HB 323-NONATTAIN AREA HOME HEATING SYSTEM GRANTS  4:29:27 PM CO-CHAIR PRUITT announced that the next order of business would be HOUSE BILL NO. 323, "An Act relating to the Alaska energy efficient home grant fund; and creating a grant program for converting homes in regions designated as particulate matter nonattainment areas to efficient home heating systems." 4:29:39 PM REPRESENTATIVE TAMMIE WILSON, Alaska State Legislature, informed the committee Fairbanks North Star Borough (FNSB) contains the only U.S. Environmental Protection Agency (EPA) particulate matter (PM-2.5) nonattainment area in the state, since Juneau avoided this status by banning the burning of wood on certain days. She provided a map of the Fairbanks area that outlined the boundary of the nonattainment area - where the majority of people in the borough live - noting that Eielson Air Force Base is out of the area, but Fort Wainwright Army Base is within the area. Representative T. Wilson then responded to questions raised at a previous hearing, saying that other states have received EPA grants; in fact, Libby, Montana is a nonattainment area that received an EPA grant for a change-out program to convert wood stoves. Spokane, Washington has a state-funded program to convert non-EPA certified wood stoves. To answer the question as to whether an energy rater may be liable if his or her estimate was lower than the final cost of the conversion, she said someone can always be sued. The purpose of the program is to bring an energy rater in, not only to look at the oil- fired furnace and non-EPA certified wood stove, but also to discuss issues specific to the home such as the proper size of the wood stove or oil furnace. The rater will also identify other problems such as gaps in windows, insulation, and inefficient light bulbs, in a similar way to the Golden Valley Electric Association (GVEA) program. Representative T. Wilson stressed that this program is specifically designed to help those in the middle class who cannot qualify for, or have not participated in, the Alaska Housing Finance Corporation (AHFC), Department of Revenue (DOR), weatherization or energy rebate programs. 4:33:29 PM REPRESENTATIVE TUCK understood that for a rebate program the homeowner pays for the work up-front and gets reimbursed after an inspection. He asked whether HB 323 provides for the vendor to perform the work and then turn in vouchers to AHFC for payment, up to $10,000. 4:34:09 PM REPRESENTATIVE T. WILSON said correct. The intent of the bill is to help those without the up-front cash. She expressed her belief that the air quality in FNSB will improve, but EPA has forced this issue to be resolved by 2014. On 3/15/12, control measures for the nonattainment area were issued for public comment, and FNSB must submit a state implementation plan (SIP). The control package includes the expansion of existing programs which are: the use of dry wood, wood stove change-outs, AHFC programs, and outdoor boiler retrofits. These programs are helping reduce emissions, but FNSB will not meet its goal without the change-out program or something similar "to help us out a little further." Most worrisome is that on high particulate matter days - that are also low-temperature days - wood burning would be banned in the borough. 4:37:04 PM REPRESENTATIVE SADDLER asked for an explanation of the emission standards. REPRESENTATIVE T. WILSON explained the relevant issue is that the wood stove change-out control program has reduced particulate matter 2.1 percent thus far. In further response to Representative Saddler, she acknowledged there was an increase in sulfur dioxide of 0.96 percent, which illustrated her frustration that taking care of one problem may increase another problem. Again to Representative Saddler, she said the control measures have reduced emissions by a cumulative total of 22.04 percent, which is a reduction of between 6.8 and 8.7 in micrograms per cubic meter. The goal is for a reduction of 11 micrograms per cubic meter. REPRESENTATIVE T. WILSON continued, saying the 2/9/12 draft proposed rules are out for public hearings, demonstrating that FNSB is going down the right road by educating residents on proper burning procedures. In addition, EPA will tighten emission standards on new wood stoves, wood pellet stoves, hydronic heaters, new camp stoves, and new cook stoves. Representative T. Wilson concluded that HB 323 was drafted to address nonattainment areas because other statewide programs may not help FNSB residents, and because these expensive upgrades may only be in effect for five or six years until gas is available. 4:42:30 PM CO-CHAIR PRUITT acknowledged that it is unknown as to the future of power generation in the Interior due to changes in state policy. He asked, "What would be expected [in five years] by the ... people of Fairbanks, where would they be?" REPRESENTATIVE T. WILSON related that EPA has set a number without providing modeling or guidelines for attainment. The Department of Environmental Conservation (DEC) and FNSB are trying to figure out what is needed to reach that number. She said there are no guarantees that the control measures will be sufficient to comply with EPA standards. Representative T. Wilson opined the best solution is for the state to ask EPA to wait for gas to come to the downtown area of Fairbanks, but that is not the administration's chosen option, due to the importance of federal transportation funding to the northern region. In response to Representative Saddler, she explained that if compliance is not met, EPA can recall millions of dollars of transportation funding. Therefore, FNSB must show a good faith effort, averaged over 2012, 2013, and 2014. 4:46:37 PM REPRESENTATIVE SADDLER asked why EPA is resistant to providing funding for compliance, as it has in other states. REPRESENTATIVE T. WILSON said the money for that program is gone. CO-CHAIR PRUITT, returning attention to facets of the bill, asked why it was written to allow for grants, instead of loans, for portions of homeowners' costs. REPRESENTATIVE T. WILSON said the intent was to follow the guidelines of the rebate program, and to focus on replacing the appliance that would make the most difference. REPRESENTATIVE PETERSEN asked whether residents have been encouraged to buy propane heating devices, which are more easily converted to natural gas. REPRESENTATIVE T. WILSON observed propane costs more than oil. CO-CHAIR PRUITT asked what impact Fort Wainwright Army Base has on the situation. 4:49:10 PM REPRESENTATIVE T. WILSON advised that all projects and expansions in Fairbanks now require special permitting to verify that construction and such would not negatively impact air quality. In response to Co-Chair Pruitt, she said the borough changed from number two heating fuel to number one heating fuel, but there was no substantial change in air quality. Within the city, there is district heat, gas, wood fuel, and oil fuel. Because of inversion, pollution from the power plants and commercial buildings is higher in the clouds. Residential wood smoke from shorter chimneys is lower and is more often registered by the EPA monitors. In addition, as more certified wood stoves are being used, on very cold days wood smoke levels stay high. She compared the problem to that of air pollution which was improved by auto emission controls. Fairbanks is a bowl with very little wind, and the pollution settles on the town. REPRESENTATIVE PETERSEN recalled other legislation for the home energy rebate program that tried to create a voucher system but the contractors would have to wait 45 days to 60 days to get reimbursed. He asked whether the bill would have similar problems. REPRESENTATIVE T. WILSON this is a simpler program - one item, the appliance - one check. If vendors say no, no money will be spent. 4:56:34 PM JOHN ANDERSON, Program Officer, Weatherization, AHFC, advised that the previous voucher idea created an unmanageable process due to the volume of suppliers in the state, however, because this program addresses specific mechanical appliances, it would be more manageable. REPRESENTATIVE SADDLER asked for the balance of the home energy efficiency grant fund. 4:57:35 PM ROSIE RICKETTS, Program Manager, Home Energy Rebate Program, AHFC, said the balance is approximately $64 million. REPRESENTATIVE SADDLER asked what the cost would be to provide $10,000 grants for enough new stoves to reduce pollution sufficiently so that Fairbanks can reach attainment. MR. ANDERSON estimated 10,000 units at $10,000 each would be equivalent to $100 million. REPRESENTATIVE T. WILSON pointed out the program would only have whatever funding is allocated by the legislature. Furthermore, the grants are for an amount up to $10,000, and most wood stoves cost much less than that, ranging in price from $2,500 to $3,500. In fact, only oil furnaces older than 1990 would qualify for a replacement cost of $10,000. She stressed that the program would be "first come, first served," and urged for the initial funding of the program to be $1 million. In further response to Representative Saddler, she said it is hard to know what investment would be necessary to reduce emissions to reach the standard, because the modeling is not done, but more information should be available from DEC by this summer. REPRESENTATIVE PETERSEN questioned whether $1 million allocated to replace 100 stoves would result in enough of a reduction to attain the goal of the bill. REPRESENTATIVE T. WILSON said the number of old oil furnaces in use is unknown, and replacing them may cost $10,000 each. However, replacing wood stoves will cost from $3,000 to $3,500 each because the grant will only replace the appliance and not the chimney and other parts. 5:02:20 PM REPRESENTATIVE SADDLER was interested in a way for the state to recover some of the cost, perhaps by a lien that is paid when the home is sold. REPRESENTATIVE T. WILSON pointed out that the weatherization program to upgrade homes does not require repayment, nor does the rebate program. The benefit to the state is that it will not lose its federal transportation funding. She acknowledged there are other programs, but oil furnaces have not been addressed. Fairbanks tests the air every day and will know if the program is working in a specific area, and the test results are provided to EPA. The program is limited by close parameters in order to target the dirtiest sources of pollution. Although the income qualifications for other assistance programs seem high, the average cost of heat and electricity in the Interior is from $700 to $1,000, and many residents don't have the extra cash for improvements because of the cost of energy. 5:05:40 PM CO-CHAIR FOSTER agreed with funding the program for $1 million the first year. He suggested there should be a priority for the dirtiest appliances. REPRESENTATIVE TUCK clarified that the intent of the previous voucher energy rebate program was to pay the homeowner, not individual vendors, which was objected to by AHFC. 5:07:03 PM CO-CHAIR PRUITT held over HB 323.