Legislature(2007 - 2008)BUTROVICH 205

02/27/2008 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 214 HUNTING BY MEMBERS OF THE MILITARY TELECONFERENCED
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
+= SB 246 SUSITNA HYDRO WORKING GROUP; REPORT TELECONFERENCED
Moved CSSB 246(RES) Out of Committee
-- Testimony <Invitation Only> --
           SB 246-SUSITNA HYDRO WORKING GROUP; REPORT                                                                       
                                                                                                                                
4:29:57 PM                                                                                                                    
CHAIR HUGGINS announced SB 246 to be up for consideration.                                                                      
                                                                                                                                
SENATOR  JOE THOMAS,  sponsor of  SB 246,  commented that  absent                                                               
reviewing  Susitna  and  other hydro-electric  potential  in  the                                                               
state, they  are allowing  themselves to slip  back to  where the                                                               
state was  in 1984 and  expect that gas  and oil will  somehow be                                                               
the cheapest source of fuel for energy and power production.                                                                    
                                                                                                                                
He elaborated:                                                                                                                  
                                                                                                                                
     In the early 1980s gas  was $.21 - $.25/tcf; diesel was                                                                    
     about $1/gallon  and river water was  free. The Susitna                                                                    
     dam  was about  a $5.2  billion project  at that  time.                                                                    
     Today  Cook   Inlet  natural  gas  to   the  electrical                                                                    
     production facilities  is about $5.57/Mmbtu  and diesel                                                                    
     is $3 - $3.85/gallon on the  road system and as much as                                                                    
     $8/gallon  in   the  villages.   Oil  is   selling  for                                                                    
     $100/barrel   and  natural   gas   outside  Alaska   is                                                                    
     $9.22/Mmbtu - and river water is still free.                                                                               
                                                                                                                                
     Recent  news stories  had highlighted  the decision  of                                                                    
     several  electric  utilities  to construct  a  new  260                                                                    
     megawatt   natural  gas   power  plant   in  Anchorage.                                                                    
     Contrast this  announcement with  the recent  news that                                                                    
     Texas  has passed  California as  our nation's  largest                                                                    
     producer of wind energy with  nearly 3,000 megawatts of                                                                    
     wind power generating capacity.  We may be entirely too                                                                    
     focused on  how we have  always done things  instead of                                                                    
     considering new more  efficient more beneficial courses                                                                    
     of  action.  Norway  is  an  oil  producer;  however  I                                                                    
     believe  that  90  percent of  their  power  is  hydro-                                                                    
     electric.  They  use  the most  efficient,  sustainable                                                                    
     resource that they have.                                                                                                   
                                                                                                                                
     Nothing   indicates  that   natural  gas   prices  will                                                                    
     stabilize and certainly no one  believes the price will                                                                    
     ever  go down  other  than for  short  periods of  time                                                                    
     before  increasing beyond  its previous  high. This  is                                                                    
     and will  be the  trend as natural  gas and  oil become                                                                    
     more scarce.  Oil and  gas exploration  and development                                                                    
     costs continue  to rise;  a quick  look at  capital and                                                                    
     operating  expenses  at Prudhoe  Bay  and  the cost  of                                                                    
     drilling  confirms   these  facts.  These   costs  will                                                                    
     continue to increase.                                                                                                      
                                                                                                                                
     Gas-fired electrical turbines are  not the solution nor                                                                    
     are they  the best and  most efficient use of  our gas.                                                                    
     Our gas  will no doubt  command the highest  price when                                                                    
     and if  it is sold outside  of Alaska and it  should be                                                                    
     to  maximize its  benefit to  Alaska and  her citizens.                                                                    
     Some  will  be  used  in  existing  infrastructure  for                                                                    
     heating purposes  or to  bolster industrial  efforts in                                                                    
     Alaska. This is  a reasonable and efficient  use of gas                                                                    
     in-state. However, gas is not  the most efficient power                                                                    
     generating fuel.  The top of  the line  next generation                                                                    
     natural gas  turbines only achieve an  efficiency of 60                                                                    
     percent and  even this modest  level of  efficiency was                                                                    
     thought impossible as recently as the early 1990s.                                                                         
                                                                                                                                
     No plan  to date  suggests in-state use  of gas  is the                                                                    
     highest and best use of  our resource. I personally see                                                                    
     it as a great potential  for industrial use in heating,                                                                    
     but not  power generation. Trans-Canada and  all of the                                                                    
     AGIA  proposals are  export  proposals  other than  the                                                                    
     bullet line  to Southcentral Alaska. Our  resources are                                                                    
     stretched to the  point that Agrium closes  down and we                                                                    
     have  to  negotiate  with  Cook  Inlet  producers  over                                                                    
     exporting  LNG, which  Nikiski has  done  for 30  years                                                                    
     versus  consumer use  in  Southcentral  Alaska. We  are                                                                    
     still on the road. Let's  learn from the past; let's do                                                                    
     it differently;  let's do our  best to change  our ways                                                                    
     and see some different and better results....                                                                              
                                                                                                                                
He said  $2-$3 million study is roughly the same amount of money                                                                
we expend as a state every two-three hours of every day of the                                                                  
year under the state's current budget.                                                                                          
                                                                                                                                
4:34:40 PM                                                                                                                    
GRIER HOPKINS, staff to Senator Thomas, said he was available to                                                                
answer questions.                                                                                                               
                                                                                                                                
SARAH  FISHER-GOAD,  Acting  Executive  Director,  Alaska  Energy                                                               
Authority  (AEA), said  the  Palin  administration supported  the                                                               
analysis  of  the Susitna  project  and  the additional  regional                                                               
planning that  is required in  SB 246.  Last week there  was some                                                               
discussion  on  whether this  project  could  be addressed  as  a                                                               
capital  project  and  that  is   technically  correct,  but  the                                                               
administration is  not taking  a position  with respect  to which                                                               
vehicle  the legislature  chooses  to address  it.  On a  broader                                                               
note, the  governor and the AEA  board of directors will  soon be                                                               
announcing  the appointment  of an  energy coordinator  that will                                                               
also be the  AEA executive director. This person will  be the one                                                               
that will direct this Railbelt  regional planning and a statewide                                                               
comprehensive planning effort.                                                                                                  
                                                                                                                                
CHAIR HUGGINS asked her to  review what they could anticipate the                                                               
AEA will bring back to the body as a product.                                                                                   
                                                                                                                                
MS.  GOAD replied  that the  product  is detailed  in the  fiscal                                                               
note. SB 246 addresses 13  objectives and those have been grouped                                                               
into specific work tasks. For example  work task one would be the                                                               
feasibility  study and  the  estimate  of the  plant  and of  the                                                               
generated power  costs; work task  two would be  an environmental                                                               
and the  socio-economic impact  study; work  task three  would be                                                               
the cost of power for  selected alternatives. This issue would be                                                               
to look  at Susitna  not as  itself in a  vacuum, but  with other                                                               
energy sources  and other potential Railbelt  projects. Work task                                                               
four  is the  financial  options  for the  project.  There is  an                                                               
integrated  systems energy  plan for  the Railbelt  as work  task                                                               
five  and creation  of a  project advisory  group. Limited  field                                                               
work has  been suggested. If  SB 246 passes, they  have suggested                                                               
that those  be capital appropriations  of $2.8 million  in FY2009                                                               
and in FY2010 of $1.5 million.                                                                                                  
                                                                                                                                
4:39:10 PM                                                                                                                    
SENATOR STEDMAN  agreed with broader scope,  especially objective                                                               
four, and  asked if this  wasn't more  of a broader  energy study                                                               
than a concentration on just the Susitna dam.                                                                                   
                                                                                                                                
MS.  GOAD replied  that they  interpreted SB  246 to  include the                                                               
previous study  of the  Susitna project as  an important  part of                                                               
the entire  Railbelt study.  There is  no idea  to not  pursue or                                                               
analyze those other projects; Susitna needs a second look.                                                                      
                                                                                                                                
SENATOR  STEDMAN said  it appears  that Susitna  creates its  own                                                               
wake  because of  its size.  He asked  if this  isn't more  of an                                                               
energy analysis  of the Railbelt  population centers  in relation                                                               
to more comprehensive planning.                                                                                                 
                                                                                                                                
MS. GOAD answered yes.                                                                                                          
                                                                                                                                
CHAIR HUGGINS clarified  that Susitna power could  reach to Homer                                                               
and Fairbanks.  He asked  about the difference  in the  version E                                                               
fiscal note.                                                                                                                    
                                                                                                                                
MS. GOAD  answered that the  tasks are  the same, but  they would                                                               
not necessarily  need the project advisory  group. Other projects                                                               
have been  conducted this way, including  the Railbelt Electrical                                                               
Grid Authority Study.                                                                                                           
                                                                                                                                
CHAIR HUGGINS asked  Senator Thomas his thoughts  on the advisory                                                               
group.                                                                                                                          
                                                                                                                                
4:43:41 PM                                                                                                                    
SENATOR THOMAS  said he  was concerned  about creating  an unruly                                                               
study,  so  he  changed  incorporating  various  departments  and                                                               
stakeholder groups  into a working  group into  simply consulting                                                               
with those groups.                                                                                                              
                                                                                                                                
MS. GOAD said she supported the change.                                                                                         
                                                                                                                                
4:45:22 PM                                                                                                                    
SENATOR  STEDMAN moved  to  adopt  version E  of  SB  246 as  the                                                               
working  document.  There  were  no  objections  and  it  was  so                                                               
ordered.                                                                                                                        
                                                                                                                                
SENATOR MCGUIRE  asked if they  intended to include  fisheries in                                                               
the term "wildlife" on page 3, line 6.                                                                                          
                                                                                                                                
4:46:05 PM                                                                                                                    
SENATOR  THOMAS answered  the  original  study realized  concerns                                                               
about a dam  project impacting fish and  wildlife. Although those                                                               
impacts would  be negligible with  the Susitna dam because  it is                                                               
so far  up the river, other  impacts need to be  reevaluated. For                                                               
instance,  as  the  dam  backs  up  water,  some  areas  will  be                                                               
inundated.                                                                                                                      
                                                                                                                                
SENATOR MCGUIRE  said the committee  might want to  consider more                                                               
specific  language   about  the   impacts,  either   positive  or                                                               
negative, on  fisheries and she  moved a conceptual  amendment to                                                               
specifically include "fish, wildlife, and land use" on line 6.                                                                  
                                                                                                                                
SENATOR  THOMAS responded  that  he had  no  problem with  adding                                                               
"fish  and wildlife"  and assumed  that study  would take  place.                                                               
There  were  no  objections  and  the  conceptual  amendment  was                                                               
adopted.                                                                                                                        
                                                                                                                                
SENATOR WAGONER asked how many  acres the Susitna reservoir would                                                               
cover.                                                                                                                          
                                                                                                                                
SENATOR THOMAS  didn't know because  there are  several different                                                               
plans  for the  river. The  Devils Canyon  is a  relatively small                                                               
footprint; the up-river Watana project is quite a bit larger.                                                                   
                                                                                                                                
4:49:40 PM                                                                                                                    
MS. GOAD said she didn't have  any comments on the amendment, but                                                               
she  mentioned  he had  wanted  to  know  last week  about  AEA's                                                               
accomplishments  and she  wanted  to  mention specifically  their                                                               
efforts in alternative energy, in  particular they just completed                                                               
an  alternative  energy  solicitation  in  partnership  with  the                                                               
Denali Commission.  This is the  first time  AEA has done  one of                                                               
these studies.  At the  same time  they did  a fifth  energy cost                                                               
reduction solicitation.                                                                                                         
                                                                                                                                
To give  the committee  an idea  of how  many proposals  and what                                                               
kinds  of projects  are  out there,  Ms. Goad  said  they had  96                                                               
proposals  requesting $118  million  for total  project costs  of                                                               
over  $1 billion.  Of  those 96  proposals,  71 were  feasibility                                                               
analysis  of   alternative  energy  projects  or   roughly  $12.3                                                               
million. She said  it is an important part of  their work to look                                                               
at  objective  ways  to  analyze   projects  and  do  feasibility                                                               
analyses. She  said the  energy cost  solicitation has  been very                                                               
successful. The  four solicitations have had  cost/benefit ratios                                                               
of 2:1  and have  realized over  $40 million  of fuel  cost life-                                                               
cycle savings of projects that have been funded through that.                                                                   
                                                                                                                                
4:51:37 PM                                                                                                                    
EARLE  AUSMAN, President,  Fullerton Consultants,  said he  was a                                                               
hydro-engineer representing  himself and his firm  in the process                                                               
of developing 4  megawatts of hydro for the MEA  system; the firm                                                               
also sells power  to MEA. He said they are  developing a paradigm                                                               
shift in technology by developing  a DC transmission project that                                                               
promises to  reduce energy costs for  Alaska's rural communities.                                                               
He said  a small  fraction of his  previous hydro  experience was                                                               
working with the Corps of  Engineers with the Snettisham, Rampart                                                               
and Bradley  dams as  well as doing  reconnaissance work  of many                                                               
other potential hydro plants throughout Alaska.                                                                                 
                                                                                                                                
MR. AUSMAN explained  that he was approached by  some people last                                                               
year who  wanted an alternative to  the MEA coal plan.  There are                                                               
more than 50 megawatts of  under-the-river hydro potential in the                                                               
Matanuska Valley  as well  as wind sites.  To be  effective, they                                                               
need to  be combined with a  peaking system and hydro  is perfect                                                               
for  this. For  instance, hydro  is what  makes the  300-megawatt                                                               
Columbia  River state  line wind  system feasible.  He said  that                                                               
system sells its wind power  for $.4/kWh on a long-term contract.                                                               
His first thought was that  a full-sized Susitna project, because                                                               
of its possible  cost and environmental opposition,  would not be                                                               
an  acceptable candidate  and that  a reduced-size  Devils Canyon                                                               
portion  of this  project may  be  economical and  would be  more                                                               
acceptable.  So he  proposed the  dam at  Devils Canyon  that was                                                               
one-half the height  of the existing proposal to  reduce costs. A                                                               
50-percent reduction  in height on  one of these dams  can reduce                                                               
the volume  of concrete to  20 percent or  so. This dam  would be                                                               
equipped  with  extra turbines  to  provide  the peak  power  and                                                               
although the  reservoir is smaller,  it would have  some storage.                                                               
If  more power  would be  needed, it  could be  augmented by  the                                                               
upper  Watana part  of the  project, which  could also  be scaled                                                               
back if necessary.                                                                                                              
                                                                                                                                
He  strongly recommended  that Alaska  look at  renewables as  is                                                               
proposed in  these bills.  They should  include both  Susitna and                                                               
Chakachamna because  they could work together  to provide peaking                                                               
power and  would be key in  replacement of new gas  turbines or a                                                               
coal plant proposed to power  the Railbelt. He also believed that                                                               
the power  from the  Railbelt system could  be shared  with rural                                                               
localities by using DC transmission.                                                                                            
                                                                                                                                
MR. AUSMAN  said wind or water  energy not used is  lost forever,                                                               
but the fossil fuel that  is replaced by renewable energy sources                                                               
can  be reserved  and  used  or sold  to  the  people outside  of                                                               
Alaska, like Norway is doing.  The Department of Energy indicates                                                               
that  the State  of Alaska  has 45,000  megawatts of  developable                                                               
hydro.                                                                                                                          
                                                                                                                                
4:57:03 PM                                                                                                                    
He advised that  an initial analysis of the  economics of Susitna                                                               
and  Chakachamna  as well  as  other  renewable energy  resources                                                               
should  be done  to  determine  if any  of  those  projects or  a                                                               
combination of them appears fruitful.  The work should be done by                                                               
a group  that includes two  hydro-plant constructors,  one should                                                               
be Norwegian because  that is where the expertise  comes from and                                                               
the second  should be  from the  U.S. It  should also  include an                                                               
engineering firm that knows Alaska  and its special position, and                                                               
an  economist   and  report  writer.   The  report   should  make                                                               
recommendations on the  best course of action  provided a project                                                               
appears  to be  feasible,  and  a more  detailed  study could  be                                                               
performed.                                                                                                                      
                                                                                                                                
4:59:09 PM                                                                                                                    
JIM HEMSATH,  AEA, explained  that the  fiscal note  is organized                                                               
specifically to focus around the  Susitna project and to look for                                                               
fatal  flaws  in the  engineering  and  cost  of power  that  may                                                               
prohibit the project from moving  ahead. The bottom of the fiscal                                                               
note indicates that at any time  during the course of the project                                                               
from the  Susitna perspective that  they find it is  not feasible                                                               
all  the work  on  it will  stop and  efforts  would be  directed                                                               
elsewhere. He said  there is never a guarantee that  a study will                                                               
get the answer you would like to have.                                                                                          
                                                                                                                                
5:00:32 PM                                                                                                                    
SENATOR STEDMAN  moved to  report CSSB  246 (RES)  from committee                                                               
with individual  recommendations and attached fiscal  note. There                                                               
were no objections and it was so ordered.                                                                                       

Document Name Date/Time Subjects