Legislature(2009 - 2010)BUTROVICH 205
03/08/2010 03:30 PM Senate RESOURCES
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* first hearing in first committee of referral
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SB 220-ENERGY EFFICIENCY/ ALTERNATIVE ENERGY 3:40:22 PM CO-CHAIR MCGUIRE announced SB 220 to be up for consideration [CSSB 220(RES), labeled 26-LS1197\D, Kane was before the committee]. MICHELLE SYDEMAN, staff to Senator Wielechowski, reviewed that the committee first took up SB 220 almost six weeks ago. She said they had taken invited testimony from energy experts, and staff has worked closely with all the agencies; the bill has had many hearings. As result there were numerous changes. Five of those main changes are that they adopted an amendment by Senator Huggins that allows nuclear power in Alaska and they added a section suggested by Senator Hoffman that expands the state's heating assistance program for low income families when oil prices are high and the state has a surplus. They also incorporated language from Senator Stedman's SB 132 which expands the purposes of Southeast Energy Fund and adopted an amendment offered by Senator Dyson requiring the Department of Transportation and Public Facilities (DOTPF) to examine the feasibility of powering vehicles in Alaska using compressed natural gas. Finally, they added new language creating a new loan fund for businesses seeking to make their facilities more energy efficient or to incorporate renewable energy into their operations. This idea was advanced by Senator Egan's office and further developed by Senator McGuire's office. One additional change was that they incorporated the Governor's SB 223 into this bill and that authorizes AHFC to issue up to $250 million in bonds to help the state, municipalities and school districts to make their buildings more energy efficient. This revolving loan fund should create an on-going revenue stream for the state to help cities and schools cut their energy-related costs. She said that they had a few more amendments and then the bill would be ready for the committee's consideration. 3:43:23 PM MIKE PAWLOWSKI, staff to Senator McGuire, said that several small changes were made to version D after the amendments were made to the previous version; some were clerical and some were based on statements heard at the table. One example is on page 14, line 11, the Emerging Energy Technology Fund (EETF) section. He explained that one of the discussions by Senator Wagoner was that while having a degree in science or engineering is appropriate, professional experience should be considered also. Others were clerical cleanups, for example, saying the department shall work with other state agencies in the alternative energy section. Another change was on page 14, line 23. In the previous version they had the Alaska Energy Authority on the board of the EETF, but since it is administering the fund it didn't make sense for someone from it to also be on the advisory committee. So they were replaced that position with the Alaska Industrial Development and Export Authority (AIDEA). Other changes were small and clerical. 3:45:07 PM CO-CHAIR MCGUIRE moved Amendment 1, labeled 26-LS1197\D.1. 26-LS1197\D.1 Kane AMENDMENT 1 OFFERED IN THE SENATE BY SENATOR MCGUIRE TO: CSSB 220(RES), Draft Version "D" Page 20, line 27: Delete "Alaska" Insert "alternative" Page 28, line 1: Delete "AS 44.42.067(c)" Insert "AS 44.42.067(d)" CO-CHAIR WIELECHOWSKI objected for discussion purposes. CO-CHAIR MCGUIRE said this amendment references alternative energy. MR. PAWLOWSKI added that Amendment 1 took on the Department of Commerce, Community and Economic Development (DCCED) business loan program for energy efficiency and retitled it the Alaska Energy Conservation Loan Fund. Since it was the Alternative Energy Conservation Loan Fund, the reference in Section 27 had to be changed to conform to the change language in an earlier reference. So Amendment 1 is pure cleanup language. The second change in Amendment 1 corrects the repeal of a wrong subsection. It relates to new construction meeting energy efficiency standards, but they wanted to repeal the reporting requirements in AS 44.42.067(c) and (d). This can be found on page 19, line 21. CO-CHAIR WIELECHOWSKI removed his objection to Amendment 1. CO-CHAIR MCGUIRE found no further objections and Amendment 1 was adopted. CO-CHAIR MCGUIRE moved Amendment 2. 26-LS1197\D.2 Kane AMENDMENT 2 OFFERED IN THE SENATE BY SENATOR MCGUIRE TO: CSSB 220(RES), Draft Version "D" Page 13, line 16, following "projects;": Insert "(2) amounts deposited under (f) of this section;" Renumber the following paragraph accordingly. Page 13, line 22: Delete "(f)" Insert "(g)" Page 14, line 1: Delete "(f)" Insert "(g)" Page 14, line 8: Delete "(f)" Insert "(g)" Page 14, following line 9: Insert a new subsection to read: "(f) As a condition of all grants awarded under this section, the authority shall require that the grantee pay to the authority a fair and reasonable return to the fund, as determined by the authority, from the revenue, economic value, or profits derived by the grantee from the grant project. The authority shall deposit the amounts received under this subsection into the fund. To secure payment of sums owed to the authority under a grant agreement, the authority may own and take a security interest in patents, copyrights, and other intellectual property." Reletter the following bill subsections accordingly. Page 14, line 24: Delete "(f)" Insert "(g)" Page 14, lines 27 - 28: Delete "(f)(4), (f)(5), or (f)(6)" Insert "(g)(4), (g)(5), or (g)(6)" Page 14, line 30: Delete "(f)(4), (f)(5), or (f)(6)" Insert "(g)(4), (g)(5), or (g)(6)" CO-CHAIR WIELECHOWSKI objected for discussion purposes. MR. PAWLOWSKI explained that Amendment 2 applies to Section 18 on page 13-15 of the bill, the Emerging Energy Technology Fund. Lines 1-18 of the amendment are conforming languages. The substance of the amendment was from line 18 through page 2, line 3. A question was raised in working with the department about giving these grants to technology development and what happens if this technology becomes wildly successful and a private sector entrepreneur makes a lot of money out of it. This is old language that existed in the Alaska Science and Technology Fund where grants had conditions to provide a return to the state in the event that a grant was successful. This language gives the department some flexibility to put conditions on grants so that they can function in a way that returns money to the fund for future use and to endow future activities. They are still working with the department to a degree on the language, but it is very open and permissive. CO-CHAIR MCGUIRE remarked that in Washington D.C. she was part of a discussion that revealed the Department of Energy (DOE) has an Emerging Technology Fund similar to this. They took a bet on the technology that involves refracking that has led to the shale extractions and as a result returns from that have set up a pretty healthy loan fund for future technologies. CO-CHAIR WIELECHOWSKI removed his objection to Amendment 2. CO-CHAIR MCGUIRE found no further objections and therefore Amendment 2 was adopted. 3:49:57 PM CO-CHAIR MCGUIRE moved to adopt Amendment 3. 26-LS1197\D.3 Kane AMENDMENT 3 OFFERED IN THE SENATE BY SENATOR MCGUIRE TO: CSSB 220(RES), Draft Version "D" Page 16, line 31, following "$30,000,000": Insert "for each project" Page 17, line 16: Insert a new paragraph to read: "(3) "project" means a plant, works, system, or facility, together with related or necessary facilities and appurtenances, including a divided or undivided interest in or a right to the capacity of a power project or project, that is used or is useful for the purpose of renewable energy production;" Renumber the following paragraph accordingly. Page 30, following line 12: Insert a new bill section to read: "* Sec. 51. The uncodified law of the State of Alaska is amended by adding a new section to read: EXHAUSTION OF UNUSED RENEWABLE ENERGY REFUNDABLE TAX CREDITS. Notwithstanding the repeal of AS 43.98.040 by sec. 43 of this Act, an unused portion of a tax credit acquired under AS 43.98.040, enacted by sec. 21 of this Act, may be carried forward until exhausted, except that the unused portion of the tax credit may not be carried forward to tax years beginning after December 31, 2023." Renumber the following bill section accordingly. CO-CHAIR WIELECHOWSKI objected for discussion purposes. MR. PAWLOWSKI explained that Amendment 3 came out of work with the Department of Revenue (DOR). In the previous work on this production tax credit there had been a degree of concern about how big the liability to the state could be. That has been approached in several different directions. It was based on the 15 percent of the electricity sold, but then also 10 percent of the capital expenditures. A way was found to get at Senator Stedman's concern about limiting a Susitna-style hydro project that would cost in the range of $4.5 billion so the investor wouldn't get a $450 million credit. They tried to design a cap that mirrors what the equity would look like in a project of that size and they came up with $30 million. So, the cap exists in the current version at $30 million, but it was per person. Working with staff and the DOR they really felt it should be per project. So on page 1, lines 1-2, of the amendment "for each project" was inserted. The amendment then inserts a definition of project. Another way they approached the issue of the liability to the state is to provide a sunset in 2018 for the production tax credits. But sunsetting it early required transition language since tax credits are accrued over the first five years a project produces energy. Section 51 on page 1, lines 15-23, of the amendment are really about how to transition once the renewable project comes on line just before the sunset period. CO-CHAIR WIELECHOWSKI removed his objection. CO-CHAIR MCGUIRE found no further objection, and, therefore, Amendment 3 was adopted. She asked for further comments. MR. PAWLOWSKI directed members to a summary sheet about fiscal notes for the bill that they received yesterday afternoon. CO-CHAIR MCGUIRE said most of the bill concerns incentives and policy shifts that don't involve a lot of money. So the total fiscal note is $1.281 million. She noted that the committee heard support all across the board from the communities, although one criticism she did hear three times is that it doesn't deal solely with renewable energy, but rather alternative energy and fossil fuel based energy in a variety of places (the Bulk Fuel Loan and power cost equalization (PCE). Nuclear has been added as an alternative fuel source, so people refer to it as renewable, but the "real nuclear guys" refer to it as alternative. 3:54:58 PM SENATOR HUGGINS asked what kind of energy hydro is called in the bill. CO-CHAIR MCGUIRE said renewable. She said they had directed the federal government to this definition in their resolutions as recently as this week when she was in D.C. She thanked the committee "for a labor of love," Michelle and Fish for all their hours of work and dedication, and the administration for heeding the call to assemble a team that has been working with them, as well as the House of Representatives, Chair Edgmon and his staff, so that the bills mirror one another. SENATOR HUGGINS gave credit to her and Senator Wielechowski for the broad travels of a group of people that really did some yeoman work. It's important to realize that what they are doing today had a thumbprint from people in communities across the state. CO-CHAIR WIELECHOWSKI commented that when they talked to Senator Stevens about this bill last year he wondered if they would ever get a product; and here it is. It is a product of one of the more open and transparent processes he has seen in this legislature. He thanked staff, staff in other offices and the administration. He thought the state would get tremendous bang for its buck out of this bill. 3:59:05 PM CO-CHAIR WIELECHOWSKI moved to report CSSB 220(RES) as amended from committee with individual recommendations and attached fiscal note(s). There were no objections and it was so ordered.