Legislature(2015 - 2016)BUTROVICH 205
03/20/2015 03:30 PM Senate RESOURCES
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SB 57-CLEAN AIR ACT PLAN 4:30:04 PM CHAIR GIESSEL brought SB 57 back before the committee and invited Mr. Rokeberg to continue commenting on the bill. [CSSB 57(NRG), 29-LS0523\G was before the committee.] 4:30:34 PM NORMAN ROKEBERG, Commissioner, Regulatory Commission of Alaska (RCA), Anchorage, Alaska, said his opinions on SB 57 are not official RCA opinions. He clarified his December 1 comments on SB 57. He said it would require the drafting of a state implementation plan that may prohibit the submission of a set from the state. Under the bill the state would have to develop and proceed with a plan but then it would run into the bill's requirements which he found troubling. For example, section (a)(1), on page 1, line 13, indicates that this does not result in increased electrical utility rates and it would have a disproportionate effect on households of low to moderate incomes. MR. ROKERBERG said page 7 of his comments referring to the impact of EPA's mandate because of the goals they set and their impact of shutting down Healy's plants 1 and 2 for the 45,000 Golden Valley Electric Association (GVEA) ratepayers in Fairbanks. The estimate of increased cost would be $.05-.07 per kilowatt hour, bringing rates up to $.29-.31 kilowatt hour or a 26 percent increase. The analysis is extremely difficult, because the RCA does not have the capability to be to determine the distinction between low and moderate income from a broad retail rate. The impacts would be $450 per year across all retail ratepayers. One could assume that increases will impact low and moderate ratepayers even with a plan that would decrease greenhouse gases. 4:34:27 PM Texas, for instance, believes an in-state plan will raise costs 10 percent, but if the EPA does it, it will be 44 percent. Similarly with the state of Ohio at 36 percent. Additionally, subsection 2 regarding electrical reliability, resource adequacy and transmission, is very vague and difficult to understand. Closing the coal plants in Fairbanks would exacerbate the problems they have now in terms of reliability. Additionally, number three, a big part of the EPA plan is to introduce a greater amount of renewables, but particularly energy efficiencies and this will clearly impair existing electrical generation capacity. Number four, obviously if there is any reduction in Healy 1, GVEA has indicated they are scheduling its potential retirement sometime around 2023. He was not sure how that would impact the meaning of the bill, but it would cost in terms of employment. These hurdles may prohibit or restrict the ability of the state to do a plan and it is hanging over the heads of the folks doing it and may have an impact on the quality of their work. MR. ROKEBERG said the RCA could look into the areas specific to electric power, but doing all the rest of the things creates an extra burden on them. The goal is to just get an exemption from the EPA and to write a plan that Alaska can live with. Further, he said Alaska has a long history of fighting against federal intrusion on policy issues. He also differed on the notion that not filing a plan would be beneficial to the mining industry. He didn't think it would be helpful at all. Alaska needs to write a plan it can live with. SENATOR STEDMAN said he heard Mr. Rokeberg say that Rule 111(d) would not impact the North Slope oil basin, but he hears differently from the companies up there. MR. ROKEBERG responded that at this point the 111(d) provision only impacts five utilities on the Railbelt; it has no impact on the North Slope. That is one of the problems. In every other state, these designs are statewide, but in Alaska enforcement is restricted to the Railbelt area. Efficiencies made in renewable and energy efficiencies there are not even being counted by the EPA. In addition, the Railbelt has an entire new generation fleet and the EPA rule applied in 2012. So, a plan needs to be written that would account for those new plants. SENATOR STEDMAN said that energy is Alaska's biggest industry and his understanding from the industry is that it will affect them. 4:40:51 PM CHAIR GIESSEL said the EPA is already in Alaska and she had received letters of support for SB 57 from Alaska's Railbelt Cooperative Transmission and Electric Company (ARCTEC), the Alaska Chamber, the Teamsters, the Fairbanks Chamber, Consumer Energy Alliance, the Miners Association, and more diverse groups and she wasn't sure what Mr. Rokeberg was advocating for. The bill advocates for a waiver at the very onset and to have the rest of the data available to the legislature before any kind of plan would be submitted seems only transparent. MR. ROKEBERG said she had done an excellent job of getting support for the bill, but he believed that the bill is based on the premise that submitting a plan is not good and that the requirements do not ultimately serve Alaska's purposes in seeking an exemption. It adds work and analysis cannot even be performed for many sections of the bill by the departments, because they don't have economists on staff, which gave rise to the fiscal note. In addition, it also gives authority to the DEC whereas the original comments were developed by a working group that cuts across numerous agencies that have expertise in doing that. Putting the authority in DEC could create the need for further fiscal notes. CHAIR GIESSEL responded that, in fact, DEC has an economist on staff and the new zero fiscal note comes about because of HB 140 that passed last year requiring departments to produce a good faith estimate on the cost of implementing regulations. Federal actions that require compliance were explicitly written into the statute through HB 140. That funding, amounting to $278,000 in FY16 provides for the procurement of an economist III position as well as contractual assistance for the development of cost estimates including data collection, analysis, and report of findings in the amount required for the contract. SENATOR GIESSEL said it is spelled out on page 2 of the fiscal note. SB 57 requires the DEC to perform this analysis; they have the money and it is unencumbered for FY16. The original fiscal note estimated about $100,000 over the two fiscal years for the contractual assistance and that would be included in what was passed last year. So, in fact, this bill has a zero fiscal note. 4:45:37 PM SENATOR STEDMAN said he is generally hesitant when committees start zeroing out fiscal notes to avoid the Finance Committee. CHAIR GIESSEL said this fiscal note came from the Division of Legislative Finance. SENATOR COSTELLO asked if the Department of Law (Department of Law) could say whether the EPA has the authority under the 111(d) rule to regulate in this manner. In a way they are recognizing that it has this authority by responding to it in a manner this legislation does, which is to allow Alaska to seek an exemption. How does that work? 4:48:31 PM EMMA POKON, Assistant Attorney General, Department of Law (DOL), Anchorage, Alaska, responded that the state is currently participating in litigation in the Washington, D.C., Circuit challenging Rule 111(d) and EPA's authority to issue the proposed regulation. This legislation would be outside of the legal question she is prepared to answer. EPA is continuing to say that they believe they have the authority for this and the rule will be issued this summer; the court will decide in the end whether or not EPA has the authority. SENATOR COSTELLO said she sits on the Department of Law's budget subcommittee and earlier this week she asked the Attorney General Craig Richards what the state's plan is on pushing back against Rule 111(d). His memo in response says that the Clean Power Plan rule is an example of an area where the state felt it necessary to push back against the EPA. It went on to say that the state is essentially submitting comments dealing with the EPA's interpretation and how they believe it is wrong. She said the state attached a legal analysis explaining why it believes the EPA's proposed interpretation is improper. It mentions the state is intervening in a lawsuit. Her concern is that the Department of Law (DOL) is already engaged in this issue, but maybe it should wait until the legislature weighs in. 4:52:24 PM MS. POKON said the litigation was started a while ago in the last administration and she couldn't say which branch of government should be first to make a statement about the EPA's authority. CHAIR GIESSEL commented that this bill is the second line of defense if the lawsuit should fail. SENATOR WIELECHOWSKI asked if the state passes this and then tries to put a plan in place, what happens if the feds reject it. MR. POKON replied that the feds would implement a plan. SENATOR WIELECHOWSKI asked the likelihood that the state would receive an exemption. MS. POKON replied that Alaska has been given a lot of exemptions. 4:54:44 PM SENATOR WIELECHOWSKI asked if anyone else had asked for an exemption. MS. POKON replied that she had not seen specific request for an exemption or waiver from the rule, but other states have objected to EPA's authority or commented in a negative fashion. SENATOR WIELECHOWSKI asked if it is possible that Alaska could fail to produce an SIP in accordance with our own stringent criteria and in turn cause ourselves to be subjected to a federal implementation plan. MS. POKON answered that her reading of SB 57 is that it would require DEC to make affirmative determinations of the effect of the state plan and it would not be submitting a state plan for approval to the EPA until the determinations could be made. If DEC could not make those determination then they wouldn't be submitting a state plan, which under the terms of the Clean Air Act would result in a federal implementation plan. SENATOR WIELECHOWSKI said in other words, the legislature could be making it so hard for DEC to come with a plan that meets federal requirements such that the federal government rejects it and then implements a federal plan. MS. POKON replied that is a possible outcome. SENATOR COGHILL said he liked what SB 57 was trying to do, but maybe this should go into effect if the feds start giving us a hard time on the exemption rather than doing it before the exemption request is settled. Has the state already applied for an exemption? 4:58:09 PM SENATOR STOLTZE asked whether the 111(d) provisions are implemented or in the development process and that might change the relevancy of their approach. 4:58:41 PM ALICE EDWARDS, Deputy Commissioner, Department of Environmental Conservation (DEC), Anchorage, Alaska, responded that the EPA has not finalized the rule making for 111(d); the state submitted comments on December 1, which was at the end of the comment period. The EPA has indicated that they will finalize ruling making this summer. In the multi-agency (RCA, Alaska Energy Authority (AEA), DEC and the Governor's Office) comments to EPA, the state requested an exemption for this rule making along with other associated comments. They don't know for certain whether or not an exemption will be granted. SENATOR COGHILL questioned the constitutionality of the proposed rule and thought we need to focus there as long as possible, and asked if SB 57 would back up their comments or weaken that position. MS. EDWARDS answered that state comments take three approaches; they start with the legal aspects, which Department of Law spoke about; it asks for the exemption and then depending on where EPA landed they also put in information that might address some of the ruling making issues if they moved forward and either of the options came through. Then the real question becomes: in the end it is not known how the final rule will look or how the state's comments or litigation is going to be resolved. If the state fails to get an exemption, the question becomes how the state will develop a state plan and if the bill will allow development of it and meeting the requirements. 5:02:40 PM SENATOR STEDMAN clarified that the Senate Resources Committee prepared the fiscal note is. CHAIR GIESSEL said it may say that, but the consultant to it was Legislative Finance. SENATOR COSTELLO asked if the department could comment on her concern, which is that the state cannot submit a plan that shows there is no retail electric service rate increase. Every state realizes that the consumer is the one who will pay and saying that the state has to submit a plan that has no effect on increased retail service rates could be tying our hands. Finding no further questions, Chair Giessel held SB 57 in committee.