HB 323-NONATTAIN AREA HOME HEATING SYSTEM GRANTS  4:17:08 PM CO-CHAIR FOSTER announced that the final 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." 4:17:24 PM REPRESENTATIVE SADDLER moved to adopt the proposed committee substitute (CS) for HB 323, Version 27-LS1275\I, as the working document. REPRESENTATIVE SADDLER objected for the purpose of discussion. 4:17:32 PM The committee took an at-ease from 4:17 p.m. to 4:22 p.m. [Although not formally stated, Representative Saddler's objection was treated as removed.] 4:22:13 PM CO-CHAIR FOSTER announced the proposed CS for HB 323, Version 27-LS1275\I, was adopted as the working document. 4:22:23 PM REPRESENTATIVE TAMMIE WILSON, Alaska State Legislature, speaking as the sponsor of the bill, explained the first change by the proposed CS specifies the grant amount for a furnace is $7,500 and requires the furnace to be installed. Also, the grant amount for an Environmental Protection Agency (EPA) certified wood stove is $5,000. She said, "It should be reflected also in the fiscal note: $1 million, not $100 million." The source of the aforementioned estimate is the Fairbanks North Star Borough (FNSB) wood stove change out program, which replaced 385 wood stoves for $441,000. Representative T. Wilson stated the program authorized by the bill is not a free giveaway but is modeled after the AHFC weatherization and rebate programs, and from funding that is currently being used for this type of activity. 4:23:48 PM CO-CHAIR PRUITT called attention page 1, lines 6 and 7 of the bill that specified the funds come from the Alaska energy efficient home grant fund. He asked whether this is the same fund given to AHFC for the weatherization program. 4:24:15 PM REPRESENTATIVE T. WILSON said, "There is nothing in that fund. It is a separate fund. We took it away from the rebate one so it would not be confused, ... [a] brand-new fund." In further response to Co-Chair Pruitt she said the bill does not create a fund but makes changes to a fund that was not being utilized. CO-CHAIR PRUITT expressed his understanding that an EPA- certified wood stove will produce little particulate matter and will be O.K. to use. REPRESENTATIVE T. WILSON responded that most non-EPA certified stoves do not have catalytic converters, thus pollute more. As guidelines become stricter, stoves will be cleaner. CO-CHAIR PRUITT asked about the possibility that EPA may change its regulations after people invest in new stoves. 4:25:55 PM REPRESENTATIVE T. WILSON recalled that the air quality in Fairbanks did not change, but EPA reduced the "numbers" from 65 parts per billion to 35 parts per billion. In fact, stoves are not tested in cold climates, "so some of the numbers sometimes are skewed." She pointed out that if Fairbanks was able to use the previous guidelines it would not be out of attainment. CO-CHAIR PRUITT expressed his concern that EPA could change its certification on stoves. REPRESENTATIVE T. WILSON pointed out that EPA is not likely to change its certification on stoves, but can change the number on emissions, and she described how a concentration of homes in a neighborhood affects air quality. REPRESENTATIVE SADDLER gave an example of everyone in Fairbanks getting an EPA-certified stove, and asked whether that would automatically meet attainment. REPRESENTATIVE T. WILSON said, "Gas is probably the only thing that gets us there." She added that Fairbanks does not want its residents who have gas or district heat to convert to wood stoves, but seeks to replace existing non-certified wood stoves. In further response to Representative Saddler, she said her frustration is that EPA does not provide a model for the community or the Department of Environmental Conservation (DEC) to follow, but simply sets levels for attainment. 4:30:06 PM REPRESENTATIVE SADDLER asked whether the new standards from EPA came with any funding to achieve them. REPRESENTATIVE T. WILSON said yes. Two years ago there was a $1 million grant from the Congestion Mitigation and Air Quality (CMAQ) Improvement Program for testing and study, but the funds are now gone. In further response to Representative Saddler, she said Libby, Montana, had funding from EPA to provide a program similar to that proposed by the bill. REPRESENTATIVE PETERSEN noted to qualify for a grant, an existing oil furnace would have a rating of less than 80 percent efficiency. He asked if 80 percent efficiency is the highest available for fuel oil. REPRESENTATIVE T. WILSON explained that in a cold climate a percentage from 82 to 90 does not greatly affect air quality. CO-CHAIR PRUITT questioned whether EPA would acknowledge a good- faith effort if Fairbanks does not reach attainment by 2014. REPRESENTATIVE T. WILSON indicated yes, explaining that there must be a state implementation plan, and this program would count as one of the ways to cure the problem; in fact, the intent of HB 323 is to show EPA the state's interest and to prevent a ban on burning wood stoves during times of an air inversion. 4:34:11 PM REPRESENTATIVE SADDLER asked whether there is an impediment to the reuse of a replaced stove. REPRESENTATIVE T. WILSON said the FNSB program destroys the replaced stoves. REPRESENTATIVE SADDLER encouraged the reuse of stoves. REPRESENTATIVE T. WILSON pointed out FNSB has an ordinance to prevent the sale of non-EPA certified wood stoves in the nonattainment area. 4:36:16 PM REPRESENTATIVE SADDLER removed his objection. There being no further objection, Version I was adopted as the working document. 4:36:45 PM STACY SCHUBERT, Director, Governmental Relations & Public Affairs, AHFC, informed the committee that the zero fiscal note submitted by AHFC [HB323-DOR-AHFC-03-01-12] attached analysis that included 10,000 homes participating in the program at an average cost of $10,000 per grant. Also, additional operating expenses to AHFC were estimated at $1.8 million. Alaska Housing Finance Corporation now recognizes that the intent of the bill is for the legislature to appropriate $1 million to the fund and reduce the amount of the grant thus the corporation will revise its estimate and provide an amended fiscal note to the committee. She also clarified that on page 1, lines 6 and 7, the bill identifies the Alaska energy efficient home grant fund, which is an inactive grant fund within AHFC that presently has zero funds. Testimony by AHFC on 3/22/12 referred to a balance of $64 million in the home energy rebate fund; this entire fund is encumbered or obligated. 4:39:20 PM CO-CHAIR PRUITT asked whether the lower grant amounts in the proposed CS are adequate to complete the change outs in the Fairbanks area. 4:39:57 PM JOHN ANDERSON, Project Officer, Weatherization, AHFC, said AHFC is completing its weatherization outcomes report which will provide details on every weatherization project; however, a recent sample of 10 "boiler swap-outs" in the Fairbanks area indicated that they cost an average of $8,900. REPRESENTATIVE TUCK observed that a homeowner cannot participate in the energy rebate program if they participate in the proposed wood stove or furnace program. He asked whether the sponsor considered allowing a homeowner to participate in both programs if the two grant amounts do not exceed $10,000. MS. SCHUBERT deferred to the sponsor. REPRESENTATIVE SADDLER asked whether the change outs averaging $8,900 were for gas furnaces or wood stoves. MR. ANDERSON answered that the change outs were from low- efficiency oil furnaces to high-efficiency oil furnaces. In further response to Representative Saddler, said the weatherization and rebate programs do not recognize wood stoves as primary sources in the rating process, so there is no analysis on wood stoves. 4:42:39 PM CO-CHAIR FOSTER opened public testimony on the proposed CS for HB 323. After determining no one wished to testify, public testimony was closed. CO-CHAIR PRUITT noted that the present bill is for homeowners. He asked whether AHFC's cost estimates included only owner- occupied homes. MR. ANDERSON understood that AHFC's estimate of 42,000 included rentals and owner-occupied units. In further response to Co- Chair Pruitt, he said including only owner-occupied units would change the estimate, as will the changes in the proposed CS. He offered to provide further estimates. 4:44:54 PM CO-CHAIR FOSTER held over HB 323.