SB 192-AIDEA BONDS, LOANS, FUND; AEA LOAN    1:08:16 PM CO-CHAIR MICCICHE announced the consideration of SB 192. JESSE LOGAN, Chief of Staff, Senator McGuire, Alaska State Legislature, Juneau, Alaska, stated that SB 192 does two things: 1. Provides bonding authority to Alaska Industrial Development and Export Authority (AIDEA) to finance the Sweetheart Lake Hydroelectric Project (SLHP) up to $120 million. 2. Authorizes Alaska Energy Authority (AEA) to issue a $22 million loan through the Power Project Loan Fund (PPF) for necessary transmission lines. MR. LOGAN disclosed that SLHP was seeking alternative funding and asked that the committee consider removing the AEA portion from the bill in a future amendment or committee substitute. He explained that SLHP would encompass the following: · Provide a maximum capacity of 19.8 megawatts. · Designed to fully supply power to the Kensington Mine with year-round power. · Possibly supply additional power to Alaska Electric Light and Power Company (AEL&P). MR. LOGAN provided an overview of SLHP's impact on the Kensington Mine and Southeast Alaska as follows: · Major economic driver in the Juneau area. · SLHP has the potential to lower the cost of the mine. · SLHP has the potential to extend the life of the mine. · SLHP could help the mine realize environmental benefits from switching from diesel to clean hydropower. · SLHP would run a submarine transmission cable across Berners Bay in the Lynn Canal to the mine. · Additional power from the mine could be sold to AEL&P and utilized for the Greens Creek Mine which currently buys from AEL&P and is under-supplied. MR. LOGAN pointed out that with any AIDEA bonding authority, the state would not be obligated to pay. He added that SB 192 does not obligate AIDEA to issue bonds until suitability, feasibility, and due diligence analysis was conducted. He specified that SB 192 was necessary should AIDEA deem SLHP suitable for issuing bonds to provide loans. He added that the issuance of the bonds for sales provides an additional round of due diligence by the international bond market. He said the additional due diligence helps protect AIDEA's investment and ensure a solid return for AIDEA and the State of Alaska. 1:09:27 PM SENATOR STEDMAN joined the committee. 1:10:39 PM DUFF MITCHELL, Managing Director, Juneau Hydropower, Inc., Juneau, Alaska, stated that he would provide an overview as to why Juneau Hydropower has asked AIDEA for money. He said the intent for SLHP was to supply power to both Kensington Mine as well as the proposed Juneau District Heating Project (JDHP). MR. MITCHELL provided details on SLHP as follows: · 19.8 megawatts. · Located at the very southern tip of the City and Borough of Juneau. · Sweetheart Lake is approximately 5-1/2 miles long and 1/2 mile wide. · Sweetheart Lake was initially studied in 1906 for hydropower. · Sweetheart Lake currently has a power-site classification and a Federal Reserve designation for hydropower. · Sweetheart Lake has been studied by the Alaska Power Authority, U.S. Geological Services, and others. · SLHP construction would start in 2016 and be in production by 2018. · Sweetheart Lake is 35 miles from Juneau, but only 8 miles from the AIDEA Snettisham line. · SLHP is designed to provide firm-power during the winter months. · SLHP will add about 25 percent new generation and capacity to Juneau. 1:12:46 PM MR. MITCHELL stated that SLHP would support power for the Juneau District Heating Project (JDHP). He detailed that JDHP would use Alaska-based technology that has been developed in Juneau with the [Ted Stevens Marine Research Institute (TSMRI).] He noted that the Alaska Sealife Center in Seward uses another generation of the technology. He summarized that the technology would be brought full-circle around to provide district-heating in Juneau. 1:13:19 PM SENATOR HOFFMAN joined the committee. MR. MITCHELL detailed JDHP as follows: · Designed to harvest heat from the Gastineau Channel. · Emerson Climate Technologies (ECT), subsidiary of Emerson Company with $22 billion in sales, has developed and patented the technology that produces 180 to 190 degree heat from seawater. · ECT has deployed their technology-suite in Drammen, Norway since 2011. · The technology is 300-percent efficient where one unit of electricity going in produces three kilowatts units of heat. · JDHP would circulate heat around Juneau from 180 to 190 degrees through a pipe-distribution network that contains a non-volatile fluid. · JDHP's pipe-distribution network would use directional drilling from basement-to-basement to minimize the installation's impact on city streets. · JDHP could provide all of Juneau with low-cost heating. · JDHP's technology can be transferred to other locations in Southeast Alaska. CO-CHAIR MICCICHE asked if TSMRI was currently using the heating technology. MR. MITCHELL answered yes. He detailed that TSMRI broke ground and "Treaded where nobody else had treaded before." He said the Seward SeaLife Center added on to the technology-suite that TSMRI started. He summarized as follows: We are really proud that this is an Alaska-based technology that we are bringing around full-circle and it's neat to see Alaskans developing this technology. CO-CHAIR BISHOP asked if JDHP would use seawater. MR. MITCHELL answered that JDHP would take seawater out of the channel at a depth of 100 feet. CO-CHAIR BISHOP asked if the piping used for JDHP would be stainless steel or incorporate a corrosion inhibitor. MR. MITCHELL explained that JDHP would use a pipeline-pig for internal cleaning. He added that filter systems would keep the "big stuff" from coming in. He noted that the system would draw seawater at low velocity so a vacuum was not created. He detailed that the seawater would be brought in for the heat pump system and circulated back out. He specified that the seawater's heat would be transferred to freshwater that would be circulated through the pipe-distribution network to buildings. CO-CHAIR MICCICHE remarked that the system Mr. Mitchell described was similar to a reverse of the refrigerant process. SENATOR HOFFMAN asked what would happen to salmon and other ocean sea life swimming near the system's intake. MR. MITCHELL explained that TSMRI and the SeaLife Center use filters to stop all of the fish and octopus from coming in, but microscopic things like barnacles are not stopped. 1:18:17 PM MR. MITCHELL presented a video to the committee on JDHP. He divulged that John Cooper and his team from TSMRI received a federal renewable energy award from the White House for the cost savings from their work on the seawater heat pump system. CO-CHAIR BISHOP asked what the seawater intake pipe was made out of. MR. MITCHELL replied that the pipe was metal with some high density polyethylene (HDP) parts within it. CO-CHAIR MICCICHE noted that the introduction to the video touted an anti-hydrocarbon message. MR. MITCHELL replied that the heating system did not use hydrocarbons and saved money. 1:22:46 PM CO-CHAIR MICCICHE asked how the heat taken from the seawater was condensed. MR. MITCHELL answered that the heat pump technology condenses the heat. He noted that the technology has been around for over 100 years. He specified that the heat pump would take about 4 or 5 degrees out of the saltwater and return it back to the ocean. SENATOR HOFFMAN asked how far north the heat pump technology could be utilized. MR. MITCHELL replied that the technology was dependent on the water temperature, not the latitude. He noted that the seawater heat pump system was used in Drammen, Norway, which was located 118 miles [latitudinally] north of Juneau. SENATOR HOFFMAN asked if the heat-pump technology has to use seawater. 1:25:04 PM MR. MITCHELL answered no. He explained that the heat pump technology can use any water source. He summarized that Juneau Hydropower's projects would lower Juneau's electricity costs. He pointed out that the Regulatory Commission of Alaska (RCA) recently passed regulations specifying that any purchases by a local utility must be just- and-reasonable where the local utility cannot discriminate against the qualifying facility as long as consumers are not adversely effected. He added that the power transmission from JDHP would add additional revenue for both the AIDEA Snettisham and AEL&P. He remarked that SLHP is not getting its power transmission for free, a fee would be paid that ultimately may pressure rates to go down. He set forth that the SLHP business model improves competitiveness and noted that "Firm hydropower always beats diesel." SENATOR EGAN noted that he was told that the power transmission outbound from Lena Cove to Kensington Mine would have to be upgraded. He asked who would pay for the upgrade from Lena Cove on out. MR. MITCHELL replied that the upgrade would be Juneau Hydropower through the Lynn Canal Transmission Corporation. SENATOR EGAN asked him to verify that Juneau Hydropower would take care of the cost for the whole thing. MR. MITCHELL answered yes. He specified that the upgrade's cost ultimately would be paid for by customers like Kensington Mine, but the cost would be prorated over 30 years to keep rates as low as possible. He reiterated that Juneau's heating costs would go down with JDHP. He remarked that he has nothing against fossil fuels, but noted that JDHP would advantage of a local resource as well as helping Juneau deal with fossil-fuel price volatility. He asserted that adding another fuel or heating source into Juneau was just competition in a free market that ultimately drives prices down. He pointed out that SLHP would benefit Juneau with a $125 million private capital investment that would create 85 construction jobs and 35 indirect jobs. He added that JDHP would create another $25 million investment with additional construction and indirect jobs. He said the Lynn Canal transmission upgrades would also provide benefits from a $22 million investment of private capital. He summarized that the projects he noted would provide economic development in Juneau during a period of decline in the state. 1:29:51 PM CO-CHAIR MICCICHE asked why the number of SLHP's construction jobs were so low. MR. MITCHELL explained that the 85 construction jobs would be for a 2-year project. He noted that the dam at Sweetheart Lake was only 111-feet high and 278-feet across, but the project's tunnel and some other things created the jobs. He added that the dam-construction stage could be done in one-construction season. MR. MITCHELL set forth that Juneau Hydropower's team was looking forward to making their proposal happen and having AIDEA participate in its financing. He specified that Juneau Hydropower was not looking at AIDEA to fully take on the projects' full load, equity and private capital investment was part of the plan. He summarized that Juneau Hydropower was excited to bring the technology forward and provide Alaskan leadership to make the projects happen with the local community, its players, and its local-labor force. CO-CHAIR BISHOP asked how much has been invested in the Juneau hydro-project to date. MR. MITCHELL answered that approximately $4 million in hard- dollars in addition to soft-dollars have been invested. CO-CHAIR MICCICHE opened public testimony. 1:31:51 PM MARY BECKER, Mayor, City and Borough of Juneau, Juneau, Alaska, disclosed that the City and Borough of Juneau Assembly unanimously voted for a letter of support for SLHP and JDHP. 1:32:59 PM PAUL GROSSI, lobbyist; Alaska State Pipe Trades, Alaska Ironworkers, and Juneau Building Trades; Juneau, Alaska, stated that the unions support the projects because of the added jobs and positive impact on Juneau's economy. He estimated that the three projects would create 100 construction jobs with 5 to 10 permanent fulltime positions. He pointed out that Juneau has a skilled construction force that will have leave the state if there are no jobs. He specified that SB 192 was permissive language that does not require AIDEA to loan money until additional analysis determines viability. He opined that $120 million in loans from AIDEA could allow the agency and the state to make as much as $120 million. He set forth that SB 192 would allow a value-added industry to happen. He remarked that the project will not happen if said AIDEA determines that the project is not viable. 1:39:17 PM ROBERT GRIMM, Alaska Power and Telephone Company, Skagway, Alaska, said the proposed project was innovative and worth the effort. He concurred with Mr. Grossi that SB 192 was just permissive language and AIDEA still had a lot of due diligence to conduct. 1:40:21 PM MIKE CRAFT, President/CEO, Delta Wind Farm, Delta Junction, Alaska, stated that he supported the project. He disclosed that he has been involved with renewable energy development in Alaska for the last eight years and admitted that the battle has been tough to bring projects forward. He pointed out that the state wanted 50 percent of energy sources to be renewable with the intent to attract private-sector capital. He said Alaska's independent power producers heard the state's message to find renewable resources to take advantage of. He opined that Mr. Mitchell's project had a lot of attributes to it with respect to economic development, public benefit, and jobs. 1:41:41 PM RODNEY HESSON, International Brotherhood of Electrical Workers (IBEW) Local 1547 and Juneau Building Trades, Juneau, Alaska, stated that the project was good because jobs would be created and the succession plan for a trained workforce can continue. 1:43:07 PM MAX MIELKE, Business Manager, Plumbers and Pipefitters Local 262, Juneau, Alaska, stated that he represented 100 members in Southeast Alaska. He said his union has 15 apprentices in its program with the intent to keep the program going. He revealed that all of the building and construction trades in Southeast Alaska has 950 members with 80 apprentices. He set forth that SB 192 was about jobs and the project was very important to its members. 1:44:44 PM COREY BAXTER, Representative-Local 302, International Union of Operating Engineers (IUOE), Juneau, Alaska, said the union supported SHLP. He set forth that SHLP was a project that would impact and benefit Juneau and Southeast Alaska by creating direct and indirect family-wages jobs. CO-CHAIR BISHOP asked if IUOE supported the use of apprentices for SHLP. MR. BAXTER answered yes. CO-CHAIR BISHOP stated that he wanted to make sure that the contractor utilized apprentices in the project. 1:47:14 PM WAYNE ZAGARLICK, Vice President and General Manager, Coeur Alaska-Kensington Mine, Juneau, Alaska, disclosed that Coeur Alaska was the owner and operator of the Kensington Mine. He detailed that the mine employed 340 employees and provided employment opportunities for 30 contractors. He revealed that labor was the mine's largest operating expense, followed by the cost for electricity from diesel fuel. He admitted that providing sustainable employment for Juneau's local economy was dependent on the mine managing and reducing its costs. He stated that competitively priced hydroelectricity could be a significant contributor towards the mine's sustainable viability. He opined that Alaska's economy has greatly benefited from its significant energy supply through its vast oil and natural resources. He set forth that Southeast Alaska's hydroelectric resource had extensive potential for generation and exportation. He stated that SLHP was a true step towards diversification. CO-CHAIR BISHOP asked how long the mine's life might be extended by the lowered operating costs from SLHP. MR. ZAGARLICK replied that quantifying the mine's life was difficult. He admitted that metal prices played a big role in a mine's viability. He said reducing operating costs made extending the mine's life more likely. 1:50:22 PM JOHN SPRINGSTEEN, Executive Director, AIDEA, Anchorage, Alaska, stated that the preliminary review has indicated that the project may be suitable for AIDEA to issue bonds for. He said AIDEA would still need to go through its feasibility and due diligence analysis. He specified that SB 192 would allow AIDEA to issue bonds in excess of its $25 million limit without prior legislative approval. 1:51:35 PM GENE THERRIAULT, Team Leader, Interior Energy Project, Alaska Industrial Development and Export Authority (AIDEA), Anchorage, Alaska, stated that he was available to address questions regarding a possible Alaska Energy Authority (AEA) loan for $22 million through the Power Project Loan Fund (PPF) for necessary transmission lines. He noted that had been part of the Power Project Loan Committee at AEA. He pointed out that Jesse Logan's testimony indicated that dropping the AEA section from the bill would make the issue moot. CO-CHAIR MICCICHE announced he would hold SB 192 in committee. He recognized a testifier who voiced his support for SB 192. KIRK PERISICH, Representative, Pacific Northwest Regional Council of Carpenters (PNWRCC) Local 1281, Juneau, Alaska, noted that he also represented millwrights and pile drivers. He explained that the projects in SB 192 would provide short term and long term jobs. He added that the "Alaska Hire" provision would assure that the majority of labor money would stay in the state.