Legislature(2015 - 2016)CAPITOL 17

01/22/2015 10:15 AM House ENERGY


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10:16:18 AM Start
10:16:34 AM Presentation: Committee Organization
11:02:21 AM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
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+ Organizational Meeting TELECONFERENCED
                    ALASKA STATE LEGISLATURE                                                                                  
               HOUSE SPECIAL COMMITTEE ON ENERGY                                                                              
                        January 22, 2015                                                                                        
                           10:16 a.m.                                                                                           
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Jim Colver, Co-Chair                                                                                             
Representative Liz Vazquez, Co-Chair                                                                                            
Representative Benjamin Nageak                                                                                                  
Representative David Talerico                                                                                                   
Representative Cathy Tilton                                                                                                     
Representative Matt Claman                                                                                                      
Representative Adam Wool                                                                                                        
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
All members present                                                                                                             
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
PRESENTATION:  COMMITTEE ORGANIZATION                                                                                           
                                                                                                                                
     - HEARD                                                                                                                    
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
No previous action to record                                                                                                    
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
No witnesses to record                                                                                                          
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
10:16:18 AM                                                                                                                   
                                                                                                                                
CO-CHAIR JIM COLVER called the  House Special Committee on Energy                                                             
meeting to  order at  10:16 a.m.   Present at  the call  to order                                                               
were  Representatives Nageak,  Talerico,  Tilton, Wool,  Vazquez,                                                               
and Colver.  Representative Claman  arrived as the meeting was in                                                               
progress.                                                                                                                       
                                                                                                                                
10:16:34 AM                                                                                                                   
                                                                                                                                
^PRESENTATION:  COMMITTEE ORGANIZATION                                                                                          
             PRESENTATION:  COMMITTEE ORGANIZATION                                                                          
                                                                                                                              
10:17:20 AM                                                                                                                   
                                                                                                                                
CO-CHAIR COLVER announced  that the only order  of business would                                                               
be committee  organization.   He advised  that the  committee has                                                               
the duty  to address the high  cost of energy in  Alaska, because                                                               
low cost  energy is a  vital component  of economic growth  and a                                                               
healthy  economy.   The committee  has  a history  of working  on                                                               
energy issues on  behalf of Alaskans:  House Bill  306, the state                                                               
energy  [policy],  was adopted  in  2010;  Senate Bill  220,  the                                                               
Alaska Sustainable Energy  Act, was adopted in  2010; Senate Bill                                                               
289,  the Home  Energy  Conservation Act,  was  adopted in  2008;                                                               
House Bill 152,  the Renewable Energy Fund, was  adopted in 2008.                                                               
Co-Chair Colver expressed his  interest in eliminating roadblocks                                                               
to providing  low-cost energy to  the state.  He  invited members                                                               
to share their expectations regarding the work of the committee.                                                                
                                                                                                                                
10:19:42 AM                                                                                                                   
                                                                                                                                
CO-CHAIR  VAZQUEZ said  she was  excited to  be working  with the                                                               
committee  on challenges  that  may affect  the  state for  10-50                                                               
years in the future.                                                                                                            
                                                                                                                                
10:20:32 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE  NAGEAK provided  personal background  information                                                               
and noted that energy is an  important topic for the residents of                                                               
Rural Alaska,  however, Barrow has  an endless supply  of natural                                                               
gas  for its  electric  utility.   Although  other villages  have                                                               
resources, such as methane, natural  gas, or coal, the expense of                                                               
developing their  resources is very high.   Having infrastructure                                                               
also reduces  the cost  of energy, and  he expressed  his support                                                               
for a  gas line.   Representative Nageak recalled that  last year                                                               
the   committee   worked   on   a  gasification   plant   and   a                                                               
[liquefaction] plant  as a  source of  natural gas  for Fairbanks                                                               
and for villages along the Yukon River.                                                                                         
                                                                                                                                
10:24:31 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE  WOOL said  Fairbanks does  not have  a supply  of                                                               
natural gas,  and a trucking plan  put in place last  year may be                                                               
in jeopardy because the [liquefaction]  plant has been "shelved."                                                               
Fairbanks needs a  supply of natural gas - either  from the North                                                               
Slope or  Cook Inlet -  and a  gas distribution system  to homes,                                                               
businesses,  and schools.   In  addition,  there needs  to be  an                                                               
incentive so residents  will convert from oil to  gas and thereby                                                               
improve  the air  quality by  using gas  to generate  electricity                                                               
instead  of  diesel  fuel.    Energy is  a  big  concern  in  the                                                               
Interior.                                                                                                                       
                                                                                                                                
10:26:44 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE TILTON  said she  represents a  large area  of the                                                               
state in  the Mat-Su Borough  and the Municipality  of Anchorage.                                                               
Her background is in real  estate development, including bringing                                                               
power  into subdivisions.   The  Mat-Su  Borough also  has a  new                                                               
energy policy.   She pointed  out that energy affects  all facets                                                               
of  the  state budget,  including  energy  subsidies through  the                                                               
Department of Health  and Social Services.  Energy is  a basis of                                                               
the economy  for municipalities and rural  areas.  Representative                                                               
Tilton said she is interested  in learning from experts about the                                                               
results of  previous energy legislation  and whether  the state's                                                               
energy  policy has  fulfilled  its  intent to  make  the state  a                                                               
leader in petroleum and natural  gas production, and in renewable                                                               
and alternative  energy development.  She  questioned whether the                                                               
state is on  track to its goal of 50  percent renewable energy by                                                               
2025.  Her  constituents are personally affected by  the price of                                                               
energy and  providers have issues with  the infrastructure needed                                                               
to provide energy.                                                                                                              
                                                                                                                                
10:28:59 AM                                                                                                                   
                                                                                                                                
CO-CHAIR COLVER asked committee staff  to report on the status of                                                               
previous legislation.                                                                                                           
                                                                                                                                
10:29:33 AM                                                                                                                   
                                                                                                                                
CO-CHAIR  VAZQUEZ  encouraged  members to  review  the  resources                                                               
listed on the meeting agenda  such as the Alaska Energy Authority                                                               
web site.   A review of these materials will  allow the committee                                                               
to "tackle a lot more if everybody gets up to speed."                                                                           
                                                                                                                                
10:30:20 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE TALERICO  said he represents District  6, which is                                                               
a large  area that  contains 43 distinct  communities.   Where he                                                               
lives there  is coal-fired power  plant that went online  in 1967                                                               
and  produces 25  megawatts  per day  for  the electric  intertie                                                               
between  Fairbanks  and  Anchorage.   In  addition,  there  is  a                                                               
windfarm facility with twelve 1.9  megawatt generators.  An issue                                                               
throughout his district is connectivity:   Communities within 100                                                               
miles of a power line have  no infrastructure in place to connect                                                               
them to a  utility.  He pointed out there  is a new hydroelectric                                                               
(hydro)  project   coming  online  soon  near   Valdez;  however,                                                               
residents  within  60-70  miles  of the  hydro  project  are  not                                                               
connected to the project.  He  noted that the cost of electricity                                                               
in some villages  ranges from $0.66-$0.92 per  kilowatt hour, and                                                               
even with Power Cost Equalization  (PCE), the high cost restricts                                                               
new development.   For example,  in Fort Yukon  diesel generators                                                               
were near  failure this  winter, and even  though oil  prices are                                                               
down now,  the fuel was purchased  at a higher price  to fill the                                                               
storage   tanks   before   the  river   closed   to   navigation.                                                               
Representative   Talerico   expressed   his   belief   that   his                                                               
constituents  want  legislators  to   "leave  everything  on  the                                                               
table," and  the liquefied  natural gas (LNG)  project is  a high                                                               
priority for Alaska.  He encouraged  the committee to look at the                                                               
potential  of  other  resources  and noted  the  success  of  the                                                               
biomass generation  project at  the school in  Tok.   The project                                                               
heats the  school, school buildings, and  year-around greenhouses                                                               
attached to  the school.  Coal  is produced in his  district, and                                                               
he advised  that Alaska  has a tremendous  amount of  the world's                                                               
coal  reserves -  perhaps  five times  the  British thermal  unit                                                               
(BTU) value of the known reserves of  oil and gas - that with new                                                               
cleaner-burning processing,  holds potential.   Alaska's  coal is                                                               
subbituminous and is  best utilized when crushed to  a powder and                                                               
burned to  heat water and  drive steam turbines.   Representative                                                               
Talerico  discussed the  most efficient  processing  of coal  and                                                               
pointed out that  coal can be a significant source  of fuel at an                                                               
estimated lower cost than natural gas  in the Fairbanks area.  He                                                               
restated his interest  in the regional sourcing of  fuels such as                                                               
biomass, wind, and hydro.                                                                                                       
                                                                                                                                
10:30:20 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE NAGEAK  said continuing to serve  on the committee                                                               
stems from his  concern about the high cost  of energy throughout                                                               
the state.   He agreed that  coal can provide much  needed energy                                                               
and thereby  relieve the  state's dependence  on natural  gas and                                                               
oil.  Coal can be shipped  to Europe by the "Northern Route," and                                                               
sourced locally  from Point  Lay for  shipment to  Russia, Japan,                                                               
and China Minerals can also be  a potential source of revenue for                                                               
the state;  however, infrastructure  is necessary to  connect the                                                               
state's communities.   He stressed the need  to diversify sources                                                               
of energy.                                                                                                                      
                                                                                                                                
10:40:19 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE  CLAMAN  said most  of  his  experience in  energy                                                               
matters is in urban Alaska.  He  pointed out that a city the size                                                               
of  Anchorage located  in the  rest of  the U.S.  would have  one                                                               
electric  utility;  however,  Anchorage has  Anchorage  Municipal                                                               
Light  &  Power,  Chugach  Electric  Association,  and  Matanuska                                                               
Electric  Association.   The delivery  of power  in Anchorage  is                                                               
less  efficient partly  because  there are  three utilities,  and                                                               
similar situations exist throughout the  Railbelt and Alaska.  He                                                               
recalled a  time when neighbors  were paying different  rates for                                                               
electricity.    Consumers  throughout Alaska  need  lower  energy                                                               
prices   because  that   is  a   key  to   economic  development.                                                               
Representative   Claman  stated   his  concern   for  issues   of                                                               
efficiency   and   for    delivering   energy   efficiently   and                                                               
effectively,  thus his  criticism  of mega-projects  such as  the                                                               
Susitna-Watana Hydroelectric  Project.  He expressed  his support                                                               
for focusing state dollars on  smaller regional projects that are                                                               
a more  effective use of  state resources in terms  of developing                                                               
infrastructure  and  reducing  energy  costs.   He  restated  his                                                               
concern  for how  to increase  efficiencies, lower  energy costs,                                                               
and  increase the  number  of residents  connected  to the  power                                                               
grid.                                                                                                                           
                                                                                                                                
10:43:42 AM                                                                                                                   
                                                                                                                                
CO-CHAIR  COLVER  observed that  energy  is  one of  the  biggest                                                               
statewide  issues  for  legislators whether  they  represent  the                                                               
Railbelt, or  rural, coastal, or  Southeast Alaska.   The problem                                                               
has been  around for  many years  and there  have been  some good                                                               
solutions such as the renewable  energy loan and grant fund which                                                               
provided 50 percent match funding  for a hydro project in Valdez,                                                               
and  upgraded  diesel  power  generation  systems  in  the  Bush.                                                               
Defending continued funding for  this program will be challenging                                                               
given  fiscal  constraints,  even  though the  program  has  been                                                               
successful  and is  a valuable  tool.   He charged  the committee                                                               
with providing  advice and direction  on energy solutions  and to                                                               
provide short-term  and long-term solutions for  the Interior and                                                               
for the  delivery of  gas to  rural Alaska.   The  long-term plan                                                               
would  address the  delivery of  natural gas  resources from  the                                                               
North Slope  to market and  to Alaskans.   He expressed  his hope                                                               
that the committee will make  recommendations and be involved and                                                               
engaged in  providing answers for  the short-term.   Although the                                                               
proposal for trucking  gas is in doubt, the  governor stated that                                                               
a  Japanese   firm,  Resources  Energy,  Incorporated   (REI)  is                                                               
interested  in building  an LNG  plant in  Cook Inlet  and WesPac                                                               
Midstream  also  has announced  a  similar  plan to  deliver  gas                                                               
throughout  the  state.   Private  sector  investment  should  be                                                               
encouraged and  may be  a short-term  solution.   Co-Chair Colver                                                               
suggested that other  topics on which to  focus are distribution,                                                               
loan  programs, and  state and  federal funding  sources to  fund                                                               
distribution extensions.   A low-interest  bond fund to  create a                                                               
vehicle  for financing  is  also  a possibility.    He noted  his                                                               
district  is  served  by several  utilities  and  encouraged  the                                                               
committee  to find  out what  problems are  faced by  the private                                                               
sector  and to  prioritize.   He said  "everybody have  their own                                                               
plan" hasn't worked in Alaska.                                                                                                  
                                                                                                                                
10:48:56 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE  NAGEAK  pointed out  that  the  governor said  he                                                               
wants to  build a  gas line,  and the legislature  has a  plan to                                                               
build a gas line  that was passed last year.   He asked about the                                                               
governor's plans.   Starting  last year, building  a gas  line is                                                               
also the desire of the legislature.                                                                                             
                                                                                                                                
10:50:36 AM                                                                                                                   
                                                                                                                                
CO-CHAIR VAZQUEZ recalled her  personal experience living without                                                               
electricity and  noted her service  on the board of  directors of                                                               
Chugach  Electric Association.   She  agreed with  Representative                                                               
Claman  that having  seven  utilities in  the  Railbelt is  "very                                                               
inefficient [and] everyday increasing  the cost because everybody                                                               
is building  their own  generation."   In addition,  a sufficient                                                               
transmission system  is lacking.   She  opined the  committee has                                                               
the  serious charge  of exploring  what has  transpired from  the                                                               
state's energy  projects and policies; visiting  and refining the                                                               
state's  energy  plan; making  suggestions  on  a regulatory  and                                                               
statutory  basis;  looking  at state  energy  policy;  developing                                                               
energy assurance  plans for the transmission  grid; and hardening                                                               
the  grid to  protect it  from sun  flares and  other situations.                                                               
Also,  because of  the fiscal  situation, energy  funds have  not                                                               
been  replenished  and  the  state  may  want  to  establish  the                                                               
authority to  issue bonds.   Co-Chair Vazquez cautioned  that the                                                               
hardest question will  be how to finance projects  outside of the                                                               
general   fund.      She  reviewed   three   scheduled   upcoming                                                               
presentations.                                                                                                                  
                                                                                                                                
10:54:17 AM                                                                                                                   
                                                                                                                                
CO-CHAIR COLVER  said Chugach Electric  will present  an overview                                                               
on the  shortcomings of the  statewide transmission system.   For                                                               
example,  in  the Railbelt,  available  power  from Bradley  Lake                                                               
Hydroelectric  Project cannot  be  transferred  to Golden  Valley                                                               
Electric Association,  so the  concept of a  manager to  move the                                                               
power instead  of individual utilities  will be presented.   This                                                               
concept  does  not  necessarily require  legislation,  but  would                                                               
manage generation  in the  Railbelt more  effectively.   He noted                                                               
several power projects that are in  progress.  There will also be                                                               
a presentation by  the Alaska Housing Finance  Corporation on the                                                               
home  and  commercial  weatherization programs  that  still  have                                                               
funding.                                                                                                                        
                                                                                                                                
10:57:51 AM                                                                                                                   
                                                                                                                                
CO-CHAIR VAZQUEZ  observed that  the first meetings  will provide                                                               
background  on energy  problems that  have been  around for  many                                                               
years.  She restated that  the big issues are financing solutions                                                               
and statutory or regulatory solutions.   She pointed out that PCE                                                               
is not  available for  business or industrial  use, and  the high                                                               
cost of energy will cause a loss of the state's population base.                                                                
                                                                                                                                
10:59:51 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE  NAGEAK  advised  that  last  session  the  Alaska                                                               
Village  Electric  Cooperative  (AVEC)  made  a  presentation  on                                                               
creating  a  mini-grid between  nearby  communities,  which is  a                                                               
cost-effective idea.                                                                                                            
                                                                                                                                
11:02:21 AM                                                                                                                   
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
There being no  further business before the  committee, the House                                                               
Special Committee on Energy meeting was adjourned at 11:02 a.m.                                                                 

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