Legislature(2009 - 2010)BUTROVICH 205

03/13/2009 11:00 AM ENERGY

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Moved CSSB 54(ENE) Out of Committee
<Bill Hearing Postponed>
Moved SB 132 Out of Committee
Moved SB 71 Out of Committee
                  SB 132-SOUTHEAST ENERGY FUND                                                                              
11:06:30 AM                                                                                                                   
CHAIR MCGUIRE announced the consideration of SB 132.                                                                            
SENATOR STEDMAN, sponsor of SB  132, said this issue is partially                                                               
left over  from back when  the state created the  Railbelt Energy                                                               
Fund. During  that era there was  a lot of need  to expand energy                                                               
systems  throughout the  state, and  the state  is in  that arena                                                               
again a couple of decades later.  So, he went back in and "dusted                                                               
off  some old  language" and  found what  the state  has to  help                                                               
communities move forward  with alternative energies, particularly                                                               
Southeast  hydro. A  lot  of focus  has been  on  getting gas  to                                                               
Alaskans,  but  Southeast is  a  little  detached from  the  main                                                               
corridor of the gas line; so this would be our bullet line.                                                                     
CHAIR  MCGUIRE agreed  that the  legislature has  spent a  lot of                                                               
time talking  about a gasline  for rural and western  Alaska, but                                                               
not as much on Southeast.                                                                                                       
DARWIN PETERSON, staff  to Senator Stedman, said  SB 132 provides                                                               
a  funding   mechanism  for  construction  of   power  generation                                                               
projects  in  Southeast  and  for   completion  of  the  regional                                                               
electric grid.  The state's goal  should be to  provide low-cost,                                                               
renewable  energy  to  all  Alaskans,  and  natural  gas  doesn't                                                               
satisfy the energy needs of every region of the state.                                                                          
The  communities in  Southeast  have a  long  history of  working                                                               
towards   the   long-term   goal  of   energy   independence   by                                                               
collaborating  on  power  generation and  transmission.  However,                                                               
most communities in  the region still are not on  hydro power and                                                               
the majority still burn oil  to generate electricity and heat. In                                                               
addition, many  of the hydroelectric  assets in Southeast  are at                                                               
or near  capacity which severely limits  regional economic growth                                                               
opportunities,  and  while  hydroelectric projects  provide  low-                                                               
cost,  renewable power  over the  long-term,  they are  extremely                                                               
capital intensive  - as high  as $1.5 billion for  completing the                                                               
electric  grid.  The  state  has  a  critical  role  to  play  in                                                               
capitalizing  these  projects  on  the  front  end,  and  SB  132                                                               
broadens the authority  of the existing Southeast  Energy Fund to                                                               
provide  that  mechanism.  The  list  of  critical  hydroelectric                                                               
projects that  may be  funded through  the Southeast  Energy Fund                                                               
     · Ketchikan-Whitman Lake Hydroelectric Project                                                                             
     · Petersburg-Ruth Lake Hydroelectric Project                                                                               
     · Sitka-Takatz Lake Hydroelectric Project                                                                                  
     · Metlakatla Intertie to Ketchikan Sitka-Blue Lake                                                                         
        Hydroelectric Project                                                                                                   
     · Prince of Wales Island Intertie Reynolds Creek                                                                           
        Hydroelectric Project                                                                                                   
     · Falls Creek Hydroelectric Project                                                                                        
     · Kake-Petersburg Intertie Metlakatla-Triangle Lake                                                                        
        Hydroelectric Project                                                                                                   
11:10:07 AM                                                                                                                   
SENATOR STEDMAN  said a  map in  their packets  indicates current                                                               
and  future   electrical  intertie   projects.  The   black  line                                                               
connecting some blue  dots from Ketchikan to  Wrangell is totally                                                               
constructed  or it  will be  energized this  summer. The  portion                                                               
between Tyee Lake and Swan  Lake, which basically hooks Ketchikan                                                               
to  Petersburg and  Wrangell should  be  energized sometime  this                                                               
summer. The subcomponent of the  Southeast intertie is to balance                                                               
the draw on those two dams.                                                                                                     
The grey line  going to Kake is  in the proposed stage  and is an                                                               
access road and power line. Kake  runs totally on diesel fuel and                                                               
has a  fishing fleet, a  cold storage and fish  processing within                                                               
the community  as well  as home  heating and  commercial business                                                               
needs. It has a population of  about 600 people. That is the next                                                               
community they  are trying  to hook up  along with  Metlakatla on                                                               
the southern  end. Metlakatla  has excess power  and they  are in                                                               
the process  of hooking  it up  to Ketchikan  with a  little less                                                               
than a mile of submarine  cable. These connections are being done                                                               
in an  incremental methodical  order so  when the  highly capital                                                               
intensive hydros  gets built, all the  juice can be drawn  out of                                                               
them almost immediately to offset the high capital cost.                                                                        
11:13:46 AM                                                                                                                   
SENATOR STEDMAN said Ruth Lake,  a little north of Petersburg, is                                                               
under consideration for  a new hydro sight; Takatz, a  28 mgW dam                                                               
is  north and  east of  Baranof  Island. Thayer  Lake would  feed                                                               
Angoon, but getting that on  line will be a multi-decade process.                                                               
Juneau has Lake  Dorothy and Snettisham, but has  no power source                                                               
coming  out of  the north  end. So  the intertie  will have  some                                                               
redundancy, particularly for Juneau,  either through Greens Creek                                                               
out  of Takatz  or from  Haines/Skagway  down. So,  if the  power                                                               
lines are lost like what has  happened in the last two winters in                                                               
Juneau,  it  can  still  run  on  hydro.  Multiple  meetings  are                                                               
happening within  the region to  get all the  communities working                                                               
together, not  much unlike what  they are  trying to do  with the                                                               
Railbelt energy utilities; so they are moving forward.                                                                          
SENATOR  STEDMAN   reminded  them   of  the   misconception  that                                                               
Southeast  is  all   on  hydro  and  therefore   they  have  very                                                               
inexpensive  energy  sources,  but  most  of  the  homes  in  the                                                               
communities on  hydro, Juneau and  Sitka are examples,  heat with                                                               
diesel  fuel and  the  hydro is  at or  near  capacity. Sitka  is                                                               
looking at extending  the height of Blue Lake  Dam and increasing                                                               
its generation  capacity to hold  the community over  till Takatz                                                               
gets built. Lake  Dorothy is another one that is  going to be put                                                               
in, in phases.  The projects are very  expensive capital-wise and                                                               
cheap  to operate.  But they  want to  make sure  in solving  the                                                               
energy  needs of  Anchorage, Fairbanks,  and the  Kenai Peninsula                                                               
that they  also look  south and  west to  the Alaskans  that live                                                               
along the coast and come up with a statewide energy solution.                                                                   
SENATOR STEDMAN  said Alaska may  be the wealthiest state  in the                                                               
nation, but he wants to make sure  the state can take care of its                                                               
energy  needs  and can  develop  and  expand its  employment  and                                                               
educational opportunities.  The need to expand  hydro capacity in                                                               
Southeast is directly tied to  the area's employment and economic                                                               
stagnation. "If  we don't find  some way to  create competitively                                                               
priced energy,  then we're going  to continue to  have stagnation                                                               
problems in Southeast." This bill  puts the Southeast Energy Fund                                                               
in front  of the legislature  to consider as  a tool as  it moves                                                               
forward to solve the energy needs of all Alaskans.                                                                              
SENATORS KOOKESH and HOFFMAN joined the committee a while ago.                                                                  
11:18:08 AM                                                                                                                   
SENATOR KOOKESH said the sponsor  statement mentions $1.5 billion                                                               
for the fund,  and he wanted people to understand  that this just                                                               
establishes the fund, but the money would go into it over time.                                                                 
SENATOR STEDMAN  said that  is correct. A  FERC process  is under                                                               
way  at Ruth  Lake, and  Takatz  probably wouldn't  be ready  for                                                               
construction  in six  or seven  years at  the earliest.  There is                                                               
also interest  in coming up with  a more formal regional  plan so                                                               
everyone  including  the  state  agrees on  the  order  in  which                                                               
projects will be constructed. So  they can take steps precisely -                                                               
because the projects will most likely  it will be done with heavy                                                               
debt loads and some equity help from the state and communities.                                                                 
11:20:05 AM                                                                                                                   
CHAIR MCGUIRE  asked about  what kind  of jobs  will come  out of                                                               
these projects.                                                                                                                 
SENATOR  STEDMAN  said Mahoney  Lake  in  Ketchikan is  9.6  mgW,                                                               
Takatz is  possibly 28 mgW or  larger and may cost  $250 million.                                                               
If they  could get to the  point of having an  orderly and fairly                                                               
quick build out over a period  of 15 years, tunnel crews could be                                                               
kept busy,  but that is  probably optimistic. Most of  the tunnel                                                               
crews  and special  crews  are  brought in.  A  lot of  operating                                                               
engineers, laborers,  and truck  drivers will  be needed  - roads                                                               
will  have  to   be  built.  It  would  help  employ   a  lot  of                                                               
construction forces and give  communities' members an opportunity                                                               
to have some  high-paying Davis Bacon jobs  through that process.                                                               
The whole  town of  Sitka boomed  for a couple  of years  when it                                                               
built Green Lake in the  mid-80s. Juneau still feels the economic                                                               
stimulus from the construction of Lake Dorothy.                                                                                 
11:21:57 AM                                                                                                                   
CHAIR  MCGUIRE said  there may  be some  opportunities for  hydro                                                               
specialties in  education at the University  of Alaska Southeast,                                                               
which is  a unique  place for hydro  - and folks  may want  to be                                                               
MR. PETERSON  said the  Southeast Energy  Fund already  exists in                                                               
statute,  but  is  just being  amended.  The  original  Southeast                                                               
Energy Fund was project-specific to  deal with Swan Lake and Tyee                                                               
Lake hydro  projects. SB  132 just amends  that existing  fund to                                                               
look at a broader scope of energy projects, not just hydro.                                                                     
CHAIR MCGUIRE asked Senator Stedman  if any other energy projects                                                               
are out there.                                                                                                                  
SENATOR STEDMAN  said there  is interest in  tidal. Not  shown on                                                               
the  map  is  a  connection  up the  Bradfield  Valley  into  the                                                               
Canadian grid,  which would allow  them to import or  sell power.                                                               
That is  part of the  Southeast long range plan.  Some geothermal                                                               
possibilities are located near Ketchikan,  Baranof Island and the                                                               
north end of Hoonah Sound.                                                                                                      
11:24:29 AM                                                                                                                   
ROBERT VENABLES, Energy  Coordinator, Southeast Conference (SEC),                                                               
supported  SB  132. He  said  the  SEC  is a  private  membership                                                               
organization that  is one  of the  state's many  ARDORs (regional                                                               
development organizations)  it is  also the  federally recognized                                                               
economic  development   district  representative.   The  Railbelt                                                               
Energy  Fund,  mentioned earlier,  was  established  in 1986  and                                                               
between 1986  and 2005 a  total of $486 million  was appropriated                                                               
to it; $437  million of that was appropriated  for various energy                                                               
projects in that  region including the Susitna  Bradley Lake, the                                                               
Alaska northern and  southern interties as well as  the Healy Co-                                                               
generation  project.  In  1993   lawmakers  amended  that  fund's                                                               
enabling  legislation  to  include a  broader  authorization  for                                                               
programs  and  projects  and  other  expenditures  to  assist  in                                                               
meeting the Railbelt's  energy needs much like SB  132 will amend                                                               
the Southeast Energy Fund.                                                                                                      
In  1997, the  Southeast Conference  formed an  energy committee,                                                               
originally called  the Intertie  Committee, committed  to working                                                               
on  the development  of the  regional electrical  grid system  in                                                               
Southeast. This is  not a new idea.  Plans go back as  far as the                                                               
1920s. The Alaska  Energy Authority (AEA) put  together what they                                                               
said  would be  a  20-year  plan to  put  together the  Southeast                                                               
electrical  intertie system  in the  1980s. Had  it been  funded,                                                               
communities would already be plugged  into it. But unfortunately,                                                               
when the  price of  oil goes  up, everyone  panics, then  when it                                                               
goes down  again, they  say we  can't afford  it. So  when prices                                                               
spike again we  are unprepared - although he has  heard that this                                                               
time it is different.                                                                                                           
11:27:32 AM                                                                                                                   
MR. VENABLES said progress is being  made and the best example is                                                               
the 57-mile  Swan/Tyee intertie  that connects  those communities                                                               
and allows  the next logical  legs to  Metlakatla and Kake  to be                                                               
interconnected to  that grid system.  In 1997 when  the Southeast                                                               
Conference formed  the committee, it commissioned  Hatch Acres to                                                               
put  together  a study  that  was  called "The  Southeast  Alaska                                                               
Electrical  Intertie  System  Plan,"  and  that  has  been  their                                                               
blueprint for  all of their  efforts to date. As  Senator Stedman                                                               
mentioned, that  plan needs to  be updated with a  new integrated                                                               
resource  plan.  It is  the  report  that  the U.S.  Congress  in                                                               
February 2001  authorized and cited  in public law  (Pub.L.) 106-                                                               
511 and  authorized $384 million  to develop this  intertie along                                                               
with a  20 percent match from  private and state sources.  So, if                                                               
the state  does put money  aside, the authorization and  plan are                                                               
in place. Since the 1997  Acres report and the 2001 Congressional                                                               
authorization,  the SEC  has continued  to work  with its  member                                                               
communities and funding partners  such as USDA Rural Development,                                                               
the  Denali  Commission, and  the  State  Legislature to  further                                                               
develop the regional electrical intertie system.                                                                                
While progress is being made, there  are many energy needs in the                                                               
region that  are costly  to build  without any  funding mechanism                                                               
available. Today the  intertie system needs they  are focusing on                                                               
are  two-fold -  the obvious  need  for the  physical links  that                                                               
connect  the  transmission  lines  community  to  community,  and                                                               
funding for  the HB  152 grants  that AEA  has forwarded  for the                                                               
legislature's approval  that have allowed many  of these projects                                                               
to move forward.                                                                                                                
11:30:07 AM                                                                                                                   
MR. VENABLES said that the  estimated cost for developing such an                                                               
intertie  system is  now approaching  $500 million.  Obviously it                                                               
can't be  done all at  once, but a plan  is needed and  this will                                                               
help fund it in an orderly fashion.                                                                                             
The second system  need is to develop capacity along  the line to                                                               
meet the ever-increasing  growth of electrical use.  The spike in                                                               
oil  prices last  year  brought that  to the  fore.  Also, it  is                                                               
needed  to  quicken  the  pace  towards  conversion  from  diesel                                                               
generated space  heat to electrical,  which is  already consuming                                                               
the excess  capacity in many  of the communities that  are having                                                               
to supplement  their hydro with diesel  or they can see  the date                                                               
that diesel will have to be run on a regular basis.                                                                             
He said  that many projects  in Southeast can meet  these growing                                                               
needs and the  map is just a snapshot. Southeast  Alaska has been                                                               
called the Saudi  Arabia of hydro. The  intertie allows resources                                                               
to  be  developed  that  aren't just  within  a  community.  Some                                                               
communities will be  forced to do biomass or  geothermal and that                                                               
can be fed  into the grid system and can  become economic engines                                                               
and opportunities  for all the  communities. Often  technology is                                                               
not quite  ready like  with tidal  and wind,  but as  they become                                                               
more cost effective, it can all be integrated.                                                                                  
11:32:26 AM                                                                                                                   
MR. VENABLES said the Southeast  communities have worked together                                                               
to forge a vision to develop  its vast renewable resources into a                                                               
regional electrical  intertie system, but a  funding mechanism to                                                               
construct such  a system still  alludes them.  SB 132 can  be the                                                               
needed mechanism.                                                                                                               
CHAIR  MCGUIRE asked  if  the federal  stimulus  package has  any                                                               
monies  that  might be  coming  to  municipalities to  assist  in                                                               
development in this area.                                                                                                       
MR. VENABLES replied  that even if they were  shovel ready, which                                                               
they are  not, the stimulus  package is designed to  ignore hydro                                                               
development.  He  has  heard  of   some  discussions  within  the                                                               
legislature on writing  a resolution urging a  new definition for                                                               
renewable resources because of that.  The other point is that the                                                               
shovel-ready status,  because they have  not been able  to commit                                                               
resources to  design and  get projects ready,  they would  not be                                                               
ready to do very many projects  within the 90-day time frame many                                                               
are talking about.                                                                                                              
11:34:12 AM                                                                                                                   
CHAIR  MCGUIRE  said  the  potential   for  exporting  energy  to                                                               
Canadian  neighbors  and  attracting manufacturing  and  jobs  in                                                               
terms of low cost energy  is another potential opportunity. SB 31                                                               
that Senator Stedman  has been helping her with  has a production                                                               
tax credit for renewable energy,  and hydro has been specifically                                                               
included in  that definition. She  is hoping that will  give some                                                               
moral authority to his conversation.  Oregon has allowed hydro to                                                               
remain  a  part  of  its  definition  of  renewable  energy,  but                                                               
Washington State has chosen not to.                                                                                             
11:35:20 AM                                                                                                                   
GORDON WROBEL, Elfin Cove Nonprofit  Corporation, said Elfin Cove                                                               
is 85  miles due west of  Juneau on Chichagof Island.  It sits on                                                               
top of  one of the most  prolific fisheries in all  of Alaska. He                                                               
supported  SB   132  because  it   provides  support   for  small                                                               
communities  like his  that are  interested in  eliminating their                                                               
dependence on  fossil fuel generation. Currently  they are paying                                                               
about 50 cents per kilowatt;  at that rate virtually all economic                                                               
development that is energy dependent  is not possible for them to                                                               
be competitive.                                                                                                                 
11:36:40 AM                                                                                                                   
ANDREW  THOMAS, Executive  Director, Sitka  Conservation Society,                                                               
supported SB  132 saying Sitka  is very excited  about increasing                                                               
the potential for developing renewable  energy resources there. A                                                               
lot of different  entities in the community have  been looking at                                                               
how to  develop their renewable energy  in Sitka and how  to take                                                               
action  on  climate  change.  In addition  to  all  the  economic                                                               
benefits this bill  will create in terms  of community resiliency                                                               
and sustainability,  and long-term economic development,  it will                                                               
help them get  away from using oil. Sitka has  two hydro electric                                                               
facilities that  were installed in 1950  and in 1980. The  one in                                                               
the  1980s  was  built  in  response  to  the  1970  oil  crisis.                                                               
Currently  their total  energy budget  is 80  percent oil  and 20                                                               
hydroelectric. This  bill will provide  an opportunity  for Sitka                                                               
to  really develop  its renewable  energy resources  and it  is a                                                               
priority  for the  community to  take action  on climate  change.                                                               
This bill will help them continue to do that.                                                                                   
11:38:24 AM                                                                                                                   
SENATOR  STEDMAN  moved to  report  SB  132 from  committee  with                                                               
individual  recommendations  and  attached zero  fiscal  note(s).                                                               
There being no objection, the motion carried.                                                                                   

Document Name Date/Time Subjects
SB 54 - CS (Version S) Energy.pdf SENE 3/13/2009 11:00:00 AM
SB 54
SB 132 - Bill Packet.pdf SENE 3/13/2009 11:00:00 AM
SB 132
SB 71 - Bill Packet.pdf SENE 3/13/2009 11:00:00 AM
SB 71