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HomeMy WebLinkAboutBlack Bear Lake Motion to Intervene, Protest, Request of Sealaska Corp 1992... BEFORE THE FEDERAL ENERGY REGULATORY COMMISSION BLACK BEAR LAKE HYDROELECTRIC PROJECT MOTION TO INTERVENE, PROTEST, REQUEST FOR STUDIES, AND REQUEST FOR TERMS AND CONDITIONS OF SEALASKA CORPORATION MARCH 1992 SEAL. 'KA CORPORATION CA,URTESY COPY UNITED STATES OF AMERICA BEFORE THE FEDERAL ENERGY REGULATORY COMMISSION APR 0 G 1992 ALASKA POWER & TELEPHONE COMPANY ) ALASKA ENERGY AUTHOR~ Project No. 10440-000 •·. , MOTION TO INTERVENE. PROTEST. REQUEST FOR STUDIES, · , AND REQUEST FOR TERMS AND CONDITIONS OF SEALASKA CORPORATION Pursuant to the Federal Energy Regulatory Co~mission's (''Commission") Notice of Application issued on January 23, 1992, and to Commission Rules of Practice and Procedure 211 and 214, 18 C.F.R. § § 385.211 and 385.214, Sealaska Corporation (''Sea]aska") hereby moves to intervene, notes its protest, requests certain studies, requests an opportunity to confront on a record positions espoused by the applicant, and asks that if a license is to issue in this proceeding, it be accompanied by conditions protective of Sealaska's interests as an affected Indian tribe and a ratepayer. In support thereof, Sealaska states as follows: I. INTRODUCTION 1. Sealaska is a corporation duly organized and existing under the laws of the State of Alaska, having its principal office at One Sealaska Plaza, Suite 400, Juneau, Alaska 99801. Correspondence and communications with respect to this Motion should be addressed to: ('\\C) hi(~) c c'· ~ hov \Lu (\'u. !\. --t ~~t7Ll"i QL{)LL 1 ' Robert W. Loescher Executive Vice President Resource Management Sealaska Corporation One Sealaska Plaza, Suite 400 Juneau,Alaska 99801 and to Sealaska's counsel: EricA Eisen Birch, Horton, Bittner & Cherat 1155 Connecticut, N.W., #1200 Washington, D.C. 20036 2. The Black Bear Lake Project, for which the Alaska Power and Telephone .. Company ("AP&T') has filed an application for a license, proposes the construction of a siphon intake, conduit and appurtenant facilities, and the insta1lation of 4.5 megawatts of power generation capacity on Prince ofWales Island. The project relies on historic stream flows and an elevated natural lake to provide for v~ryin~ power needs over the years. The stated use of the Project power is to serve the projected needs of some rural communities1 . located nearby on Prince of Wales Island and possibly the needs of other rural communities located some distance away but also on Prince of Wales Island. II. MOTION TO INTERVENE 1. Sealaska is one of twelve Regional Native Corporations established pursuant to the Alaska Native Claims Settlement Act (ANCSA) based in Alaska. ( 43 U.S.C. § § 1601, et seq.). Under ANCSA, each Regional Native Corporation is entitled to receive tracts of land in settlement of the aboriginal claims of its shareholders who are Alaska natives. As part of its entitlement under ANCSA, Sealaska has received fee conveyances of approximately 247,000 acres of land which is only a partial fulfillment of its entitlement of approximately 330,000 acres of land and an interest in subsurface estate of 600,000 acres. A portion of Sealaska•s total land ownership is located within the area of this project. Sealaska's private property will be affected by the Black Bear Lake Project. In fact, with the 1 Prince of Wales Island, comprising part of the Southeast Alaska Archipelago, is approximately 120 miles long and 50 miles wide, and about 3,475 square miles. There are five small rural communities on this island; Craig, Klawock, Hydaburg, Thome Bay, and Hollis. According to the 1990 Census statistics, the population of each village is, · respectively, 1,260, 722, 384, 581, and 111. The total population of Prince of W~.b;s Island is . 4,664. The population density is one person to every 1.3 square miles, which is extremely low by any census. This population could fit within the Radio City Music Hall and yet Prince of Wales Island is bigger than Long Island, New York, and more than 3 times the size of Rhode Island. -2- exception of a small segment of the proposed transmission line right-of-way, this entire project proposed by AP&T is on Sealaska's private property. 2. Sealaska is an "Indian tribe" within the intendment of 18 C.F.R. § 4.30(b)(10), being recognized by federal statute(~ 15 U.S.C. § 637(a)(13); 25 U.S.C. § 4506(e)) to have such status and possessing legal rights that will be affected by the development and operation of the proposed project. 3. Sealaska, its subsidiaries, and the Sealaska shareholders and their descendents residing on Prince of Wales Island, ar~ customers of AP&T and are potential .. users of the power that will be generated by the Black Bear Lake project. 4. Sealaska has previously intervened in applications filed by the Alaska Power Authority seeking to explore the hydropower potential of the project site. In those explorations, Sealaska has remained neutral, affording the Authority, an agency of the State of Alaska, the maximum opportunity to develop information concerning whether the subject site could be a source of cheap and reliable electrical energy for use by communities on Prince of Wales Island. Sealaska, as a matter of public policy, strongly favors the development of environmentally sound, cheap and reliable electric .. mergy sources that replace electrical energy produced by diesel generators. 5. Sealaska was a party intervenor to the preliminary permit proceeding that preceded the current application for license but was not consulted in a meaningful manner as to Sealaska's views by the applicant once the preliminary permit issued; nor were Sealaska 's concerns or requests addressed by the applicant. 6. Sealaska, as a landowner, affected "Indian tribe," representative of its shareholders, and potential user of power, has unique and substantial interests in this proceeding. Its interests are likely to be significantly affected by whatever ultimate determinations may be made by the Commission. Sealaska's interests a1;~ not now represented in this proceeding and may be adversely affected unless Sealaska is permitted to participate fully as a party. -3- WHEREFORE, Sealaska moves that the Commission permit Sealaska to intervene in, and be made a party to, the above-entitled proceeding for all purposes. lll. PROTEST 1. Under§ 4(e) of the Federal Power Act, the Commission is authorized to issue construction licenses for project works "necessary or convenient" for the development, transmission and utilization of power. 16 U.S.C. § 797(e). Furthermore, § 10(a) of the Federal Power Act states that all licenses are issued under the condition that the project will be such as the Commission determines to be "best adapted" to a comprehensive plan for developing a waterway. 16 U.S.C. § 803(a). Under Section 21 of the Federal Power Act, licensees only may exercise eminent domain as to project works "which in the judgment of the Commission are desirable and justified in the public interest .... " 16 U.S.C. § 814. 2. AP&T does not have nor has it included in its application such substantial, useful and relevant information as would support its contention that this project is either necessary or convenient for the development of power, is best adapted to the comprehensive development of the waterway, or is desirable and justified in the public interest. 3. To put the requirements of 4( e) of the Federal Power Act, and the complete failure of the proposed Black Bear Lake project to meet the "convenience and necessity" requirements contained therein in context requires some reference to the history of the project at this site. A Prior to the current applicant's involvement, the site was the subject of a license application for a project by the Alaska Power Authority. AP A (now the Alaska Energy Authority, "AEA") is the State of Alaska agency charged, inter alia, with the construction of hydroelectric facilities in Alaska for the public benefit. Since _...;'?" 1976, AP A has proposed numerous projects and has constructed several under license from the FER C. Each of the projects actually constructed were supported by -4- at least 50% contribution in aid of construction from the State of Alaska general funds. These subsidies were required so that consumer rates would not significantly exceed the avoided costs of diesel generated power over the life of the projects. B. During the 1980's, the AP A abandoned many more projects that it found uneconomic, even during periods of high oil prices and consequently high avoided costs of power. Among the projects abandoned as not in the public interest was the Black Bear Lake project. C. The Black Bear Lake Hydroel,ectric project was first conceived as part .. of the Alaska Power Authority's expansive plans in the late 1970s and early 1980's. At that time the agency surveyed dozens of potential hydropower sites in Southeast Alaska and the rest of the state. These studies, and nearly a billion dollars in state subsidy, resulted in major stated-owned hydroelectric plants serving Ketchikan (Swan Lake), Wrangell-Petersburg (Tyee), Valdez and the Copper Valley area (Solomon Gulch), and Kodiak (Terror Lake), collectively known as the "Four Dam Pool;" and at the railbelt region (Bradley Lake). Several smaller hydropower projects were also constructed with various levels of state subsidy. D. The Authority completed a reconnaissance study of the Black Bear Lake project in 1977 and a feasibility study in 1981, and updated that study in 1986. The early studies found the project to be "technically, economically, and environmentally" feasible (no determination was made regarding its financial feasibility without subsidy). The Authority projected that the project would cost approximately $13 million in 1986 dollars, and would have a marginal benefit/cost ratio of 1.19, assuming rather exuberantly that the real escalation in fuel costs would continue to be 2%. Average cost of energy was projected to be 11.1 cents/kwh. Between the time AP&T's preliminary permit was issued in 1988 aQ(l the 1990 Census, the combined population of Craig, Klawock, Hydaburg and Thorne Bay remained relatively stable. While AP&T projects increased energy demand and -5- population growth, the largest segment of the local economy, the forest products industry, experienced a sharp drop in employment in 1991. Recent studies project a continued shrinking economic base, owing to a nearly completed first harvest of available timber and to the decline in commercial fishing due to international and state restrictions imposed on harvesting quotas. This in turn indicates a likelihood of a shrinking population. E. In 1981, AP A submitted an Application for License to the FERC for a 6 MW project, using load growth forecasts based on the 1973-1979 period. In 1984, AP A withdrew that application and submitted an Application for Preliminary Permit for a sma11er 3MW project. This submission was based on revised load growth projections and fuel cost differentials --projects that the Authority stressed were "preliminary." In 1984, AP A reported that neither fuel cost escalations nor actual economic conditions they had predicted in 1981 had come to pass. In fact, actual loads experienced in 1984 were even below the "]ow case" scenario of the 1981 application. F. In 1986, the AP A completed a "Feasibility Study Update" of the original 1981 report. Its load growth projections were significantly below those reported earlier. The Authority concluded in its 1986 report that the project's feasibility was "only marginal" at that time. This marginal feasibility was based upon the price of oil (as determinative of the avoided cost of diesel power) being nearly $28/barrel in 1992, and escalating at 2% annually thereafter. G. As a result of this study, the Authority in 1987 determined that project feasibility was not economic, and let its preliminary permit lapse rather than proceed with its license application. H. Since the AP A abandoned the project as non-economic, th~,price of oil has decreased significantly (being approximately $16/barrel today), and there has been no significant load growth in the proposed project market area. In fact, the -6- ' economy show all the signs of further decline by the fact that only 685 homes are occupied out of the 785 units available in Craig and Klawock. This holds true for the rest of the communities on Prince of Wales Island. I. Sealaska Corporation has procured an updated analysis of the consumer impacts of the project, which is attached hereto as Exhibit 1, entitled Black Bear Lake Hydroelectric Project Analysis, date March 8, 1992. The analysis concludes that consumer rates for Black Bear Lake project power will exceed the avoided cost of diesel power for many years, and that in all probable future scenarios the project will cause a net present value loss to consumers; or in other words, during most of the 30-year period, the ratepayers will be paying a higher unit rate due to the fixed costs and the low kilowatt hours consumed. 4. To cloud the title of the ANCSA lands of Sealaska affected by this project proposal should require a showing of special need. These are lands given in settlement of aboriginal claims. They are lands to which Sealaska's shareholders have historical and cultural ties. They are patrimony. The ANCSA land settlement was effected to afford those shareholders "maximum participation .. .in decisions affecting their rights and property, .... " 43 U.S.C. § 1601(b). Federal statute already explicitly prevents their condemnation for certain laudatory federal purposes, such as inclusion in a conservation system unit under ANILCA. 16 U.S.C. § 192(b). Likewise, such lands may not be subject to claims by adverse possession, or through bankruptcy, nor may they be taxed by any governmental entity unless developed. 43 U.S.C. § 1636( d). While these lands are alienable, their involuntary alienation should be a last resort, justified only where the public interest cannot be met in a less intrusive way. In fact, Sealaska has a long-standing corporate policy not to alienate its entitlement which it holds for the benefit of all of its shareholders. It has worked with state and federal agencies, when they have requested an interest in Sealaska's property, to come up with innovative ways for these agencies to acquire the rights they needed,_"'gut avoided conveyance of a fee estate or a conveyance by condemnation. Further, Sealaska, as part of its selection of properties for satisfaction of its entitlement, has been successful in removing -7- federal power sites withdrawals from its property, thus enabling Sealaska to enjoy the fu11 benefit of its entitlement without the intetvention of federal authority. Now, however, despite these efforts, AP&T, seeking the assistance of FERC, through its application, seeks to impose upon Sealaska's property a federal interest, i.e., a hydropower permit, virtually identical to the federal interest it has worked so hard to remove from its entitlement. Any action that would affect Sealaska's interest in its entitlement carries a strong risk of frustrating the intent of ANCSA and is contrary to Sealaska's corporate policy. 5. Against this background of questiona~le economics and future growth, and of the special nature of this land, this project's problems assume proper proportions. A. Section 4.61( d) of the FERC's regulations, 18 C.F.R. § 4.61( d), calls for license applications to contain an Exhibit E in conformance with 18 C.F.R. § 4.41(f). In Exhibit E of its application, AP&T failed to include an environmental assessment of alternate locations, designs and energy sources as required by 18 C.F.R. § 4.41(f). B. A "major purpose of the [Federal Power] Act is to protect power consumers against excessiv~ prices." Pennsylvania Water & Power Co. v. FPC, 343 US 414, 418 (1952). The application here is lacking an economic feasibility analysis and even a rudimentary power requirements analysis and provides no basis for concluding that this project is economically feasible or will protect consumers against excessive prices, or is more beneficial to the customers of Prince of Wales Island than ' the current diesel generator system or alternatives such as a wood-fired plant. Exhibit 1 suggests that the project will cause consumers to pay prices for power from the project in excess of the avoided costs of diesel generated power. The potential economic harm to the residents of Prince of Wales Island is enormous. For instan.ce, because all the land is in private property, the applicant has failed to ac<;J~.unt for the cost of road use fees, land lease fees, road maintenance, and other access costs. Additionally, AP&T has not calculated the cost of the Forest Service's special use -8- fees; nor the wheeling cost through other utility systems. Lastly, AP&T has inappropriately calculated the maintenance cost after construction, thereby making that figure under-valued. Even under AP&T's optimistic assumptions, the wholesale rate for power from this project at today's load is over 30% in excess of the projected diesel generated electricity costs. AP&T is dealing with an isolated, captive group of customers who will have no choice but to pay for the power based on the costs of the project. Should those costs exceed the costs of alternative energy sources, these customers will either be forced to pay needlessly high prices for power, or forego power altogether. C. A determination of the need for the power of the proposed project requires "more than affirmation that the project would be beneficial to the licensee combined with ascertainment that the region would be able to use the additional power." Friends of River v. FERC, 720 F. 2d 93, 102 (D.C. Cir. 1983). Applicant has failed to set forth any sufficient evidence as to the need for this power. All the applicant has shown is its assurances that things will work out. In fact, population growth on Prince of Wales Island is problematic, and timber harvests and commercial fisheries --the largest economic activities --are being reduced. When this is coupled with the fact that there will be less state revenue sharing with local governments due to -the decline in the price of oil and in the volume of oil being produced, it is quite possible that less power will be needed in the future. D. The applicant must show"'that its proposed project is in the public interest. This determination can only be made after alternative power sources are considered. Udall v. FPC, 387 U.S. 428, 450 (1967). In this case, the applicant has not completed a power requirements study, and has failed to demonstrate that; if there is a need for more power, this project is the best way to fill that ne~-~ E. The applicant has failed to show that it would be financially capable of constructing the proposed project in the first instance without going bankrupt in the -9- process. The estimated cost of the project approximates applicant's total assets. Applicant has no experience in actually constructing hydroelectric projects of this magnitude. Moreover, applicant has failed to obtain a ratemaking clarification from the Alaska Public Utilities Commission ("APUC") that would allow full cost recovery for the project, despite its unofficial request for such a finding. Residents of Prince of Wales Island (who are predominantly Sealaska shareholders) should not be faced with a failing utility seeking rate relief increases from the APUC in the future. Indeed, in communication with the Alaska Public Utilities Commission, AP&T acknowledged that it could not fund the project without a joint venture with the Alaska Power Authority. F. FERC requires that the applicant consult with affected groups, including affected Indian Tribes; this includes Sealaska, the owner of all of the property embraced by this proposed project. Surely, "consultation" means more than a simple statement of intent to proceed, coupled with a demand for cooperation. Consultation has been meaningless here, with no real recognition by the applicant of the concerns and rights of the entities affected by the AP&T proposal. In the view of AP&T's largest customer and on behalf of the largest group of customers, the residents of Prince of Wales Island, which are for the most part shareholders of Sealaska, this project at this time is not "necessary and convenient." G. Alaska is riddled with the hulks of grand projects built on visions that did not work. The history of the hydropOwer projects that have been developed and constructed in Alaska has, with limited exceptions, been one of excessively optimistic initial cost assumptions. Smaller projects such as Ouzinkie, Larson Bay, and Cordova, have exceeded initial estimates by 50% to 200%. Yet, for this project to have even the potential to make economic sense, it must come in on budgt;.t, a rarity. H. The FERC cannot make judgements about whether the proposed project is best adapted to a comprehensive development of the proposed waterway -10- without the missing information and analysis discussed above being supplied and seriously considered. Nor can the FERC identify conditions appropriate to assure that any license issued would be in the public interest. FOR ALL OF THESE REASONS, Sealaska hereby registers its protest of the application filed by AP&T, and requests that the application herein be summarily dismissed and this proceeding terminated. In the alternative, and only if this matter is not so disposed of at this time, Sealaska asks that a trial-type hearing on these issues be ordered pursuant to 18 C.P.R. § 4.34(a) so that evidence may be made_ of record on the matters raised herein, .. and proponents of the views espoused by AP&T in suppo~ of its project be subject to the rigors of cross-examination. Further, a procedural schedule should be set so that discovery may commence on the matters relevant to whether a license should issue to the applicant for its proposed Black Bear Lake Project. IV. REQUEST FOR STUDIES In the event the application is not summarily dismissed as requested herein; Sealaska requests that the FERC require the applicant to conduct additional studies as discussed below. 1. To make a reliable assessment of the probable level of demand for energy from this proposed project requires a methodologically sound study of population growth and power requirements in the primary markets to be served. The only population growth projections tendered by this . applicant have been linear forecasts, which are notoriously --- unreliable. The probable population growth should be analyzed in light of demographic principles and local economic conditions, with input from expert demographers and qualified independent power requirements analysts. This should all be a part of the record before a license is granted for this project. ~~ 2. The State of Alaska subsidizes rural electricity use by residential customers through a Power Cost Equalization program. There is reason to believe that this program, which has recently been curtailed, is in the process of being terminated. It is also questionable whether the unit cost of power generated by the Black Bear project will in the foreseeable future exceed or be less than the power generated by other means, including diesel. Yet the applicant has failed to factor in demand elasticity in its power demand growth projections. Elasticity of demand on Prince of Wales Island must be studied and factored in to consider future use projections of a Black Bear Lake Project. 3. The applicant relies on a proposed intertie to connect project power to more distant rural communities on Prince of Wales Island. Indeed, with the exception of Craig and Klawock, which are five miles apart, the two nearest communities to Craig and Klawock lie over 20 miles away for one and over 45 miles away for the other. There is no clear explanation of how the mulit-million dollar costs of this intertie is to be borne by ratepayers, if at all, and of the cost and probability that the intertie will be constructed. The responsibility for costs, the allocation of costs to rates, and the probability of this intertie must be studied and conclusions must be drawn on a record about the probability of this intertie and the cost of its absence to project economics. V. REQUEST FOR TERMS AND CONDmONS In the event this application is not summarily dismissed as requested herein, Sealaska requests that FERC impose the following terms and conditions upon tl:.e granting of the applicant's license. 1. To prevent a cloud on Sealaska's property title and a cloud of uncertainty over the future of Sealaska's land and this power project, if a license must issue, then the FERC should require that construction must begin within twenty-four (24) months of issuance of the license. 2. To prevent this license applicant from painting itself into a corner of -u desperation from which it can plead to the Alaska Pub1ic Utilities Commissionfor relief, as a condition of its license the applicant should agree to obtain a rate ruling from the APUC -12- on the full recovery of its costs and the establishment of rates and further agree that it will not seek to increase its rates beyond the alternative cost of diesel fuel measured by the efficiency at which it currently uses such fuel on the Island. 3. To prevent a half-finished project and scarred lands, the applicant must demonstrate, prior to construction, that it has the financial capabilities to bring the project through to completion and on line. 4. The applicant must agree to indemnify and hold Sealaska as the landowner harmless from any environmental damages resulting from the Black Bear Lake project, and must agree to repair and reclaim any lands affected by the project to the pristine, pre- project condition at the earliest possible opportunity. 5. As a condition to its license, the applicant must agree to afford Sealaska, its agents and its assigns, free and unlimited access to its private property and must agree to reserve to Sealaska, and not encumber in any manner Sealaska's right to explore and develop its subsurface estate. 6. Applicant must agree not to afford general public access to project or adjoining private lands, nor shall applicant allL w or permit its employees to use the project or private lands for any purpose other than necessary maintenance of the project for power generation purposes. 7. Applicant shall be limited in its rights acquired in Sealaska's private lands to these rights that are absolutely necessary in order to complete the project, and such rights shall be less than fee and shall revert back to Sealaska, without notice, upon the termination of the license or project, whichever occurs first. 8. Applicant's license shall be limited to a period of time that is minimally required for the applicant to fully amortize and recover its costs. -13- SEN.,. B":BHBC 90'15869814:# 2 By tbfl project appHtaticm Alub 'O'WC & Tol.pbont Co=pany pr=potcs to fml'Q.tC ita judiem~ntalbcrJt.wbat i1 gcod for !ta cOtporata fuNrt vpotl Stelaalat., ht a,.b.idiariu •nd its sha.r!:ho!den who a:e raaidutt of Prlnoe of Wile• JllaD.d. It aeekt tc do thil by usin& a federallicel'l.!e to eonstruet a h)droelectrlc project u the lew:r to separate Scaluka and tt shareholders f:om their Janel, a Pl'OQMI ~t wm '&beD be paid. tor by tl:cs~ panlel IU rate;Jaycn for unneeesaarlly up&mf... pc!WW in ao.• ot t.hoJr DoNI lrcm tb:a ill·cu:MJcd. L'1d ill-tlmed proftct. For a!I tbe reuou Mt forUt above. ScaJaa1ca mO"f'CJ to imervene In thiS .. . matter, l)totm• tbe propou.l fc>r lioeBN ~ "7 the appHc.ant a:ncs seets au:amuuy ~lsmiual ar, in the altemaM, me ~It oppol"ftll'J&y to mate a l"tSCCl'd en m eoncerns. lf this matter is act dir.m.iued new, Setluk& reacnu i11 riFt to iDC omet issue& II thcao should appear Qn dlii:IO'Ye:y, ud. to propo~e UccDJC ccnd.iticml fallaw!DJ ~Y Commission notiee declarins that th• propoe-.1 iiNe~ for =MromncutalanaJym. Dated thla 27th day at Ma:cl\, 1992. l I I ' .! SEN7 BY:BH6C 9075869814:# 2 BIRCH, HORTON, BITI'NER & CHEROT Attorneys for Sealaska Corporation Dr.~~ C D 1155 Connecticut Ave.., N.W. Suite 1200 WashingtOn, D.C 20036