ALASKA STATE LEGISLATURE  HOUSE SPECIAL COMMITTEE ON ENERGY  March 22, 2011 3:06 p.m. MEMBERS PRESENT Representative Neal Foster, Co-Chair Representative Lance Pruitt, Co-Chair Representative Bob Lynn Representative Dan Saddler Representative Pete Petersen Representative Chris Tuck MEMBERS ABSENT  Representative Kurt Olson COMMITTEE CALENDAR  HOUSE JOINT RESOLUTION NO. 20 Urging the President of the United States, the United States Congress, and the Secretary of the United States Department of Agriculture not to implement protection of inventoried roadless areas under the "roadless rule" or otherwise restrict the development of necessary hydroelectric projects in the Tongass National Forest and the Chugach National Forest. - MOVED CSHJR 20(ENE) OUT OF COMMITTEE HOUSE JOINT RESOLUTION NO. 23 Urging the United States Congress to classify hydroelectric power as a renewable and alternative energy source. - HEARD & HELD HOUSE CONCURRENT RESOLUTION NO. 9 Establishing in the Alaska State Legislature the Alaska Working Group on Interstate Energy Production. - MOVED HCR 9 OUT OF COMMITTEE PREVIOUS COMMITTEE ACTION  BILL: HJR 20 SHORT TITLE: ROADLESS RULE & CHUGACH AND TONGASS HYDRO SPONSOR(s): REPRESENTATIVE(s) JOHANSEN 03/09/11 (H) READ THE FIRST TIME - REFERRALS 03/09/11 (H) ENE, RES 03/17/11 (H) ENE AT 3:00 PM BARNES 124 03/17/11 (H) Scheduled But Not Heard 03/22/11 (H) ENE AT 3:00 PM BARNES 124 BILL: HJR 23 SHORT TITLE: HYDROELECTRIC POWER; RENEWABLE ENERGY SPONSOR(s): ENERGY 03/16/11 (H) READ THE FIRST TIME - REFERRALS 03/16/11 (H) ENE 03/22/11 (H) ENE AT 3:00 PM BARNES 124 BILL: HCR 9 SHORT TITLE: STATE ENERGY PRODUCTION WORKING GROUP SPONSOR(s): ENERGY 03/16/11 (H) READ THE FIRST TIME - REFERRALS 03/16/11 (H) ENE, FIN 03/22/11 (H) ENE AT 3:00 PM BARNES 124 WITNESS REGISTER REPRESENTATIVE KYLE JOHANSEN Alaska State Legislature Juneau, Alaska POSITION STATEMENT: Speaking as the prime sponsor, presented HJR 20. SHELLY WRIGHT, Executive Director Southeast Conference Juneau, Alaska POSITION STATEMENT: Testified in support of HJR 20. GARRY WHITE Executive Director Sitka Economic Development Association (SEDA) Sitka, Alaska POSITION STATEMENT: Testified in support of HJR 20. CHRISTOPHER BREWTON, Utility Director Electric Department City and Borough of Sitka Sitka, Alaska POSITION STATEMENT: Answered questions during the hearing on HJR 20. HAP SYMMONDS, Chair Board of Directors Cordova Electric Cooperative, Inc. Cordova, Alaska POSITION STATEMENT: Testified in support of HJR 20. TIMOTHY ROONEY, Borough Manager City and Borough of Wrangell; Second Vice-President Southeast Conference; Alternate board member Southeast Alaska Power Agency (SEAPA) Wrangell, Alaska POSITION STATEMENT: Testified in support of HJR 20. MARILYN LELAND, Executive Director Alaska Power Association (APA) Anchorage, Alaska POSITION STATEMENT: Testified in support of HJR 20. CHARLES FREEMAN, Chair Board of Directors Southeast Alaska Power Agency (SEAPA) Ketchikan, Alaska POSITION STATEMENT: Testified in support of HJR 20. DIRK CRAFT, Staff Representative Lance Pruitt; House Special Committee on Energy Alaska State Legislature Juneau, Alaska POSITION STATEMENT: Introduced HJR 23 and HCR 9 on behalf of the House Special Committee on Energy, Alaska State Legislature. HAP SYMMONDS, Chair Board of Directors Cordova Electric Cooperative, Inc. Cordova, Alaska POSITION STATEMENT: Testified during the hearing on HJR 20. ACTION NARRATIVE 3:06:11 PM CO-CHAIR NEAL FOSTER called the House Special Committee on Energy meeting to order at 3:06 p.m. Representatives Foster, Pruitt, Petersen, and Saddler were present at the call to order. Representatives Lynn and Tuck arrived as the meeting was in progress. HJR 20-ROADLESS RULE & CHUGACH AND TONGASS HYDRO  3:07:08 PM REPRESENTATIVE FOSTER announced that the first order of business would be HOUSE JOINT RESOLUTION NO. 20, Urging the President of the United States, the United States Congress, and the Secretary of the United States Department of Agriculture not to implement protection of inventoried roadless areas under the "roadless rule" or otherwise restrict the development of necessary hydroelectric projects in the Tongass National Forest and the Chugach National Forest. 3:07:47 PM REPRESENTATIVE KYLE JOHANSEN, Alaska State Legislature, speaking as the prime sponsor, presented HJR 20. Representative Johansen advised HJR 20 was being presented to the committee because of its relevance to energy policies. The resolution is specific to the effects of the Roadless Area Conservation Rule (roadless rule) on the interconnection of Southeast hydroelectric (hydro) projects to energy grids. However, his larger concern is about energy assets statewide, and how to connect those to grids considering the issues of land ownership surrounding upcoming large hydro projects. Representative Johansen called attention to page 1, line 7, of the resolution, and noted that inventoried roadless areas constitute approximately 57 percent of the acreage in the Tongass National Forest, and an additional 35 percent is defined as wilderness. Furthermore, federal law states that the Secretary of the U.S. Department of Agriculture has the right to approve or disapprove road construction in the Tongass and Chugach National Forests. As an example of the impact of this situation, Representative Johansen stated that in the '90s, a route was selected for the construction of the Swan Lake/Lake Tyee intertie to connect two large dams and electrify part of Southeast Alaska. The cost for the chosen route was based on road access; however, litigation ensued and a new route was selected with no road access, thus construction, maintenance, and operation was supported by helicopter for a much higher cost. He opined these decisions should not be made by one person. Continuing to page 2, line 6, the resolution indicates that 14 of the 15 hydro projects in the Tongass and Chugach National Forest are subject to the protection of the roadless rule. Constraints by the roadless rule can also affect the issuance of hydro licenses by the Federal Energy Regulatory Commission (FERC), and one of the goals of the resolution is to clarify the effect of the roadless rule on projects that have already been permitted. 3:14:37 PM REPRESENTATIVE JOHANSEN reminded the committee that the President has set a goal of having 25 percent of electrical generation come from renewable sources by 2025 - although the federal government does not recognize hydro power as renewable - and the state goal is 50 percent renewable by 2025. However, these goals are thwarted by the difficulties created by the roadless rule, and other mechanisms that cause conflicts between federal agencies. 3:17:01 PM REPRESENTATIVE TUCK asked whether the President's goal should be added to the resolution. REPRESENTATIVE JOHANSEN surmised this addition could be made by this committee or by the House Resources Standing Committee. 3:18:19 PM REPRESENTATIVE SADDLER referred to page 2, and asked for a brief description of the 15 hydro projects in the Tongass and Chugach National Forests. REPRESENTATIVE JOHANSEN said he was unfamiliar with projects in the Chugach National Forest; however, in Southeast there are: Whitman Lake, two projects in Metlakatla, Blue Lake, and many more potential sites. Southeast is perfect for hydro because of its high alpine lakes that do not affect salmon. 3:20:46 PM CO-CHAIR FOSTER opened public testimony. 3:21:02 PM SHELLY WRIGHT, Executive Director, Southeast Conference, referred members to her written comments provided in the committee packet. In addition, she relayed a quote from a proclamation by President [not provided] Roosevelt. Ms. Wright stated that the Ninth Circuit Court of Appeals has put a padlock on communities and their progress. Furthermore, the U.S. Forest Service (Forest Service), U. S. Department of Agriculture (USDA), is developing a proposed new planning rule containing priorities for the conservation of trees, plants, animals, and water. When asked about the importance of socioeconomic issues and the science within the forest, representatives of the Forest Service told her they have no influence over that. She noted that the Forest Service owns 98 percent of the land, and said it is important to "get our forest back." She remarked: In the past 10 years Southeast Conference, in partnership with many other agencies and organizations, have put an extensive amount of effort into the development of affordable, self-sustaining, renewable, green, energy projects in our region. And it is fairly obvious that the federal government, controlling such vast amounts of the region, and the energy resources within, and that access is critical to this issue. It's equally obvious that during these past few years the forest was adequately protected during development of energy resources without the roadless enforcement. We have managed to develop several major hydro projects that are providing affordable, renewable, green energy to a small portion of our people. Unfortunately, we still have entire communities paying up to 90 cents a kilowatt hour for electricity. Our small businesses are the hardest hit and, as you know, have quite a ripple effect in these communities. Lack of access to land and the paralyzing permitting process of the federal government are killing our communities. People are not able to heat their homes and turn on their lights, much less start or maintain a business. A financial obligation to heat schools and community buildings is crippling in these communities, jobs are at a premium, and there is no good news in sight. MS. WRIGHT stated that two other hydro projects not mentioned by Representative Johansen are the Angoon project at Thayer Lake and the Kake-Petersburg Intertie project. 3:25:34 PM GARRY WHITE, Executive Director, Sitka Economic Development Association (SEDA), expressed his organization's support of the resolution. He said SEDA has an active FERC permit to expand the hydro capacity to Blue Lake dam, and the roadless rule is hurting the project. Sitka is at the maximum capacity of electricity that can be generated from its dams, and this situation is inhibiting the growth of the fish processing industry and new projects for the use of fish waste. In addition, a shortage of power limits the quality of life for the residents of Sitka. Mr. White opined the roadless rule is very detrimental to the future of hydro projects in this area. 3:27:25 PM REPRESENTATIVE SADDLER asked for more information on how this policy is affecting the expansion of the Blue Lake hydro project. MR. WHITE explained there is an existing road to the Blue Lake facility; however, the project will raise the existing dam by 83 feet, thus the level of the lake will then encumber Forest Service property. Removal of the timber from the area that will be flooded by the lake is in violation of the roadless rule and FERC suggested that permission to harvest the trees must come from the Secretary of Agriculture. If the trees are left standing, the water will be turbid, and a filtration plant will have to be built at a cost of millions of dollars. 3:29:43 PM CHRISTOPHER BREWTON, Utility Director, Electric Department, City and Borough of Sitka, stated that the City and Borough of Sitka has been working on a FERC license application for capacity amendments in order to increase the system capacity from Blue Lake by 27 percent. During the FERC licensing process, it was pointed out that the roadless rule would impact the project, and a request to address the harvesting issue was sent in September 2010, but there has been no response. Mr. Brewton continued to explain that the community has overwhelmingly approved bonds for the project, but the bonds have an expiration date that leaves a very short window for construction. This has created a serious deadline for the bond requirements, and the city cannot afford to wait on the Forest Service for the resolution of this critical issue for the community. 3:32:30 PM REPRESENTATIVE SADDLER asked for Mr. Brewton's previous experience with responses from the Forest Service. MR. BREWTON said very poor. The city is not privy to internal Forest Service communications from the local level to the national level. He restated the project's importance to the community. 3:33:50 PM HAP SYMMONDS, Chair, Board of Directors, Cordova Electric Cooperative, Inc., stated that the Cordova Electric Cooperative has a proposed project at Snyder Falls Creek, which is on Forest Service property, thus the Forest Service will have a major impact on the FERC licensing process. 3:35:05 PM TIMOTHY ROONEY, Borough Manager, City and Borough of Wrangell; Second Vice-President, Southeast Conference; Alternate board member, Southeast Alaska Power Agency (SEAPA), agreed with the previous testimony. Mr. Rooney said this is a critical issue for all of the communities in Southeast; in fact, Wrangell is one of the few communities with affordable electric rates. He said the ability to construct and maintain transmission lines and interties between hydro projects is vital to the survival of all of Southeast Alaska. 3:36:20 PM MARILYN LELAND, Executive Director, Alaska Power Association (APA), informed the committee APA is the statewide trade association that represents the electric utilities that supply power to over 500,000 Alaskans. She expressed her organization's strong support for HJR 20, and the efforts of the legislature to oppose implementation of the roadless rule regulation for the Tongass and Chugach National Forests. Alaska possesses an abundance of hydro resources that can be built with minimal environmental impact to replace costly, finite, and less environmentally-benign fossil fuels such as diesel, coal, and natural gas. The special use permits that are required by the roadless rule must be individually signed by the Secretary of USDA, and additional required federal actions can add one year or more to the hydro application approval process by FERC, and seriously jeopardize the three-year deadline on projects. 3:38:47 PM CHARLES FREEMAN, Chair, Board of Directors, Southeast Alaska Power Agency (SEAPA), stated SEAPA owns the Lake Tyee and Swan Lake hydro projects and the Ketchikan, Wrangell, Petersburg intertie. He affirmed that the intertie was "helicopter-built and helicopter-maintained;" however, due to the roadless rule, at the moment there is a question as to whether helicopter pads can be installed along the line for maintenance. Mr. Freeman offered SEAPA's help in opposing the roadless rule. Then, speaking for himself, he stated his opposition to the roadless rule. 3:40:10 PM CO-CHAIR FOSTER called attention to page 2, line 22, of the resolution, and noted that the goal of achieving 50 percent of the state's energy from renewable sources is ascribed to the governor; however, the goal is actually part of the state's energy policy. 3:40:49 PM CO-CHAIR PRUITT moved to adopt Amendment 1, labeled 27- LS0554\A.1, Bullock, 3/22/11, which read: Page 2, line 22: Delete "Governor's goal of generating" Insert "policy of the state, as stated in sec. 1, ch. 82, SLA 2010, to generate" 3:41:24 PM REPRESENTATIVE LYNN objected for discussion purposes. CO-CHAIR FOSTER said this is a technical amendment. 3:41:46 PM REPRESENTATIVE LYNN removed his objection. 3:42:00 PM There being no further objection, Amendment 1 was adopted. 3:42:19 PM REPRESENTATIVE TUCK opined it is important to add the President's intent - to get to 25 percent - to the resolution. CO-CHAIR FOSTER asked Representative Tuck to offer a conceptual amendment. [There followed discussion on whether a conceptual amendment was preferred.] 3:43:20 PM REPRESENTATIVE TUCK moved to adopt Conceptual Amendment 2. [Although not formally stated, Conceptual Amendment 2 added the intent of the President.] CO-CHAIR FOSTER objected for discussion purposes. 3:43:40 PM REPRESENTATIVE PETERSEN urged that the conceptual amendment state, "The President's goal was 25 percent renewable energy by 2025." 3:44:04 PM REPRESENTATIVE SADDLER observed that there is some question as to what the federal government defines as renewable, and he suggested the committee ensure hydroelectric energy was included. 3:44:26 PM REPRESENTATIVE JOHANSEN suggested that Conceptual Amendment 2 would be easily incorporated on page 2, line 25, by the resolution's drafter. However, the issue on how renewable is defined by the federal government is a larger issue that could be addressed by the House Resources Standing Committee. REPRESENTATIVE TUCK supported the insertion of "The Obama administration has set a goal of having 25 percent of the energy generated in the United States come from renewable, green, resources by 2025" at page 2, line 25. 3:46:00 PM CO-CHAIR FOSTER removed his objection. There being no further objection, Conceptual Amendment 2 was adopted. 3:46:18 PM CO-CHAIR PRUITT moved to report HJR 20, Version 27-LS0554\A, as amended, out of committee with individual recommendations and the accompanying fiscal note. There being no objection, CSHRJ 20 (ENE) was reported from the House Special Committee on Energy. 3:47:08 PM The committee took an at-ease from 3:47 p.m. to 3:51 p.m. 3:51:25 PM HJR 23-HYDROELECTRIC POWER; RENEWABLE ENERGY  3:51:40 PM CO-CHAIR FOSTER announced that the next order of business would be HOUSE JOINT RESOLUTION NO. 23, Urging the United States Congress to classify hydroelectric power as a renewable and alternative energy source. 3:51:48 PM DIRK CRAFT, Staff, Representative Lance Pruitt and the House Special Committee on Energy, introduced HJR 23 on behalf of the House Special Committee on Energy. Mr. Craft advised that the U.S. has long used targeted tax credit programs to incentivize investment and innovation in the energy sector, both for fossil and renewable resources; in fact, Investment and Production Tax Credits for renewable energy have been highly successful. The hydropower industry is creating jobs and affordable and renewable power, and private investment has often been driven by smart tax policies. In Alaska, hydroelectric (hydro) power has the potential to replace diesel-generated power with little to no environmental impact, but receives only one-half of the tax credits available to other renewable energy sources. He pointed out that there are almost 50 hydropower projects in Alaska that supply 24 percent of Alaska's electricity, large and small, and there are many potential sites for the development of future hydropower. Provided in the committee packet was a copy of U.S. Senator Lisa Murkowski's proposed federal legislation seeking to incentivize further production of hydropower resources by classifying hydro power as a renewable source of energy. 3:54:06 PM REPRESENTATIVE SADDLER called attention to page 2, line 9, of the resolution, and asked what federal renewable and alternative energy programs do not classify hydro power as a renewable or alternative energy source. MR. CRAFT said he did not know; however, the resolution is focused on production tax credit incentives. 3:55:06 PM HAP SYMMONDS, Chair, Board of Directors, Cordova Electric Cooperative, Inc., in response to Representative Saddler's question, noted that federal laws dealing with not classifying hydro as a renewable resource are related to financing; in fact, cooperatives in Alaska that are building hydropower projects are not eligible for federal financing as green energy or renewable projects. Mr. Symmonds relayed his efforts - beginning 15 years ago - to rectify this situation, and said he was very supportive of Senator Murkowski's bill and HJR 23. 3:57:23 PM REPRESENTATIVE TUCK moved to adopt Conceptual Amendment 1. CO-CHAIR FOSTER objected for discussion purposes. REPRESENTATIVE TUCK explained that unlike Washington and Oregon, Alaska is unique in its hydro resources. His intent is to reclassify hydro plants as renewable - without making Alaska an exception - by language stating that hydro can be reclassified as long as there is no economic competition for the water resource with municipalities, agriculture, or others. Representative Tuck stressed that the language should help all hydro projects in the U.S., yet allay the concerns about hydro that do not apply to Alaska. 3:58:59 PM REPRESENTATIVE SADDLER asked for the proposed language. REPRESENTATIVE TUCK proposed the following: On page 2, line 17, after "alternative energy source" add ", as long as there is no economic competition for the water resource," 3:59:35 PM REPRESENTATIVE SADDLER expressed his hesitation to condition the resolution and thereby raise the test of applicability. CO-CHAIR PRUITT wished to be line with the intent of Senator Murkowski's bill and noted that her bill did not include this wording. REPRESENTATIVE PETERSEN conversed with U.S. Senator Mark Begich, who said the U.S. Senate Committee on Energy and Natural Resources is hoping to include this definition in a future bill. 4:02:20 PM The committee took a brief at-ease. REPRESENTATIVE TUCK clarified that the conceptual amendment would have language to put a condition on hydro to address the concerns of the rest of the nation about hydro that are not shared by Alaska. The condition would help Alaska - and some other communities throughout the nation - by showing that there are places where there is no economic competition for water resources. 4:05:15 PM [HJR 23 was heard and held for further testimony.] 4:05:36 PM HCR 9-STATE ENERGY PRODUCTION WORKING GROUP  4:05:49 PM CO-CHAIR FOSTER announced that the final order of business would be HOUSE CONCURRENT RESOLUTION NO. 9, Establishing in the Alaska State Legislature the Alaska Working Group on Interstate Energy Production. 4:06:00 PM DIRK CRAFT, Staff, Representative Lance Pruitt and the House Special Committee on Energy, introduced HCR 9 on behalf of the House Special Committee on Energy, saying that the resolution establishes in the Alaska State Legislature the Alaska Working Group on Interstate Energy Production. This legislation is in response to legislation proposed by other states that produce energy and energy resources. Alaska, along with other states, continues to experience the negative consequences from delay or cancellation of economically viable energy-related projects because federal law and federal law enforcement too often overreach the federal government's constitutional authority to make and enforce laws. This working group will develop a proposal for an inter-legislature agreement that will facilitate collaboration between the Alaska State Legislature and other state legislatures in efforts to influence federal energy- related law and policy and to discourage delay or cancellation of economically viable energy-related projects in the state and in other states. The intent of this working group is to create a more unified voice from the states most affected by the consequences of energy-related federal law. He called attention to page 2, line 10, and noted the resolution directs that the working group shall consist of four members, two of which are appointed by the President of the Senate and two appointed by the Speaker of the House. On page 2, line 14, the resolution directs the working group will meet during and between regular sessions of the Alaska State Legislature and members may travel to meetings, subject to approval by the President of the Senate and the Speaker of the House. On page 2, line 20, the resolution directs that the working group will terminate on 1/18/13. On page 2, line 22, the resolution directs that the working group shall issue its report on or before 1/17/12, and allows for additional reports that the group considers advisable. 4:07:52 PM REPRESENTATIVE SADDLER clarified that the intent of the resolution was not to establish interstate energy production with another state. MR. CRAFT concurred. The resolution is unusual, but it is similar to resolutions in Utah and Wyoming, although Alaska is acting through a concurrent resolution rather than statute. 4:08:50 PM REPRESENTATIVE SADDLER asked whether Alaska would be working with Utah and Wyoming. MR. CRAFT indicated correct, and also Texas. CO-CHAIR FOSTER determined that there was no public testimony. 4:09:27 PM REPRESENTATIVE TUCK moved to adopt Amendment 1, labeled 27- LS0600\B.2, Wayne, 3/21/11, which read: Page 2, line 11: Delete "four" Insert "six" Delete "two" Insert "three" Page 2, line 12: Delete "two" Insert "three" Page 2, following line 13: Insert a new resolution section to read: "FURTHER RESOLVED that at least one of the three senators appointed to the Alaska Working Group on Interstate Energy Production shall be a member of the largest minority caucus in the Senate, and at least one of the three representatives appointed to the Alaska Working Group on Interstate Energy Production shall be a member of the largest minority caucus in the House of Representatives; and be it" CO-CHAIR PRUITT objected for discussion purposes. 4:09:43 PM REPRESENTATIVE TUCK said he was very proud of the past work done by the House Special Committee on Energy, and especially of the work done on the state's energy policy by the committee and a group of stakeholders that included a variety of interested parties; this group was able to develop a "unified voice." He explained that the amendment would increase the members of the proposed working group from four to six, consisting of three senators and three representatives. The amendment further directs that at least one member shall be a member of the largest minority caucus in the Senate and one member shall be a member of the largest minority caucus in the House. The purpose of this increase is to allow minority members to be included in the working group and "we continue having that unified voice from both bodies." 4:11:38 PM REPRESENTATIVE SADDLER observed the proposed working group will bring back to the committee proposals from work outside of the state's boundaries. He opined for compactness, efficiency, and cost, the working group should be kept to the size proposed. REPRESENTATIVE TUCK pointed out there would be no additional cost as there is no fiscal note attached to the resolution. 4:12:22 PM CO-CHAIR PRUITT there is a fiscal note related to travel estimated at $5,000 per individual. He stated that the other states have four members each. 4:13:29 PM REPRESENTATIVE TUCK withdrew Amendment 1. 4:14:02 PM CO-CHAIR PRUITT moved to report HCR 9, Version 27-LS0600\B, out of committee with individual recommendations and the accompanying fiscal note. There being no further objection, HCR 9 was reported from the House Special Committee on Energy. 4:15:19 PM ADJOURNMENT  There being no further business before the committee, the House Special Committee on Energy meeting was adjourned at 4:15 p.m.