SB 140-SMALL WATER-POWER DEVELOPMENT PROJECTS  CHAIRMAN JOHN TORGERSON called the Senate Resources Committee meeting to order at 3:34 p.m. Members present at the call to order were Senators Wilken, Halford, Stevens, Elton, Lincoln and Chairman Torgerson. Chairman Torgerson announced SB 140 to be up for consideration and told members that SB 140 mirrors the federal law that Senator Murkowski worked on for a number of years to allow certain exemptions for hydro projects. MR. DARWIN PETERSON, staff to Senator Torgerson, sponsor, said Senator Murkowski introduced SB 422 in Congress, to amend the Federal Power Act to provide for Alaska state jurisdiction over small hydro-electric projects. He explained the purpose of SB 140 as follows. SB 140 transfers to Alaska and only to the State of Alaska, licensing and regulatory authority over hydro- electric projects that are 5,000 kilowatts or less. Bringing this regulatory authority closer to home will reduce the great time and expense associated with federal licensing and regulation of small hydro projects in Alaska. The time and money required for federal licensing is virtually prohibitive for some small utility and personal projects. Before Alaska can acquire the jurisdiction from the Federal Energy and Regulatory Commission (FERC), the legislature must approve this bill and the Governor must submit a program to FERC satisfying its regulatory requirements. As SB 140 is currently drafted, the Regulatory Commission of Alaska (RCA) would be the regulatory agency responsible. All current environmental protections required under federal law will still apply and cannot be preempted by this legislation. Even with the passage of SB 140, some small hydro projects would not be eligible for state jurisdiction: those located in Metlakatla (an Indian Reservation), conservation units as defined in ANILCA, and rivers designated under the wild and scenic river system. SENATOR ELTON asked who will address the environmental concerns for FERC and whether, for instance, the U.S. Fish and Wildlife Service will address habitat issues. He wanted to know what kind of structure is needed to know who will address such issues if it's under the state's jurisdiction and how that will be coordinated. He thought the Division of Governmental Coordination (DGC) would be better able to coordinate than the RCA. MR. PETERSON replied that FERC has to approve the administration's plan before the state can take over the regulatory responsibility for these small hydro-projects. COMMISSIONER WILL ABBOTT, Regulatory Commission of Alaska, said he would walk members through the procedure for a 3.5 megawatt by- the-river project in Southeast Alaska that is in the process of going through FERC right now. He said the RCA had been involved in the process since 1996 and hopes to get it out by the end of this year. They are working under the "alternative plan," which is supposed to be the "streamlined plan." They go through a series of scoping meetings, both public and with other state and federal agencies that would be involved in the permit. They figure out who has to do what during the various processes to get them there. They notify FERC that they want to do this, which reserves the site for them for the next three years. After the scoping is done, they apply for their license and start through the process of review by all the committees. These committees will have to do a number of studies that will be reviewed by both state and federal agencies as they go. Toward the later part of the process, a draft environmental impact statement will be produced. In the end, FERC will finalize the impact statement and then issue a license. FERC steps in when there is a dispute between agencies and/or agencies and a licensee. FERC staff makes recommendations and the commissioners will decide the dispute. SENATOR ELTON asked if the RCA will operate in much the same way that FERC does, sort of like an umpire, if this becomes a state process under the RCA. COMMISSIONER ABBOTT replied that the RCA does business like that all the time, but it doesn't have as large a staff as FERC does. SENATOR ELTON asked Mr. Abbott if he thought a lot of the studies would be done solely by state agencies so that the Alaska Department of Fish and Game (ADF&G) might do the studies that the U.S. Fish and Wildlife Service (USFWS) would do under FERC. COMMISSIONER ABBOTT replied that he didn't know for sure. That needs to be worked out when the regulations are written that are submitted to FERC. He thought that would be a big catch in the whole plan and noted, "FERC has the final hammer on this as to how we do it." CHAIRMAN TORGERSON asked if the determination of which agency does the study will be predicated on who owns the land that will be affected. COMMISSIONER ABBOTT said that's what happened in the scoping meetings. CHAIRMAN TORGERSON asked if the RCA gave the committee a new fiscal note. COMMISSIONER ABBOTT replied that they are still working on it. He said their regulation process is not an insignificant task because they have to figure out how they are going to work with all of the state agencies. He remarked, "We're going to have to have some fairly significant commitment from FERC as to what they will or will not let us do. I see a lot of staff time trying to get these regulations written." He stated support for the bill. MR. KEITH BAYHA, Alaska Public Waters Coalition (APWC), said he is a retired wildlife biologist and has previously participated in FERC licensing procedures. He said that neither FERC, nor Congress, fund fish and wildlife studies pertinent to a project that would be covered by this act. They would review the studies that the applicant arranged to have done through probably a private consultant. It's possible for the applicant to provide funds to ADF&G and the U.S. Fish and Wildlife Service, but that is seldom done. If the matter is highly controversial, they put together a multi-agency task force that's funded by the applicant to pursue studies. Their product reports are submitted, in this case, through the state agency or through FERC, to ADF&G and the USFWS under the terms of the Fish and Wildlife Coordination Act, which is cited in the legislation. They review the adequacy of the consultants' work and their recommendations and may or may not recommend for or against the project and may or may not recommend mitigation and/or enhancement measures. They may find that some projects do not significantly impact fish and wildlife and might not even file a report, but if they find that impacts do exist, they file a report to the FERC. CHAIRMAN TORGERSON thanked him for the clarification and announced the next speaker would be Mr. Eric Yould. MR. ERIC YOULD, Executive Director, Alaska Rural Electric Cooperative Association (ARECA), said as a general rule ARECA thinks it is an excellent idea to accelerate the process, especially for projects of 5 megawatts or less. He said there are probably some reasons that one project is taking six years. He has been involved in several hydro-power licensures throughout the state all the way back to 1977. He thought this bill could work if the RCA would get some good technical expertise to augment its adjudicatory capability. They are the proper group to administer this program if they have the engineers, scientists and biologists that could go head to head with the state and federal agencies that are not always in favor of or objective in developing these projects. The ARECA Board of Directors adopted a resolution basically endorsing the concept of having the Department of Natural Resources act as the lead agency as opposed to the RCA, but he believes the RCA is the proper authority to do it. Again, his concern is that they don't have the technical, scientific, professional and engineering expertise to do the job. CHAIRMAN TORGERSON said it was not his intent to move this to DNR. The RCA already does this type of work and asked Mr. Yould to talk a bit more about that issue. MR. YOULD replied that it would take more staff and he's not sure how much more. CHAIRMAN TORGERSON said they have to do this type of work now and he didn't see that as a barrier. He said they talked about the opt in and opt out option last year, a major stumbling point, and that is not going to be in the bill. He suggested instead of including a sunset date, they repeal the law if it becomes unwieldy. SENATOR ELTON said he is assuming Mr. Yould's testimony is designed to make them think this could be a faster and cheaper way for applicants who want to start a project. MR. YOULD said he thought the potential is there, but his members have take a certain amount of solace in having a third independent body, FERC, that has the authority to stand up to both the federal and state agencies and make them be realistic in their expectations of studies and processes. Once they received licenses for projects and found themselves at the mercy of state agencies who sometimes are not friendly to the concept of hydropower and make the lives of the people who develop them quite miserable. If those same people have inordinate authority under this program, that would actually slow down or stop a project and he'd have to say ARECA doesn't want it. He said: FERC is a system that we know; it's an independent arbiter. We found we trust them; they are fair on both sides. They make us do all the environmental and socio- economic studies and at the same time they make sure the resource agencies don't request such an inordinate amount of assessments that it kills the project. MS. SALLY SADDLER, legislative liaison, Department of Community and Economic Development (DCED), told members that DCED had an interagency meeting recently with DNR, ADF&G, DGC, the RCA and DEC. She stated: We do believe that RCA is the appropriate agency to assume a lot of these roles. When the federal legislation was pending, the Governor did support giving Alaska this jurisdiction over this state-operated FERC program and at the same the Governor recognized that this is, in fact, a very complex undertaking and we want to be sure that the state program does result in the proper design and construction along with protecting the fish and wildlife, at least as well or as rigorously as FERC does. The agencies are in the process right now of getting a handle, trying to understand what the FERC process is about, because right now we understand our roles and duties under the existing federal program. What we need to be doing is looking at what additional duties, statutes, and regulatory authority may be needed to go ahead and operate a state version of this FERC program. For instance, FERC has jurisdiction over entire watersheds, whereas Fish and Game right now - their jurisdiction applies only to streambeds. So, these are the kinds of things we need to examine with respect to the FERC program to understand the cost implications and program details if we were to take over this kind of a state program. MS. SADDLER said they have to be able to balance the user fees with the possibility of a need for a direct appropriation at a time when revenues might not be equal to expenditures. She understands that the State of Oregon has a small state run hydro program and it hopes to get a copy of that and get ideas and insights as to what it takes to operate this kind of program. SENATOR ELTON said the fiscal note contemplates a half-time position to analyze waterpower applications and he anticipates that putting things together for state regulation will take a considerable amount of work upfront. He wanted to know if there would be a fiscal note to reflect the amount of work that needs to be done by all of the agencies. MS. SADDLER replied that is one of the issues they talked about last year when they spoke with Chair Thompson. She stated: We looked at this as more of a straight-forward regulatory adopting process and since we have a chance to work with our member agencies and get a better understanding of what FERC is about, we believe we will be redoing our fiscal note and it may be a little more substantial than what we have. CHAIRMAN TORGERSON said they wouldn't be building hydro-projects all over the place. There might be one every other year. SENATOR WILKEN moved to pass SB 140 and attached fiscal note, dated 3/20/01, from committee with individual recommendations. CHAIRMAN TORGERSON said there would be a new fiscal note. There were no objections and it was so ordered.