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HomeMy WebLinkAboutPublic Hearing-Tyee Lake-Swan Lake Electric Transmission Intertie 1992YyY An UW fF W ND wo © 10 21 12 13) 14 LS 16 17 18 19 20 2c 22 23 24 25 ORIGINAL PUBLIC HEARING TYEE LAKE - SWAN LAKE ELECTRIC TRANSMISSION INTERTIE Tuesday, January 21, 1992 7:00 p.m. Held at Ketchikan City Council Chambers 334 Front Street Ketchikan, Alaska ISLAND REPORTING P.O. BOX 5037 KETCHIKAN, ALASKA 99901 (907) 225-3470 PF WwW ND an wu 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 In Attendance: Mary Rauwolf H.M. Mullen Alaire Stanton Tom Stevenson Tom Miller Ed Johnson John Heberling Dick Emerman ISLAND REPORTING P.O. BOX 5037 KETCHIKAN, ALASKA 99901 (907) 225-3470 n WO F WwW NY ~ 10 eT 12 Als 14 1S 16 aly) 18 19 20 21) 22 23 24 25 REPORTER’S TRANSCRIPT OF PROCEEDINGS BE IT KNOWN that a public hearing conducted by the Alaska Energy Authority concerning the proposed route of Tyee Lake-Swan Lake Electric Transmission Intertie was held on Tuesday, January 21, 1992, in the Ketchikan City Council Chambers, 334 Front Street, Ketchikan, Alaska, commencing at 7:00 p.m. MR. EMERMAN: My name is Dick Emerman, and I’m an economist at the Alaska Energy Authority. And the reason we’re here, of course, is to -- the reason we scheduled this meeting was to discuss the proposed Tyee-Swan intertie. The Energy Authority is now in the midst of a feasibility study of the intertie, and my role in that, from the Energy Authority, is as the project Manager. We’ve hired a consulting firm to do the job. R.W. Beck has done a lot of work in Southeast Alaska. John Heberling is with me. He is the project director for the feasibility study from Beck. And Beck is subcontracting the environmental analysis portion of the feasibility study to Dames & Moore. And the fellow from Dames & Moore, Ed Johnson, is in charge of that portion of the study. So you’1ll be hearing from Ed a little bit later. ISLAND REPORTING P.O. BOX 5037 KETCHIKAN, ALASKA 99901 (907) 225-3470 cS n wo 10 aL. 12 13) 14 15 16 17 18 19 20 21 22 23 24 25 I thought what I would do is to just very briefly describe what the project is, how -- at least how it is envisioned at this time and tell you something of the process that the Energy Authority has to go through in order to build a project of this nature, and then finally let you know where we are in that process right now. Then Ed, I’m sure, will have some words to say about where we stand at the present on the environment analysis, what the major environmental issues appear to be. And if it goes like that, then the idea after that would be that we would just open it up and ask you for whatever comments and questions you have. The main purpose of this, aside from letting you know what we’re doing, is to give people in Ketchikan who want to come out a chance to tell us what your thoughts or concerns are on the project so that we have a chance of thinking about them while we’re still in the middle of the feasibility study. So first of all, the project, as many -- as all of you know, as it is envisioned is approximately a 50 mile 138 kilovolt line that would connect the Tyee Lake and Swan Lake projects. The basic rationale of the proposal is rooted in the surplus power that’s available from the Tyee project. ISLAND REPORTING P.O. BOX 5037 KETCHIKAN, ALASKA 99901 (907) 225-3470 11 12 13 14 rs 16 17 18 19 20 21 22 23 24 25 You may know the annual energy that’s available from Tyee in an average year is about 130 million kilowatt hours, yet the connected systems of Wrangell and Petersburg presently use about 40 million. While there has been gradual growth in Wrangell and Petersburg over the years, we don’t, at this time, see anything on the horizon that would dramatically change that situation for the foreseeable future. So we’re looking at 90 million kilowatt hours of surplus energy that is available at no cost, no real resource cost. It’s just a matter of diverting the water over the turbines instead of over the dam. So 50 miles away from Ketchikan’s interconnected system is this resource. Ketchikan, on the other hand, is, as far as I know and can tell from what I have read, in the position of growing close to the point of using all of its average annual hydro resources. Ketchikan has been growing in power demand at a significant rate over the last several years, number of years. I believe the last number that I saw was that of the 82 million kilowatt hours that are available in an average year from Swan Lake -- I believe last year 72 million, or thereabouts, was used. So it’s expected that within the next several years Ketchikan will have used or be ina position of using all the hydro energy that’s available ISLAND REPORTING P.O. BOX 5037 KETCHIKAN, ALASKA 99901 (907) 225-3470 an uo F WwW ND FS 10 a 12 3) 14 15 16 aly, 18 19 20 21 22 23 24 25 in an average water year and be in a position of using diesel generators, presumably diesel generators, to an increasing extent in the future to meet its full power requirements. So based on that forecast, that expectation, the basic concept of the project is simply to make the Tyee surplus available to Ketchikan over the long-term as a resource in lieu of what is presumed to be diesel generation. The preliminary figures that we’ve looked at over the last five years or so have consistently indicated that if you take the long view and mid-range expectations for Ketchikan growth, that the project makes basic economic sense looked at over the long-term, comparing the life cycle costs of the intertie and the energy from Tyee compared with what you’d otherwise be paying for what we presume would be diesel generation. In order for us, the Alaska Energy Authority, to build a project of this nature we have to go through a rather extensive review and approval process. Basically the steps are we have to do what is called the reconnaissance study, which is a broad view of regional alternatives that attempt to focus on and identify what the most promising regional alternatives are, that, if it points toward a particular project, ISLAND REPORTING P.O. BOX 5037 KETCHIKAN, ALASKA 99901 (907) 225-3470 oo OWN DOD WF WwW NY Fe b 12 13 14 15) 16 17 18 19 20 21 22 23 24 25 which in this case, it did, the Tyee-Swan intertie, the next step is to do a feasibility study, which we're doing now. That, in turn, is followed by a plan of finance, which attempts to identify what the appropriate and realistic financing options are and to recommend a financing alternative. And given those studies and those outcomes, that’s all submitted to the legislature. In order for us to go any further we need to get legislative authorization. There has to be a law passed by the legislature that specifically authorizes the project at a given project cost. Once we have that, then the question is funding, if we need legislative funding to make the project go. Of course, we need the money. Following that you get into things like environmental impact statements -- should they be required? -- which we assume it would be in this case in order to obtain the right of way for the corridor. And, of course, at that point we can go to final design and actually build the project. I left out one thing. You have to negotiate agreements with the parties that would enable you to cover whatever debt service you anticipate for the project. And that’s an important step which presumably would begin at some point after legislative ISLAND REPORTING P.O. BOX 5037 KETCHIKAN, ALASKA 99901 (907) 225-3470 10 11 12 13 14 LS 16 7 18 19 20 21 22 23 24 25 authorization. Where are we in that process? Well, in 1987 the Energy Authority commissioned a study by Hart Engineering to look at Southeast Alaska in all manner of different intertie alternatives. And basically it identified two as being promising, having basic economic rationale. One of the two is the Tyee-Swan intertie. The other is the connection from Juneau to the Greene’s Creek mine. The idea being to tap into another substantial surplus that currently exists, which is the Metasham (ph) project, and make that available to the mine in lieu of diesel generation. So we won’t talk about Greene’s Creek. That’s a project that we’re also pursuing. But in any event, that was -- that fulfills our reconnaissance requirements. We’re now in the midst of feasibility, and our schedule anticipates it will be issuing a draft of the feasibility study by the lst of March, coming upon us pretty quickly. There would then be a thirty-day review period and a final feasibility study would then be available for review by the legislature prior to adjournment, if things go according to schedule, in mid-April. So I guess that’s a thumbnail sketch of what we’ve done and where we are. With that, I guess ISLAND REPORTING P.O. BOX 5037 KETCHIKAN, ALASKA 99901 (907) 225-3470 an US 10 el 12 a 14 US 16 7 18 19 20 21 22 23 24 25 I’1l turn it over to Ed and let him fill you in on where we are in the environmental analysis and see what you want to talk about after that. MR. JOHNSON: Okay. Thanks, Dick. I’1l keep my comments equally brief, I hope. The environmental part of the feasibility study that we’re doing now is a look at the natural resources that exist along this corridor and providing the Alaska Energy Authority with an assessment of what those effects might be on the natural -- the effects of building a power line might be on the natural resources along that route. And this is kind of a precursor to an environmental impact statement or environmental analysis, which may come if this project is pursued further. The environmental effects are relatively simple for a project of this nature in that what’s envisioned is helicopter construction. The line would look very similar to what you’re familiar with on the Swan Lake to Ketchikan line, which was built across the national forest by that same process. A series of towers spaced nominally 300 feet or a little more apart, a 200 foot, approximately, wide right of way cut through the forest. And the main effect then is the clearing, really, of the right of way through forested, previously undisturbed country side. ISLAND REPORTING P.O. BOX 5037 KETCHIKAN, ALASKA 99901 (907) 225-3470 an uo F&F WwW N 10 aba 12 Ls 14 15 16 LT, 18 19 20 21 22 23 24 25 We’ve been talking with the Forest Service, some of their natural resource specialists, since this is almost all national forest land through here, and with representatives from the Department of Fish & Game and other natural resource agencies. We’ve been getting information from them about eagle nest sites and other animal occurences, where their habitats are and so on. And we haven’t reached any conclusions yet, but on the other hand, neither have we seen anything out of our study so far that would indicate that there’s any reasoning why this couldn’t be built. I mean from the environmental standpoint it’s a relatively benign type of activity. The biggest impacts that we know so far have to do with visual effects, particularly around popular sport fishing areas like upper Behm Canal here, and perhaps near Orchard Lake, Eagle Lake, and up here at the mouth of Eagle River. Other areas of environmental sensitivity, though not of great concern, but of interest and importance, is this area at the head of Carroll Inlet has, evidently, fairly good waterfowl area, as do some areas up here in the upper Behm Canal and the mouth of Eagle Creek. And we’re looking at the concern that was ISLAND REPORTING P.O. BOX 5037 KETCHIKAN, ALASKA 99901 (907) 225-3470 10 an uo F WwW NY aed: 12 als} 14 LS 16 17 18 19 20 21 22 23 24 25 raised. I think it was Fish & Game encouraged us to look at what effect this power line might have on waterfowl areas. They’re worried about eagles or birds striking the line and that sort of thing there. We’re looking into that and haven’t reached any conclusions yet. The other things I guess you could mention about this is they tend to follow -- the right of way tends to follow lower elevations, which means it’s down in the valleys for the most part; though I understand there’s some sections in here where it gets up to the neighborhood of a thousand feet above sea level. Most of this route is a series of interconnected valleys all through here. The main reason for that is to avoid the weather and maintenance problems of trying to maintain a line at high elevations where the weather is more adverse. The lines would also be serviced by helicopter. They can cross steep terrain, and do in several locations. There’s some steep spots even on Bell Island and certainly up in the Eagle River valley here, but they’re able to get through that. And so steep terrain, while not favored, is possible to be utilized on the route. In general that’s kind of a thumbnail sketch as to where we’re at at the moment on the environmental portion of this study. ISLAND REPORTING P.O. BOX 5037 KETCHIKAN, ALASKA 99901 (907) 225-3470 11 Ny wo Oo nN Dn YT Fe WwW 10 ey 12 13 14 15 16 7 18 19 20 21 22 23 24 25 The main reason that I’m here tonight is I’m interested in learning from the general public any issues and concerns that should be addressed in the feasibility study particularly relating to the environment, the natural environment. Now, I realize that there are a lot of other concerns that need to be discussed, and we can get into those this evening as well. Unless you have any further comments, Dick, I was going to open this up to general comments. MR. EMERMAN: Right. MR. JOHNSON: I would ask, so that we can keep a good record, that you’d introduce yourself before you ask your question or make your comment. To the extent that we know answers, we’ll try to respond to comments, but there may be some issues raised that we don’t have an answer for at the moment. And we’ll note those and try to keep track of those and see if we can find answers as we go through the study. So with that the floor is open. MR. STEVENSON: Tom Stevenson with KPU. You had originally thought, perhaps, that you could get this process done with an environmental assessment. Have you thought now maybe to abandon that or lean towards having a full environmental impact statement? ISLAND REPORTING P.O. BOX 5037 KETCHIKAN, ALASKA 99901 (907) 225-3470 12 y fn oO F&F W ND oc oO @ 12 13 14 15 16 vy 18 a9 20 21 22 23 24 25 MR. EMERMAN: It looks that way. I’11 let Ed talk about that. MR. JOHNSON: Well, the NEPA, the National Environmental Policy Act, requirements comes into this project because the land that’s to be crossed is national forest. And the national forest system would issue permits to the Alaska Energy Authority to cross this land, but before they can do that, they need to comply with the National Environmental Policy Act requirements. It’s their call as to which way it will go, whether it should be an environmental assessment or environmental impact statement. And I suspect that until they have a project application in front of them, an application for a permit, they won’t be sure which way they’re going to go. It’s hard to say at this point. MR. STEVENSON: They’re independent of the Forest Service? MR. JOHNSON: No, that is the Forest Service -- MR. STEVENSON: That is the Forest Service. MR. JOHNSON: -- we’re talking about. Right. Yeah. Now, there are other federal agencies that may come into play. If wetlands are effected, and they ISLAND REPORTING P.O. BOX 5037 KETCHIKAN, ALASKA 99901 (907) 225-3470 13 uo FP Ww ND 10 11 12 13 14 5 16 aL? 18 19 20 21 22 23 24 25 very well may be, then the Army Corps of Engineers could become involved. And they would discuss with the Forest Service their views, whether there needs to be an environmental assessment or an environmental impact statement. MR. EMERMAN: If I might just add, there are a couple of things. One was when we were scoping out the feasibility study, our intention was to have the environmental analysis done for the feasibility study be done in a way that would satisfy the environmental assessment requirement. That could then be packaged and given to the Forest Service for them to make a determination whether there -- whether, in their view, there would or would not be significant environmental impactment. If they conclude on the basis of an environmental assessment that there’s no need for a environmental impact, then you don’t have to go through the EIS, and you can get the right of way. If they -- if there is, then you do have to go through the EIS. When we got to the point of negotiating a contract, basically what I learned from Ed and Dames & Moore was that to do a formal document called an environmental assessment it’s going to take more time and money than we had in the contract. So the one point that I want to make is that this feasibility study will have ISLAND REPORTING P.O. BOX 5037 KETCHIKAN, ALASKA 99901 (907) 225-3470 14 wow on Dn YO F WwW DY be Oo 11 12 13) 14 LS) 16 17 18 19 20 21 22 23 24 25) extensive environmental analysis that will hopefully identify the major environmental issues and pull together whatever existing data and information Ed and his people can find that’s relevant to those issues, and that is felt -- and Ed might correct me or embellish on this -- it may suffice for the first couple of chapters of an environmental assessment should we go that way or should we go forward with the project and put one together. But there would have to be additional work done -- and Ed can talk about this more than I -- beyond the feasibility study that would be needed in order to complete an environmental assessment. Before I let Ed talk more about what that additional work is, the second thing is what’s the likely outcome? What’s the Forest Service likely to say? Are we likely to get away with an environmental assessment leading to a conclusion of no significant environmental impact, here’s your right of way? Or are they likely to say, "From what we can gather at this point, significant impact. You’re going to have to do an EIS"? Ed, maybe I’m stumbling ahead here in the dark, but -- saying things you didn’t want to say. But, you know, we did talk -- we haven’t talked to the people in the Ketchikan Forest Service area. We’re going to be talking to them tomorrow. But ISLAND REPORTING P.O. BOX 5037 KETCHIKAN, ALASKA 99901 (907) 225-3470 15 wo on Dn oO Fe W 10 11 12 ak} 14 15 16 7 18 19 20 2:1) 22 23 24 25 we did talk with the folks in Petersburg and Wrangell, and I have to say that it was my impression, clear impression, for what it’s worth, that they felt that the likelihood of an EIS being required was high. Would that be accurate, Ed? MR. JOHNSON: I think that’s probably true. MR. EMERMAN: Likelihood is high. MR. STEVENSON: That’s what the Forest Service told me two years ago, that they supported this process -- MR. EMERMAN: Yeah. MR. STEVENSON: -- to be -- probably not so much other than the fact that in this day and age, why should the Forest Service take the risk of any challenge to your -- if you took the lesser route, that is the assessment route, why should they defend themselves against that kind of position? So the easy way out, quite frankly, is do the full blown environmental impact statement, and then they don’t have to worry about getting drug into the process. MR. JOHNSON: It’s not an easy process for them to go through. They need to have -- first of all, they need to have a project proposal on their desk before they’re going to, I think, make a definitive answer to ISLAND REPORTING P.O. BOX 5037 KETCHIKAN, ALASKA 99901 (907) 225-3470 16 yy Hn Ww & oOo @ 10 aT 12 13 14 15 16 17 18 19 20 21 22 23 24 25) the question. The second thing is there are some related, potentially related actions that they may need to consider as well as this intertie, that seem to be connected to this intertie or potentially connected to the intertie. The obvious one is the proposal that has been around Southeast for awhile now of building a road from Ketchikan roughly following the same general route on up through here. (Indicating) If those two proposals are, in fact, linked and are real and both come before the Forest Service at about the same time, it’s almost certain that they would do an environmental impact statement, because the environmental effects of constructing a road through here would be more -- MR. STEVENSON: More involved. MR. JOHNSON: -- more obvious. I don’t know. I’m shying away from the term "significant," because I’m not sure at this point if they would be significant. But they certainly would be, in some people’s minds, more significant, and they would cause greater concern on parts of -- some parts of the population and may need to be addressed that way. MR. STEVENSON: Well, basically -- and I know the Alaska Energy Authority is concerned about that, ISLAND REPORTING P.O. BOX 5037 KETCHIKAN, ALASKA 99901 (907) 225-3470 17 uo F&F Ww ND 10 11 2 a3 14 15 16 a7 18 19 20 21 22 743} 24 25 because the consideration of any other activity might have a tendency to delay the process as far as building the power line. But that’s exactly what led us, here in the community, to believe that if they are going to have to do the full environmental impact statement, even at the risk it delays the power line construction, it would seem environmentally more cost effective and most efficient to have them both considered at the same time; in other words, to do one environmental impact statement that will do both the road and the transmission line. And there are are some offsets. And one of the offsets is, as you stated earlier, most of this route you’ve designed here preliminarily does go into the lower valleys. Well, obviously that would be the same place you’d want to put the road. So if you put the transmission line where you later determine you’d want to put the road, you might end up with some additional construction costs that would be unnecessary. MR. JOHNSON: The two, if they’re really going to go forward at the same time, should be planned together. MR. STEVENSON: Well, even if they don’t go at the same time, you could place the transmission line where it would not be -- it could be next to but not necessarily right in the middle of the road -- where the ISLAND REPORTING P.O. BOX 5037 KETCHIKAN, ALASKA 99901 (907) 225-3470 18 n uo F Ww ND F&F 10 11 12 13 14 LS) 16 17 18 ake) 20 21 22 23 24 25 road might be. So the thought was, at least at the utility -- I can only speak for the utility -- at least if you identify both, even if the road gets built five or ten years after the transmission line gets built, at least you’ve set aside the corridor then identified. The environmental impact statement has been processed, and we know where to put the transmission line. So it doesn’t interfere with that. MR. JOHNSON: Right. MR. STEVENSON: And the third part, of course, is it helps us defer some of the costs of maintenance later on if we have access by roads rather than helicopter. MR. JOHNSON: I would assume. MR. STEVENSON: The weather here does set in and sometimes you can’t get in with a helicopter right now. MR. JOHNSON: Yeah, if the road was maintained year-round, through the winter months and so on, yeah, I would assume you’re correct. It would make maintenance of the lines easier because of the the close proximity. MR. STEVENSON: The various -- it’s very desired, I think, that by working this out with Alaska Energy Authority -- we’re appreciative of their efforts. ISLAND REPORTING P.O. BOX 5037 KETCHIKAN, ALASKA 99901 (907) 225-3470 19 yY Dn WOW F W N wo © 10 abil 12 13 14 15) 16 a7 18 9) 20 21 22 23 24 25 I think there’s one fact that maybe you don’t have yet, is that in this year’s growth curve for the utility was basically flat, and no growth from last year. And the reason for that, of course, was we've had very mild weather. We haven’t had any snow or cold weather of any sort at this point. So the earlier five percent growth that we had this year evaporated the last two months of the year. Basically a tough year as far as growth. So I don’t know what that will do to your curve as far as expectations. But in that regard, I guess, it’s kind of an offset, too, if we get bogged down with this environmental impact statement. I just throw that out. MR. EMERMAN: Yeah. No, I hadn’t heard that. And, you know, you don’t know what to do with low forecasts. I don’t know that -- at this point we just intend to go with the forecast from 1990, assuming that that’s still a reasonable expectation for the long-term, unless we hear otherwise. What you’re just describing wouldn’t lead me to change that long-term forecast. MR. STEVESON: No, because we have another phenomenom that’s occurred. We don’t have any snow pack. Without the snow melt, we could be in a different ISLAND REPORTING P.O. BOX 5037 KETCHIKAN, ALASKA 99901 (907) 225-3470 20 yy Dn YW *F& W ND Oo © 10 aor 12 13) 14 LS) 16 di 18 9 20 21 22 23 24 25 position come summertime because we don’t have the melt down that fills into the reservoir at a much more efficient rate than do these five-inch rains that we got like Saturday. MR. EMERMAN: If we were to -- just on the subject of the EIS. If the road and transmission line EIS were to be done at the same time, and my understanding is that it would basically be broken into three parts. One would be we look at the impact of a transmission line only, and a road only, and a road and a transmission line combined. And if, based on that, on the review of those three different categories, if you will, the Forest Service could conclude that the impact of a transmission line only were acceptable, but a road and transmission line was not, or it could conclude that neither was acceptable, or a combined proposal was acceptable. It would give them -- that would be the way that it would be done, and it would give them the opportunity to make that kind of a distinction in their right of way decision. In talking with the Forest Service people at Petersburg, which Ed and I did about a month ago, my recollection is that their view was that if you were to do a road and intertie EIS combined, that -- just in ISLAND REPORTING P.O. BOX 5037 KETCHIKAN, ALASKA 99901 (907) 225-3470 21 n uo F WwW N rt 2 a3 14 15 16 7 18 ale) 20 21 22 23 24 25 terms of rough guesses and order of magnitude, what they thought, you would essentially multiply by two or at least two, I think they said, the cost and time. MR. JOHNSON: Uh-huh. MR. EMERMAN: So our view at this point, at the Energy Authority -- and it’s not like we had a vote and came to a -- but the general sense of it that I get from the Energy Authority is that if the funding is made available to do both, fine with us. We’d go forward and do both. But it would have the implication of a year’s delay which might not be all that bad in terms of the timing of the project and how that relates to Ketchikan’s requirements. But the Energy Authority is not out there pushing a road. Really the issue of a road is one that we defer to DOT/PF, how that road fits into their long range plans and their list of priorities and so on. MR. JOHNSON: So a long answer to your question. Did that cover what you were -- MR. EMERMAN: We’ve got all night. MR. JOHNSON: Yeah, right. Yes, sir? MR. FREER: Bill Freer, Ketchikan resident. On the feasibility of our project versus the numerous projects the Authority has throughout the state, ISLAND REPORTING P.O. BOX 5037 KETCHIKAN, ALASKA 99901 (907) 225-3470 22 NO an uu Fe WwW 10 rd 12 13 14 15 16 Ly 18 19 20 21; 22 23 24 25 is the EIS treated the same as our, you might say, populace area, between here and Petersburg and Juneau and et cetera, versus the Bush? MR. EMERMAN: Are you asking the question where does the Tyee-Swan intertie more or less fit in the Energy Authority’s scheme of proirities? That’s not the question. MR. FREER: No. The question is how does our EIS and all the rigamarole and paperwork going to get this intertie -- for this intertie, how does this compare with what you have the authority to do in the Bush and all through Interior Alaska? You’ve got projects going up there, and I’ve been watching a number of them, and I fail to see the big EIS problem with the majority of them. Granted there’s no forests way up in the Interior, but still the EIS seems to be a minor project when it comes to a Bush area, but a major project when it comes to our area. MR. EMERMAN: First thing that occurs to me is that it only takes in where you’re talking about federal government, federal lands and the necessity of the federal government making a decision. In this case we'd be applying to the U.S. Forest Service, which owns the land in the corridor, to grant a right of way application. And if that’s -- that’s to grant a right of ISLAND REPORTING P.O. BOX 5037 KETCHIKAN, ALASKA 99901 (907) 225-3470 23 wo Oo NY Dn YO F WwW DNYD KF e Co rt 12 13 14 LS 16 17 18 19 20 21 22 23 24 25 way. And it’s the application that we would make for that right of way that would lead them to require an environmental impact assessment or an environmental analysis according to their internal requirements of how they deal with such requests for access to their lands. If we’re dealing with a project that does not have any federal lands associated with it and doesn’t have any impact on federal land, we don’t need any kind of federal approval, then to my knowledge, there’s no way -- am I right? MR. JOHNSON: You’re correct. MR. EMERMAN: -- there’s no way an environmental -- an EIS becomes a factor. It can’t -- no one is there to invoke it. That may account for the distinction that you're seeing. I’m only familiar with the projects that I know about. I’m not -- I don’t know which projects you have in mind, but that may be the reasoning. It has to do with whether it’s federal land or not, whether you need their approval. MR. FREER: Okay. MR. JOHNSON: Other questions? Bob? MR. WEINSTEIN: Yeah, Bob Weinstein. What other kinds of things will you be looking at? What do ISLAND REPORTING P.O. BOX 5037 KETCHIKAN, ALASKA 99901 (907) 225-3470 24 an wo F Ww N ~ 10 Lt: 12 3 14 15 16 aly) 18 19 20 au 22 23 24 25 you consider to be environmental factors that would effect possible selection of a route and so on? MR. JOHNSON: The main ones are the common topics you’ll find in an environmental assessment or EIS; the biological environment, the birds and terrestrial things, fish and aquatic life. In this case because the marine environment is potentially effected at a couple of these crossings we might need to talk a little bit about marine biology and fisheries there. And then some of the social-economic considerations. Well, I put them in that category, but they would be things like archeological resources. If there were some old village site or something along this route, we’d need to know that. And there are ways that you can deal with that. The visual effect. The aesthetics. The Forest Service tends to be very interested in that subject. So how this appears on the landscape would be an important issue that needs to be addressed. Oh, typical, the geology, the ecology of the country side is -- what effect, if any, does this have on sedimentation or stream flow or land slides, earth movement, that kind of thing. In a broad sense those would be the main topics. MR. JOHNSON: Yes. Tom? ISLAND REPORTING P.O. BOX 5037 KETCHIKAN, ALASKA 99901 (907) 225-3470 25 y Oo WO FF» W N wo © 10 ET 12 13 14 15 16 a7 18 19 20 21 22 23 24 25 MR. STEVENSON: Environmentally, you said that probably -- you said if you do a double EIS, it would double the cost. But environmentally isn’t it still the best response to the environmental community that might be concerned with the impact on this area to consider both at the same time? MR. JOHNSON: If both proposals are, in fact, going to happen. I mean if they’re both -- MR. STEVENSON: Viable. MR. JOHNSON: -- viable. That’s the word I’m searching for. Thank you. If they’re both viable proposals and they’re both ready for decisions and somebody’s really working on it now, yes, I think you’re correct, it would be better to analyze both of those at the same time. I think that’s the response a federal agency would likely give you. In fact, I think by law they would be required to look at both of them. MR. EMERMAN: They have to make some kind of determination as to whether a project is viable. MR. JOHNSON: Viable. MR. EMERMAN: Is that the word? MR. JOHNSON: That is the word, yeah. MR. EMERMAN: Yeah. Before they want to commit the time and resources to commit to it. If there’s a reasonable likelihood it could happen. ISLAND REPORTING P.O. BOX 5037 KETCHIKAN, ALASKA 99901 (907) 225-3470 26 wo Oo NY Dn YH FP WwW NY ~ oO a 12 13 14 1S) 16 17 18 TS 20 21 22 23 24 25 MR. STEVENSON: You mean like if the cost was 40 million, and there’s nobody coming up with the cost, we couldn’t do it? MR. EMERMAN: Yeah, I would think so. MR. JOHNSON: Yeah, it can’t be speculative. MR. STEVENSON: How would we determine that out ahead of time? We’re having a study done in the community to establish that cost. MR. JOHNSON: Well -- MR. STEVENSON: And then have the cost factor around 80 million or something? MR. EMERMAN: Well, I don’t know. MR. STEVENSON: And I don’t know who makes that determination. MR. JOHNSON: I don’t know that -- MR. STEVENSON: Who would determine that? MR. JOHNSON: I don’t know that the dollar threshold really applies so much as if somebody from the community came forward -- someone from the government, local government body came forward to the Forest Service and said, "We would like a permit for a right of way to construct a road from A to B across the national forest," and this was a genuine proposal, funded and -- MR. EMERMAN: Funded. ISLAND REPORTING P.O. BOX 5037 KETCHIKAN, ALASKA 99901 (907) 225-3470 27 wo Oo NY Dn YF F WwW DY FP FP Be FP eB PF WwW ND F O 25 16 aly) 18 19 20 21 22 23 24 25 MR. JOHNSON: -- and serious -- MR. EMERMAN: Funded is the key. MR. JOHNSON: -- that there was bonding authority or something behind it to make it a reasonable, real thing, I think they would respond to you. I think that they’d believe that they’d need to do whatever level of study they would need at that point. MR. EMERMAN: I don’t know how they determine whether something is speculative or whether there’s a reasonable probability. I don’t know that there’s a methodology for it. MR. JOHNSON: No, not really, though the elements of it would be a responsible party requesting permission to cross the national forest, in this case, and -- MR. EMERMAN: Somebody has to make a judgment on the plausibility of the financing. MR. JOHNSON: Yeah. MR. STEVENSON: So are you saying the Department of Transportation would be the agency most likely to carry it past where they’re at now? MR. EMERMAN: Carry it past -- MR. STEVENSON: I look at the coordination between AEA and DOT, if that’s ever going to be something that’s going to be considered. ISLAND REPORTING P.O. BOX 5037 KETCHIKAN, ALASKA 99901 (907) 225-3470 28 an uu fF Ww N 10 a 12 a3 14 15 16 ay 18 19 20 21 22 23 24 25 MR. EMERMAN: At this point, you know, DOT will be issuing a road report. And I don’t want to speak for them, because I don’t know, but I assume that somehow they will either volunteer, or in response to a question, give you an idea of where, having that cost estimate, the road fits on their list of things that they’d like to do. I don’t know if there’s -- if they would go beyond that. What the authority is requesting -- well, let me just stop with that for the road for the moment. Now, on the intertie side let me tell you a little bit of where we stand on the budget. The Authority, a couple of months ago, put into our budget request for this coming fiscal year, our budget request that goes to the governor, a request for $10 million to go toward the Tyee-Swan intertie. Half of what our preliminary assessment suggested that the amount that we would probably need. I don’t know where the -- I don’t know what’s in the govenor’s budget. We won’t know for some time yet. He hasn’t released it. Just to give you my personal impression from what I pick up, I doubt that it’s in there, because since we’ve put in that request oil prices have gone down. What I have heard, although, nobody seems to know and I have no authoritative knowledge about it, I don’t think the $10 million is going to be in the governor’s ISLAND REPORTING P.O. BOX 5037 KETCHIKAN, ALASKA 99901 (907) 225-3470 29 wow Oo NY Dn HH FF WwW NY Fe e °o 11 12 a3 14 15 16 7 18 19) 20 21 22 23 24 25 used -- this or some other sum that they appropriate used for a combined road and intertie EIS, at that point we would get together with DOT/PF and decide who was going to be the lead agency and how it was going to be done. And we would go forward with an attempt to do a coordinated EIS. I guess one other thing that I would say, and that is, just thinking through these requirements, I don’t believe that the legislature -- that the Forest Service would consider our intertie proposal viable. I don’t think that they would consider it ready for an EIS or that they would consider our application for a right of way ready for action unless we have the legislative authorization for the project. Kind of a guess on my part, but I would think that absent legislative authorization, they would be inclined, I would guess, to consider it still in the speculative category. So I don’t know if we would even be able to proceed with an EIS without legislative project authorization first. Does that make sense? MR. JOHNSON: I think -- yeah, that sounds reasonable to me. MR. STEVENSON: The other side of that equasion, of course, is at what time do you negotiate a ISLAND REPORTING P.O. BOX 5037 KETCHIKAN, ALASKA 99901 (907) 225-3470 31 an uo FF WwW N 10 at 12 13) 14 5 16 17 18 19 20 Qi. 22 23 24 25 budget request to the legislature. Whether it is or not, what the Authority staff, people like me and Charlie Bussle are planning is at the next Authority board meeting at the end of January we're going to suggest, recommend to our board that they amend that $10 million request to four and a half million, and that the four and a half million be used for all pre-construction activities; EIS, design, so on. And the idea will be, if the governor goes along with that and if the four and a half million carries through the legislature, that we would seek in the legislature -- again depending a favorable outcome of the feasibility study for the project -- number one, legislative authorization for the project; and number two, sufficient funding to proceed with these pre-design -- or pre-construction activities. Now, the four and a half million is not a scientific number. It’s ten percent of the project cost estimates. Out thought, at this point, is not that this would cover a road and intertie EIS, though maybe it would be sufficient. I don’t know. I don’t have a careful estimate for that. Our thought and the nature of the request is simply that money is for interties. However, if it comes out of the legislature that they want this money ISLAND REPORTING P.O. BOX 5037 KETCHIKAN, ALASKA 99901 (907) 225-3470 30 an Ww F WwW NY 10 at. 12 13 14 15 16 7 18 r9 20 21 22 23 24 25 contract for purchasing utilities for the electricity through the transmission line? MR. EMERMAN: My thought on that is if we get legislative authorization for the project, and we get enough money to go forward with the EIS and design and so on, pre-construction studies, at that time we would enter into discussions and negotiations on financing. MR. STEVENSON: Have you made a projection? You figure a $45 million construction cost at this point? MR. EMERMAN: That’s only a number carried over. Maybe John might want to talk about that. But all I’m thinking of is that we had a $40 million 1991 dollar cost estimate that was -- that was -- I’m hesitant to say produced. It was the number that was used in this March 1991 preliminary financial assessment. Basically all that $40 million is was the 1987 estimate inflated. For lack of anything better we just said well, nominal dollars including inflation, something like 45, just for purposes of getting this four and a half million dollars. But within a month and a half we’ll have the draft of the feasibility concept and that will be our best numbers. MR. HEBERLING: We should have the new cost estimates probably in about three weeks or so. ISLAND REPORTING P.O. BOX 5037 KETCHIKAN, ALASKA 99901 (907) 225-3470 32 n WwW fF WwW ND 10 alal 12 23) 14 alts) 16 7 18 1S) 20 21 22 23 24 25) MR. STEVENSON: The last time we discussed it at the Four Dam Pool, the number that was thrown around as perhaps the purchase price would be in the range of 5.4 cents, approximately a penny under what we're getting for our supply in the Four Dam Pool. MR. EMERMAN: I don’t know anything about what was said in the Four Dam Pool. I do know that to go back over the two approaches that we looked at in this preliminary financial assesstment, there’s two ways of looking at it. We started with the avoided diesel costs of Ketchikan. Let’s say that’s eight cents in the initial year. And let’s just say for illustration that Ketchikan is willing to pay eight cents a kilowatt hour for -- and whether it’s a six or five doesn’t matter for the purposes of discussion, but let’s just say it’s eight cents a kilowatt hour you’re willing to pay for power delivered to Ketchikan. There’s two ways of looking at that. One is that all eight cents or a portion of it goes to pay for Tyee power, and whatever is left goes first to transmission line O and M. And whatever’s left after that is available to pay debt service on the intertie. That would be a small amount. And if that were the way it was done, $20 million in state funds would not be enough from our best estimates. ISLAND REPORTING P.O. BOX 5037 KETCHIKAN, ALASKA 99901 (907) 225-3470 33) Y Dn WW fF Ww ND F&F wo © 10 Ll 12 13 14 15 16 7) 18 19 20 21. 22 23 24 25 The other way of looking at it is to say -- the other way we did look at it in that ‘91 financial study was assume on the other hand that the surplus Tyee power is at least initially provided at no cost. You don’t pay for the power at the buss box, but that the full amount that you pay for the delivered energy -- in this example, eight cents a kilowatt hour -- is used to intertie costs, first the 0 and M. Whatever’s left after that goes to debt service. In that case you’re able to support a substantial amount of debt, whatever it was, 20, $25 million worth of revenue bonds. And we have a fighting chance of being able to implement the project, make it a reality. So if they’re talking in the Four Dam Pool about charging five cents, whatever, for the Tyee power that would be a surplus sale to Ketchikan, that kind of talk and that kind of reality would make it a lot more difficult for us to be able to build the project in the first place, because we would have very little left to use to pay off intertie bonds. MR. WEINSTEIN: Whose decision is it ultimatley in that kind of a question? MR. EMERMAN: Everybody’s. And I think it has to be -- it’s -- the power -- the sale agreement is ISLAND REPORTING P.O. BOX 5037 KETCHIKAN, ALASKA 99901 (907) 225-3470 34 10 ala 12 13 14 2S) 16 al?) 18 19 20 21: 22 23 24 25 from -- surplus sales from Tyee, I would think, would have to be approved? If it’s going to be a tenth of a sent or one cent, whatever it is from Tyee, I assume would have to be approved by the whole Four Dam Pool. MR. STEVENSON: MR. WEINSTEIN: kind of override authority, or the Four Dam Pool on that kind MR. EMERMAN: I MR. STEVESON: MR. EMERMAN: I do. MR. STEVENSON: MR. EMERMAN: MR. STEVENSON: MR. EMERMAN: I’ out. MR. STEVENSON: Right. Does your agency have some does the legislature, over of a question? doubt it. You have veto power. You have a better idea than You have veto power. We have veto power? Yeah. m not sure how it’s laid Well, with the Four Dam Pool you could cancel a contract. MR. EMERMAN: approval. MR. STEVENSON: approval, so you couldn’t push MR. EMERMAN: would call a multilateral -- Yeah. But it doesn’t force It doesn’t take unanimous your way through, either. So it will be what I ISLAND REPORTING P.O. BOX 5037 KETCHIKAN, ALASKA (907) 225-3470 99901 35 an oo F WwW N uf 12 13 14 aS) 16 aly 18 al) 20 2a 22 23 24 25 MR. STEVENSON: I think the original discussion we had in the Four Dam Pool was that the energy is, at this point, surplus power because it’s going over the dam at no cost, so the Energy Authority has already gotten the capital investment in the Tyee and Swan Lake facility. So the only part you’re talking about is debt service of X number of kilowatt hours based on the projections of three known cities that will be using the power out of Tyee, and therefore you base your projections on those growth curves for those three cities, and that’s where that number came. And it was based on the ‘87 study. It wasn’t anything that’s cast in concrete. It was just an example of a possible benefit that both sides of the equasion received. The benefits for the Four Dam Pool, of course, it extends out. It makes us more efficient because the facilities are already built and the money goes back into part of that debt service as well, where there’s a residual benefit from selling the surplus power, even if it’s at postage stamp rates of the Four Dam Pool. MR. EMERMAN: Any amount that you would pay for Tyee power at the buss box would benefit somebody. It would depend if all of it went for Four Dam Pool O and M. It would benefit even to the extent it ISLAND REPORTING P.O. BOX 5037 KETCHIKAN, ALASKA 99901 (907) 225-3470 36 n UW F W ND 10 11 12 a3 14 TS 16 aly) 18 a} 20 21 22 23 24 25 reduced O and M. If it all went to the State’s debt service, it would benefit the State. One would benefit everybody. How much would depend on how much of a buss bar charge there was to begin with. MR. STEVENSON: Right. MS. STANTON: Going back to the capital budget request you talked about earlier, are there other projects that the Energy Authority has at the present time that would be included with this project or are we sort of standing alone here, if you’re talking about 10 million or four and a half million or current or next year’s capital budget? MR. EMERMAN: The Authority’s budget request, capital budget list is -- twenty items on the list. & STANTON: Twenty items? MR. EMERMAN: And this is one of the list. & STANTON: What’s the total? MR. EMERMAN: The total from the Energy Authority? MS. STANTON: Uh-huh. MR. EMERMAN: I don’t know offhand. One of these is 55 for the rail belt intertie. For the rail belt intertie. MS. STANTON: I see. ISLAND REPORTING P.O. BOX 5037 KETCHIKAN, ALASKA 99901 (907) 225-3470 37 Ny wow Oo NY Dn YH FF W 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 MR. EMERMAN: Basically the way the request looks is about the first seven or eight items are what we call umbrella programs; two million dollars for rural technical assistance; a million -- I’m making up these numbers, but something like that. A million dollars for fuel -- bulk fuel repair. This sort of thing, and so the first seven items are of that nature. And the funding source for all of those items is basically the Four Dam Pool debt service, $8 million or so. So that’s identified the first eight million, those umbrella programs. The next item is number nine, somewhere around that some amount. I don’t know how much -- $2 million may be for a new program the legislature established last year for the -- called the Electrical Service Extension Fund to pay for extension of utilities where people aren’t hooked up in outlying areas. Beyond that I can’t remember the exact -- the order except that I think about two or three items down from that is where the Authority’s request will show the four and a half million for Tyee-Swan intertie. But how that comes out of the governor’s budget and what the legislature does -- our order of priority means very little. MS. STANTON: What you’re saying -- I’m ISLAND REPORTING P.O. BOX 5037 KETCHIKAN, ALASKA 99901 (907) 225-3470 38 an oO F&F Ww N ~ 11 12 13) 14 25 16 aly) 18 a) 20 21 22 23 24 25 saying -- I didn’t say. I’m Alaire Stanton, city mayor of the city of Ketchikan. But you didn’t say all of that was funded by money that’s coming in from other places, like the rail belt energy, I suppose? MR. EMERMAN: I should have said. MS. STANTON: How much new dollars are we looking for, I guess I’m asking? MR. EMERMAN: The first eight million, I identified where that comes from. After that all of the other projects are requests from the general fund except for the 115 -- MS. STANTON: Okay. MR. EMERMAN: And the total of the general fund request for appropriation that are not loans probably on the order of $20 million. MR. STEVENSON: They also have the energy equalization program. Isn’t that one of those top eight or something, 15 to $18 million a year. MR. EMERMAN: The power cost equalization project is in part of the operating budget. MR. STEVENSON: I see. MR. EMERMAN: Not a problem ongoing. It’s in the appropriation of 18 million. MR. STEVENSON: Is that a cash outlay? ISLAND REPORTING P.O. BOX 5037 KETCHIKAN, ALASKA 99901 (907) 225-3470 39 ry NY NM NY NY NY BF BF BP BF BF Ee Be Be Be eB PF WwW NH FEF OC 08 ODO IY DA HY ®F WH KF OC BO DOD IY HD YU F WN Ny wo MR. EMERMAN: Cash outlay. MR. STEVENSON: The Four Dam Pool, which Ketchikan is a member, we do repay debt service of about ten and a half million last year. So that implies reduction of debt. So from that standpoint we do contribute something back, right? Even though it’s not a hundred percent, probably, of what debt payment service should be. MR. EMERMAN: Yes, you contribute to -- the Four Dam Pool contributes something back. And like I say, the first eight million dollars or so of our capital budget request, at least on paper, can be funded by that stream of dollars that comes back from the Four Dam Pool. They retain -- MR. STEVENSON: Are we getting credit for that? MR. EMERMAN: Yes. MR. STEVENSON: Does it buy us any points anywhere? MR. EMERMAN: Some, yeah. MR. FREER: Does your spreadsheet, budget spreadsheet for your yearly expenditures show any comparison with like what the Four Dam Pool’s receiving and spending and contributing compared with the Bush receiving, spending and contributing? ISLAND REPORTING P.O. BOX 5037 KETCHIKAN, ALASKA 99901 (907) 225-3470 40 yY Oo WwW F&F W N co 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 MR. EMERMAN: No. MR. FREER: There’s no way we can tell how or where -- what state funds, even though it’s not State profit, with regard to funding that we’re -- is there any way of showing a comparison of all around the state of who gets what monies and how much they pay back? MR. EMERMAN: There’s a way of doing that, but it’s not a part of our budget. The thing you have to remember, too, from the point of view of Ketchikan is that, yes, you are making payments, but the repayments you’re making cover only a portion of the Swan Lake project costs. So if one were looking at what -- you know, if you’re making the political calculations of who got what, you know, Ketchikan got, you know, a substantial portion of the Swan Lake project paid for with State grants. Basically the Four Dam Pool was paid for overall with about 60 percent State grants. You’re paying off the other 40 percent at a low interest rate. So yes, there is a stream of money coming back. I’m not sure the presentation that you’re talking about would come out the way you’d want to see it. MR. FREER: Yeah. When you include, not just the Bush, but like Susitna, a billion or so that was spent on that? ISLAND REPORTING P.O. BOX 5037 KETCHIKAN, ALASKA 99901 (907) 225-3470 41 n oO fF Ww ND F&F 10 eT 12 13 14 15) 16 Ly 18 19 20 21 22 23 24 25 MR. EMERMAN: 140 million. A mere 140 million. Yeah, I don’t know. The per capita thing, we haven’t done that. It’s not -- MR. FREER: Nobody is obligated for all that money. You know, locally we’re obligated for everything that was pretty much spent on Swan through the Four Dam Pool. MR. EMERMAN: Well, you’re obligated to pay back a portion of it per your contract. MS. STANTON: I don’t have a question, but I would just like to say that the citizens of Ketchikan that I represent are really appreciative of the fact that we're this far down the line as far as the process is concerned. And we hope that the process keeps moving. We really are looking at a very narrow time frame before we’re going to be looking for other sources of energy. And I would hope that, even though it would be wonderful to have both a road and a transmission line, I’m hoping that idea of combining them will not delay the process as far as getting the transmission line ready to be built as soon as we can find the money to do that. I think that most of the citizens here recognize that we have a need. Back even ten years ago they were looking at things like Grace Lake as an ISLAND REPORTING P.O. BOX 5037 KETCHIKAN, ALASKA 99901 (907) 225-3470 42 y Dn WwW FSF W ND eo @ 10 ad 12 LS 14 5 16 17 18 LS 20 21 22 23 24 25 alternative, and that’s really hard to push because it’s so close to Misty Fjords, et cetera. And so if the Alaska Energy Authority can do anything to pursue this more quickly or keep it on line and keep it moving, why, we really think it’s economically and sensible and all of those other reasons. It’s a good project, and we hope that it would be done as speedily as possible. MR. EMERMAN: Okay. Anything else? MR. WEINSTEIN: I have a few more questions. What -- assuming that this is going to be built as is, what do you foresee the construction being? I guess what I’m really asking is would there be some kind of maintenance road associated with this? Would it be done by helicopter or what? MR. EMERMAN: There would be no, to my knowledge, no road building associated with the intertie. Whether there are any existing Forest Service roads from Behm Canal south that we could make use of, I don’t know. MR. JOHNSON: There are some in this neighborhood. (Indicating) Not much. A mile or two. And there are back in about here. (Indicating) And I don’t know what their plans are. We'll try to find that out. MR. EMERMAN: One of the things -- at tomorrow’s meeting we’ll learn more about what they have. ISLAND REPORTING P.O. BOX 5037 KETCHIKAN, ALASKA 99901 (907) 225-3470 43 n wo fF WwW ND F&F 10 Ad 12 3) 14 LS) 16 a7. 18 al) 20 21 22 23 24 25 And if there are such roads, it’s conceivable that intertie construction could involve rehabilitating some Forest Service roads that may be in disrepair. North of -- but not construction of new ones. North of Behm Canal, my understanding is that there are no service roads, and that would be entirely helicopter construction. MR. JOHNSON: There are no plans by the Forest Service, as far as we’ve been able to tell, to construct roads up in this area at the moment. On their planning process -- you know they’re doing the Tongass Land Management Plan, they’re revising it again. One of their -- no, several of their alternatives depict this corridor, or something very similar to it, as a transportation and power line corridor. So there are some elements of their planning process that are compatible with this design. It’s not an alien thought to them at all. It’s not in all of their alternatives, but it’s in several of them. I think the one that they prefer, it’s in there. MR. EMERMAN: It’s in all but one. MR. JOHNSON: Several of their alternatives. ISLAND REPORTING P.O. BOX 5037 KETCHIKAN, ALASKA 99901 (907) 225-3470 44 wow Oo NY Dn YO F WwW DNYD KF ~ oO 11 12 13 14 15 16 Ly 18 19 20 21 22 23 24 25 MR. STEVENSON: Is the funding for the -- would that make the project? For instance, if the Energy Authority used its power to sell bonds, would that raise us in the eyes of the concerns that the legislature may have for competing dollars? Would this be a project the Energy Authority would elevate to the status they want to use their bonds rather than asking the legislature to come up with all this vast sum of money? MR. EMERMAN: Well, to recap what we estimated in the preliminary financial study, out of a total project cost of about $40 million, just in rough numbers, it seems that -- from the preliminary estimates we had -- that the amount of revenue bonds that we could issue for this project would be on the order of 20 million. Given the amount -- given the avoided cost, avoided diesel costs of the city of Ketchikan, and assuming that you were willing, at least in the early years, to pay for that energy at an amount that equals those avoided costs and that the full amount of that payment went towards intertie costs and not towards payment of Tyee power at the buss, but given the fact that Ketchikan diesel requirements will start out relatively low, even though they grow over time or are projected to grow over time, that is the maximum amount that we thought, on the basis of the numbers we were ISLAND REPORTING P.O. BOX 5037 KETCHIKAN, ALASKA 99901 (907) 225-3470 45 wow Oo NY Dn YH F WwW DY Fe FP FP FP BR - Ww NY FF OO ES 16 17 18 19 20 21 22 23 24 7 looking at, Ketchikan would be able and willing to support. We can’t issue bonds without a revenue stream to pay them off, and the revenue stream to pay them off would be a committment from Ketchikan to pay that debt service essentially in the form of wheeling charges. So if $20 million is the most that we could realistically expect Ketchikan to be able to support, $20 million worth of revenue bonds, and we could reasonably expect to be able to support in debt service, that leads to the conclusion that, well, we need another 20 million from somewhere. And the State is the only source we were aware of. 3 STEVENSON: The grant process. MR. EMERMAN: I’m sorry? MR. STEVENSON: The grant process. MR. EMERMAN: Well, yes, the legislative appropriation. MR. STEVENSON: How about combining the state energy -- the Energy Authority has like Metasham project went, they let this out in one large bond issue. MR. EMERMAN: I doubt that the timing would work out that you would issue bonds for the two projects at the same time. But I’m not sure what you’re ISLAND REPORTING P.O. BOX 5037 KETCHIKAN, ALASKA 99901 (907) 225-3470 46 an uo FF Ww ND 10 LL 12 13) 14 LS 16 17 18 19 20 21 22 23 24 25 getting at. How would you save -- MR. STEVENSON: The larger issue -- MR. EMERMAN: The bigger issue cost. John, do you have any thoughts about that from your experience in financing? MR. HEBERLING: Yeah, there was initially talk of the Four Dam Pool issuing a joint bond issue for all four projects. And conceivably something could be set up to jointly issue a transmission line bond. But typically, I think, from a contractual standpoint, it would almost have to be done as a single issue. MR. EMERMAN: Because you have different revenue streams -- MR. HEBERLING: Different revenue streams. Right. MR. EMERMAN: -- supporting different projects. MR. HEBERLING: Right. Although you’ve established -- the Energy Authority would probably have to establish a fund to which transmission line revenues are paid and from which the debt service, the interest and principle on those bonds is then paid out to the bond holders. MR. STEVENSON: Well, I have a concern with this process. Through the Four Dam Pool, that’s a ISLAND REPORTING P.O. BOX 5037 KETCHIKAN, ALASKA 99901 (907) 225-3470 47 Pe WwW ND an wm v7 12 13 14 15 16 U7 18 19) 20 2a 22 23 24 25 pool process of pay back. Under this intertie we’re looking to one utility to pay for the costs -- MR. EMERMAN: Right MR. STEVENSON: -- of Tyee Lake. And my concern is this, who’s going to own the transmission line when you’re done paying for the project? And my other scenario is one of where everybody owns the project, I guess, it’s not quite the impact as it is to the rate payers here who are looked to solely to repay that debt. It seems they ought to have either some ownership or some residual rights. There ought to be some something. And maybe that’s -- MR. EMERMAN: Well, maybe there would be. MR. STEVENSON: -- part of the contract that the energy gets real cheap at the end of the twenty year period or something. I don’t know, but that -- I guess I’m circling that issue. I’m concerned that the Energy Authority is going to own the facility, but we’re going to be looked to to have the responsibility for paying for it solely, and this is unlike the rest of the projects that the Energy Authority has built to date. MR. EMERMAN: Well, just two things, one is that I think it’s real common for one purchaser, for an entity to go out and borrow money and charge somebody ISLAND REPORTING P.O. BOX 5037 KETCHIKAN, ALASKA 99901 (907) 225-3470 48 anon Ww F WwW N “I 10 rd 12 13 14 LS 16 17 18 19 20 21 22 23 24 25 for the use of -- to build a project, charge somebody for the use of the project to pay off the loan and continue to own the project after the loan is paid off. Bradley Lake would be an example. When the utility finished paying off the Bradley Lake bonds, the Authority will continue to own the project. When the federal government finishes paying off the quota bonds or Metasham bonds, the federal government will continue to own the project. Well, not the bond, but the loans that were issued to finance it. I don’t think that’s unusual at all from what I’ve seen. On the other hand I don’t know of anything that would necessitate the Authority necessarily owning the project after the bonds had matured. It seems to me that’s something that’s negotiatable. MR. STEVENSON: Well, what you’re talking about is preference of power rights. If we’re -- if you’re talking about Bonneville or of any federally financed project. The return that those utilities received, of course, was preference power. And in recent years those preference power contracts have been in court by investor owned utilities and some of the people who would like some of that cheap power. And it has cost the rate payer millions and millions of dollars, and the government as well, to protect those preference powers. ISLAND REPORTING P.O. BOX 5037 KETCHIKAN, ALASKA 99901 (907) 225-3470 49 n uo F&F W DN 10 11 12 13 14 15) 16 17 18 19 20 21 22 23 24 25 So there’s a bad side to that as well. My other concern then is that if we buy off -- if the State is the only one that can build this intertie, we do so based upon the State’s ability to negotiate the contract and get the best deal, yet we’re going to be looked to be the ones that pays it. Normally in that kind of process if you’re the one that is going to pay for it or at least have a part of it, perhaps there could be some say in that, that the local utility would have in seeing if there’s a way to mitigate the costs of the building the facility, in this case, the transmission line. For instance, are there other options? Once we’ve gotten to the point that we need to look at it, can it be done cheaper through some other source than going through the State to get it done? MR. EMERMAN: Well, we’d be happy to hear any suggestions you have anywhere along the line. MR. STEVENSON: And my thought is, of course -- and this probably is something we can’t answer here -- is that the State can support a grant of some type to a local community, and we can go out and get Peter Kewitt (ph) or somebody to build the transmission line. I don’t know. It just a question. I’m throwing that out. ISLAND REPORTING P.O. BOX 5037 KETCHIKAN, ALASKA 99901 (907) 225-3470 50 an wo F&F WwW N 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 MR. EMERMAN: Well, neither do I. The Authority’s interest in building an intertie -- MR. STEVENSON: I guess our experience in the Four Dam Pool at this point leaves a little bit to be desired, at least in my mind, the two years I’ve been involved with that. I’m not disrespectful at the decisions that were made before. I’m sure they did the best with what they had at the time. But it’s a very clumsy organization at present, at least in my eyes. MR. EMERMAN: Yeah, well, it is from what I can see. But whether -- how that relates to the proposed transmission line, I’m not sure. It wouldn’t be a joint ownership of a transmission line by five different utilities. But I don’t want to close off any of those possibilities. There’s no reason why those proposals can’t be made and discussed. Whether the legislature would want to give a grant of that magnitude to a local utility? Maybe they would. Maybe they would prefer to keep the thumb on the agency doing the work, which would be us, since they have more control over us. I don’t know. But you can -- conceptually I’m not here to tell you it’s got to be us doing it and nobody else. It just looks like an obvious opportunity, the basic concept of the line, to do something that makes sense ISLAND REPORTING P.O. BOX 5037 KETCHIKAN, ALASKA 99901 (907) 225-3470 Bl 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 over the long-term. And I know I’m not hung up. I don’t think Charlie Bussle is hung up on exactly how that’s done -- MR. STEVENSON: We’ve identified a couple of other potential users of that electricity; one is a private industry and one is the City of Metlakatla. And they both have some potential in the future for being able to use some of the electrical energy out of Tyee. Is any consideration going to be made to other users of energy or will any weight be given -- MR. EMERMAN: We’re not looking at Metlakatla. The preliminary financial assessment tells us that the line would be more difficult -- the project would be more difficult to finance if you throw the cost of a Metlakatla line on top of a Tyee-Swan line. Metlakatla’s contribution from power purchases would not be sufficient to pay their -- whatever it is $7 million or whatever their estimated cost of the line. So it makes the required grant bigger to put Metlakatla in the equasion. So at this point this feasibility study doesn’t look at Metlakatla. MR. STEVENSON: Unless they got a different funding for their portion, right? MR. EMERMAN: Well, the -- when you say another industrial user, all we’re looking at is the load ISLAND REPORTING P.O. BOX 5037 KETCHIKAN, ALASKA 99901 (907) 225-3470 52 an uu F WwW NY 10 el: 12 13 14 15 16 a7 18 a) 20 21 22 23 24 25 forecasts that were developed in 1990 which takes account of KPC. Are you talking about somebody other than -- MR. STEVENSON: That’s who I’m talking about. MR. EMERMAN: That’s who you’re talking about. Okay. Where do we stand? What we had on KPC was in the load forecast the idea that they would, over the long-term, take on the average of 15,000 or so megawatt hours a year. And John and I just spent an hour or so, an hour and a half out there this afternoon talking with them and didn’t really come to learn anything that would lead us to change that estimate. That 15,000 a year, however, they would only take at a surplus power rate. It would have to be considerably less than the amount we’re talking about as KPU avoided costs. They might continue to take 15,000 megawatt hours a year at the rate of -- on the order of two cents, today’s dollars. MR. STEVENSON: That’s with the assumption that they will maintain their present facility? MR. HEBERLING: Uh-huh. MR. EMERMAN: That’s on the assumption that they would -- what? -- not substantially -- that they would continue to have more or less the same ISLAND REPORTING P.O. BOX 5037 KETCHIKAN, ALASKA 99901 (907) 225-3470 53 10 11 12 13 14 15 16 17 18 9 20 an 22 23 24 25 requirements for oil-fire generation over the long-term. Their loads are expected to grow gradually over time, but it appears that their expectation for self-generation from wood waste and red liquor is also expected to grow gradually over time. Did you get the same impression? MR. HEBERLING: Right. MR. EMERMAN: And essentially the amount of replacement oil-fired electricity that they anticipate, as of this afternoon, doesn’t seem to be -- that doesn’t seem to change as time goes on. Their anticipation is that their requirement for oil-fired electricity remains roughly what it is now. That’s the impression we got from them. MR. HEBERLING: They could make some modifications to their system out there that would permit them to purchase more power. They figure up to a maximum of maybe five megawatts. The 15,000 megawatts hours or so we're talking about represents around two megawatts on a fairly continuous basis. MR. EMERMAN: But in order to purchase anything up to this maximum of up to five megawatts, they cautioned us that the price would have to be at or below the surplus power rate they currently enjoy, because, they went on to say, that what they’re avoiding is ISLAND REPORTING P.O. BOX 5037 KETCHIKAN, ALASKA 99901 (907) 225-3470 54 u fF WwW N 10 1 12 13 14 LS 16 aly) 18 Lg 20 21 22 23 24 25 basically fuel costs. And the fuel costs that they described to us was extremely low. They talked about number six oil at $10 a barrel. MR. STEVENSON: I understand that, except for, I guess my thought that I have is perhaps at some point, since they’re a capital intensive industry and with the pressure on their contracts, if they had an alternative supply of electricity without having to say put another $50 million to retrofit their boilers, it seems to me that would be an economically viable realistic alternative that they would want to make. MR. EMERMAN: Again, my understanding was that this -- MR. STEVESON: The next ten years that’s not going to happen. MR. HEBERLING: Right. MR. EMERMAN: -- that this 75 percent of their self-generation comes from wood waste and red liquor. That process, whatever it is, is -- they have to get rid of this stuff, and that this is the most cost effective way for them to dispose of it, and that it would be a problem for them to take more than the amount that would displace oil, because then they would have to figure out how to get rid of this stuff that they’re presently disposing by burning in their boilers and ISLAND REPORTING P.O. BOX 5037 KETCHIKAN, ALASKA 99901 (907) 225-3470 55 uu F&F WwW ND 10 11 12 13 14 15 16 ay? 18 19 20 21 22 23 24 25 generating power. MR. STEVENSON: Maybe we should have a joint venture with them, have them build another power plant and make them interested. MR. EMERMAN: We talked about that. We talked about that. The -- there’s a couple of limitations on that. One is that right now they’re using all of their wood waste and processed waste, although, they could barge in waste from Metlakatla and Thorne Bay. And if they did that, and if they built a new boiler and a new generator and so on and staffed it, they could generate additional power perhaps as much as -- what was the number? Five of them? MR. HEBERLING: Five of what? MR. EMERMAN: An additional five? MR. HEBERLING: Oh, no. No. The additional would be about -- MR. EMERMAN: What? Three? MR. HEBERLING: -- two or three. MR. EMERMAN: Three. MR. HEBERLING: Yeah. MR. EMERMAN: But it didn’t seem as though that would be a very cheap option. First of all, the fuel would be expensive because they’d have to barge it in; secondly, the capital cost is substantial. And O and ISLAND REPORTING P.O. BOX 5037 KETCHIKAN, ALASKA 99901 (907) 225-3470 56 > a wu 10 Lt 12 13 14 15) 16 a7 18 ul) 20 21 22 23 24 25 M cost is substantial, also. A lot of staffing. MR. HEBERLING: And a fairly -- MR. STEVENSON: How high? Because that gets into their argument about what it costs. MR. HEBERLING: They have a fairly extensive steam load out there, too, as you’re probably aware. And balancing the steam requirement is very critical to them, the extraction and so forth at various points in their system. It’s fairly complex to manage that whole operation and keep it running effectively. But it sounds like, from a standpoint of consuming their waste products they have available to them, they’re doing a fairly good job of that. And conceivably they could expand the system by a fairly extensive cost, and they’re not really talking about doing that right at the moment, expanding. They still intend to keep buying emergency power, as they call it, at low rates. MR. EMERMAN: Well, surplus power. MR. HEBERLING: Surplus power. MR. EMERMAN: Not just for emergencies. As you would know, they seem to take two megawatts on a fairly regular basis. MR. STEVENSON: Well, we have a limitation on that. We only get about 4.7 that we can allow them to ISLAND REPORTING P.O. BOX 5037 KETCHIKAN, ALASKA 99901 (907) 225-3470 57 a use, 4.7 megawatts. 2 MR. EMERMAN: The impression they gave us 3 is that they have three generating units. And when they 4 run two, they typically supplement it with two megawatts 5 from the city. When their requirements go much above 6 that, they run three units and cease their take from the 7 city. 8 Again, that was the impression they gave 9 to us. 10 MR. STEVENSON: That’s not what really LL happens. 12 MR. EMERMAN: Oh, is that right? LS MR. FREER: Did you notice what it was 14 doing -- LS MR. STEVENSON: I would say two is base, 16 and generally it’s three or above. 17 MR. FREER: Did you notice what it was 18 doing today off and on? Lg MR. EMERMAN: No. 20 MR. FREER: Snowing. 2A) MR. EMERMAN: Oh. 22 MR. FREER: I think when you were at the 23 pulp mill, some of that effected your judgment. 24 (Laughter) 25 MR. HEBERLING: Back to what you were ISLAND REPORTING P.O. BOX 5037 KETCHIKAN, ALASKA 99901 (907) 225-3470 58 an uo FF WwW N s 10 a 12 13) 14 15 16 17 18 19 20 21 22 23 24 25 talking about, Tom, as far as financing this thing. It’s kind of interesting to think that had this transmission line been constructed at the time the Four Dam Pool was initially established, it could have conceivably been a part of the whole process and the cost would have been melded in with everything else, just like the transmission line from Tyee to Wrangell is part of that system. And everybody’s paying for those costs on a fairly uniform basis per kilowatt hour. MR. EMERMAN: Seems like a fruitless line of thought. What are we going to do about that? MR. HEBERLING: Who knows? Maybe somehow you could retrofit this into the Four Dam Pool. MR. EMERMAN: Who would want to? MR. STEVENSON: Well, one of the pressures the pool members have put on is -- as far as they’re feeling any energy taken out of Tyee should be recovered on a debt service cost basis or to reduce the debt service on the Four Dam Pool. And so that’s the battle that is going to come later. MR. EMERMAN: Yeah. Well, you know, what it comes down to is if they want the money, they’re not going to get the project, because the more money they want, the higher the State grant has got to be; and the higher that grant has to be, the less likelihood that the ISLAND REPORTING P.O. BOX 5037 KETCHIKAN, ALASKA 99901 (907) 225-3470 59 PF WwW ND F&F an wu s 10 TT 12 3) 14 15) 16 17 18 19 20 21 22 23 24 25 project will be built at all. MR. STEVENSON: Well, I think the only saving grace to that is -- to my understanding -- is the way this procession works. And it is in the agreement that they have the first right to use the energy. If they’re not using it, the Energy Authority has the right to use it. And I think that’s the only saving grace we have at this point to beat that argument of the Four Dam Pool members. So based upon that, I was more relieved that we could still get this done, because if we’re the ones that need the power and that kind of a roadblock is out there, it basically could defeat it indirectly rather than have to take us on directly. There’s going to be some -- MR. EMERMAN: Well, Wrangell and Petersburg -- one of the things I neglected to mention. Before the meeting we were talking about the Wrangell and Petersburg meetings. And one of the things that we heard, pretty emphatically I think, was whether they wanted that third unit. And if they could just get that third unit provided by the State, then that would be a -- that would be their benefit from the intertie deal. In other words, if you were to -- the problem, of course, is that a third unit is going to cost them something like $6 ISLAND REPORTING P.O. BOX 5037 KETCHIKAN, ALASKA 99901 (907) 225-3470 60 Ny an uo F- WwW 10 aba 12 13 14 25) 16 7 18 19 20 21 22 23 24 25 million, and has relatively little benefit associated with it, at least in -- MR. STEVENSON: Peaks in power. MR. EMERMAN: Right. Where the peaks are already considerably below the project capacity. So it would be some time before you would get any actual money returned from a third unit, which means that you’d be talking about essentially adding that to the size of the required grant. I just mention that for your information, because there are things that -- MR. STEVENSON: Well, they brought that up, too. But the thing they’re not allowing for is once you have an interconnected system like this, there are other alternatives to meet peaks. Just avoid shaving, such as Ketchikan putting up -- it’s turning on one of its diesel generators. There are all kinds of other more realistic expenditures than a curve that they can’t justify, nobody can justify for twelve or thirteen years out. You can’t spend that capitol dollar and not even use it once and have a need for it for thirteen years. MR. EMERMAN: Of course, what we pointed out at the meeting in Wrangell and Petersburg is not a problem for the foreseeable future, because they have ISLAND REPORTING P.O. BOX 5037 KETCHIKAN, ALASKA 99901 (907) 225-3470 61 yy nA UW *» W ND © 10 aL 12 a3 14 15) 16 7 18 19 20 21 22 23 24 25) first call on the energy for their firm requirements. MR. STEVENSON: Right. MR. MILLER: What are we talking about when we say the third unit? MR. EMERMAN: There are two generators, ten megawatt generators at the Tyee Lake project, but there is a space for a third ten megawatt generator. MR. STEVENSON: But there’s not enough water to run it. MR. EMERMAN: Well, there’s -- MR. STEVENSON: Not on a sustained basis. MR. JOHNSON: Depending on the time of year, I suppose. Yeah. MR. EMERMAN: Well, you can’t -- you know, typically you couldn’t run a hydro project, any hydro project, flat out all year long. But they have, as I say, 130 million kilowatt hours of water and a big storage capability in the lake. And 30 megawatts would not we an unreasonable size. It’s just that their peaks are presently on the order of 10 to 12. MR. MILLER: This is 130 million kilowatts? MR. EMERMAN: Kilowatt hours. MR. MILLER: Yeah. Okay. And 40 million are used by the two towns right now? ISLAND REPORTING P.O. BOX 5037 KETCHIKAN, ALASKA 99901 (907) 225-3470 62 an wu F Ww ND F&F aki 12 LS 14 15 16 a7 18 19 20 21 22 23 24 25 MR. EMERMAN: Yes. MR. MILLER: They could use a third unit? MR. EMERMAN: Well, a third unit would not add additional kilowatt hours of energy. That’s determined by how much water there is in the lake. But it would enable them to put out more power at any particular time. MR. MILLER: All right. While we’re on glossary terms, what are wheel agreements? MR. EMERMAN: Wheeling rates refers to the charge for transferring energy across a transmission line. MR. STEVENSON: A rental fee. MR. EMERMAN: I’m sorry. MR. STEVENSON: A rental fee. MR. HEBERLING: What currently, Dick, is the wheeling rate that the State charges on the Anchorage-Fairbanks intertie? Do you know what that is? MR. EMERMAN: Anchorage-Fairbanks intertie was built with a hundred percent State grant funds in the early ‘80s when the State had a lot of money. It was a $122 million, something like a $120 million project. And so the wheeling rate for the State’s portion of the Anchorage-Fairbanks intertie, which is just from Willow to Healy, about half the total ISLAND REPORTING P.O. BOX 5037 KETCHIKAN, ALASKA 99901 (907) 225-3470 63 an uo F&F WwW ND ~ 10 Let: 12 LS 14 15 16 a7, 18 19 20 2a 22 23 24 25 Anchorage-Fairbanks system, covers only maintenance and operation of the line. And I think it’s a little under a half a cent. MR. FREER: Seeing how the State had all this money, we had to pay for Swan. MR. EMERMAN: You had to pay for a portion of it. MR. FREER: I mean we paid. MR. EMERMAN: The Four Dam Pool cost $500 million. The State granted $300 million. The loan which is presently being paid off by the utility is on the order of $190 million. How that all works out and who got how much, I don’t know. But that was the basic contour of the thing. MR. STEVENSON: I just want to make this comment for the record that in spite of the issues that we've talked about here, at least from the standpoint of the staff members of the utility, this intertie appears to be the best alternative of our energy options for meeting our future energy needs. For whatever the growth curve is and whenever it’s going to occur, this is the most economical and realistic approach. The other alternatives we’ve looked at when we have talked about potential problems and practical matters and so forth that are optible. They’re ISLAND REPORTING P.O. BOX 5037 KETCHIKAN, ALASKA 99901 (907) 225-3470 64 n uO FF WwW NY 10 at 2: z3: 14 15 16 17 18 19 20 21 22 23 24 25 all things that are solvable, compared to building a pen stop between Grace Lake and Swan Lake that goes through Misty Fjords National Monument. We think that these are rather mundane issues. I just want to make sure the record is clear. We’re a hundred percent behind and appreciate what you and the staff of Mr. Bussle are doing for us in consideration of this issue. MR. EMERMAN: Okay. MR. JOHNSON: Can I suggest we close the meeting on that note? Are there other comments? (No audible response) MR. EMERMAN: Okay. Well, thanks for coming. MS. STANTON: Thank you. MR. STEVENSON: Thanks for coming. (Hearing concluded at 8:33 p.m.) * ek ke Ke * ISLAND REPORTING P.O. BOX 5037 KETCHIKAN, ALASKA 99901 (907) 225-3470 65 wow On Dn HO F WwW ND KF NN N NY N N FP FP BF BP EF Fe BF BF FE “uF WN FE OC fb DOD TY DW HU F WN FP O REPORTER’S CERTIFICATE I, ROCKY D. JONES, CSR-RPR, hereby certify: That I am a Registered Professional Reporter for Island Reporting and Notary Public for the State of Alaska; that the foregoing proceedings were written by me in computerized machine shorthand and thereafter transcribed under my direction; that the transcript constitutes a full, true and correct record of said proceedings taken on the date and time indicated therein; Further, that I am a disinterested person to said action. IN WITNESS WHEREOF, I have hereunto subscribed my hand and affixed my official seal this 29th day of January, 1992. ‘enh, 9 \ 7 ROCKY D. JONES, C$R/RPR Registered Professional Reporter My Commission Expires: 1-14-93 ISLAND REPORTING P.O. BOX 5037 KETCHIKAN, ALASKA 99901 (907) 225-3470 66