Legislature(2009 - 2010)Fairbanks

06/17/2009 05:00 PM ENERGY

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05:03:01 PM Start
05:03:11 PM Statewide Energy Plan|| Hb218|| Hb219
07:44:19 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Location: University of Alaska Fairbanks
UA Regents Conference Room
+ Statewide Energy Plan TELECONFERENCED
Heard & Held
Heard & Held
HB 218-CREATING DEPT OF ENERGY/AEA BD                                                                                         
HB 219-RENEWABLE ENERGY GRANT REQUIREMENTS                                                                                    
5:03:11 PM                                                                                                                    
CO-CHAIR MILLETT  announced that the  only order of  business was                                                               
the discussion on a statewide energy  plan as it relates to HOUSE                                                               
BILL  NO.  218,   "An  Act  establishing  and   relating  to  the                                                               
Department of Energy and to the  board of directors of the Alaska                                                               
Energy Authority;  transferring the  Alaska Energy  Authority and                                                               
the Alaska  Natural Gas  Authority to  the Department  of Energy;                                                               
and transferring  the home energy  and weatherization  program to                                                               
the  Department of  Energy."  and  HOUSE BILL  NO.  219, "An  Act                                                               
relating to the renewable energy grant fund."                                                                                   
5:03:56 PM                                                                                                                    
CO-CHAIR MILLETT  reviewed the bills  before the committee.   She                                                               
related  that HB  218  would  create a  Department  of Energy  in                                                               
Alaska.   She  noted  that  the committee  has  heard during  its                                                               
meetings throughout the state that  there is a need to centralize                                                               
the  state's  energy  policy  to make  it  a  more  user-friendly                                                               
system.  Co-Chair  Millett reviewed that HB 219 would  serve as a                                                               
clean-up  bill for  House  Bill  152 -  a  renewable energy  bill                                                               
passed  two years  ago.   The  proposed  legislation would  allow                                                               
energy  projects to  be fully  funded and  supported, as  well as                                                               
adding an economist  to review those projects to  ensure they are                                                               
financially sound.                                                                                                              
5:06:43 PM                                                                                                                    
CO-CHAIR  EDGMON  remarked that  as  a  rural legislator,  he  is                                                               
familiar with  the challenges in  not only coping with,  but also                                                               
finding solutions to,  the energy problem the  state is currently                                                               
facing.  He  noted that a rally held in  Fairbanks earlier in the                                                               
year helped  set the tone  for much of  what is happening  in the                                                               
legislature now.   He stated  that although  he does not  want to                                                               
make  light of  the dwindling  gas supply  issue in  Southwestern                                                               
Alaska, he is pleased that the  energy crises in rural Alaska and                                                               
Fairbanks  is a  "front burner  issue" in  the legislature  right                                                               
5:08:20 PM                                                                                                                    
CO-CHAIR  MILLETT  had  each  legislator  present  state  his/her                                                               
district, then  she reviewed the  process by which  the committee                                                               
would hear testimony.                                                                                                           
5:09:37 PM                                                                                                                    
HAROLD HEINZE, Chief Executive Officer  (CEO), Alaska Natural Gas                                                               
Development  Authority  (ANGDA),  Department  of  Revenue  (DOR),                                                               
complimented the  committee for  its efforts in  traveling around                                                               
Alaska to hear  residents voice their concerns about  energy.  He                                                               
said there is  no silver bullet solution, but rather  a number of                                                               
ideas and solutions will need to  come together.  He said ANGDA's                                                               
concern has been,  "How do you keep working  on several different                                                               
things simultaneously?"   He said  ANGDA is currently  working on                                                               
propane from a North Slope facility,  which is in reaction to the                                                               
price of  oil jumping  to $140  a barrel.   He stated  his belief                                                               
that there  is opportunity to generate  sizeable propane supplies                                                               
from  the plentiful  supply  on the  North Slope,  and  to do  so                                                               
within a  couple years, which  would affect Fairbanks,  the river                                                               
and maritime  communities, private users, and  industrial utility                                                               
MR. HEINZE said  even though ANGDA is a  political subdivision of                                                               
the state,  it has enough  "business roots" that its  focus today                                                               
is  on  the private  sector.    He  expressed ANGDA's  hope  that                                                               
whatever the legislature does, it does  not lose sight that it is                                                               
the private  sector that motivates what  is done.  He  said there                                                               
is nothing  wrong with the  government helping to  facilitate and                                                               
play  a positive  and supportive  role; however,  it will  be the                                                               
private sector which has the influence.                                                                                         
5:12:44 PM                                                                                                                    
MARY ANN PEASE, Contractor to  the Alaska Natural Gas Development                                                               
Authority  (ANDGA),   Department  of  Revenue  (DOR),   told  the                                                               
committee that  "this propane  project" could  be up  and running                                                               
within two  years, delivering propane to  many rural communities.                                                               
She  suggested that  propane could  be used  as a  "bridge fuel."                                                               
She  said the  project  was  first envisioned  to  come down  the                                                               
planned natural gas pipeline, with  compressor stations every 75-                                                               
100 miles to extract the propane.   The increased price of diesel                                                               
fuel  -  in some  places  up  to $7  a  gallon  - has  created  a                                                               
compelling   need  for   alternative   solutions   that  can   be                                                               
implemented  within two  years.   She  stated  that propane  will                                                               
eventually be  a long-term opportunity  for Alaska,  because even                                                               
after the  construction of a gas  pipeline, there will be  a lack                                                               
of alternative  energy to  diesel in many  of the  state's mining                                                               
operations.  Propane is available on  the North Slope and is cost                                                               
effective.    She  talked about  having  an  open-access  propane                                                               
facility on  the North Slope,  where there are  opportunities for                                                               
barging  on  the Bering  Sea,  trucking  on  the Haul  Road,  and                                                               
shipping on the Yukon and other rivers.                                                                                         
5:15:10 PM                                                                                                                    
MS. PEASE said "this chart"  clearly shows the difference between                                                               
the Prudhoe Bay technical extraction  and what the private sector                                                               
opportunity is  "outside of that  fence."  She said  ANGDA's role                                                               
ends at  a metering facility, and  it is at that  point where the                                                               
private sector  needs to build  the gas extraction  facility, the                                                               
distribution system,  the storage facility, and  provide trucking                                                               
to "bring  it to those points  as an alternative to  what they're                                                               
delivering today."   She talked about a conference  that was held                                                               
today,  during  which  participants   expressed  an  interest  in                                                               
"reviewing this further."                                                                                                       
MS. PEASE discussed  critical "next steps."   First, she related,                                                               
it must  be determined what  an industrial load is,  because that                                                               
will make the economics more viable.   She spoke of the potential                                                               
conversion of, for example,  Golden Valley Electric Association's                                                               
"LN 6,000s."   She mentioned  there are other  associated private                                                               
sector opportunities,  as well.   Ms.  Pease said  during ANGDA's                                                               
lunch    presentation    several    "financing    giants"    gave                                                               
presentations,   including  Macquarie   group,  First   Southwest                                                               
Company,  and   J.P.  Morgan.    The   themes  covered  included:                                                               
public/private partnership, public  sector financing, and bonding                                                               
opportunities.   "All  of  these factors  will  work together  to                                                               
deliver  what is  a very  cost-effective solution  for Alaskans,"                                                               
Ms. Pease stated.                                                                                                               
5:17:44 PM                                                                                                                    
MS. PEASE  reported that the  producer with which ANGDA  has been                                                               
communicating  has requested  a detailed  technical review.   She                                                               
indicated  that  NANA Worley  Parsons,  an  expert on  the  North                                                               
Slope,  presented initial  findings, and  subsequent reports  are                                                               
expected soon.   The producer  company also requires  an economic                                                               
sustainability  model, which  shows that  ANGDA has  assessed the                                                               
demand of  a "base load customer,"  as well as some  villages and                                                               
communities.   Ms.  Pease  said,  "When that  is  done, we  could                                                               
finalize the term and volume agreement."                                                                                        
MS. PEASE reiterated that "this  propane opportunity" is a bridge                                                               
solution.    She  explained  that  once  natural  gas  sales  are                                                               
commercially  available from  the North  Slope, "this  project in                                                               
its current form will morph."   Currently, the propane is captive                                                               
on the North  Slope, and it is possible to  "sell those molecules                                                               
as long as  there's not a market price available  for them."  She                                                               
offered  a  conservative estimate  that  commercial  gas will  be                                                               
flowing in 10-12 years.                                                                                                         
5:19:16 PM                                                                                                                    
MS.  PEASE stated  that ANGDA  is acting  as facilitator  and has                                                               
negotiated  terms  that  would deliver  "an  extremely  favorable                                                               
propane  molecule in  this wholesale  facility."   The forecasted                                                               
price is  about one-twentieth on an  MMBtu basis of the  price of                                                               
oil, and that price  is critical, she said.  The  next step is to                                                               
ensure there  is a private  sector interest and commitment.   She                                                               
indicated  that   ANGDA  would  like  to   communicate  with  the                                                               
committee  and the  conference participants  within  the next  30                                                               
5:20:21 PM                                                                                                                    
MS.  PEASE, in  response to  Co-Chair Edgmon,  reviewed that  the                                                               
purpose of  the aforementioned conference was  to engage Alaskans                                                               
in  the  discussion  of  using  propane  as  a  bridge  fuel,  to                                                               
demonstrate the  project could  be up and  running within  a two-                                                               
year  period,  to  show  that  the  price  point  of  propane  is                                                               
compelling as  an alternative fuel,  and to whet the  appetite of                                                               
the private sector.                                                                                                             
5:21:19 PM                                                                                                                    
MR.  HEINZE used  Golden  Valley  Electric as  an  example of  an                                                               
entity that  is not  an efficient user  of an  oil-based product,                                                               
but potentially  would be  an efficient  user of  gas.   He noted                                                               
that Scott  Goldsmith, in his  analysis, looked at  the Fairbanks                                                               
residents who  use fuel oil  to heat  their homes.   He indicated                                                               
that the  advantage of  switching to  propane may  present itself                                                               
more quickly  for some users  than for others.   He said  Red Dog                                                               
Mine was  present at the  conference and  may find that  the most                                                               
efficient  way to  fuel itself  is  through the  use of  propane.                                                               
With  any  gas  pipeline,  there   will  be  tremendous  activity                                                               
exploring  for and  developing gas.   Currently,  diesel fuel  is                                                               
being used to  generate the equipment used  for that exploration,                                                               
but using propane  instead may be one of its  best uses, he said.                                                               
Mr. Heinze stated  there is not one case for  which propane would                                                               
not  be  extraordinarily  attractive  should  oil  reach  $140  a                                                               
5:24:02 PM                                                                                                                    
REPRESENTATIVE RAMRAS  shared that he  was a propane user  for 20                                                               
years,  but switched  to gas.   He  said that  propane "gels"  at                                                               
minus 42  degrees Fahrenheit - just  when it is needed  most.  He                                                               
said he has found natural gas to  be a superior feed stock with a                                                               
more reliable price.  He said  one of the problems with diesel is                                                               
that it  is delivered by  barge once a  year, at which  point the                                                               
price  is  set.    He   questioned  whether  [propane]  would  be                                                               
delivered  throughout the  year, whether  it would  be tied  to a                                                               
commodity price, and how it would be prevented from liquefying.                                                                 
MR. HEINZE responded that ANGDA  has proposed making Arctic-grade                                                               
propane in Prudhoe Bay, which would  have a little more ethane in                                                               
it and would continue to gasify  at colder temperatures.  He said                                                               
propane is coming from Canada, and it  is priced in a way that is                                                               
directly  tied  to  the  oil   refinery  side  of  the  business.                                                               
Furthermore,  there is  a long  delivery route,  which makes  the                                                               
transportation cost  high.  He said  he does not think  anyone is                                                               
ripping off the  state, but he expressed  his disappointment that                                                               
there is  no competition.   Mr. Heinze  said ANDGA  anticipates a                                                               
discount in the  pricing point on the North Slope  as compared to                                                               
any  oil  price  historically.     Second,  he  stated,  "If  the                                                               
transportation system  can take  advantage of the  closeness, the                                                               
logistics,  and  everything  else,  we believe  it  can  be  very                                                               
competitive."    He  related  that   Scott  Goldsmith,  based  on                                                               
yesterday's  oil price  of $67  a barrel/$61  North Slope  Crude,                                                               
calculated a  delivered price  in Fairbanks of  $1.16.   He added                                                               
that  that  price was  based  on  Mr.  Scott's estimates  of  the                                                               
capital requirements,  as well as  buying the raw molecules.   He                                                               
continued as follows:                                                                                                           
     Now, that's a pretty healthy  margin over what we would                                                                    
     see  as a  competitive price  with, say,  fuel oil,  or                                                                    
     even  naptha derived  from $67  a barrel  oil.   That's                                                                    
     probably  at  least  close  to a  dollar  good  on  the                                                                    
     margin.  And that is a  lot of room for both profit and                                                                    
     for passing on a savings to the consumer ....                                                                              
     We think  it's going  to take  new pricing  cost model:                                                                    
     the realities of how you buy  it, when you buy it - all                                                                    
     those types  of things.  We  had a number of  people at                                                                    
     the  conference today  who pointed  out that  the smart                                                                    
     move was  to get ...  a big  "pickle tank" -  not these                                                                    
     ...  100-pound bottles,  but at  least  maybe a  couple                                                                    
     hundred-gallon tank  - and  fill it  every year  or two                                                                    
     years  so you  could kind  of annualize  the price  and                                                                    
     maybe avoid some of the month to month instability.                                                                        
MR. HEINZE  said ANGDA believes  that if [propane]  is available,                                                               
plentiful, and reasonably  priced, then it has a chance  to be an                                                               
alternative solution.   He clarified that ANGDA  is not proposing                                                               
the state decide between propane  and fuel oil, but is suggesting                                                               
that a person  who presently uses wood to heat  his/her home, for                                                               
example, add a propane stove.   That way, the person has a choice                                                               
of  which  method to  use.    He suggested  that  may  be a  good                                                               
strategy  for many  Alaskans  in  the long  term,  if propane  is                                                               
readily available.                                                                                                              
5:31:00 PM                                                                                                                    
REPRESENTATIVE RAMRAS said  he believes natural gas  is the long-                                                               
term  solution, but  said  he is  pleased  this discussion  about                                                               
bridge fuel is taking place.   He stated that there is not enough                                                               
demand in Fairbanks  to justify building a pipe  that would serve                                                               
only  Fairbanks;   the  city   requires  the   Anchorage  market.                                                               
Likewise, he stated his understanding  that in order for there to                                                               
be economical propane available  to rural Alaska, Fairbanks needs                                                               
to be  a hub user of  propane.  He  said a stated timeline  for a                                                               
natural gas pipeline is five years,  while Mr. Heinze has said it                                                               
would take  two years to  deliver propane as a  bridge feedstock.                                                               
He  queried, "So,  that would  leave three  years, and  then what                                                               
happens to  rural Alaska  and what happens  to the  investment in                                                               
the  propane manufacturing  infrastructure  if  that demand  goes                                                               
away by 50 percent after the first couple years?"                                                                               
5:33:35 PM                                                                                                                    
MR. HEINZE  said ANGDA's  early focus has  been on  Golden Valley                                                               
Electric,  because  "anything  you  do to  help  them  ...  helps                                                               
everybody."  He  stated, "They are of  a size of us  that if they                                                               
alone wanted  to go to propane,  then that gives you  the economy                                                               
of scale right there."  He continued:                                                                                           
     For instance, we've looked at  Red Dog Mine, who is not                                                                    
     going  to quickly  enjoy the  relief of  anything other                                                                    
     than what can be barged  to them, frankly, for a number                                                                    
     of years -  maybe decades.  ... Propane  use there, for                                                                    
     instance, is not  as much as Golden Valley,  but it's a                                                                    
     large fraction  of it.   We have made no  assessment at                                                                    
     this  point  of  the  use   on  the  North  Slope,  for                                                                    
     instance.  And  it may turn out that use  - just on the                                                                    
     basis of  gallons of diesel  - turns  out to be  even a                                                                    
     bigger  number than  what we're  talking about  here in                                                                    
     the Fairbanks area.                                                                                                        
     ... So, on the one side,  I think our focus has clearly                                                                    
     been that the Fairbanks  market - in particular, Golden                                                                    
     Valley -  and the heating  market here is  an important                                                                    
     element to  include; but if  it's not  available, there                                                                    
     are  other people  who will  not be  served by  any gas                                                                    
     line that still  may represent more than  a enough load                                                                    
     to move the project forward.                                                                                               
MR. HEINZE  said part  of the  reason for  today's aforementioned                                                               
conference was  to round up  all the players  to find out  who is                                                               
really interested in receiving gas,  "because then we could start                                                               
in  the  form  of  propane  and  start to  work  with  it."    He                                                               
     Certainly it  is not lost  on us that any  gas pipeline                                                                    
     passing near this area provides  an opportunity to feed                                                                    
     into  Fairbanks natural  gas.    Certainly we're  aware                                                                    
     that  they  proposed  an LNG  project  from  the  North                                                                    
     Slope.  But certainly we also  know that in most of the                                                                    
     United  States  there are  times  when  propane air  is                                                                    
     introduced into  natural gas distribution  systems, and                                                                    
     it  functions  just  like  methane.     And  all  those                                                                    
     potential trade-offs are there.                                                                                            
     The  definition out  of this  project  will be  whether                                                                    
     there is a  long-term source of propane.   At the level                                                                    
     of  2,000  barrels a  day  -  2,500  barrels a  day  of                                                                    
     propane - if that endangers  the instate system, then I                                                                    
     would just simply say to  you the instate system is not                                                                    
     robust enough to move forward ... - it is at too high                                                                      
     a risk.                                                                                                                    
5:36:28 PM                                                                                                                    
MS. PEASE added  that the assessment of this  opportunity is best                                                               
ascertained by the business considering  the use of propane as an                                                               
alternative.   She said the people  who run the Red  Dog Mine are                                                               
savvy  and are  going to  review  their numbers  - currently  $17                                                               
million a year for fuel,  which translates to approximately $4.05                                                               
a gallon  - to figure out  what the cost  would be to put  in the                                                               
mine's  own gas  extraction facility.   The  project provides  an                                                               
alternative,  and the  business community  can assess  whether or                                                               
not propane  use is economical.   Ms.  Pease stated that  it does                                                               
make  sense to  "have an  industrial load,"  because without  it,                                                               
"using the  very small communities along  the Yukon/Kuskokwim for                                                               
the first phase of this is not going to make that much sense."                                                                  
5:37:45 PM                                                                                                                    
REPRESENTATIVE TUCK  spoke of  the currently  monopoly of  one or                                                               
two diesel  fuel suppliers  to rural  Alaska communities,  and he                                                               
asked how more competition between  providers of propane could be                                                               
MS. PEASE  answered that just  by having propane available  as an                                                               
alternative  will   create  a  more  competitive   market.    She                                                               
explained that  she thinks having  the feedstock at a  price that                                                               
is comparable  or less than the  price of that which  is imported                                                               
from  Alberta, Canada,  or Seattle,  Washington,  will result  in                                                               
"more players in the market."                                                                                                   
5:39:13 PM                                                                                                                    
MR.  HEINZE added  that one  of  the strong  reasons for  ANGDA's                                                               
involvement is that it will ensure  that there is "an open access                                                               
wholesale  facility."   The  project  will  be a  private  sector                                                               
effort,  but   ANGDA  believes  that  the   competition  that  is                                                               
intrinsic to the  free enterprise system is the best  way to have                                                               
competitive pricing.                                                                                                            
5:40:01 PM                                                                                                                    
REPRESENTATIVE TUCK said he is  having a difficult time imagining                                                               
any entity other  than Crowley being able to  deliver the propane                                                               
to  the communities,  because  that company  is  already so  well                                                               
established  both  in  providing   diesel  and  containers.    He                                                               
reiterated  his  desire  to  see  competition  in  terms  of  the                                                               
delivery of both diesel and propane to communities.                                                                             
5:40:47 PM                                                                                                                    
MR.  HEINZE responded  that Crowley  is a  fine provider,  but it                                                               
would  defeat  ANGDA's purpose  to  make  that company  the  only                                                               
provider of  service.   He noted that  propane containers  can be                                                               
moved  on  barges,  and  various   communities  could  own  those                                                               
containers,  for  example.   He  stated,  "If  you can  get  some                                                               
diversity  of those,  we  believe you  can  create a  competitive                                                               
situation out  there."  That  competition will have an  impact on                                                               
the  pricing and  availability  of diesel,  as  well, Mr.  Heinze                                                               
said, which "will not go away."                                                                                                 
5:41:35 PM                                                                                                                    
REPRESENTATIVE  COGHILL asked  Mr. Heinze  to help  the committee                                                               
understand the equivalent of propane to diesel.                                                                                 
MR. HEINZE  replied that  there are  a lot  less Btus  in propane                                                               
than in fuel oil or diesel.   In a circumstance where fuel oil is                                                               
priced  at $3  a gallon,  it would  make sense  to charge  around                                                               
$2.50 for the same amount of  Btus of diesel and approximately $2                                                               
for the same  amount of propane.  He clarified  that the consumer                                                               
would pay  less for propane  per gallon, because its  Btu content                                                               
is less.  He emphasized that the  price of diesel and fuel oil is                                                               
driven directly by the price of oil.  He continued:                                                                             
     If it's  $35 oil, I can  advise you right now:   please                                                                    
     stay with  your fuel oil system,  okay?  If it's  $70 a                                                                    
     barrel, you might want to  think about some alternative                                                                    
     if  you haven't  already turned  the thermostat  down a                                                                    
     lot  already.   And at  $140  a barrel,  you better  be                                                                    
       looking for something other than a fuel oil/diesel-                                                                      
     type product to burn if you can.                                                                                           
MS.  PEASE emphasized  the importance  of considering  the carbon                                                               
footprint.   Propane  is  an extremely  clean  burning fuel,  she                                                               
noted,  and for  Fairbanks, with  its  tendency to  not meet  air                                                               
quality standards  during each  winter, having  alternative fuels                                                               
to use is critical.                                                                                                             
5:44:12 PM                                                                                                                    
REPRESENTATIVE COGHILL  remarked that in Alaska,  the road system                                                               
and off-road  system have different  dynamics.  He  surmised that                                                               
delivery  of  propane to  market  on  the  road system  could  be                                                               
consistent.  Regarding the off-road  system, he said huge amounts                                                               
of money  have been  put "into infrastructure  for storage."   He                                                               
asked, "Have you  got a model that shows what  the new investment                                                               
is going to be  and what the divestment of the  other is going to                                                               
be, so that the Btu equivalent somehow balances out?"                                                                           
MR. HEINZE  responded that the  delivery and storage  system have                                                               
to be one in the same.                                                                                                          
5:46:02 PM                                                                                                                    
MS.  PEASE   noted  that  another  benefit   is  the  substantial                                                               
differential  in the  cost of  insurance  and bonding  associated                                                               
with  the transport  of propane  versus diesel.   She  reiterated                                                               
that propane is not a replacement fuel, but an alternative fuel.                                                                
MR. HEINZE  told the  committee that  one of  the people  [at the                                                               
aforementioned  conference] presented  that  the least  expensive                                                               
energy idea  that has been  brought forth in  Alaska is to  use a                                                               
hybrid  of propane  and  wind.   When the  wind  is blowing,  the                                                               
propane engine does  not run; the propane  turns on automatically                                                               
when the wind energy decreases beyond a certain point.                                                                          
5:47:13 PM                                                                                                                    
CO-CHAIR  MILLETT  reminded  everyone that  the  cheapest  energy                                                               
available is the energy that is not used.                                                                                       
5:47:20 PM                                                                                                                    
REPRESENTATIVE RAMRAS pointed out that  saying a propane and wind                                                               
hybrid is the least expensive  does not demonstrate consideration                                                               
of the upfront capital costs of  building such a system.  He said                                                               
there  is  no  easy  solution,  and  he  emphasized  that  it  is                                                               
important not to make every community  think it can have wind and                                                               
propane  power when  presently they  are using  diesel.   Dumping                                                               
that capital cost  on 200 communities, for  example, would burden                                                               
the state.                                                                                                                      
5:48:20 PM                                                                                                                    
CO-CHAIR  MILLETT said  Representative Ramras  has a  good point.                                                               
She noted  that the  committee has been  talking with  the Denali                                                               
Commission about its tank farm  diesel upgrades across the state.                                                               
That entity has  put a lot of state and  federal money into those                                                               
new tank farms.  She indicated  that it is worth questioning when                                                               
the state should stop capital  infrastructure build up for diesel                                                               
fuel  and begin  supporting  propane  use, and  whether  it is  a                                                               
reality to  support all  methods.   She said there  are a  lot of                                                               
interesting ideas, including the  need for transmission upgrades.                                                               
She stated that the committee hopes to hear more from ANGDA.                                                                    
5:49:15 PM                                                                                                                    
CO-CHAIR  MILLETT   announced  that  the  committee   would  hear                                                               
testimony from the Alaska Center for Energy and Power.                                                                          
5:49:25 PM                                                                                                                    
GWEN  HOLDMANN,  Director, Alaska  Center  for  Energy and  Power                                                               
(ACEP), said  ACEP does research  involving fossil  and renewable                                                               
resources, and  its focus is  on technology, as well  as resource                                                               
and economic evaluation of  "near-term opportunities for Alaska."                                                               
One of those opportunities is  to develop a "wind-diesel system."                                                               
Ms.  Holdmann said  this  is  an area  in  which  Alaska has  the                                                               
opportunity to further  its role as a world leader.   She stated,                                                               
"One of  the challenges with this  type of technology is  that we                                                               
have  a lot  of  different people  going in  a  lot of  different                                                               
directions."   She  said the  University of  Alaska can  play the                                                               
role of a  coordinating entity to provide  the information people                                                               
need to  make smart decisions  and put good projects  together in                                                               
the state.                                                                                                                      
MS. HOLDMANN  relayed that ACEP  has developed and  organizes the                                                               
Wind-Diesel Applications  Center -  a partnership comprised  of a                                                               
number of different entities.   She introduced Katherine Keith as                                                               
the coordinator of the center.   She noted that Ms. Keith is from                                                               
the  City  of Kotzebue  and  "worked  on" the  Kotzebue  Electric                                                               
Association - currently the leading system in the state.                                                                        
5:51:06 PM                                                                                                                    
KATHERINE    KEITH,    Wind-Diesel    Coordinator,    Wind-Diesel                                                               
Applications Center  (WiDAC), Alaska Center for  Energy and Power                                                               
(ACEP), University  of Alaska Fairbanks, stated  that wind-diesel                                                               
technology can  be a solution to  high energy costs for  over 116                                                               
communities,  [as shown  on the  second slide  of page  1 of  Ms.                                                               
Keith's handout  to a  slide presentation].   She  indicated that                                                               
the map on the slide was  compiled by the Alaska Energy Authority                                                               
(AEA).  The  map also shows that  there is a potential  for up to                                                               
240 megawatts (mWh) of "installed wind."                                                                                        
MS. KEITH  emphasized the importance  of analyzing the  past, and                                                               
she  said Alaska  is fortunate  to be  able to  analyze the  past                                                               
performance of  existing systems, including those  systems in the                                                               
City of  Kotzebue, the City  of Toksook  Bay, the City  of Wales,                                                               
and the  City of Savoonga, for  example.  She relayed  that there                                                               
are 35  proposed wind  projects - many  of which  are wind-diesel                                                               
MS.  KEITH  said  wind-diesel  systems  are  classified  as  low,                                                               
medium, or high, [as  shown on the second slide on  page 2 of the                                                               
handout].  The  more wind on the system, she  explained, the more                                                               
diesel  will be  saved.    However, as  the  wind  on the  system                                                               
increases, so does  the complexity of the system,  and, thus, the                                                               
capital cost.   The goal in using a  high penetration wind-diesel                                                               
system, she  said, is  to be able  to shut off  the diesel.   She                                                               
stated,  "Internationally   this  is   recognized  as   the  next                                                               
generation wind diesel system."                                                                                                 
5:53:59 PM                                                                                                                    
MS. KEITH  related that Alaska  has three systems which  could be                                                               
considered high penetration, and they  are located in the City of                                                               
Wales, the  City of Saint  Paul, and the  City of Savoonga.   The                                                               
system in  the City of  Wales was installed  in the 90s  and uses                                                               
energy storage  and a  secondary load  - a boiler.   The  City of                                                               
Saint Paul's system  does not use energy storage, but  does use a                                                               
boiler.  The City of Savoonga  does not shut down its diesel, but                                                               
is  able to  "see  penetration of  over 75  percent  wind on  the                                                               
system at  any one point," which  Ms. Keith said she  thinks is a                                                               
major accomplishment.  She relayed  that one of the challenges of                                                               
high penetration wind-diesel systems  is that the power stability                                                               
-  frequency  and   voltage  -  are  controlled   by  the  diesel                                                               
generator; therefore, when the power  is shut off, there needs to                                                               
be a lot of auxiliary equipment which  is able to "do that in its                                                               
MS.  KEITH stated  that there  are over  a dozen  systems in  the                                                               
state  that could  be high  penetration systems.   The  Cities of                                                               
Kotzebue and Nome are both expanding  their wind farms.  The City                                                               
of Kotzebue is  considering the use of a flow  battery to provide                                                               
power stability and  "time shifting."  The systems  in the Cities                                                               
of Buckland,  Deering, and  Noorvik are  presently in  the design                                                               
phase.  The  systems in the Cities of Mekoryuk,  Toksook Bay, and                                                               
Quinhagak  are  using  no  energy   storage;  they  are  using  a                                                               
secondary load.   Kwigillingok  ("Kwig") and  Kongiganak ("Kong")                                                               
are using  smart-grade technology  - possibly a  fly wheel.   The                                                               
City  of  Wales  offers  a   lengthy  report  listing  what  that                                                               
community  has learned  about retrofitting  a diesel  power plant                                                               
with a high penetration wind system.   The bottom line, Ms. Keith                                                               
said,  is  that a  lot  of  these  technologies are  still  "pre-                                                               
commercial."   The  topic of  energy storage  is foremost  in the                                                               
discussions  taking place  not only  in Alaska,  but also  in the                                                               
Lower  48.    She  listed  the  following  methods  used:    flow                                                               
batteries,   standard  lead   acid  batteries,   pumped  "hydro,"                                                               
compressed  air, and  hydrogen.   She  said there  are  a lot  of                                                               
methods, and  "we don't want  to ignore the  thermal applications                                                               
or  the  transportation  applications,   both  of  which  are  as                                                               
important as  the electricity  in the  rural communities."   Once                                                               
there is excess wind, there is always  a way to figure out how to                                                               
use the extra electricity.  She  stated, "The purpose of WiDAC is                                                               
to support  the broader deployment of  cost-effective wind-diesel                                                               
technologies to reduce  or stabilize the cost of  energy in these                                                               
rural communities."                                                                                                             
5:57:40 PM                                                                                                                    
MS.  KEITH   said  WiDAC  has  affiliations   with  the  National                                                               
Renewable  Energy  Laboratory   (NREL),  the  (indisc.)  National                                                               
Laboratory, and AEA.   She described WiDAC as a  funnel - a means                                                               
of  collaboration  between  wind-diesel stake  holders,  industry                                                               
partners,  various research  organizations,  developers, and  the                                                               
utilities in the  state.  Through discussion  with stake holders,                                                               
she said,  it is  possible to find  ways to  optimize wind-diesel                                                               
systems and  save more fuel and  reduce or stabilize the  cost of                                                               
power.  As  a result of discussions, WiDAC can:   train engineers                                                               
in renewable  energy technologies, put more  wind technicians out                                                               
in the field, and ultimately come  up with more innovations.  She                                                               
stated that WiDAC focuses on  three critical areas:  research and                                                               
development,  technical support,  and  workforce development  and                                                               
5:59:00 PM                                                                                                                    
MS. KEITH  stated that WiDAC  needs to:   develop Alaska-specific                                                               
verification  testing for  wind  turbines  and control  strategy;                                                               
find  lower-cost  methods to  reduce  the  cost of  wind  turbine                                                               
installation and  the cost of the  foundation; develop crane-free                                                               
turbine erection;  proof, test,  and develop  dispatch strategies                                                               
for  medium  and high  penetration  systems;  and look  at  smart                                                               
grids.   This  work is  best done  in a  laboratory setting,  she                                                               
relayed, which is  where a wind-diesel simulator  is "coming in."                                                               
She explained that WiDAC is designing  a system to be held at the                                                               
Fairbanks  facility which  will  be  similar to  the  one at  the                                                               
National Renewable  Energy Lab.   The system will allow  WiDAC to                                                               
simulate  a village  load scenario  and wind  resource, and  from                                                               
that evaluate the  control strategy.  Data from that  test can be                                                               
sent back to the developers  and manufacturers so they can create                                                               
more robust  renewable energy technologies  for Alaska.   Another                                                               
advantage  of   the  simulator  is  that   it  can  "characterize                                                               
hardware" to ultimately create a more accurate model.                                                                           
6:01:01 PM                                                                                                                    
MS. KEITH said WiDAC has organized  a summit to be held [June 22,                                                               
2009]  to which  she welcomed  all  legislators.   Alaska is  the                                                               
leader in wind-diesel technology across the world, she stated.                                                                  
6:01:50 PM                                                                                                                    
CO-CHAIR  EDGMON recalled  taking a  tour of  the City  of Nome's                                                               
Banner Wind Farm  in January or February.  He  said there were 18                                                               
wind  turbines.   The whole  project was  built "ahead  of time,"                                                               
under budget,  and was purported to  provide up to 10  percent of                                                               
the overall power  load of the community,  perhaps in cooperation                                                               
with the Rock  Creek Mine, he said.   He said he  has since heard                                                               
there are  problems with the  system, and  he asked Ms.  Keith if                                                               
she could provide more details.                                                                                                 
6:03:15 PM                                                                                                                    
MS. KEITH responded  that any project installed in  a new setting                                                               
is bound  to have a "growing  period."  The percentage  of energy                                                               
availability from  wind turbines is  always low during  the first                                                               
few months.   She reported that the City of  Nome has experienced                                                               
technical  problems  with  "the  tip  breaks"  on  the  Integrity                                                               
turbines, which  is the same  problem experienced in the  City of                                                               
Kotzebue.   Of  the  two locations,  the City  of  Nome has  more                                                               
challenging weather  conditions, she said.   The City of  Nome is                                                               
working  aggressively with  the manufacturer  to find  solutions.                                                               
She said, "It's  just a lot of work keeping  these things going."                                                               
She  said one  of the  main focus  areas for  WiDAC is  technical                                                               
support, because  it is a major  issue.  She said  she thinks the                                                               
City of Nome is an example of  a project that is "not quite there                                                               
yet," but will be by this time next year.                                                                                       
6:05:03 PM                                                                                                                    
CO-CHAIR  EDGMON offered  his understanding  that there  are wind                                                               
turbines in disuse in the Cities of  St. Paul and Sand Point.  He                                                               
said  there are  situations in  which utility  companies, village                                                               
corporations,  or  private entities  cannot  come  to an  overall                                                               
agreement of  who will provide  power and  who is going  to "have                                                               
the base load to make it work."   He asked if that issue - beyond                                                               
the  infrastructure and  application  - would  be discussed  next                                                               
6:05:38 PM                                                                                                                    
MS. KEITH  answered that the  topic of technical support  will be                                                               
discussed within the context of  how communities can be helped to                                                               
"put a successful project in  the ground."  She added, "Community                                                               
disagreement is one of the biggest hurdles out there."                                                                          
6:08:05 PM                                                                                                                    
MS.  KEITH, in  response to  Representative Tuck,  said WiDAC  is                                                               
aggressively   considering   energy  source   possibilities   and                                                               
checking to  ensure that  manufacturers' claims  are sound.   She                                                               
said it does not make sense to  invest in a large battery bank if                                                               
it has to be continually rebuilt  every five years.  She said the                                                               
advantage of running  a slow battery is the  ability to endlessly                                                               
"charge and  discharge" it "without degradation."   Batteries can                                                               
be tested on the aforementioned simulator, she noted.                                                                           
6:09:46 PM                                                                                                                    
MS.  HOLDMANN added  that she  had a  long conversation  with the                                                               
Bering Straits Native  Corporation regarding its wind  farm.  She                                                               
said,  "It would  have been  nice if  they would  have asked  our                                                               
opinion, in terms  of the type of turbine that  they selected for                                                               
that project,  because it  may not  have been  really appropriate                                                               
for that site,  and there's a good chance that  we could have let                                                               
them know that they were going to have these kinds of issues."                                                                  
6:10:27 PM                                                                                                                    
MS.  KEITH said  currently manufacturers  work with  utilities in                                                               
Alaska  to  fine   tune  their  wind  turbines.     There  is  no                                                               
standardized process for  making that happen, but  WiDAC hopes to                                                               
develop a  cold weather wind  turbine verification process.   She                                                               
said  WiDAC is  developing  a  "hub and  spoke  type method"  for                                                               
testing in the best areas.                                                                                                      
6:11:28 PM                                                                                                                    
REPRESENTATIVE  TUCK  expressed  thanks   for  the  tour  of  the                                                               
facility  today and  appreciation  for  the work  of  WiDAC.   He                                                               
stated his  vision is for  prototypes to be developed  in Alaska,                                                               
especially since the state is  the forerunner in developing wind-                                                               
diesel technologies.                                                                                                            
MS. KEITH  opined that the state  will have more success  when it                                                               
thinks  "big," develops  economies of  scale and  prototypes, and                                                               
exports its technology.                                                                                                         
6:13:04 PM                                                                                                                    
CO-CHAIR MILLETT opened public testimony.                                                                                       
6:13:44 PM                                                                                                                    
TOM STAUDENMAIER shared his experience  in the military.  He said                                                               
he was asked  to get involved with the electric  utility issue in                                                               
1982, but  he emphasized that he  does not and will  not work for                                                               
any electric  utility.  He said  his job was to  create a program                                                               
that would cut  people's electric bills "in half  to 80 percent."                                                               
He  talked  about  people  who   have  been  fired  at  Matanuska                                                               
Electric.  He  related that there are nine  electric utilities in                                                               
Southcentral  and  Interior  Alaska,  with 75  board  members,  9                                                               
computers,  and   $180,000  "at   your  monthly  billing."     He                                                               
multiplied that by  the average three household  occupants to get                                                               
$520,000,  and added  Southeast  and Northwest  Kodiak  to get  a                                                               
total human population of 670,000.                                                                                              
MR. STAUDENMAIER spoke  of a proposal to  combine utilities under                                                               
one  cooperative in  the Southcentral  and Interior  part of  the                                                               
state,  to rename  it the  Alaska Southcentral  Interior Electric                                                               
Cooperative Incorporated, and  to appoint a 16-member  board.  He                                                               
said  "the people"  would own  the utility  and control  it, with                                                               
"the reinforcement  of the  Alaska State  Senate."   The proposal                                                               
also calls  to tie  the grids together  in Southeast,  Alaska, by                                                               
combining  all the  cooperatives in  that area  and reducing  the                                                               
board to  seven members.   There are  1,500 miles of  power lines                                                               
that need to be built.   Furthermore, the proposal would have the                                                               
state use oil revenue money to "liquidate $3 billion in debt."                                                                  
6:17:04 PM                                                                                                                    
MR. STAUDENMAIER continued:                                                                                                     
     Another issue that's [a] concern:   Not only do you cut                                                                    
     your  bill in  half to  80  percent, but  you roll  the                                                                    
     interest  back in  the state  at $300  million a  year.                                                                    
     Dollar rolls  five times, that's  an extra  buy-in pump                                                                    
     of about $1.5 billion.                                                                                                     
     We also  have laid out  every city's light  bill, every                                                                    
     school district's  light bill.  You're  from Anchorage?                                                                    
     The  municipal light  bill is  right under  $10 million                                                                    
     cash  every 12  months.   Lacking 50,000.   The  school                                                                    
     district is  $10 million cash.   Where does  that money                                                                    
     come from?  Property taxes.   So, the trick here is you                                                                    
     clean it up, merge it  out, tie the grid together, take                                                                    
     your own money,  (indisc.) debt, and keep  your cash in                                                                    
     your pocket.                                                                                                               
MR. STAUDENMAIER said  in order to industrialize the  state it is                                                               
first  necessary to  create a  need,  "and then  you have  enough                                                               
juice to  build the Susitna  hydro-electric project for  the next                                                               
200 years."  He continued:                                                                                                      
     Now, nobody has ever done a  study on this, but we have                                                                    
     it all --  on Governor Palin's deal:   we're opposed to                                                                    
     that.   They want to  add a bureaucracy over  and above                                                                    
     what you already have here.   Now, I ... don't work for                                                                    
     the utilities.   ... We are supported  by a substantial                                                                    
     loan  of business  people from  Southcentral, Interior,                                                                    
     Valdez, you name it.  They're fed up.                                                                                      
CO-CHAIR   MILLETT  asked   Mr.  Staudenmaier   to  clarify   his                                                               
MR. STAUDENMAIER responded that he  was elected as a board member                                                               
to the  Matanuska Electric Association,  Inc.  He spoke  of being                                                               
re-elected  numerous  times, and  being  "gagged"  to keep  quiet                                                               
regarding a turbine  bought illegally.  The  turbine, he related,                                                               
sat idle in  the City of Soldotna, and after  15 years it "seized                                                               
up."   Mr.  Staudenmaier indicated  that federal  funds were  cut                                                               
off,  but there  was an  order to  finance the  turbine in  1984.                                                               
Eight years  ago, he said,  VECO Corporation got the  contract to                                                               
pick that turbine up,  and they took it to Nikiski  and put it in                                                               
a fertilizer  plant, which is  now shut down.   He said  the cost                                                               
was  $29 million.   He  said he  met with  the Federal  Bureau of                                                               
Investigation  (FBI)   to  uncover  a   "white-collared  criminal                                                               
CO-CHAIR MILLETT  asked Mr.  Staudenmaier to  return to  the main                                                               
focus of his testimony.                                                                                                         
MR. STAUDENMAIER said  the bottom line is to "clean  it up, merge                                                               
it out, tie  the grids together, take our own  money, pay off our                                                               
debts."    The  result  would  be an  extra  dividend  check  for                                                               
everyone  between $25-50,000.   He  indicated that  if the  state                                                               
wants to  industrialize, it should  build power lines out  to the                                                               
villages.   He  said  there  were a  half  billion dollars  under                                                               
former  Governor  Hickel to  do  all  the interties,  but  former                                                               
Governor  Knowles  cut off  the  money,  with only  one  intertie                                                               
6:20:38 PM                                                                                                                    
MR.  STAUDENMAIER contended  that tying  the grid  together is  a                                                               
matter of national security because of the missile system.                                                                      
MR. STAUDENMAIER  talked about ownership  of utility  companies -                                                               
both as a taxpayer and by being a board member.  He continued:                                                                  
     So,  the   question  is:     why  are  we   paying  the                                                                    
     duplication process?   And the problem  is, it's called                                                                    
     duplicity.   Debt service and  interest has  nothing to                                                                    
     do with the generation of  a kilowatt of power, period.                                                                    
     You've got 400 people on a payroll you don't need.                                                                         
MR. STAUDENMAIER  said either  the utilities  will be  kept under                                                               
local control  or sold off to  the highest bidder, the  latter of                                                               
which he indicated would be crazy.   He said there is going to be                                                               
a merger  between Matanuska Electric and  Chugach Electric, which                                                               
will  save $500  million "by  not building  a new  turbine."   In                                                               
response  to  Co-Chair  Millett,  he   said  he  would  give  the                                                               
committee   his  study   information   and   he  indicated   that                                                               
information  pertaining to  this  issue could  also  be found  on                                                               
6:23:42 PM                                                                                                                    
REPRESENTATIVE  DAHLSTROM noted  that Mr.  Staudenmaier had  used                                                               
the  term "we"  throughout his  testimony,  and she  asked if  he                                                               
could tell the committee the names of the other people involved.                                                                
MR.  STAUDENMAIER  responded that  a  variety  of people  donated                                                               
money  "to  bring  this   to  [fruition]  through  Staudenmaier's                                                               
Electric Merger Committee."                                                                                                     
6:24:22 PM                                                                                                                    
INGEMAR   MATHIASSON,   Energy  Coordinator,   Northwest   Arctic                                                               
Borough, stated that electricity is  not the problem in villages,                                                               
but  diesel is.   He  said it  is really  a shipping  issue.   He                                                               
added,  "That's   where  the  [power  cost   equalization  (PCE)]                                                               
belongs."   He  said, "If  anything's  going to  happen with  the                                                               
propane issue, as far as  coming into the picture for electricity                                                               
generation,  then the  PCE  has to  be applied  to  that in  some                                                               
fashion, so that that could happen."                                                                                            
6:25:32 PM                                                                                                                    
DAVID  GARDNER,  Vice  President, Marketing  &  Member  Services,                                                               
Golden  Valley  Electric,  remarked   that  energy  is  both  the                                                               
lifeblood  of society  and a  scarce  resource.   He stated,  "As                                                               
demand for  energy increases in  Alaska and around the  world, as                                                               
stocks  of  oil  and  natural   gas  are  depleted,  and  as  new                                                               
regulatory  structures establish  physical ...  disincentives for                                                               
carbon  emitted  by  fuel,  the  cost of  these  fuels  may  rise                                                               
sharply."   He said Alaskans  accept the necessity  of tightening                                                               
their  belts  during  tough times;  however,  assuring  continued                                                               
affordability and  reliable energy  is a  problem that  will call                                                               
upon  the creativity  and dedication  of the  private sector,  as                                                               
well  as  the  rigorous  actions of  local,  state,  and  federal                                                               
MR. GARDNER  stated that GVE  strongly advocates  the development                                                               
of  a comprehensive  energy plan  for  Alaska, which  would be  a                                                               
vision   for  the   role  that   Alaskan   utilities  and   state                                                               
governmental  officials,  agencies, and  elected  representatives                                                               
can play  in solving  the energy problem  and shaping  the energy                                                               
future.  He  acknowledged that the federal  government has larger                                                               
issues  to  address, such  as  funding  for energy  research  and                                                               
development and  legislation or  regulation of  greenhouse gases;                                                               
however, there  are steps that  Alaskans can take to  ensure more                                                               
stable independent patterns of energy generation and use.                                                                       
MR.  GARDNER listed  those components  that GVE  believes a  plan                                                               
should attempt  to identify.   First, he  said, would  be utility                                                               
scale  renewable resources.   He  reviewed that  statute requires                                                               
that  Alaska's  electric  utility   companies  provide  power  to                                                               
consumers  at the  lowest possible  cost and  help keep  electric                                                               
rates  low in  the  state.   However,  certain  features of  this                                                               
structure in  the state have acted  as barriers to the  amount of                                                               
electricity  generated  by renewable  resources  in  the state  -                                                               
especially  on utility-scale  projects.   He said,  "Alaska's law                                                               
makers  and electric  utilities  will need  to  work together  to                                                               
overcome  these barriers  as  carbon  emissions from  traditional                                                               
fossil fuel  power plants come  under greater scrutiny  in coming                                                               
months and years."  He suggested  one immediate step should be to                                                               
move forward with the Susitna hydro-electric project.                                                                           
MR.  GARDNER  said the  second  component  to  a plan  should  be                                                               
electrical efficiency,  which would include the  reduction of the                                                               
demand  for energy  - also  considered a  resource.   He reported                                                               
that reducing consumption  by one kilowatt hour  is equivalent to                                                               
increasing  supply   by  the  same  amount,   thus  products  and                                                               
practices,  such  as  programmable thermostats,  "smart  meters,"                                                               
efficient  appliances,   efficient  lighting   systems,  building                                                               
insulation, and simple common sense  reductions to demand can all                                                               
play a role in meeting the state's electrical production needs.                                                                 
MR. GARDNER  said the  third component would  be to  increase the                                                               
amount  of electricity  generated  by  renewable energy  sources,                                                               
replace  aging infrastructure,  and develop  a transmission  grid                                                               
across  the  state  -  all   which  will  require  a  significant                                                               
investment  in  the  construction   of  new  transmission  lines.                                                               
Alaska must establish a power pool -  like that in the Lower 48 -                                                               
to facilitate  the planning and coordinates  of transmission line                                                               
development throughout  the state.  The  responsibilities of that                                                               
power   pool  would   include:      planning,  siting,   routing,                                                               
transmission  line addition,  and  sources of  financing for  new                                                               
lines  and   line  upgrades  -   difficult  and   expensive,  but                                                               
achievable  tasks  if local,  state,  and  federal official  work                                                               
together with private and public utilities.                                                                                     
MR. GARDNER  related that  the fourth  component would  be energy                                                               
diversity.    He  explained  that regardless  of  the  future  of                                                               
regulatory change,  the focus of  Alaska's energy  utilities must                                                               
be on  developing a diverse  portfolio of generating  sources, in                                                               
order to  provide affordable and  reliable energy to  Alaskans in                                                               
the most  environmentally responsible  method possible.   Because                                                               
of the state's vast natural  resources, he relayed, the diversity                                                               
of  energy  portfolio  must include  coal,  hydro-electric,  oil,                                                               
natural gas, wind, solar, geothermal, and biomass [power].                                                                      
MR.  GARDNER  said  the  fifth component  would  be  a  renewable                                                               
portfolio  standard (RPS)  or  renewable  energy standard  (RES),                                                               
which he explained are statutory  requirements that all utilities                                                               
operating within  a state  generate a  certain percentage  of the                                                               
electricity they  distribute from renewable sources.   Currently,                                                               
he noted,  28 states have  adopted such legislation,  and changes                                                               
in the federal government,  including President Obama's renewable                                                               
initiative and shifts in  congressional committees, indicate that                                                               
a nationwide RPS or  RES may be enacted in the  near future.  Mr.                                                               
Gardner   added,  "However,   Golden  Valley   opposes  mandatory                                                               
legislation,   because  without   careful  consideration,   these                                                               
requirements can  lead to inequitable  subsidies from  one region                                                               
of the  state to  another, causing  electric consumers  to suffer                                                               
from low electric reliability and precipitous rate increases."                                                                  
6:31:00 PM                                                                                                                    
MR.  GARDNER said  the sixth  component would  be comprised  of a                                                               
number of resource utilization measures  and actions.  First, GVE                                                               
proposes  partnering  with  the   Alaska  State  Legislature  and                                                               
Congressional  Delegation to  extend the  federal production  tax                                                               
credit for renewable  energy.  Second, GVE  proposes that federal                                                               
tax  credit for  wind production  be made  tradable, which  would                                                               
allow  not-for-profit  utilities, such  as  GVE,  to capture  tax                                                               
credits  that  are  otherwise available  only  to  investor-owned                                                               
utilities.   Third,  GVE proposes  that annual  appropriations to                                                               
the renewable  energy production  incentive be increased.   Those                                                               
appropriations are designed to  offer public utilities incentives                                                               
for the  development of renewable  generation capacity,  in place                                                               
of production tax credit.   Fourth, GVE proposes the expansion of                                                               
clean renewable  energy bonds (CREBs).   Under  one congressional                                                               
plan,  he noted,  billions of  dollars  worth of  CREBs would  be                                                               
available to public utilities and  electric cooperatives for new,                                                               
renewable energy  projects.  Fifth  and sixth, GVE  proposes that                                                               
continuation  of   federal  tax  credits  for   small-scale  wind                                                               
production and  residential "photo mosaic"  electrical generation                                                               
systems be  supported.   Seventh, GVE proposes  the support  - in                                                               
partnership with  the University of  Alaska - of  the development                                                               
and  rapid   low-cost  implementation   of  carbon   capture  and                                                               
sequestration  technologies  at  existing and  future  coal-fired                                                               
generating plants.                                                                                                              
MR. GARDNER moved  on to the seventh component,  which is related                                                               
to the work of  the Alaska Center for Energy and  Power.  He said                                                               
researching new  energy technology  is crucial for  the continued                                                               
availability  of  affordable,  reliable  energy in  Alaska.    He                                                               
stated that research which leads  to advances in the viability of                                                               
efficiency  of renewable  energy  technologies  can create  jobs,                                                               
lessen dependency  on foreign fossil fuel,  and reduce greenhouse                                                               
gas emissions.   Furthermore, research that  identifies new means                                                               
of  conservation  can  help  lower  demand  for  energy,  thereby                                                               
reducing its cost.                                                                                                              
MR. GARDNER said the eighth component  would be to plan today for                                                               
tomorrow's energy  solutions.  He  said GVE supports  the efforts                                                               
of  both the  House Special  Committee on  Energy and  the Senate                                                               
Special  Committee on  Energy to  develop a  vision for  Alaska's                                                               
energy future.   A vision  would be instrumental  in establishing                                                               
both  a  state  energy  policy and  plan  that  would  streamline                                                               
current  energy programs,  as well  as  developing future  energy                                                               
solutions for the state.                                                                                                        
6:33:45 PM                                                                                                                    
MR.  GARDNER  said  GVE  has   provided  draft  language  as  its                                                               
suggestion for an energy policy, which he read as follows:                                                                      
     It is  the policy of  the state that Alaska,  through a                                                                    
     statewide   energy  plan,   have  adequate,   reliable,                                                                    
     affordable,  sustainable, and  clean energy  resources,                                                                    
     by  promoting the  development  of nonrenewable  energy                                                                    
     resources,  including natural  gas, coal  and oil,  and                                                                    
     renewable   energy  resources,   including  geothermal,                                                                    
     solar, wind, biomass, and  hydro-electric.  Alaska will                                                                    
     promote    the    development    of    resources    and                                                                    
     infrastructure sufficient  to meet the  state's growing                                                                    
     energy  demand, while  reducing  dependency on  foreign                                                                    
     energy  sources  through  energy  conservation,  energy                                                                    
     efficiency, energy  research, energy  related workforce                                                                    
     development,  and   state  regulatory   processes  that                                                                    
     balance economic cost with environmental quality.                                                                          
6:34:49 PM                                                                                                                    
MR.  GARDNER, in  response  to  Representative Ramras,  explained                                                               
that  propane  was not  overlooked  in  GVE's consideration,  but                                                               
rather is considered  with natural gas.  In  response to Co-Chair                                                               
Millett,  he  said  GVE  would  support  geothermal  energy,  but                                                               
"Susitna seems to be the one  that's in the public eye right now"                                                               
and GVE  believes [that  project] would  have the  greatest long-                                                               
term benefit for the state.                                                                                                     
6:35:44 PM                                                                                                                    
GARY  NEWMAN told  the committee  that  he has  been involved  in                                                               
energy  issues since  the mid  to late  70s, and  he offered  his                                                               
related  work history.   He  clarified that  he is  testifying on                                                               
behalf of himself.  He stated  that the legislature has a big job                                                               
in trying  to come  up with  an energy  plan for  the state.   He                                                               
suggested that the  state first needs to have a  mission in order                                                               
to  come up  with  a plan.    He observed  that  HB 218  contains                                                               
"marching  orders for  the Department  of Energy."   He  said the                                                               
following  factors are  involved  in this  issue,  which are  not                                                               
always compatible:   economic, from  the perspective of  both the                                                               
state   and  the   private   sector;   environmental,  which   is                                                               
contentious; and political.  He  said, "Everybody has their stake                                                               
in it in one form or fashion."                                                                                                  
MR. NEWMAN remarked that he is  pleased with some of the ideas he                                                               
heard  from Mr.  Gardner, but  does not  understand other  ideas.                                                               
For  example, he  mentioned GVE's  work  to get  $300 million  in                                                               
federal and  state money invested  in a coal plan  in partnership                                                               
with Usibelli Coal Mine, Inc., which  is still not up and running                                                               
more than a decade later.  The  point, he said, is that there was                                                               
public  investment  in that  project  that  was promoted  by  the                                                               
private sector.   He added, "And when you folks  are investing in                                                               
the public,  we don't  have an  unlimited supply  of funds."   He                                                               
indicated  that  coal   gasification/liquefaction  is  guesswork,                                                               
because  it has  not been  done  commercially.   He mentioned  an                                                               
amount of  $3-$5 billion.   He  said, "I think  if you  invest in                                                               
that, you're going to say you  don't have the money for something                                                               
else."  "Susitna's  even more over the top,"  at $10-$20 billion,                                                               
he estimated.                                                                                                                   
6:39:12 PM                                                                                                                    
MR. NEWMAN  charged the legislature to  come up with a  plan that                                                               
will be  best for  the state in  the long term.   He  cited House                                                               
Concurrent Resolution  56 "from many  years ago," which  "said we                                                               
should be  doing something towards dealing  with CO2 mitigation."                                                               
He  said to  date that  has not  really happened.   He  mentioned                                                               
burning nonrenewable energy, and spoke  of the role of regulatory                                                               
environment.   Mr.  Newman made  suggestions, which  he said  are                                                               
partly addressed  in [AS]  44.38.020, with  the exception  of the                                                               
aforementioned reduction  of CO2.   He  said conservation  is the                                                               
cheapest path -  "the less you use, the more  efficiently you use                                                               
it."  He  noted that Representative Ramras had  spoken of propane                                                               
as a  bridging fuel  to natural  gas, and he  said 20  years ago,                                                               
natural  gas was  being  considered as  a  bridging fuel  "toward                                                               
renewable."  He  recalled a discussion with  a resource economist                                                               
who  estimated  there  was  enough  instate  proven  reserves  of                                                               
natural gas to  last 500-1,000 years.  Mr.  Newman indicated that                                                               
he may  not be able  to see 500 years  ahead, but he  can picture                                                               
what is best for the state in the next 50 years.                                                                                
MR. NEWMAN  mentioned "cap and  trade" and  carbon tax.   He said                                                               
part of the  reason renewable [energy] has "had a  hard time," is                                                               
because "you're  not valuing the  full and true cost  of whatever                                                               
energy   you're  using."     He   highly  recommended   that  the                                                               
legislature  find some  way of  "balancing that."   He  urged the                                                               
committee to  take a  look at House  Concurrent Resolution  56 as                                                               
"something that never happened  despite the legislature's request                                                               
to the executive branch."                                                                                                       
6:43:25 PM                                                                                                                    
JESSIE PETERSEN,  Director, Issues  and Energy,  Northern Alaskan                                                               
Environmental  Center  (NAEC),  said Alaska  can  reach  Governor                                                               
Palin's goal of 50 percent renewable  energy by 2025 if the state                                                               
looks to the  future for real solutions.  He  related that people                                                               
who  live in  the Interior  are ready  and willing  to work  with                                                               
legislators to  find a solution to  the energy problem.   He said                                                               
it is  possible with Alaska's  vast renewable energy  sources and                                                               
new  technology to  meet the  state's energy  needs, save  money,                                                               
revitalize  the  state's  economy,   and  reduce  greenhouse  gas                                                               
emissions, without having to "look  through past technologies for                                                               
our answers."   Ms. Petersen stated  her belief that in  order to                                                               
achieve these goals,  Alaska will first need  state leadership on                                                               
an energy  vision, which  is what the  legislature is  showing by                                                               
being present in  Fairbanks today.  She urged  leadership to work                                                               
with GVE  to create an  energy vision  that can be  beneficial to                                                               
utilities  while   still  focusing   on  energy   efficiency  and                                                               
renewable energies.                                                                                                             
MS.  PETERSEN  suggested  utilizing  "decoupling"  measures,  and                                                               
"other  policies  to remove  the  traditional  formula that  more                                                               
energy use  equals cheaper rates."   She also suggested  that the                                                               
state  implement a  renewable portfolio  standard.   Other states                                                               
that have  done so  have had  great success.   She  said Alaska's                                                               
energy plan should:  reduce  carbon emissions; provide affordable                                                               
and reliable  base load power for  communities; reduce dependence                                                               
on  nonrenewable fossil  fuel;  implement  energy efficiency  and                                                               
conservation programs  that save  energy, thus saving  money that                                                               
can be given  back to communities; invest in  new technology; and                                                               
empower  Alaskans  to  be  part of  the  solution,  for  example,                                                               
through workforce development and training programs.                                                                            
MS. PETERSEN thanked the legislature  for supporting the numerous                                                               
energy   efficiency  and   renewable  energy   bills  that   were                                                               
introduced during the  2009 session, and for  consideration of HB
218 and  HB 219.   She opined that  HB 218 would  be "wonderful."                                                               
She stated  support of the idea  to have a centralized  entity to                                                               
address  energy issues.   She  urged the  legislators to  work to                                                               
"get some  of those  bills finalized  and passed"  in 2010.   She                                                               
said  it  is time  for  Alaskans  to  reclaim their  position  as                                                               
leaders, and  the state is  blessed with an abundance  of diverse                                                               
renewable energy  options and innovative leaders.   An investment                                                               
in  renewable  energy  and  energy  efficiency  will  create  new                                                               
economic opportunities,  while helping to address  climate change                                                               
- "the challenge of our lifetime," she stated.                                                                                  
6:47:25 PM                                                                                                                    
RICHARD   SEIFERT,  Professor/Energy   and  Housing   Specialist,                                                               
Health,   Home  &   Family  Development,   Cooperative  Extension                                                               
Service,  University   of  Alaska  Fairbanks,  stated   that  the                                                               
legislature's consideration  of creating  a Department  of Energy                                                               
is "both  optimistic and terrifying."   He explained that  he has                                                               
been in  Alaska for  39 years,  was appointed at  a young  age by                                                               
then  Governor Hammond  to  a group  called,  "The Alaska  Energy                                                               
Center," which was formed to attempt  to do "many of the types of                                                               
things"  that Senate  Bill  152 did.    He said  he  was also  in                                                               
Governor Cowper's  Energy Policy  Committee, and  he worked  in a                                                               
Division of Energy and Power  Development in the 80s, which acted                                                               
like  a Department  of Energy,  but was  "scattered to  the winds                                                               
like the fall  of the Roman Empire."  He  suggested that there is                                                               
an  entire  history  of  which  he is  aware,  of  which  today's                                                               
legislators are  not.  He  explained that  is why he  looks today                                                               
upon  the proposed  legislation  with trepidation.   He  credited                                                               
Yogi Berra  as having said, "You  can learn an awful  lot just by                                                               
watching."   He added, "You can  also learn an awful  lot just by                                                               
asking the right questions."                                                                                                    
MR.  SEIFERT said  a  primary question  is:   Just  how much  can                                                               
renewable provide?  He indicated that  much of his study has been                                                               
in an  effort to answer  that question.   He said whether  or not                                                               
the state  could sustain itself  on renewable energy should  be a                                                               
question  for the  state to  answer  and an  overarching goal  to                                                               
reach  when  developing  its  energy   policy.    He  recommended                                                               
electrifying Alaska's  entire energy  grid with  renewable energy                                                               
sources  to  the  degree  possible, which  would  result  in  the                                                               
state's not  being "vulnerable from  pressures to  taxing carbon"                                                               
or  "using  electricity  at  the   expense  of  possible  climate                                                               
change."   He  emphasized the  importance of  the climate  change                                                               
6:51:54 PM                                                                                                                    
MR.  SEIFERT said  another  piece of  history  that is  repeating                                                               
itself is the idea of "doing  energy development by project."  He                                                               
stressed that this is a bad  idea that has never worked well, and                                                               
he stated  that Alaska must choose  an energy policy that  is not                                                               
driven by that  legacy.  He said he is  asking the legislature to                                                               
adopt  a scientific,  holistic, durable,  "reality" view  that is                                                               
based on  engineering, in  order to  optimize the  entire state's                                                               
"resource  mix and  renewable potential."   He  stated, "We  have                                                               
forced  half-baked  solutions  and  maladapted  projects  on  our                                                               
defenseless  communities, and  we've got  to stop  that; we  just                                                               
can't do that anymore."                                                                                                         
6:53:21 PM                                                                                                                    
MR.  SEIFERT  outlined key  elements  of  a good  energy  policy.                                                               
First, he  said, "Always  do the conservation."   He  thanked the                                                               
legislature for  $3 million he  received toward  his conservation                                                               
work.   He indicated  that money  toward conservation  efforts is                                                               
not only the  right thing to do, but the  first thing that should                                                               
be done.   Next, Mr. Seifert encouraged the  state to "accentuate                                                               
the positive,  look for the best  renewable - wind on  the coast,                                                               
hydro where  it's available, and  the least damaging  biomass and                                                               
fossil  fuels only  when absolutely  nothing else  will suffice."                                                               
He  told  the legislature  to  place  the  highest value  on  the                                                               
highest  value  energy,  to  create  renewably  powered  electric                                                               
utilities, and  to develop renewable  electrification as  much as                                                               
possible.  He  recommended that the legislature  always ask, "How                                                               
durable  is the  system?  Will  it last?  Does  it cause  climate                                                               
change? Can  it be sustained?"   He encouraged the state  to "pay                                                               
as  you  go,"  finance  with  its own  collateral,  and  use  the                                                               
permanent  fund  if necessary  to  bond  for the  state's  energy                                                               
future.    He  said,  "This  is not  only  consistent,  but  it's                                                               
possibly  the wisest  use  of  our permanent  fund."   He  warned                                                               
against using  financial advisors, encouraging the  state instead                                                               
to "use  that permanent fund  to make a permanent  improvement in                                                               
the state."                                                                                                                     
MR.  SEIFERT  asked  for  budget  support  for  education  -  the                                                               
University of Alaska, Alaska Center  for Engine and Power (ACEP),                                                               
the  Engineering  Department,  and  Cooperative  Extension.    He                                                               
emphasized the  necessity of  a state energy  policy in  order to                                                               
prosper and have a comfortable  standard of living.  He mentioned                                                               
communication,  Internet,  and   financial  security,  and  said,                                                               
"Without  reliable  renewable  electricity, none  of  these  will                                                               
6:55:34 PM                                                                                                                    
REPRESENTATIVE TUCK  said it is true  that whenever opportunities                                                               
present themselves, there  are also dangers that  come along with                                                               
them.    He  expressed  his  hope that  Mr.  Seifert  would  stay                                                               
involved with this process.                                                                                                     
6:56:21 PM                                                                                                                    
MR. SEIFERT  responded, "I'm  your biggest  fan and  your biggest                                                               
critic."  In  response to Co-Chair Millett, he noted  that he has                                                               
two web site addresses.                                                                                                         
6:56:35 PM                                                                                                                    
JEFFREY   WERNER,  Research   Professional,  School   of  Natural                                                               
Resources  and   Agricultural  Sciences,  University   of  Alaska                                                               
Fairbanks; Director, Future Farmers  of America (FFA), University                                                               
of Alaska  Fairbanks, asked that  the legislature  pay particular                                                               
attention to  the educational needs  of youth  as it works  on an                                                               
energy plan.  The number  of students going into remedial English                                                               
and Mathematics is astounding, he  noted.  He said Alaska doesn't                                                               
even  appear on  the ranking  for natural  resource education  in                                                               
high schools.  He stated  that science directly relates to energy                                                               
use.  He related that 90 percent  of people in Alaska do not know                                                               
how much they are paying for  natural gas and electricity, and 50                                                               
percent of  Alaskans do not  know what  they pay for  gasoline at                                                               
the  pump.   He called  that a  "disconnect," and  indicated that                                                               
"the  giants"  who  provide  the sources  do  not  contribute  to                                                               
educating  Alaskans.   He said  people in  Fairbanks do  know how                                                               
much it costs to keep their  houses warm, "because that's a real-                                                               
time thing."  However, he remarked  that young people do not know                                                               
the energy requirements to make that warmth available.                                                                          
6:59:36 PM                                                                                                                    
MR. WERNER  said FFA's  students represent  Alaska's agriculture,                                                               
fisheries, and  forestry; the FFA  tagline is  "feeding, fueling,                                                               
and financing Alaska."   The objective of FFA is  to energize and                                                               
educate  youth and  excite them  about the  opportunities in  the                                                               
state  for "keeping  Alaska for  Alaskans."   He  said the  young                                                               
people  involved in  FFA  understand the  relation  of energy  to                                                               
Alaska's  future.   Mr.  Werner  related  that another  important                                                               
issue is  how Alaska  will feed  itself.  He  said the  "Lake and                                                               
Peninsula  Borough" does  not presently  have a  way to  feed its                                                               
communities there,  and is  looking for  innovative ways  to make                                                               
that  happen.    Mr.  Werner  said  that  is  possible,  but  the                                                               
borough's limiting factor right now  is energy.  Without English,                                                               
Mathematics, and Science  at the basic level,  even starting with                                                               
first-graders,  Mr. Werner  questioned how  the topics  of energy                                                               
and  natural  resources would  be  infused  into the  educational                                                               
system.  He opined that in  Alaska, "every kid should know how to                                                               
build a fish wheel and how to use a chainsaw."                                                                                  
7:02:12 PM                                                                                                                    
MR. WERNER  expressed excitement  about the  committee's proposed                                                               
energy policy, and said  he and the FFA would like  to be part of                                                               
the solution.                                                                                                                   
7:03:26 PM                                                                                                                    
MR.  WERNER, in  response  to  Representative Guttenberg,  talked                                                               
about what  attracts children to FFA  and 4-H.  He  said children                                                               
come from  all walks of  life, and sometimes the  experience they                                                               
have in either  organization is "the one thing  they find success                                                               
in."   He offered further  details, including his  own experience                                                               
growing up.                                                                                                                     
7:04:49 PM                                                                                                                    
REPRESENTATIVE TUCK supported Mr.  Werner's message regarding the                                                               
relevancy  of  exposing children  to  experiences  in which  they                                                               
become  engaged.    He  talked   about  making  connections  with                                                               
students  and   expressed  his  appreciation  for   Mr.  Werner's                                                               
7:06:09 PM                                                                                                                    
DAN RAYNES  relayed that  he is  an owner  of a  small automotive                                                               
shop in  Fairbanks.  He said  he discovered on the  Internet that                                                               
people  in Australia  are making  an  electromagnetic motor  that                                                               
will pull  25 kWh and  rates 500 percent  efficiency.  He  said a                                                               
car only  rates 40  percent efficiency.   Mr. Raynes  stated that                                                               
the  electromagnetic  motors  are  long-lived;  the  magnets  are                                                               
expected to  last 140  years.   He said it  would be  possible to                                                               
make an electromagnetic [wind] turbine,  which would end the need                                                               
for using diesel.  He surmised that  a motor could be made two to                                                               
four  times as  strong just  by using  bigger magnets  and bigger                                                               
MR. RAYNES said the problem in  schools is that teachers think of                                                               
everybody  as  a  number;  there  needs  to  be  more  one-on-one                                                               
attention.  He  said he only finished tenth grade,  but has owned                                                               
his own shop since he was 16 or 17 years of age.                                                                                
MR. RAYNES  said oil companies are  never going to be  put out of                                                               
business, because oil  will always be needed.   He explained that                                                               
he is  not trying  to put  anyone out  of business.   He  said he                                                               
knows propane is a good deal and there is potential there.                                                                      
7:10:47 PM                                                                                                                    
DOUGLAS  B.  REYNOLDS,  Ph.D., Professor,  Economics,  School  of                                                               
Management, University of Alaska  Fairbanks, stated that there is                                                               
large economy of scale or there  are small projects, and they are                                                               
almost mutually exclusive.  He  said backyard coal boilers are an                                                               
option.  He  said he doesn't think that "in  this turbulent time"                                                               
the  state  needs to  "worry  about  global warming  right  now,"                                                               
because  the projected  bullet  line will  "take  care of  things                                                               
eventually."  Until that happens, there  may be five to ten years                                                               
during which coal could be used.                                                                                                
DR. REYNOLDS  suggested that  the committee  consider the  use of                                                               
natural gas to  run vehicles.  He suggested this  idea might need                                                               
some subsidizing.                                                                                                               
7:14:00 PM                                                                                                                    
REPRESENTATIVE  PETERSEN noted  that the  Country of  Brazil uses                                                               
natural gas  to run 20  percent of its  vehicles.  He  also noted                                                               
that in  Washington, D.C., the  buses have  signs on them  to let                                                               
people know  they run on  natural gas.   He said  switching large                                                               
diesel  engines over  to using  natural gas,  which would  reduce                                                               
pollution, may  be a good  first step.   Such a  conversion could                                                               
create a demand for Alaska's natural gas, he remarked.                                                                          
DR. REYNOLDS  suggested that  if money  is going  to be  spent to                                                               
study wind-diesel  power, it could  also be spent to  reduce coal                                                               
particulates on backyard boilers.   He added, "I mean, it doesn't                                                               
have to be that bad as a stop-gap measure."                                                                                     
7:15:17 PM                                                                                                                    
MARY  WALKER, Project  Coordinator,  Alaska  Interface Power  and                                                               
Light (AIPL),  clarified that  AIPL is  not a  utility; it  is an                                                               
entity  that  supports  base communities  in  "carrying  out  the                                                               
theological imperative to  serve as wise and  prudent stewards of                                                               
our  creator's earth."   She  said AIPL  currently has  23 member                                                               
congregations -  nearly 7,000 congregants all  committed to serve                                                               
as stewards.   She said she cannot  speak to HB 218  and 219, but                                                               
can  speak to  AIPL's support  of an  energy vision  that in  the                                                               
short  term encourages  energy efficiency.   She  emphasized that                                                               
that  support  is  not  only because  such  efficiency  is  cost-                                                               
effective,  but also  because it  is morally  responsible not  to                                                               
waste precious  resources.  She  said AIPL  hopes to see  for the                                                               
mid to  long term  the use of  renewable energy  and nonrenewable                                                               
energy sources  that "no  longer externalizes  the cost  of green                                                               
house  gas  pollution."    Also  related  to  mid-  to  long-term                                                               
solutions, Ms.  Walker said  AIPL hopes to  see "green  jobs" for                                                               
low-income earners and [military]  veterans.  Regarding an energy                                                               
audit program,  she stated, "We've  got waiting lists  for people                                                               
to do  audits on our household,  but we don't have  the workforce                                                               
to go in and do the energy efficiency improvement."                                                                             
7:17:07 PM                                                                                                                    
MS.  WALKER  related   a  story  about  a  reverend   who  has  a                                                               
congregation of  100 -  a third  of whom  are out  of work.   She                                                               
suggested these  people could  be put  to work  in "green-collar"                                                               
7:18:29 PM                                                                                                                    
BOB BEACH, regarding  the issue of energy, said  these are trying                                                               
times.   He  named  some  of the  energy  projects most  recently                                                               
funded  by  the  legislature,  which use  wind,  solar,  biomass,                                                               
landfill  gas,  ocean  tidal, incremental  hydro,  or  geothermal                                                               
power.   He said it is  important to show the  younger generation                                                               
that "we have  their best interests at heart," and  that "some of                                                               
these  are  solutions  for  short   term."    He  emphasized  the                                                               
importance  of manufacturing.   He  stated, "Resource  extraction                                                               
without  any  kind  of  Alaska  stamp of  having  to  have  built                                                               
something  from  this resource  is  like  giving away  'salt  and                                                               
egg.'"  Mr.  Beach said Alaska is  consuming a lot of  gas on the                                                               
North Slope.  He talked about  garnering that power into "a clean                                                               
way of  manufacturing steel or  any type  of metal."   He stated,                                                               
"The  mainstay in  any of  our energy  independence has  to start                                                               
with manufacture  of our product."   Mr. Beach said Alaska  is on                                                               
the cutting edge  of energy technology.  He talked  about "all of                                                               
this abundance  of gas  going up the  flare pit,"  and reiterated                                                               
that it would behoove the state to consider the steel industry.                                                                 
7:23:56 PM                                                                                                                    
MR. BEACH  spoke about the need  in rural areas and  villages for                                                               
alternative energy  sources.  He stated  that [Hurricane] Katrina                                                               
was  bad, but  he  said it  seems like  the  villages "have  been                                                               
Katrinas forever."  He continued:                                                                                               
     But with  some of these  credits that can  be captured,                                                                    
     using the Indian  country label, there would  be like a                                                                    
     store house for these types  of trades in credit, and I                                                                    
     think  Alaska could  benefit quite  a  bit from  having                                                                    
     these on the market.                                                                                                       
MR. BEACH  told the committee  to take heart because  its members                                                               
are  doing  the  right  thing by  considering  bills  to  capture                                                               
7:26:02 PM                                                                                                                    
GREG EGAN, Remote  Power, Inc.; Solar Wind  Consultants, told the                                                               
committee  that   Remote  Power,  Inc.  does   solar  wind  power                                                               
projects, while  Solar Wind  Consultants conducts  lifecycle cost                                                               
analyses, feasibility  studies, and does engineering.   He stated                                                               
that  he  would  like  to  see a  reversal  of  Governor  Palin's                                                               
decision  not to  accept $28  million in  stimulus funds,  and he                                                               
would  like that  money used  to promote  small renewable  energy                                                               
systems, conservation,  and perhaps  some research into  a "smart                                                               
grid."   He  stated his  understanding of  a smart  grid is  that                                                               
[power]  can be  turned  on  and off  remotely.    He offered  an                                                               
example  of  how  it  works,   and  opined  that  the  system  is                                                               
definitely worth research.                                                                                                      
7:27:51 PM                                                                                                                    
MR.  EGAN recollected  that Mr.  Seifert talked  about durability                                                               
systems.   He said solar power  does not get much  credit because                                                               
"the sun  doesn't shine all the  time."  However, it  is possible                                                               
to put  a solar panel  on a satellite and  send it out  to space,                                                               
and it will still [power the  satellite] 50 years later.  A solar                                                               
panel is warranted  to put out 80 percent of  its original output                                                               
after 25  years.  It  is possible to  get a 15-year  warranty for                                                               
panels, he said.   For places where maintenance is  not done very                                                               
often, "solar is not necessarily a bad way to go," he remarked.                                                                 
7:29:09 PM                                                                                                                    
MR.  EGAN  mentioned the  National  Renewable  Energy Lab's  wind                                                               
resource map,  which shows areas of  high wind in the  colors red                                                               
and purple.  He said the  entire coast of Alaska would be colored                                                               
in red  and purple, because there  is so much wind.   Other areas                                                               
of the state do  not have so much wind.  He  stated, "If you have                                                               
geographic diversity in your resources,  and they're connected to                                                               
a grid,  ... it  doesn't negate  the fact  that the  wind doesn't                                                               
blow all the time,  but it blows a lot more  of the time, because                                                               
you're spreading out  over different areas."  Mr.  Egan said wind                                                               
is difficult to  predict, and energy storage is a  necessity.  He                                                               
said if  there is a dam,  wind can be used  when available; hydro                                                               
power from the dam can be used when  there is no wind.  A similar                                                               
plan could work with a combination of wind and solar power.                                                                     
7:31:08 PM                                                                                                                    
MR. EGAN said  his company deals with small wind  power systems -                                                               
wind, solar, batteries, and inverters.   Batteries work well, and                                                               
they are  a technology  that have  been around  for a  long time.                                                               
They are approximately  97 percent recyclable.   He discussed the                                                               
process of recycling.  He noted  that Ms. Walker had talked about                                                               
"real cost."  He said as of  2005, there were 3,600 people in the                                                               
nuclear  regulatory   commission  and  18,000  people   with  the                                                               
Environmental Protection  Agency (EPA).   He questioned  how many                                                               
of  those  people are  working  stilts,  solar panels,  and  wind                                                               
turbines.  He said there is a lot of cost involved.                                                                             
7:33:50 PM                                                                                                                    
DEREK  PRICE  noted  that  he   has  e-mailed  testimony  to  the                                                               
committee.    He thanked  Mr.  Seifert  for  his testimony.    He                                                               
indicated his  concern has to do  with the history and  future of                                                               
energy in Alaska.   He said the only information  he has from the                                                               
legislature is  HB 219, and he  said it is not  clear whether the                                                               
goal  of  the   legislature  is  to  reduce  costs   or  to  "add                                                               
renewables."  He asked how much  money is in the renewable energy                                                               
grant fund,  and whether any  money would be  added to it  in the                                                               
future, because he said "that has a  big effect on what it is you                                                               
do."   The cost  of projects  always ends  up being  much greater                                                               
than  anticipated, he  remarked.   He  suggested  that the  state                                                               
could  consider doing  smaller  projects.   There  are already  a                                                               
number of  agencies in the  state "who  do this exact  same thing                                                               
with  regard   to  grant  money."     He  mentioned   the  Denali                                                               
Commission,  USDA,  and  GDA,  and  said he  is  sure  the  other                                                               
electrical utilities also have similar programs.                                                                                
MR.  PRICE  said he  works  for  a  large for-profit  company  in                                                               
Fairbanks, which  would like to  invest in renewable  energy, but                                                               
must maintain profits  and, thus, needs the  stability in knowing                                                               
what  the return  is going  to be.   He  said he  has seen  solar                                                               
studies.   Wind  information  is harder  to get,  he  noted.   He                                                               
     The  [Sustainable Natural  Alternative Power  ("SNAP")]                                                                    
     program is very  interesting.  We would  very much like                                                                    
     to participate in that, but  again, you don't know what                                                                    
     the return  is going  to be.   And  I think  for almost                                                                    
     zero administrative  costs at a state  level, you could                                                                    
     help  fund a  program  like that  where  you would  get                                                                    
     immediate results  - and I  mean immediate.   You don't                                                                    
     need a five-year  study to figure out that  you can put                                                                    
     solar on  100,000 square foot  of buildings -  that you                                                                    
     can put  up a  turbine on your  own property  in Healy.                                                                    
     You just don't need those; you  can start now.  So, all                                                                    
     you need  to do is  have the information  necessary and                                                                    
     the  financial information  to make  that determination                                                                    
     or not.                                                                                                                    
7:38:26 PM                                                                                                                    
MERRICK PIERCE told the committee that  he serves on the board of                                                               
the Alaska Gasline Port Authority  (AGPA), but is speaking on his                                                               
own  behalf.     He  pointed  out  that   Alaskans,  on  multiple                                                               
occasions, have expressed  their point of view of  what the state                                                               
should do  with the gasline.   In 1999, the Fairbanks  North Star                                                               
Borough  voted overwhelmingly  to build  the all-Alaska  gasline,                                                               
and the borough  created AGPA.  The City of  Valdez and the North                                                               
Slope Borough  did the same.   A couple years later  there was an                                                               
election in  which the Alaska  Natural Gas  Development Authority                                                               
(ANGDA)  was created  by overwhelming  support -  to build  a gas                                                               
pipeline to the City of Valdez.                                                                                                 
MR. PIERCE stated  his belief that the all-Alaska  gasline is the                                                               
"only viable large-diameter  that's going to be built."   He said                                                               
there  are insurmountable  problems  with the  line into  Canada.                                                               
First,  he said,  there are  "gargantuan amounts"  of shale  gas.                                                               
Second, there are  LNG "re-gas" terminals in "the  Gulf" that are                                                               
at half capacity,  so all ExxonMobil Corporation has to  do if it                                                               
wants to bring more gas in the  Lower 48 markets is to order more                                                               
gas  "out  of  gutter."    There  are  technological  innovations                                                               
related to  clean energy projects,  such as solar power,  as well                                                               
as developing  technology with directional drilling,  which makes                                                               
shale gas much more affordable to  develop, he stated.  There are                                                               
also high transportation costs  associated with a 2,000-mile-long                                                               
journey,  which would  burn energy.   Furthermore,  there is  the                                                               
increased prospect  that there will  be carbon taxes in  the near                                                               
future.  The all-Alaska gasline  has multiple benefits:  a faster                                                               
build time; the lowest cost  clean burning energy for Alaska, the                                                               
West Coast,  Hawaii, and America's important  trading allies; the                                                               
improvement of the United States'  balance of trade, which is not                                                               
balanced; gas  to U.S. allies;  the monetization of  trillions of                                                               
dollars  of  gas  that  is  in  the  North  Slope  Basin;  and  a                                                               
critically  needed revenue  source  for Alaska  government.   Mr.                                                               
Pierce  stated that  as important  as  it is  to have  affordable                                                               
energy for Alaska, the state  needs to have a diversified revenue                                                               
stream.   He named some  possible affects of not  getting started                                                               
with a viable gasline.                                                                                                          
7:41:54 PM                                                                                                                    
MR. PIERCE offered  four ideas of actions for  the legislature to                                                               
take:   First would be to  fund the port authority  to conduct an                                                               
open season.   Second would be  to fund a gas  infrastructure for                                                               
the Fairbanks North Star Borough.   Third would be to work harder                                                               
for  compressed  natural gas  (CNG)  vehicle  use -  particularly                                                               
"sleet vehicle" use.  He said  CNG is a good energy source, which                                                               
is "about  a 50 cent per  gallon equivalent to gasoline,"  and is                                                               
cleaner  burning.    Furthermore,  using  CNG  means  being  less                                                               
dependent  on  OPEC  oil,  which  Mr. Pierce  said  is  good  for                                                               
national security.   Fourth would  be to fund the  Susitna hydro-                                                               
electric  project.   He added,  "And  as we  build Susitna,  that                                                               
gives  us  the lowest  cost  energy,  it's the  cleanest  burning                                                               
energy, and  then that  allows Alaska to  export for  dollars our                                                               
finite natural resources, like natural gas."                                                                                    
[HB 218 and HB 219 were held over.]                                                                                             

Document Name Date/Time Subjects
HB0218A.PDF HENE 6/17/2009 5:00:00 PM
HENE 8/26/2009 5:00:00 PM
HENE 9/16/2009 1:30:00 PM
HB 218
Fairbanks Agenda.doc HENE 6/17/2009 5:00:00 PM
PROPANE June 2009.pdf HENE 6/17/2009 5:00:00 PM
HB0219A.PDF HENE 6/17/2009 5:00:00 PM
HENE 8/24/2009 1:00:00 PM
HENE 8/26/2009 5:00:00 PM
HENE 9/16/2009 1:30:00 PM
HB 219