Legislature(2009 - 2010)BELTZ 211

02/27/2009 11:00 AM Senate ENERGY

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Moved CSSB 31(ENE) Out of Committee
Moved CSHCR 2(RES) am Out of Committee
Moved HCR 3 am Out of Committee
Moved HCR 4 am Out of Committee
Moved HCR 5 am Out of Committee
            SB  31-GEOTHERMAL ELEC. PROD. TAX CREDIT                                                                        
CHAIR MCGUIRE announced the consideration of SB 31.                                                                             
SENATOR WIELECHOWSKI moved to adopt the proposed committee                                                                      
substitute (CS) to SB 31, labeled 26-LS0217\W, as a working                                                                     
SENATOR STEDMAN objected for the purpose of discussion.                                                                         
TREVOR FULTON,  Staff to Senator  McGuire, said  the CS to  SB 31                                                               
changes  the  amount  of  the  tax credit  from  0.35  cents  per                                                               
kilowatt  hour to  2.1 cents.  The bill  is based  on Utah's  tax                                                               
credit, and  he spoke with someone  from there who told  him that                                                               
0.35  cents was  insignificant. The  industry told  him the  same                                                               
thing. The credit  now matches the federal credit.  The CS limits                                                               
eligibility only  to projects placed  into service  after January                                                               
1, 2010. Steve  Haagenson of AEA (Alaska  Energy Authority) noted                                                               
that  if  the credit  were  applied  to current  hydro  projects,                                                               
Bradley Lake alone  would cost the state $133  million. The third                                                               
change was to cap  the amount of the tax credit  to 20 percent of                                                               
capital investment on a given project.  This was in response to a                                                               
concern  by  the tax  division.  The  language is  borrowed  from                                                               
existing oil  and gas tax  credits. In order  to get the  bill to                                                               
function as  envisioned, there needs  to be a  certificate issued                                                               
by the  department to  an eligible  party that  could be  sold or                                                               
transferred in the open market.                                                                                                 
11:15:18 AM                                                                                                                   
MR. FULTON said  the fifth change was in response  to another tax                                                               
division concern.  There was a  situation where a  power producer                                                               
could double dip with the federal  tax credit "that the state co-                                                               
ops, to the tune of 18  percent of that production tax credit. So                                                               
if we  had our tax  credit created by SB  31 in statute,  and the                                                               
existing  federal  18  percent  of  the  federal  tax  credit  in                                                               
statute, then  there's the  possibility for  an entity  to double                                                               
dip on that. We made changes  to the bill and to existing statute                                                               
that addresses that  federal PTC." The CS has a  sunset clause of                                                               
January  1, 2025,  which coincides  with the  governor's goal  of                                                               
using 50 percent renewable energy.                                                                                              
11:16:29 AM                                                                                                                   
SENATOR  STEDMAN  asked for  clarification  on  the Dorothy  Lake                                                               
issue. He asked the status of the hydro energy sources.                                                                         
CHAIR MCGUIRE said the tax  division was concerned about the lost                                                               
revenue to  the state. Hydro is  included in the bill  because it                                                               
is the  main source of  alternative energy in Southeast,  but any                                                               
project in operation prior to 2010 will not be included.                                                                        
SENATOR  STEDMAN  suggested  clearing   up  expansions  to  these                                                               
projects. Dorothy  Lake may have  a second phase to  increase its                                                               
production  capabilities. There  are other  existing hydro  sites                                                               
that may  want to add  additional turbines, raise dam  levels, or                                                               
make other enhancements.  It appears that this  would exclude all                                                               
hydro projects in service, which would exclude expansions.                                                                      
11:18:46 AM                                                                                                                   
CHAIR MCGUIRE  said she shares  those concerns. There  are issues                                                               
of fairness. "Why should we  be more favorable to individuals who                                                               
put in to  place alternative energy today  and seemingly punitive                                                               
to those  who had the  foresight to put  them in years  ago?" The                                                               
tax division was concerned about Bradley lake.                                                                                  
SENATOR WIELECHOWSKI asked about a fiscal note.                                                                                 
MR. FULTON said the fiscal note is indeterminate.                                                                               
SENATOR  WIELECHOWSKI said  this issue  can be  worked on  in the                                                               
Senate Resources Committee.                                                                                                     
11:20:08 AM                                                                                                                   
CHAIR MCGUIRE said  the effects of the incentive  won't be known.                                                               
She  hopes that  the tax  credit incentivizes  many projects.  It                                                               
will reduce the state share, but  it is difficult to put a dollar                                                               
amount on it.  Starting the credit in 2010 minimizes  the loss of                                                               
state revenues for  projects that were easy to  quantify. It does                                                               
create  an unlevel  playing  field. The  division  can give  more                                                               
testimony in the Senate Resources  committee, but the fiscal note                                                               
will likely remain indeterminate.                                                                                               
SENATOR  STEDMAN  removed  his  objection  to  adopting  the  CS.                                                               
Therefore, Version W was before the committee.                                                                                  
11:21:34 AM                                                                                                                   
SENATOR STEDMAN moved Amendment 1  to strike the language on page                                                               
1, line 14,  and on page 2,  line 1, "to be further  worked on in                                                               
the next committee of referral."                                                                                                
SENATOR  WIELECHOWSKI said  this  can be  discussed  in the  next                                                               
committee, but he is concerned  that by taking that language out,                                                               
"then we're talking  probably hundreds of millions  of dollars in                                                               
tax  credits."  He said  he  won't  object  because the  bill  is                                                               
referred  to  other  committees.  Senator  Stedman  raises  valid                                                               
concerns about  expansions. Expansions should be  encouraged, but                                                               
it  will cost  the  state  hundreds of  millions  of dollars  for                                                               
things that were done 20 or 30 years ago.                                                                                       
SENATOR STEDMAN  said he agrees  about not looking back  in time,                                                               
but it  will give  the legislature the  ability to  target future                                                               
expansions and upgrades of existing systems.                                                                                    
11:22:52 AM                                                                                                                   
CHAIR MCGUIRE heard no objection, so Amendment 1 was adopted.                                                                   
CLAY KOPLIN,  Cordova, said  the new credit  amount is  much more                                                               
aligned  with industry  standards  and offers  a real  incentive.                                                               
There are several  renewable energy projects in  the pipeline for                                                               
2009,  so he  suggested that  January  2010 should  be the  first                                                               
eligible  tax  credit  date.  That  would  benefit  some  of  the                                                               
projects that are constructed before the end of the year.                                                                       
CHAIR MCGUIRE asked what projects are in the works.                                                                             
11:24:52 AM                                                                                                                   
MR. KOPLIN said he will put a list together.                                                                                    
CHAIR MCGUIRE  said she  hopes this  bill will  truly incentivize                                                               
alternative energy in Alaska.                                                                                                   
SENATOR WIELECHOWSKI moved  to report the CS to SB  31 as amended                                                               
from  committee  with  individual  recommendations  and  attached                                                               
fiscal  note(s). There  being no  objection, CSSB  31(ENE) passed                                                               
out of committee.                                                                                                               

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