Legislature(2011 - 2012)BARNES 124

01/27/2011 03:00 PM House ENERGY


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03:04:26 PM Start
03:05:22 PM Presentation: Alaska Energy Authority
04:15:05 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Committee Introductions, Housekeeping Business TELECONFERENCED
+ Presentation by Alaska Energy Authority on the TELECONFERENCED
Nov. 23, 2010, "Railbelt Large Hydro Evaluation
Preliminary Decision Document":
Michael Harper, Acting Executive Director, AEA
Bryan Carey, Technical Engineer, AEA
Sara Fisher-Goad, Deputy Director of Operations,
Alaska Industrial Development and Export
Authority & AEA
                    ALASKA STATE LEGISLATURE                                                                                  
               HOUSE SPECIAL COMMITTEE ON ENERGY                                                                              
                        January 27, 2011                                                                                        
                           3:04 p.m.                                                                                            
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Neal Foster, Co-Chair                                                                                            
Representative Lance Pruitt, Co-Chair                                                                                           
Representative Bob Lynn                                                                                                         
Representative Dan Saddler                                                                                                      
Representative Pete Petersen                                                                                                    
Representative Chris Tuck                                                                                                       
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Representative Kurt Olson                                                                                                       
                                                                                                                                
OTHER LEGISLATORS PRESENT                                                                                                     
                                                                                                                              
Representative Carl Gatto (via teleconference)                                                                                  
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
PRESENTATION:  ALASKA ENERGY AUTHORITY                                                                                          
                                                                                                                                
     - HEARD                                                                                                                    
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
No previous action to record                                                                                                    
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
MICHAEL HARPER, Acting Executive Director                                                                                       
Alaska Energy Authority (AEA)                                                                                                   
Department of Commerce, Community & Economic Development (DCCED)                                                                
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:   Introduced  Bryan Carey, Technical  Engineer                                                            
for  AEA, and  Sara Fisher-Goad,  Deputy Director-Operations,  for                                                              
the Alaska Industrial  Development & Export Authority  (AIDEA) and                                                              
AEA.                                                                                                                            
                                                                                                                                
BRYAN CAREY, Technical Engineer                                                                                                 
Alaska Energy Authority (AEA)                                                                                                   
Department of Commerce, Community & Economic Development (DCCED)                                                                
Anchorage, Alaska                                                                                                               
POSITION  STATEMENT:    Gave  a  PowerPoint  presentation  titled,                                                            
"Railbelt  Large  Hydroelectric,"  that  was an  overview  on  the                                                              
"Railbelt Large  Hydro Evaluation  Preliminary Decision  Document"                                                              
issued by AEA and dated 11/23/10.                                                                                               
                                                                                                                                
RICH WILSON, Spokesperson                                                                                                       
Alaska Ratepayers Inc. (Alaska Ratepayers)                                                                                      
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Testified on the presentation by AEA.                                                                    
                                                                                                                                
SARA FISHER-GOAD, Deputy Director-Operations                                                                                    
Alaska Industrial Development & Export Authority (AIDEA) and AEA                                                                
Department of Commerce, Community & Economic Development (DCCED)                                                                
Anchorage, Alaska                                                                                                               
POSITION  STATEMENT:    Reviewed   the  schedule  of  the  Susitna                                                            
Hydroelectric  Project   and  answered  questions   regarding  the                                                              
financing of the project.                                                                                                       
                                                                                                                                
BILL NOLL, Spokesperson                                                                                                         
Alaska Ratepayers Inc. (Alaska Ratepayers)                                                                                      
Anchorage, Alaska                                                                                                               
POSITION  STATEMENT:   Answered  a question  and commented  during                                                            
the presentation by AEA.                                                                                                        
                                                                                                                                
ACTION NARRATIVE                                                                                                             
                                                                                                                                
3:04:26 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  NEAL  FOSTER  called  the  House  Special  Committee  on                                                            
Energy  meeting to  order at  3:04 p.m.   Representatives  Foster,                                                              
Saddler,  Petersen, Tuck,  Lynn, and  Pruitt were  present at  the                                                              
call to order.   Also in attendance was Representative  Carl Gatto                                                              
via teleconference.                                                                                                             
                                                                                                                                
^PRESENTATION:  ALASKA ENERGY AUTHORITY                                                                                         
             PRESENTATION:  ALASKA ENERGY AUTHORITY                                                                         
                                                                                                                              
3:05:22 PM                                                                                                                    
                                                                                                                                
CO-CHAIR FOSTER  announced that the  only order of  business would                                                              
be a presentation  by AEA on the "Railbelt Large  Hydro Evaluation                                                              
Preliminary Decision Document" dated 11/23/10.                                                                                  
                                                                                                                                
3:05:37 PM                                                                                                                    
                                                                                                                                
CO-CHAIR FOSTER introduced committee staff.                                                                                     
                                                                                                                                
3:07:39 PM                                                                                                                    
                                                                                                                                
MICHAEL   HARPER,  Acting   Executive   Director,  Alaska   Energy                                                              
Authority  (AEA), Department  of  Commerce,  Community &  Economic                                                              
Development  (DCCED), introduced  Bryan Carey, Technical  Engineer                                                              
at AEA  and Sara  Fisher-Goad,  Deputy Director-Operations,  AIDEA                                                              
and AEA, who would present the report.                                                                                          
                                                                                                                                
3:08:31 PM                                                                                                                    
                                                                                                                                
BRYAN CAREY,  Technical Engineer,  Alaska Energy Authority  (AEA),                                                              
Department   of  Commerce,   Community   &  Economic   Development                                                              
(DCCED),  began   with  a  brief  history  of   the  two  proposed                                                              
hydroelectric (hydro)  projects.  He  displayed a map  that showed                                                              
the locations  of the  Watana dam  site on  the Susitna  River and                                                              
the Chakachamna  intake  site on  the Chakachamna  River.   In the                                                              
early 80's  both of  the sites  were studied  by the Alaska  Power                                                              
Authority.   Before  the studies  were discontinued,  the cost  of                                                              
building the  Chakachamna project  was estimated at  $1.5 billion.                                                              
For the  Susitna project,  the original  plan called for  building                                                              
two  dams, one  at Watana  and  one at  Devil's  Canyon, 30  miles                                                              
downstream.   Due  to  declining state  revenue,  the project  was                                                              
reconfigured to  a three-stage project  beginning with  building a                                                              
lower  Watana  dam, followed  by  a  dam  at Devil's  Canyon,  and                                                              
finally raising  the height  of the  Watana dam  from 700  feet to                                                              
885 feet during  the third stage of construction.   The final cost                                                              
for  the three-stage  project was  estimated  at $5  billion.   In                                                              
1984 the  price of  oil dropped  to approximately  $9 per  barrel,                                                              
further  decreasing  state  revenue,  and  there  were  sufficient                                                              
reserves  of  natural  gas  in  Cook  Inlet  to  provide  low-cost                                                              
electricity.   Since  then, gas  reserves in  the Cook Inlet  have                                                              
declined  and  the  generation   and  transmission  infrastructure                                                              
built  by the  utilities has  aged.   Furthermore,  last year  the                                                              
state  legislature  passed  a  state energy  policy  which  set  a                                                              
statewide goal  of achieving  50 percent  renewable energy  use by                                                              
2025.  Looking  at the possibilities  to reach that goal,  and the                                                              
need  for new  generation along  the Railbelt,  Mr. Carey  advised                                                              
the only  way to  reach the  renewable energy  goal was  to follow                                                              
the   2010   AEA  Regional   Integrated   Resource   Plan   (RIRP)                                                              
recommendation and  study the two  hydro projects.  Over  the past                                                              
year AEA has  looked at the cost  and impacts of the  two projects                                                              
in depth.   He then  displayed a map  showing the location  of the                                                              
Watana  dam site  and  powerhouse  40 miles  south  of the  Denali                                                              
Highway and 90  miles upstream of Talkeetna on  the Susitna River.                                                              
The dam  would be approximately  700 feet  tall - although  it may                                                              
be referred to  as the lower Watana  project - it is  a very large                                                              
dam, standing 550  feet above ground.  He furnished  a map showing                                                              
the  location  of  the Chakachamna  project  east  of  Lake  Clark                                                              
National Park  and Preserve (national  park), and upstream  of the                                                              
Trading  Bay State  Game Refuge  (refuge).   This  project uses  a                                                              
lake-tap  that diverts  the water  from  the existing  Chakachatna                                                              
River  over to  the McArthur  River  valley through  a 10-12  mile                                                              
long  tunnel.   A  significant feature  of  this  proposal is  the                                                              
challenge  of obtaining  permits to  divert water  from one  river                                                              
system to  another as  resource agencies  will require  sufficient                                                              
environmental flow  for existing salmon, and the  amount of energy                                                              
produced by the project would be reduced proportionately.                                                                       
                                                                                                                                
3:14:17 PM                                                                                                                    
                                                                                                                                
MR. CAREY explained  the dam on the Susitna River  at Watana would                                                              
create a reservoir  approximately 39 miles long and  2 miles wide,                                                              
situated  30 miles  above  significant  salmon habitat;  in  fact,                                                              
previous studies did  not find any salmon above  the dam location.                                                              
In  2003, some  Chinook salmon  were  found, but  it is  uncertain                                                              
whether  they  are only  present  in  low-water years.    Further,                                                              
there  would be some  loss of  wildlife habitat  as the  reservoir                                                              
fills,  but the  fisheries impact  is  believed to  be minimal  as                                                              
99.9  percent of  salmon in  the  Susitna River  spawn below  this                                                              
area.   In comparison, approximately  40,000 red salmon  travel up                                                              
through  Chakachamna Lake  to the  national park  and it is  known                                                              
that the  lake contains Lake  Trout, Dolly Varden,  Whitefish, and                                                              
perhaps spawning  salmon.   Initially, the  diversion of  water by                                                              
the Chakachamna project  could possibly cause the  wetlands to dry                                                              
out,  affecting   salmon  habitat   in  the  refuge,   potentially                                                              
blocking  migration,   and  substantially  affecting   the  salmon                                                              
downstream.  Furthermore,  locating the powerhouse  in a different                                                              
river system  may require  catching the  salmon and trucking  them                                                              
into the lake or  to the proper river system.   Another concern is                                                              
that juvenile  salmon may follow  the powerhouse current  into the                                                              
powerhouse.                                                                                                                     
                                                                                                                                
3:17:12 PM                                                                                                                    
                                                                                                                                
MR.   CAREY  cautioned   that   the  Federal   Energy   Regulatory                                                              
Commission (FERC)  licensing for the Chakachamna  project may also                                                              
be  a problem  as the  U.S. National  Park  Service notified  FERC                                                              
that  Kenibuna Lake,  located  within the  national  park, may  be                                                              
hydrologically  connected to Chakachamna  Lake and  if so,  an act                                                              
of Congress  is required to issue  a FERC permit.  Mr.  Carey then                                                              
compared  the  energy  produced  by the  two  projects:    Susitna                                                              
installed  capacity  would  be 600  megawatts  (MW),  its  average                                                              
energy would  be 2,600 gigawatt  hours per year (GWhr/yr),  and it                                                              
would provide  about 50 percent  of the  annual energy use  by the                                                              
Railbelt.       Chakachamna's   installed   capacity    would   be                                                              
approximately  300  MW,  its average  energy  would  be  860-1,100                                                              
GWhr/yr,  and it  would provide  about  20 percent  of the  annual                                                              
energy use by the  Railbelt - an amount that is  unlikely to reach                                                              
the state's goal.   Slide 7 was a graph titled,  "Railbelt Demand"                                                              
which  indicated that  the Railbelt  electrical  demand for  power                                                              
peaks during  the winter months  and decreases during  the summer.                                                              
Energy output  from both proposals  also peaks during  the summer,                                                              
but the  big difference between  the projects is  that Chakachamna                                                              
does not  have capacity for water  storage thus its  output during                                                              
the winter  is likely  to be  less than  that produced  by Bradley                                                              
Lake  Hydroelectric   Project  (Bradley   Lake  Hydro);   however,                                                              
Susitna would  produce a significant  amount of energy  during the                                                              
winter.   In  response  to  Representative Saddler,  he  explained                                                              
that  during the  period  of high  water flow  in  the summer  the                                                              
proposed Susitna  project could store  25 percent for flow  in the                                                              
winter.                                                                                                                         
                                                                                                                                
3:20:37 PM                                                                                                                    
                                                                                                                                
MR. CAREY  displayed slide 8  titled, "Railbelt Energy:  Energy by                                                              
Resource  Type."   He explained  that  the hydro  energy shown  in                                                              
yellow  on the  graph represents  power produced  by the  proposed                                                              
Susitna  project,  beginning  in  2025.    He  noted  that  energy                                                              
produced by  natural gas  is still required  by the  utilities for                                                              
the  generation   of  power  through   2059.    Slide   9  titled,                                                              
"Estimated Cost of  Power," was a comparison of the  cost of power                                                              
from  three projects,  not including  operation, maintenance,  and                                                              
utility distribution  costs:  Susitna  Embankment with  50 percent                                                              
state contribution  and 30  year bonds;  Susitna Roller  Compacted                                                              
Concrete  (RCC) with  50 percent  state contribution  and 30  year                                                              
bonds;  Chakachamna  with 50  percent  state contribution  and  30                                                              
year  bonds.    The  estimated  cost  after  the  Susitna  project                                                              
constructed with  an embankment dam  is approximately 6  cents per                                                              
kilowatt  hour (kW/hr),  which is  about the  same as the  present                                                              
cost.  If  the Susitna project  were constructed by RCC,  the cost                                                              
drops to 5 cents  per kW/hr.  The cost of energy  from Chakachamna                                                              
would be  about 12 cents per  kW/hr.  The state's  contribution to                                                              
the chosen project could be handled in many different ways.                                                                     
                                                                                                                                
3:24:44 PM                                                                                                                    
                                                                                                                                
MR. CAREY  displayed a slide of  Bradley Lake Hydro, which  is the                                                              
largest  project in  the state  and  an example  of an  embankment                                                              
dam.   There  are  no  fish present  in  the  lake and  the  water                                                              
released is for  the benefit of fish  below the dam.   If built as                                                              
an embankment dam,  the Susitna dam would be  similar, but taller.                                                              
He then displayed  a slide of the Al Wehdah  Hydroelectric Project                                                              
in Jordan  which was an  example of a  RCC constructed dam.   This                                                              
method uses  concrete, but  the concrete  is placed using  thicker                                                              
layers,  which  saves  time  and material.    Construction  of  an                                                              
expandable  embankment  dam at  Watana  would require  33  million                                                              
cubic  yards of  material, but  using RCC  construction, only  7.5                                                              
million cubic yards  are needed and construction  time is reduced.                                                              
Mr.  Carey  further  explained  that  raising  the  height  of  an                                                              
embankment  dam by  185 feet  would  require 30  million yards  of                                                              
material, whereas  he estimated the  amount needed to raise  a RCC                                                              
constructed  dam to  the higher  stage  would be  7 million  cubic                                                              
yards.                                                                                                                          
                                                                                                                                
3:27:40 PM                                                                                                                    
                                                                                                                                
MR.  CAREY,  in response  to  a  question, acknowledged  that  the                                                              
specifications on  a RCC constructed  dam "are not  necessarily as                                                              
tight as  what the conventional  concrete is,  but one of  the big                                                              
differences  is ... they  are able  to put it  on in much  thicker                                                              
layers."   Usually,  if concrete  is  applied in  thick layers  it                                                              
begins to heat and  must be cooled to prevent cracks.   But in the                                                              
case of roller  compacted concrete, other materials  are added and                                                              
the roller machine removes all of the air voids with vibration.                                                                 
                                                                                                                                
3:28:41 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  PETERSEN asked  for the  size of  the tallest  RCC                                                              
constructed dam.                                                                                                                
                                                                                                                                
MR. CAREY  said there are  completed RCC  dams over 700  feet, and                                                              
some are  under design  around the world  reaching close  to 1,000                                                              
feet.   He  related  the Susitna  timeline:    three and  one-half                                                              
years for  licensing and final  application document;  three years                                                              
for FERC  processing and  follow-up; four  and one-half  years for                                                              
construction;   power  generation   within  approximately   eleven                                                              
years.  The  next steps for  the Susitna project are:  hold public                                                              
meetings from late  February through mid March;  begin engineering                                                              
and environmental  studies including data gap analysis;  meet with                                                              
resource   agencies;    mapping;   form   working    groups   with                                                              
stakeholders   and  landowners;   work   on   access  issues;   if                                                              
authorization and  funding are received,  file the FERC  notice of                                                              
intent and  preliminary application  document.   He observed  that                                                              
until  the project  is official  with FERC, some  of the  resource                                                              
agencies  resist spending  time  on the  project.   Further  steps                                                              
would  be undertaking  the  FERC  draft environment  study  plans,                                                              
along with  the engineering  evaluation of  embankment versus  RCC                                                              
dam construction,  and determining the  best type and  location of                                                              
the  powerhouse.   In  response to  Representative  Tuck, he  said                                                              
that some  of the resource agencies  involved in addition  to FERC                                                              
are the  U. S. Fish  and Wildlife Service  (USFWS), the  Bureau of                                                              
Land Management (BLM),  the U.S. National Park  Service (NPS), the                                                              
National Marine  Fisheries Service  (NMFS), the Alaska  Department                                                              
of Fish  and Game (ADFG) and  the Department of  Natural Resources                                                              
(DNR).    All  of  these  agencies  have  mandatory  "conditioning                                                              
powers" that cannot  be easily overruled by FERC.   He assured the                                                              
committee  the probability  of  getting a  license  is very  good,                                                              
although the question is what conditions will be attached.                                                                      
                                                                                                                                
3:34:28 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  TUCK  asked how  the  state  would fare  with  the                                                              
federal agencies.                                                                                                               
                                                                                                                                
MR.  CAREY   advised  the  federal   agencies  will   be  diligent                                                              
regarding the project,  although this project has  advantages over                                                              
other hydro projects  in that there are few fish  affected, and it                                                              
is  a   glacial  river   with  less   environmental  impact   than                                                              
traditional hydro projects in the Lower 48.                                                                                     
                                                                                                                                
3:35:38 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE   SADDLER    asked   whether    the   Environmental                                                              
Protection Agency (EPA) would be involved.                                                                                      
                                                                                                                                
MR. CAREY was  unsure, but surmised that 150-200  permits would be                                                              
needed for a project like this.                                                                                                 
                                                                                                                                
3:36:13 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  PETERSEN asked  what  would be  needed to  upgrade                                                              
the  transmission lines  to distribute  the  electricity from  the                                                              
powerhouse to the current electric grid.                                                                                        
                                                                                                                                
MR. CAREY said  the Watana site is approximately  35-40 miles east                                                              
of  the location  of the  existing  northern intertie.   The  cost                                                              
estimate  that was  done covers  bringing the  power lines  to the                                                              
intertie.    Soon upgrades  will  be  required for  the  intertie,                                                              
regardless  of whether  the project  proceeds.   The  cost of  the                                                              
upgrades  ranges from  $500-$800  million and  the utilities  will                                                              
prioritize this task.   Mr. Carey then listed the  benefits of the                                                              
Susitna  project:   greater  than 100  year  life; expandable  for                                                              
future growth  by adding dams on  the river or raising  the height                                                              
of the  dam; a  source of  predictable, secure,  low cost  energy;                                                              
insulates  the state  from impacts  of world  events; income  from                                                              
the  sale of  power stays  in the  state; necessary  to reach  the                                                              
state  goal  of 50  percent  renewable  by  2025; lower  cost  for                                                              
electricity in the long-term.                                                                                                   
                                                                                                                                
3:39:59 PM                                                                                                                    
                                                                                                                                
RICH  WILSON,   spokesperson,  Alaska   Ratepayers  Inc.   (Alaska                                                              
Ratepayers),  stated that  his organization  was developed  out of                                                              
concern over  the volatility of  electric rates over the  last ten                                                              
years.    Alaska  Ratepayers  believes the  best  way  to  provide                                                              
affordable  electricity for the  Railbelt, for  at least  the next                                                              
100 years,  is the  construction of  the proposed Susitna  project                                                              
at Watana.  His  organization also supports the  other findings of                                                              
the  AEA "Railbelt  Large  Hydro Evaluation  Preliminary  Decision                                                              
Document."   Mr. Wilson said that  his organization is  a group of                                                              
informed citizens  that over the  past two and one-half  years has                                                              
developed the  following goals:   endorse the governor's  proposed                                                              
appropriation  of $65  million  for the  FERC  application and  an                                                              
additional  $65  million needed  to  proceed to  the  construction                                                              
stage; endorse  the appointment of  an independent agency  for the                                                              
development, construction,  and maintenance of the  project by the                                                              
authorizing  legislation proposed  by  Alaska Ratepayers;  endorse                                                              
the  immediate  building  of  a project  development  fund.    Mr.                                                              
Wilson  stated  that if  the  legislature  uses the  Bradley  Lake                                                              
Hydro  model for  financing, a  project fund  of approximately  $2                                                              
billion  is necessary.   The project  fund is  essential to  reach                                                              
the  goal  of  a basic  infrastructure  for  the  future  of  many                                                              
Alaskans.   He concluded  that his  organization believes  this is                                                              
an  excellent  project  and wants  to  be  a  part of  the  public                                                              
dialog.                                                                                                                         
                                                                                                                                
3:44:04 PM                                                                                                                    
                                                                                                                                
SARA FISHER-GOAD,  Deputy  Director-Operations, Alaska  Industrial                                                              
Development  &   Export  Authority   (AIDEA)  and  Alaska   Energy                                                              
Authority  (AEA), Department  of  Commerce,  Community &  Economic                                                              
Development (DCCED),  informed the committee that  the schedule of                                                              
the  Susitna  Hydroelectric  Project  indicates how  much  of  the                                                              
project can  be completed with  the FY  2011 funding limit  of $10                                                              
million,  and the  proposed  $65.7  million appropriation.    [The                                                              
schedule  provided  in the  committee  packet was  labeled,  "Task                                                              
Name: Susitna  Schedule," page 1,  dated 1/24/11, and  prepared by                                                              
AEA and  Cardno ENTRIX].  She  advised that the  schedule provides                                                              
"a high-level approach  in how we would get from  where we are now                                                              
to constructing  the project, but understanding that  there's more                                                              
detail to  be put in  here, and  there's probably some  refinement                                                              
to go on."                                                                                                                      
                                                                                                                                
3:45:44 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  TUCK  asked  Mr.   Wilson  how  Alaska  Ratepayers                                                              
determined an additional $65 million was needed.                                                                                
                                                                                                                                
MR.  WILSON expressed  his understanding  that there  is a  second                                                              
phase, after  the FERC  application, during  which the  regulators                                                              
begin an environmental  impact study (EIS) and  which will require                                                              
a lot of effort  on the part of the state.  The additional funding                                                              
would get the project to the start of construction.                                                                             
                                                                                                                                
3:47:00 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  TUCK then  asked whether  Alaska Ratepayers  wants                                                              
an independent agency - outside the state - created.                                                                            
                                                                                                                                
3:47:20 PM                                                                                                                    
                                                                                                                                
BILL   NOLL,   spokesperson,  Alaska   Ratepayers   Inc.   (Alaska                                                              
Ratepayers),  said   yes.    Alaska   Ratepayers  looked   at  the                                                              
possibility  of  expanding  AIDEA  or  AEA,  or  resurrecting  the                                                              
Alaska Power  Authority for this  task; however, the  dimension of                                                              
the  project  and  the  national   agencies  involved  warrant  an                                                              
independent  entity,  with  staff  that  "live  and  breathe  this                                                              
project  and  don't ...  get  distracted  when  they come  to  the                                                              
office  with other  important projects  or programs  ...."   Using                                                              
its  members' experience,  Alaska  Ratepayers drafted  legislation                                                              
toward that end.                                                                                                                
                                                                                                                                
3:50:23 PM                                                                                                                    
                                                                                                                                
MR.  CAREY, in  response to  Representative  Tuck, clarified  that                                                              
the average  age of dams  currently in  operation is 50  years and                                                              
the average life is unknown.                                                                                                    
                                                                                                                                
3:50:38 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  TUCK asked about  the effect  of siltation  on the                                                              
life of a glacier-fed dam.                                                                                                      
                                                                                                                                
MR.  CAREY explained  that because  the  lake is  almost 39  miles                                                              
long, most  of the silt will drop  out; in fact, it  was estimated                                                              
the active storage  area of the dam would not be  affected for 100                                                              
years.   He was unsure  of the effect on  the life of  the turbine                                                              
blades.   In further  response, he noted  that Bradley  Lake Hydro                                                              
is  less than  10 miles  from  the location  of  glaciers and  the                                                              
runners are not being harmed by silt.                                                                                           
                                                                                                                                
3:52:21 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  TUCK then asked  for the  distance to  the Devil's                                                              
Canyon phase of the project.                                                                                                    
                                                                                                                                
MR. CAREY  stated that the original  Devil's Canyon project  is 30                                                              
miles downstream from Watana.                                                                                                   
                                                                                                                                
3:52:35 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  PRUITT asked whether  the effects  of siltation  further                                                              
down  the river,  and  past the  dam, would  be  a concern  during                                                              
permitting.                                                                                                                     
                                                                                                                                
MR. CAREY answered  that the Chulitna River is the  source of much                                                              
of the  silt in  the Susitna  River and  the flow  of the  Susitna                                                              
affects  the distribution  of the  silt.   Additional studies  are                                                              
needed on this question.                                                                                                        
                                                                                                                                
3:53:39 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE GATTO  asked whether  other dam projects  have been                                                              
considered and rejected.                                                                                                        
                                                                                                                                
MR.  CAREY answered  that  one other  dam  under consideration  is                                                              
located  at  Glacier  Fork  - a  project  that  has  little  water                                                              
storage  and that  would  provide very  little  energy during  the                                                              
winter -  and any  others of  significant size  in the  state have                                                              
"fish issues."   In  response to  Representative Gatto's  question                                                              
on  whether the  completion of  a  gas pipeline  will nullify  the                                                              
need for  alternative forms  of energy, such  as hydro,  Mr. Carey                                                              
said the  Susitna project  will reduce the  amount of  natural gas                                                              
needed for  power generation,  but the  utilities will  still need                                                              
gas for  power generation in  Anchorage and homeowners  will still                                                              
need gas for heating  purposes.   The Susitna project  will reduce                                                              
the  amount of  gas needed  and  will bring  the state  to the  50                                                              
percent renewable energy goal.                                                                                                  
                                                                                                                                
3:55:48 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SADDLER  requested  information on  the  ownership                                                              
and classification of the land surrounding the proposed dam.                                                                    
                                                                                                                                
MR.  CAREY indicated  identifying  all of  the  landowners in  the                                                              
area  is  a  task  to  be  completed   this  year.    Known  major                                                              
landowners  are:  BLM,  the Cook  Inlet Region,  Inc. (CIRI),  and                                                              
the Tyonek  Native Corporation (TNC).   Regarding  the population,                                                              
he said  there are  lodges on lakes  in the  vicinity, but  no one                                                              
lives  where the  reservoir  would  be.   In  further response  to                                                              
Representative  Saddler,  he  was   uncertain  whether  there  are                                                              
mineral deposits that would be covered by the reservoir.                                                                        
                                                                                                                                
3:56:59 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  LYNN  asked  whether  the construction  of  a  gas                                                              
pipeline  negates  the  need  for  the  dam,  or  "can  they  work                                                              
together?"                                                                                                                      
                                                                                                                                
MR. CAREY  expressed the  agency's belief  that both projects  can                                                              
occur; in  fact, even  with the dam,  gas is still  needed.   As a                                                              
matter of  fact, if  a gas  pipeline is  built without  the hydro,                                                              
future energy  costs will be higher  and the state will  not reach                                                              
its goal of 50 percent renewable.                                                                                               
                                                                                                                                
3:57:57 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  GATTO assumed  the  "all-in" cost  is $5  billion,                                                              
including the dam  and the transmission lines, and  asked what the                                                              
price of  electricity delivered  to Anchorage  or Fairbanks  would                                                              
be.                                                                                                                             
                                                                                                                                
MR. CAREY  advised that the retail  price would likely  be similar                                                              
to the  present price, depending  on the consumers' utility.   The                                                              
project may lower  the cost in Fairbanks and retain  the same cost                                                              
in  Anchorage; however,  the retail  price would  vary within  the                                                              
region.                                                                                                                         
                                                                                                                                
3:58:56 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  PETERSEN   asked  whether  the  proposed   dam  is                                                              
located  in a  highly  seismic  area and  if  an event  would  put                                                              
Talkeetna in jeopardy.                                                                                                          
                                                                                                                                
MR. CAREY  acknowledged  that almost  all of  the state, with  the                                                              
exception of the  North Slope, is considered to be  a high seismic                                                              
area and Talkeetna  is approximately 90 miles below  the dam site.                                                              
He  assured  the committee  that  of  tens  of thousands  of  dams                                                              
around the world,  the engineers have found only one  failure of a                                                              
dam and  it was  actually built  on a  fault line.   There  are no                                                              
fault lines identified under the proposed site.                                                                                 
                                                                                                                                
4:00:36 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  TUCK  commented  on past  proposed  dam  projects,                                                              
going  back to  the 1950's,  and  opined they  were not  completed                                                              
primarily  because of  fish issues.    Hydro power  will keep  the                                                              
price of energy level for Anchorage.                                                                                            
                                                                                                                                
4:02:13 PM                                                                                                                    
                                                                                                                                
MS. FISHER-GOAD  addressed the Alaska Ratepayers'  suggestion that                                                              
an independent  agency is  necessary to manage  the project.   She                                                              
reported  that  the  House and  Senate  have  introduced  proposed                                                              
legislation  that  will  allow   AEA  to  establish  a  subsidiary                                                              
corporation for  the purposes of  owning a specific project.   She                                                              
opined that  the agency,  although it has  a statewide  focus, can                                                              
manage  a substantial  new  project in  addition  to its  existing                                                              
work.   Further, the  proposed legislation  incorporates  a fiscal                                                              
note to establish and staff a project office.                                                                                   
                                                                                                                                
4:04:20 PM                                                                                                                    
                                                                                                                                
MR.  NOLL expressed  his  appreciation for  the  expertise of  Ms.                                                              
Fisher-Goad and Mr. Harper.                                                                                                     
                                                                                                                                
4:05:12 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  GATTO observed  that a 40-mile-long  lake  will be                                                              
populated with  fish in  the future.    Once the  fish are  in the                                                              
lake, he  inquired whether  agencies charged  with the  protection                                                              
of fish will become involved.                                                                                                   
                                                                                                                                
MR. CAREY  reminded the committee the  lake will be very  cold and                                                              
silty.  After  the license is  issued and the dam  is constructed,                                                              
its operation  will be  unaffected by  changing conditions  for at                                                              
least 50 years, until the license is renewed.                                                                                   
                                                                                                                                
4:07:08 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE   SADDLER  asked   for  the   "downside"  of   this                                                              
proposal.                                                                                                                       
                                                                                                                                
4:07:20 PM                                                                                                                    
                                                                                                                                
MR. CAREY explained  that the project did not proceed  in the 80's                                                              
because of  the lack of  financing and  an abundance of  clean gas                                                              
from  the Cook  Inlet.   At this  time the  state is  in a  better                                                              
financial position.    The downside  is that the  utilities cannot                                                              
do this project,  or the other generation projects  required along                                                              
the Railbelt, without a contribution of capital from the state.                                                                 
                                                                                                                                
4:08:11 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SADDLER  pointed out the  expected life of  the dam                                                              
is 100  years or  more, and  suggested extending  the duration  of                                                              
the bonds beyond 30 years.                                                                                                      
                                                                                                                                
MS. FISHER-GOAD  advised  it is  "a bit premature"  to talk  about                                                              
financing.   She reported the  agency discussed whether  the state                                                              
would want  to buy the  power down assuming  a 50 percent  capital                                                              
contribution,  or  buy the  power  down to  a  certain  cost at  a                                                              
wholesale  rate.    She  agreed that  a 30-year  payback could  be                                                              
extended.   The agency  is studying  financing using the  "Bradley                                                              
model" wherein  the state participated  with 50 percent  financing                                                              
of Bradley  Lake Hydro,  and the  outstanding  debt is being  paid                                                              
through a  power sales  agreement between  the utilities  and AEA.                                                              
Under this  successful model,  after 10  years the utilities  will                                                              
continue   to  pay.     The  "Railbelt   Large  Hydro   Evaluation                                                              
Preliminary Decision  Document" has been well received,  but there                                                              
is  a lot  of  work yet  to  be done;  in fact,  discussions  with                                                              
various  utilities and  appropriate departments  within the  state                                                              
are underway.                                                                                                                   
                                                                                                                                
4:11:55 PM                                                                                                                    
                                                                                                                                
MR.  CAREY, in  response  to  Representative Tuck,  clarified  the                                                              
chart titled, "Railbelt  Demand."  In further  response, he stated                                                              
that  all of  the  extra  energy produced  in  the  summer by  the                                                              
Watana dam on the  Susitna would be sold because,  during the time                                                              
of high  output, the utilities would  take their other  sources of                                                              
energy off-line for maintenance.                                                                                                
                                                                                                                                
4:13:53 PM                                                                                                                    
                                                                                                                                
CO-CHAIR FOSTER thanked the presenters.                                                                                         
                                                                                                                                
4:15:05 PM                                                                                                                    
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
There being  no further business  before the committee,  the House                                                              
Special Committee on Energy meeting was adjourned at 4:15 p.m.                                                                  

Document Name Date/Time Subjects
AEA Presentation on Railbelt Large Hydroelectric PowerPoint.ppt HENE 1/27/2011 3:00:00 PM
Alaska Energy Authority Presentation
Railbelt Large Hydro Evaluation Preliminary Decision Document, 23 November 2010.pdf HENE 1/27/2011 3:00:00 PM
Alaska Energy Authority Presentation
AEA Susitna-Watana Schedule.pdf HENE 1/27/2011 3:00:00 PM
Alaska Energy Authority Presentation