01/23/2013 03:30 PM Senate RESOURCES
| Audio | Topic |
|---|---|
| Start | |
| Who's Keeping the Lights and Heat On? Problems and Solutions | |
| Homer Electric Association Update by Bradley Janorschke | |
| SB29 | |
| Adjourn |
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| *+ | SB 29 | TELECONFERENCED | |
ALASKA STATE LEGISLATURE
SENATE RESOURCES STANDING COMMITTEE
January 23, 2013
3:30 p.m.
MEMBERS PRESENT
Senator Cathy Giessel, Chair
Senator Fred Dyson, Vice Chair
Senator Peter Micciche
Senator Click Bishop
Senator Anna Fairclough
Senator Hollis French
Senator Lesil McGuire
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
PRESENTATION: WHO'S KEEPING THE LIGHTS AND HEAT ON? PROBLEMS AND
SOLUTIONS BY THE GAS SUPPLY STUDY GROUP
- HEARD
PRESENTATION: HOMER ELECTRIC ASSOCIATION UPDATE BY BRADLEY
JANORSCHKE
- HEARD
SENATE BILL NO. 29
"An Act relating to the regulation of wastewater discharge from
commercial passenger vessels in state waters; and providing for
an effective date."
- HEARD & HELD
PREVIOUS COMMITTEE ACTION
BILL: SB 29
SHORT TITLE: CRUISE SHIP WASTEWATER DISCHARGE PERMITS
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR
01/18/13 (S) READ THE FIRST TIME - REFERRALS
01/18/13 (S) RES, FIN
01/23/13 (S) RES AT 3:30 PM BUTROVICH 205
WITNESS REGISTER
DAN SULLIVAN, Mayor
Anchorage, AK
POSITION STATEMENT: Commented on Cook Inlet gas supply issues.
MOIRA SMITH, Vice President & General Counsel
Enstar Natural Gas Co.
Anchorage, AK
POSITION STATEMENT: Commented on Cook Inlet gas supply issues.
BRAD EVANS, CEO
Chugach Electric Association, Inc.
Anchorage, AK
POSITION STATEMENT: Commented on Cook Inlet gas supply issues.
JAMES POSEY, General Manager
Municipal Light & Power (ML&P)
Anchorage, AK
POSITION STATEMENT: Commented on Cook Inlet gas supply issues.
BRADLEY P. JANORSCHKE, General Manager
Homer Electric Association (HEA)
Homer, AK
POSITION STATEMENT: Provided update on HEA energy generation
projects as they related to Cook Inlet gas supply issues.
CORY BORGESON, President and CEO
Golden Valley Electric Association (GVEA)
Fairbanks, AK
POSITION STATEMENT: Provided update on GVEA energy generation
projects as they related to Cook Inlet gas supply issues.
LARRY HARTIG, Commissioner
Department of Environmental Conservation (DEC)
Anchorage, AK
POSITION STATEMENT: Supported SB 29.
MICHELLE BONNET HALE, Director
Division of Water
Department of Environmental Conservation (DEC)
Anchorage, AK
POSITION STATEMENT: Answered questions on SB 29.
ACTION NARRATIVE
3:30:38 PM
CHAIR CATHY GIESSEL called the Senate Resources Standing
Committee meeting to order at 3:31 p.m. Present at the call to
order were Senators French, Bishop, Dyson, Fairclough, Micciche
and Chair Giessel.
^Who's Keeping the Lights and Heat On? Problems and Solutions
Who's Keeping the Lights and Heat On? Problems and Solutions
3:31:04 PM
CHAIR GIESSEL remarked that in 2008 the committee heard the same
topic and that they would hear from the Gas Supply Study Group
today.
3:32:01 PM
DAN SULLIVAN, Mayor, Anchorage, AK, said the problem of reliable
gas supply is a top priority, because utilities had indicated
there wouldn't be enough after 2012. Now that it's 2013 it has
become a much more visible reality, so he formed this energy
task force called the Gas Supply Study Group. It has worked
closely with the utilities, the producers, the large users of
energy in Southcentral. First, after some scary incidents, they
recognized that plans were needed so that everyone would know
what their role was if there were to be a disruption in supply.
More importantly, they are working on preventing the problem
through conservation and their Energy Watch Program asks folks
to "turn it down and turn it off" if the alert goes out. He said
that public awareness was starting to increase as people start
to participate in saving energy.
MAYOR SULLIVAN said the legislature helped by passing HB 280/SB
309 in 2010 that incentivized new drilling activity and gas
storage in Cook Inlet and those activities had increased
dramatically with new players and gas storage coming on line
this year. But he warned that there is a disconnect between
activity and production. Right now if you ask the new players in
Cook Inlet if they are willing to sign a gas commitment contract
for 2014 or beyond, not many hands would be raised. So a supply
gap situation is approaching.
3:35:44 PM
MAYOR SULLIVAN said it is gratifying to know that there is unity
of purpose among all the utilities in the form of the Long-term
Gas Supply Work Group.
SENATOR MICCICHE asked why the producers would be hesitant to
sign a long-term gas supply contract.
MAYOR SULLIVAN answered that it was just a matter of having a
confirmed supply to commit. He noted that Hilcorp (that just
purchased the Chevron/Marathon assets) would now control about
70 percent of Cook Inlet gas fields. They are a very aggressive
company and he thought they felt very confident they could meet
a good portion of this challenge, if not all.
3:37:43 PM
MOIRA SMITH, Vice President & General Counsel, Enstar Natural
Gas Co., Anchorage, AK, introduced herself.
BRAD EVANS, CEO, Chugach Electric Association, Inc., Anchorage,
AK, introduced himself.
JAMES POSEY, General Manager, Municipal Light & Power (ML&P),
Anchorage, AK, introduced himself.
3:38:30 PM
MS. SMITH said several members of the group were in the audience
and that all Southcentral utilities were working together on
this problem.
She said each Southcentral utility was given a certificate of
public convenience and necessity by the Regulatory Commission of
Alaska (RCA), so they don't see a decline curve that has no end
or a cliff, but they do see a challenge to their everyday
business. The curve covers about half of the state's population
and that is why they are looking so hard for a solution.
MS. SMITH said when Protechnical Resources Alaska (PRA) was
engaged by the utility group to look at supply and demand issues
they were asked to prepare a decline curve analysis, which
looked at existing wells and projected how much they would
produce going forward. That was built as a base case, but then
knowing that additional exploration activities were going on,
they decided to build that into it. This sensitivity added 10
mmcf/day each year through 2019 and another model added 20
mmcf/day for each year between 2013 and 2019. So, the group
didn't assume that existing wells, the base case, was what would
sustain them into the future. However, even in light of that
additional production, a shortfall is expected.
3:41:34 PM
Cook Inlet demand included fuel operations by producers of oil
and gas in the Inlet, Tesoro's gas demand and utility demand,
about 80 bcf/yr. Of that, Enstar is 34 bcf percent, Chugach is
around 25 bcf and ML&P is around 12 bcf. But the demand grows
very precipitously to a point in 2017, for example, when there
is not enough gas in the Inlet to supply Chugach, for example.
It's not as if the gas would be distributed in that way, but it
gives people a sense of the magnitude of the problem.
3:42:36 PM
She thought it would be helpful to look at what Enstar went
through in December 2012, the coldest year since 1982. There
were a lot of demands on the Inlet that year not just the
"native demand" through the utilities, which was heightened by
the cold, but also an increased demand for export activities and
filling Cook Inlet Natural Gas Storage Alaska (CINGSA) up (which
needed both working gas and PAD gas to fill the reservoir's
contracted demand).
CHAIR GIESSEL asked her to define PAD gas and her other
references.
MS. SMITH explained that Cook Inlet Natural Gas Storage Alaska
is an LLC, a public utility that was begun as a result of the
Cook Inlet Recovery Act. It was a group effort among the
utilities; Enstar's parent company is one of the co-owners and
it has minority owners as well. It took a largely depleted
natural gas reservoir and added two kinds of gas to make it a
functioning natural gas storage reservoir. One kind of gas
belongs to CINGSA and that is the PADS gas and it stays there
for the life of the facility. It's there to ensure that
pressures remain at the appropriate levels so that you can get
the stuff out that you put in. The other kind is working gas and
the capacity of CINGSA is 11 bcf/working gas. CINGSA has three
customers at this point: Enstar (70 percent), Chugach and
Municipal Light and Power (ML&P).
3:45:06 PM
She explained that the point of CINGSA was to address the
deliverability problem, but there are two versions of it. One
has to do with the volumetric shortfall and the other is if the
Inlet will produce enough gas in 2013 to meet 2013 demand, and
the answer could be either yes or no. CINGSA helps to make sure
that when it gets cold Enstar doesn't have to ask the producers
to give them more gas to meet their deliverability for space
heat.
She presented a slide indicating that their base purchases from
the producers stayed relatively consistent at 150 bcf/day for
each of the cold days in December. What was pulled out of CINGSA
swung a little bit with the temperature. On December 17, for
example, Enstar's overall demand was 220 mmcf, but on that day
about 60 mmcf came out of CINGSA.
3:46:00 PM
SENATOR MCGUIRE joined the committee.
3:47:25 PM
CHAIR GIESSEL asked her to explain "gas under contract."
MS. SMITH explained that they enter into contracts with the
producers to buy gas. Producers in their ideal world would say
yes; we'll sell you 50 mmcf every day, because that is what our
wells like to produce. Historically, Enstar said no you can give
us 15 mmcf in the summer when demand is that low, but you're
going to have to give us 60 mmcf in the winter when demand goes
up, because it's colder outside. So, gas under contract means
gas they can call on the producers to give them on any given
day. It is quite different from reserves and resources, but it
is the metric by which Enstar measures its ability to deliver
gas and electricity to its customers.
3:48:02 PM
SENATOR DYSON said he heard part of last winter's deliverability
problem had to do with exports and he thought part of the deal
was that exports were interruptible when there was a short fall.
MS. SMITH answered that the export license was intended to
protect local needs.
SENATOR DYSON asked what they weren't getting in her answer.
MR. EVANS responded the constraints in the system became more
evident while they tried to support exports during the summer
and also try to fill CINGSA at the same time. The gas balance
didn't work so perfectly, but he wouldn't construe that to mean
that the local needs weren't met. There was just some trouble
getting started.
SENATOR DYSON asked if the pipes, valves or compressors weren't
big enough.
MR. EVANS answered that it's just another demonstration of Cook
Inlet decline and that it gets more and more difficult to meet
the needs of all the people that want the gas.
SENATOR DYSON asked if the export of LNG was part of the
problem.
MS. SMITH replied that Cook Inlet used to have a lot more flex
points: Agrium (which they could turn down) for one. The plant
used to have more industrial users overall and the Inlet used to
have more gas under contract, so it wasn't stretched as thin as
it is now. There is a lack of redundancy in production and how
gas is delivered and their ability to adapt to a changing demand
was much less than it used to be.
SENATOR DYSON asked if gas was being exported when
Enstar had trouble getting enough of it.
MR. EVANS said no.
3:51:24 PM
MS. SMITH added that the recent incentives had been significant
and have brought additional players in to the market. Buccaneer
puts a well on and getting gas under contract in Enstar's case
takes a very, very, short period of time. They are getting it as
quickly as people can get it behind pipe.
3:51:48 PM
SENATOR FRENCH asked how much working gas CINGSA has.
MS. SMITH answered close to 6 bcf.
3:52:37 PM
SENATOR BISHOP asked if "working gas" can be called "sales gas"
and how much "lift gas" is in the reservoir.
MS. SMITH answered about 3.5 bcf of injected gas and 3.5 bcf of
native gas is in the reservoir.
MR. EVANS said other energy like Fire Island (wind) that was
just brought on help offset gas that can be put into storage. A
larger step is Southcentral Power Project (SPP) in Anchorage
that spun its first turbine on Oct 18, 2012 that offsets 3
bcf/yr. Conservation efforts will also add up to a one-third
reduction in gas demand by 2015 in Chugach. Add the Cooper Lake
hydro expansion and Battle Creek (expanding the Bradley Lake
project) to that.
3:56:32 PM
MS. SMITH said the utilities have reached what they consider the
bottom line to where they think Cook Inlet gas needs to be
supplemented with gas from somewhere else. She reminded them of
Enstar's RCA certificates and their obligation to do their very
best to serve Southcentral customers with gas and electricity
and said they were cognizant of the state's concerns about
importing gas and want to do their best to have a solution that
has as little impact as possible on producers' ability to
produce or Alaska's fiscal reality and want this option to be
just a bridge solution to a gas line. They would buy gas from
anybody including the North Slope, but they don't view that as
something to count on to fill the shortfall in the next three or
four years. They are looking for a solution that will avoid
discouraging new Cook Inlet production, be scalable to market
needs so it can be ramped up or down as needs be, creates a
price signal that will encourage local production and supply and
be flexible to allow for a portfolio of future options.
She explained that as a result of no imports and limited exports
out of Cook Inlet Enstar counts on production being exactly what
they need to meet Cook Inlet demand. That is a big risk, because
on any given day, production hiccups can occur. Without the flex
points of the LNG export terminal, Agrium and other industrial
users, they run the risk of some sort of black out situation,
and ultimately they want a more diversified portfolio to ensure
their ability to continue delivering gas and electricity.
MS. SMITH said the Long-term Gas Supply Group has asked for
expressions of interest from different companies that are
involved in the transport of gas and is in conversations with
three marine compressed natural gas (CNG) providers, five
different marine liquefied natural gas (LNG) providers and in
conversations related to trucking LNG from the North Slope.
3:59:43 PM
SENATOR DYSON asked since pricing was in the RCA's jurisdiction
how price signals could be created to induce producers to drill
for gas.
MS. SMITH replied that was a very important question and to a
degree the RCA doesn't actually control price; it only controls
the utilities' ability to recover the cost of gas. And Enstar
takes the cost of gas and passes that cost directly on to
consumers; they don't get a margin on their gas sales.
The danger in getting exactly the right amount of production is
if you get too much the prices will go down, a matter of supply
and demand; if you get too little, then prices will go up; and
consumers will suffer. So, to the degree that their import plan
to supplement Cook Inlet gas has an effect on price, it's going
to make prices go up. None of their options are low cost. The
good news is if they come up with a relatively first "do no harm
solution" that will increase the price to a point where it will
incent production, but their goal always is to keep the prices
as low as possible to the customers. If you talk about signing a
15-year contract with a marine CNG provider, that price point
starts to look pretty reasonable. It's higher than current gas
prices, but not astronomical. However, if you try to compress
that to a five-year deal so you're not getting in the way of a
gasline or otherwise affecting the ability to stop the imports,
you're going to pay more. The longer the contract, the more
economic it is because the capital investment can be amortized.
4:03:17 PM
MS. SMITH said they broke down the need into both short-term and
long-term because nothing will come on line until 2015/16. So
what is to be done between now and then? Burning diesel is one
short-term solution that is available and dependable and relies
on existing predictable technology.
4:04:09 PM
SENATOR FRENCH said he was shocked when he first heard about the
diesel alternative and asked how that would work.
MS. SMITH answered that Enstar had commercial arrangements in
place so that if there is a shortfall they can ask ML&P to burn
diesel and shave their gas for Enstar's customers.
4:05:00 PM
SENATOR FRENCH asked if that would happen in the eventuality
that CINGSA is depleted during an exceptionally cold period and
if she envisioned some days when CINGSA couldn't make up the gap
and what sort of temperatures would those be?
MS. SMITH replied that it's in any eventuality: if several wells
go down or there is a pipeline disturbance. The system doesn't
have redundancy and there is very limited ability to flex if the
gas isn't flowing through. It could also mean a late season cold
snap when CINGSA sales balance has been depleted.
4:05:49 PM
MR. POSEY said burning diesel would be very expensive.
SENATOR FRENCH asked for a comparison of electricity generated
with gas versus diesel.
MR. POSEY replied $50-70 mgw for gas and $250-300 mgw for
diesel, which equipment is much older than that for gas.
SENATOR FRENCH said so five to six times more expensive and far
less unreliable.
SENATOR MICCICHE said he was talking about a "cocktail" or and
an index where the increased cost would be averaged over all of
the utilities.
MR. POSEY replied that he didn't know how they would do it.
MS. SMITH said an increase would be blended in with other gas
prices; it's not as if all of sudden the price would go up five
to seven times what it was before. Hopefully they would be
talking about relatively small volumes.
4:07:27 PM
Looking forward to what might be doable with extensive capital
investment by the electrics, Ms. Smith said they could burn
diesel in a more thoughtful manner. So, rather than waiting for
a compressor to go down, they could look at "managed burns"
where you burn on a less freezing cold day so you can preserve
CINGSA balances. But, none of the short-term solutions are
inexpensive.
MS. SMITH said they are trying to look at all reasonable
solutions in their timeframe and have engaged Northern Economics
to do an economic analysis and two consultants to pick it apart.
Reports and recommendations are expected next month, which would
be the precursor to a decision. Unfortunately, they have gotten
to the point where they feel a decision is necessary on short-
term and long-term plans now, and the reason is you can't have a
shortage on Monday and have gas imported on Thursday. It takes
lots of time to get purpose-built ships to contract for existing
supply and to make the commercial arrangements necessary to get
the technology put in - like a dock in Cook Inlet or at the
loading site - and to enter into the commodity agreements. And
they realize the business decision they will be forced to make
will likely have implications on the state's policy.
4:09:59 PM
She said once the studies and recommendations were done next
month and a decision was made they would make regulatory filings
with the RCA and FERC, DOE and all of the familiar crowd of
regulators.
4:11:16 PM
SENATOR MICCICHE asked why there is a bcf-equivalent draw
between 2012 and 2013 on slide 11 (on usage and the projected
forward needs).
MR. EVANS replied that it was a reflection of conservation
kicking in and the resulting efficiency gains he talked about in
production that are actually large enough to show up on the
scale.
SENATOR MICCICHE said it looked like almost 10 percent; but the
increased usage going through 2020 made it hard to tell.
MR. EVANS agreed. It's hard to start reading in those kinds of
things, because conservation, efficiency and demand constantly
change, but there is a "lump gain" in that one spot.
MR. POSEY noted that the "hockey stick" at the end was Donlin
Creek.
4:13:06 PM
SENATOR FAIRCLOUGH asked when ConocoPhillips' export permit
expires if they were going to actively seek a renewal.
MS. SMITH answered no.
SENATOR FAIRCLOUGH asked how much gas was being exported right
now.
MS. SMITH replied 9.6 bcf was exported in 2012.
SENATOR FAIRCLOUGH asked if the utilities had approached
ConocoPhillips directly to see if the state might move in on a
spot market and replace their contracts if they had any going to
the Pacific Rim and then defer that gas to the state. That way
transportation costs could be reduced and imports wouldn't be
coming in to Alaska.
MR. EVANS answered it's not that easy, because ConocoPhillips
makes commitments long in advance of those deliveries as well as
for infrastructure. Their models are hard to ramp up and down
just like ours are. There might have been a couple of
opportunities to do that, but they didn't have a place to put it
and it would have had to stay in the ground. CINGSA can only
take so much so fast.
MS. SMITH added that Enstar is in conversations with
ConocoPhillips both on gas supply and an import/export use of
the existing plant.
SENATOR FAIRCLOUGH said her point was if the utilities could
lower transportation costs by doing a spot market purchase for
Alaskans directly instead of bringing supply in from the Pacific
Rim to Alaska.
SENATOR DYSON said that he perhaps naively thought that
utilities only needed to figure out a bridge for three or four
years, and that the Division of Oil and Gas and USGS both
estimated 17 or 19 tcf of recoverable gas in the Inlet and that
would make everyone happy for a long time, but it seems now that
she was assuming that even if 18 rigs were out there drilling,
the Cook Inlet supply wouldn't ever be reliable. If her nodding
meant yes, then they have to think about why their estimate is
significantly different than DNR's.
MS. SMITH said her nodding was a lawyer thing and that they just
don't know, but they do know from professionals in this field
that there is a lot of gas in Cook Inlet and that it's also very
hard to turn around production decline curves like this. And you
can't plan on what you don't know exists. Enstar was hoping to
find a solution without causing Southcentral customers to pay
too much for it, but the reality is if you ask for a shorter
term solution, you will pay more.
4:18:30 PM
MR. POSEY said basically the department deals with what might be
there but you can only contract with what a company says is
there. The department expects that there may be more gas, but
not what it would take to have those 17 or 18 uneconomic wells
drilled to accelerate production that would take them through
the next seven years. Unless there is a big discovery in the
middle of the Inlet or a big pipeline gets built, that seven
year period needs to be extended. Most of the 16 to 17 tcf (USGS
projections) is probably in the middle of the Inlet, but right
now between Beluga's rigs and permits they don't see anyone
finding that.
SENATOR FAIRCLOUGH asked them to reflect on what happened to the
supply in the RCA offering from Marathon that had gas contracts
available, but that the RCA turned down. Hilcorp now has those
assets.
4:21:06 PM
MS. SMITH responded that they observed how Marathon did not
invest in getting that gas out of the ground between 2005 and
2013 and are optimistic about Hilcorp coming in.
^Homer Electric Association Update by Bradley Janorschke
Homer Electric Association Update by Bradley Janorschke
4:22:13 PM
BRADLEY P. JANORSCHKE, General Manager, Homer Electric
Association (HEA), said it serves the western half of the Kenai
Peninsula and about 32,000 members. He was asked to give a quick
update on what their generation needs will be. He explained that
for a long time HEA and ML&P bought wholesale power from Chugach
Electric Association (CEA). They have now recognized that the
current fleet of generation is aging and they need to make a
decision on what to do in the future. His board decided it
wanted to create some economic development on the Kenai
Peninsula, expand some of their existing resources and move
forward. Their current contract expires at the end of this year
and they decided to go "Independent Light," which means they are
connected to the Railbelt all the way to Fairbanks, so they can
take advantage of some of the economies of scale. They can buy
power cheaper than they can produce it and can see possible
opportunities to sell power to other utilities.
With that decision, they started the first phase of Independent
Light last April, which is building a steam turbine coupled to
the back-end of an existing 40 mgw generator in Nikiski. That
plant is adjacent to the Agrium facility. He explained that
since 2001 HEA had been base-loading that plant and selling the
power to Chugach Electric; the heat off the back end was sold to
Agrium. Since Agrium has closed, that excess heat has been
wasting into the atmosphere. So the backbone of Independent
Light, beginning in 2014 will be to rely on installing the steam
turbine (which is getting done now), capturing that heat and
producing an estimated 45 percent more electricity with no
additional fuel. So they will go for 40 mgw to 58 mgw of power
generation; in addition, they have the option to add more fuel
at this site that would allow them to produce as much as 80 mgw.
They hope the turbine is in service by the middle of this year.
The second part of Independent Light is for their peaking and
reserve needs. Construction of new generation began on a unique
site in Soldotna that is a key intersection point on the
transmission system between Bradley Lake, Nikiski and Anchorage.
It should be done later this year. The actual combustion turbine
is an Allen 6000 that produces 48 mgw. It's much more efficient
and is the same unit that ML&P and Chugach are installing in
south Anchorage and the same that Golden Valley operates in
North Pole.
4:27:10 PM
The third component of Independent Light is the new Bernice Lake
Power Plant substation located at Nikiski that they purchased
from Chugach last year. It gave HEA the opportunity to save $15
million by not having to build a second unit at Soldotna, which
had already been designed and permitted.
MR. JANORSCHKE said one of the frequent questions he gets is
with all the worries about the decline in production, why they
are building new gas generation. He had two responses: one is
that these new assets will be a lot more efficient than the
existing aging fleet and the other is that there is no other
option for base-load generation. As fuel supply goes, they have
secured a contract with Hilcorp for 2014 through the first
quarter of 2016; the agreement also includes two one-year
extensions upon mutual agreement.
4:30:03 PM
MR. JANORSCHKE said HEA is not solely focused on gas in reducing
their dependence on fuel. Two local options are Battle Creek and
Grant Lake. Battle Creek augments the amount of energy available
privately by about 10 percent and Grant Lake, located between
Cooper Landing and Seward that provides 5 mgw and plays a vital
role particularly during peaking periods. In addition, HEA is a
participant in CINGSA. They will finish their study work by the
end of 2013 on their current project and will finalize the
design next year; hopefully by January 2015 they will be
applying for their final FERC license.
4:31:33 PM
SENATOR BISHOP asked how many megawatts the new gas turbine at
Soldotna would generate.
MR.JANORSCHKE said 48 megawatts.
SENATOR DYSON said it's been traditional to use hydro power for
base-load and thermal plants for peaking, but he's turning that
over and asked what the timing is for turning over to a hydro-
electric plant.
MR. JANORSCHKE answered that HEA has the advantage of Bradley
Lake in its backyard; they are finding they can secure the
lowest price by buying a steady flow of gas from the producers,
and if they can keep that steady flow coming and use the storage
capability of Bradley Lake to follow their peaks, that is much
more economical than base-loading Bradley Lake to the extent
they can. One of the challenges of the current infrastructure is
scheduling that supply through a pipeline that can't accommodate
frequent variations in the flow of gas.
SENATOR DYSON said he wanted to know what it was like to use a
hydro plant for peaking.
MR. JANORSCHKE deferred that question to Mr. Evans since Chugach
was currently dispatching Bradley Lake.
SENATOR MICCICHE asked the Bradley lake capacity.
MR. JANORSCHKE replied about 120 megawatts; one of the
limitations is that the current transmission system is not
robust enough to be able to handle that much capacity at one
time and becomes increasingly unstable approaching that
capacity. So now only 90 mgw can be put on.
4:35:09 PM
CORY BORGESON, President and CEO, Golden Valley Electric
Association (GVEA), said he would talk about why Cook Inlet gas
is important to the Interior. GVEA produces power from a number
of different resources: coal, Bradley Lake hydro, Eva Creek
wind, oil-fired diesel turbines, an Allen 6000 that operates on
naphtha (a lighter blend of diesel) and a heavier grade of fuel
called HAGO (heavy atmospheric gas oil). They are always trying
to make sure they get the best mix of gas and other fuels for
their generation. They have 50 mgw of coal and anticipate the
Healy Clean Coal Plant coming on line in 2015. They also make
electricity made from gas that they get over the Intertie.
He said that in 2012 GVEA found that availability of power over
the Intertie was extremely limited and then their electric rates
were as high as 23cents/kwh while Chugach's rates were about 13
cents/kwh. Important mining customers were telling him it's too
expensive to do business there and were talking about going
elsewhere. That would have a tremendous ripple effect as GVEA
alone has 700 or more employees. So, they are very interested in
gas from Cook Inlet and see a lot of cooperation from the
Anchorage utilities on that issue.
4:39:16 PM
Today they are getting gas from Chugach Electric and ML&P,
calling them almost every day to see how much gas they have.
Chugach Electric has filed a contract they have acquired from
Hilcorp with the RCA that would provide gas that they would use
to produce power for GVEA starting in April 2013 going until
March 31, 2015. It's an extremely important contract and the
estimated savings to members would be about $34 million a year!
As a result of getting some of the gas, rates dropped from 23
cents to a little over 20 cents kwh. He said they talk to the
producers themselves and get a fair reception from them and
continue to work on that effort and hope to have a two-year
supply of gas when Healy coal comes on line.
4:41:06 PM
MR. BORGESON said when GVEA buys power over the Intertie they
can get it to Fairbanks for around 11-12 cents/kwh with all the
costs of transmission. Power from Healy would also result in 12
cents/kwh. He reported that producing power in North Pole with
HAGO costs 23 cents/kwh ($230/mgw/hr). Their North Pole unit (a
combined cycle plant with a back-end steam turbine that comes
off the Allen 6000) burns on naphtha at 16 cents/kwh.
4:42:42 PM
SENATOR DYSON asked where they get naphtha from.
MR. BORGESON replied from the Flint Hills Refinery. GVEA has
played a very active role in trying to develop a trucking
project to truck LNG from the North Slope to Fairbanks for space
heating, but it is a difficult type of commercial project to put
together. It would save about $15 million/year (over naphtha) to
re-gasify LNG from gas purchased at $14/mmcf. The real benefit
to Fairbanks of trucked gas is for space heating needs. They are
interested in working on that and have provided a letter of
interest response to AIDEA's request for letters of interest on
this project.
He said they are paying $4/gallon for heating oil now and that
is the equivalent of paying $31/mcf to heat homes. It costs
almost three times more to heat homes in Fairbanks than in
Anchorage. About $1 million has already been spent on the
liquefaction plant on the North Slope and its cost is somewhere
in the $200 to $220 million range. The trailers needed to bring
the gas to Fairbanks would cost $20 million; the regasification
plant at North Pole with storage would cost about $60 million.
Those are big dollars for a utility the size of GVEA, he
remarked, and that AIDEA had stepped in and taken a lead role
there. So they are happy to look at Cook Inlet.
SENATOR BISHOP thanked him and said he appreciated everyone's
comments.
4:47:40 PM
SENATOR DYSON asked how much of the $200 million regasification
plant is fungible, and if the rest of the plant is in trains
that are easily moveable.
MR. BORGESON answered broadly yes; they are built in modular
units; they are trains that can be moved, but you hear reports
as to how likely that is to happen in a real world after you
have sent them up to the North Slope. But a camp that used to be
on the North Slope is now at Denali National Park; so a lot of
things happen. And the Governor talked about a movable
liquefaction plant on the North Slope.
4:50:02 PM
Recess from 4:50 to 5:01 p.m.
SB 29-CRUISE SHIP WASTEWATER DISCHARGE PERMITS
5:01:27 PM
CHAIR GIESSEL reconvened the Senate Resource Committee meeting
at 5:01 p.m. and announced SB 29 to be up for consideration.
LARRY HARTIG, Commissioner, Department of Environmental
Conservation (DEC), introduced staff in the audience. He planned
to give a little history leading up to today, talk about the
Science Advisory Panel and then about the bill and permitting
facilities. While this bill deals with some aspects of that, it
primarily aligns cruise ships with other people who get
discharge permits from the department. It doesn't change the
laws on how it's done.
COMMISSIONER HARTIG recalled in 1999 when people became
concerned about the waste water discharge from cruise ship
vessels and that led to them being required to switch to advance
waste water treatment systems in 2004. They were known to be the
best water treatment at the time doing even better than land-
based facilities. In 2006, a citizens' initiative was put forth
taxing the industry to help pay for onshore infrastructure and
requiring a permit issued by the State of Alaska in order to
discharge treated waste water in Alaska's waters (no more than
three miles off shore, which is federal waters that has no such
requirement).
SENATOR FRENCH said Southeast Alaska has some enormously wide
passages much more than six miles across and asked if strips of
federal waters were located in those passages or do you have to
go to the outer coast of Alaska to find federal waters.
COMMISSIONER HARTIG said the department has maps dealing with
those issues, but it is complicated. He needed a particular
location to give him an answer, but in general, some rules apply
and you don't just go to the outer beach.
SENATOR FRENCH asked where the nearest federal water to Juneau
is.
COMMISSIONER HARTIG said he would have to get back to him on
that.
5:06:29 PM
He said the 2006 voters' initiative created the requirement for
a state permit in state waters; it required that a vessel
discharging water under that permit meet state water quality
standards at the point of discharge. He explained that water
quality standards originate in the federal Clean Water Act. Each
state is supposed to identify what uses its waters can be used
for such as drinking, recreation and acquatic life. Then those
uses are looked at to see what water quality has to be: how much
and what kind of pollutants can be allowed without impairing
that use. So, the state set water quality standards to protect
these designated uses of water bodies throughout the state. The
Environmental Protection Agency (EPA) reviews those standards
and approves them; then they get incorporated into permits.
COMMISSIONER HARTIG explained if someone needs a permit from the
state to discharge water, the department would look at the uses
of the waters they would be discharging into and what impacts it
would have on those waters and write limits into the permit.
Those permit conditions set water quality standards. So, "at the
point of discharge" means those standards have to be met before
their discharge hits the water. That is in contrast to other
dischargers of treated waste water around the state. Other
industries' water treatment plants that discharge into marine
water have mixing zones, which are an exception to water quality
standards. They are allowed by the EPA recognizing that it's
really difficult, if not impossible, for many dischargers to
meet the water quality standards at the point of discharge. So
they allow a limited area of mixing of the treated effluent with
the receiving water where the water quality standards have to be
met at the edge of the mixing zone. The permit would say what
the conditions for the mixing zone are, how much could be
discharged and where water quality standards have to be met and
how they would be monitored. Mixing zones are a typical
provision in a state permit that would be issued to a waste
water discharge facility anywhere around the state, and the 2006
initiative didn't allow DEC to give cruise ships mixing zones.
The question arose from vessels that weren't meeting state water
quality standards at point of discharge. In 2009 HB 134 passed
that gave DEC temporary (until the end of 2015) authority to
allow cruise ships to have mixing zones. So in 2016, they would
go back to the original citizens' initiative using the point of
discharge for criteria. Second, HB 134 required DEC to convene a
Science Advisory Panel to advise them about what is on the
horizon in terms of waste water treatment facilities. The
statute designates where the panel members come from and what
kind of expertise they must have.
5:12:46 PM
The panel held about 15 meetings including experts from Europe
and Alaska, DEC data and cruise ship system observations and
issued a preliminary report in November 2012 indicating what was
achievable and when. They concluded that the current systems
called "advanced waste water treatment systems" are state-of-
the-art in terms of what is available now.
COMMISSIONER HARTIG explained that advanced waste water
treatment systems are a class and that a number of manufacturers
approach waste water treatment a little differently. Some may
work better on different pollutants and ships are different in
terms of piping and spacing, so you can't say one system is the
best without studying the whole ship.
5:14:21 PM
The panel also looked at DEC water quality data and found that
these ships were doing pretty well with meeting the criteria at
the point of discharge except for treating ammonia and three
dissolved metals: zinc, copper and nickel. The panel couldn't
identify a system on the horizon that could be installed on
these vessels that would bring them into compliance with the
point of discharge requirement. They did recognize that there
certainly are opportunities for efficiencies and tweaking
systems for improvements. With the standard hanging out there
and the authority to do mixing zones sunseting in 2015, the
department would suddenly be back to using at the point of
discharge for all parameters. Maybe some affordable incremental
moves could be made, but you still wouldn't make that standard
by 2015. Would you tweak your system and try to stay in Alaska
or start making plans to leave?
The DEC has a number of ways to regulate dischargers; it isn't
just the treatment system. It can say where the discharge should
be, how often, when under way so you have the sea turning up
behind the ship and rapid mixing, and who goes when to name a
few. Other things can be done to minimize the impact of the
discharge besides just looking at the treatment system, itself,
Commissioner Hartig said.
The panel also looked at the environmental benefit with other
changes that might be made and found that it would probably be
hard to define that, particularly given DEC's other authorities
to minimize the impacts of discharging waste water. The
preliminary report was required in 2013 and a final one is due
in January 2015 - right before the sunset of DEC's mixing zone
authority with the idea that the legislature would come back and
revisit the situation and decide what to do. The DEC concurred
with the Science Advisory Panel's findings.
5:18:48 PM
The key points in SB 29 are:
-it removes at the point of discharge requirement.
-it would allow cruise ships to be able to get a mixing zone
permit only if they treat waste water in advance with an
advanced waste water treatment system.
-it gives DEC guidance on what an advanced waste water treatment
system is and the ability to approve of a system that does the
same thing in a different way.
One thing the panel didn't address is in SB 29 and that is
smaller vessels; less than 20 that operate in Alaskan waters.
Their discharges would be managed under "best management plans"
that would be submitted to and approved by DEC. The department
would still have the ability to require a permit if they thought
the vessel needed to do things differently. The plans can be in
effect for five years under SB 29 instead of the existing three,
which is consistent with all waste water permits. The five years
would also apply to the larger vessels.
5:22:22 PM
CHAIR GIESSEL asked if the small vessel section was section 2 on
page 2.
COMMISSIONER HARTIG said he wasn't going to do a sectional
analysis but give an overview of how things worked together. He
went on to say that SB 29 also puts cruise ships in the same
category as other facilities that DEC issues waste water permits
for. Current law says when the department writes a new permit
for cruise ship vessels it can't have any condition in it that
is less restrictive than was in an earlier version of the permit
(the "anti-backsliding provision," that is based on federal
law). But there are a series of exceptions for when you are
allowed to backslide. Those exceptions are in current cruise
ship law and they are needed sometimes; for instance if a ship
did well on a bunch of parameters but not so well on one. The
department now has the flexibility to let them go ahead, so they
still want that flexibility.
5:24:56 PM
He said they had been writing permits during the last few years
the initiative was in effect and maybe some of them aren't
right. They basically want to have something similar to what
they do for other dischargers.
SENATOR FRENCH asked him to explain how the effects of copper
and zinc could be of concern to people who fish for salmon.
COMMISSIONER HARTIG said all the parameters they talk about are
of concern which is why water quality criteria has been
established for them. Copper has the potential to impact
olfactory senses of fish and impair their ability to find their
home stream or change their response to prey.
He explained that the department is required to review its
standards at least every three years; it's called a tri-annual
review. They notice the public and list the things they think
need to be looked at for possible change. Copper has been on the
last couple of tri-annual reviews; so it's one they are
watching. The best advice he could give is that the science is
still emerging and moving on it now would be premature. When
they move it will be very informed, because copper is not unique
to cruise ships. It would be of concern for a mine discharge and
it's also what some water systems are built out of.
SENATOR FRENCH asked if all cruise ships have copper pipes.
COMMISSIONER HARTIG answered no. Copper has a variety of
sources; you could say copper came from the copper pipes in the
community where they got their bunkered water or from the copper
pipes or fittings in the ship. DEC sets water quality standards
for everybody, so when they look at the potential effects of
copper, it wouldn't matter where it came from. They would look
at the amount of copper that is discharged and if it would be
safe going into whatever the receiving environment is. They
couldn't require discharging under way for a shore based
facility. Copper can't be treated in the discharge, but other
approaches can be taken like looking at people putting in more
copper than the cruise ships do.
SENATOR FRENCH asked who that would be.
COMMISSIONER HARTIG replied that he would have to look at the
historic mining reports. The City and Borough of Juneau plant
had problems with copper at one point that EPA was doing some
enforcement on.
5:30:08 PM
SENATOR MICCICHE said he was aware of mixing zones being
disallowed in anadromus streams for waste water discharges and
asked if there was another scenario in the marine environment
where mixing zones are disallowed in the state.
COMMISSIONER HARTIG answered that SB 29 doesn't change the law
that would allow DEC to decide where, when and how someone could
discharge waste water from a cruise ship. So they could prohibit
it that way. Mixing zone regulations don't go away with SB 29
and there are 17 requirements to get one; it can't bio-
accumulate or have toxic effects, it can't affect anadromus fish
going through the area, and it can't affect the water body's
ability to produce aquatic life in the future or affect
populations to name a few. A cruise ship has a right to mixing
zone, but it doesn't mean they automatically get one; it must
have an advanced waste water treatment system as well as meeting
all the conditions.
COMMISSIONER HARTIG said SB 29 doesn't change water quality
standards and when the state changes them they can't be used
unless the EPA approves them. SB 29 would sunset the Science
Advisory Panel, but not change DEC's ability to impose permit
conditions or to look at best available technologies, putting it
in line with other dischargers.
CHAIR GIESSEL asked if the allowance for cruise ships expires in
2015.
COMMISSIONER HARTIG answered that it expires at the end of
calendar year 2015 and the DEC would lose its authority to allow
mixing zone for cruise ships and would go back to "at the point
of discharge" for all water quality standards.
CHAIR GIESSEL asked why it was important to address the bill
now.
COMMISSIONER HARTIG replied that two things would motivate an
earlier look. First, the cruise ships themselves have various
systems and they are pretty packed in their spaces. If you make
a big change, the ship would have to be pulled apart; it would
have to go into dry dock and be cut in half or something like
that and that would require a fair amount of lead time and the
cruise ships are scheduled around the world. Also, nothing has
been identified to be any better than existing advanced waste
water treatment systems in terms of being available soon.
5:37:13 PM
Another point was that the current permit that was used for the
last cruise season expires in April 2013 and can't be extended
(beyond the three years). The first cruise ship arrives in April
2013. a week or two after the permit expires, and it will need a
permit to be legal under Alaska law because it needs to
discharge. DEC could issue a new permit for vessels coming to
Alaska that want to discharge before this upcoming season, but
it would be based on existing law. So if SB 29 passes there
would be a permit issued for the coming season that would be
based on the previous law. Ships would have to plan their cruise
season around that. It's all doable, but if SB 29 passes, then
the department would turn around and start running another
permit through the public process.
SENATOR FAIRCLOUGH asked how the department defines "advanced
waste water treatment" in regulation.
COMMISSIONER HARTIG replied that it would look like the statute;
the only difference would be if some other treatment system
became available.
5:41:00 PM
SENATOR FAIRCLOUGH said she didn't see a definition in the bill.
Language on page 3, starting on line 13, provides two areas of
minimum standards and she asked if those were federal water
quality standards or approved Alaska water quality standards
that have been approved by the EPA or another federal agency.
COMMISSIONER HARTIG replied that those are the federal
standards, sometimes referred to as the Murkowski Law, that
caused the ships to put advanced waste water treatment systems
in.
SENATOR FAIRCLOUGH said she was looking for specific Alaska
water quality standards and needed a better definition of
"advanced waste water treatment." She also wanted to know what
the department might consider as add-ons.
COMMISSIONER HARTIG said the water quality standards are in
regulation 18 AAC 70. Manuals are incorporated by reference and
are all available on the DEC website; he offered to help her
locate what she was looking for.
SENATOR DYSON said putting the existing standards in place was
hard to do and ships spent a lot of money to install those
plants that were only required for the Alaskan market. He said
that Anchorage's municipal waste water treatment is still only a
primary system and is pretty primitive and the only way they
stay in business is by being grandfathered in. He was sure
Anchorage must have 70,000 houses with copper pipe and he had
some information that said the Mendenhall River produces 23
times the amount of copper of all the cruise ships combined and
asked if that was true.
COMMISSIONER HARTIG responded that he read that in the panel's
report, but he didn't know the exact figures.
SENATOR DYSON asked if he knew how much copper was in the Copper
River that has a world-class salmon run.
5:45:18 PM
SENATOR BISHOP asked how many permits he writes for large
vessels.
COMMISSIONER HARTIG replied that he writes one permit; it's
called a general permit and different types of vessels are
separated into subcategories within it.
SENATOR BISHOP asked for ball park information on the ratio of
people who discharge inside and outside state waters.
5:46:41 PM
MICHELLE BONNET HALE, Director, Division of Water, Department of
Environmental Conservation (DEC), Anchorage, AK, said that 40
percent of cruise ships go outside the three mile limit to
discharge.
COMMISSIONER HARTIG pointed out that may just be because of the
holding capacity they have in their itinerary and how much time
in port and between ports. It's difficult to reach a conclusion
on one fact.
SENATOR FAIRCLOUGH asked if the ferry system was excluded from
the permit requirement.
MS. HALE answered that ferries are small passenger vessels that
submit a best management practices plan.
COMMISSIONER HARTIG answered that most of those vessels are
regulated by the Coast Guard in terms of what kinds of systems
they have, which is a lower technology than an advanced waste
water treatment system.
SENATOR FAIRCLOUGH asked if he had recommendations for improving
ferry waste water discharge standards.
COMMISSIONER HARTIG replied that he hadn't looked at that.
[SB 29 was held in committee.]
5:50:15 PM
CHAIR GIESSEL thanked everyone for their testimony and adjourned
the Senate Resources Standing Committee meeting at 5:51 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| SRES Gas Supply Group. Moira Smith 2013-01-23.ppt |
SRES 1/23/2013 3:30:00 PM |
Railbelt Utility Gas Supply Study Group |
| SB 29 Sectional Analysis.pdf |
SRES 1/23/2013 3:30:00 PM SRES 1/25/2013 3:30:00 PM |
SB 29 |
| SB 29 Science Advisory Panel Rpt to Leg COVER LTR 1-8-13.pdf |
SRES 1/23/2013 3:30:00 PM SRES 1/25/2013 3:30:00 PM |
SB 29 |
| SB 29 DEC Preliminary Report on Cruise Ship Wastewater 1-1-13.pdf |
SRES 1/23/2013 3:30:00 PM SRES 1/25/2013 3:30:00 PM |
SB 29 |
| SB 29 Fiscal Note LL0987-DEC-WQ-01-17-13.pdf |
SRES 1/23/2013 3:30:00 PM SRES 1/25/2013 3:30:00 PM |
SB 29 |
| SB 29 Cruise Ship Wastewater Permits vs.A.pdf |
SRES 1/23/2013 3:30:00 PM SRES 1/25/2013 3:30:00 PM |
SB 29 |
| SB 29 Cruise Ship Wastewater Transmittal Letter 2013 01 17.pdf |
SRES 1/23/2013 3:30:00 PM SRES 1/25/2013 3:30:00 PM |
SB 29 |
| SRES HEA Janorschke 2013-01-23.pptx |
SRES 1/23/2013 3:30:00 PM |
Utility Presentation |