Legislature(2009 - 2010)SENATE FINANCE 532
02/26/2009 03:00 PM Senate ENERGY
| Audio | Topic |
|---|---|
| Start | |
| Alaska Center for Energy and Power | |
| Institute of Social and Economic Research | |
| Cambridge Energy Research Associates | |
| Black Lion Energae | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
JOINT MEETING
SENATE SPECIAL COMMITTEE ON ENERGY
HOUSE SPECIAL COMMITTEE ON ENERGY
February 26, 2009
3:08 p.m.
MEMBERS PRESENT
SENATE SPECIAL COMMITTEE ON ENERGY
Senator Lesil McGuire, Chair
Senator Bert Stedman
Senator Bill Wielechowski
HOUSE SPECIAL COMMITTEE ON ENERGY
Representative Bryce Edgmon, Co-Chair
Representative Charisse Millett, Co-Chair
Representative Kyle Johansen
Representative Jay Ramras
Representative Pete Petersen
Also present were Representatives Fairclough and Guttenberg.
MEMBERS ABSENT
SENATE SPECIAL COMMITTEE ON ENERGY
Senator Lyman Hoffman
Senator Albert Kookesh
HOUSE SPECIAL COMMITTEE ON ENERGY
Representative Nancy Dahlstrom
Representative Chris Tuck
COMMITTEE CALENDAR
Work Session: Comprehensive Energy Plan
Presenters:
Gwen Holdmann, Alaska Center for Energy and Power
Ginny Fay, Institute of Social and Economic Research
David Hobbs, Cambridge Energy Research Associates
Darrell Smith, Black Lion Energae
PREVIOUS COMMITTEE ACTION
No action to report
WITNESS REGISTER
GWEN HOLDMANN, Director
Alaska Center for Energy and Power (ACEP)
Fairbanks AK
POSITION STATEMENT: Spoke of Alaska's energy policies.
GINNY FAY, Economist
Institute of Social and Economic Research (ISER)
Anchorage AK
POSITION STATEMENT: Spoke of Alaska's energy policies.
DAVID HOBBS, Managing Director
Cambridge Energy Research Associates (CERA)
Cambridge MA
POSITION STATEMENT: Promoted CERA for providing the state with
energy consulting.
DARRELL SMITH
Black Lion Energae and ING
Mason City, IA
POSITION STATEMENT: Promoted using algae for energy.
ACTION NARRATIVE
^Work Session: Comprehensive Energy Plan
3:08:56 PM
CHAIR LESIL MCGUIRE called the joint meeting of the Senate and
House Special Committee on Energy to order at 3:08 p.m. Senators
Stedman, Wielechowski, and McGuire and Representatives Petersen,
Ramras, Edgmon, and Millett were present at the call to order.
^Alaska Center for Energy and Power
3:09:36 PM
GWEN HOLDMANN, Director, Alaska Center for Energy and Power
(ACEP), Fairbanks, said ACEP is the applied-energy research arm
of the University of Alaska. There are many programs in the
University researching energy issues in Alaska, and ACEP draws
on all of those resources and addresses the most pressing near-
term, applied energy concerns for Alaska communities and
industries. It has projects all over the state and is active in
small and large-scale renewable and non-renewable technologies.
The three areas of focus are community energy solutions;
powering the economy; and the energy field of the future. ACEP
is partnering with communities to address renewable and
alternative energy. ACEP is assessing geothermal, large scale
solutions like Susitna and Chakachamna, and power for remote
mines. The energy field of the future is how Alaska can best
manage and develop oil resources for the long term, including
heavy oil and methane hydrates. ACEP is looking at what can be
done with the infrastructure once the oil fields are depleted.
3:12:14 PM
MS. HOLDMANN said Alaska needs to address its energy goals. Does
Alaska want to lower the cost of energy, stabilize the cost,
develop community and state self-sufficiency, boost local
economies, create jobs, develop wealth, or reduce greenhouse gas
emissions? "If your energy is free but you don't have a job, is
that really a benefit to our residents?" What are Alaska's
priorities, and do some goals conflict with one another? Making
smart investments is important. Alaska has begun investing in
the renewable energy fund, and they should be prudent, smart
investments that will result in projects that are around for the
long term. Alaska should take calculated risks and be invested
in cutting-edge technology, but it should start with the low-
hanging fruit. A balanced approach includes planning, projects,
and research. Planning must be done at all levels from community
to statewide. There have been efforts at creating an Alaska
energy policy, "and I think that we're getting a lot closer to
really coming up with some good objectives."
3:14:40 PM
MS. HOLDMANN said without projects, policy means very little.
The Chena hot springs geothermal plant put Alaska on the map for
geothermal power. She showed a photo of the first in-river
turbine ever installed in North America, and it is in Ruby,
Alaska. ACEP has spent resources on the Healy clean coal
project. Research is the third leg of having a balanced plan. It
can peer over the horizon to see what is needed for long-term
success. Efficiency is the best "bang for our buck." "However,
where we are today is we're investing in projects, which have a
fairly substantial, often, capital cost investment ... but we
also see long-term benefits associated with those." There is
interest in innovative, but costly, new technology in Alaska.
The goal of ACEP is to drive down the cost and risk of
innovations so they make economic sense for Alaska.
3:17:04 PM
MS. HOLDMANN said one role of ACEP is to test equipment to keep
things out of the field that may not work, saving the state a
lot of money. ACEP is partnering with the Institute for Social
and Economic Research (ISER) for assessing technical and
economic feasibility. ACEP also tests emissions. A unique
challenge for Alaska is the integration of projects with
existing power systems. Alaska has small isolated grids, which
also occurs in the world but not so much in the United States.
Alaska needs to take the lead in deploying renewables in small
grids. Procurement experiments are a favorite of the ACEP. Many
vendors come by and the ACEP looks to see if they actually have
a product behind the sales pitch and if it meets their claims.
Her group also works with viable manufacturers to improve
products for use in Alaska. ACEP can be an impartial agent on
behalf of Alaska communities to make sure investments are wise.
ACEP can also leverage resources. Every dollar can be leveraged
into five dollars of federal funding, because the Department of
Energy typically requires 20 percent cost share per project.
3:19:46 PM
MS. HOLDMANN said these projects save money in the long run.
Fuel cells have been tested by ACEP, but that technology isn't
ready for Alaska. It may change. The big problem is that the
federal government is the customer for the research programs at
the university. "If they are the customer, we are doing research
that our customer is having us do." So ACEP focuses on what the
federal government wants instead of state interests. ACEP has no
base funding; it was vetoed in last year's budget. So the state
is not spending any money on research and development of energy;
Alaska ranks 46th in the country. North Dakota has the Energy
and Environmental Research Center -- a high-tech nonprofit
branch of the University of North Dakota. It operates as a
business within the university system, so it does things similar
to ACEP within a private business model with a goal of moving
the best technologies into the marketplace. The private sector
makes up 84 percent of its contracts. It has generated 14 spin-
off companies. It has 290 scientists and engineers, and most are
graduates from the University of North Dakota. They are people
that the state is able to retain because of the good high-paying
jobs. Additional job creation was $94 million. That program
receives no base funding from the state. It serves as a funding
source and generates money to fund the university. But there was
significant state and federal money put into developing the
program when it started about 20 years ago.
3:23:28 PM
SENATOR WIELECHOWSKI asked if there was any money put in the
budget for ACEP.
MS. HOLDMANN said there was $500,000 passed by the legislature.
SENATOR WIELECHOWSKI asked why the governor vetoed it.
MS. HOLDMANN said she heard that the governor wanted to wait for
a completed energy plan. Ms. Holdmann provided the requests for
the capital budget for energy projects for fiscal year 2010. It
is a tight budget year, but funding for research and development
is a very important component. By putting it in the capital
budget, the legislature has the opportunity to not fund programs
that aren't successful and to continue to fund programs that
give a return on the money. Another option is to create an
emerging energy technology development fund. She is not saying
that all the energy research should be done through the
university, but there is this existing program and it makes
sense to fund it. It also makes sense to fund pilot projects in
technologies where Alaska can take a leading role and that
result in long-term jobs and economic opportunities. The company
that put the in-river turbine in Ruby is considering opening a
facility in Alaska for building the turbines.
3:26:02 PM
MS. HOLDMANN said a good state research and development program
can attract investment and reduce failures. That saves money. It
can provide focus to energy initiatives. Rather than take a
scatter-shot approach, Alaska can do a good job at implementing
the projects that give a good bang for the buck. The program can
assist with developing prudent policy and planning, and it can
create jobs. Iceland is one model of a research and development
program that created 100,000 jobs tied to the energy sector.
SENATOR MCGUIRE thanked her for doing all her work without a
budget and for being creative and finding other funding sources.
REPRESENTATIVE RAMRAS said he was a shareholder of General
Electric when it was $28 per share. It is now about $9. One
corporate rule for General Electric is not to buy a business
unless it can be number one or two in the sector. The company
wants to dominate. He said he has seen some of the work done at
the university, including research on important medical issues.
He has wondered why the university doesn't seek out those things
where it can dominate. Ms. Holdmann is one of the gems of the
University programs. He asked about tidal and biomass fuels, and
suggested Alaska can be a first mover and best in a category.
3:29:35 PM
MS. HOLDMANN said Alaska has immense resources, renewable and
nonrenewable. Biomass is an opportunity for much of the state,
but the technology for small-scale gasification has not been
economic. Manufacturers are working with Alaska communities, and
if Alaska can find something that works and develop the
expertise, it can export it to a large part of the developing
world. Alaska has 90 percent of the tidal and wave resources.
"We can't be waiting for someone else to take the leading role.
If somebody is going to be developing these kinds of devices,
tidal and wave energy and in-river hydro, it's got to be done
here." Alaskans may not be inventing the turbines, but they will
be working with the manufacturers, shepherding the technology
ahead and having the expertise. Energy storage is important for
rural Alaska. It is a big deal to try and increase the capacity
of wind power on the grids. The turbines need to be performing
better and displacing more diesel fuel than they are today. This
is of interest in the developing world and in the United States.
The grid systems were not designed for inconsistent power
generation sources like wind. Energy storage can offset those
fluctuations and is a big part of research. She was at a
national lab last week and the lab was very interested in
solving Alaska's rural issues. If the models work on a small
scale, then they can work on a big scale in the Lower 48. New
transmission lines and smart grids are other opportunities here.
3:32:52 PM
SENATOR WIELECHOWSKI said the programs need funding. The
legislature provided it, but the governor vetoed it.
REPRESENTATIVE RAMRAS said Chris Rose was looking for incubator
funds. There was a vigorous debate about 77 projects for $100
million into the communities. What is the distinction between
the incubator funds and the $1 million for ACEP, and how would
that differ from the $100 million for the 77 projects? Redundant
funding would be a reason for another veto.
3:34:31 PM
MS. HOLDMANN said the Alaska Energy Authority has a specific
mandate to work in commercial technology. Its mission is to find
deployable energy solutions for today, but it doesn't look at
pre-commercial technology. A good example would be the Chena
geothermal power plant. It was the first installation like that
in the world. It was not proven technology. The state needs to
be prudently investing in those kinds of projects.
CHAIR MCGUIRE asked about alternative grants in the federal
stimulus package.
MS. HOLDMANN said she thinks there are a lot of opportunities
and has been working with the Department of Energy. Money from
the state could be leveraged for those funds. Alaska already
lost some opportunities in hydro-kinetic-tidal energy and
geothermal in the past for not having the matching dollars. But
there is a lot of funding out there. Some of the geothermal
budget is coming to Alaska, and she hopes other money too.
3:37:49 PM
MS. HOLDMANN said she works directly with communities. The
Tanana Chiefs Conference represents 42 villages in rural Alaska,
and ACEP created a position jointly with them that will expand
the work with rural communities to pick the technologies that
make the most sense and find funding opportunities.
^Institute of Social and Economic Research
GINNY FAY, Economist, Institute of Social and Economic Research
(ISER), Anchorage, said she has worked on energy policy in
Alaska for over 25 years. The average Alaska household spends 40
percent of their household budgets on space heating, 35 percent
on electricity, and 25 percent on transportation. In some parts
of Alaska people spend 70 percent on space heating. Alaska has
focused its energy policy on electric power generation and oil
and gas development. It would be good to broaden that out to
what really affects Alaskans every day. A bystander would think
that Alaska's energy policy is to reduce the total cost of
energy, to distribute the resources fairly, and to lower the
cost of energy in rural Alaska. She suggested developing a long-
term approach to energy rather than a reaction to oil prices at
the time. When oil prices go up, Alaska has more money, but all
households and businesses suffer because of the cost of energy.
"So we scramble to try to lower their cost of energy and then we
go down the next cycle, oil prices go down; we abandon our quest
for energy efficiency and renewable energy because we can't
afford it anymore."
3:42:15 PM
MS. FAY suggested looking at 50 years from now. She provided the
committee with a paper on what could be considered in an energy
policy. It's not complete, but it has general recommendations
knowing that oil prices are going to be volatile. She suggested
establishing a long-term oil price forecast to use for budgeting
and as an assumption for renewable energy planning. There will
probably be "cap and trade" and carbon pricing in the future.
Alaska should be proactive in where it wants to be, "and not
look at it that we're using renewable energy to replace fossil
fuels, think of it more as we're investing in ways that we can
be able to export more of our energy resources that we develop
because we have our long term. We're more self-sufficient, we
aren't as dependent on consuming so much of our oil, and we're
not so much victims of volatile prices, because we don't really
have any control over them."
3:44:06 PM
REPRESENTATIVE RAMRAS said a problem with export in Alaska is
the cost of moving things. "Cap and trade is a little bit like
synthetic gas for the air force. Their objective is 20 percent."
The Air Force in Alaska could be at 100 percent, contributing to
the whole United States Air Force without having to export one
drop of synthetic gas. Is the same thing true of any trade
material created in Alaska? "Could we create it and sell it to
the Lower 48, which is the whole nature of the cap and trade
exchange, without having to physically transport it?" That could
level the playing field.
3:45:17 PM
MS. FAY said she is not an expert on cap and trade, but it is
her understanding that there will be a mechanism for accounting.
It is similar to what is done with Bradley Lake. "Not all those
neurons make it to Fairbanks; it might be consumed in Homer, but
then you have agreements on how you share those agreements. So I
think they envision those kinds of things for cap and trade."
REPRESENTATIVE RAMRAS said there is a tremendous export
opportunity to invest in tidal and others and then create an
exported commodity that doesn't have to be put on a truck, boat,
or plane to actually export it. "I was hoping that you could be
more explicit."
3:46:36 PM
MS. HOLDMANN said this is a different way to export energy.
Alaska doesn't have a grid that ties Alaska to the Lower 48, but
Alaska has an opportunity to create value-added products so "we
are essentially exporting our energy to other places in the
world." This is especially true with developing stranded
resources; "that would certainly give us some fairly unique
opportunities to do that, especially when you take a look at
shipping routes and where our resources are." The state should
be looking at it very carefully in term of where it wants to
position itself. She sees it as a national security issue as
well. "As we're exporting many of our high energy-intensive
industries off shore, that really creates some potential
concerns in terms of national security. And if we can be doing
some of that here in Alaska, that certainly is one way to export
our stranded resources."
MS. FAY said one of Alaska's opportunities is its isolated
grids. While Alaska is solving problems for one community at a
time by developing integrated systems, Alaskans should be
developing the expertise the same way they have with module oil
and gas development and oil spill technology. There are about
two billion people who live off the grid in the world, and
Alaskans should be the exporters. The state's objective in
renewable energy is not always clear. Is the goal to
redistribute wealth or reduce the total amount of energy? It
would be helpful for everyone to know the state's objectives,
goals, and policies. Sometimes the most efficient policy is not
the fairest.
3:49:35 PM
REPRESENTATIVE RAMRAS said, "We might try and find somebody at
Citibank or Bank of America to talk about micro lending." It is
a new phenomenon around the world where $100 may be
insignificant for us but people start businesses in small
countries with it. It is now a commercial division of the
largest banks. Ms. Fay told the committee that there are two
billion people living in a world just like rural Alaska, and it
is an untapped potential for the state. He referred to the
Ketchikan dry dock, which has the licensing rights to the
intellectual property of Lockheed Martin and the ability to
replicate that effort. Alaska could use its villages with these
varying types of renewable energy and create all these
incubators, "and while we're solving problems of dollar
kilowatts and reducing them to 20 or 30 cents, if we learned
about micro lending and how that works, we really could
recognize this as an export commodity for the state of Alaska
that could be replicated where two billion people live."
3:51:20 PM
MS. FAY said, "As you develop energy policy...at the end of the
day we are all better off in Alaska, but instead of having
outsiders come and sell us things that might not work, we take
it on to ourselves to make sure it works by testing it,
educating our students and people within our state to become
experts." Alaska will solve its problems one village at a time.
Every time there is an oil spill in the world, someone from
Alaska goes and helps. The silver lining of high energy costs is
building an industry.
CHAIR MCGUIRE said there is a school in Seward training students
to work with wind/diesel turbines.
MS. FAY said Alaska should look at energy policy from the stand
point of electricity and space heating. Transportation is a
significant portion of household budgets. A policy should look
at "how we provide for transit and build communities and help
save families' money, and also just looking at how we build jobs
and our industrial sector to make them more cost effective by
also being more efficient."
3:53:54 PM
^ Cambridge Energy Research Associates
DAVID HOBBS, Managing Director, Cambridge Energy Research
(CERA), Cambridge, Massachusetts, said noted that the strategic
debate about energy in Alaska has changed from maximizing value
from production into developing a long-term strategy to insure
sustainable energy for residents. No strategy ever survives its
first contact with reality. Alaskans need to fly to be able to
get anywhere. The reason there is confidence in the pilot is
that he or she has worked in a simulator and in a variety of
aircraft. Alaska's energy strategy needs to come from
envisioning different results and practicing responses to those
situations so that when the unexpected happens, like a change in
oil prices, Alaska knows how to respond without losing stride.
3:58:47 PM
MR. HOBBS said Alaska has the smarts to develop a strategy, but
outsiders can help Alaska learn from other people's mistakes.
Alaska needs to be seen as islands that are separated by land
instead of water. Alaska should look at how the Seychelles or
Hawaii has dealt with energy challenges, as well as places with
cold environments. He can discuss what the components of an
energy strategy are and what can be learned from others. The
most important goal is inspiring all Alaskans to share a vision
of where it wants to go. There are many routes to arriving at
that destination. "If we can inspire a shared vision of that
destination then there's a chance of achieving something that
... probably no legislature anywhere else in North America has
successfully achieved."
4:00:39 PM
REPRESENTATIVE PETERSEN said setting a goal is the first thing
to do. Part of that would be committing funding for projects to
reach the goal. Alaska has made a commitment to renewable
energy, so it has a start. The state needs to feel confident
that it is heading in the right direction.
MR. HOBBS said it is easy to be daunted by the financial
challenge. Napoleon said his soldiers would be better off in the
shade, so he wanted to plant trees along routes. He was told the
trees would take forty years to grow. His response was, "We
better start planting now." Alaska needs that kind of long-term
commitment. With low oil prices it may look like a deep valley
to cross, but there is another side to the valley. Alaska needs
to know what it will take to bridge that divide. The new team in
Washington D.C. has a greater sense of strategic vision and a
determination not to fall pray to the prisoner's dilemma.
4:03:31 PM
REPRESENTATIVE RAMRAS said committee members are enthusiasts of
alternative energy. T. Boone Pickens believes the Midwest can be
the Saudi Arabia of wind, but it can't happen without federal
subsidies. Alaska is taking a buckshot approach to energy
because its needs are so vast, as shown in the $100 million for
77 projects that must be regionally balanced. It was difficult
to sort out a compromise on that. The three people from CERA
each represent strategy, philosophy, or business. He asked what
a comprehensive energy plan will cost that is not bogged down by
politics. What can CERA do for us? How does one string together
all these vast opportunities in Alaska and make it work? There
is a limitless energy potential. "How do we make a business out
of it so that we can get it approved by Senator Stedman?"
4:05:56 PM
MR. HOBBS said there are a variety of parts to the answer. He
has been asked by legislators if Alaska is unique. It is "as
unique as every other unique place, and in all the same ways."
CERA is in the business of ruthless research of energy. He has
no illusions that when oil prices hit $150 per barrel, it may be
very good to invest in a particular type of renewable energy,
but at a low price the investment looks terrible. Energy is
about heat, light, and motion. The firm was founded on telling
stories that allowed people to interpret the past and the
future. Energy doesn't produce jobs, but the energy is used to
create jobs. Everyone has their own vision, and sometimes they
forget that they are working in the same direction, instead of
focusing on what divides them. Any energy policy has to include
sustainable, reliable, and affordable energy. His firm helps
develop the consensus.
4:10:22 PM
CHAIR MCGUIRE asked for an example of past work.
MR. HOBBS said Libya had many of the challenges of Alaska. It
was an economy that was over dependent on oil and gas
production, and the absence of revenues that could support the
social programs generated by oil and gas made the economy a
hollow vessel. Libya has a dearth of leadership. Nobody dared to
put their head above the parapet and propose a course of action
unless they were sure the country's leader would agree with it.
His firm started by developing leadership among a professional
class that had been too frightened to display it. CERA equipped
them with "how other people had dealt with those challenges."
His firm helped Libya begin to develop a broader industrial
sector to generate economic prosperity. "We needed to get them
to take a very level-headed view of what the future of oil and
gas revenues would be." The firm didn't preach the future to
them, but it developed three stories of the future. One story
was continuing globalization, especially with demands from
developing nations, and what that would mean to keep up with
energy demands and what that would mean in the terms of the cost
and prices of energy. The second story had globalization
derailed. "We talked about a rapid rebalancing of the financial
imbalances triggered by the U.S. housing crisis coupled with an
increase in terrorist activity that undermined trust in global
trade, and that that would lead to an economic crisis in which
growth for the long term would be much slower, and we would see
a collapse in oil prices ... down below $20 per barrel." If
Libya's strategy relied on the first story, and the second story
came to pass, "then you'd feel awfully silly and also probably
be in a desperately difficult place."
4:13:57 PM
MR. HOBBS said the third story for the future of Libya was a
supply shortage pushing oil to $150 per barrel, and how policy
makers would destroy the demand for oil and gas products by
investing in renewable energy and efficiency. As demand for
fossil fuel decreased, "you would find the price collapse back
to a level at which everyone would say we don't need renewables,
we don't need efficiency, we don't need small cars, et cetera."
Once his firm got Libya to buy into those stories and understand
that they were all quite feasible, Libya was able to ask
themselves, "How would this piece of the economy that we
understand much better than you, CERA, ever can understand
because you're not Libyan?" He knows CERA will never understand
Alaska as well as Alaskans, but it can provide the framework
that forces Alaska to confront the hard truths of potential
futures and make sure a policy will be resilient to all
potential futures, rather than making a huge bet on one rather
than the other.
4:15:34 PM
REPRESENTATIVE RAMRAS asked the cost for an initial scoping and
model from CERA for a comprehensive program that would
revolutionize the energy backbone of Alaska. The state is
talking about a $4 billion private gas pipeline and $100 million
for 77 different projects that will need $1 billion in conduit
funding in order to do them all. He doesn't know how many
megawatts will be created and how much diesel will be displaced.
4:17:19 PM
MR. HOBBS said he cannot tell CERA's price now, but he can come
back with the details. CERA's engagements run from "a couple of
hundred thousand dollars to a couple million dollars." CERA
sometimes facilitates workshops to give an entity a clear idea
of the direction it wants to go, and that may be all. That would
cost a "couple hundred thousand dollars."
CHAIR MCGUIRE said CERA was invited to discuss what would go
into crafting an energy policy, and it wasn't asked to be
prepared for terms of engagement. She asked what talent CERA has
to offer to help Alaska develop an energy policy.
MR. HOBBS said he will be happy to come back with more specific
terms. A tool CERA can bring is an understanding of different
types of fuel and technology and the geographies where they have
been applied. It will work with Alaska's talent pool. Alaska has
ISER, universities, and research already being done. CERA can
help provide context to keep the discussion on the right track.
CERA is at its best when bringing the research it has been doing
on the energy world for 25 years, and that helps facilitate the
policy debate. CERA can recommend a destination, but if it is
not Alaska's solution, it won't be as resilient.
4:21:36 PM
MR. HOBBS said the works starts with the realization that the
course people are on will not lead them where they want to go.
There are diverse views that may be worked out with a common
understanding of what actually is the market landscape. CERA is
doing a lot of work on coal sands in Canada, and it has brought
together different entities. Just getting them to use a single
vocabulary to describe their problems has made an impact. The
next step is a structured dialogue on what can be achieved. As
an aside, people value electricity at a higher price than they
pay for it. People won't give up electricity even at extremely
high prices. People may not agree with decisions that are taken
but they understand them.
4:25:35 PM
MR. HOBBS said Oman's major industrial activity was oil and gas
development. It had begun to develop energy-intensive, value-
added industry only to find that the commitments to export gas
exceeded its own domestic demand. Oman had to decide between
shutting down industry or reneging on export contracts. CERA
worked in California and found that after years of not building
new plants because of environmental objectives, the inevitable
consequences was that there wouldn't be enough power. India
found that by not paying international rates to build power
stations, the contractors decided not to build them. India thus
ended up with an energy deficit. A key part of the process is
identifying the stakeholders whose opinions matter in forming
policy. The representatives of the oil companies were afraid to
tell leadership what was going to happen because their jobs
depended on the version of the future they were told. CERA's
role was "to tell truth to power and make sure they understood
the consequences of the decisions they had taken." CERA looked
at the entire energy spectrum, including nuclear power and
burning coal in an oil-producing state. CERA looked at export
earnings and industrial earnings. The stakeholders were engaged
throughout. The end result was that they looked at a variety of
options and let them make the political decisions.
4:30:19 PM
REPRESENTATIVE RAMRAS said, "We're so hungry to do something and
we need somebody to help us put together a comprehensive energy
plan, so desperately. We're going in so many different
directions and we're doing so with great enthusiasm, but quite
clumsily." He asked for a letter addressing his questions.
MR. HOBBS said economists will say a tax is the best answer, and
politicians prefer a cap and trade. The outcome will likely be a
cap and trade that looks like a tax. It will have "get-outs" at
the top end so it doesn't get too expensive, or credits can be
added to make the availability greater. The advantage is making
"energy far more location agnostic." If Alaska provides 100
percent synthetic fuel to the U.S. Air Force in Alaska it counts
against its aggregate obligation, "so you effectively export
production without ever actually physically moving it anywhere"
and without building a pipeline. Alaska can build the expertise
and export know-how - "a way in which the logistical challenges
that you face here in Alaska can be overcome to a point at which
you can achieve your economic development objectives without as
much hardware as otherwise you'd require."
4:34:50 PM
The committee took a brief at-ease.
4:36:31 PM
^Black Lion Energae
DARRELL SMITH, Black Lion Energae and ING, Mason City, Iowa,
said he has worked for ING for 23 years. Tim Tompkins invented
the system that will be discussed today. Mr. Smith has seven
different degrees. Today the Obama Administration has $634
billion in tax carbon credits in its budget. It will raise the
cost of fuel about 20 percent. Biofuel was specifically
mentioned. He asked what biofuels meant and the Department of
Energy sent him a letter that said: "We know for certain that
biofuels is defined as energy derived from algae."
4:38:22 PM
MR. SMITH said Black Lion Energae is the capital arm formed to
help fund Renewed World Energies (RWE), a South Carolina company
that produced the first known commercially-economic algae-to-
energy production facility. It developed a proprietary, fully-
automated algae growing and harvesting system that produces two
main energy feedstock sources: algae oil, which can be burned
for fuel or converted into biodiesel, and algae cake, which is
processed into synthetic gas or converted to animal feed. It is
grown in an algae bioreactor, which is an incubation unit
developed by Richard Armstrong and Tim Tompkins. The two have
built $7 billion worth of pulp paper and energy for B.F.
Goodrich, Duke Power, G.E. and others. Why algae and why now?
Biodiesel and coal are in big trouble. In rural Alaska, energy
costs are the highest in the country. About 80 percent of all
biodiesel production in the U.S. is idle due to soy oil feed
stock costs. Coal can't expand due to greenhouse gas emissions.
4:40:38 PM
MR. SMITH said he visited with [Alaska Village Electric
Cooperative] this week. The cost of a kilowatt is $00.127 in
Anchorage and $00.51 in the villages. RWE is growing algae,
which produces oil and cake. The oil is extracted from the cake.
The algae are fed with CO2 and NOx [nitrogen oxide]. Oil is
produced at $00.85 per gallon. Cake is converted into synthetic
gas to provide cheap energy at $00.025 per kilowatt hour or sold
as animal feed. The reason the biodiesel industry is going under
in the Midwest is due to high soy oil feedstock costs. Algae can
consume all the CO2 and NOx produced by coal. Power companies
spend $22.00 per ton of coal just to get rid of NOx. Algae are a
plant that offers massive growth and an energy solution. The
mass of algae is 35 to 80 percent oil. There are over 100,000
different strains of algae. It helps clean up diesel and can
seasonally reduce CO2 and NOx emissions by sequestering the
gases from diesel generators. Algae will supplement diesel
reducing the average cost per kilowatt hour. It can provide
community jobs and reduce energy subsidies. Dried algae biomass
can be stored and burned as needed. Installation costs are
affordable. The bioreactor provides low-cost energy, and
installation is affordable. "Operation costs doesn't require a
PhD." Nothing is harmed if it is spilled.
4:44:50 PM
MR. SMITH said algae consume wastes while growing. "Both human
and animal waste can be made to operate in all weather types."
He showed a picture of the bioreactor. It is fully integrated
with diesel for minimal costs. It is self sustaining. "You can
put this system down anywhere at any particular location and the
low quality oil produced by the system is used to operate the
system and provide electricity." It is a closed system with full
automation. It uses super-strains, which are modified algae, and
98 percent of the oil is extracted. Universities are partnering
with RWE. South Carolina Power and South Carolina Gas and
Electric is the largest power production company in the state
and is offering its free CO2. The state of South Carolina has
partnered with RWE and is offering $13 million in tax credits
and to pay for all worker training. The state is providing
250,000 acres at $25 per acre to grow the algae. The system was
validated by Applied Research Associates, one of the nation's
foremost grant-writing firms that work with the Department of
Defense for system weapons and energy production. "They looked
at all algae systems nationwide; they came away saying that this
particular system would solve our energy problems."
4:47:47 PM
MR. SMITH said there is a proposed tax on CO2 emissions and
algae will eat CO2. Coal plants are being voted down because of
the gas exchange problem, but algae will consume the CO2 and
NOx. A typical million-ton coal plant will spend $30 million a
year sequestering NOx. Sequestering CO2 will cost from $2 to $70
per ton for coal. Algae convert the CO2 into harmless organic
carbons. "Gas sequestration provides an environmentally safe
expansion of coal mining and the petroleum industries in
Alaska," including the Pebble gold mine. Algae consume the nasty
elements associated with mining.
4:49:56 PM
MR. SMITH said there are two models for CO2 in the world, the
European Union model where each country gets an allotted amount
of CO2 emissions, and if those are exceeded carbon credits must
be purchased or there will be heavy fines. The U.S. model is
voluntary. All emissions are reported. If the new budget comes
through there will be "CO2 issues." There are not enough carbon
credits relative to demand in Europe. In the U.S. the carbon-
trading market is $2 a ton for CO2, and in Europe it is $19 per
ton. Algae produce 38,500 gallons of oil per acre at $00.85 per
gallon. It also produces 285 tons of cake. It consumes 10,000
tons of CO2. At $2 per ton, one acre of CO2-consuming algae is
worth $20,000. If it is trading at $19 per ton, one acre is
worth $190,000. With one acre of soy, "you're lucky to get a net
profit of $1,000." Algae consume 50 tons of NOx per acre.
Gasification of both oil and cake will provide for the storage
of energy in Alaska. It can be used as needed. "We are making a
proposal with the Department of Energy for the state of Alaska."
4:53:24 PM
MR. SMITH said the company has a relationship with Applied
Research Associates, and both are filing a grant with the
department. The Applied Research Associates are bringing in the
partners. The largest power company in the Midwest met with his
company over the last several months. The power company was
skeptical, but at the end of the meeting it wanted to know when
it could get started. One ton of coal will produce 3 million
tons of carbon. There is no other solution.
CHAIR MCGUIRE asked if the grant is under the new stimulus
package - the competitive grants.
MR. SMITH said yes.
4:55:12 PM
REPRESENTATIVE PETERSEN asked how this can benefit small Alaska
communities.
MR. SMITH said his objective is simple. "We plan to plunk these
units down into individual communities." The units don't need an
outside source of energy to operate, because the energy is
created by the unit. The oil and cake are gasified. Ms. Holdmann
said the gasification industry isn't "there yet," but he is
working with gasification firms from Scotland to Texas that have
solved many gasification problems. The units will produce
kilowatt hours at substantially lower costs than the villages
are paying. He is not asking Alaska for money. He has met with
Alaska's largest shipping and handling management company. A
development corporation will help. He met with John Harpole, who
is the state's foremost authority on diesel integration. He has
put together a good team, "and we're going to approach the DOE
on your behalf."
CHAIR MCGUIRE invited him to continue to share his progress on
getting the competitive grant money.
4:57:48 PM
The meeting was adjourned at 4:57 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| Algae Fuels Presentation.pdf |
SENE 2/26/2009 3:00:00 PM |
|
| Alaska Energy Policy (ISER).doc |
SENE 2/26/2009 3:00:00 PM |
|
| CERA Presentation.ppt |
SENE 2/26/2009 3:00:00 PM |
|
| Sen Energy Mtg Notice Feb 23-27.doc |
SENE 2/26/2009 3:00:00 PM |
|
| Ginny Fay Presentation.ppt |
SENE 2/26/2009 3:00:00 PM |
|
| Gwen Holdmann Presentation (Feb 26th).ppt |
SENE 2/26/2009 3:00:00 PM |