ALASKA STATE LEGISLATURE  SENATE COMMUNITY AND REGIONAL AFFAIRS STANDING COMMITTEE  March 14, 2019 3:30 p.m. MEMBERS PRESENT Senator Click Bishop, Chair Senator Chris Birch, Vice Chair Senator Mia Costello Senator Elvi Gray-Jackson MEMBERS ABSENT  Senator Lyman Hoffman COMMITTEE CALENDAR  OVERVIEW: ROAD BELT INTER-TIE - EXPANDING ALASKA'S INFRASTRUCTURE AND DEVELOPMENT - HEARD   PREVIOUS COMMITTEE ACTION  No previous action to record WITNESS REGISTER JASON HOKE, Executive Director Copper Valley Development Association Glennallen, Alaska POSITION STATEMENT: Provided on overview of the Road Belt Inter- Tie. JOHN DUHAMEL, Chief Executive Officer Copper Valley Electric Association Glennallen, Alaska POSITION STATEMENT: Provided on overview of the Road Belt Inter- Tie. BRUCE CAIN, President Copper Valley Chamber of Commerce Glennallen, Alaska POSITION STATEMENT: Testified in support of the Road Belt Inter- Tie. ACTION NARRATIVE 3:30:12 PM CHAIR CLICK BISHOP called the Senate Community and Regional Affairs Standing Committee meeting to order at 3:30 p.m. Present at the call to order were Senators Costello, Gray-Jackson, Birch, and Chair Bishop. ^OVERVIEW: Road Belt Inter-Tie - Expanding Alaska's Infrastructure and Development OVERVIEW: Road Belt Inter-Tie - Expanding Alaska's  Infrastructure and Development  3:30:57 PM CHAIR BISHOP announced that the committee will hear an overview of the Road Belt Inter-Tie (RBIT). 3:31:33 PM JASON HOKE, Executive Director, Copper Valley Development Association, Glennallen, Alaska, said he has been the regional ARDOR (Alaska Regional Development Organizations) through the Department of Commerce, Community, and Economic Development (DCCED) for the Copper Valley Development Association for 10 years. He explained that the organization is quasi-governmental and works to advocate as a liaison between public and private business as well as state and federal government. He added that he is also the Programs Director for the Ahtna Inter-Tribal Resource Commission in charge of energy and biomass resources. He commenced with his RBIT overview and reviewed the slide Not RBIT'S First Rodeo. He said RBIT was studied in the 80s and 90s, noting that RBIT was partially funded by the legislature to some degree. RBIT was looked at by the Alaska Energy Authority when the Susitna-Watana Dam project considered RBIT as well. The Copper Valley Electric Association has everything written or studied about RBIT on its website. 3:33:11 PM He reviewed the slide Current Project Proposed Transmission Runs as follows: • Phase 1: o Sutton-Glennallen-Delta Junction. o 286 miles at 138 kilovolts (kV) to 245kV range. • Phase 2: o Gakona-Tok-Delta. o 227 miles at 65kV. • RBIT could utilize preexisting Rights-of-Way (ROWs) with the exception of approximately 100 miles of gaps. • RBIT completes a bus loop around the road system of interior Alaska and connect to the "Railbelt" electrical transmission line. • The RBIT electrical grid will be the size of Montana. MR. HOKE explained that RBIT could utilize all of the preexisting ROWs; where Matanuska Electric Association (MEA) runs and Copper Valley Electric comes in, where Alaska Power and Telephone (AP&T) runs out and Golden Valley Electric Association (GVEA) runs down. There's only about 100 miles of gaps that span between the lines. RBIT is not reinventing the wheel and breaking new territory. RBIT is something that already exists. He detailed that RBIT will complete a bus loop around the road system for the interior of Alaska to connect to the Railbelt. A bus loop is where power can go one way or it can come back another. For example, when an avalanche occurs someplace along the Railbelt, power can come from the other direction. RBIT will electrify an area the size of Montana that is currently supported by small microgrids. 3:35:01 PM SENATOR GRAY-JACKSON asked him to explain the difference between Road Belt and Railbelt. MR. HOKE answered that the Road Belt follows the road system and Railbelt is a term used for many years regarding the railroad. RBIT will follow the road. SENATOR GRAY-JACKSON noted that regional power utilities' nomenclature for the region used the term Railbelt. MR. HOKE replied that RBIT will follow the road. He reviewed the Current Concept slide for RBIT detailing that phase-1 runs along the road to Glennallen and up to Delta, and Fort Greely. Phase-2 would follow the Tok Cutoff to Tok and up to Delta Junction creating an additional loop. He noted that the larger map displayed on the Current Concept slide shows several potential mining sites, renewable energy sites, pump stations, military bases, and communities that can be served that are currently on an island with microgrids. CHAIR BISHOP pointed out that the mining sites are historical mining districts so if the bigger mines open, they are not a one off, there already is a history of mining for the last 100-plus years. MR. HOKE concurred with Chair Bishop. SENATOR BIRCH recalled past discussions on RBIT via the Railbelt Energy Fund, noting that he worked with Alyeska Pipeline at one time. He asked if the Alyeska Pipeline pump stations are tied into Copper Valley Electric and if one of the pump stations has been retired. 3:38:08 PM JOHN DUHAMEL, Chief Executive Officer, Copper Valley Electric Association, Glennallen, Alaska, explained that Alyeska Pipeline semi-retired Pump Station 12 some time ago. He confirmed that Copper Valley Electric does provide power to Alyeska Pipeline. SENATOR BIRCH noted that Alyeska was trying to electrify their pump stations rather than having them operate off jet fuel. MR. HOKE pointed out that pump stations 8 and 9 are both isolated, stand-alone facilities generating power. He noted that one thing he failed to put on the Current Concept map was the High Frequency Active Auroral Research Program (HAARP) that is owned by the University of Alaska. It is a facility that burns 600 gallons of fuel per hour. RBIT can provide considerable savings to the university system for HAARP. He addressed the slide Public Planning and Vetting Process as follows: • Copper Valley Regional Energy Plan with Alaska Energy Authority (AEA) number-one priority. • Statewide energy planning with AEA top priorities. • Copper Valley Regional CEDS (Comprehensive Economic Development Strategy- U.S. Economic Development Authority (USEDA)) top priority. • Statewide CEDS top priority (with USEDA and Alaska Department of Commerce, Community, and Economic Development). • Ahtna Tribal Energy Plan number-one priority (Office of Indian Energy Policy and Programs, U.S. Department of Energy). • Tanana Chiefs Conference Energy Planning Priority (Office of Indian Energy Policy and Programs, U.S. Department of Energy).Tanana Chiefs Conference CEDS Top Priority. • Fairbanks North Star Borough CEDS top priority. MR. HOKE said he is a firm believer in the Five Ps: "Proper planning prevents poor performance. He opined that RBIT has been planned and vetted through and through both locally and regionally. He noted that RBIT is the number one priority for the Copper Valley Regional Energy Plan, a top priority for the Copper Valley Regional Comprehensive Economic Development Strategy (CEDS) with the U.S. Economic Development Administration (EDA) and the Alaska Division of Economic Development, and a priority three for the statewide CEDS. RBIT is also a top priority for the Ahtna Tribal Energy Plan, Tanana Chiefs Conference CEDS, and the Fairbanks North Star Borough CEDS. 3:40:57 PM He reviewed the slide Support and Resolutions as follows: • Alaska Federation of Natives' only energy resolution in 2017 was RBIT. • Native organizations impacted and supportive of this project effort are approximately: o 12 tribal governments; o 12 village corporations, o 4 Alaska Native Claims Settlement Act (ANSCA) corporations (Ahtna, CIRI, Doyon, Chitina); o Ahtna Intertribal Resource Commission; o Tanana Chiefs Conference; o Copper River Native Association; o Chickaloon Native Village [Nay'dini'aa Na' Kayax'] and many more. • CVEA, AP&T, MEA, Golden Valley, and the APA (Alaska Power Association) signed board resolutions supporting RBIT. • Copper Valley Development Association (ARDOR). • Copper Valley Chamber of Commerce. • Meetings and discussions indicative of support with the communities that are impacted by RBIT. MR. HOKE said energy is the tie that binds. When energy is squeezing the state, Alaskans seem to come together to try and fix it. When RBIT was addressed in the 90s, no one talked to Alaskans to see how they felt about RBIT, Now, most of the communities impacted by RBIT have been approached to see how they feel. He opined that 97 percent of all business deals are negotiable and can be worked out, and that is part of what the engineering process for RBIT is all about. 3:42:51 PM He discussed the slide Current Costs and Consumptions Inhibiting Development as follows: • Most communities in this project area are paying 300-500 percent more than the national average which is $.12/kilowatt hour (kWh). • Communities are electrified by multiple microgrids consuming approximately 4 million gallons of diesel per year. Emissions and other issues plague these small grids. • Power Cost Equalization (PCE) does not cover commercial electricity which is approximately 60 percent of all electrical consumption in these communities. • Electrical costs directly correlate to business and resident closure and relocation. He noted that a lot of times when a generator goes out, it's going to be a long time before someone can work on it. 3:44:21 PM MR. HOKE addressed the slide Economic and Natural Resource Development as follows: • Cheaper electrical power opens the door for Business Retention and Expansion (BRE) and allows business plans to pencil out. • It is necessary infrastructure for economic development. • Timber and lumber industry (e.g. OSB manufacturing, lumber mills, biomass pellet and brick plants, etc.) • Mining operations that could open benefit: Fort Knox, Pogo, Stellar Mine, Ahtell Creek Mine, Tetlin Mine, Fourth of July Creek Mine, and others. • Tourism, fishing, and transportation industry benefits. • Alyeska Pipeline benefit with cheaper energy for pumping oil and cathodic protection at its non-grid connected pump stations 8 and 9. He summarized that businesses in the Road Belt region cannot grow without cheaper energy. An executive with Doyon Limited wrote eight business plans based on their microgrid and none of the plans penciled out. Electricity costs were too high for an Oriented Strand Board (OSB) manufacturer in the Glennallen area to start up. Multiple other things are queued up, biomass plants for bricks and pellets, lumber mills, but they just won't happen without RBIT. Mining operations in traditional mining districts can benefit from cheap power, creating jobs and revenue for the state. The City of Valdez significantly expanded its port with plans for expansion that requires a lot of power and RBIT is needed to keep their power cost down. He said he forgot to mention a regional agricultural program, Tonsina North Agriculture Land Project, a project set up by the State of Alaska. He noted that the federal government paid $2.7 million to divert an underground pipeline for the project in 2002. RBIT will help the Tonsina Project develop agriculture as well as other processing facilities and food hubs that require massive amounts of electricity. 3:47:18 PM He reviewed the slide Military Benefits and Build Up as follows: • Energy is national security. • Military bases that would benefit from RBIT: o Black Rapids Training Facility, o Donnelly Dome Range, o Fort Greeley, o Eielson AFB, o Fort Wainwright, o Clear Lidar AFB. • Redundant and reliable energy necessary. Currently an 80 megawatts (MW) bottleneck at Eva Creek on the Railbelt. RBIT offers a redundant loop with more power capacity. • Reduced cost for military with cheaper energy and redundancy. • Signs of continued defense buildup and growth. • 25 percent renewable needed and can be supplemented with RBIT. MR. HOKE opined that military benefits from RBIT is the big kahuna. Energy is national security. All military bases are in dire need for more power. He noted that the commander of U.S. Pacific Command (PACOM) told him that the military is under mandate to have 25 percent renewable for most of their funding and RBIT opens renewable energy sources. He discussed the slide Other Information as follows: • Hierarchy of needs for infrastructure: o Energy, o Transportation, o Communication. o Already have two of the three. • New industry and economic development means potentially new revenue for the state. • The region is an Unorganized Borough and the legislature is the governing body. • RBIT is about people making hard choices: o Groceries or electric bill. o Stay in homeland or migrate outside. MR. HOKE said the Road Belt region already has the road for transportation, fiber optics and fourth generation (4G) broadband cellular network technology, but it lacks cheap energy. He said RBIT is not just about industry; the project is about people. 3:50:33 PM SENATOR BIRCH asked if the Unorganized Borough within the Road Belt has indicated an appetite for a mill rate assessment like Anchorage and Fairbanks have. MR. HOKE answered no. SENATOR BIRCH said he realizes that the legislature is the governing body for the Unorganized Borough but he has never detected any appetite from the Unorganized Borough for any sort of mill rate assessment to provide for schools and infrastructure. MR. HOKE pointed out that the State of Alaska receives approximately $34 million annually from the Trans-Alaska Pipeline System (TAPS) running through the Copper Valley. SENATOR BIRCH noted that the legislature is currently taking about the topic that Mr. Hoke noted. MR. HOKE addressed the slide What's Needed as follows: • Support from the Alaska State Legislature. • Reconnaissance study estimated at approximately $2 Million "soup to nuts" for engineer's report. • Outcome of the proposed RBIT reconnaissance study would be an actionable document to define a path forward for project development, a timeline and milestones table, beneficiaries and project participants, and indicative pricing and budget, (9 months). • Total cost of project estimates: o Phase 1: square4 Approximately $200-$300 Million (about 2 F-22s). o Phase 2: square4 Approximately $100 Million (about an Abrams Tank). • Where's this coming from? o The expectation is that U.S. Departments of: Defense, Energy, Interior, Commerce, and Agriculture, along with Alaska state agencies, would be approached to contribute toward project deployment and construction, as well as beneficiary utilities, communities, and organizations. MR. HOKE disclosed that the Denali Commission is open to the idea of setting up an account for RBIT. He summarized that the legislature's support, whether verbal or written, will go far for RBIT. 3:53:31 PM SENATOR GRAY-JACKSON asked if the federal government has been approached regarding RBIT. MR. HOKE answered that the federal government has been approached to some degree. SENATOR GRAY-JACKSON asked the degree to which RBIT has been discussed with the federal government. MR. HOKE answered that U.S. Senator Murkowski assisted the previous year in hearings with the Office of Indian Energy. However, the federal definition of Indian country inhibited any money from being spent on energy going across other lands besides Native owned lands. He said the [U.S. Department of Agriculture (USDA) Rural Development Innovation Center] is coming to Alaska to talk to telecommunication and electric utilities about federal government programs for building broadband fiber and transmission line infrastructure. He added that Anne Hazlett, Assistant to the Secretary for Rural Development at the USDA, has been approached and she indicated that RBIT is a great project. He asked if Senator Gray-Jackson wants more examples of the federal government being approached about RBIT. 3:55:00 PM SENATOR GRAY-JACKSON answered yes. MR. HOKE detailed that Joe Balash, Assistant Secretary of the Interior, has been approached on several occasions regarding multiple funding sources for RBIT. He said John Torgerson, Denali Commission Interim Federal Co- Chair, indicated that an account can be set up for a project in which multiple federal agencies through different projects and programs could be used toward RBIT. He added that the Office of Electrification (OE) with the U.S. Department of Energy has programs that can possibly contribute towards RBIT. He said has been working with U.S. Senator Sullivan's office and Mr. Niemeyer, Assistant Secretary of Defense for Energy, Installations, and Environment. Assistant Secretary Niemeyer stated during his confirmation hearing that he would be working with people involved with RBIT if the infrastructure was necessitated for the military. He reiterated that RBIT addresses a people need and said he believes it is the number-one need for military support and the defense of the country. SENATOR GRAY-JACKSON opined that RBIT is not a just a good project, RBIT is a much-needed project. She said a lot of people who do not experience the high cost of energy realize how significant and urgent this is. She noted that she worked for the City of Akutan and knows the cost of energy in rural Alaska. 3:57:23 PM CHAIR BISHOP thanked Mr. Hoke for his presentation. He asked Mr. Duhamel to proceed with his presentation on RBIT. MR. DUHAMEL explained his multiple roles regarding the Road Belt Intertie (RBIT) Concept as follows: • Copper Valley electric Association - CEO. • Alaska Power Association - Director. • APA Hydropower - Chairman. He said his role is the validation from the utility community for RBIT. The Alaska Power Association has already sanctioned RBIT and submitted a resolution from the board to Mr. Hoke and the stakeholders in the RBIT concept. He added that he is also the chairman for the APA Hydropower group and represents hydropower interests as well. He said the community of utilities obviously supports RBIT quite heavily. The resolution from the Matanuska Electric Association (MEA) and Golden Valley Electric shows that the two adjoining utilities believe that RBIT is a good project. 3:58:31 PM MR. DUHAMEL described the slide Transmission vs Distribution as follows: • Distribution Power: o Lower Voltages. o Power moves to end user: square4 Residential, square4 Commercial, square4 Industrial. o Managed and maintained by the utility. • Transmission and Sub-transmission Power: o High Voltages. o Moves power between communities (substation to substation). o In Alaska, both utilities and the state manage transmission. • Road Belt Intertie is Transmission/Sub-transmission Only: o State managed. • Like airports and roads, transmission is infrastructure. He explained that utilities label power that is moved around as either distribution power or transmission or sub-transmission power. Under a distribution system, utilities push lower voltage power to the residential, commercial, or industrial end users. He explained that distribution power is managed by utilities, it is not something that the utilities consider as a state or federal infrastructure. Transmission power is different. High voltage lines with big structures keeps the lines in the air. The infrastructure for transmission power is expensive, as Mr. Hoke indicated. A reconnaissance study for RBIT would determine some accuracy in the project's numbers, but the numbers are large because the infrastructure will move large amounts of power to different communities. MR. DUHAMEL reiterated that power transmission is infrastructure, the same as airports and roads. He opined that moving power from one utility to another, from one community or another, is a role that is bigger than the utility, either as a state role or federal role. The electric utilities' vision with RBIT is that the project is transmission only with some sub- transmission and RBIT would be state managed. 4:01:25 PM He addressed the slide Electric Power System Overview as follows: • Transmission: o 230/138kV, o High Voltage Direct Current (DC). • Sub Transmission: o 69/45kV. • Distribution: o 14.4/7.2kV. He said the reconnaissance study for RBIT will determine what the power system will look like. He reviewed the slide Power Principles as follows: • A grid is a network of interconnected power lines. • The bigger the grid, the more resilient it becomes: o Fluctuations are absorbed more easily with a bigger grid. • Some renewable energy sources fluctuate significantly: o A bigger grid allows more renewable energy sources. • Power can move in any direction: o Depends on where generated and where used. • Quantities of Scale is key to cheaper power. He explained that a bigger grid is important. A small fluctuation in a small grid can bring the entire system down. For example, one tree could take Copper Valley Electric's entire system down for its 3,800 customers whereas a larger grid would hardly see a blip on the system when a tree gets into a line. A larger grid is resilient and allows a utility to give a more reliable product to the customer by adapting to any problem or breaks in the transmission or distribution system. MR. DUHAMEL noted that renewable energy, especially with wind and solar, fluctuates. Variable energy is still good energy, but fluctuations need to be controlled. The bigger the grid the more fluctuations can be controlled and that allows for more renewable energy. Power moves in any direction, so transmission with a loop feed allows power to be rerouted in the opposite direction. That means reliability goes up, customers don't have outages, and the system can adapt to problems much more easily. He said quantities of scale is important. RBIT not only benefits the area that the project is claiming, the project actually benefits everywhere. For example, if a generator in Anchorage can run more efficiently because it is feeding more customers, then the base cost is spread out over more people and the cost comes down. Thus, RBIT not only does a great thing for the area it serves, the project actually brings cost down in the Railbelt as well. 4:05:42 PM He reviewed the slide RBIT Concept as follows: • Not a New Concept. • Alaska Energy Policy Task Force Finding in 2003. He referenced a map that shows that the window of opportunity is entirely composed of isolated grids. When power can not be generated within the isolated grids, there is no power at all. RBIT will bring the isolated grids together. SENATOR BIRCH addressed redundancy and asked if direct current (DC) power has a possible role in RBIT. MR. DUHAMEL answered that direct current technology is changing daily and getting better. The project's reconnaissance study, via an electrical engineer, will determine which one of the technologies will be best for RBIT to move energy with the most efficiency. High Voltage Direct Current (HVDC) is normally best for moving a lot of power over great distances, but that is something that the project does not have a need for. He opined that the need for a HVDC system might occur if power was being moved from the North Slope down to the Anchorage area. 4:09:09 PM He reviewed the slide Concept Benefits as follows: • Grid Resilience: o Larger the grid, better reaction to fluctuations. • Overage of capacity, shortage of customers. • Bring together isolated grids for mutual benefit. • Provide a looping route for major power generators in the Railbelt. • Allows more renewable opportunities: o Wind, o Solar, o Hydro: square4 Delta, square4 Tiekel River. • Brings the cost of power down for the entire grid. • Give choices to areas that otherwise have no choices for power use. MR. DUHAMEL explained that grid resilience is the basic premise of why utilities support RBIT. There is a lot of natural gas generation that is not running at its full efficiency because the isolated grids do not have a lot of customers to push power to. A larger grid can better utilize power plants and push the cheapest, most efficient plants to take advantage of over- capacity generation. He said the isolated grids have the single option of diesel fuel, which has issues due to expense, difficulty, and emissions. RBIT will provide choices for a utility to run some of its own power and to build renewable energy. RBIT will provide a grid that is more resilient and can absorb renewable energy, or power can be purchased right from the grid. He noted that the federal government could set renewable goals and those goals are not going to be achieved unless the power system can get more renewable energy. He summarized that RBIT will bring the cost of power down to the window of opportunity and Anchorage because power plants will be used at their highest efficiency. 4:12:25 PM MR. DUHAMEL discussed the slide Why Support RBIT as follows: • Legislative support gives credibility to the concept. • Helps the project approach the congressional delegation, federal departments and the White House. • RBIT will grow renewable opportunities (wind, solar, hydro) to meet renewable goals. • Legislative support helps RBIT's requests for federal funds (to expand the grid) with more credibility. • Legislative support revitalizes a concept that has already been validated. • Legislative support will help Alaska get federal infrastructure funds. He said the utilities will go to Washington, D.C. to get funding for RBIT, there is no expectation for the state to fund the project. The utilities' job is to convince federal agencies that RBIT is something that is good for the state and a good utilization of infrastructure dollar. The legislature's support of RBIT gives credibility to the concept when the congressional delegation, federal departments, and the administration are approached for federal funds. 4:14:20 PM SENATOR BIRCH recalled that Fort Greely had a small demonstration nuclear plant. He asked if the nuclear power plant generated power and how widely was the power distributed. SENATOR BISHOP explained that Fort Greely was the first operational nuclear power plant in the United States. It provided power for the Fort Greely military base and the Allen Army Airfield. He noted that a nuclear power plant was proposed for Galena as well. SENATOR BIRCH noted that a Toshiba 4S Nuclear Battery was proposed for Galena. SENATOR BISHOP asked if all the rights-of-way for RBIT had been acquired. MR. DUHAMEL answered that rights-of-way for RBIT will be addressed in the project reconnaissance study. For example, there is distribution right-of-way between Copper Valley Electric and MEA. There is only a three-mile gap, but the gap is distribution. Transmission demands different structures and requirements. Distribution rights-of-way are 30 feet wide whereas transmission rights-of-ways are 100 feet wide. All land agreements for RBIT will have to be reestablished. Road and pipeline rights-of-way can be considered for the project. Land work and right-of-ways work are one of the reasons for the estimated expenses. He conceded that a lot of rights-of-way and possibly even some purchasing of lands are necessary for the project. 4:18:11 PM CHAIR BISHOP asked if $25 million to $50 million will be required for a project-ready estimate on a Class-5 Final Investment Decision (FID). MR. DUHAMEL replied that he does not know, but $50 million may be in the ballpark. CHAIR BISHOP announced that the next presenter is Mr. Bruce Cain with the Copper Valley Chamber of Commerce and Ahtna, Inc. 4:20:14 PM BRUCE CAIN, President, Copper Valley Chamber of Commerce, Glennallen, Alaska, testified in support of RBIT. He said the Copper Valley Chamber of Commerce has designated RBIT as its number one priority for economic development. He pointed out that the chamber's businesses do not qualify for the state's PCE and they are paying up to $1.00 per kWh. He opined that consideration must be given about having infrastructure in place for a better life for future generations. 4:25:59 PM CHAIR BISHOP asked if there were any closing comments. MR. HOKE advised that the first initial reconnaissance study for RBIT was submitted by Dryden & LaRue, an engineering firm that does transmission lines project services. The estimate was approximately $2 million. CHAIR BISHOP thanked Mr. Hoke and Mr. Duhamel for the presentations. 4:27:56 PM There being no further business to come before the committee, Chair Bishop adjourned the Senate Community and Regional Affairs Standing Committee meeting at 4:27 p.m.