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Home My WebLink AboutCopper Valley Intertie Power Flow 1996 TECHNICAL MEMORANDUM ris fi (E ficagamHyTr E : Sw . 1G Copper Valley Intertie Power Flow JAN GY 1995 PREPARED FOR: Dennis McCrohan Blaska tnaustiigt Development PREPARED BY: Dave Gray and Export Authstity DATE: January 28, 1996 At your request, CH2M HILL has reviewed power flow limitations, by direction of flow, on the proposed Copper Valley Intertie. This memorandum briefly presents the findings from this review. Power Flow Limitations The current design criteria for the Copper Valley Intertie (from Sutton to Glennallen) is based on the transmission of about 15 MW from generating utilities in the Railbelt to serve loads of the Copper Valley Electric Association (CVEA), primarily in Glennallen and Valdez. The 15-MW capacity limitation is imposed by the design of the Railbelt transmission network, not the Intertie. This transmission capacity will meet CVEA’s present load and allow for some load growth. The Copper Valley Intertie Feasibility Study, completed by R.W. Beck in April 1994 included a detailed transmission system electrical analysis that identified this limitation. This analysis concluded that under certain abnormal conditions on the Chugach Electric Association (CEA) transmission system, CVEA loads greater than about 15 MW will cause unacceptably low voltage conditions on parts of the CEA and Matanuska Electric Association (MEA) 115-kV systems. These abnormal conditions could include line outages for emergencies or for maintenance. In planning for these conditions, CVEA would have three options: (1) it could limit Intertie loads to 15 MW; (2) it could allow for its connection to the Intertie to be severed from the Railbelt grid when loads reach 15 MW, or (3) it could install and operate Static VAR Compensators (SVC) at one or both ends of the Intertie. With the addition of one or more SVC’s, power flow beyond the 15 MW limit is possible. The SVC is a high-voltage, high-speed, solid-state switching device that can manipulate the power factor of the transmission line load, and thus control the transmission voltage. SVC’s are both complicated and expensive, and are usually installed in specially designed substation buildings where operation and maintenance conditions can be controlled. CVEA has opted to keep its loads on the Intertie below 15 MW and allow for its connection to be severed from the Railbelt grid if its loads surpass the 15 MW limit. Historically this has been a common practice among Railbelt utilities. Once CVEA loads require that CVEA take more than 15 MW over the Intertie, it may install the SVC (and pay for it with revenues from the new load requirements). On the other hand, by the time loads on the Intertie reach this level, transmission conditions on the CEA system may have changed and no longer cause the need for SVC on the Intertie. cvo il 117526.C0.10 COPPER VALLEY INTERTIE Reverse Power Flow The Copper Valley Intertie could transmit power in either direction. While the power flow capacity from Sutton to Glennallen was established in the Copper Valley Intertie Feasibility Study, the capacity of a reverse flow from Glennallen to Sutton has not been established. A power flow study would be needed to establish the exact reverse power flow limitations with and without SVC. However, it is likely that the reverse flow capacity without SVC will be at least equal to the 15 MW for flows from Sutton to Glennallen. In fact, the reverse flow capacity may well be significantly greater than 15 MW because power flowing into the Railbelt would support voltage on the Railbelt transmission grid. While substantial reverse flow capacity would exist on the Intertie, it is not likely to be used for the foreseeable future. As stated in the Copper Valley Intertie Feasibility Update completed by CH2M HILL in November, 1995, there is little market opportunity for reverse flows on the Intertie. Given the substantial surplus of low-cost gas-fired generation in the Railbelt, there would not be opportunity to market energy priced above 3 to 4 cents per kWh. As indicated in the Copper Valley Intertie Feasibility Update, there are not any identified generation projects in or near the CVEA system with costs as low as in this range. cvo 2 TECHNICAL MEMORANDUM CHMHILL Projected CVEA Cost of Power Assuming State Loan Is Available for Any New Power Supply Alternative PREPARED FOR: Dennis McCrohan PREPARED BY: Dave Gray DATE: January 29, 1996 Summary At your request, CH2M HILL has calculated the projected cost of power for CVEA under the hypothetical condition that the $35 million, interest-free State of Alaska loan for the Copper Valley Intertie could be reappropriated for construction of an alternative power supply project. Use of loan proceeds for projects other than the Intertie is not allowed by the enabling legislation for the loan, but analysis of the effect of reappropriation may be helpful in deliberations on the feasibility of power supply alternatives for CVEA. As shown in Table 1 and Figures 1 through 4, the 80/20 Integrated Intertie produces the lowest cost of power for CVEA regardless of whether the State loan could be used for alternative projects. TABLE 1 CVEA Cost of Power' for Power Supply Altematives: State Funding for Intertie Only Vs. For Any Alternative (Levelized Cents per kWh, 1999-2013) Low Fuel Cost Forecast High Fuel Cost Forecast Loan for Intertle Only Loan for Any Alternative Loan for Intertie Only Loan for Any Alternative Difference Difference Difference Difference Costper from80/20 Costper from80/20 Costper from8s0/20 Costper from 80/20 Alternative kWh Intertie kWh Intertie kWh Intertie kWh Intertie 1994 All Diesel 11.24 2.00 10.82 1.58 11.71 2.32 11.29 1.90 Modified 1995 All Diesel 10.38 1.14 10.23 0.99 10.91 1.52 10.76 1.37 Intertie 10.09 0.85 10.09 0.85 10.31 0.92 10.31 0.92 80/20 Integrated Intertie 9.24 0.00 9.24 0.00 9.39 0.00 9.39 0.00 Allison Lake® na na 10.63 1.39 na na 10.81 1.42 Silver Lake Option A na na 10.78 1.54 na na 10.82 1.43 Silver Lake Option C na na 9.59 0.35 na na 9.63 0.24 Silver Lake Option C-- na na 9.92 0.68 na na 10.01 0.62 Adjusted® ‘Based on Medium-High/Medium-Low load forecast. “Includes generation charge of 6.4 cents per kWh for generation at Solomon Gulch. “Adjusted for probability that generation will be redt:ced by 15 percent to maintain adequate in-stream flows during pink salmon spawning season. SEA/$35MILL.DOC 1 PROJECTED CVEA COST OF POWER ASSUMING STATE LOAN IS AVAILABLE FOR ANY NEW POWER SUPPLY ALTERNATIVE Analysis CVEA’s cost of power was calculated for the following alternatives under the assumption that the $35 million State loan would be available for the capital cost of any power supply alternative: 1994 All Diesel Modified 1995 All Diesel Intertie (with sole financial responsibility by CVEA) 80/20 Integrated Intertie Allison Lake Silver Lake Option A Silver Lake Option C The definition of each of these alternatives, except for Silver Lake Option C, is included in the Copper Valley Intertie Feasibility Study Update (November 1995); these definitions are not repeated here. Silver Lake Option C is based on a design concept developed by White- water Engineering in November, 1995; it is discussed in CH2M HILL’s technical memo- randum on cost estimates and risk analysis for the Copper Valley Intertie and alternatives (January 29, 1996). Consistent with the Intertie Feasibility Update, CVEA’s cost of power for each alternative was projected for the 15-year period of 1999 through 2013. This analysis was limited to conditions assumed for the medium-high and medium-low forecasts of CVEA loads. How- ever, analysis was conducted to test the cost of power under both high and low fuel price forecasts. Also like the Intertie Feasibility Update, the cost of power calculations associated with each alternative include all generation and purchased power costs projected to be in- curred by the utility. By taking all costs into account, differences among alternatives can be directly translated into differences in CVEA rates. As noted above, results of the calculations are shown in Table 1 and Figures 1 through 4. As shown, the 80/20 Integrated Intertie alternative produces the lowest cost of power for CVEA regardless of whether the state loan could be used for alternative projects. With the state loan limited to the Intertie only, the 80/20 Integrated Intertie would result in a cost of power ranging from 1.1 to 2.3 cents per kWh less expensive than the All Diesel alternatives shown in the table. If the state loan were available for any power supply alternative, the 80/20 Integrated Intertie would range from 1.0 to 1.9 cents per kWh less expensive than these All Diesel alternatives. As noted above, these calculations are based on the assump- tion that the loan would be available only for capital investment in new plant and equip- ment. Since the investment in diesel generation is relatively low ($12 million every 20 years in the 1994 All Diesel alternative), the availability of the state loan for this alternative has less of an impact on the associated cost of power for CVEA it does for other alternatives. Even if the state loan were available for the Allison Lake alternative, its associated cost of power would be 1.4 cents per kWh higher than that for the 80/20 Integrated Intertie. A contributing factor to this relatively large difference is the generation charge of 6.4 cents per kWh for the portion (about half) of generation that would occur at Solomon Gulch with this alternative. SEA/$35MILL.DOC 2 PROJECTED CVEA COST OF POWER ASSUMING STATE LOAN IS AVAILABLE FOR ANY NEW POWER SUPPLY ALTERNATIVE Silver Lake Option A is the same alternative evaluated in the Intertie Feasibility Update. Even with the state loan, CVEA’s cost of power with this alternative would be 1.4 to 1.5 cents per kWh more expensive than with the 80/20 Integrated Intertie. Silver Lake Option C is a relatively low cost design for this alternative. However, in-stream flow requirements from regulatory agencies are likely to result in a 10 to 20 percent reduction in useful generation capability of the project. This is discussed in more detail in CH2M HILL’s January 22, 1996 technical memo on the environmental effects of the Copper Valley Intertie and alternatives and in CH2M HILL’s January 29 technical memorandum on cost estimates and risk analysis for the Copper Valley Intertie and alternatives. Figures 1 and 2 show CVEA’s projected cost of power if in-stream flows are not restricted and if the state loan were available for the Silver Lake Option C project. The associated cost of power would be only 0.2 to 0.4 cents per kWh higher than that with the 80/20 Integrated Intertie. Most of the difference would occur in the first 6 years of Intertie operation (1999- 2005). Thereafter, the cost of power with the Intertie or Silver Lake Option C would be roughly equivalent. Figures 3 and 4 show CVEA’s projected cost of power if in-stream flow requirements result in a 15 percent reduction in useful power generation from the Silver Lake Option C project. Under these circumstances, the associated cost of power would be 0.6 to 0.7 cents per kWh higher than that with the 80/20 Integrated Intertie. SEA/$35MILL.DOC 3 Cost of Power (cents/kWh) 12.0 5 10.0 + 2 o 6.0 4 4.0 5 2.0 4 0.0 Figure 1 Projected CVEA Cost of Power Assuming a State Loan for the Capital Cost of Any New Power Supply Alternative 2 Low Fuel Cost -- a a re fi 4 j 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Year —— 1994 All Diesel —— Allison Lake — Modified '95 All Diesel —— Silver Lake (Option 3 ~~ Intertie —— Silver Lake (Option C —— 80/20 Integrated Intertie Notes: (1) Assumes up to $35 million in State loans at 0-percent interest over a 50 year period. (2) Assumes Medium-High/Medium-Low Load Forecast. Cost of Power (cents/kWh) Figure 2 Projected CVEA Cost of Power Assuming a State Loan for the Capital Cost of Any New Power Supply Alternative 94.0 pot Migh Fuel Cost -- 12.0 4 10.0 4 @ o 2 o > o 2.0 5 0.0 + + + +- + +- + —+ + + + + + —+ + + 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Year —— 1994 All Diesel —— Allison Lake — Modified '95 All Diesel —— Silver Lake (Option A ~~~ Intertie —— Silver Lake (Option —— 80/20 Integrated Intertie Notes: (1) Assumes up to $35 million in State loans at 0-percent interest over a 50 year period. (2) Assumes Medium-High/Medium-Low Load Forecast. “+ 2012 2013 2014 Cost of Power (cents/kWh) Figure 3 Projected CVEA Cost of Power Assuming a State Loan for the Capital Cost of Any New Power Supply Alternative 140... >=. Low Fuel Cost & Adjusted Silver Lake Generation-- a 12.0 10.0 2 o 60 | \ 40 | | 2.0 0.0 + + + + + + + + + i: = + + “+ + + _- = 4 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Year —— 1994 All Diesel —— Allison Lake —— Modified '95 All Diesel —— Silver Lake (option 3 ~~ Intertie —— Silver Lake (Option C —— 80/20 Integrated Intertie Notes: (1) Assumes up to $35 million in State loans at 0-percent interest over a 50 year period. (2) Assumes Medium-High/Medium-Low Load Forecast. Cost of Power (cents/kWh) Figure 4 Projected CVEA Cost of Power Assuming a State Loan for the Capital Cost of Any New Power Supply Alternative 14.0 qe no High Fuel Cost & Adjusted Silver Lake Generation -- 12.0 + 10.0 4 2 o 6.0 40 4 2.0 + 0.0 + + + + +— + + + + + + + + + 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Year —— 1994 All Diesel —— Allison Lake — Modified '95 All Diesel —— Silver Lake (Option A ~~ Intertie —— Silver Lake (Option C —— 80/20 Integrated Intertie Notes: (1) Assumes up to $35 million in State loans at 0-percent interest over a 50 year period. (2) Assumes Medium-High/Medium-Low Load Forecast. AIDEA ALASKA INDUSTRIAL DEVELOPMENT & EXPORT AUTHORIY INTERNAL MEMORANDUM TO: Riley Snell FROM: nad Qamons DATE: January 31, 1996 RE: Sutton Glennallen Intertie CC: Dennis McCrohan You requested that I address the criticism of the Sutton Glennallen Working Groups recommendation that a 10 year credit enhanced commitment by Petro Star Valdez (PSV) to remain a customer of CVEA was not a sufficient period of time to protect CEA and CVEA ratepayers if the Intertie was constructed. According to CH2M Hill, a 20 year take or pay obligation would provide the assurance critics are suggesting is needed. “In order to obtain a 20 year take or pay, CVEA would need to commit to a power sales rate that is lower than that needed to secure a 10 year take or pay commitment. The underlying issue is risk management. If a 20 year arrangement is needed to significantly reduce risk (or perceived risk), then less of the ‘rewards’ from the Intertie will remain with CVEA (and its other customers) because a lower rate would be needed to entice Petro Star to make such a commitment. If CVEA and its customers can live with a higher level of risk, a greater reward is potentially achievable to CVEA.” The bottom line is that a long term agreement will lock the parties into a set rate. The longer the period, the lower the rate. From CVEA’s standpoint, as their costs rise they will not be able to pass increases on to PSV. Their upfront risks maybe reduced, but they could likely pay for it in the future. Even though they are projected to remain a customer through 2018 under the medium-low forecast, a 20 year take or pay commitment may be unreasonable from PSVs’ perspective. It is likely that they would consider such a commitment to be too risky for a full take or pay commitment in light of refinery economics and their current supply contracts with the North Slope producers. CVEA is using a take or pay contract to seek assurance that their investment in the Intertie would be covered. CH2M Hill has suggested an alternative to a take or pay commitment that may help reduce risk for both PSV and CVEA. They suggest that rather than attempting to cover Intertie investment costs with take or pay provisions that also cover variable costs not actually incurred if PSV leaves the CVEA system, CVEA could require payment of a fixed demand charge that covers PSV prorata share of the Intertie costs (energy charges to PSV would be reduced proportionately). Under these conditions, PSV would need only commit to a 20 year take or pay for the demand charge. Such a commitment could be reduced if other loads in the CVEA service area grow at rates higher than projected and thereby cover CVEA’s implicit investment in the Intertie. Such an arrangement may be more attractive to both PSV and CVEA. There are other factors that should also be considered. If CVEA signed a 10 year take or pay contract with PSV, it is unlikely PSV would leave the system after that period of time to self generate power. PSV probably could not generate power at a lower cost than that provided by the Intertie. Additionally, a 10 year take or pay contract takes them out until the year 2009. If the oil pipeline shuts down in 2018 as forecasted in the medium-low scenario, they would have only 9 years to depreciate their capital investment. This may be too short of a period to adequately recover their investment. Finally, if the Intertie is not constructed, losing PSV as a customer will have a negative impact on CVEA ratepayers. Currently, CH2M Hill calculates that rates would increase by 1.5 cents per Kwh. Therefore, losing PSV could further exasterbate the ratepayers situation. TECHNICAL MEMORANDUM CRMHILL Review of Environmental Impacts, Copper Valley Intertie and Alternatives PREPARED FOR: Dennis McCrohan/ AIDEA PREPARED BY: Dave Gray DATE: January 22, 1996 This technical memorandum has been prepared at the request of AIDEA to address en- vironmental issues raised during the December 1995 public meetings. Summary This discussion reviews the comparative environmental impacts of the proposed transmis- sion intertie between Sutton and Glennallen and a number of potential alternatives. Five project alternatives and a no action alternative are included. The project alternatives are: e Intertie e¢ New Diesel (upgraded diesel units in Glennallen and Valdez) ¢ Hydroelectric generation at Silver Lake with supplemental diesel generation e Hydroelectric generation at Allison Lake with supplemental diesel generation ¢ Coal-fired generation at Valdez Each alternative is discussed in terms of its relative impacts on a number of elements of the environment, as defined by the National Environmental Policy Act (NEPA). Elements cov- ered in this discussion include visual quality, economics, protected habitats and species, water quality, air quality, cultural resources, and social/recreational impacts. Table 1 pro- vides a summary of potential impacts by alternative and element. The information compiled here is drawn from three main sources: Volume 2 of the April 1994 Copper Valley Intertie Feasibility Study, the 1992 Allison Lake Reconnaissance Study, and public comment in response to the 1995 update to the Copper Valley Intertie Feasibility Study. These are the only documents that have focused specifically on the impacts of the in- tertie and alternatives. Where existing documents provided little or no information on spe- cific categories of impact (for example, economic and cultural resource issues), professional judgment and public comment on the project were used in determining potential impacts and issues of concern. Both of the studies done to date were based on conceptual project designs and limited, if any, study-area reconnaissance. The preliminary nature of the information available makes it impossible to identify environmental “fatal flaws” at this time. However, a number of po- tentially significant impacts can be identified that could substantially affect the cost and/or feasibility of each of the alternatives as they are further developed. One likely outcome of any of the alternatives is litigation over environmental and/or social impacts. While public comment from the Matanuska Valley indicates that the visual 1002C112.D0C 1 117526.C0.10 TABLE 1 Comparative Impacts of Sutton-Glenallen Intertie and Altematives Resource/lssue No Action Intertie New Diesel Silver Lake Allison Lake Valdez Coal Visual Quality No impact Significant impact on Matanuska Potential for minor localized impacts Changes in views resulting from Changes in views resulting from Alli- Localized impacts at generating fa- Valley per 1994 feasibility study; reservoir creation and construction son Lake drawdown and water level __cility, including potential emission portions of intertie would be visible of generating facilities; no known changes in Solomon Gulch; no plume; potential for significant im- from Lake Louise Road, trail sys- sensitive viewer groups in site known sensitive viewer groups pacts at mine site in Matanuska tems, and recreation areas and vicinity affected Valley, including effects of coal stor- could affect sensitive viewer groups age and truck, rail, and barge transportation Economics Potential for limitation of develop- Potential for negative impacts on Potential positive and negative ef- See New Diesel alternative See New Diesel alternative See New Diesel alternative; potential Protected Species Water Quality Air Quality Cultural Resources SEA/1002C12a.D0C 1/22/95 ment in CVEA service area due to power cost and supply issues No impact No impact Continued burning of diesel without modern controls could adversely af- fect local air quality No impact tourist-oriented businesses in Mata- nuska Valley due to visual quality changes Potential for impacts on moose, caribou, Dall sheep, trumpeter swan, bald eagles, and salmonid species resulting from intertie’s proximity to important habitat areas and from in- creased hunting access Erosion/sedimentation during intertie construction and as long-term impact of access roads could affect nearby streams; 1994 study rated water quality impacts of natural gas generation in CEA or MLP service area as low. Natural gas generation would result in some emission of pollutants, pri- marily NO,; however, pollutant emissions from diesel generation in CVEA service area would be signifi- cantly reduced Significant potential for archaeologi- cal sites and disruption of resource- based Native activities; 1994 study identified recorded sites, but consul- tation with Native corporations on current activities would be required to assess full extent of potential impacts fects on CVEA service area eco- nomic development relative to intertie Little impact 1994 study rated water quality im- pacts of diesel generation as medium Impacts of diesel generation rated high in 1994 study, with potentially significant emissions of sulfur ox- ides, NO,, and CO;; control technol- ogy could result in lower emissions than No Action alternative Potential impact limited to area of generating facilities Loss of habitat for wildlife, including productive goat and bear habitat, during filling of reservoir; potential impacts on pink and chum salmon in Duck River from changes in stream flow Effects of streamflow changes on existing water quality have not been analyzed, but could be significant; effects of potential submarine cable construction should also be explored Supplemental diesel generation would have similar emission types to those described for New Diesel al- ternative, but overall reduced reli- ance on diesel could result in net emission reductions for service area Potential for inundation of cultural resource sites; record search and/or survey are not known to have oc- curred; current Native fishing and resource activities, if any, have not been documented Similar to Silver Lake, with potential for impacts on bear, goat, wolf, wolverine, and other species; pro- posed minimum instream flow requirements may be insufficient to maintain pink and chum salmon populations; effects of Allison Lake water turbidity on hatchery produc- tion are a potential concern Similar to Silver Lake; as noted above, turbidity may be an issue Similar to Silver Lake, except that diesel supplementation and resulting emissions would be somewhat higher Similar to Silver Lake, though im- pacts may be less because no land would be inundated economic impacts of mining opera- tions could include both long-term employment opportunities and negative effects on tourism/ recrea- tion in immediate mine area Impacts of mining on nearby habitat have not been studied, but could be significant 1994 study rated water quality im- pacts of coal generation as medium; impacts of mining operation have not been studied, but could be signifi- cant Fluidized-bed technology would re- sult in lower SO, and NO, emissions than traditional coal plants; however, impacts rated high in 1994 study due to lack of specific plant information and potential for emissions plume to affect Class | airsheds Impact limited for generating facility, but potential exists for sites or cul- tural activities in the proposed min- ing area REVIEW OF ENVIRONMENTAL IMPACTS, COPPER VALLEY INTERTIE AND ALTERNATIVES impacts of the intertie would be a primary target for such litigation, Silver Lake and Allison Lake also have the potential to attract litigation based on protected species and water qual- ity issues. Although not in itself a fatal flaw, litigation could cause sufficient delay to render a project effectively infeasible. Other areas with the potential to cause project delay or re- quire substantial mitigation include: e FERC licensing requirements related to instream flow for the two hydroelectric alter- natives e Identification of endangered species and their habitats in the intertie or hydroelectric project areas e Identification of significant cultural resources at or near any of the proposed sites e Federal requirements for air pollution control technology under the Prevention of Sig- nificant Deterioration (PSD) program, which would likely apply to the Valdez coal al- ternative and possibly to the new diesel generation alternative During public comment on the intertie project, a number of commenters expressed concern about the potential effects of electromagnetic fields (EMF) on public health in communities near the transmission line. As described in the 1994 Feasibility Study, current research has not shown a causal relationship between EMF and any specific disease, and EMF levels outside the project’s right-of-way are expected to be minimal. However, to address public concerns, route alignments were cited at least 600 feet from all occupied structures when- ever possible. It should be noted that the majority of the available environmental data has been developed for the intertie project, and thus the impacts of that project can be discussed in greater detail than the impacts of the alternatives. However, each of the alternatives also has the potential for significant adverse impacts on the natural and built environments. If power generation alternatives are investigated further as a result of the state feasibility determination, it should be done on the basis of consistent levels of data for each alternative studied to allow for an objective comparison of the options. Ultimately, the preferred and secondary alterna- tives will be analyzed in detail during the NEPA process. The analysis would include all the elements of the environment discussed here, and potentially others identified during the EIS scoping process. Visual Quality No Action Alternative This alternative would entail the continued use of the existing CVEA diesel generation fa- cilities in the Glennallen and Valdez areas. No visual quality impacts are associated with this alternative. Intertie The Copper Valley Intertie Feasibility Study provided a preliminary assessment of the vis- ual impacts of alternative intertie routes through the Matanuska Valley. The overall poten- tial for visual impacts was determined to be high. Few residences would be affected, and 1002C112.D0C 3 REVIEW OF ENVIRONMENTAL IMPACTS, COPPER VALLEY INTERTIE AND ALTERNATIVES. siting was generally designed to minimize visibility from the Glenn Highway. However, recreational users of areas through which the line was routed would be affected by the pres- ence of structural elements in a largely undisturbed landscape. Transmission line structures and access roads in any of the largely barren drainages in the Talkeetna Mountains would cause high visual contrasts and would be difficult to screen because of the lack of forest cover. Specific areas of likely impact would include Lake Louise Road, which serves as the sole access to the Lake Louise recreation area, and portions of the Chickaloon-Knik- Nelchina Trail system. Potential adverse impacts on private property could occur along the Glenn Highway from Cascade Creek to Hicks Creek. The northernmost of the two align- ments studied would have fewer visual impacts overall than the southern, but still would be visible from some locations on the Glenn Highway and to backcountry users in a number of areas. As described in later sections of this document, a primary concern of area residents is the ef- fect of changes in visual quality on the local economy, which is largely based on tourism- related services that depend on the scenic quality of the environment. The 1994 study recommended a more definitive visual impact analysis that included field verification of sight distances from the Glenn Highway, recreation areas, and lodges. Mitigation for visual impacts would be based on the findings of such an analysis and would likely include changes in the alignment to provide screening from areas of sensitive viewer concentration, as well as potential changes in materials, colors, and structural configuration of the line itself. New Diesel This alternative would involve the retrofit of existing diesel facilities and/or the construc- tion of new facilities to replace aging equipment in both Glennallen and Valdez. Because transmission of power would take place through CVEA's existing intertie between the two cities, visual quality impacts would be localized to the immediate vicinity of the generating plants. To the extent that upgrades were accomplished by retrofitting of existing facilities, impacts would be minimal. New facilities would pose the potential for impacts, although such impacts would presumably be mitigated by siting the facilities in a location removed from sensitive viewer groups. There is also the potential for diesel emissions to cause a visible “ice fog” in the plant vicinity under certain atmospheric conditions (e.g., winter air inversions) in which dispersion of emissions is limited. Silver Lake This alternative would involve the construction of a dam and hydroelectric generating fa- cilities at Silver Lake, located approximately 15 miles southwest of Valdez. The lake is rela- tively remote and currently is accessible only by air or water. Construction of the dam would raise the level of the lake by up to 125 feet, and the powerhouse and other generating facilities would alter the undeveloped character of the landscape. However, the lack of sig- nificant human use of the area would minimize the project’s visual effects on sensitive viewer groups. Visual impacts of new or upgraded diesel facilities to supplement and back up Silver Lake generation would be as described above for the new diesel alternative. 1002C112.D0C 4 REVIEW OF ENVIRONMENTAL IMPACTS, COPPER VALLEY INTERTIE AND ALTERNATIVES. Allison Lake The Allison Lake project would involve the generation of hydroelectric energy at Allison Lake, located west of the Solomon Gulch reservoir, and diversion of water through a pipe- line or tunnel to provide additional firm generating capacity at Solomon Gulch. The project area is owned by the State of Alaska and managed by the Alaska Department of Natural Resources. Drawdown of Allison Lake by up to 100 feet and the deposition of tailings from the tunnel could cause impacts on the visual quality of the natural landscape; however, both the lake and the Solomon Gulch Reservoir can only be viewed by air, and these effects would not be visible to the general public. Mitigation, if necessary, could be accomplished through the revegetation of affected areas. Visual impacts of new or upgraded diesel facili- ties to supplement and back up Allison Lake generation would be as described above for the New Diesel alternative. Valdez Coal This alternative would use fluidized-bed combustion technology to generate 22 MW of power in Valdez. In addition to electrical generation, steam from the plant would be used for heating of public facilities. Because the plant would presumably be sited in an industrial area, effects on sensitive viewer groups were assumed to be low in the 1994 study. How- ever, the potential exists for an emissions plume from the facility, containing sulfur oxides, nitrogen oxides, and particulates (see Air Quality below), that could affect scenic vistas in nearby viewsheds. Additional information would need to be obtained on the proposed site, process, and area meteorology to determine the true extent of the potential impact. The other potentially significant visual quality impact associated with this alternative is the project proponent's proposal for development of a mine site in the Matanuska Valley to supply the required coal. The level of impact would depend on the surrounding land uses; the proximity and accessibility of the mine site to sensitive viewer groups; the type of min- ing operation proposed (i.e., surface versus subsurface); and the areal extent of ground dis- turbance, processing operations, and the like. Because of the scenic qualities of the valley and the importance of these qualities to users of the area, the potential for visual impacts is high and is directly correlated to the intensity of the proposed mining activities. Impacts could also occur as a result of coal storage and transportation by truck, rail, and barge. The route currently envisioned is truck transport to Palmer with transfer to rail car between Palmer and Whittier, then via barge to Valdez. Economics No Action Alternative Public comment from the CVEA service area and discussion in the Feasibility Study and Feasibility Study Update indicate that the cost and reliability of electrical energy are impor- tant factors in the economic viability of communities served by CVEA. The utility is cur- rently isolated from the regional grid, and must provide redundant generation capabilities in Glennallen and Valdez because of the potential for transmission failures between the two load centers. This self-sufficiency increases the cost of power to customers as well as the lo- cal and regional impacts of generation. Although the area is poised for economic develop- ment, power cost and reliability issues may tend to discourage such development, as 1002C112.D0C 5 REVIEW OF ENVIRONMENTAL IMPACTS, COPPER VALLEY INTERTIE AND ALTERNATIVES indicated in public comments included in Volume 3 of the 1994 Feasibility Study and made by representatives of affected recreational businesses during public meetings in December 1995. CVEA and local business groups believe that future growth in the area would be hin- dered if sole reliance on local generation resources were to continue, and that the availabil- ity of cost-effective Railbelt power provided by the intertie would facilitate beneficial economic development. No studies have been done to quantify the potential effects of alternative generation and transmission scenarios on the economy of the CVEA service area. Such studies would re- quire examination of existing development plans and proposals for the area, an overall as- sessment of economic development potential, and an analysis of the sensitivity of potential development to power cost and reliability issues. The potential adverse effects of the intertie on the economy of Matanuska Valley communities, as discussed below, would also need to be considered in the analysis. Intertie The intertie could have both positive and negative effects. Construction of the intertie, as discussed in Volume 2 of the 1994 Feasibility Study, could result in significant local em- ployment opportunities for Matanuska Valley Residents and increased revenue for are service businesses (e.g., restaurants and lodging). These effects would be limited in duration to the construction period. Long-term positive economic effects on the CVEA service area would also be realized through the availability of plentiful, relatively low-cost power from the regional grid. As discussed under the No Action Alternative, the existing lack of such a supply places limitations on the area’s economic development; with the intertie, business expansion and other development would become more attractive, resulting in the potential for increased employment opportunities and tax revenues. As noted above, negative long-term economic impacts of the intertie would likely be related in large part to the project's effects on the visual quality of lands used by tourists and rec- reationalists. Public comment on the Feasibility Study and the update indicated that busi- nesses such as guide services and lodges, which form an important part of the economy of Sutton, Chickaloon, and Glacier View, would experience negative impacts because the area's desirability as a tourist destination would decrease. Respondents believed that the visual appearance of the line and its intrusion as a manufactured structure in the natural landscape would detract from the "wilderness experience" sought by backpackers, hunters, and other recreationalists, who consequently would be more likely to seek this experience in an undisturbed area. As with the No Action alternative, no work has been done to quantify the actual likelihood and extent of economic impacts resulting from the presence of the intertie in the Matanuska Valley. This work would need to identify specific businesses and business types likely to be affected because of their nature or location, and would assess relative levels of impact on the basis of recreationalist surveys conducted in relation to similar projects. Depending on the level and quality of data available, the assessment could results in quantitative estimates of potential income and tax losses in the affected communities. 1002C112.D0C 6 REVIEW OF ENVIRONMENTAL IMPACTS, COPPER VALLEY INTERTIE AND ALTERNATIVES New Diesel By providing increased power generation capacity to meet projected needs, the New Diesel alternative would help to support planned economic development in the CVEA service area. However, the full cost of these facilities would be borne by CVEA ratepayers. This could result in power costs high enough to limit the area's overall economic development potential. This issue would need to be explored for any alternatives that involved continued reliance on local generating resources without connection to the regional grid: Negative economic effects, if any, would likely be less than with the No Action Alternative. As with the intertie, construction of new facilities would result in potentially significant temporary opportunities for area workers and over the long term would result in lower operating costs than with no action. Silver Lake Economic effects of generation at Silver Lake would be similar to those described for the New Diesel alternative. Allison Lake Economic effects of generation at Allison Lake would be similar to those described for the New Diesel alternative. Valdez Coal Economic effects of coal-fired generation at Valdez would be similar to those described for the New Diesel alternative. In addition, mining operations near Sutton could provide em- ployment opportunities for area residents, although they might also result in negative ef- fects on nearby businesses oriented toward tourism or recreation. Protected Species and Habitats No Action Alternative No protected species or habitats would be directly affected by the No Action Alternative. Intertie The Matanuska Valley contains significant populations of moose, caribou, Dall sheep, trumpeter swan, and black and brown bear. Bald eagles may also use the area. The align- ment also crosses or passes upstream of 14 anadromous fish streams and traverses 65 miles of wetlands listed in the National Wetlands Inventory. As discussed in the 1994 Feasibility Study, the intertie would pass through significant habitat of most of the species noted. Po- tential impacts would include removal of mineral licks used by Dall sheep and crossings of moose rutting and calving areas and trumpeter swan nesting areas. Trumpeter swans, in particular, are sensitive to the presence of powerlines and tend to collide with them, result- ing in injury or death. Although the intertie would not physically impede wildlife move- ment, avoidance of the disturbed area could result in changes to existing migration patterns, particularly since a 12-foot-wide wildlife movement corridor parallels much of the 1002C112.D0C 7 REVIEW OF ENVIRONMENTAL IMPACTS, COPPER VALLEY INTERTIE AND ALTERNATIVES proposed alignment. Species sensitive to the presence of humans or manmade structures could tend to change their customary ranges or travel patterns to avoid the intertie area. Increased access to previously undeveloped areas could increase hunting of the existing populations of moose, the Nelchina caribou herd, dall sheep, and brown bears. The inten- sity of any increased hunting would depend on the specific locations of proposed access roads with respect to these animals’ habitat areas. Additional access could enable hunters from the Anchorage metropolitan area to compete with local residents who use the area for subsistence hunting. Although none of the 14 anadromous streams that the intertie would cross or pass upstream of supports large populations of anadromous fish, the 1994 Feasibility Study suggests that even slight effects on water quality would be detrimental. Such effects could result from erosion into streams during the intertie's construction or from erosion of soil from access road during project operations. Mitigation measures for fish and wildlife impacts would include both those required by agencies with jurisdiction (for example, federal bald eagle protection requirements and trumpeter swan protection measures specified in the Copper River Basin Area Plan) and those that could cost-effectively be implemented to reduce impacts of concern to valley residents, such as increased pressures on species important to subsistence hunters. Mitiga- tion would need to be based on the relative significance of expected impacts, as determined by calculations of habitat loss and through coordination with resource agencies and other concerned parties (such as hunting guides and subsistence hunters). New Diesel It is assumed that new diesel generation facilities would be sited in an area characterized by industrial development. No impacts on protected species or habitat are anticipated. Silver Lake According to the Allison Lake Reconnaissance Study, Silver Lake and the surrounding area support a sizable goat population and are among the most popular goat hunting areas in Prince William Sound. Black bear habitat in the region is also rated good to excellent, with bear feeding on the salmon that spawn in the area. Deer are few in the area, and waterfowl use is not extensive. The Duck River (Silver Lake’s outlet stream) and the surrounding la- goon area are reported to be one of the most productive regions in Prince William Sound for pink salmon. Pink salmon escapement has been estimated to average around 51,000 per year. Chum salmon and Dolly Varden are also abundant in the area. Salmon spawning beds have been identified in the Duck River, The Lagoon, Reverse Creek, and a number of other small tributaries in the area. There would be a loss of habitat associated the Silver Lake project due to the raising of the lake elevation by 100 feet, increasing the surface area by about 600 acres. Effects on wildlife habitat have not been studied; what is known is that access and exposure to the region, and therefore potential pressure on animal populations, will be increased with any development in the area. Development of a hydroelectric project at Silver Lake will raise the issue of minimum in- stream flow requirements on the Duck River, which could have an effect on salmon 1002C112.D0C 8 REVIEW OF ENVIRONMENTAL IMPACTS, COPPER VALLEY INTERTIE AND ALTERNATIVES production in the region. Two potential locations on the river have been identified for the powerhouse, one at elevation 35 and one at elevation 65. The higher-elevation site is located above what is reported to be an impassable fish barrier, while the lower-elevation site is downstream of the barrier location. With either site, flows in the bypass reach would be reduced under the developer’s proposal to approximately 5 cubic feet per second (cfs). Although the project proponent has contended that most salmonid spawning takes place in Bennett Creek, which flows into the river downstream of the lower powerhouse site, no in- formation is currently available to support this contention. Discussions with the Alaska Department of Fish and Game indicate that a level of between 100 and 200 cfs during the summer months would be required to maintain salmon runs in the river. The spilling of larger volumes of water than initially anticipated would reduce the generating capacity of the project during the period when higher flows were required. The overall effect of esti- mated instream flow requirements on the power supply and economic aspects of the Silver Lake project are discussed in CH2M HILL’s January 29, 1996 technical memorandum en- titled “Cost Estimates and Risk Analysis for Copper Valley Intertie and Alternatives.” Another area of potential concern for fisheries resources is the control of water tem- peratures in the Duck River during the early part of the winter, which is essential to prevent premature hatching of salmonid eggs. To allow temperature control, the reservoir outlet structure could be designed to allow water to be taken from the lake at varying levels. This design is factored into the Silver Lake estimate included in the “Cost Estimates and Risk Analysis” memorandum. Two options are under study to deliver electricity from Silver Lake to Valdez: a 22-mile overhead transmission line, or a 2.2-mile transmission line connecting to an 18-mile subma- rine cable beneath Prince William Sound. The 22-mile overhead route would have similar potential effects to the intertie in terms of wildlife and habitat, although over a shorter cor- ridor. The submarine cable could result in temporary water quality impacts during con- struction that would have the potential to affect marine life. No detailed study has been done on the potential impacts of these transmission facilities. Allison Lake Wildlife species in the Allison Lake area include brown bear, black bear, mountain goat, wolf, wolverine, marten, porcupine, and snowshoe hare. Wildlife surveys conducted by ADFG in 1978 for the Solomon Gulch Hydroelectric Project FEIS indicated that the Solomon Creek drainage provides relatively good habitat for black bear and that the coastal area is prime habitat. The Allison Creek drainage habitat is similar to that of the Solomon drainage and likely supports similar wildlife; according to the 1981 COE Feasibility Report, the most commonly observed mammal near the proposed Allison Creek site is black bear. The closest known bald eagle nests to the site are located near Lowe River, approximately 3 miles from the project area. According to the USFWS, there are no other known endangered or threat- ened species of flora and fauna in the study area. According to the Alaska Department of Fish and Game (ADFG), much intertidal spawning by pink and chum salmon takes place in the sand, gravel, and/or silt fans present at the mouths of many area streams, including Solomon Creek and Allison Creek. Some dis- agreement exists on exactly where spawning occurs; discussions with ADFG for the Allison Lake Reconnaissance Study indicated that spawning may occur as far as 1 mile up Allison Creek, while other sources suggest that spawning occurs 1.5 miles below the outlet of 1002C112.D0C 9 REVIEW OF ENVIRONMENTAL IMPACTS, COPPER VALLEY INTERTIE AND ALTERNATIVES Allison Lake. In addition, the 1981 COE Feasibility Report states that spawning occurs only 1/4 mile from the mouth of Allison Creek. As noted above for Silver Lake, reduced flows in Allison Creek during periods of water di- version could affect spawning areas and overall fish populations in the creek. Comments from resource agencies on the Allison Lake Reconnaissance Study indicated concern that minimum instream flow requirements used to estimate generating capacity were not suf- ficient to ensure the viability of fisheries resources. Concern has also been expressed by the Solomon Gulch Hatchery, downstream of the reservoir, that introduction of Allison Lake waters could result in unacceptably high turbidity or the introduction of disease-carrying organisms. However, available data do not support this concern, according to the 1994 Feasibility Study. Valdez Coal Because the coal generation facility in Valdez is expected to be located in an industrial area, it would not be likely to affect animals or their habitat. However, the proposed mine near Sutton would have the potential to result in adverse effects on these resources. As discussed above under Visual Quality, the extent of such effects would depend upon the size and location of the mine, the mining methods employed, and other factors. Insufficient infor- mation is available to determine the level of impact at this time. Water Quality No Action No impacts on water quality would occur as a result of the No Action alternative. Intertie The intertie project would involve electrical generation using natural gas to meet CVEA demand. Natural gas generation would occur within the service area of the Chugach Elec- tric Association (CEA) or Matanuska Light and Power (MLP). The 1994 Feasibility Study evaluated the relative water quality impacts of natural gas and coal generation facilities over their respective life cycles, calculating these impacts on a basis of quantity per average megawatt per year. The evaluation was based primarily on generic information available on the types of generation facilities being evaluated. Natural gas generation assumed for the intertie was concluded, on the basis of this information, to have a low level of environ- mental effects. Water consumption per average megawatt per year was estimated at 8.4 acre-feet, thermal discharge at 28,800 MMBtu, and total suspended solids at 1.14 tons. Other categories of discharges evaluated were not consistent between the two alternatives and do not lend themselves to a comparative analysis. Water quality effects of the intertie itself would be related to the potential for erosion of soil and other materials into nearby surface waters during project construction and operation. As discussed above under Protected Species and Habitats, even small effects on water quality could affect salmonid species in project-area streams. An estimate of the total acre- age disturbed during construction and the length, location, and composition of access roads would be required to assess the relative significance of potential impacts. Best management 1002C112.D0C 10 REVIEW OF ENVIRONMENTAL IMPACTS, COPPER VALLEY INTERTIE AND ALTERNATIVES practices for erosion control, such as silt fences, temporary sedimentation basins, and timely revegetation of disturbed areas, could be used to minimize the effects of construction on streams. New Diesel The discussion of water quality impacts for diesel generation in the 1994 Feasibility Study did not include quantitative estimates of life-cycle effects. Potential impacts cited included adverse effects of cooling water discharges on biochemical oxygen demand, chemical oxy- gen demand, total suspended and dissolved solids, ammonia, and thermal discharges, which could affect fisheries resources in receiving waters. The overall water quality effects of diesel generation were estimated to be of a medium level. Silver Lake Water quality impacts on Silver Lake were not specifically discussed in the Allison Lake Re- connaissance Study. Likely sources of potential impact would include erosion and sedimen- tation during construction and the effects of reduced stream flow on Duck River, particularly the potential for increased summer temperatures and resulting reductions in dissolved oxygen concentrations. Allison Lake Potential water quality impacts of the Allison Lake project would include those described above for Silver Lake. In addition, the effects of mixing Allison Lake and Solomon Gulch Reservoir waters were discussed in the 1994 Feasibility Study. Information collected by the U.S. Army Corps of Engineers in 1979 indicated that Allison Lake water met all state and federal surface water quality standards for physical, chemical, and biological parameters. As noted above, representatives of the Solomon Gulch Hatchery have expressed concern about the potential for disease-causing organisms or unacceptable turbidity in Allison Lake water; however, according to the Feasibility Study, such effects are not anticipated. The impacts of supplemental diesel generation would be as discussed above for the New Diesel alternative, but would occur on a smaller scale because the amount of diesel genera- tion required would be less. Valdez Coal Life-cycle water quality effects of coal generation were rated as “medium” in the 1994 Feasibility Study on the basis of generic information for coal-fired facilities. Water con- sumption per average megawatt per year was estimated at 17.4 acre-feet, thermal discharge at 44,200 MMBtu, and total suspended solids at 0.063 ton. Other discharges into receiving waters would include relatively minor amounts of oil and grease, chloride, iron, and copper. 1002C112.D0C 11 REVIEW OF ENVIRONMENTAL IMPACTS, COPPER VALLEY INTERTIE AND ALTERNATIVES Air Quality No Action Assuming that current levels of power production were maintained at the existing diesel facilities, air quality would remain similar to existing conditions. It should be noted, how- ever, that the existing facilities likely have higher levels of emissions per kilowatt hour than facilities using newer combustion technology and pollutant controls. Intertie The 1994 Feasibility Study assessed the air quality impacts of the proposed natural gas gen- eration facility in the CEA or MLP service areas as low, based on the clean-burning quality of natural gas combustion turbines. The primary air quality concern would be NOx emis- sions, which tend to be a problem because of high combustion temperatures. NOx emis- sions are typically controlled through the injection of water or steam into the CT combustor, which can reduce emissions by up to 80 percent. The appropriate control technology to safeguard environmental quality is determined during permitting, which would be admin- istered by the Alaska Department of Environmental Quality (ADEC). Table 2 shows the Feasibility Study estimates of fuel-cycle air pollutant emissions, based on a GE Frame 7 combined-cycle unit. TABLE 2 Air Quality Impacts of Natural Gas Generation Generation Gas Extraction Transportation (Ib/kWh and Pollutant (tons/MW/year) (tons/MW/year) tons/MW/year) Sulfur Oxides 94.600 0.0004 0.0000089 2.80 Oxides of Nitrogen 5.630 0.266 0.0011 0.04 Particulates 0.126 0.000064 2.33 Carbon Dioxide 0.00032 4,174.00 Volatile Organic Com- 0.00011 pounds Source: Copper Valley Intertie Feasibility Study, April 1994. In addition to its relatively low impact on air quality in the area where the natural gas tur- bine is sited, the intertie project would improve air quality in the CVEA service area through reductions in diesel generation and the consequent emissions. These reductions have not been quantified in existing studies of the project. 1002C112.D0C REVIEW OF ENVIRONMENTAL IMPACTS, COPPER VALLEY INTERTIE AND ALTERNATIVES New Diesel Air quality impacts of new diesel facilities in the Copper Valley service area were rated high in the 1994 Feasibility Study, based on similar analyses of alternative sources of generation. Diesel generation would result in potentially significant emissions of sulfur oxides, oxides of nitrogen, and carbon dioxide. Mitigation of NOx would be accomplished in the same manner as for natural gas generation; sulfur oxides would be controlled through the use of scrubbers. The level of control required would depend upon estimated emissions levels; any federally designated “criteria pollutant” emission of over 250 tons per year could be subject to the Prevention of Significant Deterioration permitting process, administered by ADEC, which specifies stricter controls to limit emissions. Table 3 shows the Feasibility Study esti- mates of pollutant emissions during generation in pounds per kilowatt-hour for two models of diesel engines. Emissions associated with resource extraction and transportation are as- sumed to be the same as for natural gas generation. TABLE 3 Air Quality Impacts of Diesel Generation Pollutant DE R-46 (Ib/kWH) CAT 3608 (Ib/kWh) Oxides of Nitrogen 0.3800 0.0220 Carbon Monoxide 0.00510 0.0049 Particulates 0.00015 0.0019 Volatile Organic Compounds 0.00098 0.0025 Sulfur Oxides 0.00460 0.0046 Source: Copper Valley Intertie Feasibility Study, April 1994. Silver Lake Air quality impacts associated with the Silver Lake project would be limited to those related to supplemental diesel generation. Such impacts would be similar to those described above for the New Diesel alternative, but would be proportionately less because of the lower gen- eration requirements. In addition, by reducing the overall need for diesel generation in the CVEA service area, the project would result in reduced emissions from the existing facili- ties. The net effect of the project on diesel emissions in the service area has not been calcu- lated as part of the studies done to date. Allison Lake Impacts for the Allison Lake project would be similar to those for Silver Lake. Because Alli- son Lake’s total hydroelectric generating capacity is lower, however, diesel use and the re- sulting air quality impacts would be higher than for Silver Lake. 1002C112.D0C 13 REVIEW OF ENVIRONMENTAL IMPACTS, COPPER VALLEY INTERTIE AND ALTERNATIVES Valdez Coal As described in the Feasibility Study, the fluidized-bed combustion technology proposed for the Valdez coal project would result in substantially lower NOx and SOx emissions than for conventional coal-fired facilities. However, because no information specific to the pro- posed facility was available, it could not be confirmed that the plant’s emissions plume would not cause adverse effects on nearby Class I airsheds. This uncertainty resulted in the assignment of a high impact rating to the coal facility. Table 4 shows the estimated air emissions per average megawatt per year, based on generic information on the atmospheric fluidized-bed combustion process. TABLE 4 Air Quality Impacts of Coal Generation Pollutant Mining and Processing Transportation Generation (MW/year) (MW/year) (MW/year) SO, (tons) 0.009 0.14 1.8 NOx (tons) 0.140 0.128 15.3 Particulates (tons) 0.007 4.08 1.6 CO, (tons) 9,313.0 CO (tons) 0.028 0.189 1.54 Fugitive Dust (tons) 0.020 12.0 Heavy Metals (Ib) 2.8 Radium 226 (curies) 0.000004 Methane (tons) 7.01 Source: Copper Valley Intertie Feasibility Study. April 1994. Cultural Resources No Action No impacts on cultural resources would result from the No Action alternative. Intertie Although the Matanuska Valley Moose Range (MVMR) had not been completely surveyed for cultural resources as of the publication of the 1994 Feasibility Study, the Alaska Heritage Resources Survey had recorded eleven cultural resources within the MVMR at that time, including Native grave sites, bridges, and mines. Numerous abandoned mines are present in the MVMR, including the National Register of Historic Places-eligible Eska Mine. The MVMR Management Plan lists the Chickaloon River Trail, the Chickaloon-Knik-Nelchina Trail, the Boulder Creek Trail, and the Old 98 Trail as trails with historical value. Areas with 1002C112.D0C 14 REVIEW OF ENVIRONMENTAL IMPACTS, COPPER VALLEY INTERTIE AND ALTERNATIVES a high potential for cultural value are present along the southern portion of the Kings River, the Chickaloon River and Boulder Creek. As of 1993, the Matanuska-Susitna Borough had a federal preservation grant to identify and evaluate historic sites on portions of the Chicka- loon-Knik-Nelchina Trail. Several Native village corporations own land or have selected land within the project area under the Alaska Native Claims Settiement Act of 1971. The proposed routes pass through lands owned by the Cook Inlet Regional Incorporated (CIRI), the Chickaloon Moose Creek Native Association (CMCNA), the Tazlina Village Corporation and the Ahtna Regional Corporation. At one of the public meetings held in 1993, representatives of the Chickaloon Village Traditional Council stated that their lands were not accurately depicted on a project land-status map. As of 1993, few if any consultations with tribal stakeholders had been conducted. As noted above, lands in the Matanuska Valley are reported to be in current use for subsistence hunting; presumably some portion of this hunting is done by Native resi- dents. Because of the need for federal permits and land crossing approvals, the project would re- quire compliance with Section 106 of the Historic Preservation Act and related statutes. Dames & Moore, in consultation with the State Office of History and Archaeology at a March 1993 agency meeting, determined that the potential transmission line routes had not been surveyed and that an archaeological survey would need to be done if the project were to proceed to completion. An ethnographic survey may also be required if Native properties are affected. New Diesel The potential for impacts on cultural resources under this alternative would be limited to the discovery of a previously unidentified historic or prehistoric site during construction of diesel generation facilities. Since facilities are assumed to be sited in developed industrial areas, this potential is not considered significant. Silver Lake The potential exists for cultural resource sites to be inundated during filling of the Silver Lake reservoir or disturbed by construction of generating facilities. Available information does not indicate whether records searches or surveys for cultural resources have been completed for the Silver Lake site. It is likely that both would be required for compliance with Section 106 as a prerequisite to obtaining federal licenses for the project. In addition, Native corporations would need to be contacted to discuss the potential for resources and any traditional uses of the area. Allison Lake As with Silver Lake, it is not known whether cultural resource records searches or surveys have been done in conjunction with project proposals. Because the lake would be drawn down rather that dammed, no sites would be inundated; construction of generating facili- ties and/or excavation of the tunnel to Solomon Gulch could encounter previously undis- covered resources. Section 106 compliance would minimize the potential for adverse impacts. 1002C112.D0C 15 REVIEW OF ENVIRONMENTAL IMPACTS, COPPER VALLEY INTERTIE AND ALTERNATIVES Valdez Coal Impacts for the coal-fired generating facility would be similar to those of diesel generation and are expected to be minimal. The mining operation could affect cultural resources and/or current cultural activities of Native people, depending upon its location and extent. Further information would be needed on the proposed mine to determine the actual poten- tial for impacts. SEA/1002C112.DOC 1002C112.D0C 16 TECHNICAL MEMORANDUM CHMHILL Cost Estimates and Risk Analysis for Copper Valley Intertie and Alternatives PREPARED FOR: Dennis McCrohan PREPARED BY: Dave Gray DATE: January 29, 1996 Summary This memorandum presents 1) CH2M HILL’s analysis of cost estimates for the Copper Valley Intertie and other power supply alternatives for Copper Valley Electric Association. (CVEA), and 2) risk assessment of the least cost alternatives and analysis of the potential impact of these risks on project cost and schedule for these alternatives. The power supply alternatives are: e All Diesel generation (including the “1994 All Diesel” and the “Modified 1995” alternatives) e Intertie to natural gas generation in Alaska’s Railbelt region e Allison Lake hydroelectric generation e Silver Lake hydroelectric generation e Valdez Coal cogeneration Cost Estimates Construction cost estimates for each alternative and operation and maintenance (O&M) cost estimates for one alternative with relatively high O&M costs (the All Diesel alternative) were evaluated. The cost estimates evaluated were presented in the Copper Valley Intertie Feasibility Study completed in 1994 (referred to as the “Intertie Feasibility Study”); these estimates were subsequently used in the Copper Valley Intertie Feasibility Study Update in 1995 (referred to as the “Intertie Feasibility Update”). Public comment on the Intertie Feasibility Update was made during meetings in held in the first week of December, 1995. A number of the comments made during these meetings reflected concern about the accuracy and consistency of cost estimates for the alternatives evaluated. This memorandum is intended to respond to these concerns. CH2M HILL reviewed the approach taken to develop construction cost estimates for each alternative and checked the consistency among these estimates. Risk analysis to test the probability of cost overruns was conducted for the least-cost alternatives. Summary results of the overall analysis are shown in Table 1. Original cost estimates for the various alternatives were either developed for the Intertie Feasibility Study or taken from other studies. Estimates taken from other studies were adjusted to 1993 dollars, as shown in the first three columns of Table 1. Adjustments CH2M HILL made to these $EA/1002C1F5.D0C 1/30/96 1 estimates are reflected in the fourth column. Comparison between the third and fourth columns show that CH2M HILL generally accepts estimates made for the Intertie Feasibility Study. Table 1 Analysis of Construction Cost Estimates for Copper Valley Intertie and Alternatives CH2M HILL Cost Estimate/Review Intertie Feasibility Study Base Estimate Risk-Adjusted Estimates’ Original Cost Estimates 1993 in 1993 20th 50th 80th Dollars (000) Basis Year Dollars’ (000) Dollars (000) Percentile Percentile Percentile All Diesel 11,625° 1993 11,625° 12,125 9,960 10,840 11,700 Intertie 47,604 1993 47,604 47,604 45,400 47,600 49,800 Allison Lake 30,937 1992 32,240 32,240 na na na Silver Lake Option A 52,496 1992 54,185 54,185 na na na Silver Lake Option C na na na 39,635 34,100 35,600 37,400 Valdez Coal 36,600 1993 36,600 36,000 na na na 1 Risk-adjusted estimates show the level at which actual costs have a given probability of occurring or be in below. For example, there is an 80 percent probability that the construction cost for the Intertie will be at or below $49.8 million. 2 These data were used in the Copper Valley Intertie Feasibility Update for resource cost and cost of power calculations. 3 Construction cost estimates for the All Diesel Alternative as defined in the 1994 Intertie Feasibility Study. CH2M HILL’s evaluation of CVEA’s diesel generation option concluded that 1) construc- tion costs included in the Intertie Feasibility Study are realistic and 2) replacement of CVEA diesel units would result in improvements in generation efficiency and continuation of O&M staff at existing levels. The conclusion regarding operations is consistent with the “Modified All Diesel” alternative evaluated in the Feasibility Study Update. Table 1 also shows costs for a new design proposed for Silver Lake (Option C). This estimate is based on a proposed design by Whitewater Engineering. Cost estimates prepared by Whitewater were evaluated and adjusted to the $39.6 million estimate shown in the table. Risk Assessment and Analysis Risk analysis of Intertie construction shows that the cost to build the project will not likely vary by substantial amounts from the cost estimate. As Table 1 shows, there is an 80 percent chance that the project will cost less than $49.8 million. Risk analysis for the All Diesel alternative indicates that construction costs will likely fall between $10.0 and $11.7 million; there is an 80 percent chance that these costs will be less than $11.7 million. This is about the same as originally estimated by R.W. Beck and slightly less than estimated by CH2M HILL. Two findings from the risk analysis of Silver Lake Option C have significant, but opposite, impacts on the economics of this project. First, it is highly probable that construction costs will be less than estimated by CH2M HILL. Second, the energy output from Silver Lake will not likely be as high as planned. That plan includes a reduction in instream flows during the summer salmon spawning season from about 450 cubic feet per second (cfs) to SEA/1002C1F5.D0C 2 5 cfs. It is likely that regulatory agencies will require 100 to 200 cfs be maintained. This will reduce usable output from the plant by 10 to 20 percent. Conclusions On the basis of these findings, CH2M HILL recommends that analysis included in the Feasibility Study Update not be further refined with the exception of including evaluation of the Silver Lake Option C in the benefit-cost analysis. Based on CH2M HILL’s cost estimate and Whitewater’s planned output for Silver Lake, this project is one of the least cost alternatives. As shown in Table 2, it compares well with the Intertie and Modified All Diesel alternatives (assuming CVEA loads grow in the medium-low to medium-high range). However, risk analysis indicates that the cost of the project may be lower than estimated and that instream flow requirements for salmon spawning will likely result in lower output than planned. If the Silver Lake were to be built for only $35.6 million but output was limited to 85 percent of Whitewater’s plan, Silver Lake Option C would compare marginally less well with the Intertie: Low Fuel/ High Fuel/ Med. Low Med. High Load Fet. Load Fet. Present Value of Costs (1993$ * 10° Intertie 54,227 59,101 Silver Lake 57,369 61,870 Percentage Difference 5.8% 4.7% On the basis of data currently available, Allison Lake is still not considered as a realistic option because of the Four Dam Pool charge associated with this alternative. (The effects of this charge are not reflected in Table 2.) Following this summary are two sections. The first section contains a description and analysis of the cost estimate for each alternative. The second section is a risk analysis of three least-cost alternatives: the Intertie, the All Diesel, and the Silver Lake Option C alternatives. Each of the two sections begins with a brief review of the approach taken for the analysis in the section. $EA/1002C1F5.D0C 3 TABLE 2 Present Value and Benefit-Cost Ratio for Power Supply Alternatives -Low Fuel Cost Escalation. -High Fuel Cost Escalation Med. High Med. Low Med. High Med. Low Alternatives Load Fet. Load Fet. Load Fet. Load Fet. Present Value of Costs ($000)*: 1994 All Diesel 60,483 55,924 67,632 61,697 Modified 1995 All Diesel 56,955 49,592 65,054 55,893 Intertie 56,088 54,227 59,101 56,603 Allison Lake ‘ 59,972 55,606 63,223 57,520 Silver Lake-Option A 69,911 68,109 71,056 68,701 Silver Lake--Option C 58,644 56,895 59,780 57,492 Valdez Coal 88,683 83,962 84,499 79,574 Savings Compared to Diesel ($000): 1994 All Diesel 0 0 0 0 Modified 1995 All Diesel 3,528 6,332 2,578 5,804 Intertie 4,395 1,697 8,531 5,094 Allison Lake * 511 318 4,409 4,177 Silver Lake--Option A -9,428 -12,185 -3,424 -7,004 Silver Lake---Option C 1,839 -971 7,852 4,205 Valdez Coal -28,200 -28,038 -16,867 -17,877 Benefit /Cost Ratio: 1994 All Diesel 1.00 1.00 1.00 1.00 Modified 1995 All Diesel 1.06 1.13 1.04 1.10 Intertie 1.08 1.03 1.14 1.09 Allison Lake * 1.01 1.01 1.07 1.07 Silver Lake-Option A 0.87 0.82 0.95 0.90 Silver Lake--Option C 1.03 0.98 . 1.13 1.07 Valdez Coal 0.68 0.67 0.80 0.78 ‘Possible generation resources at Alyeska and Petro Star are excluded from this analysis due to lack of data on resource development costs. *M-H/M-L = Medium-High/Medium Low. Since the difference between the medium high and medium low forecasts is only the length of time Petro Star’s Valdez refinery is in operation, these forecasts are identical if Petro Star is assumed to leave the CVEA system. *4993 dollars based on a 4.5 percent discount rate. “Excludes 4-Dam Pool charge. SEA/1002C1F5.D0C Evaluation of Cost Estimates for Each Alternative Approach Evaluation of the cost estimates for each alternative was conducted through: ¢ Review of reports and other documentation supporting each estimate. This review was performed by experts in the primary technology employed for each alternative e A formal request to the owner or developer of each project alternative for new information pertaining to the given alternative and review of information received. e Aworkshop focusing on the various estimates and consistency among the estimates. Workshop participants included the individuals reviewing the cost estimate for each alternative, individuals who developed the original estimates, and cost estimating and risk analysis facilitators. A checklist was developed as a basis to evaluate the consistency of inclusion of specific cost elements in each estimate. Cross analysis was also conducted. e Analysis of information gained from the supporting documentation and the workshop. On the basis of this analysis, professional opinion was used to determine if adjustments to the cost estimates were warranted on the grounds of either their own merit or for consistency among the estimates. All Diesel Alternative Project Description Currently, diesel generators are being used at Glennallen and Valdez for generating and re- serve requirements above those met by hydroelectric generation at Solomon Gulch. These two sites each have seven machines, as shown in Table 3. The all diesel alternative assumes that Solomon Gulch and diesel generation would con- tinue to be used to meet CVEA generation and reserve requirements. Under this alterna- tive, several new units would be purchased to replace existing units at the time that major overhauls would otherwise occur. New generating units would be chosen as Caterpillar 3600 series engines. The choice of this supplier is intended to avoid support and supply problems exhibited with the existing En- terprise (recently) and Fairbanks Morse (historically) units. The size of engine to be pro- vided is set between 1,650 kW and 2,200 kW, presumably to support ease of installation and provide flexibility in load following. The addition of an additional engine generator at Glennallen can be accommodated with the existing building configuration—additional units would require expansion of facilities. There is presently no room for additions at the Valdez plant. Also, it is assumed that a 300,000-gallon fuel tank would be required at Valdez to supplement the current fuel system. Modifications to plant switchyard systems could certainly be required at either plant, due to the age of the present system and due to the demands of new generating equipment. SEA/1002C1F5.00C 5 TABLE 3 CVEA Existing Diesel Generation Glenallen Capacity (kW) Valdez Capacity (kW) Unit 1: Fairbanks Morse 300° Unit 1: Fairbanks 600 1959 Morse 1966 Unit 2: Fairbanks Morse 300° Unit 2: Fairbanks 600 1959 Morse 1966 Unit 3: Fairbanks Morse 600 Unit 3: Fairbanks 600 1963 Morse 1966 Unit 4: Fairbanks Morse 600 Unit 4: Enterprise 1700 1966 1972 Unit 5: Fairbanks Morse 600 Unit 5: Enterprise 2500 1966 1975 Unit 6: Enterprise 2200 Unit 6: Enterprise 950 1975 1975 Unit 7: Enterprise 2200 Unit 7: Solar (Turbine) 2800 1975 1976 “Unit is no longer in service. Cost Estimate In the Intertie Feasibility Update, data on diesel generator costs were evaluated from two sources: the Intertie Feasibility Study and CVEA’s power supply study entitled Intertie Final Report, Evaluation of Power Supply Alternatives. Cost estimates included in the Intertie Feasibility Study were judged to be more realistic in this cost estimate review. Engine generator cost estimates developed for the Intertie Feasibility Study are shown in Table 4. TABLE 4 R.W. Beck Diesel Generator Cost Estimates Description Caterpillar 3606 (1993 dollars) Caterpillar 3608 (1993 dollars) Engine 749,560 883,875 Generator 80,500 107,500 Cooling System 50,930 67,540 Exhaust System 10,230 12,210 Air Start System 26,400 26,400 Fuel System 27,500 27,500 Station Battery 7,700 7,700 Switchgear 110,000 110,000 Total Equipment 1,062,820 1,242,725 Engine Cost/kwW 592 527 Permitting, Site Prep, Engineering, Installation 255,077 298,254 Delivery 31,885 37,281 Contingency 159,423 186,409 Total 1,509,205 1,764,669 Cost per kW. 937 821 SEA/1002C1F5.00C This estimate was performed at a preliminary level of detail, which is not unusual for a facility of this kind. The contingency amount shown is about 15 percent of equipment costs. Delivery is 3 percent of equipment costs, and permitting /site preparation/engineering/installation costs are shown as 24 percent of equipment costs. Costs included in the estimate that may be overestimated or may even not be incurred are: ¢ Costs shown for permitting /site preparation/engineering /installation do not necessar- ily reflect the existing conditions at the sites. Provisions generally exist for new ma- chines, particularly if they replace existing machines. Air permits may be simply revised, site work may be minimal and engineering is limited to building and system changes (engine engineering is included in the purchase price). Installation is partially covered by engine support (provided by the supplier). ¢ Switchgear costs assume upgrade and/or new equipment provided with the new ma- chines. Existing electrical systems may be sufficient, or require minimal changes, to support the new machines. Costs that appear not to be included in the estimate are: e Switchyard improvements are not shown; either site may require substation and other improvements, estimated by R.W. Beck at $550,000. e Engine foundation and structural support systems may not be adequate for the new ma- chines. The area provided for expansion (or developed for expansion) may require foundation preparation or piling to support the new machine. e Air shed capacities are limited at Valdez. Both plants operate above PSD limits and hence Title V air permit requirements apply. This could translate to air modeling and other air permitting work, triggered solely by the addition of modern equipment-the last machine was added at Glennallen in 1975 and at Valdez in 1976. CH2M HILL recommends the All Diesel alternative cost estimate be augmented as shown in Table 5. This cost estimate reflects installation of five 3608 CAT engines (as shown in 1995 CH2M HILL report) at Glennallen (2) and Valdez (3). It assumes retirement of Unit 6 at Glennallen and Units 4, 5 and 6 at Valdez, and relocation of Unit 7 at Glennallen to Valdez. This cost estimate also shows $500,000 in permitting costs, recognizing potential problems at both sites with air shed and permitting to Title V requirements. SEA/1002C1F5.D0C 7 TABLE 5 CH2M HILL Adjustments to R.W. Beck Capital Cost Estimates for All-Diesel Alternatives Cost (1993 dollars) Description R. W. Beck CH2M HILL Structures and Improvements 2,000,000 2,000,000 Engine Generator & Accessories 6,214,000 6,214,000 Substation/Transmission 550,000 550,000 Delivery 186,000 186,000 Total Direct Construction Costs 8,950,000 8,950,000 Permitting 0 500,000 Engineering & Design 1,401,000 1,491,000 Subtotal 10,441,000 10,941,000 Contingency 1,184,000 1,184,000 Total 11,625,000 12,125,000 Possible limitations to this cost estimate are as follows: e Fuel system changes have been discussed for the Valdez plant, but were not acknowl- edged for the Glennallen plant. Cost at either site may not be adequately addressed in the cost estimate. e Electrical substation improvements have not been defined at either plant. The allowance shown in the cost estimate may not be sufficient for both plants. Conclusion The engine generator cost estimates provided for this alternative are reasonable, and typical for projects of this type. However, they may not adequately reflect powerplant building changes, significant fuel system changes or electrical substation improvements, all of which could be required. Copper Valley Intertie Project Description The proposed 138-kV transmission line between the towns of Sutton and Glennallen would allow the Copper Valley Electric Association (CVEA) to purchase relatively low-cost power from the generating utilities of Alaska’s Railbelt region. The approximately 134-mile-long intertie project would connect CVEA’s 138-kV system to the 115-kV Matanuska Electric Association (MEA) transmission system. MEA is served by the Chugach Electric Associa- tion transmission grid which is interconnected with Chugach and Anchorage Municipal Light and Power gas-fired generation resources. SEA/1002C1F5.00C 8 Cost Estimate Table 6 shows a summary of the cost estimate of the intertie prepared by R.W. Beck as part of the 1994 Copper Valley Intertie Feasibility Study. This estimate was intended to be an appropriately accurate representation of the total cost to develop and construct the project, so that fair economic comparisons can be made with the other power supply options. The estimate was based on investigations conducted by R.W. Beck and its consulting part- ners. The estimate was based on consideration of the electrical system impact, the preferred line route, and a specific construction concept. Dames and Moore. Inc., was responsible for the environmental analysis, and Power Technologies, Inc. (PTI) was responsible for the elec- trical system analysis. PTI modeled the Railbelt system with the CVEA system connected through the intertie. Numerous loading and system switch positions were used in com- puter simulations to determine the limitations imposed by the intertie. PTI found that with one Chugach 115-kV line segment out of service, CVEA loads above the planning load level of approximately 15 MW would require the addition of a Static VAR Compensator (SVC) at the new Sutton substation. To avoid the installation and the expense of the SVC, CVEA has elected to sever the intertie under these conditions and meet system load with a mix of available resources of including load shedding, if necessary. This approach is consistent with historic Railbelt utility practices. The R.W. Beck study includes estimates of the construction cost for four candidate line routes and recommends an “apparent preferred” route, as mentioned above. These esti- mates are both comprehensive and highly detailed. The analysis supporting the estimate begins with basic construction concepts and then uses numerous linked spreadsheets for the extension of material and labor costs. For example, the study considers the overall cost impact of several conductor types that meet the economic conductor size. The study also includes preliminary design of the strength, weight, and cost of several types of structures. The estimate itemizes the quantity and distribution of structure heights, span lengths, and construction assemblies, including insulators, nuts, and bolts, for each of the four distinctly different segments of the line route. The four line segments are referred to as structural Loading Zones that are distinguished by the weather exposure, terrain, vegetation, and soil conditions . Cost estimate contingencies are normally included to provide funds for additional costs that cannot be anticipated at the time of the estimate but could reasonably be expected. Such costs might include material and labor cost increases, changes during construction due to soil conditions, regulatory rule changes, or inadvertent design omissions. The R.W. Beck estimate includes contingencies that include all of these categories. $£N/1002C1F5.00c 9 TABLE 6 Copper Valley Intertie Cost Estimate Description Transmission Line Construction Structures Foundations Guys and Anchors Framing Conductor Right-of-Way Clearing Mobilization Subtotal Transmission Line Construction Substation Construction New Sutton Substation Bump Station No. 11 Substation Subtotal Substation Construction Direct Construction Cost Engineering Services Construction Management Environmental Services and Permitting Right-of-Way Acquisition Owner's Costs Subtotal Contingency Total Cost Cost (1993 dollars) 7,717,699 7,598,190 1,226,521 2,642,195 6,503,487 2,792,960 1,284,405 30,765,457 1,824,316 1,793,903 3,799,130 34,564,587 3,337,900 2,159,352 1,405,000 713,000 1,360,392 43,540,231 5,245,036 47,604,356 ‘Preferred Route Alternative D. SEA/1002C1F5.00C 10 Evaluation of Cost Estimate The Power Engineers study of 1993! developed a total Intertie project cost estimate (1993 dollars of $40,428,919 compared with the R.W. Beck total of $47,604,356). Power's estimate appears to be somewhat less comprehensive and somewhat less detailed in itemizations. Because the line routes assumed by the two estimates are different?, differences occur in right-of-way clearing, access, and judgments of construction efficiencies. The assumed design configurations for both estimates are similar. However, several design assumptions make the Beck estimate higher than that by Power Engineers. First, because of access problems at the existing O’Neil Substation, Beck determined that the Sutton terminus would require a new substation some distance from the old substation. Second, Beck assumed a somewhat larger and stronger ACSR conductor (605 kcmil Teal) compared to the conductor (556 kcmil Dove) that Power used in their estimate. These design differences probably account for approximately $1,000,000 of the estimate difference. A large difference also appears in Right-of-Way acquisition while Beck estimates $2,118,000 and Power estimates $449,000; a $1,669,000 difference. Beck included an Environmental Impact Study that was not anticipated as necessary by Power at the time of their estimate. Beck included 12 percent for overall contingencies (construction and other cost) while Power included 10 percent. This difference accounts for or about $1,000,000 of the difference between the Beck and Power estimates. The Beck contingency includes 15 percent on direct construction costs and 10 percent on other costs. A 10 percent contingency on construction is often appropriate for projects that are designed and ready for bidding. However, because the geotechnical survey and detailed design has not been completed for this project, and because the foundation work is such a large part of this project, the Beck 15 percent contingency on construction is appropriate. Adding the above estimate differences to the Power estimate brings the Power estimate to about $45,000,000 which is within 5 percent of the Beck estimate. During public meetings regarding the intertie in early December 1995, two questions were raised about specific aspects of the intertie cost estimate. Answers to these questions are: Helicopter costs : R.W. Beck includes the use of helicopters in their construction estimate where they are either required or economical to use. Beck estimates 683 hours at $239/hr for a Bell personnel helicopter and 573 hours at $3000/hr for a heavy-lift Vertol 107-2 heli- copter. Comparison with other 115-kV or 138-kV Construction Projects in Alaska: The Beck estimate divides the line route into four loading zones that result in differing costs per mile depend- ing on the construction, terrain, and access constraints. These costs are $227,000/mile for Zone 1, $223,000/mile for Zone 2, $245,000/mile for Zone 3, and $377,000/mile for Zone 4. These costs compare favorably with actual costs that were incurred for other projects with similar construction conditions in Alaska. 1 Power Engineers, Sutton to Glennallen 138kV Transmission Intertie Project, Volume 2, Final Report, prepared for the Copper Valley Electric Association, Dated January, 1993. 2 The Beck and Power Engineers routes are similar over the western-most 40 miles. At Syncline Mountain, the route assumed by Power Engineers travels to the south and that assumed by R.W. Beck travels to the north. From that point to the east end of the project, Beck’s route remains 2 to 5 miles to the north of the Power Engineers route. The Power Engineers route runs just to the North and parallel to the Glenn Highway. SEA/1002C1F5.00C 1 Given that the two estimates are for different line routes, these estimates are considered to be comparable. Conclusion The R.W. Beck estimate is an adequate and credible representation of the itemized and overall Intertie costs for the purpose of economic comparison with other power supply options. Allison Lake Hydroelectric Project Alternative Project Description Allison Lake is located about 2 miles southwest of Solomon Gulch Reservoir. The Allison Lake Project evaluated in the 1994 Intertie Study and the 1995 update, would divert water from Allison Lake to the Solomon Gulch Reservoir during the winter months in order to provide additional generator at the Solomon Gulch Project. Several design options at Alli- son Lake were reviewed in the Allison Lake Reconnaissance Study, prepared by HDR Engineering, Inc. (HDR) in September 1992. The preferred option identified in this study consists of an 11,950-foot-long tunnel from Allison Lake to the Solomon Gulch Reservoir, a lake tap approximately 2,100 feet below the surface of Allison Lake, and a 3,145-kW hydroelectric generation facility located at the discharge from the tunnel into the Solomon Gulch reservoir. Water would be withdrawn from Allison Lake, flow through the tunnel, and then pass through the generation facility and discharge into Solomon Gulch Reservoir. This water from Allison Lake would then be available to provide additional generator at the existing Solomon Gulch generation facility. The total expected average annual energy to be produced from the new powerhouse plus the increased production from the existing Solomon Gulch facility was estimated to be about 27,400 MWh. Another alternative, that would not require the passing of Lake Allison water into the Solomon Gulch reservoir or any other modifications to the Solomon Gulch hydroelectric project, would be a stand-alone project on Allison Creek. The U. S. Army Corps of Engi- neers studied such a project in 1981 and their construction cost estimate was subsequently updated by HDR in 1992. The project would consist of an Allison lake tap and a combina- tion of tunnel and pipeline to convey water down to a new powerhouse on Allison Creek just above its mouth near sea level. The estimated project cost was substantially higher than the preferred option ($53,666,932 in 1992 dollars) and the expected average annual energy was assumed to be somewhat lower (25,900 MWh). Currently the Alaska Business and Industrial Development Corporation (ABIDC) holds a FERC Preliminary Permit to study a standalone project on Allison Creek. The project con- cept is similar to that studied by the Corps of Engineers in 1981 except for the following: e A trench and siphon intake would replace the lake tap. ¢ The water would be conveyed down to the powerhouse by pipeline only, rather the tunnel /pipeline combination. ABIDC is currently proposing a 5-MW installation at this site. A cost estimate has not been prepared by ABIDC. SEA/1002C1F5.D0c 12 Cost Estimate Table 7 provides a summary construction cost estimate for the Allison Lake project. It is a summary of a more detailed cost estimate prepared in 1992 by HDR as part of their Allison Lake Reconnaissance Study. Table 7 Allison Lake Project Summary Construction Cost Estimate eas Cost Description e (1992 $) Land and Land Rights 200,000 Structures and Improvements 1,522,850 Reservoirs, Dams, and Waterways 17,122,400 Turbines and Generators (Incl. Gov. & Exciter) 975,000 Accessory Electrical Equipment 240,000 Miscellaneous Mechanical Equipment 45,000 Structures and Improvements (Trans. Facilities) 30,000 Substation Equipment & Structures 112,000 Fixtures, Conductors & Devices 300,000 Total Direct Construction Costs 20,547,250 Design Engineering (9%) ; 1,849,253 Geotechnical , Borings, & Seismic Surveys 500,000 FERC and Other Licensing 400,000 Construction Management (8%) 1,643,780 Subtotal 24,940,283 Contingency 5,996,975 1992 Estimated Construction Cost 30,937,258 Evaluation of Cost Estimate The level of cost detail provided for this alternative was ample for a reconnaissance-level investigation. The estimate included a cost contingency of approximately 24.0 percent of construction and other costs. This appears appropriate for this level of study. The major uncertainty with this alternative is with the construction of the “lake tap” underneath Allison Lake. Considerable amount of debris apparently exists on portions of the lake bottom, and to the extent that it exists at the proposed lake tap location is unknown SEA/1002C1F5.00C 13 at this time. No cost allowance for any dredging was included in the estimate. In addition the exact location at which the lake tap is to be made is of critical importance and considerable subsurface investigation and analysis will be required before construction can begin. Poor rock conditions could even potentially render this alternative unfeasible. Conclusions In our opinion, the cost estimate as developed by HDR is reasonable and the project, as configured, appears to provide for a “utility grade” (50-year) facility, consistent with the standards we believe are necessary. Silver Lake Hydroelectric Project Alternative: Option A Silver Lake is situated about 15 miles southwest of Valdez. The outlet from the lake forms the Duck River which flows into Galena Bay. The Allison Lake Reconnaissance Study briefly reviewed two options for project development: Option A , proposed by Stone & Webster in 1982 and 1983, and Option B proposed by Whitewater Engineering Corporation (Whitewater) in 1992. Following is an evaluation of Option A. Project Description This option includes a 125-foot high roller-compacted concrete (RCC) dam, 6,000 feet of 108-inch pipeline, and a 15-MW powerhouse located at elevation 65 on the Duck River. The powerhouse would be equipped with three 5-MW Francis turbines. Transmission to the Solomon Gulch Project would be accomplished with a 22-mile-long overhead transmission line. The total expected average annual energy to be produced by this option was estimated to be about 44,800 MWh. Cost Estimate Table 8 provides a summary construction cost estimate for the Silver Lake (Option A) proj- ect. It is a summary of a more detailed cost estimate prepared in 1992 by HDR as part of their Allison Lake Reconnaissance Study. Evaluation of Cost Estimate The original cost estimate for this option was prepared in 1982 by Stone & Webster as part of a Cordova power supply interim feasibility assessment. HDR developed the costs con- tained in Table 2 by using the quantities previously developed by Stone & Webster and applying their own unit prices. HDR presented the estimate in about the same level of detail as provided in their Allison Lake estimate. In recent discussions with HDR it was agreed that a cost allowance for geotechnical investigations should by added to their 1992 estimate and that has been done, as shown in the table. This estimate included a contingency of approximately 22.5 percent on the construction and other costs, which again appears appropriate for this level of study. The Silver Lake site is more remote than the Allison Lake which will make access for diffi- cult and expensive. However there doesn’t appear to be any major technical barriers to development of a project at Silver Lake. SEA/1002C1F5.D0C 14 The Duck River and surrounding lagoon area is reported to be a very productive region for pink salmon. The elevation 65 site for the powerhouse is above what has been considered to be an impassable fish barrier. Thus the environmental impacts on the fishery have been viewed as minimal. Table 8 Silver Lake (Option A) Project Summary Construction Cost Estimate ‘ost Description ! (1992 dollars) Land and Land Rights 1,175,000 Structures and Improvements 2,571,250 Reservoirs, Dams, and Waterways 20,619,500 Turbines and Generators (Incl. Gov. & Exciter) 4,095,000 Accessory Electrical Equipment 440,000 Miscellaneous Mechanical Equipment 50,000 Structures and Improvements (Trans. Facilities) 30,000 Substation Equipment & Structures 300,000 Fixtures, Conductors & Devices 6,600,000 Total Direct Construction Costs 35,880,750 Design Engineering (9%) 3,229,268 Geotechnical , Borings, & Seismic Surveys 500,000 FERC and Other Licensing 400,000 Construction Management (8%) 2,870,460 Subtotal 42,880,478 Contingency 9,615,725 1992 Estimated Construction Cost 52,496,203 Conclusions The cost estimate for this option, as developed by HDR, in our opinion is reasonable and the level of accuracy appears consistent with the Allison Lake Project estimate. This Silver Lake option appears to also provide for a “utility grade” installation. SEA/1002C1F5.00¢ ce Silver Lake Hydroelectric Project Alternative: Option C Project Description As mentioned above, Option B to hydroelectric development at Silver Lake was developed by Whitewater Engineering in 1992. Whitewater updated its plan and related cost estimate ina letter to AIDEA, dated November 13, 1995. The updated Whitewater plan is referred to as Silver Lake Option C. It is similar to the Silver Lake Option A, except the powerhouse site would be lowered from elevation 65 to elevation 35 and a submarine transmission cable would be substituted for the overhead transmission line. By locating the powerhouse down at elevation 35 there would be some increase in energy production over the elevation 65 site, but that value has not been calculated yet. Whitewater recently received a FERC Preliminary Permit to further study the site. Cost Estimate A summary of Whitewater’s current construction cost estimate for Silver Lake (Option C) is shown in Table 9. This estimate was provided in Whitewater’s November 13, 1995, memo which it updated on January 18, 1996. Some adjustments to the latest estimate were made by CH2M HILL. The January 18 Whitewater estimate as adjusted by CH2M HILL is also shown in Table 9 (in the column entitled “CH2M HILL”). Evaluation of Cost Estimate It is our understanding that Whitewater’s costs are based upon their recent experiences on the Black Bear and Power Creek projects in southeast Alaska plus some reliance on the costs developed by HDR for the Silver Lake (Option A) alternative. The estimate contained a $300,000 allowance for two operators residences which was deliberately excluded from the table for consistency because this was not included in the Silver Lake (Option A) estimate. The CH2M HILL costs provided in the table are Whitewater costs with the following modifications: e Anallowance of $1,000,000 was added to acquire the necessary land rights to develop the project. This is the same figure used in the Silver Lake (Option A) estimate. Whitewater assumed that the affected property owner(s) would be paid a royalty on power sales revenues and this would become an operating expense. It was assumed that this would be equivalent to the $1,000,000 up-front payment. e¢ Whitewater’s estimate includes an allowance of $250,000 for a prefabricated metal building for the powerhouse superstructure. The Silver Lake (Option A) estimate con- tains a $600,000 allowance for a more substantial concrete /masonry building super- structure. For consistency between the two alternatives, the difference ($350,000) was added to our estimate. (If a prefabricated metal building were installed, maintenance would increase above assumed levels.) e¢ Whitewater’s November 13, 1995, costs for installation of the penstock were adopted. SEA/1002C1F5.D0C 16 Table 9 Silver Lake (Option C) Project Summary Construction Cost Estimate Cost (1995 dollars) Description Whitewater CH2M HILL Land and Land Rights 215,000 1,215,000 Structures and Improvements 1,462,500 1,512,500 Reservoirs, Dams, and Waterways 12,859,000 14,059,000 Turbines and Generators (Incl. Gov. & Exciter) 3,060,000 3,900,000 Accessory Electrical Equipment 910,000 910,000 Miscellaneous Mechanical Equipment 50,000 50,000 Structures and Improvements (Trans. Facilities) 68,000 68,000 Substation Equipment & Structures 325,000 325,000 Fixtures, Conductors & Devices 6,440,000 6,440,000 Mobilization 2,000,000 2,000,000 Total Direct Construction Costs 27,389,500 30,479,500 Design Engineering 750,000 750,000 FERC and Other Licensing 800,000 800,000 Construction Management 1,000,000 1,000,000 Subtotal 29,939,500 33,029,500 Contingency 4,535,925 6,605,900 1995 Estimated Construction Cost 34,475,425 39,635,400 ¢ Whitewater’s November 13, 1995, costs for purchase and installation of the turbine and generator equipment was also adopted. e Whitewater’s contingency was increased from 15 to 20 percent . Given Whitewater’s approach to the project, it is reasonable to use a 20 percent contingency rather than the 24 percent figure used in the Allison Lake estimate and 22.5 percent used in the Silver Lake Option A estimate. Locating the powerhouse down as low as elevation 35 could result in adverse impacts on the salmon fishery. Whitewater has indicated that the upstream migrating salmon turn in Bennett Creek before they reach the proposed powerhouse; but this will require further study. SEA/1002C1F5.D0C Also the swift currents and rough bottom conditions in Prince Williams Sound may make it quite difficult to build and maintain the submarine transmission cable as proposed by Whitewater. However the cost allowance for this cable is probably adequate to build an overhead transmission line. Conclusions Whitewater’s cost estimate presumably reflects the intent of a private power developer and engineer to take full financial responsibility for the planning, design, construction, and perhaps even the operation of this project. Therefore it is difficult to draw a direct cost comparison between this and the other alternatives whose estimates were developed by independent engineers. However, in our opinion, Whitewater would be capable of developing this project to “utility-grade” standards (50-year life) for $39.6 million. Valdez Coal Plant Alternative Project Description Coal-fired powerplant to be located in Valdez, adjacent to CVEA's existing diesel powerplant. The project, proposed by a private developer (Alaska Cogeneration Systems, Inc. [ACSI]) includes twin boilers (coal-fired and oil-fired), twin steam turbines (6 MW and 12 MW), a district heating system, limestone dry scrubber /baghouse dry scrubber system, 3 cell cooling tower, ash handling system and coal storage and feed system. The coal-fired boiler will be converted from a 26-year-old stoker unit to a fluidized bed unit, and the steam turbines (850 F/900 psig) will be reconditioned. The district heating hot water system is intended for government buildings, commercial and dockside facilities, but there are no agreements in place to support such a system at this time. Coal for this project is provided from a mine in the Matanuska Valley near Sutton, operated by the project developer. Coal would be containerized from the mine and shipped over-the- road to the railhead, then transported to Whittier for truck transport to the site. The cost of coal (estimated at $50/ton) includes mining, all transportation and delivery to the site. The site is reported to be suitable for construction of a powerplant (bedrock), has nearby sewer and water supplies from Valdez, and is near the diesel plant switchyard for power sales. Ash removal will be to a nearby landfill or backhaul to the mine. The developer has air permits filed for a former project that he feels will apply to this project. Operation of the plant will be primarily on coal fuel, 10 months of the year. Output will vary from 10 MW firm capacity to 1 - 1.5 MW during late spring. Shutdown will be during the summer periods (June - August). Maintenance of the plant will be performed primarily during the shutdown. Projected schedule for construction is 18 months. Cost Estimate Costs submitted by ACSI have been summarized by R.W. Beck in their 1994 report, as shown in Table 10. The contingency amount shown is 8 percent of total costs. SEA/1002C1F5,.D0¢ 18 Evaluation of Cost Estimate The estimate provided has good detail in most areas and can be compared and evaluated easily with other powerplant estimates. The contingency shown for this project is 7.5 per- cent of construction and other costs; CH2M HILL recommends at least 15 percent of construction and other costs for a well-defined project. TABLE 10 ACSI Cost Estimate for Valdez Coal Alternative Cost Description (1993 dollars) Site Acquisition 500,000 Foundation and Buildings 1,200,000 Boilers 4,000,000 Turbine Generator 2,000,000 Utility Work 500,000 Other 1,000,000 Piping 1,000,000 Electrical 2,200,000 Subcontractor Services 600,000 Miscellaneous Equipment 400,000 District Heating System 3,000,000 Water Supply and Treatment 500,000 Contractor Overhead and Profit 1,600,000 Total Direct Construction Costs 18,500,000 Permitting 150,000 Engineering and Design 850,000 Construction Management 1,000,000 Coal Reserves 2,300,000 Legal & development costs 1,900,000 Subtotal 24,700,000 Contingency 2,000,000 Total 26,700,000 Costs ACSI included in the estimate that may be overestimated or may even not be incurred include the following: e Engineering & Design: the developer intends to rely heavily upon the design documents done for the proposed Air Force OTH-B project. If this is possible, engineering costs would be minimal. SEA/1002C1F5.D0C 19 Permitting: the developer hopes to use existing air permits from the OTH-B project. If true, permitting costs would be minimal. Costs that appear not to be included in the estimate include the following: Coal handling equipment: not specifically called out in the estimate, may not be ade- quately provided for. Ash handling and disposal: not shown in the estimate; equipment and disposal costs could be significant. Startup, commissioning and training costs: not shown. Contractor overhead and profit appears low for a project of this type. CH2M HILL recommends the Valdez Coal Project cost estimate be adjusted to the amounts shown in Table 11. There are several potential "fatal flaws" related to this project. They include: ACSI apparently has little or no experience in coal mine operation, powerplant opera- tion and district heat operation. The complicated fuel delivery scheme (road, rail, barge) and sophisticated powerplant design (coal-fired fluid-bed boiler and steam turbines) would challenge even the most experienced developer. Refurbishment costs for the boilers and turbines are almost impossible to verify, but are well below new equipment costs. If these equipment items cannot be refurbished, the need for new equipment will make the project more costly than construction with new equipment. The lack of contracted district heating customers could severely hamper the economics and operations of the coal plant. Steam demands determine the power levels possible from the turbine generators. Revenue dollars from the heating plant offset project costs and substantiate the cogenerator status of the project. Without full development of the steam market, revenue requirements from the electric operation would increase to pro- portionately higher levels. The technical basis of the project is questionable, in several areas. First, operations of a coal plant on a part-time or reduced load basis is unprecedented and will result in fuel handling problems and early deterioration of equipment. Second, conversion of an old stoker boiler to a fluid-bed boiler cannot be verified or guaranteed to any acceptable level of confidence. Third, the planned goal of electrical interconnection of the plant at the existing diesel plant substation may well be impossible (since both plants may be required to operate at the same time), resulting in unplanned substation and distribu- tion system costs. The proposed transfer of air permits from past projects and equipment may not be ac- cepted on a new project. Permitting in the Valdez area is anticipated to be difficult due to the number of emission sources currently in operation. The proposed re-use of engi- neering documents for this project may be flawed due to changes necessary for this project. SEA/1002C1F5.D0c 20 TABLE 11 CH2M HILL-Adjusted Cost Estimate for Valdez Coal Alternative Cost Description (1993 dollars) Site Acquisition $1,000,000 Foundation and Buildings $1,300,000 Boilers $4,000,000 Turbine Generator $2,000,000 Utility Work $1,000,000 Other $4,000,000 Piping $1,000,000 Electrical $2,200,000 Subcontractor Services $600,000 Miscellaneous Equipment $400,000 District Heating System $3,000,000 Water Supply and Treatment $500,000 Contractor Overhead and Profit $4,000,000 Total Direct Construction Cost $25,000,000 Permitting $250,000 Startup, Commissioning and Training $100,000 Engineering and Design $850,000 Construction Management $1,000,000 Coal Reserves $2,300,000 Legal & development costs $1,900,000 Subtotal $31,400,000 Contingency $4,600,000 Total $36,000,000 $EA/1002C1F5.D0C 21 Conclusion The cost estimate provided by the project developer is substantially low, when compared against projects of similar complexity and technology. Construction costs alone for a project of this type should be on the order of $25 million (as shown in Table 11), assuming used equipment. New equipment would raise the cost much higher. Total costs for this project should be on the order of $36 million. All Diesel Alternative--Operation and Maintenance Description As described in the discussion of the construction cost for the All Diesel alternative, the All Diesel alternative assumes that Solomon Gulch and diesel generation would continue to be used to meet CVEA generation and reserve requirements. Under this alternative, several new diesel units would be purchased to replace existing units at the time major overhauls of the existing units would otherwise occur. Full capacity to meet local peak loads and reserve requirements would be continue to be maintained at both Glennallen and Valdez. Staffing levels at Glennallen presently total six persons: a chief operator, four engine opera- tors (three operators / three shifts per day and one operator on rotation) and one engine mechanic. Due to the isolation location of Glennallen, additional CVEA staff are not easily available. Valdez maintains a plant staff of four persons: a chief operator, two engine operators and one engine mechanic. The Valdez plant is close to the Solomon Gulch hydro plant, which has additional CVEA staff for that operation and a dispatch control center (including SCADA system monitoring). Hydro plant staff are cross-trained in diesel plant operations, and hence offer additional manpower to the Valdez plant as needed. For the All-Diesel Alternative, the 1994 RW Beck study indicated that three new operators would be added to the Valdez plant by 1997, to support new equipment and the increased generation role. The 1995 CVEA Power Supply Study assumed staffing requirements, indicating the termi- nation of five operators (four at Glennallen and one at Valdez). This was assumed due to installation of new, more reliable engine generators and the installation of supervisory SCADA equipment in both plants. This can be summarized as follows: All Diesel Alternative Case Glennallen Plant Staffing Valdez Plant Staffing Status Quo five four 1994 Study five seven 1995 Study one three SEA/1002C1F5.00C 22 Evaluation The All Diesel Alternative must have an appropriate number of plant operators available for engine (or gas turbine) generators that run in a primary power mode. Current staffing levels (five at Glennallen and four at Valdez) are appropriate for this alternative. The instal- lation of SCADA monitoring and newer generating equipment does not eliminate the need for close supervision of equipment, particularly if CVEA wants to control damage to equipment in an expeditious manner. However, the SCADA system would allow CVEA to proceed with the All Diesel alternative without any increases in operation and maintenance staff. Conclusion An increase in staffing levels for the All Diesel Alternative (as recommended in the 1994 study) is not warranted, even with the increased power generation. Similarly, a reduction in staffing for this Alternative could seriously endanger the availability of generators at the diesel plants. Risk Assessment and Analysis of Costs and Schedule for Selected Alternatives As noted above, the least cost alternatives for new power supply at CVEA include the Copper Valley Intertie, the All Diesel, and the Silver Lake Option C. In this section, project uncertainties regarding construction costs for these alternatives are examined and cost estimates associated with each adjusted to a “risk adjusted” range. Within this range, probabilities of actual costs being at or below certain levels are calculated. In addition, risk analysis was conducted for the operating costs of the All Diesel alternative. This was because the operating costs associated with this alternative are the major component of its life-cycle cost. Risk-adjusted construction costs estimates for the Copper Valley Intertie, the All Diesel, and the Silver Lake Option C alternatives are shown in Table 1. Risk-adjusted costs for All Diesel operation are discussed later in this section. Approach The analysis proceeded in a two-step process. First, uncertainties (defined as conditions or events that might affect either the project’s cost or schedule) are identified, categorized, and measured as of high, medium, or low risk or as a potential fatal flaw. Mitigation ideas are also developed for risks assessed as either high or medium. For each project alternative studied, assessments for each of uncertainty factor were developed, typically in a day-long workshop with experts familiar with the project or critical aspects required for project construction and, in the case of All Diesel alternative, operations. Second, on the basis of the risk assessment in step 1, risk analysis was performed to determine probability-based cost estimates for each alternative. This analysis included: e Integrating the results of the risk assessment workshop into the cost estimates (for example, the cost of mitigation of risks was added to the cost estimates) SEA/1002C1F5.00c 23 e Identifying a realistic range of cost for each of the primary cost categories included in the cost estimate e Performing a simulation analysis of total costs based on the range of probable cost for the primary cost categories. The result of this analysis is a risk-adjusted or probabilistic range of the total cost for each given alternative. This range represents the likely cost result of risks considered in our assessment. However, not all risks can be identified and those that can are estimated on the basis of experience and professional judgment. Therefore, actual costs can occur outside the ranges shown in the risk analysis figures (Figures 1, 2, and 3). Risk analyses presented in this technical memorandum are not meant as a guarantee as to the ultimate cost of any project. Given the risk-adjusted range of probable costs, a cost estimate can be adopted on the basis of one’s tolerance for potential budget overruns. For example, budgeting an amount that has only a 20 percent chance to be at or above actual costs may be considered to be too risky, since there is only one chance out of five of the project being below actual costs. On the other hand, budgeting an amount that has more than an 80 percent chance to be at or above actual costs may be considered to be too conservative, since there is less than a one in five chance of actual costs being above this amount. In addition to the direct impact of risk on project costs, the risk of impacting the project schedule was also assessed and evaluated. This was done from the perspective of whether the schedule included a reasonable allowance for time delays associated with each of the risks. Copper Valley Intertie Risk Assessment In the risk assessment workshop, the risk assessment team identified 60 potential risks to project cost and schedule. These risks were further discussed and then designated as potential fatal flaws or as high, medium or low risks in terms of their potential impact. Extraordinary (extremely low probability) events were not included, but events outside the control of the owner/project team were included. This process resulted in the identification of the following risk factors for project construction: ¢ 2potential fatal flaws (major risks that might result in project termination), e 2high risks (major risks with likely cost and schedule implications but not likely to result in project termination), e 20 medium risks (important but manageable risks), and e 36 low risks (possibly important risks but with small likely impacts). These risks are summarized in Table 12. Also included in this table is an indication (check mark) as to whether the risk was integrated into the risk-adjusted cost estimate and notes on potential mitigation for these risks. SEA/1002C1F5.00C 1/30/96 24 TABLE 12 Copper Valley Intertie Project Project Risk Assessment Summary Worksheet Category of Risk Potential Cost Risk Description of Risk Issue Fatal Flaw Cost__ Schedule _ Adjustment Notes on Mitigation A Management and Administration Issues Changing Govemment Regulations (State, Local Communities) Medium Medium v EIS and Public Involvement Govemmental Support FF Public Perspective (Natural Environment, Socioeconomics) High Medium 7 EIS and Public Involvement Site Acquisition (BLM, Native Corps., MatSu Borough) Medium Medium z EIS and Public Involvement Project M ation (CVEA, Low Low B. Finance Availabilty Issues Pre-Construction (CVEA Funding) Low Low Construction (State Grant) FF Copper Valley Feasibility Study Update __ Operations Cash-Flow (rate impacts and REA Terms) Low Low c Regulatory and Permitting Issues Permit Acquisition State DNR, Mental Health Lands Medium — Medium Ni EIS and Public Involvement Federal (BLM and COE) Medium Low v Els MatSu Borough Medium Medium v EIS and Public Involvement Native Regional Corp. (CIRI, AHTNA) Medium Medium y EIS and Public Involvement APUG (Power Sales) Low Low 0. Environmental and Geotechnical Issues Weather Conditions Medium Medium v Risk Adjusted Cost Estimate Environmental Restriction on Construction Medium — Medium v Risk Adjusted Cost Estimate Availability of Subgrade Testing to Date Medium Low Vv Risk Adjusted Cost Estimate Archaeological and Historical Findings Low Low Y Cultural Resources Survey E. Engineering Planning and Design Issues Design Approvals and Changes Low Low a Route Selection High High v EIS and Public Involvement Weather Design Criteria Medium Low v Risk Adjusted Cost Estimate System Performance Identity during Preliminary Engineering Communication System Low Low Integration (Need for SVC/Shunt Reactor) Medium — Low Final Electrical System Analysis Intertie to Fairbanks Low Low MEA Substation Low Low Construction Management Low Low v Project Team Continuity Low Low ging of Bids Low Low Contractor Issues ‘Competitive Availability of Qualified Contractors Medium — Low Timing of Project Construction Level of Specification Detail in Design Drawings Low Low Labor Negotiations/Stoppages (Union Contract Expiration) Low Low Management of Subcontracts Low Low Change Orders (e.g., Structure relocate, realignment) Medium Low v Risk Adjusted Cost Estimate Worker Safety (Construction in dark) Low Low a MEA Line Tap - Safety Low Low Pump Station 11 Tie - Safety Low Low G. Existing Structures and Equipment and Material Availability Equipment Availability (Helicopters) Medium Medium q Timing of Project Construction Materials Availability Low Low Rejects and Defects Low Low Equipment Malfunctions and Failures Low Low Condition of Existing Structures Low Low Material Cost Fluctuations Low Low v H. Construction Logistics and Transportation Laydown Area Limitations Low Low Traffic Congestion during Construction Low Low Access to Site (Physical) Medium Medium y Risk Adjusted Cost Estimate Access to Site (Right of Entry) Medium Medium y EIS and Public Involvement Equipment Delivery Eastem Construction Zone Medium Medium 9 Risk Adjusted Cost Estimate Western Construction Zone Low Low Materials Delivery Low Low Maintenance of Service during Construction Low Low Mobilization (Crew Lodging) Medium — Low v EIS and Public Involvement Demobilization Low Low i Start-Up and Commissioning Issues Final Inspection Low Low Substation-Sutton Low Low Substation-Glenallen Low Low J Operating Company Issues Maintenance of Line/Access for Maintenance (Contract Services) Medium - EIS and Public Involvement Availability of Line (Outages) Medium : Final Electrical System Analysis Power Sales Agreements Low : Back Feed to Sutton Low : Spare Materials and Parts Low : Identity in Preliminary Engineering Category of Risk: FF: Major Risk that Might Become a Fatal Flaw High: — Major Risk with Likely Cost and Schedule Implication but Not Fatal Flaw Medium: Important but Manageable Risk Low: Possibly Important but with Small Impact NA: __Not Applicable $€A/1002C1F5.D0C 1/30/96 25 The two potential fatal flaws and 22 medium to high risks? are discussed below. This discussion is organized according to the same risk categories as shown in Table 12 and includes a description of risks, costs and schedule impacts, and suggested methods to mitigate the risks. A discussion on potential schedule risk is also follows. A. Management and Administration Issues. The following are three key management and administration risk issues. The potential financial impact of these risk issues has been incorporated into the assumed ranges of the risk-adjusted project cost estimate. Risk A-1 Changing government regulation, particularly the potential for communities along the transmission route to assert zoning control over the location of the route represents a project risk. If the members of local communities stay mobilized against the project, it is likely to cost more and take longer to implement. (Medium Risk) Risk A-2 The governmental support for this project is uncertain and is related to cost- effectiveness of investment from the perspective of both resource use and utility rates. Without broad local and state support, the intertie is not likely to be implemented. (Potential Fatal Flaw) Risk A-3 The public support for this project is currently mixed. Opposition to the project is multi-faceted. (High Risk) Risk A-4 Right-of-way acquisitions for transmission line corridors can be time consuming. For this project there will need to be hundreds of easements and rights-of-way acquired. (Medium Risk) The risk assessment team concluded that the key natural environment and socioeconomic impact issues identified by the public thus far will be addressed in an environmental impact statement. Mitigation developed as part of that decision making process (particularly on transmission line routing and construction mitigation) will contribute to obtaining public support. Right-of-way acquisition needs to be started as soon as a route has been selected and the project has received permits for construction. A coordinator for acquisition is recommended due to the potential difficulty in obtaining them in a timely manner. B. Finance Availability Issues. One key finance availability risk issue was identified. The potential financial impact of this risk issue has not been incorporated into the assumed ranges of the risk-adjusted project cost estimate. Risk B-1 The State of Alaska construction loan for the Copper Valley Intertie Project is considered to be vital. Without the loan, this project is considered to be highly unlikely. (Potential Fatal Flaw). 3 These 22 risks represent the team’s recommended priority list for management action based on potential schedule and cost impacts to the project. The medium risks can usually be managed by direct integration into typical preliminary engineering or environmental impact analysis. The potential fatal flaws and high risks generally require more focused management, such as directed public involvement or newsletters. SEA/1002C1F5.00¢ 26 C. Regulatory and Permitting Issues. The following are four key regulatory and permitting risk issues. The potential financial impact of these risk issues has been incorporated into the assumed ranges of the risk-adjusted project cost estimate. Risk C-1 Permit acquisition from State of Alaska Department of Natural Resources, and State Mental Health Lands is considered uncertain pending completion of the environmental impact statement process. (Medium Risk) Risk C-2 Permit acquisition from Federal Bureau of Land Management and Corps of Engineers is considered uncertain pending completion of the environmental impact statement process. (Medium Risk) Risk C-3 Permit acquisition from the MatSu Borough is considered uncertain pending completion of the environmental impact statement process. (Medium Risk) Risk C-4 Permit acquisition from Native Regional Corporations (CIRI and AHTNA) are considered uncertain pending completion of the environmental impact statement process. (Medium Risk) The risk assessment team believed that permit acquisition was a medium risk and that completion of the environmental impact statement process would result in permits for the project. The risk-adjusted project budget has been adjusted to reflect the costs of the environmental impact process. D. Environmental and Geotechnical Issues. The following are three key environmental and geotechnical risk issues. The potential financial impact of these risk issues has been incorporated into the assumed ranges of the risk-adjusted project cost estimate. Risk D-1 Winter weather conditions along the transmission corridor will result in reduced construction efficiency. The impact is uncertain, but a contract clause allowing for some sharing of this risk between contractor and owner should be evaluated as a means of reducing the contract bid price. (Medium Risk) Risk D-2 Restrictions on construction due to maintenance of environmental quality/limited stream crossings will lead to reduced construction efficiency. This impact is somewhat uncertain at this time, since a final route has not been selected. (Medium Risk) Risk D-3 The foundation construction cost is uncertain at this time due to a lack of information about subgrade conditions. This is typical at this stage of a project and may not be fully addressed for each location until construction begins. (Medium Risk) The risk assessment team evaluated the existing cost estimates to verify that allowances for severe winter weather conditions had been included in the crew productivity assumed in the cost estimate. Range estimates were further increased to account for this risk. E. Engineering Planning and Design Issues. The following are three key engineering planning and design risk issues. The potential financial impact of these risk issues has been incorporated into the assumed ranges of the risk-adjusted project cost estimate. Risk E-1 The final route selection for the transmission line has not been made. The routes evaluated to date have been compared on a construction cost basis and SEA/1002C1F5.00C 27 the least expensive was selected. Pending the findings of the environmental impact process, during which a final route selection should be made, these costs may increase. An increased allowance for route selection is included in the risk- adjusted cost estimate. (High Risk) Risk E-2 The weather design criteria have not been finalized as yet and remain somewhat uncertain. They need to be finalized during preliminary engineering with the assistance of a meteorological survey; a contingency allowance is added in the interim. (Medium Risk) Risk E-3 Additional system performance evaluations (final electrical systems analysis) are recommended to address the current questions about the need and benefit for equipment currently not included in the project. Final decisions are needed during preliminary engineering on whether to include communications links and certain substation equipment (Static VAR Compensator and Shunt Reactor) as part of this project. (Medium Risk) The risk assessment team believed that the route selection would be made on the basis of weighted criteria, including impact on natural and human environment. Since the final route selection might result in a route that is not the least costly (as currently used in the cost estimate), a specific adjustment was included in the risk-adjusted cost estimate to allow for this uncertainty. The project as currently envisioned does not include certain features that are sometimes included in similar projects. The benefits of including them need further evaluation. It is important that these evaluations should take place early in the preliminary engineering phase of the project to assure integration into design features if needed. F. Contractor Issues. The following are two key contractor risk issues. The potential financial impact of these risk issues has only partially been incorporated into the assumed ranges of the risk-adjusted project cost estimate. Risk F-1 The availability of a number of qualified contractors to bid on this project is uncertain at this time. Construction is not currently envisioned earlier than 3 years from now, and competing projects may result in a low number of bids received. This risk may result in higher than anticipated bids. (Medium Risk) Risk F-2 Change orders due to field conditions not being reflected in design drawings are to be expected. A specific allowance for extra work, separate from project contingency, is included in the risk-adjusted cost estimate. (Medium Risk) The risk assessment team was concerned about the potential conflict of other Alaska construction projects with this transmission line project. No budget allowance was, however, included to reflect the potential of non-competitive bids. Alternative project delivery methods (such as negotiated design-build) should, if necessary, be considered during preliminary engineering as an alternative to traditional low bid award. G. Existing Condition of Structures and Facilities and Equipment and Material Availability Issues. The following key risk issue was identified for this category. The potential financial impact of this risk issue has only partially been incorporated into the assumed ranges of the risk-adjusted project cost estimate. $EA/1002C1F5.00C 28 Risk G-1 The availability of a number of different types of helicopters needed for material, crew, and equipment delivery has been assumed in the cost estimate. The actual availability at the time of the construction is conjectural at this time, and an allowance for alternative delivery methods will be left to the contractors. (Medium Risk) The key equipment needs for this project include different types of helicopters. Each has different uses and capacities, and the costs vary greatly. The availability of the least cost options is unknown (unknowable) at this time. This risk issue is considered in the contractor’s domain and did not affect project budget. H. Construction Logistics and Transportation Issues. The following are four key construction logistics and transportation risk issues. The potential financial impact of these risk issues has been incorporated into the assumed ranges of the risk-adjusted project cost estimate. Risk H-1 The physical access to the transmission line site presents certain constraints that need to be reflected in the project implementation plan and cost estimate. The uncertainty of the route leads to uncertainty in physical access options. An allowance for this uncertainty is recommended to be included in the cost estimate until a final route is selected. (Medium Risk) Risk H-2 In addition to physical constraints, the right of entry and reasonable access to the site may be limited by the mitigation conditions of the permits. Since they are unknown at this time, an allowance for additional access costs included in the risk-adjusted project cost estimate. (Medium Risk) Risk H-3 Equipment delivery to the eastern construction zone in the summer months may be more difficult than currently envisioned (wetland issues.) An allowance for this uncertainty and further evaluation during preliminary engineering is included in the risk-adjusted cost estimate. (Medium Risk) Risk H-4 The lodging for transmission line construction crews is assumed to be in motels along the construction route. The implications of this assumption (reality of supply/demand and impact on tourism) will be addressed during the environmental impact statement process. Separate worker lodging facilities (camps) are not anticipated to be needed as currently envisioned. (Medium Risk) The risk assessment team was concerned about the likely site access restrictions to be placed on the construction work. A range of costs has been included in the cost estimate to reflect this potential cost uncertainty, which will not be fully understood until final permits are obtained. Schedule. The risk issues discussed above have both potential project cost and project schedule impacts. The current schedule for project planning is up to 36 months, followed by a 24- to 31-month construction schedule. After reviewing each schedule risk, the team determined that this schedule adequately reflected the potential risks identified. SEA/1002C1F5.00C 29 Risk Analysis A construction cost risk analysis conducted for the Copper Valley Intertie included: e Integrating the results of the risk assessment workshop into the cost estimates, ¢ Identifying a realistic range of costs for each of the major expenditures for the project based on level of design detail, and e Performing a simulation analysis of the range-based cost estimate. The results of the risk analysis are shown in Table 13 and Figure 1. Table 13 presents the cost estimate as originally estimated and as a risk-adjusted cost estimate. As shown at the bottom of the table, the risk analysis for each cost component replaces the provision of a general contingency like that included in the original estimate. The risk-adjusted cost estimate shows the expected value of the estimate based on the recommended cost percent ranges shown. For example, for Structures the original cost estimate was $7.7 million and the risk-adjusted estimate is $8.1 million. The $8.1 million estimate is the expected value of the range between $6.9 million (which is calculated from $7.7 million times 90%) and $9.3 million (which is calculated from $7.7 million times 121%). Two types of distributions were used in the analysis. A triangular 10/90 distribution is basically a triangular distribution between the 10th and 90th percentile, with the peak of the triangle being the most likely estimate. This distribution is commonly used as a means of avoiding the need to include events with very little probability of occurring. Another distribution type used was the uniform distribution, which is a distribution evenly divided between two values. This type of distribution is preferred when very little is known about the potential shape of the distribution but the end points are fairly well known. As shown in Figure 1, the risk-adjusted cost estimate ranges from $45.4 to $49.8 million for probabilities of 20 to 80 percent. The high end of this range can largely be traced to four factors: e The new inclusion of an alternate route allowance, which is a mitigation for the risk that the least costly construction route will not be the final route selected through the environmental impact statement process. e The increased allowance for owners’ costs, which will be needed to secure public support for the project. ¢ The increased expected value estimate for foundations, which reflects the wide cost range and uncertainty about this cost estimate. e The increased expected value estimate for conductors, which also reflects the wide cost range and uncertainty about this cost estimate. The risk-adjusted expected value of project costs is $47.4 million (1993 dollars). It is only a coincidence that this is the same number as the original cost estimate. SEA/1002C1F5.00C 30 TABLE 13 Copper Valley Intertie Project Risk Adjusted Cost Estimate (1993 Dollar Values) Risk-Adjusted Ranges Original Risk-Adjusted ——as % of Original Cost Estimate) __ Cost Category Cost Estimate Cost Estimate Low Most Likely High Risk Distribution Type A. Transmission Line Construction Structures 7,717,699 8,073,801 90% 102% 121% Triangular (10th, 90th Percentile) Foundations 7,598,190 8,915,972 90% 100% 150% Triangular (10th, 90th Percentile) Guys and Anchors 1,226,521 1,252,856 80% 100% Triangular (10th, 90th Percentile) Framing 2,642,195 2,642,195 90% 100% 110% Triangular (10th, 90th Percentile) Conductor 6,503,487 7,631,398 84% 110% 154% Triangular (10th, 90th Percentile) Right-of-Way Clearing 2,792,960 2,992,586 90% 105% 125% Triangular (10th, 90th Percentile) Mobilization 1,284,405 1,367,420 90% 100% 125% Triangular (10th, 90th Percentile) Extra Work Allowance 1,000,000 914,033 50% 100% 130% Triangular (10th, 90th Percentile) Aitemate Route Allowance ° 900,000 400,000 2,000,000 Uniform (between values shown) Subtotal Transmission Line Construction 30,765,457 34,690,262 B. Substation Construction New Sutton Substation 1,824,316 1,824,316 80% 100% 120% Triangular (10th, 90th Percentile) Bump Station No. 11 Substation 1,793,903 1,793,903 80% 100% 120% Triangular (10th, 90th Percentile) Extra Work Allowance 180,911 180,911 Subtotal Substation Construction 3,799,130 3,799,130 C. Engineering Services/Construction Management Engineering Services 3,337,900 3,288,184 85% 105% 110% Triangular (10th, 90th Percentile) Construction Management 2,159,352 2,116,917 5% 6% Uniform (as a % of Construction) Subtotal Engineering and Const. Mgmt. 5,497,252 5,405,100 D. Environmental Services & Permitting 1,405,000 1,314,428 60% 100% 125% Triangular (10th, 90th Percentile) E. Right of Way Acquisition 713,000 784,300 95% 125% Uniform (between % shown) F. Owners Costs 1.360.392 1,609,763 2% 5% Unitorm (as a % of Total Costs) Total Project Cost (w/o contingency) 43,540,231 Project Contingency Allowance — 4.064.125 Total Project Cost 47,604,356 Total Project Cost: Expected Value From Risk Analysis 47,602,983 Extra Risk Allowance —2.231.017 Total Porject Cost: At 80th Percentile of Risk 49,834,000 $EA/1002C1F5.D0C 31 117526.C0.10 « Risk Simulation 1/23/96 * GM <A7-T--wWrwovv <A-T--wOPrwoyvv @RISK Simulation Sampling= Monte Carlo PROJECT COST #Trials=1000 15% yi iii) viendo ' riwiohi wfthn wii 20% Probability | ' | 50% Probability $ 45.4 Million > | : < | $ 47.4 Million T2Z ee Pa a a oir | | | | Loo ee a : ’ 6% | im coocccc co": Tl RS Rl Re Be reer B% Poo = ee O% 100 80%, 77> 60% Fo" 35 37.5 40 425 45 47.5 50 52.5 55 57.5 60 Values in Millions @RISK Simulation Sampling= Monte Carlo PROJECT COST #Trials=1000 sacs Bee eek Sasi s oe oe Sam sieeick aes saeccae © Missle cials ais Clege & 55 37:55 40 425 45 475 50 525 55 57:5 60 Values in Millions Figure 1 Copper Valley Intertie Project Cost Simulation All Diesel Alternative Risk Assessment As shown in Table 14, the risk assessment team identified 34 potential risks to project cost (including operations cost) and schedule. These risks were further discussed and then designated as potential fatal flaws, high, medium or low risks in terms of their potential impact. As in risk assessments for other power supply alternatives, extraordinary (extremely low probability) events were not included. This process resulted in the identification of: ¢ No potential fatal flaws (major risks that might result in project termination), ¢ No high risks (major risks with likely cost and schedule implication but not likely to result in project termination), ¢ 17 medium risks (important but manageable risks), and ¢ 16 low risks (possibly important risks but with small likely impacts). Also included in Table 14 is an indication (check mark) of whether the cost estimate was adjusted to account for a particular risk, and notes on potential mitigation. The 17 medium project risks are discussed below. A. Management and Administration Issues. No key management and administration risk issues were identified. B. Finance Availability Issues. No key finance availability risk issues were identified. C. Regulatory and Permitting Issues. One key regulatory and permitting risk issue was identified. The potential financial impact of this risk issue has been incorporated into the assumed ranges of the risk-adjusted project cost estimate. Risk C-1 State Air Quality Permit acquisition from State of Alaska is considered uncertain at this time due to the current non-attainment classification of the airshed at Valdez. The risk is that considerable modeling would be required for the permit with increased time and cost. (Medium Risk) D. Environmental and Geotechnical Issues. No key environmental and geotechnical risk issues were identified. E. Engineering Planning and Design Issues. One key engineering planning and design risk issue was identified. The potential financial impact of this risk issue has been incorporated into the assumed ranges of the risk-adjusted project cost estimate. Risk E-1 The existing electrical system quality (transmission and distribution) is uncertain and needs to better understood as part of the preliminary engi- neering activities. The purpose would be to include all needed system upgrades at the same time as new diesel units are installed. (Medium Risk) The risk assessment team believed that an electrical relay protection study and a switchyard upgrade study would be appropriate during preliminary engineering. SEA/1002C1F5.D0C 33 Table 14 Copper Valley All Diesel Alternative Project Risk Assessment Summary Worksheet Category of Risk Potential Cost Risk Description of Risk Issue Fatal Flaw Cost Schedule Adjustment Notes on Mitigation A Management and Administration Issues ‘Changing Govemment Regulations (State Air Quality) Low Low ¢ Title 5 Compliance Changes Govemmental Support Low Low ¢ Public Perspective (Natural Environment, Socioeconomics) Low Low e Site Acquisition NA NA Project Management Organization (CVEA) NA NA. B. Finance Availability Issues Pre-Construction (CVEA Funding) Low NA Construction (RUS Loar/Rates) Low NA Operations Cash-Flow (rate impacts and RUS Terms) Low NA c. Regulatory and Permitting Issues Permit Acquisition (State Air Permit) Medium — Medium iv Permit Acquisition (Federal REA) Low Low A D. Environmental and Geotechnical Issues Weather Conditions NA Low Environmental Restriction on Construction NA NA Availability of Subgrade Testing to Date Low Low v ‘Archaeological and Historical Findings NA. NA. & Engineering Planning and Design Issues : Design Approvals and Changes Low Low Site Availability and Suitability Low Low Site at Valdez is Questionable Existing System Performance (Electrical Trans. and Dist.) Medium — Medium A Elec. Relay Protection/Switchyard Upgrade Construction Management NA NA Project Team Continuity NA NA Packaging of Bids NA NA F. Contractor Issues Competitive Availabilty of Qualified/Skilled Contractors Medium — Medium Level of Specification Detail in Design Drawings Low Low Labor Negotiations/Stoppages (Union Contract Expiration) NA NA Management of Subcontracts NA NA Change Orders NA NA Worker Satety NA NA G. Existing Condition of Structures and Electrical Systems Condition of Existing Structure/Foundation Low Medium v Usability of Existing Structure Medium Medium v Condition of Existing Fuel Storage Medium — Medium y Condition of Existing Diese! Generators Medium — Medium a Condition of Existing Electrical Systems Medium Medium ¢ H. Equipment and Material Availability Construction Equipment Availability NA NA Diesel Engine Availability Medium — Medium Long (6 month) Lead Time Needed Diesel Engine Cost Fluctuation Low NA ~ Rejects and Detects NA NA. i Construction Logistics and Transportation Laydown Area Limitations-Diesel Engines Medium — Medium a ‘Sequencing of Materials/Covered Storage Laydown Area Limitations-Electrical Equipment Medium — Medium Covered Storage Access to Site (Physical and Right of Way) NA NA Mobilization of Material Low Low Maintenance of Service during Construction Medium — Medium 7 Demolition/Salvage of Existing Diesel Engines Low Low v High Salvage Value Expected Demobilization/Salvage of Existing Electrical Systems Medium Medium 7 Scrap Value Expected J. Start-Up and Commissioning Issues Final Inspection NA NA. K. Operating Company Issues Operating Labor Needed Medium NA Availability of Diesels (Existing and New) Medium NA Mechanical Age of Existing Diesels Fuel Costs Low NA Range Included in Base Analysis Spare Parts and Labor Support Service (Existing Diesels) Medium NA Poor Manufacturer Support Currently Spare Parts and Labor Support Service (New Diesels) Low NA Good Manufacturer Support Envisioned Maintenance of Diesels (Existing and New) Medium __NA Mechanical Age of Existing Diesels/High Cost Category of Risk: SEA/1002C1F5.00¢ FF: Major Risk that Might Become a Fatal Flaw High: Major Risk with Likely Cost and Schedule Implication but Not Fatal Flaw Medium: Important but Manageable Risk Low: Possibly important but with Small Impact NA: __Not Applicable F. Contractor Issues. One key contractor risk issue was identified. The potential financial impact of this risk issue was not incorporated into the assumed ranges of the risk-adjusted project cost estimate. Risk F-1 The availability of a number of qualified/skilled contractors to bid on this project is uncertain at this time. Construction is not currently envisioned earlier than 3 years from now, and competing projects may result in a low number of bids received. This risk may result in higher than anticipated bids. (Medium Risk) The risk assessment team was concerned about the potential conflict of other Alaska con- struction projects. The need for a qualified and experienced contractor is high to ensure project success. No budget allowance was, however, included to reflect the potential of non- competitive bids. Alternative project delivery methods (such as negotiated contracts) should, if necessary, be considered during preliminary engineering as an alternative to traditional low bid award. G. Existing Condition of Structures and Facilities. Five key risk issues were identified for this category. The potential financial impact of these risk issues has been incorporated into the assumed ranges of the risk-adjusted project cost estimate. Risk G-1 The condition of the existing structure and foundation is currently uncertain and needs to be ascertained as part of preliminary engineering. (Medium Risk) Risk G-2 The usability of the existing structure to house additional generation units is currently uncertain and needs to be ascertained during preliminary engineering. (Medium Risk) Risk G-3 The condition of the existing fuel storage system is currently uncertain and needs to be ascertained as part of preliminary engineering. (Medium Risk) Risk G-4 The condition of the existing diesel generators is currently uncertain and needs to be ascertained as part of preliminary engineering. (Medium Risk) Risk G-5 The condition of the existing electrical system is currently uncertain and needs to be ascertained as part of preliminary engineering. (Medium Risk) H. Equipment and Material Availability. One key equipment and material availability risk issue was identified. The potential financial impact of this risk issue was not incorporated into the assumed ranges of the risk-adjusted project cost estimate. Risk H-1 The diesel generators need to be delivered over a period of 5 years and consistency in design/replacement parts need to be reasonably assured. Also a reasonably long lead time is needed for ordering the diesel generators (6 months). (Medium Risk) The risk assessment team was concerned about the potential for ordering a number of gen- erators over an extended period of time (5 years.) Maintenance and operational ease will be based on having similar units available when needed. SEA/1002C1F5.00C 35 |. Construction Logistics and Transportation Issues. The following are four key construction logistics and transportation risk issues. The potential financial impact of these risk issues has been incorporated into the assumed ranges of the risk-adjusted project cost estimate. Risk I-1 The availability and usability of a laydown area for the diesel generators is currently uncertain but can be ascertained during preliminary engineering investigations. Covered storage will be needed. (Medium Risk) Risk I-2 The availability and usability of a laydown area for the new electrical equipment is currently uncertain but can be ascertained during preliminary engineering investigations. Covered storage will be needed and adequate space for sequencing of materials will be needed. (Medium Risk) Risk I-3 The maintenance of service during construction is essential and a plan will need to be developed during engineering. (Medium Risk) Risk I-4 Demolition and salvage of existing electrical equipment is currently uncer- tain. It is likely that the equipment can be sold for scrap value without disposal cost but this will need to be verified. All allowance for this risk has been included in the risk-adjusted cost estimate. (Medium Risk) The risk assessment team was concerned that the current site is fully used and that suitable staging /laydown areas might be difficult to find. Similarly, disposal/salvage of existing generators and equipment is typically not an issue, but because of the location, may pose a risk. A range of costs have been included in the cost estimate to reflect this potential cost uncertainty which will not be fully understood until preliminary engineering. J. Start-Up and Commissioning Issues. No key start-up and commissioning issues were identified. K. Operating Issues. Five key operating company issues were identified. Recommendations for risk-adjusted operating costs have been included. Risk K-1 The number of workers required to operate and maintain the system is somewhat uncertain at this time. The emergency response requirement for the diesels may require a larger number of staff than would otherwise be required. (Medium Risk) Risk K-2 The availability (reliability) of the existing diesel generators is currently uncertain due to their age. This information will be more easily estimated once a condition survey is completed. (Medium Risk) Risk K-3 The uncertainty of future fuel costs is considered a risk for this project. The current range of forecasts are used in a scenario planning process as a means of estimating their effect. Although no risk-adjusted fuel cost estimate is used, the risk is acknowledged. (Medium Risk) Risk K-4 The future spare parts availability for the existing diesel generators is cur- rently uncertain due to their age. This information will be more easily estimated once a condition survey is completed. (Medium Risk) SEA/1002C1F5.00¢ 36 Risk K-5 The future maintenance needs for the existing diesel generators is currently uncertain due to their age. This information will be more easily estimated once a condition survey is completed. (Medium Risk) Schedule. The risk issues discussed above have both potential project cost and project schedule impacts. The project schedule was evaluated from the perspective of whether it included a reasonable allowance for the time delays associated with each of the risks. The current schedule for project planning is 9 to 12 months, followed by a7 to9 month construction schedule (for the first generating units). After reviewing each schedule risk, the team determined that this schedule adequately reflected the potential risks identified. Risk Analysis The results of the risk analysis are shown in Table 15 and Figure 2. Table 15 presents the cost estimate as originally estimated and as a risk-adjusted cost estimate. As shown in Figure 2, the risk-adjusted project cost ranges from $10.0 to $11.7 million. This range is generally lower than the $11.6 million estimated by R.W. Beck and the $12.1 million estimated by CH2M HILL. The difference can be largely traced to two factors: e The new inclusion of salvage value of the replaced diesel generators and electric equipment. e Ahigh original estimate for permitting and engineering. The distribution of the project cost range is shown in Figure 2. As shown on this figure, a range between $9.96 million and $11.70 million represents our recommended risk-adjusted budget for conditions likely to occur. SEA/1002C1F5.D0C 37 TABLE 15 All Diesel Alternative Risk Adjusted Cost Estimate (1993 Dollar Value) Risk-Adjusted Ranges % of Original Cost Estimate) Original Risk- Cost Category Cost Estimate Adjusted __Difference_Low Most Likely _ High Risk Distribution Type Contractor Costs Structures and Improvements 2,000,000 2,172,603 172,603 90% 100% 130% Triangular (10th, 90th Percentile) Engine Generator & Accessories 6,214,000 6,214,000 0 80% 100% 120% Triangular (10th, 90th Percentile) Substation & Transmission 550,000 621,199 71,199 85% 100% 145% Triangular (10th, 90th Percentile) Delivery 186,000 186,000 0 90% 100% 110% Triangular (10th, 90th Percentile) Subtotal Contractor Costs 8,950,000 9,193,801 243,801 Demolition and Salvage Existing Diesels and Electrical Equipment 0 (413,951) (413,951) (700,0 (500,000) (100,0 Triangular (10th, 90th 00) 00) Percentile) Permitting 500,000 400,000 (100,000) 60% 100% Uniform(as a % of Original Cost) Engineering, Design, & Construction Management 1,491,000 1,267,350 (223,650) 70% 100% Uniform(as a % of Original Cost) Owners Costs 0 365,652 365,652 2% 5% Uniform(as a % of Total Cost) Subtotal Project Cost (w/o contingency) 10,941,000 10,812,852 (128,148) Project Contingency 1,184,000 ° Project Risk Allowance (See Note 1) 0 888,148 (295,852) Total Project Cost 12,125,000 11,701,000 (424,000) SEA/1002C1F5.D0C 117526.C0.10 « Risk Simulation Fig.2 + 1/30/96 * GM <iA---wrwonvv <iA-r--wrwovv @RISK Simulation lin n | 15% 7 12% | 9.00% PROJECT COST 20% Probability | |. 50% Probability $9.96 Million | >| eS Baton foo cae ecenisee neeagince Se asees sens freee rreepeecn en | 80% Probability | < $ 11.70 Million | | | O% « firiols= 1000 _ 5 6 7 8 9 10 11 12 13 14 15 Values in Millions @RISK Simulation PROJECT COST Oot aa BO%-poo-- vee seen reece ee eer wees BOG foococ coco etter cee cee eee ee 20%) 77-77 O% Values in Millions Figure 2 All Diesel Alternative Project Cost Simulation Silver Lake Option C Risk Assessment In the risk assessment workshop, the risk assessment team identified 31 potential risks to project cost and schedule. These risks were further discussed and then designated as potential fatal flaws or as high, medium or low risks in terms of their potential impact. Extraordinary (extremely low probability) events were not included. This process resulted in the identifica- tion of the following risk factors for project construction: ¢ 2 potential fatal flaws (major risks that might result in project termination), ¢ 11 medium risks (important but manageable risks), and ¢ 18 low risks (possibly important risks but with small likely impacts). These risks are summarized in Table 16. Also included in this table is an indication (check mark) as to whether the risk was integrated into the risk-adjusted cost estimate and notes on potential mitigation for these risks. The two potential fatal flaws and 11 medium to high risks are discussed below. This discussion is organized according to the same risk categories as shown in Table 13 and includes a description of risks, costs and schedule impacts, and suggested methods to mitigate the risks. A discussion on potential schedule risk is also follows. A. Management and Administration Issues. The following are three key management and administration risk issues. The potential financial impact of these risk issues has been incorporated into the assumed ranges of the risk-adjusted project cost estimate. Risk A-1 The public perspective on developing the project will be expressed primarily through the FERC licensing process and the Chugach Native Corporation’s ownership of the principal project lands. No known project opposition currently exists, but could develop as planning proceeds. (Medium Risk) Risk A-2 Site acquisition of the required land rights from the Chugach Native Corporation are vital to the development of the project. Chugach has apparently expressed an interest to negotiate on this matter. (Medium Risk) Risk A-3 This project alternative has assumed that Whitewater Engineering Corporation will be responsible for full development. If a public agency were to assume this responsible additional costs and scheduling delays could occur. (Medium Risk) B. Finance Availability Issues. One key finance availability risk issue was identified. The potential financial impact of this risk issue has not been incorporated into the assumed ranges of the risk-adjusted project cost estimate. Risk B-1 The project developer may have difficulty in acquiring sufficient financing to carry the project through the FERC licensing process. The most likely risk will be project delays when the required financing is being pursued. (Medium Risk) SEA/1002C1F5.00C 40 TABLE 16 Silver Lake Option-C Project Project Risk Assessment Summary Worksheet Category of Risk Potential Cost Risk Description of Risk Issue Fatal Flaw Cost___ Schedule Adjustment Notes on Mitigation A. | Management and Administration Issues Changing Goverment Regulations Low Low Government Support Low Low Public Perspective (Natural Environment, Medium Medium v Chugach Native Corporation, FERC Socioeconomics) Site Acquisition (Chugach Native Corp.) Medium Low v Negotiate with Native Corporation Project Management Organization (Whitewater Medium Medium v Cost if Publicly Developed Development) B. Finance Availability Issues Pre-Construction (Developer Funding) Low Medium Vv Initial Capital Needed Construction (Developer Funding) Low Low Available if Project Proceeds C. Regulatory and Permitting Issues Permit Acquisition Federal (FERC License Process) fe Stream Flows Archaeological and Historical Findings Low Low D. Weather Conditions (During Construction) Medium Medium Vv Two Months to Build Dam Environmental Restriction on Construction Low Low Availability of Subgrade Testing to Date Medium Medium v Risk Adjusted Cost Estimate —. Engineering Planning and Design Issues Route Selection Low Low Options Available Weather Design Criteria Medium Medium Vv Weather-Sensitive Materials System Performance FF Overstated Energy Construction Management (Developer) Medium _ Medium Vv Risk Adjusted Cost Estimate F. Contractor Issues Competitive Availability of Qualified Contractors Low Low Level of Specification Detail in Design Drawings Low Low FERC to Review Design G. _ Existing Structures and Equipment and Material Availability Equipment Availability Low Low Materials Availability (Concrete Aggregates) Medium Medium v Import Materials/Redesign Equipment Malfunctions and Failures Low Low Material Cost Fluctuations Low Low H. Construction Logistics and Transportation Laydown Area Limitations Low Low Access to Site (Blasting Requirements) Medium Medium Vv Risk Adjusted Cost Estimate Materials Delivery Low Low Maintenance of Service during Construction Low Low Mobilization Low Low Demobilization Low Low I Start-Up and Commissioning Issues Final Inspection Low Low J. Operating Company Issues Maintenance of Facilities Low Low Power Sales Agreements Medium Medium Vv Risk Adjusted Cost Estimate Category of Risk: FF: Major Risk that Might Become a Fatal Flaw High: Major Risk with Likely Cost and Schedule Implication but Not Fatal Flaw Medium: Important but Manageable Risk Low: Possibly Important but with Small Impact SEA/1002C1F5.D0C 4 C. Regulatory and Permitting Issues. One permitting issue was identified; it is a potential fatal flow for this project alternative. Risk C-1 The FERC licensing process will establish both the amount of flow that will need to be maintained in the diverted reach of Duck Creek and the seasonal flow patterns to be maintained in the reach of Duck Creek below the proposed powerhouse site. Adverse rulings on either issue, particularly the latter, could restrict power generation to point that the project becomes economically infeasible (Potential Fatal Flaw) D. Environmental and Geotechnical Issues. The following are two key environmental and geotechnical risk issues. The potential financial impact of these risk issues has been incorporated into the assumed ranges of the risk-adjusted project cost estimate. Risk D-1 Typically there is only about two months of predictably dry weather at the site, late spring, which is suitable for construction of the proposed roller compacted concrete dam. While this amount of time should normally be sufficient, unexpected rains could add significant delays and costs to the project.. (Medium Risk) Risk D-2 Reportedly, little subsurface site investigation has been done to date. These studies are critical to establishing the local availability of suitable aggregates for constructing the dam and the amount of rock blasting that will be required for constructing the access road and pipeline.. (Medium Risk) E. Engineering Planning and Design Issues. The following are three key engineering planning and design risk issues. One of these is a potential fatal flaw. The potential financial impact of the other two risk issues has been incorporated into the assumed ranges of the risk-adjusted project cost estimate. Risk E-1 Site weather conditions and the availability of low weather-sensitive aggregates for construction of the dam are critical to this project alternative. The availability of suitable aggregates can be determined during the early explorations phases of project development. (Medium Risk) Risk E-2 The projects feasibility is extremely sensitive to the amount of annual flows entering Silver Lake. To date, accurate flow gaging data is virtually non- existent. If the actual flows that have been assumed have been overstated by 10 to 15 percent, this project could be unfeasible. (Potential Fatal Flaw) Risk E-3 The entities that will actually construct the project, manage the construction and ultimately own the facility have not been fully identified yet. (Medium Risk) G. Existing Condition of Structures and Facilities and Equipment and Material Availability Issues. The following key risk issue was identified for this category. The potential financial impact of this risk issue has only partially been incorporated into the assumed ranges of the risk-adjusted project cost estimate. SEA/1002C1F5.D0C 42 Risk G-1 The availability of suitable local aggregates is critical to the construction of the roller-compacted concrete dam. If the materials have to be hauled any appreciable distance or just aren’t readily available, both the cost and schedule will be adversely impacted. (Medium Risk) H. Construction Logistics and Transportation Issues. The following key construction logistics and transportation risk issues was identified. The potential financial impact of this risk issue has been incorporated into the assumed ranges of the risk-adjusted project cost estimate. Risk H-1 The amount of blasting that will be required for construction of the project access road and installation of the buried piping is generally unknown at this time. Some blasting has been assumed. It has also been generally assumed that the excess excavation materials can be readily disposed of on site. Both assumptions could effect project cost and schedule. (Medium Risk) J. Operating Issues. The following key risk issue was identified for this category. The potential financial impact of this risk issue has only partially been incorporated into the assumed ranges of the risk-adjusted project cost estimate. Risk J-1 The final power sales agreement for the project will include the power purchaser’s requirements for the design, construction, and the ultimate operation of the project. This will probably have some effect on the design and construction of the project. (Medium Risk) Schedule. The risk issues discussed above have both potential project cost and project schedule impacts. The current schedule for project planning is up to 36 months, followed by a 24- to 31-month construction schedule. After reviewing each schedule risk, the team determined that this schedule adequately reflected the potential risks identified. Risk Analysis A construction cost risk analysis conducted for Silver Lake Option C. The results of this risk analysis are shown in Table 17 and Figure 3. Table 17 presents the cost estimate as originally estimated and as a risk-adjusted cost estimate. The distribution of the project cost range is shown in Figure 1. As shown on this figure, a range between $34.1 million and $37.4 million represents the risk adjusted cost estimate for conditions likely to occur. SEA/1002C1F5.D0C 43 TABLE 17 Whitewater Silver Lake Hydropower Alternative C Risk Adjusted Cost Estimate (1993 Dollars) Risk-Adjusted Ranges % of Original Cost Estima' Original Risk-Adjusted Cost Category Cost Estimate Cost Estimate Low Most-Likely High Risk Distribution Type Land and Land Rights 1,215,000 1,615,000 1,215,000 1,415,000 2,215,000 Triangular Structures and Improvements 1,512,500 1,577,574 90% 100% 120% Triangular (10th, 90th Percentile) Reservoir, Dams, and Waterways 14,059,000 15,063,548 94% 110% 136% ‘Triangular (10th, 90th Percentile) Turbines and Generators 3,900,000 4,067,795 90% 100% 120% Triangular (10th, 90th Percentile) Accessory Electrical Equipment 910,000 949,152 90% 100% 120% Triangular (10th, 90th Percentile) Miscellaneous Mechanical Equipment 50,000 52,151 90% 100% 120% Triangular (10th, 90th Percentile) Structures and Improvements (Trans. Facilities) 68,000 70,926 90% 100% 120% Triangular (10th, 90th Percentile) Substation Equipment and Structures 325,000 338,983 90% 100% 120% Triangular (10th, 90th Percentile) Fixtures, Conductors, and Devices 6,440,000 6,716,697 80% 100% 130% Triangular (10th, 90th Percentile) Mobilization 2.000.000 1.827.902 60% 100% 120% Triangular (10th, 90th Percentile) Direct Construction Cost (Include. Land Rights) 30,479,500 32,279,729 FERC and Other Licensing Cost 800,000 1,266,667 800,000 1,000,000 2,000,000 Triangular Design Engineering 750,000 750,000 90% 100% 110% Triangular (10th, 90th Percentile) Construction Management 1,000,000 1,000,000 90% 100% 110% Triangular (10th, 90th Percentile) Owners Cost Allowance ee O —352.964 1% Percent of Project Cost Subtotal Project Cost (w/o Contingency) 33,029,500 Contingency (20%) 6.605.900 Total Project Cost 39,635,400 Total Project Cost: Expected Value From Risk 35,649,360 Analysis Extra Risk Allowance —1.786,540 Total Project Cost at 80th Percentile of Risk 37,435,980 seal1002C1F5.doc SEA/1002C1F5.D0C 117526.C0. 10 « Risk Simulation Fig.3 + 1/30/96 * GM <A---wrwovv <A7-T--wrwovv 15% [pou 12% 7 9.00% @RISK Simulation Sampling= Monte Carlo PROJECT COST #Trials=1000 20% Probability | $ 34.05 Million >| | aL | 50% Probability < | $35.69 Million oo 7 O% 20 20 26 29 $2 35 38 41 44 47 50 Values in Millions @RISK_ Simulation Sampling= Monte Carlo PROJECT COST #Trials=1000 LOO rrr eerie i | | | | SoZ) 7 7 1 | 1 WT oo tutte | fehl | | | | BOG Por eer eet cre eee i vif Pepeer soap ope saan pcanes | | | | cOv, f i | hi i yftfi ite lh Uh) oe anor | | DOM pn rp aan sae ‘ii | | 0% /}—+ —+- 4 at Ht Ht HT 20 23 26 29 52 3S 38 41 44 47 50 Values in Millions Figure 3 Silver Lake Option C Project Cost Simulation