Legislature(2011 - 2012)BARNES 124
02/23/2012 03:00 PM House ENERGY
| Audio | Topic |
|---|---|
| Start | |
| Presentation: Southeast Alaska Integrated Resource Plan - Public Testimony | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
HOUSE SPECIAL COMMITTEE ON ENERGY
February 23, 2012
3:13 p.m.
MEMBERS PRESENT
Representative Neal Foster, Co-Chair
Representative Lance Pruitt, Co-Chair
Representative Bob Lynn
Representative Dan Saddler
Representative Pete Petersen
MEMBERS ABSENT
Representative Kurt Olson
Representative Chris Tuck
OTHER LEGISLATORS PRESENT
Representative Cathy Munoz
COMMITTEE CALENDAR
PRESENTATION: SOUTHEAST ALASKA INTEGRATED RESOURCE PLAN -
PUBLIC TESTIMONY
- HEARD
PREVIOUS COMMITTEE ACTION
No previous action to record
WITNESS REGISTER
JEREMY MAXAND, Mayor
City and Borough of Wrangell; Member
Board of Directors
Southeast Alaska Power Agency (SEAPA)
Wrangell, Alaska
POSITION STATEMENT: Speaking on behalf of the SEAPA board of
directors, provided comments on the draft Southeast Integrated
Resource Plan.
LARRY EDWARDS, Alaska Forest Campaigner
Greenpeace
Sitka, Alaska
POSITION STATEMENT: Disagreed with the findings of the draft
Southeast Integrated Resource Plan, and answered questions.
MICHAEL SATRE, Executive Director
Council of Alaska Producers (CAP)
Juneau, Alaska
POSITION STATEMENT: Provided comments on the draft Southeast
Integrated Resource Plan.
BILL CORBUS
Juneau, Alaska
POSITION STATEMENT: Speaking as a member of the Southeast
Integrated Resource Plan advisory working group, provided
comments on the draft Southeast Integrated Resource Plan.
JODI MITCHELL, Chief Executive Officer and General Manager
Inside Passage Electric Cooperative (IPEC)
Auke Bay, Alaska
POSITION STATEMENT: Provided comments on the draft Southeast
Integrated Resource Plan.
PETER NAOROZ, President and General Manager
Kootznoowoo Incorporated ("Kootznoowoo")
Juneau, Alaska
POSITION STATEMENT: Provided written and oral comments in
opposition to the draft Southeast Integrated Resource Plan.
HAROLD FRANK
Juneau, Alaska
POSITION STATEMENT: Provided comments in opposition to the
draft Southeast Integrated Resource Plan.
DUFF MITCHELL, Business Manager
Juneau Hydropower Inc. ("JHI")
Juneau, Alaska
POSITION STATEMENT: Provided comments in opposition to the
draft Southeast Integrated Resource Plan.
TREVOR SANDE, Representative
Tongass Forest Enterprises;
President
R&M Engineering-Ketchikan, Inc.;
Owner
Marble Construction
Ketchikan, Alaska
POSITION STATEMENT: Speaking as a person involved in broad
aspects of industry, shared his perspective of the draft
Southeast Integrated Resource Plan.
JOE SEBASTIAN, Commercial Fisherman
Kupreanof, Alaska
POSITION STATEMENT: Speaking on his own behalf, provided
comments in opposition to the draft Southeast Integrated
Resource Plan.
DAVID BEEBE, Commercial Fisherman
Petersburg, Alaska
POSITION STATEMENT: Speaking on his own behalf, provided
comments in opposition to the draft Southeast Integrated
Resource Plan.
PAUL SOUTHLAND, Executive Director
Alaska-Canada Energy Coalition;
Interim General Manager
Thomas Bay Power Authority
Wrangell, Alaska
POSITION STATEMENT: Speaking on behalf of the Alaska-Canada
Energy Coalition, provided comments in opposition to the draft
Southeast Integrated Resource Plan.
STAN SELMER, Mayor
Municipality of Skagway
Skagway, Alaska
POSITION STATEMENT: Speaking in his capacity as mayor,
described the detrimental effect of the draft Southeast
Integrated Resource Plan on Skagway.
MAVIS IRENE HENRICKSEN
Skagway, Alaska
POSITION STATEMENT: Spoke in favor of the intertie.
HERFORD BURFORD
Juneau, Alaska
POSITION STATEMENT: Provided comments on the draft Southeast
Integrated Resource Plan.
ACTION NARRATIVE
3:13:59 PM
CO-CHAIR LANCE PRUITT called the House Special Committee on
Energy meeting to order at 3:13 p.m. Representatives Pruitt,
Foster, Saddler, and Lynn were present at the call to order.
Representative Petersen arrived as the meeting was in progress.
Representative Olson was excused. Representative Munoz was also
present.
^PRESENTATION: Southeast Alaska Integrated Resource Plan -
Public Testimony
PRESENTATION: Southeast Alaska Integrated Resource Plan -
Public Testimony
3:15:11 PM
CO-CHAIR PRUITT announced that the only order of business would
be further discussion and public testimony on the draft
Southeast Integrated Resource Plan (SEIRP).
3:16:30 PM
JEREMY MAXAND, Mayor, City and Borough of Wrangell; Member of
the Board of Directors, Southeast Alaska Power Agency (SEAPA),
said SEAPA was formerly known as the Four Dam Pool and now is a
joint agency providing power to Wrangell, Petersburg, and
Ketchikan. The Southeast Alaska Power Agency operates the Swan
Lake and Tyee Lake hydroelectric (hydro) projects, in addition
to over 170 miles of transmission lines. Mr. Maxand was
speaking on behalf of the SEAPA board of directors and advised
that SEAPA is reviewing the draft SEIRP and will provide written
comments to the Alaska Energy Authority (AEA). The SEAPA board
recognized that the plan is a high level directional document
that does not provide specific solutions, and that further
detailed analyses are needed to identify solutions. Mr. Maxand
stated SEAPA qualitatively agrees with some of the results and
observations identified by the draft SEIRP, such as the shortage
of hydro storage capacity in the SEAPA region. However, SEAPA
is seeking to increase storage capacity and pursue other energy
resources while planning for economic growth. He said SEAPA
also agrees that the recent increase in the cost of heating oil
has caused significant conversions from oil space heating to
electric space heating. The plan recommends that demand-side
management (DSM), energy efficiency, and biomass conversion
programs are to be developed and coordinated with the region's
utilities; however, SEAPA cautioned that the public is not fully
aware that a problem exists, thus the state must take a
leadership role to ensure success, because local communities and
utilities do not have the resources to implement this program.
He said that SEAPA also agrees that DSM and energy efficiency
are the cheapest and fastest ways to gain net power while
conserving hydro, and bringing new hydro into the power system.
Finally, Mr. Maxand said SEAPA expects AEA and its contractor to
explain the findings of the draft SEIRP and involve the public
in the solutions.
3:19:59 PM
LARRY EDWARDS, Alaska Forest Campaigner, Greenpeace, said he was
a long-time Sitka resident speaking for Greenpeace. Mr. Edwards
stated the draft SEIRP proposes converting 80 percent of the
region's space heating to biomass within 10 years at a cost of
$500 million. He advised that the plan dismissed heat pumps and
other technologies based on misinformation. For example, the
information on air source heat pumps was outdated and untrue.
The plan also ignored the long-time use of air source,
geothermal, or seawater source heat pumps in Southeast in a
school, homes, the Sitka Ranger District, U.S. Forest Service
office, the Juneau airport, and at the National Oceanic and
Atmospheric Administration (NOAA) lab. Another error is the
plan's claim that six and one-half cents per kilowatt hour is
the break-even point in energy costs between heat pumps and wood
pellet stoves, if wood pellets are at two hundred fifty dollars
per ton. Mr. Edwards said Black & Veatch recently acknowledged
the break-even point is really nineteen and one-half cents per
kilowatt hour. In addition, at current prices, pellet stoves do
not break even with heat pumps until the cost of power reaches
twenty-nine cents per kilowatt hour, less than the current price
of hydro, which is between nine and twelve cents per kilowatt
hour. He concluded that pellet stoves will be more costly than
heat pumps for the foreseeable future. The plan, and previous
AEA testimony that wood pellet heat is much cheaper than oil
heat, failed to disclose that heat pumps are cheaper to run in
hydro communities. Mr. Edwards referred to his previous written
testimony submitted to the committee on 2/9/12, which calculates
the significance of these errors. He further concluded that the
draft SEIRP errors are fatal, and a revised draft must be
released so the public can comment on a complete and fair draft.
Finally, he advised that hydro communities can be converted from
electric resistance and fuel oil heating to heat pumps, instead
of to biomass, under a 10-year program. In Sitka, converting
homes from electricity to heat pumps would result in a net
reduction of the city's power consumption. Recent technology
demonstrated in Scandinavia makes efficient seawater heat pumps
economic even in residential areas.
3:25:01 PM
CO-CHAIR PRUITT pointed out that the draft SEIRP warns
converting home heating to use electricity or heat pumps creates
such a drain on hydro-generated electricity that communities may
have to burn more diesel oil.
3:25:35 PM
MR. EDWARDS answered residents are converting to electric
resistance heat, not electrically driven heat pumps, which are
three times more efficient than resistance heat. In Sitka, the
savings would be 16,000 megawatt hours per year. Mr. Edwards,
in further response to Co-Chair Pruitt, noted the draft SEIRP
includes incentives to encourage conversions, such as capital
costs paid by the state. If the same amount of money was spent
to convert homes to heat pumps residents would "be a lot farther
ahead in the long run." He cautioned that biomass costs will
fluctuate with supply and demand as in the past; however, heat
pumps will provide lower and stable costs.
3:28:36 PM
MICHAEL SATRE, Executive Director, Council of Alaska Producers
(CAP), stated the Council of Alaska Producers is a nonprofit
trade association representing producing, large, metal mines and
developmental projects in the state. Three CAP members operate
and explore in Southeast Alaska, and have an interest in the
energy development plans for the region: Coeur Alaska
Kensington Gold Mine, Hecla Mining Company Greens Creek Mine,
and Heatherdale Resources Ltd., the developer of the Niblack
project. Mr. Satre said mining and milling are energy intensive
processes and in remote locations power is typically produced by
diesel generators. The Kensington gold mine and the Niblack
project generate their own power, but in 2006, through a public
private partnership, Greens Creek mine was connected via
intertie to the grid serviced by Alaska Electric Light and Power
(AEL&P) in Juneau. Greens Creek is an interruptible customer;
nevertheless, the economic benefit of the hydro it receives
extends the life of the mine. Furthermore, a large industrial
customer connected to the grid resulted in lower increases to
the rates charged to Juneau customers. He opined the draft
SEIRP does not address the existing or future large electrical
loads that mining may bring. The plan also does not recognize
that since Greens Creek was connected to the grid, its demand
has exceeded the capacity of AEL&P to provide electricity on a
regular basis, or that the potential from Kensington may
accelerate the development of generation and transmission
projects. The council does agree that mining development is
speculative to some degree, but mining development has the
potential to benefit the entire region. Mr. Satre acknowledged
that the plan analyzes the challenges to the development of
renewable energy resources in the region, and highlights the
shortage of storage capacity, but in the short-term ignores the
potential for mining on both side of the border. His
organization requests that the committee and the legislature
direct AEA to appropriately account for mining and large
industrial users in short- and long-term recommendations.
3:32:08 PM
CO-CHAIR PRUITT asked whether the focus of SEIRP is on
residential, and does not look at industrial development and its
potential.
MR. SATRE said yes, there is a huge focus on residential issues
due to the space heating conversions. He explained that CAP
wants the plan to look at mining or another large industrial
user as an anchor tenant. Once established, the large
industrial user can extend infrastructure throughout the region,
and leverage its demand to lessen the cost of power in small
villages. The industrial user could be mining, timber, or
seafood processing.
CO-CHAIR PRUITT agreed.
3:34:20 PM
BILL CORBUS stated he is a former manager of Alaska Electric
Light and Power (AEL&P), and a former commissioner of revenue.
Mr. Corbus said his experience allows him to understand the
electrical situation and the interests of the state. He also
served on the SEIRP advisory working group. Mr. Corbus
expressed his support of the draft plan; the state has limited
long-term financial resources and the draft SEIRP is in the best
long-term interest of Southeast's electrical users, and the
state's financial resources devoted to electrical matters. He
opined the plan recommended four important directions:
eliminate the concept of an electrical interconnection
throughout Southeast Alaska; address the problem of converting
homes and businesses to electric heat; adhere to market analysis
that indicates the Alaska/British Columbia (AK/BC) transmission
link should be placed on "hold" and reexamined later; and do not
make specific provisions for providing electricity to the
proposed mines. Mr. Corbus returned to the subject of the
Southeast intertie and pointed out that the cost of providing an
intertie system is $1 billion in 2011 dollars: The state
simply cannot afford that. The analysis of the intertie looked
at the project from two economic perspectives, and he expressed
satisfaction with the elimination of the intertie concept.
Turning to the matter of electric heat, he said that because of
the home heating conversions to electricity, Juneau will soon
run out of electricity even with the recent completion of the
Lake Dorothy hydro plant. Building new hydro projects would be
expensive and would cause rates to increase significantly, thus
the demand-side proposal and the state program to encourage
residents' conversion to pellet heating technology is a good
answer to the challenge. Furthermore, at the time SEIRP is
updated, the AK/BC Intertie should be reconsidered if market
conditions have changed. Finally, when considering mining
loads, Mr. Corbus said it takes a long time to develop a mine -
the Kensington mine took 20 years - and a mine may not operate
over the long term. It is only appropriate to "help ... out" a
mine after it is running, and if it pays its way without
subsidized energy.
3:40:21 PM
REPRESENTATIVE MUNOZ asked Mr. Corbus to comment on the
feasibility of a Lake Dorothy electrical tie-in to Kensington
mine, and whether that would enable the Lake Dorothy project to
expand to Phase 2.
MR. CORBUS pointed out he is not the current manager at AEL&P,
but that he is aware there have been "discussions." Several
transitions in the Kensington Mine management have made
discussions difficult. He observed that there are two small
hydro projects located near the Kensington mine that could be
developed, and if so, they would reduce the amount of fuel
consumption by the mine and avoid the cost of extending the
transmission lines. He said, "That might be the least expensive
way to go rather than building Phase 2 of Lake Dorothy and a
transmission intertie."
3:42:07 PM
REPRESENTATIVE MUNOZ asked at what point Phase 2 of Lake Dorothy
becomes feasible, and whether that is determined by a growth in
population to a certain level, or if a large industrial customer
such as Greens Creek mine would justify the second phase.
MR. CORBUS explained that the need for expansion at Lake Dorothy
is very difficult to predict and he hoped it is "a long, long,
ways out the road," because building Phase 1 was an arduous
process. He urged for other nearby hydro projects to be
explored first, and cautioned that building at Lake Dorothy will
increase rates to all customers.
CO-CHAIR PRUITT asked what role industry played in developing
SEIRP.
3:44:11 PM
MR. CORBUS expressed his belief that there was not a member of
the mining industry in the advisory working group, however,
members of the mining industry attended many of the meetings and
made comments during the process.
CO-CHAIR PRUITT surmised the advisory working group focused on
residential needs, and did not look at the impact of existing or
future industry, or of an anchor tenant.
3:45:10 PM
MR. CORBUS stated that the thrust was to look out for the
interests of existing customers; it would be considered
speculative to take into consideration that "a mine may be built
so many years down the road." The plan will be updated in five
years, and it may be known then whether there will be a mine on
Prince of Wales Island.
REPRESENTATIVE MUNOZ asked whether the Kensington load was
considered in the plan.
MR. CORBUS indicated yes.
3:46:35 PM
REPRESENTATIVE PETERSEN asked whether deliberations included the
consideration of a public private partnership with gold mines in
order to provide power that would be available to all users. In
response to Mr. Corbus, Representative Petersen clarified that
he was asking about deliberations during the SEIRP process about
whether a gold mine operation could contribute to the building
of transmission lines and reduce the overall price of a project.
3:47:23 PM
MR. CORBUS said he did not recall that specific subject. He
noted that the partnership between AEL&P and Greens Creek mine
"took care of itself ... without the help of the Alaska Energy
Authority." He opined the Kensington mine has that same
opportunity with several potential projects, one is with AEL&P,
and one is with an independent power producer.
3:48:07 PM
JODI MITCHELL, Chief Executive Officer and General Manager,
Inside Passage Electric Cooperative (IPEC), stated IPEC is a
small, member-owned utility serving 1,300 customers in Angoon,
Hoonah, Kake, Klukwan, and the Chilkat Valley. She said from a
rural perspective, the draft SEIRP provides a plan and a map for
the future. Her organization developed an energy plan in 2009,
"to wean ourselves off of diesel." At this time, IPEC's rates
are in the sixty-four cents per kilowatt hour range for
residential customers. She recalled rates of about twenty-eight
cents per kilowatt hour in 1993, but oil is now over $4 per
gallon in villages and rates have climbed. Residents in the
villages are having a hard time paying for electricity and
heating costs, and many are heating with wood. Ms. Mitchell
said the power cost equalization (PCE) program helps the 30
percent of IPEC's customers who are eligible, but many
businesses are failing. Customers who are heating with
electricity have hurt IPEC's plans for the future because there
is no excess power available from the Swan-Tyee Intertie for
Kake even though the intertie was completed only one year ago.
The proposed Ketchikan-Metlakatla Intertie may provide power
through the SEAPA network, however, another project may take 10-
15 years before coming online. Ms. Mitchell agreed with the
draft SEIRP regarding the problem caused by using electricity
for heat, and she also believed that interties are not economic
due to rising construction costs that are beyond the reach of
small communities.
3:53:27 PM
MS. MITCHELL continued to say there are three committed projects
recommended by the draft SEIRP that will benefit IPEC
ratepayers: the Gartina Falls project in Hoonah, although that
project will only displace 35-40 percent of the diesel-generated
power; the Kake-Petersburg Intertie; and the Thayer Lake
Hydropower Development by Kootznoowoo Incorporated. In
addition, there is the proposed Walker Lake hydro project to
benefit the upper Chilkat Valley. She concluded that the plan
provides an opportunity for the region to work toward solutions
that will decrease energy costs for the "have-nots in
Southeast," so IPEC communities may also benefit from grant-
funded renewable energy infrastructure.
3:57:16 PM
MS. MITCHELL, in response to Co-Chair Foster, said the
residential rate is 64 cents before PCE.
CO-CHAIR PRUITT asked why Kootznoowoo Incorporated has not spent
its Phase 4 renewable energy grant.
MS. MITCHELL deferred to Mr. Naoroz.
3:58:09 PM
PETER NAOROZ, President and General Manager, Kootznoowoo
Incorporated ("Kootznoowoo"), stated that Kootznoowoo is the
Alaska Native Claims Settlement Act (ANCSA) corporation for
Angoon. As part of its land settlement, Kootznoowoo holds
"hydro rights" within Admiralty Island National Monument, and
applied for Thayer Lake Hydropower Development (TLHD) grant
money in that capacity. Kootznoowoo has 1,100 shareholders -
most living in Southeast - and most of its assets are in
Southeast as well, including mining interests on southern Prince
of Wales Island. Commercial Kootznoowoo ratepayers pay sixty-
seven cents per kilowatt hour, and the corporation is in the
process of developing its lands, thus its deep interest in
energy matters. Mr. Naoroz advised that the draft SEIRP does
not address how the private sector works in Southeast, or how
Kootznoowoo can work with the state to contribute to the energy
solution for the region. In response to Co-Chair Pruitt's
earlier question, he said Kootznoowoo is thankful that TLHD is a
committed project within the plan, based on the advisory working
group's recommendation. However, working with AEA has been
difficult regarding the grant agreement, in that the Round 4
grant monies were based on a matching grant from the U.S.
Department of Energy (DOE). After arranging to combine the two
grants, Kootznoowoo has come to satisfactory terms with AEA, and
will be moving forward to a signed agreement shortly. He
confirmed Kootznoowoo's commitment to the project is "the top
priority for the corporation." Returning attention to the draft
SEIRP, he said the plan is a radical departure from the energy
planning of the collective leadership's vision of Southeast
Alaska for 30 years; in fact, the plan raises more questions
than answers, and comes to premature conclusions that are not
supported by facts.
4:03:06 PM
MR. NAOROZ agreed that the intertie system is expensive, but the
draft SEIRP did not look at ways to lower the cost, such as the
fact that corridors allowing for utility lines through the
Tongass National Forest have been approved for many years,
albeit not implemented. Also, Kootznoowoo has repeatedly
offered to AEA proposals for the intertie estimated to save $100
million. However, as the draft SEIRP is "the best plan we
have," Mr. Naoroz opined the plan should be sent back to AEA for
further analyses of costs. He also questioned the future
electrical load estimated by the draft SEIRP, and pointed out
that sawmills and mines need to be built within five years, and
that the electrical load of existing mines - like Greens Creek
and Kensington - should be considered in the same way as Angoon,
along with its future airport, ferry terminal, and residential
development. He concluded that electrical lines, loads, and
generation capabilities are undersized by the draft SEIRP, and
that its analysis assumes the state pays for all of the
generation and transmission lines, even though the private
sector and tribal monies would help build the transmission
lines.
4:06:59 PM
MR. NAOROZ called attention to a summary submitted with his
written comments entitled, "Spread Sheet confirming amount
available by subregion for Biomass, DSM/EE and Diesel upgrades
SE IRP," dated 2/12/12. The document indicated that the draft
SEIRP recommends spending $222 million over three years on
biomass, energy efficiency, DSM, and diesel plants. He said
this is not good planning, but that the state should identify
the roles of the state, the federal government, private
entities, and the people. Kootznoowoo has developed a plan,
based on former Governor Murkowski's Administrative Order No.
230 (AO 230), effective 10/19/06, which said state agencies need
to work together on the completion of the interties and power
projects. The administrative order was supported by a
resolution of the City of Angoon. Mr. Naoroz concluded that the
region should have an integrated resource plan that fairly
evaluates loads and potential loads, including those of mining,
timber, and cruise ship plug-ins.
4:09:50 PM
REPRESENTATIVE PETERSEN asked about the potential for tidal
energy in Angoon.
MR. NAOROZ said Angoon has the best resource for tidal energy in
the state. Unfortunately, because Canada offers incentives to
companies to explore tidal resources, this industry holds little
interest in Alaska. A change in policy is needed toward the
open access that would be provided by the proposed AK/BC
Intertie.
REPRESENTATIVE PETERSEN urged keeping watch on developing
technologies.
MR. NAOROZ agreed.
4:12:37 PM
HAROLD FRANK stated he was a recent graduate from university
with a degree in renewable energy after writing his thesis on
tidal energy. He said he has had a 20-year career in Southeast
Alaska, working in federal and private sector positions in land
management and environmental planning. Mr. Frank was originally
from Angoon and considers it his home, recalling that sometimes
the diesel generators were turned off to save money. He
recently completed a master's program at Central Washington
University with an emphasis on methods that Angoon could use to
provide affordable and renewable energy. He said the SEIRP
process mirrors the federal process which encourages utilities
to promote energy efficiencies around existing infrastructure,
and not changes in consumer behavior. As early as 1992,
Congress relied on energy providers to find ways to improve
energy efficiency without increasing capacity, and this pattern
is reflected in the draft SEIRP. After a review of the draft,
he was concerned that the document lacks inclusiveness, and that
affected consumers do not have a voice. Suggestions from small
municipalities, tribes, small business, mining, and tourism were
excluded. He was also concerned that the energy path in the
plan - using energy efficiency and biofuels - is not supported
by consumer behavior in Juneau, Sitka, and Ketchikan. His third
concern was the use of DSM to create a policy to last for 50
years; this action hints at protectionism and monopolistic
control of the evolving economic opportunity of energy
production in Southeast Alaska. A more traditional model is one
of supply and demand; in fact, a healthy economy embraces
competition between suppliers. History proves the paradox that
an increased supply of energy increases consumption. Although
the 1992 federal process encouraged DSM, it also provided a way
to increase the supply of energy. Mr. Frank concluded that this
can be done in Southeast by identifying new energy sources such
as the proposed dams, and a north to south intertie, neither of
which was meaningfully analyzed in the draft SEIRP. The
availability of affordable energy for all in Southeast will
reveal the full value of private and state landholdings and
interests. He expressed his hope that Angoon will not have to
continue to shut off its power at night. Lastly, Mr. Frank
observed during his studies that one of the roles of government
is to incentivize utilities by tax opportunities like those that
have encouraged the construction of wind farms in Washington
State.
4:20:18 PM
DUFF MITCHELL, Business Manager, Juneau Hydropower Inc. ("JHI"),
said JHI is a privately owned and privately financed hydropower
development company that is developing the Sweetheart Lake
hydroelectric project. This project is a 30 megawatt (MW)
capacity lake-tap system that will generate 136,000 MW hours
annually for the City and Borough of Juneau during an average
rainfall year. His company is in the process of licensing and
permitting, and could be generating electricity by 2015-2016.
Mr. Mitchell provided a short history of the project, saying the
site has been identified as a federal site since 1915, and in
1929 was given a federal power site classification, meaning the
federal land was withdrawn for the primary use of developing
hydropower. In 1958, plans were developed for the site but the
project was not built due to the lack of a market for the
resource. Mr. Mitchell said, " ... the market timing to build
it is now." His company believes in enhancing the full spectrum
of environment including aquatics, esthetics, wildlife, and
recreation. Referring to "solutions," he advised that
hydropower is the cleanest proven method of electrical
generation, and Southeast is well-suited to hydropower; as a
matter of fact, the draft SEIRP includes a list of well-defined
and identified private and public hydropower storage projects
that would utilize lake-tap hydropower technology developed
primarily in Southeast, yet the plan fails to prioritize any of
the projects on the economics of the delivered cost to citizens.
Because of this, it is not possible to rank projects on their
intended cost of energy. Hydropower interties have proven to
be reliable for 100 years, but are discounted as a preferred
alternative in the plan. Specific to Juneau, the conversion of
home heating from oil to electricity was not quantified even
though Juneau represents one-half of the Southeast energy
market. Because of insufficient hydropower storage, this
increase caused interruptible customers to be cut off, reducing
income to Juneau's economy, and increasing energy costs, which
hurt local employers and industry. He acknowledged that
hydropower storage is also affected by rainfall. Mr. Mitchell
advised the plan failed to do the following: include the
kilowatt hour sales data from any community for 2011 or 2010;
recognize or incorporate Sitka or Juneau's climate action plans
that call for electrification of mines and cruise ships, and the
use of ground source heat pumps such as those at the Juneau
International Airport, Dimond Park Aquatic Center, and AEL&P's
corporate building, and bonded for installation at Auke Bay
School.
4:26:03 PM
MR. MITCHELL continued, saying the draft SEIRP also failed to
consider: local policies or community energy and action plans;
industrial development loads, which negatively impacted its
analysis and the economic development of the region; hydropower
and interties as a resource development industry, which is
supported by Senator Murkowski. He characterized the draft
SEIRP as an insular plan that did not consider the demands from
energy-consumptive industry such as the Kensington mine and the
positive effect it could have on economy of scale. Moving to
non-Juneau market specific comments, he said the draft SEIRP
project financing did not include private financing or models
where private industry can help serve the state's needs, yet the
state energy policy promotes private enterprise and encourages
private development. Mr. Mitchell also questioned the draft
SEIRP's assumption that oil prices will decline, which is not
supported by the Department of Revenue. Also, the draft SEIRP
does not address barriers to entry - either by federal or state
governments - or open access transmission tariff (OATT) reform,
which would enable smaller businesses access to existing
infrastructure. Mr. Mitchell turned attention to the SEIRP
advisory working group, pointing out that members did not
include resource development industries or independent power
producers, and ignored the price volatility of pellets when
compared to other sources of energy. He concluded that
hydropower is the safe hedge against all other fuel
volatilities. Mr. Mitchell quoted from AEA as follows:
The granularity of the analysis underlying this IRP
and the quality and inclusiveness of all available
information on potential projects as discussed
elsewhere, is not sufficient to identify the optimal
combination of specific resources that should be
developed.
4:34:04 PM
MR. MITCHELL surmised this disclaimer raised the question: What
did the state spend $1 million on? He closed, saying the draft
SEIRP is skewed with predisposed and designed outcomes and
incorrect key data - intentionally or unintentionally - and the
legislature should send the document back to AEA, form a
balanced working group, and have an independent contractor
follow through with a final plan that is "energy source
agnostic."
4:35:32 PM
TREVOR SANDE, representative, Tongass Forest Enterprises;
president, R&M Engineering-Ketchikan, Inc.; owner, Marble
Construction, informed the committee that Tongass Forest
Enterprises is Southeast Alaska's first pellet manufacturing
mill, R&M engineering is a small engineering company with about
20 employees, and Marble Construction is a small construction
company in Ketchikan. Mr. Sande told the committee biomass
became his passion in 2006, when he designed and constructed the
wood chip-fired central heat plant heating the swimming pool,
middle school, elementary school, and the elementary school's
gym, in Craig. The new plant reduced the cost of fuel from
about $250,000 per year to $30,000 per year. This was the first
project of its kind in Alaska, followed by Tok School. Mr.
Sande pointed out the draft SEIRP does not address wood chips
specifically, only wood pellets, but he opined wood chips are
less expensive and a very good heat source for central plant or
larger installations. Marble Construction converted the Coffman
Cove School from diesel heat to a chunk wood-fired system - a
GARN boiler in a box - that is very efficient and fairly
inexpensive to operate. He opined biomass will come in many
forms, depending on the region and the unique needs of villages.
Because of his belief in the growth in this industry, Mr. Sande
constructed a pellet mill in Ketchikan that began producing
pellets two weeks ago, and has contracts to deliver pellets for
$305 [per ton]. He stated that wood will be a stable source,
due to the massive volumes of biomass available in Ketchikan
without cutting timber. As the industry grows, the price of
biomass and pellets will to go down and stabilize at around $250
per ton, which is a "nice profitable sales price for pellets."
From his engineering business experience, he agreed with the
draft SEIRP that interties are too expensive to build, and
biomass makes sense for all of Southeast, especially for
residents other than those on the Juneau, Sitka, and Ketchikan
grids. He also agreed that residents will continue to convert
from oil to electricity, resulting in an increase in the cost of
electricity.
4:41:43 PM
REPRESENTATIVE LYNN asked if the pellets could be made from any
type of wood.
MR. SANDE said the spruce, hemlock, and cedar that he has tested
have passed premium grade. Indications are pellets can be made
from any species, and there is sufficient waste wood from mills
in Southeast right now. In further response to Representative
Lynn, he said Tok School District is harvesting and grinding
trees from its forest, some of which have been killed by spruce
bark beetle.
4:43:52 PM
JOE SEBASTIAN said he was a commercial fisherman representing
himself. Mr. Sebastian cautioned a massive conversion to pellet
heat may become a "gold rush" to capture government subsidies,
rather than finding a modern, far-sighted solution to energy
costs in the future. He explained he has lived off the grid for
over 30 years with alternative energy sources such as
generators, propane, battery power, inverters, and solar panels,
and these alternative solutions are not addressed by the draft
SEIRP. In addition, he recalled that a house in Angoon was
recently reconditioned by the Southeast Alaska Conservation
Council with solar panels, an inverter and batteries, and
insulation, and energy costs were lowered dramatically, but this
project is not mentioned in the plan or in previous testimony.
Mr. Sebastian stated that his personal experience is that it
will be difficult for a local pellet industry to compete on a
wide scale with large companies that have access to wood, a rail
system, and a shipping port. The conversion recommendation by
the draft SEIRP is flawed, "bonanza-type" thinking, unless, for
example, Sealaska Corporation used its wood supply to mill
pellets instead of exporting rounds overseas; however, without
heavy government subsidies, a major pellet producing industry in
Southeast Alaska would collapse. Mr. Sebastian also warned
against attempts to turn the Tongass National Forest old growth
into a pellet farm. Because other options are available, he
said more work needs to be done on the draft SEIRP.
4:49:32 PM
DAVID BEEBE stated he was a commercial fisherman representing
himself. Mr. Beebe said he has followed energy issues in
Southeast for many years, and his interest as a commercial
fisherman is in the fact that the effects of climate change and
ocean acidification will affect his livelihood as well as the
economy of the region and the state. He warned that leading
scientists attest that the risks of climate change are
irreversible and catastrophic, and that Alaska is among the
first to be affected by problems brought on by manmade carbon
emissions. Climate change is everyone's problem, but Southeast
Alaska has solutions to help by the use of its renewable energy
resources - which have no carbon emissions - such as tidal,
wind, geothermal, and wave energy. Mr. Beebe expected SEIRP to
provide energy solutions for the next 50 years that would stem
the climate crisis; however, Black & Veatch, the U.S. Forest
Service, and the U.S. Coast Guard claim biomass energy is
carbon-neutral, but scientific research has proven otherwise.
He explained that the rainforest in Southeast stores some of the
highest volumes of carbon per acre of all North America forests.
A conversion to biomass will accelerate climate change; in fact,
management activities necessary to effect a region-wide
conversion to biomass heating will have negative consequences.
The conversion recommendation by the draft SEIRP is a missed
opportunity for Southeast to instead export storable, carbon-
free sources of energy such as hydrogen production. Mr. Beebe
does not support opening the region to private development, nor
the draft SEIRP's foregone conclusion of a region-wide
conversion to biomass space heating. Furthermore, this
conversion to biomass will rely on federal subsidies, and does
not pass the "sustainability test."
4:53:45 PM
PAUL SOUTHLAND, executive director, Alaska-Canada Energy
Coalition; Interim General Manager, Thomas Bay Power Authority,
said he is a former mayor and city council member of Wrangell,
and was speaking on behalf of the Alaska-Canada Energy Coalition
("ACEcoalition"), which is a group of businesses, individuals,
tribal entities, and communities in Alaska and Canada. Wrangell
and British Columbia have had a trade relationship for
centuries, and the ACEcoalition was formed to promote a
connection to the North America grid for the purpose of building
a "backbone" with which to develop the renewable energy
resources of Southeast. Mr. Southland represented the
ACEcoalition as a member of the SEIRP advisory working group and
found the draft SEIRP gravely flawed. He relayed a simplified
version of the plan, saying the process was driven by AEA and a
select few in a top down approach to planning. The early focus
on biomass, even before contract work had begun, indicated bias.
He said many communities face an energy crisis, yet assumptions
by the draft SEIRP only look at the home heating component.
Although consumers have chosen electricity over oil heat, the
draft SEIRP recommends changing consumer behavior with DSM and
biomass, instead of following marketing forces and market
principles. Furthermore, the draft SEIRP repeatedly states that
oil prices will return to a lower or more normal level, and he
said this is "ludicrous." As a matter of fact, Black & Veatch
has published on the Internet for other clients that oil prices
will increase. Mr. Southland advised that the November
presentation to the advisory working group on the Southeast
intertie concept was poor and ill prepared, and "heavily
weighted towards submarine cables spanning north to south
throughout the region." Subsequently, another meeting of a
select few of the utility members of the working group was held
in Seattle, and "transmission, connections, and large hydropower
storage projects were dropped from the discussion." Mr.
Southland praised the economics of existing interties and
questioned the sources of the estimates reflected in the draft
SEIRP on proposed projects, and the logic of its conclusions.
He said that the proposed AK/BC Intertie is arguably within 10
percent of being cost effective, even with flawed assumptions
and screening for import or export. On a personal note, he
observed that the residents of Angoon are facing a dire energy
crisis and have been working within the rules to acquire and
develop hydropower projects, yet have been thwarted at every
turn by "real power" and discrimination. Mr. Southland urged
that the draft SEIRP "must be fixed."
5:00:36 PM
STAN SELMER, Mayor, Municipality of Skagway, opined Skagway has
already been harmed by the draft SEIRP because its application
for renewable energy funding of the 25 megawatt West Creek Hydro
project, the primary purpose of which is to offset diesel
generation by cruise ships that dock in Skagway from May to
September. The secondary purpose of the project is to provide
power to the local grid during periods of shortfall, and to the
Yukon grid in winter. The funding for this project - in the
amount of $238,000 for feasibility and conceptual design - was
denied on the basis of a flawed document "that was not even in
the hands of the working group yet." Mr. Selmer said the draft
SEIRP was used to deny the funding because its reference load
forecast did not include cruise ship loads. Furthermore, the
least cost course of action in Upper Lynn Canal reference cases
did not include adding hydro capacity until 2050. After the
municipality prepared to file an appeal, AEA withdrew its
findings that were based on the draft document; however, even
though the appeal was successful, other projects have already
received awards, and now there is no funding for Skagway's hydro
project.
5:03:08 PM
MAVIS IRENE HENRICKSEN said she worked hard in support of the
intertie, and will send her written testimony to the committee.
5:03:44 PM
HERFORD BURFORD said he is a life-long Juneau resident and
University of Alaska graduate. He relayed a personal story and
that this is the time of water, and Southeast should utilize the
water it has. He opined the plan does not pay enough attention
to getting access from the government. The facts show that
British Columbia is interested in the intertie, as are the First
Nations, and BC Hydro and Power Authority is now building a
major dam. Mr. Burford said biomass might work, but Southeast
Alaska is basically still owned by the federal government. He
encouraged the committee not to walk away from the plan, but to
ask the right questions because the "thrust of it is a little
bit suspect."
5:07:27 PM
ADJOURNMENT
There being no further business before the committee, the House
Special Committee on Energy meeting was adjourned at 5:09 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| Comments for House Energy Committee__23-Feb SE-IRP Hearing__Edwards.pdf |
HENE 2/23/2012 3:00:00 PM |
Southeast Integrated Resource Plan Southeast Integrated Resourse Plan |