Legislature(2011 - 2012)Anch LIO Rm 220

04/29/2011 09:30 AM House FINANCE


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Audio Topic
09:36:34 AM Start
09:38:04 AM Discussion Regarding Sb 46 Energy Projects
11:47:37 AM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
HELD IN ANCHORAGE
+ Discussion on SB 46 Energy Projects by: TELECONFERENCED
- Daniel R. Fauske, CEO/Executive Director,
Alaska Housing Finance Corp.
- Sarah Fisher-Goad, Deputy Director of
Operations, Alaska Energy Authority
+ Bills Previously Heard/Scheduled TELECONFERENCED
                  HOUSE FINANCE COMMITTEE                                                                                       
                      April 29, 2011                                                                                            
                         9:36 a.m.                                                                                              
9:36:34 AM                                                                                                                    
                                                                                                                                
CALL TO ORDER                                                                                                                 
                                                                                                                                
Co-Chair Stoltze called the  House Finance Committee meeting                                                                    
to order at 9:36 a.m.                                                                                                           
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Bill Thomas Jr., Co-Chair                                                                                        
Representative Mike Doogan                                                                                                      
Representative David Guttenberg                                                                                                 
Representative Tammie Wilson                                                                                                    
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
None.                                                                                                                           
                                                                                                                                
ALSO PRESENT                                                                                                                  
                                                                                                                                
Senator Joe Thomas                                                                                                              
                                                                                                                                
PRESENT VIA TELECONFERENCE                                                                                                    
                                                                                                                                
Representative Bill Stoltze, Co-Chair                                                                                           
Representative Anna Fairclough, Vice-Chair                                                                                      
Representative Mia Costello                                                                                                     
Representative Bryce Edgmon                                                                                                     
Representative Les Gara                                                                                                         
Representative Reggie Joule                                                                                                     
Representative Mark Neuman                                                                                                      
                                                                                                                                
Senator  Olson, Senator  Giessel, Sarah  Fisher-Goad, Deputy                                                                    
Director  of  Operations,  Alaska  Energy  Authority;  Peter                                                                    
Crimp,  Deputy  Director,   Alternative  Energy  and  Energy                                                                    
Efficiency,   Alaska  Industrial   Development  and   Export                                                                    
Authority  and   Alaska  Energy  Authority,   Department  of                                                                    
Commerce,  Community  and  Economic Development;  Daniel  R.                                                                    
Fauske,  CEO/Executive  Director,   Alaska  Housing  Finance                                                                    
Corporation;  Bob  Green,  Director of  Research  and  Rural                                                                    
Development, AHFC;  Joe Dubler, CEO, Alaska  Housing Finance                                                                    
Corporation;                                                                                                                    
                                                                                                                                
SUMMARY                                                                                                                       
                                                                                                                                
^Discussion Regarding SB 46 Energy Projects                                                                                 
                                                                                                                                
Co-Chair Stoltze introduced the agenda.                                                                                         
                                                                                                                                
9:38:04 AM                                                                                                                    
                                                                                                                                
SARAH  FISHER-GOAD, DEPUTY  DIRECTOR  OF OPERATIONS,  ALASKA                                                                    
ENERGY AUTHORITY  (via teleconference), spoke to  the Alaska                                                                    
Energy Authority  (AEA) projects  and program  fund requests                                                                    
in version  T of  the bill, with  particular respect  to the                                                                    
governor's submitted requests to the capital budget.                                                                            
                                                                                                                                
Co-Chair  Stoltze  clarified  SB 46  was  currently  pending                                                                    
referral  to the  House Finance  Committee. The  meeting was                                                                    
intended  for the  review of  Section 4  of the  bill, which                                                                    
contained   contentious  non-severability   and  contingency                                                                    
language  which bound  all energy  projects  in the  section                                                                    
together.                                                                                                                       
                                                                                                                                
Representative Gara asked if version  T before the committee                                                                    
was the  latest version  of the capital  budget and,  did it                                                                    
contain   projects   with   split  50/50   funding   between                                                                    
localities and  the state. Ms. Fisher-Goad  replied yes. She                                                                    
stated that  not only was  the 50 percent locality  split an                                                                    
issue, there was the requirement  that some projects be done                                                                    
using criteria under the AEA's renewable energy fund.                                                                           
                                                                                                                                
9:41:22 AM                                                                                                                    
                                                                                                                                
Ms.  Fisher-Goad discussed  the  AEA appropriation  requests                                                                    
listed  in  the bill.  The  $16,330,000  AEA Energy  Program                                                                    
appropriation  included  $330  million  for  the  Electrical                                                                    
Emergencies  Program. The  program had  received funding  in                                                                    
the past several years. The  program was designed to respond                                                                    
to  utility emergencies  in  rural  Alaska. Ms.  Fisher-Goad                                                                    
stated  that  the  $16 million  dollar  request  for  energy                                                                    
projects  would fund  the Bulk  Fuel  Upgrades, Rural  Power                                                                    
System Upgrades  (RPSU) and energy plan  implementation. The                                                                    
AEA had  previously partnered with the  Denali Commission on                                                                    
the longstanding Bulk Fuel Program.  The program had evolved                                                                    
to incorporate  more state funds versus  federal dollars, as                                                                    
had  the  RPSU  program.  Ten million  of  the  $16  million                                                                    
requested  was  state funds  with  the  expectation that  $6                                                                    
million  would be  used for  RPSU projects,  $3 million  for                                                                    
Bulk  Fuel   Projects  and  $1   million  for   energy  plan                                                                    
implementation. The $  1 million would help the  AEA work on                                                                    
a  regional  basis  with   communities  to  determine  which                                                                    
projects were necessary in each  specific region. The effort                                                                    
had  been  driven  greatly  by  community  input  and  local                                                                    
support. The  AEA was currently  working in southeast  on an                                                                    
intergraded  resource  plan  that would  help  to  determine                                                                    
which projects were most important to the region.                                                                               
                                                                                                                                
9:43:55 AM                                                                                                                    
                                                                                                                                
Ms.  Fisher-Goad  stated  that community  discussions  would                                                                    
include  the development  of  hydroelectric  and wind  power                                                                    
programs  in Bethel.  The deputy  director  of rural  energy                                                                    
would  be in  charge  of interfacing  with communities.  She                                                                    
stated   that   the    projects   were   community   driven.                                                                    
Representative Neuman  expressed concern that the  state was                                                                    
spending  money superfluously.  He  queried  the process  of                                                                    
determining the  areas where funds  were expended.  He asked                                                                    
if  the AEA  was  communicating with  the utility  companies                                                                    
when developing  projects. Ms. Fisher-Goad replied  that the                                                                    
AEA  worked to  distribute  funds  equitably. The  Southeast                                                                    
Integrated  Resource Plan  has  specific funds  appropriated                                                                    
for the  specific regions. Many communities  were included -                                                                    
she said the  spending would not be dollar for  dollar - but                                                                    
would be  needs based.  She stated that  the AEA  had worked                                                                    
closely  with  the  railbelt  utilities  in  developing  the                                                                    
Regional Integrated  Resource Plan (RIRP). Many  projects in                                                                    
Section 4 had been put  forth by the railbelt utilities that                                                                    
belong to  the Alaska Railbelt Cooperative  Transmission and                                                                    
Electric Company (ARCTEC). ARCTEC  Alaska is a joint venture                                                                    
project between  World Technical  Services, Inc.  (WTSI) and                                                                    
ATCO Structures and Logistics. WTSI  is a subsidiary of ASRC                                                                    
Federal Holding  Company, the Government contracting  arm of                                                                    
Arctic  Slope  Regional  Corporation   and  was  created  in                                                                    
January   2009.   ATCO   Structures  and   Logistics  is   a                                                                    
subsidiary of  ATCO Group, an Alberta,  Canada based company                                                                    
with three  main business divisions.  The projects  had been                                                                    
identified as transition system  priorities for the railbelt                                                                    
area.                                                                                                                           
                                                                                                                                
9:49:02 AM                                                                                                                    
                                                                                                                                
Vice-chair  Fairclough offered  a justification  for holding                                                                    
the meeting in Anchorage. She  reiterated that he senate had                                                                    
presented in  SB 46, a  concept of tying  approximately $460                                                                    
million in  projects together. She  expressed the  desire to                                                                    
understand the perspective of the  senate and voiced concern                                                                    
that  the Section  4  would  make for  an  "all or  nothing"                                                                    
decision  concerning the  energy projects.  She wondered  if                                                                    
the  way  in  which  the senate  had  grouped  the  projects                                                                    
together   was  appropriate   when  discussing   the  energy                                                                    
projects  that were  listed  in section.  She  asked if  the                                                                    
senate  version  of  the  bill  was  to  move  forward,  and                                                                    
ultimately be vetoed  by the governor, what  would happen to                                                                    
the bulk  fuel upgrades and the  weatherization program. She                                                                    
asked if all  of the projects that were listed  under AEA on                                                                    
Pages 100-101, had  been through the same  review process as                                                                    
the other energy projects listed in the section.                                                                                
                                                                                                                                
9:52:10 AM                                                                                                                    
                                                                                                                                
Ms.  Fisher-Goad replied  that tying  the projects  together                                                                    
could hinder longstanding AEA  programs; Bulk Fuel Upgrades,                                                                    
Electrical Emergencies  Program, and the Rural  Power System                                                                    
Upgrades   (RPSU),  which   are   vital   to  rural   energy                                                                    
infrastructure.    She  stated  that  the  AEA  was  nearing                                                                    
completion on bulk  fuel projects started 10  years ago with                                                                    
the Denali  Commission. Typically, the AEA  would design for                                                                    
one year and  construct for two years. Work  was still being                                                                    
done  on  the  RPSU  program  which  would  require  further                                                                    
capital funding.  Gaps in funding would  result in necessary                                                                    
upgrades. She stated that the  department was moving forward                                                                    
on  the Susitna  Hydroelectric Energy  Plan, submitting  the                                                                    
Federal  Energy  Regulatory Commission  (FERC)  application.                                                                    
The ability  to aggressively  move forward with  the Susitna                                                                    
project  would  be hindered  by  the  unavailability of  the                                                                    
capital funds.                                                                                                                  
                                                                                                                                
Vice-chair  Fairclough   wondered  what  kind   of  capacity                                                                    
limitations  the AEA  had  concerning  energy projects.  She                                                                    
asked if the  AEA had requested that all of  the projects be                                                                    
linked together  as reflected in  the current  bill version.                                                                    
Ms. Fisher-Goad  replied that the  ARCTEC projects  that had                                                                    
resulted  from  the  rail utilities  during  the  Integrated                                                                    
Resource  Plan  (IRP)  process  had  not  been  endorsed  or                                                                    
submitted by the AEA. However,  the AEA worked together with                                                                    
the utilities to develop the  IRP. The projects that the AEA                                                                    
owned  were   managed  with   the  utilities.   When  ARCTEC                                                                    
presented the projects to the  AEA, they requested that they                                                                    
come through AEA  to present to the  legislature. She stated                                                                    
comfort  with  the  projects being  submitted  through  AEA,                                                                    
because it  would aid in  the evolution of  the relationship                                                                    
between the  utilities and AEA.  The building of  the robust                                                                    
transmission system  was important  as larger  projects were                                                                    
pursued. The Battle Creek Diversion  project and the repairs                                                                    
on  the Alaska  Intertie  were two  projects  owned by  AEA.                                                                    
Through  the  IRP, other  projects  had  been identified  as                                                                    
important for  the reparation  of aging  transmission lines.                                                                    
Ms. Fisher-Goad  believed that that  AEA should  be involved                                                                    
in  the projects  listed in  the bill  to be  sure that  the                                                                    
design  and  execution  of the  projects  conformed  to  the                                                                    
intent  of  the IRP.  Several  projects  would repair  to  a                                                                    
certain capacity  of voltage, which had  been recommended by                                                                    
the IRP.  Another project managers  would be needed  to work                                                                    
with  the utilities  and through  grants, however,  internal                                                                    
assessment and  allocation of resources would  be necessary.                                                                    
She believed  that it  made sense for  the projects  to come                                                                    
through the  AEA and be  evaluated with criteria  similar to                                                                    
the  Renewable  Energy  Grant  fund.  Projects  through  the                                                                    
Renewable Energy  Grant were  easily evaluated  because they                                                                    
were familiar to the AEA.                                                                                                       
                                                                                                                                
10:02:04 AM                                                                                                                   
                                                                                                                                
Ms. Fisher-Goad  stated that, to date,  the Renewable Energy                                                                    
Grant  programs  had  been  funded  through  the  phases  by                                                                    
specific  points of  feasibility, design,  and construction.                                                                    
She thought several  projects listed would not  be ready for                                                                    
the requested funds,  so grant conditions could  be based on                                                                    
milestones. She cited the language in Section 4, Line 17:                                                                       
                                                                                                                                
"It  is  the intent  of  the  Legislature that  the  state's                                                                    
capital  investment  required to  fully  into  any of  these                                                                    
energy  projects   not  exceed  50  percent   of  the  total                                                                    
investment  required to  fully  complete  each project.  The                                                                    
Alaska Energy  Authority (AEA) should  evaluate each  of the                                                                    
energy projects in  this section using criteria   similar to                                                                    
that  established for  the renewable  energy grant  fund (AS                                                                    
42.45.045) by the Renewable  Energy Fund Advisory committee.                                                                    
If  during   their  evaluation,   AEA  determines   that  an                                                                    
appropriation   exceeds  the   50   percent  state   funding                                                                    
threshold,  the authority  shall submit  to the  legislature                                                                    
recommendations   for  reductions   or  reappropriation   by                                                                    
February 1, 2012."                                                                                                              
                                                                                                                                
                                                                                                                                
Ms. Fisher  Goad thought  that some  of the  projects listed                                                                    
were   not   appropriate   under  the   50   percent   match                                                                    
requirement.                                                                                                                    
                                                                                                                                
Co-Chair  Stoltze   understood  that  under   the  language,                                                                    
funding  for  energy projects  that  did  not "pencil  out",                                                                    
could be  reappropriated to other projects.  Ms. Fisher-Goad                                                                    
said   that    the   funding   would   be    available   for                                                                    
reappropriation.   Ms.   Fisher-Goad  furthered   that   the                                                                    
definition of,  "total investment required to  complete each                                                                    
project.",  as written  in the  language,  was unclear.  For                                                                    
example,  $18 million  in  state funds  was  listed for  the                                                                    
Mount Spur/ORMAT  project. However,  the project  would cost                                                                    
approximately  $400 million  to complete.  She wondered  how                                                                    
the spending would break down dollar for dollar.                                                                                
                                                                                                                                
Vice-chair  Fairclough asked  how the  AEA would  prioritize                                                                    
the projects that needed to be immediately implemented.                                                                         
                                                                                                                                
10:08:24 AM                                                                                                                   
                                                                                                                                
Ms. Fisher-Goad responded that if  all the requested funding                                                                    
was  appropriated, over  70 individual  projects and  grants                                                                    
would  need to  be  processed. Although  the  volume of  the                                                                    
projects  was  large,  the department  had  streamlined  the                                                                    
development  of  grant  agreements  during  the  application                                                                    
process. The AEA would work  with the entities identified in                                                                    
the  section  to craft  a  priority  list of  projects.  She                                                                    
opined that the process of  creating the priority list could                                                                    
be painful and tiring. Once  the grants were distributed the                                                                    
focus  would turn  to  reimbursements,  which are  generally                                                                    
submitted as  the funds are  spent. She stated that  the AEA                                                                    
worked  with   the  Renewable   Energy  Advisory   Board  to                                                                    
determine  the process  and criteria  by which  the projects                                                                    
were  prioritized. She  said that  permits  and power  sales                                                                    
agreements  would need  to be  in place  before construction                                                                    
funds would be released.                                                                                                        
                                                                                                                                
10:12:49 AM                                                                                                                   
                                                                                                                                
Representative Costello  said that some of  the projects had                                                                    
been publically vetted  and that some were  more recent. She                                                                    
spoke about  evaluating the projects  a whole,  and wondered                                                                    
what defined good policy for  evaluating energy projects for                                                                    
the  state.  Ms.  Fisher-Goad  replied   that  AEA  did  not                                                                    
advocate for one project over  another, but would manage the                                                                    
projects laid out in the  budget. If the language in version                                                                    
T  of  the bill  remained,  some  individual projects  would                                                                    
require AEA  to work with individual  grantees. She strongly                                                                    
stated that  the projects would  be evaluated  without bias.                                                                    
She  highlighted  that  the renewable  energy  programs  had                                                                    
already been  vetted by the  AEA, but other  programs listed                                                                    
in the  section, like  the Homer  area natural  gas pipeline                                                                    
project, had not. She reiterated  that she did not favor one                                                                    
project over another.                                                                                                           
                                                                                                                                
10:17:38 AM                                                                                                                   
                                                                                                                                
                                                                                                                                
Representative Costello  expressed concern  for the  "all or                                                                    
nothing" nature of  the language in the bill.  She asked how                                                                    
Alaska would be affected if  all the projects were vetoed by                                                                    
the governor. Ms. Fisher-Goad replied  that all the projects                                                                    
were   priorities   for   different  legislators   and   the                                                                    
communities  they represent.  Ms.  Fisher-Goad replied  that                                                                    
were  the projects  to be  cut en  masse, the  AEA would  be                                                                    
hindered in  moving forward with  energy programs  that were                                                                    
important to every region of Alaska.                                                                                            
                                                                                                                                
Ms. Fisher-Goad believed that there  were projects listed in                                                                    
Section  4 that  were ready  for construction.  Any projects                                                                    
with a  Federal Energy Regulatory Commission  (FERC) license                                                                    
were  under deadline  for beginning  construction. She  said                                                                    
that state support was expected,  and if the support was not                                                                    
available  there  could  be some  permits  and  licenses  in                                                                    
jeopardy.                                                                                                                       
                                                                                                                                
10:21:21 AM                                                                                                                   
                                                                                                                                
Representative  Edgmon pointed  out  to  the committee  that                                                                    
there were  approximately 20  projects listed  that required                                                                    
large  appropriations.  He   believed  after  examining  the                                                                    
projects that they  did not have the framework,  and had not                                                                    
been scrutinized as well as  they should. He noted that many                                                                    
of the projects were tied to  utilities and did not have the                                                                    
funding mechanisms,  policy, or legal  background necessary.                                                                    
He felt  that the state had  no way to fund  the projects as                                                                    
they were written into the bill.                                                                                                
                                                                                                                                
10:24:35 AM                                                                                                                   
                                                                                                                                
Ms.  Fisher-Goad replied  that the  projects in  the section                                                                    
that were part of the  renewable energy fund were limited by                                                                    
caps that had put into place  prior. When the AEA set up the                                                                    
request for application (RFA)  applicants were informed that                                                                    
if they  were in a high  cost area they could  request up to                                                                    
$4 million, with  a cumulative cap. Low cost areas  had a $2                                                                    
million cap.  She said that  there was a mechanism  in place                                                                    
to get projects into the  capital budget, and that Section 4                                                                    
was one  way to do  it. She said  that as an  entity, ARCTEC                                                                    
had supported some projects moving  forward. She stated that                                                                    
the ARCTEC projects were reasonable.  She stated she was not                                                                    
privy to the  specific criteria employed in  the choosing of                                                                    
capital  budget projects,  or  their  priority listing.  She                                                                    
believed that there was more  information on specific energy                                                                    
projects  available   due  to   the  establishment   of  the                                                                    
renewable  energy  fund.  However,   the  criteria  used  to                                                                    
determine  which  projects  made  it into  the  budget,  was                                                                    
unknown to the AEA.                                                                                                             
                                                                                                                                
10:28:23 AM                                                                                                                   
                                                                                                                                
Representative  Edgmon asked  if  AEA was  better suited  to                                                                    
prioritize   the    projects   using    established   policy                                                                    
guidelines.  He understood  that  the  ability to  recommend                                                                    
large projects did  not rest with the AEA,  and thought that                                                                    
some projects were suspect.                                                                                                     
                                                                                                                                
10:29:47 AM                                                                                                                   
                                                                                                                                
Ms.  Fisher-Goad stated  that the  AEA was  required through                                                                    
legislation  to  solicit funds  every  year,  and provide  a                                                                    
recommended list  to the legislature. She  stated that Round                                                                    
5 of the  projects would require an  updated review process,                                                                    
possibly  removing  funding caps  and  changing  the way  in                                                                    
which  projects  were  evaluated.  She shared  that  the  he                                                                    
renewable energy fund will sunset  in 2013. She felt that an                                                                    
evaluation to determine the strengths  and weaknesses of the                                                                    
program,  as  well  as any  recommended  changes,  could  be                                                                    
helpful  going forward.  She  explained  that the  renewable                                                                    
energy program was a grant  recommendation program, and that                                                                    
there were 70 projects currently  in the budget that had met                                                                    
the AEA criteria, and had been  ranked. The AEA has known of                                                                    
the projects  since January 2011,  however, funding  for the                                                                    
grants  would  not be  released  until  the passing  of  the                                                                    
capital  budget in  July.  With respect  to  priority -  AEA                                                                    
would do  the projects  as they  were prioritized  under the                                                                    
established  criteria. She  suggested  that  when funds  are                                                                    
made available,  grants should be  issued for  projects that                                                                    
met the  criteria. Historically, AEA  has not been  asked to                                                                    
prioritize capital  projects, but would if  it was requested                                                                    
in the  future. Ms. Fisher-Goad informed  the committee that                                                                    
the  Denali  Commission  programs   in  the  bill  had  been                                                                    
established under  AEA criteria, which had  been established                                                                    
10 years  ago. She stated that  the goal was to  keep moving                                                                    
down the  list of  projects while  completing the  ones that                                                                    
had met all  the expected criteria. The AEA  has a statutory                                                                    
responsibility  through the  renewable energy  fund, and  is                                                                    
the expected  to submit  capital projects  established under                                                                    
the organization. She  offered that the AEA  could work with                                                                    
utilities to develop a ranking process.                                                                                         
                                                                                                                                
10:33:20 AM                                                                                                                   
                                                                                                                                
Co-Chair  Stoltze  mentioned  that SB  42,  "Power  Project;                                                                    
Alaska Energy  Authority", laid  out the  multi-year process                                                                    
for the  energy projects.  He requested  further explanation                                                                    
of the $17 million dollar Nuvista Light and Power projects.                                                                     
                                                                                                                                
PETER CRIMP, DEPUTY DIRECTOR,  ALTERNATIVE ENERGY AND ENERGY                                                                    
EFFICIENCY,   ALASKA  INDUSTRIAL   DEVELOPMENT  AND   EXPORT                                                                    
AUTHORITY  AND   ALASKA  ENERGY  AUTHORITY,   DEPARTMENT  OF                                                                    
COMMERCE,   COMMUNITY   AND    ECONOMIC   DEVELOPMENT   (via                                                                    
teleconference), explained that the  project was intended to                                                                    
address a hydro-electric development  in the Bethel. The two                                                                    
projects  in  question  are  the  Chikuminuk  and  Kisaralik                                                                    
hydro-electric plants.  The projects were part  of the hydro                                                                    
and  renewable  energy  development projects  in  the  South                                                                    
Bethel area,  and the $17  million appropriation  would fund                                                                    
the large scale project  through the permitting process. The                                                                    
department  was  actively  working with  Nuvista  Power  and                                                                    
Light on an improved regional  energy plan for, and that the                                                                    
department  encouraged phased  funding for  the projects  as                                                                    
part  of  the regional  energy  plan  for the  Lower  Yukon-                                                                    
Kuskoquim Region.                                                                                                               
                                                                                                                                
10:37:26 AM                                                                                                                   
                                                                                                                                
Mr.  Crimp calculated  that a  $3  million allocation  could                                                                    
fund  the  feasibility  assessments and  detailed  technical                                                                    
work  need  for the  first  year  of the  project.  Co-Chair                                                                    
Stoltze expressed dissatisfaction with  the reply. He argued                                                                    
that there  was $483 million  written into the  budget back-                                                                    
up.  He wondered  if the  $483 million  was being  purposely                                                                    
avoided.    He detected  and  aversion  to relaying  project                                                                    
numbers, and demanded direct and  concise responses from the                                                                    
testifier.  Mr. Crimp  replied that  currently the  planning                                                                    
level number for  the project was 483.5  million. The number                                                                    
was  based on  preliminary work  by the  engineering company                                                                    
Montgomery, Watson, and Harza (MWH).  He stated that the AEA                                                                    
would not put  stock in the number until  more detailed work                                                                    
had been  established; there was  no conceptual  design, the                                                                    
grantee  had  not arrived  at  the  proper route,  potential                                                                    
locations would put wildlife in  danger, etc, etc. He stated                                                                    
that the project number could go  up or down. He stated that                                                                    
there could  be better projects  that cost less, but  it was                                                                    
not easy to determine that at this point.                                                                                       
                                                                                                                                
10:40:30 AM                                                                                                                   
                                                                                                                                
Representative   Gara   understood  that   the   contingency                                                                    
language added by  the senate had upset  many house members,                                                                    
but thought  that enflaming tensions between  the two bodies                                                                    
would  be counterproductive  in  moving  forward. He  stated                                                                    
that  in fairness  it was  important to  recognize that  the                                                                    
senate had  crafted the contingency language  in reaction to                                                                    
the  governor's threat  to veto  projects as  punishment for                                                                    
not passing HB 110, the  governor's oil tax bill. He thought                                                                    
that the  language could  be removed  if the  house, senate,                                                                    
and governor could sit down  and prioritize the projects. He                                                                    
believed  that  prioritizing  the projects  would  make  the                                                                    
contingency language moot.                                                                                                      
                                                                                                                                
Representative Gara inquired about  the projects in the bill                                                                    
that had  been vetted. He referenced  the consortium ARCTEC,                                                                    
previously mentioned by Ms. Fisher-Goad.  He asked if all of                                                                    
the ARCTEC  programs had been  vetted through the  RIRP. Ms.                                                                    
Fisher-Goad did not  recall if the Cook Inlet  gas study had                                                                    
been  included in  the  RIRP.  She said  she  could not  say                                                                    
specifically  that all  the projects  had  been through  the                                                                    
RIRP, but thought that the majority of the projects had.                                                                        
                                                                                                                                
Representative Gara explained  that the legislature, through                                                                    
the RIRP, had funded Black  and Veatch Corporation to review                                                                    
necessary  projects,  and  that subsequently,  most  of  the                                                                    
railbelt projects had been vetted by the legislature.                                                                           
                                                                                                                                
10:43:52 AM                                                                                                                   
                                                                                                                                
Representative  Edgmon recalled  the Black  and Veatch  Corp                                                                    
hearings.  He countered  that the  energy  projects had  not                                                                    
been individually  vetted during  that process.  Ms. Fisher-                                                                    
Goad  replied that  the transmission  projects were  part of                                                                    
the IRP,  and were  listed as  projects important  to robust                                                                    
transmission lines.  Many of the  projects would  repair and                                                                    
increase the capacity of the  lines. Through the process the                                                                    
AEA would ensure  that the repairs made  were necessary, and                                                                    
that  the  long  term  aspect  and intent  of  the  IRP  was                                                                    
maintained.                                                                                                                     
                                                                                                                                
Representative Edgmon  summarized that  all of  the projects                                                                    
listed  had  been  recognized  as  necessary  parts  of  the                                                                    
railbelt  affordable energy  program, but  they had  not all                                                                    
been  vetted  individually  or   ranked  for  priority.  Ms.                                                                    
Fisher-Goad responded that that  was correct. She added that                                                                    
the  IRP was  very  clear  that the  projects  had not  been                                                                    
prioritized because  they were outside  of the scope  of the                                                                    
IRP.                                                                                                                            
                                                                                                                                
Representative  Gara  asserted  that   in  his  9  years  of                                                                    
experience working  on the capital budget,  rarely would the                                                                    
projects  in the  budget be  prioritized by  any independent                                                                    
agency. He recapped  that the RIRP had not  been vetted, but                                                                    
the group  of renewable energy  fund projects, capped  at $4                                                                    
million,  had gone  through a  ranking process.  Ms. Fisher-                                                                    
Goad replied  that certain  parts of  some of  the renewable                                                                    
energy projects had been through  a ranking process, but did                                                                    
not  know  how  the  projects   in  Section  4  would  stand                                                                    
individually.  A list  of potential  projects that  could be                                                                    
built  within the  next few  years had  been established  in                                                                    
March  2011  by  the  AEA. She  stated  that  some  projects                                                                    
through  the renewable  energy fund  program  were close  to                                                                    
construction  through the  renewable  energy  fund, but  not                                                                    
all. In 2008, at the height  of energy costs, there had been                                                                    
a  sense of  urgency  with respect  to identifying  sensible                                                                    
projects  to   move  forward.  Since   then,  the   AEA  had                                                                    
established projects through the  renewable energy fund that                                                                    
were ready  to be  constructed. She clarified  that projects                                                                    
that were  ready now  could be delayed  for any  reason down                                                                    
the line.                                                                                                                       
                                                                                                                                
10:48:57 AM                                                                                                                   
                                                                                                                                
Representative  Gara asserted  that  the goal  should be  to                                                                    
craft a  list of  projects that the  house, senate,  and the                                                                    
governor could agree  to. He stated that there  was a series                                                                    
of rural power projects  located in the contingency language                                                                    
in  Section 4  that  all  exceeded the  $4  million cap.  He                                                                    
listed  several  projects;  the Akiak  Community  Generation                                                                    
System  Upgrade,  the  Copper  Valley  Electric  Association                                                                    
Hydroelectric Project, the Eva  Creek Wind Farm Project, the                                                                    
Gustavus  Falls   Creek  Project,  the  Homer   Natural  Gas                                                                    
Pipeline Project,  each of  which had  been reviewed  by the                                                                    
legislature or received funding in  the past. He argued that                                                                    
the increment  requests for funding  could be  disputed, but                                                                    
either the legislature or AEA had vetted the projects.                                                                          
                                                                                                                                
Ms.   Fisher-Goad   replied   that  in   the   criteria   of                                                                    
establishing  the renewable  energy fund,  the projects  had                                                                    
been  seen. She  declared that  in the  terms of  vetting or                                                                    
ranking the projects,  the AEA had not been  asked to manage                                                                    
or issue grants.  She said that if the  projects were listed                                                                    
in  the capital  budget, they  were AEA  priorities. If  the                                                                    
criteria changed,  then the  ranking could  change depending                                                                    
on the direction provided by the legislature.                                                                                   
                                                                                                                                
10:52:24 AM                                                                                                                   
                                                                                                                                
Representative Gara reiterated that  most of the projects in                                                                    
the contingency  language section had been  reviewed and had                                                                    
received  AEA  or  legislative   funding  in  the  past.  He                                                                    
believed  it was  the  job  of the  legislature  to vet  the                                                                    
projects with  larger appropriation requests.  He maintained                                                                    
that the  special session would  not end  successfully until                                                                    
the  governor and  the two  other bodies  sat down  and made                                                                    
funding decisions together.                                                                                                     
                                                                                                                                
Ms. Fisher-Goad  repeated that  any application  received by                                                                    
the AEA  was ranked,  and that  the funds  available through                                                                    
the renewable energy program were capped.                                                                                       
                                                                                                                                
Representative  Gara  understood  that the  AEA  ranked  the                                                                    
projects  that had  been sent  through the  renewable energy                                                                    
fund, and  that those  funds were capped  at $4  million. He                                                                    
shared that  in the past  the legislature had  funded bigger                                                                    
projects  that  had  not been  sent  through  the  renewable                                                                    
energy  fund, and  that those  projects  were a  legislative                                                                    
prerogative  for  the house,  senate,  and  the governor  to                                                                    
prioritize.  He  said   that  it  had  never   been  an  AEA                                                                    
prerogative to  rank projects  that did  not go  through the                                                                    
renewable  energy fund.  The legislature  had funded  energy                                                                    
projects across the state in  the past without going through                                                                    
the AEA.  He clarified  that the  legislature could  fund an                                                                    
energy  project regardless  of if  it had  been through  the                                                                    
renewable energy  fund, and  that that  was how  most energy                                                                    
projects in  the state were  funded. Ms.  Fisher-Goad agreed                                                                    
that  the legislature  had funded  large, individual  energy                                                                    
projects  in the  capital  budget. She  pointed  out to  the                                                                    
committee that AEA still managed  the grants for some of the                                                                    
projects that received funding as a legislative priority.                                                                       
                                                                                                                                
Vice-chair Fairclough  interpreted that  the reason  for the                                                                    
special session was a matter  of process, and not because of                                                                    
the  projects listed  in  the bill.  She  agreed that  there                                                                    
could  be   projects  that   needed  more   discussion.  She                                                                    
contended  that  the  crux  of the  issue  was  the  linking                                                                    
together of $460 million in  energy projects that could live                                                                    
or die by one red pen.                                                                                                          
                                                                                                                                
10:57:10 AM                                                                                                                   
                                                                                                                                
Representative Gara  clarified that he did  not believe that                                                                    
the   senate's  contingency   language  was   necessary.  He                                                                    
restated the senate,  the house, and the  governor needed to                                                                    
get  together and  decide which  projects were  necessary in                                                                    
order to  quell the senate's  fears that the  governor would                                                                    
veto projects as  retaliation for the senate  not passing HB
110.                                                                                                                            
                                                                                                                                
Co-Chair Stoltze noted that HB 110  was not on the call list                                                                    
for special session.                                                                                                            
                                                                                                                                
Representative Gara  felt that, in light  of statements made                                                                    
by the  governor, the  senate had a  legitimate fear  of the                                                                    
vindictive vetoing of specific district project.                                                                                
                                                                                                                                
Co-Chair    Stoltze    questioned   Representative    Gara's                                                                    
familiarity with  the bicameral process, and  suggested that                                                                    
he  might  be better  suited  to  represent in  the  senate.                                                                    
Representative  Gara maintained  that the  senate's position                                                                    
was legitimate.                                                                                                                 
                                                                                                                                
10:57:52 AM AT EASE                                                                                                           
11:07:37 AM RECONVIEVE                                                                                                        
                                                                                                                                
Co-Chair Stoltze  called the meeting  to order.  He reminded                                                                    
the public that the house did  not have possession of SB 46,                                                                    
and that  the meeting was  being held with the  intention of                                                                    
discussing the  energy projects  found in  Section 4  of the                                                                    
bill.                                                                                                                           
                                                                                                                                
DANIEL  R. FAUSKE,  CEO/EXECUTIVE  DIRECTOR, ALASKA  HOUSING                                                                    
FINANCE  CORPORATION  (via   teleconference),  informed  the                                                                    
committee  that the  Weatherization and  Home Energy  Rebate                                                                    
Programs  had been  in existence  since  2008. The  programs                                                                    
received  an original  appropriation of  $360 million,  $200                                                                    
million for  the weatherization component, and  $160 million                                                                    
for  the  rebate  program.   Applicants  falling  under  100                                                                    
percent of  median income were placed  in the Weatherization                                                                    
Program. Applicants placing above  the median were placed in                                                                    
the rebate program. He declared  that the program had been a                                                                    
great success.  The number of  home raters working  with the                                                                    
program  had increased  to  over 100,  and  the program  had                                                                    
serviced thousands of homes across  the state. He added that                                                                    
there were thousands of people  on the program waiting list.                                                                    
He stated  that the program  had benefited the  community of                                                                    
Barrow  and  all the  communities  across  the North  Slope,                                                                    
particularly in  lowering heating costs for  the elderly. In                                                                    
his  original  request  the governor  had  appropriated  $25                                                                    
million  for   the  program,  the   senate  had   added  and                                                                    
additional $26.1 million. The  house had voiced concern over                                                                    
how  much funding  needed  to be  appropriated  to keep  the                                                                    
program running at  its current level. He  believed that the                                                                    
program  had  improved the  quality  of  life for  Alaskan's                                                                    
across the board. He asserted  that the program had met, and                                                                    
surpassed, all  of the  goals that  were established  in its                                                                    
conception.  He expounded  that  there  were many  different                                                                    
energy alternatives  within the  state that  residents could                                                                    
benefit from, but  using less energy should  be the ultimate                                                                    
goal.  He  said  that  programs that  helped  to  accomplish                                                                    
energy savings should be embraced.                                                                                              
                                                                                                                                
11:12:56 AM                                                                                                                   
                                                                                                                                
Mr. Fauske explained that the  work generated by the program                                                                    
was  technical, but  minimal. Essentially,  the work  to the                                                                    
home was  done by homeowners  and then analyzed  by experts.                                                                    
Certain funding levels would determine  the wait on the wait                                                                    
list, and how  many homes that could be visited  on a weekly                                                                    
basis.                                                                                                                          
                                                                                                                                
BOB  GREEN,  DIRECTOR  OF RESEARCH  AND  RURAL  DEVELOPMENT,                                                                    
ALASKA  HOUSING  FINANCE CORPORATION  (via  teleconference),                                                                    
testified that the $360 million  appropriated to the program                                                                    
in 2008-09, helped to  provide energy efficient improvements                                                                    
in over  17,000 homes throughout  the state. The  boost from                                                                    
$4.8 million to $360 million  in funding allowed the AHFC to                                                                    
create partnerships  with other  state agencies.  Before the                                                                    
additional  funding,   the  Weatherization  Program   had  5                                                                    
contractors  working statewide  to the  tune of  $5 million.                                                                    
After  the funding  increase, the  corporation  was able  to                                                                    
bring all the  regional housing authorities in  the state on                                                                    
as  additional contractors,  raising  the total  contractors                                                                    
servicing the  state from  5 to  20. Currently,  the program                                                                    
had reached capacity,  and over 4000 homes  were expected to                                                                    
benefit  from the  Weatherization  Program  in 2011.  Higher                                                                    
income homeowners  could do energy  efficiency improvements.                                                                    
The  maximum  rebate  issued  for  the  Home  Energy  Rebate                                                                    
Program was  $10,000. In addition  to the 17,000  homes that                                                                    
had  been  made  more   energy  efficient  statewide,  3,500                                                                    
households had  applied and were waiting  to make refundable                                                                    
improvements. The  homeowner has  18 months to  complete the                                                                    
improvements,  a post-assessment  is then  performed on  the                                                                    
home,  and  the  rebate  was  then  calculated  accordingly.                                                                    
Sophisticated   software   was   used  to   measure   energy                                                                    
improvements both  for weatherization and the  energy rebate                                                                    
program. Because  the cost  of energy can  vary from  day to                                                                    
day, energy  savings were targeted  instead of  energy cost.                                                                    
There were  3500 applicants in  the pipeline for  the rebate                                                                    
program.  Because the  waitlist continued  to grow,  and the                                                                    
funds  were obligated,  any future  funding for  the program                                                                    
was not secure. 40 names  were being dispatched per week. He                                                                    
shared  out of  respect for  available funds;  the list  had                                                                    
been  slowed down.  Reported data  showed that  the programs                                                                    
savings  averaged between  $1550  and $1600,  per year,  per                                                                    
home. He stated that the  average rebate payout was slightly                                                                    
over $6,000,  while the average amount  that homeowners were                                                                    
spending on improvements was $10,000.                                                                                           
                                                                                                                                
11:21:56 AM                                                                                                                   
                                                                                                                                
Vice-chair  Fairclough  divulged  that she  had  spent  over                                                                    
$13,000  on  home  energy  improvements,  had  received  her                                                                    
rebate, and  now had  a 5 star  home. She  expressed concern                                                                    
that the Weatherization Program  was among the programs tied                                                                    
together in Section  4. She asked if the  AHFC was concerned                                                                    
that the Weatherization Program  was included in the Section                                                                    
4 contingency language. Mr. Fauske  replied that he believed                                                                    
that the  program should be  funded in  perpetuity, possibly                                                                    
through an endowment,  and that it should be  a top priority                                                                    
for the  state. He stressed  that the program  was producing                                                                    
immediate  positive  results,  and  adding  dollars  to  the                                                                    
economy  statewide. He  strongly  believed  that losing  the                                                                    
program  would be  detrimental for  all state  residents. If                                                                    
funding  were shut  off the  program would  end in  April of                                                                    
2012.  If the  cap funding  were to  pass the  program could                                                                    
extend for  possibly a year  after that. He  understood that                                                                    
there  was   a  contentious  debate  going   on  within  the                                                                    
legislature,  and  hoped for  a  resolution  so the  program                                                                    
could continue to serve Alaskans.                                                                                               
                                                                                                                                
Vice-chair Fairclough related that  the program had resulted                                                                    
in a savings of $1,200 annually for her family.                                                                                 
                                                                                                                                
Representative Gara queried  how much it would  cost to keep                                                                    
the program  running at its  currently capacity.  Mr. Fauske                                                                    
replied $100  million would keep the  program dispatching at                                                                    
its  current   level  for  one  year.   Representative  Gara                                                                    
reminded the  committee that  Senator Stedman  had expressed                                                                    
the  willingness to  remove the  Weatherization Program  and                                                                    
the  Home   Energy  Rebate  Program  from   the  contingency                                                                    
language in Section 4.                                                                                                          
                                                                                                                                
11:28:32 AM                                                                                                                   
                                                                                                                                
Representative Guttenberg expressed  concern that there were                                                                    
not  enough   raters  working  in  the   field.  Mr.  Fauske                                                                    
responded that the raters worked  under private contract. He                                                                    
added that  raters had  expressed concern  for less  work in                                                                    
the  future  due to  lack  of  funding.  He warned  that  if                                                                    
funding for the program were  to end, 98 active raters would                                                                    
be  without  work. He  thought  that  the number  of  active                                                                    
raters would increase with continued funding.                                                                                   
                                                                                                                                
Mr. Brean  interjected that if  funds were  not appropriated                                                                    
for  the programs  the  applicants in  the  system would  be                                                                    
processed and then the programs would be phased out.                                                                            
                                                                                                                                
Representative Joule  hoped the  program would  continue. He                                                                    
mentioned that some  people in the state  were taking energy                                                                    
problems to  the private level by  developing public/private                                                                    
partnerships,   and  involving   younger   Alaskan's  at   a                                                                    
community service  level. Mr. Brean shared  that one element                                                                    
of both  programs was the Training  and Technical Assistance                                                                    
component. The  component allowed for community  training in                                                                    
technical assistance.  Grant funds  for education  were also                                                                    
available in order to perform  work locally and retain local                                                                    
funds.                                                                                                                          
                                                                                                                                
Representative  Joule  queried  what the  private  partner's                                                                    
responsibility   consisted  of.   Mr.  Brean   replied  that                                                                    
Representative Joule's  region was more active  than others.                                                                    
The list of private partners  was long, and the two programs                                                                    
that had  positive impact on  all aspects of  industry, from                                                                    
sales  to  builders  and  designers,  in  local  areas.  The                                                                    
private partner's consistently  displayed the willingness to                                                                    
underwrite activities  that the  AHFC embarked upon,  and to                                                                    
sponsor various trainings around the state.                                                                                     
                                                                                                                                
11:36:42 AM                                                                                                                   
                                                                                                                                
Mr.  Fauske shared  that a  minimum of  2,500 jobs  had been                                                                    
created or  retained by the  program, and that  number could                                                                    
be upwards of 4,000.                                                                                                            
                                                                                                                                
Representative Doogan pointed out  to the committee the $5.5                                                                    
million   for  the   Gasline  Development   Corporation.  He                                                                    
wondered  what  the funds  would  be  used for.  Mr.  Fauske                                                                    
replied  that  the  funds  would   go  toward  ongoing  work                                                                    
concerning   engineering,  summer   field   work,  and   the                                                                    
environmental  impact  statement.  He  said  that  the  $5.5                                                                    
million was part of an overall  group of funds that had been                                                                    
requested.  The  governor had  placed  $5.5  million in  the                                                                    
capital budget  with the understanding  that there  would be                                                                    
debate during the legislative session  which might result in                                                                    
more funding.  The AHFC  had requested  that the  $1 million                                                                    
that had  lapsed be reappropriated  by the  legislature, and                                                                    
had made a $6.2 million  dollar request in the supplemental.                                                                    
As the  corporation became more  familiar with  the process,                                                                    
another  $15.5 million  had been  requested  in the  capital                                                                    
budget, bringing the total to  $28.2 million, which included                                                                    
the $5.5 million.                                                                                                               
                                                                                                                                
Representative  Doogan  requested  more  clarification.  Mr.                                                                    
Fauske  replied the  $6.2 million  was requested  because of                                                                    
new  information  pertaining  to   summer  field  work.  The                                                                    
request was originally intended  for the supplemental budget                                                                    
so that work could continue through July 1, 2011.                                                                               
                                                                                                                                
JOE DUBLER,  VICE PRESIDENT/CHIEF FINANCIAL  OFFICER, ALASKA                                                                    
GASLINE   DEVELOPMENT   CORPORATION   (via   teleconference)                                                                    
discussed  the  $5.5  million   request  in  the  governor's                                                                    
request.  The request  had included  amounts  that would  be                                                                    
used for  commercial and  financial analysis.  Also included                                                                    
were RSA's with the Department  of Natural Resources and the                                                                    
Department of Environmental  Conservation for permitting and                                                                    
environmental impact statement  work, totaling $1.4 million.                                                                    
He stated that $2.2 million  would be used for personnel and                                                                    
operating costs.  The remaining  $7.2 million, which  was to                                                                    
be   in   the    supplemental,   would   fund   engineering,                                                                    
environmental, and  regulatory field work.  Co-Chair Stoltze                                                                    
requested a summary  of the funding plan in  written form be                                                                    
submitted to the committee.                                                                                                     
                                                                                                                                
Representative Guttenberg  asked why the project  was listed                                                                    
as (HD 12-35) in the bill on page 110.                                                                                          
                                                                                                                                
Vice-chair  Fairclough stated  that the  listing designating                                                                    
the district  was the result  of the staff that  had drafted                                                                    
the  bill. She  said that  the listing  could be  changed if                                                                    
necessary.                                                                                                                      
                                                                                                                                
Representative  Wilson wondered  how  the  program would  be                                                                    
affected in the event that  the contingency language went to                                                                    
court.  Mr.  Fauske replied  that  without  funding for  the                                                                    
program, the program would be shut down.                                                                                        
                                                                                                                                
11:46:02 AM                                                                                                                   
                                                                                                                                
Representative Wilson  understood that if the  language went                                                                    
to court  the program would  be affected for years  to come.                                                                    
Mr. Fauske warned  that if funding were  denied the contract                                                                    
work  necessary for  the function  of the  program would  we                                                                    
negatively affected.                                                                                                            
                                                                                                                                
11:47:37 AM                                                                                                                   
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
The meeting was adjourned at 12:01 PM.                                                                                          

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