                                               
consumer  groups,  finance   folks,  former  Representative  Norm                                                               
Rokeberg and other interested individuals.                                                                                      
                                                                                                                                
CHAIR HUGGINS asked when AEA will have a fulltime coordinator.                                                                  
                                                                                                                                
3:58:31 PM                                                                                                                    
MS.  GOAD answered  she expects  an appointed  executive director                                                               
for AEA  who is also  the energy  coordinator very soon.  For the                                                               
AIDEA executive director they are  working with a management head                                                               
hunter firm to  find potential candidates - maybe  by late spring                                                               
for  that  position  to  be  filled. It  has  been  vacant  since                                                               
February 1.                                                                                                                     
                                                                                                                                
3:59:22 PM                                                                                                                    
CHAIR HUGGINS asked how they would  take on this task if the bill                                                               
passes.                                                                                                                         
                                                                                                                                
MS. GOAD  answered they  expect this to  be a  multi-year capital                                                               
project and  would manage it  similarly to how they  have managed                                                               
other projects  through capital appropriations. Updating  the old                                                               
studies  can  happen  with  information  and  expertise  that  is                                                               
already in the building.                                                                                                        
                                                                                                                                
4:01:09 PM                                                                                                                    
MR.  HENSATH added  that through  their procurement  offices, AEA                                                               
developed  a  number   of  term  contracts  with   a  variety  of                                                               
engineering  contractors in  Alaska.  He said  they  would go  to                                                               
three  of the  term contractors  who  have the  expertise in  the                                                               
hydro  and other  energy areas.  They would  want an  engineering                                                               
contractor by the  end of June to begin valuation  of the Susitna                                                               
material and update the engineering and cost estimates.                                                                         
                                                                                                                                
4:01:57 PM                                                                                                                    
SENATOR  WAGONER asked  if the  Army Corps  would be  involved in                                                               
this project.                                                                                                                   
                                                                                                                                
MR. HENSATH replied that AEA  will go where the information takes                                                               
them. At  this point, the  fiscal note doesn't identify  the Army                                                               
Corps of Engineers as a  particular contact, but because of their                                                               
history, they would be contacted.                                                                                               
                                                                                                                                
He explained that HB 246 examines  the viability of Susitna as an                                                               
electric  generation project  in the  Railbelt and  their initial                                                               
effort will be  focused on examining the  current information and                                                               
the  design that  $135 million  put together  in 1984.  They will                                                               
look  for  engineering  flaws  that  may  have  occurred  or  new                                                               
information  and get  a  cost  to determine  if  it  is a  viable                                                               
project.                                                                                                                        
                                                                                                                                
SENATOR WAGONER said he didn't  know of any other organization or                                                               
group of engineers with more  expertise in the world for building                                                               
dams than  the Army  Corps. It  would be a  natural fit  to bring                                                               
them  on  at  the  start  of   any  project  and  any  review  of                                                               
information.                                                                                                                    
                                                                                                                                
CHAIR HUGGINS concurred.                                                                                                        
                                                                                                                                
4:03:38 PM                                                                                                                    
CHAIR HUGGINS asked if this would require a FERC certificate.                                                                   
                                                                                                                                
MR. HENSATH answered not at this point.                                                                                         
                                                                                                                                
CHAIR HUGGINS said "Let's talk  about projects; not studies. This                                                               
is about building something." Assume  you're going to build a dam                                                               
by 2010.                                                                                                                        
                                                                                                                                
MR.  HENSATH  answered   by  the  summer  of  2010   there  is  a                                                               
possibility  they would  stop work  if the  economics don't  look                                                               
viable or  the cost of  power is too  much, but after  looking at                                                               
all the different alternative costs  and factors, they would have                                                               
a report  that says whether the  Susitna dam is a  viable project                                                               
to go ahead with.                                                                                                               
                                                                                                                                
CHAIR HUGGINS wanted  to understand what length of  time they are                                                               
talking about after that "for the beavers to build the dam."                                                                    
                                                                                                                                
MR.  HENSATH  estimated  approximately  7-10  years  including  a                                                               
three-year   engineering   and   FERC  permitting   process   and                                                               
construction period before power is  being delivered. Part of the                                                               
study would evaluate that schedule.                                                                                             
                                                                                                                                
CHAIR HUGGINS noted  that the project was  potentially racing the                                                               
gas pipeline.                                                                                                                   
                                                                                                                                
MR. HENSATH  replied very  much so,  but they may  not be  in the                                                               
same race.                                                                                                                      
                                                                                                                                
CHAIR HUGGINS  asked if he  was the official  representative from                                                               
the administration on this bill.                                                                                                
                                                                                                                                
4:06:41 PM                                                                                                                    
MS. GOAD  answered that AEA is  the point agency with  respect to                                                               
working on  the fiscal  note and determining  how much  the study                                                               
would  cost. She  didn't represent  that  the administration  had                                                               
taken a position on the project.                                                                                                
                                                                                                                                
CHAIR HUGGINS asked if anyone  from the administration was at the                                                               
meeting.                                                                                                                        
                                                                                                                                
MS. GOAD  replied that  whether there is  support for  the actual                                                               
project, there is an agreement that  an analysis needs to be done                                                               
as laid out in SB 246.                                                                                                          
                                                                                                                                
CHAIR HUGGINS asked if administration supports SB 246.                                                                          
                                                                                                                                
MS. GOAD answered she couldn't say.                                                                                             
                                                                                                                                
4:08:32 PM                                                                                                                    
SENATOR  GREEN  asked  if  going  back to  the  Army  Corps  1960                                                               
comprehensive study had any merit.                                                                                              
                                                                                                                                
4:08:36 PM                                                                                                                    
MR. HENSATH  answered his opinion  would be  no. The Corps  did a                                                               
number  of studies  on  the four-dam  project  for Susitna;  they                                                               
ultimately came to a two-dam project  that the state took over in                                                               
the  early  80s  and  completed a  major  engineering  study  for                                                               
including information  on a FERC application  that would probably                                                               
still be  valid and could be  used on a new  application. Looking                                                               
at the  overall major study  would little serve from  the Susitna                                                               
aspect.  It was  marginally viable  in 1984  and this  evaluation                                                               
would start there.                                                                                                              
                                                                                                                                
4:10:13 PM                                                                                                                    
SENATOR GREEN  asked if there  should be a catch-all  phrase that                                                               
wouldn't  limit   their  opportunities  to  get   information  to                                                               
utilities,  landowners,  Matsu resource  conservation,  Fairbanks                                                               
and the Army Corp of Engineers. What about including experts?                                                                   
                                                                                                                                
4:10:56 PM                                                                                                                    
MS.  GOAD  replied that  she  didn't  look  at  their list  as  a                                                               
limiting  phrase.  She  intended  for that  language  to  not  be                                                               
limiting, but to at the very least consult with those folks.                                                                    
                                                                                                                                
SENATOR GREEN stated  the language didn't say  that, because when                                                               
you put a list in statute, it is limited to that list.                                                                          
                                                                                                                                
4:12:00 PM                                                                                                                    
MR.  HENSATH  said  the  study  would  want  to  have  an  expert                                                               
engineering contract to  look a dam, update the  costs and update                                                               
the cost  of power.  And as they  go through  the socio-economic,                                                               
the  environmental and  other aspects,  he  couldn't conceive  of                                                               
being limited, but he would welcome any expanding language.                                                                     
                                                                                                                                
SENATOR GREEN asked where it says this will be contracted out.                                                                  
                                                                                                                                
CHAIR HUGGINS replied there was  no explicit language. They could                                                               
work with the sponsor and AEA on that.                                                                                          
                                                                                                                                
4:13:13 PM                                                                                                                    
SENATOR STEDMAN  asked to compare  the evolution of this  bill to                                                               
how  they  handled  the  Bradfield  Corridor  Southeast  Intertie                                                               
Extension study  from Tyee that  will eventually go  into British                                                               
Columbia (AK/BC).                                                                                                               
                                                                                                                                
MS. GOAD  answered one similarity is  the fact that in  order for                                                               
them to produce a report  they would contract with an engineering                                                               
firm  (Hatch Energy)  to complete  study. She  would have  to get                                                               
back to  them on  the process  they used for  the fiscal  note on                                                               
AK/BC versus this one.                                                                                                          
                                                                                                                                
SENATOR STEDMAN  said he didn't  recall that the AK/BC  study was                                                               
in a bill.                                                                                                                      
                                                                                                                                
MS.  GOAD  answered  that  was correct,  but  AEA  has  statutory                                                               
authority to enter into contracts  and grants and does that every                                                               
day for  the projects they  run. They anticipate using  some term                                                               
contracts  with various  Alaskan  engineering  firms to  complete                                                               
this work.                                                                                                                      
                                                                                                                                
SENATOR  STEDMAN  asked  if  the  legislature  appropriated  $2.2                                                               
million to  AEA now and then  followed with $1.5 million  in 2010                                                               
or some combination, could they "take that and run with it."                                                                    
                                                                                                                                
MS.  GOAD  answered if  it  was  a  capital project,  they  would                                                               
probably use  the same information  they used in the  fiscal note                                                               
to give them the backup information  on how that project would be                                                               
conducted. This is a specific way to do a capital project.                                                                      
                                                                                                                                
SENATOR STEDMAN  said they didn't  need a  bill to do  this then,                                                               
but they really need is an appropriation and a request.                                                                         
                                                                                                                                
MS.  GOAD agreed  and said  either way  they would  use the  same                                                               
information.                                                                                                                    
                                                                                                                                
4:17:54 PM                                                                                                                    
ERIC  YOULD,  Wood Canyon  Group,  said  he also  represents  TDX                                                               
Power. He said  he has worked with the  electric utility industry                                                               
in Alaska for  35 years and nine years on  the Susitna project in                                                               
the 70s an 80s when he was  the prime study manager for the Corps                                                               
of Engineers.  He worked with U.S.  Senator Gravel it was  so big                                                               
project that the federal government wouldn't build it.                                                                          
                                                                                                                                
The  state needed  to  take the  lead and  put  the Alaska  Power                                                               
Authority  into place  that  later grew  into  the Alaska  Energy                                                               
Authority. He  was its  first executive  director and  worked for                                                               
the next six  years on the Susitna Hydropower Project  as well as                                                               
about $1  billion more of  smaller hydropower  projects including                                                               
the Anchorage/Fairbanks Intertie.                                                                                               
                                                                                                                                
MR. YOULD  said he supported this  bill, but he was  also here on                                                               
behalf  of  TDX Power  that  is  a  private sector  utility  with                                                               
projects throughout Alaska.  TDX also has a license  from FERC to                                                               
bring the Chakachamna  hydropower project that is  about a fourth                                                               
the size  of Susitna forward.  He wanted  to make sure  that this                                                               
effort  wouldn't   steamroll  what  a  private   sector  firm  is                                                               
attempting  to bring  forward now  and is  prepared to  spend $20                                                               
million in pre-construction licensing  efforts - even though they                                                               
haven't decided yet if it is economically feasible.                                                                             
                                                                                                                                
4:20:56 PM                                                                                                                    
He said  the bill's  sponsor asked  him to give  a little  bit of                                                               
background on Susitna.  Basically it was studied  long before the                                                               
Corps of  Engineers; the Bureau  of Reclamation looked at  in the                                                               
1940s-60s. The  Corps looked at it  for three years in  the 1970s                                                               
and went  to Congress  to get  authorization to  go into  a joint                                                               
venture with  the State of  Alaska where the state  would provide                                                               
funds to  the Corps who  would in  turn be the  development agent                                                               
for  the  project. Ultimately  the  board  of directors  for  the                                                               
Alaska Power  Authority decided there  were other  resources with                                                               
more private  sector expertise  than the  Corps of  Engineers. So                                                               
they  didn't  work with  the  Corps  and  went forward  with  the                                                               
private sector.  Acres American was  the initial  hydropower firm                                                               
they worked  with and  later they brought  on Harza,  the largest                                                               
hydropower development firm in the world.                                                                                       
                                                                                                                                
MR. YOULD  explained when he  was with the Power  Authority, they                                                               
looked at  Susitna for six years  and ultimately it came  to be a                                                               
two-dam system  - Devil Canyon  (650 ft. high concrete  thin arch                                                               
dam)  and Watana  (870 ft.  high earth  fill structure).  The two                                                               
projects  together   could  develop  some  6.5   billion  kWh  of                                                               
electricity annually.  To put that  in perspective,  the Railbelt                                                               
today from Anchorage  to the Kenai consumes about  5 billion kWh.                                                               
Susitna is an expensive project. The  first dam to be built would                                                               
be Watana  and it would cost  $3.7 billion. The second  one would                                                               
be  Devil  Canyon that  would  be  brought  on line  years  after                                                               
Watana,  but it  would  only  cost $1.5  billion.  Both of  those                                                               
figures are in 1983 dollars and  at that time they also concluded                                                               
that  the project  could probably  not  be financed  on the  open                                                               
market unless the state put in a very major equity investment.                                                                  
                                                                                                                                
If the  project went forward  today it  would cost twice  as much                                                               
and  the  state would  have  to  put in  $4  billion  to make  it                                                               
financially feasible.                                                                                                           
                                                                                                                                
4:24:12 PM                                                                                                                    
MR. YOULD said in 1985, after  the FERC licensed project had been                                                               
submitted to  the federal  government, the  price of  oil dropped                                                               
down to less  than $10/barrel. That caused two  things to happen;                                                               
one  is  it  virtually  undermined   the  economic  viability  of                                                               
Susitna. And at  $9/barrel the state was not  making enough money                                                               
to come up  with its equity contribution. So,  the state withdrew                                                               
the license  application for  the development  of the  project in                                                               
1985 where it  has laid fallow ever since. Now  they are bringing                                                               
the  project  up for  review  and  TDX  wants  to make  sure  the                                                               
Chakachamna project doesn't get lost in the shuffle.                                                                            
                                                                                                                                
4:25:25 PM                                                                                                                    
He  said SB  246 now  has a  more reasonable  timeline, which  he                                                               
agreed with. Of  the 13 things the study is  supposed to address,                                                               
it doesn't  specifically call for  an economic  feasibility study                                                               
of  Susitna and  he strongly  suggested that  they conduct  a net                                                               
present worth (NPW)  life cycle feasibility study  and any viable                                                               
alternatives to it.                                                                                                             
                                                                                                                                
MR.  YOULD  reflected that  they  didn't  look  at Susitna  in  a                                                               
vacuum;  they  looked at  all  the  many  other types  of  energy                                                               
projects. Sometimes they  have been criticized for  it, but asked                                                               
what  company like  Exxon or  Pebble wouldn't  be spending  those                                                               
monies for  the major kind  of investments they are  making today                                                               
as well.  The $160 million for  the studies was justified  at the                                                               
time and  they do have  a FERC permit sitting  on the shelf  - it                                                               
would just need dusting off and updating.                                                                                       
                                                                                                                                
SENATOR  STEDMAN moved  those  figures forward  25  years at  3.5                                                               
percent inflation and that resulted  in $11.8 billion and said he                                                               
only wished  that construction was  inflating only  at inflation.                                                               
If this  is a  $12 billion  to $15  billion capital  project, the                                                               
numbers  for the  gas line  project are  significantly less  than                                                               
that.                                                                                                                           
                                                                                                                                
4:28:38 PM                                                                                                                    
SENATOR WAGONER said  hydroelectric has the advantage  of no cost                                                               
for the  fuel and when  President Roosevelt started to  build the                                                               
Grand Coolee  Dam everybody thought he  was crazy. He did  it for                                                               
reasons other  than just producing  hydroelectric power;  one was                                                               
irrigation of the whole central  basin of the State of Washington                                                               
and the  other was  to create  jobs to bring  this country  out a                                                               
depression.  However, today  Grand  Coolee Dam  is still  sitting                                                               
there generating electricity at the  lowest rate for power in the                                                               
world. In the long run that has  to be put into the equation when                                                               
you look at how much it's going to cost to do a dam project.                                                                    
                                                                                                                                
4:29:57 PM                                                                                                                    
SENATOR  WIELECHOWSKI added  that they  should also  look at  any                                                               
potential   carbon  taxes   that   the   federal  government   is                                                               
discussing.                                                                                                                     
                                                                                                                                
CHAIR HUGGINS asked  how far up the gorge the  Chakachamna dam is                                                               
located.                                                                                                                        
                                                                                                                                
MR.  YOULD replied  that Chakachamna  is  about 40  miles up  the                                                               
McArthur River  on the west side  of Cook Inlet; it's  not in the                                                               
Susitna system. The dam would be  very minimal - 49 ft. high with                                                               
a  10-mile power  tunnel to  an  underground power  house on  the                                                               
McArthur  River. In  1982 when  the Alaska  Power Authority  used                                                               
Bechtel Engineers who  came up with a  very conservative estimate                                                               
of $1  billion to build  this project  and it's now  estimated to                                                               
cost around $2 billion.                                                                                                         
                                                                                                                                
4:32:28 PM                                                                                                                    
CHAIR HUGGINS  asked how  Chakachamna would  hook into  the power                                                               
grid.                                                                                                                           
                                                                                                                                
MR. YOULD replied  it would go 42 miles to  the Beluga substation                                                               
and Chugach Electric.                                                                                                           
                                                                                                                                
CHAIR HUGGINS  asked if  it would  have to  go through  Tyonek or                                                               
CIRI land.                                                                                                                      
                                                                                                                                
MR.  YOULD replied  not  a  lot, but  some;  Susitna, though,  is                                                               
surrounded by a lot of private land.                                                                                            
                                                                                                                                
CHAIR HUGGINS asked what TDX stands for.                                                                                        
                                                                                                                                
MR. YOULD  replied that it  is an  Aleut name. TDX  developed the                                                               
wind farm at St. Paul.                                                                                                          
                                                                                                                                
4:34:04 PM                                                                                                                    
MIKE  WRIGHT,  Fairbanks resident,  supported  SB  246 for  three                                                               
reasons.  It would  provide a  long-term supply  of reliable  and                                                               
affordable energy, stabilize costs and it is renewable.                                                                         
                                                                                                                                
4:35:47 PM                                                                                                                    
DENNIS WIDMORE, Fairbanks  resident, supported SB 246.  He said a                                                               
lot of the work he has  done in the past compared alternatives to                                                               
diesel  power generation  in  villages. One  of  the things  that                                                               
become  apparent is  that  with  a lot  of  these projects  using                                                               
diesel fuel versus  a renewable fuel, you're  trading the capital                                                               
cost of  the renewable  project for  fuel costs.  "I like  to say                                                               
that we've burned fuel because  it's cheaper than money; at least                                                               
that was true in the past."                                                                                                     
                                                                                                                                
He said  the amount of  capital that is  going to be  required on                                                               
the  Susitna project  is  very sobering,  but  it makes  economic                                                               
sense in the long run. It still needs to be looked at carefully.                                                                
                                                                                                                                
4:37:39 PM                                                                                                                    
PHILLIP OATES,  City Manager, Seward,  supported SB 246  and said                                                               
that  Seward  is a  Railbelt  utility  and purchases  power  from                                                               
Chugach Electric. They are also  responsible for transmission and                                                               
purchase  power  to their  outlying  surface  area. He  had  four                                                               
reasons  he  was interested  in  a  hydroelectric project  -  the                                                               
availability  of  future  natural  gas supplies,  the  aging  gas                                                               
turbines with  Chugach Electric  Association, the  recognition of                                                               
need  to  diversify  energy  sources   and  preservation  of  the                                                               
environment. He said  a hydro project would help  them meet their                                                               
needs  and  that   his  community  was  not  able   to  meet  the                                                               
requirements for federal funding of energy projects.                                                                            
                                                                                                                                
CHAIR  HUGGINS  thanked  him  for   testifying  and  agreed  that                                                               
affordability   along   with  environmental   considerations   is                                                               
important in looking at future energy alternatives.                                                                             
                                                                                                                                
4:40:04 PM                                                                                                                    
BRADLEY EVANS,  Acting Chief Executive Officer,  Chugach Electric                                                               
Association,  supported  SB 246.  He  said  the entities  in  the                                                               
association  served three-quarters  of  Alaska's population,  but                                                               
they are not a heavily interconnected  grid like in the Lower 48.                                                               
He  explained that  the  Railbelt produces  about  1,200 -  1,300                                                               
megawatts  of installed  generation capacity  and most  of it  is                                                               
from natural  gas or some  sort of  fossil fuel. Their  peak days                                                               
generate about  850 megawatts of  demand and of that  Chugach has                                                               
about 600 megawatts of generation capacity.                                                                                     
                                                                                                                                
He said they  are heavily dependent on natural gas  from the Cook                                                               
Inlet  Basin.  But  the  Railbelt has  other  hydro  resources  -                                                               
Bradley,  Cooper Lake  and Eklutna.  He  supported a  feasibility                                                               
study that would  update what they already know and  then see how                                                               
it competes against other projects.                                                                                             
                                                                                                                                
4:46:34 PM                                                                                                                    
JERRY MCCUTCHEON,  representing himself,  Anchorage, said  he had                                                               
followed the Susitna  energy issue since 1970.  He didn't believe                                                               
there would ever  be a gas line  and that this is  a good project                                                               
that the Army Corps of Engineers wants back.                                                                                    
                                                                                                                                
4:52:25 PM                                                                                                                    
CHAIR HUGGINS  thanked everyone for their  comments and announced                                                               
that SB 246 would be set aside.                                                                                                 

Document Name Date/Time Subjects