Legislature(2009 - 2010)BARNES 124

03/25/2010 03:00 PM ENERGY


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Audio Topic
03:07:49 PM Start
03:08:01 PM Overview: Biomass Energy
04:35:48 PM HB182
05:09:18 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Overview: Biomass Energy, by Dave TELECONFERENCED
Stancliff, Gateway School District;
Jeff Hermanns, Alaska Division of
Forestry; Thomas Deerfield, Alaska Power
& Telephone Utility
+ Bills Previously Heard/Scheduled TELECONFERENCED
+= HB 182 RAILBELT ENERGY & TRANSMISSION CORP. TELECONFERENCED
Heard & Held
<Bill Hearing Rescheduled from 03/23/10>
                    ALASKA STATE LEGISLATURE                                                                                  
               HOUSE SPECIAL COMMITTEE ON ENERGY                                                                              
                         March 25, 2010                                                                                         
                           3:07 p.m.                                                                                            
                                                                                                                                
                                                                                                                              
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Bryce Edgmon, Co-Chair                                                                                           
Representative Charisse Millett, Co-Chair                                                                                       
Representative Nancy Dahlstrom                                                                                                  
Representative Kyle Johansen                                                                                                    
Representative Jay Ramras                                                                                                       
Representative Pete Petersen                                                                                                    
Representative Chris Tuck                                                                                                       
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
All members present                                                                                                             
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
OVERVIEW:  BIOMASS ENERGY                                                                                                       
                                                                                                                                
     - HEARD                                                                                                                    
                                                                                                                                
HOUSE BILL NO. 182                                                                                                              
"An   Act   establishing   the  Greater   Railbelt   Energy   and                                                               
Transmission  Corporation   and  relating  to   the  corporation;                                                               
relating   to   transition,   financial   plan,   and   reporting                                                               
requirements   regarding  planning   for  the   initial  business                                                               
operations  of  the  Greater  Railbelt  Energy  and  Transmission                                                               
Corporation; relating  to a report  on legislation  regarding the                                                               
Regulatory Commission  of Alaska and the  Greater Railbelt Energy                                                               
and  Transmission  Corporation;  authorizing  the  Alaska  Energy                                                               
Authority to  convey the Bradley  Lake Hydroelectric  Project and                                                               
the  Alaska   Intertie  to  the   Greater  Railbelt   Energy  and                                                               
Transmission Corporation; and providing for an effective date."                                                                 
                                                                                                                                
     - HEARD & HELD                                                                                                             
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
BILL: HB 182                                                                                                                  
SHORT TITLE: RAILBELT ENERGY & TRANSMISSION CORP.                                                                               
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR                                                                                    
                                                                                                                                
03/12/09       (H)       READ THE FIRST TIME - REFERRALS                                                                        
03/12/09       (H)       ENE, L&C, FIN                                                                                          
03/26/09       (H)       ENE AT 3:00 PM BARNES 124                                                                              
03/26/09       (H)       Heard & Held                                                                                           
03/26/09       (H)       MINUTE(ENE)                                                                                            
04/09/09       (H)       ENE AT 3:00 PM BARNES 124                                                                              
04/09/09       (H)       Heard & Held                                                                                           
04/09/09       (H)       MINUTE(ENE)                                                                                            
03/18/10       (H)       ENE AT 3:00 PM BARNES 124                                                                              
03/18/10       (H)       Heard & Held                                                                                           
03/18/10       (H)       MINUTE(ENE)                                                                                            
03/23/10       (H)       ENE AT 3:00 PM BARNES 124                                                                              
03/23/10       (H)       -- MEETING CANCELED --                                                                                 
03/25/10       (H)       ENE AT 3:00 PM BARNES 124                                                                              
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
DAVE STANCLIFF, Vice-President                                                                                                  
Tok Chamber of Commerce                                                                                                         
Tok, Alaska                                                                                                                     
POSITION STATEMENT:  Presented a history of the biomass project                                                             
in Tok, Alaska.                                                                                                                 
                                                                                                                                
CHRIS MAISCH, State Forester; Director                                                                                          
Division of Forestry                                                                                                            
Department of Natural Resources (DNR)                                                                                           
Fairbanks, Alaska                                                                                                               
POSITION STATEMENT:  Presented a briefing paper from the Alaska                                                               
Wood Energy Development Task Group.                                                                                             
                                                                                                                                
JEFF HERMANNS, Area Forester                                                                                                    
Division of Forestry                                                                                                            
Department of Natural Resources (DNR)                                                                                           
Tok, Alaska                                                                                                                     
POSITION STATEMENT:  Presented a series of slides depicting                                                                   
fires and forest practices in Tok, Alaska.                                                                                      
                                                                                                                                
JIM STRANDBERG, Project Manager                                                                                                 
Alaska Energy Authority (AEA)                                                                                                   
Department of Commerce, Community, & Economic Development                                                                       
(DCCED)                                                                                                                         
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Testified during the hearing on HB 182.                                                                  
                                                                                                                                
BRIAN BJORQUIST, Senior Assistant Attorney General                                                                              
Labor and State Affairs Section                                                                                                 
Department of Law (DOL)                                                                                                         
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:   Presented  a sectional analysis  of changes                                                             
to HB 182.                                                                                                                      
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
3:07:49 PM                                                                                                                    
                                                                                                                                
CO-CHAIR CHARISSE  MILLETT called the House  Special Committee on                                                             
Energy meeting  to order  at 3:07  p.m.  Present  at the  call to                                                               
order  were   Representatives  Millett,  Edgmon,   and  Johansen.                                                               
Representatives Petersen, Ramras, Tuck,  and Dahlstrom arrived as                                                               
the meeting was in progress.                                                                                                    
                                                                                                                                
3:08:01 PM                                                                                                                    
^Overview:  Biomass Energy                                                                                                      
                   Overview:  Biomass Energy                                                                                
                                                                                                                              
3:08:23 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  MILLETT  announced that  the  first  order of  business                                                               
would  be an  overview  of Biomass  Energy,  beginning with  Dave                                                               
Stancliff.                                                                                                                      
                                                                                                                                
3:08:44 PM                                                                                                                    
                                                                                                                                
DAVE   STANCLIFF,  Vice-President,   Tok  Chamber   of  Commerce,                                                               
informed the  committee he  was representing  the Tok  Chamber of                                                               
Commerce  and  the  Gateway  School   District.    Mr.  Stancliff                                                               
observed the energy  problems of the state are  big questions for                                                               
those who live  outside of the power grid, and  in rural and Bush                                                               
areas of  Alaska.  He  recalled when the legislature  created the                                                               
Tanana Valley  State Forest and  pointed out that the  forest was                                                               
set aside for  utilization of the resource.  In  fact, the forest                                                               
has not  been used because  there has not  been a market  for its                                                               
resources.   However, the recent  and current fire  hazard forced                                                               
the community  of Tok to develop  a safety action plan,  and with                                                               
the Division of Forestry, Department  of Natural Resources (DNR),                                                               
it began  to clear  black spruce and  other non  commercial trees                                                               
that grow  clear to  the ground  and cause  the spread  of forest                                                               
fires.   This hazardous material  was supposed to be  burned, but                                                               
instead,  Mr.  Stancliff began  to  research  the possibility  of                                                               
chipping  the  wood  for  heating  systems.    Subsequently,  the                                                               
legislature provided a wood chipper  to the community of Tok, for                                                               
which he  expressed his gratitude.   The chipper will  produce 50                                                               
tons of fuel  per hour, and each  ton of fuel is equal  to a cord                                                               
of wood;  one cord  of wood  equals one  hundred gallons  of fuel                                                               
oil.   Furthermore,  the chipper  produces  in one  hour the  BTU                                                               
equivalent of  five thousand gallons  of fuel  oil.  In  fact, in                                                               
six days the chipper ground up  enough waste wood to heat the Tok                                                               
School for  one year.   The Division  of Forestry has  used funds                                                               
from its  internal budget  to clear a  defensible space  for fire                                                               
prevention around the  school, gathering enough wood  to heat the                                                               
school for  another year;  in fact,  the Tok  School will  be the                                                               
first school in  Alaska to heat exclusively with  wood chips that                                                               
come from hazardous fuel.  He  pointed out the state pays $10,000                                                               
per  acre to  fight a  wildfire, but  using the  wood as  fuel is                                                               
worth $9,000 per  acre; therefore, the value to the  state of the                                                               
waste wood  is $19,000 per  acre as a  result of the  purchase of                                                               
the  wood chipper.   At  that  time, the  primary contractor  was                                                               
installing  the new  boiler at  the school  and he  described the                                                               
process and  scheduling.  Mr.  Stancliff then spoke  of potential                                                               
commercial markets for the wood  chips that would support the Tok                                                               
economy,  and create  12-15  new  jobs in  the  community.   Most                                                               
importantly,  if  public  buildings  are  converted  to  biomass,                                                               
millions of dollars  that leave the state to pay  for diesel fuel                                                               
would  stay in  the state.   For  the first  time in  the state's                                                               
history, there  is an opportunity  to develop a  natural resource                                                               
product  to sustain  an  economy  in rural  Alaska.    This is  a                                                               
natural resource  product that  the foresters  need to  remove to                                                               
manage the  forest, and that  every village could use  to sustain                                                               
its  economy  at  some  level.   For  those  villages  without  a                                                               
chipper,  logs can  be  barged at  competitive  prices with  less                                                               
danger than oil, and chips,  briquettes, or pellets shipped back.                                                               
The  economic  loop  of  biomass  includes  foresters,  truckers,                                                               
loggers,  boiler  keepers,  and  fuel  distributers  in  a  small                                                               
economy  that  can lead  to  cheaper  energy.   Furthermore,  the                                                               
economic breakeven point between biomass  and number one fuel oil                                                               
is $1.20  per gallon for  fuel oil,  because the average  acre of                                                               
biomass  around Tok  and elsewhere  in the  Interior contains  70                                                               
cords of  wood that will  grow back.   Also, burning wood  in the                                                               
wood boiler  emits zero  carbon and will  be eligible  for future                                                               
carbon credits.                                                                                                                 
                                                                                                                                
3:19:10 PM                                                                                                                    
                                                                                                                                
MR.  STANCLIFF continued  to explain  that the  dollar to  dollar                                                               
social economic  breakeven point  is $1 per  gallon of  fuel oil.                                                               
He  thanked the  Division  of Forestry  for  its contribution  to                                                               
Tok's conversion to biomass and opined  that "Tok is a model that                                                               
can  be  scaled to  fit  anywhere  in  the  state."   He  further                                                               
explained how  the product  will be utilized  by the  Tok School,                                                               
the power company,  and the local utility company.   He re-stated                                                               
the  importance  of safety  clearing  the  hazardous wood  around                                                               
homes and buildings  in the Interior.  He urged  the committee to                                                               
encourage the state to use  biomass energy in its facilities, and                                                               
create  the markets  to  support this  industry.   Biomass  burns                                                               
clean at  2,600 degrees;  in fact, it  produces cleaner  air than                                                               
fossil fuel,  with less particulate  matter, zero carbon,  and is                                                               
as clean as  propane.  He concluded by describing  the process to                                                               
create wood pellets in Dry Creek.                                                                                               
                                                                                                                                
3:24:34 PM                                                                                                                    
                                                                                                                                
CHRIS  MAISCH, State  Forester; Director,  Division of  Forestry,                                                               
said  he  would discuss  statewide  applications  of the  biomass                                                               
program.  Mr.  Maisch presented a briefing paper  from the Alaska                                                               
Wood Energy  Development Task Group,  Office of  the Commissioner                                                               
and Division  of Forestry, DNR, that  was formed in 2004,  and is                                                               
comprised  of  state  and  federal  agencies.    The  task  group                                                               
encourages the development of wood  energy and the briefing paper                                                               
described the installation of GARN  boilers in the communities of                                                               
Kasilof and Tanana.   Mr. Maisch explained that  GARN boilers are                                                               
large wood  stoves with a  water jacket  to store heat  after the                                                               
wood is combusted  once or twice per  day.  He noted  that a wood                                                               
chip burner  is better  suited to a  larger public  facility; the                                                               
first one  installed in the  state was in  Craig, and the  one in                                                               
Tok is the  first to use material that comes  from hazardous fuel                                                               
treatments.    The burner  at  the  school  in Craig  uses  waste                                                               
material  from  the  sawmill  at Klawock.    Mr.  Maisch  further                                                               
explained  that the  scale of  heating with  wood reaches  from a                                                               
home wood  stove to pellets and  chips mixed with coal  to fuel a                                                               
coal-fired facility.  He related  that the AEA alternative energy                                                               
program  has  funded  13  woody   biomass  projects  helped  with                                                               
planning  for  the  sustainability  of the  wood  source  by  the                                                               
Division of Forestry.  A pellet  mill is currently being built in                                                               
Fairbanks that will produce 60,000  dry tons of pellets per year.                                                               
The  mill is  the first  new wood  products facility  in Interior                                                               
Alaska and is being built by a  private company at a cost of $6-7                                                               
million.  Another important aspect  of development is the process                                                               
for  permitting timber  sale  programs so  that  the public  will                                                               
support  this  type  of local  industry  and  forest  management.                                                               
Lastly, he pointed  out the relationship in  the Interior between                                                               
hazardous fuel  and frequent  fires.   There is  a large  need to                                                               
perform  hazardous  fuel  treatments in  and  around  communities                                                               
after  communities  have a  wildfire  protection  plan in  place.                                                               
Fuel treatments  are done  around the highest  risk areas  of the                                                               
community to try and reduce the  risk of fire.  Mr. Maisch warned                                                               
that the Interior  is an ecosystem that is designed  to burn, and                                                               
the  fire within  a  community can  be the  most  dangerous.   He                                                               
concluded, "There is a real  important tie between hazardous fuel                                                               
treatments and these community plans,  and the opportunity to use                                                               
this material in these bioenergy facilities."                                                                                   
                                                                                                                                
3:30:12 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE TUCK  asked for the  number of acres  available to                                                               
provide wood  to make wood chip  products, and how fast  the wood                                                               
is replenished.                                                                                                                 
                                                                                                                                
3:30:33 PM                                                                                                                    
                                                                                                                                
MR.  MAISCH  stated that  in  general,  the  new pellet  mill  in                                                               
Fairbanks would use one-third of  the annual allowable cut in the                                                               
Fairbanks working  circle.  Most  projects are for  space heating                                                               
use in buildings  and require several hundred acres.   The Tanana                                                               
Valley State Forest  has 1.8 million acres of  multiple use lands                                                               
dedicated to  forest management.   He opined  there is  plenty of                                                               
resource available  to meet the  needs of smaller  communities in                                                               
rural areas.                                                                                                                    
                                                                                                                                
3:31:50 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  JOHANSEN  asked  whether the  allowable  sale  is                                                               
limited by state statute.                                                                                                       
                                                                                                                                
3:32:16 PM                                                                                                                    
                                                                                                                                
MR. MAISCH explained  that the annual allowable  harvest level is                                                               
based on forest management plans; over  a period of 10 years, the                                                               
harvest must stay  within a sustainable cut.   The division holds                                                               
several  authorities to  offer sales,  such as  value-added sales                                                               
that allow contracts for up to  10 years in length for 10 million                                                               
feet a  year to  a company doing  value-added processing.   Also,                                                               
there  is the  Schnabel  Act that  allows  20-year contracts  for                                                               
resource harvesting in areas of high unemployment.                                                                              
                                                                                                                                
3:33:52 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE JOHANSEN asked whether  all of the programs comply                                                               
with the allowable sale limit.                                                                                                  
                                                                                                                                
3:34:21 PM                                                                                                                    
                                                                                                                                
MR. MAISCH  said, "Yes, they do.   They have to  fall within that                                                               
annual sale ... quantity, we  can't actually offer more than what                                                               
the  sustained  yield calculations  are  for  a given  geographic                                                               
area."                                                                                                                          
                                                                                                                                
3:34:41 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE JOHANSEN  asked whether the  accelerated allowable                                                               
sale quantity (ASQ)  that was put in effect  during the Murkowski                                                               
administration only affected Southeast.                                                                                         
                                                                                                                                
3:35:17 PM                                                                                                                    
                                                                                                                                
MR.  MAISCH indicated  that was  a special  program for  southern                                                               
Southeast  called  the "bridge  timber  program."   In  fact,  in                                                               
southern  Southeast  all  of  the  acres  offered  for  sale  are                                                               
processed locally,  but in the  Interior less than 10  percent of                                                               
the  allowable cut  is offered  and there  is a  large amount  of                                                               
surplus material.                                                                                                               
                                                                                                                                
3:36:21 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE JOHANSEN  asked whether  the legal  environment in                                                               
the Tok area was similar to that of Southeast.                                                                                  
                                                                                                                                
3:36:46 PM                                                                                                                    
                                                                                                                                
MR.  MAISCH  stated  that  there  have  been  only  five  or  six                                                               
litigated sales  for this program.   Unlike the  federal process,                                                               
the   state   system   is   streamlined   and   includes   public                                                               
participation  and transparency.    In Tok,  there  have been  no                                                               
legal challenges to sales.                                                                                                      
                                                                                                                                
3:37:51 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE PETERSEN asked whether the division replants.                                                                    
                                                                                                                                
3:38:18 PM                                                                                                                    
                                                                                                                                
MR. MAISCH said  that in Tok, aspen comes in  aggressively on its                                                               
own.  It is sometimes  necessary to plant spruce, otherwise birch                                                               
and  aspen  will  dominate.    The forest  referred  to  in  this                                                               
presentation is not considered commercial  for a sawmill or other                                                               
production;  in fact,  this is  the first  opportunity to  manage                                                               
this type of forest for commercial use.                                                                                         
                                                                                                                                
3:39:42 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE PETERSEN asked  for the amount of  time needed for                                                               
the forest to be harvested again.                                                                                               
                                                                                                                                
3:40:06 PM                                                                                                                    
                                                                                                                                
MR. MAISCH said the objective  of the hazardous fuel treatment is                                                               
to  convert the  tree stand  from a  conifer type  to a  hardwood                                                               
type, because  hardwoods are less  flammable.  These  trees would                                                               
be re-harvested  every 15-20 years.   If the area is  returned to                                                               
white spruce, it would take 60-120 years.                                                                                       
                                                                                                                                
3:40:43 PM                                                                                                                    
                                                                                                                                
CO-CHAIR EDGMON  asked about the  possibilities in the  next five                                                               
to  ten years  for  using biomass  as a  primary  fuel source  in                                                               
Alaska.                                                                                                                         
                                                                                                                                
3:41:25 PM                                                                                                                    
                                                                                                                                
MR. MAISCH  predicted there is  a lot of  potential for use  in a                                                               
number  of  communities in  the  Interior  for space  heating  in                                                               
public  buildings and  schools.   The 13  projects funded  by AEA                                                               
will serve as demonstration projects  to prove the effectiveness,                                                               
the  benefits, and  cost savings  of this  technology.   Although                                                               
Fairbanks has  had air  quality problems  with wood  smoke, these                                                               
fuel products  are dry and  meet Environmental  Protection Agency                                                               
(EPA) standards  for particulate and  emissions.  There  are many                                                               
possibilities for urban and rural applications.                                                                                 
                                                                                                                                
3:43:15 PM                                                                                                                    
                                                                                                                                
JEFF HERMANNS,  Area Forester,  Division of  Forestry, Department                                                               
of Natural  Resources (DNR), informed  the committee Tok  is part                                                               
of the fire  ecosystem.  He presented a map  that showed the area                                                               
surrounding Tok  that has burned  since 1935, and  said, "History                                                               
proves that the chances are we're  going to burn."  In 1990, fire                                                               
threatened the  town, and  the state spent  $30 million  to fight                                                               
the fire.   Only a shift  in the wind  saved the town.   In 2001,                                                               
the  Red Fox  fire burned  120  acres in  2 hours  and cost  $1.2                                                               
million.   This was  a wind  driven fire,  and with  the abundant                                                               
fuel there  was a danger  of firefighters "getting  burned over."                                                               
One slide  showed a  house that  was saved  because the  land was                                                               
cleared  of trees  for 100  feet.   Mr.  Hermanns showed  several                                                               
other slides of  fires and noted the state has  spent $50 million                                                               
fighting fires in the Tok area over the last 25 years.                                                                          
                                                                                                                                
3:48:11 PM                                                                                                                    
                                                                                                                                
CO-CHAIR EDGMON  observed there  is tremendous  cost to  retain a                                                               
helicopter service.                                                                                                             
                                                                                                                                
3:48:30 PM                                                                                                                    
                                                                                                                                
MR. HERMANNS  advised that in the  last 20 years, the  forest has                                                               
grown and  there are more residents,  thus the Tok area  is in as                                                               
dangerous position  as in 1990.   The state fire  management plan                                                               
requires  fighting  fires around  homes  so  the hazardous  fuels                                                               
continue to grow.                                                                                                               
                                                                                                                                
3:50:06 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  MILLETT  asked  whether   the  forest  management  plan                                                               
removes trees from around homes.                                                                                                
                                                                                                                                
3:50:14 PM                                                                                                                    
                                                                                                                                
MR. HERMANNS said  Tok has received $320,000 in  funding for fuel                                                               
reduction from  the federal government  since 1990, and  no funds                                                               
from the state.  Also,  fire management options address attacking                                                               
the  fire, but  not removing  the fuel  before the  fire strikes.                                                               
Several  slides   showed  roads  and  driveways   that  would  be                                                               
dangerous to travel  to escape a fire and  Mr. Hermanns described                                                               
how  people  are  trapped  by  fire.   He  recommended  that  the                                                               
property  around a  home  is cleared  of trees  for  100 feet  to                                                               
create a defensible zone; however,  Tok has 10,000 trees per acre                                                               
and this is  a job beyond most homeowners'  capabilities.  Within                                                               
Tok's  wildfire  plan  there  are 38,000  acres  of  high  volume                                                               
hazardous  fuels, without  a break  in  the stand  of trees,  and                                                               
1,500  residents.   The Tok  Community  Wildfire Protection  Plan                                                               
(CWPP)  priorities are:   remove  fuels from  Tok School  and the                                                               
Department  of Transportation  & Public  Facilities and  Forestry                                                               
state  communications  tower;  safe evacuation  routes  and  road                                                               
rights-of-way;   senior   citizens   defensible   space;   create                                                               
effective fuel breaks and anchors  for our firefighters.  He said                                                               
he told the residents of the  depth of the danger but some people                                                               
can not afford to clear, or  are unable to clear, their property.                                                               
Regarding the stand  conversion of spruce to  aspen, he explained                                                               
that the  aspen root  system is  in the ground  and after  a fire                                                               
kills the  spruce, the natural  cycle grows the aspen  first, and                                                               
then it is  overtaken by spruce, until a  lightning strike starts                                                               
another fire.                                                                                                                   
                                                                                                                                
3:57:42 PM                                                                                                                    
                                                                                                                                
MR.  HERMANNS, returning  to  the Tok  plan,  said the  community                                                               
began  the  process of  clearing  the  problem areas  around  the                                                               
school and the  communications tower.  He  described various fire                                                               
scenarios and the need to clear  large areas of land to create an                                                               
effective firebreak.   The division worked to  determine how much                                                               
energy  is in  the forest  and found  out there  can be  6,000 to                                                               
10,000  trees per  acre for  a weight  of 33-187  tons per  acre.                                                               
Using an average of 60 tons per  acre, there is an average of 548                                                               
million BTUs per acre in Tok.   That is equal to 21 trillion BTUs                                                               
in  the  Tok  stand  of  trees.    The  fuel  oil  equivalent  is                                                               
153,934,964 gallons.                                                                                                            
                                                                                                                                
4:04:06 PM                                                                                                                    
                                                                                                                                
MR. HERMANNS  said the fuel oil  equivalent for the value  of the                                                               
forest  within the  Tok  plan  is $307  million  and the  biofuel                                                               
equivalent is  $140 million.   Mr. Hermanns estimated  that 3,300                                                               
acres  need  to  be  cleared,  of which  500  acres  are  private                                                               
properties.  Mechanical  harvesters can remove two  acres per day                                                               
at a  cost of $1,000  to $1,200  per acre, or  $15 per ton.   The                                                               
total  cost to  remove  the  hazardous fuel  around  Tok is  $5.7                                                               
million  without commercial  resale.   The effort  to clear  land                                                               
began with  the school as  a safety  issue; $50,000 was  spent to                                                               
clear 50 acres, and the fuel will  be used to heat the school for                                                               
one  year.   This  was  a collaborative  effort  and the  process                                                               
educated students  to the danger of  fire.  He presented  a slide                                                               
that showed small  trees can be handled and chipped  as a bundle.                                                               
Mr. Hermanns opined this process  turned a huge liability for the                                                               
state into an asset for the community.                                                                                          
                                                                                                                                
4:11:14 PM                                                                                                                    
                                                                                                                                
MR. HERMANNS  recalled that the  division used to  burn hazardous                                                               
material and waste  the energy.  Now the chipper  machine takes a                                                               
whole tree  or a bundle  of hazardous  tree waste and  makes fuel                                                               
ready to go  into a boiler.   He showed slides of  the fuel going                                                               
into the boiler  at the school.  This technology  has been proven                                                               
in Montana and on the East  Coast for 20 years, and is completely                                                               
automated using  a computer  to boost  efficiency.   He predicted                                                               
the Tok  School will have a  net savings of $7.8  million over 30                                                               
years.  He urged the state  to "get serious" about fuel reduction                                                               
and invest  $1,000 in fuel  reduction versus $10,000 to  fight an                                                               
urban  interface  fire.   Let  nature  burn  it, or  control  and                                                               
harvest the forest, and benefit from  the energy.  In response to                                                               
Representative  Johansen,  Mr.  Hermanns  said he  was  the  Area                                                               
Forester  for the  state in  Tok, which  is the  equivalent to  a                                                               
District Ranger.                                                                                                                
                                                                                                                                
4:20:07 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE TUCK  asked whether there was  covered storage for                                                               
the fuel.                                                                                                                       
                                                                                                                                
4:20:27 PM                                                                                                                    
                                                                                                                                
MR. HERMANNS explained that two  month's supply of fuel is stored                                                               
inside  at the  Tok School.   There  is a  plan to  build outside                                                               
storage later, but  the area only receives 10 inches  of rain per                                                               
year.                                                                                                                           
                                                                                                                                
4:21:11 PM                                                                                                                    
                                                                                                                                
CO-CHAIR MILLETT  expressed her appreciation for  the information                                                               
provided.                                                                                                                       
                                                                                                                                
4:21:33 PM                                                                                                                    
                                                                                                                                
CO-CHAIR EDGMON  encouraged the  committee to  visit Tok  and Dry                                                               
Creek to see the business potential there.                                                                                      
                                                                                                                                
4:23:02 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  JOHANSEN asked  whether  there  was a  bottleneck                                                               
within the  administration that stops the  forestry division from                                                               
requesting the equipment and funding needed.                                                                                    
                                                                                                                                
4:24:04 PM                                                                                                                    
                                                                                                                                
MR. MAISCH  said the division  competes for federal  funding with                                                               
all of  the other  states, and  there has  been no  state funding                                                               
from  the general  fund for  hazardous fuel  mitigation projects.                                                               
His department intends to request  more funding though the normal                                                               
budget  process.   Regarding policy,  he said  he hopes  that the                                                               
governor's  office will  recommend that  CWPPs are  completed for                                                               
each community in a fire-prone area  of the state, so they can be                                                               
used as a blueprint for fuel mitigation projects.                                                                               
                                                                                                                                
4:25:52 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE   JOHANSEN  asked   whether  the   division  could                                                               
authorize clearing  by a private  company that could  profit from                                                               
the wood.                                                                                                                       
                                                                                                                                
4:26:40 PM                                                                                                                    
                                                                                                                                
MR. MAISCH  said the market  has not  matured to that  point yet.                                                               
Interest from the  private sector is growing,  but investors must                                                               
be educated that this material is commercial.                                                                                   
                                                                                                                                
4:27:51 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  JOHANSEN  observed   that  this  legislature  has                                                               
ignored opportunities such as this.                                                                                             
                                                                                                                                
CO-CHAIR EDGMON suggested the presenters  attend the Rural Energy                                                               
Conference.                                                                                                                     
                                                                                                                                
4:29:17 PM                                                                                                                    
                                                                                                                                
MR. MAISCH re-stated  the need for the state to  act as a venture                                                               
capitalist.                                                                                                                     
                                                                                                                                
CO-CHAIR MILLETT agreed  that the legislature focuses  on oil and                                                               
gas as the state's only resource.                                                                                               
                                                                                                                                
MR.   STANCLIFF   suggested   the  committee   hear   a   private                                                               
presentation from Thomas Deerfield of Dalson Energy.                                                                            
                                                                                                                                
4:31:14 PM                                                                                                                    
                                                                                                                                
The committee took an at-ease from 4:31 p.m. to 4:35 p.m.                                                                       
                                                                                                                                
4:35:34 PM                                                                                                                    
                                                                                                                                
          HB 182-RAILBELT ENERGY & TRANSMISSION CORP.                                                                       
                                                                                                                                
CO-CHAIR MILLETT  announced the next  order of business  would be                                                               
HOUSE BILL  NO. 182,  "An Act  establishing the  Greater Railbelt                                                               
Energy  and   Transmission  Corporation   and  relating   to  the                                                               
corporation;   relating  to   transition,  financial   plan,  and                                                               
reporting  requirements   regarding  planning  for   the  initial                                                               
business   operations  of   the  Greater   Railbelt  Energy   and                                                               
Transmission  Corporation; relating  to a  report on  legislation                                                               
regarding  the Regulatory  Commission of  Alaska and  the Greater                                                               
Railbelt  Energy and  Transmission  Corporation; authorizing  the                                                               
Alaska Energy Authority to convey  the Bradley Lake Hydroelectric                                                               
Project and  the Alaska Intertie  to the Greater  Railbelt Energy                                                               
and  Transmission Corporation;  and  providing  for an  effective                                                               
date."                                                                                                                          
                                                                                                                                
4:35:48 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE RAMRAS withdrew his  objection made at the hearing                                                               
of 3/18/10.                                                                                                                     
                                                                                                                                
CO-CHAIR  MILLETT  withdrew her  motion  to  adopt the  committee                                                               
substitute (CS)  for HB 182,  26-GH1041\E, Bailey,  3/18/10, made                                                               
at the hearing of 3/18/10.  She  then moved to adopt CSHB 182 26-                                                               
GH1041\S, Chenoweth/Bailey, 3/24/10, as the working document.                                                                   
                                                                                                                                
4:36:41 PM                                                                                                                    
                                                                                                                                
CO-CHAIR EDGMON objected for discussion purposes.                                                                               
                                                                                                                                
CO-CHAIR MILLETT explained that  the working document was drafted                                                               
for the Senate.                                                                                                                 
                                                                                                                                
4:36:50 PM                                                                                                                    
                                                                                                                                
JIM STRANDBERG,  Project Manager, Alaska Energy  Authority (AEA),                                                               
Department  of   Commerce,  Community,  &   Economic  Development                                                               
(DCCED), informed  the committee he  was speaking to the  bill on                                                               
behalf  of  the administration.    Referring  to the  meeting  on                                                               
3/18/10,  he  said  there were  questions  raised  regarding  the                                                               
financial  status  of  the  utility   companies.    He  presented                                                               
documents from  Seattle-Northwest Securities  that looked  at the                                                               
financial condition of the utilities.                                                                                           
                                                                                                                                
4:39:46 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  MILLETT advised  there are  attachments to  the working                                                               
document.                                                                                                                       
                                                                                                                                
4:40:29 PM                                                                                                                    
                                                                                                                                
MR. STRANDBERG  related that the administration  was pleased with                                                               
the effort on the part of  the Railbelt utilities to create a new                                                               
corporation to respond  to the energy future.   The Alaska Energy                                                               
Authority (AEA)  and the governor's  office were partners  in the                                                               
effort, and assisted  in the first step to get  all six utilities                                                               
at their board,  CEO, and technical levels to work  together.  He                                                               
said this  was a positive  action and  he expressed his  hope the                                                               
committee would consider the bill as such.                                                                                      
                                                                                                                                
4:42:41 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  EDGMON observed  Homer Electric  Association (HEA)  had                                                               
backed away from the CS.                                                                                                        
                                                                                                                                
4:43:30 PM                                                                                                                    
                                                                                                                                
MR. STRANDBERG  said his  understanding was  the matter  would be                                                               
addressed  by   testimony  at   the  Senate   Resources  Standing                                                               
Committee meeting.                                                                                                              
                                                                                                                                
4:44:05 PM                                                                                                                    
                                                                                                                                
CO-CHAIR EDGMON asked what would  happen if all six utilities are                                                               
not in agreement.                                                                                                               
                                                                                                                                
MR. STRANDBERG acknowledged AEA was also concerned.                                                                             
                                                                                                                                
4:44:57 PM                                                                                                                    
                                                                                                                                
CO-CHAIR MILLETT offered  to provide copies of a  letter from HEA                                                               
to the committee.                                                                                                               
                                                                                                                                
4:45:36 PM                                                                                                                    
                                                                                                                                
BRIAN  BJORQUIST, Senior  Assistant Attorney  General, Labor  and                                                               
State  Affairs Section,  Department  of Law  (DOL), informed  the                                                               
committee his primary  clients are AEA and  the Alaska Industrial                                                               
Development &  Export Authority (AIDEA), Department  of Commerce,                                                               
Community, & Economic Development (DCCED).                                                                                      
                                                                                                                                
4:47:09 PM                                                                                                                    
                                                                                                                                
CO-CHAIR MILLETT  asked Mr. Bjorkquist  to point out  major items                                                               
that were not in the original bill.                                                                                             
                                                                                                                                
4:47:12 PM                                                                                                                    
                                                                                                                                
MR.  BJORKQUIST  agreed.   He  explained  that  this  legislation                                                               
creates an  energy and transmission  corporation modeled  after a                                                               
generation and transmission  (G&T) cooperative.  In  this type of                                                               
entity,  public utilities  collectively  plan  for, develop,  and                                                               
implement their  G&T needs; however, the  public utilities remain                                                               
distribution  utilities  providing  electricity to  their  retail                                                               
customers.   The original bill created  one specific corporation,                                                               
but  the   CS  creates   a  statutory   scheme,  an   energy  and                                                               
transmission  corporation, and  also provides  authority for  the                                                               
Greater Railbelt  Energy and Transmission Corporation  (GRETC) to                                                               
be formed.   The  [CS] provides  that four  or more  municipal or                                                               
cooperative  electric  utilities  form  together  to  acquire  or                                                               
operate  a  project  from  AEA, to  plan  for  an  interconnected                                                               
system, and to create an  energy and transmission corporation, if                                                               
it is first approved by the  legislature.  Section 13 of the work                                                               
draft  provides  the  legislature  authority  for  this  specific                                                               
corporation to be  formed.  Mr. Bjorkquist pointed  out that this                                                               
change from the original bill was  for two reasons:  (1) to avoid                                                               
a constitutional  issue regarding local and  special legislation;                                                               
(2) to  shift the model  for the corporation from  the Commercial                                                               
Fishing and Agriculture  Bank (CFAB), which is  a specific quasi-                                                               
public  corporation established  in statute,  to a  private style                                                               
with  more  freedom  and  flexibility as  to  how  the  utilities                                                               
operate  within  GRETC.   The  utilities  desire the  ability  to                                                               
develop their own projects, rather  than the expectation that the                                                               
new corporation  will be the sole  provider of G&T services.   He                                                               
further explained  that the process  is starting "where  there is                                                               
nothing,  basically,"  and  this  will   allow  for  more  of  an                                                               
evolution  of the  corporation instead  of forcing  the utilities                                                               
into  an entity.    The  legislation gives  more  freedom to  the                                                               
utilities, but  with an expectation  that the entity  will evolve                                                               
into  the provider  of  public  services in  the  Railbelt.   Mr.                                                               
Bjorkquist began  a sectional analysis,  and said Sections  1, 4,                                                               
and 5 deal  with rate regulation by the  Regulatory Commission of                                                               
Alaska (RCA), and municipalities.   Sections 1 & 4 determine that                                                               
when GRETC is not regulated by  the RCA, it is also not regulated                                                               
by municipalities.   Section  5 provides  for the  exemption from                                                               
regulation by the  RCA.  These provisions  would become effective                                                               
8/16/15, five years  after the organization of  GRETC, thus there                                                               
would be five years of full  regulation by the RCA and five years                                                               
into the  future the  exemption from  rate regulation  would take                                                               
place.   He  cautioned  that  there is  an  inconsistency in  the                                                               
language regarding regulation, but the amendment corrects that.                                                                 
                                                                                                                                
4:55:03 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  MILLETT observed  that  GRETC would  be  a third  party                                                               
storage facility  without RCA regulation.   This is contradictory                                                               
to proposed legislation, and she questioned the reasoning.                                                                      
                                                                                                                                
4:56:08 PM                                                                                                                    
                                                                                                                                
MR. BJORKQUIST  referred to  language on page  2, line  15, which                                                               
deals   with   "related    contracts   for   wheeling,   storage,                                                               
regeneration."    He expressed  his  belief  that this  does  not                                                               
concern  gas  storage,  but  affects  water  storage  related  to                                                               
hydroelectric projects.                                                                                                         
                                                                                                                                
4:57:20 PM                                                                                                                    
                                                                                                                                
CO-CHAIR MILLETT  pointed out another  reference to  fuel storage                                                               
on page 4, line 5.                                                                                                              
                                                                                                                                
4:57:25 PM                                                                                                                    
                                                                                                                                
MR.  BJORKQUIST  noted on  page  14,  lines  15-17, there  was  a                                                               
provision  for fuel  supplies.   He said  he was  unfamiliar with                                                               
contradictory  legislation; however,  he suggested  including the                                                               
exemption  by language  on  page  18, line  8,  which deals  with                                                               
certain components that are related to regulation.                                                                              
                                                                                                                                
4:59:18 PM                                                                                                                    
                                                                                                                                
CO-CHAIR MILLETT  advised that there  is also a  contradiction in                                                               
whether  the interconnection  by  an  independent power  producer                                                               
(IPP)  has  to  conform   to  the  corporation's  interconnection                                                               
guidelines and standards.   This sets up an  adversarial role for                                                               
the  IPP  as  it  would  need   to  appeal  to  the  RCA  to  get                                                               
interconnection within GRETC.                                                                                                   
                                                                                                                                
5:00:24 PM                                                                                                                    
                                                                                                                                
MR. BJORKQUIST stated the provisions  regarding where GRETC takes                                                               
a role on  interconnection are intended to replace a  void in the                                                               
interconnection  reliability standards  throughout the  Railbelt.                                                               
In fact,  the Alaska Intertie Agreement  is not signed by  all of                                                               
the Railbelt utilities,  and will terminate next  October.  These                                                               
provisions would have GRETC fill  that void and become the entity                                                               
to deal  with interconnection standards.   Furthermore,  there is                                                               
the  provision that  allows the  RCA  to compel  interconnection.                                                               
The  first step  for  interconnection is  the  obligation on  the                                                               
utilities to negotiate terms and  conditions with each other.  If                                                               
unsuccessful,   the   RCA   can   open  a   docket   and   compel                                                               
interconnection with the terms and  conditions established by the                                                               
RCA.    This  second  step is  less  cumbersome  than  litigation                                                               
between parties,  and he gave an  example.  Section 2  also deals                                                               
with the  RCA and  provides that  power sales  agreements between                                                               
GRETC  and public  utilities would  not be  subject to  review or                                                               
approval by the RCA.  The  provision would apply as long as there                                                               
is long-term  debt associated with  the power project, as  in the                                                               
Bradley Lake, Swan Lake, and Lake  Tyee projects.  The purpose of                                                               
Sec.  2 is  to provide  assurance and  protection for  financing.                                                               
For  example,   if  power  sales   agreements  were   subject  to                                                               
regulatory  review,  the review  may  affect  the source  of  re-                                                               
payment.    In  addition,  GRETC  is  forward-looking,  and  this                                                               
applies only to new projects.  Section 3 deals with rate-                                                                       
setting, and is  identical to the provision  in rate-setting that                                                               
would become effective in 2015.  Further discussion on this                                                                     
section is forthcoming later in the analysis.  Section 6 begins                                                                 
with general law on the energy and transmission corporation.                                                                    
                                                                                                                                
5:08:08 PM                                                                                                                    
                                                                                                                                
CO-CHAIR MILLETT suggested the analysis stop at page 3, line 15,                                                                
Chapter 50, of the [CS].                                                                                                        
                                                                                                                                
5:08:24 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE TUCK observed a title change was needed.                                                                         
                                                                                                                                
5:08:42 PM                                                                                                                    
                                                                                                                                
CO-CHAIR MILLETT announced that HB 182 was held over.                                                                           
                                                                                                                                
                                                                                                                              
5:09:18 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
Tok DOF Hazardous Forest Fuels & Wood Energy Chris Edit.pdf HENE 3/25/2010 3:00:00 PM
CS HB 182 3-24-10.PDF HENE 3/25/2010 3:00:00 PM
HENE 3/30/2010 3:00:00 PM
HB 182
HB 182 Amendment 1.PDF HENE 3/25/2010 3:00:00 PM
HB 182