Legislature(2015 - 2016)BARNES 124

01/27/2015 08:00 AM House COMMUNITY & REGIONAL AFFAIRS


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08:01:08 AM Start
08:01:56 AM Presentation: Alaska Center from Energy and Power (acep)
08:48:21 AM Presentation: Alaska and Interior Energy Study
09:43:30 AM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Presentations: TELECONFERENCED
"Alaska Center for Energy & Power" by Gwen
Holdmann
"Propane Transportation Project to Interior
Communities" by Dr. Douglas Reynolds
-- Testimony <Invitation Only> --
                    ALASKA STATE LEGISLATURE                                                                                  
    HOUSE COMMUNITY AND REGIONAL AFFAIRS STANDING COMMITTEE                                                                   
                        January 27, 2015                                                                                        
                           8:01 a.m.                                                                                            
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Cathy Tilton, Chair                                                                                              
Representative Paul Seaton, Vice Chair                                                                                          
Representative Shelley Hughes                                                                                                   
Representative Harriet Drummond                                                                                                 
Representative Dan Ortiz                                                                                                        
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Representative Benjamin Nageak                                                                                                  
Representative Lora Reinbold                                                                                                    
                                                                                                                                
OTHER LEGISLATORS PRESENT                                                                                                     
                                                                                                                                
Representative David Guttenberg                                                                                                 
Representative Jim Colver                                                                                                       
Representative Liz Vazquez                                                                                                      
Representative David Talerico                                                                                                   
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
PRESENTATION: ALASKA CENTER FROM ENERGY AND POWER (ACEP)                                                                        
                                                                                                                                
     - HEARD                                                                                                                    
                                                                                                                                
PRESENTATION: ALASKA AND INTERIOR ENERGY STUDY                                                                                  
                                                                                                                                
     - HEARD                                                                                                                    
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
No previous action to record                                                                                                    
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
GWEN HOLDMANN, Director                                                                                                         
Alaska Center for Energy and Power (ACEP)                                                                                       
University of Alaska Fairbanks (UAF)                                                                                            
Fairbanks, Alaska                                                                                                               
POSITION STATEMENT:  Provided an overview of ACEP.                                                                            
                                                                                                                                
DOUG REYNOLDS, Professor                                                                                                        
Energy and Economics                                                                                                            
University of Alaska Fairbanks                                                                                                  
Fairbanks, Alaska                                                                                                               
POSITION  STATEMENT:   Provided a  presentation entitled  "Alaska                                                             
and Interior Energy Study."                                                                                                     
                                                                                                                                
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
8:01:08 AM                                                                                                                    
                                                                                                                                
CHAIR  CATHY  TILTON  called the  House  Community  and  Regional                                                             
Affairs  Standing  Committee  meeting   to  order  at  8:01  a.m.                                                               
Representatives Seaton,  Hughes, Ortiz,  and Tilton  were present                                                               
at the  call to  order.  Representative  Drummond arrived  as the                                                               
meeting   was   in   progress.      Also   in   attendance   were                                                               
Representatives Guttenberg, Colver, Vazquez, and Talerico.                                                                      
                                                                                                                                
^Presentation: Alaska Center from Energy and Power (ACEP)                                                                       
    Presentation: Alaska Center from Energy and Power (ACEP)                                                                
                                                                                                                              
8:01:56 AM                                                                                                                    
                                                                                                                                
CHAIR TILTON announced that the  first order of business would be                                                               
an overview of the Alaska Center for Energy and Power (ACEP).                                                                   
                                                                                                                                
8:02:32 AM                                                                                                                    
                                                                                                                                
GWEN  HOLDMANN,  Director, Alaska  Center  for  Energy and  Power                                                               
(ACEP),   University  of   Alaska  Fairbanks   (UAF),  began   by                                                               
highlighting  that  ACEP is  a  relatively  young research  group                                                               
within the  University of  Alaska system as  it was  formed about                                                               
seven  years ago.    The ACEP  is housed  within  the College  of                                                               
Engineering   and  Mines   within  the   Institute  of   Northern                                                               
Engineering at UAF.  She told  the committee that ACEP works with                                                               
researchers across the  university system and also  has an office                                                               
in Anchorage.  She explained that  ACEP was formed with regard to                                                               
how the university could do  business and engage with the state's                                                               
communities.   Therefore,  the decision  was made  not to  hire a                                                               
traditional  academic  to build  and  direct  the program.    She                                                               
informed  the committee  that her  background is  in the  private                                                               
sector as  an engineer  who has developed  projects in  the state                                                               
and  worked  with the  university  from  the perspective  of  the                                                               
private sector and a community  member.  The goal, she indicated,                                                               
is to take  advantage of the university's resources  and build on                                                               
those.                                                                                                                          
                                                                                                                                
8:05:26 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  HUGHES  inquired  as  to the  type  of  work  Ms.                                                               
Holdmann did in the private sector.                                                                                             
                                                                                                                                
MS. HOLDMANN informed the committee  that she has lived in Alaska                                                               
for 21 years,  her entire adult life.  Although  she said she has                                                               
worked in  a variety  of fields,  she highlighted  her work  as a                                                               
design engineer  in Fairbanks  for a  small engineering  firm and                                                               
noted that she  owned her own company for which  she designed and                                                               
installed  energy  systems  for individual  homeowners,  many  of                                                               
which  live in  rural  areas without  access  to the  traditional                                                               
electric  grid.   In  fact, she  noted that  she  has never  been                                                               
connected  to the  electric grid  in Alaska,  and thus  has lived                                                               
completely off  the grid for the  last 21 years.   Most recently,                                                               
prior to  her position with ACEP,  Ms. Holdmann said she  was the                                                               
project manager  and engineer for  the geothermal power  plant at                                                               
Chena  Hot Springs,  which is  the  lowest temperature  operating                                                               
geothermal power  plant in  the world.   In  fact, the  Chena Hot                                                               
Springs  geothermal power  plant received  the R&D  100 Award,  a                                                               
prestigious national  award.  She  noted she was involved  in the                                                               
green house project  [at Chena Hot Springs], which  she opined is                                                               
the only year round operating  green house in Northern Alaska, as                                                               
well as the ice museum that  is cooled using geothermal heat.  In                                                               
further response to Representative  Hughes, Ms. Holdmann informed                                                               
the committee  that she was  hired seven  years ago to  build the                                                               
program from the ground up and was its only staff at the time.                                                                  
                                                                                                                                
8:07:29 AM                                                                                                                    
                                                                                                                                
MS.  HOLDMANN, returning  to her  overview, stated  that ACEP  is                                                               
technology agnostic  and the  mission of ACEP  is to  develop and                                                               
disseminate  practical, cost  effective, [and  innovative] energy                                                               
solutions for communities  in Alaska.  Currently,  ACEP has about                                                               
22 staff,  primarily engineering staff,  with which it  works and                                                               
30 faculty.   Some faculty work with ACEP on  every ACEP project,                                                               
but  researchers  from  various   areas  of  the  university  are                                                               
utilized  on   an  as-needed  basis.     She   characterized  the                                                               
aforementioned as  a strength  as it affords  ACEP to  be dynamic                                                               
and flexible.   The  role of  ACEP and  the University  of Alaska                                                               
(UA)  is  to  develop  information  for  decision  makers,  which                                                               
includes everyone  from legislators to individual  citizens.  The                                                               
ACEP,  she  opined,  has  the   opportunity  to  provide  neutral                                                               
unbiased information  so that people  can make the  best possible                                                               
decisions.  Therefore,  ACEP does lots of  technology testing for                                                               
industries and  communities by bringing in  and testing equipment                                                               
that has  potential for  use in  Alaska as  well as  planning for                                                               
deployment  of technology  outside of  the laboratory.   Although                                                               
ACEP is  fundamentally an engineering  program, ACEP  believes in                                                               
the need  to review  the economics  of a project.   To  that end,                                                               
ACEP has  an energy analysis  group that  performs a lot  of work                                                               
assessing  the  various options  in  the  state.   Students,  she                                                               
highlighted, are a  large part of this program.   There are about                                                               
50  students  a  year  who  work on  research  programs  and  are                                                               
embedded in  communities as ACEP makes  partnerships with various                                                               
regions.  For example, ACEP  had a partnership with the Northwest                                                               
Arctic Borough  to assess  performance in the  Arctic.   She then                                                               
pointed out that ACEP is  also involved in commercializing energy                                                               
innovation as evidenced  by the 10 invention  disclosures that it                                                               
submitted last year alone.   Commercializing energy innovation is                                                               
an area where  the university has the potential to  work with the                                                               
private sector  to develop new ideas  that can be used  in Alaska                                                               
and beyond.                                                                                                                     
                                                                                                                                
8:11:08 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE HUGHES recalled  discussions with folks affiliated                                                               
with the Pacific NorthWest Economic  Region (PNWER) regarding the                                                               
university  research  in  Alberta,  Canada, in  which  they  were                                                               
careful   to  ensure   it  was   industry   driven  rather   than                                                               
academically  driven.   To that  end, she  asked whether  ACEP or                                                               
industry starts the conversation [on a potential project].                                                                      
                                                                                                                                
MS. HOLDMANN emphasized that one  of ACEP's fundamental tenets is                                                               
not to  compete with industry  but rather facilitate  the success                                                               
of  industry  inside and  outside  of  the  Alaska market.    For                                                               
example, there has  been a lot of interest in  Alaska in terms of                                                               
hydrokinetic  energy   due  to   the  state's  tidal   and  river                                                               
resources.   Many  communities in  Alaska are  interested in  the                                                               
notion of  extracting energy directly from  rivers.  Furthermore,                                                               
the industry has recognized there  is the opportunity to test its                                                               
devices  in Alaska.   The  aforementioned allows  ACEP to  play a                                                               
dual  role such  that  ACEP facilitates  the industry  developing                                                               
devices that  work in Alaska  while protecting communities.   For                                                               
the  hydrokinetic   industry  ACEP   worked  on   uncovering  the                                                               
industry-wide  barriers  to  placing the  equipment  in  Alaska's                                                               
rivers  and tidal  areas.   One  of the  barriers identified  was                                                               
debris, which  led to ACEP  developing a debris  diversion device                                                               
that's  technology agnostic,  and thus  it can  be used  with any                                                               
vendor.   This device,  she related, has  been running  for three                                                               
years in  a river in  Nenana and  has been tested  against actual                                                               
turbines and  manufacturers.  The industry,  she further related,                                                               
has  been  extremely pleased  with  what  ACEP has  accomplished,                                                               
particularly since  the industry couldn't individually  afford to                                                               
do the development and testing.                                                                                                 
                                                                                                                                
8:13:43 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE HUGHES asked if ACEP  has conversations with those                                                               
outside of the power industry.                                                                                                  
                                                                                                                                
MS. HOLDMANN said that since  ACEP is an energy research program,                                                               
the organization focuses on problems  that are relevant to energy                                                               
questions.   However,  at the  homeowner level  there is  no good                                                               
data with regard to how much fuel  is used to heat homes in rural                                                               
Alaska.   The lack of  real data  makes it difficult  for private                                                               
sector  investment.   Therefore, one  of ACEP's  recent invention                                                               
disclosures is  a heat  metering system to  measure fuel  use for                                                               
individual structures without  breaking into the fuel  line.  The                                                               
aforementioned has the  potential to be an  important element for                                                               
residents and policymakers  in terms of how much  heating fuel is                                                               
being used to incentivize private investment.                                                                                   
                                                                                                                                
REPRESENTATIVE HUGHES  encouraged ACEP to  increase conversations                                                               
with those outside of the  power industry, such as the refineries                                                               
and mining industry.                                                                                                            
                                                                                                                                
MS. HOLDMANN  informed the committee  that ACEP performed  a test                                                               
of an innovative flywheel in  which the laboratory was configured                                                               
to emulate a remote mine  in Canada.  The aforementioned resulted                                                               
in ACEP's  test configuration being  replicated in a  remote mine                                                               
site  in Northern  Quebec, Canada.   Therefore,  ACEP is  working                                                               
with industry to support its needs.                                                                                             
                                                                                                                                
8:17:00 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SEATON  recalled passage of legislation  that gave                                                               
free peat,  of which  there is  a lot  in Alaska,  to communities                                                               
across  the state,  but noted  that he  hasn't heard  of anything                                                               
going  forward.    Therefore,  he asked  whether  there  are  any                                                               
programs  going forward  utilizing the  resource while  providing                                                               
local jobs in  the harvesting and supplying of  the peat resource                                                               
within the communities.                                                                                                         
                                                                                                                                
MS. HOLDMANN  agreed with Representative  Seaton that there  is a                                                               
lot of peat  resource in Alaska.   The use of peat  [as an energy                                                               
source] has been considered for  one community in the Interior as                                                               
it  has an  excellent peat  resource  across the  river from  it.                                                               
However,  Ms. Holdmann  expressed the  need, in  terms of  energy                                                               
planning for  communities across  the state, to  broadly consider                                                               
the options  with regard to  the available local resources.   The                                                               
options  under review  should include  peat, coal,  gas, oil,  or                                                               
renewable energy.                                                                                                               
                                                                                                                                
REPRESENTATIVE SEATON related  that one of the  unique aspects of                                                               
using  peat  is the  external  burner  rather than  the  internal                                                               
combustion  engine,  which  avoids  the  need  for  refining  and                                                               
shipping   [both  of   which]  hold   the  potential   for  spill                                                               
contamination problems.   Furthermore, there would  be local jobs                                                               
for harvesting  the supply.   He expressed  dismay with  the U.S.                                                               
exporting its technology and pilot programs elsewhere.                                                                          
                                                                                                                                
8:20:35 AM                                                                                                                    
                                                                                                                                
MS.  HOLDMANN, continuing  her overview,  reiterated that  ACEP's                                                               
emphasis is  on understanding the  critical challenges  that face                                                               
the state.   The ACEP  is forming  teams of researchers  from the                                                               
university  system.    She  noted that  members  should  have  an                                                               
overview at  a glance of  the program,  which includes a  list of                                                               
researchers, their location, and the  project with which they are                                                               
working.    She highlighted  that  ACEP  focuses on  meeting  the                                                               
timeline of both the industry and  the community.  With regard to                                                               
funding,  ACEP  receives  a   relatively  small  base  allocation                                                               
through the university  budget.  Programs such as  ACEP make both                                                               
the university  and the  state more sustainable  as it  brings in                                                               
funds  from elsewhere  that are  applied to  challenges faced  in                                                               
Alaska.   Ms.  Holdmann said  ACEP works  hard in  communities in                                                               
order  to  determine how  to  make  a difference  for  individual                                                               
Alaskans and track via a metric.   She then directed attention to                                                               
a  slide entitled  "Conducting meaningful  research for  Alaska,"                                                               
which  highlights  some  of  the places  ACEP  has  been  working                                                               
recently as well as the type  of research.  The research has been                                                               
driven  by specific  questions, she  noted.   For example,  small                                                               
modular nuclear  reactors were of  interest to the  legislature a                                                               
few years  ago and  resulted in  ACEP conducting  a comprehensive                                                               
study  of the  technology existing  at that  time.   The findings                                                               
were presented to the legislature a  couple of years ago and ACEP                                                               
continues to  monitor that in  order to understand  whether there                                                               
is  potential for  Alaska without  deciding whether  a particular                                                               
technology  is   the  appropriate   solution  for   a  particular                                                               
community.                                                                                                                      
                                                                                                                                
8:23:55 AM                                                                                                                    
                                                                                                                                
MS.  HOLDMANN  then turned  to  three  areas  in which  ACEP  has                                                               
invested resources.   With the Power  System Integration Program,                                                               
which looks  at how  village systems  operate, ACEP  has observed                                                               
that individual manufacturers and  developers are very focused on                                                               
their products.   However, how those products work  together in a                                                               
system in a  small isolated electric grid as is  the case in many                                                               
locales in Alaska  isn't reviewed.  Therefore, there is  a lot of                                                               
opportunity  for  optimization of  energy  systems  and that  has                                                               
become  a major  priority for  ACEP.   Ms.  Holdmann returned  to                                                               
ACEP's testing  of a high  performance flywheel and  informed the                                                               
committee  that it  was a  privately funded  project, and  thus a                                                               
company paid  ACEP to test  their equipment in  ACEP's laboratory                                                               
that was  setup to emulate the  entire power spectrum of  a rural                                                               
village.    Therefore, ACEP's  laboratory  can  be configured  to                                                               
emulate any  particular village  in the  state and  determine how                                                               
the equipment works  to support that grid prior to  sending it to                                                               
a rural location.  Although this  test was for a remote mine site                                                               
in  rural  Canada,  the  technology seemed  like  it  would  have                                                               
relevance in Alaska, which is  why ACEP was interested in testing                                                               
it.                                                                                                                             
                                                                                                                                
8:26:12 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SEATON  inquired as to how  the flywheel performed                                                               
in the integrated system.                                                                                                       
                                                                                                                                
MS. HOLDMANN  answered that  it performed quite  well.   In fact,                                                               
the test  demonstrated the goal, which  was to turn off  a diesel                                                               
generator and  run the community  grid with wind  power, provided                                                               
there was  adequate wind  power.   She noted  that the  most cost                                                               
savings  would be  achieved when  the diesel  generator could  be                                                               
turned  off  for periods  of  time  in  rural communities.    The                                                               
inverter  and the  fly wheel  system were  able to  support power                                                               
quality on the  grid for meaningful periods of time  even when no                                                               
diesel   generator  was   operating.     She  characterized   the                                                               
aforementioned  as  success and  now  the  same system  is  being                                                               
installed in a mine in Northern Quebec.                                                                                         
                                                                                                                                
8:27:20 AM                                                                                                                    
                                                                                                                                
MS.  HOLDMANN, returning  to the  overview, directed  attention a                                                               
photo of  a previously tested  inverter system that  was designed                                                               
to go into  the community of Kokhanok and support  a wind project                                                               
there.  Although  this inverter didn't work as well  as it could,                                                               
ACEP  was able  to work  with the  developer and  manufacturer to                                                               
make changes in the system in  the laboratory that were then made                                                               
in the community.  The next project  for ACEP is the testing of a                                                               
liquid battery technology designed  at Massachusetts Institute of                                                               
Technology (MIT)  for potential  use in  the community  of Eagle.                                                               
She  then  directed  attention  to  the  slide  entitled  "Alaska                                                               
Hydrokinetic  Energy  Research  Center."   Although  hydrokinetic                                                               
turbines are not  a broad solution for  Alaska communities, there                                                               
is a lot of interest  in them from manufacturers and communities.                                                               
Therefore, ACEP has been testing  devices in the river in Nenana.                                                               
In fact, ACEP has the only river  test site in the world that can                                                               
test  these devices.   The  ACEP  has been  working closely  with                                                               
industry  to   address  environmental  concerns,  such   as  fish                                                               
interactions with  these devices, and to  do performance testing.                                                               
She  highlighted that  Oceana came  to Alaska  because of  ACEP's                                                               
test site  and paid ACEP to  test the turbine for  weeks.  Oceana                                                               
will return  next summer  for additional  testing and  to utilize                                                               
the time purchased  with ACEP's power systems  laboratory to work                                                               
on  an   integration  question  for  their   particular  turbine.                                                               
Therefore,  ACEP  is  bringing  people   to  Alaska  to  work  on                                                               
technology that's relevant to Alaska.                                                                                           
                                                                                                                                
8:29:13 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SEATON  inquired  as  to  the  kilowatts  of  the                                                               
turbine prototype.                                                                                                              
                                                                                                                                
MS. HOLDMANN explained  that the turbine was a small  device, a 5                                                               
kilowatt system, with a  plan to scale it up to  the level of the                                                               
needs  of  a small  community.    She  emphasized that  ACEP  had                                                               
nothing to  do with developing  that technology and  isn't saying                                                               
that it's  the appropriate technology  either.  However,  ACEP is                                                               
working  with Oceana  to support  them  and other  vendors to  be                                                               
successful in Alaska, if possible.                                                                                              
                                                                                                                                
8:30:04 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE HUGHES  asked if ACEP  has an agreement  such that                                                               
it can benefit from the information and knowledge gathered.                                                                     
                                                                                                                                
MS.  HOLDMANN  clarified that  the  Oceana  project is  partially                                                               
funded from the Emerging Technology  Fund, and thus the state has                                                               
invested in  this project as well  as some others.   The ACEP has                                                               
worked  with the  Alaska Energy  Authority (AEA)  to develop  the                                                               
program, and thus the performance  data for the systems is public                                                               
information.  Although to the  greatest degree possible ACEP does                                                               
want information,  at least performance assistance,  to be public                                                               
so   that  decisions   can  be   made  as   to  whether   various                                                               
[equipment/systems]  are appropriate  for communities,  ACEP does                                                               
have nondisclosure agreements with entities as well.                                                                            
                                                                                                                                
8:31:28 AM                                                                                                                    
                                                                                                                                
MS.  HOLDMANN, continuing  the  overview,  directed attention  to                                                               
photos  of  the Nenana  project,  which  has mostly  been  funded                                                               
through  private money,  contributions from  a major  foundation,                                                               
and some  funding from the  federal government.  The  Nenana site                                                               
is  the   only  one   like  it   in  the   world  and   has  been                                                               
internationally recognized.   Furthermore, ACEP is  recognized by                                                               
the  International Standards  Committee for  this technology  and                                                               
ACEP's  base report  is  being used  to  develop those  standards                                                               
internationally.   Ms.  Holdmann acknowledged  that just  because                                                               
something  works technically  doesn't  necessarily  mean it  will                                                               
work for  Alaska, which  is the  category in  which hydrokinetics                                                               
falls.    The hydrokinetic  systems  work,  but the  question  is                                                               
whether they  work economically.   In fact, ACEP  recently formed                                                               
an energy analysis  group that reviews how  to maximize available                                                               
government and private sector resources  to address energy issues                                                               
at  the local  level in  Alaska.   She  then noted  that ACEP  is                                                               
involved  with  review of  the  unified  system operator  of  the                                                               
Alaska Rail Belt grid and  on behalf of the Regulatory Commission                                                               
of Alaska  (RCA) is  providing technical support.   The  ACEP has                                                               
also looked at  liquefied natural gas (LNG)  shipping for coastal                                                               
communities for AEA.   The ACEP has also  reviewed diesel pricing                                                               
volatility  such that  there is  an understanding  of all  of the                                                               
factors  that  go into  pricing  for  rural  Alaska in  order  to                                                               
develop better  projections for future  pricing and  [items] that                                                               
impact energy costs more generally.   She mentioned that ACEP has                                                               
also done a fairly major  study for Interior Alaska reviewing the                                                               
various energy options and comparing projects on an equal basis.                                                                
                                                                                                                                
8:33:51 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE COLVER  asked if  ACEP has any  published research                                                               
on the unified system operator.                                                                                                 
                                                                                                                                
MS. HOLDMANN clarified that for  that project, ACEP is serving as                                                               
technological  support  for  the  RCA,   and  thus  ACEP  is  not                                                               
preparing   a  final   report.      Therefore,  any   forthcoming                                                               
information has to come through the RCA.                                                                                        
                                                                                                                                
REPRESENTATIVE  COLVER further  asked  if ACEP  has any  findings                                                               
that she could  relate in terms of how the  concept of moving the                                                               
lowest cost power to Fairbanks consumers could play out.                                                                        
                                                                                                                                
MS. HOLDMANN  highlighted that there  has been  a lot of  work in                                                               
this area, and  thus there is a fairly good  understanding of the                                                               
pros and cons.   She offered to speak  with Representative Colver                                                               
about putting together something  for the House Special Committee                                                               
on Energy.                                                                                                                      
                                                                                                                                
8:35:22 AM                                                                                                                    
                                                                                                                                
MS.  HOLDMANN, returning  to  her overview,  said  she wanted  to                                                               
address an  example in  which Alaska has  the potential  to solve                                                               
its  problems  at the  community  level  while also  building  an                                                               
economy with global  relevance.  Referring to  the slide entitled                                                               
"Strategic  Initiative:  Global Applications  Program,"  informed                                                               
the committee that this initiative  isn't funded and thus ACEP is                                                               
working on  this with industry  in the  state.  She  then related                                                               
ACEP's   vision:     "Alaska  leading   the  way   in  innovative                                                               
production, distribution, and management  of energy."  The vision                                                               
is very  much about partnership  such that Alaska is  leading the                                                               
way, which means that ACEP does  a great job getting reliable and                                                               
affordable  energy  to  all of  Alaska's  residents  and  finding                                                               
innovative  ways  to achieve  those  goals  that are  potentially                                                               
exportable.   Ms. Holdmann  then highlighted  that Alaska  is the                                                               
global  leader  in  microgrids, which  are  small  electric  grid                                                               
systems.   In  fact, the  Railbelt  grid is  one large  microgrid                                                               
because it's  not connected to  another grid  in Canada.   From a                                                               
technical  perspective, Alaska  has developed  much expertise  in                                                               
building and managing  these energy grids.   The expertise Alaska                                                               
has developed  in this  area is very  valuable and  exportable to                                                               
other markets.  Alaska has about  12 percent of the microgrids in                                                               
the world and  the market is expected to grow  four-fold to a $40                                                               
billion a year  in revenue in the next decade  or so.  Therefore,                                                               
Alaska should pay  attention to this market so  that Alaskans can                                                               
be positioned  to benefit  from it.   She informed  the committee                                                               
that  ACEP has  done a  lot of  research regarding  where markets                                                               
similar to  Alaska are located  and where Alaska's  expertise and                                                               
knowledge could be exported.   The countries with markets similar                                                               
to  Alaska  and  with  whom there  has  been  Alaska  involvement                                                               
include the South  Pacific and Guam.  There  has been significant                                                               
interest in  what Alaska  is doing  in this  area.   Ms. Holdmann                                                               
related that  there are  about 100  Alaska companies  involved in                                                               
microgrids and the  expertise is located throughout  Alaska.  She                                                               
acknowledged that there is work to  do as there are challenges to                                                               
engage  in   this  market  and  it's   difficult  for  individual                                                               
companies to  enter new  markets.   Therefore, having  a strategy                                                               
with  which everyone  can  work  is important.    Alaska has  the                                                               
operational expertise,  particularly since [companies  in Alaska]                                                               
have been running  these systems for decades.   Ms. Holdmann then                                                               
highlighted  an  example from  Iceland,  which  has extended  its                                                               
geothermal expertise  globally and has brought  much revenue back                                                               
to Iceland after working with  others around the world.  Although                                                               
Iceland is smaller  than Alaska in terms of  population, they are                                                               
involved  in almost  every major  geothermal  project around  the                                                               
world.  She  related her understanding that  Iceland has achieved                                                               
the  aforementioned by  developing  a training  program in  which                                                               
people from  around the world are  brought to Iceland for  a free                                                               
education in  geothermal energy, which results  in those students                                                               
returning to  their home  countries as  an advocate  for Iceland.                                                               
Students  work closely  with the  university and  industry.   The                                                               
individual  participants get  to know  the industry  capabilities                                                               
and skills, and therefore when  they return to their home country                                                               
to  champion  geothermal energy  they  invite  the Icelanders  to                                                               
respond to request for proposals  (RFPs).  Ms. Holdmann expressed                                                               
the desire to  emulate what the Icelanders are doing.   She noted                                                               
that  Icelanders invest  in research  and  development (R&D);  to                                                               
that  end,  she noted  that  she  is  pleased that  the  governor                                                               
included $1 million in the Emerging Technology Fund.                                                                            
                                                                                                                                
8:43:09 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  HUGHES  inquired  as  to the  amount  of  funding                                                               
Iceland  invested  for R&D  and  demonstration  projects and  the                                                               
benefit Iceland is receiving from that.                                                                                         
                                                                                                                                
MS. HOLDMANN answered  that she didn't know, but  offered to find                                                               
out and provide that information to the committee.                                                                              
                                                                                                                                
8:43:41 AM                                                                                                                    
                                                                                                                                
MS. HOLDMANN,  continuing her overview, highlighted  that Iceland                                                               
has  also  developed a  nonprofit  business  to pool  and  market                                                               
Icelandic  know-how.     She  expressed  interest   in  exploring                                                               
Iceland's strategies  in Alaska in  order to become  more engaged                                                               
in other parts of the world.                                                                                                    
                                                                                                                                
8:44:15 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE   HUGHES   encouraged   conversations   with   Joe                                                               
Jacobson, Director, Division  of Economic Development, Department                                                               
of Commerce,  Community & Economic Development  (DCCED), and with                                                               
the  House Special  Committee on  Economic Development,  Tourism,                                                               
and Arctic Policy regarding Iceland.                                                                                            
                                                                                                                                
8:45:13 AM                                                                                                                    
                                                                                                                                
The committee took an at ease from 8:45 a.m. to 8:48 a.m.                                                                       
                                                                                                                                
^Presentation: Alaska and Interior Energy Study                                                                                 
         Presentation: Alaska and Interior Energy Study                                                                     
                                                                                                                              
8:48:21 AM                                                                                                                    
                                                                                                                                
CHAIR TILTON announced that the  final order of business would be                                                               
a presentation entitled "Alaska and Interior Energy Study."                                                                     
                                                                                                                                
8:48:45 AM                                                                                                                    
                                                                                                                                
DOUG  REYNOLDS, Professor,  Energy and  Economics, University  of                                                               
Fairbanks,   clarified  that   his   presentation  will   include                                                               
information  that's  not his,  but  that  he  has reviewed.    He                                                               
directed attention to page 4  entitled "Summer 014" and explained                                                               
that  in  July and  August  2014  there  was no  Organization  of                                                               
Petroleum  Exporting  Countries  (OPEC) action,  the  dollar  was                                                               
stable, the  world supply  was only a  0.2 percent  increase, but                                                               
the oil price fell 10 percent,  which is unusual for oil markets.                                                               
What's really  happening is a  demand decline that's  causing the                                                               
price decline rather  than a supply inundation.   Europe, Russia,                                                               
Brazil, and  Japan are in recession.   He said it's  difficult to                                                               
know whether China  is in recession because they  don't have very                                                               
good statistics.   The problem is,  as expressed on page  6, when                                                               
the  price  decreases  on  a  demand-side  push  supply  will  be                                                               
effected.   In fact, there  is already  a 28 percent  decrease in                                                               
investments  in the  oil and  gas sector,  which will  eventually                                                               
result in  reductions in the  supply such that oil  projects will                                                               
stop and  there will be fewer  new oil shale projects.   If world                                                               
growth increases and the supply  decline declines, there could be                                                               
a price  shock up  to $120  per barrel  in the  next one  to five                                                               
years.  Although that's good for  Alaska, it's not for others.  A                                                               
price shock, as  related on page 8, could result  in a wage-price                                                               
spiral or  rather inflation that hits  many of the costs  for the                                                               
region.   In  summary,  oil prices,  wages,  costs, and  interest                                                               
rates   increase.     Other  businesses   in  the   Interior,  he                                                               
emphasized,  get   hit  hard   through  the   heat,  electricity,                                                               
transport, and overhead, services, and food costs.                                                                              
                                                                                                                                
8:54:15 AM                                                                                                                    
                                                                                                                                
DR.  REYNOLDS moved  on  to  page 11  entitled  the "Natural  Gas                                                               
Alternatives."  The  Arctic  Fox  pipeline  is  a  small  12-inch                                                               
pipeline [that would  cost] $750,000.  He  informed the committee                                                               
that  to get  the pipeline  to  Anchorage would  cost another  $1                                                               
billion  and would  take  two to  three years.    The Arctic  Fox                                                               
pipeline, he  opined, is probably  the best option if  the desire                                                               
is to go that route.  He  then moved on to the Alaska Stand-alone                                                               
Pipeline (ASAP)  pipeline, a 36-inch  pipeline, which  would cost                                                               
$10 billion.   Since no  open season has  been done, there  is no                                                               
knowledge as  to the  route.  Furthermore,  the ASAP  pipeline is                                                               
low pressure  and just natural  gas.  Dr. Reynolds  then directed                                                               
attention  to page  16, the  "Big Pipeline,"  which might  take a                                                               
while to achieve.  Japan, he  noted, is returning to nuclear.  At                                                               
this time, most of the LNG in  the world is being bought by Japan                                                               
and  Korea.   He opined  that China  will stick  with coal  for a                                                               
while rather  than go to  LNG.  With  regard to LNG  trucking, he                                                               
offered that  trucking is more  costly than  fuel oil.   He noted                                                               
that any  time LNG  is being  [produced] it's  a phase  change in                                                               
which natural  gas is being changed  to LNG and back,  which adds                                                               
costs.  He then highlighted the fact that Alaska is broke.                                                                      
                                                                                                                                
DR.  REYNOLDS  moved on  to  page  22 regarding  propane,  liquid                                                               
petroleum gas (LPG).   He explained that LPG is  not dense, which                                                               
is why it's not used a lot  for automobiles.  Although there is a                                                               
lot of  propane used around  the world,  it's not used  nearly as                                                               
much as  normal gasoline and  diesel, which he attributed  to its                                                               
density.   To address the density  of propane, it can  be bottled                                                               
and  kept under  pressure but  that  makes it  difficult to  use.                                                               
Furthermore, propane isn't as cheap  as natural gas, which is why                                                               
electricity  power production  doesn't  use  propane.   Moreover,                                                               
propane is volatile  chemically.  As far as  Alaska is concerned,                                                               
the costs of  the transfers, middlemen, fees, and  delays make it                                                               
unaffordable.   In fact, propane  has some of the  highest amount                                                               
of transit  fees and payments  per British thermal unit  (Btu) of                                                               
any  energy.   He then  directed  attention to  page 29  entitled                                                               
"Propane is  Ubiquitous," and said there  is a lot of  propane in                                                               
oil  shale and  there is  a lot  of supply  in the  Lower 48  and                                                               
Canada.    Propane  is  portable  as  it's  bottled  and  can  be                                                               
transported on  the Rail Belt,  the roadways, the  river systems,                                                               
and coastal regions.  Furthermore,  propane is flexible as it can                                                               
be used  in its  pure form  for residential  applications, butane                                                               
for  industrial uses,  and  there  could be  a  mixture of  both.                                                               
Moreover,  propane  is  fast  in  that a  big  project  could  be                                                               
accomplished in  one to two  years and  paid off in  three years.                                                               
Actually, at  this time a  propane project  could be paid  off in                                                               
one year.  He then highlighted  that propane is a reasonable cost                                                               
energy  source, with  a price  of about  $1/gallon over  the last                                                               
couple   of  years.     Currently,   propane   costs  less   than                                                               
$.50/gallon, and thus he projected  that propane wouldn't get too                                                               
high in price.  Propane is like  natural gas and those who use it                                                               
won't know the difference, except the  cost is cheaper, it can be                                                               
moved  faster,  and is  really  doable  for  Alaska in  terms  of                                                               
economies of scale.   Therefore, he suggested  reviewing a larger                                                               
project  that could  go  further than  Fairbanks  and into  other                                                               
areas  of  Alaska.   Although  the  ports of  Vancouver,  British                                                               
Columbia,  or  Seattle  are obvious  sources,  Prince  Rupert  is                                                               
closer and it's getting a supply  hub near there.  In response to                                                               
why  the North  Slope wouldn't  be used,  Dr. Reynolds  explained                                                               
that  North  Slope  propane  would require  a  new  facility  for                                                               
processing and the batches transported  via truck would be small.                                                               
Therefore,  the   economies  of   scale  wouldn't   be  achieved.                                                               
However,  Alaska's   rail  and  barge  system   could  make  [the                                                               
transport of propane]  work because it's not  just closeness that                                                               
should be considered but also the  size of the system.  The idea,                                                               
he  explained, would  be  to transport  the  propane from  Prince                                                               
Rupert to Fairbanks, then barge it  to Whittier, and rail it from                                                               
Fairbanks  in order  to  achieve economies  of  scale that  would                                                               
reduce the cost.   The Alaska Marine Highway  System (AMHS) could                                                               
run this as an option.                                                                                                          
                                                                                                                                
9:01:28 AM                                                                                                                    
                                                                                                                                
DR. REYNOLDS,  referring to page  39, suggested that  a dedicated                                                               
rail only  barge with two levels  could be used.   A simple barge                                                               
at a  cost of  $22 million  could be  obtained or  an articulated                                                               
barge that  goes a bit faster  [for a cost of  $25 million] could                                                               
be obtained.  The faster  articulated barge reduces the transport                                                               
time and can  reduce the cost and make the  logistics work better                                                               
while saving  money.  He emphasized  that the key is  filling the                                                               
tanker  rail cars  while they  remain on  the barge,  which would                                                               
have all the infrastructure to  fill the tanks, at Prince Rupert.                                                               
The ability  to fill the  tanker rail  cars on the  barge without                                                               
disembarking cuts  down on time, costs,  and fees.  Once  a barge                                                               
is filled in  Prince Rupert, it would sail to  Whittier where the                                                               
[tanker cars]  would be placed on  the rail to North  Pole, which                                                               
he  characterized as  a center  of energy.   Once  a terminal  is                                                               
setup in  North Pole, the  propane could  be trucked on  the rail                                                               
system or  via a barge  into the Interior.   Propane distribution                                                               
in Alaska  could be via roadways,  a coastal highway, or  a river                                                               
system.   The goal is to  move the propane to  Fairbanks and then                                                               
expand from there.   He highlighted that there would  be no piped                                                               
distribution costs  and the  trucks hold a  dense fuel,  and thus                                                               
the cost per Btu would be  lower.  Dr. Reynolds then informed the                                                               
committee that the Interior market  amounts to about [30] billion                                                               
cubic feet per  year (bcf/year), which is about  1 bcf equivalent                                                               
of natural gas.  Currently, fuel  oil is $24/mcf, about $3.00 per                                                               
gallon, but there  is the potential to have  propane delivered to                                                               
one's door for  $14/mcf, which would amount to  a $10 million/mcf                                                               
in savings or $300 million per  year in savings for the Interior.                                                               
As  one moves  farther  away,  the savings  would  be  more.   He                                                               
pointed out that  the to start with it would  be a 5/bcf project,                                                               
but  there would  be the  potential  to expand.   The  key is  to                                                               
incrementally expand such that a  5/bcf project could be expanded                                                               
incrementally at  about 2.5/bcf  per incremental expansion.   The                                                               
expansion could  include coastal  distributions and  use existing                                                               
systems to move  along the coast and enter the  rivers.  The main                                                               
point, he emphasized, is to start  with a 5 bcf/year project such                                                               
that $15/mcf  fuel enters  Fairbanks and  as it  travels further,                                                               
the cost increases.                                                                                                             
                                                                                                                                
9:06:17 AM                                                                                                                    
                                                                                                                                
                                                                                                                                
DR.  REYNOLDS  moved  on  to page  48  entitled  "Economics"  and                                                               
informed the  committee that the  capital expenditure  (CAPEX) of                                                               
the  5/bcf project  starts  with $50  million  and the  operating                                                               
expenditures (OPEX) start with $15  million/year, and the revenue                                                               
would amount  to $30 million/year with  a three year payoff.   He                                                               
noted that these  numbers are from Energia Cura  LLC engineers he                                                               
knows in  Fairbanks.  At this  time, with a selling  price of $15                                                               
and purchasing  [the propane]  in Canada  where it's  $5/mcf, the                                                               
project  could  be  paid  off  in  a year  and  save  a  lot  for                                                               
residences.    He  then  directed attention  to  page  49,  which                                                               
relates  the  operations side  that  would  include leasing  rail                                                               
cars.  Currently, with a  $15/mcf price in Fairbanks, which would                                                               
amount  to  about $18/mcf  to  the  resident, the  savings  would                                                               
amount to  roughly $20  million/year for  Alaskans.   The savings                                                               
could be even  more, say $10/mcf in Fairbanks or  the barge could                                                               
be  paid off  quicker and  expansion begun.   Therefore,  the two                                                               
strategies as outlined  on page 51 are to either  use the savings                                                               
to  lower  the  price  or  use  the  savings  to  add  expansion.                                                               
Furthermore, there could  be a cooperative or  a partnership with                                                               
the Alaska Marine Highway System  (AMHS) such that AMHS could own                                                               
it and make money.   The Alaska Railroad Corporation (ARRC) could                                                               
also be a part of this.  He  noted that now is the time to obtain                                                               
a [long-term]  contract at  a better price,  even though  it's an                                                               
index price.  It would also be  a fixed loan, he stated.  Canada,                                                               
he informed the  committee, needs propane buyers and  thus now is                                                               
the time  to enter this market.   Referring to the  graph on page                                                               
55 regarding the price differential,  he opined that the price of                                                               
propane is always  going to be significantly less than  oil and a                                                               
little bit more  than natural gas.  Furthermore,  propane is easy                                                               
to refine and  thus its costs will be a  little less.  Currently,                                                               
the price  of propane in  Canada is less than  $.50/gallon, which                                                               
means it could be transported  to Fairbanks for less than $10/mcf                                                               
with this  project.  The project  could be expanded to  address a                                                               
lot  of needs.    He  acknowledged that  once  the  price of  oil                                                               
increases,  the  price  of  propane  will  increase  while  still                                                               
remaining a  lot lower price than  the price of oil  and a little                                                               
higher than the price of natural gas.   When all the costs of the                                                               
infrastructure  projects   and  paid  off,  propane   will  match                                                               
anything that can be done with natural gas.                                                                                     
                                                                                                                                
                                                                                                                                
9:10:08 AM                                                                                                                    
                                                                                                                                
DR. REYNOLDS, referring to page  56, projected that propane could                                                               
be  transported  to North  Pole  at  a  cost  of $15/mcf  and  to                                                               
residences at  a cost  of $18/mcf.   Currently, propane  could be                                                               
transported to North Pole at a  cost of $10/mcf and residences at                                                               
$12/mcf or so.  Propane could  help gold mines expand and re-open                                                               
the  [North Pole]  refinery.   He  pointed out  that each  tanker                                                               
could have specific  products that would help the  mines or other                                                               
necessary industrial  processes.   He then directed  attention to                                                               
page 59, which  is an example of  how a river system  can be used                                                               
in Nenana.   Nenana has a propane terminal and  there are lots of                                                               
storage tanks that can be filled  in the summer and drawn down in                                                               
the winter, which  allows the system to continue year  round.  In                                                               
contrast,  the storage  for pipeline  systems is  costly.   Since                                                               
everyone has a  little bit of storage for propane,  it costs less                                                               
and will work a  lot better.  Propane, he opined,  can be used to                                                               
help  with the  existing Anchorage  pipeline distribution  system                                                               
for natural gas.  If extra  gas is needed in that system, propane                                                               
could be injected into the natural gas system.                                                                                  
                                                                                                                                
DR.  REYNOLDS  concluded  by highlighting  that  there  are  high                                                               
heating costs, even  though the price has decreased  and there is                                                               
a lot  of pollution.  Propane,  he emphasized, has a  weird niche                                                               
advantage; "It's  not exactly perfect  which is why  perfect," he                                                               
said.   Since  no one  uses  it pervasively  in the  Lower 48  or                                                               
Europe,  there's  extra supply  available.    He reiterated  that                                                               
propane  is  a  cheap  solution,  but a  large  system  with  one                                                               
transaction  is   necessary  to   achieve  economies   of  scale.                                                               
Furthermore, with  rail transport  to Fairbanks, the  $15/mcf can                                                               
be achieved  easily even when  the price  of propane rises.   The                                                               
project could be ready in one to  two years and paid off in three                                                               
years.  However,  at this time, the pay-off could  be achieved in                                                               
one year or the  price could be lowered.  He noted  that a lot of                                                               
value  could  be  leveraged  to  achieve  potential  savings  for                                                               
residences in  proportion to expansion, which  he estimated could                                                               
be in the $100 millions depending  upon size and expansion.  With                                                               
a 5  bcf project, something  on the order  of $20 million  a year                                                               
could easily be  saved and paid off in one  year or savings could                                                               
amount to  $30 or  $40 million  for residences  and a  pay-off in                                                               
three  to four  years.   He  highlighted that   multiple  markets                                                               
could be reached along the  river and coast, including Cold Foot,                                                               
Houston,   Dawson,  Tanana,   Juneau,   Valdez,  and   Anchorage.                                                               
Further,  there  are  various  dimensions  that  could  be  used,                                                               
including heat, industry, mining, pipelines, and cars.                                                                          
                                                                                                                                
9:15:36 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE COLVER inquired as  to the technical challenges of                                                               
the low  temperatures in  Fairbanks and  maintaining the  flow of                                                               
propane for residences.                                                                                                         
                                                                                                                                
DR. REYNOLDS pointed out that  propane has been used in Fairbanks                                                               
for  50   years,  although  [the   system]  must   be  engineered                                                               
correctly.  Typically  the tank is located  underground where the                                                               
system works fine so long  as the temperatures stay 10-30 degrees                                                               
above  0.   If  the  tank  is located  above  ground,  it can  be                                                               
insulated or heated.                                                                                                            
                                                                                                                                
9:16:55 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE HUGHES  remarked that she wasn't  aware that Japan                                                               
is returning to nuclear rather  than seeking LNG, and inquired as                                                               
to when  that switch occurred  and to  the hard facts  to support                                                               
that.                                                                                                                           
                                                                                                                                
DR.  REYNOLDS stated  that  Japan has  never  declared that  it's                                                               
decertifying all  its nuclear  power plants,  and thus  he opined                                                               
that they will  ramp up and use  more nuclear.  From  what he has                                                               
read, he  said he understands that  roughly 90 percent of  LNG is                                                               
going to  Japan and South  Korea because they suddenly  have this                                                               
large need.   China is in a recession and  using coal rather than                                                               
purchasing  LNG  that would  require  spending  funds to  set  up                                                               
systems to  use it.   Japan,  on the other  hand, is  paying high                                                               
prices  for electricity  as it  tries  to use  up the  LNG.   For                                                               
Japan's existing nuclear  power plants, they just  have to ensure                                                               
they are safe  by putting a few extra safety  systems in order to                                                               
reopen them.   He  opined that  Japan is on  track to  reopen its                                                               
nuclear plants.                                                                                                                 
                                                                                                                                
REPRESENTATIVE HUGHES  expressed interest in learning  more about                                                               
Japan reopening its  nuclear plants since she  had the impression                                                               
otherwise.                                                                                                                      
                                                                                                                                
9:19:59 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  HUGHES,   returning  to  propane,   recalled  Dr.                                                               
Reynolds proposal  for AMHS  to acquire  the barges  he described                                                               
and not use existing AMHS vessels.                                                                                              
                                                                                                                                
DR.  REYNOLDS  confirmed  that  the   barges  would  have  to  be                                                               
acquired,  designed  and built,  because  they  don't exist.    A                                                               
dedicated  system  is  necessary  such that  the  system  can  be                                                               
streamlined  and  expanded  to  do  one  thing  very  well.    He                                                               
projected that the  barges could be built in about  a year, after                                                               
which they  could arrive at  Prince Rupert where the  tanks would                                                               
be filled without  disembarking.  The AMHS would  own the barges,                                                               
rent  the tug  boats, and  manage the  system to  the rail  after                                                               
which the [ARRC] would manage the system to Fairbanks.                                                                          
                                                                                                                                
DR.  REYNOLDS,  in  further response  to  Representative  Hughes,                                                               
related that he did send letters  to DOT&PF and AMHS to which the                                                               
response  was that  they  are under  budget.   He  noted that  he                                                               
hasn't sent a  letter to ARRC yet.  With  regard to obtaining gas                                                               
from  Cook  Inlet, Cook  Inlet  doesn't  have  a lot  of  propane                                                               
available.  The  North Slope, on the other hand,  does have a lot                                                               
of propane but  it's being used in the pipeline.   To use propane                                                               
from  the  North Slope  outside  of  the pipeline  would  require                                                               
systems  changes and  shipping, which  would require  investment.                                                               
Although the  road distance  is less from  the North  Slope [than                                                               
the Prince  Rupert route  proposal], the  economies of  scale [of                                                               
using  propane from  Prince Rupert]  reduces the  costs per  Btu.                                                               
Specifically, only  one truck  at a time  from [the  North Slope]                                                               
would  come down  whereas multiple  rail cars  and a  barge could                                                               
come up.   The aforementioned really  cuts the cost per  Btu.  In                                                               
terms of whether  one would want to use North  Slope propane, Dr.                                                               
Reynolds pointed  out that the  North Slope  [producers] received                                                               
lower  taxes and  have no  qualms with  getting propane  wherever                                                               
it's the  cheapest.  However,  to help the villages,  the project                                                               
must start  in Fairbanks.   Although the cost would  increase the                                                               
further away from Fairbanks the  propane is distributed, it would                                                               
still be fairly reasonably priced energy.                                                                                       
                                                                                                                                
9:24:55 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SEATON  related  his understanding  that  already                                                               
there  is a  hydro train  that travels  from Seattle  to Whittier                                                               
with  dedicated rail  cars  that are  pulled off.    He asked  if                                                               
that's  the  same  kind  of  system to  which  Dr.  Reynold's  is                                                               
referring or  is a double deck  necessary or can the  hydro train                                                               
be dedicated  with a  different stop and  tanks and  enter Prince                                                               
Rupert as an entry point.                                                                                                       
                                                                                                                                
DR. REYNOLDS  said he  didn't know exactly  what the  hydro train                                                               
has, but related  his understanding that normally  the upper deck                                                               
of barges  are filled  with various  other things  besides energy                                                               
and the  lower deck with a  lot of rail  cars.  He said  he would                                                               
have to look into how the hydro train works.                                                                                    
                                                                                                                                
9:26:07 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SEATON  expressed interest in seeing  the analysis                                                               
of using  the existing  hydro train, which  only hauls  rail cars                                                               
not  any  other freight.    He  then  asked whether  the  filling                                                               
facilities  in  Prince  Rupert  already  exist  and  whether  the                                                               
propane comes from St. Johns.                                                                                                   
                                                                                                                                
DR.  REYNOLDS  clarified  that  the  Prince  Rupert  facility  is                                                               
planned and  will be a hub.   Therefore, [Alaska] could  obtain a                                                               
contract as the  barge is being built.  However,  the barge he is                                                               
proposing will  be made such  that the [tankers] would  be filled                                                               
on   the  barge   without   disembarking,   which  lowers   costs                                                               
significantly, saves time, and then  the cars could roll off onto                                                               
the train tracks  in Whittier.  Therefore, he  suggested that the                                                               
state could be in a position to get a contract [with the hub].                                                                  
                                                                                                                                
9:28:09 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  COLVER asked  if  Dr. Reynolds  has reviewed  the                                                               
availability of  these rail cars and  what that would add  to the                                                               
delivery cost of the propane.   He then asked whether the federal                                                               
safety  rules that  require there  to  be a  dedicated port  when                                                               
shipping LNG  from an American  port would apply  when delivering                                                               
propane in bulk quantities.                                                                                                     
                                                                                                                                
DR. REYNOLDS  answered that although he  hasn't reviewed specific                                                               
regulations,  there should  be no  problem because  the [tankers]                                                               
roll  off.    He  noted  that  empty  tankers  coming  down  from                                                               
Fairbanks might have to be held  on one side of the mountain into                                                               
Whittier; of the exact  sequence he was not sure.   If it takes a                                                               
year  to build  the barge,  that  should provide  enough time  to                                                               
lease tanker cars.   He noted that the lease  rate is included in                                                               
the costs.                                                                                                                      
                                                                                                                                
9:29:57 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE VAZQUEZ inquired  as to the cost  of converting to                                                               
propane, whether for a residential or commercial application.                                                                   
                                                                                                                                
DR. REYNOLDS stated that one might  have to buy a new tank, which                                                               
he hasn't  priced.  He noted  that the provider will  include the                                                               
price in  [the conversion] over  a long-term contract and  do the                                                               
work so  that a  little extra is  paid to cover  the cost  of the                                                               
tank.    In  further  response  to  Representative  Vazquez,  Dr.                                                               
Reynolds  clarified  that although  it  would  be a  case-by-case                                                               
basis, most  existing modern oil  systems the burner tips  can be                                                               
changed for propane  use and the existing system  can continue to                                                               
be used.                                                                                                                        
                                                                                                                                
CHAIR TILTON  requested that Dr.  Reynolds return  information to                                                               
the committee regarding conversion costs.                                                                                       
                                                                                                                                
9:32:41 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE HUGHES  asked if  the plans for  these nonexistent                                                               
barges have  been designed or  drafted.  She then  questioned why                                                               
the state would  have to put forward the capital  because if this                                                               
is such a good idea wouldn't  industry be doing it.  Furthermore,                                                               
she inquired  as to  why the LNG  trucking project  moved forward                                                               
instead of this.                                                                                                                
                                                                                                                                
DR.  REYNOLDS,   noting  that  he  has   contacted  some  private                                                               
businesses, opined that it's difficult  for small businesses that                                                               
have to  start slowly  and build  up, particularly  with projects                                                               
such as this  because such a big system is  necessary right away.                                                               
Whereas, this project  is perfect for the state  because it could                                                               
provide leverage  to start the  project.   As far as  the design,                                                               
Energia  Cura LLC  has had  discussions with  shipyards regarding                                                               
these  [barge]  designs  and obtained  quotes  on  getting  these                                                               
designs built.   For  many years,  natural gas  and oil  has been                                                               
used and  dictated the thinking [of  energy].  Now that  there is                                                               
more  propane on  the markets,  it has  been slow  to materialize                                                               
these markets  and use  them in  new ways  because shale  oil and                                                               
shale  gas include  a lot  of propane.   The  price advantage  of                                                               
propane is  achieved because propane  just isn't used as  much as                                                               
natural  gas or  oil.    He reiterated  that  although there  are                                                               
designs available  [for these  barges], they  are not  being used                                                               
because filling the tankers on the  barge prior to transport is a                                                               
new and innovative  idea.  Dr. Reynolds mentioned  that he hasn't                                                               
talked with ACEP regarding this particular idea.                                                                                
                                                                                                                                
                                                                                                                                
REPRESENTATIVE HUGHES remarked that  although being the first for                                                               
such a new  project is a risk, a three-year  payoff would seem to                                                               
invite  private  sector  interest  and funding.    Therefore,  he                                                               
encouraged  Dr.  Reynolds  to  engage  with  others  as  well  as                                                               
industry.                                                                                                                       
                                                                                                                                
9:37:28 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SEATON,  returning to  the issue of  converting to                                                               
propane, informed  the committee  that the  entire city  of Homer                                                               
has  converted  to natural  gas.    He explained  the  conversion                                                               
process in  Homer.  He further  explained that in Homer,  the oil                                                               
burners could  be converted  but most  of the  time they  were so                                                               
much less efficient than new  modulating gas burners and boilers,                                                               
and  thus it  made  more  sense to  replace  the heating  system.                                                               
Representative  Seaton  mentioned  that  in  the  last  10  years                                                               
propane was  one of  the most expensive  energy sources  in Homer                                                               
other  than electricity.   Therefore,  he  expressed interest  if                                                               
this  proposal  is  cheaper  and   available  under  a  long-term                                                               
contract  at   Prince  Rupert.     He   then  pointed   out  that                                                               
ConocoPhillips  Alaska, Inc.,  is  trucking roughly  100 tons  of                                                               
propane  to  North  Slope  where   it's  used  for  enhanced  oil                                                               
recovery, and thus those companies  won't supply propane from the                                                               
North  Slope fields  for such  a project.   With  regard to  this                                                               
proposal, Representative  Seaton stressed the need  to ensure the                                                               
propane terminal  is already being  planned in Prince  Rupert and                                                               
is not  reliant on  natural gas  lines from  the coast  such that                                                               
propane would  be a sub-product  from the liquefaction of  LNG as                                                               
that  would require  the  LNG  terminal to  be  developed and  he                                                               
wasn't sure the economics were present for it.                                                                                  
                                                                                                                                
DR. REYNOLDS  reminded the  committee that there  is a  train all                                                               
the way  to Prince  Rupert, and  thus it  can be  transported via                                                               
rail  all  the  way  to Prince  Rupert.    Furthermore,  Alberta,                                                               
Canada, can't  always sell all  of its propane,  which oftentimes                                                               
results  in them  selling their  propane under  the Texas  price.                                                               
Therefore, he opined  that one should be able  to obtain whatever                                                               
propane supply needed and if not,  then it could be obtained from                                                               
Seattle  or   Vancouver  where   there  are   existing  [propane]                                                               
facilities.                                                                                                                     
                                                                                                                                
9:43:30 AM                                                                                                                    
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
There being no  further business before the  committee, the House                                                               
Community  and Regional  Affairs Standing  Committee meeting  was                                                               
adjourned at 9:43 a.m.                                                                                                          

Document Name Date/Time Subjects
Reynolds UAF Interior Energy Study 012715.pdf HCRA 1/27/2015 8:00:00 AM
ACEP Overview - House Community and Regional Affairs 1-27-15 (1).pdf HCRA 1/27/2015 8:00:00 AM