SB 140-SMALL WATER-POWER DEVELOPMENT PROJECTS  CHAIRMAN TORGERSON announced SB 140 to be up for consideration. MR. DARWIN PETERSON, staff to Senator Torgerson, said in November 2000, Congress approved legislation extending programs under the Federal Energy Policy and Conservation Act. Title V of this Act, Public Law 106-469, was proposed by Senator Murkowski and transfers licensing and regulatory authority over small hydroelectric projects to the state in Alaska only. The enabling federal legislation applies to hydro-projects of 5,000 kilowatts or less. Before Alaska can acquire jurisdiction from the Federal Energy Regulatory Commission (FERC), the legislature must adopt this legislation and the Governor must submit a program to FERC. As the bill is currently drafted, RCA would be the state agency responsible for regulating these small hydro-projects. All the current environmental, cultural and resource protections required under federal law must be contained in the state program. This legislation will not preempt those protections in any way. The small hydro-projects that would not be eligible for state jurisdiction are those located on Indian reservations, such as Metlakatla, conservation units as identified in ANILCA, and rivers designated as wild and scenic. SENATOR TAYLOR asked if the state must require something similar to what the federal law requires. MR. PETERSON answered that is correct. SENATOR TAYLOR asked who has primacy in making the ultimate decision on recommendations. MR. PETERSON answered that FERC has veto power. RCA would take over the role that FERC plays right now. SENATOR ELTON said he thought another logical place for these decisions would be in the Alaska Power Authority (APA) in the Alaska Industrial Development and Export Authority (AIDEA). MR. BRIAN OMANN, Sitka Electric Department, said that Sitka doesn't have any power projects of 5 megawatts or less, but is in support of SB 140. MR. BRENT PETRIE, Alaska Village Electric Cooperative (AVEC), said AVEC supports the bill and has one project that is less than 5 megawatts. That project is on federal land, so this bill wouldn't apply to it. He suggested the committee consider the Department of Natural Resources Water Use Act be the relevant place for this purpose. CHAIRMAN TORGERSON explained that the reason he decided to put the authority with the RCA is because that is Alaska's equivalency to FERC. MS. NAN THOMPSON, Director, RCA, explained that this bill is supposed to make the processing of licensing hydro-projects simpler and the regulations more applicable to Alaska. She has talked to FERC and she is confident that the process can be streamlined and made more applicable to the State of Alaska. Her agency isn't looking for work, but the RCA can do it if the legislature so desires. MS. THOMPSON explained that the first task for the agency that gets this authority would be to draft regulations. The RCA has a regulations manager at the agency who could assume responsibility for that project. She thought SB 140 was a good bill in terms of development of alternative energy sources in Alaska, an issue the RCA faces regularly. Any process that would allow for more appropriately sized hydro-projects in small communities and delivers alternate sources of power is a good project in Alaska. MR. ERIC YOULD, Executive Director, Alaska Rural Electric Cooperative Association (ARECA), stated support for SB 140. He thanked Senator Murkowski for getting this bill through Congress. He said the federal process for licensing even small projects is a very cumbersome one and is generally a one-size-fits-all approach. FERC has tried to streamline its process for small projects, but at the state level it hasn't been helpful. He explained that recently Alaska Power and Telephone developed the Black Bear Hydropower project in Southeast Alaska. It took them seven years to get permitted and processed through FERC and cost $1.2 million. They built the project in one year at a cost of $10 million. The Skagway Goat Lake project of 4 megawatts, which would also fit under the purview of this program, took five years to get permitted and licensed for $1 million and it took one year to construct the project for $10 million. He stated, "This is what it takes to get projects permitted in this day and age. I can tell you at the federal level it's becoming more cumbersome daily." MR. YOULD said the RCA does a good job of regulating and providing rate review of utilities, but he didn't think it has the technical staff this would require. He suggested using other agencies like the Department of Transportation and Public Facilities, because it works on permits, has engineers and develops projects such as these. AIDEA was suggested, although it is a developing agency that might actually be developing the hydro projects it would permit. He highly recommended DNR because it is already in the water resource business, allocating water to users across the state. DNR is familiar with water conveyance systems and administers the dam safety programs throughout the state, which means it has certain expertise to look at dam stability. DNR would be knowledgeable about earthquake standards the projects will be designed for and its hydrologists would be able to look at probable maximum floods. RCA would have to hire staff to administer the program. MR. YOULD said if the State of Alaska takes over permitting, he hoped the development of these small projects would accelerate. Alaska has one-third of the untapped hydropower potential of the United States. It is very expensive to develop on a community-by- community basis. He mentioned if the permit process is slower under the state's authority, he would like the authority to go back to FERC. He suggested inserting a clause that would make it optional for the utilities to get their projects permitted through the federal government or the state government. CHAIRMAN TORGERSON asked if he thought an agency should have the power that FERC has to stop a project. MR. YOULD answered that the agency can't supercede any federal laws that are in place. With issues of judgments the agencies should have the ability to work with the Corps of Engineers to come up with a solution. He didn't think the state would ever have veto power over a federal agency. CHAIRMAN TORGERSON asked if that was true within FERC. MR. YOULD replied that they would work within the framework of existing laws and when there are issues of judgment, they have veto power. He presumed our state agency would have the same powers. SENATOR TAYLOR said it appears to him this commission has the discretion to decide how to protect energy conservation, mitigation of damage to salmon streams and protection of recreational opportunities. He expressed concern that jurisdiction for enforcement of this law falls within our state courts and Alaska courts still provide that if a person files a lawsuit and fails to succeed, damages can be awarded against that person. CHAIRMAN TORGERSON asked if any projects are underway right now. MR. YOULD replied Old Harbor is an existing project and a number of projects would be coming along. CHAIRMAN TORGERSON suggested doing a pilot project and putting a sunset date on the bill. He said he would hold the bill and asked the committee to think about it.