CS FOR HOUSE BILL NO. 152(FIN) "An Act establishing a renewable energy project account and a renewable energy fund and describing their uses and purposes." SARAH FISHER-GOAD, DEPUTY DIRECTOR, OPERATIONS, ALASKA INDUSTRIAL DEVELOPMENT AND EXPORT AUTHORITY (AIDEA) AND ALASKA ENERGY AUTHORITY (AEA), DEPARTMENT OF COMMERCE, COMMUNITY AND ECONOMIC DEVELOPMENT, reported that the Administration does support the establishment of the fund; Governor Palin stated support for a $250 million appropriation. Ms. Fisher-Goad said that Steve Haagenson, Executive Director of the Alaska Energy Authority, is in the process of working on developing the state energy plan, which would emphasize regional planning for rural areas. Ms. Fisher-Goad noted that several recommendations for changes from the Senate Resources Committee's version of the bill have been submitted. She reported some concern regarding the appropriation process as the projects move forward. She referred to a handout in the members' packets entitled "Alternative Energy RFP - Eligible and Complete Applications Preconstruction." She reported that AEA, with the Denali Commission, solicited alternative energy projects. The list of the projects is unranked. There was $4 million from the Denali Commission and $1 million in state funds for this RFP. There are more projects than funding available at this time. 9:17:37 AM PETER CRIMP, PROGRAM MANAGER, ALASKA INDUSTRIAL DEVELOPMENT AND EXPORT AUTHORITY AND ALASKA ENERGY AUTHORITY, DEPARTMENT OF COMMERCE, COMMUNITY AND ECONOMIC DEVELOPMENT, observed that there is a lot of demand for alternative energy projects. Senator Huggins thought it was important for the state to have goals regarding alternative energy. Ms. Fisher-Goad commented on projects that address the goals of the state energy plan. Senator Thomas suggested that there were already a number of projects in place in the state, and he thought there should be coordination between existing and new projects. Ms. Fisher-Goad thought it was an excellent point. AEA provides consultation and technical assistance regarding effective projects. 9:22:18 AM Senator Elton referred to Section 2, the responsibilities of the authority. He concluded that the only involvement the legislature has, according to Section 2, is to set up the account. He opined that the legislature cedes authority to make a loan or grant. Ms. Fisher-Goad reported that Section 2 was an amendment to the AEA Existing Power Project Fund. It emphasizes the grant portion of the program. The section that deals with the legislature's role is on page 4, paragraph (i). She pointed out that it where it says "fiscal year may be used for grants" should say "fiscal year may be appropriated for grants." Co-Chair Stedman asked why the projects are not ranked and do not use annual appropriations. Ms. Fisher-Goad thought it was a timing issue. It depends on how the legislature wants the structure. 9:26:57 AM Co-Chair Hoffman reported that fuel costs are adjusted after the barge gets to Bethel and will soon be $7 per gallon. He thought the passage of this bill assumes that it addresses the high cost of energy. He thought the state should be looking at viable, renewable projects that provide immediate effects. He referred to the list of $1.2 billion potential projects. He thought there was a need for a more aggressive approach in order to bring rural costs down. He requested a plan from ASA to address that issue. Ms. Fisher-Goad related the number one concern, the cost of energy in rural communities. She reported that Mr. Haagenson was in Bethel to meet about with a housing group in order to find rural solutions to energy issues. Co-Chair Hoffman asked when a concrete plan might be in place. Ms. Fisher-Goad thought by December 2008. She termed it a very aggressive approach. 9:31:45 AM Senator Dyson identified with Co-Chair Hoffman's comments. He thought that on page 2, line 20, coal should be added along with natural gas. He noted that on page 3, line 27, the list should also include clean coal. Ms. Fisher-Goad responded that it is a matter of renewal energy vs. alternative energy development and what the fund should be used for. The focus of the fund is on renewable energy. Senator Dyson maintained that if natural gas is considered, only after the renewables are considered, coal should likewise be considered. Ms. Fisher-Goad reiterated that the fund is for renewable sources. She questioned if natural gas should be in the bill. She said AEA is not taking a position on that. 9:35:42 AM Senator Dyson referred to page 2. He repeated his argument that if clean coal is available, it should be included. Ms. Fisher-Goad thought the policymakers should look at that issue. The bill emphasizes a clean fuel, a renewable resource. Senator Dyson asked about page 4, line 15. He questioned why a community the size of Juneau could not be included. He wondered if the Administration is in favor of the 10,000 population cut off. Ms. Fisher-Goad said Juneau has renewable resources. Senator Dyson wondered if any larger communities should be included. Mr. Crimp addressed the coal vs. renewable resources question. He related that there are many ways, in addition to renewable energy, to get to the goal of displacing the use of diesel fuel. He listed several methods of energy conservation. The emphasis of the bill is renewable energy. Senator Dyson inferred that the fund could not be used to develop a non-renewable energy like fish waste or logging slashings. 9:40:57 AM Co-Chair Stedman related that on the list of submitted projects there is only one geothermal project. He wondered why there seems to be a lack of interest in this area. He also thought communities that could not get natural gas should be given priority. Mr. Crimp replied that AEA is reacting to the proposals that have been submitted. He said there is another group that looks at helping communities develop projects and there should be more in the future. Co-Chair Hoffman reported that Naknek Cooperative has been trying to drill for a geothermal source. He said that AEA has not been supportive of this endeavor because of a fear that no thermal energies would be found. He argued that the attempt should be made. He questioned AEA's decision. Mr. Crimp replied that AEA has not responded to any funding request from Naknek. Co-Chair Hoffman argued that the process needs to go forward and should be supported by AEA. 9:46:03 AM Senator Elton summarized that any waste from a resource that is managed on a sustained yield basis would be eligible for this loan fund. Mr. Crimp said that interpretation is correct. He listed the energy sources that the bill would address such as logging slash, sawmill waste, paper from municipal waste, and other biomass resources. Senator Elton added fish oil to the list. MIKE NOTAR, IBEW LOCAL 1547, JUNEAU, spoke in support of HB 152 because it helps to address lower energy costs by utilizing renewable energy sources and provides opportunities for training and work opportunities for Alaskan electrical workers. 9:48:57 AM MEERA KOHLER, PRESIDENT, CEO, ALASKA VILLAGE ELECTRIC COOPERATIVE, testified in support of HB 152. She discussed pioneer wind projects and the difference they are making in rural Alaska. She explained the potential for wind energy in rural Alaska and the need for additional funds. Co-Chair Hoffman said it seems as though, with the continued escalation in fuel costs, there needs to be a more active role in trying to address energy problems. The wind projects are a significant advancement in reducing dependence on fossil fuels, especially in rural areas. He wondered how much the wind projects cost. Ms. Kohler said about $3 million. The $20 million could be used to leverage other federal dollars. She explained that there is a practical limit to how many wind turbans can be constructed each year. She campaigned for a reliable funding program. Co-Chair Hoffman said that the solution will have to be stretched out for many years at $20 million funding. He maintained that more effort and funding must be provided now in order to solve high energy costs problems. He thought AEA and the Administration should take the lead. JOHN BITNEY, STAFF, REPRESENTATIVE JOHN HARRIS, pointed out that there could be some modifications to the bill that would address some of the questions posed today, such as clarifying that the funds are subject to appropriation. He addressed Senator Dyson's concerns about the exclusion of coal. He said he would check into expanding the options to include coal. The intent of the bill is not to try to limit access to energy, but to try to expand it. 9:56:16 AM Senator Dyson suggested other types of fuel that should not be excluded: logging slashing, fish oil, fish waste, and farm waste. Senator Thomas asked if the sponsor would be moving forward quickly on this legislation. Mr. Bitney commented that the bill should be viewed as long term. He spoke positively about trying to address energy cost needs in a timely manner. Senator Elton voiced concern about the Administration's reimbursable services agreement for funding of AEA's executive director's salary, since the Governor appoints every member of the authority. He worried that it would become a political actor's fund. Mr. Bitney said the sponsor was trying to identify a process of getting previously evaluated projects to the legislature. He assured that the legislature would be included in the appropriation process. Senator Huggins noted that the Railbelt Energy Fund is a political animal. He wanted assurance that this bill would not become the same. Mr. Bitney thought there were several ways to address energy needs in Alaska. He pointed out that this bill deals with smaller renewable energy projects, unlike the Railbelt Fund, which is at a larger, more expensive level. Senator Huggins compared this fund to the Railbelt Energy Fund and the potential for abuse. He wished to see a viable, functional, long-term, time-tested approach that will not fall victim to "how we see the Railbelt Energy Fund". 10:03:36 AM Senator Olson asked Ms. Kohler about the expense of energy in rural Alaska and how to facilitate the cooperation between the renewable energy fund, AEA, and power producers. Ms. Kohler responded that that could be achieved through this legislation with the impartial advisory board mechanism. She thought that was the difference between the Railbelt Energy Fund and this fund. Senator Olson commented on the frustrations in Naknek possibly being alleviated by such a process. AT-EASE: 10:05:56 AM RECONVENED: 10:12:29 AM HB 152 was heard and HELD in Committee for further consideration. AT-EASE: 10:13:24 AM RECONVENE: 10:13:54 AM