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HomeMy WebLinkAboutAlaska's Energy Plan 1986 Planning Report Planning Report Alaska’s Energy Plan 1986 NOTE Susitna Hydroelectric Project Due to recent events relating to the Susitna hydroelectric project, an overview of current developments, including elements of the Susitna plan of finance, is now being prepared by the Alaska Power Authority and will be provided to the Legislature in the near future. BILL SHEFFIELO GOVERNOR STATE OF ALASKA OFFICE OF THE GOVERNOR JUNEAU Alaska’s Energy Policy, Past and Future by Governor Bill Sheffield Dear Alaskan: Energy programs have been a large and important part of Alaska’s public policy over the past decade. A lot has happened in that time, too. Ten years back, Alaskans were gazing across what looked like a limitless ocean of oil wealth. Now, we can see the other shore. Over the past 10 years, we Alaskans have modified our expectations to fit our income. In the same way, we have modified components in our energy programs to fit the fiscal realities. However, the basic policy behind those programs has not changed. There is a common sense logic and persistent pattern to the State’s involvement in energy matters over the last 10 years. That logic continues to motivate our energy program planning. All of Alaska’s energy programs share this primary goal: to use our resources to reduce consumer expenditures on energy. Our programs can be broken down into these general categories: e Identify and assist in the construction of “optimum” electric generation systems, from hydroelec- tric dams to waste heat systems; e . Reduce individual consumption of energy, especially for home heating purposes; e Hold down electric bills in high cost, rural areas. Optimum Generation By far, the State’s major initiative has been to find electric generation systems that would—over the long term—provide electricity at the lowest cost. The Alaska Legislature has pursued this objective primarily through the Energy Program for Alaska, administered by the Alaska Power Authority (APA). These are the major components of the program: ¢ Four hydroelectric dams that are providing power today in southeast and southcentral Alaska— Tyee Lake, for Wrangell and Petersburg; Swan Lake, for Ketchikan; Terror Lake, for Kodiak; and Solomon Gulch, for Valdez and Glennallen. ¢ The Bradley Lake hydro project, which will provide power to the Kenai Peninsula by 1990. Con- struction should start this spring. e The Susitna River hydro project, which is in the planning stages. ¢ The Fairbanks-to-Anchorage intertie, a 170-mile 345 kilovolt transmission line connecting the power grids of our two largest cities. The Legislature has committed about $1.4 billion (including appropriations to the Power Develop- ment Fund, a savings account for future Railbelt power projects). That is a powerful commitment to providing the people of Alaska with long-term, dependable power at the lowest possible cost. On a smaller but still impressive scale, this commitment is reflected in other APA programs such as the waste heat recovery program, the Rural Electrification Revolving Loan Fund, and the Power Project Fund. Seventeen waste-heat recovery facilities have been built in rural Alaska since 1981. Numerous low- interest loans and cash grants (some administered by other State agencies) have helped expand and upgrade rural electric distribution systems. Direct grants and loans from the Department of Com- munity and Regional Affairs have allowed villages to purchase and store their diesel fuel in larger bulk quantities, reducing the overall cost to those consumers. Reduced Consumption Energy conservation programs have helped Alaskans reduce their energy costs by using less fuel, especially home heating fuel. State energy conservation measures include consumer education and outreach programs, weatheriza- tion, home energy audits, and better thermal efficiency standards for new buildings. Both federal and State money support our conservation efforts. The agencies include the APA, the University of Alaska, the Cooperative Extension Service, and the State Department of Community and Regional Affairs, which is the lead agency in energy conservation. Direct Energy Support The Power Cost Equalization Program (about $20 million in FY 86) is a major subsidy program. Through a statutory formula, it pays a part of the monthly electric bill of the residents in many high-cost rural communities. It was designed by the Legislature to assist rural communities in attaining some measure of equity in State spending for energy projects. Additionally, the federal Low Income Energy Assistance Program, administered through the State Department of Health and Social Services, helps qualifying households defray energy costs. Looking Ahead Alaska’s energy programs have entered a new phase. It is a time for consolidation and refinement. As times change, we need to ask ourselves which of our existing energy programs most effectively implement—or can be tailored to implement—our existing energy policy. We need to streamline the programs we have and make them work better. The State of Alaska remains committed to its primary goals of reducing energy costs for Alaskans. We can achieve this by continuing our hydroelectric program and encouraging conservation through coordinated State programs. We can adapt our programs to changing times and conditions, with the cooperation of the public, our Legislature, and local public officials. Sincerely, Bill Sheffield Governor ALASKA’S ENERGY PLAN 1986 VOLUME Il — PLANNING REPORT Bill Sheffield, Governor State of Alaska Prepared by: Department of Commerce & Economic Development Loren H. Lounsbury, Commissioner Alaska Power Authority Robert D. Heath, Executive Director February 1, 1986 Special Thanks to Wanda Springsted, For additional copies of this report write to: Carol Whelan, and Barbara Weiss for Preparing the typed portions of this = document for publication. Alaska Power Authority a Box 190869 Editor Anchorage, AK 99519-0869 Mark Miller TABLE OF CONTENTS List of Figuresiy......- mettterteieiete prettereitetettsteriereterrrtetierers eeieere Li stofilablesemaassrrerieriieectditrc rerererarcterete ere veretetetsievetsrorsroretelete Part I - Alaska's Energy Plan CHAPTER 1... “INTROBUGTION. «<< <iccicte 5 0c qdicicsiec aelslelelelaielel ole loleieleisreclerersrereelel eyo A. Goals and Policies.......... sislelevevele slelere oielelelole ele elevere ere) clererelerl= Bo EN@UGMY SERLUCE occ crcl cis bere eisreiele cleicisicle © cleiciele olcieioininie= eels oleleiersio Gs ‘Plan Ofganization: 3.25300 2..cnnddemet eos hicwes efeletorelerelelstors Btcicle CHAPTER II., ENERGY POLICY. .<: 2235.5. sisloleteteretaleteielelalsisisvetelelers soleereisieisis os A. - PUSARTRGs 6. cisicicie o sie wrcie gist thei iereioreccioune Bol eteletele! slerelorcle) evel efel> we eee B. Wagor Projects... . 02. ccccs.ccicccccosecccs ietetererelelelsterstersoaiorcietel> C. Energy Support and Efficiency...... sfoleloreterer sleloreictererororeteterelolorelere D. Energy Conservation......... oe) sia felefeleVoVeveTelelole)ofeicleleleVelevetousre\e\e(srere Ete UROMWMN aise cleteitietiaoe c\oleleie/ eo oeieisiersieccicrilelereers esi oe rcccccccccece Fon) eROSSAN@ ROGUS 00300 02 -8:o ate emis eh ciclo aticliemins ecco rset Breleteteto G.° :Transportation.....:.3<. Bo letiisials ier aSieis ole lelels ols elsicla =’ s clalers)ereloters H.. ‘Other Polictes........... poislelereeeeieleiellelelaisioloioreleaie ers sioreretereiersie CHAPTER TUE. AEASKA"S ENERGY FUTURE. 5 «cistern cs ociccvicsceeoassceeces AROLGEaS Coiiecelsse cicero ciritre afelelaiere ciotololole olelelelererelelciers) eterelalaiereiiels Ty, - Stgtewide....0.5<5.0- Blelsioletelerc\alcleloversiotsielsreretelsisiole cictsisieieleletele Com ROG | Bel iGarclesleloecloreiloeielets sce cieleicicre alotslereraialelelelereretorstorerere siete 3. Southeast..... 4. Rural..... Se) REVGHUG.-1<e1r010/< sree weisle B. Recommendations andi SWWRALY.< <.0<00 0.66.06 c1010. 0.00 o1ccoc coesiciewsisic 11 20 47 TABLE OF CONTENTS (Continued) PAGE Part II - Alaska's Energy Report.......ccccececccccccccccccsscscccee «. 63 GHAPTERMIV SH SIRESOURGES fomrererciererstere store Mtkhtteseuebendee ceaeceeeedeuwas 65 AS=OjandiGasaceci. Berets error rt erier oc ererrster eters oer 68 1. Historical Background....... aereeiaiere ratoistarateioteratarnars aprepreen OO) 2. Resource Location......... Rerleeeitalrescidsierostieleler sete wees 69 (a) Cooksrlnletiterrclrtontorstercar' eixcrereiiatele epee tenia ohictexo = 09) ((b) BIENorstheS llopeaserrctrterteciecier civic sles A raerster Stee erie 71 (c) Outer-Continental Shelf teed yoleraloralars ral otters taltrevevs 74 Sra eaSiNGsanage xplOracd OMerstersrereisreieretera)everelstsierelaiclets/s eieteretorevore 74 ASMA ASKAGRET UN lm Glstsjere/orctorctarctarsiervrexetereisielerolelereloreioieteretereteicrevereters 77 5. Resource Use and Technologies EI TSTSTeTs eels ov ot ele eal oretenieiereisNolers 79 (a) Power Generation..... arctan lareforaiat ove eval ave lool vel ovevore feraleve 79 (b) Seliransporati OMcisctrcten seisicioctne sn sere Ree tellaee hrs 84 (@) Biellitni Winsaurncoonacqunspsooonenc irelarelens ref oretereecie orstere 84 BiecatG aN rereceterercrevercrorereicretevelevereverarctercterstoretera efereisierevoere Mafehorarotehoteldteleratetarelere 88 Iai RESOUTCE EE OCAltH ON ercraxs eicieicisrorereieieoienere Dlersisvelaiatelelereiereratetotekelere 88 Zea RECENT IP HOGUGTA ON creferote crererorerorel eres rerorerey ei Beyer aoretoehere eet eTetoo 3. Potential Development............ ererorered sTohereleretetereroiars BOO od ae (a) Bering River....... Riarerertarceevorurennrs rear acolarelar ere ators 91 (b) Matanuska..........- BIiaToleretorewiecere alaraaya aia ere oraee Saree 92 ((e)) SE Be lu Gatrestarclersisteroioeiorineterstertlocererrictt eters Relorslettert colt ante 92 (d) Jarvis Creek...... Be oleteisteketelerelereporeletteretetetererer .. 92 (e@) aiCapelBeautontasceceeeereeriins Bagoouogodon ioe eS Power Geneira tal OMicnrersrcoreteretoroioreteleveierere sere Sreloreteroleretars tens intolar 93 C. Hydroelectric Power........ merelorctelslersielciere Mi seteretereYerbleditersterere seee 94 I Background and Producti oncciersierclercteinasieetlais'sieiereisie 94 Zoe bNo set aDevel OpMmeltitarctscterte cicisisteteisicis cloves ailerieie ere Rr faOG (a) Project bevel owt braces€ 5. .ssscs. cece ictee ss (b) Energy Program for Alaska ...... Dare iA eieleieterisis Sela 100 C. D. Es CHAPTER V. A. B. Cc. D. ES TABLE OF CONTENTS (Continued) PAGE Hydroelectric Power (continued) (1) Sus#tna Hydroelectric Project...:....ssceseee 101 (2) Bradley Lake Hydroelectric Project........... 101 (3) Crater Lake/Snettisham Project............. oe loe (c) Rural Electrification Programs........scccesscccce 102 (d) Alaska Power Administration Projects Transfer..... 103 MPANGHISS TONE SVS COMS cicrerrc tore’ ole iors! oie iain /olelsisicieiorele ciclerele Scie ieia 104 Alternative Resources......... BTereTe late eiclowsiet over rerelereiateieioiot oie ieiclole 108 I Background. <scccctmacicacsc ere eebeere ieee ereielerelcieieererereicciors 108 2 Wikigeeleret scare cere larsieieietoreis eisierere:> Sacre Retettetcrereretere sfefereretelerereicreisierere 109 3 Sollanisicnc- aialaieieieiere 4 GeOtre rma cei crerercierecc:ci6 cieiorcicieicisie piolacrsierererere 5 BiOMaSS <<< scien 6 Réatiiciccnaaivices 7 Wilda eterorecere cecee ENERGY SUPPORT..... SF aT OToNG a [oY ovo Tato Te TovoT owes tolalaverseioieleleioieioleroreretere iret 123 Genera l= Fund -Appropria ti ONS erscerserers oc crere c sicia cree cinieie cicieraie« ce aeieileo) 1. Power: Cost Equalization. <2 <.cccccccicce atelofoieleiereiererererore¥erere 125 Oi NEAR E actieteisloicioveiese Rafer erorolarsYere’ oiercieha onorelere eto: oroieieveieke eweicisieie 126 3. Weatherization........ SONOOUODDOCOUGDOUOOOOO0 0 OOUGOIOO . 128 4. Inaedeusd ona) Conservation. << «occ cso tdiviclew stoics éclccebe 130 Gees MU PmISUO IN UG oietelereiarere cre eierers crorereiereereicloleioreiercieiersrereleicrarsrerciclersio 133 6. Bul ka rdetiteess -201:1cc toon ett oidjei Td oie ebel oi vielaveloriereleieibisToisieletete = 100 GY WS sgadoonousogoduD ooOud Rie eeeerinese tines Rrereiereeiereiorciciere . 136 VS == Power=Pregect LOAN: RUNG a: creccicre crore cisielororcrs ofsese 1 Wrels tictorsre © 136 2. Rural Electrification Revolving Loan Fund.............. 137 3. Residential Energy Conservation Loan Fund.............. 138 4. Alternative Technology Revolving Loan Fund............. 138 eS BU) KRUG LORIN over ore 10 0 oforerereroxercioiersieselololererecioieleiostloicreiorerercisle 138 Teche t Gai) SASS 1S CWO si ero:0 ce 0 0 orc lersiciein:g cieieicisivcieicieisiciesiscie'o slo's rcicio 138 To=—_ Rural Energy. Management oie: oc:01cre1e-c11e ciiarss o's vi vicies vistivieieieisis 109, 2.-_Thermaland Lighting Standards o..<.icjerscvc cicero icles Poo EQUGAt TON stoicrsreereisiarciciciorsicic's pielalelorstelslelorcioieilererersicleletersicisteierecreteiiots 140 (Continued) PAGE CHAPTER VIG UDEETIVII REGULATIONS) yarctcicrerlotcrettevevere eletetaeyoleteteleveletcleicleisveleee 143 CHAPTER VII. NON-STATE/FEDERAL ENERGY PROGRAMS. .........cceeeeeeccees 147 ASM CHUGACHE Ve CLI Cry silelsisl lotsa sister sucleielsysieteteicreicieisteteleciclerstokelereterorerelors 149 1. Energy Audit Program...... Spel latent etatebetsteretetevatsts Mietebeleleeteletere 149 2. End-Use Survey/Load Management Project ot skatletoveroys Maree Loo SM GARESHPUOGKaMsvelelsrcretevetsistslelelelel cyotersicleloverelovcvotcverersrelere plctelsislelers|| LOU) SMVOINE UCI CYAMeaMetenvericfelerelelerelctelererclele|voletereleterotsteleletetela eiele 150 5. Community Energy Management Plan...........seeeeeee soe) en 6. InFormati OnDAS Cy IDUEION seve) cerscielelsleicleloierelelore/ere Byelatetonsherers 5) TANMSChook hand) PUD Mc) iPrognamsfrscletereicierele lela aerate eveletaicleieleieie)eicl> 151 Ba MUNI CHpaltyonlAnchonageructtetesleleletecesterereteteretelletoielotetere stele siete 151 VA MMGACheriiZatllOMelaretelercrlstereversle olete Perr re rrr rer tree 151 Zone) MovEgage) Vall uation) Prognall l/s aeltevslselctsielsteleleleieveretes N52 Gai) Southeast) Conferencelsiy.\cctere erereicie: cre Meletelelcterceteveretorekersterstetereloteye 153 DROUneaul Ene ygyy COMMmipitcee testcrereleteisl sl atersleusielsicisteveelsvelelcloleterstcieycicrets 153 EAlaskavElectrniculeightiand) POwelss sccicelelsiasterretersiete Petetsiateteteleters 155 F. Tanana Chiefs Conference...... otal steloletelcleisteletercletevalstereteletereloishercists 155 GMRUTALHCA Pravsleteyelalstevefelarelarctetelcraieletststolsreveretaietelsiletstetcielereteictolelralerekrelere 156 H. Fairbanks Chamber of Commerce Energy Committee............. aS TeResourcel Development| COUNG ill Pierieilacilelclelsettcictelcieleieteietereisierielels 157 Va ACOMMONWeallichliINOGENsprelrcetelery a oteteterstelaotelererere) atetetersteloteteretsterecrerelorsts 158 Ke Sirol a uUllisttelveyetsrefelaretalstetey lst store etsfolelorel sVetsoleisi a lcfoleiststelereretstel sietstevelcts 158 L. ARCO-Yukon Pacific - Natural Gas Study.............. steve oratarets 158 M. Integrated Technology House...... elalekerorsiels) sieleveist svorslore elevate os NS) Individual) Pioneering |Efforts.jcscccieecls + ice aya eretale fcleteveveteic ets 159 TABLE OF CONTENTS LIST OF FIGURES TABLE NUMBER = TITLE PAGE 1. Popeivatton FOveCasit acee re colette afele ee lorerel oie lelotet afer oie orsteleloleleiel leleicicierel io i= 51 2. Projected Demand for Ot] in Alaska o..csnsscccsscswewsssccawass s 52 3. Projected Demand for Natural Gas in Alaska......... cece eee ween 53 4. Projected North Slope Crude Oil Production, 1985-1999.......... 54 5. Electrical Forecast...... efoferelelotorerelereelerelsieieterelsereiererateterete sfoketeketotereieis 55 6. Cook Inlet Oi] and Gas Field Location Map...........ccceeecccees 70 7. Cook Inlet Major Pipeline Systems......... cece cece eee cee eeeeee 72 85 Nowthi SiGber AGtiVitiye Map... ./6.o.c116 00 ierere vieie ereies’eie cles) ereieielelel oc erelelereie 13 9. Known O11 and Gas Provinces in Alaska <cr:cciiciscvelsioinisicissisisienns sis oss 75 10. Net Generation of Electricity in Alaska, 1980-1984.............. 81 11. Installed Electrical Capacity in Alaska, 1984..... syerorerersvelererererevers 82 12. Transportation Consumption of Petroleum By Use...............4.- 85 13. Alaska's Known Coal and Peat Resources............... Srrrlererereistere 89 14. Undeveloped Hydroelectric Resources of Alaska..... pieioleretelevererereraiere 95 15. Alaska's Known Hydroelectric ReESOUrCeS........ cee cee cece ee ceeees 96 16: Existing TransmiSSton: SYStems. .).:6 sisssmevcecesecicscesessctees aole LOD) 17. Average Annual Wind Power in Alaska...........eeeeeee aietelelelereteierere 110 18. Alaska's Known Geothermal Resources...... eloteisioleveletoicleleieretetelelatieleie/e 115 LO SAlaskanl timber RESOUrCeS\sicie11crecsicicisiaieiereislesels owiejeleloieieieierere) cle iclels s1cief> . 216 20: Potential Tidal Power Sites. im AlaSkA... 60 <5 .05.5. cistern es sisicic 120 LIST OF TABLES TABLE NUMBER TITLE PAGE Ura SSORENE HOY x GOAN Siorerarereloreret sore Te keloie! ¥oxeioloYolcretorelolers¥olelokeiololelelerolleleloraroro 5 2. Priority Policies for 1986 Energy Plan........ceeeeeeeeeeeeeees 7 3. Committee Members Developing Alaskan Energy Policy - 1986...... 9 4. Alaskan Priority Energy Policies - Planning..........cseeeeeees 18 5. Alaskan Priority Energy Policies - Major Projects............4. 22 6. Alaskan Priority Energy Policies - Energy Support and Efficiency........ aretoLonerenetetateletetorenevetetel hee rete) sie NetoreleFolNetoleleheier= 27 7. Alaskan Priority Energy Policies - Conservation...........ee00- 31 8. Alaskan Priority Energy Policies - Thermal.........cceeeeeeeeee 37 9, Alaskan Priority Energy Policies - Fossil Fuels..............0- 40 10. Alaskan Priority Energy Policies - Transportation..... see eeeee 43 11. Alaskan Energy Policies to be Implemented at a Later Date..... . 46 12. Comparision of Federal and State Leasing Schedules in Alaska... 76 13. Alaskan Petroleum Processing PlantS......ccseccceccccssccceeces 78 14 1984ebl ectric=GenerationeData= fon Alas Kalerrereyeroreleierele/srolaistetersierciele’c 79 15. Nameplate Capacity of Electrical Generation Units in Alaska and Net Generation By Primary Fuel Type.............. 83 16. Summary of Coal Resources in Alaska......cscceccecccccecceeceee 90 17. Hydroelectric Projects Operating in Alaska.........ceceeeeeeeee WY 18. Alaska Power Authority Project Approval Process SEQUENCE ZOE VENUS rrerciotovetereroteleferereorelelerelelelstenete piel leieleleroreleloroloro mrorereiere 99 19. Transmission Lines and Major Interconnections...........eeeeeee 106 20. Potential Locations for Tidal Power Plants............. eTereiererercro 121 LIST OF TABLES (Continued) TABLE NUMBER ne PAGE 21. FY 85 Low Income Home Energy Assistance Program Funding..... erereieiere Divale clare syoveistolerstalere atsrerehelsveiereloveloters o/elerelere 127 22. Weatherization Funding History, 1978-1986............... Gale stejsie| | (Led 23. Institutional Conservation Program Funding History, 1980-1985.. 131 24, 1984 Energy Mini-Grants..........seeeee Meloleleleloiereleterelcleletetoterel ole rslele 134 25. FY 86 Legislative Grants and Reauthorizations............ soreeteie} | /2o! PART | ALASKA’S ENERGY PLAN CHAPTER 1. INTRODUCTION 1985 marked a year of transition for Alaska; a year that took us from an oil-rich to an oil-sensitive posture, and one that reminded us that our future destiny must be shaped by comprehensive, cost-effective decisions made through a coordinated plan of economic development balanced by basic needs fulfillment. Within this framework, the four volume "Alaska's Energy Plan - 1986" was developed. It is the sixth in a series of reports prepared under Alaska Statute 44.83.224 (see Appendix). Previous plans have included information regarding energy demand, assessment of energy supply options, research, conservation, and emergency planning. These plans have provided basic information and examined the long-term view of Alaska's energy future to the year 2000. Emphasis was directed to reporting current energy production and consumption, and assessing Alaska's energy future. Until 1985, those plans failed to highlight energy policy and Alaska's future in the near-term. The 1985 Energy Plan combined the efforts of nine State agencies into a plan that defined each agency's energy programs, provided guidelines for future State action, and set the energy policy direction for Alaska in the coming years. This Plan adopted the view that long-range planning does not deal with future decisions, but with the future of present decisions. Acting as a "snapshot," the 1985 plan defined the baseline against which all future energy programs could be measured. "Alaska's Energy Plan - 1986" prepares the State for a future of reduced oil revenues and increasing energy needs. Working from the basic statute that requires a long-term energy plan addressing five key areas, this plan includes the identification of specific policies that will be the road map against which the Governor and Legislature may fashion their programmatic appropriations, while providing the basic information to produce long-term solutions without major upheavals in the near term. "Alaska's Energy Plan - 1986" sets the direction for comprehensive, cost effective energy implementation activities in the coming years, and provides reasonable expectations of where State action will occur on energy issues in the GOALS AND POLICIES Alaska's energy goals and policies through FY 85 were the product of governmental regulatory and budgetary actions fostered during a period of increasing State revenues. During that time, key pieces of legislation were enacted within Senate Bill 25, Senate Bill 26, and Senate Bill 438. This legislation included power development and energy conservation com- ponents. These actions have led Alaska's energy policy to fall within four key areas: Finance Power Development Projects Mitigate Electrical Costs In Rural Alaska Manage Federal Conservation Programs Leasing of resources on state lands to maximize state benefits and encourage in-state and export use of those resources PWNrE Starting into the second half of the 1980's, the competition for State and federal appropriations has become more intense, and the ability to fund energy projects has come under question. During the first session of the 14th Legislature, House Concurrent Resolution 29 was placed before the Legislature for discussion. The session terminated before passage was complete, but public hearings on HCR 29 heard strong support for comprehensible State policies that would allow legislators and the public to consciously determine Alaska's energy future. Simultaneously, "Alaska's Energy Plan - 1985" was being completed as a snapshot of where Alaskan energy programs and policies stood and as a first attempt to identify where Alaska should be going on energy issues in the future. "Alaska's Energy Plan - 1986" has been designed to build on the 1985 plan. Seven issue area goals (Table 1) were formulated under the State's long-term, overall goal which is: "Seek to assure that all Alaskans have an adequate supply of energy at lowest reasonable costs to the consumer, the environment, and the State." Originally, 38 policies were developed, and these were later consolidated into a total of 29 policies. Sixteen policies were highlighted for immediate attention, and others set for implementation over the next several years (Table 2). First, an Energy Policy Steering Committee was assembled to set the di- rection and tone for energy policy development. The Steering Committee was composed of cabinet officials (commissioners of major State departments), top counsels to the Governor, and individuals from both the State Senate and State House of Representatives (Table 3). This committee was staffed by an interagency Working Committee composed of State mid-level managers. General public direction was solicited from energy and nonprofit groups, and private citizens (see Appendix). Through a series of letters, telephone contacts, and one statewide teleconference, policy ideas were obtained. These were subsequently incorporated with ideas from top State officials to form the policy action statements in this report. Procedurely, general public comments were incorporated into the Steering Committee and Working Committee process which prepared draft goals and policy statements. These were disseminated for comment and aired at a statewide teleconference. Based on the general public outreach program, and teleconference comments, the goals and policies shown in this report were finalized. TABLE 1 1986 ENERGY GOALS ISSUE AREA: Energy Planning GOAL: Alaska will prepare an annual energy document that reports thermal, transportation, and electrical power energy use and production for the previous 5 years, forecasts consumption and production incrementally for the next 20 years, prepares and updates emergency contingencies, and outlines governmental policies for energy involvement. ISSUE AREA: Major Projects GOAL: Alaska will encourage major energy projects that provide reduced long-term energy costs to consumers and promote development of those projects through leverage financing and attractive regulatory environment while preserving the historic, scenic, and cultural heritage of the state. ISSUE AREA: Energy Support and Efficiency GOAL: Energy support and efficiency development, in the form of general fund appropriations and loans, will be designed to ultimately reduce the total level of residential and commercial energy consumption through increased energy system efficiencies that lead to producing the lowest long-term cost for electrical generaion and home heat requirements, and reduce or replace the need for fossil fuels with an emphasis on regionally available renewable energy resources. ISSUE AREA: Energy Conservation GOAL: Alaska's role in the field of energy conservation will be one that supports the development of systems that reduce the per capita consumption of nonrenewable energy resources, encourages the efficient consumption of renewable resources, and provides for long-term reliability for Alaskans statewide. ISSUE AREA: Thermal Energy GOAL: Thermal energy in the form of fuel oil, natural gas, wood, and coal is used extensively to heat Alaska's building stock and, given Alaska's harsh environment, it is imperative that all Alaskans be assured a continuous supply of thermal fuels at a reasonable price. In addition, the production of fossil fuels for export from Alaska has been, and will continued to be for the foreseeable future, the cornerstone of Alaska's economy. TABLE 1 1986 ENERGY GOALS (Continued) ISSUE AREA: Fossil Fuels GOAL: Alaska will develop fossil fuel energy resources to maximize State economic return in both development of the State's economy through development projects and through lower energy costs to Alaskan consumers. In addition, the production of fossil fuels for export from Alaska has been, and will continue to be for the foreseeable future, the cornerstone of Alaska's economy. ISSUE AREA: Transportation GOAL: Alaska will support transportation schemes that reduce the overall consumption of energy resources per mile of travel, provide for greater in-state availability of transportation fuels, and increase’ the opportunities for closer contact between all Alaskans in an expeditious manner. ISSUE AREA Planning Major Projects Major Projects Major Projects Major Projects Energy Support & Efficiency Energy Support & Efficiency Energy Support & Efficiency Energy Support & Efficiency Energy Conservation TABLE 2 POLICY PRIORITIES FOR 1986 ENERGY PLAN RESPONSIBLE POLICY AGENCY Prepare an annual energy report that APA provides an update for energy policies DCED and programs and coordinates the efforts and activities of energy planning groups statewide. Bradley Lake - Support the completion of the APA Bradley Lake hydroelectric project by 1990, as part of the least cost, most reliable energy strategy for the Railbelt. Susitna - Continue State support required APA for acquisition of the FERC license, including encouraging utility support and other evaluations and activities necessary to determine financial feasibility and completing the construction of the Susitna hydroelectric project. _ Evaluate the desirability of transferring OMB of federal hydroprojects in Alaska to state or local control. Continue evaluating and seeking to identify APA major energy projects that result in the lowest life cycle costs, as determined by reconnaissance and feasibility studies. Institute a two-year analysis of all State APA supported energy programs beginning in FY 87. OMB Review existing avenues and develop new APA alternatives for State and private sector DCRA financing of energy capital projects. DHSS Establish an accountability system to insure APA State agency statutory compliance and maximum DCRA delivery of service of State energy programs. DHSS Institute the recently completed Memorandum APA of Agreement between the Alaska Power DCRA Authority and the Department of Community and Regional Affairs. Energy efficiency will be encouraged DCRA through development of minimal thermal and lighting standards. ISSUE AREA Energy Conservation Energy Conservation Energy Conservation Thermal Energy Fossil Fuels Transportation TABLE 2 POLICY PRIORITIES FOR 1986 ENERGY PLAN (Continued) RESPONSIBLE POLICY Facilities which are constructed or where construction costs are funded by the State of Alaska, will comply with State thermal standards. Continue to seek federal Low Income Housing Energy Assistance Program (LIHEAP) funds to complete weatherization projects and to support specific conservation programs offering reduced reliance on nonrenewable energy resources. Alaska will pursue appropriate technologies that provide reliable, long-term power by using federal and state incentives to pro- mote demonstration of applied research by private investors. Generate revenue and encourage the develop- ment of Alaska's energy resource base by offering for lease appropriate State lands for potential development of oil, gas, coal, and geothermal energy resources. opportunities for obtaining firewood from State-owned lands. Disposition of royalty oi] shall be awarded in a manner which will optimize benefits to citizens of the State through proposals that maximize State revenues, supply existing in-State refineries and oi] and gas based utilities at market prices, promote new in-State refineries and oi] and gas based utilities which are economically feasible at market prices, and promote foreign markets. Evaluate projected energy use of alter- native routes for new transportation links and traffic management decisions shall be evaluated. AGENCY DCRA DOT/PF OMB DHSS APA DCRA DHSS DNR Also provide DNR DOT/PF TABLE 3 COMMITTEE MEMBERS DEVELOPING ALASKAN ENERGY POLICY-1986 Steering Committee Name Title/Agency Ben Harding/Pete Spivey Special Assistants to Governor Sheffield Gordon Harrison Director of Strategic Planning Office of Management & Budget Esther Wunnicke Commissioner, Department of Natural Resources Loren Lounsbury Commissioner, Dept. of Commerce & Economic Dev. Emil Notti Commissioner, Dept. of Community & Reg. Affairs Richard Knapp Commissioner, Department of Transportation & Public Facilities Kurt Dzinich Senior Advisor, Senate Advisory Council John Hartle Representing John Sund, House of Representatives _ Coordinating Staff Don Shira Manager Program Planning & Analysis Alaska Power Authority Mark Miller Energy Coordinator, Alaska Power Authority Working Committee Mike Tavella Alaska Public Utilities Commission Bob Brean Department of Community & Regional Affairs Ron Lind Department of Transportation & Public Facilities Eileen Rehweld Department of Health & Social Services Ned Farquhar Department of Natural Resources Carol Bruce Department of Revenue Jim Tozer Department of Education Lt. Col. Michael Murray Department of Military & Veterans' Affairs Dr. Ted Eschenbach University of Alaska ENERGY STATUTE "Alaska's Energy Plan - 1986" attempts to address each of the five main components of AS 44.83.224, prepared a series of energy policy statements, and consolidated known energy data into a central document. Five major points of the guiding energy statute are individually discussed as follows: 1. End Use Study - Within the "Resources" chapter, consumption and production of Alaska's energy resources are summarized. Within the "Regional Data Summary" document, historic energy data is presented by community. 2. Energy Development Component - Essential elements to prepare an economic development component are shown. Within the "Resources" chapter, known energy resources are examined, feasible technologies for their use are highlighted, and summaries of historical energy consumption are illustrated. Projects essential to this development, such as the Bradley Lake and Susitna hydroelectric projects for the Railbelt are discussed. Within the "Energy Programs" chapter, energy programs that are working are briefly explained. A complete energy development component has not been expressed due to rapidly changing economic conditions, and the need for a State Economic Development plan that would reflect an energy development component as an essential part. A regionalized forecast section is included in the "Alaska's Energy Future" chapter. 3. Energy Conservation Component - An energy conservation goal is expressed, and both the "Resources" and "Energy Support" chapters are specific programs to reduce energy consumption. In the Regional Data Summary, recommendations from reconnaissance and feasibility studies are illustrated. 4. Emergency Energy Conservation Component - This has not been com- pleted in the 1986 energy planning process. A brief summary of what has been done and what remains to be completed was presented in "Alaska's Energy Plan - 1985" and is not repeated here. 5. Research and Development - Within both the "Resources" and "Energy Support" chapters, applied technology research and development is shown in projects on-going and anticipated. Specific applicable technologies are briefly explained. The Regional Data Summary presents technology findings from the 1983 Energy Plan which are applicable today. The primary extension of AS 44,83.224 during this planning cycle was in the development of policy options to meet today's situation. Without policy, the intended long-term nature of AS 44.83.224 would be lost to merely the past reporting of energy activities and the present speculation on what might be done. Policy statements formulated indicate what will be done, when it will be done, and who is responsible for getting it done. -10- PLAN ORGANIZATION "Alaska's Energy Plan- 1986" is presented as a four volume set, which includes: 0 Volume I - Executive Summary - Summarizes salient points of Energy Plan and Report - Highlights policy options 0 Volume II - Planning Report - Part I, Energy Plan - Provides the long-term energy plan and does so through the identification of priority policies and by forecasting Alaska's energy future for the state's three main regions; Railbelt, Southeast, and Rural. - Part II, Energy Report - Examines Alaska's energy resources and energy programs today. Resource location and potential long-term production are discussed, consumption levels are identified, and technologies for their use are examined briefly. State, federal and private nonprofit programs are also identified. 0 Volume III - Regional Data Summary - Presents energy data by community organized into 23 energy (census) regions, and in larger composite summaries. - Includes data on consumption of energy, energy assistance, and energy project development. 0 Volume IV - Appendix - Additional background and support data Combined, these documents portray Alaska's energy status in the first half of the 1980's, and defines a planning direction through policy implementa- tion the State of Alaska should take to resolve energy issues in the coming years. These documents show where Alaska wants to go on energy issues and how it hopes to get there. Although the picture these documents paint does not have complete detail on how Alaska's energy future will look, it does provide enough image to set the general policy tone in the next few years, and pave the way for a complete legislature package in FY 87 that maps Alaska's energy plan in the long-term. -ji- CHAPTER 2. ENERGY POLICY Alaska's overall energy goal is to “assure that all Alaskans have an adequate supply of energy at lowest reasonable costs to the consumer, the environment, and the State," and the cornerstone of "Alaska's Energy Plan - 1986" is the expression of State energy goals and policies flowing from that overall goal. This section highlights those issue area goals and policies that will begin to formulate a preferred action plan with near-term and long-term implementing actions. Policy is the key to determining the complexion of the long-range plan and the importance of chosen policies is substantial. That is why energy policy has been placed as the first major chapter of this report. Knowing what Alaska has to offer in the energy field and understanding what has been accomplished to use those resources wisely is only part of Alaska's energy picture. What Alaska plans to do with available resources in the long-term is the challenge in developing energy policy. Energy policy presented in this report is the result of two year's work. Commencing with the effort to develop Alaska's Energy Plan - 1985, issue areas were defined, and specific strategies and program options were organized for analysis and discussion by top State leaders. The 1986 Plan development process utilized both a high level State official steering committee and an outreach component to formulate a series of policy statements that could potentially direct Alaska's future energy activities. Energy groups, including utility, private, nonprofit and municipal organizations were contacted for information and ideas pertinent to energy planning. Concurrently, top State leaders were organized into a steering committee to formulate policy statements that would address individual energy issue areas. The steering committee was composed of commissioners, and one representative from the Governor's office, Office of Management and Budget, House of Representatives, and State Senate, respec- tively. Twenty-nine policy statements were formulated with a subset of 16 priority policies selected for implementation during the 1986 legislative session. Priority policies are shown in each issue area discussion, and those policies not selected for action this year are shown at the close of this chapter under "other policies." Priority policies were selected on the basis of five criteria: I Impact - What is the effect of implementing this policy now instead of sometime in the future? - Would failure to act on this policy in 1986 effect the social or economic viability of the State? - How many Alaskans would the policy effect? - Does the policy selected compliment or enhance ongoing programs? -15- 2. Fiscal Impact - Will a new expense be added either to the State or the Alaskan consumer and is the cost short-term or long-term? - If there is no immediate cost, will the policy entail expense in the future or will the policy increase the economic well being of the State? - Are there other hidden costs? 3. Return on Costs - If the State or private sector expends dollars now, will there potentially be an adequate return on investment? - Can the State leverage economic development to provide long-term energy security? 4. Political Feasibility - Is the political climate ripe for policy change or would valuable time and effort be lost by challenging the system? - Have commitments been made that morally cannot be changed? 5. Legislation - Does timing for program development and implementation require that specific legislation be promulgated or changed in the 1986 legislative session to meet future policy requirements? Each of the select 16 priority policies are discussed individually within this chapter. First, a brief background ties together the priority policies within each energy issue. Next, the priority policy is stated, followed by the actions necessary to see policy implemented. Finally, implementing actions proposed for legislative attention in 1986 are shown. Several budget figures are also given in support of implementing actions. Primarily, the FY 87 Governor's budget request figures are shown. In addition, numbers in parentheses ( ) indicate the funding level to completely implement the option, and although not included in the FY 87 Governor's budget request, are included for planning purposes. Budget figures labeled "Other" come from program receipts or federal funding. Between the narrative and table presentations, the implementation of specific energy policies should become clear. -16- PLANNING Prior State energy plans have been compilations of historical data, broad attempts at forecasting Alaska's energy future, and minimal efforts to define State energy policies on which the Administration could focus programmatic attention. These planning efforts were completed under the auspices of AS 44,82.224 which requires an annual energy plan be completed for Alaska addressing five key areas which are: 1. An end-use study; Energy development component; Energy conservation component; > Ww DY Emergency energy plan component; and 5. A report on research and development. Legislation for this statute was submitted and passed during the second oil crises period of the 70's, this being in the 1979-1981 oil shock period. Since that time, the world has begun to experience an over supply and less reliance on Middle East supplies from the OPEC nations that caused the 1974 and 1979-1981 world oil crises. Changing conditions have necessitated a change in the way Alaska addresses energy. Alaska needs to look at each of the five areas of the present legislation and address each one with direction that permits the develop- ment of energy policy. The goal of this energy planning issue is: Alaska will prepare an annual energy document that reports thermal, transportation, and electrical power energy use and production for the previous five years, forecasts consumption and production incrementally for the next 20 years, prepares and updates emergency contingencies, and outlines governmental policies for energy involvement. One policy was selected as best portraying the intent of that goal (Table 4). An additional planning policy, to prepare an emergency energy plan, was delayed until the next planning cycle to provide an adequate amount of time to complete a comprehensive emergency plan. =t7 -8I- TABLE 4 — ALASKAN PRIORITY ENERGY POLICIES ALASKA'S ENERGY PLAN—1986 ISSUE AREA: PLANNING GOAL: Alaska will prepare an annual energy document that reports thermal, transportation, and electrical power energy use and production for the previous five years, forecasts consumption and production incrementally for the next 20 years, prepares and updates emergency contingencies, and outlines governmental policies for energy involvement. recent year, and comparative. Information type determined by definable core group of State agency and legislative designees, provide for review of data type every live years, an end-use study. and provide a date of publication initially and annually coinciding wih long-term energy policy document. to designate lead agency to request appropriation to Support data collection by agencies and provide for- mulae for distribution of those funds through separate ies. Includes the consolidation and compilation ‘agency information. (_) Indicates budget estimate for planning purposes to complete action. but not included in Governor's FY 87 Budget Request Other Budget — Federal or program receipt funds. RESPON- Ser ete! OTHER SIBLE POLICY OBJECTIVE IMPLEMENTING ACTION een BUDGETS | AGENCY Prepare an annual energy report 1 provides an | Prepare a document that will describe iska’s long-term | Modify Alaska energy planning 8 to reflect the 75.0 APA update for energy policies and programs and coor. | energy policy options, define “long-term” (specified in years, | need for a policy document, an energy inventory report, dinates the efforts and activities of energy planning | ie., 10, 20, 30, etc.) incorporate a summary of statewide | and a completion date of August 15 to coincide with statewide economic and energy forecasts, and provide for a comple- | annual budget preparations. tion date in line with executive budget preparation. Prepare a report on energy information that is historic, most | Modify Alaska energy planning statute to require and (150.0) APA Policy Prepare an annual energy report that provides an update for energy policies and programs and coordinates the efforts and activities of energy planning groups statewide. Background This statement identifies the purpose of "Alaska's Energy Plan - 1986," which is to concentrate on development of policy statements, address the five key areas of the statute, and incorporate energy group input. Updating information pertinent to the development of concise energy policies is central to good planning. The 1986 Regional Data Summary attempts to build on historical information available, but much of the data, other than electrical power, is not current. A concentrated effort must be undertaken to assess the cost and availability of energy resources by community. This must be kept current on an annual basis. Good, current energy data must be combined with equally good socio-economic data to prepare reliable forecasts on which sound energy planning can rely. At present, forecast data in all but the Railbelt is extremely dated or so site specific as to preclude regional application. A process to forecast energy demand through the next 20 years on a regional basis is a serious need of long-range planning efforts. Coordinating the efforts and activities of energy planning groups statewide is another primary element of this policy. In Alaska's Energy Plan - 1986, the rudimentary elements of this quest were begun, but effectual statewide integration of local and regional energy planning efforts will require commitment with a specific program and designated personnel to see the statewide coordination takes place. The Department of Community and Regional Affairs, through the Rural Alaska Community Action Program, utilized a team of two energy specialists to assist local community's energy planning, and perhaps a melded approach of local assistance and overall State planning would begin to resolve the coordination problem. Although there is no identified entity for this function in FY 87, funding within the APA energy coordination function may serve this purpose. The policy does not speak to an equally important topic of an economic development policy as an integral part of energy planning. The State must work to develop an economic development plan, in which an energy develop- ment component, such as Alaska's Energy Plan - 1986, will be an integral part. EIQ MAJOR PROJECTS Alaska has financed several major hydroelectric projects through the Energy Program for Alaska, and has supported the development of natural resources for energy use both in-State and for export. For the purpose of this plan, major projects are identified as those not of a small or dispersed nature. (These are discussed in the "Energy Support & Efficiency" policy section.) Initial projects developed under the Energy Program for Alaska include the Anchorage/Fairbanks Intertie and the Four Dam Pool consisting of Solomon Gulch (Valdez), Swan Lake (Ketchikan), Tyee Lake (Wrangell/Petersburg) and Terror Lake (Kodiak). The Power Project Revolving Loan Fund was also developed to finance $210 million interim costs prior to the completion of operational arrangements for the Four Dam Pool which have recently concluded long-term power sales agreements. The State has expressed strong financial interest in providing a long-term solution to the power needs of the Railbelt. Based on current estimates for the amount of recoverable natural gas that is available for Railbelt power generation, a substitute for natural gas will be needed soon after the turn of the century. Energy resources which might provide a substitute include hydropower, coal, natural gas (new Cook Inlet discoveries or North Slope natural gas), tidal or a mix of these resources. The Alaska Power Authority has filed license applications with the Federal Energy Regulatory Commission (FERC) for the Bradley Lake and Susitna hydroelectric projects. Current schedules call for the Susitna FERC license to be issued in 1989, Bradley Lake's FERC license was completed in December 1985 with construction expected to commence in early 1986. Both the Susitna and Bradley Lake projects have been funded through the Power Development Fund which provided a continuing appropriation of $250 million in FY 85 and FY 86. A Superior Court action in October, 1985 declared that appropriation unconstitutional, but later clarification allowed expenditures for the Bradley Lake project to stand. Only the Susitna portion of the appropriation was effected by the court ruling. A major consideration in the upcoming legislative session will be to reappropriate past funding for the Susitna project, and annually appropriate funds for both Bradley Lake and Susitna. There has also been continual strong interest in developing an intertie transmission line between the Anchorage area and the Kenai Peninsula to provide reliable transfers of power. Additionally, Alaska is studying the potential of taking over federal hydroelectric projects to State or local control, supporting western Alaskan resource development projects, and installation of other energy resource extraction projects. In combination, these potential major projects could be a dominant part of Alaska's energy future. -20- Four major project priority policies were selected (Tables 5). These priority policies indicate Alaska's desire to move ahead with the Bradley Lake hydroelectric project, continue to seek a FERC license for development of the Susitna hydroelectric project as the lowest cost source of power for the Railbelt, evaluate the benefits of obtaining federal hydroelectric projects, and continue to seek out other long-term solutions in evaluation of major projects statewide. The goal of this energy policy is: Alaska will encourage major energy projects that provide least long-term energy costs to consumers and promote development of those projects through leverage financing and attractive regulatory environment while preserving the historic, scenic, and cultural heritage of the state. -21- -22- TABLE 5 — ALASKAN PRIORITY ENERGY POLICIES ALASKA'S ENERGY PLAN—1986 ISSUE AREA: MAJOR PROJECTS GOAL: Alaska will encourage major energy projects that provide reduced long-term energy costs to consumers and promote development of those projects through leverage financing and attractive regulatory environment while preserving the historic, scenic, and cultural heritage of the state. Sorereese RESPON- ae owe | onan SIBLE POLICY OBJECTIVE IMPLEMENTING ACTION Reqwest 000 | BUDGETS | AGENCY Bradley Lake - Support the completion of the Bradley | Continue ongoing process to project completion. Continue annual State appropriation for the project. 0,000.0 APA Lake hydroelectric project by 1990, as part of the least cost, most reliable energy strategy for the Railbelt. Susitna - Continue ‘support required for acquisi- | Continue ongoing process to project completion. Continue State pursuit of FERC license. (100.000 0)" APA tion of the FERC license, including encouraging utility support and other evaluations and activities necessary Reinstatment of $200 million FY 86 appropriation. | (200.000 01° to determine financial feasibility and completing the construction of the Susitna hydroelectric project. Evaluate the desirability of transferring of federal | To determine whether acquisition of federal projects would | Specitic enabling legislation will be required to incor. | To be de- APA hydroprojects in Alaska to state or local control. be financially prudent and in the best lon, im inter of rojects under St control. Will depend upon | termined. OMB the State and the citizens these projects serve. recommendations of ongoing State/feder determine consequences of transfer. Report to be com. pleted about January 1986. Continue evaluating and seeking to identity major | Large-scale hydroelectric projects (5 MW or grea! Continue reconnaissance and {1 (125.0) 50.0 APA energy projects that result in the lowest life cycle costs, | continue to be investigated. ‘of technic: ind economic vi as determined by reconnaissance and bility, hydroelectric projects. studies. Alaska will promote electrical interties that result in lower | Continue reconnaissance and feasibility assessment 400.0 APA tong-term costs for consumers and where a reasonable return | of technical and economical viability of interties in (1,030.0) OMB on State investment may be expected through economic | Southcentral, Southeast and rural Alaska. development. Evaluate State regulations to replace those of FERC and | Analyze potential legislation parallel to governing | To be de APA design regulations to fit Alaska’s unique environment. federal legistation that exerts St: authority over | termined. project development ( ) Indicates budget Other Budget — Federal or program receipt funds. * Request to rein: imate for planning purposes to comple ction, but not included in Governor's FY 87 Budget Request, continuing appropriation from previous years, not a new budget request Policy Support the completion of the Bradley Lake hydroelectric project by 1990, as part of the least cost, most reliable power supply strategy for the Kenai Peninsula and Railbelt. Background Bradley Lake is located at the end of Kachemak Bay near Homer, Alaska on the Kenai Peninsula. Reconnaissance and feasibility studies have shown this to be a preferred hydroelectric site, and subsequent environmental impact statements have found no significant environmental roadblocks to the construction of the facility. In 1985, financing of the $300 million facility was negotiated. Despite a Superior Court ruling that declared a continuing legislative appropriation for this and other energy programs unconstitutional, a later clarification paved the way for this project to continue. Bradley Lake is ideally suited for the purpose for which it was designed. Located at the southern terminus of the Railbelt, it will provide power to the Kenai Peninsula and the Railbelt. Bradley Lake has been placed as the top major energy project because it has advanced to the final FERC licensing stage and is scheduled to go into construction in early 1986, with completion of the 90MW project in 1990. Legislative action will be required to replace the continuing appropriations mechanism and continue actively on the Bradley lake project. Policy Susitna_- Continue State support required for acquisition of FERC license, including encouraging utility support and other evaluations and activities necessary to determine Fraaberal feasibility and completing the construction of the Susitna hydroelectric project. Background After years of study and state expenditures of $142 million the Susitna hydroelectric project as a viable project appears to be the most reliable, long-term low cost source of power for the Railbelt. The final hydroelectric facility would be 1620MW. However, there remains several large milestones to pass before a FERC license can be granted and individual Railbelt utilities agree to long-term power sales contracts. The cost of the project in the face of declining State revenues, and the recent Superior Court ruling that declared continuing appropriations for the Susitna project unconstitutional are major problems to be dealt with. The State is fast approaching a time when it must decide what project or projects will be supported to assure long-term electrical energy reliability for over half the State's population in the Railbelt. -23- This priority policy recognizes the need for a long-term plan for electrical energy in the Railbelt and aligns with previous analyses that have shown the Susitna hydroelectric project to be the favored long-term electrical solution for the Railbelt. The policy will continue to receive open and frank discussion in this legislative session. Lowest life-cycle costs indicate a projects financial feasibility to provide the lowest costs over the life of the project. Included in the determination of life-cycle costs are expenses incurred for initial purchase and startup of a project, and sundry costs associated with operations and maintenance throughout the project's effective life. This analysis allows competing projects to be weighed for associated costs throughout the life of the projects existence, not just initial construction costs. Reconnaissance and feasibility analysis substantially help to provide information pertinent to life-cycle cost comparisons. Policy Evaluate the desirability of transferring of federal hydroprojects in Alaska to State or local control. Background Federal hydroelectric projects in Southcentral (Eklutna) and Southeast (Snettisham) are under study by the federal APA and State of Alaska (OMB) for possible transfer to State or local control. The State must decide if acquisition of these projects would be financially prudent and in the best long-term interest of the State and the citizens these projects serve. A report is scheduled for completion in January 1986. This policy indicates the timeliness of deliberations to transfer the federal projects given the federal intent to divest in the next several years. Policy Continue evaluating and seeking to identify major energy projects that result in the lowest life cycle costs, as determined by reconnaissance and feasibility studies. Background Energy projects indicated in the first three policy statements are not the only solutions to statewide energy needs, and the Alaska Power Authority is constantly seeking new and cost effective ways to provide more power at the least practical costs. This policy speaks to the continuing need for this eon to assure electrical needs of a growing economy are continually served. Legislative action slated for this session will focus on the reinstatement of appropriations declared unconstitutional in 1985. The intent is to fund FY 87 Susitna requirements from the $100 million FY 85 appropriation and to reinstate the $200 million FY 86 appropriation. Part of the FY 85 -24- appropriation will allow continuation of the FERC licensing process, the key ingredient of this policy. This FERC license is essential to the project whether or not later political action does not appropriate construction funds. There are presently several major projects in the investigation stage. Southeast Alaska is recognized as needing additional electrical power, and studies continue on the feasibility of an "intertie" transmission line between Canada and Southeast communities. Another long-term project is negotiation with the Federal Energy Regulatory Commission to allow Alaskan government agencies to conduct the necessary licensing requirements for development projects. Another long-term project is the development of a natural gas pipeline from the North Slope to either the "Lower 48" or to tidewater in Cook Inlet. Several major coal and mineral development projects also are foreseen. Several of these energy projects could potentially service Railbelt energy needs, and continuing analysis of project feasibility are needed to provide the optimum, low-cost alternative(s) for the Railbelt. As a means to reduce energy project costs, part of this policy would also explore ways to have Alaska license projects, potentially reducing the large costs associated with obtaining a FERC license. Loge ENERGY SUPPORT AND EFFICIENCY The level of State funding support and number of programs to reduce the economic burden of thermal and electrical requirements of Alaskans have grown dramatically and proportionately in response to the demonstrated public need in the past years. During this period, increasing State revenues afforded a reliable avenue in providing equitable economic distribution through Alaskan energy programs. Program support in the form of general fund appropriations and loans to provide a portion of home heating and electrical costs, insulating building shells, improving effi- ciencies and reducing the level of fossil fuel consumption through upgrades to community electrical systems have, and are benefiting a great number of Alaskans statewide. (Large scale support, on hydroelectric projects, is discussed in the Major Projects Section.) One of the more successful programs today is the Power Cost Equalization program which funds up to $21.7 (1985) million to reduce the higher electrical costs of Alaskans residing in smaller communities across the State. No concise effort has been made to coordinate the many support and efficiency programs to allow for these programs to work for the maximum benefit to the State. The roles and responsibilities of State agencies providing energy support and efficiency program services must be considered to assure that the service is technically appropriate, cost effective and consistently reliable. The goal of the Energy Support and Efficiency issue area is: Energy Support and efficiency development in the form of general fund appropriations and loans, will be designed to ultimately reduce the total level of residential and commercial energy consumption through increased energy system efficiencies, that lead to producing the lowest long-term cost for electrical generation and home heat requirements, and reduce or replace the need for fossil fuels with an emphasis on regionally available renewable energy resources. Four priority policies are offered in this section (Table 6). These policies seek to provide reliable, appropriate solutions to thermal and electrical needs of Alaskans by examining ways to coordinate the activities of energy support and efficiency programs that would provide quality, long-term benefits to Alaskan residents. -26- -L@- TABLE 6 — ALASKAN PRIORITY ENERGY POLICIES ALASKA'S ENERGY PLAN—1986 ISSUE AREA: ENERGY SUPPORT AND EFFICIENCY GOAL: Energy support and elficiency development in the form of general fund appropriations and loans, will be designed to ultimately reduce the total level of residential and commercial energy consumption through increased energy system efficiencies, that lead to producing the lowest long-term cost for electrical generation and home heat requirements, and reduce or replace the need for fossil fuels with an emphasis on regionally available renewable energy resources. Governor's Department of Community and Regional Affairs. (___) Indicates budget estimate for planning purposes to complete action, but not included in Governor's FY 67 Budget Request Other Budget — Federal or program receipt funds. Fv 67 oudget | OTHER nSeue POLICY OBJECTIVE IMPLEMENTING ACTION Reqwent 800 | BUDGETS | AGENCY Institute a two-year analysis of all State supported | Institute a two-year analysis and review energy assistance | Administrative order directing one agency to complete | To be de- ‘energy programs beginning in FY 87. costs and effects, generating a series of policy and funding | analysis. termined. omB recommendations to the 1988 Legistature. Review existing and develop new avenues for State and | Complete review within routine program budget in FY 87 to | Begin review process after July 1, 1986. Within APA private sector financing of energy capital projects. | FY 88. routine OCRA budget. OHSS Establish an accountability system to insure State | Determine maximum effectiveness of State delivered | Internal review process. Within APA agency statutory compliance and maximum delivery | programs. routine OCRA of service of State energy programs. budget. OHSS Institute the recently completed Memorandun of Agree- | Coordinate agency rural energy programs within Memoran- | Enact projects in agency FY 87 request. bee APA ment between the Alaska Power Authority and the | dum of Agreement. tectheat DCRA Policy sastitute a_two-year analysis of State supported energy programs beginning TOMS 75 Background The State of Alaska has provided substantial support toward energy development throughout the State. A great many large and small scale projects have been constructed through available general fund appropriations or state loan programs, and are currently benefiting many Alaskans. Such financial support has fostered an improved standard of living and encouraged economic development. While these projects have provided appreciable benefits, that would have not otherwise been realized, the ability of the State to continue at the same or higher level of support is questionable in view of the impact of declining oi] revenues on the State's general fund. It will, therefore, become necessary for the State to analyze the scope and cost effectiveness of all energy programs to insure the (1) compatibility between programs, (2) equitable distribution of benefits, (3) efficiency of power system design, construction, generation, and transmission of energy as technically and economically appropriate by region, and (4) maximum development and utilization of regionally available renewable and nonrenewable resources. In addition, the State should review and analyze its level of administrative performance and cost effectiveness in fulfilling statutory mandates of provision and delivery of energy support to residents across the state. This policy seeks to address the need to reduce Alaska's long-term residential and commercial requirement for energy and increase energy system efficiencies that will result in lower costs, reducing and/or replacing reliance on fossil fuels with an emphasis on regionally available renewable energy resources. Policy Review existing avenues and develop new alternatives for State and private sector financing of energy capital projects. Background Installed projects throughout Alaska have been funded through appropriations and loans on a project by project basis. Given declining State revenues and the continuing needs for expansion and improvement of generation systems and electrical service, it is incumbent on the State to seek new and revised financing alternatives. -28- A method of financing currently being explored is issuing revenue bonds on a pooled basis to construct waste heat projects throughout the State. Initially, these projects would be limited to the uses of heating schools or municipal facilities such that the interest on the bonds would be tax-exempt. Although only preliminary discussions with REAA's have been held, there appears to be interest in this type of financing - both with the REAA's and the financial community. Development costs for a number of waste heat construction projects have been proposed for funding within the Governor's FY87 capital budget request. This policy seeks to provide direction to the analysis of alternative financing methods of energy capital projects in Alaska. Policy Establish an accountability system to insure State agency statutory compliance and maximum delivery of service of State energy programs. Background Energy projects and programs funded by State general fund appropriations or loans administered by State agencies require cost effective fiscal administration. Maintaining a high level of administrative performance is a necessary requirement of state government in providing residents of the State with maximum benefits as statutorily mandated. In light of declining State revenues it. will become increasingly more important to maintain agency accountability in appropriate expenditure of funds. State agency policies and procedures relating to fiscal and contractual administration of projects and programs are in need of review and analysis. Such careful internal examination should provide direction for new or _ improved administrative practices. Policy Institute the recently completed Memorandum of Agreement between the Alaska Power Authority and the Department of Community and Regional Affairs. Background Both the Alaska Power Authority and the Department of Community and Regional Affairs have participated in the development of rural energy systems, and distribution of federal funding support or State Power Cost Equalization dollars. To strengthen coordination on projects in rural Alaska, these agencies have recently completed a Memorandum of Agreement (MOA) defining ways to coordinate and strengthen each other's ability to provide reliable, safe, cost efficient energy systems. This MOA should be enacted for the FY 87 budget year to coordinate agency programs and enhance the effectiveness of State financial support and technical assistance throughout rural Alaska. -29- ENERGY CONSERVATION Alaska is blessed with abundant natural resources, but availability of those resources is many times limited to imports from out-of-State or from distant Alaskan sites. Conserving scarce local resources is an important part of Alaska's energy policy, and policies created show an Alaska commitment to: 0 weatherization and securing energy efficiencies through cost-effective measures 0 using appropriate technologies to enhance the use of local resources 0 coordinating State and federal financing schemes to provide a maximum effort toward assuring Alaska's long-term energy security. Conservation is considered a resource in Alaska, and the policies set for action this year demonstrate the Alaskan commitment to conservation efforts. The goal for this Energy Conservation issue is: Alaska's role in the field of energy conservation will be one that supports the development of systems that reduce the per capita consumption of nonrenewable energy resources, encourages the efficient consumption of renewable resources, and provides for long-term reliability for Alaskans statewide. Four primary policies were developed (Table 7). Collectively they seek to provide minimal thermal and lighting standards, provide the maximum leverage for state and federal appropriations, and institute a constructive assistance program to encourage the use of appropriate technologies matched to individual situations. Together, these policies will change the total consumption of energy resources through reductions in line with cost effective conservation measures, and energy security through development of energy technologies that maximize the use of local resources. -30- -T€- GOAL: TABLE 7 — ALASKAN PRIORITY ENERGY POLICIES ALASKA'S ENERGY PLAN—1986 ISSUE AREA: ENERGY CONSERVATION Alaska’s role in the field of energy conservation will be one that supports the development of systems that reduce the per capita consumption of nonrenewable energy resources, encourages the efficient consumption of renewable resources, and provides for long-term reliability for Alaskans st POLICY OBJECTIVE IMPLEMENTING ACTION Energy efficiency will be encouraged through develop: ment of minimal thermal and lighting standards. Facilities which are constructed or where construction costs are funded by the State of Alaska, will comply with State thermal standards. Continue to seek federal Low Income Housing Energy Assistance Program (LIHEAP) funds to complete weatherization projects and to support specific con- servation programs offering reduced reliance on nonrenewable energy resources. Complete thermal and lighting standards presently being prepared under the direction of the Department of Community and Regional Affairs and enact them into statute no later than 1987. Complete thermal and lighting standards presently being prepared under the direction of the Department of Transpor- tation and Public Facilities. Develop energy consumption reduction targets for govern- ment buildings (both owned and leased) at the State and local level. Use annual federal appropriations to finance assistance to low income families to pay energy bills. To decrease annual fuel bills and increase comfort and health of assisted households. Adopt regulations establishing standards for new con- struction of non-public buildings financed with State funds. Design Standards Manual for Buildings and contract specifications for buildings would be updated to include these standards. Modity Transter of Responsibility Agreement Regula- tions to require recipients to comply with the standards. Utilize AS 35.10.160-.200 as a means to institute con- servation standards in State financed buildings. Work with Congressional staff to enhance funding for- mulas tor Alaska that will garner a larger share of the LIHEAP funds on an annual basis. Annual appropriations trom State and federal sources to fund weatherization activities. ( ) Indies Other Budget — Federal or program receipt funds. budget estimate tor planning purposes to complete action. but not included in Governor's FY 87 Budget Request. None To be provided later. To be provided later. 1,000.0 1,600.0 RESPON- ‘SIBLE AGENCY OCRA DOTPF DoTPF DOTPF OHSS OCRA TABLE 7 — ALASKAN PRIORITY ENERGY POLICIES ALASKA'S ENERGY PLAN—1986 ISSUE AREA: ENERGY CONSERVATION (Continued) GOAL: ‘Alaska's role in the field of energy conservation will be one thal supports the development of systems thet reduce the per capita consumption of nonrenewable energy resources, encourages the efficient consumption of renewable resources, and provides for bong-term sellability for Alaskans statewide. Governor's RESPON- fy a7 Sudeet | OTHER SIBLE PoLicy OBJECTIVE IMPLEMENTING ACTION feqwest3000 | BUDGETS | AGENCY - = = z ja Alaska pursue appropriate technologies that pro- | Alternative energy demonstration projects will emphasize | Budget for project manager procedure which esta- (100.0) APA vide reliable. long-term power by using federal and | applied research and commercial applications. blishes tasks, data requirements, etc., for alternative OCRA State incentives to promote demonstration of applied energy demonstration projects that are completed by DHSS research by private investors. State agencies, utilizing coordit ot position. Establish regulations and tax laws that favor investments in | Expand State loan terms and provide tax credits for | To be de- APA alternative energy and evaluate the merits of such invest- | alternative energy development projects in Alaska. termined. DCED ments through careful analysis of proposals. DOR Consider the use of third party financing in order to provide | Enact legislation to provide third party financing with | To be de- DCED the State with a market test for a proposed project and to | revolving fund to supply loans and recycle interest back | termined. DOR tap state-of-the-art expertise. into fund, and review existing statutes to remove limita- tions, if any, to third party financing. Utilize the federal wood waste and biomass program to | Continue to seek federal appropriations and define (152.0) 150.0 APA 1 demonstrate cost effective use of alternative technologies | projects to implement effective programs. DNR Ww associated with biomass, municipal solid wa: and other nm discard products. ' ‘The State loan program for alternative technologies should | Expand loans for alternative enetgy technology | To be OCED be examined to permit appropriate modification to larger | installations. provided residential and commercial installation loans. later. scale hydroelectric and other renewable power | Continue to request annual capital projects 1,300.0 6,070.0 APA ition technologies will be evaluated within each recon. | appropriations. (4,120.0) naissance and feasibility study undertaken by the State. Construct waste heat and geothermal projects in those loca- | Continue to request annual capital projects appropria- 351.3 3.160.4 APA tions found appropriate in reconnaissance and feasibility | tions on an annual basis. (4,528.7) (2,550.8) studies. a PR a ee aes (Indicates budg OTHER — Federal or receipt funds. stimate for planning purposes to complete action. but not included in Governor's FY 87 Budget Request. Policy Energy efficiency will be encouraged through development of minimal thermal and lighting standards. Background Alaska has been developing thermal and lighting standards over the past two to three years, but have yet to have a set of minimum statewide or regional standards incorporated into statute. AS 46.11.040 directs the Department of Community and Regional Affairs to complete standards for new commercial and residential buildings. Work has been done, but standards have not been put in place to begin the process of developing energy efficient building stock for Alaska. This policy addresses completion of specific thermal and _ lighting standards. Incorporation of these minimum standards into a community energy management system is needed to implement the conservation component, AS 44.83.400, of the Alaska Power Authority statute. Standards are to be completed by 1987. Policy Facilities which are constructed or where construction costs are funded by the State of Alaska will comply with State thermal standards. Background Thermal and lighting standards were discussed as an integral part of defining what levels of State and federal assistance would be provided to improve Alaska's thermal and electrical assistance programs. This policy looks directly at how the State can demonstrate appropriate conservation solutions through the construction of new State projects. The Department of Transportation and Public Facilities has been working to prepare standards that they can use as guidelines when designing and constructing new State buildings. These are not as yet complete. This policy will provide the incentives and follow-up support that the successful implementation of this policy will require. This policy seeks to implement AS 35.10.160-.200 which requires conservation standards for all state financed buildings. At present, DOT/PF has developed some thermal standards for buildings less than 12,000 square feet, but these have not been put in statute or regulations that would require such minimum standards to be implemented. Standards for public facilities in excess of 12,000 square feet are not as yet complete. Without the proper regulations, and budgetary backup, conservation standards in public facilities cannot be properly, mandatorily, implemented. -33- Policy Continue to seek federal Low Income Housing Energy Assistance Program (LIHEAP) funds to complete weatherization projects and to support specific conservation programs offering reduced reliance on nonrenewable energy resources. Background Much of the original weatherization effort was supported through the use of federal funds, especially the Low Income Energy Assistance Program (LIHEAP). These funds continue to be available today, and in the face of declining State revenues, still offer the safest long-term (in this case at least the next 4-5 years) weatherization funding with which the State can improve Alaskan residential stock. Alaska's building stock has largely been built to "Lower-48" standards or worse. This has added to the consumer's economic burden since buildings are underinsulated and poorly designed to meet Alaska's harsh climatic conditions. In many rural cases, the consumer's burden has also been a financial burden for the State which has stepped in to aid needy Alaskans meet their extraordinary fuel and electrical bills. It is incumbent on the State to continue to express interest in this program and to encourage State agencies using these funds to maximize the long-term benefit.of today's activities. This can be accomplished through the continuation of weatherization to reduce the need for this thermal and electrical assistance program in the long run. Policy Alaska will pursue appropriate technologies that provide reliable, long-term power by using federal and State incentives to promote demonstration of applied research by private investors. Background Alaska has a long history of participation in alternative energy demonstration projects. Alaska has sponsored alternative energy demonstration projects since 1978 with little positive, long-term results. This was largely due to the lack of local participation and understanding of the project, limited knowledge of the technologies application in an arctic environment, and the limited commitment to the projects success by either the vendor or community. Knowledge of the prevailing alternative energy resource also limited the effectiveness of alternative energy projects. Many of the earlier problems have been resolved, and a few alternative technology projects are successfully underway. The biomass and waste heat programs are a growing success, and it is expected that construction of Alaska's first wind farm on St. Paul Island will be started soon. Eky te Alaska should continue participating in the demonstration and construction of alternative energy projects, but must act as a partner with vendors and local communities to properly size, site, and fund alternative energy projects. Alaska must also use its offices to carefully evaluate new technologies, and manage federal flow through monies to maximize return to the State as well as provide meaningful projects to reduce Alaska reliance on fossil fuels. Alaska must also seek to implement appropriate energy solutions. In some cases, only diesel generation of power, and use of heating oi] for heat may be the appropriate solution. In other cases, perhaps a private individual will choose to invest in solar or wind, in which case the State should provide loan incentives and limit restrictions on such assistance. It has been suggested in public comment that nuclear energy is a viable option, but Alaska Statute 18.45 prohibits the use of nuclear energy, and therefore nuclear power is not considered as an alternative here. Seven objectives have been put forth. Seeking to implement technologies used elsewhere, three objectives look specifically at financial impetus for private development leveraged by state incentives. Tax laws that favor third party financing schemes and modified loan programs are included. Use of limited state and federal funds are encouraged for conducting applied research, and successful projects like waste heat systems are highlighted for further reconnaissance and feasibility definition. Conservation of fossil fuels by the use of renewable, local resources is the key to this policy and the objectives outlined to fulfill the policy's directive. -35- THERMAL Alaskans, per capita, consume three times the national average number of Btu's. This consumption requires a continuous supply of thermal energy resources, and Alaska has been active on the State and private level to assure these thermal needs are met. The State has given grants for bulk fuel storage facilities and new power generation, loans to purchase winter fuel supplies, made State forest land available for wood cutting, and leased State land for thermal resource extraction. The private sector has developed new refinery capacity, petroleum dealers have supplied remote locations on a routine basis, and transportation logistics have improved. Despite these efforts, there are annual fuel shortages in rural Alaska, prices continue to be high, and many communities have not been afforded the benefit of weatherization and improved power generation. Unlike the Energy Support & Efficiency or Fossil Fuel issue discussions, this thermal policy section concentrates on the State's participation to assure thermal schemes are instituted and a continuing effort is made to assure long-term energy supplies are available. A single priority policy statement was selected (Table 8) to stress the importance of the State's demonstration of projects and programs that will make Alaska more energy secure in the years to come. The goal of this energy issue area is: Thermal energy in the form of fuel oi], natural gas, wood, and coal is used extensively to heat Alaska's building stock, and given Alaska's harsh environment, it is imperative that all Alaskans be assured a continuous supply of thermal fuels at a reasonable price. Policy Generate revenue and encourage the development of Alaska's energy resources by offering for lease appropriate State lands for potential development of oil, gas, coal, and geothermal energy resources. Also provide opportunities for obtaining firewood from State-owned lands. Background Somewhat akin to the royalty oil philosophy expressed under Fossil Fuels, this policy extends to all four major sources of nonrenewable resources found in Alaska. The policy recognizes that the state can best meet future energy shortfalls by utilizing state lands to promote the extraction and use of resources. Oil and gas reserves have been found and are being produced from the North Slope and Cook Inlet areas, coal resources are found in and near the Cook Inlet and Railbelt areas, as well as near Valdez to the east and Kotzebue to the west. Geothermal manifestations are found throughout the state, but commercially feasible projects are found primarily in western Alaska and in the Aleutian Islands. Together, these -36- == TABLE 8 — ALASKAN PRIORITY ENERGY POLICIES ALASKA'S ENERGY PLAN—1986 ISSUE AREA: THERMAL ENERGY GOAL: Thermal energy in the form of imperative that all Alaskans be assured a continuous supply of thermal fuels at a has been, and will continue to be for the foreseeable future, the cornerstone of Alaska’s economy. firewood collection near population centers. and to offer small-scale timber sales designed for firewood ‘suppliers. Governor's: rrr estes | OTNER nSmLe POLICY OBJECTIVE IMPLEMENTING ACTION fewest | BUDGETS | AGENCY Generate revenue and encourage the development of | Conduct the State's Five Year Oil and Gas Leasing Program, | Conduct four oil and gas lease sales during FY 87 and | $2,196.3 ONR Alaska’s energy resources by offering for lease | issue competitive leases, and administer existing oil and gas | complete all necessary steps for oil and gas lease appropriate state lands for potential development of | leases. sales planned beyond FY 87. Prepare award notices, il, gas, coal, and geothermal energy resources. Also issue leases to successtul bidders, and administer all provide opportunities for obtaining firewood from state- existing oi and gas leases. owned lands. Evaluate proposed oi! and gas lease sale areas, and assess | Conduct sale-specific |, geophysical, and | $1,664.3 ONR other State-owned lands for inclusion in the leasing program. | economic evaluations of oil and gas lease sale areas prior to each lease sale to determine appropriate bid- ding terms. Continue efforts to determine Alaska's marine boundaries in | Continue technical and legal efforts to establish the | $963.8 $550.0 ONR areas where State and federal oil and gas lease sales are | location of the boundary between the State offshore planned and create leasing tract maps and legal descriptions | submerged lands and those of the federal government for State oil and gas lease sales. and create accurate legal descriptions and tract maps for State oil and gas lease sales. Continue to determine the location, size. and power poten- ee a eran one $95.5 DNR tial of Alaska’s geothermal resources so that the feasibility ee eee of developing these sources can be evaluated studies of the Copper River basin complete studies of the Mt. Goer Path Aegis Volcano geothermal areas, complete a bibliography of references on geothermal studies in Alaska, and in- itiate a “Call for Comments” in response to a request for a geothermal lease. Make available State-owned lands for coal development and | Competitively lease State lands with high to moderate | $355.5 ONR continue studies and appraisals in preparation for expected | coal potential, offer lands with low potential non- additional coal extraction in Northern Alaska and in the | competitively, administer existing coal leases. and Railbelt. implement the Alaska Surface Coal Mining and Control and Reclamation Program. Conduct field work and laboratory studies of coal and $2871 DNR overburden samples. and provide technical assistance to land-management agencies. Make firewood available from State-owned lands. Continue to open selected State-owned lands for $284.0 ONR {_) Indicates budget estimate for planning purposes to complete action. but not included in Governor's FY 87 Budget Request Other Budget — Federal or program receipt funds. offer a vast exploitable resource base in which Alaska can play a direct and major role. Most areas exhibiting geothermal potential are not located on State land, and therefore State control of those resources is limited. The first objective is to continue to implement the State's oil and gas leasing program by conducting four oi] and gas lease sales during FY 87, and by efficiently administering the leases that are currently in effect. In addition, as noted in the second objective, the State should continue its presale analysis prior to each oil and gas lease sale to determine which bidding method is appropriate for the sale. Determining the location of the boundary between federal and State submerged lands in areas with oi] and gas potential also is an objective so that leasing near these boundaries can proceed without delays or unnecessary disputes. Obtaining additional information on the State's vast geothermal potential, and summarizing the available information also are objectives of the plan. A regional geothermal atlas will be prepared and additional studies of known geothermal areas will be completed. In addition, if there is interest, the State will offer for lease prospective geothermal areas near Mt. Spurr. Also, if there is adequate interest, the State will also offer for lease additional lands with coal potential. In addition, existing coal leases and the Alaska Surface Coal Mining Control and Reclamation Act will continue to be administered, and studies of the environmental consequences of coal extraction will be conducted. And lastly, the State will continue to make available State-owned lands near population centers for the purpose of supplying firewood. This policy is designed to address the need for continuing action to find, promote, extract, and use Alaskan resources, especially where the state can play a direct part in that development through the use of state lands. -38- FOSSIL FUELS Alaska's economic prosperity has been dominated by the extraction of oil, gas, and coal. Since statehood, Alaska has been developing enlarged refining capacity, expanding markets for coal and natural gas, and working to provide a firm supply of fossil fuels. Despite these efforts, there continues to be supply shortages to portions of rural Alaska, prices remain high, and resource exports have been limited by federal laws. It is imperative that Alaska be responsible for its natural resources and pave the destiny for its citizens in a fashion that allows for strong economic development without undue restraint by outside sources. The State also has a responsibility to its citizens to provide a fair price of energy to consumers. In 1985, the Reagan Administration granted a waiver for the State to export up to 6,000 barrels of Cook Inlet crude oi] a day to foreign markets in the Pacific Rim. Although a contract for this sale and the logistics necessary for export transfer of crude oil will not occur until 1986, the way has been paved for this, and potentially other, crude oi] exports. One priority policy was selected to demonstrate the importance of royalty oil use by Alaska (Table 9). The first objective and implementing action of the fossil fuel policy is to conduct at least one short-term competitive royalty oi] sale during FY 87. The purpose of the sale is to increase the amount of revenues that would be received if the oil were left in-value. The terms for the contracts will likely be 6 to 12 months. A proposed contract for 6,500 barrels/day of royalty oil between the State and Petro Star/Chevron will be submitted to the Legislature for its approval during the 1986 session, assuming current negotiations are successful. The contract would be for a period of ten years. A portion of the crude oi] will be used in a recently completed refinery in Fairbanks, while the remaining oi] will be purchased by Chevron. The State also intends to offer for sale approximately 4,000 barrels/day of Cook Inlet royalty crude oil for export to Japan. The Federal Government is currently considering the proposal. Once approval is gained, the State will complete the necessary presale preparations and the sale will be held. An important component of the presale preparations will be the development of a back-up contract. The final objective and implementing action is to continue to ensure that the State receives the correct payments for Alaska's royalty oil and its proportionate share of payments from federal lands. This requires that the State maintain a current accounting of all oil and gas production and corresponding royalty payments. E2Qh -Ob- GOAL: Alaska will develop fossil fuel energy resources to maximize state economic return in both development of the state's economy through lower energy costs to Alaskan consumers. In addition, the production of fossil fuels for export from Alaska has been, and will continue to the comerstone of Alaska's economy. POLICY TABLE 9 — ALASKAN PRIORITY ENERGY POLICIES ALASKA'S ENERGY PLAN—1986 ISSUE AREA: FOSSIL FUELS OBJECTIVE IMPLEMENTING ACTION _| Disposals of royalty oil shall be made to optimize benefits to citizens of the State. Proposals for purchase of royalty oll shall be evaluated to determine whether they maximize State revenues, supply existing in- refineries and oi! and gas based utilities at market prices, promote new in-state refineries and oil and gas based utilities which are economically feasible at market prices, or promote foreign markets. Conduct short-term competitive royalty oil sales that will increase the price received for the State's royalty oil relative to taking the oil in-value. Consider and make decisions on proposals for long-term royally oil contracts which include in-state processing of the toyalty oil at new or existing refineri Continue efforts to export Alaska crude oil and natural gas to Pacitic Rim countries. Obtain a short-term royalty oil back up contract to be used in conjunction with the Cook Inlet export competitive sale. Assure the timely and correct receipt of ies, rentals, and net profit share payments due to the State from the produc: tion amd marketing of its royalty oil and gas, and from its proportionate share of federal receipts from oil and gas production on federal leases. Conduct at least one short-term competitive royalty oi! sale during FY 87. Complete negotiations and submit to the Alaska Legis! long-term royalty oll contract with Petro Star, Inc. and Chevron Oi! Company, USA. Also, continue to analyze proposals presented by Arctic Energy Company and Valdez Refining Company, Inc. to determine whether the proposals protect the State's ‘economic interests and whether these long-term con tracts would otherwise optimize overall benefits to Alaska residents. Conduct a competitive sale of Cook Inlet royalty oil for export to Japan. Negotiate contract. Maintain a current accounting of all oil and gas pro- duction and corresponding royalty payments trom State and federal lands, and review and approve lessees’ allowable net profit share expenditures from “Net Profit Share” leases. { _ ) Indicates budget estimate for planning purposes to complete action. but not included in Governor's FY 87 Budget Request. Other Budget — Federal or program receipt funds. $35.0 $35.0 $35.0 $654.0 ONR DNR ONR ONR The goal of this energy issue is: Alaska will develop fossil fuel energy resources to maximize state economic return in both development of the state's economy through development projects and through lower energy costs to Alaskan consumers. Policy Disposals of royalty oil shall be made to optimize benefits to citizens of the State. Proposals for purchase of royalty oi] shall be evaluated to determine whether they maximize State revenues, supply existing in-State refineries and oi] and gas based utilities at market prices, promote new in-State refineries and oil and gas based utilities which are economically feasible at market prices, or promote foreign markets. Background The State receives approximately 12.5 percent of all crude oi] production from State leased property. This “royalty oil" can be taken "in-kind" or "in-value," providing State tax and royalty revenues approaching 85 percent of the State's annual income. It is imperative that this royalty oil portion of total State crude oi] production go into a balanced function to provide in-State supplies of petroleum products and maximize State revenues. This policy was selected to demonstrate the immense importance of royalty oil to the State's economic well being. -41- TRANSPORTATION Alaska is a State where communities are separated by large distances, vast tundra, mountain ranges, and long waterways. Traveling from point to point in Alaska has been historically difficult due to the terrain and weather. Air transportation has recently been the dominant mode of travel across Alaska, but since statehood, road and rail transportation have become important, especially in the metropolitan "Railbelt" area. Much of the airport, road, port, and rail improvements have been developed with federal funding managed by the State. These improvements have resulted in reduced fuel consumption per mile of travel, increased efficiencies, and better safety. Alaska assumed sole responsibility for the operation and main- tenance of the Alaska railroad system in 1984, elevating the need for conservation in operations and extending the State's ability to provide an economical mode of transportation. It is incumbent on the State to con- tinue to seek additional improvements that will improve fuel efficiency for transportation purposes, and to assure that those transportation fuels are available to support the long-term economic health of the State. The State must also encourage the expeditious long-term use of telecommunications and reduced costs of fuel throughout the State. The single policy proposed for this year choses to concentrate on improving vehicular transportation links as a means to reducing overall consumption needs of Alaska (Table 10). The goal for the Transportation Energy issue is: Alaska will support transportation schemes that reduce the overall consumption of energy resources per mile of travel, provide for greater in-state availability of transportation fuels, and increase the opportunities for closer contact between all Alaskans in an expeditious manner. Policy Impact on projected energy use of alternative routines for new transportation links and traffic management decisions shall be evaluated. Background Energy conservation in the transportation sector has been a _ well established principle for many years. In addition to major improvements in the fuel efficiency of transportation machinery such as automobiles, airplanes and ships, significant improvements are also being realized in the energy efficiency of transportation facilities such as highways, airports and ports. -42- -€b- TABLE 10 — ALASKAN PRIORITY ENERGY POLICIES ALASKA'S ENERGY PLAN—1986 ISSUE AREA: TRANSPORTATION ‘schemes that ‘energy resources per mile of travel, provide for greater in-state availability of transpor- tation fuels, and increase the opportunities for closer contact between all Alaskans In an expeditious manner. reduce the overall of for new transportation links and traffic management decisions shall be evaluated. Development Manual would be revised to included a procedure for energy analysis on State Funded Projects: (currently required on Federal projects). (__ ) Indicates budget estimate for planning purposes to complete action, but not included in Governor's FY 87 Budget Request Other Budget — Federal or program receipt funds. RESPON- cv 07 Ootom | OTHER SIBLE POLICY OBJECTIVE IMPLEMENTING ACTION eqwent 000% | BUDGETS | AGENCY Impact on projected energy use of alternative routes | Implement use by July 1. Preconstruction Manual and Environmental Project | No impact. DOTPF Since 1973, transportation projects funded in whole or in part with federal dollars have been required to identify and evaluate the energy efficiency of alternatives. Such evaluations are applied to model alternatives, location alternatives, design alternatives and operational alternatives. For example, a new highway link might be evaluated against railroad or maritime services, aS appropriate, regarding comparative service levels and energy efficiencies. The fuel use implications of various design standards relating to curvature, grade, lane width, and a number of lanes are evaluated. The operational characteristics which carry significant fuel consumption implications include traffic volumes and speed, traffic control measures, winter maintenance programs and surface conditions; these are also evaluated and considered in the project decisions. These kinds of considerations are also being incorporated into transportation projects which are fully State funded. Implementation of this policy for existing facilities, programmed facility improvements and management procedures, as well as into the decision process for new facilities has the potential for significant fuel savings in future transportation activities. -44- OTHER POLICIES Thirteen of twenty-nine policies developed were not singled out for action this year, but were put on hold for future consideration. Those policies are shown in Table 11. These policies will be reviewed and analyzed next year for their applicability to reflect changing conditions. New policies will be added as appropriate. -45- -9p- TABLE 11 — ALASKAN ENERGY POLICIES TO BE IMPLEMENTED AT A LATER DATE DATE FOR RESPONSIBLE ISSUE AREA POLICY IMPLEMENTATION AGENCY Planning Supplement the present Natural Disaster/War Plan with an emergency plan that would allow continued economic FY 68 APA stability or growth despite fuel reductions of 10 to 25 percent. DCRA Major Projects Assist private interests seeking to construct a means of natural gas transport to the Railbelt area from the North Slope. FY 88 APA ‘Seek exemption from FERC licensing requirements under the 1920 Federal Power Act for projects located on State FY 88 APA lands and waterways, which do not create serious environmental or cultural impacts on the surrounding Require long-term contracts for sale of power and natural resources prior to the expenditure of State money to design, FY 69 APA, construct, or operate major energy projects. omB Energy Conservation Educate consumers on the benefits of energy conservation to reduce overall consumption of energy per capita in Alaska. FY 87 OCRA Encourage the use of carpools, vanpools, and other mass transit public transportation systems in Alaska’s larger FY 88 DOTPF population centers. Utitize funding where appropriate to support the implementation of fuel saving devices in Alaska. FY 89 APA OCRA Alternate energy research and development efforts will be directed to residential and commercial applications that FY 89 APA reduce the State’s reliance on fossil fuels and provide reliable, secure, long-term power. OCRA Transportation Seek to reduce marine transportation expenses and improve deliveries to marine ports through port development FY 88 DoTPF programs. Increase the quality of transportation fuel use reporting FY 88 DOTPF Establish “minimum level of service” criteria for road, rail, marine, and air transportation into a long-range plan for FY 89 DOTPF capital investments in refineries, roads, railroads, airports, and marine supply systems. Fossil Fuels Seek exemptions from federal law that restricts or curtails the marketing of North Slope Alaska fossil fuels on the FY 88 ONR international market. OMB Alaska will pursue ways to provide economical and consistent fuel supplying for heating and transportation uses. FY 88 OCRA CHAPTER 3. ALASKA’S ENERGY FUTURE What Alaska can do to shape its energy destiny is the focus of the Energy Policies chapter, and what has been predicted to occur in that energy future is a topic of the Forecast chapter to follow. Knowing Alaska's resources, predicting what the future may hold, and formulating specific policy direction to navigate successfully into the next decade leads to the conclusions of this report. FORECASTS Alaska's future energy picture has been projected using various forecast models and studies, all having their own set of assumptions. The 1983 Long-Term Energy Plan used the A.D. Little econometric model. The model used three economic scenarios to forecast State development, taking into consideration both the possible range of Pacific Rim and world market developments and related economic development in natural resources, manufacturing, and energy projects within the Alaska economy. The 1984 Energy Plan utilized the ADL model with considerations of the DELPHI study when discussing Alaska's development through the year 2000 to derive an estimate of parameters that may drive Alaska's future energy picture. The 1985 Energy Plan gave a very generic summary of combined modeling conclusions. The 1986 plan does not select one particular model or source of information as best portraying Alaska's energy future, but uses these collectively to provide a glimpse of how Alaska may develop. Forecasts of Alaska's energy, transportation and thermal needs have been produced from a variety of sources and provides some basis for long range energy planning. Due to there being diverse interests involved in Alaskan energy matters, it is difficult to obtain reliable current forecasts to support statewide plan- ning efforts. For this years' State energy plan, the below listed fore- casts have been used to help identify energy needs that may occur in Alaska through the year 2000. The lack of updated forecasts in the energy sectors, by region, points out the need to support forecasting efforts of the various State agencies and groups that must make the difficult planning decisions that lie ahead for Alaska. Future energy plans must be based on the most current information available. Statewide general forecasts are taken from: 0 Population forecasts - ISER - 1985 (as part of APA forecasting) 0 Historical and projected oi] and gas consumption - DNR - 1986 0 Projected oi] and gas consumption - APA - Susitna Project Analysis and DNR 0 Population and economics - Alaska's Long Term Energy Plan - 1983, by A. D. Little. APA - Susitna Project Analysis, Department of Labor, Statistics -49- Railbelt electrical power forecasts are taken from: 0 Forecasts of net generation and peak demand - APA - Susitna Project Analysis Southeast electrical power forecasts are taken from: 0 Juneau area load forecasts-Federal APA and local utilities-1985 0 Combined Southeast Alaska utility forecasts - Alaska Systems Coordinating Council (ASCC) - 1983 And finally, rural Alaskan electrical power forecasts are taken from: 0 Combined utility forecasts - ASCC - 1983 The sections to follow discuss Alaskan projections statewide and organize Alaska into three regions: Railbelt, Southeast and Rural. Each section will look at available information and draw broad quantitative conclusions, and prognosticate what future developments may take place. These regional discussions are followed by a revenue forecast section which details what the State can aspire to accomplish within the limited funds available. STATEWIDE Alaska's population and economic expansion statewide plays a significant role in determining in-State energy dynamics in the years to come. Production of energy resources, and the technologies to produce that energy are equally important. All but the appropriate technologies are discussed in this chapter, with technology use to follow in the "Resources" chapter. Alaska's population statewide is anticipated to increase by 1.0 percent per year (APA forecast) through the year 2000. Figure 1 shows how that increase will look compared to historical growth, and how that increase will be dispersed statewide. Oil and gas consumption is expected to continually increase through the year 2000. DNR forecasts show a 2.0 percent annual increase to oil consumption, and a 1.7 percent annual increase for natural gas. Figure 2 demonstrates those increases graphically. Natural gas consumption and production have also been given attention in DNR and APA forecasts. DNR estimates an annual consumption growth rate of 1.5 percent through 1999. Space heating usage will increase by 3.9 percent annually, utility use by 1.4 percent, and industrial use by 1.2 percent (Figure 3). On the availability side, APA predicts consumption during the period 1985-2000 to be 3.5TCF, compared to DNR's estimated 3.6TCF. APA estimates show a high estimate of proven and undiscovered natural gas reserves to be a total of 4.4TCF. Production of oi] and gas is directly tied to State revenues, and projected North Slope production, the mainstay of State income, is projected to decline through the year 2000 (Figure 4). -50- Figure 1. Population Forecast Growth, 1970 & 1980 to 1984 (DOL) Y l j l Z l l A$ AVA sands) Zi ON Numbers ( Thou: Figure 2. Projected Demand For Oil in Alaska By Region, 1985 to 1999 (DNR) SN my SSS SS Re KNODHRONTNNK K ADNONCTNANKO CGO i Ca i Si dK OMI jifejitei(eji(e)ifejite}ita) (=) To P ae mo ‘or. Util.Gen. -52- ska Ala Figure 3. Projected Demand For Natural Gas in By Region, 1985 to 1999 (DNR) RRQ A eee wreerere Khe ela8 RE QQAQQAUO_OM oe yy ” LLL KEG? Kh llelad WN Kk eel ad MAA NWYYY999 ? KLKkkLellllllllas MMO ” Kha RMQA&Q@&§ & AQANNOO89 ” KkhLillillle.s MMM OOogy * Keble la.8 RM AMOQOOH gy * ee Non—Rollbel ZZ) Rallbeit By Use, 1985 to 1999 (DNR) \ WN Nn ON LA Ni WA WZ — A Hoy! IS. SN K—~—w<iCiCOR | NWO eer er eve MMBL/Doy Figure 4. Projected North Slope Crude Oil Production, 1985-1999 1.8 rr 1.7 1.6 1.5 1.4 1.5 1.2 1.1 1 0.9 0.8 0.7 0.6 1985 1987 1989 1991 1993 1995 1997 1999 Years ~54- Electrical energy consumption statewide is forecasted to increase by about 1.5 to 4.0 percent annually for the Railbelt and Southeast regions through the year 2000. Rural Alaska is expected to increase at a slightly higher rate. These estimates are based on latest APA and Railbelt studies for the Susitna project and somewhat outdated projections by ASCC for Southeast and Rural Alaska (Figure 5). RAILBELT Alaska's Railbelt encompasses that populated area along the Alaskan Rail- road, from the Kenai Peninsula on the south to Fairbanks in the north. Approximately 70 percent of Alaska's population lives within this geographic area (ISER, 1984). Railbelt population estimates have grown by 1.5 percent to 3.5 percent annually since 1970, with a similar level of economic growth. The APA forecast for the period 1985 to 2000 indicates: 0 the long-term economic growth trend is positive 0 growth is sensitive to oi] price changes 0 size of the total economy is less sensitive to oil price assumptions. ISER projections prepared for APA predicts an annual population increase of 1.1 percent and total employment by 1.0 percent for 1985-2010 period. The 1983 ADL forecast during the same period predicts a 2.2 percent and a 3.3 percent increase, respectively. Railbelt electric power forecasts vary between 1.5 percent and 3.8 percent increase annually for the 1985-1998 period. The APA forecast is more conservative at 1.5 percent annual increase in peak demand while the Railbelt utilities estimate a 3.8 percent annual increase for the 1985-1998 period. ADL forecasts an increase more in line with APA estimates. These estimates are well below the actual peak demand growth rate of 9.6 percent annually for the 1965-1984 period. Estimates by APA and the Railbelt utilities for growth in net generation range from 3441-3691 GWH in 1985 to 4473-5606 GWH in 1998. DNR has prepared oil consumption forecasts through the year 1999. Annual changes have been predicted for oil, increasing by 2.5 percent for transportation fuel, less than 1.0 percent for space heating, and decreasing by over 35.0 percent for use by utilities for electrical generation, and unchanged for industrial consumption (industrial consumption is 61 percent of total gas consumption in 1985, but will drop to 53 percent by 1999). -55- Consumption (GWH) Figure 5. Electrical Forecast Consumption, 1981 — 2000 (ASCC) 1981 ZZ] Railbelt 1983 1985 1990 1995 Years (<N Southeast 2 Rural -56- Wild 2000 A.D. Little's 1983 findings are still pertinent today. These findings were: "Thermal needs in the Anchorage Bowl can best be served by natural gas. Fairbanks and Valdez will continue to depend on fuel oil and electricity for their thermal needs in the foreseeable future, unless a tidewater North Slope gas pipeline is constructed." "The Railbelt has several cost-competitive alternatives for electric generation, i.e., large hydroelectric projects (Susitna), mine mouth coal-fired steam-electric generators, and natural gas-fired combined cycle turbines. The Susitna Project offers the lowest long-term electricity costs, but it has the drawback of high initial capital cost. A coal-fired power plant can realize the advantage of economies of scale, subject to environmental considerations, only if developed in conjunction with an export mine development. Natural gas combined cycle generators offer low capital costs, but leave the Railbelt vulnerable to fuel price increases. In addition, natural gas used as a utility fuel for electric generation does not conserve this fuel for its best uses: space heating, process heat, and feedstocks. Unless North Slope gas finds its way to the Railbelt, reserves from the Cook Inlet might prove insufficient after the year 2000." Meeting the power needs of Railbelt Alaska will be accomplished by a combination of projects. The Bradley Lake hydroelectric project will be on-line by 1990 and work still continues on the development of the Susitna hydroelectric project. Alternatives for power generation other than hydroelectric are being evaluated, but which project or group of projects develop to meet the Railbelt's increasing demand is as yet unsettled. At least four other potential projects are in the evaluation stage: 1. A feasibility study is presently underway between the Cook Inlet Regional (Native) Corporation (CIRI), Chevron, ARCO, and Shell to evaluate LNG (liquified natural gas) export to Pacific Rim markets utilizing Cook Inlet gas. 2. The Yukon-Pacific Corporation, with ARCO and a _ Japanese consortium are exploring the potential of building a natural gas pipeline from the North Slope to Cook Inlet for Pacific Rim export in the 1990's. 3. The Hawley Group is pursuing development of the Matanuska Power Project (NPP) near Palmer to use a mine mouth coal operation to fire a 150 MW electrical generation facility. 4. Diamond-Alaska is proposing a coal fired generation plant in West Cook Inlet of 150 MW capacity, a third of which would be used in support of Diamond-Alaska's proposed 12 million ton per year of coal export project. -57- Combined, these represent some of the major, potential projects that will have some effect upon electric power transportation and thermal requirements in Railbelt Alaska. SOUTHEAST Combined utility electric power forecasts for Southeast Alaskan growth have been made in the past but, except for Juneau, are not current. Southeast includes those towns and communities from Yakutat at the northern terminus of Alaska's panhandle to Ketchikan in the south. This area includes the State capitol of Juneau. Juneau area load forecasts have been prepared by the federal Alaska Power Administration (APA) in cooperation with local utilities. In 1984, this provided the basis for Juneau's 20-year Power Supply Plan, which was completed in late 1984. The forecasts were updated in April 1985 by the federal APA in cooperation with local utilities. Southeast's population has grown from 44,200 in 1971 to 64,600 in 1983, an increase of 3.8 percent annually. In Juneau alone, the increase was 6.5 percent. Electrical generation forecasts for Southeast have been prepared by the ASCC, Juneau's Alaska Electric Light and Power utility, and the federal Alaska Power Authority. ASCC forecasts prepared in 1983 predicted a change in net generation from 563.3 GWH in 1984 (actual 1984 was 567.6 GWH) to 1100.5 GWH in 2000, an annual increase of over 6.0 percent. Juneau growth from the federal APA forecasts, estimated an increase from 227.4 GWH (actual 1984 was 248.5 GWH) to 439.5 GWH, from 1985 to 2000, an annual increase ranging from 2.0 percent (low forecast) to 3.9 percent (high forecast). Fuel consumption estimates are not available for Southeast Alaska at this time. To meet the predicted increasing need for electricity, several options are being explored or are underway. Underway is the construction by the Corps of Engineers Crater Lake addition to the Snettisham hydroelectric project which provides service to Juneau. Proposed for Juneau, after completion of Crater Lake, is the Dorothy Lake project which would meet potential energy shortfalls in the 1990's. Electrical interconnection of Southeast communities also remains a viable option. This is particularly true since the recent completion of the State projects at Tyee and Swan Lakes, and the addition of Crater Lake to the Snettisham project provides the power generation capability to support interconnection. A potential transmission line from the Yukon Territory in Canada, through Haines and Skagway, on into Juneau could intertie these communities to surplus Canadian Yukon power. A transmission line from British Columbia could bring power to the proposed Quartz Hill molybdenum mine near Ketchikan, and provide the vital link that could link Canadian power to other Southeastern communities and projects. Other hydropower projects identified as feasible long-term options for some Southeast communities are: the Takatz project near Sitka, Lake Grace and Mahoney Lakes near Ketchikan, and West Creek near Haines/Skagway. -58- RURAL For purposes of this report, rural Alaska encompasses all other areas of Alaska that do not fall directly in the Railbelt or Southeast sections described earlier. Although termed rural, there are major Alaskan communities included, from Cordova-Valdez in the east, to Kodiak in the south, Bethel, Dillingham-Kotzebue-Nome in the west, and Barrow in the north. Rural Alaskan population has increased from 61,900 in 1981 to 81,100 in 1983 (ISER, 1984), an annual increase of just 2.6 percent, while there was a decrease in proportion of rural to non-rural population from 19 percent to 15 percent during those years. Electric power forecasts are from studies completed in the early 1980's. The ASCC combined utility low forecast for rural Alaskan net generation indicates that the 8.5 percent annual increase from 194.6 MWh in 1975 to 359.5 MWh in 1985 will slow moderately to a 4.9 percent annual increase through 2000, when total net generation should approximate 622 MWh annually. By 2000, estimated net generation for rural Alaska will increase 41 percent in AVEC communities, Kodiak and Cordova-Valdez. Fuel consumption estimates for non-Railbelt communities have been prepared by DNR, but for these discussions are difficult to use since both rural and Southeast sectors are combined. Nonetheless, a look at forecasts for transportation and thermal fuels is enlightening and applicable to this discussion of rural projected demand. Non-Railbelt use of oi] and gas are expected to continue to be important, but changes to consumption are somewhat surprising. 1985 consumption of gasoline and diesel fuel for transportation use was 203 million gallons, decreasing to 196 million gallons in 1999. Not surprisingly, thermal fuels are expected to increase by 3.5 percent annually from 103 million gallons in 1985 to 154 million gallons in 1999. DNR forecasts break out a rural component for fuel use by utilities, and shows a continuing dependence on diesel generation, increasing 3.7 percent annually from 18 million gallons in 1985 to 27 million gallons in 1999. The use of natural gas is expected to double from 100,000 to 200,000 MCF for thermal use and from 500,000 to 800,000 MCF for utility generation of electricity. A.D. Little's 1983 forecast for rural Alaska is still valid today, and reads: "It is generally either technically difficult or uneconomical to alter the dependence of Bush communities on oil. Except for conservation, Bush villages or households have few alternatives which they can implement with confidence where cost savings will exceed investment and operating costs. Many alternatives, while very attractive on the drawing board, experience operation and maintenance problems which quickly negate any cost savings. Reliability and simple technology are therefore essential. Alternative supply options must be developed on a site-specific basis." -59- Moderate changes to this prognosis are in the offering. The Red Dog lead/zinc mine proposed for northwest Alaska, and potential development of Cape Beaufort coal projects, offer potential opportunities to provide jobs, improve the region's economy, and provide a long-term source of coal for thermal use in rural areas. Advances in the use of integrated alterréet ve technologies may also reduce costs and improve lifestyles in rural Alaska. On the North Slope, continuing development of marginal oil fields near- shore, and new finds on Alaska's far northern Outer Continental Shelf, will continue to bring wealth to the State, but given DNR predictions, the prospects for oil flow through TAPS will dwindle to near 100,000 barrels a day in 1999 compared to 1.7 million barrels a day in 1985. Potentially, development of a natural gas pipeline to either Fairbanks or Anchorage will help sagging revenues due to reduced crude oil production to be bolstered by increasing natural gas production. Finally, a major electrical need may come from the seafood processing industry in Western Alaska. As foreign fleets are replaced with shoreside processors of groundfish, salmon, and crab, greater needs for production of electricity may be needed. REVENUE State revenue forecasts are largely comprised of petroleum revenue projections. Petroleum revenues peaked at 90 percent of total State revenues in FY 80, but since have shrunk slightly to 84 percent. In FY 85, petroleum revenues were $2.71 billion and nonpetroleum revenues $0.52 billion of the total revenue picture of $3.2 billion. By 1988, total unrestricted revenues are expected to decrease to $2.07 billion. By the year 2000, total revenue is expected to shrink to $1.42 billion, at which time it will largely be comprised of and sustained by nonpetroleum revenues. These forecasts act as a navigational aide, keeping the State on track with Programs requested by Alaskans, but within the State's ability to fund such programs. In FY 86, the funded operational and capital budget (including loan programs and supplementals) totaled $2.84 billion, or $20 million more than presently slated for spending. These numbers are just the beginning of future spending limitations that may confront Alaska, and within those restrictions the need to maximize the use of each dollar in the most efficient manner. Declines in petroleum revenues from reduced North Slope production after 1990 and decreasing world oil prices in the near future require fiscal restraint. With that in mind, it becomes obvious that Alaska needs programs that fit into reduced budgets today while preparing Alaska for the future. Future revenue projections demand it. -60- RECOMMENDATIONS AND SUMMARY "Alaska's Energy Plan - 1986" defines what the State's major goals and policy directives should be in the coming” year. The primary recommendations that result because of these are: 0 Energy appropriations should be made to those projects and programs that provide energy at the lowest competitive cost to the consumer, increases system reliability, protects the scenic and cultural aspects of Alaska's environment, and help build the State's economy. 0 Thermal security for all Alaskans can be accomplished through weatherization, conservation, use of Alaska's indigenous resources, and the use of appropriate technology application. 0 Alaska's resource base continues to provide primary economic advantage for the State both in revenue dollars generated and potential for use as an alternative to historical energy consump- tion and it is incumbent on the State to use those resources for the maximum, long-term security of its citizens. 0 With decreased State revenues available for implementation of energy programs, the State should encourage private development through state incentives. Implementing actions and programmatic budgets have been presented in support of these major recommendations. It is incumbent upon the Legislature and the people of Alaska to carefully review the proposed energy goals, policies, objectives, and implementing actions, and through the public, political process decide what direction Alaska's energy future should take. As these recommendations are scrutinized, and supporting documentation evaluated, it should be remembered that "Alaska's Energy Plan - 1986" presents the State energy picture in a transition year between understanding where we have been, as shown in 1985, to showing where we are going in 1986 and beyond. "Alaska's Energy Plan - 1986" sets the stage for the important, long-range policy changes that will help direct the State's future energy activities. Only through the public legislative process can those recommendations be fulfilled. -61- PART II ALASKA’S ENERGY REPORT CHAPTER 4. RESOURCES Alaska is blessed with an abundant supply of nonrenewable and renewable energy resources, and the purpose of this section is to identify what those resources are, where they are located, how they are used, who is using them, and what technologies and regulations control their use and distribution. Alaska's primary resources are oil, natural gas, coal, and water for hydroelectric power. In addition, renewable resources of wind, solar, tidal and biomass, as well as peat and geothermal, will be discussed. (There has been increasing discussion on the use of nuclear energy which is prohibited under present State statute.) Alaska relies on these resources as a source of thermal, transportation, and electrical energy, and for use as a valuable export product bolstering the State's economy. -67- OIL AND GAS Oi] and natural gas are Alaska's primary energy resources. Total petroleum production in Alaska since the turn of the century has been over 4.9 billion barrels of oi], and over 9.1 trillion cubic feet (TCF) of natural gas with estimated reserves of 9.1 billion barrels of oi] and 39.4 trillion cubic feet of natural gas. Of the natural gas production, over 5.5 TCF were reinjected and 3.0 TCF were either sold, flared, or consumed in field operations. Oi] production from Alaska in 1984 was 630 million barrels. More than 95 percent of this oil was produced from the Prudhoe Bay and Kuparuk River Fields on the North Slope of Alaska. The remainder of the oil was produced in the Cook Inlet region, south of Anchorage. Oil and gas production has been utilized in-State as refined petroleum products and for export out-of-State to refineries in the "Lower 48." Crude oi] production in Alaska during 1984 was 26.3 million gallons. Of that amount, 25.2 million gallons was exported to Washington and California receiving ports, and 1.1 million gallons was used in-State. Alaska's consumption of refined petroleum products reached 1.4 million gallons in 1984, That demand was met by five in-State refineries and by transporting refined petroleum products into Alaska from the "Lower 48." In-State use has been for thermal, transportation, and power production needs of the State. At the present time, federal policy and regulations prohibit the export of crude oil, and North Slope crude oil was specifically prohibited by Congress in the Trans-Alaska Pipeline Authorization Act as amended by the Export Administration Act. In October 1985, an announcement of the Federal Government's decision to remove prohibitions on the export of Cook Inlet crude oil was made by the Federal Government. The State is presently preparing to conduct a competitive sale of about 4,000 barrels per day of royalty oil for export to Japan. The sale will be held sometime in 1986. Natural gas production in Alaska was approximately 1,212.7 billion cubic feet (BCF) in 1984, but approximately 75 percent of this gas was reinjected due to the absence of a gas transportation system from the North Slope. Domestic use of natural gas was 303.1 BCF of which 116.1 BCF left the State in the form of liquified natural gas (LNG) and ammonia/urea fertilizer, and another 909.6 BCF was reinjected. Natural gas consumed in export operations comes from production at one of the two natural gas processing plants in the Cook Inlet region. (For more details on oi] and gas in Alaska, see "Historical and Projected Oil and Gas Consumption, January 1986," Division of Oil and Gas, Department of Natural Resources.) -68- HISTORICAL BACKGROUND 0il has been found in coastal areas of Alaska since the 1800's, but today's large scale production is a product of exploration and drilling during the last 30 years. The only areas of production are Cook Inlet and the North Slope. Competitive leasing is the method used to provide temporary access to below ground petroleum reserves, with leased tracts spread from the Gulf of Alaska to the Beaufort Sea on federal and State lands. Refinery capacity in Alaska is limited to five refineries, but provides over 50 percent of Alaska's refined petroleum needs. Oil was first discovered in Alaska during the 1800's. In 1853, Russian traders first reported natural oi] seeps along Alaskan coastal areas. Until the 1940's there was a low level of oil exploration, and exploratory activities were limited through the mid-1950's. That changed in 1957 when the Swanson River Field on the Kenai Peninsula was discovered. The Swanson River discovery provided a much-needed boost to the statehood cause and ultimately led to the State's first lease sale in 1959. Off-shore and on-shore tracts were offered in the Cook Inlet area, and about 77,000 acres were leased for a total of $4 million using a cash bonus bid and a fixed 12.5 percent royalty. With the opening of the Trans-Alaska Pipeline (TAPS) in 1977, oil from the Prudhoe Bay Field began flowing to Valdez for transportation to the West Coast, reaching an October 1985 production of 1.6 million barrels per day. RESOURCE LOCATION Today's production of oil and natural gas and exploration for new finds has been limited to three primary locations in Alaska: North Slope, Cook Inlet, and the Outer Continental Shelf. Cook Inlet Oil and natural gas have been produced in the Cook Inlet region since 1959, as mentioned previously. Since then, seven oi] fields have been discovered with six in production (Figure 6). Oil production peaked in 1970 at just over 80,000,000 barrels annually and since has declined to a current production of 24,762,905 barrels annually. Natural gas production has continually risen, reaching a peak of 196,429,097 MCF in 1983. The most recent gas field to go into production was Trading Bay, on-line in 1979. Estimated recoverable oil reserves in the Cook Inlet region are approximately 140 million barrels as of 1985. Current oi] production is approximately 55,000 barrels a day. Estimated recoverable reserves of natural gas in the Cook Inlet region exceed four trillion cubic feet (113 billion cubic meters). Oil is loaded on tankers at two locations: the Drift River Terminal on the west side of Cook Inlet (water depth, 21 meters), and the Nikiski Dock near the City of Kenai (water depth, 12 meters). -69- 1. Lewle River 2 Theodore River 3. Stump Lake 4. Betuga River 5. Wan River 6. Moquawkie 7. N. Cook inlet 8. Nikolai Creek 9. Albert Kaba 10. Granite Pt. 11, Trading Bay 12, McArthur River 13, Middle Ground Shoal 14, West Foreland 16, Redoubt Shoal 1@. Broh Hl & oirieia 17. Swanson River 18. Beaver Creek @ Gas Field 19. West Fork 20. Sterling 21. Kenai 22. Fale Creek 23, North Fork Figure 6. Cook Inlet Oil and Gas Field Location Map (Reprinted from Cook Inlet Transportation Plan—1985) ain The wellhead price of oi] and natural gas has risen over the years from $5.06 to $25.20 per barrel for oil and from $.31 to $.56 per MCF for natural gas (both high values are 1984 prices). Oil produced in Cook Inlet has had two major end uses: shipment to refineries in the "Lower 48" and local refining either at the Tesoro or Chevron refineries for primarily local consumption (although some refined products are also shipped to the "Lower 48"). With declining production, other sources of oil, such as State royalty oil from Prudhoe Bay, have been used to meet local demand for refined products. Cook Inlet natural gas has historically been used in four ways: liquefaction and export to Japan, power generation, conversion to ammonia and urea, and consumption by residential, commercial, and industrial users. It is unlikely that any new market categories will be developed within or outside the State in the near future (Booz, Allen, Hamilton, 1982). The Cook Inlet Region, Inc. (CIRI) is actively pursuing the possibility of exporting Cook Inlet natural gas to Japan. A study is currently being conducted by Atlantic Richfield Company and CIRI that will assess the economic feasibility of gas exports from Cook Inlet. Both oil and gas are shipped around the Cook Inlet region by pipeline. Pipeline operations are conducted by several companies as shown in Figure 7. Beginning in 1985, the Alaska Railroad began its Oil Worker Limited (OWL) which daily transports about 500,000 gallons of jet fuel and other petroleum products from the recently expended MAPCO, Inc. refinery at North Pole. About 65 percent of the jet fuel, refined from North Slope crude oil, is destined for the Anchorage International Airport. The returning train connects with the Tesoro terminal at the Port of Anchorage to provide gasoline and other petroleum products to the Fairbanks area. The two-fold benefit for the producers will be to improve MAPCO, Inc.'s distribution by 25 percent, and assure regular, scheduled deliveries of fuel to Tesoro distributors in the Fairbanks area. North Slope Current North Slope oil production is from the Sadlerochit Reservoir in the Prudhoe Bay Unit and the Kuparuk River Reservoir in the Kuparuk River Unit. Estimated North Slope production is expected to slightly increase from a 1984 level of 1.62 million barrels a day, but after 1988 is expected to decline continuously despite potential new production additions, reaching 100,000 barrels per day by the year 2010 (Figure 8). Oi] production on the North Slope is transported by the Trans-Alaska Pipeline which extends over 800 miles from the North Slope to a terminal in Valdez. Pipeline capacity is currently approximately 1.7 million barrels a day. Four major oi] and gas accumulations on the North Slope are currently being developed. These are the Endicott (Sohio Alaska Petroleum Company), Lisburne (ARCO Alaska, Inc.), Kuparuk River (ARCO Alaska, Inc.), and Milne Point Units (Conoco, Inc.). ae q we ve, » PE TERSVILLE ) solk?® \ | ‘ TALKEETNA A eA NORTH SCALE 1°= 40’ aN ef Xo sy \) = ? Os & ay Rive! f \ caanst® p »® = ) PALMER « <2 Lott (ber ENSTAR ae PIPELINE ros Ze IS om ex ome as 7 $ / , * gfacce RIVER on 7 BUTLER fl TYONEK PIPELINE, ; HORAGE . 3 i WHIT TIER -ANCHORAGE aa CIGS eA PIPELINE COOK INLET 33 ! Z PIPELINE G7 iia \\ fe on . 4 | <A TESORO / a ¢ y J og PIPELINE / RADING BAY 7 a KENAI / R : * = PIPELINE UAW PIPELINE Wwurttien//™~ 3, 35 eo (> nixiski & % a ORIFT NS ENAL o RIVER KENAI a, Lagan NIKISKE J4qV 7° 7" PIPELINEWY— 2s SOLDOTNA sls kilok OIL Loke i oe ee ee ——— GAS Tustumeno lLoke Figure 7. Cook Inlet Major Pipeline Systems (Reprinted from Cook Inlet Transportation Plan—1985) =72- NORTH SLOPE UNIT MAP ALASKA DEPARTMENT OF NATURAL RESOURCES, DIVISION OF OIL AND GAS KAY BROWN, DIRECTOR COMPILED BY 0.0, SMITH, CARTOGRAPHER Bhy ® 5° a Lokhn heels QQ, oe sea I~ (PA & s a mane nm x Grectecn fends? A TERRISLAND . . PYMSLAND Bay ~ Ag nn ‘Oy MIKKELSEN BAY a mS by as Pump Station #1 Central Production Facility Central Facilities Pad SCALE NIEOG B80 Selected Selected J State Exploratory Wells Federal Exploratory Wells . linch = 8 miles ‘Appronimete so he Lisburne Reservoir aida ee Pores Oil and Gas Unit Boundaries 280,000, All Townships - Umiat Meridian. Figure 8. North Slope Activity Map In addition, Shell 0i1 Company and Amerada Hess Corporation have announced a discovery of oi] and have drilled several delineation wells near Seal Island in the Beaufort Sea. The companies are currently assessing whether they will produce the oil reservoir. Texaco, U.S.A. also has recently announced a discovery on the Colville River Delta on the North Slope and will be delineating the reservoir in early 1986. Very large deposits of heavy crude oil have been discovered on the North Slope in the West Sak Sands deposit and efforts are underway to develop effective methods for producing this oi]. ARCO Alaska, Inc. is taking the lead in current efforts. Due to the technical difficulties production of this information will entail, the recovery rate will be smaller than usual for North Slope production. The estimated heavy oi] in place ranges from 21 to 36 billion barrels. Natural gas is presently reinjected and not available for commercial use. The Alaska Natural Gas Transportation System (ANGTS) and the Trans-Alaska Gas System (TAGS) have both been proposed as ways to make North Slope gas available to the Railbelt, for export to the Orient, the "Lower 48," or for in-State use. A study sponsored by ARCO, Alaska; Yukon Pacific Corporation; and a number of Japanese participants is currently underway to: l. assess the feasibility of constructing a pipeline from the North Slope and liquefaction facilities; 2. develop cost estimates for the shipment and distribution of the gas; and 3. analyze the market for the gas in Japan. The study is scheduled to be completed in late 1986. Outer-Continental Shelf Activities to define the limits of petroleum and natural gas deposits on Alaska's Outer Continental Shelf are just beginning, in comparison to the extensive production work ongoing within State leased property. A discussion of the leasing and exploration in the Outer Continental Shelf areas of Alaska is presented in the "Leasing and Exploration" section that follows. LEASING AND EXPLORATION Both federal and State lands are available for oil and gas leasing (Figure 9) and exploration, and a total of 30 lease offerings are scheduled between September 1985 and 1990 (Table 12). The State of Alaska has been in the forefront of leasing activities. aA UNITED STATES DEPARTMENT OF THE INTERIOR DRAFT PROPOSED PROGRAM DEIS JAN. 1986 1986 OFFERINGS = 1987 OFFERINGS 92 N. ALEUTIAN BASIN 107 NAVARIN BASIN 100 NORTON BASIN 97 BEAUFORT SEA 89 ST.GEORGE BASIN 109 CHUKCHI SEA «1988 OFFERINGS 1989 OFFERINGS 86 SHUMAGIN 101 ST. GEORGE BASIN GULF OF ALASKA N. ALEUTIAN BASIN NORTON BASIN 1990 OFFERINGS NAVARIN BASIN BEAUFORT SEA CHUKCHI SEA BUREAU OF LAND MANAGEMENT OFFERINGS [_] 3} STEESE/WHITE MOUNTAIN 1986-87 CENTRAL YUKON 1987-88 OIL AND GAS BASINS OF ALASKA MINERALS MANAGEMENT SERVICE (OCS) / KAY BROWN, DIRECTOR DIV. OIL & GAS Compiled by 0.0. SMITH, CARTOGRAPHER: ue ~ we Figure 9. Known Oil and Gas Provinces in Alaska —_—— Ca wwe NATURAL RESOURCES DIVISION OF OIL & GAS B8sEs 288 B82 SRL sBse ALASKA DEPARTMENT OF 1986 SALES |__) KUPARUK UPLANDS FEBRUARY MIKKELSEN FEBRUARY COOK INLET MAY « BEAUFORT SEA SEPTEMBER NECHELIK SEPTEMBER 1987 SALES (__] PRUDHOE BAY UPLANDS JANUARY CAMDEN BAY MAY ICY CAPE SEPTEMBER HOLITNA BASIN SEPTEMBER 1988 SALES (__] KUPARUK UPLANDS JANUARY COOK INLET JANUARY DEMARCATION POINT MAY ALASKA PENINSULA SEPTEMBER 1989 SALES (_] NORTH SLOPE FOOTHILLS JANUARY HOPE BASIN MAY OFFSHORE IZY CAPE SEPTEMBER 1996 SALES [__] - COOK INLET JANUARY A POINT FRANKLIN MAY WHITE HILLS SEPTEMBER SCALE 1:10,100,000 -9/- TABLE 12, COMPARISON OF FEDERAL AND STATE LEASING SCHEDULES IN ALASKA STATE FEDERAL* MMS OCS SALES BLM UPLANDS OFFERINGS SALE PROPOSED SALE PROPOSED PROPOSED YEAR NO. DATE AREA NO. DATE AREA DATE AREA 1985 45A 9/85 North Slope 97 9/85 Kuparuk Uplands 89 9/85 St. George Basin 1986 48 2/86 Kuparuk Uplands 88 Pending Gulf of Alaska/ Open** Minchumina Basin . Cook Inlet 48A 2/86 Mikkelson 92 1/86 North Aleutian Basin Open** Denali 49 5/86 Cook Inlet 100 3/86 Norton Basin Open** Seward Peninsula 52 9/86 Beaufort Sea 107. 9/86 Navarin Basin 52A 9/86 Nechelik 97 12/86 Diapir Field 1987 51 1/87 Prudhoe Bay Uplands 99 Cancelled Kodiak 50 5/87 Camden Bay 109 5/87 Chukchi Sea 53 9/87 Icy Cape 86 12/87 Shumagin 46 9/87 Holitna Basin 1988 54 1/88 Kuparuk Uplands 101 = 7/88 St. George Basin 55 5/88 Demarcation Point 56 9/88 Alaska Peninsula 1989 45 1/89 North Slope Foothills 57 5/89 Hope Basin 58 9/89 Offshore Icy Cape 1990 59 1/90 Cook Inlet 3/90 Chukchi Sea 60 5/90 Point Franklin 6/90 Cook Inlet 61 9/90 White Hills *Schedule based on U.S. Department of the Interior, Minerals Management Service, Tentative Milestones for 5-Year Offshore Leasing Schedule, April 3, 1985, and Draft Proposed Program, March 1985. Federal sale dates may change. They are presented here to indicate the full scope of planned oi] and gas leasing activity in Alaska. **BLM land offerings will be non-competitive unless individual areas are otherwise classified by the U.S. Geological Survey. The State has held 45 (as of August 1985) competitive lease sales since 1959 generating about $1.7 billion in bonus monies and leasing 7.9 million acres of State-owned land. Leases are issued for a primary term up to 10 years and may be extended if petroleum is being produced or exploratory drilling is underway. A total of 1,400 leases covering 4.5 million acres are currently active. The State of Alaska plans to hold an additional 20 sales through the year 1990. A revised leasing schedule is issued each year in January. Alaska has a very large Outer Continental Shelf (OCS). The Federal Government manages the OCS as well as federally-owned on-shore lands. An aggressive leasing program instituted by the Federal Government will see as many as 16 lease sales conducted on the OCS through 1991. Areas proposed to be offered include the Cook Inlet, St. George Basin, Beaufort Sea, Kodiak and Shumagin areas. Exploratory activities are occurring on State and federally-managed areas in Cook Inlet, Beaufort Sea, St. George Basin, Navarin Basin and on the North Slope. Many years of exploration have revealed economically producible fields in the Cook Inlet and North Slope areas. Marginally economic field, such as the Kuparuk and Lisburne formations, are beginning to be produced due to their close proximity to the giant field, Prudhoe Bay. Development plans are being formulated for the Endicott formation located east of Prudhoe Bay. This is the first off-shore development in the Beaufort Sea. Additional drilling and testing is underway at Seal Island to determine the extent of the resources. ALASKA REFINING Alaska's refinery capacity is limited to production from five refineries (Table 13). Chevron Oil Company opened its 26,000 barrel per day refinery at Nikiski on the Kenai Peninsula in 1962. In 1969, Tesoro Petroleum Company opened a 45,500 barrel per day refinery. It has recently doubled the size of its plant on the Kenai. MAPCO's North Pole refinery (near Fairbanks) was added after oil began to flow through the TAPS, refining 46,000 barrels per day. MAPCO's refining capacity is due to be expended also. ARCO's Prudhoe Bay topping refinery has a capacity of 14,000 barrels per day. Asphalt is produced by Chevron at Nikiski and MAPCO in Fairbanks, and both have asphalt distribution plants in Anchorage. Alaska's newest refinery, the Petro Star refinery, is also located at North Pole and has a refining capacity of 6,500 BBL/day which it receives from TAPS to produce fuel oil. Two new refineries have been proposed. One has been proposed for Fairbanks, and one for the terminus of TAPS in Valdez. Both plan to market their refined products in-State when they begin production. aie -8l- PLANT FACILITY CAPACITY *** COOK INLET AREA *** Chevron Refinery 18,000 BPD, North Slope Crude Tesoro Refinery 45,500 BPD TABLE 13. DATE PLANT IN DATE OPERATION EXPANSION 1962 1969 1974, 1975, (17,500 (BPD)) 1977, 1980 (7,500 BPD) 80,000 BPD 1985 Union Chemical Ammonia 1969 1977 Division 1,100,000 tons/yr. Urea 1,000,000 tons/yr. Phillips- 230,000 MCF/Day 1969 Marathon LNG *** INTERIOR ALASKA *** North Pole 46,600 BPD 1977 Fall 1980 Refinery (MAPCO) PetroStar 6,500 BPD (now at 1985 900 BPD during startup) Arco-Prudhoe Bay 14,000 BPD Topping Plant ALASKAN PETROLEUM PROCESSING PLANTS PLANT PRODUCT JP4, Furnace Oil, Diesels, Fuel Oil, Asphalt, Unfinished Gasoline. Propane, Unleaded, Regular, and Premium Gasoline, Jet A, Diesel Fuel, No. 2 Diesel, JP4 and No. 6 Fuel Oil. Same Anhydrous Ammonia, Urea Prills and Granules. Liquified Natural Gas Military Jet Fuel (JP4) 3000-4000 BPD; Commer- cial Jet Fuel, 5000- 6500 BPD; Diesel/Heating No. 1, 1000-5000 BPD; DESTINATION JP4, JA50, Furnace Oil, Diesels, and Asphalt for Alaska; Unfinished Gasoline, High Sulfur Fuels to Lower 48 states. Alaska except No. 6 Fuel Oil to Lower 48 states. West Coast and export by tanker and bulk freighter. Japan Fairbanks area, Nenana and river villages, Eielson AFB. Asphalt is also distributed through MAPCO facilities in Anchorage. Diesel/Heating Fuel No. 2 1800-2500 BPD, Diesel Fuel Type No. 4, 600-1800 BPD, asphalt. Fuel 0i1 (grade unknown) Fairbanks area. Transportation Facilities North Slope Field Operations Natural gas is processed into liquefied natural gas and ammonia/urea fertilizer at two plants in Alaska. The Phillips and Marathon companies jointly operate a 230,000 million cubic feet per day liquefied natural gas (LNG) plant located at Nikiski in Cook Inlet. Union Chemical has an ammonia/urea fertilizer plant in a similar Kenai Peninsula location, Processing 1,100,000 tons of anhydrous ammonia and 1,000,000 tons of urea prills and granules per year. RESOURCE USE AND TECHNOLOGIES Oil and Natural gas are used for three main purposes: Power generation, transportation, and thermal uses (includes feedstocks for export products and ammonia/urea fertilizer). Each of these are discussed in their own sections. Power Generation Alaskan electricity is produced primarily by oil and gas. Utilizing the standard diesel electric generator, and natural gas turbines, Alaska has an installed capacity and net generation of electricity from oil and natural as of 1,224,465 kilowatt and 3,097,234 megawatt hours, respectively (rable 14). Total consumption of oi] for use in electrical generation was 50.2 million gallons and natural gas was 32.0 BCF. Oil and natural gas use for electrical production in Alaska in 1984 was 76 percent of the installed capacity and 74 percent of the total net generation. Figures 10 and 11 show Alaska's historic net generation by all fuels per region and installed capacity by all fuels per region in 1984. Diesel engines are the principal source of electric generation for most of Alaska's rural villages and many of its smaller cities, with a nameplate capacity in 1984 of 276.8 MW (Table 15). Diesel generators remain the most practical source of generation for most rural villages and will continue to play an important role in meeting Alaska's future electric needs. Natural gas fired combustion turbines are a major source of power generation in Alaska, primarily in the Railbelt area. In 1984, the nameplate capacity for combustion turbines in Alaska totaled 947.6 MW which generated 2519.5 GWh of energy. Future additions hinge on the development of the Susitna Project and the availability of natural gas after the turn of the century. Industrial energy systems are usually designed to produce steam and/or electricity. The source of energy and the technology for its utilization usually depends on the process being used. Some industries use conventional technologies to self-generate electricity. In Alaska, fish processors often use diesel engines to generate their own electricity since their power needs are seasonal and greater than the capacity of many rural utilities. 199 1984 ELECTRIC GENERATION DATA FOR ALASKA 1/ TABLE 14 GENERATION INSTALLED NET AREA SOURCE CAPACITY GENERATION (kW) (MWh) Southeast Utility 272,392 567,608 Industrial 75,076 227 ,635 Total 347 , 468 795,243 Southcentral Utility 947 ,908 2,827,848 Industrial 124,635 ose ,gil Military 56,726 152,922 Total 1,129,209 3,313,081 Yukon Utility 301,512 569,931 Industrial 37,350 71,794 Military 80,935 226,340 Total 419,797 868,065 Arctic Northwest Utility 43,789 100,906 Industrial 298 ,808 1,085,065 Military 6,940 10,735 Total 349 537 1,196,706 Southwest Utility 39,884 79,846 Industrial - - Military 59,585 119,362 Total 99,469 199,208 Alaska Total Utility 1,605,485 4,146,139 Industrial 535,869 1,717,405 Military 204,186 509,359 GRAND TOTAL 2/ 2,348,040 6,378,403 1/_ From Alaska Power Authority's "Alaska Electric Power Statistics, 1960-1985," November 1985. 2/ Includes 2,500 kW installed capacity and 5,500 kWh net generation from miscellaneous sources. -80- Figure 10. Net Generation of Electricity in Alaska — 1980-1984 na Kit Southwest (1.7%) Yukon (14.1%) Annual Net Generation In Alaska 1980 — 1984 4.2 4.1 3.9 3.8 3.7 3.6 3.5 3.4 3.3 3.2 3.1 1980 1982 yeors 1981 1983 1984 Annual Net Generation By Region Southwest (1.8%) Yukon (13.7%) Southwest (1.8%) Southeast (11.1%) Gates Southecst (12.0%) Southecet (12.8%) Arctic/NW (1.9%) Aretio/NW (2.2%) WW (2.3%) 1982 Southeentrai (69.4%) 1981 Seutneentral (70.3%) 1980 Seutheentret (71.2%) Southwest (2.0%) Southwest (1.9%) Yukon (13.595) Suthoaet (15.9%) Yukon (13.7%) Southeast (13.7%) : Arctle/NW (2.4%) 1983 1984 Southcentro! (68.9%) -8l- Figure 11. Electrical Capacity in Alaska — 1984 Installed Capacity By Region 1984 1.7 1.6 RRR 1.4 1.3 N 1.2 CLL LLM MMMM 1.1 = 1 o q 0:9 WN a 07 0 ° 0.6 0.5 0.4 0.3 tte is \, 222 2L eee ee 0.1 ANN SS 4) : WL P7777A_KSSN ZL) DIESEL STEAM GAS TOTAL Regions 27) se (XN So.Centra! Arc/NW Yukon Kx] sw Installed Capacity By Source Installed Capacity By Region Statewide — 1984 1984 HYDRO (13.9%) Southwest (2.5%) Southeest (17.0%) Yukon (18.8%) DIESEL (17.2%) Arctic/NW (2.7%) GAS (59.0%) STEAM (9.8%) Southcentral (59.0%) -82- 1 eo ° TABLE 15 NAMEPLATE CAPACITY OF ELECTRICAL GENERATION UNITS IN ALASKA AND NET GENERATION BY PRIMARY FUEL TYPE (Including Waste Heat) - 1984 1/ INSTALLED CAPACITY (KW) NET GENERATION (MWh) HYDRO DIESEL GAS STEAM TOTAL HYDRO OIL GAS COAL TOTAL Southeast 145,890 88,702 37,800 0 272,392 497,124 70,484 0 0 567,608 Southcentral 2}7 +000 66,800 699,608 104,500 947,908 232,397 101,007 2,494,444 0 2,827,848 (Waste Heat) - - (163,838) - (163,838) YUKON 0 49,396 198,616 53,500 301,512 0 250,555 0 319,376 569,931 ARCTIC © 0 32,159 11,600 30 43,789 0 75,844 25,054 8 3/ 100,906 Northwest - - - (8) (8) (Waste Heat) Southwest 100 39,784 0 0 39 884 0 79 ,846 0 0 79,846 TOTAL Alaska 222,990 276,841 947,624 158,030 1,605,485 729,520 577,736 2,519,498 319,376 4,146,139 (Waste Heat) 0 0 (163,838) (8) (163,846) 1/_ From Alaska Power Authority "Alaska Electric Power Statistics: 1960-1984," November 1985. 2/ Waste heat net generation already included in totals. 3/ From wood waste and oil, n ot coal. In additional to this direct production of electricity, the use of diesel generators has provided more power through the use of "waste heat." In the production of electricity, approximately two-thirds of the total Btu's available from the fuel is lost to waste heat. By installing various cogeneration options, the waste heat can be captured for increased generating capacity or for use in space heating. Approximately 15-25 percent of the waste heat can be converted to electricity without any increase in fuel consumption. Major examples include the development of power from waste heat to drive steam turbines in the Anchorage area, where over 163,838 MWh of energy was produced in 1984. These have recently been tested for rural Alaskan applications. Transportation Total transportation sector use totalled 1.11 billion gallons, utilized 8.5 percent by marine, 57.1 percent by autos, trucks, and off-road vehicles, and 34.4 percent by domestic and international aircraft (Figure 12). Alaska's transportation sector uses almost one-half of the total fossil fuel consumed in the State annually. Federal regulations and increased consumer demand for fuel efficient cars have increased motor vehicle performance. Better roads and timed lighting signals have reduced stop-and-go conditions as well. Consumers are becoming more aware of the savings in transportation fuel than can be derived from a well tuned car. Carpooling programs in Anchorage and modern mass transit systems in Anchorage and Fairbanks have also helped reduce overall transportation fuel use. Travel by air and sea also consume a substantial amount of transportation fuels. Small aircraft and large jet aircraft have increased their efficiency through engine modifications, adjusted flight schedules to accommodate an optimum number of travelers per mile and purchases of more efficient aircraft. Boats, from pleasure craft to the larger fishing and transport vessels, have also increased conservation efforts by increasing efficiencies in power packages and design. Thermal Thermal technologies discussed are for small-scale, dispersed systems used primarily in Alaskan residences. Conservation of heating fuel is also considered a useable technology for this discussion and is presented in the last part of this "thermal" section. Oil and gas fired boilers burn natural gas and fuel oils and use the heat of combustion for hot water or steam production. The advantages over solid fuel counterparts include lower capital costs, minimum operator attention, minimum maintenance, and higher reliability. Three areas of interest where fuel savings of 20 percent or greater are the norm include: the use of "pulse combustion" furnaces and boilers and "heat extractors" in natural -84- Figure 12. Transportation Consumption of Petroleum by Use Alaskan Transportation Fuel Consumed 1982 — 1984 SND), er ey | DK WWI j dehation (38.8%) Oth tHtwy (53.4%) Marine (7.7%) swlation (34.4%) sation (33.9%) Oth Hwy (87.15) Oth Hwy (57.3%) -85- gas combustion; the use of "flame retention burners" in oil furnaces and boilers; and the use of smaller kerosene/oil unit heaters in replacement of oi] pot burners. The pulse combustion burner incorporates the use of a pressurized chamber and spark to produce heat, unlike the direct combustion of conventional appliances. Although fuel efficiencies range between 85 and 95 percent compared to 65 to 70 percent for conventional equipment, the current market for this technology has been relatively low due to their higher up front costs. Heat extractors are also receiving more attention. They are essentially a chamber for return air (or water, in the case of a boiler), to be preheated by captured waste heat otherwise lost up the stack. Oil burners are predominately equipped with flame retention burners. Newer burners are quite efficient, and those manufactured before 1978 can be retrofitted to gain similar efficiencies for usually under $500.00. Oil pot burning stoves. have been widely used in rural Alaska, but because of the large air supply demanded by combustion, much of the heat generated is lost up the chimney. These are slowly being replaced by more efficient, compact unit heaters with capacities of 30,000 Btu's and more. Kerosene is the designated fuel, but high grade fuel oil processed in Alaska is reported to work without negative effects and could become a lower cost fuel substitute. Efficiencies for these compact units are 85 percent, compared to the pot burner's 40 to 60 percent. Space heating combustion technologies are used by residential and commercial facilities. These are largely confined to heating water jackets which are then pumped through the hydronic system of use. In rural applications, jacket waste heat from diesel generators can readily be used for space heating of large buildings in proximity to the power house. To reduce costs, many diesel generation systems in Alaska are being considered for the installation of waste heat facilities. Building insulation is one form of conservation that leads the list in reducing consumption of oi] and gas while providing maximum long-term energy savings for minimum investments. Increased levels of building insulation and properly installed air/vapor barriers lead the list of conservation measures incorporated in building standards developed by many states in cooperation with the conservation industry. Such standards add from five to eight percent to building costs, but are quickly returned through reductions in heating costs. There are many simpler forms of residential energy conservation. They include insulation of hot water heaters, caulking and weatherstripping, and the use of clock thermostats for heating units like furnaces or boilers. Attitude changes, the least expensive means to conserve energy, allow -86- people to adjust their use of energy through simple lifestyle changes. These approaches tend to be most significant when addressed by educational programs which provide factual information and reinforcement for these behavioral changes. Recent interest in new styles of energy efficient construction has been active. The Canadian R-2000 program that informs contractors on the development of "superinsulated" structures has been of particular interest. -87- COAL Alaska's coal resources are plentiful and widespread, providing long-term development potential for export and in-State use. Coal deposits range from Cook Inlet to the North Slope and offer a vast exploitable resource (Figure 13). Alaska's measured coal reserves are approximate 6.3 billion short tons (one short ton equals 2,000 pounds) with additional hypothetical reserves of 5.6 billion short tons (Table 16). These reserves are estimated to account for up to half of the total U.S. coal reserves. Despite this potential only one coal mine was active in 1985. This was the Usibelli Coal Mine which produced about 850,000 tons of subbituminous coal from a dragline-strip-mine operation in the Nenana coal field. However, several potential developments are being studied. RESOURCE LOCATION Coal occurs in several major basins or fields as well as in smaller deposits statewide (Figure 13). Northern Alaska is underlain by some of the most extensive coal deposits in the United States. Information on these resources has been acquired from petroleum well logs on the North Slope and from several site-specific coal investigations, but relatively little reserve data is available for most northern coal fields. Coal resources of south-central Alaska are very extensive, and exploration drilling has been conducted in several fields during the past decade. Recently announced plans for large-scale production of coal for export and power generation brighten prospects for major development in the near future. Exploratory ventures in Southcentral Alaska are as follows. Total coal drilling footage in 1984 was 25,700 feet. Three projects had drilling programs: the Valley Coal project in the Wishbone Hill area of the Matanuska Valley; the Bering River coal project on Chugach Alaska Corporation land near Cordova; and a State-funded project at Cape Beaufort in northwest Alaska. RECENT PRODUCTION The Usibelli Coal Mine, the only major coal mine in Alaska, produced 850,000 short tons of coal in 1984 from the Nenana field. Of this amount, about 160,000 short tons were used to fire the Golden Valley Electric Association plant in Healy, and the remaining 650,000 short tons were hauled on the Alaska Railroad to the Fairbanks area for use at the University of Alaska, the Fairbanks Municipal Utility System, and at Ft. Wainwright and Eielson military stations. The Usibelli Mine also used coal and cogeneration to provide additional power locally. There were 20,000 short tons used by Usibelli in this fashion, and another 20,000 short tons were sold directly for residential heating. -88- Figure 13. Alaska’s Known Coal and Peat Resources Arctic Ocean Explanation Chukchi Sea , / Cape Beaufort Northern Alaska Potential for — deposits ‘ i Point Hope @ Island . Gulf of Alaska . © ‘Kodiak Bristol Bay L oe Herendeen a ht hignik Explanation Rw) ® Coal exploration in 1983 ae go? ~ ; £ a Unalaska Island «@ Coal Field -89- TABLE 16 SUMMARY OF COAL RESOURCES IN ALASKA (Millions of Tons) MEASURED INDICATED HYPOTHETICAL AREA RESERVES RESOURCES RESOURCES Northern Alaska Coal Province 250.0 150,000 to 5,000,000 Cook Inlet Susitna Lowland Province 0 Beluga and Yentna fields 2,50 Kenai field Matanuska field Broad Pass field Nenana-trend Coal Province 3,50! (includes Farewell- Tonzona field) Other interior coal occurrences Bering River field Chignik Bay-Herendeen Bay fields ALASKA TOTAL over 2,500.0 11,000 over 1,600,000 0.0 10,000 to 30,000 0.5 320 to 150,000 1/ to 1,500,000 2/ 50.0 120 to 500 10.0 50 to 500 0.0 7,000 to 17,000 Little ane ---- to 3,500 60.0 100 to 3,500 20.0 200 3,500 6,300.0 168,000 5,600,000 1/_ Includes offshore deposits to 2,000 feet. 2/ Includes offshore deposits to 10,000 feet. Source: Alaska Office of Mineral Development, 1983. -90- The Usibelli Coal Mine through contract has successfully delivered coal from Healy to Korea. On December 31, 1984, three unit-train deliveries that totalled 36,790 tons of coal arrived at Seward, and the loading of a 50,000-ton-capacity collier was underway despite minor start-up difficulties at the port facility. From the beginning, Usibelli commenced to double their annual-production rate from 800,000 tons to 1.6 million tons under the 15-year contract with SunEel for the Korea Electric Power Company. This contract has permitted expansion of the mine work force and acquisition of additional equipment to handle increased production. This coal-export program was facilitated by a complex financing plan for construction of the Seward Coal Terminal, which is owned and operated by SunEel Alaska Corporation, a subsidiary of SunEel Shipping Company, Ltd. A partnership between the State of Alaska, the Alaska Railroad, the City of Seward, the Republic of Korea's Ministry of Energy Resources, the Korea Electric Power Company (KEPCO), and the Usibelli Coal Mine arranged for a $21 million loan through the Chemical Bank of America to support construction of the facility. The port and upland facilities at Seward will handle over 800,000 tons of coal/year from the Usibelli Coal Mine at Healy. In anticipation of the development of other coal or bulk-material exports, the terminal is designed to handle 3 million tons of material annually. Eleven million tons of Usibelli coal are scheduled to move through Seward to Korea during the 15-year contract period. Vessels of up to 120,000 dead-weight tons can dock at Seward, where the harbor has been dredged to 60 feet. The project obtained a 55-year lease from the Alaska Railroad for the on land infrastructure, and project components include a new railroad spur, a receiving hopper system, an extensive conveyor-belt system, junction towers, rail shakers, a stacker reclaimer named "Big Dipper," a sophisticated dust-control system, a spray fire-fighting unit, and an 1,800 feet long trestle system. The stockpile capacity is 120,000 tons, and unit trains are unloaded at a rate of 3,000 tons/hour. Samsung Heavy Industries Company, Ltd., and Peratrovich, Nottingham, and Drage, Inc., designed the Seward Coal Terminal; Samsung manufactured the heavy machinery. POTENTIAL DEVELOPMENT There are several prominent locations for coal development projects throughout Alaska. These are the Bering River, Matanuska, Jarvis Creek, Beluga, and Cape Beaufort areas. Additions to the Healy coal field operation by Usibelli mining, as discussed earlier, can be anticipated. Bering River Bering Development Corporation, an Alaska joint-venture corporation with Korea Alaska Development Corporation and Chugach Alaska Corporation, have drilled in the Monument Mountain and Cochrane Creek areas in the Bering River coal field east of Cordova. This highly folded and faulted coal bed on 33,000 acres of land is owned by the Chugach Alaska Corporation. A 58-million-ton coal reserve has been identified in five seams, and plans are being made to produce from 1 to 1.5 million short tons/year for export to Korea by 1989. -91- Matanuska Rocky Mountain Energy (a subsidiary of Union Pacific Railroad) and Hawley Resource Group have drilled and mapped in the Wishbone Hill area of the Matanuska coal field where several coal mines have been inactive for the past 17 years. The current drilling venture, named the Wishbone Hil] project, is continuing coincidentally with the Matanuska Power Project (MPP Associates), a consortium of Rocky Mountain Energy Corporation, Signal Energy Corporation, Hawley Resource Properties, Inc., and Cook Inlet Region, Inc. The Matanuska Power project is studying the viability of mine-mouth power plant that would produce 170 megawatts of electricity. Estimates of reserves on both the newly leased tracts and the existing leases indicated a 20-year supply of coal (700,000 tons/year). A comprehensive feasibility study being conducted in 1985 will determine the viability of the project and, if the results of the study are positive and if power sales agreements concluded, commercial electrical generation could begin by 1991. Diamond Alaska's Chuitna coal project in the Beluga coal field moved closer to development following the 1984 announcement of a joint feasibility study with the Electric Power Development Company of Japan for possible export of 4 million tons of coal as early as 1989. In the Beluga Coal Field, 45 miles west of Anchorage, Diamond Shamrock Corporation, through its subsidiary Diamond Alaska Coal Company, proposes to develop a 12 million ton per year coal mine for shipment to the Pacific Rim nations. Recoverable coal reserves are estimated to be a minimum of 330 million short tons. Estimated project life is approximately 34 years. The coal is low sulphur, low ash, high moisture, and approximately 7,700 Btu per pound. The federal environmental Protection Agency has initiated preparation of an environmental impact statement to be completed in early 1986. Upon improvement in market conditions, this high potential project should commence. Jarvis Creek Plans by a Fairbanks group (Jarvis Coal Company) to develop the Jarvis Creek coal field should of Delta Junction in the eastern region progressed during 1984. Cape Beaufort Of special note is the Cape Beaufort coal development project. Located along the Arctic Slope coast west of the National Petroleum Reserve Alaska (NPRA) and the village of Point Lay, the western coal region is considered one of the world's largest coal provinces. Studies have found the quantity of the western coal region resource is immense. The quality of the coal is also excellent for space heating purposes. There have been six studies conducted by the State of Alaska on the resource potential of the coal, all pointing to the Western Arctic coal fields as a viable economic alternative energy source for Western Arctic -92- communities. A preliminary report jis currently available on the Cape Beaufort project and includes: a coal resource assessment drawn from drilling activity, an environmental assessment, a permitting plan, a market evaluation, and an economic evaluation. Another study conducted by the Division of Legislative Finance estimated a local and regional marketing scenario and showed a potential for replacing up to 90 percent of existing diesel fuel needs in the region. This would displace 18.2 million gallons of diesel fuel per year by the year 2000. These preliminary studies indicate that development of the region's coal resource could result in a long-term solution to the rising costs of energy in Western Alaska. More detailed information must be secured, however, before the final determination can be made. In 1984, the Alaska Legislature appropriated $2 million to the Alaska Native Foundation to develop a preproduction program for the Cape Beaufort area of the Western Arctic coal region. The Department of Community and Regional Affairs is responsible for managing the grant, and Arctic Slope Consulting Engineers is the primary subcontractor. Phase I of the project has been completed and includes a preliminary assessment of the resource, economics, market, mining, and infrastructures. To date, preliminary work accomplished under Phase II includes the economic - financial options evaluation, preliminary mine design, and the market analysis of institutional facilities. The final report of the project is planned to be completed by April 1986. POWER GENERATION Alaskan coal-fired steam plants for utilities, industrial, and national defense had a 1984 installed capacity of 126 MW. All of this capacity is in the Fairbanks area. The source of coal for each of these installations is the Usibelli Mine near Healy. Alaska has an abundance of coal resources and additional coal-fired steam plants are a distinct possibility. New projects that are being planned include an improved $7 million coal handling facility for the Fairbanks Municipal Utility Service plant. Additional coal-fired capacity in the Railbelt will be largely influenced by decisions on development of the Susitna Hydroelectric Project. Coal-fired steam plants have been considered for the rural areas of Alaska, although economies-of-scale are a potential problem. The Alaska Power Authority (APA) has investigated the possibility of a coal-fired steam plant in Kotzebue which would include a district heating system. COMINCO, who plans to develop the Red Dog Mine near Kotzebue, is also considering coal as a source of electricity. COMINCO is evaluating the potential of a fluidized bed system which would be a new technology for Alaska. -93- HYDROELECTRIC POWER Hydropower is one of Alaska's greatest renewable resources, and potential sites are located throughout Southeast, Southcentral, and Southwest Alaska. Hydropower is the basis for productive, long-term economic development, and, in Alaska, can offer a long-term, low-cost source of electrical power. BACKGROUND AND PRODUCTION Alaska has more undeveloped hydroelectric potential than any other state in the U.S. In the 1960's, the U.S. Bureau of Reclamation investigated thousands of potential hydroelectric sites throughout Alaska. The result was an inventory of 252 sites that may have a potential capacity of 2,500 kW or more, many which have been precluded by the passage of the Alaska National Interest Lands Conservation Act of 1980. The Alaska Power Administration refined this list in 1968 to include only the most attractive sites which number 76 (Figure 14). In addition, the Army Corps of Engineers prepared a series of regional studies titled, "Regional Inventory and Reconnaissance Study for Small Hydroelectric Projects" (published 1979 to 1981), and the "National Hydroelectric Power Study Regional Report" Volume XXIII (published 1981). Except for those sites which have either been developed or have received more detailed studies, the information in these lists still provide a reasonable estimate of the hydroelectric potential that exists in Alaska. Hydropower projects, as most often developed in Alaska, take advantage of naturally occurring elevated lakes, particularly in Southeast Alaska. For example, the Lake Tyee and Snettisham projects used a tunnel from a lake tap which bypasses the need for a larger dam. This technique has been tht used in Scandinavian countries and could find further application in laska. More so than other energy projects, the design and feasibility of a hydroelectric project is largely determined by the site. Topography, precipitation, geotechnical considerations and proximity to load centers, strongly influence the feasibility of the project. Total installed capacity for hydroelectric facilities in Alaska was 223.0 MW in 1984 and total net generation from hydroelectric facilities was 729.5 GWh. Figure 15 and Table 17 illustrates the hydroelectric projects that are operating in Alaska. In addition, there are a number of privately owned small scale hydroelectric projects. On a larger scale, the Alaska Power Authority (APA) continued to investigate the feasibility of other potential hydroelectric sites. Two of the sites, Susitna River and Bradley Lake, have advanced the furthest. Alaska holds considerable potential for small scale hydroelectric installations. The "Hydroelectric Commercialization Kit, September 1981" booklet, developed by the Alaska Department of Community and Regional Affairs, outlines the procedures needed by the "nontechnically trained person to use in the most preliminary assessment of feasibility -94- -S6- aweant 20 WOOOCHOPPER 22 JUNCTION ISLAND 12 *} rs FORTYMKE 23 iy WG DELTA 16 GERSILE 17 [= 1s 4 onmson 1% ARLO 14 CRtHEORAL_LUFFS 19 LANE 43 LOWER CHULITNA 39.9 BKEETNA SKWENTNA 38 WHISKENS 42 macs 7 Wyentna 26° ureer ocluda 25 8 / FEE 34 pe ae = f. — a INGERSOL 29 _ AAMILION DOLLAR 52 A/T SNOW 8 ag lh Co 32 Soe THY TAZMINA 20,8 my 4 Lane Camnalzy —S ‘it LAKE 50 OS forte s NAKNEK 31 NORTHWEST wa SOUTHWEST i SUBREGIONS NOTE Numbers reter to xomcts bated on Summary of Aleske Lowe Pred Mydrostectric See ak Tara 26 ¥ eer) “ ak gre OlVISION $7 re SWEETHEART rus SO {HOUGHTON @0 maaan 45 GREEN 76 MAKSOUTOF RIVER 7: DEER 74 Figure 14. Undeveloped Hydroelectric Resources in Alaska Figure 15. Alaska’s Known Hydroelectric Resources St. Lawrence Island Bering Sea . a Chukchi Sea Pao Alka Island * 27 FOP Unalaska Island Kotzedueg Arctic Ocean Barrow ‘KuskoKwiin Bristol Bay eo -96- Gulf of Alaska Solemon Gulch Sjroruae of Vail) ~ Juneauy Snettisnam Tyee Lake Saan yay Br TABLE 17 HYDROELECTRIC PROJECTS OPERATING IN ALASKA SERVICE INSTALLED AVERAGE ANNUAL DATE REGION AREA PROJECT CAPACITY (MW) GENERATION (MWh) CONSTRUCTED South- Anchorage Cooper Lake 15.0 42,000 1961 central Anchorage Eklutna 30.0 147,900 1955 Kodiak *Terror Lake 20.0 139,700 1984 Valdez *Solomon Gulch 12.0 55,000 1/ 1982 Southeast Juneau Annex Creek 3.5 27,500 1915 Juneau Gold Creek 1.6 6,000 1904 Juneau Snettisham 46.7 211,000 1973 (Long Lake) Juneau Lower Salmon Creek 6.7 31,000 1984 Juneau Upper Salmon Creek 2/ 2.8 14,000 1914 Ketchikan Beaver Falls ~ 54 36,200 1947 Ketchikan Ketchikan Lakes 4.2 16,400 1957 Ketchikan Silvis 2.2 11,000 1974 Ketchikan *Swan Lake 22.0 88,000 3/ 1984 Metlakatla Purple Lake 3.0 15,800 1956 Pelican Pelican Creek 0.5 2,500 1940 Petersburg Crystal Lake 1.6 11,000 1956 Petersburg/ Wrangell *Tyee Lake 20.0 133,000 4/ 1984 Sitka Blue Lake 8.0 39 ,800** 1961 Sitka Green Lake 18.5 46 ,500** 1982 Skagway Dewey Lakes 0.7 700 1909 * APA Projects. ** Firm energy rather than average annual generation. FY 85 = 34,300 Standby power only FY 85 FY 85 "ot 46,700 25,700 -97- (a reconnaissance study) of a potential small hydroelectric project." This popular document is presently being updated by the Alaska Power Authority through funding from the federal Department of Energy and administered by the Alaska Power Administration. The publication should be available to the public by early 1986. PROJECT DEVELOPMENT A primary aspect of hydroelectric development is the State's participation in that process. Specific project development routines and programs have been undertaken by the State to assure long-term, lowest cost hydroelectric options are brought on-line in future years to meet electrical demand, and these are discussed in the following sections. Integral to providing that source of power is the extent transmission systems and sales are regulated. These two important areas are discussed within this section, although their applicability to other resource sections is recognized. Project Development Process An important aspect of the APA's hydroelectric efforts is its project development process. The full development of a power project involves five major steps which include: 1. Reconnaissance Study - assesses the electrical energy and space heating needs of a region or community and identifies those power supply options that merit more detailed evaluation; 2. Feasibility Study - provides a detailed evaluation of the technical, economic, social and environmental viability of those options which appear to be feasible. Typically, the options are compared to the base case (existing electrical system) ; 3p pecensing and/or Detailed Design - follows approval of the feasibility study, financing plan, and conditional power sales agreements. Licensing includes the permits required by local, State and federal agencies. For most hydroelectric projects, the Federal Energy Regulatory Commission (FERC) license application requires the most comprehensive effort; 4. Project Construction - begins once the detailed design is complete, all required licenses and permits have been obtained, and approval of long-term power sales agreements and final plan of finance; and 5. Operation - operation and maintenance (0&M) of the project by the APA or by a local utility which has an operating agreement with the APA. The Alaska Power Authority Board of Directors has adopted the Project Approval Process Sequence of Events for major projects as shown on Table 18. -98- TABLE 18, ALASKA POWER AUTHORITY PROJECT APPROVAL PROCESS 1/ SEQUENCE OF EVENTS STEP APPROVED BY NO. DESCRIPTION STAFF BOARD OMB LEG. 1. Annual Plan for Reconnaissance Studies X 2. Appropriation Request for Reconnaissance Studies X X X 3. Award Contract for Reconnaissance Study X 4. Authorization to submit Reconnaissance Study to OMB X 5. Approval of Reconnaissance Study X* 6. Annual Plan for Feasibility Studies X 7. Appropriation Request for Feasibility Study X X X 8. Award Contract for Feasibility Study X 9. Approve Conditional Power Sales Agreements X 10. Approval of Feasibility Study and Preliminary Plan of Finance and Authorization for Submittal to OMB and Legislature X 11. Recommend Project Approval or Disapproval to Governor and Legislature Lal 12. Authorization of Project and Construction Cost X 13. Approval to Submit License Application to FERC x 14. Annual Plan for Design X 15. Appropriation Request for Design X X X 16. Approval of Initiation of Detailed Design, Updated Power Sales Agreements, and Updated Plan of Finance X 17. Award Contract for Detailed Design X 18. Annual Plan for Construction X 19. Approval of Final Plan of Finance and Power Sales Agreements xX 20. Appropriation for Construction X X X 21. Approval of Start of Project Construction X 22. Award Construction Contracts X 1/ For all significant power projects, some steps concurrent. NOTE: * Indicates statutory requirements. OMB's review is required for new projects that are larger than 1.5 MW for generation projects or cost more than $3,000,000 for transmission projects. -99- Energy Program for Alaska Hydroelectric projects are developed through the Energy Program for Alaska which was initiated by the Legislature in 1981. An important objective of the Energy Program for Alaska has been to provide each project included in the program with identical financing forms. This is achieved by pooling the State equity appropriated to each project by the State and the debt service needed to complete construction financing. Hydroelectric projects funded by the State of Alaska for the "Four Dam Pool" communities were: 1. Solomon Gulch, a 12.0 MW hydroelectric project serving Cooper Valley Electric Association (Glennallen and Valdez areas). Completed in February 1984. 2. Swan Lake a 22.0 MW hydroelectric project serving Ketchikan. Completed in February 1984. 3. Tyee Lake, a 20.0 MW hydroelectric project serving Wrangell and Petersburg. Completed in March 1984. 4. Terror Lake, a 20.0 MW hydroelectric project serving Kodiak and Port Lyons. Completed in November 1984. In late 1985, final agreement was achieved to repay part of the original State investment and to operate these projects. The long-term agreement, which took nearly three years to negotiate, set rates based on operations and maintenance costs and debt service to the State for construction of four hydroelectric projects. Debts on the four State-owned projects total about $200 million. The contract lumps actual operation and maintenance costs from all four projects and divides them evenly among power users in the communities. Debt service will be paid off on a five-year ramping basis, starting with 2.6 cents per kilowatt hour in the first year. That will increase : aamatied to 4 cents in the fifth year, where it will remain through year 15. A rate re-opener after the 15th year of the contract could change rates, but within set ceilings. If a rate change is called for, another five-year ramping would begin with 20 percent increases. Another re-opener in year 30 of the contract will repeat the process. The ceilings dictate that the overall debt service increase cannot be more than 50 percent over the 45-year life of the contract. -100- Susitna Hydroelectric Project Licensing support for the 1,620 megawatt Susitna project continued as a top priority during 1985. Early in the year, Alaska Power Authority staff recommended constructing a two-dam project in three phases instead of two, thereby reducing the initial costs of the project and enabling on-line power to more closely match Railbelt power demand growth. The Alaska Power Authority Board of Directors approved preparation of a draft license amendment to reflect the three-stage concept in May. In October, the board adopted the findings of the amendment, including a projected 1999 on-line date for the first stage of Watana. The amendment should be filed with FERC in February 1986. Funding for the Susitna project was approved in the FY 86 budget at $200 million, with $24 million set aside specifically for licensing and administrative costs. The $200 million was appropriated by the Legislature into the Power Development Fund, to be used as State investment in the project on a continuing appropriation basis. In September, the Superior Court for the State of Alaska found the concept of a continuing appropriation unconstitutional and ordered the Legislature to address funding for the project by other means. It is anticipated that the Legislature will correct past year's appropriations, as well as address the FY 87 appropriation for the project, when it convenes in January 1986. Representatives of the Alaska Power Authority and utilities that might purchase power needs in the Railbelt have met throughout 1985 to begin outlining the terms of a conditional power sales agreement. In an effort to secure tax-exempt funding for the project, the Alaska Power Authority developed a direct-billing concept for power sales and presented an agency agreement outlining the elements of such a concept to the utilities in August. It is anticipated that a conditional agreement for the sale of power will be in place by March 1986. Bradley Lake Hydroelectric Project The 90-megawatt Bradley Lake hydroelectric project (expandable to 135 MW) is designed principally to serve the communities of the Kenai Peninsula, with excess generation in the early years available for consumers to the north. In June 1985, conditional power sales agreements were negotiated for all of the Bradley Lake output with two utilities, Homer Electric Association and Chugach Electric Association. Provisions in the agreement will allow additional utilities to purchase power from the project prior to its on-line date of 1990. The Federal Energy Regulatory Commission (FERC) issued a draft supplement environmental impact statement on the project in February 1985 and a final supplemental environmental impact statement in September 1985. A license decision on the project was granted from FERC on December 31, 1985. -101- The Alaska Power Authority initiated final design for the project in June 1985 and awarded the construction management contract in November 1985. Assuming a favorable licensing decision, the Alaska Power Authority plans to advertise the first construction contracts in early 1986 for site preparation work. The Legislature has appropriated $118 million, to date, for the project, which is estimated to cost $355.9 million at completion. The Alaska Power Authority anticipates issuing $266 million in variable rate demand notes for the project in November 1985 for conversion to fixed rate bonds at project completion. Crater Lake/Snettisham Project Although not included in the energy program for Alaska, the federal Corps of Engineers is presently constructing the Crater Lake addition to the Snettisham project. The existing Snettisham project provides about 75 percent of the total power needs for Juneau. The Crater Lake addition will increase the energy capability of Snettisham by about 60 percent and is scheduled to be completed by late 1988. Rural Electrification Programs The Alaska Power Authority's Rural Electrification Program, which is separate from the Rural Electrification Revolving Loan Fund, includes reconnaissance and feasibility studies of Alaska's rural villages, waste heat recovery facilities for diesel generator systems (discussed under the Energy Conservation Section), development of small-scale (less than 1.5 MW) electric systems which provide an alternative to diesel generators and technical assistance to utilities regarding proper installation of electrification projects. Funding for the technical assistance program began in FY 85. Numerous projects come under each of these programs and a list of APA projects is in the Regional Data Summary. The Department of Community and Regional Affairs administers grants to unincorporated communities in Alaska pursuant to AS 37.05.317. The role of the agency is to assure that the municipality: "(1) will spend the grant for the purpose specified in the appropriation or allocation; (2) will allow, on request, an audit by the State of the uses made of the grant; and (3) assures that, to the extent consistent with purpose of the appropriation or allocation, the facilities and services provided with the grant will be available for the use of the general public." Summarizing, this program provides funds to unincorporated communities for energy projects identified through DCRA's technical assistance program, or through miscellaneous appropriations made by the Legislature based on a community request. -102- The Department of Administration (DOA) distributes legislative appropriations to incorporated communities in Alaska pursuant to AS 37.05.315. According to statute, the DOA does not have authority to approve the technical design or economic feasibility of a legislatively funded electrification project, so monitoring of project results is limited to confirmation that appropriations have been expended. Small scale electrification projects are funded through a variety of structured and unstructured means in Alaska. The Alaska Power Authority, the Department of Community and Regional Affairs, and the Department of Administration all provide money to Alaskan communities for electrification improvements. Alaska Power Administration Projects Transfer During 1985, the Federal Alaska Power Administration and the State of Alaska, through the Office of Management and Budget, signed an agreement to look at the benefits of transferring the two federal hydroelectric projects (Snettisham and Eklutna) to State or local control. A number of tasks have been identified to be completed so that a thorough analysis of potential impacts can be examined. The most important of these is the potential impacts on rate payers resulting from the terms of the transfer. It is recognized that State and federal legislation will be required reflecting terms satisfactory to the State and existing rate payers. A report is due to be completed by about January 1, 1986. -103- TRANSMISSION SYSTEMS Over 1,600 miles of transmission lines were operational in Alaska during 1984. These are shown in Figure 16 and Table 19. Most of the existing transmission lines have been built to connect a source of power, such as the Snettisham, Tyee, Swan Lake and Terror Lake Hydroelectric Projects; Beluga Gas Turbine plants, and Healy Coal-Fired Power Plant, to a local load center. During the past few years, greater emphasis has been placed on developing interties between utility systems and/or load centers. These interties allow sharing of capacity and exchange of energy. Also reliability can be increased because a load center is less dependent on the operation of a single power plant. The most significant transmission line in Alaska today has been built by the Alaska Power Authority (APA) and extends from Willow to Healy. Construction on the 170-mile Anchorage-Fairbanks intertie was completed in December 1984. The intertie is designed to carry 350 megawatts of power between the two load centers; it will initially operate up to 70 megawatts. When major generating plants are built in the Railbelt, its full capacity will be available. The intertie will provide Fairbanks utilities with economic energy being generated by Cook Inlet natural gas and allow Anchorage utilities to use the reserve capacity that exists in Fairbanks. The development of the intertie has demonstrated the close cooperation among utilities in the Railbelt area. -104- Figure 16. Existing Transmission Systems Scale in miles 100 150 TABLE 19 TRANSMISSION LINES AND MAJOR INTERCONNECTIONS (NOTE: Lines under 34.5 KV not included) 1/ SUMMARY CIRCUIT kV Miles Fairbanks 138 116 69 72 34, 42 ~~ 230 Anchorage-Cook Inlet 138,230 364 138,230 16* 115 433 69 83 34.5 126 1 5022 Other Southcentral 138 124 69 7 13.8/69 4 ~~ 235, Southeast 138 41 3* 115 26 4q* 69 36 69/138 69 12* 34.5 25 216 Alaska 138,230 475 19* 69/138 69 12* 105 459 q* 69,13.8/69 202 34.5 193 1 3603 From Alaska Power Authority's "Alaska Electric Power Statistics, 1960-1985," November 1985. All lines overhead unless marked, lines under 34.5 KV not included. Submarine Cable -106- In December 1984, during testing, a main transformer malfunctioned. The manufacturer of the transformer repaired the equipment under warranty and in September 1985 it was reinstalled in the system. The intertie should be fully operational by the end of the year, when the Alaska Power Authority anticipates completion of operating agreements with the participating utilities. The project was completed within the $122.5 million budget. The State has also given attention to developing interties between rural villages. Development has been difficult due to long transmission distrances and small loads. Two single wire-ground return transmission systems have been completed between Kobuk and Shunguak, and between Bethel and Napakiak. The interties provide the benefits of using larger diesel generator sets with more optimum capacity. There appears to be significant advantages to interconnecting some communities in Southeast Alaska. One consideration is to intertie the Lake Tyee project to the Swan Lake project near Ketchikan. Lake Tyee has surplus capacity, and Ketchikan anticipates the need for additional capacity, particularly when the U.S. Borax Company begins development of a molybdenum mine at Quartz Hill. The large power needs of the Quartz Hill project, up to 44 MW for the first phase (ultimately 80 MW), have opened consideration of other sources of power that are available, particularly the opportunities that exist with B.C. Hydro (British Columbia, Canada) which has significant amounts of unused hydroelectric capacity. Another consideration is the Yukon Territory which also has unused hydroelectric capacity which may be available for marketing in Southeast Alaska. The APA is continuing to investigate the feasibility of an interconnected system which would connect Southeast Alaska to British Columbia and the Yukon Territory. Technological developments of DC underwater transmission lines could be a significant factor in determining the feasibility of an intertie through Southeast Alaska. -107- ALTERNATIVE RESOURCES Alternative energy resources include wind, solar, geothermal, biomass, peat, and tidal (nuclear energy is also considered an alternative, but is prohibited under present Alaskan statute). The technologies for these resources are not as well documented as others, such as for oil, natural gas, coal and hydroelectric. Alternative energy sources are renewable and tend to be most suitable for energy demands that are relatively small and dispersed. Alaska is considered to have good potential for the introduction of alternative energy technologies because of the high fossil fuel costs encountered throughout most of the State. In order to take advantage of this potential, the State has sponsored numerous alternative energy demonstration projects and currently provides a low-interest loan program to help finance individual project development efforts. The general purpose of this support has been: 1. to test emerging technologies under Alaskan conditions; 2. to provide a catalyst needed for development of commercially feasible products; and then 3. to replace expensive sources of energy, such as_ diesel generators, with those alternative energy products that are less costly. BACKGROUND In the past five to seven years, the State of Alaska has undertaken a number of alternative energy projects in an effort to determine their feasibility in far northern latitudes. Examples include wind turbine generators, geothermal drilling projects, peat feasibility studies, bioenergy projects, electrical transmission experiments and more traditional conservation efforts. Projects were funded by legislative appropriations or federal dollars that required the State grantees to limit research or applications to a specific technology or locality of the State. The resulting alternative energy program encompassed a checkerboard of projects, which ranged from research and development to fully commercialized technologies. From FY 1976-1983, most of the State alternative energy development activities, including those funded by federal grants, were managed by the Division of Energy and Power Development (DEPD). However, the Legislature did not fund this division in FY 84 and redistributed funds for alternative energy development and energy conservation from DEPD to the Department of Community and Regional Affairs. Following this, most of the alternative energy development projects were then transferred back to the Department of Commerce and Economic Development. In the fall of 1983, the Department of Commerce and Economic Development established an Office of Energy to complete existing demonstration projects and to determine the potential for additional alternative energy development efforts. In June 1984, the Office of Energy was eliminated and -108- the existing programs for bioenergy and close-out of remaining alternative energy demonstration projects were transferred to the Alaska Power Authority. At present, Alaska's alternative energy activities include the Alaska Power Authority's completion of demonstration projects, acquiring federal funding for additional alternative energy projects, creating an attractive climate for investment in projects by the private sector, and completing reconnaissance and feasibility studies. The University of Alaska is also continuing basic research. Identification of those activities are discussed in the following sections. WIND During the past few years there has been considerable interest in Alaska regarding the potential for wind generated electricity. Both the State and the private sector have installed a number of demonstration and commercial systems. Wind power, suitable for generation of energy in the form of electricity, heat or mechanical power, occurs most favorably in Alaskan coastal areas and mountain passes (Figure 17). Wind speeds and air density tend to increase in the winter months when most communities experience their peak electrical and heating demand. During the past few years, interest in wind generation has increased. In order to achieve sufficient economies through the use of wind power, average speeds of 13 miles per hour or greater are recommended. The National Weather Service and the University of Alaska, Arctic Environmental Information and Data Center, are good sources of information. This historical data is summarized in the Battelle publication, "Wind Resource Atlas Volume 10 - Alaska." Although assembled from extrapolated information, the Atlas does provide a good summary. Most wind data is provided from airports which are normally sites in low wind areas. The State does not currently have a program to obtain specific data although the APA does accumulate incidental data in its reconnaissance work. Generally speaking, at least one year of monitoring data is needed in order to assess the potential wind resource. To date, several wind monitoring studies have been completed. The most notable was an appraisal of the Bristol Bay area which charted specific wind regions around the area. The purchase of some 20 anemometers for distribution and data collection was initiated and eventually taken over by the Arctic Environmental Information Data Center (AEIDC) at the University of Alaska. Wind energy resources have been considered in various Alaska Power Authority reconnaissance studies, although it has most often been in a secondary role. In order to survey the number of wind generators in operation and determine their effectiveness, the Department of Commerce and Economic Development completed a study, "Alaska's Wind Energy System," (January 1984), which reported the existence of at least 140 wind generators in Alaska ranging from 1 kW to 20 kW producing electricity in the range of 17.5¢/kWh to $1.53/kWh. (These costs include the price of equipment, installation, and -109- -OII- Classes of Wind Power Density at 10 m and 50 mle) Wind Power Clays mst) $0 m (164 fe) Wind Power Wind Power Density, — Speed,(b) Density, — Speed,(b) watts/m2 nfs (mph) _watts/m2__an/s (mph) 0——-——0 0 0 WANED ——— 2w—5.6 (12.5) $ pv000 1 (E1000 0 VAP KILOMETERS Figure 17. Average Annual Wind Power in Alaska 100— 4.4 ( 9.8) 200 ——- 5.6 (12.5) 1S0——5.1 (11.5) 300 — 6.4 (14.3) 400——7.0 (15 7) $00-——7.5 (16.8) 600 —— 8.0 (17.9) 800 —— 8.8 (19.7) 280-——6.0 (13.4) JON — 6.4 (14.3) 400 ——7.0 (15.7 1000 ——9.4 (21.1) ——2000- —11.9 (26.6) © power density, speed imerearer Hey ation (—) RIDGE CREST ESTIMATES 1) MILES operations and maintenance.) The lower end of this generating cost is very competitive with diesel which can easily exceed 60¢/kWh for unsubsidized production. Although there was considerable variance in the performance, the study concluded that with current technology, it appears that wind generators can be economically feasible for rural Alaska if the wind regime is suitable and the installation and operation properly managed. Several communities, in particular Naknek, St. Paul, Cold Bay and Adak, have also conducted on-site studies to determine the application for wind technologies. Power generation from the wind has been part of Alaska's power development scheme since 1976. At that time, the Department of Commerce and Economic Development began several demonstration projects funded by an appropriation made by the Alaska Legislature. Demonstration projects were performed to evaluate the performance of both electrical grid intertie machines and battery storage type systems. Alaska's initial attempts to use wind turbine generators (WTG) were saddled with a number of liabilities. WTG technologies were largely experimental, with only a few projects in Europe and California achieving economic viability. Alaska demonstration projects were far removed from technicians and suppliers, and logistical costs were high. The project objectives were, consequently, more oriented toward technical performance than economic feasibility. Despite these drawbacks, nine separate WTG projects were undertaken with State money. Two very early installations took place in Nelson Lagoon and Sheldon Point. The former was an intertie machine, a 20 kW Grumman, while the latter was comprised of a series of 2 kW battery bank installations providing individual homes with electricity. The 20 kW Grumman encountered mechanical problems and was finally dismantled after providing some 2,000 hours of operation with over 70 percent of the average load being met at various times. The Sheldon Point project has gone through a major redesign and is now providing satisfactory power to five households with anticipated expansion to seven others. Unalakleet, Skagway and Port Alexander continue to operate intermittently successful projects. Small installations in Shishmaref and Wales hold promise for future development in the Bering Straits area. However, projects in Kotzebue and Newhalen are no longer operational due to equipment failure and the lack of an operation and maintenance (0&M) network to keep generators on line. Some of the earlier reluctance to develop wind energy systems faded in 1985. On August 19, the City of St. Paul and the FloWind Corporation signed an agreement to jointly develop a 2 megawatt wind-diesel electric power generating facility. St. Paul, on the island of St. Paul in the Pribilof Islands located in the Bering Sea, has a population of 600 and electrical costs in excess of 38 cents per kWh. The Alaska Power Authority will provide $400,000 to assist in the development of the new facility. As quoted from a recent Alaska Power Authority appraisal of the project, "The effort made by the City of St. -111- Paul, FloWind and the Alaska Power Authority staff is noteworthy. Not only is this a commercial application of wind technology, but is privately owned and financed; it brings the private sector into its proper role in helping to solve Alaska's energy problems." The new hybrid wind-diesel power facility will consist of seven (7) FloWind 250 kW vertical axis wind turbines interconnected with existing and new diesel generators. Utilizing the excellent wind resource on the island, it is projected that more than 50 percent of the power generation from the new facility will be from the wind. Total development costs for the installation will be $3.2 million. An invitation to bid was issued by the Navy for a 3 megawatt wind farm installation at Adak Naval Base in 1985. The low bid was from Michael Consortium of Washington state. Construction costs of $4.0 million will provide 55 MAN wind turbines providing power at 9.75 cents per kilowatt hour. The West German MAN company plans to provide $1.375 million for construction, and each of the wind turbines will cost $70,000 per machine. About $1.7 million has been secured from private financing with the balance of the financing in negotiation. Future interest in wind generators by State agencies will probably concentrate on operational systems for utilities; i.e., interfacing wind farms to diesel generators, rather than demonstration projects. In order to avoid frequency and voltage fluctuations within the utility, wind generators must incorporate various load management options. These may include "energy dumps" such as water or space heating applications which will absorb excess capacity which may occur in high wind situations. The single greatest deterrent to future development is the small electrical load which exists in our strongest wind power sites. It is a deterrent to third-party financing and requires special technical solutions as well. SOLAR Applications of solar technology in Alaska range from the simplest form of passive solar heating to the more technologically advanced use of photovoltaics for the production of electricity. Two references best explain the pros and cons of solar use in Alaska, they are: 0 A_ Solar Design Manual For Alaska by Richard Siefert, published July 1981 by the Institute of Water Resources, University of Alaska, Fairbanks. 0 Assessment _of Energy Technologies, published June 1983 by the Alaska Department of Commerce and Economic Development. Solar energy has good potential for use as an additional source of energy in Alaska. Varying levels of daylight experienced in Alaska through the seasons actually permits 230 hours more sunlight in Alaska than at the equator each year. Solar energy production has the advantage of being clean, safe, and could actually become cheaper with time as technology advances are made. Drawbacks of using solar energy include being out of phase with peak heating requirements and lack of full time reliability due to storms or changing seasonal lighting conditions. These drawbacks are -112- less important if solar is used as part of an integrated energy management system. Although the actual experience with solar energy in Alaska is limited, solar can be a valuable energy resource. Solar energy can be used in one of four forms: passive heating, active heating, photovoltaics, and daylighting. Passive solar use is one of the simplest forms of converting solar into useable forms of energy. Solar energy is transmitted to an interior space where it is used directly, allowing naturally occurring air currents to distribute the heat spacially, or through storage of the heat in some form of medium that permits its use at a later time. The only maintenance involves preparing an insulated space to hold the collected heat and routine checks on the storage mediums. As outlined earlier, passive solar may also be considered as a means of saving other energy resources when it is used in "daylighting" situations, or using natural light instead of forms of generated light. In heating applications, passive solar has a varying cost/benefit ratio dependent upon the site conditions and the building heat load. Active solar technologies employ an auxiliary energy source to move heat from where it is collected to where it is used or stored (usually by a pump or fan). Active solar technologies are used for providing domestic hot water in Alaska. Active systems are less economic than their passive counterparts because of the extreme annual variation of available solar radiation in Alaska. Thus, it is rare to obtain more than 25 to 35 percent of the annual heating requirements for even a highly insulated structure. Capital costs of active heating systems are often very high. Solar energy can be directly converted to electricity using photovoltaic cells. This application is used where small amounts of power are needed in remote locations. Photovoltaic systems are commercially available in Alaska and have been used successfully in several rural applications as sole source use of 12V or 24V self-contained systems. Photovoltaic systems are also being used in low wattage, remote uses such as fish-counting equipment, communication equipment and railroad crossings. Photovoltaic technology is still undergoing development by manufacturers and research institutions and new developments should reduce installation costs and increase market penetration. A more obvious and often overlooked aspect of solar is the use of visible solar radiation to reduce or eliminate the need for artificial lighting in a building. Referred to as daylighting, this use can provide substantial economic benefit by reducing the need for costly rural electrical lighting. Research by the University of Alaska and the Department of Transportation and Public Facilities (DOTPF) on the optimum use of daylighting in Alaska has only recently begun, but it is one of the oldest and most common uses of solar energy. -113- GEOTHERMAL Alaska has good potential for geothermal resources (Figure 18). Over 100 surface manifestations including hot springs, fumaroles, mud pots, and wells have been identified. Over 11 million acres in the State have significant geologic evidence for geothermal energy development. These are identified in DNR's "Geothermal Resources of Alaska" map, published in 1984. Over the past several decades, geothermal heat has emerged as a competitor with other forms of energy for both electrical generation and a variety of direct-use applications. Previously, its practical use was limited to its alleged curative properties for various human ailments and to its availability in remote areas for natural hot baths. The State of Alaska has conducted three geothermal drilling programs since 1979. The first was at Pilgrim Hot Springs on the Seward Peninsula where six wells ranging from 60 to 1,000 feet were drilled between 1979 and 1982, penetrating a 195°F (90°C) shallow reservoir. In 1980, two shallow $50-foot) geothermal wells were drilled at Summer Bay on Unalaska Island where 122°F (50°C) fluids were encountered. Since 1981, a geothermal exploration program has been ongoing at Makushin Volcano on Unalaska Island. There, a two-phase, highly productive, geothermal system was discovered at 1,950 feet with a 380°F (190°C) flowing temperature. This resource is capable of supplying several times the electrical energy needs of the island for the foreseeable future. A feasibility study is needed to determine whether geothermal energy development at the site is economically and environmentally sound. In addition to the State projects, the U.S. Department of Navy has been investigating the possibility of developing geothermal resources for electrical generation on Adak Island. The Navy is planning a geothermal exploration program for 1985. Recent advances in technology and worldwide successes in geothermal resource development assure geothermal energy a role as a viable competitor among the variety of energy options and alternatives. With Alaska's abundance of geothermal potential, this alternative deserves serious consideration. BIOMASS The term biomass traditionally includes wood residue, municipal solid waste, and agricultural products including fish processing and animal wastes. Peat is sometimes loosely classified in the biomass area. Alaska has tremendous biomass potential, particularly in the forestry area (Figure 19). Alaska's timberlands have the potential to produce an array of finished lumber products and provide waste material for energy consumption. Interior Alaska alone has 22.5 million acres of commercial forest land. -114- = Atka Island Figure 18. Alaska’s Known Geothermal Resources Arctic Ocean Barrow Chukchi Sea Island Juneau Bering Sea 0 ichikan Gult of Alaska Bnstol Bay Potential for geothermal resources * Geothermal Site Moderate to high temperature (more than 150° C)—Suitable for electrical generation and cascaded direct use: located in areas of active or recent! active volcanic systems 6 Light Low to moderate temperature (less than 150 C)—Suitable tor direct use 1 . Pree? faland Space heating. agriculture. aquaculture. recreation. recreational tacilities and industrial processes: located in areas with deep circulation of water along fracture systems associated with granitic intrusive bodies Dark -115- Figure19. Alaska Timber Resources Arctic Ocean Barrow Chukchi Sea Kotzebue Nome St ees Island Cy 8 Bering Sea . Gulf of Alaska 7 Kodiak Bristol Bay = Ss, (A SSCP eo, IE iP % Atka Island > oe Pons Island -116- —<wep Commercial—Well-stocked Noncommercial—Poorly stocke In 1984, DNR estimated that of the 22.5 million acres of interior forest land available for commercial use, 10.2 million acres were State-owned, 7.6 million acres Native corporation owned, and 4.7 million acres owned by others. However, the majority of this timber is not accessible to real markets because of geography, climate, and the lack of processing facilities in the State. In spite of this, 457,200 million board feet of logs were harvested in Alaska in 1983, resulting in production of 126.8 million board feet of lumber, 237,000 short tons of pulp, and 7,000 short tons of chips. Additionally, Native corporations exported 233 million board feet of logs that year. There are approximately 200 sawmills in the State with a capacity of one million board feet/year or greater. Additionally, there are about 140 personal-use sawmills. Of these, only 30 operate year-round and the remainder are seasonal or sporadic operations. Operational mills include two pulp mills with a capacity of 392,000 short tons of pulp. Wood wastes comprise a potentially significant energy resource. These wastes include unusable portions of the tree, such as bark, small limbs, chips and roots; waste from logging and milling operations and wood from land clearing for agriculture (statewide this could potentially be 300,000 acres by 1990). Rotting, diseased or burn-killed wood and driftwood also add to the State's biomass resource base. Periodically, hundreds of acres of forest lands are burned to improve moose habitat. If this wood were harvested instead, it would provide a potential energy resource as well. Some projects completed or underway are shown in the Appendix. Several sawmills in Alaska have used mill waste to assist in providing heat and electricity for plan operations and others are planning to use it. Louisiana Pacific Corporation in Ketchikan and Alaska Lumber and Pulp in Sitka have utilized wood waste to assist in the production of process steam and electricity. Alaska Timber Corporation in Klawock is designed to use waste wood to fuel a 2,000 kilowatt steam generation plan to provide for its sawmill's electrical needs. The plant was proceeding with a project to use waste wood products to supplement electrical generation, but due to a slump in timber sales has been prevented from doing so. -117- Use of municipal solid waste (garbage) and organic waste such as sewage, provide another potential biomass resource that can be used locally. The Municipality of Anchorage, for example, has cut operating costs through sewage treatment plant modifications, using organic waste to assist in providing energy for waste incineration and plant space heating. There is potential in the Fairbanks area to supplement coal-fired generating facilities with municipal solid waste. Wood is also used for space heating in many parts of Alaska. Some interesting points summarized from the 1980 Federal Census are: 1. between 1970-1980 statewide use of wood as a heating fuel increased from 3.5% to 7.15% of all heating fuels used statewide. 2. Mat-Su wood use for the same period increased from 17.3% to 25.27% of all heating fuels used in the area. Anchorage increased from 0.2% to 0.8%. Recent data indicates decreased wood consumption from the time of the 1985 Plan. Firewood removal from National Forest Service lands from October 1983 to September 1984 totalled 11,520 cords of wood. State lands provided an additional 37,486 cords of wood. This equals a total Btu energy equivalent of 840 billion Btu's. Wood burning efficiencies have been primarily improved through air-tight construction of combustion chambers and dampening adjustments, and the use of catalyst conversion systems. Additionally, combustion of volatile exhaust gases and better designs in heat exchangers add to the efficiency of wood burners. The catalytic converters alone can increase efficiencies to 70 percent, a 20 percent improvement over most stoves. Drawback of these advanced designs include higher initial cost and the expense for replacement of the catalytic converters should they be damaged or worn out. Wood burning continues to create air pollution problems in populated areas such as Juneau and Fairbanks. PEAT Peat has been used for years in European countries for fuel and agricultural purposes. The Soviet Union operates approximately 80 elec- trical power stations with a rated capacity in excess of 4,000 megawatts. They consume approximately 80 million tons of peat per year. Ireland consumes approximately 9 million tons for a rated capacity of 400 megawatts or one quarter of their total electrical demand. Potential use of peat as a fuel source in Alaska was presented in the 1983 Department of Commerce and Economic Development report, "Peat Commercial Feasibility Analysis." It discussed Alaska's peat resource and potential commercial extraction for fuel. Based on that, and the U.S. Department of Energy criteria for peat used as a fuel source, Alaska is considered to have only a small part of the known world supply of useable peat. Peatlands with fuel grade potential cover 4.4 million acres of Alaska (Figure 13). With a minimum deposit thickness of five feet, these peat -118- deposits could yield approximately 0.88 billion tons of moisture free, fuel grade peat. The potential use of this resource is clouded by the fact that much of it is in permafrost areas which normally are not considered suitable for mining. Peat assessment may continue in the Dillingham area and has been ongoing in the Roger's Creek and Houston areas, in the Susitna Valley, and on the Kenai Peninsula. Part of the assessment will address questions concerning harvesting technologies, combustion systems and environmental impacts from mining peat for fuel. Horticultural peat is mined from four pits in the Fairbanks area and two in the Willow area. TIDAL The ebb and flow of the tide produces kinetic energy which can be harnessed to produce electricity if there is sufficient tidal range. However, the density of the kinetic energy in tidal currents is relatively low and harnessing this energy source is capital intensive. A conventional tidal power project includes a barrage, to create sufficient differences in elevation between sea level and basin level, and hydraulic turbines which generate electricity. The simplest and least expensive method to generate tidal power is by means of a single impounding, single effect basin. The basin is filled by open sluiceways during the rising or flood tide. Release of impounded water through turbines during the falling, or ebb tide, provides the source of power generation. The single effect operation can be modified to a double effect system by using turbines that are capable of generating power on both the ebb and flow tides. Although there are still intervals where power is not generated, the total generation time during each tide is lengthened. Because of less efficient design, the double effect turbine configuration will not double the amount of energy generated. Tidal power can be re-timed to provide firm power. This is accomplished by using a portion of the generated power to pump water to separate basins. This water is released and power is generated during periods when there is insufficient difference in elevation between sea level and basin level to generate power. The principal tidal resource in Alaska is found in the Cook Inlet area which has the second highest tides in the world. Tidal power options have also been evaluated in Southeast Alaska. Cook Inlet is a major tidal estuary which is approximately 180 miles long and ranges in width from approximately 80 miles near its mouth to approximately 20 miles at the confluence of the Knik and Turnagain Arms. The most recent evaluation of Cook Inlet tidal power, "Preliminary Assessment of Cook Inlet Tidal Power" by Acres American, Inc. in September 1981, identified 16 sites that have potential for a tidal power plant (see Figure 20, and Table 20). Some of these sites could potentially produce more power than what is currently -119- -02T- 1RTWESELDOVIA APA PORT GRAHAM ix! POFT CHATHAM aay Figure 20. Potential Tidal Power Sites in Alaska SITE LIST PORT GRAHAM KACHEMAK BAY (1) KACHEMAK BAY (2) ILIAMNA BAY CHINITNA BAY TUXEDNI BAY . ANCHOR PT FORELAND EAST/WEST . FORELAND NORTH FIRE ISLAND/KNIK _ FIRE ISLAND/ TURNAGAIN . POINT MACKENZIE . CAIRN POINT 14. EAGLE BAY 1S RAINBOW 16. SUNRISE WANA SUH — OFFICE OF THE GOVERNOR STATE OF ALASKA COOK INLET TIDAL POWER RRR RP RRR DANPWNHrPOWONAAPWNHrH TABLE 20 POTENTIAL LOCATIONS FOR TIDAL POWER PLANTS IN COOK INLET Tidal Range Site (ft) Port Graham 14.4 Kachemak Bay (1) 15.5 Kachemak Bay (2) 15.5 Iliamna Bay 123 Chinitna Bay 1320) Tuxedni Bay/Snug Harbor se Anchor Point 1a Foreland East/West 17.6 North Forelands 19.0 Knik/Fire Island 24.4 Turnagain/Fire Island 2520 Point MacKenzie 257 Cairn Point 26.3 Above Eagle Bay/Goose Bay 27.6 Rainbow UGS Sunrise 3033 Initial Estimate o Net Energy 117 3,730 2,230 120 408 484 63,700 39,500 32,800 7,400 16,600 6,000 5,500 3,500 3,000 1,900 From Preliminary Assessment of Cook Inlet Tidal Power Acres American, September 1981 -121- if Ps (kWh x 10 Produced in the Anchorage area. In Southeast Alaska, a 1981 report by the International Engineering Company for the Alaska Power Authority titled "Angoon Tidal Power and Comparative Analysis" indicated poor economic feasibility for tidal power. Due to high costs and significant environmental problems associated with development of major hydraulic works, tidal power does not appear feasible at this time, when compared to other alternatives. -122- CHAPTER 5. ENERGY SUPPORT This section includes those activities related to energy programs that improve energy management practices in Alaska. Alaska has a variety of programs that aid low income families to weatherize their homes, help communities obtain funds to increase power generation efficiencies and educate communities on ways to conserve limited fuel supplies. The Alaska Power Authority (APA) provides assistance through large and small scale electrification projects, utility loans, rural technical assistance, and construction of waste heat facilities. By AS 44.83.400, the Alaska Power Authority is directed to ensure: 0 that communities that benefit from the energy program for Alaska implement cost effective conservation measures for residences, commercial and public buildings, and industries. 0 that communities shall fulfill those responsibilities by co- operating with State agencies concerned with development and conservation of energy. The Department of Transportation and Public Facilities also participates in conservation activities. AS 46.11.010 requires the Department to complete a set of thermal and lighting standards for public facilities built and maintained by the State. The Department of Community and Regional Affairs (DCRA) through its Division of Community Development (DCD) provides weatherization funding with pass-through money from State and federal sources, assists communities in defining energy needs and funding procurement, and monitors legislative grants and contracts. The Department of Administration (DOA) also plays a role in distributing energy appropriations. Monies appropriated to communities by the Legislature are awarded directly through the Department of Administration. GENERAL FUND APPROPRIATIONS General Fund appropriations from State and federal sources are a primary means of providing energy support to Alaskans. The State funded Power Cost Equalization program and federally funded (and State administered) Low Income Housing Energy Assistance Program are the most dominant, visible Programs. POWER COST EQUALIZATION Power Cost Equalization (PCE) became effective in October, 1984 replacing the Power Cost Assistance Program which had been active since 1980. PCE received a continuing appropriation in the FY 85 budget at $16.3 million and for FY 86 at $21.7 million. The Alaska Power Authority administers this program. The intent of the PCE program is to provide customers of rural Alaska electric utilities with rates that are comparable to the "mean of the cost per kilowatt hour in Anchorage, Fairbanks and Juneau." The difference between the rate specified by statute and actual utility costs per kilowatt-hour is paid for by the State. -125- PCE reduces the entry rate to 8.5¢/kWh for eligible utilities and increases the ceiling to 52.5¢/kWh. These rates can be changed annually, but have remained the same since 1984. PCE will pay up to the consumption level equal to 750 kWh per month for each customer and 70 kWh a month per resident for community facilities. The PCE program applies to 95 percent of the eligible costs of each utility. The consumer pays 5 percent of the actual costs that are between the entry rate and the ceiling rate. PCE is applicable only to those utilities which provide the information required for certification, had residential sector consumption levels of less than 7,500 MWh (or 15,000 MWh if serving two or more communities) during calendar year 1983, use diesel- fired generators to provide more than 75 percent of their electrical generation during calendar year 1984 and are subject to APUC rate regula- tions or have had at least 25 percent of their customers petition for PCE if the utility itself has not voluntarily requested PCE support. PCE has been provided to 155 rural communities as of December 31, 1985. The range of subsidy is from 2.99 cents per kilowatt-hour in Pelican to as high as 41.80 cents per kilowatt-hour in communities like Allakaket, Eagle Village, Hughes, and others. A total of 27 regulated and 62 unregulated utilities are participating in the PCE program. Communities receiving PCE and the rates applied are shown in the Regional Data Summary and Appendix documents. LIHEAP The Low Income Home Energy Assistance Program (LIHEAP) provides a federal block grant to the Alaska Department of Health and Social Services (DHSS) through the Division of Public Assistance and seven tribal grantees (Table 21). Concern focuses mainly on using LIHEAP funds to reduce home energy costs for low-income Alaskans. Low-income households are most affected by rising home energy costs since they must pay a greater percentage of their income for those costs than do middle or upper-income households. Funding in FY 85 totalled $11.7 million. The majority of funds go directly to subsidize home energy costs, but grantees may use up to 15 percent of the block grant for energy conservation and weatherization. The Energy Assistance Program distributes federal LIHEAP funds statewide through the DHSS Division of Public Assistance, and various tribal organi- zations. The tribal organizations administering LIHEAP block grants in FY 85 were the Association of Village Council Presidents, Orutsararmuit Native Corporation, Cook Inlet Native Association, Kenaitze Indian Tribe, Ketchikan Indian Corporation, Tanana Chiefs Conference and the Tlingit and Haida Central Council. The Division of Public Assistance delivers its program through 18 district offices and village fee agents. Tribal organ- izations use their own social service staff in program delivery. LIHEAP grantors will serve approximately 13,000 low income households in FY 86. -126- TABLE 21 FY 85 LOW INCOME HOME ENERGY ASSISTANCE PROGRAM FUNDING LIHEAP DHSS ORGANIZATION GRANT TRANSFER TOTAL Cook Inlet Native Association 483,791 191,209 675,000 Assoc. Village Council Pres. 519,046 755,954 1,275,000 Tlingit & Haida Central Council 273 ,667 301,333 575,000 Tanana Chiefs Conference 381,920 703,080 1,085,000 Kenaitze Indian Tribe 37,101 47,499 84,600 Ketchikan Indian Corporation 52,005 46,320 98,325 Orutsararmuit Native Corporation 79 ,369 130,631 210,000 TOTALS $1,826,899 $2,176,026 $4,002,925 DHSS FY 85 LIHEAP BLOCK GRANT $ 9,862,259 MINUS TRIBAL TRANSFERS 2,176,026 TOTAL $ 7,686,233 Alaska's FY 85 LIHEAP FUNDING DHSS $ 7,686,233 TRIBAL GRANTEES (with transfers ) 4,002,925 TOTAL $11,689, 158 -127- WEATHERIZATION DCRA's Weatherization Program is another essential aspect of community energy management. Since its inception, the Weatherization Program has provided low-income Alaskans with direct, immediate and long-lasting benefits. It has reduced the annual home heating costs of low-income Alaskans by as much as 25 percent and has increased the personal health and well-being of its recipients. It has done so by repairing and upgrading the thermal soundness of low-income housing stock in rural Alaska with such items as insulation, caulking, and other low-cost weatherization functions. The State's weatherization program has undergone a progressive evolution from 100% federal funding to State sponsorship (Table 22). From FY 77 through FY 82, the Weatherization Program was 100% federally funded through the Department of Energy (DOE) and the Low Income Energy Assistance Program (LIHEAP administered through the State Department of Health and Social Services). Federal funding was inadequate to provide statewide assistance, however, and federal regulations were particularly unsuited for Alaska's unique climatic and economic conditions. The Alaska Legislature recognized the inadequacy of the federal program and its funding level and has appropriated funds since FY 83 to supplement federal funds and/or increase the size of the program. However, FY 86's decreased oi] revenues caused a decrease in appropriated State funds for weatherization and a related decrease in the number of homes which will be assisted in the future. DCRA's weatherization program administers contracts and equitably distri- butes funds. Program funds are distributed based on cost of fuel and heating degree days with priority given to the elderly and the handicapped. Each home is given an energy assessment and, on the basis of that assess- ment, materials are purchased and installed for the household. Household members receive one-to-one energy education on low cost/no cost type future conservation efforts. As funding permits, community level workshops concerning weatherization and other appropriate energy conservation measures are held. Funds are distributed through contracts awarded on an annual basis. The weatherization program has short and long-term goals. Short term goals include gathering and computerizing statewide weatherization data to more efficiently deliver service, cross reference information, improve outreach programs for available services and programs, and coordinate these with other departments. -128- TABLE 22 WEATHERIZATION FUNDING HISTORY, 1978-1986 ($) FEDERAL DEPT. OF ENERGY LIHEAP STATE YEAR 1/ PROGRAM PROGRAM PROGRAM TOTAL 1978 $ 500,000 $ O: | $ 0 $ 500,000 1979 1,200,000 0 0 1,200,000 1980 900 ,000 0 0 900,000 1981 1,400,000 0 0 1,400,000 1982 800,000 500,000 0 1,300,000 1983 1,300,000 650,000 2,300,000 4,250,000 1984 900 ,000 500,000 5,000,000 6,400,000 1985 1,800,000 1,000,000 2,000,000 4,800,000 1986 * 2,000,000 * 1,000,000 2,000,000 5,000,000 TOTALS $10,800 ,000 $ 3,650,000 $11,300,000 $25,750,000 ny, Calendar year - State Fiscal Year included as part of next calendar year, and federal year is same as calendar year. * Estimated funding level of federal grants. -129- Long range goals include raising the consumer education level on conser- vation so that the general public recognizes the full value of cost savings derived from applying conservation measures in their homes, and weather- izing at least 50 percent of the eligible homes in Alaska as timely as funding permits. Unfortunately, the number of eligible, unweatherized homes under the State's current income guidelines is staggering. DCRA estimates that approximately 35,000 to 37,000 homes of low-income elderly and handicapped Alaskans still need to be weatherized. It will take a serious State commitment to provide all low-income Alaskans with this service. At the current rate of funding (approximately $5.0 million in State and federal appropriated funds in FY 86) it will take approximately 30 years to meet today's need. The State has the option of maintaining the status quo and not completing weatherization for 30 years or selecting a weatherization goal of a pre- determined percentage of eligible homes and then dedicating the necessary resources to obtain it. The following options are available: 1. $4.5 million dollars annually means approximately 15 years to weatherize 50 percent of the homes. 2. Six million dollars annually means approximately 10 years to weatherize 50 percent of the homes. 3. Eight million dollars annually means approximately 8 years to weatherize 50 percent of the homes. It should be noted that only 15 percent of the eligible homes have been weatherized since implementation of the program seven years ago. Eligible homes are estimated to be approximately 33 percent of the total homes in the State. INSTITUTIONAL CONSERVATION DCRA's Institutional Conservation Program helps Alaskan schools, hospitals, local governments and public institutions reduce the impact that increasing energy costs are placing on their operating budgets. Yukon Flats School District, for example, pays an annual energy bill of over $4 million. The Institutional Conservation Program directly assists Alaskan institutions by financing energy audits and technical analyses. Schools and hospitals are eligible for conservation improvements. Improvements made under the program largely result in a payback in energy savings within 15 years. Historically, most funded projects have a payback of seven years or less. To date, 83 grants have been issued through the program totaling $4,888,882. 1980 to 1985 funding is shown in Table 23. The U.S. Department of Energy makes direct grants to the institutions on a 50 percent match basis. The State may provide up to 90 percent of the required match and the participating institute provides the remaining amount. ~130- YEAR 1980 1980 1980 1980 1980 1980 1980 1980 1980 1980 1980 1980 1980 1981 1981 1981 1981 1982 1982 1982 1982 1983 1983 1983 1983 1983 1983 1983 1983 1983 1984 1984 1984 1984 1984 1984 TAB INSTITUTIONAL CONSERVATION PROGRAM FUNDING HISTORY 1980 INSTITUTION Alaska Gateway School District City & Borough of Juneau City of Hoonah School District City of Seward Fairbanks North Star Borough Haines Borough School District Lower Kuskokwim School District Nenana City Public Schools Tri-Valley School Providence Hospital (Anchorage) Southwest Regional School Distr Valley Hospital Yukon Flats School District City & Borough of Juneau Fairbanks North Star Borough Lower Kuskokwim School District Alaska Psychiatric Institute Cordova Junior/Senior High Fairbanks North Star Borough Kodiak High School Ft. Yukon School Fairbanks North Star Borough Galena City School Kodiak Junior High School Nome Public Schools Norton Sound Health Corporation Petersburg School District Valdez Senior High School Ft. Yukon School City of St. Paul City of Aniak City of St. George Kodiak Elementary School Lower Kuskokwim School District Norton Sound Health Corporation St. George School EE=23 - 1985 INSTI- FEDERAL STATE TUTIONAL FUNDING FUNDING MATCH $ 6,799 -0- $6,199 77 ,088 165732 58,279 6,393 -0- 2,178 143,056 -0- 143,056 104,788 -0- 55,089 52,000 37 ,648 14,352 140,532 82,138 73,183 38,234 -0- 12,158 319,907 -0- 319,907 54,884 7,388 105,546 ict 209,261 56,759 105 ,283 3,871 -0- 2,669 9,600 -0- 9,600 259,800 92,628 98,825 125,603 32,343 93,966 1,795 1,197 598 7,000 -0- 7,000 4,400 -0- 4,400 78,759 255509 13,969 83,200 -0- 83,200 132,638 97,710 29 ,884 150,825 117,644 33,181 124,216 -0- 15,553 80,054 62,442 29,643 16,000 6,400 9,600 8,582 6,876 1,707 68,793 26,628 42,165 12,450 -0- 12,450 45,188 25,318 10,666 4,750 1,900 2,850 fefil 2,169 542 10,129 8,104 2,026 28,912 23,130 5,782 -0- 148 ,898 16,545 5,070 -0- 5,963 5,000 4,000 1,000 -131- YEAR 1984 1984 1985 1985 1985 1985 1985 1985 1985 1985 1985 1985 TABLE 23 INSTITUTIONAL CONSERVATION PROGRAM FUNDING HISTORY -132- 1980 - 1985 (Continued) INSTI- FEDERAL STATE TUTIONAL INSTITUTION FUNDING FUNDING MATCH St. Mary's Mission -0- 196,200 21,800 Valdez Senior High School 209,370 -0- 209,371 City & Borough of Juneau 142,908 106,662 213130 Cordova Public School District 85,697 68,558 17,140 Aleutian Region School District 555873 -0- 6,209 Tok School 4,275 -0- 4,275 Dillingham High School 11,000 8,800 2,200 Tetlin School 2,100 1,680 420 Valdez City School 8,726 -0- 8,726 City of Emmonak -0- 5,000 5,000 City of Sand Point -0- 11,120 11,120 City of St. Mary's -0- 8,000 8,000 Due to the scope of this program and its many complicated regulations, however, many of the concerns of Alaska institutions are not addressed. For example, federal regulations prohibit local governments from receiving financial assistance for energy conservation improvements. The DCD is currently exploring options that will make the program more suitable to Alaskan needs and permit federal funds to be leveraged for this purpose. MINI-GRANTS DCRA's Energy Mini-Grants (Table 24) were initiated to encourage communities and nonprofit organizations to develop energy education programs. Emphasis was placed on programs with simple and innovative designs. The program was based on information that the delivery of energy programs in a centralized manner is very difficult and many times unsuitable to community needs and that program delivery could be enhanced through the development of regional and local capacities. Under this program a grant could not exceed $10,000. For the first year of the program, 35 applications with requests totaling $274,609 were received. Of these applications, 9 proposals for $70,926 were funded. In 1985, 46 applications, requesting a total of $387,117 were received. Of these, 15 proposals totalling $107,767 were funded. 1985 is the last cycle for the program. The Sixth Annual Alaska Energy Conference took place in Anchorage in 1985, providing nearly 500 Alaskans (including professionals such as architects, engineers, builders, bankers, planners, and local government officials) information on state-of-the-art energy management. Governor Sheffield addressed the conference. The Seventh Annual Conference will be taking place at the Hotel Captain Cook in Anchorage on March 17-23, 1986. DCRA also used a federal grant to support the Municipality of Anchorage carpooling program. Previously, the municipality had received funding for its carpool office, but there was no funding for promotion. With DCRA support, the municipality can now undertake a promotion campaign. Legislative grants are administered through DCRA and the Department of Administration (Table 25). Grants are generated by the Legislature in response to a request from a community. Projects range from the $4 million Fairbanks utility and street upgrade program to small scale electrification projects. -133- TABLE 24 1984 ENERGY MINI-GRANTS GRANTEE Cordova Electric Coop. Chaputnguak High School* Municipality of Anchorage RurAL CAP Older Persons Action Group City of Togiak City of St. Paul Alaska Public Radio Network Cooper Valley Elec. Assn. Bering Straits Housing Auth. Manillaq Association City & Borough of Juneau Fairbanks North Star Borough Tanana Chiefs Conference Kongiganak Village Council * Chaputnguak High School has elected not to pursue its grant. PROJECT DESCRIPTION "Consumer Information Booklet" "Wasteheat Greenhouse" "Anchorage Mortgage Valuation" "Rural Energy Newsletter" "Low Income Elderly Persons Energy Outreach" "Community Energy Plan" "Community Energy Education" "Energy Features" "Safety/Conservation Education" "Furnace Maintenance Education" "Regional Education" "Juneau Mortgage Valuation" "Fairbanks Mortgage Valuation" "Woodstove Video Tape" "Energy Education" -134- AMOUNT OF GRANT $ 9,432 10,000 4,411 8,180 9,849 3,000 9,992 10,000 3,000 5,767 1,028 6,518 9,450 9,949 3,000 TABLE 25 FY 86 LEGISLATIVE GRANTS AND REAUTHORIZATIONS DEPARTMENT OF COMMUNITY AND REGIONAL AFFAIRS AMOUNT GRANTEE PROJECT DESCRIPTION OF GRANT AVCP Tuntutuliak Weatherization $120,000 Beaver Village Council Electrification 40,000 Black River Corporation Chalkyitsik Electrification 45,000 Karluk IRA Council Electrification 100,000 Kipnuk Traditional Council Electrification 300,500 Portage Creek Village Council Electrification 100,000 Sleetmute Village Council Electrification 85,000 Tokotna Community Association Electrification 100,000 Tanana Chiefs Conference Conservation Tech. Assistance 80,000 Alaska Consumer Advocacy Pgm. Consumer Representation/Utility Issues 75,000 DEPARTMENT OF ADMINISTRATION NAME Akiak Cordova Kasigluk Kobuk Kotzebue Ouzinkie Thorne Bay Tuluksak Fairbanks Shageluk PROJECT DESCRIPTION AMOUNT Electrification Improvement $ 57,000 Electric Coop Energy Program 150,000 Electrification Improvements 89,400 Electrical/Water and Sewer 75,000 Electric Assoc. Utility Project 300 ,000 Electrical Distribution System Repair 200,000 Utilities Upgrade 440,000 Generators/Bulk Fuel Upgrade 130,000 Downtown Utility/Street Upgrade 4,300,000 Power Plant Relocation 150,000 DEPARTMENT OF ADMINISTRATION (Changes to Grants from Previous Years) NAME Bethel Ruby Ruby Ruby Galena Eagle AMOUNT $259,300 200,000 190,000 75,000 510,000 21,500 CHANGE (Original plus Addition) Energy Conservation Audits and Grants "and the purchase of emergency equipment." Dock Facility "and purchase of generator." Road construction and upgrade "and purchase of generator." Construction of Boardwalks “and purchase of generator." Vehicle Storage Building "and waste heat recovery system." REPEALED. School Heat Recovery (FY 82). -135- BULK FUEL The Department of Community and Regional Affairs, through its Division of Community Development, administers the State's bulk fuel oil storage tank grant program. Each community is allowed one-time grant of up to $100,000 for the construction of a bulk fuel storage facility. The State appro- priated $600,000 for this program in FY 85. Bulk fuel storage is critical to most rural communities since it helps lower electrical and heating costs. The ability to restore spent fuel is minimal or non-existent during the fall to spring period and bulk fuel storage is one way to avoid crisis due to fuel shortage or depletion in the dead of winter. The "Regional Data Summary" provides a summary, by community, on this program. LOANS Loans have been provided to improve energy services across Alaska. The bulk of these have been made through the Power Project Loan Fund, and the Rural Electrification Revolving Loan Fund. Smaller loans are made for conservation and fuel security purposes. POWER PROJECT LOAN FUND The Power Project Loan Fund provides State financing for power projects that will be owned and operated by a local utility. Terms for these loans are established by statute. The repayment term must not exceed 50 years and the interest rate must not be less than five percent nor more than the average weekly yield of municipal bonds for the 12 months preceding the date of the loan. Loans which have been made from the Power Project Fund are: Borrower Principal Alaska Electric Light and Power $13,200,000 City of King Cove 200,000 Bethel Cogeneration Utility 1,000,000 I] iamna-Newhalen 300,000 City of Sitka 15,000,000 Tanana Power Co. 120,000 G&K, Inc. (Cold Bay) 1,283,836 Levelock Electric Cooperative, Inc. 30,000 Far North Utilities (Central) 200,000 City of King Cove 120,000 The total outstanding balance on these loans as of June 30, 1985 was $29,334,729. -136- RURAL ELECTRIFICATION REVOLVING LOAN FUND The Rural Electrification Revolving Loan Fund (RERLF) was created by the Legislature in 1981 in order to provide low-interest loans for the extension of distribution lines to new customers. The repayment term of 20 years is established by regulation and the interest rate of two percent is established by statute. To date, $7,500,000 has been appropriated to the RERLF of which $4,615,601 has been approved as loans to five utilities. These include: Date of Loan Borrower Principal 6/81 1] iamna-Newhalen $ 230,000 7/82 I] jamna-Newhalen 1,340,000 1/83 Andreanof Electric 200,000 10/83 Egegik Light & Power 130,000 11/83 Yakutat Power 134,000 1/84 City of Unalaska 250,000 1/84 City of Unalaska 1,560,486 7/84 Egegik Light & Power 83 ,830 6/85 St. Paul Municipal Electric Utility 687,295 Outstanding loan balances and appropriations for the fiscal year ended June 30, 1985 was $3,787,957. -137- RESIDENTIAL ENERGY CONSERVATION LOAN FUND The Residential Energy Conservation Loan Fund provides loans to purchase, construct and install energy conservation improvements in existing buildings. Loans under the program may not exceed $5,000 or the amount equal to the estimated total energy savings attributable to the improvement over a 10 year period, whichever is less. Interest rates are equal to an average of municipal bond yields for the 12 months preceding the loan. Over $5.2 million was loaned from FY 83 to FY 85 to 1,317 recipients. ALTERNATIVE TECHNOLOGY REVOLVING LOAN FUND The Alternative Technology and Energy Revolving Loan Fund makes loans for the purchase, construction and installation of alternative energy systems, including wood stoves with catalytic converters, solar systems, wind systems, hydropower systems and centralized, multi-fuel heating systems. The maximum loan amounts are $30,000 over 20 years at 5 percent interest for the first $15,000 and 15 percent for the amount of loan that exceeds $15,000, computed as a composite rate. The Alternative Energy Loan Fund distributed $7.4 million to 1,153 loans during fiscal years 1983 to 1985. BULK FUEL LOANS Bulk fuel storage enables a community to purchase large volumes of fuel oil in one delivery, thereby reducing transportation costs and the cost of diesel generation. However, without State assistance, many rural communities would not have the necessary funds to purchase large quantities of fuel oil. The Department of Commerce and Economic Development, through its Division of Investments, offers communities a loan program for bulk fuel oil purchases. Loans are made to organized municipalities or unincorporated villages with a population under 2,000, or an individual with a written endorsement from the governing body of the community. In most cases, a community is not required to repay any interest on its first bulk fuel loan. An interest rate of 5 percent may be charged on a community's second bulk fuel loan, and an interest rate based upon the municipal bond rate may be charged on a community's third bulk fuel loan and any additional bulk fuel loans. The maximum loan amount is $50,000, and must be repaid in 12 months or less. From FY 83 to FY 85, 150 bulk fuel loans were made totalling $5.63 million. TECHNICAL ASSISTANCE Technical assistance is provided by both the APA and DCRA. The APA provides the services of a consulting engineer or in-house staff to assist communities which request small energy systems planning, design, trouble- shooting, inspection, electric rate evaluation and maintenance. DCRA is initiating a Rural Electrification and Technical Assistance Program. The -138- purpose of this program is to help rural communities develop a better understanding of the need for local energy planning, how to develop an electrification system and what capabilities are needed for its operation. Additionally, funds have been provided to private-nonprofit groups to assist small Alaskan communities refine their energy management capabilities. RURAL ENERGY MANAGEMENT Rural community energy management has been identified by Governor Sheffield's Mini-Cabinet for rural issues as an issue to receive priority attention. Community energy management looks at the total energy conservation potential of a community. It includes such strategies as providing education on energy conservation to residents of the community, weatherization of low-income residents' homes, residential oil heating system retrofits, fuel management, energy planning and electrification technical assistance. In 1983, the Rural Alaska Community Action Program completed, through a contract with DCRA, a pilot community education project in eight villages in the Calista and Doyon regions. A team of two energy specialists worked with the respective regional nonprofit organization in each region in developing and undertaking energy programs tailored to each community's needs. The energy team assisted communities in such areas as community planning, electrification, weatherization, energy conservation and bulk fuel storage. One-to-one consultation with village leaders and community workshops were emphasized. In 1984, Tanana Chiefs Conference received funding to provide education and technical assistance to the communities in its region on bulk fuel storage, electrification, community planning, weatherization and alternative energy. DCRA, in 1985, has expanded this approach to four other regions of the State through the pilot regional energy management program. Through this federally funded program, the North Slope Borough, Kawerak, Nunam Kitlutsisti, and the Tlinget and Haida Central Council will develop energy management and technical assistance programs for their regions. THERMAL AND LIGHTING STANDARDS The DCRA's Division of Community Development is also responsible for formulating a set of lighting and thermal efficiency standards for new construction for commercial and residential buildings. The statute that mandate the standards, AS 46.11.040, require that any nonpublic building constructed and financed with State funds must meet a minimum set of standards established by the Division. The statute recognizes the need for more efficient housing in Alaska because of the colder climates and high energy costs. The statute reads, that if the State is going to subsidize the construction of commercial and residential buildings, it has an interest to ensure that they are efficient and affordable to maintain. -139- A Lighting and Thermal Standards Advisory Committee has been established and consists of 17 members from facets of the building industry. The group includes bankers, engineers, designers, home builders, Alaska House Finance Corporation (AHFC), rural consumers, urban consumers and a legislative aide. The first meeting of the group was held in February 1984. Over the past year, staff has completed detailed research of other states' standards and the production of up-to-date Alaskan data. This data is more comprehensive than was previously available and consisted of weather data, construction costs, fuel costs, and construction techniques, all identified by regions. The University of Alaska's Institute of Social and Economic Research was contracted to undertake a computerized life cycle cost analysis of the data. Armed with this research, the Advisory Committee, on June 7, 1985, recommended what levels the residential thermal levels should be set. The division is now in the process of writing the standards and developing a public education program. A significant event for residential energy efficiency in 1985 was the development of energy mortgage valuation in Alaska. Energy mortgage valuation is a cooperative program by the private sector, local governments, utilities, and the State. The program qualifies more buyers for better built, more energy efficient homes. To date, the Division of Community Development has provided the support and coordination necessary to begin the development of the program with federal funds. The Municipality of Anchorage, Fairbanks North Star Borough, and the City and Borough of Juneau have spearheaded the effort. The program is being guided by a statewide committee of government agencies and shelter industry leaders. The development of mortgage valuation is integrated with the development of the State's residential energy standards. It is envisioned that the program's implementation will dovetail in that the standards thermal levels will be incorporated in the mortgage valuation rating sheets. DOT/PF is responsible for establishing a set of lighting and thermal standards for public facilities. AS 46.11.010 requires, as far as economically feasible, that minimum standards be developed and implemented in State facilities before the end of this decade. DOT/PF is proceeding EDUCATION There are a number of State sponsored educational programs conducted through the Department of Community and Regional Affairs (DCRA), Department of Education (DOE), and the University of Alaska, Cooperative Extension Service, and other college programs. The DCRA Urban Outreach Program recognizes the current demand by consumers for technical information on energy conservation and alternative technologies. This is particularly true in the Anchorage area, which contains over half of the State's population. To provide Alaska's urban -140- residents with energy information, the Department has contracted with the University of Alaska's Cooperative Extension Service (CES). The CES has an established outreach network, particularly in the State's urban areas. Through its contract, CES has hired an energy specialist for its Anchorage office and has undertaken activities in the areas of consumer response, workshop presentation, factsheet development and printing, an energy information referral service and weekly newspaper columns. In FY 85, DCRA continued to focus on expanding the low-income weatherization program to include consumer education. Previously, energy education was not delivered to communities in adjunct to. their participation in the weatherization program. Often home owners receiving weatherization assistance did not receive information on how to maintain their energy improvements and what other low cost/no cost measures they could undertake to further reduce their energy consumption. With federal funds, the Division of Community Development has developed weatherization publications, video tapes, community workshops, and a bulk material purchase manual. The division is currently undertaking an evaluation of its weatherization education efforts. This evaluation will determine the most effective efforts that will be undertaken by the Weatherization Program on an ongoing basis. The University of Alaska system, campuses in Anchorage and Fairbanks offer energy education courses. The UA-Fairbanks has mechanical engineering programs that enroll undergraduate and graduate design professionals in courses specifically focused on energy conservation, use, and generation. The UAF also trains utility system dispatchers each summer for the major utilities. At both the UA-Anchorage and UA-Fairbanks, courses within the Arctic Engineering program focus on heating aspects of cold climate design, including Arctic Engineering which most professional engineers in Alaska take in order to fulfill engineering registration requirements. The University of Alaska Rural Education and Cooperative Extension Service also provides a video-taped semester length course in super-insulation for institutions statewide. The Anchorage Community College (ACC) offers courses in Home Energy Management, Passive Solar Home Design, Wind Generator System Design, and Energy Efficient Residential Construction: Super Insulation, etc., are offered through the college's Division of Technical Programs. Mat-Su, Northwest, and Kenai Peninsula Community Colleges offer courses similar to those listed for ACC, but these offerings are somewhat less regular. The Alaska Department of Education, Office of Adult and Vocational Education has prepared both the "Alaska Energy Education" and "Appropriate Technology for Alaskans" series in 1984-1985 for use in elementary, highschool, and adult vocational education classes. The "Alaska Energy Education Series" is an eight volume set covering all aspects of energy awareness from conservation to pertinent energy issues facing Alaska. "The Appropriate Technology for Alaskans" series is an 11 lesson, elective course curriculum bound in one notebook for high school students. -141- The former Division of Energy and Power Development in the Department of Commerce and Economic Development completed the Alaska Energy Technology Series, a 23 volume set, in 1983 and later condensed this into the 785 page Assessment of Energy Technologies. The Department of Transportation and Public Facilities has also completed a series of booklets dealing with education pertinent to basic energy education, and these may be found in the Appendix. RESEARCH The University of Alaska (UA) is involved with a number of research and development projects related to improving energy efficiencies. For example, a prototype design employing passive solar heating and super- insulation techniques was implemented in the construction of the Two Rivers Elementary School in Fairbanks. The building is being monitored and a report on its performance should be available in late 1985. UA analysis of existing energy systems has also added to the research and development information available to Alaskans. Energy projects are completed within the Institute of Water Resources and the Engineering Experimental Station with funding from the Department of Transportation and Public Facilities. Research projects recently completed or presently underway include: 0 Computer monitoring of energy use in the super-insulated Two Rivers Elementary School in Fairbanks (Final Report, mid-1986). 0 Rural power quality analysis (Interim Report, July 1985). oO Part load economies of diesel electric generators (Final Report, June, 1985) and economics of diesel-electric generators (in progress). 0 Thermal standards for buildings (Final Report, September 1985). 0 Relocation of solar culvert thawing devices (Final Report, September 1985). ° Insulation thermal conductivity testing (in progress). 0 Building energy program assistance (in progress). 0 Underground coal gasification literature survey (in progress). 0 Biomass heating for corrections facility at Sutton (in progress). In addition to formalized research, there is an extensive private entrepreneurial force in Alaska developing small and/or remote experimental energy systems. "Frontier Energy-Appropriate Technology Program - 1979-1984" prepared by the Department of Community and Regional Affairs is a good overview of the type of private research being conducted in Alaska today. -142- CHAPTER 6. UTILITY REGULATIONS The Alaska Public Utilities Commission (APUC) is the only State agency authorized to certify and regulate public utilities and pipeline carriers. The goal of the APUC is to ensure that utilities and pipeline carriers are able to provide adequate, efficient and safe services to the public and that rates, terms and conditions are just and reasonable. The APUC consists of five commissioners, an executive director and 45 employees who report to the executive director. The commissioners approve all rates, rules and regulations of the utilities the commission regulates and responds to complaints by consumers. Some electric utilities can be exempt from APUC regulations. These include: 1. a utility owned and operated by political subdivisions of the State such as municipalities; 2. a cooperative utility that elects to be exempt; 3. a utility that grosses less than $50,000 annually; or 4. a utility that grosses less than $325,000 annually and elects to be exempt. There are 68 electric utilities that are certified by the APUC, of which 36 are regulated. The Regional Data Summary lists these utilities. The APUC also regulates pipeline carriers. The APUC certifies requests from eligible utilities for monthly Power Cost Equalization payments and determines what costs are eligible. The Power Cost Equalization Program is described in the Support Section of this plan. In December 1981, the APUC adopted regulations to comply with federal Public Utilities Regulatory Policies Act (PURPA). These regulations intend to promote the three purposes of PURPA which are conservation of energy, efficient use of facilities and resources by electric and natural gas utilities, and establishment of equitable rates for electric and natural gas consumers. PURPA regulations require utilities to purchase power from small power producers and cogeneration facilities to sell power to utilities at the avoided cost of the utility. APUC regulations (3 AAC 40.750-.820) determine avoided cost by dividing the fuel and variable operation and maintenance costs for a 12 month period by the number of kilowatt hours sold for that period. Expenses and kilowatt hours sold associated with hydroelectric generation must be specifically excluded from the computation of avoided costs for an electric utility which relies on hydroelectric generation for 29 percent or more of its total power requirements. In November 1984, the Alaska Public Utilities Commission (APUC) added Article 6 to its regulations, entitled "Cost-of-Service Study and Rate Design Information for Electric Utilities" (codified at 3 AAC 48.500 - .560). These generic regulations were accompanied by an order (U-83-47, -145- General Order No. 13) establishing load research and experimental and innovative rate design guidelines and procedures for electric utilities which sell 100 million kWh or more annually (ACAP, 1985). Three rates are generally used when discussing charges to customers by utilities and these are: declining block rates, flat rates, and marginal cost pricing. These rate structures are presently the topic of vigorous conversation statewide since the new regulations require a cost-of-service study by all utilities with the minimum service level and for all utilities that request rate changes in the future. In 1985, the Alaska State Legislature held hearings on "sunsetting" the APUC. These hearings will continue in 1986 with a potential sunset date as early as June 30, 1986. -146- CHAPTER /7. NON-STATE / FEDERAL ENERGY PROGRAMS There are significant energy activities taking place across Alaska that are carried out by utilities, local energy groups, private nonprofit entities, municipalities, and private individuals. This section identifies those groups that are conducting programs that benefit energy awareness and conservation, or promote innovative uses of appropriate technologies. Section headlines identify the lead energy group for each program, although several programs are joint efforts as identified in the text. This section responds to the energy development, energy conservation, and energy research and development components of AS 44.83.224. CHUGACH ELECTRIC Chugach Electric is one of the largest utilities in Alaska, and is a leader in the fields of energy awareness and energy conservation in the Anchorage - southern Railbelt area. Alone, and in concert with other area utilities such as Anchorage Municipal Light and Power (ML&P), Matanuska Electric Association (MEA), Homer Electric Association (HEA), and Enstar Natural Gas (ENSTAR), Chugach electric provides an extensive outreach and coordination effort through their energy management office. Each of the programs available are listed individually. ENERGY AUDIT PROGRAM Since 1979, Chugach has performed more than 1,500 residential energy audits of members' homes. While the State program was in effect, Chugach offered energy audits for $15.00 to members. Since the sunset of that program, Chugach has continued to offer both a full Residential Conservation Service (RCS) energy audit for $15.00 and a free walk-through energy audit. The RCS audit offers the consumer a full heat loss study. The walk-through audit identifies all recommended areas for improvement within the home, as well as offers information on appliance efficiency and a packet containing energy brochures and booklets, as well as samples of weatherstripping and outlet gaskets. The commercial walk-through audit addresses: lighting efficiency conversions; timeclocks for controlling usage on lighting and ventilating units; infiltration reduction; insulation possibilities; heating, ventilation and air conditioning maintenance; correct refrigeration temperatures; refrigeration maintenance; efficient heating utilization and heat recovery possibilities. Chugach will offer a mail-in energy audit for members in 1986. This 18-page booklet requires the consumer to fill in information concerning living habits, energy consumption and statistical data such as house size, historical energy consumption. The booklet is returned to Chugach, analyzed and a computer results summary mailed to the consumer. In the fall of 1985, Chugach, ML&P, ENSTAR and the Cooperative Extension Service presented two Interfaith Coalition on Energy (ICE) seminars to approximately 75 church personnel. These two-hour seminars addressed energy consumption in religious structures and promoted consumption through lighting conversions for efficiency, boiler maintenance, and building energy efficiency. In December 1985, Chugach will joint-venture the first small commercial seminar modeled after the ICE presentations. -149- Chugach also offers weatherization clinics for members through the community schools program in Anchorage. The two-evening presentation teaches a do-it-yourself energy audit, reading meters and calculating energy consumption and bills. END-USE SURVEY/LOAD MANAGEMENT PROJECT Chugach has instituted an end-use consumer survey to determine how electricity is being utilized by members. The survey will also include questions on load management and 50 consumers will be selected to participate in a load management survey which will include placing load controllers on all-electric residences and monitor metering to investigate time-of-day rates. After these 50 consumers are monitored for one year, information will be implemented in rate design and planning processes. CARES PROGRAM Chugach will implement a flat rate for residential consumers in February 1986, and all electric residential customers are expected to see an increase of 15 to 25 percent in their electric bills. To offset some of this shock, Chugach is presently putting together a new member program called CARES (Chugach Assistance for Real Energy Savings), which will allow consumers to borrow funds at five percent to convert to gas space and water heat, reinsulate, weatherstrip, caulk, and install load management devices, clock thermostats, thermopane windows, and air exchangers. Funding has been provided through the Rural Electrification Administration (REA) which has approved $4.3 million a year for two years (with the option of renewing the loan beyond that time period) to Chugach for the loan program. Chugach expects to assist from 600 to 1,000 members per year with the CARES program. JOINT UTILITY TEAM The Joint Utility Team (JET) is comprised of representatives of local utilities involved in energy management or consumer relations. Represented in JET are personnel from Chugach, ENSTAR, ML&P, Elmendorf Air Force Base, Cooperative Extension Service (UAA), Alaska Power Authority, APUC, and MEA. Periodic updates are provided to Homer Electric, City of Seward and Golden Valley Electric on activities so that they can "borrow" from any successful programs or projects which might be of benefit to their consumers. JET joint ventures home and trade fairs, brochures, advertising, community outreach (TV interviews), workshops, seminars, school energy projects ari poster contests and any other projects which might prove beneficial and cost-reducing to Alaska residents. Additionally, JET is presently cooperating on the commercial energy audit program and will provide guidance to the Municipal Energy Management study being substantially funded by Chugach. -150- COMMUNITY ENERGY MANAGEMENT PLAN In May 1985, members of the community gathered with members of the ad-hoc Municipal Energy Steering Committee to consider the value of pursuing an energy management strategy for the Anchorage area. The committee proposed that an analysis be performed on a number of programs which they selected to be promising for an energy management plan for Anchorage. Suggested strategy areas addressed were: Energy Service Corporation to make conservation investments to private and public facilities for a share of accrued savings; Revolving Conservation Fund to finance conservation improvements; Interest-free Loans for Commercial Energy Audits which would be an in-depth audit and analysis; Appliance Efficiency Incentives for interest-free loans and/or rebate programs; and Off-Peak Heat Storage. INFORMATION DISTRIBUTION Chugach continues to publish and make available to consumers brochures and booklets on energy conservation items new to the marketplace, as well as retrofit information. This information is always shared with other utilities and their consumers and is not limited to Chugach members. SCHOOL AND PUBLIC PROGRAMS Chugach participates in presentations to schools and public organizations as required. Teaching the wise use of our energy resources to the youth of today, will make better use of these resources for tomorrow. In addition to the school presentations, Chugach also is actively involved in providing Energy Source education materials both to the Anchorage School District as well as statewide. Chugach participates in their speakers' bureau, and acts as editor for the newsletter. Chugach is also developing a Governor's Energy Award program to be utilized statewide with the Energy Source program, which will provide credits toward the Governor's Award and prizes to students who expend extra efforts in energy education, not only in science, but english, art and other areas. Chugach is also developing a joint utility program for the Anchorage schools which will teach junior high students about energy conservation, R-values and how they apply to building structures, with culmination in a contest for students to actually audit their school buildings and suggest improvements. MUNICIPALITY OF ANCHORAGE WEATHERIZATION The Municipality of Anchorage conducts a weatherization and building rehabilitation program using a mix of federal and State funds. Funding from the Department of Community and Regional Affairs and the federal Department of Energy and Low Income Housing Energy Assistance Program have combined to weatherize over 900 homes in the past two years. A total maximum of $2,000 per single family homes and from $1,400-$1,600 per multifamily housing unit is available to make conservation improvements and thereby reduce overall energy consumption in the Railbelt. -151- The Municipality of Anchorage is offering free weatherization grants to low- and moderate-income persons in the Anchorage/Eagle River area (Matanuska Electric Association Service area). Homes in need of weather- ization (caulking, weatherstripping, insulation, storm windows and storm doors) may receive materials and labor needed to make houses warmer and lower heating bills. Grants will be available to both renters and homeowners between October 1985 and March 1986. To be eligible for this free program, applicants must meet the income guidelines listed below: Family Size Maximum Income $11,180 14,620 18,060 21,500 24,940 28, 380 DOrwnre (For each additional family member, add $645. Income is determined by a household's previous 12 months' gross income. ) Additionally, any family receiving State support under certain other programs automatically qualifies for the weatherization program. HOME MORTGAGE VALUATION PROGRAM In mid-October 1984, Anchorage Municipal Light and Power and the Building Industry Association of Anchorage began investigations to determine how to proceed with a program to qualify more buyers for better built, energy efficient homes. After meeting with professionals from the housing, financial, and energy industries, a program developed by Western Resources Institute (WRI) entitled, "Home Mortgage Valuation Program," was selected for use in the Alaskan home buying market. The WRI program is a way for energy efficiency to be systematically in- corporated into the business practices of lenders, appraisers, home build- ers, real estate agents, home buyers and homeowners. Efficiency ratings are based on points for levels of insulation, caulking and weatherstripping, plus efficiency of windows, walls, water heaters and space heaters, resulting in estimates of a home's annual energy use anc cost. Home ratings fall into a one to five star category, five stars be‘ag the most energy efficient. Without direct State, federal, or local govern- ment subsidy, the Real Estate and Appraisers Association and Bank Under- writers Association will fund advertising and training to initiate the program. -152- The Home Mortgage Valuation Program recognizes that energy costs are rapidly approaching mortgage payments in magnitude and pose a real hardship for many homeowners. Energy efficiency can lower those monthly energy costs and make it easier for home buyers to obtain a home of choice and still afford to make monthly payments. In Alaska, incorporation of this program into routine lending programs has been approved conceptually by Alaska Pacific Mortgage and Rainier Mortgage. After completion of auditor and appraiser training in November 1985, a full-fledged program for single family residences will come on line in early 1986 for major metropolitan areas of Alaska. As the program grows, the same concept is planned for multifamily and rural housing. The program will also provide information to bankers on the payback of energy efficiency improvements in the long-term, and even include a program to retrofit older homes to meet specific rating levels of efficiency. SOUTHEAST CONFERENCE The Southeast Conference (SEC) is composed of municipal and community business leaders concerned with the economic well-being of Southeast Alaska. This 25 year old organization has placed its efforts as a lobbying organization in lowering costs for services in Southeast, and presently includes work to assure long-term, low cost power is available throughout Southeast. The Southeast Conference's home office is located in Juneau. In 1985, the SEC passed a resolution firmly in support of Alaska's development of a regional Southeast Intertie Power Transmission System connecting British Columbia, Yukon Territory, and power projects in South- east Alaska. British Columbia has a surplus of low-cost hydroelectric power and, in combination with new and existing hydroelectric projects in Southeast Alaska, could provide a long-term power solution for the Alaska panhandle. Obtaining this power is part of the long-term commitment of the Southeast Conference. JUNEAU ENERGY COMMITTEE The Juneau Energy Committee (JEC) is a citizen's group established by the City and Borough Assembly in June 1979, consisting of nine appointed positions. The committee addresses a wide range of issues relating to energy development, use and policy of concern to the community. The committee holds regular meetings and frequently meets in working groups. The committee expresses its concerns by recommending action to the assembly, by working with groups, agencies and industry in the energy arena, and by sponsoring community programs. -153- JEC activities include the following: 0 Energy Supply and Demand Planning. Although endowed with hydro- electric resources that have served the Juneau area since the turn of the century, the City and Borough of Juneau residents are faced with escalating costs, due to subsequent rate increases to pay for additional diesel generation. Through financial analysis and presentation of options to decision makers, the JEC seeks to improve planning and accomplish the goal of maximizing Juneau's use of renewable energy resources. Building Design and Building Code. The energy committee has worked with the Juneau Homebuilders Association, city inspectors, and energy auditors in developing home building standards incorporated into the Juneau building code. The new code requires a minimum of R-30 insulated ceilings, R-19 insulated walls and floors, R-1.5 windows (a maximum of 16 percent of total gross floor area), and R-7 doors, with weather stripping. JEC has also worked with the State Department of Community and Regional Affairs and other with the aim of improving the energy efficiency of Juneau's housing stock. Workshops for builders on the use of insulation has been conducted in conjunction with the Homebuilders Association. A subcommittee also has been formed to examine approaches to improving the energy conservation features of the city building code. Electric Rate Restructuring. JEC has formulated a long range plan, approved by the City and Borough Assembly that outlines community energy goals and their relationship to electric rates. These were used as a recommendation to APUC regarding rate structures that would encourage conservation of electricity, especially in the winter when costs are high due to the need to supplement hydro generation with diesel oil-fired generation. This was completed in conjunction with the application by the Alaska Electric Light and Power Company (AEL&P) to restructure local electric rates. Ridesharing. JEC jis working to establish a formal ridesharing program to promote carpooling, vanpooling and expanded bus service. Key elements are securing funding from federal, State and local sources, and establishing a full-time position of ridesharing coordinator. The program would: involve major employers, especially the three levels of government; provide parking in preferred locations for participants; offer person- alized services to develop ridesharing arrangements; and act as an information resource regarding ridesharing, mass transit, and special services for the elderly and handicapped. Energy Education. Members of the JEC have hosted this monthly radio program on KTOO FM since July 1981, "Its Your BTU." The program pursues statewide energy issues and activities. The first half-hour of the show offers an educational overview of an -154- important energy topic. The second half-hour provides a chance for listeners to call in, ask questions, voice concerns, and share ideas. The program airs at 8:30 p.m. on the first Monday of each month. The JEC also regularly uses the Juneau Empire to publish articles on pertinent energy topics as a general educa- tion awareness program. 0 Recycling. JEC assisted in site selection, publicity in develop- ment of the JAWS (Juneau Aluminum Waste System) aluminum, paper, glass, copper and waste oil recycling program. JEC participates on the JAWS steering committee and in city policy. 0 Energy Conservation and Education Workshops. JEC sponsors and co-sponsors workshops for the community where interest and necessity indicate a need. Workshops have been held on energy conservation practices, solar sunspace/greenhouses and wood stoves (increasing efficiency/decreasing air pollution). ALASKA ELECTRIC LIGHT AND POWER Juneau's Alaska Electric LIght and Power (AEL&P) has been active in several innovative attempts to educate the public on energy conservation and to utilize new power rates. In 1985, Roark-Harmon Associates prepared a series of seven, weekly, 30 minute television programs on Juneau energy issues in particular and energy conservation in general. The goal of this series was to educate Juneau as to programs and techniques which can be used to conserve energy without making adverse alterations in their lifestyles. AEL&P has instituted a load management program designed to control consumer loads in order to shift the time and amount of electric power and energy used. The principle objectives have been to reduce the long-term average cost of electricity, reduce the need for generation capacity by shifting power loads from peak to off-peak periods, and improve system efficiency by reducing the amount of energy provided by expensive generating units. AEL&P has used the media and handouts to educate consumers on this program. Part of this program includes experimenting with rates for thermal heat storage, heat pumps, interruptible hot water, interruptible space heating, and dual fuel. TANANA CHIEFS CONFERENCE The Tanana Chiefs Conference (TCC), located in Fairbanks, has been one of the prime nonprofit groups working to provide cost effective use of appro- priate technologies for rural Alaska. Since 1984, TCC has developed and operated a regional energy program that utilizes TCC's extensive outreach network to assist the 43 villages in the region with developing ways to minimize the cost of energy. It is estimated that 25 percent to 50 percent of a rural household's income is being spent on energy costs. TCC's regional energy program assists villages in developing appropriate technologies and programs that reduce the costs of electricity, heating of -155- homes, preservation of food and operation of public facilities, continues most of the past regional energy program activities, and builds on the experience gained to focus on the most worthwhile efforts, such as TCC's newly established space heating unit upgrade program. Activities completed by TCC since 1984 include: 0 Planned and then constructed community passive freezers that do not use electricity to operate (barrels of brine are frozen in the winter and stored in superinsulated building freezers in the warmer months) in Allakaket, Huslia and Shageluk, and produced a 15-minute broadcast program on community passive freezers aired on Learn/Alaska. 0 Assisted the communities of Allakaket, Beaver, Arctic Village, Chalkyitsik, Rampart, Venetie, Stevens and Eagle Village in planning and implementing electrification projects. 0 Assisted seven villages in planning and purchasing of bulk fuel at the lowest possible cost. Also worked with three villages on securing bulk fuel facilities. 0 Assisted ten villages in seeking qualification for Power Cost Equalization. 0 Initiated a space heating unit upgrade program whereby all inefficient or unsafe space heating units in low-income rural households in the TCC region will be replaced with high quality and efficient heaters, potentially reducing fuel consumption by half and providing safe, reliable heat. 0 Provided overall supervision to TCC's 175 home weatherization “RURAL CAP The Rural Alaska Community Action Program (RurAL CAP) has a multiple function to serve all Alaska's rural area. One of their major thrusts is for energy, particularly as energy relates to housing, thermal security, and electrical generation. Paramount to this and other major activities, RurAL CAP's mission is to provide an economic development climate that will assure the long-term health and security of rural Alaskans. RurAL CAP is located in Anchorage and has an office specifically identified for energy program implementation. -156- FAIRBANKS CHAMBER OF COMMERCE ENERGY COMMITTEE The Fairbanks Chamber of Commerce Energy Committee (FCCEC) has adopted a borough wide economic development policy which is predominately energy oriented. In a prepared evaluation and recommendation statement prepared in December 1985, the FCCEC has made the following statements on Alaska's energy future: 0 Strongly recommend that the Railbelt utilities form a Generation and Transmission Cooperative (G&T Co-op) for the purpose of selecting, building, and managing a power generation system to supply power economically and safely to cooperative members, to resell to their customers. Cooperative members, with their expertise and closer ties to consumers, can best develop an efficient combination of power sources to insure that the long-term power needs of the Railbelt are met. 0 The FCCEC is displeased with the seemingly endless research requirements and raising of peripheral issues in the Federal Energy Regulatory Commission (FERC) licensing process. While not objecting to addressing reasonable and valid issues, the FCCEC feels that the process employed to safeguard the environment has been exploited to create barriers, rather than to seek solutions, resulting in unnecessary delays and excessive costs, without the issuance of the FERC license. 0 Planning for future power requirements and generating power for the Railbelt should be accomplished using a prudent, cost- effective mixture of available energy options and should not be restricted, either by legislation or regional bias, to a single fuel source. Oo The role of the Alaska Power Authority (APA) should be one of assisting the Legislature in creating a statewide energy policy; promoting research and development; providing advice and tech- nical support for entities such as a Railbelt G&T Co-op; and as a funding and licensing agency for the State. RESOURCE DEVELOPMENT COUNCIL Resource Development Council (RDC) activities focus on energy issues that promote economic development. Situated in Anchorage, the RDC holds weekly meetings, attracting top state legislative leaders to discuss ideas on the formulation of state energy policy direction. RDC's executive committee is composed of prominent Anchorage businessmen, and hosts a directors and ex-officio membership including Alaska's congressional delegation and prominent members from the railbelt business and government community. -157- COMMONWEALTH NORTH Commonwealth North has been active on energy issues and promulgating Alaska's energy future for the past several years. During 1985, a new study entitled "Energy Policy For Alaska" was undertaken, and continues in progress today. Chairman of the latest study group is retired Alaskan Superior Court Judge Ralph Moody. The group's charge is "to identify energy problems, define the role of the state and private sector in public energy programs, evaluate the public policy implication for power cost subsidy, and to make recommendations for a state energy policy." The study results should be completed in the Spring, 1986. ST. PAUL St. Paul, with a population of 600, located in the Pribilof Islands of the Bering Sea, is demonstrating how local government can provide energy programs with limited State or federal assistance. Although this repeats an earlier presentation, the importance of this type of project cannot be overlooked. On August 19, 1985, the City of St. Paul and FloWind Corporation signed an agreement to jointly develop a new 2 MW hybrid wind-diesel electric power generating facility on the Island of St. Paul. Vern McCorkle, City Manager of St. Paul, said "This new facility, when it becomes fully operational in late 1986, will reduce the cost of electric power on the Island of St. Paul by more than 20 percent." Electric power cost on the island is currently at 38 cents per kWh. ARCO-YUKON PACIFIC - GAS STUDY The Atlantic Richfield Company (ARCO) and the Yukon Pacific Corporation (YPC) has combined with the Japanese Marubeni Corporation, Industrial Bank of Japan, and the Institute of Energy Economics to support an 18-month study on the feasibility of moving natural gas from Alaska's North Slope to Cook Inlet. The study began in June 1985 and is expected to be completed by December 1986. INTEGRATED TECHNOLOGY HOUSE Near Mt. McKinley is located the home of Steven Jones, 1985 winner of the U.S. Department of Energy's innovative technology awards program. Mr. Jones, contractor and proprietor of "Popo Agie Solar," won his award by developing an integrated alternative electrical system to demonstrate a cost effective alternative to diesel power generation in remote sites at high latitudes and cold climates. The demonstration system consists of an 864 watt PV array, a 900 watt WECS and a 90 watt thermoelectric generator for power production. It utilized a 2460 AH battery bank for storage and includes a DC to AC inverter and automatic load dumps. The system has 10 days of automony. It is designed to produce a minimum of 2.25 kWh/day, is cost effective when electrical costs exceed 20¢/kWh, and has an expected payback of 20 years. -158- INDIVIDUAL PIONEERING EFFORTS There have been numerous attempts to reduce long-term energy costs or provide a more normal quality of life throughout Alaska with appropriate technologies. "Frontier Energy-Appropriate Technology In _ Alaska, 1979-1984," prepared by the Department of Community and Regional Affairs with match funding from the U.S. Department of Energy, is an excellent review of many of those innovative, pioneering efforts known today. -159-