Legislature(2025 - 2026)BUTROVICH 205
01/24/2025 03:30 PM Senate RESOURCES
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| Audio | Topic |
|---|---|
| Start | |
| Presentation(s): 2025 Enstar Natural Gas Update | |
| Presentation(s): Alaska Energy Authority (aea) Progress Update | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
SENATE RESOURCES STANDING COMMITTEE
January 24, 2025
3:30 p.m.
MEMBERS PRESENT
Senator Cathy Giessel, Chair
Senator Bill Wielechowski, Vice Chair (via teleconference)
Senator Matt Claman
Senator Forrest Dunbar
Senator Scott Kawasaki
Senator Shelley Hughes
Senator Robert Myers
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
PRESENTATION(S): 2025 ENSTAR NATURAL GAS UPDATE
- HEARD
PRESENTATION(S): ALASKA ENERGY AUTHORITY (AEA) PROGRESS UPDATE
- HEARD
PREVIOUS COMMITTEE ACTION
No previous action to record
WITNESS REGISTER
JOHN SIMS, President
ENSTAR Natural Gas Company
Anchorage, Alaska
POSITION STATEMENT: Presented the 2025 ENSTAR Update.
CURTIS THAYER, Executive Director
Alaska Energy Authority
Anchorage, Alaska
POSITION STATEMENT: Presented the Alaska Energy Authority (AEA)
Progress Update.
ACTION NARRATIVE
3:30:09 PM
CHAIR GIESSEL called the Senate Resources Standing Committee
meeting to order at 3:30 p.m. Present at the call to order were
Senators Dunbar, Myers, Claman, Kawasaki, Hughes, Wielechowski
(via teleconference) and Chair Giessel.
^PRESENTATION(S): 2025 ENSTAR NATURAL GAS UPDATE
PRESENTATION(S): 2025 ENSTAR NATURAL GAS UPDATE
3:31:02 PM
CHAIR GIESSEL introduced a presentation by ENSTAR President John
Sims titled 2025 ENSTAR Update.
3:31:15 PM
JOHN SIMS, President, ENSTAR Natural Gas Company, Anchorage,
Alaska, introduced himself and said he was also the President of
Cook Inlet Natural Gas Storage Alaska (CINGSA). He moved to
slide 1 and said the presentation would be an update on the last
24 months from ENSTARs perspective of gas supplying Cook Inlet
and on the recently announced exclusive agreement with
Glenfarne.
3:31:51 PM
MR. SIMS moved to slide 2 and highlighted the unique duty and
responsibility of the utility:
[Original punctuation provided.]
Utility Duty to Serve
This duty is not shared by producers, IPPs, or anyone
else in this state. It is our obligation alone.
Sec. 42.05.291. Standards of service and facilities.
(a) Each public utility shall furnish and maintain
adequate, efficient, and safe service and facilities.
This service shall be reasonably continuous and
without unreasonable interruption or delay.
3:32:45 PM
MR. SIMS moved to slide 3:
[Original punctuation provided.]
Establishing the Path Forward
April 2022: Hilcorp Announcement
• Creation of the Utility Working Group ENSTAR,
Chugach [Electric Association (CEA)], [Matanuska
Electric Association] MEA, [Homer Electric
Association] HEA, [Golden Valley Electric Association]
GVEA, [Interior Alaska Natural Gas Utility] IGU
MR. SIMS noted the Utility Working Group included all the
utilities and began the work of evaluating potential projects
that could meet the needs of utilities for natural gas along the
railbelt.
February 2023: Approval of the creation of a Reg
Asset, "we grant ENSTAR authority to defer all
necessary and prudent third-party costs incurred
during its participation in the multiparty working
group for studying and securing long-term gas supplies
in the Cook Inlet."
MR. SIMS said this mechanism was critical to ensure the recovery
of costs specifically related to the project and necessary for
the work to proceed. He said ENSTAR spent $4.4 million
evaluating and analyzing projects over the past 24 months.
June 28, 2023: [Berkeley Research Group] BRG & ENSTAR
presented our key options to the commission, which
included the Floating Storage Regas Unit (FSRU) and a
variety of other [liquid natural gas] LNG solutions.
MR. SIMS said this was the first step toward identifying which
projects could meet the [LNG] needs and what the estimated cost
would be to meet those needs.
3:34:48 PM
MR. SIMS moved to slide 4 and discussed the evaluation process
for each project proposal:
[Original punctuation provided.]
Assessment of Options
June 2023 - December 2024:
Over 30 [Confidentiality Agreements] CAs and [Non-
Disclosure Agreements] NDAs signed
For each proposal:
• Does it make operational sense?
3:35:06 PM
MR. SIMS said the point was to look at each proposal to
determine whether it would meet the needs of the utilities and
to operate on the existing system or require that the system be
boosted up.
For each entity:
• Are they fit? Are they able?
MR. SIMS emphasized that the evaluation process was long and
drawn out to be sure that the projects being pitched were
something that made sense and that the entity making the
proposal would be a good partner and could be trusted to move
forward as a developer.
3:36:06 PM
MR. SIMS said each utility had a different timeline for
[contract] expiration from Cook Inlet gas. Homer Electric
(HEA)'s contract with Hilcorp expired in 2024 and HEA became a
customer of ENSTAR April 1, 2024. Matanuska's contract expires
in 2028 and they have no gas supplies lined up, to his
knowledge. He noted that Chugach Electric also expires in 2028.
He said ENSTAR's contract with Hilcorp expires in 2023. He said
the priority was to determine whether the proposed projects
could meet the timeline of the utilities.
BRG created a prioritized system of scoring different
options with guidance from the Utility Working Group.
Options were scored based on ten criteria.
Uniformly, the top three criteria received the highest
priority scores.
1. Schedule Risk
2. Reliability of supply during operations
3. Delivered cost of supply per Mcf
4. Flexibility/Scalability
5. Project Complexity
6. Permitting
7. Environmental impact
8. Size of direct investment by utilities
9. Local economic impact
10. Carbon efficiency
3:37:29 PM
MR. SIMS moved to slide 5, titled Cook Inlet Gas Negotiations
and said while ENSTAR was reviewing the projects and entities,
they were also negotiating with Cook Inlet producers to procure
gas from Cook Inlet. He noted that, because ENSTAR's system
surrounds Cook Inlet, from a cost perspective, providing gas
from the Inlet made sense. Slide 5 contains a table illustrating
the details of a contract between ENSTAR and Furie submitted
December 31, 2024:
Year Volume Price
2026 3 BcF with royalty relief, $12.30 per McF
without royalty relief, $13.69 per McF
2027 9.5 BcF No price specified
2028 10.77 BcF No price specified
2029 9.12 BcF No price specified
2030 7.2 BcF No price specified
MR. SIMS said ENSTAR and the Cook Inlet producers were
optimistic that Department of Natural Resources (DNR) would
approve the contract. He said the prices for 2027 through 2030
were not specified because they would be driven by inflation. He
said [inflation increase] was capped at 1.5 percent, and there
was potential for deflation in the economy.
MR. SIMS pointed out that the contract begins in 2026 and there
are significant [LNG] needs in 2025 that are not yet filled, for
example, Homer Electric Association (HEA) would be served on an
interruptible basis beginning April 1, 2025. ENSTAR was working
on HEA's behalf to secure gas.
3:39:19 PM
MR. SIMS moved to slide 6 [Cook Inlet Natural Gas Storage
Alaska] CINGSA - Well Side photos, and said ENSTAR worked on the
CINGSA expansion over the past 24 months. He explained the
photos were of a small storage facility run by ENSTAR, in
partnership with [Cook Inlet Region Incorporated] (CIRI) and
Northern Natural [Gas]. The site was originally developed in
2012 according to the needs at that time. Current expansion work
will increase the facility's capacity by 2 BcF through
additional compression and the drilling of wells 6 and 7,
totaling seven wells. He said the expansion aims to deliver 65
million cubic feet per day in winter, ensuring pipeline pressure
and [ability to provide] customer service. The project,
initially budgeted at $72 million, was estimated at $67 to $68
million due to cost-reducing measures. He reported that the
perforation of wells 6 and 7 was scheduled for the upcoming
week.
3:40:58 PM
MR. SIMS moved to slide 7, photos of a large crane moving heavy
equipment. He said the crane was one of the largest on the Kenai
Peninsula and that it cost $60,000 per day to use. He explained
that supply chain shortages led ENSTAR to hold the crane unused
at high cost to prevent losing access to it. He said the lack of
resources and services are an unfortunate reality for [Cook
Inlet] projects.
3:41:47 PM
CHAIR GIESSEL emphasized that services in Cook Inlet are limited
for things [like the large crane].
3:41:55 PM
MR. SIMS concurred. He said the current project was impacted by
the limited services, not only with the crane but also with
[drilling] rig availability.
3:42:12 PM
MR. SIMS moved to slide 8, Gas Supply Communications. Slide 8
included screenshots of slides from a Department of Natural
Resources (DNR) presentation to the House Resources Committee
and a Wood MacKenzie presentation. He said, while ENSTAR was
evaluating import projects, negotiating with Cook Inlet
producers and expanding CINGSA, they were also doing a lot of
listening. He emphasized that all the public presentations
offered by different entities point to the fact that Cook Inlet
gas will run short of the total demand. He noted the Wood
MacKenzie slide bullet point communicating a nine percent
success rate. He said there have been 34 exploration wells
drilled in Cook Inlet over the past 15 years, with a nine
percent success rate. He said these facts reinforce the idea
that importing LNG to Alaska is an appropriate and prudent
measure to serve their customers.
3:43:48 PM
MR. SIMS moved to slide 9 and discussed the public announcement
on January 8, 2025 of the Glenfarne agreement signed in December
2024. He said the agreement was the culmination of 24 months of
intense internal discussions and work. He noted the agreement
allowed for the use of the Glenfarne name without fear of legal
action, but there were still many details to be worked out. The
exclusivity agreement involves a period of mutual project
development aimed at reaching a joint development agreement. He
said the project's timeline would accommodate the various needs
of the utilities starting in 2028, with a goal of completion by
2029 or 2030. He said specific details will be available in a
few months. He expressed pride in the partnership and the
ability to share the project publicly but emphasized that
specific decisions had not been made:
[Original punctuation provided.]
Glenfarne & ENSTAR
December 16, 2024:
Exclusivity Agreement signed between Glenfarne Group,
LLC and ENSTAR
• What is it?
• What it means
January 8, 2025:
Agreement went public
3:46:11 PM
SENATOR CLAMAN asked whether the public disclosure was the
result of someone making it public when they weren't supposed
to, or of a mutual decision between ENSTAR and Glenfarne.
3:46:27 PM
MR. SIMS explained that the information had to go public and the
legislature had to be informed, but the January 8 announcement
was not planned. He discussed the challenge of balancing the
various perspectives and the need for information with the need
for time and confidentiality to work through details of the
agreement. He expressed pride in the decision by Glenfarne and
ENSTAR to disclose information about their efforts.
3:48:04 PM
CHAIR GIESSEL noted that Glenfarne was also working with Alaska
Gasline Development Corporation (AGDC). She asked whether there
was conflict of interest for Glenfarne to work on two different
projects related to the same topic.
3:48:20 PM
MR. SIMS said he did not think a conflict of interest existed.
He said ENSTAR clarified, from the utility perspective, that it
was important for ENSTAR to have control and confidence that a
project can be developed and that it would be independent of the
Alaska [liquid natural gas] LNG project. He expressed optimism
and enthusiasm about the potential for the Alaska LNG pipeline
project, however he emphasized the importance of maintaining the
independence of the Glenfarne-ENSTAR project.
3:49:38 PM
MR. SIMS moved to slide 10. Slide 10 includes a photorealistic
rendering of the plans for the Alaska LNG export site:
[Original punctuation provided.]
Import Terminal Facilities
1. Cost-Effective optimized project
2. Aligned long-term infrastructure vision
3. Reliable gas supply
MR. SIMS highlighted the challenge of obtaining permits and
explained that the project proposed by Glenfarne would offer the
opportunity to leverage the existing permits for the Alaska
liquid natural gas (AK LNG) project's export site. He noted that
the Glenfarne proposal would impose a small utility footprint on
the site.
MR. SIMS stated that the multiple permits required for the
Glenfarne project were one of the reasons it was difficult to
determine the time and costs necessary to move forward.
3:51:26 PM
SENATOR MYERS asked whether a LNG facility would require
approval from the U.S. Maritime Department. He said he
understood that approval [of the LNG project] would require the
state to have a Coastal Zone Management Plan, which, he said,
the state does not currently have. He asked whether ENSTAR or
Glenfarne had investigated that.
3:52:03 PM
MR. SIMS said that is one of the many challenges ahead for this
project. He said he could not speak to it directly, but he was
aware of future challenges and future permitting needs.
3:52:51 PM
MR. SIMS moved to slide 11:
[Original punctuation provided.]
Highlighting the benefits at the Alaska LNG Site
1. Enhanced permitting and construction timeline
reduced
2. Cost-effective gas supply
3. Increased reliability with reduced mooring and ice
challenges
4. Flexibility on imported and local gas
5. Onshore reliability 6 and efficiency potentially
supported by LNG storage
6. Long-term support of Alaska Gas Pipeline
MR. SIMS expanded on the benefits of the Alaska LNG site
depicted on slide 11. He said the [Glenfarne] project underwent
extensive investigation, with over $4 million spent on analysis,
leading to the conclusion that it was the best solution.
3:54:56 PM
SENATOR DUNBAR raised concerns about the potential conflict of
interest related to a tax reform discussion from the previous
year. He said the tax reform primarily impacted a company whose
business was primarily on the North Slope, and led to a letter
from the company stating it would reduce investment in Cook
Inlet and Cook Inlet gas [if the reform was implemented]. He
noted the letter from the company was not well-received by the
[Senate Resource] committee members and others, highlighting the
sensitivity of the issue. He said, currently another company,
involved in a multi-billion-dollar project, might face funding
decisions that could impact a smaller but crucial project
providing affordable gas to Anchorage and other areas. He
questioned whether [Glenfarne] could use funding leverage in the
larger project discussions, and he sought assurance about
contractual or other protections to prevent this.
3:56:48 PM
MR. SIMS appreciated the questions and emphasized the value of
the ENSTAR - Glenfarne project's independence from AGDC in
financial terms as well as freedom from reliance on federal or
state money. He said the ENSTAR - Glenfarne project should hold
up on its own with just the utility contracts and the
commitments of Glenfarne. He said he did not foresee an
opportunity for it to be leveraged or taken advantage of.
3:57:42 PM
SENATOR MYERS noted studies for the path forward and a report
released by ENSTAR in June, 2023. He asked when a follow-up
report would be released and why it had not already come out.
3:58:08 PM
MR. SIMS emphasized the importance of radical transparency by
the utilities and referenced ENSTAR's efforts to provide
detailed reports on projects and pricing. He acknowledged
signing 30 confidentiality agreements and non-disclosure
agreements (NDAs), which restricted the ability to share
information publicly. He highlighted the necessity of obtaining
Regulatory Commission of Alaska (RCA) approval before charging
customers for any project. He assured public disclosure before
implementation of any charges.
4:00:14 PM
SENATOR WIELECHOWSKI noted a letter from the utilities to the
attorney general approximately two years prior regarding
concerns about the failure of the duty to produce gas in Cook
Inlet. He asked whether [the utilities] received a response to
that letter.
4:00:39 PM
MR. SIMS said, to his knowledge they had not received a
response.
4:00:51 PM
SENATOR WIELECHOWSKI asked whether the utilities still had
concerns about inadequate gas production in Cook Inlet.
4:01:00 PM
MR. SIMS said he does have significant concerns about Cook Inlet
and was very thankful for the unusually warm [winter]
temperatures. He said the market for Cook Inlet gas was very
tight. The producers and utilities are challenged and are
working collaboratively to be sure customers' needs are met; but
he said he does have concerns for the present and for the future
up through the time that Furie develops their project. He noted
that there were execution risks for [the Furie] project and he
was not sure what would be done [if the Furie project is not
successful] other than bringing in LNG by truck.
4:02:17 PM
CHAIR GIESSEL asked to return to slide 10. She asked whether the
tank depicted in the slide would have the capacity to hold the
volume of LNG that would be delivered by a ship.
4:02:40 PM
MR. SIMS affirmed that the yellow tank is above-ground storage
for LNG. He noted there was a cost per day for the ship to be
moored as it is being off-loaded as well as up-front capital
cost for an above-ground LNG tank. Evaluating the benefit of up-
front capital cost vs. operating costs is one of the analyses
underway. He stated that Cook Inlet needs more [LNG] storage
[capacity].
4:03:31 PM
CHAIR GIESSEL asked whether [the ENSTAR-Glenfarne project] would
also use Cook Inlet Natural Gas Storage Alaska (CINGSA).
4:03:35 PM
MR. SIMS affirmed that they would still use CINGSA as well as
other storage available in the market.
4:03:43 PM
SENATOR CLAMAN asked whether the Alaska LNG site would include
underground storage in addition to the above ground storage.
4:03:59 PM
MR. SIMS said this facility would only have above-ground
storage. He said there are other storage opportunities near-by,
which is a huge benefit of the location as opposed to the west
side [of Cook Inlet].
4:04:36 PM
CHAIR GIESSEL asked for confirmation that the facility [depicted
on slide 10] for export does not yet exist.
MR. SIMS said that was correct.
4:04:52 PM
CHAIR GIESSEL asked for clarification that the property depicted
on slide 11 was currently just empty property.
MR. SIMS affirmed that it was and he reiterated the objective to
limit the footprint as much as possible to reduce the cost of
land while providing a reliable supply of natural gas to
customers. He said the project would use only land necessary to
allow for import facilities.
4:05:31 PM
CHAIR GIESSEL asked whether the land [depicted on slide 11] was
currently owned by AK LNG.
4:05:36 PM
MR. SIMS answered that it was not and, to his knowledge there
were multiple owners.
4:05:41 PM
CHAIR GIESSEL asked whether the land was reserved for AGDC and
AK LNG.
4:05:47 PM
MR. SIMS said those were some of the details currently being
worked out.
4:05:52 PM
CHAIR GIESSEL asked whether [ENSTAR and Glenfarne] would be
purchasing the land or leasing it.
4:06:57 PM
MR. SIMS said there are different ways to approach that; from a
utility perspective, ENSTAR prefers to own and control the land.
He said the details remain to be worked out.
4:06:20 PM
CHAIR GIESSEL expressed appreciation for the utilities'
collaborative efforts. She also appreciated the attention
brought to the lack of services [needed to support production in
Cook Inlet].
4:07:01 PM
At ease.
^PRESENTATION(S): ALASKA ENERGY AUTHORITY (AEA) PROGRESS UPDATE
PRESENTATION(S): ALASKA ENERGY AUTHORITY (AEA) PROGRESS UPDATE
4:08:11 PM
CHAIR GIESSEL reconvened the meeting and introduced Executive
Director Curtis Thayer to present Alaska Energy Authority (AEA)
Progress Update.
4:08:39 PM
CURTIS THAYER, Executive Director, Alaska Energy Authority
(AEA), Anchorage, Alaska, said the presentation to the committee
titled Alaska Energy Authority (AEA) Progress Update would focus
on projects in the Cook Inlet. He said AEA's focus was primarily
upgrading energy transmission lines and looking for additional
sources of power to displace natural gas.
4:09:09 PM
MR. THAYER moved to slide 2:
[Original punctuation provided.]
AEA History
AEA is an independent and public corporation of the
State of Alaska created by the state legislature in
1976.
1976
Created to promote, finance, and construct power
projects
AS 44.83.070: "The purpose of the Authority is to
promote, develop, and advance the general prosperity
and economic welfare of the people of the state by
providing a means of financing and operating power
projects and facilities that recover and use waste
energy and by carrying out the powers and duties
assigned to it under AS 42.45."
4:09:36 PM
MR. THAYER moved to slide 3 and highlighted some of the
assignments for AEA:
[Original punctuation provided.]
Sec. 44.83.080 Powers of the Authority
In furtherance of its corporate purposes, the
authority has the following powers in addition to its
other powers:
• to issue bonds to carry out any of its corporate
purposes
• to enter into contracts with the United States or
any person? ?for the construction, financing,
operation, and maintenance of all or any part of
a power project or bulk fuel, waste energy,
energy conservation, energy efficiency, or
alternative energy facilities or equipment
• to acquire, construct, maintain, and operate
power projects in accordance with the licenses or
permits,
MR. THAYER noted that AEA owns the state's largest hydroelectric
facility, Bradley Lake.
• to promote energy conservation, energy
efficiency, and alternative energy through
training and public education;
MR. THAYER said this duty was split with Alaska Housing who does
the residential side and AEA does the commercial side.
• to acquire a Susitna River power project,
MR. THAYER noted that AEA spent $200 million dollars to acquire
the Susitna River project; Governor Walker placed it in abeyance
in 2015 and there has been no action taken on the project since.
• to perform feasibility studies and engineering
and design with respect to power projects.
• Battery Energy Storage Systems
4:10:39 PM
MR. THAYER moved to slide 4 and emphasized the board's expertise
in energy needs across Alaska and a good balance of perspectives
and experience. He also noted that only two current board
members reside in Anchorage:
[Original punctuation provided.]
AEA Board of Directors
[photos of the board members are included on slide 4.]
Clay Koplin
Chair Utility Not Interconnected
Duff Mitchell
Vice Chair Financial Expertise in Large Power
Generation
Adam Crum
Commissioner, Alaska Department of Revenue
Tony Izzo
Board Member Utility Interconnected
Ingemar Mathiasson
Board Member Rural Energy Development
Jenn Miller
Board Member Expertise in Engineering
Julie Sande
Commissioner, Alaska Department of Commerce,
Community, and Economic Development
Robert Siedman
Board Member Municipal Utility Off Road System
4:11:26 PM
MR. THAYER moved to slide 5:
[Original punctuation provided.]
About AEA
AEA's mission is to reduce the cost of energy in
Alaska. To achieve this mission, AEA strives to
diversify Alaska's energy portfolio increasing
resiliency, reliability, and redundancy.
Railbelt Energy (Owned Assets)
• Bradley Lake Hydroelectric Project
• Alaska Intertie
• Sterling to Quartz Creek Transmission Line
• High-Voltage Direct Current Transmission Line
Power Cost Equalization (PCE)
• $48 Million Program
• 192 Rural Communities
• 91 Electric Utilities
• 80,000+ Alaskans
Rural Energy
• Bulk Fuel Upgrades
• Rural Power System Upgrades
• Circuit Rider Program
• Electrical Emergency Assistance
Renewable Energy and Energy Efficiency
• Renewable projects: biomass, electric vehicles,
hydroelectric, solar, and wind
• Federal programs: NEVI, Solar for All, and Home
Energy and High Efficiency Rebate Allocations
Grants and Loans
• Renewable Energy Fund
4:12:38 PM
MR. THAYER said the renewable energy fund funded over 100
projects in Alaska to look at feasibility of projects. He said
the Alaska legislature and the governor had funded almost $45
million over the past four years and a total of $300 million
since inception and has displaced 85 million gallons of diesel
fuel on a permanent basis through new renewable energy projects.
He reported 100 operating [renewable energy] projects got their
seed money from AEA.
• Power Project Fund
4:13:36 PM
MR. THAYER said the Power Project Fund is able to offer low-cost
loans and highlighted renewable energy projects on Prince of
Wales island and in Kodiak.
Energy Planning
• Alaska Energy Security Task Force
• State Energy Security Profile
• Electronic Library
• Energy Data Resources
• 40101(d) Grid Resilience Program
4:14:47 PM
MR. THAYER said the 40101(d) grid resilience plan was a $70
million program through the Department of Energy. He said
Fairbanks received the first three allotments, $22 million and
would be applying for a second round.
Railbelt Transmission Organization (RTO)
4:15:21 PM
MR. THAYER moved to slide 6:
[Original punctuation provided.]
House Bill 307: Integrated Transmission Systems
House Bill 307 is one of the most important pieces of
legislation affecting energy policy for the Railbelt
since Alaska statehood.
• The bill also incentivizes new energy development
by extending tax-exempt statutes to independent
power producers.
• This law also fundamentally changes how AEA
operates:
• Established its own distinct board of
directors better positioning the state's
energy office to address Alaska's unique
energy challenges and opportunities.
• Authorized AEA to have its own direct-hire
employees.
• Created the Railbelt Transmission
Organization, as a division of AEA, to
establish and administer a non-
discriminatory open access transmission
tariff that provides for recovery of
transmission costs and ancillary services
and replaces wholesale charges assessed by
each utility with a new mechanism that
fairly recovers the costs of operating the
backbone transmission system.
• Offers reduced interest rates for Power Project
Fund loans that are $5 million or more.
4:16:46 PM
MR. THAYER moved to slide 7, a map of Alaska marking the
locations of AEA projects and services. He said the map was a
snapshot of AEA activity today.
4:17:13 PM
MR. THAYER moved to slide 8, a map of Alaska's railbelt region,
marking Cook Inlet transmission projects identifying areas which
need upgrades. He said the map began at Bradley Lake and
progressed to Fairbanks. He emphasized that the numbering was
not a ranking. The goal was to identify opportunities to improve
reliability and redundancy, improve delivery and maximize
alternative energy additions to the system.
4:18:05 PM
SENATOR MYERS noted that the Grid Resilience and Innovation
Partnership (GRIP) funding approved by the legislature last year
was among funding placed on pause by the current administration.
He asked whether Mr. Thayer expected the pause to impact funding
and construction of Alaska GRIP efforts.
4:18:44 PM
MR. THAYER said there was a 90-day pause and review process
initiated by the incoming administration, for all types of
projects, noting that this pause was common practice among
presidents. He noted the president had specifically called out
projects for off-shore wind and he said Alaska has no off-shore
wind projects. He also speculated that funding for electric
vehicle charging would receive scrutiny but did not expect that
to impact Alaska. He said he expected infrastructure projects
like transmission lines would move through the 90 day review
process and be resumed. He noted upcoming meetings with Alaska's
congressional delegation and with the National Association of
State Energy Offices as well as a visit to the Department of
Energy.
4:21:20 PM
MR. THAYER explained that the Cook Inlet transmission line
project is funded by the legislature ($12.7 million) and by AEA
and the utilities ($62.7 million) and can proceed with the
state's portion of the project. He noted that there was an
eight-year timeline to complete the project.
4:22:14 PM
MR. THAYER returned to slide 8 and highlighted projects that are
in progress and/or have funding behind them. He specified
current work on the Dixon Diversion, Bradley Lake, Soldotna to
Sterling, Sterling to Quartz Creek, and Quartz Creek to
Anchorage. He emphasized that 17 percent of the water from
Bradley Lake at $0.04 per kilowatt goes to Fairbanks. He said
upgrading the line to improve efficiency to Fairbanks was
critical. He noted GRIP projects and said there were other
projects with federal funding underway in the Fairbanks area.
4:23:58 PM
SENATOR CLAMAN noted the interplay between the current funding
pause and the apparent desire of the current administration to
stop funding green power. He asked whether it was fair to
proceed with projects, potentially resulting in people not
receiving funds they expected to receive for work they've
committed to providing.
4:24:49 PM
MR. THAYER said the funding is on pause, but that funding
approved and signed by the president and approved by congress
could not be withdrawn except by an act of congress. He said
Alaska is not the only state with billions of dollars of needed
infrastructure funding on pause and expressed confidence federal
funding would come through.
4:26:18 PM
MR. THAYER continued with slide 9, Clean Energy Projects,
consisting of a map identifying clean energy projects in the
railbelt region. He highlighted the Dixon Diversion project and
Kenai Peninsula solar project which were already underway. He
pointed out the wind and solar power are interruptible power
because the sun doesn't always shine and the wind doesn't always
blow, so he said they displace natural gas as a fuel source
during certain times of the year, but they are not a repla
cement [for natural gas]. By contrast, hydroelectric power is a
replacement because that can be utilized anytime. The map
includes wind projects, geothermal projects and hydro projects.
4:27:21 PM
MR. THAYER moved to slide 10:
[Original punctuation provided.]
Bradley Lake Hydroelectric Project
• Energized in 1991, the Bradley Lake Hydroelectric
Project is Alaska's largest renewable energy
source. It is located 27 air miles northeast of
Homer.
• The 120 -megawatt facility provides low -cost
energy to over 550,000 people on the Railbelt.
• Bradley Lake's annual energy production is ~10
percent of Railbelt electricity at 4.5 cents/kWh
(or ~54,400 homes/year) and over $20 million in
savings per year for Railbelt utilities from
Bradley Lake versus natural gas.
• AEA, in partnership with Railbelt utilities, is
studying the Dixon Diversion Project, which would
increase the annual energy production of Bradley
Lake by 50 percent (the equivalent of up to
30,000 homes)
MR. THAYER played a video showing the Bradley Lake Hydroelectric
Project development beginning in 1955 with a feasibility study
through planning, construction and implementation to eventually
produce some of the most economical energy on the railbelt. The
video concludes with the Dixon Diversion proposal to increase
production by up to 50 percent.
4:30:38 PM
SENATOR MYERS highlighted the dates for the Bradley Lake project
and said he was not sure whether the extended timeline was
encouraging or discouraging.
4:31:08 PM
MR. THAYER moved to slide 11:
[Original punctuation provided.]
$342 Million (AEA bonds anticipated)
FY2026 Request - $6.5 million
Dixon Diversion Project
AEA is studying the Dixon Diversion Project to
optimize the Bradley Lake Hydroelectric Project's
energy potential. Like the West Fork Upper Battle
Creek Diversion Project, the Dixon Diversion Project
would divert water from Dixon Glacier to increase
Bradley Lake's annual energy production by 50 percent.
• Located five miles from Bradley Lake and would
utilize existing powerhouse at Bradley Lake
• Estimated annual energy 100,000-200,000 MWh (the
equivalent of up to 30,000 homes)
• Estimated to offset 1.5 billion cubic feet of
natural gas per year in Railbelt power generation
(equal to 7.5 percent of Alaska's unmet natural
gas demand projected for 2030)
• Estimated completion is 2030
MR. THAYER said an AEA engineer studied the Dixon Glacier
recession beginning with aerial photos from 1952 and proposed
the project. He emphasized that diverting water from the
receding Dixon Glacier to Bradley Lake would raise the level of
the lake and increase the hydroelectric capacity by 50 percent.
He said the utilities all support the proposal and it appears
very do-able. The project could be completed by 2030.
4:32:32 PM
MR. THAYER played a video describing the development and
expected benefits of the proposed Dixon Diversion Project. He
pointed out that the diversion would be entirely underground and
would create no footprint beyond a small diversion dam.
MR. THAYER said the project would cost about $342 million. He
said the Bradley Lake project was supported by revenue bonds
through the utilities and AEA was considering revenue bonds as a
source of financing for the Dixon Diversion project as well.
Additional funds could come from federal tax credits. He noted
the tax credits expire in 2032, but that, if things remain
steady, the project could qualify for ten to thirty percent. He
emphasized that the Dixon Diversion would not add energy
generation, rather, the storage capacity would increase,
allowing the generators to be run for longer periods.
4:35:51 PM
CHAIR GIESSEL noted that Bradley Lake was considered too
expensive when it first came on line. She asked what the cost
per kilowatt hour (kWh) was initially.
4:35:59 PM
MR. THAYER answered that it was four cents per kWh compared to
two cents per kWh from Cook Inlet at the time. He said the
approval to proceed with the Bradley Lake project passed by one
vote. He said the price for hydro power doesn't change as long
as the facility exists. AEA expects Bradley Lake to last fifty
years or more, generating power at four cents per kWh. He said
AEA expects the Dixon Diversion will generate power below the
current cost of natural gas, probably six or seven cents per
kWh.
4:36:55 PM
CHAIR GIESSEL noted that the Bradley Lake dam is relatively
young, pointing out that the dams in Juneau are over one hundred
years old and still functional.
4:37:03 PM
MR. THAYER said there have been no issues with the Bradley Lake
dam or the generators and the expectation is for that
functionality to continue. He said it is a crown jewel and has
supplied the railbelt with reliable power for over 35 years.
MR. THAYER said AEA requested $6.5 million from the legislature
to complete the Dixon Diversion study and proceed to Federal
Energy Regulatory Commission (FERC) [application]. He said the
chairman of FERC toured the Bradley Lake facility and Mr. Thayer
shared with the chairman that the actual drilling work to
accomplish the Dixon Diversion would take six to eight months,
but securing approval for the project from FERC is expected to
take eighteen to twenty-four months.
4:38:15 PM
CHAIR GIESSEL noted getting the power from the dam to consumers
will require transmission upgrades via sub-sea cable.
4:38:27 PM
MR. THAYER moved to slide 12. The slide includes a map
illustrating the area relevant to the points in the slide:
[Original punctuation provided.]
$90 Million (Under Construction; AEA Bonds Existing)
Sterling to Quartz (SSQ) and Soldotna to Sterling
Transmission Lines
In 2020, AEA acquired the SSQ Transmission Line, as
part of the Bradley Lake Hydroelectric Project.
• Location 39.4 miles of 115 kilovolt (kV)
transmission and out of use 69 kV transmission
from Sterling to Quartz substation (Kenai Lake).
• Benefits AEA ownership ensures better cost
alignment, reduce line losses, increased
reliability, and more timely repairs and
upgrades.
• Status 69 kV line decommissioned and removed;
engineers are designing and are procuring
equipment for the upgrade of the existing 115 kV
line to 230 kV. Construction has started on first
section.
• Cost Estimated cost to upgrade line is $90
million for the SSQ transmission line and
Sterling to Soldotna transmission line.
MR. THAYER said the current railbelt power generation capability
and growing demand are significantly greater than the capacity
of the 60-year-old transmission lines. He said there is also a
huge amount of line loss, energy wasted. The 39-mile
transmission line [upgrade] from Sterling to Quartz Creek is
owned by AEA and is under construction. The upgrade has been
fully funded using bonds and did not require funds from the
state nor did it require raising consumer rates. He described
the bonding and planning process to fund required projects and
said GRIP or IIJA funds, which weren't available when planning
began in 2022, may be applicable. He said AEA, in consultation
with the [railbelt] utilities, approved moving $50 million in
two tranches, combined with $12.7 million from the state for a
total of $62.7 million toward the required $206 million matching
funds.
4:41:04 PM
MR. THAYER moved to and narrated slide 13:
[Original punctuation provided.]
$413 Million (Match of $62.7 Million Secured; $143.8
Million Future Need) FY2026 Request - $1.5 Million
Grid Resilience and Innovation Partnerships (GRIP):
HVDC Line
AEA secured $206.5 million for GRIP Topic Area 3: Grid
Innovation through the U.S. Department of Energy's
Grid Deployment Office. A cost share of 100 percent,
or $206.5 million, is required for a total project
amount of $413 million. The project includes
constructing high-voltage direct current (HVDC)
submarine cables as a parallel transmission route from
the Kenai Peninsula to Anchorage.
The project addresses several challenges facing
Alaska's Railbelt regions:
• Provides a redundant pathway between the Southern
(Kenai Peninsula) and Central (Anchorage and Mat-
Su) Regions
• Eliminates the single-point-of-failure inherent
in the previous system (the system will still be
subject to single point of failure between Willow
and Healy)
• Allows for more renewable power to be added to
the grid and distributed across the Railbelt
• Increases the ability to share power between the
Southern, Central, and Northern Regions of the
Railbelt, allowing the most economical power to
be used at all times
4:41:47 PM
MR. THAYER played a video highlighting the need for transmission
line upgrade, the proposal to accomplish the upgrade and the
expected benefits.
4:44:45 PM
MR. THAYER moved to slide 14:
[Original punctuation provided.]
Submarine Power Cable's Attributes
Submarine power cables are designed for the transport
of electric energy under the sea.
• Outside diameter 4.5"
• Weight per foot 20 Ibs. with standard armor
(may spec for Cook Inlet)
• Length is about 35 miles under water
• Estimated lifespan is 50 years
Slide 14 includes an artist's rendering of the cable's layered
components, labeled as follows from exterior to the core: outer
serving, armoring, transversal reinforcement, plastic sheath,
lead sheath, insulation system, and conductor.
MR. THAYER said this was the submarine cable laid between Fire
Island and Anchorage, an AEA project. He emphasized the
characteristics of the cable noted in slide 14 and said the two
cables would be laid in a trench, providing redundancy in the
system.
4:45:25 PM
MR. THAYER moved to slide 15:
[Original punctuation provided.]
Schedule
The statutory period for the project is eight (8)
years and the construction schedule below is based on
a design-bid-build process a traditional project
delivery method that consists of three distinct phases
in sequence:
• September 2024 Award
• First Quarter 2025 Preliminary Engineering &
Schedule
• Second Quarter 2026 Commence Full Design and
Permitting
• July 2027 Complete National Environmental
Policy Act (NEPA) Process
• January 2028 to December 2029 Long Lead Items
• January 2030 to December 2031 Construction
MR. THAYER said the undersea cable was on schedule and costs
appear to be coming in better than expected. He said the grant
was written to allow for any available federal funding to go
towards battery energy storage system in Anchorage or Fairbanks.
4:46:02 PM
MR. THAYER emphasized that all three projects: the Dixon
Diversion, the Sterling to Quartz Creek Upgrade and the GRIP are
all currently underway. He said they represent over 5,000
construction jobs and over a billion dollars in economic input
in Alaska through 2030.
4:46:48 PM
MR. THAYER moved to and narrated slide 16:
[Original punctuation provided.]
Alaska Intertie
Constructed in the mid-1980s with $124 million in State
of Alaska appropriations, there is no debt associated
with the Alaska Intertie.
• AEA owns the 170-mile Alaska Intertie
transmission line that runs between Willow and
Healy. The line operates at 138 kV (it was
designed to operate at 345 kV) and includes 850
structures.
• A vital section of the Railbelt transmission
system, the Intertie is the only link for
transferring power between northern and southern
utilities.
• The Intertie transmits power north into the
Golden Valley Electric Association (GVEA) system
and provides Interior customers with low-cost,
reliable power between 2008 and 2021, the
Intertie saved GVEA customers an average of $30
million annually.
• The Intertie provides benefits to Southcentral
customers as well through cost savings and
resilience to unexpected events.
MR. THAYER noted that during the cold spell in 2023-2024, power
was being shipped where it was needed, illustrating the unity
[of those in the railbelt transmission system] from Homer to
Fairbanks.
4:47:17 PM
SENATOR MYERS noted that the slide says the system operates at
138 kV, but that it was designed to operate at 354 kV. He asked
why that was and said it was his understanding that
[transmitting] lower volume leads to greater line loss.
4:47:35 PM
MR. THAYER said the decision was made based on funding available
at the time, 40 years ago. He said they did build the towers
[for the higher capacity], so they would need to re-string the
wires. He noted that there would still be one line and not the
redundancy of a second line, which would be required if the
system were FERC regulated. He said the upgrade would be fairly
straightforward.
4:48:15 PM
SENATOR CLAMAN asked how much line loss impacted the efficiency
of power production and the ability to deliver power to
different parts of the railbelt.
4:48:35 PM
MR. THAYER said it depends where and when the line loss occurs.
He said the Sterling to Quartz Creek section includes some of
the oldest line and some of the highest line loss that occurs.
He said the loss could be as much as seven to ten percent. He
emphasized that, especially with the expectation of increasing
power by completing the Dixon Diversion, it was critical to
increase the transmission capacity of the line and to provide
redundancy. He noted the Swan Lake fire experience and said the
transmission line was down for four months. He also said snow
took down some of the lines for three or four days between
Girdwood and Whittier during the past winter.
4:49:36 PM
SENATOR CLAMAN asked whether it would be possible to get more
information for the committee specifically about line loss.
4:49:46 PM
MR. THAYER said he could invite an engineer to present to the
committee.
4:49:54 PM
MR. THAYER moved to slide 17:
[Original punctuation provided.]
$28 Million to Utilities
Battery Energy Storage Systems (BESS) for Grid
Stabilization
• Scope The BESS projects consist of an upgrade
to the existing BESS system in the North, and new
BESS systems in the Southern, and Central regions
of the grid. The Northern BESS is located at
Fairbanks, the Southern BESS is located in Kenai,
the Central Region BESS will be located at
Anchorage. BESS will be needed to fully realize
the benefits of a 230 kV bulk power supply
system, regulate energy from various generation,
and increase resilience.
• Benefits Increase system resilience, transfer
capability, more efficient use of system, and
lowers impediments to additional renewable
generation development.
• Schedule Estimated completion date is 2026: -
Southern (Kenai) In service - Central
(Anchorage) October 2024 - Northern (Fairbanks)
To be determined
• Budget $28 million in services to dampen
oscillation
MR. THAYER said slide 17 depicted the Battery Energy Storage
System (BESS) in Homer and that Anchorage also has a BESS. He
said AEA was able to assist utilities with the purchase of BESS
systems using their bonding process. AEA entered into agreements
with the three utilities to provide $28 million over the next
fifteen years. He said some of the battery systems also
qualified for federal tax credits which also lowered the cost.
The batteries will help dampen oscillation issues and provide
spinning reserve, reducing the need for gas generators to be
constantly running to respond to blackouts.
4:52:17 PM
MR. THAYER moved to and narrated slide 18:
[Original punctuation provided.]
Railbelt Transmission Organization (RTO)
Owing to recommendations from the governor's Alaska
Energy Security Task Force concerning the elimination
of transmission wheeling charges and the establishment
of a RTO, the Legislature passed House Bill 307, which
was signed into law on July 31, 2024. Under the law,
the RTO is a division of AEA.
• The RTO operates through its governance committee
comprised of a representatives from AEA, each
Railbelt utility, and the Railbelt Reliability
Council (as an ex officio non-voting member).
• Since the signing of House Bill 307, the RTO has
held five public meetings, established a charter,
and adopted bylaws modeled after the Bradley Lake
Project Management Committee.
• The RTO submitted an application for a
certificate of public convenience and necessity
(CPCN) and a petition for waivers with the
Regulatory Commission of Alaska (RCA) on December
20th, in advance of the January 1 st statutory
deadline. The RCA will rule on the petition for
waivers and determine whether the application is
complete by February 18th.
• By July 1, 2025, the RTO shall file with the RCA
a nondiscriminatory open access transmission
tariff that provides for the recovery of Railbelt
backbone transmission costs and related ancillary
services, and replaces wheeling charges with a
new mechanism that fairly recovers and equitably
allocates the costs of operating the backbone
system.
4:54:01 PM
SENATOR DUNBAR asked for clarification of the timeline for
upgrades to the transmission system resulting in the removal of
wheeling rates on the railbelt.
4:54:29 PM
MR. THAYER clarified that the July 1st, 2025 deadline was set by
statute and is a hard deadline. He explained that this was a
public process through the Regulatory Commission of Alaska (RCA)
with public hearings and public comment periods and reviews. He
said he thought it would take at least six months for the RCA to
work through the submission. He hoped by next year to be working
through the regulatory process. He noted some of the challenges
would be determining which utilities were responsible for which
transmission lines and how various contracts and cost structures
would be restructured. He reported that the utilities and AEA
were meeting frequently to do that work.
4:56:10 PM
MR. THAYER thanked the committee for their support and offered
to provide information and updates as needed.
4:56:34 PM
CHAIR GIESSEL expressed appreciation to AEA and the utilities
for the collaborative approach they were taking.
4:57:40 PM
There being no further business to come before the committee,
Chair Giessel adjourned the Senate Resources Standing Committee
meeting at 4:57 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| 1.24.25 AEA Progress Update Presentation to Senate Resources Committee.pdf |
SRES 1/24/2025 3:30:00 PM |
|
| 1.24.25 Enstar Presentation to Senate Resources.pdf |
SRES 1/24/2025 3:30:00 PM |
|
| 1.24.25 Enstar Handout.pdf |
SRES 1/24/2025 3:30:00 PM |